1
PROFILE
of the
TRANSAMERICA CLASSICsm VARIABLE ANNUITY
Issued by
Transamerica Life Insurance and Annuity Company
May 1, 1999
This Profile is a summary of some of the more important points that you
should know and consider before purchasing the contract. The contract
is more fully described in the full prospectus that accompanies this
Profile. Please read the prospectus carefully.
1. The Contract. The Transamerica Classicsm Variable Annuity is a contract
between you and Transamerica Life Insurance and Annuity Company that allows you
to invest your purchase payments in your choice of 17 mutual fund portfolios
("portfolios") in the variable account and two general account options. The
portfolios are professionally managed and you can gain or lose money invested in
a portfolio, but you could also earn more than investing in the general account
options. We guarantee the safety of money invested in the general account
options. Certain portfolios and general account options may not be available in
all states.
The contract is a deferred annuity and it has two phases: the accumulation phase
and the annuitization phase. During the accumulation phase, you can make
additional payments to your contract, transfer money among the investment
options, and withdraw some or all of your investment. During this phase, your
earnings accumulate on a tax-deferred basis for individuals, but some or all of
any money you withdraw may be taxable and/or subject to penalty. Tax deferral is
not available for non-qualified contracts owned by corporations and some trusts.
During the annuitization phase, we will make periodic payments to you. The
dollar amount of the payments may depend on the amount of money invested and
earned during the accumulation phase and on other factors, such as the
annuitant's age and sex.
2. Annuity Payments. You can generally decide when to end the accumulation phase
and begin receiving annuity payments from us. You may choose fixed payments,
where the dollar amount of each payment generally remains the same, or variable
payments, where the dollar amount of each payment may increase or decrease based
on the investment performance of the portfolios you select. You can choose among
payments for the lifetime of an individual, or payments for the longer of one
lifetime or a guaranteed period of 10, 15, or 20 years, or payments for one
lifetime and the lifetime of another individual.
3. Purchasing a Contract. Generally you must invest at least $5,000 ($2,000 for
IRAs) to purchase a contract. You can make additional payments of at least $200
each ($100 each if made under an automatic payment plan deducted from your bank
account).
You may cancel your contract during the free look period.
The Transamerica Classic Variable Annuity is designed for long-term tax-deferred
accumulation of assets, generally for retirement and other long-term goals.
Individuals in high tax brackets get the most benefit from the tax deferral
feature. You should not invest in the contract for short-term purposes or if you
cannot take the risk of losing some of your investment.
4. Investment Options. VARIABLE ACCOUNT: You can invest in any of the following
17 portfolios:
--------------------------------------- ----------------------------------
Alger American Income & Growth MFS VIT Research
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Alliance VPF Growth & Income MSDW UF Fixed Income
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Alliance VPF Premier Growth MSDW UF High Yield
--------------------------------------- ----------------------------------
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Dreyfus VIF Capital Appreciation MSDW UF International Magnum
--------------------------------------- ----------------------------------
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Dreyfus VIF Small Cap OCC Accumulation Trust Managed
--------------------------------------- ----------------------------------
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Janus Aspen Balanced Transamerica VIF Growth
--------------------------------------- ----------------------------------
--------------------------------------- ----------------------------------
Janus Aspen Worldwide Growth OCC Accumulation Trust Small Cap
--------------------------------------- ----------------------------------
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MFS VIT Emerging Growth Transamerica VIF Money Market
--------------------------------------- ----------------------------------
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MFS VIT Growth with Income
--------------------------------------- ----------------------------------
You can earn or lose money in any of these portfolios. These portfolios are
described in their own prospectuses. All portfolios may not be available in all
states.
GENERAL ACCOUNT: You can also allocate payments to the general account options,
where we guarantee the principal invested plus an annual interest rate of at
least 3%. The general account options include a fixed account and guarantee
period options.
5. Expenses. We make certain charges and deductions in order to provide the
benefits and features available under the contract:
If you withdraw your money within seven years of investing it, there
may be a contingent deferred sales load of up to 6% of the amount
invested.
We deduct an annual account fee of no more than $30 (the fee is waived
for account values over $50,000).
We deduct insurance and administrative charges of 1.35% per year from
your average daily value in the variable account.
If you elect the Living Benefits Rider (or Waiver of Contingent
Deferred Sales Load Rider in some states), we will deduct a monthly fee
equal to 1/12 of 0.05% of the account value.
The first 18 transfers each year are free (then we will deduct a $10
fee for each additional transfer).
Advisory fees are also deducted by the portfolios' managers, and the
portfolios pay other expenses which, in total, range from 0.60% to
1.15% of the amounts in the portfolios.
There might be premium tax charges ranging from 0 to 5% of your investment
and/or amounts you use to purchase annuity benefits (depending on your state's
law).
The following chart shows these charges (not including the optional Living
Benefits Rider fee, any transfer fees or premium taxes). The $30 annual account
fee is included in the first column as a charge of 0.075%. The third column is
the sum of the first two columns. The examples in the last two columns show the
total amounts you would be charged if you invested $1,000, the investment grew
5% each year, and you withdrew your entire investment after one year or 10
years. Year one includes the contingent deferred sales load and year 10 does
not.
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Total Total Total
Annual Annual Total Expenses Expenses
Insurance Portfolio Annual at End of at End of
Charges Charges Charges 1 Year 10 Years
------------------------------------------------------------------
- -----------------------------------------
<S> <C> <C> <C> <C> <C>
Alger American Income & Growth 1.425% 0.70% 2.125 $73 $246
Alliance VPF Growth & Income 1.425% 0.73% 2.155 $73 $249
Alliance VPF Premier Growth 1.425% 1.06% 2.485 $76 $282
Dreyfus VIF Capital Appreciation Growth 1.425% 0.81% 2.235 $74 $257
Dreyfus VIF Small Cap 1.425% 0.77% 2.195 $73 $253
Janus Aspen Balanced 1.425% 0.74% 2.165 $73 $250
Janus Aspen Worldwide Growth 1.425% 0.72% 2.145 $73 $248
MFS Emerging Growth 1.425% 0.85% 2.275 $74 $261
MFS Growth & Income 1.425% 0.88% 2.305 $74 $264
MFS Research 1.425% 0.86% 2.285 $74 $262
MSDW UF Fixed Income 1.425% 0.70% 2.125 $73 $246
MSDW UF High Yield 1.425% 0.80% 2.225 $74 $256
MSDW UF International Magnum 1.425% 1.15% 2.575 $77 $291
OCC Accumulation Trust Managed 1.425% 0.82% 2.245 $74 $258
OCC Accumulation Trust Small Cap 1.425% 0.88% 2.305 $74 $264
Transamerica VIF Growth 1.425% 0.85% 2.275 $74 $261
Transamerica VIF Money Market 1.425% 0.60% 2.025 $72 $235
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The Annual Portfolio Charges above are for the year ended December 31, 1998 and
reflect any expense reimbursements or fee waivers. Expenses may be higher or
lower in the future. See the "Variable Account Fee Table" in the Transamerica
Classic Variable Annuity prospectus for more detailed information.
