Filed Pursuant to Rule 424(b)3
Registration Number: 33-33691
T-MARK
PROSPECTUS
T-Mark Contracts are group or individual modified guaranteed annuities
("Contracts"), which provide 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 Contract Value paid to you will be subject to a market value
adjustment and surrender charges.
This prospectus explains:
o the Contract (single Purchase Payment)
o the MetLife Insurance Company of Connecticut (formerly, The Travelers
Insurance Company)* and MetLife of CT Separate Account MGA (formerly,
The Travelers Separate Account MGA)
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. The Company
is located at One Cityplace, 185 Asylum Street, Hartford, Connecticut
06103-3415. The telephone number is 1-800-599-9460. MLI Distribution LLC
(formerly, Travelers Distribution LLC), One Cityplace, Hartford, Connecticut
06103-3415, is the principal underwriter and distributor of the Contracts.
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* 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 POLICY ENDORSEMENT
NOTIFYING YOU OF THE NAME CHANGE ONCE IT HAS OCCURRED.
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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................................................ Special Terms-1
Prospectus Summary........................................... 1
The Insurance Company........................................ 2
The Contracts................................................ 2
Application and Purchase Payment............................. 2
Right to Cancel.............................................. 2
Guarantee Periods............................................ 3
Establishment of Guaranteed Interest Rates................... 4
Surrenders................................................... 4
General...................................................... 4
Surrender Charge............................................. 4
Market Value Adjustment...................................... 5
Waiver of Surrender Charge................................... 5
Premium Taxes................................................ 6
Death Benefit................................................ 6
Annuity Period............................................... 6
Election of Annuity Commencement Date and Form of Annuity.... 6
Change of Annuity Commencement Date or Annuity Option........ 6
Annuity Options.............................................. 7
Annuity Payment.............................................. 7
Death of Annuitant After Annuity Commencement Date........... 7
Income Options............................................... 8
Investments by the Company................................... 8
Amendment of the Contracts................................... 8
Assignment of the Contracts.................................. 8
Distribution of the Contracts................................ 9
Federal Tax Considerations................................... 10
General...................................................... 10
Deferred Non-Qualified Annuity Contracts..................... 11
Qualified Annuity Contracts.................................. 14
Penalty Tax for Premature Distribution....................... 18
The Employment Retirement Income Security Act of 1974........ 18
Federal Income Tax Withholding & Eligible Rollover
Distributions ............................................... 19
Other Tax Considerations..................................... 20
Hurricane Relief............................................. 20
Puerto Rico Tax Considerations............................... 21
Non-Resident Aliens.......................................... 21
Information Incorporated by Reference........................ 21
Experts...................................................... 22
Appendix A................................................... A-1
Appendix B................................................... B-1
SPECIAL TERMS
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In this Prospectus the following terms have the indicated meanings:
ACCOUNT -- An Account is the Cash Value or Cash Surrender Value credited to a
Participant or Owner.
ACCUMULATED 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 Maturity Value of a Deposit on the Maturity Date or the Market
Adjusted Value before the Maturity Date of that Deposit.
CERTIFICATE -- Evidence of a participating interest under a Group Contract. Any
reference in this Prospectus to Certificate includes the underlying Group
Contract.
COMPANY (WE, US, OUR) -- The MetLife Insurance Company of Connecticut.
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. 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.
DEPOSIT -- The premium payment applied to the Contract less premium taxes if
applicable.
FREE INTEREST -- The interest credited in the previous Contract Year which 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 located at 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. For a group Contract, the person or entity to
whom the certificate under a group annuity Contract is issued.
Special Terms-1
PROSPECTUS SUMMARY
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MetLife Insurance Company of Connecticut (the "Company," "We," "Us"), a
wholly-owned subsidiary of MetLife, Inc., is offering group and individual
modified guaranteed annuity contracts to eligible individuals. If a group
contract is purchased, we issue certificates to the individual participants.
Where we refer to "you," we are referring to the individual contract owner or to
the group participant, as applicable. For convenience, this prospectus refers to
Contracts and Certificates as "Contracts." 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 (if applicable).
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 "Accumulation Period -- Guarantee Periods" and
"Establishment of Guaranteed Interest Rates.")
At the end of each Guarantee Period, a subsequent Guarantee Period of seven days
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 will be assessed as a percentage of the Cash
Value withdrawn as follows:
YEARS SINCE SURRENDER
DEPOSIT MADE CHARGE
---------------------- ---------------------
0-1 7%
2 6%
3 5%
4 4%
5 3%
6 or more 0%
The surrender charges listed above apply to full or partial surrenders,
regardless of the length of the Guarantee Period selected. The surrender charge
will apply if a surrender occurs at the expiration date of the Guarantee Period
for Deposits in the contract less than five years.
