As filed with the Securities and Exchange Commission on January 16, 2001
Securities Act Registration No. _________
Investment Act Registration No. 811-07627
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.____ [ ]
Post Effective Amendment No. ____ [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT ACT OF 1940
Amendment No. 7 [X]
------
ACACIA NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT II
(Exact Name of Registrant)
ACACIA NATIONAL LIFE INSURANCE COMPANY
(Depositor)
7315 Wisconsin Avenue
Bethesda, Maryland 20814
(301) 280-1000
Robert-John H. Sands
Senior Vice President and General Counsel
Acacia National Life Insurance Company
7315 Wisconsin Avenue
Bethesda, Maryland 20814
Approximate Date of Proposed Public Offering: As soon as practicable after
effective date.
TITLE OF SECURITIES BEING REGISTERED: SECURITIES OF UNIT INVESTMENT TRUST
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a) may determine.
<PAGE>
<TABLE>
ACACIA DESIGNER ANNUITY
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-4
PART A
FORM N-4 ITEM HEADING IN PROSPECTUS
<S> <C> <C>
Item 1. Cover Page.........................Cover Page
Item 2. Definitions........................DEFINED TERMS
Item 3. Synopsis or Highlights.............POLICY OVERVIEW; FEE TABLES; Advertising
Item 4. Condensed Financial Information....Financial Information
Item 5. General Description of Registrant,
Depositor and Portfolio Companies
a) Depositor.......................MISCELLANEOUS - About Our Company
b) Registrant......................INVESTMENT OPTIONS - Separate Account Variable Investment
Options
c) Portfolio Company...............INVESTMENT OPTIONS - Separate Account Variable Investment
Options
d) Prospectus......................Cover Page; INVESTMENT OPTIONS
e) Voting..........................MISCELLANEOUS - Voting Rights
f) Administrator...................N/A
Item 6. Deductions and Expenses
a) Deductions......................FEE TABLES; FEES
b) Sales Load......................FEE TABLES; FEES - Withdrawal Charge
c) Special purchase plans..........FEES - Waiver of Certain Fees
d) Commissions.....................FEES - Distribution Expenses
e) Portfolio company deductions and
expenses...........................FEE TABLES
f) Registrant's expenses...........N/A
Item 7. General Description of Variable
Annuity Contracts
a) Rights..........................IMPORTANT POLICY PROVISIONS; MISCELLANEOUS - Voting Rights
b) Allocations, Transfers.......... INVESTMENT OPTIONS - Transfers
c) Changes in contracts or
operations.........................INVESTMENT OPTIONS - Separate Account Variable Investment Options - Adding,
Deleting, or Substituting Variable Investment Options
d) Contract owner inquiries........Cover Page; Table of Contents Page; Last Page
Item 8. Annuity Period
a) Level of benefits...............POLICY DISTRIBUTIONS - Annuity Income Phase
b) Annuity commencement date.......POLICY DISTRIBUTIONS - Annuity Income Phase
c) Annuity payments................POLICY DISTRIBUTIONS - Annuity Income Phase
d) Assumed investment return.......N/A
e) Minimums........................POLICY DISTRIBUTIONS - Annuity Income Phase
f) Rights to change options or
transfer investment base...........POLICY DISTRIBUTIONS - Annuity Income Phase
Item 9. Death Benefit
a) Death benefit calculation.......POLICY DISTRIBUTIONS - Death Benefits
b) Forms of benefits...............POLICY DISTRIBUTIONS - Annuity Income Phase
Item 10. Purchases and Contract Values
a) Procedures for
purchases........Cover Page;
IMPORTANT POLICY PROVISIONS -
Policy Application and
Issuance; IMPORTANT POLICY
PROVISIONS - Your Policy Value
b) Accumulation unit value.........IMPORTANT POLICY PROVISIONS - Your Policy Value
<PAGE>
c) Calculation of accumulation unit
value..............................IMPORTANT POLICY PROVISIONS - Your Policy Value
d) Principal underwriter...........MISCELLANEOUS - Distributor of the Policies
Item 11. Redemptions
a) Redemption procedures...........POLICY DISTRIBUTIONS - Withdrawals
b) Texas Optional Retirement
Program............................N/A
c) Delay...........................IMPORTANT POLICY PROVISIONS - Delay of Payments
d) Lapse...........................N/A
e) Revocation of rights............IMPORTANT POLICY PROVISIONS - Policy Application and Issuance
Item 12. Taxes
a) Tax consequences................FEDERAL TAX MATTERS
b) Qualified plans.................FEDERAL TAX MATTERS
c) Impact of taxes.................FEDERAL TAX MATTERS
Item 13. Legal Proceedings..................MISCELLANEOUS - Legal Proceedings
Item 14. Table of Contents for Statement of
Additional Information.............Statement of Additional Information Table of Contents
PART B
FORM N-4 ITEM....................................HEADING IN STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page..............................Cover Page
Item 16. Table of Contents.......................Table of Contents
Item 17. General Information and History
a) Name change/Suspended Sales..........N/A
b) Attribution of Assets................N/A
c) Control of Depositor.................General Information and History
Item 18. Services
a) Fees, expenses and costs.............N/A
b) Management-related services..........N/A
c) Custodian and independent public
accountant..............................Services
d) Other custodianship..................N/A
e) Administrative servicing agent.......N/A
f) Depositor as principal
underwriter.............................N/A
Item 19. Purchase of Securities Being Offered
a) Manner of Offering...................N/A
b) Sales load...........................N/A
Item 20. Underwriters
a) Depositor or affiliate as principal
underwriter.............................Underwriters
b)continuous offering...................Underwriters
c) Underwriting commissions.............Underwriters
d) Payments of underwriter..............N/A
Item 21. Calculation of Performance Data.........Calculation of Performance
Item 22. Annuity Payments........................N/A
Item 23. Financial Statements
a) Registrant...........................Financial Statements
b) Depositor............................Financial Statements
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
PROSPECTUS: _______, 2001
Acacia Designer Annuity(sm)
Flexible Premium ACACIA NATIONAL LIFE INSURANCE COMPANY [LOGO]
Deferred Variable Annuity Policy AN AMERITAS ACACIA COMPANY
Acacia National Variable Annuity Separate Account II
--------------------------------------------------------------------------------
This prospectus describes the Policy, especially its Separate Account. The
Policy is designed to help you, the Policy Owner, invest on a tax-deferred basis
and meet long-term financial goals. It provides a menu of optional features for
you to select from to meet your particular needs; ask your sales representative
or us which of these are available in your state. As an annuity, it also
provides you with several ways to receive regular income from your investment.
An initial minimum payment is required. Further investment is optional.
You may allocate all or part of your investment among variable investment
options (where you have the investment risk, including possible loss of
principal) with allocated indirect interests in non-publicly traded portfolios
from these series funds:
<TABLE>
<CAPTION>
Series Fund issuing the Subaccount variable
Referred to as: investment option underlying portfolios Portfolio
------------------ ------------------------------------------------ -------------------------------------------
------------------ ------------------------------------------------ -------------------------------------------
<S> <C> <C>
ALGER The Alger American Fund FRED ALGER MANAGEMENT, INC.
------------------ ------------------------------------------------ -------------------------------------------
------------------ ------------------------------------------------ -------------------------------------------
CALVERT SOCIAL Calvert Variable Series,Inc. Calvert Social CALVERT ASSET MANAGMENT COMPANY, INC.
Portfolios
------------------ ------------------------------------------------ -------------------------------------------
------------------ ------------------------------------------------ -------------------------------------------
DEUTSCHE Deutsche Asset Management VIT Funds BANKERS TRUST COMPANY
------------------ ------------------------------------------------ -------------------------------------------
------------------ ------------------------------------------------ -------------------------------------------
FIDELITY Variable Insurance Products: Service Class 2 FIDELITY MANAGEMENT & RESEARCH COMPANY
------------------ ------------------------------------------------ -------------------------------------------
------------------ ------------------------------------------------ -------------------------------------------
NEUBERGER BERMAN Neuberger Berman Advisers Management Trust NEUBERGER BERMAN MANAGEMENT INC.
------------------ ------------------------------------------------ -------------------------------------------
------------------ ------------------------------------------------ -------------------------------------------
OPPENHEIMER Oppenheimer Variable Account Funds OPPENHEIMER FUNDS, INC.
------------------ ------------------------------------------------ -------------------------------------------
------------------ ------------------------------------------------ -------------------------------------------
TEMPLETON Franklin Templeton Variable Insurance Products TEMPLETON INVESTMENT COUNSEL, INC.
Trust
------------------ ------------------------------------------------ -------------------------------------------
------------------ ------------------------------------------------ -------------------------------------------
VAN ECK Van Eck Worldwide Insurance Trust VAN ECK ASSOCIATES
------------------ ------------------------------------------------ -------------------------------------------
</TABLE>
or you may allocate all or part of your investment to a Fixed Account fixed
interest rate option (where we have the investment risk and guarantee a certain
return on your investment).
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. It
provides information you should consider before investing in a Policy.
Prospectuses for the portfolios underlying the Subaccount variable investment
options are available without charge from your sales representative or from our
Service Center.
A Statement of Additional Information and other information about us and
the Policy, with the same date as this prospectus, is on file with the
Securities and Exchange Commission ("SEC") and is incorporated into this
prospectus by reference. For a free copy, access it on the SEC's Web site
(WWW.SEC.GOV/EDAUX/PROSPECT.HTM, and type in "Acacia National"), or write or
call us. The Table of Contents for the Statement of Additional Information is on
the last page of this prospectus.
THE SEC DOES NOT PASS UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS, AND HAS NOT APPROVED OR DISAPPROVED THE
POLICY. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NOT FDIC INSURED : MAY LOSE VALUE : NO BANK GUARANTEE
--------------------------------------------------------------------------------
ACACIA NATIONAL LIFE INSURANCE COMPANY (WE, US, OUR)
Home Office: 7315 Wisconsin Ave., Bethesda, Maryland 20814.
SERVICE CENTER, P.O. BOX 82579, LINCOLN, NEBRASKA 68501. 1-888-837-6791.
WWW.ACACIAGROUP.COM
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS BEGIN ON PAGE
--------------------------------------------------------------------------------
DEFINED TERMS...............................................3
POLICY OVERVIEW.............................................4
FEE TABLE...................................................6
FINANCIAL INFORMATION.......................................9
IMPORTANT POLICY PROVISIONS.................................9
Policy Application and Issuance
Your Policy Value
Telephone Transactions
Death of Annuitant
Delay of Payments
Beneficiary
Minor Owner or Beneficiary
Policy Changes
Spendthrift Trust Endorsement
Policy Termination
Optional Features
INVESTMENT OPTIONS.........................................14
Separate Account Variable Investment Options
Fixed Account Fixed Interest Rate Option
Transfers
Third-Party Services
Systematic Transfer programs: Model Asset Allocation,
Dollar Cost Averaging, Portfolio Rebalancing,
Earnings Sweep
FEES 19
Withdrawal Charge
Mortality and Expense Risk Charge
Administrative Fees
Administrative Expense Fee, Annual Policy Fee
Transfer Fee
Tax Charges
Fees Charged by the Portfolios
Optional Features' Fees
POLICY DISTRIBUTIONS.......................................21
Withdrawals
Loans
Death Benefits
Annuity Income Phase
FEDERAL TAX MATTERS........................................27
Taxation of Nonqualified Policies
Taxation of Qualified Policies
Possible Tax Law Changes
MISCELLANEOUS..............................................29
About Our Company
Distribution of the Policies
Voting Rights
Distribution of Materials
Advertising
Legal Proceedings
APPENDIX A: Variable Investment Option Portfolios..........A:1
APPENDIX B: Tax-Qualified Plan Disclosures................B:1
Thank You. If You Have Questions,......................Last Page
Statement of Additional Information Table of Contents...Last Page
CONTACTING US. To answer your questions or to send additional premium, contact
your sales representative or write or call us at:
Acacia National Life
Insurance Company,
Service Center
P.O. Box 82579
Lincoln, Nebraska 68501
Or
5900 "O" Street
Lincoln, Nebraska 68510
Telephone: 1-888-837-6791
Fax: 1-402-467-6153
WWW.ACACIAGROUP.COM
Express mail packages should be sent to our street address, not our P.O. Box
address.
SENDING FORMS, WRITTEN NOTICE AND WRITTEN REQUESTS IN "GOOD ORDER." If you are
writing to change your beneficiary, request a withdrawal or for any other
purpose, contact us or your sales representative to learn what informaiton is
required for the request to be in "good order". We can only act upon requests
that are received in good order.
REMEMBER, THE CORRECT FORM is important for us to accurately process your Policy
elections and changes. Many can be found on our website "on-lines services"
site. Or, call us at our toll-free number and we'll send you the form you need.
MAKE CHECKS PAYABLE TO: "Acacia National Life Insurance Company"
Acacia Designer Annuity -2-
<PAGE>
DEFINED TERMS
--------------------------------------------------------------------------------
ACCUMULATION UNITS are an accounting unit of measure used to calculate the
Policy value allocated to Subaccounts of the Separate Account. It is similar to
a share of a mutual fund. The Policy describes how Accumulation Units are
calculated.
ANNUITY DATE is the date annuity income payments are scheduled to begin. This
date is identified on the Policy Schedule page of your Policy. You may change
this date, as permitted by the Policy and described in this prospectus.
BUSINESS DAY is each day that the New York Stock Exchange is open for trading.
CASH SURRENDER VALUE is the Policy value less applicable withdrawal charge,
Policy fee, outstanding loans, and any premium tax charge not previously
deducted.
OWNER, YOU, YOUR is you -- the person(s) or legal entity who may exercise all
rights and privileges under the Policy. If there are joint Owners, the
signatures of both Owners are needed to exercise rights under the Policy.
POLICY YEAR/MONTH/ANNIVERSARY are measured from respective anniversary dates of
the date of issue of this Policy.
SUBACCOUNT is a division within the Separate Account for which Accumulation
Units are separately maintained. Each Subaccount corresponds to a single
underlying non-publicly traded portfolio issued through a series fund.
WE, US, OUR, ACACIA, ANLIC - Acacia National Life Insurance Company.
WRITTEN NOTICE OR REQUEST -- Written notice, signed by you, on a form approved
by or acceptable to us, that gives us the information we require and is received
at ANLIC, Service Center, P.O. Box 82579, Lincoln, NE 68501 (or 5900 "O" Street,
Lincoln, NE 68510), fax 1-402-467-6153. Call us if you have questions about what
form or information is required.
--------------------------------------------------------------------------------
THIS PROSPECTUS MAY ONLY BE USED TO OFFER THE POLICY WHERE
THE POLICY MAY LAWFULLY BE SOLD. THE POLICY, AND CERTAIN
FEATURES DESCRIBED IN THIS PROSPECTUS, MAY NOT BE AVAILABLE
IN ALL STATES.
IF YOUR POLICY IS ISSUED AS PART OF A QUALIFIED PLAN UNDER
THE INTERNAL REVENUE CODE, REFER TO ANY PLAN DOCUMENTS
AND DISCLOSURES FOR INFORMATION ABOUT HOW SOME OF THE
BENEFITS AND RIGHTS OF THE POLICY MAY BE AFFECTED.
NO ONE IS AUTHORIZED
TO GIVE INFORMATION OR MAKE ANY REPRESENTATION ABOUT THE POLICY
THAT IS NOT IN THIS PROSPECTUS.
IF ANYONE DOES SO, YOU SHOULD NOT RELY UPON IT AS
BEING ACCURATE OR ADEQUATE.
Acacia Designer Annuity -3-
<PAGE>
POLICY OVERVIEW
--------------------------------------------------------------------------------
THE FOLLOWING IS INTENDED AS A SUMMARY. PLEASE READ EACH SECTION OF
THIS PROSPECTUS FOR ADDITIONAL DETAIL.
The ACACIA DESIGNER ANNUITY Policy is a variable annuity savings
vehicle offering a variety of investment options to help meet long-term
financial goals. The Policy includes a menu of feature options for you to select
from to meet your particular needs; ask your sales representative or us which
ones are available in your state. Associated charges are discussed in this
prospectus' FEE TABLES and FEES sections. You can allocate your premiums among a
wide spectrum of Separate Account variable investment options or to a Fixed
Account fixed interest rate option. On the Separate Account variable investment
options you may gain or lose money on your investment. On the Fixed Account
option, we guarantee you will earn a fixed rate of interest. The investment
options are described on this prospectus' cover and the INVESTMENT OPTIONS
section.
[] COMPARISON TO OTHER POLICIES AND INVESTMENTS
COMPARED TO FIXED ANNUITIES. The Policy is like a fixed annuity in most
ways except for its variable investment features. The Policy is different from
fixed-interest annuities in that, to the extent you select Separate Account
variable investment options, your Policy value will reflect the investment
experience of the selected variable investment options, so you have both the
investment risk (including possible loss of principal) and opportunity, not us.
COMPARED TO MUTUAL FUNDS. Although the Separate Account variable
investment options' underlying portfolios operate like publicly traded mutual
funds and have the same investment risks, in many ways the Policy differs from
publicly traded mutual fund investments. Unlike publicly traded mutual funds,
the Policy has these features:
A significant advantage of the Policy is that it provides the ability to
accumulate capital on a tax-deferred basis. The purchase of a Policy to fund a
tax-qualified retirement account does not provide any additional tax deferred
treatment beyond the treatment provided by the tax-qualified retirement plan
itself. However, the Policy does provide benefits such as lifetime income
payments, family protection through death benefits and guaranteed fees.
o Accumulates capital on a tax-deferred basis.
o A guaranteed minimum return on your investment (if you choose a Fixed Account
option).
o Can provide annuity payments for the rest of your life or for some
other period.
o Provides a death benefit that could be higher than the value of
the Policy.
o Federal income tax liability on any earnings generally is deferred until you
receive a distribution from the Policy.
o You can transfer money from one
underlying investment portfolio to another without tax liability.
o Dividends and capital gains distributed by the variable investment options'
underlying portfolios are automatically reinvested and are reflected in the
portfolio's value.
o Insurance-related charges not associated with direct mutual fund investments
are deducted from the value of the Policy.
o Withdrawals before age 59 1/2 generally are subject to a 10% federal tax
penalty. Also, Policy earnings that would be treated as capital gains in a
mutual fund are treated as ordinary income when distributed, although taxation
of them is deferred until such earnings are distributed. Taxable earnings are
considered to be paid out first followed by the return of your premiums.
o Withdrawals can result in a withdrawal charge.
o You have a short time period to review your Policy and cancel it for a
return of premium paid. The terms of this "right to examine" period vary by
state (see the cover of your Policy).
o We, not you, own the shares of the variable investment option's underlying
portfolios. You have interests in the Separate Account Subaccounts that
invest in the underlying portfolios that you select.
[] TAX-QUALIFIED PLANS
The Policy can be used to fund a tax-qualified plan such as an IRA or
Roth IRA (including for rollovers from tax-sheltered annuities), SEP, or SIMPLE
IRA, etc. This Prospectus generally addresses the terms that affect a
non-tax-qualified annuity. If your Policy funds a tax-qualified plan, read the
Qualified Plan Disclosures in this prospectus' APPENDIX B to see how they might
change your Policy rights and requirements. Contact us if you have questions
about the use of the Policy in these or other tax-qualified plans.
Acacia Designer Annuity -4-
<PAGE>
[] POLICY OPERATION & FEATURES
PREMIUMS.
o Minimum initial premium: $25,000.
o Minimum additional premium is $1,000, or $50 per month if by monthly
electronic funds transfer.
o No additional premiums will be accepted after the earlier of the Annuity Date
or the Annuitant's 85th birthday without our approval.
INVESTMENT OPTIONS.
o Variable investment option allocations are invested in Subaccounts of the
Separate Account, which in turn invest in corresponding underlying
portfolios. Fixed Account allocations are invested in our general account and
we guarantee a fixed rate of interest.
o You may transfer between investments, subject to limits. Dollar cost
averaging, portfolio rebalancing and earnings sweep systematic investment
programs are available.
DEDUCTIONS FROM ASSETS.
(SEE FEE TABLES ON NEXT PAGES.)
Deductions from entire Policy value:
o Generally, premium taxes, if any.(Some states levy this tax when premium is
paid.)
o Policy fee, if any.
o Withdrawal charge, if any.
o Charges for selected optional features.
Deductions from Separate Account assets only:
o Mortality and expense risk charge.
o Administrative expense charge.
o Underlying portfolio investment advisory fees and operating expenses.
WITHDRAWALS.
o Withdrawal charges apply to withdrawals under the base Policy. Two optional
"free withdrawal" features are available, for a charge. After a premium is
received, withdrawal charges apply for 9 years or, for a charge, 7 years or 5
years.
o Each withdrawal must be at least $250.
ANNUITY INCOME.
o Several fixed annuity income options are available.
-----------------
Premiums to
Your Policy
-----------------
---------------------------------------------------------
Acacia National Life Insurance Company
---------------------------------------------------------
---------------------------------------------------------
Investment Options
---------------------------------------------------------
-------------- -- ---------------------------------------
Fixed
Account Acacia National Variable Annuity
Separate Account II
POLICY VALUE
RECEIVES A Variable Investment Options
GUARANTEED POLICY VALUE MAY VARY DAILY DEPENDING
FIXED UPON THE INVESTMENT PERFORMANCE OF
INTEREST THE UNDERLYING PORTFOLIOS.
RATE.
-------------- -- ---------------------------------------
-------------- -- ---------------------------------------
The Subaccounts
-------------- --
-------------- -- ------------ ------------- ------------
A B Etc.
-------------- -- ------------ ------------- ------------
-------------- -- ------------ ------------- ------------
Underlying Underlying Etc.
Portfolio A Portfolio B
-------------- ------------ ------------- ------------
---------------------------------------------------------
Fees (DEDUCTIONS FROM ASSETS)
---------------------------------------------------------
------------------- --------------- ---------------
Withdrawals Death Annuity
Benefit Income Options
------------------- --------------- ---------------
DEATH BENEFIT.
o A standard death benefit is paid upon the death of the Annuitant unless the
guaranteed minimum death benefit is payable.
OPTIONAL FEATURES.
o Optional features available are listed in the prospectus' IMPORTANT POLICY
PROVISIONS section. Most can only be elected at Policy issue and only if you
are then not older than age 70.
Acacia Designer Annuity -5-
<PAGE>
[] POLICY PHASES
The Policy is a deferred annuity: it has an accumulation (or deferral) phase and
an annuity income phase.
ACCUMULATION PHASE. During the accumulation phase, any earnings that
you leave in the Policy are not taxed. During this phase you can invest
additional money into the Policy, transfer amounts among the investment options,
and withdraw some or all of the value of your Policy. Some restrictions may
apply to transfers (especially to transfers out of the Fixed Account).
Withdrawals may be subject to a withdrawal charge, income tax and a penalty tax.
ANNUITY INCOME PHASE. The accumulation phase ends and the annuity
income phase begins on a date you select or the later of the fifth Policy
Anniversary or Anniversary nearest the annuitant's 85th birthday. During the
annuity income phase, we will make periodic payments to the annuitant, unless
you specify otherwise. You can select payments that are guaranteed to last for
the annuitant's entire life or for some other period. Some or all of each
payment will be taxable.
FEE TABLES (> = BASE POLICY; Y = OPTIONAL FEATURE FEE)
--------------------------------------------------------------------------------
The following charts show the fees that may affect your Policy value.
The fees shown do not reflect any premium tax that may apply.
<TABLE>
<CAPTION>
<S> <C> <C>
--------------------------------------------------------------------------------
> = Base Policy Fees Current Guaranteed
x = Optional Feature Fees Fee Maximum
Fee
--------------------------------------------------------------------------------
TRANSACTION FEES
--------------------------------------------------------------------------------
WITHDRAWAL CHARGE (THE FEE FOR THE WITHDRAWAL CHARGE FEATURES IS DEDUCTED
MONTHLY FROM POLICY VALUE TO EQUAL THE ANNUAL % SHOWN)
-----------------------------------------------
(THE WITHDRAWAL CHARGE IS Years since recipt of premium
DEDUCTED AS A % OF EACH 1 2 3 4 5 6 7 8 9 10+
PREMIUM WITHDRAWN) --- --- --- --- --- --- --- --- --- ---- ---------- -------------
> 9-YEAR WITHDRAWAL CHARGE 8% 8% 8% 7% 7% 6% 5% 4% 2% 0% NONE NONE
--- --- --- --- --- --- --- --- --- ---
Y 7-YEAR WITHDRAWAL CHARGE 7% 6% 5% 4% 3% 2% 1% 0% - - 0.30% 0.40%
--- --- --- --- --- --- --- --- --- ---
Y 5-YEAR WITHDRAWAL CHARGE 7% 7% 6% 4% 2% 0% - - - - 0.45% 0.60%
---------------------------------- --------------------------------------------- ---------------- ---------------
> TRANSFER FEE > first 15 transfers per year NONE NONE
(PER TRANSFER) > over 15 transfers in one Policy Year, $10 $10
we may charge ...
----------------------------------------------------------------------------------------------------------------------
ANNUAL POLICY FEE (WAIVED IF POLICY VALUE IS AT LEAST $50,000.)
----------------------------------------------------------------------------------------------------------------------
NONE $40
> ANNUAL POLICY FEE $36 $40
Y OPTIONAL MINIMUM INITIAL PREMIUM FEATURE ANNUAL POLICY FEE
----------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES
(DEDUCTED DAILY FROM ASSETS ALLOCATED TO SEPARATE ACCOUNT SUBACCOUNTS TO EQUAL THE ANNUAL % SHOWN )
------------------------------------------------------------------------------------- ---------------- ---------------
> MORTALITY & EXPENSE RISK CHARGE 0.70% 0.85
> ADMINISTRATIVE EXPENSE FEE 0.15% 0.25%
---------------------------------------------------------------------------------------------------------------------
TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES 0.85% 1.10%
----------------------------------------------------------------------------------------------------------------------
MORE OPTIONAL FEATURE FEES
(DEDUCTED MONTHLY FROM POLICY VALUE TO EQUAL THE ANNUAL % SHOWN)
--------------------------------------------------------------------------------------------------------------------
Y OPTIONAL MINIMUM INITIAL PREMIUM FEATURE (WAIVED IF POLICY VALUE IS AT
LEAST $50,000) 0.25% 0.55%
-------------------------------------------------------------------------------------------------------------------
OPTIONAL FREE WITHDRAWAL PRIVILEGE FEATURES
x able to withdraw 10% of Policy value without withdrawal charge 0.05% 0.15%
0.20% 0.40%
x able to withdraw greater of 15% of Policy value, or accumulated earnings,
without withdrawal charge, plus carry over certain amount of unused free
withdrawals
--------------------------------------------------------------------------------------------------------------------
OPTIONAL GUARANTEED MINIMUM DEATH BENEFIT FEATURES
x 1- Year "Periodic Step-Up" Guaranteed Minimum Death Benefit 0.25% 0.55%
x "5% Roll-Up" Guaranteed Minimum Death Benefit 0.35% 0.75%
x "Greater Of" Guaranteed Minimum Death Benefit 0.37% 0.80%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
Acacia Designer Annuity -6-
<PAGE>
--------------------------------------------------------------------------------
SUBACCOUNT UNDERLYING PORTFOLIO ANNUAL EXPENSES
--------------------------------------------------------------------------------
The following chart shows the expenses charged in the year 2000 by each
Subaccount underlying portfolio before each fund provided us with the daily net
asset value. We then deduct applicable Separate Account charges from the net
asset value in calculating the unit value of the corresponding Subaccount. The
management fees and other expenses are more fully described in the prospectus
for each underlying portfolio. Information relating to the underlying portfolios
was provided by the underlying portfolios and was not independently verified by
us.
