 | Administrative Office: 4333 Edgewood Road NE Cedar Rapids, IA 52499 |
October 28, 2011
Mr. Craig Ruckman
Staff Attorney – Office of Insurance Products
Division of Investment Management
U.S. Securities and Exchange Commission
100 F Street NE
Washington, D.C. 20549-0506
| Re: | Initial Filing to the Registration Statement on Form N-4 for Transamerica Life Insurance Company, Separate Account |
| VA M (File No.333-177584) |
Dear Mr. Ruckman:
Enclosed is a copy of the Prospectus in the above-referenced filing with the complete information for the bracketed areas.
If you have any comments or questions, please call Sandy Dix at (319) 355-8427 or Darin Smith at (319) 355-8330.
Very truly yours,
/s/Darin D. Smith
Darin D. Smith
Division General Counsel
Enclosures
The information in this Prospectus is not complete and may be changed. This Prospectus is contained in a registration statement filed with the Securities and Exchange Commission and we may not sell these securities until that registration statement is effective. This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
PROSPECTUS (Subject to Completion , 2011)
FLEXIBLE PREMIUM VARIABLE ANNUITY - U
Issued Through
SEPARATE ACCOUNT VA M
By
TRANSAMERICA LIFE INSURANCE COMPANY
Prospectus
, 2011
This flexible premium deferred annuity policy has many investment choices. There is a separate account that currently provides a means of investing in various underlying fund portfolios. There is also a fixed account, which offers interest at rates that are guaranteed by Transamerica Life Insurance Company. You can choose any combination of these investment choices. You bear the entire investment risk for all amounts you put in the separate account.
This prospectus and the underlying fund prospectuses give you important information about the policies and the underlying fund portfolios. Please read them carefully before you invest and keep them for future reference.
If you would like more information about the Flexible Premium Variable Annuity - U, you can obtain a free copy of the Statement of Additional Information (SAI) dated , 2011. Please call us at (800) 525-6205 or write us at: Transamerica Life Insurance Company, Attention: Customer Care Group, 4333 Edgewood Road NE, Cedar Rapids, IA 52499-0001. A registration statement, including the SAI, has been filed with the Securities and Exchange Commission (SEC) and the SAI is incorporated herein by reference. More information about the variable annuity can be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may obtain information about the operation of the public reference room by calling the SEC at 1-800-732-0330. The SEC also maintains a web site (http://www.sec.gov) that contains the prospectus, the SAI, material incorporated by reference, and other information. The table of contents of the SAI is included at the end of this prospectus.
Please note that the policies fixed account, and separate account investment choices:
| • | are not bank deposits |
| • | are not federally insured |
| • | are not endorsed by any bank or government agency |
| • | are not guaranteed to achieve their goal |
| • | are subject to risks, including loss of premium |
The Securities and Exchange Commission has not approved or disapproved these securities, or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
PORTFOLIOS ASSOCIATED WITH THE SUBACCOUNTS
TRANSAMERICA SERIES TRUST
Portfolio Construction Manager: Morningstar Associates, LLC
TA Asset Allocation - Conservative – Service Class
TA Asset Allocation - Growth – Service Class
TA Asset Allocation - Moderate – Service Class
TA Asset Allocation - Moderate Growth – Service Class
TA International Moderate Growth – Service Class
Subadvised by AEGON USA Investment Management, LLC
TA AEGON Tactical Vanguard ETF - Balanced - Service Class
TA AEGON Tactical Vanguard ETF - Conservative - Service Class
TA AEGON Tactical Vanguard ETF - Growth - Service Class
TA AEGON Money Market – Service Class
TA AEGON U.S. Government Securities – Service Class
TA Efficient Markets - Service Class
TA Vanguard ETF Index – Agressive Growth – Service Class
TA Vanguard ETF Index – Balanced – Service Class
TA Vanguard ETF Index – Conservative – Service Class
TA Vanguard ETF Index – Growth – Service Class
Subadvised by Alliance Bernstein L.P.
TA AllianceBernstein Dynamic Allocation - Service Class
Subadvised by BlackRock Financial Management, Inc.
TA BlackRock Tactical Allocation - Service Class
Subadvised by Hanlon Investment Management, Inc.
TA Hanlon Balanced – Service Class
TA Hanlon Growth – Service Class
TA Hanlon Growth and Income – Service Class
TA Hanlon Income – Service Class
Managed by Janus Capital Management LLC
TA Janus Balanced – Service Class
Subadvised by J.P. Morgan Investment Management Inc.
TA JPMorgan Core Bond - Service Class
TA JPMorgan Mid Cap Value – Service Class TA
JPMorgan Tactical Allocation - Service Class
Subadvised by J.P. Morgan Investment Management Inc. and BlackRock Financial Management, Inc.
TA Multi-Managed Balanced – Service Class
Subadvised by Pacific Investment Management Company LLC
TA PIMCO Real Return TIPS - Service Class
TA PIMCO Total Return – Service Class
Advised by Transamerica Asset Management, Inc.
TA BlackRock Global Allocation - Service Class
Subadvised by AEGON USA Investment Management, LLC
TA AEGON High Yield Bond – Initial Class
Subadvised by BlackRock Investment Management, LLC
TA BlackRock Large Cap Value – Initial Class
Subadvised by CBRE Clarion Securities, LLC
TA Clarion Global Real Estate Securities – Initial Class
Subadvised by J.P. Morgan Investment Management Inc.
TA JPMorgan Enhanced Index – Initial Class
Subadvised by Jennison Associates LLC
TA Jennison Growth – Initial Class
Subadvised by MFS® Investment Management
TA MFS International Equity – Initial Class
Subadvised by Morgan Stanley Investment Management Inc.
TA Morgan Stanley Active International Allocation – Initial Class
TA Morgan Stanley Mid-Cap Growth – Initial Class
Subadvised by Morgan Stanley Investment Management Inc. and Invesco Advisers, Inc.
TA Multi Managed Large Cap Core - Initial Class
Subadvised by Systematic Financial Management L.P.
TA Systematic Small/Mid Cap Value - Initial Class
Subadvised by T. Rowe Price Associates, Inc.
TA T. Rowe Price Small Cap – Initial Class
Subadvised by Third Avenue Management LLC
TA Third Avenue Value - Initial Class
Subadvised by Wellington Management Company, LLP
TA WMC Diversified Growth – Initial Class
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TABLE OF CONTENTS continued
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Accumulation Unit— An accounting unit of measure used in calculating the policy value in the separate account before the annuity commencement date.
Adjusted Policy Value— The policy value increased or decreased by any excess interest adjustment.
Administrative and Service Office— Transamerica Life Insurance Company, Attention: Customer Care Group, 4333 Edgewood Road NE, Cedar Rapids, IA 52499-0001, (800) 525-6205.
Annuitant— The person on whose life any annuity payments involving life contingencies will be based.
Annuity Commencement Date— The date upon which annuity payments are to commence. This date may be any date after the policy date and may not be later than the last day of the policy month following the month after the annuitant attains age 95. The earliest annuity commencement date is at least thirty days after you purchase your policy. The annuity commencement date may have to be earlier for qualified policies and may be earlier if required by state law.
Annuity Payment Option— A method of receiving a stream of annuity payments selected by the owner.
Cash Value— The adjusted policy value less any rider fees (imposed upon surrender).
Excess Interest Adjustment— A positive or negative adjustment to amounts surrendered (both partial or full surrenders and transfers) or applied to annuity payment options from the fixed account guaranteed period options prior to the end of the guaranteed period. The adjustment reflects changes in the interest rates declared by the Company since the date any payment was received by, or an amount was transferred to, the guaranteed period option. The excess interest adjustment can either decrease or increase the amount to be received by the owner upon full surrender or commencement of annuity payments, depending upon whether there has been an increase or decrease in interest rates, respectively.
Fixed Account— One or more investment choices under the policy that are part of the Company’s general assets and are not in the separate account.
Free Amount— The amount that can be withdrawn each year without incurring any excess interest adjustment.
Guaranteed Lifetime Withdrawal Benefit— Any optional benefit under the policy that provides a guaranteed minimum withdrawal benefit, including the Retirement Income MaxSM Rider.
Guaranteed Period Options— The various guaranteed interest rate periods of the fixed account which the Company may offer and into which premium payments may be paid or amounts transferred.
Owner (You, Your)— The person who may exercise all rights and privileges under the policy. The owner during the lifetime of the annuitant and before the annuity commencement date is the person designated as the owner in the information that we require to issue a policy.
Policy Date— The date shown on the policy data page attached to the policy and the date on which the policy becomes effective.
Policy Value— On or before the annuity commencement date, the policy value is equal to the owner’s:
| • | premium payments; minus |
| • | gross partial surrenders (partial surrenders minus excess interest adjustments); plus |
| • | interest credited in the fixed account; plus |
| • | accumulated gains in the separate account; minus |
| • | accumulated losses in the separate account; minus |
| • | service charges, rider fees, premium taxes, transfer fees, and other charges, if any. |
Policy Year— A policy year begins on the policy date and on each anniversary thereof.
Separate Account— Separate Account VA M, a separate account established and registered as a unit investment trust under the Investment Company Act of 1940, as amended (the “1940 Act”), to which premium payments under the policies may be allocated.
Separate Account Value— The portion of the policy value that is invested in the separate account.
Subaccount— A subdivision within the separate account, the assets of which are invested in a specified underlying fund portfolio.
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Written Notice— Written notice, signed by the owner, that gives the Company the information it requires and is received in good order at the Administrative and Service Office. For some transactions, the Company may accept an electronic notice such as telephone instructions. Such electronic notice must meet the requirements for good order that the Company establishes for such notices.
You (Your)— the owner of the policy.
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The sections in this summary correspond to sections in this prospectus, which discuss the topics in more detail.
| 1. | THE ANNUITY POLICY |
The flexible premium deferred variable annuity policy offered by Transamerica Life Insurance Company (the Company, we, us, or our) provides a way for you to invest on a tax-deferred basis in the following investment choices: various subaccounts of the separate account and the fixed account of the Company. The policy is intended to accumulate money for retirement or other long-term investment purposes.
This policy currently offers subaccounts that are listed under “Investment Choices” in this prospectus. Each subaccount invests exclusively in shares of one of the underlying fund portfolios. The policy value may depend on the investment experience of the selected subaccounts. Therefore, you bear the entire investment risk with respect to all policy value in any subaccount. You could lose the amount that you invest.
The fixed account offers an interest rate that the Company guarantees.
The policy, like all deferred annuity policies, has two phases: the “accumulation phase” and the “income phase.” During the accumulation phase, earnings accumulate on a tax-deferred basis and are taxed as ordinary income when you take them out of the policy. The income phase occurs when you annuitize and begin receiving regular annuity payments from your policy. The money you can accumulate during the accumulation phase will largely determine the payments you receive during the income phase.
| 2. | PURCHASE |
The initial premium payment for nonqualified policies must be at least $5,000 or more, and at least $1,000 for qualified policies, under most circumstances. You must obtain prior Company approval to purchase a policy with an amount less than the stated minimum. You can generally add as little as $50 at any time during the accumulation phase.
| 3. | INVESTMENT CHOICES |
You can allocate your premium payments to one of several underlying fund portfolios listed under Investment Choices in this prospectus and described in the underlying fund prospectuses. Depending upon their investment performance, you can make or lose money in any of the subaccounts.
You can also allocate your premium payments to the fixed account.
We currently allow you to transfer money between any of the investment choices during the accumulation phase. We reserve the right to impose a $10 fee for each transfer in excess of 12 transfers per policy year and to impose restrictions and limitations on transfers.
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| 4. | PERFORMANCE |
The value of the policy will vary up or down depending upon the investment performance of the subaccounts you choose.
| 5. | EXPENSES |
No deductions are made from premium payments at the time you buy the policy so that the full amount of each premium payment is invested in one or more of your investment choices. If you select the Life with Emergency Cash® annuity payment option, then you can surrender your policy after annuity payments have begun. A surrender charge of up to 4% of policy value will apply during the first four years after the annuity commencement date.
Full surrenders, partial surrenders, and transfers from a guaranteed period option of the fixed account may also be subject to an excess interest adjustment, which may increase or decrease the amount you receive. This adjustment may also apply to amounts applied to an annuity payment option from a guaranteed period option of the fixed account prior to the end of the guaranteed period option.
We deduct daily mortality and expense risk fees and administrative charges from the assets in each subaccount during the accumulation phase, at an annual rate (as a percentage of the subaccount’s value) that depend on the death benefit option that you select, as follows:
| • | 0.45% if you do not choose an optional guaranteed minimum death benefit |
| • | 0.60% if you choose the Return of Premium Death Benefit |
During the accumulation phase, we deduct an annual service charge of no more than $35 from the policy value on each policy anniversary and at the time of surrender. The charge is waived if either the policy value or the sum of all premium payments, minus all partial surrenders, is at least $50,000.
Upon full surrender, payment of a death benefit, or when annuity payments begin, we will deduct state premium taxes, if applicable. State premium taxes currently range from 0% to 3.50%, depending on the state.
If you elect the Initial Payment Guarantee feature when you annuitize, then there is a daily fee (during the income phase) currently equal to an annual rate of 1.25% of the daily net asset value in the subaccounts.
If you elect the Retirement Income MaxSM Rider, there is a quarterly rider fee during the accumulation phase of 1.25% annually.
The value of the net assets of the subaccounts will reflect the management fee and other expenses incurred by the underlying fund portfolios.
| 6. | ACCESS TO YOUR MONEY |
You can generally take out $500 or more anytime during the accumulation phase (except under certain qualified policies).
You may have to pay income tax and a tax penalty on any money you take out.
If you have policy value in the fixed account, you may take out any cumulative interest credited free of excess interest adjustments.
Access to amounts held in qualified policies may be restricted or prohibited by law or regulation or the terms of the policy.
Surrenders are not generally permitted during the income phase unless you elect the Life with Emergency Cash® annuity payment option.
Partial surrenders will reduce your policy value. Depending on its amount and timing, a partial surrender may considerably reduce or eliminate some
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of the benefits and guarantees provided by your Contract. You should carefully consider whether a partial surrender under a particular circumstance will have a negative impact to your benefits or guarantees. The impact of partial and full surrenders (generally) on your benefits and guarantees is discussed in the corresponding sections of the prospectus describing such benefits and guarantees.
| 7. | ANNUITY PAYMENTS (THE INCOME PHASE) |
The policy allows you to receive income under one of several annuity payment options. You may choose from fixed payment options, variable payment options, or a combination of both. If you select a variable payment option, then the dollar amount of your annuity payments may go up or down. However, the Initial Payment Guarantee is available for an extra fee and it guarantees a minimum amount for each variable annuity payment.
| 8. | DEATH BENEFIT |
If the sole annuitant dies before the income phase begins, then the beneficiary will generally receive a death benefit. If the owner is not the annuitant, then no death benefit is paid if the owner dies; however required distribution rules require that the policy value be distributed upon the death of any owner.
Naming different persons as owner and annuitant can affect to whom and whether amounts will be paid. Use care when naming owners, annuitants and beneficiaries, and consult your agent if you have questions.
When you purchase a policy you may generally choose an optional guaranteed minimum death benefit:
| • | Return of Premium Death Benefit |
Charges are lower if you do not choose an optional guaranteed minimum death benefit.
After the policy is issued, a guaranteed minimum death benefit cannot be added, and the death benefit cannot be changed.
| 9. | TAXES |
Earnings, if any, are generally not taxed until taken out. If you take money out of a nonqualified policy during the accumulation phase, earnings come out first for federal tax purposes, and are taxed as ordinary income. For nonqualified and certain qualified policies, payments during the income phase may be considered partly a return of your original investment so that part of each payment may not be taxable as income. For qualified policies, payments during the income phase are, in many cases, considered as all taxable income. If you are younger than 59 1/2 when you take money out, you may incur a 10% federal penalty tax on the taxable earnings.
| 10. | ADDITIONAL FEATURES |
This policy has additional features that might interest you. These features may not be available for all policies, may vary for certain policies, may not each be available in combination with other optional benefits under the policy, and may not be suitable for your particular situation.
These features include, but are not limited to, the following:
| • | You can arrange to have money automatically sent to you monthly, quarterly, semi-annually or annually while your policy is in the accumulation phase. This feature is referred to as the “Systematic Payout Option” (“SPO”). Amounts you receive may be included in your gross income, and in certain circumstances, may be subject to penalty taxes. |
| • | You can elect an optional feature at the time of annuitization that guarantees your variable annuity payments will never be less than a percentage of the initial variable annuity |
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payment. This feature is called the “Initial Payment Guarantee” (“IPG”). There is an extra charge for this feature. |
| • | Under certain medically related circumstances, you may surrender all or part of the policy value without any may be subject to any excess interest adjustment; and. This feature is called the “Nursing Care and Terminal Condition Withdrawal Option.” |
| • | Under certain unemployment circumstances, you may surrender all or a portion of the policy value free of any excess interest adjustment. This feature is called the “Unemployment Waiver.” |
| • | You may generally make transfers and/or change the allocation of additional premium payments by telephone. We may restrict or eliminate this feature. |
| • | You can arrange to automatically transfer money (at least $500 per transfer) monthly or quarterly from certain investment choices into one or more subaccounts. This feature is known as “Dollar Cost Averaging.” |
| • | We will, upon your request, automatically transfer amounts among the subaccounts on a regular basis to maintain a desired allocation of the policy value among the various subaccounts. This feature is called “Asset Rebalancing.” |
| • | You may elect to purchase an optional rider which provides you with a guaranteed lifetime withdrawal benefit. This feature is called the “Retirement Income MaxSM Rider.” If you elect the Retirement Income MaxSM Rider, you must allocate 100% of your policy value to one or more “designated investment option(s).” (See “Retirement Income MaxSM - Designated Investment Options”.) The designated investment options differ from the designated investment options for the other guaranteed lifetime withdrawal benefits. You may lose the benefit of this rider if you take “excess” withdrawals. There is an extra charge for this rider. |
| 11. | OTHER INFORMATION |
Right to Cancel Period.You may return your policy for a refund, but only if you return it within a prescribed period, which is generally 10 days (after you receive the policy), or whatever longer time may be required by state law. The amount of the refund will generally be the premiums paid plus or minus accumulated gains or losses in the separate account; if state law requires, we will refund your original premium payment(s). The policy will then be deemed void.
No Probate.Usually, the person receiving the death benefit under this policy will not have to go through probate. State laws vary on how the amount that may be paid is treated for estate tax purposes.
Who should purchase the Policy?This policy is designed for people seeking long-term tax-deferred accumulation of assets, generally for retirement or other long-term purposes; and for persons who have maximized their use of other retirement savings methods, such as 401(k) plans. The tax-deferred feature is most attractive to people in high federal and state tax brackets. The tax deferral features of variable annuities are unnecessary when purchased to fund a qualified plan. You should not buy this policy if you are looking for a short-term investment, market timing, or if you cannot take the risk of losing money that you put in.
There are various fees and charges associated with variable annuities. You should consider whether the features and benefits of this policy, unique to variable annuities, such as the opportunity for lifetime income payments, a guaranteed death benefit, the guaranteed level of certain charges, and additional features, make this policy appropriate for your needs.
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State Variations.Policies issued in your state may provide different features and benefits from, and impose different costs than, those described in this prospectus because of state law variations. These differences include, among other things, free look rights, issue age limitations, and the general availability of riders. This prospectus describes the material rights and obligations of a policy owner, and the maximum fees and charges for all policy features and benefits are set forth in the fee table of this prospectus. See your policy for specific variations because any such state variations will be included in your policy or in riders or endorsements attached to your policy. See your agent or contact us for specific information that is applicable to your state.
Financial Statements.Financial Statements for the Company are in the SAI. The subaccounts of the separate account had not commenced operations as of December 31, 2010, therefore there are no separate account financial statements.
| 12. | INQUIRIES |
If you need more information or want to make a transaction, please contact us at:
Transamerica Life Insurance Company
Administrative and Service Office
Attention: Customer Care Group
4333 Edgewood Road NE
Cedar Rapids, IA 52499-0001
(800) 525-6205
You may check your policy at www.transamericaannuities.com. Follow the logon procedures. You will need your pre-assigned Personal Identification Number (“PIN”) to access information about your policy. We cannot guarantee that you will be able to access this site.
You should protect your PIN, because on-line (or telephone) options may be available and could be made by anyone who knows your PIN. We may not be able to verify that the person providing instructions using your PIN is you or someone authorized by you.
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ANNUITY POLICY FEE TABLE AND EXPENSE EXAMPLES
The following describes the fees and expenses that you will pay when buying, owning, and surrendering the policy.Please be certain to review the notes following the fee table and expense examples for further information about the fees and charges presented.The order of the notes follows the order in which the fees and charges under the policy are presented in the fee tables and the expense examples.
The fee table applies only to the accumulation phase and reflects the maximum charges unless otherwise noted. During the income phase the fees may be different than those described in the Fee Table. See section “5. Expenses”.
The first section describes the fees and expenses that you will pay at the time that you buy the policy, surrender the policy, or transfer cash value between investment choices. State premium taxes may also be deducted. Excess interest adjustments may be made to amounts surrendered or applied to annuity payment options from cash value from the fixed account. (All fees are maximum for purchases made while this prospectus is effective unless otherwise noted.)
Policy Owner Transaction Expenses:
Sales Load On Purchase Payments | 0 | % | ||
Maximum Surrender Charge (as a % of premium payments surrendered) Base Policy | 0 | % | ||
Transfer Fee | $ | 0 - $10 | ||
Special Service Fee | $ | 0 - $25 |
The next section describes the fees and expenses that you will pay periodically during the time that you own the policy, not including portfolio fees and expenses. (All fees are maximum for purchases made while this prospectus is effective unless otherwise noted.)