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 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.")
If a Participant under a group contract or an annuitant under an individual
Contract dies before the Annuity Commencement Date, we will pay a death benefit
to the beneficiary. This death benefit equals (a) the greater of the Cash Value
or the Accumulated Value of the Contract if death occurs before age 65 or (b)
the Cash Value of the Contract if death occurs on or after age 65, less any
applicable premium tax.
1
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 COMPANY
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MetLife Insurance Company of Connecticut (formerly, The Travelers Insurance
Company) is a stock insurance company chartered in 1863 in the State of
Connecticut and has been continuously engaged in the insurance business since
that time. 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.
THE CONTRACTS
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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 within a 12 month period
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
You may return your Contract to us at our Home Office within 10 days of your
original Purchase Payment in most states. Refer to your Contract for any
state-specific information.
2
GUARANTEE PERIODS
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You will select the duration of the Guarantee Period and corresponding
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
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YEAR I 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 (I + Guaranteed Interest Rate) 1.055
------------
$ 55,651.25
============
Account Value at end of Contract Year 2 $ 55,651.25
X (I + 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
(i.e. Maturity Value) $ 65,348.00
============
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" BELOW). 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 Values into a 7 day Guarantee Period, which you may transfer
out of into a new Guarantee Period with no transfer, surrender or
Market Value Adjustment charge.
In no event may subsequent Guarantee Periods extend beyond the Annuity
Commencement Date then in effect.
3
ESTABLISHMENT OF GUARANTEED INTEREST RATES
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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
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GENERAL
You may make a full or partial surrender at any time, subject to certain tax law
and retirement plan restrictions, and 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.")
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 fifth year since your Purchase Payment was
made. The surrender charge is computed as a percentage of the Cash Value being
surrendered.
CHARGE AS A
YEARS SINCE PERCENTAGE OF CASH
DEPOSIT WAS MADE VALUE
-------------------------- ----------------------
1 or less 7%
2 6%
3 5%
4 4%
5 3%
Thereafter 0%
The surrender charges listed above will apply to full or partial surrenders,
regardless of the length of the Guarantee Period selected. For example, assume a
Guarantee Period of four years. In this case, any surrenders made during the
fourth year, even on the Maturity Date, will be subject to a 4% Surrender
Charge.
4
MARKET VALUE ADJUSTMENT
The Market Value Adjustment may adjust up or down the amount payable on a full
or partial withdrawal 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, or less than 0.50
percent higher 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 more than 0.50 percent 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.
Appendix A shows the formula for calculating the Market Value Adjustment as well
as an additional illustration of the application of the Market Value Adjustment.
WAIVER OF SURRENDER CHARGE
The surrender charge will be waived if:
o an annuity payout is begun
o a level Income Option of at least three years' duration is begun after
the first Certificate Year or Contract Year, as applicable
o the Participant of a Group Contract, or Annuitant of an Individual
Contract becomes disabled (as defined by the Internal Revenue Service
("IRS")) subsequent to purchase of the Certificate or Contract
o the Participant of a Group Contract, or Annuitant of an Individual
Contract dies
o the Participant of a Group Contract, or Annuitant of an Individual
Contract under a tax deferred annuity plan (403(b) plan) retires after
age 55, provided the Certificate or Contract has been in effect five
years or more and the proceeds are paid by check made payable to the
owner of the Group Contract
o the Participant of a Group Contract, or Annuitant of an Individual
Contract under an IRA plan reaches age 70 1/2, provided the
Certificate or Contract, as applicable, has been in effect five years
or more
o the Participant of a Group Contract, or Annuitant of an Individual
Contract under a qualified pension or profit-sharing plan, including a
401 (k) plan, retires at or after age 59 1/2, provided the Certificate
or Contract, as applicable, has been in effect five years or more; or
if refunds are made to satisfy the anti-discrimination test; (for
Participants or Annuitants under contracts issued before May 1, 1992,
the surrender charge will also be waived if he or she retires at
normal retirement age (as defined by the plan), provided the
Certificate or Contract has been in effect one year or more) or
o the Participant of a Group Contract, or Annuitant of an Individual
Contract under a Section 457 deferred compensation plan retires and
the Certificate or Contract has been in effect five years or more, or
if a financial hardship or disability withdrawal has been allowed by
the plan administrator under applicable IRS rules.
