UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
| REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | File No .333-160635 |
| Pre-Effective Amendment No. 2 | þ |
| Post-Effective Amendment No. | o |
and
| REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | File No. 811-03330 |
(Check appropriate box or boxes.)
NATIONWIDE VARIABLE ACCOUNT – II
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Depositor)
One Nationwide Plaza, Columbus, Ohio 43215
(Address of Depositor's Principal Executive Offices) (Zip Code)
| Depositor's Telephone Number, including Area Code | (614) 249-7111 |
Robert W. Horner, III, Vice President, Corporate Governance and Secretary, One Nationwide Plaza, Columbus, Ohio 43215
(Name and Address of Agent for Service)
| Approximate Date of Proposed Public Offering | As soon as possible after effective date. |
| Title of Securities Being Registered | Individual Flexible Premium Deferred Variable Annuity Contract |
The Registrant hereby agrees to amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall therefore become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
Nationwide Destination SM B
Nationwide Life Insurance Company
Individual Flexible Premium Deferred Variable Annuity Contracts
Issued by Nationwide Life Insurance Company through its Nationwide Variable Account-II
The date of this prospectus is __________, 20 10 .
This prospectus contains basic information you should understand about the contracts before investing. Please read this prospectus carefully and keep it for future reference. Variable annuities are complex investment products with unique benefits and advantages that may be particularly useful in meeting long-term savings and retirement needs. There are costs and charges associated with these benefits and advantages - costs and charges that are different, or do not exist at all, within other investment products. With help from financial consultants and advisers, investors are encouraged to compare and contrast the costs and benefits of the variable annuity described in this prospectus against those of other investment products, especially other variable annuity and variable life insurance products offered by Nationwide and its affiliates. Nationwide offers a wide array of such products, many with different charges, benefit features and underlying investment options. This process of comparison and analysis should aid in determining whether the purchase of the contract described in this prospectus is consistent with your investment objectives, risk tolerance, investment time horizon, marital status, tax situation and other personal characteristics and needs. The Statement of Additional Information (dated __________, 20 10 ), which contains additional information about the contracts and the Variable Account, has been filed with the Securities and Exchange Commission (“SEC”) and is incorporated herein by reference. The table of contents for the Statement of Additional Information is on page 45. To obtain free copies of the Statement of Additional Information and other information about the Variable Account that has been filed with the SEC, call 1-800-848-6331 (TDD 1-800-238-3035) or write: Nationwide Life Insurance Company 5100 Rings Road, RR1-04-F4 Dublin, Ohio 43017-1522 Information about this and other Nationwide products can be found at: www.nationwide.com. Information about Nationwide and the variable annuity contract described in this prospectus (including the Statement of Additional Information) may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C., or may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, 100 F Street NE, Washington, D.C. 20549-0102. Additional information on the operation of the Public Reference Room may be obtained by calling the SEC at (202) 551-8090. The SEC also maintains a web site (www.sec.gov) that contains the prospectus, the Statement of Additional Information, material incorporated by reference, and other information. Before investing, understand that annuities and/or life insurance products are not insured by the FDIC or any other Federal government agency, and are not deposits or obligations of, guaranteed by, or insured by the depository institution where offered or any of its affiliates. Variable a nnuity contracts and the associated optional benefit rider s involve investment risk and may lose value. These securities have not been approved or disapproved by the SEC, nor has the SEC passed upon the accuracy or adequacy of the prospectus. Any representation to the contrary is a criminal offense. This contract contains features that apply credits to the Contract Value. The benefit of the credits may be more than offset by the additional fees that the Contract Owner will pay in connection with the credits. A contract without credits may cost less. |
The Sub-Accounts available under this contract invest in underlying mutual funds of the portfolio companies listed below.
AIM Variable Insurance Funds
AllianceBernstein Variable Products Series Fund, Inc.
American Century Variable Portfolios II, Inc.
American Century Variable Portfolios, Inc.
BlackRock Variable Series Funds, Inc.
Dreyfus
Dreyfus Investment Portfolios
Dreyfus Variable Investment Fund
Fidelity Variable Insurance Products Fund
Franklin Templeton Variable Insurance Products Trust
Ivy Funds Variable Insurance Portfolios, Inc.
Janus Aspen Series
MFS® Variable Insurance Trust
Nationwide Variable Insurance Trust
Neuberger Berman Advisers Management Trust
Oppenheimer Variable Account Funds
PIMCO Variable Insurance Trust
Wells Fargo Advantage Funds® Variable Trust
For a complete list of the available Sub-Accounts, please refer to “Appendix A: Underlying Mutual Funds.” For more information on the underlying mutual funds, please refer to the prospectus for the mutual fund.
Purchase payments not invested in the Sub-Accounts of the Nationwide Variable Account-II (the “Variable Account”) may be allocated to the Fixed Account.
Accumulation Unit- An accounting unit of measure used to calculate the Contract Value allocated to the Variable Account before the Annuitization Date.
Annuitant- The person upon whose continuation of life benefit payments involving life contingencies depends.
Annuitization Date- The date on which annuity payments begin.
Annuity Commencement Date- The date on which annuity payments are scheduled to begin.
Annuity Unit- An accounting unit of measure used to calculate the value of variable annuity payments.
Co-Annuitant (s) - The person ( s ) designated by the Contract Owner to receive the Spousal Protection Feature.
Contract Owner (s) - the person(s) who owns all rights under the contract. All references in this prospectus to “you” shall mean the Contract Owner.
Contract Value- The value of all Accumulation Units in a contact plus any amount held in the Fixed Account.
Contract Anniversary- Each recurring one-year anniversary of the date the contract was issued.
Contract Year- Each year the contract is in force beginning with the date the contract is issued.
Current Income Benefit Base- For purposes of the 5% Lifetime Income Option and the 10% Lifeime Income Option , it is equal to the Original Income Benefit Base adjusted throughout the life of the contract to account for subsequent purchase payments, excess withdrawals, and reset opportunities. This amount is multiplied by the Lifetime Withdrawal Percentage to arrive at the benefit amount for any given year.
Daily Net Assets- A figure that is calculated at the end of each Valuation Date and represents the sum of all the Contract Owners’ interests in the variable Sub-Accounts after the deduction of contract and underlying mutual fund expenses.
FDIC- Federal Deposit Insurance Corporation.
Fixed Account- An investment option that is funded by Nationwide's General Account. Amounts allocated to the Fixed Account will receive periodic interest, subject to a guaranteed minimum crediting rate that varies depending on the type of allocation ( e.g., new purchase payment, transfer, Dollar Cost Averaging allocation, Enhanced Dollar Cost Averaging allocation, etc.).
General Account- All assets of Nationwide other than those of the Variable Account or in other separate accounts that have been or may be established by Nationwide.
Individual Retirement Account- An account that qualifies for favorable tax treatment under Section 408(a) of the Internal Revenue Code, but does not include Roth IRAs.
Individual Retirement Annuity or IRA- An annuity contract that qualifies for favorable tax treatment under Section 408(b) of the Internal Revenue Code, but does not include Roth IRAs.
Investment-Only Contract- A contract purchased by a qualified pension, profit-sharing or stock bonus plan as defined by Section 401(a) of the Internal Revenue Code.
Lifetime Withdrawal Percentage- An age-based percentage used to determine the annual amount available for surrender under a lifetime income option. The applicable percentage is multiplied by the Current Income Benefit Base to arrive at the benefit amount for any given year.
Monthly Contract Anniversary- Each recurring one-month anniversary of the date the contract was issued.
Nationwide- Nationwide Life Insurance Company. All references in this prospectus to “we” or “us” shall mean Nationwide.
Net Asset Value- The value of one share of an underlying mutual fund investment option at the close of the New York Stock Exchange.
Non-Qualified Contract- A contract which does not qualify for favorable tax treatment as a Qualified Plan, IRA, Roth IRA, SEP IRA, Simple IRA, or Tax Sheltered Annuity.
Original Income Benefit Base- For purposes of the 5% Lifetime Income Option and the 10% Lifetime Income Option , the initial benefit base calculated on the date the contract is issued, which is equal to the Contract Value.
Qualified Plan- A retirement plan that receives favorable tax treatment under Section 401 of the Internal Revenue Code, including Investment-Only Contracts. In this prospectus, all provisions applicable to Qualified Plans also apply to Investment-Only Contracts unless specifically stated otherwise.
Roth IRA- An annuity contract that qualifies for favorable tax treatment under Section 408A of the Internal Revenue Code.
SEC- Securities and Exchange Commission.
SEP IRA- An annuity contract which qualifies for favorable tax treatment under Section 408(k) of the Internal Revenue Code.
Simple IRA- An annuity contract which qualifies for favorable tax treatment under Section 408(p) of the Internal Revenue Code.
Sub-Accounts- Divisions of the Variable Account, each of which invests in a single underlying mutual fund.
Tax Sheltered Annuity- An annuity that qualifies for favorable tax treatment under Section 403(b) of the Internal Revenue Code. Contracts issued pursuant to this prospectus cannot be issued as Tax Sheltered Annuities.
Valuation Date- Each day the New York Stock Exchange is open for business, or any other day during which there is a sufficient degree of trading of underlying mutual fund shares such that the current Net Asset Value of Accumulation Units or Annuity Units might be materially affected. Values of the Variable Account are determined as of the close of the New York Stock Exchange which generally closes at 4:00 p.m. Eastern Time.
Valuation Period- The period of time commencing at the close of a Valuation Date and ending at the close of the New York Stock Exchange for the next succeeding Valuation Date.
Variable Account- Nationwide Variable Account-II, a separate account of Nationwide that contains Variable Account allocations. The Variable Account is divided into Sub-Accounts, each of which invests in shares of a separate underlying mutual fund.
| Table of Contents | Page |
| Glossary of Special Terms | 2 |
| Contract Expenses | 6 |
| Underlying Mutual Fund Annual Expenses | 7 |
| Example | 8 |
| Synopsis of the Contracts | 8 |
| Surrenders | |
| Minimum Initial and Subsequent Purchase Payments | |
| Dollar Limit Restrictions | |
| Credits on Purchase Payments | |
| Charges and Expenses | |
| Annuity Payments | |
| Taxation | |
| Death Benefit | |
| Ten Day Free Look | |
| Condensed Financial Information | 11 |
| Financial Statements | 11 |
| Nationwide Life Insurance Company | 11 |
| Nationwide Investment Services Corporation | 11 |
| Investing in the Contract | 11 |
| The Variable Account and Underlying Mutual Funds | |
| The Fixed Account | |
| The Contract in General | 13 |
| Distribution, Promotional and Sales Expenses | |
| Underlying Mutual Fund Payments | |
| Profitability | |
| Contract Modification | |
| Standard Charges and Deductions | 15 |
| Mortality and Expense Risk Charge | |
| Administrative Charge | |
| Contract Maintenance Charge | |
| Contingent Deferred Sales Charge | |
| Premium Taxes | |
| Short-Term Trading Fees | |
| Optional Contract Benefits, Charges and Deductions | 17 |
| Death Benefit Options | |
| Beneficiary Protector II Option | |
| 10% and 5% Lifetime Income Option | |
| 10% and 5% Spousal Continuation Benefit | |
| Income Benefit Investment Options | |
| Removal of Variable Account Charges | 25 |
| Ownership and Interests in the Contract | 25 |
| Contract Owner | |
| Joint Owner | |
| Contingent Owner | |
| Annuitant | |
| Contingent Annuitant | |
| Co-Annuitant | |
| Joint Annuitant | |
| Beneficiary and Contingent Beneficiary | |
| Changes to the Parties to the Contract | |
| Operation of the Contract | 26 |
| Purchase Payment Credits | |
| Pricing | |
| Application and Allocation of Purchase Payments | |
| Determining the Contract Value | |
| Transfer Requests | |
| Table of Contents (continued) | Page |
| Transfer Restrictions | |
| Transfers Prior to Annuitization | |
| Transfers After Annuitization | |
| Right to Examine and Cancel | 30 |
| Surrender (Redemption) Prior to Annuitization | 31 |
| Partial Surrenders (Partial Redemptions) | |
| Full Surrenders (Full Redemptions) | |
| Surrender (Redemption) After Annuitization | 31 |
| Assignment | 31 |
| Contract Owner Services | 32 |
| Asset Rebalancing | |
| Dollar Cost Averaging | |
| Enhanced Fixed Account Dollar Cost Averaging | |
| Dollar Cost Averaging for Living Benefits | |
| Fixed Account Interest Out Dollar Cost Averaging | |
| Systematic Withdrawals | |
| Custom Portfolio Asset Rebalancing Service | |
| Death Benefits | 34 |
| Death of Contract Owner | |
| Death of Annuitant | |
| Death of Contract Owner/Annuitant | |
| Death Benefit Payment | |
| Death Benefit Calculations | |
| Spousal Protection Feature | |
| Annuity Commencement Date | 38 |
| Annuitizing the Contract | 39 |
| Annuitization Date | |
| Annuitization | |
| Fixed Annuity Payments | |
| Variable Annuity Payments | |
| Frequency and Amount of Annuity Payments | |
| Annuity Payment Options | 40 |
| Annuity Payment Options for Contracts with Total Purchase Payments Less Than or Equal to $2,000,000 | |
| Annuity Payment Options for Contracts with Total Purchase Payments Greater Than $2,000,000 | |
| Annuitization of Amounts Greater than $5,000,000 | |
| Statements and Reports | 41 |
| Legal Proceedings | 41 |
| Table of Contents of Statement of Additional Information | 45 |
| Appendix A: Underlying Mutual Funds | 46 |
| Appendix B: Condensed Financial Information | 58 |
| Appendix C: Contract Types and Tax Information | 59 |
| Appendix D: State Variations | 67 |
The following tables describe the fees and expenses that a Contract Owner will pay when buying, owning, or surrendering the contract.
The first table describes the fees and expenses a Contract Owner will pay at the time the contract is purchased, surrendered, or when cash value is transferred between investment options.
| Contract Owner Transaction Expenses |
Maximum Contingent Deferred Sales Charge (“CDSC”) (as a percentage of purchase payments surrendered) | 7% |
Range of CDSC over time:
| Number of Completed Years from Date of Purchase Payment | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7+ |
| CDSC Percentage | 7% | 7% | 6% | 5% | 4% | 3% | 2% | 0% |
Maximum Premium Tax Charge (as a percentage of purchase payments) | 5%1 |
Maximum Short-Term Trading Fee (as a percentage of transaction amount2) | 1% |
The next table describes the fees and expenses that a Contract Owner will pay periodically during the life of the contract (not including underlying mutual fund fees and expenses).
| Recurring Contract Expenses |
| Maximum Annual Contract Maintenance Charge | $303 |
Variable Account Annual Expenses (assessed as an annualized percentage of Daily Net Assets) | |
Mortality and Expense Risk Charge Administrative Charge | 1.10% 0.20% |
Death Benefit Options (assessed as an annualized percentage of Daily Net Assets) (eligible applicants may purchase one) | |
One-Year Enhanced Death Benefit Option Charge Total Variable Account Charges (including this option only) | 0.20% 1.50% |
One-Month Enhanced Death Benefit Option Charge Total Variable Account Charges (including this option only) | 0.35% 1.65% |
Combination Enhanced Death Benefit Option Charge Total Variable Account Charges (including this option only) | 0.45% 1.75% |
Beneficiary Protector II Option Charge (assessed as an annualized percentage of Daily Net Assets) Total Variable Account Charges (including this option only) | 0.35%4 1.65% |
Lifetime Income Options (assessed annually as a percentage of the Current Income Benefit Base5) (eligible applicants may purchase one) | |
5% Lifetime Income Option Charge (only available in NY) | 1.00%6 |
| 10% Lifetime Income Option Charge | 1.20 %7 |
Spousal Continuation Benefits (assessed annually as a percentage of the Current Income Benefit Base) (eligible applicants may purchase the option that corresponds to the elected lifetime income option) | |
5% Spousal Continuation Benefit Charge (only available in NY) | 0.15%8 |
10% Spousal Continuation Benefit Charge (not available in NY) | 0.30%9 |
The next table shows the fees and expenses that a Contract Owner would pay if he/she elected all of the optional benefits available under the contract (and the most expensive of mutually exclusive optional benefits).
Summary of Maximum Contract Expenses (annualized rate, as a percentage of the Daily Net Assets) |
| Mortality and Expense Risk Charge (applicable to all contracts) | 1.10% |
| Administrative Charge (applicable to all contracts) | 0.20% |
| Combination Enhanced Death Benefit Option Charge | 0.45% |
| Beneficiary Protector II Option Charge | 0.35% |
| 10% Lifetime Income Option Charge | 1. 2 0%10 |
| 10% Spousal Continuation Benefit Charge | 0.30%10 |
| Maximum Possible Total Variable Account Charges | 3.60 %11 |
The next table provides the minimum and maximum total operating expenses, as of December 31, 2008, charged by the underlying mutual funds that you may pay periodically during the life of the Contract. More detail concerning each underlying mutual fund's fees and expenses is contained in the prospectus for each underlying mutual fund.
| Total Annual Underlying Mutual Fund Operating Expenses | Minimum | Maximum |
| | | |
| (expenses that are deducted from underlying mutual fund assets, including management fees, distribution (12b-1) fees, and other expenses, as a percentage of average underlying mutual fund assets) | 0.44% | 2.30% |
The minimum and maximum underlying mutual fund operating expenses indicated above do not reflect voluntary or contractual reimbursements and/or waivers applied to some underlying mutual funds. Therefore, actual expenses could be lower. Refer to the underlying mutual und prospectuses for specific expense information.
____________________________
1 Nationwide will charge between 0% and 5% of purchase payments for premium taxes levied by state or other government entities. The amount assessed to the contract will equal the amount assessed by the state or government entity.
2 The transaction amount is the amount of the transfer determined to be engaged in short-term trading. See “Short-Term Trading Fees” later in this prospectus.
3 On each contract’s Contract Anniversary, Nationwide deducts the Contract Maintenance Charge if the Contract Value is less than $50,000 on such Contract Anniversary. This charge is permanently waived for any contracts valued at $50,000 or more on any Contract Anniversary.
4 In addition to the 0.35% charge assessed to Variable Account allocations, allocations made to the Fixed Account will be assessed a fee of 0.35% by decreasing the interest credited to amounts allocated to the Fixed Account.
5 For information about how the Current Income Benefit Base is calculated, please see “Determination of the Income Benefit Base Prior to the First Surrender” later in this prospectus.
6 Currently, the charge associated with the 5% Lifetime Income Option is equal to 0.85% of the Current Income Benefit Base.
7 Currently, the charge associated with the 10% Lifetime Income Option is equal to 1.00% of the Current Income Benefit Base .
8Currently, the charge for the 5% Spousal Continuation Benefit is equal to 0.15% of the Current Income Benefit Base
9Currently, the charge associated with the 10% Spousal Continuation Benefit is equal to 0.20% of the Current Income Benefit Base .
10 This charge is a percentage of the Current Income Benefit Base. For purposes of this table, Nationwide assumes the Current Income Benefit Base is equal to the Daily Net Assets.
11 The Maximum Possible Total Variable Account Charges associated with a particular contract may be higher or lower than 3. 60 % depending on whether the Current Income Benefit Base is higher or lower than the Daily Net Assets. For purposes of this table, Nationwide assumes the Current Income Benefit Base is equal to the Daily Net Assets.
This Example is intended to help Contract Owners compare the cost of investing in the contract with the cost of investing in other variable annuity contracts. These costs include Contract Owner transaction expenses, contract fees, Variable Account annual expenses, and underlying mutual fund fees and expenses. The Example does not reflect premium taxes or Short-Term Trading Fees which, if reflected, would result in higher expenses.
The following Example assumes:
| · | a $10,000 investment in the contract for the time periods indicated; |
| · | the maximum and the minimum fees and expenses of any of the underlying mutual funds; |
| · | the maximum Contingent Deferred Sales Charge; |
| · | a $30 Contract Maintenance Charge expressed as a percentage of the average contract account size; and |
| · | the total Variable Account charges associated with the most expensive allowable combination of optional benefits ( 3.60 %).1 |
For those contracts that do not elect the most expensive combination of optional benefits, the expenses would be lower.
| | If you surrender your contract at the end of the applicable time period | If you annuitize your contract at the end of the applicable time period | If you do not surrender your contract |
| | 1 Yr. | 3 Yrs. | 5 Yrs. | 10 Yrs. | 1 Yr. | 3 Yrs. | 5 Yrs. | 10 Yrs. | 1 Yr. | 3 Yrs. | 5 Yrs. | 10 Yrs. |
Maximum Total Underlying Mutual Fund Operating Expenses (2.30%) | ** | ** | ** | ** | * | ** | ** | ** | ** | ** | ** | ** |
| Minimum Total Underlying Mutual Fund Operating Expenses (0.44%) | ** | ** | ** | ** | * | ** | ** | ** | ** | ** | ** | ** |
*The contracts sold under this prospectus do not permit annuitization during the first two Contract Years.
**To be added by subsequent amendment.
1 The total Variable Account charges associated with the most expensive allowable combination of optional benefits may be higher or lower than 3.60 % depending on whether the Current Income Benefit Base is higher or lower than the Daily Net Assets. For purposes of this table, Nationwide assumes the Current Income Benefit Base is equal to the Daily Net Assets.
Synopsis of the Contracts
The annuity described in this prospectus is intended to provide benefits to a single or joint owner and his/her beneficiaries. The contracts described in this prospectus are individual flexible purchase payment contracts.
The contracts can be categorized as:
| · | Charitable Remainder Trusts; |
| · | Individual Retirement Annuities (“IRAs”); |
| · | Investment-Only Contracts (Qualified Plans); |
| · | Non-Qualified Contracts; |
| · | Simplified Employee Pension IRAs (“SEP IRAs”); and |
For more detailed information with regard to the differences in contract types, please see “Appendix C: Contract Types and Tax Information” later in this prospectus. Prospective purchasers may apply to purchase a contract through broker dealers that have entered into a selling agreement with Nationwide Investment Services Corporation.
Surrenders
Contract Owners may generally surrender some or all of their Contract Value at any time prior to annuitization by notifying Nationwide in writing. See the “Surrender (Redemption) Prior to Annuitization” section later in this prospectus. After the Annuitization Date, surrenders are not permitted. See the “Surrender (Redemption) After Annuitization” section later in this prospectus.
For all contract types, the minimum initial purchase payment is $10,000. A Contract Owner will meet the minimum initial purchase payment requirement by making purchase payments equal to $10,000 over the course of the first Contract Year.
The minimum subsequent purchase payment is $1,000. However, for subsequent purchase payments sent via electronic deposit, the minimum subsequent purchase payment is $150. Subsequent purchase payments may not be permitted in all states.
Nationwide reserves the right to refuse any purchase payment that would result in the cumulative total for all contracts issued by Nationwide on the life of any one Annuitant to exceed $1,000,000. Its decision as to whether or not to accept a purchase payment in excess of that amount will be based on one or more factors, including, but not limited to: age, spouse age (if applicable), Annuitant age, state of issue, total purchase payments, optional benefits elected, current market conditions, and current hedging costs. All such decisions will be based on internally established actuarial guidelines and will be applied in a non-discriminatory manner. In the event that we do not accept a purchase payment under these guidelines, we will immediately return the purchase payment in its entirety in the same manner as it was received. If we accept the purchase payment, it will be applied to the contract immediately and will receive the next calculated
Accumulation Unit value. See “Pricing” later in this prospectus. Any references in this prospectus to purchase payment amounts in excess of $1,000,000 are assumed to have been approved by Nationwide.
Nationwide prohibits subsequent purchase payments made after death of the Contract Owner(s), the Annuitant or Co-Annuitant. If upon notification of death of the Contract Owner(s), the Annuitant or Co-Annuitant, it is determined that death occurred prior to a subsequent purchase payment being made, Nationwide reserves the right to return the purchase payment subject to investment performance.
Dollar Limit Restrictions
In addition to the potential purchase payment restriction listed above, certain features of the contract have additional purchase payment and/or Contract Value limitations associated with them:
Annuitization. Annuity payment options will be limited if the Contract Owner submits total purchase payments in excess of $2,000,000. Furthermore, if the amount to be annuitized is greater than $5,000,000, we may limit both the amount that can be annuitized on a single life and the annuity payment options. See the “Annuity Payment Options” section for additional information.
Death benefit calculations. Purchase payments up to $3,000,000 will result in a higher death benefit payment than purchase payments in excess of $3,000,000. See the “Death Benefit Calculations” section for additional information.
Optional riders. If the Contract Owner elects either the 10% Lifetime Income Option or the 5% Lifetime Income Option, subsequent purchase payments may be limited to an aggregate total of $50,000 per calendar year.
Credits on Purchase Payments
Purchase Payment Credits (“PPCs”) are additional credits that Nationwide will apply to a contract when cumulative purchase payments reach certain aggregate levels.
Each time a Contract Owner submits a purchase payment, Nationwide will perform a calculation to determine if and how many PPCs are payable as a result of that particular deposit.
PPCs are considered earnings, not purchase payments, and they will be allocated in the same proportion that purchase payments are allocated on the date the PPCs are applied. If the Contract Owner cancels the contract pursuant to the contractual free-look provision, Nationwide will recapture all PPCs applied to the contract. In those states that require the return of purchase payments for IRAs that are surrendered pursuant to the contractual free-look, Nationwide will recapture all PPCs, but under no circumstances will the amount returned to the Contract Owner be less than the purchase payments made to the contract. In those states that allow a return of Contract Value, the Contract Owner will retain any earnings attributable to the PPCs, but all losses attributable to the PPCs will be incurred by Nationwide.
All PPCs are fully vested after the end of the contractual free-look period.
For further information on PPCs, please see the “Purchase Payment Credits” section later in this prospectus.
Charges and Expenses
Underlying Mutual Fund Annual Expenses
The underlying mutual funds charge fees and expenses that are deducted from underlying mutual fund assets. These fees and expenses are in addition to the fees and expenses assessed by the contract. The prospectus for each underlying mutual fund provides information regarding the fees and expenses applicable to the fund.
Short-Term Trading Fees
Some underlying mutual funds may assess (or reserve the right to assess) a short-term trading fee in connection with transfers from a Sub-Account that occur within 60 days after the date of allocation to the Sub-Account. Any short-term trading fee assessed by any underlying mutual fund available in conjunction with the contracts described in this prospectus will equal 1% of the amount determined to be engaged in short-term trading.
Mortality and Expense Risk Charge
Nationwide deducts a Mortality and Expense Risk Charge equal to an annualized rate of 1.10% of the Daily Net Assets of the Variable Account.
The Mortality and Expense Risk Charge compensates Nationwide for providing the insurance benefits under the contract, including the contract’s standard death benefit that provides a guaranteed death benefit to the beneficiary(ies) even if the market declines. It also compensates Nationwide for assuming the risk that Annuitants will live longer than assumed. Finally, the Mortality and Expense Risk Charge compensates Nationwide for guaranteeing that charges will not increase regardless of actual expenses. Nationwide may realize a profit from this charge, which Nationwide may use to finance the distribution of the contracts.
Administrative Charge
Nationwide deducts an Administrative Charge equal to an annualized rate of 0.20% of the Daily Net Assets of the Variable Account.
The Administrative Charge reimburses Nationwide for administrative costs it incurs resulting from providing contract benefits, including preparation of the contract and prospectus, confirmation statements, annual account statements and annual reports, legal and accounting fees as well as various related expenses. Nationwide may realize a profit from this charge, which Nationwide may use to finance the distribution of the contracts.
Contract Maintenance Charge
A $30 Contract Maintenance Charge is assessed on each Contract Anniversary and upon full surrender of the contract. If, on any Contract Anniversary (or on the date of a full surrender) the Contract Value is $50,000 or more, Nationwide will waive the Contract Maintenance Charge from that point forward.
Contingent Deferred Sales Charge
Nationwide does not deduct a sales charge from purchase payments upon deposit into the contract. However, Nationwide may deduct a Contingent Deferred Sales Charge (“CDSC”) if any amount is withdrawn from the contract. This CDSC reimburses Nationwide for sales expenses. The amount of the CDSC will not exceed 7% of purchase payments surrendered.
Death Benefit Options
The contract contains a standard death benefit at no additional charge. In lieu of the standard death benefit, an applicant may elect one of the following death benefit options at the time of application:
| Death Benefit Options | Charge* |
One-Year Enhanced Death Benefit Option1 | 0.20% |
One-Month Enhanced Death Benefit Option2 | 0.35% |
Combination Enhanced Death Benefit Option2 | 0.45% |
*The charges shown are the annualized rates charged as a percentage of the Daily Net Assets of the Variable Account.
1The One-Year Enhanced Death Benefit is only available for contracts with Annuitants age 80 or younger at the time of application.
2The Combination Enhanced Death Benefit Option and the One-Month Enhanced Death Benefit Option are only available for contracts with Annuitants age 75 or younger at the time of application.
For more information about the standard and optional death benefits, please see the “Death Benefit Calculations” provision.
Beneficiary Protector II Option
A Beneficiary Protector II Option is available under the contract at the time of application. This option is only available for contracts with Annuitants age 75 or younger at the time of application. If the Contract Owner of an eligible contract elects the Beneficiary Protector II Option, Nationwide will deduct an additional charge at an annualized rate of 0.35% of the Daily Net Assets of the Variable Account. Additionally, allocations made to the Fixed Account will be assessed a fee of 0.35%.
10% Lifetime Income Option
The 10% Lifetime Income Option is available under the contract at the time of application. The Contract Owner (or the Annuitant in the case of a non-natural Contract Owner) must be between age 45 and 85 at the time of application.
If the Contract Owner elects the 10% Lifetime Income Option, Nationwide will deduct an additional charge not to exceed 1.20% of the Current Income Benefit Base, which is the amount upon which the annual benefit is based. The current charge for the 10% Lifetime Income Option is 1.00% of the Current Income Benefit Base. The charge is deducted on each Contract Anniversary and is taken from the Sub-Accounts proportionally based on contract allocations at the time the charge is deducted.
5% Lifetime Income Option
The 5% Lifetime Income Option is available under the contract at the time of application for contracts issued in the State of New York. The Contract Owner (or the Annuitant in the case of a non-natural Contract Owner) must be between age 45 and 85 at the time of application.
If the Contract Owner elects the 5% Lifetime Income Option, Nationwide will deduct an additional charge not to exceed 1.00% of the Current Income Benefit Base, which is the amount upon which the annual benefit is based. The current charge for the 5% Lifetime Income Option is 0.85% of the Current Income Benefit Base. The charge is deducted on each Contract Anniversary and is taken from the Sub-Accounts proportionally based on contract allocations at the time the charge is deducted.