6. Federal Income Taxes. Individuals generally are not taxed on increases in the
account value until a distribution occurs (e.g., a withdrawal or annuity
payment) or is deemed to occur (e.g., a pledge, loan, or assignment of the
contract). If you withdraw money, earnings come out first and are taxed.
Generally, some portion (sometimes all) of any distribution or deemed
distribution is taxable as ordinary income. In some cases, income taxes will be
withheld from distributions. If you are under age 59 1/2 when you withdraw
money, an additional 10% federal tax penalty may apply on the withdrawn
earnings. Certain owners of non-qualified contracts that are not individuals may
be currently taxed on increases in the account value, whether distributed or
not. Qualified contracts are subject to special income tax rules depending on
the plan or arrangement.
7. Access to Your Money. You can generally take money out at any time during the
accumulation phase. We may assess a contingent deferred sales load of up to 6%
of a purchase payment, but no contingent deferred sales load will be assessed on
money that has been in the contract for seven years or longer. In certain cases,
if you elect the Living Benefits Rider when you purchase the contract, the
contingent deferred sales load may be waived if you are in a hospital or nursing
home for a long period or, in some states, if you are diagnosed with a terminal
illness, or if you are receiving medically required in-home care. Subject to
certain conditions, each contract year you may withdraw up to 15% of purchase
payments received less than seven years ago, without incurring a contingent
deferred sales load. Withdrawals from qualified contracts may be subject to
severe restrictions and, in certain circumstances, prohibited.
You may have to pay income taxes on amounts you withdraw and there may also be a
10% tax penalty if you make withdrawals before you are 59 1/2years old.
If you withdraw money from a guarantee period prematurely, you may forfeit some
of the interest that you earned, but you will always receive the principal you
invested plus 3% interest, less any contingent deferred sales load that may
apply.
8. Past Investment Performance. The value of the money you allocate to the
portfolios will go up or down, depending on the investment performance of the
portfolios you select. The following chart shows the adjusted past investment
performance on a year-by-year basis for each portfolio. These figures have
already been reduced by the insurance charges, the account fee, the advisory fee
and all the expenses of the portfolios. These figures do not include the
contingent deferred sales load, the fee for the optional Living Benefits Rider,
any transfer fees or premium taxes, which would reduce performance if applied
<PAGE>
Past performance is no guarantee of future performance or earnings.
<TABLE>
<CAPTION>
CALENDAR YEAR
----------------------------------------------------------------
SUB-ACCOUNT 1998 1997 1996 1995 1994
----------------------------------------------------------------
- -------------------------------------------
<S> <C> <C> <C> <C> <C>
Alger American Income & Growth 30.55% 34.37% 17.98% 33.23% -9.59%
Alliance VPF Growth & Income 19.20% 26.98% 22.34% 33.96% -1.85%
Alliance VPF Premier Growth 45.93% 31.98% 20.97% 42.82% -4.34%
Dreyfus VIF Capital Appreciation Growth 28.36% 26.29% 23.78% 31.65% 1.57%
Dreyfus VIF Small Cap -4.80% 15.10% 14.94% 27.56% 6.22%
Janus Aspen Balanced 32.42% 20.38% 14.54% 23.03% -0.59%
Janus Aspen Worldwide Growth 27.13% 20.43% 27.22% 25.58% 0.09%
MFS Emerging Growth 32.38% 20.11% 15.36% NA NA
MFS Growth & Income 20.62% 27.96% 22.69% NA NA
MFS Research 21.59% 18.64% 20.60% NA NA
MSDW UF Fixed Income 6.39% NA NA NA NA
MSDW UF High Yield 3.33% NA NA NA NA
MSDW UF International Magnum 7.44% NA NA NA NA
OCC Accumulation Trust Managed 5.62% 20.57% 21.03% 43.52% 1.16%
OCC Accumulation Trust Small Cap -10.32% 20.52% 17.03% 13.60% -2.42%
Transamerica VIF Growth 41.29% 44.45% 26.00% 51.34% 6.10%
Transamerica VIF Money Market NA NA NA NA NA
- -----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------
SUB-ACCOUNT 1993 1992 1991 1990 1989
----------------------------------------------------------------
- -------------------------------------------
Alger American Income & Growth 8.78% 7.09% 21.77% -1.15% 5.88%
Alliance VPF Growth & Income 10.11% 6.40% NA NA NA
Alliance VPF Premier Growth 11.03% NA NA NA NA
Dreyfus VIF Capital Appreciation Growth NA NA NA NA NA
Dreyfus VIF Small Cap 65.82% 69.04% 156.16% NA NA
Janus Aspen Balanced NA NA NA NA NA
Janus Aspen Worldwide Growth NA NA NA NA NA
MFS Emerging Growth NA NA NA NA NA
MFS Growth & Income NA NA NA NA NA
MFS Research NA NA NA NA NA
MSDW UF Fixed Income NA NA NA NA NA
MSDW UF High Yield NA NA NA NA NA
MSDW UF International Magnum NA NA NA NA NA
OCC Accumulation Trust Managed 8.82% 16.96% 43.94% -5.01% 30.69%
OCC Accumulation Trust Small Cap 17.82% 19.77% 46.05% -11.06% 16.68%
Transamerica VIF Growth 20.98% 12.19% 39.32% -12.05% 32.24%
Transamerica VIF Money Market NA NA NA NA NA
- -----------------------------------------------------------------------------------------------------------
</TABLE>
9. Death Benefit. If you or your joint owner die during the accumulation phase,
a death benefit will be paid to your beneficiary.
If you or your joint owner die before either of you turn 85, the death benefit
will be the greatest of three amounts: (1) the account value; (2) the sum of all
purchase payments less the proportion of withdrawals taken and applicable
premium tax charges; or (3) the highest account value on any contract
anniversary prior to the earlier of your or your joint owner's 85th birthday,
plus purchase payments made, less the proportion of withdrawals taken and
premium tax charges since that contract anniversary. If death occurs after your
or your joint owner's 85th birthday, the death benefit will be equal to the
account value. 10. Other Information. The Transamerica Classic Variable Annuity
offers other features you might be interested in. Some of these features are as
follows:
Free Look. After you get your contract, you have 10 days to look it over and
decide if it is really right for you (this period may be longer in certain
states). If you decide not to keep the contract, you can cancel it during this
period by delivering a written notice of cancellation and returning the contract
to our Service Center at the address listed in item 11 below. Unless otherwise
required by law, we will refund the purchase payments allocated to any general
account option (less any withdrawals) plus the value in the variable account as
of the date the written notice and the contract are received by our Service
Center.
Telephone Transfers. You can generally arrange to transfer money between the
investments in your contract by telephone.
Dollar Cost Averaging. You can instruct us to automatically transfer money from
either the money market sub-account or the fixed account to any of the other
variable sub-accounts each month. This is intended to give you a lower average
cost per share or unit than a single one time investment.
Automatic Rebalancing Option. The performance of each sub-account may cause the
allocation of value among the sub-accounts to change. You may instruct us to
periodically automatically rebalance the amounts in the sub-accounts by
reallocating amounts among them.
Systematic Withdrawal Option. You can arrange to have us send you money
automatically each month out of your contract, during the accumulation phase.
