REGISTRATION STATEMENT NO. 333-103909
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-2
POST-EFFECTIVE NO. 2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THE TRAVELERS INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
CONNECTICUT
(State or other jurisdiction of incorporation or organization)
I.R.S. Employer Identification Number: 06-0566090
P.O. BOX 990026
HARTFORD, CONNECTICUT 06199-0026
(860) 308-1000
(Address, including Zip Code, and Telephone Number, including Area Code,
of Registrant's Principal Executive Offices)
ERNEST J. WRIGHT
Secretary
The Travelers Insurance Company
P. O. Box 990026
Hartford, Connecticut 06199-0026
(860) 308-1000
(Name, Address, including Zip Code, and Telephone Number,
including Area Code of Agent for Service)
Approximate date of commencement of proposed sale to the public: The
investment option interests covered by this registration statement are to be
issued from time to time after the effective date of this registration
statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. X
_____
If the Registrant elects to deliver its latest Annual Report to
security-holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this Form, check the following box. _____
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ___
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering ____.
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering ____.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. ---
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PART I
INFORMATION REQUIRED IN PROSPECTUS
THE TRAVELERS INSURANCE COMPANY
FIXED ANNUITY
The Travelers Insurance Company's Fixed Annuity is a flexible premium group
deferred annuity Contract ("the Contract and/or Certificates") which provides a
guaranteed fixed rate of return for your investment. We offer the Contract to
employers for use with retirement plans and programs that qualify for favorable
federal tax treatment. Where permitted by state law, we reserve the right to
restrict purchase payments into the Contract. If you surrender your Contract,
your Cash Value may be subject to a market adjusted value calculation and
surrender charges.
This prospectus explains:
o the Contract and Certificate;
o The Travelers Insurance Company;
o the Interest Rates;
o Surrenders and Partial Surrenders;
o Surrender Charges;
o Market Adjusted Value;
o Death Benefit;
o Annuity Payments;
o other aspects of the Contract.
The group annuity contracts may be issued to employers on an unallocated or
allocated basis. This Contract is issued by The Travelers Insurance Company. The
Company is located at One Cityplace, Hartford, Connecticut 06103-3415. Travelers
Distribution LLC, One Cityplace, Hartford, Connecticut 06103-3415 is the
principal underwriter and distributor of the Contracts.
THIS PROSPECTUS IS ACCOMPANIED BY A COPY OF THE TRAVELERS INSURANCE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 2004.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR THE ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MUTUAL FUNDS, ANNUITIES AND INSURANCE PRODUCTS ARE NOT DEPOSITS OF ANY BANK, AND
ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT AGENCY.
PROSPECTUS DATED MAY 2, 2005.
TABLE OF CONTENTS
PAGE
Special Terms 1
Summary 3
The Insurance Company 4
The Contract 4
Application and Purchase Payments 4
Interest Periods 5
Establishment of Interest Rates 6
Surrenders 6
Transfers 6
Charges and Deductions 7
Contract Discontinuation and Market Adjusted Value 9
Premium Taxes 10
Reductions of Charges 10
Death Benefit 11
Distribution Rules 11
Election of Maturity Date and Settlement Options 11
Change of Maturity Date or Annuity Option 12
Annuity Options 12
Investments by the Company 13
Annual Statement 13
Amendment of the Contracts 13
Distribution of the Contracts 13
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Federal Tax Considerations 14
General 14
Section 403(b) Plans and Arrangements 14
Qualified Pension and Profit-Sharing Plans 15
The Employee Retirement Income Security Act of 1974 17
Federal Income Tax Withholding 17
Tax Advice 18
Available Information 19
Financial Statements 19
Legal Opinion 19
Experts 20
Appendix A 21
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SPECIAL TERMS
In this prospectus, the following terms have the indicated meanings:
ANNUITANT - The person upon whose life the Contract is issued.
ANNUITY - Payment of income for a stated period or amount.
APPROVED PRODUCTS - Products approved by the Travelers Insurance Company.
BENEFICIARY(IES) - Beneficiary of this Contract is the Plan Trustee, unless the
Plan provides otherwise.
CASH SURRENDER VALUE - The Cash Value less surrender charges and any applicable
Premium Tax.
CASH VALUE - the value of net Purchase Payments in Your Account or an Individual
Account less the amount of any surrenders, plus interest, sometimes referred to
as "Account Value."
CERTIFICATE DATE - The date on which a certificate is issued, as shown on the
Certificate Specifications page.
CERTIFICATE OF PARTICIPATION - A certificate stating the benefits to which each
Participant is entitled under this Contract if issued.
CERTIFICATE YEAR - A twelve-month period beginning on the Certificate Date and
each anniversary thereof. This may or may not coincide with the Plan year.
CODE - The Internal Revenue Code of 1986, as amended, and all related laws and
regulations, which are in effect during the term of this Contract.
COMPANY (WE, US, OUR) - The Travelers Insurance Company.
DUE PROOF OF DEATH - (i) A copy of a certified death certificate; (ii) a copy of
a certified decree of a court of competent jurisdiction as to the finding of
death, (iii) a written statement by a medical doctor who attended the deceased;
or (iv) any other proof satisfactory to Us.
EXCESS PLAN CONTRIBUTIONS - Plan contributions including excess deferrals,
excess contributions, excess aggregate contributions, excess annual additions,
and excess nondeductible contributions that require correction by the Plan
Administrator, excluding reversions upon Plan Termination.
FIXED ACCOUNT - Part of the general account of the Company, which may invest in
stocks, bonds, money market investments, real estate mortgages, real estate and
other investments.
FIXED ANNUITY - An Annuity with payments that remain fixed as to dollar amount
throughout the payment period.
INDIVIDUAL ACCOUNT - Account Value/Cash Value credited to a Participant or
Beneficiary under this Contract.
MATURITY DATE - The date on which Annuity payments begin.
OUR OFFICE - The home offices of The Travelers Insurance Company located at One
Cityplace, Hartford Connecticut 06103-3415. Please send all correspondence to
P.O. Box 990009, Hartford, Connecticut 06199-0009.
PARTICIPANT - An eligible person who is a member in Your Plan.
PLAN - The Plan or the arrangement under Section 403(b) of the Code used in a
retirement plan or program whereby the Purchase Payments and any gains are
intended to qualify under Sections 401, 403, or 457 of the Code. We are not a
party to the Plan. We do not assume the responsibilities of the Plan
Administrator, nor are We bound by the terms of the Plan. All records pertaining
to the Plan will be open for inspection by Us.
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PLAN ADMINISTRATOR - The corporation or other entity so specified on the
application or purchase order. If none is specified, the Plan Trustee is the
Plan Administrator.
PLAN TERMINATION - Termination of Your Plan, including partial Plan Termination,
as determined by Us.
PLAN TRUSTEE - The trustee specified in the Contract Specifications.
PREMIUM TAX - The amount of tax, if any, charged by the state or municipality.
Generally, We will deduct any applicable Premium Tax from the Cash Value either
upon Surrender, annuitization, death, or at the time a Purchase Payment is made,
but no earlier than when We have the liability under state law.
PURCHASE PAYMENTS - Payments of premium You make on behalf of the Participants
under this Contract.
SEPARATION FROM SERVICE - The termination or permanent severance of a
Participant's employment with the employer for any reason that is a separation
from service within the meaning of the Plan. However, termination of a
Participant's employment with the employer as a result of the sale of all or
part of the employer's business (including divisions or subsidiaries of the
employer) will not be considered Separation from Service unless the Participant
actually loses his/her job or is not immediately included in a pension or profit
sharing plan of the successor employer.
SURRENDER - Funds distributed from the Contract or certificate for retirement,
Separation from Service, loans, hardship withdrawals, death, disability, return
of Excess Plan Contributions, payment of certain Plan expenses as mutually
agreed upon, Contract Discontinuance, or transfers to other Plan funding
vehicles. Such surrender may or may not be subject to surrender charges and the
market adjusted value calculations.
SURRENDER DATE - The date We receive Your Written Request or a Participant's
Written Request if so authorized, for a Surrender.
VALUATION DATE - A date on which the Contract is valued.
WRITTEN REQUEST - Written information including requests for Contract,
Beneficiary, ownership transfers, surrenders or other changes sent to Us in a
written form satisfactory to Us and received in good order at Our Office.
