REGISTRATION STATEMENT NO. 333-126255
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 2
-----------
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: 06-0904249
ONE CITYPLACE, HARTFORD, CONNECTICUT 06103-3415
(860) 308-1000
(Address, including Zip Code, and Telephone Number, including Area Code,
of Registrant's Principal Executive Offices)
---------------
JAMES J. LIPSCOMB
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
The Travelers Insurance Company
One Cityplace, Hartford, Connecticut 06103-3415
(860) 308-1000
(Name, Address, including Zip Code, and Telephone Number,
including Area Code of Agent for Service)
Copies to:
Diane E. Ambler, Esq.
Kirkpatrick & Lockhart Nicholson Graham LLP
1601 K Street, N.W.
Washington, D.C. 20006
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|
Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus
contained herein relates to Registration Statement Nos. 333-51804 and 64862.
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 |_|.
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
THE TRAVELERS INSURANCE COMPANY
MODIFIED CROSS REFERENCE SHEET
FIXED ANNUITY
================================================================================================================================
ITEM NO. FORM S-1 REGISTRATION FORM FORM S-2 REGISTRATION FORM LOCATION IN PROSPECTUS
1 Forepart of the Registration Forepart of the Registration Statement Forepart of the Registration
Statement and Outside Front Cover and Outside Front Cover Page of Statement and Cover Page
Page of Prospectus Prospectus
2 Inside Front and Outside Back Cover Inside Front and Outside Back Cover Front and Back Cover Pages
Pages of Prospectus Pages of Prospectus
3 Summary Information, Risk Factors Summary Information, Risk Factors and Summary; Charges and
and Ratio of Earnings to Fixed Ratio of Earnings to Fixed Charges Deductions
Charges
4 Use of Proceeds Use of Proceeds The Contract
5 Determination of Offering Price Determination of Offering Price Purchase Payment
6 Dilution Dilution N/A
7 Selling Security Holders Selling Security Holders N/A
8 Plan of Distribution Plan of Distribution Distribution of the Contracts
9 Description of Securities to be Description of Securities to be Summary; The Contract
Registered Registered
10 Interests of Named Experts and Interests of Named Experts and Counsel Experts, Legal Opinion
Counsel
11 Information with Respect to Information with Respect to Registrant The Insurance Company
Registrant
11A Material Changes N/A [Included in Item 11(a)(4)]
12 Incorporation of Certain Information Incorporation of Certain Information Incorporation of Certain
by Reference by Reference Information by Reference
12A Disclosure of Commission Position on N/A See Part II, Item 14
Indemnification for Securities Act
Liabilities
13 N/A Disclosure of Commission Position on N/A
Indemnification for Securities Act
Liabilities
MTM
METLIFE TARGET MATURITY
MTM, MetLife Target Maturity, is a deferred annuity Contract ("Contract") that
provides a guaranteed fixed rate of return for your investment if you do not
surrender your Contract before the Guarantee Period ends. Generally, if you do
surrender your Contract before the Guarantee Period ends, your Cash Value will
be subject to a market value adjustment and surrender charges.
This prospectus explains:
o the Contract (single purchase payment)
o MetLife Insurance Company of Connecticut (formerly, The Travelers
Insurance Company)* and MetLife of CT Separate Account MGA
(formerly, The Travelers Separate Account MGA)
o MetLife Life and Annuity Company of Connecticut (formerly, The
Travelers Life and Annuity Company)** and MetLife of CT Separate
Account MGA II (formerly, The Travelers Separate Account MGA II)
o the Guarantee Periods and Interest Rates
o Surrenders
o Surrender Charges
o Market Value Adjustment
o Death Benefit
o Annuity Payments
o other aspects of the Contract
This Contract is issued by MetLife Insurance Company of Connecticut or MetLife
Life and Annuity Company of Connecticut. MetLife Life and Annuity Company of
Connecticut does not solicit or issue insurance products in the State of New
York. Refer to your Contract for the name of your issuing company. Both
companies are located at One Cityplace, 185 Asylum Street , Hartford,
Connecticut 06103-3415. The telephone number is 1-800-233-3591. MLI Distribution
LLC (formerly, Travelers Distribution LLC), One Cityplace, Hartford, Connecticut
06103-3415, is the principal underwriter and distributor of the Contracts.
- --------------------------------------------------------------------------------
*THE TRAVELERS INSURANCE COMPANY HAS FILED FOR APPROVAL TO CHANGE ITS NAME TO
METLIFE INSURANCE COMPANY OF CONNECTICUT. THE CHANGE WILL BE EFFECTIVE MAY 1,
2006 PENDING REGULATORY APPROVAL. YOU WILL RECEIVE A CONTRACT ENDORSEMENT
NOTIFYING YOU OF THE NAME CHANGE ONCE IT HAS OCCURRED.
**THE TRAVELERS LIFE AND ANNUITY COMPANY HAS FILED FOR APPROVAL TO CHANGE ITS
NAME TO METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT. THE CHANGE WILL BE
EFFECTIVE MAY 1, 2006 PENDING REGULATORY APPROVAL. YOU WILL RECEIVE A CONTRACT
ENDORSEMENT NOTIFYING YOU OF THE NAME CHANGE ONCE IT HAS OCCURRED.
- --------------------------------------------------------------------------------
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 1, 2006
TABLE OF CONTENTS
Special Terms........................................................... 3
Prospectus Summary...................................................... 4
The Insurance Companies................................................. 5
The Contracts........................................................... 5
Application and Purchase Payment..................................... 5
Right to Cancel...................................................... 5
Guarantee Periods....................................................... 6
Establishment of Guaranteed Interest Rates.............................. 7
Surrenders.............................................................. 7
General.............................................................. 7
Surrender Charge..................................................... 7
Special Surrenders................................................... 8
Market Value Adjustment.............................................. 8
Waiver of Surrender Charge........................................... 8
Guarantee Period Exchange Option..................................... 9
Premium Taxes........................................................ 9
Death Benefit........................................................... 9
Annuity Period.......................................................... 11
Election of Annuity Commencement Date and Form of Annuity............ 11
Change of Annuity Commencement Date or Annuity Option................ 11
Annuity Options...................................................... 11
Annuity Payment...................................................... 12
Death of Annuitant after Annuity Commencement Date................... 12
Investments by the Company.............................................. 12
Amendment of the Contracts.............................................. 13
Assignment of the Contracts............................................. 13
Distribution of the Contracts........................................... 13
Federal Tax Considerations.............................................. 15
General.............................................................. 15
Non-qualified Annuity Contracts....................................... 15
Qualified Annuity Contracts.......................................... 18
Individual Retirement Annuities...................................... 19
Roth IRA's........................................................... 20
Qualified Pension and Profit-Sharing Plans .......................... 23
Section 457 Plans.................................................... 23
The Employee Retirement Income Security Act of 1974.................. 24
Federal Income Tax Withholding....................................... 25
Tax Advice........................................................... 26
OTHER TAX CONSIDERATIONS ............................................... 26
Hurricane Relief............................... ..................... 26
Puerto Rico Tax Considerations....................................... 27
Non-Resident Aliens.................................................. 27
Incorporation of Certain Information by Reference....................... 27
Experts................................................................. 28
Appendix A.............................................................. A-1
Appendix B.............................................................. B-1
SPECIAL TERMS
- --------------------------------------------------------------------------------
IN THIS PROSPECTUS THE FOLLOWING TERMS HAVE THE INDICATED MEANINGS:
ACCOUNT VALUE -- The Purchase Payment plus all interest earned, minus all
surrenders, surrender charges and applicable premium tax previously deducted.
ANNUITANT -- The person upon whose life the Contract is issued.
ANNUITY COMMENCEMENT DATE -- The date on which annuity payments are to start.
The date may be designated in the Contract or elected by the Owner.
BENEFICIARY -- The person entitled to receive benefits under the Contract in
case of the death of the Annuitant or the Owner, or joint Owner, as applicable.
CASH SURRENDER VALUE -- The Cash Value less surrender charges and any applicable
premium tax.
CASH VALUE -- The Account Value at the end of a Guarantee Period or the Market
Adjusted Value before the end of a Guarantee Period.
COMPANY (WE, US, OUR) --MetLife Insurance Company of Connecticut or the MetLife
Life and Annuity Company of Connecticut, depending on the state where your
Contract is issued.
CONTINGENT ANNUITANT -- The person named prior to the Contract Date by the Owner
who, upon the Annuitant's death (prior to the Annuity Commencement Date) becomes
the Annuitant. All rights and benefits provided by the Contract then continue to
be in effect. Applicable to nonqualified Contracts only.
CONTRACT -- For a group Contract, the certificate evidencing a participating
interest in the group annuity Contract. Any reference in this Prospectus to
Contract includes the underlying group annuity Contract. See Appendix A. For an
individual Contract, the individual annuity Contract.
CONTRACT DATE -- The effective date of participation under the group annuity
Contract as designated in the certificate, or the date of issue of an individual
annuity Contract.
CONTRACT YEAR -- A continuous twelve-month period beginning on the Contract Date
and each anniversary thereof.
FREE WITHDRAWAL AMOUNT -- The interest credited in the previous Contract Year
that is not subject to a surrender charge or a market value adjustment.
GUARANTEE PERIOD -- The period for which either an initial or subsequent
Guaranteed Interest Rate is credited.
GUARANTEED INTEREST RATE -- The annual effective interest rate credited during
the Guarantee Period.
HOME OFFICE -- The principal executive offices of MetLife Insurance Company of
Connecticut or MetLife Life and Annuity Company of Connecticut located at
Annuity Operations and Services, One Cityplace, Hartford, Connecticut
06103-3415.
MARKET VALUE ADJUSTMENT -- The Market Value Adjustment reflects the
relationship, at the time of surrender, between the then-current Guaranteed
Interest Rate for a Guarantee Period equal to the duration left in your
Guarantee Period, and the Guaranteed Interest Rate that applies to your
Contract.
MATURITY VALUE -- The accumulated value of a Purchase Payment at the Guaranteed
Interest Rate at the end of the Guarantee Period selected, minus all surrenders,
surrender charges and premium taxes previously deducted.
OWNER (YOU, YOURS) -- For an individual Contract, the person or entity to whom
the individual Contract is issued. Joint Owners, who share in ownership rights
and any benefits or payments, may be named in nonqualified Contracts. For a
group contract, the person or entity to whom the certificate under a group
annuity Contract is issued.
PURCHASE PAYMENT -- The premium payment applied to the Contract less premium
taxes if applicable.
3
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
MetLife Target Maturity is a single purchase payment modified guaranteed
annuity. Modified Guaranteed Annuities offer a guaranteed fixed rate of return
on your principal investment if you do not surrender your Contract before the
Guarantee Period ends. If you do surrender your Contract before the end of the
Guarantee Period, generally your Cash Value is subject to a Market Value
Adjustment and Surrender Charge.