10% and 5% Spousal Continuation Benefit
The 10% or 5% Spousal Continuation Benefit is only available for election at the time of application if and when the 10% or 5% Lifetime Income Option is elected , respectively (except that the 10% Spousal Continuation Benefit is not available in the State of New York). The Contract Owner’s spouse (or the Annuitant’s spouse in the case of a non-natural Contract Owner) must be between age 45 and 85 at the time of application. If the Contract Owner elects the 10% Spousal Continuation Benefit, Nationwide will deduct an additional charge not to exceed 0.30% of the Current Income Benefit Base. Currently, the charge for the 10% Spousal Continuation Benefit is 0.20% of the Current Income Benefit Base. If the Contract Owner elects the 5% Spousal Continuation Benefit, Nationwide will deduct an additional charge not to exceed 0.15% of the Current Income Benefit Base. The charge is deducted at the same time and in the same manner as the respective l ifetime i ncome o ption charge.
Charges for Optional Benefits
The charges associated with optional benefits are assessed prior to annuitization.
Underlying Mutual Fund Annual Expenses
The underlying mutual funds charge fees and expenses that are deducted from underlying mutual fund assets. These fees and expenses are in addition to the fees and expenses assessed by the contract. The prospectus for each underlying mutual fund provides information regarding the fees and expense applicable to the fund (see “The Variable Account and Underlying Mutual Funds” for information on how to obtain an underlying mutual fund prospectus).
Short-Term Trading Fees
Some underlying mutual funds may assess (or reserve the right to assess) a short-term trading fee in connection with transfers from a Sub-Account that occur within 60 days after the date of allocation to the Sub-Account. Any short-term trading fee assessed by any underlying mutual fund available in conjunction with the contracts described in this prospectus will equal 1% of the amount determined to be engaged in short-term trading.
Annuity Payments
On t he Annuitization Date , annuity payments begin. Annuity payments will be based on the annuity payment option chosen prior to annuitization. Annuity payments will generally be sent within 3 days after each annuity payment date and received by the Annuitant within 7 to 10 days thereafter.
Taxation
How a contract is taxed depends on the type of contract issued and the purpose for which the contract is purchased. Nationwide will charge against the contract any premium taxes levied by any governmental authority. Premium tax rates currently range from 0% to 5% (see “Federal Tax Considerations” in “Appendix C: Contract Types and Tax Information” and “Premium Taxes”).
Death Benefit
An applicant may elect the standard death benefit (at no additional cost) or may elect the One-Year Enhanced Death Benefit Option for an additional charge of 0.20% of the Daily Net Assets of the Variable Account, the One-Month Enhanced Death Benefit Option for an additional charge of 0.35% of the Daily Net Assets of the Variable Account, or the Combination Enhanced Death Benefit Option for an additional charge of 0.45% of the Daily Net Assets of the Variable Account.
For more information about the standard and optional death benefits, please see the “Death Benefits” section later in the prospectus.
Ten Day Free Look
Under state insurance laws, Contract Owners have the right, during a limited period of time, to examine their contract and decide if they want to keep it or cancel it. This right is referred to as a “free look” right. The length of this time period depends on state law and may vary depending on whether your purchase is replacing another annuity contract you own.
If the Contract Owner elects to cancel the contract pursuant to the free look provision, where required by law, Nationwide will return the greater of the Contract Value or the amount of purchase payment(s) applied during the free look period, less any Purchase Payment Credits, and applicable federal and state income tax withholding. Otherwise, Nationwide will return the Contract Value, less any Purchase Payment Credits, applicable federal and state income tax withholding.
See “Right to Examine and Cancel” and “Purchase Payment Credits” later in this prospectus for more information.
The value of an Accumulation Unit is determined on the basis of changes in the per share value of the underlying mutual funds and the assessment of Variable Account charges which may vary from contract to contract (for more information on the calculation of Accumulation Unit values, see “Determining Variable Account Value – Valuing an Accumulation Unit”). Since this annuity contract was not available as of December 31, 2008, there are no Accumulation Unit values available.
Financial statements for the Variable Account and consolidated financial statements for Nationwide are located in the Statement of Additional Information. A current Statement of Additional Information may be obtained, without charge, by contacting Nationwide's home office at the telephone number listed on page 1 of this prospectus.
Nationwide, the depositor, is a stock life insurance company organized under Ohio law in March 1929, with its home office at One Nationwide Plaza, Columbus, Ohio 43215. Nationwide is a provider of life insurance, annuities and retirement products. It is admitted to do business in all states, the District of Columbia and Puerto Rico.
Nationwide is a member of the Nationwide group of companies. Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company (the “Companies”) are the ultimate controlling persons of the Nationwide group of companies. The Companies were organized under Ohio law in December 1925 and 1933 respectively. The Companies engage in a general insurance and reinsurance business, except life insurance.
The contracts are distributed by the general distributor, Nationwide Investment Services Corporation (“NISC”), One Nationwide Plaza, Columbus, Ohio 43215. NISC is a wholly owned subsidiary of Nationwide.
The Variable Account and Underlying Mutual Funds
Nationwide Variable Account-II is a variable account that invests in the underlying mutual funds listed in Appendix A. Nationwide established the Variable Account on October 7, 1981 pursuant to Ohio law. Although the Variable Account is registered with the SEC as a unit investment trust pursuant to the Investment Company Act of 1940 (“1940 Act”), the SEC does not supervise the management of Nationwide or the Variable Account.
Income, gains, and losses credited to, or charged against, the Variable Account reflect the Variable Account's own investment experience and not the investment experience of Nationwide's other assets. The Variable Account's assets are held separately from Nationwide's assets and are not chargeable with liabilities incurred in any other business of Nationwide. Nationwide is obligated to pay all amounts promised to Contract Owners under the contracts.
The Variable Account is divided into Sub-Accounts, each corresponding to a single underlying mutual fund. Nationwide uses the assets of each Sub-Account to buy shares of the
underlying mutual funds based on Contract Owner instructions.
Contract Owners receive underlying mutual fund prospectuses when they make their initial Sub-Account allocations and any time they change those allocations. Contract Owners can obtain prospectuses for underlying funds free of charge at any other time by contacting Nationwide's home office at the telephone number listed on page 1 of this prospectus. Contract Owners should read these prospectuses carefully before investing.
Underlying mutual funds in the Variable Account are NOT publicly traded mutual funds. They are only available as investment options in variable life insurance policies or variable annuity contracts issued by life insurance companies, or in some cases, through participation in certain qualified pension or retirement plans.
The investment advisers of the underlying mutual funds may manage publicly traded mutual funds with similar names and investment objectives. However, the underlying mutual funds are NOT directly related to any publicly traded mutual fund. Contract Owners should not compare the performance of a publicly traded fund with the performance of underlying mutual funds participating in the Variable Account. The performance of the underlying mutual funds could differ substantially from that of any publicly traded funds.
The particular underlying mutual funds available under the contract may change from time to time. Specifically, underlying mutual funds or underlying mutual fund share classes that are currently available may be removed or closed off to future investment. New underlying mutual funds or new share classes of currently available underlying mutual funds may be added. Contract Owners will receive notice of any such changes that affect their contract.
In the future, additional underlying mutual funds managed by certain financial institutions, brokerage firms or their affiliates may be added to the Variable Account. These additional underlying mutual funds may be offered exclusively to purchasing customers of the particular financial institution or brokerage firm, or through other exclusive distribution arrangements.
Voting Rights
Contract Owners who have allocated assets to the underlying mutual funds are entitled to certain voting rights. Nationwide will vote Contract Owner shares at special shareholder meetings based on Contract Owner instructions. However, if the law changes and Nationwide is allowed to vote in its own right, it may elect to do so.
Contract Owners with voting interests in an underlying mutual fund will be notified of issues requiring the shareholders' vote as soon as possible before the shareholder meeting. Notification will contain proxy materials and a form with which to give Nationwide voting instructions. Nationwide will vote shares for which no instructions are received in the same proportion as those that are received. What this means to you is that when only a small number of Contract Owners vote, each vote has a greater impact on, and may control, the outcome.
The number of shares which a Contract Owner may vote is determined by dividing the cash value of the amount they have allocated to an underlying mutual fund by the Net Asset Value of that underlying mutual fund. Nationwide will designate a date for this determination not more than 90 days before the shareholder meeting.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other insurance companies, as well as through other separate accounts of Nationwide. Nationwide does not anticipate any disadvantages to this. However, it is possible that a conflict may arise between the interests of the Variable Account and one or more of the other separate accounts in which these underlying mutual funds participate.
Material conflicts may occur due to a change in law affecting the operations of variable life insurance policies and variable annuity contracts, or differences in the voting instructions of the Contract Owners and those of other companies. If a material conflict occurs, Nationwide will take whatever steps are necessary to protect Contract Owners and variable annuity payees, including withdrawal of the Variable Account from participation in the underlying mutual fund(s) involved in the conflict.
Substitution of Securities
Nationwide may substitute, eliminate, or combine shares of another underlying mutual fund for shares already purchased or to be purchased in the future if either of the following occurs:
| (1) | shares of a current underlying mutual fund are no longer available for investment; or |
| (2) | further investment in an underlying mutual fund is inappropriate. |
No substitution of shares may take place without the prior approval of the SEC. All affected Contract Owners will be notified in the event there is a substitution, elimination or combination of shares.
Deregistration of the Variable Account
Nationwide may deregister the Variable Account under the 1940 Act in the event the Variable Account meets an exemption from registration under the 1940 Act, if there are no shareholders in the separate account, or for any other purpose approved by the SEC.
No deregistration may take place without the prior approval of the SEC. All affected Contract Owners will be notified in the event Nationwide deregisters the Variable Account.
The Fixed Account
The Fixed Account is an investment option that is funded by assets of Nationwide's General Account. The General Account contains all of Nationwide's assets other than those in this and other Nationwide separate accounts and is used to support Nationwide's annuity and insurance obligations. The
General Account is not subject to the same laws as the Variable Account and the SEC has not reviewed material in this prospectus relating to the Fixed Account.
Purchase payments will be allocated to the Fixed Account by election of the Contract Owner. Nationwide reserves the right to limit or refuse purchase payments allocated to the Fixed Account at its sole discretion. Generally, Nationwide will invoke this right when interest rates are low by historical standards.
The investment income earned by the Fixed Account will be allocated to the contracts at varying guaranteed interest rate(s) depending on the following categories of Fixed Account allocations:
| · | New Money Rate – The rate credited on the Fixed Account allocation when the contract is purchased or when subsequent purchase payments are made. Subsequent purchase payments may receive different New Money Rates than the rate when the contract was issued, since the New Money Rate is subject to change based on market conditions. |
| · | Variable Account to Fixed Rate – Allocations transferred from any of the underlying investment options in the Variable Account to the Fixed Account may receive a different rate. The rate may be lower than the New Money Rate. There may be limits on the amount and frequency of movements from the Variable Account to the Fixed Account. |
| · | Renewal Rate – The rate available for maturing Fixed Account allocations which are entering a new guarantee period. The Contract Owner will be notified of this rate in a letter issued with the quarterly statements when any of the money in the Contract Owner's Fixed Account matures. At that time, the Contract Owner will have an opportunity to leave the money in the Fixed Account and receive the Renewal Rate or the Contract Owner can move the money to any of the other underlying mutual fund options. |
| · | Dollar Cost Averaging Rate – From time to time, Nationwide may offer a more favorable rate for an initial purchase payment into a new contract when used in conjunction with a dollar cost averaging program. Rates will vary depending on the dollar cost averaging program elected (see “ Contract Owner Services ” ). |
All of these rates are subject to change on a daily basis; however, once applied to the Fixed Account, the interest rates are guaranteed until the end of the calendar quarter during which the 12 month anniversary of the Fixed Account allocation occurs.
Credited interest rates are annualized rates – the effective yield of interest over a one-year period. Interest is credited to each contract on a daily basis. As a result, the credited interest rate is compounded daily to achieve the stated effective yield.
The guaranteed rate for any purchase payment will be effective for not less than twelve months. Nationwide guarantees that the rate will not be less than the minimum interest rate required by applicable state law.
Any interest in excess of the minimum interest rate required by applicable state law will be credited to Fixed Account allocations at Nationwide's sole discretion. The Contract Owner assumes the risk that interest credited to Fixed Account allocations may not exceed the minimum interest rate required by applicable state law for any given year.
Nationwide guarantees that the Fixed Account value will not be less than the amount of the purchase payments allocated to the Fixed Account, plus interest credited as described above, less any surrenders and any applicable charges including CDSC. Additionally, Nationwide guarantees that interest credited to Fixed Account allocations will not be less than the minimum interest required by applicable state law.
Fixed Account Interest Rate Guarantee Period
The Fixed Account interest rate guarantee period is the period of time that the Fixed Account interest rate is guaranteed to remain the same. During a Fixed Account interest rate guarantee period, transfers cannot be made from the Fixed Account, and amounts transferred to the Fixed Account must remain on deposit.
For new purchase payments allocated to the Fixed Account and transfers to the Fixed Account, the Fixed Account interest rate guarantee period begins on the date of deposit or transfer and ends on the one year anniversary of the deposit or transfer. The guaranteed interest rate period may last for up to 3 months beyond the 1 year anniversary because guaranteed terms end on the last day of a calendar quarter.
In order to comply with the USA Patriot Act and rules promulgated thereunder, Nationwide has implemented procedures designed to prevent contracts described in this prospectus from being used to facilitate money laundering or the financing of terrorist activities.
Not all benefits, programs, features and investment options described in this prospectus are available or approved for use in every state. For more detailed information regarding provisions that vary by state, please see “Appendix D: State Variations” later in this prospectus.
If this contract is purchased to replace another variable annuity, be aware that the mortality tables used to determine the amount of annuity payments may be less favorable than those in the contract being replaced.
These contracts are offered to customers of various financial institutions and brokerage firms. No financial institution or brokerage firm is responsible for any of the contractual insurance benefits and features guaranteed under the contracts. These guarantees are the sole responsibility of Nationwide.
In general, deferred variable annuities are long-term investments; they are not intended as short-term investments. Deferred variable annuities are not intended to be sold to a terminally ill Contract Owner or Annuitant. Accordingly, Nationwide has designed the contract to offer features, pricing, and investment options that encourage long-term ownership. It is very important that Contract Owners and
prospective Contract Owners understand all the costs associated with owning a contract, and if and how those costs change during the lifetime of the contract. Contract and optional charges may not be the same in later Contract Years as they are in early Contract Years. The various contract and optional benefit charges are assessed in order to compensate Nationwide for administrative services, distribution and operational expenses, and assumed actuarial risks associated with the contract.
Following is a discussion of some relevant factors that may be of particular interest to prospective investors.
Distribution, Promotional and Sales Expenses
Nationwide pays commissions to the firms that sell the contracts. The maximum gross commission that Nationwide will pay on the sale of the contracts is 8.00% of purchase payments. Note that the individual registered representatives typically receive only a portion of this amount; the remainder is retained by the firm. Nationwide may also, instead of a premium-based commission, pay an asset-based commission (sometimes referred to as “trails” or “residuals”), or a combination of the two.
In addition to or partially in lieu of commission, Nationwide may also pay the selling firms a marketing allowance, which is based on the firm’s ability and demonstrated willingness to promote and market Nationwide's products. How any marketing allowance is spent is determined by the firm, but generally will be used to finance firm activities that may contribute to the promotion and marketing of Nationwide's products. For more information on the exact compensation arrangement associated with this contract, please consult your registered representative.
Underlying Mutual Fund Payments
Nationwide’s Relationship with the Underlying Mutual Funds
The underlying mutual funds incur expenses each time they sell, administer, or redeem their shares. The Variable Account aggregates Contract Owner purchase, redemption, and transfer requests and submits net or aggregated purchase/redemption requests to each underlying mutual fund daily. The Variable Account (not the Contract Owners) is the underlying mutual fund shareholder. When the Variable Account aggregates transactions, the underlying mutual fund does not incur the expense of processing individual transactions it would normally incur if it sold its shares directly to the public. Nationwide incurs these expenses instead.
Nationwide also incurs the distribution costs of selling the contract (as discussed above), which benefit the underlying mutual funds by providing Contract Owners with Sub-Account options that correspond to the underlying mutual funds.
An investment adviser or subadviser of an underlying mutual fund or its affiliates may provide Nationwide or its affiliates with wholesaling services that assist in the distribution of the contract and may pay Nationwide or its affiliates to participate in educational and/or marketing activities. These activities may provide the adviser or subadviser (or their affiliates) with increased exposure to persons involved in the distribution of the contract.
Types of Payments Nationwide Receives
In light of the above, the underlying mutual funds and their affiliates make certain payments to Nationwide or its affiliates (the “payments”). The amount of these payments is typically based on a percentage of assets invested in the underlying mutual funds attributable to the contracts and other variable contracts Nationwide and its affiliates issue, but in some cases may involve a flat fee. These payments may be used by us for any corporate purpose, which include reducing the prices of the contracts, paying expenses that Nationwide or its affiliates incur in promoting, marketing, and administering the contracts and the underlying mutual funds, and achieving a profit.
Nationwide or its affiliates receive the following types of payments:
| · | Underlying mutual fund 12b-1 fees, which are deducted from underlying mutual fund assets; |
| · | Sub-transfer agent fees or fees pursuant to administrative service plans adopted by the underlying mutual fund, which may be deducted from underlying mutual fund assets; and |
| · | Payments by an underlying mutual fund’s adviser or subadviser (or its affiliates). Such payments may be derived, in whole or in part, from the advisory fee, which is deducted from underlying mutual fund assets and is reflected in mutual fund charges. |
Furthermore, Nationwide benefits from assets invested in Nationwide’s affiliated underlying mutual funds (i.e., Nationwide Variable Insurance Trust) because its affiliates also receive compensation from the underlying mutual funds for investment advisory, administrative, transfer agency, distribution, and/or other services. Thus, Nationwide may receive more revenue with respect to affiliated underlying mutual funds than unaffiliated underlying mutual funds.
Nationwide took into consideration the anticipated payments from the underlying mutual funds when we determined the charges imposed under the contracts (apart from fees and expenses imposed by the underlying mutual funds). Without these payments, Nationwide would have imposed higher charges under the contract.
Amount of Payments Nationwide Receives
Most underlying mutual funds or their affiliates have agreed to make payments to Nationwide or its affiliates, although the applicable percentages may vary from underlying mutual fund to underlying mutual fund and some may not make any payments at all. Because the amount of the actual payments Nationwide and its affiliates receive depends on the assets of the underlying mutual funds attributable to the contract, Nationwide and its affiliates may receive higher payments from underlying mutual funds with lower percentages (but greater assets) than from underlying mutual funds that have higher percentages (but fewer assets).
For additional information related to amount of payments Nationwide receives, go to www.nationwide.com.
Identification of Underlying Mutual Funds
Nationwide may consider several criteria when identifying the underlying mutual funds, including some or all of the following: investment objectives, investment process, investment performance, risk characteristics, investment capabilities, experience and resources, investment consistency, and fund expenses. Another factor Nationwide considers during the identification process is whether the underlying mutual fund’s adviser or subadviser is one of our affiliates or whether the underlying mutual fund, its adviser, its subadviser(s), or an affiliate will make payments to us or our affiliates.
There may be underlying mutual funds with lower fees, as well as other variable contracts that offer underlying mutual funds with lower fees. You should consider all of the fees and charges of the contract in relation to its features and benefits when making your decision to invest. Please note that higher contract and underlying mutual fund fees and charges have a direct effect on and may lower your investment performance.
Profitability
Nationwide does consider profitability when determining the charges in the contract. In early Contract Years, Nationwide does not anticipate earning a profit, since that is a time when administrative and distribution expenses are typically higher. Nationwide does, however, anticipate earning a profit in later Contract Years. In general, Nationwide's profit will be greater the higher the investment return and the longer the contract is held.
Contract Modification
Nationwide may modify the contract, but no modification will affect the amount or term of any contract unless a modification is required to conform the contract to applicable federal or state law. No modification will affect the method by which Contract Value is determined.
Mortality and Expense Risk Charge
Nationwide deducts a Mortality and Expense Risk Charge from the Variable Account. This amount is computed on a daily basis and is equal to an annualized rate of 1.10% of the Daily Net Assets of the Variable Account. This fee compensates Nationwide for providing the insurance benefits under the contract, including the contract’s standard death benefit. It also compensates Nationwide for assuming the risk that Annuitants will live longer than assumed. Finally, the Mortality and Expense Risk Charge compensates Nationwide for guaranteeing that charges will not increase regardless of actual expenses. Nationwide may realize a profit from this charge, which Nationwide may use to finance the distribution of the contracts.
Administrative Charge
Nationwide deducts an Administrative Charge from the Variable Account. This amount is computed on a daily basis and is equal to an annualized rate of 0.20% of the Daily Net Assets of the Variable Account. This fee reimburses Nationwide for administrative costs it incurs resulting from providing contract benefits, including preparation of the contract and prospectus, confirmation statements, annual account statements and annual reports, legal and accounting fees, as well as various related expenses. Nationwide may realize a profit from this charge, which Nationwide may use to finance the distribution of the contracts.
Contract Maintenance Charge
Nationwide deducts a Contract Maintenance Charge of $30 on each Contract Anniversary that occurs before annuitization and upon full surrender of the contract. This charge reimburses Nationwide for administrative expenses involved in issuing and maintaining the contract.
If, on any Contract Anniversary (or on the date of a full surrender), the Contract Value is $50,000 or more, Nationwide will waive the Contract Maintenance Charge from that point forward.
T he deduction of the Contract Maintenance Charge will be taken proportionately from each Sub-Account and the Fixed Account based on the value in each option as compared to the total Contract Value.
Nationwide will not increase the Contract Maintenance Charge. Nationwide will not reduce or eliminate the Contract Maintenance Charge where it would be discriminatory or unlawful.
No sales charge deduction is made from purchase payments upon deposit into the contracts. However, if any part of the contract is surrendered, Nationwide may deduct a CDSC. The CDSC will not exceed 7% of purchase payments surrendered.
The CDSC is calculated by multiplying the applicable CDSC percentage (noted below) by the amount of purchase payments surrendered.
For purposes of calculating the CDSC, surrenders are considered to come first from the oldest purchase payment made to the contract, then the next oldest purchase payment, and so forth. Earnings are not subject to the CDSC, but may not be distributed prior to the distribution of all purchase payments. (For tax purposes, a surrender is usually treated as a withdrawal of earnings first.)
The CDSC applies as follows:
| Number of Completed Years from Date of Purchase Payment | CDSC Percentage |
| 0 | 7% |
| 1 | 7% |
| 2 | 6% |
| 3 | 5% |
| 4 | 4% |
| 5 | 3% |
| 6 | 2% |
| 7 | 0% |
The CDSC is used to cover sales expenses, including commissions, production of sales material, and other
promotional expenses. If expenses are greater than the CDSC, the shortfall will be made up from Nationwide's general assets, which may indirectly include portions of the Variable Account charges, since Nationwide may generate a profit from these charges.
All or a portion of any withdrawal may be subject to federal income taxes. Contract Owners taking withdrawals before age 59½ may be subject to a 10% penalty tax.
The maximum amount that can be withdrawn annually without a CDSC is the greater of:
| (1) | 10% of (purchase payments that are subject to CDSC minus purchase payments previously withdrawn that were already subject to the CDSC); or |
| (2) | an amount withdrawn to meet minimum distribution requirements for this contract under the Internal Revenue Code. |
This CDSC-free withdrawal privilege is non-cumulative. Free amounts not taken during any given Contract Year cannot be taken as free amounts in a subsequent Contract Year.
Purchase payments surrendered under the CDSC-free withdrawal privilege are not, for purposes of calculating the maximum amount that can be withdrawn annually without a CDSC in subsection (1) above and for determining the waiver of CDSC for partial surrenders discussed later in this section, considered a surrender of purchase payments. In addition, no CDSC will be deducted:
| (1) | upon the annuitization of contracts which have been in force for at least 2 years; |
| (2) | upon payment of a death benefit. However, additional purchase payments made to the contract after receiving the benefit of an increased Contract Value (under the Spousal Protection Feature) are subject to the CDSC provisions of the contract; or |
| (3) | from any values which have been held under a contract for at least seven years. |
No CDSC applies to transfers among Sub-Accounts or between or among the various investment options in the contract.
A contract held by a Charitable Remainder Trust (within the meaning of Internal Revenue Code Section 664) may withdraw CDSC-free the greater of the amount that would otherwise be available for withdrawal without a CDSC; and the difference between:
| (a) | the Contract Value at the close of the day prior to the date of the withdrawal; and |
| (b) | the total purchase payments made to the contract (less an adjustment for amounts surrendered). |
This contract is not designed for and does not support active trading strategies. In order to protect investors in this contract that do not utilize such strategies, Nationwide may initiate certain exchange offers intended to provide Contract Owners that meet certain criteria with an alternate variable annuity designed to accommodate active trading. If this contract is exchanged as part of an exchange offer, the exchange will be made on the basis of the relative Net Asset Values of the exchanged contract. Furthermore, no CDSC will be assessed on the exchanged assets and Nationwide will “tack” the contract’s CDSC schedule onto the new contract. This means that the CDSC schedule will not start anew on the exchanged assets in the new contract; rather, the CDSC schedule from the exchanged contract will be applied to the exchanged assets both in terms of percentages and the number of completed Contract Years. This enables the Contract Owner to exchange into the new contract without having to start a new CDSC schedule on exchanged assets. However, if subsequent purchase payments are made to the new contract, they will be subject to any applicable CDSC schedule that is part of the new contract.
The CDSC will not be eliminated if to do so would be unfairly discriminatory or prohibited by state law.
The waiver of CDSC only applies to partial surrenders. If the Contract Owner elects to surrender the contract in full, where permitted by state law, Nationwide will assess a CDSC on the entire amount surrendered. For purposes of the CDSC free withdrawal privilege, a full surrender is:
| · | multiple surrenders taken within a one-year period that deplete the entire Contract Value; or |
| · | any single surrender of 90% or more of the Contract Value. |
The contract includes a Long-Term Care/Nursing Home and Terminal Illness Waiver at no additional charge.
Under this provision, no CDSC will be charged if:
| (1) | the third Contract Anniversary has passed; and |
| (2) | the Contract Owner has been confined to a long-term care facility or hospital for a continuous 90-day period that began after the contract issue date; or |
| (3) | the Contract Owner has been diagnosed by a physician, at any time after contract issuance, to have a terminal illness; and |
| (4) | Nationwide receives and records such a letter from that physician indicating such diagnosis. |
Written notice and proof of terminal illness or confinement for 90 days in a hospital or long term care facility must be received in a form satisfactory to Nationwide and recorded at Nationwide's home office prior to waiver of the CDSC.
In the case of joint ownership, the waivers will apply if either joint owner meets the qualifications listed above.
For those contracts that have a non-natural person as Contract Owner as an agent for a natural person, the Annuitant may exercise the right of the Contract Owner for purposes described in this provision. If the non-natural Contract Owner does not own the contract as an agent for a natural person (e.g., the Contract Owner is a corporation or a trust for the
benefit of an entity), the Annuitant may not exercise the rights described in this provision.
Nationwide will charge against the Contract Value any premium taxes levied by a state or other government entity. Premium tax rates currently range from 0% to 5%. This range is subject to change. Nationwide will assess premium taxes to the contract at the time Nationwide is assessed the premium taxes by the state. Premium tax requirements vary from state to state.
Premium taxes may be deducted from death benefit proceeds.
Short-Term Trading Fees
Some underlying mutual funds may assess (or reserve the right to assess) a short-term trading fee in connection with transfers from a Sub-Account that occur within 60 days after the date of allocation to the Sub-Account.
Short-term trading fees are intended to compensate the underlying mutual fund (and Contract Owners with interests allocated in the underlying mutual fund) for the negative impact on fund performance that may result from frequent, short-term trading strategies. Short-term trading fees are not intended to affect the large majority of Contract Owners not engaged in such strategies.
Any short-term trading fee assessed by any underlying mutual fund available in conjunction with the contracts described in this prospectus will equal 1% of the amount determined to be engaged in short-term trading. Short-term trading fees will only apply to those Sub-Accounts corresponding to underlying mutual funds that charge such fees (see the underlying mutual fund prospectus). Any short-term trading fees paid are retained by the underlying mutual fund, not by Nationwide, and are part of the underlying mutual fund’s assets. Contract Owners are responsible for monitoring the length of time allocations are held in any particular underlying mutual fund. Nationwide will not provide advance notice of the assessment of any applicable short-term trading fee.
To determine whether a particular underlying mutual fund assesses (or reserves the right to assess) a short-term trading fee, please see “Appendix A: Underlying Mutual Funds” later in this prospectus.
If a short-term trading fee is assessed, the underlying mutual fund will charge the Variable Account 1% of the amount determined to be engaged in short-term trading. The Variable Account will then pass the short-term trading fee on to the specific Contract Owner that engaged in short-term trading by deducting an amount equal to the short-term trading fee from that Contract Owner’s Sub-Account value. All such fees will be remitted to the underlying mutual fund; none of the fee proceeds will be retained by Nationwide or the Variable Account.
When multiple purchase payments (or exchanges) are made to a Sub-Account that is subject to short-term trading fees, transfers will be considered to be made on a first in/first out (FIFO) basis for purposes of determining short-term trading fees. In other words, units held the longest time will be treated as being transferred first, and units held for the shortest time will be treated as being transferred last.
Some transactions are not subject to the short-term trading fees. Transactions that are not subject to short-term trading fees include:
| · | scheduled and systematic transfers, such as Dollar Cost Averaging, Asset Rebalancing, and Systematic Withdrawals; |
| · | surrenders, including CDSC-free withdrawals; |
| · | surrenders of Annuity Units to make annuity payments; |
| · | surrenders of Accumulation Units to pay the annual Contract Maintenance Charge; |
| · | surrenders of Accumulation Units to pay a death benefit; or |
| · | transfers made upon annuitization of the contract. |
New share classes of certain currently available underlying mutual funds may be added as investment options under the contracts. These new share classes may require the assessment of short-term trading or redemption fees. When these new share classes are added, new purchase payment allocations and exchange reallocations to the underlying mutual funds in question may be limited to the new share class.
For an additional charge, the following optional benefits are available to Contract Owners. Not all optional benefits are available in every state. Unless otherwise indicated:
| (1) | optional benefits must be elected at the time of application; |
| (2) | optional benefits, once elected, may not be terminated; and |
| (3) | the charges associated with the optional benefits will be assessed until annuitization. |
For an additional charge, the Contract Owner may elect one of the following death benefit options in lieu of the standard death benefit.
One-Year Enhanced Death Benefit Option
Applicants with Annuitants age 80 or younger at the time of application can elect the One-Year Enhanced Death Benefit Option for an additional charge equal to an annualized rate of 0.20% of the Daily Net Assets of the Variable Account. Nationwide may realize a profit from the charge assessed for this option.