Requests for changes are subject to any action taken prior to Our receipt of the
written information.
YOU, YOUR - The Contract owner.
YOUR ACCOUNT - Cash Value attributed to Purchase Payments plus interest credited
to You under this Contract.
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SUMMARY
The Travelers Insurance Company Fixed Annuity is a flexible premium group
deferred fixed annuity contract available to certain types of retirement plans
and programs that receive favorable tax treatment under the Code such as
qualified pension and profit sharing plans, tax deferred annuity plans (for
public school teachers and employees and employees of certain other tax-exempt
and qualifying employers) and deferred compensation plans of state and local
governments.
This prospectus describes both the Contract and the Certificate. The Contract
and Certificate have similar features and provisions. An employer as the
Contract Owner purchases the Contract to fund its Qualified Plan. The employer
can purchase the Contract on an allocated or unallocated basis. If the employer
purchases the Contract on an allocated basis, the employee participating in the
Qualified Plan ("Participant") will be issued a Certificate. Generally,
allocated contracts are issued to tax deferred annuity plans. If the employer
purchases the Contract on an unallocated basis, the employer will be responsible
for any accounts for the Participant and no Certificates will be issued by us.
Generally, unallocated contracts are issued to qualified pension and profit
sharing plans and deferred compensation plans of state and local governments.
The Contract is offered by The Travelers Insurance Company. It is an indirect
wholly owned subsidiary of Citigroup Inc. The Contract is available only in
those states where it has been approved for sale.
We deposit your Purchase Payments in Our Fixed Account. For each Purchase
Payment, We establish an interest rate "period " and guarantee a rate of
interest for that Purchase Payment for twelve months. At the end of the twelve
months, We will establish a renewal rate of interest. (See "Guaranteed Interest
Rates").
You may surrender your Contract at any time before the Maturity Date, but the
Cash Value may be subject to a surrender charge and/or Our market adjusted value
calculations. You may also take partial surrenders from your Contract; partial
surrenders may be subject to a surrender charge. However, if your Contract was
issued as part of a tax deferred annuity plan, deferred compensation plan or
combined qualified plan/tax deferred annuity plan, You or a Participant, if
authorized, may take partial surrenders after the first Contract/Certificate
Year annually of up to 10% of the Cash Value of Your Account/Individual Account
as of the first Valuation Date of any given Contract/Certificate Year without
the imposition of a surrender charge. We may waive surrender charges in certain
instances. (See "Surrenders"). We also may deduct any applicable premium taxes
from the amounts You surrender. A Participant may be subject to income tax and a
10% penalty tax if he or she is younger than 59 1/2 at the time of the full or
partial surrender, and the full or partial surrender may also be subject to
income tax withholding. (See "Federal Tax Considerations").
The market adjusted value calculations reflect the relationship between the
interest rate on new deposits for this class of contracts on the date of
surrender and the interest rate credited to amounts in Your Contract on the date
of surrender. The Company has no specific formula for determining initial
interest rates or renewal interest rates. However, such determination will
generally reflect interest rates available on the types of debt instruments in
which the Company intends to invest the amounts invested in the Contract. In
addition, the Company's management may also consider various other factors in
determining these rates for a given period, including regulatory and tax
requirements; sales commission and administrative expenses borne by the Company;
general economic trends; and competitive factors. (See Investments by the
Company.) It is possible that the amount You receive upon surrender may be less
than Your Purchase Payments if interest rates increase. It is also possible that
if interest rates decrease, the amount You receive upon surrender may be Your
net Purchase Payments plus accrued interest. On the Maturity Date You specified,
the Company will make either a lump sum payment or start to pay a series of
payments based on the Annuity Options you select. (See "Annuity Period").
If a Participant dies before the Maturity Date, the Contract provides for a
death benefit which is the Cash Value of the Participant's Individual Account,
less any applicable premium tax as of the date We receive Due Proof of Death.
(See "Death Benefit").
We will deduct any applicable premium taxes from Cash Value either upon death,
surrender, annuitization, or at the time You make a Purchase Payment to the
Contract. (See "Surrenders Premium Taxes").
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The terms and conditions of the Plan govern what is available to Participants.
Participants should carefully consider the features of their employer's Plan,
which may be different from the Contract and Certificate described in this
prospectus. In addition, certain features described in this prospectus may vary
from your Contract because of differences in applicable state law.
We offer a variety of fixed and variable annuity contracts. They offer features,
including variable investment options, fees and/or charges that are different
from those described in this prospectus. Upon request, Your agent can provide
You with more information about those Contracts.
THE INSURANCE COMPANY
The Travelers Insurance Company is a stock insurance company chartered in 1863
in the state of Connecticut and has been continuously engaged in the insurance
business since that time. The Company is licensed to conduct life insurance
business in all states of the United States, the District of Columbia, Puerto
Rico, Guam, the U.S. and British Virgin Islands, and the Bahamas. The Company is
an indirect wholly owned subsidiary of Citigroup Inc. The Company's home office
is located at One Cityplace, Hartford, Connecticut 06103-3415.
On January 31, 2005, CITIGROUP INC. announced that it has agreed to sell its
life insurance and annuity businesses to METLIFE, INC. The proposed sale would
include The Travelers Insurance Company. The transaction is subject to certain
domestic and international regulatory approvals, as well as other customary
conditions to closing. The transaction is expected to close this summer. Under
the terms of the transaction, The Travelers Insurance Company will distribute
its ownership of Primerica Life Insurance Company and certain other assets,
including shares of Citigroup preferred stock, to Citigroup Inc., or its
subsidiaries prior to the closing. The Travelers Insurance Company has filed a
current report on Form 8-K on February 2, 2005 with additional information about
the transaction, including pro forma financial information. The filing can be
found at the SEC's Internet website at http://www.sec.gov.
The transaction will not affect the terms or conditions of your annuity
contract, and The Travelers Insurance Company will remain fully responsible for
its contractual obligations to annuity contract owners.
THE CONTRACT
APPLICATION AND PURCHASE PAYMENTS
You may purchase a Contract through an authorized agent. The agent will send
Your completed application or order to purchase, along with a minimum Purchase
Payment of at least $1,000 for the Contract and $20 for each certificate to Us,
and We will determine whether to accept or reject your application or order to
purchase. If We accept your application or order to purchase, one of Our legally
authorized officers will prepare and execute a Contract within two business days
after We receive that application or order. We then will send the Contract to
you through your sales representative.
We may:
o accept Purchase Payments up to $3 million without prior approval;
o contact You or Your agent if the application or order form is not
properly completed; and/ or
o return your entire application or order form and Purchase Payment
within thirty days if not properly completed.
We sell the Contract for use with certain qualified retirement plans. Please be
aware that the Contract includes features such as tax deferral on accumulated
earnings. Qualified retirement plans provide their own tax deferral benefit.
Please consult a tax adviser to determine whether this Contract is an
appropriate investment for You. See Appendix A for information concerning
qualified plans.
You may make additional Purchase Payments of at least $1,000 ($20 per
Certificate) at any time before the Maturity Date. We will apply any subsequent
net Purchase Payment You make within two Business Days after We receive it.
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INTEREST PERIODS
We deposit each net Purchase Payment (I.E., a Purchase Payment less any
applicable Premium Tax charge) in our Fixed Account where We credit the Payment
with interest daily at an effective annual interest rate between 1.0% and 3.0%
for allocated contracts and 1.0% for unallocated contracts, depending on
applicable states' statutory minimum requirements. We may, however, in our sole
discretion, credit interest above the statutory minimum requirements. The actual
minimum interest rate for your Contract will be on the Contract Specifications
page. This rate will not change for the life of the Contract and will apply to
any Certificates issues under the Contract.
The amount of interest We credit to a particular net Purchase Payment varies
with that Purchase Payment's interest rate "period". We establish an interest
rate "period " for each net Purchase Payment, and guarantee that rate for twelve
months. At the end of that twelve-month guarantee period, We will determine and
credit a renewal interest rate. We guarantee that renewal rate until the end of
the current calendar year. After that, We will declare the second and all future
renewal rates each subsequent January 1 and guarantee such rates through
December 31 of each year.
