MARY E. THORNTON
DIRECT LINE: 202.383.0698
Internet: mary.thornton@sablaw.com
March 27, 2008
VIA EDGAR TRANSMISSION
Sonny Oh, Esq.
Office of Insurance Products
Division of Investment Management
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Re: Post-Effective Amendment No. 15 to the
Registration Statement on Form N-4 for
New England Variable Annuity Separate Account
(File No. 333-51676)
Dear Mr. Oh:
On behalf of New England Life Insurance Company (the "Company") and its separate
account, New England Variable Annuity Separate Account, we are responding to the
comments that you orally provided to us on March 6 and 7, 2008 in connection
with the "American Forerunner Series" post-effective amendment (the "Amendment")
filed on January 16, 2008 pursuant to paragraph (a)(1) of Rule 485 under the
Securities Act of 1933 (the "1933 Act"). Each of the Staff's comments is set
forth below, followed by the Company's response. A printer's proof of the
American Forerunner Series prospectus reflecting the responses is attached
hereto.
1. General Comment -- Missing Fee Table Information
Comment: Please include the missing Fee Table information in a
Rule 485(a) filing.
Response: The Company will include the missing Fee Table
information in a Rule 485(a) filing.
Sonny Oh, Esq.
Securities and Exchange Commission
Page 2
2. General Comment -- Guarantees and Support Agreements
Comment: Please disclose to the staff whether there are any
types of guarantees or support agreements with third
parties to support the company's guarantees under the
Contract.
Response: There are no guarantees or support agreements with
third parties to support the Company's guarantees
under the Contract, other than the net worth
maintenance agreement discussed in the Statement of
Additional Information.
3. General Comment -- EDGAR Class Identifier
Comment: Please confirm that the Contract name on the front
cover page of the prospectus is the same as the EDGAR
class identifier associated with the Contract.
Response: The Contract name on the front cover page of the
prospectus -- American Forerunner Series -- is the
same as the EDGAR class identifier for the Contract.
4. Investment Options, page A-8
Comment: Please define the term EDCA the first time it is
referenced.
Response: The Company has revised the disclosure to define the
term EDCA (Enhanced Dollar Cost Averaging) the first
time it is referenced in the prospectus, on page A-8.
5. Fee Tables and Examples, pages A-11 -- A-17
Comment: a. Please disclose the range of state premium taxes.
Response: a. The Company has revised the prospectus to disclose
the range of state premium taxes in the narrative
preceding the Fee Table.
Comment: b. Please reduce the font size of the table in
Footnote 1 to the Contract Owner Transaction
Expenses section of the Fee Table so that it is
the same as the font size of the rest of the
Footnote.
Response: b. The Company has reduced the font size of the table
in Footnote 1 so that it is the same as the font
size of the rest of the Footnote.
Sonny Oh, Esq.
Securities and Exchange Commission
Page 3
Comment: c. Please disclose each maximum guaranteed charge
before its corresponding current charge, where
applicable.
Response: c. The Company has revised the disclosure so that
each maximum guaranteed charge is provided before
its corresponding current charge.
Comment: d. Please add a heading titled "Optional Benefit
Riders" before the Enhanced Death Benefit Rider in
the Fee Table.
Response: d. The Company has added a heading titled "Optional
Benefit Riders" to precede the optional rider
charges.
Comment: e. Please confirm that the range of Total Annual
Eligible Fund Operating Expenses and Net Total
Annual Eligible Fund Operating Expenses complies
with Instruction 17(a) to Item 3 of Form N-4.
Please also confirm that the fund expenses set
forth in the Annual Eligible Fund Operating
Expenses table comply with Item 3 of Form N-1A,
including Instruction 3(f). Finally, please
confirm that the duration of each contractual fund
waiver and reimbursement reflected in the Net
Total Annual Eligible Fund Operating Expenses is
at least one year beyond the date of the
prospectus.
Response: e. The Company confirms that when it updates the
expenses of the underlying funds, it will ensure
that: i) the range of Total Annual Eligible Fund
Operating Expenses and Net Total Annual Eligible
Fund Operating Expenses complies with Instruction
17(a) to Item 3 of Form N-4; ii) the fund expenses
set forth in the Annual Eligible Fund Operating
Expenses table comply with Item 3 of Form N-1A,
including Instruction 3(f); and iii) the duration
of each contractual fund waiver and reimbursement
reflected in the Net Total Annual Eligible Fund
Operating Expenses is at least one year beyond the
date of the prospectus.
Comment: f. Please confirm that the expense examples reflect
the highest combination of Contract fees and
expenses, and that any contractual expense
reimbursements and/or waivers reflected in the
examples do not extend beyond the duration of the
reimbursement or waiver.
Response: f. The Company confirms that when it updates the
expense examples, it will ensure that the examples
reflect the highest combination of Contract fees
and expenses. With respect to
Sonny Oh, Esq.
Securities and Exchange Commission
Page 4
ensuring that the examples do not reflect
contractual expense reimbursements and/or waivers
that extend beyond the duration of the
reimbursement or waiver, the expense examples
reflect fund expenses before any reimbursement
and/or waiver, as noted in the paragraph preceding
each expense example.
6. Fixed Account, page A-28
Comment: Please define the name of the Predictor Plus rider
early in the prospectus, conform the references to
the Predictor Plus as described in the Fixed Account
discussion and on page A-34 of the prospectus, and be
consistent with respect to such references throughout
the prospectus.
Response: The Company will ensure that any references to the
Predictor Plus (also known as the GMIB Plus I Rider)
are consistent throughout the April 28, 2008
prospectus.
7. The Contracts, page A-29
Comment: Please clearly disclose that the Company expects to
make a profit from the higher charges associated with
the bonus. In addition, please state that there may
be circumstances where a Contract Owner may be worse
off as a result of the bonus, and identify such
circumstances. Finally, please identify all
circumstances in which the bonus may be recaptured.
Response: The Company discloses generally in the charges
section of the prospectus that it may profit from
Contract charges. However, the Company respectfully
declines to add disclosure stating that it will
profit from higher charges associated with the bonus,
because the Company does not expect to make any
additional profit from such higher charges. Rather,
the higher charges associated with the bonus are
imposed merely to offset the cost of the bonus. The
Company notes that the B Plus Class is no more
profitable than any of the other Classes of the
Contract.
The Company has added disclosure to the section of
the prospectus discussing the Classes of the Contract
to explain that there may be circumstances where a
Contract Owner may be worse off as a result of the
bonus, with examples of such circumstances.
With respect to bonus recapture, the Company has
revised the disclosure to clarify that it will only
recapture the bonus during the free look period.
Sonny Oh, Esq.
Securities and Exchange Commission
Page 5
8. Ten Day Right to Review, page A-30
Comment: Please add disclosure stating that if the surrender
value is greater than premium payments on the
effective date of a "free look," the Contract Owner
will receive the surrender value regardless of state
law.
Response: The Company respectfully declines to add such
disclosure because it would require a change in the
Company's current policies regarding free look rights
that would be costly and burdensome and are not
necessary for investor protection. Under the
Company's existing procedures, in states that require
insurers to return premium payments during the free
look period, the Company refunds premium payments
even if the surrender value is higher (which, by the
way, is rare). While erstwhile Contract Owners
clearly should be entitled to their Contract's
surrender value at any time after the free look
period, the Company believes it is entirely
appropriate to refund premium payments rather than
giving the surrender value to a Contract Owner who
has chosen to end his or her relationship with the
Company during the free look period.
Moreover, the Company's administrative systems are
not currently capable of returning the greater of
purchase payments or surrender value in states that
only require return of purchase payments.
Accordingly, it would be a significant administrative
and financial burden for the Company to change its
systems. Furthermore, the Company notes that Rule
6e-3(T) under the Investment Company Act of 1940
provides that an insurer is exempt from Section
27(f), so long as the insurer permits the Contract
Owner to withdraw from the Contract during a
specified time period (the "free look" period) and
the insurer refunds the Contract Owner cash value
plus charges, provided that "if state law or the
contract so require, the redeeming contract [owner]
shall receive a refund of all payments made for such
contract." Although Rule 6e-3(T) is not applicable in
this situation, the Company believes the fact that
there is no "greater of" standard apparent in this
rule is an indication that the Commission did not
determine it is necessary to provide a "greater of"
free look right to variable contract owners
generally.
Sonny Oh, Esq.
Securities and Exchange Commission
Page 13
9. Investment Allocation Restrictions, page A-32
Comment: Please clarify whether and when any changes in
classification of a subaccount will result in
rebalancing regardless of whether a new purchase
payment or request for a transfer has been made.
Response: The Company respectfully declines to make any
revisions to the disclosure relating to the changes
in classification of a subaccount. As noted in the
disclosure, "[w]e may determine or change the
classification of a subaccount in the event that a
subaccount is added, deleted, substituted, merged or
otherwise reorganized. In that case, any change in
classification will only take effect as to your
contract in the event you make a new purchase payment
or request a transfer among subaccounts." The Company
believes that the existing disclosure is clear that a
subaccount will only be reclassified (and thus
rebalanced) if a new purchase payment or transfer
request is made.
10. General Comment -- Purchase Payment Formulas
Comment: With respect to any formulas based all or in part on
purchase payment amounts, please disclose whether or
not the calculation of a purchase payment includes
its corresponding bonus amount.
Response: The Company will ensure that, in the April 28, 2008
prospectus, any formulas based all or in part on
purchase payment amounts will indicate whether or not
the calculation of a purchase payment includes its
corresponding bonus amount.
11. Enhanced Death Benefit Rider, page A-36
Comment: Please disclose whether the Company will continue to
assess the rider charge if the Contract Owner
discontinues the Automatic Annual Step-Up.
Response: The Company has revised the prospectus to clarify
that if a Contract Owner discontinues the Automatic
Annual Step-Up, the charge for the Enhanced Death
Benefit will not end.
Sonny Oh, Esq.
Securities and Exchange Commission
Page 7
12. Enhanced Death Benefit Rider, page A-35
Comment: Please provide examples of the operation of the death
benefit base.
Response: The Company has created a new prospectus appendix
with an example of how the enhanced death benefit
operates, including the death benefit base.
13. Options for Death Proceeds, page A-37
Comment: Please confirm that the tax disclosure is updated
throughout the prospectus.
Response: The Company confirms that the tax disclosure will be
updated throughout the April 28, 2008 prospectus.
14. Market Timing, page A-40
Comment: With respect to Eligible Funds other than the
Monitored Portfolios, please add disclosure
explaining that there is a risk that market timing in
those funds could occur, and that such an occurrence
could be detrimental to other Contract Owners.
