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SUPPLEMENTER
MODIFIED GUARANTEED ANNUITY CONTRACTS
ISSUED BY HARTFORD LIFE INSURANCE COMPANY [THE HARTFORD LOGO]
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This Prospectus describes participating interests in a group deferred annuity
contract designed and offered to provide retirement programs for you if you are
an eligible individual. Eligible individuals include certain persons who are
employees, retirees or the dependents of employees of employers as well as
certain persons who are members or dependents of members of trade unions, bona
fide associations and other entities who have entered into group deferred
annuity contracts with Hartford Life Insurance Company ("Hartford" or the
"Company"). Eligible individuals also include members or dependents of members
of employee organizations or customers of financial institutions that are
participating in group annuity contracts with the Company.
An individually allocated deferred annuity certificate is offered in certain
states and this certificate may be purchased to accept monies that are eligible
for rollover to an Individual Retirement Account with a value of $5,000 or
more.
Participation in a Group Contract (the "Contract") will be separately
accounted for by the issuance of a Certificate evidencing your interest under
the Contract. The Certificate and Individual Annuity Certificate are hereafter
referred to as "the Certificate."
A minimum single purchase payment of at least $5,000 must accompany the
application for a Certificate. Hartford reserves the right to limit the maximum
single purchase payment amount. No additional payment is permitted on a
Certificate although eligible individuals may purchase more than one
Certificate. (See "Application and Purchase Payment")
Purchase payments become part of the general assets of Hartford. During the
period before annuity payments start, we credit interest on your account.
If you decide to become a Contract Owner or a Participant, you should keep
this Prospectus for your records.
This prospectus is filed with the Securities and Exchange Commission ("SEC")
The SEC doesn't approve or disapprove these securities or determine if the
information in this prospectus is truthful or complete. Anyone who represents
that the Securities and Exchange Commission does these things may be guilty of
a criminal offense.
This Prospectus can also be obtained from the Securities and Exchange
Commission's website (www.sec.gov).
This group deferred annuity contract IS NOT:
- - A bank deposit or obligation
- - Federally insured
- - Endorsed by any bank or governmental agency
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Prospectus Dated: May 1, 2006
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AVAILABLE INFORMATION
We are required by the Securities Exchange Act of 1934 to file reports and
other information with the SEC. You may read or copy these reports at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C., 20549. You
may call the SEC at 1-800-SEC-0330 for further information on the public
reference room. You may also obtain reports, proxy and information statements
and other information about us at the SEC's website at: www.sec.gov.
We filed a registration statement ("Registration Statement") relating to the
Contracts offered by this prospectus with the SEC under the Securities Act of
1933. This prospectus has been filed as a part of the Registration Statement
and does not contain all of the information contained in the Registration
Statement. For more information about the Contracts and us, you may obtain a
copy of the Registration Statement in the manner set forth in the preceding
paragraph.
In addition, the SEC allows Hartford to "incorporate by reference"
information that Hartford files with the SEC into this prospectus, which means
that incorporated documents are considered part of this prospectus. Hartford
can disclose important information to you by referring you to those documents.
Information that Hartford files with the SEC will automatically update and
supercede the information in this prospectus.
This prospectus incorporates by reference the following documents:
(a)Our Annual Report on Form 10-K for the fiscal year ended December 31,
2005;
(b)Our Quarterly Report on Form 10-Q for the period ended March 31, 2006;
and
(c)Until this offering has been completed, any future filings we will make
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934.
Statements in this prospectus, or in documents that we file later with the
SEC and that legally become part of this prospectus, may change or supercede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
Hartford will provide without charge to each person to whom a copy of this
prospectus has been delivered, upon the written or oral request of such person,
a copy of the document referred to above which has been incorporated by
reference in this prospectus, other than exhibits to such document. Requests
for such copies should be directed to Hartford Life Insurance Company, Attn:
IPD/Retirement Plan Service Center, P.O. Box 1583, Hartford, Connecticut 06102-
5085, telephone: 1-800-528-9009.
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TABLE OF CONTENTS
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SUMMARY...................................................................................................... 4
GLOSSARY OF SPECIAL TERMS.................................................................................... 5
DESCRIPTION OF CERTIFICATES.................................................................................. 6
A. Application and Purchase Payment....................................................................... 6
B. Accumulation Period.................................................................................... 6
1. Initial and Subsequent Guarantee Periods............................................................. 6
2. Establishment of Guarantee Rates and Current Rates................................................... 6
3. Surrenders........................................................................................... 7
(a) General.......................................................................................... 7
(b) Market Value Adjustment.......................................................................... 7
(c) Special Surrenders............................................................................... 7
4. Premium Taxes........................................................................................ 8
5. Death Benefit........................................................................................ 8
6. Payment upon Partial or Full Surrender............................................................... 8
C. Annuity Period......................................................................................... 8
1. Electing the Annuity Commencement Date and Form of Annuity........................................... 8
2. Change of Annuity Commencement Date or Annuity Option................................................ 9
3. Annuity Options...................................................................................... 9
4. Annuity Payment...................................................................................... 9
5. Death of Annuitant After Annuity Commencement Date................................................... 10
INVESTMENTS BY HARTFORD...................................................................................... 10
AMENDMENT OF CERTIFICATES.................................................................................... 11
ASSIGNMENT OF CERTIFICATES................................................................................... 11
DISTRIBUTION OF CERTIFICATES.................................................................................
FEDERAL TAX CONSIDERATIONS................................................................................... 13
A. General................................................................................................ 13
B. Taxation of Hartford and the Separate Account.......................................................... 13
C. Diversification of the Separate Account................................................................ 13
D. Tax Ownership of the Assets in the Separate Account.................................................... 14
E. Non-Natural Persons as Owners.......................................................................... 14
F. Annuity Purchases by Nonresident Aliens and Foreign Corporations....................................... 15
G. Generation Skipping Transfer Tax....................................................................... 15
I. Individual Retirement Annuities ("IRAs")............................................................... 16
HARTFORD LIFE INSURANCE COMPANY.............................................................................. 22
LEGAL OPINIONS............................................................................................... 23
EXPERTS...................................................................................................... 23
APPENDIX A (MARKET VALUE ADJUSTMENT)......................................................................... 24
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THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALES PERSON, OR
OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION
MUST NOT BE RELIED ON.
THIS CERTIFICATE IS NOT AVAILABLE IN ALL STATES.
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SUMMARY
Upon application, you select an initial Guarantee Period from among those
then offered by Hartford. During this Guarantee Period, your purchase payment
earns interest at the applicable Initial Guarantee Rate as established by
Hartford. (See, "Initial and Subsequent Guarantee Periods" and "Establishment
of Guarantee Rates and Current Rates")
At the end of each Guarantee Period, a subsequent Guarantee Period of the
same duration will begin unless, within the thirty-day period preceding the end
of such Guarantee Period, you elect a different duration from among those
offered by us at that time. In no event may subsequent Guarantee Periods extend
beyond the Annuity Commencement date then in effect.
The Account Value as of the first day of each subsequent Guarantee Period
will earn interest at the Subsequent Guarantee Rate. HARTFORD'S MANAGEMENT WILL
MAKE THE FINAL DETERMINATION AS TO GUARANTEE RATES TO BE DECLARED. WE CANNOT
PREDICT NOR CAN WE GUARANTEE FUTURE GUARANTEE RATES. (See, "Initial and
Subsequent Guarantee Periods," and "Establishment of Guarantee Rates and
Current Rates")
Subject to certain restrictions, total surrenders are permitted. However,
such surrenders may be subject to a Market Value Adjustment. A full surrender
made prior to the end of a Guarantee Period will be subject to a Market Value
Adjustment. A REQUEST FOR SURRENDER AT THE END OF A GUARANTEE PERIOD MUST BE
RECEIVED IN WRITING 30 DAYS PRECEDING THE END OF THE GUARANTEE PERIOD. A MARKET
VALUE ADJUSTMENT WILL NOT BE APPLIED TO SURRENDERS MADE AT THE END OF A
GUARANTEE PERIOD.
A Market Value Adjustment will be applied to your Account Value to purchase
an annuity on the Annuity Commencement Date if the Annuity Commencement Date is
not at the end of a Guarantee Period. To elect an Annuity Option you must
notify us at least 30 days before the end of that Guarantee Period.
In addition, at the end of a Certificate Year we will send you any interest
that has been credited during the Certificate Year if you so request in
writing. No Market Value Adjustment will be imposed on such interest payments.
Any such surrender may, however, be subject to tax.
The Market Value Adjustment reflects the relationship between the Current
Rate for the duration remaining in the Guarantee Period at the time you request
the surrender and the then applicable Guarantee Rate being applied to your
Account Value. Since Current Rates are based in part upon the investment yields
available to Hartford (see "Investments by Hartford"), the effect of the Market
Value Adjustment will be closely related to the levels of such yields. It is
possible, therefore, that, should such yields increase significantly from the
time you purchased your Certificate, the amount you would receive upon a full
surrender of your Certificate may be less than your original purchase payment.
If such yields should decrease significantly, the amount you would receive upon
a full surrender may be more than your original purchase payment.
We may defer payment of a full surrender for a period not exceeding 6
months from the date of our receipt of your written notice of surrender or the
period permitted by state insurance law, if less, but such a deferral of
payment will be for a period greater than thirty days only under highly unusual
circumstances. Interest of at least 4% per annum will be paid on any amounts
deferred for more than 30 days if Hartford chooses to exercise this deferral
right. (See, "Payment Upon Partial or Full Surrender")
On the Annuity Commencement Date specified by you, Hartford will make a
lump-sum payment or start to pay a series of payments based on the Annuity
Options selected by you. (See, "Annuity Period")
The Certificate provides for a Death Benefit. If the Participant dies
before the Annuity Commencement Date and there is no designated Contingent
Annuitant surviving, the Death Benefit will be payable to the Beneficiary as
determined under the Certificate Control Provisions. The Death Benefit is
calculated as of the date we receive written notification of Due Proof of Death
at the offices of Hartford.
If the death occurs on or prior to the Annuity Commencement Date and on or
prior to the Annuitant attaining age 65, then the Death Benefit equals the
higher of the Account Value or the Net Surrender Value as each is calculated as
of the date the Company receives written notification of Due Proof of Death. If
the death occurs prior to the Annuity Commencement Date after the Annuitant
attains age 65, then the death benefit equals the Net Surrender Value. If the
named Beneficiary is the spouse of the Participant and the Annuitant is living,
the spouse may elect, in lieu of receiving the Death Benefit, to become the
Participant and continue the Certificate. (See, "Death Benefit")
On any Certificate subject to premium tax, Hartford will pay premium taxes
at the time imposed under applicable law. At its sole discretion, Hartford may
deduct premium taxes at the time Hartford pays such taxes to the applicable
taxing authorities, at the time the Certificate is surrendered or at the time
the Certificate annuitizes. (See, "Premium Taxes")
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GLOSSARY OF SPECIAL TERMS
In this Prospectus "We," "Us" and "Our" refer to Hartford Life Insurance
Company. "You," "Yours" and "Participant" refer to a person/persons who
has/have been issued a Certificate under the group deferred annuity contract.
