[SUTHERLAND ASBILL & BRENNAN LLP LETTERHEAD]
PITTS, PATRICE M.
DIRECT LINE: 202.383.0548
E-mail: patrice.pitts@sutherland.com
March 29, 2012
VIA E-MAIL AND EDGAR CORRESPONDENCE
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Min S. Oh, Esq.
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-8629
RE: MetLife Investors USA Insurance Company:
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MetLife Investors USA Separate Account A
"Marquis Portfolios (offered on and after_____, 2012)"
(the "National Version")
Initial Registration Statement filed on Form N-4
File Nos. 811-03365 and 333-179239
First MetLife Investors Insurance Company
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First MetLife Investors Variable Annuity Account One
"Marquis Portfolios (offered on and after _____, 2012)"
(the "NY Version")
Initial Registration Statement filed on Form N-4
File Nos. 811-08306 and 333-179240
Dear Mr. Oh:
On behalf of MetLife Investors USA Insurance Company ("MLI USA") and its
separate account MetLife Investors USA Separate Account A ("Separate Account
A"), and First MetLife Investors Insurance Company ("FMLI") and its separate
account First MetLife Investors Variable Annuity Account One ("Account One"), we
are providing the responses of MLI USA and FMLI to the comments of the staff of
the U.S. Securities and Exchange Commission ("SEC" or the "Commission") provided
by letter dated March 22, 2012, in connection with the
Min S. Oh, Esq.
March 29, 2012
Page 2
above-captioned registration statements filed on January 30, 2012.(1) For your
convenience, each of those comments is set forth below in italics, followed by
the response to the comment. In addition, we have attached pages from revised
prospectuses and statements of additional information ("SAIs") for the
above-captioned registration statements, marked to show changes made in response
to the SEC staff comments.
GENERAL
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1. FOR THE NATIONAL VERSION, PLEASE DISCLOSE TO THE STAFF WHETHER THERE ARE ANY
TYPES OF GUARANTEES OR SUPPORT AGREEMENTS WITH ANY THIRD PARTIES.
RESPONSE: MLI USA does not have any type of guarantee or support agreement
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with a third party to support any of the guarantees under the contract or any of
its related riders. MLI USA is responsible for paying out guaranteed benefits
associated with the contract.
PROSPECTUS
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2. INDEX OF SPECIAL TERMS (PAGE 4)
PLEASE CONFIRM THAT ALL SPECIAL TERMS HAVE BEEN DEFINED IN THE TEXT
INCLUDING THE INDEX OF SPECIAL TERMS AND APPEAR IN UPPER CASE THROUGHOUT THE
PROSPECTUS.
RESPONSE: Each of the Registrants has revised the disclosure in its
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respective prospectus to incorporate definitions of special terms the first time
they appear in the prospectus, except where a definition would detract from the
readability or clarity of the disclosure. However, neither Registrant has
defined special terms in the Index of Special Terms. In this regard, Registrants
note that Form N-4 permits the use of an Index of Special Terms that does not
include actual definitions, as a glossary would, but rather refers to the page
of the prospectus on which the special term is defined.
In addition, special terms are presented in the prospectus with initial
capital letters. (The capitalized terms on the attached pages are illustrative
of the revisions made in response to the second part of this comment.)
3. FEE TABLES AND EXAMPLES (PAGE 7)
A. FOR CONSISTENCY, PLEASE UPPER CASE THE "MORTALITY, AND EXPENSE
CHARGE" AND "ADMINISTRATION CHARGE" REFERENCED IN FOOTNOTE 5 TO THE TABLE.
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(1) Separate Account A and Account One will be referred to herein collectively
as the "Registrants," and each as a "Registrant."
Min S. Oh, Esq.
March 29, 2012
Page 3
RESPONSE: The names of the various charges under the National Version
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and under the NY Version are not used as "special terms" in the
prospectuses, and therefore are not presented with initial capital letters
(except when used as headings). Registrants will confirm that this
convention is followed consistently when references are made to the various
charges assessed under the National Version and NY Version. For example, in
the "Fee Tables and Examples" in the National Version prospectus, the
initial capital letters will be removed from the term "Mortality and
Expense Charge" that appears in Note 4, and the capital "C" in "mortality
and expense Charge" in Note 5 will be replaced with a lower case "c." (See
attached page 7 of the National Version prospectus.) The names of charges
assessed under the NY Version are presented consistently in the "Fee Tables
and Examples" section of the NY Version prospectus.
B. FOR PURPOSES OF THE INDIVIDUAL PORTFOLIO FEES TABLE BEGINNING ON
PAGE 9, PLEASE BE SURE TO PROVIDE DISCLOSURE FOLLOWING THE TABLE TO EXPLAIN
"ACQUIRED FUND FEES AND EXPENSES" AS HAS BEEN PROVIDED IN PRIOR METLIFE
FILINGS.
RESPONSE: The Registrants note that the disclosure requested by this
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comment describes the components of operating expenses for a "fund of
funds." In updating the table of "Investment Portfolio Expenses" and
accompanying footnotes in a pre-effective amendment to its respective
initial registration statement, neither of the Registrants anticipates
adding such disclosure because there will be no "fund of funds" Investment
Portfolios under either the National Version or the NY Version contracts.
4. TERMINATION FOR LOW ACCOUNT VALUE (PAGE 14)
FOR THE NATIONAL VERSION, PLEASE CLARIFY THE TERM "GUARANTEED DEATH
BENEFIT" USED IN THE FIFTH SENTENCE AND IN THE FIRST SENTENCE OF THE SECOND
PARAGRAPH UNDER "WITHDRAWALS" ON PAGE 35, I.E., IT IS UNCLEAR WHETHER IT APPLIES
TO THE STANDARD AND/OR OPTIONAL DEATH BENEFITS.
RESPONSE: The term "guaranteed death benefit," as used in the two instances
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cited in the comment, refers to two distinct concepts. As used in the
"Termination for Low Account Value" section of the National Version prospectus,
the term "guaranteed death benefit" was intended as shorthand for the amount
payable under any death benefit--the standard death benefit or any optional
death benefit--in circumstances under which MLI USA is obligated to pay an
amount in excess of an Owner's Account Value. Accordingly, the disclosure in
that section of the prospectus has been revised to replace the term "guaranteed
death benefit" with the phrase "guaranteed amount under any death benefit." (See
page 14 of the National Version prospectus.)
With regard to the second instance, the first sentence of the second
paragraph under "Withdrawals" conveys to Owners that certain benefits under the
contract (or charges for those benefits) could be deemed to be taxable income.
Because Registrants believe that the meaning and import of that sentence are
clear without mention of examples of the types of "benefits"
Min S. Oh, Esq.
March 29, 2012
Page 4
referenced, updated disclosure in the "Federal Income Tax Status" section of the
prospectus will include a simplified first sentence of the second paragraph
under the subheading "Withdrawals"--the phrase "such as any of the guaranteed
death benefits" will be removed. (See attached page 35 of the National Version
prospectus. For consistency of disclosure, the corresponding disclosure on page
33 of the NY Version has also been revised.)
5. INVESTMENT OPTIONS (PAGE 16)
ONCE THE FUNDS AVAILABLE THROUGH THE CONTRACT HAVE BEEN UPDATED, PLEASE
DELETE/REVISE THE THIRD TO LAST PARAGRAPH ON PAGE 17 REGARDING THE AGREEMENT
BETWEEN METLIFE AND LEGG MASON ACCORDINGLY AS WELL AS OTHER APPLICABLE PORTIONS
OF THE PROSPECTUS INCLUDING THE SECOND PARAGRAPH UNDER "MARKET TIMING' ON PAGE
20 AND THE "EXAMPLE" ON PAGE 22.
RESPONSE: The disclosure regarding the agreement between MetLife and Legg
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Mason has been removed from the National Version and NY Version prospectuses.
(See attached page 17 of the National Version and NY Version prospectuses.) Each
of the Registrants will update other portions of its respective
prospectus--including the disclosure under the subheading "Market Timing," and
the "Example" under the heading "Automatic Rebalancing Program" referenced in
this comment--as necessary to reflect the Investment Portfolios that are
available under the National Version or NY Version.
6. MARQUIS ASSET ALLOCATION PROGRAM (PAGE 22)
A. FOLLOWING THE BOLDED SENTENCE IN THE FIRST PARAGRAPH THAT
ENROLLMENT IN THE ASSET ALLOCATION PROGRAM IS REQUIRED, PLEASE DISCLOSE
WHETHER A CONTRACT OWNER IS REQUIRED TO ALLOCATE ALL, NONE, OR A SPECIFIED
PERCENTAGE OF PURCHASE PAYMENTS OR CONTRACT VALUE TO A SINGLE ASSET
ALLOCATION MODEL OR AMONG SEVERAL MODELS.
RESPONSE: The disclosure under the subheading "Marquis Asset
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Allocation Program has been revised to provide a clearer explanation of the
operation of the Asset Allocation Program.
. When an Owner purchases a National Version or NY Version contract, at
the time the contract is issued, the Owner's initial Purchase Payment
will be allocated in accordance with the Asset Allocation Program, and
the default investment allocation for future Purchase Payments and
automatic rebalancing are set in accordance with an asset allocation
model that the Owner selects in consultation with his/her registered
representative.
. At any time after contract issue, an Owner can change his/her
investment allocations for future Purchase Payments, transfers of
Account Value, and automatic rebalancing and not maintain the
investment allocation restrictions related to models in the Asset
Allocation Program.
Min S. Oh, Esq.
March 29, 2012
Page 5
In addition, each Registrant has added to the section of the prospectus
describing "Allocation of Purchase Payments" a cross-reference to the
section of the prospectus describing the "Marquis Asset Allocation
Program." (See attached pages 14 and 22 of the National Version and NY
Version prospectuses.)
B. WHEN DISCUSSING THE AVAILABILITY AND/OR LIMITS ON THE CHOICES OF
INVESTMENT OPTIONS (18) UNDER THE CONTRACT HERE AND EARLIER IN THE
PROSPECTUS UNDER "ALLOCATION OF PURCHASE PAYMENTS" ON PAGE 14, PLEASE
DISCLOSE HOW THE SELECTION OF MODELS WOULD AFFECT SUCH LIMITS. IN THIS
REGARD, WILL EACH FUND IN A MODEL BE COUNTED SEPARATELY OR WILL A MODEL BE
COUNTED AS ONE INVESTMENT OPTION REGARDLESS OF THE NUMBER OF FUNDS
INCLUDED? IF APPROPRIATE, PLEASE DISTINGUISH BETWEEN FUNDS AVAILABLE AS
SEPARATE INVESTMENT OPTION. AND THOSE AVAILABLE ONLY THROUGH A MODEL.
