Filed pursuant to
Rule 424(b) (3)
333-209163
BRIGHTHOUSE LIFE INSURANCE COMPANY
FIXED ANNUITY
(STRATEGIC VALUE ANNUITY)
The Brighthouse Life Insurance Company Fixed Annuity is a flexible premium
group deferred Annuity Contract (the "Contract" and/or "Certificates") which
provides a guaranteed fixed rate of return for Your investment. We offer the
Contract to employers for use with retirement Plans and programs that qualify
for favorable federal tax treatment. The Company no longer actively offers the
Contract to new purchasers, however, Contract Owners may be able to make
additional Purchase Payments and enroll new Participants in Plans funded by the
Contract. WHERE PERMITTED BY STATE LAW, WE RESERVE THE RIGHT TO RESTRICT
PURCHASE PAYMENTS INTO THE CONTRACT. If You Surrender Your Contract, Your Cash
Value may be subject to a Market Adjusted Value calculation and Surrender
charges.
This Contract is available to the following Plans: Sections 401, 403(a), 403(b)
and 457.
This prospectus explains:
o the Contract and Certificate;
o Brighthouse Life Insurance Company -- RISK (SEE PAGE 6);
o the interest rates;
o Surrenders and partial Surrenders;
o Surrender charges;
o Market Adjusted Value;
o death benefit;
o Annuity Payments;
o other aspects of the Contract.
The group Annuity Contracts may be issued to employers on an unallocated or
allocated basis. Under an unallocated Contract, Cash Value records are kept for
a Plan or group as a whole. Under an allocated Contract, Cash Value records are
kept for You as an individual. This Contract is issued by Brighthouse Life
Insurance Company. The Company is located at 11225 North Community House Road,
Charlotte, NC 28277. The telephone number is 1-800-842-9406. Brighthouse
Securities, LLC, 11225 North Community House Road, Charlotte, NC 28277, is the
principal underwriter and distributor of the Contracts.
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
OR ANY OTHER GOVERNMENT AGENCY.
PROSPECTUS DATED MAY 1, 2015 AS REVISED AND REPRINTED MAY 1, 2017
TABLE OF CONTENTS
PAGE
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Special Terms............................................... 3
Summary..................................................... 5
When a Market Adjusted Value Calculation and Surrender
Charges Apply-- General................................... 6
The Insurance Company -- Risk............................... 6
The Contract................................................ 7
Application and Purchase Payments......................... 7
Purchase Payments -- Section 403(b) Plan.................. 7
The Annuity Contract and Your Retirement Plan............... 8
Section 403(b) Plan Terminations.......................... 8
Other Plan Terminations................................... 8
Interest Periods............................................ 9
Establishment of Interest Rates........................... 9
Surrenders.................................................. 9
Transfers................................................... 10
Restrictions on Financial Transactions.................... 10
Loans....................................................... 10
Account Reduction Loans................................... 10
Section 403(b) Collateralized Loans....................... 11
Charges and Deductions...................................... 11
Account Reduction Loan Fees............................... 11
Surrender Charge.......................................... 12
Reductions of Charges..................................... 12
Contract Discontinuation and Market Adjusted Value........ 13
Market Adjusted Value Formula............................. 14
Example of Negative Market Adjusted Value:................ 14
Example of Positive Market Adjusted Value:................ 14
PAGE
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Premium Taxes............................................. 15
Death Benefit............................................... 15
Distribution Rules........................................ 15
Annuity Period.............................................. 15
Election of Maturity Date and Settlement Options.......... 15
Misstatement.............................................. 16
Change of Maturity Date or Annuity Option................. 16
Annuity Options........................................... 16
Annuity Payment........................................... 17
Death of Annuitant After the Maturity Date................ 17
Investments by the Company.................................. 18
Annual Statement............................................ 18
Amendment of the Contracts.................................. 18
Distribution of the Contracts............................... 18
Federal Tax considerations.................................. 20
Qualified Annuity Contracts............................... 20
Required Minimum Distributions............................ 22
Additional Information Regarding TSA (ERISA and
non-ERISA) 403(b)....................................... 23
Abandoned Property requirements............................. 27
Information Incorporated by Reference....................... 27
Experts..................................................... 28
Independent Registered Public Accounting Firm............. 28
Appendix A: Information Concerning Qualified Plans.......... A-1
Appendix B: What You Need To Know If You Are A Texas
Optional Retirement Program Participant................... B-1
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SPECIAL TERMS
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In this prospectus, the following terms have the indicated meanings:
ANNUITANT -- A person on whose life the Maturity Date depends and Annuity
Payments are made.
ANNUITY -- Payment of income for a stated period or amount.
ANNUITY PAYMENTS -- A series of periodic payments (a) for life; (b) for life
with a minimum number of payments; (c) for the joint lifetime of the Annuitant
and another person, and thereafter during the lifetime of the survivor; or (d)
for a fixed period.
ANNUITY PERIOD -- The period during which Annuity Payments are made.
APPROVED PRODUCTS -- Products approved by the Brighthouse Life Insurance
Company.
BENEFICIARY (IES) -- The person(s) or trustee designated to receive any
remaining contractual benefits in the event of a Participant's, Annuitant's or
Contract Owner's death, as applicable.
CASH SURRENDER VALUE -- The Cash Value less any amounts deducted upon a
withdrawal or Surrender, outstanding loans, if available under the Contract,
any applicable Premium Taxes or other Surrender charges not previously
deducted.
CASH VALUE -- The value of net Purchase Payments in Your Account or a
Participant's Individual Account less Surrenders.
CODE -- The Internal Revenue Code of 1986, as amended, and all related laws and
regulations, which are in effect during the term of this Contract.
COMPANY (WE, US, OUR) -- Brighthouse Life Insurance Company.
COMPETING FUND -- Any investment option under the Plan, which in Our opinion,
consists primarily of fixed income securities and/or money market instruments.
CONTRACT -- The Fixed Annuity Contract.
CONTRACT DATE -- The date on which the Contract is issued. For certain group
Contracts, it is the date on which the Contract becomes effective, as shown on
the specifications page of the Contract.
CONTRACT OWNER -- The person named in the Contract (on the specifications page,
which may be the Participant if so authorized). For certain group Contracts,
the Contract Owner is the trustee or other entity which owns the Contract. Any
reference in this prospectus to the Contract includes the underlying
Certificate. Certificates are issued to Participants under group allocated
Contracts.
CONTRACT VALUE -- The amount of all Purchase Payments, plus any applicable
credits, plus or minus any investment experience or interest.
CONTRACT YEAR -- A continuous twelve -month period beginning on the Contract
Date and each anniversary thereof. Contract Year also means certificate year.
DUE PROOF OF DEATH -- (a) A copy of a certified death certificate; (b) a copy
of a certified decree of a court of competent jurisdiction as to the finding of
death, (c) a written statement by a medical doctor who attended the deceased;
or (d) any other proof satisfactory to Us.
ERISA -- The Employee Retirement Income Security Act of 1974, as amended, and
all related laws and regulations which are in effect during the term of this
Contract.
EXCESS PLAN CONTRIBUTIONS -- Plan contributions including excess deferrals,
excess contributions, excess aggregate contributions, excess annual additions,
and excess nondeductible contributions that require correction by the Plan
Administrator, excluding reversions upon Plan Termination.
FIXED ANNUITY -- An Annuity with payments that remain fixed as to dollar amount
throughout the payment period.
GENERAL ACCOUNT -- Comprised of the Company's assets, other than assets in any
separate accounts it may maintain.
GUARANTEE PERIOD -- The period during which a Guaranteed Interest Rate is
credited.
GUARANTEED INTEREST RATE -- The annual effective interest rate credited during
the Guarantee Period.
3
HOME OFFICE -- The principal executive offices of Brighthouse Life Insurance
Company located at 11225 North Community House Road, Charlotte, NC 28277.
INDIVIDUAL ACCOUNT -- Cash Value credited to a Participant or Beneficiary under
this Contract.
MARKET ADJUSTED VALUE -- The current value as of the date of discontinuance and
also reflects the relationship, at the time of Surrender, between the
then-current Guaranteed Interest Rate for a Guarantee Period and the Guaranteed
Interest Rate that applies to Your Contract.
MATURITY DATE -- The date on which the Annuity Payments are to begin.
PARTICIPANT -- An eligible person who is a member in Your Plan.
PLAN -- The Plan or the arrangement used in a retirement plan or program
whereby the Purchase Payments and any gains are intended to qualify under
Sections 401, 403(a), 403(b) or 457 of the Code.
PLAN ADMINISTRATOR -- The corporation or other entity so specified on the
application or purchase order. If none is specified, the Plan Trustee is the
Plan Administrator.
PLAN TERMINATION -- Termination of Your Plan, including partial Plan
Termination, as determined by Us.
PLAN TRUSTEE -- The trustee specified in the Contract specifications.
PREMIUM TAX -- The amount of tax, if any, charged by the state or municipality.
Generally, We will deduct any applicable Premium Tax from the Cash Value either
upon Surrender, annuitization, death, or at the time a Purchase Payment is
made, but no earlier than when We have the liability under state law.
PURCHASE PAYMENTS -- The premium payments applied to the Contract less any
Premium Taxes if applicable.
QUALIFIED CONTRACT -- A Contract used in a retirement Plan or program that is
intended to qualify under Sections 401(a), 401(k), 403(a), 403(b), or 457(b) of
the Code.
SEPARATION FROM SERVICE -- The termination or permanent severance of a
Participant's employment with the employer for any reason that is a Separation
from Service within the meaning of the Plan. However, termination of a
Participant's employment with the employer as a result of the sale of all or
part of the employer's business (including divisions or subsidiaries of the
employer) will not be considered Separation from Service unless the Participant
actually loses his/her job or is not immediately included in a pension or
profit sharing plan of the successor employer.
SURRENDER -- Funds distributed from the Contract or certificate for retirement,
Separation from Service, loans, hardship withdrawals, death, disability, return
of Excess Plan Contributions, payment of certain Plan expenses as mutually
agreed upon, Contract discontinuance, or transfers to other Plan funding
vehicles. Such Surrender may or may not be subject to Surrender charges and the
Market Adjusted Value calculations.
VALUATION DATE -- A date on which the Contract is valued.
WRITTEN REQUEST -- Written instructions or information sent to Us in a form and
content satisfactory to Us and received in good order at Our Home Office.
YOU, YOUR -- In this prospectus, depending on the context, "You" is the owner
of the Contract or the Participant or Annuitant for whom money is invested
under certain group arrangements. In cases where We are referring to giving
instructions or making payments to Us for qualified Contracts "You" means the
trustee or employer. Under certain group arrangements where the Participant or
Annuitant is permitted to choose among investment options under the Plan, "You"
means the Participant or Annuitant who is giving Us instructions about the
investment options under the Plan. In connection with a Plan Termination, as of
the date of the Contract or cash distribution under such Plan Termination,
"You" means the Participant who has received such Contract or cash
distribution.
YOUR ACCOUNT -- Cash Value attributed to Purchase Payments plus interest
credited to You under this Contract.
