Exhibit 1(11)
DESCRIPTION OF GE LIFE AND ANNUITY ASSURANCE COMPANY'S ISSUANCE, TRANSFER
REDEMPTION, AND EXCHANGE PROCEDURES FOR POLICIES
This document sets forth certain administrative procedures that will be followed
by GE Life and Annuity Assurance Company ("GE Life & Annuity") in connection
with its Single Premium Variable Life Insurance Policy ("Policy" or "Policies")
supported by GE Life & Annuity Separate Account III (File Nos. 333-37856 and
811-5054). Included is a description of the issuance procedures to be used in
connection with the Policy, the transfer of assets held thereunder, and the
redemption by Policy Owners of their interests in the Policies.
1. "Public Offering Price": Purchase and Related Transactions
Set out below is a summary of the principal Policy provisions and
administrative procedures that might be deemed to constitute, either
directly or indirectly, a "purchase transaction." The summary shows that,
because of the insurance nature of the Policies, the procedures involved
necessarily differ in certain significant respects from the purchase
procedures for mutual funds and contractual plans.
(a) Premiums and Underwriting Standards
Premiums for the Policies will not be the same for all Policy Owners. For a
given Specified Amount, the initial premium will depend on the age, gender
and risk classification of the Insured under a single life Policy or both
Insureds under a joint and last survivor Policy. The initial premium is due
on the Policy Date and is the guideline single premium for life insurance
as determined in the Internal Revenue Code. The minimum initial premium is
$25,000.
There are three general circumstances in which Additional Premium Payments
may be made. All three circumstances require that there be no outstanding
Policy Debt at the time the Additional Premium Payment is made. First,
after the first policy year, the Policy Owner may request an increase in
Specified Amount. If the Policy Owner's request is approved, GE Life &
Annuity will require the Policy Owner to make an Additional Premium Payment
in order for an increase to become effective. Second, if the Surrender
Value on a Monthly Anniversary Day is insufficient to cover the monthly
deduction due on that Monthly Anniversary Day, then the Policy Owner may
make an Additional Premium Payment during the grace period sufficient to
cover the monthly deduction. Such a payment will be required in order to
prevent lapse. Third, Additional Premium Payments may be made, at the
Policy Owner's discretion, so long as the amount of the payment is at least
$1,000 and the payment plus the total of all premiums previously paid does
not exceed the maximum premiums limitation shown in the Policy.(1)
If an Additional Premium Payment is made under the third circumstance that
causes the total amount of premiums paid under the Policy to exceed the
maximum premium limitation, GE Life & Annuity will accept only the portion
of the premium, which together with premiums previously paid, equals the
maximum premiums limitation and return the excess to the Policy Owner.
Thereafter, no Additional Premium Payments will be accepted under the third
general circumstance until allowed by the maximum premium limitation.
The Policy will remain in force so long as the Surrender Value (Account
Value less Policy Debt less any surrender charge) is sufficient to pay the
monthly deduction. Thus, the amount that must be paid to keep the Policy in
force depends on the Account Value of the Policy, which in turn depends on
the investment experience of GE Life & Annuity Separate Account III
("Separate Account III") and the cost of insurance charge. The cost of
insurance rate utilized in computing the guaranteed cost of insurance
charge will not be the same for each Policy Owner. The chief reason is that
the principle of pooling and distribution of mortality risks is based on
- -------------------------
(1) The maximum premiums limitation will be derived from the guideline premium
test for life insurance set forth in the Internal Revenue Code. Because of
that test, the maximum premiums limitation ordinarily will equal the
initial premium for a number of years. Therefore, discretionary Additional
Premium Payments normally will not be permitted during the early years of
the Policy.
the assumption that the cost of insuring each Insured is commensurate with
their mortality risk which is actuarially determined based upon factors
such as the Insured's gender and Attained Aged. While not all insurance
will be subject to the same guaranteed cost of insurance rate, there will
be a single guaranteed "rate" for all Insureds in a given actuarial
category.