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ESTABLISHMENT OF INTEREST RATES
When you purchase Your Contract, You will know the initial interest rate for
your Purchase Payment. The Company has no specific formula for determining
interest rates in the future. The interest rates will be declared from time to
time as market conditions dictate. (See "Investments by the Company"). The
Company may consider various factors in determining interest rates for a given
period, including regulatory and tax requirements, sales commissions,
administrative expenses, general economic trends, and competitive factors. THE
COMPANY'S MANAGEMENT WILL MAKE THE FINAL DETERMINATION AS TO ANY DECLARED
INTEREST RATES AND ANY INTEREST IN EXCESS OF THE MINIMUM INTEREST RATE ALLOWED
UNDER STATE LAW. THE COMPANY CANNOT PREDICT NOR GUARANTEE THE RATES OF ANY
FUTURE DECLARED INTEREST IN EXCESS OF THE MINIMUM RATE.
The Company will make the final determination as to guaranteed interest rates to
be declared. We cannot predict nor can We guarantee future interest rates.
SURRENDERS
There are two sets of rules when considering surrenders or partial surrenders
from Your Contract. The first are rules and procedures that apply to surrenders
and partial surrenders under the Contract; We discuss these provisions in this
prospectus. The second are rules specific to Your Plan. Please consult Your Plan
for information as to those provisions.
The Contract allows You to make a full or partial surrender by Written Request
before the Maturity Date, subject to the surrender charges and in some
instances, adjusted market value calculations. In addition, Participants, if so
authorized, may make partial surrenders. We may discontinue the Contract or
terminate a Participant's Individual Account under certain circumstances.
We will determine Your Cash Surrender Value (or Cash Surrender Value in an
Individual Account) as of the next Valuation Date following Our receipt of a
Written Request by You or the Participant, if so authorized. We may defer
payment of any surrender up to six months from the date We receive Your notice
of surrender, or such lesser period if required by state law. State law requires
that if We defer payment for more than 30 days, We will pay the state required
annual interest rate on the amount that we defer.
For the purposes of processing partial surrenders, We will take the amount
surrendered from the most recent "period" first, and then from each subsequent
"period" in descending order on a last-in, first out basis. Upon request, We
will inform You of the amount payable upon a full or partial surrender. Any full
or partial surrender may be subject to ordinary income tax and, if a Participant
is younger than age 59 1/2 at the time of the full or partial surrender, a 10%
penalty tax may apply. A full or partial surrender may also be subject to income
tax withholding. A Participant may not be able to take partial surrenders from
his or her Individual Account before age 59 1/2. A Participant should discuss
his or her options with a qualified tax advisor. (See "Federal Tax
Considerations".)
TRANSFERS
You may transfer amounts from the Fixed Account to products within Your Plan and
to Approved Products not issued by Us. If you transfer Cash Value to Approved
Products not issued by Us, Your transfers may not exceed 20% per
Contract/Certificate Year of the Cash Value in the Fixed Account valued on each
Contract/Certificate Year anniversary. We reserve the right to modify the amount
available for transfer to Approved Products and to products not issued by Us.
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Federal laws designed to counter terrorism and prevent money laundering might,
in certain circumstances, require us to block a contract owner's ability to make
certain transactions and thereby refuse to accept any request for withdrawals,
surrenders, or death benefits, until the instructions are received from the
appropriate regulator. We may also be required to provide additional information
about you and your contract to government regulators.
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CHARGES AND DEDUCTIONS
We will deduct the charges described below to cover our costs and expenses, the
services provided, and our risks assumed under the Contracts. We incur certain
costs and expenses for the distribution and administration of the Contract and
for providing the benefits payable thereunder. Our administrative services and
risks may include:
o processing applications for and issuing the Contracts and certificates
thereunder;
o maintaining Contract owner and Participant records;
o administering Annuity payments;
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o furnishing accounting services;
o reconciling and depositing cash receipts;
o providing Contract confirmations and periodic statements;
o providing toll-free inquiry services; and
o the risk that our costs in providing the services will exceed our
revenues from Contract charges (which cannot be changed).
The amount of the charge may not necessarily correspond to the costs associated
with providing the services or benefits stated in the Contract. We may realize a
profit on one or more of the charges, and may use any such profit for any
corporate purpose. Surrender Charge
We do not assess front-end sales charges. We may, however, assess a surrender
charge on full and partial surrenders made before the end of the eighth
Contract/Certificate Year. The surrender charge for an allocated Contract is
calculated based on the age of each Certificate. The surrender charge for an
unallocated Contract is calculated based on the age of the Contract. The
surrender charge is computed as a percentage of the Cash Value being surrendered
and is as follows:
CHARGE AS A PERCENTAGE
CONTRACT/CERTIFICATE YEAR OF CASH VALUE
------------------------- -------------
1-2 5%
3-4 4%
5-6 3%
7 2%
8 1%
9+ 0%
We will not assess a surrender charge on:
> transfers to Approved Products within Your Plan
> certain benefit distributions that become payable under the terms of a Plan
and other distributions, including:
o retirement, death, or disability of a Participant (as defined by Code
section 72(m)(7));
o Separation from Service;
o hardship withdrawals as defined by the Code;
o minimum distributions as defined by the Code;
o return on Excess Plan Contributions;
o certain Plan expenses as mutually agreed upon between You and Us;
o transfers to an employer stock fund as mutually agreed upon between
You and Us; and
o annuitization under this Contract.
> if the market adjusted value is greater than the Cash Value of the Contract
as of the date of discontinuance, and You elect to receive the Cash Value of
the Contract in equal installments over a 5-year period.
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Unless payment of surrender charges are provided in a different manner, We will
reduce your requested distribution by any applicable surrender charges.
In addition, for Contracts issued to tax deferred annuity plans, deferred
compensation plans or combined qualified plans/tax deferred annuity plans, We
may allow You or a Participant, if authorized, after the first
Contract/Certificate Year to take partial surrenders annually of up to 10% of
the Cash Value in Your Account/Individual Account as of the first Valuation Date
of any given Contract Year without the imposition of a surrender charge. The
free withdrawal allowance does not apply to full surrenders transferred directly
to annuity contracts issued by other financial institutions. We reserve the
right to modify the free withdrawal amount.
We reserve the right to modify the surrender charge provisions for Contracts
issued in the future. This will not affect Your Contract if the Contract is in
effect before the modification to the surrender charge is effective.
CONTRACT DISCONTINUATION AND MARKET ADJUSTED VALUE
Under certain circumstances, We may discontinue the Contract.
You may discontinue this Contract by Written Request at any time for any reason.
If the Contract is discontinued, any Certificates issued under the Contract will
be discontinued.
We reserve the right to discontinue this Contract if:
o the Cash Value of Your Contract is less than the termination amount
shown on your Contract Specifications page. We state a termination
amount on your Contract Specifications page. In general, this amount
is $2,000 of the Cash Value of a Participant's Individual Account (the
amount is $2,000 per Account for an allocated Contract and $20,000 per
unallocated Contract). If the Cash Value in a Participant's Individual
Account is less than that stated termination amount, We reserve the
right to terminate that Account and move the Cash Value of that
Participant's Individual Account to Your Account. We will move to Your
Account at Your direction any Cash Value to which a Participant is not
entitled under the Plan upon termination;
o We determine within Our sole discretion and judgment that the Plan or
administration of the Plan is not in conformity with applicable law;
or
o We receive notice that is satisfactory to Us of Plan Termination.
If you discontinue this Contract because of Plan Termination and the Plan
certifies to Us that the Plan Termination is the result of the dissolution or
liquidation of the employer under US Code Title 11 procedures, We will
distribute the Cash Surrender Value directly to the employees entitled to share
in such distributions in accordance with the Plan relating to Plan Termination.
Distribution may be in the form of cash payments, Annuity options, or deferred
annuities.
The following events will not trigger a market adjusted value:
o retirement, death, or disability of a Participant (as defined by Code
section 72(m)(7));
o Separation from Service;
o hardship withdrawals as defined by the Code;
o minimum distributions as defined by the Code;
o return on Excess Plan Contributions;
o certain Plan expenses as mutually agreed upon between You and Us;
o transfers to an employer stock fund as mutually agreed upon between
You and Us; and
o annuitization under this Contract.
However, if you discontinue this Contract for any other reason than the events
described immediately above or because of Our exercise of Our right to
discontinue the Contract, We will determine the market adjusted value
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of the Contract. The market adjusted value is the current value as of the date
of discontinuance and reflects the relationship between the rate of interest
credited to funds on deposit under the Contract at the time of discontinuance to
the rate of interest credited on new deposits for this class of contracts at the
time of discontinuance. The market adjusted value may be greater than or less
than the Cash Value of the Contract.
