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CRC(R) COMPOUND RATE CONTRACT
MODIFIED GUARANTEED ANNUITY CONTRACT
HARTFORD LIFE INSURANCE COMPANY
P.O. BOX 5085
HARTFORD, CONNECTICUT 06102-5085
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TELEPHONE: 1-800-862-6668
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[THE HARTFORD LOGO]
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This Prospectus describes participating interests in a group deferred annuity
Contract and individual deferred annuity Contracts. Both are designed and
offered to provide retirement programs for you if you are an eligible
individual. With respect to the group Contract, eligible individuals include
persons who have established accounts with certain broker-dealers which have
entered into a distribution agreement to offer participating interests in the
Contract, and members of other eligible groups. (See "Distribution of
Contracts"). An individual deferred annuity Contract is offered in certain
states and to certain trusts. Certain Qualified Plans may also purchase the
Contract. (See Appendix A).
For a description of individual Contracts issued in certain states where this
Contract has not been approved, see Appendix B. Participation in a group
Contract will be separately accounted for by the issuance of a Certificate
evidencing your interest under the Contract. Participation in an individual
Contract is evidenced by the issuance of an individual annuity Contract. The
Certificate and individual annuity Contract are hereafter referred to as the
"Contract."
A minimum single purchase payment of at least $5,000 for Non-Qualified
Contracts ($2,000 for Qualified Contracts) must accompany the application for a
Contract. Hartford Life Insurance Company ("Hartford") reserves the right to
limit the maximum single purchase payment amount. No additional payment is
permitted on a Contract although eligible individuals may purchase more than
one Contract. (See "Application and Purchase Payment").
Purchase payments become part of the general assets of Hartford. Hartford
intends generally to invest proceeds from the Contracts in investment-grade
securities. (See "Investments by Hartford").
THIS PROSPECTUS IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
SECURITIES AND EXCHANGE COMMISSION DOESN'T APPROVE OR DISAPPROVE THESE
SECURITIES OR DETERMINE IF THE INFORMATION 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).
Annuity contracts ARE NOT:
- - A bank deposit or obligation
- - Federally insured
- - Endorsed by any bank or governmental agency
This annuity may not be available for sale in all states.
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PROSPECTUS DATED: MAY 1, 2006
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2 HARTFORD LIFE INSURANCE COMPANY
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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 Section 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, P.O. Box
5085, Hartford, Connecticut 06102-5085, telephone: 1-800-862-6668.
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HARTFORD LIFE INSURANCE COMPANY 3
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TABLE OF CONTENTS
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PAGE
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SUMMARY 5
GLOSSARY OF SPECIAL TERMS 6
DESCRIPTION OF CONTRACTS 7
A. Application and Purchase Payment 7
B. Accumulation Period 7
1. Initial and Subsequent Guarantee Periods 7
2. Establishment of Guarantee Rates and Current Rates 8
3. Surrenders 8
(a) General 8
(b) Surrender Charge 9
(c) Market Value Adjustment 9
(d) Special Surrenders 9
4. Guarantee Period Exchange Option 10
5. Premium Taxes 10
6. Death Benefit 10
7. Payment Upon Partial or Full Surrender 10
C. Annuity Period 11
1. Electing the Annuity Commencement Date and Form of Annuity 11
2. Change of Annuity Commencement Date or Annuity Option 11
3. Annuity Options 11
4. Annuity Payment 11
5. Death of Annuitant After Annuity Commencement Date 12
INVESTMENTS BY HARTFORD 12
AMENDMENT OF CONTRACTS 12
ASSIGNMENT OF CONTRACTS 12
DISTRIBUTION OF CONTRACTS 13
FEDERAL TAX CONSIDERATIONS 14
A. Introduction 14
B. Taxation of Hartford 15
C. Taxation of Annuities -- General Provisions Affecting Contracts Not Held in Tax-Qualified Retirement Plans 15
1. Non-Natural Persons as Owners 15
2. Other Contract Owners (Natural Persons) 15
a. Distributions Prior to the Annuity Commencement Date 15
b. Distributions After Annuity Commencement Date 16
c. Aggregation of Two or More Annuity Contracts 16
d. 10% Penalty Tax -- Applicable to Certain Surrenders and Annuity Payments 16
e. Special Provisions Affecting Contracts Obtained through a Tax-Free Exchange of Other Annuity or Life
Insurance Contracts Purchased Prior to August 14, 1982 17
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4 HARTFORD LIFE INSURANCE COMPANY
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PAGE
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f. Required Distributions 17
g. Addition of Riders 17
h. Partial Exchanges 17
D. Federal Income Tax Withholding 18
E. General Provisions Affecting Qualified Retirement Plans 18
F. Annuity Purchases By Nonresident Aliens and Foreign Corporations 18
G. Estate, Gift and Generation-Skipping Transfer Tax and Related Tax Considerations 18
INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS 18
THE COMPANY 22
Business of Hartford Life Insurance Company
LEGAL OPINION 22
EXPERTS 22
APPENDIX A -- MODIFIED GUARANTEED ANNUITY FOR QUALIFIED PLANS 23
APPENDIX B -- SPECIAL PROVISIONS FOR INDIVIDUAL CONTRACTS ISSUED IN THE STATES OF CALIFORNIA, MICHIGAN, MISSOURI, NEW
YORK, OREGON, SOUTH CAROLINA, TEXAS, VIRGINIA AND WISCONSIN 24
APPENDIX C -- MARKET VALUE ADJUSTMENT 25
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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.
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HARTFORD LIFE INSURANCE COMPANY 5
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SUMMARY
Upon application, or purchase order, you select an initial Guarantee Period
from among those then offered by Hartford. (See "Initial and Subsequent
Guarantee Periods" and "Establishment of Guarantee Rates and Current Rates").
Your purchase payment (less surrenders and less applicable premium taxes, if
any) will earn interest at the initial Guarantee Rate which is an Annual
Effective Rate of Interest. Interest is credited daily to your account using
the Compound Interest Method. (See "Accumulation Period -- Initial and
Subsequent Guarantee Periods").
At the end of each Guarantee Period, a subsequent Guarantee Period of the same
duration will begin unless, within the 30-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, partial and total surrenders are permitted.
However, such surrenders may be subject to a surrender charge and/or a Market
Value Adjustment. A full or partial surrender made preceding the end of a
Guarantee Period will be subject to a Market Value Adjustment. Except as
described below, the surrender charge will be deducted from any partial or full
surrender made before the end of the seventh Contract Year. The surrender
charge will be equal to seven percent of the Gross Surrender Value in the first
Contract Year, and be reduced by one percentage point for each of the next six
Contract Years.
For a surrender made at the end of the initial guarantee period, no surrender
charge will be applied, provided such surrender occurs on or after the end of
the third contract year. For a surrender made at the end of any other guarantee
period, no surrender charge will be applied, provided such surrender occurs on
or after the end of the fifth contract year. A request for surrender at the end
of a guarantee period must be received in writing within 30 days preceding the
end of the guarantee period. A Market Value Adjustment will not be applied.
No surrender charges will be applicable to the application of your Account
Value to purchase an annuity on the Annuity Commencement Date. A Market Value
Adjustment will be applied if the Annuity Commencement Date is not at the end
of a Guarantee Period. To elect an Annuity Option you must notify us at least
30 days before the Annuity Commencement Date.
In addition, we will send you any interest that has been credited during the
prior 12 months if you so request in writing. We will not impose any surrender
charge or Market Value Adjustment on such interest payments. Any such surrender
may, however, be subject to tax. (See "Surrenders" and "Federal Tax
Considerations").