RESPONSE: The allocation restrictions described under the subheading
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"Allocation of Purchase Payments" (page 14 of the National Version and NY
Version prospectuses) also apply to Purchase Payments allocated in
accordance with any asset allocation model available under the Asset
Allocation Program. Each Investment Portfolio in an asset allocation model
will be counted separately; an asset allocation model will not be counted
as a single investment option. Because the same allocations restrictions
apply, and the same set of Investment Portfolios is available to an Owner,
regardless of whether the Owner is using/following an asset allocation
model, Registrant believes that no revisions to the disclosure are
warranted.
7. DEATH BENEFIT (PAGE 31)
A. FOR THE NATIONAL VERSION, PLEASE BE CONSISTENT WHEN DESCRIBING THE
CUT-OFF AGE FOR ELECTING THE VARIOUS DEATH BENEFITS, FOR EXAMPLE, COMPARE
"80 YEARS OLD OR OLDER" IN THE FOURTH SENTENCE OF THE FIRST PARAGRAPH UNDER
"UPON YOUR DEATH" ON PAGE 31 WITH "AGE 75" IN THE FIRST PARAGRAPH UNDER
"ADDITIONAL DEATH BENEFIT -- EARNINGS PRESERVATION BENEFIT" ON PAGE 33.
RESPONSE: The disclosure in the first paragraph under "Upon Your
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Death" and in the first paragraph under "Additional Death Benefit--Earnings
Preservation Benefit" has been revised to provide that the cut-off age is
age 79. (See attached pages 31 and 33 of the National Version prospectus.)
B. UNDER "OPTIONAL DEATH BENEFIT ANNUAL STEP-UP" ON PAGE 32, PLEASE
CLARIFY HOW ALTERNATIVES (2) AND (3) DIFFER.
RESPONSE: Alternative (2) is based on total Purchase Payments, whereas
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alternative (3) is a "high water mark," reflecting the highest peak in
Account Value. How
Min S. Oh, Esq.
March 29, 2012
Page 6
the highest anniversary value is computed is set forth in the second
paragraph under "Optional Death Benefit--Annual Step-Up." (See page 32 of
the National Version prospectus and page 31 of the NY Version prospectus.).
At contract issue, the highest anniversary value will equal the initial
Purchase Payment; thereafter, however, the highest anniversary value and
the total Purchase Payments can diverge. The highest anniversary value is
adjusted by adding Purchase Payments and deducting amounts that are
proportional to the percentage reduction in Account Value attributable to
each subsequent partial withdrawal, and on each contract anniversary is set
to the greater of the highest anniversary value before the recalculation or
the Account Value on the date of the calculation.
Registrant believes that no further disclosure is necessary to present
and distinguish alternatives (2) and (3).
C. FOR CONSISTENCY, IN THE NY VERSION PLEASE INSERT "IF YOU HAVE
ALREADY BEEN ISSUED A CONTRACT," AT THE BEGINNING OF THE SECOND SENTENCE OF
THE SECOND PARAGRAPH UNDER "UPON YOUR DEATH" ON PAGE 31, SEE CORRESPONDING
SENTENCE IN SECOND TO LAST SENTENCE OF THE SECOND PARAGRAPH ON PAGE 31 OF
THE NATIONAL VERSION.
RESPONSE: The disclosure in the NY Version prospectus has been revised
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as requested. (See attached page 30 of the NY Version prospectus.)
8. PLEASE CONFIRM THAT DISCLOSURE UNDER "FEDERAL INCOME TAX STATUS" BEGINNING ON
PAGE 35 (AS WELL AS UNDER "TAX STATUS OF THE CONTRACTS" BEGINNING ON PAGE 7 OF
SAI) IS CURRENT.
RESPONSE: The disclosure under the heading "Federal Income Tax Status" in
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the prospectus, and under the heading "Tax Status of the Contracts" in the SAI,
has been updated. (See pages 35-41 of the National Version prospectus and pages
8-9 of the National Version SAI, and pages 33-39 of the NY Version prospectus
and pages 8-10 of the NY Version SAI.)
9. PLEASE RECONCILE THE TABLE OF CONTENTS FOR THE SAI PROVIDED ON PAGE 43 OF THE
NY VERSION WITH THE ACTUAL TABLE OF CONTENTS IN THE SA1, I.E., FORMER LISTS
"INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM" AND LATTER LISTS "EXPERTS."
RESPONSE: The list of the contents of the SAI on page 43 of the NY Version
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prospectus has been reconciled with the actual table of contents in the NY
Version SAI. (See attached page 43 of the NY Version prospectus and page 2 of
the NY Version SAI.
STATEMENT OF ADDITIONAL INFORMATION
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10. IN THE SECOND TO LAST PARAGRAPH UNDER "TOTAL RETURN" ON PAGE 4, PLEASE
CONFIRM THE ACCURACY OF THE REFERENCE TO "ACCOUNT FEE" IN THE FIRST SENTENCE,
I.E., SUCH CHARGE DID NOT APPEAR
Min S. Oh, Esq.
March 29, 2012
Page 7
IN THE CORRESPONDING SENTENCE OF THE SA1 FOR THE METLIFE INVESTORS USA SEPARATE
ACCOUNT MARQUIS PORTFOLIOS, FILE NO. 333-125757.
RESPONSE: The reference to "account fee" on page 4 of the National Version
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SAI is accurate. However, a reference to the "account fee" was inadvertently
omitted from the corresponding disclosure in the SAI for the Marquis Portfolios
contracts issued by MLI USA (File No. 333-125757). A reference to the "account
fee" will be added to that disclosure in an upcoming 485(b) filing.
11. PLEASE DELETE THE REFERENCE TO "PRORATED RIDER CHARGE" IN THE FIRST SENTENCE
OF THE SECOND PARAGRAPH UNDER "VARIABLE ANNUITY" ON PAGE 5 AS THERE ARE NO SUCH
CHARGES.
RESPONSE: The reference to "prorated rider charges" has been deleted from
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the National Version SAI and the NY Version SAI. (See attached page 6 of the
National Version SAI and page 7 of NY Version SAI.)
12. FOR THE NY VERSION, PLEASE CONFIRM THAT YOU INTEND TO INCORPORATE BY
REFERENCE THE FINANCIALS OF METLIFE, INC. INTO THE SAI AS INDICATED IN THE
DISCLOSURE UNDER "EXPERTS" AND "ADDITIONAL INFORMATION."
RESPONSE: The consolidated financial statements and the related financial
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statement schedules for MetLife, Inc. will be incorporated by reference into the
NY Version SAI.
PART C
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13. PLEASE REVISE THE EXHIBITS PROVIDED UNDER ITEM 24.B. TO PROPERLY REFLECT THE
RIDERS AND INVESTMENT OPTIONS THAT WILL BE AVAILABLE THROUGH THIS CONTRACT AND
TO OTHERWISE ACCOUNT FOR ALL REQUIRED EXHIBITS.
RESPONSE: Each Registrant acknowledges that, in a pre-effective amendment
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to its respective above-captioned initial registration statement, it will make
any revisions to entries for the exhibits listed under Item 24.b that are
necessary so that exhibits are provided for the riders available under the
National Version or the NY Version, as appropriate.
14. PLEASE REVISE AND RESUBMIT YOUR POWERS OF ATTORNEY TO BE MORE SPECIFIC TO
THE FILING, I.E., REFER TO EXACT NAME OF CONTRACT OR PROVIDE THE FILE NUMBER
UNDER THE SECURITIES ACT OF 1933.
RESPONSE: Each Registrant acknowledges this comment. Powers of attorney
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that relate more specifically to the Form N-4 filing for the National Version
will be filed in a pre-effective amendment to the initial registration statement
for the National Version. Powers of attorney that relate more specifically to
the Form N-4 filing for the NY Version will be filed in a pre-effective
amendment to the initial registration statement for the NY Version.
Min S. Oh, Esq.
March 29, 2012
Page 8
15. PLEASE PROVIDE THE NET WORTH MAINTENANCE AGREEMENT BETWEEN THE COMPANY AND
METLIFE, INC AS AN EXHIBIT.
RESPONSE: An exhibit for the net worth maintenance agreement between FMLI
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and MetLife, Inc. will be incorporated by reference in a pre-effective amendment
to the above-captioned registration statement for the NY Version.
16. FINANCIAL STATEMENTS, EXHIBITS, AND CERTAIN OTHER INFORMATION
ANY FINANCIAL STATEMENTS, EXHIBITS, AND ANY OTHER REQUIRED DISCLOSURE NOT
INCLUDED IN THIS REGISTRATION STATEMENT MUST BE FILED BY PRE-EFFECTIVE AMENDMENT
TO THE REGISTRATION STATEMENT.
RESPONSE: Each Registrant acknowledges the comment and will include any
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financial statements, exhibits and required disclosure not included in its
respective initial registration statement in a pre-effective amendment to that
initial registration statement.
17. REPRESENTATIONS
WE URGE ALL PERSONS WHO ARE RESPONSIBLE FOR THE ACCURACY AND ADEQUACY OF
THE DISCLOSURE IN THE FILINGS REVIEWED BY THE STAFF TO BE CERTAIN THAT THEY HAVE
PROVIDED ALL INFORMATION INVESTORS REQUIRE FOR AN INFORMED DECISION. SINCE THE
REGISTRANT IS IN POSSESSION OF ALL FACTS RELATING TO THE REGISTRANT'S
DISCLOSURE, IT IS RESPONSIBLE FOR THE ACCURACY AND ADEQUACY OF THE DISCLOSURES
IT HAS MADE.
NOTWITHSTANDING OUR COMMENTS, IN THE EVENT THE REGISTRANT REQUESTS
ACCELERATION OF THE EFFECTIVE DATE OF THE PENDING REGISTRATION STATEMENT, IT
SHOULD FURNISH A LETTER, AT THE TIME OF SUCH REQUEST, ACKNOWLEDGING THAT
. SHOULD THE COMMISSION OR THE STAFF, ACTING PURSUANT TO DELEGATED
AUTHORITY, DECLARE THE FILING EFFECTIVE, IT DOES NOT FORECLOSE THE
COMMISSION FROM TAKING ANY ACTION WITH RESPECT TO THE FILING;
. THE ACTION OF THE COMMISSION OR THE STAFF, ACTING PURSUANT TO
DELEGATED AUTHORITY, IN DECLARING THE FILING EFFECTIVE, DOES NOT
RELIEVE THE REGISTRANT FROM ITS FULL RESPONSIBILITY FOR THE ADEQUACY
AND ACCURACY OF THE DISCLOSURE IN THE FILING; AND
. THE REGISTRANT MAY NOT ASSERT THIS ACTION AS A DEFENSE IN ANY
PROCEEDING INITIATED BY THE COMMISSION OR ANY PERSON UNDER THE FEDERAL
SECURITIES LAWS OF THE UNITED STATES.