The Policies will be offered and sold pursuant to established underwriting
standards and in accordance with state insurance laws. State insurance laws
prohibit unfair discrimination but recognize that premiums and Policy
benefits must be based upon factors such as age, gender, health and
occupation.
(b) Application and Initial Premium Processing
Upon receipt of a completed application or a supplemental application, GE
Life & Annuity will follow certain insurance underwriting (i.e., evaluation
of risks) procedures designed to determine whether the proposed Insured or
both Insureds, in the case of a joint and last survivor Policy, are
insurable. This process may involve such verification procedures as medical
examinations or tests and may require that the applicant provide further
information before a determination can be made. A Policy will not be issued
until this underwriting procedure has been completed.
If the Policy is issued as applied for, insurance coverage under the Policy
normally will begin on the later of the policy date or the end of the
Valuation Period(2) during which GE Life & Annuity receives the initial
premium. If the Policy is issued on a basis other than as applied for, the
insurance coverage will normally begin on the date the Policy is accepted
by the Policy Owner or at the end of the Valuation Period during which the
initial premium is received, whichever is later.
The Policy Owner determines the allocation of premiums among the
Subaccounts of Separate Account III; however, at any one point in time, the
Account Value may not be invested in more than ten Subaccounts.
Furthermore, the minimum percentage that may be allocated to any one
Subaccount is 1%.
Until the application is approved, all necessary forms (including any
subsequent amendments to the application) are received, and the entire
initial premium is received, any premium paid will be placed into a non-
interest bearing account. Once all these conditions are met, the initial
premium from the non-interest bearing account will be transferred to the
Subaccounts selected on the application. Any portion of the initial premium
designated for the Guarantee Account will be transferred to the Guarantee
Account.
A Policy Date is assigned to each Policy when the Policy is issued. The
Policy Date will normally be a date between the date the application is
signed and the date the Policy is issued; however, the Policy Date may be
any other date mutually agreeable to GE Life & Annuity and the Policy
Owner. If the Policy Date would otherwise fall on the 29th, 30th or 31st
day of a month, the Policy Date will be the 28th.
Policy years for the original Specified Amount and the initial premium are
measured from the Policy Date. With regard to increases in the Specified
Amount, however, "years" are measured from the effective date of the
increase.
(c) Changes in the Specified Amount
After the first policy year, the Policy Owner may request an increase in
the Specified Amount by submitting a supplemental application to GE Life &
Annuity, along with evidence of the Insured's insurability under a single
life Policy or both Insureds under a joint and last survivor Policy. Once
the increase has been approved, the Policy Owner must make an Additional
Premium Payment in order for an increase to become effective. The required
Additional Premium Payment will be the greater of (1) the increase in the
guideline single premium due to the increase in the Specified Amount and
(2) the maximum premiums limitation allowed immediately after the increase,
less the total premiums paid to date. The amount of the required Additional
Premium Payment will be based on the amount of the increase requested and
the Insured's gender and Attained Age under a single life Policy or the
gender and Attained Age of both Insureds under a joint and last survivor
Policy. The minimum increase in Specified Amount is one that requires a
$1,000 Additional Premium Payment.
- -----------------------
(2) The Valuation Period is the period between the close of business on a
Valuation Day and the close of business on the next succeeding Valuation
Day. A Valuation Day is each day on which the New York Stock Exchange is
open for regular trading except for days that the Subaccount's
corresponding portfolio does not value its shares.
(d) Reinstatement
Prior to the Maturity Date, a lapsed Policy may be reinstated at any time
within three years after the date of lapse by submitting to GE Life &
Annuity evidence satisfactory to it that the Insured under a single life
Policy is or both Insureds under a joint and last survivor Policy are
insurable. In addition, a payment must be made which is sufficient to cover
the monthly deductions for the first two Policy Months following
reinstatement; GE Life & Annuity may, however, accept a payment larger than
this amount as long as immediately after the payment the total of all
premium payments made is less than the maximum premiums limitation shown in
the policy data pages.