The Contract is offered by either MetLife Insurance Company of Connecticut or
MetLife Life and Annuity Company of Connecticut (each a "Company," "We" or
"Us"). MetLife Insurance Company of Connecticut is a wholly-owned subsidiary of
MetLife, Inc. MetLife Life and Annuity Company of Connecticut is a subsidiary of
MetLife Insurance Company of Connecticut. MetLife Life and Annuity Company of
Connecticut does not solicit or issue insurance products in the state of New
York. Refer to your Contract for the name of your issuing company. The Contract
is available only in those states where it has been approved for sale.
You may select an initial Guarantee Period from those available from the
Company. Currently, we offer Guarantee Periods up to ten years. Interest on the
Purchase Payment is credited on a daily basis and so compounded in the
Guaranteed Interest Rate. (See "Guarantee Periods" and "Establishment of
Guaranteed Interest Rates".)
At the end of each Guarantee Period, a subsequent Guarantee Period of one year
will automatically begin unless you elect another duration within thirty days
before the Guarantee Period ends.
You may surrender your Contract, but the Cash Value may be subject to a
Surrender Charge and/or a Market Value Adjustment. A full or partial surrender
made prior to the end of a Guarantee Period will be subject to a Market Value
Adjustment. The surrender charge may be deducted from any surrender made before
the end of the seventh Contract Year. The surrender charge is computed as a
percentage of the Cash Value being surrendered.
CHARGE AS A
CONTRACT YEAR PERCENTAGE OF CASH
IN WHICH SURRENDER IS MADE VALUE
-------------------------- ------------------
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
Thereafter 0%
There is no surrender charge for full or partial surrenders: (1) at the end of
an initial Guarantee Period of at least three years, or (2) at the end of any
other Initial Guarantee Period if the surrender occurs on or after the fifth
Contract Year. We may waive surrender charges in certain instances. (See
"Surrenders -- Waiver of Surrender Charge".)
There is no Market Value Adjustment if you surrender at the end of a guarantee
period. Any such surrender request must be in writing and received by us within
30 days before the Guarantee Period ends. You may request any interest that has
been credited during the prior Contract Year. No surrender charge or Market
Value Adjustment will be imposed on such interest payments; however, all
applicable premium taxes will be deducted. Any such surrender may also be
subject to federal and state taxes. (See "Surrenders" and "Federal Tax
Considerations".)
The Market Value Adjustment reflects the relationship between the current
Guaranteed Interest Rate for the time left in the Guarantee Period at surrender
and the Guaranteed Interest Rate that applies to your Contract. The Market Value
Adjustment amount primarily depends on the interest rates the Company receives
on its investments when the current Guaranteed Interest Rates are established.
The Market Value Adjustment is sensitive, therefore, to changes in interest
rates. It is possible that the amount you receive upon surrender may be less
than your original Purchase Payment if interest rates increase. It is also
possible that if interest rates
4
decrease, the amount you receive upon surrender may be more than your original
Purchase Payment plus accrued interest.
On the Annuity Commencement Date specified by you, 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".)
The Contract may provide for a death benefit that is the Account Value on the
date we receive written notification of death. If the Annuitant dies before the
Annuity Commencement Date with no designated Contingent Annuitant surviving, or
if the Owner dies before the Annuity Commencement Date with the Annuitant
surviving, we will pay the death benefit to the Beneficiary. We calculate the
death benefit as of the date the Home Office receives written notification of
due proof of death. (See "Death Benefit".)
We 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. (See "Surrenders Premium Taxes".)
THE INSURANCE COMPANIES
- --------------------------------------------------------------------------------
Please refer to your Contract to determine which Company issued your Contract.
MetLife Insurance Company of Connecticut (formerly The Travelers Insurance
Company) is a stock insurance company chartered in 1863 in Connecticut and
continuously engaged in the insurance business since that time. It 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 a wholly-owned subsidiary of MetLife, Inc., a
publicly traded company. MetLife, Inc., through its subsidiaries and affiliates,
is a leading provider of insurance and other financial services to individual
and institutional customers. The Company's home office is located at One
Cityplace, Hartford, Connecticut 06103-3415.
MetLife Life and Annuity Company of Connecticut (formerly The Travelers Life and
Annuity Company) is a stock insurance company chartered in 1973 in Connecticut
and continuously engaged in the insurance business since that time. It is
licensed to conduct life insurance business in all states of the United States
(except New York), the District of Columbia and Puerto Rico. The Company is an
indirect wholly-owned subsidiary of MetLife, Inc., a publicly traded company.
The Company's home office is located at One Cityplace, Hartford, Connecticut
06103-3415.
THE CONTRACTS
- --------------------------------------------------------------------------------
APPLICATION AND PURCHASE PAYMENT
For the Company to issue a Contract to you, you must:
o complete an application or an order to purchase
o include your minimum Purchase Payment of at least $5,000 and
o submit both to our Home Office for approval.
The Company may:
o accept Purchase Payments up to $1 million without prior approval
o contact you or your agent if the application or order form is not
properly completed
o return your entire application or order form and Purchase Payment if
not properly completed.
RIGHT TO CANCEL
Generally, you may return your Contract to us at our Home Office within 10 days
(7 days for IRAs) of delivery of your Contract. Depending on your state, we will
return your Purchase Payment or Cash Value. Please refer to your Contract for
any additional information.
5
GUARANTEE PERIODS
- --------------------------------------------------------------------------------
You will select the duration of the Guarantee Period and corresponding declared
Guaranteed Interest Rate. Your Purchase Payment will earn interest at the
Guaranteed Interest Rate during the entire Guarantee Period. All interest earned
will be credited daily; this compounding effect is reflected in the Guaranteed
Interest Rate.
EXAMPLE OF COMPOUNDING AT THE GUARANTEED INTEREST RATE
Beginning Account Value: $50,000
Guarantee Period: 5 years
Guaranteed Interest Rate: 5.50% Annual Effective Rate
END OF CONTRACT YEAR
-----------------------------------------------------------------------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
------------- ------------- ------------- ------------- --------------
Beginning Account Value...................... $ 50,000.00
X (1 + Guaranteed Interest Rate)............. 1.055
-------------
$ 52,750.00
=============
Account Value at end of Contract Year 1...... $ 52,750.00
X (1 + Guaranteed Interest Rate)............. 1.055
-------------
$ 55,651.25
=============
Account Value at end of Contract Year 2...... $ 55,651.25
X (1 + Guaranteed Interest Rate)............. 1.055
-------------
$ 58,712.07
=============
Account Value at end of Contract Year 3...... $ 58,712.07
X (1 + Guaranteed Interest Rate)............. 1.055
-------------
$ 61,941.23
=============
Account Value at end of Contract Year 4...... $ 61,941.23
X (1 + Guaranteed Interest Rate)............. 1.055
--------------
$ 65,348.00
==============
Account Value at end of Guarantee Period $ 65,348.00
(i.e. Maturity Value)........................ ==============
Total Interest Credited in Guarantee Period -- $65,348.00 - $50,000.00 =
$15,348.00
Account Value at end of Guarantee Period -- $50,000.00 + $15,348.00 = $65,348.00
THE ABOVE EXAMPLE ASSUMES NO SURRENDERS, DEDUCTIONS FOR PREMIUM TAXES, OR
PRE-AUTHORIZED PAYMENT OF INTEREST DURING THE ENTIRE FIVE-YEAR PERIOD. A MARKET
VALUE ADJUSTMENT OR SURRENDER CHARGE MAY APPLY TO ANY SUCH INTERIM SURRENDER
(SEE "SURRENDERS"). THE HYPOTHETICAL GUARANTEED INTEREST RATES ARE ILLUSTRATIVE
ONLY AND ARE NOT INTENDED TO PREDICT FUTURE GUARANTEED INTEREST RATES TO BE
DECLARED UNDER THE CONTRACT. ACTUAL GUARANTEED INTEREST RATES DECLARED FOR ANY
GIVEN TIME MAY BE MORE OR LESS THAN THOSE SHOWN.
We will notify you about subsequent Guarantee Periods near the end of your
current Guarantee Period. At the end of a Guarantee Period:
o you may elect a subsequent Guarantee Period by telephone or in
writing
o your Account Value will be transferred to the new Guarantee Period
at the Guaranteed Interest Rate offered at that time
o if you do not make any election, we will automatically transfer the
Account Value into a 1-year Guarantee Period, which you may transfer
out of into a new Guarantee Period with no transfer, surrender or
Market Value Adjustment charge
6
ESTABLISHMENT OF GUARANTEED INTEREST RATES
- --------------------------------------------------------------------------------
When you purchase your Contract, you will know the Guaranteed Interest Rate for
the Guarantee Period you choose. We will send you a confirmation showing the
amount of your Purchase Payment and the applicable Guaranteed Interest Rate.
After the end of each calendar year, we will send you a statement that will
show:
o your Account Value as of the end of the preceding year
o all transactions regarding your Contract during the year
o your Account Value at the end of the current year
o the Guaranteed Interest Rate being credited to your Contract.
The Company has no specific formula for determining Guaranteed Interest Rates in
the future. The Guaranteed Interest Rates will be declared from time to time as
market conditions dictate. (See "Investments by the Company".) In addition, the
Company may also consider various other factors in determining Guaranteed
Interest Rates for a given period, including regulatory and tax requirements,
sales commissions, administrative expenses, general economic trends and
competitive factors.
THE COMPANY WILL MAKE THE FINAL DETERMINATION AS TO GUARANTEED INTEREST RATES TO
BE DECLARED. WE CANNOT PREDICT NOR CAN WE GUARANTEE FUTURE GUARANTEED INTEREST
RATES.
SURRENDERS
- --------------------------------------------------------------------------------
GENERAL
You may make a full or partial surrender at any time, subject to the surrender
charges described below. In the case of all surrenders, the Cash Value and
Maturity Value will be reduced.
Upon request, we will inform you of the amount payable upon a full or partial
surrender. Any full, partial or special surrender may be subject to tax. (See
"Federal Tax Considerations".)
We may defer payment of any surrender up to six months from the date we receive
your notice of surrender or the period permitted by state insurance law, if
less. If we defer payment for more than 30 days, we will pay interest of at
least 3.5% per annum on the amount deferred.
Participants in Section 403 (b) tax-deferred annuity plans may not make
surrenders from certain amounts before the earliest of age 59 1/2, separation
from service, death, disability or hardship. (See "Federal Tax Considerations --
Section 403 (b) Plans and Arrangements".)
SURRENDER CHARGE
There are no front-end sales charges. A surrender charge may be assessed on
surrenders made before the end of the seventh Contract Year. The surrender
charge is computed as a percentage of the Cash Value being surrendered.
CONTRACT YEAR CHARGE AS A
IN WHICH SURRENDER IS MADE PERCENTAGE OF CASH VALUE
-------------------------- ------------------------
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
Thereafter 0%
7
SPECIAL SURRENDERS
No surrender charge or Market Value Adjustment will apply for full or partial
surrenders taken: (1) at the end of an Initial Guarantee Period of at least
three years in duration; or (2) at the end of any other Initial Guarantee Period
if the surrender occurs on or after the fifth Contract Year. However, Guarantee
Periods initiated through the Guaranteed Period Exchange Option will be subject
to the surrender charges based on the original Contract Date. (See "Guarantee
Period Exchange Option".)
