Registration Statement for Securities Offered Pursuant to a Transaction — Form S-3
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-3 Allstate Life Insurance Company of New York 210 1.35M
2: EX-5.(H) Opinion and Consent of General Counsel 2± 8K
3: EX-23 Consent of Independent Registered Public 1 6K
Accounting Firm
4: EX-24 Powers of Attorney 13 28K
5: EX-99.(B) Experts 1 6K
As filed with the Securities and Exchange Commission on March 24, 2009
FILE NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(Exact Name of Registrant)
NEW YORK 36-2608394
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
100 MOTOR PARKWAY
SUITE 132
HAUPPAUGE, NEW YORK 11788
631/357-8920
(Address and Phone Number of Principal Executive Office)
SUSAN L. LEES
DIRECTOR, VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
847/402-5000
(Name, Complete Address and Telephone Number of Agent for Service)
COPIES TO:
JOCELYN LIU, ESQUIRE
ASSISTANT COUNSEL
ALLSTATE LIFE OF NEW YORK
3100 SANDERS ROAD SUITE J5B
NORTHBROOK, IL 60062
Approximate date of commencement of proposed sale to the Public: As soon as
practicable after the effective date of this registration statement. If any of
the securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box: [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a registration statement pursuant to General Instruction I.D. or
a post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box: [ ]
If this Form is a post-effective amendment to a registration statement filed
pursuant to General Instruction I.D. filed to register additional securities or
additional classes of securities pursuant to Rule 413(b) under the Securities
Act, check the following box. [ ]
Indicate by checkmark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [X] (Do not check if a smaller reporting company)
Smaller reporting company [ ]
CALCULATION OF REGISTRATION FEE
[Enlarge/Download Table]
Title of securities Amount to be Proposed maximum offering Proposed maximum Amount of
to be registered registered (1) price per unit aggregate offering price (1) registration fee
------------------------------- -------------- ------------------------- ---------------------------- -----------------
Deferred annuity interests and
participating interests therein $20,000,000 (1) $20,000,000 $1,116.00
(1) The Contract does not provide for a predetermined amount or number of
units.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
Allstate Life Insurance Company of New York
AIM Lifetime Plus
AIM Lifetime Plus II
Allstate Provider Variable Annuity
Custom Portfolio
Select Directions
Supplement, dated May 1, 2009
This supplement amends certain disclosure contained in the prospectus for
certain annuity contracts issued by Allstate Life Insurance Company of New York.
Under the "More Information" section, the subsection entitled "Legal Matters" is
deleted and replaced with the following:
LEGAL MATTERS
Certain matters of state law pertaining to the Contracts, including the validity
of the Contracts and Allstate New York's right to issue such Contracts under
applicable state insurance law, have been passed upon by Susan L. Lees, General
Counsel of Allstate New York.
The "Annual Reports and Other Documents" section is deleted and replaced with
the following:
ANNUAL REPORTS AND OTHER DOCUMENTS
Allstate Life Insurance Company of New York ("Allstate New York") incorporates
by reference into the prospectus its latest annual report on Form 10-K filed
pursuant to Section 13(a) or Section 15(d) of the Exchange Act since the end of
the fiscal year covered by its latest annual report, including filings made on
Form 10-Q and Form 8-K. In addition, all documents subsequently filed by
Allstate New York pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act also are incorporated into the prospectus by reference. Allstate New York
will provide to each person, including any beneficial owner, to whom a
prospectus is delivered, a copy of any or all of the information that has been
incorporated by reference into the prospectus but not delivered with the
prospectus. Such information will be provided upon written or oral request at no
cost to the requester by writing to Allstate New York, P.O. Box 70178,
Philadelphia, PA 19176 or by calling 1-877-234-8688. Allstate New York files
periodic reports as required under the Securities Exchange Act of 1934. The
public may read and copy any materials that Allstate New York files with the SEC
at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C.
20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site that contains reports, proxy, and information statements, and
other information regarding issuers that file electronically with the SEC (see
http://www.sec.gov).
EXPERTS
In the prospectus for Allstate Provider Variable Annuity, the section entitled
"Experts" is deleted.
AIM LIFETIME PLUS(SM) VARIABLE ANNUITY
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STREET ADDRESS: 2940 S. 84TH STREET, LINCOLN, NE 68506-4142 MAILING ADDRESS:
P.O. BOX 82656, LINCOLN, NE 68501-2656 TELEPHONE NUMBER: 1-800-692-4682
PROSPECTUS DATED APRIL 30, 2005
Allstate Life Insurance Company of New York ("Allstate New York") has issued the
AIM Lifetime Plus(SM) Variable Annuity, a group flexible premium deferred
variable annuity contract ("CONTRACT"). This prospectus contains information
about the Contract that you should know before investing. Please keep it for
future reference.
The Contract currently offers 19 investment alternatives ("INVESTMENT
ALTERNATIVES"). The investment alternatives include the fixed account ("FIXED
ACCOUNT") and 18 variable sub-accounts ("VARIABLE SUB-ACCOUNTS") of the Allstate
Life of New York Separate Account A ("VARIABLE ACCOUNT"). Each Variable
Sub-Account invests exclusively in shares of one of the following funds
("FUNDS") of AIM Variable Insurance Funds (Series I shares):
[Enlarge/Download Table]
AIM V.I. AGGRESSIVE GROWTH FUND - SERIES I AIM V.I. GOVERNMENT SECURITIES FUND -
AIM V.I. BALANCED FUND - SERIES I* SERIES I
AIM V.I. BASIC VALUE FUND - SERIES I AIM V.I. GROWTH FUND - SERIES I
AIM V.I. BLUE CHIP FUND - SERIES I AIM V.I. HIGH YIELD FUND - SERIES I
AIM V.I. CAPITAL APPRECIATION FUND - SERIES I AIM V.I. INTERNATIONAL GROWTH FUND -
AIM V.I. CAPITAL DEVELOPMENT FUND - SERIES I SERIES I
AIM V.I. CORE EQUITY FUND - SERIES I AIM V.I. MID CAP CORE EQUITY FUND -
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND - SERIES I** SERIES I
AIM V.I. DIVERSIFIED INCOME FUND - SERIES I AIM V.I. MONEY MARKET FUND - SERIES I
AIM V.I. PREMIER EQUITY FUND - SERIES I
AIM V.I. TECHNOLOGY FUND - SERIES I
AIM V.I. UTILITIES FUND - SERIES I
* Effective July 1, 2005, the AIM V.I. Balanced Fund-Series I will change its
name to AIM V.I. Basic Balanced Fund-Series I.
** Effective July 1, 2005, the AIM V.I. Dent Demographic Trends Fund - Series
I will change its name to AIM V.I. Demographic Trends Fund - Series I.
THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED
OR DISAPPROVED THE
SECURITIES DESCRIBED IN
THIS PROSPECTUS, NOR HAS IT
PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS
PROSPECTUS. ANYONE WHO
TELLS YOU OTHERWISE IS
COMMITTING A FEDERAL CRIME.
THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS
IMPORTANT THAT HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
NOTICES INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
THE CONTRACTS WERE ONLY
AVAILABLE IN NEW YORK, BUT
ARE NO LONGER AVAILABLE FOR
SALE.
WE (Allstate New York) have filed a Statement of Additional Information, dated
April 30, 2005, with the Securities and Exchange Commission ("SEC"). It contains
more information about the Contract and is incorporated herein by reference,
which means it is legally a part of this prospectus. Its table of contents
appears on page 40 of this prospectus. For a free copy, please write or call us
at the address or telephone number above, or go to the SEC's Web site (http://
www.sec.gov) You can find other information and documents about us, including
documents that are legally part of this prospectus, at the SEC's Web site.
1 PROSPECTUS
TABLE OF CONTENTS
PAGE
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OVERVIEW
Important Terms 3
The Contract at a Glance 4
How the Contract Works 6
Expense Table 7
Financial Information 9
CONTRACT FEATURES
The Contract 9
Purchases 10
Contract Value 11
Investment Alternatives 12
The Variable Sub-Accounts 12
The Fixed Account 13
Transfers 15
Expenses 17
Other Expenses 19
Access To Your Money 19
PAGE
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Income Payments 20
Death Benefits 22
OTHER INFORMATION
More Information: 24
Allstate New York 24
The Variable Account 24
The Funds 24
The Contract 25
Non-Qualified Annuities Held Within a Qualified Plan 25
Legal Matters 26
Taxes 27
Annual Reports and Other Documents 34
APPENDIX A-ACCUMULATION UNIT VALUES AND NUMBER OF ACCUMULATION
UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE
CONTRACTS WERE FIRST OFFERED 35
APPENDIX B-MARKET VALUE ADJUSTMENT 39
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS 40
2 PROSPECTUS
IMPORTANT TERMS
--------------------------------------------------------------------------------
This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
PAGE
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Accumulation Phase 6
Accumulation Unit 11
Accumulation Unit Value 11
Allstate New York ("We" and/or "us") 1, 24
Anniversary Values 22
Annuitant 9
Automatic Additions Program 10
Automatic Fund Rebalancing Program 17
Beneficiary 9
*Contract 9
Contract Anniversary 5
Contract Owner ("You") 6
Contract Value 5
Contract Year 5
Death Benefit Anniversary 22
Dollar Cost Averaging Program 17
Due Proof of Death 22
Fixed Account 13
PAGE
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Funds 24
Guarantee Periods 13
Income Plans 20
Investment Alternatives 12
Issue Date 6
Market Value Adjustment 5, 14
Payout Phase 6
Payout Start Date 20
Preferred Withdrawal Amount 18
SEC 1
Settlement Value 22
Systematic Withdrawal Program 20
Tax Qualified Contracts 30
Treasury Rate 15
Valuation Date 10
Variable Account 24
Variable Sub-Account 12
* The AIM Lifetime Plus(SM) Variable Annuity is a group contract, and your
ownership is represented by certificates. References to "Contract" in this
prospectus include certificates, unless the context requires otherwise.
3 PROSPECTUS
THE CONTRACT AT A GLANCE
The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
FLEXIBLE PAYMENTS You can purchase a Contract with as
little as $5,000 ($2,000 for "QUALIFIED
CONTRACTS", which are Contracts issued with
qualified plans). You can add to your Contract
as often and as much as you like, but each
payment must be at least $500 ($100 for
automatic purchase payments to the variable
investment options). You must maintain a
minimum account size of $1,000.
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RIGHT TO CANCEL You may cancel your Contract by returning it to
us within 10 days after receipt ("CANCELLATION
PERIOD"). Upon cancellation, as permitted by
federal or state law, we will return your
purchase payments adjusted to reflect the
investment experience of any amounts allocated
to the Variable Account. The adjustment will
reflect the deduction of mortality and expense
risk charges and administrative expense
charges.
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EXPENSES You will bear the following expenses:
. Total Variable Account annual fees equal
to 1.45% of average daily net assets
. Annual contract maintenance charge of $35
(with certain exceptions)
. Withdrawal charges ranging from 0% to 7%
of payment withdrawn (with certain
exceptions)
. Transfer fee of $10 after 12th transfer in
any CONTRACT YEAR (fee currently waived)
. State premium tax (New York currently does
not impose one).
In addition, each Fund pays expenses that you
will bear indirectly if you invest in a
Variable Sub-Account.
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INVESTMENT The Contract offers 19 investment alternatives
ALTERNATIVES including:
. the Fixed Account (which credits interest
at rates we guarantee), and
. 18 Variable Sub-Accounts investing in
Funds offering professional money
management by A I M Advisors, Inc.
To find out current rates being paid on the
Fixed Account, or to find out how the Variable
Sub-Accounts have performed, please call us at
1-800-692-4682.
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SPECIAL SERVICES For your convenience, we offer these special
services:
. AUTOMATIC FUND REBALANCING PROGRAM
. AUTOMATIC ADDITIONS PROGRAM
. DOLLAR COST AVERAGING PROGRAM
. SYSTEMATIC WITHDRAWAL PROGRAM
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INCOME PAYMENTS You can choose fixed income payments, variable
income payments, or a combination of the two.
You can receive your income payments in one of
the following ways:
. life income with guaranteed payments
. a joint and survivor life income with
guaranteed payments
. guaranteed payments for a specified period
(5 to 30 years).
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DEATH BENEFITS If you or the Annuitant (if the Contract is
owned by a non-living person) die before the
PAYOUT START DATE, we will pay the death
benefit described in the Contract.
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4 PROSPECTUS
TRANSFERS Before the Payout Start Date, you may transfer
your Contract value ("CONTRACT VALUE") among
the investment alternatives, with certain
restrictions. Transfers to the Fixed Account
must be at least $500.
We do not currently impose a fee upon
transfers. However, we reserve the right to
charge $10 per transfer after the 12th transfer
in each "CONTRACT YEAR," which we measure from
the date we issue your contract or a Contract
anniversary ("CONTRACT ANNIVERSARY").
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WITHDRAWALS You may withdraw some or all of your Contract
Value at anytime during the Accumulation Phase.
Full or partial withdrawals are available under
limited circumstances on or after the Payout
Start Date.
In general, you must withdraw at least $50 at a
time. ($1,000 for withdrawals made during the
Payout Phase.) Withdrawals taken prior to
annuitization (referred to in this prospectus
as the Payout Phase) are generally considered
to come from the earnings in the Contract
first. If the Contract is tax-qualified,
generally all withdrawals are treated as
distributions of earnings. Withdrawals of
earnings are taxed as ordinary income and, if
taken prior to age 59 1/2, may be subject to an
additional 10% federal tax penalty. A
withdrawal charge and MARKET VALUE ADJUSTMENT
also may apply.
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5 PROSPECTUS
HOW THE CONTRACT WORKS
The Contract basically works in two ways.
First, the Contract can help you (we assume you are the CONTRACT OWNER) save for
retirement because you can invest in up to 19 investment alternatives and
generally pay no federal income taxes on any earnings until you withdraw them.
You do this during what we call the "ACCUMULATION PHASE" of the Contract. The
Accumulation Phase begins on the date we issue your Contract (we call that date
the "ISSUE DATE") and continues until the Payout Start Date, which is the date
we apply your money to provide income payments. During the Accumulation Phase,
you may allocate your purchase payments to any combination of the Variable
Sub-Accounts and/or the Fixed Account. If you invest in the Fixed Account, you
will earn a fixed rate of interest that we declare periodically. If you invest
in any of the Variable Sub-Accounts, your investment return will vary up or down
depending on the performance of the corresponding Funds.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/ or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page 20. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Funds. The amount of money you accumulate under
your Contract during the Accumulation Phase and apply to an Income Plan will
determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
[Enlarge/Download Table]
Issue Payout Start
Date Accumulation Phase Date Payout Phase
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You buy You save for retirement You elect to receive You can receive Or you can receive
a Contract income payments or income payments income payments
receive a lump sum for a set period for life
payment
As the Contract owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract owner, or if there is none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract owner or, if none, to your
Beneficiary. See "Death Benefits."
Please call us at 1-800-692-4682 if you have any questions about how the
Contract works.
6 PROSPECTUS
EXPENSE TABLE
The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes because New York currently does not impose premium taxes on
annuities. For more information about Variable Account expenses, see "Expenses,"
below. For more information about Fund expenses, please refer to the
accompanying prospectus for the Funds.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments withdrawn)*
[Enlarge/Download Table]
Number of Complete Years Since We Received the Purchase Payment 0 1 2 3 4 5 6 7+
Being Withdrawn
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Applicable Charge 7% 6% 5% 4% 3% 2% 1% 0%
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Annual Contract Maintenance Charge $35.00**
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Transfer Fee $10.00***
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* Each Contract Year, you may withdraw up to 10% of purchase payments without
incurring a withdrawal charge or a Market Value Adjustment.
** We will waive this charge in certain cases. See "Expenses."
*** Applies solely to the thirteenth and subsequent transfers within a Contract
Year excluding transfers due to dollar cost averaging or automatic fund
rebalancing. We are currently waiving the transfer fee.
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSET VALUE
DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT)
Mortality and Expense Risk Charge 1.35%
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Administrative Expense Charge 0.10%
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Total Variable Account Annual Expense 1.45%
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FUND ANNUAL EXPENSES
(as a percentage of Fund average daily net assets) (1)
The next table shows the minimum and maximum total operating expenses charged by
the Funds that you may pay periodically during the time that you own the
Contract. Advisers and/or other service providers of certain Funds may have
agreed to waive their fees and/or reimburse Fund expenses in order to keep the
Funds' expenses below specified limits. The range of expenses shown in this
table does not show the effect of any such fee waiver or expense reimbursement.
More detail concerning each Fund's fees and expenses appears in the prospectus
for each Fund.
ANNUAL FUND EXPENSES
Minimum Maximum
--------------------------------------------------------------------------------
Total Annual Fund Operating Expenses/(1)/
(expenses that are deducted from Fund assets,
which may include management fees, distribution
and/or services
(12b-1) fees, and
other expenses) 0.75% 1.16%
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(1) Expenses are shown as a percentage of Fund average daily net assets (before
any waiver or reimbursement) as of December 31, 2004.
7 PROSPECTUS
EXAMPLE 1
This Example is intended to help you compare the cost of investing in the
Contracts with the cost of investing in other variable annuity contracts. These
costs include Contract owner transaction expenses, Contract fees, Variable
Account annual expenses, and Fund fees and expenses. The example below shows the
dollar amount of expenses that you would bear directly or indirectly if you:
.. invested $10,000 in the Contract for the time periods indicated,
.. earned a 5% annual return on your investment, and
.. surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period.
The first line of the example assumes that the maximum fees and expenses of any
of the Funds are charged. The second line of the example assumes that the
minimum fees and expenses of any of the Funds are charged. Your actual expenses
may be higher or lower than those shown below.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------
Costs Based on Maximum Annual
Fund Expenses $842 $1,283 $1,746 $3,278
------------------------------------------------------------------------
Costs Based on Minimum Annual
Fund Expenses $800 $1,158 $1,538 $2,866
------------------------------------------------------------------------
EXAMPLE 2
This Example uses the same assumptions as Example 1 above, except that it
assumes you decided not to surrender your Contract, or you began receiving
income payments for a specified period of at least 120 months, at the end of
each time period.
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------
Costs Based on Maximum
Annual Fund Expenses $302 $923 $1,566 $3,278
------------------------------------------------------------------------
Costs Based on Minimum
Annual Fund Expenses $260 $798 $1,358 $2,866
------------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EXPENSES. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE
SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES DO NOT ASSUME THAT ANY FUND EXPENSE
WAIVERS OR REIMBURSEMENT ARRANGEMENTS ARE IN EFFECT FOR THE PERIODS PRESENTED.
THE ABOVE EXAMPLES ASSUME A MORTALITY AND EXPENSE RISK CHARGE OF 1.35%, AN
ADMINISTRATIVE EXPENSE CHARGE OF 0.10% AND AN ANNUAL CONTRACT CHARGE OF $35. THE
ABOVE EXAMPLES ASSUME TOTAL ANNUAL FUND EXPENSES LISTED IN THE EXPENSE TABLE
WILL CONTINUE THROUGHOUT THE PERIODS SHOWN.
8 PROSPECTUS
FINANCIAL INFORMATION
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund.
Attached as Appendix A to this prospectus are tables showing the Accumulation
Unit Values of each Variable Sub-Account since the date we first offered the
Contracts. To obtain a fuller picture of each Variable Sub-Account's finances,
please refer to the Variable Account's financial statements contained in the
Statement of Additional Information. The financial statements of Allstate New
York also appear in the Statement of Additional Information.
THE CONTRACT
CONTRACT OWNER
The AIM Lifetime Plus(SM) Variable Annuity is a contract between you, the
Contract owner, and Allstate New York, a life insurance company. As the Contract
Owner, you may exercise all of the rights and privileges provided to you by the
Contract. That means it is up to you to select or change (to the extent
permitted):
.. the investment alternatives during the Accumulation and Payout Phases,
.. the amount and timing of your purchase payments and withdrawals,
.. the programs you want to use to invest or withdraw money,
.. the income payment plan you want to use to receive retirement income,
.. the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
.. the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner or Annuitant dies,
and
.. any other rights that the Contract provides.
If you die, any surviving Contract Owner or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-living person and a living
person. If the Contract Owner is a Grantor Trust, the Owner will be considered a
non-living person for purpose of this section and the Death Benefit section. The
maximum issue age of a Contract owner is age 90 as of the date we receive the
completed application to purchase the Contract.
Changing ownership of this Contract may cause adverse tax consequences and may
not be allowed under qualified plans. Please consult with a competent tax
advisor prior to making a request for a change of Contract Owner.
The Contract can also be purchased as an IRA or TSA (also known as a 403(b)).
The endorsements required to qualify these annuities under the Internal Revenue
Code of 1986, as amended, ("Code") may limit or modify your rights and
privileges under the Contract.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. If
the Contract Owner is a living person you may change the Annuitant prior to the
Payout Start Date. In our discretion, we may permit you to designate a joint
Annuitant, who is a second person on whose life income payments depend, on the
Payout Start Date. The maximum issue age of an Annuitant cannot exceed age 80 as
of the date we receive the completed application to purchase the Contract.
If the Annuitant dies prior to the Payout Start Date, the new Annuitant will be:
.. the youngest Contract Owner if living, otherwise
.. the youngest Beneficiary.
BENEFICIARY
The Beneficiary is the person who may elect to receive the Death Benefit or
become the new Contract Owner, subject to the Death of Owner provisions, if the
sole surviving Contract Owner dies before the Payout Start Date. (See section
titled "Death Benefits" for more details.) If the sole surviving Contract Owner
dies after the Payout Start Date, the Beneficiary will receive any guaranteed
Income Payments scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You may
also name one or more contingent Beneficiaries who will receive any Death
Benefit or guaranteed income benefit if there are no surviving primary
Beneficiaries upon the death of the sole surviving Contract Owner. You may
change or add Beneficiaries at any time by writing to us, unless you have
designated an irrevocable Beneficiary. We will provide a change of Beneficiary
form to be signed and filed with us. Any change will be effective at the time
you sign the written notice, whether or not the Annuitant is living when we
receive the notice. Until we receive your written
9 PROSPECTUS
notice to change a Beneficiary, we are entitled to rely on the most recent
Beneficiary information in our files. We will not be liable as to any payment or
settlement made prior to receiving the written notice. Accordingly, if you wish
to change your Beneficiary, you should deliver your written notice to us
promptly.
If you did not name a Beneficiary or if the named Beneficiary is no longer
living and there are no other surviving Beneficiaries, the new Beneficiary will
be:
.. your spouse or, if he or she is no longer alive,
.. your surviving children equally, or if you have no surviving children,
.. your estate.
If more than one Beneficiary survives you, we will divide the Death Benefit
among your Beneficiaries according to your most recent written instructions. If
you have not given us written instructions, we will pay the Death Benefit in
equal amounts to the surviving Beneficiaries.
You may restrict income payments to Beneficiaries by providing us a written
request. Once we accept the written request, the change or restriction will take
effect as of the date you signed the request. Any change is subject to any
payment we make or other action we take before we accept the change.
MODIFICATION OF THE CONTRACT
Only an Allstate New York officer may approve a change in or waive any provision
of the Contract. Any change or waiver must be in writing. None of our agents has
the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law. If a provision of the Contract
is inconsistent with state law, we will follow state law.
ASSIGNMENT
No Owner has a right to assign any interest in a Contract as collateral or
security for a loan. However, you may assign periodic income payments under the
Contract prior to the Payout Start Date. No Beneficiary may assign benefits
under the Contract until they are due. We will not be bound by any assignment
until the assignor signs it and files it with us. We are not responsible for the
validity of any assignment. Federal law prohibits or restricts the assignment of
benefits under many types of retirement plans and the terms of such plans may
themselves contain restrictions on assignments. An assignment may also result in
taxes or tax penalties. YOU SHOULD CONSULT WITH AN ATTORNEY BEFORE TRYING TO
ASSIGN YOUR CONTRACT.
PURCHASES
MINIMUM PURCHASE PAYMENTS
Your initial Purchase Payment must be at least $5,000 ($2,000 for a Qualified
Contract). All subsequent Purchase Payments must be $500 or more. The maximum
Purchase Payment is $2,000,000 without prior approval. We reserve the right to
change the minimum Purchase Payment and to change the maximum Purchase Payment.
You may make Purchase Payments of at least $500 at any time prior to the Payout
Start Date. We also reserve the right to reject any application.
AUTOMATIC ADDITIONS PROGRAM
You may make additional purchase payments of at least $100 ($500 for allocation
to the Fixed Account) by automatically transferring amounts from your bank
account. Please consult with your sales representative for detailed information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
Purchase Payments among the Investment Alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by notifying us in writing. We reserve the right to limit the
availability of the Investment Alternatives.
We will allocate your additional purchase payments to the investment
alternatives according to your most recent instructions on file with us. Unless
you notify us in writing otherwise, we will allocate subsequent purchase
payments according to the allocation for the previous purchase payment. We will
effect any change in allocation instructions at the time we receive written
notice of the change in good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our service center. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit additional Purchase Payments to the Contract at
the close of the business day on which we receive the purchase payment at our
service center located in Vernon Hills, Illinois (mailing address: P.O. BOX
82656, LINCOLN, NE 68501-2656).
We are open for business each day Monday through Friday that the New York Stock
Exchange is open for business. We also refer to these days as "VALUATION DATES."
Our business day closes when the New York Stock Exchange closes, usually 4:00
p.m. Eastern Time
10 PROSPECTUS
(3:00 p.m. Central Time). If we receive your purchase payment after 4:00 p.m.
Eastern Time (3:00 p.m. Central Time) on any Valuation Date, we will credit your
purchase payment using the Accumulation Unit Values computed on the next
Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 10 day period after you receive the Contract (60 days if
you are exchanging another contract for the Contract described in this
prospectus.) You may return it by delivering it or mailing it to us. If you
exercise this "RIGHT TO CANCEL," the Contract terminates and we will pay you the
full amount of your purchase payments allocated to the Fixed Account Options.
Upon cancellation, as permitted by federal or state law, we will return your
purchase payments allocated to the Variable Account after an adjustment to
reflect investment gain or loss and any applicable charges that occurred from
the date of allocation through the date of cancellation. If your Contract is
qualified under Code Section 408(b), we will refund the greater of any purchase
payment or the Contract Value,
CONTRACT VALUE
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of the value of your Accumulation Units in the Variable Sub-Accounts you
have selected, plus the sum of Sub-Account values in the Fixed Account.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
credit to your Contract, we divide (i) the amount of the purchase payment or
transfer you have allocated to a Variable Sub-Account by (ii) the Accumulation
Unit Value of that Variable Sub-Account next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Sub-Account when the Accumulation Unit Value for the
Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable
Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
.. changes in the share price of the Fund in which the Variable Sub-Account
invests, and
.. the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have
accrued since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account on
each Valuation Date.
YOU SHOULD REFER TO THE PROSPECTUS FOR THE FUNDS THAT ACCOMPANIES THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH FUND ARE VALUED, SINCE
THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
11 PROSPECTUS
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
You may allocate your purchase payments to up to 18 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Fund. Each Fund
has its own investment objective(s) and policies. We briefly describe the Funds
below.
For more complete information about each Fund, including expenses and risks
associated with the Fund, please refer to the accompanying prospectus for the
Fund. You should carefully review the Fund prospectus before allocating amounts
to the Variable Sub-Accounts. A I M Advisors, Inc. serves as the investment
advisor to each Fund.
SERIES I SHARES: EACH FUND SEEKS*: INVESTMENT ADVISOR
-------------------------------------------------------------------------------
AIM V.I. Aggressive Long-term growth of capital
Growth Fund - Series
I**
-------------------------------------------------------------------------------
AIM V.I. Balanced Fund As high a total return as
- Series I*** possible, consistent with
preservation of capital
-------------------------------------------------------------------------------
AIM V.I. Basic Value Long-term growth of capital
Fund - Series I
-------------------------------------------------------------------------------
AIM V.I. Blue Chip Long-term growth of capital
Fund - Series I with a secondary objective of
current income
-------------------------------------------------------------------------------
AIM V.I. Capital Growth of capital
Appreciation Fund -
Series I
-------------------------------------------------------------------------------
AIM V.I. Capital Long-term growth of capital
Development Fund -
Series I
-------------------------------------------------------------------------------
AIM V.I. Core Equity Growth of capital
Fund - Series I A I M ADVISORS, INC..
-------------------------------------------------------------------------------
AIM V.I. Dent Long-term growth of capital
Demographic Trends
Fund - Series I****
-------------------------------------------------------------------------------
AIM V.I. Diversified High level of current income
Income Fund - Series
I
-------------------------------------------------------------------------------
AIM V.I. Government High level of current income
Securities Fund - consistent with reasonable
Series I concern for safety of
principal
-------------------------------------------------------------------------------
AIM V.I. Growth Fund - Growth of capital
Series I
-------------------------------------------------------------------------------
AIM V.I. High Yield High level of current income
Fund - Series I
-------------------------------------------------------------------------------
AIM V.I. International Long-term growth of capital
Growth Fund - Series
I
-------------------------------------------------------------------------------
AIM V.I. Mid Cap Core Long-term growth of capital
Equity Fund - Series
I
-------------------------------------------------------------------------------
AIM V.I. Money Market As high a level of current
Fund - Series I income as is consistent with
the preservation of capital
and liquidity
-------------------------------------------------------------------------------
AIM V.I. Premier Long-term growth of capital
Equity Fund - Series with income as a secondary
I objective
-------------------------------------------------------------------------------
AIM V.I. Technology Capital growth
Fund - Series I
-------------------------------------------------------------------------------
AIM V.I. Utilities Capital growth and current
Fund - Series I income
-------------------------------------------------------------------------------
* A Fund's investment objective(s) may be changed by the Fund's Board of
Trustees without shareholder approval.
** Due to the sometime limited availability of common stocks of small-cap
companies that meet the investment criteria for AIM V.I. Aggressive Growth
Fund - Series I, the Fund may periodically suspend or limit the offering of
its shares and it will be closed to new participants when Fund assets reach
$200 million. During the closed periods the Fund will accept additional
investments from existing Contract owners maintaining an allocation in the
Fund.
*** Effective July 1, 2005, the AIM V.I. Balanced Fund-Series I will change its
name to AIM V.I. Basic Balanced Fund-Series I. In addition, the Fund's
objective will change to long-term growth of capital and current income.
**** The AIM V.I. Dent Demographic Trends Fund - Series I is sub-advised by H.S.
Dent Advisors, Inc. Effective July 1, 2005, the AIM V.I. Dent Demographic
Trends Fund - Series I will change its name to AIM V.I. Demographic Trends
Fund - Series I. In addition, H.S. Dent Advisors, Inc. will no longer be
the sub-advisor to the Fund effective June 30, 2005.
AMOUNTS YOU ALLOCATE TO VARIABLE SUB-ACCOUNTS MAY GROW IN VALUE, DECLINE IN
VALUE, OR GROW LESS THAN YOU EXPECT, DEPENDING ON THE INVESTMENT PERFORMANCE OF
THE FUNDS IN WHICH THOSE VARIABLE SUB-ACCOUNTS INVEST. YOU BEAR THE INVESTMENT
RISK THAT THE FUNDS MIGHT NOT MEET THEIR INVESTMENT OBJECTIVES. SHARES OF THE
FUNDS
12 PROSPECTUS
ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT
You may allocate all or a portion of your purchase payments to the Fixed
Account. The Fixed Account supports our insurance and annuity obligations. The
Fixed Account consists of our general assets other than those in segregated
asset accounts. We have sole discretion to invest the assets of the Fixed
Account, subject to applicable law. Any money you allocate to the Fixed Account
does not entitle you to share in the investment experience of the Fixed Account.
GUARANTEE PERIODS
Each payment or transfer allocated to a Guarantee Period earns interest at a
specified rate that we guarantee for a period of years. Guarantee Periods may
range from 1 to 10 years. In the future, we may offer Guarantee Periods of
different lengths or stop offering some Guarantee Periods.
You select the Guarantee Period for each payment or transfer. If you do not
select a Guarantee Period, we will assign the same period(s) you selected for
your most recent purchase payment(s), if available.
Each purchase payment or transfer allocated to a Guarantee Period must be at
least $500. We reserve the right to limit the number of additional purchase
payments that you may allocate to the Fixed Account. Please consult with your
sales representative for more information.
INTEREST RATES. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We may declare different interest rates for
Guarantee Periods of the same length that begin at different times. We will not
change the interest rate that we credit to a particular allocation until the end
of the relevant Guarantee Period.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors. WE DETERMINE THE
INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN NEITHER PREDICT NOR
GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For current interest rate
information, please contact your sales representative or Allstate New York at
1-800-692-4682. The interest rate will never be less than the minimum guaranteed
amount stated in the Contract.
13 PROSPECTUS
HOW WE CREDIT INTEREST.
We will credit interest daily to each amount allocated to a Guarantee Period at
a rate that compounds to the effective annual interest rate that we declared at
the beginning of the applicable Guarantee Period.
The following example illustrates how a purchase payment allocated to the Fixed
Account would grow, given an assumed Guarantee Period and effective annual
interest rate:
Purchase Payment.................................................... $10,000
Guarantee Period.................................................... 5 years
Annual Interest Rate................................................ 4.50%
[Download Table]
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ------------
Beginning Contract
Value................ $10,000.00
X (1 + Annual
Interest Rate) 1.045
----------
$10,450.00
Contract Value at end
of Contract Year..... $10,450.00
X (1 + Annual
Interest Rate) 1.045
----------
$10,920.25
Contract Value at end
of Contract Year..... $10,920.25
X (1 + Annual
Interest Rate) 1.045
----------
$11,411.66
Contract Value at end
of Contract Year..... $11,411.66
X (1 + Annual
Interest Rate) 1.045
----------
$11,925.19
Contract Value at end
of Contract Year..... $11,925.19
X (1 + Annual
Interest Rate) 1.045
-----------
$12,461.82
TOTAL INTEREST CREDITED DURING GUARANTEE PERIOD = $2,461.82 ($12,461.82-$10,000)
This example assumes no withdrawals during the entire 5 year Guarantee Period.
If you were to make a withdrawal, you may be required to pay a withdrawal
charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. The hypothetical interest rate is for
illustrative purposes only and is not intended to predict current or future
interest rates to be declared under the Contract. Actual interest rates declared
for any given Guarantee Period may be more or less than shown above but will
never be less than the guaranteed minimum rate stated in the Contract.
RENEWALS. Prior to the end of each Guarantee Period, we will mail you a notice
asking you what to do with your money, including the accrued interest. At the
end of the Guarantee Period, we will automatically renew the Guarantee Period
value to a new Guarantee Period of the shortest duration available, to be
established on the day the previous Guarantee Period expired, or to the Money
Market Variable Sub-account if no Guarantee Periods are available at the time of
expiration of the previous Guarantee Period. Please consult with your
representative. During the 30-day period after the end of the Guarantee Period,
you may:
1) Take no action. We will automatically apply your money to a Guarantee Period
of the shortest duration available or the Money Market Variable Sub-account. The
new Guarantee Period will begin on the day the previous Guarantee Period ends.
Please consult with your representative. The new interest rate will be the rate
in effect on the 1/ST/ day of the New Period; or
2) Instruct us to apply your money to one or more new Guarantee Periods of your
choice. The new Guarantee Period(s) will begin on the day the previous Guarantee
Period ends. The new interest rate will be our then current declared rate for
those Guarantee Periods; or
3) Instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts. We will effect the transfer on the day we receive your
instructions. We will not adjust the amount transferred to include a Market
Value Adjustment; or
4) Withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to include a
Market Value Adjustment. You may also be required to pay premium taxes and
withholding (if applicable). The amount withdrawn will be deemed to have been
withdrawn on the day the previous Guarantee Period ends. Unless you specify
otherwise, amounts not withdrawn will be applied to a new Guarantee Period of
the shortest duration available. The new Guarantee Period will begin on the day
the previous Guarantee Period ends.
MARKET VALUE ADJUSTMENT. All withdrawals in excess of the Preferred Withdrawal
Amount, transfers, and amounts applied to an Income Plan from a Guarantee
Period, other than those taken or applied during the 30 day period after such
Guarantee Period expires, are
14 PROSPECTUS
subject to a Market Value Adjustment. A Market Value Adjustment also will apply
when you apply amounts currently invested in a Guarantee Period to an Income
Plan (unless applied during the 30 day period after such Guarantee Period
expires). A Market Value Adjustment may apply in the calculation of the
Settlement Value described below in the "Death Benefit Amount" section below. We
will not apply a Market Value Adjustment to a transfer you make as part of a
Dollar Cost Averaging Program. We also will not apply a Market Value Adjustment
to a withdrawal you make:
.. within the Preferred Withdrawal Amount as described on page 18; or
.. to satisfy the IRS minimum distribution rules.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time it is
removed from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the Treasury Rate for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the time remaining in the
Guarantee Period when you remove your money. "TREASURY RATE" means the U.S.
Treasury Note Constant Maturity Yield as reported in Federal Reserve Board
Statistical Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal of your
Contract Value to an amount that is less than the purchase payment plus interest
at the minimum guaranteed interest rate under the Contract.
Generally, if the Treasury Rate at the time you allocate money to a Guarantee
Period is higher than the applicable current Treasury Rate for a period equal to
the time remaining in the Guarantee Period, then the Market Value Adjustment
will result in a higher amount payable to you, transferred, or applied to an
Income Plan. Conversely, if the Treasury Rate at the time you allocate money to
a Guarantee Period is lower than the applicable Treasury Rate for a period equal
to the time remaining in the Guarantee Period, then the Market Value Adjustment
will result in a lower amount payable to you, transferred, or applied to an
Income Plan.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5 year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 2 year Treasury Rate is 4.20%, then the Market
Value Adjustment will be positive, which will result in an increase in the
amount payable to you. Conversely, if the current 2 year Treasury Rate is 4.80%,
then the Market Value Adjustment will be negative, which will result in a
decrease in the amount payable to you.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
INVESTMENT ALTERNATIVES: TRANSFERS
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may request in writing on a form that we provide or
by telephone according to the procedure described below. The minimum amount that
you may transfer into a Guarantee Period is $500. We currently do not assess,
but reserve the right to assess, a $10 charge on each transfer in excess of 12
per Contract Year. We treat transfers to or from more than one Fund on the same
day as one transfer.
We will process transfer requests that we receive before 4:00 p.m. Eastern Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 4:00 p.m. on any Valuation Date using the
Accumulation Unit Values for the next Valuation Date. The Contract permits us to
defer transfers from the Fixed Account for up to 6 months from the date we
receive your request. If we decide to postpone transfers from any Guarantee
Period for 10 days or more, we will pay interest as required by applicable law.
Any interest would be payable from the date we receive the transfer request to
the date we make the transfer. If you transfer an amount from a Guarantee Period
other than during the 30 day period after such Guarantee Period expires, we will
increase or decrease the amount by a Market Value Adjustment.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
to change the relative weighting of the Variable Sub-Accounts on which your
variable income payments will be based. In addition, you will have a limited
ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive fixed income payments
into variable income payments.
You may not make any transfers for the first 6 months after the Payout Start
Date. Thereafter, you may make transfers among the Variable Sub-Accounts or make
transfers from the Variable Sub-Accounts to increase the
15 PROSPECTUS
proportion of your income payments consisting of fixed income payments. Your
transfers must be at least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-692-4682, if you first send
us a completed authorization form. The cut off time for telephone transfer
requests is 4:00 p.m. Eastern Time. In the event that the New York Stock
Exchange closes early, i.e., before 4:00 p.m. Eastern Time, or in the event that
the Exchange closes early for a period of time but then reopens for trading on
the same day, we will process telephone transfer requests as of the close of the
Exchange on that particular day. We will not accept telephone requests received
at any telephone number other than the number that appears in this paragraph or
received after the close of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privilege, as well as
any other electronic or automated means we previously approved, at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
MARKET TIMING & EXCESSIVE TRADING
The Contracts are intended for long-term investment. Market timing and excessive
trading can potentially dilute the value of Variable Sub-Accounts and can
disrupt management of a Fund and raise its expenses, which can impair Fund
performance and adversely affect your Contract Value. Our policy is not to
accept knowingly any money intended for the purpose of market timing or
excessive trading. Accordingly, you should not invest in the Contract if your
purpose is to engage in market timing or excessive trading, and you should
refrain from such practices if you currently own a Contract.
We seek to detect market timing or excessive trading activity by reviewing
trading activities. Funds also may report suspected market-timing or excessive
trading activity to us. If, in our judgment, we determine that the transfers are
part of a market timing strategy or are otherwise harmful to the underlying
Fund, we will impose the trading limitations as described below under "Trading
Limitations." Because there is no universally accepted definition of what
constitutes market timing or excessive trading, we will use our reasonable
judgment based on all of the circumstances.
While we seek to deter market timing and excessive trading in Variable
Sub-Accounts, because our procedures involve the exercise of reasonable
judgment, we may not identify or prevent some market timing or excessive
trading. Moreover, imposition of trading limitations is triggered by the
detection of market timing or excessive trading activity, and the trading
limitations are not applied prior to detection of such trading activity.
Therefore, our policies and procedures do not prevent such trading activity
before it is detected. As a result, some investors may be able to engage in
market timing and excessive trading, while others are prohibited, and the
portfolio may experience the adverse effects of market timing and excessive
trading described above.
TRADING LIMITATIONS
We reserve the right to limit transfers among the investment alternatives in any
Contract Year, or to refuse any transfer request, if:
.. we believe, in our sole discretion, that certain trading practices, such as
excessive trading, by, or on behalf of, one or more Contract Owners, or a
specific transfer request or group of transfer requests, may have a
detrimental effect on the Accumulation Unit Values of any Variable
Sub-Account or on the share prices of the corresponding Fund or otherwise
would be to the disadvantage of other Contract Owners; or
.. we are informed by one or more of the Funds that they intend to restrict
the purchase, exchange, or redemption of Fund shares because of excessive
trading or because they believe that a specific transfer or group of
transfers would have a detrimental effect on the prices of Fund shares.
In making the determination that trading activity constitutes market timing or
excessive trading, we will consider, among other things:
.. the total dollar amount being transferred, both in the aggregate and in the
transfer request;
.. the number of transfers you make over a period of time and/or the period of
time between transfers (note: one set of transfers to and from a Variable
Sub-Account in a short period of time can constitute market timing);
.. whether your transfers follow a pattern that appears designed to take
advantage of short term market fluctuations, particularly within certain
Variable Sub-Account underlying Funds that we have identified as being
susceptible to market timing activities;
.. whether the manager of the underlying Fund has indicated that the transfers
interfere with Fund management or otherwise adversely impact the Fund; and
.. the investment objectives and/or size of the Variable Sub-Account
underlying Fund.
We seek to apply these trading limitations uniformly. However, because these
determinations involve the exercise of discretion, it is possible that we may
not detect some market timing or excessive trading activity. As a
16 PROSPECTUS
result, it is possible that some investors may be able to engage in market
timing or excessive trading activity, while others are prohibited, and the Fund
may experience the adverse effects of market timing and excessive trading
described above.
If we determine that a Contract Owner has engaged in a pattern of market timing
or excessive trading activity involving multiple Variable Sub-Accounts, we will
require that all future transfer requests be submitted through regular U.S. mail
thereby refusing to accept transfer requests via telephone, facsimile, Internet,
or overnight delivery. In addition, for Contracts issued on or after May 1,
2000, if we determine that a Contract Owner has engaged in market timing or
excessive trading activity, we will also restrict that Contract Owner from
making future additions or transfers into the impacted Variable Sub-Account(s).
In our sole discretion, we may revise our Trading Limitations at any time as
necessary to better deter or minimize market timing and excessive trading or to
comply with regulatory requirements.
DOLLAR COST AVERAGING PROGRAM
Through the Dollar Cost Averaging Program, you may automatically transfer a set
amount at regular intervals during the Accumulation Phase from any Variable
Sub-Account, or the 1 year Guarantee Period of the Fixed Account, to any other
Variable Sub-Account. The interval between transfers may be monthly, quarterly,
semi-annually, or annually. You may not use dollar cost averaging to transfer
amounts to the Fixed Account.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfers count against the 12 transfers you can make each Contract
Year without paying a transfer fee. In addition, we will not apply the Market
Value Adjustment to these transfers.
The theory of dollar cost averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market. Call or write us for instructions on how to enroll.
AUTOMATIC FUND REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our Automatic Fund Rebalancing
Program, we will automatically rebalance the Contract Value in each Variable
Sub-Account and return it to the desired percentage allocations. Money you
allocate to the Fixed Account will not be included in the rebalancing.
We will rebalance your account each quarter according to your instructions. We
will transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone. The new allocation will be effective
with the first rebalancing that occurs after we receive your request. We are not
responsible for rebalancing that occurs prior to receipt of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Sub-Accounts. You want 40% to be in the AIM V.I. Diversified Income Variable
Sub-Account and 60% to be in the AIM V.I. Growth Variable Sub-Account. Over the
next 2 months the bond market does very well while the stock market performs
poorly. At the end of the first quarter, the AIM V.I. Diversified Income
Variable Sub-Account now represents 50% of your holdings because of its increase
in value. If you choose to have your holdings rebalanced quarterly, on the first
day of the next quarter we would sell some of your units in the AIM V.I.
Diversified Income Variable Sub-Account and use the money to buy more units in
the AIM V.I. Growth Variable Sub-Account so that the percentage allocations
would again be 40% and 60% respectively.
The Automatic Fund Rebalancing Program is available only during the Accumulation
Phase. The transfers made under the Program do not count towards the 12
transfers you can make without paying a transfer fee, and are not subject to a
transfer fee.
Fund rebalancing is consistent with maintaining your allocation of investments
among market segments, although it is accomplished by reducing your Contract
Value allocated to the better performing segments.
EXPENSES
As a Contract owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$35 contract maintenance charge from your Contract Value invested in each
17 PROSPECTUS
Variable Sub-Account in proportion to the amount invested. We also will deduct a
full contract maintenance charge if you withdraw your entire Contract Value,
unless your Contract qualifies for a waiver, described below. During the Payout
Phase, we will deduct the charge proportionately from each income payment.
The charge is for the cost of maintaining each Contract and the Variable
Account. Maintenance costs include expenses we incur in billing and collecting
purchase payments; keeping records; processing death claims, cash withdrawals,
and policy changes; proxy statements; calculating Accumulation Unit Values and
income payments; and issuing reports to Contract owners and regulatory agencies.
We cannot increase the charge. We will waive this charge if:
.. total purchase payments equal $50,000 or more, or
.. all money is allocated to the Fixed Account on a Contract Anniversary.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.35%
of the average daily net assets you have invested in the Variable Sub-Accounts.
The mortality and expense risk charge is for all the insurance benefits
available with your Contract (including our guarantee of annuity rates and the
death benefits), for certain expenses of the Contract, and for assuming the risk
(expense risk) that the current charges will not be sufficient in the future to
cover the cost of administering the Contract. If the charges under the Contract
are not sufficient, then we will bear the loss.
We guarantee the mortality and expense risk charge and we cannot increase it. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that exceed the
revenues from the contract maintenance charge. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We guarantee that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging Program or Automatic Fund
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 7% of the purchase payment(s) you
withdraw in excess of the Preferred Withdrawal Amount, adjusted by a Market
Value Adjustment. The charge declines annually to 0% after 7 complete years from
the day we receive the purchase payment being withdrawn. A schedule showing how
the charge declines appears on page 7. During each Contract Year, you can
withdraw up to 10% of purchase payments without paying the charge. Unused
portions of this 10% "PREFERRED WITHDRAWAL AMOUNT" are not carried forward to
future Contract Years.
We determine the withdrawal charge by;
.. multiplying the percentage corresponding to the number of complete years
since we received the purchase payment being withdrawn by
.. the part of each purchase payment withdrawal that is in excess of the
Preferred Withdrawal Amount, adjusted by a Market Value Adjustment.
We will deduct withdrawal charges, if applicable, from the amount paid. For
purposes of the withdrawal charge, we will treat withdrawals as coming from the
oldest purchase payments first. However, for federal income tax purposes, please
note that withdrawals are considered to have come first from earnings in the
Contract. Thus, for tax purposes, earnings are considered to come out first,
which means you pay taxes on the earnings portion of your withdrawal.
If you make a withdrawal before the Payout Start Date, we will apply the
withdrawal charge percentage in effect on the date of the withdrawal, or the
withdrawal charge percentage in effect on the following day, whichever is
lower.We do not apply a withdrawal charge in the following situations:
.. on the Payout Start Date (a withdrawal charge may apply if you elect to
receive income payments for a specified period of less than 120 months);
.. the death of the Contract owner or Annuitant (unless the Settlement Value
is used);
.. withdrawals taken to satisfy IRS minimum distribution rules for the
Contract; or
.. withdrawals made after all purchase payments have been withdrawn.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals may be subject to tax penalties or income tax and a Market Value
Adjustment. You should consult your
18 PROSPECTUS
own tax counsel or other tax advisers regarding any withdrawals.
We reserve the right to waive the withdrawal charge with respect to Contracts
issued to employees and registered representatives of any broker-dealer that has
entered into a sales agreement with ALFS, Inc. ("ALFS") to sell the Contracts
and all wholesalers and their employees that are under agreement with ALFS to
wholesale the Contract.
PREMIUM TAXES
Currently, we do not make deductions for premium taxes under the Contract
because New York does not charge premium taxes on annuities. We may deduct taxes
that may be imposed in the future from purchase payments or the Contract Value
when the tax is incurred or at a later time.
DEDUCTION FOR VARIABLE ACCOUNT INCOME TAXES
We are not currently making a provision for taxes. In the future, however, we
may make a provision for taxes if we determine, in our sole discretion, that we
will incur a tax as a result of the operation of the Variable Account. We will
deduct for any taxes we incur as a result of the operation of the Variable
Account, whether or not we previously made a provision for taxes and whether or
not it was sufficient. Our status under the Internal Revenue Code is briefly
described in the Taxes section.
OTHER EXPENSES
Each Fund deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Fund whose shares are held by
the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectus for the Funds. For a summary of current estimates of
those charges and expenses, see pages 7-8 above.
We may receive compensation from A I M Advisors, Inc., for administrative
services we provide to the Funds.
ACCESS TO YOUR MONEY
You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. Withdrawals also are available under limited circumstances on
or after the Payout Start Date. See "Income Plans" on page 20.
The amount payable upon withdrawal is the Contract Value next computed after we
receive the request for a withdrawal at our service center, adjusted by any
Market Value Adjustment, less any withdrawal charges, contract maintenance
charges, income tax withholding, and any premium taxes. We will pay withdrawals
from the Variable Account within 7 days of receipt of the request, subject to
postponement in certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account. To
complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
withdrawal charge and premium taxes.
You have the opportunity to name the investment alternative(s) from which you
are taking the withdrawal. If none is specified, we will deduct your withdrawal
pro-rata from the investment alternatives according to the value of your
investments therein.
In general, you must withdraw at least $50 at a time. You also may withdraw a
lesser amount if you are withdrawing your entire interest in a Variable Sub-
Account.
If you request a total withdrawal, we may require that you return your Contract
to us. We also will deduct a Contract Maintenance Charge of $35, unless we have
waived the Contract Maintenance Charge on your Contract.
Withdrawals taken prior to annuitization (referred to in this prospectus as the
Payout Phase) are generally considered to come from the earnings in the Contract
first. If the Contract is tax-qualified, generally all withdrawals are treated
as distributions of earnings. Withdrawals of earnings are taxed as ordinary
income and, if taken prior to age 59 1/2, may be subject to an additional 10%
federal tax penalty.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account for up to
6 months or shorter period if required by law. If we delay payment or transfer
for 10 days or more, we will pay interest as required by law. Any interest would
be payable from the date we receive the withdrawal request to the date we make
the payment or transfer.
19 PROSPECTUS
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. At our
discretion, systematic withdrawals may not be offered in conjunction with the
Dollar Cost Averaging or the Automatic Fund Rebalancing Programs.
Depending on fluctuations in the accumulation unit value of the Variable
Sub-Accounts and the value of the Fixed Account, systematic withdrawals may
reduce or even exhaust the Contract Value. We will make systematic withdrawal
payments to you or your designated payee. We may modify or suspend the
Systematic Withdrawal Program and charge a processing fee for the service. If we
modify or suspend the Systematic Withdrawal Program, existing systematic
withdrawal payments will not be affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce the amount in any
Guarantee Period to less than $500, we will treat it as a request to withdraw
the entire amount invested in such Guarantee Period. In addition, if your
request for a partial withdrawal would reduce the Contract Value to less than
$1,000, we may treat it as a request to withdraw your entire Contract Value.
Before terminating any Contract whose value has been reduced by withdrawals to
less than $1,000, we would inform you in writing of our intention to terminate
your Contract and give you at least 30 days in which to make an additional
Purchase Payment to restore your Contract's value to the contractual minimum of
$1,000. Your Contract will terminate if you withdraw all of your Contract Value.
We will, however, ask you to confirm your withdrawal request before terminating
your Contract. If we terminate your Contract, we will distribute to you its
Contract Value, adjusted by any applicable Market Value Adjustment, less
withdrawal and other charges, and applicable taxes. Your Contract will terminate
if you withdraw all of your Contract Value.
INCOME PAYMENTS
PAYOUT START DATE
The Payout Start Date is the day that we apply your Contract Value, adjusted by
any Market Value Adjustment and less any applicable taxes, to an Income Plan.
The Payout Start Date must be no later than the Annuitant's 90th birthday.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An "Income Plan" is a series of payments on a scheduled basis to you or to
another person designated by you. You may choose and change your choice of
Income Plan until 30 days before the Payout Start Date. If you do not select an
Income Plan, we will make income payments in accordance with Income Plan 1 with
guaranteed payments for 10 years. After the Payout Start Date, you may not make
withdrawals (except as described below) or change your choice of Income Plan.
Three Income Plans are available under the Contract. Each is available to
provide:
.. fixed income payments;
.. variable income payments; or
.. a combination of the two.
A portion of each payment will be considered taxable and the remaining portion
will be a non-taxable return of your investment in the Contract, which is also
called the "basis". Once the basis in the Contract is depleted, all remaining
payments will be fully taxable. If the Contract is tax-qualified, generally, all
payments will be fully taxable. Taxable payments taken prior to age 59 1/2, may
be subject to an additional 10% federal tax penalty.
The three Income Plans are:
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as required by
the Contract.
INCOME PLAN 3 - GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30
YEARS). Under this plan, we make periodic income payments for the period you
have chosen. These payments do not depend on the Annuitant's life. Income
payments for less than 120 months may be subject to a withdrawal charge. We will
deduct the mortality and expense risk charge from the Variable Sub-Account
assets that support the variable income payments even though we may not bear any
mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule,
20 PROSPECTUS
longer guarantee periods result in lower income payments, all other things being
equal. For example, if you choose an Income Plan with payments that depend on
the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant is alive before
we make each payment. Please note that under such Income Plans, if you elect to
take no minimum guaranteed payments, it is possible that the payee could receive
only 1 income payment if the Annuitant and any joint Annuitant both die before
the second income payment, or only 2 income payments if they die before the
third income payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or part of the Variable Account portion of
the income payments at any time and receive a lump sum equal to the present
value of the remaining variable payments associated with the amount withdrawn.
To determine the present value of any remaining variable income payments being
withdrawn, we use a discount rate equal to the assumed annual investment rate
that we use to compute such variable income payments. The minimum amount you may
withdraw under this feature is $1,000. A withdrawal charge may apply. We deduct
applicable premium taxes from the Contract Value at the Payout Start Date.
We may make other Income Plans available. You may obtain information about them
by writing or calling us.
You must apply at least the Contract Value in the Fixed Account on the Payout
Start Date to fixed income payments. If you wish to apply any portion of your
Fixed Account balance to provide variable income payments, you should plan ahead
and transfer that amount to the Variable Sub-Accounts prior to the Payout Start
Date. If you do not tell us how to allocate your Contract Value among fixed and
variable income payments, we will apply your Contract Value in the Variable
Account to variable income payments and your Contract Value in the Fixed Account
to fixed income payments.
We will apply your Contract Value, adjusted by any applicable Market Value
Adjustment, less applicable taxes to your Income Plan on the Payout Start Date.
If the amount available to apply under an Income Plan is less than $2,000 or not
enough to provide an initial payment of at least $20, and state law permits, we
may:
.. pay you the Contract Value, adjusted by any Market Value Adjustment and
less any applicable taxes, in a lump sum instead of the periodic payments
you have chosen; or
.. reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Funds and (b) the Annuitant could live longer or shorter than we
expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate. Please refer to the
Statement of Additional Information for more detailed information as to how we
determine variable income payments.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from the Fixed Account for the
duration of the Income Plan. We calculate the fixed income payments by:
1) adjusting the portion of the Contract Value in the Fixed Account on the
Payout Start Date by any applicable Market Value Adjustment;
2) deducting any applicable premium tax; and
3) applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as
we are offering at that time.
We may defer making fixed income payments for a period of up to 6 months or such
shorter time as state law may require. If we defer payments for 10 business days
or more, we will pay interest as required by law from the date we receive the
withdrawal request to the date we make payment.
21 PROSPECTUS
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age. However, we
reserve the right to use income payment tables that do not distinguish on the
basis of sex to the extent permitted by law. In certain employment-related
situations, employers are required by law to use the same income payment tables
for men and women. Accordingly, if the Contract is to be used in connection with
an employment-related retirement or benefit plan, you should consult with legal
counsel as to whether the purchase of a Contract is appropriate. For qualified
plans, where it is appropriate, we may use income payment tables that do not
distinguish on the basis of sex.
DEATH BENEFITS
We will pay a death benefit if, prior to the Payout Start Date:
1. any Contract owner dies; or
2. the Annuitant dies, if the Contract owner is not a living person.
We will pay the death benefit to the new Contract owner who is determined
immediately after the death. The new Contract owner would be a surviving
Contract owner or, if none, the Beneficiary(ies). In the case of a Contract
owned by a non-living owner, upon death of an Annuitant, we will pay the death
benefit to the current Contract owner.
We will not settle any death claim until we receive DUE PROOF OF DEATH.
We will accept the following documentation as Due Proof of Death:
.. a certified copy of a death certificate; or
.. a certified copy of a decree of a court of competent jurisdiction as to a
finding of death; or
any other proof acceptable to us.
Where there are multiple beneficiaries, we will only value the death benefit at
the time the first beneficiary submits the necessary documentation in good
order. Any death benefit amounts attributable to any beneficiary which remain in
the investment divisions are subject to investment risk.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest of:
1. the Contract Value as of the date we determine the death benefit; or
2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value) on the date we determine the death benefit; or
3. the Contract Value on the DEATH BENEFIT ANNIVERSARY immediately preceding
the date we determine the death benefit, adjusted by any purchase payments,
partial withdrawals and charges made since that Death Benefit Anniversary.
A "Death Benefit Anniversary" is every seventh Contract Anniversary
beginning with the Issue Date. For example, the Issue Date, 7th and 14th
Contract Anniversaries are the first three Death Benefit Anniversaries; or
4. the greatest of the ANNIVERSARY VALUES as of the date we determine the
death benefit. An "Anniversary Value" is equal to the Contract Value on a
Contract Anniversary, increased by purchase payments made since that
Anniversary and reduced by the amount of any partial withdrawals since that
anniversary. Anniversary Values will be calculated for each Contract
Anniversary prior to the earlier of: (i) the date we determine the death
benefit; or (ii) the deceased's 75th birthday or 5 years after the Issue
Date, if later.
In calculating the Settlement Value, the amount in each individual Guarantee
Period may be subject to a Market Value Adjustment. A Market Value Adjustment
will apply to amounts in a Guarantee Period, unless we calculate the Settlement
Value during the 30-day period after the expiration of the Guarantee Period.
Also, the Settlement Value will reflect deduction of any applicable withdrawal
charges, contract maintenance charges, and premium taxes.
We will determine the value of the death benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit,
which includes Due Proof of Death. If we receive a request after 4:00 p.m.
Eastern Time (3:00 p.m. Central Time) on a Valuation Date, we will process the
request as of the end of the following Valuation Date.
DEATH BENEFIT PAYMENTS
If the new Owner is your spouse, the new Owner may:
1. elect to receive the Death Benefit in a lump sum, or
2. elect to apply the Death Benefit to an Income Plan. Payments from the
Income Plan must begin within 1 year of the date of death and must be
payable throughout:
.. The life of the new Owner; or
.. for a guaranteed number of payments from 5 to 50 years, but not to exceed
the life expectancy of the new Owner; or
.. over the life of the new Owner with a guaranteed number of payments from 5
to 30 years but not to exceed the life expectancy of the new Owner.
If your spouse does not elect one of the above options above, the Contract will
continue in the Accumulation
22 PROSPECTUS
Phase as if the death had not occurred. If the Contract is continued in the
Accumulation Phase, the following restrictions apply:
.. On the date the Contract is continued, the Contract Value will equal the
amount of the Death Benefit as determined as of the Valuation Date on which
we received the completed request for settlement of the Death Benefit (the
next Valuation Date, if we receive the completed request for settlement of
the Death Benefit after 3 p.m. Central Time). Unless otherwise instructed
by the continuing spouse, the excess, if any, of the Death Benefit over the
Contract Value will be allocated to the Sub-Accounts of the Variable
Account. This excess will be allocated in proportion to your Contract Value
in those Sub-accounts as of the end of the Valuation Period during which we
receive the completed request for settlement of the Death Benefit, except
that any portion of this excess attributable to the Fixed Account Options
will be allocated to the Money Market Sub-account. Within 30 days of the
date the Contract is continued, your surviving spouse may choose one of the
following transfer alternatives without incurring a transfer fee:
.. transfer all or a portion of the excess among the Variable Sub-Accounts;
.. transfer all or a portion of the excess into the Guaranteed Maturity Fixed
Account and begin a new Guarantee Period; or
.. transfer all or a portion of the excess into a combination of Variable
Sub-Accounts and the Guaranteed Maturity Fixed Account.
Any such transfer does not count as one of the free transfers allowed each
Contract Year and is subject to any minimum allocation amount specified in your
Contract.
The surviving spouse may make a single withdrawal of any amount within one year
of the date of death without incurring a Withdrawal Charge.
Only one spousal continuation is allowed under this Contract.
If the new Owner is not your spouse but is a living person, the new Owner may:
1) elect to receive the Death Benefit in a lump sum, or
2) elect to apply the Death Benefit to an Income Plan. Payments from the
Income Plan must begin within 1 year of the date of death and must be
payable throughout:
.. the life of the new Owner; or
.. for a guaranteed number of payments from 5 to 50 years, but not to exceed
the life expectancy of the new Owner; or
.. over the life of the new Owner with a guaranteed number of payments from 5
to 30 years but not to exceed the life expectancy of the new Owner.
If the new Owner does not elect one of the above options above, then the new
Owner must receive the Contract Value payable within 5 years of your date of
death. The Contract Value will equal the amount of the Death Benefit as
determined as of the Valuation Date on which we received the completed request
for settlement of the Death Benefit (the next Valuation Date, if we receive the
completed request for settlement of the Death Benefit after 3 p.m. Central
Time). Unless otherwise instructed by the new Owner, the excess, if any, of the
Death Benefit over the Contract Value will be allocated to the Money Market
Variable Sub-Account. The new Owner may exercise all rights as set forth in the
TRANSFERS section during this 5 year period.
No additional Purchase Payments may be added to the Contract under this
election. Withdrawal Charges will be waived for any withdrawals made during this
5 year period.
If the new Owner dies prior to the receiving all of the Contract Value, then the
new Owner's named Beneficiary(ies) will receive the greater of the Settlement
Value or the remaining Contract Value. This amount must be received as a lump
sum within 5 years of the date of the original Owner's death.
We reserve the right to offer additional options upon Death of Owner.
If the new Owner is a corporation, trust, or other non-living person:
(a) The new Owner may elect, within 180 days of the date of death, to receive
the Death Benefit in a lump sum; or
(b) If the new Owner does not elect the option above, then the new Owner must
receive the Contract Value payable within 5 years of your date of death. On
the date we receive the complete request for settlement of the Death
Benefit, the Contract Value under this option will be the Death Benefit.
Unless otherwise instructed by the new Owner, the excess, if any of the
Death Benefit over the Contract Value will be allocated to the Money Market
Variable Sub-Account. The new Owner may exercise all rights set forth in
the Transfers provision during this 5 year period.
We reserve the right to offer additional options upon Death of Owner.
If any new Owner is a non-living person, all new Owners will be considered to be
non-living persons for the above purposes.
Under any of these options, all ownership rights, subject to any restrictions
previously placed upon the Beneficiary, are available to the new Owner from the
date of your death to the date on which the death proceeds are paid.
DEATH OF ANNUITANT
If the Annuitant who is not also the Contract Owner dies prior to the Payout
Start Date and the Contract Owner is
23 PROSPECTUS
a living person, then the Contract will continue with a new Annuitant as
designated by the Contract Owner.
If the Annuitant who is not also the Contract Owner dies prior to the Payout
Start Date and the Contract Owner is a non-living person, the following apply:
(a) The Contract Owner may elect to receive the Death Benefit in a lump sum; or
(b) If the new Owner does not elect the option above, then the Owner must
receive the Contract Value payable within 5 years of the Annuitant's date
of death. On the date we receive the complete request for settlement of the
Death Benefit, the Contract Value under this option will be the Death
Benefit. Unless otherwise instructed by the Contract Owner, the excess, if
any, of the Death Benefit over the Contract Value will be allocated to the
Money Market Variable Sub-Account. The Contract Owner may then exercise all
rights set forth in the Transfers provision during this 5 year period.
We reserve the right to offer additional options upon Death of Annuitant.
MORE INFORMATION
ALLSTATE NEW YORK
Allstate New York is the issuer of the Contract. Allstate New York is a stock
life insurance company organized under the laws of the State of New York.
Allstate New York was incorporated in 1967 and was known as "Financial Life
Insurance Company" from 1967 to 1978. From 1978 to 1984, Allstate New York was
known as "PM Life Insurance Company." Since 1984 the company has been known as
"Allstate Life Insurance Company of New York."
Allstate New York is currently licensed to operate in New York. Our home office
is located at 100 Motor Parkway, Hauppauge, NY 11788-5107. Our service center is
located in Vernon Hills, Illinois.
Allstate New York is a wholly owned subsidiary of Allstate Life Insurance
Company ("Allstate Life"), a stock life insurance company incorporated under the
laws of the State of Illinois. Allstate Life is a wholly owned subsidiary of
Allstate Insurance Company, a stock property-liability insurance company
incorporated under the laws of Illinois. With the exception of the directors
qualifying shares, all of the outstanding capital stock of Allstate Insurance
Company is owned by The Allstate Corporation.
THE VARIABLE ACCOUNT
Allstate New York established the Allstate Life of New York Separate Account A
on December 15, 1995. We have registered the Variable Account with the SEC as a
unit investment trust. The SEC does not supervise the management of the Variable
Account or Allstate New York.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under New York law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
Allstate New York.
The Variable Account consists of multiple Variable Sub-Accounts, 18 of which are
available through the Contracts. Each Variable Sub-Account invests in a
corresponding Fund. We may add new Variable Sub-Accounts or eliminate one or
more of them, if we believe marketing, tax, or investment conditions so warrant.
We do not guarantee the investment performance of the Variable Account, its
Sub-Accounts or the Funds. We may use the Variable Account to fund our other
annuity contracts. We will account separately for each type of annuity contract
funded by the Variable Account.
THE FUNDS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Funds in shares of the
distributing Fund at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Funds held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Funds that we hold
directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Fund as of the record date of
the meeting. After the Payout Start Date, the person receiving income payments
has the voting interest. The payee's number of votes will be determined by
dividing the reserve for such Contract allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Fund. The
votes decrease as income payments are made and as the reserves for the Contract
decrease.
24 PROSPECTUS
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted on a pro-rata basis to reduce the votes eligible
to be cast.
We reserve the right to vote Fund shares as we see fit without regard to voting
instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN FUNDS. If the shares of any of the Funds are no longer available for
investment by the Variable Account or if, in our judgment, further investment in
such shares is no longer desirable in view of the purposes of the Contract, we
may eliminate that Fund and substitute shares of another eligible investment
fund. Any substitution of securities will comply with the requirements of the
1940 Act. We also may add new Variable Sub-Accounts that invest in underlying
Funds. We will notify you in advance of any changes.
CONFLICTS OF INTEREST. Certain of the Funds sell their shares to Variable
Accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance Variable Accounts and variable annuity Variable Accounts to invest in
the same Fund. The boards of trustees of these Funds monitor for possible
conflicts among Variable Accounts buying shares of the Funds. Conflicts could
develop for a variety of reasons. For example, differences in treatment under
tax and other laws or the failure by a Variable Account to comply with such laws
could cause a conflict. To eliminate a conflict, a Fund's board of trustees may
require a Variable Account to withdraw its participation in a Fund. A Fund's net
asset value could decrease if it had to sell investment securities to pay
redemption proceeds to a Variable Account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. ALFS, Inc. ("ALFS"), located at 3100 Sanders Road, Northbrook,
Illinois 60062, serves as principal underwriter of the Contracts. ALFS is a
wholly owned subsidiary of Allstate Life Insurance Company. ALFS is a registered
broker dealer under the Securities and Exchange Act of 1934, as amended
("EXCHANGE ACT"), and is a member of the NASD.
We will pay commissions to broker-dealers who sell the Contracts. Commissions
paid may vary, but we estimate that the total commissions paid on all Contract
sales will not exceed 8 1/2% of any purchase payments. Sometimes, we also pay
the broker-dealer a persistency bonus in addition to the standard commissions. A
persistency bonus is not expected to exceed .56%, on an annual basis, of the
purchase payments considered in connection with the bonus. These commissions are
intended to cover distribution expenses.
Allstate New York does not pay ALFS a commission for distribution of the
Contracts. The underwriting agreement with ALFS provides that we will reimburse
ALFS for any liability to Contract owners arising out of services rendered or
Contracts issued.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account.
We provide the following administrative services, among others:
.. issuance of the Contracts;
.. maintenance of Contract owner records;
.. Contract owner services;
.. calculation of unit values;
.. maintenance of the Variable Account; and
.. preparation of Contract owner reports.
We will send you Contract statements and transaction confirmations at least
annually. The annual statement details values and specific Contract data for
each particular Contract. You should notify us promptly in writing of any
address change. You should read your statements and confirmations carefully and
verify their accuracy. You should contact us promptly if you have a question
about a periodic statement. We will investigate all complaints and make any
necessary adjustments retroactively, but you must notify us of a potential error
within a reasonable time after the date of the questioned statement. If you wait
too long, we will make the adjustment as of the date that we receive notice of
the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
NON-QUALIFIED ANNUITIES HELD WITHIN A QUALIFIED PLAN
If you use the Contract within an employer sponsored qualified retirement plan,
the plan may impose different or additional conditions or limitations on
withdrawals, waivers of withdrawal charges, death benefits, Payout Start Dates,
income payments and other Contract features. In addition, adverse tax
consequences may result if qualified plan limits on distributions and other
conditions are not met. Please consult your qualified plan administrator for
more information. Allstate Life Insurance Company of New York no longer issues
deferred annuities to employer sponsored qualified retirement plans.