Any Policy Debt that existed at the end of the grace period will be
reinstated if it is not paid. If there is outstanding Policy Debt, the
payment will be treated first as repayment of Policy Debt; any additional
amount paid will be treated as an Additional Premium Payment. Regardless of
whether the payment is made as repayment of Policy Debt or an Additional
Premium Payment, the amount of the payment must be sufficient to cover the
monthly deductions for the first two policy months following reinstatement.
The Policy will be reinstated on the date the reinstatement is approved
by GE Life & Annuity.
GE Life & Annuity will not reinstate a Policy that has been surrendered for
its Surrender Value.
(e) Repayment of Policy Debt
A portion of the Policy loans taken or existing on or after the preferred
loan availability date (as shown on the Policy data pages) will be
designated as preferred policy debt. In Policy Years 2 and later,
preferred policy debt will be at least as large as the Account Value minus
the total premiums paid.
Policy loans will be subject to a charge. The effective annual rate on any
outstanding non-preferred policy debt will be 6% and the effective annual
rate on preferred policy debt will be 4%. Policy Debt (policy loans plus
accrued interest) may be repaid in whole or in part at any time while the
Insured is living and the Policy is in force under a single life Policy or
while either Insured is living and the Policy is in force under a Joint and
Last Survivor Policy. So long as there is any outstanding Policy Debt, any
payments received by GE Life & Annuity, other than the initial premium,
will be considered as repayment of the Policy Debt. The portion of a
payment in excess of any outstanding Policy Debt will be treated as an
Additional Premium Payment, if the other conditions for an Additional
Premium Payment are met. Whenever a repayment is made, the Account Value in
the General Account securing the repaid portion of the Policy Debt will be
transferred back to Separate Account III and allocated among the
Subaccounts in accordance with the written instructions of the Policy
Owner. GE Life & Annuity will allocate the Account Value securing the
repaid portion of Policy Debt at the end of the Valuation Period during
which the repayment is made.
(f) Correction of Misstatement of Age or Gender
If an Insured's age or gender was misstated in an application, the Death
Benefit Proceeds will be adjusted. The adjusted Death Benefit Proceeds will
be the sum of (a) and (b) where: (a) is the Account Value at the time of
the death of the Insured; and (b) is the unadjusted Death Benefit, reduced
by the Account Value at the time of the Insured's death, and multiplied by
the ratio of (1) the most recent monthly deduction based on the age and
gender shown in the application, to (2) the most recent monthly deduction
based on the true age or gender. All amounts are those in effect in the
Policy Month of the Insured's death.
In no event will the Death Benefit be less than the amount required to keep
the Policy qualified as life insurance.
2. Transfers Among Subaccounts
A Policy Owner may transfer amounts among the Subaccounts; at any one point
in time, however, the Account Value may not be invested in more than ten
Subaccounts.
There is no limitation on the number of transfers or the amount that can be
transferred; however, GE Life & Annuity reserves the right to limit the
number of transfers, if necessary, in order that the Policy will continue
to receive life insurance treatment by the Internal Revenue Service. The
first transfer in each calendar month is without charge. GE Life & Annuity
reserves the right to assess a $10 charge for each subsequent transfer from
the amount transferred. All transfers will be made as of the end of the
Valuation period during which GE Life & Annuity receive the transfer
request.
3. Redemption Procedures: Surrender and Related Transactions
This section outlines those procedures that might be deemed to constitute
redemptions under the Policy. These procedures differ in certain
significant respects from redemption procedures for mutual funds and
contractual plans.
(a) Surrender for Account Value
During the Insured's life under a single life Policy or while at least one
Insured is living under a Joint and Last Survivor Policy, and as long as
the Policy is in effect, a Policy Owner may surrender the Policy at any
time by sending a written request, along with the Policy, to GE Life &
Annuity at its Home Office. Upon surrender, the Policy Owner will receive
the Surrender Value (Account Value less any outstanding Policy Debt and
less any applicable surrender charge) of the Policy computed as of the end
of the Valuation Period during which the surrender request is received by
GE Life & Annuity. Account Value will be determined on a daily basis,
thereby enabling GE Life & Annuity to pay a Surrender Value based on the
next computed value after a request is received. Surrenders will generally
be paid within seven days of receipt of a written request.(3) The Surrender
Value may be paid in a lump sum or under one of the optional payment plans
specified in the Policy.