Response: The Company respectfully declines to add disclosure
on the market timing risk associated with
non-Monitored Portfolios. The Company does not state
that there is no possibility that market timing will
occur in these portfolios; rather, the Company states
that it believes there is not a "significant"
opportunity that market timing will occur. The
Company does not believe that a Contract Owner could
fail to understand that there is a small possibility
of market timing occurring in the non-Monitored
Portfolios. Moreover, to the extent a Contract Owner
is concerned with the possibility of market timing
occurring in the non-Monitored Portfolios, the risks
associated with market timing are clearly described
in the first paragraph of this section.
15. State Variations, page A-46
Comment: a. Please disclose all state variations in the
prospectus.
Response: a. The Company has assessed the number of state
variations that would need to be disclosed on an
ongoing basis, including free look rights, age
issuance limitations, transfer rights and
limitations, the right to reject purchase
payments, the right to assess transfer fees, and
general availability of certain riders,
Sonny Oh, Esq.
Securities and Exchange Commission
Page 8
and has determined that the list of the state
variations would be extremely lengthy and
confusing to Contract Owners. In addition, state
variations are constantly changing so if the
Company was to disclose the variations in the
prospectus, it would continuously be required to
"sticker" the prospectus. Form N-4 does not
require that state variations be disclosed and the
Company believes that the current disclosure
sufficiently alerts Contract Owners to the fact
that there are state variations among Contracts
and that Contract Owners must therefore consult
their own Contract for the terms that apply in
their state. The Company, therefore, believe that
the administrative costs involved with disclosing
the state variations on an ongoing basis would
greatly outweigh any potential benefits.
However, to further emphasize that state
variations do exist, the Company has clarified
that different features, benefits, and costs may
occur "because of state law variations," and has
added the following disclosure: "These differences
include, among other things, free look rights, age
issuance limitations, transfer rights and
limitations, the right to reject purchase
payments, the right to assess transfer fees, and
general availability of certain riders."
Comment: b. Please remove any disclosure stating that the
prospectus provides a general description of the
Contracts, and the actual Contract and any
endorsement are the controlling documents. In
addition, please add disclosure indicating that
all material features, rights, and obligations
under the Contract are described in the
prospectus.
Response: b. The Company has revised this section to focus
solely on state variations and to remove any
implication that the prospectus cannot be relied
upon. Accordingly, this prospectus provision now
reads as follows: "Contracts issued in your state
may provide different features and benefits from,
and impose different costs than, those described
in this prospectus because of state law
variations. These differences include, among other
things, free look rights, age issuance
limitations, transfer rights and limitations, the
right to reject purchase payments, the right to
assess transfer fees, and general availability of
certain riders. However, please note that the
maximum fees and charges for all features and
benefits are set forth in the fee table in this
prospectus. If you would like to review a copy of
your Contract and any endorsements, contact our
Annuity Administrative Office."
Sonny Oh, Esq.
Securities and Exchange Commission
Page 9
16. GMIB Plus II, pages A-59 -- A-60
Comment: a. Please clarify what is meant by "eligible Contract
Anniversary."
Response: a. The Company will clarify the phrase "eligible
Contract Anniversary" throughout the April 28,
2008 prospectus.
Comment: b. Please disclose whether the Company will continue
to assess the rider charge if the Contract Owner
discontinues the Automatic Annual Step-Up.
Response: b. The Company has revised the prospectus to clarify
that if a Contract Owner discontinues the
Automatic Annual Step-Up, the charge for the GMIB
Plus II will not end.
Comment: c. Please bold the disclosure that states if the
Guaranteed Principal Option is exercised, the GMIB
rider will terminate as of the date the option
takes effect and no additional GMIB charges will
apply thereafter.
Response: c. The Company has bolded the disclosure that states
if the Guaranteed Principal Option is exercised,
the GMIB rider will terminate as of the date the
option takes effect and no additional GMIB charges
will apply thereafter.
17. GMIB Plus I, page A-62
Comment: Please revise the paragraph discussing Contracts
issued before February 26, 2007 applying plain
English principles, and provide an example of the
calculation described in the disclosure.
Response: The Company has revised the paragraph discussing
Contracts issued before February 26, 2007 so that the
disclosure is more consistent with plain English
principles. The Company also has provided a
cross-reference to Appendix D of the prospectus,
which provides examples of the GMIB Plus II with a 6%
annual increase rate and notes that the only
difference between the two riders in the example is
the annual increase rate.
18. Tax Disclosure, page A-65
Comment: Please bold the disclosure that discusses the tax
treatment of withdrawals under the GWB and LWG
riders.
Sonny Oh, Esq.
Securities and Exchange Commission
Page 10
Response: The Company has bolded the disclosure that discusses
the tax treatment of withdrawals under the GWB and
LWG riders.
19. Tax Disclosure, page A-66
Comment: a. Please disclose how the amount of remaining Annual
Benefit Payments is determined once the Contract
Value and/or Remaining Guaranteed Withdrawal
Amount, as applicable, declines to zero.
Response: a. The Company has revised the prospectus to clarify
how the amount of remaining Annual Benefit
Payments is determined once the Contract Value
and/or Remaining Guaranteed Withdrawal Amount, as
applicable, declines to zero.
Comment: b. Please bold the disclosure that discusses when to
begin taking withdrawals under the LWG II rider.
Response: b. The Company has bolded the disclosure that
discusses when to begin taking withdrawals under
the LWG II rider.
20. Enhanced Guaranteed Withdrawal Benefit, page A-72
Comment: Please add disclosure to the Lifetime Withdrawal
Guarantee section of the prospectus that is similar
to the withdrawal charge and tax disclosure set forth
on page A-72 for the Enhanced Guaranteed Withdrawal
Benefit.
Response: The Company has moved the withdrawal charge and tax
disclosure from page A-72 to the Facts About
Guaranteed Withdrawal Benefit Riders section of the
Guaranteed Withdrawal Benefit discussion, which
addresses both the Lifetime Withdrawal Guarantee and
the Enhanced Guaranteed Withdrawal Benefit.
21. Lifetime Withdrawal Guarantee II, page A-67
Comment: a. Please clarify that the failure to enroll in the
Required Minimum Distribution program may result
in mandatory Excess Withdrawals.
Response: a. The Company has revised the prospectus to clarify
that if a Contract Owner has not enrolled in the
Required Minimum Distribution program, then
withdrawals taken to satisfy required minimum
distribution amounts will be treated as Excess
Withdrawals if they exceed the Annual Benefit
Payment.
Sonny Oh, Esq.
Securities and Exchange Commission
Page 11
Comment: b. Please clarify how the Company will reconcile the
calculation of Annual Benefit Payments that must
satisfy minimum distribution requirements (and
thus must be determined each calendar year) and
those Annual Benefit Payments that do not (and
thus are determined each Contract Year).
Response: b. As indicated in the current disclosure, in order
to qualify for the increased Annual Benefit
Payment amount, a Contract Owner must enroll in
the Automated Required Minimum Distribution
program and the frequency of withdrawals must be
annual. The Company is not required to calculate
the Annual Benefit Payment in that situation any
differently than it normally would. The Company
merely compares the current Annual Benefit Payment
to the most recently calculated required minimum
distribution amount, and, as stated, if the
required minimum distribution amount exceeds the
then current Annual Benefit Payment, the Company
increases the Annual Benefit Payment to the
required minimum distribution amount so that the
annual withdrawal made under the Automated
Required Minimum Distribution program will not
trigger the adjustments to the benefit amounts at
the next Contract Anniversary. The Company has
revised the disclosure to clarify the operation of
this feature.
22. Legal Proceedings, page A-87
Comment: Please update the Legal Proceedings disclosure, if necessary.
Response: The Company confirms that the Legal Proceedings
disclosure will be updated, if necessary, for the
April 28, 2008 prospectus.
23. General Comment -- Statement of Additional Information
Comment: Please note that the Statement of Additional
Information did not appear to be included in the
Amendment.
Response: The Statement of Additional Information will be
included in the next post-effective amendment to the
registration statement.
24. General Comment -- Legal Opinion
Comment: Please ensure that the Company has filed a legal
opinion as an exhibit to the registration statement.
Sonny Oh, Esq.
Securities and Exchange Commission
Page 12
Response: The Company filed a legal opinion as an exhibit to
the registration statement on April 29, 2004.
25. General Comment - Powers of Attorney
Comment: Please ensure that the powers of attorney
specifically relate to the registration statement.
Response: All powers of attorney filed in connection with the
Amendment specifically relate to the registration
statement.
26. General Comment -- Tandy Representations
Comment: Please provide the appropriate Tandy representations.
Response: The Company will submit a letter under separate cover
acknowledging the Tandy representations.
* * *
We hope that you will find these responses satisfactory. We appreciate the
Staff's assistance in reviewing this filing. If you have any questions or
comments, please contact the undersigned at (202) 383-0698 or Elisabeth
Bentzinger at (202) 383-0717.
Sincerely,
Mary E. Thornton
Enclosure
cc: Michele Abate, Esq.
Elisabeth Bentzinger, Esq.
Internal Revenue Code ("the Code") and a Simple Retirement Account ("SIMPLE
IRA") under paragraph 408(p) of the Code. A contract generally may have two
owners (both of whom must be individuals). Subject to state approval, certain
retirement plans qualified under the Internal Revenue Code ("the Code") may
purchase the Contract.
FOR ANY TAX QUALIFIED ACCOUNT (E.G. INDIVIDUAL RETIREMENT ACCOUNTS), THE
TAX DEFERRED ACCRUAL FEATURE IS PROVIDED BY THE TAX QUALIFIED RETIREMENT PLAN.
THEREFORE, THERE SHOULD BE REASONS OTHER THAN TAX DEFERRAL FOR ACQUIRING AN
ANNUITY CONTRACT WITHIN A QUALIFIED PLAN.
For contract transactions, we rely on instructions from Contract Owners,
whether a trustee or custodian of an eligible retirement plan or an individual
owner.