Annual Service Charge | $ | 0 - $35 per policy | ||
Separate Account Annual Expenses (as a percentage, annually, of average separate account value): | ||||
Base Separate Account Expenses: | ||||
Mortality and Expense Risk Fee | 0.30 | % | ||
Administrative Charge | 0.15 | % | ||
Total Base Separate Account Annual Expenses | 0.45 | % | ||
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| |||
Optional Separate Account Expenses:(You may only elect one of the guaranteed minimum death benefits listed below) |
| |||
Return of Premium Death Benefit | 0.15 | % | ||
Total Separate Account Annual Expenses with Highest Optional Separate Account Expenses | 0.60 | % | ||
|
| |||
Optional Guaranteed Lifetime Withdrawal Benefit Rider Fees:(You may only elect one of the optional riders listed below) |
| |||
Retirement Income MaxSM Rider (annual charge a % of withdrawal base): | ||||
Base Benefit (Maximum) | 2.00 | % | ||
Base Benefit (Current) | 1.25 | % | ||
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The next section shows the lowest and highest total operating expenses charged by the underlying fund portfolios for the year ended December 31, 2010 (before any fee waiver or expense reimbursements). Expenses may be higher or lower in future years. More detail concerning each portfolio’s fees and expenses is contained in the prospectus for each portfolio.
Total Portfolio Annual Operating Expenses (Expenses that are deducted from portfolio assets, including management fees, distribution and/or service 12b-1 fees, and other expenses):
Lowest Gross | 0.65 | % | ||
Highest Gross | 1.78 | % |
The following Example is intended to help you compare the cost of investing in the policy with the cost of investing in other variable annuity policies. These costs include policy owner transaction expenses, policy fees, separate account annual expenses, and portfolio fees and expenses.
The Example assumes that you invest $10,000 in the policy for the time periods indicated. The Example also assumes that your investment has a 5% return each year, the highest fees and expenses of any of the portfolios for the year ended December 31, 2010, and the base policy with the combination of available optional features or riders with the highest fees and expenses, including the Return of Premium Death Benefit, and Retirement Income MaxSM Rider options. Although your actual costs may be higher or lower, based on these assumptions, your costs would be:
Expense Examples:
If the policy is surrendered at the end of the applicable time period:
1 Year | $ | 376 | ||
3 Years | $ | 1157 | ||
5 Years | $ | 1979 | ||
10 Years | $ | 4226 |
If the policy is annuitized at the end of the applicable time period or if you do not surrender your policy:
1 Year | $ | 376 | ||
3 Years | $ | 1157 | ||
5 Years | $ | 1979 | ||
10 Years | $ | 4226 |
Please remember that the Example is an illustration and does not represent past or future expenses. Your actual expenses may be lower or higher than those reflected in the Example. Similarly, your rate of return may be more or less than the 5% assumed in the Example.
For information concerning compensation paid for the sale of the policies, see “Distributor of the Policies.”
NOTES TO FEE TABLE AND EXPENSE EXAMPLES
Policy Owner Transaction Expenses:
Maximum Surrender Charge: If you select the Life with Emergency Cash® annuity payment option, you will be subject to a surrender charge after the annuity commencement date. See section “5. Expenses”.
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Transfer Fee: The transfer fee, if any is imposed, applies to each policy, regardless of how policy value is allocated among the investment choices. There is no fee for the first 12 transfers per policy year. For additional transfers, the Company may charge a fee of $10 per transfer.
Special Service Fees: We may deduct a charge for special services, such as overnight delivery.
Annual Service Charge:
Annual Service Charge: The annual service charge is assessed on each policy anniversary and at surrender. The charge is waived if your policy value, or the sum of your premiums less all partial surrenders, is at least $50,000.
Separate Account Annual Expenses:
Mortality and Expense Risk Fee: The mortality and expense risk fee shown is for the accumulation phase with the base death benefit.
Optional Separate Account Expenses: Any optional separate account expense is in addition to the mortality and expense risk and administrative fees.
Total Separate Account Annual Expenses with Highest Optional Separate Account Expenses: This reflects the base separate account expenses and the Return of Premium Death Benefit fee, but does not include any annual optional rider fees. The death benefits are mutually exclusive.
Optional Rider Fees:
Optional Rider Fees: In some cases, riders to the policy are available that provide optional benefits. There are additional fees (each year) for those riders.
Retirement Income MaxSM Rider - base benefit: The fee is a percentage of the Withdrawal Base. The Withdrawal Base on the rider date is the policy value. During any rider year, the Withdrawal Base is equal to the Withdrawal Base on the rider date or most recent rider anniversary, plus subsequent premium payments, less subsequent Withdrawal Base adjustments.
Retirement Income MaxSM Rider Fees: After the first rider anniversary, the base benefit rider fees can increase when there is an automatic step-up. The Withdrawal Base on the rider date is the policy value. This fee total reflects the maximum fee increase resulting from an automatic step-up of the Withdrawal Base while the rider is in effect.
Total Portfolio Annual Operating Expenses:
Total Portfolio Annual Operating Expenses: The fee table information relating to the underlying fund portfolios was provided to the Company by the underlying fund portfolios, their investment advisors or managers, and the Company has not and cannot independently verify the accuracy or completeness of such information. Actual future expenses of the portfolios may be greater or less than those shown in the Table. “Gross” expense figures do not reflect any fee waivers or expense reimbursements. Actual expenses may have been lower than those shown in the Table.
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Expense Examples:
Expense Examples: The Example does not reflect premium tax charges or transfer fees. Different fees and expenses not reflected in the Example may be assessed during the income phase of the policy.
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| 1. | THE ANNUITY POLICY |
This prospectus describes the Flexible Premium Variable Annuity - U policy offered by the Company.
An annuity is a contract between you, the owner, and an insurance company (in this case the Company), where the insurance company promises to pay you an income in the form of annuity payments. These payments begin on a designated date, referred to as the annuity commencement date. Until the annuity commencement date, your annuity is in the accumulation phase and the earnings (if any) are tax deferred. Tax deferral means you generally are not taxed until you take money out of your annuity. After you annuitize, your annuity switches to the income phase.
The policy is a flexible premium deferred variable annuity. You can use the policy to accumulate funds for retirement or other long-term financial planning purposes. Your individual investment and your rights are determined primarily by your own policy.
The policy is a “flexible premium” annuity because after you purchase it, you can generally make additional investments of $50 or more until the annuity commencement date. You are not required to make any additional investments.
The policy is a “variable” annuity because the value of your investments can go up or down based on the performance of your investment choices. If you invest in the separate account, the amount of money you are able to accumulate in your policy during the accumulation phase depends upon the performance of your investment choices. You could lose the amount you allocate to the separate account. The amount of annuity payments you receive during the income phase from the separate account also depends upon the investment performance of your investment choices for the income phase. However, if you annuitize under the Initial Payment Guarantee feature, then you will receive stabilized annuity payments that will never be less than a percentage of your initial variable annuity payment. There is an extra charge for this feature.
The policy also contains a fixed account. The fixed account offers interest at rates that we guarantee will not decrease during the selected guaranteed period. There may be different interest rates for each different guaranteed period that you select.
| 2. | PURCHASE |
The Company will not issue a policy unless:
| • | the Company receives in good order (See Section 11. OTHER INFORMATION - Sending Forms and Transaction Requests in Good Order) all information needed to issue the policy; |
| • | the Company receives in good order (at our Administrative and Service Office) a minimum initial premium payment; and |
| • | the annuitant, owner, and any joint owner are age 90 or younger (the limit may be lower for qualified policies). |
We reserve the right to reject any application or premium payment.
You should make checks for premium payments payable only to Transamerica Life Insurance Company and send them to the Administrative and Service Office. Your check must be honored in order for us to pay any associated payments and benefits due under the policy.
We do not accept cash. We reserve the right to not accept third party checks. A third party check is a check that is made payable to one person who endorses it and offers it as payment to a second person. Checks should normally be payable to
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Transamerica Life Insurance Company, however, in some circumstances, at our discretion we may accept third party checks that are from a rollover or transfer from other financial institutions. Any third party checks not accepted by our company will be returned.
We reserve the right to reject or accept any form of payment. Any unacceptable forms of payment will be returned.
The initial premium payment for nonqualified policies must be at least $5,000, and at least $1,000 for qualified policies. You must obtain prior company approval to purchase a policy with an amount less than the stated minimum. There is generally no minimum initial premium payment for policies issued under section 403(b) of the Internal Revenue Code; however, your premium must be received within 90 days of the policy date or your policy will be canceled. We will credit your initial premium payment to your policy within two business days after the day we receive it and your complete policy information at our administrative and service office. If we are unable to credit your initial premium payment, we will contact you within five business days and explain why. We will also return your initial premium payment at that time unless you let us keep it and credit it as soon as possible.
The date on which we credit your initial premium payment to your policy is generally the policy date. The policy date is used to determine policy years, policy months and policy anniversaries.
There may be delays in our receipt of applications that are outside of our control (for example, because of the failure of the selling broker/dealer or sales agent to forward the application to us promptly, or because of delays in determining whether the policy is suitable for you). Any such delays will affect when your policy can be issued and your premium allocated among your investment choices.
You are not required to make any additional premium payments. However, you can generally make additional premium payments as often as you like during the accumulation phase. Additional premium payments must be at least $50. We will credit additional premium payments to your policy as of the business day we receive your premium and required information in good order at our Administrative and Service Office. Additional premium payments must be received before the close of a regular business session of the New York Stock Exchange (usually 4:00 p.m. Eastern time) to get same-day pricing of the additional premium payment.
Maximum Total Premium Payments
For issue ages 0-80, we reserve the right to reject cumulative premium payments over $1,000,000 (this includes subsequent premium payments) for policies with the same owner or same annuitant issued by us or an affiliate. For issue ages over 80, we reserve the right to reject cumulative premium payments over $500,000 (this includes subsequent premium payments) for policies with the same owner or same annuitant issued by us or an affiliate.
Allocation of Premium Payments
When you purchase a policy, we will allocate your premium payment to the investment choices you select. Your allocation must be in whole percentages and must total 100%. We will allocate additional premium payments the same way, unless you request a different allocation.
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If you allocate premium payments to the Dollar Cost Averaging program, you must give us instructions regarding the subaccount(s) to which transfers are to be made or we cannot accept your premium payment.
You may change allocations for future additional premium payments by sending written instructions to our Administrative and Service Office, or by telephone, subject to the limitations described under “Telephone Transactions”. The allocation change will apply to premium payments received on or after the date we receive the change request in good order.
You could lose the amount you allocate to the variable subaccounts.
The Company reserves the right to restrict or refuse any premium payment.
You should expect your policy value to change from valuation period to valuation period. A valuation period begins at the close of regular trading on the New York Stock Exchange on each business day and ends at the close of regular trading on the next succeeding business day. A business day is each day that the New York Stock Exchange is open. The New York Stock Exchange generally closes at 4:00 p.m. Eastern time. Holidays are generally not business days.
| 3. | INVESTMENT CHOICES |
The following variable subaccounts are available under the policy for new investors, but may not be available for all policies. The subaccounts invest in shares of the various underlying fund portfolios. The companies that provide investment advice and administrative services for the underlying fund portfolios offered through this policy are listed below.
The following variable investment choices are currently offered through this policy. Please be certain to review the notes following the list of variable investment choices.
Note:If you received a summary prospectus for any of the portfolios listed below, please follow the instructions on the first page of the summary prospectus to obtain a copy of the full fund prospectus.
TRANSAMERICA SERIES TRUST
Portfolio Construction Manager: Morningstar Associates, LLC
TA Asset Allocation - Conservative – Service Class
TA Asset Allocation - Growth – Service Class
TA Asset Allocation - Moderate – Service Class
TA Asset Allocation - Moderate Growth – Service Class
TA International Moderate Growth – Service Class
Subadvised by AEGON USA Investment Management, LLC
TA AEGON Tactical Vanguard ETF - Balanced - Service Class
TA AEGON Tactical Vanguard ETF - Conservative - Service Class
TA AEGON Tactical Vanguard ETF - Growth - Service Class
TA AEGON Money Market – Service Class
TA AEGON U.S. Government Securities – Service Class
TA Efficient Markets - Service Class
TA Vanguard ETF Index – Agressive Growth – Service Class
TA Vanguard ETF Index – Balanced – Service Class
TA Vanguard ETF Index – Conservative – Service Class
TA Vanguard ETF Index – Growth – Service Class
Subadvised by Alliance Bernstein L.P.
TA AllianceBernstein Dynamic Allocation - Service Class
Subadvised by BlackRock Financial Management, Inc.
TA BlackRock Tactical Allocation - Service Class
Subadvised by Hanlon Investment Management, Inc.
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TA Hanlon Balanced – Service Class
TA Hanlon Growth – Service Class
TA Hanlon Growth and Income – Service Class
TA Hanlon Income – Service Class
Managed by Janus Capital Management LLC
TA Janus Balanced – Service Class
Subadvised by J.P. Morgan Investment Management Inc.
TA JPMorgan Core Bond - Service Class
TA JPMorgan Mid Cap Value – Service Class
TA JPMorgan Tactical Allocation - Service Class
Subadvised by J.P. Morgan Investment Management Inc. and BlackRock Financial Management, Inc.
TA Multi-Managed Balanced – Service Class
Subadvised by Pacific Investment Management Company LLC
TA PIMCO Real Return TIPS - Service Class
TA PIMCO Total Return – Service Class
Advised by Transamerica Asset Management, Inc.
TA BlackRock Global Allocation - Service Class
Subadvised by AEGON USA Investment Management, LLC
TA AEGON High Yield Bond – Initial Class
Subadvised by BlackRock Investment Management, LLC
TA BlackRock Large Cap Value – Initial Class
Subadvised by CBRE Clarion Securities, LLC
TA Clarion Global Real Estate Securities – Initial Class
Subadvised by J.P. Morgan Investment Management Inc.
TA JPMorgan Enhanced Index – Initial Class
Subadvised by Jennison Associates LLC
TA Jennison Growth – Initial Class
Subadvised by MFS® Investment Management
TA MFS International Equity – Initial Class
Subadvised by Morgan Stanley Investment Management Inc.
TA Morgan Stanley Active International Allocation –Initial Class
TA Morgan Stanley Mid-Cap Growth – Initial Class
Subadvised by Morgan Stanley Investment Management Inc. and Invesco Advisers, Inc.
TA Multi Managed Large Cap Core - Initial Class
Subadvised by Systematic Financial Management L.P.
TA Systematic Small/Mid Cap Value - Initial Class
Subadvised by T. Rowe Price Associates, Inc.
TA T. Rowe Price Small Cap – Initial Class
Subadvised by Third Avenue Management LLC
TA Third Avenue Value - Initial Class
Subadvised by Wellington Management Company, LLP
TA WMC Diversified Growth – Initial Class
NOTES TO VARIABLE INVESTMENT CHOICES
Some subaccounts may be available for certain policies and may not be available for all policies. You should work with your registered representative to decide which subaccount(s) may be appropriate for you based on a thorough analysis of your particular insurance needs, financial objectives, investment goals, time horizons, and risk tolerance.
There can be no assurance that the Transamerica AEGON Money Market VP - Service Class portfolio will be able to maintain a stable net asset value per share. During extended periods of low interest rates, and partly as a result of policy charges, the yield on the Transamerica AEGON Money Market VP - Service Class subaccount may become extremely low and possibly negative.
The general public may not purchase shares of any of these underlying fund portfolios. The names and investment objectives and policies may be similar to other portfolios managed by the same investment advisor or manager that are sold directly to the public. You should not expect the investment results of the underlying fund portfolios to be the same as those of other portfolios.
More detailed information, including an explanation of the portfolios’ fees and investment objectives, may be found in the current prospectuses for the underlying fund portfolios, which accompany this prospectus. You should read the prospectuses for the underlying fund portfolios carefully before you invest.
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Selection of Underlying Portfolios
The underlying fund portfolios offered through this product are selected by the Company, and the Company may consider various factors, including, but not limited to, asset class coverage, the strength of the adviser’s or sub-adviser’s reputation and tenure, brand recognition, performance, and the capability and qualification of each investment firm. Another factor that we may consider is whether the underlying fund portfolio or its service providers (e.g., the investment adviser or sub-advisers) or its affiliates will make payments to us or our affiliates. For additional information about these arrangements, see “Revenue We Receive.” We review the portfolios periodically and may remove a portfolio, or limit its availability to new premiums and/or transfers of cash value if we determine that a portfolio no longer satisfies one or more of the selection criteria, and/or if the portfolio has not attracted significant allocations from owners. We have included the Transamerica Series Trust (“TST”) underlying fund portfolios at least in part because they are managed by one of our affiliates, Transamerica Asset Management, Inc. (“TAM”).
We have developed this variable annuity product in cooperation with one or more distributors, and have included certain underlying fund portfolios based on their recommendations; their selection criteria may differ from our selection criteria.
You are responsible for choosing the subaccounts which invest in the underlying fund portfolios, and the amounts allocated to each, that are appropriate for your own individual circumstances and your investment goals, financial situation, and risk tolerance. Because investment risk is borne by you, decisions regarding investment allocations should be carefully considered.
In making your investment selections, we encourage you to thoroughly investigate all of the information regarding the underlying fund portfolios that are available to you, including each underlying fund portfolio’s prospectus, statement of additional information and annual and semi-annual reports. Other sources such as the Fund’s website or newspapers and financial and other magazines provide more current information, including information about any regulatory actions or investigations relating to a Fund or underlying fund portfolio. After you select underlying fund portfolios for your initial premium, you should monitor and periodically re-evaluate your allocations to determine if they are still appropriate.
You bear the risk of any decline in the cash value of your policy resulting from the performance of the underlying fund portfolios you have chosen.
We do not recommend or endorse any particular underlying fund portfolio and we do not provide investment advice.
We do not guarantee that any of the subaccounts will always be available for premium payments, allocations, or transfers. We reserve the right, subject to compliance with applicable law, to make certain changes to the separate account and its investments. We reserve the right to add new portfolios [or portfolio classes], close existing portfolios [or portfolio classes], or substitute portfolio shares that are held by any subaccount for shares of a different portfolio. We will not add, delete or substitute any underlying fund portfolio shares attributable to your interest in a subaccount without notice to you and prior approval of the SEC, to the extent required by the 1940 Act or other applicable law.
We reserve the right to limit the number of subaccounts you are invested in at any one time.
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Addition, Deletion, or Substitution of Investments
The Company cannot and does not guarantee that any of the subaccounts will always be available for premium payments, allocations, or transfers. The Company retains the right, subject to any applicable law, to make certain changes in the separate account and its investments. The Company reserves the right to eliminate the shares of any portfolio held by a subaccount and to substitute shares of another portfolio of the underlying fund portfolios, or of another registered open-end management investment company for the shares of any portfolio, if the shares of the portfolio are no longer available for investment or if, in the Company’s judgment, investment in any portfolio would be inappropriate in view of the purposes of the separate account. To the extent required by the 1940 Act, as amended, substitutions of shares attributable to your interest in a subaccount will not be made without prior notice to you and the prior approval of the Securities and Exchange Commission (“SEC”). Nothing contained herein shall prevent the separate account from purchasing other securities for other series or classes of variable annuity policies, or from affecting an exchange between series or classes of variable annuity policies on the basis of your requests.
New subaccounts may be established when, in the sole discretion of the Company, marketing, tax, investment or other conditions warrant. Any new subaccounts may be made available to existing owners on a basis to be determined by the Company. Each additional subaccount will purchase shares in a mutual fund portfolio, or other investment vehicle. The Company may also eliminate one or more subaccounts if, in its sole discretion, marketing, tax, investment or other conditions warrant such change. In the event any subaccount is eliminated, the Company will notify you and request a reallocation of the amounts invested in the eliminated subaccount.
Similarly, the Company may, at its discretion, close a subaccount to new investment (either transfers or premium payments).
If you allocate premium to a subaccount that is closed to new investment, we will request new instructions. If we do not receive new instructions, the requested transaction will be canceled and the premium will be returned.
In the event of any such substitution or change, the Company may, by appropriate endorsement, make such changes in the policies as may be necessary or appropriate to reflect such substitution or change. Furthermore, if deemed to be in the best interests of persons having voting rights under the policies, the separate account may be (1) operated as a management company under the 1940 Act or any other form permitted by law, (2) deregistered under the 1940 Act in the event such registration is no longer required or (3) combined with one or more other separate accounts. To the extent permitted by applicable law, the Company also may (1) transfer the assets of the separate account associated with the policies to another account or accounts, (2) restrict or eliminate any voting rights of owners or other persons who have voting rights as to the separate account, (3) create new separate accounts, (4) add new subaccounts to or remove existing subaccounts from the separate account, or combine subaccounts, or (5) add new underlying fund portfolios, or substitute a new fund for an existing fund.
Premium payments allocated and amounts transferred to the fixed account become part of the Company’s general account. Interests in the general account have not been registered under the Securities Act of 1933 (the “1933 Act”), nor is the general account registered as an investment company under the 1940 Act. Accordingly, neither the general account nor any interests therein are generally subject to the provisions of
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the 1933 or 1940 Acts. Disclosures relating to interests in the general account may, however, be subject to certain generally applicable provisions of the federal securities laws relating to the accuracy of statements made in a registration statement.
While we do not guarantee that the fixed account will always be available for investment, we do guarantee that the interest credited to the fixed account will not be less than the guaranteed minimum effective annual interest rate shown on your policy (the “guaranteed minimum”). We determine credited rates, which are guaranteed for at least one year, in our sole discretion. You bear the risk that we will not credit interest greater than the guaranteed minimum. At the end of the guaranteed period option you selected, the value in that guaranteed period option will automatically be transferred into a new guaranteed period option of the same length (or the next shorter period if the same period is no longer offered) at the current interest rate for that period. You can transfer to another investment choice by giving us notice within 30 days before the end of the expiring guaranteed period.
Full and partial surrenders and transfers from a guaranteed period option of the fixed account are generally subject to an excess interest adjustment (except at the end of the guaranteed period). See Section 6. Access To Your Money - Excess Interest Adjustment for more information about when an excess interest adjustment applies. This adjustment will also be made to amounts that you apply to an annuity payment option. This adjustment may increase or decrease the amount of interest credited to your policy. The excess interest adjustment will not decrease the interest credited to your policy below the guaranteed minimum.