<TABLE>
<CAPTION>
Total Total
Subaccount's underlying Management 12b-1 Other Fund Waivers and After waivers and
Portfolio Name Fees Fees Fees Fees Reductions reductions, if any
<S> <C> <C> <C> <C> <C> <C>
ALGER
o Alger American Growth 0.75% - 0.04% 0.79% - 0.79%
o Alger American MidCap 0.80% - 0.05% 0.85% - 0.85%
o Alger American Small 0.85% - 0.05% 0.90% - 0.90%
Capitalization
CALVERT SOCIAL(1)
o CVS Social Balanced 0.70% - 0.19% 0.89% - 0.89%
o CVS Social International Equity 1.10% - 0.50% 1.60%(2) - 1.60%
o CVS Social Mid Cap Growth 0.90% - 0.21% 1.11% - 1.11%
o CVS Social Money Market 0.50% - 0.17% .067% - 0.67%
o CVS Social Small Cap Growth 1.00% - 0.58% 1.58% - 1.58%
DEUTSCHE(3)
o VIT Equity 500 Index 0.20% - 0.23% 0.43% 0.13% 0.30%
o VIT Small Cap Index 0.35% - 0.83% 1.18% 0.73% 0.45%
o VIT EAFE Equity Index 0.45% - 0.69% 1.15% 0.50% 0.65%
FIDELITY (SERVICE CLASS 2)
o VIP Contrafund 0.58% 0.25% 0.12% 0.95% - 0.95%(4)
o VIP Equity-Income 0.48% 0.25% 0.10% 0.83% - 0.83%(4)
o VIP High Income 0.58% 0.25% 0.12% 0.95% - 0.95%
o EUBERGER BERMAN
o AMT Growth 0.84% - 0.08% 0.92% - 0.92%
o AMT Limited Maturity Bond 0.65% - 0.11% 0.76% - 0.76%
o AMT Partners 0.80% - 0.07% 0.87% - 0.87%
OPPENHEIMER
o Aggressive Growth /VA 0.66% - 0.01% 0.67% - 0.67%
o Capital Appreciation /VA 0.68% - 0.02% 0.70% - 0.70%
o High Income /VA 0.74% - 0.01% 0.75% - 0.75%
o Main Street Growth & Income /VA 0.73% - 0.05% 0.78% - 0.78%
o Strategic Bond /VA 0.74% - 0.04% 0.78% - 0.78%
TEMPLETON (CLASS 2)
o Asset Strategy (5) 0.60% 0.25% 0.14% 0.99% - 0.99%
o International Securities (5) 0.65% 0.25% 0.20% 1.10% - 1.10%
VAN ECK
o Worldwide Hard Assets 1.00% - 0.26% 1.26% - 1.26%
</TABLE>
(1) "Other Fees" reflect an indirect fee resulting from the portfolio's offset
arrangement with the custodian bank whereby the custodian's and transfer
agent's fees may be paid indirectly by credits earned on the portfolio's
uninvested cash balances. These credits are used to reduce the Portfolio's
expenses. Net operating expenses after reductions for fees paid indirectly
would be as follows:
CVS Social Balanced 0.86%
CVS Social International Equity 1.50%
CVS Social Mid Cap Growth 1.02%
CVS Money Market 0.64%
CVS Social Small Cap Growth 1.15%
(2) Total expenses reflect expenses expected to be incurred in 2000, resulting
from a change in 1999 to the administrative services agreement, as approved
by the shareholders.
(3) The investment advisor receives a fee for its services that is a percentage
of each fund's average daily net assets. The investment advisor has agreed
to waive and/or reimburse operating expenses, including its fees, that
exceed certain percentages of the funds' aggregate average daily net
assets. Any differences in amounts are due to rounding.
(4) A portion of the brokerage commissions that certain Funds pay was used to
reduce Fund expenses. Also, through arrangements with certain Fund
custodians, credits realized as a result of uninvested cash balances were
used to reduce a portion of each applicable Fund's expenses. After
reductions, total operating expenses would have been:
VIP Contrafund: Service Class 2 0.65%
VIP Equity-Income: Service Class 2 0.56%
(5) The fund's class 2 distribution plan or "rule 12b-1 plan" is described in
the fund's prospectus. While the maximum amount payable under the fund's
12b-1 plan is 0.35% per year of the fund's average daily net assets, the
series fund has set the current rate at 0.25% per year.
Acacia Designer Annuity -7-
<PAGE>
Expense reimbursement agreements are expected to continue in future years but
may be terminated at any time. As long as the expense limitations continue for a
portfolio, if a reimbursement occurs, it has the effect of lowering the
portfolio's expense ratio and increasing its total return.
We may receive administrative fees from the investment advisers of certain
portfolios. We currently do not assess a separate charge against our Separate
Account or Fixed Account for any income taxes. We may, however, make such a
charge in the future if income or gains within the Separate Account will incur
any income tax liability, or if tax treatment of us changes.
EXAMPLES. The following chart shows the overall expenses you would pay
under a Policy under certain assumptions. In total, these examples assume
maximum charges of 1.10% for Separate Account annual expenses, a $40 guaranteed
maximum Policy fee (although our current base Policy fee is $0), 2.35% of other
Policy value annual expenses for the most expensive of each optional feature
(the Minimum Initial Premium, 15%+ carryover free withdrawal, 5-year withdrawal
charge, and "greater of" guaranteed minimum death benefit optional features),
plus the underlying portfolio 2000 expenses. If you select fewer or less
expensive optional features, your expenses could be less than shown. If our
current fees are less than the guaranteed maximum fees, your expenses could also
be less than shown. The examples assume that the fee waiver and expense
reimbursement limits set forth in the chart above will continue for the period
shown, but do not reflect any premium tax charge which may apply. THE EXAMPLE
AMOUNTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. YOUR ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN IN THE CHART.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
An Owner would pay the 1 2 3
following expenses on Surrender Policy Annuitize Policy Policy is not
a $1,000 investment at end of the time at the end of the surrendered
assuming a 5% annual period. ($) time period. ($) and is not
return on assets if: annuitized.($)
----------------------------------------------------------------------------------
Variable Investment 1yr 3yr 5yr 10yr 1yr 3yr 5yr 10yr 1yr 3yr 5yr 10yr
Option
----------------------------------------------------------------------------------
ALGER
o Alger American Growth
o Alger American MidCap
o Alger American Small
Capitalization
CALVERT SOCIAL
o CVS Social Balanced
o CVS Social International
Equity
o CVS Social Mid Cap Growth
o CVS Social Money Market
o CVS Social Small Cap
Growth
DEUTSCHE
o VIT Equity 500 Index
o VIT Small Cap Index
o VIT EAFE Equity Index
FIDELITY (SERVICE CLASS 2)
o VIP Contrafund
o VIP Equity-Income
o VIP High Income
NEUBERGER BERMAN
o AMT Growth
o AMT Limited Maturity Bond
o AMT Partners
OPPENHEIMER
o Aggressive Growth /VA
o Capital Appreciation /VA
o High Income/VA
o Main Street Growth & Income /VA
o Strategic Bond /VA
TEMPLETON (CLASS 2)
o Asset Strategy
o International Securities
VAN ECK
o Worldwide Hard Assets
THESE EXAMPLES REFLECT SEPARATE ACCOUNT AND 2000 UNDERLYING PORTFOLIO
EXPENSES. THE $40 GUARANTEED MAXIMUM ANNUAL POLICY FEE IS REFLECTED AS A DAILY
0.07% CHARGE IN THESE EXAMPLES, BASED ON AN AVERAGE POLICY VALUE OF $75,000;
HOWEVER WE DO NOT CURRENTLY CHARGE THE POLICY FEE. PREMIUM TAXES MAY ALSO
APPLY.
---------------------------------------------------------------------------------
</TABLE>
Acacia Designer Annuity -8-
<PAGE>
The Fee Tables are designed to help you understand the various costs
and expenses that a Policy Owner will bear directly or indirectly. For more
information, read this prospectus' FEES section and the prospectus for each
Subaccount's underlying portfolio.
FINANCIAL INFORMATION
--------------------------------------------------------------------------------
We provide Accumulation Unit value history for each of the Separate
Account variable investment options. However, since the Separate Account
variable investment options just commenced operation under this Policy on the
effective date of this prospectus, there is no history to report. Future updated
Policy prospectuses will disclose this information. Financial statements of the
Separate Account and our company are included in the Statement of Additional
Information; to learn how to get a copy, see the front or back page of this
prospectus.
IMPORTANT POLICY PROVISIONS (x = OPTIONAL FEATURE)
--------------------------------------------------------------------------------
The ACACIA DESIGNER ANNUITY Policy is a flexible premium deferred
variable annuity policy. The Policy allows you to save and invest your assets on
a tax-deferred basis. A feature of the Policy distinguishing it from non-annuity
investments is its ability to guarantee annuity payments to you for as long as
the Annuitant lives or for some other period you select. In addition, if you die
before those payments begin, the Policy will pay a death benefit to your
beneficiary. Many key rights and benefits under the Policy are summarized in
this prospectus; however, you must refer to the Policy itself for the actual
terms of the Policy. You may obtain a copy of the Policy from us. The Policy can
be purchased as a tax-qualified or nonqualified annuity. The Policy remains in
force until surrendered for its Cash Surrender Value, or all proceeds have been
paid under an annuity income option or as a death benefit.
[] POLICY APPLICATION AND ISSUANCE
To purchase a Policy, you must submit an application and a minimum
initial premium. A Policy usually will be issued only if you and the Annuitant
are age 0 through 85, nearest birthday. We reserve the right to reject any
application or premium for any reason.
Replacing an existing annuity policy is not always your best choice. Evaluate
any replacement carefully.
If your application is in good order upon receipt, we will credit your
initial net premium to the Policy value in accordance with the "right to
examine" rules in your state within two Business Days after the later of the
date we receive your application or your premium. If the application is
incomplete or otherwise not in good order, we will contact you within five
Business Days to explain the delay; at that time we will refund your initial
premium unless you consent to our retaining it to apply it to your Policy once
all Policy issuance requirements are met.
The Policy Date is the date two days after we receive your application
and initial premium. It is the date used to determine Policy Anniversaries and
Policy Years. No Policy will be dated on or after the 29th day of a month. (This
does not affect how premium is credited; see the paragraph above.)
You can purchase a tax-qualified Policy in connection with a number of
arrangements, including Section 401(a) pension or profit-sharing plans, or an
IRA, Roth IRA, SIMPLE IRA, SEP, 403(b) (TSAs), and Section 457 deferred
compensation plans, subject to certain limitations. See this prospectus' FEDERAL
TAX MATTERS section for details. Call us if to see if the Policy may be issued
as part of other kinds of plans or arrangements.
Acacia Designer Annuity -9-
<PAGE>
o APPLICATION IN GOOD ORDER
All application questions must be answered, but particularly note these
requirements:
o The Owner's and the annuitant's full name, Social Security
number, and date of birth must be included.
o Your premium allocations must becompleted, be in whole percentages, and total
100%.
o Initial premium must meet minimum premium requirements.
o Your signature and your agent's signature must be on the application.
o Identify the type of plan, whether it is nonqualified or, if qualified, the
type of qualified plan.
o City, state and date application was signed must be completed.
o If you have one, give us your e-mail address to facilitate receiving
updated Policy information by internet delivery.
o There may be forms in addition to the application required by law or
regulation, especially when a qualified plan or
replacement is involved.
o Your agent must be both properly licensed and appointed with us.
o PREMIUM REQUIREMENTS
Your premium checks should be made payable to "Acacia National Life
Insurance Company." We may postpone crediting any payment made by check to your
Policy value until the check has been honored by your bank. Payment by certified
check, banker's draft, or cashier's check will be promptly applied. Under our
electronic fund transfer program, you may select a monthly payment schedule for
us to automatically deduct premiums from your bank account or other sources.
Total premiums for all annuities held with us for the same Annuitant may not
exceed $1 million without our consent.
INITIAL PREMIUM
o The only premium required. All others are optional.
o Must be at least $25,000. If you purchase the optional Minimum Initial
Premium feature, it must be at least $2,000. We have the right to change
these premium requirements.
ADDITIONAL PREMIUMS
o Must be at least $1,000; $50 if payments are established as part of a
regularly billed program (electronic funds transfer, payroll deduction,
etc.) or a tax-qualified plan. We have the right to change these premium
requirements.
o Will not be accepted, without our approval, on or after the later of
(i) the Policy Anniversary following your or the annuitant's 85th
birthday or (ii) the Annuity Date.
X OPTIONAL MINIMUM INITIAL PREMIUM FEATURE
For a charge, you may elect an optional feature to allow the initial
premium to be as low as $2,000. Under this feature, additional premium
requirements remain the same. This optional feature is only available at issue
of the Policy and if you and the annuitant are not older than age 70 at issue of
the Policy. See this prospectus' FEES and FEE TABLES sections for information on
the charge for this optional feature.
o ALLOCATING YOUR PREMIUMS
You must allocate your premiums among the variable investment options
or the Fixed Account fixed interest rate option. Initial allocations in your
Policy application will be used for additional premiums until you change your
allocation. If you do not specify any allocation, we will not accept your
premium.
o Allocations must be in whole percentages, and total 100%.
o You may change your allocation by sending us Written Notice or
through an authorized telephone transaction. The change will apply to
premiums received on or after the date we receive your Written Notice
or authorized telephone transaction.
o All premiums will be allocated pursuant to your instructions on
record with us, except your initial premium and any additional
premiums received during your Policy's "right to examine" period may
be subject to special requirements.
"RIGHT TO EXAMINE" PERIOD ALLOCATIONS
RETURN OF VALUE STATE. In states that permit us to refund your Policy
value upon your cancellation of the Policy during the "right to examine" period,
we will allocate your initial premium to your selected variable investment
options on the date of issue of the Policy.
Acacia Designer Annuity -10-
<PAGE>
RETURN OF PREMIUM STATES AND IRA PLAN POLICIES. In states that require
us to refund at least your full premium upon your cancellation of the Policy
during the "right to examine" period and for all IRA plan policies, we will hold
the portion of your initial premium allocated to the Separate Account in the
Calvert Social Money Market Subaccount for 13 days. Then, we will invest your
initial premium in the variable investment options pursuant to your application
instruction. (Any additional premiums we receive during the "right to examine"
period plus 3 days will be allocated in the same manner.) If, at the end of the
"right to examine" period, you decide to cancel your Policy, we will refund the
amount required by your state as stated in your Policy (usually all premiums
paid).
[] YOUR POLICY VALUE
On your Policy's date of issue, the Policy value equals the initial
premium less any charge for applicable premium taxes. On any Business Day
thereafter, the Policy value equals the sum of the values in the Separate
Account variable investment options and the Fixed Account. The Policy value is
expected to change from day to day, reflecting the expenses and investment
experience of the selected variable investment options (and interest earned in
the Fixed Account options) as well as the deductions for fees under the Policy.
o SEPARATE ACCOUNT VALUE
Premiums or transfers allocated to Subaccounts are accounted for in
Accumulation Units. The Policy value held in the Separate Account Subaccounts on
any Business Day is determined by multiplying each Subaccount's Accumulation
Unit value by the number of Subaccount units allocated to the Policy. Each
Subaccount's Accumulation Unit value is calculated at the end of each Business
Day as follows:
(a) the net asset value of the Subaccount's underlying portfolio as of
the end of the current Business Day plus any dividend or capital
gain distribution declared and unpaid by the underlying portfolio
during that Business Day, times the number of shares held by the
Subaccount, before the purchase or redemption of any shares on
that date; minus
(b) the daily administrative expense fee; minus
(c) the daily mortality and expense risk charge; and this result
divided by
(d) the total number of Accumulation Units held in the Subaccount on
the Business Day before the purchase or redemption of any
Accumulation Units on that day.
When transactions are made to or from a Subaccount, the actual dollar
amounts are converted to Accumulation Units. The number of Accumulation Units
for a transaction is found by dividing the dollar amount of the transaction by
the Accumulation Unit value on the Business Day the transaction is made.
o FIXED ACCOUNT VALUE
The Policy value of the Fixed Account (the fixed interest rate
investment option) on any Business Day equals:
(a) the Policy value of the Fixed Account at the end of the preceding
Policy month; plus
(b) any net premiums credited since the end of the previous Policy
month; plus
(c) any transfers from the Subaccounts credited to the Fixed
Account since the end of the previous Policy month; minus
(d) any transfers and transfer fee from the Fixed Account to the
Subaccounts since the end of the previous Policy month; minus
(e) any partial withdrawal and withdrawal charge taken from the Fixed
Account since the end of the previous Policy month; minus
(f) the Fixed Account's share of the annual Policy fee on the
Policy Anniversary; minus
(g) the Fixed Account's share of the charges for any optional
features; plus
(h) interest credited on the Fixed Account balance.
Acacia Designer Annuity -11-
<PAGE>
[] TELEPHONE TRANSACTIONS
TELEPHONE TRANSACTIONS PERMITTED
o Transfers among investment options.
o Establish systematic transfer programs.
o Change of premium allocations.
HOW TO AUTHORIZE TELEPHONE TRANSACTIONS
o Upon your authorization on the Policy application or in Written Notice to
us, you, your registered representative or a third person named by you may
do telephone transactions on your behalf. You bear the risk of the accuracy
of any designated person's instructions to us.
TELEPHONE TRANSACTION RULES:
o Must be received by close of the New York Stock Exchange ("NYSE") (usually
3 p.m. Central Time); if later, the transaction will be processed the next day
the NYSE is open.
o will be recorded for your protection.
o For security, you or your authorized designee must provide your Social
Security number and/or other identification information.
o May be discontinued at any time as to some or all Owners.
We are not liable for following telephone transaction instruction we reasonably
believe to be genuine.
[] DEATH OF ANNUITANT
Upon the annuitant's death prior to 30 days before the Annuity Date,
you may generally name a new annuitant. If any Owner is the annuitant, then upon
that Owner's death, the Policy's applicable death benefit becomes payable to the
named beneficiary(ies). However, if the beneficiary is the deceased Owner's
spouse, then upon that Owner's death the spouse may be permitted under federal
tax law to become the new Owner of the Policy and to name an annuitant and
different beneficiaries.
[] DELAY OF PAYMENTS
We will usually pay any amounts from the Separate Account requested as
a full surrender or partial withdrawal within 7 days after we receive your
Written Notice. We can postpone such payments or any transfers out of a
Subaccount if: (i) the NYSE is closed for other than customary weekend and
holiday closings; (ii) trading on the NYSE is restricted; (iii) an emergency
exists as determined by the SEC, as a result of which it is not reasonably
practical to dispose of securities, or not reasonably practical to determine the
value of the net assets of the Separate Account; or (iv) the SEC permits delay
for the protection of security holders. The applicable rules of the SEC will
govern as to whether the conditions in (iii) or (iv) exist.
We may defer payments of full surrender or partial withdrawals from the
Fixed Account for up to 6 months from the date we receive your Written Notice.
[] BENEFICIARY
You may change your beneficiary by sending Written Notice to us, unless
the named beneficiary is irrevocable. Once we record and acknowledge the change,
it is effective as of the date you signed the Written Notice. The change will
not apply to any payments made or other action taken by us before recording. If
the named beneficiary is irrevocable you may change the named beneficiary only
by Written Notice signed by both you and the beneficiary. If more than one named
beneficiary is designated, and you fail to specify their interest, they will
share equally.
If there are joint Owners, the surviving joint Owner will be deemed the
beneficiary, and the beneficiary named in the Policy application or subsequently
changed will be deemed the contingent beneficiary. If both joint Owners die
simultaneously, the death benefit will be paid to the contingent beneficiary.
If the beneficiary is your surviving spouse, the spouse may elect
either to receive the death benefit, in which case the Policy will terminate, or
to continue the Policy in force with the spouse as Owner.
If the named beneficiary dies before you, then your estate is the
beneficiary until you name a new beneficiary.
Acacia Designer Annuity -12-
<PAGE>
[] MINOR OWNER OR BENEFICIARY
A minor may not own the Policy solely in the minor's name and cannot
receive payments directly as a Policy beneficiary. Contrary to common belief, in
most states parental status does NOT automatically give parents the power to
provide an adequate release to us to make beneficiary payments to the parent for
the minor's benefit. A minor can "own" a Policy through the trustee of a trust
established for the minor's benefit, or through the minor's named and court
appointed guardian, who owns the Policy in his or her capacity as trustee or
guardian. Where a minor is a named beneficiary, we are able to pay the minor's
beneficiary payments to the minor's trustee or guardian. Some states allow us to
make such payments up to a limited amount directly to parents. Parents seeking
to have a minor's interest made payable to them for the minor's benefit are
encouraged to check with their local court to determine the process to be
appointed as the minor's guardian; it is often a very simple process that can be
accomplished without the assistance of an attorney. If there is no adult
representative able to give us an adequate release for payment of the minor's
beneficiary interest, we will retain the minor's interest on deposit until the
minor attains the age of majority.
[] POLICY CHANGES
Any change to your Policy is only effective if on a form acceptable to
us, and then only once it is received at our Service Office and recorded on our
records. Information on how to contact us to determine what information is
needed and where you can get various forms for Policy changes is shown on this
Prospectus' first two pages and last page.
[] X SPENDTHRIFT PROTECTION
An optional Spendthrift Protection Endorsement can be added to your
Policy, at no extra cost, before annuity income benefits begin. Under this
Endorsement, we will pay annuity benefits only to the Owner or to a payee named
by the Owner before annuity benefits begin. The Endorsement seeks to protect
annuity benefits from attachment by the Owner's or other payee's creditors, and
in doing so restricts the Owner's or other payee's rights to anticipate, assign,
commute, transfer or otherwise alienate the proceeds of the annuity benefits.
[] POLICY TERMINATION
We may treat any partial withdrawal that leaves a Policy value of less
than $1,000 as a complete surrender of the Policy. See this prospectus' POLICY
DISTRIBUTIONS: WITHDRAWALS section for more information.
If you have paid no premiums during the previous 36-month period, we
have the right to pay you the total value of your Policy in a lump sum and
cancel the Policy if (i) the Policy value is less than $1,000 (does not apply to
IRAs), or (ii) the paid-up life-time income annuity benefit at maturity, based
on an accumulation of the Policy value to maturity, would be less than $20 per
month. We will not impose a withdrawal charge on involuntary terminations.
[] X OPTIONAL FEATURES
This Policy allows you the opportunity to select, and pay for, only
those variable annuity policy features you want by "unbundling" features that
are often incorporated into a base variable annuity policy. Except for the
optional Spendthrift Protection feature, these optional features are currently
only available at Policy issue, and most are only available if you are then not
older than age 70. Check with your sales representative or us before selecting
an optional feature, as some may not be available in your state. Each of the
optional features is principally described in the prospectus sections noted
below:
<TABLE>
<CAPTION>
[] OPTIONAL FEATURE PROSPECTUS SECTION WHERE IT IS COVERED
---------------- --------------------------------------
<S> <C>
x optional Minimum Initial Premium feature........................IMPORTANT POLICY PROVISIONS:
Policy Application and Issuance
x optional Spendthrift Protection feature.........................IMPORTANT POLICY PROVISIONS
x optional Withdrawal Charge Period features......................FEES: Withdrawal Charge
x optional Free Withdrawal Privilege features.....................POLICY DISTRIBUTIONS: Withdrawals
x optional Guaranteed Minimum Death Benefit features..............POLICY DISTRIBUTIONS: Death Benefits
Charges for each of the optional features are shown in this
prospectus' FEE TABLES section.
</TABLE>
Acacia Designer Annuity -13-
<PAGE>
INVESTMENT OPTIONS
--------------------------------------------------------------------------------
We recognize you have very personal goals and investment strategies. The
Policy allows you to choose from a wide array of investment options - each
chosen for its potential to meet specific investment objectives.
THE VALUE OF YOUR POLICY WILL GO UP (UP ARROW) OR DOWN (DOWN ARROW) BASED ON THE
INVESTMENT PERFORMANCE OF THE VARIABLE INVESTMENT OPTIONS YOU CHOSE. The
investment results of each variable investment option are likely to differ
significantly, and vary over time. They do not earn a fixed interest rate.
Please consider carefully, and on a continuing basis, which investment options
best suit your long-term investment ofjectives and risk tolerance.
You may allocate all or a part of your premiums among 25 Separate Account
variable investment options or the Fixed Account fixed interest rate option.
Allocations must be in whole percentages and total 100%. The variable investment
options, which invest in underlying portfolios, are listed and described in
APPENDIX A to this prospectus.
[] SEPARATE ACCOUNT VARIABLE INVESTMENT OPTIONS (ALSO SEE APPENDIX A)
The Separate Account provides you with variable investment options in the
form of underlying portfolio investments. Each underlying portfolio is an
open-end investment management company. When you allocate investments to an
underlying portfolio, those investments are placed in a Subaccount of the
Separate Account corresponding to that portfolio, and the Subaccount in turn
invests in the portfolio. The Policy value of your Policy depends directly on
the investment performance of the portfolios that you select.
THE UNDERLYING PORTFOLIOS IN THE SEPARATE ACCOUNT ARE NOT PUBLICLY TRADED MUTUAL
FUNDS, AND ARE NOT THE SAME AS OTHER PUBLICLY TRADED MUTUAL FUNDS WITH VERY
SIMILAR NAMES. They are only available as separate account investment options in
life insurance or variable annuity policies issued by insurance companies, or
thourgh participation in certain qulaified pension or retirement plans.
Even if the investment option and policies of some underlying portfolios
available under the Policy may be very similar to the investment objectivies and
policies of publicly traded mutual funds that may be managed by the same
investment adviser, the investment performance and results of the portfolios
available under the Policy may vary significantly from the investment results os
such other publicly traded mutual funds.
You should read the prospectuses for the underlying portfolios together with
this prospectus for mor information.
The Separate Account is registered with the SEC as a unit investment trust.
However, the SEC does not supervise the management or the investment practices
or policies of the Separate Account or Acacia National. The Separate Account was
established as a separate investment account of Acacia National under Virginia
law on November 30, 1995. Under Virginia law, we own the Separate Account
assets, but they are held separately from our other assets and are not charged
with any liability or credited with any gain of business unrelated to the
Separate Account. Any and all distributions made by the underlying portfolios,
with respect to the shares held by the Separate Account, will be reinvested in
additional shares at net asset value. We are responsible to you for meeting the
obligations of the Policy, but we do not guarantee the investment performance of
any of the variable investment options' underlying portfolios. We do not make
any representations about their future performance.
YOU BEAR THE RISK THAT THE VARIABLE INVESTMENT
OPTIONS YOU SELECT MAY FAIL TO MEET THEIR
OBJECTIVES, THAT THEY COULD GO DOWN IN VALUE,
AND THAT YOU COULD LOSE PRINCIPAL.
Each Subaccount underlying portfolio operates as a separate
investment fund, and the income or losses of one generally has no effect on the
investment performance of any other. Complete descriptions of each variable
investment option's investment objectives and restrictions and other material
information related to an investment in the variable investment option are
contained in the prospectuses for each of the series funds which accompany this
prospectus.
Acacia Designer Annuity -14-
<PAGE>
o ADDING, DELETING, OR SUBSTITUTING VARIABLE INVESTMENT OPTIONS
We do not control the Subaccounts' underlying portfolios, so we cannot
guarantee that any of the portfolios will always be available. We retain the
right to change the investments of the Separate Account, and to eliminate the
shares of any Subaccount underlying portfolio and substitute shares of another
series fund portfolio. If the shares of the underlying portfolio are no longer
available for investment or if, in our judgment, investment in the portfolio
would be inappropriate in view of the purposes of the Separate Account, we will
first notify you and receive any necessary SEC and state approval before making
such a change.
New Separate Account underlying portfolios may be added, or existing
funds eliminated, when, in our sole discretion, conditions warrant a change. If
a portfolio is eliminated, we will ask you to reallocate any amount in the
eliminated portfolio. If you do not reallocate these amounts, we will
automatically reinvest them in the Calvert Social Money Market portfolio.
If we make a portfolio substitution or change, we may change the Policy
to reflect the substitution or change. Our Separate Account may be (i) operated
as an investment management company or any other form permitted by law, (ii)
deregistered with the SEC if registration is no longer required, or (iii)
combined with one or more other separate accounts. To the extent permitted by
law, we also may transfer assets of the Separate Account to other accounts.
[]
FIXED ACCOUNT FIXED INTEREST RATE OPTION
There is one fixed interest rate option ("Fixed Account"), where we
bear the investment risk. We guarantee that you will earn a minimum interest
rate that will yield at least 3% per year, compounded annually. We may declare a
higher current interest rate. Whatever interest rate we declare will be
guaranteed for the Policy Year. However, you bear the risk that we will not
credit more interest than will yield the minimum guaranteed rate per year for
the life of the Policy. We have sole discretion over how assets allocated to the
Fixed Account are invested, and we bear the risk that those assets will perform
better or worse than the amount of interest we have declared. The focus of this
prospectus is to disclose the Separate Account aspects of the Policy. For
additional details regarding the Fixed Account, read the Policy.
ALL AMOUNT ALLOCATED TO THE FIXED ACCOUNT BECOME ASSETS OF OUR GNERAL ACCOUNT.
INTEREST IN THE GENERAL ACCOUNT HAS NOT BEEN REGISTERED WITH THE SEC AND IS NOT
SUBJECT TO SEC REGULATION, NOR IS THE GENERAL ACCOUNT REGISTERED AS AN
INVESTMENT COMPANY WITH THE SEC. THEREFOR, SEC STAFF HAVE NOT REVIEWED THE FIXED
ACCOUNT DISCLOSURES IN THIS PROSPECTUS.
[] TRANSFERS
The Policy is designed for long-term investment, not for use with
professional "market timing" services or use with programmed, large or frequent
transfers. Excessive transfers could harm other Policy Owners by having a
detrimental effect on investment portfolio management. We reserve the right to
reject any specific premium allocation or transfer request, if in the judgment
of a Subaccount portfolio fund advisor, a Subaccount portfolio would be unable
to invest effectively in accordance with its investment objectives and policies,
or if Policy owners would otherwise potentially be adversely affected.
Subject to restrictions during the "right to examine period" and prior
to the Annuity Date, you may transfer Policy value from one Subaccount to
another, from the Separate Account to the Fixed Account, or from the Fixed
Account to any Subaccount, subject to these rules:
Acacia Designer Annuity -15-
<PAGE>
TRANSFER RULES:
o A transfer is considered any single request to move assets from one
or more Subaccounts or the Fixed Account to one or more of the other
Subaccounts or the Fixed Account.
o We must receive notice of the transfer- either Written Notice, an
authorized telephone transaction, or by internet when available.
o The transferred amount must be at least $250, or the entire
Subaccount or Fixed Account value if it is less. (If the value
remaining after a transfer will be less the $250 in a Subaccount or
$100 in the Fixed Account, we will include that amount as part of the
transfer.)