There are limits on the amounts, and the payments may be taxable, and, prior to
age 59 1/2, subject to the penalty tax. If the total amount of withdrawals
(including systematic withdrawals) made in a contract year exceed the allowed
amount to be withdrawn without a charge for that year, any applicable contingent
deferred sales load will then apply.
Automatic Payout Option. For qualified contracts, many pension and retirement
plans require that minimum amounts be distributed from the plan at certain ages.
You can arrange to have such amounts distributed automatically during the
accumulation phase.
Living Benefits Rider. If you elect this option, we will waive the applicable
contingent deferred sales load if you or the joint owner; (a) receive extended
medical care in a qualifying institution for at least 60 consecutive days; (b)
receive medically required hospice or in-home care for at least 60 consecutive
days; or (c) are diagnosed as terminally ill after the first contract year and
are reasonably expected to die within 12 months.
These features may not be available in all states and may not be suitable for
your particular situation.
11. Inquiries. If you need further information or have any questions about the
contract, please write or call:
Transamerica Annuity Service Center
401 North Tryon Street, Suite 700
Charlotte, North Carolina 28202
800-420-7749
1
<PAGE>
2
3
PROSPECTUS FOR THE
TRANSAMERICA SERIESsm CLASSIC VARIABLE ANNUITY
A Flexible Premium Deferred Variable Annuity
Issued By
Transamerica Life Insurance
and
Annuity Company
Offering 17 Sub-Accounts within the Variable Account
Designated as Separate Account VA-6
In Addition to:
A Fixed Account
&
A Guarantee Period Account
<TABLE>
<CAPTION>
<S> <C> <C>
This prospectus contains Portfolios Associated with Sub-Accounts
information you should Alger American Income and Growth
know before investing. Alliance VPF Growth and Income
Alliance VPF Premier Growth
Please keep this prospectus Dreyfus VIF Capital Appreciation
for future reference. Dreyfus VIF Small Cap
Janus Aspen Series Balanced
You can obtain more information about Janus Aspen Series Worldwide Growth
the contract by requesting a copy of the MFS VIT Emerging Growth
Statement of Additional Information MFS VIT Growth with Income
("SAI") dated May 1, 1999. The SAI is MFS VIT Research
available free by writing to Transamerica MSDW UF Fixed Income
Life Insurance and Annuity Company, MSDW UF High Yield
Annuity Service Center, MSDW UF International Magnum
401 N. Tryon St., Suite 700, OCC Accumulation Trust Managed
Charlotte, NC 28202 or OCC Accumulation Trust Small Cap
by calling 800-420-7749. Transamerica VIF Growth
Transamerica VIF Money Market
</TABLE>
The current SAI has been filed with the Securities and Exchange Commission
and is incorporated by reference into this prospectus. The table of
contents of the SAI is included at the end of this
prospectus.
The SEC's web site is http://www.sec.gov
Transamerica's web site is
http://www.transamerica.com
Neither the SEC nor any state securities commission has approved this investment
offering or determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
May 1, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SUMMARY.....................................................................................................5
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT...................................15
Transamerica Life Insurance and Annuity Company...................................................15
Published Ratings.................................................................................15
Insurance Marketplace Standards Association.......................................................15
The Variable Account..............................................................................16
THE PORTFOLIOS.............................................................................................16
THE CONTRACT...............................................................................................21
PURCHASE PAYMENTS..........................................................................................21
Purchase Payments.................................................................................21
Allocation of Purchase Payments...................................................................22
Free Look Option..................................................................................22
Investment Option Limit...........................................................................22
ACCOUNT VALUE..............................................................................................23
How Variable Accumulation Units Are Valued........................................................23
TRANSFERS..................................................................................................23
Before the Annuity Date...........................................................................23
Other Restrictions................................................................................24
Telephone Transfers...............................................................................24
Dollar Cost Averaging.............................................................................25
Eligibility Requirement for Dollar Cost Averaging ................................................25
Special Dollar Cost Averaging Option..............................................................25
Automatic Asset Rebalancing.......................................................................25
After the Annuity Date............................................................................26
CASH WITHDRAWALS...........................................................................................26
Systematic Withdrawal Option......................................................................27
Automatic Payment Option (APO)....................................................................27
DEATH BENEFIT..............................................................................................28
Payment of Death Benefit..........................................................................28
Designation of Beneficiaries......................................................................29
Death of Owner of Joint Owner Before Annuity Date.................................................29
If Annuitant Dies Before Annuity Date.............................................................30
Death After Annuity Date..........................................................................30
Survival Provision................................................................................30
CHARGES, FEES AND DEDUCTIONS...............................................................................30
Contingent Deferred Sales Load/Surrender Charge...................................................30
Free Withdrawals - Allowed Amount.................................................................30
Free Withdrawals - Living Benefits Rider..........................................................31
Other Free Withdrawals............................................................................31
Administrative Charges............................................................................31
Mortality and Expense Risk Charge.................................................................32
Living Benefits Rider Fee.........................................................................32
Premium Tax Charges...............................................................................32
Transfer Fee......................................................................................33
Option and Service Fees...........................................................................33
Taxes.............................................................................................33
Portfolio Expenses................................................................................33
Interest Adjustment...............................................................................33
Sales in Special Situations.......................................................................33
DISTRIBUTION OF THE CONTRACT...............................................................................33
SETTLEMENT OPTION PAYMENTS.................................................................................34
Annuity Date......................................................................................34
Settlement Option Payments........................................................................34
Election of Settlement Option Forms and Payment Options...........................................35
Payment Options...................................................................................35
Fixed Payment Option..............................................................................35
Variable Payment Option...........................................................................35
Settlement Option Forms...........................................................................35
FEDERAL TAX MATTERS........................................................................................36
Introduction......................................................................................36
Purchase Payments.................................................................................37
Taxation of Annuities.............................................................................38
Qualified Contracts...............................................................................39
Taxation of Transamerica .........................................................................41
Tax Status of Contract............................................................................41
Possible Changes in Taxation......................................................................42
Other Tax Consequences............................................................................43
PERFORMANCE DATA...........................................................................................43
YEAR 2000 ISSUE............................................................................................45
LEGAL PROCEEDINGS..........................................................................................44
LEGAL MATTERS..............................................................................................45
ACCOUNTANTS AND FINANCIAL STATEMENTS.......................................................................45
VOTING RIGHTS..............................................................................................45
AVAILABLE INFORMATION......................................................................................46
STATEMENT OF ADDITIONAL INFORMATION - TABLE OF CONTENTS....................................................47
APPENDIX A - THE GENERAL ACCOUNT OPTIONS...................................................................48
The General Account Options.......................................................................48
Fixed Account ....................................................................................48
Special Dollar Cost Averaging Option..............................................................49
Guarantee Period Account .........................................................................49
APPENDIX B.................................................................................................52
Example of Variable Accumulation Unit Value Calculations..........................................52
Example of Variable Annuity Unit Value Calculations...............................................52
Example of Variable Annuity Payment Calculations..................................................52
APPENDIX C.................................................................................................53
Condensed Financial Information...................................................................53
APPENDIX D.................................................................................................54
Definitions.......................................................................................54
APPENDIX E.................................................................................................56
Disclosure Statement for Individual Retirement Annuities..........................................56
</TABLE>
11
<PAGE>
SUMMARY
The Contract
The Transamerica Seriessm Transamerica Classicsm Variable Annuity is a flexible
purchase payment deferred annuity. It is designed to aid:
your long-term financial planning needs; and
your long-term retirement needs
The contract may be used in connection with a retirement plan which qualifies
as:
a retirement program under Sections 403(b), 408 or 408A of the Code;
with various types of qualified pension and profit sharing plans under
Section 401 of the Code; or
with non-qualified plans.