We also guarantee that upon full surrender your cash value attributable to the fixed account will not be less than the amount required by the applicable nonforfeiture law at the time the policy is issued.
If you select the fixed account, your money will be placed with the Company’s other general assets. The amount of money you are able to accumulate in the fixed account during the accumulation phase depends upon the total interest credited. The amount of each annuity payment you receive during the income phase from the fixed portion of your policy will remain level for the entire income phase.
We reserve the right to refuse any premium payment or transfer to the fixed account.
During the accumulation phase, you may make transfers to or from any investment choice within certain limitations.
Transfers out of a guaranteed period option of the fixed account are limited to the following:
| • | Transfers at the end of a guaranteed period. No excess interest adjustment will apply. |
| • | Transfers of amounts equal to interest credited. This may affect your overall interest-crediting rate, because transfers are deemed to come from the oldest premium payment first. |
| • | Other than at the end of a guaranteed period, transfers of amounts from the guaranteed period option in excess of amounts equal to interest credited, are subject to an excess interest adjustment. If it is a negative adjustment, the maximum amount you can transfer in any one policy year is 25% of the amount in that guaranteed period option, less any previous transfers during the current policy year. If it is a positive adjustment, we do not limit the amount that you can transfer. |
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Each transfer must be at least $500, or the entire subaccount value. Transfers of interest from a guaranteed period option of the fixed account must be at least $50. If less than $500 remains as a result of the transfer, then we reserve the right to include that amount in the transfer. Transfer requests must be received in good order at our Administrative and Service Office while the New York Stock Exchange is open for regular trading to get same-day pricing of the transaction. See Section 11. OTHER INFORMATION - Sending Forms and Transaction Requests in Good Order.
The number of transfers permitted may be limited and a $10 charge for each transfer in excess of 12 in any policy year may apply. We reserve the right to prohibit transfers to the fixed account.
During the income phase, you may transfer values out of any subaccount; however, you cannot transfer values out of the fixed account. The minimum amount that can be transferred during this phase is the lesser of $10 of monthly income, or the entire monthly income of the annuity units in the subaccount from which the transfer is being made.
Transfers made by telephone are subject to the limitations described below under “Telephone Transactions.”
Market Timing and Disruptive Trading
Statement of Policy.This variable insurance product was not designed for the use of market timers or frequent or disruptive traders. (Frequent transfers are considered to be disruptive.) Such transfers may be harmful to the underlying fund portfolios and increase transaction costs.
Market timing and disruptive trading among the subaccounts or between the subaccounts and the fixed account can cause risks with adverse effects for other policy owners (and beneficiaries and underlying fund portfolios). These risks and harmful effects include:
| (1) | dilution of the interests of long-term investors in a subaccount if purchases or transfers into or out of an underlying fund portfolio are made at prices that do not reflect an accurate value for the underlying fund portfolio’s investments (some market timers attempt to do this through methods known as “time-zone arbitrage” and “liquidity arbitrage”); |
| (2) | an adverse effect on portfolio management, such as: |
| (a) | impeding a portfolio manager’s ability to sustain an investment objective; |
| (b) | causing the underlying fund portfolio to maintain a higher level of cash than would otherwise be the case; or |
| (c) | causing an underlying fund portfolio to liquidate investments prematurely (or otherwise at an inopportune time) in order to pay withdrawals or transfers out of the underlying fund portfolio; and |
| (3) | increased brokerage and administrative expenses. |
These costs are borne by all policy owners invested in those subaccounts, not just those making the transfers.
We have developed policies and procedures with respect to market timing and disruptive trading (which vary for certain subaccounts at the request of the corresponding underlying fund portfolios) and we do not make special arrangements or grant exceptions to accommodate market timing or potentially disruptive trading. As discussed herein, we cannot detect or deter all market timing or potentially disruptive trading. Do not invest with us if you intend to conduct market timing or potentially disruptive trading.
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Detection.We employ various means in an attempt to detect and deter market timing and disruptive trading. However, despite our monitoring we may not be able to detect nor halt all harmful trading. In addition, because other insurance companies (and retirement plans) with different policies and procedures may invest in the underlying fund portfolios, we cannot guarantee that all harmful trading will be detected or that an underlying fund portfolio will not suffer harm from market timing and disruptive trading among subaccounts of variable products issued by these other insurance companies or retirement plans.
Deterrence.If we determine you are engaged in market timing or disruptive trading, we may take one or more actions in an attempt to halt such trading. Your ability to make transfers is subject to modification or restriction if we determine, in our sole opinion, that your exercise of the transfer privilege may disadvantage or potentially harm the rights or interests of other policy owners (or others having an interest in the variable insurance products). As described below, restrictions may take various forms, but under our current policies and procedures will include loss of expedited transfer privileges. We consider transfers by telephone, fax, overnight mail, or the Internet to be “expedited” transfers. This means that we would accept only written transfer requests with an original signature transmitted to us only by U.S. mail. We may also restrict the transfer privileges of others acting on your behalf, including your registered representative or an asset allocation or investment advisory service.
We reserve the right to reject any premium payment or transfer request from any person without prior notice, if, in our judgment, (1) the payment or transfer, or series of transfers, would have a negative impact on an underlying fund portfolio’s operations, or (2) if an underlying fund portfolio would reject or has rejected our purchase order or has instructed us not to allow that purchase or transfer, or (3) because of a history of market timing or disruptive trading.
We may impose other restrictions on transfers, or even prohibit transfers for any owner who, in our view, has abused, or appears likely to abuse, the transfer privilege on a case-by-case basis. We may, at any time and without prior notice, discontinue transfer privileges, modify our procedures, impose holding period requirements or limit the number, size, frequency, manner, or timing of transfers we permit. Because determining whether to impose any such special restrictions depends on our judgement and discretion, it is possible that some policy owners could engage in disruptive trading that is not permitted for others. We also reserve the right to reverse a potentially harmful transfer if an underlying fund portfolio refuses or reverses our order; in such instances some policy owners may be treated differently than others in that some transfers may be reversed and others allowed. For all of these purposes, we may aggregate two or more variable insurance products that we believe are connected.
Please note: If you engage a third party investment advisor for asset allocation services, then you may be subject to these transfer restrictions because of the actions of your investment advisor in providing these services.
In addition to our internal policies and procedures, we will administer your variable insurance product to comply with any applicable state, federal, and other regulatory requirements concerning transfers. We reserve the right to implement, administer, and charge you for any fee or restriction, including redemption fees, imposed by any underlying fund portfolio. To the extent permitted by law, we also reserve the right to defer the transfer privilege at any time that we are unable to purchase or redeem shares of any of the underlying fund portfolios.
Under our current policies and procedures, we do not:
| • | impose redemption fees on transfers; or |
| • | expressly limit the number or size of transfers in a given period except for certain subaccounts |
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where an underlying fund portfolio has advised us to prohibit certain transfers that exceed a certain size; or |
| • | provide a certain number of allowable transfers in a given period. |
Redemption fees, transfer limits, and other procedures or restrictions may be more or less successful than ours in deterring market timing or other disruptive trading and in preventing or limiting harm from such trading.
In the absence of a prophylactic transfer restriction (e.g., expressly limiting the number of trades within a given period or limiting trades by their size), it is likely that some level of market timing and disruptive trading will occur before it is detected and steps taken to deter it (although some level of market timing and disruptive trading can occur even with a prophylactic transfer restriction). As noted above, we do not impose a prophylactic transfer restriction and, therefore, it is likely that some level of market timing and disruptive trading will occur before we are able to detect it and take steps in an attempt to deter it.
Please note that the limits and restrictions described herein are subject to our ability to monitor transfer activity. Our ability to detect market timing or disruptive trading may be limited by operational and technological systems, as well as by our ability to predict strategies employed by policy owners (or those acting on their behalf) to avoid detection. As a result, despite our efforts to prevent harmful trading activity among the variable investment choices available under this variable insurance product, there is no assurance that we will be able to detect or deter market timing or disruptive trading by such policy owners or intermediaries acting on their behalf. Moreover, our ability to discourage and restrict market timing or disruptive trading may be limited by decisions of state regulatory bodies and court orders that we cannot predict.
Furthermore, we may revise our policies and procedures in our sole discretion at any time and without prior notice, as we deem necessary or appropriate (1) to better detect and deter harmful trading that may adversely affect other policy owners, other persons with material rights under the variable insurance products, or underlying fund shareholders generally, (2) to comply with state or federal regulatory requirements, or (3) to impose additional or alternative restrictions on owners engaging in market timing or disruptive trading among the investment choices under the variable insurance product. In addition, we may not honor transfer requests if any variable investment choice that would be affected by the transfer is unable to purchase or redeem shares of its corresponding underlying fund portfolio.
Underlying Fund Portfolio Frequent Trading Policies.The underlying fund portfolios may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares. Underlying fund portfolios may, for example, assess a redemption fee (which we reserve the right to collect) on shares held for less than a certain period of time. The prospectuses for the underlying fund portfolios describe any such policies and procedures. The frequent trading policies and procedures of an underlying fund portfolio may be different, and more or less restrictive, than the frequent trading policies and procedures of other underlying fund portfolios and the policies and procedures we have adopted for our variable insurance products to discourage market timing and disruptive trading. Policy owners should be aware that we may not have the contractual ability or the operational capacity to monitor policy owners’ transfer requests and apply the frequent trading policies and procedures of the respective underlying funds that would be affected by the transfers. Accordingly, policy owners and other persons who have material rights under our variable insurance products should assume that any protection they may have against potential harm from market timing and
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disruptive trading is the protection, if any, provided by the policies and procedures we have adopted for our variable insurance products to discourage market timing and disruptive trading in certain subaccounts.
Policy owners should be aware that we are required to provide to an underlying fund portfolio or its designee, promptly upon request, certain information about the trading activity of individual policy owners, and to restrict or prohibit further purchases or transfers by specific policy owners identified by an underlying fund portfolio as violating the frequent trading policies established for the portfolio.
Omnibus Orders.Policy owners and other persons with material rights under the variable insurance products also should be aware that the purchase and redemption orders received by the underlying fund portfolios generally are “omnibus” orders from intermediaries such as retirement plans and separate accounts funding variable insurance products. The omnibus orders reflect the aggregation and netting of multiple orders from individual retirement plan participants and individual owners of variable insurance products. The omnibus nature of these orders may limit the underlying fund portfolios’ ability to apply their respective frequent trading policies and procedures. We cannot guarantee that the underlying fund portfolios will not be harmed by transfer activity relating to the retirement plans or other insurance companies that may invest in the underlying fund portfolios. These other insurance companies are responsible for their own policies and procedures regarding frequent transfer activity. If their policies and procedures fail to successfully discourage harmful transfer activity, it will affect other owners of underlying fund portfolio shares, as well as the owners of all of the variable annuity or life insurance policies, including ours, whose variable investment choices correspond to the affected underlying fund portfolios. In addition, if an underlying fund portfolio believes that an omnibus order we submit may reflect one or more transfer requests from owners engaged in market timing and disruptive trading, the underlying fund portfolio may reject the entire omnibus order and thereby delay or prevent us from implementing your request.
| 4. | PERFORMANCE |
The Company periodically advertises performance of the various subaccounts. Performance figures might not reflect charges for options, riders, or endorsements. We may disclose at least three different kinds of non-standard performance. First, we may calculate performance by determining the percentage change in the value of an accumulation unit by dividing the increase (decrease) for that unit by the value of the accumulation unit at the beginning of the period. This performance number reflects the deduction of the mortality and expense risk fees and administrative charges. It does not reflect the deduction of any applicable premium taxes, or fees for any optional riders or endorsements. Any such deduction would reduce the percentage increase or make greater any percentage decrease.
Second, advertisements may also include total return figures, which reflect the deduction of the mortality and expense risk fees and administrative charges. These figures may also reflect the premium enhancement, if any.
Third, for certain investment portfolios, performance may be shown for the period commencing from the inception date of the investment portfolio (i.e., before commencement of subaccount operations). These figures should not be interpreted to reflect actual historical performance of the subaccounts.
Not all types of performance data presented reflect all of the fees and charges that may be deducted (such as fees for optional benefits); performance figures would be lower if these charges were included.
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| 5. | EXPENSES |
There are charges and expenses associated with your policy that reduce the return on your investment in the policy.
Surrenders and transfers from the fixed account may be subject to an excess interest adjustment. This adjustment could retroactively reduce the interest credited in the fixed account to the guaranteed minimum or increase the amount credited. This adjustment may also apply to amounts applied to an annuity payment option. Please see “Appendix - Excess Interest Adjustment Examples” for an example showing the effect of a hypothetical excess interest adjustment calculation. The excess interest adjustment plays a role in calculating the total interest credited to the fixed account.
Mortality and Expense Risk Fees
We charge a fee as compensation for bearing certain mortality and expense risks under the policy. This fee is assessed daily based on the net asset value of each subaccount. Examples of such risks include a guarantee of annuity rates, the death benefit, certain expenses of the policy, and assuming the risk that the current charges will be insufficient in the future to cover costs of administering the policy. We may also pay distribution expenses out of this charge.
During the accumulation phase:
| • | The mortality and expense risk fee is at an annual rate of 0.30% if no guaranteed minimum death benefit is elected. |
| • | For the Return of Premium Death Benefit, the daily mortality and expense risk fee is at an annual rate of 0.45%. |
During the income phase, the mortality and expense risk fee is at an annual rate of 0.30%.
If this charge does not cover our actual costs, we absorb the loss. Conversely, if the charge more than covers actual costs, the excess is added to our surplus. We expect to profit from this charge. We may use any profit for any proper purpose, including distribution expenses.
Some states assess premium taxes on the premium payments you make. We currently do not deduct for these taxes at the time you make a premium payment. However, we will deduct the total amount of premium taxes, if any, from the policy value when:
| • | you begin receiving annuity payments; |
| • | you surrender the policy; or |
| • | a death benefit is paid. |
State premium taxes currently range from 0% to 3.50%, depending on the state.
Federal, State and Local Taxes
We may in the future deduct charges from the policy for any taxes we incur because of the policy. However, no deductions are being made at the present time.
We will deduct a charge for special services, such as overnight delivery, up to $25 per service provided.
You are generally allowed to make 12 free transfers per policy year before the annuity commencement date. If you make more than 12 transfers per year, we reserve the right to charge $10 for each additional transfer. Premium payments, Asset Rebalancing, and Dollar Cost Averaging transfers do not count as one of your free transfers. All transfer requests made at the same time are treated as a single transfer.
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We deduct a daily administrative charge to cover the costs of supporting and administering the policy (including certain distribution-related expenses). This charge is equal to an annual rate of 0.15% of the daily net asset value of each subaccount during both the accumulation phase and the income phase.
In addition, during the accumulation phase, an annual service charge of $35 (but not more than 2% of the policy value) is charged on each policy anniversary and at surrender. The service charge is waived if your policy value or the sum of your premiums, less all partial surrenders, is at least $50,000.
If you elect the Initial Payment Guarantee feature at the time of annuitization, there is a fee (during the income phase) currently at an annual rate of 1.25% of the daily net asset value. This fee may be higher or lower at the time you annuitize and elect the feature.
Retirement Income MaxSM Rider Fees
If you elect the Retirement Income MaxSM rider, then the rider fee, which is charged quarterly before annuitization, is 1.25% (on an annual basis) of the withdrawal base. We will also deduct the rider fee pro rata upon full surrender of the policy or other termination of the rider. The rider fee(s) is deducted from each investment choice in proportion to the amount of policy value in each investment choice.
Life with Emergency Cash® Surrender Charge
If you select the Life with Emergency Cash® annuity payment option, then you can surrender your policy even after annuity payments have begun. However, there is a surrender charge during the first four years after the annuity commencement date (no matter which policy or variation thereof you previously purchased). The following schedule shows the current surrender charge:
Number of Years Since Annuity Commencement Date | Surrender Charge (as a % of adjusted policy value surrendered) | |||
0 – 1 | 4 | % | ||
1 – 2 | 3 | % | ||
2 – 3 | 2 | % | ||
3 – 4 | 1 | % | ||
more than 4 | 0 | % | ||
We can change the surrender charge, and you will be subject to whatever surrender schedule is in effect at the time you annuitize under the Life with Emergency Cash® annuity payment option.
Note carefully the following three things about this surrender charge:
| • | this surrender charge is measured from the annuity commencement date andnot from the premium payment date; |
| • | this surrender charge is a percentage of the adjusted policy value surrendered andnot a percentage of premium; and |
| • | under this payment option, there isno surrender charge free amount. |
The value of the assets in each subaccount will reflect the fees and expenses paid by the underlying fund portfolios. The lowest and highest fund expenses for the previous calendar year are found in the Annuity Policy Fee Table section of this prospectus. See the prospectuses for the underlying fund portfolios for more information.
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This prospectus describes generally the payments that we (and/or our affiliates) may directly or indirectly receive from the underlying fund portfolios, their advisers, subadvisers, distributors or affiliates thereof, in connection with certain administrative, marketing and other support services we (and/or our affiliates) provide and expenses we incur in offering and selling our variable insurance products. These arrangements are sometimes referred to as “revenue sharing” arrangements and are described further below. While only certain of the types of payments described below may be made in connection with your particular policy,all such payments may nonetheless influence or impact actions we (and/or our affiliates) take, and recommendations we (and our affiliates) make, regardingeach of the variable insurance products that we (and our affiliates) offer, including your policy.
We (and/or our affiliates) may receive some or all of the following types of payments:
| • | Rule 12b-1 Fees.Our affiliate Transamerica Capital, Inc. (“TCI”) is the principal underwriter for the policies and directly or indirectly receives some or all of the 12b-1 fees from the funds available as investment choices under our variable insurance products. Any 12b-1 fees received by TCI that are attributable to our variable insurance products are then credited to us. These fees range from 0.00% to 0.25% of the average daily assets of the certain underlying fund portfolios attributable to the policies and to certain other variable insurance products that we and our affiliates issue. |
| • | Administrative, Marketing and Support Service Fees (“Support Fees”).As noted above, an investment adviser, sub-adviser, administrator and/or distributor (or affiliates thereof) of the underlying fund portfolios may make payments to us and/or our affiliates, including TCI. These payments may be derived, in whole or in part, from the profits the investment advisor or sub-adviser realized on the advisory fee deducted from underlying fund portfolio assets. Policy owners, through their indirect investment in the underlying fund portfolios, bear the costs of these advisory fees (see the prospectuses for the underlying funds for more information). The amount of the payments we (or our affiliates) receive is generally based on a percentage of the assets of the particular underlying fund portfolios attributable to the policy and to certain other variable insurance products that our affiliates and we issue. These percentages differ and the amounts may be significant. Some advisers or sub-advisers (or other affiliates) pay us more than others. |
The following chart provides the maximum combined percentages of 12b-1 fees and Support Fees that we anticipate will be paid to us on an annual basis.Please note:Some of the underlying funds listed in the chart below may not currently be available under your policy:
Incoming Payments to the Company and/or TCI
Fund | Maximum Fee % of assets | |||
TRANSAMERICA SERIES TRUST | 0.25 | % | ||
NOTES TO INCOMING PAYMENTS TABLE:
Maximum Fee % of Assets: Payments are based on a percentage of the average assets of each underlying fund portfolio owned by the subaccounts available under this policy and under certain other variable insurance products offered by our affiliates and us. We and/or TCI may continue to receive 12b-1 fees and administrative fees on subaccounts that are closed to new investments, depending on the terms of the agreements supporting those payments and on the services we and TCI provide.
Transamerica Series Trust (“TST”): Because TST is managed by Transamerica Asset Management, Inc. (“TAM”), an affiliate of ours, there are additional benefits to us and our affiliates for amounts you allocate to the TST underlying fund portfolios, in terms of our and our affiliates’ overall profitability. These additional benefits may be significant. Payments or other benefits may be received from TAM. Such payments or benefits may be entered into for a variety of purposes, such as to allocate resources to us to provide administrative services to the policyholders who invest in the TST underlying fund portfolios. These payments or benefits may take the form of internal credits,
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recognition, or cash payments. A variety of financial and accounting methods may be used to allocate resources and profits to us. Additionally, if a TST portfolio is sub-advised by an entity that is affiliated with us, we may retain more revenue than on those TST portfolios that are sub-advised by non-affiliated entities. During 2010 we received $72,069,379 in benefits from TAM pursuant to these arrangements. This includes the 0.25% amount in the above chart. We anticipate receiving comparable amounts in the future.
| • | Other Payments.TCI also serves as the wholesale distributor for the policies, and in that capacity directly or indirectly receives additional amounts or different percentages of assets under management from certain advisers and sub-advisers to the underlying fund portfolios (or their affiliates) with regard to variable insurance products and/or mutual funds that are issued by us and our affiliates. These amounts may be derived, in whole or in part, from the profits the investment adviser or sub-adviser receives from the advisory fee deducted from underlying fund portfolio assets. Policy owners, through their indirect investment in the underlying fund portfolios, bear the costs of these advisory fees. Certain advisers and sub-advisers of the underlying fund portfolios (or their affiliates): |
| • | may each directly or indirectly pay TCI amounts up to $75,000 per year to participate in a “preferred sponsor” program that provides such advisers and sub-advisers with access to TCI’s wholesalers at TCI’s national and regional sales conferences as well as internal and external meetings and events that are attended by TCI’s wholesalers and/or other TCI employees. |
| • | may provide our affiliates and/or selling firms with wholesaling services to assist us in the distribution of the policies. |
| • | may provide us and/or certain affiliates and/or selling firms with occasional gifts, meals, tickets or other compensation as an incentive to market the underlying fund portfolios and to assist with their promotional efforts. The amounts may be significant and these arrangements provide the adviser or subadviser (or other affiliates) with increased access to us and to our affiliates involved in the distribution of the policies. |
For the calendar year ended December 31, 2010, TCI or its affiliates received total revenue sharing payments in the amount of $1,769,559 from the following Fund managers and/or sub-advisers to participate in TCI’s events: Alliance Bernstein Investments, American Funds, BlackRock Investment Management, LLC., BNY Melon, , Federated Equity Management Co, of PA, Fidelity Investments, Foxhall Capital Management, Franklin Templeton Investments, GE Asset Management, Hanlon Investment Management Inc., ING Clarion Real Estate Securities, Invesco AIM, Janus Capital, Jennison Associates, JPMorgan Investment Management, Loomis, Sayles & Company, MFS Investment Management, Neuberger Berman Management, Oppenheimer Funds, Pacific Investment Management Company, Putnam, Schroder Investment Management North America, Transamerica Investment Management, Van Kampen Investments, Vanguard, Wellington Management Company. Please note some of the aforementioned managers and/or subadvisors may not be associated with underlying fund portfolios currently available in this product.
