As filed with the Securities and Exchange Commission on April 5, 2005
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FILE NO. 333-117685
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ALLSTATE LIFE INSURANCE COMPANY
(Exact Name of Registrant)
ILLINOIS 36-2554642
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
847/402-5000
(Address and Phone Number of Principal Executive Office)
MICHAEL J. VELOTTA
SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
ALLSTATE LIFE INSURANCE COMPANY
3100 SANDERS ROAD, SUITE J5B
NORTHBROOK, ILLINOIS 60062
847/402-5000
(Name, Complete Address and Telephone Number of Agent for Service)
COPIES TO:
ALLEN R. REED, ESQUIRE
ALLSTATE LIFE INSURANCE COMPANY
3100 SANDERS ROAD, SUITE J5B
NORTHBROOK, IL 60062
Approximate date of commencement of proposed sale to the public: The annuity
contracts and interests thereunder covered by this registration statement are to
be issued promptly and from time to time after the effective date of this
registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/x
ALLSTATE(R) EQUITY INDEXED ANNUITY
ALLSTATE LIFE INSURANCE COMPANY
PO BOX 82656
LINCOLN, NE 68501
TELEPHONE NUMBER: 1-800-203-0068 PROSPECTUS DATED APRIL 30, 2005
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Allstate Life Insurance Company ("Allstate Life") is offering the Allstate(R)
Equity Indexed Annuity, a group and individual single premium deferred annuity
contract ("Contract"). This prospectus contains information about the Contract
that you should know before investing. Please keep it for future reference.
The Contracts are available through Allstate Distributors, L.L.C., the principal
underwriter for the Contracts.
THE SECURITIES AND EXCHANGE COMMISSION ("SEC") HAS NOT
APPROVED OR DISAPPROVED THE SECURITIES DESCRIBED IN THIS
PROSPECTUS, NOR HAS IT PASSED ON THE ACCURACY OR THE
ADEQUACY OF THIS PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE
IS COMMITTING A FEDERAL CRIME.
THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS
THAT HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
IMPORTANT BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS,
NOTICES INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE
MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE ANY INFORMATION
OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
THE CONTRACTS ARE NOT FDIC INSURED.
THE CONTRACTS MAY NOT BE AVAILABLE IN ALL STATES.
1 PROSPECTUS
TABLE OF CONTENTS
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PAGE
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OVERVIEW
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Important Terms 3
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The Contract At A Glance 4
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How the Contract Works 6
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CONTRACT FEATURES
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The Contract 7
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Contract Owner 7
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Annuitant 7
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Beneficiary 8
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Modification of the Contract 8
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Assignment 8
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Purchases and Contract Value 8
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Purchase Payment 8
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Allocation of Purchase Payment 9
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Contract Value 9
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Trial Examination Period 9
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Guarantee Period Accounts 9
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Interest Rates 9
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Index 9
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How We Credit Interest 10
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Expenses 12
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Withdrawal Charge 12
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Premium Taxes 13
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PAGE
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Access To Your Money 14
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Systematic Withdrawal Program 14
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Postponement of Payments 14
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Minimum Contract Value 14
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Income Payments 14
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Payout Start Date 14
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Income Plans 14
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Income Payments 15
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Certain Employee Benefit Plans 15
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Death Proceeds 15
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Death Proceeds Payments 16
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OTHER INFORMATION
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More Information: 17
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Allstate Life 17
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The Contract 17
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Legal Matters 18
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Taxes 19
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Taxation of Allstate Life Insurance Company 19
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Taxation of Fixed Annuities in General 19
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Income Tax Withholding 21
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Tax Qualified Contracts 21
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Annual Reports and Other Documents 25
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Annual Statements 25
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Appendix A - Market Value Adjustment 26
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2 PROSPECTUS
IMPORTANT TERMS
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This prospectus uses a number of important terms with which you may not be
familiar. The index below identifies the page that describes each term. The
first use of each term in this prospectus appears in bolded text.
PAGE
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Accumulation Phase 6
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Allstate Life ("We") 1
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Annuitant 7
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Beneficiary 8
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*Contract 1
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Contract Owner ("You") 6
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Contract Value 5
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Contract Year 12
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Death Proceeds 6
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Due Proof 13
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Due Proof of Death 16
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Free Withdrawal Amount 11
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PAGE
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Guarantee Period Account 9
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Guarantee Period Account Value 9
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Income Plans 14
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Issue Date 6
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Market Value Adjustment 4
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Ownership 4
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Payout Phase 6
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Payout Start Date 6
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Tax Qualified Contracts 21
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Trial Examination Period 4
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SEC 1
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Systematic Withdrawal Program 14
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Unemployment Compensation 13
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*
In certain states a Contract is available only as a group Contract. In these
states we issued you a certificate that represents your ownership and
summarizes the provisions of the group Contract. References to "Contract" in
this prospectus include certificates unless the context requires otherwise.
3 PROSPECTUS
THE CONTRACT AT A GLANCE
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The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
OWNERSHIP Only natural (or living) persons may own the
Contract.
A non-natural person must not own the Contract
except:
. Custodial IRAs, or
. Grantor Trusts when all grantors and
beneficiaries of the Grantor Trust are natural
(living) persons. If any Contract Owner is not
a living person or a Custodial IRA or a
Grantor Trust where all grantors and all
beneficiaries of the Grantor Trust are natural
(living) persons, then we reserve the right to
declare the Contract void and return all
premiums to the Contract Owner.
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PURCHASE PAYMENT Your purchase payment must be at least $25,000.
We reserve the right to accept a lesser purchase
payment amount for the Contract. We may limit
the amount of the purchase payment to a maximum
of $1,000,000. You cannot make any additional
purchase payments at any time.
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TRIAL EXAMINATION PERIOD You may cancel your Contract
within 20 days of receipt or any longer period
as your state may require ("TRIAL EXAMINATION
PERIOD"). Upon cancellation, we will return your
purchase payment less any withdrawals to you.
See "Trial Examination Period" for details.
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EXPENSES You will bear the following expenses:
.Withdrawal charges ranging from 0%-7% of
amounts withdrawn (with certain exceptions).
.A MARKET VALUE ADJUSTMENT (which can be
positive or negative) may apply to withdrawals
in excess of the FREE WITHDRAWAL AMOUNT.
.State premium tax (if your state imposes one).
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SYSTEMATIC WITHDRAWAL PROGRAM You may choose to receive
systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis.
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INCOME PAYMENTS The Contract offers three income payment plans:
.life income with or without guaranteed payment
period;
.a joint and survivor life income with or
without guaranteed payment period; or
.guaranteed payment period (5 to 50 years)
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INTEREST Interest is credited only at the end of the
applicable Guarantee Period, or (when
applicable) at the death of a Contract Owner or
(if the Contract Owner is a non-living person)
the death of the Annuitant.
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DEATH PROCEEDS If you (or the ANNUITANT if the
Contract Owner is a non-living person) die
before the PAYOUT START DATE, we will pay
benefits as described in the Contract.
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WITHDRAWALS You may withdraw some or all of your Contract
value ("CONTRACT VALUE") at any time prior to
the Payout Start Date. A withdrawal charge
and/or a Market Value Adjustment may apply.
For federal income tax purposes, distributions
or withdrawals taken prior to the Payout Start
Date are generally considered to come from
the earnings in the Contract first. If
the Contract is tax-qualified, generally all
withdrawals are treated as distributions of
earnings. Withdrawals of earnings are taxed as
ordinary income and, if taken prior to age
59 1/2, may be subject to an additional 10%
federal tax penalty.
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4 PROSPECTUS
HOW THE CONTRACT WORKS
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The Contract basically works in two ways.
First, the Contract can help you (we assume you are the "Contract Owner") save
for retirement because you can invest in the Contract and generally pay no
federal income taxes on any earnings until you withdraw them. You do this during
what we call the "Accumulation Phase" of the Contract. The Accumulation Phase
begins on the date we issue your Contract (we call that date the "Issue Date")
and continues until the "Payout Start Date," which is the date we apply your
money to provide income payments. When your Contract is issued, you may allocate
your purchase payment to any combination of the Guarantee Periods we offer at
that time. You must select one of two Crediting Options, each of which credits
indexed interest at the end of the Guarantee Period depending on the performance
of an index and a participation rate we declare when the Contract is issued.
After the end of the Guarantee Period and before the Payout Start Date, we
credit interest at a standard fixed rate we declare from time to time.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/ or for a pre-set number of years by
selecting one of the income payment options (we call these "INCOME PLANS")
described at "Income Payments - Income Plans." You receive income payments
during what we call the "PAYOUT PHASE" of the Contract, which begins on the
Payout Start Date and continues until we make the last income payment required
by the Income Plan you select. During the Payout Phase we guarantee the amount
of your payments, which will remain fixed. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
Issue Payout Start
Date Accumulation Phase Date Payout Phase
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You buy You save for retirement You elect to receive You can receive Or you can receive
a Contract income payments income payments income payments
for a set period for life
As the Contract Owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract Owner or, if none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date we will
pay DEATH PROCEEDS to any surviving Contract Owner or, if there is none, to your
Beneficiary. (See "Death Proceeds.")
Please call us at 1-800-203-0068 if you have any questions about how the
Contract works.
5 PROSPECTUS
THE CONTRACT
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CONTRACT OWNER
The Allstate(R) Equity Indexed Annuity is a contract between you, the Contract
Owner, and Allstate Life Insurance Company ("Allstate Life"), a life insurance
company. As the Contract Owner, you may exercise all of the rights and
privileges provided to you by the Contract. That means it is up to you to select
or change (to the extent permitted):
.. the amount and timing of your withdrawals,
.. the programs you want to use to withdraw money,
.. the income payment plan you want to use to receive retirement income,
.. the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
.. the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner dies, and
.. any other rights that the Contract provides.
If you die, any surviving Contract Owner or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract. If the sole
surviving Contract Owner dies after the Payout Start Date, the Beneficiary will
receive any guaranteed income payments scheduled to continue.