- If the Dollar Cost Averaging systematic transfer program is
used, then the minimum transfer amount out of a Subaccount or
the Fixed Account is the lesser of $100 or the balance in the
Subaccount or Fixed Account. Under this program, the maximum
amount that may be transferred from the Fixed Account each month
is 1/36th of the value of the Fixed Account at the time the
Dollar Cost Averaging program is established. While a Dollar
Cost Averaging program is in effect, elective transfers out of
the Fixed Account are prohibited.
- The Portfolio Rebalancing and Earnings Sweep systematic transfer programs have
no minimum transfer limits.
o The first 15 transfers each Policy Year from one investment option to another
are free. Thereafter, transfers may result in a $10 charge for each transfer.
This fee is deducted on a pro-rata basis from balances in all Subaccounts and
the Fixed Account, so is not subtracted from the amount of the transfer.
Transfers under any systematic transfer program DO count toward the 15 free
transfer limit.
o A transfer from the Fixed Account (except made pursuant to a systematic
transfer program):
- may be made only once each Policy Year;
- may be delayed up to six months;
- is limited during any Policy Year to the greater of:
- 25% of the Fixed account value on the date of the initial
transfer during that year;
- the greatest amount of any similar transfer out of the Fixed
Account during the previous 13 months; or
- $1,000.
o We reserve the right to limit transfers, or to modify transfer
privileges, and we reserve the right to change the transfer rules at
any time.
o If the Policy value in any Subaccount falls below $250, we may
transfer the remaining balance, without charge, to the Ameritas Money
Market portfolio.
[] THIRD-PARTY SERVICES
Where permitted and subject to our rules, we may accept your
authorization to have a third party (such as your sales representative or
someone else you name) exercise transfers or investment allocations on your
behalf. Third-party transfers and allocations are subject to the same rules as
all other transfers and allocations. You can make this election on the
application or by sending us Written Notice. Please note that any person or
entity you authorize to make transfers or allocations on your behalf, including
any investment advisory, asset allocation, money management or timing service,
does so independently from any agency relationship they may have with us for the
sale of the Policies. They are accountable to you alone for such transfers or
allocations. We are not responsible for such transfers or allocations on your
behalf, or recommendations to you, by such third-party services. You should be
aware that fees charged by such third-party services for their service are
separate from and in addition to fees paid under the Policy.
[] SYSTEMATIC TRANSFER PROGRAMS
o MODEL ASSET ALLOCATION PROGRAM
Our Model Asset Allocation program is intended to match your risk
tolerance and investment objectives with a model subaccount allocation formula.
The model allocations were designed by Ibbotson Associates, Inc., and provide a
valuable service to an Owner who seeks to follow the science of asset
allocation. Some research studies have shown that the asset allocation decision
is the single largest determinant of portfolio performance. Asset allocation
combines the concepts of asset-liability management, mean-variance optimization,
simulation and economic forecasting. Its objectives are to match asset classes
and strategies to achieve better returns, to reduce volatility and to attain
specific goals such as avoidance of interest rate or market risk. Refer to this
prospectus' APPENDIX A and each portfolio's own prospectus for risks associated
with international investments.
Systematic Transfer Programs are inteded to result in the purchase of mor
Accumulation Units when a portfolio's value is low, and fewer units when its
value is high. However, there is no guarantee that such a prgram will result in
a higher Policy value, protect against a loss, or otherwise be successful.
Acacia Designer Annuity -16-
<PAGE>
MODEL ASSET ALLOCATION PROGRAM RULES:
o There is no additional charge for the Model Asset Allocation program.
o You must complete a written questionnaire about risk tolerance and
Policy performance objectives and provide it to your registered
representative who will help match your needs to an asset allocation
model.
o We must receive your written questionnaire and instruction as to the
asset allocation model chosen before we can begin this program for
you.
o To use the Model Asset Allocation program, you must have all Policy
value allocated to one asset allocation model. Model Asset Allocation
transfers occur quarterly.
o The series funds that are included in a model may change from period
to period. Your election to use a model will remain in effect,
without regard to changes in the funds in that model, unless you
provide us with changed instructions.
The Model Asset Allocation program limits loss, but does not guarantee against a
loss or that you'll achieve your investment goal.
<TABLE>
-------------------------------------- ----------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
WITH International Investment Conservative Conservative Moderate Moderate- Aggressive
-Moderate Aggressive
-------------------------------------- -------------- -------------- ------------- ------------- ------------
Alger American Growth 5% 5% 5% 10%
-------------------------------------- -------------- -------------- ------------- ------------- ------------
Alger American Small Capitalization 5% 5%
-------------------------------------- -------------- -------------- ------------- ------------- ------------
Calvert CVS Social Money Market 15% 10%
-------------------------------------- -------------- -------------- ------------- ------------- ------------
Deutsche VIT Equity 500 Index 10% 12% 15% 20% 20%
-------------------------------------- -------------- -------------- ------------- ------------- ------------
Deutsche VIT Small Cap Index 5% 5% 5%
-------------------------------------- -------------- -------------- ------------- ------------- ------------
Deutsche VIT EAFE Equity Index 5% 10% 15% 20% 25%
-------------------------------------- -------------- -------------- ------------- ------------- ------------
Fidelity VIP Equity-Income
(Service Class 2) 5% 5% 5% 5%
---------------------------------------- -------------- -------------- ------------- ------------- ------------
Neuberger Berman AMT
Limited Maturity Bond 50% 35% 25% 15%
---------------------------------------- -------------- -------------- ------------- ------------- ------------
Neuberger Berman AMT Partners 5% 5% 10% 10% 10%
---------------------------------------- -------------- -------------- ------------- ------------- ------------
Oppenheimer Aggressive
Growth /VA 5%
---------------------------------------- -------------- -------------- ------------- ------------- ------------
Oppenheimer Main Street
Growth & Income /VA 5% 5% 10% 10%
---------------------------------------- -------------- -------------- ------------- ------------- ------------
Oppenheimer Strategic Bond /VA 15% 13% 10%
---------------------------------------- -------------- -------------- ------------- ------------- ------------
Van Eck Worldwide Hard Assets 5% 5% 5%
---------------------------------------- -------------- -------------- ------------- ------------- ------------
</TABLE>
<TABLE>
<CAPTION>
With OUT International Investment Conservative Conservative Moderate Moderate- Aggressive
-Moderate Aggressive
<S> <C> <C> <C> <C> <C>
--------------------------------------- -------------- -------------- ------------- ------------- ------------
Alger American Growth 10% 15% 15% 15%
--------------------------------------- -------------- -------------- ------------- ------------- ------------
--------------------------------------- -------------- -------------- ------------- ------------- ------------
Alger American Small Capitalization 5% 5%
--------------------------------------- -------------- -------------- ------------- ------------- ------------
Calvert CVS Social Money Market 15% 10%
--------------------------------------- -------------- -------------- ------------- ------------- ------------
Deutsche VIT Equity 500 Index 10% 15% 20% 25% 25%
--------------------------------------- -------------- -------------- ------------- ------------- ------------
Deutsche VIT Small Cap Index 5% 5% 5%
--------------------------------------- -------------- -------------- ------------- ------------- ------------
Fidelity VIP Equity-Income
(Service Class 2) 5% 5% 5% 10% 10%
--------------------------------------- -------------- -------------- ------------- ------------- ------------
Neuberger Berman AMT
Limited Maturity Bond 50% 35% 25% 15%
--------------------------------------- -------------- -------------- ------------- ------------- ------------
Neuberger Berman AMT Partners 5% 5% 7% 10% 10%
--------------------------------------- -------------- -------------- ------------- ------------- ------------
Oppenheimer Aggressive
Growth /VA 5%
--------------------------------------- -------------- -------------- ------------- ------------- ------------
Oppenheimer Main Street
Growth & Income /VA 5% 5% 10% 20%
--------------------------------------- -------------- -------------- ------------- ------------- ------------
Oppenheimer Strategic Bond /VA 15% 15% 13%
--------------------------------------- -------------- -------------- ------------- ------------- ------------
Van Eck Worldwide Hard Assets 5% 5% 5%
--------------------------------------- -------------- -------------- ------------- ------------- ------------
</TABLE>
o DOLLAR COST AVERAGING PROGRAM
Dollar Cost Averaging allows you to automatically transfer, on a
periodic basis, a set dollar amount or percentage from the Calvert Social Money
Market Subaccount or the Fixed Account to any other Subaccount(s) or the Fixed
Account. Requested percentages are converted to a dollar amount. You can begin
Dollar Cost Averaging when you purchase the Policy or later. You can increase or
decrease the amount or percentage of transfers or discontinue the program at any
time.
Acacia Designer Annuity -17-
<PAGE>
DOLLAR COST AVERAGING RULES:
o There is no additional charge for the Dollar Cost Averaging program.
o We must receive notice of your election and any changed instruction -
either Written Notice, by telephone transaction instruction, or by
internet when available.
o Automatic transfers can only occur monthly.
o The minimum transfer amount out of the Calvert Social Money Market
portfolio or the Fixed Account is the lesser of $250 or the balance
in the Subaccount or Fixed Account. Under this program, the maximum
amount that may be transferred from the Fixed Account each month is
1/36th of the Fixed Account value at the time Dollar Cost Averaging
is established. While a Dollar Cost Averaging program is in effect,
elective transfers out of the Fixed Account are prohibited. There is
no maximum transfer amount limitation applicable to any of the
Subaccounts.
o Dollar Cost Averaging program transfers cannot begin before the end of a
Policy's "right to examine" period.
o You may specify that transfers be made on the 1st through the 28th day of the
month. Transfers will be made on the date you specify (or if that is not a
Business Day, then on the next Business Day). If you do not select a date,the
program will begin on the next Policy month anniversary following the date
the Policy's "right to examine" period ends.
o You can limit the number of transfers to be made, in which case the
program will end when that number has been made. Otherwise, the
program will terminate when the amount remaining in the Calvert
Social Money Market portfolio or the Fixed Account is less than $100.
o Dollar Cost Averaging is not available with the Model Portfolio Asset
Allocation program or when Automatic Rebalancing is elected.
The Dollar Cost Averaging program limits loss, but does not guarantee against a
loss or that you'll achieve your investment goal.
o PORTFOLIO REBALANCING PROGRAM
The Portfolio Rebalancing program allows you to rebalance your Policy
value among designated Subaccounts only as you instruct. You may change your
rebalancing allocation instructions at any time. Any change will be effective
when the next rebalancing occurs.
PORTFOLIO REBALANCING PROGRAM RULES:
o There is no additional charge for the Portfolio Rebalancing program. o The
Fixed Account is excluded from this program.
o You must request the rebalancing program, give us your rebalancing
instructions, or request to end this program either by Written
Notice, by telephone transaction instruction, or by internet when
available.
o You may have rebalancing occur quarterly, semi-annually or annually.
o Portfolio Rebalancing occurs automatically with the Model Portfolio Asset
Allocation program.
The Portfolio Rebalancing program limits loss, but does not guarantee against a
loss or that you'll achieve your investment goal.
o EARNINGS SWEEP PROGRAM
The Earnings Sweep program allows you to sweep earnings from your
Subaccounts to be rebalanced among designated investment options (Subaccounts or
the Fixed Account), either based on your original Policy allocation of premiums
or pursuant to new allocation instructions. You may change your Earnings Sweep
program instructions at any time. Any change will be effective when the next
sweep occurs.
EARNINGS SWEEP PROGRAM RULES:
o There is no additional charge for the Earnings Sweep program. o The Fixed
Account is included in this program.
o You must request the Earnings Sweep program, give us your rebalancing
instructions, or request to end this program either by Written
Notice, by telephone transaction instruction, or by internet when
available.
o You may have your earnings rebalanced quarterly, semi-annually or annually.
The Earnings Sweep program limits loss, but does not guarantee against a loss or
that you'll achieve your investment goal.
Acacia Designer Annuity -16-
<PAGE>
FEES (> = BASE POLICY FEE; X = OPTIONAL FEATURE FEE)
--------------------------------------------------------------------------------
The following repeats and adds to information provided in the FEE
TABLES section. Please review both prospectus sections for information on fees.
[] WITHDRAWAL CHARGE
<TABLE>
<CAPTION>
YEARS SINCE RECEIPT OF PREMIUM
----- ------ ----- ------ ------ ----- ------ ----- ------ ------
(% OF EACH PREMIUM WITHDRAWN) 1 2 3 4 5 6 7 8+ 9 10+
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------- ----- ------ ----- ------ ------ ----- ------ ----- ------ ------
> Base Policy 9-Year Withdrawal Charge 8% 8% 8% 7% 7% 6% 5% 4% 2% 0%
---------------------------------------- ----- ------ ----- ------ ------ ----- ------ ----- ------ ------
x Optional 7-Year Withdrawal 7% 6% 5% 4% 3% 2% 1% 0% - -
Charge
---------------------------------------- ----- ------ ----- ------ ------ ----- ------ ----- ------ ------
x Optional 5-Year Withdrawal 7% 7% 6% 4% 2% 0% - - - -
Charge
---------------------------------------- ----- ------ ----- ------ ------ ----- ------ ----- ------ ------
</TABLE>
We will deduct a withdrawal charge from Policy value upon a full
surrender or partial withdrawal, and also from any Policy value paid out due to
the Owner's death while withdrawal charges apply. We may also deduct a
withdrawal charge from Policy value on the date annuity income payments begin
from amounts applied to provide annuity payments. We do not assess a withdrawal
charge on premiums after the second year since receipt that are then applied to
the Life or Joint and Last Survivor annuity income options. This charge
partially covers our distribution costs, including commissions and other
promotional costs. Any deficiency is met from our general account, including
amounts derived from the mortality and expense risk charge.
The amount of a partial withdrawal you request plus any withdrawal
charge is deducted from the Policy value on the date we receive your withdrawal
request. Partial withdrawals (including any charge) are deducted from the
Subaccounts and the Fixed Account on a pro rata basis, unless you instruct us
otherwise. The oldest premium is considered to be withdrawn first, the next
oldest premium is considered to be withdrawn next, and so on (a "first-in,
first-out" basis). All premiums are deemed to be withdrawn before any earnings.
X OPTIONAL WITHDRAWAL CHARGE FEATURES
The optional withdrawal charge features carry the following additional
current fees which are deducted monthly from Policy value to equal this annual
percentage of Policy value: 0.30% for the Optional 7-Year Withdrawal Charge
(guaranteed to never exceed 0.40%), and 0.45% for the Optional 5-Year Withdrawal
Charge (guaranteed to never exceed 0.60%). Your election of one of the optional
withdrawal charge features must be made at issue of the Policy, and only if you
are not older than age 70 at issue of the Policy.
X OPTIONAL FREE WITHDRAWAL FEATURES
The base Policy does NOT have any free withdrawal features (allowing
withdrawals not subject to a withdrawal charge). Two optional free withdrawal
features are available: See the prospectus' POLICY DISTRIBUTIONS: WITHDRAWALS
section of this prospectus for details about these features. These optional
features have current fees which are deducted monthly from Policy value to equal
this annual percentage of Policy value: 0.05% for the Optional 10% Free
Withdrawal Privilege (guaranteed to never exceed 0.15%), and 0.20% for the
Optional 15%/Carryover Free Withdrawal Privilege (guaranteed to never exceed
0.40%).
[] MORTALITY AND EXPENSE RISK CHARGE
' We impose a daily fee to compensate us for the mortality and expense
risks we have under the Policy. This fee is equal to an annual rate of 0.70% of
the value of the net assets in the Separate Account, and is guaranteed to never
exceed an annual rate of 0.85%. This fee is reflected in the Accumulation Unit
values for each Subaccount.
Our MORTALITY RISK arises from our obligation to make annuity payments
and to pay death benefits prior to the Annuity Date. The mortality risk we
assume is that annuitants will live longer than we project, so our cost in
making annuity payments will be higher than projected. However, an Annuitant's
own longevity, or improvement in general life expectancy, will not affect the
periodic annuity payments we pay under your Policy. Another mortality risk we
assume is that at your death the death benefit we pay will greater than the
Policy value.
Our EXPENSE RISK is that our costs to administer your Policy will
exceed the amount we collect through administrative charges.
If the mortality and expense risk charge does not cover our costs, we
bear the loss, not you. If the charge exceeds our costs, the excess is our
profit. If the withdrawal charge does not cover our Policy distribution costs,
the deficiency is met from our general account assets, which may include
amounts, if any, derived from this mortality and expense risk charge.
Acacia Designer Annuity -19-
<PAGE>
[] ADMINISTRATIVE FEES
Administrative fees help us cover our cost to administer your Policy.
ADMINISTRATIVE EXPENSE FEE
> This fee is equal to an annual rate of 0.15% of the value of the net
assets in the Separate Account, and is guaranteed to never exceed an annual rate
of 0.25%. This fee is reflected in the Accumulation Unit values for each
Subaccount.
ANNUAL POLICY FEE
> Currently $0. We reserve the right to charge an annual Policy fee
not to exceed $40.
X The optional Minimum Initial Premium feature has a current annual
Policy fee of $36.
Any Policy Fee (currently only levied under the optional Minimum
Initial Premium feature) is deducted from your Policy value on the last Business
Day of each Policy Year and upon a complete surrender. This fee is levied by
canceling Accumulation Units and making deductions from the Fixed Account. It is
deducted from each Subaccount and the Fixed Account in the same proportion that
the value in each Subaccount or the Fixed Account bears to the total Policy
value. We currently waive any Policy Fee if the Policy value is at least
$50,000.
[] TRANSFER FEE
> The first 15 transfers per Policy Year from Subaccounts or the Fixed
Account are free. A transfer fee of $10 may be imposed for any transfer in
excess of 15 per Policy Year. The transfer fee is deducted pro rata from each
Subaccount (and, if applicable, the Fixed Account) in which the Owner is
invested.
[] TAX CHARGES
Some states and municipalities levy a tax on annuities, currently
ranging from 0% to 3.5% of your premiums. These tax rates, and the timing of the
tax, vary and may change. Presently, we deduct the charge for the tax in those
states with a tax either (a) from premiums as they are received, or (b) upon
applying proceeds to an annuity income option.
No charges are currently made for taxes other than premium taxes. We
reserve the right to levy charges in the future for taxes or other economic
burdens resulting from taxes that we determine are properly attributable to the
Separate Account.
[] FEES CHARGED BY THE PORTFOLIOS
> Each Subaccount's underlying portfolio has investment advisory fees
and expenses. They are set forth in this prospectus' FEE TABLES section and
described in more detail in each fund's prospectus. A portfolio's fees and
expenses are not deducted from your Policy value. Instead, they are reflected in
the daily value of portfolio shares which, in turn, will affect the daily
Accumulation Unit value of the Subaccounts. These fees and expenses help to pay
the portfolio's investment adviser and operating expenses.
[] OPTIONAL FEATURES' FEES
X Each of the optional features is principally described in the
prospectus sections noted below:
<TABLE>
<CAPTION>
OPTIONAL FEATURE PROSPECTUS SECTION WHERE IT IS COVERED
---------------- --------------------------------------
<S> <C>
Y optional Minimum Initial Premium feature........................IMPORTANT POLICY PROVISIONS:
Policy Application and Issuance
Y optional Withdrawal Charge Period features......................FEES: Withdrawal Charge
Y optional Free Withdrawal Privilege features.....................POLICY DISTRIBUTIONS: Withdrawals
Y optional Guaranteed Minimum Death Benefit features..............POLICY DISTRIBUTIONS: Death Benefits
Charges for each of the optional features are shown in this prospectus'
FEE TABLES section.
</TABLE>
----------------------------------
WAIVER OF CERTAIN FEES
When the Policy is sold in a manner that results in savings of sales or
administrative expenses, we reserve the right to waive all or part of any fee we
charge (excluding fees charged by the portfolios) under the Policy. Factors we
consider include one or more of the following: size and type of group to whom
the Policy is issued; amount of expected premiums; relationship with us
(employee of us or an affiliated company, receiving distributions or making
transfers from other policies we or one of our affiliates issue or transferring
amounts held under qualified retirement plans we or one of our affiliates
sponsor); type and frequency of administrative and sales services provided; or
level of annual maintenance fee and withdrawal charges. In an exchange of
another policy we or an affiliated company issued and where the withdrawal
charge has been waived, the withdrawal charge for this Policy may be determined
based on the dates premiums were received in the prior policy.
Any fee waiver will not be discriminatory and will be done according to
our rules in effect at the time the Policy is issued. We reserve the right to
change these rules. The right to waive any fees may be subject to state
approval.
Acacia Designer Annuity -20-
<PAGE>
POLICY DISTRIBUTIONS (X = OPTIONAL FEATURE)
--------------------------------------------------------------------------------
There are several ways to take all or part of your investment out of
your Policy, both before and after the Annuity Date. Tax penalties and
withdrawal charges may apply to amounts taken out of your Policy before the
Annuity Date. Your Policy also provides a death benefit (including, for an
additional charge, an optional feature guaranteed minimum death benefit) that
may be paid upon your death prior to the Annuity Date. All or part of a death
benefit may be taxable.
[] WITHDRAWALS
You may withdraw, by Written Notice, all or part of your Policy's Cash
Surrender Value prior to the Annuity Date. Amounts withdrawn (except for
optional feature "free" partial withdrawals you may have elected, described
below) are subject to a withdrawal charge. Following a full surrender of the
Policy, or at any time the Policy value is zero, all your rights in the Policy
end. Total surrender requires you to return your Policy to us.
Withdrawals may be subject to:
- Income Tax
- Penalty Tax
- Withdrawal Charge
Even so called "free" withdrawal may be subject to the tax charge.
Premiums are deemed to be withdrawn before any earnings; this means
that there may be no withdrawal charge if the amount of the withdrawal is less
than or equal to premiums received at least "x" years prior to the withdrawal
and not considered having been previously withdrawn, where "x" is the number of
years in the withdrawal charge period. Of premium considered withdrawn, the
oldest premium is considered withdrawn first, the next oldest premium is
considered withdrawn next, and so on (a "first-in, first-out" procedure). (This
is different than taxation order, which generally considers the last premium
withdrawn first - a "last-in, first-out" procedure.)
WITHDRAWAL RULES
o Withdrawals must be by Written Notice. A request for a systematic
withdrawal plan must be on our form and must specify a date for the
first payment, which must be at least 30 days after we receive the
form.
o Minimum withdrawal is $250 from any investment option.
o We may treat any partial withdrawal that leaves a Policy value of less than
$1,000 as a complete surrender of the Policy.
o Withdrawal results in cancellation of Accumulation Units from each
applicable Subaccount and deduction of Policy value from any Fixed Account
option. If you do not specify which investment option(s) to take the
withdrawal from, it will be taken from each investment option in the
proportion that the Policy value in each investment option bears to the
total Policy value.
o The total amount paid to you upon total surrender of the Policy
(taking any prior partial withdrawals into account) may be less than
the total premiums made, because a withdrawal charge or premium tax
charge may apply to withdrawals, and because you bear the investment
risk for all amounts you allocate to the Separate Account.
o Unless you give us Written Notice not to withhold taxes from a
withdrawal, we must withhold 10% of the taxable amount withdrawn to
be paid as a federal tax, as well as any amounts required by state
laws to be withheld for state income taxes.
o SYSTEMATIC WITHDRAWAL PLAN
The systematic withdrawal plan allows you to automatically withdraw
payments of a pre-determined dollar amount or fixed percentage of Policy value
from a specified investment option monthly, quarterly, semi-annually or
annually. We can support and encourage your use of electronic fund transfer of
systematic withdrawal plan payments to an account of yours that you specify to
us. The fixed dollar amount of systematic withdrawals may be calculated in
support of Internal Revenue Service minimum distribution requirements over the
lifetime of the Annuitant. No systematic withdrawal may be established after the
28th of each month. Although this plan mimics annuity payments, each
distribution is a withdrawal that may be taxable and subject to the charges and
expenses described above; you may wish to consult a tax advisor before
requesting this plan.
Acacia Designer Annuity -21-
<PAGE>
o X OPTIONAL "FREE" WITHDRAWAL FEATURES
You may elect one of two optional "free" withdrawal features, for a
charge. For information about the charge for these features, see this
prospectus' FEES and FEE TABLES sections. Your election must be made at issue of
the Policy, and only if you are then not older than age 70.
X OPTIONAL 10% "FREE" WITHDRAWAL FEATURE.
--------------------------------------
This optional feature allows you to withdraw, each Policy
Year, up to 10% of your Policy value without deduction of a withdrawal charge.
Under this option, Policy value is considered withdrawn on the same basis as in
the base Policy (first premiums on a first-in first-out basis, then earnings).
(This is different than taxation order, which generally considers the last
premium withdrawn first - a "last-in, first-out" procedure.) The 10% amount is
determined at the time the withdrawal is made and is reduced by all prior free
withdrawals in that Policy Year. If you do not withdraw the 10% amount in a
Policy Year, you may NOT carry forward the unused "free" withdrawal amount into
the next Policy Year.
X OPTIONAL 15% "FREE" WITHDRAWAL WITH CARRYOVER PRIVILEGE FEATURE.
---------------------------------------------------------------
This optional feature allows you to withdraw, each Policy Year, up to
the greater of 15% of your Policy value or any of your accumulated Policy
earnings without deduction of a withdrawal charge. (Accumulated Policy earnings
are the excess of the Policy value over the net of premiums paid less any
previous withdrawals of premium.) Under this option, earnings are considered
withdrawn before premium, and premium is considered withdrawn on a first-in
first-out basis. (This is different than taxation order, which generally
considers the last premium withdrawn first - a "last-in, first-out" procedure.)
The 15% amount is determined at the time the withdrawal is made and is reduced
by all prior free withdrawals in that Policy Year. This withdrawal charge will
be determined based on the relationship of the amount of principal withdrawn to
the net amount of principal remaining in the Policy after any previous
withdrawals. Unused "free" withdrawal amounts in a Policy Year are carried
forward to the next Policy Year, subject to a maximum of 30% of Policy value.
[] LOANS (403B PLANS ONLY)
Loans are only available if your Policy is a Tax Sheltered Annuity
(sometimes called a "TSA" or "403(b) plan") under federal tax law and your
Policy value is at least $5,000. We do not charge any loan fee. These Owners can
take loans from the Policy value beginning one year after the Policy is issued
up to the Annuity Date, and cannot take out more than one loan each Policy year.
Loans are subject to the terms of the Policy, the plan, and federal tax law. We
reserve the right to modify the terms of a loan to comply with changes in
applicable law, or to reject any loan request if we believe it may violate the
terms of the plan or applicable law.
(We are not responsible for compliance of a loan request with plan
requirements.)
MINIMUM AND MAXIMUM LOAN AMOUNTS
MINIMUM - $2,500. Each loan must individually satisfy this minimum
amount.
MAXIMUM - We will calculate the maximum nontaxable loan amount based
upon information provided by the plan participant or the employer. Loans may be
taxable if a participant has additional loans from other plans. The total of all
your outstanding TSA loans must not exceed the lesser of (i) $50,000 reduced by
the highest outstanding balance owned during the previous 12 months, or (ii) 50%
of your Policy value.
HOW LOANS ARE PROCESSED
All loans are made from our general account. We transfer Policy value
to our general account as security for the loan. The transfer is made in
proportion to assets in and among the Subaccounts and in the Fixed Account,
unless you give us different allocation instructions. No withdrawal charge is
levied upon Policy value transfers related to loan processing. We are usually
able to process a loan request within 7 Business Days.
LOAN INTEREST
INTEREST RATE CHARGED ON LOAN BALANCE: currently 7% effective annual
rate; guaranteed maximum rate is 8%. INTEREST RATE CREDITED TO LOAN
BALANCE:currently 4.5% effective annual rate; guaranteed minimum rate
is 3%.
Specific loan terms are disclosed at the time of loan application or issuance.
Acacia Designer Annuity -22-
<PAGE>
LOAN REPAYMENT
Loans must be repaid within 5 years, or 20 years if the loan is used to
purchase your principal residence. Loan repayments must be identified as such;
if they aren't, we'll treat them as additional premium payments and they will
not reduce the outstanding loan. Loan repayments must be substantially level and
made at least quarterly. Loan repayments will consist of principal and interest
in amounts set forth in the loan agreement. Repayments are allocated to the
Subaccounts and Fixed Account pursuant to your then current investment option
allocation instructions. Any repayment due under the loan that is unpaid for 90
days will cause the loan balance to become immediately due without notice. The
loan will then be treated as a deemed Policy distribution and reported as income
to be taxed to the Owner.
POLICY DISTRIBUTIONS, INCLUDING ANNUITY INCOME PAYMENTS
While a loan is outstanding, any Policy distributions made, including
annuity income payments, will be reduced by the amount of the outstanding loan
plus accrued interest.
TRANSFERRING THE POLICY
We reserve the right to restrict any transfer of the Policy while a
loan is outstanding.