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 applicable Guarantee Rate being applied to your Account
Value. Since Current Rates may reflect, in part, 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 Contract, the amount you would receive upon a full
surrender of your Contract 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 any partial or full surrender for a period not
exceeding six months from the date of our receipt of your written notice of
surrender or the period permitted by state insurance law, if less. Such a
deferral of payment will be for a period greater than 30 days only under highly
unusual circumstances. Interest of at least 4 1/2% 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 Contract provides for a Death Benefit. If the Annuitant dies before the
Annuity Commencement Date and there is no designated Contingent Annuitant
surviving, or if the Participant dies before the Annuity Commencement Date, the
Death Benefit will be payable to the Beneficiary as determined under the
Contract Control Provisions. With regard to joint Participants, at the first
death of a joint Participant preceding the Annuity Commencement Date, the
Beneficiary will be the surviving Participant notwithstanding that the
designated Beneficiary may be different. The Death Benefit is calculated as of
the date we receive written notification of Due Proof of Death at the offices
of Hartford.
The Death Benefit will equal the Account 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
Contract. (See "Death Benefit").
A deduction will be made for premium taxes for Contracts sold in certain
states. (See "Premium Taxes").
Certain special provisions apply only with respect to Contracts issued in the
states of California, Michigan, Missouri, New York, Oregon, South Carolina,
Texas, Virginia and Wisconsin. These are set forth in detail in Appendix B.
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6 HARTFORD LIFE INSURANCE COMPANY
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For Contracts issued as individual retirement annuities, Hartford will refund
the purchase payment to the Participant if the Contract is returned to Hartford
within seven days after Contract delivery.
GLOSSARY OF SPECIAL TERMS
In this Prospectus, "we," "us," and "our" refer to Hartford Life Insurance
Company. With respect to a group deferred annuity Contract, "you," "yours," and
"Participant" refer to a person/persons who has/have been issued a Certificate.
With respect to an individual annuity Contract, "you," "yours," and
"Participant" refer to a person/persons who has/have been issued a Contract.
In addition, as used in this Prospectus, the following terms have the indicated
meanings:
ACCOUNT VALUE: As of any date on which the New York Stock Exchange is open for
business, the Account Value is the sum of the purchase payment and all interest
earned to date less the sum of the Gross Surrender Value of any surrenders made
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 surrenders are made
during the year). If interest surrenders 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 Annuity payments are issued.
ANNUITY COMMENCEMENT DATE: The date designated in the Contract or otherwise by
the Participant on which annuity payments are to start.
BENEFICIARY: The person entitled to receive benefits per the terms of the
Contract in case of the death of the Annuitant or the Participant or Joint
Participant, as applicable.
COMPOUND INTEREST METHOD: The process of interest being reinvested to earn
additional interest on a daily basis. This method results in an exponential
calculation of daily interest.
CONTRACT: For a group annuity Contract, "Contract" means the Certificate
evidencing a participating interest in the group annuity Contract as set forth
in this Prospectus. Any reference in this Prospectus to "Contract" includes the
underlying group annuity Contract. For an individual annuity Contract,
"Contract" means that individual annuity contract.
CONTRACT DATE: The effective date of Participant's participation under the
group annuity Contract, as designated in the Contract, or the date of issue of
an individual annuity Contract.
CONTRACT YEAR: A continuous 12 month period commencing on the Contract Date and
each anniversary thereof.
CONTINGENT ANNUITANT: The person so designated by the Participant, who upon the
Annuitant's death, prior to the Annuity Commencement Date, becomes the
Annuitant.
CURRENT RATE: The applicable interest rate contained in a schedule of rates
established by us from time to time for various durations.
DUE PROOF OF DEATH: A certified copy of a 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 Hartford.
GROSS SURRENDER VALUE: As of any date, that portion of the Account Value
specified by you for a full or a partial surrender.
GUARANTEE PERIOD: The period for which either an initial Guarantee Rate or
Subsequent Guarantee Rate is credited.
HARTFORD: Hartford Life Insurance Company.
GUARANTEE RATE: The rate of interest credited and compounded annually during
the Guarantee Period.
IN WRITING: A written form satisfactory to us and received at our offices,
Attn.: Individual Product Services, P.O. Box 5085, Hartford, Connecticut 06102-
5085.
MARKET VALUE ADJUSTMENT: A positive or negative financial adjustment made in
connection with a full or partial surrender or annuitization during a Guarantee
Period. The adjustment will reflect the relationship between the Current Rate
for a new contract of the duration remaining in the Guarantee Period(s) at
surrender or upon annuitization during a Guarantee Period and the interest rate
for the Guarantee Period then applicable under the Contract.
NET SURRENDER VALUE: The amount payable to you on a full or partial surrender
under the Contract after the application of any Contract charges and/or Market
Value Adjustment.
NON-QUALIFIED CONTRACT: A Contract which is not classified as, or issued in
connection with, a tax-qualified retirement plan using pre-tax dollars under
the Internal Revenue Code of 1986, as amended (the "Code").
PURCHASE PAYMENT: The payment made to Hartford pursuant to the terms of the
Contract.
QUALIFIED CONTRACT: A Contract which qualifies as, or issued in connection
with, a tax-qualified retirement plan using pre-tax dollars under the Code,
such as an employer-sponsored Section 401(k) plan or an eligible state deferred
compensation plan under Section 457.
SUBSEQUENT GUARANTEE RATE: The rate of interest established by us for the
applicable subsequent Guarantee Period.
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HARTFORD LIFE INSURANCE COMPANY 7
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DESCRIPTION OF CONTRACTS
A. APPLICATION AND PURCHASE PAYMENT
To apply for a Contract, you must complete an application form or an order to
purchase. The application, along with your purchase payment, must be submitted
to Hartford for its approval.
The Contracts are issued within a reasonable time after the payment of a single
purchase payment. You may not contribute additional purchase payments to a
Contract in the future. You may, however, purchase additional Contracts, if you
are an eligible individual, at then-prevailing Guarantee Rates and terms.
The minimum purchase payment for a Contract is $5,000 for Non- Qualified
Contracts ($2,000 for Qualified Contracts). 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. We will generally confirm your purchase payment
in writing within five business days of receipt. 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 application, you will select the duration of your Initial Guarantee Period
from among those durations offered by us. The duration you select will
determine your initial Guarantee Rate. Your purchase payment (less surrenders
and less applicable premium taxes, if any) will earn interest at the 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 surrenders are made during the year, interest on
the amount of the surrenders is lost for the remainder of the year.
Set forth below is an illustration of how interest would be credited to your
Account Value during each Guarantee Period, using a five year Guarantee Period.
For the purpose of this example, we have made the assumptions.
No full or partial surrenders or pre-authorized distributions of interest
during the entire five year period. A Market Value Adjustment, surrender
charge, or both may apply to any such surrenders or distributions (see
"Surrenders"). The hypothetical interest rates are illustrative only and are
not intended to predict future interest rates to be declared under the
contract. Actual interest rates declared for any given time may be more or less
than those shown.
