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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
TELEPHONE: 1-800-862-6668
[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, 2008
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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,
2007;
(b) Our Quarterly Report on Form 10-Q for the period ended March 31, 2008;
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
<Table>
<Caption>
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 10
1. Electing the Annuity Commencement Date and Form of Annuity 10
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 12
FEDERAL TAX CONSIDERATIONS 14
A. Introduction 14
B. Taxation of Hartford 15
C. Taxation of Annuities -- General Provisions Affecting Contracts 15
Not Held in Tax-Qualified Retirement Plans
1. Non-Natural Persons as Owners 15
2. Other Contract Owners (Natural Persons) 15
a. Distributions Prior to the Annuity Commencement Date 16
b. Distributions After Annuity Commencement Date 16
c. Aggregation of Two or More Annuity Contracts 17
d. 10% Penalty Tax -- Applicable to Certain Surrenders and Annuity 17
Payments
e. Special Provisions Affecting Contracts Obtained through a 17
Tax-Free Exchange of Other Annuity or Life Insurance Contracts
Purchased Prior to August 14, 1982
</Table>
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4 HARTFORD LIFE INSURANCE COMPANY
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<Table>
<Caption>
PAGE
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f. Required Distributions 17
g. Addition of Riders 18
h. Partial Exchanges 18
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 19
Considerations
INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS 19
THE COMPANY
LEGAL OPINION 25
EXPERTS 26
APPENDIX A -- MODIFIED GUARANTEED ANNUITY FOR QUALIFIED PLANS 27
APPENDIX B -- SPECIAL PROVISIONS FOR INDIVIDUAL CONTRACTS ISSUED IN THE 28
STATES OF CALIFORNIA, MICHIGAN, MISSOURI, NEW YORK, OREGON, SOUTH
CAROLINA, TEXAS, VIRGINIA AND WISCONSIN
APPENDIX C -- MARKET VALUE ADJUSTMENT 29
</Table>
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.
We no longer accept any incoming 403(b) exchanges or applications for 403(b)
individual annuity Contracts.
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
<Table>
Beginning Account Value: $50,000
Guarantee Period: 5 years
Guarantee Rate: 5.50% per annum
</Table>
<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 $65,348.00
Period
</Table>
<Table>
Total Interest Credited in $65,348.00 - 50,000.00 = $15,348.00
Guarantee Period
Account Value at end of Guarantee $50,000.00 + 15,348.00 = $65,348.00
Period
Account Value after 180 days from $50,000 x (1.055)(180/365) = $51,337.77
the Contract Date
</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.
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.
WE NO LONGER ACCEPT ANY INCOMING 403(B) EXCHANGES OR APPLICATIONS FOR 403(B)
INDIVIDUAL ANNUITY CONTRACTS.
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
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HARTFORD LIFE INSURANCE COMPANY 9
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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 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.
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10 HARTFORD LIFE INSURANCE COMPANY
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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, currently ranges from 0% - 3.5%. 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.
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,
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HARTFORD LIFE INSURANCE COMPANY 11
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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.
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.
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12 HARTFORD LIFE INSURANCE COMPANY
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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.
DISTRIBUTION OF CONTRACTS
HOW CONTRACTS ARE SOLD -- We have entered into a distribution agreement with our
affiliate Hartford Securities Distribution Company, Inc. ("HSD") under which HSD
serves as the 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
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HARTFORD LIFE INSURANCE COMPANY 13
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broker-dealer and is a member of Financial Industry Regulatory Authority
(FINRA). The principal business address of HSD is the same as ours. PLANCO
Financial Services, Inc., a subsidiary of Hartford Life Insurance Company,
provides marketing support for us. Woodbury Financial Services, Inc. is another
affiliated broker-dealer that sells this Contract.
HSD has entered into selling agreements with affiliated and unaffiliated
broker-dealers, and financial institutions ("Financial Intermediaries") for the
sale of the Contracts. We pay compensation to HSD for sales of the Contracts by
Financial Intermediaries. HSD, in its role as principal underwriter, did not
retain any underwriting commissions for the fiscal year ended December 31, 2007.
Contracts will be sold by individuals who have been appointed by us as insurance
agents and who are registered representatives of Financial Intermediaries
("Registered Representatives").
We list below types of arrangements that help to incentivize sales people to
sell our products. These types of arrangements could be viewed as creating
conflicts of interest.
Financial Intermediaries receive commissions (described below under
"Commissions"). Certain selected Financial Intermediaries also receive
additional compensation (described below under "Additional Payments"). All or a
portion of the payments we make to Financial Intermediaries may be passed on to
Registered Representatives according to a Financial Intermediaries' internal
compensation practices.
Affiliated broker-dealers also employ individuals called "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.
COMMISSIONS
Up front commissions paid to Financial Intermediaries generally range from 1% to
up to 7% of each Premium Payment you pay for your Contract. We may pay a lower
commission for sales to people over age 80.
Commission arrangements vary from one Financial Intermediary to another. We are
not involved in determining your Registered Representative's compensation. Under
certain circumstances, your Registered Representative may be required to return
all or a portion of the commissions paid.
Check with your Registered Representative to verify whether your account is a
brokerage or an advisory account. Your interests may differ from ours and your
Registered Representative (or the Financial Intermediary with which they are
associated). Please ask questions to make sure you understand your rights and
any potential conflicts of interest. If you are an advisory client, your
Registered Representative (or the Financial Intermediary with which they are
associated) can be paid both by you and by us based on what you buy. Therefore,
profits, and your Registered Representative's (or their Financial
Intermediary's) compensation, may vary by product and over time. Contact an
appropriate person at your Financial Intermediary with whom you can discuss
these differences.
ADDITIONAL PAYMENTS
Subject to FINRA and Financial Intermediary rules, we (or our affiliates) also
pay the following types of fees to among other things encourage the sale of this
Contract. These additional payments could create an incentive for your
Registered Representative, and the Financial Intermediary with which they are
associated, to recommend products that pay them more than others, which may not
necessarily be to your benefit.
<Table>
<Caption>
ADDITIONAL
PAYMENT TYPE WHAT IT'S USED FOR
- ---------------------------------------------------------------------------------------------------------------------------------
Access Access to Registered Representatives and/or Financial Intermediaries such as one-on-one
wholesaler visits or attendance at national sales meetings or similar events.
Gifts & Entertainment Occasional meals and entertainment, tickets to sporting events and other gifts.
Marketing Joint marketing campaigns and/or Financial Intermediary event advertising/ participation;
sponsorship of Financial Intermediary sales contests and/or promotions in which participants
(including Registered Representatives) receive prizes such as travel awards, merchandise and
recognition; client generation expenses.
Marketing Expense Allowances Pay Fund related parties for wholesaler support, training and marketing activities for certain
Funds.
Support Sales support through such things as providing hardware and software, operational and systems
integration, links to our website from a Financial Intermediary's websites; shareholder
services (including sub-accounting sponsorship of Financial Intermediary due diligence
meetings; and/or expense allowances and reimbursements.