Some qualified contracts may not be available in all states or in all
situations.
The contract is issued by Transamerica Life Insurance and Annuity Company, an
indirect wholly-owned subsidiary of Transamerica Corporation.
The principal office for Transamerica Life Insurance and Annuity Company is:
401 North Tryon Street
Charlotte, North Carolina
28202
We will issue the contract as:
a certificate under a group annuity contract in some states; and
as an individual annuity contract in other states.
The term contract as used in this prospectus refers to either:
the individual annuity contract; or
to a certificate issued under a group annuity contract.
The terms owner and you refer to:
the owner or owners of the individual contract; or
the owner or owners of the certificate.
We will establish and maintain an account for each contract. Each owner will
receive either:
an individual annuity contract; or
a certificate evidencing the owner's coverage under a group annuity
contract.
The contract provides that the account value, after certain adjustments, will be
applied to a settlement option on a future date you select. This date will be
the annuity date.
You may allocate all or portions of your purchase payments to:
one or more variable sub-accounts; or
the general account options.
Sub-Account Values Will Vary According to Investment Experience. The account
value before the annuity date, except for amounts in the general account
options, will vary depending on the investment experience of each of the
variable sub-accounts selected by you as the owner. All benefits and values
provided under the contract, when based on the investment experience of the
variable account, are variable and are not guaranteed as to dollar amount.
Therefore, before the annuity date, you bear the entire investment risk under
the contract for amounts allocated to the variable account.
There is no guaranteed or minimum cash surrender value on amounts allocated to
the variable account, so the proceeds of a surrender could be less than the
amount invested.
The initial purchase payment for each contract must be at least $5,000, or, if
for contributory IRAs, SEP/IRAs and Roth IRAs, $2,000. Generally each additional
purchase payment must be at least $200, unless an automatic purchase payment
plan is selected. See Purchase Payments on page 21.
<PAGE>
The Variable Account
The variable account is a separate account, designated Separate Account VA-6,
that is subdivided into variable sub-accounts. Assets of each variable
sub-account are invested in a specified mutual fund portfolio. The variable
sub-accounts currently available for investment are:
Alger American Income & Growth Alliance VPF Growth & Income Alliance VPF Premier
Growth Dreyfus VIF Capital Appreciation Dreyfus VIF Small Cap Janus Aspen Series
Balanced Janus Aspen Series Worldwide Growth MFS VIT Emerging Growth MFS VIT
Growth with Income MFS VIT Research
MSDW UF Fixed Income
MSDW UF High Yield
MSDW UF International Magnum
OCC Accumulation Trust Managed
OCC Accumulation Trust Small Cap
Transamerica VIF Growth Portfolio
Transamerica VIF Money Market
The portfolios pay their investment advisers and administrators certain fees
charged against the assets of each portfolio. The variable accumulated value, if
any, of a contract and the amount of any variable settlement option payments
will vary to reflect the investment performance of the variable sub-accounts to
which amounts have been allocated. Additionally, applicable charges are
deducted. For more information see Charges, Fees and Deductions on page 30, The
Portfolios on page 16, and the accompanying portfolio pro-spectuses.
<PAGE>
<TABLE>
<CAPTION>
Sales Load(1)
<S> <C>
Sales Load Imposed on Purchase Payments 0%
Maximum Contingent Deferred Sales Load(2) 6%
Range of Contingent Deferred Sales Load Over Time:
Contingent Deferred
Years Since Sales Load
Purchase Payment Receipt as a percentage of purchase payment
Less than 1 year 6%
1 year but less than 2 years 6%
2 years but less than 3 years 5%
3 years but less than 4 years 5%
4 years but less than 5 years 5%
5 years but less than 6 years 4%
6 years but less 7 years 2%
7 or more years 0%
<PAGE>
Other Contract Expenses
Transfer Fee, first 18 per contract year(3) 0
Fees For Other Services and Options(4) 0
Account Fee(5) $30
Living Benefits Rider Fee, if elected(6) 0.05%
Variable Account Annual Expenses(7)
as a percentage of the variable accumulated value
Mortality and Expense Risk Charge 1.20%
Administrative Expense Charge(8) 0.15%
Total Variable Account Annual Expenses 1.35%
</TABLE>
<TABLE>
<CAPTION>
Portfolio Expenses
as a percentage of assets after fee waiver and/or expense reimbursement(9)
Total
Management Other Portfolio
Portfolio Fees Expenses Annual
Expenses
<S> <C> <C> <C>
Alger American Income & Growth 0.625% 0.075% 0.70%
Alliance VPF Growth & Income 0.625% 0.105% 0.73%
Alliance VPF Premier Growth 0.97% 0.09% 1.06%
Dreyfus VIF Capital Appreciation 0.75% 0.06% 0.81%
Dreyfus VIF Small Cap 0.75% 0.02% 0.77%
Janus Aspen Series Balanced 0.72% 0.02% 0.74%
Janus Aspen Series Worldwide Growth 0.65% 0.07% 0.72%
MFS VIT Emerging Growth 0.75% 0.10% 0.85%
MFS VIT Growth with Income 0.75% 0.13% 0.88%
MFS VIT Research 0.75% 0.11% 0.86%
MSDW UF Fixed Income 0.06% 0.64% 0.70%
MSDW UF High Yield 0.15% 0.65% 0.80%
MSDW UF International Magnum 0.15% 1.00% 1.15%
OCC Accumulation Trust Managed 0.78% 0.04% 0.82%
OCC Accumulation Trust Small Cap 0.15% 0.08% 0.88%
Transamerica VIF Growth 0.64% 0.21% 0.85%
Transamerica VIF Money Market 0.00% 0.60% 0.60%
</TABLE>
Expense information regarding the portfolios has been provided by the
portfolios. In preparing the tables above and below and the examples that
follow, we have relied on the figures provided by the portfolios. We have no
reason to doubt the accuracy of that information, but we have not verified those
figures. These figures are for the year ended December 31, 1998. Actual expenses
in future years may be higher or lower than these figures.
<PAGE>
Notes to Fee Table:
1. The contingent deferred sales load applies to each contract, regardless of
how the account value is allocated between the variable account and the
general account options.
2. A portion of the purchase payments may be withdrawn each contract year
without imposition of any contingent deferred sales load, and after seven
years, a purchase payment may be withdrawn free of any contingent deferred
sales load. See Charges, Fees and Deductions on page 30.
3. A transfer fee of $10 will be imposed for each transfer in excess of 18 in a
contract year.
4. We currently do not impose fees for any other services, or options.
However, we reserve the right to impose a fee for various services and
options including dollar cost averaging, systematic withdrawals, automatic
payouts, asset allocation and asset rebalancing.
5. The current account fee is $30, or 2% of the account value, if less, per
contract year. This fee will be waived for account values over $50,000.