In addition, as used in this Prospectus, the following terms have the
indicated meanings:
ACCOUNT VALUE: As of any date, the Account Value is the sum of the purchase
payment and all interest earned to that date.
ANNUAL EFFECTIVE RATE OF INTEREST: At the beginning of a year, the rate of
return an investment will earn during that year, where interest is not paid
until the end of the year (i.e., no surrenders or interest withdrawals are
made during the year). If interest withdrawals are taken more frequently than
annually, the total interest for a given year will be less than the Annual
Effective Rate of Interest times the Account Value at the beginning of the
year.
ANNUITANT: The person upon whose life the Certificate is issued. The
Participant must also be the Annuitant.
ANNUITY COMMENCEMENT DATE: The date designated in the Certificate or otherwise
by the Participant on which annuity payments are to start.
BENEFICIARY: The person entitled to receive benefits per the terms of the
Certificate in case of the death of the Participant.
CERTIFICATE: The Certificate evidencing a participating interest in the group
annuity contract as set forth in this Prospectus. Any reference in this
Prospectus to Certificate also includes the group annuity contract. Likewise,
any reference in this Prospectus to Contract includes the underlying
Certificate.
CERTIFICATE DATE: The effective date of participation under the group annuity
contract as designated in the Certificate or date of issue of an individual
annuity Certificate.
CERTIFICATE YEAR: A continuous 12 month period commencing on the Certificate
Date and each anniversary thereof.
COMPOUND INTEREST METHOD: The process of interest being reinvested to earn
additional interest on a daily basis.
CONTINGENT ANNUITANT: The spouse of the Participant, if designated by the
Participant, who upon the Annuitant's death, prior to the Annuity Commencement
Date, becomes the Annuitant and also the Participant.
CONTRACT OWNER: The employer or entity owning the Contract.
CURRENT RATE: The applicable effective annual interest rate contained in a
schedule of rates established by us from time to time for various durations.
DEPENDENT: The spouse or child of an Employee or Retiree eligible to
participate in this Certificate.
DUE PROOF OF DEATH: A certified copy of the death certificate, an order of a
court of competent jurisdiction, a statement from a physician who attended the
deceased, or any other proof acceptable to the Company.
GROSS SURRENDER VALUE: As of any date, the Account Value specified by you for
a full surrender.
GUARANTEE PERIOD: The period for which either an Initial or Subsequent
Guarantee Rate is credited.
HOME OFFICE: Located at 200 Hopmeadow Street, Simsbury, CT 06089. The mailing
address for correspondence concerning this Contract is P.O. Box 1583,
Hartford, CT 06144-1583, except for overnight or express mail packages, which
should be sent to: Attention: IPD/Retirement Plan Service Center, 200
Hopmeadow Street, Simsbury, CT 06089.
INITIAL GUARANTEE RATE: The effective annual rate of interest credited and
compounded annually during the initial Guarantee Period.
IN WRITING: A written form satisfactory to us and received at our Home Office.
MARKET VALUE ADJUSTMENT: The amount payable as a partial or full surrender
made prior to the end of any Guarantee Period may be adjusted up or down by
the application of this formula.
NET SURRENDER VALUE: The amount payable to you on a full surrender under the
Certificate after the application of any Market Value Adjustment.
PARTICIPANT: A term used to describe, for record-keeping purposes, any
employee or other eligible person electing to participate in the Contract.
SUBSEQUENT GUARANTEE RATE: The effective annual rate of interest established
by us for the applicable subsequent Guarantee Period.
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DESCRIPTION OF CERTIFICATES
A. APPLICATION AND PURCHASE PAYMENT
To apply for a Certificate, you need only complete an enrollment form and
make your purchase payment. This Certificate is purchased by completing an
enrollment form and submitting it to Hartford along with your purchase payment
for its approval.
The Certificates are issued after the receipt of a properly completed
application and the payment of a single purchase payment. You may not
contribute additional purchase payments to a Certificate in the future. You
may, however, purchase additional Certificates, if you are an eligible
individual, at then prevailing Guarantee Rates and terms.
The minimum purchase payment in relation to a Certificate is $5,000.
Hartford retains the right to limit the amount of the maximum purchase payment.
Your purchase payment becomes part of our general assets and is credited to
an account we establish for you. You start earning interest on your account the
day the purchase payment is applied.
In the event that your application or an order to purchase is not properly
completed, we will attempt to contact you in writing or by telephone. We will
return the purchase payment three weeks after its receipt by us if the
application or an order to purchase has not, by that time, been properly
completed.
B. ACCUMULATION PERIOD
1. INITIAL AND SUBSEQUENT GUARANTEE PERIODS
Upon enrollment, you will select the duration of your Initial Guarantee
Period from among those durations offered by us. The duration you select and
amount of your purchase payment will determine your Initial Guarantee Rate, and
your purchase payment (less applicable premium taxes, if any) will earn
interest at this Initial Guarantee Rate which is an Annual Effective Rate of
Interest. Interest is credited daily to Your account using the Compound
Interest Method. With compound interest, the total investment of principal and
interest earned to date is invested at all times. You continue to earn interest
on interest already earned. However, when withdrawals are made during the year,
interest on the amount of the withdrawals is lost for the remainder of the
year.
Unless you elect to make a full surrender or elect an annuity option (see,
"Surrenders"), a subsequent Guarantee Period will automatically commence at the
end of a Guarantee Period. Each subsequent Guarantee Period will be the same
duration as the previous Guarantee Period unless you elect in writing on any
day within the thirty day period preceding the end of the previous Guarantee
Period, a Guarantee Period of a different duration from among those offered by
us at that time.
In no event may subsequent Guarantee Periods extend beyond the Annuity
Commencement Date then in effect. For example, if you are age 62 upon the
expiration of a Guarantee Period and you have chosen age 65 as an Annuity
Commencement Date, we will provide a three year Guarantee Period to equal the
number of years remaining before your Annuity Commencement Date. Your Account
Value will then earn interest at a Guarantee Rate, which we have declared for
that duration. The Guarantee Rate for the Guarantee Period automatically
applied in these circumstances may be higher or lower than the Guarantee Rate
for longer durations.
The Account Value at the beginning of any subsequent Guarantee Period will
be equal to the Account Value at the end of the Guarantee Period just ending.
This Account Value will earn interest at the Subsequent Guarantee Rate.
Within thirty days preceding the end of a Guarantee Period, we will notify
you of the expiration of the current Guarantee Period.
2. ESTABLISHMENT OF GUARANTEE RATES AND CURRENT RATES
The Initial Guarantee Rate for the Guarantee Period you choose will be
determined on the date your Purchase Payment and enrollment form are received
in good order at the Home Office. Current Rates will be established
periodically along with the Guarantee Rates, which will be applicable to
subsequent Guarantee Periods. After the end of each Certificate Year, we will
send you a confirmation which will show (a) your Account Value as of the end of
the preceding Certificate Year, (b) your Account Value at the end of the
current Certificate Year, and (c) the rate of interest being credited to your
Certificate.
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Hartford has no specific formula for determining the rate of interest that
it will declare as Current Rates or Guarantee Rates in the future. The
determination of Current Rates and Guarantee Rates will be reflective of
interest rates available on the types of debt instruments in which Hartford
intends to invest the proceeds attributable to the Certificates. (See,
"Investments by Hartford") In addition, Hartford's management may also consider
various other factors in determining Current Rates and Guarantee Rates for a
given period, including, regulatory and tax requirements; sales commissions and
administrative expenses borne by Hartford; general economic trends; and
competitive factors. HARTFORD'S MANAGEMENT WILL MAKE THE FINAL DETERMINATION AS
TO CURRENT AND GUARANTEE RATES TO BE DECLARED. WE CANNOT PREDICT NOR CAN WE
GUARANTEE FUTURE CURRENT RATES OR GUARANTEE RATES.
3. SURRENDERS
(a) GENERAL
Full surrenders may be made under a Certificate at any time and will
terminate the Certificate.
In the case of all surrenders, the Account Value will be reduced by the
Gross Surrender Value on the Surrender Date and the Net Surrender Value
will be payable to you. The Net Surrender Value equals:
(A - B) x C, where:
A = the Gross Surrender Value,
B = any unpaid premium tax,
C = the Market Value Adjustment.
Hartford will, upon request, inform you of the amount payable upon a
full surrender.
Any full or special surrender may be subject to tax. (See, "Tax
Considerations")
(b) MARKET VALUE ADJUSTMENT
The amount payable on a partial or full surrender made preceding the end
of any Guarantee Period may be adjusted up or down by the application of
the Market Value Adjustment. Where applicable, the Market Value Adjustment
is applied to Gross Surrender Value.
In the case of a full surrender, the Market Value Adjustment will
reflect the relationship between the Current Rate for the duration
remaining in the Guarantee Period at the time you request the surrender,
and the Guarantee Rate then applicable to your Certificate. Generally, if
your Guarantee Rate is lower than the applicable Current Rate, then the
application of the Market Value Adjustment will result in a lower payment
upon surrender. Similarly, if your Guarantee Rate is higher than the
applicable Current Rate, the application of the Market Value Adjustment
will result in a higher payment upon surrender.
For example, assume you purchase a Certificate and select an initial
Guarantee Period of ten years and our Guarantee Rate for that duration is
7% per annum. Assume at the end of seven years you make a total surrender.
If the three year Current Rate is then 5%, the amount payable upon
surrender will increase after the application of the Market Value
Adjustment. On the other hand, if such Current Rate is higher than your
Guarantee Rate, for example, 8%, the application of the Market Value
Adjustment will cause a decrease in the amount payable to you upon this
surrender.
Since Current Rates are based in part upon the investment yields
available to Hartford (see, "Investments By Hartford"), the effect of the
Market Value Adjustment will be closely related to the levels of such
yields. It is theoretically possible, therefore, that, should such yields
increase significantly from the time you purchased your Certificate, the
amount you would receive upon a full surrender of your Certificate could be
less than your original purchase payment.
The formula for calculating the Market Value Adjustment is set forth in
Appendix A to this Prospectus, which also contains an additional
illustration of the application of the Market Value Adjustment.
(c) SPECIAL SURRENDERS
A Market Value Adjustment will not be applied to a full surrender made
at the end of a Guarantee Period. A request for a surrender at the end of a
Guarantee Period must be received, in writing, during the 30 day period
preceding or within five business days after the end of said Guarantee
Period.
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A Market Value Adjustment will be applied to your account value to purchase
an annuity on the Annuity Commencement Date if the Annuity Commencement Date is
not at the end of a Guarantee Period. To elect an Annuity Option you must
notify us at least 30 days before the end of that Guarantee Period.
In addition, we will send you any interest that has been credited during
the prior Certificate Year if you so request in writing within 30 days prior to
the end of the Certificate Year. No Market Value Adjustment will be imposed on
such interest payments. Any such surrender may, however, be subject to tax.
4. PREMIUM TAXES
A deduction is also made for premium taxes, if applicable, imposed by a
state or other governmental entity. Certain states impose a premium tax,
currently ranging up to 3.5%. Some states assess the tax at the time purchase
payments are made; others assess the tax at the time of annuitization. Hartford
will pay premium taxes at the time imposed under applicable law. At its sole
discretion, Hartford may deduct premium taxes at the time Hartford pays such
taxes to the applicable taxing authorities, upon surrender, or when annuity
payments commence.