4
SUMMARY
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The Brighthouse Life Insurance Company Fixed Annuity (also referred to as
Strategic Value Annuity) is a flexible premium group deferred Fixed Annuity
Contract available to certain types of retirement Plans and programs that
receive favorable tax treatment under the Code such as qualified pension and
profit sharing Plans, tax deferred annuity Plans (for public school teachers
and employees and employees of certain other tax-exempt and qualifying
employers) and deferred compensation Plans of state and local governments.
This prospectus describes both the Contract and the Certificate. The Contract
and Certificate have similar features and provisions. An employer as the
Contract Owner purchases the Contract to fund its qualified Plan. The employer
can purchase the Contract on an allocated or unallocated basis. If the employer
purchases the Contract on an allocated basis, the employee participating in the
qualified Plan ("Participant") will be issued a Certificate. Generally,
allocated contracts are issued to tax deferred annuity Plans. If the employer
purchases the Contract on an unallocated basis, the employer will be
responsible for any accounts for the Participant and no Certificates will be
issued by Us. Generally, unallocated contracts are issued to qualified pension
and profit sharing Plans and deferred compensation Plans of state and local
governments.
The Contract is offered by Brighthouse Life Insurance Company, a subsidiary of
MetLife, Inc. The Contract is available only in those states where it has been
approved for sale.
We deposit Your Purchase Payments in Our General Account. For each Purchase
Payment, We establish an interest rate "period" and guarantee a rate of
interest for that Purchase Payment for twelve months. At the end of the twelve
months, We will establish a renewal rate of interest. (See "Interest Periods").
You may Surrender Your Contract at any time before the Maturity Date, but the
Cash Value may be subject to a Surrender charge and/or Our Market Adjusted
Value calculations. You may also take partial Surrenders from Your Contract;
partial Surrenders may be subject to a Surrender charge. However, if Your
Contract was issued as part of a tax deferred annuity Plan, deferred
compensation Plan or combined qualified Plan/tax deferred annuity Plan, You or
a Participant, if authorized, may take partial Surrenders after the first
Contract/Certificate Year annually of up to 10% of the Cash Value of Your
Account/Individual Account as of the first Valuation Date of any given
Contract/Certificate Year without the imposition of a Surrender charge. We may
waive Surrender charges in certain instances. (See "Surrenders"). We also may
deduct any applicable Premium Taxes from the amounts You Surrender. A
Participant may be subject to income tax and a 10% Federal income tax penalty
if he or she is younger than 59 1/2 at the time of the full or partial
Surrender, and the full or partial Surrender may also be subject to income tax
withholding. (See "Federal Tax Considerations").
The Market Adjusted Value calculations reflect the relationship between the
interest rate on new deposits for this class of contracts on the date of
Surrender and the interest rate credited to amounts in Your Contract on the
date of Surrender. The Company has no specific formula for determining initial
interest rates or renewal interest rates. However, such determination will
generally reflect interest rates available on the types of debt instruments in
which the Company intends to invest the amounts invested in the Contract. In
addition, the Company's management may also consider various other factors in
determining these rates for a given period, including regulatory and tax
requirements; sales commission and administrative expenses borne by the
Company; general economic trends; and competitive factors. (See "Investments by
the Company".) It is possible that the amount You receive upon Surrender may be
less than Your Purchase Payments if interest rates increase. It is also
possible that if interest rates decrease, the amount You receive upon Surrender
may be greater than Your net Purchase Payments plus accrued interest. On the
Maturity Date You specified, the Company will make either a lump sum payment or
start to pay a series of payments based on the Annuity options You select. (See
"Annuity Period").
If a Participant dies before the Maturity Date, the Contract provides for a
death benefit which is the Cash Value of the Participant's Individual Account,
less any applicable Premium Tax as of the date We receive Due Proof of Death.
(See "Death Benefit".)
We will deduct any applicable Premium Taxes from Cash Value either upon death,
Surrender, annuitization, or at the time You make a Purchase Payment to the
Contract. (See "Surrenders Premium Taxes".)
The terms and conditions of the Plan govern what is available to Participants.
Participants should carefully consider the features of their employer's Plan,
which may be different from the Contract and Certificate described in this
prospectus. In addition, certain features described in this prospectus may vary
from Your Contract because of differences in applicable state law.
5
We offer a variety of fixed and variable Annuity contracts. They offer
features, including variable investment options, fees and/or charges that are
different from those described in this prospectus. Upon request, Your agent can
provide You with more information about those Contracts.
WHEN A MARKET ADJUSTED VALUE CALCULATION AND SURRENDER CHARGES APPLY-- GENERAL
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If Your Contract Value is subject to both a Market Adjusted Value calculation
and a Surrender charge, the Market Adjusted Value calculation will be applied
first. A Surrender charge will generally apply if You make a partial or full
surrender of Your Contract. However, a surrender charge will not be applied to
transfers from Your Contract made to Approved Products within Your Plan. If You
make a transfer from Your Contract to Approved Products not issued by Us You
will be subject to Surrender charges. (See "Surrenders.") A Market Adjusted
Value calculation will generally apply to Contract discontinuations. (See
"Contract Discontinuation and Market Adjusted Value.")
THE INSURANCE COMPANY -- RISK
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Brighthouse Life Insurance Company is a stock life insurance company originally
chartered in Connecticut in 1863 and currently subject to the laws of the State
of Delaware. The Company was previously known as MetLife Insurance Company of
Connecticut but changed its name to MetLife Insurance Company USA when it
changed its state of domicile from Connecticut to Delaware on November 14,
2014. We changed our name to Brighthouse Life Insurance Company on March 6,
2017. The Company is licensed to conduct business in all states of the United
States, except New York, and in the District of Columbia, Puerto Rico, Guam,
the U.S. and British Virgin Islands and the Bahamas. The Company is a
subsidiary of, and controlled by, MetLife, Inc., a publicly-traded company (see
"Planned Separation from MetLife, Inc." below). MetLife, Inc., through its
subsidiaries and affiliates, is a leading provider of insurance and financial
services to individuals and institutional customers.
PLANNED SEPARATION FROM METLIFE, INC.
In January 2016, MetLife, Inc. announced its plan to pursue the separation of a
substantial portion of its U.S. retail business. In preparation for the planned
separation, in August 2016 MetLife, Inc. formed a new, wholly-owned Delaware
holding company, Brighthouse Financial, Inc. (Brighthouse Financial), which
filed a registration statement on Form 10 (the Form 10) with the SEC in October
2016, as amended in December 2016, reflecting MetLife Inc.'s current initiative
to conduct the separation in the form of a spin-off.
To effect the separation, first, MetLife Inc. expects to undertake the
restructuring described in more detail in the Form 10. The restructuring would
result in future Brighthouse Financial subsidiaries, including the Company,
being wholly-owned subsidiaries of Brighthouse Financial. Following the
restructuring, MetLife, Inc. would distribute at least 80.1% of Brighthouse
Financial's common stock to MetLife, Inc.'s shareholders (the Distribution),
and Brighthouse Financial would become a separate, publicly traded company. The
separation remains subject to certain conditions including, among others,
obtaining final approval from the MetLife, Inc. board of directors, receipt of
a favorable IRS ruling and an opinion from MetLife Inc.'s tax advisor regarding
certain U.S. federal income tax matters, receipt of the approval of state
insurance and other regulatory authorities and an SEC declaration of the
effectiveness of the Form 10.
Following the Distribution, if it occurs, the Company will be a wholly-owned
subsidiary of, and ultimately controlled by, Brighthouse Financial. MetLife,
Inc. currently plans to dispose of its remaining shares of Brighthouse
Financial common stock as soon as practicable following the Distribution, but
in no event later than five years after the Distribution. For more information
about Brighthouse Financial and the Distribution, please see the most recent
amendment to Brighthouse Financial's Form 10 (SEC File No. 001-37905),
available via the SEC's EDGAR system on its website at
https://www.sec.gov/edgar/searchedgar/companysearch.html.
No assurances can be given regarding the final form the Distribution (or any
alternative separation transaction) may take or the specific terms thereof, or
that the Distribution (or any other form of separation) will in fact occur.
However, any separation transaction will not affect the terms or conditions of
your variable Contract. The Company will remain fully responsible for its
contractual obligations to variable Contract owners, and you should carefully
consider the potential impact of any separation transaction that may occur on
the Company's financial strength and claims-paying ability.
6
Benefit amounts are paid from Our General Account and are subject to the
financial strength and claims paying ability of the Company and Our long term
ability to make such payments and are not guaranteed by Our parent company,
MetLife, Inc., or 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. The Company's General Account is not
segregated or insulated from the claims of the Company's creditors. The General
Account consists of securities and other investments that may decline in value
during periods of adverse market conditions. We are 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. The Company's financial statements include a
further discussion of risks inherent within the Company's General Account
investments. (See "Information Incorporated by Reference"). You may Surrender
Your Contract at any time before the Maturity Date, but the Cash Value may be
subject to a Surrender charge and/or a Market Adjusted Value calculation that
may increase or decrease the amount payable upon Surrender.
The Company's Home Office is located at 11225 North Community House Road,
Charlotte, NC 28277. The office that administers Your Contract is located at
4700 Westown Parkway, Ste. 200, West Des Moines, Iowa 50266.
THE CONTRACT
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APPLICATION AND PURCHASE PAYMENTS
You may purchase a Contract through an authorized agent. The agent will send
Your completed application or order to purchase, along with a minimum Purchase
Payment of at least $1,000 for the Contract and $20 for each Certificate to Us,
and We will determine whether to accept or reject Your application or order to
purchase. If We accept Your application or order to purchase, one of Our
legally authorized officers will prepare and execute a Contract within two
business days after We receive that application or order. We then will send the
Contract to You through Your sales representative.
We may:
o refuse to accept total Purchase Payments over $3 million;
o contact You or Your agent if the application or order form is not
properly completed; and/or
o return Your entire application or order form and Purchase Payment
within thirty days if not properly completed.
We sell the Contract for use with certain qualified retirement Plans. Please be
aware that the Contract includes features such as tax deferral on accumulated
earnings. Qualified retirement Plans provide their own tax deferral benefit.
Please consult a tax adviser to determine whether this Contract is an
appropriate investment for You. See Appendix A for information concerning
qualified Plans.
You may make additional Purchase Payments of at least $1,000 ($20 per
Certificate) at any time before the Maturity Date. We will apply any subsequent
net Purchase Payment You make within two Business Days after We receive it. If
payments on your behalf are not made in a timely manner, there may be a delay
in when amounts are credited.
We accept Purchase Payments made by check or cashier's check. We do not accept
cash, money orders or traveler's checks. We reserve the right to refuse
Purchase Payments made via a personal check in excess of $100,000. Purchase
Payments over $100,000 may be accepted in other forms, including but not
limited to, EFT/wire transfers, certified checks, corporate checks, and checks
written on financial institutions. The form in which We receive a Purchase
Payment may determine how soon subsequent disbursement requests may be
fulfilled.
PURCHASE PAYMENTS -- SECTION 403(B) PLAN
The Internal Revenue Service ("IRS") announced regulations affecting Section
403(b) Plans and arrangements which are generally effective January 1, 2009. As
part of these regulations, employers need to meet certain requirements in order
for their employees' Annuity contracts that fund these programs to retain a tax
deferred status under Section 403(b). Prior to the new rules, transfers of one
Annuity contract to another would not result in a loss of tax deferred status
under Section 403(b) under certain conditions (so-called "90-24 transfers").