We will not assess a surrender charge if your Account Value is applied to elect
an annuity option on the Annuity Commencement Date (except if the Fifth Option
is elected within the First Contract Year). A Market Value Adjustment will be
applied if the Annuity Commencement Date is not at the end of a Guarantee
Period. To elect an annuity option, you must notify us at least 30 days before
your Annuity Commencement Date.
In addition, for all full or partial surrenders, no surrender charge or Market
Value Adjustment will apply to any interest credited during the previous
Contract Year. Any such surrender may, however, be subject to federal or state
taxes.
If you participate in our Minimum Distribution Program, any payments that
satisfy the maximum requirements for the Minimum Distribution Program will not
be subject to the Market Value Adjustment or surrender charge. Systematic
withdrawals outside our Minimum Distribution Program are subject to a surrender
charge and a Market Value Adjustment to the extent that the payments exceed the
interest earned during the prior Contract Year.
Any payments may be subject to federal or state taxes.
MARKET VALUE ADJUSTMENT
The Market Value Adjustment may adjust up or down the amount payable on a full
or partial surrender before the end of any guarantee period.
The Market Value Adjustment is the relationship between the then-current
Guaranteed Interest Rate for a Guarantee Period equal to the time left in your
Guarantee Period, and the Guaranteed Interest Rate that applies to your
Contract.
Generally, if your Guaranteed Interest Rate is lower than the applicable current
Guaranteed Interest Rate, then the Market Value Adjustment will result in a
lower payment upon surrender. Conversely, if your Guaranteed Interest Rate is
higher than the applicable current Guaranteed Interest Rate, the Market Value
Adjustment will result in a higher payment upon surrender.
The Market Value Adjustment amount primarily depends on the level of interest
rates on the Company's investments when the current Guaranteed Interest Rates
are established. The Market Adjusted Value is sensitive, therefore, to changes
in current interest rates. It is possible that the amount you receive upon
surrender would be less than the original Purchase Payment if interest rates
increase. It is also possible that if interest rates decrease, the amount you
receive upon surrender may be more than the original Purchase Payment plus
accrued interest.
The formula for calculating the Market Value Adjustment is shown in Appendix B,
which also contains an additional illustration of the application of the Market
Value Adjustment.
WAIVER OF SURRENDER CHARGE
The surrender charge will be waived if:
(a) distributions are applied to any one of the annuity options (except
if the Fifth Option is elected within the first Contract Year) or
(b) the Owner or Annuitant dies and payment of a death benefit is made
to the Beneficiary.
8
GUARANTEE PERIOD EXCHANGE OPTION
Once each Contract Year after the first year, you may elect to transfer from
your current Guarantee Period into a new Guarantee Period of a different
duration and at the then-current Guaranteed Interest Rate. A Market Value
Adjustment will be applied to your current Account Value at the time of
transfer. There will be no surrender charge for this exchange. However,
surrender charges will continue to be based on time elapsed from the original
Contract Date. We reserve the right to charge a fee of up to $50 for such
transfers, but do not impose a transfer charge as of the date of this
prospectus.
PREMIUM TAXES
Certain state and local governments impose premium taxes. These taxes currently
range from 0% to 3.5%, depending upon 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.
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 transfers,
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.
DEATH BENEFIT
- --------------------------------------------------------------------------------
The Death Benefit is the Account Value on the date we receive written
notification of due proof of death. No market value adjustment is made upon the
payment of a Death Benefit.
A qualified group contract issued in connection with a qualified plan except for
group 403(b) annuity will not provide a death benefit because there are no
individual participant accounts.
PAYMENT OF PROCEEDS
The process of paying death benefit proceeds before the maturity date under
various situations for nonqualified contracts is summarized in the charts below.
The charts do not encompass every situation and are merely intended as a general
guide. More detailed information is provided in your Contract. Generally, the
person (s) receiving the benefit may request that the proceeds be paid in a lump
sum, or be applied to one of the settlement options available under the
Contract.
- ----------------------------------------------------------------------------------------------------------------------------------
BEFORE THE MATURITY DATE, THE COMPANY WILL MANDATORY PAYOUT
UPON THE DEATH OF THE PAY THE PROCEEDS TO: UNLESS. . . RULES APPLY*
- ----------------------------------------------------------------------------------------------------------------------------------
OWNER (WHO IS NOT THE ANNUITANT) The Beneficiary (ies), Unless the Beneficiary is the Yes
(WITH NO JOINT OWNER) or if none, to the Contract Owner's spouse and the
Contract Owner's estate. spouse elects to continue the
contract as the new owner rather
than receive the distribution.
- ----------------------------------------------------------------------------------------------------------------------------------
OWNER (WHO IS THE ANNUITANT) (WITH The Beneficiary (ies), Unless the Beneficiary is the Yes
NO JOINT OWNER) or if none, to the Contract Owner's spouse and the
Contract Owner's estate. spouse elects to continue the
contract as the new owner rather
than receive the distribution.
- ----------------------------------------------------------------------------------------------------------------------------------
9
- ----------------------------------------------------------------------------------------------------------------------------------
BEFORE THE MATURITY DATE, THE COMPANY WILL UNLESS. . . MANDATORY PAYOUT
UPON THE DEATH OF THE PAY THE PROCEEDS TO: RULES APPLY*
- ----------------------------------------------------------------------------------------------------------------------------------
JOINT OWNER (WHO IS NOT THE The surviving joint Unless the surviving joint owner is Yes
ANNUITANT) owner. the spouse and elects to continue
the Contract.
- ----------------------------------------------------------------------------------------------------------------------------------
JOINT OWNER (WHO IS THE ANNUITANT) The surviving joint Unless the surviving joint owner is Yes
owner. the Contract Owner's spouse and the
spouse elects to continue the
Contract.
Or, unless there is a Contingent
Annuitant the Contingent Annuitant
becomes the Annuitant and the
proceeds will be paid to the
surviving joint owner. If the
surviving joint owner is the
spouse, the spouse may elect to
continue the Contract.
- ----------------------------------------------------------------------------------------------------------------------------------
ANNUITANT (WHO IS NOT THE The Beneficiary (ies), Unless, the Beneficiary is the Yes
CONTRACT OWNER) or if none, to the Contract Owner's spouse and the
Contract Owner. spouse elects to continue the
Contract as the new owner rather
than receive the distribution.
Or, unless there is a Contingent
Annuitant. Then, the Contingent
Annuitant becomes the Annuitant and
the Contract continues in effect
(generally using the original
Maturity Date). The proceeds will
then be paid upon the death of the
Contingent Annuitant or owner.
- ----------------------------------------------------------------------------------------------------------------------------------
ANNUITANT (WHO IS THE CONTRACT See death of "owner who Yes
OWNER) is the Annuitant" above.
- ----------------------------------------------------------------------------------------------------------------------------------
ANNUITANT (WHERE OWNER IS A The Beneficiary (ies) Yes (Death of
NONNATURAL PERSON/TRUST) (e.g. the trust). Annuitant is
treated as death
of the owner in
these circumstances.)
- ----------------------------------------------------------------------------------------------------------------------------------
CONTINGENT ANNUITANT (ASSUMING No death proceeds are N/A
ANNUITANT IS STILL ALIVE) payable; Contract
continues.
- ----------------------------------------------------------------------------------------------------------------------------------
BENEFICIARY No death proceeds are N/A
payable; Contract
continues.
- ----------------------------------------------------------------------------------------------------------------------------------
CONTINGENT BENEFICIARY No death proceeds are N/A
payable; Contract
continues.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------
* Certain payout rules of the Internal Revenue Code (IRC) are triggered upon
the death of any Owner. Non-spousal Beneficiaries (as well as spousal
beneficiaries who choose not to assume the contract) must begin taking
distributions based on the Beneficiary's life expectancy within one year
of death or take a complete distribution of contract proceeds within 5
years of death.
10
DEATH PROCEEDS AFTER THE MATURITY DATE
If any owner or the Annuitant dies on or after the maturity date, the Company
will pay the Beneficiary a death benefit consisting of any benefit remaining
under the annuity or income option then in effect.
ANNUITY PERIOD
- --------------------------------------------------------------------------------
ELECTION OF ANNUITY COMMENCEMENT DATE AND FORM OF ANNUITY
You can select an Annuity Commencement Date at the time you apply for a
Contract. If no date is elected, for nonqualified Contracts, the automatic
default age is 90. For qualified Contracts, the automatic default age is 70 1/2.
Within 30 days before your Annuity Commencement Date, you may elect to have all
or a portion of your Cash Surrender Value paid in a lump sum on your Annuity
Commencement Date. Or, at least 30 days before the Annuity Commencement Date,
you may elect to have your Cash Value or a portion thereof (less applicable
premium taxes, if any) distributed under any of the Annuity Options described
below. If Option 5 "Payments for a Designated Period" is elected in the first
contract year, the Cash Surrender Value will be applied.
If no option is elected for nonqualified Contracts, the Cash Value will be
applied on the Annuity Commencement Date under the Second Option to provide a
life annuity with 120 monthly payments certain. For qualified Contracts, the
Cash Value will be applied to Option 4, to provide a joint and last life
annuity. This Contract may not be surrendered once annuity payments begin,
except with respect to Option 6.
CHANGE OF ANNUITY COMMENCEMENT DATE OR ANNUITY OPTION
You may change the Annuity Commencement Date at any time as long as such change
is made in writing and is received by us at least 30 days prior to the scheduled
Annuity Commencement Date. Once an Annuity Option has begun, it may not be
changed.
ANNUITY OPTIONS
Any one of the following Annuity Options may be elected. 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.
OPTION 1 -- LIFE ANNUITY -- NO REFUND: The Company will make annuity payments
during the lifetime of the Annuitant ending with the last 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 -- CASH REFUND LIFE ANNUITY: The Company will make monthly annuity
payments during the lifetime of the Annuitant. Upon the death of the Annuitant,
the Beneficiary will receive a payment equal to the Cash Value applied to this
option on the Annuity Commencement Date minus the dollar amount of annuity
payments already paid.
OPTION 4 -- JOINT AND LAST SURVIVOR LIFE ANNUITY -- NO REFUND: The Company will
make regular annuity payments during the lifetime of the Annuitant and a second
person. When either person dies, we will continue making payments to the
survivor. No further payments will be made following the death of the survivor.
OPTION 5 -- PAYMENTS FOR A DESIGNATED PERIOD: We will make periodic payments
guaranteed for the number of years selected which may be from five to thirty
years.