Only natural (or living) persons may own the Contract. A non-natural person must
not own the Contract except:
.. Custodial IRAs, or
.. Grantor Trusts when all grantors and beneficiaries of the Grantor Trust are
natural (living) persons. If any Contract Owner is not a living person or a
Custodial IRA or a Grantor Trust where all grantors and all beneficiaries of
the Grantor Trust are natural (living) persons, then we reserve the right to
declare the Contract void and return all premiums to the Contract Owner.
If other non-natural persons (for example hedge funds, partnerships, or
corporations, purchase the Contract) through a trust or other mechanism, we
reserve the right to declare the Contract void and return all premiums to such
non-natural person. In such event, no interest or any other Contract benefit
will accrue to the non-natural person. Except for the two limited exceptions
referenced above, non-natural persons should not purchase this Contract.
The age of the oldest Contract Owner cannot exceed 70 as of the date we receive
the completed application.
The Contract can also be purchased as an IRA or TSA (also known as a 403(b)).
The endorsements required to qualify these annuities under the Internal Revenue
Code of 1986, as amended, ("Code") may limit or modify your rights and
privileges under the Contract. Contracts purchased as IRA's or TSA's are called
"Tax Qualified Contracts." If your contract is a Tax Qualified Contract, the
maximum age of the oldest Contract Owner as of the date we receive the completed
application must be younger than age 70. The maximum issue age for any
particular Contract will depend on the length of the Guarantee Period Accounts
chosen. See "Purchases and Contract Value - GUARANTEE PERIOD ACCOUNTS."
Except for certain Tax Qualified Contracts, you may change the Contract Owner at
any time by written notice in a form satisfactory to us. Until we receive your
written notice to change the Contract Owner, we are entitled to rely on the most
recent information in our files. We will provide a change of ownership form to
be signed by you and filed with us. Once we accept your change request, any
change will be effective on the date you sign the written request. We will not
be liable for any payment we make or other action we take before accepting any
written request from you. Accordingly, if you wish to change the Contract Owner,
you should deliver your written request to us promptly. Each change is subject
to any payment we make or other action we take before we accept it. Changing
ownership of this Contract may cause adverse tax consequences and may not be
allowed under qualified plans. Please consult with a competent tax advisor prior
to making a request for a change of Contract Owner.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). The Contract requires that there be an Annuitant at all times
during the Accumulation Phase and on the Payout Start Date. The Annuitant must
be a living person. The Annuitant may not be older than 75 as of the date we
receive the completed application.
You initially designate an Annuitant in your application. You will be the
Annuitant unless a different person is named. You may change the Annuitant at
any time prior to the Payout Start Date in a form satisfactory to us.
Once we accept your change request, any change will be effective on the date you
sign the written request. We are not liable for any payment we make or other
action we take before accepting any written request from you.
If you select Income Plan 2, you may designate a joint Annuitant, who is a
second person on whose life income payments depend. A joint Annuitant
designation is effective only on the Payout Start Date and remains effective
thereafter.
BENEFICIARY
You may name one or more primary and contingent Beneficiaries when you apply for
a Contract. The primary Beneficiary is the person who may, in accordance
6 PROSPECTUS
with the terms of the Contract, elect to receive the Death Proceeds or become
the new Contract Owner pursuant to the Contract if the sole surviving Contract
Owner dies before the Payout Start Date. If the sole surviving Contract Owner
dies on or after the Payout Start Date, the primary Beneficiary will receive any
guaranteed income payments scheduled to continue. A contingent Beneficiary is
the person selected by the Contract Owner who will exercise the rights of the
primary Beneficiary if all named primary Beneficiaries die before the death of
the sole surviving Contract Owner.
You may change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary request form to
be signed by you and filed with us. Until we receive your written request to
change a Beneficiary, we are entitled to rely on the most recent Beneficiary
information in our files. Once we accept your change request, any change will be
effective on the date you sign the written request. We are not liable for any
payment we make or other action we take before accepting any written request
from you. Accordingly, if you wish to change your Beneficiary, you should
deliver your written request to us promptly.
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if no named Beneficiary is living when the sole
surviving Contract Owner dies, the new Beneficiary will be:
.. your spouse, or if he or she is no longer alive,
.. your surviving children equally, or if you have no surviving children,
.. your estate.
Children, as used in this prospectus, are natural and adopted children only,
either minor or adult.
If more than one Beneficiary survives you, we will divide the Death Proceeds
among the surviving Beneficiaries according to your most recent written
instructions. If you have not given us written instructions in a form
satisfactory to us, we will pay the Death Proceeds in equal amounts to the
surviving Beneficiaries. If there is more than one Beneficiary in a class (e.g.,
more than one primary Beneficiary) and one of the Beneficiaries predeceases the
Contract Owner, the remaining Beneficiaries in that class will divide the
deceased Beneficiary's share in proportion to the original share of the
remaining Beneficiaries.
For purposes of the Contract, in determining whether a living person, including
a Contract Owner, primary Beneficiary, contingent Beneficiary, or Annuitant
("Living Person A") has survived another living person, including a Contract
Owner, primary Beneficiary, contingent Beneficiary, or Annuitant ("Living Person
B"), Living Person A must survive Living Person B by at least 24 hours.
Otherwise, Living Person A will be conclusively deemed to have predeceased
Living Person B.
MODIFICATION OF THE CONTRACT
Only an officer of Allstate Life may approve a change in or waive any provision
of the Contract. Any change or waiver must be in writing. None of our agents has
the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law or except as otherwise
permitted in the Contract. If a provision of the Contract is inconsistent with
state law, we will follow state law.
ASSIGNMENT
No Contract Owner has a right to assign any interest in a Contract as collateral
or security for a loan, and we will not honor an assignment of an interest in a
Contract as collateral or security for a loan. However, you may otherwise assign
periodic income payments under the Contract prior to the Payout Start Date. No
Beneficiary may assign benefits under the Contract until they are due. We will
not be bound by any assignment until you sign and file it with us. We are not
responsible for the validity of any assignment. Federal law prohibits or
restricts the assignment of benefits under many types of retirement plans and
the terms of such plans may themselves contain restrictions on assignments. An
assignment may also result in taxes or tax penalties. YOU SHOULD CONSULT WITH AN
ATTORNEY BEFORE TRYING TO ASSIGN YOUR CONTRACT.
PURCHASES AND CONTRACT VALUE
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PURCHASE PAYMENT
This is a single premium annuity which allows for only one purchase payment.
Your purchase payment must be at least $25,000. The maximum amount of the
purchase payment we will accept for the Contract without our prior approval is
$1,000,000. We reserve the right to reject any application or waive this
limitation in our sole discretion.
Your purchase payment becomes part of our general account, which supports our
insurance and annuity obligations. The general account consists of our general
assets other than those in segregated asset accounts. We have sole discretion to
invest the assets of the general account, subject to applicable law. You do not
share in the investment experience of the general account.
If you did not sign an application for the Contract, you will be provided a
document for you to sign called a "Signature Page." The Signature Page provides
fraud warnings, a natural person ownership certification, and a certification of
your taxpayer identification number. If you do not sign the Signature Page, we
reserve the right
7 PROSPECTUS
to declare the Contract void and return all premiums to you.
ALLOCATION OF PURCHASE PAYMENT
At the time you apply for a Contract, you must decide how to allocate your
purchase payment amount among the Guarantee Periods. A Guarantee Period is a
period of years at the end of which you will receive an interest payment.
Interest is credited only at the end of the applicable Guarantee Period, or
(when applicable) at the death of the first Contract Owner or (if the Contract
Owner is a non-living person) the death of the Annuitant.
CONTRACT VALUE
Your Contract Value at any time during the Accumulation Phase is equal to the
purchase payment, plus interest credited to date, less any amounts previously
withdrawn and any applicable taxes.
TRIAL EXAMINATION PERIOD
You may cancel your Contract within the Trial Examination Period, which is the
20-day period following receipt of your Contract, or such longer period that
your state may require. You may cancel the Contract by delivering it or mailing
it to us. If you exercise this right to cancel, the Contract (and if applicable,
your Contract purchased as an IRA) terminates and we will return your purchase
payments, less any withdrawals, to you.
GUARANTEE PERIOD ACCOUNTS
You may allocate your purchase payment to a specific Guarantee Period Account or
you may divide your purchase payment among multiple Guarantee Period Accounts.
Your Guarantee Period Account Value allocated to a Guarantee Period Account will
earn interest at a specified rate that we guarantee. Currently we offer
Guarantee Periods of 5, 7, 10, and 15 years in length. In the future, we may
offer Guarantee Periods of different lengths ranging from 1 to 15 years or stop
offering some Guarantee Periods. We reserve the right to offer additional
Guarantee Periods, or to limit the Guarantee Periods available in the future. If
your Contract is a Tax Qualified Contract, then in no event may a Guarantee
Period extend beyond December 30 of the year before the year in which the
Contract Owner reaches age 70 1/2.
A new Guarantee Period Account is established when you allocate your original
purchase payment. Each Guarantee Period Account is identified by the term length
of the Guarantee Period.
At the expiration of a Guarantee Period, the Guarantee Period Account Value will
be transferred to the Standard Fixed Account.
INTEREST RATES
Interest may be credited to either a Guarantee Period Account or the Standard
Fixed Account.
Interest will be credited to a Guarantee Period Account at the applicable
Indexed Interest Rate.
Interest is credited only at the end of the applicable Guarantee Period, or
(when applicable) at the death of the first Contract Owner or (if the Contract
Owner is a non-living person) the death of the Annuitant.
The Indexed Interest Rate credited to a Guarantee Period Account will be equal
to the greater of:
1) the Participation Rate times the Index Increase; or
2) the Minimum Guaranteed Rate.
The Participation Rate and Minimum Guarateed Rate will be set at issue for each
Guarantee Period Account to which funds are allocated. We will not change the
Participation Rate or Minimum Guaranteed Rate for a Guarantee Period Account
before it expires. The Participation Rate and Minimum Guarateed Rate may vary
depending upon the length of a Guarantee Period Account. The Minimum Guaranteed
Rate ranges from 0% to 100% and is set at time of issue. The Participation Rate
ranges from 0% to 200% and is set at time of issue.
