Filed pursuant to
Rule 424(b)(3)
333-185333
METLIFE SHIELD LEVEL SELECTOR/SM /ANNUITY
MetLife Shield Level Selector/SM /Annuity is a single premium deferred
annuity contract (the "Contract") issued by MetLife Insurance Company of
Connecticut ("MICC", "we" or "us").
MICC is located at 1300 Hall Boulevard, Bloomfield, Connecticut 06002-2910.
The telephone number is 1-800-343-8496. MetLife Investors Distribution Company,
5 Park Plaza, Suite 1900, Irvine, California 92614, is the principal
underwriter and distributor of the Contracts.
THE RISK FACTORS FOR THIS CONTRACT APPEAR ON PAGE 12.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR THE ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. MUTUAL
FUNDS, ANNUITIES AND INSURANCE PRODUCTS ARE NOT DEPOSITS OF ANY BANK, AND ARE
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE
"FDIC") OR ANY OTHER GOVERNMENT AGENCY. YOU MAY LOSE MONEY INVESTED IN THE
CONTRACT.
THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT HAVE
RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS OR BY EMPLOYEES OF
SUCH BANKS. HOWEVER, THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY. INVESTMENT IN
THE CONTRACTS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE PRINCIPAL UNDERWRITER OF THE CONTRACT IS METLIFE INVESTORS DISTRIBUTION
COMPANY. THE OFFERING OF THE CONTRACT IS INTENDED TO BE CONTINUOUS.
Prospectus dated May 1, 2013
TABLE OF CONTENTS
SPECIAL TERMS................................................. 4
SUMMARY....................................................... 9
Key Features of the Contract............................... 10
RISK FACTORS.................................................. 12
THE ANNUITY CONTRACT.......................................... 14
Replacement of Contracts................................... 15
Exchanges.............................................. 15
Exchange Programs...................................... 15
PURCHASE...................................................... 15
Purchase Payment........................................... 15
Allocation of the Purchase Payment......................... 16
SHIELD OPTIONS................................................ 16
TERM....................................................... 17
Term Start Date........................................ 18
Term End Date.......................................... 18
INDICES.................................................... 18
Discontinuation or Substantial Change to an Index...... 19
Index Value............................................ 19
Index Performance...................................... 19
SHIELD RATES............................................... 19
RATE CREDITING TYPES....................................... 20
Cap Rate............................................... 20
Step Rate.............................................. 20
ADDITION OR DISCONTINUANCE OF A SHIELD OPTION................. 21
INVESTMENT AMOUNT............................................. 21
CALCULATING YOUR INVESTMENT AMOUNT ON A TERM END DATE......... 22
INTERIM VALUE CALCULATION..................................... 25
Accrued Shield Rate for Interim Value Calculation.......... 26
Accrued Cap Rate for Interim Value Calculation............. 26
Accrued Step Rate for Interim Value Calculation............ 26
YOUR ACCOUNT VALUE............................................ 28
WITHDRAWAL PROVISIONS......................................... 28
Withdrawal Charge.......................................... 29
When No Withdrawal Charge Applies.......................... 30
Free Withdrawal Amount................................. 30
TRANSFERS..................................................... 33
DEATH BENEFITS................................................ 35
Standard Death Benefit..................................... 35
Optional Death Benefit -- Return of Premium................ 35
General Death Benefit Provisions....................... 35
Controlled Payout...................................... 36
Total Control Account.................................. 36
Death of Owner During the Accumulation Period.......... 36
Death of Annuitant During the Accumulation Period...... 36
Death Benefit Options.................................. 37
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INCOME PAYMENTS (THE INCOME PERIOD)................................................. 38
Annuity Date..................................................................... 38
Maturity Date.................................................................... 38
Income Payments.................................................................. 38
Annuity Options.................................................................. 38
Death of Owner During the Income Period...................................... 39
PREMIUM AND OTHER TAXES............................................................. 40
INCOME TAXES........................................................................ 40
FEDERAL TAX CONSIDERATIONS.......................................................... 40
Taxation of Non-Qualified Contracts.............................................. 40
Taxation of Qualified Contracts.................................................. 42
Puerto Rico Tax Considerations................................................... 43
Possible Tax Law Changes......................................................... 43
YOUR RIGHT TO CANCEL (FREE LOOK).................................................... 44
OWNERSHIP PROVISIONS................................................................ 44
Owner............................................................................ 44
Joint Owner...................................................................... 44
Annuitant........................................................................ 44
Beneficiary...................................................................... 44
Assignment....................................................................... 44
ABANDONED PROPERTY REQUIREMENTS..................................................... 45
SUSPENSION OF PAYMENTS OR TRANSFERS................................................. 45
WHEN WE CAN CANCEL YOUR CONTRACT.................................................... 45
THE INSURANCE COMPANY............................................................... 45
MetLife Insurance Company of Connecticut ("MICC")................................ 45
THE SEPARATE ACCOUNT................................................................ 45
MICC Separate Account SA......................................................... 46
INVESTMENTS BY MICC................................................................. 46
ANNUAL STATEMENT.................................................................... 46
DISTRIBUTION OF THE CONTRACTS....................................................... 46
THE FIXED ACCOUNT................................................................... 49
RESTRICTIONS ON FINANCIAL TRANSACTIONS.............................................. 49
REQUESTS AND ELECTIONS.............................................................. 49
CONFIRMING TRANSACTIONS............................................................. 50
LEGAL PROCEEDINGS................................................................... 50
EXPERTS............................................................................. 51
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM....................................... 51
STATE VARIATIONS.................................................................... 51
ELECTRONIC DELIVERY................................................................. 51
AMENDMENT OF THE CONTRACT........................................................... 51
MISSTATEMENT........................................................................ 51
INFORMATION INCORPORATED BY REFERENCE............................................... 51
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES. 52
Appendix A -- Index Publishers...................................................... A-1
Appendix B -- Index Substitution Investment Amount Example.......................... B-1
Appendix C -- Return of Premium Death Benefit Example............................... C-1
Appendix D -- The Fixed Account..................................................... D-1
Appendix E -- Premium Tax Table..................................................... E-1
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SPECIAL TERMS
In this prospectus, the following capitalized terms have the indicated meanings:
ACCOUNT VALUE. The total of the Fixed Account Value and the value of the
Shield Option(s) under the Contract during the Accumulation Period.
ACCRUED CAP RATE. The portion of the Cap Rate that has accrued from the Term
Start Date to any day within the Term. This is the maximum Index Performance
that may be applied in calculating the Interim Value on any day prior to the
Term End Date if Index Performance is greater than zero. The Accrued Cap Rate
is equal to the Cap Rate multiplied by the number of days elapsed since the
Term Start Date, divided by the total number of days in the Term.
ACCRUED SHIELD RATE. The portion of the Shield Rate that has accrued from the
Term Start Date to any day within the Term. This is the amount that will be
applied in calculating the Interim Value on any day prior to the Term End Date
if Index Performance is less than zero. The Accrued Shield Rate is equal to the
Shield Rate multiplied by the number of days elapsed since the Term Start Date,
divided by the total number of days in the Term. Unlike the other Shield
Options, a Shield Option with the Shield 100 is not subject to accrual, and so
the Shield 100 is fully accrued on any Business Day during the Term.
ACCRUED STEP RATE. The portion of the Step Rate that has accrued from the
Term Start Date to any day within the Term. This is the rate that will be
applied in calculating the Interim Value on any day prior to the Term End Date
if Index Performance is equal to or greater than zero. The Accrued Step Rate is
equal to the Step Rate multiplied by the number of days elapsed since the Term
Start Date, divided by the total number of days in the Term.
ACCUMULATION PERIOD. The period prior to the Annuity Date.
ANNUITANT. The natural person(s) listed on the Contract Schedule on whose life
Income Payments are based. Any reference to Annuitant will also include any
Joint Annuitant under an Annuity Option.
ANNUITY DATE. A date on which you choose to begin receiving Income Payments.
If we agree, you may change the Annuity Date, subject to certain requirements.
If you do not choose an Annuity Date, the Annuity Date will be the Annuity Date
indicated on the Contract Schedule.
ANNUITY SERVICE OFFICE. The office indicated on the Contract Schedule to which
notices and requests must be sent, or as otherwise changed by Notice from us.
BENEFICIARY. The person(s) or entity(ies) you name to receive a death benefit
payable under the Contract upon the death of the Owner or a Joint Owner, or in
certain circumstances, an Annuitant.
BUSINESS DAY. Our "business day" is generally any day the NYSE is open for
regular trading. For purposes of administrative requests and transactions, a
Business Day ends at 4:00 PM Eastern Standard Time. If the SEC determines the
existence of emergency conditions on any day, and consequently, the NYSE does
not open, then that day is not a Business Day.
CAP RATE. The maximum rate that may be credited at the Term End Date based on
Index Performance. The Cap Rate may vary between Shield Options and it is not
an annual rate.
CODE. The Internal Revenue Code of 1986, as amended, and all related laws and
regulations, which are in effect during the term of the Contract.
COMMODITY INDEX. An Index based on the performance of commodities.
CONTRACT. The legal agreement between you and MetLife. It contains relevant
provisions of your deferred annuity.
CONTRACT ANNIVERSARY. An anniversary of the Issue Date of the Contract.
CONTRACT SCHEDULE. The schedule attached to your Contract.
CONTRACT YEAR. A one-year period starting on the Issue Date and on each
Contract Anniversary thereafter.
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DEATH BENEFIT AMOUNT. For the standard death benefit, the Account Value, and,
for the optional Return of Premium death benefit, the greater of the Account
Value or your Purchase Payment (reduced proportionately by the percentage
reduction in Account Value of the Shield Option(s) and the Fixed Account for
each partial withdrawal (including any applicable Withdrawal Charge))
determined as of the end of the Business Day on which we have received Notice
of due proof of death and an acceptable election for the payment method.
EXCHANGE ACT. Securities Exchange Act of 1934, as amended.
FDIC. Federal Deposit Insurance Corporation.
FINRA. Financial Industry Regulatory Authority.
FIXED ACCOUNT. An account, if available, that consists of all of the assets
under the Contract other than those in the Separate Account. You may allocate
your Purchase Payment or transfer your Investment Amount to the Fixed Account.
The Fixed Account is part of the General Account assets of MICC.
FIXED ACCOUNT VALUE. The initial Fixed Account Value is the amount of your
Purchase Payment initially allocated to the Fixed Account. Thereafter, the
Fixed Account Value equals: (a) the initial Fixed Account Value or the Fixed
Account Value on the most recent Contract Anniversary, including any transfers,
whichever is applicable; plus (b) any interest credited by us; less (c) the
amount of any withdrawals including any Withdrawal Charges; less (d) any
Premium or Other Taxes, if applicable; and less (e) any other fees indicated on
the Contract Schedule or associated with riders and endorsements, if applicable.
FREE WITHDRAWAL AMOUNT. The Free Withdrawal Amount in the first Contract Year
is zero. Thereafter, the Free Withdrawal Amount each Contract Year is equal to
10% of your Account Value as of the prior Contract Anniversary, less the total
amount withdrawn from the Account Value in the current Contract Year. The Free
Withdrawal Amount is non-cumulative and is not carried over to other Contract
Years.
GENERAL ACCOUNT. The General Account of MICC.
GOOD ORDER. A request or transaction generally is considered in "Good Order"
if it complies with our administrative procedures and the required information
is complete and accurate. A request or transaction may be rejected or delayed
if not in Good Order. If you have any questions, you should contact us or your
sales representative before submitting the form or request.
INCOME PAYMENTS. A series of payments made by us during the Income Period,
which we guarantee as to dollar amount.
INCOME PERIOD. A period starting on the Annuity Date during which Income
Payments are payable.
INDEX. We currently offer Shield Options based on two types of indices:
Securities Indices and a Commodity Index. In the future we may offer Shield
Options based on other types of Indices. We may also add other indices for new
Contracts at our discretion.
INDEX PERFORMANCE. The percentage change in the Index Value measured from the
Term Start Date to any day, including the Term End Date, within the Term. Index
Performance can be positive, zero or negative.
INDEX VALUE. The Index Value of an Index, on a Business Day, is the published
closing value of the Index on that Business Day. The Index Value on any day
that is not a Business Day is the value as of the prior Business Day.
INTEREST RATE TERM. The length of time over which the current Fixed Account
interest rate is guaranteed. No Interest Rate Term will extend beyond the
Annuity Date. The minimum Interest Rate Term depends on the date your Contract
is issued but will not be less than one (1) year.
INTEREST RATE TERM END DATE. The Contract Anniversary on which an Interest
Rate Term ends.
INTEREST RATE TERM START DATE. The Contract Anniversary on which an Interest
Rate Term is established. If chosen at issue, the initial Interest Rate Term
Start Date begins on the Issue Date or otherwise it will begin on the first
Contract Anniversary in which you make the allocation to the Fixed Account.
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INTERIM VALUE. For each Shield Option, the value we assign on any Business Day
prior to the Term End Date. During the Transfer Period, the Interim Value of
each Shield Option will equal the Investment Amount in that Shield Option.
After the Transfer Period, the Interim Value of that Shield Option is equal to
the Investment Amount in the Shield Option, adjusted for the Index Performance
of the associated Index and subject to the applicable Accrued Shield Rate,
Accrued Cap Rate or Accrued Step Rate. The Interim Value is the amount that is
available for annuitization, death benefits, withdrawals and Surrenders.
INVESTMENT AMOUNT. The Investment Amount, for each Shield Option, is the
amount that is allocated to the Shield Option and subsequently reflects all
withdrawals and adjustments at the Term End Date. The Investment Amount will be
reduced for any withdrawal by the same percentage that the withdrawal reduces
the Interim Value attributable to that Shield Option.
ISSUE DATE. The date the Contract is issued.
JOINT ANNUITANT. If there is more than one Annuitant, each Annuitant will be a
Joint Annuitant of the Contract.
JOINT OWNER. If there is more than one Owner, each Owner will be a Joint Owner
of the Contract.
MATURITY DATE. The Maturity Date is specified in your Contract and is the
first day of the calendar month following the Annuitant's 90th birthday or 10
years from the date we issue your Contract, whichever is later. The Contract
will be annuitized at the Maturity Date.
METLIFE. Metropolitan Life Insurance Company.
MICC ("WE", "US", "OUR"). MetLife Insurance Company of Connecticut.
MINIMUM ACCOUNT VALUE. $2,000. If your Account Value falls below the Minimum
Account Value as a result of a withdrawal we will treat the withdrawal request
as a request for a full withdrawal.
MINIMUM GUARANTEED CAP RATE. The actual Minimum Guaranteed Cap Rate for your
Contract is the amount shown on your Contract Schedule but will not be less
than 1% for Shield Options with a 1-Year term, 3% for Shield Options with a
3-Year term and 6% for Shield Options with a 6-Year term.
MINIMUM GUARANTEED INTEREST RATE. The current Minimum Guaranteed Interest Rate
will not be less than 1%. This interest rate is guaranteed to be a rate not
less than the minimum interest rate allowed by state law--see Appendix D. The
actual Minimum Guaranteed Interest Rate for your Contract is the amount shown
on your Contract Schedule and applies only to amounts in the Fixed Account.
MINIMUM GUARANTEED STEP RATE. The actual Minimum Guaranteed Step Rate for your
Contract is the amount shown on your Contract Schedule but will not be less
than 1% for Shield Options with a 1-Year term and 3% for Shield Options with a
3-Year term.
MINIMUM PARTIAL WITHDRAWAL AMOUNT. $500.
MLIDC. MetLife Investors Distribution Company.
MSI. MetLife Securities, Inc.
NES. New England Financial(R) licensed sales representatives who are
associated with New England Securities Corporation.
NOTICE. Any form of communication providing information we need, either in a
signed writing or another manner that we approve in advance. All Notices to us
must be sent to our Annuity Service Office and received in Good Order. To be
effective for a Business Day, a Notice must be received in Good Order prior to
the end of that Business Day.
NYSE. New York Stock Exchange.
OWNER ("YOU", "YOURS"). The person(s) entitled to the ownership rights under
the Contract. If Joint Owners are named, all references to Owner shall mean
Joint Owners.
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PERFORMANCE RATE. The rate credited at the Term End Date. The Performance Rate
is based on the Index Performance, adjusted for the applicable Shield Rate, Cap
Rate or Step Rate. The Performance Rate can be positive, zero or negative. At
the end of the Term, any increase or reduction in the Investment Amount in a
particular Shield Option is determined by multiplying the Performance Rate by
the Investment Amount of the Shield Option on the last day of the Term.
PERFORMANCE RATE ADJUSTMENT. The adjustment made to the Investment Amount for
each Shield Option on any day during the Term, up to, and including, the Term
End Date. Prior to the Term End Date, this adjustment is based on the Index
Performance of the associated Index for a particular Term, subject to any
applicable Accrued Shield Rate, Accrued Cap Rate or Accrued Step Rate. On the
Term End Date, this adjustment is based on the Performance Rate. This
adjustment can be positive, zero or negative. When the Performance Rate
Adjustment is positive we may also refer to this adjustment as "earnings." When
the Performance Rate Adjustment is negative we may also refer to this
adjustment as "losses."
PREMIUM TAX. The amount of tax, if any, charged by the state or municipality.
PURCHASE PAYMENT. The amount paid to us under the Contract as consideration
for the benefits it provides.
RATE CREDITING TYPE. Either the Cap Rate or the Step Rate.
RMD. Required Minimum Distribution.
SEC. Securities and Exchange Commission.
SECURITIES INDICES. Indices based on the performance of securities.
SEPARATE ACCOUNT. The separate account is MICC Separate Account SA.
SHIELD 10. A Shield Rate where negative Index Performance of up to 10% of your
Investment Amount is absorbed by us at the Term End Date, which would leave you
to absorb any remaining negative Index Performance of up to 90% of your
Investment Amount.
SHIELD 15. A Shield Rate where negative Index Performance of up to 15% of your
Investment Amount is absorbed by us at the Term End Date, which would leave you
to absorb any remaining negative Index Performance of up to 85% of your
Investment Amount.
SHIELD 25. A Shield Rate where negative Index Performance of up to 25% of your
Investment Amount is absorbed by us at the Term End Date, which would leave you
to absorb any remaining negative Index Performance of up to 75% of your
Investment Amount.
SHIELD 100. A Shield Rate where 100% of negative Index Performance is absorbed
by us at the Term End Date.
SHIELD RATE. The amount of any negative Index Performance that is absorbed by
us at the Term End Date. Any negative Index Performance beyond the Shield Rate
will reduce the Investment Amount associated with the Shield Option. The Shield
Rate may vary between Shield Options and it is not an annual rate. We currently
offer the following Shield Rates: Shield 10, Shield 15, Shield 25 and Shield
100.
SHIELD OPTION. You may allocate your Purchase Payment or transfer your
Investment Amount to one or more of the available Shield Options. Each Shield
Option has an associated Term, Index, Shield Rate and either a Cap Rate or Step
Rate.
STEP RATE. The rate credited at the Term End Date if the Index Performance is
equal to or greater than zero. The Step Rate may vary between Shield Options
and it is not an annual rate.
SURRENDER. A full withdrawal of your Account Value.
TERM. The Term is the number of years that the Shield Option is in effect. We
currently offer Terms of 1 year, 3 years or 6 years. The Initial Term(s) begin
on the Issue Date.
TERM END DATE. The Contract Anniversary on which a Shield Option ends.
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TERM START DATE. The Contract Anniversary on which a Shield Option is
established. The initial Term Start Date(s) begins on the Issue Date, and
thereafter, will be the Contract Anniversary coinciding with the term duration
of the current Term you have selected.