OPTION 6 -- ANNUITY PROCEEDS SETTLEMENT OPTION: Proceeds from the Death Benefit
may be left with the Company for a period not to exceed five years from the date
of the Owner's or Annuitant's death prior to the Annuity Commencement Date. The
proceeds will remain in the same Guarantee Period and continue to
11
earn the same Guaranteed Interest Rate as at the time of death. If the Guarantee
Period ends before the end of the five-year period, the Beneficiary may elect a
new Guarantee Period with a duration not to exceed the time remaining in the
period of five years from the date of the Owner's or Annuitant's death. Full or
partial surrenders may be made at any time. In the event of surrenders, the
remaining Cash Value will equal the proceeds left with the Company, minus any
surrender charge and applicable premium tax, plus any interest earned. A Market
Value Adjustment will be applied to all surrenders except those occurring at the
end of a Guarantee Period.
The Tables in the Contract reflect guaranteed dollar amounts of monthly payments
for each $1,000 applied under the first five Annuity Options listed above. Under
Options 1, 2 or 3, the amount of each payment will depend upon the age (and, for
nonqualified Contracts, sex) of the Annuitant at the time the first payment is
due. Under Option 4, the amount of each payment will depend upon the payees'
ages at the time the first payment is due (and, for nonqualified Contracts, the
sex of both payees).
The Tables for Options 1, 2, 3 and 4 are based on the 1983 Individual Annuitant
Mortality Table A with ages set back one year and a net investment rate of 3%
per annum. The table for Option 5 is based on a net investment rate of 3% per
annum. If mortality appears more favorable and interest rates so justify, at our
discretion, we may apply other tables which will result in higher payments for
each $1,000 applied under one or more of the first five Annuity Options.
ANNUITY PAYMENT
The first payment under any Annuity Option will be made on the Annuity
Commencement Date. Subsequent payments will be made in accordance with the
manner of payment selected and are based on the first payment date.
The option elected must result in a payment at least equal to the minimum
payment amount according to Company rules then in effect. If at any time
payments are less than the minimum payment amount, the Company has the right to
change the frequency to an interval resulting in a payment at least equal to the
minimum. If any amount due is less than the minimum per year, the Company may
make other arrangements that are equitable to the Annuitant.
Once annuity payments have begun, no surrender of the annuity benefit (including
benefits under Option 5) can be made for the purpose of receiving a lump-sum
settlement.
DEATH OF ANNUITANT AFTER ANNUITY COMMENCEMENT DATE
If the Annuitant dies after the Annuity Commencement Date, any amount payable as
a death benefit will be distributed at least as rapidly as under the method of
distribution in effect.
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. Purchase Payments made to
Contracts issued by the MetLife Insurance Company of Connecticut are invested in
MetLife of CT Separate Account MGA, and purchase payments made to contracts
issued by the MetLife Life and Annuity Company of Connecticut are invested in
MetLife of CT Separate Account MGA II. Both MetLife of CT Separate Account MGA
and MetLife of CT Separate Account MGA II are non-unitized separate accounts and
are not chargeable with liabilities arising out of any other business that the
Company may conduct. Owners do not share in the investment performance of assets
allocated to the Separate Accounts. The obligations under the Contract are
independent of the investment performance of the Separate Accounts and are the
obligations of the Company.
In establishing Guaranteed 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 Guaranteed Interest Rates are
established. (See "Establishment of Guaranteed Interest Rates".) The current
investment strategy for the Contracts is to invest in fixed income securities,
including public bonds, privately placed bonds, and mortgages,
12
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.
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.
ASSIGNMENT OF THE CONTRACTS
- --------------------------------------------------------------------------------
Our rights as evidenced by a Contract may be assigned as permitted by applicable
law. An assignment will not be binding upon us until we receive notice from you
in writing. We assume no responsibility for the validity or effect of any
assignment. You should consult your tax adviser regarding the tax consequences
of an assignment.
DISTRIBUTION OF THE CONTRACTS
- --------------------------------------------------------------------------------
DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT. MetLife Insurance Company of
Connecticut and MetLife Life and Annuity Company of Connecticut (together the
"Company") have appointed MLI Distribution LLC (formerly, Travelers Distribution
LLC) ("MLIDLLC") to serve as the principal underwriter and distributor of the
securities offered through this prospectus, pursuant to the terms of a
Distribution and Principal Underwriting Agreement. MLIDLLC, which is an
affiliate of the Company, also acts as the principal underwriter and distributor
of other annuity contracts and variable annuity contracts and variable life
insurance policies issued by the Company and its affiliated companies. The
Company reimburses MLIDLLC for expenses MLIDLLC incurs in distributing the
Contracts (e.g. commissions payable to retail broker-dealers who sell the
Contracts). MLIDLLC does not retain any fees under the Contracts.
MLIDLLC's principal executive offices are located at One Cityplace, Hartford,
Connecticut 06103. MLIDLLC is registered as a broker-dealer with the Securities
and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as
well as the securities commissions in the states in which it operates, and is a
member of the National Association of Securities Dealers, Inc. ("NASD").
MLIDLLC and the Company enter into selling agreements with affiliated and
unaffiliated broker-dealers who are registered with the SEC and are members of
the NASD, and with entities that may offer the Contracts but are exempt from
registration. Applications for the Contract are solicited by registered
representatives who are associated persons of such affiliated or unaffiliated
broker-dealer firms. Such representatives act as appointed agents of the Company
under applicable state insurance law and must be licensed to sell variable
insurance products. The Company intends to offer the Contract in all
jurisdictions where it is licensed to do business and where the Contract is
approved. The Contracts are offered on a continuous basis.
COMPENSATION. Broker-dealers who have selling agreements with MLIDLLC and the
Company are paid compensation for the promotion and sale of the Contracts.
Registered representatives who solicit sales of the Contract typically receive a
portion of the compensation payable to the broker-dealer firm. The amount the
registered representative receives depends on the agreement between the firm and
the registered representative. This agreement may also provide for the payment
of other types of cash and non-cash compensation and other benefits. A
broker-dealer firm or registered representative of a firm may receive different
compensation for selling one product over another and/or may be inclined to
favor one product provider over another product provider due to differing
compensation rates.
We generally pay compensation as a percentage of purchase payments invested in
the Contract. Alternatively, we may pay lower compensation on purchase payments
but pay periodic asset-based compensation based on all or a portion of the
Contract Value. The amount and timing of compensation may vary depending on the
selling agreement but is not expected to exceed 6.00% of Purchase Payments (if
up-front compensation is paid to registered representatives) and up to 1.50%
annually of average Contract Value (if asset-based compensation is paid to
registered representatives).
The Company and MLIDLLC have also entered into preferred distribution
arrangements with certain broker-dealer firms. These arrangements are sometimes
called "shelf space" arrangements. Under these arrangements, the Company and
MLIDLLC pay separate, additional compensation to the broker-dealer firm for
services the broker-dealer provides in connection with the distribution of the
Company's products. These services may include providing the Company
13
with access to the distribution network of the broker-dealer, the hiring and
training of the broker-dealer's sales personnel, the sponsoring of conferences
and seminars by the broker-dealer, or general marketing services performed by
the broker-dealer. The broker-dealer may also provide other services or incur
other costs in connection with distributing the Company's products.
These preferred distribution arrangements will not be offered to all
broker-dealer firms and the terms of such arrangements may differ between
broker-dealer firms. Compensation payable under such arrangements may be based
on aggregate, net or anticipated sales of the Contracts, total assets
attributable to sales of the Contract by registered representatives of the
broker-dealer firm or based on the length of time that a Contract Owner has
owned the Contract. Any such compensation payable to a broker-dealer firm will
be made by MLIDLLC or the Company out of their own assets and will not result in
any additional direct charge to you. Such compensation may cause the
broker-dealer firm and its registered representatives to favor the Company's
products. The Company and MLIDLLC have entered into preferred distribution
arrangements with their affiliates Tower Square Securities, Inc. and as well as
with unaffiliated broker-dealer firms. The Company may enter into similar
arrangements with its other affiliates Metropolitan Life Insurance Company and
New England Securities Corporation. A list of the unaffiliated broker-dealer
firms which have entered into such arrangements is available on our website.
SALE OF THE CONTRACTS BY AFFILIATES OF THE COMPANY. The Company and MLIDLLC may
offer the Contracts through retail broker-dealer firms that are affiliates of
the Company, including Tower Square Securities, Inc., Metropolitan Life
Insurance Company, Walnut Street Securities, Inc. and New England Securities
Corporation. The compensation paid to affiliated broker-dealer firms for sales
of the Contracts is generally not expected to exceed, on a present value basis,
the percentages described above. These broker-dealer firms pay their registered
representatives all or a portion of the commissions received for their sales of
Contracts; some firms may retain a portion of commissions. The amount the
broker-dealer firms pass on to their registered representatives is determined in
accordance with their internal compensation programs. These programs may also
include other types of cash compensation, such as bonuses, equity awards (such
as stock options), training allowances, supplementary salary, financing
arrangements, marketing support, medical and other insurance benefits,
retirement benefits, non-qualified deferred compensation plans, and other
benefits. For registered representatives of certain affiliates, the amount of
this additional cash compensation is based primarily on the amount of
proprietary products sold and serviced by the representative. Proprietary
products are those issued by the Company or its affiliates. The managers who
supervise these registered representatives may also be entitled to additional
cash compensation based on the sale of proprietary products by their
representatives. Because the additional cash compensation paid to these
registered representatives and their managers is primarily based on sales of
proprietary products, these registered representatives and their managers have
an incentive to favor the sale of proprietary products over other products
issued by non-affiliates.
Registered representatives of our affiliate, Metropolitan Life Insurance
Company, receive cash payments for the products they sell and service based upon
a 'gross dealer concession' model. The cash payment is equal to a percentage of
the gross dealer concession. For MetLife registered representatives other than
those in our MetLife Resources (MLR) Division, the percentage is determined by a
formula that takes into consideration the amount of premiums and purchase
payments applied to proprietary products that the registered representative
sells and services. The percentage could be as high as 100%. (MLR registered
representatives receive compensation based upon premiums and purchase payments
applied to all products sold and serviced by the representative.) In addition,
all MetLife registered representative are entitled to the additional
compensation described above based on sales of proprietary products. Because
sales of proprietary products are a factor determining the percentage of gross
dealer concession and/or the amount of additional compensation to which MetLife
registered representatives are entitled, they have an incentive to favor the
sale of proprietary products. In addition, because their sales managers'
compensation is based on the sales made by the representatives they supervise,
these sales managers also have an incentive to favor the sale of proprietary
products.
The Company's affiliates also offer their registered representatives and their
managers non-cash compensation incentives, such as conferences, trips, prizes
and awards. Other non-cash compensation payments may be made for other services
that are not directly related to the sale of products. These payments may
include support services in the form of recruitment and training of personnel,
production of promotional materials and similar services.
14
FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
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 (current top rate of 35%).
Under current Federal income tax law, the taxable portion of distribution under
variable annuity contracts and qualified plans (including IRAs) is not eligible
for the reduced tax rate applicable to long-term capital gains and dividends.
We are not responsible for determining if your employer's plan or arrangement
satisfies the requirements of the Code and/or ERISA (the Employee Retirement
Income Security Act of 1974). If the Annuity is subject to the Retirement Equity
Act because it is part of a plan subject to ERISA, the participant's spouse has
certain rights which may be waived with the written consent of the spouse.