This limit may be changed in the future. The fee may be changed, but it may
not exceed $60, or 2% of the account value, if less.
6. If the owner elects a rider, the rider fee will be deducted at the rate of
1/12 of the annual fee at the end of each contract month based on the
account value at that time.
7. The variable account annual expenses do not apply to the general account
options.
8. The current annual administrative expense charge of 0.15% may be increased to
no more than 0.35%.
9. From time to time, the portfolios' investment advisers, each in its own
discretion, may voluntarily waive all or part of their fees and/or
voluntarily assume certain portfolio expenses. The expenses shown in the
Portfolio Expenses table are the expenses paid for 1998. The expenses shown
in that table reflect a portfolio's adviser's waivers of fees or
reimbursement of expenses, if applicable. It is anticipated that such
waivers or reimbursements will continue for calendar year 1999. Without
such waivers or reimbursements, the annual expenses for 1998 for certain
portfolios would have been, as a percentage of assets, as follows:
<TABLE>
<CAPTION>
Management Other Total Portfolio
Fee Expenses Annual Expense
<S> <C> <C> <C>
Alliance VPF Premier Growth 1.00% 0.09% 1.09%
Janus Aspen Series Worldwide Growth 0.67% 0.07% 0.74%
MSDW UF Fixed Income 0.40% 0.64% 1.04%
MSDW UF High Yield 0.50% 0.65% 1.15%
MSDW UF International Magnum 0.80% 1.00% 1.80%
Transamerica VIF Growth 0.75% 0.21% 0.96%
Transamerica VIF Money Market 0.35% 2.68% 3.03%
</TABLE>
Examples
The following tables show the total expenses an owner would incur in various
situations assuming a $1,000 investment and a 5% annual return on assets.
These examples assume an average account value of $40,000 and, therefore, a
deduction of 0.075% has been made to reflect the $30 account fee. These examples
also assume that all amounts were allocated to the variable sub-account
indicated. These examples also assume that no transfer fees or other option or
service fees or premium tax charges have been assessed. Premium tax charges may
be applicable. See Premium Tax Charges on page 32.
Examples 1 through 3 show expenses for contracts without the optional Living
Benefit Rider based on fee waivers and reimbursements for the portfolios for
1998. There is no guarantee that any fee waivers or expense reimbursements will
continue in the future. For annuitizations before the first contract
anniversary, and for annuitizations under a form that does not include life
contingencies, the contingent deferred sales load may apply. Expense examples in
column 1 illustrate this occurrence.
An owner would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets: Example 1: If the owner surrenders the contract at the
end of the applicable time period:
<TABLE>
<CAPTION>
-------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------
--------------------------------------
<S> <C> <C> <C> <C>
Alger American Income & Growth $73 $109 $148 $246
Alliance VPF Growth & Income $73 $110 $150 $249
Alliance VPF Premier Growth $76 $120 $166 $282
Dreyfus VIF Capital Appreciation $74 $112 $154 $257
Dreyfus VIF Small Cap $73 $111 $152 $253
Janus Aspen Series Balanced $73 $110 $150 $250
Janus Aspen Series Worldwide Growth $73 $110 $149 $248
MFS Emerging Growth $74 $114 $156 $261
MFS Growth & Income $74 $114 $157 $264
MFS Research $74 $114 $156 $262
MSDW UF Fixed Income $73 $109 $148 $246
MSDW UF High Yield $74 $112 $153 $256
MSDW UF International Magnum $77 $123 $171 $291
OCC Accumulation Trust Managed $74 $113 $154 $258
OCC Accumulation Trust Small Cap $74 $114 $157 $264
Transamerica VIF Growth $74 $114 $156 $261
Transamerica VIF Money Market $72 $106 $143 $235
---------------------------------------------------------------------------------------------------
Example 2: If the owner does not surrender and does not annuitize the contract:
-----------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------
--------------------------------------
Alger American Income & Growth $22 $67 $114 $246
Alliance VPF Growth & Income $22 $67 $116 $249
Alliance VPF Premier Growth $25. $77 $132 $282
Dreyfus VIF Capital Appreciation $23 $70 $120 $257
Dreyfus VIF Small Cap $22 $69 $118 $253
Janus Aspen Series Balanced $22 $68 $116 $250
Janus Aspen Series Worldwide Growth $22 $67 $115 $248
MFS Emerging Growth $23 $71 $122 $261
MFS Growth & Income $23 $72 $123 $264
MFS Research $23 $71 $122 $262
MSDW UF Fixed Income $22 $67 $114 $246
MSDW UF High Yield $23 $70 $119 $256
MSDW UF International Magnum $26 $80 $137 $291
OCC Accumulation Trust Managed $23 $70 $120 $258
OCC Accumulation Trust Small Cap $23 $72 $123 $264
Transamerica VIF Growth $23 $71 $122 $261
Transamerica VIF Money Market $21 $64 $109 $235
-------------------------------------------------------------------------------------------------
<PAGE>
Example 3: If the owner elects to annuitize at the end of the applicable period
under a Settlement Option with life contingencies:
-----------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------
--------------------------------------
Alger American Income & Growth $22 $67 $114 $246
Alliance VPF Growth & Income $22 $67 $116 $249
Alliance VPF Premier Growth $25 $77 $132 $282
Dreyfus VIF Capital Appreciation $23 $70 $120 $257
Dreyfus VIF Small Cap $22 $69 $118 $253
Janus Aspen Series Balanced $22 $68 $116 $250
Janus Aspen Series Worldwide Growth $22 $67 $115 $248
MFS Emerging Growth $23 $71 $122 $261
MFS Growth & Income $23 $72 $123 $264
MFS Research $23 $71 $122 $262
MSDW UF Fixed Income $22 $67 $114 $246
MSDW UF High Yield $23 $70 $119 $256
MSDW UF International Magnum $26 $80 $137 $291
OCC Accumulation Trust Managed $23 $70 $120 $258
OCC Accumulation Trust Small Cap $23 $72 $123 $264
Transamerica VIF Growth $23 $71 $122 $261
Transamerica VIF Money Market $21 $64 $109 $235
-------------------------------------------------------------------------------------------------
Examples 4 through 6 show expenses for contracts with the optional Living
Benefits Rider based on the fee waivers and reimbursements for the portfolios
for 1998. There is no guarantee that fee waivers or expense reimbursements will
continue in the future. For annuitizations before the first contract anniversary
and for annuitizations under a form that does not include life contingencies, a
contingent deferred sales load may apply. Examples in column 4 illustrate this
occurrence.