Training Educational (due diligence), sales or training seminars, conferences and programs, sales and
service desk training, and/or client or prospect seminar sponsorships.
Visibility Inclusion of our products on a Financial Intermediary's "preferred list"; participation in, or
visibility at, national and regional conferences; and/or articles in Financial Intermediary
publications highlighting our products and services.
Volume Pay for the overall volume of their sales or the amount of money investing in our products.
</Table>
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14 HARTFORD LIFE INSURANCE COMPANY
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As of December 31, 2007, we have entered into ongoing contractual arrangements
to make Additional Payments to the following Financial Intermediaries for our
entire suite of variable annuities: A.G. Edwards & Sons, Inc., AIG Advisors
Group, Inc., (Advantage Capital, AIG Financial Advisors, American General, FSC
Securities Corporation, Royal Alliance Assoc., Inc.), Bancwest Investment
Services, Inc., Cadaret, Grant & Co., Inc., Capital Analyst Inc., Centaurus
Financial, Inc., Citigroup, Inc. (various divisions and affiliates), Comerica
Securities, Commonwealth Financial Network, Compass Brokerage, Inc., Crown
Capital Securities, L.P., Cuna Brokerage Services, Inc., Cuso Financial
Services, L.P., Edward D. Jones & Co., L.P., FFP Securities, Inc., First Allied
Securities, Inc., First Citizens Investor Services, First Montauk Securities
Corp., First Tennessee Bank, First Tennessee Brokerage, Inc., Frost Brokerage
Services, Inc., Great American Advisors, Inc., H. Beck, Inc., H.D. Vest
Investment Services (subsidiary of Wells Fargo & Company), Harbour Investments,
Inc., Heim & Young Securities, Huntington Investment Company, Independent
Financial Group LLC, Infinex Financial Group, ING Advisors Network, (Financial
Network Services (or Investment) Corp., ING Financial Partners, Multi-Financial
Securities, Primevest Financial Services, Inc.,), Investacorp, Inc. , Investment
Professionals, Inc., Investors Capital Corp., J.J.B. Hilliard, James T. Borello
& Co., Janney Montgomery Scott, Inc., Jefferson Pilot Securities Corporation,
Key Investment Services, LaSalle Financial Services, Inc., Lincoln Financial
Advisors Corp. (marketing name for Lincoln National Corp.), LPL Financial
Corporation, M&T Securities, Inc., Merrill Lynch Pierce Fenner & Smith, Morgan
Keegan & Company, Inc., Morgan Keegan FID Division, Morgan Stanley & Co., Inc.
(various divisions and affiliates), Mutual Service Corporation, NatCity
Investments, National Planning Holdings (Invest Financial Corp., Investment
Centers of America, Inc., National Planning Corp., SII Investments, Inc.),
Newbridge Securities Corp., NEXT Financial Group, Inc., NFP Securities, Inc.,
Pension Planners Securities, Inc., Prime Capital Services, Inc., Prospera
Financial Services, Inc., Raymond James & Associates, Inc., Raymond James FID
Division, Raymond James Financial Services, RBC Dain FID Division, RBC Dain
Rauscher Inc., RDM Investment Svcs Inc., Robert W. Baird & Co. Inc., Securities
America, Inc., Sigma Financial Corporation, Sorrento Pacific, Stifel Nicolaus &
Company, Incorporated, Summit Brokerage Services Inc., Sun Trust Bank, TFS
Securities, Inc., The Investment Center, Inc., Thurston, Springer, Miller, Herd
& Titak, Inc., Triad Advisors, Inc., U.S. Bancorp Investments, Inc., UBOC
Investment Services, Inc. (Union Bank of California, N.A.), UBS Financial
Services, Inc., Uvest Financial Services Group Inc., Vanderbilt Securities, LLC,
Wachovia Securities, LLC (various divisions), Walnut Street Securities, Inc.,
Wells Fargo Brokerage Services, L.L.C., WaMu Investments, Inc., Woodbury
Financial Services, Inc. (an affiliate of ours), XCU Capital Corporation, Inc.
Inclusion on this list does not imply that these sums necessarily constitute
"special cash compensation" as defined by FINRA 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.
As of December 31, 2007, we have entered into arrangements to pay Marketing
Expense Allowances to the following Fund Companies (or affiliated parties) for
our entire suite of variable annuities: AIM Advisors, Inc., AllianceBernstein
Variable Products Series Funds & Alliance Bernstein Investment Research and
Management, Inc., American Variable Insurance Series & Capital Research and
Management Company, Franklin Templeton Services, LLC, Oppenheimer Variable
Account Funds & Oppenheimer Funds Distributor, Inc., Putnam Retail Management
Limited Partnership. Marketing Expense Allowances may vary based on the form of
Contract sold and the age of the purchaser. We will endeavor to update this
listing annually and interim arrangements may not be reflected. We assume no
duty to notify you whether any Financial Intermediary 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.
For the fiscal year ended December 31, 2007, Additional Payments did not in the
aggregate exceed approximately $66.4 million (excluding corporate-sponsorship
related perquisites and Marketing Expense Allowances) or approximately 0.06% of
average total individual variable annuity assets. Marketing Expense Allowances
for this period did not exceed $15.8 million or approximately 0.25% of the
Premium Payments invested in a particular Fund during this period.
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.
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HARTFORD LIFE INSURANCE COMPANY 15
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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.
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.
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16 HARTFORD LIFE INSURANCE COMPANY
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Except as provided below, upon the death of the Contract Owner prior to the
Annuity Commencement Date, if the designated beneficiary is the surviving spouse
of the Contract Owner; (a) or the civil union partner of the Contract Owner in a
civil union established under applicable state law (or any law succeeding or
replacing such statute(s)); or (b) the civil union partner or member of a
similar same sex relationship under the law of any state; and the Annuitant or
Joint Annuitant, if any, is alive, then such designated beneficiary may continue
the Contract as the succeeding Contract Owner. The right of the designated
beneficiary (as spouse or civil union partner) to continue the Contract is
contingent upon the treatment of the designated beneficiary as the "holder" of
the Contract in accordance with the provisions of section 72(s)(3) of the Code
(which under current tax law is limited to different sex spouses). In the event
that the designated beneficiary continues the Contract, the distribution
requirements of Code section 72(s) will only arise upon the death of such
designated beneficiary, unless the designated beneficiary elects not to continue
the Contract. If the designated beneficiary is not treated as the "holder" under
section 72(s)(3) of the Code (as is the case under current federal tax law for a
civil union partner), the distribution requirements of Code section 72(s)(1) and
(2) outlined above shall apply at the time of the Contract Owner's death and the
entire interest in the Contract must be distributed within five years of the
Contract Owner's death or under the Alternative Election. Contract continuation
under this provision may take effect only once with respect to this Contract.
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) generally is an appropriate measure. However,
in some instances 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 cash-value type
benefits.
iii. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a withdrawal or 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
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HARTFORD LIFE INSURANCE COMPANY 17
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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)(12) 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).
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.).
7. Distributions purchased by an employer upon termination of certain
qualified plans and held by the employer until the employee
separates from service.