Calculation of the Index Increase is described at "How We Credit Interest,"
below.
Any amount allocated to the Standard Fixed Account will earn interest at the
interest rate in effect for the Standard Fixed Account. The minimum interest
rate for the Standard Fixed Account is 0%, or such higher rate as we may
declare.
We have no specific formula for determining the interest rates, Participation
Rates, or Minimum Guaranteed Rates that we will declare initially or in the
future. We will set these rates based on investment returns available at the
time we determine the rate. In addition, we may consider various other factors
in determining rates, including regulatory and tax requirements, sales
commissions and administrative expenses, general economic trends, and
competitive factors. We determine the rates to be declared in our sole
discretion. We can neither predict nor guarantee what those rates will be in the
future. For current rate information, please contact your annuity representative
or Allstate Life at 1-800-203-0068.
INDEX
The Index for the Contract ("Index") will be shown on the Annuity Data Page.
Currently, the only Index we offer is the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500 Index"), commonly known as the S&P 500 Index. The Index is
guaranteed to apply while the Contract is in force unless publication of the
Index is discontinued, or the calculation of the Index is changed substantially.
If the publication of the Index is discontinued, or the calculation of the Index
values is changed substantially, we will substitute a suitable index
8 PROSPECTUS
which will apply to the entire then-current Contact Year, and we will notify you
of the change. We may offer additional indices at our discretion.
The Index value for a particular day is the value published at the end of that
day, computed to the nearest 1/100th of a point. If the Index is not published
that day, the first preceding published Index value will apply. Current Index
values may be obtained at Standard & Poor's website, www.standardandpoors.com.
"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500" and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed
for use by Allstate Life and affiliates. This Contract is not sponsored,
endorsed, sold or promoted by S&P and S&P makes no representation regarding the
advisability of investing therein. S&P does not guarantee the accuracy and/or
the completeness of the S&P 500 Index or any data included therein.
HOW WE CREDIT INTEREST
At the time of purchase, you may choose only one Crediting Option for all
Guarantee Period Accounts. Once chosen, your Crediting Option is irrevocable.
The Crediting Option you choose will be shown on the Annuity Data Page.
We offer two Crediting Options: Crediting Option A and Crediting Option B.
.. Crediting Option A - Index Increase is equal to the Index Value at time of
calculation divided by the Index Value at end of the day the contract is
issued, minus 1.
.. Crediting Option B - Index Increase is equal to the average of the Index Value
over the last 6 Calendar Month Anniversaries ending at time of calculation
divided by the Index Value at end of the day the contract is issued, minus 1.
If the Contract has been in force for less than 6 months, we will calculate
the average of the Index Value using the Calendar Month Anniversaries that
have passed since the Contract has been in force.
The Index at time of calculation means the end of the day following the
calculation date. We will not issue a Contract on days when the Index does not
trade. If the day after a calculation date is a day when the Index does not
trade, the Index value will be the Index at close of the previous trading day.
For example, for a five-year Guarantee Period Account using Crediting Option A
opened on December 1, 2005, we will use the closing Index Value for that date
and the closing Index Value on December 1, 2010, to calculate your Index
Increase at the end of the Guarantee Period Account.
The Indexed Interest rate is equal to the Participation Rate multiplied by the
Index Increase described in the Crediting Options above. The Index Increase will
never be less than zero for either Crediting Option.
Indexed Interest will be credited to a Guarantee Period Account ONLY at the end
of the Guarantee Period or at the death of the first Contract Owner or (if the
Contract Owner is a non-living person) the death of the Annuitant.
At the end of the Guarantee Period, if Indexed Interest is less than the minimum
guarantee, then the Guarantee Period Account will be credited with the minimum
guarantee. The minimum guarantee is shown on the Annuity Data Page. The minimum
guarantee may vary by crediting option.
The Credited Interest Rate for the Standard Fixed Account will be credited daily
at a rate which compounds over one year to the annualized effective interest
rate we declare from time to time. The minimum guarantee annualized effective
interest rate for the Standard Fixed Account is shown on the Annuity Data Page.
You should carefully evaluate the risks associated with each crediting option
before making a purchase payment and selecting a Crediting Option.
The following examples illustrate how interest would be credited, based on
selected participation rates, minimum guarantees, performance of the S&P 500
Index, and choices of a 10 year guarantee period and Crediting Option A:
9 PROSPECTUS
EXAMPLE 1 2 3 4
- -------------------------------------------------------------------------------
Contract issue date 4/19/2005 4/19/2005 4/19/2005 4/19/2005
- -------------------------------------------------------------------------------
Index Value at close of trading 1118.15 1118.15 1118.15 1118.15
on contract issue date
- -------------------------------------------------------------------------------
End of Guarantee Period 4/18/2015 4/18/2015 4/18/2015 4/18/2015
- -------------------------------------------------------------------------------
Index Value at end of day 1000 1200 2200 2200
following end of Guarantee Period
- -------------------------------------------------------------------------------
Participation Rate applied to 100% 100% 100% 90%
percentage change in Index
- -------------------------------------------------------------------------------
Minimum Guarantee Rate 0% 30% 30% 0%
- -------------------------------------------------------------------------------
Percentage change in Index -10.57% 7.32% 96.75% 96.75%
- -------------------------------------------------------------------------------
Indexed Interest before
application of Minimum Guarantee -10.57% 7.32% 96.75% 87.08%
Rate
- -------------------------------------------------------------------------------
Indexed Interest after
application of Minimum Guarantee 0.00% 30.00% 96.75% 87.08%
Rate
- -------------------------------------------------------------------------------
This example assumes no withdrawals during the entire 10- year period. If you
were to make a partial withdrawal, you may be required to pay a withdrawal
charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. Actual interest rates declared may be more or
less than shown above.
No interest will be credited to any Contract owned by a non-natural person,
unless such non-natural person is a Custodial IRA or is a Grantor Trust meeting
the requirements outlined under the section titled "The Contract - CONTRACT
OWNER."
MARKET VALUE ADJUSTMENT. All withdrawals, unless expressly exempted, are subject
to a Market Value Adjustment.
A Market Value Adjustment will not be made to the following:
.. withdrawals made from the Standard Fixed Account;
.. withdrawals you make to satisfy IRS minimum distribution rules for a Tax
Qualified Contract;
.. withdrawals made within the Free Withdrawal Amount, described under "Expenses"
below;
.. amounts paid during the Payout Phase; or
.. the Death Proceeds.
We apply the Market Value Adjustment to reflect changes in interest rates from
the date a Guarantee Period Account commences to the time you make the
withdrawal.
We calculate the Market Value Adjustment by comparing the U.S. Treasury Constant
Maturity rate ("Treasury Rate") for the week prior to the date the Guarantee
Period begins to the Treasury Rate for the week prior to the date you withdraw
your money. The Treasury Rate used will be the rate for a maturity equal to the
length of the Guarantee Period. If the United States Federal Reserve Board ("the
Fed") does not publish a maturity equal to the length of the Guarantee Period
you selected, we will calculate an average rate from rates the Fed does publish.
The Market Value Adjustment may be positive or negative, depending on changes in
the Treasury Rate. As a result, if you choose to make a withdrawal, you bear the
investment risk associated with changes in the Treasury Rate. If the Treasury
Rate increases significantly from the time you make the purchase payment, the
Market Value Adjustment, withdrawal charge, premium taxes, and income tax
withholding (if applicable) could reduce the amount you receive upon full
withdrawal of your Contract Value to an amount that is less than your original
purchase payment.
Generally, if the Treasury Rate for the beginning of the Market Value Adjustment
period is lower than the current Treasury Rate upon withdrawal, then the Market
Value Adjustment will decrease the amount payable to you. Conversely, if the
Treasury Rate for the beginning of the Market Value Adjustment period is higher
than the current Treasury Rate, then the Market Value Adjustment will increase
the amount payable to you.
For example, assume that you purchase a Contract and the Treasury Rate on the
day you purchase the Contract is 4.50%. Assume that at the end of 3 years, you
make a partial withdrawal. If, at that later time, the Treasury Rate is 4.00%,
then the Market Value Adjustment will be positive, which will increase the
amount payable to you. But, if the Treasury Rate is 5.00%, then the Market Value
Adjustment will be negative, which will decrease the amount payable to you.
The Market Value Adjustment also depends upon the amount of time remaining prior
to the end of the current Market Value Adjustment period. The formula for
calculating Market Value Adjustments is set forth in Appendix A to this
prospectus, which also contains additional examples of the application of the
Market Value Adjustment.
10 PROSPECTUS
EXPENSES
- --------------------------------------------------------------------------------
As a Contract Owner, you will bear the charges and expenses described below.
WITHDRAWAL CHARGE
We may assess a withdrawal charge on withdrawals from the Contract. However,
each Contract Year you may withdraw up to 10% of the premium allocated to each
Guarantee Period Account at the beginning of the Contract Year without paying a
withdrawal charge. Unused portions of this 10% "FREE WITHDRAWAL AMOUNT" are not
carried forward to future Contract Years. Unused portions of the Free Withdrawal
Amount for any given Guarantee Period Account may not be applied to another
Guarantee Period Account.
The withdrawal charge for a 15-year Guarantee Period is as follows:
NUMBER OF COMPLETE YEARS WITHDRAWAL CHARGE:
SINCE ISSUE DATE: ------------------
-----------------
0 7%
1 7%
2 7%
3 6%
4 6%
5 6%
6 5%
7 5%
8 5%
9 4%
10 4%
11 4%
12 3%
13 3%
14 3%
15 and Later 0%
For Guarantee Period shorter than fifteen years, the withdrawal charges stop at
the end of the Guarantee Period.
You should specify the Guarantee Period Account(s) from which the withdrawal
will be made. Since interest is not credited until the end of the Guarantee
Period, all withdrawals will be of principal for purposes of this section. For
tax purposes, the withdrawal will first be treated as a withdrawal of earnings
in the Contract. See "Taxes" If you do not specify which Guarantee Period
Accounts to withdraw from, withdrawals will be taken pro-rata.