[] DEATH BENEFITS
We will pay the death benefit after we receive Due Proof of Death of an
Owner's death or as soon thereafter as we have sufficient information about the
beneficiary to make the payment. Death benefits may be paid pursuant to an
annuity income option to the extent allowed by applicable law and any settlement
agreement in effect at your death. If the beneficiary does not make an annuity
income option election within 60 days of our receipt of Due Proof of Death, we
will issue a lump-sum payment to the beneficiary.
A death benefit is payable upon:
- Your Policy being in force;
- Receipt of Due Proof of Death of the first Owner to die;
- Election of an annuity income option; and
- Proof that the Owner died before any annuity payments begin
"DUE PROOF OF DEATH" is a certified copy of a death certificate, a certified
copy of a decree of a court of competent jurisdiction as to the finding of
death, a written statement by the attending physician, or any other proof
satisfactory to us.
If an Owner of the Policy is a corporation, trust or other
non-individual, we treat the primary annuitant as an Owner for purposes of the
death benefit. The "primary annuitant" is that individual whose life affects the
timing or the amount of the death benefit payout under the Policy. A change in
the primary annuitant will be treated as the death an Owner.
If the annuitant is an Owner or joint Owner, the annuitant's death is
treated as the Owner's death.
If the annuitant is not an Owner and the annuitant dies before the
Annuity Date, the Owner may name a new annuitant if such Owner(s) is not a
corporation or other non-individual or if such Owner is the trustee of an
Internal Revenue Code Section 401(a) retirement plan. If the Owner does not name
a new annuitant, the Owner will become the annuitant.
If your spouse is the Policy beneficiary, annuitant, or a joint Owner,
special tax rules apply. See the IRS REQUIRED DISTRIBUTION UPON OWNER'S DEATH
section below.
We will deduct any applicable premium tax not previously deducted from
the death benefit payable.
o STANDARD DEATH BENEFIT
Upon any Owner's death before the Annuity Date, the Policy will end,
and we will pay a death benefit to your beneficiary. The death benefit equals
the largest of:
- your Policy value (without deduction of the withdrawal charge)
on the later of the date we receive Due Proof of Death or an annuity
payout option election less any charge for applicable premium taxes; or
- the sum of net premiums, less partial withdrawals.
Upon any Owner's death on or after the Annuity Date and before all
proceeds have been paid, no death benefit is payable, but any remaining proceeds
will be paid to the designated annuity benefit payee based on the annuity income
option in effect at the time of death.
o IRS REQUIRED DISTRIBUTION UPON DEATH OF OWNER
Federal law requires that if your Policy is tax non-qualified and you die before
the Annuity Date, then the entire value of your Policy must be distributed
within 5 years of your death. The 5-year rule does not apply to that portion of
the proceeds which (a) is for the benefit of an individual beneficiary; and (b)
will be paid over the lifetime or the life expectancy of that beneficiary as
long as payments begin not later than one year after the date of your death.
Acacia Designer Annuity -23-
<PAGE>
Special rules may apply to your surviving spouse. The Statement of Additional
Information has a more detailed description of these rules. Other required
distribution rules apply to tax-qualified Policies and are described in this
prospectus' APPENDIX B.
o TABLE ILLUSTRATING BENEFITS UPON DEATH
The following tables illustrate benefits payable, if any, upon death of
a party to the Policy for most, but not necessarily all, situations. The terms
of any Policy rider or qualified plan funded by the Policy may change this
information. Please consult your own legal and tax advisor for advice. You may
contact us for more information.
<TABLE>
<caption.
IF DEATH OCCURS BEFORE THE ANNUITY DATE:
If the
deceased is... and.... and... then the...
<S> <C> <C> <C>
---------------- --------------------- ------------------- ------------------
any Policy Owner - - - - - - Policy beneficiary
receives the death
benefit.
---------------- --------------------- ------------------- ------------------
any Policy Owner there is no surviving the beneficiary is surviving spouse
joint Policy Owner or the Policy Owner's may elect to
it is the deceased surviving spouse become the Policy the
Owner's spouse Owner and continue
the Policy, or may
have the Policy
end and receive
the death benefit.
---------------- ---------------------- --------------------- ---------------------------------------------
the annuitant a Policy Owner is there is no named the Policy continues with the Policy Owner
living contingent or joint as the Policy annuitant unless the Owner
annuitant names a new annuitant.
---------------- ---------------------- --------------------- ---------------------------------------------
the annuitant the Policy Owner is a - - - the annuitant's death is treated as a
non-person Policy Owner's death.
---------------- ---------------------- --------------------- ---------------------------------------------
an annuitant a Policy Owner is the contingent or contingent annuitant becomes the annuitant,
living joint annuitant is and the Policy continues.
living
---------------------- ------------------------- --------------------- ---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
IF DEATH OCCURS ON OR AFTER THE ANNUITY DATE:
<S> <C> <C>
---------------------- -------------------- ------------------------------------------------------------------------
any Policy Owner there is a living surviving Policy Owner remains as Owner for purposes of distributing
joint Owner, and any remaining Policy proceeds pursuant to the annuity income option
the annuitant is then in effect. If the annuity benefit payee was the deceased Policy
living Owner, the surviving Owner receives the proceeds. If the payee is
other than the deceased Owner, proceeds continue to be paid to the
payee until the payee's death, then are paid to the Policy beneficiary.
---------------------- -------------------- ------------------------------------------------------------------------
any Policy Owner there is no Policy beneficiary becomes the Policy Owner for purposes of
surviving joint distributing any remaining Policy proceeds pursuant to the annuity
Owner, and income option then in effect. If the annuity benefit payee was the
the annuitant is Owner, then the Policy beneficiary receives the proceeds. If the
living payee is other than the Owner, proceeds continue to be paid to the
payee until the payee's death, then are paid to the Policy beneficiary.
---------------------- -------------------- ------------------------------------------------------------------------
any Policy annuitant any Policy Owner Policy Owner (or other named payee) receives distribution of any
is living remaining Policy proceeds pursuant to the annuity income option then
in effect.
---------------------- -------------------- ------------------------------------------------------------------------
the annuitant the annuitant is Policy beneficiary becomes the Policy Owner for purposes of
also the Policy distributing any remaining Policy proceeds pursuant to the annuity
Owner income option then in effect. If the annuity benefit payee was the
Owner, then the Policy beneficiary receives the proceeds. If the payee
is other than the Owner, proceeds continue to be paid to the payee
until the payee's death, then are paid to the Policy beneficiary.
---------------------- -------------------- ------------------------------------------------------------------------
</TABLE>
o X OPTIONAL GUARANTEED MINIMUM DEATH BENEFIT FEATURES
You may elect one of three optional Guaranteed Minimum Death Benefit
features, for a charge. Your election must be made when the Policy is issued,
and only if you and the Annuitant are then not older than age 70. Your election
cannot be changed or revoked. Each feature ends at your age 85. Under these
features, if the Owner is not a natural person, you cannot change the annuitant
after the guaranteed minimum death benefit feature is elected. Each of the
options provides the opportunity to enhance the Policy's death benefit if
Subaccount underlying portfolios should sharply decrease in value. See this
prospectus' FEES and FEE TABLES sections for information on the charge for these
optional features.
X OPTIONAL "PERIODIC STEP-UP" GUARANTEED MINIMUM DEATH BENEFIT
At Policy issue, the guaranteed minimum death benefit amount is the
amount of the initial premium. Thereafter, the guaranteed minimum death benefit
amount for a given Policy Year is equal to the greater of:
(a) the Policy value at the time Due Proof of Death is received,
(b) the sum of premiums paid less withdrawals, or
(c) the guaranteed minimum death benefit on the Policy Anniversary
when the most recent death benefit "step-up occurred.
Acacia Designer Annuity -24-
<PAGE>
The "step-up" interval is stated in your Policy's schedule page for this
feature. For your attained ages 80-85, the guaranteed minimum death benefit
amount is the guaranteed minimum death benefit on your 80th birthday adjusted by
adding subsequent premiums paid and subtracting withdrawals made. After your
85th birthday, the guaranteed minimum death benefit is $0, so that the death
benefit is just the standard death benefit available under the Policy.
X OPTIONAL 5% ROLL-UP GUARANTEED MINIMUM DEATH BENEFIT
At Policy issue, the guaranteed minimum death benefit amount is the
amount of the initial premium. Thereafter, the guaranteed minimum death benefit
amount for a given Policy Year is equal to the greater of:
(a) the current Policy value, or
(b) the total premiums paid less withdrawals (net premiums)
accumulated at 5% simple interest, up to a maximum of 200% of net
premiums.
For your attained ages 80-85, the guaranteed minimum death benefit amount is the
guaranteed minimum death benefit on your 80th birthday adjusted by adding
subsequent premiums paid and subtracting withdrawals made. After your 85th
birthday, the guaranteed minimum death benefit is $0, so that the death benefit
is just the standard death benefit available under the Policy.
X OPTIONAL "GREATER OF" GUARANTEED MINIMUM DEATH BENEFIT
At Policy issue, the guaranteed minimum death benefit amount is the
amount of the initial premium. Thereafter, the guaranteed minimum death benefit
amount for a given Policy Year is equal to the greater of the guaranteed minimum
death benefit amount payable under either the optional Annual Ratchet guaranteed
minimum death benefit feature, or the optional 5% Roll-up guaranteed minimum
death benefit feature.
` ANNUITY INCOME PHASE
A primary function of an annuity contract, like this Policy, is to
provide annuity payments to the payee(s) you name. You will receive the annuity
benefits unless you designate another payee(s). The level of annuity payments is
determined by your Policy value, the annuitant's sex (except where prohibited by
law) and age, and the annuity income option selected. All or part of your Policy
Cash Surrender Value may be placed under one or more annuity income option.
Annuity payments:
- require investment to be allocated to our general account, so are not
variable.
- may be subject to a withdrawal charge.
- may be taxable and, if premature, subject to a tax penalty.
Annuity payments may be subject to a withdrawal charge. A withdrawal
charge is not applied on the Annuity Date for premiums applied after the second
year since receipt to the Life or Joint and Last Survivor annuity income
options. However, the withdrawal charge does apply to Policy value placed under
other annuity income options.
Annuity payments must be made to individuals receiving payments on
their own behalf, unless otherwise agreed to by us. Any annuity income option is
only effective once we acknowledge it. We may require initial and ongoing proof
of the Owner's or annuitant's age or survival. Unless you specify otherwise, the
payee is the Owner.
Payments under the annuity income options are FIXED ANNUITY PAYMENTS
based on a fixed rate of interest at or higher than the minimum effective annual
rate which is guaranteed to yield 3% on an annual basis. We have sole discretion
whether or not to pay a higher interest rate for annuity income options 1, 2, or
3 (see below). Current immediate annuity rates for options 4 or 5 for the same
class of annuities are used if higher than the guaranteed amounts (guaranteed
amounts are based upon the tables contained in the Policy). The guaranteed
amounts are based on the 1983 Table "a" Individual Annuity Table projected 17
years, and an interest rate which is guaranteed to yield 3% on an annual basis.
Current interest rates, and further information, may be obtained from us. The
amount of each fixed annuity payment is set and begins on the Annuity Date, and
does not change.
o WHEN ANNUITY INCOME PAYMENTS BEGIN
You select the Annuity Date by completing an election form that you can
request from us at any time. This date may not be any earlier than the fifth
Policy anniversary. If you do not specify a date, the Annuity Date will be the
later of the Policy Anniversary nearest the annuitant's 85th birthday or the
fifth Policy Anniversary. Tax-qualified Policies may require an earlier Annuity
Date. You may change this date by sending Written Notice for our receipt at
least 30 days before the then current Annuity Date.
Acacia Designer Annuity -25-
<PAGE>
o SELECTING AN ANNUITY INCOME OPTION
You choose the annuity income option by completing an election form
that you can request from us at any time. You may change your selection during
your life by sending Written Notice for our receipt at least 30 days before the
date annuity payments are scheduled to begin. If no selection is made by then,
we will apply the Policy Cash Surrender Value to make annuity payments under
annuity income option 4 providing lifetime income payments.
The longer the guaranteed or projected annuity income option period, the lower
the amount of each annuity payment.
If you die before the Annuity Date (and the Policy is in force), your
beneficiary may elect to receive the death benefit under one of the annuity
income options (unless applicable law or a settlement agreement dictate
otherwise).
o ANNUITY INCOME OPTIONS
Once fixed annuity payments under an annuity income option begin, they
cannot be changed. (We may allow the beneficiary to transfer amounts applied
under options 1, 2 or 3 to option 4, 5 or 6 after the Annuity Date. However, we
reserve the right to discontinue this practice.) When the Owner dies, we will
pay any unpaid guaranteed payments to your beneficiary. Upon the last payee's
death, we will pay any unpaid guaranteed payments to that payee's estate.
NOTE: UNLESS YOU ELECT AN ANNUITY INCOME OPTION WITH A GUARANTEED
PERIOD OR OPTION 1, IT IS POSSIBLE THAT ONLY ONE ANNUITY PAYMENT WOULD BE MADE
UNDER THE ANNUITY OPTION IF THE ANNUITANT DIES BEFORE THE DUE DATE OF THE SECOND
ANNUITY PAYMENT, ONLY TWO ANNUITY PAYMENTS WOULD BE MADE IF THE ANNUITANT DIED
BEFORE THE DUE DATE OF THE THIRD ANNUITY PAYMENT, ETC.
Part or all of any annuity payment may be taxable as ordinary income.
If, at the time annuity payments begin, you have not given us Written Notice to
not withhold federal income taxes, we must by law withhold such taxes from the
taxable portion of each annuity payment and remit it to the Internal Revenue
Service. (Withholding is mandatory for certain tax-qualified Policies.)
We may pay your Policy proceeds to you in one sum if they are less than
$1,000, or when the annuity income option chosen would result in periodic
payments of less than $20. If any annuity payment would be or becomes less than
$20, we also have the right to change the frequency of payments to an interval
that will result in payments of at least $20. In no event will we make payments
under an annuity option less frequently than annually.
The annuity income options are:
(1) INTEREST PAYMENT. While proceeds remain on deposit, we annually credit
interest to the proceeds. The interest may be paid to the payee or
added to the amount on deposit.
(2) DESIGNATED AMOUNT ANNUITY. Proceeds are paid in monthly installments
of a specified amount over at least a 5-year period until proceeds,
with interest, have been fully paid.
(3) DESIGNATED PERIOD ANNUITY. Proceeds are paid in monthly installments
for the specified period chosen. Monthly incomes for each $1,000 of
proceeds, which include interest, are illustrated by a table in the
Policy.
(4) LIFETIME INCOME ANNUITY. Proceeds are paid as monthly income during
the annuitant's life. Variations provide for guaranteed payments for a
period of time.
(5) JOINT AND LAST SURVIVOR LIFETIME INCOME ANNUITY. Proceeds are paid as
monthly income during the joint annuitants' lives and until the last of
them dies.
(6) LUMP SUM. Proceeds are paid in one sum.
Acacia Designer Annuity -26-
<PAGE>
FEDERAL TAX MATTERS
--------------------------------------------------------------------------------
The following discussion is general in nature and is not intended as
tax advice. Each person concerned should consult a competent tax advisor. No
attempt is made to consider any applicable state tax or other tax laws, or to
address any federal estate, or state and local estate, inheritance and other tax
consequences of ownership or receipt of distributions under a Policy. This
discussion of federal income tax consideration relating to the Policy is based
upon our understanding of laws as they now exist and are currently interpreted
by the Internal Revenue Service ("IRS").
When you invest in an annuity contract, you usually do not pay taxes on
your investment gains until you withdraw the money - generally for retirement
purposes. If you invest money (generally on a pre-tax basis) in an annuity as
part of a pension or retirement plan that is subject to requirements and may
have additional benefits under the Internal Revenue Code beyond those generally
applicable to annuities (e.g., "qualified plan" such as IRAs, TSAs, and the
like), your contract is called a "Qualified Policy." Other annuities, in which
already taxed money is invested (other than as part of a qualified plan which
can accept after-tax deposits), are referred to as a "Nonqualified Policy." The
tax rules applicable to Qualified Policies vary according to the type of
retirement plan and the terms and conditions of the plan.
[] TAXATION OF NONQUALIFIED POLICIES
If a non-natural person (e.g., a corporation or a trust) owns a
Nonqualified Policy, the taxpayer generally must include in income any increase
in the excess of the Policy value over the investment in the Policy (generally,
the premiums paid for the Policy) during the taxable year. There are some
exceptions to this rule and a prospective owner that is not a natural person
should discuss these with a tax adviser.
THE FOLLOWING DISCUSSION GENERALLY APPLIES TO POLICIES OWNED BY NATURAL
PERSONS.
o WITHDRAWALS. When a withdrawal from a Nonqualified Policy occurs, the amount
received will be treated as ordinary income subject to tax up to an amount
equal to the excess (if any) of the Policy value immediately before the
distribution over the Owner's investment in the Policy (generally, the
premiums paid for the Policy, reduced by any amount previously distributed
from the Policy that was not subject to tax) at that time. In the case of a
surrender under a Nonqualified Policy, the amount received generally will be
taxable only to the extent it exceeds the Owner's investment in the Policy.
o PENALTY TAX ON CERTAIN WITHDRAWALS. In the case of a distribution from a
Nonqualified Policy, there may be imposed a federal tax penalty equal to 10%
of the amount treated as income. In general, however, there is no penalty on
distributions:
- made on or after the taxpayer reaches age 59 1/2;
- made on or after an Owner's death;
- attributable to the taxpayer's becoming disabled; or
- made as part of a series of substantially equal periodic payments for
the life (or life expectancy) of the taxpayer.
Other exceptions may be applicable under certain circumstances and special
rules may be applicable in connection with the exceptions enumerated above.
You should consult a tax adviser with regard to exceptions from the penalty
tax.
o ANNUITY PAYMENTS. Although tax consequences may vary depending on the payout
option elected under an annuity contract, a portion of each annuity payment
is generally not taxed and the remainder is taxed as ordinary income. The
non-taxable portion of an annuity payment is generally determined in a manner
that is designed to allow you to recover your investment in the Policy
ratably on a tax-free basis over the expected stream of annuity payments, as
determined when annuity payments start. Once your investment in the Policy
has been fully recovered, however, the full amount of each annuity payment is
subject to tax as ordinary income.
o TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from the
Policy because of your death or the death of the Annuitant. Generally, such
amounts are includible in the income of the recipient as follows: (i) if
distributed in a lump sum, they are taxed in the same manner as a surrender
of the Policy, or (ii) if distributed under an annuity income option, they
are taxed in the same way as annuity payments.
Acacia Designer Annuity -27-
<PAGE>
o TRANSFERS, ASSIGNMENT OR EXCHANGES OF A POLICY. A transfer or assignment of
ownership of the Policy, the designation of an Annuitant, the selection of
certain dates for annuity payments to begin, or the exchange of the Policy
may result in certain tax consequences to you that are not discussed here. An
Owner contemplating any such transfer, assignment, or exchange, should
consult a tax advisor as to the tax consequences.
o WITHHOLDING. Annuity distributions are generally subject to withholding for
the recipient's federal income tax liability. Recipients can generally elect,
however, not to have tax withheld from distributions.
o WITHHOLDING FOR NONRESIDENT ALIEN OWNERS. Generally, the amount of any
payment of interest to a non-resident alien of the United States shall be
subject to withholding of a tax equal to 30% of such amount or, if
applicable, a lower treaty rate. A payment may not be subject to withholding
where the recipient sufficiently establishes that such payment is effectively
connected to the recipient's conduct of a trade or business in the United
States and such payment is included in the recipient's gross income.
o MULTIPLE POLICIES. All Non-Qualified deferred annuity contracts that are
issued by us (or our affiliates) to the same Owner during any calendar year
are treated as one annuity contract for purposes of determining the amount of
gain includable in such Owner's income when a taxable distribution occurs.
o FURTHER INFORMATION. We believe that the Policy qualifies as an annuity
contract for Federal income tax purposes and the above discussion is based on
that assumption. Further details can be found in the Statement of Additional
Information under the heading "Tax Status of the Policy."
[] TAXATION OF QUALIFIED POLICIES
The tax rules applicable to Qualified Policies vary according to the
type of retirement plan and the terms and conditions of the plan. Your rights
under a Qualified Policy may be subject to the terms of the retirement plan
itself, regardless of the terms of the Policy. Adverse tax consequences may
result if you do not ensure that contributions, distributions and other
transactions with respect to the Policy comply with the law. Also, you may wish
to consult a tax and/or financial adviser regarding the use of the Policy within
a qualified or other retirement plan, since the purchase of a Policy to fund a
tax-qualified retirement account does not provide any additional tax deferred
treatment of earning beyond the treatment provided by the tax-qualified
retirement plan itself. However, the Policy does provide benefits such as
lifetime income payments, family protection through death benefits, guaranteed
fees and asset allocation models that many retirement plans do not provide.
o INDIVIDUAL RETIREMENT ACCOUNTS (IRAs), as defined in Section 408 of the
Internal Revenue Code (Code), permit individuals to make annual contributions
of up to the lesser of $2,000 or 100% of adjusted gross income. The
contributions may be deductible in whole or in part, depending on the
individual's income. Distributions from certain pension plans may be "rolled
over" into an IRA on a tax-deferred basis without regard to these limits.
Amounts in the IRA (other than nondeductible contributions) are taxed when
distributed from the IRA. A 10% penalty tax generally applies to
distributions made before age 59 1/2, unless certain exceptions apply. The
Internal Revenue Service has not addressed in a ruling of general
applicability whether a death benefit provision such as the optional
guaranteed minimum death benefit provision(s) in the Policy comports with IRA
qualification requirements.
o ROTH IRAS, as described in Code section 408A, permit certain eligible
individuals to make non-deductible contributions to a Roth IRA in cash or as
a rollover or transfer from another Roth IRA or other IRA. A rollover from or
conversion of an IRA to a Roth IRA is generally subject to tax and other
special rules apply. The Owner may wish to consult a tax adviser before
combining any converted amount with any other Roth IRA contributions,
including any other conversion amounts from other tax years. Distributions
from a Roth IRA generally are not taxed, except that, once aggregate
distributions exceed contributions to the Roth IRA income tax and a 10%
penalty tax may apply to distributions made (1) before age 59 1/2 (subject to
certain exception) or (2) during the five taxable years starting with the
year in which the first contribution is made to any Roth IRA. A 10% penalty
tax may apply to amounts attributable to a conversion from an IRA if they are
distributed during the five taxable years beginning with the year in which
the conversion was made.
Acacia Designer Annuity -28-
<PAGE>
o CORPORATE PENSION AND PROFIT-SHARING PLANS under Section 401(a) of the Code
allow corporate employers to establish various types of retirement plans for
employees, and self-employed individuals to establish qualified plans for
themselves and their employees. Adverse tax consequences to the retirement
plan, the participant, or both may result if the Policy is transferred to any
individual as a means to provide benefit payments, unless the plan complies
with all the requirements applicable to such benefits prior to transferring
the Policy. The Policy includes guaranteed minimum death benefit options that
in some cases may exceed the greater of the premiums or the Policy value. The
standard death benefit or optional guaranteed minimum death benefit could be
characterized as an incidental benefit, the amount of which is limited in any
pension or profit-sharing plan. Because the death benefit may exceed this
limitation, employers using the Policy in connection with such plans should
consult their tax adviser.
o OTHER TAX ISSUES. Qualified Policies have minimum distribution rules that
govern the timing and amount of distributions. You should refer to your
retirement plan, adoption agreement, or consult a tax advisor for more
information about these distribution rules.
Distributions from Qualified Policies generally are subject to withholding
for the Owner's Federal Income Tax liability. The withholding rate varies
according to the type of distribution and the Owner's tax status. The Owner
will be provided the opportunity to elect not to have tax withheld from
distributions.
"Eligible rollover distributions" from section 401(a) plans are subject to a
mandatory federal income tax withholding of 20%. An eligible rollover
distribution is the taxable portion of any distribution from such a plan,
except certain distributions such as distributions required by the Code or
distributions in a specified annuity form. The 20% withholding does not
apply, however, if the Owner chooses a "direct rollover" from the plan to
another tax-qualified plan or IRA.
[] POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative change is uncertain, there is
always the possibility that the tax treatment of the Policy could change by
legislation or otherwise. Consult a tax adviser with respect to legislative
developments and their effect on the Policy.
We have the right to modify the Policy in response to legislative
changes that could otherwise diminish the favorable tax treatment that annuity
contract Owners currently receive. We make no guarantee regarding the tax status
of any Policy and do not intend the above discussion as tax advice.
MISCELLANEOUS
--------------------------------------------------------------------------------
[] ABOUT OUR COMPANY
RATINGS: A.M. BEST - A (EXCELLENT), 3rd highest rating of 15 categories.
STANDARD & POOR'S - AA (VERY STRONG), 3rd highest rating of 21
categories for insurer financial strength. (THESE RATINGS DO NOT
BEAR ON THE INVESTMENT PERFORMANCE OF ASSETS HELD IN THE SEPARATE
ACCOUNT OR ON THE DEGREE OF RISK IN INVESTMENTS IN THE SEPARATE
ACCOUNT.)
Acacia National Life Insurance Company issues the Policy described in
this prospectus and is responsible for providing each Policy's insurance and
annuity benefits. We are a stock life insurance company organized under the
insurance laws of the State of Virginia in 1974. We are an indirect
majority-owned subsidiary of Ameritas Acacia Mutual Holding Company ("Ameritas
Acacia"), the ultimate parent company of Acacia Life Insurance Company, a
District of Columbia domiciled company chartered by an Act of the United States
Congress in 1869, and Ameritas Life Insurance Corp., Nebraska's oldest insurance
company - in business since 1887. Ameritas Acacia and its subsidiaries had total
statutory assets at December 31, 1999 of over $6.3 billion. Our home office
address is at 7315 Wisconsin Avenue, Bethesda, Maryland 20814. Our service
office is at 5900 "O" Street, Lincoln, Nebraska, 68510. (See page 2 of this
prospectus, or the cover page or last page for information on how to contact
us.)
We are engaged in the business of issuing life insurance and annuities
throughout the United States (except Alaska, Maine, New Hampshire and New York),
with an emphasis on products with variable investment options in underlying
portfolios.
Acacia Designer Annuity -29-
<PAGE>
[] DISTRIBUTION OF THE POLICIES
The Advisors Group, Inc. ("TAG"), 7315 Wisconsin Avenue, Bethesda,
Maryland 20814, an affiliate of ours, is the principal underwriter of the
Policies. Like us, TAG is also an indirect wholly owned subsidiary of Ameritas
Acacia Mutual Holding Company. TAG enters into contracts with various
broker-dealers ("Distributors") to distribute Policies. All persons selling the
Policy will be registered representatives of the Distributors, and will also be
licensed as insurance agents to sell variable insurance products. TAG is
registered with the Securities and Exchange Commission as a broker-dealer and is
a member of the National Association of Securities Dealers, Inc. Commissions
paid to all distributors may be up to a total of 7% of premiums. We may also pay
other distribution expenses such as production incentive bonuses. These
distribution expenses do not result in any additional charges under the Policy
other than those described in this prospectus' FEES section.
[] VOTING RIGHTS
As required by law, we will vote the Subaccount shares in the
underlying portfolios at regular and special shareholder meetings of the series
funds pursuant to instructions received from persons having voting interests in
the underlying portfolios. The underlying portfolios may not hold routine annual
shareholder meetings.
As a Policy Owner, you may have voting rights in the portfolios whose
shares underlie the Subaccounts you are invested in. You will receive proxy
material, reports, and other materials relating to each underlying portfolio in
which you have voting rights.
[] DISTRIBUTION OF MATERIALS
We will distribute proxy statements, updated prospectuses and other
materials to you from time to time. In order to achieve cost savings, we may
send consolidated mailings to several owners with the same last name who share a
common address or post office box.
[] ADVERTISING
From time to time, we may advertise several types of performance for
the Subaccount variable investment options. We may also advertise ratings,
rankings or other information related to us, the Subaccounts or the underlying
portfolios. Following is a description of types of performance reporting:
TOTAL RETURN is the overall change in the value of an investment in a
Subaccount variable investment option over a given period of time.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN is calculated in accordance
with SEC guidelines. This shows the percentage return on $1,000 invested in the
Subaccounts over the most recent 1, 5 and 10 year periods. If the variable
investment option was not available for the full period, we give a history from
the date money was first received in that option. This return reflects deduction
of all recurring Policy charges during each period (i.e. mortality and expense
risk charges, annual Policy fee, administrative expenses, and any applicable
withdrawal charges). Standardized returns may reflect current waiver of any fees
or current charges that are lower than our guaranteed maximum charges.
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN may be for periods other
than those required or may otherwise differ from standardized average annual
total return. For example, if a Subaccount's underlying portfolio has been in
existence longer than the Subaccount, we may show non-standardized performance
for periods that begin on the inception date of the underlying portfolio, rather
than the inception date of the Subaccount. Otherwise, non-standardized average
annual total return is calculated in a similar manner as that stated above,
except we do not include the deduction of any applicable withdrawal charge
(e.g., we assume the Policy continues beyond the period shown), and some
non-standardized returns may be based on Policy sizes where the Policy fee would
be waived.