25 PROSPECTUS
LEGAL MATTERS
All matters of New York law pertaining to the Contracts, including the validity
of the Contracts and Allstate New York's right to issue such Contracts under New
York insurance law, have been passed upon by Michael J. Velotta, General Counsel
of Allstate New York.
26 PROSPECTUS
TAXES
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. ALLSTATE
NEW YORK MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
Allstate New York is taxed as a life insurance company under Part I of
Subchapter L of the Code. Since the Variable Account is not an entity separate
from Allstate New York, and its operations form a part of Allstate New York, it
will not be taxed separately. Investment income and realized capital gains of
the Variable Account are automatically applied to increase reserves under the
Contract. Under existing federal income tax law, Allstate New York believes that
the Variable Account investment income and capital gains will not be taxed to
the extent that such income and gains are applied to increase the reserves under
the Contract. Accordingly, Allstate New York does not anticipate that it will
incur any federal income tax liability attributable to the Variable Account, and
therefore Allstate New York does not intend to make provisions for any such
taxes. If Allstate New York is taxed on investment income or capital gains of
the Variable Account, then Allstate New York may impose a charge against the
Variable Account in order to make provision for such taxes.
TAXATION OF VARIABLE ANNUITIES IN GENERAL
TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
.. the Contract Owner is a natural person,
.. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
.. Allstate New York is considered the owner of the Variable Account assets
for federal income tax purposes.
NON-NATURAL OWNERS. Non-natural owners are also referred to as Non Living Owners
in this prospectus. As a general rule, annuity contracts owned by non-natural
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. The income on such contracts
does not enjoy tax deferral and is taxed as ordinary income received or accrued
by the non-natural owner during the taxable year.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE. There are several exceptions to the
general rule that annuity contracts held by a non-natural owner are not treated
as annuity contracts for federal income tax purposes. Contracts will generally
be treated as held by a natural person if the nominal owner is a trust or other
entity which holds the contract as agent for a natural person. However, this
special exception will not apply in the case of an employer who is the nominal
owner of an annuity contract under a non-Qualified deferred compensation
arrangement for its employees. Other exceptions to the non-natural owner rule
are: (1) contracts acquired by an estate of a decedent by reason of the death of
the decedent; (2) certain qualified contracts; (3) contracts purchased by
employers upon the termination of certain qualified plans; (4) certain contracts
used in connection with structured settlement agreements; and (5) immediate
annuity contracts, purchased with a single premium, when the annuity starting
date is no later than a year from purchase of the annuity and substantially
equal periodic payments are made, not less frequently than annually, during the
annuity period.
GRANTOR TRUST OWNED ANNUITY. Contracts owned by a grantor trust are considered
owned by a non-natural owner. Grantor trust owned contracts receive tax deferral
as described in the Exceptions to the Non-Natural Owner Rule section. In
accordance with the Code, upon the death of the annuitant, the death benefit
must be paid. According to your Contract, the Death Benefit is paid to the
surviving Contract Owner. Since the trust will be the surviving Contract Owner
in all cases, the Death Benefit will be payable to the trust notwithstanding any
beneficiary designation on the annuity contract. A trust, including a grantor
trust, has two options for receiving any death benefits: 1) a lump sum payment;
or 2) payment deferred up to five years from date of death.
DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract owner during the taxable
year. Although Allstate New York does not have control over the Portfolios or
their investments, we expect the Portfolios to meet the diversification
requirements.
OWNERSHIP TREATMENT. The IRS has stated that a contract owner will be considered
the owner of separate account assets if he possesses incidents of ownership in
those assets, such as the ability to exercise investment control over the
assets. At the time the diversification regulations were issued, the Treasury
Department
27 PROSPECTUS
announced that the regulations do not provide guidance concerning circumstances
in which investor control of the separate account investments may cause a
Contract owner to be treated as the owner of the separate account. The Treasury
Department also stated that future guidance would be issued regarding the extent
that owners could direct sub-account investments without being treated as owners
of the underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
private and published rulings in which it found that Contract owners were not
owners of separate account assets. For example, if your contract offers more
than twenty (20) investment alternatives you have the choice to allocate
premiums and contract values among a broader selection of investment
alternatives than described in such rulings. You may be able to transfer among
investment alternatives more frequently than in such rulings. These differences
could result in you being treated as the owner of the Variable Account. If this
occurs, income and gain from the Variable Account assets would be includible in
your gross income. Allstate New York does not know what standards will be set
forth in any regulations or rulings which the Treasury Department may issue. It
is possible that future standards announced by the Treasury Department could
adversely affect the tax treatment of your Contract. We reserve the right to
modify the Contract as necessary to attempt to prevent you from being considered
the federal tax owner of the assets of the Variable Account. However, we make no
guarantee that such modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a Non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a full withdrawal
under a Non-Qualified Contract, the amount received will be taxable only to the
extent it exceeds the investment in the Contract.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a Non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If any variable payment is less than the excludable amount you should
contact a competent tax advisor to determine how to report any unrecovered
investment. The federal tax treatment of annuity payments is unclear in some
respects. As a result, if the IRS should provide further guidance, it is
possible that the amount we calculate and report to the IRS as taxable could be
different. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is possible that a greater or lesser portion of such a payment could be
taxable than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
.. if any Contract Owner dies on or after the Payout Start Date but before the
entire interest in the Contract has been distributed, the remaining portion
of such interest must be distributed at least as rapidly as under the
method of distribution being used as of the date of the Contract Owner's
death;
.. if any Contract Owner dies prior to the Payout Start Date, the entire
interest in the Contract will be distributed within 5 years after the date
of the Contract Owner's death. These requirements are satisfied if any
portion of the Contract Owner's interest that is payable to (or for the
benefit of) a designated Beneficiary is distributed over the life of such
Beneficiary (or over a period not extending beyond the life expectancy of
the Beneficiary) and the distributions begin within 1 year of the Contract
Owner's death. If the Contract Owner's designated Beneficiary is the
surviving spouse of the Contract Owner, the Contract may be continued with
the surviving spouse as the new Contract Owner;
.. if the Contract Owner is a non-natural person, then the Annuitant will be
treated as the Contract Owner for purposes of applying the distribution at
death rules. In addition, a change in the Annuitant on a Contract owned by
a non-natural person will be treated as the death of the Contract Owner.
TAXATION OF ANNUITY DEATH BENEFITS. Death Benefit amounts are included in income
as follows:
.. if distributed in a lump sum, the amounts are taxed in the same manner as a
total withdrawal, or
.. if distributed under an Income Plan, the amounts are taxed in the same
manner as annuity payments.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any
28 PROSPECTUS
premature distribution from a non-Qualified Contract. The penalty tax generally
applies to any distribution made prior to the date you attain age 59 1/2.
However, no penalty tax is incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or becoming totally
disabled,
.. made in substantially equal periodic payments over the Contract Owner's
life or life expectancy, or over the joint lives or joint life expectancies
of the Contract Owner and the Beneficiary,
.. made under an immediate annuity, or
.. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS. With respect to non-Qualified Contracts
using substantially equal periodic payments or immediate annuity payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the Contract Owner's attaining age 59 1/2 would be
subject to a 10% penalty tax unless another exception to the penalty tax
applied. The tax for the year of the modification is increased by the penalty
tax that would have been imposed without the exception, plus interest for the
years in which the exception was used. A material modification does not include
permitted changes described in published IRS rulings. You should consult a
competent tax advisor prior to creating or modifying a substantially equal
periodic payment stream.
TAX FREE EXCHANGES UNDER INTERNAL REVENUE CODE SECTION 1035. A 1035 exchange is
a tax-free exchange of a non-qualified life insurance contract, endowment
contract or annuity contract into a non-Qualified annuity contract. The contract
owner(s) must be the same on the old and new contract. Basis from the old
contract carries over to the new contract so long as we receive that information
from the relinquishing company. If basis information is never received, we will
assume that all exchanged funds represent earnings and will allocate no cost
basis to them.
PARTIAL EXCHANGES. The IRS has issued a ruling that permits partial exchanges of
annuity contracts. Under this ruling, if you take a withdrawal from a receiving
or relinquishing annuity contract within 24 months of the partial exchange, then
special aggregation rules apply for purposes of determining the taxable amount
of a distribution. The IRS has issued limited guidance on how to aggregate and
report these distributions. The IRS is expected to provide further guidance; as
a result, it is possible that the amount we calculate and report to the IRS as
taxable could be different. Your Contract may not permit partial exchanges.
TAXATION OF OWNERSHIP CHANGES. If you transfer a non-Qualified Contract without
full and adequate consideration to a person other than your spouse (or to a
former spouse incident to a divorce), you will be taxed on the difference
between the Contract Value and the investment in the Contract at the time of
transfer. Any assignment or pledge (or agreement to assign or pledge) of the
Contract Value is taxed as a withdrawal of such amount or portion and may also
incur the 10% penalty tax.
AGGREGATION OF ANNUITY CONTRACTS. The Code requires that all non-Qualified
deferred annuity contracts issued by Allstate New York (or its affiliates) to
the same Contract Owner during any calendar year be aggregated and treated as
one annuity contract for purposes of determining the taxable amount of a
distribution.
INCOME TAX WITHHOLDING
Generally, Allstate New York is required to withhold federal income tax at a
rate of 10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold the required 10% of the taxable
amount. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Allstate New York is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. If no U.S. taxpayer identification number is
provided, we will automatically withhold using single with zero exemptions as
the default. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Allstate New York as a withholding
agent must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien.
Withholding may be reduced or eliminated if covered by an income tax treaty
between the U.S. and the non-resident alien's country of residence if the payee
provides a U.S. taxpayer identification number on a fully completed Form W-8BEN.
A U.S. taxpayer identification number is a social security number or an
individual taxpayer identification number ("ITIN"). ITINs are issued by the IRS
to non-resident alien individuals who are not eligible to obtain a social
security number. The U.S. does not have a tax treaty with
29 PROSPECTUS
all countries nor do all tax treaties provide an exclusion or lower withholding
rate for annuities.
TAX QUALIFIED CONTRACTS
The income on tax sheltered annuity (TSA) and IRA investments is tax deferred,
and the income from annuities held by such plans does not receive any additional
tax deferral. You should review the annuity features, including all benefits and
expenses, prior to purchasing an annuity as a TSA or IRA. Tax Qualified
Contracts are contracts purchased as or in connection with:
.. Individual Retirement Annuities (IRAs) under Code Section 408(b);
.. Roth IRAs under Code Section 408A;
.. Simplified Employee Pension (SEP IRA) under Code Section 408(k);
.. Savings Incentive Match Plans for Employees (SIMPLE IRA) under Code Section
408(p);
.. Tax Sheltered Annuities under Code Section 403(b);
.. Corporate and Self Employed Pension and Profit Sharing Plans under Code
Section 401; and
.. State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans under Code Section 457.
Allstate New York reserves the right to limit the availability of the Contract
for use with any of the retirement plans listed above or to modify the Contract
to conform with tax requirements. If you use the Contract within an employer
sponsored qualified retirement plan, the plan may impose different or additional
conditions or limitations on withdrawals, waiver of charges, death benefits,
Payout Start Dates, income payments, and other Contract features. In addition,
adverse tax consequences may result if qualified plan limits on distributions
and other conditions are not met. Please consult your qualified plan
administrator for more information. Allstate New York no longer issues deferred
annuities to employer sponsored qualified retirement plans.
The tax rules applicable to participants with tax qualified annuities vary
according to the type of contract and the terms and conditions of the
endorsement. Adverse tax consequences may result from certain transactions such
as excess contributions, premature distributions, and, distributions that do not
conform to specified commencement and minimum distribution rules. Allstate New
York can issue an individual retirement annuity on a rollover or transfer of
proceeds from a decedent's IRA, TSA, or employer sponsored retirement plan under
which the decedent's surviving spouse is the beneficiary. Allstate New York does
not offer an individual retirement annuity that can accept a transfer of funds
for any other, non-spousal, beneficiary of a decedent's IRA, TSA, or employer
sponsored qualified retirement plan.
Please refer to your Endorsement for IRAs or 403(b) plans, if applicable, for
additional information on your death settlement options. In the case of certain
qualified plans, the terms of the Qualified Plan Endorsement and the plans may
govern the right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM AN INDIVIDUALLY OWNED TAX QUALIFIED CONTRACT. If
you make a partial withdrawal under a Tax Qualified Contract other than a Roth
IRA, the portion of the payment that bears the same ratio to the total payment
that the investment in the Contract (i.e., nondeductible IRA contributions)
bears to the Contract Value, is excluded from your income. We do not keep track
of nondeductible contributions, and generally all tax reporting of distributions
from Tax Qualified Contracts other than Roth IRAs will indicate that the
distribution is fully taxable.
"Qualified distributions" from Roth IRAs are not included in gross income.
"Qualified distributions" are any distributions made more than five taxable
years after the taxable year of the first contribution to any Roth IRA and which
are:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made to a beneficiary after the Contract Owner's death,
.. attributable to the Contract Owner being disabled, or
.. made for a first time home purchase (first time home purchases are subject
to a lifetime limit of $10,000).
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, Tax Qualified Contracts (excluding
Roth IRAs) require minimum distributions upon reaching age 70 1/2. Failure to
withdraw the required minimum distribution will result in a 50% tax penalty on
the shortfall not withdrawn from the Contract. Not all income plans offered
under the Contract satisfy the requirements for minimum distributions. Because
these distributions are required under the Code and the method of calculation is
complex, please see a competent tax advisor.
THE DEATH BENEFIT AND TAX QUALIFIED CONTRACTS. Pursuant to the Code and IRS
regulations, an IRA (e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE IRA)
may not invest in life insurance contracts. However, an IRA may provide a death
benefit that equals the greater of the purchase payments or the Contract Value.
The Contract offers a death benefit that in certain circumstances may exceed the
greater of the purchase payments or the Contract Value. We believe that the
Death Benefits offered by your Contract do not constitute life insurance under
these regulations.
30 PROSPECTUS
It is also possible that certain death benefits that offer enhanced earnings
could be characterized as an incidental death benefit. If the death benefit were
so characterized, this could result in current taxable income to a Contract
Owner. In addition, there are limitations on the amount of incidental death
benefits that may be provided under qualified plans, such as in connection with
a TSA or employer sponsored qualified retirement plan.
Allstate New York reserves the right to limit the availability of the Contract
for use with any of the qualified plans listed above.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM TAX QUALIFIED CONTRACTS. A 10%
penalty tax applies to the taxable amount of any premature distribution from a
Tax Qualified Contract. The penalty tax generally applies to any distribution
made prior to the date you attain age 59 1/2. However, no penalty tax is
incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or total disability,
.. made in substantially equal periodic payments over the Contract Owner's
life or life expectancy, or over the joint lives or joint life expectancies
of the Contract Owner and the Beneficiary,
.. made after separation from service after age 55 (does not apply to IRAs),
.. made pursuant to an IRS levy,
.. made for certain medical expenses,
.. made to pay for health insurance premiums while unemployed (applies only
for IRAs),
.. made for qualified higher education expenses (applies only for IRAs), and
.. made for a first time home purchase (up to a $10,000 lifetime limit and
applies only for IRAs).
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject to the premature distribution penalty,
will be subject to a 25% penalty tax.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON TAX QUALIFIED CONTRACTS. With respect
to Tax Qualified Contracts using substantially equal periodic payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the taxpayer's attaining age 59 1/2 would be subject to
a 10% penalty tax unless another exception to the penalty tax applied. The tax
for the year of the modification is increased by the penalty tax that would have
been imposed without the exception, plus interest for the years in which the
exception was used. A material modification does not include permitted changes
described in published IRS rulings. You should consult a competent tax advisor
prior to creating or modifying a substantially equal periodic payment stream.
INCOME TAX WITHHOLDING ON TAX QUALIFIED CONTRACTS. Generally, Allstate New York
is required to withhold federal income tax at a rate of 10% from all
non-annuitized distributions that are not considered "eligible rollover
distributions." The customer may elect out of withholding by completing and
signing a withholding election form. If no election is made, we will
automatically withhold the required 10% from the taxable amount. In certain
states, if there is federal withholding, then state withholding is also
mandatory. Allstate New York is required to withhold federal income tax at a
rate of 20% on all "eligible rollover distributions" unless you elect to make a
"direct rollover" of such amounts to an IRA or eligible retirement plan.
Eligible rollover distributions generally include all distributions from Tax
Qualified Contracts, including TSAs but excluding IRAs, with the exception of:
.. required minimum distributions, or,
.. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
.. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
.. hardship distributions.
For all annuitized distributions that are not subject to the 20% withholding
requirement, Allstate New York is required to withhold federal income tax using
the wage withholding rates. The customer may elect out of withholding by
completing and signing a withholding election form. If no election is made, we
will automatically withhold using married with three exemptions as the default.
If no U.S. taxpayer identification number is provided, we will automatically
withhold using single with zero exemptions as the default. In certain states, if
there is federal withholding, then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Allstate New York as a withholding
agent must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien or to
certain other 'foreign persons'. Withholding may be reduced or eliminated if
covered by an income tax treaty between the U.S. and the non-resident alien's
country of residence if the payee provides a U.S. taxpayer identification number
on a fully completed Form W-8BEN. A U.S. taxpayer
31 PROSPECTUS
identification number is a social security number or an individual taxpayer
identification number ("ITIN"). ITINs are issued by the IRS to non-resident
alien individuals who are not eligible to obtain a social security number. The
U.S. does not have a tax treaty with all countries nor do all tax treaties
provide an exclusion or lower withholding rate for annuities.
INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408(b) permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity (IRA). Individual Retirement Annuities are subject
to limitations on the amount that can be contributed and on the time when
distributions may commence. Certain distributions from other types of qualified
retirement plans may be "rolled over" on a tax-deferred basis into an Individual
Retirement Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408A permits eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth Individual Retirement Annuity. Roth Individual
Retirement Annuities are subject to limitations on the amount that can be
contributed and on the time when distributions may commence.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "rolled over" to a Roth Individual Retirement
Annuity. The income portion of a conversion or rollover distribution is taxable
currently, but is exempted from the 10% penalty tax on premature distributions.
ANNUITIES HELD BY INDIVIDUAL RETIREMENT ACCOUNTS (COMMONLY KNOWN AS CUSTODIAL
IRAS). Code Section 408 permits a custodian or trustee of an Individual
Retirement Account to purchase an annuity as an investment of the Individual
Retirement Account. If an annuity is purchased inside of an Individual
Retirement Account, then the Annuitant must be the same person as the beneficial
owner of the Individual Retirement Account.
Generally, the death benefit of an annuity held in an Individual Retirement
Account must be paid upon the death of the Annuitant. However, in most states,
the Contract permits the custodian or trustee of the Individual Retirement
Account to continue the Contract in the accumulation phase, with the Annuitant's
surviving spouse as the new Annuitant, if the following conditions are met:
1) The custodian or trustee of the Individual Retirement Account is the owner
of the annuity and has the right to the death proceeds otherwise payable
under the Contract;
2) The deceased Annuitant was the beneficial owner of the Individual
Retirement Account;
3) We receive a complete request for settlement for the death of the
Annuitant; and
4) The custodian or trustee of the Individual Retirement Account provides us
with a signed certification of the following:
(a) The Annuitant's surviving spouse is the sole beneficiary of the Individual
Retirement Account;
(b) The Annuitant's surviving spouse has elected to continue the Individual
Retirement Account as his or her own Individual Retirement Account; and
(c) The custodian or trustee of the Individual Retirement Account has continued
the Individual Retirement Account pursuant to the surviving spouse's
election.
SIMPLIFIED EMPLOYEE PENSION IRA. Code Section 408(k) allows eligible employers
to establish simplified employee pension plans for their employees using
individual retirement annuities. These employers may, within specified limits,
make deductible contributions on behalf of the employees to the individual
retirement annuities. Employers intending to use the Contract in connection with
such plans should seek competent tax advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE IRA). Code Section 408(p)
allows eligible employers with 100 or fewer employees to establish SIMPLE
retirement plans for their employees using individual retirement annuities. In
general, a SIMPLE IRA consists of a salary deferral program for eligible
employees and matching or nonelective contributions made by employers. Employers
intending to purchase the Contract as a SIMPLE IRA should seek competent tax and
legal advice.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAS
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
TAX SHELTERED ANNUITIES. Code Section 403(b) provides tax-deferred retirement
savings plans for employees of certain non-profit and educational organizations.
Under Section 403(b), any contract used for a 403(b) plan must provide that
distributions attributable to salary reduction contributions made after
12/31/88, and all earnings on salary reduction contributions, may be made only
on or after the date the employee:
.. attains age 59 1/2,
.. severs employment,
.. dies,
.. becomes disabled, or
.. incurs a hardship (earnings on salary reduction contributions may not be
distributed on account of hardship).
These limitations do not apply to withdrawals where Allstate New York is
directed to transfer some or all of the Contract Value to another 403(b) plan.
Generally, we do
32 PROSPECTUS
not accept funds in 403(b) contracts that are subject to the Employee Retirement
Income Security Act of 1974 (ERISA).
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS.
Section 401(a) of the Code permits corporate employers to establish various
types of tax favored retirement plans for employees. Self-employed individuals
may establish tax favored retirement plans for themselves and their employees
(commonly referred to as "H.R.10" or "Keogh"). Such retirement plans may permit
the purchase of annuity contracts. Allstate New York no longer issues annuity
contracts to employer sponsored qualified retirement plans.
There are two owner types for contracts intended to qualify under Section
401(a): a qualified plan fiduciary or an annuitant owner.
.. A qualified plan fiduciary exists when a qualified plan trust that is
intended to qualify under Section 401(a) of the Code is the owner. The
qualified plan trust must have its own tax identification number and a
named trustee acting as a fiduciary on behalf of the plan. The annuitant
should be the person for whose benefit the contract was purchased.
.. An annuitant owner exists when the tax identification number of the owner
and annuitant are the same, or the annuity contract is not owner by a
qualified plan trust. The annuitant should be the person for whose benefit
the contract was purchased.
If a qualified plan fiduciary is the owner of the contract, the qualified plan
must be the beneficiary so that death benefits from the annuity are distributed
in accordance with the terms of the qualified plan. Annuitant owned contracts
require that the beneficiary be the annuitant's spouse (if applicable), which is
consistent with the required IRS language for qualified plans under Section
401(a). A completed Annuitant Owned Qualified Plan Designation of Beneficiary
form is required in order to change the beneficiary of an annuitant owned
Qualified Plan contract.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION DEFERRED COMPENSATION
PLANS. Section 457 of the Code permits employees of state and local governments
and tax-exempt organizations to defer a portion of their compensation without
paying current taxes. The employees must be participants in an eligible deferred
compensation plan. In eligible governmental plans, all assets and income must be
held in a trust/ custodial account/annuity contract for the exclusive benefit of
the participants and their beneficiaries. To the extent the Contracts are used
in connection with a non-governmental eligible plan, employees are considered
general creditors of the employer and the employer as owner of the Contract has
the sole right to the proceeds of the Contract. Under eligible 457 plans,
contributions made for the benefit of the employees will not be includible in
the employees' gross income until distributed from the plan. Allstate New York
no longer issues annuity contracts to employer sponsored qualified retirement
plans. Contracts that have been previously sold to State and Local government
and Tax-Exempt organization Deferred Compensation Plans will be administered
consistent with the rules for contracts intended to qualify under Section
401(a).
33 PROSPECTUS
ANNUAL REPORTS AND OTHER DOCUMENTS
Allstate New York's annual report on Form 10-K for the year ended December 31,
2004 is incorporated herein by reference, which means that it is legally a part
of this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0000839759. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http://www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at: Customer Service, 2940 S. 84TH STREET, LINCOLN, NE
68506-4142 (telephone: 1-800-692-4682).
34 PROSPECTUS
APPENDIX A ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING
FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED*
BASIC POLICY
[Enlarge/Download Table]
For the period beginning January 1 and ending December 31, 1996 1997 1998 1999 2000
--------------------------------------------------------------------------------------------------------------
AIM V.I. AGGRESSIVE GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000 $ 13.988
Accumulation Unit Value, End of Period -- -- -- $ 13.988 $ 14.15
Number of Units Outstanding, End of Period -- -- -- 12,661 53,890
AIM V.I. BALANCED - SERIES I SUB-ACCOUNT **
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000 $ 13.162
Accumulation Unit Value, End of Period -- -- -- $ 13.162 $ 12.43
Number of Units Outstanding, End of Period -- -- -- 6,382 24,499
AIM V.I. BASIC VALUE - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
AIM V.I. BLUE CHIP - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- $ 10.000
Accumulation Unit Value, End of Period -- -- -- -- $ 8.82
Number of Units Outstanding, End of Period -- -- -- -- 11,309
AIM V.I. CAPITAL APPRECIATION - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 9.855 $ 11.387 $ 12.739 $ 14.979 $ 21.350
Accumulation Unit Value, End of Period $11.387 $ 12.739 $ 14.979 $ 21.350 $ 18.75
Number of Units Outstanding, End of Period 7,681 161,013 287,336 425,748 456,761
AIM V.I. CAPITAL DEVELOPMENT - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000 $ 11.655
Accumulation Unit Value, End of Period -- -- -- $ 11.655 $ 12.55
Number of Units Outstanding, End of Period -- -- -- 3,948 18,297
AIM V.I. CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 9.926 $ 11.699 $ 14.496 $ 18.243 $ 24.138
Accumulation Unit Value, End of Period $11.699 $ 14.496 $ 18.243 $ 24.138 $ 20.33
Number of Units Outstanding, End of Period 5,371 167,625 361,890 645,133 674,689
AIM V.I. DENT DEMOGRAPHIC TRENDS - SERIES I SUB-ACCOUNT ***
Accumulation Unit Value, Beginning of Period -- -- -- -- $ 10.000
Accumulation Unit Value, End of Period -- -- -- -- $ 7.89
Number of Units Outstanding, End of Period -- -- -- -- 32,307
AIM V.I. DIVERSIFIED INCOME - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.086 $ 10.934 $ 11.789 $ 12.035 $ 12.002
Accumulation Unit Value, End of Period $10.934 $ 11.789 $ 12.035 $ 12.002 $ 11.55
Number of Units Outstanding, End of Period 4,618 58,958 146,644 227,201 204,561
AIM V.I. GOVERNMENT SECURITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.080 $ 10.164 $ 10.834 $ 11.829 $ 11.189
Accumulation Unit Value, End of Period $10.164 $ 10.834 $ 11.829 $ 11.189 $ 12.15
Number of Units Outstanding, End of Period 0 39,009 301,983 108,494 99,531
AIM V.I. GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 9.892 $ 11.466 $ 14.338 $ 18.954 $ 25.263
Accumulation Unit Value, End of Period $11.466 $ 14.338 $ 18.954 $ 25.263 $ 19.80
Number of Units Outstanding, End of Period 2,384 97,039 220,831 383,214 403,785
AIM V.I. HIGH YIELD - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000 $ 9.957
Accumulation Unit Value, End of Period -- -- -- $ 9.957 $ 7.95
Number of Units Outstanding, End of Period -- -- -- 1,751 834
35 PROSPECTUS
[Enlarge/Download Table]
AIM V.I. INTERNATIONAL GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.168 $ 11.953 $ 12.598 $ 14.340 $ 21.914
Accumulation Unit Value, End of Period $11.953 $ 12.598 $ 14.340 $ 21.914 $ 15.90
Number of Units Outstanding, End of Period 5,404 85,934 136,898 220,690 245,480
AIM V.I. MID CAP CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
AIM V.I. MONEY MARKET - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.023 $ 10.369 $ 10.745 $ 11.126 $ 11.479
Accumulation Unit Value, End of Period $10.369 $ 10.745 $ 11.126 $ 11.479 $ 11.98
Number of Units Outstanding, End of Period 4,373 42,128 87,010 137,433 95,879
AIM V.I. PREMIER EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 9.800 $ 11.090 $ 13.520 $ 17.644 $ 22.589
Accumulation Unit Value, End of Period $11.090 $ 13.520 $ 17.644 $ 22.589 $ 19.00
Number of Units Outstanding, End of Period 5,921 180,440 405,246 987,076 1,000,356
AIM V.I. TECHNOLOGY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
AIM V.I. UTILITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
[Enlarge/Download Table]
For the period beginning January 1 and ending December 31, 2001 2002 2003 2004
--------------------------------------------------------------------------------------------------
AIM V.I. AGGRESSIVE GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 14.15 $ 10.308 $ 7.856 $ 9.809
Accumulation Unit Value, End of Period $ 10.308 $ 7.856 $ 9.809 $ 10.809
Number of Units Outstanding, End of Period 51,176 37,549 30,613 28,619
AIM V.I. BALANCED - SERIES I SUB-ACCOUNT **
Accumulation Unit Value, Beginning of Period $ 12.43 $ 10.849 $ 8.865 $ 10.167
Accumulation Unit Value, End of Period $ 10.849 $ 8.865 $ 10.167 $ 10.774
Number of Units Outstanding, End of Period 29,494 29,105 30,281 23,748
AIM V.I. BASIC VALUE - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 11.200 $ 8.594 $ 11.319
Accumulation Unit Value, End of Period $ 11.200 $ 8.594 $ 11.319 $ 12.390
Number of Units Outstanding, End of Period 6,325 22,360 26,204 45,919
AIM V.I. BLUE CHIP - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 8.82 $ 6.736 $ 4.902 $ 6.046
Accumulation Unit Value, End of Period $ 6.736 $ 4.902 $ 6.046 $ 6.238
Number of Units Outstanding, End of Period 8,408 33,025 34,736 36,134
AIM V.I. CAPITAL APPRECIATION - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 18.75 $ 14.176 $ 10.569 $ 13.491
Accumulation Unit Value, End of Period $ 14.176 $ 10.569 $ 13.491 $ 14.178
Number of Units Outstanding, End of Period 393,890 342,465 300,657 272,332
AIM V.I. CAPITAL DEVELOPMENT - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 12.55 $ 11.369 $ 8.812 $ 11.757
Accumulation Unit Value, End of Period $ 11.369 $ 8.812 $ 11.757 $ 13.383
Number of Units Outstanding, End of Period 15,528 17,080 14,370 15,343
AIM V.I. CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 20.33 $ 15.460 $ 12.863 $ 15.774
Accumulation Unit Value, End of Period $ 15.460 $ 12.863 $ 15.774 $ 16.941
Number of Units Outstanding, End of Period 590,855 490,936 436,022 385,401
36 PROSPECTUS
[Enlarge/Download Table]
AIM V.I. DENT DEMOGRAPHIC TRENDS - SERIES I SUB-ACCOUNT ***
Accumulation Unit Value, Beginning of Period $ 7.89 $ 5.294 $ 3.537 $ 4.793
Accumulation Unit Value, End of Period $ 5.294 $ 3.537 $ 4.793 $ 5.114
Number of Units Outstanding, End of Period 23,934 21,406 21,473 20,823
AIM V.I. DIVERSIFIED INCOME - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 11.55 $ 11.788 $ 11.886 $ 12.797
Accumulation Unit Value, End of Period $ 11.788 $ 11.886 $ 12.797 $ 13.248
Number of Units Outstanding, End of Period 179,226 153,878 158,069 118,523
AIM V.I. GOVERNMENT SECURITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 12.15 $ 12.738 $ 13.759 $ 13.706
Accumulation Unit Value, End of Period $ 12.738 $ 13.759 $ 13.706 $ 13.855
Number of Units Outstanding, End of Period 110,454 147,016 91,728 73,112
AIM V.I. GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 19.80 $ 12.901 $ 8.777 $ 11.353
Accumulation Unit Value, End of Period $ 12.901 $ 8.777 $ 11.353 $ 12.110
Number of Units Outstanding, End of Period 338,025 291,782 263,392 237,475
AIM V.I. HIGH YIELD - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 7.95 $ 7.443 $ 6.908 $ 8.717
Accumulation Unit Value, End of Period $ 7.443 $ 6.908 $ 8.717 $ 9.558
Number of Units Outstanding, End of Period 4,833 5,236 4,236 4,779
AIM V.I. INTERNATIONAL GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 15.90 $ 11.980 $ 9.957 $ 12.665
Accumulation Unit Value, End of Period $ 11.980 $ 9.957 $ 12.665 $ 15.480
Number of Units Outstanding, End of Period 213,691 190,512 160,288 141,698
AIM V.I. MID CAP CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 11.357 $ 9.950 $ 12.486
Accumulation Unit Value, End of Period $ 11.357 $ 9.950 $ 12.486 $ 14.007
Number of Units Outstanding, End of Period 2,829 13,588 15,110 19,232
AIM V.I. MONEY MARKET - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 11.98 $ 12.231 $ 12.198 $ 12.092
Accumulation Unit Value, End of Period $ 12.231 $ 12.198 $ 12.092 $ 12.000
Number of Units Outstanding, End of Period 151,830 129,079 84,943 46,009
AIM V.I. PREMIER EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 19.00 $ 16.376 $ 11.256 $ 13.877
Accumulation Unit Value, End of Period $ 16.376 $ 11.256 $ 13.877 $ 14.466
Number of Units Outstanding, End of Period 881,690 685,598 606,188 538,069
AIM V.I. TECHNOLOGY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000
Accumulation Unit Value, End of Period -- -- -- $ 11.090
Number of Units Outstanding, End of Period -- -- -- 4,500
AIM V.I. UTILITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000
Accumulation Unit Value, End of Period -- -- -- $ 12.230
Number of Units Outstanding, End of Period -- -- -- 61,438
* The Contracts were first offered on October 14, 1996. The inception date of
the following Variable Sub-Accounts is October 14, 1996: AIM V.I. Capital
Appreciation - Series I Sub-Account, AIM V.I. Diversified Income - Series I
Sub-Account, AIM V.I. Government Securities - Series I Sub-Account, AIM
V.I. Growth - Series I Sub-Account, AIM V.I. Core Equity - Series I
Sub-Account, AIM V.I. International Growth - Series I Sub-Account, AIM V.I.
Money Market - Series I Sub-Account, AIM V.I. Premier Equity - Series I
Sub-Account. The inception date of the AIM V.I. Aggressive Growth - Series
I Sub-Account, AIM V.I. Balanced - Series I Sub-Account, AIM V.I. Capital
Development - Series I Sub-Account, and AIM V.I. High Yield - Series I
Sub-Account is October 25, 1999. The inception date of the AIM V.I. Blue
Chip - Series I Sub-Account and AIM V.I. Dent Demographic Trends - Series I
Sub-Account is January 3, 2000. The inception date of the AIM V.I. Basic
Value - Series I Sub-Account and AIM V.I. Mid Cap Core Equity - Series I
Sub-Account is October 1, 2001. The inception date of the AIM V.I.
Technology - Series I Sub-Account and the AIM V.I. Utilities - Series I
Sub-Account is October 15, 2004.The Accumulation Unit Values in this table
reflect a mortality and expense risk charge of 1.35% and an administrative
charge of 0.10%.
** Effective July 1, 2005, the AIM V.I. Balanced Fund-Series I will change its
name to AIM V.I. Basic Balanced Fund-Series I. Effective July 1, 2005, a
corresponding change in the name of the Variable Sub-Account that invests
in that Fund will be made.
*** Effective July 1, 2005, the AIM V.I. Dent Demographic Trends Fund - Series
I will change its name to AIM V.I. Demographic Trends Fund - Series I.
Effective July 1, 2005, a corresponding change in the name of the Variable
Sub-Account that invests in that Fund will be made.
37 PROSPECTUS
APPENDIX B MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the applicable Guarantee Period
for the week preceding the establishment of the Guarantee Period.
N = the number of whole and partial years from the date we receive the
withdrawal, transfer, or death benefit request, or from the Payout Start Date,
to the end of the Guarantee Period.
J = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the receipt of the withdrawal, transfer, death benefit, or income
payment request. If a note for a maturity of length N is not available, a
weighted average will be used. If N is one year or less, J will be the 1-year
Treasury Rate.
"Treasury Rate" means the U.S. Treasury Note Constant Maturity Yield as reported
in Federal Reserve Board Statistical Release H.15.
The Market Value Adjustment factor is determined from the following formula:
..9 X (I - J) X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred (in excess of the Free Withdrawal
Amount) paid as a death benefit, or applied to an Income Plan, from a Guarantee
Period at any time other than during the 30 day period after such Guarantee
Period expires.
38 PROSPECTUS
EXAMPLES OF MARKET VALUE ADJUSTMENT
Purchase Payment: $10,000
Guarantee Period: 5 years
Treasury Rate (at the time the Guarantee Period was established): 4.50%
Assumed Net Annual Earnings Rate in Money Market Variable Sub-Account: 4.50%
Full Surrender: End of Contract Year 3
NOTE: These examples assume that premium taxes are not applicable.
[Download Table]
Step 1. Calculate Contract $10,000.00 X (1.045)/3/ = $11,411.66
Value at End of Contract
Year 3:
Step 2. Calculate the .10 X $10,000.00 = $1,000.00
Preferred Withdrawal
Amount:
Step 3. Calculate the I = 4.50%
Market Value Adjustment: J = 4.20%
730 days
N = -------- = 2
365 days
Market Value Adjustment Factor: .9 X (I - J) X N =
.9 X (.045 - .042) X (2) = .0054
Market Value Adjustment = Market Value Adjustment
Factor X Amount Subject to Market Value
Adjustment:
= .0054 X ($11,411.66 - $1,000.00) = $56.22
Step 4. Calculate the .05 X ($10,000.00 - $1,000.00 + $56.22) = $452.81
Withdrawal Charge:
Step 5. Calculate the $11,411.66 - $452.81 + $56.22 = $11,015.07
amount received by a
Contract owner as a result
of full withdrawal at the
end of Contract Year 3:
EXAMPLE 1 (ASSUME DECLINING INTEREST RATES)
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
[Enlarge/Download Table]
Step 1. Calculate Contract Value at End $10,000.00 X (1.045)/3/ = $11,411.66
of Contract Year 3:
Step 2. Calculate the Preferred .10 X $10,000.00 = $1,000.00
Withdrawal Amount:
Step 3. Calculate the Market Value I = 4.50%
Adjustment: J = 4.80%
730 days
N = -------- = 2
365 days
Market Value Adjustment Factor: .9 X (I - J) X N =
.9 X (.045 - .048) X (2) = - .0054
Market Value Adjustment = Market Value Adjustment
Factor X Amount Subject to Market Value Adjustment:
-.0054 X ($11,411.66 - $1,000.00) = $-56.22
Step 4. Calculate the Withdrawal Charge: .05 X ($10,000.00 - $1,000.00 - $56.22) = $447.19
Step 5. Calculate the amount received by
a Contract owner as a result of full
withdrawal at the end of Contract Year
3: $11,411.66 - $447.19 - $56.22 = $10,908.25
39 PROSPECTUS
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
THE CONTRACT
Purchase of Contracts
CALCULATION OF ACCUMULATION UNIT VALUES
NET INVESTMENT FACTOR
CALCULATION OF VARIABLE INCOME PAYMENTS
CALCULATION OF ANNUITY UNIT VALUES
GENERAL MATTERS
Incontestability
Settlements
Safekeeping of the Variable Account's Assets
Premium Taxes
Tax Reserves
EXPERTS
FINANCIAL STATEMENTS
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
40 PROSPECTUS
AIM LIFETIME PLUS(SM) II VARIABLE ANNUITY
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STREET ADDRESS: 2940 S. 84TH STREET, LINCOLN, NE 68506-4142 MAILING ADDRESS:
P.O. BOX 82656, LINCOLN, NE 68501-2656 TELEPHONE NUMBER: 1-800-692-4682
PROSPECTUS DATED APRIL 30, 2005
Allstate Life Insurance Company of New York ("ALLSTATE NEW YORK") is offering
the AIM Lifetime Plus(SM) II Variable Annuity, a group flexible premium deferred
variable annuity contract ("CONTRACT"). This prospectus contains information
about the Contract that you should know before investing. Please keep it for
future reference.
The Contract currently offers 21 investment alternatives ("INVESTMENT
ALTERNATIVES"). The investment alternatives include 3 fixed account options
("FIXED ACCOUNT OPTIONS") and 18 variable sub-accounts ("VARIABLE SUB-ACCOUNTS")
of the Allstate Life of New York Separate Account A ("VARIABLE ACCOUNT"). Each
Variable Sub-Account invests exclusively in shares of one of the following funds
("FUNDS") of AIM Variable Insurance Funds, Inc. (SERIES I SHARES):
[Enlarge/Download Table]
AIM V.I. AGGRESSIVE GROWTH FUND - SERIES I AIM V.I. GOVERNMENT SECURITIES FUND -
AIM V.I. BALANCED FUND - SERIES I* SERIES I
AIM V.I. BASIC VALUE FUND - SERIES I AIM V.I. GROWTH FUND - SERIES I
AIM V.I. BLUE CHIP FUND - SERIES I AIM V.I. HIGH YIELD FUND - SERIES I
AIM V.I. CAPITAL APPRECIATION FUND - SERIES I AIM V.I. INTERNATIONAL GROWTH FUND -
AIM V.I. CAPITAL DEVELOPMENT FUND - SERIES I SERIES I
AIM V.I. CORE EQUITY FUND - SERIES I AIM V.I. MID CAP CORE EQUITY FUND -
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND - SERIES I** SERIES I
AIM V.I. DIVERSIFIED INCOME FUND - SERIES I AIM V.I. MONEY MARKET FUND - SERIES I
AIM V.I. PREMIER EQUITY FUND - SERIES I
AIM V.I. TECHNOLOGY FUND - SERIES I
AIM V.I. UTILITIES FUND - SERIES I
* Effective July 1, 2005, the AIM V.I. Balanced Fund-Series I will change its
name to AIM V.I. Basic Balanced Fund-Series I.
** Effective July 1, 2005, the AIM V.I. Dent Demographic Trends Fund - Series
I will change its name to AIM V.I. Demographic Trends Fund - Series I.
WE (Allstate New York) have filed a Statement of Additional Information, dated
April 30, 2005, with the Securities and Exchange Commission ("SEC"). It contains
more information about the Contract and is incorporated herein by reference,
which means it is legally a part of this prospectus. Its table of contents
appears on page 41 of this prospectus. For a free copy, please write or call us
at the address or telephone number above, or go to the SEC's Web site
(http:www.sec.gov). You can find other information and documents about us,
including documents that are legally part of this prospectus, at the SEC's Web
site (http:\\www.sec.gov).
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
OR DISAPPROVED THE SECURITIES DESCRIBED IN THIS
PROSPECTUS, NOR HAS IT PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANYONE WHO TELLS YOU
OTHERWISE IS COMMITTING A FEDERAL CRIME.
IMPORTANT NOTICES THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS
THAT HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY
AGENCY. INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
THE CONTRACTS WERE ONLY AVAILABLE IN NEW YORK, BUT ARE NO
LONGER AVAILABLE FOR SALE.
1 PROSPECTUS
TABLE OF CONTENTS
PAGE
----
OVERVIEW
Important Terms 3
The Contract at a Glance 4
How the Contract Works 6
Expense Table 7
Financial Information 9
CONTRACT FEATURES
The Contract 9
Purchases 10
Contract Value 11
Investment Alternatives 12
The Variable Sub-Accounts 12
The Fixed Account Options 13
Transfers 15
Expenses 18
Other Expenses 19
Access To Your Money 19
PAGE
----
Income Payments 20
Death Benefits 22
OTHER INFORMATION
More Information:
Allstate New York 25
The Variable Account 25
The Funds 25
The Contract 26
Non-Qualified Annuities Held Within a Qualified Plan 26
Legal Matters 26
Taxes 27
Annual Reports and Other Documents 34
APPENDIX A-ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS
OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST
OFFERED 35
APPENDIX B-MARKET VALUE ADJUSTMENT 39
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS 41
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2 PROSPECTUS
IMPORTANT TERMS
--------------------------------------------------------------------------------
This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
PAGE
----
Accumulation Phase 6
Accumulation Unit 11
Accumulation Unit Value 11
Allstate New York ("We and/or "Us") 1, 25
Anniversary Values 23
Annuitant 9
Automatic Additions Program 10
Automatic Fund Rebalancing Program 17
Beneficiary 9
Cancellation Period 4
Contract* 26
Contract Anniversary 5
Contract Owner ("You") 9
Contract Value 5
Contract Year 5
Death Benefit Anniversary 22
Dollar Cost Averaging Option 13
Dollar Cost Averaging Program 17
Due Proof of Death 22
Enhanced Death Benefit Option 23
PAGE
----
Fixed Account Options 13
Funds 25
Guarantee Periods 13
Income Plans 20
Investment Alternatives 4
Issue Date 6
Market Value Adjustment 14
Payout Phase 6
Payout Start Date 20
Preferred Withdrawal Amount 18
Right to Cancel 10
SEC 1
Settlement Value 22
Systematic Withdrawal Program 20
Tax Qualified Contracts 30
Treasury Rate 15
Valuation Date 10
Variable Account 25
Variable Sub-Account 12
* The AIM Lifetime Plus(SM) II Variable Annuity is a group contract and your
ownership is represented by certificates. References to "Contract" in this
prospectus include certificates, unless the context requires otherwise.
3 PROSPECTUS
THE CONTRACT AT A GLANCE
The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
FLEXIBLE PAYMENTS You can purchase a Contract with an initial
purchase payment of $5,000 ($2,000 for
"QUALIFIED CONTRACTS," which are Contracts
issued with QUALIFIED PLANS). You can add to
your Contract as often and as much as you like,
but each payment must be at least $500 ($100
for automatic purchase payments to the variable
investment options). You must maintain a
minimum account size of $1,000.
-------------------------------------------------------------------------------
RIGHT TO CANCEL You may cancel your Contract within 10 days
after receipt ("CANCELLATION PERIOD"). Upon
cancellation, as permitted by federal or state
law, we will return your purchase payments
adjusted to reflect the investment experience
of any amounts allocated to the Variable
Account. The adjustment will reflect the
deduction of mortality and expense risk charges
and administrative expense charges.
-------------------------------------------------------------------------------
EXPENSES You will bear the following expenses:
. Total Variable Account annual fees equal
to 1.10% of average daily net Assets
(1.30% if you select the ENHANCED DEATH
BENEFIT OPTION)
. Annual contract maintenance charge of $35
(with certain exceptions)
. Withdrawal charges ranging from 0% to 7%
of payment withdrawn (with certain
exceptions)
. Transfer fee of $10 after 12th transfer in
any CONTRACT YEAR (fee currently waived)
. State premium tax (New York currently does
not impose one).
In addition, each Fund pays expenses that you
will bear indirectly if you invest in a
Variable Sub-Account.
-------------------------------------------------------------------------------
INVESTMENT The Contract offers 21 investment alternatives
ALTERNATIVES including:
. 3 Fixed Account Options (which credit
interest at rates we guarantee), and
. 18 Variable Sub-Accounts investing in
Funds offering professional money
management by A I M Advisors, Inc.
To find out current rates being paid on the
Fixed Account Options, or to find out how the
Variable Sub-Accounts have performed, please
call us at 1-800-692-4682.
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SPECIAL SERVICES For your convenience, we offer these special
services:
. AUTOMATIC FUND REBALANCING PROGRAM
. AUTOMATIC ADDITIONS PROGRAM
. DOLLAR COST AVERAGING PROGRAM
. SYSTEMATIC WITHDRAWAL PROGRAM
-------------------------------------------------------------------------------
INCOME PAYMENTS You can choose fixed income payments, variable
income payments, or a combination of the two.
You can receive your income payments in one of
the following ways:
. life income with guaranteed payments
. a joint and survivor life income with
guaranteed payments
. guaranteed payments for a specified period
(5 to 30 years)
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4 PROSPECTUS
DEATH BENEFITS If you or the Annuitant (if the
Contract is owned by a non-living person) die
before the PAYOUT START DATE, we will pay the
death benefit described in the Contract. We
also offer an Enhanced Death Benefit Option.
-------------------------------------------------------------------------------
TRANSFERS Before the Payout Start Date, you may transfer
your Contract value ("CONTRACT VALUE") among
the investment alternatives, with certain
restrictions.
We do not currently impose a fee upon
transfers. However, we reserve the right to
charge $10 per transfer after the 12th transfer
in each "CONTRACT YEAR," which we measure from
the date we issue your contract or a Contract
anniversary ("CONTRACT ANNIVERSARY").
-------------------------------------------------------------------------------
WITHDRAWALS You may withdraw some or all of your Contract
Value at any time during the Accumulation
Phase. Full or partial withdrawals are
available under limited circumstances on or
after the Payout Start Date.
In general, you must withdraw at least $50 at a
time ($1,000 for withdrawals made during the
Payout Phase.) Withdrawals in the Payout Phase
are only available if the Payout Option is a
Variable Income Payment using Guaranteed
Payments for a Specified Period. Withdrawals
taken prior to annuitization (referred to in
this prospectus as the Payout Phase) are
generally considered to come from the earnings
in the Contract first. If the Contract is
tax-qualified, generally all withdrawals are
treated as distributions of earnings.
Withdrawals of earnings are taxed as ordinary
income and, if taken prior to age 59 1/2, may
be subject to an additional 10% federal tax
penalty. A withdrawal charge and MARKET VALUE
ADJUSTMENT also may apply.
-------------------------------------------------------------------------------
5 PROSPECTUS
HOW THE CONTRACT WORKS
The Contract basically works in two ways.
First, the Contract can help you (we assume you are the CONTRACT OWNER) save for
retirement because you can invest in up to 21 investment alternatives and
generally pay no federal income taxes on any earnings until you withdraw them.
You do this during what we call the "ACCUMULATION PHASE" of the Contract. The
Accumulation Phase begins on the date we issue your Contract (we call that date
the "ISSUE DATE") and continues until the Payout Start Date, which is the date
we apply your money to provide income payments. During the Accumulation Phase,
you may allocate your purchase payments to any combination of the Variable
Sub-Accounts and/or Fixed Account Options. If you invest in the Fixed Account
Options, you will earn a fixed rate of interest that we declare periodically. If
you invest in any of the Variable Sub-Accounts, your investment return will vary
up or down depending on the performance of the corresponding Funds.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/ or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page 20. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Funds. The amount of money you accumulate under
your Contract during the Accumulation Phase and apply to an Income Plan will
determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
[Enlarge/Download Table]
Issue Payout Start
Date Accumulation Phase Date Payout Phase
--------------------------------------------------------------------------------------------------->
You buy You save for retirement You elect to receive You can receive Or you can receive
a Contract income payments or income payments income payments
receive a lump sum for a set period for life
payment
As the Contract owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract owner, or if there is none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract owner or, if none, to your
Beneficiary. See "Death Benefits."
Please call us at 1-800-692-4682 if you have any questions about how the
Contract works.
6 PROSPECTUS
EXPENSE TABLE
The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes because New York currently does not impose premium taxes on
annuities. For more information about Variable Account expenses, see "Expenses,"
below. For more information about Fund expenses, please refer to the
accompanying prospectuses for the Funds.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
[Enlarge/Download Table]
Number of Complete Years Since We Received the Purchase 0 1 2 3 4 5 6 7+
Payment Being Withdrawn
-------------------------------------------------------------------------------------------------
Applicable Charge 7% 6% 5% 4% 3% 2% 1% 0%
-------------------------------------------------------------------------------------------------
Annual Contract Maintenance Charge $35.00**
-------------------------------------------------------------------------------------------------
Transfer Fee $10.00***
-------------------------------------------------------------------------------------------------
* Each Contract Year, you may withdraw up to 15% of the Contract Value as of
the beginning of the Contract Year without incurring a withdrawal charge or
Market Value Adjustment.
** We will waive this charge in certain cases. See "Expenses."
*** Applies solely to the thirteenth and subsequent transfers within a Contract
Year excluding transfers due to dollar cost averaging or automatic fund
rebalancing. We are currently waiving the transfer fee.
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF DAILY NET ASSET VALUE DEDUCTED FROM EACH VARIABLE
SUB-ACCOUNT)
WITHOUT ENHANCED DEATH BENEFIT OPTION 1.00%
Mortality and Expense Risk Charge
--------------------------------------------------------------------------------
Administrative Expense Charge 0.10%
--------------------------------------------------------------------------------
Total Variable Account Annual Expense 1.10%
--------------------------------------------------------------------------------
WITH ENHANCED DEATH BENEFIT OPTION 1.20%
Mortality and Expense Risk Charge
--------------------------------------------------------------------------------
Administrative Expense Charge 0.10%
--------------------------------------------------------------------------------
Total Variable Account Annual Expense 1.30%
--------------------------------------------------------------------------------
FUND ANNUAL EXPENSES
(as a percentage of Fund average daily net assets) (1) The next table shows the
minimum and maximum total operating expenses charged by the Funds that you may
pay periodically during the time that you own the Contract. Advisers and/or
other service providers of certain Funds may have agreed to waive their fees
and/or reimburse Fund expenses in order to keep the Funds' expenses below
specified limits. The range of expenses shown in this table does not show the
effect of any such fee waiver or expense reimbursement.
More detail concerning each Fund's fees and expenses appears in the prospectus
for each Fund.
ANNUAL FUND EXPENSES
Minimum Maximum
--------------------------------------------------------------------------------
Total Annual Fund Operating Expenses/(1)/
(expenses that are deducted from Fund assets,
which may include management fees, distribution
and/or services
(12b-1) fees, and
other expenses) 0.75% 1.16%
--------------------------------------------------------------------------------
(1) Expenses are shown as a percentage of Fund average daily net assets (before
any waiver or reimbursement) as of December 31, 2004.
7 PROSPECTUS
EXAMPLE 1
This Example is intended to help you compare the cost of investing in the
Contracts with the cost of investing in other variable annuity contracts. These
costs include Contract owner transaction expenses, Contract fees, Variable
Account annual expenses, and Fund fees and expenses. The example below shows the
dollar amount of expenses that you would bear directly or indirectly if you:
.. invested $10,000 in the Contract for the time periods indicated,
.. earned a 5% annual return on your investment, and
.. surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period,
and
.. elected the Enhanced Death Benefit Option.
The first line of the example assumes that the maximum fees and expenses of any
of the Funds are charged. The second line of the example assumes that the
minimum fees and expenses of any of the Funds are charged. Your actual expenses
may be higher or lower than those shown below.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------
Costs Based on Maximum Annual
Fund Expenses $797 $1,215 $1,658 $3,129
------------------------------------------------------------------------
Costs Based on Minimum Annual
Fund Expenses $755 $1,088 $1,447 $2,711
------------------------------------------------------------------------
EXAMPLE 2
This Example uses the same assumptions as Example 1 above, except that it
assumes you decided not to surrender your Contract, or you began receiving
income payments for a specified period of at least 120 months, at the end of
each time period.
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------
Costs Based on Maximum
Annual Fund Expenses $287 $877 $1,490 $3,129
------------------------------------------------------------------------
Costs Based on Minimum
Annual Fund Expenses $245 $751 $1,280 $2,711
------------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EXPENSES. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE
SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES DO NOT ASSUME THAT ANY FUND EXPENSE
WAIVERS OR REIMBURSEMENT ARRANGEMENTS ARE IN EFFECT FOR THE PERIODS PRESENTED.
THE ABOVE EXAMPLES ASSUME THE ELECTION OF THE ENHANCED DEATH BENEFIT OPTION,
WITH A MORTALITY AND EXPENSE RISK CHARGE OF 1.20%, AN ADMINISTRATIVE EXPENSE
CHARGE OF 0.10% AND AN ANNUAL CONTRACT MAINTENANCE CHARGE OF $35. IF THE
ENHANCED DEATH BENEFIT HAS NOT ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD BE
SLIGHTLY LOWER. THE ABOVE EXAMPLES ASSUME TOTAL ANNUAL FUND EXPENSES LISTED IN
THE EXPENSE TABLE WILL CONTINUE THROUGHOUT THE PERIODS SHOWN.
8 PROSPECTUS
FINANCIAL INFORMATION
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund.
Attached as Appendix A to this prospectus are tables showing the Accumulation
Unit Values of each Variable Sub-Account since the date we first offered the
Contracts. To obtain a fuller picture of each Variable Sub-Account's finances,
please refer to the Variable Account's financial statements contained in the
Statement of Additional Information. The financial statements of Allstate New
York also appear in the Statement of Additional Information.
THE CONTRACT
CONTRACT OWNER
The AIM Lifetime Plus(SM) II Variable Annuity is a contract between you, the
Contract Owner, and Allstate New York, a life insurance company. As the Contract
owner, you may exercise all of the rights and privileges provided to you by the
Contract. That means it is up to you to select or change (to the extent
permitted):
.. the investment alternatives during the Accumulation and Payout Phases,
.. the amount and timing of your purchase payments and withdrawals,
.. the programs you want to use to invest or withdraw money,
.. the income payment plan you want to use to receive retirement income,
.. the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
.. the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner or Annuitant dies,
and
.. any other rights that the Contract provides.
If you die, any surviving Contract owner or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-living person and a living
person. If the Contract Owner is a Grantor Trust, the Contract Owner will be
considered a non-living person for purposes of this section and the Death
Benefit section. The maximum age of the oldest Contract owner cannot exceed age
90 as of the date we receive the completed application to purchase the Contract.
Changing ownership of this Contract may cause adverse tax consequences and may
not be allowed under qualified plans. Please consult with a competent tax
advisor prior to making a request for a change of Contract Owner.
The Contract can also be purchased as an IRA or TSA (also known as a 403(b)).
The endorsements required to qualify these annuities under the Internal Revenue
Code of 1986, as amended, ("Code") may limit or modify your rights and
privileges under the Contract.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. The
maximum age of the Annuitant cannot exceed age 90 as of the date we receive the
completed application to purchase the Contract. If the Contract Owner is a
living person you may change the Annuitant prior to the Payout Start Date. In
our discretion, we may permit you to designate a joint Annuitant, who is a
second person on whose life income payments depend, on the Payout Start Date.
If the Annuitant dies prior to the Payout Start Date, the new Annuitant will be:
.. the youngest Contract Owner, if living, otherwise
.. the youngest Beneficiary.
BENEFICIARY
The Beneficiary is the person who may elect to receive the Death Benefit or
become the new Contract Owner, subject to the Death of Owner provision, if the
sole surviving Contract Owner dies before the Payout Start Date (See section
titled "Death Benefits" for details.) If the sole surviving Contract owner dies
after the Payout Start Date, the Beneficiary will receive any guaranteed income
payments scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You may
change or add Beneficiaries at any time by writing to us, unless you have
designated an irrevocable Beneficiary. We will provide a change of Beneficiary
form to be signed and filed with us. Any change will be effective at the time
you sign the written notice, whether or not the Annuitant is living when we
receive the notice. Until we receive your written notice to change a
Beneficiary, we are entitled to rely on the most recent Beneficiary information
in our files. We will not be liable as to any payment or settlement made prior
to receiving the written notice. Accordingly, if you wish to
9 PROSPECTUS
change your Beneficiary, you should deliver your written notice to us promptly.
If you do not name a Beneficiary or if the named Beneficiary is no longer living
and there are no other surviving Beneficiaries, the new Beneficiary will be:
.. your spouse or, if he or she is no longer alive,
.. your surviving children equally, or if you have no surviving children,
.. your estate.
If more than one Beneficiary survives you, we will divide the death benefit
among your Beneficiaries according to your most recent written instructions. If
you have not given us written instructions, we will pay the death benefit in
equal amounts to the surviving Beneficiaries
MODIFICATION OF THE CONTRACT
Only an Allstate New York officer may approve a change in or waive any provision
of the Contract. Any change or waiver must be in writing. None of our agents has
the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law. If a provision of the Contract
is inconsistent with state law, we will follow state law.
ASSIGNMENT
No Owner has the right to assign any interest in a Contract as collateral or
security for a loan. However, you may assign periodic income payments under the
Contract prior to the Payout Start Date. No Beneficiary may assign benefits
under the Contract until they are due. We will not be bound by any assignment
until the assignor signs it and files it with us. We are not responsible for the
validity of any assignment. Federal law prohibits or restricts the assignment of
benefits under many types of retirement plans and the terms of such plans may
themselves contain restrictions on assignments. An assignment may also result in
taxes or tax penalties. YOU SHOULD CONSULT WITH AN ATTORNEY BEFORE TRYING TO
ASSIGN YOUR CONTRACT.
PURCHASES
MINIMUM PURCHASE PAYMENTS
Your initial Purchase Payment must be at least $5,000 ($2,000 for a Qualified
Contract). All subsequent Purchase Payments must be $500 or more. The maximum
Purchase Payment is $2,000,000 without prior approval. We reserve the right to
change the minimum Purchase Payment and to change the maximum Purchase Payment.
You may make Purchase Payments of at least $500 at any time prior to the Payout
Start Date. We also reserve the right to reject any application.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of at least $100 ($500 for allocation
to the Fixed Account Options) by automatically transferring amounts from your
bank account. Please consult with your sales representative for detailed
information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by notifying us in writing. We reserve the right to limit the
availability of the investment alternatives.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our servicing center. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
service center located in Vernon Hills, Illinois (mailing address: 2940 S. 84TH
STREET, LINCOLN, NE 68506-4142).
We are open for business each day Monday through Friday that the New York Stock
Exchange is open for business. We also refer to these days as "VALUATION DATES."
Our business day closes when the New York Stock Exchange closes, usually 4:00
p.m. Eastern Time (3:00 p.m. Central Time). If we receive your purchase payment
after 4:00 p.m. Eastern Time (3:00 p.m. Central Time) on any Valuation Date, we
will credit your purchase payment using the Accumulation Unit Values computed on
the next Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 10 day period after you receive the Contract (60 days if
you are exchanging another contract for the Contract described in this
prospectus.) You may return it by delivering it or mailing
10 PROSPECTUS
it to us. If you exercise this "RIGHT TO CANCEL," the Contract terminates and we
will pay you the full amount of your purchase payments allocated to the Fixed
Account Options. Upon cancellation, as permitted by federal or state law, we
will return your purchase payments allocated to the Variable Account after an
adjustment to reflect investment gain or loss and applicable charges that
occurred from the date of allocation through the date of cancellation. If your
Contract is qualified under ode Section 408(b), we will refund the greater of
any purchase payment or the Contract Value.
CONTRACT VALUE
On the issue date, the Contract Value is equal to the initial purchase payment.
Thereafter, your Contract Value at any time during the Accumulation Phase is
equal to the sum of the value of your Accumulation Units in the Variable
Sub-Accounts you have selected, plus the value of your investment in the Fixed
Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
allocate to your Contract, we divide (i) the amount of the purchase payment or
transfer you have allocated to a Variable Sub-Account by (ii) the Accumulation
Unit Value of that Variable Sub-Account next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Sub-Account when the Accumulation Unit Value for the
Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable
Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
.. changes in the share price of the Fund in which the Variable Sub-Account
invests, and
.. the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have
accrued since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account on
each Valuation Date. We also determine a separate set of Accumulation Unit
Values reflecting the cost of the Enhanced Death Benefit Option described on
page 23.
YOU SHOULD REFER TO THE PROSPECTUS FOR THE FUNDS THAT ACCOMPANIES THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH FUND ARE VALUED, SINCE
THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
11 PROSPECTUS
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
You may allocate your purchase payments to up to 18 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Fund. Each Fund
has its own investment objective(s) and policies. We briefly describe the Funds
below.
For more complete information about each Fund, including expenses and risks
associated with the Fund, please refer to the accompanying prospectus for the
Fund. You should carefully review the Fund prospectuses before allocating
amounts to the Variable Sub-Accounts. A I M Advisors, Inc. serves as the
investment advisor to each Fund.
SERIES I SHARES: EACH FUND SEEKS*: INVESTMENT ADVISOR
-------------------------------------------------------------------------------
AIM V.I. Aggressive Long-term growth of capital
Growth Fund - Series
I**
-------------------------------------------------------------------------------
AIM V.I. Balanced Fund As high a total return as
- Series I*** possible, consistent with
preservation of capital
-------------------------------------------------------------------------------
AIM V.I. Basic Value Long-term growth of capital
Fund - Series I
-------------------------------------------------------------------------------
AIM V.I. Blue Chip Long-term growth of capital
Fund - Series I with a secondary objective of
current income
-------------------------------------------------------------------------------
AIM V.I. Capital Growth of capital
Appreciation Fund -
Series I
-------------------------------------------------------------------------------
AIM V.I. Capital Long-term growth of capital
Development Fund -
Series I
-------------------------------------------------------------------------------
AIM V.I. Core Equity Growth of capital A I M ADVISORS, INC..
Fund - Series I
-------------------------------------------------------------------------------
AIM V.I. Dent Long-term growth of capital
Demographic Trends
Fund - Series I****
-------------------------------------------------------------------------------
AIM V.I. Diversified High level of current income
Income Fund - Series I
-------------------------------------------------------------------------------
AIM V.I. Government High level of current income
Securities Fund - consistent with reasonable
Series I concern for safety of
principal
-------------------------------------------------------------------------------
AIM V.I. Growth Fund - Growth of capital
Series I
-------------------------------------------------------------------------------
AIM V.I. High Yield High level of current income
Fund - Series I
-------------------------------------------------------------------------------
AIM V.I. International Long-term growth of capital
Growth Fund - Series I
-------------------------------------------------------------------------------
AIM V.I. Mid Cap Core Long-term growth of capital
Equity Fund - Series I
-------------------------------------------------------------------------------
AIM V.I. Money Market As high a level of current
Fund - Series I income as is consistent with
the preservation of capital
and liquidity
-------------------------------------------------------------------------------
AIM V.I. Premier Long-term growth of capital
Equity Fund - Series with income as a secondary
I objective
-------------------------------------------------------------------------------
AIM V.I. Technology Capital growth
Fund - Series I
-------------------------------------------------------------------------------
AIM V.I. Utilities Capital growth and current
Fund - Series I income
-------------------------------------------------------------------------------
* A Fund's investment objective(s) may be changed by the Fund's Board of
Trustees without shareholder approval.
** Due to the sometime limited availability of common stocks of small-cap
companies that meet the investment criteria for AIM V.I. Aggressive Growth
Fund - Series I, the Fund may periodically suspend or limit the offering of
its shares and it will be closed to new participants when Fund assets reach
$200 million. During closed periods the Fund will accept additional
investments from existing Contract owners maintaining an allocation in the
Fund.
*** Effective July 1, 2005, the AIM V.I. Balanced Fund-Series I will change its
name to AIM V.I. Basic Balanced Fund-Series I. In addition, the Fund's
objective will cahnge to long-term growth of capital and current income.
*** The AIM V.I. Dent Demographic Trends Fund - Series I is sub-advised by H.S.
Dent Advisors, Inc. Effective July 1, 2005, the AIM V.I. Dent Demographic
Trends Fund - Series I will change its name to AIM V.I. Demographic Trends
Fund - Series I. In addition, H.S. Dent Advisors, Inc. will no longer be
the sub-advisor to the Fund effective June 30, 2005.
AMOUNTS YOU ALLOCATE TO VARIABLE SUB-ACCOUNTS MAY GROW IN VALUE, DECLINE IN
VALUE, OR GROW LESS THAN YOU EXPECT, DEPENDING ON THE INVESTMENT PERFORMANCE OF
THE FUNDS IN WHICH THOSE VARIABLE SUB-ACCOUNTS INVEST. YOU BEAR THE INVESTMENT
RISK THAT THE FUNDS MIGHT NOT MEET THEIR INVESTMENT OBJECTIVES. SHARES OF THE
FUNDS
12 PROSPECTUS
ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
You may allocate all or a portion of your purchase payments to the Fixed
Account. You may choose from among 3 Fixed Account Options, including 2 DOLLAR
COST AVERAGING FIXED ACCOUNT OPTIONS ("DOLLAR COST AVERAGING OPTION"), and the
option to invest in one or more GUARANTEE PERIODS. The Fixed Account Options may
not be available in all states. Please consult with your sales representative
for current information. The Fixed Account supports our insurance and annuity
obligations. The Fixed Account consists of our general assets other than those
in segregated asset accounts. We have sole discretion to invest the assets of
the Fixed Account, subject to applicable law. Any money you allocate to a Fixed
Account Option does not entitle you to share in the investment experience of the
Fixed Account.
DOLLAR COST AVERAGING OPTION. You may establish a Dollar Cost Averaging Program,
as described on page 17, by allocating purchase payments to the Dollar Cost
Averaging Option either for 6 months (the "6 Month Dollar Cost Averaging
Option") or for 12 months (the "12 Month Dollar Cost Averaging Option"). Your
purchase payments that you allocate to the Dollar Cost Averaging Option will
earn interest for the period you select at the current rate in effect at the
time of allocation. Rates may differ from those available for the Guarantee
Periods described below.
We will credit interest daily at a rate that will compound over the 6 or 12
month period to the annual interest rate we guaranteed at the time of
allocation. You must transfer all of your money out of the 6 or 12 Month Dollar
Cost Averaging Options to other investment alternatives in equal monthly
installments beginning within 30 days of allocation. The number of monthly
installments must be no more than 6 for the 6 Month Dollar Cost Averaging
Option, and no more than 12 for the 12 Month Dollar Cost Averaging Option.
If we do not receive allocation instructions from you within one month of the
date of the payment, the payment plus associated interest will be transferred to
the Money Market Variable Sub-Account in equal monthly installments using the
longest transfer period being offered at the time the Purchase Payment is made.
At the end of the applicable transfer period, any nominal amounts remaining in
the Dollar Cost Averaging Option will be allocated to the Money Market Variable
Sub-Account.
You may not transfer funds from other investment alternatives to the Dollar Cost
Averaging Option.
Transfers out of the Dollar Cost Averaging Option do not count towards the 12
transfers you can make without paying a transfer fee.
We may declare different interest rates for different amounts allocated to the
Dollar Cost Averaging Option depending on when they were allocated. For current
interest rate information, please contact your Financial Advisor or our Customer
Service unit at 1-800-692-4682.
GUARANTEE PERIODS
Each payment or transfer allocated to a Guarantee Period earns interest at a
specified rate that we guarantee for a period of years. Guarantee Periods may
range from 1 to 10 years. In the future we may offer Guarantee Periods of
different lengths or stop offering some Guarantee Periods. You select one or
more Guarantee Periods for each purchase payment or transfer. If you do not
select the Guarantee Period for a purchase payment or transfer, we will assign
the shortest Guarantee Period available under the Contract for such payment or
transfer. We reserve the right to limit the number of additional purchase
payments that you may allocate to this Option. Please consult with your sales
representative for more information. Each Purchase Payment or transfer allocated
to a Guarantee Period must be at least $500.