The withdrawal charge is determined by multiplying the withdrawal charge
percentage corresponding to the number of complete Contract Years in the table
above by the amount withdrawn in excess of the Free Withdrawal Amount. We will
deduct withdrawal charges, if applicable, from the amount withdrawn.
For federal income tax purposes, earnings under your Contract are considered to
come out first. This means you pay taxes on your withdrawal to the extent of any
earnings in the Contract.
We do not apply a withdrawal charge in the following situations:
.. withdrawals on or after the Payout Start Date;
.. withdrawals taken to satisfy IRS minimum distribution rules for a Tax
Qualified Contract;
.. withdrawals that qualify for a waiver as described below.
We use the amounts obtained from the withdrawal charge to help pay sales
commissions and other promotional or distribution expenses associated with
marketing the Contracts.
Withdrawals may be subject to tax penalties, income tax and a Market Value
Adjustment. You should consult your own tax counsel or tax advisor regarding any
withdrawals.
CONFINEMENT WAIVER. We will waive the withdrawal charge and Market Value
Adjustment on any applicable withdrawal taken under your Contract if the
following conditions are satisfied:
.. you are or the Annuitant is, if the Contract Owner is not a living person,
first confined to a long term care facility or a hospital for at least 90
consecutive days. You or the Annuitant must enter the long term care facility
or hospital at least 30 days after the Issue Date,
.. we receive your request for withdrawal and written proof of the stay no later
than 90 days following the end of your or the Annuitant's (as applicable) stay
at the long term care facility or hospital, and
.. a physician must have prescribed the stay and the stay must be medically
necessary (as defined in the Contract).
TERMINAL ILLNESS WAIVER. Only once during the term of the Contract, we will
waive the withdrawal charge and Market Value Adjustment on any applicable
withdrawal taken under your Contract if:
.. you are or the Annuitant is, if the Contract Owner is not a living person,
first diagnosed by a physician as having a terminal illness at least 30 days
after the Issue Date, and
.. you provide adequate proof of diagnosis to us before or at the time you
request the withdrawal.
Terminal Illness is a condition which is expected to result in death within one
year from the date of onset for 80% of the diagnosed cases.
At our expense, we may require a second physician's opinion, and if the first
and second physicians disagree,
11 PROSPECTUS
we may require a third opinion. We will honor a consensus of any two of the
three physicians.
UNEMPLOYMENT WAIVER. Only once during the term of the Contract, we will waive
the withdrawal charge and Market Value Adjustment on one partial or a total
withdrawal taken under your Contract, if you meet the following requirements:
.. you or the Annuitant, if the Contract Owner is not a living person, become
unemployed at least one year after the Issue Date,
.. you or the Annuitant (as applicable) receive(s) Unemployment Compensation for
at least 30 days as a result of that unemployment, and
.. you or the Annuitant (as applicable) claim(s) this benefit within 180 days of
your or the Annuitant's initial receipt of Unemployment Compensation.
Before we will waive any withdrawal charges, you must give us Due Proof prior
to, or at the time of, the withdrawal request, that you or the Annuitant have
been unemployed and have been granted Unemployment Compensation for at least 30
consecutive days.
"UNEMPLOYMENT COMPENSATION" means unemployment compensation received from a unit
of state or federal government in the U.S. "DUE PROOF" includes, but is not
limited to, a legible photocopy of an unemployment compensation payment that
meets the above described criteria with regard to dates and a signed letter from
you stating that the Owner or Annuitant meets the above described criteria.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers.
The laws of your state may limit the availability of these waivers and also may
change certain terms and/or benefits available under the waivers. You should
consult your Contract for further details on these variations. Even if you do
not pay a withdrawal charge because of these waivers, a Market Value Adjustment
may apply and you still may be required to pay taxes or tax penalties on the
amount withdrawn. You should consult your tax advisor to determine the effect of
a withdrawal on your taxes.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. If we are responsible for withholding these
taxes we will deduct them from your Contract Value. Some of these taxes are due
when the Contract is issued, others are due when income payments begin or upon
surrender. Our current practice is not to withhold for these taxes until income
payments begin or when a total withdrawal occurs, including payment upon death.
We may some time in the future discontinue this practice and deduct premium
taxes from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, we deduct the charge for premium taxes from the total
Contract Value before applying the Contract Value to an Income Plan.
12 PROSPECTUS
ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
You can withdraw some or all of your money at any time prior to the Payout Start
Date. You may not make any withdrawals or total withdrawal from your Contract
once the Payout Phase has begun. The minimum you may withdraw is $250.
The amount you receive may be reduced by a withdrawal charge, income tax
withholding and any applicable premium taxes. The amount you receive may also be
increased or reduced by a Market Value Adjustment. If you request a total
withdrawal, we may require that you return your Contract to us.
If you withdraw money from your Contract prior to the end of the Guarantee
Period you will not receive interest on the amount withdrawn. Further, a Market
Value Adjustment may result in your receiving less money than you invested. If
you must access your money before the expiration of the Guarantee Period, you
should not purchase this Contract.
SYSTEMATIC WITHDRAWAL PROGRAM
No Systematic Withdrawal Program is available with this Contract.
POSTPONEMENT OF PAYMENTS
We may defer payment of withdrawals for up to 6 months from the date we receive
your withdrawal request. If we delay payment for 30 days or more, we will pay
interest as required by law.
MINIMUM CONTRACT VALUE
If the amount you withdraw reduces your Contract Value to less than $3,000, we
may treat it as a request to withdraw your entire Contract Value. Your Contract
will terminate if you withdraw all of your Contract Value. We will, however, ask
you to confirm your withdrawal request before terminating your Contract. If we
terminate your Contract, we will distribute to you its Contract Value, adjusted
by any Market Value Adjustment, less withdrawal charges and applicable taxes.
INCOME PAYMENTS
- --------------------------------------------------------------------------------
PAYOUT START DATE
The Payout Start Date is the day that we apply your Contract Value, less any
applicable taxes, to an Income Plan. The Payout Start Date must be:
.. at least 30 days after the Issue Date; and
.. no later than the Annuitant's 90th birthday, or
.. the 10th Contract anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An Income Plan is a series of scheduled payments to you or someone you
designate. You may choose only one Income Plan. You may choose and change your
choice of Income Plan until 30 days before the Payout Start Date. If you do not
select an Income Plan, we will make income payments in accordance with Income
Plan 1 with guaranteed payments for 10 years. After the Payout Start Date, you
may not make withdrawals or change your choice of Income Plan.
A portion of each payment will be considered taxable and the remaining portion
will be a non-taxable return of your investment in the Contract, which is also
called the "basis". Once the investment in the Contract is depleted, all
remaining payments will be fully taxable. If the Contract is tax-qualified,
generally, all payments will be fully taxable. Taxable payments taken prior to
age 59 1/2, may be subject to an additional 10% federal tax penalty.
The three Income Plans available under the Contract are:
INCOME PLAN 1 - LIFE INCOME WITH AND WITHOUT GUARANTEED NUMBER OF PAYMENTS.
Under this plan, we make periodic income payments for at least as long as the
Annuitant lives. If the Annuitant dies in the Payout Phase, we will continue to
pay income payments until the guaranteed number of payments has been paid. The
number of months guaranteed ("Guaranteed Payment Period") may range from 0 to
360 months. If you choose 0 months, payments will continue only as long as the
Annuitant lives. If the Annuitant is age 90 or older as of the Payout Start
Date, the Guaranteed Payment Period may range from 60 to 360 months.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH AND WITHOUT GUARANTEED
NUMBER OF PAYMENTS. Under this plan, we make periodic income payments for at
least as long as either the Annuitant or the joint Annuitant, named at the time
the Income Plan was selected, lives. If both the Annuitant and joint Annuitant
die in the Payout Phase, we will continue to pay the income payments until the
guaranteed number of payments has been paid. The Guaranteed Payment Period may
range from 0 to 360 months. If you choose 0 months, payments will continue only
as long as the Annuitant or joint Annuitant lives. If either the Annuitant or
joint Annuitant is age 90 or older as of the Payout Start Date, the Guaranteed
Payment Period may range from 60 to 360 months.
INCOME PLAN 3 - GUARANTEED NUMBER OF PAYMENTS. Under this plan, we make periodic
income payments for
13 PROSPECTUS
the period you have chosen. These payments do not depend on the Annuitant's
life. The shortest number of months guaranteed is 60 (120 if the Payout Start
Date occurs before the third Contract anniversary). The longest number of months
guaranteed is 360 or the number of months between the Payout Start Date and the
date that the Annuitant reaches age 100, if greater. In no event may the number
of months guaranteed exceed 600.
The length of any Guaranteed Payment Period under your selected Income Plan
generally will affect the dollar amount of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments. As a general rule, plans with a joint Annuitant also will result in
lower income payments. Income plans may vary from state to state.
We may make other Income Plans available, including ones that you and we agree
upon. You may obtain information about them by writing or calling us.
If the Contract Owner dies after the Payout Start Date, the new Contract Owner
will be the surviving Contract Owner. If there is no surviving Contract Owner,
the new Contract Owner will be the Beneficiary(ies). Any remaining income
payments will be paid to the new Contract Owner as scheduled.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we will
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and may require proof that the Annuitant or joint Annuitant are
alive before we make each payment. Please note that under such Income Plans, if
you elect to take no guaranteed payments, it is possible that the payee could
receive no income payments if the Annuitant and any joint Annuitant both die
before the first income payment, or only one income payment if they die before
the second income payment, and so on.
We will apply your Contract Value less any applicable premium tax, to your
Income Plan on the Payout Start Date.
If the amount available to apply under an Income Plan is less than $3,000, or if
your initial monthly payment would be less than $250, and state law permits, we
reserve the right to:
.. reduce the frequency of your payments so that each payment will be at least
$250; or
.. terminate the Contract and pay you the Contract Value less any applicable
taxes, in a lump sum instead of the periodic payments you have chosen.