RESPONSE: Each of the Registrants will make the acknowledgments listed
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above in a letter submitted under separate cover.
Min S. Oh, Esq.
March 29, 2012
Page 9
IN ADDITION, PLEASE BE ADVISED THAT THE DIVISION OF ENFORCEMENT HAS ACCESS
TO ALL INFORMATION YOU PROVIDE TO THE STAFF OF THE DIVISION OF INVESTMENT
MANAGEMENT IN CONNECTION WITH OUR REVIEW OF YOUR FILING OR IN RESPONSE TO OUR
COMMENTS ON YOUR FILING.
RESPONSE: Registrants acknowledge this comment.
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* * * * * * *
We hope that you find these responses satisfactory. If you have questions
or further comments about this matter, please contact the undersigned at
202.383.0548 or my colleague, Fred Bellamy, at 202.383.0126.
Sincerely,
/s/ Patrice M. Pitts
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Patrice M. Pitts
PMP/ga
Attachments
cc: Marie C. Swift, Esq.
Michele H. Abate, Esq.
John B. Towers, Esq.
Frederick R. Bellamy, Esq.
THE VARIABLE ANNUITY CONTRACT
ISSUED BY
FIRST METLIFE INVESTORS INSURANCE COMPANY
AND
FIRST METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE
MARQUIS PORTFOLIOS (OFFERED ON AND AFTER __________, 2012)
__________, 2012
This prospectus describes the flexible premium deferred variable annuity
contract offered by First MetLife Investors Insurance Company (First
MetLife Investors or we or us). The contract is offered for individuals
and some tax qualified and non-tax qualified retirement plans.
The annuity contract has 44 investment choices listed below. You can put your
money in any of these Investment Portfolios.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THE CONTRACTS AS DESCRIBED IN THIS PROSPECTUS UNTIL THE REGISTRATION
STATEMENT RELATING TO THE CONTRACTS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IS EFFECTIVE. THE PROSPECTUS IS NOT AN OFFER TO SELL THESE CONTRACTS
AND IS NOT SOLICITING AN OFFER TO BUY THESE CONTRACTS IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
AMERICAN FUNDS INSURANCE SERIES (Reg. TM)
(CLASS 2):
American Funds Global Growth Fund
American Funds Growth Fund
American Funds Growth-Income Fund
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2):
Templeton Foreign Securities Fund
LEGG MASON PARTNERS VARIABLE EQUITY TRUST (CLASS I):
Legg Mason ClearBridge Variable Appreciation Portfolio
Legg Mason ClearBridge Variable Large Cap Value Portfolio
Legg Mason ClearBridge Variable Small Cap Growth Portfolio
LEGG MASON PARTNERS VARIABLE INCOME TRUST (CLASS I):
Legg Mason Western Asset Variable Global High Yield Bond Portfolio
1
o The minimum initial Purchase Payment we will accept is $25,000.
o If you want to make an initial Purchase Payment of $1 million or more, or an
additional Purchase Payment that would cause your total Purchase Payments
to exceed $1 million, you will need our prior approval.
o You can make additional Purchase Payments of $500 or more unless you have
elected an electronic funds transfer program approved by us, in which case
the minimum additional Purchase Payment is $100 per month.
o We will accept a different amount if required by federal tax law.
o We reserve the right to refuse Purchase Payments made via a personal check
in excess of $100,000. Purchase Payments over $100,000 may be accepted in
other forms, including, but not limited to, EFT/wire transfers, certified
checks, corporate checks, and checks written on financial institutions.
The form in which we receive a Purchase Payment may determine how soon
subsequent disbursement requests may be fulfilled. (See "Access to Your
Money.")
o We will not accept Purchase Payments made with cash, money orders, or
travelers checks.
We reserve the right to reject any application or Purchase Payment and to limit
future Purchase Payments.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your Purchase Payment to the
Investment Portfolios you have selected. At the time the contract is issued,
your default investment allocation for Purchase Payments and automatic
rebalancing will be set in accordance with an asset allocation model you select
with your registered representative (see "Transfers - Marquis Asset Allocation
Program"). You may not choose more than 18 Investment Portfolios at the time
your initial Purchase Payment is allocated. Each allocation must be at least
$500 and must be in whole numbers.
Once we receive your Purchase Payment and the necessary information (or a
designee receives a payment and the necessary information in accordance with
the designee's administrative procedures), we will issue your contract and
allocate your first Purchase Payment within 2 Business Days. A BUSINESS DAY is
each day that the New York Stock Exchange is open for business. A Business Day
closes at the close of normal trading on the New York Stock Exchange, usually
4:00 p.m. Eastern Time. If you do not give us all of the information we need,
we will contact you to get it before we make any allocation. If for some reason
we are unable to complete this process within 5 Business Days, we will either
send back your money or get your permission to keep it until we get all of the
necessary information. (See "Other Information - Requests and Elections.")
If you make additional Purchase Payments, we will allocate them in the same way
as your first Purchase Payment unless you tell us otherwise. You may change
your allocation instructions at any time by notifying us in writing, by calling
us or by Internet. You may not choose more than 18 Investment Portfolios at the
time you submit a subsequent Purchase Payment. If you wish to allocate the
payment to more than 18 Investment Portfolios, we must have your request to
allocate future Purchase Payments to more than 18 Investment Portfolios on
record before we can apply your subsequent Purchase Payment to your chosen
allocation. If there are Joint Owners, unless we are instructed to the
contrary, we will accept allocation instructions from either Joint Owner.
FREE LOOK
If you change your mind about owning this contract, you can cancel it within 10
days after receiving it. We ask that you submit your request to cancel in
writing, signed by you, to our Annuity Service Center. You will receive back
whatever your contract is worth on the day we receive your request. This may be
more or less than your payment depending upon the performance of the portfolios
you allocated your Purchase Payments to during the free look period. This means
that you bear the risk of any decline in the value of your contract during the
free look period. We do not refund any charges or deductions assessed during
the free look period.
ACCUMULATION UNITS
The portion of your Account Value allocated to the Separate Account will go up
or down depending upon the investment performance of the Investment
Portfolio(s) you choose. In order to keep track of this portion of your Account
Value, we use a unit of measure we call an ACCUMULATION UNIT. (An Accumulation
Unit works like a share of a mutual fund.)
Every Business Day as of the close of the New York Stock Exchange (generally
4:00 p.m. Eastern Time), we determine the value of an Accumulation Unit for
each of the
14
1940. An Investment Portfolio's 12b-1 Plan, if any, is described in more detail
in the Investment Portfolio's prospectus. (See "Fee Tables and Examples -
Investment Portfolio Expenses" and "Other Information - Distributor.") Any
payments we receive pursuant to those 12b-1 Plans are paid to us or our
distributor. Payments under an Investment Portfolio's 12b-1 Plan decrease the
Investment Portfolio's investment return.
We select the Investment Portfolios offered through this contract based on a
number of criteria, including asset class coverage, the strength of the
adviser's or subadviser's reputation and tenure, brand recognition,
performance, and the capability and qualification of each investment firm.
Another factor we consider during the selection process is whether the
Investment Portfolio's adviser or subadviser is one of our affiliates or
whether the Investment Portfolio, its adviser, its subadviser(s), or an
affiliate will make payments to us or our affiliates. In this regard, the
profit distributions we receive from our affiliated investment advisers are a
component of the total revenue that we consider in configuring the features and
investment choices available in the variable insurance products that we and our
affiliated insurance companies issue. Since we and our affiliated insurance
companies may benefit more from the allocation of assets to portfolios advised
by our affiliates than to those that are not, we may be more inclined to offer
portfolios advised by our affiliates in the variable insurance products we
issue. We review the Investment Portfolios periodically and may remove an
Investment Portfolio or limit its availability to new Purchase Payments and/or
transfers of Account Value if we determine that the Investment Portfolio no
longer meets one or more of the selection criteria, and/or if the Investment
Portfolio has not attracted significant allocations from contract Owners. In
some cases, we have included Investment Portfolios based on recommendations
made by selling firms. These selling firms may receive payments from the
Investment Portfolios they recommend and may benefit accordingly from the
allocation of Account Value to such Investment Portfolios.
We make certain payments to American Funds Distributors, Inc., principal
underwriter for the American Funds Insurance Series. (See "Other Information -
Distributor.")
WE DO NOT PROVIDE ANY INVESTMENT ADVICE AND DO NOT RECOMMEND OR ENDORSE ANY
PARTICULAR INVESTMENT PORTFOLIO. YOU BEAR THE RISK OF ANY DECLINE IN THE
ACCOUNT VALUE OF YOUR CONTRACT RESULTING FROM THE PERFORMANCE OF THE INVESTMENT
PORTFOLIOS YOU HAVE CHOSEN.
AMERICAN FUNDS INSURANCE SERIES (Reg. TM) (CLASS 2)
American Funds Insurance Series (Reg. TM) is a trust with multiple portfolios.
Capital Research and Management Company is the investment adviser to each
portfolio. The following Class 2 portfolios are available under the contract:
American Funds Global Growth Fund
American Funds Growth Fund
American Funds Growth-Income Fund
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2)
Franklin Templeton Variable Insurance Products Trust currently consists of
multiple series (Funds). Funds may be available in multiple classes: Class 1,
Class 2, Class 3 and Class 4. The portfolio available in connection with your
contract is Class 2 shares. Templeton Investment Counsel, LLC is the investment
adviser for the Templeton Foreign Securities Fund. The following portfolio is
available under the contract:
Templeton Foreign Securities Fund
LEGG MASON PARTNERS VARIABLE EQUITY TRUST (CLASS I)
Legg Mason Partners Variable Equity Trust is a trust with multiple portfolios.