[] LEGAL PROCEEDINGS
As of the date of this Prospectus, there are no proceedings affecting
the Separate Account, or that are material in relation to our total assets.
Acacia Designer Annuity -30-
<PAGE>
APPENDIX A: VARIABLE INVESTMENT OPTION PORTFOLIOS
-------------------------------------------------------------------------------
The Separate Account Subaccount underlying portfolios listed below are
designed primarily as investments for variable annuity and variable life
insurance policies issued by insurance companies. They are NOT publicly traded
mutual funds available for direct purchase by you. THERE IS NO ASSURANCE THE
INVESTMENT OBJECTIVES WILL BE MET.
This information is just a summary for each underlying portfolio. You
should read the series fund prospectus for an underlying portfolio for more
information about that portfolio.
<TABLE>
<CAPTION>
<S> <C> <C>
-------------------------------------- ---------------------------------------- --------------------------------------
Separate Accout Investment Stratagy Invesment Objective
Portfolio
-------------------------------------- ----------------------------------------- -------------------------------------
ALGER Offered through THE ALGER AMERICAN FUND
Advised by FRED ALGER MANAGEMENT, INC.
-------------------------------------- ----------------------------------------- --------------------------------------
ALGER AMERICAN BALANCED Common stock of companies with
growth potential and fixed-income Current Income and long-term capital
securities. growth
-------------------------------------- ---------------------------------------- --------------------------------------
ALGER AMERICAN MIDCAP GROWTH Common stocks of midsize U.S.
companies with promising growth Long-term capital growth.
potential.
-------------------------------------- ---------------------------------------- --------------------------------------
Common stocks of small, fast-growing
U.S. companies that offer innovative
ALGER AMERICAN SMALL CAPITALIZATION products, services or technologies Long-term capital growth.
to a rapidly expanding marketplace.
-------------------------------------- -------------------------------------------------------------------------------
CALVERT SOCIAL Offered through CALVERT VARIABLE SERIES, INC. CALVERT SOCIAL PORTFOLIOS
Advised by CALVERT ASSET MANAGEMENT COMPANY
-------------------------------------- -------------------------------------------------------------------------------
CVS SOCIAL BALANCED Mostly large-cap growth oriented
common stock of U.S. companies, with
some bonds and money market Income and capital growth through
instruments. social criteria screened investments.
-------------------------------------- ---------------------------------------- --------------------------------------
CVS SOCIAL INTERNATIONAL EQUITY Common stocks of mid to large cap High total return through social
companies. criteria screened investments.
-------------------------------------- ---------------------------------------- --------------------------------------
CVS SOCIAL MID CAP GROWTH Common stocks of mid size companies. Long-term capital growth through
social criteria screened investments.
-------------------------------------- ---------------------------------------- --------------------------------------
CVS SOCIAL MONEY MARKET High quality money market securities. Current Income through social criteria
screened investments.
-------------------------------------- ---------------------------------------- --------------------------------------
CVS SOCIAL SMALL CAP GROWTH Common stocks of small cap companies. Long-term capital growth through
social criteria screened investments.
-------------------------------------- -------------------------------------------------------------------------------
FIDELITY (SERVICE CLASS 2) Offered through VARIABLE INSURANCE PRODUCTS: SERVICE CLASS 2
Advised by FIDELITY MANAGEMENT AND RESEARCH COMPANY
-------------------------------------- -------------------------------------------------------------------------------
VIP CONTRAFUND Common stocks of companies whose
value is not fully recognized. Long-term capital growth.
-------------------------------------- ---------------------------------------- --------------------------------------
VIP EQUITY-INCOME Income producing equity securities. Reasonable income.
-------------------------------------- ---------------------------------------- --------------------------------------
High yielding fixed-income
VIP HIGH INCOME securities, while also considering
growth of capital. High level of current income.
-------------------------------------- ---------------------------------------- --------------------------------------
NEUBERGER BERMAN Offered through NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST.
Advised by NEUBERGER BERMAN MANAGEMENT INC.
-------------------------------------- -------------------------------------------------------------------------------
AMT GROWTH Common stocks, often of companies Long-term capital growth.
that may be temporarily out of favor
in the market.
-------------------------------------- ---------------------------------------- --------------------------------------
AMT LIMITED MATURITY BOND Fixed and variable rate debt Current income; secondarily, total
securities. return.
-------------------------------------- ---------------------------------------- --------------------------------------
AMT PARTNERS Common stocks of mid- to large-cap Capital growth.
companies.
-------------------------------------- -------------------------------------------------------------------------------
OPPENHEIMER Offered through OPPENHEIMER VARIABLE ACCOUNT FUNDS
Advised by OPPENHEIMER FUNDS, INC.
-------------------------------------- -------------------------------------------------------------------------------
AGGRESSIVE GROWTH /VA Common stocks of "growth-type" Capital appreciation.
companies.
-------------------------------------- ---------------------------------------- --------------------------------------
CAPITAL APPRECIATION /VA Common stocks of well-known Capital appreciation.
established companies.
-------------------------------------- ---------------------------------------- --------------------------------------
High yield fixed-income securities,
including foreign government and
HIGH INCOME /VA corporate debt securities, U.S. Current Income.
government securities, and "junk
bonds."
-------------------------------------- ---------------------------------------- --------------------------------------
Equity and debt securities,
MAIN STREET GROWTH & INCOME /VA including small to medium capital Capital appreciation and current
issuers. income.
-------------------------------------- ---------------------------------------- --------------------------------------
STRATEGIC BOND /VA Diversified portfolio of high yield Current Income.
fixed-income securities, including
foreign government and corporate
debt securities, U.S. government
securities, and "junk bonds."
Acacia Designer Annuity Variable Investment Options Portfolios
- A: 1 -
<PAGE>
------------------------------------- -------------------------------------------------------------------------------
TEMPLETON (Class 2) Offered through FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Advised by TEMPLETON INVESTMENT COUNSEL, INC.
-------------------------------------- -------------------------------------------------------------------------------
ASSET STRATEGY Domestic and foreign equity
securities of companies, debt
securities of companies and
governments, and money market High total return.
instruments.
-------------------------------------- ---------------------------------------- --------------------------------------
Equity securities of foreign
INTERNATIONAL SECURITIES companies, including emerging
markets. Long-term capital growth.
-------------------------------------- ---------------------------------------- --------------------------------------
VAN ECK Offered through VAN ECK WORLDWIDE INSURANCE TRUST.
Advised by VAN ECK ASSOCIATES.
-------------------------------------- -------------------------------------------------------------------------------
WORLDWIDE HARD ASSETS Investing globally, primarily in Long-term capital appreciation.
securities of companies that derive most
of revenue or profit from exploration,
development, production or distribution
of precious metals, natural resources,
real estate or commodities.
-------------------------------------- ---------------------------------------- --------------------------------------
</TABLE>
Acacia Designer Annuity Variable Investment Options Portfolios
- A: 2 -
<PAGE>
APPENDIX B: TAX-QUALIFIED PLAN DISCLOSURES
--------------------------------------------------------------------------------
INDEX
Disclosure Statement for IRA,
SEP IRA, SIMPLE IRA, & Roth IRA plan..................................Page B: 1
Disclosure Statement for 401(a)
Pension/Profit Sharing, 403(b) ERISA plan.............................Page B: 10
Withdrawal Restrictions for 403(b)
Tax Sheltered Annuity plan............................................Page B: 11
--------------------------------------------------------------------------------
DISCLOSURE STATEMENT | IRA
ACACIA NATIONAL LIFE INSURANCE COMPANY | SEP IRA
(WE, US, OUR, THE COMPANY) | SIMPLE IRA
| ROTH IRA
for annuity policies issued as a(n):
--------------------------------------------------------------------------------
TABLE OF CONTENTS
PART I: PURPOSE; YOUR RIGHT TO CANCEL YOUR IRA
PART II. PROVISIONS OF THE IRA LAW
A. Eligibility
B. Nontransferability
C. Nonforfeitability
D. Premium
E. Contribution Limits
F. Distribution Rights
PART III: RESTRICTIONS AND TAX CONSIDERATIONS
---------------------------------------------
A. Timing of Contributions
B. Timing of Roth IRA Conversions
C. Deductible IRA Contributions
D. Non-deductible Regular IRA Contributions
E. Effects of Conversion of
Regular IRA to Roth IRA
F. Recharacterization of
IRA/ Roth IRA Contributions
G. Excess Contributions
H. Loans and Prohibited Transactions
I. Taxability of Regular IRA Distributions
J. Taxability of Roth IRA Distributions
K. Lump Sum Distribution
L. Premature IRA Distribution
M. Minimum Required Distributions
N. Tax Filing - Regular IRAs
O. Tax Filing - Roth IRA
PART IV: STATUS OF OUR IRA PLAN
PART V: FINANCIAL DISCLOSURE
For purchasers of a Internal Revenue Code Section 408(b) Individual Retirement
Annuity (IRA) Plan, 408(k) Simplified Employee Pension (SEP IRA) Plan, 408(p)
Savings Incentive Match (SIMPLE IRA) Plan or a 408A Roth IRA, please review the
following:
PART I. PURPOSE; YOUR RIGHT TO CANCEL YOUR IRA
THE INFORMATION PROVIDED IN THIS DISCLOSURE STATEMENT IS PROVIDED PURSUANT TO
IRS REQUIREMENTS. IT DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. FOR THAT, CONTACT
YOUR OWN LEGAL OR TAX ADVISOR. Numerical references refer to sections of the
Internal Revenue Code (IRC).
If you have any questions about your Policy, please contact us at the address
and telephone number shown below. For further information about IRAs, contact
your personal tax advisor, any district office of the Internal Revenue Service
(IRS), or consult IRS publication 590: Individual Retirement Arrangements. Pub.
590 can be obtained by calling 1-800-TAX-FORM (829-3676).
After you establish an IRA Plan with us, you may revoke your IRA within a
limited time and receive a full refund of any initial premium paid. The period
to revoke will not be less than seven days following the date your IRA plan
policy is issued. To do so, send a signed and dated written notice and your
Policy to us at:
Acacia National Life Insurance Company
Service Center, Attn: Annuity Service Team
P.O. Box 82579
Lincoln, NE 68501
Telephone 1-888-837-6791
Your revocation will be effective on the date of the postmark (or certification
or registration, if applicable), if sent by United States mail, properly
addressed and by first class postage prepaid. After your Policy's free look
period expires, you cannot forfeit your interest in your IRA or transfer
ownership to another person.
PART II. PROVISIONS OF THE IRA LAW
Your variable annuity Policy can be used for a Regular IRA, a Rollover IRA, a
Spousal IRA Arrangement, a Simplified Employee Pension Plan (SEP IRA), or a
salary reduction Simplified Employee Pension Plan (SARSEP), a SIMPLE IRA, or a
Roth IRA. A separate policy must be purchased for each individual under each
plan. State income tax treatment of IRAs varies; this disclosure only discusses
the federal tax treatment of IRAs. While provisions of the IRA law are similar
for all such plans, the major differences are set forth under the appropriate
topics below.
Acacia National Life Insurance Company Tax-Qualified Plan Disclosure
-B:1-
<PAGE>
A. ELIGIBILITY
REGULAR IRA PLAN: Any person under age 70 1/2 and earning income from personal
services may establish an IRA Plan, although deductibility of the contributions
is determined by adjusted gross income ("AGI") and whether the person (or
person's spouse) is an "active participant" in an employer sponsored retirement
plan.
ROLLOVER IRA: This is an IRA plan purchased with your distributions from another
IRA (including a SEP IRA, SARSEP or SIMPLE IRA), a Section 401(a) Qualified
Retirement Plan, or a Section 403(b) Tax Sheltered Annuity (TSA). Amounts
transferred as Rollover Contributions are not taxable in the year of
distribution (provided the rules for Rollover treatment are satisfied) and may
or may not be subject to withholding. Rollover Contributions are not deductible.
SPOUSAL IRA ARRANGEMENT: A Spousal IRA, consisting of a separate contract for
each spouse, may be set up provided a joint return is filed, the "nonworking
spouse" has less taxable compensation, if any, for the tax year than the working
spouse, and is under age 70 1/2 at the end of the tax year.
Divorced spouses can continue a Spousal IRA or start a Regular IRA based on the
standard IRA eligibility rules. All taxable alimony received by the divorced
spouse under a decree of divorce or separate maintenance is treated as
compensation for purposes of the IRA deduction limit.
ROTH IRAS: A Roth IRA must be designated as such when it is established.
Eligibility to contribute or convert to a Roth IRA is subject to income and
other limits. Unlike Regular IRAs, if eligible, you may contribute to a Roth IRA
even after age 70 1/2.
1.A REGULAR ROTH IRA is a Roth IRA established to receive annual
contributions and/or qualified rollover contributions (including IRA
conversion contributions) from other Roth IRAs or from other IRAs if
permitted by the policy and endorsement. Unlike Regular IRAs,
contributions to a Roth IRA are not deductible for tax purposes. However,
any gain accumulated in a Roth IRA may be nontaxable, depending upon how
and when withdrawals are made.
2.A ROTH CONVERSION IRA is a Roth IRA established to receive only rollovers
or conversions from non-Roth IRAs made in the same tax year and is
limited to such contributions.
3.SPOUSAL ROTH IRA ARRANGEMENT: A Spousal Roth IRA may be set up for a
"non-working" spouse who has less taxable compensation, if any, for the
tax year than the "working" spouse, regardless of age, provided the
spouses file a joint tax return and subject to the adjusted gross income
("AGI") limits described in PART II, MAXIMUM CONTRIBUTIONS--SPOUSAL ROTH
IRA ARRANGEMENT. Divorced spouses can continue a Spousal Roth IRA or
start a regular Roth IRA based on standard Roth IRA eligibility rules.
Taxable alimony received by the divorced spouse under a decree of divorce
or separate maintenance is treated as compensation for purposes of Roth
IRA eligibility limits.
SIMPLIFIED EMPLOYEE PENSION PLAN (SEP IRA): An employee is eligible to
participate in a SEP IRA Plan based on eligibility requirements set forth in IRS
form 5305-SEP or other plan document provided by the employer.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLAN (SARSEP): An employee may
participate in a SARSEP plan based on eligibility requirements set forth in IRS
form 5305A-SEP or the plan document provided by the employer. New SARSEP plans
may not be established after December 31, 1996. SARSEPs established prior to
January 1, 1997, may continue to receive contributions after 1996, and new
employees hired after 1996 are also permitted to participate in such plans.
SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES OF SMALL EMPLOYERS (SIMPLE IRA): An
employee may participate in a SIMPLE IRA Plan based on eligibility requirements
set forth in IRS Form 5304-SIMPLE or other plan document provided by the
employer. A SIMPLE IRA must be established as such, thus some policies may not
be available for use with a SIMPLE IRA Plan.
B. NONTRANSFERABILITY
You may not transfer, assign or sell your IRA Plan to anyone (except in the case
of transfer incident to divorce).
C. NONFORFEITABILITY
The value of your IRA Plan belongs to you at all times, without risk of
forfeiture.
D. PREMIUM
The annual premium (if applicable) of your IRA Plan or Roth IRA may not exceed
the lesser of $2,000, or 100% of compensation for the year (or for Spousal IRAs,
or Spousal Roth IRAs, the combined compensation of the spouses reduced by any
Roth IRA or deductible IRA contribution made by the "working" spouse). Any
premium in excess of or in addition to $2,000 will be permitted only as a
"Rollover Contribution" (or "Conversion" contribution to a Roth IRA). Your
contribution must be made in cash. For IRAs established under SEP Plans (SEP
IRAs), premiums are limited to the lesser of $30,000 or 15% of the first
$150,000 of compensation (adjusted for cost of living increases). In addition,
if the IRA is under a SARSEP Plan established prior to January 1, 1997, annual
premiums made by salary reduction are limited to $7,000 (adjusted for cost of
living increases). Premiums under a SIMPLE IRA are limited to permissible levels
of annual employee elective contributions (up to $6,000 adjusted for cost of
living increases) plus the applicable percentage of employer matching
contributions (up to 3% of compensation but not in excess of $6,000, as
adjusted) or of employer non-elective contributions (2% of compensation (subject
to the cap under Code Section 401(a)(17) as indexed) for each eligible
employee).
E. CONTRIBUTION LIMITS
REGULAR IRA PLAN: In any year that your annuity is maintained under the rules
for a Regular IRA Plan, your maximum contribution is limited to 100% of your
compensation or $2,000, whichever is less. Further, this is the maximum amount
you may contribute to ALL IRAs in a year (including Roth IRAs, but not Education
IRAs or employer contributions or salary deferrals made to SEP or SIMPLE IRAs).
The amount of permissible contributions to your Regular IRA may or may not be
deductible. Whether IRA contributions other than Rollovers) are deductible
depends on whether you (or your spouse, if married) are an active participant in
an employer-sponsored retirement plan and whether your adjusted gross income is
above the "phase-out level." You will only be deemed to be an active participant
and your deductions for contributions subject to phase-out because of your
spouse's participation in an employer- sponsored retirement plan, if your
combined adjusted gross income exceeds $150,000. SEE PART III. C., DEDUCTIBLE
IRA CONTRIBUTIONS.
Acacia National Life Insurance Company Tax-Qualified Plan Disclosure
-B:2-
<PAGE>
ROLLOVER IRA: A Plan to Plan Rollover is a method for accomplishing continued
tax deferral on otherwise taxable distributions from certain plans. Rollover
contributions are not subject to the contribution limits on Regular IRA
contributions, but also are not tax deductible.
There are two ways to make a rollover to an IRA:
1.PARTICIPANT ROLLOVERS are available to participants, surviving spouses or
former spouses who receive eligible rollover distributions from 401(a)
Qualified Retirement Plans, TSAs or IRAs (including SEPs, SARSEPs, and
SIMPLE IRAs). Participant Rollovers are accomplished by contributing part
or all of the eligible amounts (which includes amounts withheld for
federal income tax purposes) to your new IRA within 60 days following
receipt of the distribution. IRA to IRA Rollovers are limited to one per
distributing plan per 12 month period, while direct IRA to IRA transfers
(where you do not directly receive a distribution) are not subject to
this limitation. Distributions from a SIMPLE IRA may not be rolled over
or transferred to an IRA (which isn't a SIMPLE IRA) during the 2 year
period following the date you first participate in any SIMPLE Plan
maintained by your employer.
2.DIRECT ROLLOVERS are available to participants, surviving spouses and
former spouses who receive eligible rollover distributions from 401(a)
Qualified Retirement Plans or TSAs. Direct Rollovers are made by
instructing the plan trustee, custodian or issuer to pay the eligible
portion of your distribution directly to the trustee, custodian or issuer
of the receiving IRA. Direct Rollover amounts are not subject to
mandatory federal income tax withholding.
FOR RULES APPLICABLE TO ROLLOVERS OR TRANSFERS TO ROTH IRAS, SEE THE PARAGRAPHS
ON ROTH AND ROTH CONVERSION IRAS, THAT FOLLOW.
Certain distributions are NOT considered to be eligible for Rollover and
include: (1) distributions which are part of a series of substantially equal
periodic payments (made at least annually) for 10 years or more; (2)
distributions attributable to after-tax employee contributions to a 401(a)
Qualified Retirement Plan or TSA; (3) required minimum distributions made during
or after the year you reach age 70 1/2 or, if later and applicable, the year in
which you retire; and (4) amounts in excess of the cash (except for certain loan
offset amounts) or in excess of the proceeds from the sale of property
distributed. Also, hardship distributions made from 401(k) or 403(b) plans are
no longer considered eligible rollover distributions except as otherwise
permitted by the Internal Revenue Service. The Internal Revenue Service
announced transition relief from this rule for 1999.
At the time of a Rollover, you must irrevocably designate in writing that the
transfer is to be treated as a Rollover Contribution. Eligible amounts which are
not rolled over are normally taxed as ordinary income in the year of
distribution. If a Rollover Contribution is made to an IRA from a Qualified
Retirement Plan, you may later be able to roll the value of the IRA into a new
employer's plan PROVIDED YOU MAKE NO CONTRIBUTIONS TO THE IRA OTHER THAN FROM
THE FIRST EMPLOYER'S PLAN. THIS IS KNOWN AS "CONDUIT IRA," AND YOU SHOULD
DESIGNATE YOUR ANNUITY AS SUCH WHEN YOU COMPLETE YOUR APPLICATION.
SPOUSAL IRA ARRANGEMENT: In any year that your annuity is maintained under the
rules for a Spousal IRA, the maximum combined contribution to the Spousal IRA
and the "working" spouse's IRA is the lesser of 100% of the combined
compensation of both spouses which is includable in gross income (reduced by the
amount of any contributions to a Roth IRA or the amount allowed as a deduction
to the "working" spouse for contribution to his or her own IRA) or $4,000. No
more than $2,000 may be contributed to either spouse's IRA. Whether the
contribution is deductible or non-deductible depends on whether either spouse is
an "active participant" in an employer-sponsored retirement plan for the year,
and whether the adjusted gross income of the couple is above the applicable
phase-out level. (SEE PART III. C., DEDUCTIBLE IRA CONTRIBUTIONS).
The contribution limit for divorced spouses is the lesser of $2,000 or the total
of the taxpayer's taxable compensation and alimony received for the year.
(Married individuals who live apart for the entire year and who file separate
tax returns are treated as if they are single when determining the maximum
deductible contribution limits).
ROTH IRA: The maximum total annual contribution an individual can make to all
IRAs (including Roth IRAs, but not Education, SARSEP or SIMPLE IRAs) is the
lesser of $2,000 or 100% of compensation. (This limit does not apply to rollover
contributions, which includes amounts converted from a Regular IRA to a Roth
IRA). If an individual contributes to both a Regular IRA and Roth IRA for the
same tax year, contributions are treated as first made to the Regular IRA. For
Roth IRAs, this $2,000 limitation is phased out for adjusted gross incomes
between $150,000 and $160,000 for joint filers; between $95,000 and $110,000 for
single taxpayers; and between $0 and $10,000 for married individuals who file
separate tax returns. Adjusted Gross Income ("AGI") for this purpose includes
any deductible contribution to a Regular IRA, (i.e., the deduction is
disregarded) but does not include any amount included in income as a result of a
rollover or conversion from a non-Roth IRA to a Roth IRA.
Rollovers and transfers may also be made from one Roth IRA to another. Such
rollovers or transfers are generally subject to the same timing and frequency
rules as apply to Participant Rollovers and transfers from one Regular or
Rollover IRA to another. (SEE PART II, CONTRIBUTION LIMITS: ROLLOVER IRA,
ABOVE).
Also, rollovers or conversions may be made from non-Roth IRAs to a Roth IRA.
These contributions can be commingled with regular Roth contributions if your
policy permits. To be eligible to make such a conversion or rollover from a
non-Roth IRA, the taxpayer's AGI for the taxable year cannot exceed $100,000
(joint or individual) and he or she must NOT be married filing a separate tax
return (unless the taxpayer lives apart from his of her spouse at all times
during the year). A rollover from a non-Roth IRA to a Roth IRA does not count
toward the limit of one rollover per IRA in any 12-month period under the normal
IRA rollover rules. Also, eligible rollover distributions received by you or
your spouse from a qualified plan other than an IRA, may not be directly rolled
over to a Roth IRA. However, you may be able to roll such a distribution over to
a non-Roth IRA, then convert that IRA to a Roth IRA. Also if you are eligible to
make a conversion, you may transfer amounts from most non-Roth IRAs (other than
Education IRAs). Conversion of an individual's SIMPLE IRA is only permitted
after expiration of the 2-year period which begins on the date the individual
first participated in any SIMPLE IRA Plan of the employer. Once an amount in a
SIMPLE IRA or SEP has been converted to a Roth IRA, it is treated as a Roth IRA
contribution for all purposes. Future contributions under the SEP or SIMPLE Plan
may not be made to the Roth IRA. AGI for the purpose of determining eligibility
to convert to a Roth IRA does not include any amount included in income as a
result of a rollover or conversion from a non-Roth IRA to a Roth IRA, but does
include the amount of any deductible contribution made to a Regular IRA for the
tax year. In addition, for tax years
Acacia National Life Insurance Company Tax-Qualified Plan Disclosure
-B:3-
<PAGE>
beginning before January 1, 2005, required minimum distributions from an IRA are
included in AGI for purposes of determining eligibility for conversion to a Roth
IRA. However, for tax years beginning after December 31, 2004, required minimum
distributions from an IRA will not be included in AGI (solely for purposes of
determining the $100,000 AGI limit on conversions).
ROTH CONVERSION IRA: A Roth Conversion IRA is a Roth IRA that only accepts IRA
conversion contributions made during the same tax year. You should not designate
your policy as a Roth Conversion IRA if you wish to make both regular Roth and
Conversion contributions to the policy.
SPOUSAL ROTH IRA ARRANGEMENT: If the "non-working" spouse's compensation is less
than $2,000, the spouses file a joint tax return, and their combined AGI
(unreduced by any deductible IRA contribution made for the year, but not
including any amounts includable in income as a result of a conversion to a Roth
IRA) is $150,000 or below, a contribution of up to $2,000 may be made to a
separate Spousal Roth IRA in the name of the "non-working" spouse. The $2,000
limit is phased out proportionately between $150,000 and $160,000 of AGI
(modified as described above). Spouses are not required to make equal
contributions to both Roth IRAs; however no more than $2,000 may be contributed
to the "working" or "non-working" spouse's Roth IRA for any year, and the total
amount contributed annually to all IRAs (including both Roth and Regular IRAs,
but not Education, SARSEP, or SIMPLE IRAs) for both spouses cannot exceed
$4,000. If the combined compensation of both spouses (reduced by any deductible
IRA or non-deductible Roth contributions made for the "working" spouse) is less
than $4,000, the total contribution for all IRAs is limited to the total amount
of the spouses' combined compensation. These limits do not apply to rollover
contributions.
For divorced spouses, the contribution limit to a Roth IRA is the lesser of
$2,000 or the total of the taxpayer's compensation and alimony received for the
year, subject to the applicable phase-out limits for eligibility to make
contributions to a Roth IRA. (Married individuals who live apart for the entire
year and who file separate tax returns are treated as if they are single when
determining the maximum contribution they are eligible to make in a Roth IRA).
SEP IRA PLAN: In any year that your annuity is maintained under the rules for a
SEP Plan, the employer's maximum contribution is the lesser of $30,000 or 15% of
your first $150,000 of compensation (adjusted for cost-of-living increases) or
as changed under Section 415 of the Code. You may also be able to make
contributions to your SEP IRA the same as you do to a Regular IRA; however, you
will be considered an "active participant" for purposes of determining your
deduction limit. In addition to the above limits, if your annuity is maintained
under the rules for a SARSEP, the maximum amount of employee pre-tax
contributions which can be made is $7,000 (adjusted for cost of living
increases). New SARSEP plans may not be established. Employees may, however,
continue to make salary reductions to a SARSEP plan established prior to January
1, 1997. In addition, employees hired after December 31, 1996 may participate in
SARSEP plans established by their employers prior to 1997.
SIMPLE IRA: Contributions to a SIMPLE IRA may not exceed the permissible amounts
of employee elective contributions and required employer matching contributions
or non-elective contributions. Annual employee elective contributions must be
expressed as a percentage of compensation and may not exceed $6,000 (adjusted
for cost of living increases). If an employer elects a matching contribution
formula, it is generally required to match employee contributions dollar for
dollar up to 3% of the employee's compensation for the year (but not in excess
of $6,000 as adjusted for cost-of-living adjustments). An employer may elect a
lower percentage match (but not below 1%) for a year, provided certain notice
requirements are satisfied and the employer's election will not result in the
matching percentage being lower than 3% in more than 2 of the 5 years in the
5-year period ending with that calendar year. Alternatively, an employer may
elect to make non-elective contributions of 2% of compensation for all employees
eligible to participate in the plan who have at least $5,000 in compensation for
the year. The employer must notify employees of this election within specified
time frames in advance of the plan year or election period. "Compensation" for
purposes of the 2% non-elective contribution option may not exceed the limit on
compensation under Code Section 401(a)(17) ($150,000, adjusted for cost of
living increases).
F. DISTRIBUTION REQUIREMENTS
1.IRA (EXCEPT ROTH IRAS) DISTRIBUTION REQUIREMENTS
WHILE YOU ARE LIVING. Payments to you from your IRA Plan (other than a Roth IRA)
must begin no later than the April 1 following the close of the calendar year in
which you attain age 70 1/2, the Required Beginning Date (RBD). If you have not
already withdrawn your entire balance by this date, you may elect to receive the
entire value of your IRA Plan on or before the RBD in one lump sum; or arrange
for an income to be paid over your lifetime, your expected lifetime, or over the
lifetimes or expected lifetimes of you and your designated beneficiary.