INCOME PAYMENTS
Subject to your Income Plan selection, we may guarantee income payment amounts
for the duration of the Income Plan. We calculate income payments by:
1. determining your Contract Value as of the Payout Start Date;
2. deducting any applicable premium tax; and
3. applying the resulting amount to the greater of:
(a) the appropriate value from the income payment table in your Contract; or
(b) such other value as we are offering at that time.
We may defer making fixed income payments for a period of up to six months or
such shorter time state law may require. If we defer such payments for 30 days
or more, we will pay interest as required by law from the date we receive the
withdrawal request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contract offered by this prospectus contains income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex, to the extent permitted by
law. In certain employment-related situations, employers are required by law to
use the same income payment tables for men and women. Accordingly, if the
Contract is used in connection with an employment-related retirement or benefit
plan and we do not offer unisex annuity tables in your state, you should consult
with legal counsel as to whether the Contract is appropriate.
DEATH PROCEEDS
- --------------------------------------------------------------------------------
Under certain conditions, described below, we will pay a death settlement
("DEATH PROCEEDS") for your Contract on the death of the Contract Owner or the
death of the Annuitant (if the Contract Owner is a non-living person) if the
death occurs prior to the Payout Start Date. If the Contract Owner or Annuitant
(if the Contract Owner is a non-living person) dies after the Payout Start Date,
we will pay remaining income payments as described in the "Payout Phase" section
of your Contract. See "Income Payments" above, for more details.
The Contract offers Death Proceeds prior to the Payout Start Date on the earlier
of:
1. the death of the first Contract Owner; or
14 PROSPECTUS
2. the death of the Annuitant, if the Contract Owner is a non-living person.
We will pay the Death Proceeds to the new Contract Owner as determined
immediately after the death. The new Contract Owner will be the surviving
Contract Owner(s) or, if there are none, the Beneficiary(ies).
A claim for settlement of the Death Proceeds must include Due Proof of Death. We
will accept the following documentation as "DUE PROOF OF DEATH":
.. a certified copy of a death certificate;
.. a certified copy of a decree of a court of competent jurisdiction as to the
finding of death; or
.. any other proof acceptable to us.
Prior to the Payout Start Date, the Death Proceeds are equal to the the sum of:
the Standard Fixed Account; plus the Guarantee Period Account Values; plus any
Indexed Interest accumulated as of the date of death. The Death Proceeds are not
eligible for the minimum guarantee described in "How We Credit Interest."
We will calculate the value of the Death Proceeds as of the date of the first
death of any Contract Owner or (if the Contract Owner is a non-living person)
the date of death of the Annuitant.
DEATH PROCEEDS PAYMENTS
DEATH OF CONTRACT OWNER. If any Contract Owner dies before the Payout Start
Date, the new Contract Owner will be the surviving Contract Owner. If there is
no surviving Contract Owner, the new Contract Owner will be the Beneficiary(ies)
as described in the Beneficiary provision.
If there is more than one new Contract Owner taking a share of the Death
Proceeds each new Contract Owner will be treated as a separate and independent
Contract Owner of his or her respective share of the Death Proceeds. Each new
Contract Owner will exercise all rights related to his or her share of the Death
Proceeds, including the sole right to elect one of the Option(s) below for his
or her respective share. Each new Contract Owner may designate a
Beneficiary(ies) for his or her respective share, but that designated
Beneficiary(ies) will be restricted to the Option chosen by the original new
Contract Owner.
The Options available to the new Contract Owner will be determined by the
applicable Category described below in which the new Contract Owner is defined.
An Option will be deemed to have been chosen on the day we receive written
notification in a form satisfactory to us. Once an Option is selected, it is
irrevocable.
CATEGORY 1. If your spouse is the sole new Contract Owner of the entire
Contract, the Contract will continue in the Accumulation Phase, unless your
spouse chooses from Options A, B, C, or D, described below. If the Contract
continues in the Accumulation Phase, the Contract Value will not be adjusted to
include Death Proceeds.
If you also were the Annuitant, then your spouse will be the new Annuitant
unless he or she names a new Annuitant, as described in the Annuitant provision,
above. Your spouse may make a single withdrawal of any amount within one year of
the date of your death without incurring a withdrawal charge; however the amount
withdrawn may be subject to a Market Value Adjustment.
CATEGORY 2. If the new Contract Owner is a living person who is not your spouse,
or if there are multiple living new Contract Owners, the new Contract Owner(s)
must (each) choose from Options A, B, C, or D, described below. If a new
Contract Owner does not choose one of these Options, Option A will apply for
such new Contract Owner.
CATEGORY 3. If the new Contract Owner is a Custodial IRA or Grantor Trust, the
new Contract Owner must choose between Options A or D, described below. If the
new Contract Owner does not choose either of these Options, Option A will apply.
The following Death of Contract Owner Options are available, as applicable:
OPTION A.
The new Contract Owner may elect to receive the Death Proceeds payable within 5
years of the date of your death. Withdrawal charges will be waived for any
withdrawals made during this 5 year period; however the amounts withdrawn may be
subject to Market Value Adjustments.
If the new Contract Owner dies prior to the end of the 5 year period and before
the complete liquidation of the Contract Value, then the new Contract Owner's
Beneficiary(ies) will receive the remaining Contract Value. This amount must be
fully withdrawn within 5 years of the date of your death.
OPTION B.
The new Contract Owner may elect, within 11 months of the date of your death, to
receive the Death Proceeds paid out under one of the Income Plans described in
the Income Payments section, subject to the following conditions:
Income payments must begin within one year of your date of death. Income
payments must be payable:
(i) Over the life of the new Contract Owner; or
(ii) for a guaranteed payment period of at least 5 years, but not to exceed
the life expectancy of the new Contract Owner; or
(iii) over the life of the new Contract Owner with a guaranteed payment
period of at least 5 years, but not to exceed the life expectancy of the new
Contract Owner.
OPTION C.
15 PROSPECTUS
The Contract may continue in the Accumulation Phase with the Death Proceeds as
the Contract Value, subject to the following restrictions:
(iv) An annual required distribution must be withdrawn in each calendar year
as specified below.
(v) In the calendar year in which the Death Proceeds are determined, the
annual required distribution is equal to the Death Proceeds divided by the life
expectancy of the new Owner, and the result multiplied by a fraction that
represents the portion of the calendar year remaining after the date of the
Death Proceeds were determined. In any subsequent calendar year, the annual
required distribution is equal to the Contract Value as of December 31 of the
prior year divided by the remaining life expectancy of the new Owner.
(vi) The first withdrawal must occur within one year of the date of death.
The new Owner may only withdraw the minimum annual required distribution amount
per year or make a full withdrawal terminating the Contract.
(vii) Withdrawal Charges and Market Value Adjustment charges do not apply.
(viii) If the new Owner dies, the named Beneficiary(ies) will continue under
Option D using the original new Owner's life expectancy.
OPTION D.
The new Contract Owner may elect to receive the Death Proceeds in a lump sum
within five years of the date of your death. Death Proceeds received under this
Option in a lump sum are not subject to a Market Value Adjustment.
All ownership rights subject to the conditions described in this provision or
any restrictions previously placed upon the Beneficiary, will be available to
the new Contract Owner from the date of your death until the date on which the
Death Proceeds are paid.
We reserve the right to offer additional Death of Contract Owner Options.
If the Contract Owner dies after the Payout Start Date, refer to the Income
Payments section.
DEATH OF ANNUITANT. If the Annuitant who is also the Contract Owner dies before
the Payout Start Date, the Death of Contract Owner provision, described above
will apply. If the Annuitant who is not also the Contract Owner dies before the
Payout Start Date, the Options available to the Contract Owner will be
determined by the applicable Category described below in which the Contract
Owner is defined.
CATEGORY 1. If the Contract Owner is a living person, the Contract will continue
in the Accumulation Phase with a new Annuitant. The new Annuitant will be:
.. A person you name by written request subject to the conditions described in
the section "The Contract - ANNUITANT"; otherwise,
.. The youngest Contract Owner; otherwise,
.. The youngest Beneficiary.
CATEGORY 2. If the Contract Owner is a Custodial IRA or Grantor Trust, the
Contract Owner must receive the Contract Value payable within 5 years of the
Annuitant's date of death. Withdrawal charges will be waived for any withdrawals
made during this 5 year period; however the amounts withdrawn may be subject to
Market Value Adjustments.
All ownership rights provided by the Contract will be available to the Contract
Owner from the date of the Annuitant's death until the date on which the Death
Proceeds are paid.
We reserve the right to offer additional Death of Annuitant Options.
MORE INFORMATION
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ALLSTATE LIFE
Allstate Life is the issuer of the Contract. Allstate Life was organized in 1957
as a stock life insurance company under the laws of the State of Illinois.
Allstate Life is a wholly owned subsidiary of Allstate Insurance Company, a
stock property-liability insurance company organized under the laws of the State
of Illinois. All of the capital stock issued and outstanding of Allstate
Insurance Company is owned by The Allstate Corporation.
Allstate Life is licensed to operate in the District of Columbia, Puerto Rico,
and all jurisdictions except the State of New York. We intend to offer the
Contract in those jurisdictions in which we are licensed. Our home office is
located at 3100 Sanders Road, Northbrook, Illinois, 60062.
THE CONTRACT
DISTRIBUTION. Allstate Distributors, L.L.C. ("Allstate Distributors"), located
at 3100 Sanders Road, Northbrook, IL 60062, is the principal underwriter and
distributor of the Contract. Allstate Distributors is a wholly owned subsidiary
of Allstate Life. Allstate Distributors is registered as a broker-dealer under
the Securities Exchange Act of 1934, as amended, and is a member of the National
Association of Securities Dealers, Inc. ("NASD").
Allstate Distributors does not sell Contracts directly to purchasers. Allstate
Distributors enters into selling agreements with affiliated and unaffiliated
broker-dealers and banks to sell the Contracts through their registered
representatives. The broker-dealers are registered with the SEC and are NASD
member firms. Their registered
16 PROSPECTUS
representatives are also licensed as insurance agents by applicable state
insurance authorities and appointed as agents of Allstate Life in order to sell
the Contracts. Contracts also may be sold by representatives or employees of
banks that may be acting as broker-dealers without separate registration under
the Exchange Act, pursuant to legal and regulatory exceptions.