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
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18 HARTFORD LIFE INSURANCE COMPANY
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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 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.
Generally no "election out" is permitted if the distribution is delivered
outside the United States and any possession of the United States 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
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HARTFORD LIFE INSURANCE COMPANY 19
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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 are available to a variety of tax-qualified retirement plans and
arrangements (a "Qualified Plan" or "Plan"). Tax restrictions and consequences
for Contracts or accounts under each type of Qualified Plan differ from each
other and from those for Non-Qualified Contracts. In addition, individual
Qualified Plans may have terms and conditions that impose additional rules.
Therefore, no attempt is made herein to provide more than general information
about the use of the Contract with the various types of Qualified Plans.
Participants under such Qualified Plans, as well as Contract Owners, annuitants
and beneficiaries, are cautioned that the rights of any person to any benefits
under such Qualified Plans may be subject to terms and conditions of the Plans
themselves or limited by applicable law, regardless of the terms and conditions
of the Contract issued in connection therewith. Qualified Plans generally
provide for the tax deferral of income regardless of whether the Qualified Plan
invests in an annuity or other investment. You should consider if the Contract
is a suitable investment if you are investing through a Qualified Plan.
THE FOLLOWING IS ONLY A GENERAL DISCUSSION ABOUT TYPES OF QUALIFIED PLANS FOR
WHICH THE CONTRACTS MAY BE AVAILABLE. WE ARE NOT THE PLAN ADMINISTRATOR FOR ANY
QUALIFIED PLAN. THE PLAN ADMINISTRATOR OR CUSTODIAN, WHICHEVER IS APPLICABLE,
(BUT NOT US) IS RESPONSIBLE FOR ALL PLAN ADMINISTRATIVE DUTIES INCLUDING, BUT
NOT LIMITED TO, NOTIFICATION OF DISTRIBUTION OPTIONS, DISBURSEMENT OF PLAN
BENEFITS, HANDLING ANY PROCESSING AND ADMINISTRATION OF QUALIFIED PLAN LOANS,
COMPLIANCE REGULATORY REQUIREMENTS AND FEDERAL AND STATE TAX REPORTING OF
INCOME/DISTRIBUTIONS FROM THE PLAN TO PLAN PARTICIPANTS AND, IF APPLICABLE,
BENEFICIARIES OF PLAN PARTICIPANTS AND IRA CONTRIBUTIONS FROM PLAN PARTICIPANTS.
OUR ADMINISTRATIVE DUTIES ARE LIMITED TO ADMINISTRATION OF THE CONTRACT AND ANY
DISBURSEMENTS OF ANY CONTRACT BENEFITS TO THE OWNER, ANNUITANT OR BENEFICIARY OF
THE CONTRACT, AS APPLICABLE. OUR TAX REPORTING RESPONSIBILITY IS LIMITED TO
FEDERAL AND STATE TAX REPORTING OF INCOME/DISTRIBUTIONS TO THE APPLICABLE PAYEE
AND IRA CONTRIBUTIONS FROM THE OWNER OF A CONTRACT, AS RECORDED ON OUR BOOKS AND
RECORDS. IF YOU ARE PURCHASING A QUALIFIED CONTRACT, YOU SHOULD CONSULT WITH
YOUR PLAN ADMINISTRATOR AND/OR A QUALIFIED TAX ADVISER. YOU ALSO SHOULD CONSULT
WITH A QUALIFIED TAX ADVISER AND/OR PLAN ADMINISTRATOR BEFORE YOU WITHDRAW ANY
PORTION OF YOUR CONTRACT VALUE.
The tax rules applicable to Qualified Contracts and Qualified Plans, including
restrictions on contributions and distributions, taxation of distributions and
tax penalties, vary according to the type of Qualified Plan, as well as the
terms and conditions of the Plan itself. Various tax penalties may apply to
contributions in excess of specified limits, plan distributions (including
loans) that do not comply with specified limits, and certain other transactions
relating to such Plans. Accordingly, this summary provides only general
information about the tax rules associated with use of a Qualified Contract in
such a Qualified Plan. In addition, some Qualified Plans are subject to
distribution and other requirements that are not incorporated into our
administrative procedures. Owners, participants, and beneficiaries are
responsible for determining that contributions, distributions and other
transactions comply with applicable tax (and non-tax) law. Because of the
complexity of these rules, Owners, participants and beneficiaries are advised to
consult with a qualified tax adviser as to specific tax consequences.
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We do not currently offer the Contracts in connection with all of the types of
Qualified Plans discussed below, and may not offer the Contracts for all types
of Qualified Plans in the future.
1. INDIVIDUAL RETIREMENT ANNUITIES ("IRAS").
In addition to "traditional" IRAs governed by Code Sections 408(a) and (b)
("Traditional IRAs"), there are Roth IRAs governed by Code Section 408A, SEP
IRAs governed by Code Section 408(k), and SIMPLE IRAs governed by Code Section
408(p). Also, Qualified Plans under Code Section 401, 403(b) or 457(b) that
include after-tax employee contributions may be treated as deemed IRAs subject
to the same rules and limitations as Traditional IRAs. Contributions to each of
these types of IRAs are subject to differing limitations. The following is a
very general description of each type of IRA for which a Contract is available.
a. TRADITIONAL IRAS
Traditional IRAs are subject to limits on the amounts that may be contributed
each year, the persons who may be eligible, and the time when minimum
distributions must begin. Depending upon the circumstances of the individual,
contributions to a Traditional IRA may be made on a deductible or non-deductible
basis. Failure to make required minimum distributions ("RMDs") when the Owner
reaches age 70 1/2 or dies, as described below, may result in imposition of a
50% penalty tax on any excess of the RMD amount over the amount actually
distributed. In addition, any amount received before the Owner reaches age 59
1/2 or dies is subject to a 10% penalty tax on premature distributions, unless a
special exception applies, as described below. Under Code Section 408(e), an IRA
may not be used for borrowing (or as security for any loan) or in certain
prohibited transactions, and such a transaction could lead to the complete tax
disqualification of an IRA.
You (or your surviving spouse if you die) may rollover funds tax-free from
certain existing Qualified Plans (such as proceeds from existing insurance
contracts, annuity contracts or securities) into a Traditional IRA under certain
circumstances, as indicated below. However, mandatory tax withholding of 20% may
apply to any eligible rollover distribution from certain types of Qualified
Plans if the distribution is not transferred directly to the Traditional IRA. In
addition, under Code Section 402(c)(11) a non-spouse "designated beneficiary" of
a deceased Plan participant may make a tax-free "direct rollover" (in the form
of a direct transfer between Plan fiduciaries, as described below in "Rollover
Distributions") from certain Qualified Plans to a Traditional IRA for such
beneficiary, but such Traditional IRA must be designated and treated as an
"inherited IRA" that remains subject to applicable RMD rules (as if such IRA had
been inherited from the deceased Plan participant). In addition, such a Plan is
not required to permit such a rollover.