If the market adjusted value is less than the Cash Value of your Contract as of
the date of discontinuance, We will pay You Your choice of:
(a) the market adjusted value, less any amounts deducted on surrender, in
one lump sum within 60 days of the date of discontinuance; or
(b) the Cash Surrender Value of the Contract in equal installments over a
5-year period. We determine the amount deducted on surrender, if any,
as of the date of discontinuance and will apply that amount to all
installment payments. We will credit interest to the remaining Cash
Value during this installment period at a fixed effective annual
interest rate of not less than the interest rate required under state
insurance law. We will make the first payment no later than 60 days
following Our mailing the written notice to You at the most current
address available on Our records. We will mail the remaining payments
on each anniversary of the discontinuance date for 4 years. Allowable
distributions shown of Your Contract Specifications page are not
allowed during the 5-year installment period.
If the market adjusted value is greater than the Cash Value of the Contract as
of the date of discontinuance, We will pay You Your Choice of:
(a) the Cash Surrender Value of the Contract within 60 days of the date of
discontinuance; or
(b) the Cash Value of the Contract in equal installments over a 5-year
period. We will credit interest on the remaining Cash Value of the
Contract during the installment period at a fixed annual rate of
interest of not less than the interest rate required under state
insurance law. We will make the first payment no later than 60 days
following Our mailing of the written notice to You at the most current
address available on Our records. We will mail the remaining payments
on each anniversary of the discontinuance date for 4 years. We do not
allow the allowable distributions shown on Your Contract
Specifications page during the 5-year installment period.
MARKET ADJUSTED VALUE FORMULA: Payment on a partial or full surrender may be
adjusted up or down by the application of the market adjusted value calculation.
The market adjusted value formula is:
MARKET ADJUSTED VALUE = CASH VALUE X (1+RO)(5) / (1+R1+.0025)(5)
Where:
RO is the average interest rate credited to amounts in the Contract on the date
of discontinuance, and
R1 is the interest rate on new deposits for this class of contracts on the date
of discontinuance.
PREMIUM TAXES
Certain state and local governments impose premium taxes. These taxes currently
range from 0% to 5.0%, depending upon the jurisdiction. The Company is
responsible for paying these taxes and will determine the method used to recover
premium tax expenses incurred. The Company will deduct any applicable premium
taxes from the Cash Value either upon death, surrender, annuitization, or at the
time the Purchase Payment is made to the Contract, but no earlier than when the
Company has a tax liability under state law.
REDUCTIONS OF CHARGES
We may reduce or eliminate certain charges or alter the manner in which the
particular charge is deducted. Generally, these types of changes will be based
on our anticipation of lower sales expenses or perform fewer sales services due
to:
o the size of the group participating in the Contract;
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o an existing relationship to the contract owner;
o use of mass enrollment procedures; or
o performance of sales functions by a third party which We would
otherwise perform.
Please see your Contract for any reduction of charges provisions applicable to
You.
DEATH BENEFIT
If applicable under Your Plan, We may pay a death benefit in a single sum to the
Beneficiary if a Participant dies before the Maturity Date. We also may pay a
death benefit under certain circumstances if the Annuitant dies on or after the
Maturity Date.
The death benefit before the Maturity Date equals the Cash Value of a
Participant's Individual Account less any applicable premium tax as of the date
We receive Due Proof of Death. If the Annuitant dies on or after the Maturity
Date, the death benefit will consist of any benefit remaining under the Annuity
option then in effect.
We will pay interest on death proceeds of a Participant's Individual Account in
accordance with regulation in effect by the state whose laws apply to the
Contract.
DISTRIBUTION RULES
The distributions required by federal tax law differ for qualified plans
depending on the type of Plan. Upon receipt of Due Proof of Death, the
Beneficiary will instruct us how to treat the proceeds, subject to the
distribution rules discussed below.
In general, the Beneficiary will receive any remaining contractual benefits upon
the death of the Participant. The Beneficiary may receive the remaining benefits
in a single sum or elect one of the settlement options. If the Participant dies
after any mandatory distribution has begun but before his or her entire interest
has been distributed, the remaining interest must be paid out at least as
rapidly as it was being paid out under the method of payment in effect at the
time of death. If the Participant dies before the distribution of his or her
entire interest has begun, the entire interest must be distributed within five
years after the Participant's death or an Annuity payable over no longer than
life or life expectancy must be distributed to an electing Beneficiary starting
within one year of the Participant's death. A spousal designated Beneficiary may
elect to defer distributions until the Participant would have attained the age
of 70 1/2.
Please see Your Contract and Your tax advisor for more information.
Annuity Options
ELECTION OF MATURITY DATE AND SETTLEMENT OPTIONS
You can select a Maturity Date when you apply for the Contract and/or when We
issue a certificate thereunder; if You do not, the default age for certificate
maturity is when a Participant reaches age 70 1/2.
You may elect to have all or a portion of the Cash Surrender Value of an
Individual Account paid in a lump sum, or You may elect to have Your Cash
Surrender Value or a portion thereof, distributed under any of the Annuity
options described below. In addition, any amount payable from the Contact may be
applied to an Annuity option. A Participant, if authorized, may apply any
proceeds payable from his or her Individual Account to an Annuity Option.
To elect an Annuity option, You must send a Written Request to Our Office at
least 30 days before such election is to become effective. If no option is
elected for qualified Contracts, We will apply the Cash Surrender Value to
Option 4 to provide a Joint and Last Survivor Life Annuity.
You must provide Us with the following information when you elect an Annuity
option:
o the Participant's name, address, date of birth, and social security
number;
o the amount to be distributed in the form of an Annuity option;
o the Annuity option which is to be purchased;
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o the date the Annuity option payments are to begin;
o if the form of the Annuity provides a death benefit in the event of
the Participant's death, the name, relationship, and address of the
Beneficiary as designated by You; and
o any other data We may require.
CHANGE OF MATURITY DATE OR ANNUITY OPTION
You may change the Maturity Date at any time as long as such change is made in
writing and is received by Us at least 30 days before the scheduled Maturity
Date or date the Annuity option is scheduled to become effective. Once an
Annuity option has begun, it may not be changed.
ANNUITY OPTIONS
You or a Participant, if authorized, may elect any one of the following Annuity
options. Annuity payments may be available on a monthly, quarterly, semiannual,
or annual basis. The minimum amount that may be applied to Annuity options is
$2,000 unless We consent to a smaller amount. If any periodic payments due are
less than $100, We reserve the right to make payments at less frequent
intervals.
We use the Life Annuity Tables to determine the first monthly payment. They show
the dollar amount of the first monthly Annuity payment which can be purchased
with each $1,000 applied. The amount applied to an Annuity will be the Cash
Surrender Value attributable to a Participant's Individual Account as of 14 days
before the Maturity Date. We reserve the right to require satisfactory proof of
age of any person on whose life We base Annuity payments before making the first
payment under any of these options.
Any Cash Surrender Value We apply to an Annuity option will provide payments at
least equal to those provided if the same amount was applied to purchase a
single premium immediate Annuity We offer at that time for the same class of
contracts. If it would produce a larger payment, We agree that We will determine
the Annuity payment using the Life Annuity Tables in effect on the Maturity
Date.
As provided in your Contract, We may adjust the age used to determine Annuity
payments, and We may deduct premium taxes from Annuity payments.
OPTION 1 -- LIFE ANNUITY -- NO REFUND: The Company will make Annuity payments
during the lifetime of the Annuitant ending with the last monthly payment before
death. This option offers the maximum periodic payment, since there is no
assurance of a minimum number of payments or provision for a death benefit for
Beneficiaries.
OPTION 2--LIFE ANNUITY WITH 120, 180, OR 240 MONTHLY PAYMENTS ASSURED: The
Company will make monthly Annuity payments during the lifetime of the Annuitant,
with the agreement that if, at the death of that person, payments have been made
for less than 120,180, or 240 months as elected, We will continue making
payments to the Beneficiary during the remainder of the period.
OPTION 3 -- JOINT AND LAST SURVIVOR LIFE ANNUITY: The Company will make monthly
annuity payments during the joint lifetime of the Annuitant and a second person.