Legg Mason Partners Fund Advisor, LLC is the investment adviser to each
portfolio. Legg Mason Partners Fund Advisor, LLC has engaged subadvisers to
provide investment advice for the individual Investment Portfolios. (See
Appendix B for the names of the subadvisers.) The following Class I portfolios
are available under the contract:
Legg Mason ClearBridge Variable Appreciation Portfolio
Legg Mason ClearBridge Variable Large Cap Value Portfolio
Legg Mason ClearBridge Variable Small Cap Growth Portfolio
LEGG MASON PARTNERS VARIABLE INCOME TRUST (CLASS I)
Legg Mason Partners Variable Income Trust is a trust with multiple portfolios.
Legg Mason Partners Fund Advisor, LLC is the investment adviser to the
portfolio listed below. Legg Mason Partners Fund Advisor, LLC has engaged
subadvisers to provide investment advice for the individual Investment
Portfolios. (See Appendix B for the names of
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MARQUIS ASSET ALLOCATION PROGRAM
The Marquis Asset Allocation Program is not offered by this prospectus and is
not a part of your contract. The Marquis Asset Allocation Program is a separate
service we make available in connection with the contract, at no additional
charge to you, to help you select investment options. You should be aware that
certain aspects of the administration of this Program are provided by your
selling firm and are dependent upon the continued ability of the selling firm
to provide that administrative support. WHEN YOU PURCHASE THE CONTRACT, YOU ARE
REQUIRED TO ENROLL IN THE ASSET ALLOCATION PROGRAM. At the time the contract is
issued, and at any time you change or update your asset allocation model with
your registered representative, your default investment allocation for Purchase
Payments and automatic rebalancing will be set in accordance with the one model
you select. Although the Marquis Portfolios product is designed to work
together with the Asset Allocation Program, if you wish to change your default
allocation to an allocation that is not in accordance with any of the models,
or transfer to an allocation outside any of the models, you will need to
contact our Annuity Service Center.
Asset allocation, in general, is an investment strategy intended to optimize
the selection of investment options for a given level of risk tolerance, in
order to attempt to maximize returns and limit the effects of market
volatility. Asset allocation strategies reflect the theory that diversification
among asset classes can help reduce volatility and potentially enhance returns
over the long term. An asset class refers to a category of investments having
similar characteristics, such as stocks and other equities, bonds and other
fixed income investments, and cash equivalents. There are further divisions
within asset classes, for example, divisions according to the size of the
issuer (large cap, mid cap, small cap), the type of issuer (government,
municipal, corporate, etc.) or the location of the issuer (domestic, foreign,
etc.).
While you participate in the Asset Allocation Program, our affiliate MetLife
Advisers, LLC (MetLife Advisers), an investment adviser registered under the
Investment Advisers Act of 1940, will serve as your investment adviser, but
solely for the purpose of developing and updating the models. MetLife Advisers
currently follows the recommendations of an independent third-party consultant
in providing this service. From time to time, MetLife Advisers may select a
different consultant, to the extent permitted under applicable law. MetLife
Advisers also serves as the investment adviser to certain Investment Portfolios
available under the contract and receives compensation for those services. (See
"Investment Options-Certain Payments We Receive with Regard to the Investment
Portfolios," "Investment Options-Met Investors Series Trust," and "Investment
Options-Metropolitan Series Fund.") However, MetLife Advisers receives no
compensation for services it performs in developing and updating the asset
allocation models discussed below.
It is your responsibility to select or change your model and your Investment
Portfolios. Your registered representative can provide you with information
that may assist you in selecting a model and your Investment Portfolios. Once
you select a model and the Investment Portfolio allocations, these selections
will remain unchanged until you elect to revise the Investment Portfolio
allocations, select a new model, or both. Although the models are designed to
maximize investment returns and reduce volatility for a given level of risk,
there is no guarantee that an asset allocation model will not lose money or
experience volatility. A model may fail to perform as intended, or may perform
worse than any single Investment Portfolio, asset class or different
combination of investment options. In addition, the model is subject to all of
the risks associated with its underlying Investment Portfolios. If, from time
to time, MetLife Advisers changes the models, the flows of money into and out
of underlying Investment Portfolios may generate higher brokerage and
administrative costs for those portfolios, or such changes may disrupt an
Investment Portfolio's management strategy.
In the Asset Allocation Program, you will choose to allocate your Purchase
Payments among a set of Investment Portfolios you select using one of the asset
allocation models MetLife Advisers provides. An asset allocation model is a set
of target percentages for asset classes or sub-classes that represent the
principal investments of the available Investment Portfolios. There currently
are twenty asset allocation models, a disciplined and a flexible model for each
of ten levels of risk tolerance and return potential (generally, asset classes
and sub-classes with higher potential returns have greater risk of losses and
experience greater volatility). Disciplined models are designed to be
constructed only from Investment Portfolios that adhere strictly to their
stated investment styles and invest in specific asset classes or sub-classes,
whereas flexible models can include allocations to Investment Portfolios that
may invest across multiple asset classes or sub-classes, or that
22
Federal laws designed to counter terrorism and prevent money laundering might,
in certain circumstances, require us to block an Owner's ability to make
certain transactions and thereby refuse to accept any requests for transfers,
withdrawals, surrenders, or death benefits until instructions are received from
the appropriate regulator. We may also be required to provide additional
information about you and your contract to government regulators.
7. PERFORMANCE
We periodically advertise subaccount performance relating to the Investment
Portfolios. We will calculate performance by determining the percentage change
in the value of an Accumulation Unit by dividing the increase (decrease) for
that unit by the value of the Accumulation Unit at the beginning of the period.
This performance number reflects the deduction of the Separate Account product
charges (including certain death benefit rider charges) and the Investment
Portfolio expenses. It does not reflect the deduction of any applicable account
fee. The deduction of these charges would reduce the percentage increase or
make greater any percentage decrease. Any advertisement will also include total
return figures which reflect the deduction of the Separate Account product
charges (including certain death benefit rider charges), account fee, and the
Investment Portfolio expenses.
For periods starting prior to the date the contract was first offered, the
performance will be based on the historical performance of the corresponding
Investment Portfolios for the periods commencing from the date on which the
particular Investment Portfolio was made available through the Separate
Account.
In addition, the performance for the Investment Portfolios may be shown for the
period commencing from the inception date of the Investment Portfolios. These
figures should not be interpreted to reflect actual historical performance of
the Separate Account.
We may, from time to time, include in our advertising and sales materials
performance information for funds or investment accounts related to the
Investment Portfolios and/or their investment advisers or subadvisers. Such
related performance information also may reflect the deduction of certain
contract charges. We may also include in our advertising and sales materials
tax deferred compounding charts and other hypothetical illustrations, which may
include comparisons of currently taxable and tax deferred investment programs,
based on selected tax brackets.
We may advertise the death benefit riders using illustrations showing how the
benefit works with historical performance of specific Investment Portfolios or
with a hypothetical rate of return (which rate will not exceed 12%) or a
combination of historical and hypothetical returns. These illustrations will
reflect the deduction of all applicable charges including the portfolio
expenses of the underlying Investment Portfolios.
You should know that for any performance we illustrate, future performance will
vary and results shown are not necessarily representative of future results.
8. DEATH BENEFIT
UPON YOUR DEATH
If you die during the Accumulation Phase, we will pay a death benefit to your
Beneficiary(ies). The Principal Protection is the standard death benefit for
your contract. If you are age 79 or younger at the effective date of your
contract, you may select the optional Annual Step-Up Death Benefit rider.
The death benefits are described below. If you have already been issued a
contract, please check your contract and riders for the specific provisions
applicable to you.
The death benefit is determined as of the end of the Business Day on which we
receive both due proof of death and an election for the payment method. Where
there are multiple Beneficiaries, the death benefit will only be determined as
of the time the first Beneficiary submits the necessary documentation in Good
Order. If the death benefit payable is an amount that exceeds the Account Value
on the day it is determined, we will apply to the contract an amount equal to
the difference between the death benefit payable and the Account Value, in
accordance with the current allocation of the Account Value. This death benefit
amount remains in the Investment Portfolios until each of the other
Beneficiaries submits the necessary documentation in Good Order to claim
his/her death benefit. (See "General Death Benefit Provisions" below.) Any
death benefit amounts held in the Investment
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Portfolios on behalf of the remaining Beneficiaries are subject to investment
risk. There is no additional death benefit guarantee.
If you have a Joint Owner, the death benefit will be paid when the first Owner
dies. Upon the death of either Owner, the surviving Joint Owner will be the
primary Beneficiary. Any other Beneficiary designation will be treated as a
contingent Beneficiary, unless instructed otherwise.
If a non-natural person owns the contract, the Annuitant will be deemed to be
the Owner in determining the death benefit. If there are Joint Owners, the age
of the oldest Owner will be used to determine the death benefit amount.
If we are presented with notification of your death before any requested
transaction is completed (including transactions under the Automatic
Rebalancing Program, the Systematic Withdrawal Program, or the Automated
Required Minimum Distribution Program), we will cancel the request. As
described above, the death benefit will be determined when we receive both due
proof of death and an election for the payment method.
STANDARD DEATH BENEFIT - PRINCIPAL PROTECTION
The death benefit will be the greater of:
(1) the Account Value; or
(2) total Purchase Payments, reduced proportionately by the percentage
reduction in Account Value attributable to each partial withdrawal.
If the Owner is a natural person and the Owner is changed to someone other than
a spouse, the death benefit amount will be determined as defined above;
however, subsection (2) will be changed to provide as follows: "the Account
Value as of the effective date of the change of Owner, increased by Purchase
Payments received after the date of the change of Owner, reduced
proportionately by the percentage reduction in Account Value attributable to
each partial withdrawal made after such date."
In the event that a Beneficiary who is the spouse of the Owner elects to
continue the contract in his or her name after the Owner dies, the death
benefit amount will be determined in accordance with (1) or (2) above.
(See Appendix B for examples of the Principal Protection death benefit rider.)
OPTIONAL DEATH BENEFIT - ANNUAL STEP-UP
If you are age 79 or younger at the effective date of your contract, you may
select the optional Annual Step-Up Death Benefit rider. If you select the
Annual Step-Up death benefit rider, the death benefit will be the greatest of:
(1) the Account Value; or
(2) total Purchase Payments, reduced proportionately by the percentage
reduction in Account Value attributable to each partial withdrawal; or
(3) the highest anniversary value, as defined below.
On the date we issue your contract, the highest anniversary value is equal to
your initial Purchase Payment. Thereafter, the highest anniversary value (as
recalculated) will be increased by subsequent Purchase Payments and reduced
proportionately by the percentage reduction in Account Value attributable to
each subsequent partial withdrawal. On each contract anniversary prior to your
81st birthday, the highest anniversary value will be recalculated and set equal
to the greater of the highest anniversary value before the recalculation or the
Account Value on the date of the recalculation.