TRANSFER PERIOD. The five (5) calendar days following the Contract Anniversary
coinciding with the Term End Date for each applicable Shield Option and/or the
Interest Rate Term End Date for the Fixed Account, during the Accumulation
Period.
WITHDRAWAL CHARGE. A charge applied to the percentage of the amount withdrawn
from your Account Value in a Contract Year in excess of the Free Withdrawal
Amount.
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SUMMARY
The MetLife Shield Level Selector/SM /Annuity is a single premium deferred
annuity contract (the "Contract") issued by MICC, that provides for the
accumulation of retirement savings. The Contract is intended for retirement or
other long term investment purposes.
The Contract offers various Shield Options, which permit Owners to
potentially receive interest equal to the percentage returns of certain
Securities Indices and a Commodity Index, up to a Cap Rate or Step Rate, with
certain guarantees against negative returns--guarantees we call "Shield Rates."
We currently offer Shield Options with Terms of 1, 3, or 6 years in length.
The Cap Rate and Step Rate (each, a "Rate Crediting Type") are the two ways
we offer that you can potentially receive interest based on the upside
performance of an Index. The Cap Rate is the maximum rate that may be credited
at the Term End Date based on Index Performance and the Step Rate is the rate
credited at the Term End Date if the Index Performance is equal to or greater
than zero. (See "Key Features of the Contract--Rate Crediting Type" below.)
Unless you allocate your Purchase Payment to a Shield Option with the Shield
100, you may lose money by investing in the Contract. Unlike the other Shield
Options, a Shield Option with the Shield 100 provides a guarantee that we
absorb 100% of any negative return on Investment Amounts in those Shield
Options. A Fixed Account that guarantees a fixed rate of interest may also be
available.
You may withdraw a portion or all of your Account Value at any time until
you commence receiving Income Payments, subject to an adjustment to the
Investment Amounts. Depending on the performance of the Indices you choose,
this adjustment may be substantial. Withdrawal Charges may also apply.
The Contract is available only in those states where it has been approved
for sale.
When you purchase the Contract, you can choose between the standard death
benefit and, if available, an optional Return of Premium death benefit. The
standard death benefit is the Account Value, however, if you select the Return
of Premium death benefit, the death benefit will be the greater of your
(i) Account Value or (ii) Purchase Payment, reduced proportionately by the
percentage reduction in Account Value of the Shield Option(s) and the Fixed
Account for each partial withdrawal (including any applicable Withdrawal
Charge).
Like all annuity contracts the Contract offers a range of annuity options,
which provide Income Payments for your lifetime.
See "SPECIAL TERMS" in this prospectus for more detailed explanations of the
terms associated with the Shield Options.
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The following chart describes the key features of the Contract. Please read
this prospectus for more detailed information about the Contract.
KEY FEATURES OF THE CONTRACT
Contract Single premium deferred annuity contract.
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Purchase Payment The minimum Purchase Payment: $25,000. Prior approval required for
Purchase Payment of $1,000,000 or more.
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Owner and Annuitant Issue Ages 0-85
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Contract Periods The Contract has two periods:
The Accumulation Period, the period prior to the Annuity Date; and
The Income Period, which begins on the Annuity Date and during
which Income Payments are provided.
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Account Value The total of the Fixed Account Value and the value of the Shield Option(s)
under the Contract during the Accumulation Period.
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Shield Option Each Shield Option has an associated Term, Index, Shield Rate and Rate
Crediting Type.
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Term The Term may be 1, 3, or 6 years in length.
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Index The current Indices are as follows:
S&P 500(R) Index (Price Return Index);
Russell 2000(R) Index (Price Return Index);
NASDAQ-100 Index(R) (Price Return Index);
MSCI EAFE Index (Price Return Index); and
Dow Jones-UBS Commodity Index/SM/ (Price Return Index).
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Shield Rate We currently offer different levels of protection at maturity:
SHIELD 10 -- A Shield Rate where negative Index Performance of up to
10% of your Investment Amount is absorbed by us at the Term End Date,
which would leave you to absorb any remaining negative Index
Performance of up to 90% of your Investment Amount.
SHIELD 15 -- A Shield Rate where negative Index Performance of up to
15% of your Investment Amount is absorbed by us at the Term End Date,
which would leave you to absorb any remaining negative Index
Performance of up to 85% of your Investment Amount.
SHIELD 25 -- A Shield Rate where negative Index Performance of up to
25% of your Investment Amount is absorbed by us at the Term End Date,
which would leave you to absorb any remaining negative Index
Performance of up to 75% of your Investment Amount.
SHIELD 100 -- A Shield Rate where 100% of negative Index Performance is
absorbed by us at the Term End Date.
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Rate Crediting Type A Shield Option can only have one associated Rate Crediting Type: either a
Cap Rate or a Step Rate.
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Interim Value For each Shield Option, the value we assign on any Business Day prior to
the Term End Date. The Interim Value of a Shield Option is equal to the
Investment Amount in the Shield Option, adjusted for the Index
Performance of the associated Index and subject to the applicable Accrued
Shield Rate, Accrued Cap Rate or Accrued Step Rate.
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Transfers During the Accumulation Period you may make transfers to the Fixed
Account and/or to new Shield Option(s) during the Transfer Period. The
effective date of such transfer is the first day of the Interest Rate Term
and/or a Term(s) in which the transfer is made.
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Fixed Account See Appendix D.
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Access to Your Money You may withdraw some or all of your money at any time prior to the
Annuity Date. For any withdrawal, a Performance Rate Adjustment, as of
the date of the withdrawal, will apply. In addition, a withdrawal taken in
excess of the Free Withdrawal Amount may be subject to a Withdrawal
Charge.
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Withdrawal Charge A percentage charge applied to withdrawals in excess of the Free
Withdrawal Amount.
The Withdrawal Charge is calculated at the time of each withdrawal in
accordance with the following:
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Number of Complete Contract Withdrawal Charge percentage
Years since Issue Date
-----------------------------------------------------------------
0 9%
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1 8%
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2 8%
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3 7%
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4 6%
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5 5%
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6 or more 0%
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See "WITHDRAWAL PROVISIONS -- When No Withdrawal Charge
Applies" for a list of Withdrawal Charge waivers.
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Death Benefits The standard death benefit or the optional Return of Premium death
benefit.
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Annuity Options You can choose an Annuity Option. After Income Payments begin, you
cannot change the Annuity Option. You can choose one of the following
Annuity Options on a fixed payment basis or any other Annuity Option
acceptable to us:
(i)Life Annuity;
(ii)Life Annuity with 10 Years of Income Payments Guaranteed;
(iii)Joint and Last Survivor Annuity; and
(iv)Joint and Last Survivor Annuity with 10 Years of Income
Payments Guaranteed.
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Charges and Expenses You will bear the following charges and expenses:
(i)Withdrawal Charges;
(ii)Premium and Other Taxes; and
(iii)Lower Cap Rates and Step Rates if the Return of Premium death
benefit is selected.
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Your Right to Cancel You may cancel the Contract within a certain time period after receiving it.
This is known as a "free look." Unless otherwise required by state law, we
will return either your Purchase Payment or Account Value, depending on
your state, and we will not deduct a Withdrawal Charge.
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RISK FACTORS
The purchase of the Contract involves certain risks. You should carefully
consider the following factors, in addition to the matters set forth elsewhere
in the prospectus, prior to purchasing the Contract.
RISK OF LOSS
There is a risk of substantial loss of your principal (unless you allocated
your Purchase Payment to a Shield Option with the Shield 100 or the Fixed
Account) because you agree to absorb all losses that exceed the Shield Rate for
the Shield Options you select under the Contract. This means that if a negative
Index Performance for a Shield Option you select exceeds the corresponding
Shield Rate at the Term End Date, you will bear the portion of the loss that
exceeds the Shield Rate.
NO OWNERSHIP OF THE UNDERLYING SECURITIES
When you purchase the Contract and allocate your Purchase Payment to a
Shield Option(s), you will not be investing in the Index for the Shield Options
you select or in a mutual fund or exchange traded fund that tracks the Index
for the Shield Options you select. Your Performance Rate Adjustment for a
Shield Option is limited by a Cap Rate or Step Rate, which means your
Investment Amount will be lower than if you had invested in a mutual fund or
exchange traded fund designed to track the performance of the applicable Index
and the performance is greater than your Cap Rate or Step Rate.
COST OF OPTIONAL DEATH BENEFIT
If you purchase a Contract with the optional Return of Premium death
benefit, the Cap Rates and Step Rates set for your Shield Options under the
Contract will be lower than the Cap Rates and Step Rates that you would have
received had you purchased the Contract without this optional death benefit,
except for a Shield Option with the Shield 100. In deciding whether to purchase
the optional death benefit, you should consider the desirability of the
benefit, relative to the generally lower Cap Rates and Step Rates that will be
set under your Contract for the life of the Contract as compared to a Contract
purchased without such benefit, and your needs.
WITHDRAWAL CHARGES
You may withdraw some or all of your money at any time prior to the Annuity
Date, however, any applicable Withdrawal Charge is calculated as a percentage
of the amount withdrawn. After the first Contract Year, the Contract provides
for a limited free access to your money, called the Free Withdrawal Amount. If
you withdraw an amount that is greater than the Free Withdrawal Amount for your
Contract, you may be subject to a Withdrawal Charge which will reduce the
amount that is payable to you. For example, assume you make a $1,000 Purchase
Payment at Contract issue. If your Account Value is $800 in the beginning of
the fifth (5/th/) Contract Year and you take a full withdrawal from your
Contract, the Free Withdrawal Amount is $80 (10% of $800) and a Withdrawal
Charge percentage of 5% is applied to the remaining amount. This is a 5%
reduction of your Account Value, less the Free Withdrawal Amount ($720 =
$800-$80). The Withdrawal Charge would be $36 (5% of $720). This results in a
cash value of $764 paid to you ($764 = $800-$36). If you make a withdrawal
before a Term End Date, a Performance Rate Adjustment, as of the date of the
withdrawal, will apply. A Performance Rate Adjustment may result in a loss that
is greater than the Accrued Shield Rate when Index Performance is negative on
the date of the withdrawal. Performance Rate Adjustments, at the time of the
withdrawal, may decrease the amount that is payable to you.
EFFECT OF WITHDRAWALS
The method we use in calculating your Interim Value may result in an amount
that is less than the amount you would receive had you held the investment
until the Term End Date. If you take a withdrawal when Index Performance is
negative, your remaining Investment Amount may be significantly less than if
you waited to take the withdrawal when Index Performance was positive.
. If you take a withdrawal, including RMDs, your Account Value will be
reduced by the amount withdrawn proportionately from your Shield Options
and Fixed Account unless you tell us from which options, in which you
currently have any Account Value, where the withdrawal should be taken.
12
. If you die (unless you selected the optional Return of Premium death
benefit), make a withdrawal or Surrender your Contract prior to the Term
End Date, we will pay the Interim Value, which may be less than if you
held the Contract until all of your Shield Options reached their Term End
Dates.
. If your Contract is annuitized prior to a Term End Date, we will use the
Interim Value to calculate the Income Payments you will receive based on
the applicable Annuity Option. In deciding on an Annuity Date, you should
take into consideration the Term End Dates of your Shield Options relative
to the Annuity Date you have chosen.
. The calculation of the Interim Value will be based on Index Performance
and the applicable Accrued Shield Rate, Accrued Cap Rate or Accrued Step
Rate as of the date of the calculation. Shield Rates, with the exception
of a Shield 100, Cap Rates and Step Rates accrue during the Term and only
reach full accrual on the last day of a Term. If negative Index
Performance is constant during the Term, the Interim Value will be lower
the earlier a withdrawal is made during the Term because the Shield Rate
is accruing during this period. Also, withdrawals prior to the Term End
Date, when Index Performance is positive, are subject to an Accrued Cap
Rate or Accrued Step Rate based on the period those amounts were invested
in the Shield Option. This means the earlier you take a withdrawal the
lesser extent to which any positive Index Performance is reflected in your
Account Value due to the accruing of the Cap Rate or Step Rate.
. If your Account Value falls below the Minimum Account Value as a result of
a withdrawal, we may terminate your Contract.
LIMITATIONS ON TRANSFERS
You may make transfers between the Fixed Account and the Shield Option(s)
only during the Transfer Period. You cannot make transfers outside the Transfer
Period and you cannot transfer out of a current Shield Option to another Shield
Option or the Fixed Account until the Term End Date of the current Shield
Option and you cannot transfer out of the Fixed Account to a Shield Option
until the Interest Rate Term End Date (which will not be less than one
(1) year). In both cases, the amount transferred, can only be transferred to
new Shield Options or the Fixed Account and not a Shield Option, you may
currently have, whose Term has not ended as of the date you would like to
transfer such amount. This may limit your ability to react to market conditions.
In addition, you should understand that for renewals into the same Shield
Option, a new Cap Rate or Step Rate, as applicable, will be declared and will
go into effect on the Contract Anniversary that coincides with the beginning of
the new Shield Option.
AVAILABILITY OF SHIELD OPTIONS
We may stop offering a Shield Option(s), consequently, a Shield Option may
not be available for you to transfer your Investment Amount or Fixed Account
Value into after a Term End Date or the Interest Rate Term End Date. If the
same Shield Option is no longer available at the Term End Date, the Investment
Amount in the applicable Shield Option(s) will automatically transfer into the
Fixed Account at the Term End Date, unless you instruct us otherwise. The
amounts transferred to the Fixed Account must remain in the Fixed Account until
the Interest Rate Term End Date (which, currently, will not be less than one
(1) year). The Investment Amount held in the Fixed Account may earn a return
that is less than the return you might have earned if those amounts were held
in a Shield Option. If we exercise this right, your ability to increase your
Account Value and, consequently, increase your death benefit will be limited.
If the Fixed Account is not available, the Investment Amount will automatically
transfer into the Shield Option with, in order of priority, the shortest Term,
the highest Shield Rate and the lowest Cap Rate, from the Shield Options
available at the Term End Date, unless you instruct us otherwise. A Shield
Option with the Shield 100 will be available to you for at least your first six
(6) Contract Years, subject to the transfer requirements.
AN INDEX MAY BE SUBSTITUTED
We have the right to substitute a comparable index prior to the Term End
Date if any Index is discontinued or, at our sole discretion, we determine that
our use of such Index should be discontinued, or if the calculation of an
13
Index is substantially changed. We would attempt to choose a substitute index
that has a similar investment objective and risk profile to the replaced index.
Upon substitution of an Index, we will calculate your Index Performance on the
replaced Index up until the date of substitution and the substitute Index from
the date of substitution to the Term End Date. An Index substitution will not
change the Shield Rate, Cap Rate or Step Rate for an existing Shield Option.
The performance of the new Index may not be as good as the one that it
substituted and as a result your Index Performance may have been better if
there had been no substitution.
ISSUING COMPANY
No company other than MICC has any legal responsibility to pay amounts that
MICC owes under the Contract. An Owner should look to the financial strength of
MICC for its claims-paying ability.
THE ANNUITY CONTRACT
This prospectus describes the MetLife Shield Level Selector/SM /Annuity
issued by us and describes all the material features of the Contract. The
MetLife Shield Level Selector/SM /Annuity is a contract between you as the
Owner, and us, the insurance company, where you agree to make a Purchase
Payment to us and we agree to make a series of Income Payments at a later date
you select (the "Annuity Date").
The Contract, like all deferred annuity contracts, has two periods: the
Accumulation Period and the Income Period. During the Accumulation Period,
Account Value accumulates on a tax-deferred basis and is taxed as income when
you make a withdrawal. If you make a withdrawal during the Accumulation Period,
we may assess a Withdrawal Charge of up to 9%. Withdrawals, depending on the
amount and timing, may negatively impact the benefits and guarantees provided
by your Contract. You should carefully consider whether a withdrawal under a
particular circumstance will have any negative impact to your benefits or
guarantees. The Income Period occurs when you or a designated payee begin
receiving regular Income Payments from your Contract.
The maximum issue age for this Contract is 85.
When you purchase the Contract, you can choose one or more of the available
Shield Options and the Fixed Account. A Purchase Payment applied to the Shield
Options is allocated to the Separate Account. You do not share in the
investment performance of assets allocated to the Separate Account. We are
obligated to pay all money we owe under the Contract, including death benefits
and income payments. Any such amount that exceeds the assets in the Separate
Account is paid from our General Account, subject to our financial strength and
claims-paying ability and our long-term ability to make such payments, and is
not guaranteed by any other party. (See "THE SEPARATE ACCOUNT.")
The Contract is intended for retirement savings or other long-term
investment purposes. The Contract benefits from tax deferral. Tax deferral
means that you are not taxed on Account Value or appreciation on the assets in
your Contract until you take money out of your Contract. For any tax qualified
account (e.g., an IRA), the tax deferred accrual feature is provided by the tax
qualified retirement plan. Therefore, there should be reasons other than tax
deferral for acquiring the Contract within a qualified plan. (See "FEDERAL TAX
CONSIDERATIONS.")
In most states, the Contract also contains a Fixed Account (contact your
registered representative regarding the availability in your state). The Fixed
Account is not offered by this prospectus. The Fixed Account offers an interest
rate that is guaranteed by us. The minimum interest rate depends on the date
your Contract is issued and is indicated on your Contract Schedule. Your
registered representative can tell you the current and minimum interest rates
that apply. If you select the Fixed Account, your money will be placed with our
other General Account assets, and the amount of money you are able to
accumulate in your Contract during the Accumulation Period depends upon the
total interest credited to your Contract. The Fixed Account is part of our
General Account. Our General Account consists of all assets owned by us other
than those in the Separate Account and our other separate accounts. We have
sole discretion over the investment of assets in the General Account and the
Separate Account. If you select an Annuity Option during the Income Period,
payments are made from our General Account assets.
The amount of the Income Payments you receive during the Income Period from
an Income Payment option will remain level for the entire Income Period,
subject to the payout chosen. (See "Income Payments (The Income Period)" for
more information.)
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As Owner, you exercise all interests and rights under the Contract. You can
change the Owner at any time, subject to our underwriting requirements. The
Contract may be owned generally by Joint Owners (limited to natural persons).
(See "OWNERSHIP PROVISIONS.")
Under the Code, spousal continuation and certain distribution options are
available only to a person who is defined as a "spouse" under the Federal
Defense of Marriage Act or other applicable Federal law. All Contract
provisions will be interpreted and administered in accordance with the
requirements of the Code. Therefore, under current Federal law, a purchaser 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 their status as a spouse should consult a tax advisor.
REPLACEMENT OF CONTRACTS
EXCHANGES. Generally you can exchange one annuity contract for another in a
tax-free exchange under Section 1035 of the Code. Before making an exchange,
you should compare both annuities carefully. If you exchange another annuity
for the one described in this prospectus, you might have to pay a withdrawal
charge on your old annuity, and there will be a new Withdrawal Charge period
for the Contract. Other charges may be higher (or lower) and the benefits may
be different. Also, because we will not issue the Contract until we have
received the initial premium from your existing insurance company, the issuance
of the Contract may be delayed. Generally, it is not advisable to purchase a
Contract as a replacement for an existing annuity contract. Before you exchange
another annuity for our Contract, ask your registered representative whether
the exchange would be advantageous, given the Contract features, benefits and
charges.
EXCHANGE PROGRAMS. From time to time we may offer programs under which
certain annuity contracts previously issued by us or one of our affiliates may
be exchanged for the Contracts offered by this prospectus. Currently, with
respect to exchanges from certain of our annuity contracts to the Contract, an
existing contract is eligible for exchange if a surrender of the existing
contract would not trigger a withdrawal charge. You should carefully consider
whether an exchange is appropriate for you by comparing the benefits and other
guarantees provided by the contract you currently own to the benefits and
guarantees that would be provided by the new Contract offered by this
prospectus. Then, you should compare the fees and charges of your current
contract to the fees and charges of the new Contract, which may be higher than
your current contract. The programs we offer will be made available on terms
and conditions determined by us, and any such programs will comply with
applicable law. We believe the exchanges will be tax free for Federal income
tax purposes; however, you should consult your tax advisor before making any
such exchange.