The new regulations have
7
the following effect regarding transfers: (1) a newly issued contract funded by
a transfer which is completed after September 24, 2007, is subject to the
employer requirements referred to above; (2) additional Purchase Payments made
after September 24, 2007, to a contract that was funded by a 90-24 transfer on
or before September 24, 2007, may subject the contract to this employer
requirement.
In consideration of these regulations, We have determined to only make
available the Contract/Certificate for purchase (including transfers) where
Your employer currently permits salary reduction contributions to be made to
the Contract/Certificate.
If Your Contract/Certificate was issued previously as a result of a 90-24
transfer completed on or before September 24, 2007, and You have never made
salary reduction contributions into Your Contract/Certificate, We urge You to
consult with Your tax advisor prior to making additional Purchase Payments.
THE ANNUITY CONTRACT AND YOUR RETIREMENT PLAN
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If You participate through a retirement Plan or other group arrangement, the
Contract may provide that all or some of Your rights or choices as described in
this prospectus are subject to the Plan's terms. For example, limitations on
Your rights may apply to Purchase Payments, withdrawals, transfers, loans, the
death benefit and pay-out options.
The Contract may provide that a Plan administrative fee will be paid by making
a withdrawal from the Contract/Certificate Cash Value. Also, the Contract may
require that You or Your Beneficiary obtain a signed authorization from Your
employer or Plan Administrator to exercise certain rights. We may rely on Your
employer's or Plan Administrator's statements to Us as to the terms of the Plan
or Your entitlement to any amounts. We are not a party to Your employer's
retirement Plan. We will not be responsible for determining what Your Plan
says. You should consult the Contract and Plan document to see how You may be
affected. If You are a Texas Optional Retirement Program Participant, please
see Appendix B for specific information which applies to You.
SECTION 403(B) PLAN TERMINATIONS
Upon a Section 403(b) plan termination, Your employer is required to distribute
Your Plan benefits under the Contract to You. Your employer may permit You to
receive Your distribution of Your 403(b) plan benefit in cash or in the form of
the Contract.
If You elect to receive Your full distribution in cash, the distribution is a
withdrawal under the Contract and any amounts withdrawn are subject to a Market
Adjusted Value calculation and applicable Surrender charges. Outstanding loans,
if available, will be satisfied (paid) from Your cash benefit prior to its
distribution to You. In addition, Your cash distributions are subject to
withholding, ordinary income tax and applicable Federal income tax penalties.
(See "Federal Tax Considerations.") If Your employer chooses to distribute cash
as the default option, Your employer may not give You the opportunity to
instruct the Company to make, at a minimum, a direct transfer to another
funding option or annuity contract issued by Us or one of Our affiliates which
may avoid a Surrender charge. In that case, You will receive the net cash
distribution, less any applicable Market Adjusted Value calculation, Surrender
charge and withholding.
If You receive the distribution in the form of the Contract. We will continue
to administer the Contract according to its terms. However in that case, You
may not make any additional Purchase Payments or take any loans. In addition
the Company will rely on You to provide certain information that would
otherwise be provided to the Company by the employer or Plan Administrator. The
employer may choose distribution of the Contract as the default option. The
employer may not choose distribution of a Contract as a default option when
that Contract is an investment vehicle for a Section 403(b) ERISA plan.
OTHER PLAN TERMINATIONS
Upon termination of a retirement plan that is not a Section 403(b) plan, Your
employer is generally required to distribute Your Plan benefits under the
Contract to You.
This distribution is in cash. The distribution is a withdrawal under the
Contract and any amounts withdrawn are subject to a Market Adjusted Value
Calculation and any applicable Surrender charges. Outstanding loans, if
available, will be satisfied (paid) from Your cash benefit prior to its
distribution to You. In addition, Your cash distributions are subject to
withholding, ordinary income tax and applicable federal income tax penalties.
(See "Federal Tax Considerations.")
8
Surrender charges will be waived if the net distribution is made under the
exceptions listed in the "Surrenders" section of the prospectus. However, Your
employer may not give You the opportunity to instruct the Company to make, at a
minimum, a direct transfer to another funding option or annuity contract issued
by Us or one of Our affiliates which may avoid a surrender charge. In that
case, You will receive the net cash distribution, less any applicable Market
Adjusted Value Calculation, Surrender charge and withholding.
INTEREST PERIODS
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We deposit each net Purchase Payment (i.e., a Purchase Payment less any
applicable Premium Tax charge) in Our General Account where We credit the
payment with interest daily at an effective annual interest rate between 1.0%
and 3.0% for both allocated Contracts and unallocated Contracts, depending on
applicable states' statutory minimum requirements. We may, however, in Our sole
discretion, credit interest above the statutory minimum requirements. The
actual minimum interest rate for Your Contract will be on the Contract
specifications page. This rate will not change for the life of the Contract and
will apply to any Certificates issues under the Contract.
The amount of interest We credit to a particular net Purchase Payment varies
with that Purchase Payment's interest rate "period". We establish an interest
rate "period" for each net Purchase Payment, and guarantee that rate for twelve
months. At the end of that twelve-month Guarantee Period, We will determine and
credit a renewal interest rate. We guarantee that renewal rate until the end of
the current calendar year. After that, We will declare the second and all
future renewal rates each subsequent January 1 and guarantee such rates through
December 31 of each year.
ESTABLISHMENT OF INTEREST RATES
When You purchase Your Contract, You will know the initial interest rate for
Your Purchase Payment. The Company has no specific formula for determining
interest rates in the future. The interest rates will be declared from time to
time as market conditions dictate. (See "Investments by the Company"). The
Company may consider various factors in determining interest rates for a given
period, including regulatory and tax requirements, sales commissions,
administrative expenses, general economic trends, and competitive factors. THE
COMPANY'S MANAGEMENT WILL MAKE THE FINAL DETERMINATION AS TO ANY DECLARED
INTEREST RATES AND ANY INTEREST IN EXCESS OF THE MINIMUM INTEREST RATE ALLOWED
UNDER STATE LAW. THE COMPANY CANNOT PREDICT NOR GUARANTEE THE RATES OF ANY
FUTURE DECLARED INTEREST IN EXCESS OF THE MINIMUM RATE.
SURRENDERS
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There are two sets of rules when considering Surrenders or partial Surrenders
from Your Contract/Certificate. The first are rules and procedures that apply
to Surrenders and partial Surrenders under the Contract/Certificate; We discuss
these provisions in this prospectus. The second are rules specific to Your
Plan. Please consult Your Plan for information as to those provisions.
The Contract/Certificate allows You to make a full or partial Surrender by
Written Request before the Maturity Date, subject to the Surrender charges and
in some instances, adjusted market value calculations. In addition,
Participants, if so authorized, may make partial Surrenders. We may discontinue
the Contract or terminate a Participant's Individual Account under certain
circumstances.
We will determine Your Cash Surrender Value (or Cash Surrender Value in an
Individual Account) as of the next Valuation Date following Our receipt of a
Written Request by You or the Participant, if so authorized. We may defer
payment of any Surrender up to six months from the date We receive Your notice
of Surrender, or such lesser period if required by state law. State law
requires that if We defer payment for more than 30 days, We will pay the state
required annual interest rate on the amount that We defer.
For the purposes of processing partial Surrenders, We will take the amount
Surrendered from the most recent "period" first, and then from each subsequent
"period" in descending order on a last-in, first out basis. Upon request, We
will inform You of the amount payable upon a full or partial Surrender. Any
full or partial Surrender may be subject to ordinary income tax and, if a
Participant is younger than age 59 1/2 at the time of the full or partial
Surrender, a 10% federal income tax penalty may apply. A full or partial
Surrender may also be subject to income tax withholding. A Participant may not
be able to take partial Surrenders from his or her Individual Account before
age 59 1/2. A Participant should discuss his or her options with a qualified
tax advisor. (See "Federal Tax Considerations".)
9
We may withhold payment of Cash Surrender Value or a Participant's loan
proceeds if any portion of those proceeds would be derived from a Contract
Owner's check that has not yet cleared (i.e., that could still be dishonored by
Your banking institution). We may use telephone, fax, internet or other means
of communication to verify that payment from the Contract Owner's check has
been or will be collected. We will not delay payment longer than necessary for
Us to verify that payment has been or will be collected. Contract Owners may
avoid the possibility of delay in the disbursement of proceeds coming from a
check that has not yet cleared by providing Us with a certified check.
TRANSFERS
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You may transfer amounts from this Contract/Certificate to Approved Products
within Your Plan and to Approved Products not issued by Us. If You transfer
Cash Value to Approved Products not issued by Us, Your transfers may not exceed
20% per Contract/Certificate Year of the Cash Value valued on each
Contract/Certificate Year anniversary. It is important to note that it will
take over 10 years (assuming no additional Purchase Payments or transfers into
the Contract/Certificate and discounting any accrued interest) to make a
complete transfer of your balance from the Contract/Certificate to Approved
Products not issued by Us because of the transfer allowance restriction
indicated above. This is because the 20% transfer allowance is based on a
declining Cash Value in the Contract/Certificate rather than withdrawals based
upon a fixed number of years. For example (based on the assumptions above), if
your initial Cash Value in the Contract/Certificate is $100, the 20% transfer
allowance only allows you to transfer up to $20 that Contract/Certificate Year.
If you transfer the maximum transfer allowance that Contract/Certificate Year,
you may only transfer up to $16 the following Contract/Certificate Year based
on the 20% transfer allowance of the $80 Cash Value remaining in the
Contract/Certificate for such Contract/Certificate Year. It is important to
consider when deciding to invest in the Contract/Certificate whether this 20%
transfer allowance restriction fits your risk tolerance and time horizon.
We reserve the right to modify the amount available for transfer to Approved
Products and to products not issued by Us.
If amounts are transferred from this Contract/Certificate to Approved Products
not issued by Us, no transfers will be allowed directly into any Competing
Fund, unless it is a benefit responsive distribution.
Amounts previously transferred from this Contract/Certificate to an Approved
Product or Approved Product not issued by Us may not be transferred back into
this Contract/Certificate for a period of at least 3 months from the date of
transfer.
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Federal laws designed to counter terrorism and prevent money laundering might,
in certain circumstances, require Us to block a Contract Owner's ability to
make certain transactions and thereby refuse to accept any request for
transfers, withdrawals, Surrenders, or death benefits, until the instructions
are received from the appropriate regulator. We may also be required to provide
additional information about You and Your Contract to government regulators.
LOANS
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ACCOUNT REDUCTION LOANS
We administer loan programs made available through Plans or group arrangements
on an account reduction basis if permitted by Your Plan. If the loan is in
default and has been reported to the IRS as income but not yet offset, loan
repayments will be posted as after-tax contributions. Loan amounts will be
taken from amounts that are vested according to Your Plan or group arrangement
on a pro-rata basis from the source(s) of money the Plan or group arrangement
permits to be borrowed (e.g., money contributed to the Plan or group
arrangement through salary reduction, elective deferrals, direct transfers,
direct rollovers and employer contributions), then, unless We are directed
otherwise, on a pro-rata basis from Your Contract's Cash Value and any other
Plan funding vehicles (that We have approved) in which You then have a balance
consisting of these sources of money. Loan repayment amounts will be posted
back to the original money sources used to make the loan, if the loan is in
good standing at the time of repayment. Loan repayments will be allocated on a
pro-rata basis into the Contract and other Plan funding vehicles
10
according to Your allocation schedule for future contributions. Loan repayment
periods, repayment methods, interest rate, default procedures, tax reporting
and permitted minimum and maximum loan amounts will be disclosed in the loan
agreement documents. There may be initiation and maintenance fees associated
with these loans.