Consult your tax advisor.
The rules for state and local income taxes may differ from the Federal income
tax rules. Contract Owners and prospectus contract owners of the Contract should
consult their own tax advisors and the law of the applicable taxing jurisdiction
to determine what rules and tax benefits apply to the contract.
FEDERAL ESTATE TAXES. While no attempt is being made to discuss the Federal
estate tax implications of the Contract, you should keep in mind that the value
of an annuity contract owned by a decedent and payable to a beneficiary by
virtue of surviving the decedent is included in the decedent's gross estate.
Depending on the terms of the annuity contract, the value of the annuity
included in the gross estate may be the value of the lump sum payment payable to
the designated beneficiary or the actuarial value of the payments to be received
by the beneficiary. Consult an estate planning advisor for more information.
GENERATION-SKIPPING TRANSFER TAX. Under certain circumstances, the Code may
impose a "generation skipping transfer tax" when all or part of an annuity
contract is transferred to, or a death benefit is paid to, an individual two or
more generations younger than the Contract Owner. Regulations issued under the
Code may require us to deduct the tax from your Contract, or from any applicable
payment, and pay it directly to the Internal Revenue Service (the "IRS").
Consult a tax advisor or attorney prior to naming a beneficiary or other payee
under the Income Annuity to determine whether this tax may apply.
To the extent permitted under Federal income tax law, the Separate Account may
claim the benefit of certain tax credits attributable to taxes paid by certain
of the Variable Funding Options to foreign jurisdictions.
NON-QUALIFIED ANNUITY CONTRACTS
As the owner of a non-qualified annuity, you do not receive any tax benefit
(deduction or deferral of income) on Purchase Payments, but you will not be
taxed on increases in the value of your Contract until a distribution occurs -
either as a withdrawal (distribution made prior to the Maturity Date), or as
periodic Annuity Payments. When a withdrawal is made, you are taxed on the
amount of the withdrawal that is considered earnings under federal tax laws.
Similarly, when you receive an Annuity Payment, part of each periodic payment is
considered a return of your
15
Purchase Payments and will not be taxed. The remaining portion of the Annuity
Payment (i.e., any earnings) will be considered ordinary income for federal
income tax purposes.
If a non-qualified annuity is owned by other than an individual (e.g. by a
corporation), however, increases in the value of the Contract attributable to
Purchase Payments made after February 28, 1986 are includable in income annually
and taxed at ordinary income tax rates. Furthermore, for contracts issued after
April 22, 1987, if you transfer the Contract to another person or entity without
adequate consideration, all deferred increases in value will be includable in
your income for federal income tax purposes at the time of the transfer.
The tax law treats all non-qualified deferred annuities issued after October 21,
1988 by the same company (or its affiliates) to the same owner during any one
calendar year as one annuity. This may cause a greater portion of your
withdrawals from the Deferred Annuity to be treated as income than would
otherwise be the case. Although the law is not clear, the aggregation rule may
also adversely affect the tax treatment of payments received under an income
annuity where the owner has purchased more than one non-qualified annuity during
the same calendar year from the same or an affiliated company after October 21,
1988, and is not receiving income payments from all annuities at the same time.
Under Section 1035 of the Code, your Non-Qualified Contract may be exchanged for
another Non-Qualified annuity without paying income taxes if certain Code
requirements are met and income payments have not yet commenced. Code Section
1035 provides that no gain or loss is recognized when an annuity contract or a
portion of an existing annuity account balance is received in exchange for a
life, endowment, or annuity Contract. Since different annuity contracts have
different expenses, fees and benefits, a tax-free exchange (or a portion
thereof) could result in your investment becoming subject to higher or lower
fees and/or expenses.
For partial exchanges under section 1035, it is conceivable that the IRS could
require aggregation of the several contracts if distributions have been taken
from any of the contracts after the exchange within a certain period of time
(E.G. 24 months) resulting in greater taxable income and adverse tax
consequences such as imposition of the 10% penalty if the taxpayer has not
attained age 59 1/2 at the time of the distribution(s).
Additionally, consolidation of contracts under a Section 1035 exchange will
cause an aggregation of contract values and may adversely impact gain reported
and possible imposition of the 10% penalty if the taxpayer is under age 59 1/2
at the time of distribution from a consolidated contract.
Where otherwise permitted under the Deferred Annuity, pledges, direct or
indirect borrowing against the value of the contract and other types of
transfers of all or a portion of your Account Balance may result in the
immediate taxation of the gain in your Deferred Annuity. This rule may not apply
to certain transfers between spouses or between ex-spouses which are considered
incident to divorce as defined by the Code.
Consult your tax advisor prior to changing the annuitant or prior to changing
the date you have determined to commence income payments, if permitted under the
terms of your contract, as it is conceivable that the IRS could consider such
actions to be a taxable exchange of annuity contracts.
OWNERSHIP OF THE INVESTMENTS
In certain circumstances, owners of annuity contracts have been considered to be
the owners of the underlying investments for Federal income tax purposes due to
their ability to exercise investment control over those assets. When this is the
case, the Contract Owners have been currently taxed on income and gains
attributable to the underlying investments. While we believe that the Contract
does not give the Contract Owner investment control over the underlying
investments, we reserve the right to modify the Contract as necessary to prevent
a Contract Owner from being treated as the owner of the underlying investments
supporting the Contract.
PARTIAL AND FULL WITHDRAWALS
Any withdrawal is generally treated as coming first from earnings (determined
based on the difference between the account balance prior to any surrender
charges and the remaining basis, immediately prior to the withdrawal) and only
after all earnings are paid out from your contributions (and thus a nontaxable
return of principal). However, this rule does not apply to payments made under
income annuities. Such payments are subject to an "exclusion ratio" or
"excludable amount" which determines how much of each payment is a non-taxable
return of your contribution/purchase payment and how much is a taxable payment
of earnings. Once the total amount treated as a
16
return of your contribution/purchase payment equals the amount of such
contribution/purchase payment, all remaining payments are fully taxable.
Generally, when you (or your beneficiary in the case of a death benefit) make a
partial withdrawal from your Non-Qualified Annuity, the Code treats such a
withdrawal as:
o First coming from earnings (and thus subject to income tax); and
o Then from your purchase payment (which is not subject to income tax).
This rule does not apply to payments made pursuant to an income pay-out option
under your Contract.
In the case of a full withdrawal, the withdrawn amounts are treated as first
coming from your non-taxable return of purchase payment and then from a taxable
payment of earnings. In the event the proceeds on full surrender of your
Contract are less than remaining purchase payment you may be able to claim a
loss: consult a tax advisor as to whether a loss is allowable, the character of
such loss and where to claim it in your Federal Income Tax return.
INCOME ANNUITY PAYMENTS
Generally, different tax rules apply to payments made generally pursuant to an
Income Annuity or pay-out option under your Deferred Annuity than to withdrawals
and payments received before the annuity starting date.
Income payments are subject to an "excludable amount" or "exclusion ratio,"
which determines how much of each payment is treated as:
o A non-taxable return of your purchase payment; and
o A taxable payment of earnings.
Partial Annuitizations: At the present time the IRS has not approved the use of
an exclusion ratio or exclusion amount when only part of your account balance is
used to convert to income payments. Consult your tax attorney prior to partially
annuitizing your Contract.
Income payments and amounts received on the exercise of a full withdrawal or
partial withdrawal option under your Non-qualified Qualified Income Annuity may
not be transferred in a tax-free exchange into another annuity contract. In
accordance with our procedures, such amounts will instead be taxable under the
rules for income payment or withdrawals, whichever is applicable.
Additionally, if you are under age 59 1/2 at the time income payments commence
and intend the income payments to constitute an exception to the 10% penalty
tax, any attempt to make a tax-free transfer or rollover (whether for
non-qualified or qualified annuities) prior to the later of (a) age 59 1/2, or
(b) five years after income payments commence will generally invalidate the
exception and subject you to income tax, additional penalties and interest.
Generally, once the total amount treated as a non-taxable return of your
purchase payment equals your purchase payment, then all remaining payments are
fully taxable. We will withhold a portion of the taxable amount of your income
payment for income taxes, unless you elect otherwise. The amount we withhold is
determined by the Code.
Under the Code, withdrawals or income payments from Non-Qualified qualified
annuities need not be made by a particular age. However, it is possible that the
IRS may determine that you must take a lump sum withdrawal or elect to receive
income payments by a certain age (E.G., 85).
17
AFTER DEATH & DEATH BENEFITS: NON-QUALIFIED ANNUITIES
The death benefit under an annuity is generally taxable to the recipient
beneficiary or other payee, such as your estate, in the same manner as
distributions made to the contract owner (using the rules for withdrawals or
income payments, whichever is applicable).
If you die before the annuity starting date, as defined under Treasury
Regulations, we must make payment of your entire interest in the Contract within
five years of the date of your death or begin payments for a period and in a
manner allowed by the Code (and any regulations thereunder) to your beneficiary
within one year of the date of your death. If your spouse is your beneficiary,
he or she may elect to continue as "contract owner" of the Contract.
If the Contract is issued in your name after your death for the benefit of your
designated beneficiary with a purchase payment which is directly transferred to
the Contract from another non-qualified account or non-qualified annuity you
owned, the entire interest in the Contract including the value of all benefits
in addition to the account balance must be distributed to your designated
beneficiary under the required minimum distribution rules under the Code that
apply after your death. Additionally, the death benefit must continue to be
distributed to your beneficiary's beneficiary in a manner at least as rapidly as
the method of distribution in effect at the time of your beneficiary's death.
After your death, if your designated beneficiary does not timely elect in
accordance with our procedures a method for the payment of the death benefit
complying with the Code, the remaining interest in the Contract must be
distributed within five years of the date of your death.
If you die on or after the "annuity starting date", as defined under Treasury
Regulations, payments must continue to be made at least as rapidly as under the
income type being used as of the date of your death.
If you die before all purchase payments are returned, the unreturned amount may
be deductible on your final income tax return or deductible by either your
beneficiary, if income payments continue after your death, or by your estate or
your beneficiary if paid in a lump sum.
In the case of joint owners, the above rules will be applied on the death of any
contract owner.
Where the contract owner is not a natural person, these rules will be applied on
the death of or change of any annuitant (if changes to the annuitant are
permitted under the Contract).
QUALIFIED ANNUITY CONTRACTS
If you purchase your Contract with proceeds of an eligible rollover distribution
from any qualified employee pension plan or individual retirement annuity (IRA),
your Contract is referred to as a Qualified Contract. Some examples of Qualified
Contracts are: IRAs, tax-sheltered annuities established by public school
systems or certain tax-exempt organizations under Code Section 403(b), corporate
sponsored pension and profit-sharing plans (including 401(k) plans), Keogh Plans
(for self-employed individuals), and certain other qualified deferred
compensation plans. Another type of Qualified Contract is a Roth IRA, under
which after-tax contributions accumulate until maturity, when amounts (including
earnings) may be withdrawn tax-free. The rights and benefits under a Qualified
Contract may be limited by the terms of the retirement plan, regardless of the
terms and conditions of the Contract. Plan participants making contributions to
Qualified Contracts will be subject to the required minimum distribution rules
as provided by the Code and described below.