Once you reach your RBD, you must withdraw at least a minimum amount each year
or be subject to a 50% non-deductible excise tax on the difference between the
minimum required distribution and the amount distributed. To determine the
required minimum distribution for your first "required distribution year"
(assuming an annuity payout has not been elected) divide your entire interest
(subject to certain adjustments) in your IRA (generally as of December 31 of the
calendar year immediately preceding your age 70 1/2 year) by your life
expectancy or the joint life expectancies of you and your designated
beneficiary. For subsequent required distribution calendar years, the applicable
life expectancy(ies) will be applied to your IRA account balance as of December
31 of the calendar year immediately preceding the distribution calendar year
(subject to adjustments). Your single or joint life expectancy is determined by
using IRS life expectancy tables. See IRS Publications 575 and 590.
Your life expectancy (and that of your spousal beneficiary, if applicable) will
be recalculated annually, unless you irrevocably elect otherwise by the time
distributions are required to begin. With the recalculation method, if a person
whose life expectancy is being recalculated dies, his or her life expectancy
will be zero in all subsequent years. The life expectancy of a non-spouse
beneficiary cannot be recalculated. Where life expectancy is not recalculated,
it is reduced by one year for each year after your 70 1/2 year to determine the
applicable remaining life expectancy. Also, if your benefit is payable in the
form of a joint and survivor annuity, a larger minimum distribution amount may
be required during your lifetime under IRS regulations, unless your spouse is
the designated beneficiary. If your designated beneficiary is not your spouse,
the designated beneficiary's age will be deemed to be no more than ten (10)
years younger than you when determining life expectancy for required payouts.
However, under current I.R.S. proposed regulations, this rule only applies while
you are living and life expectancy of your beneficiary after your death can be
determined without regard to this rule.
AFTER YOUR DEATH. If you die after the RBD, amounts undistributed at your death
must be distributed at least as rapidly as under the method being used to
determine distributions at the time of your death. If you die before the RBD,
your entire interest must generally
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be distributed by the end of the calendaryear which contains the fifth
anniversary of your death (the "five year payout rule"). However, if a
beneficiary is designated, the beneficiary may elect to receive distributions
over his or her life expectancy if the beneficiary so elects by December 31 of
the year following the year of your death. If the beneficiary fails to make an
election, the entire benefit will be paid to the beneficiary under the "five
year payout rule". Also, if the designated beneficiary is your spouse, the life
annuity distribution must begin by the later of December 31 of the calendar year
following the calendar year of your death or December 31 of the year in which
you would have attained age 70 1/2. If your designated beneficiary is not your
spouse, life annuity distributions must begin by December 31 of the year
following your death. A surviving spouse may in the alternative elect to treat
the policy as his or her own IRA. This election may be expressly made or will be
deemed made if the spouse makes a regular IRA contribution to the policy, makes
a rollover to or from the IRA, or fails to elect minimum distributions as
described above.
2.ROTH IRA DISTRIBUTION REQUIREMENTS
WHILE YOU ARE LIVING. None, even after you reach age 70 1/2.
AFTER YOUR DEATH. If you die after you have reached your Annuity Date, and have
begun to receive distributions under an annuity option (not including an
interest only option), the remaining Policy value will continue to be
distributed to your designated beneficiary according to the terms of the elected
options, (provided that method satisfies the requirements of Code Section
408(b)(3), as modified by Code Section 408A(c)(5)).
If you die before you have elected an annuity option or before distribution of
your entire interest in the policy has been made or begun, your entire interest
in your Roth IRA generally must be distributed by the end of the calendar year
which contains the fifth anniversary of your death (the "five year payout
rule"). However, if there is a designated beneficiary, he or she may elect to
receive distributions over a period not longer than his or her life expectancy
provided the election is made and distributions commence by December 31 of the
calendar year following the calendar year of your death. If the beneficiary does
not make this election, the entire benefit will be paid to him or her under the
"five year payout rule". If your designated beneficiary is your surviving
spouse, he or she may elect to delay distributions until the later of the end of
the calendar year following the year in which you died or the end of the year in
which you would have reach age 70 1/2. If your sole designated beneficiary is
your surviving spouse, he or she may elect to treat the policy as his or her own
Roth IRA by making an express election to do so, by making a regular Roth IRA
contribution or rollover contribution (as applicable or as permissible) to the
policy, or by failing to elect minimum distributions under the "five year payout
rule" or the life annuity options discussed above.
Life expectancies will be determined by using IRS life expectancy tables. A
surviving spouse's life expectancy will be recalculated annually, unless he or
she irrevocably elects otherwise. Non-spousal beneficiary life expectancies will
be determined using the beneficiary's attained age in the calendar year
distributions are required to begin and reducing life expectancy by one for each
year thereafter.
3.TAKING REQUIRED MINIMUM DISTRIBUTIONS FROM ONE IRA:
AGGREGATING MINIMUM DISTRIBUTIONS: If you are required to take minimum
distributions from more than one IRA (either as owner of one or more Regular
IRAs and/or as a beneficiary of one or more decedent's Roth IRAs or Regular
IRAs), you may not have to take a minimum distribution from each IRA. (Regular
and Roth IRAs are treated as different types of IRAs, so minimum distributions
from a Roth IRA will not satisfy the minimum distributions required from a
Regular IRA). Instead, you may be able to calculate the minimum distribution
amount required for each IRA (considered to be of the same type) separately, add
the relevant amounts and take the total required amount from one IRA or Roth IRA
(as applicable). However, an individual required to receive minimum
distributions as a beneficiary under a Roth IRA can only satisfy the minimum
distributions for one Roth IRA by receiving distributions from another Roth IRA
if the Roth IRAs were inherited from the same decedent. Because of these
requirements, we cannot monitor the required distribution amounts from IRAs held
with us. Please check with your tax advisor to verify that you are receiving the
proper amount from all of your IRAs.
PART III. RESTRICTIONS & TAX CONSIDERATIONS
A. TIMING OF CONTRIBUTIONS
Once you establish an IRA, (including a Roth or Spousal Roth IRA) contributions
must be made by the due date, not including extensions, for filing your tax
return. (Participant Rollovers must be made within 60 days of your receipt of
the distribution.) A CONTRIBUTION MADE BETWEEN JANUARY 1 AND THE FILING DUE DATE
FOR YOUR RETURN, MUST BE SUBMITTED WITH WRITTEN DIRECTION THAT IT IS BEING MADE
FOR THE PRIOR TAX YEAR OR IT WILL BE TREATED AS MADE FOR THE CURRENT TAX YEAR.
SEP IRA contributions must be made by the due date of the Employer's tax return
(including extensions). SIMPLE IRA contributions, if permitted, must be made by
the tax return due date for the employer (including extensions) for the year for
which the contribution is made. Note, an employer is required to make SIMPLE
plan contributions attributable to employee elective contributions as soon as it
is administratively feasible to segregate these contributions from the
employer's general assets, but in no event later than the 30th day of the month
following the month in which the amounts would have otherwise been payable to
the employee in cash.
B. TIMING OF ROTH IRA CONVERSIONS
Conversions from a non-Roth IRA to a Roth IRA for a particular tax year, MUST BE
INITIATED SO THAT THE DISTRIBUTION OR TRANSFER FROM THE NON-ROTH IRA IS MADE BY
DECEMBER 31 OF THAT YEAR. YOU DO NOT HAVE UNTIL THE DUE DATE OF YOUR TAX RETURN
FOR A YEAR TO CONVERT A REGULAR IRA TO A ROTH IRA FOR THAT TAX YEAR. For
example, if you wish to convert a Regular IRA to a Roth IRA in 2001, the
conversion and transfer must be made by December 31, 2001, even though your tax
return for 2000 may not be due until April 15, 2002.
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C. DEDUCTIBLE IRA CONTRIBUTIONS
The amount of permissible contributions to your Regular IRA may or may not be
deductible. If you or your spouse are not active participants in an employer
sponsored retirement plan, any permissible contribution you make to your IRA
will be deductible. If you or your spouse are an active participant in an
employer-sponsored retirement plan, the size of your deduction if any, will
depend on your combined adjusted gross income (AGI).
If you are not an active participant in an employer sponsored plan, but your
spouse is an active participant, you may take a full deduction for your IRA
contribution (other than to a Roth IRA) if your AGI is below $150,000; if you
are not an active participant but your spouse is, the maximum deductible
contribution for you is phased out at AGIs between $150,000 and $160,000.
If you are an active participant in an employer sponsored requirement plan you
may make deductible contributions if your AGI is below a threshold level of
income. For single taxpayers and married taxpayers (who are filing jointly and
are both active participants) the available deduction is reduced proportionately
over a phaseout range. If you are married and an active participant in an
employer retirement plan, but file a separate tax return from your spouse, your
deduction is phased out between $0 and $10,000 of AGI.
If your AGI is not above the maximum applicable phase out level, a minimum
contribution of $200 is permitted regardless of whether the phase out rules
provide for a lesser amount.
Active participants with income above the phaseout range are not entitled to an
IRA deduction. The phaseout limits are scheduled to increase as follows:
MARRIED FILING JOINTLY SINGLE/HEAD OF HOUSEHOLD
YEAR AGI AGI
2000 $52,000 - $ 62,000 $32,000 - $42,000
2001 $53,000 - $ 63,000 $33,000 - $43,000
2002 $54,000 - $ 64,000 $34,000 - $44,000
2003 $60,000 - $ 70,000 $40,000 - $50,000
2004 $65,000 - $ 75,000 $45,000 - $55,000
2005 $70,000 - $ 80,000 $50,000 - $60,000
2006 $75,000 - $ 85,000 $50,000 - $60,000
2007+ $80,000 - $ 100,000 $50,000 - $60,000
You can elect to treat deductible contributions as non-deductible. SEP IRA,
SARSEP, SIMPLE IRA and Roth IRA contributions are not deductible by you.
Remember, except for rollovers, conversions or transfers, the maximum amount you
may contribute to all IRAs (including Roth and Regular IRAs, but not Education
IRAs) for a calendar year is $2,000 or 100% of compensation, whichever is less.
D. NON-DEDUCTIBLE REGULAR IRA CONTRIBUTIONS
You may make non-deductible contributions to your Regular IRA (not including
SIMPLE IRAs) even if you are not eligible to make deductible contributions to a
Regular IRA or non-deductible contributions to a Roth IRA for the year. The
amount of non-deductible contributions you can make depends on the amount of
deductible contributions you make. The sum of your non-deductible and deductible
contributions for a year may not exceed the lesser of (1) $2,000 ($4,000
combined when a Spousal IRA is also involved), or (2) 100% of your compensation
(or, if a Spousal IRA is involved, 100% of you and your spouse's combined
compensation, reduced by the amount of any deductible IRA contribution and
non-deductible Roth IRA contribution made by the "working" spouse). The sum of
your annual non-deductible (including Roth IRA) and deductible contributions,
other than when combined with a Spousal IRA or Spousal Roth IRA, may not exceed
$2,000. IF YOU WISH TO MAKE A NON-DEDUCTIBLE CONTRIBUTION, YOU MUST REPORT THIS
ON YOUR TAX RETURN BY FILING FORM 8606 (NON-DEDUCTIBLE IRA). REMEMBER, YOU ARE
REQUIRED TO KEEP TRACK OF YOUR NON-DEDUCTIBLE CONTRIBUTIONS AS THE COMPANY DOES
NOT KEEP A RECORD OF THESE FOR YOU. THIS INFORMATION WILL BE NECESSARY TO
DOCUMENT THAT THE CONTRIBUTIONS WERE MADE ON A NON-DEDUCTIBLE BASIS AND
THEREFORE, ARE NOT TAXABLE UPON DISTRIBUTION.
E. EFFECTS OF CONVERSION OF REGULAR IRA TO ROTH IRA
If you convert all or part of a non-Roth IRA to a Roth IRA, the amount converted
from the non-Roth IRA will be taxable as if it had been distributed to you in
the year of distribution or transfer from the non-Roth IRA. If you made
non-deductible contributions to any Regular IRA, part of the amount taken out of
a Regular IRA for conversion will be taxable and part will be non-taxable. (Use
IRS Form 8606 to determine how much of the withdrawal from your Regular IRA is
taxable and how much is non-taxable). The taxable portion of the amount
converted is includable in your income for the year of conversion.
Amounts properly converted from a non-Roth IRA to a Roth IRA are generally not
subject to the 10% early withdrawal penalty. However, if you make a conversion
to a Roth IRA, but keep part of the money for any reason, that amount will be
taxable in the year distributed from the non-Roth IRA and the taxable portion
may be subject to the 10% early withdrawal penalty.
You should consult with your tax advisor to ensure that you receive the tax
benefits you desire before you contribute to a Roth IRA, convert to a Roth IRA
or take distributions from a Roth IRA. IT WILL ALSO BE IMPORTANT FOR YOU TO KEEP
TRACK OF AND REPORT ANY REGULAR OR CONVERSION CONTRIBUTIONS YOU MAKE TO YOUR
ROTH IRAS AS REQUIRED BY THE IRS. CONVERSION CONTRIBUTIONS, RECHARACTERIZATIONS
OF CONVERSIONS AND DISTRIBUTIONS FROM A ROTH IRA MUST BE REPORTED ON IRS FORM
8606.
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F. RECHARACTERIZATION OF IRA AND ROTH IRA CONTRIBUTIONS
IRA owners are permitted to treat a contribution made to one type of IRA as made
to a different type of IRA for a taxable year in a process known as
"recharacterization". A recharacterization is accomplished by an individual who
has made a contribution to an IRA of one type for a taxable year, electing to
treat the contribution as having been made to a second IRA of a different type
for the taxable year. To accomplish the recharacterization, a trustee-to-trustee
transfer from the first IRA to the second IRA must be made on or before the due
date (including extensions) for filing the individual's Federal income tax
return for the taxable year for which the contribution was made to the first
IRA. Any net income attributable to the recharacterized contribution must also
be transferred to the second IRA. Once the transfer is made, the election is
irrevocable. The effect of recharacterizing a contribution is that it is treated
as having been originally contributed to the second IRA on the same date and (in
the case of a regular contribution) for the same taxable year that the
contribution was made to the first IRA. If you elect to recharacterize a
contribution, you must report the recharacterization and treat the contribution
as having been made to the second IRA, instead of the first, on your Federal
income tax return.
Examples of where a recharacterization election might be useful or desired
include: where an individual discovers he was ineligible to convert a regular
IRA to a Roth IRA because his adjusted gross income exceeded $100,000; amounts
were erroneously rolled over from a traditional IRA to a SIMPLE IRA; or an
individual decides after he has made a contribution to a regular IRA for a tax
year that he is eligible for and prefers to contribute to a Roth IRA, or vice
versa. Recharacterizations are not permitted where a deduction has been taken
for the contribution to the first IRA; the contribution to the first IRA was the
result of a tax-free transfer or; the original contribution was an employer
contribution to a SIMPLE or SEP IRA.
RECONVERSION RULES. If you convert a non-Roth IRA to a Roth IRA and then
recharacterize it back to a non-Roth IRA, you are not permitted by IRS rules to
reconvert the amount from the non-Roth IRA back to a Roth IRA before the
beginning of the taxable year following the taxable year in which the amount was
converted to a Roth IRA or, if later, the end of the 30-day period beginning on
the day on which you recharacterized the Roth IRA to a non-Roth IRA. This rule
will apply even if you were not eligible to make the original conversion because
of your AGI or tax filing status. If you attempt a reconversion prior to the
time permitted, it will be treated as a "failed conversion". The remedy for a
failed conversion is recharacterization to a non-Roth IRA. If the failed
conversion is not corrected, it will be treated as a regular contribution to a
Roth IRA and thus, may be an excess contribution subject to a 6% excise tax for
each tax year it remains in the Roth IRA to the extent it exceeds the maximum
regular Roth IRA contribution permitted for the tax year. (SEE PART III. G.,
EXCESS CONTRIBUTIONS, BELOW). Also, the failed conversion will be subject to the
10% premature distribution penalty tax, unless corrected or an exception to that
tax applies. CONSULT WITH YOUR TAX ADVISOR BEFORE ATTEMPTING A "RECONVERSION".
G. EXCESS CONTRIBUTIONS
There is a 6% IRS penalty tax on IRA contributions made in excess of permissible
contribution limits. However, excess contributions made in one year may be
applied against the contribution limits in a later year if the contributions in
the later year are less than the limit. This penalty tax can be avoided if the
excess amount, together with any earnings on it, is returned to you before the
due date of your tax return for the year for which the excess amount was
contributed. Any earnings so distributed will be taxable in the year for which
the contribution was made and may be subject to the 10% premature distribution
penalty tax (SEE PART III, PREMATURE IRA DISTRIBUTIONS). The 6% excess
contribution penalty tax will apply to each year the excess amount remains in
the IRA Plan, until it is removed either by having it returned to you or by
making a reduced contribution in a subsequent year. To the extent an excess
contribution is absorbed in a subsequent year by contributing less than the
maximum deduction allowable for that year, the amount absorbed will be
deductible in the year applied (provided you are eligible to take a deduction).
If a taxpayer transfers amounts contributed for a tax year to a Regular IRA (and
any earnings allocated to such amounts) to a Roth IRA by the due date for filing
the return for such tax year (including extensions), the amounts are not
included in the taxpayer's gross income to the extent that no deduction was
allowed for the contribution (SEE PART III. F. RECHARACTERIZATION OF IRA AND
ROTH IRA CONTRIBUTIONS ABOVE).
EXCESS CONTRIBUTIONS TO A ROTH IRA: If you are ineligible and convert a Regular
IRA to a Roth IRA, all or a part of the amount you convert may be an excess
contribution. (Examples may include conversions made when your Roth AGI exceeds
$100,000 or because you fail to timely make the rollover contribution from the
Regular IRA to the Roth IRA). You may also have an excess contribution if your
conversion is a "failed conversion" that is not timely corrected. You will have
an excess contribution if the ineligible amounts you convert and the
contributions you make to all your IRAs for the tax year exceed your IRA
contribution limits for the year. To avoid the 6% excise tax on excess
contributions, you must withdraw the excess contributions plus earnings before
the due date of your tax return (plus extensions) or recharacterize the
contribution, if permitted (SEE PART III. F. RECHARACTERIZATION OF IRA AND ROTH
IRA CONTRIBUTIONS ABOVE).
H. LOANS AND PROHIBITED TRANSACTIONS
You may not borrow from your IRA Plan (including Roth IRAs) or pledge it as
security for a loan. A loan would disqualify your entire IRA Plan, and its full
value (or taxable portions of your Roth IRA or non-deductible Regular IRA) would
be includable in your taxable income in the year of violation. This amount would
also be subject to the 10% penalty tax on premature distributions. Your IRA Plan
will similarly be disqualified if you or your beneficiary engage in any
transaction prohibited by Section 4975 of the Internal Revenue Code. A pledge of
your IRA as security for a loan will cause a constructive distribution of the
portion pledged and also be subject to the 10% penalty tax.
I. TAXABILITY OF REGULAR IRA DISTRIBUTIONS
Any cash distribution from your IRA Plan, other than a Roth IRA, is normally
taxable as ordinary income. All IRAs of an individual are treated as one
contract. All distributions during a taxable year are treated as one
distribution; and the value of the contract, income on the contract, and
investment in the contract is computed as of the close of the calendar year with
or within which the taxable year ends. If an individual withdraws an amount from
an IRA during a taxable year and the individual has previously made both
deductible and non-deductible IRA contributions, the amount excludable from
income for the taxable year is the portion of the amount withdrawn which bears
the same ratio to the amount withdrawn for the taxable year as the individual's
aggregate non-deductible IRA contributions bear to the balance of all IRAs of
the individual.
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J. TAXABILITY OF ROTH IRA DISTRIBUTIONS
"Qualified distributions" from a Roth IRA are not included in the taxpayer's
gross income and are not subject to the additional ten percent (10%) early
withdrawal penalty tax. To be a "qualified distribution," the distribution must
satisfy a 5-year holding period and meet one of the following four requirements:
(1) be made on or after the date on which the individual attains age 59 1/2; (2)
be made to a beneficiary or the individual's estate on or after the individual's
death; (3) be attributable to the individual being disabled; or (4) be a
distribution to pay for a "qualified" first-time home purchase (up to a lifetime
limit of $10,000). The 5-year holding period for escaping inclusion in income
begins with the first day of the tax year in which any contribution (including a
conversion from a Regular IRA) is made to a Roth IRA of the taxpayer. If the
Roth IRA owner dies, this 5-taxable-year period is not redetermined for the Roth
IRA while it is held in the name of a beneficiary or a surviving spouse who
treats the decedent's Roth IRA as his or her own. However, a surviving spouse
who treats the Roth IRA as his or her own, must receive any distributions as
coming from the surviving spouse's own Roth IRA, thus it cannot be treated as
being received by a beneficiary on or after the owner's death for purposes of
determining whether the distribution is a "qualified distribution".
If a distribution from a Roth IRA is not a "qualified distribution" and it
includes amounts allocable to earnings, the earnings distributed are includable
in taxable income and may be subject to the 10% premature distribution penalty
if the taxpayer is under age 59 1/2. Also, the 10% premature distribution
penalty tax may apply to conversion amounts distributed even though they are not
includable in income, if the distribution is made within the 5-taxable-year
period beginning on the first day of the individual's taxable year in which the
conversion contribution was made. Only the portion of the conversion includable
in income as a result of the conversion would be subject to the penalty tax
under this rule. The 5-taxable-year period for this purpose is determined
separately for each conversion contribution and may not be the same as the
5-taxable-year period used to determine whether a distribution from a Roth IRA
is a "qualified distribution" or not. FOR THIS REASON IT IS IMPORTANT THAT YOU
KEEP TRACK OF WHEN YOUR CONVERSION CONTRIBUTIONS ARE MADE TO YOUR ROTH IRA. (SEE
PART III. L., PREMATURE IRA DISTRIBUTIONS).
Unlike Regular IRAs, distributions from Roth IRAs come first from regular
contributions, then converted amounts on a first-in first-out basis, and last
from earnings. Any distributions made before 2001 which are attributable to 1998
conversion contributions for which the 4-year income-tax spread is being
utilized, will result in an acceleration of taxable income in the year of
distribution up to the amount of the distribution allocable to the 1998
conversion. This amount is in addition to the amount otherwise includable in
gross income for that taxable year as a result of the conversion, but not in
excess of the amount required to be included over the 4-year period. This tax
treatment would likewise apply in the case of distributions made by a surviving
spouse who elects to continue the 4-year spread on death of the original owner
of the Roth IRA. Generally, all Roth IRAs (both regular Roth IRAs and Roth
Conversion IRAs) must be treated as one for purposes of determining the taxation
of distributions. However, if a Roth IRA is held by an individual as beneficiary
of a deceased Roth IRA owner, the 5-taxable-year period used to determine
whether distributions are qualified or not is determined independently of the
5-year-taxable period for the beneficiary's own Roth IRAs. However, if a
surviving spouse elects to treat the Roth IRA as his or her own, the
5-year-taxable period for all of the surviving spouse's Roth IRAs is the earlier
of the end of either the 5-taxable-year period for the decedent or that
applicable to the surviving spouse's own Roth IRAs.
THE RULES FOR TAXING NON-QUALIFIED DISTRIBUTIONS AND PREMATURE DISTRIBUTIONS OF
CONVERSION AMOUNTS FROM A ROTH IRA ARE COMPLEX. TO ENSURE THAT YOU RECEIVE THE
TAX RESULT YOU DESIRE, YOU SHOULD CONSULT WITH YOUR TAX ADVISOR BEFORE TAKING A
DISTRIBUTION FROM A ROTH IRA.
K. LUMP SUM DISTRIBUTION
If you decide to receive the entire value of your IRA Plan in one lump sum, the
full amount is taxable when received (except as to non-deductible contributions
to a Regular IRA or to a Roth IRA, or "qualified distributions" from a Roth
IRA), and is not eligible for the special 5 or 10 year averaging tax rules under
Code Section 402 on lump sum distributions which may be available for other
types of Qualified Retirement Plans.
L. PREMATURE IRA DISTRIBUTIONS
There is a 10% penalty tax on taxable amounts distributed from your IRA
(including the taxable portion of any non-qualified distributions from a Roth
IRA, or if you receive a distribution of conversion amounts within the 5-year
period beginning with the year of the conversion, any amounts distributed that
were originally taxable as a result of the conversion) prior to the attainment
of age 59 1/2, except for: (1) distributions made to a beneficiary on or after
the owner's death; (2) distributions attributable to the owner's being disabled
as defined in Code Section 72(m)(7); (3) distributions that are part of a series
of substantially equal periodic payments (made at least annually) for the life
of the annuitant or the joint lives of the annuitant and his or her beneficiary;
(4) distributions made for medical expenses which exceed 7.5% of the annuitant's
adjusted gross income; (5) distributions made to purchase health insurance for
the individual and/or his or her spouse and dependents if he or she: (a) has
received unemployment compensation for 12 consecutive weeks or more; (b) the
distributions are made during the tax year that the unemployment compensation is
paid or the following tax year; and (c) the individual has not been re-employed
for 60 days or more; (6) distributions made for certain qualified higher
education expenses of the taxpayer, the taxpayer's spouse, or any child or
grandchild of the taxpayer or the taxpayer's spouse; (7) qualified first-time
home buyer distributions (up to a lifetime maximum of $10,000) used within 120
days of withdrawal to buy, build or rebuild a first home that is the principal
residence of the individual, his or her spouse, or any child, grandchild, or
ancestor of the individual or spouse, or (8) distributions to satisfy a levy
issued by the IRS. Generally, the part of a distribution attributable to
non-deductible contributions is not includable in income and is not subject to
the 10% penalty. (BUT SEE ROTH IRA EXCEPTIONS BELOW).
Distributions from a SIMPLE Plan during the two-year period beginning on the
date the employee first participated in the employer's SIMPLE Plan will be
subject to a 25% (rather than 10%) premature distribution penalty tax.
Distributions from a Roth IRA made before the expiration of the applicable 5
year holding period (SEE TAXABILITY OF ROTH IRA DISTRIBUTIONS) are not treated
as qualified distributions and are subject to the 10% penalty tax to the extent
they are includable in taxable income. In addition, any conversion amounts
distributed within the 5-year period beginning with the year in which the
conversion occurred, are subject to the 10% penalty tax even if the distribution
is not currently taxable as income, unless one of the above mentioned exceptions
to the penalty tax applies. The penalty tax will only apply to the amount of the
conversion that was includable in income as a result of the conversion (i.e., it
will not apply to non-deductible contributions that were converted from the
Regular IRA).
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M. MINIMUM REQUIRED DISTRIBUTIONS (SEE PART II. F.1. AND F.2., NON-ROTH IRA
MINIMUM DISTRIBUTION REQUIREMENTS AND ROTH IRA MINIMUM DISTRIBUTION
REQUIREMENTS.)
If a minimum distribution is not made from your IRA (including a Roth IRA) for a
tax year in which it is required, the excess, in any taxable year, of the amount
that should have been distributed over the amount that was actually distributed
is subject to an excise tax of 50%.
N. TAX FILING-REGULAR IRAS
You are not required to file a special IRA tax form for any taxable year (1) for
which no penalty tax is imposed with respect to the IRA Plan, and (2) in which
the only activities engaged in, with respect to the IRA Plan, are making
deductible contributions and receiving permissible distributions. Information
regarding such contributions or distributions will be included on your regular
Form 1040. In some years, you may be required to file Form 5329 and/or Form 8606
in connection with your Regular IRA. Form 5329 is filed as an attachment to Form
1040 or 1040A for any tax year that special penalty taxes apply to your IRA. If
you make non-deductible contributions to a regular IRA, you must designate those
contributions as non-deductible on Form 8606 and attach it to your Form 1040 or
1040A. There is a $100 penalty each time you overstate the amount of your
non-deductible contributions unless you can prove the overstatement was due to
reasonable cause. Additional information is required on Form 8606 in years you
receive a distribution from a Regular IRA. There is a $50 penalty for each
failure to file a required Form 8606 unless you can prove the failure was due to
reasonable cause. For further information, consult the instructions for Form
5329 (Additional Taxes Attributable to Qualified Retirement Plans (including
IRAs), Annuities, and Modified Endowment Contracts), Form 8606 and IRS
Publication 590.
O. TAX FILING-ROTH IRA
It is your responsibility to keep records of your regular and conversion
contributions to a Roth IRA and to file any income tax forms the Internal
Revenue Service may require of you as a Roth IRA owner. You will need this
information to calculate your taxable income if any, when distributions from the
Roth IRA begin. For example, conversion contributions must be reported to the
Service on Form 8606. Form 5329 is required to be filed to the Service by you to
report and remit any penalty or excise taxes. Consult the instructions to your
tax return or your tax advisor for additional reporting requirements that may
apply. Additional information is also available in IRS Publication 590.
PART IV. STATUS OF OUR IRA PLAN
We may seek IRS approved of your IRA, SEP IRA, SIMPLE IRA or Roth IRA form.
Approval by the IRS is optional to us as the issuer. Approval by the IRS is to
form only and does not represent a determination of the merits of the IRA, SEP
IRA, SIMPLE IRA or Roth IRA.
PART V. FINANCIAL DISCLOSURE
Contributions to your IRA will be invested in a variable annuity policy. The
variable annuity policy, its operation, and all related fees and expenses are
explained in detail in the prospectus to which this Disclosure Statement is
attached.