SECTION 403(B) COLLATERALIZED LOANS
If Your employer's Plan and Section 403(b) Contract permits loan, such loans
will be made only from any Cash Value and only up to the IRS Code limit
(currently $50,000). In that case, We credit Your Cash Value up to the amount
of the outstanding loan balance with a rate of interest that is less than the
interest rate We charge for the loan. Current levels of interest rates depend
on a number of factors and are not capped under Your Contract. To find out our
current rate of interest, call us at 1-800-842-9406.
The Code and applicable income tax regulations limit the amount that may be
borrowed from Your Contract and all of Your employer Plans in the aggregate and
also require that loans be repaid, at a minimum, in scheduled level payments
over a proscribed term.
Your employer's Plan and Contract will indicate whether loans are permitted.
The terms of the loan are governed by the Contract and loan agreement. Failure
to satisfy loan limits under the Code or to make any scheduled payments
according to the terms of Your loan agreement and federal tax law could have
adverse tax consequences. Consult Your tax advisor and read Your loan agreement
and Contract prior to taking any loan.
CHARGES AND DEDUCTIONS
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We will deduct the charges described below to cover Our costs and expenses, the
services provided, and Our risks assumed under the Contracts. We incur certain
costs and expenses for the distribution and administration of the Contract and
for providing the benefits payable thereunder. Our administrative services and
risks may include:
o processing applications for and issuing the Contracts and Certificates
thereunder;
o maintaining Contract Owner and Participant records;
o administering Annuity Payments;
o furnishing accounting services;
o reconciling and depositing cash receipts;
o providing Contract confirmations and periodic statements;
o providing toll-free inquiry services; and
o the risk that Our costs in providing the services will exceed Our
revenues from Contract charges (which cannot be changed).
The amount of the charge may not necessarily correspond to the costs associated
with providing the services or benefits stated in the Contract. We may realize
a profit on one or more of the charges, and may use any such profit for any
corporate purpose.
ACCOUNT REDUCTION LOAN FEES
We make available account reduction loans. If Your Plan or group of which You
are a Participant or member permits account reduction loans, and You take an
account reduction loan, there is a $75 account reduction loan initiation fee.
This fee is paid from the requested loan principal amount. There is also a $50
annual maintenance fee per loan outstanding. Either or both fees may be waived
for certain groups.
11
SURRENDER CHARGE
We do not assess front-end sales charges. We may, however, assess a Surrender
charge on full and partial Surrenders made before the end of the eighth
Contract/Certificate Year. The Surrender charge for an allocated Contract is
calculated based on the age of each Certificate. The Surrender charge for an
unallocated Contract is calculated based on the age of the Contract. The
maximum Surrender charge is computed as a percentage of the Cash Value being
Surrendered and is as follows:
CHARGE AS A PERCENTAGE
CONTRACT/CERTIFICATE YEAR OF CASH VALUE
--------------------------- -----------------------
1-2 5%
3-4 4%
5-6 3%
7 2%
8 1%
9+ 0%
We will not assess a Surrender charge on:
o transfers to Approved Products within Your Plan;
o distribution of a loan under the Plan;
o certain benefit distributions that become payable under the terms of a
Plan and other distributions including:
o retirement, death, or disability of a Participant (as defined by Code
section 72(m)(7));
o Separation from Service;
o hardship withdrawals as defined by the Code;
o return of Excess Plan Contributions;
o certain Plan expenses as mutually agreed upon between You and Us
o transfers to an employer stock fund as mutually agreed upon between You
and Us; and
o annuitization under this Contract.
o if the Market Adjusted Value is greater than the Cash Value of the
Contract as of the date of discontinuance, and You elect to receive the
Cash Value of the Contract in equal installments over a 5-year period.
o withdrawals for required minimum distributions from Qualified Contracts
in order to satisfy federal income tax rules or withdrawals to avoid
required federal income tax penalties. (This exception only applies to
amounts required to be distributed from this Contract.)
o for 403(b) arrangements, 401(k) Plans, 401(a) Plans, Section 457
deferred compensation Plans and 403(a) arrangements, direct transfers to
another funding vehicle or Annuity contract issued by Us or by one of
Our affiliates and We agree.
Unless payment of Surrender charges are provided in a different manner, We will
reduce Your requested distribution by any applicable Surrender charges.
In addition, for Contracts issued to tax deferred annuity Plans, deferred
compensation Plans or combined qualified Plans/tax deferred annuity Plans, We
may allow You or a Participant, if authorized, after the first
Contract/Certificate Year to take partial Surrenders annually of up to 10% of
the Cash Value in Your Account/Individual Account as of the first Valuation
Date of any given Contract/Certificate Year without the imposition of a
Surrender charge.
REDUCTIONS OF CHARGES
We may reduce or eliminate certain charges or alter the manner in which the
particular charge is deducted. Generally, the types of changes will be based on
anticipated lower sales expenses or fewer sales services due to:
the size of the group participating in the Contract;
12
an existing relationship to the Contract Owner
use of mass enrollment procedures; or
performance of sales functions by a third party which We would otherwise
perform.
Please see Your Contract for any reduction of charges provisions applicable to
You.
CONTRACT DISCONTINUATION AND MARKET ADJUSTED VALUE
Under certain circumstances, We may discontinue the Contract.
You may discontinue this Contract by Written Request at any time for any
reason.
If the Contract is discontinued, any Certificates issued under the Contract
will be discontinued.
We reserve the right to discontinue this Contract if:
o the Cash Value of Your Contract is less than the termination amount
shown on Your Contract specifications page. We state a termination
amount on Your Contract specifications page. In general, this amount is
$2,000 of the Cash Value of a Participant's Individual Account (the
amount is $2,000 per account for an allocated Contract and $20,000 per
unallocated Contract). If the Cash Value in a Participant's Individual
Account is less than that stated termination amount, We reserve the
right to terminate that account and move the Cash Value of that
Participant's Individual Account to Your Account. We will move to Your
Account at Your direction any Cash Value to which a Participant is not
entitled under the Plan upon termination;
o We determine within Our sole discretion and judgment that the Plan or
administration of the Plan is not in conformity with applicable law; or
o We receive notice that is satisfactory to Us of Plan Termination.
If You discontinue this Contract because of Plan Termination and the Plan
certifies to Us that the Plan Termination is the result of the dissolution or
liquidation of the employer under US Code Title 11 procedures, We will
distribute the Cash Surrender Value directly to the employees entitled to share
in such distributions in accordance with the Plan relating to Plan Termination.
Distribution may be in the form of cash payments, Annuity options, or deferred
annuities.
The following events will not trigger a Market Adjusted Value:
o retirement, death, or disability of a Participant (as defined by Code
section 72(m)(7));
o Separation from Service;
o hardship withdrawals as defined by the Code;
o return of Excess Plan Contributions;
o certain Plan expenses as mutually agreed upon between You and Us;
o transfers to an employer stock fund as mutually agreed upon between You
and Us;
o annuitization under this Contract;
o partial Surrenders;
o distribution of a loan under the Plan; and
o required minimum distributions from Qualified Contracts in order to
satisfy federal income tax rules or withdrawals to avoid required
federal income tax penalties. (This exception only applies to amounts
required to be distributed from this Contract.)
However, if You discontinue this Contract for any other reason than the events
described immediately above or because of Our exercise of Our right to
discontinue the Contract, We will determine the Market Adjusted Value of the
Contract. The Market Adjusted Value is the current value as of the date of
discontinuance and reflects the relationship between the rate of interest
credited to funds on deposit under the Contract at the time of discontinuance
to the rate of interest credited on new deposits for this class of Contracts at
the time of discontinuance. The Market Adjusted Value may be greater than or
less than the Cash Value of the Contract.
13
If the Market Adjusted Value is less than the Cash Value of Your Contract as of
the date of discontinuance, We will pay You Your choice of:
(a) the Market Adjusted Value, less any amounts deducted on
Surrender, in one lump sum within 60 days of the date of
discontinuance; or
(b) the Cash Surrender Value of the Contract in equal installments
over a 5-year period. We determine the amount deducted on
Surrender, if any, as of the date of discontinuance and will
apply that amount to all installment payments. We will credit
interest to the remaining Cash Value during this installment
period at a fixed effective annual interest rate of not less than
the interest rate required under state insurance law. We will
make the first payment no later than 60 days following Our
mailing the written notice to You at the most current address
available on Our records. We will mail the remaining payments on
each anniversary of the discontinuance date for 4 years.
Allowable distributions shown of Your Contract specifications
page are not allowed during the 5-year installment period.
If the Market Adjusted Value is greater than the Cash Value of the Contract as
of the date of discontinuance, We will pay You Your Choice of:
(a) the Cash Surrender Value of the Contract within 60 days of the
date of discontinuance; or
(b) the Cash Value of the Contract in equal installments over a
5-year period. We will credit interest on the remaining Cash
Value of the Contract during the installment period at a fixed
annual rate of interest of not less than the interest rate
required under state insurance law. We will make the first
payment no later than 60 days following Our mailing of the
written notice to You at the most current address available on
Our records. We will mail the remaining payments on each
anniversary of the discontinuance date for 4 years. We do not
allow the allowable distributions shown on Your Contract
specifications page during the 5-year installment period.
MARKET ADJUSTED VALUE FORMULA
Payment on a full Surrender at Contract discontinuance may be adjusted up or
down by the application of the Market Adjusted Value calculation. The Market
Adjusted Value formula is:
MARKET ADJUSTED VALUE = CASH VALUE X (1+RO)/5/ /(1+R1+.0025+)/5/
Where:
RO is the weighted average of all interest rates credited to all amounts in the
Contract on the date of discontinuance, and
R1 is the interest rate on new deposits for this class of Contracts on the date
of discontinuance.
+ Margin that accounts for the liquidation of the assets.
The Market Adjusted Value will increase the Account Value when the credited
rates on new deposits are more than 0.25% (0.0025) higher than the average
interest rate credited to the Contract. The Market Adjusted Value will decrease
the Cash Value when the credited rates on new deposits are lower than the
average interest rate credited to the Contract, or less than 0.25% (0.0025)
higher.
EXAMPLE OF NEGATIVE MARKET ADJUSTED VALUE:
A negative Market Adjusted Value results when credited interest rates are
higher on new deposits than the average interest rate credited to the Contract.
Assume new deposits are crediting 4.50%, and the average interest rate credited
to the Contract is 4.00%. The Cash Value at the time of discontinuance is
$100,000.
The Market Adjusted Value would be
$96,470.95 = $100,000 * (1+0.04)/5/ /(1+0.045+0.0025)/5/
EXAMPLE OF POSITIVE MARKET ADJUSTED VALUE:
A positive Market Adjusted Value generally results when credited interest rates
are lower on new deposits than the average interest rate credited to the
Contract.