If the Annuitant dies before the Annuitization Date, the death benefit will be the greatest of:
| (1) | the Contract Value as of the date that Nationwide receives all the information necessary to pay the death benefit; |
| (2) | the total of all purchase payments, less an adjustment for amounts surrendered; or |
| (3) | the highest Contract Value on any Contract Anniversary prior to the Annuitant's 86th birthday, less an adjustment for amounts subsequently surrendered, plus purchase payments received after that Contract Anniversary. |
The adjustment for amounts surrendered will reduce items (2) and (3) above in the same proportion that the Contract Value was reduced on the date(s) of the partial surrenders.
Note: For Contract Owners who have elected this option, if the total of all purchase payments made to the contract is greater than $3,000,000, the death benefit will be adjusted as described in the “Death Benefit Calculations” provision on page 35.
The One-Year Enhanced Death Benefit Option also includes the Spousal Protection Feature, which allows a surviving spouse to continue the contract while receiving the economic benefit of the death benefit upon the death of the other spouse. Please see “Spousal Protection Feature” later in this prospectus.
One-Month Enhanced Death Benefit Option
Applicants with Annuitants age 75 or younger at the time of application can elect the One-Month Enhanced Death Benefit Option for an additional charge equal to an annualized rate of 0.35% of the Daily Net Assets of the Variable Account. Nationwide may realize a profit from the charge assessed for this option.
If the Annuitant dies before the Annuitization Date, the death benefit will be the greatest of:
| (1) | the Contract Value as of the date that Nationwide receives all the information necessary to pay the death benefit; |
| (2) | the total of all purchase payments, less an adjustment for amounts surrendered; or |
| (3) | the highest Contract Value on any Monthly Contract Anniversary prior to the Annuitant’s 81st birthday, less an adjustment for amounts subsequently surrendered, plus purchase payments received after that Monthly Contract Anniversary. |
The adjustment for amounts surrendered will reduce items (2) and (3) above in the same proportion that the Contract Value was reduced on the date(s) of the partial surrenders.
Note: For Contract Owners who that have elected this option, if the total of all purchase payments made to the contract is greater than $3,000,000, the death benefit will be adjusted as described in the “Death Benefit Calculations” provision on page 35.
The One-Month Enhanced Death Benefit Option also includes the Spousal Protection Feature, which allows a surviving spouse to continue the contract while receiving the economic benefit of the death benefit upon the death of the other spouse. Please see “ Spousal Protection Feature ” later in this prospectus.
Combination Enhanced Death Benefit Option
Applicants with Annuitants age 75 or younger at the time of application can elect the Combination Enhanced Death Benefit Option for an additional charge equal to an annualized rate of 0.45% of the Daily Net Assets of the Variable Account. Nationwide may realize a profit from the charge assessed for this option.
If the Annuitant dies before the Annuitization Date, the death benefit will be the greatest of:
| (1) | the Contract Value as of the date that Nationwide receives all the information necessary to pay the death benefit; |
| (2) | the total of all purchase payments, less an adjustment for amounts surrendered; |
| (3) | the highest Contract Value on any Contract Anniversary before the Annuitant's 81st birthday, less an adjustment for amounts subsequently surrendered, plus purchase payments received after that Contract Anniversary; or |
| (4) | the 5% interest anniversary value (as described in the “Death Benefit Calculations” provision on page 35). |
The adjustment for amounts surrendered will reduce items (2) and (3) above in the same proportion that the Contract Value was reduced on the date(s) of the partial surrenders.
Note: For Contract Owners who have elected this option, if the total of all purchase payments made to the contract is greater than $3,000,000, the death benefit will be adjusted as described in the “Death Benefit Calculations” provision on page 35.
The Combination Enhanced Death Benefit Option also includes the Spousal Protection Feature, which allows a surviving spouse to continue the contract while receiving the economic benefit of the death benefit upon the death of the other spouse. Please see “Spousal Protection Feature” later in this prospectus.
For an additional charge equal to an annualized rate of 0.35% of the Daily Net Assets of the Variable Account, the Contract Owner may purchase the Beneficiary Protector II Option. In addition, allocations to the Fixed Account will be assessed a fee of 0.35% by decreasing the interest Nationwide credits to amounts allocated to the Fixed Account. Nationwide may realize a profit from the charge assessed for this option. The Beneficiary Protector II Option is only available for contracts with Annuitants age 75 or younger at the time of application.
The Beneficiary Protector II Option provides that upon the death of the Annuitant (and potentially, the Co-Annuitant, if one is named), and in addition to any death benefit payable, Nationwide will credit an additional amount to the contract (the “benefit”). The amount of the benefit depends on the Annuitant’s age at the time of application and, if applicable, the Co-Annuitant’s age at the time of the first Annuitant’s death.
After the death of the last surviving Annuitant or after all applicable benefits have been credited to the contract, the
charge associated with the Beneficiary Protector II Option will be removed and the beneficiary may:
| (a) | take distribution of the contract in the form of the death benefit or required distributions as applicable; or |
| (b) | if the beneficiary is the deceased Annuitant’s surviving spouse, continue the contract as the new beneficial Contract Owner and subject to any mandatory distribution rules. |
Calculation of the First Benefit
The formula for determining the first benefit, which is paid upon the first Annuitant’s death, is as follows:
Earnings Percentage x Adjusted Earnings.
If the Annuitant is age 70 or younger at the time of application, the Earnings Percentage will be 40%. If the Annuitant is age 71 through age 75 at the time of application, the Earnings Percentage will be 25%.
Adjusted Earnings = (a) – (b); where:
| | a = | the Contract Value on the date the death benefit is calculated and prior to any death benefit calculation; and |
| | b = | purchase payments, proportionally adjusted for surrenders. |
The adjustment for amounts surrendered will reduce purchase payments in the same proportion that the Contract Value was reduced on the date(s) of the partial surrender(s).
There is a limit on the amount of Adjusted Earnings used in the first benefit calculation.
Maximum Adjusted Earnings from the Date of the First Benefit = 200% of the total of all purchase payments that were applied to the contract more than 12 months before the date of the Co-Annuitant’s death (regardless of the date of the Annuitant’s death), proportionally adjusted for surrenders.
The benefit will either be paid in addition to the death benefit, or will be credited to the contract if there is a Co-Annuitant named to the contract.
If there is no Co-Annuitant named to the contract, the charge associated with the Beneficiary Protector II Option will be removed after the benefit is paid.
Calculation of the Second Benefit
If a Co-Annuitant is named under the contract, a second benefit will be paid upon the death of the Co-Annuitant if the Co-Annuitant is age 75 or younger at the date of the first Annuitant’s death. If the Co-Annuitant is older than age 75 at the date of the first Annuitant’s death, no second benefit will be paid and the charge associated with the Beneficiary Protector II Option will be removed.
The calculation of the second benefit will be based on earnings to the contract after the first benefit was calculated. The formula for calculating the second benefit is as follows:
Earnings Percentage x Adjusted Earnings from the Date of the First Benefit.
If the Co-Annuitant is age 70 or younger at the time of the first Annuitant’s death, the Earnings Percentage will be 40%. If the Co-Annuitant is age 71 through age 75 at the time of the first Annuitant’s death, the Earnings Percentage will be 25%.
Adjusted Earnings from the Date of the First Benefit =
(a) – (b) – (c), where:
| | a = | Contract Value on the date the second death benefit is calculated (before the second death benefit is calculated); |
| | b = | the Contract Value on the date the first benefit and the first death benefit were calculated (after the first benefit and the first death benefit were applied), proportionately adjusted for surrenders; and |
| | c = | purchase payments made after the first benefit was applied, proportionately adjusted for surrenders. |
The adjustment for amounts surrendered will reduce the beginning Contract Value and purchase payments in the same proportion that the Contract Value was reduced on the date(s) of the partial surrender(s).
There is a limit on the amount of Adjusted Earnings from the Date of the First Benefit used in the second benefit calculation.
Maximum Adjusted Earnings from the Date of the First Benefit = 200% of the total of all purchase payments that were applied to the contract more than 12 months before the date of the Co-Annuitant’s death (regardless of the date of the Annuitant’s death), proportionally adjusted for surrenders.
After the second benefit is applied, the charge associated with the Beneficiary Protector II Option will be removed.
How the Benefit is Allocated
Any amounts credited to the contract pursuant to the Beneficiary Protector II Option will be allocated among the Sub-Accounts and the Fixed Account in the same proportion as each purchase payment is allocated to the contract on the date the benefit is applied.
10% and 5% Lifetime Income Option
The 10% Lifetime Income Option and the 5% Lifetime Income Option (collectively, the “ Lifetime Income Options ” ) provide for lifetime withdrawals, up to a certain amount each year, even after the Contract Value is zero. The age of the person upon which the benefit depends (the “determining life”) must be between 45 and 85 years old at the time of application. For most contracts, the determining life is that of the Contract Owner. For those contracts where the Contract Owner is a non-natural person, for purposes of this option, the determining life is that of the Annuitant, and all references in this option to “Contract Owner” shall mean Annuitant. If in addition to the Annuitant, a Co-Annuitant or joint annuitant
has been elected, the determining life will be that of the younger Annuitant. The determining life may not be changed.
While the tax treatment for surrenders under withdrawal benefits such as the Lifetime Income Option s is not clear under federal tax law, Nationwide currently treats these surrenders as taxable to the extent that the cash value of the contract exceeds the Contract Owner’s investment at the time of the surrender. Please consult a qualified tax advisor.
Availability
The 10% Lifetime Income Option is available under the contract at the time of application. The 5% Lifetime Income Option is available under the contract at the time of application for contracts issued in the State of New York. The Lifetime Income Option s are not available on beneficially owned contracts.
Lifetime Income Option Charge
In exchange for the 10% Lifetime Income Option, Nationwide will assess an annual charge not to exceed 1.20% of the Current Income Benefit Base. The current charge for the 10% Lifetime Income Option is 1.00% of the Current Income Benefit Base. In exchange for th e 5% Lifetime Income Option , Nationwide will assess an annual charge not to exceed 1.00% of the Current Income Benefit Base. The current charge for the 5% Lifetime Income Option is 0.85% of the Current Income Benefit Base. The charge associated with the respective Lifetime Income Option will not change, except, possibly, upon the Contract Owner’s election to reset the benefit base, as discussed herein.
The charge will be assessed on each Contract Anniversary (the “L.Inc Anniversary”) and will be deducted via redemption of Accumulation Units. A prorated charge will also be deducted upon full surrender of the contract. Accumulation Units will be redeemed proportionally from each Sub-Account in which the Contract Owner is invested at the time the charge is taken. Amounts redeemed as the Lifetime Income Option charge will not negatively impact calculations associated with other benefits elected or available under the contract, will not be subject to a CDSC, and will not reduce amounts available under the CDSC-free withdrawal privilege. (See below for an explanation of what happens if application of the CDSC causes the gross surrender (the surrender amount plus the CDSC) to exceed the Lifetime Withdrawal Percentage limit).
Lifetime Income Option Investment Requirements
Election of either of the Lifetime Income Option s requires that the Contract Owner, until annuitization, allocate the entire Contract Value to the Custom Portfolio Asset Rebalancing Service (see “Contract Owner Services”) or to a limited set of investment options currently available in the contract. For the list of investment options available under each Lifetime Income Option, please see “ Income Benefit Investment Options ” later in this prospectus. Allocation requests to investment options other than those listed in the “ Income Benefit Investment Options ” chart will not be honored; they will be treated as though no allocation request was submitted. The Contract Owner may elect Dollar Cost Averaging for Living Benefits described in the “ Contract Owner Services ” provision. Allocation to the Fixed Account is not permitted ( except as the originating account when the Contract Owner elects Dollar Cost Averaging for Living Benefits ).
Transfers Among Permitted Investment Options
The Contract Owner may reallocate the Contract Value among the limited set of investment options in accordance with the “Transfers Prior to Annuitization” provision. The Contract Owner may reallocate the Contract Value within the Custom Portfolio Asset Rebalancing Service in accordance with that provision. Additionally, Contract Owners may change from the Custom Portfolio Asset Rebalancing Service to the permitted investment options, and vice versa.
Subsequent Purchase Payments
Where permitted by state law, subsequent purchase payments are permitted under the elected Lifetime Income Option as long as the Contract Value is greater than zero. There may be instances where a subsequent purchase payment creates a financial risk that Nationwide is unwilling to bear. If this occurs, Nationwide may exercise its right to refuse subsequent purchase payments which total in aggregate $50,000 or more in any calendar year. If Nationwide exercises this right to refuse a purchase payment, the entire purchase payment that causes the aggregate amount to exceed $50,000 will be immediately returned to the Contract Owner in the same form in which it was received.
Determination of the Income Benefit Base Prior to the First Surrender
Upon contract issuance, the Original Income Benefit Base is equal to the Contract Value. Each time the benefit base is recalculated, as described below, the resulting benefit base becomes the Current Income Benefit Base.
10% Lifetime Income Option. Provided no surrenders are taken from the contract, the Current Income Benefit Base for the 10% Lifetime Income Option will equal the greater of:
| (1) | the highest Contract Value on any L.Inc Anniversary plus purchase payments submitted and credits applied after that L.Inc Anniversary; or |
| (2) | the sum of the following calculations: |
| | (a) | Original Income Benefit Base with Roll-up: the Original Income Benefit Base, plus 10 % of the Original Income Benefit Base for each L.Inc Anniversary up to and including the 10th L.Inc Anniversary; plus |
| | (b) | Purchase Payments with Roll-up: any purchase payments submitted after contract issuance and before the 10th L.Inc Anniversary, increased by a simple interest rate of 10 % through the 10th L.Inc Anniversary; plus |
| | (c) | Purchase Payments with No Roll-up: any purchase payments submitted after the 10th L.Inc Anniversary. |
5% Lifetime Income Option. Provided no surrenders are taken from the contract, the Current Income Benefit Base for the 5% Lifetime Income Option will equal the greater of:
| (1) | the highest Contract Value on any L.Inc Anniversary plus purchase payments submitted and credits applied after that L.Inc Anniversary; or |
| (2) | the sum of the following calculations: |
| | (a) | Original Income Benefit Base with Roll-up : the Original Income Benefit Base, plus 5% of the Original Income Benefit Base for each L.Inc Anniversary up to and including the 10 th L.Inc Anniversary; plus |
| | (b) | Purchase Payments with Roll-up : any purchase payments submitted after contract issuance and before the 10 th L.Inc Anniversary, increased by a simple interest rate of 5% through the 10 th L.Inc Anniversary; plus |
| | (c) | Purchase Payments with No Roll-up : any purchase payments submitted after the 10 th L.Inc Anniversary. |
Regardless of which Lifetime Income Option is elected, w hen a purchase payment is made on a date other than a L.Inc Anniversary, simple interest is calculated using a prorated method based upon the number of days from the date of the purchase payment to the next L.Inc Anniversary.
However, if at any time prior to the first surrender the Contract Value equals zero, no further Income Benefit Base calculations will be made. The Current Income Benefit Base will be set equal to the Income Benefit Base calculated on the most recent 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 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 Withdrawal 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) | Lifetime Withdrawal Percentage |
| 45 up to 59½ | 3% |
| 59½ through 64 | 4% |
| 65 through 80 | 5% |
| 81 and older | 6% |
A Contract Owner will receive the 6% Lifetime Withdrawal 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 Withdrawal Percentage available to that contract is 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 Withdrawal Percentage greater than 5%. Consult a qualified tax advisor.
At the time of the first surrender and on each L.Inc Anniversary thereafter, the Lifetime Withdrawal 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 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, and are subject to the CDSC provisions of the contract.
If a CDSC does apply, application of the CDSC could cause the gross surrender (the surrender amount plus the CDSC) to exceed the Lifetime Withdrawal Percentage limit. To avoid this, the Contract Owner can request to receive the surrender net of the CDSC amount. The gross amount of the surrender (including the CDSC) is the amount used to determine whether the surrender exceeds the Lifetime Withdrawal Percentage limit.
Impact of Withdrawals in Excess of the Withdrawal 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) | a figure representing the proportional amount of the withdrawal. This amount is determined by the following formula: |
dollar amount of the excess surrender | X | Current Income Benefit Base prior to the surrender |
| Contract Value (reduced by the amount of the benefit amount surrendered) |
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 does not apply to beneficially owned contracts. 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, SEP IRA, Simple IRA, or Investment-Only Contract; and |
| (3) | submit a completed administrative form in advance of the withdrawal to Nationwide’s home office which can be obtained by contacting Nationwide’s home office at the telephone number listed on page 1 of this prospectus. |
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 to required minimum distributions, including the issuance of relevant IRS guidance. If Nationwide exercises this right, Nationwide will provide notice to Contract Owners and 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. Additionally, there is no Contract Value to annuitize, making the payment of the benefit associated with this option the only income stream producing benefit remaining in the contract.
Reset Opportunities
Nationwide offers an automatic reset of the income benefit base. If, on any L.Inc Anniversary, the Contract Value exceeds the 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 Lifetime Income Option change.
In the event one or more terms and conditions of the Lifetime Income Option change, the reset opportunities still exist, but are not longer automatic. An election to reset the Current Income Benefit Base must be made by the Contract Owner to Nationwide. On or about each 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 respective Lifetime Income Option; and instructions on how to communicate an election to reset the benefit base.
If the Contract Owner elects to reset the Current Income Benefit Base, it will be at the then current terms and conditions of the respective Lifetime Income O ption as described in the most current prospectus. If Nationwide does not receive a Contract Owner’s election to reset the Current Income Benefit Base within 60 days after the L.Inc Anniversary, Nationwide will assume that the Contract Owner does not wish to reset the Current Income Benefit Base. If the Current Income Benefit Base is not reset, it will remain the same and the terms and conditions of the Lifetime Income Option will not change (as applicable to that particular contract).
Contract Owners may cancel the automatic reset feature of the Lifetime Income Option by notifying Nationwide as to such election. Nationwide reserves the right to modify or terminate the automatic reset feature at any time upon written notice to Contract Owners.
Settlement Options
If, after beginning the lifetime income surrenders, a Contract Owner’s Contract Value falls to zero and there is still a positive Current Income Benefit Base, Nationwide will provide the Contract Owner with one or more settlement options (in addition to the ability to continue annual benefit payments). Specifically, Nationwide will provide a notification to the Contract Owner describing the following three options, along with instructions on how to submit the election to Nationwide:
| (1) | The Contract Owner can continue to take annual surrenders of no more than the annual benefit amount until the death of the Contract Owner; |
| (2) | The Contract Owner can elect the Age Based Lump Sum Settlement Option, as described below; or |
| (3) | If the Contract Owner qualifies after a medical examination, the Contract Owner can elect the Underwritten Lump Sum Settlement Option, as described below. |
The options above each result in a different amount ultimately received under the respective Lifetime Income Option. The Underwritten Lump Sum Settlement Option will generally pay a larger amount than the Age Based Lump Sum Settlement Option when a Contract Owner is healthier than the normal population. Regardless of age or health, the Underwritten Lump Sum Settlement Option amount will never be less than the Age Based Lump Sum Settlement Option amount. Election of the Age Based Lump Sum Settlement Option
enables the Contract Owner to receive payment without a medical exam, which could potentially delay payment. Before selecting a settlement option, consult with a qualified financial advisor to determine which option is best for you based on your individual financial situation and needs.
The Contract Owner will have 60 days from the date of Nationwide’s notification letter to make an election. Once the Contract Owner makes an election, the election is irrevocable. If the Contract Owner does not make an election within the 60 days of the date of the notification letter, Nationwide will assume that the Contract Owner intends to continue to take surrenders of the annual benefit amount.
Age Based Lump Sum Settlement Option. Under the Age Based Lump Sum Settlement Option, in lieu of taking surrenders of the annual benefit amount, Nationwide will pay the Contract Owner a lump sum equal to the Contract Owner’s most recently calculated annual benefit amount multiplied by the Annual Benefit Multiplier listed below:
Contract Owner’s Age (as of the date the Age Based Lump Sum Option is elected) | Annual Benefit Multiplier |
| Up to Age 70 | 5.5 |
| 71-75 | 4.5 |
| 76-80 | 3.5 |
| 81-85 | 2.5 |
| 86-90 | 2.0 |
| 91-95 | 1.5 |
| 96+ | 1.0 |
For contracts that have elected the Spousal Continuation Benefit, if both spouses are living on the date the Age Based Lump Sum Settlement Option is elected, Nationwide will use the age of the younger spouse minus three years to determine the Annual Benefit Multiplier. If only one spouse is living on the date the Age Based Lump Sum Settlement Option is elected, Nationwide will use the age of the living spouse to determine the Annual Benefit Multiplier.
Underwritten Lump Sum Settlement Option. Under the Underwritten Lump Sum Settlement Option, in lieu of taking surrenders of the annual benefit amount, for those who qualify based on a medical exam, Nationwide will pay the Contract Owner a lump sum based upon the attained age, sex, and health of the Contract Owner (and spouse if the Spousal Continuation Benefit is elected). Once Nationwide receives the Contract Owner’s election to take the Underwritten Lump Sum Settlement Option, Nationwide will provide the Contract Owner with a medical examination form, which must be completed by a certified physician chosen by the Contract Owner and returned to Nationwide’s home office within 30 days. Upon completion of underwriting by Nationwide, the lump sum settlement amount is issued to the Contract Owner. If Nationwide does not receive the completed form within the 30-day period, Nationwide will pay the Contract Owner the amount that would be payable under the Age Based Lump Sum Settlement Option.
Annuitization
If the Contract Owner elects to annuitize the contract, th e Lifetime Income O ption will terminate. Specifically, the charge associated with the option will no longer be assessed and all benefits associated with the Lifetime Income Option will terminate.
Death of Determining Life
For contracts with no Spousal Continuation Benefit, upon the death of the determining life, the benefits associated with the option terminate. If the Contract Owner is also the Annuitant, the death benefit will be paid in accordance with the “Death Benefits” provision. If the Contract Owner is not the Annuitant, the Contract Value will be distributed in accordance with the “Required Distributions” section of “Appendix C: Contract Types and Tax Information.”
For contracts with the Spousal Continuation Benefit, upon the death of the determining life, the surviving spouse continues to receive the same benefit associated with the elected Lifetime Income Option which had been received by the deceased spouse, for the remainder of the survivor’s lifetime. The Contract Value will reflect the death benefit and Spousal Protection Feature.
At the time the 10% Lifetime Income Option or the 5% Lifetime Income Option is elected (at time of application), the Contract Owner may elect the corresponding Spousal Continuation Benefit (not available for contracts issued as Charitable Remainder Trusts). The charge for the 10% Spousal Continuation Benefit will not exceed 0.30% of the Current Income Benefit Base. The current charge for the 10% Spousal Continuation Benefit is 0.20% of the Current Income Benefit Base. The 10% Spousal Continuation Benefit is only available for contracts issued in jurisdictions other than the State of New York. The charge for the 5% Spousal Continuation Benefit is 0.15% of the Current Income Benefit Base. The 5% Spousal Continuation Benefit is only available for contracts issued in the State of New York.
The Spousal Continuation Benefit allows a surviving spouse to continue to receive, for the duration of his/her lifetime, the benefit associated with the respective Lifetime Income Option, provided that the following conditions are satisfied:
| | (1) | Both spouses must be between 45 and 85 years old at the time of application. |
| | (2) | Both spouses must be at least age 45 before either spouse is eligible to begin withdrawals. Note: the Internal Revenue Code imposes a penalty tax if a distribution is made before the Contract Owner reaches age 59½ unless certain exceptions are met. See “Federal Tax Considerations” in “Appendix C: Contract Types and Tax Information” for additional information. |
| | (3) | Once the Spousal Continuation Benefit is elected, it may not be removed from the contract, except as provided below. |
| | (4) | The Lifetime Withdrawal Percentage will be based on the age of the younger spouse as of the date of the first surrender from the contract. |
| | (5) | One or both spouses (or a revocable trust of which either or both of the spouses is/are grantor(s)) must be named as the Contract Owner. For contracts issued as IRAs and Roth IRAs, only the person for whom the IRA or Roth IRA was established may be named as the Contract Owner. |
| | (6) | Both spouses must be named as beneficiaries. For contracts with non-natural owners, both spouses must be named as Co-Annuitants. |
| | (7) | No person other than the spouse may be named as Contract Owner, Annuitant or beneficiary. |
| | (8) | If both spouses are alive upon annuitization, the Contract Owner must specify which spouse is the Annuitant upon whose continuation of life any annuity payments involving life contingencies depend (for IRA and Roth IRA contracts, this person must be the Contract Owner). |
Note: The Spousal Continuation Benefit is distinct from the Spousal Protection Feature associated with the death benefits. The Spousal Continuation Benefit allows a surviving spouse to continue receiving the lifetime income payments associated with the elected Lifetime Income Option. In contrast, the Spousal Protection Feature is a death benefit bump-up feature associated with the death benefits.
Marriage Termination
If, prior to taking any surrenders from the contract, the marriage terminates due to divorce, dissolution, or annulment, the Contract Owner may remove the Spousal Continuation Benefit from the contract. Nationwide will remove the benefit and the associated charge upon the Contract Owner’s written request and evidence of the marriage termination satisfactory to Nationwide. Once the Spousal Continuation Benefit is removed from the contract, the benefit may not be re-elected or added to cover a subsequent spouse.
If, after taking any surrender from the contract, the marriage terminates due to divorce, dissolution, or annulment, the Contract Owner may not remove the Spousal Continuation Benefit from the contract.
Risks Associated with Electing the Spousal Continuation Benefit
There are situations where a Contract Owner who elects the Spousal Continuation Benefit will not receive the benefits associated with the option. This will occur if:
| (1) | your spouse (contingent annuitant) dies before you; |
| (2) | the contract is annuitized; or |
| (3) | withdrawals are taken after the withdrawal start date and the marriage terminates due to divorce, dissolution, or annulment. |
Additionally, in the situations described in (1) and (3) above, not only will the Contract Owner not receive the benefits associated with the Spousal Continuation Benefit, but he/she must continue to pay for the option and comply with all of the terms and conditions associated with the respective Lifetime Income Option, including the investment option requirements, until annuitization.
Income Benefit Investment Options
The following investment options are the only investment options available for contracts that have elected a Lifetime Income Option:
Fidelity Variable Insurance Products Fund
| · | VIP Freedom 2010 Portfolio: Service Class 2 |
| · | VIP Freedom 2020 Portfolio: Service Class 2 |
Nationwide Variable Insurance Trust
| · | American Funds NVIT Asset Allocation Fund: Class II |
| · | NVIT Cardinal Balanced Fund: Class II |
| · | NVIT Cardinal Capital Appreciation Fund: Class II |
| · | NVIT Cardinal Conservative Fund: Class II |
| · | NVIT Cardinal Moderate Fund: Class II |
| · | NVIT Cardinal Moderately Conservative Fund: Class II |
| · | NVIT Investor Destinations Balanced Fund: Class II |
| · | NVIT Investor Destinations Capital Appreciation Fund: Class II |
| · | NVIT Investor Destinations Conservative Fund: Class II |
| · | NVIT Investor Destinations Moderately Conservative Fund: Class II |
| · | NVIT Investor Destinations Moderate Fund: Class II |
Static Asset Allocation Model
| · | American Funds Option (33% American Funds NVIT Asset Allocation Fund, 33% American Funds NVIT Bond Fund and 34% American Funds NVIT Growth-Income Fund) |
Static Asset Allocation Model
A Static Asset Allocation Model is an allocation strategy comprised of two or more underlying mutual funds that together provide a unique allocation mix not available as a single underlying mutual fund. Contract Owners that elect a Static Asset Allocation Model directly own Sub-Account units of the underlying mutual funds that comprise the particular model. In other words, a Static Asset Allocation Model is not a portfolio of underlying mutual funds with one Accumulation Unit/Annuity Unit value, but rather, direct investment in a certain allocation of Sub-Accounts. There is no additional charge associated with investing in a Static Asset Allocation Model.
The Static Asset Allocation Model is just that: static. The allocations or “split” between one or more Sub-Accounts is not monitored and adjusted to reflect changing market conditions. However, a Contract Owner’s investment in a Static Asset Allocation Model is rebalanced quarterly to ensure that the assets are allocated to the percentages in the same proportion that they were allocated at the time of election. The entire contract value must be allocated to the elected model.
With respect to transferring into and out of a Static Asset Allocation Model, the model is treated like an underlying
mutual fund and is subject to the “Transfers Prior to Annuitization” provision. You may request to transfer from a model to a permitted underlying mutual fund. Each transfer into or out of a Static Asset Allocation Model is considered one transfer event.
For additional information about the underlying mutual funds that comprise the Static Asset Allocation Model, see “Appendix A: Underlying Mutual Funds.”
The Mortality and Expense Risk Charge and the Administrative Charge apply for the life of the contract. The charge for each optional benefit is assessed until annuitization, except for the Beneficiary Protector II Option Charge, which is removed after the benefit associated with that feature is paid. To remove the charge, Nationwide systematically re-rates the contract. This re-rating results in lower contract charges, but no change in Contract Value or any other contractual benefit.
Re-rating involves two steps: the adjustment of contract expenses and the adjustment of the number of units in the contract.
The first step, the adjustment of contract expenses, involves removing the charge from the unit value calculation. For example, on a contract where the only optional benefit elected is the Beneficiary Protector II Option, the Variable Account value will be calculated using unit values with Variable Account charges of 1.65%. Once the benefit is paid, the charge associated with the Beneficiary Protector II option will be removed. From that point on, the Variable Account value will be calculated using the unit values with Variable Account charges at 1.30%. Thus, the Beneficiary Protector II Option charge is no longer included in the daily Sub-Account valuation for the contract.
The second step of the re-rating process, the adjustment of the number of units in the contract, is necessary in order to keep the re-rating process from altering the Contract Value. Generally, for any given Sub-Account, the higher the Variable Account charges, the lower the unit value, and vice versa. For example, Sub-Account X with charges of 1.65% will have a lower unit value than Sub-Account X with charges of 1.30% (higher expenses result in lower unit values). When, upon re-rating, the unit values used in calculating Variable Account value are dropped from the higher expense level to the lower expense level, the higher unit values will cause an incidental increase in the Contract Value. In order to avoid this incidental increase, Nationwide adjusts the number of units in the contract down so that the Contract Value after the re-rating is the same as the Contract Value before the re-rating.
Contract Owner
Prior to the Annuitization Date, the Contract Owner has all rights under the contract, unless a joint owner is named. If a joint owner is named, each joint owner has all rights under the contract. Purchasers who name someone other than themselves as the Contract Owner will have no rights under the contract.
On the Annuitization Date, the Annuitant becomes the Contract Owner, unless the Contract Owner is a Charitable Remainder Trust. If the Contract Owner is a Charitable Remainder Trust, the Charitable Remainder Trust continues to be the Contract Owner after annuitization.
Contract Owners of Non-Qualified Contracts may name a new Contract Owner at any time before the Annuitization Date. Any change of Contract Owner automatically revokes any prior Contract Owner designation. Changes in contract ownership may result in federal income taxation and may be subject to state and federal gift taxes.
Joint owners each own an undivided interest in the contract.