5. DEATH BENEFIT
If the Annuitant dies before the Annuity Commencement Date and there is no
designated Contingent Annuitant surviving, the Death Benefit will be payable to
the Beneficiary as determined under the Certificate Control Provisions. The
Death Benefit is calculated as of the date we receive written notification of
Due Proof of Death at the offices of Hartford.
If the death occurs prior to the Annuity Commencement Date and on or prior
to the Annuitant attaining age 65, then the death benefit equals the higher of
the Account Value or the Net Surrender Value as each is calculated as of the
date the Company receives written notification of Due Proof of Death. If the
death occurs prior to the Annuity Commencement Date after the Annuitant attains
age 65, then the death benefit equals the Net Surrender Value.
The Death Benefit may be taken in one sum, to be paid within six months
after the date we receive Due Proof of Death, or under any of the Annuity
Options available under the Contract, provided, however, that: (a) in the event
of the death of any Participant prior to the Annuity Commencement Date, any
Annuity Option selected must provide that any amount payable as a Death Benefit
will be distributed within 5 years of the date of death; and (b) if any
Participant or Annuitant dies on or after the Annuity Commencement Date, any
remaining interest in the Contract will be paid at least as rapidly as under
the method of distribution in effect at the time of death, or, if the benefit
is payable over a period not extending beyond the life expectancy of the
Beneficiary or over the life of the Beneficiary, such distribution must
commence within one year of the date of death. Notwithstanding the foregoing,
in the event of the Participant's death where the sole Beneficiary is the
spouse of the Participant and the Annuitant or Contingent Annuitant is living,
such spouse may elect, in lieu of receiving the Death Benefit, to be treated as
the Participant.
If the Certificate is owned by a corporation or other non-individual, the
Death Benefit payable upon the death of the Annuitant preceding the Annuity
Commencement Date will be payable only as one sum or under the same Annuity
Options and in the same manner as if an individual Certificate owner died on
the date of the Annuitant's death.
6. PAYMENT UPON PARTIAL OR FULL SURRENDER
We may defer payment of a full surrender for a period not exceeding 6
months from date of our receipt of your notice of surrender or the period
permitted by state insurance law, if less. Only under highly unusual
circumstances will we defer a surrender payment more than thirty days, and if
we defer payment for more than 30 days, we will pay interest of at least 4% per
annum on the amount deferred. While all circumstances under which we could
defer payment upon surrender may not be foreseeable at this time, such
circumstances could include, for example, a time of an unusually high surrender
rate among Participants, accompanied by a radical shift in interest rates. If
we intend to withhold payment for more than thirty days, we will notify you in
writing. We will not, however, defer payment for more than thirty days for any
surrender that is to be effective at the end of any Guarantee Period. Full or
partial surrenders may be made under a Certificate at any time. However, a
Market Value Adjustment will apply. For additional information regarding the
application of the Market Value Adjustment, please refer to section B.3. of the
Description of Certificates portion of this prospectus.
C. ANNUITY PERIOD
1. ELECTING THE ANNUITY COMMENCEMENT DATE AND FORM OF ANNUITY
Upon application for a Certificate, you select an Annuity Commencement
Date. Within 30 days preceding your Annuity Commencement Date you may elect to
have all or a portion of your Net Surrender Value paid in a lump sum
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on your Annuity Commencement Date. Alternatively, or with respect to any
portion of your Net Surrender Value not paid in a lump sum, you may elect, at
least 30 days preceding the Annuity Commencement Date, to have your Account
Value with a Market Value Adjustment, if applicable, (less applicable premium
taxes, if any) applied on the Annuity Commencement Date under any of the
Annuity Options described below. In the absence of such election, Account Value
with a Market Value Adjustment, if applicable, will be applied on the Annuity
Commencement Date under the Second Option to provide a life annuity with 120
monthly payments certain.
2. CHANGE OF ANNUITY COMMENCEMENT DATE OR ANNUITY OPTION
You may change the Annuity Commencement Date and/or the Annuity Option from
time to time, but any such change must be made in writing and received by us at
least 30 days preceding the scheduled Annuity Commencement Date. Also, the
proposed Annuity Commencement Date may not be beyond the later of the
Annuitant's 90th birthday or the end of the Initial Guarantee Period provided
such Initial Guarantee Period is 10 years or less.
3. ANNUITY OPTIONS
Any one of the following Annuity Options may be elected:
FIRST OPTION -- LIFE ANNUITY
An annuity payable monthly during the lifetime of the Annuitant, and
terminating with the last monthly payment due preceding the death of the
Annuitant. It would be possible under this Option for an Annuitant to receive
only one Annuity payment if he died prior to the due date of the second Annuity
payment, two payments if he died before the due date of the third Annuity
payment and so on.
SECOND OPTION -- LIFE ANNUITY WITH 120, 180, OR 240 MONTHLY PAYMENTS
CERTAIN
An annuity providing monthly income to the Annuitant for a fixed period of
120 months, 180 months, or 240 months (as selected), and for as long thereafter
as the Annuitant shall live.
THIRD OPTION -- CASH REFUND LIFE ANNUITY
An annuity payable monthly during the lifetime of the Annuitant provided
that, at the death of the Annuitant, the Beneficiary will receive an additional
payment equal to the excess, if any, of (a) over (b) where (a) is the Account
Value applied on the Annuity Commencement Date under this Option and (b) is the
dollar amount of annuity payments already paid.
FOURTH OPTION -- JOINT AND LAST SURVIVOR LIFE ANNUITY
An annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment preceding the death of the survivor. It
would be possible under this Option for the Annuitant, and designated second
person in the event of the common or simultaneous death of the parties, to
receive only one payment in the event of death prior to the due date for the
second payment and so on.
FIFTH OPTION -- PAYMENTS FOR A DESIGNATED PERIOD
An amount payable monthly for the number of years selected which may be
from 5 to 30 years.
The Tables in the Certificate provide for guaranteed dollar amounts of
monthly payments for each $1,000 applied under the five Annuity Options. Under
the First, Second, or Third Options, the amount of each payment will depend
upon the age of the Annuitant at the time the first payment is due. Under the
Fourth Option, the amount of each payment will depend upon the age of both
payees at the time the first payment is due.
The Tables for the First, Second, Third and Fourth Options are based on the
1983a Individual Annuity Mortality Table with ages set back one year and a net
investment rate of 4% per annum. The table for the Fifth Option is based on a
net investment rate of 4% per annum. We may, from time to time, at our
discretion if mortality and interest rates justify, apply other tables, which
will result in higher monthly payments for each $1,000 applied under one or
more of the five Annuity Options.
4. ANNUITY PAYMENT
The first payment under any Annuity Option will be made on the Annuity
Commencement Date. Subsequent payments will be made on the same day of each
month in accordance with the manner of payment selected.
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The option elected must result in a payment of an amount at least equal to
the minimum payment amount according to Company rules then in effect. If at any
time payments are less than the minimum payment amount, the Company has the
right to change the frequency to an interval resulting in a payment at least
equal to the minimum. If any amount due is less than the minimum per year, the
Company may make other arrangements that are equitable to the Annuitant.
Once annuity payments have commenced, no surrender of the annuity benefit
(including benefits under the Fifth Option) can be made for the purpose of
receiving a lump sum settlement in lieu thereof.
5. DEATH OF ANNUITANT AFTER ANNUITY COMMENCEMENT DATE
In the event of the death of the Annuitant after the Annuity Commencement
Date, the present values on the date of death of the current dollar amount of
any remaining guaranteed payments will be paid in one sum to the Beneficiary
designated by you unless other provisions shall have been made and approved by
us. Calculations of such present value will be based on the interest rate that
is used by us to determine the amount of each certain payment.
INVESTMENTS BY HARTFORD
Assets of Hartford must be invested in accordance with the requirements
established by applicable state laws regarding the nature and quality of
investments that may be made by life insurance companies and the percentage of
their assets that may be committed to any particular type of investment. In
general, these laws permit investments, within specified limits and subject to
certain qualifications, in federal, state, and municipal obligations, corporate
bonds, preferred and common stocks, real estate mortgages, real estate and
certain other investments.
Contract reserves will be accounted for in a non-unitized separate account.
Contract Owners have no priority claims on assets accounted for in this
separate account. All assets of Hartford, including those accounted for in this
separate account, are available to meet the guarantees under the Contracts and
are available to meet the general obligations of Hartford.
Nonetheless, in establishing Guarantee Rates and Current Rates, Hartford
intends to take into account the yields available on the instruments in which
it intends to invest the proceeds from the Certificates. (See, "Establishment
of Guarantee Rates and Current Rates"). Hartford's investment strategy with
respect to the proceeds attributable to the Certificates will generally be to
invest in investment-grade debt instruments having durations tending to match
the applicable Guarantee Periods.
Investment-grade debt instruments in which Hartford intends to invest the
proceeds from the Certificates include:
- Securities issued by the United States Government or its agencies or
instrumentalities, which issues may or may not be guaranteed by the United
States Government.
- Debt securities which have an investment grade, at the time of purchase,
within the four highest grades assigned by Moody's Investors Services,
Inc. (Aaa, Aa, A or Baa), Standard & Poor's Corporation (AAA, AA, A or
BBB) or any other nationally recognized rating service.
- Other debt instruments, including but not limited to, issues of or
guaranteed by banks or bank holding companies and corporations, which
obligations, although not rated by Moody's or Standard & Poor's are deemed
by Hartford's management to have an investment quality comparable to
securities which may be purchased as stated above.
While the foregoing generally describes our investment strategy with
respect to the proceeds attributable to the Certificates, we are not obligated
to invest the proceeds attributable to the Certificate according to any
particular strategy, except as may be required by Connecticut and other state
insurance laws.
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AMENDMENT OF CERTIFICATES
We reserve the right to amend the Certificates to meet the requirements of
applicable federal or state laws or regulations. We will notify you in writing
of any such amendments.
ASSIGNMENT OF CERTIFICATES
Your rights as evidenced by a Certificate may be assigned as permitted by
applicable law. An assignment will not be binding upon us until we receive
notice from you in writing. We assume no responsibility for the validity or
effect of any assignment. You should consult your tax adviser regarding the tax
consequences of an assignment.
HOW CONTRACTS ARE SOLD -- Hartford Securities Distribution Company, Inc.
("HSD") serves as principal underwriter for the Contracts which are offered on
a continuous basis. HSD is registered with the Securities and Exchange
Commission under the 1934 Act as a broker-dealer and is a member of the NASD.
The principal business address of HSD is the same as ours.
Contracts will be sold by individuals who have been appointed by us as
insurance agents and who are registered representatives of broker-dealers that
have entered into selling agreements with HSD. We generally bear the expenses
of providing services pursuant to Contracts, including the payment of expenses
relating to the distribution of prospectuses for sales purposes as well as any
advertising or sales literature (provided, however, we may offset some or all
of these expenses by, among other things, administrative service fees received
from Fund complexes).