If the Owner is a natural person and the Owner is changed to someone other than
a spouse, the death benefit is equal to the greatest of (1), (2) or (3);
however, for purposes of calculating (2) and (3) above:
o Subsection (2) is changed to provide: "The Account Value as of the effective
date of the change of Owner, increased by Purchase Payments received after
the date of change of Owner, and reduced proportionately by the percentage
reduction in Account Value attributable to each partial withdrawal made
after such date."
o For subsection (3), the highest anniversary value will be recalculated to
equal your Account Value as of the effective date of the change of Owner.
Thereafter, the highest anniversary value (as recalculated) will be
increased by subsequent Purchase Payments and reduced proportionately by
the percentage reduction in Account Value attributable to each subsequent
partial withdrawal. On each contract anniversary prior to the Owner's 81st
birthday, the highest anniversary value will be recalculated and set equal
to the greater of the highest anniversary value before the recalculation
or the Account Value on the date of the recalculation.
In the event that a Beneficiary who is the spouse of the Owner elects to
continue the contract in his or her name after the Owner dies, the death
benefit is equal to the greatest of (1), (2) or (3).
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who has or is contemplating a civil union or same-sex marriage should note that
the favorable tax treatment afforded under federal law would not be available
to such same-sex partner or same-sex spouse. Same-sex partners or spouses who
own or are considering the purchase of annuity products that provide benefits
based upon status as a spouse should consult a tax adviser.
DEATH OF THE ANNUITANT
If the Annuitant, not an Owner or Joint Owner, dies during the Accumulation
Phase, you automatically become the Annuitant. You can select a new Annuitant
if you do not want to be the Annuitant (subject to our then-current
underwriting standards). However, if the Owner is a non-natural person (for
example, a trust), then the death of the primary Annuitant will be treated as
the death of the Owner, and a new Annuitant may not be named.
Upon the death of the Annuitant after Annuity Payments begin, the death
benefit, if any, will be as provided for in the Annuity Option selected. Death
benefits will be paid at least as rapidly as under the method of distribution
in effect at the Annuitant's death.
CONTROLLED PAYOUT
You may elect to have the death benefit proceeds paid to your Beneficiary in
the form of Annuity Payments for life or over a period of time that does not
exceed your Beneficiary's life expectancy. This election must be in writing in
a form acceptable to us. You may revoke the election only in writing and only
in a form acceptable to us. Upon your death, the Beneficiary cannot revoke or
modify your election. The Controlled Payout is only available to Non-Qualified
Contracts.
9. FEDERAL INCOME TAX STATUS
The following discussion is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax adviser. No
attempt is made to consider any applicable state tax or other tax laws, or to
address any state and local estate, inheritance and other tax consequences of
ownership or receipt of distributions under a contract.
When you invest in an annuity contract, you usually do not pay taxes on your
investment gains until you withdraw the money, generally for retirement
purposes. If you invest in an annuity contract as part of an individual
retirement plan, pension plan or employer-sponsored retirement program, your
contract is called a QUALIFIED CONTRACT. The tax rules applicable to Qualified
Contracts vary according to the type of retirement plan and the terms and
conditions of the plan. You should note that for any Qualified Contract, the
tax deferred accrual feature is provided by the tax qualified retirement plan,
and as a result there should be reasons other than tax deferral for acquiring
the contract within a qualified plan.
If your annuity is independent of any formal retirement or pension plan, it is
termed a NON-QUALIFIED CONTRACT.
Under current federal income tax law, the taxable portion of distributions
under variable annuity contracts and qualified plans (including IRAs) is not
eligible for the reduced tax rate applicable to long-term capital gains and
qualifying dividends.
TAXATION OF NON-QUALIFIED CONTRACTS
NON-NATURAL PERSON. If a non-natural person (e.g., a trust) owns a
Non-Qualified Contract, the taxpayer generally must include in income any
increase in the excess of the Account Value over the investment in the contract
(generally, the premiums or other consideration paid for the contract) during
the taxable year. There are some exceptions to this rule and a prospective
Owner that is not a natural person should discuss these with a tax adviser.
The following discussion generally applies to Non-Qualified Contracts owned by
natural persons.
WITHDRAWALS. When a withdrawal from a Non-Qualified Contract occurs, the amount
received will be treated as ordinary income subject to tax up to an amount
equal to the excess (if any) of the Account Value immediately before the
distribution over the Owner's investment in the contract (generally, the
premiums or other consideration paid for the contract, reduced by any amount
previously distributed from the contract that was not subject to tax) at that
time. In the case of a surrender under a Non-Qualified Contract, the amount
received generally will be taxable only to the extent it exceeds the Owner's
investment in the contract.
It is conceivable that certain benefits or the charges for certain benefits
could be considered to be taxable each year as deemed distributions from the
contract to pay for non-annuity benefits. We currently treat these charges and
benefits as an intrinsic part of the annuity contract and do not tax report
these as taxable income until distributions are actually made. However, it is
possible that this may
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change in the future if we determine that this is required by the IRS. If so,
the charges or benefits could also be subject to a 10% penalty tax if the
taxpayer is under age 59 1/2.
We reserve the right to change our tax reporting practices if we determine that
they are not in accordance with IRS guidance (whether formal or informal).
ADDITIONAL PENALTY TAX ON CERTAIN WITHDRAWALS. In the case of a distribution
(or a deemed distribution) from a Non-Qualified Contract, there may be imposed
a federal tax penalty equal to 10% of the amount treated as income. In general,
however, there is no penalty on distributions:
o made on or after the taxpayer reaches age 59 1/2;
o made on or after the death of an Owner;
o attributable to the taxpayer's becoming disabled;
o made as part of a series of substantially equal periodic payment (at least
annually) for the life (or life expectancy) of the taxpayer or the joint
lives (or joint life expectancies) of the taxpayer and his or her
designated Beneficiary; or
o under certain immediate income annuities providing for substantially equal
payments made at least annually.
Other exceptions may be applicable under certain circumstances and special
rules may be applicable in connection with the exceptions enumerated above.
Also, additional exceptions apply to distributions from a Qualified Contract.
You should consult a tax adviser with regard to exceptions from the penalty
tax.
ANNUITY PAYMENTS. Although tax consequences may vary depending on the payout
option elected under an annuity contract, a portion of each Annuity Payment is
generally not taxed and the remainder is taxed as ordinary income. The
non-taxable portion of any Annuity Payment is generally determined in a manner
that is designed to allow you to recover your investment in the contract
ratably on a tax-free basis over the expected stream of Annuity Payments, as
determined when Annuity Payments start. Once your investment in the contract
has been fully recovered, however, the full amount of each Annuity Payment is
subject to tax as ordinary income. In general, the amount of each payment under
a variable Annuity Payment option that can be excluded from federal income tax
is the remaining after-tax cost in the amount annuitized at the time such
payments commence, divided by the number of expected payments, subject to
certain adjustments. No deduction is permitted for any excess of such
excludable amount for a year over the Annuity Payments actually received in
that year. However, you may elect to increase the excludable amount
attributable to future years by a ratable portion of such excess. Consult your
tax adviser as to how to make such election and also as to how to treat the
loss due to any unrecovered investment in the contract when the income stream
is terminated. Once the investment in the contract has been recovered through
the use of the excludable amount, the entire amount of all future payments are
includable in taxable income.
The IRS has not furnished explicit guidance as to how the excludable amount is
to be determined each year under variable income annuities that permit
transfers between Investment Portfolios after the annuity starting date.
Consult your tax adviser.
Starting in 2011, if your contract allows and you elect to apply less than the
entire Account Value of your contract to a pay-out option provided under the
contract ("partial annuitization"), an exclusion ratio will apply to the
Annuity Payments you receive, provided the payout period is for 10 years or
more, or for the life of one or more individuals. Your after-tax Purchase
Payments in the contract will be allocated pro rata between the annuitized
portion of the contract and the portion that remains deferred. Consult your own
independent tax adviser before you partially annuitize your contract.
TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from a
Non-Qualified Contract because of your death or the death of the Annuitant.
Generally, such amounts are includible in the income of the recipient as
follows: (i) if distributed in a lump sum, they are taxed in the same manner as
a surrender of the contract, or (ii) if distributed under a payout option, they
are taxed in the same way as Annuity Payments.
See the Statement of Additional Information as well as "Death Benefit - General
Death Benefit Provisions" in this prospectus for a general discussion on the
federal income tax rules applicable to how death benefits must be distributed.
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT. Where otherwise permitted
under the terms of the contract, a transfer or assignment of ownership of a
Non-Qualified Contract, the designation or change of an Annuitant, the
selection of certain maturity dates, or the exchange of a contract may result
in certain adverse tax
34
consequences to you that are not discussed herein. An Owner contemplating any
such transfer, assignment, exchange or event should consult a tax adviser as to
the tax consequences.
WITHHOLDING. Annuity distributions are generally subject to withholding for the
recipient's federal income tax liability. Recipients can generally elect,
however, not to have tax withheld from distributions.
MULTIPLE CONTRACTS. The tax law provides that deferred annuities issued after
October 21, 1988 by the same insurance company or an affiliate in the same
calendar year to the same Owner are combined for tax purposes. As a result, a
greater portion of your withdrawals may be considered taxable income than you
would otherwise expect. Please consult your own tax adviser.
OWNERSHIP OF THE INVESTMENTS. In certain circumstances, Owners of variable
annuity contracts have been considered to be the Owners of the assets of the
underlying Separate Account for federal income tax purposes due to their
ability to exercise investment control over those assets. When this is the
case, the contract Owners have been currently taxed on income and gains
attributable to the variable account assets. There is little guidance in this
area, and some features of the contract, such as the number of funds available
and the flexibility of the contract Owner to allocate premium payments and
transfer amounts among the funding options, have not been addressed in public
rulings. While we believe that the contract does not give the contract Owner
investment control over Separate Account assets, we reserve the right to modify
the contract as necessary to prevent a contract Owner from being treated as the
Owner of the Separate Account assets supporting the contract.
FURTHER INFORMATION. We believe that the contracts will qualify as annuity
contracts for federal income tax purposes and the above discussion is based on
that assumption. Further details can be found in the Statement of Additional
Information under the heading "Tax Status of the Contracts."