Non-Qualified Contract Owners can name a joint owner at any time before annuitization. However, joint owners must be spouses at the time joint ownership is requested, unless state law requires Nationwide to allow non-spousal joint owners.
Generally, the exercise of any ownership rights under the contract must be in writing and signed by both joint owners. However, if a written election, signed by both Contract Owners, authorizing Nationwide to allow the exercise of ownership rights independently by either joint owner is submitted, Nationwide will permit joint owners to act independently. If such an authorization is submitted, Nationwide will not be liable for any loss, liability, cost, or expense for acting in accordance with the instructions of either joint owner.
If either joint owner dies before the Annuitization Date, the contract continues with the surviving joint owner as the remaining Contract Owner.
Contingent Owner
The contingent owner succeeds to the rights of a Contract Owner if a Contract Owner who is not the Annuitant dies before the Annuitization Date, and there is no surviving joint owner.
If a Contract Owner who is the Annuitant dies before the Annuitization Date, the contingent owner will not have any rights under the contract, unless such contingent owner is also the beneficiary.
The Contract Owner may name a contingent owner at any time before the Annuitization Date.
The Annuitant is the person who will receive annuity payments and upon whose continuation of life any annuity payment involving life contingencies depends. This person must be age 85 or younger at the time of contract issuance, unless Nationwide approves a request for an Annuitant of greater age.
Only Non-Qualified Contract Owners may name someone other than himself/herself as the Annuitant.
The Contract Owner may not name a new Annuitant without Nationwide's consent.
Contingent Annuitant
If the Annuitant dies before the Annuitization Date, the contingent annuitant becomes the Annuitant. The contingent
annuitant must be age 85 or younger at the time of contract issuance, unless Nationwide approves a request for a contingent annuitant of greater age.
If a contingent annuitant is named, all provisions of the contract that are based on the Annuitant's death prior to the Annuitization Date will be based on the death of the last survivor of the Annuitant and contingent annuitant.
Co-Annuitant
A Co-Annuitant, if named, must be the Annuitant's spouse. The Co-Annuitant may be named at any time prior to annuitization and will receive the benefit of the Spousal Protection Feature.
If either Co-Annuitant dies before the Annuitization Date, the surviving Co-Annuitant may continue the contract and will receive the benefit of the Spousal Protection Feature.
Joint Annuitant
The joint annuitant is designated as a second person (in addition to the Annuitant) upon whose continuation of life any annuity payment involving life contingencies depend. This person must be age 85 or younger at the time of contract issuance, unless Nationwide approves a request for a joint annuitant of greater age.
The Contract Owner may name a joint annuitant at any time before the Annuitization Date.
Beneficiary and Contingent Beneficiary
The beneficiary is the person who is entitled to the death benefit if the Annuitant dies before the Annuitization Date and there is no joint owner. The Contract Owner can name more than one beneficiary. Multiple beneficiaries will share the death benefit equally, unless otherwise specified.
A contingent beneficiary will succeed to the rights of the beneficiary if no beneficiary is alive when a death benefit is paid. The Contract Owner can name more than one contingent beneficiary. Multiple contingent beneficiaries will share the death benefit equally, unless otherwise specified.
Changes to the Parties to the Contract
Prior to the Annuitization Date (and subject to any existing assignments), the Contract Owner may request to change the following:
| · | Contract Owner (Non-Qualified Contracts only); |
| · | joint owner (must be the Contract Owner's spouse); |
| · | Annuitant (subject to Nationwide's underwriting and approval); |
| · | contingent annuitant (subject to Nationwide's underwriting and approval); |
| · | Co-Annuitant (must be the Annuitant's spouse); |
| · | joint annuitant (subject to Nationwide's underwriting and approval); |
The Contract Owner must submit the request to Nationwide in writing and Nationwide must receive the request at its home office before the Annuitization Date. Once Nationwide receives and records the change request, the change will be effective as of the date the written request was signed, whether or not the Contract Owner or Annuitant is living at the time it was recorded. The change will not affect any action taken by Nationwide before the change was recorded.
In addition to the above requirements, any request to change the Contract Owner must be signed by the existing Contract Owner and the person designated as the new Contract Owner. Nationwide may require a signature guarantee.
If the Contract Owner is not a natural person and there is a change of the Annuitant, distributions will be made as if the Contract Owner died at the time of the change, regardless of whether the Contract Owner named a contingent annuitant.
Nationwide reserves the right to reject any change request that would alter the nature of the risk that Nationwide assumed when it originally issued the contract.
Purchase Payment Credits
Purchase Payment Credits (“PPCs”) are additional credits that Nationwide will apply to a contract when cumulative purchase payments reach certain aggregate levels.
When determining PPCs Nationwide will include the purchase payments in this contract, as well as the purchase payments of any other Nationwide annuity contract issued to an immediate family member made within the 12 months before the purchase of this contract. Immediate family members include spouses, children, or other family members living within the Contract Owner’s household. In order to be considered for PPCs, the Contract Owner must notify Nationwide in writing of all Nationwide annuity contracts owned by the Contract Owner or immediate family members.
Each time a Contract Owner submits a purchase payment, Nationwide will perform a calculation to determine if and how many PPCs are payable as a result of that particular deposit.
The formula used to determine the amount of the PPC is as follows:
| | (Cumulative Purchase Payments x PPC%) |
| – | PPCs Paid to Date |
| = | PPCs Payable |
Cumulative Purchase Payments = the total of all purchase payments applied to the contract, including the current deposit, minus any surrenders.
PPC% = either 0.0%, 0.5%, or 1.0%, depending on the level of Cumulative Purchase Payments as follows:
| If Cumulative Purchase Payments are . . . | Then the PPC% is . . . |
| $0 - $499,999 | 0.0% (no PPC is payable) |
| $500,000 - $999,999 | 0.5% |
| $1,000,000 or more | 1.0% |
PPCs Paid to Date = the total PPCs that Nationwide has already applied to the contract.
PPCs Payable = the PPCs that Nationwide will apply to the contract as a result of the current deposit.
For example, on March 1, Ms. Z makes an initial deposit of $200,000 to her contract. She does not receive a PPC since her Cumulative Purchase Payments are less than $500,000.
On April 1, Ms. Z applies additional purchase payments of $350,000. Cumulative Purchase Payments now equal $550,000. Nationwide will apply PPCs to Ms. Z’s contract equal to $2,750, which is (0.5% x $550,000) - $0.
On May 1, Ms. Z takes a surrender of $150,000. Cumulative Purchase Payments now equal $400,000.
On June 1, Ms. Z applies additional purchase payments of $500,000. Cumulative Purchase Payments now equal $900,000. Nationwide will apply PPCs to Ms. Z’s contract equal to $1,750, which is ($900,000 x 0.5%) - $2,750. At this point in time, a total of $4,500 in PPCs have been applied to Ms. Z’s contract.
On July 1, Ms. Z applies additional purchase payments of $300,000. Cumulative Purchase Payments now equal $1,200,000. Nationwide will apply PPCs to Ms. Z’s contract equal to $7,500, which is ($1,200,000 x 1.0%) - $4,500. At this point in time, a total of $12,000 in PPCs have been applied to Ms. Z’s contract.
For purposes of all benefits and taxes under these contracts, PPCs are considered earnings, not purchase payments, and they will be allocated in the same proportion that purchase payments are allocated on the date the PCCs are applied.
If the Contract Owner cancels the contract pursuant to the contractual free-look provision, Nationwide will recapture all PPCs applied to the contract. In those states that require the return of purchase payments for IRAs that are surrendered pursuant to the contractual free-look, Nationwide will recapture all PPCs, but under no circumstances will the amount returned to the Contract Owner be less than the purchase payments made to the contract. In those states that allow a return of Contract Value, the Contract Owner will retain any earnings attributable to the PPCs, but all losses attributable to the PPCs will be incurred by Nationwide.
All PPCs are fully vested after the end of the contractual free-look period and are not subject to recapture.
Pricing
Generally, Nationwide prices Accumulation Unit values of the Sub-Accounts on each day that the New York Stock Exchange is open. (Pricing is the calculation of a new Accumulation Unit value that reflects that day's investment experience.)
Accumulation Units are not priced when the New York Stock Exchange is closed or on the following nationally recognized holidays:
·New Year's Day | ·Independence Day |
·Martin Luther King, Jr. Day | ·Labor Day |
·Presidents' Day | ·Thanksgiving |
·Good Friday | ·Christmas |
·Memorial Day | |
Nationwide also will not price purchase payments, surrenders or transfers if:
| (1) | trading on the New York Stock Exchange is restricted; |
| (2) | an emergency exists making disposal or valuation of securities held in the Variable Account impracticable; or |
| (3) | the SEC, by order, permits a suspension or postponement for the protection of security holders. |
Rules and regulations of the SEC will govern as to when the conditions described in (2) and (3) exist. If Nationwide is closed on days when the New York Stock Exchange is open, Contract Value may change and Contract Owners will not have access to their accounts.
Application and Allocation of Purchase Payments
Initial Purchase Payments
Initial purchase payments wills be priced at the Accumulation Unit value next determined no later than 2 business days after receipt of an order to purchase if the application and all necessary information are complete and are received at Nationwide's home office before the close of the New York Stock Exchange, which generally occurs at 4:00 p.m. Eastern Time. If the order is received after the close of the New York Stock Exchange, the initial purchase payment will be priced within 2 business days after the next business day.
If an incomplete application is not completed within 5 business days of receipt at Nationwide's home office, the prospective purchaser will be informed of the reason for the delay. The purchase payment will be returned to the prospective purchaser unless he or she specifically consents to allow Nationwide to hold the purchase payment until the application is completed.
In some states, Nationwide will allocate initial purchase payments to the money market Sub-Account during the free look period. After the free look period, Nationwide will reallocate the Contract Value among the investment options based on the instructions contained on the application. In other states, Nationwide will immediately allocate initial purchase payments to the investment options based on the instructions contained on the application.
Subsequent Purchase Payments
Any subsequent purchase payment received at Nationwide's home office (along with all necessary information) before the close of the New York Stock Exchange will be priced at the Accumulation Unit value next determined after receipt of the purchase payment. If a subsequent purchase payment is received at Nationwide's home office (along with all necessary
information) after the close of the New York Stock Exchange, it will be priced at the Accumulation Unit value determined on the following Valuation Date.
Allocation of Purchase Payments
Nationwide allocates purchase payments to Sub-Accounts as instructed by the Contract Owner. Shares of the underlying mutual funds allocated to the Sub-Accounts are purchased at Net Asset Value, then converted into Accumulation Units.
Contract Owners can change allocations or make exchanges among the Sub-Accounts. However, no change may be made that would result in an amount less than 1% of the purchase payments being allocated to any Sub-Account. In the event that Nationwide receives such a request, Nationwide will inform the Contract Owner that the allocation instructions are invalid and that the contract's allocations among the Sub-Accounts prior to the request will remain in effect. Certain transactions may be subject to conditions imposed by the underlying mutual funds.
Determining the Contract Value
The Contract Value is the sum of:
| (1) | the value of amounts allocated to the Sub-Accounts of the Variable Account; and |
| amounts allocated to the Fixed Account(2) | . |
If charges are assessed against the whole Contract Value, Nationwide will deduct a proportionate amount from each Sub-Account and the Fixed Account based on current cash values.
Determining Variable Account Value – Valuing an Accumulation Unit
Sub-Account allocations are accounted for in Accumulation Units. Accumulation Unit values (for each Sub-Account) are determined by calculating the net investment factor for the underlying mutual funds for the current Valuation Period and multiplying that result with the Accumulation Unit values determined on the previous Valuation Period.
Nationwide uses the net investment factor as a way to calculate the investment performance of a Sub-Account from Valuation Period to Valuation Period. For each Sub-Account, the net investment factor shows the investment performance of the underlying mutual fund in which a particular Sub-Account invests, including the charges assessed against that Sub-Account for a Valuation Period.
The net investment factor for any particular Sub-Account is determined by dividing (a) by (b), and then subtracting (c) from the result, where:
| | (1) | the Net Asset Value of the underlying mutual fund as of the end of the current Valuation Period; and |
| | (2) | the per share amount of any dividend or income distributions made by the underlying mutual fund (if the date of the dividend or income distribution occurs during the current Valuation Period). |
| (b) | is the Net Asset Value of the underlying mutual fund determined as of the end of the preceding Valuation Period. |
| (c) | is a factor representing the daily total Variable Account charges, which may include charges for optional benefits elected by the Contract Owner. The factor is equal to an annualized rate ranging from 1.30% to 2.10% of the Daily Net Assets of the Variable Account, depending on which optional benefits the Contract Owner elects. |
Note: The range shown above reflects only those Variable Account charges that are assessed daily as part of the daily Accumulation Unit calculation. It does not reflect the cost of other optional benefits that assess charges via the redemption of Accumulation Units ( e.g., the Lifetime Income Options).
Based on the change in the net investment factor, the value of an Accumulation Unit may increase or decrease. Changes in the net investment factor may not be directly proportional to changes in the Net Asset Value of the underlying mutual fund shares because of the deduction of Variable Account charges.
Though the number of Accumulation Units will not change as a result of investment experience, the value of an Accumulation Unit may increase or decrease from Valuation Period to Valuation Period.
Determining Fixed Account Value
Nationwide determines the value of the Fixed Account by:
| (1) | adding all amounts allocated to the Fixed Account, minus amounts previously transferred or surrendered; |
| (2) | adding any interest earned on the amounts allocated to the Fixed Account; and |
| (3) | subtracting charges deducted in accordance with the contract. |
Transfer Requests
Contract Owners may submit transfer requests in writing, over the telephone, or via the internet. Nationwide will use reasonable procedures to confirm that instructions are genuine and will not be liable for following instructions that it reasonably determined to be genuine. Nationwide may restrict or withdraw the telephone and/or internet transfer privilege at any time.
Generally, Sub-Account transfers will receive the Accumulation Unit value next computed after the transfer request is received. However, if a contract that is limited to submitting transfer requests via U.S. mail submits a transfer request via the internet or telephone pursuant to Nationwide's one-day delay policy, the transfer will be executed on the next business day after the exchange request is received by Nationwide (see “Managers of Multiple Contracts”).
Transfer Restrictions
Neither the contracts described in this prospectus nor the underlying mutual funds are designed to support active trading strategies that require frequent movement between or among Sub-Accounts (sometimes referred to as “market-timing” or “short-term trading”). A Contract Owner who intends to use
an active trading strategy should consult his/her registered representative and request information on other Nationwide variable annuity contracts that offer underlying mutual funds that are designed specifically to support active trading strategies.
Nationwide discourages (and will take action to deter) short-term trading in this contract because the frequent movement between or among Sub-Accounts may negatively impact other investors in the contract. Short-term trading can result in:
| · | the dilution of the value of the investors’ interests in the underlying mutual fund; |
| · | underlying mutual fund managers taking actions that negatively impact performance (keeping a larger portion of the underlying mutual fund assets in cash or liquidating investments prematurely in order to support redemption requests); and/or |
| · | increased administrative costs due to frequent purchases and redemptions. |
To protect investors in this contract from the negative impact of these practices, Nationwide has implemented, or reserves the right to implement, several processes and/or restrictions aimed at eliminating the negative impact of active trading strategies. Nationwide makes no assurances that all risks associated with short-term trading will be completely eliminated by these process and/or restrictions.
Nationwide cannot guarantee that its attempts to deter active trading strategies will be successful. If we are unable to deter active trading strategies, the performance of the Sub-Accounts that are actively trade may be adversely impacted.
Redemption Fees
Some underlying mutual funds assess a short-term trading fee in connection with transfers from a Sub-Account that occur within 60 days after the date of the allocation to the Sub-Account. The fee is assessed against the amount transferred and is paid to the underlying mutual fund. Redemption fees compensate the underlying mutual fund for any negative impact on fund performance resulting from short-term trading. For more information on short-term trading fees, please see the “Short-Term Trading Fees” provision.
U.S. Mail Restrictions
Nationwide monitors transfer activity in order to identify those who may be engaged in harmful trading practices. Transaction reports are produced and examined. Generally, a contract may appear on these reports if the Contract Owner (or a third party acting on their behalf) engages in a certain number of “transfer events” in a given period. A “transfer event” is any transfer, or combination of transfers, occurring on a given trading day (Valuation Period). For example, if a Contract Owner executes multiple transfers involving 10 underlying mutual funds in one day, this counts as one transfer event. A single transfer occurring on a given trading day and involving only two underlying mutual funds (or one underlying mutual fund if the transfer is made to or from the Fixed Account) will also count as one transfer event.
As a result of this monitoring process, Nationwide may restrict the method of communication by which transfer orders will be accepted. In general, Nationwide will adhere to the following guidelines:
| Trading Behavior | Nationwide's Response |
| 6 or more transfer events in one calendar quarter | Nationwide will mail a letter to the Contract Owner notifying them that: (1)they have been identified as engaging in harmful trading practices; and (2)if their transfer events exceed 11 in 2 consecutive calendar quarters or 20 in one calendar year, the Contract Owner will be limited to submitting transfer requests via U.S. mail on a Nationwide issued form. |
More than 11 transfer events in 2 consecutive calendar quarters OR More than 20 transfer events in one calendar year | Nationwide will automatically limit the Contract Owner to submitting transfer requests via U.S. mail on a Nationwide issued form. |
Each January 1st, Nationwide will start the monitoring anew, so that each contract starts with 0 transfer events each January 1. See, however, the “Other Restrictions” provision below.
Managers of Multiple Contracts
Some investment advisers/representatives manage the assets of multiple Nationwide contracts pursuant to trading authority granted or conveyed by multiple Contract Owners. These multi-contract advisers will generally be required by Nationwide to submit all transfer requests via U.S. mail.
Nationwide may, as an administrative practice, implement a “one-day delay” program for these multi-contract advisers, which they can use in addition to or in lieu of submitting transfer requests via U.S. mail. The one-day delay option permits multi-contract advisers to continue to submit transfer requests via the internet or telephone. However, transfer requests submitted by multi-contract advisers via the internet or telephone will not receive the next available Accumulation Unit value. Rather, they will receive the Accumulation Unit value that is calculated on the following business day. Transfer requests submitted under the one-day delay program are irrevocable. Multi-contract advisers will receive advance notice of being subject to the one-day delay program.
Other Restrictions
Contract Owners that are required to submit transfer requests via U.S. mail will be required to use a Nationwide issued form for their transfer request. Nationwide will refuse transfer requests that either do not use the Nationwide issued form for their transfer request or fail to provide accurate and complete information on their transfer request form. In the event that a Contract Owner’s transfer request is refused by Nationwide, they will receive notice in writing by U.S. Mail and will be
required to resubmit their transfer request on a Nationwide issued form.
Nationwide reserves the right to refuse or limit transfer requests, or take any other action it deems necessary, in order to protect Contract Owners, Annuitants, and beneficiaries from the negative investment results that may result from short-term trading or other harmful investment practices employed by some Contract Owners (or third parties acting on their behalf). In particular, trading strategies designed to avoid or take advantage of Nationwide's monitoring procedures (and other measures aimed at curbing harmful trading practices) that are nevertheless determined by Nationwide to constitute harmful trading practices, may be restricted.
Any restrictions that Nationwide implements will be applied consistently and uniformly.
Underlying Mutual Fund Restrictions and Prohibitions
Pursuant to regulations adopted by the SEC, Nationwide is required to enter into written agreements with the underlying mutual funds which allow the underlying mutual funds to:
| (1) | request the taxpayer identification number, international taxpayer identification number, or other government issued identifier of any Nationwide Contract Owner; |
| (2) | request the amounts and dates of any purchase, redemption, transfer or exchange request (“transaction information”); and |
| (3) | instruct Nationwide to restrict or prohibit further purchases or exchanges by Contract Owners that violate policies established by the underlying mutual fund (whose policies may be more restrictive than Nationwide’s policies). |
Nationwide is required to provide such transaction information to the underlying mutual funds upon their request. In addition, Nationwide is required to restrict or prohibit further purchases or requests to exchange into an underlying mutual fund upon instruction from the underlying mutual fund. Nationwide and any affected Contract Owner may not have advance notice of such instructions from an underlying mutual fund to restrict or prohibit further purchases or requests to exchange into an underlying mutual fund. If an underlying mutual fund refuses to accept a purchase or request to exchange into the underlying mutual fund submitted by Nationwide, Nationwide will keep any affected Contract Owner in their current underlying mutual fund allocation.
A Contract Owner may request to transfer allocations from the Fixed Account to the Sub-Accounts only upon reaching the end of a Fixed Account interest rate guarantee period. Fixed Account transfers must be made within 45 days after the end of the interest rate guarantee period. The Fixed Account interest rate guarantee period is the period of time that the Fixed Account interest rate is guaranteed to remain the same.
Normally, Nationwide will permit 100% of the maturing Fixed Account allocations to be transferred. However, Nationwide may limit the amount that can be transferred from the Fixed Account. Nationwide will determine the amount that may be transferred and will declare this amount at the end of the Fixed Account interest rate guarantee period. The maximum transferable amount will never be less than 10% of the Fixed Account allocation reaching the end of a Fixed Account interest rate guarantee period.
Contract Owners who use Dollar Cost Averaging may transfer from the Fixed Account under the terms of that program.
Nationwide is required by state law to reserve the right to postpone the transfer of assets from the Fixed Account for a period of up to 6 months from the date of the transfer request.
A Contract Owner may request to transfer allocations from the Sub-Accounts to the Fixed Account. Nationwide reserves the right to limit or refuse transfers to the Fixed Account.
Transfers Among the Sub-Accounts
A Contract Owner may request to transfer allocations among the Sub-Accounts at any time, subject to terms and conditions imposed by this prospectus and the underlying mutual funds.
Transfers After Annuitization
After annuitization, the portion of the Contract Value allocated to fixed annuity payments and the portion of the Contract Value allocated to variable annuity payments may not be changed.
After annuitization, transfers among Sub-Accounts may only be made on the anniversary of the Annuitization Date.
If the Contract Owner elects to cancel the contract, he/she may return it to Nationwide’s home office within a certain period of time known as the “free look” period. Depending on the state in which the contract was purchased (and, in some states, if the contract is purchased as a replacement for another annuity contract), the free look period may be 10 days or longer. For ease of administration, Nationwide will honor any free look cancellation that is received at Nationwide’s home office or postmarked within 30 days after the contract issue date. The contract issue date is the next business day after the initial purchase payment is applied to the contract.
If the Contract Owner elects to cancel the contract pursuant to the free look provision, where required by law, Nationwide will return the greater of the Contract Value or the amount of purchase payment(s) applied during the free look period, less any applicable federal and state income tax withholding. Otherwise, Nationwide will return the Contract Value, less any applicable federal and state income tax withholding.
Where state law requires the return of purchase payments upon cancellation of the contract during the free look period, Nationwide will allocate initial purchase payments allocated to Sub-Accounts to the money market Sub-Account during the free look period. Where state law requires the return of
Contract Value upon cancellation of the contract during the free look period, Nationwide will immediately allocate initial purchase payments to the investment options based on the instructions contained on the application.
Liability of the Variable Account under this provision is limited to the Contract Value in each Sub-Account on the date of revocation. Any additional amounts refunded to the Contract Owner will be paid by Nationwide.
Prior to annuitization and before the Annuitant's death, Contract Owners may generally surrender some or all of their Contract Value. Surrenders from the contract may be subject to federal income tax and/or a tax penalty. See “Federal Income Taxes” in “Appendix C: Contract Types and Tax Information.” Surrender requests must be in writing and Nationwide may require additional information. When taking a full surrender, the contract must accompany the written request. Nationwide may require a signature guarantee.
Nationwide will pay any amounts surrendered from the Sub-Accounts within 7 days (See “Pricing”). However, Nationwide may suspend or postpone payment when it is unable to price a purchase payment or transfer.
Nationwide is required by state law to reserve the right to postpone payment of assets in the Fixed Account for a period of up to 6 months from the date of the surrender request.
Partial Surrenders (Partial Redemptions)
If a Contract Owner requests a partial surrender, Nationwide will surrender Accumulation Units from the Sub-Accounts and an amount from the Fixed Account. The amount withdrawn from each investment option will be in proportion to the value in each option at the time of the surrender request.
Partial surrenders are subject to the CDSC provisions of the contract. If a CDSC is assessed, the Contract Owner may elect to have the CDSC deducted from either:
| (a) | the amount requested; or |
| (b) | the Contract Value remaining after the Contract Owner has received the amount requested. |
If the Contract Owner does not make a specific election, any applicable CDSC will be deducted from the amount requested by the Contract Owner.
The CDSC deducted is a percentage of the amount requested by the Contract Owner. Amounts deducted for CDSC are not subject to subsequent CDSC.
Partial Surrenders to Pay Investment Advisory Fees
Some Contract Owners utilize an investment advisor(s) to manage their assets, for which the investment advisor assesses a fee. Investment advisors are not endorsed or affiliated with Nationwide and Nationwide makes no representation as to their qualifications. The fees for these investment advisory services are specified in the respective account agreements and are separate from and in addition to the contract fees and expenses described in this prospectus. Some Contract Owners authorize their investment advisor to take a partial surrender(s) from the contract in order to collect investment advisory fees. Surrenders taken from this contract to pay advisory or investment management fees are subject to the CDSC provisions of the contract and may be subject to income tax and/or tax penalties.
Full Surrenders (Full Redemptions)
Upon full surrender, the Contract Value may be more or less than the total of all purchase payments made to the contract. The Contract Value will reflect:
| · | Variable Account charges; |
| · | underlying mutual fund charges; |
| · | a $30 Contract Maintenance Charge (this charge will be waived upon full surrender if the Contract Value is equal to or greater than $50,000 at the time of the full surrender or on any Contract Anniversary prior to the full surrender); |
| · | the investment performance of the underlying mutual funds; |
| · | amounts allocated to the Fixed Account and any interest credited; and |
| · | .Purchase Payment Credits (if applicable) |
F ull surrenders are subject to the CDSC provisions of the contract, where permitted by state law. The CDSC-free withdrawal privilege does not apply to full surrenders of the contract. For purposes of the CDSC free withdrawal privilege, a full surrender is:
| · | multiple surrenders taken within a Contract Year that deplete the entire Contract Value; or |
| · | any single net surrender of 90% or more of the Contract Value. |
After the Annuitization Date, surrenders other than regularly scheduled annuity payments are not permitted.
Contract rights are personal to the Contract Owner and may not be assigned without Nationwide's written consent. Nationwide reserves the right to refuse to recognize assignments that alter the nature of the risks that Nationwide assumed when it originally issued the contract.
A Non-Qualified Contract Owner may assign some or all rights under the contract. An assignment must occur before annuitization while the Annuitant is alive. Once proper notice of assignment is recorded by Nationwide's home office, the assignment will become effective.
Investment-Only Contracts, IRAs, Roth IRAs, SEP IRAs, and Simple IRAs may not be assigned, pledged or otherwise transferred except where allowed by law.
Nationwide is not responsible for the validity or tax consequences of any assignment. Nationwide is not liable for any payment or settlement made before the assignment is recorded. Assignments will not be recorded until Nationwide
receives sufficient direction from the Contract Owner and the assignee regarding the proper allocation of contract rights.
Amounts pledged or assigned will be treated as distributions and will be included in gross income to the extent that the cash value exceeds the investment in the contract for the taxable year in which it was pledged or assigned. Amounts assigned may be subject to a tax penalty equal to 10% of the amount included in gross income.
Assignment of the entire Contract Value may cause the portion of the Contract Value exceeding the total investment in the contract and previously taxed amounts to be included in gross income for federal income tax purposes each year that the assignment is in effect.
Asset Rebalancing
Asset Rebalancing is the automatic reallocation of Contract Values to the Sub-Accounts on a predetermined percentage basis. Asset Rebalancing is not available for assets held in the Fixed Account. Requests for Asset Rebalancing must be on a Nationwide form. Once Asset Rebalancing is elected, it will only be terminated upon specific instruction from the Contract Owner; manual transfers will not automatically terminate the program.
Asset Rebalancing occurs every three months or on another frequency if permitted by Nationwide. If the last day of the three-month period falls on a Saturday, Sunday, recognized holiday, or any other day when the New York Stock Exchange is closed, Asset Rebalancing will occur on the next business day. Each Asset Rebalancing reallocation is considered a transfer event.
Contract Owners should consult a financial adviser to discuss the use of Asset Rebalancing.
Nationwide reserves the right to stop establishing new Asset Rebalancing programs.
Dollar Cost Averaging
Dollar Cost Averaging is a long-term transfer program that allows you to make regular, level investments over time. It involves the automatic transfer of a specified amount from the Fixed Account and/or certain Sub-Accounts into other Sub-Accounts. Nationwide does not guarantee that this program will result in profit or protect Contract Owners from loss.
Contract Owners direct Nationwide to automatically transfer specified amounts from the Fixed Account and the:
Fidelity Variable Insurance Products Fund
| | · | VIP Investment Grade Bond Portfolio: Service Class 2 |
Neuberger Berman Advisers Management Trust
| | · | AMT Short Duration Bond Portfolio: I Class |
Nationwide Variable Insurance Trust
| | · | NVIT Government Bond Fund: Class I |
| | · | NVIT Investor Destinations Funds: Class II |
| | Ø | NVIT Investor Destinations Conservative Fund: Class II |
| | · | NVIT Money Market Fund: Class I |
to any other underlying mutual fund(s). Dollar Cost Averaging transfers may not be directed to the Fixed Account.
Transfers occur monthly or on another frequency if permitted by Nationwide. Dollar Cost Averaging transfers are not considered transfer events. Nationwide will process transfers until either the value in the originating investment option is exhausted, or the Contract Owner instructs Nationwide in writing to stop the transfers.
Transfers from the Fixed Account must be equal to or less than 1/30th of the Fixed Account value at the time the program is requested. Contract Owners that wish to utilize Dollar Cost Averaging from the Fixed Account should first inquire whether any Enhanced Fixed Account Dollar Cost Averaging programs are available.
Nationwide reserves the right to stop establishing new Dollar Cost Averaging programs.
Nationwide is required by state law to reserve the right to postpone transfer of assets from the Fixed Account for a period of up to 6 months from the date of the transfer request.
Nationwide may, periodically, offer Enhanced Fixed Account Dollar Cost Averaging programs. Only new purchase payments to the contract are eligible for Enhanced Fixed Account Dollar Cost Averaging.
Enhanced Fixed Account Dollar Cost Averaging involves the automatic transfer of a specific amount from the Fixed Account into the Sub-Accounts. Enhanced Fixed Account Dollar Cost Averaging transfers may not be directed to the Fixed Account. Amounts allocated to the Fixed Account as part of an Enhanced Fixed Account Dollar Cost Averaging program earn a higher rate of interest than other assets allocated to the Fixed Account. Each enhanced interest rate is guaranteed for as long as the corresponding program is in effect.