IRAs generally may not invest in life insurance contracts. However, an annuity
contract that is used as an IRA may provide a death benefit that equals the
greater of the premiums paid or the contract's cash value. The Contract offers
an enhanced death benefit that may exceed the greater of the Contract Value or
total premium payments. The tax rules are unclear as to what extent an IRA can
provide a death benefit that exceeds the greater of the IRA's cash value or the
sum of the premiums paid and other contributions into the IRA. Please note that
the IRA rider for the Contract has provisions that are designed to maintain the
Contract's tax qualification as an IRA, and therefore could limit certain
benefits under the Contract (including endorsement, rider or option benefits) to
maintain the Contract's tax qualification.
b. SEP IRAS
Code Section 408(k) provides for a Traditional IRA in the form of an
employer-sponsored defined contribution plan known as a Simplified Employee
Pension ("SEP") or a SEP IRA. A SEP IRA can have employer, employee and salary
reduction contributions, as well as higher overall contribution limits than a
Traditional IRA, but a SEP is also subject to special tax-qualification
requirements (e.g., on participation, nondiscrimination and withdrawals) and
sanctions. Otherwise, a SEP IRA is generally subject to the same tax rules as
for a Traditional IRA, which are described above. Please note that the IRA rider
for the Contract has provisions that are designed to maintain the Contract's tax
qualification as an IRA, and therefore could limit certain benefits under the
Contract (including endorsement, rider or option benefits) to maintain the
Contract's tax qualification.
c. SIMPLE IRAS
The Savings Incentive Match Plan for Employees of small employers ("SIMPLE
Plan") is a form of an employer-sponsored Qualified Plan that provides IRA
benefits for the participating employees ("SIMPLE IRAs"). Depending upon the
SIMPLE Plan, employers may make plan contributions into a SIMPLE IRA established
by each eligible participant. Like a Traditional IRA, a SIMPLE IRA is subject to
the 50% penalty tax for failure to make a full RMD, and to the 10% penalty tax
on premature distributions, as described below. In addition, the 10% penalty tax
is increased to 25% for amounts received during the 2-year period beginning on
the date you first participated in a qualified salary reduction arrangement
pursuant to a SIMPLE Plan maintained by your employer under Code Section
408(p)(2). Contributions to a SIMPLE IRA may be either salary deferral
contributions or employer contributions, and these are subject to different tax
limits from those for a Traditional IRA. Please note that the SIMPLE IRA rider
for the Contract has provisions that are designed to maintain the Contract's tax
qualification as an SIMPLE IRA, and therefore could limit certain benefits under
the Contract (including endorsement, rider or option benefits) to maintain the
Contract's tax qualification.
A SIMPLE Plan may designate a single financial institution (a Designated
Financial Institution) as the initial trustee, custodian or issuer (in the case
of an annuity contract) of the SIMPLE IRA set up for each eligible participant.
However, any such Plan also must allow each eligible participant to have the
balance in his SIMPLE IRA held by the Designated Financial Institution
transferred without cost or penalty to a SIMPLE IRA maintained by a different
financial institution. Absent a Designated Financial
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Institution, each eligible participant must select the financial institution to
hold his SIMPLE IRA, and notify his employer of this selection.
If we do not serve as the Designated Financial Institution for your employer's
SIMPLE Plan, for you to use one of our Contracts as a SIMPLE IRA, you need to
provide your employer with appropriate notification of such a selection under
the SIMPLE Plan. If you choose, you may arrange for a qualifying transfer of any
amounts currently held in another SIMPLE IRA for your benefit to your SIMPLE IRA
with us.
d. ROTH IRAS
Code Section 408A permits eligible individuals to establish a Roth IRA.
Contributions to a Roth IRA are not deductible, but withdrawals of amounts
contributed and the earnings thereon that meet certain requirements are not
subject to federal income tax. In general, Roth IRAs are subject to limitations
on the amounts that may be contributed by the persons who may be eligible to
contribute, certain Traditional IRA restrictions, and certain RMD rules on the
death of the Contract Owner. Unlike a Traditional IRA, Roth IRAs are not subject
to RMD rules during the Contract Owner's lifetime. Generally, however, upon the
Owner's death the amount remaining in a Roth IRA must be distributed by the end
of the fifth year after such death or distributed over the life expectancy of a
designated beneficiary. The Owner of a Traditional IRA may convert a Traditional
IRA into a Roth IRA under certain circumstances. The conversion of a Traditional
IRA to a Roth IRA will subject the fair market value of the converted
Traditional IRA to federal income tax. In addition to the amount held in the
converted Traditional IRA, the fair market value may include the value of
additional benefits provided by the annuity contract on the date of conversion,
based on reasonable actuarial assumptions. Tax-free rollovers from a Roth IRA
can be made only to another Roth IRA under limited circumstances, as indicated
below. After 2007, distributions from eligible Qualified Plans can be "rolled
over" directly (subject to tax) into a Roth IRA under certain circumstances.
Anyone considering the purchase of a Qualified Contract as a Roth IRA or a
"conversion" Roth IRA should consult with a qualified tax adviser. Please note
that the Roth IRA rider for the Contract has provisions that are designed to
maintain the Contract's tax qualification as a Roth IRA, and therefore could
limit certain benefits under the Contract (including endorsement, rider or
option benefits) to maintain the Contract's tax qualification.
2. QUALIFIED PENSION OR PROFIT-SHARING PLAN OR SECTION 401(k) PLAN
Provisions of the Code permit eligible employers to establish a tax-qualified
pension or profit sharing plan (described in Section 401(a), and Section 401(k)
if applicable, and exempt from taxation under Section 501(a)). Such a Plan is
subject to limitations on the amounts that may be contributed, the persons who
may be eligible to participate, the amounts of "incidental" death benefits, and
the time when RMDs must commence. In addition, a Plan's provision of incidental
benefits may result in currently taxable income to the participant for some or
all of such benefits. Amounts may be rolled over tax-free from a Qualified Plan
to another Qualified Plan under certain circumstances, as described below.
Anyone considering the use of a Qualified Contract in connection with such a
Qualified Plan should seek competent tax and other legal advice.
In particular, please note that these tax rules provide for limits on death
benefits provided by a Qualified Plan (to keep such death benefits "incidental"
to qualified retirement benefits), and a Qualified Plan (or a Qualified
Contract) often contains provisions that effectively limit such death benefits
to preserve the tax qualification of the Qualified Plan (or Qualified Contract).
In addition, various tax-qualification rules for Qualified Plans specifically
limit increases in benefits once RMDs begin, and Qualified Contracts are subject
to such limits. As a result, the amounts of certain benefits that can be
provided by any option under a Qualified Contract may be limited by the
provisions of the Qualified Contract or governing Qualified Plan that are
designed to preserve its tax qualification.