PURCHASE
The Contract may not be available for purchase through your broker dealer
("selling firm") during certain periods. There are a number of reasons why the
Contract periodically may not be available, including that the insurance
company wants to limit the volume of sales of the Contract. You may wish to
speak to your registered representative about how this may affect your
purchase. For example, you may be required to submit your purchase application
in Good Order prior to or on a stipulated date in order to purchase a Contract,
and a delay in such process could result in your not being able to purchase a
Contract. Your selling firm may offer the Contract with a lower maximum issue
age for the Contract and certain riders than other selling firms.
PURCHASE PAYMENT
A Purchase Payment is the total amount of money you give us to invest in the
Contract. The Purchase Payment is due on the date the Contract is issued.
. The minimum Purchase Payment we will accept is $25,000.
. If you want to make a Purchase Payment of $1,000,000 or more you will need
our prior approval.
15
. We reserve the right to refuse a Purchase Payment made via a personal
check in excess of $100,000. A Purchase Payment 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.
. We will not accept a Purchase Payment made with cash, money orders, or
travelers checks.
We reserve the right to reject any application.
ALLOCATION OF THE PURCHASE PAYMENT
You may allocate your Purchase Payment to one or more of the available
Shield Options or into the Fixed Account. On your Issue Date, your Purchase
Payment is allocated to the Shield Option(s) and/or the Fixed Account, as you
specified on the application, unless we receive Notice of any changes from you
before we have issued your Contract. All allocations must be in whole
percentages that total 100% or in whole dollars. Once your Purchase Payment is
allocated to the Shield Options and/or the Fixed Account, they become part of
your Account Value.
SHIELD OPTIONS
The MetLife Shield Level Selector/SM /Annuity is not a variable annuity
where your account value varies based on the investment performance of the
underlying portfolios you choose, rather the Shield Options offer potential
interest based upon index performance. This potential interest--the Performance
Rate Adjustment--may be a positive or negative percentage or zero. You may
allocate your Purchase Payment to one or more of the Shield Options we
currently offer and the Fixed Account. Based upon the Index Performance of the
Index associated with the Shield Option, a Performance Rate Adjustment will be
applied to the Investment Amount in that Shield Option on any day during the
Term that you make a withdrawal from the Shield Option, Surrender your
Contract, annuitize your Contract, a Death Benefit is paid or the Term ends.
Given that Index Performance may be positive, zero or negative, your
Performance Rate Adjustment may be positive, zero or negative. It is possible
for you to lose a portion of the Purchase Payment and any earnings invested in
the Contract. The Performance Rate Adjustment is based on a certain amount of
protection against decreases in an Index Value and a limitation on potential
interest based on an Index Value. The extent of the downside protection varies
by the Shield Rate you select. If you access amounts in the Shield Options
before the Term End Date, we will instead calculate an Interim Value on each
Business Day between the Term Start Date and the Term End Date. (See "Interim
Value Calculation.")
You have the opportunity to allocate your Investment Amount to any of the
Shield Options described below, subject to the requirements, limitations and
procedures disclosed in the prospectus. We are not obligated to offer any one
particular Shield Option. Each Shield Option has an associated (i) Term,
(ii) Index, (iii) Shield Rate and (iv) Rate Crediting Type.
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The following chart lists the Shield Options (each of which is issued with a
Cap Rate unless otherwise noted) currently available:
SHIELD OPTIONS
-------------------------------------------------------------------------------
TERM INDEX
-------------------------------------------------------------------------------
SHIELD 100
(100% downside protection)
-------------------------------------------------------------------------------
1 Year S&P 500(R) Index
S&P 500(R) Index Step Rate
-------------------------------------------------------------------------------
SHIELD 25
(up to 25% downside protection)
-------------------------------------------------------------------------------
6 Year S&P 500(R) Index
-------------------------------------------------------------------------------
SHIELD 15
(up to 15% downside protection)
-------------------------------------------------------------------------------
3 Year S&P 500(R) Index
-------------------------------------------------------------------------------
6 Year S&P 500(R) Index
-------------------------------------------------------------------------------
SHIELD 10
(up to 10% downside protection)
-------------------------------------------------------------------------------
1 Year S&P 500(R) Index
S&P 500(R) Index Step Rate
Russell 2000(R) Index
NASDAQ-100 Index(R)
MSCI EAFE Index
Dow Jones-UBS Commodity Index/SM/
-------------------------------------------------------------------------------
3 Year S&P 500(R) Index
S&P 500(R) Index / Step Rate
Russell 2000(R) Index
NASDAQ-100 Index(R)
MSCI EAFE Index
Dow Jones-UBS Commodity Index/SM/
-------------------------------------------------------------------------------
6 Year S&P 500(R) Index
The Indices are described in more detail below, under the heading "Indices."
For each new Shield Option we declare a new Cap Rate or a new Step Rate, as
applicable, for each Term. The initial Cap Rate or Step Rate, as applicable,
for each Shield Option is declared on the Issue Date. Thereafter the Cap Rate
or Step Rate, as applicable, for each subsequent Shield Option is declared for
each subsequent Term. See "Cap Rate" and "Step Rate".
PLEASE NOTE, SHIELD OPTIONS WITH HIGHER SHIELD RATES TEND TO HAVE LOWER CAP
RATES AND STEP RATES, AS APPLICABLE, THAN OTHER SHIELD OPTIONS THAT USE THE
SAME INDEX AND TERM BUT PROVIDE LOWER SHIELD RATES. For example, a S&P 500(R)
Index with a 1 year Term and a Shield 100 will tend to have a Cap Rate that is
lower than a S&P 500(R) Index with a 1 year Term and a Shield 10.
A Shield Option will always be available; however, we reserve the right to
change the duration of any new Shield Options, stop offering any of the Shield
Options or suspend offering any of the Shield Options temporarily. We may also
add Shield Options in the future. All Shield Options may not be available in
all states.
TERM
The Term is the number of years that a Shield Option is in effect. For
specific Shield Options we currently offer Terms of 1 year, 3 years or 6 years.
An Initial Term(s) begins on the Issue Date. A Term ends and a subsequent Term
begins, on the Contract Anniversary coinciding with the term duration of the
then current Term for the Shield Option you have selected.
17
TERM START DATE
Each Shield Option will have a Term Start Date, which is the Contract
Anniversary on which a Shield Option is established. The initial Term Start
Date(s) begins on the Issue Date, and thereafter, will be the Contract
Anniversary coinciding with the term duration of the Term for the Shield Option
completed.
TERM END DATE
The Contract Anniversary on which a Shield Option ends. We will send you
written Notice thirty (30) days in advance of the maturing Shield Options in
which you are currently invested. At the Term End Date, the Investment Amount
allocated to the Shield Option that has reached its Term End Date will
automatically be renewed into the same Shield Option unless you elect to
transfer such amount into a different Shield Option(s) or the Fixed Account. If
the same Shield Option is no longer available at the Term End Date, the
Investment Amount will automatically transfer into the Fixed Account at the
Term End Date, unless you instruct us otherwise. The amounts transferred to the
Fixed Account must remain in the Fixed Account until the Interest Rate Term End
Date (which, currently, will not be less than one (1) year). If the Fixed
Account is not available, the Investment Amount will automatically transfer
into the Shield Option with, in order of priority, the shortest Term, the
highest Shield Rate and the lowest Cap Rate, from the Shield Options available
at the Term End Date, unless you instruct us otherwise. You have the Transfer
Period to notify us that you want to transfer some or all of your Investment
Amount to a new Shield Option(s) or the Fixed Account. For renewals into the
same Shield Option, a new Cap Rate or Step Rate, as applicable, will be
declared and will go into effect on the Contract Anniversary that coincides
with the beginning of the new Term in the Shield Option that just ended. The
amount transferred to the new Shield Option is the Investment Amount as of the
Contract Anniversary.
INDICES
The Performance Rate of a Shield Option is based on the performance of the
associated Index. We currently offer Shield Options based on two types of
Indices: Indices based on the performance of securities (the "Securities
Indices") and an Index based on the performance of commodities (the "Commodity
Index"). In the future we may offer Shield Options based on other types of
indices. We may also add or remove indices for new Contracts at our discretion.
Securities Indices.
The following Securities Indices are currently available:
S&P 500(R) INDEX (PRICE RETURN INDEX). The S&P 500(R) Index includes 500
large cap stocks from leading companies in leading industries of the U.S.
economy, capturing approximately 80% coverage of U.S. equities. The S&P 500(R)
Index does not include dividends declared by any of the companies in this Index.
RUSSELL 2000(R) INDEX (PRICE RETURN INDEX). The Russell 2000(R) Index
measures the performance of the small-cap segment of the U.S. equity universe.
The Russell 2000 is a subset of the Russell 3000(R) Index representing
approximately 10% of the total market capitalization of that index. It includes
approximately 2000 of the smallest securities based on a combination of their
market cap and current index membership. The Russell 2000(R) Index does not
include dividends declared by any of the companies in this Index.
NASDAQ-100 INDEX(R) (PRICE RETURN INDEX). The NASDAQ-100 Index(R) includes
100 of the largest domestic and international non-financial securities listed
on The Nasdaq Stock Market based on market capitalization. The Index reflects
companies across major industry groups including computer hardware and
software, telecommunications, retail/wholesale trade and biotechnology. It does
not contain securities of financial companies including investment companies.
The NASDAQ-100 Index(R) does not include dividends declared by any of the
companies in this Index.
MSCI EAFE INDEX (PRICE RETURN INDEX). The MSCI EAFE Index (Europe,
Australasia, Far East) is a free float-adjusted market capitalization index
that is designed to measure the equity market performance of developed markets,
excluding the US & Canada. As of the date of this prospectus the MSCI EAFE
Index consists of the following 22 developed market country indices: Australia,
Austria, Belgium, Denmark, Finland, France, Germany,
18
Greece, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand,
Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United
Kingdom. The MSCI EAFE Index does not include dividends declared by any of the
companies in this Index.
Commodities Index.
The following Commodity Index is currently available:
DOW JONES-UBS COMMODITY INDEX/SM /(PRICE RETURN INDEX). The Dow Jones-UBS
Commodity Index/SM /is a broadly diversified representation of commodity market
as an asset class. The index is composed of futures contracts on physical
commodities. As of the date of this Prospectus, the index consists of 22
commodities: Aluminum, Brent Crude, Coffee, Cotton, Corn, Copper (COMEX), Gold,
Heating Oil, Kansas Wheat, Lean Hogs, Live Cattle, Nickel, Natural Gas, Silver,
Soybeans, Soybean Meal, Soybean Oil, Sugar, Unleaded Gasoline, Wheat, WTI Crude
Oil and Zinc. The Dow Jones-UBS Commodity Index/SM /reflects the return of
underlying commodity futures prices.
See Appendix A for important information regarding the publishers of the
Indices.
DISCONTINUATION OR SUBSTANTIAL CHANGE TO AN INDEX. If any Index is
discontinued or, we determine that our use of such Index should be
discontinued, or if the calculation of an Index is substantially changed, we
may substitute a comparable index with a similar investment objective and risk
profile. We will send you (i) written Notice thirty (30) days in advance of
such substitution if we determine such Index should be discontinued and
(ii) reasonable written Notice relative to the notice we receive under our
license agreements with the publishers of the Indices if an Index is
discontinued. Upon substitution of an Index, we will calculate your Index
Performance on the existing Index up until the date of substitution and the
substitute Index from the date of substitution to the Term End Date. The Index
Performance as of the Term End Date will be equal to the return from having
invested in the initial Index up to the substitution date and then investing in
the substitute Index from the date of substitution to the Term End Date
assuming no withdrawals or transfers based on the following formula: (initial
Index at Index substitution date / initial Index at Term Start Date) x
(substituted Index at Term End Date / substituted Index at substitution date) -
1. An Index substitution will not change the Term, Shield Rate, Cap Rate or
Step Rate for an existing Shield Option.
See Appendix B for an Index substitution Investment Amount example.
INDEX VALUE
The Index Value of an Index, on a Business Day, is the published closing
value of the Index on that Business Day. The Index Value on any day that is not
a Business Day is the value as of the prior Business Day. We will use
consistent sources to obtain Index Values. If these sources are no longer
available for specific indices, we will select an alternative published
source(s) for these Index Values.
INDEX PERFORMANCE
The Performance Rate of a Shield Option is based on the performance of an
Index. Index Performance is the percentage change in an Index Value measured
from the Term Start Date to any day, including the Term End Date, within the
Term. The Index Performance can be positive, zero or negative.
SHIELD RATES
The Shield Rate is accrued from the Term Start Date to the Term End Date,
and the full Shield Rate only applies if you hold the Shield Option until the
Term End Date, other than the Shield 100. The Shield Rate for each Shield
Option is the amount of any negative Index Performance that is absorbed by us
at the Term End Date. Any negative Index Performance beyond the Shield Rate
will reduce the Investment Amount.
We currently offer the following Shield Rates--Shield 10, Shield 15, Shield
25 and Shield 100:
---------------------------------
Shield Rate Downside Protection
---------------------------------
Shield 10 up to 10%
---------------------------------
Shield 15 up to 15%
---------------------------------
Shield 25 up to 25%
---------------------------------
Shield 100 100%
---------------------------------
19
For example, a -15% Index Performance with a 10% Shield Rate will result in
a -5% Performance Rate; or, a -10% Index Performance with a 25% Shield Rate
will result in a 0% Performance Rate. The Shield Rate may vary between Shield
Options and it is not an annual rate.
Unlike the other Shield Rates, the Shield 100 is not subject to accrual, and
so the Shield 100 is fully accrued on any Business Day during the Term. This
means you get the full benefit of the Shield 100 regardless of where you are in
your Term. For Shield Options without the Shield 100, you get more of the
Shield Rate the closer you are to the Term End Date. A Shield Option with the
Shield 100 will be available for at least the first six (6) Contract Years,
subject to the transfer requirements. See "TRANSFERS."
In deciding whether to choose a Shield Option with a higher Shield Rate, you
should consider that Shield Options with higher Shield Rates tend to have lower
Cap Rates and Step Rates, as applicable, than Shield Options with lower Shield
Rates that have the same index and term.
RATE CREDITING TYPES
CAP RATE
The Cap Rate is the maximum rate that may be credited at the Term End Date
based on Index Performance. For example, a 15% Index Performance with a 10% Cap
Rate will result in a 10% Performance Rate; or, a 5% Index Performance with a
10% Cap Rate will result in a 5% Performance Rate. THE CAP RATE MAY VARY
BETWEEN SHIELD OPTIONS AND IT IS NOT AN ANNUAL RATE. The Cap Rate is measured
from the Term Start Date to the Term End Date, and the full Cap Rate only
applies if you hold the Shield Option until the Term End Date. For renewals
into the same Shield Option a new Cap Rate is declared for each subsequent
Term, and such rate will not be less than the Minimum Guaranteed Cap Rate
stated in your Contract, but will not be less than 1% for Shield Options with a
1-Year term, 3% for Shield Options with a 3-Year term and 6% for Shield Options
with a 6-Year term. A thirty (30) day advance written Notice will be mailed to
you indicating your maturing Shield Options and how you can obtain the new Cap
Rates and Step Rates for the available Shield Options and the interest rate for
the Fixed Account. At the Term End Date, the Investment Amount will
automatically be renewed into the same Shield Option, with the new Cap Rate,
unless you elect to transfer such amount into a different Shield Option(s) or
the Fixed Account. See "TRANSFERS."
STEP RATE
The Step Rate is the rate credited at the Term End Date if the Index
Performance is equal to or greater than zero. For example, a 15% Index
Performance with a 10% Step Rate will result in a 10% Performance Rate; or, a
5% Index Performance with a 10% Step Rate will result in a 10% Performance
Rate. The Step Rate is measured from the Term Start Date to the Term End Date,
and the full Step Rate only applies if you hold the Shield Option until the
Term End Date. THE STEP RATE MAY VARY BETWEEN SHIELD OPTIONS AND IT IS NOT AN
ANNUAL RATE. For renewals into the same Shield Option a new Step Rate is
declared for each subsequent Term, and such rate will not be less than Minimum
Guaranteed Step Rate stated in your Contract, but will not be less than 1% for
Shield Options with a 1-Year term and 3% for Shield Options with a 3-Year
term). A thirty (30) day advance written Notice will be mailed to you
indicating your maturing Shield Options and how you can obtain the new Step
Rates and Cap Rates for the available Shield Options and the interest rate for
the Fixed Account. At the Term End Date, the Investment Amount will
automatically be renewed into the same Shield Option, with the new Step Rate,
unless you elect to transfer such amount into a different Shield Option(s) or
the Fixed Account. See "TRANSFERS."
In deciding whether to purchase a Shield Option with a Cap Rate or a Step
Rate, you should consider that Step Rates are generally lower than Cap Rates.
If Index Performance is equal to or greater than zero but less than the Step
Rate, and you chose a Cap Rate for your Shield Option, your Performance Rate
Adjustment will be lower than it otherwise would be had you chosen a Step Rate.
Alternatively, if the Index Performance is positive and exceeds the Step Rate,
and you chose a Step Rate for your Shield Option, your Performance Rate
Adjustment will be lower than it would otherwise be had you chosen a Cap Rate.
For example, if you chose a Shield Option with a 10% Cap Rate and there is a
15% Index Performance, your Performance Rate is 10%, however, if instead you
were to choose a Shield Option with an 8% Step Rate, your Performance Rate
would instead be 8%. Alternatively, if you chose a Shield Option with a 10% Cap
Rate and there is a 0% Index Performance your Performance Rate is 0%, however,
if instead you were to choose a Shield Option with an 8% Step Rate, your
Performance Rate would be 8%.
20
ADDITION OR DISCONTINUANCE OF A SHIELD OPTION
A Shield Option will always be available; however, we can add or discontinue
any Shield Option. When a change is made to a Shield Option or an Index, or
changed subsequent to the Issue Date, we will send a notification describing
any changes to the Shield Option, as required by law. This change will take
effect under your Contract as of the next Contract Anniversary for any
allowable transfers into the Shield Option(s). If you are currently allocated
in a Shield Option which is no longer available, you will remain in that Shield
Option until the Term End Date, but that Shield Option will no longer be
available following the Term End Date. A Shield Option with the Shield 100 will
be available to you for at least your first six (6) Contract Years, subject to
the transfer requirements. For more on transfers and renewals, see "TRANSFERS."
INVESTMENT AMOUNT
The Investment Amount, for each Shield Option, is the amount that is
allocated to the Shield Option and subsequently reflects all withdrawals and
adjustments at the Term End Date. The Investment Amount will be reduced for any
withdrawal by the same percentage that the withdrawal reduces the Interim Value
attributable to that Shield Option.