EXAMPLE OF COMPOUNDING AT THE INITIAL GUARANTEE RATE
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Beginning Account Value: $50,000
Guarantee Period: 5 years
Guarantee Rate: 5.50% per annum
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<Table>
<Caption>
END OF CONTRACT YEAR:
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
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Beginning Account Value.................................... $ 50,000.00
(1+Guarantee Rate)...................................... 1.055
$ 52,750.00
Account Value at end of Contract Year 1.................... $ 52,750.00
x (1+Guarantee Rate)....................................... 1.055
$ 55,651.25
Account Value at end of Contract Year 2.................... $ 55,651.25
x (1+Guarantee Rate)....................................... 1.055
$ 58,712.07
Account Value at end of Contract Year 3.................... $ 58,712.07
x (1+Guarantee Rate)....................................... 1.055
$ 61,941.23
Account Value at end of Contract Year 4.................... $ 61,941.23
x (1+Guarantee Rate)....................................... 1.055
$ 65,348.00
Account Value at end of Guarantee Period................... $ 65,348.00
</Table>
<Table>
Total Interest Credited in Guarantee Period......................... $65,348.00 - 50,000.00 = $15,348.00
Account Value at end of Guarantee Period............................ $50,000.00 + 15,348.00 = $65,348.00
Account Value after 180 days from the Contract Date................. $50,000 x (1.055)(180/365) = $51,337.77
</Table>
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8 HARTFORD LIFE INSURANCE COMPANY
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Unless you elect to make a surrender (see "Surrenders"), a subsequent Guarantee
Period will automatically commence at the end of a Guarantee Period. Each
subsequent Guarantee Period will be of the same duration as the previous
Guarantee Period unless you elect in writing, on any day within the 30 day
period preceding the end of the current Guarantee Period, a Guarantee Period of
a different duration from among those offered by us at that time. Under a
program currently offered by Hartford, this 30-day period is extended to 90
days, however a Market Value Adjustment will apply to your current Account
Value if you do not elect the subsequent Guarantee Period during the 30-day
period preceding the end of the current Guarantee Period. Hartford may
discontinue this program at any 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 (less surrenders made after the beginning of the subsequent
Guarantee Period) will earn interest compounded annually at the Subsequent
Guarantee Rate.
Within 30 days preceding the end of a Guarantee Period, we will notify you that
the current rate Guarantee Period is expiring.
2. ESTABLISHMENT OF GUARANTEE RATES AND CURRENT RATES
You will know the initial Guarantee Rate for the Guarantee Period you choose at
the time you purchase your Contract. Current Rates will be established
periodically along with the Guarantee Rates which will be applicable to
subsequent Guarantee Periods. After the end of each Contract Year, we will send
you a statement which will show (a) your Account Value as of the end of the
preceding Contract Year, (b) all transactions regarding your Contract during
the Contract Year, (c) your Account Value at the end of the current Contract
Year, and (d) the rate of interest being credited to your Contract.
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 may reflect, in part, the
income anticipated from the types of debt instruments in which Hartford intends
to invest the proceeds attributable to the Contracts. (See "Investments by
Hartford"). In addition, Hartford's management may also consider various other
factors in determining Current Rates and Guarantee Rates for given periods,
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 Rates and
Guarantee Rates to be declared. We cannot predict, nor can we guarantee, future
current rates or guarantee rates.
Under a program currently offered by Hartford, you may exchange your Contract
for a new CRC Contract and receive an enhanced rate. You must elect for this
program in writing within the 90-day period preceding the end of the current
Guarantee Period. A Market Value Adjustment will apply to your current Account
Value if this election is not made within the 30-day period preceding the end
of the current Guarantee Period. A new surrender charge schedule will begin
under the new Contract. This program is not available if your Contract is less
than five years old unless this will be the first renewal of an initial three-
year Guarantee Period. Hartford may discontinue or modify this program at any
time.
3. SURRENDERS
(A) GENERAL
Full surrenders may be made under a Contract at any time. Partial surrenders
may only be made if:
i. the Gross Surrender Value is at least $1,000; and
ii. the remaining Account Value after the Gross Surrender Value has been
deducted is at least $5,000.
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 = the surrender charge plus any unpaid premium tax; and
C = the Market Value Adjustment.
Hartford will, upon request, inform you of the amount payable upon a full or
partial surrender.
Any full, partial or special surrender may be subject to tax. (See "Federal Tax
Considerations")
THERE ARE CERTAIN RESTRICTIONS ON SECTION 403(b) TAX-SHELTERED ANNUITIES. AS OF
DECEMBER 31, 1988, ALL SECTION 403(b) ANNUITIES HAVE LIMITS ON FULL AND PARTIAL
SURRENDERS. CONTRIBUTIONS TO THE CONTRACT MADE AFTER DECEMBER 31, 1988 AND ANY
INCREASES IN CASH VALUE AFTER DECEMBER 31, 1988 MAY NOT BE DISTRIBUTED UNLESS
THE CONTRACT OWNER/EMPLOYEE HAS: (A) ATTAINED AGE 59 1/2, (B) TERMINATED
EMPLOYMENT, (C) DIED, (D) BECOME DISABLED, OR (E) EXPERIENCED FINANCIAL
HARDSHIP.
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HARTFORD LIFE INSURANCE COMPANY 9
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DISTRIBUTIONS DUE TO FINANCIAL HARDSHIP OR SEPARATION FROM SERVICE MAY STILL BE
SUBJECT TO A PENALTY TAX OF 10%.
HARTFORD WILL NOT ASSUME ANY RESPONSIBILITY IN DETERMINING WHETHER A SURRENDER
IS PERMISSIBLE, WITH OR WITHOUT TAX PENALTY, IN ANY PARTICULAR SITUATION OR IN
MONITORING SURRENDER REQUESTS REGARDING PRE- OR POST- JANUARY 1, 1989 ACCOUNT
VALUES.
(B) SURRENDER CHARGE
No deduction for a sales charge is made from the purchase payment when
received. A surrender charge, however, may be deducted from the Gross Surrender
Value (before application of any Market Value Adjustment) of any partial or
full surrender made before the end of the seventh Contract Year regardless of
the length of Guarantee Periods, as follows:
<Table>
<Caption>
SURRENDER CHARGE AS
CONTRACT YEAR IN WHICH PERCENTAGE OF GROSS
SURRENDER IS MADE SURRENDER VALUE
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1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
Thereafter 0%
</Table>
No surrender charge will be made for surrenders after Contract Year 7 or
certain surrenders effective at the end of a Guarantee Period. (See "Special
Surrenders").
The surrender charge may be reduced if you are surrendering to purchase a
variable annuity contract issued by Hartford or an affiliate of Hartford.
For example, assume you select an initial Guarantee Period of five years and
then you take no action to change the duration of the second Guarantee Period,
resulting in a second Guarantee Period also with a duration of five years. Any
surrenders made during the sixth Contract Year will be subject to a two percent
surrender charge even though you could have made a surrender of up to the
Account Value at the end of the initial five year Guarantee Period which would
not have been subject to a surrender charge.
(C) MARKET VALUE ADJUSTMENT
The amount payable on a partial or full surrender made during 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, net of any surrender charge.
In the case of either a partial or 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 Contract.
Generally, if your Guarantee Rate is lower than the applicable Current Rate,
then the application of the Market Value Adjustment will reduce the payment
upon surrender.
Similarly, if your Guarantee Rate is higher than the applicable Current Rate,
the application of the Market Value Adjustment will increase the payment upon
surrender.
For example, assume you purchase a Contract and select an initial Guarantee
Period of ten years and our Guarantee Rate for that duration is 8% per annum.
Assume that at the end of seven years you make a partial surrender. If the
three year Current Rate is then 6%, the amount payable upon partial 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, 10%), the application of the Market Value Adjustment will cause a
decrease in the amount payable to you upon this partial surrender.
Since Current Rates may reflect, in part, the investment yields available to
Hartford (see "Investments By Hartford"), the Market Value Adjustment may also
reflect, in part, the levels of such yields. It is possible, therefore, that
should such yields increase significantly from the time you purchased your
Contract, coupled with the application of the surrender charges, the amount you
would receive upon a full surrender of your Contract could be less than your
original purchase payment.
The formula for calculating the Market Value Adjustment is set forth in
Appendix C, which also contains an additional illustration of the application
of the Market Value Adjustment.