3. TAX SHELTERED ANNUITY UNDER SECTION 403(b) ("TSA")
Code Section 403(b) permits public school employees and employees of certain
types of charitable, educational and scientific organizations described in Code
Section 501(c)(3) to purchase a "tax-sheltered annuity" ("TSA") contract and,
subject to certain limitations, exclude employer contributions to a TSA from
such an employee's gross income. Generally, total contributions may not exceed
the lesser of an annual dollar limit (e.g., $46,000 in 2008) or 100% of the
employee's "includable compensation" for the most recent full year of service,
subject to other adjustments. The general annual elective deferral limit for a
TSA participant after 2005 is $15,000. In addition, for years after 2006 this
$15,000 limit will be indexed for cost-of-living adjustments under Code Section
402(g)(4) at $500 increments. For any such participant age 50 or older, the
contribution limit after 2005 generally is increased by an additional $5,000
under Code Section 414(v). For years after 2006 this "over-50 catch-up" $5,000
limit also will be indexed for cost-of-living adjustments under Code Section
414(v)(2)(C) at $500 increments. Special provisions may allow certain employees
different overall limitations.
A TSA is subject to a prohibition against distributions from the TSA
attributable to contributions made pursuant to a salary reduction agreement,
unless such distribution is made:
a. after the employee reaches age 59 1/2;
b. upon the employee's separation from service;
c. upon the employee's death or disability;
d. in the case of hardship (and in the case of hardship, any income
attributable to such contributions may not be distributed); or
e. as a qualified reservist distribution upon certain calls to active
duty.
Please note that the TSA rider for the Contract has provisions that are designed
to maintain the Contract's tax qualification as
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22 HARTFORD LIFE INSURANCE COMPANY
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a TSA, and therefore could limit certain benefits under the Contract (including
endorsement, rider or option benefits) to maintain the Contract's tax
qualification. In particular, please note that tax rules provide for limits on
death benefits provided by a Qualified Plan (to keep such death benefits
"incidental" to qualified retirement benefits), and a Qualified Plan (or a
Qualified Contract) often contains provisions that effectively limit such death
benefits to preserve the tax qualification of the Qualified Plan (or Qualified
Contract). In addition, various tax-qualification rules for Qualified Plans
specifically limit increases in benefits once RMDs begin, and Qualified
Contracts are subject to such limits. As a result, the amounts of certain
benefits that can be provided by any option under a Qualified Contract may be
limited by the provisions of the Qualified Contract or governing Qualified Plan
that are designed to preserve its tax qualification. In addition, a life
insurance contract issued after September 23, 2007 is generally ineligible to
qualify as a TSA under Reg. Section 1.403(b)-8(c)(2).
Amounts may be rolled over tax-free from a TSA to another TSA or Qualified Plan
(or from a Qualified Plan to a TSA) under certain circumstances, as described
below. However, effective for TSA contract exchanges after September 24, 2007,
Reg. ' 1.403(b)-10(b) allows a TSA contract of a participant or beneficiary
under a TSA Plan to be exchanged tax-free for another eligible TSA contract
under that same TSA Plan, but only if all of the following conditions are
satisfied: (1) such TSA Plan allows such an exchange, (2) the participant or
beneficiary has an accumulated benefit after such exchange that is no less than
such participant's or beneficiary's accumulated benefit immediately before such
exchange (taking into account such participant's or beneficiary's accumulated
benefit under both TSA contracts immediately before such exchange), (3) the
second TSA contract is subject to distribution restrictions with respect to the
participant that are no less stringent than those imposed on the TSA contract
being exchanged, and (4) the employer for such TSA Plan enters into an agreement
with the issuer of the second TSA contract under which such issuer and employer
will provide each other from time to time with certain information necessary for
such second TSA contract (or any other TSA contract that has contributions from
such employer) to satisfy the TSA requirements under Code Section 403(b) and
other federal tax requirements (e.g., plan loan conditions under Code Section
72(p) to avoid deemed distributions). Such necessary information could include
information about the participant's employment, information about other
Qualified Plans of such employer, and whether a severance has occurred, or
hardship rules are satisfied, for purposes of the TSA distribution restrictions.
Consequently, you are advised to consult with a qualified tax advisor before
attempting any such TSA exchange, particularly because it requires an agreement
between the employer and issuer to provide each other with certain information.
We are no longer accepting any incoming exchange request, or new contract
application, for any individual TSA contract.
4. DEFERRED COMPENSATION PLANS UNDER SECTION 457 ("SECTION 457 PLANS")
Certain governmental employers, or tax-exempt employers other than a
governmental entity, can establish a Deferred Compensation Plan under Code
Section 457. For these purposes, a "governmental employer" is a State, a
political subdivision of a State, or an agency or an instrumentality of a State
or political subdivision of a State. A Deferred Compensation Plan that meets the
requirements of Code Section 457(b) is called an "Eligible Deferred Compensation
Plan" or "Section 457(b) Plan." Code Section 457(b) limits the amount of
contributions that can be made to an Eligible Deferred Compensation Plan on
behalf of a participant. 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 $15,000 for 2006 and thereafter. The $15,000
limit will be indexed for cost-of-living adjustments at $500 increments. 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, with an eligible Deferred Compensation Plan for a
governmental employer, the contribution limitation may be increased under Code
Section 457(e)(18) to allow certain "catch-up" contributions for individuals who
have attained age 50, but only one "catch-up" may be used in a particular year.
In addition, under Code Section 457(d) a Section 457(b) Plan may not make
amounts available for distribution to participants or beneficiaries before (1)
the calendar year in which the participant attains age 70 1/2, (2) the
participant has a severance from employment (including death), or (3) the
participant is faced with an unforeseeable emergency (as determined in
accordance with regulations).
Under Code Section 457(g) 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,
annuity contracts and custodial accounts described in Code Section 401(f) are
treated as trusts. This trust requirement does not apply to amounts under an
Eligible Deferred Compensation Plan of a tax-exempt (non-governmental) employer.
In addition, this trust requirement does not apply to amounts held under a
Deferred Compensation Plan of a governmental employer that is not a Section
457(b) Plan. However, where the trust requirement does not apply, amounts held
under a Section 457 Plan must remain subject to the claims of the employer's
general creditors under Code Section 457(b)(6).
5. TAXATION OF AMOUNTS RECEIVED FROM QUALIFIED PLANS
Except under certain circumstances in the case of Roth IRAs, amounts received
from Qualified Contracts or Plans generally are taxed as ordinary income under
Code Section 72, to the extent that they are not treated as a tax-free recovery
of after-tax contributions or other "investment in the contract." For annuity
payments and other amounts received after the Annuity Commencement Date from a
Qualified Contract or Plan, the tax rules for determining what portion of each
amount received represents a tax-free recovery of "investment in the contract"
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HARTFORD LIFE INSURANCE COMPANY 23
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are generally the same as for Non-Qualified Contracts, as described above.
For non-periodic amounts from certain Qualified Contracts or Plans, Code Section
72(e)(8) provides special rules that generally treat a portion of each amount
received as a tax-free recovery of the "investment in the contract," based on
the ratio of the "investment in the contract" over the Contract Value at the
time of distribution. However, in determining such a ratio, certain aggregation
rules may apply and may vary, depending on the type of Qualified Contract or
Plan. For instance, all Traditional IRAs owned by the same individual are
generally aggregated for these purposes, but such an aggregation does not
include any IRA inherited by such individual or any Roth IRA owned by such
individual.