21
CALCULATING YOUR INVESTMENT AMOUNT ON A TERM END DATE
On the Term End Date, we apply the Performance Rate Adjustment to your
Investment Amount. The Performance Rate Adjustment is based on the Performance
Rate, which is the rate credited at the Term End Date. The Performance Rate is
determined by the Index Performance adjusted for the applicable Shield Rate,
Cap Rate or Step Rate. The Performance Rate can be positive, zero or negative
and is determined as follows:
IF INDEX PERFORMANCE (CAN BE POSITIVE,
SHIELD OPTION TYPE: ZERO OR NEGATIVE) IS: PERFORMANCE RATE WILL EQUAL:
------------------------------------------------------------------------------------------------------------
Shield 100 with a Cap Rate less than or equal to zero zero
greater than zero and less than the Cap the Index Performance
Rate
greater than zero and equals or the Cap Rate
exceeds the Cap Rate
------------------------------------------------------------------------------------------------------------
Shield 100 with a Step Rate less than zero zero
equal to or greater than zero the Step Rate
------------------------------------------------------------------------------------------------------------
Other Shield Options with a less than or equal to zero the lesser of: zero or the Index
Cap Rate Performance increased by the Shield
Rate (For example: a -15% Index
Performance with a Shield 10 will
result in a -5% Performance Rate. The
Performance Rate can never be greater
than zero if the Index Performance is
negative.)
greater than zero and less than the Cap the Index Performance
Rate
greater than zero and equals or the Cap Rate
exceeds the Cap Rate
------------------------------------------------------------------------------------------------------------
Other Shield Options with a less than zero the lesser of: zero or the Index
Step Rate Performance increased by the Shield
Rate (For example: a -15% Index
Performance with a Shield 10 will
result in a -5% Performance Rate. The
Performance Rate can never be greater
than zero if the Index Performance is
negative.)
equal to or greater than zero the Step Rate
------------------------------------------------------------------------------------------------------------
EXAMPLES
Example 1 set forth below, as well as Examples 2-4 found throughout this
prospectus, are intended to illustrate how various features of your Contract
work. The examples will use hypothetical "Owner 1" to illustrate the following
concepts:
Example 1--Calculating your Investment Amount on a Term End Date (See below.)
Example 2--Calculating your Interim Value (See "INTERIM VALUE CALCULATION.")
Example 3--Withdrawals (See "WITHDRAWAL PROVISIONS.")
Example 4--Transfers (See "TRANSFERS.")
These examples should not be considered a representation of past or future
performance for any Shield Option. Actual performance may be greater or less
than those shown in the examples. Similarly, the Index Values in the examples
are not an estimate or guarantee of future Index Performance.
The rates for the Rate Crediting Types shown in the following examples are
for illustrative purposes only and may not reflect actual declared rates.
Values are rounded for display purposes only.
22
EXAMPLE 1--CALCULATING YOUR INVESTMENT AMOUNT ON A TERM END DATE
Examples 1A and 1B are intended to show how the Investment Amount on a Term
End Date is calculated. In both examples assume Owner 1 allocates her $50,000
Purchase Payment into a one Year Term / Shield 10 / S&P 500(R) Index and she
allows her allocation to roll over from year to year for five years. In Example
1A she has selected the Shield 10 S&P 500(R) Index with a Cap Rate of 10%. In
Example 1B she has selected the Shield 10 S&P 500(R) Index with a Step Rate of
8%. For purposes of both examples, assume no withdrawals are made during the
five year example period, the Example 1A Cap Rate stays at 10% for all five
years and the Example 1B Step Rate stays at 8% for all five years. If a
withdrawal were made, a Withdrawal Charge and an Interim Value calculation may
apply; and consequently the Investment Amount for the Term would be adjusted
accordingly.
Example 1A--Shield Option with Cap Rate:
Owner 1 allocates her $50,000 Purchase Payment into a one Year Term / Shield
10 / S&P 500(R) Index with a Cap Rate of 10% and lets it roll over year after
year for five years. The following example illustrates how her initial $50,000
Purchase Payment could perform over a five-year period given fluctuating Index
Values. For renewals into the same Shield Option a new Cap Rate would be
declared and go into effect on the Contract Anniversary that coincides with the
beginning of the new Shield Option.
[CHART]
Contract Year 1 2 3 4 5
----------------------------------------------------------------------------------
Investment Amount at Term Start Date/(1)/ $50,000 $55,000 $57,750 $57,750 $57,750
----------------------------------------------------------------------------------
Index Value at Term Start Date 1,000 1,200 1,260 1,260 1,197
----------------------------------------------------------------------------------
Index Value at Term End Date 1,200 1,260 1,260 1,197 1,017
----------------------------------------------------------------------------------
Index Performance/(2)/ 20% 5% 0% -5% -15%
----------------------------------------------------------------------------------
Cap Rate 10% 10% 10% 10% 10%
----------------------------------------------------------------------------------
Shield Rate 10% 10% 10% 10% 10%
----------------------------------------------------------------------------------
Performance Rate (one year)/(3)/ 10% 5% 0% 0% -5%
----------------------------------------------------------------------------------
Performance Rate Adjustment/(4)/ $5,000 $2,750 $0 $0 -$2,888
----------------------------------------------------------------------------------
INVESTMENT AMOUNT AT TERM END DATE/(5)/ $55,000 $57,750 $57,750 $57,750 $54,862
23
-------
Notes to the table above:
/(1)/Investment Amount at Term Start Date in year one is the $50,000 Purchase
Payment. In years two through five, the Investment Amount at Term Start
Date would be $55,000, $57,750, $57,750 and $57,750, respectively, which
was the Investment Amount at Term End Date for the prior year.
/(2)/Index Performance is equal to the percentage change in the Index Value
measured from the Term Start Date to the Term End Date. For example, in
year one, Index Performance is calculated as follows:
(1,200 [Index Value at Term End Date] -- 1,000 [Index Value at Term Start
Date]) / 1,000 [Index Value at Term Start Date] = 20%
/(3)/In year one, Index Performance exceeds the Cap Rate and therefore the
Performance Rate is equal to the Cap Rate. In years two and three the
Performance Rate is equal to the Index Performance because the Index
Performance is not negative and does not exceed the Cap Rate. In year
four the Performance Rate is 0% because the Index Performance is -5% and
the Shield 10 absorbs up to 10% of the negative Index Performance. In
year five, the Performance Rate is -5% because the Index Performance is
-15% and the Shield 10 absorbs up to 10% of negative Index Performance.
/(4)/The Performance Rate Adjustment is equal to the product of the Investment
Amount at the Term Start Date adjusted for any withdrawals (there are no
withdrawals in the example) multiplied by the Performance Rate. For
example, in year one the Performance Rate Adjustment is calculated as
follows:
$50,000 [Investment Amount at Term Start Date] x 10% [Performance Rate] =
$5,000
/(5)/The Investment Amount at the Term End Date is equal to the Investment
Amount at Term Start Date adjusted for any withdrawals (there are no
withdrawals in the example) plus the Performance Rate Adjustment. For
example, in year one the Investment Amount at the Term End Date is
calculated as follows:
$50,000 [Investment Amount at Term Start Date] + $5,000 [Performance Rate
Adjustment] = $55,000
Example 1B--Shield Option with Step Rate:
Owner 1 allocates her $50,000 Purchase Payment into a one Year Term / Shield
10 / S&P 500(R) Index with a Step Rate of 8% and lets it roll over year after
year for five years. The following example illustrates how her initial $50,000
Purchase Payment could perform over a five-year period given fluctuating Index
Values. For renewals into the same Shield Option a new Step Rate would be
declared and go into effect on the Contract Anniversary that coincides with the
beginning of the new Shield Option.
[CHART]
24
Contract Year 1 2 3 4 5
----------------------------------------------------------------------------------
Investment Amount at Term Start Date/(1)/ $50,000 $54,000 $58,320 $62,986 $62,986
----------------------------------------------------------------------------------
Index Value at Term Start Date 1,000 1,050 1,260 1,260 1,134
----------------------------------------------------------------------------------
Index Value at Term End Date 1,050 1,260 1,260 1,134 964
----------------------------------------------------------------------------------
Index Performance/(2)/ 5% 20% 0% -10% -15%
----------------------------------------------------------------------------------
Step Rate 8% 8% 8% 8% 8%
----------------------------------------------------------------------------------
Shield Rate 10% 10% 10% 10% 10%
----------------------------------------------------------------------------------
Performance Rate (one year)/(3)/ 8% 8% 8% 0% -5%
----------------------------------------------------------------------------------
Performance Rate Adjustment/(4)/ $4,000 $4,320 $4,666 $0 -$3,149
----------------------------------------------------------------------------------
INVESTMENT AMOUNT AT TERM END DATE/(5)/ $54,000 $58,320 $62,986 $62,986 $59,837
-------
Notes to the table above:
/(1)/Investment Amount at Term Start Date in year one is the $50,000 Purchase
Payment. In years two through five, the Investment Amount at the Term
Start Date would be $54,000, $58,320, $62,986 and $62,986, respectively,
which was the Investment Amount at the Term End Date for the prior year.
/(2)/Index Performance is equal to the percentage change in the Index Value
measured from the Term Start Date to the Term End Date. For example, in
year one, Index Performance is calculated as follows:
(1,050 [Index Value at Term End Date] -- 1,000 [Index Value at Term Start
Date]) / 1,000 [Index Value at Term Start Date]) = 5%
/(3)/In years one, two and three the Performance Rate is equal to the Step
Rate because the Index Performance is positive or zero. It should be
noted that although Index Performance was 20% in year two, the
Performance Rate is capped at 8% by the Step Rate. In year four the
Performance Rate is 0% because the Index Performance is -10% and the
Shield 10 absorbs up to 10% of the negative Index Performance. In year
five, the Performance Rate is -5% because the Index Performance is -15%
and the Shield 10 absorbs up to 10% of the negative Index Performance.
/(4)/The Performance Rate Adjustment is equal to the product of the Investment
Amount at the Term Start Date adjusted for any withdrawals (there are no
withdrawals in the example) multiplied by the Performance Rate. For
example, in year one the Performance Rate Adjustment is calculated as
follows:
$50,000 [Investment Amount at Term Start Date] x 8% [Performance Rate] =
$4,000
/(5)/The Investment Amount at the Term End Date is equal to the Investment
Amount at Term Start Date adjusted for any withdrawals (there are no
withdrawals in the example) plus the Performance Rate Adjustment. For
example, in year one the Investment Amount at the Term End Date is
calculated as follows:
$50,000 [Investment Amount at Term Start Date] + $4,000 [Performance Rate
Adjustment] = $54,000
INTERIM VALUE CALCULATION
Your Investment Amount in each Shield Option on the Term End Date is
calculated as described above "Calculating your Investment Amount on a Term End
Date". In setting the various rates we use in calculating the Investment
Amount, we assume that you are going to hold a Shield Option until the Term End
Date. Nevertheless, you have the right under the Contract to make withdrawals,
Surrender the Contract or annuitize before the Term End Date. Therefore, we
calculate an Interim Value on each Business Day between the Term Start Date and
prior to the Term End Date that you make a withdrawal, Surrender the Contract,
annuitize or we pay a death benefit. It is equal to the Investment Amount at
the Term Start Date, adjusted for any withdrawals, in the Shield Option,
adjusted for the Index Performance of the associated Index and subject to the
applicable Accrued Shield Rate, Accrued Cap Rate or Accrued Step Rate. A
withdrawal from a Shield Option will reduce your Interim Value by the amount
withdrawn on the date of withdrawal. The Interim Value calculation is different
than the calculation we use to calculate the Investment Amount for a Shield
Option on the Term End Date. Prior to the Term End Date, we use the Interim
Value to calculate the amount that is available for (1) annuitizations;
(2) death benefits; (3) withdrawals; or (4) Surrenders.
25
ACCRUED SHIELD RATE FOR INTERIM VALUE CALCULATION
The Accrued Shield Rate is the portion of the Shield Rate that has accrued
from the Term Start Date to any day within the Term. This is the amount that
will be applied in calculating the Interim Value on any day prior to the Term
End Date if Index Performance is less than zero. The Accrued Shield Rate is
equal to the Shield Rate multiplied by the number of days elapsed since the
Term Start Date, divided by the total number of days in the Term. Unlike the
other Shield Options, a Shield Option with the Shield 100 is not subject to
accrual, and so the Shield 100 is fully accrued on any Business Day during the
Term. This means you get the full benefit of the Shield 100 regardless of where
you are in your Term. For Shield Options without the Shield 100, you get more
of the Shield Rate the closer you are to the Term End Date.
ACCRUED CAP RATE FOR INTERIM VALUE CALCULATION
The Accrued Cap Rate is the portion of the Cap Rate that has accrued from
the Term Start Date to any day within the Term. This is the maximum Index
Performance that may be applied in calculating the Interim Value on any day
prior to the Term End Date if Index Performance is greater than zero. The
Accrued Cap Rate is equal to the Cap Rate multiplied by the number of days
elapsed since the Term Start Date, divided by the total number of days in the
Term.
ACCRUED STEP RATE FOR INTERIM VALUE CALCULATION
The Accrued Step Rate is the portion of the Step Rate that has accrued from
the Term Start Date to any day within the Term. This is the rate that will be
applied in calculating the Interim Value on any day prior to the Term End Date
if Index Performance is equal to or greater than zero. The Accrued Step Rate is
equal to the Step Rate multiplied by the number of days elapsed since the Term
Start Date, divided by the total number of days in the Term.
For purposes of determining the Accrued Shield Rate, Accrued Cap Rate and
Accrued Step Rate, the total number of days in each calendar year of a Term is
365.
PERFORMANCE RATE FOR DETERMINATION OF INTERIM VALUE. The Performance Rate
during a particular Term is the Index Performance, adjusted for the applicable
Accrued Shield Rate, Accrued Cap Rate or Accrued Step Rate.
As noted above, the Interim Value is calculated using accrued values for the
Shield Rate, Cap Rate and Step Rate. So if you annuitize, die, make a
withdrawal, Surrender or cancel your Contract before the Term End Date, you
will not receive the full benefit of the Shield Rate (other than the Shield
100), Cap Rate or Step Rate but instead will receive the accrued percentage to
the date of the annuitization, date of the payment of the death benefit,
withdrawal or Surrender. In addition, a withdrawal from a Shield Option will
reduce your Interim Value by the amount withdrawn on the date of the
withdrawal. For example if you have a Shield Option with a Term Start Date of
February 15, 2013, a 6 year Term, a Shield 10 and a 20% Cap Rate and you make a
withdrawal on February 15, 2016, halfway through your Term, the Interim Value
will be calculated using your Accrued Shield Rate and Accrued Cap Rate. That
means your Accrued Shield Rate will be 5% and your Accrued Cap Rate will be
10%. The accrued rates are calculated as follows:
The Shield Rate (10%) is multiplied by the number of days elapsed since the
Term Start Date (1095) and divided by the total number of days in the Term
(2190), so the Accrued Shield Rate is 5%.
The Cap Rate (20%) is multiplied by the number of days elapsed since the
Term Start Date (1095) and divided by the total number of days in the Term
(2190), so the Accrued Cap Rate is 10%.
An Accrued Step Rate is calculated in the same manner--the Step Rate is
multiplied by the number of days elapsed since the Term Start Date and divided
by the total number of days in the Term. For example, if the Step Rate is 8%
and the total number of days in the Term is 2190 and 1095 days have elapsed,
then the Step Rate (8%) is multiplied by 1095 and divided by 2190 to arrive at
an Accrued Step Rate of 4%.
26
EXAMPLE 2--CALCULATING YOUR INTERIM VALUE
Examples 2A and 2B are intended to show how an Interim Value is calculated.
An Interim Value Calculation will be made if you annuitize, die, make a
withdrawal, Surrender or cancel your Contract before the Term End Date. In both
examples assume Owner 1 allocates her $50,000 Purchase Payment on February 1,
2014 to a three Year Term / Shield 15 / S&P 500(R) Index with a Cap Rate of
30%. Example 2A will illustrate an Interim Value calculation with positive
Index Performance and Example 2B will illustrate an Interim Value calculation
with negative Index Performance. For purposes of these examples, assume the
activity that triggers the Interim Value calculation occurs on February 1, 2015
and that there are no withdrawals made as of the date the Interim Value is
calculated.
Example 2A--Positive Index Performance:
Term Start Date February 1, 2014
------------------------------------------------------------
Investment Amount at Term Start Date $50,000
------------------------------------------------------------
Shield Rate Shield 15
------------------------------------------------------------
Cap Rate 30%
------------------------------------------------------------
Index Value on February 1, 2014 500
------------------------------------------------------------
Date of Interim Value Calculation February 1, 2015
------------------------------------------------------------
Index Value on February 1, 2015 600
------------------------------------------------------------
Index Performance/(1)/ 20%
------------------------------------------------------------
Accrued Cap Rate/(2)/ 10%
------------------------------------------------------------
Performance Rate/(3)/ 10%
------------------------------------------------------------
Performance Rate Adjustment/(4)/ $5,000
------------------------------------------------------------
Interim Value as of February 1, 2015/(5)/ $55,000
----------
Notes to the table above:
/(1)/Index Performance is equal to the percentage change in the Index Value
measured from the Term Start Date to the date of the Interim Value
calculation. Index Performance is calculated as follows:
(600 [Index Value on date of Interim Value calculation] -- 500 [Index Value at
Term Start Date]) / 500 [Index Value at Term Start Date] = 20%
/(2)/The Accrued Cap Rate is equal to the Cap Rate multiplied by the number of
days elapsed since the Term Start Date divided by the total number of days
in the Term. The Accrued Cap Rate is calculated as follows:
30% [Cap Rate] x 365 [number of days elapsed since the Term Start Date] / 1095
[total number of days in the Term] = 10%
/(3)/The Performance Rate is equal to the Accrued Cap Rate because it cannot
exceed the Accrued Cap Rate even though the Index Performance was at 20%.
/(4)/The Performance Rate Adjustment is equal to the product of the Investment
Amount at the Term Start Date adjusted for any withdrawals (there are no
withdrawals in the example) multiplied by the Performance Rate. The
Performance Rate Adjustment is calculated as follows:
$50,000 [Investment Amount at Term Start Date] x 10% [Performance Rate] = $5,000
/(5)/The Interim Value on February 1, 2015 is equal to the Investment Amount at
the Term Start Date adjusted for any withdrawals (there are no withdrawals
in the example) plus the Performance Rate Adjustment. The Interim Value is
calculated as follows:
$50,000 [Investment Amount at Term Start Date] + $5,000 [Performance Rate
Adjustment] = $55,000
27
Example 2B--Negative Index Performance:
Term Start Date February 1, 2014
------------------------------------------------------------
Investment Amount at Term Start Date $50,000
------------------------------------------------------------
Shield Rate Shield 15
------------------------------------------------------------
Cap Rate 30%
------------------------------------------------------------
Index Value on February 1, 2014 500
------------------------------------------------------------
Date of Interim Value Calculation February 1, 2015
------------------------------------------------------------
Index Value on February 1, 2015 400
------------------------------------------------------------
Index Performance/(1)/ -20%
------------------------------------------------------------
Accrued Shield Rate/(2)/ 5%
------------------------------------------------------------
Performance Rate/(3)/ -15%
------------------------------------------------------------
Performance Rate Adjustment/(4)/ -$7,500
------------------------------------------------------------
Interim Value as of February 1, 2015/(5)/ $42,500
----------
Notes to the table above:
/(1)/Index Performance is equal to the percentage change in the Index Value
measured from the Term Start Date to the date of the Interim Value
calculation. Therefore the Index Performance is calculated as follows:
(400 [Index Value on date of Interim Value calculation] -- 500 [Index Value at
Term Start Date]) / 500 [Index Value at Term Start Date]) = -20%
/(2)/The Accrued Shield Rate is equal to the Shield Rate multiplied by the
number of days elapsed since the Term Start Date divided by the total
number of days in the Term. The Accrued Shield Rate is calculated as
follows:
15% [Shield Rate] x 365 [number of days elapsed since the Term Start Date] /
1095 [total number of days in the Term] = 5%
/(3)/The Performance Rate is -15% because the Index Performance is -20% and the
Accrued Shield Rate of 5% absorbs up to 5% of the negative Index
Performance.