TAXATION OF QUALIFIED CONTRACTS
The tax rules applicable to Qualified Contracts vary according to the type of
retirement plan and the terms and conditions of the plan. Your rights under a
Qualified Contract may be subject to the terms of the retirement plan itself,
regardless of the terms of the Qualified Contract. Adverse tax consequences may
result if you do not ensure that contributions, distributions and other
transactions with respect to the contract comply with the law.
WITHDRAWALS. In the case of a withdrawal under a Qualified Contract, a ratable
portion of the amount received is taxable, generally based on the ratio of the
"investment in the contract" to the individual's total account balance or
accrued benefit under the retirement plan. The "investment in the contract"
generally equals the amount of any non-deductible Purchase Payments paid by or
on behalf of any individual. In many cases, the "investment in the contract"
under a Qualified Contract can be zero.
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS). IRAs, as defined in Section 408 of the
Internal Revenue Code (Code), permit individuals to make annual contributions
of up to the lesser of the applicable dollar amount for the year (for 2012,
$5,000 plus, for an Owner age 50 or older, $1,000) or the amount of
compensation includible in the individual's gross income for the year. The
contributions may be deductible in whole or in part, depending on the
individual's income. Distributions from certain retirement plans may be "rolled
over" into an IRA on a tax-deferred basis without regard to these limits.
Amounts in the IRA (other than non-deductible contributions) are taxed when
distributed from the IRA. A 10% penalty tax generally applies to distributions
made before age 59 1/2, unless an exception applies. The contract (and
appropriate IRA tax endorsements) have not yet been submitted to the IRS for
review and approval as to form. Such approval is not required to constitute a
valid Traditional IRA or SIMPLE IRA. Such approval does not constitute an IRS
endorsement of the investment options and benefits offered under the contract.
Traditional IRAs/SEPs, SIMPLE IRAs and Roth IRAs may not invest in life
insurance. The contract may provide death benefits that could exceed the
greater of premiums paid or the account balance. The final required minimum
distribution income tax regulations generally treat such benefits as part of
the annuity contract and not as life insurance and require the value of such
benefits to be included in the participant's interest that is subject to the
required minimum distribution rules.
SIMPLE IRA. A SIMPLE IRA permits certain small employers to establish SIMPLE
plans as provided by Section 408(p) of the Code, under which employees may
elect to defer to a SIMPLE IRA a percentage of
35
compensation up to $11,500 for 2012. The sponsoring employer is generally
required to make matching or non-elective contributions on behalf of employees.
Distributions from SIMPLE IRA's are subject to the same restrictions that apply
to IRA distributions and are taxed as ordinary income. Subject to certain
exceptions, premature distributions prior to age 59 1/2 are subject to a 10%
penalty tax, which is increased to 25% if the distribution occurs within the
first two years after the commencement of the employee's participation in the
plan.
ROTH IRA. A Roth IRA, as described in Code section 408A, permits certain
eligible individuals to make non-deductible contributions to a Roth IRA in cash
or as a rollover or transfer from another Roth IRA or other IRA. A rollover
from or conversion of an IRA to a Roth IRA is generally subject to tax, and
other special rules apply. The Owner may wish to consult a tax adviser before
combining any converted amounts with any other Roth IRA contributions,
including any other conversion amounts from other tax years. Distributions from
a Roth IRA generally are not taxed, except that, once aggregate distributions
exceed contributions to the Roth IRA, income tax and a 10% penalty tax may
apply to distributions made (1) before age 59 1/2 (subject to certain
exceptions) or (2) during the five taxable years starting with the year in
which the first contribution is made to any Roth IRA. A 10% penalty tax may
apply to amounts attributable to a conversion from an IRA if they are
distributed during the five taxable years beginning with the year in which the
conversion was made.
PENSION PLANS. Corporate pension and profit-sharing plans under Section 401(a)
of the Code allow corporate employers to establish various types of retirement
plans for employees, and self-employed individuals to establish qualified plans
for themselves and their employees. Adverse tax consequences to the retirement
plan, the participant or both may result if the contract is transferred to any
individual as a means to provide benefit payments, unless the plan complies
with all the requirements applicable to such benefits prior to transferring the
contract. Subject to certain exceptions, premature distributions prior to age
59 1/2 are subject to a 10% penalty tax. The contract includes optional death
benefits that in some cases may exceed the greater of the premium payments or
the Account Value.
TAX SHELTERED ANNUITIES. Tax Sheltered Annuities (TSA) that qualify under
section 403(b) of the Code allow employees of certain Section 501(c)(3)
organizations and public schools to exclude from their gross income the premium
payments made, within certain limits, on a contract that will provide an
annuity for the employee's retirement. These premium payments may be subject to
FICA (social security) tax. Distributions of (1) salary reduction contributions
made in years beginning after December 31, 1988; (2) earnings on those
contributions; and (3) earnings on amounts held as of the close of the last
year beginning before January 1, 1989, are not allowed prior to age 59 1/2,
severance from employment, death or disability. Salary reduction contributions
may also be distributed upon hardship, but would generally be subject to
penalties.
Income tax regulations issued in July 2007 require certain fundamental changes
to these arrangements, including: (a) a requirement that there be a written
plan document in addition to the annuity contract (or section 403(b)(7)
custodial account), (b) significant restrictions on the ability of participants
to direct proceeds between 403(b) annuity contracts and (c) new restrictions on
withdrawals of amounts attributable to contributions other than elective
deferrals.
The regulations are now in effect, including a prohibition on use of new life
insurance under section 403(b) arrangements and rules affecting payroll taxes
on certain types of contributions. Please note that, in light of the
regulations, this contract is not available for purchase via a "90-24"
transfer.
Recent income tax regulations also provide certain new restrictions on
withdrawals of amounts from tax sheltered annuities that are not attributable
to salary reduction contributions. Under these regulations, a Section 403(b)
contract is permitted to distribute retirement benefits attributable to pre-tax
contributions other than elective deferrals to the participant no earlier than
upon the earlier of the participant's severance from employment or upon the
prior occurrence of some event such as after a fixed number of years, the
attainment of a stated age, or disability. This new withdrawal restriction is
applicable for tax sheltered annuity contracts issued on or after January 1,
2009.
Recently enacted legislation allows (but does not require) 403(b) plans that
offer designated Roth accounts to permit participants to roll their non-Roth
account assets into a designated Roth account under the same plan, provided the
non-Roth assets are distributable under the plan and otherwise eligible for
rollover.
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SECTION 457(B) PLANS. An eligible 457(b) plan, while not actually a qualified
plan as that term is normally used, provides for certain eligible deferred
compensation plans with respect to service for state governments, local
governments, political subdivisions, agencies, instrumentalities and certain
affiliates of such entities, and tax exempt organizations. Under such plans a
participant may specify the form of investment in which his or her
participation will be made. Under a non-governmental plan, which must be a
tax-exempt entity under section 501(c) of the Code, all such investments,
however, are owned by and are subject to, the claims of the general creditors
of the sponsoring employer. In general, all amounts received under a
non-governmental section 457(b) plan are taxable and are subject to federal
income tax withholding as wages.
SEPARATE ACCOUNT CHARGES FOR DEATH BENEFITS. For contracts purchased under
section 401(a) plans or 403(b) plans, certain death benefits could conceivably
be characterized as an incidental benefit, the amount of which is limited in
any pension or profit-sharing plan. Because the death benefits, in certain
cases, may exceed this limitation employers using a contract in connection with
such plans should consult their tax adviser. Additionally, it is conceivable
that the explicit charges for, or the amount of the mortality and expense
charges allocable to, such benefits may be considered taxable distributions.
OTHER TAX ISSUES. Qualified Contracts (including contracts under section 457(b)
plans) have required minimum distribution (RMD) rules that govern the timing
and amount of distributions. You should refer to your retirement plan, adoption
agreement, or consult a tax adviser for more information about these
distribution rules. Failure to meet such rules generally results in the
imposition of a 50% excise tax on the amount that should have been, but was
not, distributed.
Final income tax regulations regarding minimum distribution requirements were
released in June 2004. These regulations affect both deferred and income
annuities. Under these rules, effective with respect to minimum distributions
required for the 2006 distribution year, in general, the value of all benefits
under a deferred annuity (including death benefits in excess of Account Value)
must be added to the Account Value in computing the amount required to be
distributed over the applicable period.
The final required minimum distribution regulations permit income payments to
increase due to "actuarial gain" which includes the investment performance of
the underlying assets, as well as changes in actuarial factors and assumptions
under certain conditions. Additionally, withdrawals may also be permitted under
certain conditions. The new rules are not entirely clear, and you should
consult with your own tax adviser to determine whether your variable income
annuity will satisfy these rules for your own situation.
For RMDs following the death of the Annuitant of a Qualified Contract, the
five-year rule is applied without regard to calendar year 2009. For instance,
for a contract Owner who died in 2007, the five-year period would end in 2013
instead of 2012. The RMD rules are complex, so consult with your tax adviser
because the application of these rules to your particular circumstances may
have been impacted by the 2009 RMD waiver.
Distributions from Qualified Contracts generally are subject to withholding for
the Owner's federal income tax liability. The withholding rate varies according
to the type of distribution and the Owner's tax status. The Owner will be
provided the opportunity to elect not to have tax withheld from distributions.
"Eligible rollover distributions" from section 401(a), 403(a), 403(b) and
governmental section 457(b) plans are subject to a mandatory federal income tax
withholding of 20%. An eligible rollover distribution is any distribution to an
employee (or employee's spouse or former spouse as Beneficiary or alternate
payee) from such a plan, except certain distributions such as distributions
required by the Code, distributions in a specified annuity form or hardship
distributions. The 20% withholding does not apply, however, if the employee
chooses a "direct rollover" from the plan to a tax-qualified plan, IRA or tax
sheltered annuity or to a governmental 457(b) plan that agrees to separately
account for rollover contributions. Effective March 28, 2005, certain mandatory
distributions made to participants in an amount in excess of $1,000 must be
rolled over to an IRA designated by the Plan, unless the participant elects to
receive it in cash or roll it over to a different IRA or eligible retirement
plan of his or her own choosing. General transitional rules apply as to when
plans have to be amended. Special effective date rules apply for governmental
plans and church plans.
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COMMUTATION FEATURES UNDER ANNUITY PAYMENT OPTIONS. Please be advised that the
tax consequences resulting from the election of an Annuity Payment option
containing a commutation feature are uncertain and the IRS may determine that
the taxable amount of Annuity Payments and withdrawals received for any year
could be greater than or less than the taxable amount reported by us. The
exercise of the commutation feature also may result in adverse tax consequences
including:
o The imposition of a 10% penalty tax on the taxable amount of the commuted
value, if the taxpayer has not attained age 59 1/2 at the time the
withdrawal is made. This 10% penalty tax is in addition to the ordinary
income tax on the taxable amount of the commuted value.
o The retroactive imposition of the 10% penalty tax on Annuity Payments
received prior to the taxpayer attaining age 59 1/2.
o The possibility that the exercise of the commutation feature could adversely
affect the amount excluded from federal income tax under any Annuity
Payments made after such commutation.