Commissions -- We pay compensation to broker-dealers, financial
institutions and other affiliated broker-dealers ("Financial Intermediaries")
for the sale of the Contracts according to selling agreements with Financial
Intermediaries. Affiliated broker-dealers also employ wholesalers in the sales
process. Wholesalers typically receive commissions based on the type of
Contract or optional benefits sold. Commissions are based on a specified amount
of Premium Payments or Contract Value. Your Registered Representative may be
compensated on a fee for services and/or commission basis.
For individual and group Contracts, we pay an up-front commission of up to
7% of your Contract Value at the time of sale to the Financial Intermediary
that your Registered Representative is associated with. Your Registered
Representative's Financial Intermediary may also receive on-going or trail
commissions of generally not more than 1% of your Contract Value. Commissions
range from 1% for Access Contracts to 7% for Core Contracts. Registered
Representatives may have multiple options on how they wish to allocate their
commissions and/or compensation. Compensation paid to your Registered
Representative may also vary depending on the particular arrangements between
your Registered Representative and their Financial Intermediary. We are not
involved in determining your Registered Representative's compensation. You are
encouraged to ask your Registered Representative about the basis upon which he
or she will be personally compensated for the advice or recommendations
provided in connection with this transaction.
Additional Payments -- In addition to commissions and any Rule 12b-1 fees,
we or our affiliates pay significant additional compensation ("Additional
Payments") to some Financial Intermediaries (who may or may not be affiliates),
in connection with the promotion, sale and distribution of our variable
annuities. Additional Payments are generally based on average net assets (or on
aged assets) of the Contracts attributable to a particular Financial
Intermediary; on sales of the Contracts attributable to a particular Financial
Intermediary and/or on reimbursement of sales expenses. Additional Payments may
take the form of, among other things: (1) sponsorship of due diligence meetings
to educate Financial Intermediaries about our variable products; (2) payments
for providing training and information relating to our variable products; (3)
expense allowances and reimbursements; (3) override payments and bonuses; (4)
personnel education or training; (5) marketing support fees (or allowances) for
providing assistance in promoting the sale of our variable products; and/or (6)
shareholder services, including sub-accounting and the preparation of account
statements and other communications.
We are among several insurance companies that pay Additional Payments to
certain Financial Intermediaries to receive "preferred" or recommended status.
These privileges include our ability to gain additional or special access to
sales staff, provide and/or attend training and other conferences; placement of
our products on customer lists ("shelf-space arrangements"); and otherwise
improve sales by featuring our products over others. We also may pay Additional
Payments to certain key Financial Intermediaries based on assets under
management.
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Consistent with NASD Conduct Rules, we provide cash and non-cash
compensation in the form of: (1) occasional meals and entertainment; (2)
occasional tickets to sporting events; (3) nominal gifts (not to exceed $100
annually); (4) sponsorship of sales contests and/or promotions in which
participants receive prizes such as travel awards, merchandise and recognition;
(5) sponsorship of training and educational events; and/or (6) due diligence
meetings. In addition to NASD rules governing limitations on these payments, we
also follow our guidelines and those of Financial Intermediaries which may be
more restrictive than NASD rules.
Additional Payments create a potential conflict of interest in the form of
an additional financial incentive to the Registered Representative and/or
Financial Intermediary to recommend the purchase of this Contract over another
variable annuity or another investment option. For the fiscal year ended
December 31, 2005, Additional Payments did not in the aggregate exceed
approximately $48 million (excluding incidental corporate-sponsorship related
perquisites).
For individual and group Contracts, as of December 31, 2005, we have
entered into arrangements to make Additional Payments to the following
Financial Intermediaries: A.G. Edwards & Sons, Inc., ABN AMRO Bank, N.V.,
Advest, Inc., Aegis Capital Advisors, LLC, AIG Advisors Group, Inc., AIG
SunAmerica, American International Group, Inc., AMSouth Investment Services,
Inc., Asset Management Securities, Associated Investment Services, Inc., B. C.
Ziegler & Co., Banc of America Investment Services, Inc., Banc One Securities
Corp., Bancnorth Investment Group, Inc., Bancwest Investment Services, Inc.,
BB&T Investment Services, Inc., BNY Investment Center of The Bank of New York
Company, Inc., BOSC, Inc., BlueVase Securities, LLC., Cadaret Grant & Co.,
Inc., Cambridge Investment Research, Inc., Capital Analyst Inc., Capital
Securities of America, Inc., Centaurus Financial, Inc., Citigroup, Inc.
(various divisions and affiliates), Colonial Brokerage House (LifeMark
Partners), Coordinated Capital Securities, Inc., Commerce Brokerage Services,
Inc., Comerica Securities, Commonwealth Financial Network, Compass Brokerage,
Inc., Crowell, Weedon & Co., Crown Capital Securities, L.P., Cuso Financial
Services, L.P., Dortch Securities & Investments, Inc., Duerr Financial
Corporation, Edward D. Jones & Co., L.P., Empire Securities, Inc., ePLANNING,
Inc., Ferris, Baker Watts, Incorporated, FFP Securities, Inc., Fifth Third
Securities, Inc., FIMCO Securities Group (Mequon, WI), Financial Network
Services (or Investment) Corp., Fintegra Financial Services, LLC., First Allied
Securities, Inc., First Citizens Investor Services, First Heartland Capital,
Inc., First Montauk Securities Corp., First National Bank of Omaha, First
Tennessee Brokerage, Inc., First Wall Street Corporation, Frost Brokerage
Services, Inc., FSC Securities Corporation, Girard Securities, Inc., Great
American Advisors, Inc., H.D. Vest Investment Services (subsidiary of Wells
Fargo & Company), Harbour Investments, Inc., H & R Block Financial Advisors,
Inc., Harvest Capital LLC, Heim & Young Securities, Hibernia Investments,
L.L.C., Hong Kong and Shanghai Banking Corporation Limited (HSBC), The
Huntington Investment Company, IFMG Securities, Inc. at Rockland Trust,
Independent Financial Group, LLC, Infinex Financial Group, ING Advisors
Network, Intersecurities, INC., Invest Financial Corp., Investacorp, Inc.,
Investment Professionals, Inc., Investors Capital Corporation, Investment
Centers of America, Inc., Investment Professionals, Inc., Investors Capital
Corp., James T. Borello & Co, Janney Montgomery Scott LLC, Jefferson Pilot
Securities Corporation, J.J.B. Hilliard, W.L. Lyons, Inc., KMS Financial
Services, Inc., Legg Mason Wood Walker, Incorporated, Leigh Baldwin & Co., LLC,
Lincoln Financial Advisors Corp. (marketing name for Lincoln National Corp.),
Linsco/Private Ledger Corp., Local Securities Corporation, M&T Securities,
Inc., McDonald Investments Inc., Merrill Lynch Pierce Fenner & Smith, Morgan
Keegan & Company, Inc, Morgan Stanley & Co., Inc. (various divisions and
affiliates), Mutual Service Corporation, Natcity Investments, Inc., National
Planning Corp., Newbridge Securities Corp., NEXT Financial Group, Inc., NFP
Securities, Inc., North Ridge Securities Corp., ONB Investment Services, Inc.,
Oppenheimer & Co., Inc., Park Avenue Securities LLC, Parker/Hunter
Incorporated, Partners Investment Network, Inc., Pension Planners Securities,
Inc., People's Securities, Inc., PFIC Securities Corp., Piper Jaffray & Co.,
Prime Capital Services, Inc., Primevest Financial Services, Inc., Proequities,
Inc., Prospera Financial Services, Inc., QA3 Financial Corp, Raymond James
Financial Services, RBC Dain Rauscher Inc., Retirement Plan Advisors, Inc.,
Robert W. Baird & Co., Inc., Rogan & Assoc., Inc., Royal Alliance Assoc., Inc.,
Ryan Beck & Co., Scott & Stringfellow, Inc., Securian Financial Services, Inc.,
Securities America, Inc., Securities Service Network, Inc., Sigma Financial
Corporation, SII Investments, Inc., Southtrust Securities, Inc., Stifel
Nicolaus & Company, Incorporated, Sun Trust Bank, SunTrust Investment Services,
Inc. -- Alexander Key Division, SWBC Investment Services, LLC, Synovus
Securities, Inc., TFS Securities, Inc., The Investment Center, Inc., Thurston,
Springer, Miller, Herd & Titak, Inc.,Triad Advisors, Inc., UBOC Investment
Services, Inc. (Union Bank of California, N.A.), UBS Financial Services, Inc.,
UMB Scout Brokerage Services, Inc., U.S. Bancorp Investments, Inc., Unionbanc
Investment Services, LLC, Uvest Financial Services Group Inc., Valmark
Securities, Inc., Wachovia Securities, LLC. (various divisions), Wall Street
Financial Group, Inc., Walnut Street Securities, Inc., Webster Investment
Services, Inc., Wells Fargo Brokerage Services, L.L.C., Wescom Financial
Services, Wilbanks Securities, Inc., WM Financial Services, Inc., Woodbury
Financial Services, Inc. (an affiliate of ours), WRP Investments, Inc., XCU
Capital Corporation, Inc.
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Inclusion on this list does not imply that these sums necessarily
constitute "special cash compensation" as defined by NASD Conduct Rule
2830(l)(4). We will endeavor to update this listing annually and interim
arrangements may not be reflected. We assume no duty to notify any investor
whether their Registered Representative is or should be included in any such
listing. You are encouraged to review the prospectus for each Fund for any
other compensation arrangements pertaining to the distribution of Fund shares.
FEDERAL TAX CONSIDERATIONS
WHAT ARE SOME OF THE FEDERAL TAX CONSEQUENCES WHICH AFFECT THESE CONTRACTS?
A. GENERAL
Since the federal tax law is complex, the tax consequences of purchasing
this contract will vary depending on your situation. You may need tax or legal
advice to help you determine whether purchasing this contract is right for you.
Our general discussion of the tax treatment of this contract is based on
our understanding of federal income tax laws as they are currently interpreted.
A detailed description of all federal income tax consequences regarding the
purchase of this contract cannot be made in the prospectus. We also do not
discuss state, municipal or other tax laws that may apply to this contract. For
detailed information, you should consult with a qualified tax adviser familiar
with your situation.
B. TAXATION OF HARTFORD AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company under Subchapter L of Chapter 1 of the Code. Accordingly, the
Separate Account will not be taxed as a "regulated investment company" under
Subchapter M of Chapter 1 of the Code. Investment income and any realized
capital gains on assets of the Separate Account are reinvested and taken into
account in determining the value of the Accumulation and Annuity Units. (See
"How do I know what my Participant Account is worth?"). As a result, such
investment income and realized capital gains are automatically applied to
increase reserves under the Contract.
Currently, no taxes are due on interest, dividends and short-term or long-
term capital gain earned by the Separate Account with respect to the Contracts.
Hartford is entitled to certain tax benefits related to the investment of
company assets, including assets of the Separate Account. These tax benefits,
which may include the foreign tax credit and the corporate dividends received
deduction, are not passed back to you since Hartford is the owner of the assets
from which the tax benefits are derived.