All IRAs, TSAs (ERISA and non-ERISA) ss.457(b), ss.403(a), SEP and SIMPLE plans
and 401(a) and 401(k) plans (hereinafter "Qualified Plans" unless otherwise
specified) receive tax deferral under the Code. Although there are no additional
tax benefits by funding your Qualified Plan with an annuity, doing so does offer
you additional insurance benefits such as the availability of a guaranteed
income for life.
TAXATION OF QUALIFIED ANNUITY CONTRACTS
Under a qualified annuity, since amounts paid into the Contract have generally
not yet been taxed, the full amount of such distributions, including the amount
attributable to the Purchase Payment, whether paid in the
18
form of lump-sum withdrawals or Annuity Payments, are generally taxed at the
ordinary income tax rate unless the distribution is transferred to an eligible
rollover account or contract. The Contract is available as a vehicle for IRA
rollovers and for other Qualified Contracts. There are special rules which
govern the taxation of Qualified Contracts, including withdrawal restrictions,
requirements for mandatory distributions, and contribution limits. Amounts
rolled over to the Contract from other qualified plan funding vehicles are
generally not subject to current taxation.
MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS
Federal tax law requires that minimum annual distributions begin by April 1st of
the calendar year following the calendar year in which an IRA owner attains age
70 1/2. Participants in qualified plans and 403(b) annuities may defer minimum
distributions until the later of April 1st of the calendar year following the
calendar year in which they attain age 70 1/2 or the year of retirement (except
for 5% or more owners). If you own more than one individual retirement annuity
and/or account, you may satisfy the minimum distribution rules on an aggregate
basis (I.E. determine the total amount of required distributions from all IRAs
and take the required amount from any one or more IRAs). A similar aggregate
approach is available to meet your 403(b) minimum distribution requirements if
you have multiple 403(b) annuities. Recently promulgated Treasury regulations
changed the distribution requirements; therefore, it is important that you
consult your tax adviser as to the impact of these regulations on your personal
situation.
Final income tax regulations regarding minimum distribution requirements were
released in June 2004. These regulations affect both deferred and income
annuities. Under these new rules, effective with respect to minimum
distributions required for the 2006 distribution year, in general, the value of
all benefits under a deferred annuity (including death benefits in excess of
cash value must be added to the Contract Value in computing the amount required
to be distributed over the applicable period. We will provide You with
additional information as to the amount of your interest in the Contract that is
subject to required minimum distributions under this new rule and either compute
the required amount for You or offer to do so at Your request. The new rules are
not entirely clear and you should consult your own tax advisors as to how these
rules affect your own Contract.
MINIMUM DISTRIBUTIONS FOR BENEFICIARIES UPON THE CONTRACT OWNER'S DEATH: Upon
the death of the Contract Owner and/or Annuitant of a Qualified Contract, the
funds remaining in the Contract must be completely withdrawn within 5 years from
the date of death (including in a single lump sum) or minimum distributions may
be taken over the life expectancy of the individual beneficiaries (and in
certain situations, trusts for individuals), provided such distributions are
payable at least annually and begin within one year from the date of death.
Special rules apply in the case of an IRA where the beneficiary is the surviving
spouse, which allow the spouse to assume the Contract as owner. Alternative
rules permit a spousal beneficiary under a qualified contract, including an IRA,
to defer the minimum distribution requirements until the end of the year in
which the deceased owner would have attained age 70 1/2, or to rollover the
death proceeds to his or her own IRA or to another eligible retirement plan in
which he or she participates.
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.
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 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 $4,000 for calendar years 2006-2007, and will be indexed for inflation
in years subsequent to 2008. 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 and 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. The single purchase premium may include the deductible contribution for
the year of purchase.
19
Deductible contributions to an IRA and Roth IRA must be aggregated for the year
for purposes of the individual Code Section 408A limits and the Code Section 219
limits (age 50+catch-up).
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. 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 and can accept an annual
employer contribution limited to the lesser of $44,000 or 100% of pay for each
participant in 2006.
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.
CONVERSION
You may convert/rollover an existing IRA to a Roth IRA if your modified adjusted
gross income does not exceed $100,000 in the year you convert. If you are
married but file separately, you may not convert a Traditional IRA into a Roth
IRA.
Except to the extent you have non-deductible IRA contributions, the amount
converted from an existing IRA into a Roth IRA is taxable. Generally, the 10%
early withdrawal penalty does not apply to conversions/rollovers. (See
discussion below).
Unless you elect otherwise, amounts you convert from a Traditional IRA to a Roth
IRA will be subject to income tax withholding. The amount withheld is determined
by the Code.
Note: new IRS guidance requires that in the case of a redesignation of a
Traditional IRA into a Roth IRA under the same Contract, the amount that is
treated as a taxable distribution is the entire value of the contract, in
addition to the account balance. The method(s) under which this value must be
determined has not been finalized by the IRS. However, interim guidance has been
issued which provides the Issuer may use a method similar to that used in
determining the required minimum distribution (but without certain exceptions
and assumptions being permitted). Additionally, issuers are required to increase
the value subject to tax in the year of the redesignation by any front loads or
non-recurring charges (this could include contractual withdrawal charges)
imposed in the 12 months prior to the conversion. If your Contract permits such
redesignation, consult your tax advisor prior to redesignating your Traditional
IRA to a Roth.
If you mistakenly convert or otherwise wish to change your Roth IRA contribution
to a Traditional IRA contribution, the tax law allows you to reverse your
conversion provided you do so before you file your tax return for the year of
the contribution and if certain conditions are met.
20
In general, a taxpayer may be permitted to revoke or recharacterize a previous
conversion from a Traditional IRA to a Roth IRA provided that certain conditions
are met. Consult your tax advisor and the instructions to IRS Form 8606 which
indicates how and when the recharacterization must be made to be valid and how
amounts should be reported. The income tax regulations also impose a waiting
period to make a reconversion after such a reversal or recharacterization.
KEOGH
A Keogh plan is generally a qualified retirement plan (defined contribution or
defined benefit) that covers a self-employed person. Other employees may also be
covered. Special rules apply to contribution limits in the case of a
self-employed person. The tax rules work similarly to the withdrawal,
distribution and eligible distribution rules as under IRAs. However, there may
be some differences: consult your tax advisor.
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 ($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 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 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.
21
DESIGNATED ROTH ACCOUNTS FOR 403(B) & 401(K) PLANS.
Effective January 1, 2006, employers that have established and maintain TSA or
401(k) plans ("collectively the Plan") may also establish a Qualified Roth
Contribution Program under Section 402A of the Code ("Designated Roth Accounts")
to accept after tax contributions as part of the TSA or 401(k) plan. In
accordance with our administrative procedures, on or before May 15, 2005, we may
permit these contributions to be made as purchase payments to a Section 403(b)
Contract or to a Contract issued under a 401(k) program under the following
conditions:
1. The employer maintaining the plan has demonstrated to our satisfaction that
Designated Roth Accounts are permitted under the Plan.
2. In accordance with our administrative procedures, the amount of elective
deferrals has been irrevocably designated as an after-tax contribution to the
Designated Roth Account.
3. All state regulatory approvals have been obtained to permit the Contract to
accept such after-tax elective deferral contributions (and, where permitted
under the Qualified Roth Contribution Program and the Contract, rollovers and
trustee-to trustee transfers from other Designated Roth Accounts).
4. In accordance with our procedures and in a form satisfactory to us, we may
accept rollovers from other funding vehicles under any Qualified Roth
Contribution Program of the same type in which the employee participates as well
as trustee-to-trustee transfers from other funding vehicles under the same
Qualified Roth Contribution Program for which the participant is making elective
deferral contributions to the Contract.
5. No other contribution types (including employer contributions, matching
contributions, etc.) will be allowed as designated Roth contributions, unless
they become permitted under the Code.
6. If permitted under the federal tax law, we may permit both pre-tax
contributions under a 403(b) plan as well as after-tax contributions under that
Plan's Qualified Roth Contribution Program to be made under the same Contract as
well as rollover contributions and contributions by trustee-to-trustee
transfers. In such cases, we will account separately for the designated Roth
contributions and the earnings thereon from the contributions and earnings made
under the pre-tax TSA plan or pre-tax 401(k) plan (whether made as elective
deferrals, rollover contributions or trustee-to-trustee transfers). As between
the pre-tax or traditional Plan and the Qualified Roth Contribution Program, we
will allocate any living benefits or death benefits provided under the Contract
on a reasonable basis, as permitted under the tax law. However, we reserve the
right to require a separate TSA Contract to accept designated Roth TSA
contributions and a separate section 401(k) Contract to accept designated Roth
401(k) contributions.
7. We may refuse to accept contributions made as rollovers and
trustee-to-trustee transfers, unless we are furnished with a breakdown as
between participant contributions and earnings at the time of the contribution.
Many of the federal income tax rules pertaining to Designated Roth Accounts have
not yet been finalized. Both you and your employer should consult their own tax
and legal advisors prior to making or permitting contributions to be made to a
Qualified Roth Contribution Program.
The following general tax rules are based on our understanding of the Code and
any regulations issued through December 31,2005, and are subject to change and
to different interpretation as well as additional guidance in respect to areas
not previously addressed:
o The employer must permit contributions under a pre-tax 403(b) or pretax 401
(k) plan in order to permit contributions to be irrevocably designated and made
part of the Qualified Roth Contribution Program.
o Elective deferral contributions to the Designated Roth Account must be
aggregated with all other elective deferral contributions made by a taxpayer for
purposes of the individual Code Section 402(g) limits and the Code Section
414(v) limits (age 50+catch-up) as well as contribution limits that apply under
the Plan.
o In general, the same tax law rules with respect to restricted monies,
triggering events and permitted distributions will apply to the Designated Roth
Accounts under the Plan, if such amounts have been held under any Designated
Roth Account for at least 5 years, as apply to the traditional pre-tax accounts
under the Plan (E.G., death or disability of
22
participant, severance from employment, attainment of age 59 1/2, hardship
withdrawals only with respect to contributions, if permitted under the Plan).
o If the amounts have been held under any Designated Roth Account of a
participant for at least five years, and are made on account of death,
disability, or after attainment of age 59 1/2, then any withdrawal, distribution
or payment of these amounts is generally free of federal income tax ("Qualified
Distribution").
o Unlike Roth IRAs, withdrawals, distributions and payments that do not meet the
five year rule will generally be taxed on a pro-rated basis with respect to
earnings and after-tax contributions. The 10% penalty tax will generally apply
on the same basis as a traditional pre-tax account under the Plan. Additionally,
rollover distributions may only be made tax-free into another Designated Roth
Account or into a Roth IRA.
o Some states may not permit contributions to be made to a Qualified Roth
Contribution Program or may require additional conforming legislation for these
rules to become effective.