14
Assume new deposits are credited 4.50%, and the average interest rate credited
to the Contract is 5.00%. The Cash Value at the time of discontinuance is
$100,000.
The Market Adjusted Value would be
$101,199.03 = $100,000 * (1+0.05)/5/ /(1+0.045+0.0025)/5/
PREMIUM TAXES
Certain state and local governments impose Premium Taxes. These taxes currently
range from 0% to 3.5%, depending upon the jurisdiction. The Company is
responsible for paying these taxes and will determine the method used to
recover Premium Tax expenses incurred. The Company may deduct any applicable
Premium Taxes from the Cash Value either upon death, Surrender, annuitization,
or at the time the Purchase Payment is made to the Contract, but no earlier
than when the Company has a tax liability under state law.
DEATH BENEFIT
--------------------------------------------------------------------------------
If applicable under Your Plan, We may pay a death benefit in a single sum to
the Beneficiary if a Participant dies before the Maturity Date. We also may pay
a death benefit under certain circumstances if the Annuitant dies on or after
the Maturity Date.
The death benefit before the Maturity Date equals the Cash Value of a
Participant's Individual Account less any applicable Premium Tax as of the date
We receive Due Proof of Death. If the Annuitant dies on or after the Maturity
Date, the death benefit will consist of any benefit remaining under the Annuity
option then in effect.
We will pay interest on death proceeds of a Participant's Individual Account in
accordance with regulations in effect by the state whose laws apply to the
Contract.
DISTRIBUTION RULES
The distributions required by federal tax law differ for qualified Plans
depending on the type of Plan. Upon receipt of Due Proof of Death, the
Beneficiary will instruct Us how to treat the proceeds, subject to the
distribution rules discussed below.
In general, the Beneficiary will receive any remaining contractual benefits
upon the death of the Participant. The Beneficiary may receive the remaining
benefits in one sum, including either by check, by placing the amount in an
account that earns interest, or by any other method of payment that provides
the Beneficiary with immediate and full access to the proceeds, or under other
settlement options that We may make available. If the Participant dies after
any mandatory distribution has begun but before his or her entire interest has
been distributed, the remaining interest must be paid out at least as rapidly
as it was being paid out under the method of payment in effect at the time of
death. If the Participant dies before the distribution of his or her entire
interest has begun, the entire interest must be distributed within five years
after the Participant's death or an Annuity payable over no longer than life or
life expectancy must be distributed to an elected Beneficiary starting within
one year of the Participant's death. A spousal designated Beneficiary may elect
to defer distributions until the Participant would have attained the age of
70 1/2.
Please see Your Contract and Your tax adviser for more information.
ANNUITY PERIOD
--------------------------------------------------------------------------------
ELECTION OF MATURITY DATE AND SETTLEMENT OPTIONS
You can select a Maturity Date when You apply for the Contract and/or when We
issue a Certificate.
You may elect to have all or a portion of the Cash Surrender Value of an
Individual Account paid in a lump sum, or You may elect to have Your Cash
Surrender Value or a portion thereof, distributed under any of the Annuity
options described below. In addition, any amount payable from the Contract may
be applied to an Annuity option. A Participant, if authorized, may apply any
proceeds payable from his or her Individual Account to an Annuity option.
15
To elect an Annuity option, You must send a Written Request to Our Home Office
at least 30 days before such election is to become effective. If no option is
elected for Qualified Contracts, We will apply the Cash Surrender Value to
Option 4 to provide a Joint and Last Survivor Life Annuity.
You must provide Us with the following information when You elect an Annuity
option:
o the Participant's name, address, date of birth, and social security
number;
o the amount to be distributed in the form of an Annuity option;
o the Annuity option which is to be purchased;
o the date the Annuity option payments are to begin;
o if the form of the Annuity provides a death benefit in the event of the
Participant's death, the name, relationship, and address of the
Beneficiary as designated by You; and
o any other data We may require.
MISSTATEMENT
We may require proof of age of the Contract Owner, Beneficiary or Annuitant
before making any payments under this Contract that are measured by the
Contract Owner's, Beneficiary's or Annuitant's life. If the age of the
measuring life has been misstated, the amount payable will be the amount that
would have been provided at the correct age.
Once Annuity Payments have begun, the amount of any overpayments or
underpayments will be deducted from or added to the payment or payments made
after the adjustment. In certain states, We are required to pay interest on any
underpayments.
CHANGE OF MATURITY DATE OR ANNUITY OPTION
You may change the Maturity Date at any time as long as such change is made in
writing and is received by Us at least 30 days before the scheduled Maturity
Date is scheduled to become effective. Once an Annuity option has begun, it may
not be changed.
ANNUITY OPTIONS
You or a Participant, if authorized, may elect any one of the following Annuity
options. Annuity Payments may be available on a monthly, quarterly, semiannual,
or annual basis. The minimum amount that may be applied to Annuity options is
$2,000 unless We consent to a smaller amount. If any periodic payments due are
less than $100, We reserve the right to make payments at less frequent
intervals. Where required by state law or under a qualified retirement Plan,
sex will not be taken into account in calculating Annuity Payments. Annuity
rates will not be less than the rates guaranteed by the Contract at the time of
purchase. Due to underwriting, administrative or Code considerations, the
choice of percentage reduction and/or the duration of the Guarantee Period may
be limited.
We use the Life Annuity Tables to determine the first monthly payment. They
show the dollar amount of the first monthly Annuity Payment which can be
purchased with each $1,000 applied. The amount applied to an Annuity will be
the Cash Surrender Value attributable to a Participant's Individual Account as
of 14 days before the Maturity Date. We reserve the right to require
satisfactory proof of age of any person on whose life We base Annuity Payments
before making the first payment under any of these options.
Any Cash Surrender Value We apply to an Annuity option will provide payments at
least equal to those provided if the same amount was applied to purchase a
single premium immediate Annuity We offer at that time for the same class of
Contracts. If it would produce a larger payment, We agree that We will
determine the Annuity Payment using the Life Annuity Tables in effect on the
Maturity Date.
As provided in Your Contract, We may adjust the age used to determine Annuity
Payments, and We may deduct Premium Taxes from Annuity Payments.
Your income payment amount will depend upon Your choices. For lifetime options,
the age and sex (where permitted) of the measuring lives (Annuitants) will also
be considered. For example, if You select an Annuity option guaranteeing
payments for Your lifetime and Your spouse's lifetime, Your payments will
typically be lower than if You select an Annuity option with payments over only
Your lifetime. Annuity options that guarantee that payments will be made for a
certain number of years regardless of whether the Annuitant or joint Annuitant
is alive (such as Options 2, as defined
16
below) result in payments that are smaller than with Annuity options without
such a guarantee (such as Option 1, Option 3 or Option 4, as defined below). In
addition, to the extent the Annuity options have a guarantee period, choosing a
shorter guarantee period will result in each payment being larger. Generally,
if more than one frequency is permitted under Your Contract, choosing less
frequent payments will result in each Annuity payment being larger.
Option 1 -- Life Annuity -- NO REFUND: The Company will make Annuity Payments
during the lifetime of the Annuitant ending with the last payment before death.
This option offers the maximum periodic payment, since there is no assurance of
a minimum number of payments or provision for a death benefit for
Beneficiaries.
Option 2 -- Life Annuity With 120, 180, or 240 Monthly Payments Assured: The
Company will make monthly Annuity Payments during the lifetime of the
Annuitant, with the agreement that if, at the death of that person, payments
have been made for less than 120, 180, or 240 months as elected, We will
continue making payments to the Beneficiary during the remainder of the period.
Option 3 -- Joint And Last Survivor Life Annuity: The Company will make Annuity
Payments during the joint lifetime of the Annuitant and a second person. On the
death of either person, We will continue making payments to the survivor. No
further payments will be made following the death of the survivor.
Option 4 -- Joint and Last Survivor Life Annuity -- Annuity Reduced on Death of
Primary Payee: The Company will make monthly Annuity Payments during the joint
lifetime of two persons on whose lives We base the payments. We will designate
one of the two persons as the primary payee. We will designate the other person
as the secondary payee. On the death of the secondary payee, if survived by the
primary payee, We will continue to make monthly Annuity Payments to the primary
payee in the same amount that would have been payable during the joint lifetime
of the two persons.
On the death of the primary payee, if survived by the secondary payee, We will
continue to make monthly Annuity Payments to the secondary payee in an amount
equal to 50% of the payments, which would have been made during the lifetime of
the primary payee.
No further payments will be made following the death of the survivor.
Option 5 -- Payments For A Fixed Period: The Company will make monthly payments
for the period selected. If at the death of the Annuitant payments have been
made for less than the period selected, the Company will continue to make
payments to the Beneficiary during the remainder of that period. Please note
that Option 5 may not satisfy minimum required distribution rules for Qualified
Contracts. Consult a tax advisor before electing this option.
Option 6 -- Other Annuity Options: The Company will make other arrangements for
Annuity Payments as may be mutually agreed upon by You and Us.
ANNUITY PAYMENT
The first payment under any Annuity option will be made on the Maturity Date.
Subsequent payments will be made in accordance with the manner of payment
selected and are based on the first payment date.
The option elected must result in a payment at least equal to the minimum
payment amount according to Company rules then in effect. If at any time
payments are less than the minimum payment amount, the Company has the right to
change the frequency to an interval resulting in a payment at least equal to
the minimum. If any amount due is less than the minimum per year, the Company
may make other arrangements that are equitable to the Annuitant.
Once Annuity Payments have begun, no Surrender of the Annuity benefit can be
made for the purpose of receiving a lump-sum settlement.
DEATH OF ANNUITANT AFTER THE MATURITY DATE
If the Annuitant dies after the Maturity Date, any amount payable as a death
benefit will be distributed at least as rapidly as under the method of
distribution in effect.
17
INVESTMENTS BY THE COMPANY
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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.
In establishing interest rates, the Company will consider the yields on fixed
income securities that are part of the Company's current investment strategy
for the Contracts at the time that the interest rates are established. (See
"Establishment of Interest Rates".) The current investment strategy for the
Contracts is to invest in fixed income securities, including public bonds,
privately placed bonds, and mortgages, some of which may be zero coupon
securities. While this generally describes Our investment strategy, We are not
obligated to follow any particular strategy except as may be required by
federal and state laws.
ANNUAL STATEMENT
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At the end of each calendar year, You will receive a statement that will show:
o Your Cash Value as of the end of the preceding year;
o all transactions regarding Your Contract during the year;
o Your Cash Value at the end of the current year; and
o the interest credited to Your Contract.
AMENDMENT OF THE CONTRACTS
--------------------------------------------------------------------------------
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.
DISTRIBUTION OF THE CONTRACTS
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Brighthouse Securities, LLC ("Brighthouse Securities") is the principal
underwriter and distributor of the securities offered through this prospectus.
Prior to March 6, 2017, the principal underwriter and the distributor of the
Contracts was MetLife Investors Distribution Company. Brighthouse Securities,
which is Our affiliate, also acts as the principal underwriter and distributor
of some of the other variable annuity contracts and variable life insurance
policies We and Our affiliated companies issue. We reimburse Brighthouse
Securities for expenses Brighthouse Securities incurs in distributing the
Contracts (e.g. commissions payable to retail broker-dealers who sell the
Contracts). Brighthouse Securities does not retain any fees under the
Contracts.