INVESTMENT OPTIONS:
You may allocate purchase payments to the subaccounts or to the Fixed
Account. The Fixed Account is not available to Contracts purchased on or after
May 1, 2003 for which the C Class has been selected. The Fixed Account is also
not available to Contracts purchased in New York on or after May 1, 2003 if the
optional Guaranteed Minimum Income Benefit ("GMIB I") or a Guaranteed Withdrawal
Benefit or Lifetime Withdrawal Guarantee is selected. If you elect to purchase
the GMIB Plus II Guaranteed Minimum Income Benefit, the Lifetime Withdrawal
Guarantee II, or the Enhanced Death Benefit, you are limited to allocating your
purchase payments and Contract Value as described in "THE
CONTRACTS -- Investment Allocation Restrictions for Certain Riders." If you
elect to purchase the GMIB Plus I Guaranteed Minimum Income Benefit, you are
limited to allocating your purchase payments and Contract Value among the
MetLife Conservative Allocation Subaccount, MetLife Conservative to Moderate
Allocation Subaccount, MetLife Moderate Allocation Subaccount, MetLife Moderate
to Aggressive Allocation Subaccount and, if you use enhanced dollar cost
averaging ("EDCA"), the EDCA Guaranteed Account (provided your EDCA destination
portfolios are one of the above Subaccounts). If you elect to purchase the
Lifetime Withdrawal Guarantee I, you are limited to allocating your purchase
payments and Contract Value to the same subaccounts, however, you may also
allocate monies to the BlackRock Money Market Subaccount and the Fixed Account.
If you elect to purchase the optional Guaranteed Minimum Accumulation Benefit,
you are limited to allocating your purchase payments and Contract Value to one
of the MetLife Conservative Allocation Subaccount, MetLife Conservative to
Moderate Allocation Subaccount, MetLife Moderate Allocation Subaccount ("GMAB
Asset Allocation Subaccounts") and the EDCA Guaranteed Account (provided your
EDCA destination portfolio is one of the GMAB Asset Allocation Subaccounts). You
can allocate your Contract Value among the subaccounts and the Fixed Account as
you choose any time (subject to limitation). However, you may not choose more
than 18 subaccounts (including the Fixed Account) at the time you submit your
initial purchase payment. You may not choose more than 18 subaccounts (including
the Fixed Account) at the time you submit a subsequent purchase payment, unless
you notify us of your chosen allocation one or more days prior to submitting the
payment. You must allocate a minimum of $500 dollars to each account you select.
However, for individual retirement annuities, individual retirement accounts and
Roth Individual Retirement Accounts, if purchase payments are less than $2,000,
then you may allocate the payment to a maximum of four subaccounts.
You can change your purchase payment allocation (unless you elect to
purchase the optional Guaranteed Minimum Accumulation Benefit). We believe that
under current tax law you can transfer Contract Value between accounts without
federal income tax. We reserve the right to limit transfers and charge a
transfer fee. Currently, we do not charge a transfer fee or limit the number of
transfers, but we do apply special limits to "market timing." (See "Transfer
Privilege--Market Timing.") The minimum transfer amount is currently $500,
unless we have agreed otherwise. Special limits may apply to transfers to and
from the Fixed Account. (See "THE FIXED ACCOUNT.") The maximum transfer amount
is $500,000 for each transaction.
CHARGES:
We apply the following charges to your Contract:
-- premium tax charge, in some states.
-- asset-based insurance charge at an annual rate ranging from 1.15% to
1.95% of the Variable Account's daily net assets depending upon the
Class and death benefit option you select (these amounts increase by
.25% for subaccounts investing in the American Funds Insurance
Series).
A-8
FEE TABLE
The following tables describe the fees and expenses that you will pay when
buying, owning, and surrendering the Contract. The first table describes the
fees and expenses that you will pay at the time that you buy the Contract,
surrender the Contract, or transfer cash value between Eligible Fund options.
State premium taxes of 0% to 3.5% may also be deducted.
CONTRACT OWNER TRANSACTION EXPENSES
<Table>
Sales Charge Imposed on Purchase Payments......... None
Withdrawal Charge (as a percentage of each
purchase payment)............................... 9% declining
annually -- see Note
(1)
Transfer Fee(2)................................... $25
</Table>
NOTES:
(1) The Withdrawal Charge is a declining percentage of each purchase payment and
varies by Contract Class, as follows:
<Table>
<Caption>
NUMBER OF
COMPLETE YEARS FROM RECEIPT OF STANDARD CLASS B PLUS CLASS L CLASS P CLASS C CLASS
PURCHASE PAYMENT CHARGE CHARGE CHARGE CHARGE CHARGE
------------------------------ -------------- ------------ ------- ------- -------
0............................................ 7% 9% 7% 8% None
1............................................ 6% 8% 6% 8%
2............................................ 6% 8% 5% 8%
3............................................ 5% 7% 0% 7%
4............................................ 4% 6% 0% 6%
5............................................ 3% 5% 0% 5%
6............................................ 2% 4% 0% 4%
7............................................ 0% 2% 0% 3%
8............................................ 0% 2% 0% 2%
9 and thereafter............................. 0% 0% 0% 0%
</Table>
(2) Currently, we do not charge this fee. We reserve the right to limit the
number and dollar amount of transfers and impose a transfer fee of up to $25. We
will not restrict transfers to less than 12 per Contract Year.
The next table describes the fees and expenses that you will pay
periodically during the time that you own the Contract, not including Eligible
Fund fees and expenses.
VARIABLE ACCOUNT ANNUAL EXPENSES*
(as a percentage of average daily net assets in the subaccounts)
Asset-Based Insurance Charge for all subaccounts except the American
Funds Bond, American Funds Growth, American Funds Growth-Income, and
American Funds Global Small Capitalization Subaccounts(1)
<Table>
<Caption>
DEATH BENEFIT:** STANDARD CLASS B PLUS CLASS(2) C CLASS L CLASS P CLASS
---------------- -------------- --------------- ------- ------- -------
Standard Death Benefit.............. 1.25% 1.60% 1.60% 1.50% 1.15%
Annual Step-Up Death Benefit........ 1.45% 1.80% 1.80% 1.70% 1.35%
Greater of Annual Step-Up or 5%
Annual Increase Death Benefit..... 1.60% 1.95% 1.95% 1.85% 1.50%
</Table>
A-11
Asset-Based Insurance Charge for the American Funds Bond, American
Funds Growth, American Funds Growth-Income, and American Funds Global
Small Capitalization Subaccounts(1)
<Table>
<Caption>
DEATH BENEFIT:** STANDARD CLASS B PLUS CLASS(2) C CLASS L CLASS P CLASS
---------------- -------------- --------------- ------- ------- -------
Standard Death Benefit.............. 1.50% 1.85% 1.85% 1.75% 1.40%
Annual Step-Up Death Benefit........ 1.70% 2.05% 2.05% 1.95% 1.60%
Greater of Annual Step-Up or 5%
Annual Increase Death Benefit..... 1.85% 2.20% 2.20% 2.10% 1.75%
Earnings Preservation Benefit Rider(3).................................................... 0.25%
</Table>
<Table>
OTHER CONTRACT FEES
Annual Contract Administrative Fee(4)........... $30
OPTIONAL BENEFIT RIDERS
Enhanced Death Benefit Rider (issue age
0-[60-80](5).................................. Maximum Guaranteed Charge: 1.50%
Current Charge: [ ]%
Enhanced Death Benefit Rider (issue age
[60-80](5).................................... Maximum Guaranteed Charge: 1.50%
Current Charge: [ ]%
Guaranteed Minimum Income Benefit (GMIB Plus
II)(6)........................................ Maximum Guaranteed Charge: 1.50%
Current Charge: [ ]%
Guaranteed Minimum Income Benefit (GMIB Plus
I)(6)......................................... Maximum Guaranteed Charge: 1.50%
Current Charge: 0.80%
Guaranteed Minimum Income Benefit (GMIB II or
GMIB I)(6).................................... Current Charge: 0.50%
Guaranteed Withdrawal Benefit(7)................ Maximum Guaranteed Charge: 0.95%
Current Charge: 0.50%
Enhanced Guaranteed Withdrawal Benefit(7)....... Maximum Guaranteed Charge: 1.00%
Current Charge: 0.55%
Lifetime Withdrawal Guarantee II Benefit (Single
Life Version)(8).............................. Maximum Guaranteed Charge: 1.25%
Current Charge: [ ]%
Lifetime Withdrawal Guarantee II Benefit (Joint
Life Version)(8).............................. Maximum Guaranteed Charge: 1.50%
Current Charge: [ ]%
Lifetime Withdrawal Guarantee I Benefit (Single
Life version)(8).............................. Maximum Guaranteed Charge: 0.95%
Current Charge: 0.50%
Lifetime Withdrawal Guarantee I Benefit (Joint
Life version)(8).............................. Maximum Guaranteed Charge: 1.40%
Current Charge: 0.70%
Guaranteed Minimum Accumulation Benefit(9)...... Current Charge: 0.75%
</Table>
NOTES:
* We are waiving the Asset Based Insurance Charge in the amount of 0.08% for
the Subaccount investing in the BlackRock Large Cap Core Portfolio.
** Please see below for an additional optional death benefit rider, the
Enhanced Death Benefit, for which the charge is assessed on the death
benefit base and deducted annually from your Contract Value.
(1) For Contracts issued prior to May 1, 2003, the Asset-Based Insurance Charge
for the Annual Step-Up Death Benefit and the Greater of Annual Step-Up or
5% Annual Increase Death Benefit is 0.10% lower than what is described in
the table. After annuitization, the amount of the Asset-Based Insurance
Charge for each Class will be the charge that would apply for the standard
death benefit; except that for the B Plus Class and the P Class, the
Asset-Based Insurance Charge will be 1.25% after annuitization (1.50% for
the American Funds Bond, American Funds Growth, American Funds
Growth-Income, and American Funds Global Small Capitalization Subaccounts).
We reserve the right to impose an increased Asset-Based Insurance Charge on
other subaccounts that we add to the Contract in the future. The increase
will not exceed the annual rate of 0.25% of average daily net assets in any
such subaccounts.
(2) The Asset-Based Insurance Charge will be reduced on the B Plus Class by
0.35% after the expiration of the 9-year Withdrawal Charge period.
(3) The charge for the Earnings Preservation Benefit Rider will not be assessed
after annuitization.
(4) We will also deduct this fee on full withdrawal (regardless of contract
size) and pro rata on annuitization. This fee will not be deducted during
the accumulation period or on annuitization for Contracts with a Contract
Value of $50,000 or more. We reserve the right to deduct this fee during
the Annuity Period, pro rata from each annuity payment.
(5) The death benefit base is initially set at an amount equal to your initial
purchase payment. The death benefit base may increase with additional
purchase payments. See "THE CONTRACTS -- Enhanced Death Benefit" for a
definition of the term death benefit base. If you elect both the Enhanced
Death Benefit rider and the GMIB Plus II rider, the charge for the Enhanced
Death Benefit will be reduced to [ ]% of the death benefit base if you are
age 0-[60-80] at issue and [ ]% of the death benefit base if you are age
[60-80] at issue.