INTEREST RATES. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We may declare different interest rates for
Guarantee Periods of the same length that begin at different times. We will not
change the interest rate that we credit to a particular allocation until the end
of the relevant Guarantee Period.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors. WE DETERMINE THE
INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN NEITHER PREDICT NOR
GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For current interest rate
information, please contact your sales representative or Allstate New York at
1-800-692-4682. The interest rates we credit for the Dollar Cost Averaging
Option will never be less than 3% annually.
HOW WE CREDIT INTEREST. We will credit interest daily to each amount allocated
to a Guarantee Period at a rate that compounds to the effective annual interest
rate that we declared at the beginning of the applicable Guarantee Period.
13 PROSPECTUS
The following example illustrates how a purchase payment allocated to a
Guarantee Period would grow, given an assumed Guarantee Period and effective
annual interest rate:
Purchase Payment.................................................... $10,000
Guarantee Period.................................................... 5 years
Annual Interest Rate................................................ 4.50%
END OF CONTRACT YEAR
[Download Table]
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ------------
Beginning Contract
Value................ $10,000.00
X (1 + Annual
Interest Rate) 1.045
----------
$10,450.00
Contract Value at end
of Contract Year..... $10,450.00
X (1 + Annual
Interest Rate) 1.045
----------
$10,920.25
Contract Value at end
of Contract Year..... $10,920.25
X (1 + Annual
Interest Rate) 1.045
----------
$11,411.66
Contract Value at end
of Contract Year..... $11,411.66
X (1 + Annual
Interest Rate) 1.045
----------
$11,925.19
Contract Value at end
of Contract Year..... $11,925.19
X (1 + Annual
Interest Rate) 1.045
-----------
$12,461.82
TOTAL INTEREST CREDITED DURING GUARANTEE PERIOD = $2,461.82 ($12,461.82-$10,000)
This example assumes no withdrawals during the entire 5 year Guarantee Period.
If you were to make a withdrawal, you may be required to pay a withdrawal
charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. The hypothetical interest rate is for
illustrative purposes only and is not intended to predict current or future
interest rates to be declared under the Contract. Actual interest rates declared
for any given Guarantee Period may be more or less than shown above but will
never be less than the guaranteed minimum rate stated in the Contract, if any.
RENEWALS. At least 15 but not more than 45 days prior to the end of each
Guarantee Period, we will mail you a notice asking you what to do with your
money, including the accrued interest. During the 30-day period after the end of
the Guarantee Period, you may:
1) Take no action. We will automatically apply your money to a new Guarantee
Period of the shortest duration available. The new Guarantee Period will
begin on the day the previous Guarantee Period ends. The new interest rate
will be our then current declared rate for a Guarantee Period of that
length; or
2) Instruct us to apply your money to one or more new Guarantee Periods of
your choice. The new Guarantee Period(s) will begin on the day the previous
Guarantee Period ends. The new interest rate will be our then current
declared rate for those Guarantee Periods; or
3) Instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts. We will effect the transfer on the day we receive
your instructions. We will not adjust the amount transferred to include a
Market Value Adjustment; or
4) Withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to include a
Market Value Adjustment. You may also be required to pay premium taxes and
withholding (if applicable). The amount withdrawn will be deemed to have
been withdrawn on the day the previous Guarantee Period ends. Unless you
specify otherwise, amounts not withdrawn will be applied to a new Guarantee
Period of the shortest duration available. The new Guarantee Period will
begin on the day the previous Guarantee Period ends.
MARKET VALUE ADJUSTMENT. All withdrawals in excess of the Preferred Withdrawal
Amount, transfers, and amounts applied to an Income Plan from a Guarantee
Period, other than those taken or applied during the 30 day period after such
Guarantee Period expires, are subject to a Market Value Adjustment. A Market
Value Adjustment also will apply when you apply amounts currently invested in a
Guarantee Period to an Income Plan (unless applied during the 30 day period
after such Guarantee Period expires). A Market Value Adjustment may apply in the
calculation of the Settlement Value described below in the "Death Benefit
Amount" section below. We will not apply a Market Value Adjustment to a transfer
you make as part of a Dollar Cost Averaging Program. We also will not apply a
Market Value Adjustment to a withdrawal you make:
14 PROSPECTUS
.. within the Preferred Withdrawal Amount as described on page 18, or
.. to satisfy the IRS minimum distribution rules for the Contract.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time it is
removed from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the Treasury Rate for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the time remaining in the
Guarantee Period when you remove your money. "TREASURY RATE" means the U.S.
Treasury Note Constant Maturity Yield as reported in Federal Reserve Board
Statistical Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal of your
Contract Value to an amount that is less than the purchase payment plus interest
at the minimum guaranteed interest rate under the Contract. Death benefits will
not be subject to a negative Market Value Adjustment.
Generally, if the Treasury Rate at the time you allocate money to a Guarantee
Period is higher than the applicable current Treasury Rate for a period equal to
the time remaining in the Guarantee Period, then the Market Value Adjustment
will result in a higher amount payable to you, transferred, or applied to an
Income Plan. Conversely, if the Treasury Rate at the time you allocate money to
a Guarantee Period is lower than the applicable Treasury Rate for a period equal
to the time remaining in the Guarantee Period, then the Market Value Adjustment
will result in a lower amount payable to you, transferred, or applied to an
Income Plan.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5 year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 2 year Treasury Rate is 4.20%, then the Market
Value Adjustment will be positive, which will result in an increase in the
amount payable to you. Conversely, if the current 2 year Treasury Rate is 4.80%,
then the Market Value Adjustment will be negative, which will result in a
decrease in the amount payable to you.
The formula for calculating Market Value Adjustments is set forth in Appendix A
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
INVESTMENT ALTERNATIVES: TRANSFERS
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may not transfer Contract Value into the Dollar
Cost Averaging Option. You may request transfers in writing on a form that we
provided or by telephone according to the procedure described below. The minimum
amount that you may transfer into a Guarantee Period is $500. We currently do
not assess, but reserve the right to assess, a $10 charge on each transfer in
excess of 12 per Contract Year. We treat transfers to or from more than one Fund
on the same day as one transfer. Transfers you make as part of a Dollar Cost
Averaging Program or Automatic Fund Rebalancing Program do not count against the
12 free transfers per Contract Year.
We will process transfer requests that we receive before 4:00 p.m. Eastern Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 4:00 p.m. Eastern Time on any Valuation Date
using the Accumulation Unit Values for the next Valuation Date. The Contract
permits us to defer transfers from the Fixed Account for up to 6 months from the
date we receive your request. If we decide to postpone transfers from the Fixed
Account Options for 10 days or more, we will pay interest as required by
applicable law. Any interest would be payable from the date we receive the
transfer request to the date we make the transfer.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment.
We reserve the right to waive any transfer restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
to change the relative weighting of the Variable Sub-Accounts on which your
variable income payments will be based. In addition, you will have a limited
ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive fixed income payments
into variable income payments.
You may not make any transfers for the first 6 months after the Payout Start
Date. Thereafter, you may make transfers among the Variable Sub-Accounts or make
transfers from the Variable Sub-Accounts to increase the proportion of your
income payments consisting of fixed income payments. Your transfers must be at
least 6 months apart.
15 PROSPECTUS
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-692-4682, if you first send
us a completed authorization form. The cut off time for telephone transfer
requests is 4:00 p.m. Eastern Time. In the event that the New York Stock
Exchange closes early, i.e., before 4:00 p.m. Eastern Time, or in the event that
the Exchange closes early for a period of time but then reopens for trading on
the same day, we will process telephone transfer requests as of the close of the
Exchange on that particular day. We will not accept telephone requests received
at any telephone number other than the number that appears in this paragraph or
received after the close of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
MARKET TIMING & EXCESSIVE TRADING
The Contracts are intended for long-term investment. Market timing and excessive
trading can potentially dilute the value of Variable Sub-Accounts and can
disrupt management of a Fund and raise its expenses, which can impair Fund
performance and adversely affect your Contract Value. Our policy is not to
accept knowingly any money intended for the purpose of market timing or
excessive trading. Accordingly, you should not invest in the Contract if your
purpose is to engage in market timing or excessive trading, and you should
refrain from such practices if you currently own a Contract.
We seek to detect market timing or excessive trading activity by reviewing
trading activities. Funds also may report suspected market-timing or excessive
trading activity to us. If, in our judgment, we determine that the transfers are
part of a market timing strategy or are otherwise harmful to the underlying
Fund, we will impose the trading limitations as described below under "Trading
Limitations." Because there is no universally accepted definition of what
constitutes market timing or excessive trading, we will use our reasonable
judgment based on all of the circumstances.
While we seek to deter market timing and excessive trading in Variable
Sub-Accounts, because our procedures involve the exercise of reasonable
judgment, we may not identify or prevent some market timing or excessive
trading. Moreover, imposition of trading limitations is triggered by the
detection of market timing or excessive trading activity, and the trading
limitations are not applied prior to detection of such trading activity.
Therefore, our policies and procedures do not prevent such trading activity
before it is detected. As a result, some investors may be able to engage in
market timing and excessive trading, while others are prohibited, and the Fund
may experience the adverse effects of market timing and excessive trading
described above.
TRADING LIMITATIONS
We reserve the right to limit transfers among the investment alternatives in any
Contract Year, or to refuse any transfer request, if:
.. we believe, in our sole discretion, that certain trading practices, such as
excessive trading, by, or on behalf of, one or more Contract Owners, or a
specific transfer request or group of transfer requests, may have a
detrimental effect on the Accumulation Unit Values of any Variable
Sub-Account or on the share prices of the corresponding Fund or otherwise
would be to the disadvantage of other Contract Owners; or
.. we are informed by one or more of the Funds that they intend to restrict
the purchase, exchange, or redemption of Fund shares because of excessive
trading or because they believe that a specific transfer or group of
transfers would have a detrimental effect on the prices of Fund shares.
In making the determination that trading activity constitutes market timing or
excessive trading, we will consider, among other things:
.. the total dollar amount being transferred, both in the aggregate and in the
transfer request;
.. the number of transfers you make over a period of time and/or the period of
time between transfers (note: one set of transfers to and from a Variable
Sub-Account in a short period of time can constitute market timing);
.. whether your transfers follow a pattern that appears designed to take
advantage of short term market fluctuations, particularly within certain
Variable Sub-Account underlying Funds that we have identified as being
susceptible to market timing activities;
.. whether the manager of the underlying Fund has indicated that the transfers
interfere with Fund management or otherwise adversely impact the Fund; and
.. the investment objectives and/or size of the Variable Sub-Account
underlying Fund.
We seek to apply these trading limitations uniformly. However, because these
determinations involve the exercise of discretion, it is possible that we may
not detect some market timing or excessive trading activity. As a result, it is
possible that some investors may be able to engage in market timing or excessive
trading activity, while others are prohibited, and the Fund may experience the
adverse effects of market timing and excessive trading described above.
16 PROSPECTUS
If we determine that a Contract Owner has engaged in market timing or excessive
trading activity, we will restrict that Contract Owner from making future
additions or transfers into the impacted Variable Sub-Account(s). If we
determine that a Contract Owner has engaged in a pattern of market timing or
excessive trading activity involving multiple Variable Sub-Accounts, we will
also require that all future transfer requests be submitted through regular U.S.
mail thereby refusing to accept transfer requests via telephone, facsimile,
Internet, or overnight delivery.
In our sole discretion, we may revise our Trading Limitations at any time as
necessary to better deter or minimize market timing and excessive trading or to
comply with regulatory requirements.
DOLLAR COST AVERAGING PROGRAM
Through the Dollar Cost Averaging Program, you may automatically transfer a set
amount at regular intervals during the Accumulation Phase from any Variable
Sub-Account, the Dollar Cost Averaging Option, or interest credited from the 3,
5, 7 or 10 year Guarantee Periods, to any Variable Sub-Account. The interval
between transfers may be monthly, quarterly, semi-annually, or annually.
Transfers made through dollar cost averaging must be $50 or more. You may not
use dollar cost averaging to transfer amounts into the Dollar Cost Averaging
Option.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfers count against the 12 transfers you can make each Contract
Year without paying a transfer fee. In addition, we will not apply the Market
Value Adjustment to these transfers.
The theory of dollar cost averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market.
Call or write us for instructions on how to enroll.
AUTOMATIC FUND REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our Automatic Fund Rebalancing
Program, we will automatically rebalance the Contract Value in each Variable
Sub-Account and return it to the desired percentage allocations. Money you
allocate to the Fixed Account Options will not be included in the rebalancing.
We will rebalance your account each quarter according to your instructions. We
will transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone. The new allocation will be effective
with the first rebalancing that occurs after we receive your request. We are not
responsible for rebalancing that occurs prior to receipt of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Sub-Accounts. You want 40% to be in the AIM V.I. Diversified Income Variable
Sub-Account and 60% to be in the AIM V.I. Growth Variable Sub-Account. Over the
next 2 months the bond market does very well while the stock market performs
poorly. At the end of the first quarter, the AIM V.I. Diversified Income
Variable Sub-Account now represents 50% of your holdings because of its increase
in value. If you choose to have your holdings rebalanced quarterly, on the first
day of the next quarter we would sell some of your units in the AIM V.I.
Diversified Income Variable Sub-Account and use the money to buy more units in
the AIM V.I. Growth Variable Sub-Account so that the percentage allocations
would again be 40% and 60% respectively.
The Automatic Fund Rebalancing Program is available only during the Accumulation
Phase. The transfers made under the Program do not count towards the 12
transfers you can make without paying a transfer fee, and are not subject to a
transfer fee.
Fund rebalancing is consistent with maintaining your allocation of investments
among market segments, although it is accomplished by reducing your Contract
Value allocated to the better performing segments.
17 PROSPECTUS
EXPENSES
As a Contract owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$35 contract maintenance charge from your Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. We also will deduct a
full contract maintenance charge if you withdraw your entire Contract Value,
unless your Contract qualifies for a waiver, described below. During the Payout
Phase, we will deduct the charge proportionately from each income payment.
The charge is for the cost of maintaining each Contract and the Variable
Account. Maintenance costs include expenses we incur in billing and collecting
purchase payments; keeping records; processing death claims, cash withdrawals,
and policy changes; proxy statements; calculating Accumulation Unit Values and
income payments; and issuing reports to Contract owners and regulatory agencies.
We cannot increase the charge. We will waive this charge if:
.. total purchase payments equal $50,000 or more, or
.. all money is allocated to the Fixed Account Options, as of the Contract
Anniversary.
After the Payout Start Date, we will waive this charge if:
.. as of the Payout Start Date, the Contract Value is $50,000 or more, or
.. all income payments are fixed amount income payments.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.00%
of the average daily net assets you have invested in the Variable Sub-Accounts
(1.20% if you select the Enhanced Death Benefit Option). The mortality and
expense risk charge is for all the insurance benefits available with your
Contract (including our guarantee of annuity rates and the death benefits), for
certain expenses of the Contract, and for assuming the risk (expense risk) that
the current charges will not be sufficient in the future to cover the cost of
administering the Contract. If the charges under the Contract are not
sufficient, then we will bear the loss. We charge an additional .20% for the
Enhanced Death Benefit Option to compensate us for the additional risk that we
accept by providing the rider.
We guarantee the mortality and expense risk charge and we cannot increase it. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that exceed the
revenues from the contract maintenance charge. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We guarantee that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or Automatic Fund Rebalancing
Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 7% of the purchase payment(s) you
withdraw in excess of the Preferred Withdrawal Amount, adjusted by a Market
Value Adjustment. The charge declines annually to 0% after 7 complete years from
the day we receive the purchase payment being withdrawn. A schedule showing how
the charge declines appears on page 7. During each Contract Year, you can
withdraw up to 15% of the Contract Value as of the beginning of that Contract
Year without paying the charge. Unused portions of this 15% "PREFERRED
WITHDRAWAL AMOUNT" are not carried forward to future Contract Years.
We determine the withdrawal charge by:
.. multiplying the percentage corresponding to the number of complete years
since we received the purchase payment being withdrawn, times
.. the part of each purchase payment withdrawal that is in excess of the
Preferred Withdrawal Amount, adjusted by a Market Value Adjustment.
We will deduct withdrawal charges, if applicable, from the amount paid. For
purposes of the withdrawal charge, we will treat withdrawals as coming from the
oldest purchase payments first. However, for federal income tax purposes, please
note that withdrawals are considered to have come first from earnings in the
Contract. Thus, for tax purposes, earnings are considered to come out first,
which means you pay taxes on the earnings portion of your withdrawal.
If you make a withdrawal before the Payout Start Date, we will apply the
withdrawal charge percentage in effect on the date of the withdrawal, or the
withdrawal charge percentage in effect on the following day, whichever is
18 PROSPECTUS
lower.We do not apply a withdrawal charge in the following situations:
.. on the Payout Start Date (a withdrawal charge may apply if you elect to
receive income payments for a specified period of less than 120 months);
.. the death of the Contract owner or Annuitant (unless the Settlement Value
is used);
.. withdrawals taken to satisfy IRS minimum distribution rules for the
Contract; and
.. withdrawals made after all purchase payments have been withdrawn.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals may be subject to tax penalties or income tax and a Market Value
Adjustment. You should consult your own tax counsel or other tax advisers
regarding any withdrawals.
PREMIUM TAXES
Currently, we do not make deductions for premium taxes under the Contract
because New York does not charge premium taxes on annuities. We may deduct taxes
that may be imposed in the future from purchase payments or the Contract Value
when the tax is incurred or at a later time.
DEDUCTION FOR VARIABLE ACCOUNT INCOME TAXES
We are not currently making a provision for taxes. In the future, however, we
may make a provision for taxes if we determine, in our sole discretion, that we
will incur a tax as a result of the operation of the Variable Account. We will
deduct for any taxes we incur as a result of the operation of the Variable
Account, whether or not we previously made a provision for taxes and whether or
not it was sufficient. Our status under the Internal Revenue Code is briefly
described in the Taxes section.
OTHER EXPENSES
Each Fund deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Fund whose shares are held by
the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectus for the Funds. For a summary of current estimates of
those charges and expenses, see pages 7-8.
We may receive compensation from A I M Advisors, Inc., for administrative
services we provide to the Funds.
ACCESS TO YOUR MONEY
You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. Withdrawals also are available under limited circumstances on
or after the Payout Start Date. See "Income Plans" on page 20.
The amount payable upon withdrawal is the Contract Value next computed after we
receive the request for a withdrawal at our service center, adjusted by any
Market Value Adjustment, less any withdrawal charges, contract maintenance
charges, income tax withholding, and any premium taxes. We will pay withdrawals
from the Variable Account within 7 days of receipt of the request, subject to
postponement in certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account Options.
To complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
withdrawal charge and premium taxes.
You have the opportunity to name the investment alternative(s) from which you
are taking the withdrawal. If none is specified, we will deduct your withdrawal
pro-rata from the investment alternatives according to the value of your
investments therein.
In general, you must withdraw at least $50 at a time. You also may withdraw a
lesser amount if you are withdrawing your entire interest in a Variable
Sub-Account.
If you request a total withdrawal, we may request that you return your Contract
to us. We also will deduct a Contract Maintenance Charge of $35, unless we have
waived the Contract Maintenance Charge on your Contract.
Withdrawals taken prior to annuitization (referred to in this prospectus as the
Payout Phase) are generally considered to come from the earnings in the Contract
first. If the Contract is tax-qualified, generally all withdrawals are treated
as distributions of earnings. Withdrawals of earnings are taxed as ordinary
income and, if taken prior to age 59 1/2, may be subject to an additional 10%
federal tax penalty.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
19 PROSPECTUS
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account Options
for up to 6 months or shorter period if required by law. If we delay payment or
transfer for 10 days or more, we will pay interest as required by law. Any
interest would be payable from the date we receive the withdrawal request to the
date we make the payment or transfer.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. Systematic
Withdrawals are not available from the Dollar Cost Averaging Option. At our
discretion, systematic withdrawals may not be offered in conjunction with the
Dollar Cost Averaging Program or the Automatic Fund Rebalancing Program.
Depending on fluctuations in the accumulation unit value of the Variable
Sub-Accounts and the value of the Fixed Account Options, systematic withdrawals
may reduce or even exhaust the Contract Value. Please consult your tax advisor
before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. We
may modify or suspend the Systematic Withdrawal Program and charge a processing
fee for the service. If we modify or suspend the Systematic Withdrawal Program,
existing systematic withdrawal payments will not be affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce the amount in any
Guarantee Period to less than $500, we may treat it as a request to withdraw the
entire amount invested in such Guarantee Period. If your request for a partial
withdrawal would reduce the Contract Value to less than $1,000, we may treat it
as a request to withdraw your entire Contract Value. Your Contract will
terminate if you withdraw all of your Contract Value. We will, however, ask you
to confirm your withdrawal request before terminating your Contract. Before
terminating any Contract value whose value has been reduced by withdrawals to
less than $1,000, we would inform you in writing of our intention to terminate
your Contact and give you at least 30 days in which to make an additional
Purchase Payment to restore your Contract's value to the contractual minimum of
$1,000. If we terminate your Contract, we will distribute to you its Contract
Value, adjusted by any applicable Market Value Adjustment, less withdrawal and
other charges, and applicable taxes.
INCOME PAYMENTS
PAYOUT START DATE
The Payout Start Date is the day that we apply your Contract Value, adjusted by
any Market Value Adjustment and less any applicable taxes, to an Income Plan.
The Payout Start Date must be no later than the Annuitant's 90th birthday.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An "Income Plan" is a series of payments on a scheduled basis to you or to
another person designated by you. You may choose and change your choice of
Income Plan until 30 days before the Payout Start Date. If you do not select an
Income Plan, we will make income payments in accordance with Income Plan 1 with
guaranteed payments for 10 years. After the Payout Start Date, you may not make
withdrawals (except as described below) or change your choice of Income Plan.
Three Income Plans are available under the Contract. Each is available to
provide:
.. fixed income payments;
.. variable income payments; or
.. a combination of the two.
A portion of each payment will be considered taxable and the remaining portion
will be a non-taxable return of your investment in the Contract, which is also
called the "basis". Once the basis in the Contract is depleted, all remaining
payments will be fully taxable. If the Contract is tax-qualified, generally, all
payments will be fully taxable. Taxable payments taken prior to age 59 1/2, may
be subject to an additional 10% federal tax penalty.
The three Income Plans are:
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we will
20 PROSPECTUS
continue to pay the remainder of the guaranteed income payments as required by
the Contract.
INCOME PLAN 3 - GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30
YEARS). Under this plan, we make periodic income payments for the period you
have chosen. These payments do not depend on the Annuitant's life. Income
payments for less than 120 months may be subject to a withdrawal charge. We will
deduct the mortality and expense risk charge from the Variable Sub-Account
assets that support variable income payments even though we may not bear any
mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant is alive before
we make each payment. Please note that under such Income Plans, if you elect to
take no minimum guaranteed payments, it is possible that the payee could receive
only 1 income payment if the Annuitant and any joint Annuitant both die before
the second income payment, or only 2 income payments if they die before the
third income payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or a portion of the Variable Account portion
of the income payments at any time and receive a lump sum equal to the present
value of the remaining variable payments associated with the amount withdrawn.
To determine the present value of any remaining variable income payments being
withdrawn, we use a discount rate equal to the assumed annual investment rate
that we use to compute such variable income payments. The minimum amount you may
withdraw under this feature is $1,000. A withdrawal charge may apply. We deduct
applicable premium taxes from the Contract Value at the Payout Start Date.
We may make other Income Plans available. You may obtain information about them
by writing or calling us.
You must apply at least the Contract Value in the Fixed Account Options on the
Payout Start Date to fixed income payments. If you wish to apply any portion of
your Fixed Account Option balance to provide variable income payments, you
should plan ahead and transfer that amount to the Variable Sub-Accounts prior to
the Payout Start Date. If you do not tell us how to allocate your Contract Value
among fixed and variable income payments, we will apply your Contract Value in
the Variable Account to variable income payments and your Contract Value in the
Fixed Account Options to fixed income payments.
We will apply your Contract Value, adjusted by any applicable Market Value
Adjustment, less applicable taxes to your Income Plan on the Payout Start Date.
If the Contract owner has not made any purchase payments for at least 3 years
preceding the Payout Start Date, and either the Contract Value is less than
$2,000 or not enough to provide an initial payment of at least $20, and state
law permits, we may:
.. terminate the Contract and pay you the Contract Value, adjusted by any
Market Value Adjustment and less any applicable taxes, in a lump sum
instead of the periodic payments you have chosen, or
.. reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Funds and (b) the Annuitant could live longer or shorter than we
expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate. Please refer to the
Statement of Additional Information for more detailed information as to how we
determine variable income payments.
21 PROSPECTUS
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
1) adjusting the portion of the Contract Value in any Fixed Account Option on
the Payout Start Date by any applicable Market Value Adjustment;
2) deducting any applicable premium tax; and
3) applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as
we are offering at that time.
We may defer making fixed income payments for a period of up to 6 months or such
shorter time as state law may require. If we defer payments for 10 business days
or more, we will pay interest as required by law from the date we receive the
withdrawal request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age. However, we
reserve the right to use income payment tables that do not distinguish on the
basis of sex to the extent permitted by law. In certain employment-related
situations, employers are required by law to use the same income payment tables
for men and women. Accordingly, if the Contract is to be used in connection with
an employment-related retirement or benefit plan, you should consult with legal
counsel as to whether the purchase of a Contract is appropriate. For qualified
plans, where it is appropriate, we may use income payment tables that do not
distinguish on the basis of sex.
DEATH BENEFITS
We will pay a death benefit if, prior to the Payout Start Date:
1. any Contract owner dies or,
2. the Annuitant dies, if the Contract owner is not a living person.
We will pay the death benefit to the new Contract owner who is determined
immediately after the death. The new Contract owner would be a surviving
Contract owner or, if none, the Beneficiary(ies). In the case of the death of an
Annuitant, we will pay the death benefit to the current Contract owner. A
request for payment of the death benefit must include "DUE PROOF OF DEATH." We
will accept the following documentation as Due Proof of Death:
.. a certified copy of a death certificate,
.. a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
.. any other proof acceptable to us.
Where there are multiple beneficiaries, we will only value the death benefit at
the time the first beneficiary submits the necessary documentation in good
order. Any death benefit amounts attributable to any beneficiary which remain in
the investment divisions are subject to investment risk.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest of:
1. the Contract Value as of the date we determine the death benefit, or
2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value) on the date we determine the death benefit, or
3. the sum of all purchase payments reduced by a withdrawal adjustment, as
defined below, or
4. the greatest of the Contract Value on each DEATH BENEFIT ANNIVERSARY prior
to the date we determine the death benefit, increased by purchase payments
made since that Death Benefit Anniversary and reduced by a withdrawal
adjustment as defined below.
In calculating the Settlement Value, the amount in each individual Guarantee
Period may be subject to a Market Value Adjustment. A Market Value Adjustment
will apply to amounts in a Guarantee Period, unless we calculate the Settlement
Value during the 30-day period after the expiration of the Guarantee Period.
Also, the Settlement Value will reflect deduction of any applicable withdrawal
charges, contract maintenance charges, and premium taxes.
A "Death Benefit Anniversary" is every seventh Contract Anniversary during the
Accumulation Phase. For example, the 7th, 14th, and 21st Contract Anniversaries
are the first three Death Benefit Anniversaries.
The "withdrawal adjustment" is equal to (a) divided by (b), with the result
multiplied by (c), where:
(a) is the withdrawal amount;
(b) is the Contract Value immediately prior to the withdrawal; and
(c) is the value of the applicable death benefit alternative immediately prior
to the withdrawal.
Please see Appendix B to this prospectus, which contains examples of the
application of the withdrawal adjustment.
We will determine the value of the death benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 4:00 p.m. Eastern Time on a Valuation Date,
22 PROSPECTUS
we will process the request as of the end of the following Valuation Date.
ENHANCED DEATH BENEFIT OPTION
If the oldest Contract owner and Annuitant is less than or equal to age 80 as of
the date we receive the completed application, the Enhanced Death Benefit
Option, is an optional benefit that you may select. If the Contract owner is a
living individual, the Enhanced Death Benefit applies only for the death of the
Contract owner. If the Contract owner is not a living individual, the enhanced
death benefit applies only for the death of the Annuitant. For Contracts with
the Enhanced Death Benefit Rider, the death benefit will be the greatest of (1)
through (4) above, or (5) the Enhanced Death Benefit, described below. The
Enhanced Death Benefit will never be greater than the maximum death benefit
allowed by any state nonforfeiture laws which govern the Contract.
ENHANCED DEATH BENEFIT. The Enhanced Death Benefit on the Issue Date is equal to
the initial purchase payment. On each Contract Anniversary, we will recalculate
your Enhanced Death Benefit to equal the greater of your Contract Value on that
date, or the most recently calculated Enhanced Death Benefit. We also will
recalculate your Enhanced Death Benefit whenever you make an additional purchase
payment or a partial withdrawal. Additional purchase payments will increase the
Enhanced Death Benefit dollar-for-dollar. Withdrawals will reduce the Enhanced
Death Benefit by an amount equal to a withdrawal adjustment computed in the
manner described above under "Death Benefit Amount." In the absence of any
withdrawals or purchase payments, the Enhanced Death Benefit will be the
greatest of all Contract Anniversary Contract Values on or before the date we
calculate the death benefit.
We will calculate ANNIVERSARY VALUES for each Contract Anniversary prior to the
oldest Contract owner's or the oldest Annuitant's, if the Contract owner is not
a living person, 85th birthday. After age 85, we will recalculate the Enhanced
Death Benefit only for purchase payments and withdrawals. The Enhanced Death
Benefit will never be greater than the maximum death benefit allowed by any
non-forfeiture laws which govern the Contract.
DEATH BENEFIT PAYMENTS
IF THE NEW OWNER IS YOUR SPOUSE, THE NEW OWNER MAY:
1. elect to receive the death benefit in a lump sum, or
2. elect to apply the death benefit to an Income Plan. Payments from the
Income Plan must begin within 1 year of the date of death and must be
payable throughout:
.. the life of the new Owner; or
.. for a guaranteed number of payments from 5 to 50 years, but not to exceed
the life expectancy of the new Owner; or
.. over the life of the new Owner with a guaranteed number of payments from 5
to 30 years but not to exceed the life expectancy of the new Owner.
If your spouse does not elect one of the above options, the Contract will
continue in the Accumulation Phase as if the death had not occurred. If the
Contract is continued in the Accumulation Phase, the following restrictions
apply:
.. On the date the Contract is continued, the Contract Value will equal the
amount of the Death Benefit as determined as of the Valuation Date on which
we received the completed request for settlement of the death benefit (the
next Valuation Date, if we receive the completed request for settlement of
the death benefit after 3 p.m. Central Time). Unless otherwise instructed
by the continuing spouse, the excess, if any, of the death benefit over the
Contract Value will be allocated to the Sub-Accounts of the Variable
Account. This excess will be allocated in proportion to your Contract Value
in those Sub-accounts as of the end of the Valuation Period during which we
receive the completed request for settlement of the death benefit, except
that any portion of this excess attributable to the Fixed Account Options
will be allocated to the Money Market Sub-account. Within 30 days of the
date the Contract is continued, your surviving spouse may choose one of the
following transfer alternatives without incurring a transfer fee:
.. transfer all or a portion of the excess among the Variable Sub-Accounts;
.. transfer all or a portion of the excess into the Guaranteed Maturity Fixed
Account and begin a new Guarantee Period; or
.. transfer all or a portion of the excess into a combination of Variable
Sub-Accounts and the Guaranteed Maturity Fixed Account.
Any such transfer does not count as one of the free transfers allowed each
Contract Year and is subject to any minimum allocation amount specified in your
Contract.
The surviving spouse may make a single withdrawal of any amount within one year
of the date of death without incurring a Withdrawal Charge.
Only one spousal continuation is allowed under this Contract.
IF THE NEW OWNER IS NOT YOUR SPOUSE BUT IS A LIVING PERSON, THE NEW OWNER MAY:
1) elect to receive the death benefit in a lump sum, or
2) elect to apply the death benefit to an Income Plan. Payments from the
Income Plan must begin within 1 year of the date of death and must be
payable throughout:
.. the life of the new Owner; or
23 PROSPECTUS
.. for a guaranteed number of payments from 5 to 50 years, but not to exceed
the life expectancy of the new Owner; or
.. over the life of the new Owner with a guaranteed number of payments from 5
to 30 years but not to exceed the life expectancy of the new Owner.
If the new Owner does not elect one of the above options then the new Owner must
receive the Contract Value payable within 5 years of your date of death. The
Contract Value will equal the amount of the death benefit as determined as of
the Valuation Date on which we received a completed request for settlement of
the death benefit (the next Valuation Date, if we receive a completed request
for settlement of the death benefit after 3 p.m. Central Time). Unless otherwise
instructed by the new Owner, the excess, if any, of the death benefit over the
Contract Value will be allocated to the Money Market Variable Sub-Account. The
new Owner may exercise all rights as set forth in the TRANSFERS section during
this 5 year period.
No additional Purchase Payments may be added to the Contract under this
election. Withdrawal Charges will be waived for any withdrawals made during this
5 year period.
If the new Owner dies prior to the receiving all of the Contract Value, then the
new Owner's named Beneficiary(ies) will receive the greater of the Settlement
Value or the remaining Contract Value. This amount must be received as a lump
sum within 5 years of the date of the original Owner's death.
We reserve the right to offer additional options upon Death of Owner.
IF THE NEW OWNER IS A CORPORATION, TRUST, OR OTHER NON-LIVING PERSON:
(a) The new Owner may elect to receive the death benefit in a lump sum; or
(b) If the new Owner does not elect the option above, then the new Owner must
receive the Contract Value payable within 5 years of your date of death. On
the date we receive the complete request for settlement of the Death
Benefit, the Contract Value under this option will be the death benefit.
Unless otherwise instructed by the new Owner, the excess, if any of the
death benefit over the Contract Value will be allocated to the Money Market
Variable Sub-Account. The new Owner may exercise all rights set forth in
the TRANSFERS provision during this 5 year period. No additional Purchase
Payments may be added to the Contract under this election. Withdrawal
Charges will be waived during this 5 year period.
We reserve the right to offer additional options upon Death of Owner.
If any new Owner is a non-living person, all new Owners will be considered to be
non-living persons for the above purposes.
Under any of these options, all ownership rights, subject to any restrictions
previously placed upon the Beneficiary, are available to the new Owner from the
date of your death to the date on which the death proceeds are paid.
DEATH OF ANNUITANT
If the Annuitant who is not also the Contract Owner dies prior to the Payout
Start Date and the Contract Owner is a living person, then the Contract will
continue with a new Annuitant as designated by the Contract Owner.
If the Annuitant who is not also the Contract Owner dies prior to the Payout
Start Date and the Contract Owner is a non-living person, the following apply:
(a) The Contract Owner may elect to receive the death benefit in a lump sum; or
(b) If the new Owner does not elect the option above, then the Owner must
receive the Contract Value payable within 5 years of the Annuitant's date
of death. On the date we receive the complete request for settlement of the
death benefit, the Contract Value under this option will be the death
benefit. Unless otherwise instructed by the Contract Owner, the excess, if
any, of the death benefit over the Contract Value will be allocated to the
Money Market Variable Sub-Account. The Contract Owner may then exercise all
rights set forth in the TRANSFERS provision during this 5 year period. No
additional Purchase Payments may be added to the Contract under this
election. Withdrawal Charges will be waived during this 5 year period.
We reserve the right to offer additional options upon Death of Owner.
24 PROSPECTUS
MORE INFORMATION
ALLSTATE NEW YORK
Allstate New York is the issuer of the Contract. Allstate New York is a stock
life insurance company organized under the laws of the State of New York.
Allstate New York was incorporated in 1967 and was known as "Financial Life
Insurance Company" from 1967 to 1978. From 1978 to 1984, Allstate New York was
known as "PM Life Insurance Company." Since 1984 the company has been known as
"Allstate Life Insurance Company of New York."
Allstate New York is currently licensed to operate in New York. Our home office
is located at 100 Motor Parkway, Hauppauge, NY 11788-5107. Our service center
located in Northbrook, Illinois.
Allstate New York is a wholly owned subsidiary of Allstate Life Insurance
Company ("ALLSTATE LIFE"), a stock life insurance company incorporated under the
laws of the State of Illinois. Allstate Life is a wholly owned subsidiary of
Allstate Insurance Company, a stock property-liability insurance company
incorporated under the laws of Illinois. With the exception of the directors
qualifying shares, all of the outstanding capital stock of Allstate Insurance
Company is owned by The Allstate Corporation.
THE VARIABLE ACCOUNT
Allstate New York established the Allstate Life of New York Separate Account A
on December 15, 1995. We have registered the Variable Account with the SEC as a
unit investment trust. The SEC does not supervise the management of the Variable
Account or Allstate New York.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under New York law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
Allstate New York.
The Variable Account consists of multiple Variable Sub-Accounts, 18 of which are
available through the Contracts. Each Variable Sub-Account invests in a
corresponding Fund. We may add new Variable Sub-Accounts or eliminate one or
more of them, if we believe marketing, tax, or investment conditions so warrant.
We do not guarantee the investment performance of the Variable Account, its
Sub-Accounts or the Funds. We may use the Variable Account to fund our other
annuity contracts. We will account separately for each type of annuity contract
funded by the Variable Account.
THE FUNDS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Funds in shares of the
distributing Fund at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Funds held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Funds that we hold
directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Fund as of the record date of
the meeting. After the Payout Start Date, the person receiving income payments
has the voting interest. The payee's number of votes will be determined by
dividing the reserve for such Contract allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Fund. The
votes decrease as income payments are made and as the reserves for the Contract
decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted on a pro-rata basis to reduce the votes eligible
to be cast.
We reserve the right to vote Fund shares as we see fit without regard to voting
instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN FUNDS. If the shares of any of the Funds are no longer available for
investment by the Variable Account or if, in our judgment, further investment in
such shares is no longer desirable in view of the purposes of the Contract, we
may eliminate that Fund and substitute shares of another eligible investment
fund. Any substitution of securities will comply with the requirements of the
1940 Act. We also may add new Variable Sub-Accounts that invest in underlying
Funds. We will notify you in advance of any changes.
25 PROSPECTUS
CONFLICTS OF INTEREST. Certain of the Funds sell their shares to Variable
Accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance Variable Accounts and variable annuity Variable Accounts to invest in
the same Fund. The boards of trustees of these Funds monitor for possible
conflicts among Variable Accounts buying shares of the Funds. Conflicts could
develop for a variety of reasons. For example, differences in treatment under
tax and other laws or the failure by a Variable Account to comply with such laws
could cause a conflict. To eliminate a conflict, a Fund's board of trustees may
require a Variable Account to withdraw its participation in a Fund. A Fund's net
asset value could decrease if it had to sell investment securities to pay
redemption proceeds to a Variable Account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. ALFS, Inc.* ("ALFS"), located at 3100 Sanders Road, Northbrook, IL
60062-7154, serves as principal underwriter of the Contracts. ALFS is a wholly
owned subsidiary of Allstate Life Insurance Company. ALFS is a registered broker
dealer under the Securities and Exchange Act of 1934, as amended ("EXCHANGE
ACT"), and is a member of the NASD.
We will pay commissions to broker-dealers who sell the Contracts. Commissions
paid may vary, but we estimate that the total commissions paid on all Contract
sales will not exceed 8 1/2% of any purchase payments. Sometimes, we also pay
the broker-dealer a persistency bonus in addition to the standard commissions. A
persistency bonus is not expected to exceed 1.2%, on an annual basis, of the
purchase payments considered in connection with the bonus. These commissions are
intended to cover distribution expenses. Contracts may be sold by
representatives or employees of banks which may be acting as broker-dealers
without separate registration under the Exchange Act, pursuant to legal and
regulatory exceptions.
Allstate New York does not pay ALFS a commission for distribution of the
Contracts. The underwriting agreement with ALFS provides that we will reimburse
ALFS for any liability to Contract owners arising out of services rendered or
Contracts issued.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
.. issuance of the Contracts;
.. maintenance of Contract owner records;
.. Contract owner services;
.. calculation of unit values;
.. maintenance of the Variable Account; and
.. preparation of Contract owner reports.
We will send you Contract statements and transaction confirmations at least
annually. The annual statement details values and specific Contract data for
each particular Contract. You should notify us promptly in writing of any
address change. You should read your statements and confirmations carefully and
verify their accuracy. You should contact us promptly if you have a question
about a periodic statement. We will investigate all complaints and make any
necessary adjustments retroactively, but you must notify us of a potential error
within a reasonable time after the date of the questioned statement. If you wait
too long, we will make the adjustment as of the date that we receive notice of
the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
NON-QUALIFIED ANNUITIES HELD WITHIN A QUALIFIED PLAN
If you use the Contract within an employer sponsored qualified retirement plan,
the plan may impose different or additional conditions or limitations on
withdrawals, waivers of withdrawal charges, death benefits, Payout Start Dates,
income payments and other Contract features. In addition, adverse tax
consequences may result if qualified plan limits on distributions and other
conditions are not met. Please consult your qualified plan administrator fr more
information. Allstate Life Insurance Company of New York no longer issues
deferred annuities to employer sponsored qualified retirement plans.
LEGAL MATTERS
All matters of New York law pertaining to the Contracts, including the validity
of the Contracts and Allstate New York's right to issue such Contracts under New
York insurance law, have been passed upon by Michael J. Velotta, General Counsel
of Allstate New York.
26 PROSPECTUS
TAXES
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. ALLSTATE
NEW YORK MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
Allstate New York is taxed as a life insurance company under Part I of
Subchapter L of the Code. Since the Variable Account is not an entity separate
from Allstate New York, and its operations form a part of Allstate New York, it
will not be taxed separately. Investment income and realized capital gains of
the Variable Account are automatically applied to increase reserves under the
Contract. Under existing federal income tax law, Allstate New York believes that
the Variable Account investment income and capital gains will not be taxed to
the extent that such income and gains are applied to increase the reserves under
the Contract. Accordingly, Allstate New York does not anticipate that it will
incur any federal income tax liability attributable to the Variable Account, and
therefore Allstate New York does not intend to make provisions for any such
taxes. If Allstate New York is taxed on investment income or capital gains of
the Variable Account, then Allstate New York may impose a charge against the
Variable Account in order to make provision for such taxes.
TAXATION OF VARIABLE ANNUITIES IN GENERAL
TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
.. the Contract Owner is a natural person,
.. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
.. Allstate New York is considered the owner of the Variable Account assets
for federal income tax purposes.
NON-NATURAL OWNERS. Non-natural owners are also referred to as Non Living Owners
in this prospectus. As a general rule, annuity contracts owned by non-natural
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. The income on such contracts
does not enjoy tax deferral and is taxed as ordinary income received or accrued
by the non-natural owner during the taxable year.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE. There are several exceptions to the
general rule that annuity contracts held by a non-natural owner are not treated
as annuity contracts for federal income tax purposes. Contracts will generally
be treated as held by a natural person if the nominal owner is a trust or other
entity which holds the contract as agent for a natural person. However, this
special exception will not apply in the case of an employer who is the nominal
owner of an annuity contract under a non-Qualified deferred compensation
arrangement for its employees. Other exceptions to the non-natural owner rule
are: (1) contracts acquired by an estate of a decedent by reason of the death of
the decedent; (2) certain qualified contracts; (3) contracts purchased by
employers upon the termination of certain qualified plans; (4) certain contracts
used in connection with structured settlement agreements; and (5) immediate
annuity contracts, purchased with a single premium, when the annuity starting
date is no later than a year from purchase of the annuity and substantially
equal periodic payments are made, not less frequently than annually, during the
annuity period.
GRANTOR TRUST OWNED ANNUITY. Contracts owned by a grantor trust are considered
owned by a non-natural owner. Grantor trust owned contracts receive tax deferral
as described in the Exceptions to the Non-Natural Owner Rule section. In
accordance with the Code, upon the death of the annuitant, the death benefit
must be paid. According to your Contract, the Death Benefit is paid to the
surviving Contract Owner. Since the trust will be the surviving Contract Owner
in all cases, the Death Benefit will be payable to the trust notwithstanding any
beneficiary designation on the annuity contract. A trust, including a grantor
trust, has two options for receiving any death benefits: 1) a lump sum payment;
or 2) payment deferred up to five years from date of death.
DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract owner during the taxable
year. Although Allstate New York does not have control over the Portfolios or
their investments, we expect the Portfolios to meet the diversification
requirements.
OWNERSHIP TREATMENT. The IRS has stated that a contract owner will be considered
the owner of separate account assets if he possesses incidents of ownership in
those assets, such as the ability to exercise investment control over the
assets. At the time the diversification regulations were issued, the Treasury
Department
27 PROSPECTUS
announced that the regulations do not provide guidance concerning circumstances
in which investor control of the separate account investments may cause a
Contract owner to be treated as the owner of the separate account. The Treasury
Department also stated that future guidance would be issued regarding the extent
that owners could direct sub-account investments without being treated as owners
of the underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
private and published rulings in which it found that Contract owners were not
owners of separate account assets. For example, if your contract offers more
than twenty (20) investment alternatives you have the choice to allocate
premiums and contract values among a broader selection of investment
alternatives than described in such rulings. You may be able to transfer among
investment alternatives more frequently than in such rulings. These differences
could result in you being treated as the owner of the Variable Account. If this
occurs, income and gain from the Variable Account assets would be includible in
your gross income. Allstate New York does not know what standards will be set
forth in any regulations or rulings which the Treasury Department may issue. It
is possible that future standards announced by the Treasury Department could
adversely affect the tax treatment of your Contract. We reserve the right to
modify the Contract as necessary to attempt to prevent you from being considered
the federal tax owner of the assets of the Variable Account. However, we make no
guarantee that such modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a Non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a full withdrawal
under a Non-Qualified Contract, the amount received will be taxable only to the
extent it exceeds the investment in the Contract.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a Non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If any variable payment is less than the excludable amount you should
contact a competent tax advisor to determine how to report any unrecovered
investment. The federal tax treatment of annuity payments is unclear in some
respects. As a result, if the IRS should provide further guidance, it is
possible that the amount we calculate and report to the IRS as taxable could be
different. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is possible that a greater or lesser portion of such a payment could be
taxable than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
.. if any Contract Owner dies on or after the Payout Start Date but before the
entire interest in the Contract has been distributed, the remaining portion
of such interest must be distributed at least as rapidly as under the
method of distribution being used as of the date of the Contract Owner's
death;
.. if any Contract Owner dies prior to the Payout Start Date, the entire
interest in the Contract will be distributed within 5 years after the date
of the Contract Owner's death. These requirements are satisfied if any
portion of the Contract Owner's interest that is payable to (or for the
benefit of) a designated Beneficiary is distributed over the life of such
Beneficiary (or over a period not extending beyond the life expectancy of
the Beneficiary) and the distributions begin within 1 year of the Contract
Owner's death. If the Contract Owner's designated Beneficiary is the
surviving spouse of the Contract Owner, the Contract may be continued with
the surviving spouse as the new Contract Owner;
.. if the Contract Owner is a non-natural person, then the Annuitant will be
treated as the Contract Owner for purposes of applying the distribution at
death rules. In addition, a change in the Annuitant on a Contract owned by
a non-natural person will be treated as the death of the Contract Owner.
TAXATION OF ANNUITY DEATH BENEFITS. Death Benefit amounts are included in income
as follows:
.. if distributed in a lump sum, the amounts are taxed in the same manner as a
total withdrawal, or
.. if distributed under an Income Plan, the amounts are taxed in the same
manner as annuity payments.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any
28 PROSPECTUS
premature distribution from a non-Qualified Contract. The penalty tax generally
applies to any distribution made prior to the date you attain age 59 1/2.
However, no penalty tax is incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or becoming totally
disabled,
.. made in substantially equal periodic payments over the Contract Owner's
life or life expectancy, or over the joint lives or joint life expectancies
of the Contract Owner and the Beneficiary,
.. made under an immediate annuity, or
.. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS. With respect to non-Qualified Contracts
using substantially equal periodic payments or immediate annuity payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the Contract Owner's attaining age 59 1/2 would be
subject to a 10% penalty tax unless another exception to the penalty tax
applied. The tax for the year of the modification is increased by the penalty
tax that would have been imposed without the exception, plus interest for the
years in which the exception was used. A material modification does not include
permitted changes described in published IRS rulings. You should consult a
competent tax advisor prior to creating or modifying a substantially equal
periodic payment stream.
TAX FREE EXCHANGES UNDER INTERNAL REVENUE CODE SECTION 1035. A 1035 exchange is
a tax-free exchange of a non-qualified life insurance contract, endowment
contract or annuity contract into a non-Qualified annuity contract. The contract
owner(s) must be the same on the old and new contract. Basis from the old
contract carries over to the new contract so long as we receive that information
from the relinquishing company. If basis information is never received, we will
assume that all exchanged funds represent earnings and will allocate no cost
basis to them.
PARTIAL EXCHANGES. The IRS has issued a ruling that permits partial exchanges of
annuity contracts. Under this ruling, if you take a withdrawal from a receiving
or relinquishing annuity contract within 24 months of the partial exchange, then
special aggregation rules apply for purposes of determining the taxable amount
of a distribution. The IRS has issued limited guidance on how to aggregate and
report these distributions. The IRS is expected to provide further guidance; as
a result, it is possible that the amount we calculate and report to the IRS as
taxable could be different. Your Contract may not permit partial exchanges.
TAXATION OF OWNERSHIP CHANGES. If you transfer a non-Qualified Contract without
full and adequate consideration to a person other than your spouse (or to a
former spouse incident to a divorce), you will be taxed on the difference
between the Contract Value and the investment in the Contract at the time of
transfer. Any assignment or pledge (or agreement to assign or pledge) of the
Contract Value is taxed as a withdrawal of such amount or portion and may also
incur the 10% penalty tax.
AGGREGATION OF ANNUITY CONTRACTS. The Code requires that all non-Qualified
deferred annuity contracts issued by Allstate New York (or its affiliates) to
the same Contract Owner during any calendar year be aggregated and treated as
one annuity contract for purposes of determining the taxable amount of a
distribution.
INCOME TAX WITHHOLDING
Generally, Allstate New York is required to withhold federal income tax at a
rate of 10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold the required 10% of the taxable
amount. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Allstate New York is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. If no U.S. taxpayer identification number is
provided, we will automatically withhold using single with zero exemptions as
the default. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Allstate New York as a withholding
agent must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien.
Withholding may be reduced or eliminated if covered by an income tax treaty
between the U.S. and the non-resident alien's country of residence if the payee
provides a U.S. taxpayer identification number on a fully completed Form W-8BEN.
A U.S. taxpayer identification number is a social security number or an
individual taxpayer identification number ("ITIN"). ITINs are issued by the IRS
to non-resident alien individuals who are not eligible to obtain a social
security number. The U.S. does not have a tax treaty with all
29 PROSPECTUS
countries nor do all tax treaties provide an exclusion or lower withholding rate
for annuities.
TAX QUALIFIED CONTRACTS
The income on tax sheltered annuity (TSA) and IRA investments is tax deferred,
and the income from annuities held by such plans does not receive any additional
tax deferral. You should review the annuity features, including all benefits and
expenses, prior to purchasing an annuity as a TSA or IRA. Tax Qualified
Contracts are contracts purchased as or in connection with:
.. Individual Retirement Annuities (IRAs) under Code Section 408(b);
.. Roth IRAs under Code Section 408A;
.. Simplified Employee Pension (SEP IRA) under Code Section 408(k);
.. Savings Incentive Match Plans for Employees (SIMPLE IRA) under Code Section
408(p);
.. Tax Sheltered Annuities under Code Section 403(b);
.. Corporate and Self Employed Pension and Profit Sharing Plans under Code
Section 401; and
.. State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans under Code Section 457.
Allstate New York reserves the right to limit the availability of the Contract
for use with any of the retirement plans listed above or to modify the Contract
to conform with tax requirements. If you use the Contract within an employer
sponsored qualified retirement plan, the plan may impose different or additional
conditions or limitations on withdrawals, waiver of charges, death benefits,
Payout Start Dates, income payments, and other Contract features. In addition,
adverse tax consequences may result if qualified plan limits on distributions
and other conditions are not met. Please consult your qualified plan
administrator for more information. Allstate New York no longer issues deferred
annuities to employer sponsored qualified retirement plans.
The tax rules applicable to participants with tax qualified annuities vary
according to the type of contract and the terms and conditions of the
endorsement. Adverse tax consequences may result from certain transactions such
as excess contributions, premature distributions, and, distributions that do not
conform to specified commencement and minimum distribution rules. Allstate New
York can issue an individual retirement annuity on a rollover or transfer of
proceeds from a decedent's IRA, TSA, or employer sponsored retirement plan under
which the decedent's surviving spouse is the beneficiary. Allstate New York does
not offer an individual retirement annuity that can accept a transfer of funds
for any other, non-spousal, beneficiary of a decedent's IRA, TSA, or employer
sponsored qualified retirement plan.
Please refer to your Endorsement for IRAs or 403(b) plans, if applicable, for
additional information on your death settlement options. In the case of certain
qualified plans, the terms of the Qualified Plan Endorsement and the plans may
govern the right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM AN INDIVIDUALLY OWNED TAX QUALIFIED CONTRACT. If
you make a partial withdrawal under a Tax Qualified Contract other than a Roth
IRA, the portion of the payment that bears the same ratio to the total payment
that the investment in the Contract (i.e., nondeductible IRA contributions)
bears to the Contract Value, is excluded from your income. We do not keep track
of nondeductible contributions, and generally all tax reporting of distributions
from Tax Qualified Contracts other than Roth IRAs will indicate that the
distribution is fully taxable.
"Qualified distributions" from Roth IRAs are not included in gross income.
"Qualified distributions" are any distributions made more than five taxable
years after the taxable year of the first contribution to any Roth IRA and which
are:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made to a beneficiary after the Contract Owner's death,
.. attributable to the Contract Owner being disabled, or
.. made for a first time home purchase (first time home purchases are subject
to a lifetime limit of $10,000).
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, Tax Qualified Contracts (excluding
Roth IRAs) require minimum distributions upon reaching age 70 1/2. Failure to
withdraw the required minimum distribution will result in a 50% tax penalty on
the shortfall not withdrawn from the Contract. Not all income plans offered
under the Contract satisfy the requirements for minimum distributions. Because
these distributions are required under the Code and the method of calculation is
complex, please see a competent tax advisor.
THE DEATH BENEFIT AND TAX QUALIFIED CONTRACTS. Pursuant to the Code and IRS
regulations, an IRA (e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE IRA)
may not invest in life insurance contracts. However, an IRA may provide a death
benefit that equals the greater of the purchase payments or the Contract Value.
The Contract offers a death benefit that in certain circumstances may exceed the
greater of the purchase payments or the Contract Value. We believe that the
Death Benefits offered by your Contract do not constitute life insurance under
these regulations.
30 PROSPECTUS
It is also possible that certain death benefits that offer enhanced earnings
could be characterized as an incidental death benefit. If the death benefit were
so characterized, this could result in current taxable income to a Contract
Owner. In addition, there are limitations on the amount of incidental death
benefits that may be provided under qualified plans, such as in connection with
a TSA or employer sponsored qualified retirement plan.
Allstate New York reserves the right to limit the availability of the Contract
for use with any of the qualified plans listed above.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM TAX QUALIFIED CONTRACTS. A 10%
penalty tax applies to the taxable amount of any premature distribution from a
Tax Qualified Contract. The penalty tax generally applies to any distribution
made prior to the date you attain age 59 1/2. However, no penalty tax is
incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or total disability,
.. made in substantially equal periodic payments over the Contract Owner's
life or life expectancy, or over the joint lives or joint life expectancies
of the Contract Owner and the Beneficiary,
.. made after separation from service after age 55 (does not apply to IRAs),
.. made pursuant to an IRS levy,
.. made for certain medical expenses,
.. made to pay for health insurance premiums while unemployed (applies only
for IRAs),
.. made for qualified higher education expenses (applies only for IRAs), and
.. made for a first time home purchase (up to a $10,000 lifetime limit and
applies only for IRAs).
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject to the premature distribution penalty,
will be subject to a 25% penalty tax.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON TAX QUALIFIED CONTRACTS. With respect
to Tax Qualified Contracts using substantially equal periodic payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the taxpayer's attaining age 59 1/2 would be subject to
a 10% penalty tax unless another exception to the penalty tax applied. The tax
for the year of the modification is increased by the penalty tax that would have
been imposed without the exception, plus interest for the years in which the
exception was used. A material modification does not include permitted changes
described in published IRS rulings. You should consult a competent tax advisor
prior to creating or modifying a substantially equal periodic payment stream.
INCOME TAX WITHHOLDING ON TAX QUALIFIED CONTRACTS. Generally, Allstate New York
is required to withhold federal income tax at a rate of 10% from all
non-annuitized distributions that are not considered "eligible rollover
distributions." The customer may elect out of withholding by completing and
signing a withholding election form. If no election is made, we will
automatically withhold the required 10% from the taxable amount. In certain
states, if there is federal withholding, then state withholding is also
mandatory. Allstate New York is required to withhold federal income tax at a
rate of 20% on all "eligible rollover distributions" unless you elect to make a
"direct rollover" of such amounts to an IRA or eligible retirement plan.
Eligible rollover distributions generally include all distributions from Tax
Qualified Contracts, including TSAs but excluding IRAs, with the exception of:
.. required minimum distributions, or,
.. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
.. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
.. hardship distributions.
For all annuitized distributions that are not subject to the 20% withholding
requirement, Allstate New York is required to withhold federal income tax using
the wage withholding rates. The customer may elect out of withholding by
completing and signing a withholding election form. If no election is made, we
will automatically withhold using married with three exemptions as the default.
If no U.S. taxpayer identification number is provided, we will automatically
withhold using single with zero exemptions as the default. In certain states, if
there is federal withholding, then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Allstate New York as a withholding
agent must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien or to
certain other 'foreign persons'. Withholding may be reduced or eliminated if
covered by an income tax treaty between the U.S. and the non-resident alien's
country of residence if the payee provides a U.S. taxpayer identification number
on a fully completed Form W-8BEN. A U.S. taxpayer
31 PROSPECTUS
identification number is a social security number or an individual taxpayer
identification number ("ITIN"). ITINs are issued by the IRS to non-resident
alien individuals who are not eligible to obtain a social security number. The
U.S. does not have a tax treaty with all countries nor do all tax treaties
provide an exclusion or lower withholding rate for annuities.
INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408(b) permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity (IRA). Individual Retirement Annuities are subject
to limitations on the amount that can be contributed and on the time when
distributions may commence. Certain distributions from other types of qualified
retirement plans may be "rolled over" on a tax-deferred basis into an Individual
Retirement Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408A permits eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth Individual Retirement Annuity. Roth Individual
Retirement Annuities are subject to limitations on the amount that can be
contributed and on the time when distributions may commence.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "rolled over" to a Roth Individual Retirement
Annuity. The income portion of a conversion or rollover distribution is taxable
currently, but is exempted from the 10% penalty tax on premature distributions.
ANNUITIES HELD BY INDIVIDUAL RETIREMENT ACCOUNTS (COMMONLY KNOWN AS CUSTODIAL
IRAS). Code Section 408 permits a custodian or trustee of an Individual
Retirement Account to purchase an annuity as an investment of the Individual
Retirement Account. If an annuity is purchased inside of an Individual
Retirement Account, then the Annuitant must be the same person as the beneficial
owner of the Individual Retirement Account.
Generally, the death benefit of an annuity held in an Individual Retirement
Account must be paid upon the death of the Annuitant. However, in most states,
the Contract permits the custodian or trustee of the Individual Retirement
Account to continue the Contract in the accumulation phase, with the Annuitant's
surviving spouse as the new Annuitant, if the following conditions are met:
1) The custodian or trustee of the Individual Retirement Account is the owner
of the annuity and has the right to the death proceeds otherwise payable
under the Contract;
2) The deceased Annuitant was the beneficial owner of the Individual
Retirement Account;
3) We receive a complete request for settlement for the death of the
Annuitant; and
4) The custodian or trustee of the Individual Retirement Account provides us
with a signed certification of the following:
(a) The Annuitant's surviving spouse is the sole beneficiary of the Individual
Retirement Account;
(b) The Annuitant's surviving spouse has elected to continue the Individual
Retirement Account as his or her own Individual Retirement Account; and
(c) The custodian or trustee of the Individual Retirement Account has continued
the Individual Retirement Account pursuant to the surviving spouse's
election.
SIMPLIFIED EMPLOYEE PENSION IRA. Code Section 408(k) allows eligible employers
to establish simplified employee pension plans for their employees using
individual retirement annuities. These employers may, within specified limits,
make deductible contributions on behalf of the employees to the individual
retirement annuities. Employers intending to use the Contract in connection with
such plans should seek competent tax advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE IRA). Code Section 408(p)
allows eligible employers with 100 or fewer employees to establish SIMPLE
retirement plans for their employees using individual retirement annuities. In
general, a SIMPLE IRA consists of a salary deferral program for eligible
employees and matching or nonelective contributions made by employers. Employers
intending to purchase the Contract as a SIMPLE IRA should seek competent tax and
legal advice.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAS
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
TAX SHELTERED ANNUITIES. Code Section 403(b) provides tax-deferred retirement
savings plans for employees of certain non-profit and educational organizations.
Under Section 403(b), any contract used for a 403(b) plan must provide that
distributions attributable to salary reduction contributions made after
12/31/88, and all earnings on salary reduction contributions, may be made only
on or after the date the employee:
.. attains age 59 1/2,
.. severs employment,
.. dies,
.. becomes disabled, or
.. incurs a hardship (earnings on salary reduction contributions may not be
distributed on account of hardship).
These limitations do not apply to withdrawals where Allstate New York is
directed to transfer some or all of the Contract Value to another 403(b) plan.
Generally, we do
32 PROSPECTUS
not accept funds in 403(b) contracts that are subject to the Employee Retirement
Income Security Act of 1974 (ERISA).
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS.
Section 401(a) of the Code permits corporate employers to establish various
types of tax favored retirement plans for employees. Self-employed individuals
may establish tax favored retirement plans for themselves and their employees
(commonly referred to as "H.R.10" or "Keogh"). Such retirement plans may permit
the purchase of annuity contracts. Allstate New York no longer issues annuity
contracts to employer sponsored qualified retirement plans.
There are two owner types for contracts intended to qualify under Section
401(a): a qualified plan fiduciary or an annuitant owner.
.. A qualified plan fiduciary exists when a qualified plan trust that is
intended to qualify under Section 401(a) of the Code is the owner. The
qualified plan trust must have its own tax identification number and a
named trustee acting as a fiduciary on behalf of the plan. The annuitant
should be the person for whose benefit the contract was purchased.
.. An annuitant owner exists when the tax identification number of the owner
and annuitant are the same, or the annuity contract is not owner by a
qualified plan trust. The annuitant should be the person for whose benefit
the contract was purchased.
If a qualified plan fiduciary is the owner of the contract, the qualified plan
must be the beneficiary so that death benefits from the annuity are distributed
in accordance with the terms of the qualified plan. Annuitant owned contracts
require that the beneficiary be the annuitant's spouse (if applicable), which is
consistent with the required IRS language for qualified plans under Section
401(a). A completed Annuitant Owned Qualified Plan Designation of Beneficiary
form is required in order to change the beneficiary of an annuitant owned
Qualified Plan contract.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION DEFERRED COMPENSATION
PLANS. Section 457 of the Code permits employees of state and local governments
and tax-exempt organizations to defer a portion of their compensation without
paying current taxes. The employees must be participants in an eligible deferred
compensation plan. In eligible governmental plans, all assets and income must be
held in a trust/ custodial account/annuity contract for the exclusive benefit of
the participants and their beneficiaries. To the extent the Contracts are used
in connection with a non-governmental eligible plan, employees are considered
general creditors of the employer and the employer as owner of the Contract has
the sole right to the proceeds of the Contract. Under eligible 457 plans,
contributions made for the benefit of the employees will not be includible in
the employees' gross income until distributed from the plan. Allstate New York
no longer issues annuity contracts to employer sponsored qualified retirement
plans. Contracts that have been previously sold to State and Local government
and Tax-Exempt organization Deferred Compensation Plans will be administered
consistent with the rules for contracts intended to qualify under Section
401(a).
33 PROSPECTUS
ANNUAL REPORTS AND OTHER DOCUMENTS
Allstate New York's annual report on Form 10-K for the year ended December 31,
2004 is incorporated herein by reference, which means that it is legally a part
of this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0000839759. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http://www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at Customer Service, 2940 S. 84TH STREET, LINCOLN, NE
68506-4142 (telephone: 1-800-692-4682).
34 PROSPECTUS
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED* WITHOUT THE ENHANCED
DEATH BENEFIT OPTION
[Enlarge/Download Table]
For the period beginning January 1 and ending December 31, 2000 2001 2002 2003 2004
-----------------------------------------------------------------------------------------------------------------
AIM V.I. AGGRESSIVE GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 13.988 $ 14.15 $ 8.049 $ 6.157 $ 7.714
Accumulation Unit Value, End of Period $ 14.15 $ 8.049 $ 6.157 $ 7.714 $ 8.530
Number of Units Outstanding, End of Period 53,890 238,485 200,136 197,069 198,533
AIM V.I. BALANCED - SERIES I SUB-ACCOUNT **
Accumulation Unit Value, Beginning of Period $ 13.162 $ 12.43 $ 8.541 $ 7.003 $ 8.060
Accumulation Unit Value, End of Period $ 12.43 $ 8.541 $ 7.003 $ 8.060 $ 8.571
Number of Units Outstanding, End of Period 24,499 329,610 320,917 290,941 274,548
AIM V.I. BASIC VALUE - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- $ 10.000 $ 11.210 $ 8.632 $ 11.408
Accumulation Unit Value, End of Period -- $ 11.210 $ 8.632 $ 11.408 $ 12.532
Number of Units Outstanding, End of Period -- 38,643 120,510 141,541 146,383
AIM V.I. BLUE CHIP - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 8.82 $ 6.784 $ 4.955 $ 6.133
Accumulation Unit Value, End of Period $ 8.82 $ 6.784 $ 4.955 $ 6.133 $ 6.349
Number of Units Outstanding, End of Period 11,309 507,018 549,430 546,965 519,012
AIM V.I. CAPITAL APPRECIATION - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 21.350 $ 18.75 $ 7.233 $ 5.411 $ 6.932
Accumulation Unit Value, End of Period $ 18.75 $ 7.233 $ 5.411 $ 6.932 $ 7.311
Number of Units Outstanding, End of Period 456,761 284,137 242,299 241,264 226,743
AIM V.I. CAPITAL DEVELOPMENT - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 11.655 $ 12.55 $ 10.536 $ 8.195 $ 10.971
Accumulation Unit Value, End of Period $ 12.55 $ 10.536 $ 8.195 $ 10.971 $ 12.533
Number of Units Outstanding, End of Period 18,297 67,296 63,097 59,597 39,783
AIM V.I. CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 24.138 $ 20.33 $ 6.944 $ 5.798 $ 7.134
Accumulation Unit Value, End of Period $ 20.33 $ 6.944 $ 5.798 $ 7.134 $ 7.689
Number of Units Outstanding, End of Period 674,689 426,488 397,515 369,211 378,980
AIM V.I. DENT DEMOGRAPHIC TRENDS - SERIES I SUB-ACCOUNT ***
Accumulation Unit Value, Beginning of Period $ 10.000 $ 7.89 $ 5.332 $ 3.575 $ 4.861
Accumulation Unit Value, End of Period $ 7.89 $ 5.332 $ 3.575 $ 4.861 $ 5.205
Number of Units Outstanding, End of Period 32,307 191,409 143,535 156,869 137,352
AIM V.I. DIVERSIFIED INCOME - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 12.002 $ 11.55 $ 10.095 $ 10.214 $ 11.036
Accumulation Unit Value, End of Period $ 11.55 $ 10.095 $ 10.214 $ 11.036 $ 11.464
Number of Units Outstanding, End of Period 204,561 76,653 85,995 84,651 83,355
AIM V.I. GOVERNMENT SECURITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 11.189 $ 12.15 $ 11.357 $ 12.311 $ 12.306
Accumulation Unit Value, End of Period $ 12.15 $ 11.357 $ 12.311 $ 12.306 $ 12.484
Number of Units Outstanding, End of Period 99,531 187,943 248,521 167,459 152,610
AIM V.I. GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 25.263 $ 19.80 $ 5.446 $ 3.718 $ 4.826
Accumulation Unit Value, End of Period $ 19.80 $ 5.446 $ 3.718 $ 4.826 $ 5.166
Number of Units Outstanding, End of Period 403,785 302,438 270,471 271,832 265,169
AIM V.I. HIGH YIELD - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 9.957 $ 7.95 $ 7.547 $ 7.028 $ 8.900
Accumulation Unit Value, End of Period $ 7.95 $ 7.547 $ 7.028 $ 8.900 $ 9.793
Number of Units Outstanding, End of Period 834 35,116 36,928 103,920 49,255
35 PROSPECTUS
[Enlarge/Download Table]
AIM V.I. INTERNATIONAL GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 21.914 $ 15.90 $ 6.136 $ 5.117 $ 6.532
Accumulation Unit Value, End of Period $ 15.90 $ 6.136 $ 5.117 $ 6.532 $ 8.012
Number of Units Outstanding, End of Period 245,480 141,910 129,999 152,651 206,187
AIM V.I. MID CAP CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- $ 10.000 $ 11.367 $ 9.994 $ 12.585
Accumulation Unit Value, End of Period -- $ 11.367 $ 9.994 $ 12.585 $ 14.167
Number of Units Outstanding, End of Period -- 3,984 21,093 31,766 29,472
AIM V.I. MONEY MARKET - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 11.479 $ 11.98 $ 10.751 $ 10.759 $ 10.703
Accumulation Unit Value, End of Period $ 11.98 $ 10.751 $ 10.759 $ 10.703 $ 10.659
Number of Units Outstanding, End of Period 95,879 186,834 148,120 104,438 97,730
AIM V.I. PREMIER EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 22.589 $ 19.00 $ 7.602 $ 5.243 $ 6.487
Accumulation Unit Value, End of Period $ 19.00 $ 7.602 $ 5.243 $ 6.487 $ 6.786
Number of Units Outstanding, End of Period 1,000,356 623,432 589,373 560,684 523,477
AIM V.I. TECHNOLOGY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- $ 10.000
Accumulation Unit Value, End of Period -- -- -- -- $ 11.117
Number of Units Outstanding, End of Period -- -- -- -- 36,911
AIM V.I. UTILITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- $ 10.000
Accumulation Unit Value, End of Period -- -- -- -- $ 12.259
Number of Units Outstanding, End of Period -- -- -- -- 53,862
* The Contracts were first offered on January 17, 2000. All Variable
Sub-Accounts were first offered under the Contracts on January 17, 2000,
except the AIM V.I. Basic Value Fund - Series I and AIM V.I. Mid Cap Core
Equity Fund - Series I, which commenced operations on October 1, 2001, and
the AIM V.I. Technology Fund - Series I and the AIM V.I. Utilities Fund -
Series I, which were first offered on October 15, 2004. The Accumulation
Unit Values in this table reflect a mortality and expense risk charge of
1.00% and an administrative charge of 0.10%.