Transfers occur monthly or on another frequency if permitted by Nationwide. Enhanced Fixed Account Dollar Cost Averaging transfers are not considered transfer events. Nationwide will process transfers until either amounts allocated to the Fixed Account as part of an Enhanced Fixed Account Dollar Cost Averaging program are exhausted or the Contract Owner instructs Nationwide in writing to stop the transfers. For Enhanced Fixed Account Dollar Cost Averaging, when a Contract Owner instructs Nationwide to stop the transfers, Nationwide will automatically transfer any amount remaining in the Fixed Account as part of the program to the money market Sub-Account.
Nationwide reserves the right to stop establishing new Enhanced Fixed Account Dollar Cost Averaging programs.
Nationwide is required by state law to reserve the right to postpone transfer of assets from the Fixed Account, including
transfers as part of an Enhanced Fixed Account Dollar Cost Averaging program, for a period of up to 6 months from the date of the transfer request.
Dollar Cost Averaging for Living Benefits
Nationwide may periodically offer Dollar Cost Averaging programs with the Lifetime Income Option s referred to as “Dollar Cost Averaging for Living Benefits.” Dollar Cost Averaging for Living Benefits involves the automatic transfer of a specific amount from the Fixed Account into another Sub-Account(s). With this service, the Contract Owner benefits from the ability to invest in the Sub-Account over a period of time, thereby smoothing out the effects of market volatility.
Only new purchase payments to the contract are eligible for Dollar Cost Averaging for Living Benefits. Nationwide reserves the right to require a minimum balance to establish this program. Additionally, only those Sub-Accounts available for the elected Lifetime Income Option are available for use in Dollar Cost Averaging for Living Benefits -- transfers may not be directed to the Fixed Account or to any investment option that is unavailable with the respective Lifetime Income O ption. Please refer to the “ Income Benefit Investment Options ” chart earlier in this prospectus for the investment options available for each Lifetime Income Option .
Once a Dollar Cost Averaging for Living Benefits program has begun, no transfers among or between Sub-Accounts is permitted until the Dollar Cost Averaging for Living Benefits program is completed or terminated. The interest rate credited on amounts applied to the Fixed Account as part of Dollar Cost Averaging for Living Benefits programs may vary depending on the Lifetime Income Option elected.
Fixed Account Interest Out Dollar Cost Averaging
Nationwide may, periodically, offer Fixed Account Interest Out Dollar Cost Averaging programs. Fixed Account Interest Out Dollar Cost Averaging involves the automatic transfer of the interest earned on Fixed Account allocations into any other Sub-Accounts. Fixed Account Interest Out Dollar Cost Averaging transfers may not be directed to the Fixed Account.
Transfers occur monthly or on another frequency if permitted by Nationwide. Fixed Account Interest Out Dollar Cost Averaging transfers are not considered transfer events. Nationwide will continue to process transfers until the Contract Owner instructs Nationwide in writing to stop the transfers.
Nationwide reserves the right to stop establishing new Fixed Account Interest Out Dollar Cost Averaging programs.
Nationwide is required by state law to reserve the right to postpone transfer of assets from the Fixed Account for a period of up to 6 months from the date of the transfer request.
Systematic Withdrawals allow Contract Owners to receive a specified amount (of at least $100) on a monthly, quarterly, semi-annual, or annual basis. Requests for Systematic Withdrawals and requests to discontinue Systematic Withdrawals must be in writing.
The withdrawals will be taken from the Sub-Accounts and the Fixed Account proportionately unless Nationwide is instructed otherwise.
Nationwide will withhold federal income taxes from Systematic Withdrawals unless otherwise instructed by the Contract Owner. The Internal Revenue Service may impose a 10% penalty tax if the Contract Owner is under age 59½ unless the Contract Owner has made an irrevocable election of distributions of substantially equal payments.
A CDSC may apply to amounts taken through systematic withdrawals. If the Contract Owner takes Systematic Withdrawals, the maximum amount that can be withdrawn annually without a CDSC is the greatest of:
| (1) | 10% of the net difference of purchase payments that are subject to CDSC minus purchase payments surrendered that were subject to CDSC; |
| (2) | an amount withdrawn to meet minimum distribution requirements under the Internal Revenue Code; or |
| (3) | a percentage of the Contract Value based on the Contract Owner's age, as shown in the table below: |
Contract Owner's Age | Percentage of Contract Value |
| Under age 59½ | 5% |
| 59½ through age 61 | 7% |
| 62 through age 64 | 8% |
| 65 through age 74 | 10% |
| 75 and over | 13% |
The Contract Owner's age is determined as of the date the request for Systematic Withdrawals is recorded by Nationwide's home office. For joint owners, the older joint owner's age will be used.
If total amounts withdrawn in any Contract Year exceed the CDSC-free amount described above, those amounts will only be eligible for the CDSC-free withdrawal privilege described in the CDSC provision. The total amount of CDSC for that Contract Year will be determined in accordance with that provision.
The CDSC-free withdrawal privilege for Systematic Withdrawals is non-cumulative. Free amounts not taken during any Contract Year cannot be taken as free amounts in a subsequent Contract Year.
Nationwide reserves the right to stop establishing new Systematic Withdrawal programs. Systematic Withdrawals are not available before the end of the ten-day free-look period.
Custom Portfolio Asset Rebalancing Service
For Contract Owners that have elected a Lifetime Income Option, Nationwide makes available the Custom Portfolio Asset Rebalancing Service (“Custom Portfolio”) at no extra charge. Custom Portfolio is an asset allocation program that Contract Owners can use to build their own customized portfolio of investments, subject to certain limitations. Asset allocation is the process of investing in different asset classes
(such as equity funds, fixed income funds, and money market funds) and may reduce the risk and volatility of investing. There are no guarantees that Custom Portfolio will result in a profit or protect against loss in a declining market.
Each model is comprised of different percentages of standardized asset categories designed to meet different investment goals, risk tolerances, and investment time horizons. The Contract Owner selects their model, then selects the specific underlying mutual funds (also classified according to standardized asset categories) and investment percentages within the model’s parameters, enabling the Contract Owner to create their own unique “Custom Portfolio.” Only one “Custom Portfolio” may be created and in effect at a time and the entire Variable Account Contract Value must participate in the model.
Note: Contract Owners should consult with a qualified investment advisor regarding the use of Custom Portfolio and to determine which model is appropriate for them.
Once the Contract Owner creates their “Custom Portfolio,” that Contract Owner’s model is static. This means that the percentage allocated to each underlying mutual fund will not change over time, except for quarterly rebalancing, as described below. Note: allocation percentages within a particular model may subsequently change, but any such changes will not apply to existing model participants; the changes will only apply to participants that elect the model after the change implementation date.
To participate in Custom Portfolio, eligible Contract Owners must submit the proper administrative form to Nationwide’s home office. While Custom Portfolio is elected, Contract Owners cannot participate in Asset Rebalancing.
Asset Allocation Models available with Custom Portfolio
The following models are available with Custom Portfolio:
| Conservative: | Designed for Contract Owners that are willing to accept very little risk but still want to see a small amount of growth. |
| Moderately Conservative: | Designed for Contract Owners that are willing to accept some market volatility in exchange for greater potential income and growth. |
| Balanced: | Designed for Contract Owners that are willing to accept some market volatility in exchange for potential long-term returns. |
| Moderate: | Designed for Contract Owners that are willing to accept some short-term price fluctuations in exchange for potential long-term returns. |
| Capital Appreciation: | Designed for Contract Owners that are willing to accept more short-term price fluctuations in exchange for potential long-term returns. |
The specific underlying mutual funds available to comprise the equity and fixed income components of the models are contained in the election form, which is provided to Contract Owners at the time Custom Portfolio is elected. At that time, Contract Owners elect their model and the specific underlying mutual funds and percentages that will comprise their “Custom Portfolio.”
Quarterly Rebalancing
At the end of each calendar quarter, Nationwide will reallocate the Variable Account Contract Value so that the percentages allocated to each underlying mutual fund match the most recently provided percentages provided by the Contract Owner. If the end of a calendar quarter is a Saturday, Sunday, recognized holiday, or any other day that the New York Stock Exchange is closed, the quarterly rebalancing will occur on the next business day. Rebalancing will be priced using the unit value determined on the last Valuation Date of the calendar quarter. Each quarterly rebalancing is considered a transfer event. However, quarterly rebalancing transfers within your Custom Portfolio are not subject to Short-Term Trading Fees.
Changing Models or Underlying Mutual Fund Allocations
Contract Owners who have elected a Lifetime Income Option may change the underlying mutual fund allocations within their elected model, percentages within their elected model and/or may change models and create a new “Custom Portfolio” within that new model. To implement one of these changes, Contract Owners must submit new allocation instructions to Nationwide’s home office in writing on Nationwide’s administrative form. Any model and percentage changes will be subject to Short-Term Trading Fees and will count as a transfer event, as described in the “Transfer Restrictions” provision.
Nationwide reserves the right to limit the number of model changes a Contract Owner can make each year.
Terminating Participation in Custom Portfolio
Contract Owners can terminate participation in Custom Portfolio by submitting a written request to Nationwide’s home office. In order for the termination to be effective, the termination request must contain valid reallocation instructions that are in accordance with the terms and conditions of the elected Lifetime Income Option. Termination is effective on the date the termination request is received at Nationwide’s home office in good order.
Death of Contract Owner
If a Contract Owner (including a joint owner) who is not the Annuitant dies before the Annuitization Date, no death benefit is payable and the surviving joint owner becomes the Contract Owner.
If no joint owner is named, the contingent owner becomes the Contract Owner.
If no contingent owner is named, the beneficiary becomes the Contract Owner.
If no beneficiary survives the Contract Owner, the last surviving Contract Owner's estate becomes the Contract Owner.
Distributions will be made pursuant to the “Required Distributions for Non-Qualified Contracts” in “Appendix C: Contract Types and Tax Information.”
Death of Annuitant
If the Annuitant who is not a Contract Owner dies before the Annuitization Date, the contingent annuitant becomes the Annuitant and no death benefit is payable. If no contingent annuitant is named, a death benefit is payable to the beneficiary. Multiple beneficiaries will share the death benefit equally unless otherwise specified.
If no beneficiaries survive the Annuitant, the contingent beneficiary receives the death benefit. Multiple contingent beneficiaries will share the death benefit equally unless otherwise specified.
If no beneficiaries or contingent beneficiaries survive the Annuitant, the Contract Owner or the last surviving Contract Owner’s estate will receive the death benefit.
If the Contract Owner is a Charitable Remainder Trust and the Annuitant dies before the Annuitization Date, the death benefit will accrue to the Charitable Remainder Trust. Any designation in conflict with the Charitable Remainder Trust's right to the death benefit will be void.
If the Annuitant dies after the Annuitization Date, any benefit that may be payable will be paid according to the selected annuity payment option.
Death of Contract Owner/Annuitant
If a Contract Owner (including a joint owner) who is also the Annuitant dies before the Annuitization Date, a death benefit is payable to the surviving joint owner.
If there is no surviving joint owner, the death benefit is payable to the beneficiary. Multiple beneficiaries will share the death benefit equally unless otherwise specified.
If no beneficiaries survive the Contract Owner/Annuitant, the contingent beneficiary receives the death benefit. Multiple contingent beneficiaries will share the death benefit equally unless otherwise specified.
If no contingent beneficiaries survive the Contract Owner/Annuitant, the last surviving Contract Owner's estate will receive the death benefit.
If the Contract Owner/Annuitant dies after the Annuitization Date, any benefit that may be payable will be paid according to the selected annuity payment option.
Death Benefit Payment
The recipient of the death benefit may elect to receive the death benefit:
| (2) | as an annuity (please see the “Annuity Payment Options” section for additional information); or |
| (3) | in any other manner permitted by law and approved by Nationwide. |
Nationwide will pay (or will begin to pay) the death benefit upon receiving proof of death and the instructions as to the payment of the death benefit. If the recipient of the death benefit does not elect the form in which to receive the death benefit payment, Nationwide will pay the death benefit in a lump sum. Contract Value will continue to be allocated according to the most recent allocation instructions until the death benefit is paid.
If the contract has multiple beneficiaries entitled to receive a portion of the death benefit, the Contract Value will continue to be allocated according to the most recent allocation instructions until the first beneficiary provides Nationwide with instructions for payment of death benefit proceeds. After the first beneficiary provides these instructions, the Contract Value for all beneficiaries will be allocated to the available money market Sub-Account until instructions are received from the beneficiary(ies) to allocate their Contract Value in another manner.
An applicant may elect either the standard death benefit or an available death benefit option that is offered under the contract for an additional charge. If no election is made at the time of application, the death benefit will be the standard death benefit.
The value of each component of the applicable death benefit calculation will be determined as of the date of the Annuitant's death, except for the Contract Value component, which will be determined as of the date Nationwide receives:
| (1) | proper proof of the Annuitant’s death; |
| (2) | an election specifying the distribution method; and |
| (3) | any state required form(s). |
Nationwide reserves the right to refuse purchase payments in excess of $1,000,000 (see “Synopsis of the Contracts”). If you do not submit purchase payments in excess of $1,000,000, or if Nationwide has refused to accept purchase payments in excess of $1,000,000, the references in this provision to purchase payments in excess of $1,000,000 will not apply to your contract.
Standard Death Benefit
If the Annuitant dies before the Annuitization Date, the standard death benefit will be the greater of:
| (1) | the Contract Value as of the date that Nationwide receives all the information necessary to pay the death benefit; or |
| (2) | the total of all purchase payments, less an adjustment for amounts surrendered. |
The adjustment for amounts surrendered will reduce item (2) above in the same proportion that the Contract Value was reduced on the date(s) of the partial surrender(s).
The standard death benefit also includes the Spousal Protection Feature, which allows a surviving spouse to continue the contract while receiving the economic benefit of the death benefit upon the death of the other spouse
For an additional charge at an annualized rate of 0.20% of the Daily Net Assets of the Variable Account, an applicant can elect the One-Year Enhanced Death Benefit Option at the time of application. The One-Year Enhanced Death Benefit Option is only available for contracts with Annuitants age 80 or younger at the time of application.
If the Annuitant dies prior to the Annuitization Date and the total of all purchase payments made to the contract is less than or equal to $3,000,000, the death benefit will be the greatest of:
| (1) | the Contract Value as of the date that Nationwide receives all the information necessary to pay the death benefit; |
| (2) | the total of all purchase payments, less an adjustment for amounts surrendered; or |
| (3) | the highest Contract Value on any Contract Anniversary prior to the Annuitant's 86th birthday, less an adjustment for amounts subsequently surrendered, plus purchase payments received after that Contract Anniversary. |
The adjustment for amounts surrendered will reduce items (2) and (3) above in the same proportion that the Contract Value was reduced on the date(s) of the partial surrender(s).
If Nationwide does not receive all information necessary to pay the death benefit within one year of the Annuitant's death, the death benefit will be the greater of (1) or (2) above.
If the Annuitant dies prior to the Annuitization Date and the total of all purchase payments made to the contract is greater than $3,000,000, the death benefit will be determined using the following formula:
(A x F) + B(1 - F), where
| | (1) | the Contract Value as of the date that Nationwide receives all the information necessary to pay the death benefit; |
| | (2) | the total of all purchase payments, less an adjustment for amounts surrendered; or |
| | (3) | the highest Contract Value on any Contract Anniversary prior to the Annuitant's 86th birthday, less an adjustment for amounts subsequently surrendered, plus purchase payments received after that Contract Anniversary. |
The adjustment for amounts surrendered will reduce items (2) and (3) above in the same proportion that the Contract Value was reduced on the date(s) of the partial surrender(s).
If Nationwide does not receive all information necessary to pay the death benefit within one year of the Annuitant's death, the calculation for A above will be the greater of (1) or (2) above.
| | B = the Contract Value as of the date that Nationwide receives all the information necessary to pay the death benefit; and |
| | F = the ratio of $3,000,000 to the total of all purchase payments made to the contract. |
The practical effect of this formula is that the beneficiary recovers a lesser percentage of purchase payments in excess of $3,000,000 than for purchase payments up to $3,000,000. In no event will the beneficiary receive less than the Contract Value.
The One-Year Enhanced Death Benefit Option also includes the Spousal Protection Feature, which allows a surviving spouse to continue the contract while receiving the economic benefit of the death benefit upon the death of the other spouse.
For an additional charge at an annualized rate of 0.35% of the Daily Net Assets of the Variable Account, an applicant can elect the One-Month Enhanced Death Benefit Option at the time of application. The One-Month Enhanced Death Benefit Option is only available for contracts with Annuitants age 75 or younger at the time of application.
If the Annuitant dies prior to the Annuitization Date and the total of all purchase payments made to the contract is less than or equal to $3,000,000, the death benefit will be the greatest of:
| (1) | the Contract Value as of the date that Nationwide receives all the information necessary to pay the death benefit; |
| (2) | the total of all purchase payments, less an adjustment for amounts surrendered; or |
| (3) | the highest Contract Value on any Monthly Contract Anniversary prior to the Annuitant’s 81st birthday, less an adjustment for amounts subsequently surrendered, plus purchase payments received after that Monthly Contract Anniversary. |
The adjustment for amounts surrendered will reduce items (2) and (3) above in the same proportion that the Contract Value was reduced on the date(s) of the partial surrender(s).
If Nationwide does not receive all information necessary to pay the death benefit within one year of the Annuitant’s death, the death benefit will be the greater of (1) or (2) above.
If the Annuitant dies prior to the Annuitization Date and the total of all purchase payments made to the contract is greater than $3,000,000, the death benefit will be determined using the following formula:
(A x F) + B(1 - F), where
| | (1) | the Contract Value as of the date that Nationwide receives all the information necessary to pay the death benefit; |
| | (2) | the total of all purchase payments, less an adjustment for amounts surrendered; or |
| | (3) | the highest Contract Value on any Monthly Contract Anniversary prior to the Annuitant’s 81st birthday, less an adjustment for amounts subsequently surrendered, plus purchase payments received after that Monthly Contract Anniversary. |
The adjustment for amounts surrendered will reduce items (2) and (3) above in the same proportion that the Contract Value was reduced on the date(s) of the partial surrender(s).
If Nationwide does not receive all information necessary to pay the death benefit within one year of the Annuitant’s death, the calculation for A above will be the greater of (1) or (2) above.
| | B = the Contract Value as of the date that Nationwide receives all the information necessary to pay the death benefit; and |
| | F = the ratio of $3,000,000 to the total of all purchase payments made to the contract. |
The practical effect of this formula is that the beneficiary recovers a lesser percentage of purchase payments in excess of $3,000,000 than for purchase payments up to $3,000,000. In no event will the beneficiary receive less than the Contract Value.
The One-Month Enhanced Death Benefit Option also includes the Spousal Protection Feature, which allows a surviving spouse to continue the contract while receiving the economic benefit of the death benefit upon the death of the other spouse.
For an additional charge at an annualized rate of 0.45% of the Daily Net Assets of the Variable Account, an applicant can elect the Combination Enhanced Death Benefit Option at the time of application. The Combination Enhanced Death Benefit Option is only available for contracts with Annuitants age 75 or younger at the time of application.
If the Annuitant dies prior to the Annuitization Date and the total of all purchase payments made to the contract is less than or equal to $3,000,000, the death benefit will be the greatest of:
| (1) | the Contract Value as of the date that Nationwide receives all the information necessary to pay the death benefit; |
| (2) | the total of all purchase payments, less an adjustment for amounts surrendered; |
| (3) | the highest Contract Value on any Contract Anniversary before the Annuitant's 81st birthday, less an adjustment for amounts subsequently surrendered, plus purchase payments received after that Contract Anniversary; or |
| (4) | the 5% interest anniversary value. |
The adjustment for amounts surrendered will reduce items (2) and (3) above in the same proportion that the Contract Value was reduced on the date(s) of the partial surrender(s).
If Nationwide does not receive all information necessary to pay the death benefit within one year of the Annuitant's death, the death benefit will be the greater of (1) or (2) above.
The 5% interest anniversary value is equal to purchase payments, accumulated at 5% annual compound interest until the last Contract Anniversary prior to the Annuitant's 81st birthday, proportionately adjusted for amounts surrendered. The adjustment for amounts surrendered will reduce the accumulated value as of the most recent Contract Anniversary prior to each partial surrender in the same proportion that the Contract Value was reduced on the date of the partial surrender. Such total accumulated amount, after the surrender adjustment, shall not exceed 200% of purchase payments adjusted for amounts surrendered.
For example, assume Joe purchases a contract in 2008 for $100,000. In the year 2021, his contract stands as follows:
| Total purchase payments: | $100,000 |
| Contract Value: | $120,000 |
| Highest anniversary Contract Value: | $125,000 |
| 5% interest anniversary value: | $197,933 |
If Joe dies in 2021, his death benefit would be $197,933.
However if he dies the next year, his death benefit would be $200,000 instead of $207,829 (calculation: 105% X $197,933) since the 5% interest anniversary value is limited to 200% of his initial purchase payment of $100,000.
Following is an example of how a surrender would impact the death benefit calculation. In the year 2015, his contract stands as follows:
| Total purchase payments: | $100,000 |
| Contract Value: | $120,000 |
| Highest anniversary Contract Value: | $120,000 |
| 5% interest anniversary value: | $155,133 |
In 2016, Joe takes a partial surrender of $60,000. After his surrender, the highest Contract Anniversary value is $60,000 (calculation: $120,000 -– $60,000) and the 5% interest anniversary value is $77,566 (calculation: ($60,000/$120,000) x $155,133). After the date of the withdrawal, the 5% interest anniversary value is limited to $80,000 (calculation: 200% ($100,000 - $60,000).
If, after the first Contract Anniversary, the Fixed Account allocation becomes greater than 30% of the Contract Value solely due to the application of additional purchase payments, additional surrenders, or transfers among investment options, then for purposes of calculating the 5% interest anniversary value, 0% will accrue for that year. If, however, the 30% threshold is reached due to a combination of market performance and Contract Owner actions, and would not have been reached but for the market performance, interest will continue to accrue at 5%.
If the Annuitant dies prior to the Annuitization Date and the total of all purchase payments made to the contract is greater than $3,000,000, the death benefit will be determined using the following formula:
(A x F) + B(1 - F), where
| | (1) | the Contract Value as of the date that Nationwide receives all the information necessary to pay the death benefit; |
| | (2) | the total of all purchase payments, less an adjustment for amounts surrendered; |
| | (3) | the highest Contract Value on any Contract Anniversary before the Annuitant's 81st birthday, less an adjustment for amounts subsequently surrendered, plus purchase payments received after that Contract Anniversary; or |
| | (4) | the 5% interest anniversary value. |
The adjustment for amounts surrendered will reduce items (2) and (3) above in the same proportion that the Contract Value was reduced on the date(s) of the partial surrender(s).
If Nationwide does not receive all information necessary to pay the death benefit within one year of the Annuitant's death, the calculation for A above will be the greater of (1) or (2) above.
| | B = the Contract Value as of the date that Nationwide receives all the information necessary to pay the death benefit; and |
| | F = the ratio of $3,000,000 to the total of all purchase payments made to the contract. |
The practical effect of this formula is that the beneficiary recovers a lesser percentage of purchase payments in excess of $3,000,000 that for purchase payments up to $3,000,000. In no event will the beneficiary receive less than the Contract Value.
Spousal Protection Feature
The standard death benefit and all of the death benefit options include a Spousal Protection Feature at no additional charge. The Spousal Protection Feature is not available for contracts issued as Charitable Remainder Trusts. The Spousal Protection Feature allows a surviving spouse to continue the contract while receiving the economic benefit of the death benefit upon the death of the other spouse, provided the conditions described below are satisfied:
| (1) | One or both spouses (or a revocable trust of which either or both of the spouses is/are grantor(s)) must be named as the Contract Owner. For contracts issued as IRAs and Roth IRAs, only the person for whom the IRA or Roth IRA was established may be named as the Contract Owner; |
| (2) | The spouses must be Co-Annuitants; |
| (3) | (a) Both spouses must be age 85 or younger at the time the contract is issued for the standard death benefit; |
| | (b) Both spouses must be age 80 or younger at the time the contract is issued for the One-Year Enhanced Death Benefit Option; |
| | (c) Both spouses must be age 75 or younger at the time the contract is issued for the Combination Enhanced Death Benefit Option or the One-Month Enhanced Death Benefit Option; |
| (4) | Both spouses must be named as beneficiaries; |
| (5) | No person other than the spouse may be named as Contract Owner, Annuitant or primary beneficiary; |
| (6) | If both spouses are alive upon annuitization, the Contract Owner must specify which spouse is the Annuitant upon whose continuation of life any annuity payments involving life contingencies depend (for IRA and Roth IRA contracts, this person must be the Contract Owner); and |
| (7) | If the Contract Owner requests to add a Co-Annuitant after contract issuance, the date of marriage must be after the contract issue date and Nationwide will require the Contract Owner to provide a copy of the marriage certificate. The new Co-Annuitant must meet the age requirement of the respective death benefit option on the date the Co-Annuitant is added. |
If a Co-Annuitant dies before the Annuitization Date, the surviving spouse may continue the contract as its sole Contract Owner. Additionally, if the death benefit value is higher than the Contract Value at the time of the first Co-Annuitant’s death, Nationwide will adjust the Contract Value to equal the death benefit value. The surviving Co-Annuitant may then name a new beneficiary but may not name another Co-Annuitant.
If the marriage terminates due to the death of a spouse, divorce, dissolution, or annulment, the surviving spouse may not elect the Spousal Protection Option to cover a subsequent spouse.
Additional purchase payments made to the contract after receiving the benefit of the Spousal Protection Feature are subject to the CDSC provisions of the contract.
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.
Annuity Commencement Date and Lifetime Income Option
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 negative tax consequences. See “Required Distributions for IRAs, SEP IRAs, Simple IRAs and Roth IRAs” in “Appendix C: Contract Types and Tax Information,” and the “ 10% Lifetime Income Option” and the “5% Lifetime Income Option” provisions in this prospectus. Consult a qualified tax advisor.
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. |
Any allocations in the Fixed Account that are to be annuitized as a variable payment annuity must be moved to the Variable Account prior to the Annuitization Date. There are no restrictions on Fixed Account transfers made in anticipation of annuitization.
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 those underlying mutual funds shown in “Appendix A : Underlying Mutual Funds .” The Static A sset A llocation Model is not available after annuitization.
First Variable Annuity Payment
The following factors determine the amount of the first variable annuity payment:
| · | the portion of purchase payments allocated to provide variable annuity payments; |
| · | the Variable Account value on the Annuitization Date; |
| · | the adjusted age and sex of the Annuitant (and joint annuitant, if any) in accordance with the contract; |
| · | the annuity payment option elected; |
| · | the frequency of annuity payments; |
| · | the assumed investment return (the net investment return required to maintain level variable annuity payments); |
| · | the deduction of applicable premium taxes; and |
| · | the date the contract was issued. |
Subsequent Variable Annuity Payments
Variable annuity payments after the first will vary with the performance of the underlying mutual funds chosen by the Contract Owner after the investment performance is adjusted by the assumed investment return factor.
The dollar amount of each subsequent variable annuity payment is determined by taking the portion of the first annuity payment funded by a particular Sub-Account divided by the Annuity Unit value for that Sub-Account as of the Annuitization Date. This establishes the number of Annuity Units provided by each Sub-Account for each variable annuity payment after the first.
The number of Annuity Units comprising each variable annuity payment, on a Sub-Account basis, will remain constant, unless the Contract Owner transfers value from one
underlying mutual fund to another. After annuitization, transfers among Sub-Accounts may only be made on the anniversary of the Annuitization Date.
The number of Annuity Units for each Sub-Account is multiplied by the Annuity Unit value for that Sub-Account for the Valuation Period for which the payment is due. The sum of these results for all the Sub-Accounts in which the Contract Owner invests establishes the dollar amount of the variable annuity payment.
Subsequent variable annuity payments may be more or less than the previous variable annuity payment, depending on whether the net investment performance of the elected underlying mutual funds is greater or lesser than the assumed investment return.
Assumed Investment Return
An assumed investment return is the net investment return required to maintain level variable annuity payments. Nationwide uses a 3.5% assumed investment return factor. Therefore, if the net investment performance of each Sub-Account in which the Contract Owner invests exactly equals 3.5% for every payment period, then each payment will be the same amount. To the extent that investment performance is not equal to 3.5% for given payment periods, the amount of the payments in those periods will not be the same. Payments will increase from one payment date to the next if the annualized net rate of return is greater than 3.5% during that time. Conversely, payments will decrease from one payment to the next if the annualized net rate of return is less than 3.5% during that time.
Nationwide uses the assumed investment rate of return to determine the amount of the first variable annuity payment.
Value of an Annuity Unit
Annuity Unit values for Sub-Accounts are determined by:
| (1) | multiplying the Annuity Unit value for each Sub-Account for the immediately preceding Valuation Period by the net investment factor for the Sub-Account for the subsequent Valuation Period (see “Determining the Contract Value – Determining Variable Account Value – Valuing an Accumulation Unit”); and then |
| (2) | multiplying the result from (1) by a factor to neutralize the assumed investment return factor. |
Annuity payments are based on the annuity payment option elected.
If the net amount to be annuitized is less than $2,000, Nationwide reserves the right to pay this amount in a lump sum instead of periodic annuity payments.
Nationwide reserves the right to change the frequency of payments if the amount of any payment becomes less than $100. The payment frequency will be changed to an interval that will result in payments of at least $100.
Annuity payments will generally be sent within 3 days after each annuity payment date and received by the Annuitant within 7 to 10 days there after.
The Annuitant must elect an annuity payment option before the Annuitization Date. If the Annuitant does not elect an annuity payment option, a variable payment life annuity with a guarantee period of 240 months will be assumed as the automatic form of payment upon annuitization. Once elected or assumed, the annuity payment option may not be changed.
Not all of the annuity payment options may be available in all states. Additionally, the annuity payment options available may be limited based on the Annuitant's age (and the joint annuitant's age, if applicable) or requirements under the Internal Revenue Code.
Nationwide reserves the right to refuse purchase payments in excess of $1,000,000 (see “Synopsis of the Contracts”). If you do not submit purchase payments in excess of $1,000,000, or if Nationwide has refused to accept purchase payments in excess of $1,000,000, the references in this provision to purchase payments in excess of $1,000,000 will not apply to your contract. If you are permitted to submit purchase payments in excess of $1,000,000, additional restrictions apply, as follows.
Annuity Payment Options for Contracts with Total Purchase Payments Less Than or Equal to $2,000,000
If, at the Annuitization Date, the total of all purchase payments made to the contract is less than or equal to $2,000,000, the annuity payment options available are:
| · | Standard Joint and Survivor; and |
| · | Single Life with a 10 or 20 Year Term Certain. |
Each of the annuity payment options is discussed more thoroughly below.
Single Life
The Single Life annuity payment option provides for annuity payments to be paid during the lifetime of the Annuitant.
Payments will cease with the last payment before the Annuitant's death. For example, if the Annuitant dies before the second annuity payment date, the Annuitant will receive only one payment. The Annuitant will only receive two annuity payments if he or she dies before the third payment date, and so on. No death benefit will be paid.