A payee should consult with his or her own tax adviser prior to electing to
annuitize the contract and prior to exercising any commutation feature under an
Annuity Payment option.
FEDERAL ESTATE TAXES. While no attempt is being made to discuss the federal
estate tax implications of the contract, you should keep in mind that the value
of an annuity contract owned by a decedent and payable to a Beneficiary by
virtue of surviving the decedent is included in the decedent's gross estate.
Depending on the terms of the annuity contract, the value of the annuity
included in the gross estate may be the value of the lump sum payment payable
to the designated Beneficiary or the actuarial value of the payments to be
received by the Beneficiary. Consult an estate planning adviser for more
information.
GENERATION-SKIPPING TRANSFER TAX. Under certain circumstances, the Code may
impose a "generation-skipping transfer tax" when all or part of an annuity
contract is transferred to, or a death benefit is paid to, an individual two or
more generations younger than the contract Owner. Regulations issued under the
Code may require us to deduct the tax from your contract, or from any
applicable payment, and pay it directly to the IRS.
ANNUITY PURCHASE PAYMENTS 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
the U.S. federal withholding tax on taxable distributions from annuity
contracts at a 30% rate, unless a lower treaty rate applies. In addition,
purchasers may be subject to state and/or municipal taxes and taxes that may be
imposed by the purchaser's country of citizenship or residence. Prospective
purchasers are advised to consult with a qualified tax adviser regarding U.S.,
state, and foreign taxation with respect to an annuity contract purchase.
PUERTO RICO TAX CONSIDERATIONS
The Puerto Rico Internal Revenue Code of 2011 (the "2011 PR Code") taxes
distributions from non-qualified annuity contracts differently than in the U.S.
Distributions that are not in the form of an annuity (including partial
surrenders and period certain payments) are treated under the 2011 PR Code
first as a return of investment. Therefore, a substantial portion of the
amounts distributed generally will be excluded from gross income for Puerto
Rico tax purposes until the cumulative amount paid exceeds your tax basis. The
amount of income on annuity distributions (payable over your lifetime) is
calculated differently under the 2011 PR Code. Since the U.S. source income
generated by a Puerto Rico bona fide resident is subject to U.S. income tax and
the Internal Revenue Service issued guidance in 2004 which indicated that the
income from an annuity contract issued by a U.S. life insurer would be
considered U.S. source income, the timing of recognition of income from an
annuity contract could vary between the two jurisdictions. Although the 2011 PR
Code provides a credit against the Puerto Rico income tax for U.S. income taxes
paid, an individual may not get full credit because of the timing differences.
You should consult with a personal tax adviser regarding the tax consequences
of purchasing an annuity contract and/or any proposed distribution,
particularly a partial distribution or election to annuitize.
38
TAX BENEFITS RELATED TO THE ASSETS OF THE SEPARATE ACCOUNT
We may be entitled to certain tax benefits related to the assets of the
Separate Account. These tax benefits, which may include foreign tax credits and
corporate dividends received deductions, are not passed back to the Separate
Account or to contract Owners because we are the Owner of the assets from which
the tax benefits are derived.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative changes is uncertain, there is always
the possibility that the tax treatment of the contract could change by
legislation or otherwise. We will notify you of any changes to your contract.
Consult a tax adviser with respect to legislative developments and their effect
on the contract.
We have the right to modify the contract in response to legislative changes
that could otherwise diminish the favorable tax treatment that annuity contract
Owners currently receive. We make no guarantee regarding the tax status of the
contract and do not intend the above discussion as tax advice.
10. OTHER INFORMATION
FIRST METLIFE INVESTORS
First MetLife Investors is a stock life insurance company that was organized
under the laws of the State of New York on December 31, 1992, as First Xerox
Life Insurance Company. On June 1, 1995, a wholly-owned subsidiary of General
American Life Insurance Company purchased First Xerox Life Insurance Company,
which on that date changed its name to First Cova Life Insurance Company. On
January 6, 2000, Metropolitan Life Insurance Company acquired GenAmerica
Financial Corporation, the ultimate parent of General American Life Insurance
Company. We changed our name to First MetLife Investors Insurance Company on
February 12, 2001. On December 31, 2002, First MetLife Investors became an
indirect subsidiary of MetLife, Inc., the holding company of Metropolitan Life
Insurance Company and a listed company on the New York Stock Exchange. On
October 1, 2004, First MetLife Investors became a direct subsidiary of MetLife,
Inc. MetLife, Inc., through its subsidiaries and affiliates, is a leading
provider of insurance and other financial services to individual and
institutional customers. First MetLife Investors is licensed to do business
only in the State of New York.
Marquis Portfolios is a service mark of Morgan Stanley Smith Barney Holdings
LLC and is used by MetLife, Inc. and its affiliates under license.
THE SEPARATE ACCOUNT
We have established a SEPARATE ACCOUNT, First MetLife Investors Variable
Annuity Account One (Separate Account), to hold the assets that underlie the
contracts. Our Board of Directors adopted a resolution to establish the
Separate Account under New York insurance law on December 31, 1992. We have
registered the Separate Account with the Securities and Exchange Commission as
a unit investment trust under the Investment Company Act of 1940. The Separate
Account is divided into subaccounts.
The Separate Account's assets are solely for the benefit of those who invest in
the Separate Account and no one else, including our creditors. The assets of
the Separate Account are held in our name on behalf of the Separate Account and
legally belong to us. All the income, gains and losses (realized or unrealized)
resulting from these assets are credited to or charged against the contracts
issued from this Separate Account without regard to our other business.
We reserve the right to transfer assets of the Separate Account to another
account, and to modify the structure or operation of the Separate Account,
subject to necessary regulatory approvals. If we do so, we guarantee that the
modification will not affect your Account Value.
We are obligated to pay all money we owe under the contracts - such as death
benefits and income payments -
even if that amount exceeds the assets in the Separate Account. Any such amount
that exceeds the assets in the Separate Account is paid from our general
account. Any amount under any optional death benefit that exceeds the assets in
the Separate Account is also paid from our general account. Benefit amounts
paid from the general account are subject to our financial strength and claims
paying ability and our long term ability to make such payments. We issue other
annuity contracts and life insurance policies where we pay all money we owe
under those contracts and policies from our general account. First MetLife
Investors is regulated as an insurance company under state law, which generally
includes limits on the amount and type of investments in our general account.
However, there is no
39
ASSIGNMENT. You can assign a Non-Qualified Contract at any time during your
lifetime. We will not be bound by the assignment until the written notice of
the assignment is recorded by us. We will not be liable for any payment or
other action we take in accordance with the contract before we record the
assignment. AN ASSIGNMENT MAY BE A TAXABLE EVENT.
If the contract is issued pursuant to a qualified plan, there may be
limitations on your ability to assign the contract.
LEGAL PROCEEDINGS
In the ordinary course of business, First MetLife Investors, similar to other
life insurance companies, is involved in lawsuits (including class action
lawsuits), arbitrations and other legal proceedings. Also, from time to time,
state and federal regulators or other officials conduct formal and informal
examinations or undertake other actions dealing with various aspects of the
financial services and insurance industries. In some legal proceedings
involving insurers, substantial damages have been sought and/or material
settlement payments have been made.
It is not possible to predict with certainty the ultimate outcome of any
pending legal proceeding or regulatory action. However, First MetLife Investors
does not believe any such action or proceeding will have a material adverse
effect upon the Separate Account or upon the ability of MetLife Investors
Distribution Company to perform its contract with the Separate Account or of
First MetLife Investors to meet its obligations under the contracts.
FINANCIAL STATEMENTS
Our financial statements and the financial statements of the Separate Account
have been included in the SAI.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Company
Independent Registered Public Accounting Firm
Additional Information
Custodian
Distribution
Calculation of Performance Information
Annuity Provisions
Tax Status of the Contracts
Financial Statements
43
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL VARIABLE DEFERRED ANNUITY CONTRACT
ISSUED BY
FIRST METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE
AND
FIRST METLIFE INVESTORS INSURANCE COMPANY
MARQUIS PORTFOLIOS/SM/
(OFFERED ON AND AFTER APRIL 30, 2012)
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED APRIL 30, 2012, FOR THE
INDIVIDUAL VARIABLE DEFERRED ANNUITY CONTRACT THAT IS DESCRIBED HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS WRITE US AT: P.O.
BOX 10366, DES MOINES, IOWA 50306-0366, OR CALL (800) 842-9325.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED APRIL 30, 2012.
MARQUIS PORTFOLIOS IS A SERVICE MARK OF MORGAN STANLEY SMITH BARNEY HOLDINGS
LLC AND IS USED BY METLIFE, INC. AND ITS AFFILIATES UNDER LICENSE.
SAI-0412MARQUISNY
1
TABLE OF CONTENTS PAGE
COMPANY................................. 3
INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM.................................... 3
ADDITIONAL INFORMATION.................. 4
CUSTODIAN............................... 4
DISTRIBUTION............................ 4
CALCULATION OF PERFORMANCE INFORMATION.. 5
Total Return....................... 5
Historical Unit Values............. 6
Reporting Agencies................. 6
ANNUITY PROVISIONS...................... 7
Variable Annuity................... 7
Fixed Annuity...................... 8
Mortality and Expense Guarantee.... 8
Legal or Regulatory Restrictions
on Transactions.................... 8
TAX STATUS OF THE CONTRACTS............. 8
FINANCIAL STATEMENTS.................... 11
2
effects of market risk on total return performance. This type of ranking may
address the question as to which funds provide the highest total return with
the least amount of risk. Other ranking services may be used as sources of
performance comparison, such as CDA/Weisenberger.
Morningstar rates a variable annuity against its peers with similar investment
objectives. Morningstar does not rate any variable annuity that has less than
three years of performance data.
ANNUITY PROVISIONS
VARIABLE ANNUITY
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount; and (2) will vary in amount in proportion to the amount
that the net investment factor exceeds the assumed investment return selected.