We will pay commissions to broker-dealers and banks which sell the Contracts.
Commissions paid vary, but we may pay up to a maximum sales commission of 7.25%
of total purchase payments. In addition, we may pay ongoing annual compensation
of up to 1.25% of Contract Value. Individual representatives receive a portion
of compensation paid to the broker-dealer or bank with which they are associated
in accordance with the broker-dealer's or bank's practices. We estimate that
commissions and annual compensation, when combined, will not exceed 8.5% of
total purchase payments. However, commissions and annual compensation could
exceed that amount because ongoing annual compensation is related to Contract
Value and the number of years the Contract is held.
From time to time, we pay asset-based compensation and/or marketing allowances
to banks and broker-dealers. These payments vary among individual banks and
broker dealers, and the asset-based payments may be up to 0.25% of Contract
Value annually. These payments are intended to contribute to the promotion and
marketing of the Contracts, and they vary among banks and broker-dealers. The
marketing and distribution support services include but are not limited to: (1)
placement of the Contracts on a list of preferred or recommended products in the
bank's or broker-dealer's distribution system; (2) sales promotions with regard
to the Contracts; (3) participation in sales conferences; and (4) helping to
defray the costs of sales conferences and educational seminars for the bank or
broker-dealer's registered representatives. For more information on the
compensation associated with this Contract that your registered representative
or his or her bank or brokerage firm may receive, please consult your registered
representative.
Allstate Life does not pay Allstate Distributors a commission for distribution
of the Contracts. Allstate Distributors compensates its representatives who act
as wholesalers, and their sales management personnel, for Contract sales. This
compensation is based on a percentage of premium payments and/or a percentage of
Contract Values. The underwriting agreement with Allstate Distributors provides
that we will reimburse Allstate Distributors for expenses incurred in
distributing the Contracts, including any liability to Contract Owners arising
out of services rendered or Contracts issued.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts. We provide the following administrative services, among others:
.. issuance of the Contracts;
.. maintenance of Contract Owner records;
.. Contract Owner services; and
.. preparation of Contract Owner reports.
You should notify us promptly in writing of any address change. You should read
your statements and confirmations carefully and verify their accuracy. You
should contact us promptly if you have a question about a periodic statement. We
will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we
reserve the right to make the adjustment as of the date that we receive notice
of the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
LEGAL MATTERS
All matters of law pertaining to the Contracts, including the validity of the
Contracts and Allstate Life's right to issue such Contracts under applicable
state insurance law, have been passed upon by Michael J. Velotta, General
Counsel of Allstate Life.
17 PROSPECTUS
TAXES
- --------------------------------------------------------------------------------
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. ALLSTATE
LIFE MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF ALLSTATE LIFE INSURANCE COMPANY
Allstate Life is taxed as a life insurance company under Part I of Subchapter L
of the Code.
TAXATION OF FIXED ANNUITIES IN GENERAL
TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where the Contract Owner is
a natural person.
NON-NATURAL OWNERS. Non-natural owners are also referred to as Non Living Owners
in this prospectus. As a general rule, annuity contracts owned by non-natural
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. The income on such contracts
does not enjoy tax deferral and is taxed as ordinary income received or accrued
by the non-natural owner during the taxable year.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE. There are several exceptions to the
general rule that annuity contracts held by a non-natural owner are not treated
as annuity contracts for federal income tax purposes. Contracts will generally
be treated as held by a natural person if the nominal owner is a trust or other
entity which holds the contract as agent for a natural person. However, this
special exception will not apply in the case of an employer who is the nominal
owner of an annuity contract under a non-Qualified deferred compensation
arrangement for its employees. Other exceptions to the non-natural owner rule
are: (1) contracts acquired by an estate of a decedent by reason of the death of
the decedent; (2) certain qualified contracts; (3) contracts purchased by
employers upon the termination of certain qualified plans; (4) certain contracts
used in connection with structured settlement agreements; and (5) immediate
annuity contracts, purchased with a single premium, when the annuity starting
date is no later than a year from purchase of the annuity and substantially
equal periodic payments are made, not less frequently than annually, during the
annuity period.
GRANTOR TRUST OWNED ANNUITY. Contracts owned by a grantor trust are considered
owned by a non-natural owner. Grantor trust owned contracts receive tax deferral
as described in the Exceptions to the Non-Natural Owner Rule section.
In accordance with the Code, upon the death of the annuitant, the death benefit
must be paid. According to your Contract, the Death Benefit is paid to the
surviving Contract Owner. Since the trust will be the surviving Contract Owner
in all cases, the Death Benefit will be payable to the trust notwithstanding any
beneficiary designation on the annuity contract. A trust, including a grantor
trust, has two options for receiving any death benefits: 1) a lump sum payment;
or 2) payment deferred up to five years from date of death.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a total withdrawal
under a non-Qualified Contract, the amount received will be taxable only to the
extent it exceeds the investment in the Contract.
You should contact a competent tax advisor about the potential tax consequences
of a Market Value Adjustment, as no definitive guidance exists on the proper tax
treatment of Market Value Adjustments.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. The annuity payments will be fully taxable after the total amount
of the investment in the Contract is excluded using these ratios. The federal
tax treatment of annuity payments is unclear in some respects. As a result, if
the IRS should provide further guidance, it is possible that the amount we
calculate and
18 PROSPECTUS
report to the IRS as taxable could be different. If you die, and annuity
payments cease before the total amount of the investment in the Contract is
recovered, the unrecovered amount will be allowed as a deduction for your last
taxable year.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is possible that a greater or lesser portion of such a payment could be
taxable than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
.. if any Contract Owner dies on or after the Payout Start Date but before the
entire interest in the Contract has been distributed, the remaining portion of
such interest must be distributed at least as rapidly as under the method of
distribution being used as of the date of the Contract Owner's death;
.. if any Contract Owner dies prior to the Payout Start Date, the entire interest
in the Contract will be distributed within 5 years after the date of the
Contract Owner's death. These requirements are satisfied if any portion of the
Contract Owner's interest that is payable to (or for the benefit of) a
designated Beneficiary is distributed over the life of such Beneficiary (or
over a period not extending beyond the life expectancy of the Beneficiary) and
the distributions begin within 1 year of the Contract Owner's death. If the
Contract Owner's designated Beneficiary is the surviving spouse of the
Contract Owner, the Contract may be continued with the surviving spouse as the
new Contract Owner;
.. if the Contract Owner is a non-natural person, then the Annuitant will be
treated as the Contract Owner for purposes of applying the distribution at
death rules. In addition, a change in the Annuitant on a Contract owned by a
non-natural person will be treated as the death of the Contract Owner.
TAXATION OF ANNUITY DEATH BENEFITS. Death Benefit amounts are included in
income as follows:
.. if distributed in a lump sum, the amounts are taxed in the same manner as a
total withdrawal, or
.. if distributed under an Income Plan, the amounts are taxed in the same manner
as annuity payments.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
59 1/2. However, no penalty tax is incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or becoming totally disabled,
.. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
.. made under an immediate annuity, or
.. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS. With respect to non-Qualified Contracts
using substantially equal periodic payments or immediate annuity payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the Contract Owner's attaining age 59 1/2 would be
subject to a 10% penalty tax unless another exception to the penalty tax
applied. The tax for the year of the modification is increased by the penalty
tax that would have been imposed without the exception, plus interest for the
years in which the exception was used. A material modification does not include
permitted changes described in published IRS rulings. You should consult a
competent tax advisor prior to creating or modifying a substantially equal
periodic payment stream.
TAX FREE EXCHANGES UNDER INTERNAL REVENUE CODE SECTION 1035. A 1035 exchange is
a tax-free exchange of a non-qualified life insurance contract, endowment
contract or annuity contract into a non-Qualified annuity contract. The contract
owner(s) must be the same on the old and new contract. Basis from the old
contract carries over to the new contract so long as we receive that information
from the relinquishing company. If basis information is never received, we will
assume that all exchanged funds represent earnings and will allocate no cost
basis to them.
PARTIAL EXCHANGES. The IRS has issued a ruling that permits partial exchanges of
annuity contracts. Under this ruling, if you take a withdrawal from a receiving
or relinquishing annuity contract within 24 months of the partial exchange, then
special aggregation rules apply for purposes of determining the taxable amount
of a
19 PROSPECTUS
distribution. The IRS has issued limited guidance on how to aggregate and report
these distributions. The IRS is expected to provide further guidance; as a
result, it is possible that the amount we calculate and report to the IRS as
taxable could be different. Your Contract may not permit partial exchanges.
TAXATION OF OWNERSHIP CHANGES. If you transfer a non-Qualified Contract without
full and adequate consideration to a person other than your spouse (or to a
former spouse incident to a divorce), you will be taxed on the difference
between the Contract Value and the investment in the Contract at the time of
transfer. Any assignment or pledge (or agreement to assign or pledge) of the
Contract Value is taxed as a withdrawal of such amount or portion and may also
incur the 10% penalty tax.
AGGREGATION OF ANNUITY CONTRACTS. The Code requires that all non-Qualified
deferred annuity contracts issued by Allstate Life (or its affiliates) to the
same Contract Owner during any calendar year be aggregated and treated as one
annuity contract for purposes of determining the taxable amount of a
distribution.
INCOME TAX WITHHOLDING
Generally, Allstate Life is required to withhold federal income tax at a rate of
10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold the required 10% of the taxable
amount. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Allstate Life is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. If no U.S. taxpayer identification number is
provided, we will automatically withhold using single with zero exemptions as
the default. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Allstate Life as a withholding agent
must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien.
Withholding may be reduced or eliminated if covered by an income tax treaty
between the U.S. and the non-resident alien's country of residence if the payee
provides a U.S. taxpayer identification number on a fully completed Form W-8BEN.
A U.S. taxpayer identification number is a social security number or an
individual taxpayer identification number ("ITIN"). ITINs are issued by the IRS
to non-resident alien individuals who are not eligible to obtain a social
security number. The U.S. does not have a tax treaty with all countries nor do
all tax treaties provide an exclusion or lower withholding rate for annuities.