No withdrawals other than the scheduled annuity payments are permitted.
Standard Joint and Survivor
The Standard Joint and Survivor annuity payment option provides for annuity payments to continue during the joint lifetimes of the Annuitant and joint annuitant. After the death of either the Annuitant or joint annuitant, payments will continue for the life of the survivor.
Payments will cease with the last payment due prior to the death of the last survivor of the Annuitant and joint annuitant. As is the case of the Single Life annuity payment option, there is no guaranteed number of payments. Therefore, it is possible that if the Annuitant dies before the second annuity payment date, the Annuitant will receive only one annuity payment. No death benefit will be paid.
No withdrawals other than the scheduled annuity payments are permitted.
Single Life with a 10 or 20 Year Term Certain
The Single Life with a 10 or 20 Year Term Certain annuity payment option provides that monthly annuity payments will be paid during the Annuitant's lifetime or for the term selected, whichever is longer. The term may be either 10 or 20 years.
If the Annuitant dies before the end of the 10 or 20 year term, payments will be paid to the beneficiary for the remainder of the term.
No withdrawals other than the scheduled annuity payments are permitted.
Any Other Option
Annuity payment options not set forth in this provision may be available. Any annuity payment option not set forth in this provision must be approved by Nationwide.
Annuity Payment Options for Contracts with Total Purchase Payments Greater Than $2,000,000
If, at the Annuitization Date, the total of all purchase payments made to the contract is greater than $2,000,000, Nationwide may limit the annuity payment option to the longer of:
| (1) | a Fixed Life Annuity with a 20 Year Term Certain; or |
| (2) | a Fixed Life Annuity with a Term Certain to Age 95. |
Annuitization of Amounts Greater than $5,000,000
Additionally, we may limit the amount that may be annuitized on a single life to $5,000,000. If the total amount to be annuitized is greater than $5,000,000, the Contract Owner must:
| (1) | reduce the amount to be annuitized to $5,000,000 or less by taking a partial surrender from the contract; |
| (2) | reduce the amount to be annuitized to $5,000,000 or less by exchanging the portion of the Contract Value in excess of $5,000,000 to another annuity contract; or |
| (3) | annuitize the portion of the Contract Value in excess of $5,000,000 under an annuity payment option with a term certain, if available. |
Nationwide will mail Contract Owners statements and reports. Therefore, Contract Owners should promptly notify Nationwide of any address change.
These mailings will contain:
| · | statements showing the contract's quarterly activity; |
| · | confirmation statements showing transactions that affect the contract's value. Confirmation statements will not be sent for recurring transactions (i.e., Dollar Cost Averaging or salary reduction programs). Instead, confirmation of recurring transactions will appear in the contract's quarterly statements; and |
| · | semi-annual and annual reports of allocated underlying mutual funds. |
Contract Owners can receive information from Nationwide faster and reduce the amount of mail they receive by signing up for Nationwide’s eDelivery program. Nationwide will notify Contract Owners by email when important documents (statements, prospectuses and other documents) are ready for a Contract Owner to view, print, or download from Nationwide’s secure server. To choose this option, go to:
www.nationwide.com/login.
Contract Owners should review statements and confirmations carefully. All errors or corrections must be reported to Nationwide immediately to assure proper crediting to the contract. Unless Nationwide is notified within 30 days of receipt of the statement, Nationwide will assume statements and confirmation statements are correct.
IMPORTANT NOTICE REGARDING DELIVERY OF SECURITY HOLDER DOCUMENTS
When multiple copies of the same disclosure document(s), such as prospectuses, supplements, proxy statements and semi-annual and annual reports are required to be mailed to multiple Contract Owners in the same household, Nationwide will mail only one copy of each document, unless notified otherwise by the Contract Owner(s). Household delivery will continue for the life of the contracts. Please call 1-866-223-0303 to resume regular delivery. Please allow 30 days for regular delivery to resume.
Nationwide Financial Services, Inc. (NFS, or collectively with its subsidiaries, the Company) was formed in November 1996. NFS is the holding company for Nationwide Life Insurance Company (NLIC), Nationwide Life and Annuity Insurance Company (NLAIC) and other companies that comprise the life insurance and retirement savings operations of the Nationwide group of companies (Nationwide). This group includes Nationwide Financial Network (NFN), which refers to Nationwide Life Insurance Company of America (NLICA), Nationwide Life and Annuity Company of America (NLACA) and subsidiaries, including the affiliated distribution network. NFS is incorporated in Delaware and maintains its principal executive offices in Columbus, Ohio.
The Company is a party to litigation and arbitration proceedings in the ordinary course of its business. It is often not possible to determine the ultimate outcome of the pending investigations and legal proceedings or to provide reasonable
ranges of potential losses with any degree of certainty. Some matters, including certain of those referred to below, are in very preliminary stages, and the Company does not have sufficient information to make an assessment of the plaintiffs’ claims for liability or damages. In some of the cases seeking to be certified as class actions, the court has not yet decided whether a class will be certified or (in the event of certification) the size of the class and class period. In many of the cases, the plaintiffs are seeking undefined amounts of damages or other relief, including punitive damages and equitable remedies, which are difficult to quantify and cannot be defined based on the information currently available. The Company does not believe, based on information currently known by management, that the outcomes of such pending investigations and legal proceedings are likely to have a material adverse effect on the Company’s consolidated financial position. However, given the large and/or indeterminate amounts sought in certain of these matters and inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could have a material adverse effect on the Company’s consolidated financial position or results of operations in a particular period.
In recent years, life insurance companies have been named as defendants in lawsuits, including class action lawsuits relating to life insurance and annuity pricing and sales practices. A number of these lawsuits have resulted in substantial jury awards or settlements against life insurers other than the Company.
The financial services industry, including mutual fund, variable annuity, retirement plan, life insurance and distribution companies, has also been the subject of increasing scrutiny by regulators, legislators and the media over the past few years. Numerous regulatory agencies, including the SEC, the Financial Industry Regulatory Authority and the New York State Attorney General, have commenced industry-wide investigations regarding late trading and market timing in connection with mutual funds and variable insurance contracts, and have commenced enforcement actions against some mutual fund and life insurance companies on those issues. The Company has been contacted by or received subpoenas from the SEC and the New York State Attorney General, who are investigating market timing in certain mutual funds offered in insurance products sponsored by the Company. The Company has cooperated with these investigations. Information requests from the New York State Attorney General and the SEC with respect to investigations into late trading and market timing were last responded to by the Company and its affiliates in December 2003 and June 2005, respectively, and no further information requests have been received with respect to these matters.
In addition, state and federal regulators and other governmental bodies have commenced investigations, proceedings or inquiries relating to compensation and bidding arrangements and possible anti-competitive activities between insurance producers and brokers and issuers of insurance products, and unsuitable sales and replacements by producers on behalf of the issuer. Also under investigation are compensation and revenue sharing arrangements between the issuers of variable insurance contracts and mutual funds or their affiliates, fee arrangements in retirement plans, the use of side agreements and finite reinsurance agreements, funding agreements issued to back medium-term note (MTN) programs, recordkeeping and retention compliance by broker/dealers, and supervision of former registered representatives. Related investigations, proceedings or inquiries may be commenced in the future. The Company and/or its affiliates have been contacted by or received subpoenas from state and federal regulatory agencies and other governmental bodies, state securities law regulators and state attorneys general for information relating to certain of these investigations, including those relating to compensation, revenue sharing and bidding arrangements, anti-competitive activities, unsuitable sales or replacement practices, fee arrangements in retirement plans, the use of side agreements and finite reinsurance agreements, and funding agreements backing the NLIC MTN program. The Company is cooperating with regulators in connection with these inquiries and will cooperate with Nationwide Mutual Insurance Company (NMIC) in responding to these inquiries to the extent that any inquiries encompass NMIC’s operations.
A promotional and marketing arrangement associated with the Company’s offering of a retirement plan product and related services in Alabama is under investigation by the Alabama Securities Commission. The Company currently expects that any damages paid to settle this matter will not have a material adverse impact on its consolidated financial position. It is not possible to predict what effect, if any, the outcome of this investigation may have on the Company’s retirement plan operations with respect to promotional and marketing arrangements in general in the future.
These proceedings are expected to continue in the future and could result in legal precedents and new industry-wide legislation, rules and regulations that could significantly affect the financial services industry, including mutual fund, retirement plan, life insurance and annuity companies. These proceedings also could affect the outcome of one or more of the Company’s litigation matters. There can be no assurance that any such litigation or regulatory actions will not have a material adverse effect on the Company’s consolidated financial position or results of operations in the future.
Nationwide Financial Services, Inc. (NFS), NMIC, Nationwide Mutual Fire Insurance Company (NMFIC), Nationwide Corporation and the directors of NFS have been named as defendants in several class actions brought by NFS shareholders. These lawsuits arose following the announcement of the joint offer by NMIC, NMFIC and Nationwide Corporation to acquire all of the outstanding shares of NFS’ Class A common stock. The defendants deny any and all allegations of wrongdoing and have defended these lawsuits vigorously. On August 6, 2008, NFS and NMIC, NMFIC and Nationwide Corporation announced that they had entered into a definitive agreement for the acquisition of all of
the outstanding shares of NFS’ Class A common stock for $52.25 per share by Nationwide Corporation, subject to the satisfaction of specific closing conditions. Simultaneously, the plaintiffs and defendants entered into a memorandum of understanding for the settlement of these lawsuits. The memorandum of understanding provides, among other things, for the settlement of the lawsuits and release of the defendants and, in exchange for the release and without admitting any wrongdoing, defendant NMIC shall acknowledge that the pending lawsuits were a factor, among others, that led it to offer an increased share price in the transaction. NMIC shall agree to pay plaintiffs’ attorneys’ fees and the costs of notifying the class members of the settlement. The memorandum of understanding is conditioned upon court approval of the proposed settlement. The court has scheduled the fairness hearing for approval of the proposed settlement for June 23, 2009. The lawsuits are pending in multiple jurisdictions and allege that the offer price was inadequate, that the process for reviewing the offer was procedurally unfair and that the defendants have breached their fiduciary duties to the holders of the NFS Class A common stock. NFS continues to defend these lawsuits vigorously.
On November 20, 2007, Nationwide Retirement Solutions, Inc. (NRS) and NLIC were named in a lawsuit filed in the Circuit Court of Jefferson County, Alabama entitled Ruth A. Gwin and Sandra H. Turner, and a class of similarly situated individuals v Nationwide Life Insurance Company, Nationwide Retirement Solutions, Inc., Alabama State Employees Association, PEBCO, Inc. and Fictitious Defendants A to Z. On December 2, 2008, the plaintiffs filed an amended complaint. The plaintiffs claim to represent a class of all participants in the Alabama State Employees Association (ASEA) Plan, excluding members of the Deferred Compensation Committee, members of the Board of Control, ASEA’s directors, officers and board members, and PEBCO’s directors, officers and board members. The class period is from November 20, 2001, to the date of trial. In the amended class action complaint, the plaintiffs allege breach of fiduciary duty, wantonness and breach of contract. The amended class action complaint seeks a declaratory judgment, an injunction, an appointment of an independent fiduciary to protect Plan participants, disgorgement of amounts paid, reformation of Plan documents, compensatory damages and punitive damages, plus interest, attorneys’ fees and costs and such other equitable and legal relief to which plaintiffs and class members may be entitled. Also, on December 2, 2008, the plaintiffs filed a motion for preliminary injunction seeking an order requiring periodic payments made by NRS and/or NLIC to ASEA or PEBCO to be held in a trust account for the benefit of Plan participants. On December 4, 2008, the Alabama State Personnel Board and the State of Alabama by, and through the State Personnel Board, filed a motion to intervene and a complaint in intervention. On December 16, 2008, the Companies filed their Answer. On February 4, 2009, the court provisionally agreed to add the State of Alabama, by and through the State Personnel Board as a party. NRS and NLIC continue to defend this case vigorously.
On July 11, 2007, NLIC was named in a lawsuit filed in the United States District Court for the Western District of Washington at Tacoma entitled Jerre Daniels-Hall and David Hamblen, Individually and on behalf of All Others Similarly Situated v. National Education Association, NEA Member Benefits Corporation, Nationwide Life Insurance Company, Security Benefit Life Insurance Company, Security Benefit Group, Inc., Security Distributors, Inc., et. al. The plaintiffs seek to represent a class of all current or former National Education Association (NEA) members who participated in the NEA Valuebuilder 403(b) program at any time between January 1, 1991 and the present (and their heirs and/or beneficiaries). The plaintiffs allege that the defendants violated the Employee Retirement Income Security Act of 1974, as amended (ERISA) by failing to prudently and loyally manage plan assets, by failing to provide complete and accurate information, by engaging in prohibited transactions, and by breaching their fiduciary duties when they failed to prevent other fiduciaries from breaching their fiduciary duties. The complaint seeks to have the defendants restore all losses to the plan, restoration of plan assets and profits to participants, disgorgement of endorsement fees, disgorgement of service fee payments, disgorgement of excessive fees charged to plan participants, other unspecified relief for restitution, declaratory and injunctive relief, and attorneys’ fees. On May 23, 2008, the Court granted the defendants’ motion to dismiss. On June 19, 2008, the plaintiffs filed a notice of appeal. On October 17, 2008, the plaintiffs filed their opening brief. On December 19, 2008 the defendants filed their briefs. On January 26, 2009, the plaintiffs filed Appellants’ Reply Brief. NLIC continues to defend this lawsuit vigorously.
On November 15, 2006, NFS, NLIC and NRS were named in a lawsuit filed in the United States District Court for the Southern District of Ohio entitled Kevin Beary, Sheriff of Orange County, Florida, In His Official Capacity, Individually and On Behalf of All Others Similarly Situated v. Nationwide Life Insurance Co., Nationwide Retirement Solutions, Inc. and Nationwide Financial Services, Inc. The plaintiff seeks to represent a class of all sponsors of 457(b) deferred compensation plans in the United States that had variable annuity contracts with the defendants at any time during the class period, or in the alternative, all sponsors of 457(b) deferred compensation plans in Florida that had variable annuity contracts with the defendants during the class period. The class period is from January 1, 1996 until the class notice is provided. The plaintiff alleges that the defendants breached their fiduciary duties by arranging for and retaining service payments from certain mutual funds. The complaint seeks an accounting, a declaratory judgment, a permanent injunction and disgorgement or restitution of the service fee payments allegedly received by the defendants, including interest. On January 25, 2007, NFS, NLIC and NRS filed a motion to dismiss. On September 17, 2007, the Court granted the motion to dismiss. On October 1, 2007, the plaintiff filed a motion to vacate judgment and for leave to file an amended complaint. On September 15, 2008, the Court denied the
plaintiffs’ motion to vacate judgment and for leave to file an amended complaint. On October 15, 2008, the plaintiffs filed a notice of appeal. NFS, NLIC and NRS continue to defend this lawsuit vigorously.
On February 11, 2005, NLIC was named in a class action lawsuit filed in Common Pleas Court, Franklin County, Ohio entitled Michael Carr v. Nationwide Life Insurance Company. The complaint seeks recovery for breach of contract, fraud by omission, violation of the Ohio Deceptive Trade Practices Act and unjust enrichment. The complaint also seeks unspecified compensatory damages, disgorgement of all amounts in excess of the guaranteed maximum premium and attorneys’ fees. On February 2, 2006, the court granted the plaintiff’s motion for class certification on the breach of contract and unjust enrichment claims. The court certified a class consisting of all residents of the United States and the Virgin Islands who, during the class period, paid premiums on a modal basis to NLIC for term life insurance policies issued by NLIC during the class period that provide for guaranteed maximum premiums, excluding certain specified products. Excluded from the class are NLIC; any parent, subsidiary or affiliate of NLIC; all employees, officers and directors of NLIC; and any justice, judge or magistrate judge of the State of Ohio who may hear the case. The class period is from February 10, 1990 through February 2, 2006, the date the class was certified. On January 26, 2007, the plaintiff filed a motion for summary judgment. On April 30, 2007, NLIC filed a motion for summary judgment. On February 4, 2008, the Court granted the class’s motion for summary judgment on the breach of contract claims arising from the term policies in 43 of 51 jurisdictions. The Court granted NLIC’s motion for summary judgment on the breach of contract claims on all decreasing term policies. On November 7, 2008, the case was settled.
On April 13, 2004, NLIC was named in a class action lawsuit filed in Circuit Court, Third Judicial Circuit, Madison County, Illinois, entitled Woodbury v. Nationwide Life Insurance Company. NLIC removed this case to the United States District Court for the Southern District of Illinois on June 1, 2004. On December 27, 2004, the case was transferred to the United States District Court for the District of Maryland and included in the multi-district proceeding entitled In Re Mutual Funds Investment Litigation. In response, on May 13, 2005, the plaintiff filed the first amended complaint purporting to represent, with certain exceptions, a class of all persons who held (through their ownership of an NLIC annuity or insurance product) units of any NLIC sub-account invested in mutual funds that included foreign securities in their portfolios and that experienced market timing or stale price trading activity. The first amended complaint purports to disclaim, with respect to market timing or stale price trading in NLIC’s annuities sub-accounts, any allegation based on NLIC’s untrue statement, failure to disclose any material fact, or usage of any manipulative or deceptive device or contrivance in connection with any class member’s purchases or sales of NLIC annuities or units in annuities sub-accounts. The plaintiff claims, in the alternative, that if NLIC is found with respect to market timing or stale price trading in its annuities sub-accounts, to have made any untrue statement, to have failed to disclose any material fact or to have used or employed any manipulative or deceptive device or contrivance, then the plaintiff purports to represent a class, with certain exceptions, of all persons who, prior to NLIC’s untrue statement, omission of material fact, use or employment of any manipulative or deceptive device or contrivance, held (through their ownership of an NLIC annuity or insurance product) units of any NLIC sub-account invested in mutual funds that included foreign securities in their portfolios and that experienced market timing activity. The first amended complaint alleges common law negligence and seeks to recover damages not to exceed $75,000 per plaintiff or class member, including all compensatory damages and costs. On June 1, 2006, the District Court granted NLIC’s motion to dismiss the plaintiff’s complaint. On January 30, 2009, the United States Court of Appeals for the Fourth Circuit affirmed that dismissal. NLIC continues to defend this lawsuit vigorously.
On August 15, 2001, NFS and NLIC were named in a lawsuit filed in the United States District Court for the District of Connecticut entitled Lou Haddock, as trustee of the Flyte Tool & Die, Incorporated Deferred Compensation Plan, et al v. Nationwide Financial Services, Inc. and Nationwide Life Insurance Company. Currently, the plaintiffs’ fifth amended complaint, filed March 21, 2006, purports to represent a class of qualified retirement plans under ERISA that purchased variable annuities from NLIC. The plaintiffs allege that they invested ERISA plan assets in their variable annuity contracts and that NLIC and NFS breached ERISA fiduciary duties by allegedly accepting service payments from certain mutual funds. The complaint seeks disgorgement of some or all of the payments allegedly received by NFS and NLIC, other unspecified relief for restitution, declaratory and injunctive relief, and attorneys’ fees. To date, the District Court has rejected the plaintiffs’ request for certification of the alleged class. On September 25, 2007, NFS’ and NLIC’s motion to dismiss the plaintiffs’ fifth amended complaint was denied. On October 12, 2007, NFS and NLIC filed their answer to the plaintiffs’ fifth amended complaint and amended counterclaims. On November 1, 2007, the plaintiffs filed a motion to dismiss NFS’ and NLIC’s amended counterclaims. On November 15, 2007, the plaintiffs filed a motion for class certification. On February 8, 2008, the Court denied the plaintiffs’ motion to dismiss the amended counterclaim, with the exception that it was tentatively granting the plaintiffs’ motion to dismiss with respect to NFS’ and NLIC’s claim that it could recover any “disgorgement remedy” from plan sponsors. On April 25, 2008, NFS and NLIC filed their opposition to the plaintiffs’ motion for class certification. On September 29, 2008, the plaintiffs filed their reply to NFS’ and NLIC’s opposition to class certification. The Court has set a hearing on the class certification motion for February 27, 2009. NFS and NLIC continue to defend this lawsuit vigorously.
The general distributor, NISC, is not engaged in any litigation of any material nature.
| Page |
General Information and History | 1 |
Services | 1 |
Purchase of Securities Being Offered | 2 |
Underwriters | 2 |
Advertising | 2 |
Annuity Payments | 2 |
Condensed Financial Information | 2 |
Financial Statements | 3 |
To learn more about this product, you should read the Statement of Additional Information (the “SAI”) dated the same date as this prospectus. For a free copy of the SAI and to request other information about this product please call our Service Center at 1-800-848-6331 (TDD 1-800-238-3035) or write to us at Nationwide Life Insurance Company, 5100 Rings Road, RR1-04-F4, Dublin, Ohio 43017-1522.
The SAI has been filed with the SEC and is incorporated by reference into this prospectus. The SEC maintains an Internet website (http://www.sec.gov) that contains the SAI and other information about us and the product. Information about us and the product (including the SAI) may also be reviewed and copied at the SEC's Public Reference Room in Washington, D.C., or may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, 100 F Street NE, Washington, D.C. 20549-8090. Additional information on the operation of the Public Reference Room may be obtained by calling the SEC at (202) 551-8090.
Investment Company Act of 1940 Registration File No. 811-03330
Securities Act of 1933 Registration File No. 333-160635
The underlying mutual funds listed below are designed primarily as investments for variable annuity contracts and variable life insurance policies issued by insurance companies. There is no guarantee that the investment objectives will be met.
Please refer to the prospectus for each underlying mutual fund for more detailed information.
AIM Variable Insurance Funds - AIM V.I. Capital Development Fund: Series II Shares
| Investment Adviser: | Invesco Aim Advisors, Inc. |
| Sub-adviser: | Invesco Trimark Investment Management, Inc.; Invesco Global Asset |
| | Management (N.A.), Inc.; Invesco Institutional (N.A.), Inc.; Invesco Senior |
| | Secured Management, Inc.; Invesco Hong Kong Limited; Invesco Asset |
| | Management Limited; Invesco Asset Management (Japan) Limited; Invesco |
| | Asset Management Deutschland, GmbH; and Invesco Australia Limited |
| Investment Objective: | Long-term capital growth. |
This underlying mutual fund or Sub-Account may invest in other funds. Therefore, a proportionate share of the fees and expenses of any acquired funds are indirectly borne by investors. As a result, investors may incur higher charges in this underlying mutual fund or Sub-Account than a fund that does not invest in other funds.
AllianceBernstein Variable Products Series Fund, Inc. - AllianceBernstein Small/Mid Cap Value Portfolio: Class B
| Investment Adviser: | AllianceBernstein L.P. |
| Investment Objective: | Long-term growth of capital. |
American Century Variable Portfolios II, Inc. - American Century VP Inflation Protection Fund: Class II
| Investment Adviser: | American Century Investment Management, Inc. |
| Investment Objective: | Long-term total return using a strategy that seeks to protect against U.S. |
| | inflation. |
American Century Variable Portfolios, Inc. - American Century VP Mid Cap Value Fund: Class II
| Investment Adviser: | American Century Investment Management, Inc. |
| Investment Objective: | Long-term capital growth with income as a secondary objective. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
BlackRock Variable Series Funds, Inc. - BlackRock Global Allocation V.I. Fund: Class III
| Investment Adviser: | BlackRock Advisors, LLC |
| Sub-adviser: | BlackRock Investment Management, LLC; BlackRock Asset Management |
| | U.K. Limited |
| Investment Objective: | Seeks high total investment return. |
This underlying mutual fund or Sub-Account may invest in other funds. Therefore, a proportionate share of the fees and expenses of any acquired funds are indirectly borne by investors. As a result, investors may incur higher charges in this underlying mutual fund or Sub-Account than a fund that does not invest in other funds.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Dreyfus Investment Portfolios - Small Cap Stock Index Portfolio: Service Shares
| Investment Adviser: | The Dreyfus Corporation |
| Sub-adviser: | Mellon Capital Management |
| Investment Objective: | To match performance of the S&P SmallCap 600 Index®. |
Dreyfus Stock Index Fund, Inc.: Service Shares
| Investment Adviser: | The Dreyfus Corporation |
| Sub-adviser: | Mellon Capital Management |
| Investment Objective: | To match performance of the S&P 500. |
Dreyfus Variable Investment Fund - Appreciation Portfolio: Service Shares
| Investment Adviser: | The Dreyfus Corporation |
| Sub-adviser: | Fayez Sarofim |
| Investment Objective: | Long-term capital growth consistent with the preservation of capital. |
Fidelity Variable Insurance Products Fund - VIP Energy Portfolio: Service Class 2
| Investment Adviser: | Fidelity Management & Research Company (FMR) |
| Sub-adviser: | Fidelity Management & Research Co., Inc. (FMR Co., Inc.); Fidelity |
| | Research & Analysis Company (FRAC) |
| Investment Objective: | Capital appreciation. |
This underlying mutual fund or Sub-Account assesses a short-term trading fee (please see “Short-Term Trading Fees” earlier in this prospectus).
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Fidelity Variable Insurance Products Fund - VIP Equity-Income Portfolio: Service Class 2
| Investment Adviser: | Fidelity Management & Research Company (FMR) |
| Sub-adviser: | Fidelity Management & Research Co., Inc. (FMR Co., Inc.); Fidelity |
| | Research & Analysis Company (FRAC) |
| Investment Objective: | Reasonable income. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Fidelity Variable Insurance Products Fund - VIP Freedom 2010 Portfolio: Service Class 2
| Investment Adviser: | Fidelity Management & Research Company (FMR) |
| Sub-adviser: | Fidelity Management & Research Co., Inc. (FMR Co., Inc.); Fidelity |
| | Research & Analysis Company (FRAC) |
| Investment Objective: | High total return with a secondary objective of principal preservation as the |
| | fund approaches its target date and beyond. |
The VIP Freedom Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for VIP Freedom Funds for more information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Fidelity Variable Insurance Products Fund - VIP Freedom 2020 Portfolio: Service Class 2
| Investment Adviser: | Fidelity Management & Research Company (FMR) |
| Sub-adviser: | Fidelity Management & Research Co., Inc. (FMR Co., Inc.); Fidelity |
| | Research & Analysis Company (FRAC) |
| Investment Objective: | High total return with a secondary objective of principal preservation as the |
| | fund approaches its target date and beyond. |
The VIP Freedom Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for VIP Freedom Funds for more information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Fidelity Variable Insurance Products Fund - VIP Freedom 2030 Portfolio: Service Class 2
| Investment Adviser: | Fidelity Management & Research Company (FMR) |
| Sub-adviser: | Fidelity Management & Research Co., Inc. (FMR Co., Inc.); Fidelity |
| | Research & Analysis Company (FRAC) |
| Investment Objective: | High total return with a secondary objective of principal preservation as the |
| | fund approaches its target date and beyond. |
The VIP Freedom Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for VIP Freedom Funds for more information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Fidelity Variable Insurance Products Fund - VIP Growth Portfolio: Service Class 2
| Investment Adviser: | Fidelity Management & Research Company (FMR) |
| Sub-adviser: | Fidelity Management & Research Co., Inc. (FMR Co., Inc.); Fidelity |
| | Research & Analysis Company (FRAC) |
| Investment Objective: | Capital appreciation. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Fidelity Variable Insurance Products Fund - VIP Investment Grade Bond Portfolio: Service Class 2
| Investment Adviser: | Fidelity Management & Research Company (FMR) |
| Sub-adviser: | Fidelity Management & Research Co., Inc. (FMR Co., Inc.); Fidelity |
| | Research & Analysis Company (FRAC) |
| Investment Objective: | High level of current income. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Fidelity Variable Insurance Products Fund - VIP Mid Cap Portfolio: Service Class 2
| Investment Adviser: | Fidelity Management & Research Company (FMR) |
| Sub-adviser: | Fidelity Management & Research Co., Inc. (FMR Co., Inc.); Fidelity |
| | Research & Analysis Company (FRAC) |
| Investment Objective: | Long-term growth of capital. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Fidelity Variable Insurance Products Fund - VIP Overseas Portfolio: Service Class 2R
| Investment Adviser: | Fidelity Management & Research Company (FMR) |
| Sub-adviser: | Fidelity Management & Research Co., Inc. (FMR Co., Inc.); Fidelity |
| | Research & Analysis Company (FRAC) |
| Investment Objective: | Long-term capital growth. |
This underlying mutual fund or Sub-Account assesses a short-term trading fee (please see “Short-Term Trading Fees” earlier in this prospectus).
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Franklin Templeton Variable Insurance Products Trust - Franklin Income Securities Fund: Class 2
| Investment Adviser: | Franklin Advisors, Inc. |
| Investment Objective: | Maximum income while maintaining prospects for capital appreciation. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Franklin Templeton Variable Insurance Products Trust - Franklin Small Cap Value Securities Fund: Class 2
| Investment Adviser: | Franklin Advisory Services, LLC |
| Investment Objective: | Long-term total return. |
This underlying mutual fund or Sub-Account may invest in other funds. Therefore, a proportionate share of the fees and expenses of any acquired funds are indirectly borne by investors. As a result, investors may incur higher charges in this underlying mutual fund or Sub-Account than a fund that does not invest in other funds.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Franklin Templeton Variable Insurance Products Trust - Franklin Templeton VIP Founding Funds Allocation Fund: Class 2
| Investment Adviser: | Franklin Templeton Services, LLC |
| Investment Objective: | Capital appreciation with income as a secondary goal. |
This underlying mutual fund or Sub-Account may invest in other funds. Therefore, a proportionate share of the fees and expenses of any acquired funds are indirectly borne by investors. As a result, investors may incur higher charges in this underlying mutual fund or Sub-Account than a fund that does not invest in other funds.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Ivy Funds Variable Insurance Portfolios, Inc. - Asset Strategy
| Investment Adviser: | Waddell & Reed Investment Management Company |
| Investment Objective: | High total return over the long run. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Janus Aspen Series - Forty Portfolio: Service Shares
| Investment Adviser: | Janus Capital Management LLC |
| Investment Objective: | Long-term growth of capital. |
This underlying mutual fund or Sub-Account may invest in other funds. Therefore, a proportionate share of the fees and expenses of any acquired funds are indirectly borne by investors. As a result, investors may incur higher charges in this underlying mutual fund or Sub-Account than a fund that does not invest in other funds.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Janus Aspen Series - Overseas Portfolio: Service II Shares (formerly, International Growth Portfolio: Service II Shares)
| Investment Adviser: | Janus Capital Management LLC |
| Investment Objective: | Long-term growth of capital. |
This underlying mutual fund or Sub-Account may invest in other funds. Therefore, a proportionate share of the fees and expenses of any acquired funds are indirectly borne by investors. As a result, investors may incur higher charges in this underlying mutual fund or Sub-Account than a fund that does not invest in other funds.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
This underlying mutual fund or Sub-Account assesses a short-term trading fee (please see “Short-Term Trading Fees” earlier
MFS® Variable Insurance Trust - MFS Value Series: Service Class
| Investment Adviser: | Massachusetts Financial Services Company |
| Investment Objective: | To seek capital appreciation. |
Nationwide Variable Insurance Trust - AllianceBernstein NVIT Global Fixed Income Fund: Class III
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | AllianceBernstein L.P. |
| Investment Objective: | Seeks a high level of current income consistent with preserving capital. |
This underlying mutual fund or Sub-Account assesses a short-term trading fee (please see “Short-Term Trading Fees” earlier in this prospectus).