A-12
choose the Class that best meets your needs. Prior to issuance, you must select
one of the following five available Classes of the Contract:
STANDARD CLASS
If you do not select a Class, your Contract will be issued as a Standard
Class Contract. The Standard Class imposes a Withdrawal Charge on withdrawals
equal to a maximum of 7% of each purchase payment, reducing over 7 years. It
also imposes an Asset-Based Insurance Charge that ranges from 1.25% to 1.60%
during the accumulation period, depending on the death benefit that you select.
B PLUS CLASS
If you select this Class, we will add a bonus amount to your Contract Value
every time you make a purchase payment within the first Contract Year. The
amount of the bonus is currently 4% of the amount of the purchase payment. The
purchase payment bonus will be allocated among the subaccounts and the Fixed
Account in the same manner as your purchase payments.
The B Plus Class imposes a Withdrawal Charge on withdrawals equal to a
maximum of 9% of each purchase payment, reducing over 9 years. It also imposes
an Asset-Based Insurance Charge that ranges from 1.60% to 1.95% during the
withdrawal charge period, depending on the death benefit that you select. This
charge is reduced by 0.35% after the expiration of the withdrawal charge period.
The Asset-Based Insurance Charge will be 1.25% after annuitization (see
"Asset-Based Insurance Charge").
Generally, an annuity with a purchase payment bonus may have higher charges
and expenses than a similar annuity without a purchase payment bonus. Or, it may
have less advantageous benefits and other features, or some combination of
different charges and benefits. Alternatively, the charges and features could be
the same, but we could make less profit or pay lower commissions to sales
agents, or both. In addition, you should know that over time and under certain
circumstances (such as withdrawal during the last few years that a withdrawal
charge applies, or after an extended period of poor market performance), the
costs associated with a bonus may exceed the bonus amount and any related
earnings. Accordingly, you should always consider the expenses along with the
benefits and other features to be sure any annuity or class of annuity meets
your financial needs and goals. Additionally, the annuity purchase rates for the
B Plus Class Contract are different than for other Classes (see "Amount of
Annuity Payments").
If you cancel the Contract by returning it during the Free Look Period, we
will deduct any bonus amounts from the refund amount. We will take back the
premium credit as if it had never been applied if we recapture a purchase
payment bonus. However, the amount returned to you will not be decreased by any
investment loss and you will retain any investment gain attributable to the
bonus.
C CLASS
The C Class does not impose any Withdrawal Charge on withdrawals, but
imposes a higher Asset-Based Insurance Charge than the Standard Class. This
Asset-Based Insurance Charge ranges from 1.60% to 1.95% during the accumulation
period, depending on the death benefit that you select.
L CLASS
The L Class reduces the period of time that a Withdrawal Charge applies on
withdrawals, but imposes a higher Asset-Based Insurance Charge than the Standard
Class. Specifically, the L Class imposes a Withdrawal Charge on withdrawals for
three years equal to a maximum of 7% of each purchase payment (reducing to 6% in
the second year and 5% in the third year). It also imposes an Asset-Based
Insurance Charge that ranges from 1.50% to 1.85% during the accumulation period,
depending on the death benefit that you select.
P CLASS
The P Class lengthens the period of time that a Withdrawal Charge is
imposed on withdrawals, and imposes a lower Asset-Based Insurance Charge than
the Standard Class. Specifically, the P Class imposes a Withdrawal Charge on
withdrawals equal to a maximum of 8% of each purchase payment, reducing over 9
years. It also imposes an Asset-Based Insurance Charge that ranges from 1.15% to
1.50% during the accumulation period, depending on the death benefit that you
select. The Asset-Based Insurance Charge will be 1.25% after annuitization (see
"Asset-Based Insurance Charge").
A-29
you decline the Automatic Annual Step-Up, you must notify us in accordance with
our Administrative Procedures (currently we require you to submit your request
in writing to our Annuity Administrative Office no less than seven calendar days
prior to the applicable Contract anniversary). Once you notify us of your
decision to decline the Automatic Annual Step-Up, you will no longer be eligible
for future Automatic Annual Step-Ups until you notify us in writing to our
Annuity Administrative Office that you wish to reinstate the Step-Ups. This
reinstatement will take effect at the next Contract anniversary after we receive
your request for reinstatement.
If you have also elected the Predictor Plus II rider and you elect Optional
Step-Ups to occur under the Automatic Annual Step-up, it will remain in effect
through the seventh Contract anniversary following the date you make the
election. You may make a new election if you want Automatic Annual Step-Ups to
continue after the seventh Contract anniversary.
You may discontinue Automatic Annual Step-Ups at any time by notifying us
in writing to our Annuity Administrative Office (or by any other method
acceptable to us), at least 30 days prior to the Contract anniversary following
the date you make this election. If you discontinue Automatic Annual Step-Ups,
the Enhanced Death Benefit rider (and the rider charge) will continue, and you
may choose to elect a one time Optional Step-Up or reinstate Automatic Annual
Step-Ups as described above.
INVESTMENT ALLOCATION RESTRICTIONS. If you select the Enhanced Death
Benefit rider, there are certain investment allocation restrictions. (See "THE
CONTRACTS--Investment Allocation Restrictions for Certain Riders.")
TERMINATION OF THE ENHANCED DEATH BENEFIT. The Enhanced Death Benefit will
terminate upon the earliest of:
(a) The date you make a total withdrawal of your Contract Value (a pro
rata portion of the rider charge will be assessed);
(b) The date there are insufficient funds to deduct the Enhanced Death
Benefit rider charge from your Contract Value;
(c) The date you annuitize your Contract (a pro rata portion of the
rider charge will be assessed);
(d) A change of the Owner or Joint Owner (or Annuitant if the Owner is
a non-natural person), subject to our administrative procedures;
(e) The date you assign your Contract, subject to our administrative
procedures;
(f) The date the death benefit amount is determined (excluding the
determination of the death benefit amount under the spousal continuation
option); or
(g) Termination of the Contract to which this rider is attached.
EARNINGS PRESERVATION BENEFIT RIDER
The Earnings Preservation Benefit Rider is an optional rider that provides
an additional death benefit ("Additional Death Benefit") to assist with covering
income taxes payable upon death. This rider may not be suitable for all Contract
Owners (particularly those approaching age 70 1/2) or in all circumstances. You
should discuss with your registered representative whether this rider is
appropriate for your needs and circumstances.
The Additional Death Benefit Amount will be calculated upon the death of
the first Owner or Joint Owner. If the spouse is the beneficiary and elects to
continue the Contract, then he or she may: (1) continue the rider so that the
Additional Death Benefit is payable upon his or her death; or (2) discontinue
the rider and have the Additional Death Benefit that would have been payable at
the Owner's death added to the Contract Value. The rider terminates, and the
rider fee is no longer deducted, upon payment of the Additional Death Benefit.
Before the Contract Anniversary immediately prior to the Contract Owner's
81st birthday, the Earnings Preservation Benefit is equal to the applicable
Benefit Percentage from the table below times the amount calculated by (a)-(b)
below:
(a) is the death benefit under your Contract; and
(b) total purchase payments not withdrawn. For purposes of calculating
this value, partial withdrawals (including any applicable Withdrawal
Charge) are first applied against earnings in the Contract and then against
purchase payments.
A-36
If we have not received your request by 4:00 p.m. Eastern Time, even if due
to our delay, we will treat your request as having been received on the
following business day.
All other requests must be in written form, satisfactory to us. We may
allow requests for a withdrawal over the telephone, by fax, or through the
Internet, subject to certain limitations. We may stop offering telephone, fax
and Internet transactions at any time in our sole discretion.
We will use reasonable procedures such as requiring certain identifying
information, tape recording the telephone instructions, and providing written
confirmation of the transaction, in order to confirm that instructions
communicated by telephone, Internet or fax are genuine. However, because
telephone and Internet transactions may be available to anyone who provides
certain information about you and your Contract, you should protect that
information. We may not be able to verify that you are the person providing
telephone or Internet instructions, or that you have authorized any such person
to act for you. Any telephone, Internet or fax instructions reasonably believed
by us to be genuine will be your responsibility, including losses arising from
any errors in the communication of instructions. As a result of this policy, you
will bear the risk of loss. If we do not employ reasonable procedures to confirm
that instructions communicated by telephone, Internet or fax are genuine, we may
be liable for any losses due to unauthorized or fraudulent transactions.
All other requests and elections under your Contract must be in writing
signed by the proper party, must include any necessary documentation and must be
received at our Annuity Administrative Office to be effective. If acceptable to
us, requests or elections relating to Beneficiaries and ownership will take
effect as of the date signed unless we have already acted in reliance on the
prior status. We are not responsible for the validity of any written request or
election.
Telephone, facsimile, and computer systems (including the Internet) may not
always be available. Any telephone, facsimile or computer system, whether it is
yours, your service provider's, your registered representative's, or ours, can
experience outages or slowdowns for a variety of reasons. These outages or
slowdowns may delay or prevent our processing of your request. Although we have
taken precautions to help our systems handle heavy use, we cannot promise
complete reliability under all circumstances. If you experience technical
difficulties or problems, you should make your request in writing to the
Company's Annuity Administrative Office as described above.
CONFIRMING TRANSACTIONS
We will send out written statements confirming that a transaction was
recently completed. Certain transactions may be confirmed quarterly. Unless you
inform us of any errors within 60 days of receipt, we will consider these
communications to be accurate and complete.
STATE VARIATIONS
Contracts issued in your state may provide different features and benefits
from, and impose different costs than, those described in this prospectus
because of state law variations. These differences include, among other things,
free look rights, age issuance limitations, transfer rights and limitations, the
right to reject purchase payments, the right to assess transfer fees, and
general availability of certain riders. However, please note that the maximum
fees and charges for all features and benefits are set forth in the fee table in
this prospectus. If you would like to review a copy of the Contract and
endorsements, contact our Annuity Administrative Office.
ASSET-BASED INSURANCE CHARGE,
WITHDRAWAL CHARGE AND OTHER DEDUCTIONS
We deduct various charges from your Contract Value for the services
provided, expenses incurred and risks assumed in connection with your Contract.
The charges are:
-- Asset-Based Insurance Charge
-- Contract Administrative Fee
-- Withdrawal Charge
-- For Contracts with an Enhanced Death Benefit Rider, an extra fee
A-46
Value exceeds the Annual Increase Amount immediately before the reset; and
(2)the Owner (or oldest Joint Owner or Annuitant if the Contract is owned by a
non-natural person) is not older than age [50-85] on the date of the Optional
Step-Up.