(D) SPECIAL SURRENDERS
No surrender charge is imposed:
(1) Upon a surrender made at the end of the initial Guarantee Period,
provided such surrender occurs on or after the end of the third Contract
Year.
(2) Upon a surrender made at the end of any subsequent Guarantee Period,
provided such surrender occurs on or after the end of the fifth Contract
Year.
A request for surrender at the end of a Guarantee Period pursuant to (1) and
(2) above must be received in writing by Hartford during the 30 day period
preceding the end of that Guarantee Period. Under a program currently offered
by Hartford, this period is extended to 90 days if you exchange your Contract
for a variable or other annuity issued by Hartford or an affiliate. Hartford
may discontinue or modify this program at any time.
(3) Upon the application of your Account Value to purchase an annuity on the
Annuity Commencement Date. A Market Value Adjustment will be applied if the
Annuity Commencement Date is not at the end of a Guarantee Period. To elect
an Annuity Option, Hartford must receive your
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10 HARTFORD LIFE INSURANCE COMPANY
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notice in writing 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 12 months if you so request in writing. No surrender charge or Market
Value Adjustment will apply to such interest payments. Any such surrender may,
however, be subject to tax.
For certain tax-qualified plans, we reserve the right to offer by rider an
extended surrender privilege, without imposing a surrender charge or Market
Value Adjustment.
4. GUARANTEE PERIOD EXCHANGE OPTION
Once each Contract Year you may elect to transfer from your current rate
Guarantee Period into a new rate Guarantee Period of a different duration. A
Market Value Adjustment will be applied to your current Account Value at the
time of transfer. There will be no surrender charge for this exchange.
Surrender charges will continue to be based on time elapsed from the original
Contract Date. While we currently do not impose a transfer charge, Hartford
reserves the right to charge a fee of up to $50 for each transfer.
5. PREMIUM TAXES
A deduction is also made for premium taxes, if applicable, imposed by a state
or other governmental entity, generally ranging up to 5.0%. Some states assess
the tax at the time purchase payments are made; others assess the tax when
annuity payments begin. 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.
6. DEATH BENEFIT
If the Annuitant dies before the Annuity Commencement Date and there is no
designated Contingent Annuitant surviving, or if the Participant dies before
the Annuity Commencement Date, the Death Benefit will be payable to the
Beneficiary as determined under the Contract Control Provisions. With regard to
Joint Participants, at the first death of a Joint Participant preceding the
Annuity Commencement Date, the Beneficiary will be the surviving Participant,
notwithstanding that the Designated Beneficiary may be different. The Death
Benefit is calculated as of the date we receive at the offices of Hartford
written notification of Due Proof of Death. The Death Benefit will equal the
Account 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 a 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 five years of the date of death; and (b) in the event of the
death of a Participant or Annuitant which occurs 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. 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 sole
Beneficiary may elect, in lieu of receiving the Death Benefit, to be treated as
the Participant.
If the Contract 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 Contract Owner died on the
date of the Annuitant's death.
Proceeds from the Death Benefit may be left with Hartford for a period not to
exceed five years from the date of the Participant's death preceding the
Annuity Commencement Date. The proceeds will remain in the same Guarantee
Period and continue to earn the same interest rate as at the time of death. If
the Guarantee Period ends before the end of the five year period, the
Beneficiary may elect a new Guarantee Period with a duration closest to but not
to exceed the time remaining in the period of five years from the date of the
Participant's death. Full or partial surrenders may be made at any time. In the
event of surrenders, the remaining value will equal the proceeds left with
Hartford, minus any surrenders, plus any interest earned. A Market Value
Adjustment will be applied to all surrenders except those occurring at the end
of a Guarantee Period.
The Beneficiary of a non-qualified Contract or IRA may also elect the "Single
Life Expectancy Only" option. This option allows the Beneficiary to take the
Death Benefit in a series of payments spread over a period equal to the
Beneficiary's remaining life expectancy. Distributions are calculated based on
IRS life expectancy tables. This option is subject to different limitations and
conditions depending on whether the Contract is non-qualified or an IRA.
7. PAYMENT UPON PARTIAL OR FULL SURRENDER
We may defer payment of any partial or full surrender for a period not
exceeding six months from the date of our receipt of your notice of surrender
or the period permitted by state insurance law, if less. We may defer a
surrender payment more than 30 days and, if we do, we will pay interest of at
least 4 1/2% 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 under the Contracts, accompanied by a radical shift in
interest rates. If we intend to withhold payment for more than 30 days, we will
notify you in writing. We will not, however, defer payment for more than 30
days as to any surrender which is to be effective at the end of any Guarantee
Period.
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HARTFORD LIFE INSURANCE COMPANY 11
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C. ANNUITY PERIOD
1. ELECTING THE ANNUITY COMMENCEMENT DATE AND FORM OF ANNUITY
Upon application for a Contract, 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 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, or a portion thereof multiplied by the
Market Value Adjustment (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 Life
Annuity with 120 Monthly Payments Certain. This Contract may not be surrendered
for its Termination Value after the commencement of annuity payments, except
with respect to proceeds from the Death Benefit remaining at Hartford.
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. Once Annuity
Payouts begin, you cannot change the Annuity Payout Option. Also, the proposed
Annuity Commencement Date may not be beyond the Annuitant's 90th birthday.
3. ANNUITY OPTIONS
Any one of the following Annuity Options may be elected:
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 preceding 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.
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.
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 (a) minus (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.
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 preceding the due date for the
second payment, and so on.
PAYMENTS FOR A DESIGNATED PERIOD
We will make Annuity Payments for the number of years that you select. You can
select any number of years between 5 and 100 years minus the Annuitant's age.
If, at the death of the Annuitant, Annuity Payments have been made for less
than the time period selected, then the Beneficiary may elect to continue the
remaining Annuity Payments or receive the commuted value in one sum.
The Tables in the Contract 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 and sex of the Annuitant at the time the first payment is due. Under the
Fourth Option, the amount of each payment will depend upon the sex of both
payees and their ages 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 appears more
favorable 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.
IMPORTANT INFORMATION: YOU CANNOT SURRENDER YOUR CONTRACT ONCE ANNUITY PAYMENTS
BEGIN.
FOR QUALIFIED CONTRACTS, IF YOU ELECT AN ANNUITY OPTION WITH 120, 180 OR 240
MONTHLY PAYMENTS CERTAIN, THE GUARANTEED NUMBER OF YEARS MUST BE LESS THAN THE
LIFE EXPECTANCY OF THE ANNUITANT AT THE TIME THE ANNUITY PAYMENTS BEGIN. WE
COMPUTE LIFE EXPECTANCY USING THE IRS MORTALITY TABLES.
AUTOMATIC ANNUITY PAYMENTS. If you do not elect an Annuity Option, annuity
payments will automatically begin on the Annuity Commencement Date under the
Life Annuity with 120 Monthly Payments Certain.
4. ANNUITY PAYMENT
The first payment under any Annuity Option will be made following the Annuity
Commencement Date. Subsequent payments will be made on the same day in
accordance with the manner of payment selected.
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12 HARTFORD LIFE INSURANCE COMPANY
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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 Hartford's rules then in effect. If at any
time payments are less than the minimum payment amount, Hartford 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, Hartford 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 Payments for a Designated Period 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 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 Contracts. (See "Establishment of
Guarantee Rates and Current Rate"). Hartford's investment strategy with respect
to the proceeds attributable to the Contracts 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 Contracts 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 Investors Services, Inc. or Standard & Poor's
Corporation 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 Contracts, we are not obligated to invest the
proceeds attributable to the Contract according to any particular strategy,
except as may be required by Connecticut and other state insurance laws.
AMENDMENT OF CONTRACTS
We reserve the right to amend the Contracts to meet the requirements of
applicable federal or state laws or regulations. We will notify you in writing
of any such amendments.