An owner would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
Example 4: If the owner surrenders the contract at the end of the applicable
time period:
--------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------
--------------------------------------
Alger American Income & Growth $73 $111 $151 $251
Alliance VPF Growth & Income $73 $111 $152 $254
Alliance VPF Premier Growth $77 $121 $169 $287
Dreyfus VIF Capital Appreciation $74 $114 $156 $262
Dreyfus VIF Small Cap $74 $113 $154 $258
Janus Aspen Series Balanced $73 $112 $153 $255
Janus Aspen Series Worldwide Growth $73 $111 $152 $253
MFS Emerging Growth $75 $115 $158 $266
MFS Growth & Income $75 $116 $160 $269
MFS Research $75 $115 $159 $267
MSDW UF Fixed Income $73 $111 $151 $251
MSDW UF High Yield $74 $114 $156 $261
MSDW UF International Magnum $78 $124 $173 $296
OCC Accumulation Trust Managed $74 $114 $157 $263
OCC Accumulation Trust Small Cap $75 $116 $160 $269
Transamerica VIF Growth $75 $115 $158 $266
Transamerica VIF Money Market $72 $108 $146 $241
----------------------------------------------------------------------------------------------------
Example 5: If the owner does not surrender and does not annuitize the contract:
-----------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------
--------------------------------------
Alger American Income & Growth $22 $68 $117 $251
Alliance VPF Growth & Income $22 $69 $118 $254
Alliance VPF Premier Growth $26 $79 $135 $287
Dreyfus VIF Capital Appreciation $23 $71 $122 $262
Dreyfus VIF Small Cap $23 $70 $120 $258
Janus Aspen Series Balanced $22 $69 $119 $255
Janus Aspen Series Worldwide Growth $22 $69 $118 $253
MFS Emerging Growth $24 $73 $124 $266
MFS Growth & Income $24 $73 $126 $269
MFS Research $24 $73 $125 $267
MSDW UF Fixed Income $22 $68 $117 $251
MSDW UF High Yield $23 $71 $122 $261
MSDW UF International Magnum $27 $82 $139 $296
OCC Accumulation Trust Managed $23 $72 $123 $263
OCC Accumulation Trust Small Cap $24 $73 $126 $269
Transamerica VIF Growth $24 $73 $124 $266
Transamerica VIF Money Market $21 $65 $112 $241
-------------------------------------------------------------------------------------------------
Example 6: If the owner elects to annuitize at the end of the applicable period
under a Settlement Option with life contingencies:
------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------
--------------------------------------
Alger American Income & Growth $22 $68 $117 $251
Alliance VPF Growth & Income $22 $69 $118 $254
Alliance VPF Premier Growth $26 $79 $135 $287
Dreyfus VIF Capital Appreciation $23 $71 $122 $262
Dreyfus VIF Small Cap $23 $70 $120 $258
Janus Aspen Series Balanced $22 $69 $119 $255
Janus Aspen Series Worldwide Growth $22 $69 $118 $253
MFS Emerging Growth $24 $73 $124 $266
MFS Growth & Income $24 $73 $126 $269
MFS Research $24 $73 $125 $267
MSDW UF Fixed Income $22 $68 $117 $251
MSDW UF High Yield $23 $71 $122 $261
MSDW UF International Magnum $27 $82 $139 $296
OCC Accumulation Trust Managed $23 $72 $123 $263
OCC Accumulation Trust Small Cap $24 $73 $126 $269
Transamerica VIF Growth $24 $73 $124 $266
Transamerica VIF Money Market $21 $65 $112 $241
--------------------------------------------------------------------------------------------------
</TABLE>
These examples should not be considered representations of past or future
expenses. Actual expenses paid may be greater or less than those shown, subject
to the guarantees in the contract. The assumed 5% annual rate of return is
hypothetical and should not be considered a representation of past or future
annual returns, which may be greater or less than this assumed rate.
<PAGE>
59
Condensed Financial Information
You will find condensed financial information on each sub-account in Appendix C
on page 53. You will find the full financial statements and reports of
independent auditors for the variable account in the Statement of Additional
Information.
General Account Options
There are two types of general account options:
the fixed account; and
the guarantee period account.
The amounts in the fixed account will be credited interest at a rate of not less
than 3% annually. We may credit interest at a rate in excess of 3% at our
discretion for any class. Each interest rate will be guaranteed to be credited
for at least 12 months.
The other general account option, the guarantee period account, provides
specified rates of interest for specified terms, currently three, five and seven
years. These rates are subject to interest adjustments on early withdrawals or
transfers which, if applicable, could reduce the interest credited to the 3%
minimum rate.
The general account options are not available in all states. Refer to the
contract for limitations.
Investment Options Limit
Currently, you may not elect more than a total of 18 investment options over the
life of the contract. Investment options include variable sub-accounts and
general account options.
Transfers Before the Annuity Date
Before the annuity date, you may transfer values between the variable
sub-accounts and the general account options. For transfers after the annuity
date, see After the Annuity Date on page 26.
Transfers out of the fixed account are restricted to four per contract year and
to a limited percentage of the fixed account value. We may allow more frequent
transfers under certain services and options, for example, dollar cost
averaging. Transfers out of a guarantee period before the end of the term may be
subject to an interest adjustment which may reduce interest credited to the 3%
minimum rate.
We currently impose a transfer fee of $10 for each transfer in excess of 18 made
during the same contract year.
Withdrawals
You may withdraw all or part of the cash surrender value on or before the
annuity date. The cash surrender value of your contract is the account value
less any account fee, interest adjustment, contingent deferred sales load and
premium tax charges. The account fee generally will be deducted on a full
surrender of a contract if the account value is then less than $50,000.
We may delay payment of any withdrawal from the general account options for up
to six months. Withdrawals may be taxable, subject to withholding and subject to
a penalty tax. Withdrawals from qualified contracts may be subject to severe
restrictions and, in certain circumstances, prohibited. See Federal Tax Matters
on page 36.
Contingent Deferred Sales Load/
Surrender Charge
We do not deduct a sales charge when purchase payments are made, although
premium tax charges may be deducted. However, if any part of the account value
is withdrawn, we may deduct a contingent deferred sales load, or surrender
charge, of up to 6% of purchase payments. After we have held a purchase payment
for seven years, you may withdraw it without charge. See Contingent Deferred
Sales Load/Surrender Charge on page 30.
In most states, you may elect, for an extra charge, an optional Living Benefits
Rider. It provides that we will waive the contingent deferred sales load in
certain circumstances. We do not assess the contingent deferred sales load on
payment of the death benefit, on transfers within the contract, or on certain
annuitizations.
Also, beginning 30 days from the contract effective date, or at the end of the
free look period if this ends later, you may withdraw any portion of the allowed
amount each contract year without imposition of any contingent deferred sales
load/surrender charge. The allowed amount for each contract year, determined as
of the last contract anniversary, is equal to 15% of purchase payments received
during the last seven years, less any withdrawals already taken that contract
year.
All purchase payments not previously withdrawn that have been held at least
seven years are not subject to a contingent deferred sales load. In calculating
the contingent deferred sales load/surrender charge, we will consider
withdrawals to be taken first from purchase payments, on a first in/first out
basis, and then from earnings.
Other Charges and Deductions
We deduct:
a mortality and expense risk charge of 1.20% annually of the assets in
the variable account; and
an administrative expense charge of 0.15% annually of these assets.
The administrative expense charge may change, but we guarantee it won't exceed a
maximum effective annual rate of 0.35%.
We deduct an account fee of currently $30, or 2% of the account value,
if less, at the end of each contract year and upon surrender.
This fee may change, but we guarantee that it won't exceed the lesser of $60, or
2% of the account value, per contract year. If the account value is more than
$50,000 on the last business day of a contract year, or as of the date the
contract is surrendered, we will waive the account fee for that year.