/(4)/The Performance Rate Adjustment is equal to the product of the Investment
Amount at the Term Start Date adjusted for any withdrawals (there are no
withdrawals in the example) multiplied by the Performance Rate. The
Performance Rate Adjustment is calculated as follows:
$50,000 [Investment Amount at Term Start Date] x -15% [Performance Rate] =
-$7,500
/(5)/The Interim Value on February 1, 2015 is equal to the Investment Amount at
the Term Start Date adjusted for any withdrawals (there are no withdrawals
in the example) plus the Performance Rate Adjustment. The Interim Value is
calculated as follows:
$50,000 [Investment Amount at Term Start Date] + -$7,500 [Performance Rate
Adjustment] = $42,500
YOUR ACCOUNT VALUE
Your Account Value is the total of the Fixed Account Value and the value of
the Shield Option(s) under your Contract during the Accumulation Period.
WITHDRAWAL PROVISIONS
Prior to the Annuity Date, you may, upon Notice to us, request a full or a
partial withdrawal and we will withdraw that amount from your Account Value
(the "Withdrawal Amount"). A withdrawal will result in a reduction to the
Investment Amount in each Shield Option and the Fixed Account in the ratio that
each Shield Option and the Fixed Account bears to the total Account Value,
unless you instruct us otherwise. The amount payable to you will be a net
amount equal to the Withdrawal Amount adjusted for any applicable Withdrawal
Charge and any other fees, Premium and Other Taxes and any other rider and
endorsement fees.
The total Withdrawal Amount from the Account Value must not be less than the
Minimum Partial Withdrawal Amount ($500). If the withdrawal would result in the
Account Value being less than the Minimum Account Value, we will treat the
withdrawal request as a request for a full withdrawal.
28
If you request a full or partial withdrawal, the Withdrawal Amount after
adjustments for any Withdrawal Charge will result in our paying you a net
amount. The net amount payable to you is equal to (a)-(b)-(c)-(d), where:
(a) is the amount withdrawn from the Account Value, and
(b) is the Withdrawal Charge and other fees, if any, and
(c) is the Premium and Other Taxes, if any, and
(d) the endorsement fees, if any.
Since the Withdrawal Amount will reduce the Investment Amount for each
Shield Option by the percentage reduction in the Interim Value of such Shield
Option (i.e., a proportionate reduction), a withdrawal when Index Performance
is negative will cause a greater percentage reduction in the remaining
Investment Amount relative to the percentage reduction for the same Withdrawal
Amount when Index Performance is positive. For example, assume you make a
$100,000 Purchase Payment at Contract issue and allocate the Purchase Payment
equally to two Shield Options so that each starts with $50,000. This amount is
the initial Investment Amount. Assume in 6 months Shield Option A has an
Interim Value of $65,000 and Shield Option B has an Interim Value of $45,000.
Assume at this time you decide to make a withdrawal of $20,000. If the
withdrawal is taken completely from Shield Option A, the reduction in the
Interim Value is 30.77% ($20,000 / $65,000). The Investment Amount for Shield
Option A would then be reduced to $34,615.38 ($50,000 x (1-30.77%)). The total
Investment Amount is then $84,615.38 ($34,615.38 + $50,000). If the entire
withdrawal is taken from Shield Option B, the reduction in the Interim Value is
44.44% ($20,000 / $45,000). The Investment Amount for Shield Option B would be
reduced to $27,777.78 ($50,000 x (1-44.44%)). The total Investment Amount is
then $77,777.78 ($50,000 + $27,777.78).
The remaining Investment Amount after a withdrawal will be used as the new
Investment Amount for the Term until the Term End Date for that Shield Option.
A partial withdrawal from a Shield Option does not affect the Cap Rate or Step
Rate, as applicable, and the Shield Rate that will apply to the remaining
Investment Amounts that are held in the Shield Option through the Term End Date.
After receipt of a Notice of withdrawal from you, we reserve the right to
defer payment for a withdrawal for the period permitted by applicable law but
not more than six (6) months.
DIVORCE. A withdrawal made pursuant to a divorce or separation agreement is
subject to the same Withdrawal Charge provisions described in this section, if
permissible under tax law. In addition, the withdrawal will reduce the Account
Value and the death benefit. The withdrawal could have a significant negative
impact on the death benefit.
WITHDRAWAL CHARGE
We impose a Withdrawal Charge to reimburse us for contract sales expenses,
including commissions and other distribution, promotion, and acquisition
expenses. During the Accumulation Period, you can make a partial or complete
withdrawal from your Contract.
The Withdrawal Charge is the percentage of the amount withdrawn from the
Account Value in a Contract Year in excess of the Free Withdrawal Amount.
The Withdrawal Charge is calculated at the time of each withdrawal in
accordance with the following:
NUMBER OF COMPLETE CONTRACT
YEARS SINCE ISSUE DATE WITHDRAWAL CHARGE PERCENTAGE
--------------------------- ----------------------------
0 9%
1 8%
2 8%
3 7%
4 6%
5 5%
6 or more 0%
NOTE: For tax purposes, earnings from Non-Qualified Contracts are considered
to come out first.
29
WHEN NO WITHDRAWAL CHARGE APPLIES
In some cases we will not charge you the Withdrawal Charge when you make a
withdrawal. We may, however, ask you to prove that you meet any of the
following conditions:
(i) Maturity of the Contract;
(ii) Payment of the death benefit;
(iii) Application of your Account Value to an Annuity Option;
(iv) If the withdrawal is to avoid required Federal income tax penalties
or to satisfy Federal income tax rules concerning minimum distribution
requirements that apply to your Contract, except for RMDs on a decedent Roth
IRA. For purposes of this exception, we assume that the Contract is the only
contract or funding vehicle from which distributions are required to be
taken and we will ignore all other Account Values;
(v) If you properly "recharacterize" as permitted under Federal tax law
your Traditional IRA Contract or Roth IRA Contract issued by us;
(vi) If we agree in writing that none will apply. For example, if you
transfer your Account Value to another approved annuity contract issued by
us or one of our affiliates;
(vii) Withdrawals pursuant to either the Nursing Home Exception or the
Terminal Illness Exception (see below); or
(viii) Withdrawals up to the Free Withdrawal Amount.
Nursing Home Exception/Terminal Illness Exception. After the first Contract
Year, if approved in your state, and your Contract provides for this, a
Withdrawal Charge which would otherwise apply to a withdrawal will be waived,
if you, or your Joint Owner:
. (Nursing Home Exception) Has been a resident of certain nursing home
facilities or a hospital for a minimum of 90 consecutive days or for a
minimum total of 90 days where there is no more than a 6-month break in
that residency and the residencies are for related causes, where you have
exercised this right no later than 90 days after exiting the nursing home
facility or hospital. The confinement must be prescribed by a physician
and be medically necessary. Not available in Massachusetts and South
Dakota; or
. (Terminal Illness Exception) Is diagnosed with a terminal illness and not
expected to live more than 12 months (a physician certifies to your
illness and life expectancy) and you were not diagnosed with the terminal
illness as of the date we issued your Contract. Not available in
Massachusetts and Washington.
This Contract feature is only available if you are less than 80 years old on
the Contract Issue Date and terminates on the Annuity Date. This Contract
feature is free of charge. Additional conditions and requirements apply and are
specified in the rider(s) that are part of your Contract.
FREE WITHDRAWAL AMOUNT. After the first Contract Year, you may withdraw a
portion of your Account Value free from any Withdrawal Charge. The Free
Withdrawal Amount each Contract Year is equal to 10% of your Account Value as
of the prior Contract Anniversary, less the total amount withdrawn from the
Account Value in the current Contract Year. The Free Withdrawal Amount is
non-cumulative and is not carried over to other Contract Years.
EXAMPLE 3--WITHDRAWALS
Examples 3A and 3B are intended to show how withdrawals work. In both
examples assume that Owner 1 allocates her $50,000 Purchase Payment on
February 1, 2014 to the three Year Term / Shield 15 / S&P 500(R) Index with a
Cap Rate of 30%. Example 3A will illustrate a withdrawal when Index Performance
is positive and assumes no Withdrawal Charge applies due to a Withdrawal Charge
waiver. Example 3B will illustrate a withdrawal when Index Performance is
negative and an 8% Withdrawal Charge is applied. In both examples, Owner 1
takes only one $20,000 withdrawal on February 1, 2015. The remaining Investment
Amount after a withdrawal will be used as the new Investment Amount for the
Term until the Term End Date for that Shield Option (assuming no additional
withdrawals).
30
Example 3A--Positive Index Performance and no Withdrawal Charge:
Term Start Date February 1, 2014
---------------------------------------------------------------------------
Investment Amount at Term Start Date $50,000
---------------------------------------------------------------------------
Shield Rate Shield 15
---------------------------------------------------------------------------
Cap Rate 30%
---------------------------------------------------------------------------
Index Value at Term Start Date 500
---------------------------------------------------------------------------
Date of Interim Value Calculation February 1, 2015
---------------------------------------------------------------------------
Index Value on February 1, 2015 600
---------------------------------------------------------------------------
Index Performance/(1)/ 20%
---------------------------------------------------------------------------
Accrued Cap Rate/(2)/ 10%
---------------------------------------------------------------------------
Performance Rate/(3)/ 10%
---------------------------------------------------------------------------
Performance Rate Adjustment/(4)/ $5,000
---------------------------------------------------------------------------
Interim Value as of February 1, 2015/(5)/ $55,000
---------------------------------------------------------------------------
Withdrawal Amount taken on February 1, 2015 $20,000
---------------------------------------------------------------------------
Investment Amount adjusted for any withdrawals/(6)/ $31,818
---------------------------------------------------------------------------
Net Proceeds from withdrawal paid to Contract Owner/(7)/ $20,000
---------------------------------------------------------------------------
Index Value at Term End Date (February 1, 2017) 700
---------------------------------------------------------------------------
Index Performance at Term End Date/(8)/ 40%
---------------------------------------------------------------------------
Performance Rate at Term End Date/(9)/ 30%
---------------------------------------------------------------------------
Performance Rate Adjustment at Term End Date/(10)/ $9,545
---------------------------------------------------------------------------
Investment Amount at Term End Date/(11)/ $41,363
----------
Notes to the table above:
/(1)/Index Performance is equal to the percentage change in the Index Value
measured from the Term Start Date to the date of the Interim Value
calculation. Index Performance is calculated as follows:
(600 [Index Value on date of Interim Value calculation] -- 500 [Index Value at
Term Start Date]) / 500 [Index Value at Term Start Date]) = 20%
/(2)/The Accrued Cap Rate is equal to the Cap Rate multiplied by the number of
days elapsed since the Term Start Date divided by the total number of days
in the Term. The Accrued Cap Rate is calculated as follows:
30% [Cap rate] x 365 [number of days elapsed since Term Start Date] / 1095
[total number of days in the Term] = 10%
/(3)/The Performance Rate is equal to the Accrued Cap Rate because it cannot
exceed the Accrued Cap Rate even though Index Performance was at 20%.
/(4)/The Performance Rate Adjustment is equal to the product of the Investment
Amount at the Term Start Date adjusted for any withdrawals (no withdrawals
have been taken so far) multiplied by the Performance Rate. The
Performance Rate Adjustment is calculated as follows:
$50,000 [Investment Amount at Term Start Date] x 10% [Performance Rate] = $5,000
/(5)/The Interim Value on February 1, 2015 is equal to the Investment Amount at
the Term Start Date plus the Performance Rate Adjustment. This is the
amount in the Shield Option selected that would be available if you
annuitize, die, make a withdrawal, Surrender or cancel your Contract on
that date. The Interim Value is calculated as follows:
$50,000 [Investment Amount at Term Start Date] + $5,000 [Performance Rate
Adjustment] = $55,000
/(6)/The Investment Amount is reduced proportionally by the withdrawal taken
based on the reduction in Interim Value. Therefore, the Investment Amount
adjusted for any withdrawals is calculated as follows:
$50,000 [Investment Amount on February 1, 2014 ] x (1-$20,000 [gross withdrawal
amount on February 1, 2015] / $55,000 [Interim Value as of February 1, 2015]) =
$31,818
The proportionally reduced Investment Amount is used as the new Investment
Amount for the Term until the Term End Date for this Shield Option (assuming
no additional withdrawals.)
/(7)/The net amount payable to the Contact Owner is equal to the amount
withdrawn minus the Withdrawal Charge. The net amount payable is
calculated as follows:
$20,000 [amount withdrawn] -$0 [Withdrawal Charge] = $20,000.
31
/(8)/Index Performance at the Term End Date is equal to the percentage change
in the Index Value measured from the Term Start Date to the Term End Date.
Index Performance at the Term End Date is calculated as follows:
(700 [Index Value at Term End Date] -- 500 [Index Value at Term Start Date]) /
500 [Index Value at Term Start Date] = 40%
/(9)/Index Performance at the Term End Date exceeds the Cap Rate and therefore
the Performance Rate at the Term End Date is equal to the Cap Rate.
/(10)/The Performance Rate Adjustment at the Term End Date is equal to the
product of the Investment Amount at the Term Start Date adjusted for any
withdrawals multiplied by the Performance Rate at the Term End Date. The
Performance Rate Adjustment at the Term End Date is calculated as follows:
$31,818 [Investment Amount on February 1, 2014] x 30% [Performance Rate at Term
End Date] = $9,545
/(11)/The Investment Amount at the Term End Date is equal to the Investment
Amount on February 1, 2015 adjusted for any withdrawals plus the
Performance Rate Adjustment at Term End Date. The Investment Amount at
the Term End Date is calculated as follows:
$31,818 [Investment Amount on February 1, 2014] + $9,545 [Performance Rate
Adjustment at Term End Date] = $41,363
Example 3B--Negative Index Performance and Withdrawal Charge:
---------------------------------------------------------------------------
Term Start Date February 1, 2014
---------------------------------------------------------------------------
Investment Amount at Term Start Date $50,000
---------------------------------------------------------------------------
Shield Rate Shield 15
---------------------------------------------------------------------------
Cap Rate 30%
---------------------------------------------------------------------------
Index Value at Term Start Date 500
---------------------------------------------------------------------------
Date of Interim Value Calculation February 1, 2015
---------------------------------------------------------------------------
Index Value on February 1, 2015 400
---------------------------------------------------------------------------
Index Performance/(1)/ -20%
---------------------------------------------------------------------------
Accrued Shield Rate/(2)/ 5%
---------------------------------------------------------------------------
Performance Rate/(3)/ -15%
---------------------------------------------------------------------------
Performance Rate Adjustment/(4)/ -$7,500
---------------------------------------------------------------------------
Interim Value as of February 1, 2015/(5)/ $42,500
---------------------------------------------------------------------------
Withdrawal Amount taken on February 1, 2015 $20,000
---------------------------------------------------------------------------
Investment Amount adjusted for any withdrawals/(6)/ $26,471
---------------------------------------------------------------------------
Free Withdrawal Amount/(7)/ $4,250
---------------------------------------------------------------------------
Withdrawal Charge Amount/(8)/ $1,260
---------------------------------------------------------------------------
Net Proceeds from Withdrawal paid to Contract Owner/(9)/ $18,740
---------------------------------------------------------------------------
Index Value at Term End Date (February 1, 2017) 450
---------------------------------------------------------------------------
Index Performance at Term Date/(10)/ -10%
---------------------------------------------------------------------------
Performance Rate at Term End Date/(11)/ 0%
---------------------------------------------------------------------------
Performance Rate Adjustment at Term End Date/(12)/ $0
---------------------------------------------------------------------------
Investment Amount at Term End Date/(13)/ $26,471
---------------------------------------------------------------------------
----------
Notes to the table above:
/(1)/Index Performance is equal to the percentage change in the Index Value
measured from the Term Start Date to the date of the Interim Value
calculation. Index Performance is calculated as follows:
(400 [Index Value on date of Interim Value calculation] -- 500 [Index Value at
Term Start Date]) / 500 [Index Value at Term Start Date]) = -20%
/(2)/The Accrued Shield Rate is equal to the Shield Rate multiplied by the
number of days elapsed since the Term Start Date divided by the total
number of days in the Term. The Accrued Shield Rate is calculated as
follows:
15% [Shield Rate] x 365 [number of days elapsed since Term Start Date] / 1095
[total number of days in the Term] = 5%
/(3)/The Performance Rate is -15% because the Index Performance is -20% and the
Accrued Shield Rate of 5% absorbs up to 5% of the negative Index
Performance.
32
/(4)/The Performance Rate Adjustment is equal to the product of the Investment
Amount at the Term Start Date adjusted for any withdrawals (no withdrawals
have been taken so far) multiplied by the Performance Rate. The
Performance Rate Adjustment is calculated as follows:
$50,000 [Investment Amount at Term Start Date] x -15% [Performance Rate] =
-$7,500
/(5)/The Interim Value on February 1, 2015 is equal to the Investment Amount at
the Term Start Date adjusted for any withdrawals plus the Performance Rate
Adjustment. This is the amount in the Shield Option selected that would be
available if you annuitize, die, make a withdrawal, Surrender or cancel
your Contract on that date. The Interim Value is calculated as follows:
$50,000 [Investment Amount at Term Start Date] + -$7,500 [Performance Rate
Adjustment] = $42,500
/(6)/The Investment Amount is reduced proportionally by the withdrawal taken
based on the reduction in Interim Value. Therefore, the Investment Amount
adjusted for any withdrawals is calculated as follows:
$50,000 [Investment Amount as of February 1, 2014] x (1-$20,000 [gross
withdrawal amount on February 1, 2015]) / $42,500 [Interim Value as of
February 1, 2015] = $26,471
The proportionally reduced Investment Amount will be used as the new
Investment Amount for the Term until the Term End Date for this Shield
Option (assuming no additional withdrawals.)
/(7)/The Free Withdrawal Amount is the value as of the most recent Contract
Anniversary multiplied by the Free Withdrawal Amount Percentage. The Free
Withdrawal Amount is calculated as follows:
$42,500[Interim Value as of February 1, 2015] x 10% [Free Withdrawal
Amount percentage] = $4,250
/(8)/The Withdrawal Charge Amount is the gross withdrawal amount minus the Free
Withdrawal Amount multiplied by the Withdrawal Charge.
($20,000 [gross withdrawal amount] -$4,250 [Free Withdrawal Amount*]) x 8%
[Withdrawal Charge] = $1,260
/(9)/The net amount payable to the Contact Owner is equal to the amount
withdrawn minus the Withdrawal Charge. The net amount payable is
calculated as follows:
$20,000 [amount withdrawn] -$1,260 [Withdrawal Charge] = $18,740
/(10)/Index Performance at the Term End Date is equal to the percentage change
in the Index Value measured from the Term Start Date to the Term End
Date. Index Performance at the Term End Date is calculated as follows:
(450 [Index Value at Term End Date] -- 500 [Index Value at Term Start Date]) /
500 [Index Value at Term Start Date] = -10%
/(11)/The Performance rate at the Term End Date is 0% because the Index
Performance at the Term End Date is -10% and the Shield 15 absorbs up to
15% of the negative Index Performance.
/(12)/The Performance Rate Adjustment at the Term End Date is equal to the
product of the Investment Amount at the Term Start Date adjusted for any
withdrawals multiplied by the Performance Rate at the Term End Date. The
Performance Rate Adjustment at the Term End Date is calculated as follows:
$26,471 [Investment Amount on February 1, 2014] x 0% [Performance Rate at Term
End Date] = $0
/(13)/The Investment Amount at the Term End Date is equal to the Investment
Amount on February 1, 2015 adjusted for any withdrawals plus the
Performance Rate Adjustment at Term End Date. The Investment Amount at
the Term End Date is calculated is calculated as follows:
$26,471 [Investment Amount on February 1, 2014] + $0 [Performance Rate
Adjustment at Term End Date] = $26,471
TRANSFERS
During the Transfer Period you may make transfers to or from the Fixed
Account and/or to or from the Shield Option(s). We must receive notification of
your election to transfer, in a form satisfactory to us or by calling us at
1-800-343-8496, no later than five (5) calendar days after the Contract
Anniversary on which the transfer will take place. Your financial
representative can provide more information or you may contact our Annuity
Service Office. You cannot make transfers outside the Transfer Period and
transfers may not be made after the Annuity Date. To make a transfer from a
Shield Option in which you have an Investment Amount the Shield Option must
have reached its Term End Date. The Transfer Period is the five (5) days
following the Contract Anniversary coinciding with the Term End Date and
Interest Rate Term End Date, as applicable, for the Shield Option(s) and/or the
Fixed Account. The effective date of such transfer is the first day of the
Interest Rate Term and/or a Term(s) in which the transfer is made.