ASSIGNMENT OF CONTRACTS
Your rights as evidenced by a Contract may be assigned as permitted by
applicable law. An assignment will not be binding upon us until we receive
notice from you in writing. We assume no responsibility for the validity or
effect of any assignment. You should consult your tax adviser regarding the tax
consequences of an assignment.
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HARTFORD LIFE INSURANCE COMPANY 13
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DISTRIBUTION OF CONTRACTS
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.
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.
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).
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
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14 HARTFORD LIFE INSURANCE COMPANY
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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.
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. INTRODUCTION
The following summary of tax rules does not provide or constitute any tax
advice. It provides only a general discussion of certain of the expected
federal income tax consequences with respect to amounts contributed to,
invested in or received from a Contract, based on our understanding of the
existing provisions of the Code, Treasury Regulations thereunder, and public
interpretations thereof by the IRS (e.g., Revenue Rulings, Revenue Procedures
or Notices) or by published court decisions. This summary discusses only
certain federal income tax consequences to United States Persons, and does not
discuss state, local or foreign tax consequences. The term United States
Persons means citizens or residents of the United States, domestic
corporations, domestic partnerships, trust or estates that are subject to
United States federal income tax, regardless of the source of their income. See
"Annuity Purchases by Nonresident Aliens and Foreign Corporations," regarding
annuity purchases by non-U.S. citizens or residents.
This summary has been prepared by us after consultation with tax counsel, but
no opinion of tax counsel has been obtained. We do not make any guarantee or
representation regarding any tax status (e.g., federal, state, local or
foreign) of any Contract or any transaction involving a Contract. In addition,
there is always a possibility that the tax treatment of an annuity contract
could change by legislation or other means (such as regulations, rulings or
judicial decisions). Moreover, it is always possible that any such change in
tax treatment could be made retroactive (that is, made effective prior to the
date of the change). Accordingly, you should consult a qualified tax adviser
for complete information and advice before purchasing a Contract.
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HARTFORD LIFE INSURANCE COMPANY 15
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In addition, this discussion does not address many of the tax consequences if
you use the Contract in various arrangements, including Charitable Remainder
Trusts, tax-qualified retirement arrangements, deferred compensation plans,
split-dollar insurance arrangements, or other employee benefit arrangements.
The tax consequences of any such arrangement may vary depending on the
particular facts and circumstances of each individual arrangement and whether
the arrangement satisfies certain tax qualification or classification
requirements. In addition, the tax rules affecting such an arrangement may have
changed recently, e.g., by legislation or regulations that affect compensatory
or employee benefit arrangements. Therefore, if you are contemplating the use
of a Contract in any arrangement the value of which to you depends in part on
its tax consequences, you should consult a qualified tax adviser regarding the
tax treatment of the proposed arrangement and of any Contract used in it.
THE DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL PURPOSES ONLY. SPECIAL
TAX RULES MAY APPLY WITH RESPECT TO CERTAIN SITUATIONS THAT ARE NOT DISCUSSED
HEREIN. EACH POTENTIAL PURCHASER OF A CONTRACT IS ADVISED TO CONSULT WITH A
QUALIFIED TAX ADVISER AS TO THE CONSEQUENCES OF ANY AMOUNTS INVESTED IN A
CONTRACT UNDER APPLICABLE FEDERAL, STATE, LOCAL OR FOREIGN TAX LAW.
B. TAXATION OF HARTFORD
Hartford is taxed as a life insurance company under Subchapter L of Chapter 1
of the Code. The assets underlying the Contracts will be owned by Hartford. The
income earned on such assets will be Hartford's income.
C. TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING CONTRACTS NOT HELD IN
TAX-QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. 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.
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.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS).
A Contract Owner is not taxed on increases in the value of the Contract until
an amount is received or deemed received, e.g., in the form of a lump sum
payment (full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are
summarized briefly below. Also summarized are special rules affecting
distributions from Contracts obtained in a tax-free exchange for other annuity
contracts or life insurance contracts which were purchased prior to August 14,
1982.
A. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not includable in
gross income equal the "investment in the contract" under Section 72 of
the Code.
ii. To the extent that the value of the Contract (ignoring any surrender
charges except on a full surrender) exceeds the "investment in the
contract," such excess constitutes the "income on the contract." It is
unclear what value should be used in determining the "income on the
contract." We believe that the current Contract value (determined without
regard to surrender charges) is an appropriate measure. However, the IRS
could take the position that the value should be the current Contract
value (determined without regard to surrender charges) increased by some
measure of the value of certain future benefits.
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iii. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a partial surrender) is deemed to come first from any
such "income on the contract" and then from "investment in the contract,"
and for these purposes such "income on the contract" shall be computed by
reference to any aggregation rule in subparagraph 2.c. below. As a result,
any such amount received or deemed received (1) shall be includable in
gross income to the extent that such amount does not exceed any such
"income on the contract," and (2) shall not be includable in gross income
to the extent that such amount does exceed any such "income on the
contract." If at the time that any amount is received or deemed received
there is no "income on the contract" (e.g., because the gross value of the
Contract does not exceed the "investment in the contract" and no
aggregation rule applies), then such amount received or deemed received
will not be includable in gross income, and will simply reduce the
"investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the assignment
or pledge of any portion of the value of the Contract shall be treated as
an amount received for purposes of this subparagraph a. and the next
subparagraph b.
v. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not
apply, however, to certain transfers of property between spouses or
incident to divorce.
B. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the
Annuity Commencement Date, any additional payments (including surrenders)
will be entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from
gross income by the exclusion ratio does not exceed the investment in the
contract as of the Annuity Commencement Date, then the remaining portion
of unrecovered investment shall be allowed as a deduction for the last
taxable year of the Annuitant.
iii. Generally, nonperiodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and
shall be fully includable in gross income. However, upon a full surrender
after such date, only the excess of the amount received (after any
surrender charge) over the remaining "investment in the contract" shall be
includable in gross income (except to the extent that the aggregation rule
referred to in the next subparagraph c. may apply).
C. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or affiliated
insurer) to the same owner within the same calendar year (other than certain
contracts held in connection with tax-qualified retirement arrangements) will
be aggregated and treated as one annuity contract for the purpose of
determining the taxation of distributions prior to the Annuity Commencement
Date. An annuity contract received in a tax-free exchange for another annuity
contract or life insurance contract may be treated as a new contract for this
purpose. We believe that for any Contracts subject to such aggregation, the
values under the Contracts and the investment in the contracts will be added
together to determine the taxation under subparagraph 2.a., above, of amounts
received or deemed received prior to the Annuity Commencement Date. Withdrawals
will be treated first as withdrawals of income until all of the income from all
such Contracts is withdrawn. In addition, the Treasury Department has specific
authority under the aggregation rules in Code Section 72(e)(11) to issue
regulations to prevent the avoidance of the income-out-first rules for non-
periodic distributions through the serial purchase of annuity contracts or
otherwise. As of the date of this prospectus, there are no regulations
interpreting these aggregation provisions.
D. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract (before or
after the Annuity Commencement Date), the Code applies a penalty tax equal
to ten percent of the portion of the amount includable in gross income,
unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions:
1. Distributions made on or after the date the recipient has attained the
age of 59 1/2.
2. Distributions made on or after the death of the holder or where the
holder is not an individual, the death of the primary annuitant.
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of substantially
equal periodic payments (not less frequently than annually) for the
life (or life expectancy) of the recipient (or the joint lives or life
expectancies of the recipient and the recipient's designated
Beneficiary). In determining whether a payment stream designed to
satisfy this exception
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qualifies, it is possible that the IRS could take the position that the
entire interest in the Contract should include not only the current
Contract value, but also some measure of the value of certain future
benefits.
