7% L.Inc anniversary, and the annual benefit amount will be based on that Current Income Benefit Base.
Lifetime Income Surrenders
At any time after the 7% Lifetime Income Option is elected, the contract owner may begin taking the lifetime income benefit by taking a surrender from the contract. The first surrender under the contract constitutes the first lifetime income surrender, even if such surrender is taken to meet minimum distribution requirements under the Internal Revenue Code. Nationwide will surrender accumulation units proportionally from the sub-accounts as of the date of the surrender request. As with any surrender, lifetime income surrenders reduce the contract value and consequently, the amount available for annuitization.
At the time of the first surrender, the Current Income Benefit Base is locked in and will not change unless the contract owner takes excess surrenders, elects a reset opportunity (both discussed later in this provision), or submits additional purchase payments. Additional purchase payments submitted after the first surrender from the contract will increase the Current Income Benefit Base by the amount of the purchase payment.
Simultaneously, the lifetime income percentage is determined based on the age of the contract owner as indicated in the following table:
Contract Owner’s Age (at time of first surrender) | 7% Lifetime Income Percentage |
| 45 up to 59½ | 4% |
| 59½ through 66 | 5% |
| 67 through 71 | 5.5% |
| 72 through 80 | 6% |
| 81 and older | 7% |
A contract owner will receive the 7% lifetime income percentage only if he or she does not take a surrender from the contract prior to age 81. Note: The Internal Revenue Code requires that IRAs, SEP IRAs, and Simple IRAs begin distributions no later than April 1 of the calendar year following the calendar year in which the contract owner reaches age 70½. Thus, if the contract is subject to these minimum distribution rules and distributions are taken at the latest date possible under the tax rules, the maximum lifetime income percentage available to that contract is 5.5%. Contract owners may be eligible to take the minimum required distributions from other IRA, SEP IRA, or Simple IRA contracts or accounts, and thus may be able to receive a lifetime income percentage greater than 5.5%. Consult a qualified tax advisor.
At the time of the first surrender and on each 7% L.Inc anniversary thereafter, the lifetime income percentage is multiplied by the Current Income Benefit Base to determine the benefit amount for that year. The benefit amount is the maximum amount that can be surrendered from the contract before the next 7% L.Inc anniversary without reducing the Current Income Benefit Base. The ability to surrender the current benefit amount will continue until the earlier of the contract owner’s death or annuitization.
Although surrenders up to the benefit amount do not reduce the Current Income Benefit Base, they do reduce the contract value and the death benefit.
Impact of Withdrawals in Excess of the7% Lifetime Income Percentage Limit
The contract owner is permitted to surrender contract value in excess of that year’s benefit amount provided that the contract value is greater than zero. Surrenders in excess of the benefit amount will reduce the Current Income Benefit Base, and consequently, the benefit amount calculated for subsequent years. In the event of excess surrenders, the Current Income Benefit Base will be reduced by the greater of:
| (1) | the dollar amount of the surrender in excess of the benefit amount; or |
| (2) | the ratio of the dollar amount of the excess surrender to the contract value (which has been reduced by the amount of the benefit amount surrendered), multiplied by the Current Income Benefit Base. |
In situations where the contract value exceeds the existing Current Income Benefit Base, excess surrenders will typically result in a dollar amount reduction to the new Current Income Benefit Base. In situations where the contract value is less than the existing Current Income Benefit Base, excess surrenders will typically result in a proportional reduction to the new Current Income Benefit Base.
Currently, Nationwide allows for an “RMD privilege” whereby Nationwide permits a contract owner to surrender contract value in excess of the benefit amount without reducing the Current Income Benefit Base if such excess surrender is for the sole purpose of meeting Internal Revenue Code required minimum distributions for this contract. This RMD privilege is not available for contracts issued as IRAs that are taken over, upon a contract owner’s death, by a non-spouse. In order to qualify for the RMD privilege, the contract owner must:
| (1) | be at least 70 ½ years old as of the date of the request; |
| (2) | own the contract as an IRA, Roth IRA, SEP IRA, Simple IRA, or Investment-Only Contract; and |
| (3) | submit a completed administrative form to Nationwide’s home office. |
Nationwide reserves the right to modify or eliminate the RMD privilege if there is any change to the Internal Revenue Code or IRS rules relating required minimum distributions, including the issuance of relevant IRS guidance. If Nationwide exercises this right, any surrender in excess of the benefit amount will reduce the remaining Current Income Benefit Base.