On the death of either person, We will continue making payments to the survivor.
No further payments will be made following the death of the survivor.
OPTION 4 - JOINT AND LAST SURVIVOR LIFE ANNUITY - ANNUITY REDUCED ON DEATH OF
PRIMARY PAYEE: The Company will make monthly Annuity payments during the joint
lifetime of two persons on whose lives We base the payments. We will designate
one of the two persons as the primary payee. We will designate the other person
as the secondary payee. On the death of the secondary payee, if survived by the
primary payee, We will continue to make monthly Annuity payments to the primary
payee in the same amount that would have been payable during the joint lifetime
of the two persons.
On the death of the primary payee, if survived by the secondary payee, We will
continue to make monthly Annuity payments to the secondary payee in an amount
equal to 50% of the payments, which would have been made during the lifetime of
the primary payee.
No further payments will be made following the death of the survivor.
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OPTION 5 -- PAYMENTS FOR A FIXED PERIOD: The Company will make monthly payments
for the period selected. If at the death of the Annuitant payments have been
made for less than the period selected, the Company will continue to make
payments to the Beneficiary during the remainder of that period.
OPTION 6 -- OTHER ANNUITY OPTIONS: The Company will make other arrangements for
Annuity payments as may be mutually agreed upon by You and Us.
INVESTMENTS BY THE COMPANY
We must invest our assets according to applicable state laws regarding the
nature, quality and diversification of investments that may be made by life
insurance companies. In general, these laws permit investments, within specified
limits and subject to certain qualifications, in federal, state and municipal
obligations, corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments.
In establishing interest rates, the Company will consider the yields on fixed
income securities that are part of the Company's current investment strategy for
the Contracts at the time that the interest rates are established. (See
"Establishment of Interest Rates".) The current investment strategy for the
Contracts is to invest in fixed income securities, including public bonds,
privately placed bonds, and mortgages, some of which may be zero coupon
securities. While this generally describes our investment strategy, We are not
obligated to follow any particular strategy except as may be required by federal
and state laws.
ANNUAL STATEMENT
After the end of each calendar year, You will receive a statement that will
show:
o Your Cash Value as of the end of the preceding year;
o all transactions regarding Your Contract during the year;
o Your Cash Value at the end of the current year; and
o the interest credited to Your Contract.
AMENDMENT OF THE CONTRACTS
We reserve the right to amend the Contracts to comply with applicable federal or
state laws or regulations. We will notify You in writing of any such amendments.
DISTRIBUTION OF THE CONTRACTS
Travelers Distribution LLC ("TDLLC") an affiliate of the Company, is the
principal underwriter of the Contracts. TDLLC is registered with the Securities
and Exchange Commission under the Act as a broker-dealer, and is a member of the
National Association of Securities Dealers, Inc. The Contract is offered through
both affiliated and non-affiliated broker dealers.
The principal underwriter enters into selling agreements with certain
broker-dealers registered under the Act. Under the selling agreements such
broker-dealers may offer Contracts to persons who have established an account
with the broker-dealer. In addition, the Company may offer certificates to
members of certain other eligible groups. The Company will pay a maximum
commission of 6% of the Purchase Payment for the sale of a Contract. Tower
Square Securities, Inc., an affiliate of the Company, receives greater
compensation for selling the contract than nonaffiliated broker-dealers.
From time to time, the Company may offer customers of certain broker-dealers
special interest rates and negotiated commissions. In addition, the Company may
offer Contracts to members of certain other eligible groups through trusts or
otherwise.
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FEDERAL TAX CONSIDERATIONS
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GENERAL
The Company is taxed as a life insurance company under Subchapter L of the Code.
Generally, amounts credited to a contract are not taxable until received by the
Contract Owner, participant or Beneficiary, either in the form of annuity
payments or other distributions. Tax consequences and limits are described
further below for each annuity program. The following general discussion of the
federal income tax consequences related to your investment in this Contract is
not intended to cover all situations, and is not meant to provide legal or tax
advice. Because of the complexity of the law and the fact that the tax results
will vary depending upon many factors, you should consult with your tax and/or
legal advisor regarding the tax implications of purchasing this Contract based
upon your individual situation.
Congress has recognized the value of saving for retirement by providing certain
tax benefits for annuities. The Internal Revenue Code ("Code") governs how
earnings on your investment in the Contract are ultimately taxed, depending upon
the type of Contract, Qualified or Non-qualified, and the manner in which the
money is distributed, as briefly described below. In analyzing the benefits of
tax deferral it is important to note that the Jobs and Growth Tax Relief
Reconciliation Act of 2003 reduced the marginal tax rates on long-term capital
gains and dividends to 5% and 15%. The reduced rates apply during 2003 through
2008, and thereafter will increase to prior levels. Earnings under annuity
Contracts, like interest payable as fixed investments (notes, bonds, etc.),
continue to be taxed as ordinary income (top rate of 35%).
NOTE TO PARTICIPANTS IN QUALIFIED PLANS INCLUDING 401, 403 (b), 457 AS WELL AS
IRA OWNERS:
While annual plan contribution limits may be increased from time to time by
Congress and the IRS for federal income tax purposes, these limits must be
adopted by each state for the higher limits to be effective at a state income
tax level. In other words, permissible contribution limit for income tax
purposes may be different at the federal level from your state's income tax
laws. Please consult your employer or tax adviser regarding this issue.
SECTION 403 (B) PLANS AND ARRANGEMENTS
Purchase Payments for a tax-deferred annuity contract (including salary
reduction contributions) may be made by an employer for employees under annuity
plans adopted by public educational organizations and certain organizations
which are tax exempt under Section 501 (c) (3) of the Code. Within statutory
limits ($14,000 in 2005, $15,000 in 2006), such salary reduction contributions
are not currently includable in the gross income of the participants. Additional
"catch-up contributions" may be made by individuals age 50 or over. Increases in
the value of the Contract attributable to these Purchase Payments are similarly
not subject to current taxation. Instead, both the contributions to the
tax-sheltered annuity and the income in the Contract are taxable as ordinary
income when distributed.
An additional tax of 10% will apply to any taxable distribution received by the
participant before the age of 59 1/2, except when due to death, disability, or
as part of a series of payments for life or life expectancy, or made after the
age of 55 with separation from service. There are other statutory exceptions
that may apply in certain situations.
Amounts attributable to salary reductions made to a tax-sheltered annuity and
income thereon may not be withdrawn prior to attaining the age of 59 1/2,
separation from service, death, total and permanent disability, or in the case
of hardship as defined by federal tax law and regulations. Hardship withdrawals
are available only to the extent of the salary reduction contributions and not
from the income attributable to such contributions. These restrictions do not
apply to assets held generally as of December 31, 1988.
Distributions must begin by April 1st of the calendar year following the later
of the calendar year in which the participant attains the age of 70 1/2 or the
calendar year in which the Participant retires. Certain other mandatory
distribution rules apply at the death of the participant.
Certain distributions, including most partial or full redemptions or
"term-for-years" distributions of less than 10 years, are eligible for direct
rollover to another 403 (b) contract, certain qualified plans or to an
Individual Retirement Arrangement (IRA) without federal income tax or
withholding.
To the extent an eligible rollover distribution is not directly rolled over to
another 403 (b) contract, an IRA or eligible qualified contract, 20% of the
taxable amount must be withheld. In addition, current tax may be
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avoided on eligible rollover distributions which were not directly transferred
to a qualified retirement program if the participant makes a rollover to a
qualified retirement plan or IRA within 60 days of the distribution.
Distributions in the form of annuity payments are taxable to the participant or
Beneficiary as ordinary income in the year of receipt, except that any
distribution that is considered the participant's "investment in the Contract"
is treated as a return of capital and is not taxable.
QUALIFIED PENSION AND PROFIT-SHARING PLANS
Like most other contributions made under a qualified pension or profit-sharing
trust described in Section 401 (a) of the Code and exempt from tax under Section
501 (a) of the Code, a Purchase Payment made by an employer (including salary
reduction contributions under Section 401(k) of the Code) is not currently
taxable to the participant and increases in the value of a contract are not
subject to taxation until received by a participant or Beneficiary. For 2005,
the applicable limits are $42,000 for total contributions and $14,000 for salary
reduction contributions made pursuant to Code Section 401(k). Additional
"catch-up contributions" may be made by individuals age 50 or over.