C. DIVERSIFICATION OF THE SEPARATE ACCOUNT
The Code requires that investments supporting your Contract be adequately
diversified. Code Section 817(h) provides that a variable annuity contract will
not be treated as an annuity contract for any period during which the
investments made by the separate account or underlying fund are not adequately
diversified. If a contract is not treated as an annuity contract, the contract
owner will be subject to income tax on annual increases in cash value.
The Treasury Department's diversification regulations under Code Section
817(h) require, among other things, that:
- no more than 55% of the value of the total assets of the segregated asset
account underlying a variable contract is represented by any one
investment,
- no more than 70% is represented by any two investments,
- no more than 80% is represented by any three investments and
- no more than 90% is represented by any four investments.
In determining whether the diversification standards are met, all
securities of the same issuer, all interests in the same real property project,
and all interests in the same commodity are each treated as a single
investment. In the case of government securities, each government agency or
instrumentality is treated as a separate issuer.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, the company may still comply within a reasonable period and avoid
the taxation of contract income on
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an ongoing basis. However, either the insurer or the contract owner must agree
to pay the tax due for the period during which the diversification requirements
were not met.
D. TAX OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT
In order for a variable annuity contract to qualify for tax income
deferral, assets in the separate account supporting the contract must be
considered to be owned by the insurance company, and not by the contract owner,
for tax purposes. The IRS has stated in published rulings that a variable
contract owner will be considered the "owner" of separate account assets for
income tax purposes if the contract owner possesses sufficient incidents of
ownership in those assets, such as the ability to exercise investment control
over the assets. In circumstances where the variable contract owner is treated
as the "tax owner" of certain separate account assets, income and gain from
such assets would be includable in the variable contract owner's gross income.
The Treasury Department indicated in 1986 that, in regulations or revenue
rulings under Code Section 817(d) (relating to the definition of a variable
contract), it would provide guidance on the extent to which contract owners may
direct their investments to particular sub-accounts without being treated as
tax owners of the underlying shares. Although no such regulations have been
issued to date, the IRS has issued a number of rulings that indicate that this
issue remains subject to a facts and circumstances test for both variable
annuity and variable life insurance contracts.
For instance, the IRS in Rev. Rul. 2003-92 reiterated its position in prior
rulings that, where shares in a fund offered in an insurer's separate account
are not available exclusively through the purchase of a variable insurance
contract (e.g., where such shares can be purchased directly by the general
public or others without going through such a variable contract), such "public
availability" means that such shares should be treated as owned directly by the
contract owner (and not by the insurer) for tax purposes, as if such contract
owner had chosen instead to purchase such shares directly (without going
through the variable contract). None of the shares or other interests in the
fund choices offered in our Separate Account for your Contract are available
for purchase except through an insurer's variable contracts or by other
permitted entities.
The IRS in Rev. Rul. 2003-91 also indicated that an insurer could provide
as many as 20 fund choices for its variable contract owners (each with a
general investment strategy, e.g., a small company stock fund or a special
industry fund) under certain circumstances, without causing such a contract
owner to be treated as the tax owner of any of the underlying fund assets. The
ruling does not specify the number of fund options, if any, that might prevent
a variable contract owner from receiving favorable tax treatment. As a result,
we believe that any owner of a Contract also should receive the same favorable
tax treatment. However, there is necessarily some uncertainty here as long as
the IRS continues to use a facts and circumstances test for investor control
and other tax ownership issues. Therefore, we reserve the right to modify the
Contract as necessary to prevent you from being treated as the tax owner of any
underlying assets.
E. NON-NATURAL PERSONS AS OWNERS
Pursuant to Code Section 72(u), an annuity contract held by a taxpayer
other than a natural person generally is not treated as an annuity contract
under the Code. Instead, such a non-natural Contract Owner generally could be
required to include in gross income currently for each taxable year the excess
of (a) the sum of the Contract Value as of the close of the taxable year and
all previous distributions under the Contract over (b) the sum of net premiums
paid for the taxable year and any prior taxable year and the amount includable
in gross income for any prior taxable year with respect to the Contract under
Section 72(u). However, Section 72(u) does not apply to:
- A contract the nominal owner of which is a non-natural person but the
beneficial owner of which is a natural person (e.g., where the non-natural
owner holds the contract as an agent for the natural person),
- A contract acquired by the estate of a decedent by reason of such
decedent's death,
- Certain contracts acquired with respect to tax-qualified retirement
arrangements,
- Certain contracts held in structured settlement arrangements that may
qualify under Code Section 130, or
- A single premium immediate annuity contract under Code Section 72(u)(4),
which provides for substantially equal periodic payments and an annuity
starting date that is no later than 1 year from the date of the contract's
purchase.
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A non-natural Contract Owner that is a tax-exempt entity for federal tax
purposes (e.g., a tax-qualified retirement trust or a Charitable Remainder
Trust) generally would not be subject to federal income tax as a result of such
current gross income under Code Section 72(u). However, such a tax-exempt
entity, or any annuity contract that it holds, may need to satisfy certain tax
requirements in order to maintain its qualification for such favorable tax
treatment. See, e.g., IRS Tech. Adv. Memo. 9825001 for certain Charitable
Remainder Trusts.
Pursuant to Code Section 72(s), if the Contract Owner is a non-natural
person, the primary annuitant is treated as the "holder" in applying the
required distribution rules described below. These rules require that certain
distributions be made upon the death of a "holder." In addition, for a non-
natural owner, a change in the primary annuitant is treated as the death of the
"holder." However, the provisions of Code Section 72(s) do not apply to certain
contracts held in tax-qualified retirement arrangements or structured
settlement arrangements.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to annuity purchasers that are U.S. citizens or
residents. Purchasers that are not U.S. citizens or residents will generally be
subject to U.S. federal income tax and withholding on taxable annuity
distributions at a 30% rate, unless a lower treaty rate applies and any
required tax forms are submitted to Hartford. If withholding applies, we are
required to withhold tax at the 30% rate, or a lower treaty rate if applicable,
and remit it to the IRS. In addition, purchasers may be subject to state
premium tax, other state and/or municipal taxes, and taxes that may be imposed
by the purchaser's country of citizenship or residence. Prospective purchasers
are advised to consult with a qualified tax adviser regarding U.S., state, and
foreign taxation with respect to an annuity purchase.
G. GENERATION SKIPPING TRANSFER TAX
Under certain circumstances, the Code may impose a "generation skipping
transfer tax" when all or part of an annuity contract is transferred to, or a
death benefit is paid to, an individual two or more generations younger than
the owner. Regulations issued under the Code may require Hartford to deduct the
tax from your Contract, or from any applicable payment, and pay it directly to
the IRS.
INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS
This summary does not attempt to provide more than general information
about the federal income tax rules associated with use of a Contract by a tax-
qualified retirement plan. State income tax rules applicable to tax-qualified
retirement plans often differ from federal income tax rules, and this summary
does not describe any of these differences. Because of the complexity of the
tax rules, owners, participants and beneficiaries are encouraged to consult
their own tax advisors as to specific tax consequences.
The Contracts are available to a variety of tax-qualified retirement plans
and arrangements (a "Qualified Plan" or "Plan"). Tax restrictions and
consequences for Contracts, accounts under each type of Qualified Plan differ
from each other and from those for Non-Qualified Contracts. In addition,
individual Qualified Plans may have terms and conditions that impose additional
rules. Therefore, no attempt is made herein to provide more than general
information about the use of the Contract with the various types of Qualified
Plans. Participants under such Qualified Plans, as well as Contract Owners,
annuitants and beneficiaries, are cautioned that the rights of any person to
any benefits under such Qualified Plans may be subject to terms and conditions
of the Plans themselves or limited by applicable law, regardless of the terms
and conditions of the Contract issued in connection therewith. Qualified Plans
generally provide for the tax deferral of income regardless of whether the
Qualified Plan invests in an annuity or other investment. You should consider
whether the Contract is a suitable investment if you are investing through a
Qualified Plan.
THE FOLLOWING IS ONLY A GENERAL DISCUSSION ABOUT TYPES OF QUALIFIED PLANS
FOR WHICH THE CONTRACTS MAY BE AVAILABLE. WE ARE NOT THE PLAN ADMINISTRATOR FOR
ANY QUALIFIED PLAN. THE PLAN ADMINISTRATOR OR CUSTODIAN, WHICHEVER IS
APPLICABLE, (BUT NOT US) IS RESPONSIBLE FOR ALL PLAN ADMINISTRATIVE DUTIES
INCLUDING, BUT NOT LIMITED TO, NOTIFICATION OF DISTRIBUTION OPTIONS,
DISBURSEMENT OF PLAN BENEFITS, HANDLING ANY PROCESSING AND ADMINISTRATION OF
QUALIFIED PLAN LOANS, COMPLIANCE REGULATORY REQUIREMENTS AND FEDERAL AND STATE
TAX REPORTING OF INCOME/DISTRIBUTIONS FROM THE PLAN TO PLAN PARTICIPANTS AND,
IF APPLICABLE, BENEFICIARIES OF PLAN PARTICIPANTS AND IRA CONTRIBUTIONS FROM
PLAN PARTICIPANTS. OUR ADMINISTRATIVE DUTIES ARE LIMITED TO ADMINISTRATION OF
THE CONTRACT AND ANY DISBURSEMENTS OF ANY CONTRACT BENEFITS TO THE OWNER,
ANNUITANT OR BENEFICIARY OF THE CONTRACT, AS APPLICABLE. OUR TAX REPORTING
RESPONSIBILITY IS LIMITED TO FEDERAL AND STATE TAX REPORTING OF
INCOME/DISTRIBUTIONS TO THE APPLICABLE PAYEE AND IRA CONTRIBUTIONS FROM THE
OWNER OF A CONTRACT, AS RECORDED ON OUR BOOKS AND RECORDS. IF YOU ARE
PURCHASING A QUALIFIED CONTRACT, YOU SHOULD CONSULT WITH YOUR PLAN
ADMINISTRATOR AND/OR A QUALIFIED TAX ADVISER. YOU ALSO SHOULD CONSULT WITH A
QUALIFIED TAX ADVISER AND/OR PLAN ADMINISTRATOR BEFORE YOU WITHDRAW ANY PORTION
OF YOUR CONTRACT VALUE.
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The tax rules applicable to Qualified Contracts and Qualified Plans,
including restrictions on contributions and distributions, taxation of
distributions and tax penalties, vary according to the type of Qualified Plan,
as well as the terms and conditions of the Plan itself. Various tax penalties
may apply to contributions in excess of specified limits, plan distributions
(including loans) that do not comply with specified limits, and certain other
transactions relating to such Plans. Accordingly, this summary provides only
general information about the tax rules associated with use of a Qualified
Contract in such a Qualified Plan. In addition, some Qualified Plans are
subject to distribution and other requirements that are not incorporated into
our administrative procedures. Owners, participants, and beneficiaries are
responsible for determining that contributions, distributions and other
transactions comply with applicable tax (and non-tax) law. Because of the
complexity of these rules, Owners, participants and beneficiaries are advised
to consult with a qualified tax adviser as to specific tax consequences.