Proceeds from certain of these payments by the underlying fund portfolios, the advisers, the sub-advisers and/or their affiliates may be used for any corporate purpose, including payment of expenses (1) that we and our affiliates incur in promoting, marketing, and administering the policy, and (2) that we incur, in our role as intermediary, in promoting, marketing, and
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administering the underlying fund portfolios. We and our affiliates may profit from these payments.
For further details about the compensation payments we make in connection with the sale of the policies, see “Distribution of the Policies” in this prospectus.
| 6. | ACCESS TO YOUR MONEY |
During the accumulation phase, you can have access to the money in your policy in the following ways:
| • | by making a surrender (either a full or partial surrender); or |
| • | by taking systematic payouts (See “Section 10, Systematic Payout Option” for more details). |
If you take a full surrender, you will receive your cash value.
If you want to take a partial surrender, in most cases it must be for at least $500. Unless you tell us otherwise, we will take the surrender from each of the investment choices in proportion to the policy value.
Remember that any surrender you take will reduce the policy value, and the amount of the death benefit. See “Section 8, Death Benefit”, for more details. A partial surrender also may have a negative impact on certain other benefits and guarantees of your Contract.
Surrenders from qualified policies may be restricted or prohibited.
During the income phase, you will receive annuity payments under the annuity payment option you select; however, you generally may not take any other surrenders, either full or partial, unless you elect a Life with Emergency Cash® payment option.
If your policy was issued pursuant to a 403(b) plan, we generally are required to confirm, with your 403(b) plan sponsor or otherwise, that surrenders, loans or transfers you request comply with applicable tax requirements and to decline requests that are not in compliance. We will defer such payments you request until all information required under the tax law has been received. By requesting a surrender, loan or transfer, you consent to the sharing of confidential information about you, the policy, and transactions under the policy and any other 403(b) contracts or accounts you have under the 403(b) plan among us, your employer or plan sponsor, any plan administrator or recordkeeper, and other product providers.
Delay of Payment and Transfers
Payment of any amount due from the separate account for a surrender, a death benefit, or the death of the owner of a nonqualified policy, will generally occur within seven days from the date we receive in good order all required information at our Administrative and Service Office. We may defer such payment from the separate account if:
| • | the New York Stock Exchange is closed other than for usual weekends or holidays or trading on the Exchange is otherwise restricted; |
| • | an emergency exists as defined by the SEC or the SEC requires that trading be restricted; or |
| • | the SEC permits a delay for the protection of owners. |
Transfers of amounts from the subaccounts also may be deferred under these circumstances. In addition, if, pursuant to SEC rules, the Transamerica AEGON Money Market VP portfolio suspends payment of redemption proceeds in connection with a liquidation of the portfolio, then we may delay payment of any transfer, partial withdrawal, surrender, loan, or death benefit from the Transamerica AEGON Money Market VP portfolio until the portfolio is liquidated.
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Any payment or transfer request which is not in good order will cause a delay. See Section 11. OTHER INFORMATION - Sending Forms and Transaction Requests in Good Order.
Federal laws designed to counter terrorism and prevent money laundering by criminals might in certain circumstances require us to reject a premium payment and/or “freeze” a policy owner’s account. If these laws apply in a particular situation, we would not be allowed to pay any request for withdrawals, surrenders, or death benefits, make transfers, or continue making annuity payments absent instructions from the appropriate federal regulator. We may also be required to provide information about you and your policy to government agencies or departments.
Pursuant to the requirements of certain state laws, we reserve the right to defer payment of the cash value from the fixed account for up to six months. We may defer payment of any amount until your premium payment check has cleared your bank.
Money that you transfer out of or surrender from a guaranteed period option of the fixed account before the end of its guaranteed period (the number of years you specified the money would remain in the guaranteed period option) may be subject to an excess interest adjustment. At the time you request a transfer or surrender (either full or partial), if interest rates set by the Company have risen since the date of the initial guarantee, the excess interest adjustment will result in a lower cash value on surrender or transfer (but not below the excess interest adjustment floor described in “Appendix - Excess Interest Adjustment Examples”). However, if interest rates have fallen since the date of the initial guarantee, the excess interest adjustment will result in a higher cash value on surrender or transfer. Please see “Appendix - Excess Interest Adjustment Examples” to see how the excess interest adjustment is calculated and illustrative examples using hypothetical values.
Any amount surrendered in excess of the cumulative interest credited is generally subject to an excess interest adjustment. An excess interest adjustment may also be made on amounts applied to an annuity payment option.
The formula that will be used to determine the excess interest adjustment is:
S* (G-C)* (M/12)
| S | = | Gross amoung being surrendered that is subject to the excess interest adjustment. | ||
| G | = | Guaranteed interest rate in effect for the policy | ||
| M | = | Number of months remaining in the current option period, rounded up to the next higher whole number of months. | ||
| C | = | Current guaranteed interest rate then being offered on new premiums for the next longer option period than “M”. If this policy form or such an option period is no longer offered, “C” will be the U.S. Treasury rate for the next longer maturity (in whole years) than “M” on the 25th day of the previous calendar month, plus up to 2% (the amount of the “adjustment” will be based on an actuarial risk based analysis considering a number of financial criteria including the prevailing interest rate environment). | ||
| * | = | multiplication | ||
| ^ | = | exponentiation |
There will be no excess interest adjustment on any of the following:
| • | surrenders of cumulative interest credited; |
| • | Nursing Care and Terminal Condition Withdrawal Option surrenders; |
| • | Unemployment Waiver surrenders; |
| • | transfers from a Dollar Cost Averaging fixed source; |
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| • | surrenders to satisfy any minimum distribution requirements; and |
| • | Systematic Payout Option payments, which do not exceed cumulative interest credited at the time of payment. |
Please note that in these circumstances you will not receive a higher cash value if interest rates have fallen nor will you receive a lower cash value if interest rates have risen.
The excess interest adjustment may vary for certain policies and may not be applicable for all policies.
As a protection against fraud, we require a signature guarantee (i.e., Medallion Signature Guarantee or Notary Public Stamp as required by us) for the following transaction requests:
| • | Any surrenders over $250,000; |
| • | Certain surrenders on or within 15 days of an address change; |
| • | Any disbursement request made on or within 15 days of an ownership change; |
| • | Any surrender when the Company has been directed to send proceeds to a different personal address from the address of record for that contract owner’s account.PLEASE NOTE:This requirement will not apply to requests made in connection with exchanges of one annuity for another with the same owner in a “tax-free exchange”; |
| • | Any surrender when the Company does not have an originating or guaranteed signature on file; |
| • | Any other transaction where we require. |
We may change the specific requirements listed above, or add signature guarantees in other circumstances, in our discretion if we deem it necessary or appropriate to help protect against fraud.
For current requirements, please refer to the requirements listed on the appropriate form or call us at (800) 552-6205.
You can obtain a Medallion signature guarantee from more than 7,000 financial institutions across the United States and Canada that participate in a Medallion signature guarantee program. This includes many:
| • | National and state banks; |
| • | Savings banks and savings and loan associations; |
| • | Securities brokers and dealers; and |
| • | Credit Unions. |
The best source of a Medallion signature guarantee is a bank, savings and loan association, brokerage firm, or credit union with which you do business.
A notary public cannot provide a Medallion signature guarantee. Notarization will not substitute for a Medallion signature guarantee.
| 7. | ANNUITY PAYMENTS (THE INCOME PHASE) |
You choose the annuity commencement date. You can change this date by giving us notice with the information we need. New annuity commencement dates less than 30 days after we receive notice of the change require prior approval. The latest maximum annuity commencement date generally cannot be after the policy month following the month in which the annuitant attains age 95. The earliest annuity commencement date is at least thirty days after you purchase your policy.
Before the annuity commencement date, if the annuitant is alive, you may choose an annuity payment option or change your election. If the annuitant dies before the annuity commencement date, the death benefit is payable in a lump sum or under one of the annuity payment options (unless the surviving spouse continues the policy).
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Unless you specify otherwise, the annuitant will receive the annuity payments. After the annuitant’s death, the beneficiary you designate at annuitization will receive any remaining guaranteed payments.
The policy provides several annuity payment options that are described below. You may choose any combination of annuity payment options. We will use your policy value to provide these annuity payments. If the policy value on the annuity commencement date is less than $2,000, we reserve the right to pay it in one lump sum in lieu of applying it under an annuity payment option. You can receive annuity payments monthly, quarterly, semi-annually, or annually. (We reserve the right to change the frequency if payments would be less than $50.)
In deciding on which annuity payment option to elect, you must decide if fixed or variable payments are better for you. If you choose to receive fixed payments, then the amount of each payment will be set on the annuity commencement date and will not change. You may, however, choose to receive variable payments. The dollar amount of the first variable payment will be determined in accordance with the annuity payment rates set forth in the applicable table contained in the policy. The dollar amount of additional variable payments will vary based on the investment performance of the subaccount(s) you select. The dollar amount of each variable payment after the first may increase, decrease, or remain constant. If the actual investment performance (net of fees and expenses) exactly matched the assumed investment return of 5% at all times, the amount of each variable annuity payment would remain constant. If actual investment performance (net of fees and expenses) exceeds the assumed investment return, the amount of the variable annuity payments would increase.Conversely, if actual investment performance (net of fees and expenses) is lower than the assumed investment return, the amount of the variable annuity payments would decrease.Please note that these changes only occur annually under the Initial Payment Guarantee.
You must also decide if you want your annuity payments to be guaranteed for the annuitant’s lifetime, a period certain, or a combination thereof. Generally, payments will be lower if you combine a period certain, guaranteed amount, or liquidity with a lifetime guarantee (e.g., Life Income with 10 years Certain and Life with Guaranteed Return of Policy proceeds). Likewise, payments will also generally be lower the longer the period certain (because you are guaranteed payments for a longer time).
A charge for premium taxes and an excess interest adjustment may be made when annuity payments begin.
The annuity payment options are explained below. Some options are fixed only and some can be fixed or variable.
Income for a Specified Period (fixed only). We will make level payments only for a fixed period. No funds will remain at the end of the period.
If your policy is a qualified policy, this payment option may not satisfy minimum required distribution rules. Consult a tax advisor before electing this option.
Income of a Specified Amount (fixed only). Payments are made for any specified amount until the amount applied to this option, with interest, is exhausted. This will be a series of level payments followed by a smaller final payment.
If your policy is a qualified policy, this payment option may not satisfy minimum required distribution rules. Consult a tax advisor before electing this option.
Life Income. You may choose between:
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| • | No Period Certain (fixed or variable)-Payments will be made only during the annuitant’s lifetime. The last payment will be the payment immediately before the annuitant’s death. |
| • | 10 Years Certain (fixed or variable)-Payments will be made for the longer of the annuitant’s lifetime or ten years. |
| • | Guaranteed Return of Policy Proceeds (fixed only)-Payments will be made for the longer of the annuitant’s lifetime or until the total dollar amount of payments we made to you equals the annuitized amount (i.e., the adjusted policy value). |
| • | Life with Emergency Cash® (fixed or variable)-Payments will be made during the annuitant’s lifetime. With the Life with Emergency Cash® feature, you are able to surrender all or a portion of the Life with Emergency Cash® benefit (unlike all other life annuitization options which are not surrenderable). The amount you surrender must be at least $2,500. We will provide you with a Life with Emergency Cash® benefit schedule that will assist you in estimating the amount you have available to surrender. A partial surrender will reduce all future payments pro rata. A surrender charge may apply and there may be tax consequences (consult a tax advisor before requesting a full or partial surrender). The maximum surrender charge is 4% of the annuitized amount (see “Expenses” for the surrender charge schedule). You will be subject to whatever surrender schedule is in effect at the time you annuitize under this annuity payment option. The Life with Emergency Cash® benefit will continue through age 100 of the annuitant. |
The Life with Emergency Cash® benefit is also a death benefit that is paid upon the death of the annuitant and is generally equal to the surrender value (i.e., the amount that would be available for to surrender according to the Life with Emergency Cash® benefit schedule) without any surrender charges. For qualified policies the death benefit ceases on the date the annuitant reaches the IRS age limitation.
Joint and Survivor Annuity. You may choose:
| • | No Period Certain (fixed or variable)-Payments are made during the joint lifetime of the annuitant and a joint annuitant of your selection. Payments will be made as long as either person is living. |
| • | Life with Emergency Cash® (fixed or variable)-Payments will be made during the joint lifetime of the annuitant and a joint annuitant of your selection. Payments will be made as long as either person is living. With the Life with Emergency Cash® feature, you are able to surrender all or a portion of the Life with Emergency Cash® benefit. The amount you surrender must be at least $2,500. We will provide you with a Life with Emergency Cash® benefit schedule that will assist you in estimating the amount you have available to surrender. A partial surrender will reduce all future payments pro rata. A surrender charge may apply and there may be tax consequences (consult a tax advisor before requesting a full or partial surrender). The maximum surrender charge is 4% of the adjusted policy value surrendered (see “Expenses” for the surrender charge schedule). You will be subject to whatever surrender schedule is in effect at the time you annuitize under this annuity payment option. The Life with Emergency Cash® benefit will continue through age 100 of the surviving joint annuitant. |
The Life with Emergency Cash® benefit is also a death benefit that is paid upon the death of the surviving joint annuitant and is generally equal to the surrender value without any surrender charges. For qualified policies the death benefit ceases on the date the surviving joint annuitant reaches the IRS joint age limitation.
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Other annuity payment options may be arranged by agreement with the Company. Some annuity payment options may not be available for all policies.
NOTE CAREFULLY
IF:
| • | you choose Life Income with No Period Certain or a Joint and Survivor Annuity with No Period Certain; and |
| • | the annuitant dies (or both joint annuitants die) before the due date of the second (third, fourth, etc.) annuity payment; |
THEN:
| • | we may make only one (two, three, etc.) annuity payments. |
IF:
| • | you choose Income for a Specified Period, Life Income with 10 Years Certain, Life Income with Guaranteed Return of Policy Proceeds, or Income of a Specified Amount; and |
| • | the person receiving payments dies prior to the end of the guaranteed period; |
THEN:
| • | the remaining guaranteed payments will be continued to a new payee, or their present value may be paid in a single sum. |
However, IF:
| • | you choose Life with Emergency Cash®; and |
| • | the annuitant dies (if both joint annuitants die) before age 101; |
THEN:
| • | a Life with Emergency Cash® death benefit will be paid. |
We will not pay interest on amounts represented by uncashed annuity payment checks if the postal or other delivery service is unable to deliver checks to the payee’s address of record. The person receiving payments is responsible for keeping the Company informed of his/her current address.
You must annuitize your policy no later than the maximum annuity commencement date specified in your policy (earlier for certain distribution channels). If you do not elect an annuity payment option, the default option will be Life with 10 Years Certain option. Please note, all optional benefits (including guaranteed minimum death benefits and living benefits) terminate upon annuitization.
| 8. | DEATH BENEFIT |
We will pay a death benefit to your beneficiary, under certain circumstances, if the annuitant dies during the accumulation phase. If there is a surviving owner(s) when the annuitant dies, the surviving owner(s) will receive the death benefit instead of the listed beneficiary. The person receiving the death benefit may choose an annuity payment option (if you pick a variable annuity payment option fees and expenses will apply), or may choose to receive a lump sum.
We will determine the amount of and pay the death benefit proceeds, if any are payable on a policy, upon receipt at our Administrative and Service Office of satisfactory proof of the annuitant’s death, written directions from each eligible recipient of death benefit proceeds regarding how to pay the death benefit, and any other documents, forms and information that we need (collectively referred to as “due proof of death”).
Please Note: Such due proof of death must be submitted in good order to avoid a delay in processing the death benefit claim. Due proof requires selecting a payment option. See Section 11. OTHER INFORMATION - Sending Forms and Transaction Requests in Good Order.
The death benefit proceeds remain invested in the separate account in accordance with the allocations made by the policy owner until the beneficiary has provided us with due proof of death. Once the Company receives due proof of death, then
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investments in the separate account may be reallocated in accordance with the beneficiary’s instructions. The Company may permit the beneficiary to give a “one-time” instruction to reallocate the investments in the separate account to the money market fund after the death of the annuitant but before receiving due proof of death. If there is more than one beneficiary, all beneficiaries must agree to the reallocation instructions.
We will pay a death benefit IF:
| • | you are both the annuitant and sole owner of the policy; and |
| • | you die before the annuity commencement date. |
We will pay a death benefit to you (owner) IF:
| • | you are not the annuitant; and |
| • | the annuitant dies before the annuity commencement date. |
If the only person receiving the death benefit is the surviving spouse, then he or she may elect to continue the policy as the new annuitant and owner, instead of receiving the death benefit.
When We Do Not Pay A Death Benefit
We will not pay a death benefit IF:
| • | you are not the annuitant; and |
| • | you die prior to the annuity commencement date. |
Please note the new owner (unless it is the deceased owner’s spouse) must generally surrender the policy within five years of your death.
Distribution requirements apply to the policy value upon the death of any owner. Generally, upon the owner’s death (who is not the annuitant) the entire interest must be distributed within five years. See the SAI for a more detailed discussion of the distribution requirements under the Code.
Deaths After the Annuity Commencement Date
The death benefit payable, if any, on or after the annuity commencement date depends on the annuity payment option selected.
IF:
| • | you are not the annuitant; and |
| • | you die on or after the annuity commencement date; and |
| • | the entire interest in the policy has not been paid; |
THEN:
| • | the remaining portion of such interest in the policy will continue to be distributed at least as rapidly as under the method of distribution being used as of the date of your death. |
IF:
| • | you are the owner and annuitant; and |
| • | you die after the annuity commencement date; and |
| • | the annuity payment option you selected did not or no longer has a guaranteed period; |
THEN:
| • | no additional payments will be made (there is no death benefit). |
NOTE: If you elect the Life with Emergency Cash® and the annuitant dies before age 100; then a Life with Emergency Cash® death benefit equaling the amount available for surrender will be paid.
IF:
| • | annuity payments are being made under the Life with Emergency Cash® ; and |
| • | the annuitant dies before age 101 (or earlier, if a qualified policy); |
THEN:
| • | a Life with Emergency Cash® death benefit will be paid. |
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If an owner dies during the accumulation phase, the person or entity first listed below who is alive or in existence on the date of that death will become the new owner:
| • | any surviving owner; |
| • | primary beneficiary; |
| • | contingent beneficiary; or |
| • | owner’s estate. |
Death benefit provisions may differ from state to state. The death benefit may be paid as a lump sum or as annuity payments. The amount of the death benefit depends on the guaranteed minimum death benefit option, if any, you choose when you buy the policy. The “base policy” death benefit will generally be the greatest of:
| • | the policy value on the date we receive the required information in good order at our Administrative and Service Office; |
| • | the cash value on the date we receive the required information in good order at our Administrative and Service Office (this will be more than the policy value if there is a positive excess interest adjustment); |
| • | and the guaranteed minimum death benefit, if any, (discussed below), plus premium payments, less adjusted partial surrenders, from the date of death to the date the death benefit is paid. Please see “Appendix - Death Benefit” for illustrative examples regarding Death Benefit calculations. |
Please note, the death benefit terminates upon annuitization and there is a maximum annuity commencement date.
Guaranteed Minimum Death Benefit
NOTE: The following generally applies, depending on the state of issue, to policies issued after the date of this prospectus.
On the policy application, you may generally choose a guaranteed minimum death benefit (age limitations may apply) for an additional fee. After the policy is issued, you cannot make an election and the death benefit cannot be changed.
Return of Premium Death Benefit
The Return of Premium Death Benefit is equal to:
| • | total premium payments; less |
| • | any adjusted partial surrenders as of the date of death. |
This benefit is not available if you or the annuitant is 86 or older on the policy date. There is an extra charge for this death benefit of 0.15% annually.
Please note: You will not receive an optional guaranteed minimum death benefit if you do not choose one when you purchase your policy.
The Guaranteed Minimum Death Benefit may vary for certain policies and may not be available for all policies. This disclosure explains the material features of the Guaranteed Minimum Death Benefit. The application and operation of the Guaranteed Minimum Death Benefit are governed by the terms and conditions of the policy form and riders.
When you request a partial surrender, your guaranteed minimum death benefit will be reduced by an amount called the adjusted partial surrender.Under certain circumstances, the adjusted partial surrender may be more than the dollar amount of your surrender request. This will generally be the case if the guaranteed minimum death benefit exceeds the policy value at the time of surrender. It is also possible that if a death benefit is paid after you have made a partial surrender, then the total amount paid could be less than the total premium payments.
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The formula used to calculate the adjusted partial surrender amount is: Adjusted partial surrender = (amount gross partial surrender * value of the current death proceeds immediately prior to the gross partial surrender ) / policy value immediately prior to the gross surrender.