TAX QUALIFIED CONTRACTS
The income on tax sheltered annuity (TSA) and IRA investments is tax deferred,
and the income from annuities held by such plans does not receive any additional
tax deferral. You should review the annuity features, including all benefits and
expenses, prior to purchasing an annuity as a TSA or IRA. Tax Qualified
Contracts are contracts purchased as or in connection with:
.. Individual Retirement Annuities (IRAs) under Code Section 408(b);
.. Roth IRAs under Code Section 408A;
.. Simplified Employee Pension (SEP IRA) under Code Section 408(k);
.. Savings Incentive Match Plans for Employees (SIMPLE IRA) under Code Section
408(p);
.. Tax Sheltered Annuities under Code Section 403(b);
.. Corporate and Self Employed Pension and Profit Sharing Plans under Code
Section 401; and
.. State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans under Code Section 457.
Allstate Life reserves the right to limit the availability of the Contract for
use with any of the retirement plans listed above or to modify the Contract to
conform with tax requirements. If you use the Contract within an employer
sponsored qualified retirement plan, the plan may impose different or additional
conditions or limitations on withdrawals, waiver of charges, death benefits,
Payout Start Dates, income payments, and other Contract features. In addition,
adverse tax consequences may result if qualified plan limits on distributions
and other conditions are not met. Please consult your qualified plan
administrator for more information. Allstate Life no longer issues deferred
annuities to employer sponsored qualified retirement plans.
The tax rules applicable to participants with tax qualified annuities vary
according to the type of contract and the terms and conditions of the
endorsement. Adverse tax consequences may result from certain transactions such
as excess contributions, premature distributions, and, distributions that do not
conform to specified commencement and minimum distribution rules. Allstate Life
can issue an individual retirement annuity on a
20 PROSPECTUS
rollover or transfer of proceeds from a decedent's IRA, TSA, or employer
sponsored retirement plan under which the decedent's surviving spouse is the
beneficiary. Allstate Life does not offer an individual retirement annuity that
can accept a transfer of funds for any other, non-spousal, beneficiary of a
decedent's IRA, TSA, or employer sponsored qualified retirement plan.
Please refer to your Endorsement for IRAs or 403(b) plans, if applicable, for
additional information on your death settlement options. In the case of certain
qualified plans, the terms of the Qualified Plan Endorsement and the plans may
govern the right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM AN INDIVIDUALLY OWNED TAX QUALIFIED CONTRACT. If
you make a partial withdrawal under a Tax Qualified Contract other than a Roth
IRA, the portion of the payment that bears the same ratio to the total payment
that the investment in the Contract (i.e., nondeductible IRA contributions)
bears to the Contract Value, is excluded from your income. We do not keep track
of nondeductible contributions, and generally all tax reporting of distributions
from Tax Qualified Contracts other than Roth IRAs will indicate that the
distribution is fully taxable.
"Qualified distributions" from Roth IRAs are not included in gross income.
"Qualified distributions" are any distributions made more than five taxable
years after the taxable year of the first contribution to any Roth IRA and which
are:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made to a beneficiary after the Contract Owner's death,
.. attributable to the Contract Owner being disabled, or
.. made for a first time home purchase (first time home purchases are subject to
a lifetime limit of $10,000).
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, Tax Qualified Contracts (excluding
Roth IRAs) require minimum distributions upon reaching age 70 1/2. Failure to
withdraw the required minimum distribution will result in a 50% tax penalty on
the shortfall not withdrawn from the Contract. Not all income plans offered
under the Contract satisfy the requirements for minimum distributions. Because
these distributions are required under the Code and the method of calculation is
complex, please see a competent tax advisor.
THE DEATH BENEFIT AND TAX QUALIFIED CONTRACTS. Pursuant to the Code and IRS
regulations, an IRA (e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE IRA)
may not invest in life insurance contracts. However, an IRA may provide a death
benefit that equals the greater of the purchase payments or the Contract Value.
The Contract offers a death benefit that in certain circumstances may exceed the
greater of the purchase payments or the Contract Value. We believe that the
Death Benefits offered by your Contract do not constitute life insurance under
these regulations.
It is also possible that certain death benefits that offer enhanced earnings
could be characterized as an incidental death benefit. If the death benefit were
so characterized, this could result in current taxable income to a Contract
Owner. In addition, there are limitations on the amount of incidental death
benefits that may be provided under qualified plans, such as in connection with
a TSA or employer sponsored qualified retirement plan.
Allstate Life reserves the right to limit the availability of the Contract for
use with any of the qualified plans listed above.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM TAX QUALIFIED CONTRACTS. A 10%
penalty tax applies to the taxable amount of any premature distribution from a
Tax Qualified Contract. The penalty tax generally applies to any distribution
made prior to the date you attain age 59 1/2. However, no penalty tax is
incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or total disability,
.. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
.. made after separation from service after age 55 (does not apply to IRAs),
.. made pursuant to an IRS levy,
.. made for certain medical expenses,
.. made to pay for health insurance premiums while unemployed (applies only for
IRAs),
.. made for qualified higher education expenses (applies only for IRAs), and
.. made for a first time home purchase (up to a $10,000 lifetime limit and
applies only for IRAs).
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject
21 PROSPECTUS
to the premature distribution penalty, will be subject to a 25% penalty tax.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON TAX QUALIFIED CONTRACTS. With respect
to Tax Qualified Contracts using substantially equal periodic payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the taxpayer's attaining age 59 1/2 would be subject to
a 10% penalty tax unless another exception to the penalty tax applied. The tax
for the year of the modification is increased by the penalty tax that would have
been imposed without the exception, plus interest for the years in which the
exception was used. A material modification does not include permitted changes
described in published IRS rulings. You should consult a competent tax advisor
prior to creating or modifying a substantially equal periodic payment stream.
INCOME TAX WITHHOLDING ON TAX QUALIFIED CONTRACTS. Generally, Allstate Life is
required to withhold federal income tax at a rate of 10% from all non-annuitized
distributions that are not considered "eligible rollover distributions." The
customer may elect out of withholding by completing and signing a withholding
election form. If no election is made, we will automatically withhold the
required 10% from the taxable amount. In certain states, if there is federal
withholding, then state withholding is also mandatory. Allstate Life is required
to withhold federal income tax at a rate of 20% on all "eligible rollover
distributions" unless you elect to make a "direct rollover" of such amounts to
an IRA or eligible retirement plan. Eligible rollover distributions generally
include all distributions from Tax Qualified Contracts, including TSAs but
excluding IRAs, with the exception of:
.. required minimum distributions, or,
.. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
.. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
.. hardship distributions.
For all annuitized distributions that are not subject to the 20% withholding
requirement, Allstate Life is required to withhold federal income tax using the
wage withholding rates. The customer may elect out of withholding by completing
and signing a withholding election form. If no election is made, we will
automatically withhold using married with three exemptions as the default. If no
U.S. taxpayer identification number is provided, we will automatically withhold
using single with zero exemptions as the default. In certain states, if there is
federal withholding, then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Allstate Life as a withholding agent
must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien or to
certain other 'foreign persons'. Withholding may be reduced or eliminated if
covered by an income tax treaty between the U.S. and the non-resident alien's
country of residence if the payee provides a U.S. taxpayer identification number
on a fully completed Form W-8BEN. A U.S. taxpayer identification number is a
social security number or an individual taxpayer identification number ("ITIN").
ITINs are issued by the IRS to non-resident alien individuals who are not
eligible to obtain a social security number. The U.S. does not have a tax treaty
with all countries nor do all tax treaties provide an exclusion or lower
withholding rate for annuities.
INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408(b) permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity (IRA). Individual Retirement Annuities are subject
to limitations on the amount that can be contributed and on the time when
distributions may commence. Certain distributions from other types of qualified
retirement plans may be "rolled over" on a tax-deferred basis into an Individual
Retirement Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408A permits eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth Individual Retirement Annuity. Roth Individual
Retirement Annuities are subject to limitations on the amount that can be
contributed and on the time when distributions may commence.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "rolled over" to a Roth Individual Retirement
Annuity. The income portion of a conversion or rollover distribution is taxable
currently, but is exempted from the 10% penalty tax on premature distributions.
ANNUITIES HELD BY INDIVIDUAL RETIREMENT ACCOUNTS (COMMONLY KNOWN AS CUSTODIAL
IRAS). Code Section 408 permits a custodian or trustee of an Individual
Retirement Account to purchase an annuity as an investment of the Individual
Retirement Account. If an annuity is purchased inside of an Individual
22 PROSPECTUS
Retirement Account, then the Annuitant must be the same person as the beneficial
owner of the Individual Retirement Account.
Generally, the death benefit of an annuity held in an Individual Retirement
Account must be paid upon the death of the Annuitant. However, in most states,
the Contract permits the custodian or trustee of the Individual Retirement
Account to continue the Contract in the accumulation phase, with the Annuitant's
surviving spouse as the new Annuitant, if the following conditions are met:
1) The custodian or trustee of the Individual Retirement Account is the owner of
the annuity and has the right to the death proceeds otherwise payable under
the Contract;
2) The deceased Annuitant was the beneficial owner of the Individual Retirement
Account;
3) We receive a complete request for settlement for the death of the Annuitant;
and
4) The custodian or trustee of the Individual Retirement Account provides us
with a signed certification of the following:
(a) The Annuitant's surviving spouse is the sole beneficiary of the Individual
Retirement Account;
(b) The Annuitant's surviving spouse has elected to continue the Individual
Retirement Account as his or her own Individual Retirement Account; and
(c) The custodian or trustee of the Individual Retirement Account has
continued the Individual Retirement Account pursuant to the surviving spouse's
election.