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - American Century NVIT Multi Cap Value Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | American Century Investment Management, Inc. |
| Investment Objective: | Seeks capital appreciation. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - American Funds NVIT Asset Allocation Fund: Class II
| Investment Adviser: | Capital Research and Management Company |
| Investment Objective: | Seeks to provide high total return (including income and capital gains) |
| | consistent with the preservation of capital over the long term. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - American Funds NVIT Bond Fund: Class II
| Investment Adviser: | Capital Research and Management Company |
| Investment Objective: | Seeks to provide investors with high total return (including income and |
| | capital gains) consistent with the preservation of capital over the long term. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - American Funds NVIT Global Growth Fund: Class II
| Investment Adviser: | Capital Research and Management Company |
| Investment Objective: | Capital appreciation through stocks. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - American Funds NVIT Growth Fund: Class II
| Investment Adviser: | Capital Research and Management Company |
| Investment Objective: | Capital appreciation principally through investment in stocks. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - American Funds NVIT Growth-Income Fund: Class II
| Investment Adviser: | Capital Research and Management Company |
| Investment Objective: | Seeks returns from both capital gains as well as income generated by |
| | dividends paid by stock issuers. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - Federated NVIT High Income Bond Fund: Class III
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Federated Investment Management Company |
| Investment Objective: | High current income. |
This underlying mutual fund or Sub-Account assesses a short-term trading fee (please see “Short-Term Trading Fees” earlier in this prospectus).
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - Gartmore NVIT Emerging Markets Fund: Class VI
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Gartmore Global Partners |
| Investment Objective: | Long-term capital growth by investing primarily in equity securities of |
| | companies located in emerging market countries. |
This underlying mutual fund or Sub-Account assesses a short-term trading fee (please see “Short-Term Trading Fees” earlier in this prospectus).
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - Gartmore NVIT International Equity Fund: Class VI
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Gartmore Global Partners |
| Investment Objective: | The Fund seeks long-term capital growth by investing primarily in equity |
| | securities of companies in Europe, Australasia, the Far East and other |
| | regions, including developing countries. |
This underlying mutual fund or Sub-Account assesses a short-term trading fee (please see “Short-Term Trading Fees” earlier in this prospectus).
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - Gartmore NVIT Worldwide Leaders Fund: Class VI
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Gartmore Global Partners |
| Investment Objective: | The Fund seeks long-term capital growth. The Fund invests at least 80% of |
| | the value of its net assets in equity securities issued by companies located |
| | throughout the world (including the U.S.) that the subadviser believes are, or |
| | have the potential to be, Worldwide Leaders. |
This underlying mutual fund or Sub-Account assesses a short-term trading fee (please see “Short-Term Trading Fees” earlier in this prospectus).
Nationwide Variable Insurance Trust - Neuberger Berman NVIT Multi Cap Opportunities Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Neuberger Berman Management Inc. |
| Investment Objective: | The fund seeks long-term capital growth. |
Nationwide Variable Insurance Trust - Neuberger Berman NVIT Socially Responsible Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Neuberger Berman Management Inc. |
| Investment Objective: | The Fund seeks long-term total return by investing primarily in securities of |
| | companies that meet the fund's financial criteria and social policy. |
Nationwide Variable Insurance Trust - NVIT Cardinal(SM) Aggressive Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Investment Objective: | Seeks maximum growth of capital consistent with a more aggressive level of |
| | risk as compared to other Cardinal Funds. |
The NVIT Cardinal Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for NVIT Cardinal Funds for more
information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Cardinal(SM) Balanced Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Investment Objective: | Seeks a high level of total return through investment in both equity and |
| | fixed income securities. |
The NVIT Cardinal Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for NVIT Cardinal Funds for more information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Cardinal(SM) Capital Appreciation Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Investment Objective: | Seeks growth of capital, but also seeks income consistent with a less |
| | aggressive level of risk as compared to other Cardinal Funds. |
The NVIT Cardinal Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for NVIT Cardinal Funds for more information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Cardinal(SM) Conservative Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Investment Objective: | Seeks a high level of total return consistent with a conservative level of risk |
| | as compared to other Cardinal Funds. |
The NVIT Cardinal Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for NVIT Cardinal Funds for more information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Cardinal(SM) Moderate Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Investment Objective: | Seeks a high level of total return consistent with a moderate level of risk as |
| | compared to other Cardinal Funds |
The NVIT Cardinal Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for NVIT Cardinal Funds for more information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Cardinal(SM) Moderately Aggressive Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Investment Objective: | Seeks growth of capital, but also seeks income consistent with a moderately |
| | aggressive level of risk as compared to other Cardinal Funds. |
The NVIT Cardinal Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for NVIT Cardinal Funds for more information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Cardinal(SM) Moderately Conservative Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Investment Objective: | Seeks a high level of total return consistent with a moderately conservative |
| | level of risk. |
The NVIT Cardinal Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for NVIT Cardinal Funds for more information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Core Bond Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Nationwide Asset Management, LLC |
| Investment Objective: | The Fund seeks a high level of current income consistent with preserving |
| | capital. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Core Plus Bond Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Lehman Brothers Asset Management LLC |
| Investment Objective: | The Fund seeks long-term total return consistent with reasonable risk. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Government Bond Fund: Class I
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Nationwide Asset Management, LLC |
| Investment Objective: | To provide a high level of income as is consistent with the preservation of |
| | capital. |
Nationwide Variable Insurance Trust - NVIT Health Sciences Fund: Class VI
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Aberdeen Asset Management, Inc. |
| Investment Objective: | Long-term capital appreciation. |
This underlying mutual fund or Sub-Account assesses a short-term trading fee (please see “Short-Term Trading Fees” earlier in this prospectus).
Nationwide Variable Insurance Trust - NVIT International Index Fund: Class VIII
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | BlackRock Investment Management, LLC |
| Investment Objective: | To match the performance of the Morgan Stanley Capital International |
| | Europe, Australasia and Far East Index (“MSCI EAFE® Index”) as closely as |
| | possible before the deduction of Fund expenses. |
This underlying mutual fund or Sub-Account assesses a short-term trading fee (please see “Short-Term Trading Fees” earlier in this prospectus).
Nationwide Variable Insurance Trust - NVIT Investor Destinations Aggressive Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Investment Objective: | To maximize growth of capital consistent with a more aggressive level of |
| | risk as compared to the other Investor Destinations Funds. |
The Nationwide NVIT Investor Destinations Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for Nationwide NVIT Investor Destinations Funds for more information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Investor Destinations Balanced Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Investment Objective: | The NVIT Investor Destinations Balanced Fund (“Balanced Fund” or the |
| | “Fund”) seeks a high level of total return through investment in both equity |
| | and fixed-income securities. The Balanced Fund is a “fund-of-funds” that |
| | invests its assets primarily in underlying portfolios of Nationwide Variable |
| | Insurance Trust (each, an “Underlying Fund” or collectively, “Underlying |
| | Funds”) that represent several asset classes. Each of the Underlying Funds in |
| | turn invests in equity or fixed-income securities, as appropriate to its |
| | respective objective and strategies. |
The Nationwide NVIT Investor Destinations Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for Nationwide NVIT Investor Destinations Funds for more information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Investor Destinations Capital Appreciation Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Investment Objective: | The NVIT Investor Destinations Capital Appreciation Fund (“Capital |
| | Appreciation Fund” or the “Fund”) seeks growth of capital, but also seeks |
| | income consistent with a less aggressive level of risk as compared to other |
| | NVIT Investor Destinations Funds. The Capital Appreciation Fund is a |
| | “fund-of-funds” that invests its assets primarily in underlying portfolios of |
| | Nationwide Variable Insurance Trust (each, an “Underlying Fund” or |
| | collectively, “Underlying Funds”) that represent several asset classes. Each |
| | of the Underlying Funds in turn invests in equity or fixed-income securities, |
| | as appropriate to its respective objective and strategies. |
The Nationwide NVIT Investor Destinations Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for Nationwide NVIT Investor Destinations Funds for more information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Investor Destinations Conservative Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Investment Objective: | High level of return consistent with a conservative level of risk compared to |
| | the other Investor Destinations Funds. |
The Nationwide NVIT Investor Destinations Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for Nationwide NVIT Investor Destinations Funds for more information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Investor Destinations Moderate Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Investment Objective: | High level of total return consistent with a moderate level of risk as |
| | compared to other Investor Destinations Funds. |
The Nationwide NVIT Investor Destinations Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for Nationwide NVIT Investor Destinations Funds for more information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Investor Destinations Moderately Aggressive Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Investment Objective: | Growth of capital, but also seeks income consistent with a moderately |
| | aggressive level of risk as compared to the other Investor Destinations Funds. |
The Nationwide NVIT Investor Destinations Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for Nationwide NVIT Investor Destinations Funds for more information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Investor Destinations Moderately Conservative Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Investment Objective: | High level of total return consistent with a moderately conservative level of |
| | risk. |
The Nationwide NVIT Investor Destinations Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus for Nationwide NVIT Investor Destinations Funds for more information.
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Mid Cap Index Fund: Class I
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | BlackRock Investment Management, LLC |
| Investment Objective: | Capital appreciation. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Money Market Fund: Class I
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Federated Investment Management Company |
| Investment Objective: | The fund seeks as high a level of current income as is consistent with |
| | preserving capital and maintaining liquidity. |
Nationwide Variable Insurance Trust - NVIT Multi Sector Bond Fund: Class I
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Logan Circle Partners, L.P. |
| Investment Objective: | Above average total return over a market cycle of three to five years. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Multi-Manager International Growth Fund: Class VI
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Invesco Advisers , Inc. and American Century Global |
| | Investment Management, Inc. |
| Investment Objective: | The fund seeks long-term capital growth. |
This underlying mutual fund or Sub-Account assesses a short-term trading fee (please see “Short-Term Trading Fees” earlier in this prospectus).
Nationwide Variable Insurance Trust - NVIT Multi-Manager International Value Fund: Class VI
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | AllianceBernstein L.P.; JPMorgan Investment Management, Inc. |
| Investment Objective: | Long-term capital appreciation. |
This underlying mutual fund or Sub-Account assesses a short-term trading fee (please see “Short-Term Trading Fees” earlier in this prospectus).
Nationwide Variable Insurance Trust - NVIT Multi-Manager Large Cap Growth Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Goldman Sachs Asset Management, L.P.; Neuberger Berman Management |
| | Inc.; Wells Capital Management, Inc. |
| Investment Objective: | The fund seeks long-term capital growth. |
Nationwide Variable Insurance Trust - NVIT Multi-Manager Large Cap Value Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Goldman Sachs Asset Management L.P.; Neuberger Berman Management, |
| | Inc. and Wells Capital Management, Inc. |
| Investment Objective: | The fund seeks long-term capital growth. |
Nationwide Variable Insurance Trust - NVIT Multi-Manager Mid Cap Growth Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Neuberger Berman Management Inc. and American Century Investment |
| | Management Inc. |
| Investment Objective: | The fund seeks long-term capital growth. |
Nationwide Variable Insurance Trust - NVIT Multi-Manager Mid Cap Value Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | American Century Investment Management; RiverSource Investment |
| | Management; Thompson, Siegel & Walmsley, Inc. |
| Investment Objective: | The fund seeks long-term capital growth. |
Nationwide Variable Insurance Trust - NVIT Multi-Manager Small Cap Growth Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Waddell & Reed Investment Management Company; OppenheimerFunds, |
| Investment Objective: | Capital growth. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Multi-Manager Small Cap Value Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Aberdeen Asset Management, Inc.; Epoch Investment Partners, Inc.; J.P. |
| | Morgan Investment Management Inc. |
| Investment Objective: | Capital appreciation. |
Nationwide Variable Insurance Trust - NVIT Multi-Manager Small Company Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Aberdeen Asset Management, Inc.: American Century Investment |
| | Management Inc.; Gartmore Global Partners; Morgan Stanley Investment |
| | Management; Neuberger Berman Management, Inc.; Putnam Investment |
| | Management, LLC; Waddell & Reed Investment Management Company |
| Investment Objective: | Long-term growth of capital. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Nationwide Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Aberdeen Asset Management, Inc. |
| Investment Objective: | Total return through a flexible combination of capital appreciation and |
| | current income. |
Nationwide Variable Insurance Trust - NVIT Short Term Bond Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Nationwide Asset Management, LLC |
| Investment Objective: | The fund seeks to provide a high level of current income while preserving |
| | capital and minimizing fluctuations in share value. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - NVIT Technology and Communications Fund: Class VI
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Aberdeen Asset Management, Inc. |
| Investment Objective: | Long-term capital appreciation. |
This underlying mutual fund or Sub-Account assesses a short-term trading fee (please see “Short-Term Trading Fees” earlier in this prospectus).
Nationwide Variable Insurance Trust - NVIT U.S. Growth Leaders Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Aberdeen Asset Management, Inc. |
| Investment Objective: | Long-term growth of capital. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - Oppenheimer NVIT Large Cap Growth Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | OppenheimerFunds, Inc. |
| Investment Objective: | Seeks long-term capital growth. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - Templeton NVIT International Value Fund: Class III
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Templeton Investment Counsel, LLC |
| Investment Objective: | Seeks to maximize total return, consisting of capital appreciation and/or |
| | current income. |
This underlying mutual fund or Sub-Account assesses a short-term trading fee (please see “Short-Term Trading Fees” earlier in this prospectus).
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - Van Kampen NVIT Comstock Value Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Van Kampen Asset Management |
| Investment Objective: | Seeks capital growth and income through investments in equity securities, |
| | including common stocks, preferred stocks and convertible securities. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Nationwide Variable Insurance Trust - Van Kampen NVIT Real Estate Fund: Class II
| Investment Adviser: | Nationwide Fund Advisors |
| Sub-adviser: | Van Kampen Asset Management |
| Investment Objective: | The Fund seeks current income and long-term capital appreciation. |
Neuberger Berman Advisers Management Trust - AMT Short Duration Bond Portfolio: I Class
| Investment Adviser: | Neuberger Berman Management LLC. |
| Sub-adviser: | Lehman Brothers Asset Management LLC |
| Investment Objective: | Highest available current income consistent with liquidity and low risk to |
| | principal; total return is a secondary goal. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Oppenheimer Variable Account Funds - Oppenheimer Global Securities Fund/VA: Class 4
| Investment Adviser: | OppenheimerFunds, Inc. |
| Investment Objective: | Long-term capital appreciation by investing a substantial portion of its |
| | assets in securities of foreign issuers, “growth-type” companies, cyclical |
| | industries and special situations that are considered to have appreciation |
This underlying mutual fund or Sub-Account assesses a short-term trading fee (please see “Short-Term Trading Fees” earlier in this prospectus).
Oppenheimer Variable Account Funds - Oppenheimer Main Street Fund®/VA: Service Shares
| Investment Adviser: | OppenheimerFunds, Inc. |
| Investment Objective: | High total return which includes growth in the value of its shares as well as |
| | current income from equity and debt securities. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Oppenheimer Variable Account Funds - Oppenheimer Main Street Small Cap Fund®/VA: Service Shares
| Investment Adviser: | OppenheimerFunds, Inc. |
| Investment Objective: | Capital appreciation. |
PIMCO Variable Insurance Trust - Foreign Bond Portfolio (Unhedged): Advisor Class
| Investment Adviser: | Pacific Investment Management Company LLC |
| Investment Objective: | Seeks maximum total return, consistent with preservation of capital and |
| | prudent investment management. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
PIMCO Variable Insurance Trust - Low Duration Portfolio: Advisor Class
| Investment Adviser: | Pacific Investment Management Company LLC |
| Investment Objective: | Seeks maximum total return, consistent with preservation of capital and |
| | prudent investment management. |
This underlying mutual fund or Sub-Account may invest in lower quality debt securities commonly referred to as junk bonds.
Wells Fargo Advantage Funds® Variable Trust - VT Small Cap Growth Fund
| Investment Adviser: | Wells Fargo Funds Management, LLC |
| Sub-adviser: | Wells Capital Management Incorporated |
| Investment Objective: | Long-term capital appreciation. |
Because the contracts described in this prospectus have not been previously made available for sale, there are no Accumulation Unit values for the year ending December 31, 2008. The Statement of Additional Information is available FREE OF CHARGE by:
calling: 1-800-848-6331, TDD 1-800-238-3035
writing: Nationwide Life Insurance Company
5100 Rings Road, RR1-04-F4
Dublin, Ohio 43017-1522
checking
on-line at: www.nationwide.com
The contracts described in this prospectus are classified according to the tax treatment to which they are subject under the Internal Revenue Code. Following is a general description of the various contract types. Eligibility requirements, tax benefits (if any), limitations, and other features of the contracts will differ depending on contract type.
Charitable Remainder Trusts
Charitable Remainder Trusts are trusts that meet the requirements of Section 664 of the Internal Revenue Code. Non-Qualified Contracts that are issued to Charitable Remainder Trusts will differ from other Non-Qualified Contracts in three respects:
| (1) | Waiver of CDSC. In addition to the CDSC-free withdrawal privilege available to all contracts, Charitable Remainder Trusts may also withdraw the difference between: |
| | (a) | the Contract Value on the day before the withdrawal; and |
| | (b) | the total amount of purchase payments made to the contract (less an adjustment for amounts surrendered). |
| (2) | Contract ownership at annuitization. On the Annuitization Date, if the Contract Owner is a Charitable Remainder Trust, the Charitable Remainder Trust will continue to be the Contract Owner and the Annuitant will NOT become the Contract Owner. |
| (3) | Recipient of death benefit proceeds. With respect to the death benefit proceeds, if the Contract Owner is a Charitable Remainder Trust, the death benefit is payable to the Charitable Remainder Trust. Any designation in conflict with the Charitable Remainder Trust’s right to the death benefit will be void. |
While these provisions are intended to facilitate a Charitable Remainder Trust's ownership of this contract, the rules governing Charitable Remainder Trusts are numerous and complex. A Charitable Remainder Trust that is considering purchasing this contract should seek the advice of a qualified tax and/or financial adviser prior to purchasing the contract. An annuity that has a Charitable Remainder Trust endorsement is not a charitable remainder trust; the endorsement is merely to facilitate ownership of the contract by a Charitable Remainder Trust.
Investment Only (Qualified Plans)
Contracts that are owned by Qualified Plans are not intended to confer tax benefits on the beneficiaries of the plan; they are used as investment vehicles for the plan. The income tax consequences to the beneficiary of a Qualified Plan are controlled by the operation of the plan, not by operation of the assets in which the plan invests.
Beneficiaries of Qualified Plans should contact their employer and/or trustee of the plan to obtain and review the plan, trust, summary plan description and other documents for the tax and other consequences of being a participant in a Qualified Plan.
Individual Retirement Annuities (IRAs)
IRAs are contracts that satisfy the provisions of Section 408(b) of the Internal Revenue Code, including the following requirements:
| | · | the contract is not transferable by the owner; |
| | · | the premiums are not fixed; |
| | · | if the Contract Owner is younger than age 50, the annual premium cannot exceed $5,000; if the Contract Owner is age 50 or older, the annual premium cannot exceed $6,000 (although rollovers of greater amounts from qualified plans and other IRAs can be received); |
| | · | certain minimum distribution requirements must be satisfied after the owner attains the age of 70½; |
| | · | the entire interest of the owner in the contract is nonforfeitable; and |
| | · | after the death of the owner, additional distribution requirements may be imposed to ensure distribution of the entire balance in the contract within the statutory period of time. |
Depending on the circumstance of the owner, all or a portion of the contributions made to the account may be deducted for federal income tax purposes.
Failure to make the mandatory distributions can result in an additional penalty tax of 50% of the excess of the amount required to be distributed over the amount that was actually distributed.
IRAs may receive rollover contributions from other Individual Retirement Accounts, other Individual Retirement Annuities, certain 457 governmental plans and qualified retirement plans (including 401(k) plans).
When the owner of an IRA attains the age of 70½, the Internal Revenue Code requires that certain minimum distributions be made. In addition, upon the death of the owner of an IRA, mandatory distribution requirements are imposed by the Internal Revenue Code to ensure distribution of the entire Contract Value within the required statutory period. Due to recent changes in Treasury Regulations, the amount used to compute the mandatory distributions may exceed the Contract Value.
For further details regarding IRAs, please refer to the disclosure statement provided when the IRA was established and the annuity contract’s IRA endorsement.
Non-Qualified Contracts
A Non-Qualified Contract is a contract that does not qualify for certain tax benefits under the Internal Revenue Code, and which is not an IRA, a Roth IRA, a SEP IRA, or a Simple IRA.
Upon the death of the owner of a Non-Qualified Contract, mandatory distribution requirements are imposed to ensure
distribution of the entire balance in the contract within a required period.
Non-Qualified contracts that are owned by natural persons allow the deferral of taxation on the income earned in the contract until it is distributed or deemed to be distributed. Non-Qualified contracts that are owned by non-natural persons, such as trusts, corporations and partnerships are generally subject to current income tax on the income earned inside the contract, unless the non-natural person owns the contract as an “agent” of a natural person.
Roth IRAs
Roth IRA contracts are contracts that satisfy the provisions of Section 408A of the Internal Revenue Code, including the following requirements:
| | · | the contract is not transferable by the owner; |
| | · | the premiums are not fixed; |
| | · | if the Contract Owner is younger than age 50, the annual premium cannot exceed $5,000; if the Contract Owner is age 50 or older, the annual premium cannot exceed $6,000 (although rollovers of greater amounts from other Roth IRAs and IRAs can be received); |
| | · | the entire interest of the owner in the contract is nonforfeitable; and |
| | · | after the death of the owner, certain distribution requirements may be imposed to ensure distribution of the entire balance in the contract within the statutory period of time. |
A Roth IRA can receive a rollover from an IRA or another eligible retirement plan; however, the amount rolled over from the IRA or other eligible retirement plan to the Roth IRA is required to be included in the owner's federal gross income at the time of the rollover, and will be subject to federal income tax.
There are income limitations on eligibility to participate in a Roth IRA and additional income limitations for eligibility to roll over amounts from an IRA or other eligible retirement plan to a Roth IRA.
For further details regarding Roth IRAs, please refer to the disclosure statement provided when the Roth IRA was established and the annuity contract’s IRA endorsement.
Simplified Employee Pension IRAs (SEP IRA)
A SEP IRA is a written plan established by an employer for the benefit of employees which permits the employer to make contributions to an IRA established for the benefit of each employee.
An employee may make deductible contributions to a SEP IRA subject to the same restrictions and limitations as an IRA. In addition, the employer may make contributions to the SEP IRA, subject to dollar and percentage limitations imposed by both the Internal Revenue Code and the written plan.
A SEP IRA plan must satisfy:
| | · | minimum participation rules; |
| | · | top-heavy contribution rules; |
| | · | nondiscriminatory allocation rules; and |
| | · | requirements regarding a written allocation formula. |
In addition, the plan cannot restrict withdrawals of non-elective contributions, and must restrict withdrawals of elective contributions before March 15th of the following year.
When the owner of a SEP IRA attains the age of 70½, the Internal Revenue Code requires that certain minimum distributions be made. Due to recent changes in Treasury Regulations, the amount used to compute the minimum distributions may exceed the Contract Value. In addition, upon the death of the owner of a SEP IRA, mandatory distribution requirements are imposed by the Internal Revenue Code to ensure distribution of the entire Contract Value within the required statutory period.
Simple IRAs
A Simple IRA is an Individual Retirement Annuity that is funded exclusively by a qualified salary reduction arrangement and satisfies:
| | · | participation requirements; and |
| | · | administrative requirements. |
The funds contributed to a Simple IRA cannot be commingled with funds in IRAs or SEP IRAs.
A Simple IRA cannot receive rollover distributions except from another Simple IRA.
When the owner of Simple IRA attains the age of 70½, the Internal Revenue Code requires that certain minimum distributions be made. Due to recent changes in Treasury Regulations, the amount used to compute the minimum distributions may exceed the Contract Value.
In addition, upon the death of the owner of a Simple IRA, mandatory distribution requirements are imposed by the Internal Revenue Code to ensure distribution of the entire Contract Value within the required statutory period.
Federal Tax Considerations
Federal Income Taxes
The tax consequences of purchasing a contract described in this prospectus will depend on:
| · | the type of contract purchased; |
| · | the purposes for which the contract is purchased; and |
| · | the personal circumstances of individual investors having interests in the contracts. |
Existing tax rules are subject to change, and may affect individuals differently depending on their situation. Nationwide does not guarantee the tax status of any contracts or any transactions involving the contracts.
Representatives of the Internal Revenue Service have informally suggested, from time to time, that the number of underlying mutual funds available or the number of transfer
opportunities available under a variable product may be relevant in determining whether the product qualifies for the desired tax treatment. In 2003, the Internal Revenue Service issued formal guidance, in Revenue Ruling 2003-91, that indicates that if the number of underlying mutual funds available in a variable insurance product does not exceed 20, the number of underlying mutual funds alone would not cause the contract to not qualify for the desired tax treatment. The Internal Revenue Service has also indicated that exceeding 20 investment options may be considered a factor, along with other factors including the number of transfer opportunities available under the contract, when determining whether the contract qualifies for the desired tax treatment. The revenue ruling did not indicate the actual number of underlying mutual funds that would cause the contract to not provide the desired tax treatment. Should the U.S. Secretary of the Treasury issue additional rules or regulations limiting the number of underlying mutual funds, transfers between underlying mutual funds, exchanges of underlying mutual funds or changes in investment objectives of underlying mutual funds such that the contract would no longer qualify for tax deferred treatment under Section 72 of the Internal Revenue Code, Nationwide will take whatever steps are available to remain in compliance.
If the contract is purchased as an investment of certain retirement plans (such as qualified retirement plans and Individual Retirement Accounts as described in Sections 401 and 408(a) of the Internal Revenue Code), tax advantages enjoyed by the Contract Owner and/or Annuitant may relate to participation in the plan rather than ownership of the annuity contract. Such plans are permitted to purchase investments other than annuities and retain tax-deferred status.
The following is a brief summary of some of the federal income tax considerations related to the contracts. In addition to the federal income tax, distributions from annuity contracts may be subject to state and local income taxes. The tax rules across all states and localities are not uniform and therefore will not be discussed in this prospectus. Tax rules that may apply to contracts issued in U.S. territories such as Puerto Rico and Guam are also not discussed. Nothing in this prospectus should be considered to be tax advice. Contract Owners and prospective Contract Owners should consult a financial consultant, tax adviser or legal counsel to discuss the taxation and use of the contracts.
IRAs, SEP IRAs and Simple IRAs
Distributions from IRAs, SEP IRAs and Simple IRAs are generally taxed as ordinary income when received. If any of the amounts contributed to the Individual Retirement Annuity was nondeductible for federal income tax purposes, then a portion of each distribution is excludable from income.
If distributions of income from an IRA are made prior to the date that the owner attains the age of 59½ years, the income is subject to both the regular income tax, and an additional penalty tax of 10% is generally applicable. (For Simple IRAs, the 10% penalty is increased to 25% if the distribution is made during the 2-year period beginning on the date that the individual first participated in the Simple IRA.) The 10% penalty tax can be avoided if the distribution is:
| | · | made to a beneficiary on or after the death of the owner; |
| | · | attributable to the owner becoming disabled (as defined in the Internal Revenue Code); |
| | · | part of a series of substantially equal periodic payments made not less frequently than annually made for the life (or life expectancy) of the owner, or the joint lives (or joint life expectancies) of the owner and his or her designated beneficiary; |
| | · | used for qualified higher education expenses; or |
| | · | used for expenses attributable to the purchase of a home for a qualified first-time buyer. |
If the Contract Owner dies before the contract is completely distributed, the balance will be included in the Contract Owner’s gross estate for tax purposes.
Roth IRAs
Distributions of earnings from Roth IRAs are taxable or nontaxable depending upon whether they are “qualified distributions” or “non-qualified distributions.” A “qualified distribution” is one that satisfies the five-year rule and meets one of the following requirements:
| · | it is made on or after the date on which the Contract Owner attains age 59½; |
| · | it is made to a beneficiary (or the Contract Owner’s estate) on or after the death of the Contract Owner; |
| · | it is attributable to the Contract Owner’s disability; or |
| · | it is used for expenses attributable to the purchase of a home for a qualified first-time buyer. |
The five-year rule generally is satisfied if the distribution is not made within the five year period beginning with the first taxable year in which a contribution is made to any Roth IRA established for the owner.
A qualified distribution is not included in gross income for federal income tax purposes.
A non-qualified distribution is not includable in gross income to the extent that the distribution, when added to all previous distributions, does not exceed the total amount of contributions made to the Roth IRA. Any non-qualified distribution in excess of total contributions is includable in the Contract Owner’s gross income as ordinary income in the year that it is distributed to the Contract Owner.
Special rules apply for Roth IRAs that have proceeds received from an IRA prior to January 1, 1999 if the owner elected the special 4-year income averaging provisions that were in effect for 1998.
If non-qualified distributions of income from a Roth IRA are made prior to the date that the owner attains the age of 59½ years, the income is subject to both the regular income tax and an additional penalty tax of 10%. The penalty tax can be avoided if the distribution is:
| | · | made to a beneficiary on or after the death of the owner; |
| | · | attributable to the owner becoming disabled (as defined in the Internal Revenue Code); |
| | · | part of a series of substantially equal periodic payments made not less frequently than annually made for the life (or life expectancy) of the owner, or the joint lives (or joint life expectancies) of the owner and his or her designated beneficiary; |
| | · | for qualified higher education expenses; or |
| | · | used for expenses attributable to the purchase of a home for a qualified first-time buyer. |
If the Contract Owner dies before the contract is completely distributed, the balance will be included in the Contract Owner’s gross estate for tax purposes.
Non-Qualified Contracts - Natural Persons as Contract Owners
Generally, the income earned inside a Non-Qualified Annuity Contract that is owned by a natural person is not taxable until it is distributed from the contract.
Distributions before the Annuitization Date are taxable to the Contract Owner to the extent that the cash value of the contract exceeds the Contract Owner’s investment in the contract at the time of the distribution. In general, the investment in the contract is equal to the purchase payments made with after-tax dollars. Distributions, for this purpose, include full and partial surrenders, any portion of the contract that is assigned or pledged, amounts borrowed from the contract, or any portion of the contract that is transferred by gift. For these purposes, a transfer by gift may occur upon annuitization if the Contract Owner and the Annuitant are not the same individual.