In addition, penalty taxes, mandatory tax withholding or rollover rules may
apply to amounts received from a Qualified Contract or Plan, as indicated below,
and certain exclusions may apply to certain distributions (e.g., distributions
from an eligible Government Plan to pay qualified health insurance premiums of
an eligible retired public safety officer). Accordingly, you are advised to
consult with a qualified tax adviser before taking or receiving any amount
(including a loan) from a Qualified Contract or Plan.
6. PENALTY TAXES FOR QUALIFIED PLANS
Unlike Non-Qualified Contracts, Qualified Contracts are subject to federal
penalty taxes not just on premature distributions, but also on excess
contributions and failures to make required minimum distributions ("RMDs").
Penalty taxes on excess contributions can vary by type of Qualified Plan and
which person made the excess contribution (e.g., employer or an employee). The
penalty taxes on premature distributions and failures to make timely RMDs are
more uniform, and are described in more detail below.
a. PENALTY TAXES ON PREMATURE DISTRIBUTIONS
Code Section 72(t) imposes a penalty income tax equal to 10% of the taxable
portion of a distribution from certain types of Qualified Plans that is made
before the employee reaches age 59 1/2. However, this 10% penalty tax does not
apply to a distribution that is either:
(i) made to a beneficiary (or to the employee's estate) on or after the
employee's death;
(ii) attributable to the employee's becoming disabled under Code Section
72(m)(7);
(iii) part of a series of substantially equal periodic payments (not less
frequently than annually -- "SEPPs") made for the life (or life
expectancy) of the employee or the joint lives (or joint life
expectancies) of such employee and a designated beneficiary ("SEPP
Exception"), and for certain Qualified Plans (other than IRAs) such a
series must begin after the employee separates from service;
(iv) (except for IRAs) made to an employee after separation from service
after reaching age 55 (or made after age 50 in the case of a qualified
public safety employee separated from certain government plans);
(v) (except for IRAs) made to an alternate payee pursuant to a qualified
domestic relations order under Code Section 414(p) (a similar exception
for IRAs in Code Section 408(d)(6) covers certain transfers for the
benefit of a spouse or ex-spouse);
(vi) not greater than the amount allowable as a deduction to the employee
for eligible medical expenses during the taxable year; or
(vii) certain qualified reservist distributions under Code Section
72(t)(2)(G) upon a call to active duty.
In addition, the 10% penalty tax does not apply to a distribution from an IRA
that is either:
(viii) made after separation from employment to an unemployed IRA owner for
health insurance premiums, if certain conditions are met;
(ix) not in excess of the amount of certain qualifying higher education
expenses, as defined by Code Section 72(t)(7); or
(x) for a qualified first-time home buyer and meets the requirements of
Code Section 72(t)(8).
If the taxpayer avoids this 10% penalty tax by qualifying for the SEPP Exception
and later such series of payments is modified (other than by death or
disability), the 10% penalty tax will be applied retroactively to all the prior
periodic payments (i.e., penalty tax plus interest thereon), unless such
modification is made after both (a) the employee has reached age 59 1/2 and (b)
5 years have elapsed since the first of these periodic payments.
For any premature distribution from a SIMPLE IRA during the first 2 years that
an individual participates in a salary reduction arrangement maintained by that
individual's employer under a SIMPLE Plan, the 10% penalty tax rate is increased
to 25%.
b. RMDS AND 50% PENALTY TAX
If the amount distributed from a Qualified Contract or Plan is less than the
amount of the required minimum distribution ("RMD") for the year, the
participant is subject to a 50% penalty tax on the amount that has not been
timely distributed.
An individual's interest in a Qualified Plan generally must be distributed, or
begin to be distributed, not later than the Required Beginning Date. Generally,
the Required Beginning Date is April 1 of the calendar year following the later
of --
(i) the calendar year in which the individual attains age 70 1/2, or
(ii) (except in the case of an IRA or a 5% owner, as defined in the Code)
the calendar year in which a participant retires from service with the
employer sponsoring a Qualified Plan that allows such a later Required
Beginning Date.
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24 HARTFORD LIFE INSURANCE COMPANY
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The entire interest of the individual must be distributed beginning no later
than the Required Beginning Date over --
(a) the life of the individual or the lives of the individual and a
designated beneficiary (as specified in the Code), or
(b) over a period not extending beyond the life expectancy of the individual
or the joint life expectancy of the individual and a designated
beneficiary.
If an individual dies before reaching the Required Beginning Date, the
individual's entire interest generally must be distributed within 5 years after
the individual's death. However, this RMD rule will be deemed satisfied if
distributions begin before the close of the calendar year following the
individual's death to a designated beneficiary and distribution is over the life
of such designated beneficiary (or over a period not extending beyond the life
expectancy of such beneficiary). If such beneficiary is the individual's
surviving spouse, distributions may be delayed until the deceased individual
would have attained age 70 1/2.
If an individual dies after RMDs have begun for such individual, any remainder
of the individual's interest generally must be distributed at least as rapidly
as under the method of distribution in effect at the time of the individual's
death.
The RMD rules that apply while the Contract Owner is alive do not apply with
respect to Roth IRAs. The RMD rules applicable after the death of the Owner
apply to all Qualified Plans, including Roth IRAs. In addition, if the Owner of
a Traditional or Roth IRA dies and the Owner's surviving spouse is the sole
designated beneficiary, this surviving spouse may elect to treat the Traditional
or Roth IRA as his or her own.
The RMD amount for each year is determined generally by dividing the account
balance by the applicable life expectancy. This account balance is generally
based upon the account value as of the close of business on the last day of the
previous calendar year. RMD incidental benefit rules also may require a larger
annual RMD amount, particularly when distributions are made over the joint lives
of the Owner and an individual other than his or her spouse. RMDs also can be
made in the form of annuity payments that satisfy the rules set forth in
Regulations under the Code relating to RMDs.
In addition, in computing any RMD amount based on a contract's account value,
such account value must include the actuarial value of certain additional
benefits provided by the contract. As a result, electing an optional benefit
under a Qualified Contract may require the RMD amount for such Qualified
Contract to be increased each year, and expose such additional RMD amount to the
50% penalty tax for RMDs if such additional RMD amount is not timely
distributed.
7. TAX WITHHOLDING FOR QUALIFIED PLANS
Distributions from a Qualified Contract or Qualified Plan generally are subject
to federal income tax withholding requirements. These federal income tax
withholding requirements, including any "elections out" and the rate at which
withholding applies, generally are the same as for periodic and non-periodic
distributions from a Non-Qualified Contract, as described above, except where
the distribution is an "eligible rollover distribution" (described below in
"ROLLOVER DISTRIBUTIONS"). In the latter case, tax withholding is mandatory at a
rate of 20% of the taxable portion of the "eligible rollover distribution," to
the extent it is not directly rolled over to an IRA or other Eligible Retirement
Plan (described below in "ROLLOVER DISTRIBUTIONS"). Payees cannot elect out of
this mandatory 20% withholding in the case of such an "eligible rollover
distribution."