We have included a detailed explanation of this adjustment with examples in the “Appendix - Death Benefit.” This is referred to as “adjusted partial surrender” in your policy. If you have a qualified policy, minimum required distributions rules may require you to request a partial surrender.
| 9. | TAXES |
NOTE: We have prepared the following information on federal income taxes as a general discussion of the subject. It is not intended as tax advice to any individual. No attempt is made to consider any applicable state or other income tax laws, any state and local estate or inheritance tax, or other tax consequences of ownership or receipt of distributions under the policy. You should consult your own tax adviser about your own circumstances. We have included an additional discussion regarding taxes in the SAI.
Deferred annuity policies are a way of setting aside money for future needs like retirement. Congress recognized how important saving for retirement is and provided special rules in the Internal Revenue Code for annuities.
Simply stated, these rules generally provide that individuals will not be taxed on the earnings, if any, on the money held in an annuity policy until taken out. This is referred to as tax deferral. When a non-natural person (e.g., corporation or certain other entities other than tax-qualified trusts) owns a nonqualified policy, the policy will generally not be treated as an annuity for tax purposes.
There are different rules as to how you will be taxed depending on how you take the money out and the type of policy-qualified or nonqualified.
You will generally not be taxed on increases in the value of your policy until a distribution occurs (either as a surrender or as annuity payments).
Qualified and Nonqualified Policies
If you purchase the policy under an individual retirement annuity, a 403(b) plan, a pension plan, or specially sponsored program, your policy is referred to as a qualified policy.
Qualified policies are issued in connection with the following:
| • | Individual Retirement Annuity (IRA): A traditional IRA allows individuals to make contributions, which may be deductible, to the policy. A Roth IRA also allows individuals to make contributions to the policy, but it does not allow a deduction for contributions, and distributions may be tax-free if the owner meets certain rules. |
| • | Tax-Sheltered Annuity (403(b) Plan): A 403(b) Plan may be made available to employees of certain public school systems and tax-exempt organizations and permits contributions to the policy on a pre-tax basis. Pursuant to new tax regulations, starting January 1, 2009 the policy is not available for purchase under a 403(b) plan and we do not accept additional premiums or transfers to existing 403(b) policies. We generally are required to confirm, with your 403(b) plan sponsor or otherwise, that surrenders, loans or transfers you request from an existing 403(b) policy comply with applicable tax requirements before we process your request. |
| • | Corporate Pension and Profit-Sharing and H.R. 10 Plan: Employers and self-employed individuals can establish pension or |
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profit-sharing plans for their employees or themselves and make contributions to the policy on a pre-tax basis. |
| • | Deferred Compensation Plan (457 Plan): Certain governmental and tax-exempt organizations can establish a plan to defer compensation on behalf of their employees through contributions to the policy. |
There is no additional tax deferral benefit derived from placing qualified funds into a variable annuity. Features other than tax deferral should be considered in the purchase of a qualified policy. There are limits on the amount of contributions you can make to a qualified policy. Other restrictions may apply including terms of the plan in which you participate.
Optional death benefit features in some cases may exceed the greater of the premium payments or the policy value. Such a death benefit could be characterized as an incidental benefit, the amount of which is limited in any pension or profit-sharing plan or 403(b) plan. Because an optional death benefit may exceed this limitation, anyone using the policy in connection with such plans should consult their tax adviser before purchasing an optional death benefit. The Internal Revenue Service has not reviewed the policy for qualification as an IRA, and has not addressed in a ruling of general applicability whether the death benefit options and riders available, with the policy, if any, comport with IRA qualification requirements. The value of death benefit options and riders elected may need to be considered in calculating minimum required distributions.
If you purchase the policy as an individual and not under an individual retirement annuity, 403(b) plan, 457 plan, or pension or profit sharing plan, your policy is referred to as a nonqualified policy.
Surrenders-Qualified Policies Generally
There are special rules that govern qualified policies. Generally, these rules restrict:
| • | the amount that can be contributed to the policy during any year; |
| • | the time when amounts can be paid from the policy; and |
| • | the amount of any death benefit that may be allowed. |
In the case of a withdrawal under a qualified policy, a pro rata portion of the amount you receive is taxable, generally based on the ratio of your “investment in the contract” to your total account balance or accrued benefit under the retirement plan. Your “investment in the contract” generally equals the amount of any non-deductible purchase payments made by you or on your behalf. In some cases, your “investment in the contract” can be zero.
In addition, a penalty tax may be assessed on amounts surrendered from the policy prior to the date you reach age 59 1/2, unless you meet one of the exceptions to this rule. You may also be required to begin taking minimum distributions from the policy by a certain date. The terms of the plan may limit the rights otherwise available to you under the policy. We have provided more information in the SAI.
We may make available under the policy certain guaranteed lifetime withdrawal and other optional benefits. The tax rules for qualified policies may limit the value of these optional benefits. For example, if you elect a guaranteed lifetime withdrawal benefit and your minimum required distribution amount exceeds your guaranteed withdrawal amount, you will have to withdraw more than the guaranteed withdrawal amount to avoid imposition of a 50% excise tax. It is not clear whether guaranteed lifetime withdrawal benefit payments made during the settlement phase will be taxed as withdrawals or as annuity payments. In view of this uncertainty, we will apply the non-annuity rules for determining
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minimum required distributions, meaning that a percentage of the value of all benefits under the policy will need to be withdrawn each year. The value may have to include the value of enhanced death benefits and other optional policy provisions such as the guaranteed lifetime withdrawal benefit rider itself.
If you are attempting to satisfy minimum required distribution rules through partial surrenders, the value of any enhanced death benefit or other optional rider may need to be included in calculating the amount required to be distributed.
The Internal Revenue Code generally requires that interests in a qualified policy be nonforfeitable. If your policy contains a bonus rider with a recapture, forfeiture, or “vesting” feature, it may not be consistent with those requirements. Consult a tax advisor before purchasing a bonus rider as part of a qualified policy.
You should consult your legal counsel or tax adviser if you are considering purchasing an enhanced death benefit or other optional rider, or if you are considering purchasing a policy for use with any qualified retirement plan or arrangement.
The rules described above for qualified policies generally apply to 403(b) policies. However, specific rules apply to surrenders from certain 403(b) policies. Partial withdrawals and surrenders can generally only be made when an owner:
| • | reaches age 59 1/2; |
| • | leaves his/her job; |
| • | dies; |
| • | becomes disabled (as that term is defined in the Internal Revenue Code); or |
| • | declares hardship. However, in the case of hardship, the owner can only surrender the premium payments and not any earnings. |
Please Note:In some instances the signature of the employer may be required. For policies issued after 2008, amounts attributable to nonelective contributions may be subject to distribution restrictions specified in the employer’s section 403(b) plan.
Pursuant to new tax regulations, we generally are required to confirm, with your 403(b) plan sponsor or otherwise, that surrenders or transfers you request from a 403(b) policy comply with applicable tax requirements before we process your request. We will defer such payments you request until all information required under the tax law has been received. By requesting a surrender or transfer, you consent to the sharing of confidential information about you, the policy, and transactions under the policy and any other 403(b) policies or accounts you have under the 403(b) plan among us, your employer or plan sponsor, any plan administrator or recordkeeper, and other product providers.
Defaulted loans from Code Section 403(b) arrangements, and pledges and assignments of qualified policies generally are taxed in the same manner as surrenders from such policies. Please refer to the SAI for further information applicable to distributions from 403(b) policies. Please note that a defaulted loan may stop the growth on a guaranteed lifetime withdrawal benefit.
Surrenders-Nonqualified Policies
The information above describing the taxation of qualified policies does not apply to nonqualified policies. If you take a partial withdrawal or surrender (including systematic payouts and payouts under an optional feature, if any) from a nonqualified policy before the annuity commencement date, the Internal Revenue Code treats that surrender as first coming from earnings and then from your premium payments. If your policy contains an excess interest adjustment feature (also known as a market value adjustment), then your account value immediately
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before the surrender may have to be increased by any positive excess interest adjustments that result from the surrender. There is, however, no definitive guidance on the proper tax treatment of excess interest adjustments, and you may want to discuss the potential tax consequences of an excess interest adjustment with your tax advisor.
When you make a surrender you are taxed on the amount of the surrender that is earnings. If you make a surrender, you are generally taxed on the amount that your surrender proceeds exceeds the “investment in the contract,” which is generally your premiums paid (adjusted for any prior surrenders or portions thereof that were not taxable). In general, loans, pledges, and assignments are taxed in the same manner as partial withdrawals and surrenders. Different rules apply for annuity payments. See “Annuity Payments” below.
The Internal Revenue Code also provides that surrendered earnings may be subject to a penalty tax. The amount of the penalty tax is equal to 10% of the amount that is includable in income. Some surrenders will be exempt from the penalty tax. They include, among others, any amounts:
| • | paid on or after the taxpayer reaches age 59 1/2; |
| • | paid after an owner dies; |
| • | paid if the taxpayer becomes disabled (as that term is defined in the Internal Revenue Code); |
| • | paid in a series of substantially equal payments made annually (or more frequently) under a lifetime annuity; |
| • | paid under an immediate annuity; or |
| • | which come from premium payments made prior to August 14, 1982. |
If your nonqualified policy contains a guaranteed lifetime withdrawal benefit rider, certain rules may apply. It is not clear whether guaranteed lifetime withdrawal benefit payments made during the settlement or income (payout) phase may be taxed as either withdrawals or annuities. In view of this uncertainty, we intend to adopt a conservative approach and treat guaranteed lifetime withdrawal payments during the settlement phase under nonqualified policies as withdrawals. Consult a tax advisor before purchasing a guaranteed lifetime withdrawal benefit rider or option.
All nonqualified deferred annuity policies that are issued by us (or our affiliates) to the same owner during any calendar year are treated as one annuity for purposes of determining the amount includable in the owner’s income when a taxable distribution occurs.
Taxation of Death Benefit Proceeds
Amounts may be distributed from the policy because of the death of the annuitant. Generally, such amounts should be includable in the income of the recipient:
| • | if distributed in a lump sum, these amounts are taxed in the same manner as a surrender; or |
| • | if distributed under an annuity payment option, these amounts are taxed in the same manner as annuity payments. |
Although the tax consequences may vary depending on the annuity payment option you select, in general, for nonqualified and certain qualified policies, only a portion of the annuity payments you receive will be includable in your gross income.
In general, the excludable portion of each annuity payment you receive will be determined as follows:
| • | Fixed payments-by dividing the “investment in the contract” on the annuity commencement date by the total expected value of the annuity payments for the term of the payments. This is the percentage of each annuity payment that is excludable. |
| • | Variable payments-by dividing the “investment in the contract” on the annuity commencement |
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date by the total number of expected periodic payments. This is the amount of each annuity payment that is excludable. |
The remainder of each annuity payment is includable in gross income. Once the “investment in the contract” has been fully recovered, the full amount of any additional annuity payments is includable in gross income and taxed as ordinary income.
If you select more than one annuity payment option, special rules govern the allocation of the policy’s entire “investment in the contract” to each such option, for purposes of determining the excludable amount of each payment received under that option. We advise you to consult a competent tax adviser as to the potential tax effects of allocating amounts to any particular annuity payment option.
If, after the annuity commencement date, annuity payments stop because an annuitant died, the excess (if any) of the “investment in the contract” as of the annuity commencement date over the aggregate amount of annuity payments received that was excluded from gross income may possibly be allowable as a deduction in your tax return.
You should consult a tax advisor before electing the Initial Payment Guarantee or a feature with stabilized payments.
Under a new tax provision enacted in 2010, if part of an annuity policy’s value is applied to an annuity option that provides payments for one or more lives and for a period of at least ten years, those payments may be taxed as annuity payments instead of withdrawals. None of the payment options under the policy is intended to qualify for this “partial annuitization” treatment and, if you apply only part of the value of the policy to a payment option, we will treat those payments as withdrawals for tax purposes.
Beginning in 2013, distributions from nonqualified annuity policies will be considered “investment income” for purposes of the newly enacted Medicare tax on investment income. Thus, in certain circumstances, a 3.8% tax may be applied to some or all of the taxable portion of distributions (e.g. earnings) to individuals whose income exceeds certain threshold amounts ($200,000 for filing single, $250,000 for married filing jointly and $125,000 for married filing separately). Please consult a tax advisor for more information.
Diversification and Distribution Requirements
The Internal Revenue Code provides that the underlying investments for a variable annuity must satisfy certain diversification requirements in order to be treated as an annuity. The policy must also meet certain distribution requirements at the death of an owner in order to be treated as an annuity. These diversification and distribution requirements are discussed in the SAI. We may modify the policy to attempt to maintain favorable tax treatment.
Federal Defense of Marriage Act
The Federal Defense of Marriage Act currently does not recognize same-sex marriages or civil unions, even those that are permitted under individual state laws. Therefore, exercise of the spousal continuation provisions of this policy by persons who do not meet the definition “spouse” under federal law—e.g., civil union partners or same-sex marriage spouses—may have adverse tax consequences. Consult a tax advisor for more information on this subject.
While no attempt is being made to discuss the Federal estate tax implications of the Policy, a purchaser should keep in mind that the value of an annuity policy owned by a decedent and payable to a
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beneficiary by virtue of surviving the decedent is included in the decedent’s gross estate. Depending on the terms of the annuity policy, the value of the annuity included in the gross estate may be the value of the lump sum payment payable to the designated beneficiary or the actuarial value of the payments to be received by the beneficiary. Consult an estate planning advisor for more information.
Generation-Skipping Transfer Tax
Under certain circumstances, the Internal Revenue Code may impose a “generation skipping transfer tax” when all or part of an annuity policy is transferred to, or a death benefit is paid to, an individual two or more generations younger than the Owner. Regulations issued under the Internal Revenue Code may require us to deduct the tax from your policy, or from any applicable payment, and pay it directly to the IRS.
Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “2010 Act”) increases the federal estate tax exemption to $5,000,000 and reduces the federal estate tax rate to 35%; increases the Federal gift tax exemption to $5,000,000 and retains the federal gift tax rate at 35%; and increases the generation-skipping transfer tax exemption to $5,000,000 and reduces the generation-skipping transfer tax rate to 35%. Commencing in 2012, these exemption amounts will be indexed for inflation.
The estate, gift, and generation-skipping transfer provisions of the 2010 Act are only effective until December 31, 2012; thereafter, the provisions will sunset, and the federal estate, gift and generation-skipping transfer taxes will return to their pre-2001 levels, resulting in significantly lower exemptions and significantly higher tax rates. Between now and the end of 2012, Congress may make these provisions of the 2010 Act permanent, or they may do nothing and allow these 2010 Act provisions to sunset, or they may alter the exemptions and/or applicable tax rates.
The uncertainty as to how the current law might be modified in coming years underscores the importance of seeking guidance from a qualified adviser to help ensure that your estate plan adequately addresses your needs and that of your beneficiaries under all possible scenarios.
Annuity Purchases by Residents of Puerto Rico
The Internal Revenue Service recently announced that income received by residents of Puerto Rico under life insurance or annuity policies issued by a Puerto Rico branch of a United States life insurance company is U.S.-source income that is generally subject to United States federal income tax.
Annuity Policies Purchased by Nonresident Aliens and Foreign Corporations
The discussion above provided general information (but not tax advice) regarding U.S. federal income tax consequences to annuity owners that are U.S. persons. Taxable distributions made to owners who are not U.S. persons will generally be subject to U.S. federal income tax withholding at a 30% rate, unless a lower treaty rate applies. In addition, distributions may be subject to state and/or municipal taxes and taxes that may be imposed by the owner’s country of citizenship or residence. Prospective foreign owners are advised to consult with a qualified tax adviser regarding U.S., state, and foreign taxation for any annuity policy purchase.
Transfers, Assignments or Exchanges of Policies
A transfer of ownership or assignment of a policy, the designation of an annuitant or payee or other beneficiary who is not also the owner, the selection of certain annuity commencement dates, the exchange
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of a policy and certain other transactions, or a change of annuitant other than the owner, may result in certain income or gift tax consequences to the owner that are beyond the scope of this discussion. An owner contemplating any such transfer, assignment, selection, exchange or change should contact a competent tax adviser with respect to the potential tax effects of such a transaction.
Although the likelihood of legislative or regulatory changes is uncertain, there is always the possibility that the tax treatment of the policy could change by legislation, regulation, or otherwise. You should consult a tax adviser with respect to legal or regulatory developments and their effect on the policy.
We have the right to modify the policy to meet the requirements of any applicable laws or regulations, including legislative changes that could otherwise diminish the favorable tax treatment that annuity policy owners currently receive.
It is possible that the Internal Revenue Service may take a position that fees for certain optional benefits (e.g., death benefits other than the Return of Premium death benefit) are deemed to be taxable distributions to you. In particular, the Internal Revenue Service may treat fees associated with certain optional benefits as a taxable surrender, which might also be subject to a tax penalty if the surrender occurs prior to age 59 1/2. Although we do not believe that the fees associated with any optional benefit provided under the policy should be treated as taxable surrenders, the tax rules associated with these benefits are unclear, and we advise that you consult your tax advisor prior to selecting any optional benefit under the policy.
We may benefit from any foreign tax credits attributable to taxes paid by certain underlying funds to foreign jurisdictions to the extent permitted under federal tax law.
Guaranteed Lifetime Withdrawal Benefits
We may make available, as options under the policy, certain guaranteed lifetime withdrawal and other optional benefits. If your policy contains a guaranteed lifetime withdrawal benefit rider the application of certain tax rules, particularly those rules relating to distributions from your policy, are not entirely clear. The tax rules for qualified policies may limit the value of these optional benefits. In view of this uncertainty, you should consult a tax advisor before purchasing a guaranteed lifetime withdrawal benefit rider for a qualified policy.
| 10. | ADDITIONAL FEATURES |
You can select at any time (during the accumulation phase) to receive regular withdrawals (i.e., partial surrenders) from your policy by using the Systematic Payout Option. Under this option, you can receive the greater of (1) or (2), divided by the number of withdrawals made per year, where: (1) up to 10% of your premium payments (reduced by prior withdrawals in that policy year); and (2) is any gains in the policy. For amounts greater than 10% of your premium payments, you must receive prior Company approval. The amount of your payment is established when you select the option. The amount available is recalculated on each policy anniversary thereafter while the Systematic Payout Option is in effect.
Any payment in excess of the cumulative interest credited at the time of the payment may be subject to an excess interest adjustment.
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Systematic withdrawals can be made monthly, quarterly, semi-annually, or annually. Each withdrawal must be at least $50. Monthly and quarterly withdrawals must generally be made by electronic funds transfer directly to your checking or savings account.
If you request an additional withdrawal while a Systematic Payout Option is in effect, then the Systematic Payout Option will terminate.
Keep in mind that partial withdrawals under the Systematic Payout Option may be taxable, and if made before age 59 1/2, may be subject to a 10% federal penalty tax.
There is no charge for this benefit.
You may only elect to purchase the Initial Payment Guarantee which provides annually stabilized payments that are guaranteed to never be less than a percentage of the initial variable annuity payment at the time you annuitize your policy. You cannot terminate this payment guarantee (or eliminate the charge for it) after you have elected it. The guarantee only applies to variable annuity payments. There is an additional charge for this guarantee.
The Initial Payment Guarantee does not establish or guarantee the performance of any subaccount.
Under the Initial Payment Guarantee, you receive annuity payments that are stabilized—that is, held level throughout each policy year—and are guaranteed to never be less than a percentage of the initial payment. The guaranteed percentage is subject to change from time to time; however once you annuitize, the guaranteed percentage will not change during the life of the Initial Payment Guarantee. Contact us for the current guaranteed percentage.
The payment amount is adjusted once each year (on the anniversary of your annuity commencement date) to reflect the investment performance of your selected investment choice(s) over the preceding year (but your payment will not be less than the guaranteed minimum).
Fee. There is a charge for the Initial Payment Guarantee, which is in addition to the base product mortality and expense risk fee and administrative charge. This fee is reflected in the amount of the annuity payments that you receive if you select the Initial Payment Guarantee. It is reflected in the calculation of the annuity unit values.
The Initial Payment Guarantee fee is currently equal to an annual rate of 1.25% of the daily net asset value in the subaccounts. We can change the fee, and you pay whatever the fee is when you annuitize.
Other Terms and Conditions. The Initial Payment Guarantee uses a 5% assumed investment return to calculate your annuity payments. This means that the dollar amount of the annuity payments will remain level if the investment return (net of fees and expenses) exactly equals 5%. The payments will increase if actual investment performance (net of fees and expenses) exceeds the assumed investment return, and decrease if actual performance is below the assumed investment return (but not below the guaranteed level).
Termination. The Initial Payment Guarantee is irrevocable.
The Initial Payment Guarantee may vary for certain policies, may not be available for all policies, and may not be available in all states. This disclosure explains the material features of the Initial Payment Guarantee. The application and operation of the Initial Payment Guarantee are governed by the terms and conditions of the policy itself.
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Nursing Care and Terminal Condition Withdrawal Option
No excess interest adjustment will apply if you make a surrender ($1,000 minimum), under certain circumstances, because you or your spouse has been:
| • | confined in a hospital or nursing facility for 30 days in a row after the policy issue date; or |
| • | diagnosed with a terminal condition after the policy issue date (usually a life expectancy of 12 months or less). |
This benefit is also available to the annuitant or annuitant’s spouse if the owner is not a natural person.
You may exercise this benefit at any time (during the accumulation phase). There is no charge for this benefit.
There is no restriction on the maximum amount you may surrender under this benefit.
This benefit may vary for certain policies, may not be available for all policies, and may not be available in all states.
No excess interest adjustment will apply to surrenders after you or your spouse become unemployed in certain circumstances, because you were terminated, laid off, or otherwise lost your job involuntarily. In order to qualify, you (or your spouse, whichever is applicable) must have been:
| • | employed full time for at least two years prior to becoming unemployed; |
| • | employed full time on the policy date; |
| • | unemployed for at least 60 days in a row at the time of surrender; |
| • | must have a minimum cash value at the time of surrender of $5,000; and |
| • | you (or your spouse) must be receiving unemployment benefits. |
You must provide written proof from your State’s Department of Labor, which verifies that you qualify for and are receiving unemployment benefits at the time of surrender.