5. Distributions made under certain annuities issued in connection with
structured settlement agreements.
6. Distributions of amounts which are allocable to the "investment in the
contract" prior to August 14, 1982 (see next subparagraph e.).
If the taxpayer avoids this 10% penalty tax by qualifying for the substantially
equal periodic payments 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 taxpayer
has reached age 59 1/2 and (b) 5 years have elapsed since the first of these
periodic payments.
E. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE
EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED PRIOR
TO AUGUST 14, 1982.
If the Contract was obtained by a tax-free exchange of a life insurance or
annuity Contract purchased prior to August 14, 1982, then any amount received
or deemed received prior to the Annuity Commencement Date shall be deemed to
come (1) first from the amount of the "investment in the contract" prior to
August 14, 1982 ("pre-8/14/82 investment") carried over from the prior
Contract, (2) then from the portion of the "income on the contract" (carried
over to, as well as accumulating in, the successor Contract) that is
attributable to such pre-8/14/82 investment, (3) then from the remaining
"income on the contract" and (4) last from the remaining "investment in the
contract." As a result, to the extent that such amount received or deemed
received does not exceed such pre-8/14/82 investment, such amount is not
includable in gross income. In addition, to the extent that such amount
received or deemed received does not exceed the sum of (a) such pre-8/14/82
investment and (b) the "income on the contract" attributable thereto, such
amount is not subject to the 10% penalty tax. In all other respects, amounts
received or deemed received from such post-exchange Contracts are generally
subject to the rules described in this subparagraph e.
F. REQUIRED DISTRIBUTIONS.
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary provisions in ii
or iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date
and before the entire interest in the Contract has been distributed,
the remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution being used as of the date
of such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the
entire interest in the Contract shall be distributed within 5 years
after such death; and
3. If the Contract Owner is not an individual, then for purposes of 1. or
2. above, the primary annuitant under the Contract shall be treated as
the Contract Owner, and any change in the primary annuitant shall be
treated as the death of the Contract Owner. The primary annuitant is
the individual, the events in the life of whom are of primary
importance in affecting the timing or amount of the payout under the
Contract.
ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in i. above
is payable to or for the benefit of a designated beneficiary, such
beneficiary may elect to have the portion distributed over a period that
does not extend beyond the life or life expectancy of the beneficiary.
Such distributions must begin within a year of the Contract Owner's death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to or for
the benefit of his or her spouse, and the Annuitant or Contingent
Annuitant is living, such spouse shall be treated as the Contract Owner of
such portion for purposes of section i. above. This spousal contract
continuation shall apply only once for this contract.
G. ADDITION OF RIDER OR MATERIAL CHANGE
The addition of a rider to the Contract, or a material change in the Contract's
provisions, could cause it to be considered newly issued or entered into for
tax purposes, and thus could cause the Contract to lose certain grandfathered
tax status. Please contact your tax adviser for more information.
H. PARTIAL EXCHANGES
The IRS in Rev. Rul. 2003-76 has confirmed that the owner of an annuity
contract can direct its insurer to transfer a portion of the contract's cash
value directly to another annuity contract (issued by the same insurer or by a
different insurer), and such a direct transfer can qualify for tax-free
exchange treatment under Code Section 1035 (a "partial exchange"). However,
Rev. Rul. 2003-76 also refers to caveats and additional guidance in the
companion Notice 2003-51, which discusses cases in which a partial exchange is
followed by a surrender, withdrawal or other distribution from either the old
contract or the new contract. Notice 2003-51 specifically indicates that the
IRS is considering (1) under what circumstances it should treat a partial
exchange followed by such a distribution within 24 months as presumptively for
"tax avoidance" purposes (e.g., to avoid the income-out-first rules on amounts
received under Code Section 72) and (2) what circumstances it should treat as
rebutting such a presumption (e.g., death, disability, reaching age 59 1/2,
divorce or loss of employment). Accordingly, we advise
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you to consult with a qualified tax adviser as to potential tax consequences
before attempting any partial exchange.
D. FEDERAL INCOME TAX WITHHOLDING
The portion of an amount received under a Contract that is taxable gross income
to the recipient is also subject to federal income tax withholding, pursuant to
Code Section 3405, which requires the following:
1. Non-Periodic Distributions. The portion of a non-periodic distribution
that is includable in gross income is subject to federal income tax
withholding unless the recipient elects not to have such tax withheld
("election out"). We will provide such an "election out" form at the
time such a distribution is requested. If the necessary "election out"
forms are not submitted to us in a timely manner, we are required to
withhold 10 percent of the includable amount of distribution and remit
it to the IRS.
2. Periodic Distributions (payable over a period greater than one year).
The portion of a periodic distribution that is includable in gross
income is subject to federal income tax withholding as if the recipient
were married claiming 3 exemptions, unless the recipient elects
otherwise. A recipient may elect out of such withholding, or elect to
have income tax withheld at a different rate, by providing a completed
election form. We will provide such an election form at the time such a
distribution is requested. If the necessary "election out" forms are
not submitted to us in a timely manner, we are required to withhold tax
as if the recipient were married claiming 3 exemptions, and remit the
tax to the IRS.
Regardless of any "election out" (or any amount of tax actually withheld) on an
amount received from a Contract, the recipient is generally liable for any
failure to pay the full amount of tax due on the includable portion of such
amount received. You also may be required to pay penalties under the estimated
income tax rules, if your withholding and estimated tax payments are
insufficient to satisfy your total tax liability.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I for information relative to the types of plans
for which it may be used and the general explanation of the tax features of
such plans.
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 us. If withholding tax applies, we are required to withhold tax at
a 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.
G. ESTATE, GIFT AND GENERATION-SKIPPING TAX AND RELATED TAX CONSIDERATIONS
Any amount payable upon a Contract Owner's death, whether before or after the
Annuity Commencement Date, is generally includable in the Contract Owner's
estate for federal estate tax purposes. Similarly, prior to the Contract
Owner's death, the payment of any amount from the Contract, or the transfer of
any interest in the Contract, to a beneficiary or other person for less than
adequate consideration may have federal gift tax consequences. In addition, any
transfer to, or designation of, a non-spouse beneficiary who either is (1) 37
1/2 or more years younger than a Contract Owner or (2) a grandchild (or more
remote further descendent) of a Contract Owner may have federal generation-
skipping-transfer ("GST") tax consequences under Code Section 2601. Regulations
under Code Section 2662 may require us to deduct any such GST tax from your
Contract, or from any applicable payment, and pay it directly to the IRS.
However, any federal estate, gift or GST tax payment with respect to a Contract
could produce an offsetting income tax deduction for a beneficiary or
transferee under Code Section 691(c) (partially offsetting such federal estate
or GST tax) or a basis increase for a beneficiary or transferee under Code
Section 691(c) or Section 1015(d). In addition, as indicated above in
"Distributions Prior to the Annuity Commencement Date," the transfer of a
Contract for less than adequate consideration during the Contract Owner's
lifetime generally is treated as producing an amount received by such Contract
Owner that is subject to both income tax and the 10% penalty tax. To the extent
that such an amount deemed received causes an amount to be includable currently
in such Contract Owner's gross income, this same income amount could produce a
corresponding increase in such Contract Owner's tax basis for such Contract
that is carried over to the transferee's tax basis for such Contract under Code
Section 72(e)(4)(C)(iii) and Section 1015.
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 may offer death benefits that may exceed the greater of the
amounts paid for the Contract or the Contract's
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cash value. Owners who intend to use the Contract in connection with tax-
qualified retirement plans should consider the income tax effects that such a
death benefit may have on the plan.