Brighthouse Securities' principal executive offices are located at 11225 North
Community House Road, Charlotte, NC 28277. Brighthouse Securities is registered
as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), 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 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 on-line.
The Contracts are sold through unaffiliated broker-dealers under the Exchange
Act and members of FINRA. The Contracts may also be sold through the mail, the
Internet or by telephone. The Company no longer actively offers the Contracts
to new purchasers, but it continues to accept Participants from existing
Contracts and Purchase Payments from existing Contract owners and Plan
Participants.
There is no front-end sales load deducted from Purchase Payments to pay sales
commissions. Brighthouse Securities pays compensation based upon a `gross
dealer concession' model. With respect to the Contracts, the maximum gross
dealer concession is 6% of each Purchase Payment. The gross dealer concession
applies each year the Contract is in
18
force and, starting in the second Contract Year, is a maximum of 1% of the
contract value each year that the Contract is in force for servicing the
Contract. Gross dealer concession may also be credited when the Contract is
annuitized. The amount of gross dealer concession credited upon annuitization
depends on several factors, including the number of years the Contract has been
in force.
We may make payments to Brighthouse Securities that may be used for its
operating and other expenses, including the following sales expenses:
compensation and bonuses for Brighthouse Securities' management team,
advertising expenses, and other expenses of distributing the Contracts.
Brighthouse Securities' management team also may be eligible for non-cash
compensation items that We may provide jointly with Brighthouse Securities.
Non-cash items include conferences, seminars and trips (including travel,
lodging and meals in connection therewith), entertainment, merchandise and
other similar items.Broker-dealers pay their sales representatives all or a
portion of the commissions received for their sales of the Contracts. Some
firms may retain a portion of commissions. The amount that the broker-dealer
passes on to its sales representatives is determined in accordance with its
internal compensation programs. Those programs may also include other types of
cash and non-cash compensation and other benefits. Sales representatives of
these selling firms may also receive non-cash compensation pursuant to their
firm's guidelines, directly from Us or the distributor. We and Our affiliates
may also provide sales support in the form of training, sponsoring conferences,
defraying expenses at vendor meetings, providing promotional literature and
similar services. An unaffiliated broker-dealer or sales representative of an
unaffiliated broker-dealer may receive different compensation for selling one
product over another and/or may be inclined to favor one product provider over
another product provider due to differing compensation rates. Ask Your sales
representative further information about what Your sales representative and the
broker-dealer for which he or she works may receive in connection with Your
purchase of a Contract.
From time to time, We pay organizations, associations and non-profit
organizations fees to sponsor Our variable annuity contracts. We may also
obtain access to an organization's members to market Our variable annuity
contracts. These organizations are compensated for their sponsorship of Our
variable annuity contracts in various ways. Primarily, they receive a flat fee
from Us. We also compensate these organizations by funding of their programs,
scholarships, events or awards, such as a principal of the year award. We may
also lease their office space or pay fees for display space at their events,
purchase advertisements in their publications or reimburse or defray their
expenses. In some cases, We hire organizations including, for example,
Metropolitan Life Insurance Company or MetLife Securities, Inc., with whom we
were previously affiliated, to perform administrative and enrollment services
for Us, for which they are paid a fee based upon a percentage of the account
balances their members hold in the Contract. We also may retain finders and
consultants to introduce Us to potential clients and for establishing and
maintaining relationships between Us and various organizations. The finders and
consultants are primarily paid flat fees and may be reimbursed for their
expenses. We or Our affiliates may also pay duly licensed individuals
associated with these organizations cash compensation for the sales of the
Contracts.
ADDITIONAL COMPENSATION FOR SELECTED SELLING FIRMS. We and Brighthouse
Securities have entered into distribution arrangements with certain selected
selling firms. Under these arrangements We and Brighthouse Securities 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 Brighthouse Securities have
entered into such distribution agreements with unaffiliated selling firms
identified on our website.
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
19
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.
FEDERAL TAX CONSIDERATIONS
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The following information on taxes is a general discussion of the subject. It
is not intended as tax advice. The Internal Revenue Code ("Code") and the
provisions of the Code that govern the Contract are complex and subject to
change regularly. The applicability of federal income tax rules may vary with
you particular circumstances. This discussion does not include all the federal
income tax rules that may affect You and your Contract. Nor does this
discussion address other federal tax consequences (such as estate and gift
taxes, sales to foreign individuals or entities), or state or local tax
consequences, which may affect your investment in the Contract. As a result,
You should always consult a tax adviser for complete information and advice
applicable to your individual situation.
You are responsible for determining whether Your purchase of a Contract,
withdrawals, income payments and any other transactions under your Contract
satisfy applicable tax law. We are not responsible for determining if Your
employer's Plan or arrangement satisfies the requirements of the Code and/or
the Employee Retirement Income Security Act of 1974 ("ERISA").
Any Code reference to "spouse" includes those persons who enter into lawful
marriages under state law, regardless of sex.
QUALIFIED ANNUITY CONTRACTS
INTRODUCTION
The Contract may be purchased through certain types of retirement Plans that
receive favorable treatment under the Code ("tax qualified Plans"). In general,
tax-qualified Plans include arrangements described in Code Sections 401(a),
401(k), 403(a), 403(b) or tax sheltered annuities ("TSA"), 408 or "IRAs"
(including SEP and SIMPLE IRAs), 408A or "Roth IRAs" or 457 (b) or 457(b)
governmental Plans. Extensive special tax rules apply to qualified Plans and to
the annuity Contracts used in connection with these Plans. Therefore, the
following discussion provides only general information about the use of the
Contract with the various types of qualified Plans. 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.
The rights to any benefit under the Plan will be subject to the terms and
conditions of the Plan itself as well as the terms and conditions of the
Contract.
We exercise no control over whether a particular retirement Plan or a
particular contribution to the Plan satisfies the applicable requirements of
the Code, or whether a particular individual is entitle to participate or
benefit under a Plan.
All qualified Plans and arrangements receive tax deferral under the Code. Since
there are no additional tax benefits in funding such retirement arrangements
with an annuity, there should be reasons other than tax deferral for acquiring
within the Plan. Such non-tax benefits may include additional insurance
benefits, such as availability of a guaranteed income for life.
A Contract may also be available in connection with an employer's non-qualified
deferred compensation Plan and qualified governmental excess benefit
arrangement to provide benefits to certain employees in the Plan. The tax rules
regarding these Plans are complex. We do not provide tax advice. Please consult
your tax adviser about your particular situation.
ACCUMULATION
The tax rules applicable to qualified Plans vary according to the type of Plan
and the terms and conditions of the Plan itself. Both the amount of the
contribution that may be made and the tax deduction or exclusion that You may
claim for that contribution are limited under qualified Plans.
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Purchase payments or contributions to IRAs or tax qualified retirement Plans of
an employer may be taken from current income on a before tax basis or after tax
basis. Purchase payments made on a "before tax" basis entitle You to a tax
deduction or are not subject to current income tax. Purchase payments made on
an "after tax" basis do not reduce your taxable income or give You a tax
deduction. Contributions may also consist of transfers or rollovers as
described below which are not subject to the annual limitations on
contributions.
The Contract will accept as a single purchase payment a transfer or rollover
from another IRA or rollover form an eligible retirement Plan of an employer
(i.e., 401(a), 401(k), 403(a), 403(b) or governmental 457(b) Plan.)
For income annuities establishes in accordance with a distribution option under
a retirement Plan of an employer (e.g., 401(a), 401(k), 403(a), 403(b) or
457(b) Plan), the Contract will only accept as its single purchase payment a
transfer from such employer retirement Plan.
TAXATION OF ANNUITY DISTRIBUTION
If contributions are made on a "before tax" basis, You generally pay income
taxes on the full amount of money You withdraw as well as income earned under
the Contract. Withdrawals attributable to any after-tax contributions are your
basis in the Contract and not subject to income tax (except for the portion of
the withdrawal allocable to earnings). Under current federal income tax rules,
the taxable portion of distributions under annuity contracts and qualified
Plans (including IRAs) is not eligible for the reduced tax rate applicable to
long-term capital gains and qualifying dividends.
If You meet certain requirements, Your Roth IRA, Roth 403(b) and Roth 401(k)
earnings are free from federal income taxes.
WITHDRAWALS PRIOR TO AGE 59 1/2
A taxable withdrawal or distribution from a qualified Plan which is subject to
income tax may also be subject to a 10% federal income tax penalty for "early"
distribution if taken prior to age 59 1/2, unless an exception described below
applies.
These exceptions include distributions made:
(a) on account of your death or disability, or
(b) as part of a series of substantially equal periodic payments payable
for your life (or life expectancy) or joint lives (or joint life
expectancies) of You and your designated beneficiary and You are separated
from employment.
If You receive systematic payments that You intend to qualify for the
"substantially equal periodic payments" exception noted above, any
modifications (except due to death or disability) to your payment before age
59 1/2 or within five years after beginning these payments, whichever is later,
will result in the retroactive imposition of the 10% federal income tax penalty
with interest. Such modifications may include additional Purchase Payments or
withdrawals (including tax-free transfers or rollovers of income payments) from
the Contract.
In addition, a withdrawal or distribution from a qualified annuity Contract
other than an IRA (including SEPs and SIMPLEs) will avoid the penalty if: (1)
the distribution is on separation from employment after age 55; (2) the
distribution is made pursuant to a qualified domestic relations order ("QDRO");
(3) the distribution is to pay deductible medical expenses; or (4) if the
distribution is to pay IRS levies (and made after December 31, 1999).
The 10% federal income tax penalty on early distribution does not apply to
governmental 457(b) Plan Contracts. However, it does apply to distributions
from 457(b) Plans of employer which are state or local governments to the
extent that the distribution is attributable to rollovers accepted from other
types of eligible retirement Plans.
ROLLOVERS
Your Contract is non-forfeitable (i.e., not subject to the claims of your
creditors) and non-transferable (i.e., You may not transfer it to someone
else).
Nevertheless, Contracts held in certain employer Plans subject to ERISA may be
transferred in part pursuant to a QDRO.
Under certain circumstances, You may be able to transfer amounts distributed
from your Contract to another eligible retirement Plan or IRA. For 457(b) Plans
maintained by non-governmental employers, if certain conditions are met,
amounts may be transferred into another 457(b) Plan maintained by a
non-governmental employer.
21
Generally, a distribution may be eligible for rollover. Certain types of
distributions cannot be rolled over, such as distributions received on account
of:
(a) minimum distribution requirements, or
(b) financial hardship.
20% WITHHOLDING ON ELIGIBLE ROLLOVER DISTRIBUTIONS
For certain qualified employer Plan, we are required to withhold 20% of the
taxable portion of your withdrawal that constitutes an "eligible rollover
distribution" for federal income taxes. The amount we withhold is determined by
the Code. You may avoid withholding if You assign or transfer a withdrawal from
this Contract directly into another qualified Plan or IRA. Similarly, You may
be able to avoid withholding on a transfer into this Contract from an existing
qualified Plan You may have with another provider by arranging to have the
transfer made directly to us. For taxable withdrawals that are not "eligible
rollover distributions," the Code requires different withholding rules which
determine the withholding amounts.