** Effective July 1, 2005, the AIM V.I. Balanced Fund-Series I will change its
name to AIM V.I. Basic Balanced Fund-Series I. Effective July 1, 2005, a
corresponding change in the name of the Variable Sub-Account that invests
in that Fund will be made.
*** Effective July 1, 2005, the AIM V.I. Dent Demographic Trends Fund - Series
I will change its name to AIM V.I. Demographic Trends Fund - Series I.
Effective July 1, 2005, a corresponding change in the name of the Variable
Sub-account that invests in that Portfolio will be made.
36 PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED* WITH THE ENHANCED DEATH
BENEFIT OPTION
[Enlarge/Download Table]
For the period beginning January 1 and ending December 31, 2000 2001 2002 2003 2004
--------------------------------------------------------------------------------------------------------------
AIM V.I. AGGRESSIVE GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.985 $ 8.016 $ 6.119 $ 7.651
Accumulation Unit Value, End of Period $ 10.985 $ 8.016 $ 6.119 $ 7.651 $ 8.444
Number of Units Outstanding, End of Period 102,502 198,010 219,455 202,257 178,359
AIM V.I. BALANCED - SERIES I SUB-ACCOUNT **
Accumulation Unit Value, Beginning of Period $ 10.000 $ 9.729 $ 8.506 $ 6.960 $ 7.995
Accumulation Unit Value, End of Period $ 9.729 $ 8.506 $ 6.960 $ 7.995 $ 8.485
Number of Units Outstanding, End of Period 75,164 345,629 371,207 354,606 328,989
AIM V.I. BASIC VALUE - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- $ 10.000 $ 11.204 $ 8.610 $ 11.357
Accumulation Unit Value, End of Period -- $ 11.204 $ 8.610 $ 11.357 $ 12.451
Number of Units Outstanding, End of Period -- 17,531 51,089 59,320 55,305
AIM V.I. BLUE CHIP - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 8.837 $ 6.757 $ 4.924 $ 6.083
Accumulation Unit Value, End of Period $ 8.837 $ 6.757 $ 4.924 $ 6.083 $ 6.285
Number of Units Outstanding, End of Period 177,304 474,975 497,574 476,681 449,033
AIM V.I. CAPITAL APPRECIATION - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 9.513 $ 7.203 $ 5.378 $ 6.876
Accumulation Unit Value, End of Period $ 9.513 $ 7.203 $ 5.378 $ 6.876 $ 7.237
Number of Units Outstanding, End of Period 131,409 235,836 252,981 236,372 215,174
AIM V.I. CAPITAL DEVELOPMENT - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 11.566 $ 10.493 $ 8.145 $ 10.883
Accumulation Unit Value, End of Period $ 11.566 $ 10.493 $ 8.145 $ 10.883 $ 12.407
Number of Units Outstanding, End of Period 7,338 19,877 20,402 17,651 16,020
AIM V.I. CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 9.080 $ 6.915 $ 5.762 $ 7.077
Accumulation Unit Value, End of Period $ 9.080 $ 6.915 $ 5.762 $ 7.077 $ 7.612
Number of Units Outstanding, End of Period 136,401 356,510 352,466 321,497 297,145
AIM V.I. DENT DEMOGRAPHIC TRENDS - SERIES I SUB-ACCOUNT ***
Accumulation Unit Value, Beginning of Period $ 10.000 $ 7.902 $ 5.310 $ 3.554 $ 4.822
Accumulation Unit Value, End of Period $ 7.902 $ 5.310 $ 3.554 $ 4.822 $ 5.153
Number of Units Outstanding, End of Period 78,274 164,204 168,918 142,509 127,214
AIM V.I. DIVERSIFIED INCOME - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 9.833 $ 10.054 $ 10.152 $ 10.947
Accumulation Unit Value, End of Period $ 9.833 $ 10.054 $ 10.152 $ 10.947 $ 11.349
Number of Units Outstanding, End of Period 6,486 40,016 55,291 54,298 46,642
AIM V.I. GOVERNMENT SECURITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.770 $ 11.311 $ 12.236 $ 12.207
Accumulation Unit Value, End of Period $ 10.770 $ 11.311 $ 12.236 $ 12.207 $ 12.358
Number of Units Outstanding, End of Period 15,884 96,743 129,085 105,262 88,690
AIM V.I. GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 8.312 $ 5.424 $ 3.696 $ 4.788
Accumulation Unit Value, End of Period $ 8.312 $ 5.424 $ 3.696 $ 4.788 $ 5.114
Number of Units Outstanding, End of Period 122,705 241,384 245,046 206,466 194,304
AIM V.I. HIGH YIELD - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 8.015 $ 7.516 $ 6.985 $ 8.829
Accumulation Unit Value, End of Period $ 8.015 $ 7.516 $ 6.985 $ 8.829 $ 9.695
Number of Units Outstanding, End of Period 15,188 36,553 32,747 35,695 36,742
37 PROSPECTUS
[Enlarge/Download Table]
AIM V.I. INTERNATIONAL GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 8.096 $ 6.110 $ 5.086 $ 6.479
Accumulation Unit Value, End of Period $ 8.096 $ 6.110 $ 5.086 $ 6.479 $ 7.931
Number of Units Outstanding, End of Period 108,706 96,654 102,940 94,381 87,589
AIM V.I. MID CAP CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- $ 10.000 $ 11.361 $ 9.969 $ 12.528
Accumulation Unit Value, End of Period -- $ 11.361 $ 9.969 $ 12.528 $ 14.075
Number of Units Outstanding, End of Period -- 3,675 19,816 26,343 26,487
AIM V.I. MONEY MARKET - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.468 $ 10.707 $ 10.694 $ 10.617
Accumulation Unit Value, End of Period $ 10.468 $ 10.707 $ 10.694 $ 10.617 $ 10.552
Number of Units Outstanding, End of Period 15,332 121,447 140,442 81,551 72,126
AIM V.I. PREMIER EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 8.772 $ 7.570 $ 5.211 $ 6.434
Accumulation Unit Value, End of Period $ 8.772 $ 7.570 $ 5.211 $ 6.434 $ 6.718
Number of Units Outstanding, End of Period 212,887 470,018 497,394 460,643 410,137
AIM V.I. TECHNOLOGY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- $ 10.000
Accumulation Unit Value, End of Period -- -- -- -- $ 11.102
Number of Units Outstanding, End of Period -- -- -- -- 42,692
AIM V.I. UTILITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- $ 10.000
Accumulation Unit Value, End of Period -- -- -- -- $ 12.242
Number of Units Outstanding, End of Period -- -- -- -- 32,969
* The Contracts were first offered on January 17, 2000. All Variable
Sub-Accounts were first offered under the Contracts on January 17, 2000,
except the AIM V.I. Basic Value Fund - Series I and AIM V.I. Mid Cap Core
Equity Fund - Series I, which commenced operations on October 1, 2001, and
the AIM V.I. Technology Fund - Series I and the AIM V.I. Utilities Fund -
Series I, which were first offered on October 15, 2004. The Accumulation
Unit Values in this table reflect a mortality and expense risk charge of
1.20% and an administrative charge of 0.10%.
** Effective July 1, 2005, the AIM V.I. Balanced Fund-Series I will change its
name to AIM V.I. Basic Balanced Fund-Series I. Effective July 1, 2005, a
corresponding change in the name of the Variable Sub-Account that invests
in that Fund will be made.
*** Effective July 1, 2005, the AIM V.I. Dent Demographic Trends Fund - Series
I will change its name to AIM V.I. Demographic Trends Fund - Series I.
Effective July 1, 2005, a corresponding change in the name of the Variable
Sub-Account that invests in that Fund will be made.
38 PROSPECTUS
APPENDIX B MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the applicable Guarantee Period
for the week preceding the establishment of the Guarantee Period.
N = the number of whole and partial years from the date we receive the
withdrawal, transfer, or death benefit request, or from the Payout Start Date,
to the end of the Guarantee Period.
J = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the receipt of the withdrawal, transfer, death benefit, or income
payment request. If a note for a maturity of length N is not available, a
weighted average will be used. If N is one year or less, J will be the 1-year
Treasury Rate.
"Treasury Rate" means the U.S. Treasury Note Constant Maturity Yield as reported
in Federal Reserve Board Statistical Release H.15.
The Market Value Adjustment factor is determined from the following formula:
..9 X (I - J) X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred (in excess of the Free Withdrawal
Amount) paid as a death benefit, or applied to an Income Plan, from a Guarantee
Period at any time other than during the 30 day period after such Guarantee
Period expires.
39 PROSPECTUS
EXAMPLES OF MARKET VALUE ADJUSTMENT
Purchase Payment: $10,000
Guarantee Period: 5 years
Treasury Rate (at the time the Guarantee Period was established): 4.50%
Assumed Net Annual Earnings Rate in Money Market Variable Sub-Account: 4.50%
Full Surrender: End of Contract Year 3
NOTE: These examples assume that premium taxes are not applicable.
Step 1. Calculate Contract Value at $10,000.00 X (1.045)/3/ = $11,411.66
End of Contract Year 3:
Step 2. Calculate the Free Withdrawal 15% X $10,000.00 X (1.045)/2/ = $1,638.04
Amount:
Step 3. Calculate the Market Value I = 4.50%
Adjustment: J = 4.20%
730 days
N = -------- = 2
365 days
Market Value Adjustment Factor: .9 X
(I - J) X N = .9 X (.045 - .042) X
(730/365) = .0054
Market Value Adjustment = Market
Value Adjustment Factor X Amount
Subject to Market Value Adjustment
= .0054 X ($11,411.66 - $1,638.04)
= $52.78
Step 4. Calculate the Withdrawal .05 X ($10,000.00 - $1,638.04 +
Charge: $52.78) = $420.74
Step 5. Calculate the amount received $11,411.66 - $420.74 + $52.78 =
by a Contract owner as a result of $11,043.70
full withdrawal at the end of
Contract Year 3:
EXAMPLE 1 (ASSUME DECLINING INTEREST RATES)
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1. Calculate Contract Value at $10,000.00 X (1.045)/3/ = $11,411.66
End of Contract Year 3:
Step 2. Calculate the Preferred .15 X $10,000.00 X (1.045)/2/ = $1,638.04
Withdrawal Amount:
Step 3. Calculate the Market Value I = 4.5%
Adjustment: J = 4.8%
730 days
N = -------- = 2
365 days
Market Value Adjustment Factor: .9
X (I - J) X N =
.9 X (.045 - .048) X (730/365) =
- .0054
Market Value Adjustment = Market
Value Adjustment Factor X Amount
Subject to Market Value
Adjustment:
= -.0054 X ($11,411.66 -
$1,638.04) = -$52.78
Step 4. Calculate the Withdrawal .05 X ($10,000.00 - $1,638.04 -
Charge: $52.78) = $415.46
Step 5. Calculate the amount received $11,411.66 - $415.46 - $52.78 =
by a Contract owner as a result of $10,943.42
full withdrawal at the end of
Contract Year 3:
40 PROSPECTUS
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
THE CONTRACT
Purchase of Contracts
CALCULATION OF ACCUMULATION UNIT VALUES
NET INVESTMENT FACTOR
CALCULATION OF VARIABLE INCOME PAYMENTS
CALCULATION OF ANNUITY UNIT VALUES
GENERAL MATTERS
Incontestability
Settlements
Safekeeping of the Variable Account's Assets
Premium Taxes
Tax Reserves
EXPERTS
FINANCIAL STATEMENTS
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
41 PROSPECTUS
ALLSTATE PROVIDER VARIABLE ANNUITY
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
300 N. MILWAUKEE AVE.
VERNON HILLS, IL 60061
TELEPHONE NUMBER: 1-800-692-4682 PROSPECTUS DATED MAY 1, 2002
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK ("ALLSTATE NEW YORK") is offering
the Allstate Provider Variable Annuity, a group flexible premium deferred
variable annuity contract ("CONTRACT"). This prospectus contains information
about the Contract that you should know before investing. Please keep it for
future reference.
The Contract currently offers 42 investment alternatives ("INVESTMENT
ALTERNATIVES"). The investment alternatives including 3 fixed account options
("FIXED ACCOUNT") and 39 variable sub-accounts ("VARIABLE SUB-ACCOUNTS") of the
Allstate Life of New York Separate Account A ("VARIABLE ACCOUNT"). Each Variable
Sub-Account invests exclusively in shares of one of the following mutual fund
portfolios ("Portfolios"):
AIM Variable Insurance Funds Franklin Templeton Variable Insurance
The Dreyfus Socially Responsible Growth Products Trust (VIP)
Products Trust Fund, Inc. Goldman Sachs Variable Insurance Trust
Dreyfus Stock Index Fund (VIT)
Dreyfus Variable Investment Fund (VIF) MFS Variable Insurance Trust
Fidelity Variable Insurance Products The Universal Institutional Funds, Inc.
Fund (VIP)
WE (ALLSTATE NEW YORK) have filed a Statement of Additional Information, May 1,
2002, with the Securities and Exchange Commission ("SEC"). It contains more
information about the Contract and is incorporated herein by reference, which
means it is legally a part of this prospectus. Its table of contents appears on
page D-1 of this prospectus. For a free copy, please write or call us at the
address or telephone number above, or go to the SEC's Web site (http://
www.sec.gov). You can find other information and documents about us, including
documents that are legally part of this prospectus, at the SEC's Web site.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR HAS IT
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A FEDERAL CRIME.
THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT HAVE
RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS OR BY
IMPORTANT EMPLOYEES OF SUCH BANKS. HOWEVER, THE CONTRACTS ARE NOT DEPOSITS OR
NOTICES OBLIGATIONS OF, OR GUARANTEED BY SUCH INSTITUTIONS OR ANY FEDERAL
REGULATORY AGENCY. INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
THE CONTRACTS ARE ONLY AVAILABLE IN NEW YORK.
1 PROSPECTUS
TABLE OF CONTENTS
PAGE
OVERVIEW
Important Terms 3
The Contract at a Glance 4
How the Contract Works 6
Expense Table 7
Financial Information 13
CONTRACT FEATURES
The Contract 13
Purchases 14
Contract Value 15
Investment Alternatives 16
The Variable Sub-Accounts 16
The Fixed Account 19
Transfers 22
Expenses 23
Access To Your Money 25
Income Payments 26
Death Benefits 27
OTHER INFORMATION
More Information: 29
ALLSTATE NEW YORK 29
The Variable Account 29
The Portfolios 30
The Contract 29
Tax Qualified Plans 30
Legal Matters 30
Taxes 31
Annual Reports and Other Documents 36
Performance Information 36
Experts 36
APPENDIX A - MARKET VALUE ADJUSTMENT 37
APPENDIX B - WITHDRAWAL ADJUSTMENT EXAMPLES 39
2 PROSPECTUS
IMPORTANT TERMS
This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
PAGE
Accumulation Phase 6
Accumulation Unit 15
Accumulation Unit Value 15
ALLSTATE NEW YORK ("We" or "Us") 29
Anniversary Values 28
Annuitant 13
Automatic Additions Program 14
Automatic Portfolio Rebalancing Program 23
Beneficiary 13
Cancellation Period 14
Contract* 29
Contract Anniversary 5
Contract Owner ("You") 13
Contract Value 15
Contract Year 4
Death Benefit Anniversary 27
Dollar Cost Averaging Program 23
Due Proof of Death 28
Fixed Accounts 19
Guarantee Periods 19
Income Plan 26
Investment Alternatives 16
Issue Date 6
Market Value Adjustment 21
Payout Phase 6
Payout Start Date 6
Portfolios 30
Preferred Withdrawal Amount 24
Qualified Contracts 33
Right to Cancel 14
SEC 1
Settlement Value 27
Systematic Withdrawal Program 25
Treasury Rate 21
Valuation Date 14
Variable Account 29
Variable Sub-Account 16
* The Allstate Provider Variable Annuity is a group contract and your
ownership is represented by certificates. References to "Contract" in this
prospectus include certificates, unless the context requires otherwise.
3 PROSPECTUS
THE CONTRACT AT A GLANCE
The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
FLEXIBLE PAYMENTS You can purchase a Contract with as little as $3,000 ($2,000
for a "QUALIFIED CONTRACT," which is a Contract issued with
a qualified plan). You can add to your Contract as often and
as much as you like, but each payment must be at least $100,
$500 for allocations to the Fixed Account. You must maintain
a minimum account size of $1,000.
RIGHT TO CANCEL You may cancel your Contract within 10 days after receipt
(60 days if you are exchanging another contract for the
Contract described in this prospectus) ("CANCELLATION
PERIOD"). Upon cancellation we will return your purchase
payments adjusted to the extent federal or state law permits
to reflect the investment experience of any amounts
allocated to the Variable Account.
EXPENSES You will bear the following expenses:
. Total Variable Account annual fees equal to 1.25% of
average daily net assets
. Annual contract maintenance charge of $30 (with certain
exceptions)
. Withdrawal charges ranging from 0% to 7% of payment
withdrawn (with certain exceptions)
. Transfer fee of $10 after 12th transfer in any CONTRACT
YEAR (fee currently waived)
. State premium tax (New York currently does not impose
one).
In addition, each Portfolio pays expenses that you will bear
indirectly if you invest in a Variable Sub-Account.
INVESTMENT The Contract offers 42 investment alternatives including:
ALTERNATIVES
. 3 Fixed Account Options (which credit interest at rates
we guarantee), and
. 39 Variable Sub-Accounts investing in portfolios
("Portfolios") offering professional money management
by:
. A I M Advisors, Inc.
. The Dreyfus Corporation
. Fidelity Management & Research Company
. Franklin Advisers, Inc.
. Franklin Mutual Advisers, LLC
. Goldman Sachs Asset Management
. Goldman Sachs Asset Management International
. MFS Investment Management/(R)/
. Miller Anderson & Sherrerd, LLP
. Morgan Stanley Asset Management
. Oppenheimer Funds, Inc.
. Templeton Global Advisors Limited
. Templeton Investment Counsel, LLC
. Templeton Asset Management LTD.
To find out current rates being paid on the Fixed Account,
or to find out how the Variable Sub-Accounts have performed,
please call us at 1-800-692-4682.
4 PROSPECTUS
SPECIAL SERVICES For your convenience, we offer these special services:
. AUTOMATIC PORTFOLIO REBALANCING PROGRAM
. AUTOMATIC ADDITIONS PROGRAM
. DOLLAR COST AVERAGING PROGRAM
. SYSTEMATIC WITHDRAWAL PROGRAM
INCOME PAYMENTS You can choose fixed income payments, variable income
payments, or a combination of the two. You can receive your
income payments in one of the following ways:
. life income with guaranteed payments
. a joint and survivor life income with guaranteed
payments
. guaranteed payments for a specified period (5 to 30
years)
DEATH BENEFITS If you die before the PAYOUT START DATE, we will pay the
death benefit described in the Contract.
TRANSFERS Before the Payout Start Date, you may transfer your Contract
value ("CONTRACT VALUE") among the investment alternatives,
with certain restrictions. Transfers to the Fixed Account
must be at least $500.
We do not currently impose a fee upon transfers. However, we
reserve the right to charge $10 per transfer after the 12th
transfer in each "CONTRACT YEAR," which we measure from the
date we issue your Contract or a Contract anniversary
("CONTRACT ANNIVERSARY").
WITHDRAWALS You may withdraw some or all of your Contract Value at any
time during the Accumulation Phase. Full or partial
withdrawals also are available under limited circumstances
on or after the Payout Start Date.
In general, you must withdraw at least $50 at a time ($1,000
for withdrawals made during the Payout Phase). Withdrawals
of earnings are taxed as ordinary income and, if taken prior
to age 59 1/2, may be subject to an additional 10% federal
tax penalty. A withdrawal charge and MARKET VALUE ADJUSTMENT
also may apply.
5 PROSPECTUS
HOW THE CONTRACT WORKS
The Contract basically works in two ways.
First, the Contract can help you (we assume you are the CONTRACT OWNER) save for
retirement because you can invest in up to 40 investment alternatives and
generally pay no federal income taxes on any earnings until you withdraw them.
You do this during what we call the "ACCUMULATION PHASE" of the Contract. The
Accumulation Phase begins on the date we issue your Contract (we call that date
the "ISSUE DATE") and continues until the Payout Start Date, which is the date
we apply your money to provide income payments. During the Accumulation Phase,
you may allocate your purchase payments to any combination of the Variable
Sub-Accounts and/or Fixed Accounts. If you invest in the Fixed Accounts, you
will earn a fixed rate of interest that we declare periodically. If you invest
in any of the Variable Sub-Accounts, your investment return will vary up or down
depending on the performance of the corresponding Portfolios.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/ or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page 26. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
[Enlarge/Download Table]
Issue Payout Start
Date Accumulation Phase Date Payout Phase
---------- ----------------------- -------------------- ----------------
You buy You save for retirement You elect to receive You can receive Or you can receive
a Contract income payments or income payments income payments
receive a lump sum for a set period for life
payment
As the Contract Owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract Owner, or if there is none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract Owner or, if none, to your
Beneficiary. See "Death Benefits."
Please call us at 1-800-692-4682 if you have any questions about how the
Contract works.
6 PROSPECTUS
EXPENSE TABLE
The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes because New York currently does not impose premium taxes on
annuities. For more information about Variable Account expenses, see "Expenses,"
below. For more information about Portfolio expenses, please refer to the
accompanying prospectuses for the Portfolios.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
Number of Complete Years
Since We Received the Purchase
Payment Being Withdrawn 0 1 2 3 4 5 6 7+
---------------------------------- --- --- --- --- --- --- --- ---
Applicable Charge 7% 6% 5% 4% 3% 2% 1% 0%
Annual Contract Maintenance Charge $30.00**
Transfer Fee $10.00***
* Each Contract Year, you may withdraw up to 15% of purchase payments without
incurring a withdrawal charge or a Market Value Adjustment.
** We will waive this charge in certain cases. See "Expenses."
*** Applies solely to the thirteenth and subsequent transfers within a Contract
Year excluding transfers due to dollar cost averaging or automatic
portfolio rebalancing. We are currently waiving the transfer fee.
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF DAILY NET ASSET VALUE DEDUCTED FROM EACH VARIABLE
SUB-ACCOUNT)
Mortality and Expense Risk Charge 1.15%*
Administrative Expense Charge 0.10%
Total Variable Account Annual Expense 1.25%
7 PROSPECTUS
PORTFOLIO ANNUAL EXPENSES (as a percentage of Portfolio average daily net
assets)/1/ (After contractual Reductions and Reimbursements)
(1)
[Enlarge/Download Table]
Total
Management 12b-1 Other Portfolio
Portfolio Fees Fees Expenses Annual Expenses
---------------------------------------------------------- ---------- ----- -------- ---------------
AIM V.I. Balanced Fund - Series I 0.75% N/A 0.37% 1.12%
AIM V.I. Core Equity Fund - Series I (2) 0.61% N/A 0.21% .82%
AIM V.I. Diversified Income Fund - Series I 0.60% N/A 0.33% 0.93%
AIM V.I. Government Securities Fund - Series I 0.50% N/A 0.58% 1.08%
AIM V.I. Growth Fund - Series I 0.62% N/A 0.26% 0.88%
AIM V.I. International Growth Fund - Sereis I (2) 0.73% N/A 0.32% 1.05%
AIM V.I. Premier Equity Fund - Series I (2) 0.60% N/A 0.25% 0.85%
The Dreyfus Socially Responsible Growth Fund, Inc.:
Initial Shares 0.75% N/A 0.03% 0.78%
Dreyfus Stock Index Fund: Initial Shares 0.25% N/A 0.01% 0.26%
Dreyfus VIF - Growth & Income Portfolio: Initial Shares 0.75% N/A 0.05% 0.80%
Dreyfus VIF - Money Market Portfolio 0.50% N/A 0.08% 0.58%
Fidelity VIP Contrafund Portfolio - Initial Class (3) 0.58% N/A 0.10% 0.68%
Fidelity VIP Equity-Income Portfolio - Initial Class (3) 0.48% N/A 0.10% 0.58%
Fidelity VIP Growth Portfolio - Initial Class (3) 0.58% N/A 0.10% 0.68%
Fidelity VIP High Income Portfolio - Initial Class (3) 0.58% N/A 0.13% 0.71%
Franklin Small Cap Fund-Class 2 (4,5) 0.45% 0.25% 0.31% 1.01%
Mutual Shares Securities Fund - Class 2 (4) 0.60% 0.25% 0.19% 1.04%
Templeton Developing Markets Securities Fund - Class 2 (4) 1.25% 0.25% 0.32% 1.82%
Templeton Foreign Securities Fund - Class 2 (4,6,7) 0.68% 0.25% 0.22% 1.15%
Templeton Growth Securities Fund - Class 2 (4,8) 0.80% 0.25% 0.05% 1.10%
Goldman Sachs VIT Capital Growth Fund (9) 0.75% N/A 0.94% 1.69%
Goldman Sachs VIT CORE(SM) Small Cap Equity Fund (9) 0.75% N/A 0.47% 1.22%
Goldman Sachs VIT CORE(SM) U.S. Equity Fund (9) 0.70% N/A 0.12% 0.82%
Goldman Sachs VIT International Equity Fund (9) 1.00% N/A 1.05% 2.05%
MFS Emerging Growth Series - Initial Class (10) 0.75% N/A 0.12% 0.87%
MFS Investors Trust Series - Initial Class (10) 0.75% N/A 0.15% 0.90%
MFS New Discovery Series (10,11) 0.90% N/A 0.16% 1.06%
MFS Research Series - Initial Class (10) 0.75% N/A 0.15% 0.90%
Oppenheimer Aggressive Growth Fund/VA 0.64% N/A 0.04% 0.68%
Oppenheimer Capital Appreciation Fund/VA 0.64% N/A 0.04% 0.68%
Oppenheimer Global Securities Fund/VA 0.64% N/A 0.06% 0.70%
Oppenheimer Main Street Growth & Income Fund/VA 0.68% N/A 0.05% 0.73%
Oppenheimer Strategic Bond Fund/VA(12) 0.74% N/A 0.05% 0.79%
Van Kampen UIF Core Plus Fixed Income Portfolio (13,14) 0.40% N/A 0.31% 0.71%
Van Kampen UIF Equity Growth Portfolio (13,14) 0.55% N/A 0.36% 0.91%
Van Kampen UIF Global Equity Portfolio (13,14) 0.80% N/A 0.48% 1.28%
Van Kampen UIF Mid Cap Value Portfolio (13,14) 0.75% N/A 0.35% 1.10%
Van Kampen UIF Value Portfolio (13,14) 0.55% N/A 0.38% 0.93%
(1) Figures shown in the Table are for the year ended December 31, 2001(except
as otherwise noted).
(2) Effective May 1, 2002 the AIM V.I. Growth and Income Fund, AIM V.I.
International Equity Fund and AIM V.I. Value Fund changed their names to
the AIM V.I. Core Equity Fund, AIM V.I. International Growth Fund and AIM
V.I. Premier Equity Fund, respectively.
(3) Actual "Total Portfolio Annual Expenses" were lower because a portion of
8 PROSPECTUS
the brokerage commissions that the Portfolios paid was used to reduce the
Portfolios' expenses. In addition, through arrangements with the
Portfolios' custodian, credits realized as a result of uninvested cash
balances are used to reduce a portion of the Portfolios' custodian
expenses. These offsets may be discontinued at any time. Had these offsets
been taken into account, "Total Portfolio Annual Expenses" would have been
0.64% for Contrafund Portfolio, 0.57% for Equity-Income Portfolio, 0.65%
for Growth Portfolio and 0.70% for High Income Portfolio.
(4) The Portfolio's Class 2 distribution plan or "rule 12b-1 plan" is described
in the Portfolio's prospectus.
(5) The manager had agreed in advance to make an estimated reduction of 0.08%
to its management fee to reflect reduced services resulting from the
Portfolio's investment in a Franklin Templeton money fund. This reduction
is required by the Portfolio's Board of Trustees and an order of the
Securities and Exchange Commission. Without this reduction, "Total
Portfolio Annual Expenses" would have been 1.09%.
(6) Effective May 1, 2002 the Templeton International Securities Fund - Class 2
changed its name to the Templeton Foreign Securities Fund - Class 2.
(7) The manager had agreed in advance to make an estimated reduction of 0.01%
to its management fee to reflect reduced services resulting from the
Portfolio's investment in a Franklin Templeton money fund. This reduction
is required by the Portfolio's Board of Trustees and an order of the
Securities and Exchange Commission. Without this reduction, "Total
Portfolio Annual Expenses" would have been 1.16%.
(8) The Portfolio administration fee is paid indirectly through the management
fee.
(9) "Total Portfolio Annual Expenses" listed in the table above reflect gross
ratios prior to any voluntary waivers/ reimbursements of expenses. Goldman
Sachs Asset Management and Goldman Sachs Asset Management International,
the investment advisers, have voluntarily agreed to reduce or limit certain
other expenses (excluding management fees, taxes, interest, brokerage fees,
litigation, indemnification and other extraordinary expenses) to the extent
"Total Portfolio Annual Expenses" exceed 1.00% for Capital Growth Fund,
1.00% for CORESM Small Cap Equity Fund, 0.90% for CORESM U.S. Equity Fund
and 1.35% for International Equity Fund. With these limitations taken into
consideration, "Management Fees", "Rule 12b-1 Fees", "Other Expenses" and
"Total Portfolio Annual Expenses" were as follows:
[Enlarge/Download Table]
Total
Management 12b-1 Other Portfolio
Portfolio Fees Fees Expenses Annual Expenses
------------------------------------------------ ---------- ----- -------- ---------------
Goldman Sachs VIT Capital Growth Fund 0.75% N/A 0.25% 1.00%
Goldman Sachs VIT CORE(SM) Small Cap Equity Fund 0.75% N/A 0.25% 1.00%
Goldman Sachs VIT CORE(SM) U.S. Equity Fund 0.70% N/A 0.11% 0.81%
Goldman Sachs VIT International Equity Fund 1.00% N/A 0.35% 1.35%
(10) Each Portfolio has an expense offset arrangement which reduces the
Portfolios' custodian fee based upon the amount of cash maintained by the
Portfolio with its custodian and dividend disbursing agent. Each Portfolio
may enter into other such arrangements and directed brokerage arrangements,
which would also have the effect of reducing the Portfolios' expenses.
"Other Expenses" do not take these expense reductions into account, and are
therefore higher than the actual expenses of the Portfolios. Had these fee
reductions been taken into account, "Total Portfolio Annual Expenses" would
have been lower and would equal 0.86% for Emerging Growth Series, 0.89% for
Investors Trust Series, 1.05% for New Discovery Series and 0.89 for
Research Series.
(11) MFS has contractually agreed, subject to reimbursement, to bear expenses
for the Portfolio such that "Other Expenses" (after taking into account the
expense offset arrangement described in note 10 above), do not exceed 0.15%
of the average daily net assets of the Portfolios during the current fiscal
year. Without these fee arrangements "Total Portfolio Annual Expenses"
would have been 1.09%. These contractual fee arrangements will continue at
least until May 1, 2003, unless changed with the consent of the board of
trustees which oversee the Portfolios.
(12) Oppenheimer Funds, Inc. (OFI) will reduce the management fee by 0.10% as
long as the fund's trailing 12-month performance at the end of the quarter
is in the fifth Lipper peer-group quintile; and by 0.05% as long as it is
in the fourth quintile. If the fund emerges from a "penalty box" position
for a quarter but then slips back in the next quarter, OFI will reinstate
the waiver. The waiver is voluntary and may be terminated by the Manager at
any time.
(13) "Total Portfolio Annual Expenses" listed in the table above reflect gross
ratios prior to any voluntary waivers/ reimbursements of expenses by the
adviser. For the year ended December 31, 2001, the management fee was
reduced to reflect the voluntary waiver of a portion or all of the
9 PROSPECTUS
management fee and the reimbursement by the Portfolios' adviser to the
extent "Total Portfolio Annual Expenses" exceed the following percentages:
Van Kampen UIF Core Plus Fixed Income Portfolio 0.70%; Van Kampen UIF
Equity Growth Portfolio 0.85%; Van Kampen UIF Global Value Equity Portfolio
1.15%; Van Kampen UIF Mid Cap Value Portfolio 1.05%; Van Kampen UIF Value
Portfolio 0.85%. The adviser may terminate this voluntary waiver at any
time at its sole discretion. After such reductions, the "Management Fees",
"Rule 12b-1 Fees", "Other Expenses" and "Total Portfolio Annual Expenses"
were as follows:
[Enlarge/Download Table]
Total
Management 12b-1 Other Portfolio
Portfolio Fees Fees Expenses Annual Expenses
----------------------------------------------- ---------- ----- -------- ---------------
Van Kampen UIF Core Plus Fixed Income Portfolio 0.39% N/A 0.31% 0.70%
Van Kampen UIF Equity Growth Portfolio 0.49% N/A 0.36% 0.85%
Van Kampen UIF Global Equity Portfolio 0.67% N/A 0.48% 1.15%
Van Kampen UIF Mid Cap Value Portfolio 0.70% N/A 0.35% 1.05%
Van Kampen UIF Value Portfolio 0.47% N/A 0.38% 0.85%
(14) Effective May 1, 2002 the Portfolios have been re-branded and have changed
names from Morgan Stanley UIF Fixed Income Portfolio to Van Kampen UIF Core
Plus Fixed Income Portfolio, Morgan Stanley UIF Equity Growth Portfolio to
Van Kampen UIF Equity Growth Portfolio, Morgan Stanley UIF Global Value
Equity Portfolio to Van Kampen UIF Global Value Equity Portfolio, Morgan
Stanley UIF Mid Cap Value Portfolio to Van Kampen UIF Mid Cap Value
Portfolio and Morgan Stanley UIF Value Portfolio to Van Kampen UIF Value
Portfolio.
10 PROSPECTUS
EXAMPLE 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
.. invested $1,000 in a Variable Sub-Account,
.. earned a 5% annual return on your investment, and
.. earned a 5% annual return on your investment, surrendered your Contract, or
began receiving income payments for a specified period of less than 120
months, at the end of each time period.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES YOU MAY BE REQUIRED TO PAY IF YOU
SURRENDER YOUR CONTRACT OR RECEIVE INCOME PAYMENTS. THE EXAMPLE DOES NOT INCLUDE
DEDUCTIONS FOR PREMIUM TAXES BECAUSE NEW YORK DOES NOT CHARGE PREMIUM TAXES ON
ANNUITIES.
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
--------------------------------------------- ------ ------- ------- --------
AIM V.I. Balanced $76 $111 $148 $279
AIM V.I. Core Equity $73 $101 $133 $248
AIM V.I. Diversified Income $74 $105 $138 $259
AIM V.I. Government Securities $76 $109 $146 $275
AIM V.I. Growth $73 $103 $136 $254
AIM V.I. International Growth $75 $109 $144 $272
AIM V.I. Premier Equity $73 $102 $134 $251
The Dreyfus Socially Responsible Growth, Inc. $72 $100 $130 $244
Dreyfus Stock Index $67 $ 84 $103 $187
Dreyfus VIF - Growth & Income $73 $101 $131 $246
Dreyfus VIF - Money Market $70 $ 94 $120 $222
Fidelity VIP Contrafund $71 $ 97 $125 $233
Fidelity VIP Equity-Income $70 $ 94 $120 $222
Fidelity VIP Growth $71 $ 97 $125 $233
Fidelity VIP High Income $72 $ 98 $127 $236
Franklin Small Cap $75 $107 $142 $268
Mutual Shares Securities $75 $108 $144 $271
Templeton Developing Markets $75 $108 $144 $271
Templeton Foreign Securities $76 $112 $150 $282
Templeton Growthl Securitie $76 $110 $147 $277
Goldman Sachs VIT Capital Growth $82 $128 $177 $335
Goldman Sachs VIT CORE(SM) Small Cap Equity $77 $114 $153 $289
Goldman Sachs VIT CORE(SM) U.S. Equity $73 $101 $133 $248
Goldman Sachs VIT International Equity $85 $139 $195 $369
MFS Emerging Growth $73 $103 $135 $253
MFS Investors Trust $74 $104 $137 $256
MFS New Discovery $75 $109 $145 $273
MFS Research $74 $104 $137 $256
Oppenheimer Aggressive Growth/VA $71 $ 97 $125 $233
Oppenheimer Capital AppreciationVA $71 $ 97 $125 $233
Oppenheimer Global Securities/VA $64 $ 76 $ 89 $158
Oppenheimer Main Street Growth & Income/VA $72 $ 99 $128 $238
Oppenheimer Strategic Bond/VA $73 $101 $131 $245
Van Kampen UIF Core Plus Fixed Income $72 $ 98 $127 $236
Van Kampen UIF Equity Growth $74 $104 $137 $257
Van Kampen UIF Global Equity $74 $105 $138 $259
Van Kampen UIF Mid Cap Value $78 $110 $156 $277
Van Kampen UIF Value $78 $116 $156 $295
11 PROSPECTUS
EXAMPLE 2
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract, or you began receiving income payments (for at least 120 months
if under an Income Plan with a specified period), at the end of each period.
Variable Sub-Account 1 Year 3 Years 5 Years 10 Years
--------------------------------------------- ------ ------- ------- --------
AIM V.I. Balanced $25 $ 77 $131 $279
AIM V.I. Core Equity $22 $ 67 $116 $248
AIM V.I. Diversified Income $23 $ 71 $121 $259
AIM V.I. Government Securities $25 $ 75 $129 $275
AIM V.I. Growth $22 $ 69 $119 $254
AIM V.I. International Growth $24 $ 75 $127 $272
AIM V.I. Premier Equity $22 $ 68 $117 $251
The Dreyfus Socially Responsible Growth, Inc. $21 $ 66 $113 $244
Dreyfus Stock Index $16 $ 50 $ 86 $187
Dreyfus VIF - Growth & Income $22 $ 67 $114 $246
Dreyfus VIF - Money Market $19 $ 60 $103 $222
Fidelity VIP Contrafund $20 $ 63 $108 $233
Fidelity VIP Equity-Income $19 $ 60 $103 $222
Fidelity VIP Growth $20 $ 63 $108 $233
Fidelity VIP High Income $24 $ 64 $110 $236
Franklin Small Cap $24 $ 73 $125 $268
Mutual Shares Securities $24 $ 74 $127 $271
Templeton Developing Markets $25 $ 74 $127 $271
Templeton Foreign Securities $25 $ 78 $133 $282
Templeton Growthl Securitie $25 $ 76 $130 $277
Goldman Sachs VIT Capital Growth $31 $ 94 $160 $335
Goldman Sachs VIT CORE(SM) Small Cap Equity $26 $ 80 $136 $289
Goldman Sachs VIT CORE(SM) U.S. Equity $22 $ 67 $116 $248
Goldman Sachs VIT International Equity $34 $105 $178 $369
MFS Emerging Growth $22 $ 69 $118 $253
MFS Investors Trust $23 $ 70 $120 $256
MFS New Discovery $24 $ 75 $128 $273
MFS Research $23 $ 70 $120 $256
Oppenheimer Aggressive Growth/VA $20 $ 63 $108 $233
Oppenheimer Capital AppreciationVA $20 $ 63 $108 $233
Oppenheimer Global Securities/VA $13 $ 42 $ 72 $158
Oppenheimer Main Street Growth & Income/VA $21 $ 65 $111 $238
Oppenheimer Strategic Bond/VA $22 $ 67 $114 $245
Van Kampen UIF Core Plus Fixed Income $21 $ 64 $110 $236
Van Kampen UIF Equity Growth $23 $ 70 $120 $257
Van Kampen UIF Global Equity $23 $ 71 $121 $259
Van Kampen UIF Mid Cap Value $25 $ 76 $130 $277
Van Kampen UIF Value $27 $ 82 $139 $295
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EXPENSES. THE EXAMPLES ASSUME THAT ANY PORTFOLIO EXPENSE WAIVERS
OR REIMBURSEMENT ARRANGEMENTS DESCRIBED IN THE FOOTNOTES ON PAGE 8-9 ARE IN
EFFECT FOR THE TIME PERIODS PRESENTED ABOVE. YOUR ACTUAL EXPENSES MAY BE LESSER
OR GREATER THAN THOSE SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LESSER
OR GREATER THAN 5%, WHICH IS NOT GUARANTEED. TO REFLECT THE CONTRACT MAINTENANCE
CHARGE IN THE EXAMPLES, WE ESTIMATED AN EQUIVALENT PERCENTAGE CHARGE, BASED ON
AN ASSUMED AVERAGE CONTRACT SIZE OF $45,000.
12 PROSPECTUS
FINANCIAL INFORMATION
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund.
No Accumulation Unit Values are reported because as of the date of this
prospectus, no sales of the Contract had occurred.
To obtain more information on each Variable Sub-Account's finances, please refer
to the Variable Account's financial statements contained in the Statement of
Additional Information. The financial statements of ALLSTATE NEW YORK also
appear in the Statement of Additional Information. The Variable Account
Financial Statements do not reflect any assets attributed to the Contracts
offered by this prospectus because no sales of the Contract have occurred as of
the date of this prospectus.
THE CONTRACT
CONTRACT OWNER
The Allstate Provider Variable Annuity is a contract between you, the Contract
Owner, and Allstate New York, a life insurance company. As the Contract Owner,
you may exercise all of the rights and privileges provided to you by the
Contract. That means it is up to you to select or change (to the extent
permitted):
.. the investment alternatives during the Accumulation and Payout Phases,
.. the amount and timing of your purchase payments and withdrawals,
.. the programs you want to use to invest or withdraw money,
.. the income payment plan you want to use to receive retirement income,
.. the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
.. the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner dies, and
.. any other rights that the Contract provides.
If you die, any surviving Contract Owner or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-natural person and a natural
person. The maximum age of the oldest Contract Owner cannot exceed 85 as of the
date we receive the completed application.
Changing ownership of this Contract may cause adverse tax consequences and may
not be allowed under qualified plans. Please consult with a competent tax
advisor prior to making a request for a change of Contract Owner.
You can use the Contract with or without a qualified plan. A qualified plan is a
retirement savings plan, such as an IRA or tax-sheltered annuity, that meets the
requirements of the Internal Revenue Code. Qualified plans may limit or modify
your rights and privileges under the Contract. We use the term "QUALIFIED
CONTRACT" to refer to a Contract issued with a qualified plan. See "Qualified
Contracts" on page 33.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. The
maximum age of the oldest Annuitant cannot exceed 85 as of the date we receive
the completed application. If the Contract Owner is a natural person you may
change the Annuitant prior to the Payout Start Date. In our discretion, we may
permit you to designate a joint Annuitant, who is a second person on whose life
income payments depend, on the Payout Start Date.
If the Annuitant dies prior to the Payout Start Date, the new Annuitant will be:
.. the youngest Contract Owner, if living, otherwise
.. the youngest Beneficiary.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract Owner subject to the Death of Owner provision if the
sole surviving Contract Owner dies before the Payout Start Date. See "Death
Benefits" on page 27. If the sole surviving Contract Owner dies after the Payout
Start Date, the Beneficiary will receive any guaranteed income payments
scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You may
change or add Beneficiaries at any time by writing to us, unless you have
designated an irrevocable Beneficiary. We will provide a change of Beneficiary
form to be signed and filed with us. Any change will be effective at the time
you sign the written notice, whether or not the Annuitant is living when we
receive the notice. Until we receive your written notice to change a
Beneficiary, we are entitled to rely on the most recent Beneficiary information
in our files. We will not be liable as to any payment or settlement made prior
to
13 PROSPECTUS
receiving the written notice. Accordingly, if you wish to change your
Beneficiary, you should deliver your written notice to us promptly.
If you do not name a Beneficiary or, if the named Beneficiary is no longer
living and there are no other surviving Beneficiaries, the new Beneficiary will
be:
.. your spouse or, if he or she is no longer alive,
.. your surviving children equally, or if you have no surviving children,
.. your estate.
If more than one Beneficiary survives you (or the Annuitant if the Contract
Owner is not a natural person), we will divide the death benefit among your
Beneficiaries according to your most recent written instructions. If you have
not given us written instructions, we will pay the death benefit in equal
amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only an Allstate New York officer may approve a change in or waive any provision
of the Contract. Any change or waiver must be in writing. None of our agents has
the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law. If a provision of the Contract
is inconsistent with state law, we will follow state law.
ASSIGNMENT
You may not assign any interest in a Contract as collateral or security for a
loan. However, you may assign periodic income payments under the Contract prior
to the Payout Start Date. No Beneficiary may assign benefits under the Contract
until they are due. We will not be bound by any assignment until the assignor
signs it and files it with us. We are not responsible for the validity of any
assignment.
Federal law prohibits or restricts the assignment of benefits under many types
of retirement plans and the terms of such plans may themselves contain
restrictions on assignments. An assignment may also result in taxes and tax
penalties. YOU SHOULD CONSULT WITH YOUR ATTORNEY BEFORE TRYING TO ASSIGN YOUR
CONTRACT.
PURCHASES
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $3,000 ($2,000 for a Qualified
Contract). All subsequent purchase payments must be $100 ($500 for allocations
to the Fixed Account) or more. You may make purchase payments at any time prior
to the Payout Start Date. We reserve the right to limit the maximum amount of
purchase payments, or reduce the minimum purchase payment we will accept. We
reserve the right to reject any application.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of at least $100 ($500 for allocation
to the Fixed Account) by automatically transferring amounts from your bank
account. Please consult with your representative for detailed information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by notifying us in writing. We reserve the right to limit the
availability of the investment alternatives.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our service center. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
service center located in Vernon Hills, Illinois (mailing address: 300 N.
Milwaukee Ave., Vernon Hills, IL 60061.
We are open for business each day Monday through Friday that the New York Stock
Exchange is open for business. We also refer to these days as "VALUATION DATES."
Our business day closes when the New York Stock Exchange closes, usually 4:00
p.m. Eastern Time (3:00 p.m. Central Time). If we receive your purchase payment
after 4:00 p.m. Eastern Time (3:00 p.m. Central Time) on any Valuation Date, we
will credit your purchase payment using the Accumulation Unit Values computed on
the next Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 10 day period after
14 PROSPECTUS
you receive the Contract (60 days if you are exchanging another contract for the
Contract described in this prospectus). You may return it by delivering it or
mailing it to us. If you exercise this "RIGHT TO CANCEL," the Contract
terminates and we will pay you the full amount of your purchase payments
allocated to the Fixed Account. Upon cancellation, as permitted by federal or
state law, we will return your purchase payments allocated to the Variable
Account after an adjustment to the extent federal or state law permits to
reflect investment gain or loss that occurred from the date of allocation
through the date of cancellation. If your Contract is qualified under Section
408 of the Internal Revenue Code, we will refund the greater of any purchase
payments or the Contract Value.
CONTRACT VALUE
On the Issue Date, the Contract Value is equal to the initial purchase payment.
Your Contract Value at any other time during the Accumulation Phase is equal to
the sum of the value as of the most recent Valuation Date of your Accumulation
Units in the Variable Sub-Accounts you have selected, plus the value of your
investment in the Fixed Account.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
credit to your Contract, we divide (i) the amount of the purchase payment or
transfer you have allocated to a Variable Sub-Account by (ii) the Accumulation
Unit Value of that Variable Sub-Account next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Sub-Account when the Accumulation Unit Value for the
Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable
Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
.. changes in the share price of the Portfolio in which the Variable
Sub-Account invests, and
.. the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have
accrued since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account on
each Valuation Date.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE PORTFOLIOS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
15 PROSPECTUS
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
You may allocate your purchase payments to up to 39 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectuses for
the Portfolios. You should carefully review the Portfolio prospectuses before
allocating amounts to the Variable Sub-Accounts.
PORTFOLIO: EACH PORTFOLIO SEEKS:
---------------------- -----------------------------
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Balanced Achieve as high a total
Fund* return as possible,
consistent with preservation
of capital.
AIM V.I. Core Equity Growth of capital with a
Fund*** secondary objective of
current income
AIM ADVISORS, INC.
AIM V.I. Diversified A high level of current
Income Fund* income
AIM V.I. Government A high level of current
Securities Fund* income consistent with a
reasonable concern for safety
of principal
AIM V.I. Growth Fund* Growth of capital
AIM V.I. International Long-term growth of capital
Growth Fund****
AIM V.I. Premier Long-term growth of capital.
Equity Fund***** Income is a secondary
objective.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.; THE DREYFUS STOCK INDEX
FUND; AND THE DREYFUS VARIABLE INVESTMENT FUND (VIF) (COLLECTIVELY, THE
DREYFUS FUNDS)
The Dreyfus Socially Capital growth and,
Responsible Growth secondarily, current income
Fund, Inc.
Dreyfus Stock Index To match the total return
Fund Stock Price Index of the
Standard & Poor's(C) 500
Composite THE DREYFUS CORPORATION
Dreyfus VIF Growth & Long-term capital growth,
Income Portfolio income current and growth of
income, consistent with
reasonable investment risk
Dreyfus VIF Money A high level of current
Market Portfolio income as is consistent with
the preservation of capital
and the maintenance of
liquidity
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Fidelity VIP Reasonable income
Equity-Income
Portfolio
FIDELITY MANAGEMENT &
Fidelity VIP Growth Capital appreciation RESEARCH COMPANY
Portfolio
Fidelity VIP High High level of current income
Income Portfolio while also considering growth
of capital
Fidelity VIP Portfolio Long-term capital
Contrafund(R) appreciation
16 PROSPECTUS
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (VIP) -- CLASS 2
Franklin Small Cap Long-term capital growth FRANKLIN ADVISERS, INC.
Fund
Mutual Shares Capital appreciation. FRANKLIN MUTUAL
Securities Fund Secondary goal is income. ADVISORS, LLC.
Templeton Developing Long-term capital TEMPLETON ASSET
Markets Securities Appreciation MANAGEMENT LTD.
Fund
Templeton Growth Long-term capital growth TEMPLETON GLOBAL
Securities Fund ADVISORS LIMITED
Templeton Long-term capital growth TEMPLETON INVESTMENT
International COUNSEL, LLC.
Securities Fund
GOLDMAN SACHS VARIABLE INSURANCE TRUST (VIT)
Goldman Sachs VIT Long-term growth of capital
Capital Growth Fund
GOLDMAN SACHS ASSET
Goldman Sachs VIT Long-term growth of capital MANAGEMENT
Core(SM)Small Cap
Equity Fund
Goldman Sachs VIT Long-term growth of capital
Core(SM)U.S. Equity and dividend income
Fund
Goldman Sachs VIT Long-term capital GOLDMAN SACHS ASSET
International Equity appreciation MANAGEMENT INTERNATIONAL
Fund
MFS(R) VARIABLE INSURANCE TRUST(SM)
MFS Emerging Growth Long-term growth of capital
Series
MFS Investors Trust Long-term growth of capital MFS INVESTMENT
Series** with a secondary objective to MANAGEMENT(R)
seek reasonable current
income
MFS New Discovery Capital appreciation
Series
MFS Research Series Long-term growth of capital
and future income
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
Van Kampen UIF Equity Long-term capital
Growth****** appreciation
Van Kampen UIF Core Above-average total return MORGAN STANLEY ASSET
Plus Fixed over a market cycle of three MANAGEMENT
Income****** to five years
Van Kampen UIF Global Long-term capital
Equity****** appreciation
Van Kampen UIF Mid Cap Above-average total return
Value****** over a market cycle of three
to five years
Van Kampen UIF Above-average total return MILLER ANDERSON &
Value****** over a market cycle of three SHERRERD, LLP
to five years
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Aggressive Capital appreciation
Growth Fund/VA
Oppenheimer Capital Capital appreciation
Appreciation Fund/VA
OPPENHEIMER FUNDS, INC.
Oppenheimer Global Long-term capital
Securities Fund/VA appreciation
Oppenheimer Main High total return, which
Street Growth & Income includes growth in the value
Fund/VA of its shares as well as
current income, from equity
and debt securities
Oppenheimer Strategic High level of current income
Bond Fund/VA
17 PROSPECTUS
* The Portfolio's investment objectives may be changed by the Portfolio's
Board of Trustees without shareholder approval.
** Effective May 1, 2001, the MFS Growth with Income Series changed its name
to MFS Investors Trust Series, and changed its investment policies.
*** Effective May 1, 2002, the Portfolio changed its name from AIM V.I.
Growth and Income Fund to AIM V.I. Core Equity Fund. We have made a
corresponding change in the name of the Variable Sub-Account that invests
in that Portfolio.
**** Effective May 1, 2002, the Portfolio changed its name from AIM V.I.
International Equity Fund to AIM V.I. International Growth Fund. We have
made a corresponding change in the name of the Variable Sub-Account that
invests in that Portfolio.
***** Effective May 1, 2002, the Portfolio changed its name from AIM V.I. Value
Fund to AIM V.I. Premier Equity Fund. We have made a corresponding change
in the name of the Variable Sub-Account that invests in that Portfolio.
****** Effective May 1, 2002, the Portfolio changed its name from Morgan Stanley
to Van Kampen. We have made a corresponding change in the name of the
Variable Sub-Account that invests in that Portfolio.
AMOUNTS YOU ALLOCATE TO VARIABLE SUB-ACCOUNTS MAY GROW IN VALUE, DECLINE IN
VALUE, OR GROW LESS THAN YOU EXPECT, DEPENDING ON THE INVESTMENT PERFORMANCE OF
THE PORTFOLIOS IN WHICH THOSE VARIABLE SUB-ACCOUNTS INVEST. YOU BEAR THE
INVESTMENT RISK THAT THE PORTFOLIOS MIGHT NOT MEET THEIR INVESTMENT OBJECTIVES.
SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
VARIABLE INSURANCE PORTFOLIOS MIGHT NOT BE MANAGED BY THE SAME PORTFOLIO
MANAGERS WHO MANAGE RETAIL MUTUAL FUNDS WTH SIMILAR NAMES. THESE PORTFOLIOS ARE
LIKELY TO DIFFER FROM SIMILARLY NAMED RETAIL FUNDS IN ASSETS, CASH FLOW, AND TAX
MATTERS. ACCORDINGLY, THE HOLDINGS ARE RESULT OF VARIABLE INSURANCE PORTFOLIO
CAN BE EXPECTED TO BE HIGHER AS LEVELS THAN THE INVESTMENT RESULTS OF A
SIMILARLY NAMED RETAIL MUTUAL FUND.
18 PROSPECTUS
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
You may allocate all or a portion of your purchase payments to the Fixed Account
Options. We will credit a minimum annual interest rate of 3% to money you
allocate to any of the Fixed Account Options. Please consult with your
representative for current information. The Fixed Account consists of our
general account assets other than those in segregated asset accounts. We have
sole discretion to invest the assets of the Fixed Account, subject to applicable
law. Any money you allocate to the Fixed Account Option does not entitle you to
share in the investment experience of the Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS
SIX MONTH DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. Under this Option, you may
establish a Dollar Cost Averaging Program by allocating purchase payments to The
Six Month Dollar Cost Averaging Fixed Account Option ("Six Month DCA Fixed
Account Option"). We will credit interest to purchase payments you allocate to
this Option for six months at the current rate in effect at the time of
allocation. We will credit interest daily at a rate that will compound at the
annual interest rate we guaranteed at the time of allocation.
We will follow your instructions in transferring amounts monthly from the Six
Month DCA Fixed Account Option. You must transfer all of your money out of the
Six Month DCA Fixed Account Option to the Variable Sub-Accounts in six equal
monthly installments. If you discontinue the Six Month Dollar Cost Averaging
Option before the end of the transfer period, we will transfer the remaining
balance in this Option to the Dreyfus VIF Money Market Variable Sub-Account
unless you request a different investment alternative. No transfers are
permitted into the Six Month DCA Fixed Account.
For each purchase payment allocated to this Option, your first monthly transfer
will occur at the end of the first month following such purchase payment. If we
do not receive an allocation from you within one month of the date of payment,
we will transfer the payment plus associated interest to the Dreyfus VIF Money
Market Variable Sub-Account in equal monthly installments. Transfering Account
Value to the Money Market Variable Sub-Account in this manner may not be
consistent with the theory of Dollar Cost Averaging described on page 23.
TWELVE MONTH DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. Under this Option, you
may establish a Dollar Cost Averaging Program by allocating purchase payments to
The Twelve Month Dollar Cost Averaging Fixed Account Option ("Twelve Month DCA
Fixed Account Option"). We will credit interest to purchase payments you
allocate to this Option for twelve months at the current rate in effect at the
time of allocation. We will credit interest daily at a rate that will compound
at the annual interest rate we guaranteed at the time of allocation.
We will follow your instructions in transferring amounts monthly from the Twelve
Month DCA Fixed Account Option. You must transfer all of your money out of the
Twelve Month DCA Fixed Account Option to the Variable Sub-Accounts in twelve
equal monthly installments. If you discontinue the Twelve Month Dollar Cost
Averaging Option before the end of the transfer period, we will transfer the
remaining balance in this Option to the Dreyfus VIF Money Market Variable
Sub-Account unless you request a different investment alternative. No transfers
are permitted into the Twelve Month DCA Fixed Account.
For each purchase payment allocated to this Option, your first monthly transfer
will occur at the end of the first month following such purchase payment. If we
do not receive an allocation from you within one month of the date of payment,
we will transfer the payment plus associated interest to the Dreyfus VIF Money
Market Variable Sub-Account in equal monthly installments. Transferring Account
Value to the Money Market Variable Sub-Account in this manner may not be
consistent with the theory of dollar cost averaging described on page 23.
At the end of the transfer period, any nominal amounts remaining in the Six
Month Dollar Cost Averaging Fixed Account or the Twelve Month Dollar Cost
Averaging Fixed Account will be allocated to the Dreyfus VIF Money Market
Variable Sub-Account.
Transfers out of the Dollar Cost Averaging Fixed Account Options do not count
towards the 12 transfers you can make without paying a transfer fee.
INVESTMENT RISK. We bear the investment risk for all amounts allocated to the
Six Month DCA Fixed Account Option and the Twelve Month DCA Fixed Account
Option. That is because we guarantee the current interest rates we credit to the
amounts you allocate to either of these Options, which will never be less than
the minimum guaranteed rate in the Contract. Currently, we determine, in our
sole discretion, the amount of interest credited in excess of the guaranteed
rate.
We may declare more than one interest rate for different monies based upon the
date of allocation to the Six Month DCA Fixed Account Option and the Twelve
Month DCA Fixed Account Option. For current interest rate information, please
contact your representative or our customer support unit at 1-800-692-4682.
GUARANTEE PERIODS
Under this option, each payment or transfer allocated to the Fixed Account
earns interest at a specified rate that we guarantee for a period of years we
call a GUARANTEE PERIOD. Guarantee Periods may range from 1 to 10 years. We are
19 PROSPECTUS
currently offering Guarantee Periods of 1, 3, 5, 7, and 10 years in length. In
the future we may offer Guarantee Periods of different lengths or stop offering
some Guarantee Periods. You select one or more Guarantee Periods for each
purchase payment or transfer. If you do not select the Guarantee Period for a
purchase payment or transfer, we will assign the shortest Guarantee Period
available under the Contract for such payment or transfer.
Each payment or transfer allocated to a Guarantee Period must be at least $500.
We reserve the right to limit the number of additional purchase payments that
you may allocate to the Fixed Account. Please consult with your sales
representative for more information.
INTEREST RATES. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We may declare different interest rates for
Guarantee Periods of the same length that begin at different times. We will not
change the interest rate that we credit to a particular allocation until the end
of the relevant Guarantee Period.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors. We determine the
interest rates to be declared in our sole discretion. We can neither predict nor
guarantee what those rates will be in the future. For current interest rate
information, please contact your sales representative or ALLSTATE NEW YORK at
1-800-692-4682. The interest rate will never be less than the minimum guaranteed
amount stated in the Contract.
HOW WE CREDIT INTEREST. We will credit interest daily to each amount allocated
to a Guarantee Period at a rate that compounds to the effective annual interest
rate that we declared at the beginning of the applicable Guarantee Period.
The following example illustrates how a purchase payment allocated to the Fixed
Account would grow, given an assumed Guarantee Period and effective annual
interest rate:
Purchase Payment ......... ......................................... $10,000
Guarantee Period.................................................... 5 years
Annual Interest Rate................................................ 4.50%
[Enlarge/Download Table]
END OF CONTRACT YEAR
--------------------------------------------------------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ----------
Beginning Contract Value................... $10,000.00
X (1 + Annual Interest Rate) x 1.045
----------
$10,450.00
Contract Value at end of Contract Year..... $10,450.00
X (1 + Annual Interest x 1.045
----------
$10,920.25
Contract Value at end of Contract Year..... $10,920.25
X (1 + Annual Interest Rate) 1.045
----------
$11,411.66
Contract Value at end of Contract Year..... $11,411.66
X (1 + Annual Interest Rate) x 1.045
----------
$11,925.19
Contract Value at end of Contract Year..... $11,925.19
X (1 + Annual Interest Rate) 1.045
----------
$12,461.82
TOTAL INTEREST CREDITED DURING GUARANTEE PERIOD = $2,461.82 ($12,461.82-$10,000)
This example assumes no withdrawals during the entire 5 year Guarantee Period.
If you were to make a withdrawal, you may be required to pay a withdrawal
charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. Withdrawals of earnings are taxed as ordinary
income and, if taken prior to age 59 1/2, may be subject to an additional 10%
federal tax penalty. The hypothetical interest rate is for illustrative purposes
only and is not intended to predict future interest rates to be declared under
the Contract. Actual interest rates declared for any given Guarantee Period may
be more or less than shown above but will never be less than the guaranteed
minimum rate stated in the Contract.
20 PROSPECTUS
RENEWALS. At least 15 but not more than 45 days prior to the end of each
Guarantee Period, we will mail you a notice asking you what to do with your
money, including the accrued interest. During the 30-day period after the end of
the Guarantee Period, you may:
1) take no action. We will automatically apply your money to a new Guarantee
Period of the shortest duration available. The new Guarantee Period will begin
on the day the previous Guarantee Period ends. The new interest rate will be our
then current declared rate for a Guarantee Period of that length; or
2) Instruct us to apply your money to one or more new Guarantee Periods of your
choice. The new Guarantee Period(s) will begin on the day the previous Guarantee
Period ends. The new interest rate will be our then current declared rate for
those Guarantee Periods; or
3) Instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts. We will effect the transfer on the day we receive your
instructions. We will not adjust the amount transferred to include a Market
Value Adjustment. We will pay interest from the day the Guarantee Period expired
until the date of the transfer. The interest will be the rate for the Shortest
Guarantee Period then being offered; or
4) Withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to include a
Market Value Adjustment. You may also be required to pay premium taxes and
withholding (if applicable). The amount withdrawn will be deemed to have been
withdrawn on the day the previous Guarantee Period ends. Unless you specify
otherwise, amounts not withdrawn will be applied to a new Guarantee Period of
the shortest duration available. The new Guarantee Period will begin on the day
the previous Guarantee Period ends. Withdrawals of earnings are taxed as
ordinary income and, if taken prior to age 59 1/2, may be subject to an
additional 10% federal tax penalty.
Under our automatic laddering program ("Automatic Laddering Program"), you may
choose, in advance, to use Guarantee Periods of the same length for all
renewals. You can select this Program at any time during the Accumulation Phase,
including on the Issue Date. We will apply renewals to Guarantee Periods of the
selected length until you direct us in writing to stop. We may stop offering
this Program at any time. For additional information on the Automatic Laddering
Program, please call our customer service center at 1-800-692-4682.
MARKET VALUE ADJUSTMENT. All withdrawals in excess of the PREFERRED WITHDRAWAL
AMOUNT, and transfers from a Guarantee Period, other than those taken during the
30 day period after such Guarantee Period expires, are subject to a Market Value
Adjustment. A Market Value Adjustment also applies when you apply amounts
currently invested in a Guarantee Period to an Income Plan (unless paid or
applied during the 30 day period after such Guarantee Period expires). A
positive Market Value Adjustment will apply to amounts currently invested in a
Guarantee Period that are paid out as death benefits. We will not apply a Market
Value Adjustment to a transfer you make as part of a Dollar Cost Averaging
Program. We also will not apply a Market Value Adjustment to a withdrawal you
make:
.. within the Preferred Withdrawal Amount as described on page 24, or
.. to satisfy the IRS minimum distribution rules for the Contract.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time it is
removed from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the Treasury Rate for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the time remaining in the
Guarantee Period when you remove your money. "TREASURY RATE" means the U.S.
Treasury Note Constant Maturity Yield as reported in Federal Reserve Bulletin
Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal of your
Contract Value to an amount that is less than the purchase payment plus interest
at the minimum guaranteed interest rate under the Contract.
Generally, if the Treasury Rate at the time you allocate money to a Guarantee
Period is higher than the applicable current Treasury Rate for a period equal to
the time remaining in the Guarantee Period, then the Market Value Adjustment
will result in a higher amount payable to you or transferred. Conversely, if the
Treasury Rate at the time you allocate money to a Guarantee Period is lower than
the applicable Treasury Rate for a period equal to the time remaining in the
Guarantee Period, then the Market Value Adjustment will result in a lower amount
payable to you or transferred.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5 year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 2 year Treasury Rate is 4.20%, then the Market
Value Adjustment will be positive, which will result in an increase in the
amount payable to you. Conversely, if the current 2 year Treasury
21 PROSPECTUS
Rate is 4.80%, then the Market Value Adjustment will be negative, which will
result in a decrease in the amount payable to you.
The formula for calculating Market Value Adjustments is set forth in Appendix A
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
INVESTMENT ALTERNATIVES: TRANSFERS
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives at any time. The minimum amount that you may transfer
into a Guarantee Period is $500. You may request transfers in writing on a form
that we provided or by telephone according to the procedure described below. We
currently do not assess, but reserve the right to assess, a $10 charge on each
transfer in excess of 12 per Contract Year. We treat transfers to or from more
than one Portfolio on the same day as one transfer. Transfers you make as part
of a Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program do
not count against the 12 free transfers per Contract Year.
We will process transfer requests that we receive before 4:00 p.m. Eastern Time
(3:00 p.m. Central Time) on any Valuation Date using the Accumulation Unit
Values for that Date. We will process requests completed after 4:00 p.m. Eastern
Time (3:00 p.m. Central Time) on any Valuation Date using the Accumulation Unit
Values for the next Valuation Date. The Contract permits us to defer transfers
from the Fixed Account for up to 6 months from the date we receive your request.
If we decide to postpone transfers from the Fixed Account for 10 days or more,
we will pay interest as required by applicable law. Any interest would be
payable from the date we receive the transfer request to the date we make the
transfer.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment. If any transfer reduces your value in such
Guarantee Period to less than $500, we will treat the request as a transfer of
the entire value in such Guarantee Period.
We reserve the right to waive any transfer fees and restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
to change the relative weighting of the Variable Sub-Accounts on which your
variable income payments will be based. In addition, you will have a limited
ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive fixed income payments
into variable income payments.
You may not make any transfers for the first 6 months after the Payout Start
Date. Thereafter, you may make transfers among the Variable Sub-Accounts or make
transfers from the Variable Sub-Accounts to increase the proportion of your
income payments consisting of fixed income payments. Your transfers must be at
least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-692-4682, if you first send
us a completed authorization form. The cut off time for telephone transfer
requests is 4:00 p.m. Eastern Time (3:00 p.m. Central Time). In the event that
the New York Stock Exchange closes early, i.e., before 4:00 p.m. Eastern Time
(3:00 p.m. Central Time), or in the event that the Exchange closes early for a
period of time but then reopens for trading on the same day, we will process
telephone transfer requests as of the close of the Exchange on that particular
day. We will not accept telephone requests received at any telephone number
other than the number that appears in this paragraph or received after the close
of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
EXCESSIVE TRADING LIMITS
We reserve the right to limit transfers among the Variable Sub-Accounts in any
Contract year, or to refuse any Variable Sub-Account transfer request, if:
.. we believe, in our sole discretion, that excessive trading by such Contract
Owner or Owners, or a specific transfer request or group of transfer
requests, may have a detrimental effect on the Accumulation Unit Values of
any Variable Sub-Account or the share prices of the corresponding Portfolio
or would be to the disadvantage of other Contract owners; or
.. we are informed by one or more of the Portfolios that they intend to
restrict the purchase or redemption of Portfolio shares because of
excessive trading or because they believe that a specific transfer or
groups of transfers would have a detrimental effect on the prices of
Portfolio shares.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract Owners.
22 PROSPECTUS
DOLLAR COST AVERAGING PROGRAM
Through the Dollar Cost Averaging Program, you may automatically transfer a set
amount every month during the Accumulation Phase from any Variable Sub-Account,
or the the Six Month DCA Fixed Account, or the Twelve Month DCA Fixed Account
Option, to any other Variable Sub-Account. You may not use dollar cost averaging
to transfer amounts to the Fixed Account.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfers count against the 12 transfers you can make each Contract
Year without paying a transfer fee. In addition, we will not apply the Market
Value Adjustment to these transfers.
The theory of dollar cost averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market.
Call or write us for instructions on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our Automatic Portfolio Rebalancing
Program, we will automatically rebalance the Contract Value in each Variable
Sub-Account and return it to the desired percentage allocations. Money you
allocate to the Fixed Account will not be included in the rebalancing.
We will rebalance your account each quarter according to your instructions. We
will transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone. The new allocation will be effective
with the first rebalancing that occurs after we receive your request. We are not
responsible for rebalancing that occurs prior to receipt of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Sub-Accounts. You want 40% to be in the AIM V.I. Balanced Variable Sub-Account
and 60% to be in the Fidelity VIP Growth Variable Sub-Account. Over the next 2
months the bond market does very well while the stock market performs poorly. At
the end of the first quarter, the AIM V.I. Balanced Variable Sub-Account now
represents 50% of your holdings because of its increase in value. If you choose
to have your holdings rebalanced quarterly, on the first day of the next quarter
we would sell some of your units in the AIM V.I. Balanced Variable Sub-Account
and use the money to buy more units in the Fidelity VIP Growth Variable
Sub-Account so that the percentage allocations would again be 40% and 60%
respectively.
The Automatic Portfolio Rebalancing Program is available only during the
Accumulation Phase. The transfers made under the Program do not count towards
the 12 transfers you can make without paying a transfer fee, and are not subject
to a transfer fee.