During the Transfer Period, the Interim Value of each Shield Option will
equal the Investment Amount in that Shield Option. After the Transfer Period,
the Interim Value of that Shield Option is equal to the Investment Amount in
the Shield Option, adjusted for the Index Performance of the associated Index
and subject to the applicable Accrued Shield Rate, Accrued Cap Rate or Accrued
Step Rate.
33
At the Term End Date, the Investment Amount allocated to the Shield Option
that has reached its Term End Date will automatically be renewed into the same
Shield Option unless you elect to transfer into a different Shield Option or
the Fixed Account. If the same Shield Option is no longer available at the end
of the existing Term, these amounts will automatically transfer into the Fixed
Account at the Term End Date, unless otherwise instructed by you. The amounts
transferred to the Fixed Account must remain in the Fixed Account until the
Interest Rate Term End Date (which, currently, will not be less than one
(1) year). If the Fixed Account is not available, these amounts will
automatically transfer into the Shield Option with, in order of priority, the
shortest Term, the highest Shield Rate and the lowest Cap Rate, from the Shield
Options available at the Term End Date, unless otherwise instructed by you. You
have the Transfer Period to notify us if you want to transfer some or all of
your Investment Amount to a new Shield Option(s) or the Fixed Account.
RENEWALS. For renewals into the same Shield Option, a new Cap Rate or Step
Rate, as applicable, will be declared and will go into effect on the Contract
Anniversary that coincides with the beginning of the new Shield Option.
EXAMPLE 4--TRANSFERS
Example 4 is intended to show how transfers work. Owner 1 allocates her
$50,000 Purchase Payment on February 1, 2014 to the one Year Term / Shield 15 /
S&P 500(R) Index with a Cap Rate of 10%. At the end of the one year Term, she
transfers 50% of her one Year Term / Shield 15 / S&P 500(R) Index with a Cap
Rate of 10% into a one Year Term / Shield 10 / S&P 500(R) Index with a Cap Rate
of 15% and opts to let the remaining 50% of her Investment Amount automatically
roll over.
Shield Options prior to Transfer:
-----------------------------------------------------------------------
CONTRACT YEAR 1
-----------------------------------------------------------------------
Investment Amount at Term Start Date (February 1, 2014) $50,000
-----------------------------------------------------------------------
Index Value at Term Start Date 1,000
-----------------------------------------------------------------------
Index Value at Term End Date 1,200
-----------------------------------------------------------------------
Index Performance/(1)/ 20%
-----------------------------------------------------------------------
Cap Rate 10%
-----------------------------------------------------------------------
Shield Rate Shield 10
-----------------------------------------------------------------------
Performance Rate (one year)/(2)/ 10%
-----------------------------------------------------------------------
Performance Rate Adjustment/(3)/ $5,000
-----------------------------------------------------------------------
Investment Amount at Term End Date (February 1, 2015)/(4)/ $55,000
-----------------------------------------------------------------------
----------
Notes to the table above:
/(1)/Index Performance is equal to the percentage change in the Index Value
measured from the Term Start Date to the Term End Date. Index Performance
is calculated as follows:
(1,200 [Index Value at Term End Date] -- 1,000 [Index Value at Term Start
Date]) / 1000 [Index Value at Term Start Date]) = 20%
/(2)/Since Index Performance is greater than zero and exceeds the Cap Rate, the
Performance Rate equals the Cap Rate.
/(3)/The Performance Rate Adjustment is equal to the product of the Investment
Amount at the Term Start Date adjusted for any withdrawals (there are no
withdrawals in the example) multiplied by the Performance Rate. The
Performance Rate Adjustment is calculated as follows:
$50,000 [Investment Amount at Term Start Date] x 10% [Performance Rate] = $5,000
/(4)/The Investment Amount at Term End Date is equal to the Investment Amount
at Term Start Date adjusted for any withdrawals (there are no withdrawals
in the example) plus the Performance Rate Adjustment. The Investment
Amount is calculated as follows:
$50,000 [Investment Amount at Term Start Date] + $5,000 [Performance Rate
Adjustment] = $55,000
Shield Options after Transfer:
-------------------------------------------------------------------------------------------------------
CONTRACT YEAR 2
-------------------------------------------------------------------------------------------------------
One Year Term / Shield 15 / S&P One Year Term / Shield 10 / S&P 500(R)
500(R) Index with a Cap Rate of 10% Index with a Cap Rate of 15%
-------------------------------------------------------------------------------------------------------
Investment Amount at Term $27,500 $27,500
Start Date (February 1,
2015)/(1)/
-------------------------------------------------------------------------------------------------------
----------
Notes to the table above:
/(1)/The Investment Amount at Term End Date on February 1, 2015 is reallocated
so that 50% is rolled over and 50% is allocated to a new Shield Option.
34
DEATH BENEFITS
If you die during the Accumulation Period, we will pay a death benefit to
your Beneficiary (or Beneficiaries). The standard death benefit for your
Contract is described below. At the time you purchase the Contract, depending
on availability in your state, you can select the optional Return of Premium
death benefit. The decision to add the optional death benefit is made at
application and is irrevocable. If you purchase a Contract with the optional
Return of Premium death benefit, the Cap Rates and Step Rates set for your
Shield Options under the Contract will be lower than the Cap Rates and Step
Rates that you would have received had you purchased the Contract without this
optional death benefit, except for a Shield Option with the Shield 100. The
reduction in the Cap Rates and Step Rates will not exceed 60%. For example if
you purchase a Contract without the Return of Premium death benefit and you
choose a Shield Option with a Cap Rate, such Cap Rate may be set at 10%
compared to that same Shield Option purchased with the Return of Premium death
benefit where such Cap Rate may be set as low as 4%. If you choose the optional
death benefit, you receive the optional death benefit in place of the standard
death benefit. In deciding whether to purchase the optional death benefit, you
should consider the desirability of the benefit, relative to the lower Cap
Rates and Step Rates that may be set under your Contract as compared to a
Contract purchased without such benefit, and your needs. Unless you tell us
otherwise, we will assume that you are purchasing the Contract with the
standard death benefit and not the optional death benefit.
If you have already been issued a Contract, please check your Contract and
riders for the specific provisions applicable to you. We will require both due
proof of death and an acceptable election for the payment method before any
death benefit is paid. Our obligations are subject to all payments made and
actions taken by us before our receipt of Notice of due proof of death. Any
death benefit will be paid in accordance with applicable law or regulations
governing death benefit payments. (See "General Death Benefit Provisions"
below.)
STANDARD DEATH BENEFIT
The death benefit is the Account Value.
OPTIONAL DEATH BENEFIT--RETURN OF PREMIUM
Please check with your registered representative regarding the availability
of the following in your state.
If you are age 72 or younger at the Issue Date of your Contract, you may
select the Return of Premium death benefit.
The death benefit will be the greater of:
(1) your Account Value; or
(2) your Purchase Payment, reduced proportionately by the percentage
reduction in Account Value of the Shield Option(s) and the Fixed Account for
each partial withdrawal (including any applicable Withdrawal Charge).
If a non-natural person owns the Contract, then the Annuitant will be deemed
to be the Owner for purposes of determining the Death Benefit Amount. If Joint
Owners are named, the age of the oldest Joint Owner will be used to determine
the eligibility to purchase the Return of Premium death benefit.
If the Owner is a natural person and the Owner is changed, subject to our
underwriting requirements, 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, reduced proportionately by the percentage reduction in
Account Value of the Shield Option(s) and the Fixed Account for each partial
withdrawal (including any applicable Withdrawal Charge) 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.
Other than a Shield Option with the Shield 100, the cost for this optional
death benefit will be reflected in lower Cap Rates and Step Rates, which will
not be less than the minimum rates stated in the Contract, than if this
optional benefit was not elected.
See Appendix C for examples of the Return of Premium death benefit rider.
GENERAL DEATH BENEFIT PROVISIONS
If the Beneficiary under a Qualified Contract is the Annuitant's spouse, the
tax law generally allows distributions to begin by the year in which the
Annuitant would have reached 70 1/2 (which may be more or less than five years
after the Annuitant's death).
35
The Death Benefit Amount is determined as of the end of the Business Day on
which we receive both due proof of death and an acceptable election for the
payment method. Where there are multiple Beneficiaries, the death benefit will
be determined as of the time the first Beneficiary submits the necessary
documentation in Good Order. The Death Benefit Amount remains in the Contract
until each of the other Beneficiaries submits the necessary documentation in
Good Order to claim his/her death benefit. Any Death Benefit Amounts held in
the Contract on behalf of the remaining Beneficiaries will remain in the
existing Shield Options and/or the Fixed Account and are subject to fluctuation
in value. This risk is borne by the Beneficiaries. There is no additional death
benefit guarantee.
If the Return of Premium death benefit is chosen and the Beneficiary chooses
to continue the Contract, any excess of the Death Benefit Amount over the
Account Value will be allocated to the Fixed Account. If the Fixed Account is
not available, any excess amount of the Death Benefit Amount over the Account
Value will be allocated into the Shield Option with, in order of priority, the
shortest Term, the highest Shield Rate, and the lowest Cap Rate from the Shield
Options available at the End of the Term.
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 we are presented with notification of your death before any requested
transaction is completed, 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.
We will pay interest on any delayed death benefit payments in accordance
with the laws and regulations in effect under the applicable state law.
CONTROLLED PAYOUT
You may elect to have the death benefit proceeds paid to your Beneficiary in
the form of Income 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.
TOTAL CONTROL ACCOUNT
The Beneficiary may elect to have the Contract's death proceeds paid through
a settlement option called the Total Control Account. The Total Control Account
is an interest-bearing account through which the Beneficiary has immediate and
full access to the proceeds, with unlimited draft writing privileges. We credit
interest to the account at a rate that will not be less than a guaranteed
minimum annual effective rate.
Assets backing the Total Control Accounts are maintained in our General
Account and are subject to the claims of our creditors. We will bear the
investment experience of such assets; however, regardless of the investment
experience of such assets, the interest credited to the Total Control Account
will never fall below the applicable guaranteed minimum annual effective rate.
Because we bear the investment experience of the assets backing the Total
Control Account, we may receive a profit from these assets. The Total Control
Account is not insured by the FDIC or any other governmental agency. The Total
Control Account may not be available, please check with your registered
representative regarding availability.
DEATH OF OWNER DURING THE ACCUMULATION PERIOD
The death benefit will be paid to your Beneficiary(ies) upon your death, or
the first death of a Joint Owner. If the Contract is owned by a non-natural
person, the Annuitant will be deemed the Owner in determining the death
benefit. If there are Joint Owners, the age of the older Owner will be used to
determine the death benefit.
DEATH OF ANNUITANT DURING THE ACCUMULATION PERIOD
Upon the death of an Annuitant, who is not the Owner or Joint Owner, the
Owner (or Oldest Joint Owner) automatically becomes the Annuitant, unless the
Owner, subject to our underwriting requirements in effect at the time of the
request, chooses a new Annuitant. If the Owner is a non-natural person, the
death of the Annuitant will be treated as the death of an Owner, and a new
Annuitant may not be named. (See "Death of Owner During the Accumulation
Period" above).
36
DEATH BENEFIT OPTIONS
In the event an Owner (or the Annuitant, where the Owner is not an
individual) dies during the Accumulation Period, a Beneficiary must choose
payment of the death benefit under one of the options below (unless the Owner
has previously made the election). The death benefit options available under
the Contract include the following and any other options acceptable to you and
us:
(a) Option 1--lump sum payment in cash or the Beneficiary may elect to
have the death proceeds paid through a settlement option called the Total
Control Account; or
(b) Option 2--payment of the entire death benefit within five (5) years
of the date of death of the Owner or the first Joint Owner to die; or
(c) Option 3--payment of the death benefit under an Annuity Option or
other periodic payment option acceptable to us in substantially equal
periodic payments (made at least annually) over the lifetime of the
Beneficiary or over a period not extending beyond the life expectancy of the
Beneficiary with distribution beginning within one (1) year of the date of
death of the Owner or the first Joint Owner to die. Any portion of the death
benefit not applied within one (1) year of the date of the Owner's or Joint
Owner's death must be distributed within five (5) years of the date of death.
For Non-Qualified Contracts, payment must begin within one year of the date
of death. For Qualified Contracts, payment must begin no later than the end of
the calendar year immediately following the year of death.
We may also offer a payment option, for both Non-Qualified Contracts and
certain Qualified Contracts, under which your Beneficiary may receive payments,
over a period not extending beyond his or her life expectancy, under a method
of distribution similar to the distribution of RMDs from Individual Retirement
Accounts. If this option is elected, we will issue a new contract to your
Beneficiary in order to facilitate the distribution of payments. Upon the death
of your Beneficiary, the death benefit would be required to be distributed to
your Beneficiary's Beneficiary at least as rapidly as under the method of
distribution in effect at the time of your Beneficiary's death. (See "FEDERAL
TAX CONSIDERATIONS.")
If a lump sum payment is elected and all the necessary requirements are met,
the payment will be made within seven (7) days.
BENEFICIARY CONTINUATION OPTIONS. We offer two types of Beneficiary
Continuation Options during the Accumulation Period: the Spousal Continuation
and Non-Spousal Beneficiary Continuation Options described below. We must
receive Notice of the election of one of these Beneficiary Continuation Options
by the end of the 90th day after we receive Notice of due proof of death. If
the surviving spouse qualifies for Spousal Continuation and has not chosen one
of the death benefit options above by the end of the 90 day period, the Spousal
Continuation Option will be automatically applied on the 90th day. If a
Non-Spousal Beneficiary qualifies for Non-Spousal Beneficiary Continuation and
has not chosen one of the death benefit options above by the end of the 90 day
period, the Non-Spousal Beneficiary Continuation Option will be automatically
applied on the 90th day.
SPOUSAL CONTINUATION. If the Owner dies during the Accumulation Period, the
spouse may choose to continue the Contract in his or her own name and exercise
all of the Owner's rights under the Contract. Upon such election the Account
Value will be adjusted to an amount equal to the Death Benefit Amount
determined upon such election and receipt of due proof of death of the Owner.
Any excess of the Death Benefit Amount over the Account Value will be allocated
to the Fixed Account. If the Fixed Account is not available, any excess amount
of the Death Benefit Amount over the Account Value will be allocated into the
Shield Option with, in order of priority, the shortest Term, the highest Shield
Rate, and the lowest Cap Rate from the Shield Options available at the end of
the Term.
Spousal continuation will not satisfy minimum required distribution rules
for Qualified Contracts other than IRAs (see "FEDERAL TAX CONSIDERATIONS.")
NON-SPOUSAL BENEFICIARY CONTINUATION. A Beneficiary who is not a spouse can
choose to continue the Contract until the fifth anniversary of the Owner's
death. The Contract can be continued by a Beneficiary only if his or her share
of the death benefit is at least equal to the Minimum Account Value. If the
Beneficiary continues the Contract under this provision his or her share will
not be paid. It will instead be continued in the Contract on the date we
determine the Death Benefit Amount. Such Beneficiary will have the right to
make partial and full withdrawals of his/her share of the Contract, not subject
to Withdrawal Charges. Such Beneficiary will also have the right to make
transfers at the Term End Date or the Interest Rate Term End Date.
37
During the continuation period the Beneficiary can choose to receive his/her
share of the Contract in a single lump sum payment or apply it to an Annuity
Option or other option acceptable to us that must be payable for the life of
the Beneficiary or for a term no longer than the life expectancy of the
Beneficiary starting within one (1) year after the death of the Owner.
On the fifth anniversary of the Owner's death any Beneficiary will be paid
his/her share of the Account Value that has not been applied to an Annuity
Option or other settlement option permissible under the Code, in a single lump
sum payment and the Contract will terminate.
INCOME PAYMENTS (THE INCOME PERIOD)
ANNUITY DATE
Under the Contract you can receive regular Income Payments. You can choose
the month and year in which those payments begin (the "Annuity Date"). Your
Annuity Date must be the first day of a calendar month. The Annuity Date must
not be less than thirteen (13) months from the Issue Date. You can change the
Annuity Date at any time before the Annuity Date, subject to certain
limitations and restrictions that may apply in your state. Income Payments must
begin on, or before, the Maturity Date. Please note that in the Contract, the
Annuity Date and Maturity Date are the same date.
MATURITY DATE
The Maturity Date is specified in your Contract at purchase and is the first
day of the calendar month following the Annuitant's 90th birthday or 10 years
from the date we issue your Contract, whichever is later. If Income Payments
don't begin on, or before, the Maturity Date, the Contract will be annuitized
at the Maturity Date under the Contract's default Annuity Option, or you can
make a complete withdrawal of your Account Value.
You can change or extend your Maturity Date at any time before the Maturity
Date with thirty (30) days prior notice to us (subject to restrictions that may
apply in your state, restrictions imposed by your selling firm and our current
established administrative procedures.) The latest date we will allow you to
extend to must be based on the Owner's age and not the Annuitant's age. You
must contact us at our Annuity Service Office to make this election. This
requirement may be changed by us. PLEASE BE AWARE THAT ONCE YOUR CONTRACT IS
ANNUITIZED, YOU ARE INELIGIBLE TO RECEIVE THE DEATH BENEFIT.
INCOME PAYMENTS
You (unless another payee is named) will receive Income Payments during the
Income Period. The Annuitant is the natural person(s) whose life we look to in
the determination of Income Payments. All Income Payments are fixed as to
amount.
The Account Value, less any applicable Premium Taxes on the day immediately
preceding the Annuity Date will be used to determine the Income Payment amount.
The amount of each Income 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 Income Payment greater than that which is
guaranteed under the same Annuity Option under the Contract, the greater
payment will be made.
Income Payments will be paid as monthly installments or at any frequency
acceptable to you and us. If the amount of the Account Value to be applied
under an Annuity Option is less than $5,000, we reserve the right to make one
lump sum payment equal to the then current Account Value in lieu of Income
Payments. If the amount of the Income Payment would be less than $100, we may
reduce the frequency of payments to an interval which will result in the
payment being at least $100, but with a frequency of no less than annually.
ANNUITY OPTIONS
You can choose among income plans (the "Annuity Options"). You can change it
at any time before the death benefit becomes payable or the Annuity Date.
If you do not choose an Annuity Option at the time you purchase the
Contract, Option 2, which provides a life annuity with 10 years of guaranteed
Income Payments, will automatically be applied.
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You can choose one of the following Annuity Options or any other Annuity
Option acceptable to us. After Income Payments begin, you cannot change the
Annuity Option.
If more than one frequency is permitted under your Contract, choosing less
frequent payments will result in each Income Payment being larger. Annuity
Options that guarantee that payments will be made for a certain number of years
regardless of whether the Annuitant or joint Annuitant are alive (such as
Options 2 and 4 below) result in Income Payments that are smaller than Annuity
Options without such a guarantee (such as Options 1 and 3 below). For Annuity
Options with a designated period, choosing a shorter designated period will
result in each Income Payment being larger.