Also, special withholding rules apply with respect to distributions from
non-governmental Section 457(b) Plans, and to distributions made to individuals
who are neither citizens nor resident aliens of the United States.
Regardless of any "election out" (or any actual amount of tax actually withheld)
on an amount received from a Qualified Contract or Plan, the payee is generally
liable for any failure to pay the full amount of tax due on the includable
portion of such amount received. A payee also may be required to pay penalties
under estimated income tax rules, if the withholding and estimated tax payments
are insufficient to satisfy the payee's total tax liability.
8. ROLLOVER DISTRIBUTIONS
The current tax rules and limits for tax-free rollovers and transfers between
Qualified Plans vary according to (1) the type of transferor Plan and transferee
Plan, (2) whether the amount involved is transferred directly between Plan
fiduciaries (a "direct transfer" or a "direct rollover") or is distributed first
to a participant or beneficiary who then transfers that amount back into another
eligible Plan within 60 days (a "60-day rollover"), and (3) whether the
distribution is made to a participant, spouse or other beneficiary. Accordingly,
we advise you to consult with a qualified tax adviser before receiving any
amount from a Qualified Contract or Plan or attempting some form of rollover or
transfer with a Qualified Contract or Plan.
For instance, generally any amount can be transferred directly from one type of
Qualified Plan (e.g., a TSA) to the same type of Plan for the benefit of the
same individual, without limit (or federal income tax), if the transferee Plan
is subject to the same kinds of restrictions as the transferor Plan (e.g., a TSA
that is subject to the same kinds of salary reduction restrictions) and certain
other conditions to maintain the applicable tax qualification are satisfied
(e.g., as described above for TSA exchanges after September 24, 2007). Such a
"direct transfer" between the same kinds of Plan is generally not treated as any
form of "distribution" out of such a Plan for federal income tax purposes.
By contrast, an amount distributed from one type of Plan (e.g., a TSA) into a
different type of Plan (e.g., a Traditional IRA) generally is treated as a
"distribution" out of the first Plan for federal income tax purposes, and
therefore to avoid being subject to such tax, such a distribution must qualify
either as a "direct rollover" (made directly to another Plan fiduciary) or as a
"60-day rollover." The tax restrictions and other rules for a "direct rollover"
and a "60-day rollover" are similar in many
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HARTFORD LIFE INSURANCE COMPANY 25
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ways, but if any "eligible rollover distribution" made from certain types of
Qualified Plan is not transferred directly to another Plan fiduciary by a
"direct rollover," then it is subject to mandatory 20% withholding, even if it
is later contributed to that same Plan in a "60-day rollover" by the recipient.
If any amount less than 100% of such a distribution (e.g., the net amount after
the 20% withholding) is transferred to another Plan in a "60-day rollover", the
missing amount that is not rolled over remains subject to normal income tax plus
any applicable penalty tax.
Under Code Sections 402(f)(2)(A) and 3405(c)(3) an "eligible rollover
distribution" (which is both eligible for rollover treatment and subject to 20%
mandatory withholding absent a "direct rollover") is generally any distribution
to an employee of any portion (or all) of the balance to the employee's credit
in any of the following types of "Eligible Retirement Plan": (1) a Qualified
Plan under Code Section 401(a) ("Qualified 401(a) Plan"), (2) a qualified
annuity plan under Code Section 403(a) ("Qualified Annuity Plan"), (3) a TSA
under Code Section 403(b), or (4) a governmental Section 457(b) Plan. However,
an "eligible rollover distribution" does not include any distribution that is
either --
a. an RMD amount;
b. one of a series of substantially equal periodic payments (not less
frequently than annually) made either (i) for the life (or life
expectancy) of the employee or the joint lives (or joint life
expectancies) of the employee and a designated beneficiary, or (ii) for
a specified period of 10 years or more; or
c. any distribution made upon hardship of the employee.
Before making an "eligible rollover distribution," a Plan administrator
generally is required under Code Section 402(f) to provide the recipient with
advance written notice of the "direct rollover" and "60-day rollover" rules and
the distribution's exposure to the 20% mandatory withholding if it is not made
by "direct rollover." Generally, under Code Sections 402(c), 403(b)(8) and 457
(e)(16), a "direct rollover" or a "60-day rollover" of an "eligible rollover
distribution" can be made to a Traditional IRA or to another Eligible Retirement
Plan that agrees to accept such a rollover. However, the maximum amount of an
"eligible rollover distribution" that can qualify for a tax-free "60-day
rollover" is limited to the amount that otherwise would be includable in gross
income. By contrast, a "direct rollover" of an "eligible rollover distribution"
can include after-tax contributions as well, if the direct rollover is made
either to a Traditional IRA or to another form of Eligible Retirement Plan that
agrees to account separately for such a rollover, including accounting for such
after-tax amounts separately from the otherwise taxable portion of this
rollover. Separate accounting also is required for all amounts (taxable or not)
that are rolled into a governmental Section 457(b) Plan from either a Qualified
Section 401(a) Plan, Qualified Annuity Plan, TSA or IRA. These amounts, when
later distributed from the governmental Section 457(b) Plan, are subject to any
premature distribution penalty tax applicable to distributions from such a
"predecessor" Qualified Plan.
Rollover rules for distributions from IRAs under Code Sections 408(d)(3) and
408A(d)(3) also vary according to the type of transferor IRA and type of
transferee IRA or other Plan. For instance, generally no tax-free "direct
rollover" or "60-day rollover" can be made between a "NonRoth IRA" (Traditional,
SEP or SIMPLE IRA) and a Roth IRA, and a transfer from NonRoth IRA to a Roth
IRA, or a "conversion" of a NonRoth IRA to a Roth IRA, is subject to special
rules. In addition, generally no tax-free "direct rollover" or "60-day rollover"
can be made between an "inherited IRA" (NonRoth or Roth) for a beneficiary and
an IRA set up by that same individual as the original owner. Generally, any
amount other than an RMD distributed from a Traditional or SEP IRA is eligible
for a "direct rollover" or a "60-day rollover" to another Traditional IRA for
the same individual. Similarly, any amount other than an RMD distributed from a
Roth IRA is generally eligible for a "direct rollover" or a "60-day rollover" to
another Roth IRA for the same individual. However, in either case such a
tax-free 60-day rollover is limited to 1 per year (365-day period); whereas no
1-year limit applies to any such "direct rollover." Similar rules apply to a
"direct rollover" or a "60-day rollover" of a distribution from a SIMPLE IRA to
another SIMPLE IRA or a Traditional IRA, except that any distribution of
employer contributions from a SIMPLE IRA during the initial 2-year period in
which the individual participates in the employer's SIMPLE Plan is generally
disqualified (and subject to the 25% penalty tax on premature distributions) if
it is not rolled into another SIMPLE IRA for that individual. Amounts other than
RMDs distributed from a Traditional or SEP IRA (or SIMPLE IRA after the initial
2-year period) also are eligible for a "direct rollover" or a "60-day rollover"
to an Eligible Retirement Plan (e.g., a TSA) that accepts such a rollover, but
any such rollover is limited to the amount of the distribution that otherwise
would be includable in gross income (i.e., after-tax contributions are not
eligible).