DEATH BENEFITS
The death benefit is taxable to the recipient in the same manner as if paid to
the Contract owner or Plan Participant (under the rules for withdrawals or
income payments, whichever is applicable).
Distributions required from a qualified annuity Contract following your death
depend on whether You die before You had converted your Contract to an annuity
form and started taking Annuity Payments (your Annuity Starting Date). If You
die on or after your Annuity Starting Date, the remaining portion of the
interest in the Contract must be distributed at least as rapidly as under the
method of distribution being used as of the date of death. If You die before
your Annuity Starting Date, the entire interest in the Contract must be
distributed within five (5) years after the date of death, or as periodic
payments over a period not extending beyond the life or life expectancy of the
designated beneficiary (provided such payments begin within one year of your
death). Your designated beneficiary is the person to whom benefit rights under
the Contract pass by reason of death; the beneficiary must be a natural person
in order to elect a periodic payment option based on life expectancy or a
period exceeding five years.
Additionally, if the annuity is payable to (or for the benefit of) your
surviving spouse, that portion of the Contract may be continued with your
spouse as the owner. If your spouse is your beneficiary, and your Contract
permits, your spouse may delay the start of these payments until December 31 of
the year in which You would have reached age 70 1/2.
If your spouse is your beneficiary, your spouse may be able to rollover the
death proceeds into another eligible retirement Plan in which he or she
participates, if permitted under the receiving Plan. Alternatively, if your
spouse is your sole beneficiary, he or she may elect to rollover the death
proceeds into his or her own IRA, or he or she may elect to transfer the death
proceeds into an inherited IRA.
If your beneficiary is not your spouse and your Plan and Contract permit, your
beneficiary may be able to rollover the death proceeds via a direct
trustee-to-trustee transfer into an inherited IRA. However, a non-spouse
beneficiary may not treat the inherited IRA as his or her own IRA.
Additionally, for Contracts issued in connection with qualified Plans subject
to ERISA, the spouse or ex-spouse of the owner may have rights in the Contract.
In such a case, the owner may need the consent of the spouse or ex-spouse to
change annuity options or make a withdrawal from the Contract.
REQUIRED MINIMUM DISTRIBUTIONS
Generally, You must begin receiving retirement Plan withdrawals by April 1
following the latter of:
(1) the calendar year in which You reach age 70 1/2
(2) the calendar year You retire, provided You do not own more than 5% of
the outstanding stock, capital, or profits of your employer.
A tax penalty of 50% applies to the amount by which the required minimum
distribution exceeds the actual distribution.
22
You may not satisfy minimum distributions for one employer's qualified Plan
(i.e., 401(a), 403(a), 457(b)) with distributions from another qualified Plan
of the same or a different employer. However, an aggregation rule does apply in
the case of 403(b) Plans. The amount of required minimum distribution is
calculated separately with respect to each 403(b) arrangement, but the
aggregate amount of the required distribution may be taken from any one or more
of the your 403(b) Plan contracts.
Complex rules apply to the calculation of these withdrawals.
The regulations also require that the value of benefits under a deferred
annuity including certain death benefits in excess of Contract value must be
added to the amount credited to Your Account in computing the amount required
to be distributed over the applicable period. We will provide You with
additional information regarding the amount that is subject to minimum
distribution under this rule. You should consult your own tax adviser as to how
these rules affect your own distribution under this rule.
If You intend to receive your minimum distributions which are payable over the
joint lives of You and a beneficiary who is not your spouse (or over a period
not exceeding the joint life expectancy of You and your non-spousal
beneficiary), be advised that federal tax rules may require that payments be
made over a shorter period or may require that payments to the beneficiary be
reduced after your death to meet the minimum distribution incidental benefit
rules and avoid the 50% excise tax. You should consult your own tax adviser as
to how these rules affect your own Contract.
ADDITIONAL INFORMATION REGARDING TSA (ERISA AND NON-ERISA) 403(B)
SPECIAL RULES REGARDING EXCHANGES
In order to satisfy tax regulations, contract exchanges within a 403(b) Plan
after September 24, 2007, must, at a minimum, meet the following requirements:
(1) the Plan must allow the exchange; (2) the exchange must not result in a
reduction in a Participant's or a beneficiary's accumulated benefit: (3) the
receiving contract includes distribution restrictions that are no less
stringent than those imposed on the contract being exchanged; and (4) if the
issuer receiving the exchanges is not part of the Plan, the employer enters
into an agreement with the issuer to provide information to enable the contract
provider to comply with Code requirements. Such information would include
details concerning severance from employment, hardship withdrawals, loans, and
tax basis. You should consult your tax or legal counsel for any advice relating
to Contract exchanges or any other matter relating to these regulations.
WITHDRAWALS
If You are under age 59 1/2, You generally cannot withdraw money from your TSA
Contract unless the withdrawal:
(a) Related to Purchase Payments made prior to 1989 and pre-1989 earnings
on those Purchase Payments;
(b) Is exchanged to another permissible investment under your 403(b) Plan;
(c) Relates to contributions to an annuity contract that are not salary
reduction elective deferrals, if Your Plan allows it;
(d) Occurs after You die, leave your job or become disabled (as defined by
the Code);
(e) Is for financial hardship (but only to the extent of elective
deferrals), if your Plan allows it;
(f) Relates to distributions attributable to certain TSA Plan
terminations, if the conditions of the Code are met;
(g) Relates to rollover or after-tax contributions; or
(h) Is for the purchase of permissive service credit under a governmental
defined benefit Plan.
In addition, a Section 403(b) Contract is permitted to distribute retirement
benefits attributable to pre-tax contributions other than elective deferrals to
the Participant no earlier than upon the earlier of the Participant's severance
from employment or upon the prior occurrence of some event, such as after a
fixed number of years, the attainment of a stated age or disability.
23
DISTINCTION FOR PUERTO RICO CODE
An annuity Contract may be purchased by an employer for an employee under a
qualified pension, profit sharing, stock bonus, annuity, or a "cash or
deferred" arrangement Plan established pursuant to Section 1081.01 of the 2011
PR Code. To be tax qualified under the 2011 PR Code, a Plan must comply with
the requirements of Section 1081.0 1(a) of the 2011 PR Code which includes
certain participation requirements, among other requirements. A trust created
to hold assets for a qualified Plan is exempt from tax on its investment
income.
CONTRIBUTIONS
The employer is entitled to a current income tax deduction for contributions
made to a qualified Plan, subject to statutory limitations on the amount that
may be contributed each year. The Plan contributions by the employer are not
required to be included in the current income of the employee.
DISTRIBUTIONS
Any amount received or made available to the employee under the qualified Plan
is includible in the gross income of the employee in the taxable year in which
received or made available. In such case, the amount paid or contributed by the
employer shall not constitute consideration paid by the employee for the
Contract for purposes of determining the amount of Annuity Payments required to
be included in the employee's gross income. Thus, amounts actually distributed
or made available to any employee under the qualified Plan will be included in
their entirety in the employee's gross income. The value of accrued benefits in
a qualified retirement plan with respect to which the special 8% tax under
Puerto Rico Act No. 77-2014 was prepaid will be considered as part of the
participant's tax basis in his retirement plan account. Thus, any distributions
attributable to the benefits for which such taxes were prepaid will not be
subject to income taxes when the same are subsequently received by the
participant. However, the investment income and the appreciation in value, if
any, accrued on the benefits with respect to which the special tax was prepaid,
will be taxed as provided by the tax rules in effect at the time of
distribution. Lump-sum proceeds from a Puerto Rico qualified retirement Plan
due to separation from service will generally be taxed at a 20% capital gain
tax rate to be withheld at the source. A special rate of 10% may apply instead,
if the Plan satisfies the following requirements:
(1) the Plan's trust is organized under the laws of Puerto Rico, or has a
Puerto Rico resident trustee and uses such trustee as paying agent; and
(2) 10% of all Plan's trust assets (calculated based on the average balance
of the investments of the trust) attributable to Participants who are
Puerto Rico residents must be invested in "property located in Puerto Rico"
for a three-year period.
If these two requirements are not satisfied, the distribution will generally be
subject to the 20% tax rate. The three-year period includes the year of the
distribution and the two immediately preceding years. In the case of a defined
contribution Plan that maintains separate accounts for each Participant, the
described 10% investment requirement may be satisfied in the accounts of a
Participant that chooses to invest in such fashion rather than at the trust
level. Property located in Puerto Rico includes shares of stock of a Puerto
Rico registered investment company, fixed or variable annuities issued by a
domestic insurance company or by a foreign insurance corporation that derives
more than 80% of its gross income from sources within Puerto Rico and bank
deposits. The PR 2011 Code does not impose a penalty tax in cases of early
(premature) distributions from a qualified Plan.
ROLLOVER
Deferral of the recognition of income continues upon the receipt of a
distribution by a Participant from a qualified Plan, if the distribution is
contributed to another qualified retirement Plan or traditional individual
retirement account for the employee's benefit no later than sixty (60) days
after the distribution.
ERISA CONSIDERATIONS
In the context of a Puerto Rico qualified retirement Plan trust, the IRS has
recently held that the transfer of assets and liabilities from a qualified
retirement Plan trust under the Code to that type of Plan would generally be
treated as a distribution includible in gross income for U.S. income tax
purposes even if the Puerto Rico retirement Plan is a Plan described in ERISA
Section 1 022(i)(l ). By contrast, a transfer from a qualified retirement Plan
trust under the Code to a Puerto Rico qualified retirement Plan trust that has
made an election under ERISA Section 1022(i)(2) is not treated as a
distribution from the transferor Plan for U.S. income tax purposes because a
Puerto Rico retirement Plan that has made an election under ERISA Section
1022(i)(2) is treated as a qualified retirement Plan for purposes Code Section
40l(a).
24
The IRS has determined that the above described rules prescribing the inclusion
in income of transfers of assets and liabilities to a Puerto Rico retirement
Plan trust described in ERISA Section 1 022(i)(l) would be applicable to
transfers taking effect after December 31, 2012. Notwithstanding the above, the
IRS has recently held that a Puerto Rico retirement plan described in ERISA
Section 1022(i)(2) may participate in a 81-100 group trust because it permits
said plan to diversify its investments without adverse tax consequences to the
group trust or its investors.
Similar to the IRS in Revenue Ruling 2013-17, the U.S. Department of Labor
issued DOL Technical Release No. 2013-04 on September 18, 2013, providing that,
where the Secretary of Labor has authority to regulate with respect to the
provisions of ERISA dealing with the use of the term "spouse", spouse will be
read to refer to any individuals who are lawfully married under any state law,
including same-sex spouses, and without regard to whether their state of
domicile recognizes same-sex marriage. Thus, for ERISA purposes as well as
federal tax purposes, an employee benefit Plan Participant who marries a person
of the same sex in a jurisdiction that recognizes same-sex marriage will
continue to be treated as married even if the couple moves to a jurisdiction
that does not recognize same-sex marriage.
ADDITIONAL FEDERAL TAX CONSIDERATIONS
Annuity contracts purchased through tax qualified Plans are subject to
limitations imposed by the Code and regulations as a condition of tax
qualification. There are various types of tax qualified Plans which have
certain beneficial tax consequences for Contract owners and Plan Participants.