Once the contract value falls to zero, the contract owner is no longer permitted to submit additional purchase payments or take surrenders in excess of the benefit amount.
Reset Opportunities
Nationwide offers an automatic reset of the income benefit base. If, on any 7% L.Inc anniversary, the contract value owner takes excess surrenders, elects a reset opportunity (both
discussed later in this provision), or submits additional purchase payments. Additional purchase payments submitted after the first surrender from the contract will increase the Current Income Benefit Base by the amount of the purchase payment.
Simultaneously, the lifetime income percentage is determined based on the age of the contract owner as indicated in the following table:
Contract Owner’s Age (at time of first surrender) | 5% Lifetime Income Percentage |
| 45 up to 59½ | 4% |
| 59½ through 66 | 5% |
| 67 through 71 | 5.5% |
| 72 through 80 | 6% |
| 81 and older | 7% |
A contract owner will receive the 7% lifetime income percentage only if he or she does not take a surrender from the contract prior to age 81. Note: The Internal Revenue Code requires that IRAs, SEP IRAs, and Simple IRAs begin distributions no later than April 1 of the calendar year following the calendar year in which the contract owner reaches age 70½. Thus, if the contract is subject to these minimum distribution rules and distributions are taken at the latest date possible under the tax rules, the maximum lifetime income percentage available to that contract is 5.5%. Contract owners may be eligible to take the minimum required distributions from other IRA, SEP IRA, or Simple IRA contracts or accounts, and thus may be able to receive a lifetime income percentage greater than 5.5%. Consult a qualified tax advisor.
At the time of the first surrender and on each 5% L.Inc anniversary thereafter, the lifetime income percentage is multiplied by the Current Income Benefit Base to determine the benefit amount for that year. The benefit amount is the maximum amount that can be surrendered from the contract before the next 5% L.Inc anniversary without reducing the Current Income Benefit Base. The ability to surrender the current benefit amount will continue until the earlier of the contract owner’s death or annuitization.
Although surrenders up to the benefit amount do not reduce the lifetime benefit base, they do reduce the contract value and the death benefit.
Impact of Withdrawals in Excess of the 5% Lifetime Income Percentage Limit
The contract owner is permitted to surrender contract value in excess of that year’s benefit amount provided that the contract value is greater than zero. Surrenders in excess of the benefit amount will reduce the Current Income Benefit Base, and consequently, the benefit amount calculated for subsequent years. In the event of excess surrenders, the Current Income Benefit Base will be reduced by the greater of:
| (1) | the dollar amount of the surrender in excess of the benefit amount; or |
| (2) | the ratio of the dollar amount of the excess surrender to the contract value (which has been reduced by the amount of the benefit amount surrendered), multiplied by the Current Income Benefit Base. |
In situations where the contract value exceeds the existing Current Income Benefit Base, excess surrenders will typically result in a dollar amount reduction to the new Current Income Benefit Base. In situations where the contract value is less than the existing Current Income Benefit Base, excess surrenders will typically result in a proportional reduction to the new Current Income Benefit Base.
Currently, Nationwide allows for an “RMD privilege” whereby Nationwide permits a contract owner to surrender contract value in excess of the benefit amount without reducing the Current Income Benefit Base if such excess surrender is for the sole purpose of meeting Internal Revenue Code required minimum distributions for this contract. This RMD privilege is not available for contracts issued as IRAs that are taken over, upon a contract owner’s death, by a non-spouse. In order to qualify for the RMD privilege, the contract owner must:
| (1) | be at least 70 ½ years old as of the date of the request; |
| (2) | own the contract as an IRA, Roth IRA, SEP IRA, Simple IRA, or Investment-only Contract; and |
| (3) | submit a completed administrative form to Nationwide’s home office. |
Nationwide reserves the right to modify or eliminate the RMD privilege if there is any change to the Internal Revenue Code or IRS rules relating required minimum distributions, including the issuance of relevant IRS guidance. If Nationwide exercises this right, any surrender in excess of the benefit amount will reduce the remaining Current Income Benefit Base.
Once the contract value falls to zero, the contract owner is no longer permitted to submit additional purchase payments or take surrenders in excess of the benefit amount.
Reset Opportunities
Nationwide offers an automatic reset of the income benefit base. If, on any 5% L.Inc anniversary, the contract value exceeds the existing Current Income Benefit Base, Nationwide will automatically reset the Current Income Benefit Base to equal that contract value. This higher amount will be the new Current Income Benefit Base. This automatic reset will continue until any terms and conditions associated with the 5% Lifetime Income Option change.