You may select this benefit at any time (during the accumulation phase) and there is no charge for this benefit.
This benefit is also available to the annuitant or annuitant’s spouse if the owner is not a natural person. There is no charge for this benefit.
There is no restricion on the maximum amount you may surrender under this benefit.
This benefit may vary for certain policies, may not be available for all policies, and may not be available in all states.
You may generally make certain transactions by telephone upon our receipt of the appropriate authorization.
You will be required to provide certain information for identification purposes when requesting a transaction by telephone and we may record your telephone call. We may also require written confirmation of your request. We will not be liable for losses resulting from telephone requests that we believe are genuine. We reserve the right to revoke your telephone transaction privileges at any time without revoking all owners’ telephone transfer privileges.
Telephone requests must be received while the New York Stock Exchange is open for regular trading to get same-day pricing of the transaction. We may discontinue this option at any time.
We may deny the telephone transaction privileges to market timers and frequent or disruptive traders.
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We cannot guarantee that telephone transactions will always be available. For example, our offices may be closed during severe circumstances or other emergencies. There may be interruptions in service beyond our control, and if the volume of calls is unusually high, we might not have anyone available, or lines available, to take your call. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability in all circumstances.
During the accumulation phase, you may instruct us to automatically make transfers into one or more variable subaccounts in accordance with your allocation instructions. This is known as Dollar Cost Averaging. While Dollar Cost Averaging buys more accumulation units when prices are low and fewer accumulation units when prices are high, it does not guarantee profits or assure that you will not experience a loss.
There are two Dollar Cost Averaging programs available under your policy:
| • | Traditional—You may specify the dollar amount to be transferred or the number of transfers. Transfers will begin as soon as the program is started. A minimum of $500 per transfer is required. The minimum number of transfers is 6 monthly or 4 quarterly, and the maximum is 24 monthly or 8 quarterly. You can elect to transfer from either the fixed account or money market (see the Dollar Cost Averaging election form). |
| • | Special—You may only elect either a six or twelve month program. Transfers will begin as soon as the program is started. You cannot transfer from another investment choice into a Special Dollar Cost Averaging program. This program is only available for new premium, requires transfers from a fixed source, and may credit a higher or lower interest rate than a traditional program. A minimum of $500 per transfer is required ($3,000 or $6,000 to start a 6-month or 12-month program, respectively). |
A Dollar Cost Averaging program will begin once we have received in good order all necessary information and the minimum required amount. See also Section 11. OTHER INFORMATION - Sending Forms and Transaction Requests in Good Order. Please note: Dollar Cost Averaging programs will not begin on the 29th, 30th, or 31st. If a program would have started on one of those dates, it will start on the 1st business day of the following month. If we receive additional premium payments while a Dollar Cost Averaging program is running, absent new instructions to the contrary, the amount of the Dollar Cost Averaging transfers will increase, but the length of the Dollar Cost Averaging program will not.
NOTE CAREFULLY:
IF:
| • | we do not receive all necessary information to begin an initial Dollar Cost Averaging program within 30 days of allocating the minimum required amount to a Dollar Cost Averaging program; or |
| • | we do not receive the minimum required amount to begin an initial Dollar Cost Averaging program within 30 days of allocating an insufficient amount; |
THEN:
| • | any amount in a fixed source will be transferred to the money market investment choice; and |
| • | any amount in a variable source will remain in that variable investment choice; and |
| • | new instructions will be required to begin a Dollar Cost Averaging program. |
IF:
| • | we receive additional premium payments after a Dollar Cost Averaging program is |
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completed and the additional premium meets the minimum requirements to start a Dollar Cost Averaging program; |
THEN:
| • | we will, absent new instructions to the contrary, start a new Dollar Cost Averaging program using the previous instructions. |
IF:
| • | we receive additional premium payments after a Dollar Cost Averaging program is completed, and the additional premium does not meet the minimum requirements to start a Dollar Cost Averaging program; |
THEN:
| • | we will, absent new instructions to the contrary, allocate the additional premium among the subaccounts as identified in the previous Dollar Cost Averaging program. |
IF:
| • | you discontinue a Dollar Cost Averaging program before its completion; |
THEN:
| • | we will, absent new instructions to the contrary, transfer any remaining balance directly into the subaccounts in the Dollar Cost Averaging instructions. |
You should consider your ability to continue a Dollar Cost Averaging program during all economic conditions.
Transfers from a Dollar Cost Averaging fixed source are not subject to an excess interest adjustment.
A Dollar Cost Averaging program can be used in conjunction with a guaranteed minimum withdrawal benefit (subject to any investment restrictions involving the source).
There is no charge for this benefit.
The Dollar Cost Averaging Program may vary for certain policies, may not be available for all policies, and may not be available in all states. See your policy for availability of the fixed account options.
During the accumulation phase you can instruct us to automatically rebalance the amounts in your subaccounts to maintain your desired asset allocation. This feature is called Asset Rebalancing and can be started and stopped at any time. However, we will not rebalance if you are in the Dollar Cost Averaging program or if any other transfer is requested. If a transfer is requested, we will honor the requested transfer and discontinue Asset Rebalancing. New instructions are required to start Asset Rebalancing. Asset Rebalancing ignores amounts in the fixed account. You can choose to rebalance monthly, quarterly, semi-annually, or annually.
Asset Rebalancing can be used in conjunction with a guaranteed minimum withdrawal benefit.
There is no charge for this benefit.
You may elect to purchase the optional Retirement Income MaxSM rider which, provides you with: (1) a guaranteed lifetime withdrawal benefit; and (2) an opportunity for increases in the rider withdrawal amount. This rider is available during the accumulation phase, and requires that you allocate 100% of your policy value in certain designated investment choices which are designed to help manage the Company’s risk and support the guarantees under the rider. The tax rules for qualified policies may limit the value of this rider. Please consult a qualified tax advisor before electing the Retirement Income MaxSM rider for a qualified policy. If you elect the Retirement Income MaxSM rider you cannot elect another GLWB.
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Retirement Income MaxSM – Base Benefit
Under this benefit, you can receive up to the rider withdrawal amount each rider year (first as withdrawals from your policy value and, if necessary because your policy value goes to zero by other than an excess withdrawal, as payments from us for life), starting with the rider year immediately following the annuitant’s (or the annuitant’s spouse if younger and the joint life option is elected) 59th birthday and lasting until the annuitant’s (or surviving spouse’s if the joint life option is elected) death (unless your withdrawal base is reduced to zero because of an “excess withdrawal”; see Withdrawal Base Adjustments, below). A rider year begins on the rider date and thereafter on each anniversary of that date.
Of course, you can always withdraw an amount up to your cash value pursuant to your rights under the policy at your discretion.
See the “Appendix—Guaranteed Lifetime Withdrawal Benefit Adjusted Partial Surrenders -Retirement Income MaxSM Rider” for examples showing the effect of hypothetical withdrawals in more detail.
Please note:
| • | You will begin paying the rider charge as of the date the rider takes effect, even if you do not begin taking withdrawals for many years, or ever. We will not refund the charges you have paid under the rider if you never choose to take withdrawals and/or if you never receive any payments under the rider. |
| • | We have designed this rider to allow for withdrawals from your policy value each rider year that are less than or equal to the rider withdrawal amount. You should not purchase this rider if you plan to take withdrawals in excess of the rider withdrawal amount, because such excess withdrawals may significantly reduce or eliminate the value of the guarantee provided by the rider. |
| • | The longer you wait to start making withdrawals under the benefit, the less time you have to benefit from the guarantee because of decreasing life expectancy as you age. On the other hand, the longer you wait to begin making withdrawals, the higher your withdrawal percentage may be, the higher the withdrawal base due to growth may be, and the more opportunities you will have to lock in a higher withdrawal base. You should carefully consider when to begin making withdrawals. There is a risk that you will not begin making withdrawals at the most financially beneficial time for you. |
| • | Because the guaranteed lifetime withdrawal benefit under this rider is accessed through regular withdrawals that do not exceed the rider withdrawal amount, the rider may not be appropriate for you if you do not foresee a need for liquidity and your primary objective is to take maximum advantage of the tax deferral aspect of the policy. |
| • | All policy value must be allocated to a limited number of specified funds. You should consult with your registered representative to assist you in determining whether these certain investment options are suited for your financial needs and risk tolerance. |
| • | Cumulative withdrawals in any rider year that are in excess of the rider withdrawal amount are excess withdrawals. |
| • | An excess withdrawal may impact the withdrawal base on a greater than dollar-for-dollar basis and may cause you to lose the benefit of this rider. |
| • | Upon the death of the annuitant (or the death of the surviving spouse if the joint option is elected), the Retirement Income MaxSM rider terminates and all benefits thereunder cease. |
Like all withdrawals, withdrawals while this rider is in effect also:
| • | reduce your policy value; |
| • | reduce your base policy death benefit and other benefits; |
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| • | may be subject to excess interest adjustment; |
| • | may be subject to income taxes and federal tax penalties; and |
| • | may be limited or restricted under certain qualified policies. |
Rider Withdrawal Amount. You can withdraw up to the rider withdrawal amount in any rider year (after age 59) from your policy value without causing an excess withdrawal. See “Withdrawal Base Adjustments” below.
The rider withdrawal amount is zero if the annuitant (or the annuitant’s spouse if younger and the joint life option is elected) is not 59 years old on the rider date and remains zero until the first day of the rider year after the annuitant’s (or the annuitant’s spouse’s if younger and the joint life option is elected) 59th birthday. If the annuitant (or the annuitant’s spouse if younger and the joint life option is elected) is at least 59 years old on the rider date, then the rider withdrawal amount is equal to the withdrawal base multiplied by the withdrawal percentage (see below).
For qualified policies:If the plan participant (generally the annuitant) is at least 70 1/2 years old, the rider withdrawal amount for that rider year (and each subsequent rider year) is equal to the greater of:
| • | the rider withdrawal amount described above; or |
| • | an amount equal to any minimum required distribution amount(for the tax year on that rider anniversary)calculated using only: (1) the living annuitant’s age, (2) the IRS Uniform Lifetime table or, if applicable, the Joint Life and Survivor Expectancy table, (3) the policy value of the base policy, (prior to the first rider anniversary we use the policy value on the rider date and thereafter we use the policy value on the date prescribed by the IRS) and (4) amounts from the current calendar year (no carry-over from past years). |
Only amounts calculated as set forth above can be used as the rider withdrawal amount. If the minimum required distribution amount (determined as set forth above) exceeds the rider withdrawal amount, the excess will not be treated as an excess withdrawal under the rider. See “Appendix – Guaranteed Lifetime Withdrawal Benefit Adjusted Partial Surrenders – Retirement Income MaxSM Rider” for an example showing the effect of a minimum required distribution amount.
If your policy value reaches zero:
| • | due to a non-excess withdrawal, then you cannot make premium payments and all other policy features, benefits, and guarantees (except those provided by this rider) are terminated. In order to receive benefits guaranteed by this rider after your policy value reaches zero, (i.e., payments of the rider withdrawal amount for life) you must select the amount and frequency of future payments. Once selected, the amount and frequency cannot be changed. |
| • | due to an excess withdrawal, then this rider terminates (as does the policy). |
Please note:
| • | If the rider is added prior to the annuitant’s 59th birthday, the rider withdrawal amount will be zero until the beginning of the rider year after the annuitant’s 59th birthday, however, you will still be charged a rider fee prior to this time. |
| • | You cannot carry over any portion of your rider withdrawal amount that is not withdrawn during a rider year for withdrawal in a future rider year. This means that if you do not take the entire rider withdrawal amount during a rider year, you cannot take more than the rider withdrawal amount in the next rider year and maintain the rider’s guarantees. |
| • | Excess withdrawals may cause you to lose the benefit of the rider. |
| • | All policy value must be allocated to a limited number of specified funds. (See “Designated Investment Options.”) |
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Withdrawal Percentage. We use the withdrawal percentage to calculate the rider withdrawal amount. The withdrawal percentage is determined by the annuitant’s age (or the annuitant’s spouse’s age if younger and the joint life option is elected) at the time of the first withdrawal taken on or after the rider anniversary immediately following the annuitant’s (or the annuitant’s spouse’s if younger and the joint life option is elected) 59th birthday. The withdrawal percentage is as follows:
Age at time of first withdrawal | Withdrawal Percentage— Single Life Option | Withdrawal Percentage— Joint Life Option | ||||||
0-58 | 0.0 | % | 0.0 | % | ||||
59-64 | 4.30 | % | 3.80 | % | ||||
65-79 | 5.30 | % | 4.80 | % | ||||
³ 80 | 6.30 | % | 5.80 | % | ||||
Please note, once established, the withdrawal percentage will not generally increase even though the annuitant’s age increases except in certain instances involving automatic step-ups.
Withdrawal Base. We use the withdrawal base to calculate the rider withdrawal amount. The withdrawal base on the rider date is the policy value. During any rider year, the withdrawal base is equal to the withdrawal base on the rider date or most recent rider anniversary, plus subsequent premium payments, less subsequent withdrawal base adjustments due to excess withdrawals.
Please note:
| • | We determine the withdrawal base solely to calculate the rider withdrawal amount. Your withdrawal base is not a cash value, a surrender value, or a death benefit. It is not available for withdrawal, it is not a minimum return for any subaccount, and it is not a guarantee of policy value. |
| • | Because the withdrawal base is generally equal to the policy value on the rider date, the rider withdrawal amount may be lower if you delay electing the rider and the policy value decreases before you elect the rider. |
On each rider anniversary, the withdrawal base will equal the greatest of:
| • | current withdrawal base; |
| • | the withdrawal base immediately before the rider anniversary, increased by the growth credit, if any (see “Growth” below); |
| • | the policy value on any monthiversary, (the same day of the month as the rider date, or the next business day if our Administrative Office or the New York Stock Exchange are closed) including the current rider anniversary (see “Automatic Step-Up” below). |
See “Appendix – Hypothetical Example of the Withdrawal Base Calculation – Retirement Income MaxSM Rider” which illustrates the hypothetical example of the withdrawal base calculation.
Growth. On each of the first ten rider anniversaries, we will add an annual growth credit to your withdrawal base if no withdrawal occurred during the preceding rider year. The annual growth credit is equal to 5.0% of the withdrawal base immediately before the rider anniversary (i.e., withdrawal base x 0.05).
Please note:Because a withdrawal will eliminate a potential growth credit for that rider year, you should consider your need or possible need to take withdrawals within the first 10 rider years in deciding whether to purchase the rider.
Automatic Step-Up. On each rider anniversary, we will automatically step-up the withdrawal base to an amount equal to the greater of (1) the highest policy value on any monthiversary during the preceding rider year, if no excess withdrawal occurred, or (2) the policy value on the rider anniversary. This comparison takes place after the application of any applicable annual growth credit. The withdrawal
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percentage (as indicated in the withdrawal percentage table) will also increase if you have crossed into another age band prior to the automatic step-up. Please note, the increase is part of the automatic step-up and if no automatic step-up occurs then there will be no withdrawal percentage increase.
On each rider anniversary the rider fee percentage may increase (or decrease) up to 75 basis points (0.75%) at the time of any automatic step-up (but will not exceed the maximum rider fee percentage in the fee table), i.e., the rider fee percentage is reset to the rider fee percentage then associated with newly issued riders.
Automatic Step-Up Opt Out. Each time an automatic step-up results in a rider fee percentage increase, you have the option to reject the automatic step-up and reinstate the withdrawal base, withdrawal percentage, and rider fee percentage to their respective amounts immediately before the automatic step-up, provided that you do so within 30 days after the rider anniversary on which the automatic step-up occurred. We must receive your rejection (each time you elect to opt out), in good order, at our Administrative and Service Office within the same 30 day period after the rider anniversary on which the automatic step-up occurred.Opting out of one step-up does not operate as an opt-out of any future step-ups.
Withdrawal Base Adjustments. Cumulative gross partial withdrawals up to the rider withdrawal amount in any rider year will not reduce the withdrawal base. Cumulative gross partial withdrawals in excess of the rider withdrawal amount in any rider year (“excess withdrawals”) will reduce the withdrawal base, however, by the greater of the dollar amount of the excess withdrawal (if the policy value is greater than the withdrawal base) or a pro rata amount (in proportion to the reduction in the policy value when the policy value is less than the withdrawal base),possibly to zero. If an excess withdrawal reduces the policy value to zero, this rider will terminate. Withdrawal base adjustments occur immediately following excess withdrawals. See “Appendix - Guaranteed Lifetime Withdrawal Benefit Adjusted Partial Surrenders - Retirement Income MaxSM Rider” for examples showing the effect of hypothetical withdrawals in more detail, including an excess withdrawal that reduces the withdrawal base by a pro rata amount. The effect of an excess withdrawal is amplified if the policy value is less than the withdrawal base.
Please Note: We do not monitor for, or notify you of, excess withdrawals. If you take regular or scheduled withdrawals please pay particular attention to any excess withdrawal because your otherwise regular or scheduled non-excess withdrawals may thereafter all be excess withdrawals that reduce or eliminate your benefit on an accelerated basis.
Designated Investment Options. If you elect this rider, you must designate 100% of your policy value into one or more of the designated investment options:
TA AEGON Tactical Vanguard ETF - Balanced - Service Class
TA AEGON Tactical Vanguard ETF - Conservative - Service Class
TA AEGON Money Market – Service Class
TA AEGON U.S. Government Securities – Service Class
TA Asset Allocation - Conservative – Service Class
TA Asset Allocation - Moderate – Service Class
TA Vanguard ETF Index – Balanced – Service Class
TA Vanguard ETF Index – Conservative – Service Class
TA JPMorgan Core Bond - Service Class
TA JPMorgan Tactical Allocation - Service Class
TA PIMCO Real Return TIPS - Service Class
TA PIMCO Total Return – Service Class
Fixed Account
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Transfers between the designated investment options are allowed as permitted under the policy; however, you cannot transfer any amount (or allocate premium payments) to any non-designated investment option. Within 30 days following the fifth rider anniversary (and each successive fifth rider anniversary), you can terminate this rider. Starting the next business day, you may transfer (or allocate premium payments) to a non-designated investment option. Terminating the rider will result in losing all your benefits under the rider.
Please note:
| • | The earliest you can transfer (or allocate premium payments) to a non-designated investment option is the first business day after the fifth rider anniversary. You will be required to terminate the rider first (and lose its benefits). |
| • | We can eliminate a designated investment option at any time. If this occurs, then a policy owner will be required to reallocate values in the affected designated investment options to other designated investment options that meet the allocation requirements. |
Retirement Income MaxSM – Joint Life Option
If you elect this rider, then you can also elect to postpone termination of the rider until the later of the annuitant or annuitant’s spouse’s death (only if the annuitant’s spouse continues the policy). If you elect the Joint Life option, then the withdrawal percentage (used to calculate the rider withdrawal amount) is lower.
Please note:
| • | The annuitant’s spouse must be either a joint owner along with the annuitant or the sole primary beneficiary (and there is no joint owner), if you elect this option. |
| • | A former spouse of the annuitant cannot continue to keep the policy in force if no longer married to the annuitant at the time of the annuitant’s death. In that event, the rider will terminate and no additional withdrawals under the rider will be permitted. |
| • | The annuitant’s spouse for purposes of this rider cannot be changed to a new spouse. |
| • | The rider withdrawal percentage is based on the age of the younger of the annuitant and annuitant’s spouse, if you elect this option. |
| • | The withdrawal percentage for each “age at the time of the first withdrawal” is lower if you elect this option. |
Retirement Income MaxSM Rider Fees
Retirement Income MaxSM. The rider fee is calculated on the rider date and at the beginning of each rider quarter. The rider fee will be adjusted for any premium additions and excess withdrawals. It will be deducted automatically from your policy value at the end of each rider quarter.
On an annual basis, in general terms, the rider fee is the “rider fee percentage” (see the Fee Table) times the withdrawal base. Specifically, the quarterly fee is calculated by multiplying (A) by (B) multiplied by (C), where:
| (A) | is the withdrawal base; |
| (B) | is the rider fee percentage; and |
| (C) | is the number of remaining days in the rider quarter divided by the total number of days in the applicable rider year. |
Example 1: Calculation at rider issue for first quarter rider fee assuming an initial withdrawal base of $100,000.
=100,000*0.0125*(91/365)
=1,250*(91/365)
=$311.64
We will assess a prorated rider fee upon termination of the rider for the period beginning on the first day of the most recent rider quarter and ending on the date of termination.
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On each rider anniversary the rider fee percentage may increase (or decrease) at the time of an automatic step-up. Each time an automatic step-up results in a rider fee percentage increase, you will have the option to reject the automatic step-up and reinstate the withdrawal base and rider fee percentage to their respective amounts immediately before the automatic step-up (adjusted for any subsequent premium payments or withdrawals), provided that you do so within 30 calendar days after the rider anniversary on which the automatic step-up occurred. We must receive your rejection, in good order, at our Administrative and Service Office within the 30 day period after the rider anniversary on which the automatic step-up occurred.
Please note regarding the rider fee:
| • | Because the rider fee is a percentage of the withdrawal base, it could be a much higher percentage of your policy value, particularly in the event that your policy value decreases significantly. |
| • | Because the rider fee is a percentage of the withdrawal base, the amount of the rider fee we deduct will increase if the withdrawal base increases (although the percentage(s) may remain the same). |
Rider Fee Adjustment for Premium Payments and Excess Withdrawals. A rider fee adjustment will be calculated for subsequent premium payments and excess withdrawals because these events will change the withdrawal base. The rider fee adjustment will be calculated using the same formula as the rider fee and compare the fee for the remainder of the rider quarter to the initially calculated fee for the same period. The rider fee adjustment may be positive or negative and will be added to or subtracted from the rider fee to be collected.