The federal tax rules applicable to owners of Contracts under tax-qualified
retirement plans vary according to the type of plan as well as the terms and
conditions of the plan itself. Contract owners, plan participants and
beneficiaries are cautioned that the rights and benefits of any person may be
controlled by the terms and conditions of the tax-qualified retirement plan
itself, regardless of the terms and conditions of a Contract. We are not bound
by the terms and conditions of such plans to the extent such terms conflict
with a Contract, unless we specifically consent to be bound.
Some tax-qualified retirement plans are subject to distribution and other
requirements that are not incorporated into our administrative procedures.
Contract owners, participants and beneficiaries are responsible for determining
that contributions, distributions and other transactions comply with applicable
law. Tax penalties may apply to transactions with respect to tax-qualified
retirement plans if applicable federal income tax rules and restrictions are
not carefully observed.
WE DO NOT CURRENTLY OFFER THE CONTRACTS IN CONNECTION WITH ALL OF THE TYPES OF
TAX-QUALIFIED RETIREMENT PLANS DISCUSSED BELOW AND MAY NOT OFFER THE CONTRACTS
FOR ALL TYPES OF TAX-QUALIFIED RETIREMENT PLANS IN THE FUTURE.
1. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS -- Eligible employers can
establish certain tax-qualified pension and profit-sharing plans under section
401 of the Code. Rules under section 401(k) of the Code govern certain "cash or
deferred arrangements" under such plans. Rules under section 408(k) govern
"simplified employee pensions". Tax-qualified pension and profit-sharing plans
are subject to limitations on the amount that may be contributed, the persons
who may be eligible to participate, the time when distributions must commence,
and the form in which distributions must be paid. Employers intending to use
the Contracts in connection with tax-qualified pension or profit-sharing plans
should seek competent tax and other legal advice. If the death benefit under
the Contract can exceed the greater of the amount paid for the Contract and the
Contract's cash value, it is possible that the IRS would characterize such
death benefit as an "incidental death benefit." There are limitations on the
amount of incidental benefits that may be provided under pension and profit
sharing plans. In addition, the provision of such benefits may result in
currently taxable income to the participants.
2. TAX SHELTERED ANNUITIES UNDER SECTION 403(b) -- Public schools and certain
types of charitable, educational and scientific organizations, as specified in
section 501(c)(3) of the Code, can purchase tax-sheltered annuity contracts for
their employees. Tax-deferred contributions can be made to tax-sheltered
annuity contracts under section 403(b) of the Code, subject to certain
limitations. In general, total contributions may not exceed the lesser of (1)
100% of the participant's compensation, and (2) $40,000 (adjusted for increases
in cost-of-living). The maximum elective deferral amount is equal to $14,000
for 2005 and $15,000 for 2006 and thereafter, indexed. The limitation on
elective deferrals may be increased to allow certain "catch-up" contributions
for individuals who have attained age 50.
Tax-sheltered annuity programs under section 403(b) are subject to a
PROHIBITION AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO
CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT, unless such
distribution is made:
- - after the participating employee attains age 59 1/2;
- - upon severance from employment;
- - upon death or disability; or
- - in the case of hardship (and in the case of hardship, any income attributable
to such contributions may not be distributed).
Generally, the above restrictions do not apply to distributions attributable to
cash values or other amounts held under a section 403(b) contract as of
December 31, 1988.
If the death benefit under the Contract can exceed the greater of the amount
paid for the Contract and the Contract's cash value, it is possible that the
IRS would characterize such death benefit as an "incidental death benefit." If
the death benefit were so characterized, this could result in currently taxable
income to purchasers. In addition, there are limitations on the amount of
incidental death benefits that may be provided under a section 403(b)
arrangement.
3. DEFERRED COMPENSATION PLANS UNDER SECTION 457 -- Certain governmental
employers or tax-exempt employers other than a governmental unit can establish
a Deferred Compensation Plan under section 457 of the Code. 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.
Employees and independent contractors performing services for a governmental or
tax-exempt employer can elect to have contributions made to a Deferred
Compensation Plan of their employer in accordance with the employer's plan and
section 457 of the Code.
Deferred Compensation Plans that meet the requirements of section 457(b) of the
Code are called "eligible" Deferred Compensation Plans. Section 457(b) limits
the amount of contributions that can be made to an eligible Deferred
Compensation Plan on behalf of a participant. Generally, the limitation on
contributions is the lesser of (1) 100% of a participant's includible
compensation or (2) the applicable dollar amount, equal to $14,000 for 2005 and
$15,000 for 2006 and thereafter, indexed. The plan may provide for additional
"catch-up" contributions during the three taxable years ending before the year
in which the participant attains normal retirement age. In addition, the
contribution limitation may be increased to
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allow certain "catch-up" contributions for individuals who have attained age
50.
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. For this purpose, certain custodial
accounts and annuity contracts are treated as trusts. The requirement of a
trust does not apply to amounts under an eligible Deferred Compensation Plan of
a tax-exempt (non-governmental) employer. In addition, the requirement of a
trust does not apply to amounts under a Deferred Compensation Plan of a
governmental employer if the Deferred Compensation Plan is not an eligible plan
within the meaning of section 457(b) of the Code. In the absence of such a
trust, amounts under the plan will be subject to the claims of the employer's
general creditors.
In general, distributions from an eligible Deferred Compensation Plan to a
participant or beneficiary are prohibited under section 457 of the Code unless
made after the participating employee:
- - attains age 70 1/2,
- - has a severance from employment as defined in the Code (including death of
the participating employee), or
- - suffers an unforeseeable financial emergency as defined in the Code.
4. INDIVIDUAL RETIREMENT ANNUITIES ("IRAS") UNDER SECTION 408
TRADITIONAL IRAS. -- Eligible individuals can establish individual retirement
programs under section 408 of the Code through the purchase of an IRA. Section
408 imposes limits with respect to IRAs, including limits on the amount that
may be contributed to an IRA, the amount of such contributions that may be
deducted from taxable income, the persons who may be eligible to contribute to
an IRA, and the time when distributions commence from an IRA. See Section 6
below for a discussion of rollovers involving IRAs.
SIMPLE IRAS -- Eligible employees may establish SIMPLE IRAs in connection with
a SIMPLE IRA plan of an employer under section 408(p) of the Code. Special
rollover rules apply to SIMPLE IRAs. Amounts can be rolled over from one SIMPLE
IRA to another SIMPLE IRA. However, amounts can be rolled over from a SIMPLE
IRA to a Traditional IRA only after two years have expired since the employee
first commenced participation in the employer's SIMPLE IRA plan. Amounts cannot
be rolled over to a SIMPLE IRA from a qualified plan or a Traditional IRA.
Hartford is a non-designated financial institution for purposes of the SIMPLE
IRA rules.
ROTH IRAS -- Eligible individuals may establish Roth IRAs under section 408A of
the Code. Contributions to a Roth IRA are not deductible. Subject to special
limitations, a Traditional IRA, SIMPLE IRA or Simplified Employee Pension under
Section 408(k) of the Code may be converted into a Roth IRA or a distribution
from such an arrangement may be rolled over to a Roth IRA. However, a
conversion or a rollover to a Roth IRA is not excludable from gross income. If
certain conditions are met, qualified distributions from a Roth IRA are tax-
free.
5. FEDERAL TAX PENALTIES AND WITHHOLDING -- Distributions from tax-qualified
retirement plans are generally taxed as ordinary income under section 72 of the
Code. Under these rules, a portion of each distribution may be excludable from
income. The excludable amount is the portion of the distribution that bears the
same ratio as the after-tax contributions bear to the expected return.