Special rules also apply to transfers or rollovers for the benefit of a spouse
(or ex-spouse) or a nonspouse designated beneficiary, Plan distributions of
property, and obtaining a waiver of the 60-day limit for a tax-free rollover
from the IRS. The Katrina Emergency Tax Relief Act of 2005 (KETRA) allows
certain amounts to be recontributed within three years as a rollover
contribution to a plan from which a KETRA distribution was taken.
LEGAL OPINION
The validity of the interests in the Contracts described in this Prospectus will
be passed upon for Hartford by Richard J. Wirth, Senior Counsel for Hartford
Life Insurance Company.
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26 HARTFORD LIFE INSURANCE COMPANY
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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, 2007 have been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in their
report dated February 20, 2008 which is incorporated herein by reference, and
has been so incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended March 31, 2008 and 2007 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 report included in the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 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 report 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
that report is not a "report" or a "part" of the registration statement prepared
or certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
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HARTFORD LIFE INSURANCE COMPANY 27
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APPENDIX A -- MODIFIED GUARANTEED ANNUITY FOR QUALIFIED PLANS
The CRC(R) (Compound Rate Contract) Annuity for Qualified Plans is a group
deferred annuity Contract under which one or more purchase payments may be made.
Plans eligible to purchase the Contract are pension and profit-sharing plans
qualified under Section 401(a) of the Internal Revenue Code (the "Code"), Keogh
Plans and eligible state deferred compensation plans under Section 457 of the
Code ("Qualified Plans").
To apply for a Group Annuity Contract, the trustee or other applicant need only
complete an application for the Group Annuity Contract and make its initial
purchase payment. A Group Annuity Contract will then be issued to the applicant
and subsequent Purchase Payments may be made, subject to the same $2,000 minimum
applicable to qualified purchasers of Certificates. While no Certificates are
issued, each purchase payment, and the Account established thereby, are
confirmed to the Contract Owner. The initial and subsequent purchase payments
operate to establish Accounts under the Group Annuity Contract in the same
manner as non-qualified purchases. Each Account will have its own Initial and
Subsequent Guarantee Periods and Guaranteed Rates. Surrenders under the Group
Annuity Contract may be made, at the election of the Contract Owner, from one or
more of the Accounts established under the Contract. Account surrenders are
subject to the same limitations, adjustments and charges as surrenders made
under a certificate (see "Surrenders"). Net Surrender Values may be surrendered
or applied to purchase annuities for the Contract Owners' Qualified Plan
Participants.
Because there are no individual participant accounts, the Qualified Group
Annuity Contract issued in connection with a Qualified Plan does not provide for
death benefits. Annuities purchased for Qualified Plan Participants may provide
for a payment upon the death of the Annuitant, depending on the option chosen
(see "Annuity Options"). Additionally, since there are no Annuitants prior to
the actual purchase of an Annuity by the Contract Owner, the provisions
regarding the Annuity Commencement Date are not applicable.
If you are purchasing the Contract for use in an IRA or other qualified
retirement plan, you should consider other features of the Contract besides tax
deferral, since any investment vehicle used within an IRA or other qualified
plan receives tax deferred treatment under the Code.
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28 HARTFORD LIFE INSURANCE COMPANY
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APPENDIX B -- SPECIAL PROVISIONS FOR INDIVIDUAL CONTRACTS ISSUED IN THE STATE OF
CALIFORNIA, MICHIGAN, MISSOURI, NEW YORK, OREGON, SOUTH CAROLINA, TEXAS,
VIRGINIA AND WISCONSIN
The following provision, among others, applies only to individual Contracts
issued in the States of California, Michigan, Missouri, New York, Oregon, South
Carolina, Texas, Virginia and Wisconsin:
(1) The Contract Owner has the right to request, in writing, a surrender of the
Contract within ten (10) days after it was purchased. In such event, in
California, New York, Oregon, Texas, Virginia and Wisconsin, Hartford will
pay the Contract Owner an amount equal to the sum of (a) the Account Value
on the date the written request for surrender was received multiplied by
the Market Value Adjustment formula and (b) any charges deducted from the
Purchase Payment. In Michigan, Missouri and South Carolina, the Contract
will be cancelled and any premium paid will be refunded in full.
<Page>
HARTFORD LIFE INSURANCE COMPANY 29
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APPENDIX C -- MARKET VALUE ADJUSTMENT
The formula which will be used to determine the Market Value Adjustment is: [(1
+ i)/(1 + J)](n/12)
i = The Guarantee Rate in effect for the Current Guarantee
Period(expressed as a decimal, e.g., 1% = .01)
J = The Current Rate (expressed as a decimal, e.g., 1% = .01) in effect
for durations equal to the number of years remaining in the current
Guarantee Period (years are rounded to the next highest number of
years).
N = The number of complete months from the surrender date to the end of
the current Guarantee Period.
EXAMPLE OF MARKET VALUE ADJUSTMENT
<Table>
Beginning Account Value: $50,000
Guarantee Period: 5 Years
Guarantee Rate: 5.50% per annum
Full Surrender: Middle of Contract Year 3
</Table>
EXAMPLE 1:
<Table>
Gross Surrender Value at middle of Contract Year 3 = $50,000 (1.055)TO THE POWER OF 2.5 = $57,161.18
Net Surrender Value at middle of Contract Year 3 = [$57,161.18 - (0.05) x $57,161.18]
x Market Value Adjustment
= $54,303.12 x Market Value Adjustment
Market Value Adjustment
i = 0.055
J = 0.061
N = 30
Market Value Adjustment = [(1 + i)/(1 + J)]TO THE POWER OF n/12
= (1.055/1.061)TO THE POWER OF 30/12
= 0.985922
Net Surrender Value at middle of Contract Year 3 = $54,303.12 x 0.985922
= $53,538.64
</Table>
EXAMPLE OF MARKET VALUE ADJUSTMENT
<Table>
Beginning Account Value: $50,000
Guarantee Period: 5 Years
Guarantee Rate: 5.50% per annum
Full Surrender: Middle of Contract Year 3
</Table>
EXAMPLE 2:
<Table>
Gross Surrender Value at middle of Contract Year 3 = $50,000 (1.055)TO THE POWER OF 2.5 = $57,161.18
Net Surrender Value at middle of Contract Year 3 = [$57,161.18 - (0.05) x $57,161.18]
x Market Value Adjustment
= $54,303.12 x Market Value Adjustment
Market Value Adjustment
i = .055
J = 0.050
N = 30
Market Value Adjustment = [(1 + i)/(1 + J)]TO THE POWER OF n/12
= (1.055/1.05)TO THE POWER OF 30/12
= 1.011947
Net Surrender Value at middle of Contract Year 3 = $54,303.12 x 1.011947
= $54,951.88
</Table>
This example does not include any applicable taxes.