You may elect either: 1) a one-time Optional Step-Up at any Contract
anniversary provided the above requirements are met, or 2) Optional Step-Ups to
occur under the Automatic Annual Step-Up. If you elect Automatic Annual
Step-Ups, on any Contract anniversary while this election is in effect, the
Annual Increase Amount will reset to the Contract Value automatically, provided
the above requirements are met. The same conditions described above will apply
to each Automatic Step-Up. You may discontinue this election at any time by
notifying us in writing at our Annuity Administrative Office (or by any other
method acceptable to us), at least 30 days prior to the Contract anniversary on
which a reset may otherwise occur. Otherwise, it will remain in effect through
the seventh Contract anniversary following the date you make this election, at
which point you must make a new election if you want Automatic Annual Step-Ups
to continue. If you discontinue or do not re-elect the Automatic Annual
Step-Ups, no Optional Step-Up will occur automatically on any subsequent
Contract anniversary unless you make a new election under the terms described
above. If you discontinue Automatic Annual Step-Ups, the GMIB Plus II rider (and
the rider charge) will continue, and you may choose to elect a one time Optional
Step-Up or reinstate Automatic Annual Step-Ups as described above.
We must receive your request to exercise the Optional Step-Up in writing at
our Annuity Administrative Office, or by any other method acceptable to us. We
must receive your request prior to the Contract anniversary for an Optional
Step-Up to occur on that Contract anniversary.
The Optional Step-Up will:
(1) reset the Annual Increase Amount to the Contract Value on the
Contract anniversary following the receipt of an Optional Step-Up election;
(2) reset GMIB Plus II waiting period to the tenth Contract
anniversary following the date the Optional Step-Up took effect; and
(3) we may reset GMIB Plus II rider charge to a rate we shall
determine that does not exceed the Maximum Optional Step-Up Charge (1.50%),
provided that this rate will not exceed the rate currently applicable to
the same rider available for new Contract purchases at the time of the
Optional Step-Up.
On the date of the Optional Step-Up, the Contract Value on that day will be
treated as a single purchase payment received on the date of the Step-Up for
purposes of determining the Annual Increase Amount after the reset. All purchase
payments and withdrawal adjustments previously used to calculate the Annual
Increase Amount will be set equal to zero on the date of the Step-Up.
OWNERSHIP. If the Owner is a natural person, the Owner must be the
Annuitant. If a non-natural person owns the Contract, then Annuitant will be
considered the Owner in determining the Income Base and GMIB Plus II annuity
payments. If Joint Owners are named, the age of the older will be used to
determine the Income Base and GMIB Plus II annuity payments.
INVESTMENT ALLOCATION RESTRICTIONS. If you elect GMIB Plus II, there are
certain investment allocation restrictions. (See "THE CONTRACTS--Investment
Allocation Restrictions for Certain Riders.") If you elect GMIB Plus II, you may
not participate in the Dollar Cost Averaging (DCA) program. However, you may
elect to participate in the Enhanced Dollar Cost Averaging (EDCA) program,
provided that your destination subaccounts are selected in accordance with the
investment allocation restrictions.
GUARANTEED PRINCIPAL OPTION. Starting with the tenth Contract Anniversary
that is prior to the Owner's [70th- 100th] birthday, you may exercise the
Guaranteed Principal Option. If the Owner is a non-natural person, the
Annuitant's age is the basis for determining the birthday. If there are Joint
Owners, the age of the oldest Owner is used for determining the birthday. We
must receive your request to exercise the Guaranteed Principal Option in
writing, or any other method that we agree to, within 30 days following the
eligible Contract Anniversary. The Guaranteed Principal Option will take effect
at the end of this 30-day period following the eligible Contract Anniversary.
By exercising the Guaranteed Principal Option, you elect to receive an
additional amount to be added to your Contract Value intended to restore your
initial investment in the Contract, in lieu of receiving GMIB Plus II payments.
The additional amount is called the Guaranteed Principal Adjustment and is equal
to (a) minus (b) where:
(a) is purchase payments credited within 120 days of the date we
issued the Contract (reduced proportionately by the percentage reduction in
Contract Value attributable to each partial withdrawal (including
applicable withdrawal charges) prior to the exercise of the Guaranteed
Principal Option) and
A-59
(b) the Contract Value on the Contract anniversary immediately
preceding exercise of the Guaranteed Principal Option.
The Guaranteed Principal Option can only be exercised if (a) exceeds (b),
as defined above. The Guaranteed Principal Adjustment will be added to each
applicable subaccount in the ratio the portion of the Contract Value in such
subaccount bears to the total Contract Value in all subaccounts. It is important
to note that only purchase payments made during the first 120 days that you hold
the Contract are taken into consideration in determining the Guaranteed
Principal Adjustment. If you anticipate making purchase payments after 120 days,
you should understand that such payments will not increase the Guaranteed
Principal Adjustment. However, because purchase payments made after 120 days
will increase your Contract Value, such payments may have a significant impact
on whether or not a Guaranteed Principal Adjustment is due. Therefore, Predictor
Plus II may not be appropriate for you if you intend to make additional purchase
payments after the 120-day period and are purchasing the Predictor Plus II for
this feature.
The Guaranteed Principal Adjustment will never be less than zero. IF THE
GUARANTEED PRINCIPAL OPTION IS EXERCISED, THE PREDICTOR PLUS II RIDER WILL
TERMINATE AS OF THE DATE THE OPTION TAKES EFFECT AND NO ADDITIONAL GMIB CHARGES
WILL APPLY THEREAFTER. The variable annuity Contract, however, will continue,
and the Predictor Plus II investment allocation restrictions, described above,
will no longer apply.
EXERCISING THE GMIB PLUS II RIDER. If you exercise GMIB Plus II, you must
elect to receive annuity payments under one of the following fixed annuity
options:
(1) Life annuity with 10 years of annuity payments guaranteed. For
annuitization ages over [70-100], the guaranteed component of the life
annuity is reduced as follows:
<Table>
<Caption>
AGE AT ANNUITIZATION GUARANTEE PERIOD
-------------------- ----------------
[70-100]................. 9
[70-100]................. 8
[70-100]................. 7
[70-100]................. 6
[70-100]................. 5
</Table>
(2) Joint and last survivor annuity with 10 years of annuity payments
guaranteed. Based on federal tax rules, this option is not available for
Qualified Contracts where the difference in ages of the joint Annuitants is
greater than 10 years. (See "ANNUITY PAYMENTS.")
These options are described in the Contract and the GMIB Plus II rider. Partial
annuitizations are not permitted. We reserve the right to reduce the Income Base
for any Premium and Other Taxes that may apply.
The GMIB Annuity Table is specified in the rider. This table is calculated
based on the Annuity 2000 Mortality Table with a 7-year age set back with
interest of 2.5% per annum. As with other payout types, the amount you receive
as an income payment also depends on your age, your sex, and the annuity option
you select. The annuity rates in the GMIB Annuity Table are conservative and a
withdrawal charge may be applicable, so the amount of guaranteed minimum
lifetime income that the GMIB produces may be less than the amount of annuity
income that would be provided by applying your Contract Value on your annuity
date to then-current annuity purchase rates.
If you exercise GMIB Plus II, your annuity payments will be the greater of:
-- the annuity payment determined by applying the amount of the Income Base
to the GMIB Annuity Table, or
-- the annuity payment determined for the same annuity option in accordance
with the base Contract. (See "ANNUITY PAYMENTS.")
If you take a full withdrawal of your Contract Value, your Contract is
terminated by us due to its small Contract Value and inactivity (see "THE
CONTRACTS--Inactive Contracts"), or your Contract lapses and there remains any
Income Base, we will commence making income payments within 30 days of the date
of the full withdrawal, termination or lapse. In such cases, your income
payments under this benefit, if any, will be determined using the Income Base
and any applicable withdrawal adjustment that was taken on account of the
withdrawal, termination or lapse.
A-60
(5) Termination provision g) above does not apply, and the following
replaces termination provision a), above:
The 30th day following the Contract anniversary on or following your 85th
birthday.
(6) If you elect GMIB Plus I, you are limited to allocating your
purchase payments and Contract Value among the following subaccounts:
(a) the MetLife Conservative Allocation Portfolio,
(b) the MetLife Conservative to Moderate Allocation Portfolio,
(c) the MetLife Moderate Allocation Portfolio, or
(d) the MetLife Moderate to Aggressive Allocation Portfolio.
You may elect to participate in the EDCA program, provided that your
destination subaccounts are one or more of the above-listed subaccounts.
For Contracts issued before July 16, 2007, the enhanced GMIB purchase
payout rates described under "Exercising the GMIB Plus II Rider" will not be not
applied.
For Contracts issued before February 26, 2007, we offered a version of GMIB
Plus I that is no longer available. Under this prior version, when we calculate
the Annual Increase Amount: (1) the annual increase rate is 5% per year through
the Contract Anniversary on or following the Owner's 85th birthday; and (2) the
amount of total withdrawal adjustments for a Contract Year will be set equal to
the dollar amount of total withdrawals in such Contract Year provided that such
total withdrawals do not exceed 5% of the Annual Increase Amount on the issue
date or on the prior Contract Anniversary after the first Contract Year. The
rider charge for this prior version of GMIB Plus I is 0.75% of the Income Base
(with a maximum charge of up to 1.50% upon the exercise of the Optional Reset
feature). (See Appendix D for examples of the GMIB.)
For Contracts issued before February 27, 2006, you may elect an Optional
Reset under GMIB Plus I as described above, except that: 1) you may elect an
Optional Reset on any Contract anniversary only on or after the third Contract
anniversary, and you may then elect an Optional Reset at any subsequent Contract
anniversary only if it has been at least three years since the last Optional
Reset; and 2) you are required to affirmatively elect an Optional Reset in
accordance with the procedures described above; the Automatic Annual Step-Up
feature is not available. Subject to state approval, we will enhance your
Contract to change the frequency of the Optional Resets from every third
Contract anniversary to every Contract anniversary. You will also be able to
elect Automatic Annual Step-Ups, as described above.
DESCRIPTION OF GMIB II (THE PREDICTOR)
In states where approved, GMIB II is available only for Owners up through
age 75, and you can only elect GMIB II at the time you purchase the Contract.
GMIB II may be exercised after a 10-year waiting period and then only within 30
days following a Contract anniversary, provided that the exercise must occur no
later than the 30-day period following the Contract anniversary on or following
the Owner's 85th birthday. We may refer to GMIB II as the Predictor in marketing
materials or other communications.
GMIB II is otherwise identical to GMIB Plus II, with the following
exceptions:
(1) The additional charge for GMIB II is lower (see "ASSET BASED
INSURANCE CHARGE, WITHDRAWAL CHARGE AND OTHER DEDUCTIONS--Guaranteed
Minimum Income Benefit Rider").