The Adjusted Contract Value (the account value, less any applicable premium
taxes and account fee) will be applied to the applicable Annuity Table to
determine the first annuity payment. The Adjusted Contract Value is determined
on the annuity calculation date, which is a business day no more than five (5)
business days before the annuity date. The dollar amount of the first variable
annuity payment is determined as follows: The first variable annuity payment
will be based upon the annuity option elected, the annuitant's age, the
annuitant's sex (where permitted by law), and the appropriate variable annuity
option table. Your annuity rates will not be less than those guaranteed in your
contract at the time of purchase for the assumed investment return and annuity
option elected. If, as of the annuity calculation date, the then current
variable annuity option rates applicable to this class of contracts provide a
first annuity payment greater than that which is guaranteed under the same
annuity option under this contract, the greater payment will be made.
The dollar amount of variable annuity payments after the first payment is
determined as follows:
1. the dollar amount of the first variable annuity payment is divided by the
value of an annuity unit for each applicable investment portfolio as of
the annuity calculation date. This establishes the number of annuity units
for each monthly payment. The number of annuity units for each applicable
investment portfolio remains fixed during the annuity period, unless you
transfer values from the investment portfolio to another investment
portfolio;
2. the fixed number of annuity units per payment in each investment portfolio
is multiplied by the annuity unit value for that investment portfolio for
the business day for which the annuity payment is being calculated. This
result is the dollar amount of the payment for each applicable investment
portfolio, less any account fee. The account fee will be deducted pro rata
out of each annuity payment.
The total dollar amount of each variable annuity payment is the sum of all
investment portfolio variable annuity payments.
ANNUITY UNIT - The initial annuity unit value for each investment portfolio of
the Separate Account was set by us.
The subsequent annuity unit value for each investment portfolio is determined
by multiplying the annuity unit value for the immediately preceding business
day by the net investment factor for the investment portfolio for the current
business day and multiplying the result by a factor for each day since the last
business day which represents the daily equivalent of the AIR you elected.
(1) the dollar amount of the first annuity payment is divided by the value of
an annuity unit as of the annuity date. This establishes the number of annuity
units for each monthly payment. The number of annuity units remains fixed
during the annuity payment period.
(2) the fixed number of annuity units is multiplied by the annuity unit value
for the last valuation period of the month preceding the month for which the
payment is due. This result is the dollar amount of the payment.
NET INVESTMENT FACTOR - The net investment factor for each investment portfolio
is determined by dividing A by B and multiplying by (1-C) where:
A is (i) the net asset value per share of the portfolio at the end of the
current business day; plus
(ii) any dividend or capital gains per share declared on behalf of
such portfolio that has an ex-dividend date as of the current
business day.
B is the net asset value per share of the portfolio for the immediately
preceding business day.
7
C is (i) the separate account product charges and for each day since the last
business day. The daily charge is equal to the annual separate
account product charges divided by 365; plus
(ii) a charge factor, if any, for any taxes or any tax reserve we
have established as a result of the operation of the Separate
Account.
Transfers During the Annuity Phase:
o You may not make a transfer from the fixed annuity option to the variable
annuity option;
o Transfers among the subaccounts will be made by converting the number of
annuity units being transferred to the number of annuity units of the
subaccount to which the transfer is made, so that the next annuity payment
if it were made at that time would be the same amount that it would have
been without the transfer. Thereafter, annuity payments will reflect
changes in the value of the new annuity units; and
o You may make a transfer from the variable annuity option to the fixed
annuity option. The amount transferred from a subaccount of the Separate
Account will be equal to the product of "(a)" multiplied by "(b)"
multiplied by "(c)", where (a) is the number of annuity units representing
your interest in the subaccount per annuity payment; (b) is the annuity
unit value for the subaccount; and (c) is the present value of $1.00 per
payment period for the remaining annuity benefit period based on the
attained age of the annuitant at the time of transfer, calculated using
the same actuarial basis as the variable annuity rates applied on the
annuity date for the annuity option elected. Amounts transferred to the
fixed annuity option will be applied under the annuity option elected at
the attained age of the annuitant at the time of the transfer using the
fixed annuity option table. If at the time of transfer, the then current
fixed annuity option rates applicable to this class of contracts provide a
greater payment, the greater payment will be made. All amounts and annuity
unit values will be determined as of the end of the business day on which
the Company receives a notice.
FIXED ANNUITY
A fixed annuity is a series of payments made during the annuity phase which are
guaranteed as to dollar amount by the Company and do not vary with the
investment experience of the Separate Account. The Adjusted Contract Value on
the day immediately preceding the annuity date will be used to determine the
fixed annuity monthly payment. The monthly annuity payment will be based upon
the annuity option elected, the annuitant's age, the annuitant's sex (where
permitted by law), and the appropriate annuity option table. Your annuity rates
will not be less than those guaranteed in your contract at the time of
purchase. If, as of the annuity calculation date, the then current annuity
option rates applicable to this class of contracts provide an annuity payment
greater than that which is guaranteed under the same annuity option under this
contract, the greater payment will be made.
MORTALITY AND EXPENSE GUARANTEE
The Company guarantees that the dollar amount of each annuity payment after the
first annuity payment will not be affected by variations in mortality or
expense experience.
LEGAL OR REGULATORY RESTRICTIONS ON TRANSACTIONS
If mandated under applicable law, the Company may be required to reject a
premium payment. The Company may also be required to block a contract owner's
account and thereby refuse to pay any request for transfers, withdrawals,
surrenders, death benefits or continue making annuity payments until
instructions are received from the appropriate regulator.
TAX STATUS OF THE CONTRACTS
Tax law imposes several requirements that variable annuities must satisfy in
order to receive the tax treatment normally accorded to annuity contracts.
DIVERSIFICATION. In order for your Non-Qualified Contract to be considered an
annuity contract for federal income tax purposes, we must comply with certain
diversification standards with respect to the investments underlying the
contract. We believe that we satisfy and will continue to satisfy these
diversification standards. However, the tax law concerning these rules is
subject to change and to different interpretations. Inadvertent failure to meet
these standards may be correctable. Failure to meet these standards would
result in immediate taxation to contract owners of gains under their contracts.
Consult your tax adviser prior to purchase.
If underlying fund shares are sold directly to tax-qualified retirement plans
that later lose their tax-qualified status or to non-qualified plans, the
separate accounts investing in
8
the underlying fund may fail the diversification requirements of Section 817,
which could have adverse tax consequences for variable contract owners,
including losing the benefit of tax deferral.
REQUIRED DISTRIBUTIONS. In order to be treated as an annuity contract for
Federal income tax purposes, Section 72(s) of the Code generally requires any
Non-Qualified Contract to contain certain provisions specifying how your
interest in the contract will be distributed in the event of the death of an
owner of the contract (or on the death of, or change in, any primary annuitant
where the contract is owned by a non-natural person). Specifically, Section
72(s) requires that: (a) if any owner dies on or after the annuity starting
date, but prior to the time the entire interest in the contract has been
distributed, the entire interest in the contract will be distributed at least
as rapidly as under the method of distribution being used as of the date of
such owner's death; and (b) if any owner dies prior to the annuity starting
date, the entire interest in the contract will be distributed within five years
after the date of such owner's death. These requirements will be considered
satisfied as to any portion of an owner's interest which is payable to or for
the benefit of a designated beneficiary and which is distributed over the life
of such designated beneficiary or over a period not extending beyond the life
expectancy of that beneficiary, provided that such distributions begin within
one year of the owner's death. The designated beneficiary refers to a natural
person designated by the owner as a beneficiary and to whom ownership of the
contract passes by reason of death. However, if the designated beneficiary is
the surviving spouse of the deceased owner, the contract may be continued with
the surviving spouse as the new owner.
The Non-Qualified Contracts contain provisions that are intended to comply with
these Code requirements, although no regulations interpreting these
requirements have yet been issued. We intend to review such provisions and
modify them if necessary to assure that they comply with the applicable
requirements when such requirements are clarified by regulation or otherwise.
Other rules may apply to Qualified Contracts.
MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS. Federal tax law requires that
minimum annual distributions begin by April 1st of the calendar year following
the calendar year in which an IRA owner attains age 70 1/2. Participants in
qualified plans and 403(b) annuities may defer minimum distributions until the
later of April 1st of the calendar year following the calendar year in which
they attain age 70 1/2 or the year of retirement (except for 5% or more
owners). If you own more than one individual retirement annuity and/or account,
you may satisfy the minimum distribution rules on an aggregate basis (i.e.,
determine the total amount of required distributions from all IRAs and take the
required amount from any one or more IRAs). A similar aggregate approach is
available to meet your 403(b) minimum distribution requirements if you have
multiple 403(b) annuities. Recently promulgated Treasury regulations changed
the distribution requirements; therefore, it is important that you consult your
tax adviser as to the impact of these regulations on your personal situation.
Final income tax regulations regarding minimum distribution requirements were
released in June 2004. These regulations affect both deferred and income
annuities. Under these rules, effective with respect to minimum distributions
required for the 2006 distribution year, in general, the value of all benefits
under a deferred annuity (including death benefits in excess of cash value)
must be added to the account value in computing the amount required to be
distributed over the applicable period. We will provide you with additional
information as to the amount of your interest in the contract that is subject
to required minimum distributions under this new rule and either compute the
required amount for you or offer to do so at your request. The new rules are
not entirely clear and you should consult your tax adviser as to how these
rules affect your contract.
MINIMUM DISTRIBUTIONS FOR BENEFICIARIES UPON THE CONTRACT OWNER'S DEATH. Upon
the death of the contract owner and/or annuitant of a Qualified Contract, the
funds remaining in the contract must be completely withdrawn within 5 years
from the date of death (including in a single lump sum) or minimum
distributions may be taken over the life expectancy of the individual
beneficiaries (and in certain situations, trusts for individuals), provided
such distributions are payable at least annually and begin within one year from
the date of death. Special rules apply in the case of an IRA where the
beneficiary is the surviving spouse which allow the spouse to assume the
contract as owner. Alternative rules permit a spousal beneficiary under a
qualified contract, including an IRA, to defer the required minimum
distribution ("RMD") requirements until the end of the year in which the
deceased spouse would have attained age 70 1/2 or to
9
rollover the death proceeds to his or her own IRA or to another eligible
retirement plan in which he or she participates.
For RMDs after the death of the contract owner, the five-year rule is applied
without regard to calendar year 2009. For instance, for a contract owner who
died in 2007, the five-year period would end in 2013 instead of 2012. The RMD
rules are complex, so consult with your tax adviser because the application of
these rules to your particular circumstances may have been impacted by the 2009
RMD waiver.
10