We do not currently offer the Contracts in connection with all of the types
of Qualified Plans discussed below, and may not offer the Contracts for all
types of Qualified Plans in the future.
1. INDIVIDUAL RETIREMENT ANNUITIES ("IRAs").
In addition to "traditional" IRAs governed by Code Sections 408(a) and (b)
("Traditional IRAs"), there are Roth IRAs governed by Code Section 408A, SEP
IRAs governed by Code Section 408(k), and SIMPLE IRAs governed by Code Section
408(p). Also, Qualified Plans under Code Section 401, 403(b) or 457(b) that
include after-tax employee contributions may be treated as deemed IRAs subject
to the same rules and limitations as Traditional IRAs. Contributions to each of
these types of IRAs are subject to differing limitations. The following is a
very general description of each type of IRA for which a Contract is available.
(a) TRADITIONAL IRAs
Traditional IRAs are subject to limits on the amounts that may be
contributed each year (which contribution limits are scheduled to increase
over the next several years), the persons who may be eligible, and the time
when minimum distributions must begin. Depending upon the circumstances of
the individual, contributions to a Traditional IRA may be made on a
deductible or non-deductible basis. Failure to make required minimum
distributions ("RMDs") when the Owner reaches age 70 1/2 or dies, as
described below, may result in imposition of a 50% penalty tax on any
excess of the RMD amount over the amount actually distributed. In addition,
any amount received before the Owner reaches age 59 1/2 or dies is subject
to a 10% penalty tax on premature distributions, unless a special exception
applies, as described below. Under Code Section 408(e), an IRA may not be
used for borrowing (or as security for any loan) or in certain prohibited
transactions, and such a transaction could lead to the complete tax
disqualification of an IRA.
You (or your surviving spouse if you die) may rollover funds tax-free
from certain existing Qualified Plans (such as proceeds from existing
insurance contracts, annuity contracts or securities) into your Traditional
IRA under certain circumstances, as indicated below. However, mandatory tax
withholding of 20% may apply to any eligible rollover distribution from
certain types of Qualified Plan if the distribution is not transferred
directly to your Traditional IRA.
IRAs generally may not invest in life insurance contracts. However, an
annuity contract that is used as an IRA may provide a death benefit that
equals the greater of the premiums paid or the contract's cash value. The
Contract offers an enhanced death benefit that may exceed the greater of
the Contract Value or total premium payments. The tax rules are unclear as
to what extent an IRA can provide a death benefit that exceeds the greater
of the IRA's cash value or the sum of the premiums paid and other
contributions into the IRA. Please note that the IRA rider for the Contract
has provisions that are designed to maintain the Contract's tax
qualification as an IRA, and therefore could limit certain benefits under
the Contract (including endorsement, rider or option benefits) to maintain
the Contract's tax qualification.
(b) SEP IRAs
Code Section 408(k) provides for a Traditional IRA in the form of an
employer-sponsored defined contribution plan known as a Simplified Employee
Pension ("SEP") or a SEP IRA. A SEP IRA can have employer, employee and
salary reduction contributions, as well as higher overall contribution
limits than a Traditional IRA, but a SEP is also subject to special tax-
qualification requirements (e.g., on participation, nondiscrimination and
withdrawals) and sanctions. Otherwise, a SEP IRA is generally subject to
the same tax rules as for a Traditional IRA, which are described above.
Please note that the IRA rider for the Contract has provisions that are
designed to maintain the Contract's tax qualification as an IRA, and
therefore could limit certain benefits under the Contract (including
endorsement, rider or option benefits) to maintain the Contract's tax
qualification.
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(c) SIMPLE IRAs
The Savings Incentive Match Plan for Employees of Small Employers
("SIMPLE Plan") is a form of an employer-sponsored Qualified Plan that
provides IRA benefits for the participating employees ("SIMPLE IRAs").
Depending upon the SIMPLE Plan, employers may make plan contributions into
a SIMPLE IRA established by each eligible participant. Like a Traditional
IRA, a SIMPLE IRA is subject to the 50% penalty tax for failure to make a
full RMD, and to the 10% penalty tax on premature distributions, as
described below. In addition, the 10% penalty tax is increased to 25% for
amounts received during the 2-year period beginning on the date you first
participated in a qualified salary reduction arrangement pursuant to a
SIMPLE Plan maintained by your employer under Code Section 408(p)(2).
Contributions to a SIMPLE IRA may be either salary deferral contributions
or employer contributions, and these are subject to different tax limits
from those for a Traditional IRA. Please note that the SIMPLE IRA rider for
the Contract has provisions that are designed to maintain the Contract's
tax qualification as an SIMPLE IRA, and therefore could limit certain
benefits under the Contract (including endorsement, rider or option
benefits) to maintain the Contract's tax qualification.
A SIMPLE Plan may designate a single financial institution (a Designated
Financial Institution) as the initial trustee, custodian or issuer (in the
case of an annuity contract) of the SIMPLE IRA set up for each eligible
participant. However, any such Plan also must allow each eligible
participant to have the balance in his SIMPLE IRA held by the Designated
Financial Institution transferred without cost or penalty to a SIMPLE IRA
maintained by a different financial institution. Absent a Designated
Financial Institution, each eligible participant must select the financial
institution to hold his SIMPLE IRA, and notify his employer of this
selection.
If we do not serve as the Designated Financial Institution for your
employer's SIMPLE Plan, for you to use one of our Contracts as a SIMPLE
IRA, you need to provide your employer with appropriate notification of
such a selection under the SIMPLE Plan. If you choose, you may arrange for
a qualifying transfer of any amounts currently held in another SIMPLE IRA
for your benefit to your SIMPLE IRA with us.
(d) ROTH IRAs
Code Section 408A permits eligible individuals to establish a Roth IRA.
Contributions to a Roth IRA are not deductible, but withdrawals of amounts
contributed and the earnings thereon that meet certain requirements are not
subject to federal income tax. In general, Roth IRAs are subject to
limitations on the amounts that may be contributed by the persons who may
be eligible to contribute, certain Traditional IRA restrictions, and
certain RMD rules on the death of the Contract Owner. Unlike a Traditional
IRA, Roth IRAs are not subject to RMD rules during the Contract Owner's
lifetime. Generally, however, upon the Owner's death the amount remaining
in a Roth IRA must be distributed by the end of the fifth year after such
death or distributed over the life expectancy of a designated beneficiary.
The Owner of a Traditional IRA may convert a Traditional IRA into a Roth
IRA under certain circumstances. The conversion of a Traditional IRA to a
Roth IRA will subject the fair market value of the converted Traditional
IRA to federal income tax. In addition to the amount held in the converted
Traditional IRA, the fair market value may include the value of additional
benefits provided by the annuity contract on the date of conversion, based
on reasonable actuarial assumptions. Tax-free rollovers from a Roth IRA can
be made only to another Roth IRA and under limited circumstances, as
indicated below. Anyone considering the purchase of a Qualified Contract as
a Roth IRA or a "conversion" Roth IRA should consult with a qualified tax
adviser. Please note that the Roth IRA rider for the Contract has
provisions that are designed to maintain the Contract's tax qualification
as a Roth IRA, and therefore could limit certain benefits under the
Contract (including endorsement, rider or option benefits) to maintain the
Contract's tax qualification.
2. QUALIFIED PENSION OR PROFIT-SHARING PLAN OR SECTION 401(K) PLAN
Provisions of the Code permit eligible employers to establish a tax-
qualified pension or profit sharing plan (described in Section 401(a), and
Section 401(k) if applicable, and exempt from taxation under Section 501(a)).
Such a Plan is subject to limitations on the amounts that may be contributed,
the persons who may be eligible to participate, the amounts of "incidental"
death benefits, and the time when RMDs must commence. In addition, a Plan's
provision of incidental benefits may result in currently taxable income to the
participant for some or all of such benefits. Amounts may be rolled over tax-
free from a Qualified Plan to another Qualified Plan under certain
circumstances, as described below. Anyone considering the use of a Qualified
Contract in connection with such a Qualified Plan should seek competent tax and
other legal advice.
In particular, please note that these tax rules provide for limits on death
benefits provided by a Qualified Plan (to keep such death benefits "incidental"
to qualified retirement benefits), and a Qualified Plan (or a Qualified
Contract)
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often contains provisions that effectively limit such death benefits to
preserve the tax qualification of the Qualified Plan (or Qualified Contract).
In addition, various tax-qualification rules for Qualified Plans specifically
limit increases in benefit once RMDs begin, and Qualified Contracts are subject
to such limits. As a result, the amounts of certain benefits that can be
provided by any option under a Qualified Contract may be limited by the
provisions of the Qualified Contract or governing Qualified Plan that are
designed to preserve its tax qualification.
3. TAX SHELTERED ANNUITY UNDER SECTION 403(b) ("TSA")
Code Section 403(b) permits public school employees and employees of
certain types of charitable, educational and scientific organizations described
in Code Section 501(c)(3) to purchase a "tax-sheltered annuity" contract
("TSA") and, subject to certain limitations, exclude employer contributions to
a TSA from such an employee's gross income. Generally, such contributions may
not exceed the lesser of an annual dollar limit (e.g., $44,000 in 2006) or 100%
of the employee's "includable compensation" for his most recent full year of
service, subject to other adjustments. Special provisions may allow certain
employees to elect a different overall limitation.
A TSA is subject to a prohibition against distributions from the TSA
attributable to contributions made pursuant to a salary reduction agreement,
unless such distribution is made:
a. after the employee reaches age 59 1/2;
b. upon the employee's separation from service;
c. upon the employee's death or disability; or
d. in the case of hardship (and in the case of hardship, any income
attributable to such contributions may not be distributed).
Please note that the TSA rider for the Contract has provisions that are
designed to maintain the Contract's tax qualification as a TSA, and therefore
could limit certain benefits under the Contract (including endorsement, rider
or option benefits) to maintain the Contract's tax qualification. In
particular, please note that tax rules provide for limits on death benefits
provided by a Qualified Plan (to keep such death benefits "incidental" to
qualified retirement benefits), and a Qualified Plan (or a Qualified Contract)
often contains provisions that effectively limit such death benefits to
preserve the tax qualification of the Qualified Plan (or Qualified Contract).
In addition, various tax-qualification rules for Qualified Plans specifically
limit increases in benefits once RMDs begin, and Qualified Contracts are
subject to such limits. As a result, the amounts of certain benefits that can
be provided by any option under a Qualified Contract may be limited by the
provisions of the Qualified Contract or governing Qualified Plan that are
designed to preserve its tax qualification.
Amounts may be rolled over tax-free from a TSA to another TSA or Qualified
Plan (or from a Qualified Plan to a TSA) under certain circumstances, as
described below.
4. DEFERRED COMPENSATION PLANS UNDER SECTION 457 ("SECTION 457 PLANS")
Certain governmental employers, or tax-exempt employers other than a
governmental entity, can establish a Deferred Compensation Plan under Code
Section 457. For these purposes, a "governmental employer" is a State, a
political subdivision of a State, or an agency or an instrumentality of a State
or political subdivision of a State. A Deferred Compensation Plan that meets
the requirements of Code Section 457(b) is called an "Eligible Deferred
Compensation Plan" or "Section 457(b) Plan." Code Section 457(b) limits the
amount of contributions that can be made to an Eligible Deferred Compensation
Plan on behalf of a participant. In addition, under Code Section 457(d) a
Section 457(b) Plan may not make amounts available for distribution to
participants or beneficiaries before (1) the calendar year in which the
participant attains age 70 1/2, (2) the participant has a severance from
employment (including death), or (3) the participant is faced with an
unforeseeable emergency (as determined in accordance with regulations).