Portfolio rebalancing is consistent with maintaining your allocation of
investments among market segments, although it is accomplished by reducing your
Contract Value allocated to the better performing segments.
You may not use the Dollar Cost Averaging and Automatic Portfolio Rebalancing
programs at the same time.
EXPENSES
As a Contract Owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$30 contract maintenance charge from your Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. We also will deduct a
full contract maintenance charge if you withdraw your entire Contract Value,
unless your Contract qualifies for a waiver, described below. During the Payout
Phase, we will deduct the charge proportionately from each income payment.
The charge is for the cost of maintaining each Contract and the Variable
Account. Maintenance costs include expenses we incur in billing and collecting
purchase payments; keeping records; processing death claims, cash withdrawals,
and policy changes; proxy statements; calculating Accumulation Unit Values and
income payments; and issuing reports to Contract Owners and regulatory agencies.
We cannot increase the charge. We will waive this charge if:
.. total purchase payments equal $50,000 or more, or
.. all of your money is allocated to the Fixed Account on a Contract
Anniversary.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an
23 PROSPECTUS
annual rate of 1.15% of the average daily net assets you have invested in the
Variable Sub-Accounts. The mortality and expense risk charge is for all the
insurance benefits available with your Contract (including our guarantee of
annuity rates and the death benefits), for certain expenses of the Contract, and
for assuming the risk (expense risk) that the current charges will be sufficient
in the future to cover the cost of administering the Contract. If the charges
under the Contract are not sufficient, then we will bear the loss.
We guarantee the mortality and expense risk charge and we cannot increase it. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that exceed the
revenues from the contract maintenance charge. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We guarantee that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or Automatic Portfolio
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 7% of the purchase payment(s) you
withdraw in excess of the Preferred Withdrawal Amount, adjusted by a Market
Value Adjustment. The charge declines by 1% annually to 0% after 7 complete
years from the day we receive the purchase payment being withdrawn. A schedule
showing how the charge declines appears on page 6. During each Contract Year,
you can withdraw up to 15% of purchase payments without paying the charge.
Unused portions of this 15% "PREFERRED WITHDRAWAL AMOUNT" are not carried
forward to future Contract Years.
We determine the withdrawal charge by:
.. multiplying the percentage corresponding to the number of complete years
since we received the purchase payment being withdrawn, times
.. the part of each purchase payment withdrawal that is in excess of the
Preferred Withdrawal Amount, adjusted by a Market Value Adjustment.
We will deduct withdrawal charges, if applicable, from the amount paid. For
purposes of the withdrawal charge, we will treat withdrawals as coming from the
oldest purchase payments first. However, for federal income tax purposes, please
note that withdrawals are considered to have come first from earnings in the
Contract, which means you pay taxes on the earnings portion of your withdrawal.
We do not apply a withdrawal charge in the following situations:
.. on the Payout Start Date (a withdrawal charge may apply if you elect to
receive income payments for a specified period of less than 120 months);
.. the death of the Contract Owner or Annuitant (unless the Settlement Value
is used);
.. withdrawals taken to satisfy IRS minimum distribution rules for the
Contract; or
.. withdrawals made after all purchase payments have been withdrawn.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals of earnings are taxed as ordinary income and, if taken prior to age
59 1/2, may be subject to an additional 10% federal tax penalty. Withdrawals may
also be subject to a Market Value Adjustment. You should consult your own tax
counsel or other tax advisers regarding any withdrawals.
PREMIUM TAXES
Currently, we do not make deductions for premium taxes under the Contract
because New York does not charge premium taxes on annuities. We may deduct taxes
that may be imposed in the future from purchase payments or the Contract Value
when the tax is incurred or at a later time.
DEDUCTION FOR VARIABLE ACCOUNT INCOME TAXES
We are not currently making a provision for such taxes. In the future, however,
we may make a provision for taxes if we determine, in our sole discretion, that
we will incur a tax as a result of the operation of the Variable Account. We
will deduct for any taxes we incur as a result of the operation of the Variable
Account, whether or not we previously made a provision for taxes and whether or
not it was sufficient. Our status under the Internal Revenue Code is briefly
described in the Taxes section.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the
24 PROSPECTUS
Variable Sub-Accounts. These fees and expenses are described in the accompanying
prospectuses for the Portfolios. For a summary of these charges and expenses,
see pages 8-10. We may receive compensation from the investment advisers or
administrators of the Portfolios for administrative services we provide to the
Portfolios.
ACCESS TO YOUR MONEY
You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. Full or partial withdrawals also are available under limited
circumstances on or after the Payout Start Date. See "Income Plans" on page 25.
The amount payable upon withdrawal is the Contract Value next computed after we
receive the request for a withdrawal at our customer service center, adjusted by
any Market Value Adjustment, less any withdrawal charges, contract maintenance
charges, income tax withholding, and any premium taxes. We will pay withdrawals
from the Variable Account within 7 days of receipt of the request, subject to
postponement in certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account. To
complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
withdrawal charge and premium taxes.
Withdrawals of earnings are taxed as ordinary income and, if taken prior to age
59 1/2, may be subject to an additional 10% federal tax penalty.
You must name the investment alternative from which you are taking the
withdrawal. If none is named, then the withdrawal request is incomplete and
cannot be honored.
In general, you must withdraw at least $50 at a time. You also may withdraw a
lesser amount if you are withdrawing your entire interest in a Variable
Sub-Account.
If you request a total withdrawal, you must return your Contract to us.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account for up to
6 months or a shorter period if required by law. If we delay payment or transfer
for 10 business days or more, we will pay interest as required by law. Any
interest would be payable from the date we receive the withdrawal request to the
date we make the payment or transfer.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. At our
discretion, systematic withdrawals may not be offered in conjunction with the
Dollar Cost Averaging Program or the Automatic Portfolio Rebalancing Program.
Depending on fluctuations in the net asset value of the Variable Sub-Accounts
and the value of the Fixed Account, systematic withdrawals may reduce or even
exhaust the Contract Value. Withdrawals of earnings are taxed as ordinary income
and, if taken prior to age 59 1/2, may be subject to an additional 10% federal
tax penalty. Please consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. We
may modify or suspend the Systematic Withdrawal Program and charge a processing
fee for the service. If we modify or suspend the Systematic Withdrawal Program,
existing systematic withdrawal payments will not be affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce the amount in any
Guarantee Period to less than $500, we will treat it as a request to withdraw
the entire amount invested in such Guarantee Period. If your request for a
partial withdrawal would reduce your Contract Value to less than $1,000, we may
treat it as a request to withdraw your entire Contract Value. Your Contract will
terminate if you withdraw all of your Contract Value. We will, however, ask you
to confirm your withdrawal request before terminating your Contract.
Before terminating any Contract whose value has been reduced by withdrawals to
less than $1,000, we will inform you in writing of our intention to terminate
your Contract and give you ast least 30 days in which to make an additional
purchase payment to restore your Contract's value to the contractual minimum of
$1,000. If we terminate your Contract, we will distribute to you its Contract
Value, adjusted by any applicable Market Value Adjustment, less withdrawal and
other charges and applicable taxes.
25 PROSPECTUS
INCOME PAYMENTS
PAYOUT START DATE
The Payout Start Date is the day that we apply your money to an Income Plan. The
Payout Start Date must be no later than the day the Annuitant reaches age 90, or
the 10th Contract Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An "Income Plan" is a series of payments on a scheduled basis to you or to
another person designated by you. You may choose and change your choice of
Income Plan until 30 days before the Payout Start Date. If you do not select an
Income Plan, we will make income payments in accordance with Income Plan 1 with
guaranteed payments for 10 years if you have designated only one Annuitant or
Income Plan 2 with guaranteed payments for 10 years if you have desginated joint
Annuitants. After the Payout Start Date, you may not make withdrawals (except as
described below) or change your choice of Income Plan.
Three Income Plans are available under the Contract. Each is available to
provide:
.. fixed income payments;
.. variable income payments; or
.. a combination of the two.
The three Income Plans are:
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as required by
the Contract.
INCOME PLAN 3 - GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30
YEARS). Under this plan, we make periodic income payments for the period you
have chosen. These payments do not depend on the Annuitant's life. Income
payments for less than 120 months may be subject to a withdrawal charge. We will
deduct the mortality and expense risk charge from the Variable Sub-Account
assets that support variable income payments even though we may not bear any
mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant is alive before
we make each payment.
Please note that under such Income Plans, if you elect to take no minimum
guaranteed payments, it is possible that the payee could receive only 1 income
payment if the Annuitant and any joint Annuitant both die before the second
income payment, or only 2 income payments if they die before the third income
payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or part of the Variable Account portion of
the income payments at any time and receive a lump sum equal to the present
value of the remaining variable income payments associated with the amount
withdrawn. To determine the present value of any remaining variable income
payments being withdrawn, we use a discount rate equal to the assumed annual
investment rate that we use to compute such variable income payments. The
minimum amount you may withdraw under this feature is $1,000. A withdrawal
charge may apply. You will also have a limited ability to make transfers from
the Variable Account portion of the income payments to increase the proportion
of your income payments consisting of fixed income payments. You may not,
however, convert any portion of your right to receive fixed income payments into
variable income payments. We deduct applicable premium taxes, if any, from the
Contract Value at the Payout Start Date. New York does not currently impose a
premium tax.
We may make other Income Plans available. You may obtain information about them
by writing or calling us.
You must apply at least the Contract Value in the Fixed Account on the Payout
Start Date to fixed income payments. If you wish to apply any portion of your
Fixed
26 PROSPECTUS
Account balance to provide variable income payments, you should plan ahead and
transfer that amount to the Variable Sub-Accounts prior to the Payout Start
Date. If you do not tell us how to allocate your Contract Value among fixed and
variable income payments, we will apply your Contract Value in the Variable
Account to variable income payments and your Contract Value in the Fixed Account
to fixed income payments.
We will apply your Contract Value, adjusted by a Market Value Adjustment, less
applicable taxes to your Income Plan on the Payout Start Date. If the Contract
Value is less than $2,000 or not enough to provide an initial payment of at
least $20, and state law permits, we may:
.. terminate the Contract and pay you the Contract Value, adjusted by any
Market Value Adjustment and less any applicable taxes, in a lump sum
instead of the periodic payments you have chosen, or
.. reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Portfolio and (b) the Annuitant could live longer or shorter than we
expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate.
Please refer to the Statement of Additional Information for more detailed
information as to how we determine variable income payments.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from the Fixed Account for the
duration of the Income Plan. We calculate the fixed income payments by:
1. adjusting the portion of the Contract Value in the Fixed Account on the
Payout Start Date by any applicable Market Value Adjustment;
2. deducting any applicable premium tax; and
3. applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as we are
offering at that time.
We may defer making fixed income payments for a period of up to 6 months or such
shorter time as state law may require. If we defer payments for 10 business days
or more, we will pay interest as required by law from the date we receive the
withdrawal request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age. However, we
reserve the right to use income payment tables that do not distinguish on the
basis of sex to the extent permitted by law. In certain employment-related
situations, employers are required by law to use the same income payment tables
for men and women. Accordingly, if the Contract is to be used in connection with
an employment-related retirement or benefit plan, you should consult with legal
counsel as to whether the purchase of a Contract is appropriate. For qualified
plans, where it is appropriate, we may use income payment tables that do not
distinguish on the basis of sex.
DEATH BENEFITS
We will pay a death benefit if, prior to the Payout Start Date:
1. any Contract owner dies or,
2. the Annuitant dies, if the Contract Owner is not a natural person.
We will pay the death benefit to the new Contract Owner who is determined
immediately after the death. The new Contract Owner would be a surviving
Contract Owner or, if none, the Beneficiary(ies).
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest of:
1. the Contract Value as of the date we determine the death benefit, or
2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value) on the date we determine the death benefit, or
3. the Contract Value on the DEATH BENEFIT
27 PROSPECTUS
ANNIVERSARY immediately preceding the date we determine the death benefit,
adjusted by any purchase payments, withdrawal adjustment as defined below, and
charges made since that Death Benefit Anniversary. A "Death Benefit Anniversary"
is every seventh Contract Anniversary beginning with the Issue Date. For
example, the Issue Date, 7th and 14th Contract Anniversaries are the first three
Death Benefit Anniversaries, or
4. the greatest of the Anniversary Values as of the date we determine the death
benefit. An "Anniversary Value" is equal to the Contract Value on a Contract
Anniversary, increased by purchase payments made since that anniversary and
reduced by the amount of any withdrawal adjustment, as defined below, since that
anniversary. Anniversary Values will be calculated for each Contract Anniversary
prior to the earlier of:
(i) the date we determine the death benefit, or
(ii) the deceased's 75th birthday or 5 years after the Issue Date, if later.
A positive Market Value Adjustment will apply to amounts currently invested in a
Guarantee Period that are paid out as death benefits.
The value of the death benefit will be determined at the end of the Valuation
Date on which we receive a complete request for payment of the death benefit,
which includes Due Proof of Death.
The withdrawal adjustment is equal to (a) divided by (b), with the result
multiplied by (c), where:
(a) = the withdrawal amount,
(b) = the Contract Value immediately prior to the withdrawal, and
(c) = the value of the applicable death benefit alternative immediately prior to
the withdrawal.
See Appendix C for an example representative of how the withdrawal adjustment
applies.
We will not settle any death claim until we receive Due Proof of Death. We will
accept the following documentation as Due Proof of Death:
.. a certified copy of a death certificate; or
.. a certified copy of a decree of a court of competent jurisdiction as to a
finding of death; or
.. any other proof acceptable to us.
DEATH BENEFIT PAYMENTS
A death benefit will be paid:
1. if the new Contract Owner elects to receive the death benefit distributed in
a single payment within 180 days of the date of death, and
2. if the death benefit is paid as of the day the value of the death benefit is
determined.
Otherwise, the Settlement Value will be paid. The new Contract Owner may make a
single withdrawal of any amount within one year of the date of death without
incurring a withdrawal charge. However, any applicable Market Value Adjustment,
determined as of the date of the withdrawal, will apply.
We reserve the right to waive the 180 day limit on a non-discriminatory basis.
The Settlement Value paid will be the Settlement Value next computed on or after
the requested distribution date for payment, or on the mandatory distribution
date of 5 years after the date of death.
In any event, the entire value of the Contract must be distributed within 5
years after the date of death unless an Income Plan is elected or a surviving
spouse continues the Contract in accordance with the provisions described below.
If the Contract Owner eligible to receive the death benefit is not a natural
person, the Contract Owner may elect to receive the distribution upon death in
one or more distributions. However, the entire value of the Contract must be
distributed within five years after the date of death.
If the Contract Owner is a natural person, the Contract Owner may elect to
receive the distribution upon death either in one or more distributions, or by
periodic payments through an Income Plan. Payments from the Income Plan must
begin within one year of the date of death and must be payable throughout:
.. the life of the Contract Owner; or
.. a period not to exceed the life expectancy of the Contract Owner; or
.. the life of the Contract Owner with payments guaranteed for a period not to
exceed the life expectancy of the Contract Owner.
If the surviving spouse of the deceased Contract Owner is the sole new Contract
Owner, then the spouse may elect one of the options listed above or may continue
the Contract in the Accumulation Phase as if the death had not occurred. The
Contract may only be continued once.
If the Contract is continued in the Accumulation Phase, the surviving spouse may
make a single withdrawal of any amount within one year of the date of death
without incurring a withdrawal charge. However, any applicable Market Value
Adjustment, determined as of the date of the withdrawal, will apply. Withdrawals
of earnings are taxed as ordinary income and, if taken prior to age 59 1/2, may
be subject to an additional 10% federal tax penalty.
28 PROSPECTUS
MORE INFORMATION
ALLSTATE NEW YORK
Allstate New York is the issuer of the Contract. Allstate New York is a stock
life insurance company organized under the laws of the State of New York.
Allstate New York was incorporated in 1967 and was known as "Financial Life
Insurance Company" from 1967 to 1978. From 1978 to 1984, Allstate New York was
known as "PM Life Insurance Company." Since 1984 the company has been known as
"Allstate Life Insurance Company of New York."
Allstate New York is currently licensed to operate in New York. Our home office
is One Allstate Drive, Farmingville, New York 11738. Our service center is
located in Vernon Hills, Illinois.
Allstate New York is a wholly owned subsidiary of Allstate Life Insurance
Company ("Allstate Life"), a stock life insurance company incorporated under the
laws of the State of Illinois. Allstate Life is a wholly owned subsidiary of
Allstate Insurance Company, a stock property-liability insurance company
incorporated under the laws of the State of Illinois. With the exception of the
directors qualifying shares, all of the outstanding capital stock of Allstate
Insurance Company is owned by The Allstate Corporation.
Independent rating agencies regularly evaluate life insurers' claims-paying
ability, quality of investments, and overall stability. A.M. Best Company
assigns an A+ (Superior) financial strength rating to Allstate Life, which
results in A+g rating to Allstate New York due to its group affiliation with
Allstate Life. Standard & Poor's Insurance Rating Service assigns an AA+ (Very
Strong) financial strength rating and Moody's Investors Service assigns an Aa2
(Excellent) financial strength rating to Allstate New York, sharing the same
ratings of its parents, Allstate Life. These ratings do not reflect the
performance of the Variable Account.We may from time to time advertise these
ratings in our sales literature.
THE VARIABLE ACCOUNT
Allstate New York established the Allstate Life of New York Separate Account A
on December 15, 1995. We have registered the Variable Account with the SEC as a
unit investment trust. The SEC does not supervise the management of the Variable
Account or Allstate New York.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under New York law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
Allstate New York.
The Variable Account consists of multiple Variable Sub-Accounts, 39 of which are
available through the Contracts. Each Variable Sub-Account invests in a
corresponding Portfolio. We may add new Variable Sub-Accounts or eliminate one
or more of them, if we believe marketing, tax, or investment conditions so
warrant. We do not guarantee the investment performance of the Variable Account,
its Sub-Accounts or the Portfolios. We may use the Variable Account to fund our
other annuity contracts. We will account separately for each type of annuity
contract funded by the Variable Account.
THE CONTRACT
DISTRIBUTION. ALFS, Inc. ("ALFS"), located at 3100 Sanders Road, Northbrook,
Illinois 60062, serves as principal underwriter of the Contracts. ALFS is a
wholly owned subsidiary of Allstate Life Insurance Company. ALFS is a registered
broker-dealer under the Securities and Exchange Act of 1934, as amended
("Exchange Act"), and is a member of the National Association of Securities
Dealers, Inc.
The Contracts described in this prospectus are sold by registered
representatives of broker-dealers who are our licensed insurance agents, either
individually or through an incorporated insurance agency. Commission paid to
broker-dealers may vary, but we estimate that the total commissions paid on all
Contract sales to broker-dealers will not exceed 6.25% of any purchase payments.
These commissions are intended to cover distribution expenses. From time to
time, we may offer additional sales incentives of up to 1% of purchase payments
to broker-dealers who maintain certain sales volume levels.
Allstate New York does not pay ALFS a commission for distribution of the
Contracts. The underwriting agreement with ALFS provides that we will reimburse
ALFS for any liability to Contract Owners arising out of services rendered or
Contracts issued.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
.. issuance of the Contracts;
.. maintenance of Contract Owner records;
.. Contract Owner services;
.. calculation of unit values;
.. maintenance of the Variable Account; and
.. preparation of Contract Owner reports.
We will send you Contract statements and transaction confirmations at least
annually. The annual statement details values and specific Contract data for
each
29 PROSPECTUS
particular Contract. You should notify us promptly in writing of any address
change. You should read your statements and confirmations carefully and verify
their accuracy. You should contact us promptly if you have a question about a
periodic statement. We will investigate all complaints and make any necessary
adjustments retroactively, but you must notify us of a potential error within a
reasonable time after the date of the questioned statement. If you wait too
long, we will make the adjustment as of the date that we receive notice of the
potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
TAX QUALIFIED PLANS
If you use the Contract with a qualified plan, the plan may impose different or
additional conditions or limitations on withdrawals, waivers of withdrawal
charges, death benefits, Payout Start Dates, income payments, and other Contract
features. In addition, adverse tax consequences may result if qualified plan
limits on distributions and other conditions are not met. Please consult your
qualified plan administrator for more information.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract Owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date, the person receiving income
payments has the voting interest. The payee's number of votes will be determined
by dividing the reserve for such Contract allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Portfolio. The
votes decrease as income payments are made and as the reserves for the Contract
decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted on a pro-rata basis to reduce the votes eligible
to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer
available for investment by the Variable Account or if, in our judgment, further
investment in such shares is no longer desirable in view of the purposes of the
Contract, we may eliminate that Portfolio and substitute shares of another
eligible investment portfolio. Any substitution of securities will comply with
the requirements of the 1940 Act. We also may add new Variable Sub-Accounts that
invest in additional mutual funds. We will notify you in advance of any changes.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to Variable
Accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance Variable Accounts and variable annuity Variable Accounts to invest in
the same Portfolio. The boards of directors of these Portfolios monitor for
possible conflicts among Variable Accounts buying shares of the Portfolios.
Conflicts could develop for a variety of reasons. For example, differences in
treatment under tax and other laws or the failure by a Variable Account to
comply with such laws could cause a conflict. To eliminate a conflict, a
Portfolio's board of directors may require a Variable Account to withdraw its
participation in a Portfolio. A Portfolio's net asset value could decrease if it
had to sell investment securities to pay redemption proceeds to a Variable
Account withdrawing because of a conflict.
LEGAL MATTERS
JordenBurt LLP, Washington, D.C., has advised ALLSTATE NEW YORK on certain
federal securities law matters. All matters of New York law pertaining to the
Contracts, including the validity of the Contracts and ALLSTATE NEW YORK's right
to issue such Contracts under New York insurance law, have been passed upon by
Michael J. Velotta, General Counsel of Allstate New York.
30 PROSPECTUS
TAXES
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. ALLSTATE
NEW YORK MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
ALLSTATE NEW YORK is taxed as a life insurance company under Part I of
Subchapter L of the Internal Revenue Code. Since the Variable Account is not an
entity separate from ALLSTATE NEW YORK, and its operations form a part of
ALLSTATE NEW YORK, it will not be taxed separately. Investment income and
realized capital gains of the Variable Account are automatically applied to
increase reserves under the Contract. Under existing federal income tax law,
ALLSTATE NEW YORK believes that the Variable Account investment income and
capital gains will not be taxed to the extent that such income and gains are
applied to increase the reserves under the Contract. Accordingly, ALLSTATE NEW
YORK does not anticipate that it will incur any federal income tax liability
attributable to the Variable Account, and therefore ALLSTATE NEW YORK does not
intend to make provisions for any such taxes. If ALLSTATE NEW YORK is taxed on
investment income or capital gains of the Variable Account, then ALLSTATE NEW
YORK may impose a charge against the Variable Account in order to make provision
for such taxes.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
1. the Contract Owner is a natural person,
2. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
3. ALLSTATE NEW YORK is considered the owner of the Variable Account assets for
federal income tax purposes.
NON-NATURAL OWNERS. As a general rule, annuity contracts owned by non-natural
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. The income on such contracts
does not enjoy tax deferral and is taxed as ordinary income received or accrued
by the owner during the taxable year.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE. There are several exceptions to the
general rule that annuity contracts held by a non-natural owner are not treated
as annuity contracts for federal income tax purposes. contracts will generally
be treated as held by a natural person if the nominal owner is a trust or other
entity which holds the contract as agent for a natural person. However, this
special exception will not apply in the case of an employer who is the nominal
owner of an annuity contract under a non-qualified deferred compensation
arrangement for its employees. Other exceptions to the non-natural owner rule
are: (1) contracts acquired by an estate of a decedent by reason of the death of
the decedent; (2) certain qualified contracts; (3) contracts purchased by
employers upon the termination of certain qualified plans; (4) certain contracts
used in connection with structured settlement agreements, and (5) immediate
annuity contracts, purchased with a single premium, when the annuity starting
date is no later than a year from purchase of the annuity and substantially
equal periodic payments are made, not less frequently than annually, during the
annuity period.
DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"ADEQUATELY DIVERSIFIED" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract Owner during the taxable
year. Although ALLSTATE NEW YORK does not have control over the Funds or their
investments, we expect the Funds to meet the diversification requirements.
OWNERSHIP TREATMENT. The IRS has stated that a contract owner will be considered
the owner of separate account assets if he possesses incidents of ownership in
those assets, such as the ability to exercise investment control over the
assets. At the time the diversification regulations were issued, the Treasury
Department announced that the regulations do not provide guidance concerning
circumstances in which investor control of the separate account investments may
cause a contract owner to be treated as the owner of the separate account. The
Treasury Department also stated that future guidance would be issued regarding
the extent that owners could direct sub-account investments without being
treated as owners of the underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
rulings in which it found that contract owners were not owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among a broader selection of investment alternatives. Also, you
may be able to transfer among investment alternatives more frequently than in
such rulings. These differences could result in you
31 PROSPECTUS
being treated as the owner of the Variable Account. If this occurs, income and
gain from the Variable Account assets would be includible in your gross income.
ALLSTATE NEW
YORK does not know what standards will be set forth in any regulations or
rulings which the Treasury Department may issue. It is possible that future
standards announced by the Treasury Department could adversely affect the tax
treatment of your Contract. We reserve the right to modify the Contract as
necessary to attempt to prevent you from being considered the federal tax owner
of the assets of the Variable Account. However, we make no guarantee that such
modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a non-qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a full withdrawal
under a non-Qualified Contract, the amount received will be taxable only to the
extent it exceeds the investment in the Contract.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a nonqualified contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. The Federal tax treatment of annuity payments is unclear in some
respects. As a result, if the IRS should provide further guidance, it is
possible that the amount we calculate and report to the IRS as taxable could be
different. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is possible that a greater or lesser portion of such a payment could be
taxable than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
1. if any Contract Owner dies on or after the Payout Start Date but before the
entire interest in the Contract has been distributed, the remaining portion of
such interest must be distributed at least as rapidly as under the method of
distribution being used as of the date of the Contract Owner's death;
2. if any Contract Owner dies prior to the Payout Start Date, the entire
interest in the Contract will be distributed within 5 years after the date of
the Contract Owner's death. These requirements are satisfied if any portion of
the Contract Owner's interest that is payable to (or for the benefit of) a
designated Beneficiary is distributed over the life of such Beneficiary (or over
a period not extending beyond the life expectancy of the Beneficiary) and the
distributions begin within 1 year of the Contract Owner's death. If the Contract
Owner's designated Beneficiary is the surviving spouse of the Contract Owner,
the Contract may be continued with the surviving spouse as the new Contract
Owner.
3. if the Contract Owner is a non-natural person, then the Annuitant will be
treated as the Contract Owner for purposes of applying the distribution at death
rules. In addition, a change in the Annuitant on a Contract owned by a
non-natural person will be treated as the death of the Contract Owner.
TAXATION OF ANNUITY DEATH BENEFITS. Death Benefit amounts are included in income
as follows:
1. if distributed in a lump sum, the amounts are taxed in the same manner as a
full withdrawal, or
2. if distributed under an Income Plan, the amounts are taxed in the same manner
as annuity payments.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
59 1/2. However, no penalty tax is incurred on distributions:
1. made on or after the date the Contract Owner attains age 59 1/2,
2. made as a result of the Contract Owner's death or becoming totally disabled,
3. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
4. made under an immediate annuity, or
5. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS. With respect to non-Qualified Contracts
using substantially equal periodic payments or immediate annuity payments as an
exception to the penalty tax on premature distributions,
32 PROSPECTUS
any additional withdrawal or other modification of the payment stream would
violate the requirement that payments must be substantially equal. Failure to
meet this requirement would mean that the income portion of each payment
received prior to the later of 5 years or the Contract Owner's attaining age
59 1/2 would be subject to a 10% penalty tax unless another exception to the
penalty tax applied. The tax for the year of the modification is increased by
the penalty tax that would have been imposed without the exception, plus
interest for the years in which the exception was used. You should consult a
competent tax advisor prior to taking a withdrawal.
TAX FREE EXCHANGES UNDER IRC SECTION 1035. A 1035 exchange is a tax-free
exchange of a non-qualified life insurance contract, endowment contract or
annuity contract for a new non-qualified annuity contract. The Contract Owner(s)
must be the same on the old and new contract. Basis from the old contract
carries over to the new contract so long as we receive that information from the
relinquishing company. If basis information is never received, we will assume
that all exchanged funds represent earnings and will allocate no cost basis to
them.
TAXATION OF OWNERSHIP CHANGES. If you transfer a non-Qualified Contract without
full and adequate consideration to a person other than your spouse (or to a
former spouse incident to a divorce), you will be taxed on the difference
between the Contract Value and the investment in the Contract at the time of
transfer. Except for certain Qualified Contracts, any amount you receive as a
loan under a Contract, and any assignment or pledge (or agreement to assign or
pledge) of the Contract Value is taxed as a withdrawal of such amount or portion
and may also incur the 10% penalty tax. Currently we do not allow assignments.
AGGREGATION OF ANNUITY CONTRACTS. The Code requires that all non-qualified
deferred annuity contracts issued by ALLSTATE NEW YORK (or its affiliates) to
the same Contract Owner during any calendar year be aggregated and treated as
one annuity contract for purposes of determining the taxable amount of a
distribution.
INCOME TAX WITHHOLDING
Generally, ALLSTATE NEW YORK is required to withhold federal income tax at a
rate of 10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold the required 10% of the taxable
amount. In certain states, if there is federal withholding, then state
withholding is also mandatory.
ALLSTATE NEW YORK is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. In certain states, if there is federal withholding,
then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
QUALIFIED CONTRACTS
The income on qualified plan and IRA investments is tax deferred, and the income
on variable annuities held by such plans does not receive any additional tax
deferral. You should review the annuity features, including all benefits and
expenses, prior to purchasing a variable annuity in a qualified plan or IRA.
Contracts may be used as investments with certain qualified plans such as:
.. Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
.. Roth IRAs under Section 408A of the Code;
.. Simplified Employee Pension Plans under Section 408(k) of the Code;
.. Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
.. Tax Sheltered Annuities under Section 403(b) of the Code;
.. Corporate and Self Employed Pension and Profit Sharing Plans under Sections
401 and 403; and
.. State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans under Section 457.
ALLSTATE NEW YORK reserves the right to limit the availability of the Contract
for use with any of the Qualified Plans listed above or to modify the Contract
to conform with tax requirements. The tax rules applicable to participants in
such qualified plans vary according to the type of plan and the terms and
conditions of the plan itself. Adverse tax consequences may result from certain
transactions such as excess contributions, premature distributions, and
distributions that do not conform to specified commencement and minimum
distribution rules.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM A QUALIFIED CONTRACT. If you make a partial
withdrawal under a Qualified Contract other than a Roth IRA, the portion of the
payment that bears the same ratio to the total payment that the investment in
the Contract (i.e., nondeductible IRA contributions, after tax contributions to
qualified plans) bears to the Contract Value, is excluded from your income. We
do not keep track of nondeductible contributions, and all tax reporting of
distributions from Qualified Contracts other than Roth IRAs will indicate that
the distribution is fully taxable.
"QUALIFIED DISTRIBUTIONS" from Roth IRAs are not included in gross income.
"Qualified distributions" are
33 PROSPECTUS
any distributions made more than five taxable years after the taxable year of
the first contribution to any Roth IRA and which are:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made to a beneficiary after the Contract Owner's death,
.. attributable to the Contract Owner being disabled, or
.. made for a first time home purchase (first time home purchases are subject
to a lifetime limit of $10,000).
"NONQUALIFIED DISTRIBUTIONS" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. All tax reporting of distributions from Roth
IRAs will indicate that the taxable amount is not determined.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, qualified plans require minimum
distributions upon reaching age 70 1/2. Failure to withdraw the required minimum
distribution will result in a 50% tax penalty on the shortfall not withdrawn
from the contract. Not all income plans offered under this annuity contract
satisfy the requirements for minimum distributions. Because these distributions
are required under the code and the method of calculation is complex, please see
a competent tax advisor.
THE DEATH BENEFIT AND QUALIFIED CONTRACTS. Pursuant to the Code and IRS
regulations, an IRA may not invest in life insurance contracts. However, an IRA
(e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE IRA) may provide a death
benefit that equals the greater of the purchase payments or the Contract Value.
The Contract offers a death benefit that in certain circumstances may exceed the
greater of the purchase payments or the Contract Value. It is possible that the
Death Benefit could be viewed as violating the prohibition on investment in life
insurance contracts, with the result that the Contract would not satisfy the
requirements of an IRA. We believe that these regulations do not prohibit all
forms of optional death benefits; however, at this time we are not allowing the
Enhanced Earnings Death Benefit Plus Option to be sold with an IRA.
It is also possible that the certain death benefits that offer enhanced earnings
could be characterized as an incidental death benefit. If the death benefit were
so characterized, this could result in current taxable income to a Contract
Owner. In addition, there are limitations on the amount of incidental death
benefits that may be provided under qualified plans, such as in connection with
a 403(b) plan.
ALLSTATE NEW YORK reserves the right to limit the availability of the Contract
for use with any of the qualified plans listed above.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM QUALIFIED CONTRACTS. A 10% penalty
tax applies to the taxable amount of any premature distribution from a Qualified
Contract. The penalty tax generally applies to any distribution made prior to
the date you attain age 59 1/2. However, no penalty tax is incurred on
distributions:
1. made on or after the date the Contract Owner attains age 59 1/2,
2. made as a result of the Contract Owner's death or total disability,
3. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Contract Beneficiary,
4. made pursuant to an IRS levy,
5. made for certain medical expenses,
6. made to pay for health insurance premiums while unemployed (only applies for
IRAs),
7. made for qualified higher education expenses (only applies for IRAs), and
8. made for a first time home purchase (up to a $10,000 lifetime limit and only
applies for IRAs).
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject to the premature distribution penalty,
will be subject to a 25% penalty tax.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON QUALIFIED CONTRACTS. With respect to
Qualified Contracts using substantially equal periodic payments as an exception
to the penalty tax on premature distributions, any additional withdrawal or
other modification of the payment stream would violate the requirement that
payments must be substantially equal. Failure to meet this requirement would
mean that the income portion of each payment received prior to the later of 5
years or the taxpayer's attaining age 59 1/2 would be subject to a 10% penalty
tax unless another exception to the penalty tax applied. The tax for the year of
the modification is increased by the penalty tax that would have been imposed
without the exception, plus interest for the years in which the exception was
used. You should consult a competent tax advisor prior to taking a withdrawal.
INCOME TAX WITHHOLDING ON QUALIFIED CONTRACTS. Generally, ALLSTATE NEW YORK is
required to withhold federal income tax at a rate of 10% from all non-annuitized
distributions that are not considered "ELIGIBLE ROLLOVER DISTRIBUTIONS." The
customer may elect out of withholding by completing and signing a withholding
election form. If no election is made, we will automatically withhold the
required 10% from the taxable amount. In certain states, if there is federal
withholding, then state withholding is also mandatory. ALLSTATE NEW YORK is
required to withhold federal income
34 PROSPECTUS
tax at a rate of 20% on all "ELIGIBLE ROLLOVER DISTRIBUTIONS" unless you elect
to make a "DIRECT ROLLOVER" of such amounts to an IRA or eligible retirement
plan. Eligible rollover distributions generally include all distributions from
Qualified Contracts, excluding IRAs, with the exception of:
1. required minimum distributions, or
2. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
3. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
4. hardship distributions.
For all annuitized distributions that are not subject to the 20% withholding
requirement, ALLSTATE NEW YORK is required to withhold federal income tax using
the wage withholding rates from all annuitized distributions. The customer may
elect out of withholding by completing and signing a withholding election form.
If no election is made, we will automatically withhold using married with three
exemptions as the default. In certain states, if there is federal withholding,
then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity (IRA). Individual Retirement Annuities are subject
to limitations on the amount that can be contributed and on the time when
distributions may commence. Certain distributions from other types of qualified
plans may be "ROLLED OVER" on a tax-deferred basis into an Individual Retirement
Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Section 408A of the Code permits eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth Individual Retirement Annuity. Roth Individual
Retirement Annuities are subject to limitations on the amount that can be
contributed and on the time when distributions may commence.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "ROLLED OVER" to a Roth Individual Retirement
Annuity. The income portion of a conversion or rollover distribution is taxable
currently, but is exempted from the 10% penalty tax on premature distributions.
SIMPLIFIED EMPLOYEE PENSION PLANS. Section 408(k) of the Code allows eligible
employers to establish simplified employee pension plans for their employees
using individual retirement annuities. Under these plans the employer may,
within specified limits, make deductible contributions on behalf of the
employees to the individual retirement annuities. Employers intending to use the
Contract in connection with such plans should seek competent tax advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE PLANS). Sections 408(p) and
401(k) of the Code allow eligible employers with 100 or fewer employees to
establish SIMPLE retirement plans for their employees. SIMPLE plans may be
structured as a SIMPLE retirement account using an IRA or as a Section 401(k)
qualified cash or deferred arrangement. In general, a SIMPLE plan consists of a
salary deferral program for eligible employees and matching or nonelective
contributions made by employers. Employers intending to use the Contract in
conjunction with SIMPLE plans should seek competent tax and legal advice.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAS
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
TAX SHELTERED ANNUITIES. Section 403(b) of the Tax Code provides tax-deferred
retirement savings plans for employees of certain non-profit and educational
organizations. Under Section 403(b), any contract used for a 403(b) plan must
provide that distributions attributable to salary reduction contributions made
after 12/31/88, and all earnings on salary reduction contributions, may be made
only on or after the date the employee:
.. attains age 59 1/2,
.. separates from service,
.. dies,
.. becomes disabled, or
.. incurs a hardship (earnings on salary reduction contributions may not be
distributed on account of hardship).
These limitations do not apply to withdrawals where ALLSTATE NEW YORK is
directed to transfer some or all of the Contract Value to another 403(b) plan.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS. Sections 401(a)
and 403(a) of the Code permit corporate employers to establish various types of
tax favored retirement plans for employees. Self-employed individuals may
establish tax favored retirement plans for themselves and their employees. Such
retirement plans (commonly referred to as "H.R.10" or "KEOGH") may permit the
purchase of annuity contracts.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION DEFERRED COMPENSATION
PLANS. Section 457 of the Code permits employees of state and local governments
and tax-exempt organizations to defer a portion of their compensation without
paying current taxes. The employees must be participants in an eligible deferred
compensation plan. In eligible governmental plans, all assets and income must be
held in a trust/ custodial account/annuity contract for the exclusive
35 PROSPECTUS
benefit of the participants and their beneficiaries. To the extent the Contracts
are used in connection with a non-governmental eligible plan, employees are
considered general creditors of the employer and the employer as owner of the
Contract has the sole right to the proceeds of the Contract. Under eligible 457
plans, contributions made for the benefit of the employees will not be
includible in the employees' gross income until distributed from the plan.
ANNUAL REPORTS AND OTHER DOCUMENTS
ALLSTATE NEW YORK's annual report on Form 10-K for the year ended December 31,
2001 is incorporated herein by reference, which means that it is legally a part
of this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0000948255. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http:// www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at: Customer Service, P.O. Box 94038, Palatine, Illinois
60094-4038 (telephone: 1-800-692-4682).
PERFORMANCE INFORMATION
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Yield refers to the income generated by an
investment in a Variable Sub-Account over a specified period. Total return
represents the change, over a specified period of time, in the value of an
investment in a Variable Sub-Account after reinvesting all income distributions.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect the deduction of insurance charges, the
contract maintenance charge, and withdrawal charge. Performance advertisements
also may include total return figures that reflect the deduction of insurance
charges, but not the contract maintenance or withdrawal charges. The deduction
of such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate, average, year-by-year, or other types of
total return figures.
Performance information for periods prior to the inception date of the Variable
Sub-Accounts will be based on the historical performance of the corresponding
Portfolios for the periods beginning with the inception dates of the Portfolios
and adjusted to reflect current Contract expenses. You should not interpret
these figures to reflect actual historical performance of the Variable Account.
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our Variable Sub-Accounts
with: (a) certain unmanaged market indices, including but not limited to the Dow
Jones Industrial Average, the Standard & Poor's 500, and the Shearson Lehman
Bond Index; and/or (b) other management investment companies with investment
objectives similar to the underlying funds being compared. In addition, our
advertisements may include the performance ranking assigned by various
publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
EXPERTS
The financial statements of Allstate New York as of December 31, 2001 and 2000
and for each of the three years in the period ended December 31, 2001 and
related financial statement schedules incorporated herein by reference from the
Annual Report on Form 10-K of Allstate New York and from the STatement of
Additional Information, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon the
authority as experts in accounting and auditing.
The financial statements of the Variable Accounts as of December 31, 2001 and
for each of the periods in the two years then ended incorporated herein by
reference from the Statement of Additional Information, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
36 PROSPECTUS
APPENDIX A MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the applicable Guarantee Period
for the week preceding the establishment of the Guarantee Period.
N = the number of whole and partial years from the date we receive the
withdrawal, transfer, or death benefit request, or from the Payout Start Date,
to the end of the Guarantee Period; and
J = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the receipt of the withdrawal, transfer, death benefit, or income
payment request. If a note for a maturity of length N is not available, a
weighted average will be used.
"Treasury Rate" means the U.S. Treasury Note Constant Maturity Yield as reported
in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment factor is determined from the following formula:
..9 x (I - J) x N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transefered (in excess of the Free Withdrawal
Amount) paid as a death benefit, or applied to an Income Plan, from a Guarantee
Period at any time other than during the 30 day period after such Guarentee
Period expires.
EXAMPLES OF MARKET VALUE ADJUSTMENT
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Guaranteed Interest Rate: 4.50%
5 Year Treasury Rate at the time the Guarantee Period is established: 4.50%
Full Surrender: End of Contract Year 3
NOTE: These examples assume that premium taxes are not applicable.
EXAMPLE 1 (ASSUME DECLINING INTEREST RATES)
Step 1. Calculate
Contract Value at End
of Contract Year 3: $10,000.00 X (1.045)/3/ = $11,411.66
Step 2. Calculate the
Preferred Withdrawal Amount: .15 X 10,000.000 = $1,500.00
Step 3. Calculate the I = 4.5%
Market Value Adjustment: J = 4.2%
N = 730 days
------------ = 2
365 days
Market Value Adjustment Factor: .9 X (I - J) X N
= .9 X (.045 - .042) X (730/365) = .0054
Market Value Adjustment = Market Value Adjustment
Factor x Amount Subject to Market Value Adjustment:
= .0054 X ($11,411.66 - $1,500.00) = $53.32
Step 4. Calculate the
Withdrawal Charge: = .05 X (10,000.00 - 1,500.00 + 53.52) = $427.68
Step 5. Calculate the amount
received by a Contract Owner
as a result of full
withdrawal at the end of
Contract Year 3: 11,411.66 - 427.68 + 53.52 = $11,037.50
37 PROSPECTUS
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1. Calculate Contract
Value at End of Contract
Year 3: 10,000.00 X (1.045)/3/ = $11,411.66
Step 2. Calculate the
Preferred Withdrawal
Amount: .15 X 10,000.00 = $1,500.00
Step 3. Calculate the
Market Value Adjustment: I = 4.5%
J = 4.8%
N = 730 days
-------- = 2
365 days
Market Value Adjustment Factor: .9 X (I-J) X N
= .9 X (.045 - .048) X (730/365) = -.0054
Market Value Adjustment = Market Value Adjustment
Factor X Amount Subject to Market Value Adjustment:
-.0054 X (11,411.66 - 1,500.00) = -$53.52
Step 4. Calculate the
Withdrawal Charge: .05 X (10,000.00 - 1,500.00 - 53.52) = $422.32
Step 5. Calculate the
amount received by a
Contract Owner as a result
of full withdrawal at the
end of Contract Year 3: 11,411.66 - 422.32 - 53.52 = $10,935.82
38 PROSPECTUS
APPENDIX B
WITHDRAWAL ADJUSTMENT EXAMPLE
Issue Date: January 1, 2002
Initial Purchase Payment: $50,000
Death Benefit Amount
[Enlarge/Download Table]
Death Benefit
Contract Value
Contract Value Transaction After Greatest
Date Type of Occurence Before Occurrence Amount Occurence Anniversary Value Anniversary Value
------ ------------------ ----------------- ----------- ------------- ----------------- -----------------
1/1/01 Issue Date -- $50,000 $50,000 $50,000 $50,000
1/1/02 Contract
Anniversary $55,000 -- $55,000 $50,000 $55,000
7/1/02 Partial Withdrawal $60,000 $15,000 $45,000 $37,500 $41,250
Withdrawal adjustment equals the partial withdrawal amount divided by the
Contract Value immediately prior to the partial withdrawal multiplied by the
value of the applicable death benefit amount alternative immediately prior to
the partial withdrawal.
DEATH BENEFIT ANNIVERSARY VALUE DEATH BENEFIT
PARTIAL WITHDRAWAL AMOUNT (w) $15,000
Contract Value Immediately Prior to Partial Withdrawal (a) $60,000
Value of Applicable Death Benefit Amount Immediately
Prior to Partial Withdrawal (d) $50,000
Withdrawal Adjustment [(w)/(a)]x(d) $12,500
Adjusted Death Benefit $37,500
GREATEST ANNIVERSARY VALUE DEATH BENEFIT
PARTIAL WITHDRAWAL AMOUNT (w) $15,000
Contract Value Immediately Prior to Partial Withdrawal (a) $60,000
Value of Applicable Death Benefit Amount Immediately
Prior to Partial Withdrawal (d) $55,000
Withdrawal Adjustment [(w)/(a)]x(d) $13,750
Adjusted Death Benefit $41,250
Please remember that you are looking at a hypothetical example, and that your
investment performance may be greater or less than the figures shown.
39 PROSPECTUS
CUSTOM PORTFOLIO VARIABLE ANNUITY
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STREET ADDRESS: 2940 S. 84TH STREET, LINCOLN, NE 68506-4142 MAILING ADDRESS:
P.O. BOX 82656, LINCOLN, NE 68501-2656 TELEPHONE NUMBER: 1-800-692-4682
PROSPECTUS DATED APRIL 30, 2005
Allstate Life Insurance Company of New York ("ALLSTATE NEW YORK") is offering
the Custom Portfolio Variable Annuity, a group flexible premium deferred
variable annuity contract ("CONTRACT"). This prospectus contains information
about the Contract that you should know before investing. Please keep it for
future reference.
The Contract currently offers 29 investment alternatives ("INVESTMENT
ALTERNATIVES"). The investment alternatives include 3 fixed account options
("FIXED ACCOUNT") and 26 variable sub-accounts ("VARIABLE SUB-ACCOUNTS") of the
Allstate Life of New York Separate Account A ("VARIABLE ACCOUNT"). Each Variable
Sub-Account invests exclusively in shares of one of the following underlying
fund portfolios ("PORTFOLIOS"):
AIM VARIABLE INSURANCE FUNDS DREYFUS STOCK INDEX FUND
FIDELITY(R) VARIABLE INSURANCE PRODUCTS DREYFUS VARIABLE INVESTMENT FUND
(VIF)
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST WELLS FARGO VARIABLE TRUST FUNDS
OPPENHEIMER VARIABLE ACCOUNT FUNDS DELAWARE VIP TRUST
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH
FUND, INC.
WE (Allstate New York) have filed a Statement of Additional Information, dated
April 30, 2005, with the Securities and Exchange Commission ("SEC"). It contains
more information about the Contract and is incorporated herein by reference,
which means it is legally a part of this prospectus. Its table of contents
appears on page 40 of this prospectus. For a free copy, please write or call us
at the address or telephone number above, or go to the SEC's Web site (http://
www.sec.gov). You can find other information and documents about us, including
documents that are legally part of this prospectus, at the SEC's Web site.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR HAS
IT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A FEDERAL CRIME.
THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT
IMPORTANT HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS
OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE CONTRACTS ARE NOT
NOTICES DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY SUCH INSTITUTIONS
OR ANY FEDERAL REGULATORY AGENCY. INVESTMENT IN THE CONTRACTS
INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
THE CONTRACTS ARE ONLY AVAILABLE IN NEW YORK.
1 PROSPECTUS
TABLE OF CONTENTS
PAGE
----
OVERVIEW
Important Terms 3
The Contract at a Glance 4
How the Contract Works 6
Expense Table 7
Financial Information 9
CONTRACT FEATURES
The Contract 9
Purchases 10
Contract Value 11
Investment Alternatives 11
The Variable Sub-Accounts 11
The Fixed Account 13
Transfers 17
Expenses 19
Access To Your Money 20
Income Payments 21
PAGE
----
Death Benefits 23
OTHER INFORMATION
More Information: 26
Allstate New York 26
The Variable Account 26
The Portfolios 27
The Contract 27
Non-Qualified Annuities Held Within a Qualified Plan 28
Legal Matters 28
Taxes 29
Annual Reports and Other Documents 35
APPENDIX A-ACCUMULATION UNIT VALUE 34
APPENDIX B-MARKET VALUE ADJUSTMENT 37
APPENDIX C-WITHDRAWAL ADJUSTMENT EXAMPLE 39
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS 40
2 PROSPECTUS
IMPORTANT TERMS
This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
PAGE
----
Accumulation Phase 6
Accumulation Unit 11
Accumulation Unit Value 11
Allstate New York ("We" or "Us") 1
Anniversary Values 23
Annuitant 9
Automatic Additions Program 10
Automatic Portfolio Rebalancing Program 18
Beneficiary 9
Cancellation Period 11
Contract* 9
Contract Anniversary 5
Contract Owner ("You") 9
Contract Value 5
Contract Year 5
Death Benefit Anniversary 24
Dollar Cost Averaging Program 18
Due Proof of Death 24
Fixed Account 13
PAGE
----
Guarantee Periods 14
Income Payments 21
Investment Alternatives 11
Issue Date 6
Market Value Adjustment 16
Payout Phase 6
Payout Start Date 21
Portfolios 27
Preferred Withdrawal Amount 20
Tax Qualified Contracts 32
Right to Cancel 11
SEC 1
Settlement Value 24
Systematic Withdrawal Program 21
Treasury Rate 16
Valuation Dates 11
Variable Account 26
Variable Sub-Account 11
* The Allstate Custom Portfolio Variable Annuity is a group contract and your
ownership is represented by certificates. References to "Contract" in this
prospectus include certificates, unless the context requires otherwise.
3 PROSPECTUS
THE CONTRACT AT A GLANCE
The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
FLEXIBLE PAYMENTS You can purchase a Contract with as little as
$3,000 ($2,000 for a "QUALIFIED CONTRACT" which
is a Contract issued with a qualified
endorsement). You can add to your Contract as
often and as much as you like, but each payment
must be at least $100. For allocations to the
Fixed Account the minimum payment must be at
least $500. You must maintain a minimum account
size of $1,000.
--------------------------------------------------------------------------------
RIGHT TO CANCEL You may cancel your Contract within 10 days
after receipt (60 days if you are exchanging
another contract for the Contract described in
this prospectus) ("CANCELLATION PERIOD"). Upon
cancellation we will return your purchase
payments adjusted to the extent federal or
state law permits to reflect the investment
experience of any amounts allocated to the
Variable Account.
--------------------------------------------------------------------------------
EXPENSES You will bear the following expenses:
. Total Variable Account annual fees equal
to 1.25% of average daily net assets
. Annual contract maintenance charge of $30
(with certain exceptions)
. Withdrawal charges ranging from 0% to 7%
of payment withdrawn (with certain
exceptions)
. Transfer fee of $10 after 12th transfer in
any CONTRACT YEAR (fee currently waived)
. State premium tax (New York currently does
not impose one).
In addition, each Portfolio pays expenses that
you will bear indirectly if you invest in a
Variable Sub-Account.
-------------------------------------------------------------------------------
INVESTMENT The Contract offers 29 investment alternatives
ALTERNATIVES including:
. 3 Fixed Account Options (which credits
interest at rates we guarantee), and
. 26 Variable Sub-Accounts investing in
Portfolios offering professional money
management by:
. A I M Advisors, Inc.
. Fidelity Management & Research Company
. Templeton Investment Counsel, LLC
. OppenheimerFunds, Inc.
. The Dreyfus Corporation
. Wells Fargo Funds Management, LLC
. Delaware Management Company
To find out current rates being paid on the
Fixed Account, or to find out how the Variable
Sub-Accounts have performed, please call us at
1-800-692- 4682.
--------------------------------------------------------------------------------
SPECIAL SERVICES For your convenience, we offer these special
services:
. AUTOMATIC PORTFOLIO REBALANCING PROGRAM
. AUTOMATIC ADDITIONS PROGRAM
. DOLLAR COST AVERAGING PROGRAM
. SYSTEMATIC WITHDRAWAL PROGRAM
4 PROSPECTUS
--------------------------------------------------------------------------------
INCOME PAYMENTS You can choose fixed income payments, variable
income payments, or a combination of the two.
You can receive your income payments in one of
the following ways:
. life income with guaranteed payments
. a joint and survivor life income with
guaranteed payments
. guaranteed payments for a specified period
(5 to 30 years)
--------------------------------------------------------------------------------
DEATH BENEFITS If you die before the PAYOUT START DATE, we
will pay the death benefit described in the
Contract.
--------------------------------------------------------------------------------
TRANSFERS Before the Payout Start Date, you may transfer
your Contract value ("CONTRACT VALUE") among
the investment alternatives, with certain
restrictions. Transfers to the Fixed Account
must be at least $500.
We do not currently impose a fee upon
transfers. However, we reserve the right to
charge $10 per transfer after the 12th transfer
in each Contract Year, which we measure from
the date we issue your Contract or a Contract
anniversary ("CONTRACT ANNIVERSARY").
--------------------------------------------------------------------------------
WITHDRAWALS You may withdraw some or all of your Contract
Value at any time during the Accumulation
Phase. Full or partial withdrawals also are
available under limited circumstances on or
after the Payout Start Date. In general, you
must withdraw at least $50 at a time ($1,000
for withdrawals made during the Payout Phase).
Withdrawals taken during the Accumulation Phase
are generally considered to come from the
earnings in the Contract first. If the Contract
is tax-qualified, generally all withdrawals are
treated as distributions of earnings.
Withdrawals of earnings are taxed as ordinary
income and, if taken prior to age 59 1/2, may
be subject to an additional 10% federal tax
penalty. A withdrawal charge and MARKET VALUE
ADJUSTMENT also may apply.
--------------------------------------------------------------------------------
5 PROSPECTUS
HOW THE CONTRACT WORKS
The Contract basically works in two ways.
First, the Contract can help you (we assume you are the CONTRACT OWNER) save for
retirement because you can invest in up to 29 investment alternatives and
generally pay no federal income taxes on any earnings until you withdraw them.
You do this during what we call the "ACCUMULATION PHASE" of the Contract. The
Accumulation Phase begins on the date we issue your Contract (we call that date
the "ISSUE DATE") and continues until the Payout Start Date, which is the date
we apply your money to provide income payments. During the Accumulation Phase,
you may allocate your purchase payments to any combination of the Variable
Sub-Accounts and/or Fixed Account. If you invest in the Fixed Account, you will
earn a fixed rate of interest that we declare periodically. If you invest in any
of the Variable Sub-Accounts, your investment return will vary up or down
depending on the performance of the corresponding Portfolios.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/ or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page 22. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
[Enlarge/Download Table]
Issue Payout Start
Date Accumulation Phase Date Payout Phase
-------------------------------------------------------------------------------------------------->
You buy You save for retirement You elect to receive You can receive Or you can receive
a Contract income payments or income payments income payments
receive a lump sum for a set period for life
payment
As the Contract Owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract Owner, or if there is none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract Owner or, if none, to your
Beneficiary. See "Death Benefits."
Please call us at 1-800-692-4682 if you have any question about how the Contract
works.
6 PROSPECTUS
EXPENSE TABLE
The following tables show the fees and expenses that you will pay when buying,
owning, making withdrawals or surrendering the Contract. The first table
describes the fees and expenses that you will pay when you make a withdrawal,
surrender the Contract, or transfer Contract Value among the investment
alternatives. Premium taxes are not reflected in the tables because New York
currently does not impose premium taxes on annuities.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
[Enlarge/Download Table]
Number of Complete Years Since We Received the Purchase
Payment Being Withdrawn 0 1 2 3 4 5 6 7
-------------------------------------------------------------------------------------------------
Applicable Charge 7% 6% 5% 4% 3% 2% 1% 0%
-------------------------------------------------------------------------------------------------
Transfer Fee $10.00**
-------------------------------------------------------------------------------------------------
* Each Contract Year, you may withdraw up to 15% of purchase payments without
incurring a Withdrawal Charge or a Market Value Adjustment.
** Applies solely to the thirteenth and subsequent transfers within a Contract
Year excluding transfers due to dollar cost averaging or automatic
portfolio rebalancing. We are currently waiving the transfer fee.
The next tables describe the fees and expenses that you will pay periodically
during the time you own the Contract, not including Portfolio fees and expenses.
Annual Contract Maintenance Charge $30.00/(1)/
--------------------------------------------------------------------------------
(1) We will waive this charge in certain cases.
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF DAILY NET ASSET VALUE
DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT)
Mortality and Expense Risk Charge 1.15%
--------------------------------------------------------------------------------
Administrative Expense Charge 0.10%
--------------------------------------------------------------------------------
Total Variable Account Annual Expense 1.25%
--------------------------------------------------------------------------------
PORTFOLIO ANNUAL EXPENSES
(as a percentage of Portfolio average daily net assets)/(1)/
The next table shows the minimum and maximum total operating expenses charged by
the Portfolios that you may pay periodically during the time that you own the
Contract. Advisers and/or other service providers of certain Portfolios may have
agreed to waive their fees and/or reimburse Portfolio expenses in order to keep
the Portfolios' expenses below specified limits. The range of expenses shown in
this table does not show the effect of any such fee waiver or expense
reimbursement. More detail concerning each Portfolio's fees and expenses appears
in the prospectus for each Portfolio.
ANNUAL PORTFOLIO EXPENSES
Minimum Maximum
--------------------------------------------------------------------------------
Total Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio
assets, which may include
management fees, and
other expenses) 0.26% 1.14%
--------------------------------------------------------------------------------
(1) Expenses are shown as a percentage of Portfolio average daily net assets
(before any waiver or reimbursement) as of December 31, 2004.
7 PROSPECTUS
EXAMPLES
Example 1
This Example is intended to help you compare the cost of investing in the
Contracts with the cost of investing in other variable annuity contracts. These
costs include Contract owner transaction expenses, Contract fees, Variable
Account annual expenses, and Portfolio fees and expenses.
The example shows the dollar amount of expenses that you would bear directly or
indirectly if you:
.. invested $10,000 in the Contract for the time periods indicated,
.. earned a 5% annual return on your investment, and
.. surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
The first line of the example assumes that the maximum fees and expenses of any
of the Portfolios are charged. The second line of the example assumes that the
minimum fees and expenses of any of the Portfolios are charged. Your actual
expenses may be higher or lower than those shown below because of variations in
a Portfolio's expense ratio from year to year.
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------
Costs Based on
Maximum Annual
Portfolio Expenses $785 $1,181 $1,601 $3,015
-------------------------------------------------------------------------
Costs Based on
Minimum Annual
Portfolio Expenses $695 $ 909 $1,144 $2,088
-------------------------------------------------------------------------
EXAMPLE 2
This Example uses the same assumptions as Example 1 above, except that it
assumes you decided not to surrender your Contract, or you began receiving
income payments for a specified period of at least 120 months, at the end of
each time period.
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------
Costs Based on
Maximum Annual
Portfolio Expenses $275 $841 $1,431 $3,015
------------------------------------------------------------------------
Costs Based on
Minimum Annual
Portfolio Expenses $185 $569 $ 974 $2,088
------------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EXPENSES. YOUR RATE OF RETURN MAY BE HIGHER OR LOWER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES DO NOT ASSUME THAT ANY PORTFOLIO EXPENSE
WAIVERS OR REIMBURSEMENT ARRANGEMENTS ARE IN EFFECT FOR THE PERIODS PRESENTED.
THE EXAMPLES REFLECT THE FREE WITHDRAWAL AMOUNTS, IF APPLICABLE, AND THE
DEDUCTION OF THE ANNUAL CONTRACT MAINTANENCE CHARGE OF $30 EACH YEAR.
8 PROSPECTUS
FINANCIAL INFORMATION
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund.
Attached as Appendix A to this prospectus are tables showing the Accumulation
Unit Values for each Variable Sub-Account since the date the Contracts were
first offered. To obtain a fuller picture of each Variable Sub-Account's
finances, please refer to the Variable Account's financial statements contained
in the Statement of Additional Information. The financial statements of Allstate
New York also appear in the Statement of Additional Information.
THE CONTRACT
CONTRACT OWNER
The Custom Portfolio Variable Annuity is a contract between you, the Contract
Owner, and Allstate New York, a life insurance company. As the Contract Owner,
you may exercise all of the rights and privileges provided to you by the
Contract. That means it is up to you to select or change (to the extent
permitted):
.. the investment alternatives during the Accumulation and Payout Phases,
.. the amount and timing of your purchase payments and withdrawals,
.. the programs you want to use to invest or withdraw money,
.. the income payment plan you want to use to receive retirement income,
.. the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
.. the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner dies, and
.. any other rights that the Contract provides.
If you die prior to the Payout Start Date, the new Contract Owner will be the
surviving Owner. If there is no surviving Owner, the new Contract Owner will be
the Beneficiary(ies) as described in the Beneficiary provision. The new Contract
Owner may exercise the rights and privileges provided by the Contract, except
that if the new Contract Owner took ownership as the Beneficiary, the new
Contract Owner's rights will be subject to any restrictions previously placed
upon the Beneficiary.
The Contract cannot be jointly owned by both a non-living person and a living
person. If the Owner is a Grantor Trust, the Contract Owner will be considered a
non-living person for purposes of the Death of Owner and Death of Annuitant
provisions of your Contract. The maximum age of the oldest Contract Owner cannot
exceed 85 as of the date we receive the completed application. Changing
ownership of this Contract may cause adverse tax consequences and may not be
allowed under qualified plans. Please consult with a competent tax advisor prior
to making a request for a change of Contract Owner.
The Contract can also be purchased as an IRA or TSA (also known as a 403(b)).
The endorsements required to qualify these annuities under the Internal Revenue
Code of 1986, as amended, ("Code") may limit or modify your rights and
privileges under the Contract.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. The
maximum age of the oldest Annuitant cannot exceed 85 as of the date we receive
the completed application. If the Contract Owner is a living person you may
change the Annuitant prior to the Payout Start Date. In our discretion, we may
permit you to designate a joint Annuitant, who is a second person on whose life
income payments depend, on the Payout Start Date.
If the Annuitant dies prior to the Payout Start Date, the new Annuitant will be:
.. the youngest Contract Owner, if living, otherwise
.. the youngest Beneficiary.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract Owner subject to the Death of Owner provision if the
sole surviving Contract Owner dies before the Payout Start Date. See "Death
Benefits" on page 23. If the sole surviving Contract Owner dies after the Payout
Start Date, the Beneficiary will receive any guaranteed income payments
scheduled to continue.
You may name one or more primary and contingent Beneficiaries when you apply for
a Contract. The primary Beneficiary is the Beneficiary(ies) who is first
entitled to receive benefits under the Contract upon the death of the sole
surviving Contract Owner. The contingent Beneficiary is the Beneficiary(ies)
entitled to receive
9 PROSPECTUS
benefits under the Contract when all primary Beneficiaries predecease the sole
surviving Contract Owner.
You may restrict income payments to Beneficiaries by providing us a written
request. Once we accept the written request, the change or restriction will take
effect as of the date you signed the request. Any change is subject to any
payment we make or other action we take before we accept the change.
You may change or add Beneficiaries at any time by writing to us, unless you
have designated an irrevocable Beneficiary. We will provide a change of
Beneficiary form to be signed and filed with us. After we accept the form, the
change of Beneficiary will be effective as of the date you signed the form,
whether or not the Annuitant is living when we receive the notice. Each change
is subject to any payment made by us or any other action we take before we
accept the change. Accordingly, if you wish to change your Beneficiary, you
should deliver your written notice to us promptly.
If you do not name a Beneficiary or, if the named Beneficiary is no longer
living and there are no other surviving Beneficiaries, the new Beneficiary will
be:
.. your spouse or, if he or she is no longer alive,
.. your surviving children equally, or if you have no surviving children,
.. your estate.
If more than one Beneficiary survives you, we will divide the death benefit
among your Beneficiaries according to your most recent written instructions. If
you have not given us written instructions, we will pay the death benefit in
equal amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only an Allstate New York officer may approve a change in or waive any provision
of the Contract. Any change or waiver must be in writing. None of our agents has
the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law. If a provision of the Contract
is inconsistent with state law, we will follow state law.
ASSIGNMENT
No owner has a right to assign any interest in a Contract as collateral or
security for a loan. However, you may assign periodic income payments under the
Contract prior to the Payout Start Date. No Beneficiary may assign benefits
under the Contract until they are due. We will not be bound by any assignment
until the assignor signs it and files it with us. We are not responsible for the
validity of any assignment. Federal law prohibits or restricts the assignment of
benefits under many types of qualified plans and the terms of such plans may
themselves contain restrictions on assignments. An assignment may also result in
taxes and tax penalties. YOU SHOULD CONSULT WITH YOUR ATTORNEY BEFORE TRYING TO
ASSIGN YOUR CONTRACT.
PURCHASES
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $3,000 ($2,000 for a Qualified
Contract). All subsequent purchase payments must be $100 ($500 for an allocation
to the Fixed Account) or more. You may make purchase payments at any time prior
to the Payout Start Date. We reserve the right to limit the maximum amount of
purchase payments we will accept. We also reserve the right to reject any
application.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of at least $100 ($500 for allocation
to the Fixed Account) by automatically transferring amounts from your bank
account. Please consult with your representative for detailed information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by notifying us in writing. We reserve the right to limit the
availability of the investment alternatives.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice, in good order, of
the change.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our service center. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
service
10 PROSPECTUS
center located in Vernon Hills, Illinois (mailing address: 300 N. Milwaukee Ave,
Vernon Hills, Illinois 60061).
We are open for business each day Monday through Friday that the New York Stock
Exchange is open for business. We also refer to these days as "VALUATION DATES."
Our business day closes when the New York Stock Exchange closes, usually 4:00
p.m. Eastern Time (3:00 p.m. Central Time). If we receive your purchase payment
after 4:00 p.m. Eastern Time (3:00 p.m. Central Time) on any Valuation Date, we
will credit your purchase payment using the Accumulation Unit Values computed on
the next Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 10 day period after you receive the Contract (60 days if
you are exchanging another contract for the Contract described in this
prospectus). You may return it by delivering it or mailing it to us. If you
exercise this "RIGHT TO CANCEL," the Contract terminates and we will pay you the
full amount of your purchase payments allocated to the Fixed Account. Upon
cancellation, as permitted by federal or state law, we will return your purchase
payments allocated to the Variable Account after an adjustment to the extent
federal or state law permits to reflect investment gain or loss that occurred
from the date of allocation through the date of cancellation. If your Contract
is qualified under Code Section 408(b), we will refund the greater of any
purchase payment or the Contract Value.
CONTRACT VALUE
On the Issue Date, the Contract Value is equal to the initial purchase payment.
Your Contract Value at any other time during the Accumulation Phase is equal to
the sum of the value as of the most recent Valuation Date of your Accumulation
Units in the Variable Sub-Accounts you have selected, plus the value of your
investment in the Fixed Account.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
credit to your Contract, we divide (i) the amount of the purchase payment or
transfer you have allocated to a Variable Sub-Account by (ii) the Accumulation
Unit Value of that Variable Sub-Account next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Sub-Account when the Accumulation Unit Value for the
Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable
Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
.. changes in the share price of the Portfolio in which the Variable
Sub-Account invests, and
.. the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have
accrued since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account on
each Valuation Date.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE PORTFOLIOS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
You may allocate your purchase payments to up to 26 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectus for
the Portfolio. You should carefully review the Portfolio prospectuses before
allocating amounts to the Variable Sub-Accounts.
11 PROSPECTUS
PORTFOLIO: EACH PORTFOLIO SEEKS INVESTMENT ADVISER:
-------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS - SERIES I SHARES: (*)
-------------------------------------------------------------------------------
AIM V.I. Balanced Fund - As high a total return as
Series I /1/ possible, consistent with
preservation of capital
-------------------------------------------------------------------------------
AIM V.I. Capital Growth of capital
Appreciation Fund -
Series I
-------------------------------------------------------------------------------
AIM V.I. Government High level of current A I M ADVISORS, INC.
Securities Fund - Series income consistent with
I reasonable concern for
safety of principal
-------------------------------------------------------------------------------
AIM V.I. Growth Fund - Growth of capital
Series I
-------------------------------------------------------------------------------
AIM V.I. High Yield Fund High level of current
- Series I income
-------------------------------------------------------------------------------
AIM V.I. International Long-term growth of
Growth Fund - Series I capital
-------------------------------------------------------------------------------
AIM V.I. Premier Equity Long-term growth of
Fund - Series I capital with income as a
secondary objective
-------------------------------------------------------------------------------
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
-------------------------------------------------------------------------------
Fidelity VIP Long-term capital
Contrafund(R) Portfolio appreciation.
- Initial Class
-------------------------------------------------------------------------------
Fidelity VIP Reasonable income by
Equity-Income Portfolio investing primarily in
- Initial Class income-producing equity
securities. In
choosing these
securities, the
fund will also
consider the
potential for
capital
appreciation. The FIDELITY MANAGEMENT
fund's & goal RESEARCH COMPANY
is to achieve a
yield which
exceeds the
composite yield on
the securities
comprising the S&P
500.
-------------------------------------------------------------------------------
Fidelity VIP Growth To achieve capital
Portfolio - Initial appreciation.
Class
-------------------------------------------------------------------------------
Fidelity VIP Growth To provide capital growth
Opportunities Portfolio
- Initial Class
-------------------------------------------------------------------------------
Fidelity VIP Overseas Long-term growth of
Portfolio - Initial capital.
Class
-------------------------------------------------------------------------------
DELAWARE VIP TRUST
-------------------------------------------------------------------------------
Delaware VIP Small Cap Capital appreciation
Value Series - Standard DELAWARE MANAGEMENT
Class COMPANY
-------------------------------------------------------------------------------
Delaware VIP Trend Series Long-term capital
- Standard Class appreciation
-------------------------------------------------------------------------------
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.; DREYFUS STOCK INDEX FUND;
AND DREYFUS VARIABLE INVESTMENT FUND (VIF)
-------------------------------------------------------------------------------
The Dreyfus Socially Capital growth and,
Responsible Growth Fund, secondarily, current
Inc.: Initial Shares income
-------------------------------------------------------------------------------
Dreyfus Stock Index Fund, To match the total return
Inc.: Initial Shares of the Standard & Poor's THE DREYFUS CORPORATION
500 Composite Stock Price
Index
-------------------------------------------------------------------------------
Dreyfus VIF - Long-term capital growth
Appreciation Portfolio: consistent with the
Initial Shares /(2)/ preservation of capital.