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 2006,
the applicable limits are $44,000 for total contributions and $15,000 for salary
reduction contributions made pursuant to Code Section 401(k). Additional
"catch-up contributions" may be made by individuals age 50 or over ($5,000 for
2006).
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.
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.
Such plans are not available for churches and qualified church controlled
organizations.
The Owner of contracts issued under Section 457 plans by non-governmental
employers is the employer 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
23
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.
GENERALLY, MONIES IN YOUR CONTRACT CAN NOT BE "MADE AVAILABLE" TO YOU UNTIL YOU,
REACH AGE 70 1/2, LEAVE YOUR JOB OR YOUR EMPLOYER CHANGES OR HAVE AN UNFORESEEN
EMERGENCY (AS DEFINED BY THE CODE)
The tax rules for taxation of distributions and withdrawals work similarly as to
those for IRAs. However the 10% penalty tax only applies to distributions and
withdrawals that are attributable to rollovers from IRAs and other eligible
retirement plans, and do not apply at all to 457(b) plans of tax exempt
employers other than state or local governmental units. Distributions and
withdrawals under a 457(b) plan of a tax exempt employer that is not a
governmental unit are generally taxed under the rules applicable to wages.
Consult your tax advisor.
LOANS: In the case of a 457(b) plan maintained by a state or local government,
the plan may permit loans. The Code and applicable income tax regulations limit
the amount that may be borrowed from your 457(b) plan and all employer plans in
the aggregate and also require that loans be repaid, at a minimum, in scheduled
level payments over a certain term.
Your 457(b) plan will indicate whether plan loans are permitted. The terms of
the loan are governed by your loan agreement with the plan. Failure to satisfy
loan limits under the Code or to make any scheduled payments according to the
terms of your loan agreement and Federal tax law could have adverse tax
consequences. Consult a tax advisor and read your loan agreement and Contract
prior to taking any loan.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a Contract because of the death of an owner or
Annuitant. Generally, such amounts are includable in the income of the recipient
as follows: (i) if distributed in a lump sum, they are taxed in the same manner
as a full surrender of the Contract; or (ii) if distributed under a payment
option, they are taxed in the same way as Annuity Payments.
PENALTY TAX FOR PREMATURE DISTRIBUTIONS
Taxable distributions taken before the Contract Owner has reached the age of
59 1/2 will be subject to a 10% additional tax penalty unless the distribution
is taken in a series of periodic distributions for life or life expectancy, or
unless the distribution follows the death or disability of the Contract Owner.
Other exceptions may be available in certain qualified plans. The 10% additional
tax is in addition to any penalties that may apply under your Contract and the
normal income taxes due on the distribution.
In general this does not apply to section 457(b) annuities. However, it does
apply to distributions from Contracts under Section 457(b) plans of employers
which are state or local governments to the extent that the distribution is
attributable to rollovers accepted from other types of eligible retirement
plans.
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
24
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 & ELIGIBLE ROLLOVER DISTRIBUTIONS
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.
We are required to withhold 20% of the portion of your withdrawal that
constitutes an "eligible rollover distribution" for Federal income taxes. We are
not required to withhold this money if you direct us or the trustee or the
custodian of the plan to directly rollover your eligible rollover distribution
to a traditional IRA or another eligible retirement plan.
Generally, an "eligible rollover distribution" is any taxable amount you (or a
spousal designated beneficiary or "alternate payee" under the Code) receives
from your Contract. In certain cases, after-tax amounts may also be considered
eligible rollover distributions.
However, it does not include taxable distributions that are:
(1) Part of a series of substantially equal payments being made at least
annually for:
o your life or life expectancy
o both you and your beneficiary's lives or life expectancies or
o a specified period of 10 years or more
(2) Generally, income payments made under a permissible income annuity on or
after the required beginning date are not eligible rollover distributions
(3) Withdrawals to satisfy minimum distribution requirements
(4) Certain withdrawals on account of financial hardship
Other exceptions to the definition of eligible rollover distribution may exist.
Effective March 28, 2005, certain mandatory distributions made to participants
in an amount in excess of $1,000 must be automatically rolled over to an IRA
designated by the plan administrator, unless the participant elects to receive
it in cash or roll it over to a different IRA or eligible retirement plan of his
or her own choosing. Generally, transitional rules apply as to when plans have
to be amended. Special effective date rules apply for governmental plans and
church plans.
ELIGIBLE ROLLOVER DISTRIBUTIONS
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.
OTHER NON-PERIODIC DISTRIBUTIONS (FULL OR PARTIAL REDEMPTIONS)
To the extent not subject to the mandatory 20% withholding as
described in above, the portion of a nonperiodic distribution which
constitutes taxable income will be subject to
25
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.
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.
OTHER TAX CONSIDERATIONS
HURRICANE RELIEF
DISTRIBUTIONS: Your plan may provide for "qualified hurricane distributions"
pursuant to the Katrina Emergency Tax Relief Act of 2005 and the Gulf
Opportunity Zone Act of 2005. Subject to an aggregate limit of $100,000 among
all eligible retirement plans, a participant's qualified hurricane distributions
are not subject to the 10% early withdrawal penalty that might otherwise apply
to a qualified annuity under section 72(t).
To the extent a participant "repays" a qualified hurricane distribution by
contributing within three years of the distribution date to an eligible
retirement plan that accepts rollover contributions, it will generally be
treated as a timely direct trustee-to-trustee transfer and will not be subject
to income tax. To the extent a participant does not repay a qualified hurricane
distribution within three years, he or she will include the distribution in
gross income ratably over the three-tax year period, beginning with the tax year
in which the distribution is received, unless the participant elects to opt out
of three-year averaging by including the qualified hurricane distribution in
gross income for the year it is received. Consult your independent tax advisor
to determine if hurricane relief is available to Your particular situation.
LOANS: Your plan may provide for increased limits and delayed repayment of
participant loans, where otherwise permitted by your plan, pursuant to the
Katrina Emergency Tax Relief Act of 2005 and the Gulf Opportunity Zone Act of
2005. An eligible retirement plan other than an IRA may allow a plan loan to
delay loan repayment by certain individuals impacted by Hurricanes Katrina, Rita
and Wilma, whose principal places of abode on certain dates were located in
statutorily defined disaster areas and who sustained an economic loss due to the
hurricane. Generally, if
26
the due date for any repayment with respect to such loan occurs during a period
beginning on September 23, 2005 (for purposes of Hurricane Katrina) or October
23, 2005 (for purposes of Hurricanes Rita and Wilma) and ending on December 31,
2006, then such due date may be delayed for one year. Note: For purposes of
these loan rules, an individual cannot be a qualified individual with respect to
more than one hurricane. Consult your independent tax advisor to determine if
hurricane relief is available to Your particular situation.
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
United States. 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, a substantial portion of the amounts
distributed will generally be excluded from gross income 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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
- --------------------------------------------------------------------------------
Under the Securities Act of 1933, the 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 Company's latest annual report on Form 10-K for both The Travelers Insurance
Company and The Travelers Life and Annuity Company have been filed with the
Commission. It is incorporated by reference into this prospectus. The Form 10-K
for the period ended December 31, 2005 contains additional information about the
Company, including audited consolidated financial statements for the Company's
latest fiscal year. The Travelers Insurance Company filed its Form 10-K on March
31, 2006 via Edgar File No. 33-03094. The Travelers Life and Annuity Company
filed its Form 10-K on April 3, 2006 via EDGAR File No. 033-58677. All other
reports filed by the Company pursuant to Section 13(a) or 15(d) of the Exchange
Act (such as quarterly and periodic reports) or proxy or information statements
filed pursuant to Section 14 of the Exchange Act since the end of the fiscal
year ending December 31, 2005 are also incorporated by reference into this
prospectus.
There have been no material changes in the Company's affairs which have occurred
since the end of the latest fiscal year for which audited consolidated financial
statements were included in the latest Form 10-K or which have not been
described in a Form 10-Q or Form 8-K filed by the Company under the Exchange
Act.
If requested, the Company will furnish, without charge, a copy of any and all of
the reports or documents that have been incorporated by reference into this
prospectus. You may direct your requests to the Company at Annuity
27
Operations and Services, One Cityplace, 185 Asylum Street, Hartford, CT
06103-3415. The telephone number is 1-800-233-3591. You may also access the
incorporated reports and other documents at www.metlife.com.
You may also read and copy any materials that the Company files with the SEC at
the SEC's Public Reference Room at 100 F Street, N.E., Washington, DC 20549. The
public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC at (http://www.sec.gov).
EXPERTS
- --------------------------------------------------------------------------------
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
Connecticut law and the validity of the forms of the Contracts under Connecticut
law have been passed on by legal counsel for the Company.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
THE METLIFE INSURANCE COMPANY OF CONNECTICUT (FORMERLY, THE TRAVELERS INSURANCE
COMPANY)
The consolidated financial statements of The Travelers Insurance Company (the
"Company") (which report expresses an unqualified opinion and includes an
explanatory paragraph referring to the acquisition of the Company by MetLife
Inc. on July 1, 2005 and the application of the purchase method of accounting to
the assets and liabilities of the Company as required by the U.S. Securities and
Exchange Commission Staff Accounting Bulletin 5.J., Push Down Basis of
Accounting Required in Certain Limited Circumstances and such assets and
liabilities were measured at their fair values as of the acquisition date in
conformity with Statement of Financial Accounting Standards No.141, Business
Combinations) as of December 31, 2005 and the related consolidated statements of
income, stockholder's equity, and cash flows for the six months ended December
31, 2005 (SUCCESSOR), and June 30, 2005 (PREDECESSOR) and the consolidated
financial statement schedules as of December 31, 2005 (SUCCESSOR), and the six
months ended December 31, 2005 (SUCCESSOR), and June 30, 2005 (PREDECESSOR)
incorporated by reference in this Prospectus have been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in their
reports appearing herein, and are included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing. The
principal business address of Deloitte & Touche LLP is Two World Financial
Center, New York, New York 10281-1414.
The consolidated financial statements and schedules of The Travelers Insurance
Company and subsidiaries as of December 31, 2004 and for each of the years in
the two-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 Travelers Insurance Company and subsidiaries refer to changes in the
Company's methods of accounting for certain nontraditional long-duration
contracts and for separate accounts in 2004 and for variable interest entities
in 2003.