Distributions in the form of annuity payments are taxable to the participant or
Beneficiary as ordinary income in the year of receipt, except that any
distribution that is considered the participant's "investment in the contract"
is treated as a return of capital and is not taxable. Certain eligible rollover
distributions including most partial and full surrenders or term-for-years
distributions of less than 10 years are eligible for direct rollover to an
eligible retirement plan or to an IRA without federal income tax withholding.
If a distribution that is eligible for rollover is not directly rolled over to
another qualified retirement plan or IRA, 20% of the taxable amount must be
withheld. In addition, current tax may be avoided on eligible rollover
distributions that were not directly transferred to a qualified retirement
program if the participant makes a rollover contribution to a qualified
retirement plan or IRA within 60 days of the distribution.
Distributions must begin by April Ist of the calendar year following the later
of the calendar year in which you attain age 70 1/2 or the calendar year in
which you retire, except that if you are a 5% owner as defined in Code Section
416(i) (1) (B), distributions must begin by April Ist of the calendar year
following the calendar year in which you attain age 70 1/2. Certain other
mandatory distribution rules apply on the death of the participant.
An additional tax of 10% will apply to any taxable distribution received by the
participant before the age of 59 1/2, except by reason of death, disability or
as part of a series of payments for life or life expectancy, or at early
retirement at or after the age of 55. There are other statutory exceptions which
may apply in certain situations. Amounts attributable to salary reduction
contributions under Code Section 401(k) and income thereon may not be withdrawn
prior to severance from employment, death, total and permanent disability,
attainment of age 59 1/2, or in the case of hardship.
INDIVIDUAL RETIREMENT ANNUITIES
To the extent of earned income for the year and not exceeding the applicable
limit for the taxable year, an individual may make deductible contributions to
an individual retirement annuity (IRA). The applicable limit ($2,000 per year
prior to 2002) has been increased by the Economic Growth and Tax Relief
Reconciliation Act of 2001 ("EGTRRA"). The limit is $3,000 for calendar years
2002-2004, $4,000 for calendar years 2005-2007, and will be indexed for
inflation in years subsequent to 2008. (Note: The minimum Purchase Payment
allowed for this Contract is $5,000.) Additional "catch-up contributions" may be
made to an IRA by individuals age 50 or over. There are certain limits on the
deductible amount based on the adjusted gross income of the individual and
spouse based on their participation in a retirement plan. If an individual is
married and the spouse is not employed, the individual may establish IRAs for
the individual and spouse. Purchase Payments may then be made annually into IRAs
for both spouses in the maximum amount of 100% of earned income up to a combined
limit based on the individual limits outlined above.
Partial or full distributions are treated as ordinary income, except that
amounts contributed after 1986 on a non-deductible basis are not includable in
income when distributed. An additional tax of 10% will apply to any taxable
distribution from the IRA that is received by the participant before the age of
59 1/2 except by reason of death, disability or as part of a series of payments
for life or life expectancy. Distributions must commence by April 1st of the
calendar year after the close of the calendar year in which the individual
attains the age of 70 1/2.
15
Certain other mandatory distribution rules apply on the death of the individual.
The individual must maintain personal and tax return records of any
non-deductible contributions and distributions.
Section 408 (k) of the Code provides for the purchase of a Simplified Employee
Pension (SEP) plan. A SEP is funded through an IRA with an annual employer
contribution limit of $40,000 for each participant.
ROTH IRAS
Effective January 1, 1998, Section 408A of the Code permits certain individuals
to contribute to a Roth IRA. Eligibility to make contributions is based upon
income, and the applicable limits vary based on marital status and/or whether
the contribution is a rollover contribution from another IRA or an annual
contribution. Contributions to a Roth IRA, which are subject to certain
limitations, (similar to the annual limits for traditional IRAs), are not
deductible and must be made in cash or as a rollover or transfer from another
Roth IRA or other IRA. A conversion of "traditional" IRA to a Roth IRA may be
subject to tax and other special rules apply. You should consult a tax adviser
before combining any converted amounts with other Roth IRA contributions,
including any other conversion amounts from other tax years.
Qualified distributions from a Roth IRA are tax-free. A qualified distribution
requires that the Roth IRA has been held for at least 5 years, and the
distribution is made after age 59 1/2, on death or disability of the owner, or
for a limited amount ($10,000) for a qualified first time home purchase for the
owner or certain relatives. Income tax and a 10% penalty tax may apply to
distributions made (1) before age 59 1/2 (subject to certain exceptions) or (2)
during five taxable years starting with the year in which the first contribution
is made to the Roth IRA.
SECTION 457 PLANS
Section 457 of the Code allows employees and independent contractors of state
and local governments and tax-exempt organizations to defer a portion of their
salaries or compensation to retirement years without paying current income tax
on either the deferrals or the earnings on the deferrals. Such deferrals are
subject to limits similar to those applicable to 403(b) and 401(k) plans.
The Owner of contracts issued under Section 457 plans by non-governmental
employers is the employer or a contractor of the participant and amounts may not
be made available to participants (or beneficiaries) until separation from
service, retirement or death or an unforeseeable emergency as determined by
Treasury Regulations. The proceeds of annuity contracts purchased by Section 457
plans are subject to the claims of general creditors of the employer or
contractor. A different rule applies with respect to Section 457 plans that are
established by governmental employers. The contract must be for the exclusive
benefit of the plan participants (and their beneficiaries), and the governmental
employer (and their creditors) must have no claim on the contract.
Distributions must begin by April 1st of the calendar year following the later
of the calendar year in which the participant attains the age of 70 1/2 or the
calendar year in which the participant retires. Certain other mandatory
distribution rules apply upon the death of the participant.
All distributions from plans that meet the requirements of Section 457 of the
Code are taxable as ordinary income in the year paid or made available to the
participant or Beneficiary.
NONQUALIFIED ANNUITIES
Individuals may purchase tax-deferred annuities without any limits. The Purchase
Payment receives no tax benefit, deduction or deferral, but taxes on the
increases in the value of the Contract are generally deferred until
distribution. Generally, if an annuity is owned other than by an individual, the
owner will be taxed each year on the increase in the value of the Contract. An
exception applies for Purchase Payments made before March 1, 1986. In addition,
for Contracts issued after April 22, 1987, all deferred increases in value will
be includable annually in the income of an Owner when that Owner transfers the
Contract without adequate considerations.
The federal tax law requires nonqualified annuity contracts issued on or after
January 19, 1985 to meet minimum mandatory distribution requirements upon the
death of the Contract Owner. Failure to meet these requirements will cause the
succeeding Contract Owner or Beneficiary to lose the tax benefits associated
with annuity contracts, i.e., primarily the tax deferral prior to distribution.
The distribution required depends upon whether an Annuity Option is elected or
whether the succeeding Owner is the surviving spouse. Contracts will be
administered by the Company in accordance with these rules.
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If two or more nonqualified annuity contracts are purchased from the same
insurer within the same calendar year, such annuity contracts will be aggregated
for federal income tax purposes. As a result, distributions from any of them
will be taxed based upon the amount of income in all of the same calendar year
series of annuities. This will generally have the effect of causing taxes to be
paid sooner on the deferred gain in the contracts.
Those receiving partial distributions made before annuitization of a contract
will generally be taxed on an income-first basis to the extent of income in the
Contract. Certain pre-August 14, 1982 deposits into a nonqualified annuity
contract that have been placed in the Contract by means of a tax-deferred
exchange under Section 1035 of the Code may be withdrawn first without income
tax liability. This information on deposits must be provided to the Company by
the other insurance company at the time of the exchange. There is income in the
Contract generally to the extent the Cash Value exceeds the investment in the
Contract. The investment in the Contract is equal to the amount of premiums paid
less any amount received previously that was excludable from gross income. Any
direct or indirect borrowing against the value of the Contract or pledging of
the Contract as security for a loan will be treated as a cash withdrawal under
the tax law.
With certain exceptions, the law will impose an additional tax if a Contract
Owner makes a withdrawal of any amount under the Contract that is allocable to
an investment made after August 13, 1982. The amount of the additional tax will
be 10% of the amount includable in income by the Contract Owner because of the
withdrawal. The additional tax will not be imposed if the amount is received on
or after the Contract Owner reaches the age of 59 1/2, or if the amount is one
of a series of substantially equal periodic payments made for life or life
expectancy of the taxpayer. The additional tax will not be imposed if the
withdrawal or partial surrender follows the death or disability of the Contract
Owner.