(2) The GMIB II Income Base is calculated as described above, except
that, for purposes of calculating the Annual Increase Amount:
a. the annual increase rate is 5% per year through the Contract
anniversary on or following the Owner's 85th birthday and 0% thereafter,
and
b. the amount of total withdrawal adjustments for a Contract Year
as calculated in paragraph (b)(ii)(2) of the "Income Base" section of
"Description of GMIB Plus II" above will be set equal to the dollar
amount of total withdrawals (including any applicable withdrawal charge)
in such Contract Year provided that such total withdrawals do not exceed
5% of the Annual Increase Amount on the issue date or on the prior
Contract anniversary after the first Contract Year.
A-62
Lifetime Withdrawal Guarantee I rider, we may increase the Lifetime Withdrawal
Guarantee I rider charge to the charge applicable to current contract purchases
of the same rider at the time of the step-up, but to no more than a maximum of
0.95% (Single Life version) or 1.40% (Joint Life version) of the Total
Guaranteed Withdrawal Amount. If one of the Lifetime Withdrawal Guarantee riders
is in effect, the rider charge will continue if your Remaining Guaranteed
Withdrawal Amount (see "Description of the Lifetime Withdrawal Guarantee
II -- Remaining Guaranteed Withdrawal Amount") equals zero.
The charge for the Enhanced GWB rider is equal to 0.55% of the Guaranteed
Withdrawal Amount (see "Description of the Enhanced Guaranteed Withdrawal
Benefit -- Guaranteed Withdrawal Amount") on the applicable Contract
anniversary, prior to taking into account any Optional Reset occurring on such
Contract anniversary. (For Contracts issued prior to July 16, 2007, the charge
for the Enhanced GWB rider is equal to 0.50% of the Guaranteed Withdrawal Amount
on the applicable Contract anniversary, prior to taking into account any
Optional Reset occurring on such Contract anniversary.) The charge for the GWB I
rider is equal to 0.50% of the Guaranteed Withdrawal Amount on the applicable
Contract anniversary, prior to taking into account any Optional Reset occurring
on such Contract anniversary. If you elect an Optional Reset as permitted under
the Enhanced GWB rider or the GWB I rider, we may increase the rider charge to
the Enhanced GWB/GWB I rider charge applicable to current Contract purchases of
the same rider at the time of the reset, but to no more than a maximum of 1.00%
(for Enhanced GWB) or 0.95% (for GWB I) of the Guaranteed Withdrawal Amount.
(For contracts issued prior to July 16, 2007, the maximum charge for the
Enhanced GWB rider upon an Optional Reset is equal to 0.95% of the Guaranteed
Withdrawal Amount.) If the Enhanced GWB or GWB I rider is in effect, the rider
charge will not continue if your Benefit Base (see "Description of the Enhanced
Guaranteed Withdrawal Benefit -- Benefit Base") equals zero.
WITHDRAWAL CHARGE. We will apply a withdrawal charge to withdrawals from
purchase payments of up to 9% of purchase payments taken in the first seven
years following receipt of the applicable purchase payment. (See "ASSET BASED
INSURANCE CHARGE, WITHDRAWAL CHARGE AND OTHER DEDUCTIONS--Withdrawal Charge" and
"THE CONTRACTS--Systematic Withdrawals.")
TAXES. Withdrawals of taxable amounts will be subject to ordinary income
tax and, if made prior to age 59 1/2, a 10% federal tax penalty may apply.
TAX TREATMENT. THE TAX TREATMENT OF WITHDRAWALS UNDER THE GWB AND LWG
RIDERS IS UNCERTAIN. IT IS CONCEIVABLE THAT THE AMOUNT OF POTENTIAL GAIN COULD
BE DETERMINED BASED ON THE BENEFIT BASE (REMAINING GUARANTEED WITHDRAWAL AMOUNT
UNDER THE LIFETIME WITHDRAWAL GUARANTEE RIDERS) AT THE TIME OF THE WITHDRAWAL,
IF THE BENEFIT BASE (OR REMAINING GUARANTEED WITHDRAWAL AMOUNT) IS GREATER THAN
THE CONTRACT VALUE (PRIOR TO WITHDRAWAL CHARGES, IF APPLICABLE). THIS COULD
RESULT IN A GREATER AMOUNT OF TAXABLE INCOME REPORTED UNDER A WITHDRAWAL AND
CONCEIVABLY A LIMITED ABILITY TO RECOVER ANY REMAINING BASIS IF THERE IS A LOSS
ON SURRENDER OF THE CONTRACT. CONSULT YOUR TAX ADVISOR PRIOR TO PURCHASE.
GWB, LIFETIME WITHDRAWAL GUARANTEE AND DECEDENT CONTRACTS. In the event a
Lifetime Withdrawal Guarantee rider is made available for purchase by a
beneficiary under a decedent's IRA (or where otherwise offered, under any other
Contract which is being "stretched" by a beneficiary after the death of the
Owner or after the death of the Annuitant in certain cases) and the beneficiary,
as required under tax rules, is to receive required minimum distributions prior
to attaining age 59 1/2, the required minimum distributions received from the
Contract will have the effect of eliminating the lifetime payments under the
Lifetime Withdrawal Guarantee. Under the tax rules, such Contracts generally
require distributions to commence in accordance with tax regulations by the end
of the calendar year following the year of the Owner's death. Therefore the
Lifetime Withdrawal Guarantee riders are not appropriate for purchase under a
decedent's IRA by a beneficiary who has not attained age 59 1/2.
Note that the Lifetime Withdrawal Guarantee II, Lifetime Withdrawal
Guarantee, Enhanced GWB and GWB I riders are not appropriate for purchase by a
beneficiary under a decedent's Non-Qualified Contract.
(See Appendix E for examples of the GWB riders.)
DESCRIPTION OF THE LIFETIME WITHDRAWAL GUARANTEE II
TOTAL GUARANTEED WITHDRAWAL AMOUNT. While the Lifetime Withdrawal
Guarantee II rider is in effect, we guarantee that you will receive a minimum
amount over time. We refer to this minimum amount as the Total Guaranteed
Withdrawal Amount . The initial Total Guaranteed Withdrawal Amount is equal to
your initial purchase payment. We increase the Total Guaranteed Withdrawal
Amount (up to a maximum of $10,000,000) by each additional purchase payment. For
purposes of calculating the Total Guaranteed Withdrawal Amount, the B Plus Class
bonus credits are not included. If you take a withdrawal that does not exceed
the Annual Benefit Payment (see
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"Annual Benefit Payment" below), then we will not reduce the Total Guaranteed
Withdrawal Amount. We refer to this type of withdrawal as a Non-Excess
Withdrawal. If, however, you take a withdrawal that results in cumulative
withdrawals for the current Contract Year that exceeds the Annual Benefit
Payment, then we will reduce the Total Guaranteed Withdrawal Amount in the same
proportion that the withdrawal reduces the Contract Value. We refer to this type
of withdrawal as an Excess Withdrawal.
REMAINING GUARANTEED WITHDRAWAL AMOUNT. The Remaining Guaranteed
Withdrawal Amount is the remaining amount you are guaranteed to receive over
time. We increase the Remaining Guaranteed Withdrawal Amount (up to a maximum of
$10,000,000) by additional purchase payments. If you take a Non-Excess
Withdrawal, we will decrease the Remaining Guaranteed Withdrawal Amount by the
amount of the Non-Excess Withdrawal. If, however, you take an Excess Withdrawal,
then we will reduce the Remaining Guaranteed Withdrawal Amount in the same
proportion that the withdrawal reduces the Contract Value. Each withdrawal will
include any applicable withdrawal charge.
[1-10]% COMPOUNDING INCOME AMOUNT. On each Contract anniversary until the
earlier of: (a) the date of the second withdrawal from the Contract or (b) the
tenth Contract anniversary, we increase the Total Guaranteed Withdrawal Amount
and the Remaining Guaranteed Withdrawal Amount by an amount equal to [1-10]%
multiplied by the Total Guaranteed Withdrawal Amount and Remaining Guaranteed
Withdrawal Amount before such increase (up to a maximum of $10,000,000). We may
also increase the Total Guaranteed Withdrawal Amount and Remaining Guaranteed
Withdrawal Amount by the Automatic Annual Step-Up (discussed below), if that
would result in a higher Total Guaranteed Withdrawal Amount and Remaining
Guaranteed Withdrawal Amount.
ANNUAL BENEFIT PAYMENT. The initial Annual Benefit Payment is equal to the
initial Total Guaranteed Withdrawal Amount multiplied by the 5% Withdrawal Rate
(6% Withdrawal Rate if you make your first withdrawal on or after the date you
reach age [70-90]). If the Total Guaranteed Withdrawal Amount is later
recalculated (for example, because of additional purchase payments, the [1-10]%
Compounding Income Amount, the Automatic Annual Step-Up, or Excess Withdrawals),
the Annual Benefit Payment is reset equal to the new Total Guaranteed Withdrawal
Amount multiplied by the 5% Withdrawal Rate (6% Withdrawal Rate if you make your
first withdrawal on or after the date you reach age [70-90]).
IT IS IMPORTANT TO NOTE:
-- If you take your first withdrawal before the date you reach age 59 1/2,
we will continue to pay the Annual Benefit Payment each year until the
Remaining Guaranteed Withdrawal Amount is depleted, even if your Contract
Value declines to zero. This means if your Contract Value is depleted due
to a Non-Excess Withdrawal or the deduction of the, and your Remaining
Guaranteed Withdrawal Amount is greater than zero, we will pay you the
remaining Annual Benefit Payment, if any, not yet withdrawn during the
Contract Year that the Contract Value was depleted, and beginning in the
following Contract Year, we will continue paying the Annual Benefit
Payment to you each year until your Remaining Guaranteed Withdrawal
Amount is depleted. This guarantees that you will receive your purchase
payments regardless of market performance so long as you do not take
Excess Withdrawals; however, you will not be guaranteed income for the
rest of your life.
-- If you take your first withdrawal on or after the date you reach age
59 1/2, we will continue to pay the Annual Benefit Payment each year for
the rest of your life (and the life of your spouse, if the Joint Life
version of the rider was elected, and your spouse elects to continue the
Contract and is at least age 59 1/2 at continuation), even if your
Remaining Guaranteed Withdrawal Amount and/or Contract Value declines to
zero. This means if your Remaining Guaranteed Withdrawal Amount and/or
your Contract Value is depleted due to a Non-Excess Withdrawal or the
deduction of the rider charge, we will pay to you the remaining Annual
Benefit Payment, if any, not yet withdrawn during the Contract Year that
the Contract Value was depleted, and beginning in the following Contract
Year, we will continue paying the Annual Benefit Payment to you each year
for the rest of your life (and your spouse's life, if applicable).