(A) PENALTY TAX ON EARLY DISTRIBUTIONS Section 72(t) of the Code imposes an
additional penalty tax equal to 10% of the taxable portion of a distribution
from certain tax-qualified retirement plans. However, the 10% penalty tax
does not apply to a distribution that is:
- - Made on or after the date on which the employee reaches age 59 1/2;
- - Made to a beneficiary (or to the estate of the employee) on or after the
death of the employee;
- - Attributable to the employee's becoming disabled (as defined in the Code);
- - Part of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
employee or the joint lives (or joint life expectancies) of the employee and
his or her designated beneficiary. In determining whether a payment stream
designed to satisfy this exception qualifies, it is possible that the IRS
could take the position that the entire interest in the Contract should
include not only the current Contract value, but also some measure of the
value of certain future benefits;
- - Except in the case of an IRA, 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:
- - 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 section 72(t)(7) of the Code; or
- - A qualified first-time homebuyer distribution meeting the requirements
specified at section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware that the 10%
penalty tax is increased to 25% with respect to non-exempt early distributions
made from your SIMPLE IRA during the first two years following the date you
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first commenced participation in any SIMPLE IRA plan of your employer.
(B) MINIMUM DISTRIBUTION PENALTY TAX If the amount distributed is less than
the minimum required distribution for the year, the Participant is subject
to a 50% penalty tax on the amount that was not properly distributed.
An individual's interest in a tax-qualified retirement 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
- - the calendar year in which the individual retires from service with the
employer sponsoring the plan.
The Required Beginning Date for an individual who is a five (5) percent owner
(as defined in the Code), or who is the owner of an IRA, is April 1 of the
calendar year following the calendar year in which the individual attains age
70 1/2.
The entire interest of the Participant must be distributed beginning no later
than the Required Beginning Date over:
- - the life of the Participant or the lives of the Participant and the
Participant's designated beneficiary (as defined in the Code), or
- - over a period not extending beyond the life expectancy of the Participant or
the joint life expectancy of the Participant and the Participant's designated
beneficiary.
Each annual distribution must equal or exceed a "minimum distribution amount"
which is determined generally by dividing the account balance by the applicable
life expectancy. This account balance is generally based upon the entire value
of all benefits provided under a Contract as of the close of business on the
last day of the previous calendar year. The death benefit and any optional
benefits purchased under the Contract may affect the amount of the minimum
required distribution that must be taken. In addition, minimum distribution
incidental benefit rules may require a larger annual distribution. Required
minimum distributions also can be made in the form of annuity payments if the
payment structure satisfies certain rules set forth in Income Tax Regulations.
If an individual dies before reaching his or her Required Beginning Date, the
individual's entire interest must generally be distributed within five years of
the individual's death. However, this 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 the beneficiary). If the beneficiary is the individual's
surviving spouse, distributions may be delayed until the individual would have
attained age 70 1/2.
If an individual dies after reaching his or her Required Beginning Date or
after distributions have commenced, the individual's interest must generally be
distributed at least as rapidly as under the method of distribution in effect
at the time of the individual's death.
The minimum distribution requirements apply to Roth IRAs after the Contract
owner dies, but not while the Contract owner is alive. In addition, if the
owner of a Traditional or Roth IRA dies and the Contract owner's spouse is the
sole designated beneficiary, the surviving spouse may elect to treat the
Traditional or Roth IRA as his or her own.
In 2002 and in 2004, the Internal Revenue Service issued final and temporary
regulations in the Federal Register relating to minimum required distributions.
Please consult with your tax or legal adviser with any questions regarding the
new regulations.
(C) WITHHOLDING We are generally required to withhold federal income tax from
the taxable portion of each distribution made under a Contract. The federal
income tax withholding requirements, including the rate at which withholding
applies, depend on whether a distribution is or is not an eligible rollover
distribution.
Federal income tax withholding from the taxable portion of distributions that
are not eligible rollover distributions is required unless the payee is
eligible to, and does in fact, elect not to have income tax withheld by filing
an election with us. Where the payee does not elect out of withholding, the
rate of income tax to be withheld depends on whether the distribution is
nonperiodic or periodic. Regardless of whether an election is made not to have
federal income taxes withheld, the recipient is still liable for payment of
federal income tax on the taxable portion of the distribution.
For periodic payments, federal income tax will be withheld from the taxable
portion of the distribution by treating the payment as wages under IRS wage
withholding tables, using the marital status and number of withholding
allowances elected by the payee on an IRS Form W-4P, or acceptable substitute,
filed us. Where the payee has not filed a Form W-4P, or acceptable substitute,
with us, the payee will be treated as married claiming three withholding
allowances. Special rules apply where the payee has not provided us with a
proper taxpayer identification number or where the payments are sent outside
the United States or U.S. possessions.
For nonperiodic distributions, where a payee has not elected out of
withholding, income tax will be withheld at a rate of 10 percent from the
taxable portion of the distribution.
Federal income tax withholding is required at a rate of 20 percent from the
taxable portion of any distribution that is an eligible rollover distribution
to the extent it is not directly rolled over to an eligible recipient plan.
Payees cannot elect out of income tax withholding with respect to such
distributions.
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 or resident aliens of the United States.
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22 HARTFORD LIFE INSURANCE COMPANY
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6. ROLLOVER DISTRIBUTIONS -- Under present federal tax law, "eligible rollover
distributions" from qualified retirement plans under section 401(a) of the
Code, qualified annuities under section 403(a) of the Code, section 403(b)
arrangements, and governmental 457(b) plans generally can be rolled over tax-
free within 60 days to any of such plans or arrangements that accept such
rollovers. Similarly, distributions from an IRA generally are permitted to be
rolled over tax-free within 60 days to a qualified plan, qualified annuity,
section 403(b) arrangement, or governmental 457(b) plan. After tax
contributions may be rolled over from a qualified plan, qualified annuity or
governmental 457 plan into another qualified plan or an IRA. In the case of
such a rollover of after tax contributions, the rollover is permitted to be
accomplished only through a direct rollover. In addition, a qualified plan is
not permitted to accept rollovers of after tax contributions unless the plan
provides separate accounting for such contributions (and earnings thereon).
Similar rules apply for purposes of rolling over after tax contributions from a
section 403(b) arrangement. After tax contributions (including nondeductible
contributions to an IRA) are not permitted to be rolled over from an IRA into a
qualified plan, qualified annuity, section 403(b) arrangement, or governmental
457(b) plan.
For this purpose, an eligible rollover distribution is generally a distribution
to an employee of all or any portion of the balance to the credit of the
employee in a qualified trust under section 401(a) of the Code, qualified
annuity under section 403(a) of the Code, a 403(b) arrangement or governmental
457(b) plan. However, an eligible rollover distribution does not include: any
distribution which is one of a series of substantially equal periodic payments
(not less frequently than annually) made (1) for the life (or life expectancy)
of the employee or the joint lives (or joint life expectancies) of the employee
and the employee's designated beneficiary, or (2) for a specified period of 10
years or more; any distribution to the extent it is a required minimum
distribution amount (discussed above); or any distribution which is made upon
hardship of the employee.
Separate accounting is required on amounts rolled from plans described under
Code sections 401, 403(b) or 408(IRA), when those amounts are rolled into plans
described under section 457(b) sponsored by governmental employers. These
amounts, when distributed from the governmental 457(b) plan, will be subject to
the 10% early withdrawal tax applicable to distributions from plans described
under sections 401, 403(b) or 408(IRA), respectively.
THE 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 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 OPINION
The validity of the interests in the Contracts described in this Prospectus
will be passed upon for Hartford by Christopher M. Grinnell, Senior Counsel for
Hartford Life Insurance Company.
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.
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HARTFORD LIFE INSURANCE COMPANY 23
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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.