Code Section 1035 provides that, if certain conditions are met, no gain or loss
is recognized when an annuity contract is received in exchange for a life,
endowment, or annuity contract. Since different annuity contract have different
expenses, fees, and benefits, a tax-free exchange could result in your
investment becoming subject to higher or lower fees and expenses.
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
Under the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended,
certain special provisions may apply to the Contract if the Owner of a Section
403 (b) plan Contract or the owner of a contract issued to certain qualified
plans requests that the Contract be issued to conform to ERISA or if the Company
has notice that the Contract was issued pursuant to a plan subject to ERISA.
ERISA requires that certain Annuity Options, withdrawals or other payments and
any application for a loan secured by the Contract may not be made until the
Participant has filed a Qualified Election with the plan administrator. Under
certain plans, ERISA also requires that a designation of a Beneficiary other
than the participant's spouse be deemed invalid unless the participant has filed
a Qualified Election.
A Qualified Election must include either the written consent of the
Participant's spouse, notarized or witnessed by an authorized plan
representative, or the participant's certification that there is no spouse or
that the spouse cannot be located.
The Company intends to administer all contracts to which ERISA applies in a
manner consistent with the direction of the plan administrator regarding the
provisions of the plan, in accordance with applicable law. Because these
requirements differ according to the plan, a person contemplating the purchase
of an annuity contract should consider the provisions of the plan.
FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution that is taxable income to the recipient will be
subject to federal income tax withholding, generally pursuant to Section 3405 of
the Code. The application of this provision is summarized below.
1. ELIGIBLE ROLLOVER DISTRIBUTION FROM SECTION 403(b) PLANS OR
ARRANGEMENTS, FROM QUALIFIED PENSION AND PROFIT-SHARING PLANS, OR FROM
457 PLANS SPONSORED BY GOVERNMENTAL ENTITIES
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There is a mandatory 20% tax withholding for plan distributions that
are eligible for rollover to an IRA or to another retirement plan but
that are not directly rolled over. A distribution made directly to a
participant or Beneficiary may avoid this result if:
(a) a periodic settlement distribution is elected based upon a life
or life expectancy calculation, or
(b) a complete term-for-years settlement distribution is elected for
a period of ten years or more, payable at least annually, or
(c) a minimum required distribution as defined under the tax law is
taken after the attainment of the age of 701/2 or as otherwise
required by law.
A distribution including a rollover that is not a direct rollover will
require the 20% withholding, and the 10% additional tax penalty on
premature withdrawals may apply to any amount not added back in the
rollover. The 20% withholding may be recovered when the participant or
Beneficiary files a personal income tax return for the year if a
rollover was completed within 60 days of receipt of the funds, except
to the extent that the participant or spousal Beneficiary is otherwise
underwithheld or short on estimated taxes for that year.
2. OTHER NON-PERIODIC DISTRIBUTIONS (FULL OR PARTIAL REDEMPTIONS)
To the extent not subject to the mandatory 20% withholding as
described in (1) above, the portion of a nonperiodic distribution
which constitutes taxable income will be subject to federal income tax
withholding, to the extent such aggregate distributions exceed $200
for the year, unless the recipient elects not to have taxes withheld.
If an election to opt out of withholding is not provided, 10% of the
taxable portion of the distribution will be withheld as federal income
tax; provided that the recipient may elect any other percentage.
Election forms will be provided at the time distributions are
requested. This form of withholding applies to all annuity programs.
3. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER
THAN ONE YEAR)
The portion of a periodic distribution that constitutes taxable income
will be subject to federal income tax withholding under the wage
withholding tables as if the recipient were married claiming three
exemptions. A recipient may elect not to have income taxes withheld or
have income taxes withheld at a different rate by providing a
completed election form. Election forms will be provided at the time
distributions are requested. This form of withholding applies to all
annuity programs.
Recipients who elect not to have withholding made are liable for payment of
federal income tax on the taxable portion of the distribution. All recipients
may also be subject to penalties under the estimated tax payment rules if
withholding and estimated tax payments are not sufficient.
Recipients who do not provide a social security number or other taxpayer
identification number will not be permitted to elect out of withholding.
Additionally, United States citizens residing outside of the country, or U.S.
legal residents temporarily residing outside the country, are subject to
different withholding rules and cannot elect out of withholding.
TAX ADVICE
Because of the complexity of the law and the fact that the tax results will vary
according to the factual status of the individual involved, a person
contemplating purchase of an annuity contract and/or an Owner, participant or
Beneficiary who may make elections under a contract should consult with a
qualified tax or legal adviser prior to such purchase or the making of an
election. It should be understood that the foregoing description of the federal
income tax consequences under these contracts is not exhaustive and that special
rules are provided with respect to situations not discussed here. It should be
understood that if a tax benefited plan loses its exempt status, employees could
lose some of the tax benefits described. For further information, a qualified
tax adviser should be consulted.
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PUERTO RICO TAX CONSIDERATIONS
The Puerto Rico Internal Revenue Code of 1994 (the "1994 Code") taxes
distributions from non-qualified annuity contracts differently than in the U.S.
Distributions that are not in the form of an annuity (including partial
surrenders and period certain payments) are treated under the 1994 Code first as
a return of investment. Therefore, no taxable income is recognized for Puerto
Rico tax purposes until the cumulative amount paid exceeds your tax basis. The
amount of income on annuity distributions (payable over your lifetime) is also
calculated differently under the 1994 Code. Since Puerto Rico residents are also
subject to U.S. income tax on all income other than income sourced to Puerto
Rico, and the Internal Revenue Service issued guidance in 2004 which indicated
that the income from an annuity contract issued by a U.S. life insurer would be
considered U.S. source income, the timing of recognition of income from an
annuity contract could vary between the two jurisdictions. Although the 1994
Code provides a credit against the Puerto Rico income tax for U.S. income taxes
paid, an individual may not get full credit because of the timing differences.
You should consult with a personal tax adviser regarding the tax consequences of
purchasing an annuity contract and/or any proposed distribution, particularly a
partial distribution or election to annuitize.
NON-RESIDENT ALIENS
Distributions to non-resident aliens ("NRAs") are subject to special and complex
tax and withholding rules under the Code with respect to U.S. source income,
some of which are based upon the particular facts and circumstances of the
Contract Owner, the beneficiary and the transaction itself. As stated above, the
IRS has taken the position that income from the Contract received by NRAs is
considered U.S. source income. In addition, Annuity Payments to NRAs in many
countries are exempt from U.S. tax (or subject to lower rates) based upon a tax
treaty, provided that the Contract Owner complies with the applicable
requirements. NRAs should seek guidance from a tax adviser regarding their
personal situation.
AVAILABLE INFORMATION
The Company files reports and other information with the Securities and Exchange
Commission ("Commission"), as required by law. You may read and copy this
information and other information at the public reference facilities of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. You may also
review this information by accessing the Commission's website at
http://www.sec.gov.
Under the Securities Act of 1933, each Company has filed with the Commission a
registration statement (the "Registration Statement") relating to the Contracts
offered by this prospectus. This prospectus has been filed as a part of the
Registration Statement and does not contain all of the information set forth in
the Registration Statement and the exhibits, and reference is hereby made to
such Registration Statement and exhibits for further information relating to the
Company and the Contracts. The Registration Statement and the exhibits may be
inspected and copied as described above. Although the Company furnishes
certificate and contract owners with the Annual Reports on Form 10-K for the
year ended December 31, 2004 the Company does not plan to furnish subsequent
financial reports.
FINANCIAL STATEMENTS
The Company's latest annual report on Form 10-K has been filed with the
Commission. It is incorporated by reference into this Prospectus and a copy of
the annual report on Form 10-K must accompany this Prospectus.
The Form 10-K for the period ended December 31, 2004 contains additional
information about the Company, including audited financial statements for the
Company's latest fiscal year. The Company filed its Form 10-K on March 30, 2005
via Edgar File No. 33-03094.
If requested, the Company will furnish, without charge, a copy of any and all of
the documents incorporated by reference, other than exhibits to those documents
(unless such exhibits are specifically incorporated by reference in those
documents). You may direct your requests to the Company at P.O. Box 990009,
Hartford, CT 06199-0009, Attention: Annuity Services. The telephone number is
(800) 842-0086. You may also obtain copies of any documents, incorporated by
reference into this prospectus by accessing the SEC's Website
(http://www.sec.gov).