Its secondary goal is
current income.
-------------------------------------------------------------------------------
Dreyfus VIF - Money A high level of current
Market Portfolio income as is consistent
with the preservation of
capital and the
maintenance of liquidity
-------------------------------------------------------------------------------
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
-------------------------------------------------------------------------------
FTVIP Templeton Global High total return
Asset Allocation Fund - TEMPLETON INVESTMENT
Class 2 COUNSEL, LLC
-------------------------------------------------------------------------------
FTVIP Templeton Foreign Long-term capital growth.
Securities Fund - Class
2
-------------------------------------------------------------------------------
12 PROSPECTUS
OPPENHEIMER VARIABLE ACCOUNT FUNDS
-------------------------------------------------------------------------------
Oppenheimer Aggressive Capital appreciation by
Growth Fund/VA investing in "growth
type" companies.
-------------------------------------------------------------------------------
Oppenheimer Main Street High total return (which
Fund/VA includes growth in the OPPENHEIMERFUNDS, INC.
value of its shares as
well as current income)
from equity and debt
securities.
-------------------------------------------------------------------------------
Oppenheimer Strategic A high level of current
Bond Fund/VA income principally
derived from interest on
debt securities.
-------------------------------------------------------------------------------
WELLS FARGO VARIABLE TRUST FUNDS
-------------------------------------------------------------------------------
Wells Fargo Advantage Long-term total return,
Asset Allocation Fund consistent with
/(3)/ reasonable risk
-------------------------------------------------------------------------------
Wells Fargo Advantage Long-term capital WELLS FARGO FUNDS
Equity Income Fund/(4)/ appreciation and MANAGEMENT, LLC
above-average dividend
income
-------------------------------------------------------------------------------
Wells Fargo Advantage Total return comprised of
Large Company Core Fund long-term capital
/(5)/ appreciation and current
income
-------------------------------------------------------------------------------
* The Portfolio's investment objective(s) may be changed by the Portfolio's
Board of Trustees without shareholder approval.
(1) Effective July 1, 2005, the AIM V.I. Balanced Fund- Series I will change
its name to AIM V.I Basic Balanced Fund-Series I. In addition, the
Portfolio's objective will change to long-term growth of capital and
current income.
(2) Sub-Advised by Fayez Sarofim & Co.
(3) Effective April 11, 2005 the Wells Fargo VT Asset Allocation Fund changed
its name toWells Fargo Advantage Asset Allocation Fund. The Portfolio's
objective has not changed.
(4) Effective April 11, 2005 the Wells Fargo VT Equity Income Fund changed its
name to Wells Fargo Advantage Equity Income Fund. The Portfolio's objective
has not changed.
(5) Effective April 11, 2005 the Wells Fargo VT Growth Fund changed its name to
Wells Fargo Advantage Large Company Core Fund. In addition, the Portfolio's
objective has changed.
AMOUNTS YOU ALLOCATE TO VARIABLE SUB-ACCOUNTS MAY GROW IN VALUE, DECLINE IN
VALUE, OR GROW LESS THAN YOU EXPECT, DEPENDING ON THE INVESTMENT PERFORMANCE OF
THE PORTFOLIOS IN WHICH THOSE VARIABLE SUB-ACCOUNTS INVEST. YOU BEAR THE
INVESTMENT RISK THAT THE PORTFOLIOS MIGHT NOT MEET THEIR INVESTMENT OBJECTIVES.
SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
VARIABLE INSURANCE PORTFOLIOS MIGHT NOT BE MANAGED BY THE SAME PORTFOLIO
MANAGERS WHO MANAGE RETAIL MUTUAL FUNDS WITH SIMILAR NAMES. THESE PORTFOLIOS ARE
LIKELY TO DIFFER FROM SIMILARLY NAMED RETAIL FUNDS IN ASSETS, CASH FLOW, AND TAX
MATTERS. ACCORDINGLY, THE HOLDINGS AND RESULTS OF A VARIABLE INSURANCE PORTFOLIO
CAN BE EXPECTED TO BE HIGHER OR LOWER THAN THE INVESTMENT RESULTS OF A SIMILARLY
NAMED RETAIL MUTUAL FUND.
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT
You may allocate all or a portion of your purchase payments to the Fixed Account
Options. We will credit a minimum annual interest rate of 3% to money you
allocate to any of the Fixed Account Options. Please consult with your
representative for current information. The Fixed Account supports our insurance
and annuity obligations. The Fixed Account consists of our general account
assets other than those in segregated asset accounts. We have sole discretion to
invest the assets of the Fixed Account, subject to applicable law. Any money you
allocate to a Fixed Account Option does not entitle you to share in the
investment experience of the Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION
SIX MONTH DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. Under this Option, you may
establish a Dollar Cost Averaging Program by allocating purchase payments to the
Six Month Dollar Cost Averaging Fixed Account Option ("Six Month DCA Fixed
Account Option"). We will credit interest to purchase payments you allocate to
this Option for six months at the current rate in effect at
13 PROSPECTUS
the time of allocation. We will credit interest daily at a rate that will
compound at the annual interest rate we guaranteed at the time of allocation.
We will follow your instructions in transferring amounts monthly from the Six
Month DCA Fixed Account Option.
You must transfer all of your money out of the Six Month DCA Fixed Account
Option to the Variable Sub-Accounts in six equal monthly installments. If you
discontinue the Dollar Cost Averaging Option before the end of the transfer
period, we will transfer the remaining balance in this Option to the Dreyfus VIF
Money Market Variable Sub-Account unless you request a different investment
alternative. No transfers are permitted into the Six Month DCA Fixed Account.
For each purchase payment allocated to this Option, your first monthly transfer
will occur at the end of the first month following such purchase payment. If we
do not receive an allocation from you within one month of the date of payment,
we will transfer the payment plus associated interest to the Dreyfus VIF Money
Market Variable Sub-Account in equal monthly installments. Transferring Account
Value to the Dreyfus Money Market Variable Sub-Account in this manner may not be
consistent with the theory of Dollar Cost Averaging described on page 18.
TWELVE MONTH DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. Under this Option, you
may establish a Dollar Cost Averaging Program by allocating purchase payments to
the Twelve Month Dollar Cost Averaging Fixed Account Option ("Twelve Month DCA
Fixed Account Option"). We will credit interest to purchase payments you
allocate to this Option for twelve months at the current rate in effect at the
time of allocation. We will credit interest daily at a rate that will compound
at the annual interest rate we guaranteed at the time of allocation.
We will follow your instructions in transferring amounts monthly from the Twelve
Month DCA Fixed Account Option.
You must transfer all of your money out of the Twelve Month DCA Fixed Account
Option to the Variable Sub-Accounts in twelve equal monthly installments. If you
discontinue the Dollar Cost Averaging Option before the end of the transfer
period, we will transfer the remaining balance in this Option to the Dreyfus VIF
Money Market Variable Sub-Account unless you request a different investment
alternative. No transfers are permitted into the Twelve Month DCA Fixed Account.
For each purchase payment allocated to this Option, your first monthly transfer
will occur at the end of the first month following such purchase payment. If we
do not receive an allocation from you within one month of the date of payment,
we will transfer the payment plus associated interest to the Dreyfus VIF Money
Market Variable Sub-Account in equal monthly installments. Transferring Account
Value to the Money Market Variable Sub-Account in this manner may not be
consistent with the theory of dollar cost averaging described on page 18.
At the end of the transfer period, any nominal amounts remaining in the Six
Month Dollar Cost Averaging Fixed Account or the Twelve Month Dollar Cost
Averaging Fixed Account will be allocated to the Dreyfus VIF Money Market
Variable Sub-Account.
Transfers out of the Dollar Cost Averaging Fixed Account Options do not count
towards the 12 transfers you can make without paying a transfer fee.
INVESTMENT RISK. We bear the investment risk for all amounts allocated to the
Six Month DCA Fixed Account Option and the Twelve Month DCA Fixed Account
Option. That is because we guarantee the current interest rates we credit to the
amounts you allocate to either of these Options, which will never be less than
the minimum guaranteed rate in the Contract. Currently, we determine, in our
sole discretion, the amount of interest credited in excess of the guaranteed
rate.
We may declare more than one interest rate for different monies based upon the
date of allocation to the Six Month DCA Fixed Account Option and the Twelve
Month DCA Fixed Account Option. For current interest rate information, please
contact your representative or our customer support unit at 1-800-692-4682.
GUARANTEE PERIODS
Under this option, each payment or transfer allocated to the Fixed Account earns
interest at a specified rate that we guarantee for a period of years we call a
Guarantee Period. Guarantee Periods may range from 1 to 10 years. We are
currently offering Guarantee Periods of 1, 3, 5, 7, and 10 years in length. In
the future we may offer Guarantee Periods of different lengths or stop offering
some Guarantee Periods. You select one or more Guarantee Periods for each
purchase payment or transfer. If you do not select the Guarantee Period for a
purchase payment or transfer, we will assign the shortest Guarantee Period
available under the Contract for such payment or transfer.
Each payment or transfer allocated to a Guarantee Period must be at least $500.
We reserve the right to limit the number of additional purchase payments that
you may allocate to the Fixed Account. Please consult with your representative
for more information.
INTEREST RATES. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We may declare different interest rates for
Guarantee Periods of the same length that begin at different times. We will not
change the interest rate that we credit to a particular allocation until the end
of the relevant Guarantee Period.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We
14 PROSPECTUS
will set those interest rates based on investment returns available at the time
of the determination. In addition, we may consider various other factors in
determining interest rates including regulatory and tax requirements, our sales
commission and administrative expenses, general economic trends, and competitive
factors. We determine the interest rates to be declared in our sole discretion.
We can neither predict nor guarantee what those rates will be in the future. For
current interest rate information, please contact your representative or
Allstate New York at 1-800-692-4682. The interest rate will never be less than
the minimum guaranteed amount stated in the Contract.
HOW WE CREDIT INTEREST. We will credit interest daily to each amount allocated
to a Guarantee Period at a rate that compounds to the effective annual interest
rate that we declared at the beginning of the applicable Guarantee Period.
The following example illustrates how a purchase payment allocated to the Fixed
Account would grow, given an assumed Guarantee Period and effective annual
interest rate:
Purchase Payment.................................................... $10,000
Guarantee Period.................................................... 5 years
Annual Interest Rate................................................ 4.50%
END OF CONTRACT YEAR
[Download Table]
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ------------
Beginning Contract
Value................ $10,000.00
X (1 +Annual Interest
Rate) X 1.045
----------
$10,450.00
Contract Value at end
of Contract Year..... $10,450.00
X (1 + Annual
Interest Rate) X 1.045
----------
$10,920.25
Contract Value at end
of Contract Year..... $10,920.25
X (1 + Annual
Interest Rate) X 1.045
----------
$11,411.66
Contract Value at end
of Contract Year..... $11,411.66
X (1 + Annual
Interest Rate) X 1.045
----------
$11,925.19
Contract Value at end
of Contract Year..... $11,925.19
X (1 + Annual
Interest Rate) X 1.045
----------
$12,461.82
TOTAL INTEREST CREDITED DURING GUARANTEE PERIOD = $2,461.82 ($12,461.82-$10,000)
This example assumes no withdrawals during the entire 5 year Guarantee Period.
If you were to make a withdrawal, you may be required to pay a Withdrawal
Charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. Withdrawals of earnings are taxed as ordinary
income and, if taken prior to age 59 1/2, may be subject to an additional 10%
federal tax penalty. The hypothetical interest rate is for illustrative purposes
only and is not intended to predict future interest rates to be declared under
the Contract. Actual interest rates declared for any given Guarantee Period may
be more or less than shown above but will never be less than the guaranteed
minimum rate stated in the Contract.
RENEWALS. At least 15 but not more than 45 days prior to the end of each
Guarantee Period, we will mail you a notice asking you what to do with your
money, including the accrued interest. During the 30-day period after the end of
the Guarantee Period, you may:
1) Take no action. We will automatically apply your money to a new Guarantee
Period of the shortest duration available. The new Guarantee Period will
begin on the day the previous Guarantee Period ends. The new interest rate
will be our then current declared rate for a Guarantee Period of that
length; or
2) Instruct us to apply your money to one or more new Guarantee Periods of
your choice. The new Guarantee Period(s) will begin on the day the previous
Guarantee Period ends. The new interest rate will be our then current
declared rate for those Guarantee Periods; or
3) Instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts. We will effect the transfer on the day we receive
your instructions. We will not adjust the amount transferred to include a
Market Value Adjustment. We will pay interest from the day the Guarantee
Period expired until the date of the transfer. The interest will be the
rate for the shortest Guarantee Period then being offered; or
4) Withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not
15 PROSPECTUS
adjust the amount withdrawn to include a Market Value Adjustment. You may
also be required to pay premium taxes and withholding (if applicable). The
amount withdrawn will be deemed to have been withdrawn on the day the
previous Guarantee Period ends. Unless you specify otherwise, amounts not
withdrawn will be applied to a new Guarantee Period of the shortest
duration available. The new Guarantee Period will begin on the day the
previous Guarantee Period ends. Withdrawal of earnings are taxed as
ordinary income, and, if taken prior to age 59 1/2, may be subject to an
additional tax penalty
Under our automatic laddering program ("Automatic Laddering Program"), you may
choose, in advance, to use Guarantee Periods of the same length for all
renewals. You can select the Automatic Laddering Program at any time during the
Accumulation Phase, including on the Issue Date. We will apply renewals to
Guarantee Periods of the selected length until you direct us in writing to stop.
We may stop offering the Automatic Laddering Program at any time. For additional
information on the Automatic Laddering Program, please call our customer service
center at 1-800-692-4682.
MARKET VALUE ADJUSTMENT. All withdrawals in excess of the PREFERRED WITHDRAWAL
AMOUNT, and transfers from a Guarantee Period, other than those taken during the
30 day period after such Guarantee Period expires, are subject to a Market Value
Adjustment. A Market Value Adjustment also applies when you apply amounts
currently invested in a Guarantee Period to an Income Plan (unless paid or
applied during the 30 day period after such Guarantee Period expires). A
positive Market Value Adjustment will apply to amounts currently invested in a
Guarantee Period that are paid out as death benefits. We will not apply a Market
Value Adjustment to a transfer you make as part of a Dollar Cost Averaging
Program. We also will not apply a Market Value Adjustment to a withdrawal you
make:
.. within the Preferred Withdrawal Amount as described on page 19, or
.. to satisfy the IRS minimum distribution rules for the Contract.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time it is
removed from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the Treasury Rate for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the time remaining in the
Guarantee Period when you remove your money. "TREASURY RATE" means the U.S.
Treasury Note Constant Maturity Yield as reported in Federal Reserve Board
Statistical Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal of your
Contract Value to an amount that is less than the purchase payment plus interest
at the minimum guaranteed interest rate under the Contract.
Generally, if the Treasury Rate at the time you allocate money to a Guarantee
Period is higher than the applicable current Treasury Rate for a period equal to
the time remaining in the Guarantee Period, then the Market Value Adjustment
will result in a higher amount payable to you or transferred. Conversely, if the
Treasury Rate at the time you allocate money to a Guarantee Period is lower than
the applicable Treasury Rate for a period equal to the time remaining in the
Guarantee Period, then the Market Value Adjustment will result in a lower amount
payable to you or transferred.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5 year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 2 year Treasury Rate is 4.20%, then the Market
Value Adjustment will be positive, which will result in an increase in the
amount payable to you. Conversely, if the current 2 year Treasury Rate is 4.80%,
then the Market Value Adjustment will be negative, which will result in a
decrease in the amount payable to you.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
16 PROSPECTUS
INVESTMENT ALTERNATIVES: TRANSFERS
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. The minimum amount that you may transfer into a
Guarantee Period is $500. You may request transfers in writing on a form that we
provided or by telephone according to the procedure described below. We
currently do not assess, but reserve the right to assess, a $10 charge on each
transfer in excess of 12 per Contract Year. We treat transfers to or from more
than one Portfolio on the same day as one transfer. Transfers you make as part
of a Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program do
not count against the 12 free transfers per Contract Year.
We will process transfer requests that we receive before 4:00 p.m. Eastern Time
(3:00 p.m. Central Time) on any Valuation Date using the Accumulation Unit
Values for that Date. We will process requests completed after 4:00 p.m. Eastern
Time (3:00 p.m. Central Time) on any Valuation Date using the Accumulation Unit
Values for the next Valuation Date. The Contract permits us to defer transfers
from the Fixed Account for up to 6 months from the date we receive your request.
If we decide to postpone transfers from the Fixed Account for 10 days or more,
we will pay interest as required by applicable law. Any interest would be
payable from the date we receive the transfer request to the date we make the
transfer.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment. If any transfer reduces your value in such
Guarantee Period to less than $500, we will treat the request as a transfer of
the entire value in such Guarantee Period.
We reserve the right to waive any transfer fees and restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
to change the relative weighting of the Variable Sub-Accounts on which your
variable income payments will be based. In addition, you will have a limited
ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive fixed income payments
into variable income payments.
You may not make any transfers for the first 6 months after the Payout Start
Date. Thereafter, you may make transfers among the Variable Sub-Accounts or make
transfers from the Variable Sub-Accounts to increase the proportion of your
income payments consisting of fixed income payments. Your transfers must be at
least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-692-4682, if you first send
us a completed authorization form. The cut off time for telephone transfer
requests is 4:00 p.m. Eastern Time (3:00 p.m. Central Time). In the event that
the New York Stock Exchange closes early, i.e., before 4:00 p.m. Eastern Time
(3:00 p.m. Central Time), or in the event that the Exchange closes early for a
period of time but then reopens for trading on the same day, we will process
telephone transfer requests as of the close of the Exchange on that particular
day. We will not accept telephone requests received at any telephone number
other than the number that appears in this paragraph or received after the close
of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privilege, as well as
any other electronic or automated means we previously approved, at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
MARKET TIMING & EXCESSIVE TRADING
The Contracts are intended for long-term investment. Market timing and excessive
trading can potentially dilute the value of Variable Sub-Accounts and can
disrupt management of a Portfolio and raise its expenses, which can impair
Portfolio performance and adversely affect your Contract Value. Our policy is
not to accept knowingly any money intended for the purpose of market timing or
excessive trading. Accordingly, you should not invest in the Contract if your
purpose is to engage in market timing or excessive trading, and you should
refrain from such practices if you currently own a Contract.
We seek to detect market timing or excessive trading activity by reviewing
trading activities. Portfolios also may report suspected market-timing or
excessive trading activity to us. If, in our judgment, we determine that the
transfers are part of a market timing strategy or are otherwise harmful to the
underlying Portfolio, we will impose the trading limitations as described below
under "Trading Limitations." Because there is no universally accepted definition
of what constitutes market timing or
17 PROSPECTUS
excessive trading, we will use our reasonable judgment based on all of the
circumstances.
While we seek to deter market timing and excessive trading in Variable
Sub-Accounts, because our procedures involve the exercise of reasonable
judgment, we may not identify or prevent some market timing or excessive
trading. Moreover, imposition of trading limitations is triggered by the
detection of market timing or excessive trading activity, and the trading
limitations are not applied prior to detection of such trading activity.
Therefore, our policies and procedures do not prevent such trading activity
before it is detected. As a result, some investors may be able to engage in
market timing and excessive trading, while others are prohibited, and the
portfolio may experience the adverse effects of market timing and excessive
trading described above.
TRADING LIMITATIONS
We reserve the right to limit transfers among the investment alternatives in any
Contract year, or to refuse any transfer request, if:
.. we believe, in our sole discretion, that certain trading practices, such as
excessive trading, by, or on behalf of, one or more Contract Owners, or a
specific transfer request or group of transfer requests, may have a
detrimental effect on the Accumulation Unit Values of any Variable
Sub-Account or on the share prices of the corresponding Portfolio or
otherwise would be to the disadvantage of other Contract Owners; or
.. we are informed by one or more of the Portfolios that they intend to
restrict the purchase, exchange, or redemption of Portfolio shares because
of excessive trading or because they believe that a specific transfer or
group of transfers would have a detrimental effect on the prices of
Portfolio shares.
In making the determination that trading activity constitutes market timing or
excessive trading, we will consider, among other things:
.. the total dollar amount being transferred, both in the aggregate and in the
transfer request;
.. the number of transfers you make over a period of time and/or the period of
time between transfers (note: one set of transfers to and from a Variable
Sub-Account in a short period of time can constitute market timing);
.. whether your transfers follow a pattern that appears designed to take
advantage of short term market fluctuations, particularly within certain
Variable Sub-Account underlying Portfolios that we have identified as being
susceptible to market timing activities;
.. whether the manager of the underlying Portfolio has indicated that the
transfers interfere with Portfolio management or otherwise adversely impact
the Portfolio; and
.. the investment objectives and/or size of the Variable Sub-Account
underlying Portfolio.
We seek to apply these trading limitations uniformly. However, because these
determinations involve the exercise of discretion, it is possible that we may
not detect some market timing or excessive trading activity. As a result, it is
possible that some investors may be able to engage in market timing or excessive
trading activity, while others are prohibited, and the Portfolio may experience
the adverse effects of market timing and excessive trading described above.
If we determine that a Contract Owner has engaged in market timing or excessive
trading activity, we will restrict that Contract Owner from making future
additions or transfers into the impacted Variable Sub-Account(s). If we
determine that a Contract Owner has engaged in a pattern of market timing or
excessive trading activity involving multiple Variable Sub-Accounts, we will
also require that all future transfer requests be submitted through regular U.S.
mail thereby refusing to accept transfer requests via telephone, facsimile,
Internet, or overnight delivery.
In our sole discretion, we may revise our Trading Limitations at any time as
necessary to better deter or minimize market timing and excessive trading or to
comply with regulatory requirements.
DOLLAR COST AVERAGING PROGRAM
Through the Dollar Cost Averaging Program, you may automatically transfer a set
amount every month during the Accumulation Phase from any Variable Sub-Account,
the Six Month Dollar Cost Averaging Fixed Account, or the Twelve Month Dollar
Cost Averaging Fixed Account, to any other Variable Sub-Account. You may not use
dollar cost averaging to transfer amounts to the Fixed Account.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfers count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
The theory of dollar cost averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market.
Call or write us for instructions on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Variable Sub-Account may cause a shift in the percentage you
allocated to each Variable Sub-Account. If you select our Automatic Portfolio
Rebalancing Program, we will
18 PROSPECTUS
automatically rebalance the Contract Value in each Variable Sub-Account and
return it to the desired percentage allocations. Money you allocate to the Fixed
Account will not be included in the rebalancing.
We will rebalance your account each quarter according to your instructions. We
will transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone. The new allocation will be effective
with the first rebalancing that occurs after we receive your request. We are not
responsible for rebalancing that occurs prior to receipt of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Sub-Accounts. You want 40% to be in the AIM V.I. Balanced - Series I Sub-Account
Variable Sub-Account and 60% to be in the Fidelity VIP Growth - Initial Class
Sub-Account Variable Sub-Account. Over the next 2 months the bond market does
very well while the stock market performs poorly. At the end of the first
quarter, the AIM V.I. Balanced - Series I Sub-Account Variable Sub-Account now
represents 50% of your holdings because of its increase in value. If you choose
to have your holdings rebalanced quarterly, on the first day of the next quarter
we would sell some of your units in the AIM V.I. Balanced - Series I Sub-Account
Variable Sub-Account and use the money to buy more units in the Fidelity VIP
Growth - Initial Class Sub-Account Variable Sub-Account so that the percentage
allocations would again be 40% and 60% respectively.
The Automatic Portfolio Rebalancing Program is available only during the
Accumulation Phase. The transfers made under the Program do not count towards
the 12 transfers you can make without paying a transfer fee, and are not subject
to a transfer fee.
Portfolio rebalancing is consistent with maintaining your allocation of
investments among market segments, although it is accomplished by reducing your
Contract Value allocated to the better performing segments.
You may not use the Dollar Cost Averaging and automatic Portfolio Rebalancing
programs at the same time.
EXPENSES
As a Contract Owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$30 contract maintenance charge from your Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. We also will deduct a
full contract maintenance charge if you withdraw your entire Contract Value,
unless your Contract qualifies for a waiver, described below. During the Payout
Phase, we will deduct the charge proportionately from each income payment.
The charge is for the cost of maintaining each Contract and the Variable
Account. Maintenance costs include expenses we incur in billing and collecting
purchase payments; keeping records; processing death claims, cash withdrawals,
and policy changes; proxy statements; calculating Accumulation Unit Values and
income payments; and issuing reports to Contract Owners and regulatory agencies.
We cannot increase the charge. We will waive this charge if:
.. total purchase payments equal $50,000 or more, or
.. all of your money is allocated to the Fixed Account on a Contract
Anniversary.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.15%
of the average daily net assets you have invested in the Variable Sub-Accounts.
The mortality and expense risk charge is for all the insurance benefits
available with your Contract (including our guarantee of annuity rates and the
death benefits), for certain expenses of the Contract, and for assuming the risk
(expense risk) that the current charges will not be sufficient in the future to
cover the cost of administering the Contract. If the charges under the Contract
are not sufficient, then we will bear the loss.
We guarantee the mortality and expense risk charge and we cannot increase it. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE We deduct an administrative expense charge daily
at an annual rate of 0.10% of the average daily net assets you have invested in
the Variable Sub-Accounts. We intend this charge to cover actual administrative
expenses that exceed the revenues from the contract maintenance charge. There is
no necessary relationship between the amount of administrative charge imposed on
a given Contract and the amount of expenses that may be attributed to that
Contract. We assess this charge each day during the Accumulation Phase and the
Payout Phase. We guarantee that we will not raise this charge.
19 PROSPECTUS
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or Automatic Portfolio
Rebalancing Program.
WITHDRAWAL CHARGE We may assess a Withdrawal Charge of up to 7% of the purchase
payment(s) you withdraw in excess of the Preferred Withdrawal Amount, adjusted
by a Market Value Adjustment. The charge declines by 1% annually to 0% after 7
complete years from the day we receive the purchase payment being withdrawn.
Beginning on January 1, 2004, if you make a withdrawal before the Payout Start
Date, we will apply the Withdrawal Charge percentage in effect on the date of
the withdrawal, or the Withdrawal Charge percentage in effect on the following
day, whichever is lower. A schedule showing how the Withdrawal Charge declines
appears on page 7. During each Contract Year, you can withdraw up to 15% of
purchase payments without paying the Withdrawal Charge. Unused portions of this
15% "PREFERRED WITHDRAWAL AMOUNT" are not carried forward to future Contract
Years.
We determine the Withdrawal Charge by:
.. multiplying the percentage corresponding to the number of complete years
since we received the purchase payment being withdrawn, times
.. the part of each purchase payment withdrawal that is in excess of the
Preferred Withdrawal Amount, adjusted by a Market Value Adjustment.
We will deduct Withdrawal Charges, if applicable, from the amount paid. For
purposes of the Withdrawal Charge, we will treat withdrawals as coming from the
oldest purchase payments first. However, for federal income tax purposes, please
note that withdrawals are considered to have come first from earnings in the
Contract, which means you pay taxes on the earnings portion of your withdrawal.
We do not apply a Withdrawal Charge in the following situations:
.. on the Payout Start Date (a Withdrawal Charge may apply if you elect to
receive income payments for a specified period of less than 120 months);
.. the death of the Contract Owner or Annuitant (unless the Settlement Value
is used);
.. withdrawals taken to satisfy IRS required minimum distribution rules for
the Contract; or
.. withdrawals made after all purchase payments have been withdrawn.
We use the amounts obtained from the Withdrawal Charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the Withdrawal Charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals taken during the Accumulation Phase are generally considered to come
from the earnings in the Contract first. If the Contract is tax-qualified,
generally all withdrawals are treated as distributions of earnings. Withdrawals
of earnings are taxable as ordinary income and, if taken prior to age 59 1/2,
may be subject to an additional 10% federal tax penalty. Withdrawals may also be
subject to a Market Value Adjustment. You should consult your own tax counsel or
other tax advisers regarding any withdrawals.
PREMIUM TAXES
Currently, we do not make deductions for premium taxes under the Contract
because New York does not charge premium taxes on annuities. We may deduct taxes
that may be imposed in the future from purchase payments or the Contract Value
when the tax is incurred or at a later time.
DEDUCTION FOR VARIABLE ACCOUNT INCOME TAXES
We are not currently making a provision for such taxes. In the future, however,
we may make a provision for taxes if we determine, in our sole discretion, that
we will incur a tax as a result of the operation of the Variable Account. We
will deduct for any taxes we incur as a result of the operation of the Variable
Account, whether or not we previously made a provision for taxes and whether or
not it was sufficient. Our status under the Internal Revenue Code is briefly
described in the Taxes section.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectus for the Portfolios. For a summary of the maximum and
minimum amounts for these charges and expenses, see pages 7-8. We may receive
compensation from the investment advisers or administrators of the Portfolios
for administrative services we provide to the Portfolios.
20 PROSPECTUS
ACCESS TO YOUR MONEY
You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. Full or partial withdrawals also are available under limited
circumstances on or after the Payout Start Date. See "Income Plans" on page 22.
The amount payable upon withdrawal is the Contract Value next computed after we
receive the request for a withdrawal at our customer service center, adjusted by
any Market Value Adjustment, less any Withdrawal Charges, contract maintenance
charges, income tax withholding, and any premium taxes. We will pay withdrawals
from the Variable Account within 7 days of receipt of the request, subject to
postponement in certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account. To
complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
Withdrawal Charge and premium taxes.
Withdrawals taken during the Accumulation Phase are generally considered to come
from the earnings in the Contract first. If the Contract is tax-qualified,
generally all withdrawals are treated as distributions of earnings. Withdrawals
of earnings are taxed as ordinary income and, if taken prior to age 59 1/2, may
be subject to an additional 10% federal tax penalty.
You have the opportunity to name the investment alternative(s) from which you
are taking the withdrawal. If none is specified, we will deduct your withdrawal
pro-rata from the investment alternatives according to the value of your
investments therein.
In general, you must withdraw at least $50 at a time. You also may withdraw a
lesser amount if you are withdrawing your entire interest in a Variable Sub-
Account.
If you request a total withdrawal, you must return your Contract to us.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account for up to
6 months or a shorter period if required by law. If we delay payment or transfer
for 10 business days or more, we will pay interest as required by law. Any
interest would be payable from the date we receive the withdrawal request to the
date we make the payment or transfer.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. At our
discretion, systematic withdrawals may not be offered in conjunction with the
Dollar Cost Averaging Program or the Automatic Portfolio Rebalancing Program.
Depending on fluctuations in the net asset value of the Variable Sub-Accounts
and the value of the Fixed Account, systematic withdrawals may reduce or even
exhaust the Contract Value. Please consult your tax advisor before taking any
withdrawal.
We will make systematic withdrawal payments to you or your designated payee. We
may modify or suspend the Systematic Withdrawal Program and charge a processing
fee for the service. If we modify or suspend the Systematic Withdrawal Program,
existing systematic withdrawal payments will not be affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce the amount in any
Guarantee Period to less than $500, we will treat it as a request to withdraw
the entire amount invested in such Guarantee Period. If your request for a
partial withdrawal would reduce your Contract Value to less than $1,000, we may
treat it as a request to withdraw your entire Contract Value. Your Contract will
terminate if you withdraw all of your Contract Value. We will, however, ask you
to confirm your withdrawal request before terminating your Contract. Before
terminating any Contract whose value has been reduced by withdrawals to less
than $1,000, we will inform you in writing of our intention to terminate your
Contract and give you at least 30 days in which to make an additional purchase
payment to restore your Contract's value to the contractual minimum of $1,000.
If we terminate your Contract, we will distribute to you its Contract Value,
adjusted by any applicable Market Value Adjustment, less withdrawal and other
charges and applicable taxes.
INCOME PAYMENTS
PAYOUT START DATE
The Payout Start Date is the day that we apply your money to an Income Plan. The
Payout Start Date must be no later than the day the Annuitant reaches age 90, or
the 10th Contract Anniversary, if later. You may change the Payout Start Date at
any time by notifying us in
21 PROSPECTUS
writing of the change at least 30 days before the scheduled Payout Start Date.
Absent a change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An "Income Plan" is a series of payments on a scheduled basis to you or to
another person designated by you. You may choose and change your choice of
Income Plan until 30 days before the Payout Start Date. If you do not select an
Income Plan, we will make income payments in accordance with Income Plan 1 with
guaranteed payments for 10 years if you have designated only one annuitant or
Income Plan 2 with guaranteed payments for 10 years if you have designated a
joint Annuitant. After the Payout Start Date, you may not make withdrawals
(except as described below) or change your choice of Income Plan.
Three Income Plans are available under the Contract. Each is available to
provide:
.. fixed income payments;
.. variable income payments; or
.. a combination of the two.
A portion of each payment will be considered taxable and the remaining portion
will be a non-taxable return of your investment in the Contract, which is also
called the "basis". Once the investment in the Contract is depleted, all
remaining payments will be fully taxable. If the Contract is tax-qualified,
generally, all payments will be fully taxable. Taxable payments taken prior to
age 59 1/2, may be subject to an additional 10% federal tax penalty.
The three Income Plans are:
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract. The number of months guaranteed may be 0 months, or range from
60 to 360 months.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as required by
the Contract. The number of months guaranteed may be 0 months, or range from 60
to 360 months.
INCOME PLAN 3 - GUARANTEED PAYMENT FOR A SPECIFIED PERIOD (5 YEARS TO 30 YEARS).
Under this plan, we make periodic income payments for the period you have
chosen. These payments do not depend on the Annuitant's life. Income payments
for less than 120 months may be subject to a withdrawal charge. We will deduct
the mortality and expense risk charge from the Variable Sub-Account assets that
support variable income payments even though we may not bear any mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant is alive before
we make each payment.
Please note that under such Income Plans, if you elect to take no minimum
guaranteed payments, it is possible that the payee could receive only 1 income
payment if the Annuitant and any joint Annuitant both die before the second
income payment, or only 2 income payments if they die before the third income
payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or part of the Variable Account portion of
the income payments at any time and receive a lump sum equal to the present
value of the remaining variable income payments associated with the amount
withdrawn. To determine the present value of any remaining variable income
payments being withdrawn, we use a discount rate equal to the assumed annual
investment rate that we use to compute such variable income payments. The
minimum amount you may withdraw under this feature is $1,000. A withdrawal
charge may apply. You will also have a limited ability to make transfers from
the Variable Account portion of the income payments to increase the proportion
of your income payments consisting of fixed income payments. You may not,
however, convert any portion of your right to receive fixed income payments into
variable income payments. We deduct applicable premium taxes, if any, from the
Contract Value at the Payout Start Date. New York does not currently impose a
premium tax.
We may make other Income Plans available. You may obtain information about them
by writing or calling us.
You must apply at least the Contract Value in the Fixed Account on the Payout
Start Date to fixed income payments. If you wish to apply any portion of your
Fixed
22 PROSPECTUS
Account balance to provide variable income payments, you should plan ahead and
transfer that amount to the Variable Sub-Accounts prior to the Payout Start
Date. If you do not tell us how to allocate your Contract Value among fixed and
variable income payments, we will apply your Contract Value in the Variable
Account to variable income payments and your Contract Value in the Fixed Account
to fixed income payments.
We will apply your Contract Value, adjusted by a Market Value Adjustment, less
applicable taxes to your Income Plan on the Payout Start Date. If the Contract
Value is less than $2,000 or not enough to provide an initial payment of at
least $20, and state law permits, we may:
.. terminate the Contract and pay you the Contract Value, adjusted by any
Market Value Adjustment and less any applicable taxes, in a lump sum
instead of the periodic payments you have chosen, or
.. reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, if any, the
age and sex of the Annuitant, and the Income Plan you choose. We guarantee that
the payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Portfolio and (b) the Annuitant could live longer or shorter than we
expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate. Please refer to the
Statement of Additional Information for more detailed information as to how we
determine variable income payments.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from the Fixed Account for the
duration of the Income Plan. We calculate the fixed income payments by:
1. adjusting the portion of the Contract Value in the Fixed Account on the
Payout Start Date by any applicable Market Value Adjustment;
2. deducting any applicable premium tax; and
3. applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as
we are offering at that time.
We may defer making fixed income payments for a period of up to 6 months or such
shorter time as state law may require. If we defer payments for 10 business days
or more, we will pay interest as required by law from the date we receive the
withdrawal request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
law. In certain employment-related situations, employers are required by
applicable law to use the same income payment tables for men and women.
Accordingly, if the Contract is to be used in connection with an
employment-related retirement or benefit plan, and we do not offer unisex
annuity tables in your state, you should consult with legal counsel as to
whether the purchase of a Contract is appropriate. For qualified plans, where it
is appropriate, we may use income payment tables that do not distinguish on the
basis of sex.
DEATH BENEFITS
We will pay the death proceeds prior to the Payout Start Date on:
(a) the death of any Contract Owner, or
(b) the death of the Annuitant, if the Contract is owned by a non-living
person.
We will pay the death proceeds to the new Contract Owner as determined
immediately after the death. The new Contract Owner would be a surviving
Contract Owner or, if none, the Beneficiary(ies). In the case of a Contract
owned by a non-living owner, upon the death of the Annuitant, we will pay the
death proceeds to the current Contract Owner.
We will determine the value of the death proceeds as of the end of the Valuation
Date on which we receive a complete request for settlement of the death
proceeds. If we receive a request after 3 p.m. Central Time on a Valuation Date,
we will process the request as of the end of the following Valuation Date.
23 PROSPECTUS
A complete request for settlement of the death proceeds must include DUE PROOF
OF DEATH. We will accept the following documentation as "Due Proof of Death:"
.. a certified copy of the death certificate,
.. a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
.. any other proof acceptable to us.
DEATH PROCEEDS
If we receive a complete request for settlement of the death proceeds within 180
days of the date of the death of any Contract Owner, or the death of the
Annuitant, if the Contract is owned by a non-living owner, the death proceeds
are equal to the Death Benefit described below. Otherwise, the death proceeds
are equal to the greater of the Contract Value or the Settlement Value.
We reserve the right to extend, on a non-discriminatory basis, the 180-day
period in which the death proceeds will equal the Death Benefit as described
below. This right applies only to the amount payable as death proceeds and in no
way restricts when a claim may be filed.
If we do not receive a complete request for settlement of the death proceeds
within 180 days of the date of death, the death proceeds are equal to the
greater of:
1) the Contract Value as of the date we determine the death proceeds; or
2) the Settlement Value as of the date we determine the death proceeds.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the Death Benefit is equal to the greatest of:
1. the Contract Value as of the date we receive a complete request for
settlement of the death proceeds, or
2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value) on the date we determine the death proceeds, or
3. the Contract Value on the Death Benefit Anniversary immediately preceding
the date we receive a complete request for settlement of the death
proceeds, adjusted by any purchase payments, withdrawal adjustment as
defined below, and charges made since that Death Benefit Anniversary. A
"DEATH BENEFIT ANNIVERSARY" is every seventh Contract Anniversary beginning
with the Issue Date. For example, the Issue Date, 7th and 14th Contract
Anniversaries are the first three Death Benefit Anniversaries, or
4. the greatest of the Anniversary Values as of the date we receive a complete
request for settlement of the death proceeds. An "ANNIVERSARY VALUE" is
equal to the Contract Value on a Contract Anniversary, increased by
purchase payments made since that Anniversary and reduced by the amount of
any withdrawal adjustment, as defined below, since that anniversary.
Anniversary Values will be calculated for each Contract Anniversary prior
to the earlier of:
(i) the date we determine the death benefit, or
(ii) the deceased's 75th birthday or 5 years after the Issue Date, if later.
The withdrawal adjustment is equal to (a) divided by (b), with the result
multiplied by (c), where:
(a) = the withdrawal amount,
(b) = the Contract Value immediately prior to the withdrawal, and
(c) = the value of the applicable death benefit alternative immediately prior
to the withdrawal.
See Appendix C for an example representative of how the withdrawal adjustment
applies.
In calculating the Settlement Value, the amount in each individual Guarantee
Period may be subject to a Market Value Adjustment. A Market Value Adjustment
will apply to amounts in a Guarantee Period, unless we calculate the Settlement
Value during the 30-day period after the expiration of the Guarantee Period.
Also, the Settlement Value will reflect the deduction of any applicable
Withdrawal Charges, contract maintenance charges, and premium taxes. Contract
maintenance charges will be pro rated for the part of the Contract Year elapsed
as of the date we determine the Settlement Value, unless your Contract qualifies
for a waiver of such charges described in the "Contract Maintenance Charge"
section above.
DEATH BENEFIT PAYMENTS
DEATH OF OWNER
1. If your spouse is the sole surviving Contract Owner, or is the sole
Beneficiary:
a. Your spouse may elect to receive the Death Proceeds in a lump sum; or
b. Your spouse may elect to receive the Death Proceeds paid out under one of
the Income Plans (described in "Income Payments" above), subject to the
following conditions:
The Payout Start Date must be within one year of your date of death. Income
payments must be payable:
i. over the life of your spouse; or
ii. for a guaranteed number of payments from 5 to 50 years but not to exceed
the life expectancy of your spouse; or
iii. over the life of your spouse with a guaranteed number of payments from 5 to
30 years but not to exceed the life expectancy of your spouse.
c. If your spouse does not elect one of these options, the Contract will
continue in the Accumulation
24 PROSPECTUS
Phase as if the death had not occurred. If the Contract is continued in the
Accumulation Phase, the following conditions apply: The Contract Value of the
continued Contract will be the Death Proceeds. Unless otherwise instructed by
the continuing spouse, the excess, if any, of the Death Proceeds over the
Contract Value will be allocated to the Sub-Accounts of the Variable Account.
This excess will be allocated in proportion to your Contract Value in those
Variable Sub-Accounts as of the end of the Valuation Date on which we receive
the complete request for settlement of the Death Proceeds (the next Valuation
Date if we receive the request after 3:00 p.m. Central Time), except that any
portion of this excess attributable to the Fixed Account Options will be
allocated to the money market Variable Sub-Account. Within 30 days of the date
the Contract is continued, your surviving spouse may choose one of the following
transfer alternatives without incurring a transfer fee:
i. transfer all or a portion of the excess among the Variable Sub-accounts;
ii. transfer all or a portion of the excess into the Fixed Account and begin a
new Guarantee Period; or
iii. transfer all or a portion of the excess into a combination of Variable
Sub-Accounts and the Fixed Account.
Any such transfer does not count as one of the free transfers allowed each
Contract Year and is subject to any minimum allocation amount specified in the
Contract.
The surviving spouse may make a single withdrawal of any amount within one year
of the date of your death without incurring a Withdrawal Charge or Market Value
Adjustment.
Prior to the Payout Start Date, the Death Proceeds of the continued Contract
will be described under "Death Benefit Amount."
Only one spousal continuation is allowed under the Contract.
2. If the new Contract Owner is not your spouse but is a living person or if
there are multiple living-person new Contract Owners:
a. The new Contract Owner may elect to receive the Death Proceeds in a lump
sum; or
b. The new Contract Owner may elect to receive the Death Proceeds paid out
under one of the Income Plans (described in "Income Payments" on page 21),
subject to the following conditions:
The Payout Start Date must be within one year of your date of death. Income
payments must be payable:
i. over the life of the new Contract Owner; or
ii. for a guaranteed number of payments from 5 to 50 years but not to exceed
the life expectancy of the new Contract Owner; or
iii. over the life of the new Contract Owner with a guaranteed number of
payments from 5 to 30 years but not to exceed the life expectancy of the
new Contract Owner.
c. If the new Contract Owner does not elect one of the options above, then the
new Contract Owner must receive the Contract Value payable within 5 years
of your date of death. The Contract Value will equal the amount of the
Death Proceeds as determined as of the end of the Valuation Date on which
we receive a complete request for settlement of the Death Proceeds (the
next Valuation Date if we receive the request after 3:00 p.m. Central
Time). Unless otherwise instructed by the new Contract Owner, the excess,
if any, of the Death Proceeds over the Contract Value will be allocated to
the money market Variable Sub-Account. Henceforth, the new Contract Owner
may make transfers (as described in "Transfers During the Payout Phase" on
page 18) during this 5 year period. No additional purchase payments may be
added to the Contract under this election. Withdrawal Charges will be
waived for any withdrawals made during this 5 year period.
We reserve the right to offer additional options upon the death of the Contract
Owner.
If the new Contract Owner dies prior to the omplete liquidation of the Contract
Value, then the new Contract Owner's named Beneficiary(ies) will receive the
greater of the Settlement Value or the remaining Contract Value. This amount
must be liquidated as a lump sum within 5 years of the date of the original
Contract Owner's death.
3. If the new Contract Owner is a corporation or other type of non-living
person:
a. The new Contract Owner may elect to receive the Death Proceeds in a lump
sum; or
b. If the new Contract Owner does not elect the option above, then the new
Contract Owner must receive the Contract Value payable within 5 years of
your date of death. The Contract Value will equal the amount of the Death
Proceeds as determined as of the end of the Valuation Date on which we
receive a complete request for settlement of the Death Proceeds (the next
Valuation Date if we receive the request after 3:00 p.m. Central Time).
Unless otherwise instructed by the new Contract Owner, the excess, if any,
of the Death Proceeds over the Contract Value will be allocated to the
money market Variable Sub-Account. Henceforth, the new Contract Owner may
make transfers (as described in "Transfers During the Payout Phase" on page
18) during this 5 year period.
No additional purchase payments may be added to the Contract under this
election. Withdrawal charges will be waived during this 5 year period.
We reserve the right to make additional options available to the new Contract
Owner upon the death of the Contract Owner.
If any new Contract Owner is a non-living person, all new Contract Owners will
be considered to be non-living persons for the above purposes. Under any of
these options, all ownership rights, subject to any restrictions previously
placed upon the Beneficiary, are available to the new Contract Owner from the
date of your death to the date on which the Death Proceeds is paid.
DEATH OF ANNUITANT
If the Annuitant who is not also the Contract Owner dies prior to the Payout
Start Date, the following apply:
1. If the Contract Owner is a living person, then the Contract will continue
with a new Annuitant, who will be:
a. the youngest Contract Owner; otherwise
b. the youngest Beneficiary. You may change the Annuitant before the Payout
Start Date.
2. If the Contract Owner is a non-living person:
a. The Contract Owner may elect to receive the Death Proceeds in a lump sum;
or
b. If the Contract Owner does not elect the option above, then the Contract
Owner must receive the Contract Value payable within 5 years of the
Annuitant's date of death. The Contract Value will equal the amount of the
Death Proceeds as determined as of the end of the Valuation Date on which
we receive a complete request for settlement of the Death Proceeds (the
next Valuation Date if we receive the request after 3:00 p.m. Central
Time). Unless otherwise instructed by the Contract Owner, the excess, if
any, of the Death Proceeds over the Contract Value will be allocated to the
money market Variable Sub-Account. Henceforth, the Contract Owner may make
transfers (as described in "Transfers During the Payout Phase" on page 18)
during this 5 year period.
No additional purchase payments may be added to the Contract under this
election. Withdrawal Charges will be waived during this 5 year period.
25 PROSPECTUS
We reserve the right to make additional options available to the Contract Owner
upon the death of the Annuitant.
Under any of these options, all ownership rights are available to the non-living
Contract Owner from the date of the Annuitant's death to the date on which the
Death Proceeds is paid.
MORE INFORMATION
ALLSTATE NEW YORK
Allstate New York is the issuer of the Contract. Allstate New York is a stock
life insurance company organized under the laws of the State of New York.
Allstate New York was incorporated in 1967 and was known as "Financial Life
Insurance Company" from 1967 to 1978. From 1978 to 1984, Allstate New York was
known as "PM Life Insurance Company." Since 1984 the company has been known as
"Allstate Life Insurance Company of New York."
Allstate New York is currently licensed to operate in New York. Our home office
is located 100 Motor Parkway, Hauppauge, New York 11788-5107. Our service center
is located in Vernon Hills, Illinois.
Allstate New York is a wholly owned subsidiary of Allstate Life Insurance
Company ("Allstate Life") , a stock life insurance company incorporated under
the laws of the State of Illinois. Allstate Life is a wholly owned subsidiary of
Allstate Insurance Company, a stock property-liability insurance company
incorporated under the laws of the State of Illinois. With the exception of the
directors qualifying shares, all of the outstanding capital stock of Allstate
Insurance Company is owned by The Allstate Corporation.
THE VARIABLE ACCOUNT
Allstate New York established the Allstate Life of New York Separate Account A
on December 15, 1995. We have registered the Variable Account with the SEC as a
unit investment trust. The SEC does not supervise the management of the Variable
Account or Allstate New York.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under New York law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
Allstate New York.
The Variable Account consists of multiple Variable Sub-Accounts, 26 of which are
available through the Contracts. Each Variable Sub-Account invests in a
corresponding Portfolio. We may add new Variable Sub-Accounts or eliminate one
or more of them, if we believe marketing, tax, or investment conditions so
warrant. We do not guarantee the investment performance of the Variable Account,
its Sub-Accounts or the Portfolios. We
26 PROSPECTUS
may use the Variable Account to fund our other annuity contracts. We will
account separately for each type of annuity contract funded by the Variable
Account.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract Owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date, the person receiving income
payments has the voting interest. The payee's number of votes will be determined
by dividing the reserve for such Contract allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Portfolio. The
votes decrease as income payments are made and as the reserves for the Contract
decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted on a pro-rata basis to reduce the votes eligible
to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer
available for investment by the Variable Account or if, in our judgment, further
investment in such shares is no longer desirable in view of the purposes of the
Contract, we may eliminate that Portfolio and substitute shares of another
eligible investment portfolio. Any substitution of securities will comply with
the requirements of the Investment Company Act of 1940. We also may add new
Variable Sub-Accounts that invest in additional portfolios. We will notify you
in advance of any changes.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to Variable
Accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance Variable Accounts and variable annuity Variable Accounts to invest in
the same Portfolio. The boards of directors of these Portfolios monitor for
possible conflicts among Variable Accounts buying shares of the Portfolios.
Conflicts could develop for a variety of reasons. For example, differences in
treatment under tax and other laws or the failure by a Variable Account to
comply with such laws could cause a conflict. To eliminate a conflict, a
Portfolio's board of directors may require a Variable Account to withdraw its
participation in a Portfolio. A Portfolio's net asset value could decrease if it
had to sell investment securities to pay redemption proceeds to a Variable
Account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. ALFS, Inc. ("ALFS"), located at 3100 Sanders Road, Northbrook,
Illinois 60062, serves as principal underwriter of the Contracts. ALFS is a
wholly owned subsidiary of Allstate Life Insurance Company. ALFS is a registered
broker-dealer under the Securities and Exchange Act of 1934, as amended
("Exchange Act"), and is a member of the NASD.
Contracts described in this prospectus are sold by registered representatives of
broker-dealers who are our licensed insurance agents, either individually or
through an incorporated insurance agency. Commissions paid to broker-dealers may
vary, but we estimate that the total commissions paid on all Contract sales to
broker-dealers will not exceed 8.5% of any purchase payments. These commissions
are intended to cover distribution expenses. From time to time, we may offer
additional sales incentives of up to 1% of purchase payments to broker-dealers
who maintain certain sales volume levels.
Allstate New York does not pay ALFS a commission for distribution of the
Contracts. The underwriting agreement with ALFS provides that we will reimburse
ALFS for any liability to Contract Owners arising out of services rendered or
Contracts issued.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
.. issuance of the Contracts;
.. maintenance of Contract Owner records;
.. Contract Owner services;
.. calculation of unit values;
.. maintenance of the Variable Account; and
27 PROSPECTUS
.. preparation of Contract Owner reports.
We will send you Contract statements and transaction confirmations at least
annually. The annual statement details values and specific Contract data for
each particular Contract. You should notify us promptly in writing of any
address change. You should read your statements and confirmations carefully and
verify their accuracy. You should contact us promptly if you have a question
about a periodic statement. We will investigate all complaints and make any
necessary adjustments retroactively, but you must notify us of a potential error
within a reasonable time after the date of the questioned statement. If you wait
too long, we will make the adjustment as of the date that we receive notice of
the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
NON-QUALIFIED ANNUITIES HELD WITHIN A QUALIFIED PLAN
If you use the Contract within an employer sponsored qualified retirement plan,
the plan may impose different or additional conditions or limitations on
withdrawals, waivers of withdrawal charges, death benefits, Payout Start Dates,
income payments, and other Contract features. In addition, adverse tax
consequences may result if qualified plan limits on distributions and other
conditions are not met. Please consult your qualified plan administrator for
more information. We no longer issue deferred annuities to employer sponsored
qualified retirement plans.
LEGAL MATTERS
All matters of New York law pertaining to the Contracts, including the validity
of the Contracts and Allstate New York's right to issue such Contracts under New
York insurance law, have been passed upon by Michael J. Velotta, General Counsel
of Allstate New York.
28 PROSPECTUS
TAXES
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. ALLSTATE
NEW YORK MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
Allstate New York is taxed as a life insurance company under Part I of
Subchapter L of the Code. Since the Variable Account is not an entity separate
from Allstate New York, and its operations form a part of Allstate New York, it
will not be taxed separately. Investment income and realized capital gains of
the Variable Account are automatically applied to increase reserves under the
Contract. Under existing federal income tax law, Allstate New York believes that
the Variable Account investment income and capital gains will not be taxed to
the extent that such income and gains are applied to increase the reserves under
the Contract. Accordingly, Allstate New York does not anticipate that it will
incur any federal income tax liability attributable to the Variable Account, and
therefore Allstate New York does not intend to make provisions for any such
taxes. If Allstate New York is taxed on investment income or capital gains of
the Variable Account, then Allstate New York may impose a charge against the
Variable Account in order to make provision for such taxes.
TAXATION OF VARIABLE ANNUITIES IN GENERAL
TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
.. the Contract Owner is a natural person,
.. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
.. Allstate New York is considered the owner of the Variable Account assets
for federal income tax purposes.
NON-NATURAL OWNERS. Non-natural owners are also referred to as Non Living Owners
in this prospectus. As a general rule, annuity contracts owned by non-natural
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. The income on such contracts
does not enjoy tax deferral and is taxed as ordinary income received or accrued
by the non-natural owner during the taxable year.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE. There are several exceptions to the
general rule that annuity contracts held by a non-natural owner are not treated
as annuity contracts for federal income tax purposes. Contracts will generally
be treated as held by a natural person if the nominal owner is a trust or other
entity which holds the contract as agent for a natural person. However, this
special exception will not apply in the case of an employer who is the nominal
owner of an annuity contract under a non-Qualified deferred compensation
arrangement for its employees. Other exceptions to the non-natural owner rule
are: (1) contracts acquired by an estate of a decedent by reason of the death of
the decedent; (2) certain qualified contracts; (3) contracts purchased by
employers upon the termination of certain qualified plans; (4) certain contracts
used in connection with structured settlement agreements; and (5) immediate
annuity contracts, purchased with a single premium, when the annuity starting
date is no later than a year from purchase of the annuity and substantially
equal periodic payments are made, not less frequently than annually, during the
annuity period.
GRANTOR TRUST OWNED ANNUITY. Contracts owned by a grantor trust are considered
owned by a non-natural owner. Grantor trust owned contracts receive tax deferral
as described in the Exceptions to the Non-Natural Owner Rule section. In
accordance with the Code, upon the death of the annuitant, the death benefit
must be paid. According to your Contract, the Death Benefit is paid to the
surviving Contract Owner. Since the trust will be the surviving Contract Owner
in all cases, the Death Benefit will be payable to the trust notwithstanding any
beneficiary designation on the annuity contract. A trust, including a grantor
trust, has two options for receiving any death benefits: 1) a lump sum payment;
or 2) payment deferred up to five years from date of death.
DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract owner during the taxable
year. Although Allstate New York does not have control over the Portfolios or
their investments, we expect the Portfolios to meet the diversification
requirements.
OWNERSHIP TREATMENT. The IRS has stated that a contract owner will be considered
the owner of separate account assets if he possesses incidents of ownership in
those assets, such as the ability to exercise investment control over the
assets. At the time the diversification regulations were issued, the Treasury
Department
29 PROSPECTUS
announced that the regulations
do not provide guidance concerning circumstances in which investor control of
the separate account investments may cause a Contract owner to be treated as the
owner of the separate account. The Treasury Department also stated that future
guidance would be issued regarding the extent that owners could direct
sub-account investments without being treated as owners of the underlying assets
of the separate account.
Your rights under the Contract are different than those described by the IRS in
private and published rulings in which it found that Contract owners were not
owners of separate account assets. For example, if your contract offers more
than twenty (20) investment alternatives you have the choice to allocate
premiums and contract values among a broader selection of investment
alternatives than described in such rulings. You may be able to transfer among
investment alternatives more frequently than in such rulings. These differences
could result in you being treated as the owner of the Variable Account. If this
occurs, income and gain from the Variable Account assets would be includible in
your gross income. Allstate New York does not know what standards will be set
forth in any regulations or rulings which the Treasury Department may issue. It
is possible that future standards announced by the Treasury Department could
adversely affect the tax treatment of your Contract. We reserve the right to
modify the Contract as necessary to attempt to prevent you from being considered
the federal tax owner of the assets of the Variable Account. However, we make no
guarantee that such modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a Non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a full withdrawal
under a Non-Qualified Contract, the amount received will be taxable only to the
extent it exceeds the investment in the Contract.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a Non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If any variable payment is less than the excludable amount you should
contact a competent tax advisor to determine how to report any unrecovered
investment. The federal tax treatment of annuity payments is unclear in some
respects. As a result, if the IRS should provide further guidance, it is
possible that the amount we calculate and report to the IRS as taxable could be
different. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is possible that a greater or lesser portion of such a payment could be
taxable than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
.. if any Contract Owner dies on or after the Payout Start Date but before the
entire interest in the Contract has been distributed, the remaining portion
of such interest must be distributed at least as rapidly as under the
method of distribution being used as of the date of the Contract Owner's
death;
.. if any Contract Owner dies prior to the Payout Start Date, the entire
interest in the Contract will be distributed within 5 years after the date
of the Contract Owner's death. These requirements are satisfied if any
portion of the Contract Owner's interest that is payable to (or for the
benefit of) a designated Beneficiary is distributed over the life of such
Beneficiary (or over a period not extending beyond the life expectancy of
the Beneficiary) and the distributions begin within 1 year of the Contract
Owner's death. If the Contract Owner's designated Beneficiary is the
surviving spouse of the Contract Owner, the Contract may be continued with
the surviving spouse as the new Contract Owner;
.. if the Contract Owner is a non-natural person, then the Annuitant will be
treated as the Contract Owner for purposes of applying the distribution at
death rules. In addition, a change in the Annuitant on a Contract owned by
a non-natural person will be treated as the death of the Contract Owner.
TAXATION OF ANNUITY DEATH BENEFITS. Death Benefit amounts are included in income
as follows:
.. if distributed in a lump sum, the amounts are taxed in the same manner as a
total withdrawal, or
.. if distributed under an Income Plan, the amounts are taxed in the same
manner as annuity payments.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any
30 PROSPECTUS
premature distribution from a non-Qualified Contract. The penalty tax generally
applies to any distribution made prior to the date you attain age 59 1/2.
However, no penalty tax is incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or becoming totally
disabled,
.. made in substantially equal periodic payments over the Contract Owner's
life or life expectancy, or over the joint lives or joint life expectancies
of the Contract Owner and the Beneficiary,
.. made under an immediate annuity, or
.. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS. With respect to non-Qualified Contracts
using substantially equal periodic payments or immediate annuity payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the Contract Owner's attaining age 59 1/2 would be
subject to a 10% penalty tax unless another exception to the penalty tax
applied. The tax for the year of the modification is increased by the penalty
tax that would have been imposed without the exception, plus interest for the
years in which the exception was used. A material modification does not include
permitted changes described in published IRS rulings. You should consult a
competent tax advisor prior to creating or modifying a substantially equal
periodic payment stream.
TAX FREE EXCHANGES UNDER INTERNAL REVENUE CODE SECTION 1035. A 1035 exchange is
a tax-free exchange of a non-qualified life insurance contract, endowment
contract or annuity contract into a non-Qualified annuity contract. The contract
owner(s) must be the same on the old and new contract. Basis from the old
contract carries over to the new contract so long as we receive that information
from the relinquishing company. If basis information is never received, we will
assume that all exchanged funds represent earnings and will allocate no cost
basis to them.
PARTIAL EXCHANGES. The IRS has issued a ruling that permits partial exchanges of
annuity contracts. Under this ruling, if you take a withdrawal from a receiving
or relinquishing annuity contract within 24 months of the partial exchange, then
special aggregation rules apply for purposes of determining the taxable amount
of a distribution. The IRS has issued limited guidance on how to aggregate and
report these distributions. The IRS is expected to provide further guidance; as
a result, it is possible that the amount we calculate and report to the IRS as
taxable could be different. Your Contract may not permit partial exchanges.
TAXATION OF OWNERSHIP CHANGES. If you transfer a non-Qualified Contract without
full and adequate consideration to a person other than your spouse (or to a
former spouse incident to a divorce), you will be taxed on the difference
between the Contract Value and the investment in the Contract at the time of
transfer. Any assignment or pledge (or agreement to assign or pledge) of the
Contract Value is taxed as a withdrawal of such amount or portion and may also
incur the 10% penalty tax.
AGGREGATION OF ANNUITY CONTRACTS. The Code requires that all non-Qualified
deferred annuity contracts issued by Allstate New York (or its affiliates) to
the same Contract Owner during any calendar year be aggregated and treated as
one annuity contract for purposes of determining the taxable amount of a
distribution.
INCOME TAX WITHHOLDING
Generally, Allstate New York is required to withhold federal income tax at a
rate of 10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold the required 10% of the taxable
amount. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Allstate New York is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. If no U.S. taxpayer identification number is
provided, we will automatically withhold using single with zero exemptions as
the default. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Allstate New York as a withholding
agent must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien.
Withholding may be reduced or eliminated if covered by an income tax treaty
between the U.S. and the non-resident alien's country of residence if the payee
provides a U.S. taxpayer identification number on a fully completed Form W-8BEN.
A U.S. taxpayer identification number is a social security number or an
individual taxpayer identification number ("ITIN"). ITINs are issued by the IRS
to non-resident alien individuals who are not eligible to obtain a social
security number. The U.S. does not have a tax treaty with all
31 PROSPECTUS
countries nor do all tax treaties provide an exclusion or lower withholding rate
for annuities.
TAX QUALIFIED CONTRACTS
The income on tax sheltered annuity (TSA) and IRA investments is tax deferred,
and the income from annuities held by such plans does not receive any additional
tax deferral. You should review the annuity features, including all benefits and
expenses, prior to purchasing an annuity as a TSA or IRA. Tax Qualified
Contracts are contracts purchased as or in connection with:
.. Individual Retirement Annuities (IRAs) under Code Section 408(b);
.. Roth IRAs under Code Section 408A;
.. Simplified Employee Pension (SEP IRA) under Code Section 408(k);
.. Savings Incentive Match Plans for Employees (SIMPLE IRA) under Code Section
408(p);
.. Tax Sheltered Annuities under Code Section 403(b);
.. Corporate and Self Employed Pension and Profit Sharing Plans under Code
Section 401; and
.. State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans under Code Section 457.
Allstate New York reserves the right to limit the availability of the Contract
for use with any of the retirement plans listed above or to modify the Contract
to conform with tax requirements. If you use the Contract within an employer
sponsored qualified retirement plan, the plan may impose different or additional
conditions or limitations on withdrawals, waiver of charges, death benefits,
Payout Start Dates, income payments, and other Contract features. In addition,
adverse tax consequences may result if qualified plan limits on distributions
and other conditions are not met. Please consult your qualified plan
administrator for more information. Allstate New York no longer issues deferred
annuities to employer sponsored qualified retirement plans.
The tax rules applicable to participants with tax qualified annuities vary
according to the type of contract and the terms and conditions of the
endorsement. Adverse tax consequences may result from certain transactions such
as excess contributions, premature distributions, and, distributions that do not
conform to specified commencement and minimum distribution rules. Allstate New
York can issue an individual retirement annuity on a rollover or transfer of
proceeds from a decedent's IRA, TSA, or employer sponsored retirement plan under
which the decedent's surviving spouse is the beneficiary. Allstate New York does
not offer an individual retirement annuity that can accept a transfer of funds
for any other, non-spousal, beneficiary of a decedent's IRA, TSA, or employer
sponsored qualified retirement plan.
Please refer to your Endorsement for IRAs or 403(b) plans, if applicable, for
additional information on your death settlement options. In the case of certain
qualified plans, the terms of the Qualified Plan Endorsement and the plans may
govern the right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM AN INDIVIDUALLY OWNED TAX QUALIFIED CONTRACT. If
you make a partial withdrawal under a Tax Qualified Contract other than a Roth
IRA, the portion of the payment that bears the same ratio to the total payment
that the investment in the Contract (i.e., nondeductible IRA contributions)
bears to the Contract Value, is excluded from your income. We do not keep track
of nondeductible contributions, and generally all tax reporting of distributions
from Tax Qualified Contracts other than Roth IRAs will indicate that the
distribution is fully taxable.
"Qualified distributions" from Roth IRAs are not included in gross income.
"Qualified distributions" are any distributions made more than five taxable
years after the taxable year of the first contribution to any Roth IRA and which
are:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made to a beneficiary after the Contract Owner's death,
.. attributable to the Contract Owner being disabled, or
.. made for a first time home purchase (first time home purchases are subject
to a lifetime limit of $10,000).
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, Tax Qualified Contracts (excluding
Roth IRAs) require minimum distributions upon reaching age 70 1/2. Failure to
withdraw the required minimum distribution will result in a 50% tax penalty on
the shortfall not withdrawn from the Contract. Not all income plans offered
under the Contract satisfy the requirements for minimum distributions. Because
these distributions are required under the Code and the method of calculation is
complex, please see a competent tax advisor.
THE DEATH BENEFIT AND TAX QUALIFIED CONTRACTS. Pursuant to the Code and IRS
regulations, an IRA (e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE IRA)
may not invest in life insurance contracts. However, an IRA may provide a death
benefit that equals the greater of the purchase payments or the Contract Value.
The Contract offers a death benefit that in certain circumstances may exceed the
greater of the purchase payments or the Contract Value. We believe that the
Death Benefits offered by your Contract do not constitute life insurance under
these regulations.
32 PROSPECTUS
It is also possible that certain death benefits that offer enhanced earnings
could be characterized as an incidental death benefit. If the death benefit were
so characterized, this could result in current taxable income to a Contract
Owner. In addition, there are limitations on the amount of incidental death
benefits that may be provided under qualified plans, such as in connection with
a TSA or employer sponsored qualified retirement plan.
Allstate New York reserves the right to limit the availability of the Contract
for use with any of the qualified plans listed above.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM TAX QUALIFIED CONTRACTS. A 10%
penalty tax applies to the taxable amount of any premature distribution from a
Tax Qualified Contract. The penalty tax generally applies to any distribution
made prior to the date you attain age 59 1/2. However, no penalty tax is
incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or total disability,
.. made in substantially equal periodic payments over the Contract Owner's
life or life expectancy, or over the joint lives or joint life expectancies
of the Contract Owner and the Beneficiary,
.. made after separation from service after age 55 (does not apply to IRAs),
.. made pursuant to an IRS levy,
.. made for certain medical expenses,
.. made to pay for health insurance premiums while unemployed (applies only
for IRAs),
.. made for qualified higher education expenses (applies only for IRAs), and
.. made for a first time home purchase (up to a $10,000 lifetime limit and
applies only for IRAs).
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject to the premature distribution penalty,
will be subject to a 25% penalty tax.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON TAX QUALIFIED CONTRACTS. With respect
to Tax Qualified Contracts using substantially equal periodic payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the taxpayer's attaining age 59 1/2 would be subject to
a 10% penalty tax unless another exception to the penalty tax applied. The tax
for the year of the modification is increased by the penalty tax that would have
been imposed without the exception, plus interest for the years in which the
exception was used. A material modification does not include permitted changes
described in published IRS rulings. You should consult a competent tax advisor
prior to creating or modifying a substantially equal periodic payment stream.
INCOME TAX WITHHOLDING ON TAX QUALIFIED CONTRACTS. Generally, Allstate New York
is required to withhold federal income tax at a rate of 10% from all
non-annuitized distributions that are not considered "eligible rollover
distributions." The customer may elect out of withholding by completing and
signing a withholding election form. If no election is made, we will
automatically withhold the required 10% from the taxable amount. In certain
states, if there is federal withholding, then state withholding is also
mandatory. Allstate New York is required to withhold federal income tax at a
rate of 20% on all "eligible rollover distributions" unless you elect to make a
"direct rollover" of such amounts to an IRA or eligible retirement plan.
Eligible rollover distributions generally include all distributions from Tax
Qualified Contracts, including TSAs but excluding IRAs, with the exception of:
.. required minimum distributions, or,
.. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
.. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
.. hardship distributions.
For all annuitized distributions that are not subject to the 20% withholding
requirement, Allstate New York is required to withhold federal income tax using
the wage withholding rates. The customer may elect out of withholding by
completing and signing a withholding election form. If no election is made, we
will automatically withhold using married with three exemptions as the default.
If no U.S. taxpayer identification number is provided, we will automatically
withhold using single with zero exemptions as the default. In certain states, if
there is federal withholding, then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Allstate New York as a withholding
agent must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien or to
certain other 'foreign persons'. Withholding may be reduced or eliminated if
covered by an income tax treaty between the U.S. and the non-resident alien's
country of residence if the payee provides a U.S. taxpayer identification number
on a fully completed Form W-8BEN. A U.S. taxpayer
33 PROSPECTUS
identification number is a social security number or an individual taxpayer
identification number ("ITIN"). ITINs are issued by the IRS to non-resident
alien individuals who are not eligible to obtain a social security number. The
U.S. does not have a tax treaty with all countries nor do all tax treaties
provide an exclusion or lower withholding rate for annuities.
INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408(b) permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity (IRA). Individual Retirement Annuities are subject
to limitations on the amount that can be contributed and on the time when
distributions may commence. Certain distributions from other types of qualified
retirement plans may be "rolled over" on a tax-deferred basis into an Individual
Retirement Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408A permits eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth Individual Retirement Annuity. Roth Individual
Retirement Annuities are subject to limitations on the amount that can be
contributed and on the time when distributions may commence.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "rolled over" to a Roth Individual Retirement
Annuity. The income portion of a conversion or rollover distribution is taxable
currently, but is exempted from the 10% penalty tax on premature distributions.