After the annuity date, we will deduct the annual annuity fee of $30 in equal
installments from each periodic payment under the variable payment option.
For each transfer in excess of 18 during a contract year, we will impose a
transfer fee of $10. See Transfer Fee on page 33.
We do not currently deduct charges for premium taxes, including retaliatory
premium taxes, except for annuitizations. But we could impose such charges in
some jurisdictions. Depending on the applicability of such taxes, we could
deduct the charges from purchase payments, from amounts withdrawn, and/or upon
annuitization. See Premium Tax Charges on page 32.
In addition, amounts withdrawn or transferred out of a guarantee period account
before the end of its term may be subject to an interest adjustment.
Living Benefits Rider. If, as the owner, you elect the Living Benefits Rider, we
will deduct an annual fee of 0.05% of the account value at the end of each
contract month. The rate is 1/12 times 0.05% times the account value. The Living
Benefit Rider is not available in all states, or may be called a Waiver of
Contingent Deferred Sales Load Rider.
Currently, we do not deduct fees for any other services or options under the
contract. However, we do reserve the right to impose fees to cover processing
for certain services and options in the future. This may include dollar cost
averaging, systematic withdrawals, automatic payouts, asset allocation and asset
rebalancing.
Variable Account Fee Table
The purpose of this table is to assist you in understanding the various costs
and expenses that you, as the owner will bear directly and indirectly. The table
reflects expenses of the variable account as well as of the mutual fund
portfolios. The table assumes that the entire account value is in the variable
account. You should consider the information below together with the narrative
provided under the heading Charges, Fees and Deductions on page 30 of this
prospectus, and with the prospectuses for the portfolios. In addition to the
expenses listed below, premium tax charges may be applicable.
Settlement Option Payments
Settlement option payments will be made either on a fixed basis or a variable
basis or a combination of a fixed and variable basis, as you select. You have
flexibility in choosing the annuity date, but it may generally not be a date
later than an annuitant's 85th birthday or the tenth contract anniversary,
whichever occurs last. The annuity date may never be later than an annuitant's
97th birthday. Certain qualified contracts may have restrictions as to the
annuity date and the types of settlement options available.
Four settlement options are available under the contract:
1. life annuity;
2. life and contingent annuity;
3. life annuity with period certain; or
4. joint and survivor annuity.
Death of Owner Before the Annuity Date
If you or the joint owner die before the annuity date and before you or a joint
owner turn 85, the death benefit will be the greatest of three amounts:
1. the account value;
2. the sum of all purchase payments less the proportion of withdrawals taken
and applicable premium tax charges; or
3. the highest account value on any contract anniversary before the earlier of
your or a joint owner's 85th birthday, plus purchase payments made, less
withdrawals taken and premium tax charges since that contract anniversary.
If you or the joint owner die before the annuity date and after your or a joint
owner's 85th birthday, the death benefit will be the account value.
The death benefit will generally be paid within seven days of receipt of the
required proof of death of an owner and election of the method of settlement or
as soon thereafter as we have sufficient information to make the payment. If no
settlement method is elected, the death benefit will be distributed within five
years after the owner's death. No contingent deferred sales load is imposed. The
death benefit may be paid as either a lump sum or as a settlement option.
Amounts in the guarantee period account will not be subject to interest
adjustments in calculating the death benefit.
If the owner is not a natural person, we will treat the annuitant as the owner
for purposes of the death benefit.
Federal Income Tax Consequences
An owner who is a natural person generally should not be taxed on increases in
the account value until a distribution under the contract occurs. Taxable
events, for example, would occur with a withdrawal or settlement option payment,
or as the result of a pledge, loan, or assignment of a contract. Generally, a
portion, up to 100%, of any distribution or deemed distribution is taxable as
ordinary income. The taxable portion of distributions is generally subject to
income tax withholding unless the recipient elects otherwise. Withholding is
mandatory for certain qualified contracts. In addition, a federal penalty tax
may apply to certain distributions. See Federal Tax Matters on page 36.
Right to Cancel
As the owner, you have the right to examine the contract for a limited period,
known as a "free look period." You may cancel the contract during this period by
delivering or mailing a written notice of cancellation, or sending a telegram to
our Service Center. You must return the contract before midnight of the tenth
day after receipt of the contract, or longer in some situations or if required
by state law. Notice given by mail and the return of the contract by mail will
be effective on the date received by us. Unless otherwise required by law, we
will refund the purchase payments allocated to any general account option, minus
any withdrawals, plus the variable accumulated value as of the date your written
notice to cancel and your contract are received by us. See Purchase Payments on
page 21.
Questions
We will answer your questions about procedures or the contract if you write to:
The Transamerica Annuity Service Center
P.O. Box 31848
Charlotte, North Carolina
28231-1848
Or call us at: 1- 800-258-4260
All inquiries should include the contract number and the owner's name.
Please Note: The foregoing summary is qualified in its entirety by the detailed
information in the remainder of this prospectus and in the prospectuses for the
portfolios. Please refer to this prospectus and the portfolio prospectuses for
more detailed information. With respect to qualified contracts, the requirements
of a particular retirement plan, an endorsement to the contract, or limitations
or penalties imposed by the Code or the Employee Retirement Income Security Act
of 1974, as amended, may impose additional limits or restrictions. These limits
or restrictions may be on purchase payments, withdrawals, distributions, or
benefits, or on other provisions of the contract. This prospectus does not
describe such limitations or restrictions. See Federal Tax Matters on page 36.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
AND THE VARIABLE ACCOUNT
Transamerica Life Insurance and Annuity Company
Transamerica Life Insurance and Annuity Company, hereafter referred to simply as
Transamerica is a stock life insurance company incorporated under the laws of
the State of California in 1966. The company moved to North Carolina in 1994. It
is principally engaged in the sale of life insurance and annuity policies. The
address of Transamerica is 401 North Tryon Street, Charlotte, North Carolina
28202.
On February 18, 1999, Transamerica Corporation announced that it had signed a
merger agreement with AEGON N.V., one of the world's leading international
insurance groups, providing for AEGON's acquisition of all of Transamerica's
outstanding common stock for a combination of cash and AEGON stock worth $9.7
billion. The closing of the transaction is expected to occur during the summer
of 1999.
Transamerica Corporation indirectly owns the issuing company, Transamerica Life
Insurance and Annuity Company.
Published Ratings
Transamerica may from time to time publish its ratings in advertisements, sales
literature and reports to owners. We receive ratings and other information from
one or more independent rating organizations such as A.M. Best Company, Standard
& Poor's, Moody's, and Duff & Phelps. The ratings reflect the financial strength
and/or claims-paying ability of Transamerica. These ratings should not be
considered as bearing on the investment performance of the variable account.
Ratings and investment performance are unrelated. Each year the A.M. Best
Company reviews the financial status of thousands of insurers, resulting in the
assignment of Best's Ratings. These ratings reflect A.M. Best's current opinion
of the relative financial strength and operating performance of an insurance
company in comparison to the norms of the life/health insurance industry.