LEGAL OPINION
Legal matters in connection with federal laws and regulations affecting the
issue and sale of the Contracts described in this prospectus and the
organization of the Company, its authority to issue such Contracts under
19
Connecticut law and the validity of the forms of the Contracts under Connecticut
law have been passed on by the Deputy General Counsel of the Company.
EXPERTS
THE TRAVELERS INSURANCE COMPANY
The consolidated financial statements and schedules of The Travelers Insurance
Company and subsidiaries as of December 31, 2004 and 2003, and for each of the
years in the three-year period ended December 31, 2004, have been incorporated
by reference herein in reliance upon the reports of KPMG LLP, independent
registered public accounting firm, also incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing. The audit
reports covering the December 31, 2004, consolidated financial statements and
schedules refer to changes in the Company's methods of accounting for certain
nontraditional long-duration contracts and for separate accounts in 2004,
variable interest entities in 2003, and for goodwill and intangible assets in
2002.
20
APPENDIX A
Plans eligible to purchase the Contract are pension and profit sharing plans
qualified under ss.401 (a) of the Internal Revenue Code, Section 403 (b) ERISA
plans, and eligible state deferred compensation plans under ss.457 of the Code
("Qualified Plans"). Trustees should consider whether the Plan permits the
investment of Plan assets in the Contract, the distribution of such an annuity
and payment of death benefits in accordance with the requirements of the federal
income tax rules. Assuming continued Plan qualification and operation, earnings
on Plan assets will accumulate value on a tax-deferred even if the Plan is not
funded by this Contract. Trustees therefore should consider features of the
Contract other than tax-deferral before investing in the Contract. In addition,
because required minimum distributions must generally begin for annuitants after
age 70 1/2, trustees should consider whether that the Contract may not be an
appropriate purchase for annuitants approaching or over age 70 1/2.
To apply for this Contract, the trustee or other applicant must complete an
application or purchase order for the Group Annuity Contract and make a Purchase
Payment. A Group Annuity Contract will then be issued to the applicant. While
certificates may or may not be issued, each Purchase Payment is confirmed to the
contract owner. Surrenders under the Group Annuity Contract may be made at the
election of the contract owner, from the Account established under the Contract.
Account surrenders are subject to the same limitations, adjustments and charges
as surrenders made under a certificate (see "Surrenders"). Cash Surrender Values
may be taken in cash or applied to purchase annuities for the Contract Owners'
Qualified Plan participants.
Because there might not be individual participant accounts, the qualified Group
Annuity Contract issued in connection with a Qualified Plan may not provide for
death benefits. Annuities purchased for Qualified Plan participants may provide
for a payment upon the death of the Annuitant depending on the option chosen
(see "Annuity Options"). Additionally, since there might not be Annuitants prior
to the actual purchase of an Annuity by the contract owner, the provisions
regarding the Maturity Date may not be applicable.
21
THE TRAVELERS INSURANCE COMPANY
FIXED ANNUITY
L-23159 05/2005
22
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration Fees: $18, 400 for 200,000,000 in interests of Fixed Annuity
Contracts
Estimate of Printing Costs: $4,000
Cost of Independent Auditors: $4,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 33-770 et seq inclusive of the Connecticut General Statutes ("C.G.S.")
regarding indemnification of directors and officers of Connecticut corporations
provides in general that Connecticut corporations shall indemnify their
officers, directors and certain other defined individuals against judgments,
fines, penalties, amounts paid in settlement and reasonable expenses actually
incurred in connection with proceedings against the corporation. The
corporation's obligation to provide such indemnification generally does not
apply unless (1) the individual is wholly successful on the merits in the
defense of any such proceeding; or (2) a determination is made (by persons
specified in the statute) that the individual acted in good faith and in the
best interests of the corporation and in all other cases, his conduct was at
least not opposed to the best interests of the corporation, and in a criminal
case he had no reasonable cause to believe his conduct was unlawful; or (3) the
court, upon application by the individual, determines in view of all of the
circumstances that such person is fairly and reasonably entitled to be
indemnified, and then for such amount as the court shall determine. With respect
to proceedings brought by or in the right of the corporation, the statute
provides that the corporation shall indemnify its officers, directors and
certain other defined individuals, against reasonable expenses actually incurred
by them in connection with such proceedings, subject to certain limitations.
Citigroup Inc. also provides liability insurance for its directors and officers
and the directors and officers of its subsidiaries, including the Registrant.
This insurance provides for coverage against loss from claims made against
directors and officers in their capacity as such, including, subject to certain
exceptions, liabilities under the federal securities laws.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 16. EXHIBITS
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
-------- -----------
1. Underwriting Agreement. Distribution and Principal
Underwriting Agreement. (Incorporated herein by reference to
Exhibit 1 to the Registration Statement on Form S-2, File No.
333-51804 filed December 14, 2000).
2. None
3(a). Charter of The Travelers Insurance Company, as amended on
October 19, 1994. (Incorporated herein by reference to Exhibit
3(a) to the Registration Statement on Form N-4, File No.
333-40193 filed November 17, 1997).
3(b). By-Laws of The Travelers Insurance Company, as amended on
October 20, 1994. (Incorporated herein by reference to Exhibit
3(b) to the Registration Statement on Form N-4, File No.
333-40193 filed November 17, 1997).
4. Contracts. (Incorporated herein by reference to Pre-Effective
Amendement No. 1 to the Registration Statement on Form S-2,
File No. 333-103909 filed February 10, 2004).
5. Opinion Re: Legality, Including Consent. (Incorporated herein
by reference to Pre-Effective Amendement No. 1 to the
Registration Statement on Form S-2, File No. 333-103909 filed
February 10, 2004).
8. None.
9. None.
10. None.
11 None.
12. None.
13. None.
15. None.
16. None.
23(a). Consent of Independent Registered Public Accounting Firm.
Filed herewith.
23(b). Consent of Counsel. (See Exhibit 5.)
24. Powers of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for George C. Kokulis, Glenn D. Lammey,
Marla Berman Lewitus and Kathleen L. Preston. (Incorporated
herein by reference to Exhibit 5 to the Registration Statement
on Form S-2, File No. 333-103909, filed on March 18, 2003.)
24(a). Powers of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for Edward W. Cassidy and William P.
Krivoshik (Incorporated herein by reference to Exhibit 24 (d)
to the Registration Statement on Form S-2, File No. 333-69793,
filed on March 30, 2005).
25. None.
26. None.
27. None.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows, pursuant to Item 512 of
Regulation S-K:
1. To file, during any period in which offers or sales of the registered
securities are being made, a post-effective amendment to this
registration statement:
i. to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
ii. to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price set
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement, and
iii. to include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes as follows, pursuant to Item 512(h)
of Regulation S-K:
(h) Request for Acceleration of Effective Date:
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable gournds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hartford, State of Connecticut, on March 30, 2005.
THE TRAVELERS INSURANCE COMPANY
(Registrant)
By: *Glenn D. Lammey
Glenn D. Lammey, Chief Financial Officer, Chief
Accounting Officer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
on March 30, 2005.
*GEORGE C. KOKULIS Director, President and Chief Executive
- ------------------------------ Officer (Principal Executive Officer)
(George C. Kokulis)
*GLENN D. LAMMEY Director, Chief Financial Officer, Chief
- ------------------------------ Accounting Officer (Principal Financial
(Glenn D. Lammey) Officer)
*MARLA BERMAN LEWITUS Director, Senior Vice President and
- ------------------------------ General Counsel
(Marla Berman Lewitus)
*KATHLEEN L. PRESTON Director and Executive Vice President
- ------------------------------
(Kathleen L. Preston)
*EDWARD W. CASSIDY Director and Executive Vice President
- ------------------------------
(Edward W. Cassidy)
*WILLIAM P. KRIVOSHIK Director, Senior Vice President and
- ------------------------------ Chief Information Officer
(William P. Krivoshik)
*By:
/s/Ernest J. Wright, Attorney-in-Fact
EXHIBIT INDEX
EXHIBIT
LETTER DESCRIPTION
23(a) Consent of KPMG LLP, Independent Registered Public Accounting Firm.