ANNUITIES HELD BY INDIVIDUAL RETIREMENT ACCOUNTS (COMMONLY KNOWN AS CUSTODIAL
IRAS). Code Section 408 permits a custodian or trustee of an Individual
Retirement Account to purchase an annuity as an investment of the Individual
Retirement Account. If an annuity is purchased inside of an Individual
Retirement Account, then the Annuitant must be the same person as the beneficial
owner of the Individual Retirement Account.
Generally, the death benefit of an annuity held in an Individual Retirement
Account must be paid upon the death of the Annuitant. However, in most states,
the Contract permits the custodian or trustee of the Individual Retirement
Account to continue the Contract in the accumulation phase, with the Annuitant's
surviving spouse as the new Annuitant, if the following conditions are met:
1) The custodian or trustee of the Individual Retirement Account is the owner
of the annuity and has the right to the death proceeds otherwise payable
under the Contract;
2) The deceased Annuitant was the beneficial owner of the Individual
Retirement Account;
3) We receive a complete request for settlement for the death of the
Annuitant; and
4) The custodian or trustee of the Individual Retirement Account provides us
with a signed certification of the following:
(a) The Annuitant's surviving spouse is the sole beneficiary of the Individual
Retirement Account;
(b) The Annuitant's surviving spouse has elected to continue the Individual
Retirement Account as his or her own Individual Retirement Account; and
(c) The custodian or trustee of the Individual Retirement Account has continued
the Individual Retirement Account pursuant to the surviving spouse's
election.
SIMPLIFIED EMPLOYEE PENSION IRA. Code Section 408(k) allows eligible employers
to establish simplified employee pension plans for their employees using
individual retirement annuities. These employers may, within specified limits,
make deductible contributions on behalf of the employees to the individual
retirement annuities. Employers intending to use the Contract in connection with
such plans should seek competent tax advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE IRA). Code Section 408(p)
allows eligible employers with 100 or fewer employees to establish SIMPLE
retirement plans for their employees using individual retirement annuities. In
general, a SIMPLE IRA consists of a salary deferral program for eligible
employees and matching or nonelective contributions made by employers. Employers
intending to purchase the Contract as a SIMPLE IRA should seek competent tax and
legal advice.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAS
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
TAX SHELTERED ANNUITIES. Code Section 403(b) provides tax-deferred retirement
savings plans for employees of certain non-profit and educational organizations.
Under Section 403(b), any contract used for a 403(b) plan must provide that
distributions attributable to salary reduction contributions made after
12/31/88, and all earnings on salary reduction contributions, may be made only
on or after the date the employee:
.. attains age 59 1/2,
.. severs employment,
.. dies,
.. becomes disabled, or
.. incurs a hardship (earnings on salary reduction contributions may not be
distributed on account of hardship).
These limitations do not apply to withdrawals where Allstate New York is
directed to transfer some or all of the Contract Value to another 403(b) plan.
Generally, we do
34 PROSPECTUS
not accept funds in 403(b) contracts that are subject to the Employee Retirement
Income Security Act of 1974 (ERISA).
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS.
Section 401(a) of the Code permits corporate employers to establish various
types of tax favored retirement plans for employees. Self-employed individuals
may establish tax favored retirement plans for themselves and their employees
(commonly referred to as "H.R.10" or "Keogh"). Such retirement plans may permit
the purchase of annuity contracts. Allstate New York no longer issues annuity
contracts to employer sponsored qualified retirement plans.
There are two owner types for contracts intended to qualify under Section
401(a): a qualified plan fiduciary or an annuitant owner.
.. A qualified plan fiduciary exists when a qualified plan trust that is
intended to qualify under Section 401(a) of the Code is the owner. The
qualified plan trust must have its own tax identification number and a
named trustee acting as a fiduciary on behalf of the plan. The annuitant
should be the person for whose benefit the contract was purchased.
.. An annuitant owner exists when the tax identification number of the owner
and annuitant are the same, or the annuity contract is not owner by a
qualified plan trust. The annuitant should be the person for whose benefit
the contract was purchased.
If a qualified plan fiduciary is the owner of the contract, the qualified plan
must be the beneficiary so that death benefits from the annuity are distributed
in accordance with the terms of the qualified plan. Annuitant owned contracts
require that the beneficiary be the annuitant's spouse (if applicable), which is
consistent with the required IRS language for qualified plans under Section
401(a). A completed Annuitant Owned Qualified Plan Designation of Beneficiary
form is required in order to change the beneficiary of an annuitant owned
Qualified Plan contract.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION DEFERRED COMPENSATION
PLANS. Section 457 of the Code permits employees of state and local governments
and tax-exempt organizations to defer a portion of their compensation without
paying current taxes. The employees must be participants in an eligible deferred
compensation plan. In eligible governmental plans, all assets and income must be
held in a trust/ custodial account/annuity contract for the exclusive benefit of
the participants and their beneficiaries. To the extent the Contracts are used
in connection with a non-governmental eligible plan, employees are considered
general creditors of the employer and the employer as owner of the Contract has
the sole right to the proceeds of the Contract. Under eligible 457 plans,
contributions made for the benefit of the employees will not be includible in
the employees' gross income until distributed from the plan. Allstate New York
no longer issues annuity contracts to employer sponsored qualified retirement
plans. Contracts that have been previously sold to State and Local government
and Tax-Exempt organization Deferred Compensation Plans will be administered
consistent with the rules for contracts intended to qualify under Section
401(a).
ANNUAL REPORTS AND OTHER DOCUMENTS
Allstate New York's annual report on Form 10-K for the year ended December 31,
2004, is incorporated herein by reference, which means that it is legally a part
of this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0000839759. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http://www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at Customer Service, P.O. Box 82656, Lincoln, NE 68501-2656
(telephone: 1-800-692-4682).
35 PROSPECTUS
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED*
[Enlarge/Download Table]
For the period beginning January 1 and ending December 31, 2000 2001 2002 2003 2004
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. BALANCED - SERIES I SUB-ACCOUNT **
Accumulation Unit Value, Beginning of Period $10.000 $ 10.154 $ 8.881 $ 7.270 $ 8.354
Accumulation Unit Value, End of Period $10.154 $ 8.881 $ 7.270 $ 8.354 $ 8.870
Number of Units Outstanding, End of Period 26,413 122,945 252,907 290,005 278,556
AIM V.I. CAPITAL APPRECIATION - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.242 $ 7.001 $ 5.230 $ 6.689
Accumulation Unit Value, End of Period $ 9.242 $ 7.001 $ 5.230 $ 6.689 $ 7.043
Number of Units Outstanding, End of Period 10,595 65,809 134,666 161,621 175,396
AIM V.I. GOVERNMENT SECURITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 10.807 $ 11.356 $ 12.290 $ 12.226
Accumulation Unit Value, End of Period $10.807 $ 11.356 $ 12.290 $ 12.226 $ 12.423
Number of Units Outstanding, End of Period 12.496 51,574 205,419 280,241 227,477
AIM V.I. GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 8.338 $ 5.443 $ 3.710 $ 4.809
Accumulation Unit Value, End of Period $ 8.338 $ 5.443 $ 3.710 $ 4.809 $ 5.139
Number of Units Outstanding, End of Period 14,487 66,340 103,684 128,420 114,786
AIM V.I. HIGH YIELD - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 8.362 $ 7.845 $ 7.294 $ 9.223
Accumulation Unit Value, End of Period $ 8.362 $ 7.845 $ 7.294 $ 9.223 $ 10.132
Number of Units Outstanding, End of Period 7,031 27,476 54,243 74,581 106,724
AIM V.I. INTERNATIONAL GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 8.989 $ 6,787 $ 5.652 $ 7.203
Accumulation Unit Value, End of Period $ 8.989 $ 6.787 $ 5.652 $ 7.203 $ 8.820
Number of Units Outstanding, End of Period 6,197 51,835 95,690 96,516 92,690
AIM V.I. PREMIER EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 8.980 $ 7.754 $ 5.339 $ 6.595
Accumulation Unit Value, End of Period $ 8.980 $ 7.754 $ 5.339 $ 6.595 $ 6.889
Number of Units Outstanding, End of Period 29,890 132,390 194,292 196,079 182,257
FIDELITY VIP CONTRAFUND(R) - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.950 $ 8.621 $ 7.718 $ 9.791
Accumulation Unit Value, End of Period $ 9.950 $ 8.621 $ 7.718 $ 9.791 $ 11.165
Number of Units Outstanding, End of Period 16,726 54,431 130,889 142,815 143,910
FIDELITY VIP EQUITY-INCOME - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 10.810 $ 10.145 $ 8.320 $ 10.708
Accumulation Unit Value, End of Period $10.810 $ 10.145 $ 8.320 $ 10.708 $ 11.794
Number of Units Outstanding, End of Period 1,655 98,345 343,378 427,122 427,302
FIDELITY VIP GROWTH - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.389 $ 7.634 $ 5.269 $ 6.913
Accumulation Unit Value, End of Period $ 9.389 $ 7.634 $ 5.269 $ 6.913 $ 7.057
Number of Units Outstanding, End of Period 12,984 111,676 271,819 292,079 287,423
FIDELITY VIP GROWTH OPPORTUNITIES - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.350 $ 7.901 $ 6.098 $ 7.820
Accumulation Unit Value, End of Period $ 9.350 $ 7.901 $ 6.098 $ 7.820 $ 8.278
Number of Units Outstanding, End of Period 4,746 23,416 49,139 63,281 75,230
FIDELITY VIP OVERSEAS - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.314 $ 7.251 $ 5.707 $ 8.081
Accumulation Unit Value, End of Period $ 9.314 $ 7.251 $ 5.707 $ 8.081 $ 9.068
Number of Units Outstanding, End of Period 4,880 29,515 84,428 84,019 86,851
36 PROSPECTUS
[Enlarge/Download Table]
FTVIP TEMPLETON GLOBAL ASSET ALLOCATION - CLASS 2 SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 10.443 $ 9.286 $ 8.768 $ 11.425
Accumulation Unit Value, End of Period $10.443 $ 9.286 $ 8.768 $ 11.425 $ 13.055
Number of Units Outstanding, End of Period 632 13,934 25,836 37,170 38,129
FTVIP TEMPLETON FOREIGN SECURITIES - CLASS 2 SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 10.522 $ 8.728 $ 7.019 $ 9.164
Accumulation Unit Value, End of Period $10.522 $ 8.728 $ 7.019 $ 9.164 $ 10.276
Number of Units Outstanding, End of Period 7,881 44,999 110,201 121,630 115,042
OPPENHEIMER AGGRESSIVE GROWTH/VA SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.162 $ 6.218 $ 4.434 $ 5.499
Accumulation Unit Value, End of Period $ 9.162 $ 6.218 $ 4.434 $ 5.499 $ 6.504
Number of Units Outstanding, End of Period 10,578 137,154 289,514 301,948 293,993
OPPENHEIMER MAIN STREET/VA SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.274 $ 8.227 $ 6.597 $ 8.256
Accumulation Unit Value, End of Period $ 9.274 $ 8.227 $ 6.597 $ 8.256 $ 8.924
Number of Units Outstanding, End of Period 35,354 173,074 401,718 494,003 512,442
OPPENHEIMER STRATEGIC BOND/VA SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 10.320 $ 10.685 $ 11.336 $ 13.218
Accumulation Unit Value, End of Period $10.320 $ 10.685 $ 11.336 $ 13.218 $ 14.185
Number of Units Outstanding, End of Period 8,730 96,313 220,809 276,973 263,324
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.: INITIAL SHARES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.249 $ 7.071 $ 4.962 $ 6.174
Accumulation Unit Value, End of Period $ 9.249 $ 7.071 $ 4.962 $ 6.174 $ 6.475
Number of Units Outstanding, End of Period 11.070 32,951 39,724 41,869 39,582
DREYFUS STOCK INDEX FUND, INC.: INITIAL SHARES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.409 $ 8.159 $ 6.255 $ 7.929
Accumulation Unit Value, End of Period $ 9.409 $ 8.159 $ 6.255 $ 7.929 $ 8.663
Number of Units Outstanding, End of Period 28,181 185,335 611,361 703,922 677,882
DREYFUS VIF - APPRECIATION: INITIAL SHARES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.931 $ 8.894 $ 7.314 $ 8.752
Accumulation Unit Value, End of Period $ 9.931 $ 8.894 $ 7.314 $ 8.752 $ 9.079
Number of Units Outstanding, End of Period 1,285 27,925 80,006 97,355 93,398
DREYFUS VIF - MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000 $ 8.752
Accumulation Unit Value, End of Period -- -- -- $ 9.957 $ 9.911
Number of Units Outstanding, End of Period -- -- -- 398,378 329,692
WELLS FARGO ADVANTAGE ASSET ALLOCATION SUB-ACCOUNT ***
Accumulation Unit Value, Beginning of Period $10.000 $ 10.012 $ 9.198 $ 7.916 $ 9.544
Accumulation Unit Value, End of Period $10.012 $ 9.198 $ 7.916 $ 9.544 $ 10.306
Number of Units Outstanding, End of Period 667 13,021 54,392 66,680 59,351
WELLS FARGO ADVANTAGE EQUITY INCOME SUB-ACCOUNT ****
Accumulation Unit Value, Beginning of Period $10.000 $ 10.429 $ 9.741 $ 7.766 $ 9.679
Accumulation Unit Value, End of Period $10.429 $ 9.741 $ 7.766 $ 9.679 $ 10.617
Number of Units Outstanding, End of Period 264 8,467 23,695 25,815 30,383
WELLS FARGO ADVANTAGE LARGE COMPANY CORE SUB-ACCOUNT *****
Accumulation Unit Value, Beginning of Period $10.000 $ 9.048 $ 7.218 $ 5.286 $ 6.451
Accumulation Unit Value, End of Period $ 9.048 $ 7.218 $ 5.286 $ 6.451 $ 6.904
Number of Units Outstanding, End of Period 390 4,893 20,443 40,250 55,986
DELAWARE VIP SMALL CAP VALUE - STANDARD CLASS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 11.593 $ 12.802 $ 11.934 $ 16.732
Accumulation Unit Value, End of Period $11.593 $ 12.802 $ 11.934 $ 16.732 $ 20.073
Number of Units Outstanding, End of Period 7,204 45,515 133,174 157,546 161,967
DELAWARE VIP TREND - STANDARD CLASS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $ 9.265 $ 7.745 $ 6.124 $ 8.170
Accumulation Unit Value, End of Period $ 9.265 $ 7.745 $ 6.124 $ 8.170 $ 9.084
Number of Units Outstanding, End of Period 5,514 24,184 80,076 112,774 114,856
37 PROSPECTUS
* The Contracts were first offered on June 1, 2000. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.15%
and an administrative charge of 0.10%. All of the Variable Sub-Accounts,
with the exception of the Dreyfus VIF - Money Market Sub-Account which was
first offered on April 30, 2003, were first offered under the Contracts on
June 1, 2000.
** Effective July 1, 2005, the AIM V.I. Balanced Fund -Series I will change
its name to AIM V.I Basic Balanced Fund-Series I. Effective July 1, 2005,
a corresponding change in the name of the Variable Sub-Account that
invests in that Portfolio will be made.
*** Effective April 11, 2005 the Wells Fargo VT Asset Allocation Fund changed
its name to Wells Fargo Advantage Asset Allocation Fund. We have made a
corresponding change in the name of the Variable Sub-Account that invests
in that Portfolio.
**** Effective April 11, 2005 the Wells Fargo VT Equity Income Fund changed its
name to Wells Fargo Advantage Equity Income Fund. We have made a
corresponding change in the name of the Variable Sub-Account that invests
in that Portfolio.
***** Effective April 11, 2005 the Wells Fargo VT Growth Fund changed its name
to Wells Fargo Advantage Large Company Core Fund. We have made a
corresponding change in the name of the Variable Sub-Account that invests
in that Portfolio.
38 PROSPECTUS
APPENDIX B MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the applicable Guarantee Period
for the week preceding the establishment of the Guarantee Period.
N = the number of whole and partial years from the date we receive the
withdrawal, transfer, or death benefit request, or from the Payout Start Date,
to the end of the Guarantee Period; and
J = the Treasury Rate for a maturity equal to N years for the week preceding the
receipt of the withdrawal, transfer, death benefit, or income payment request.
If a note for a maturity of length N is not available, a weighted average will
be used.
"Treasury Rate" means the U.S. Treasury Note Constant Maturity Yield as reported
in Federal Reserve Board Statistical Release H.15.
The Market Value Adjustment factor is determined from the following formula:
..9 X (I - J) X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred (in excess of the Free Withdrawal
Amount) paid as a death benefit, or applied to an Income Plan, from a Guarantee
Period at any time other than during the 30 day period after such Guarantee
Period expires.
39 PROSPECTUS
EXAMPLES OF MARKET VALUE ADJUSTMENT
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Guaranteed Interest Rate: 4.50%
5 Year Treasury Rate at the time the Guarantee Period is established: 4.50%
Full Surrender: End of Contract Year 3
NOTE: These examples assume that premium taxes are not applicable.
EXAMPLE 1 (ASSUME DECLINING INTEREST RATES)
Step 1. Calculate Contract $10,000.00 X (1.045)/3/ = $11,411.66
Value at End of Contract Year 3:
Step 2. Calculate the Preferred .15 X $10,000.00 = $1,500.00
Withdrawal Amount:
Step 3. Calculate the Market I = 4.5%
Value Adjustment: J = 4.2%
730 days
N = -------- = 2
365 days
Market Value Adjustment Factor: .9 X (I - J) X
N = .9 X (.045 - .042) X (730/365) = .0054
Market Value Adjustment = Market Value
Adjustment Factor X Amount Subject to Market
Value Adjustment:
= .0054 X ($11,411.66 - $1,500.00) = $53.32
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1. Calculate Contract $10,000.00 X (1.045)/3/ = $11,411.66
Value at End of Contract Year
3:
Step 2. Calculate the Preferred .15 X $10,000.00 = $1,500.00
Withdrawal Amount:
Step 3. Calculate the Market I = 4.5%
Value Adjustment: J = 4.8%
730 days
N = -------- = 2
365 days
MARKET VALUE ADJUSTMENT FACTOR: .9 X (I - J)
X N = .9 X (.045 - .048) X (730/365) = -.0054
Market Value Adjustment = Market Value
Adjustment Factor X Amount Subject to Market
Value Adjustment:
= -.0054 X ($11,411.66 - $1,500.00) = -$53.52
40 PROSPECTUS
APPENDIX C
WITHDRAWAL ADJUSTMENT EXAMPLE
Issue Date: January 1, 2005
Initial Purchase Payment: $50,000
Death Benefit Amount
[Enlarge/Download Table]
Contract Contract Death Benefit Greatest
Value Before Transaction Value After Anniversary Anniversary
Date Type of Occurrence Occurrence Amount Occurrence Value Value
---------------------------------------------------------------------------------------------------------
1/1/05 Issue Date -- $50,000 $50,000 $50,000 $50,000
---------------------------------------------------------------------------------------------------------
1/1/06 Contract Anniversary $55,000 -- $55,000 $50,000 $55,000
---------------------------------------------------------------------------------------------------------
7/1/06 Partial Withdrawal $60,000 $15,000 $45,000 $37,500 $41,250
---------------------------------------------------------------------------------------------------------
Withdrawal adjustment equals the partial withdrawal amount divided by the
Contract Value immediately prior to the partial withdrawal multiplied by the
value of the applicable death benefit amount alternative immediately prior to
the partial withdrawal.
[Enlarge/Download Table]
DEATH BENEFIT ANNIVERSARY VALUE DEATH BENEFIT
--------------------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (w) $15,000
--------------------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (a) $60,000
--------------------------------------------------------------------------------------------------------------
Value of Applicable Death Benefit Amount Immediately Prior to Partial (d) $50,000
Withdrawal
--------------------------------------------------------------------------------------------------------------
Withdrawal Adjustment $12,500
[(w)/(a)] X (d)
--------------------------------------------------------------------------------------------------------------
Adjusted Death Benefit $37,500
--------------------------------------------------------------------------------------------------------------
GREATEST ANNIVERSARY VALUE DEATH BENEFIT
--------------------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (w) $15,000
--------------------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (a) $60,000
--------------------------------------------------------------------------------------------------------------
Value of Applicable Death Benefit Amount Immediately Prior to Partial (d) $55,000
Withdrawal
--------------------------------------------------------------------------------------------------------------
Withdrawal Adjustment $13,750
[(w)/(a)] * (d)
--------------------------------------------------------------------------------------------------------------
Adjusted Death Benefit $41,250
--------------------------------------------------------------------------------------------------------------
Please remember that you are looking at a hypothetical example, and that your
investment performance may be greater or less than the figures shown.
41 PROSPECTUS
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Additions, Deletions or Substitutions of Investments
The Contract
Purchase of Contracts
Calculation of Accumulation Unit Values
Calculation of Variable Income Payments
General Matters
Incontestability
Settlements
Safekeeping of the Variable Account's Assets
Experts
Financial Statements
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
42 PROSPECTUS
SELECTDIRECTIONS(SM) VARIABLE ANNUITY
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STREET ADDRESS: 2940 S. 84TH STREET, LINCOLN, NE 68506-4142 MAILING ADDRESS:
P.O. BOX 82656, LINCOLN, NE 68501-2656 TELEPHONE NUMBER: 1-800-632-3492
PROSPECTUS DATED APRIL 30, 2005
Allstate Life Insurance Company of New York ("Allstate New York") is offering
the SelectDirections(SM) Variable Annuity, a group flexible premium deferred
variable annuity contract ("CONTRACT"). This prospectus contains information
about the Contract that you should know before investing. Please keep it for
future reference.
The Contract currently offers 27 investment alternatives ("INVESTMENT
ALTERNATIVES"). The investment alternatives including 3 fixed accounts ("FIXED
ACCOUNT") and 24 variable sub-accounts ("VARIABLE SUB-ACCOUNTS") of the Allstate
Life of New York Separate Account A ("VARIABLE ACCOUNT"). Each Variable
Sub-Account invests exclusively in shares of one of the following underlying
fund portfolios ("PORTFOLIOS"):
AIM VARIABLE INSURANCE FUNDS: MFS(R) VARIABLE INSURANCE TRUST(SM):
----------------------------- ------------------------------------
AIM V.I. Capital Appreciation Fund - MFS Research Bond Series - Initial
Series I Class*
AIM V.I. Core Equity Fund - Series I MFS High Income Series - Initial Class
AIM V.I. Diversified Income Fund - MFS Investors Trust Series - Initial
Series I Class
AIM V.I. International Growth Fund - MFS New Discovery Series - Initial
Series I Class
AIM V.I. Premier Equity Fund - Series I
FIDELITY(R) VARIABLE INSURANCE PRODUCTS: OPPENHEIMER VARIABLE ACCOUNT FUNDS:
---------------------------------------- -----------------------------------
Fidelity VIP Contrafund(R) Portfolio - Oppenheimer Core Bond Fund/VA **
Initial Class Oppenheimer Capital Appreciation
Fidelity VIP Growth Portfolio - Initial Fund/VA
Class Oppenheimer Global Securities Fund/VA
Fidelity VIP High Income Portfolio - Oppenheimer High Income Fund/VA
Initial Class Oppenheimer Main Street Small Cap
Fidelity VIP Index 500 Portfolio - Fund/VA
Initial Class
Fidelity VIP Investment Grade Bond VAN KAMPEN LIFE INVESTMENT TRUST:
Portfolio - Initial Class ---------------------------------
Fidelity VIP Overseas Portfolio - Van Kampen LIT Comstock Portfolio,
Initial Class Class I
Van Kampen LIT Emerging Growth
Portfolio, Class I
Van Kampen LIT Government Portfolio,
Class I
Van Kampen LIT Money Market Portfolio,
Class I
* Effective May 1, 2005, the MFS Bond Series - Initial Class will change its
name to MFS Research Bond Series - Initial Class.
** Effective Apil 29, 2005, the Oppenheimer Bond Fund/VA changed its name to
Oppenheimer Core Bond Fund/VA.
WE (Allstate New York) have filed a Statement of Additional Information, dated
April 30, 2005, with the Securities and Exchange Commission ("SEC"). It contains
more information about the Contract and is incorporated herein by reference,
which means it is legally a part of this prospectus. Its table of contents
appears on page 41 of this prospectus. For a free copy, please write or call us
at the address or telephone number above, or go to the SEC's Web site (http://
www.sec.gov). You can find other information and documents about us, including
documents that are legally part of this prospectus, at the SEC's Web site.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
OR DISAPPROVED THE SECURITIES DESCRIBED IN THIS
PROSPECTUS, NOR HAS IT PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANYONE WHO TELLS YOU
OTHERWISE IS COMMITTING A FEDERAL CRIME.
THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS
IMPORTANT THAT HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
NOTICES CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY
AGENCY. INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
THE CONTRACTS ARE ONLY AVAILABLE IN NEW YORK.
1 PROSPECTUS
TABLE OF CONTENTS
PAGE
----
OVERVIEW
Important Terms 3
The Contract at a Glance 4
How the Contract Works 6
Expense Table 7
Financial Information 9
CONTRACT FEATURES
The Contract 9
Purchases 10
Contract Value 11
Investment Alternatives 12
The Variable Sub-Accounts 12
The Fixed Account 14
Transfers 17
Expenses 19
Access To Your Money 21
Income Payments 22
PAGE
----
Death Benefits 24
OTHER INFORMATION
More Information: 26
Allstate New York 26
The Variable Account 26
The Portfolios 27
The Contract 27
Non-Qualified Annuities Held Within a Qualified Plan 28
Legal Matters 28
Federal Tax Matters 29
Annual Reports and Other Documents 35
APPENDIX A-ACCUMULATION UNIT VALUES AND NUMBER OF ACCUMULATION
UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS
WERE FIRST OFFERED 38
APPENDIX B -MARKET VALUE ADJUSTMENT 38
APPENDIX C - WITHDRAWAL ADJUSTMENT EXAMPLE 40
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS 41
2 PROSPECTUS
IMPORTANT TERMS
This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
PAGE
----
Accumulation Phase 6
Accumulation Unit 11
Accumulation Unit Value 11
Allstate New York ("We" or "Us") 1
Anniversary Values 24
Annuitant 9
Automatic Additions Program 10
Automatic Portfolio Rebalancing Program 18
Beneficiary 9
Cancellation Period 4
Contract* 9
Contract Anniversary 5
Contract Owner ("You") 9
Contract Value 5
Contract Year 4
Death Benefit Anniversary 24
Dollar Cost Averaging Program 18
Due Proof of Death 24
Fixed Account 14
PAGE
----
Guarantee Periods 15
Income Plans 22
Investment Alternatives 12
Issue Date 6
Market Value Adjustment 16
Payout Phase 6
Payout Start Date 6
Portfolios 27
Preferred Withdrawal Amount 20
Right to Cancel 11
SEC 1
Settlement Value 24
Systematic Withdrawal Program 21
Tax Qualified Contracts 32
Treasury Rate 16
Valuation Dates 11
Variable Account 26
Variable Sub-Account 12
* The SelectDirections(SM) Variable Annuity is a group contract and your
ownership is represented by certificates. References to "CONTRACT" in this
prospectus include certificates, unless the context requires otherwise.
3 PROSPECTUS
THE CONTRACT AT A GLANCE
The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
FLEXIBLE PAYMENTS You can purchase a Contract with as little as
$3,000 ($2,000 for a "QUALIFIED CONTRACT" which is a
Contract issued with a qualified endorsement). You can
add to your Contract as often and as much as you like,
but each payment must be at least $100. You must maintain
a minimum account size of $1,000.
-------------------------------------------------------------------------------
RIGHT TO CANCEL You may cancel your Contract within 10 days after receipt
(60 days if you are exchanging another contract for the
Contract described in this prospectus) ("CANCELLATION
PERIOD"). Upon cancellation we will return your purchase
payments adjusted, to the extent federal or state law
permits, to reflect the investment experience of any
amounts allocated to the Variable Account.
-------------------------------------------------------------------------------
EXPENSES You will bear the following expenses:
. Total Variable Account annual fees equal to 1.25% of
average daily net assets
. Annual contract maintenance charge of $30 (with
certain exceptions)
. Withdrawal charges ranging from 0% to 7% of payment
withdrawn (with certain exceptions)
. Transfer fee of $10 after 12th transfer in any
CONTRACT YEAR (fee currently waived)
. State premium tax (New York currently does not
impose one).
In addition, each Portfolio pays expenses that you will
bear indirectly if you invest in a Variable Sub-Account.
-------------------------------------------------------------------------------
INVESTMENT The Contract offers 27 investment alternatives
ALTERNATIVES including:
. 3 Fixed Account Options (which credits interest at
rates we guarantee), and
. 24 Variable Sub-Accounts investing in Portfolios
offering professional money management by:
. A I M Advisors, Inc.
. Fidelity Management & Research Company
. MFS(TM) Investment Management
. OppenheimerFunds, Inc.
. Van Kampen Asset Management
To find out current rates being paid on the Fixed
Account, or to find out how the Variable Sub-Accounts
have performed, please call us at 1-800-632-3492.
-------------------------------------------------------------------------------
SPECIAL SERVICES For your convenience, we offer these special services:
. AUTOMATIC PORTFOLIO REBALANCING PROGRAM
. AUTOMATIC ADDITIONS PROGRAM
. DOLLAR COST AVERAGING PROGRAM
. SYSTEMATIC WITHDRAWAL PROGRAM
-------------------------------------------------------------------------------
INCOME PAYMENTS You can choose fixed income payments, variable income
payments, or a combination of the two. You can receive
your income payments in one of the following ways:
. life income with guaranteed payments
. joint and survivor life income with guaranteed
payments
. guaranteed payments for a specified period (5 to 30
years)
-------------------------------------------------------------------------------
4 PROSPECTUS
DEATH BENEFITS If you die before the PAYOUT START DATE, we will pay the
death benefit described in the Contract.
-------------------------------------------------------------------------------
TRANSFERS Before the Payout Start Date, you may transfer your
Contract value ("CONTRACT VALUE") among the investment
alternatives, with certain restrictions. Transfers to the
Fixed Account must be at least $500.
We do not currently impose a fee upon transfers. However,
we reserve the right to charge $10 per transfer after the
12th transfer in each "Contract Year," which we measure
from the date we issue your Contract or a Contract
anniversary ("CONTRACT ANNIVERSARY").
-------------------------------------------------------------------------------
WITHDRAWALS You may withdraw some or all of your Contract Value at
anytime during the Accumulation Phase. Full or partial
withdrawals also are available under limited
circumstances on or after the Payout Start Date.
In general, you must withdraw at least $50 at a time
($1,000 for withdrawals made during the Payout Phase).
Withdrawals taken during the Accumulation Phase are
generally considered to come from the earnings in the
Contract first. If the Contract is tax-qualified,
generally all withdrawals are treated as distributions of
earnings. Withdrawals of earnings are taxed as ordinary
income and, if taken prior to age 59 1/2, may be subject
to an additional 10% federal tax penalty. A withdrawal
charge and MARKET VALUE ADJUSTMENT also may apply.
--------------------------------------------------------------------------------
5 PROSPECTUS
HOW THE CONTRACT WORKS
The Contract basically works in two ways.
First, the Contract can help you (we assume you are the CONTRACT OWNER) save for
retirement because you can invest in up to 27 investment alternatives and
generally pay no federal income taxes on any earnings until you withdraw them.
You do this during what we call the "ACCUMULATION PHASE" of the Contract. The
Accumulation Phase begins on the date we issue your Contract (we call that date
the "ISSUE DATE") and continues until the Payout Start Date, which is the date
we apply your money to provide income payments. During the Accumulation Phase,
you may allocate your purchase payments to any combination of the Variable
Sub-Accounts and/or the Fixed Account. If you invest in the Fixed Account, you
will earn a fixed rate of interest that we declare periodically. If you invest
in any of the Variable Sub-Accounts, your investment return will vary up or down
depending on the performance of the corresponding Portfolios.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/ or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page 22. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
[Enlarge/Download Table]
Issue Payout Start
Date Accumulation Phase Date Payout Phase
------------------------------------------------------------------------------------------------->
You buy You save for retirement You elect to receive You can receive Or you can receive
a Contract income payments or income payments income payments
receive a lump sum for a set period for life
payment
As the Contract Owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract Owner, or if there is none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract Owner or, if none, to your
Beneficiary. See "Death Benefits."
Please call us at 1-800-632-3492 if you have any question about how the Contract
works.
6 PROSPECTUS
EXPENSE TABLE
The following tables describe the fees and expenses that you will pay when
buying, owning, making withdrawals or surrendering the Contract. The first table
describes the fees and expenses that you will pay when you make a withdrawal,
surrender the Contract, or transfer Contract Value among the investment
alternatives. Premium taxes are not reflected in the tables because New York
currently does not impose premium taxes on annuities.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
[Enlarge/Download Table]
Number of Complete Years Since We Received the Purchase 0 1 2 3 4 5 6 7+
Payment Being Withdrawn
-------------------------------------------------------------------------------------------------
Applicable Charge 7% 6% 5% 4% 3% 2% 1% 0%
-------------------------------------------------------------------------------------------------
Transfer Fee $10.00**
-------------------------------------------------------------------------------------------------
* Each Contract Year, you may withdraw up to 15% of purchase payments without
incurring a Withdrawal Charge or a Market Value Adjustment.
** Applies solely to the thirteenth and subsequent transfers within a Contract
Year, excluding transfers due to dollar cost averaging or automatic
portfolio rebalancing. We are currently waiving the transfer fee.
The next tables describe the fees and expenses that you will pay periodically
during the time you own the Contract, not including Portfolio fees and expenses.
Annual Contract Maintenance Charge $30.00/(1)/
--------------------------------------------------------------------------------
(1) We will waive this charge in certain cases.
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF DAILY NET ASSET VALUE
DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT)
Mortality and Expense Risk Charge 1.15%
-------------------------------------------------------------------------------
Administrative Expense Charge 0.10%
-------------------------------------------------------------------------------
Total Variable Account Annual Expense 1.25%
-------------------------------------------------------------------------------
PORTFOLIO ANNUAL EXPENSES (AS A PERCENTAGE OF PORTFOLIO AVERAGE DAILY NET
ASSETS)(1)
The next table shows the minimum and maximum total operating expenses charged by
the Portfolios that you may pay periodically during the time that you own the
Contract. Advisers and/or other service providers of certain Portfolios may have
agreed to waive their fees and/or reimburse Portfolio expenses in order to keep
the Portfolios' expenses below specified limits. The range of expenses shown in
this table does not show the effect of any such fee waiver or expense
reimbursement. More detail concerning each Portfolio's fees and expenses appears
in the prospectus for each Portfolio.
ANNUAL PORTFOLIO EXPENSES
Minimum Maximum
--------------------------------------------------------------------------------
Total Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio
assets, which may include
management fees, and
other expenses) 0.10% 1.14%
--------------------------------------------------------------------------------
(1) Expenses are shown as a percentage of Portfolio average daily net assets
(before any waiver or reimbursement) as of December 31, 2004.
7 PROSPECTUS
EXAMPLES
EXAMPLE 1
This Example is intended to help you compare the cost of investing in the
Contracts with the cost of investing in other variable annuity contracts. These
costs include Contract owner transaction expenses, Contract fees, Variable
Account annual expenses, and Portfolio fees and expenses.
The example shows the dollar amount that you would bear directly or indirectly
if you:
.. invested $10,000 in the Contract for the time periods indicated,
.. earned a 5% annual return on your investment, and
.. surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period.
THE EXAMPLES DO NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
The first line of the example assumes that the maximum fees and expenses of any
of the Portfolios are charged. The second line of the example assumes that the
minimum fees and expenses of any of the Portfolios are charged. Your actual
expenses may be higher or lower than those shown below, because of variations in
a Portfolio's expense ratio from year to year.
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------
Costs Based on Maximum Annual
Portfolio Expenses $785 $1,181 $1,601 $3,015
------------------------------------------------------------------------
Costs Based on Minimum Annual
Portfolio Expenses $678 $ 859 $1,059 $1,911
------------------------------------------------------------------------
EXAMPLE 2
This Example uses the same assumptions as Example 1 above, except that it
assumes you decided not to surrender your Contract, or you began receiving
income payments for a specified period of at least 120 months, at the end of
each time period.
1Year 3Years 5Years 10Years
------------------------------------------------------------------------
Costs Based on
Maximum Annual
Portfolio Expenses $275 $841 $1,431 $3,015
------------------------------------------------------------------------
Costs Based on
Minimum Annual
Portfolio Expenses $168 $519 $ 889 $1,911
------------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EXPENSES. YOUR RATE OF RETURN MAY BE HIGHER OR LOWER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES DO NOT ASSUME THAT ANY PORTFOLIO EXPENSE
WAIVERS OR REIMBURSEMENT ARRANGEMENTS ARE IN EFFECT FOR THE PERIODS PRESENTED.
THE EXAMPLES REFLECT THE FREE WITHDRAWAL AMOUNTS, IF APPLICABLE, AND THE
DEDUCTION OF THE ANNUAL CONTRACT MAINTANENCE CHARGE OF $30 EACH YEAR.
8 PROSPECTUS
FINANCIAL INFORMATION
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund.
Attached as Appendix A to this prospectus are tables showing the Accumulation
Unit Values of each Variable Sub-Account since the date the Contracts were first
offered. To obtain a fuller picture of each Variable Sub-Account's finances,
please refer to the Variable Account's financial statements contained in the
Statement of Additional Information. The financial statements of Allstate New
York also appear in the Statement of Additional Information.
THE CONTRACT
CONTRACT OWNER
The SelectDirections(SM) Variable Annuity is a contract between you, the
Contract Owner, and Allstate New York, a life insurance company. As the Contract
Owner, you may exercise all of the rights and privileges provided to you by the
Contract. That means it is up to you to select or change (to the extent
permitted):
.. the investment alternatives during the Accumulation and Payout Phases,
.. the amount and timing of your purchase payments and withdrawals,
.. the programs you want to use to invest or withdraw money,
.. the income payment plan you want to use to receive retirement income,
.. the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
.. the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner dies, and
.. any other rights that the Contract provides.
If you die prior to the Payout Start Date, the new Contract Owner will be the
surviving Owner. If there is no surviving Owner, the new Contract Owner will be
the Beneficiary(ies) as described in the Beneficiary provision. The new Contract
Owner may exercise the rights and privileges provided by the Contract, except
that if the new Contract Owner took ownership as the Beneficiary, the new
Contract Owner's rights will be subject to any restrictions previously placed
upon the Beneficiary.
The Contract cannot be jointly owned by both a non-living person and a living
person. If the Owner is a Grantor Trust, the Contract Owner will be considered a
non-living person for purposes of the Death of Owner and Death of Annuitant
provisions of your Contract. The maximum age of the oldest Contract Owner cannot
exceed 85 as of the date we receive the completed application. Changing
ownership of this Contract may cause adverse tax consequences and may not be
allowed under qualified plans. Please consult with a competent tax advisor prior
to making a request for a change of Contract Owner.
The Contract can alo be purchased as an IRA or TSA (also known as 403(b)). The
endorsements required to qualify these annuities under the Internal Revenue Code
of 1986, as amended, ("Code") may limit or modify your rights and privileges
under the Contract.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. The
maximum age of the oldest Annuitant cannot exceed 85 as of the date we receive
the completed application. If the Contract Owner is a living person you may
change the Annuitant prior to the Payout Start Date. In our discretion, we may
permit you to designate a joint Annuitant, who is a second person on whose life
income payments depend, on the Payout Start Date.
If the Annuitant dies prior to the Payout Start Date, the new Annuitant will be:
.. the youngest Contract Owner, if living, otherwise
.. the youngest Beneficiary.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract Owner subject to the Death of Owner provision if the
sole surviving Contract Owner dies before the Payout Start Date. See "Death
Benefits" on page 24. If the sole surviving Contract Owner dies after the Payout
Start Date, the Beneficiary will receive any guaranteed income payments
scheduled to continue.
You may name one or more primary and contingent Beneficiaries when you apply for
a Contract. The primary Beneficiary is the Beneficiary(ies) who is first
entitled to receive benefits under the Contract upon the death of the sole
surviving Contract Owner. The contingent Beneficiary is the Beneficiary(ies)
entitled to receive benefits under the Contract when all primary
9 PROSPECTUS
Beneficiaries predecease the sole surviving Contract Owner.
You may restrict income payments to Beneficiaries by providing us a written
request. Once we accept the written request, the change or restriction will take
effect as of the date you signed the request. Any change is subject to any
payment we make or other action we take before we accept the change.
You may change or add Beneficiaries at any time by writing to us, unless you
have designated an irrevocable Beneficiary. We will provide a change of
Beneficiary form to be signed and filed with us. After we accept the form, the
change of Beneficiary will be effective as of the date you signed the form,
whether or not the Annuitant is living when we receive the notice. Each change
is subject to any payment made by us or any other action we take before we
accept the change. Accordingly, if you wish to change your Beneficiary, you
should deliver your written notice to us promptly.
If you do not name a Beneficiary or, if the named Beneficiary is no longer
living and there are no other surviving Beneficiaries, the new Beneficiary will
be:
.. your spouse or, if he or she is no longer alive,
.. your surviving children equally, or if you have no surviving children,
.. your estate.
If more than one Beneficiary survives you, we will divide the death benefit
among your Beneficiaries according to your most recent written instructions. If
you have not given us written instructions, we will pay the death benefit in
equal amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only an Allstate New York officer may approve a change in or waive any provision
of the Contract. Any change or waiver must be in writing. None of our agents has
the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law. If a provision of the Contract
is inconsistent with state law, we will follow state law.
ASSIGNMENT
You may not assign any interest in a Contract as collateral or security for a
loan. However, you may assign periodic income payments under the Contract prior
to the Payout Start Date. No Beneficiary may assign benefits under the Contract
until they are due. We will not be bound by any assignment until the assignor
signs it and files it with us. We are not responsible for the validity of any
assignment. Federal law prohibits or restricts the assignment of benefits under
many types of qualified plans and the terms of such plans may themselves contain
restrictions on assignments. An assignment may also result in taxes or tax
penalties. YOU SHOULD CONSULT WITH YOUR ATTORNEY BEFORE TRYING TO ASSIGN YOUR
CONTRACT.
PURCHASES
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $3,000 ($2,000 for a Qualified
Contract). All subsequent purchase payments must be $100 ($500 for allocation to
the Fixed Account or the Dollar Cost Averaging Fixed Account) or more. You may
make purchase payments at any time prior to the Payout Start Date. We reserve
the right to limit the maximum amount of purchase payments, or reduce the
minimum purchase payment we will accept. We reserve the right to reject any
application.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of at least $100 ($500 for allocation
to the Fixed Account) by automatically transferring amounts from your bank
account. Please consult with your Personal Financial Representative for detailed
information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by notifying us in writing. We reserve the right to limit the
availability of the investment alternatives.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive, in good order, written notice of
the change.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our service center. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
service
10 PROSPECTUS
center located in Lincoln, Nebraska (mailing address: P.O. Box 82656, Lincoln,
NE 68501-2656).
We are open for business each day Monday through Friday that the New York Stock
Exchange is open for business. We also refer to these days as "VALUATION DATES."
Our business day closes when the New York Stock Exchange closes, usually 4:00
p.m. Eastern Time (3:00 p.m. Central Time). If we receive your purchase payment
after 4:00 p.m. Eastern Time (3:00 p.m. Central Time) on any Valuation Date, we
will credit your purchase payment using the Accumulation Unit Values computed on
the next Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 10 day period after you receive the Contract (60 days if
you are exchanging another contract for the Contract described in this
prospectus). You may return it by delivering it or mailing it to us. If you
exercise this "RIGHT TO CANCEL," the Contract terminates and we will pay you the
full amount of your purchase payments allocated to the Fixed Account. Upon
cancellation, as permitted by federal or state law, we will return your purchase
payments allocated to the Variable Account after an adjustment to the extent
federal or state law permits to reflect investment gain or loss that occurred
from the date of allocation through the date of cancellation. If your Contract
is qualified under Code Section 408(b), we will refund the greater of any
purchase payment or the Contract Value.
CONTRACT VALUE
On the Issue Date, the Contract Value is equal to the initial purchase payment.
Your Contract Value at any other time during the Accumulation Phase is equal to
the sum of the value as of the most recent Valuation Date of your Accumulation
Units in the Variable Sub-Accounts you have selected, plus the value of your
investment in the Fixed Account.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
credit to your Contract, we divide (i) the amount of the purchase payment or
transfer you have allocated to a Variable Sub-Account by (ii) the Accumulation
Unit Value of that Variable Sub-Account next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Sub-Account when the Accumulation Unit Value for the
Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable
Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
.. changes in the share price of the Portfolio in which the Variable
Sub-Account invests, and
.. the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have
accrued since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate Accumulation Unit Value,
please refer to the Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account on
each Valuation Date.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE PORTFOLIOS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
11 PROSPECTUS
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
You may allocate your purchase payments to up to 24 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectus for
the Portfolio. You should carefully review the Portfolio prospectuses before
allocating amounts to the Variable Sub-Accounts.
PORTFOLIO: EACH PORTFOLIO SEEKS: INVESTMENT ADVISOR:
-------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS
-------------------------------------------------------------------------------
AIM V.I. Capital Growth of capital
Appreciation Fund -
Series I*
-------------------------------------------------------------------------------
AIM V.I. Core Equity Growth of capital
Fund - Series I* A I M ADVISORS, INC.
-------------------------------------------------------------------------------
AIM V.I. Diversified High level of current income
Income Fund - Series
I*
-------------------------------------------------------------------------------
AIM V.I. International Long-term growth of capital
Growth Fund - Series
I*
-------------------------------------------------------------------------------
AIM V.I. Premier Equity Long-term growth of capital
Fund - Series I* with income as a secondary
objective
-------------------------------------------------------------------------------
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
-------------------------------------------------------------------------------
Fidelity VIP Long-term capital
Contrafund(R) appreciation.
Portfolio - Initial
Class
-------------------------------------------------------------------------------
Fidelity VIP Growth To achieve capital
Portfolio - Initial appreciation.
Class
-------------------------------------------------------------------------------
Fidelity VIP High High level of current
Income Portfolio - income, while also
Initial Class considering growth of FIDELITY MANAGEMENT &
capital. RESEARCH COMPANY
-------------------------------------------------------------------------------
Fidelity VIP Index 500 Investment results that
Portfolio - Initial correspond to the total
Class return of common stocks
publicly traded in
the United States,
as represented by
the Standard &
Poor's 500(SM) Index
(S&P 500(R)).
-------------------------------------------------------------------------------
Fidelity VIP Investment As high a level of
current Grade Bond Portfolio - income as is
consistent Initial Class with the
preservation of capital.
-------------------------------------------------------------------------------
Fidelity VIP Overseas Long-term growth of
capital.
Portfolio - Initial
Class
-------------------------------------------------------------------------------
MFS(R) VARIABLE INSURANCE TRUST(SM)
-------------------------------------------------------------------------------
MFS Research Bond To provide total return
Series - Initial (high current income and
Class** long-term growth of
capital)
-------------------------------------------------------------------------------
MFS High Income Series High current income by
- Initial Class investing primarily in a
professionally managed MFS(TM) INVESTMENT
diversified portfolio of MANAGEMENT
fixed income securities,
some of which may involve
equity features
-------------------------------------------------------------------------------
MFS Investors Trust To provide long-term growth
Series - Initial Class of capital and secondarily
to provide reasonable
current income
-------------------------------------------------------------------------------
MFS New Discovery Capital appreciation.
Series - Initial Class
-------------------------------------------------------------------------------
12 PROSPECTUS
OPPENHEIMER VARIABLE ACCOUNT FUNDS
-------------------------------------------------------------------------------
Oppenheimer Core Bond High level of current
Fund/VA*** income. As a secondary
objective, the
Portfolio seeks
capital appreciation
when consistent with
its primary
objective.
-------------------------------------------------------------------------------
Oppenheimer Capital Capital appreciation by
Appreciation Fund/VA investing in securities of
well-known, established
companies.
-------------------------------------------------------------------------------
Oppenheimer Global Long-term capital OPPENHEIMERFUNDS, INC.
Securities Fund/VA appreciation by investing a
substantial portion
of assets in
securities of
foreign issuers,
growth-type
companies, cyclical
industries and
special situations
that are considered
to have appreciation
possibilities.
-------------------------------------------------------------------------------
Oppenheimer High Income A high level of current
Fund/VA income from investment in
high-yield fixed-income
securities.
-------------------------------------------------------------------------------
Oppenheimer Main Street Capital appreciation.
Small Cap Fund/VA
-------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST
-------------------------------------------------------------------------------
Van Kampen LIT Comstock Capital growth and income VAN KAMPEN ASSET
Portfolio, Class I through investments in MANAGEMENT
equity securities,
including common stocks,
preferred stocks and
securities convertible into
common and preferred
stocks.
-------------------------------------------------------------------------------
Van Kampen LIT Emerging Capital appreciation.
Growth Portfolio,
Class I
-------------------------------------------------------------------------------
Van Kampen LIT High current return
Government Portfolio, consistent with
Class I preservation of capital
-------------------------------------------------------------------------------
Van Kampen LIT Money Protection of capital and
Market Portfolio, high current income through
Class I investments in money market
instruments.
-------------------------------------------------------------------------------
* The Portfolio's investment objective(s) may be changed by the Portfolio's
Board of Trustees without shareholder approval
..** Effective May 1, 2005, the MFS Bond Series-Initial Class will change its
name to MFS Research Bond Series-Initial Class. In addition, the
Portfolio's objective will change as described above.
*** Effective April 29, 2005, the Oppenheimer Bond Fund/VA changed its name to
Oppenheimer Core Bond Fund/VA. The Portfolio's objective has not changed.
AMOUNTS YOU ALLOCATE TO VARIABLE SUB-ACCOUNTS MAY GROW IN VALUE, DECLINE IN
VALUE, OR GROW LESS THAN YOU EXPECT, DEPENDING ON THE INVESTMENT PERFORMANCE OF
THE PORTFOLIOS IN WHICH THOSE VARIABLE SUB-ACCOUNTS INVEST. YOU BEAR THE
INVESTMENT RISK THAT THE PORTFOLIOS MIGHT NOT MEET THEIR INVESTMENT OBJECTIVES.
SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
VARIABLE INSURANCE PORTFOLIOS MIGHT NOT BE MANAGED BY THE SAME PORTFOLIO
MANAGERS WHO MANAGE RETAIL MUTUAL FUNDS WITH SIMILAR NAMES. THESE PORTFOLIOS ARE
LIKELY TO DIFFER FROM SIMILARLY NAMED RETAIL FUNDS IN ASSETS, CASH FLOW, AND TAX
MATTERS. ACCORDINGLY, THE HOLDINGS AND RESULTS OF A VARIABLE INSURANCE PORTFOLIO
CAN BE EXPECTED TO BE HIGHER OR LOWER THAN THE INVESTMENT RESULTS OF A SIMILARLY
NAMED RETAIL MUTUAL FUND.
13 PROSPECTUS
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT
You may allocate all or a portion of your purchase payments to the Fixed Account
Options. We will credit a minimum annual interest rate of 3% to money you
allocate to any of the Fixed Account Options. Please consult with your
representative for current information. The Fixed Account supports our insurance
and annuity obligations. The Fixed Account consists of our general assets other
than those in segregated asset accounts. We have sole discretion to invest the
assets of the Fixed Account, subject to applicable law. Any money you allocate
to the Fixed Account Option does not entitle you to share in the investment
experience of the Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS
SIX MONTH DOLLAR COST AVERAGING FIXED ACCOUNT OPTION
Under this Option, you may establish a Dollar Cost Averaging Program allocating
purchase payments to the Six Month Dollar Cost Averaging Fixed Account Option
("Six Month DCA Fixed Account Option"). We will credit interest to purchase
payments you allocate to this Option for six months at the current rate in
effect at the time of allocation. We will credit interest daily at a rate that
will compound at the annual interest rate we guaranteed at the time of
allocation.
We will follow your instructions in transferring amounts monthly from the Six
Month DCA Fixed Account Option. You must transfer all of your money out of the
Six Month DCA Fixed Account Option to the Variable Sub-Accounts in six equal
monthly installments. If you discontinue the Six Month DCA Fixed Account Option
before the end of the transfer period, we will transfer the remaining balance in
this Option to the Van Kampen LIT Money Market Variable Sub-Account unless you
request a different investment alternative. No transfers are permitted into the
Six Month DCA Fixed Account.
For each purchase payment allocated to this Option, your first monthly transfer
will occur at the end of the first month following such purchase payment. If we
do not receive an allocation from you within one month of the date of payment,
we will transfer the payment plus associated interest to the Van Kampen LIT
Money Market Variable Sub-Account in equal monthly installments. Transferring
Account Value to the Van Kampen LIT Money Market Variable Sub-Account in this
manner may not be consistent with the theory of dollar cost averaging described
on page 19.
TWELVE MONTH DOLLAR COST AVERAGING FIXED ACCOUNT OPTION
Under this Option, you may establish a Dollar Cost Averaging Program by
allocating purchase payments to the Twelve Month Dollar Cost Averaging Fixed
Account Option ("Twelve Month DCA Fixed Account Option"). We will credit
interest to purchase payments you allocate to this Option for twelve months at
the current rate in effect at the time of allocation. We will credit interest
daily at a rate that will compound at the annual interest rate we guaranteed at
the time of allocation.
We will follow your instructions in transferring amounts monthly from the Twelve
Month DCA Fixed Account Option. You must transfer all of your money out of the
Twelve Month DCA Fixed Account Option to the Variable Sub-Accounts in twelve
equal monthly installments. If you discontinue the Dollar Cost Averaging Option
before the end of the transfer period, we will transfer the remaining balance in
this Option to the Van Kampen LIT Money Market Variable Sub-Account unless you
request a different investment alternative. No transfers are permitted into the
Twelve Month DCA Fixed Account.
For each purchase payment allocated to this Option, your first monthly transfer
will occur at the end of the first month following such purchase payment. If we
do not receive an allocation from you within one month of the date of payment,
we will transfer the payment plus associated interest to the Van Kampen LIT
Money Market Variable Sub-Account in equal monthly installments. Transferring
Account Value to the Van Kampen LIT Money Market Variable Sub-Account in this
manner may not be consistent with the theory of dollar cost averaging described
on page 19.
At the end of the transfer period, any nominal amounts remaining in the Six
Month Dollar Cost Averaging Fixed Account or the Twelve Month Term Dollar Cost
Averaging Fixed Account will be allocated to the Van Kampen LIT Money Market
Variable Sub-Account.
Transfers out of the Dollar Cost Averaging Fixed Account Options do not count
towards the 12 transfers you can make without paying a transfer fee.
INVESTMENT RISK
We bear the investment risk for all amounts allocated to the Six Month DCA Fixed
Account Option and the Twelve Month DCA Fixed Account Option. That is because we
guarantee the current interest rates we credit to the amounts you allocate to
either of these Options, which will never be less than the minimum guaranteed
rate in the Contract. Currently, we determine, in our sole discretion, the
amount of interest credited in excess of the guaranteed rate.
We may declare more than one interest rate for different monies based upon the
date of allocation to the Six Month DCA Fixed Account Option and the Twelve
Month DCA Fixed Account Option. For current rate information, please contact
your representative or our customer support unit at 1-800-632-3492.
14 PROSPECTUS
GUARANTEE PERIODS
Under this option, each payment or transfer allocated to the Fixed Account earns
interest at a specified rate that we guarantee for a period of years we call a
Guarantee Period. Guarantee Periods may range from 1 to 10 years. We are
currently offering Guarantee Periods of 1, 3, 5, 7, and 10 years in length. In
the future we may offer Guarantee Periods of different lengths or stop offering
some Guarantee Periods. You select one or more Guarantee Periods for each
purchase payment or transfer. If you do not select the Guarantee Period for a
purchase payment or transfer, we will assign the shortest Guarantee Period
available under the Contract for such payment or transfer.
Each payment or transfer allocated to a Guarantee Period must be at least $500.
We reserve the right to limit the number of additional purchase payments that
you may allocate to the Fixed Account. Please consult with your Personal
Financial Representative for more information.
INTEREST RATES. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We may declare different interest rates for
Guarantee Periods of the same length that begin at different times. We will not
change the interest rate that we credit to a particular allocation until the end
of the relevant Guarantee Period.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors. We determine the
interest rates to be declared in our sole discretion. We can neither predict nor
guarantee what those rates will be in the future. For current interest rate
information, please contact your Personal Financial Representative or Allstate
New York at 1-800-632-3492. The interest rate will never be less than the
minimum guaranteed amount stated in the Contract.
HOW WE CREDIT INTEREST. We will credit interest daily to each amount allocated
to a Guarantee Period at a rate that compounds to the effective annual interest
rate that we declared at the beginning of the applicable Guarantee Period.
The following example illustrates how a purchase payment allocated to the Fixed
Account would grow, given an assumed Guarantee Period and effective annual
interest rate:
Purchase Payment.................................................... $10,000
Guarantee Period.................................................... 5 years
Annual Interest Rate................................................ 4.50%
Total Interest Credited During Guarantee Period = $2,461.82 ($12,461.82-$10,000)
END OF CONTRACT YEAR
[Enlarge/Download Table]
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ------------
Beginning Contract Value................. $10,000.00
X (1 + Annual Interest Rate) X 1.045
----------
$10,450.00
Contract Value at end of Contract Year... $10,450.00
X (1 + Annual Interest X 1.045
----------
$10,920.25
Contract Value at end of Contract Year... $10,920.25
X (1 + Annual Interest Rate) X 1.045
----------
$11,411.66
Contract Value at end of Contract Year... $11,411.66
X (1 + Annual Interest Rate) X 1.045
----------
$11,925.19
Contract Value at end of Contract Year... $11,925.19
X (1 + Annual Interest Rate) X 1.045
-----------
$12,461.82
This example assumes no withdrawals during the entire 5 year Guarantee Period.
If you were to make a withdrawal, you may be required to pay a Withdrawal
Charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. Withdrawals of earnings are taxed as ordinary
income and, if taken prior to age 59 1/2, may be subject to an additional 10%
federal tax penalty. The hypothetical interest rate is for illustrative purposes
only and is not intended to predict future interest rates to be declared under
the Contract. Actual interest rates declared for any given Guarantee Period may
be more or less than shown above but will never be less than the guaranteed
minimum rate stated in the Contract.
15 PROSPECTUS
RENEWALS. At least 15 but not more than 45 days prior to the end of each
Guarantee Period, we will mail you a notice asking you what to do with your
money, including the accrued interest. During the 30-day period after the end of
the Guarantee Period, you may:
1) take no action. We will automatically apply your money to a new Guarantee
Period of the shortest duration available. The new Guarantee Period will
begin on the day the previous Guarantee Period ends. The new interest rate
will be our then current declared rate for a Guarantee Period of that
length; or
2) instruct us to apply your money to one or more new Guarantee Periods of
your choice. The new Guarantee Period(s) will begin on the day the previous
Guarantee Period ends. The new interest rate will be our then current
declared rate for those Guarantee Periods; or
3) instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts. We will effect the transfer on the day we receive
your instructions. We will not adjust the amount transferred to include a
Market Value Adjustment. We will pay interest from the day the Guarantee
Period expired until the date of the transfer. The interest will be the
rate for the Shortest Guarantee Period then being offered; or
4) withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to include a
Market Value Adjustment. You may also be required to pay premium taxes and
withholding (if applicable). The amount withdrawn will be deemed to have
been withdrawn on the day the previous Guarantee Period ends. Unless you
specify otherwise, amounts not withdrawn will be applied to a new Guarantee
Period of the shortest duration available. The new Guarantee Period will
begin on the day the previous Guarantee Period ends. Withdrawals of
earnings are taxed as ordinary income and, if taken prior to age 59 1/2,
may be subject to an additional 10% federal tax penalty.
Under our automatic laddering program ("Automatic Laddering Program"), you may
choose, in advance, to use Guarantee Periods of the same length for all
renewals. You can select the Automatic Laddering Program at any time during the
Accumulation Phase, including on the Issue Date. We will apply renewals to
Guarantee Periods of the selected length until you direct us in writing to stop.
We may stop offering the Automatic Laddering Program at any time. For additional
information on the Automatic Laddering Program, please call our customer service
center at 1-800-632-3492.
MARKET VALUE ADJUSTMENT. All withdrawals in excess of the Preferred Withdrawal
Amount, and transfers from a Guarantee Period, other than those taken during the
30 day period after such Guarantee Period expires, are subject to a Market Value
Adjustment. A Market Value Adjustment also applies when you apply amounts
currently invested in a Guarantee Period to an Income Plan (unless paid or
applied during the 30 day period after such Guarantee Period expires). A
positive Market Value Adjustment will apply to amounts currently invested in a
Guarantee Period that are paid out as death benefits. We will not apply a Market
Value Adjustment to a transfer you make as part of a Dollar Cost Averaging
Program. We also will not apply a Market Value Adjustment to a withdrawal you
make:
.. within the Preferred Withdrawal Amount as described on page 20, or
.. to satisfy the IRS minimum distribution rules for a qualified Contract.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time it is
removed from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the Treasury Rate for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the time remaining in the
Guarantee Period when you remove your money. "TREASURY RATE" means the U.S.
Treasury Note Constant Maturity Yield as reported in Federal Reserve Board
Statistical Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal of your
Contract Value to an amount that is less than the purchase payment plus interest
at the minimum guaranteed interest rate under the Contract.
Generally, if the Treasury Rate at the time you allocate money to a Guarantee
Period is higher than the applicable current Treasury Rate for a period equal to
the time remaining in the Guarantee Period, then the Market Value Adjustment
will result in a higher amount payable to you or transferred. Conversely, if the
Treasury Rate at the time you allocate money to a Guarantee Period is lower than
the applicable Treasury Rate for a period equal to the time remaining in the
Guarantee Period, then the Market Value Adjustment will result in a lower amount
payable to you or transferred.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5 year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 2 year Treasury Rate is 4.20%, then the Market
Value Adjustment will be positive, which will result in an increase in the
amount payable to you. Conversely, if the current 2 year Treasury Rate is 4.80%,
then the Market Value Adjustment will be
16 PROSPECTUS
negative, which will result in a decrease in the amount payable to you.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
INVESTMENT ALTERNATIVES: TRANSFERS
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. The minimum amount that you may transfer into a
Guarantee Period is $500. You may request transfers in writing on a form that we
provided or by telephone according to the procedure described below. We
currently do not assess, but reserve the right to assess, a $10 charge on each
transfer in excess of 12 per Contract Year. We treat transfers to or from more
than one Portfolio on the same day as one transfer. Transfers you make as part
of a Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program do
not count against the 12 free transfers per Contract Year.
We will process transfer requests that we receive before 4:00 p.m. Eastern Time
(3:00 p.m. Central Time) on any Valuation Date using the Accumulation Unit
Values for that Date. We will process requests completed after 4:00 p.m. Eastern
Time (3:00 p.m. Central Time) on any Valuation Date using the Accumulation Unit
Values for the next Valuation Date. The Contract permits us to defer transfers
from the Fixed Account for up to 6 months from the date we receive your request.
If we decide to postpone transfers from the Fixed Account for 10 days or more,
we will pay interest as required by applicable law. Any interest would be
payable from the date we receive the transfer request to the date we make the
transfer.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment. If any transfer reduces your value in such
Guarantee Period to less than $500, we will treat the request as a transfer of
the entire value in such Guarantee Period.
We reserve the right to waive any transfer fees and restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
to change the relative weighting of the Variable Sub-Accounts on which your
variable income payments will be based. In addition, you will have a limited
ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive fixed income payments
into variable income payments.
You may not make any transfers for the first 6 months after the Payout Start
Date. Thereafter, you may make transfers among the Variable Sub-Accounts or make
transfers from the Variable Sub-Accounts to increase the proportion of your
income payments consisting of fixed income payments. Your transfers must be at
least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-632-3492, if you first send
us a completed authorization form. The cut off-time for telephone transfer
requests is 4:00 p.m. Eastern Time (3:00 p.m. Central Time). In the event that
the New York Stock Exchange closes early, i.e., before 4:00 p.m. Eastern Time
(3:00 p.m. Central Time), or in the event that the Exchange closes early for a
period of time but then reopens for trading on the same day, we will process
telephone transfer requests as of the close of the Exchange on that particular
day. We will not accept telephone requests received at any telephone number
other than the number that appears in this paragraph or received after the close
of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privilege, as well as
any other electronic or automated means we previously approved, at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
MARKET TIMING & EXCESSIVE TRADING
The Contracts are intended for long-term investment. Market timing and excessive
trading can potentially dilute the value of Variable Sub-Accounts and can
disrupt management of a Portfolio and raise its expenses, which can impair
Portfolio performance. Our policy is not to accept knowingly any money intended
for the purpose of market timing or excessive trading. Accordingly, you should
not invest in the Contract if your purpose is to engage in market timing or
excessive trading, and you should refrain from such practices if you currently
own a Contract.
17 PROSPECTUS
We seek to detect market timing or excessive trading activity by reviewing
trading activities. Portfolios also may report suspected market-timing or
excessive trading activity to us. If, in our judgment, we determine that the
transfers are part of a market timing strategy or are otherwise harmful to the
underlying Portfolio, we will impose the trading limitations as described below
under "Trading Limitations." Because there is no universally accepted definition
of what constitutes market timing or excessive trading, we will use our
reasonable judgment based on all of the circumstances.
While we seek to deter market timing and excessive trading in Variable
Sub-Accounts, not all market timing or excessive trading is identifiable or
preventable. Imposition of trading limitations is triggered by the detection of
market timing or excessive trading activity, and the trading limitations are not
applied prior to detection of such trading activity. Therefore, our policies and
procedures do not prevent such trading activity before it first occurs. To the
extent that such trading activity occurs prior to detection and the imposition
of trading restrictions, the portfolio may experience the adverse effects of
market timing and excessive trading described above.
TRADING LIMITATIONS
We reserve the right to limit transfers among the investment alternatives in any
Contract year, or to refuse any transfer request, if:
.. we believe, in our sole discretion, that certain trading practices, such as
excessive trading, by, or on behalf of, one or more Contract Owners, or a
specific transfer request or group of transfer requests, may have a
detrimental effect on the Accumulation Unit Values of any Variable
Sub-Account or on the share prices of the corresponding Portfolio or
otherwise would be to the disadvantage of other Contract Owners; or
.. we are informed by one or more of the Portfolios that they intend to
restrict the purchase, exchange, or redemption of Portfolio shares because
of excessive trading or because they believe that a specific transfer or
group of transfers would have a detrimental effect on the prices of
Portfolio shares.
In making the determination that trading activity constitutes market timing or
excessive trading, we will consider, among other things:
.. the total dollar amount being transferred, both in the aggregate and in the
transfer request;
.. the number of transfers you make over a period of time and/or the period of
time between transfers (note: one set of transfers to and from a
sub-account in a short period of time can constitute market timing);
.. whether your transfers follow a pattern that appears designed to take
advantage of short term market fluctuations, particularly within certain
Sub-account underlying portfolios that we have identified as being
susceptible to market timing activities;
.. whether the manager of the underlying portfolio has indicated that the
transfers interfere with portfolio management or otherwise adversely impact
the portfolio; and
.. the investment objectives and/or size of the Sub-account underlying
portfolio.
If we determine that a contract owner has engaged in market timing or excessive
trading activity, we will restrict that contract owner from making future
additions or transfers into the impacted Sub-account(s). If we determine that a
contract owner has engaged in a pattern of market timing or excessive trading
activity involving multiple Sub-accounts, we will also require that all future
transfer requests be submitted through regular U.S. mail thereby refusing to
accept transfer requests via telephone, facsimile, Internet, or overnight
delivery. Any Sub-account or transfer restrictions will be uniformly applied.
In our sole discretion, we may revise our Trading Limitations at any time as
necessary to better deter or minimize market timing and excessive trading or to
comply with regulatory requirements.
DOLLAR COST AVERAGING PROGRAM
Through the Dollar Cost Averaging Program, you may automatically transfer a set
amount every month during the Accumulation Phase from any Variable Sub-Account,
the Six Month Dollar Cost Averaging Fixed Account, or the Twelve Month Dollar
Cost Averaging Fixed Account, to any other Variable Sub-Account. You may not use
dollar cost averaging to transfer amounts to the Fixed Account.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfers count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
The theory of dollar cost averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market.
Call or write us for instructions on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Variable Sub-Account may cause a shift in the percentage you
allocated to each Variable Sub-Account. If you select our Automatic Portfolio
Rebalancing Program, we will
18 PROSPECTUS
automatically rebalance the Contract Value in each Variable Sub-Account and
return it to the desired percentage allocations. Money you allocate to the Fixed
Account will not be included in the rebalancing.
We will rebalance your account each quarter according to your instructions. We
will transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone. The new allocation will be effective
with the first rebalancing that occurs after we receive your request. We are not
responsible for rebalancing that occurs prior to receipt of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Sub-Accounts. You want 40% to be in the AIM V.I. Capital Appreciation Variable
Sub-Account and 60% to be in the Fidelity VIP Growth Variable Sub-Account. Over
the next 2 months the bond market does very well while the stock market performs
poorly. At the end of the first quarter, the AIM V.I. Capital Appreciation
Variable Sub-Account now represents 50% of your holdings because of its increase
in value. If you choose to have your holdings rebalanced quarterly, on the first
day of the next quarter we would sell some of your units in the AIM V.I. Capital
Appreciation Variable Sub-Account and use the money to buy more units in the
Fidelity VIP Growth Variable Sub-Account so that the percentage allocations
would again be 40% and 60% respectively.
The Automatic Portfolio Rebalancing Program is available only during the
Accumulation Phase. The transfers made under the Program do not count towards
the 12 transfers you can make without paying a transfer fee, and are not subject
to a transfer fee.
Portfolio rebalancing is consistent with maintaining your allocation of
investments among market segments, although it is accomplished by reducing your
Contract Value allocated to the better performing segments.
You may not use the Dollar Cost Averaging and the Automatic Portfolio
Rebalancing programs at the same time.
EXPENSES
As a Contract Owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$30 contract maintenance charge from your Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. We also will deduct a
full contract maintenance charge if you withdraw your entire Contract Value,
unless your Contract qualifies for a waiver, described below. During the Payout
Phase, we will deduct the charge proportionately from each income payment.
The charge is for the cost of maintaining each Contract and the Variable
Account. Maintenance costs include expenses we incur in billing and collecting
purchase payments; keeping records; processing death claims, cash withdrawals,
and policy changes; proxy statements; calculating Accumulation Unit Values and
income payments; and issuing reports to Contract Owners and regulatory agencies.
We cannot increase the charge. We will waive this charge if:
.. total purchase payments equal $50,000 or more, or
.. all of your money is allocated to the Fixed Account on a Contract
Anniversary.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.15%
of the average daily net assets you have invested in the Variable Sub-Accounts.