In the event one or more terms and conditions of the 5% Lifetime Income Option change, the reset opportunities still exist, but are no longer automatic. An election to reset the Current Income Benefit Base must be made by the contract owner to Nationwide. On or about each 5% L.Inc anniversary, Nationwide will provide the contract owner with information necessary to make this determination. Specifically, Nationwide will provide: the contract value; the Current Income Benefit Base; the current terms and conditions associated with the 5% Lifetime Income Option; and instructions on how to communicate an election to reset the benefit base.
If the deceased is the … | and … | and … | then the … |
| Annuitant | The annuitant is not the contract owner | There is no surviving contingent annuitant, no surviving beneficiary, no surviving contingent beneficiary and no surviving contract owner | Death benefit is paid to the last surviving contract owner’s estate. |
If you do not elect the Spousal Continuation Benefit and upon your death the joint or contingent owner is not the surviving spouse, the joint or contingent owner may receive the death benefit or the contract must be paid out either (1) entirely within 5 years or (2) in annual (or more frequent) substantially equal periodic payments for life or over a period not to exceed life expectancy. Please see “Required Distributions for Non-Qualified Contracts” and “Required Distributions for IRAs, SEP IRAs, Simple IRAs and Roth IRAs” in Appendix C for more information about required distributions upon death of the contract owner.
Annuity Commencement Date
The annuity commencement date is the date on which annuity payments are scheduled to begin.
Generally, the contract owner designates the annuity commencement date at the time of application. If no annuity commencement date is designated at the time of application, Nationwide will establish the annuity commencement date as the date the annuitant reaches age 90 for Non-Qualified Contracts and the date the contract owner reaches age 70½ for all other contract types.
The contract owner may change the annuity commencement date before annuitization. This change must be in writing and approved by Nationwide. The annuity commencement date may not be later than the first day of the first calendar month after the annuitant’s 90th birthday (or the 90th birthday of the oldest annuitant if there are joint annuitants) unless approved by Nationwide.
If the contract owner elected a Lifetime Income Option, Nationwide will, approximately three months before the annuity commencement date, notify the contract owner of the impending annuity commencement date and give the contract owner the opportunity to defer the annuity commencement date in order to preserve the benefit associated with the Lifetime Income Option. Deferring the annuity commencement date may have tax consequences. See “Required Distributions for IRAs, SEP IRAs, Simple IRAs and Roth IRAs” in Appendix C, the “7% Lifetime Income Option,” and the “5% Lifetime Income Option provisions in this prospectus. Consult a qualified tax advisor.
Annuitizing the Contract
Annuitization Date
The annuitization date is the date that annuity payments begin. Annuity payments will not begin until the contract owner affirmatively elects to begin annuity payments. If the contract owner has elected a Lifetime Income Option, an election to begin annuity payments will terminate all benefits, conditions, guarantees, and charges associated with the Lifetime Income Option.
The annuitization date will be the first day of a calendar month unless otherwise agreed. The annuitization date must be at least 2 years after the contract is issued, but may not be later than either:
| · | the age (or date) specified in your contract; or |
| · | the age (or date) specified by state law, where applicable. |
On the annuitization date, the annuitant becomes the contract owner unless the contract owner is a Charitable Remainder Trust.
The Internal Revenue Code may require that distributions be made prior to the annuitization dates specified above see "Required Distributions" in Appendix C: Contract Types and Tax Information.
Annuitization
Annuitization is the period during which annuity payments are received. It is irrevocable once payments have begun. Upon arrival of the annuitization date, the annuitant must choose:
| (1) | an annuity payment option; and |
| (2) | either a fixed payment annuity, variable payment annuity, or an available combination. |
Nationwide guarantees that each payment under a fixed payment annuity will be the same throughout annuitization. Under a variable payment annuity, the amount of each payment will vary with the performance of the underlying mutual funds chosen by the contract owner.
Fixed Annuity Payments
Fixed annuity payments provide for level annuity payments. Premium taxes are deducted prior to determining fixed annuity payments. The fixed annuity payments will remain level unless the annuity payment option provides otherwise.
Variable Annuity Payments
Variable annuity payments will vary depending on the performance of the underlying mutual funds selected. The underlying mutual funds available during annuitization are