In addition, for individuals under a 403(b) annuity, a pension or profit-sharing
plan, or a Section 457 deferred compensation plan, there is a 10% free
withdrawal allowance for partial surrenders prior to the Annuity Commencement
Date. An individual under an IRA plan who is over age 59 1/2 has a 20% free
withdrawal allowance. This means that, each Certificate or Contract Year after
the first such year, for the first partial surrender made in that year, 10% (20%
for IRA plans) of his or her Cash Value may be withdrawn without a
5
surrender charge. All Cash Values withdrawn will reflect any applicable Market
Value Adjustment. Full surrenders are not eligible for the free withdrawal
allowance. Failure to use all or part of the free withdrawal allowance in any
Certificate or Contract Year forfeits the balance of the allowance for that
year. For 403(b) plan participants, partial and full surrenders may be subject
to restrictions. (See "Section 403(b) Plans and Arrangements.")
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
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If a Participant under a group Contract, or an Annuitant under an individual
Contract dies before his or her Annuity Commencement Date, the Death Benefit
payable to the Beneficiary will equal (a) the greater of the Cash Value or the
Accumulated Value of the Contract, if death occurs before age 65; or (b) the
Cash Value of the Contract, if death occurs on or after age 65 less any
applicable premium tax. 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 Contracts, will not provide a death benefit on those
accounts held by individual participants.
ANNUITY PERIOD
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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 75 (or ten years after the date of purchase, if later). For
qualified Contracts, the automatic default age is 70. 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 no option is elected and you do not have a spouse on the Annuity Commencement
Date, 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. If
you do have a spouse, the Cash Value will be applied to Option 4, to provide a
Joint and Last Survivor Life Annuity.
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.
6
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 $5,000 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 -- Other Annuity Options: An annuity payable as is mutually agreed on
by the Company and the Annuitant or Owner, as provided in the Plan, if any.
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
Option 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 Progressive Annuitant
Table (assuming births in the year 1900) with age set back two years and a net
investment rate of 3.5% per annum. If mortality appears more favorable and
interest rates so justify, at our discretion, we may apply other tables that
will result in higher payments for each $1,000 applied under one or more of the
first four Annuity Options.
ANNUITY PAYMENT
The first payment under any Annuity Option will be made on the first day of the
month following 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 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.
7
INCOME OPTIONS
Instead of one of the Annuity Options described above, and subject to the
conditions described under Election of Options, all or part of the Cash
Surrender Value of the Contract may be paid under one or more of the following
Income Options, provided that they are consistent with federal tax law
qualification requirements. Payments under the Income Options may be elected on
a monthly, quarterly, semiannual or annual basis:
Option 1 -- Payments of a Fixed Amount. The Company will make equal payments of
the amount elected until the Cash Value applied under this option has been
exhausted. The final payment will include any amount insufficient to make
another full payment.
Option 2 -- Payments for a Fixed Period. The Company will make payments for the
period selected. The payment will be based on a minimum net investment rate of
3.5% per annum.
Option 3 -- Other Income Options. The Company will make any other arrangements
for Income Payments as may be mutually agreed upon.
The amount applied to effect an Income Option will be the Cash Value as of the
date Income Payments commence, less any applicable premium taxes not previously
deducted and any applicable surrender charge. The Income Options differ from
Annuity Options in that the amount of the payments made under Income Options are
unrelated to the length of life of any person. Thus, the Annuitant may outlive
the payment period.
INVESTMENTS BY THE COMPANY
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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
the Contracts are invested in Separate Account MGA, a non-unitized separate
account 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 Separate Account MGA. The obligations under
the Contract are independent of the investment performance of Separate Account
MGA 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, 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
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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
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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. Ownership of Contracts issued in connection with Section 401(a),
401(k), 403(c), 403(b), 408, 414(d) or 457 plans may not generally be assigned.
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.
8
DISTRIBUTION OF THE CONTRACTS
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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 7.00% of Purchase Payments.
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 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,
Walnut Street Securities, Inc.
9
and New England Securities Corporation. A list of the unaffiliated broker-dealer
firms which have entered into such arrangements are 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.
FEDERAL TAX CONSIDERATIONS
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GENERAL
The Company is taxed as a life insurance company under Subchapter L of the Code.
Generally, amounts credited to a contract are not taxable until received by the
Contract Owner, participant or Beneficiary, either in the form of annuity
payments or other distributions. Tax consequences and limits are described
further below for each annuity program. The following general discussion of the
federal income tax consequences related to your investment in this Contract is
not intended to cover all situations, and is not meant to provide legal or tax
advice. Because of the complexity of the law and the fact that the tax results
will vary depending upon many factors, you should consult with your tax and/or
legal advisor regarding the tax implications of purchasing this Contract based
upon your individual situation.
Congress has recognized the value of saving for retirement by providing certain
tax benefits for annuities. The Internal Revenue Code ("Code") governs how
earnings on your investment in the Contract are ultimately taxed, depending upon
the type of Contract, Qualified or Non-qualified, and the manner in which the
money is
10
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.