SIMPLIFIED EMPLOYEE PENSION IRA. Code Section 408(k) allows eligible employers
to establish simplified employee pension plans for their employees using
individual retirement annuities. These employers may, within specified limits,
make deductible contributions on behalf of the employees to the individual
retirement annuities. Employers intending to use the Contract in connection with
such plans should seek competent tax advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE IRA). Code Section 408(p)
allows eligible employers with 100 or fewer employees to establish SIMPLE
retirement plans for their employees using individual retirement annuities. In
general, a SIMPLE IRA consists of a salary deferral program for eligible
employees and matching or nonelective contributions made by employers. Employers
intending to purchase the Contract as a SIMPLE IRA should seek competent tax and
legal advice.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAS
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
TAX SHELTERED ANNUITIES. Code Section 403(b) provides tax-deferred retirement
savings plans for employees of certain non-profit and educational organizations.
Under Section 403(b), any contract used for a 403(b) plan must provide that
distributions attributable to salary reduction contributions made after
12/31/88, and all earnings on salary reduction contributions, may be made only
on or after the date the employee:
.. attains age 59 1/2,
.. severs employment,
.. dies,
.. becomes disabled, or
.. incurs a hardship (earnings on salary reduction contributions may not be
distributed on account of hardship).
These limitations do not apply to withdrawals where Allstate Life is directed to
transfer some or all of the Contract Value to another 403(b) plan. Generally, we
do not accept funds in 403(b) contracts that are subject to the Employee
Retirement Income Security Act of 1974 (ERISA).
23 PROSPECTUS
ANNUAL REPORTS AND OTHER DOCUMENTS
- --------------------------------------------------------------------------------
Allstate Life's Annual Report on Form 10-K for the year ended December 31, 2004,
is incorporated herein by reference, which means that it is legally a part of
this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q, electronically on the SEC's
"EDGAR" system using the identifying number CIK No. 0000352736. The SEC
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
The address of the site is http://www.sec.gov. You also can view these materials
at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of the SEC's Public Reference
Room, call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at P.O. Box 80469, Lincoln, NE 68501-0469 (telephone:
1-800-203-0068).
ANNUAL STATEMENTS
- --------------------------------------------------------------------------------
At least once a year prior to the Payout Start Date, we will send you a
statement containing information about your Contract Value. For more
information, please contact your financial representative or call our customer
support unit at 1-800-203-0068.
24 PROSPECTUS
APPENDIX A- MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
The Market Value Adjustment is based on the following:
I = the Treasury Constant Maturity Rate for a maturity equal to the length of
the Guarantee Period as reported in Federal Reserve Board Statistical
Release H.15 ("Treasury Rate") for the week preceding Contract issue.
N = the number of whole and partial years from the date we receive the
withdrawal request to the end of the current Market Value Adjustment
Period; and
J = the Treasury Rate for the week preceding the receipt of the withdrawal
request.
The Market Value Adjustment factor is determined from the following formula:
.9 X {(I - (J + 0.0025)} X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount (in excess of the Free Withdrawal Amount)
subject to the Market Value Adjustment.
EXAMPLES OF MARKET VALUE ADJUSTMENT
Purchase Payment: $125,000
Guarantee Period: 7 years
Full Surrender: Beginning of Contract Year 4
Contract Value at time of full
surrender: $125,000
NOTE: These examples assume that premium taxes are not applicable.
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1. Calculate Contract Value at $125,000
End of Contract Year 3:
Step 2. Calculate the Amount in FREE WITHDRAWAL AMOUNT (.10 X 12,500) =
excess of Free Withdrawal Amount: $12,500
AMOUNT IN EXCESS: $125,000 - $12,500 =
$112,500
Step 3. Calculate the Withdrawal .06 X $112,500 = $6,750
Charge:
Step 4. Calculate the Market Value I = 4.5%
Adjustment: J = 4.2%
N = 4 years
Market Value Adjustment Factor: .9 X
(I-(J+.0025)) X N = .9 X (.045 -
(.042+.0025)) X 4 = .0020 Market Value
Adjustment = Market Value Adjustment
Factor X Amount Subject to Market Value
Adjustment: = .0020 X $112,500 = $225.00
Step 5. Calculate the amount $125,000 - $6,750 + $225.00 = $118,475.00
received by Contract Owners as a result of full withdrawal at the beginning of
Contract Year 4:
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1. Calculate Contract Value at $125,000
the time of the withdrawal:
Step 2. Calculate the Amount in FREE WITHDRAWAL AMOUNT (.10 X 125,000) =
excess of Free Withdrawal Amount: $12,500
AMOUNT IN EXCESS: $125,000 - $12,500 =
$112,500
Step 3. Calculate the Withdrawal .06 X $112,500 = $6,750
Charge:
Step 4. Calculate the Market Value I = 4.5%
Adjustment: J = 4.8%
N = 4 years
Market Value Adjustment Factor: .9 X
(I-(J+.0025)) X N = .9 X (.045 -
(.048+.0025)) X 4 = - .0198 Market Value
Adjustment = Market Value Adjustment
Factor X Amount Subject to Market Value
Adjustment: = - .0198 X $112,500 = -
$2,227.50
Step 5. Calculate the amount $125,000 - $6,750 - $2,227.50 =
received by Contract Owners as a $116,022.50
result of full withdrawal at the
beginning of Contract Year 4:
25 PROSPECTUS
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-laws of Allstate Life Insurance Company ("Registrant") provide that
Registrant will indemnify all of its directors, former directors, officers and
former officers, to the fullest extent permitted under law, who were or are a
party or are threatened to be made a party to any proceeding by reason of the
fact that such persons were or are directors or officers of Registrant, against
liabilities, expenses, judgments, fines and amounts paid in settlement actually
and reasonably incurred by them. The indemnity shall not be deemed exclusive of
any other rights to which directors or officers may be entitled by law or under
any articles of incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise. In addition, the indemnity shall inure to
the benefit of the legal representatives of directors and officers or of their
estates, whether such representatives are court appointed or otherwise
designated, and to the benefit of the heirs of such directors and officers. The
indemnity shall extend to and include claims for such payments arising out of
any proceeding commenced or based on actions of such directors and officers
taken prior to the effectiveness of this indemnity; provided that payment of
such claims had not been agreed to or denied by Registrant before such date.
The directors and officers of Registrant have been provided liability insurance
for certain losses arising from claims or charges made against them while acting
in their capacities as directors or officers of Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibit No. Description
(1) Underwriting Agreement between Allstate Life Insurance Company and
Allstate Distributors, L.L.C. (Incorporated herein by reference to
Pre-Effective Amendment No. 1 to the Form N-4 Registration Statement of
Allstate Life Insurance Company Separate Account A (File No. 333-31288)
dated April 27, 2000).
(2) None
(4) Form of Single Premium Deferred Market Value Adjusted Equity Indexed
Annuity Contract and Application (Previously filed in initial Form S-3
Registration Statement (File No. 333-117685) dated July 27, 2004.)
(5) Opinion and Consent of General Counsel re: Legality (Previously filed in
Post-Effective Amendment No. 1 to this Registration Statement (File No.
333-117685) dated December 20, 2004.)
(8) None
(11) None
(12) None
(15) None
(23)(a) Consent of Independent Registered Public Accounting Firm filed herewith
(24)(a) Powers of Attorney for Michael J. Velotta, David A. Bird, Edward M.
Liddy, John C. Lounds, Robert W. Pike, Samuel H. Pilch, Eric A. Simonson,
Kevin R. Slawin and Thomas J. Wilson, (Incorporated herein by reference to
Allstate Life's initial Form S-3 Registration Statement (File No.
333-100068) on September 25, 2002.)
(24)(b) Powers of Attorney for Casey J. Sylla and Danny L. Hale (Incorporated
herein by reference to Allstate Life's initial Form S-3 registration
Statement (File No. 333-105331) on May 16, 2003).
(24)(c) Powers of Attorney for John C. Pintozzi and Douglas B. Welch filed
herewith
(25) None
(26) None
(27) Not applicable
(99) Experts filed herewith
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to the registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof ) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; provided,
however, that paragraphs (1)(i) and (1)(ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by
Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) that, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant, Allstate Life Insurance Company, pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant certifies
that it has reasonable grounds to believe that it will meet all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the Township of Northfield, State of Illinois on the 1st day of
April, 2005.
ALLSTATE LIFE INSURANCE COMPANY
(REGISTRANT)
By: /s/MICHAEL J. VELOTTA
----------------------------------------
Michael J. Velotta
Senior Vice President, Secretary
and General Counsel
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
1st day of April, 2005.
*/CASEY J. SYLLA Chairman of the Board,
- ---------------------- President and Director
Casey J. Sylla (Principal Executive Officer)
/s/MICHAEL J. VELOTTA Senior Vice President, Secretary,
- --------------------- General Counsel and Director
Michael J. Velotta
*/DAVID A. BIRD Senior Vice President and Director
- ------------------
David A. Bird
*/DANNY L. HALE Director
- -----------------
Danny L. Hale
*/EDWARD M. LIDDY Director
- -----------------
Edward M. Liddy
*/JOHN C. LOUNDS Senior Vice President and Director
- -----------------
John C. Lounds
*/ROBERT W. PIKE Director
- ------------------
Robert W. Pike
*/SAMUEL H. PILCH Group Vice President and Controller
- ----------------- (Principal Accounting Officer)
Samuel H. Pilch
*/JOHN C. PINTOZZI Senior Vice President, Chief Financial
- ------------------ Officer and Director
John C. Pintozzi (Principal Financial Officer)
*/ERIC A. SIMONSON Senior Vice President, Chief Investment
- ------------------ Officer and Director
Eric A. Simonson
*/KEVIN R. SLAWIN Senior Vice President and Director
- ------------------
Kevin R. Slawin
*/DOUGLAS C. WELCH Senior Vice President and Director
- ------------------
Douglas C. Welch
*/THOMAS J. WILSON, II Director
- -----------------
Thomas J. Wilson, II
*/ By Michael J. Velotta, pursuant to Powers of Attorney filed herewith or
previously filed.
EXHIBIT LIST
The following exhibits are filed herewith:
Exhibit No. Description
(23)(a) Consent of Independent Registered Public Accounting Firm
(24)(c) Powers of Attorney for John C. Pintozzi and Douglas B. Welch
(99) Experts