All of the assets and income of an Eligible Deferred Compensation Plan for
a governmental employer must be held in trust for the exclusive benefit of
participants and their beneficiaries. This trust requirement does not apply to
amounts under an Eligible Deferred Compensation Plan of a tax-exempt (non-
governmental) employer. In addition, this trust requirement does not apply to
amounts held under a Deferred Compensation Plan of a governmental employer that
is not a Section 457(b) Plan. However, where the trust requirement does not
apply, amounts held under a Section 457 Plan must remain subject to the claims
of the employer's general creditors.
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5. TAXATION OF AMOUNTS RECEIVED FROM QUALIFIED PLANS
Except under certain circumstances in the case of Roth IRAs, amounts
received from Qualified Contracts or Plans generally are taxed as ordinary
income under Code Section 72, to the extent that they are not treated as a tax-
free recovery of after-tax contributions or other "investment in the contract."
For annuity payments and other amounts received after the Annuity Commencement
Date from a Qualified Contract or Plan, the tax rules for determining what
portion of each amount received represents a tax-free recovery of "investment
in the contract" are generally the same as for Non-Qualified Contracts, as
described above.
For non-periodic amounts from certain Qualified Contracts or Plans, Code
Section 72(e)(8) provides special rules that generally treat a portion of each
amount received as a tax-free recovery of the "investment in the contract,"
based on the ratio of the "investment in the contract" over the Contract Value
at the time of distribution. However, in determining such a ratio, certain
aggregation rules may apply and may vary, depending on the type of Qualified
Contract or Plan. For instances, all Traditional IRAs owned by the same
individual are generally aggregated for these purposes, but such an aggregation
does not include any IRA inherited by such individual or any Roth IRA owned by
such individual.
In addition, penalty taxes, mandatory tax withholding or rollover rules may
apply to amounts received from a Qualified Contract or Plan, as indicated
below. Accordingly, you are advised to consult with a qualified tax adviser
before taking or receiving any amount (including a loan) from a Qualified
Contract or Plan.
6. PENALTY TAXES FOR QUALIFIED PLANS
Unlike Non-Qualified Contracts, Qualified Contracts are subject to federal
penalty taxes not just on premature distributions, but also on excess
contributions and failures to make required minimum distributions ("RMDs").
Penalty taxes on excess contributions can vary by type of Qualified Plan and
which person made the excess contribution (e.g., employer or an employee). The
penalty taxes on premature distributions and failures to make timely RMDs are
more uniform, and are described in more detail below.
(A) PENALTY TAXES ON PREMATURE DISTRIBUTIONS
Code Section 72(t) imposes a penalty income tax equal to 10% of the
taxable portion of a distribution from certain types of Qualified Plans
that is made before the employee reaches age 59 1/2. However, this 10%
penalty tax does not apply to a distribution that is either:
- made to a beneficiary (or to the employee's estate) on or after the
employee's death;
- attributable to the employee's becoming disabled under Code Section
72(m)(7);
- part of a series of substantially equal periodic payments (not less
frequently than annually -- "SEPPs") made for the life (or life
expectancy) of the employee or the joint lives (or joint life
expectancies) of such employee and a designated beneficiary ("SEPP
Exception"), and for certain Qualified Plans (other than IRAs) such a
series must begin after the employee separates from service;
- (except for IRAs) made to an employee after separation from service after
reaching age 55; or
- not greater than the amount allowable as a deduction to the employee for
eligible medical expenses during the taxable year.
In addition, the 10% penalty tax does not apply to a distribution from
an IRA that is either:
- made after separation from employment to an unemployed IRA owner for
health insurance premiums, if certain conditions are met;
- not in excess of the amount of certain qualifying higher education
expenses, as defined by Code Section 72(t)(7); or
- a qualified first-time home buyer and meets the requirements of Code
Section 72(t)(8).
If the taxpayer avoids this 10% penalty tax by qualifying for the SEPP
Exception and later such series of payments is modified (other than by
death or disability), the 10% penalty tax will be applied retroactively to
all the prior periodic payments (i.e., penalty tax plus interest thereon),
unless such modification is made after both (a) the employee has reached
age 59 1/2 and (b) 5 years have elapsed since the first of these periodic
payments.
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For any premature distribution from a SIMPLE IRA during the first 2
years that an individual participates in a salary reduction arrangement
maintained by that individual's employer under a SIMPLE Plan, the 10%
penalty tax rate is increased to 25%.
(B) RMDS AND 50% PENALTY TAX
If the amount distributed from a Qualified Contract or Plan is less than
the amount of the required minimum distribution ("RMD") for the year, the
participant is subject to a 50% penalty tax on the amount that has not been
timely distributed.
An individual's interest in a Qualified Plan generally must be
distributed, or begin to be distributed, not later than the Required
Beginning Date. Generally, the Required Beginning Date is April 1 of the
calendar year following the later of --
- the calendar year in which the individual attains age 70 1/2, or
- (except in the case of an IRA or a 5% owner, as defined in the Code) the
calendar year in which a participant retires from service with the
employer sponsoring a Qualified Plan that allows such a later Required
Beginning Date.
The entire interest of the individual must be distributed beginning no
later than the Required Beginning Date over --
- the life of the individual or the lives of the individual and a designated
beneficiary (as specified in the Code), or
- a period not extending beyond the life expectancy of the individual or the
joint life expectancy of the individual and a designated beneficiary.
If an individual dies before reaching the Required Beginning Date, the
individual's entire interest generally must be distributed within 5 years
after the individual's death. However, this RMD rule will be deemed
satisfied if distributions begin before the close of the calendar year
following the individual's death to a designated beneficiary and
distribution is over the life of such designated beneficiary (or over a
period not extending beyond the life expectancy of such beneficiary). If
such beneficiary is the individual's surviving spouse, distributions may be
delayed until the deceased individual would have attained age 70 1/2.
If an individual dies after RMDs have begun for such individual, any
remainder of the individual's interest generally must be distributed at
least as rapidly as under the method of distribution in effect at the time
of the individual's death.
The RMD rules that apply while the Contract Owner is alive do not apply
with respect to Roth IRAs. The RMD rules applicable after the death of the
Owner apply to all Qualified Plans, including Roth IRAs. In addition, if
the Owner of a Traditional or Roth IRA dies and the Owner's surviving
spouse is the sole designated beneficiary, this surviving spouse may elect
to treat the Traditional or Roth IRA as his or her own.
The RMD amount for each year is determined generally by dividing the
account balance by the applicable life expectancy. This account balance is
generally based upon the account value as of the close of business on the
last day of the previous calendar year. RMD incidental benefit rules also
may require a larger annual RMD amount. RMDs also can be made in the form
of annuity payments that satisfy the rules set forth in Regulations under
the Code relating to RMDs.
In addition, in computing any RMD amount based on a contract's account
value, such account value must include the actuarial value of certain
additional benefits provided by the contract. As a result, electing an
optional benefit under a Qualified Contract may require the RMD amount for
such Qualified Contract to be increased each year, and expose such
additional RMD amount to the 50% penalty tax for RMDs if such additional
RMD amount is not timely distributed.
7. TAX WITHHOLDING FOR QUALIFIED PLANS
Distributions from a Qualified Contract or Qualified Plan generally are
subject to federal income tax withholding requirements. These federal income
tax withholding requirements, including any "elections out" and the rate at
which withholding applies, generally are the same as for periodic and non-
periodic distributions from a Non-Qualified Contract, as described above,
except where the distribution is an "eligible rollover distribution" (described
below in "ROLLOVER DISTRIBUTIONS"). In the latter case, tax withholding is
mandatory at a rate of 20% of the taxable portion of the "eligible rollover
distribution," to the extent it is not directly rolled over to an IRA or other
Eligible Retirement Plan
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(described below in "ROLLOVER DISTRIBUTIONS"). Payees cannot elect out of this
mandatory 20% withholding in the case of such an "eligible rollover
distribution."
Also, special withholding rules apply with respect to distributions from
non-governmental Section 457(b) Plans, and to distributions made to individuals
who are neither citizens nor resident aliens of the United States.
Regardless of any "election out" (or any actual amount of tax actually
withheld) on an amount received from a Qualified Contract or Plan, the payee is
generally liable for any failure to pay the full amount of tax due on the
includable portion of such amount received. A payee also may be required to pay
penalties under estimated income tax rules, if the withholding and estimated
tax payments are insufficient to satisfy the payee's total tax liability.
8. ROLLOVER DISTRIBUTIONS
The current tax rules and limits for tax-free rollovers and transfers
between Qualified Plans vary according to (1) the type of transferor Plan and
transferee Plan, (2) whether the amount involved is transferred directly
between Plan fiduciaries (a "direct transfer" or a "direct rollover") or is
distributed first to a participant or beneficiary who then transfers that
amount back into another eligible Plan within 60 days (a "60-day rollover"),
and (3) whether the distribution is made to a participant, spouse or other
beneficiary. Accordingly, we advise you to consult with a qualified tax adviser
before receiving any amount from a Qualified Contract or Plan or attempting
some form of rollover or transfer with a Qualified Contract or Plan.
For instance, generally any amount can be transferred directly from one
type of Qualified Plan (e.g., a TSA) to the same type of Plan for the benefit
of the same individual, without limit (or federal income tax), if the
transferee Plan is subject to the same kinds of restrictions as the transferor
Plan (e.g., a TSA that is subject to the same kinds of salary reduction
restrictions). Such a "direct transfer" between the same kind of Plan is
generally not treated as any form of "distribution" out of such a Plan for
federal income tax purposes.
By contrast, an amount distributed from one type of Plan (e.g., a TSA) into
a different type of Plan (e.g., a Traditional IRA) generally is treated as a
"distribution" out of the first Plan for federal income tax purposes, and
therefore to avoid being subject to such tax, such a distribution must qualify
either as a "direct rollover" (made directly to another Plan fiduciary) or as a
"60-day rollover." The tax restrictions and other rules for a "direct rollover"
and a "60-day rollover" are similar in many ways, but if any "eligible rollover
distribution" made from certain types of Qualified Plan is not transferred
directly to another Plan fiduciary by a "direct rollover," then it is subject
to mandatory 20% withholding, even if it is later contributed to that same Plan
in a "60-day rollover" by the recipient.