DEFERRED 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 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.
11
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 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.
12
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 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 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).
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.
13
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 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
14
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.
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.
15
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.
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.
16
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.
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
17
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 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
18
certain qualified plans requests that the Contract be issued to conform to ERISA
or if the Company has notice that the Contract was issued pursuant to a plan
subject to ERISA.
ERISA requires that certain Annuity Options, withdrawals or other payments and
any application for a loan secured by the Contract may not be made until the
Participant has filed a Qualified Election with the plan administrator. Under
certain plans, ERISA also requires that a designation of a Beneficiary other
than the participant's spouse be deemed invalid unless the participant has filed
a Qualified Election.
A Qualified Election must include either the written consent of the
Participant's spouse, notarized or witnessed by an authorized plan
representative, or the participant's certification that there is no spouse or
that the spouse cannot be located.
The Company intends to administer all contracts to which ERISA applies in a
manner consistent with the direction of the plan administrator regarding the
provisions of the plan, in accordance with applicable law. Because these
requirements differ according to the plan, a person contemplating the purchase
of an annuity contract should consider the provisions of the plan.
FEDERAL INCOME TAX WITHHOLDING & 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.
19
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 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
20
hurricane. Generally, if 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
IRS 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.
INFORMATION INCORPORATED 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 has 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 Company filed its Form 10-K on March 31, 2006 via Edgar
File No. 033-03094. 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 One Cityplace, 185
Asylum Street, Hartford, CT 06103-3415. The telephone number is 1-800-599-9460.
You may also access the incorporated reports and other documents at
www.metlife.com.
21
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 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.
22
APPENDIX A
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MARKET VALUE ADJUSTMENT
The application of a Market Value Adjustment may adjust up or down you account
value. The following describes the amount the Market Value Adjustment applies
to:
Maturity Value = [(CURRENTACCOUNTVAULE - FI) X (1 + iG)(t/365)]
Market Adjusted Value = [(MATURITYVALUE X 1/(1 + iC + 0.005)(t/365)]
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 current
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 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%
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:
$46,381.63=[($61,941.23)X(1/(1 + .07 + .005)(4)]
Total amount available, prior to charges and premium taxes:
$49,131.63 = $46,381.63 + $2,750.00
A-1
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:
$52,947.62=[($61,941.23)X(1/(1 + 0.35 + .005)(4)]
Total amount available, prior to charges and premium taxes:
$55,697.62 = $52,947.62 + $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.
A-2
APPENDIX B
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Plans eligible to purchase the Contract are pension and profit sharing plans
qualified under ss.401 (a) of the Internal Revenue Code, Section 403(b) ERISA
plans, and eligible state deferred compensation plans under ss.457 of the Code
("Qualified Plans"). Trustees should consider whether the Plan permits the
investment of Plan assets in the Contract, the distribution of such an annuity
and payment of death benefits in accordance with the requirements of the federal
income tax rules. Assuming continued Plan qualification and operation, earnings
on Plan assets will accumulate value on a tax-deferred basis even if the Plan is
not funded by this Contract. Trustees therefore should consider features of the
Contract other than tax-deferral before investing in the Contract. In addition,
because required minimum distributions must generally begin for annuitants after
age 70 1/2, trustees should consider whether that the Contract may not be an
appropriate purchase for annuitants approaching or over age 70 1/2.
To apply for this Contract, the trustee or other applicant must complete an
application or purchase order for the Group Annuity Contract and make a Purchase
Payment. A Group Annuity Contract will then be issued to the applicant. While
certificates may or may not be issued, each Purchase Payment is confirmed to the
contract owner. Surrenders under the Group Annuity Contract may be made at the
election of the contract owner, from the Account established under the Contract.
Account surrenders are subject to the same limitations, adjustments and charges
as surrenders made under a certificate (see "Surrenders"). Cash Surrender Values
may be taken in cash or applied to purchase annuities for the Contract Owners'
Qualified Plan participants.
Because there might not be individual participant accounts, the qualified Group
Annuity Contract issued in connection with a Qualified Plan may not provide for
death benefits. Annuities purchased for Qualified Plan participants may provide
for a payment upon the death of the Annuitant depending on the option chosen
(see "Annuity Options"). Additionally, since there might not be Annuitants prior
to the actual purchase of an Annuity by the contract owner, the provisions
regarding the Maturity Date may not be applicable.
B-1
T-MARK
MODIFIED GUARANTEED ANNUITY CONTRACTS
ISSUED BY
METLIFE INSURANCE COMPANY OF CONNECTICUT*
ONE CITYPLACE
HARTFORD, CONNECTICUT 06103-3415
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* 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.
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Book 27 May 1, 2006