OPTION 1. LIFE ANNUITY. Under this option, we will make Income Payments so
long as the Annuitant is alive. We stop making Income Payments after the
Annuitant's death. It is possible under this option to receive only one Income
Payment if the Annuitant dies before the due date of the second payment or to
receive only two Income Payments if the Annuitant dies before the due date of
the third payment, and so on.
OPTION 2. LIFE ANNUITY WITH 10 YEARS OF INCOME PAYMENTS GUARANTEED. Under
this option, we will make Income Payments so long as the Annuitant is alive.
If, when the Annuitant dies, we have made Income Payments for less than ten
years, we will then continue to make Income Payments to the Beneficiary for the
rest of the 10 year period.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make
Income Payments so long as the Annuitant and a second person (joint Annuitant)
are both alive. When either Annuitant dies, we will continue to make Income
Payments, so long as the survivor continues to live. We will stop making Income
Payments after the last survivor's death.
OPTION 4. JOINT AND LAST SURVIVOR ANNUITY WITH 10 YEARS OF INCOME PAYMENTS
GUARANTEED. Under this option, we will make Income Payments so long as the
Annuitant and a second person (joint Annuitant) are both alive. When either
Annuitant dies, we will continue to make Income Payments, so long as the
survivor continues to live. If, at the last death of the Annuitant and the
joint Annuitant, we have made Income Payments for less than ten years, we will
then continue to make Income Payments to the Beneficiary for the rest of the 10
year period.
We may require proof of the age or sex of an Annuitant before making any
Income Payments under the Contract that are measured by the Annuitant's life.
If the age or sex of the Annuitant has been misstated, the amount payable will
be the amount that the Account Value would have provided at the correct age or
sex. Once Income Payments have begun, any underpayments will be made up in one
sum with the next Income Payment or in any other manner agreed to by us. Any
overpayments will be deducted first from future Income Payments. No interest
will be credited or charged in the event of an underpayment or overpayment.
Upon the death of the last surviving Annuitant, the Beneficiary may choose
to continue receiving income payments or to receive the commuted value of the
remaining guaranteed payments. The calculation of the commuted value will be
done using the then current Annuity Option rates.
Due to underwriting, administrative or Code considerations, there may be
limitations on payments to the survivor under Options 3 and 4 and/or the
duration of the guarantee period under Options 2 and 4.
Tax rules with respect to decedent contracts may prohibit the election of
Joint and Last Survivor Annuity Options (or income types) and may also prohibit
payments for as long as the Owner's life in certain circumstances.
In addition to the Annuity Options described above, we may offer an
additional payment option that would allow your Beneficiary to take
distribution of the Account Value over a period not extending beyond his or her
life expectancy. Under this option, annual distributions would not be made in
the form of an annuity, but would be calculated in a manner similar to the
calculation of RMDs from IRAs. (See "FEDERAL TAX CONSIDERATIONS.") We intend to
make this payment option available to both Qualified Contracts and
Non-Qualified Contracts. In the event that you purchased the Contract as a
Qualified Contract, you must take distribution of the Account Value in
accordance with the minimum required distribution rules set forth in applicable
tax law. (See "FEDERAL TAX CONSIDERATIONS.") Under certain circumstances, you
may satisfy those requirements by electing an Annuity Option. You may choose
any death benefit available under the Contract. Upon your death, if Income
Payments have already begun, the death benefit would be required to be
distributed to your Beneficiary at least as rapidly as under the method of
distribution in effect at the time of your death.
DEATH OF OWNER DURING THE INCOME PERIOD
If the Owner (or a Joint Owner), is not the Annuitant, and dies during the
Income Period, any remaining guaranteed payments under the Annuity Option
elected will continue at least as rapidly as under the method of
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distribution in effect at the time of the Owner's (or Joint Owner's) death.
Upon the death of the Owner (or a Joint Owner) during the Income Period, the
Beneficiary becomes entitled to exercise the rights of the Owner. If an Owner
(or Joint Owner) is the Annuitant and dies during the Income Period, the death
benefit, if any, will be as specified in the Annuity Option chosen and will
continue at least as rapidly as under the method of distribution in effect at
the time of the Owner's (or Joint Owner's) death.
PREMIUM AND OTHER TAXES
We reserve the right to deduct from the Purchase Payment or Account Value
any taxes relating to the Contract paid by us to any government entity
(including, but not limited to, Premium Taxes, Federal, state and local
withholding of income, estate, inheritance, other taxes required by law and any
new or increased state income taxes that may be enacted into law). Premium
taxes generally range from 0.5% to 3.5%, which are applicable only in certain
jurisdictions--see Appendix E. We will determine when taxes relate to the
Contract.
We may pay taxes when due and deduct that amount from the Account Value at a
later date. Payment at an earlier date does not waive any right we may have to
deduct amounts at a later date. Generally, it is our practice not to charge
Premium Taxes until Income Payments begin.
INCOME TAXES
We reserve the right to deduct from the Contract for any income taxes which
we incur because of the Contract. At the present time, however, we are not
incurring any such income tax or making any such deductions.
FEDERAL TAX CONSIDERATIONS
The following discussion is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax advisor. 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 your Contract is called a Qualified Contract. The tax rules
applicable to Qualified Contracts vary according to the type of individual
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
individual retirement plan, and as a result there should be reasons other than
tax deferral for acquiring the Contract within an individual retirement 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 deferred annuity contracts and IRAs is not eligible for the reduced tax
rate applicable to long-term capital gains and qualifying dividends.
Under current Federal income tax law, a same-sex spouse is treated as a
non-spouse Beneficiary.
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 premium 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 advisor.
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
premium 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.
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It is conceivable that certain benefits or the charges for certain benefits
such as any guaranteed death 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 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 income tax penalty equal to 10% of the amount treated
as income. In general, however, there is no penalty on distributions:
. made on or after the taxpayer reaches age 59 1/2;
. made on or after the death of an Owner;
. attributable to the taxpayer's becoming disabled;
. made as part of a series of substantially equal periodic payments (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
. under certain immediate income annuities providing for substantially
equal payments made at least annually (Non-Qualified Contracts only).
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 advisor with regard to exceptions from the penalty tax.
INCOME PAYMENTS. Although tax consequences may vary depending on the
Annuity Option elected under an annuity contract, a portion of each Income
Payment is generally not taxed and the remainder is taxed as ordinary income.
The non-taxable portion of any Income 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 Income Payments, as
determined when Income Payments start. Once your investment in the Contract has
been fully recovered, however, the full amount of each Income Payment is
subject to tax as ordinary income.
If your Contract allows and you elect to apply less than the entire Account
Value of your Contract to an Annuity Option provided under the Contract
("partial annuitization"), an exclusion ratio will apply to the Income Payments
you receive, provided the Income Period is for 10 years or more, or for the
life of one or more individuals. Your after-tax Purchase Payment 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 advisor before you partially annuitize your Contract.
MEDICARE TAX. Beginning January 1, 2013, a new 3.8% Medicare contribution
tax will be imposed on the "net investment income" of certain individuals whose
income exceeds certain threshold amounts (Health Care and Education
Reconciliation Act of 2010). For purposes of this tax, net investment income
will include income from non-qualified annuity contracts (as well as interest,
dividends and certain other items).
The new 3.8% Medicare tax is imposed on the lesser of:
1. the taxpayer's "net investment income," (from non-qualified annuities,
interest, dividends, etc., offset by specified allowable deductions); or
2. the taxpayer's modified adjusted gross income in excess of a specified
income threshold ($250,000 for married couples filing jointly, $125,000 for
married couples filing separately and $200,000 otherwise).
"Net investment income" in item 1 does not include distributions from
tax-qualified plans (i.e., IRAs, Roth IRAs or arrangements described in Code
Sections 401(a), 403(a), 403(b), or 457(b)), but such income will increase
modified adjusted gross income in Item 2.
The IRS has issued proposed guidance regarding this income surtax. You
should consult your tax adviser regarding the applicability of this tax to
income you would receive under this annuity 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
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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 an Annuity Option,
they are taxed in the same way as Income Payments.
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 consequences to you that are not
discussed herein. An Owner contemplating any such transfer, assignment,
exchange or event should consult a tax advisor 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 advisor.
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.
TAXATION OF QUALIFIED CONTRACTS
The tax rules applicable to Qualified Contracts vary according to the type
of individual 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 Payment 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 ARRANGEMENTS (IRAS). IRAs, as defined in Section 408
of the Code, permit individuals to make annual contributions of up to the
lesser of the applicable dollar amount for the year (for 2013, $5,500 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%
Federal income tax penalty generally applies to distributions made before age
59 1/2, unless an exception applies. Traditional and Roth IRAs may not invest
in life insurance. The Contract may provide death benefits that could exceed
the greater of the premium paid or the account balance. The final RMD 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 RMD rules.
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 eligible retirement
plan. A rollover from, or conversion, of a non-Roth eligible retirement plan to
a Roth IRA is generally subject to tax, and other special rules apply. The
Owner may wish to consult a tax advisor 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% Federal income tax penalty 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% Federal income tax penalty may apply to amounts
attributable to a conversion from an eligible retirement plan if they are
distributed during the five taxable years beginning with the year in which the
conversion was made.
OTHER TAX ISSUES. IRAs have RMD rules that govern the timing and amount of
distributions. You should refer to your retirement plan, adoption agreement, or
consult a tax advisor 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.
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Income tax regulations regarding minimum distribution requirements affect
both deferred and income annuities. Generally, the value of all benefits under
a deferred annuity (including death benefits in excess of Account Value, as
well as all living benefits) must be added to the Account Value in computing
the amount required to be distributed over the applicable period.
The RMD 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. These
rules are not entirely clear, and you should consult with your own tax advisor
to determine whether your 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 an 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 advisor 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.
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 advisor 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 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 PAYMENT 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 advisor
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
withdrawals 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 advisor regarding the tax consequences
of purchasing an annuity contract and/or any proposed distribution,
particularly a partial distribution or election to annuitize.
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 advisor with respect to legislative developments and their effect
on the Contract.
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We have the right to modify the Contract in response to legislative changes
that could otherwise diminish the favorable tax treatment that annuity Owners
currently receive. We make no guarantee regarding the tax status of the
Contract and do not intend the above discussion as tax advice.
YOUR RIGHT TO CANCEL (FREE LOOK)
If you change your mind about owning the Contract, you can cancel it within
a certain time period after receiving it. This is known as a "free look." Not
all Contracts issued are subject to free look provisions under state law. We
ask that you submit your request to cancel in writing, signed by you, to us
(e.g., the Annuity Service Office) or to the agent who sold it. When you cancel
the Contract within this free look period, we will not assess a Withdrawal
Charge. Unless otherwise required by state law, you will receive whatever your
Contract is worth on the day that we receive your cancellation request. The
amount you receive may be more or less than your Purchase Payment depending
upon the Shield Options you allocated your Purchase Payment to during the free
look period. This means that you bear the risk of any decline in the Account
Value of your Contract during the free look period. We do not refund any
charges or deductions assessed during the free look period. In certain states,
we are required to give back your Purchase Payment if you decide to cancel your
Contract during the free look period.
OWNERSHIP PROVISIONS
OWNER. You, as the Owner, have all the interest and rights under the
Contract.
These rights include the right to:
(a) change the Beneficiary.
(b) change the Annuitant before the Annuity Date (subject to our
underwriting and administrative rules).
(c) assign the Contract (subject to limitation).
(d) change the Income Payment option before the Annuity Date.
(e) exercise all other rights, benefits, options and privileges permitted
by the Contract or us.
The Owner is as designated at the time the Contract is issued, unless
changed. You may change the Owner at any time. Any change of Owner is subject
to our underwriting requirements in effect at the time of the request. A change
of Owner will automatically revoke any prior designation of the Owner.
JOINT OWNER. The Contract can be owned by Joint Owners, limited to natural
persons. Either Joint Owner can exercise all rights under the Contract unless
you inform us otherwise as indicated on the Contract Schedule or in a Notice to
us. Upon the death of either Owner, the surviving Joint Owner will be the
primary Beneficiary, unless you inform us otherwise. Any other Beneficiary
designation will be treated as a contingent Beneficiary unless otherwise
indicated on the Contract Schedule or in a Notice to us.
ANNUITANT. The Annuitant is the natural person(s) on whose life we base
Income Payments. You can change the Annuitant at any time prior to the Annuity
Date, unless an Owner is not a natural person. Any reference to Annuitant
includes any joint Annuitant under an Annuity Option. The Owner and the
Annuitant do not have to be the same person except as required under certain
sections of the Code. Any change of the Annuitant is subject to our
underwriting requirements in effect at the time of the request.
BENEFICIARY. The person(s) or entity(ies) you name to receive a death
benefit payable under the Contract upon the death of the Owner or a Joint
Owner, or in certain circumstances, an Annuitant. The Beneficiary is named at
the time the Contract is issued unless changed at a later date. Unless an
irrevocable Beneficiary has been named, you can change the Beneficiary at any
time before you die by filing a Notice with us. If Joint Owners are named, and
unless you tell us otherwise, the surviving Joint Owner will be the primary
Beneficiary. Any other primary Beneficiary designation will be treated as the
contingent Beneficiary.
ASSIGNMENT. Our rights as evidenced by a Contract may not be assigned
without our written consent and is subject to our underwriting requirements.
You may not assign your rights under the Contract after the start of Income
Payments. In certain tax markets, assignment of the Contract is prohibited by
the Code. If the Contract is assigned absolutely, we will treat it as a change
of ownership and all rights will be transferred. We are not bound by any
assignment request unless it is in writing. We assume no responsibility for the
validity or effect of any assignment. We will not be liable for any payment or
other action we take in accordance with the Contract before we record the
assignment. Assignments, unless otherwise specified by the Owner, will take
effect on the date the
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notice of assignment is signed, subject to any payments made or actions taken
by us before a signed copy of the assignment form is received by us at our
Annuity Service Office. You should consult your tax advisor regarding the tax
consequences of an assignment. AN ASSIGNMENT MAY BE A TAXABLE EVENT.
ABANDONED PROPERTY REQUIREMENTS
Every state has unclaimed property laws that generally declare non-ERISA
("Employee Retirement Income Security Act of 1974") annuity contracts to be
abandoned after a period of inactivity of three to five years from the
contract's maturity date or the date the death benefit is due and payable. For
example, if the payment of a death benefit has been triggered, but, if after a
thorough search, we are still unable to locate the Beneficiary of the death
benefit, or the Beneficiary does not come forward to claim the death benefit in
a timely manner, the death benefit will be paid to the abandoned property
division or unclaimed property office of the state in which the Beneficiary or
you last resided, as shown on our books and records, or to our state of
domicile. (Escheatment is the formal, legal name for this process.) However,
the state is obligated to pay the death benefit (without interest) if your
Beneficiary steps forward to claim it with the proper documentation. To prevent
your Contract's proceeds from being paid to the state abandoned or unclaimed
property office, it is important that you update your Beneficiary designations,
including addresses, if and as they change. Please call 1-800-343-8496 to make
such changes.
SUSPENSION OF PAYMENTS OR TRANSFERS
We may be required to suspend or delay the payment of death benefits, the
calculation of income payments, withdrawals and transfers when we cannot obtain
an Index Value under the following circumstances:
(i) the NYSE is closed (other than customary weekend and holiday
closings);
(ii) trading on the NYSE is restricted;
(iii) an emergency exists such that we cannot value Investment Amounts; or
(iv) during any other period when a regulator by order, so permits.
WHEN WE CAN CANCEL YOUR CONTRACT
We may terminate your Contract by paying you the Account Value in one sum
if, prior to the Annuity Date the Minimum Account Value after any partial
withdrawal is less than $2,000 or any lower amount required by Federal tax
laws. Accordingly, no Contract will be terminated due solely to negative Index
Performance. We will only do so to the extent allowed by law. If we do so, we
will return the full Account Value. Federal tax law may impose additional
restrictions on our right to cancel your Traditional IRA or Roth IRA Contract.
We will not terminate any Contract if at the time the termination would
otherwise occur the guaranteed amount under any death benefit, is greater than
the Account Value. For all other Contracts, we reserve the right to exercise
this termination provision, subject to obtaining any required regulatory
approvals. State variations may apply.
THE INSURANCE COMPANY
METLIFE INSURANCE COMPANY OF CONNECTICUT ("MICC")
MICC is a stock insurance company chartered in 1863 in the state of
Connecticut and has been continuously engaged in the insurance business since
that time. It is licensed to conduct life insurance business in all states of
the United States, the District of Columbia, Puerto Rico, Guam, the U.S. and
British Virgin Islands and the Bahamas. MICC is a wholly-owned subsidiary of
MetLife, Inc., a publicly traded company. MetLife, Inc., through its
subsidiaries and affiliates, is a leading provider of insurance and other
financial services to individual and institutional customers.
MICC's Home Office is located at 1300 Hall Boulevard, Bloomfield,
Connecticut 06002-2910. The office that administers your Contract is located at
4700 Westown Parkway, Ste. 200, West Des Moines, Iowa 50266.
THE SEPARATE ACCOUNT
The assets of the Separate Account are held in our name on behalf of the
Separate Account and legally belong to us. We are obligated to pay all money we
owe under the Contracts--such as death benefits and Income
45
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. Amounts paid from the General Account are subject to the
financial strength and claims paying ability of MICC and our long term ability
to make such payments and are not guaranteed by any other party. 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. MICC is regulated
as an insurance company under state law, which includes, generally, limits on
the amount and type of investments in its General Account. However, there is no
guarantee that we will be able to meet our claims paying obligations; there are
risks to purchasing any insurance product.
MICC SEPARATE ACCOUNT SA
A Purchase Payment made to the Contract is allocated to the MICC Separate
Account SA (the "Separate Account"). We have exclusive and absolute ownership
and control of the assets of the Separate Account. It is a non-unitized
separate account. You do not share in the investment performance of assets
allocated to the Separate Account. All investment income, gains and losses,
whether or not realized, from assets allocated to the Separate Account are
borne by MICC. The obligations under the Contract are independent of the
investment performance of the Separate Account and are our obligations.
We will maintain in the Separate Account assets with an aggregate value at
least equal to the Contract reserves.
If the aggregate value of such assets in the Separate Account should fall
below such amount, we will transfer assets into the Separate Account so that
the value of the Separate Account's assets is at least equal to such amount.
Assets supporting reserves for annuity benefits under such contracts, in the
course of payment, will not be maintained in the Separate Account.
INVESTMENTS BY MICC
We must invest our assets according to applicable state laws regarding the
nature, quality and diversification of investments that may be made by life
insurance companies. In general, these laws permit investments, within
specified limits and subject to certain qualifications, in Federal, state and
municipal obligations, corporate bonds, preferred and common stocks, real
estate mortgages, real estate and certain other investments. Purchase Payments
made to these Contracts issued by MICC are invested in the MICC Separate
Account SA. The MICC Separate Account SA is a non-unitized Separate Account and
to the extent such assets are attributable to your Purchase Payment amount
invested in MICC Separate Account SA. Owners do not share in the investment
performance of assets allocated to the Separate Account. The obligations under
the Contract are independent of the investment performance of the Separate
Account and are the obligations of MICC.
ANNUAL STATEMENT
At least once each calendar year, we will send you a statement that will
show:
(i) your Account Value;
(ii) all transactions regarding your Contract during the year; and
(iii) the interest and the Investment Amount credited to your Contract.
Such statements will be sent to your last known address on our records. You
will have sixty (60) days from the date you receive such statement to inform us
of any errors, otherwise such statement will be deemed final and correct.
DISTRIBUTION OF THE CONTRACTS
MetLife Investors Distribution Company ("MLIDC") is the principal
underwriter and distributor of the securities offered through this prospectus.