With respect to annuity distributions on or after the Annuitization Date, a portion of each annuity payment is excludable from taxable income. The amount excludable from each annuity payment is determined by multiplying the annuity payment by a fraction which is equal to the Contract Owner’s investment in the contract, divided by the expected return on the contract. Once the entire investment in the contract is recovered, all distributions are fully includable in income. The maximum amount excludable from income is the investment in the contract. If the Annuitant dies before the entire investment in the contract has been excluded from income, and as a result of the Annuitant's death no more payments are due under the contract, then the unrecovered investment in the contract may be deducted on his or her final tax return.
In determining the taxable amount of a distribution, all annuity contracts issued after October 21, 1988 by the same company to the same Contract Owner during the same calendar year will be treated as one annuity contract.
A special rule applies to distributions from contracts that have investments that were made prior to August 14, 1982. For those contracts, distributions that are made prior to the Annuitization Date are treated first as a recovery of the investment in the contract as of that date. A distribution in excess of the amount of the investment in the contract as of August 14, 1982, will be treated as taxable income.
The Internal Revenue Code imposes a penalty tax if a distribution is made before the Contract Owner reaches age 59½. The amount of the penalty is 10% of the portion of any distribution that is includable in gross income. The penalty tax does not apply if the distribution is:
| | · | the result of a Contract Owner’s death; |
| | · | the result of a Contract Owner’s disability, (as defined in the Internal Revenue Code); |
| | · | one of a series of substantially equal periodic payments made over the life (or life expectancy) of the Contract Owner or the joint lives (or joint life expectancies) of the Contract Owner and the beneficiary selected by the Contract Owner to receive payment under the annuity payment option selected by the Contract Owner; or |
| | · | is allocable to an investment in the contract before August 14, 1982. |
If the Contract Owner dies before the contract is completely distributed, the balance will be included in the Contract Owner’s gross estate for tax purposes.
Non-Qualified Contracts - Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned by individuals. Different rules (the so-called “non-natural persons” rules) apply if the Contract Owner is not a natural person.
Generally, contracts owned by corporations, partnerships, trusts, and similar entities are not treated as annuity contracts under the Internal Revenue Code. Therefore, income earned under a Non-Qualified Contract that is owned by a non-natural person is taxed as ordinary income during the taxable year that it is earned. Taxation is not deferred, even if the income is not distributed out of the contract. The income is taxable as ordinary income, not capital gain.
The non-natural persons rules do not apply to all entity-owned contracts. For purposes of the non-natural persons rule, a contract that is owned by a non-natural person as an agent of an individual is treated as owned by the individual. This would cause the contract to be treated as an annuity under the Internal Revenue Code, allowing tax deferral. However, this exception does not apply when the non-natural person is an employer that holds the contract under a non-qualified deferred compensation arrangement for one or more employees.
The non-natural persons rules also do not apply to contracts that are:
| | · | acquired by the estate of a decedent by reason of the death of the decedent; |
| | · | issued in connection with certain qualified retirement plans and individual retirement plans; |
| | · | purchased by an employer upon the termination of certain qualified retirement plans; or |
| | · | immediate annuities within the meaning of Section 72(u) of the Internal Revenue Code. |
If the Annuitant dies before the contract is completely distributed, the balance may be included in the Annuitant’s
gross estate for tax purposes, depending on the obligations that the non-natural owner may have owed to the Annuitant.
Exchanges
As a general rule, federal income tax law treats exchanges of property in the same manner as a sale of the property. However, pursuant to Section 1035 of the Code, an annuity contract may be exchanged tax-free for another annuity, provided that the obligee (the person to whom the annuity obligation is owed) is the same for both contracts. If the exchange includes the receipt of property in addition to another annuity contract, such as cash, special rules may cause a portion of the transaction to be taxable.
Tax Treatment of a Partial 1035 Exchange With Subsequent Withdrawal
In March 2008, the IRS issued Rev. Proc. 2008-24, which addresses the income tax consequences of the direct transfer of a portion of the cash value of an annuity contract in exchange for the issuance of a second annuity contract. A direct transfer that satisfies the revenue procedure will be treated as a tax-free exchange under section 1035 of the Internal Revenue Code if, for a period of at least 12 months from the date of the direct transfer, there are no distributions or surrenders from either annuity contract involved in the exchange. In addition, the tax-free status of the exchange may still be preserved despite a distribution or surrender from either contract if the Contract Owner can show that between the date of the direct transfer and the distribution or surrender, one of the conditions described under section 72(q)(2) of the Internal Revenue Code that would exempt the distribution from the 10% early distribution penalty (such as turning age 59½, or becoming disabled; but not a series of substantially equal periodic payments or an immediate annuity) or “other similar life event” such as divorce or loss of employment occurred. Absent a showing of such an occurrence, Rev. Proc. 2008-24 concludes that the direct transfer would fail to qualify as a tax-free 1035 exchange, and the full amount transferred from the original contract would be treated as a taxable distribution, followed by the purchase of a new annuity contract. Rev. Proc. 2008-24 applies to direct transfers completed on or after June30, 2008. Please discuss any tax consequences concerning any contemplated or completed transactions with a professional tax advisor.
Taxation of Lifetime Surrenders Under the 10% Lifetime Income Option or the 5% Lifetime Income Option
While the tax treatment for surrenders for benefits such as the Lifetime Income Option s is not clear under federal tax law, Nationwide intends to treat surrenders under these options as taxable to the extent that the cash value of the contract exceeds the Contract Owner’s investment at the time of the surrender. Specifically, we intend to treat the following amount of each surrender as a taxable distribution:
The greater of:
Where
A = the Contract Value immediately before the surrender;
| | B = the guaranteed annual benefit amount immediately before the surrender; and |
C = the remaining investment in the contract.
In certain circumstances, this treatment could result in your Contract Value being less than your investment in the contract after such a surrender. If you subsequently surrender your contract under such circumstances, you would have a loss that may be deductible. If you purchase one of these options in an IRA, surrenders in excess of the annual benefit amount may be required to satisfy the minimum distribution requirements under the Internal Revenue Code. Please consult a qualified tax advisor.
Withholding
Pre-death distributions from the contracts are subject to federal income tax. Nationwide will withhold the tax from the distributions unless the Contract Owner requests otherwise. Under some circumstances, the Internal Revenue Code will not permit Contract Owners to waive withholding. Such circumstances include:
| | · | if the payee does not provide Nationwide with a taxpayer identification number; or |
| | · | if Nationwide receives notice from the Internal Revenue Service that the taxpayer identification number furnished by the payee is incorrect. |
If a Contract Owner is prohibited from waiving withholding, as described above, the distribution will be subject to mandatory back-up withholding. The mandatory back-up withholding rate is established by Section 3406 of the Internal Revenue Code and is applied against the amount of income that is distributed.
Non-Resident Aliens
Generally, a pre-death distribution from a contract to a non-resident alien is subject to federal income tax at a rate of 30% of the amount of income that is distributed. Nationwide is required to withhold this amount and send it to the Internal Revenue Service. Some distributions to non-resident aliens may be subject to a lower (or no) tax if a treaty applies. In order to obtain the benefits of such a treaty, the non-resident alien must:
| (1) | provide Nationwide with a properly completed withholding certificate claiming the treaty benefit of a lower tax rate or exemption from tax; and |
| (2) | provide Nationwide with an individual taxpayer identification number. |
If the non-resident alien does not meet the above conditions, Nationwide will withhold 30% of income from the distribution.
Another exemption from the 30% withholding is for the non-resident alien to provide Nationwide with sufficient evidence that:
| (1) | the distribution is connected to the non-resident alien’s conduct of business in the United States; |
| (2) | the distribution is includable in the non-resident alien’s gross income for United States federal income tax purposes; and |
| (3) | provide Nationwide with a properly completed withholding certificate claiming the exemption. |
Note that for the preceding exemption, the distributions would be subject to the same withholding rules that are applicable to payments to United States persons, including back-up withholding, which is currently at a rate of 28%, if a correct taxpayer identification number is not provided.
Federal Estate, Gift and Generation Skipping Transfer Taxes
The following transfers may be considered a gift for federal gift tax purposes:
| | · | a transfer of the contract from one Contract Owner to another; or |
| | · | a distribution to someone other than a Contract Owner. |
Upon the Contract Owner’s death, the value of the contract may be subject to estate taxes, even if all or a portion of the value is also subject to federal income taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine whether a death benefit or other distribution is a “direct skip” and the amount of the resulting generation skipping transfer tax, if any. A direct skip is when property is transferred to, or a death benefit or other distribution is made to:
| (1) | an individual who is two or more generations younger than the Contract Owner; or |
| (2) | certain trusts, as described in Section 2613 of the Internal Revenue Code (generally, trusts that have no beneficiaries who are not 2 or more generations younger than the Contract Owner). |
If the Contract Owner is not an individual, then for this purpose only, “Contract Owner” refers to any person:
| | · | who would be required to include the contract, death benefit, distribution, or other payment in his or her federal gross estate at his or her death; or |
| | · | who is required to report the transfer of the contract, death benefit, distribution, or other payment for federal gift tax purposes. |
If a transfer is a direct skip, Nationwide will deduct the amount of the transfer tax from the death benefit, distribution or other payment, and remit it directly to the Internal Revenue Service.
Charge for Tax
Nationwide is not required to maintain a capital gain reserve liability on Non-Qualified Contracts. If tax laws change requiring a reserve, Nationwide may implement and adjust a tax charge.
Diversification
Internal Revenue Code Section 817(h) contains rules on diversification requirements for variable annuity contracts. A variable annuity contract that does not meet these diversification requirements will not be treated as an annuity, unless:
| | · | the failure to diversify was accidental; |
| | · | the failure is corrected; and |
| | · | a fine is paid to the Internal Revenue Service. |
The amount of the fine will be the amount of tax that would have been paid by the Contract Owner if the income, for the period the contract was not diversified, had been received by the Contract Owner.
If the violation is not corrected, the Contract Owner will be considered the owner of the underlying securities and will be taxed on the earnings of his or her contract. Nationwide believes that the investments underlying this contract meet these diversification requirements.
Tax Changes
The foregoing tax information is based on Nationwide’s understanding of federal tax laws. It is NOT intended as tax advice. All information is subject to change without notice. You should consult with your personal tax and/or financial adviser for more information.
In 2001, the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) was enacted. EGTRRA made numerous changes to the Internal Revenue Code, including the following:
| | · | generally lowering federal income tax rates; |
| | · | increasing the amounts that may be contributed to various retirement plans, such as IRAs and Qualified Plans; |
| | · | increasing the portability of various retirement plans by permitting IRAs, Qualified Plans and certain governmental 457 plans to “roll” money from one plan to another; |
| | · | eliminating and/or reducing the highest federal estate tax rates; |
| | · | increasing the estate tax credit; and |
| | · | for persons dying after 2009, repealing the estate tax. |
In 2006, the Pension Protection Act of 2006 made permanent the EGTRRA provisions noted above that increase the amounts that may be contributed to various retirement plans and that increase the portability of various retirement plans. However, all of the other changes resulting from EGTRRA are scheduled to “sunset,” or become ineffective, after December 31, 2010 unless they are extended by additional legislation. If changes resulting from EGTRRA are not extended, beginning January 1, 2011, the Internal Revenue Code will be restored to its pre-EGTRRA form.
This creates uncertainty as to future tax requirements and implications. Please consult a qualified tax or financial
adviser for further information relating to EGTRRA and other tax issues.
Required Distributions
Any distribution paid that is NOT due to payment of the death benefit may be subject to a CDSC.
The Internal Revenue Code requires that certain distributions be made from the contracts issued in conjunction with this prospectus. Following is an overview of the required distribution rules applicable to each type of contract. Please consult a qualified tax or financial adviser for more specific required distribution information.
If you purchase a Lifetime Income Option, surrenders in excess of the annual benefit amount may be required to satisfy the minimum distribution requirements under the Internal Revenue Code. Please consult a qualified tax advisor.
Required Distributions – General Information
In general, a beneficiary is an individual or other entity that the Contract Owner designates to receive death proceeds upon the Contract Owner’s death. The distribution rules in the Internal Revenue Code make a distinction between “beneficiary” and “designated beneficiary” when determining the life expectancy that may be used for payments that are made from IRAs, SEP IRAs, Simple IRAs, and Roth IRAs after the death of the Annuitant, or that are made from Non-Qualified Contracts after the death of the Contract Owner. A designated beneficiary is a natural person who is designated by the Contract Owner as the beneficiary under the contract. Non-natural beneficiaries (e.g. charities or certain trusts) are not designated beneficiaries for the purpose of required distributions and the life expectancy of such a beneficiary is zero.
Life expectancies and joint life expectancies will be determined in accordance with the relevant guidance provided by the Internal Revenue Service and the Treasury Department, including but not limited to Treasury Regulation 1.72-9 and Treasury Regulation 1.401(a)(9)-9.
Required distributions paid upon the death of the Contract Owner are paid to the beneficiary or beneficiaries stipulated by the Contract Owner. How quickly the distributions must be made may be determined with respect to the life expectancies of the beneficiaries. For Non-Qualified Contracts, the beneficiaries used in the determination of the distribution period are those in effect on the date of the Contract Owner’s death. For contracts other than Non-Qualified Contracts, the beneficiaries used in the determination of the distribution period do not have to be determined until September 30 of the year following the Contract Owner’s death. If there is more than one beneficiary, the life expectancy of the beneficiary with the shortest life expectancy is used to determine the distribution period. Any beneficiary that is not a designated beneficiary has a life expectancy of zero.
Required Distributions for Non-Qualified Contracts
Internal Revenue Code Section 72(s) requires Nationwide to make certain distributions when a Contract Owner dies. The following distributions will be made in accordance with the following requirements:
| (1) | If any Contract Owner dies on or after the Annuitization Date and before the entire interest in the contract has been distributed, then the remaining interest must be distributed at least as rapidly as the distribution method in effect on the Contract Owner's death. |
| (2) | If any Contract Owner dies before the Annuitization Date, then the entire interest in the contract (consisting of either the death benefit or the Contract Value reduced by charges set forth elsewhere in the contract) will be distributed within 5 years of the Contract Owner’s death, provided however: |
| | (a) | any interest payable to or for the benefit of a designated beneficiary may be distributed over the life of the designated beneficiary or over a period not longer than the life expectancy of the designated beneficiary. Payments must begin within one year of the Contract Owner's death unless otherwise permitted by federal income tax regulations; and |
| | (b) | if the designated beneficiary is the surviving spouse of the deceased Contract Owner, the spouse can choose to become the Contract Owner instead of receiving a death benefit. Any distributions required under these distribution rules will be made upon that spouse’s death. |
In the event that the Contract Owner is not a natural person (e.g., a trust or corporation), for purposes of these distribution provisions:
| (a) | the death of the Annuitant will be treated as the death of a Contract Owner; |
| (b) | any change of Annuitant will be treated as the death of a Contract Owner; and |
| (c) | in either case, the appropriate distribution will be made upon the death or change, as the case may be. |
These distribution provisions do not apply to any contract exempt from Section 72(s) of the Internal Revenue Code by reason of Section 72(s)(5) or any other law or rule.
Required Distributions for IRAs, SEP IRAs, Simple IRAs and Roth IRAs
Distributions from an IRA, SEP IRA or Simple IRA must begin no later than April 1 of the calendar year following the calendar year in which the Contract Owner reaches age 70½. Distributions may be paid in a lump sum or in substantially equal payments over:
| (a) | the life of the Contract Owner or the joint lives of the Contract Owner and the Contract Owner’s designated beneficiary; or |
| (b) | a period not longer than the period determined under the table in Treasury Regulation 1.401(a)(9)-9, which is the deemed joint life expectancy of the Contract Owner and a person 10 years younger than the Contract Owner. If the designated beneficiary is the spouse of the Contract Owner, the period may not exceed the longer of the period determined under such table or the joint life expectancy of the Contract Owner and the Contract Owner’s spouse, determined in accordance with Treasury Regulation 1.72-9, or such additional guidance as may be provided pursuant to Treasury Regulation 1.401(a)(9)-9. |
For IRAs, SEP IRAs and Simple IRAs, required distributions do not have to be withdrawn from this contract if they are being withdrawn from another IRA, SEP IRA or Simple IRA of the Contract Owner.
The Worker, Retiree, and Employer Recovery Act of 2008 provides that the normal required distribution rules will not be applicable to defined contribution plans (which generally includes IRAs, TSAs and SEP IRAs) during 2009. However, annuitized distributions from such plans may not receive the same exception and should continue to be made. Consequently, if you desire to forego the distribution that would be required to be made to you during 2009, you should consult with your advisor and notify us of your decision.
If the Contract Owner’s entire interest in an IRA, SEP IRA or Simple IRA will be distributed in equal or substantially equal payments over a period described in (a) or (b) above, the payments must begin on or before the required beginning date. The required beginning date is April 1 of the calendar year following the calendar year in which the Contract Owner reaches age 70½. The rules for Roth IRAs do not require distributions to begin during the Contract Owner’s lifetime, therefore, the required beginning date is not applicable to Roth IRAs.
Due to recent changes in Treasury Regulations, the amount used to compute the minimum distribution requirement may exceed the Contract Value.
If the Contract Owner dies before the required beginning date (in the case of an IRA, SEP IRA or Simple IRA) or before the entire Contract Value is distributed (in the case of Roth IRAs), any remaining interest in the contract must be distributed over a period not exceeding the applicable distribution period, which is determined as follows:
| | a) | if the designated beneficiary is the Contract Owner’s spouse, the applicable distribution period is the surviving spouse’s remaining life expectancy using the surviving spouse’s birthday for each distribution calendar year after the calendar year of the Contract Owner’s death. For calendar years after the death of the Contract Owner’s surviving spouse, the applicable distribution period is the spouse’s remaining life expectancy using the spouse’s age in the calendar year of the spouse’s death, reduced by one for each calendar year that elapsed since the calendar year immediately following the calendar year of the spouse’s death; |
| | b) | if the designated beneficiary is not the Contract Owner’s surviving spouse, the applicable distribution period is the designated beneficiary’s remaining life expectancy using the designated beneficiary’s birthday in the calendar year immediately following the calendar year of the Contract Owner’s death, reduced by one for each calendar year that elapsed thereafter; and |
| | c) | if there is no designated beneficiary, the entire balance of the contract must be distributed by December 31 of the fifth year following the Contract Owner’s death. |
If the Contract Owner dies on or after the required beginning date, the interest in the IRA, SEP IRA or Simple IRA must be distributed over a period not exceeding the applicable distribution period, which is determined as follows:
| (a) | if the designated beneficiary is the Contract Owner’s spouse, the applicable distribution period is the surviving spouse’s remaining life expectancy using the surviving spouse’s birthday for each distribution calendar year after the calendar year of the Contract Owner’s death. For calendar years after the death of the Contract Owner’s surviving spouse, the applicable distribution period is the greater of (a) the Contract Owner’s remaining life expectancy using the Contract Owner’s birthday in the calendar year of the Contract Owner’s death, reduced by one for each year thereafter; or (b) the spouse’s remaining life expectancy using the spouse’s age in the calendar year of the spouse’s death, reduced by one for each calendar year that elapsed since the calendar year immediately following the calendar year of the spouse’s death; |
| (b) | if the designated beneficiary is not the Contract Owner’s surviving spouse, the applicable distribution period is the greater of (a) the Contract Owner’s remaining life expectancy using the Contract Owner’s birthday in the calendar year of the Contract Owner’s death, reduced by one for each year thereafter; or (b) the designated beneficiary’s remaining life expectancy using the designated beneficiary’s birthday in the calendar year immediately following the calendar year of the Contract Owner’s death, reduced by one for each calendar year that elapsed thereafter; and |
| (c) | if there is no designated beneficiary, the applicable distribution period is the Contract Owner’s remaining life expectancy using the Contract Owner’s birthday in the calendar year of the Contract Owner’s death, reduced by one for each year thereafter. |
If distribution requirements are not met, a penalty tax of 50% is levied on the difference between the amount that should have been distributed for that year and the amount that actually was distributed for that year.
For IRAs, SEP IRAs and Simple IRAs, all or a portion of each distribution will be included in the recipient’s gross income and taxed at ordinary income tax rates. The portion of a distribution that is taxable is based on the ratio between the amount by which non-deductible purchase payments exceed prior non-taxable distributions and total account balances at the time of the distribution. The owner of an IRA, SEP IRA or Simple IRA must annually report the amount of non-deductible purchase payments, the amount of any distribution, the amount by which non-deductible purchase payments for all years exceed non taxable distributions for all years, and the total balance of all IRAs, SEP IRAs or Simple IRAs.
Distributions from Roth IRAs may be either taxable or nontaxable, depending upon whether they are “qualified distributions” or “non-qualified distributions.”
Described below are the variations to certain prospectus disclosures resulting from state law or the instruction provided by state insurance authorities as of the date of this prospectus. Information regarding a state’s requirements does not mean that Nationwide currently offers contracts within that jurisdiction. These variations are subject to change without notice and additional variations may be imposed as required by specific states.
California – Nationwide will honor any free look cancellation that is received at Nationwide’s home office or postmarked within 35 days after the contract issue date. Nationwide will allocate initial purchase payments allocated to Sub-Accounts to the Fixed Account during the free look period. After the free look period, Nationwide will reallocate the Contract Value among the Sub-Accounts based on the instructions contained on the application.
Hawaii – Joint owners are not limited to spouses. See “Ownership and Interests in the Contract” earlier in this prospectus for more information.
Indiana – Purchase payments, if any, after the initial purchase payment must be at least $500 and may only be made until the later of the Contract Owner reaching 63 years of age or the sixth Contract Anniversary. See “Synopsis of the Contracts” subsection “Minimum Initial and Subsequent Purchase Payments” earlier in this prospectus for more information.
Massachusetts – The Long-Term Care/Nursing Home Waiver is not available. See “Standard Charges and Deductions” subsection “Contingent Deferred Sales Charge” subsection “Long-Term Care/Nursing Home and Terminal Illness Waiver” earlier in this prospectus for more information.
Purchase payments, if any, after the initial purchase payment may only be made until the later of the Contract Owner reaching 63 years of age or the sixth Contract Anniversary. See “Synopsis of the Contracts” subsection “Minimum Initial and Subsequent Purchase Payments” earlier in this prospectus for more information.
New Jersey – Charitable Remainder Trust contract type is not available. See “Synopsis of the Contracts” earlier in this prospectus for more information.
The Beneficiary Protector II Option is not available. See “Optional Contract Benefits, Charges and Deductions” subsection “Beneficiary Protector II Option” earlier in this prospectus for more information.
The Long-Term Care/Nursing Home and Terminal Illness Waiver is not available. See “Standard Charges and Deductions” subsection “Contingent Deferred Sales Charge” subsection “Long-Term Care/Nursing Home and Terminal Illness Wavier” earlier in this prospectus for more information.
For CDSC-free partial surrenders, the amount required to meet IRC minimum distribution requirements is not included in the calculation to determine the amount that may be surrendered without CDSC. See “Standard Charges and Deductions” subsection “Contingent Deferred Sales Charge” subsection “Waiver of Contingent Deferred Sales Charge” earlier in this prospectus for more information.
The age based component of the calculation to determine the withdrawal amount that may be surrendered without CDSC under the Systematic Withdrawals program is not available. See “Contract Owner Services” earlier in this prospectus for more information.
Joint owners are not limited to spouses. See “Ownership and Interests in the Contract” earlier in this prospectus for more information.
Total purchase payments may not exceed $2,000,000 or ($1,000,000 if an optional rider is elected). See “Synopsis of the Contracts” subsection “Minimum Initial and Subsequent Purchase Payments” earlier in this prospectus for more information.
A Contract Owner cannot meet the minimum initial purchase payment requirement by making purchase payments equal to the required minimum over the course of the first Contract Year. See “Synopsis of the Contracts” subsection “Minimum Initial and Subsequent Purchase Payments” earlier in this prospectus for more information.
The calculations used to determine the amount of the One-Year Enhanced Death Benefit, One-Month Enhanced Death Benefit and Combination Enhanced Death Benefit if the Annuitant dies prior to the Annuitization Date and the total of all purchase payments made to the contract is greater than $3,000,000 are not applicable. See “Death Benefits” subsection “Death Benefit Calculations“ subsections “One-Year Enhanced Death Benefit Option,” “One-Month Enhanced death Benefit Option” and “Combination Enhanced Death Benefit Option” earlier in this prospectus for more information.
T he Spousal Continuation Benefit s are referred to as Secondary Life Continuation Benefits. A Secondary Life Continuation Benefit is available to any two people but additional restrictions apply. Once elected, the Secondary Life Continuation Benefit may not be removed. See “Optional Contract Benefits, Charges and Deductions” subsection “ 10% and 5% Spousal Continuation Benefit” earlier in this prospectus for more information.
The Spousal Protection Feature is referred to as the Secondary Life Protection Feature. The Secondary Life Protection Feature is available to any two people but additional restrictions apply. The Secondary Life Protection Feature must be elected at the time of application and is not available to be elected after contract issuance. Once elected, the Secondary Life Protection Feature may not be removed. See “Death Benefits” subsection “Death Benefit Calculations” subsection “Spousal Protection Feature” earlier in this prospectus for more information.
New York - The Long-Term Care/Nursing Home and Terminal Illness Waiver is not available. See “Standard Charges and Deductions” subsection “Contingent Deferred Sales Charge “subsection” Long-Term Care/Nursing Home and Terminal Illness Wavier” earlier in this prospectus for more information.
The Beneficiary Protector II Option is not available. See “Optional Contract Benefits, Charges and Deductions” subsection “Beneficiary Protector II Option” earlier in this prospectus for more information.
Joint owners are not limited to spouses. See “Ownership and Interests in the Contract” earlier in this prospectus for more information.
If no purchase payment is received three (3) years prior to the Annuitization Date and, if the net amount to be applied to any annuity payment option at the Annuitization Date is less than $2,000, Nationwide has the right to pay this amount in one lump sum instead of periodic annuity payments. See “Annuitizing the Contract” subsection “Frequency and Amount of Annuity Payments” earlier in this prospectus for more information.
The Combination Enhanced Death Benefit Option is not available. See “Death Benefits” subsection “Death Benefit Calculations” subsection “Combination Enhanced Death Benefit Option” earlier in this prospectus for more information.
For purpose of the 10% Lifetime Income Option, the Spousal Continuation Benefit is not available. See “ Optional Contract Benefits, Charges and Deductions ” subsection “ 10% and 5% Spousal Continuation Benefit ” earlier in this prospectus for more information.
The 5% Lifetime Income Option is only available for contracts issued in the State of New York. See “Optional Contract Benefits, Charges and Deductions” subsection “5% Lifetime Income Option” earlier in this prospectus for more information.
The 10% Lifetime Income Option requires that the age of the person upon which the benefit depends (the “ determining life ” ) must be between 57 and 85 years old at the time of application. See “ Optional Contract Benefits, Charges and Deductions ” subsection “ 10% Lifetime Income Option ” earlier in this prospectus for more information.
North Dakota - The Beneficiary Protector II Option is not available. See “Optional Contract Benefits, Charges and Deductions” subsection “Beneficiary Protector II Option” earlier in this prospectus for more information.
Oregon - Purchase payments, if any, after the initial purchase payment may only be made until the later of the Contract Owner reaching 63 years of age or the sixth Contract Anniversary. See “Synopsis of the Contracts” subsection “Minimum Initial and Subsequent Purchase Payments” earlier in this prospectus for more information.
Joint owners are not limited to spouses. See “Ownership and Interests in the Contract” earlier in this prospectus for more information.
The maximum transferable amount from the Fixed Account will never be less than 25% of the allocation reaching the end of an interest rate guarantee period. See “Operation of the Contract” subsection “Transfers Prior to Annuitization” subsection “Transfers from the Fixed Account” earlier in this prospectus for more information.
The Enhanced Fixed Account Dollar Cost Averaging program offers a rate of interest of at least 0.05% over the standard declared rate for the Fixed Account. See “Contract Owner Services” earlier in this prospectus for more information.
Pennsylvania - The Long-Term Care/Nursing Home and Terminal Illness Waiver is not available. See “Standard Charges and Deductions” subsection “Contingent Deferred Sales Charge” subsection “Long-Term Care/Nursing Home and Terminal Illness Waiver” earlier in this prospectus for more information.
Joint owners are not limited to spouses. See “Ownership and Interests in the Contract” earlier in this prospectus for more information.
Texas - CDSC will not apply if the Contract Owner (or Annuitant if the contract has a non-natural owner) is confined to a long-term care facility or hospital for a continuous 90 day period after the first Contract Anniversary. Written proof of confinement is a bill or a statement from the physician or from the long-term care facility or hospital, as defined in the contract that demonstrates the continuous 90-day confinement of the Contract Owner at the time of withdrawal or surrender occurring after the first Contract Anniversary. The request for waiver must be received by Nationwide during the period of confinement or no later than 91 days after the confinement period ends. If the request for waiver is received later than 91 days after the confinement period ends, the CDSC, if applicable, will be assessed. See “Contingent Deferred Sales Charge” subsection “Long-Term Care/Nursing Home and Terminal Illness Waiver” earlier in this prospectus for more information.
CDSC will not be charged if the Contract Owner (or a joint owner) is diagnosed by a physician (who is not a party to the contract or an immediate family member of a party to the contract) to have a terminal illness at any time after the contract has been issued. Written notice requesting a terminal illness waiver of CDSC and proof of terminal illness must be provided by the physician to Nationwide and recorded at Nationwide prior to the waiver of surrender charges. See “Contingent Deferred Sales Charge“ subsection “Long-Term Care/Nursing Home and Terminal Illness Waiver” earlier in this prospectus for more information.
Vermont - Joint owners are not limited to spouses. See “Ownership and Interests in the Contract” earlier in this prospectus for more information.
Washington - The Beneficiary Protector II Option is not available. See “Optional Contract Benefits, Charges and Deductions” subsection “Beneficiary Protector II Option” earlier in this prospectus for more information.
The CDSC-free withdrawal privilege is available on surrenders (full and partial) of the contract equal to 10% of the net difference of purchase payments still subject to CDSC. See “Standard Charges and Deductions” subsection “Contingent Deferred Sales Charge” subsection “Waiver of Contingent Deferred Sales Charge” earlier in this prospectus for more information.
Purchase payments, if any, after the initial purchase payment may only be made until the later of the Contract Owner reaching 63 years of age or the sixth Contract Anniversary. See “Synopsis of the Contracts” subsection “Minimum Initial and Subsequent Purchase Payments” earlier in this prospectus for more information.
The Combination Enhanced Death Benefit Option is not available. See “Death Benefits” subsection “Death Benefit Calculations” subsection “Combined Enhanced Death Benefit Option” earlier in this prospectus for more information.
The age based component of the calculation to determine the withdrawal amount that may be surrendered without CDSC under the Systematic Withdrawals program is not available. See “Contract Owner Services” subsection “Systematic Withdrawals earlier in this prospectus for more information.