TYPES OF QUALIFIED PLANS
The following list includes individual account-type Plans which may hold an
annuity Contract as described in the Prospectus. They are established by an
employer for participation of its employees.
401(k), 401(a)
Established by for-profit employers, Section 501(c)(3) tax exempt and non-tax
exempt entities, Indian tribes.
403(b) Tax Sheltered Annuity ("TSA ")
Established by Section 501 ( c )(3) tax exempt entities, public schools (K
-12), public colleges, universities, churches, synagogues and mosques.
457(b) Governmental Sponsor
Established by state and local governments, public schools (K-12), public
colleges and universities.
457(b) Non-Governmental Sponsor
Established by a tax-exempt entity. Under a non-governmental Plan, which must
be a tax-exempt entity under Section 50 I( c) of the Code, all such investments
of the Plan are owned by and are subject to the claims of the general creditors
of the sponsoring employer. In general, all amounts received under a
non-governmental Section 457(b) Plan are taxable and are subject to federal
income tax withholding as wages.
Additional information regarding 457(b) Plans
A 457(b) Plan may provide a one-time election to make special one-time
"catch-up" contributions in one or more of the Participant's last three taxable
years ending before the Participant's normal retirement age under the Plan.
Participants in governmental 457(b) Plans may make two types of catch-up
contributions, the age 50 or older catch-up and the special one-time catch-up
contribution. However, both catch-up contribution types cannot be made in the
same taxable year. In general, contribution limits with respect to elective
deferral and to age 50 plus catch-up contributions are not aggregated with
contributions under the other types of qualified Plans for the purposes of
determining the limitations applicable to Participants.
403(a)
If your benefit under the 403(b) Plan is worth more than $5,000, the Code
requires that your annuity protect your spouse if You die before You receive
any payments under the annuity or if You die while payments are being made. You
may waive these requirements with the written consent of your spouse. In
general, designating a beneficiary other than your spouse is considered a
waiver and requires your spouse's written consent. Waiving these requirements
may cause your monthly benefit to increase during your lifetime. Special rules
apply to the withdrawal of excess contributions.
25
Roth Account
Individual or employee Plan contributions made to certain Plans on an after-tax
basis. An IRA may be established as a Roth IRA, and 401(k), 403(b) and 457(b)
Plans may provide for Roth accounts.
ERISA
If your Plan is subject to ERISA and You are married, the income payments,
withdrawal provisions, and methods of payment of the death benefit under your
Contract may be subject to your spouse's rights as described below.
Generally, the spouse must give qualified consent whenever You elect to:
(a) Choose income payments other than on a qualified joint and
survivor (one under which we make payments to You during your
reduced by no more than 50% to your spouse for his or her
remaining life, if any): or choose to waive the qualified
pre-retirement survivor annuity benefit ("QPSA") (the benefit
payable to the surviving spouse of a Participant who dies with a
vested interest in an accrued retirement benefit under the Plan
before payment of the benefit has begun);
(b) Make certain withdrawals under Plans for which a qualified
consent is required;
(c) Name someone other than the spouse as your beneficiary; or
(d) Use your accrued benefit as security for a loan exceeding
$5,000.
Generally, there is no limit to the number of your elections as long as a
qualified consent is given each time. The consent to waive the QJSA must meet
certain requirements, including that it be in writing, that it acknowledges the
identity of the designated beneficiary and the form of benefit selected, dated,
signed by your spouse, witnessed by a notary public or Plan representative, and
that it be in a form satisfactory to us. The waiver of the QJSA generally must
be executed during the 180 days period (90 days for certain loans) ending on
the date on which income payments are to commence, or the withdrawal or the
loan is to be made, as the case may be. If You die before benefits commence,
your surviving spouse will be your beneficiary unless he or she has given a
qualified consent otherwise.
The qualified consent to waive the QPSA benefit and the beneficiary designation
must be made in writing that acknowledges the designated beneficiary, dated,
signed by your spouse, witnessed by a notary public or Plan representative and
in a form satisfactory to us. Generally, there is no limit to the number of
beneficiary designations as long as a qualified consent accompanies each
designation. The waiver of and the qualified consent for the QPSA benefit
generally may not be given until the Plan year in which You attain age 35. The
waiver period for the QPSA ends on the date of your death.
If the present value of your benefit is worth $5,000 or less, your Plan
generally may provide for distribution of your entire interest in a lump sum
without spousal consent.
Comparison of Plan Limits for Individual Contributions:
PLAN TYPE ELECTIVE CONTRIBUTION CATCH-UP CONTRIBUTION
401(a) (Employer contributions only)
401(k) $18,000 $6,000
403(b) (TSA) $18,000 $6,000
457(b) $18,000 $6,000
Dollar limits are for 2017 and subject to cost-of-living adjustments in future
years. Employer-sponsored individual account Plans (other than 457(b) Plans)
may provide for additional employer contributions such that total annual plan
contributions do not to exceed the greater of $54,000 or 25% of an employee's
compensation for 2017.
26
FEDERAL ESTATE TAXES
While no attempt is being made to discuss the federal estate tax implications
of the Contract, You should bear in mind that the value of an annuity contract
owned by a decedent and payable to a beneficiary by virtue of surviving the
decedent is included in the decedent's gross estate. Depending on the terms of
the annuity contract, the value of the annuity included in the gross estate may
be the value of the lump sum payment payable to the designated beneficiary or
the actuarial value of the payments to be received by the beneficiary. Consult
an estate planning adviser for more information.
GENERATION-SKIPPING TRANSFER TAX
Under certain circumstances, the Code may impose a "generation-skipping
transfer tax" when all or part of an annuity contract is transferred to, or a
death benefit is paid to, an individual two or more generations younger than
the Contract Owner. Regulations issued under the Code may require us to deduct
the tax from your contract, or from any applicable payment, and pay it directly
to the IRS.
ANNUITY PURCHASE PAYMENTS BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides information regarding U.S. federal income tax
consequences to annuity purchasers that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
U.S. federal withholding tax on taxable distributions from annuity contracts at
a 30% rate, unless a lower treaty rate applies. In addition, purchasers may be
subject to state and/or municipal taxes and taxes that may be imposed by the
purchaser's country of citizenship or residence. Prospective purchasers are
advised to consult with a qualified tax adviser regarding U.S., state and
foreign taxation with respect to an annuity contract purchase.
ABANDONED PROPERTY REQUIREMENTS
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Every state has unclaimed property laws which generally declare non-ERISA
annuity contracts to be abandoned (1) 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 if annuity payments have not commenced or (2) after a period of
two or three years from the date the payment is due and payable, or if death
benefits are unclaimed after a period of inactivity of three to five years from
the date the death benefit is due and payable, if annuity payments have
commenced. 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 of 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. To make changes,
please call 1-800-842-9406.
INFORMATION INCORPORATED BY REFERENCE
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Under the Securities Act of 1933, the Company 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 to
the Company and the Contracts. The Company's annual report on Form 10-K was
filed with the SEC on March 28, 2017 via EDGAR File No. 033-03094. The Form
10-K contains information for the period ended December 31, 2016, about the
Company, including consolidated audited financial statements for the Company's
latest fiscal year. The Form 10-K is incorporated by reference into this
prospectus. In addition, all documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering, are also incorporated by reference into this
prospectus. We are not incorporating by reference any documents or information
deemed to have been furnished instead of filed in accordance with SEC rules
such as current reports on Form 8-K furnished under Item 2.02 or Item 7.01.
27
If requested, the Company 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 the Company at, 11225 North
Community House Road, Charlotte, NC, 28277. The telephone number is
1-800-842-9406. You may also access the incorporated reports and other
documents at www.brighthousefinancial.com.
The Company 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 the Company 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.
EXPERTS
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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 the Company, its authority to issue such Contracts under
Delaware law and the validity of the forms of the Contracts under Delaware law
have been passed on by legal counsel for the Company.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The consolidated financial statements, and the related financial statement
schedules, incorporated by reference in this Registration Statement from the
Brighthouse Life Insurance Company (formerly, MetLife Insurance Company USA)
and subsidiaries' Annual Report on Form 10-K for the year ended December 31,
2016, 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 30 Rockefeller
Plaza, New York, New York 10112-0015.
28
APPENDIX A
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INFORMATION CONCERNING QUALIFIED PLANS
Plans eligible to purchase the Contract are pension and profit sharing Plans
qualified under Section 401(a) of the Code, Section 403(b) Plans, and eligible
state deferred compensation Plans under Section 457 of the Code ("Qualified
Plans"). Trustees should consider whether the Plan permits the investment of
Plan assets in the Contract, the distribution of such and Annuity and payment
of death benefits in accordance with the requirements of the federal income tax
rules. Assuming continued Plan qualification and operation, earnings on Plan
assets will accumulate value on a tax deferred basis even if the Plan is not
funded by this Contract. Trustees therefore should consider features of the
Contract other than tax deferral before investing in the Contract. In addition,
because required minimum distributions must generally begin for Participants
after age 70 1/2, (or, if later, when the Participant retires from employment
with the employer maintaining the Plan, provided the Plan permits and the
Participant is not a 5% or more owner), trustees should consider whether the
Contract may be an appropriate purchase for Participants approaching or over
age 70 1/2.
To apply for this Contract, the trustee or other applicant must complete an
application or purchase order for the group Annuity Contract and make a
Purchase Payment. A group Annuity Contract will then be issued to the
applicant. While Certificates may or may not be issued, each Purchase Payment
is confirmed to the Contract Owner. Each account will have its own optional
Guarantee Period and Guaranteed Interest Rate. Surrenders under the group
Annuity Contract may be made at the election of the Contract Owner, from the
account established under the Contract. Account surrenders are subject to the
same limitations, adjustments and charges as surrenders made under a
Certificate (see "Surrenders"). Cash Surrender Values may be taken in cash or
applied to purchase annuities for the Contract Owners' Qualified Plan
Participants.
Because there might be Participant accounts, the qualified group Annuity
Contract issued in connection with a Qualified Plan may not provide for death
benefits. Annuities purchased for Qualified Plan Participants may provide for a
payment upon the death of the Annuitant depending on the option chosen (see
"Annuity Options"). Additionally, since there might not be Annuitants prior to
the actual purchase of an Annuity by the Contract Owner, the provisions
regarding the Maturity Date may not be applicable.
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APPENDIX B
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WHAT YOU NEED TO KNOW IF YOU ARE A TEXAS OPTIONAL RETIREMENT PROGRAM
PARTICIPANT
If You are a Participant in the Texas Optional Retirement Program, Texas law
permits Us to make withdrawals on Your behalf only if You die, retire or
terminate employment in all Texas institutions of higher education, as defined
under Texas law. Any withdrawal You ask for requires a written statement from
the appropriate Texas institution of higher education verifying Your vesting
status and (if applicable) termination of employment. Also, We require a
written statement from You that You are not transferring employment to another
Texas institution of higher education. If You retire or terminate employment in
all Texas institutions of higher education or die before being vested, amounts
provided by the state's matching contribution will be refunded to the
appropriate Texas institution. We may change these restrictions or add others
without Your consent to the extent necessary to maintain compliance with the
law.
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