Growth in the value of your variable annuity policy IRA cannot be guaranteed or
projected. The income and expenses of your variable annuity policy will affect
the value of your IRA. Dividends from net income earned are reduced by
investment advisory fees and also be certain other costs. For an explanation of
these fees and other costs, please refer to your prospectus.
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DISCLOSURE STATEMENT |
ACACIA NATIONAL LIFE INSURANCE COMPANY |
(WE, US, OUR, THE COMPANY) | EMPLOYEE BENEFIT
| PLAN:
| > PENSION/PROFIT SHARING PLAN
for annuity policies issued as an: | > 403(B) ERISA PLAN
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For purchasers of a 401(a) Pension/Profit Sharing Plan, or 403(b) ERISA Plan,
this statement informs you as an independent Fiduciary of the Employee Benefit
Plan, of the Sales Representative's relationship to and compensation from us, as
well as of charges under the variable annuity Policy being purchased from the
Sales Representative as described in the Policy Prospectus to which this
Disclosure Statement is attached.
The Sales Representative is appointed with First Ameritas as its Sales
Representative and is a Securities Registered Representative. In this position,
the Sales Representative is employed to procure and submit to First Ameritas
applications for contracts, including applications for variable annuity
policies.
SALES COMMISSION: Commissions paid to all distributors under the Policy may be
up to a total of 7% of premiums. We may also pay other distribution expenses
such as production incentive bonuses. These distribution expenses do not result
in any additional charges under the Policy other than those described in the
Policy's prospectus.
OTHER FEES AND CHARGES are disclosed in the Policy Prospectus "FEE TABLES" and
"FEES" sections. Please see the Policy Prospectus Table of Contents for the
location of those Prospectus sections. This Disclosure Statement is attached to
the Policy Prospectus, and the referenced sections of the Prospectus are
incorporated in this Statement by reference. Other Fees and Charges may include
the following:
[] THESE TRANSACTION FEES:
- WITHDRAWAL CHARGE (A PERCENTAGE OF EACH PREMIUM WITHDRAWN, DEDUCTED FOR A
CERTAIN NUMBER OF YEARS AS DEFINED IN THE POLICY PROSPECTUS)
- TRANSFER FEE (PER TRANSFER)
[] ANNUAL POLICY FEE (DEDUCTED ANNUALLY FROM POLICY VALUE)
[] THESE SEPARATE ACCOUNT ANNUAL EXPENSES (DEDUCTED DAILY FROM ASSETS
ALLOCATED TO THE SEPARATE ACCOUNT SUBACCOUNTS):
- MORTALITY & EXPENSE RISK CHARGE
- ADMINISTRATIVE EXPENSE FEE
[] OPTIONAL FEATURE CHARGES, IF ELECTED (DEDUCTED MONTHLY FROM POLICY VALUE)
TAXES: We will deduct premium taxes upon receipt of a premium payment or upon
annuitization depending upon the requirements of the State of the Policy owner's
residence. Currently, premium taxes will not exceed 3.5% of the premium paid,
but are subject to change by legislation, administrative interpretations, or
judicial act.
FUND INVESTMENT ADVISORY FEES AND EXPENSES: At the direction of the Policy
owner, the Separate Account purchases shares of Funds which are available for
investment under this Policy. The net assets of the Separate Account will
reflect the value of the Fund shares and therefore, investment advisory fees and
other expenses of the Funds. A complete description of these fees and expenses
is contained in the Funds' prospectuses.
Acacia National Life Insurance Company Tax-Qualified Plan Disclosure
-B:10-
<PAGE>
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WITHDRAWAL RESTRICTIONS |
ACACIA NATIONAL LIFE INSURANCE COMPANY |
(WE, US, OUR, THE COMPANY) |
| TAX-SHELTERED
| ANNUITY (TSA)
for annuity policies issued as a: | PLAN
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If this policy is purchased by the policyowner or his/her employer as part of a
retirement plan under Internal Revenue Code (IRC) Section 403(b), distributions
under the policy are limited as follows, notwithstanding policy language to the
contrary:
A. Distributions attributable to contributions made and interest accruing
after December 3l, 1988, pursuant to a salary reduction agreement within
the meaning of IRC Section 402(g)(3)(c) may be paid only:
1. when the employee attains age 59 1/2, separates from service, dies, or
becomes disabled within the meaning of IRC Section 72(m)(7); or
2. in the case of hardship. (Hardship distributions may not be made from any
income earned after December 31, 1988, which is attributable to salary
reduction contributions regardless of when the salary reduction
contributions were made.)
B. Distributions attributable to funds transferred from IRC Section 403(b)(7)
custodial account may be paid or made available only:
1. When the employee attains age 59 1/2, separates from service, dies or
becomes disabled within the meaning of IRC Section 72(m)(7); or
2. in the case of financial hardship. Distributions on account of financial
hardship will be permitted only with respect to the following amounts:
(i) benefits accrued as of December 31, 1988, but not earnings on those amounts
subsequent to that date.
(ii) contributions made pursuant to a salary reduction agreement within the
meaning of IRC Section 3121(a)(1)(D) after December 31, 1988, but not
as to earnings on those contributions.
Acacia National Life Insurance Company Tax-Qualified Plan Disclosure
-B:11-
<PAGE>
[] IMSA
We are a member of the Insurance Marketplace Standards Association
("IMSA"). IMSA is a voluntary membership organization created by the life
insurance industry to promote ethical market conduct for individual life
insurance and annuity products. Our membership in IMSA applies to us only and
not to our products or affiliates.
THANK YOU
for reviewing this Prospectus. You
should also review the series
fund prospectuses for those
Subaccount variable investment
options underlying portfolios you
wish to select.
IF YOU HAVE QUESTIONS,
contact your sales representative, or
write or call us at:
Acacia National Life Insurance Company
Service Center
P.O. Box 82579
Lincoln, Nebraska 68501
or
5900 "O" Street
Lincoln, Nebraska 68510
Telephone: 1-888-837-6791
Fax: 1-402-467-6153
www.acaciagroup.com
REMEMBER, THE CORRECT FORM
is important for us to accurately process your Policy
elections and changes. Many can be found on our
website "on-line services" site. Or, call us at our
toll-free number and we'll send you the form you
need.
[] STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
A Statement of Additional Information and other information about us and
the Policy with the same date as this prospectus contains more details
concerning the disclosures in this prospectus.
For a free copy, access it on the SEC's Web site
(WWW.SEC.GOV/EDAUX/PROSPECT.HTM, and type in "Acacia National"), or write or
call us. Here is the Table of Contents for the Statement of Additional
Information:
BEGIN ON
PAGE
------------------------------------------ -----------
General Information and History 1
Services
------------------------------------------ -----------
Purchase of Securities Being Offered 2
Underwriters
------------------------------------------ -----------
Calculation of Performance 2
Standardized Performance Reporting
Non-Standardized Performance Reporting
Our Performance Reports
Yields
------------------------------------------ -----------
Additional Tax Information 5
General
Withholding Tax on Distributions
Diversification
Owner Control
Multiple Contracts
Partial 1035 Exchanges
Contracts Owned by other than Natural
Persons
Death Benefits
Tax Treatment of Assignments
Qualified Plans
Tax Treatment of Withdrawals
Types of Qualified Plans
------------------------------------------ -----------
Other Information 12
Service Marks & Copyright
Financial Statements
(C) Acacia National Life Insurance Company
[LOGO} ACACIA NATIONAL LIFE INSURANCE COMPANY
AN AMERITAS ACACIA COMPANY
Acacia Designer Annuity
LAST PAGE
--------------------------------------------------------------------------------
Statement of Additional Information: _______,2001
to accompany Policy Prospectus dated: ________,2001
Acacia Designer Annuity(sm)
Flexible Premium [LOGO] ACACIA NATIONAL LIFE INSURANCE COMPANY
Deferred Variable Annuity Policy AN AMERITAS ACACIA COMPANY
Acacia National Variable Annuity Separate Account II
--------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than set forth in the Policy
prospectus and should be read in conjunction with the prospectus. The Policy
prospectus may be obtained from our Service Center by writing us at P.O. Box
82550, Lincoln, Nebraska 68501, by e-mailing us through our website at
WWW.OVERTURELIFE.COM, or by calling us at 1-800-745-1112. Defined terms used in
the current prospectus for the Policies are incorporated in this Statement.
TABLE OF CONTENTS PAGE
General Information and History....................... 1
Services
Purchase of Securities Being Offered.................. 2
Underwriters
Calculation of Performance............................ 3
Standardized Performance Reproting
Non-Standardized Performance Reporting
Other Performance Reporting
Yields
Additional Tax Information............................ 5
General
Withholding Tax on Distributions
Diversification
Owner Control
Multiple Contracts
Partial 1035 Exchanges
Contracts Owned by other than Natural Persons
Death Benefits
Tax Treatment of Assignments
Qualified Plans
Tax Treatment of Withdrawals
Types of Qualified Plans
Other Information..................................... 11
Service Marks & Copyright
Financial Statements
GENERAL INFORMATION AND HISTORY
Acacia National Variable Annuity Separate Account II is a separate investment
account of Acacia National Life Insurance Company ("we, us, our, Acacia"). We
are a stock life insurance company organized under the insurance laws of the
State of Virginia in 1974. We are an indirect wholly owned subsidiary of
Ameritas Acacia Mutual Holding Company, the ultimate parent company of Ameritas
Life Insurance Corp. ("Ameritas Life"), Nebraska's oldest insurance company - in
business since 1887, and Acacia Life Insurance Company, a District of Columbia
domiciled company chartered by an Act of the United States Congress in 1869. We
issue life insurance and annuities throughout the United States (except Alaska,
Maine, Hampshire and New York), with an emphasis on products with variable
investment options in underlying portfolios managed by advisors of nationally
prominent mutual fund companies.
SERVICES
We are the custodian of the assets of the Separate Account. The custodian has
custody of all funds of the Separate Account and collects proceeds of shares of
the Subaccount underlying portfolios bought and sold by the Separate Account. We
are also the custodian of Policy assets in the Fixed Account, which are held in
our general account.
Our financial statements as of December 31, 2000 and 1999, and for each of the
three years in the period ended December 31, 2000, and the financial statements
of the Subaccounts of Separate Account II as of December 31, 2000, and for each
of the two years in the period then ended, included in this Statement of
Additional Information have been audited by Deloitte & Touche LLP, 1248 "O"
Street Suite 1040, Lincoln, Nebraska 68508, independent auditors, as stated in
their reports appearing herein, and are included in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
Acacia National DESIGNER Statement of Additional Information
SAI: 1
<PAGE>
All matters of state and federal law pertaining to the Policies have been passed
upon by our internal legal staff.
PURCHASE OF SECURITIES BEING OFFERED
The Policy will be sold by licensed insurance agents in states where the
Policies may be lawfully sold. The agents will be registered representatives of
broker-dealers that are registered under the Securities Exchange Act of 1934 and
members of the National Association of Securities Dealers, Inc. (NASD).
UNDERWRITERS
The Policy is offered continuously and is distributed by The Advisors Group
("TAG"), 7315 Wisconsin Avenue, Bethesda, Maryland 20814. TAG, an affiliate of
ours, is also an indirect wholly owned subsidiary of Ameritas Acacia Mutual
Holding Company. TAG enters into contracts with various broker-dealers
("Distributors") to distribute Policies. Gross variable annuity compensation
we've paid to TAG for TAG's Principal Underwriter fees and distribution
concessions was $_________ for 2000, $__________ for 1999, and $________ for
1998. Of this amount, TAG in turn paid distribution concessions to selling
broker dealers and registered representatives.
CALCULATION OF PERFORMANCE
When we advertise performance for a Subaccount (except any Money Market
Subaccount), we will include quotations of standardized average annual total
return to facilitate comparison with standardized average annual total return
advertised by other variable annuity separate accounts. Standardized average
annual total return for a Subaccount will be shown for periods beginning on the
date the Subaccount first invested in a corresponding series fund portfolio. We
will calculate standardized average annual total return according to the
standard methods prescribed by rules of the Securities and Exchange Commission
("SEC").
We report average annual total return information via internet and periodic
printed reports. Average annual total return quotations on our internet website
will be current as of the previous Business Day. Printed average annual total
return information may be current to the last Business Day of the previous
calendar week, month, or quarter preceding the date on which a report is
submitted for publication. Both standardized average annual total return
quotations and non-standardized total return quotations will cover at least
periods of one, five, and ten years, or a period covering the time the
Subaccount has been in existence, if it has not been in existence for one of the
prescribed periods. If the corresponding series fund portfolio has been in
existence for longer than the Subaccount, the non-standardized total return
quotations will show the investment performance the Subacount would have
achieved (reduced by the applicable charges) had it been invested in the series
fund portfolio for the period quoted; this is referred to as "adjusted
historical" performance reporting. Standardized average annual total return is
not available for periods before the Subaccount was in existence.
Quotations of standardized average annual total return and non-standardized
total return are based on historical earnings and will fluctuate. Any quotation
of performance should not be considered a guarantee of future performance.
Factors affecting the performance of a Subaccount and it's corresponding series
fund portfolio include general market conditions, operating expenses and
investment management. An Owner's withdrawal value upon surrender of a Policy
may be more or less than the premium invested in the Policy.
Acacia National DESIGNER Statement of Additional Information
SAI: 2
<PAGE>
STANDARDIZED PERFORMANCE REPORTING
Standardized average annual total return for a specific period is calculated by
taking a hypothetical $1,000 investment in a Subaccount at the offering on the
first day of the period ("initial investment"), and computing the ending
redeemable value ("redeemable value") of that investment at the end of the
period. The redeemable value is then divided by the initial investment and
expressed as a percentage, carried to at least the nearest hundredth of a
percent. Standardized average annual total return is annualized and reflects the
deduction of the mortality and expense fee, the administrative expense charge,
the annual Policy Fee (if any), and is presented both with and without the most
expensive of each of the types of optional features. Current fees are used, not
the guaranteed maximum fees. The redeemable value also reflects the effect of
any applicable withdrawal charge that may be imposed at the end of the period.
No deduction is made for premium taxes which may be assessed by certain states.
NON-STANDARDIZED PERFORMANCE REPORTING
We may also advertise non-standardized total return. Non-standardized total
return may assume: (1) the Policy is not surrendered, so no withdrawal charges
are levied; (2) the Subaccounts have existed for periods other than those
required to be presented; (3) current charges are incurred if they are less than
the Policy's guaranteed maximum charges; or (4) may differ from standardized
average annual total return in other ways disclosed in the table description.
Non-standardized total return may also assume a larger initial investment which
more closely approximates the size of a typical Policy. For these reasons,
non-standardized total returns for a Subaccount are usually higher than
standardized total returns for a Subaccount.
OUR PERFORMANCE REPORTS
Since the Separate Account Subaccounts under the Policy just commenced
operations on the effective date of this Prospectus, we do not have any
standardized average annual total returns to report for each investment
portfolio (except the Ameritas Money Market Subaccount). When we do, they will
be shown for 1, 5, and 10 year periods and since inception of each Separate
Account Subaccount under the Policy. (More recent returns may be more or less
than the stated returns due to market volatility).
The non-standardized average annual total returns that each Subaccount (except
any Money Market Subaccount) would have achieved if it had been invested in the
corresponding series fund portfolio for the periods indicated, calculated in a
manner similar to standardized average annual total return (more recent returns
may be more or less than the stated returns due to market volatility) are:
NON-STANDARDIZED "ADJUSTED HISTORICAL" AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDING ON 12/31/2000
(REFLECTS CURRENT BASE POLICY CHARGES THAT ARE APPLICABLE TO THE SEPARATE
ACCOUNT ONLY; E.G., NO POLICY FEE, AND NO WITHDRAWAL CHARGES. ALSO REFLECTS
EXPERIENCE OF THE SUBACCOUNT UNDERLYING PORTFOLIO FOR PERIODS BEYOND THE
SUBACCOUNT'S OWN INCEPTION DATE.) (COMPUTED ON THE SAME BASIS AS STANDARDIZED
TOTAL RETURN EXCEPT NO POLICY FEE IS REFLECTED, AND NO WITHDRAWAL CHARGES ARE
REFLECTED SINCE THE POLICY IS INTENDED FOR LONG TERM INVESTMENT.) REFLECTS THESE
CURRENT EXPENSES DEDUCTED DAILY FROM POLICY SEPARATE ACCOUNT ASSETS TO EQUAL THE
ANNUAL % SHOWN: MORTALITY AND EXPENSE RISK CHARGE OF 0.70%, AND ADMINISTRATIVE
EXPENSE CHARGE OF 0.15%.
Subaccount (inception date) One Year Five Year Ten Year
(inception date of underlying Continue Continue Since
series fund portfolio where Policy Policy Inception
Subaccount has less than 10 Continue
year's experience Policy
--------------------------------------------------------------------------------
ALGER
o Alger American Growth (9/5/89)
o Alger American MidCap (1/25/95)
CALVERT SOCIAL
o CVS Social Balanced (9/2/86)
o CVS Social International Equity (6/30/92)
o CVS Social Mid Cap Growth (7/16/91)
o CVS Social Money Market (6/30/92)
o CVS Social Small Cap Growth (3/15/95)
DEUTSCHE
o VIT Equity 500 Index (1/9/89)
o VIT Small Cap Index (11/15/88)
o VIT EAFE Equity Index (5/3/93)
FIDELITY
Acacia National DESIGNER Statement of Additional Information
SAI: 3
o VIP Contrafund (1/3/95)
o VIP Equity Income(10/9/86)
o VIP High Income (9/19/85)
NEUBERGER BERMAN
o AMT Growth (9/10/84)
o AMT Limited Maturity Bond (9/10/84)
o AMT Partners (
OPPENHEIMER
o Aggressive Growth /VA (8/15/86)
o Capital Appreciation /VA (4/3/85)
o High Income /VA (4/30/86)
o Main Street Growth & Income /VA (7/5/95)
o Strategic Bond /VA (5/3/93)
TEMPLETON (CLASS 2)
o Asset Strategy (11/28/88)
o International Securities (5/1/92)
VAN ECK
o Worldwide Hard Assets (9/1/89)
--------------------------------------------------------------------------------
YIELDS
We may advertise the current annualized yield for a 30-day period for a
Subaccount. The annualized yield of a Subaccount refers to the income generated
by the Subaccount over a specified 30-day period. Because this yield is
annualized, the yield generated by a Subaccount during the 30-day period is
assumed to be generated each 30-day period. THE YIELD IS COMPUTED BY DIVIDING
THE NET INVESTMENT INCOME PER ACCUMULATION UNIT EARNED DURING THE PERIOD BY THE
PRICE PER UNIT ON THE LAST DAY OF THE PERIOD, ACCORDING TO THE FOLLOWING
FORMULA:
YIELD=2[(A - B +1)6 - 1]
cd
WHERE A=NET INVESTMENT INCOME EARNED DURING THE PERIOD BY THE PORTFOLIO COMPANY
ATTRIBUTABLE TO SHARES OWNED BY THE SUBACCOUNT, B=EXPENSES ACCRUED FOR THE
PERIOD (NET OF REIMBURSEMENTS), C=THE AVERAGE DAILY NUMBER OF ACCUMULATION UNITS
OUTSTANDING DURING THE PERIOD, AND D=THE MAXIMUM OFFERING PRICE PER ACCUMULATION
UNIT ON THE LAST DAY OF THE PERIOD. THE YIELD REFLECTS THE BASE POLICY MORTALITY
AND EXPENSE RISK FEE AND ADMINISTRATIVE EXPENSE CHARGE. NET INVESTMENT INCOME
WILL BE DETERMINED ACCORDING TO RULES ESTABLISHED BY THE SEC. THE YIELD ASSUMES
AN AVERAGE POLICY SIZE OF $75,000, SO NO POLICY FEE IS CURRENTLY APPLICABLE, AND
ALSO ASSUMES THE POLICY WILL CONTINUE (SINCE THE POLICY IS INTENDED FOR LONG
TERM INVESTMENT) SO DOES NOT REFLECT ANY WITHDRAWAL CHARGE.
Because of the charges and deductions imposed by the Separate Account, the yield
for a Subaccount will be lower than the yield for the corresponding series fund
portfolio. The yield on amounts held in the Subaccount normally will fluctuate
over time. Therefore, the disclosed yield for any given period is not an
indication or representation of future yields or rates of return. A Subaccount's
actual yield will be affected by the types and quality of portfolio securities
held by the series fund and the series fund's operating expenses.
Any current yield quotations of the Calvert Social Money Market Subaccount,
subject to Rule 482 of the Securities Act of 1933, will consist of a seven
calendar day historical yield, carried at least to the nearest hundredth of a
percent. We may advertise yield for the Subaccount based on different time
periods, but we will accompany it with a yield quotation based on a seven day
calendar period. The Ameritas Money Market Subaccount's yield will be calculated
by determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing Policy having a balance of one Accumulation Unit at
the beginning of the base period, subtracting a hypothetical charge reflecting
those Policy deductions stated above, and dividing the net change in Policy
value by the value of the Policy at the beginning of the period to obtain a base
period return and multiplying the base period return by (365/7). The Calvert
Social Money Market Subaccount's effective yield is computed similarly but
includes the effect of assumed compounding on an annualized basis of the current
yield quotations of the Subaccount.
Acacia National DESIGNER Statement of Additional Information
SAI: 4
<PAGE>
AS OF 12/31/2000
REFLECTING CURRENT CHARGES YIELD EFFECTIVE YIELD
Calvert Social Money Market Subacccount ?.??% ?.??%
The Calvert Social Money Market Subaccount's yield and effective yield will
fluctuate daily. Actual yields will depend on factors such as the type of
instruments in the series fund's portfolio, portfolio quality and average
maturity, changes in interest rates, and the series fund's expenses. Although we
determine the Subaccount's yield on the basis of a seven calendar day period, we
may use a different time period on occasion. The yield quotes may reflect the
expense limitations described in the series fund's prospectus or Statement of
Additional Information. There is no assurance that the yields quoted on any
given occasion will be maintained for any period of time and there is no
guarantee that the net asset values will remain constant. It should be noted
that neither a Policy owner's investment in the Calvert Social Money Market
Subaccount nor that Subaccount's investment in the Calvert Social Money Market
series fund portfolio is guaranteed or insured. Yields of other money market
funds may not be comparable if a different base or another method of calculation
is used.
ADDITIONAL TAX INFORMATION
NOTE: THIS INFORMATION SHOULD NOT BE SUBSTITUTED FOR THE ADVICE OF A PERSONAL
TAX ADVISOR. WE DO NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY POLICY
OR TRANSACTION INVOLVING THE POLICY. PURCHASERS BEAR THE COMPLETE RISK THAT THE
POLICY MAY NOT BE TREATED AS "ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS.
THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND SPECIAL RULES NOT DESCRIBED IN
THE POLICY PROSPECTUS MAY BE APPLICABLE IN CERTAIN SITUATIONS. MOREOVER, NO
ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS.
GENERAL
Section 72 of the Internal Revenue Code of 1986, as amended (the "Code"),
governs taxation of annuities in general. An individual owner is not taxed on
increases in Policy value until distribution occurs, either in the form of a
withdrawal or as annuity payments under the annuity option elected. For a
withdrawal received as a total surrender (total withdrawal or a death benefit),
the recipient is taxed on the portion of the payment that exceeds the cost basis
of the Policy. For a payment received as a partial withdrawal, federal tax
liability is generally determined on a last-in, first-out basis, meaning taxable
income is withdrawn before the Policy's cost basis is withdrawn. For Policies
issued in connection with non-qualified plans, the cost basis is generally the
premiums, while for contracts issued in connection with qualified plans there
may be no cost basis. The taxable portion of a withdrawal is taxed at ordinary
income tax rates. Tax penalties may also apply.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includable in taxable income. The exclusion amount for payments based on a
fixed annuity income option is determined by multiplying the payment by the
ratio that the cost basis of the Policy (adjusted for any period certain or
refund feature) bears to the expected return under the Policy. Payments received
after the investment in the Policy has been recovered (i.e. when the total of
the excludable amounts equals the investment in the Policy) are fully taxable.
The taxable portion is taxed at ordinary income tax rates. For certain types of
qualified plans there may be no cost basis in the Policy within the meaning of
Section 72 of the Code. Owners, Annuitants and Beneficiaries under a Policy
should seek competent financial advice about the tax consequences of
distributions.
We are taxed as a life insurance company under the Code. For federal income tax
purposes, the Separate Account is not a separate entity from us.
WITHHOLDING TAX ON DISTRIBUTIONS
The Code generally requires us (or, in some cases, a plan administrator) to
withhold tax on the taxable portion of any distribution or withdrawal from a
contract. For "eligible rollover distributions" from Policies issued under
certain types of qualified plans, 20% of the distribution must be withheld,
unless the payee elects to have the distribution "rolled over" to another
eligible plan in a direct transfer. This requirement is mandatory and cannot be
waived by the owner.
An "eligible rollover distribution" is the estimated taxable portion of any
amount received by a covered employee from a plan qualified under Section 401(a)
or 403(a) of the Code, or from a tax sheltered annuity qualified under
Acacia National DESIGNER Statement of Additional Information
SAI: 5
<PAGE>
Section 403(b) of the Code (other than (1) a series of substantially equal
annuity payments for the life (or life expectancy) of the employee, or joint
lives (or joint life expectancies) of the employee, and his or her designated
beneficiary, or for a specified period of ten years or more; (2) minimum
distributions required to be made under the Code; and (3) hardship withdrawals).
Failure to "rollover" the entire amount of an eligible rollover distribution
(including an amount equal to the 20% portion of the distribution that was
withheld) could have adverse tax consequences, including the imposition of a
penalty tax on premature withdrawals, described later in this section.
Withdrawals or distributions from a Policy other than eligible rollover
distributions are also subject to withholding on the estimated taxable portion
of the distribution, but the owner may elect in such cases to waive the
withholding requirement. If not waived, withholding is imposed (1) for periodic
payments, at the rate that would be imposed if the payments were wages, or (2)
for other distributions, at the rate of 10%. If no withholding exemption
certificate is in effect for the payee, the rate under (1) above is computed by
treating the payee as a married individual claiming three withholding
exemptions.
Generally, the amount of any payment of interest to a non-resident alien of the
United States shall be subject to withholding of a tax equal to thirty (30%)
percent of such amount or, if applicable, a lower treaty rate. A payment may not
be subject to withholding where the recipient sufficiently establishes that such
payment is effectively connected to the recipient's conduct of a trade or
business in the United States and such payment is included in the recipient's
gross income.
DIVERSIFICATION
Section 817(h) of the Code provides that in order for a variable annuity policy
based on a segregated asset account to qualify as an annuity contract under the
Code, the investments made by such policy must be "adequately diversified." The
Treasury regulations issued under Section 817(h) (Treas. Reg. 1.817-5) apply a
diversification requirement to each of the Subaccounts of the Separate Account.
The Separate Account, through the series funds and their portfolios, intends to
comply with those diversification requirements. We and the series funds have
entered into agreements regarding participation in the series funds that
requires the series funds and their portfolios to comply with the Treasury
regulations.
OWNER CONTROL
The Treasury department has indicated that the diversification regulations do
not provide guidance regarding the circumstances in which Policy owner control
of the investments of the Separate Account will cause the Policy owner to be
treated as the owner of the assets of the Separate Account, thereby resulting in
the loss of favorable tax treatment of the Policy. At this time it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance.
The amount of Owner control which may be exercised under the Policy is different
in some respects from the situations addressed in published rulings issued by
the Internal Revenue Service in which it was held that the policy owner was not
the owner of the assets of the separate account. It is unknown whether these
differences, such as the Owner's ability to transfer among investment choices or
the number and type of investment choices available, would cause the Owner to be
considered as the owner of the assets of the Separate Account resulting in the
imposition of federal income tax to the Owner with respect to earnings allocable
to the contract prior to receipt of payments under the Policy.
Due to the uncertainty in this area, we reserve the right to modify the Policy
in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple annuity contracts which are issued within a
calendar year to the same contract owner by one company or its affiliates are
treated as one annuity contract for purposes of determining the tax consequences
of any distribution. Such treatment may result in adverse tax consequences
including more rapid taxation of the distributed amounts from such multiple
contracts. For purposes of this rule, contracts received in a Section 1035
exchange will be considered issued in the year of the exchange. OWNERS SHOULD
CONSULT A TAX ADVISER PRIOR TO PURCHASING MORE THAN ONE ANNUITY CONTRACT IN ANY
CALENDAR YEAR.