The mortality and expense risk charge is for all the insurance benefits
available with your Contract (including our guarantee of annuity rates and the
death benefits), for certain expenses of the Contract, and for assuming the risk
(expense risk) that the current charges will be sufficient in the future to
cover the cost of administering the Contract. If the charges under the Contract
are not sufficient, then we will bear the loss.
We guarantee the mortality and expense risk charge and we cannot increase it. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that exceed the
revenues from the contract maintenance charge. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We guarantee that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or Automatic Portfolio
Rebalancing Program.
19 PROSPECTUS
WITHDRAWAL CHARGE
We may assess a Withdrawal Charge of up to 7% of the purchase payment(s) you
withdraw in excess of the Preferred Withdrawal Amount, adjusted by a Market
Value Adjustment. The charge declines by 1% annually to 0% after 7 complete
years from the day we receive the purchase payment being withdrawn. Beginning on
January 1, 2004, if you make a withdrawal before the Payout Start Date, we will
apply the Withdrawal Charge percentage in effect on the date of the withdrawal,
or the Withdrawal Charge percentage in effect on the following day, whichever is
lower. A schedule showing how the Withdrawal Charge declines appears on page 7.
During each Contract Year, you can withdraw up to 15% of purchase payments
without paying the Withdrawal Charge. Unused portions of this 15% "PREFERRED
WITHDRAWAL AMOUNT" are not carried forward to future Contract Years.
We determine the Withdrawal Charge by:
.. multiplying the percentage corresponding to the number of complete years
since we received the purchase payment being withdrawn, times
.. the part of each purchase payment withdrawal that is in excess of the
Preferred Withdrawal Amount, adjusted by a Market Value Adjustment.
We will deduct Withdrawal Charges, if applicable, from the amount paid. For
purposes of the Withdrawal Charge, we will treat withdrawals as coming from the
oldest purchase payments first. However, for federal income tax purposes, please
note that withdrawals are considered to have come first from earnings in the
Contract, which means you pay taxes on the earnings portion of your withdrawal.
We do not apply a Withdrawal Charge in the following situations:
.. on the Payout Start Date (a Withdrawal Charge may apply if you elect to
receive income payments for a specified period of less than 120 months);
.. the death of the Contract Owner or Annuitant (unless the Settlement Value
is used);
.. withdrawals taken to satisfy IRS required minimum distribution rules for
the Contract; or
.. withdrawals made after all purchase payments have been withdrawn.
We use the amounts obtained from the Withdrawal Charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the Withdrawal Charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals taken during the Accumulation Phase are generally considered to come
from the earnings in the Contract first. If the Contract is tax-qualified,
generally all withdrawals are treated as distributions of earnings. Withdrawals
of earnings are taxed as ordinary income and, if taken prior to age 59 1/2, may
be subject to an additional 10% federal tax penalty. Withdrawals may also be
subject to a Market Value Adjustment. You should consult your own tax counsel or
other tax advisers regarding any withdrawals.
PREMIUM TAXES
Currently, we do not make deductions for premium taxes under the Contract
because New York does not charge premium taxes on annuities. We may deduct taxes
that may be imposed in the future from purchase payments or the Contract Value
when the tax is incurred or at a later time.
DEDUCTION FOR VARIABLE ACCOUNT INCOME TAXES
We are not currently making a provision for such taxes. In the future, however,
we may make a provision for taxes if we determine, in our sole discretion, that
we will incur a tax as a result of the operation of the Variable Account. We
will deduct for any taxes we incur as a result of the operation of the Variable
Account, whether or not we previously made a provision for taxes and whether or
not it was sufficient. Our status under the Internal Revenue Code is briefly
described in the Federal Tax Matters section.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectuses for the Portfolios. For a summary of the maximum and
minimum amounts for these charges and expenses, see pages 8-9. We may receive
compensation from the investment advisers or administrators of the Portfolios
for administrative services we provide to the Portfolios.
20 PROSPECTUS
ACCESS TO YOUR MONEY
You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. Full or partial withdrawals also are available under limited
circumstances on or after the Payout Start Date. See "Income Plans" on page 22.
The amount payable upon withdrawal is the Contract Value next computed after we
receive the request for a withdrawal at our customer service center, adjusted by
any Market Value Adjustment, less any Withdrawal Charges, contract maintenance
charges, income tax withholding, and any premium taxes. We will pay withdrawals
from the Variable Account within 7 days of receipt of the request, subject to
postponement in certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account. To
complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
Withdrawal Charge and premium taxes.
Withdrawals taken during the Accumulation Phase are generally considered to come
from the earnings in the Contract first. If the Contract is tax-qualified,
generally all withdrawals are treated as distributions of earnings. Withdrawals
of earnings are taxed as ordinary income and, if taken prior to age 59 1/2, may
be subject to an additional 10% federal tax penalty.
You have the opportunity to name the investment alternative(s) from which you
are taking the withdrawal. If none is specified, we will deduct your withdrawal
pro-rata from the investment alternatives according to the value of your
investments therein.
In general, you must withdraw at least $50 at a time. You also may withdraw a
lesser amount if you are withdrawing your entire interest in a Variable
Sub-Account.
If you request a total withdrawal, you must return your Contract to us.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account for up to
6 months or a shorter period if required by law. If we delay payment or transfer
for 10 business days or more, we will pay interest as required by law. Any
interest would be payable from the date we receive the withdrawal request to the
date we make the payment or transfer.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. At our
discretion, systematic withdrawals may not be offered in conjunction with the
Dollar Cost Averaging Program or the Automatic Portfolio Rebalancing Program.
Depending on fluctuations in the net asset value of the Variable Sub-Accounts
and the value of the Fixed Account, systematic withdrawals may reduce or even
exhaust the Contract Value. Please consult your tax advisor before taking any
withdrawal.
We will make systematic withdrawal payments to you or your designated payee. We
may modify or suspend the Systematic Withdrawal Program and charge a processing
fee for the service. If we modify or suspend the Systematic Withdrawal Program,
existing systematic withdrawal payments will not be affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce the amount in any
Guarantee Period to less than $500, we will treat it as a request to withdraw
the entire amount invested in such Guarantee Period. If your request for a
partial withdrawal would reduce your Contract Value to less than $1,000, we may
treat it as a request to withdraw your entire Contract Value. Your Contract will
terminate if you withdraw all of your Contract Value. We will, however, ask you
to confirm your withdrawal request before terminating your Contract. Before
terminating any Contract whose value has been reduced by withdrawals to less
than $1,000, we will inform you in writing of our intention to terminate your
Contract and give you at least 30 days in which to make an additional purchase
payment to restore your Contract's value to the contractual minimum of $1,000.
If we terminate your Contract, we will distribute to you its Contract Value,
adjusted by any applicable Market Value Adjustment, less withdrawal and other
charges and applicable taxes.
21 PROSPECTUS
INCOME PAYMENTS
PAYOUT START DATE
The Payout Start Date is the day that we apply your money to an Income Plan. The
Payout Start Date must be no later than the day the Annuitant reaches age 90, or
the 10th Contract Anniversary, if later. You may change the Payout Start Date at
any time by notifying us in writing of the change at least 30 days before the
scheduled Payout Start Date. Absent a change, we will use the Payout Start Date
stated in your Contract.
INCOME PLANS
An "Income Plan" is a series of payments on a scheduled basis to you or to
another person designated by you. You may choose and change your choice of
Income Plan until 30 days before the Payout Start Date. If you do not select an
Income Plan, we will make income payments in accordance with Income Plan 1 with
guaranteed payments for 10 years if you have designated only one Annuitant, or
Income Plan 2 with guaranteed payments for 10 years if you have designated joint
Annuitants. After the Payout Start Date, you may not make withdrawals (except as
described below) or change your choice of Income Plan.
Three Income Plans are available under the Contract. Each is available to
provide:
.. fixed income payments;
.. variable income payments; or
.. a combination of the two.
A portion of each payment will be considered taxable and the remaining portion
will be a non-taxable return of your investment in the Contract, which is also
called the "basis". Once the basis in the Contract is depleted, all remaining
payments will be fully taxable. If the Contract is tax-qualified, generally, all
payments will be fully taxable. Taxable payments taken prior to age 59 1/2, may
be subject to an additional 10% federal tax penalty.
The three Income Plans are:
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract. The number of months guaranteed may be 0 months, or range from
60 to 360 months.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as required by
the Contract. The number of months guaranteed may be 0 months, or range from 60
to 360 months.
INCOME PLAN 3 - GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30
YEARS). Under this plan, we make periodic income payments for the period you
have chosen. These payments do not depend on the Annuitant's life. Income
payments for less than 120 months may be subject to a withdrawal charge. We will
deduct the mortality and expense risk charge from the Variable Sub-Account
assets that support variable income payments even though we may not bear any
mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant is alive before
we make each payment.
Please note that under such Income Plans, if you elect to take no minimum
guaranteed payments, it is possible that the payee could receive only 1 income
payment if the Annuitant and any joint Annuitant both die before the second
income payment, or only 2 income payments if they die before the third income
payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or part of the Variable Account portion of
the income payments at any time and receive a lump sum equal to the present
value of the remaining variable income payments associated with the amount
withdrawn. To determine the present value of any remaining variable income
payments being withdrawn, we use a discount rate equal to the assumed annual
investment rate that we use to compute such variable income payments. The
minimum amount you may withdraw under this feature is $1,000. A withdrawal
charge may apply. You will also have a limited ability to make transfers from
the Variable Account portion of the income payments to increase the proportion
of your income payments consisting of fixed income payments. You may not,
however, convert any
22 PROSPECTUS
portion of your right to receive fixed income payments into variable income
payments. We deduct applicable premium taxes, if any, from the Contract Value at
the Payout Start Date. New York does not currently impose a Premium Tax.
We may make other Income Plans available. You may obtain information about them
by writing or calling us.
You must apply at least the Contract Value in the Fixed Account on the Payout
Start Date to fixed income payments. If you wish to apply any portion of your
Fixed Account balance to provide variable income payments, you should plan ahead
and transfer that amount to the Variable Sub-Accounts prior to the Payout Start
Date. If you do not tell us how to allocate your Contract Value among fixed and
variable income payments, we will apply your Contract Value in the Variable
Account to variable income payments and your Contract Value in the Fixed Account
to fixed income payments.
We will apply your Contract Value, adjusted by a Market Value Adjustment, less
applicable taxes to your Income Plan on the Payout Start Date. If the Contract
Value is less than $2,000 or not enough to provide an initial payment of at
least $20, and state law permits, we may:
.. terminate the Contract and pay you the Contract Value, adjusted by any
Market Value Adjustment and less any applicable taxes, in a lump sum
instead of the periodic payments you have chosen, or
.. reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Portfolio and (b) the Annuitant could live longer or shorter than we
expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate. Please refer to the
Statement of Additional Information for more detailed information as to how we
determine variable income payments.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from the Fixed Account for the
duration of the Income Plan. We calculate the fixed income payments by:
1. adjusting the portion of the Contract Value in the Fixed Account on the
Payout Start Date by any applicable Market Value Adjustment;
2. deducting any applicable premium tax; and
3. applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as
we are offering at that time.
We may defer making fixed income payments for a period of up to 6 months or such
shorter time as state law may require. If we defer payments for 10 business days
or more, we will pay interest as required by law from the date we receive the
withdrawal request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
applicable law. In certain employment-related situations, employers are required
by law to use the same income payment tables for men and women. Accordingly, if
the Contract is to be used in connection with an employment-related retirement
or benefit plan and we do not offer unisex annuity tables in your state, you
should consult with legal counsel as to whether the purchase of a Contract is
appropriate.
23 PROSPECTUS
DEATH BENEFITS
We will pay the death proceeds prior to the Payout Start Date on:
(a) the death of any Contract Owner, or
(b) the death of the Annuitant, if the Contract is owned by a non-living
person.
We will pay the death proceeds to the new Contract Owner as determined
immediately after the death. The new Contract Owner would be a surviving
Contract Owner or, if none, the Beneficiary(ies). In the case of a Contract
owned by a non-living owner, upon the death of the Annuitant, we will pay the
death proceeds to the current Contract Owner.
We will determine the value of the death proceeds as of the end of the Valuation
Date on which we receive a complete request for settlement of the death
proceeds. If we receive a request after 3 p.m. Central Time on a Valuation Date,
we will process the request as of the end of the following Valuation Date.
A complete request for settlement of the death proceeds must include DUE PROOF
OF DEATH. We will accept the following documentation as "Due Proof of Death:"
.. a certified copy of the death certificate,
.. a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
.. any other proof acceptable to us.
DEATH PROCEEDS If we receive a complete request for settlement of the death
proceeds within 180 days of the date of the death of any Contract Owner, or the
death of the Annuitant, if the Contract is owned by a non-living owner, the
death proceeds are equal to the Death Benefit described below. Otherwise, the
death proceeds are equal to the greater of the Contract Value or the Settlement
Value.
We reserve the right to extend, on a non-discriminatory basis, the 180-day
period in which the death proceeds will equal the Death Benefit as described
below. This right applies only to the amount payable as death proceeds and in no
way restricts when a claim may be filed.
If we do not receive a complete request for settlement of the death proceeds
within 180 days of the date of death, the death proceeds are equal to the
greater of:
1) the Contract Value as of the date we determine the death proceeds; or
2) the Settlement Value as of the date we determine the death proceeds.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the Death Benefit is equal to the greatest of:
1. the Contract Value as of the date we receive a complete request for
settlement of the death proceeds, or
2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value) on the date we determine the death proceeds, or
3. the Contract Value on the Death Benefit Anniversary immediately preceding
the date we receive a complete request for settlement of the death
proceeds, adjusted by any purchase payments, withdrawal adjustment as
defined below, and charges made since that Death Benefit Anniversary. A
"DEATH BENEFIT ANNIVERSARY" is every seventh Contract Anniversary beginning
with the Issue Date. For example, the Issue Date, 7th and 14th Contract
Anniversaries are the first three Death Benefit Anniversaries, or
4. the greatest of the Anniversary Values as of the date we receive a complete
request for settlement of the death proceeds. An "ANNIVERSARY VALUE" is
equal to the Contract Value on a Contract Anniversary, increased by
purchase payments made since that Anniversary and reduced by the amount of
any withdrawal adjustment, as defined below, since that anniversary.
Anniversary Values will be calculated for each Contract Anniversary prior
to the earlier of:
(i) the date we determine the death benefit, or
(ii) the deceased's 75th birthday or 5 years after the Issue Date, if later.
The withdrawal adjustment is equal to (a) divided by (b), with the result
multiplied by (c), where:
(a) = the withdrawal amount,
(b) = the Contract Value immediately prior to the withdrawal, and
(c) = the value of the applicable death benefit alternative immediately prior to
the withdrawal.
See Appendix C for an example representative of how the withdrawal adjustment
applies.
In calculating the Settlement Value, the amount in each individual Guarantee
Period may be subject to a Market Value Adjustment. A Market Value Adjustment
will apply to amounts in a Guarantee Period, unless we calculate the Settlement
Value during the 30-day period after the expiration of the Guarantee Period.
Also, the Settlement Value will reflect the deduction of any applicable
Withdrawal Charges, contract maintenance charges, and premium taxes. Contract
maintenance charges will be pro rated for the part of the Contract Year elapsed
as of the date we determine the Settlement Value, unless your Contract qualifies
for a waiver of such charges described in the "Contract Maintenance Charge"
section above.
DEATH BENEFIT PAYMENTS
DEATH OF OWNER
24 PROSPECTUS
1. If your spouse is the sole surviving Contract Owner, or is the sole
Beneficiary:
a. Your spouse may elect to receive the Death Proceeds in a lump sum; or
b. Your spouse may elect to receive the Death Proceeds paid out under one of
the Income Plans (described in "Income Payments" above), subject to the
following conditions:
The Payout Start Date must be within one year of your date of death. Income
payments must be payable:
i. over the life of your spouse; or
ii. for a guaranteed number of payments from 5 to 50 years but not to exceed
the life expectancy of your spouse; or
iii. over the life of your spouse with a guaranteed number of payments from 5 to
30 years but not to exceed the life expectancy of your spouse.
c. If your spouse does not elect one of these options, the Contract will
continue in the Accumulation Phase as if the death had not occurred. If the
Contract is continued in the Accumulation Phase, the following conditions
apply: The Contract Value of the continued Contract will be the Death
Proceeds. Unless otherwise instructed by the continuing spouse, the excess,
if any, of the Death Proceeds over the Contract Value will be allocated to
the Sub-Accounts of the Variable Account. This excess will be allocated in
proportion to your Contract Value in those Variable Sub-Accounts as of the
end of the Valuation Date on which we receive the complete request for
settlement of the Death Proceeds (the next Valuation Date if we receive the
request after 3:00 p.m. Central Time), except that any portion of this
excess attributable to the Fixed Account Options will be allocated to the
money market Variable Sub-Account. Within 30 days of the date the Contract
is continued, your surviving spouse may choose one of the following
transfer alternatives without incurring a transfer fee:
i. transfer all or a portion of the excess among the Variable Sub-accounts;
ii. transfer all or a portion of the excess into the Fixed Account and begin a
new Guarantee Period; or
iii. transfer all or a portion of the excess into a combination of Variable
Sub-Accounts and the Fixed Account.
Any such transfer does not count as one of the free transfers allowed each
Contract Year and is subject to any minimum allocation amount specified in the
Contract.
The surviving spouse may make a single withdrawal of any amount within one year
of the date of your death without incurring a Withdrawal Charge or Market Value
Adjustment.
Prior to the Payout Start Date, the Death Proceeds of the continued Contract
will be described under "Death Benefit Amount."
Only one spousal continuation is allowed under the Contract.
2. If the new Contract Owner is not your spouse but is a living person or if
there are multiple living-person new Contract Owners:
a. The new Contract Owner may elect to receive the Death Proceeds in a lump
sum; or
b. The new Contract Owner may elect to receive the Death Proceeds paid out
under one of the Income Plans (described in "Income Payments" on page 22),
subject to the following conditions:
The Payout Start Date must be within one year of your date of death. Income
payments must be payable:
i. over the life of the new Contract Owner; or
ii. for a guaranteed number of payments from 5 to 50 years but not to exceed
the life expectancy of the new Contract Owner; or
iii. over the life of the new Contract Owner with a guaranteed number of
payments from 5 to 30 years but not to exceed the life expectancy of the
new Contract Owner.
c. If the new Contract Owner does not elect one of the options above, then the
new Contract Owner must receive the Contract Value payable within 5 years
of your date of death. The Contract Value will equal the amount of the
Death Proceeds as determined as of the end of the Valuation Date on which
we receive a complete request for settlement of the Death Proceeds (the
next Valuation Date if we receive the request after 3:00 p.m. Central
Time). Unless otherwise instructed by the new Contract Owner, the excess,
if any, of the Death Proceeds over the Contract Value will be allocated to
the money market Variable Sub-Account. Henceforth, the new Contract Owner
may make transfers (as described in "Transfers During the Payout Phase" on
page 18) during this 5 year period. No additional purchase payments may be
added to the Contract under this election. Withdrawal Charges will be
waived for any withdrawals made during this 5 year period.
We reserve the right to offer additional options upon the death of the Contract
Owner.
If the new Contract Owner dies prior to the complete liquidation of the Contract
Value, then the new Contract Owner's named Beneficiary(ies) will receive the
greater of the Settlement Value or the remaining Contract Value. This amount
must be liquidated as a lump sum within 5 years of the date of the original
Contract Owner's death.
25 PROSPECTUS
3. If the new Contract Owner is a corporation or other type of non-living
person:
a. The new Contract Owner may elect to receive the Death Proceeds in a lump
sum; or
b. If the new Contract Owner does not elect the option above, then the new
Contract Owner must receive the Contract Value payable within 5 years of
your date of death. The Contract Value will equal the amount of the Death
Proceeds as determined as of the end of the Valuation Date on which we
receive a complete request for settlement of the Death Proceeds (the next
Valuation Date if we receive the request after 3:00 p.m. Central Time).
Unless otherwise instructed by the new Contract Owner, the excess, if any,
of the Death Proceeds over the Contract Value will be allocated to the
money market Variable Sub-Account. Henceforth, the new Contract Owner may
make transfers (as described in "Transfers During the Payout Phase" on page
18) during this 5 year period.
No additional purchase payments may be added to the Contract under this
election. Withdrawal charges will be waived during this 5 year period.
We reserve the right to make additional options available to the new Contract
Owner upon the death of the Contract Owner.
If any new Contract Owner is a non-living person, all new Contract Owners will
be considered to be non-living persons for the above purposes. Under any of
these options, all ownership rights, subject to any restrictions previously
placed upon the Beneficiary, are available to the new Contract Owner from the
date of your death to the date on which the Death Proceeds is paid.
DEATH OF ANNUITANT
If the Annuitant who is not also the Contract Owner dies prior to the Payout
Start Date, the following apply:
1. If the Contract Owner is a living person, then the Contract will continue
with a new Annuitant, who will be:
a. the youngest Contract Owner; otherwise
b. the youngest Beneficiary. You may change the Annuitant before the Payout
Start Date.
2. If the Contract Owner is a non-living person:
a. The Contract Owner may elect to receive the Death Proceeds in a lump sum;
or
b. If the Contract Owner does not elect the option above, then the Contract
Owner must receive the Contract Value payable within 5 years of the
Annuitant's date of death. The Contract Value will equal the amount of the
Death Proceeds as determined as of the end of the Valuation Date on which
we receive a complete request for settlement of the Death Proceeds (the
next Valuation Date if we receive the request after 3:00 p.m. Central
Time). Unless otherwise instructed by the Contract Owner, the excess, if
any, of the Death Proceeds over the Contract Value will be allocated to the
money market Variable Sub-Account. Henceforth, the Contract Owner may make
transfers (as described in "Transfers During the Payout Phase" on page 18)
during this 5 year period.
No additional purchase payments may be added to the Contract under this
election. Withdrawal Charges will be waived during this 5 year period.
We reserve the right to make additional options available to the Contract Owner
upon the death of the Annuitant.
Under any of these options, all ownership rights are available to the non-living
Contract Owner from the date of the Annuitant's death to the date on which the
Death Proceeds is paid.
MORE INFORMATION
ALLSTATE NEW YORK
Allstate New York is the issuer of the Contract. Allstate New York is a stock
life insurance company organized under the laws of the State of New York.
Allstate New York was incorporated in 1967 and was known as "Financial Life
Insurance Company" from 1967 to 1978. From 1978 to 1984, Allstate New York was
known as "PM Life Insurance Company." Since 1984 the company has been known as
"Allstate Life Insurance Company of New York."
Allstate New York is currently licensed to operate in New York. Our home office
is located at 100 Motor Parkway, Hauppauge, New York 11788-5107.
Allstate New York is a wholly owned subsidiary of Allstate Life Insurance
Company ("Allstate Life"), a stock life insurance company incorporated under the
laws of the State of Illinois. Allstate Life is a wholly owned subsidiary of
Allstate Insurance Company, a stock property-liability insurance company
incorporated under the laws of the State of Illinois. With the exception of the
directors' qualifying shares, all of the outstanding capital stock of Allstate
Insurance Company is owned by The Allstate Corporation.
THE VARIABLE ACCOUNT
Allstate New York established the Allstate Life of New York Separate Account A
on December 15, 1995. We have registered the Variable Account with the SEC as a
unit investment trust. The SEC does not supervise the
26 PROSPECTUS
management of the Variable Account or Allstate New York.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under New York law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
Allstate New York.
The Variable Account consists of multiple Variable Sub-Accounts, 24 of which are
available through the Contracts. Each Variable Sub-Account invests in a
corresponding Portfolio. We may add new Variable Sub-Accounts or eliminate one
or more of them, if we believe marketing, tax, or investment conditions so
warrant. We do not guarantee the investment performance of the Variable Account,
its Sub-Accounts or the Portfolios. We may use the Variable Account to fund our
other annuity contracts. We will account separately for each type of annuity
contract funded by the Variable Account.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract Owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date, the person receiving income
payments has the voting interest. The payee's number of votes will be determined
by dividing the reserve for such Contract allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Portfolio. The
votes decrease as income payments are made and as the reserves for the Contract
decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted on a pro-rata basis to reduce the votes eligible
to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer
available for investment by the Variable Account or if, in our judgment, further
investment in such shares is no longer desirable in view of the purposes of the
Contract, we may eliminate that Portfolio and substitute shares of another
eligible investment portfolio. Any substitution of securities will comply with
the requirements of the Investment Company Act of 1940. We also may add new
Variable Sub-Accounts that invest in additional Portfolios. We will notify you
in advance of any changes.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to Variable
Accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance Variable Accounts and variable annuity Variable Accounts to invest in
the same Portfolio. The boards of directors of these Portfolios monitor for
possible conflicts among Variable Accounts buying shares of the Portfolios.
Conflicts could develop for a variety of reasons. For example, differences in
treatment under tax and other laws or the failure by a Variable Account to
comply with such laws could cause a conflict. To eliminate a conflict, a
Portfolio's board of directors may require a Variable Account to withdraw its
participation in a Portfolio. A Portfolio's net asset value could decrease if it
had to sell investment securities to pay redemption proceeds to a Variable
Account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. ALFS, Inc. ("ALFS"), located at 3100 Sanders Road, Northbrook,
Illinois 60062, serves as principal underwriter of the Contracts. ALFS is a
wholly owned subsidiary of Allstate Life Insurance Company. ALFS is a registered
broker-dealer under the Securities and Exchange Act of 1934, as amended
("Exchange Act"), and is a member of the NASD, Inc.
The Contracts described in this prospectus are sold by registered
representatives of broker-dealers who are our licensed insurance agents, either
individually or through an incorporated insurance agency. Commissions paid to
27 PROSPECTUS
broker-dealers may vary, but we estimate that the total commissions paid on all
Contract sales to broker-dealers will not exceed 8.5% of any purchase payments.
These commissions are intended to cover distribution expenses.
From time to time, we may offer additional sales incentives of up to 1% of
purchase payments to broker-dealers who maintain certain sales volume levels.
Allstate New York does not pay ALFS a commission for distribution of the
Contracts. The underwriting agreement with ALFS provides that we will reimburse
ALFS for any liability to Contract Owners arising out of services rendered or
Contracts issued.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
.. issuance of the Contracts;
.. maintenance of Contract Owner records;
.. Contract Owner services;
.. calculation of unit values;
.. maintenance of the Variable Account; and
.. preparation of Contract Owner reports.
We will send you Contract statements and transaction confirmations at least
annually. The annual statement details values and specific Contract data for
each particular Contract. You should notify us promptly in writing of any
address change. You should read your statements and confirmations carefully and
verify their accuracy. You should contact us promptly if you have a question
about a periodic statement. We will investigate all complaints and make any
necessary adjustments retroactively, but you must notify us of a potential error
within a reasonable time after the date of the questioned statement. If you wait
too long, we will make the adjustment as of the date that we receive notice of
the potential error. We also will provide you with additional periodic and other
reports, information and prospectuses as may be required by federal securities
laws.
NON-QUALIFIED ANNUITIES HELD WITHIN A QUALIFIED PLAN
If you use the Contract within an employer sponsored qualified retirement plan,
the plan may impose different or additional conditions or limitaitons on
withdrawals, waivers of withdrawal charges, death benefits, Payout Start Dates,
income payments, and other Contract features. In addition, adverse tax
consequences may result if qualified plan limits on distributions and other
conditions are not met. Please consult your qualified plan administrator for
more information. Allstate Life Insurance Company of New York no longer issues
deferred annuities to employer spnsored qualified retirement plans.
LEGAL MATTERS
All matters of New York law pertaining to the Contracts, including the validity
of the Contracts and Allstate New York's right to issue such Contracts under New
York insurance law, have been passed upon by Michael J. Velotta, General Counsel
of Allstate New York.
28 PROSPECTUS
FEDERAL TAX MATTERS
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. ALLSTATE
NEW YORK MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
Allstate New York is taxed as a life insurance company under Part I of
Subchapter L of the Code. Since the Variable Account is not an entity separate
from Allstate New York, and its operations form a part of Allstate New York, it
will not be taxed separately. Investment income and realized capital gains of
the Variable Account are automatically applied to increase reserves under the
Contract. Under existing federal income tax law, Allstate New York believes that
the Variable Account investment income and capital gains will not be taxed to
the extent that such income and gains are applied to increase the reserves under
the Contract. Accordingly, Allstate New York does not anticipate that it will
incur any federal income tax liability attributable to the Variable Account, and
therefore Allstate New York does not intend to make provisions for any such
taxes. If Allstate New York is taxed on investment income or capital gains of
the Variable Account, then Allstate New York may impose a charge against the
Variable Account in order to make provision for such taxes.
TAXATION OF VARIABLE ANNUITIES IN GENERAL
TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
.. the Contract Owner is a natural person,
.. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
.. Allstate New York is considered the owner of the Variable Account assets
for federal income tax purposes.
NON-NATURAL OWNERS. Non-natural owners are also referred to as Non Living Owners
in this prospectus. As a general rule, annuity contracts owned by non-natural
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. The income on such contracts
does not enjoy tax deferral and is taxed as ordinary income received or accrued
by the non-natural owner during the taxable year.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE. There are several exceptions to the
general rule that annuity contracts held by a non-natural owner are not treated
as annuity contracts for federal income tax purposes. Contracts will generally
be treated as held by a natural person if the nominal owner is a trust or other
entity which holds the contract as agent for a natural person. However, this
special exception will not apply in the case of an employer who is the nominal
owner of an annuity contract under a non-Qualified deferred compensation
arrangement for its employees. Other exceptions to the non-natural owner rule
are: (1) contracts acquired by an estate of a decedent by reason of the death of
the decedent; (2) certain qualified contracts; (3) contracts purchased by
employers upon the termination of certain qualified plans; (4) certain contracts
used in connection with structured settlement agreements; and (5) immediate
annuity contracts, purchased with a single premium, when the annuity starting
date is no later than a year from purchase of the annuity and substantially
equal periodic payments are made, not less frequently than annually, during the
annuity period.
GRANTOR TRUST OWNED ANNUITY. Contracts owned by a grantor trust are considered
owned by a non-natural owner. Grantor trust owned contracts receive tax deferral
as described in the Exceptions to the Non-Natural Owner Rule section. In
accordance with the Code, upon the death of the annuitant, the death benefit
must be paid. According to your Contract, the Death Benefit is paid to the
surviving Contract Owner. Since the trust will be the surviving Contract Owner
in all cases, the Death Benefit will be payable to the trust notwithstanding any
beneficiary designation on the annuity contract. A trust, including a grantor
trust, has two options for receiving any death benefits: 1) a lump sum payment;
or 2) payment deferred up to five years from date of death.
DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract owner during the taxable
year. Although Allstate New York does not have control over the Portfolios or
their investments, we expect the Portfolios to meet the diversification
requirements.
OWNERSHIP TREATMENT. The IRS has stated that a contract owner will be considered
the owner of separate account assets if he possesses incidents of ownership in
those assets, such as the ability to exercise investment control over the
assets. At the time the diversification regulations were issued, the Treasury
Department
29 PROSPECTUS
announced that the regulations do not provide guidance concerning circumstances
in which investor control of the separate account investments may cause a
Contract owner to be treated as the owner of the separate account. The Treasury
Department also stated that future guidance would be issued regarding the extent
that owners could direct sub-account investments without being treated as owners
of the underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
private and published rulings in which it found that Contract owners were not
owners of separate account assets. For example, if your contract offers more
than twenty (20) investment alternatives you have the choice to allocate
premiums and contract values among a broader selection of investment
alternatives than described in such rulings. You may be able to transfer among
investment alternatives more frequently than in such rulings. These differences
could result in you being treated as the owner of the Variable Account. If this
occurs, income and gain from the Variable Account assets would be includible in
your gross income. Allstate New York does not know what standards will be set
forth in any regulations or rulings which the Treasury Department may issue. It
is possible that future standards announced by the Treasury Department could
adversely affect the tax treatment of your Contract. We reserve the right to
modify the Contract as necessary to attempt to prevent you from being considered
the federal tax owner of the assets of the Variable Account. However, we make no
guarantee that such modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a Non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a full withdrawal
under a Non-Qualified Contract, the amount received will be taxable only to the
extent it exceeds the investment in the Contract.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a Non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If any variable payment is less than the excludable amount you should
contact a competent tax advisor to determine how to report any unrecovered
investment. The federal tax treatment of annuity payments is unclear in some
respects. As a result, if the IRS should provide further guidance, it is
possible that the amount we calculate and report to the IRS as taxable could be
different. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is possible that a greater or lesser portion of such a payment could be
taxable than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
.. if any Contract Owner dies on or after the Payout Start Date but before the
entire interest in the Contract has been distributed, the remaining portion
of such interest must be distributed at least as rapidly as under the
method of distribution being used as of the date of the Contract Owner's
death;
.. if any Contract Owner dies prior to the Payout Start Date, the entire
interest in the Contract will be distributed within 5 years after the date
of the Contract Owner's death. These requirements are satisfied if any
portion of the Contract Owner's interest that is payable to (or for the
benefit of) a designated Beneficiary is distributed over the life of such
Beneficiary (or over a period not extending beyond the life expectancy of
the Beneficiary) and the distributions begin within 1 year of the Contract
Owner's death. If the Contract Owner's designated Beneficiary is the
surviving spouse of the Contract Owner, the Contract may be continued with
the surviving spouse as the new Contract Owner;
.. if the Contract Owner is a non-natural person, then the Annuitant will be
treated as the Contract Owner for purposes of applying the distribution at
death rules. In addition, a change in the Annuitant on a Contract owned by
a non-natural person will be treated as the death of the Contract Owner.
TAXATION OF ANNUITY DEATH BENEFITS. Death Benefit amounts are included in income
as follows:
.. if distributed in a lump sum, the amounts are taxed in the same manner as a
total withdrawal, or
.. if distributed under an Income Plan, the amounts are taxed in the same
manner as annuity payments.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any
30 PROSPECTUS
premature distribution from a non-Qualified Contract. The penalty tax generally
applies to any distribution made prior to the date you attain age 59 1/2.
However, no penalty tax is incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or becoming totally
disabled,
.. made in substantially equal periodic payments over the Contract Owner's
life or life expectancy, or over the joint lives or joint life expectancies
of the Contract Owner and the Beneficiary,
.. made under an immediate annuity, or
.. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS. With respect to non-Qualified Contracts
using substantially equal periodic payments or immediate annuity payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the Contract Owner's attaining age 59 1/2 would be
subject to a 10% penalty tax unless another exception to the penalty tax
applied. The tax for the year of the modification is increased by the penalty
tax that would have been imposed without the exception, plus interest for the
years in which the exception was used. A material modification does not include
permitted changes described in published IRS rulings. You should consult a
competent tax advisor prior to creating or modifying a substantially equal
periodic payment stream.
TAX FREE EXCHANGES UNDER INTERNAL REVENUE CODE SECTION 1035. A 1035 exchange is
a tax-free exchange of a non-qualified life insurance contract, endowment
contract or annuity contract into a non-Qualified annuity contract. The contract
owner(s) must be the same on the old and new contract. Basis from the old
contract carries over to the new contract so long as we receive that information
from the relinquishing company. If basis information is never received, we will
assume that all exchanged funds represent earnings and will allocate no cost
basis to them.
PARTIAL EXCHANGES. The IRS has issued a ruling that permits partial exchanges of
annuity contracts. Under this ruling, if you take a withdrawal from a receiving
or relinquishing annuity contract within 24 months of the partial exchange, then
special aggregation rules apply for purposes of determining the taxable amount
of a distribution. The IRS has issued limited guidance on how to aggregate and
report these distributions. The IRS is expected to provide further guidance; as
a result, it is possible that the amount we calculate and report to the IRS as
taxable could be different. Your Contract may not permit partial exchanges.
TAXATION OF OWNERSHIP CHANGES. If you transfer a non-Qualified Contract without
full and adequate consideration to a person other than your spouse (or to a
former spouse incident to a divorce), you will be taxed on the difference
between the Contract Value and the investment in the Contract at the time of
transfer. Any assignment or pledge (or agreement to assign or pledge) of the
Contract Value is taxed as a withdrawal of such amount or portion and may also
incur the 10% penalty tax.
AGGREGATION OF ANNUITY CONTRACTS. The Code requires that all non-Qualified
deferred annuity contracts issued by Allstate New York (or its affiliates) to
the same Contract Owner during any calendar year be aggregated and treated as
one annuity contract for purposes of determining the taxable amount of a
distribution.
INCOME TAX WITHHOLDING
Generally, Allstate New York is required to withhold federal income tax at a
rate of 10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold the required 10% of the taxable
amount. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Allstate New York is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. If no U.S. taxpayer identification number is
provided, we will automatically withhold using single with zero exemptions as
the default. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Allstate New York as a withholding
agent must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien.
Withholding may be reduced or eliminated if covered by an income tax treaty
between the U.S. and the non-resident alien's country of residence if the payee
provides a U.S. taxpayer identification number on a fully completed Form W-8BEN.
A U.S. taxpayer identification number is a social security number or an
individual taxpayer identification number ("ITIN"). ITINs are issued by the IRS
to non-resident alien individuals who are not eligible to obtain a social
security number. The U.S. does not have a tax treaty with all
31 PROSPECTUS
countries nor do
all tax treaties provide an exclusion or lower withholding rate for annuities.
TAX QUALIFIED CONTRACTS
The income on tax sheltered annuity (TSA) and IRA investments is tax deferred,
and the income from annuities held by such plans does not receive any additional
tax deferral. You should review the annuity features, including all benefits and
expenses, prior to purchasing an annuity as a TSA or IRA. Tax Qualified
Contracts are contracts purchased as or in connection with:
.. Individual Retirement Annuities (IRAs) under Code Section 408(b);
.. Roth IRAs under Code Section 408A;
.. Simplified Employee Pension (SEP IRA) under Code Section 408(k);
.. Savings Incentive Match Plans for Employees (SIMPLE IRA) under Code Section
408(p);
.. Tax Sheltered Annuities under Code Section 403(b);
.. Corporate and Self Employed Pension and Profit Sharing Plans under Code
Section 401; and
.. State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans under Code Section 457.
Allstate New York reserves the right to limit the availability of the Contract
for use with any of the retirement plans listed above or to modify the Contract
to conform with tax requirements. If you use the Contract within an employer
sponsored qualified retirement plan, the plan may impose different or additional
conditions or limitations on withdrawals, waiver of charges, death benefits,
Payout Start Dates, income payments, and other Contract features. In addition,
adverse tax consequences may result if qualified plan limits on distributions
and other conditions are not met. Please consult your qualified plan
administrator for more information. Allstate New York no longer issues deferred
annuities to employer sponsored qualified retirement plans.
The tax rules applicable to participants with tax qualified annuities vary
according to the type of contract and the terms and conditions of the
endorsement. Adverse tax consequences may result from certain transactions such
as excess contributions, premature distributions, and, distributions that do not
conform to specified commencement and minimum distribution rules. Allstate New
York can issue an individual retirement annuity on a rollover or transfer of
proceeds from a decedent's IRA, TSA, or employer sponsored retirement plan under
which the decedent's surviving spouse is the beneficiary. Allstate New York does
not offer an individual retirement annuity that can accept a transfer of funds
for any other, non-spousal, beneficiary of a decedent's IRA, TSA, or employer
sponsored qualified retirement plan.
Please refer to your Endorsement for IRAs or 403(b) plans, if applicable, for
additional information on your death settlement options. In the case of certain
qualified plans, the terms of the Qualified Plan Endorsement and the plans may
govern the right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM AN INDIVIDUALLY OWNED TAX QUALIFIED CONTRACT. If
you make a partial withdrawal under a Tax Qualified Contract other than a Roth
IRA, the portion of the payment that bears the same ratio to the total payment
that the investment in the Contract (i.e., nondeductible IRA contributions)
bears to the Contract Value, is excluded from your income. We do not keep track
of nondeductible contributions, and generally all tax reporting of distributions
from Tax Qualified Contracts other than Roth IRAs will indicate that the
distribution is fully taxable.
"Qualified distributions" from Roth IRAs are not included in gross income.
"Qualified distributions" are any distributions made more than five taxable
years after the taxable year of the first contribution to any Roth IRA and which
are:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made to a beneficiary after the Contract Owner's death,
.. attributable to the Contract Owner being disabled, or
.. made for a first time home purchase (first time home purchases are subject
to a lifetime limit of $10,000).
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, Tax Qualified Contracts (excluding
Roth IRAs) require minimum distributions upon reaching age 70 1/2. Failure to
withdraw the required minimum distribution will result in a 50% tax penalty on
the shortfall not withdrawn from the Contract. Not all income plans offered
under the Contract satisfy the requirements for minimum distributions. Because
these distributions are required under the Code and the method of calculation is
complex, please see a competent tax advisor.
THE DEATH BENEFIT AND TAX QUALIFIED CONTRACTS. Pursuant to the Code and IRS
regulations, an IRA (e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE IRA)
may not invest in life insurance contracts. However, an IRA may provide a death
benefit that equals the greater of the purchase payments or the Contract Value.
The Contract offers a death benefit that in certain circumstances may exceed the
greater of the purchase payments or the Contract Value. We believe that the
Death Benefits offered by your Contract do not constitute life insurance under
these regulations.
32 PROSPECTUS
It is also possible that certain death benefits that offer enhanced earnings
could be characterized as an incidental death benefit. If the death benefit were
so characterized, this could result in current taxable income to a Contract
Owner. In addition, there are limitations on the amount of incidental death
benefits that may be provided under qualified plans, such as in connection with
a TSA or employer sponsored qualified retirement plan.
Allstate New York reserves the right to limit the availability of the Contract
for use with any of the qualified plans listed above.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM TAX QUALIFIED CONTRACTS. A 10%
penalty tax applies to the taxable amount of any premature distribution from a
Tax Qualified Contract. The penalty tax generally applies to any distribution
made prior to the date you attain age 59 1/2. However, no penalty tax is
incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or total disability,
.. made in substantially equal periodic payments over the Contract Owner's
life or life expectancy, or over the joint lives or joint life expectancies
of the Contract Owner and the Beneficiary,
.. made after separation from service after age 55 (does not apply to IRAs),
.. made pursuant to an IRS levy,
.. made for certain medical expenses,
.. made to pay for health insurance premiums while unemployed (applies only
for IRAs),
.. made for qualified higher education expenses (applies only for IRAs), and
.. made for a first time home purchase (up to a $10,000 lifetime limit and
applies only for IRAs).
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject to the premature distribution penalty,
will be subject to a 25% penalty tax.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON TAX QUALIFIED CONTRACTS. With respect
to Tax Qualified Contracts using substantially equal periodic payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the taxpayer's attaining age 59 1/2 would be subject to
a 10% penalty tax unless another exception to the penalty tax applied. The tax
for the year of the modification is increased by the penalty tax that would have
been imposed without the exception, plus interest for the years in which the
exception was used. A material modification does not include permitted changes
described in published IRS rulings. You should consult a competent tax advisor
prior to creating or modifying a substantially equal periodic payment stream.
INCOME TAX WITHHOLDING ON TAX QUALIFIED CONTRACTS. Generally, Allstate New York
is required to withhold federal income tax at a rate of 10% from all
non-annuitized distributions that are not considered "eligible rollover
distributions." The customer may elect out of withholding by completing and
signing a withholding election form. If no election is made, we will
automatically withhold the required 10% from the taxable amount. In certain
states, if there is federal withholding, then state withholding is also
mandatory. Allstate New York is required to withhold federal income tax at a
rate of 20% on all "eligible rollover distributions" unless you elect to make a
"direct rollover" of such amounts to an IRA or eligible retirement plan.
Eligible rollover distributions generally include all distributions from Tax
Qualified Contracts, including TSAs but excluding IRAs, with the exception of:
.. required minimum distributions, or,
.. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
.. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
.. hardship distributions.
For all annuitized distributions that are not subject to the 20% withholding
requirement, Allstate New York is required to withhold federal income tax using
the wage withholding rates. The customer may elect out of withholding by
completing and signing a withholding election form. If no election is made, we
will automatically withhold using married with three exemptions as the default.
If no U.S. taxpayer identification number is provided, we will automatically
withhold using single with zero exemptions as the default. In certain states, if
there is federal withholding, then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Allstate New York as a withholding
agent must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien or to
certain other 'foreign persons'. Withholding may be reduced or eliminated if
covered by an income tax treaty between the U.S. and the non-resident alien's
country of residence if the payee provides a U.S. taxpayer identification number
on a fully completed Form W-8BEN. A U.S. taxpayer
33 PROSPECTUS
identification number is a social security number or an individual taxpayer
identification number ("ITIN"). ITINs are issued by the IRS to non-resident
alien individuals who are not eligible to obtain a social security number. The
U.S. does not have a tax treaty with all countries nor do all tax treaties
provide an exclusion or lower withholding rate for annuities.
INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408(b) permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity (IRA). Individual Retirement Annuities are subject
to limitations on the amount that can be contributed and on the time when
distributions may commence. Certain distributions from other types of qualified
retirement plans may be "rolled over" on a tax-deferred basis into an Individual
Retirement Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408A permits eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth Individual Retirement Annuity. Roth Individual
Retirement Annuities are subject to limitations on the amount that can be
contributed and on the time when distributions may commence.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "rolled over" to a Roth Individual Retirement
Annuity. The income portion of a conversion or rollover distribution is taxable
currently, but is exempted from the 10% penalty tax on premature distributions.
ANNUITIES HELD BY INDIVIDUAL RETIREMENT ACCOUNTS (COMMONLY KNOWN AS CUSTODIAL
IRAS). Code Section 408 permits a custodian or trustee of an Individual
Retirement Account to purchase an annuity as an investment of the Individual
Retirement Account. If an annuity is purchased inside of an Individual
Retirement Account, then the Annuitant must be the same person as the beneficial
owner of the Individual Retirement Account.
Generally, the death benefit of an annuity held in an Individual Retirement
Account must be paid upon the death of the Annuitant. However, in most states,
the Contract permits the custodian or trustee of the Individual Retirement
Account to continue the Contract in the accumulation phase, with the Annuitant's
surviving spouse as the new Annuitant, if the following conditions are met:
1) The custodian or trustee of the Individual Retirement Account is the owner
of the annuity and has the right to the death proceeds otherwise payable
under the Contract;
2) The deceased Annuitant was the beneficial owner of the Individual
Retirement Account;
3) We receive a complete request for settlement for the death of the
Annuitant; and
4) The custodian or trustee of the Individual Retirement Account provides us
with a signed certification of the following:
(a) The Annuitant's surviving spouse is the sole beneficiary of the Individual
Retirement Account;
(b) The Annuitant's surviving spouse has elected to continue the Individual
Retirement Account as his or her own Individual Retirement Account; and
(c) The custodian or trustee of the Individual Retirement Account has continued
the Individual Retirement Account pursuant to the surviving spouse's
election.
SIMPLIFIED EMPLOYEE PENSION IRA. Code Section 408(k) allows eligible employers
to establish simplified employee pension plans for their employees using
individual retirement annuities. These employers may, within specified limits,
make deductible contributions on behalf of the employees to the individual
retirement annuities. Employers intending to use the Contract in connection with
such plans should seek competent tax advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE IRA). Code Section 408(p)
allows eligible employers with 100 or fewer employees to establish SIMPLE
retirement plans for their employees using individual retirement annuities. In
general, a SIMPLE IRA consists of a salary deferral program for eligible
employees and matching or nonelective contributions made by employers. Employers
intending to purchase the Contract as a SIMPLE IRA should seek competent tax and
legal advice.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAS
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
TAX SHELTERED ANNUITIES. Code Section 403(b) provides tax-deferred retirement
savings plans for employees of certain non-profit and educational organizations.
Under Section 403(b), any contract used for a 403(b) plan must provide that
distributions attributable to salary reduction contributions made after
12/31/88, and all earnings on salary reduction contributions, may be made only
on or after the date the employee:
.. attains age 59 1/2,
.. severs employment,
.. dies,
.. becomes disabled, or
.. incurs a hardship (earnings on salary reduction contributions may not be
distributed on account of hardship).
These limitations do not apply to withdrawals where Allstate New York is
directed to transfer some or all of the Contract Value to another 403(b) plan.
Generally, we do
34 PROSPECTUS
not accept funds in 403(b) contracts that are subject to the Employee Retirement
Income Security Act of 1974 (ERISA).
ANNUAL REPORTS AND OTHER DOCUMENTS
Allstate New York's Annual Report on Form 10-K for the year ended December 31,
2004, is incorporated herein by reference, which means that it is legally a part
of this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0000839759. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http://www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at Customer Service, P.O. Box 82656, Lincoln, NE 68501-2656
(telephone: 1-800-632-3492).
35 PROSPECTUS
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED*
[Enlarge/Download Table]
For the period beginning January 1 and ending December 31, 2000 2001 2002 2003 2004
------------------------------------------------------------------------------------------------------------------
AIM V.I. CAPITAL APPRECIATION - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 7.63 $ 5.779 $ 4.317 $ 5.521
Accumulation Unit Value, End of Period $ 7.63 $ 5.779 $ 4.317 $ 5.521 $ 5.813
Number of Units Outstanding, End of Period 1,991 35,576 91,317 117,184 160,308
AIM V.I. CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.18 $ 6.231 $ 5.195 $ 6.382
Accumulation Unit Value, End of Period $ 8.18 $ 6.231 $ 5.195 $ 6.382 $ 6.868
Number of Units Outstanding, End of Period 1,488 34,966 62,419 79,425 94,314
AIM V.I. DIVERSIFIED INCOME - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.99 $ 10.223 $ 10.328 $ 11.141
Accumulation Unit Value, End of Period $ 9.99 $ 10.223 $ 10.328 $ 11.141 $ 11.555
Number of Units Outstanding, End of Period 364 5,443 24,375 33,509 47,763
AIM V.I. INTERNATIONAL GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.66 $ 6.538 $ 5.444 $ 9.938
Accumulation Unit Value, End of Period $ 8.66 $ 6.538 $ 5.444 $ 9.938 $ 8.496
Number of Units Outstanding, End of Period 305 11,638 15,358 20,763 28,603
AIM V.I. PREMIER EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.67 $ 7.482 $ 5.153 $ 6.365
Accumulation Unit Value, End of Period $ 8.67 $ 7.482 $ 5.153 $ 6.365 $ 6.648
Number of Units Outstanding, End of Period 21,939 71,223 158,710 177,633 197,713
FIDELITY VIP CONTRAFUND(R) - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.39 $ 8.138 $ 7.285 $ 9.242
Accumulation Unit Value, End of Period $ 9.39 $ 8.138 $ 7.285 $ 9.242 $ 10.539
Number of Units Outstanding, End of Period 2,196 31,995 97,646 147,589 197,911
FIDELITY VIP GROWTH - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.53 $ 6.934 $ 4.786 $ 6.279
Accumulation Unit Value, End of Period $ 8.53 $ 6.934 $ 4.786 $ 6.279 $ 6.410
Number of Units Outstanding, End of Period 27,151 90,481 208,536 257,920 354,754
FIDELITY VIP HIGH INCOME - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.40 $ 7.317 $ 7.474 $ 9.393
Accumulation Unit Value, End of Period $ 8.40 $ 7.317 $ 7.474 $ 9.393 $ 10.166
Number of Units Outstanding, End of Period 33 20,582 43,029 63,385 103,282
FIDELITY VIP INDEX 500 - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.04 $ 7.845 $ 6.025 $ 7.640
Accumulation Unit Value, End of Period $ 9.04 $ 7.845 $ 6.025 $ 7.640 $ 8.345
Number of Units Outstanding, End of Period 0 67,571 215,402 267,570 404,671
FIDELITY VIP INVESTMENT GRADE BOND - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.44 $ 11.179 $ 12.181 $ 12.655
Accumulation Unit Value, End of Period $ 10.44 $ 11.179 $ 12.181 $ 12.655 $ 13.054
Number of Units Outstanding, End of Period 132 26,618 143,699 202, 195,735
FIDELITY VIP OVERSEAS - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.97 $ 6.982 $ 5.496 $ 7.781
Accumulation Unit Value, End of Period $ 8.97 $ 6.982 $ 5.496 $ 7.781 $ 8.732
Number of Units Outstanding, End of Period 92 25,188 36,513 43,249 52,535
MFS RESEARCH BOND - INITIAL CLASS SUB-ACCOUNT **
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.39 $ 11.150 $ 11.993 $ 12.949
Accumulation Unit Value, End of Period $ 10.39 $ 11.150 $ 11.993 $ 12.949 $ 13.563
Number of Units Outstanding, End of Period 0 18,271 100,799 121,895 110,249
36 PROSPECTUS
[Enlarge/Download Table]
MFS HIGH INCOME - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.22 $ 9.298 $ 9.417 $ 10.969
Accumulation Unit Value, End of Period $ 9.22 $ 9.298 $ 9.417 $ 10.969 $ 11.823
Number of Units Outstanding, End of Period 108 10,338 9,733 15,277 49,548
MFS INVESTORS TRUST - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.73 $ 8.078 $ 6.305 $ 7.605
Accumulation Unit Value, End of Period $ 9.73 $ 8.078 $ 6.305 $ 7.605 $ 8.363
Number of Units Outstanding, End of Period 0 27,560 73,504 87,690 114,180
MFS NEW DISCOVERY - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.89 $ 8.336 $ 5.628 $ 7.432
Accumulation Unit Value, End of Period $ 8.89 $ 8.336 $ 5.628 $ 7.432 $ 7.817
Number of Units Outstanding, End of Period 6,891 19,369 66,020 77,933 86,243
OPPENHEIMER CORE BOND/VA SUB-ACCOUNT ***
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.20 $ 10.857 $ 11.695 $ 12.332
Accumulation Unit Value, End of Period $ 10.20 $ 10.857 $ 11.695 $ 12.332 $ 12.847
Number of Units Outstanding, End of Period 0 25,776 106,484 121,184 143,175
OPPENHEIMER CAPITAL APPRECIATION/VA SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.95 $ 7.723 $ 5.578 $ 7.213
Accumulation Unit Value, End of Period $ 8.95 $ 7.723 $ 5.578 $ 7.213 $ 7.617
Number of Units Outstanding, End of Period 91 107,889 186,591 237,209 299,956
OPPENHEIMER GLOBAL SECURITIES/VA SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.63 $ 8.363 $ 6.431 $ 9.082
Accumulation Unit Value, End of Period $ 9.63 $ 8.363 $ 6.431 $ 9.082 $ 10.687
Number of Units Outstanding, End of Period 0 41,075 84,628 108,776 130,413
OPPENHEIMER HIGH INCOME/VA SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 9.46 $ 9.520 $ 9.176 $ 11.232
Accumulation Unit Value, End of Period $ 9.46 $ 9.520 $ 9.176 $ 11.232 $ 12.087
Number of Units Outstanding, End of Period 0 23,570 52,432 63,049 95,050
OPPENHEIMER MAIN STREET SMALL CAP/VA SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 8.73 $ 8.589 $ 7.146 $ 10.187
Accumulation Unit Value, End of Period $ 8.73 $ 8.589 $ 7.146 $ 10.187 $ 12.013
Number of Units Outstanding, End of Period 240 22,387 77,910 119,444 164,702
VAN KAMPEN LIT COMSTOCK, CLASS I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 11.58 $ 11.154 $ 8.894 $ 11.505
Accumulation Unit Value, End of Period $ 11.58 $ 11.154 $ 8.894 $ 11.505 $ 13.379
Number of Units Outstanding, End of Period 337 38,811 117,684 175,133 232,285
VAN KAMPEN LIT EMERGING GROWTH, CLASS I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 7.47 $ 5.053 $ 3.369 $ 4.237
Accumulation Unit Value, End of Period $ 7.47 $ 5.053 $ 3.369 $ 4.237 $ 4.478
Number of Units Outstanding, End of Period 16,637 65,356 138,721 171,774 182,412
VAN KAMPEN LIT GOVERNMENT, CLASS I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- $ 10.000 $ 10.642 $ 10.692
Accumulation Unit Value, End of Period -- -- $ 10.642 $ 10.692 $ 10.999
Number of Units Outstanding, End of Period -- -- 46,592 56,776 48,986
VAN KAMPEN LIT MONEY MARKET, CLASS I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.00 $ 10.14 $ 10.381 $ 10.377 $ 10.305
Accumulation Unit Value, End of Period $ 10.14 $ 10.381 $ 10.377 $ 10.305 $ 10.258
Number of Units Outstanding, End of Period 0 129,426 199,118 192,771 199,636
* The Contracts were first offered on September 22, 2000. The Accumulation
Unit Values in this table reflect a mortality and expense risk charge of
1.15% and an administrative expense charge of 0.10%. All of the Variable
Sub-Accounts were first offered under the Contracts on September 19, 2000,
with the exception of the Van Kampen LIT Government, Class I Sub-Account
that was first offered April 30, 2002.
** Effective May 1, 2005, the MFS Bond Series - Initial Class will change its
name to MFS Research Bond Series - Initial Class. We will make a
corresponding change in the name of the Variable Sub-Account that invests
in that Portfolio.
*** Effective Apil 29, 2005, the Oppenheimer Bond Fund/VA changed its name to
Oppenheimer Core Bond Fund/VA. We have made a corresponding change in the
name of the Variable Sub-Account that invests in that Portfolio.
37 PROSPECTUS
APPENDIX B MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the applicable Guarantee Period
for the week preceding the establishment of the Guarantee Period.
N = the number of whole and partial years from the date we receive the
withdrawal, transfer, or death benefit request, or from the Payout Start Date,
to the end of the Guarantee Period; and
J = the Treasury Rate for a maturity equal to N years for the week preceding the
receipt of the withdrawal, transfer, death benefit, or income payment request.
If a note for a maturity of length N is not available, a weighted average will
be used.
"Treasury Rate" means the U.S. Treasury Note Constant Maturity Yield as reported
in Federal Reserve Board Statistical Release H.15.
The Market Value Adjustment factor is determined from the following formula:
..9 X (I - J) X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred (in excess of the Preferred
Withdrawal Amount) paid as a death benefit, or applied to an Income Plan, from a
Guarantee Period at any time other than during the 30 day period after such
Guarantee Period expires.
38 PROSPECTUS
EXAMPLES OF MARKET VALUE ADJUSTMENT
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Guaranteed Interest Rate: 4.50%
5 Year Treasury Rate at the time the Guarantee Period is established: 4.50%
Full Surrender: End of Contract Year 3
NOTE: These examples assume that premium taxes are not applicable.
EXAMPLE 1 (ASSUME DECLINING INTEREST RATES)
Step 1. Calculate Contract $10,000.00 X (1.045)/3/ = $11,411.66
Value at End of Contract Year
3:
Step 2. Calculate the Preferred .15 X
$10,000.00 = $1,500.00 Withdrawal Amount:
Step 3. Calculate the Market I = 4.5%
Value Adjustment: J = 4.2%
730 days
N = -------- = 2
365 days
Market Value Adjustment Factor: .9 X (I - J) X
N = .9 X (.045 - .042) X (730/365) = .0054
Market Value Adjustment = Market Value
Adjustment Factor X Amount Subject to Market
Value Adjustment:
= .0054 X ($11,411.66 - $1,500.00) = $53.32
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1. Calculate Contract $10,000.00 X (1.045)/3/ = $11,411.66
Value at End of Contract Year 3:
Step 2. Calculate the Preferred .15 X
$10,000.00 = $1,500.00 Withdrawal Amount:
Step 3. Calculate the Market I = 4.5%
Value Adjustment: J = 4.8%
730 days
N = -------- = 2
365 days
Market Value Adjustment Factor: .9 X (I - J) X
N = .9 X (.045 - .048) X (730/365) = -.0054
Market Value Adjustment = Market Value
Adjustment Factor X Amount Subject to Market
Value Adjustment:
= -.0054 X ($11,411.66 - $1,500.00) = -$53.52
39 PROSPECTUS
APPENDIX C WITHDRAWAL ADJUSTMENT EXAMPLE
Issue Date: January 1, 2005
Initial Purchase Payment: $50,000
Death Benefit Amount
[Enlarge/Download Table]
-----------------------------------------------------------------------------------------------
Contract Contract Greatest
Type Value Before Transaction Value After Death Benefit Anniversary
Date of Occurrence Occurrence Amount Occurrence Anniversary Value
Value
-----------------------------------------------------------------------------------------------
1/1/05 IssueDate -- $50,000 $50,000 $50,000 $50,000
-----------------------------------------------------------------------------------------------
1/1/06 Contract $55,000 -- $55,000 $50,000 $55,000
Anniversary
-----------------------------------------------------------------------------------------------
7/1/06 Partial $60,000 $15,000 $45,000 $37,500 $41,250
Withdrawal
-----------------------------------------------------------------------------------------------
Withdrawal adjustment equals the partial withdrawal amount divided by the
Contract Value immediately prior to the partial withdrawal multiplied by the
value of the applicable death benefit amount alternative immediately prior to
the partial withdrawal.
[Enlarge/Download Table]
DEATH BENEFIT ANNIVERSARY VALUE DEATH BENEFIT
--------------------------------------------------------------------------------------------------------------
PARTIAL WITHDRAWAL AMOUNT (w) $15,000
--------------------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (a) $60,000
--------------------------------------------------------------------------------------------------------------
Value of Applicable Death Benefit Amount Immediately Prior to Partial (d) $50,000
Withdrawal
--------------------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(w)/(a)] X (d) $12,500
--------------------------------------------------------------------------------------------------------------
Adjusted Death Benefit $37,500
--------------------------------------------------------------------------------------------------------------
GREATEST ANNIVERSARY VALUE DEATH BENEFIT
--------------------------------------------------------------------------------------------------------------
PARTIAL WITHDRAWAL AMOUNT (w) $15,000
--------------------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (a) $60,000
--------------------------------------------------------------------------------------------------------------
Value of Applicable Death Benefit Amount Immediately Prior to Partial (d) $55,000
Withdrawal
--------------------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(w)/(a)] X (d) $13,750
--------------------------------------------------------------------------------------------------------------
Adjusted Death Benefit $41,250
--------------------------------------------------------------------------------------------------------------
Please remember that you are looking at a hypothetical example, and that your
investment performance may be greater or less than the figures shown.
40 PROSPECTUS
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Additions, Deletions or Substitutions of Investments
The Contract
Purchase of Contracts
Calculation of Accumulation Unit Values
Calculation of Variable Income Payments
General Matters
Incontestability
Settlements
Safekeeping of the Variable Account's Assets
Experts
Financial Statements
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
41 PROSPECTUS
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14.OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registrant anticipates that it will incur the following approximate expenses in
connection with the issuance and distribution of the securities to be
registered:
Registration fees................ $1,116
Cost of printing and engraving... $ 100
Legal fees....................... $ 0
Accounting fees.................. $3,000
Mailing fees..................... $2,100
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-laws of Allstate Life Insurance Company of New York ("Registrant")
provide that Registrant will indemnify all of its directors, former directors,
officers and former officers, to the fullest extent permitted under law, who
were or are a party or are threatened to be made a party to any proceeding by
reason of the fact that such persons were or are directors or officers of
Registrant, against liabilities, expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred by them. The indemnity shall not be
deemed exclusive of any other rights to which directors or officers may be
entitled by law or under any articles of incorporation, bylaw, agreement, vote
of stockholders or disinterested directors or otherwise. In addition, the
indemnity shall inure to the benefit of the legal representatives of directors
and officers or of their estates, whether such representatives are court
appointed or otherwise designated, and to the benefit of the heirs of such
directors and officers. The indemnity shall extend to and include claims for
such payments arising out of any proceeding commenced or based on actions of
such directors and officers taken prior to the effectiveness of this indemnity;
provided that payment of such claims had not been agreed to or denied by
Registrant before such date.
The directors and officers of Registrant have been provided liability insurance
for certain losses arising from claims or charges made against them while acting
in their capacities as directors or officers of Registrant.
ITEM 16. EXHIBITS.
Exhibit No. Description
(1) Form of Underwriting Agreement (Incorporated herein by reference to
Pre-Effective Amendment No. 1 to Registrant's Form N-4 Registration Statement
(File No. 033-65381) dated September 23, 1996.)
(2) None
(4)(a) Form of AIM Lifetime Plus(SM) Variable Annuity Contract (Incorporated
herein by reference to Pre-Effective Amendment No. 1 to Form N-4 Registration
Statement of Allstate Life of New York Separate Account A (File No. 033-65381)
dated September 23, 1996.)
(b) Form of AIM Lifetime Plus(SM) II Variable Annuity Contract (Incorporated
herein by reference to Post-Effective Amendment No. 4 to Form N-4 Registration
Statement of Allstate Life of New York Separate Account A (File No. 033-65381)
dated November 12, 1999.)
(c) Form of "Allstate Custom Portfolio," "Allstate Provider" or
"SelectDirections(SM)" Variable Annuity Contract (Incorporated herein by
reference to Form N-4 Registration Statement of Allstate Life of New York
Separate Account A (File No. 333-94785) dated January 14, 2000.)
(d) Form of Amendatory Endorsement to Add Dollar Cost Averaging Fixed Accounts
to the "Allstate Custom Portfolio", "Allstate Provider", or "SelectDirections"
Variable Annuity (Incorporated herein by reference to Post-Effective Amendment
No. 23 to Form N-4 Registration Statement of Allstate Life of New York Separate
Account A (File No. 333-94785) dated April 20, 2001.)
(e) Form of Amendatory Endorsement for Transfer Limitations under the "Allstate
Custom Portfolio", "Allstate Provider", or "SelectDirections" Variable Annuity
(Incorporated herein by reference to Post-Effective Amendment No. 23 to Form N-4
Registration Statement of Allstate Life of New York Separate Account A (File No.
333-94785) dated April 20, 2001.)
(f) Form of Death Benefit Endorsement (Previously filed in Post-Effective
Amendment No. 1 to this Registration Statement (File No. 333-100029) dated April
11, 2003.)
(5)(a) Opinion and Consent of General Counsel re: Legality (Incorporated herein
by reference to Pre-Effective Amendment No. 1 to Form S-3 Registration Statement
of Allstate Life Insurance Company of New York (File No. 033-65355) dated
September 23, 1996.)
(5)(b) Opinion and Consent of General Counsel re: Legality (Incorporated herein
by reference to Post-Effective Amendment No. 4 to Form S-3 Registration
Statement of Allstate Life Insurance Company of New York (File No. 033-65355)
dated November 12, 1999.)
(5)(c) Opinion and Consent of General Counsel re: Legality (Incorporated herein
by reference to Post-Effective Amendment No. 1 to the Form S-3 Registration
Statement (File No.333-95703) dated February 14, 2000.)
(5)(d) Opinion of General Counsel Re: Legality (Incorporated herein by reference
to Post-Effective Amendment No. 3 to the Form S-3 Registration Statement (File
No.333-95703) dated July 21, 2000.)
(5)(e) Opinion of General Counsel Re: Legality (Incorporated herein by reference
to Post-Effective Amendment No. 4 to the Registration Statement on Form S-3
(File No. 333-95703) dated August 21, 2000.)
(5)(f) Opinion of General Counsel Re: Legality (Incorporated herein by reference
to Registrant's Form S-3 Initial Registration Statement (File No. 333-61846)
dated May 30, 2001.)
(5)(g) Opinion of General Counsel Re: Securities registered (Previously filed in
Registrant's Form S-3 Initial Registration Statement (File No. 333-100029) dated
September 24, 2002.)
(5)(h) Opinion of General Counsel Re: Legality. Filed herewith.
(8) None
(11) None
(12) None
(15) Not applicable
(23) Consent of Independent Registered Public Accounting Firm. Filed herewith.
(24) Powers of Attorney for Marcia D. Alazraki, Michael B. Boyle, Frederick F.
Cripe, Robert J. Holden, Cleveland Johnson, Jr., Susan L. Lees, John C. Lounds,
Kenneth R. O'Brien, Samuel H. Pilch, John C. Pintozzi, John R. Raben, Jr.,
Phyllis H. Slater, and J. Eric Smith. Filed herewith.
(25) None
(26) None
(27) Not applicable
(99)(a) Form of Resolution of Board of Directors (Incorporated herein by
reference to Post-Effective Amendment No. 5 to Registrant's Form S-1
Registration Statement (File No. 033-47245) dated April 1, 1997.)
(99)(b) Experts. Filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to the registration statement:
(i) to include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; and provided,
however, that paragraphs (1)(i) and (1)(ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by
Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bonafide offering thereof;
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant, Allstate Life Insurance Company of New York, pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the
Township of Northfield, State of Illinois on the 24th day of March, 2009.
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(REGISTRANT)
By: /s/ SUSAN L. LEES
---------------------------------------
Susan L. Lees, Director, Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
24th day of March 2009.
*/MARCIA D. ALAZRAKI Director
-------------------------------------
Marcia D. Alazraki
*/MICHAEL B. BOYLE Director and Vice President
-------------------------------------
Michael B. Boyle
*/FREDERICK F. CRIPE Director, Chairman, President and Chief
------------------------------------- Executive Officer
Fredrick F. Cripe
*/ROBERT J. HOLDEN Director, Vice President and Chief
------------------------------------- Operations Officer
Robert J. Holden
*/CLEVELAND JOHNSON, JR. Director
-------------------------------------
Cleveland Johnson, Jr.
/s/ SUSAN L. LEES Director, Vice President, General
------------------------------------- Counsel and Secretary
Susan L. Lees
*/JOHN C. LOUNDS Director and Vice President
-------------------------------------
John C. Lounds
*/KENNETH R. O'BRIEN Director
-------------------------------------
Kenneth R. O'Brien
*/SAMUEL H. PILCH Controller and Group Vice President
------------------------------------- (Principal Accounting Officer)
Samuel H. Pilch
*/JOHN C. PINTOZZI Director, Vice President and Chief
------------------------------------- Financial Officer (Principal Financial
John C. Pintozzi Officer)
*/JOHN R. RABEN, JR. Director
-------------------------------------
John R. Raben, Jr.
*/PHYLLIS H. SLATER Director
-------------------------------------
Phyllis H. Slater
*/JOHN ERIC SMITH Director and Vice President
-------------------------------------
John Eric Smith
*/ By Susan L. Lees, pursuant to Power of Attorney filed herewith.
EXHIBIT LIST
The following exhibits are filed herewith:
Exhibit No. Description
(5)(h) Opinion and Consent of General Counsel re: Legality
(23) Consent of Independent Registered Public Accounting Firm
(24) Powers of Attorney for Marcia D. Alazraki, Michael B. Boyle, Frederick F.
Cripe, Robert J. Holden, Cleveland Johnson, Jr., Susan L. Lees, John C. Lounds,
Kenneth R. O'Brien, Samuel H. Pilch, John C. Pintozzi, John R. Raben, Jr.,
Phyllis H. Slater, and J. Eric Smith.
(99)(b) Experts
Dates Referenced Herein and Documents Incorporated by Reference
3 Subsequent Filings that Reference this Filing
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