THE METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (FORMERLY, THE TRAVELERS
LIFE AND ANNUITY COMPANY)
The consolidated financial statements of The Travelers Life and Annuity Company
(the "Company") (which report expresses an unqualified opinion and includes an
explanatory paragraph referring to the acquisition of the Company by MetLife
Inc. on July 1, 2005 and the application of the purchase method of accounting to
the assets and liabilities of the Company as required by the U.S. Securities and
Exchange Commission Staff Accounting Bulletin 5.J., Push Down Basis of
Accounting Required in Certain Limited Circumstances and such assets and
liabilities were measured at their fair values as of the acquisition date in
conformity with Statement of Financial Accounting Standards No.141, Business
Combinations) as of December 31, 2005 and the related consolidated statements of
income, stockholder's equity, and cash flows for the six months ended December
31, 2005 (SUCCESSOR), and June 30, 2005 (PREDECESSOR) and the consolidated
financial statement schedules as of December 31, 2005 (SUCCESSOR), and the six
months ended December 31, 2005 (SUCCESSOR), and June 30, 2005 (PREDECESSOR)
incorporated by reference in this Prospectus have been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in their
reports appearing herein, and are included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing. The
principal business address of Deloitte & Touche LLP is Two World Financial
Center, New York, New York 10281-1414.
The financial statements and schedules of The Travelers Life and Annuity Company
as of December 31, 2005 and for each of the years in the two-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 Travelers Life and
Annuity Company refer to changes in the Company's methods of accounting for
certain traditional long-duration contracts and for separate accounts in 2004.
28
THIS PAGE INTENTIONALLY LEFT BLANK.
APPENDIX A
- --------------------------------------------------------------------------------
Plans eligible to purchase the Contract are pension and profit sharing plans
qualified under Section 401 (a) of the Internal Revenue Code, Section 403 (b)
ERISA plans, and eligible state deferred compensation plans under Section 457 of
the Code ("Qualified Plans").
To apply for a group annuity 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 no Certificates are issued, each Purchase Payment and the
Account established thereby, are confirmed to the Contract Owner. Each account
will have its own optional Guarantee Period and Guaranteed Interest Rate.
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"). Surrender Values may be
taken in cash or applied to purchase annuities for the Contract Owners'
Qualified Plan participants.
Because there are no individual participant accounts, the qualified group
annuity contract issued in connection with a Qualified Plan does 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 are no Annuitants prior to
the actual purchase of an Annuity by the Contract Owner, the provisions
regarding the Annuity Commencement Date are not applicable.
A-1
THIS PAGE INTENTIONALLY LEFT BLANK.
APPENDIX B
- --------------------------------------------------------------------------------
MARKET VALUE ADJUSTMENT
The application of a Market Value Adjustment may adjust up or down your account
value. The following describes the amount the Market Value Adjustment applies
to:
Maturity Value = [(CURRENT ACCOUNT VALUE - FI) X ((1+iG)^(t/365))]
Market Adjusted Value = [(MATURITY VALUE) X (1/(1+iC)^(T/365))]
o where: "FI" is the available free interest credited for the Previous
Certificate Year, "iG" is the Guaranteed Credited rate as stated on the
contract specification page, "iC" is the Guaranteed Interest Rate for a
Guarantee Period of "t" days, where "t" is the number of days remaining in
the Guarantee Period adjusted for leap years.
The total amount available to customers, prior to any charges or premium taxes,
is: Market Adjusted Value + free interest.
The current Guaranteed Interest Rate is declared periodically by the Company and
is based on the rate (straight line interpolation between whole years) which the
Company is then paying on premiums paid under this class of Contracts with the
same maturity date as the Purchase Payment to which the formula is being
applied.
ILLUSTRATION OF A MARKET VALUE ADJUSTMENT
Purchase Payment: $50,000.00
Guarantee Period: 5 years
Guaranteed Interest Rate: 5.50% Effective Annual Rate
The following examples illustrate how the Market Value Adjustment may affect the
values of your Contract. In these examples, a Purchase Payment of $50,000 was
made to the Contract. After one year of the guarantee period, the Account Value
(i.e., the Purchase Payment plus accumulated interest) would be $52,750.
The Market Adjusted Value is calculated based on your then current Account Value
less any available free interest, and is based on a rate the Company is
crediting at the time on new Purchase Payments of the same term-to-maturity as
the time remaining in your Guarantee Period. One year after the Purchase Payment
was made, you would have four years remaining in the five-year Guarantee Period.
EXAMPLE OF A NEGATIVE MARKET VALUE ADJUSTMENT
A negative Market Value Adjustment results when interest rates have increased
since the date the Purchase Payment was made. Assume interest rates have
increased one year after the Purchase Payment and the Company is crediting 7.00%
for a four-year Guarantee Period.
The Maturity Value would be:
$61,941.23 = ($52,750.00 - $2,750) X (1 + .055)^4
The Market Adjusted Value would be:
$47,254.67 = [(61,941.23) X (1/(1+.07)^4)]
B-1
Total amount available, prior to charges and premium taxes:
$50,004.67 = $47,254.67 + $2,750.00
EXAMPLE OF A POSITIVE MARKET VALUE ADJUSTMENT
A positive Market Value Adjustment results when interest rates have decreased
since the date the Purchase Payment was made. Assume interest rates have
decreased one year after the Purchase Payment and the Company is crediting 3.50%
for a four-year Guarantee Period.
The Maturity Value would be:
$61,941.23 = ($52,750.00 - $2,750) X (1 + .055)^4
The Market Adjusted Value would be:
$53,978.21 = [(61,941.23) X (1/(1+.035)^4)]
Total amount available, prior to charges and premium taxes:
$56,728.21 = $53,978.21 + $2,750.00
These examples illustrate what may happen when interest rates increase or
decrease from the beginning of a Guarantee Period. A particular Market Value
Adjustment may have a greater or lesser impact than that shown in these
examples, depending on how much interest rates have changed since the beginning
of a Guarantee Period and the amount of time remaining to maturity. In addition,
a surrender charge may be assessed on surrenders made before the Purchase
Payment has been under the Contract for five years.
B-2
"MTM"
METLIFE TARGET MATURITY
MODIFIED GUARANTEED ANNUITY CONTRACTS
ISSUED BY
METLIFE INSURANCE COMPANY OF CONNECTICUT*
OR
METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT**
ONE CITYPLACE
HARTFORD, CONNECTICUT 06103-3415
- --------------------------------------------------------------------------------
*The Travelers Insurance Company has filed for approval to change its name to
MetLife Insurance Company of Connecticut. The change will be effective May 1,
2006 pending regulatory approval. You will receive a Contract endorsement
notifying you of the name change once it has occurred.
**The Travelers Life and Annuity Company has filed for approval to change its
name to MetLife Life and Annuity Company of Connecticut. The change will be
effective May 1, 2006 pending regulatory approval. You will receive a Contract
endorsement notifying you of the name change once it has occurred.
- --------------------------------------------------------------------------------
Book 28 May 1, 2006
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Estimate of Printing Costs: $4000
Cost of Independent Auditors: Approximately $5600
ITEM14. 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.
C.G.S. Section 33-778 provides an exclusive remedy; a Connecticut corporation
cannot indemnify a director or officer to an extent either greater or less than
that authorized by the statute, e.g., pursuant to its certificate of
incorporation, by-laws, or any separate contractual arrangement. However, the
statute does specifically authorize a corporation to procure indemnification
insurance to provide greater indemnification rights. The premiums for such
insurance may be shared with the insured individuals on an agreed basis.
The Depositor's parent, MetLife, Inc. has secured a Financial Institution Bond
in the amount of $50,000,000, subject to a $5,000,000 deductible. MetLife
maintains Directors' and Officers' Liability insurance coverage with limits of
$400 million under which the Depositor and MetLife Distribution LLC, the
Registrant's underwriter (the "Underwriter"), as well as certain other
subsidiaries of MetLife are covered.
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 15. RECENT SALES OF UNREGISTERED SECURITIES
NONE
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
1. Distribution and Principal Underwriting Agreement. (Incorporated
herein by reference to Exhibit 1 to the Registration Statement on
Form S-2, File No. 333-51800, filed December 14, 2000.)
2. None.
3(i). Charter of The Travelers Life and Annuity Company, as amended on
April 10, 1990. (Incorporated herein by reference to Exhibit 6(a)
to the Registration Statement on Form N-4, File No. 333-40191
filed November 13, 1997.)
3(ii). By-Laws of The Travelers Life and Annuity Company, as amended on
October 20, 1994. (Incorporated herein by reference to Exhibit
6(b) to the Registration Statement on Form N-4, File No. 333-40191
filed November 13, 1997.)
4. Contracts. (Incorporated herein by reference to Exhibit 4(a) to
Pre-Effective Amendment No. 1 to the Registration Statement on
Form S-2, File No. 33-58677, filed on July 11, 1995.)
5. Opinion Re: Legality, Including Consent. (Incorporated herein by
reference to Exhibit 5 to Pre-Effective Amendment No. 1 to the
Registration on Form S-2, File No. 333-83076, filed March 25,
2002.)
8. None.
9. None.
10. None.
11. None.
12. None.
13. None.
15. None.
16. None.
23(a). Consent of KPMG LLP, Independent Registered Public Accounting
Firm. Filed herewith.
23(b) Consent of Deloitte & Touche LLP, Independent Registered Public
Accounting Firm. Filed herewith.
23(c). Consent of Counsel (see Exhibit 5).
24. Powers of Attorney authorizing Michael H. Abate, John E. Connolly,
Jr., James L. Lipscomb, Gina C. Sandonato, Myra L. Saul, Paul G.
Cellupica, Richard S. Collins and Marie C. Swift, a signatory for
C. Robert Henrikson, Leland C. Launer, Lisa M. Weber, Stanley J.
Talbi and Joseph J. Prochaska, Jr. (Incorporated herein by
reference to Exhibit 24 to the Registration Statement on Form S-1,
File No. 333-126255 filed March 6, 2006.)
25. None.
26. None.
27. None.
(b) Financials pursuant to Regulation S-X - Incorporated by reference to Form
10-K for the fiscal year ended December 31, 2005 (File No. 033-03094), as filed
with the Commission on March 31, 2006 (Accession No. 0000950144-06-003059) and
by reference to Form 10-Q for the period ended September 30, 2005 (File No.
033-03094), as filed with the Commission on November 18, 2005 (Accession No.
0000950123-05-013893).
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 grounds to believe that it meets all of the
requirements for filing on Form S-1 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 April 26, 2006.
THE TRAVELERS INSURANCE COMPANY
(Registrant)
By: *Bennett Kleinberg
------------------------
Vice President & Actuary
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 April 26, 2006.
*C. ROBERT HENRIKSON Chairman, President and Chief Executive
- -------------------------------- Officer
(C. Robert Henrikson)
*LELAND C. LAUNER, JR. Director
- --------------------------------
(Leland C. Launer, Jr.)
*LISA M. WEBER Director
- --------------------------------
(Lisa M. Weber)
*STANLEY J. TALBI Senior Vice President and Chief Financial
- -------------------------------- Officer
(Stanley J. Talbi)
*JOSEPH J. PROCHASKA, JR. Senior Vice President and Chief Accounting
- -------------------------------- Officer
(Joseph J. Prochaska, Jr.)
*By: /s/Myra L. Saul, Attorney-in-Fact
EXHIBIT
NUMBER DESCRIPTION
23(a). Consent of KPMG LLP, Independent Registered Public Accounting Firm.
23(b). Consent of Deloitte & Touche LLP, Independent Registered Public
Accounting Firm.