Example 2: Calculation for first quarter fee assuming initial withdrawal base from Example 1 above, plus adjustment for additional premium payment of $10,000 made with 20 days remaining in the first rider quarter. The withdrawal base change equals $10,000. Fee adjustment as follows:
=10,000*0.0125*(20/365)
=125*(20/365)
=$6.85
Total fee assessed at the end of the first rider quarter (assuming no further rider fee adjustments):
=6.85 + 311.64
=$318.49
We will also deduct all rider fees pro rata upon full surrender of the policy or other termination of the rider.
Retirement Income MaxSM Rider Issue Requirements
The Company will not issue the Retirement Income MaxSM rider unless:
| • | the annuitant is also an owner (except in the case of non-natural owners); |
| • | there are no more than two owners; and |
| • | if the joint life option is elected, the annuitant’s spouse is also not yet 86 (lower if required by state law) and (1) is a joint owner along with the annuitant or (2) is the sole primary beneficiary (and there is no joint owner). |
Termination
The Retirement Income MaxSM rider will terminate upon the earliest of the following:
| • | the date we receive written notice from you requesting termination of the rider if such notice is received by us during the 30 days following the fifth rider anniversary or every fifth rider anniversary thereafter; |
| • | the death of the annuitant (or if the joint life option was elected, the death of the annuitant’s spouse if that spouse continued the policy as the surviving spouse); |
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| • | annuitization (however, if you have reached your maximum annuity commencement date you may choose an annuitization option which guarantees you lifetime payments in an amount equal to your rider withdrawal amount); |
| • | the date the policy to which this rider is attached is assigned or if the owner is changed without our approval; |
| • | the date an excess withdrawal reduces your policy value to zero; or |
| • | termination of your policy. |
Please note:This rider terminates upon annuitization and there is a maximum annuity commencement date at which time your policy will be annuitized according to its terms. However, if you have reached your maximum annuity commencement date, we will allow you to annuitize your policy and elect to receive lifetime annuity payments which are at least equal to your rider withdrawal amount. Please contact us for more information concerning your options.
The Retirement Income MaxSM rider and additional options may vary for certain policies, may not be available for all policies, and may not be available in all states. This disclosure explains the material features of the Retirement Income MaxSM rider. The application and operation of the rider are governed by the terms and conditions of the rider itself.
| 11. | OTHER INFORMATION |
You, as owner of the policy, exercise all rights under the policy. You can change the owner at any time by notifying us in writing at our Administrative and Service Office. An ownership change may be a taxable event.
The beneficiary designation will remain in effect until changed. The owner may change the designated beneficiary by sending written notice to the Company. The beneficiary’s consent to such change is not required unless the beneficiary was irrevocably designated or law requires consent. (If an irrevocable beneficiary dies, the owner may then designate a new beneficiary.) The change will take effect as of the date the owner signs the written notice, whether or not the owner is living when the notice is received by the Company. The Company will not be liable for any payment made before the written notice is received. If more than one beneficiary is designated, and the owner fails to specifiy their interests, they will share equally. If, upon the death of the annuitant, there is a surviving owner(s), then the surviving owner(s) automatically takes the place of any beneficiary designation.
You may return your policy for a refund, but only if you return it within a prescribed period, which is generally 10 days (after you receive the policy), or whatever longer time may be required by state law. The amount of the refund will generally be the premiums paid plus or minus accumulated gains or losses in the separate account. You bear the risk of any decline in policy value during the right to cancel period. However, if state law requires, we will refund your original premium payment(s). We will pay the refund within seven days after we receive in good order within the applicable period at our Administrative and Service Office, written notice of cancellation and the returned policy. The policy will then be deemed void.
You can also generally assign the policy any time during your lifetime. We will not be bound by the assignment until we receive written notice of the
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assignment in good order at our Administrative and Service Office and approve it. We reserve the right, except to the extent prohibited by applicable laws, regulations, or actions of the State insurance commissioner, to require that an assignment will be effective only upon acceptance by us, and to refuse assignments or transfers at any time on a non-discriminatory basis. We will not be liable for any payment or other action we take in accordance with the policy before we approve the assignment. There may be limitations on your ability to assign a qualified policy. An assignment may have tax consequences.
Sending Forms and Transaction Requests in Good Order
We cannot process your requests for transactions relating to the policy until we have received them in good order at our Administrative and Service Office. “good order” means the actual receipt by us of the instructions relating to the requested transaction in writing (or, when appropriate, by telephone or electronically), along with all forms, information and supporting legal documentation necessary to effect the transaction. This information and documentation generally includes, to the extend applicable to the transaction: your completed application; the policy number; the transaction amount (in dollars or percentage terms); the names and allocations to and/or from the Subaccounts affected by the requested transaction; the signatures of all policy owners (exactly as registered on the Policy) if necessary; Social Security Number or Taxpayer I.D.; and any other information or supporting documentation that we may require, including any spousal or joint owner’s consents. With respect to purchase requests, “good order” also generally includes receipt (by us) of sufficient funds to effect the purchase. We may, in our sole discretion, determine whether any particular transaction request is in good order, and we reserve the right to change or waive any good order requirements at any time.
Before making a decision concerning the allocation of premium payments to a particular subaccount, please read the prospectuses for the underlying fund portfolios. The underlying fund portfolios are not limited to selling their shares to this separate account and can accept investments from any insurance company separate account or qualified retirement plan. Since the underlying fund portfolios are available to registered separate accounts offering variable annuity products of the Company, as well as variable annuity and variable life products of other insurance companies, and qualified retirement plans, there is a possibility that a material conflict may arise between the interests of this separate account and one or more of the other separate accounts of another participating insurance company. In the event of a material conflict, the affected insurance companies, including the Company, agree to take any necessary steps to resolve the matter. This may include removing their separate accounts from the underlying fund portfolios. See the underlying fund portfolios prospectuses for more details.
You can generally exchange one annuity policy for another in a “tax-free exchange” under Section 1035 of the Internal Revenue Code. Before making an exchange, you should compare both annuities carefully. Remember that if you exchange another annuity for the one described in this prospectus, then you may pay a surrender charge on the other annuity and other charges may be higher (or lower) and the benefits under this annuity may be different. You should not exchange another annuity for this one unless you determine, after knowing all the facts, that the exchange is in your best interest and not just better for the person trying to sell you this policy (that person will generally earn a commission if you buy this policy through an exchange or otherwise).
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You may surrender your policy and transfer your money directly to another life insurance company (sometimes referred to as a 1035 Exchange or a trustee-to-trustee transfer). You may also ask us to reinstate your policy after such a transfer and in certain limited circumstances we will allow you to do so by returning the same total dollar amount of funds to the applicable investment choices. The dollar amount will be used to purchase new accumulation units at the then current price. Because of changes in market value, your new accumulation units may be worth more or less than the units you previously owned. We recommend that you consult a tax professional to explain the possible tax consequences of exchanges and/or reinstatements.
To the extent required by law, the Company will vote all shares of the underlying fund portfolios held in the separate account in accordance with instructions we receive from you and other owners that have voting interests in the portfolios. We will send you and other owners requests for instructions on how to vote those shares. When we receive those instructions, we will vote all of the shares in proportion to those instructions. Accordingly, it is possible for a small number of policy owners (assuming there is a quorum) to determine the outcome of a vote, especially if they have large policy values. If, however, we determine that we are permitted to vote the shares in our own right, we may do so.
Each person having a voting interest will receive proxy material, reports, and other materials relating to the appropriate portfolio.
There are no legal proceedings to which the separate account is a party or to which the assets of the separate account are subject. The Company, like other life insurance companies, is involved in lawsuits. In some class action and other lawsuits involving other insurers, substantial damages have been sought and/or material settlement payments have been made. Although the outcome of any litigation cannot be predicted with certainty, the Company believes that at the present time there are no pending or threatened lawsuits that are reasonably likely to have a material adverse impact on the separate account, on the ability of Transamerica Capital, Inc., to perform under its principal underwriting agreement, or on the ability of the Company to meet its obligations under the policy.
Transamerica Life Insurance Company
Transamerica Life Insurance Company was incorporated under the laws of the State of Iowa on April 19, 1961 as NN Investors Life Insurance Company, Inc. It is engaged in the sale of life and health insurance and annuity policies. The Company is a wholly-owned indirect subsidiary of Transamerica Corporation which conducts most of its operations through subsidiary companies engaged in the insurance business or in providing non-insurance financial services. All of the stock of Transamerica Corporation is indirectly owned by AEGON N.V. of The Netherlands, the securities of which are publicly traded. AEGON N.V., a holding company, conducts its business through subsidiary companies engaged primarily in the insurance business. The Company is licensed in the District of Columbia, Guam, Puerto Rico, the U.S. Virgin Islands, and all states except New York.
All obligations arising under the policies, including the promise to make annuity payments, are general corporate obligations of the Company. Accordingly, no financial institution, brokerage firm or insurance agency is responsible for the financial obligations of the Company arising under the policies.
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Financial Condition of the Company
We pay benefits under your policy from our general account assets and/or from your policy value held in the separate account. It is important that you understand that payments of the benefits depend upon certain factors discussed below.
Assets in the Separate Account.You assume all of the investment risk for your policy value that is allocated to the subaccounts of the separate account. Your policy value in those subaccounts constitutes a portion of the assets of the separate account. These assets are segregated and insulated from our general account, and may not be charged with liabilities arising from any other business that we may conduct.
Assets in the General Account. You also may be permitted to make allocations to guaranteed period options of the fixed account, which are supported by the assets in our general account. Any guarantees under a policy that exceed policy value, such as those associated with any lifetime withdrawal benefit riders and any optional death benefits, are paid from our general account (and not the separate account). Therefore, any amounts that we may be obligated to pay under the policy in excess of policy value are subject to our financial strength and claims-paying ability and our long-term ability to make such payments. The assets of the separate account, however, are also available to cover the liabilities of our general account, but only to the extent that the separate account assets exceed the separate account liabilities arising under the policies supported by it.
We issue other types of insurance policies and financial products as well, and we also pay our obligations under these products from our assets in the general account.
Our Financial Condition. As an insurance company, we are required by state insurance regulation to hold a specified amount of reserves in order to meet all the contractual obligations of our general account. In order to meet our claims-paying obligation we monitor our reserves so that we hold sufficient amounts to cover actual or expected policy and claims payments. However, it is important to note that there are risks to purchasing any insurance product.
State insurance regulators also require insurance companies to maintain a minimum amount of capital, which acts as a cushion in the event that the insurer suffers a financial impairment, based on the inherent risks in the insurer’s operations. These risks include those associated with losses that we may incur as the result of defaults on the payment of interest or principal on our general account assets, which include bonds, mortgages, general real estate investments, and stocks, as well as the loss in market value of these investments.
How to Obtain More Information. We encourage both existing and prospective policy owners to read and understand our financial statements. We prepare our financial statements on a statutory basis. Our financial statements, which are presented in conformity with accounting practices prescribed or permitted by the Iowa Department of Commerce, Insurance Division as well as the financial statements of the separate account—are located in the statement of Additional Information (SAI). For a free copy of the SAI, simply call or write us at the phone number or address of our Administrative and Service Office referenced in this prospectus. In addition, the SAI’s available on the SEC;s website athttp://www.sec.gov.Our financial strength can be found on our website.
The Company established a separate account, called Separate Account VA M, under the laws of the State of Iowa on . The separate account receives and invests the premium payments that are allocated to it for investment in shares of the underlying fund portfolios.
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The separate account is registered with the SEC as a unit investment trust under the 1940 Act. However, the SEC does not supervise the management, the investment practices, or the policies of the separate account or the Company. Income, gains and losses (whether or not realized), from assets allocated to the separate account are, in accordance with the policies, credited to or charged against the separate account without regard to the Company’s other income, gains or losses.
The assets of the separate account are held in the Company’s name on behalf of the separate account and belong to the Company. However, those assets that underlie the policies are not chargeable with liabilities arising out of any other business the Company may conduct. The separate account may include other subaccounts that are not available under these policies.
Distribution and Principal Underwriting Agreement.We have entered into a principal underwriting agreement with our affiliate, Transamerica Capital, Inc. (TCI), for the distribution and sale of the policies. We pay commissions to TCI which are passed through to selling firms. (See below). We also pay TCI an “override” that is a percentage of total commissions paid on sales of our policies which is not passed through to the selling firms and we may reimburse TCI for certain expenses it incurs in order to pay for the distribution of the policies. TCI markets the policies through bank affiliated firms, national brokerage firms, regional and independent broker-dealers and independent financial planners.
Compensation to Broker-Dealers Selling the Policies.The policies are offered to the public through broker-dealers (“selling firms”) that are licensed under the federal securities laws; the selling firm and/or its affiliates are also licensed under state insurance laws. The selling firms have entered into written selling agreements with us and with TCI as principal underwriter for the policies. We pay commissions through TCI to the selling firms for their sales of the policies.
A limited number of affiliated and unaffiliated broker-dealers may also be paid commissions and overrides to “wholesale” the policies, that is, to provide sales support and training to sales representatives at the selling firms. We also provide compensation to a limited number of broker-dealers for providing ongoing service in relation to the policies that have already been purchased.
There are no commissions paid on premium payments, however, an annual continuing fee based on policy values will be paid to the selling firms. These commissions are not deducted from premium payments.
To the extent permitted by Financial Industry Regulatory Authority (FINRA) rules, TCI may pay (or allow other broker-dealers to provide) promotional incentives or payments in the form of cash or non-cash compensation or reimbursement to some, but not all, selling firms and their sales representatives. These arrangements are sometimes referred to as “revenue sharing” arrangements and are described further below.
The sales representative who sells you the policy typically receives a portion of the compensation we (and our affiliates) pay to the selling firms, depending on the agreement between the selling firm and its registered representative and the firm’s internal compensation program. These programs may include other types of cash and non-cash compensation and other benefits. Ask your sales representative for further information about the compensation your sales representative, and the selling firm that employs your sales representative, may receive in connection with your purchase of a policy. Also inquire about
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any revenue sharing arrangements that we and our affiliates may have with the selling firm, including the conflicts of interests that such arrangements may create.
You should be aware that a selling firm or its sales representatives may receive different compensation or incentives for selling one product over another. In some cases, these differences may create an incentive for the selling firm or its sales representatives to recommend or sell this policy to you. You may wish to take such incentives into account when considering and evaluating any recommendation relating to the policies.
Special Compensation Paid to Affiliated Firms.
We and/or our affiliates provide paid-in capital to TCI and pay the cost of TCI’s operating and other expenses, including costs for facilities, legal and accounting services, and other internal administrative functions. We and/or our affiliates also provide TCI with a percentage of total commissions paid on sales of our policies and provide TCI with capital payments that are not contingent on sales.
TCI’s registered representatives and supervisors may receive non-cash compensation, such as attendance at conferences, seminars and trips (such as travel, lodging and meals in connection therewith), entertainment, merchandise and other similar items, payments, loans, loan forgiveness or loan guaranties.
Additional Compensation That We, TCI and/or Our Affiliates Pay to Selected Selling Firms.TCI, in connection with the sales of the policies, may pay certain selling firms additional cash amounts for “preferred product” treatment of the policies in their marketing programs in order to receive enhanced marketing services and increased access to their sales representatives. In exchange for providing TCI with access to their distribution network, such selling firms may receive additional compensation or reimbursement for, among other things, the hiring and training of sales personnel, marketing, sponsoring of conferences, meetings, seminars, events, and/or other services they provide to us and our affiliates. To the extent permitted by applicable law, TCI and other parties may provide the selling firms with occasional gifts, meals, tickets or other non-cash compensation as an incentive to sell the policies. These special compensation arrangements are not offered to all selling firms and the terms of such arrangements may differ among selling firms.
Special compensation arrangements are calculated in different ways by different selling firms and may be based on past or anticipated sales of the policies and other criteria. For instance, in 2010, TCI, in connection with the sales of our policies, made flat fee payments to several selling firms ranging from $6,350 to $500,000, and payments of between 0.10% and 1.32% on new sales. TCI also paid selling firms special fees based on new sales and/or assets under management.
During 2010, we and/or TCI had such “preferred product” arrangements with the following selling firms:
AXA
Carillon Financial
Centarus Financial
CFD Investments
Citizens Bank
Compass Bank
Equity Services
Financial Advisors of America
Financial Network
Fintegra
Genworth Financial
Girard Securities
Hantz Financial
Huntington Bank
Independent Financial Group
Invest Financial Corporation
James T. Borello
Kovack Securities
LPL Financial
61
M&T Bank
Merrill Lynch
Money Concepts
Morgan Stanley Smith Barney
Multi Family Securities Corp
Multi Financial
National Planning Corporation
Newbridge Securities
NEXT Financial Group
Park Avenue Securities
Primevest
ProEquities
Raymond James and Associates
Raymond James Financial Group
Sigma Financial
Signator Investments
SII Investments
Summit Equities
Suntrust Bank
TFS Securities, Inc.
The Planners Network
Transamerica Financial Advisors
UBS Financial
UnionBanc Investment Services LLC
US Bancorp
Valmark Securities
Wells Fargo/Wachovia
World Equity Group
Word Group Securities
During 2010, in conjunction with TCI, we paid the following amounts (in addition to sales commissions) to the top 10 selling firms (in terms of amounts paid):
Name of Firm | Amount Paid in 2010 | |||
Wells Fargo/Wachovia | $ | 1,327,561 | ||
LPL Financial | $ | 1,170,949 | ||
Morgan Stanley Smith Barney | $ | 1,122,219 | ||
Merrill Lynch | $ | 810,000 | ||
Transamerica Financial Advisors | $ | 750,789 | ||
UBS Financial | $ | 485,097 | ||
Raymond James Financial Services | $ | 426,264 | ||
World Group Securities | $ | 412,219 | ||
National Planning Corporation | $ | 315,904 | ||
Citizens Bank | $ | 270,113 | ||
No specific charge is assessed directly to policy owners or the separate account to cover commissions, non-cash compensation, and other incentives or payments described above. We do intend to recoup commissions and other sales expenses and incentives we pay, however, through fees and charges deducted under the policy and other corporate revenue.
62
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Glossary of Terms
The Policy - General Provisions
Certain Federal Income Tax Consequences
Investment Experience
Historical Performance Data
Published Ratings
State Regulation of Transamerica Life Insurance Company
Administration
Records and Reports
Distribution of the Policies
Voting Rights
Other Products
Custody of Assets
Legal Matters
Independent Registered Public Accounting Firm
Other Information
Financial Statements
63
EXCESS INTEREST ADJUSTMENT EXAMPLES
Money that you surrender from, transfer out of, or apply to an annuity payment option, from a guaranteed period option of the fixed account before the end of its guaranteed period (the number of years you specified the money would remain in the guaranteed period option) may be subject to an excess interest adjustment (“EIA”). At the time you request a surrender, if interest rates set by the Company have risen since the date of the initial guarantee, the excess interest adjustment will result in a lower cash value. However, if interest rates have fallen since the date of the initial guarantee, the excess interest adjustment will result in a higher cash value.
Excess interest adjustments will not reduce the policy value for a guaranteed period option below the premium payments and transfers to that guaranteed period option, less any prior partial surrenders and transfers from the guaranteed period option, plus interest at the policy’s minimum guaranteed effective annual interest rate. This is referred to as the excess interest adjustment floor.
The formula that will be used to determine the excess interest adjustment is:
S* (G-C)* (M/12)
| S | = | Gross amount being surrendered that is subject to the excess interest adjustment | ||||||
| G | = | Guaranteed interest rate in effect for the policy | ||||||
| M | = | Number of months remaining in the current option period, rounded up to the next higher whole number of months. | ||||||
| C | = | Current guaranteed interest rate then being offered on new premiums for the next longer option period than “M”. If this policy form or such an option period is no longer offered, “C” will be the U.S.Treasury rate for the next longer maturity (in whole years) than “M” on the 25th day of the previous calendar month, plus up to 2% (the amount of the “adjustment” will be based on an actuarial risk based analysis considering a number of financial criteria including the prevailing interest rate environment). | ||||||
| * | = | multiplication | ||||||
| ^ | = | exponentiation |
The following examples are for illustrative purposes only and ore calculated using hypothetical values. Your experience will vary based on circumstances at the time of withdrawal.