MLIDC, which is our affiliate, also acts as the principal underwriter and
distributor of some of the variable annuity contracts and variable life
insurance policies we and our affiliated companies issue. We reimburse MLIDC
for expenses MLIDC incurs in distributing the Contracts (e.g., commissions
payable to the retail broker-dealers who sell the Contracts, including our
affiliated broker-dealers). MLIDC does not retain any fees under the Contracts.
We also pay amounts to MLIDC that may be used for its operating and other
expenses, including the following sales expenses: compensation and bonuses for
MLIDC's management team, advertising
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expenses, and other expenses of distributing the Contracts. MLIDC's management
team also may be eligible for non-cash compensation items that we may provide
jointly with MLIDC. Non-cash items include conferences, seminars and trips
(including travel, lodging and meals in connection therewith), entertainment,
merchandise and other similar items.
MLIDC's principal executive offices are located at 5 Park Plaza, Suite 1900,
Irvine, CA 92614. MLIDC is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as well as the securities commissions in the
states in which it operates, and is a member of the Financial Industry
Regulatory Authority ("FINRA"). FINRA provides background information about
broker-dealers and their registered representatives through FINRA BrokerCheck.
You may contact the FINRA BrokerCheck Hotline at 1-800-289-9999, or log on to
www.finra.org. An investor brochure that includes information describing FINRA
BrokerCheck is available through the Hotline or online.
Contracts are sold through Metropolitan Life Insurance Company ("MetLife")
licensed sales representatives who are associated with MetLife Securities, Inc.
("MSI"), our affiliate and a broker-dealer, and through New England
Financial(R) licensed sales representatives who are associated with New England
Securities Corporation ("NES"), also our affiliate and a broker-dealer. Both
broker-dealers are paid compensation for the promotion and sale of the
Contracts. New England Financial(R) is the service mark for New England Life
Insurance Company, Boston, MA, and related companies. The Contracts are also
sold through the registered representatives of our other affiliated
broker-dealers. MSI, NES and our affiliated broker-dealers are registered with
the SEC as broker-dealers under the Securities Exchange Act of 1934 and are
also members of FINRA. The Contracts may also be sold through other registered
broker-dealers. We also may sell the Contracts directly, without compensation,
to sales representatives, to employees, officers, directors, and trustees of
MetLife and its affiliated companies, and certain family members of the
foregoing, and to employees, officers, directors, trustees and registered
representatives of any broker-dealer authorized to sell the Contracts or any
bank affiliated with such a broker-dealer, and certain family members of the
foregoing. If consistent with applicable state insurance law, we may sell the
Contracts, without compensation, to MetLife or its affiliated companies for use
with deferred compensation plans for agents, employees, officers, directors,
and trustees of MetLife and its affiliated companies, subject to any
restrictions imposed by the terms of such plans, or to persons who obtain their
Contracts through a bank, advisor or consultant to whom they pay a fee for
investment or planning advice. Contracts also may be sold through the mail or
over the Internet.
There is no front-end sales load deducted from purchase payments to pay
sales commissions. Distribution costs are recovered through the charges and
deductions under the Contract. New England Financial(R) sales representatives
and MetLife sales representatives who are not in our MetLife Resources division
("non-MetLife Resources MetLife sales representatives") must meet a minimum
level of sales of proprietary products in order to maintain employment with us.
Sales representatives in our MetLife Resources division must meet a minimum
level of sales production in order to maintain employment with us.
New England Financial(R) sales representatives, non-MetLife Resources
MetLife sales representatives and MetLife Resources sales representatives
receive cash payments for the products they sell and service based upon a
'gross dealer concession' model. With respect to the Contract, the maximum
gross dealer concession is 5% of the Purchase Payment. Some sales
representatives may elect to receive a lower gross dealer concession when a
Purchase Payment is made, along with a trail gross dealer concession of up to
0.60% of the Account Value each year the Contract is in force for servicing the
contract. A gross dealer concession may also be paid when the Contract is
annuitized. The amount of this gross dealer concession, payable upon
annuitization, depends on several factors, including the number of years the
Contract has been in force. Compensation to the sales representative is all or
part of the gross dealer concession. Compensation to sales representatives in
the MetLife Resources division is based upon premiums and purchase payments
applied to all products sold and serviced by the representative. Compensation
to New England Financial(R) sales representatives and non-MetLife Resources
MetLife sales representatives is determined based upon a formula that
recognizes premiums and purchase payments applied to proprietary products sold
and serviced by the representative as well as certain premiums and purchase
payments applied to non-proprietary products sold by the representative.
Proprietary products are those issued by us or our affiliates. Because one of
the factors determining the percentage of a gross dealer concession that
applies to New England Financial(R) sales representatives and non-MetLife
Resources MetLife sales representative's compensation is sales of proprietary
products, these sales representatives have an incentive to favor the sale of
proprietary products. Because New England Financial(R) sales representatives
and non-MetLife Resources MetLife sales managers' compensation is based on the
sales made by the representatives they supervise, these sales managers also
have an incentive to favor the sales of proprietary products.
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New England Financial(R) sales representatives, non-MetLife Resources
MetLife sales representatives and MetLife Resources sales representatives and
their managers and the sales representatives and managers of our affiliates may
be eligible for additional cash compensation, such as bonuses, equity awards
(such as stock options), training allowances, supplemental salary, financial
arrangements, marketing support, medical and other insurance benefits, and
retirement benefits and other benefits based primarily on the amount of
proprietary products sold. Because additional cash compensation paid to New
England Financial(R) sales representatives and non-MetLife Resources MetLife
sales representatives and MetLife Resources sales representatives and their
managers and the sales representatives and their managers of our affiliates is
based primarily on the sales of proprietary products, New England Financial(R)
sales representatives and non-MetLife Resources MetLife sales representatives
and MetLife Resources sales representatives and their managers and the sales
representatives and their managers of our affiliates have an incentive to favor
the sale of proprietary products.
Sales representatives who meet certain productivity, persistency, and length
of service standards and/or their managers may be eligible for additional cash
compensation. Moreover, managers may be eligible for additional cash
compensation based on the sales production of the sales representatives that
the manager supervises.
Our sales representatives and their managers may be eligible for non-cash
compensation incentives, such as conferences, trips, prizes and awards. Other
non-cash compensation payments may be made for other services that are not
directly related to the sale of products. These payments may include support
services in the form of recruitment and training of personnel, production of
promotional services and other support services.
Other incentives and additional cash compensation provide sales
representatives and their managers with an incentive to favor the sale of
proprietary products. The business unit responsible for the operation of our
distribution system is also paid.
MLIDC also pays compensation for the sale of the Contracts by other
affiliated broker-dealers. The compensation paid to other affiliated
broker-dealers for sales of the Contracts is generally not expected to exceed,
on a present value basis, the aggregate amount of total compensation that is
paid with respect to sales made through New England Financial(R) and MetLife
representatives. (The total compensation includes payments that we make to our
business unit that is responsible for the operation of the distribution systems
through which the Contracts are sold.) These firms pay their sales
representatives all or a portion of the commissions received for their sales of
Contracts; some firms may retain a portion of commissions. The amount that
selling firms pass on to their sales representatives is determined in
accordance with their internal compensation programs. Those programs may also
include other types of cash and non-cash compensation and other benefits. Sales
representatives of other affiliated broker-dealers and their managers may be
eligible for various cash benefits and non-cash compensation (as described
above) that we may provide jointly with other affiliated broker-dealers.
Because of the receipt of this cash and non-cash compensation, sales
representatives and their managers of our other affiliated broker-dealers have
an incentive to favor the sale of proprietary products.
MLIDC may also enter into preferred distribution arrangements with certain
other affiliated selling firms such as Walnut Street Securities, Inc. and Tower
Square Securities, Inc. These arrangements are sometimes called "shelf space"
arrangements. Under these arrangements, MLIDC may pay separate, additional
compensation to the broker-dealer firm for services the selling firm provides
in connection with the distribution of the Contracts.
These services may include providing us with access to the distribution
network of the selling firm, the hiring and training of the selling firm's
sales personnel, the sponsoring of conferences and seminars by the selling
firm, or general marketing services performed by the selling firm. The selling
firm may also provide other services or incur other costs in connection with
distributing the Contracts.
MLIDC and, in certain cases, we have also entered into selling agreements
with unaffiliated selling firms for the sale of the Contracts. A portion of the
payments made to selling firms may be passed on to their sales representatives
in accordance with the selling firms' internal compensation programs. Those
programs may also include other types of cash and non-cash compensation and
other benefits.
We and MLIDC pay compensation to unaffiliated selling firms in the form of
commissions and may also provide certain types of non-cash compensation. The
maximum commission payable for Contract sales by selling firms is 6% of each
Purchase Payment. Some selling firms may elect to receive a lower commission
when a Purchase Payment is made, along with annual trail commissions up to 1%
of Account Value for so long as the Contract remains in effect or as agreed in
the selling agreement. We may also pay commissions when an Owner elects to
begin receiving regular income payments. MLIDC may also provide non-cash
compensation items that we may provide jointly with MLIDC. Non-cash items
include expenses for conference or seminar trips and certain gifts.
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With respect to the Contracts, the compensation paid to unaffiliated selling
firms is generally not expected to exceed, on a present value basis, the
aggregate amount of commission that is paid by MLIDC to affiliated firms.
ADDITIONAL COMPENSATION FOR SELECTED SELLING FIRMS. We and MLIDC have
entered into distribution arrangements with certain selected selling firms.
Under these arrangements we and MLIDC may pay additional compensation to
selected selling firms, including marketing allowances, introduction fees,
persistency payments, preferred status fees and industry conference fees.
Marketing allowances are periodic payments to certain selling firms, the amount
of which depends on cumulative periodic (usually quarterly) sales of our
insurance contracts (including the Contracts) and may also depend on meeting
thresholds in the sale of certain of our insurance contracts (other than the
Contracts). They may also include payments we make to cover the cost of
marketing or other support services provided for or by registered
representatives who may sell our products. Introduction fees are payments to
selling firms in connection with the addition of our products to the selling
firm's line of investment products, including expenses relating to establishing
the data communications systems necessary for the selling firm to offer, sell
and administer our products. Persistency payments are periodic payments based
on account values of our insurance contracts (including Account Values of the
Contracts) or other persistency standards. Preferred status fees are paid to
obtain preferred treatment of the Contracts in selling firms' marketing
programs, which may include marketing services, participation in marketing
meetings, listings in data resources and increased access to their sales
representatives. Industry conference fees are amounts paid to cover in part the
costs associated with sales conferences and educational seminars for selling
firms' sales representatives. We and MLIDC have entered into such distribution
agreements with our affiliates, Tower Square Securities, Inc. and Walnut Street
Securities, Inc., as well as unaffiliated selling firms identified on our
website. We and MLIDC may enter into similar arrangements with other
affiliates, such as MSI and New England Securities Corporation.
The additional types of compensation discussed above are not offered to all
selling firms. The terms of any particular agreement governing compensation may
vary among selling firms and the amounts may be significant. The prospect of
receiving, or the receipt of, additional compensation as described above may
provide selling firms and/or their sales representatives with an incentive to
favor sales of the Contracts over other annuity contracts (or other
investments) with respect to which selling firm does not receive additional
compensation, or lower levels of additional compensation. You may wish to take
such payment arrangements into account when considering and evaluating any
recommendation relating to the Contracts. For more information about any such
additional compensation arrangements, ask your registered representative.
(Visit our website at www.metlife.com/shield for a list of selling firms that
received compensation during the last calendar year, as well as the range of
additional compensation paid.)
THE FIXED ACCOUNT
We may offer our Fixed Account as a funding option. Please refer to your
Contract and Appendix D for more information.
RESTRICTIONS ON FINANCIAL TRANSACTIONS
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 request 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.
REQUESTS AND ELECTIONS
We will treat your request for a Contract transaction, or your submission of
the Purchase Payment, as received by us if we receive a request conforming to
our administrative procedures or the Purchase Payment at our Annuity Service
Office on any Business Day before 4:00 PM Eastern Standard Time. We will treat
your submission of the Purchase Payment as received by us if we receive it at
our Annuity Service Office (or a designee receives it in accordance with the
designee's administrative procedures) on any Business Day before 4:00 PM
Eastern Standard Time. If we receive the request, or if we (or our designee)
receive the Purchase Payment, on any Business Day on or after 4:00 PM Eastern
Standard Time, then the request or payment will be treated as received on the
next day. Our Annuity Service Office is located at P.O. Box 10366, Des Moines,
IA 50306-0366. If you send your Purchase Payment or transaction requests to an
address other than the one we have designated for receipt of such Purchase
Payment or requests, we may return the Purchase Payment to you, or there may be
a delay in applying the Purchase Payment or processing the transaction.
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Requests for service may be made through your registered representative:
. By telephone at (800) 343-8496, between the hours of 7:30AM and 5:30PM
Central Time Monday through Thursday and 7:30AM and 5:00PM Central
Time on Friday;
. In writing to our Annuity Service Office;
. By fax at (515) 457-4400; or
. By Internet at www.metlife.com.
Some of the requests for service that may be made by telephone or Internet
include transfers of your Account Value into Shield Option(s) or the Fixed
Account. We may from time to time permit requests for other types of
transactions to be made by telephone or Internet. All transaction requests must
be in a form satisfactory to us. Contact us for further information. Some
selling firms may restrict the ability of their registered representatives to
convey transaction requests by telephone or Internet on your behalf.
A request or transaction generally is considered in Good Order if it
complies with our administrative procedures and the required information is
complete and accurate. A request or transaction may be rejected or delayed if
not in Good Order. If you have any questions, you should contact us or your
registered representative before submitting the form or request.
We will use reasonable procedures such as requiring certain identifying
information, tape recording the telephone instructions, and providing written
confirmation of the transaction, in order to confirm that instructions
communicated by telephone, fax, Internet or other means are genuine. Any
telephone, fax or Internet instructions reasonably believed by us to be genuine
will be your responsibility, including losses arising from any errors in the
communication of instructions. As a result of this policy, you will bear the
risk of loss. If we do not employ reasonable procedures to confirm that
instructions communicated by telephone, fax or Internet are genuine, we may be
liable for any losses due to unauthorized or fraudulent transactions. All other
requests and elections under your Contract must be in writing signed by the
proper party, must include any necessary documentation and must be received at
our Annuity Service Office to be effective. If acceptable to us, requests or
elections relating to Beneficiaries and Ownership will take effect as of the
date signed unless we have already acted in reliance on the prior status. We
are not responsible for the validity of any written request or action.
Telephone and computer systems may not always be available. Any telephone or
computer system, whether it is yours, your service provider's, your agent's, or
ours, can experience outages or slowdowns for a variety of reasons. These
outages or slowdowns may delay or prevent our processing of your request.
Although we have taken precautions to help our systems handle heavy use, we
cannot promise complete reliability under all circumstances. If you experience
technical difficulties or problems, you should make your transaction request in
writing to our Annuity Service Office.
INQUIRIES. If you need more information, please contact our Annuity Service
Office at:
MetLife Investors Distribution Company
P.O. Box 10366
Des Moines, Iowa 50306-0366
(800) 343-8496
CONFIRMING TRANSACTIONS
We will send out written statements confirming that a transaction was
recently completed. Unless you inform us of any errors within 60 days of
receipt, we will consider these communications to be accurate and complete.
LEGAL PROCEEDINGS
In the ordinary course of business, MICC, 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.
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It is not possible to predict with certainty the ultimate outcome of any
pending legal proceeding or regulatory action. However, MICC 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 MICC to meet its
obligations under the contracts.
EXPERTS
Legal matters in connection with Federal laws and regulations affecting the
issue and sale of the Contracts described in this prospectus and the
organization of MICC, its authority to issue such Contracts under Connecticut
law and the validity of the forms of the Contracts under Connecticut law have
been passed on by legal counsel for MICC.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The consolidated financial statements, and the related financial statement
schedules, incorporated by reference in this Registration Statement from the
MetLife Insurance Company of Connecticut and subsidiaries' Annual Report on
Form 10-K for the year ended December 31, 2012, have been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in
their report, which is incorporated herein by reference. Such consolidated
financial statements and financial statement schedules have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The principal business address of Deloitte & Touche LLP is Two World
Financial Center, New York, New York 10281-1414.
STATE VARIATIONS
Contracts issued in your state may provide different features and benefits
from, and impose different costs than, those described in this prospectus
because of state law variations. These differences include, among other things,
free look rights, age issuance limitations, transfer rights and limitations,
the right to reject a Purchase Payment, the requirements for unisex annuity
rates and the general availability of certain features. However, please note
that the maximum fee is set forth in this prospectus. This prospectus describes
all the material features of the Contract. If you would like to review a copy
of the Contract and any endorsements, contact our Annuity Service Office.
ELECTRONIC DELIVERY
As Owner you may elect to receive electronic delivery of current
prospectuses related to the Contract and other Contract related documents.
Contact us at our website at www.metlife.com/shield for more information and to
enroll.
AMENDMENT OF THE CONTRACT
We reserve the right to amend the Contracts to comply with applicable
Federal or state laws or regulations. We will notify you in writing of any such
amendments.
MISSTATEMENT
We may require proof of the age or sex (where permitted) of the Annuitant,
Owner and/or the Beneficiary before making any payments under the Contract that
are measured by the Annuitant's, Owner's or Beneficiary's life. If the age or
sex of the measuring life has been misstated, the amount payable will be the
amount that would have been provided at the correct age and sex.
INFORMATION INCORPORATED BY REFERENCE
Under the Securities Act of 1933, MICC has filed with the SEC a registration
statement (the "Registration Statement") relating to the Contracts offered by
this prospectus. This prospectus has been filed as a part of the Registration
Statement and does not contain all of the information set forth in the
Registration Statement and the exhibits and reference is hereby made to such
Registration Statement and exhibits for further information relating
51
to MICC and the Contracts. MICC's annual report on Form 10-K was filed with the
SEC on March 22, 2013 via EDGAR File No. 033-03094. The Form 10-K contains
information for the period ended December 31, 2012, about MICC, including
consolidated audited financial statements for MICC's latest fiscal year. The
Form 10-K is incorporated by reference into this prospectus. In addition, all
documents subsequently filed by MICC pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended ("Exchange Act") prior
to the termination of the offering, are also incorporated by reference into
this prospectus. We are not incorporating by reference, in any case, any
documents or information deemed to have been furnished and not filed in
accordance with SEC rules.
There have been no material changes in MICC's affairs which have occurred
since the end of the latest fiscal year for which audited consolidated
financial statements were included in the latest Form 10-K or which have not
been described in a Form 10-Q or Form 8-K filed by MICC under the Exchange Act.
If requested, MICC will furnish, without charge, a copy of any and all of
the reports or documents that have been incorporated by reference into this
prospectus. You may direct your requests to MICC at, 1300 Hall Boulevard,
Bloomfield, Connecticut, 06002-2910. The telephone number 1-800-343-8496. You
may also access the incorporated reports and other documents at www.metlife.com.
MICC files periodic reports as required under the Exchange Act (including
Form 10-K, 10-Q and 8-K). You may also read and copy any materials that MICC
files with the SEC at the SEC's Public Reference Room at 100 F Street, N.E.,
Washington, DC 20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains
an Internet site that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC at
http://www.sec.gov.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
MICC's parent, MetLife has secured a financial institutions bond in the
amount of $50,000,000, subject to a $5,000,000 deductible. MetLife also
maintains directors' and officers' liability insurance coverage with limits of
$400 million under which MICC and MLIDC, as well as certain other subsidiaries
of MetLife, are covered. A provision in MetLife's by-laws provides for the
indemnification (under certain circumstances) of individuals serving as
directors or officers of certain organizations, including MICC and MLIDC.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling MICC
pursuant to the foregoing provisions, MICC has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is
therefore unenforceable.
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