Therefore, you will be guaranteed income for life.
-- If you take your first withdrawal on or after the date you reach age
[70-90], your Annual Benefit payment will be set equal to a 6% Withdrawal
Rate multiplied by the Total Guaranteed Withdrawal Amount.
-- IF YOU HAVE ELECTED THE LWG II, YOU SHOULD CAREFULLY CONSIDER WHEN TO
BEGIN TAKING WITHDRAWALS. IF YOU BEGIN TAKING WITHDRAWALS TOO SOON, YOU
MAY LIMIT THE VALUE OF THE LWG II. FOR EXAMPLE, WE NO LONGER INCREASE
YOUR TOTAL GUARANTEED WITHDRAWAL AMOUNT BY THE [1-10]% COMPOUNDING INCOME
AMOUNT ONCE YOU MAKE YOUR SECOND WITHDRAWAL. HOWEVER, IF YOU DELAY TAKING
WITHDRAWALS FOR TOO LONG, YOU MAY LIMIT
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THE NUMBER OF YEARS AVAILABLE FOR YOU TO TAKE WITHDRAWALS IN THE FUTURE (DUE TO
LIFE EXPECTANCY) AND YOU MAY BE PAYING FOR A BENEFIT YOU ARE NOT USING.
-- At any time during the accumulation phase, you can elect to annuitize
under current annuity rates in lieu of continuing the LWG II rider. This
may provide higher income amounts and/or different tax treatment than the
payments received under the LWG II rider.
MANAGING YOUR WITHDRAWALS. It is important that you carefully manage your
annual withdrawals. To retain the full guarantees of this rider, your annual
withdrawals cannot exceed the Annual Benefit Payment each Contract Year. In
other words, you should not take Excess Withdrawals. We do not include
withdrawal charges for the purpose of calculating whether you have made an
Excess Withdrawal. If you do take an Excess Withdrawal, we will recalculate the
Total Guaranteed Withdrawal Amount and reduce the Annual Benefit Payment to the
new Total Guaranteed Withdrawal Amount multiplied by the 5% Withdrawal Rate (6%
Withdrawal Rate if you make your first withdrawal on or after the date you reach
age [70-90]).
In addition, as noted above, if you take an Excess Withdrawal, we will
reduce the Remaining Total Guaranteed Withdrawal Amount in the same proportion
that the withdrawal reduces the Contract Value. These reductions in the Total
Guaranteed Withdrawal Amount, Annual Benefit Payment, and Remaining Guaranteed
Withdrawal Amount may be significant. You are still eligible to receive either
lifetime payments or the remainder of the Remaining Guaranteed Withdrawal Amount
so long as the withdrawal that exceeded the Annual Benefit Payment did not cause
your Contract Value to decline to zero.
You can always take Non-Excess Withdrawals. However, if you choose to
receive only a part of your Annual Benefit Payment in any given Contract Year,
your Annual Benefit Payment is not cumulative and your Remaining Guaranteed
Withdrawal Amount and Annual Benefit Payment will not increase. For example,
since your Annual Benefit Payment is 5% of your Total Guaranteed Withdrawal
Amount (or 6% if you make your first withdrawal on or after the date you reach
age [70-90]), you cannot withdraw 3% of the Total Guaranteed Withdrawal Amount
in one year and then withdraw 7% of the Total Guaranteed Withdrawal Amount the
next year without making an Excess Withdrawal in the second year.
AUTOMATIC ANNUAL STEP-UP. On each Contract anniversary prior to the
Owner's [70th-100th] birthday, an Automatic Annual Step-Up will occur, provided
that the Contract Value exceeds the Total Guaranteed Withdrawal Amount
immediately before the Step-Up (and provided that you have not chosen to decline
the Step-Up as described below).
The Automatic Annual Step-Up will:
-- reset the Total Guaranteed Withdrawal Amount and the Remaining
Guaranteed Withdrawal Amount to the Contract Value on the date of the
Step-Up, up to a maximum of $10,000,000, regardless of whether or not you
have taken any withdrawals.
-- reset the Annual Benefit Payment equal to 5% of the Total Guaranteed
Withdrawal Amount after the Step-Up (or 6% if you make your first
withdrawal on or after the date you reach age [70-90]); and
-- reset the LWG II rider charge to a rate we shall determine that does not
exceed the maximum charge of 1.25% (Single Life version) or 1.50% (Joint
Life version), provided that this rate will not exceed the rate currently
applicable to the same rider available for new Contract purchases at the
time of the step-up.
In the event that the charge applicable to Contract purchases at the time
of the Step-Up is higher than your current LWG II rider charge, we will notify
you in writing a minimum of 30 days in advance of the applicable Contract
anniversary and inform you that you may choose to decline the Automatic Annual
Step-Up. If you choose to decline the Automatic Annual Step-Up, you must notify
us in accordance with our Administrative Procedures (currently we require you to
submit your request in writing at our Annuity Administrative office no less than
seven calendar days prior to the applicable Contract anniversary). Once you
notify us of your decision to decline the Automatic Annual Step-Up, you will no
longer be eligible for future Automatic Annual Step-Ups until you notify us in
writing at our Annuity Administrative office that you wish to reinstate the
Step-Ups. This reinstatement will take effect at the next Contract anniversary
after we receive your request for reinstatement. Please note that the Automatic
Annual Step-Up may be of limited benefit if you intend to make purchase payments
that would cause your Contract Value to approach $10,000,0000, because the Total
Guaranteed Withdrawal Amount and Remaining Guaranteed Withdrawal Amount cannot
exceed $10,000,000.
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REQUIRED MINIMUM DISTRIBUTIONS. For IRAs and other Contracts subject to
Section 401(a)(9) of the Internal Revenue Code, you may be required to take
withdrawals to fulfill minimum distribution requirements generally beginning at
age 70 1/2. These required distributions may be larger than your Annual Benefit
Payment. If you enroll in the Automated Required Minimum Distribution program
and elect annual withdrawals, after the first Contract Year, we will increase
your Annual Benefit Payment to equal your most recently calculated required
minimum distribution amount, if such amounts are greater than your Annual
Benefit Payment. Otherwise, any cumulative withdrawals you make to satisfy your
required minimum distribution amount will be treated as Excess Withdrawals if
they exceed your Annual Benefit Payment. YOU MUST BE ENROLLED IN THE AUTOMATED
REQUIRED MINIMUM DISTRIBUTION PROGRAM TO QUALIFY FOR THIS INCREASE IN THE ANNUAL
BENEFIT PAYMENT. THE FREQUENCY OF YOUR WITHDRAWALS MUST BE ANNUAL. THE AUTOMATED
REQUIRED MINIMUM DISTRIBUTION PROGRAM IS BASED ON INFORMATION RELATING TO THIS
CONTRACT ONLY. To enroll in the Automated Required Minimum Distribution program,
please contact our Annuity Administrative Office.
INVESTMENT ALLOCATION RESTRICTIONS. If you elect the LWG II rider, there
are certain investment allocation restrictions. Please see "THE
CONTRACTS--Investment Allocation Restrictions For Certain Riders".
JOINT LIFE VERSION. A Joint Life version of the LWG II rider is available
for a charge of [ ]% (which may increase upon an Automatic Annual Step-Up to
a maximum of 1.50%). Like the Single Life version of the LWG II rider, the Joint
Life version must be elected at the time you purchase the Contract, and the
Owner (or oldest Joint Owner) must be age 85 or younger. Under the Joint Life
version, when the Owner of the Contract dies (or when the first Joint Owner
dies), the LWG II rider will automatically remain in effect only if the spouse
is the primary beneficiary and elects to continue the Contract under the spousal
continuation provisions. (See "THE CONTRACTS--Options for Death Proceeds.") This
means that if you purchase the Joint Life version and subsequently get divorced,
or your spouse is no longer the primary beneficiary at the time of your death,
he or she will not be eligible to receive payments under the LWG II rider. If
the spouse is younger than age 59 1/2 when he or she elects to continue the
Contract, the spouse will receive the Annual Benefit Payment each year until the
Remaining Guaranteed Withdrawal Amount is depleted. If the spouse is age 59 1/2
or older when he or she elects to continue the Contract, the spouse will receive
the Annual Benefit Payment each year for the remainder of his or her life. In
situations in which a trust is both the Owner and beneficiary of the Contract,
the Joint Life version of the LWG II would not apply.
CANCELLATION AND GUARANTEED PRINCIPAL ADJUSTMENT. You may elect to cancel
the LWG II rider on the Contract anniversary every five Contract Years for the
first 15 Contract Years and annually thereafter. We must receive your
cancellation request within 30 days following the eligible Contract anniversary
in accordance with our Administrative Procedures (currently we require you to
submit your request in writing). The cancellation will take effect upon our
receipt of your request. If cancelled, the LWG II rider will terminate, we will
no longer deduct the LWG II rider charge, and the investment allocation
restrictions described in "Investment Allocation Restrictions For Certain
Riders" will no longer apply. The variable annuity Contract, however, will
continue.
If you cancel the LWG II rider on the fifteenth Contract anniversary or any
eligible Contract anniversary thereafter, we will add a Guaranteed Principal
Adjustment to your Contract Value. The Guaranteed Principal Adjustment is
intended to restore your initial investment in the Contract in the case of poor
investment performance. The Guaranteed Principal Adjustment is equal to (a)-(b)
where:
(a) is purchase payments credited within 120 days of the date that we
issued the Contract, reduced proportionately by the percentage reduction in
Contract Value attributable to any partial withdrawals taken (including any
applicable withdrawal charges) and
(b) is the Contract Value on the date of cancellation.
The Guaranteed Principal Adjustment will be added to each applicable
subaccount in the ratio the portion of the Contract Value in such subaccount
bears to the total Contract Value in all subaccounts. The Guaranteed Principal
Adjustment will never be less than zero.
Only purchase payments made during the first 120 days that you hold the
Contract are taken into consideration in determining the Guaranteed Principal
Adjustment. Contract Owners who anticipate making purchase payments after 120
days should understand that such payments will not increase the Guaranteed
Principal Adjustment. Purchase payments made after 120 days are added to your
Contract Value and impact whether or not a benefit is due. Therefore, the LWG II
may not be appropriate for you if you intend to make additional purchase
payments after the 120-day period and are purchasing the LWG II for its
Guaranteed Principal Adjustment feature.