64
Excess Interest Adjustment Examples — (Continued)
Example 1 (Full Surrender, rates increase by 4%):
| Single premium: | $50,000.00 | |
| Guarantee period: | 5 Years | |
| Guarantee rate: | 5.50% per annum | |
| Surrender: | Middle of policy year 3 (this is represented by 2.5 in this example) | |
| Policy value at middle of policy year 3 | = 50,000.00 * (1.055) ^ 2.5 = 57,161.18 | |
| Adjustment free amount at middle of policy year 3 | = 57,161.18 - 50,000 = 7,161.18 | |
| Amount subject to excess interest adjustment | = 57,161.18 – 7,161.18 = 50,000.00 | |
| Excess interest adjustment floor | = 50,000.00 * (1.015) ^ 2.5 = 51,896.14 | |
| Excess interest adjustment | ||
| G = .055 | ||
| C = .095 | ||
| M = 30 | ||
| Excess interest adjustment | = S * (G - C) * (M/12) | |
| = 50,000.00 * (.055 - .095) * (30/12) | ||
| = -5,000.00, but excess interest adjustment cannot cause the adjusted policy value to fall below the excess interest adjustment floor, so the adjustment is limited to 51,896.14 - 57,161.18 = -5,265.03 | ||
| Adjusted policy value | = policy value + excess interest adjustment | |
| = 57,161.18 + (-5,265.03) = 51,896.15 | ||
| Cash value at middle of policy year 3 | = policy value + excess interest adjustment | |
| = 57,161.18 + (-5,265.03) = 51,896.15 |
Upon full surrender of the policy, the minimum cash value will never be less than that required by the non-forfeiture laws of your state.
| * | This example is for illustrative purposes only. The purpose of this illustration is to demonstrate how this feature is calculated using hypothetical values. Your experience will vary based on circumstances at the time of withdrawal. Please note the exponentiation represents the compounding of the interest rate. |
65
Excess Interest Adjustment Examples — (Continued)
Example 2 (Full Surrender, rates decrease by 1%):
| Single premium: | $50,000.00 | |
| Guarantee period: | 5 Years | |
| Guarantee rate: | 5.50% per annum | |
| Surrender: | Middle of policy year 3 (this is represented by 2.5 in this example) | |
| Policy value at middle of policy year 3 | = 50,000.00 * (1.055) ^ 2.5 = 57,161.18 | |
| Adjustment free amount at middle of policy year 3 | = 57,161.18 – 50,000.00 = 7,161.18 | |
| Amount subject to excess interest adjustment | = 57,161.18 –7,161.18 = 50,000.00 | |
| Excess interest adjustment floor | = 50,000.00 * (1.015) ^ 2.5 = 51,896.14 | |
| Excess interest adjustment | ||
| G = .055 | ||
| C = .045 | ||
| M = 30 | ||
| Excess interest adjustment | = S * (G - C) * (M/12) | |
| = 50,000.00 * (.055 - .045) * (30/12) = 1,250.00 | ||
| Adjusted policy value | = 57,161.18 + 1,250.00 = 58,411.18 | |
| Cash value at middle of policy year 3 | = policy value + excess interest adjustment | |
| = 57,161.18 + 1,250.00 = 58,411.18 |
Upon full surrender of the policy, the minimum cash value will never by less than that required by the non-forfeiture laws of your state.
| * | This example is for illustrative purposes only. The purpose of this illustration is to demonstrate how this feature is calculated using hypothetical values. Your experience will vary based on circumstances at the time of withdrawal. Please note the exponentiation represents the compounding of the interest rate. |
On a partial surrender, the Company will pay the policyholder the full amount of surrender requested (as long as the policy value is sufficient). Amounts surrendered will reduce the policy value by an amount equal to:
R - E
| R | = | the requested partial surrender | ||||||
| E | = | the excess interest adjustment |
66
Excess Interest Adjustment Examples — (Continued)
Example 3 (Partial Surrender, rates increase by 1%):
| Single premium: | $50,000.00 | |
| Guarantee period: | 5 Years | |
| Guarantee rate: | 5.50% per annum | |
| Partial surrender: | $20,000; middle of policy year 3 (this is represented by 2.5 in this example) | |
| Policy value at middle of policy year 3 | = 50,000.00 * (1.055) ^ 2.5 = 57,161.18 | |
| Adjustment free amount at middle of contract year 3 | = 57,161.18 – 50,000.00 = 7,161.18 | |
| Excess interest adjustment | ||
| S= 20,000 –7,161.18 = 12,838.82 | ||
| G= .055 | ||
| C= .065 | ||
| M= 30 | ||
| Excess interest adjustment | = S * (G - C) * (M/12) | |
| = 12,838.82 * (.055 - .065) * (30/12) | ||
| = - 320.97 | ||
| Remaining policy value at middle of policy year 3 | = 57,161.18 - (R - E) | |
| = 57,161.18 - (20,000.00 - (-320.97)) = 36,840.21 |
| * | This example is for illustrative purposes only. The purpose of this illustration is to demonstrate how this feature is calculated using hypothetical values. Your experience will vary based on circumstances at the time of withdrawal. Please note the exponentiation represents the compounding of the interest rate. |
Example 4 (Partial Surrender, rates decrease by 1%):
| Single premium: | $50,000.00 | |
| Guarantee period: | 5 Years | |
| Guarantee rate: | 5.50% per annum | |
| Partial surrender: | $20,000; middle of policy year 3 (this is represented by 2.5 in this example) | |
| Policy value at middle of policy year 3 | = 50,000.00 * (1.055) ^ 2.5 = 57,161.18 | |
| Adjustment free amount at middle of policy year 3 | = 57,161.18 - 50,000.00 = 7,161.18 | |
| Excess interest adjustment | ||
| S= 20,000 –7,161.18 = 12,838.82 | ||
| G= .055 | ||
| C= .045 | ||
| M= 30 | ||
| Excess interest adjustment | = 12,838.82 * (.055 - .045) * (30/12) | |
| = 320.97 | ||
| Remaining policy value at middle of policy year 3 | = 57,161.18 - (R - E) | |
| = 57,161.18 - (20,000.00 – 320.97) = 37,482.15 |
67
Excess Interest Adjustment Examples — (Continued)
| * | This example is for illustrative purposes only. The purpose of this illustration is to demonstrate how this feature is calculated using hypothetical values. Your experience will vary based on circumstances at the time of withdrawal. Please note the exponentiation represents the compounding of the interest rate. |
68
DEATH BENEFIT
Adjusted Partial Surrender. If you make a partial surrender (withdrawal), then your guaranteed minimum death benefit is reduced by an amount called the adjusted partial surrender. The amount of the reduction depends on the relationship between your death benefit and policy value. The adjusted partial surrender is equal to (1) multiplied by (2) divided by (3), where:
| (1) | is the amount of the gross partial surrender; |
| (2) | is the value of the current death proceeds immediately prior to the gross partial surrender; |
| (3) | is the policy value immediately prior to the gross partial surrender. |
The following examples describe the effect of a surrender on the guaranteed minimum death benefit and policy value.
Example 1 (Assumed Facts for Example)
Current guaranteed minimum death benefit before surrender | $ | 75,000 | ||
Current policy value before surrender | $ | 50,000 | ||
Current death proceeds | $ | 75,000 | ||
Total Gross Partial Surrender | $ | 15,494 | ||
Adjusted partial surrender = 15,494 * 75,000 / 50,000 | $ | 23,241 | ||
New guaranteed minimum death benefit (after surrender) = 75,000 – 23,241 | $ | 51,759 | ||
New policy value (after surrender) = 50,000 - 15,494 | $ | 34,506 |
Summary: |
| |||
Reduction in guaranteed minimum death benefit | =$ | 23,241 | ||
Reduction in policy value | =$ | 15,494 | ||
| * | This example is for illustrative purposes only. The purpose of this illustration is to demonstrate how this feature is calculated using hypothetical values. Your experience will vary based on circumstances at the time of withdrawal. |
| ** | The guaranteed minimum death benefit is reduced more than the policy value because the guaranteed minimum death benefit was greater than the policy value just prior to the surrender. |
69
Death Benefit — (Continued)
Example 2 (Assumed Facts for Example)
Current guaranteed minimum death benefit before surrender | $ | 50,000 | ||
Current policy value before surrender | $ | 75,000 | ||
Current death proceeds | $ | 75,000 | ||
Total Gross Partial Surrender | $ | 15,556 | ||
Adjusted partial surrender = 15,556 * 75,000 / 75,000 | $ | 15,556 | ||
New guaranteed minimum death benefit (after surrender) = 50,000 - 15,556 | $ | 34,444 | ||
New policy value (after surrender) = 75,000 -15,556 | $ | 59,444 |
Summary: |
| |||
Reduction in guaranteed minimum death benefit | =$ | 15,556 | ||
Reduction in policy value | =$ | 15,556 | ||
| * | This example is for illustrative purposes only. The purpose of this illustration is to demonstrate how this feature is calculated using hypothetical values. Your experience will vary based on circumstances at the time of withdrawal. |
| ** | The guaranteed minimum death benefit and policy value are reduced by the same amount because the policy value was higher than the guaranteed minimum death benefit just prior to the surrender. |
70
Death Benefit — (Continued)
Hypothetical Example
In this example, certain death benefit values at various points in time are depicted based on hypothetical assumed rates of performance. This example is for illustrative purposes only and assumes a single $100,000 premium payment by a sole owner and annuitant who is age 50. It further assumes no subsequent premium payments or withdrawals.
End of Year | Net Rate of Return for Fund* | Policy Value (No GMDB Elected) | Policy Value (Return of Premium GMDB Elected) | Return of Premium GMDB | ||||||||||||
| Issue | N/A | $ | 100,000 | $ | 100,000 | $ | 100,000 | |||||||||
| 1 | -4 | % | $ | 95,550 | $ | 95,400 | $ | 100,000 | ||||||||
| 2 | 18 | % | $ | 112,319 | $ | 112,000 | $ | 100.000 | ||||||||
| 3 | 15 | % | $ | 128,661 | $ | 128,128 | $ | 100,000 | ||||||||
| 4 | -7 | % | $ | 119,076 | $ | 118,390 | $ | 100,000 | ||||||||
| 5 | 2 | % | $ | 120,922 | $ | 120,047 | $ | 100,000 | ||||||||
| 6 | 10 | % | $ | 132,470 | $ | 131,332 | $ | 100,000 | ||||||||
| 7 | 14 | % | $ | 150,420 | $ | 148,930 | $ | 100,000 | ||||||||
| 8 | -3 | % | $ | 145,230 | $ | 143,569 | $ | 100,000 | ||||||||
| 9 | 17 | % | $ | 169,266 | $ | 167,114 | $ | 100,000 | ||||||||
| 10 | 6 | % | $ | 178,660 | $ | 176,138 | $ | 100,000 | ||||||||
| * | The assumed rate does reflect the deduction of a hypothetical fund fee but does not reflect the deduction of any other fees, charges or taxes. The death benefit values do reflect the deduction of hypothetical base policy fees and hypothetical death benefit fees. Different hypothetical returns and fees would produce different results. |
71
GUARANTEED LIFETIME WITHDRAWAL BENEFIT
ADJUSTED PARTIAL SURRENDERS - RETIREMENT INCOME MAXSM RIDER
When a withdrawal is taken, the following parts of the guaranteed lifetime withdrawal benefit can be affected:
| 1. | Withdrawal Base (“WB”) |
| 2. | Rider Withdrawal Amount (“RWA”) |
Withdrawal Base. Gross partial withdrawals in a rider year up to the rider withdrawal amount will not reduce the withdrawal base. Gross partial withdrawals in a rider year in excess of the rider withdrawal amount will reduce the withdrawal base by an amount equal to the greater of:
| 1) | the excess gross partial withdrawal amount; and |
| 2) | a pro rata amount, the result of (A / B) * C, where: |
| A | is the excess gross partial withdrawal (the amount in excess of the rider withdrawal amount remaining prior to the withdrawal); |
| B | is the policy value after the rider withdrawal amount has been withdrawn, but prior to the withdrawal of the excess amount; and |
| C | is the withdrawal base prior to the withdrawal of the excess amount. |
The following demonstrates, on a purely hypothetical basis, the effects of partial withdrawals under this guaranteed lifetime withdrawal benefit.
Example 1 (Base):
Assumptions:
Withdrawal Base (“WB”) = $100,000
Rider Withdrawal Amount (“RWA”) = 5.3% withdrawal would be $5,300 (5.3% of the current $100,000 withdrawal base)
Gross partial withdrawal (“GPWD”) = $5,300
Excess withdrawal (“EWD”) = None
Policy Value (“PV”) = $100,000 (PV after GPWD = $94,700)
You = owner and annuitant, age 71 at time withdrawals begin, which means Withdrawal Percentage is 5.3%.
Question:Is any portion of the withdrawal greater than the rider withdrawal amount?
No. There is no excess withdrawal under the guarantee since no more than $5,300 is withdrawn.
Result.In this example, because no portion of the withdrawal was in excess of $5,300, the withdrawal base does not change.
72
Guaranteed Lifetime Withdrawal Benefit — (Continued)
Example 2 (Excess Withdrawal):
Assumptions:
WB = $100,000
RWA = 5.3% withdrawal would be $5,300 (5.3% of the current $100,000 withdrawal base)
GPWD = $7,000
EWD = $1,700 ($7,000 - $5,300)
PV = $90,000
You = owner and annuitant, age 71 at time withdrawals begin, which means Withdrawal Percentage is 5.3%.
Result.For the guaranteed lifetime withdrawal benefit, because there was an excess withdrawal amount, the withdrawal base needs to be adjusted and a new lower rider withdrawal amount calculated. Had the withdrawal for this example not been more than $5,300, the withdrawal base would remain at $100,000 and the rider withdrawal amount would be $5,300 starting on the next rider anniversary. However, because an excess withdrawal has been taken, the withdrawal base is also reduced (this is the amount the 5.3% is based on).
New withdrawal base:
Step One. The withdrawal base is reduced only by the amount of the excess withdrawal or the pro rata amount, if greater.
Step Two. Calculate how much the withdrawal base is affected by the excess withdrawal.
| 1. | The formula is (EWD / (PV - 5.3% withdrawal)) * WB before any adjustments |
| 2. | ($1,700 / ($90,000 - $5,300)) * $100,000 = $2,007.08 |
Step Three. Which is larger, the actual $1,700 excess withdrawal or the $2,007.08 pro rata amount? $2,007.08 pro rata amount.
Step Four. What is the new withdrawal base upon which the rider withdrawal amount is based? $100,000 -$2,007.08 = $97,992.92
Result.The new withdrawal base is $97,992.92
New rider withdrawal amount:
Because the withdrawal base was adjusted (due to the excess withdrawal) we have to calculate a new rider withdrawal amount for the 5.3% guarantee that will be available starting on the next rider anniversary. This calculation assumes no more activity prior to the next rider anniversary.
Question:What is the new rider withdrawal amount?
$97,992.92 (the adjusted withdrawal base) * 5.3% = $5,193.62
Result.Going forward, the maximum you can take out in a year without causing an excess withdrawal and further reduction of the withdrawal base (assuming there are no future automatic step-ups) is $5,193.62.
73
Guaranteed Lifetime Withdrawal Benefit — (Continued)
Example 3 (Base demonstrating growth):
Assumptions:
WB = $100,000
Automatic step-up never occurs and no withdrawals are taken.
WB in 8 years (assuming an annual growth rate percentage of 5%) = $100,000 * (1 + .05) ^ 8 = $147,745.54
RWA = 5.3% withdrawal beginning 8 years from the rider date would be $7,830.51 (5.3% of the then-current $147,745.54 withdrawal base)
GPWD = $7,830.51
EWD = None
PV = $90,000 in 8 years
You = owner and annuitant, age 63 on rider issue; age 71 at time withdrawals begin, which means Withdrawal Percentage is 5.3%.
Question:Is any portion of the withdrawal greater than the rider withdrawal amount?
No. There is no excess withdrawal under the guarantee if no more than $7,830.51 is withdrawn in a rider year.
Result.In this example, because no portion of the withdrawal was in excess of $7,830.51, the withdrawal base does not change.
Example 4 (Minimum Required Distribution “MRD”):
WB= $100,000
Automatic Step-up and growth never occur.
RWA for rider year beginning July 1, 2010 = 5.3% withdrawal would be $5,300 (5.3% of the current $100,000 withdrawal base.
MRD for 2010 = $6,000 (calculated as set forth in the rider)
MRD for 2011 = $6,500 (calculated as set forth in the rider)
GPWD on February 1, 2011 = $6,500
EWD = $500
Question:Is any portion of the withdrawal greater than the rider withdrawal amount or the minimum required withdrawal calculated pursuant to the terms of the rider?
Yes. Because more than $6,000 (the greater of the RWA ($5,500) or MRDfor the tax year on that rider anniversary($6,000) was withdrawn, there is an excess withdrawal of $500 (6,500 - 6,000 = 500). Please note, even though the withdrawal occurred in 2011, the MRD for 2011 does not become part of the RWA calculation until July 1, 2011 (the rider anniversary during that tax year).
Result:Because there was an excess withdrawal amount, the withdrawal base needs to be adjusted and a new lower withdrawal amount calculated.SeeExample 2 (Excess Withdrawal) for an example ofhow the new withdrawal base and new rider withdrawal amount are calculated.
74
HYPOTHETICAL EXAMPLE OF THE WITHDRAWAL BASE CALCULATION -
RETIREMENT INCOME MAXSM RIDER
The following table demonstrates, on a purely hypothetical basis, the withdrawal base calculation for the Retirement Income MaxSM rider using an initial premium payment of $100,000 for a Single Life Option rider at an issue age of 80. All values shown are post transaction values.
Rider | Hypothetical Policy Value | Subsequent Premium Payment | Withdrawal | Excess WB Adjustment | Growth Amount | High Monthiversary Value | Withdrawal Base | Rider Withdrawal Amount | ||||||||||||||||||||||||
| $ | 100,000 | $ | $ | $ | $ | $ | 100,000 | $ | 100,000 | $ | 6,300 | |||||||||||||||||||||
1 | $ | 102,000 | $ | $ | $ | $ | $ | 102,000 | $ | 100,000 | $ | 6,300 | ||||||||||||||||||||
1 | $ | 105,060 | $ | $ | $ | $ | $ | 105,060 | $ | 100,000 | $ | 6,300 | ||||||||||||||||||||
1 | $ | 107,161 | $ | $ | $ | $ | $ | 107,161 | $ | 100,000 | $ | 6,300 | ||||||||||||||||||||
1 | $ | 110,376 | $ | $ | $ | $ | $ | 110,376 | $ | 100,000 | $ | 6,300 | ||||||||||||||||||||
1 | $ | 112,584 | $ | $ | $ | $ | $ | 112,584 | $ | 100,000 | $ | 6,300 | ||||||||||||||||||||
1 | $ | 115,961 | $ | $ | $ | $ | $ | 115,961 | $ | 100,000 | $ | 6,300 | ||||||||||||||||||||
1 | $ | 118,280 | $ | $ | $ | $ | $ | 118,280 | $ | 100,000 | $ | 6,300 | ||||||||||||||||||||
1 | $ | 121,829 | $ | $ | $ | $ | $ | 121,829 | $ | 100,000 | $ | 6,300 | ||||||||||||||||||||
1 | $ | 124,265 | $ | $ | $ | $ | $ | 124,265 | $ | 100,000 | $ | 6,300 | ||||||||||||||||||||
1 | $ | 120,537 | $ | $ | $ | $ | $ | 124,265 | $ | 100,000 | $ | 6,300 | ||||||||||||||||||||
1 | $ | 115,716 | $ | $ | $ | $ | $ | 124,265 | $ | 100,000 | $ | 6,300 | ||||||||||||||||||||
1 | $ | 109,930 | $ | $ | $ | $ | 105,000 | $ | 124,265 | $ | 124,265 | 1 | $ | 7,829 | ||||||||||||||||||
2 | $ | 112,129 | $ | $ | $ | $ | $ | 112,129 | $ | 124,265 | $ | 7,829 | ||||||||||||||||||||
2 | $ | 115,492 | $ | $ | $ | $ | $ | 115,492 | $ | 124,265 | $ | 7,829 | ||||||||||||||||||||
2 | $ | 117,802 | $ | $ | $ | $ | $ | 117,802 | $ | 124,265 | $ | 7,829 | ||||||||||||||||||||
2 | $ | 121,336 | $ | $ | $ | $ | $ | 121,336 | $ | 124,265 | $ | 7,829 | ||||||||||||||||||||
2 | $ | 124,976 | $ | $ | $ | $ | $ | 124,976 | $ | 124,265 | $ | 7,829 | ||||||||||||||||||||
2 | $ | 177,476 | $ | 50,000 | $ | $ | $ | $ | 177,476 | $ | 174,265 | $ | 10,979 | |||||||||||||||||||
2 | $ | 175,701 | $ | $ | $ | $ | $ | 177,476 | $ | 174,265 | $ | 10,979 | ||||||||||||||||||||
2 | $ | 172,187 | $ | $ | $ | $ | $ | 177,476 | $ | 174,265 | $ | 10,979 | ||||||||||||||||||||
2 | $ | 167,022 | $ | $ | $ | $ | $ | 177,476 | $ | 174,265 | $ | 10,979 | ||||||||||||||||||||
2 | $ | 163,681 | $ | $ | $ | $ | $ | 177,476 | $ | 174,265 | $ | 10,979 | ||||||||||||||||||||
2 | $ | 166,955 | $ | $ | $ | $ | $ | 177,476 | $ | 174,265 | $ | 10,979 | ||||||||||||||||||||
2 | $ | 170,294 | $ | $ | $ | $ | 182,979 | $ | 177,476 | $ | 182,979 | 2 | $ | 11,528 | ||||||||||||||||||
3 | $ | 166,888 | $ | $ | $ | $ | $ | 166,888 | $ | 182,979 | $ | 11,528 | ||||||||||||||||||||
3 | $ | 171,895 | $ | $ | $ | $ | $ | 171,895 | $ | 182,979 | $ | 11,528 | ||||||||||||||||||||
3 | $ | 173,614 | $ | $ | $ | $ | $ | 173,614 | $ | 182,979 | $ | 11,528 | ||||||||||||||||||||
3 | $ | 178,822 | $ | $ | $ | $ | $ | 178,822 | $ | 182,979 | $ | 11,528 | ||||||||||||||||||||
3 | $ | 175,246 | $ | $ | $ | $ | $ | 178,822 | $ | 182,979 | $ | 11,528 | ||||||||||||||||||||
3 | $ | 151,741 | $ | $ | 20,000 | $ | 9,676 | $ | $ | $ | 173,303 | $ | ||||||||||||||||||||
3 | $ | 154,775 | $ | $ | $ | $ | $ | $ | 173,303 | $ | ||||||||||||||||||||||
3 | $ | 159,419 | $ | $ | $ | $ | $ | $ | 173,303 | $ | ||||||||||||||||||||||
75
Rider | Hypothetical Policy Value | Subsequent Premium Payment | Withdrawal | Excess WB Adjustment | Growth Amount | High Monthiversary Value | Withdrawal Base | Rider Withdrawal Amount | ||||||||||||||||||||||||
3 | $ | 161,013 | $ | $ | $ | $ | $ | $ | 173,303 | $ | ||||||||||||||||||||||
3 | $ | 165,843 | $ | $ | $ | $ | $ | $ | 173,303 | $ | ||||||||||||||||||||||
3 | $ | 174,135 | $ | $ | $ | $ | $ | $ | 173,303 | $ | ||||||||||||||||||||||
3 | $ | 181,101 | $ | $ | $ | $ | $ | $ | 181,101 | 1 | $ | 11,409 | ||||||||||||||||||||
| (1) | Automatic Step Up Applied |
| (2) | Growth Applied |
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