PARTIAL 1035 EXCHANGES
Section 1035 of the Code provides that an annuity contract may be exchanged in a
tax-free transaction for another annuity contract. The Internal Revenue
Acacia National DESIGNER Statement of Additional Information
SAI: 6
<PAGE>
Service has stated that it will challenge transactions where taxpayers enter
into a series of partial exchanges and annuitizations as part of a design to
avoid application of the 10% premature distribution penalty or other limitations
imposed on annuity contracts under the Code. In the absence of further guidance
from the Internal Revenue Service it is unclear what specific types of partial
exchange designs and transactions will be challenged by the Internal Revenue
Service. DUE TO THE UNCERTAINTY IN THIS AREA, OWNERS SHOULD CONSULT THEIR OWN
TAX ADVISERS PRIOR TO ENTERING INTO A PARTIAL EXCHANGE OF AN ANNUITY CONTRACT.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on policy premiums will
be taxed currently to the owner if the owner is a non-natural person, e.g., a
corporation or certain other entities. Such policies generally will not be
treated as annuities for federal income tax purposes. However, this treatment is
not applied to policies held by a trust or other entity as an agent for a
natural person nor to policies held by certain qualified plans. PURCHASERS
SHOULD CONSULT THEIR OWN TAX COUNSEL OR OTHER TAX ADVISER BEFORE PURCHASING A
POLICY TO BE OWNED BY A NON-NATURAL PERSON.
DEATH BENEFITS
Any death benefits paid under the Policy are taxable to the beneficiary. The
rules governing the taxation of payments from an annuity policy, as discussed
above, generally apply to the payment of death benefits and depend on whether
the death benefits are paid as a lump sum or as annuity payments. Estate taxes
may also apply.
TAX TREATMENT OF ASSIGNMENTS
AN ASSIGNMENT OR PLEDGE OF A POLICY MAY HAVE TAX CONSEQUENCES, AND MAY ALSO BE
PROHIBITED BY ERISA IN SOME CIRCUMSTANCES. OWNERS SHOULD, THEREFORE, CONSULT
COMPETENT LEGAL ADVISERS SHOULD THEY WISH TO ASSIGN OR PLEDGE THEIR POLICY.
QUALIFIED PLANS
The Policy offered by the Prospectus is designed to be suitable for use under
various types of qualified plans. Taxation of owners in each qualified plan
varies with the type of plan and terms and conditions of each specific plan.
Owners, Annuitants and Beneficiaries are cautioned that benefits under a
qualified plan may be subject to the terms and conditions of the plan,
regardless of the terms and conditions of the Policies issued to fund the plan.
TAX TREATMENT OF WITHDRAWALS
NON-QUALIFIED PLANS
Section 72 of the Code governs treatment of distributions from annuity policies.
It provides that if the policy value exceeds the aggregate premiums made, any
amount withdrawn not in the form of an annuity payment will be treated as coming
first from the earnings and then, only after the income portion is exhausted, as
coming from the principal. Withdrawn earnings are included in a taxpayer's gross
income. Section 72 further provides that a 10% penalty will apply to the income
portion of any distribution. The penalty is not imposed on amounts received: (1)
after the taxpayer reaches 59 1/2; (2) upon the death of the owner; (3) if the
taxpayer is totally disabled as defined in Section 72(m)(7) of the Code; (4) in
a series of substantially equal periodic payments made at least annually for the
life (or life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his beneficiary; (5) under an immediate
annuity; or (6) which are allocable to premium payments made prior to August 14,
1982.
With respect to (4) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
QUALIFIED PLANS
In the case of a withdrawal under a qualified Policy, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a qualified
Policy. Section 72(t) of the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including Policies
issued and qualified under Code Sections 401 (Pension and Profit Sharing plans),
403(b) (tax-sheltered annuities) and 408 and 408A (IRAs).
Acacia National DESIGNER Statement of Additional Information
SAI: 7
<PAGE>
To the extent amounts are not included in gross income because they have been
rolled over to an IRA or to another eligible qualified plan, no tax penalty will
be imposed.
The tax penalty will not apply to the following distributions: (1) if
distribution is made on or after the date on which the owner or annuitant (as
applicable) reaches age 59 1/2; (2) distributions following the death or
disability of the owner or annuitant (as applicable) (for this purpose
"disability" is defined in Section 72(m)(7) of the Code); (3) after separation
from service, distributions that are part of substantially equal periodic
payments made not less frequently than annually for the life (or life
expectancy) of the owner or annuitant (as applicable) or the joint lives (or
joint life expectancies) of such owner or annuitant (as applicable) and his or
her designated beneficiary; (4) distributions to an owner or annuitant (as
applicable) who has separated from service after he has attained age 55; (5)
distributions made to the owner or annuitant (as applicable) to the extent such
distributions do not exceed the amount allowable as a deduction under Code
Section 213 to the owner or annuitant (as applicable) for amounts paid during
the taxable year for medical care; (6) distributions made to an alternate payee
pursuant to a qualified domestic relations order; (7) distributions made on
account of an IRS levy upon the qualified Policy; (8) distributions from an IRA
for the purchase of medical insurance (as described in Section 213(d)(1)(D) of
the Code) for the policy owner or annuitant (as applicable) and his or her
spouse and dependents if the policy owner or annuitant (as applicable) has
received unemployment compensation for at least 12 weeks (this exception will no
longer apply after the policy owner or annuitant (as applicable) has been
re-employed for at least 60 days); (9) distributions from an Individual
Retirement Annuity made to the owner or annuitant (as applicable) to the extent
such distributions do not exceed the qualified higher education expenses (as
defined in Section 72(t)(7) of the Code) of the owner or annuitant (as
applicable) for the taxable year; and (10) distributions from an Individual
Retirement Annuity made to the owner or annuitant (as applicable) which are
qualified first-time home buyer distributions (as defined in Section 72(t)(8) of
the Code). The exception stated in items (4) and (6) above do not apply in the
case of an IRA. The exception stated in (3) above applies to an IRA without the
requirement that there be a separation from service.
With respect to (3) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
Withdrawals of amounts attributable to contributions made pursuant to a salary
reduction agreement (in accordance with Section 403(b)(11) of the Code) are
limited to the following: when the owner attains age 59 1/2, separates from
services, dies, becomes disabled (within the meaning of Section 72(m)(7) of the
Code), or in the case of hardship. Hardship withdrawals do not include any
earnings on salary reduction contributions. These limitations on withdrawals
apply to: (1) salary reduction contributions made after December 31, 1988; (2)
income attributable to such contributions; and (3) income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect rollovers or exchanges between certain qualified plans. Tax penalties may
also apply. While the foregoing limitations only apply to certain contracts
issued in connection with Section 403(b) qualified plans, all owners should seek
competent tax advice regarding any withdrawals or distributions.
The taxable portion of a withdrawal or distribution from contracts issued under
certain types of plans may, under some circumstances, be "rolled over" into
another eligible plan so as to continue to defer income tax on the taxable
portion. Such treatment is available for an "eligible rollover distribution"
made by certain types of plans (as described above under "Withholding Tax on
Distributions") that is transferred within 60 days of receipt into another
eligible plan or an IRA, or an individual retirement account described in
section 408(a) of the Code. Plans making such eligible rollover distributions
are also required, with some exceptions specified in the Code, to provide for a
direct transfer of the distribution to the transferee plan designated by the
recipient.
Amounts received from IRAs may also be rolled over into other IRAs, individual
retirement accounts or certain other plans, subject to limitations set forth in
the Code.
Acacia National DESIGNER Statement of Additional Information
SAI: 8
<PAGE>
Generally, distributions from a qualified plan must commence no later than April
1 of the calendar year following the year in which the employee attains the
later of age 70 1/2 or the date of retirement. In the case of an IRA,
distribution must commence no later than April 1 of the calendar year following
the year in which the owner attains age 70 1/2. Required distributions must be
over a period not exceeding the life or life expectancy of the individual or the
joint lives or life expectancies of the individual and his or her designated
beneficiary. If the required minimum distributions are not made, a 50% penalty
tax is imposed as to the amount not distributed.
TYPES OF QUALIFIED PLANS
The Policy is designed to be suitable for use under various types of qualified
plans. Taxation of participants in each qualified plan varies with the type of
plan and terms and conditions of each specific plan. Owners, Annuitants and
Beneficiaries are cautioned that benefits under a qualified plan may be subject
to the terms and conditions of the plan regardless of the terms and conditions
of the policies issued pursuant to the plan. Some retirement plans are subject
to distribution and other requirements that are not incorporated into our
administrative procedures. We are not bound by the terms and conditions of such
plans to the extent such terms conflict with the terms of a Policy, unless we
specifically consents to be bound. OWNERS, ANNUITANTS AND BENEFICIARIES ARE
RESPONSIBLE FOR DETERMINING THAT CONTRIBUTIONS, DISTRIBUTIONS AND OTHER
TRANSACTIONS WITH RESPECT TO THE POLICY COMPLY WITH APPLICABLE LAW.
A qualified Policy will not provide any necessary or additional tax deferral if
it is used to fund a qualified plan that is tax deferred. However, the Policy
has features and benefits other than tax deferral that may make it an
appropriate investment for a qualified plan. Following are generally
descriptions of the types of qualified plans with which annuity policies may be
used. Refer to the Policy and Prospectus to determine those qualified plans with
which this Policy may be used. Such descriptions are not exhaustive and are for
general informational purposes only. THE TAX RULES REGARDING QUALIFIED PLANS ARE
VERY COMPLEX AND WILL HAVE DIFFERING APPLICATIONS DEPENDING ON INDIVIDUAL FACTS
AND CIRCUMSTANCES. EACH PURCHASER SHOULD OBTAIN COMPETENT TAX ADVICE PRIOR TO
PURCHASING A POLICY ISSUED UNDER A QUALIFIED PLAN.
Policies issued pursuant to qualified plans include special provisions
restricting Policy provisions that may otherwise be available as described
herein. Generally, Policies issued pursuant to qualified plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from qualified policies. (See "Tax
Treatment of Withdrawals - Qualified Contracts" above.)
Federal law requires that optional annuity benefits provided under an employer's
deferred compensation plan cannot vary between men and women. The Policies we
sell in connection with certain qualified plans use annuity tables which do not
differentiate based upon sex. We may also use such tables for use with certain
non-qualified deferred compensation plans.
TAX-SHELTERED ANNUITIES
Public schools and certain charitable, educational and scientific organizations
described in Section 501(c) (3) of the Code may purchase "tax-sheltered
annuities," also known as "403(b) annuities." These qualifying employers may
make contributions to the Policy for the benefit of their employees. Such
contributions are not included in the gross income of the employee until the
employee receives distributions from the Policy. The amount of contributions to
the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, non-discrimination and withdrawals. Employee
loans are allowed under this Policy. ANY EMPLOYEE SHOULD OBTAIN COMPETENT TAX
ADVICE AS TO THE TAX TREATMENT AND SUITABILITY OF SUCH AN INVESTMENT.
Acacia National DESIGNER Statement of Additional Information
SAI: 9
<PAGE>
INDIVIDUAL RETIREMENT ANNUITIES
Eligible individuals may contribute to an individual retirement program known as
an "Individual Retirement Annuity" ("IRA"). Under applicable limitations,
certain amounts may be contributed to an IRA which will be deductible from the
individual's taxable income. These IRAs are subject to limitations on
eligibility, contributions, transferability and distributions. Sales of Policies
for use with IRAs are subject to special requirements imposed by the Code,
including the requirement that certain informational disclosure be given to
persons desiring to establish an IRA. PURCHASERS OF POLICIES TO BE QUALIFIED AS
IRAS SHOULD OBTAIN COMPETENT TAX ADVICE AS TO THE TAX TREATMENT AND SUITABILITY
OF SUCH AN INVESTMENT.
ROTH IRAS
Individuals may purchase a non-deductible IRA known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000 per year and are not
deductible from taxable income. Lower maximum limitations apply to individuals
with adjusted gross incomes between $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing
joint returns, and between $0 and $10,000 in the case of married taxpayers
filing separately. An overall $2,000 annual limitation continues to apply to all
of a taxpayer's IRA contributions, including Roth IRAs and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that the individual has held the Roth IRA for at
least five years and, in addition, that the distribution is made either after
the individual reaches age 59 1/2, on the individual's death or disability, or
as a qualified first-time home purchase, subject to a $10,000 lifetime maximum,
for the individual, a spouse, child, grandchild, or ancestor. Any nonqualified
Roth IRA distribution is taxable to the extent of earnings in the distribution.
Distributions are treated as made from contributions first and therefore no
distributions are taxable until they exceed the amount of contributions to the
Roth IRA. The 10% penalty tax and the regular IRA exceptions to the 10% penalty
tax apply to taxable Roth IRA distributions.
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. There are no similar limitations on
rollovers from a Roth IRA to another Roth IRA.
PENSION AND PROFIT-SHARING PLANS
Sections 401(a) and 401(k) of the Code permit employers, including self-employed
individuals, to establish various types of retirement plans for employees. These
retirement plans may permit the purchase of the Policy to provide benefits under
the plan. Contributions to the plan for the benefit of employees will not be
included in the gross income of the employee until distributed from the plan.
The tax consequences to owners may vary depending upon the particular plan
design. However, the Code places limitations on all plans on such items as
amount of allowable contributions; form, manner and timing of distributions;
vesting and non-forfeitability of interests; nondiscrimination in eligibility
and participation; and the tax treatment of distributions, transferability of
benefits, withdrawals and surrenders. PURCHASERS OF CONTRACTS FOR USE WITH
PENSION OR PROFIT SHARING PLANS SHOULD OBTAIN COMPETENT TAX ADVICE AS TO THE TAX
TREATMENT AND SUITABILITY OF SUCH AN INVESTMENT.
NON-QUALIFIED DEFERRED COMPENSATION PLANS -- SECTION 457
Under Code provisions, employees and independent contractors performing services
for state and local governments and other tax-exempt organizations may
participate in Deferred Compensation Plans under Section 457 of the Code. The
amounts deferred under a plan which meets the requirements of Section 457 of the
Code are not taxable as income to the participant until paid or otherwise made
available to the participant or beneficiary. As a general rule, the maximum
amount which can be deferred in any one year is the lesser of $8,000 or 33 1/3
percent of the participant's includible compensation. However, in limited
circumstances, the plan may provided for additional catch-up contributions in
each of the last three years before normal retirement age. Furthermore, the Code
provides additional requirements and restrictions regarding eligibility and
distributions.
All of the assets and income of a plan established by governmental employer
after August 20, 1996, must be held in trust for the exclusive benefit of
participants and their beneficiaries. For this purpose,
Acacia National DESIGNER Statement of Additional Information
SAI: 10
<PAGE>
custodial accounts and certain annuity contracts are treated as trusts. Plans
that were in existence on August 20, 1996 may be amended to satisfy the trust
and exclusive benefit requirement any time prior to January 1, 1999, and must be
amended not later than that date to continue to receive favorable tax treatment.
The requirement of a trust does not apply to amounts under a plan of a
tax-exempt (non-governmental) employer. In addition, the requirement of a trust
does not apply to amounts under a plan of a governmental employer if the plan is
not an eligible plan within the meaning of section 457(b) of the Code. In the
absence of such a trust, amounts under the plan will be subject to the claims of
the employer's general creditors.
In general, distributions from a plan are prohibited under section 457 of the
Code unless made after the participating employee attains age 70 1/2, separates
from service, dies, or suffers an unforeseeable financial emergency as defined
in the Code.
Under present federal tax law, amounts accumulated in a plan under section 457
of the Code cannot be transferred or rolled over on a tax-deferred basis except
for certain transfers to other plans under section 457.
OTHER INFORMATION
A registration statement has been filed with the SEC under the Securities Act of
1933, as amended, with respect to the Policy described in this Statement. Not
all information set forth in the registration statement is addressed in the
Policy prospectus or this Statement. Statements in the prospectus and this
Statement are intended to be summaries. For a complete statement of the terms of
the registration, refer to the documents we file with the SEC. They may be
accessed on the SEC's internet site at WWW.SEC.GOV/EDAUX/PROSPECT.HTM and type
in "Ameritas Variable" or you may review and copy it (for a fee) at the SEC's
Public Reference Room in Washington D.C. (Call the SEC at 1-800-SEC-0330 for
details and public hours.)
SERVICE MARKS & COPYRIGHT
"Acacia" and the griffin symbol are registered service marks of Acacia Life
Insurance Company, which licenses their use to Acacia National Life Insurance
Company. "Acacia Designer Annuity" is a registered service mark of Acacia
National Life Insurance Company. The Policy and Policy prospectus are
copyrighted by Acacia National Life Insurance Company.
FINANCIAL STATEMENTS
Our financial statements follow this page of this Statement. They only bear on
our ability to meet our obligations under the Policy, and should not be
considered as bearing on the investment performance of the assets held in the
Separate Account.
Acacia National DESIGNER Statement of Additional Information
SAI: 11
<PAGE>
Financials to be provided in pre-effective amendment.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a) Financial Statements:
The financial statements of the subaccounts of Acacia National Variable
Annuity Separate Account II and Acacia National Life Insurance Company will
be included in Part B in a later filing and shall include: Subaccounts of
of Acacia National Variable Annuity Separate Account II:
- Report of [xxxxxx], independent auditors.
- Statement of Net Assets as of December 31, 2000.
- Statement of Operations for the years ended December 31, 2000 and 1999.
- Statements of Changes in Net Assets for the years ended December 31, 2000 and
1999.
- Notes to Financial Statements for the years ended December 31, 2000 and
1999.
Acacia National Life Insurance Company:
- Report of [xxxxxx], independent auditors.
- Balance Sheets as of December 31, 2000 and 1999.
- Statements of Operations for the years ended December 31, 2000, 1999, and
1998.
- Statements of Comprehensive Income for the years ended December 31,
2000, 1999, and 1998.
- Statements of Stockholder's Equity for the years ended December 31, 2000,
1999, and 1998.
- Statements of Cash Flows for the years ended December 31, 2000, 1999, and
1998.
- Notes to Financial Statements for the years ended December 31, 2000, 1999,
and 1998.
All schedules of Acacia National Life Insurance Company for which provision
is made in the applicable accounting regulations of the Securities and
Exchange Commission are not required under the related instructions, are
inapplicable or have been disclosed in the Notes to the Financial
Statements and therefore have been omitted.
There are no financial statements included in Part A or Part C.
(b) Exhibits
(1) Resolution of the Board of Directors of Acacia National Life
Insurance Company ("ANLIC") authorizing establishment
of the Acacia National Variable Annuity Separate Account II(1)
(2) N/A
(3) (A) Principal Underwriting Agreement. (1)
(B) Form of Broker-Dealer Sales Agreement. (1)
(C) Commission Schedule. (To be filed by later amendment.)
(4) Form of Annuity Policy. (To be filed by later amendment.)
(5) Form of Application. (To be filed by later amendment.)
(6) (A) Restated Articles of Incorporation of ANLIC. (2)
(B) By-Laws of ANLIC. (2)
(7) N/A
(8) (A) Participation Agreements.
Oppenheimer (2)
Variable Insurance Products Fund - (5)
Variable Insurance Products Fund II - (5)
BT Insurance Trust (4)
Franklin Templeton Variable Insurance Products Trust (4)
(B) Form of Administration Agreement. (1)
Amendment dated May 30, 1996 (3)
(9) Opinion and Consent of Robert-John H. Sands
(10) Consent of Independent Auditors. (To be filed by later
amendment.)
(11) N/A
(12) N/A
(13) Schedule of Computation and Performance Quotations (6)
(1) Incorporated by reference to the initial filing of the Registration
Statement on Form N-4 (File No.
<PAGE>
333-03963) filed on May 16, 1996.
(2) Incorporated by reference to the Post-Effective Amendment No. 3 to the
Registration Statement on Form S-6 (File No. 33-90208) filed on May 1, 1997.
(3) Incorporated by reference to the Post-Effective Amendment No. 1 to the
Registration Statement on Form N-4 (File No. 333-03963) filed on May 1,1997.
(4) Incorporated by reference to the Post-Effective Amendment No. 1 to the
Registration Statement on Form S-6 (File No. 333-81057) filed on February 25,
2000.
(5) Incorporated by reference to the Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-6 (File No. 333-95593) filed on April 17, 2000.
(6) Incorporated by reference to the Post-Effective Amendment No. 5 to the
Registration Statement on Form N-4 (File No.
333-03963) filed on February 25, 2000.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
EXECUTIVE OFFICERS AND DIRECTORS OF ANLIC
Charles T. Nason, Chairman of the Board and Chief Executive Officer*
Robert W. Clyde, President and Chief Operating Officer; Director*
Haluk Ariturk, Senior Vice President, Product Management and Administration;
Director**
JoAnn M. Martin, Senior Vice President and Chief Financial Officer; Director**
Brian J. Owens, Senior Vice President, Career Distribution*
Barry C. Ritter, Senior Vice President and Chief Information Officer**
Robert-John H. Sands, Senior Vice President, General Counsel and Corporate
Secretary; Director*
Janet L. Schmidt, Senior Vice President, Human Resources*
Richard W. Vautravers, Senior Vice President and Corporate Actuary**
William W. Lester, Vice President and Treasurer**
Reno J. Martini, Director***
* The principal business address of each person is Acacia National Life
Insurance Company, 7315 Wisconsin Avenue, Bethesda, Maryland 20814. ** The
principal business address of each person is Ameritas Life Insurance Corp., 5900
"O" Street, Lincoln, Nebraska 68510. *** The principal business address of each
person is Calvert Group, Ltd., 4550 Montgomery Avenue, Bethesda, Maryland 20814.
<PAGE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The depositor, Acacia National Life Insurance Company , is wholly owned by
Acacia Life Insurance Corp. The Registrant is segregated asset account of Acacia
National Life Insurance Company.
Organizations under common control with the depositor include:
<TABLE>
<CAPTION>
NAME OF CORPORATION (WHERE ORGANIZED)* PRINCIPAL BUSINESS
Ameritas Acacia Mutual Holding Company (NE) mutual insurance holding company
Ameritas Holding Company (NE) mutual insurance holding company
<S> <C>
Acacia Life Insurance Company (D.C.) life/health insurance company
Acacia National Life Insurance Company (VA) variable life/annuity insurance company
Acacia Financial Corp. (VA) holding company
Acacia Federal Savings Bank (n/a) federally chartered bank
Calvert Group. Ltd. (DE) offering socially responsible investments
its 1940 Act Investment Companies (DE) offering socially responsible mutual funds
The Advisors Group, Inc. (DE) securities broker-dealer & investment advisor
Ameritas Life Insurance Corp. (NE) life/health insurance company
AMAL Corporation (NE) a joint venture holding company between Ameritas Life Insurance
Corp. (66%) and AmerUs Life Insurance Company (34%)
Ameritas Investment Corp. (NE) securities broker dealer & investment advisor
Ameritas Variable Life Insurance Company (NE) life insurance company
Ameritas Investment Advisors, Inc. (NE) investment advisor
Ameritas Managed Dental Plan, Inc. (CA) managed care dental insurance company
First Ameritas Life Insurance Corp. (NY) life insurance company
Pathmark Assurance Company (NE) third-party administrator & reinsurer of dental insurance plans
Veritas Corp. (NE) insurance marketing agency
</TABLE>
* Principal operating companies only. Subsidiaries of subsidiaries are indicated
by indentations. Ownership is 100% by the immediate parent company except as
noted.
<PAGE>
ITEM 27. NUMBER OF POLICY OWNERS
As of January 16, 2001 there were no qualified contracts and no
non-qualified contracts.
ITEM 28. INDEMNIFICATION
Article VII of ANLIC's By-Laws provides, in part:
Section 2 Indemnification. In the event any action, suit or proceeding is
brought against a present or former Director, elected officer, appointed officer
or other employee because of any action taken by such person as a Director,
officer or employee of the Company, the Company shall reimburse or indemnify him
for all loss reasonably incurred by him in connection with such action to the
fullest extent permitted by Section 13.1-3.1 of the Code of Virginia, as is now
or hereafter amended, except in relation to matters as to which such person
shall
<PAGE>
have been finally adjudged to be liable by reason of having been guilty of
gross negligence or willful misconduct in the performance of duties as such
director, officer or employee. In case any such suit, action or proceeding shall
result in a settlement prior to final judgment and if, in the judgment of the
Board of Directors, such person in taking the action or failing to take the
action complained of was not grossly negligent or guilty of wilful misconduct in
the performance of his duty, the Company shall reimburse or indemnify him for
the amount of such settlement and for all expenses reasonably incurred in
connection with such action and its settlement. This right of indemnification
shall not be exclusive of any other rights to which any such person may be
entitled.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) The Advisors Group, Inc. is the principal underwriter of the Policies as
defined in the Investment Company Act of 1940, and is also the principal
underwriter for Acacia National Life Insurance Company Separate Account I
variable life insurance policies.
(b) The following table sets forth certain information regarding directors and
officers of The Advisors Group, Inc.:
NAME* POSITIONS AND OFFICES
Charles T. Nason Chairman of the Board
Salene Hitchcock-Gear Vice Chairman of the Board; President and Chief
Executive Officer
Robert W. Clyde Director; Executive Vice President
Robert-John H. Sands Director
Scott A. Grebenstein Director; Vice President - Product Development
Brian J. Owens Senior Vice President
David A. Glazer Regional Vice President
* The principal business address of each person listed is:
The Advisors Group, Inc., 7315 Wisconsin Avenue, Bethesda, Maryland 20814
(c) Commissions Received by Each Principal Underwriter from the Registrant
during the Registrant's Last Fiscal Year :
Net Underwriting Compensation
Name of Principal Discounts and on
UNDERWRITER COMMISSIONS REDEMPTION COMMISSIONS COMPENSATION
The Advisors Group, Inc. (N/A) (N/A) (N/A) (N/A)
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records required to be maintained by Section 31(a) of the 1940
Act and the rules under it are maintained by ANLIC at its Service Center, P.O.
Box 82579, Lincoln, Nebraska 68501, and at its Principal Office, 7315 Wisconsin
Avenue, Bethesda, Maryland 20814.
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B.
ITEM 32. UNDERTAKINGS
Registrant undertakes that it will file a Post-Effective Amendment to this
Registration Statement as frequently as necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted.
<PAGE>
Registrant undertakes that it will include either (1) as part of any application
to purchase a contract offered by the Prospectus, a space that an applicant can
check to request a Statement of Additional Information, or (2) a post card or
similar written communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional Information.
Registrant undertakes to deliver any Statement of Additional Information and any
financial statements required to be made available under this Form promptly upon
written or oral request to ANLIC at the address or phone number listed in the
Prospectus.
STATEMENT PURSUANT TO RULE 6C-7
ANLIC and the Variable Account rely on 17 C.F.R. Sections 270.6c-7 and represent
that the provisions of that Rule have been or will be complied with.
Accordingly, ANLIC and the Variable Account are exempt from the provisions of
Sections 22(e), 27(c)(1) and 27(d) of the Investment Company Act of 1940 with
respect to any variable annuity contract participating in such account to the
extent necessary to permit compliance with the Texas Optional Retirement
Program.
SECTION 403(B) REPRESENTATIONS
ANLIC represents that it is relying on a no-action letter dated November 28,
1988, to the American Council of Life Insurance (Ref. No. IP-6-88) regarding
Sections 22(e), 27(c)(1), and 27(d) of the Investment Company Act of 1940, in
connection with redeemability restrictions on Section 403(b) policies, and that
paragraphs numbered (1) through (4) of that letter will be complied with.
SECTION 26(E)(2)(A) REPRESENTATIONS
Pursuant to Section 26 (e)(2)(A) of the Investment Company Act of 1940, as
amended, ANLIC represents that the fees and charges deducted under the Policy,
in the aggregate, are reasonable in relation to the services rendered, the
expenses expected to be incurred and the risks assumed by ANLIC.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Acacia National Variable Annuity Separate Account II, has caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized in the City of Bethesda, County of Montgomery, State of Maryland
on this 16th day of January, 2001.
ACACIA NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT II, Registrant
ACACIA NATIONAL LIFE INSURANCE COMPANY, Depositor
Attest: /S/ ROBERT-JOHN H. SANDS By: /S/ CHARLES T. NASON
-------------------------- ---------------------
Secretary Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the Directors and Principal Officers of Acacia
National Life Insurance Company on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/S/ CHARLES T. NASON Chairman of the Board January 16, 2001
-----------------------
Charles T. Nason and Chief Executive Officer
and Director
/S/ ROBERT W. CLYDE President and Chief January 16, 2001
-----------------------
Robert W. Clyde Operating Officer and
Director
/S/ ROBERT-JOHN H. SANDS Senior Vice President, January 16, 2001
------------------------
Robert-John H. Sands General Counsel, Corporate
Secretary and Director
/S/ HALUK ARITURK Senior Vice President, January 16, 2001
-----------------------
Haluk Ariturk Product Management and
Administration and Director
/S/ JOANN M. MARTIN Senior Vice President, January 16, 2001
-----------------------
JoAnn M. Martin Chief Financial Officer
and Director
/S/ RENO J. MARTINI Director January 16, 2001
------------------------
Reno J. Martini
<PAGE>
/S/ BRIAN J. OWENS Senior Vice President, January 16, 2001
------------------------
Brian J. Owens Career Distribution
/S/ JANET L. SCHMIDT Senior Vice President January 16, 2001
------------------------
Janet L. Schmidt Human Resources
/S/ BARRY C. RITTER Senior Vice President January 16, 2001
------------------------
Barry C. Ritter and Chief Information Officer
/S/ RICHARD W. VAUTRAVERS Senior Vice President January 16, 2001
-------------------------
Richard W. Vautravers and Corporate Actuary
<PAGE>
EXHIBIT INDEX
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EXHIBIT
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9 Legal Opinion and Consent