A surrender charge will be imposed under surrenders that occur within seven
years of the initial premium payment to cover certain expenses relating to
the sale of the Policy, including premium taxes, commissions to registered
representatives and other promotional expenses. This surrender charge,
along with any outstanding Policy Debt, will be deducted from the Account
Value to determine the amount payable upon surrender.
GE Life & Annuity will make the payment of the Surrender Value out of its
General Account and, at the same time, transfer assets from Separate
Account III in an amount equal to the Account Value less any outstanding
Policy Debt.
(b) Benefit Claims
So long as the Policy remains in force, GE Life & Annuity will pay Death
Benefit Proceeds to the Primary or Contingent Beneficiary upon the death of
the Insured under a single life Policy or both Insureds under a joint and
last survivor Policy. Payment will be made in a lump sum or in accordance
with the designated optional payment plan. Death Benefit Proceeds
ordinarily will be paid within seven days after receipt of due proof of
death, but payment may be postponed under certain circumstances.(4) The
amount of the Death Benefit Proceeds will be determined as of the date on
which the Insured's death occurred. In determining the Proceeds payable,
the Death Benefit provided by the Policy will be reduced by any outstanding
Policy Debt and any due and unpaid monthly deductions. Interest will be
paid by GE Life & Annuity at its current rate, or at a rate required by
state law, if greater.
As long as the Policy remains in force, the Death Benefit will never be
less than the Specified Amount. Initially, the Specified Amount is
determined when the Policy is issued by the amount of the initial premium
- ------------------------
(3) Amounts payable as a result of surrender, policy loan, and the payment of
Death Benefit Proceeds or benefits at maturity may be postponed whenever:
(i) the New York Stock Exchange is closed other than customary weekend
and holiday closings, or trading on the New York Stock Exchange is
restricted as determined by the Commission; or
(ii) the Commission by order permits postponement for the protection of
Policy Owners; or
(iii) an emergency exists, as determined by the Commission, as a result
of which disposal of securities is not reasonably practicable or
it is not reasonably practicable to determine the value of the net
assets of Separate Account III.
Payments under the Policy which are derived from any amount paid to GE Life
& Annuity by check or draft may be postponed until such time as GE Life &
Annuity is satisfied that the check or draft has cleared the bank upon
which it is drawn.
(4) See supra note 3.
and the age, gender and applicable risk class of the Insured under a single
life Policy or both Insureds under a joint and last survivor Policy. After
a Policy has been in effect for one year, however, the Specified Amount may
be increased.
Under the terms of the Policy, the Policy's Death Benefit may be greater
than the Specified Amount, depending upon the length of time the Policy is
in force, any Additional Premium Payments made, and the Policy's investment
results. If it is greater than the Specified Amount, it will vary with the
Policy's Account Value and will depend upon a corridor percentage. The
calculation of the Death Benefit based on the corridor percentage occurs
only when the Account Value reaches a certain proportion of the Specified
Amount. Because there is no guaranteed Account Value, there is no guarantee
this will occur. The corridor percentage depends upon the Attained Age of
the Insured under a single life Policy or both Insureds under a joint and
last survivor Policy. For a single life Policy, the corridor percentage is
250% until attainment of Age 40 and declines after that as the Insured's
Attained Age increases. For a joint and last survivor Policy, the corridor
percentage is 250% until the younger Insured attains age 40 and declines
after that as the younger Insured's Attained Age increases). If the
younger Insured was the first to die, the corridor percentage will depend
on the Attained Age that he or she would have been if still living.