Under Code Sections 402(f)(2)(A) and 3405(c)(3) an "eligible rollover
distribution" (which is both eligible for rollover treatment and subject to 20%
mandatory withholding absent a "direct rollover") is generally any distribution
to an employee of any portion (or all) of the balance to the employee's credit
in any of the following types of "Eligible Retirement Plans": (1) a Qualified
Plan under Code Section 401(a) ("Qualified 401(a) Plan"), (2) a qualified
annuity plan under Code Section 403(a) ("Qualified Annuity Plan"), (3) a TSA
under Code Section 403(b), or (4) a governmental Section 457(b) Plan. However,
an "eligible rollover distribution" does not include any distribution that is
either --
- an RMD amount;
- one of a series of substantially equal periodic payments (not less
frequently than annually) made either (i) for the life (or life
expectancy) of the employee or the joint lives (or joint life
expectancies) of the employee and a designated beneficiary, or (ii) for a
specified period of 10 years or more; or
- any distribution made upon hardship of the employee.
Before making an "eligible rollover distribution," a Plan administrator
generally is required under Code Section 402(f) to provide the recipient with
advance written notice of the "direct rollover" and "60-day rollover" rules and
the distribution's exposure to the 20% mandatory withholding if it is not made
by "direct rollover." Generally, under Code Sections 402(c), 403(b)(8) and
457(e)(16), a "direct rollover" or a "60-day rollover" of an "eligible rollover
distribution" can be made to a Traditional IRA or to another Eligible
Retirement Plan that agrees to accept such a rollover. However, the maximum
amount of an "eligible rollover distribution" that can qualify for a tax-free
"60-day rollover" is limited to the amount that otherwise would be includable
in gross income. By contrast, a "direct rollover" of an "eligible rollover
distribution" can include after-tax contributions as well, if the direct
rollover is made either to a Traditional IRA or to another form of Eligible
Retirement Plan that agrees to account separately for such a rollover,
including accounting for such after-tax amounts separately from the otherwise
taxable portion of this rollover. Separate accounting also is required for all
amounts (taxable or not) that are rolled into a governmental Section 457(b)
Plan from either a Qualified Section 401(a) Plan, Qualified Annuity Plan, TSA
or IRA. These amounts, when later distributed
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from the governmental Section 457(b) Plan, are subject to any premature
distribution penalty tax applicable to distributions from such a "predecessor"
Qualified Plan.
Rollover rules for distributions from IRAs under Code Sections 408(d)(3)
and 408A(d)(3) also vary according to the type of transferor IRA and type of
transferee IRA or other Plan. For instance, generally no tax-free "direct
rollover" or "60-day rollover" can be made between a "NonRoth IRA"
(Traditional, SEP or SIMPLE IRA) and a Roth IRA, and a transfer from NonRoth
IRA to a Roth IRA, or a "conversion" of a NonRoth IRA to a Roth IRA, is subject
to special rules. In addition, generally no tax-free "direct rollover" or "60-
day rollover" can be made between an "inherited IRA" (NonRoth or Roth) for a
beneficiary and an IRA set up by that same individual as the original owner.
Generally, any amount other than an RMD distributed from a Traditional or SEP
IRA is eligible for a "direct rollover" or a "60-day rollover" to another
Traditional IRA for the same individual. Similarly, any amount other than an
RMD distributed from a Roth IRA is generally eligible for a "direct rollover"
or a "60-day rollover" to another Roth IRA for the same individual. However, in
either case such a tax-free 60-day rollover is limited to 1 per year (365-day
period); whereas no 1year limit applies to any such "direct rollover." Similar
rules apply to a "direct rollover" or a "60-day rollover" of a distribution
from a SIMPLE IRA to another SIMPLE IRA or a Traditional IRA, except that any
distribution of employer contributions from a SIMPLE IRA during the initial 2-
year period in which the individual participates in the employer's SIMPLE Plan
is generally disqualified (and subject to the 25% penalty tax on premature
distributions) if it is not rolled into another SIMPLE IRA for that individual.
Amounts other than RMDs distributed from a Traditional or SEP IRA (or SIMPLE
IRA after the initial 2-year period) also are eligible for a "direct rollover"
or a "60-day rollover" to an Eligible Retirement Plan (e.g., a TSA) that
accepts such a rollover, but any such rollover is limited to the amount of the
distribution that otherwise would be includable in gross income (i.e., after-
tax contributions are not eligible).
Special rules also apply to transfers or rollovers for the benefit of a
spouse (or ex-spouse), Plan distributions of property, and obtaining a waiver
of the 60-day limit for a tax-free rollover from the IRS.
9. QUALIFIED HURRICANE RELIEF
The Katrina Emergency Tax Relief Act of 2005 ("KETRA"), signed by the
President on September 23, 2005, contains several provisions regarding
distributions from qualified plans for participants who were affected by
Hurricane Katrina. Generally, KETRA allows eligible persons to take
distributions from their retirement plans without being subject to the 10%
penalty on early distributions and permits the income portion of such
distribution to be included in taxable income ratably over a three-year period.
KETRA also allows such distributed amounts to be recontributed to the
retirement plan within three years and such re-contribution will be treated as
a rollover contribution, thus avoiding taxation of the distributed amounts. The
total amount of qualified KETRA distributions that an eligible person may
receive from all qualified plans is limited to $100,000. KETRA also provides
relief for certain qualified plan withdrawals made in connection with home
purchases which were cancelled because of Hurricane Katrina and modifies the
qualified plan loan rules for certain loans taken by eligible persons. These
qualified plan provisions of KETRA were extended to certain victims of
Hurricanes Rita and Wilma through the enactment of the Gulf Opportunity Zone
Act signed by the President on December 21, 2005. The IRS is preparing further
guidance regarding these relief provisions for the victims of the Hurricanes
and is drafting Form 8915 for use by eligible persons for reporting qualified
plan distributions and determining the amount to be included in taxable income.
You should check the IRS's web site to determine if your residence was in an
area of hurricane impact which entitles you to the relief being sought. KETRA
and the Gulf Opportunity Zone Act contain tax relief provisions in addition to
the qualified plan provisions described above and the IRS has designated areas
in the hurricane impacted states for different types of tax relief.
HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company is the issuer of the Contract. Hartford
Life Insurance Company is a life insurance company organized under the laws of
Connecticut. Our Home Office is located at 200 Hopmeadow Street, Simsbury, CT
06089.
Hartford Life Insurance Company and its subsidiaries ("Hartford Life
Insurance Company" or the "Company"), is a direct subsidiary of Hartford Life
and Accident Insurance Company ("HLA"), a wholly owned subsidiary of Hartford
Life, Inc. ("Hartford Life"). Hartford Life is an indirect subsidiary of The
Hartford Financial Services Group, Inc. ("The Hartford"). The Company, together
with HLA, provides (i) retail and institutional investment products, including
variable annuities, fixed market value adjusted ("MVA") annuities, private
placement life insurance, which includes life insurance products purchased by a
company on the lives of its employees, and retirement plan services for the
savings
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and retirement needs of over 5.0 million customers, (ii) life insurance for
wealth protection, accumulation and transfer needs for approximately 738,000
customers, (iii) group benefits products such as group life and group
disability insurance for the benefit of millions of individuals and (iv) fixed
annuity products through its international operations. The Company is one of
the largest sellers of individual variable annuities, variable universal life
insurance and group disability insurance in the United States. The Company's
strong position in each of its core businesses provides an opportunity to
increase the sale of the Company's products and services as individuals
increasingly save and plan for retirement, protect themselves and their
families against the financial uncertainties associated with disability or
death and engage in estate planning.
Hartford Life Insurance Company is licensed to operate in the District of
Columbia and all jurisdictions. We intend to offer the Contract in any
jurisdictions in which we are licensed.
LEGAL OPINIONS
The validity of the interests in the Contracts described in this Prospectus
will be passed upon for Hartford by Christopher M. Grinnell, Senior Counsel and
Assistant Vice President of Hartford.
EXPERTS
The consolidated financial statements and related financial statement
schedules incorporated in this prospectus by reference from the Company's
Annual Report on Form 10-K for the year ended December 31, 2005 have been
audited by Deloitte & Touche LLP, an independent registered public accounting
firm, as stated in their report dated February 22, 2006 (which report expresses
an unqualified opinion and includes an explanatory paragraph relating to the
Company's change in its method of accounting and reporting for certain
nontraditional long-duration contracts and for separate accounts in 2004) which
is incorporated herein by reference, and has been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended March 31, 2006 and 2005 which is incorporated herein by reference,
Deloitte & Touche LLP, an independent registered public accounting firm, have
applied limited procedures in accordance with the standards of the Public
Company Accounting Oversight Board (United States) for a review of such
information. However, as stated in their reports included in the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 and
incorporated by reference herein, they did not audit and they do not express an
opinion on that interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. Deloitte & Touche LLP are
not subject to the liability provisions of Section 11 of the Securities Act of
1933 for their reports on the unaudited interim financial information because
those reports are not "reports" or a "part" of the registration statement
prepared or certified by an accountant within the meaning of Sections 7 and 11
of the Act.
23
<Page>
APPENDIX A
MARKET VALUE ADJUSTMENT
The formula which will be used to determine the Market Value Adjustment is:
<Table>
[(1 + I)/(1 + J)](N/12)
I = The Guarantee Rate in effect for the Current Guarantee Period (expressed as a decimal, e.g., 1% = .01)
J = The Current Rate plus 0.25% (expressed as a decimal, e.g., 1% = .01) ineffect for durations equal to
the number of years remaining in the current Guarantee Period (years are rounded to the next highest
number of years). If not available, the Company will utilize a rate equal to the most recent Moody's
Corporate Bond Yield Average -- Monthly Average Corporate for the applicable duration plus 0.25% as
Published by Moody's Investors Service, Inc.
N = The number of complete months from the surrender date to the end of the current Guarantee Period.
</Table>
> Example of Market Value Adjustment
<Table>
Beginning Account Value: $50,000
Guarantee Period: 5 Years
Guarantee Rate: 7.5% per annum
Full Surrender: Middle of Certificate Year 3
</Table>
> Example 1:
<Table>
Gross Surrender Value at middle of Certificate Year 3 = 50,000 (1.075) TO THE POWER OF (2.5)
=59,908.86
Net Surrender Value at middle of Certificate Year 3 = [59,908.86] x Market Value Adjustment
Market Value Adjustment
I = .075
J = .08
N = 30
Market Value Adjustment = [(1 + I)/(1 +J)] TO THE POWER OF (N/12)
= (1.075/1.08) TO THE POWER OF (30/12)
= 0.988466
Net Surrender Value at middle of Certificate Year 3 = $59,908.86 x0.988466
= $59,217.87
</Table>
> Example of Market Value Adjustment
<Table>
Beginning Account Value: $50,000
Guarantee Period: 5 Years
Guarantee Rate: 7.5% per annum
Full Surrender: Middle of Certificate Year 3
</Table>
24
<Page>
> Example 2:
<Table>
Gross Surrender Value at middle of Certificate Year 3 = 50,000 (1.075) TO THE POWER OF (2.5)
=59,908.86
Net Surrender Value at middle of Certificate Year 3 = [59,908.86] x Market Value Adjustment
Market Value Adjustment
I = .075
J = .07
N = 30
Market Value Adjustment = [(1 + I)/(1 + J)] TO THE POWER OF (N/12)
= (1.075/1.07) TO THE POWER OF (30/12)
= 1.011723
Net Surrender Value at middle of Certificate Year 3 = $59,908.86 x1.011723
= $60,611.18
</Table>
25