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APPENDIX F
ENHANCED DEATH BENEFIT EXAMPLES
The purpose of these examples is to illustrate the operation of the death
benefit base under the Enhanced Death Benefit rider. The investment results
shown are hypothetical and are not representative of past or future performance.
Actual investment results may be more or less than those shown and will depend
upon a number of factors, including the investment allocation made by a Contract
Owner and the investment experience of the Eligible Funds. The examples do not
reflect the deduction of fees and charges.
(1) WITHDRAWAL ADJUSTMENTS TO ANNUAL INCREASE AMOUNT
Dollar-for-dollar adjustment when withdrawal is less than or equal to 6% of the
Annual Increase Amount from the prior contract anniversary
Assume the initial purchase payment is $100,000 and the Enhanced Death
Benefit is selected. Assume the Contract Value at the first Contract Anniversary
is $100,000. The Annual Increase Amount at the first Contract Anniversary will
be $106,000 ($100,000 increased by 6% per year, compounded annually). Assume
that on the first Contract Anniversary, $6,000 is withdrawn (leaving an account
balance of $94,000). Because the withdrawal is less than or equal to 6% of the
Annual Increase Amount from the prior Contract Anniversary, the Annual Increase
Amount is reduced by the withdrawal on a dollar-for-dollar basis to $100,000
($106,000 -- $6,000 = $100,000). Assuming no other purchase payments or
withdrawals are made before the second Contract Anniversary, the Annual Increase
Amount at the second Contract Anniversary will be $106,000 ($100,000 increased
by 6% per year, compounded annually).
Proportionate adjustment when withdrawal is greater than 6% of the Annual
Increase Amount from the prior Contract Anniversary
Assume the initial purchase payment is $100,000 and the Enhanced Death
Benefit is selected. Assume the Contract Value at the first Contract Anniversary
is $100,000. The Annual Increase Amount at the first Contract Anniversary will
be $106,000 ($100,000 increased by 6% per year, compounded annually). Assume
that on the first Contract Anniversary, $10,000 is withdrawn (leaving an account
balance of $90,000). Because the withdrawal is greater than 6% of the Annual
Increase Amount from the prior Contract Anniversary, the Annual Increase Amount
is reduced by the value of the Annual Increase Amount immediately prior to the
withdrawal ($106,000) multiplied by the percentage reduction in the Contract
Value attributed to that withdrawal (10%). Therefore, the new Annual Increase
Amount is $95,400 ($106,000 x 10% = $10,600; $106,000 -- $10,600 = $95,400).
Assuming no other purchase payments or withdrawals are made before the second
Contract Anniversary, the Annual Increase Amount at the second Contract
Anniversary will be $101,124 ($95,400 increased by 6% per year, compounded
annually).
(2) THE 6% ANNUAL INCREASE AMOUNT
Example
Assume the Owner of the Contract is a male, age 55 at issue, and he elects
the Enhanced Death Benefit rider. He makes an initial purchase payment of
$100,000, and makes no additional purchase payments or partial withdrawals. On
the Contract issue date, the 6% Annual Increase Amount is equal to $100,000 (the
initial purchase payment). The 6% Annual Increase Amount is calculated at each
Contract Anniversary (through the Contract Anniversary on or following the
Owner's 90th birthday). At the tenth Contract Anniversary, when the Owner is age
65, the 6% Annual Increase Amount is $179,085 ($100,000 increased by 6% per
year, compounded annually). See section (3) below for an example of the
calculation of the Highest Anniversary Value.
Determining a death benefit based on the Annual Increase Amount
Assume that you make an initial purchase payment of $100,000. Prior to
annuitization, your Contract Value fluctuates above and below your initial
purchase payment depending on the investment performance of the subaccounts you
selected. The 6% Annual Increase Amount, however, accumulates an amount equal to
your purchase payments at the Annual Increase Rate of 6% per annum, until the
Contract Anniversary on or following the Contract Owner's 90th birthday. The 6%
Annual Increase Amount is also adjusted for any withdrawals (including any
applicable Withdrawal Charge) made during this period. The 6% Annual Increase
Amount line is the value upon which a future death benefit amount can be based
(if it is greater than the Highest Anniversary Value and Contract Value on the
date the death benefit amount is determined).
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(3) THE HIGHEST ANNIVERSARY VALUE
Example
Assume, as in the example in section (2) above, the Owner of the Contract
is a male, age 55 at issue, and he elects the Enhanced Death Benefit rider. He
makes an initial purchase payment of $100,000, and makes no additional Purchase
Payments or partial withdrawals. On the Contract issue date, the Highest
Anniversary Value is equal to $100,000 (the initial Purchase Payment). Assume
the Contract Value on the first Contract Anniversary is $108,000 due to good
market performance. Because the Contract Value is greater than the Highest
Anniversary Value ($100,000), the Highest Anniversary Value is set equal to the
Contract Value ($108,000). Assume the Contract Value on the second Contract
Anniversary is $102,000 due to poor market performance. Because the Contract
Value is less than the Highest Anniversary Value ($108,000), the Highest
Anniversary Value remains $108,000.
Assume this process is repeated on each Contract Anniversary until the
tenth Contract Anniversary, when the Contract Value is $155,000 and the Highest
Anniversary Value is $150,000. The Highest Anniversary Value is set equal the
Contract Value ($155,000).
Determining a death benefit based on the Highest Anniversary Value
Prior to annuitization, the Highest Anniversary Value begins to lock in
growth. The Highest Anniversary Value is adjusted upward each Contract
Anniversary if the Contract Value at that time is greater than the amount of the
current Highest Anniversary Value. Upward adjustments will continue until the
Contract Anniversary immediately prior to the Contract Owner's 80th birthday.
The Highest Anniversary Value also is adjusted for any withdrawals taken
(including any applicable Withdrawal Charge) or any additional payments made.
The Highest Anniversary Value line is the value upon which a future death
benefit amount can be based (if it is greater than the Annual Increase Amount
and Contract Value on the date the death benefit amount is determined).
(4) PUTTING IT ALL TOGETHER
Example
Continuing the examples in sections (2) and (3) above, assume the Owner
dies after the tenth Contract Anniversary but prior to the eleventh Contract
Anniversary, and on the date the death benefit amount is determined, the
Contract Value is $150,000 due to poor market performance. Because the 6% Annual
Increase Amount ($179,085) is greater than the Highest Anniversary Value
($155,000), the 6% Annual Increase Amount ($179,085) is used as the death
benefit base. Because the death benefit base ($179,085) is greater than the
Contract Value ($150,000), the death benefit base will be the death benefit
amount.
The above example does not take into account the impact of premium and
other taxes.
THE DEATH BENEFIT BASE IS NOT AVAILABLE FOR CASH WITHDRAWALS AND IS ONLY
USED FOR PURPOSES OF CALCULATING THE DEATH BENEFIT AMOUNT AND THE CHARGE FOR THE
BENEFIT.
(5) THE OPTIONAL STEP-UP
Assume your initial Purchase Payment is $100,000 and no withdrawals are
taken. The 6% Annual Increase Amount increases to $106,000 on the first
anniversary ($100,000 increased by 6% per year, compounded annually). Assume
your Contract Value at the first Contract Anniversary is $110,000 due to good
market performance, and you elect an Optional Step-Up.
The effect of the Optional Step-Up election is:
(1) The 6% Annual Increase Amount resets from $106,000 to $110,000; and
(2) The Enhanced Death Benefit rider charge is reset to the fee we charge
new Contract Owners for the Enhanced Death Benefit at that time.
The 6% Annual Increase Amount increases to $116,600 on the second
anniversary ($110,000 increased by 6% per year, compounded annually). Assume
your Contract Value at the second Contract Anniversary is $112,000 due to poor
market performance. You may NOT elect an Optional Step-Up at this time, because
the Contract Value is less than the 6% Annual Increase Amount.
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(6) THE OPTIONAL STEP-UP: AUTOMATIC ANNUAL STEP-UP
Assume your initial investment is $100,000 and no withdrawals are taken.
The 6% Annual Increase Amount increases to $106,000 on the first anniversary
($100,000 increased by 6% per year, compounded annually). Assume your Contract
Value at the first Contract Anniversary is $110,000 due to good market
performance, and you elected Optional Step-Ups to occur under the Automatic
Annual Step-Up feature prior to the first Contract Anniversary. Because your
Contract Value is higher than your 6% Annual Increase Amount, an Optional
Step-Up will automatically occur.
The effect of the Optional Step-Up is:
(1) The 6% Annual Increase Amount resets from $106,000 to $110,000; and
(2) The Enhanced Death Benefit rider charge is reset to the fee we charge
new Contract Owners for the Enhanced Death Benefit at that time.
The 6% Annual Increase Amount increases to $116,600 on the second
anniversary ($110,000 increased by 6% per year, compounded annually). Assume
your Contract Value at the second Contract Anniversary is $120,000 due to good
market performance, and you have not discontinued the Automatic Annual Step-Up
feature. Because your Contract Value is higher than your 6% Annual Increase
Amount, an Optional Step-Up will automatically occur.
The effect of the Optional Step-Up is:
(1) The 6% Annual Increase Amount automatically resets from $116,600 to
$120,000; and
(2) The Enhanced Death Benefit rider charge is reset to the fee we charge
new Contract Owners for the Enhanced Death Benefit at that time.
Assume your Contract Value increases by $10,000 at each Contract
Anniversary in years three through seven. At each Contract Anniversary, your
Contract Value would exceed the 6% Annual Increase Amount and an Optional
Step-Up would automatically occur (provided you had not discontinued the
Automatic Annual Step-Up feature, and other requirements were met).
The effect of each Optional Step-Up is:
(1) The 6% Annual Increase Amount automatically resets to the higher
Contract Value; and
(2) The Enhanced Death Benefit rider charge is reset to the fee we charge
new Contract Owners for the Enhanced Death Benefit at that time.
After the seventh Contract Anniversary, the initial Automatic Annual
Step-Up election expires. Assume you do not make a new election of the Automatic
Annual Step-Up. The 6% Annual Increase Amount increases to $180,200 on the
eighth anniversary ($170,000 increased by 6% per year, compounded annually).
Assume your Contract Value at the eighth Contract Anniversary is $160,000 due to
poor market performance. An Optional Step-Up is NOT permitted because your
Contract Value is lower than your 6% Annual Increase Amount. However, because
the Optional Step-Up has locked-in previous gains, the 6% Annual Increase Amount
remains at $180,200 despite poor market performance, and, provided the rider
continues in effect, will continue to grow at 6% annually (subject to
adjustments for additional Purchase Payments and/or withdrawals) through the
Contract Anniversary on or after your 90th birthday. Also, please note the
Enhanced Death Benefit rider charge remains at its current level.
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