(c) Policy Loans
The Policy Owner may borrow money from GE Life & Annuity using the Policy
as the only security for the loan. Loans have priority over the claims of
any assignee or other person. The minimum loan amount is $1,000. The
Maximum Loan Amount is 90% of the Policy's Account Value at the end of the
Valuation Period during which the loan request is received, less any
surrender charge. The amount available to be borrowed at any given time is
the Maximum Loan Amount reduced by any outstanding Policy Debt. Policy
loans ordinarily will be paid within seven days after GE Life & Annuity
receives a request for a loan at its Home Office, although payments may be
postponed.
Policy Debt equals the total of all policy loans and any accrued interest
on the loans. The loan and any accrued interest may be repaid in whole or
in part at any time while the Insured is living and the Policy is in force
under a single life Policy or while either Insured is living and the Policy
is in force under a Joint and Last Survivor Policy. Interest accrues daily
and is due and payable on each policy anniversary. If interest is not paid
when due, an amount equal to the amount owed will be treated as a policy
loan and interest will be charged on that amount.
When a policy loan is made, a portion of the Policy's Account Value equal
to the loan amount will be transferred out of Separate Account III into GE
Life & Annuity's General Account to be held as "collateral" for the loan.
It will be transferred in accordance with instructions from the Policy
Owner or, absent any instructions, in the same proportion that the Account
Value in each Subaccount bears to the total Account Value in all
Subaccounts on the date the loan is made. Where the amount transferred out
of Separate Account III is insufficient to cover the total loan amount, the
remaining portion will be taken from Account Value in the Guarantee Account
to be held as "collateral" for the loan, starting with the amounts that
have been in the Guarantee Account for the longest period of time. Any loan
interest that is due and unpaid will also be so transferred.
Currently, GE Life & Annuity credits interest at an annual rate of 4% for
that part of the Account Value that secures Policy Debt. On each policy
anniversary, the interest earned since the preceding policy anniversary
will be credited and transferred to Separate Account III.
If Policy Debt exceeds the Account Value less any applicable surrender
charge, GE Life & Annuity will notify the Policy Owner and any assignee of
record. A payment at least equal to the excess Policy Debt must be made to
GE Life & Annuity within 61 days from the date notice is sent; otherwise
the Policy will lapse and terminate without value. The Policy may, however,
later be reinstated.
(d) Lapse of Policy
Lapse will occur if, on a Monthly Anniversary Day, the Surrender Value is
insufficient to cover the monthly deduction due on that Monthly Anniversary
Day, and a grace period expires without a sufficient payment. If the
Surrender Value is insufficient to cover the monthly deduction, the Policy
Owner must, during the grace period, make a payment that is sufficient to
cover any due and unpaid monthly deductions.
If the Surrender Value is insufficient to cover the monthly deduction due,
GE Life & Annuity will notify the Policy Owner of the shortfall. The Policy
Owner will then have a grace period of 61 days, measured from the date
notice is sent to the Policy Owner, to make sufficient payment. See
Reinstatement. Failure to make a sufficient payment during the grace period
will cause the Policy to lapse and terminate without value. Insurance
coverage continues during the grace period, but the Policy will be deemed
to have no Account Value for purposes of policy loans and surrenders. If
the Insured under a single life Policy or both Insureds under a joint and
last survivor Policy dies during the grace period, the Death Benefit
Proceeds payable during the grace period will equal the amount of the Death
Benefit in effect immediately prior to the commencement of the grace period
less any due and unpaid monthly deductions and any outstanding Policy Debt.
4. Exchange of Policy
During the first 24 Policy Months, the Policy Owner may convert this Policy
to a permanent fixed benefit policy. The amount of the new Policy will be
the Specified Amount of this Policy on the date of the Exchange. Premiums
will be based on the same issue age and risk classification of the Insured
or Insureds, in the case of a joint and last survivor Policy, as the
existing Policy. The conversion will be subject to an equitable adjustment
in payments and Account Values to reflect the variances, if any, in the
payments and account values under the existing Policy and the new policy.