In addition, the claims-paying ability of Transamerica as measured by Standard &
Poor's Insurance Ratings Services, Moody's, or Duff & Phelps may be referred to
in advertisements or sales literature or in reports to owners. These ratings are
opinions provided by the companies named above. These opinions relate to how
well they have determined Transamerica is prepared, from a financial standpoint,
to meet our insurance and annuity obligations. The terms of our obligations are
stated within the general account options of this contract. These ratings do not
reflect the investment performance of the variable account or the degree of risk
associated with an investment in the variable account.
Insurance Marketplace Standards
Association
In recent years, the insurance industry has recognized the need to develop
specific principles and practices to help maintain the highest standards of
marketplace behavior and enhance credibility with consumers. As a result, the
industry established the Insurance Marketplace Standards Association (IMSA).
As an IMSA member, we agree to follow a set of standards in our advertising,
sales and service for individual life insurance and annuity products. The IMSA
logo, which you will see on our advertising and promotional materials,
demonstrates that we take our commitment to ethical conduct seriously.
The Variable Account
Separate Account VA-6 of Transamerica, also referred to as the variable account
was established by Transamerica as a separate account under the laws of the
State of North Carolina following June 11, 1996, resolutions adopted by
Transamerica's Board of Directors. The variable account is registered with the
Securities and Exchange Commission, hereafter referred to simply as the
Commission under the Investment Company Act of 1940 as a unit investment trust.
It meets the definition of a separate account under the federal securities laws.
However, the Commission does not supervise the management or the investment
practices or policies of the variable account.
The assets of the variable account are owned by Transamerica, but they are held
separately from the other assets of Transamerica. Section 58-7-95 of the North
Carolina Insurance Law provides that the assets of a separate account are not
chargeable with liabilities incurred in any other business operation of the
insurance company. This is the case except to the extent that assets in the
separate account exceed the reserves and other liabilities of the separate
account.
Income, gains and losses incurred on the assets in the variable account, whether
or not realized, are credited to or charged against the variable account without
regard to other income, gains or losses of Transamerica. Therefore, the
investment performance of the variable account is entirely independent of the
investment performance of Transamerica's general account assets or any other
separate account maintained by Transamerica.
The variable account currently has 17 variable sub-accounts available under the
contract, each of which invests solely in a specific corresponding portfolio. At
our discretion, we may make changes to the variable sub-accounts.
THE PORTFOLIOS
Each of the variable sub-accounts offered under the contract invests exclusively
in one of the portfolios. Descriptions of each portfolio's investment objective
follow. The management fees listed below are specified in each portfolio
adviser's contract before any fee waivers.
The Income and Growth Portfolio of The Alger American Fund seeks, primarily, a
high level of dividend income. Capital appreciation is a secondary objective of
the portfolio. The portfolio invests in dividend paying equity securities, such
as common or preferred stocks, preferably those which the Manager believes also
offer opportunities for capital appreciation.
Adviser: Fred Alger Management, Inc. Management Fee: 0.625%.
The Growth and Income Portfolio of the Alliance Variable Products Series Fund,
Inc., seeks reasonable current income and reasonable opportunity for
appreciation through investments primarily in dividend-paying common stocks of
good quality. Whenever the economic outlook is unfavorable for investment in
common stock, this portfolio may invest in other types of securities, such as
bonds, convertible bonds, preferred stock and convertible preferred stocks. The
portfolio managers will purchase and sell portfolio securities at times and in
amounts as management deems advisable in light of market, economic and other
conditions.
Adviser: Alliance Capital Management L.P.
Management Fee: 0.63%.
The Premier Growth Portfolio of Alliance Variable Products Series Fund, Inc.,
seeks growth of capital by pursuing aggressive investment policies. Since this
portfolio's investments will be made based upon their potential for capital
appreciation, current income will not be a high priority for this portfolio. The
portfolio will invest mainly in the equity securities, such as common stocks,
securities convertible into common stocks and rights and warrants to subscribe
for or purchase common stocks. Equity investments will be of a limited number of
large, carefully selected, high-quality U.S. companies. In the Adviser's
judgement, the companies chosen will be those which are likely to achieve
superior earnings growth. Approximately 25 companies believed by the Adviser to
show superior potential for capital appreciation will usually constitute
approximately 70% of the portfolio's net assets at any one time. The portfolio
thus differs from more typical equity mutual funds by investing most of its
assets in a relatively small number of intensively researched companies. Under
normal circumstances the portfolio will invest at least 85% of the value of its
total assets in the equity securities of U.S. companies.
Adviser: Alliance Capital Management L.P.
Management Fee: 1.00%.
The Capital Appreciation Portfolio of the Dreyfus Variable Investment Fund is a
diversified portfolio seeking long-term capital growth and preservation of
principal. Current income is a secondary investment objective. During periods of
strong market momentum, the portfolio will invest aggressively to increase its
holdings in: common stocks of foreign and domestic issuers, common stocks with
warrants attached and debt securities of foreign governments. Generally, the
portfolio will invest in large cap companies, defined as those with market
capitalizations exceeding $500 million. These companies will also be selected on
the basis of their potential to achieve predictable, above average earnings
growth.
Adviser: The Dreyfus Corporation.
Sub-Adviser: Fayez Sarofim & Co.
Management Fee: 0.75%.
The Small Cap Portfolio of the Dreyfus Variable Investment Fund seeks to
maximize capital appreciation by investing principally in common stocks of
domestic and foreign issuers. Under normal market conditions, the portfolio will
invest at least 65% of its total assets in companies with market capitalizations
of less than $1.5 billion at the time of purchase. Companies selected for this
portfolio will include those thought to possess new or innovative products or
services which are expected to propel growth in future earnings.
Adviser: The Dreyfus Corporation.
Management Fee: 0.75%.
The Balanced Portfolio of the Janus Aspen Series seeks long-term capital growth
consistent with preservation of capital and current income. Normally, this
diversified portfolio invests 40-60% of its assets in securities selected
primarily for their growth potential. The balance of its holdings is invested in
securities selected primarily for their capacity to generate income. Such
holdings are likely to consist of bonds and preferred stocks. Typically, at
least 25% of this portfolio is made up of fixed-income securities.
Adviser: Janus Capital Corporation.
Management Fee: 0.75% of the first $300 million plus 0.70% of the next
$200 million plus 0.65% of the
assets over $500 million.
The Worldwide Growth Portfolio of the Janus Aspen Series seeks long-term growth
of capital in a manner consistent with the preservation of capital. It is a
diversified portfolio that pursues its objective primarily through investments
in common stocks of foreign and domestic issuers. The portfolio has the
flexibility to invest on a worldwide basis in companies and other organizations
of any size, regardless of country of origin or place of principal business
activity. The portfolio normally invests in issuers from at least five different
countries, including the United States. The portfolio may at times invest in
fewer than five countries or even a single country.
Adviser: Janus Capital Corporation.
Management Fee: 0.75% of the first $300 million plus 0.70% of the next
$200 million plus 0.65% of the
assets over $500 million.
The Emerging Growth Series of the MFS Variable Insurance Trust will seek
long-term growth of capital. The series invests, under normal market conditions,
at least 65% of its total assets in common stocks and related securities, such
as preferred stocks, convertible securities and depositary receipts for those
securities, of emerging growth companies. These companies are companies that the
series' adviser believes are either early in their life cycle but have the
potential to become major enterprises or are major enterprises whose rates of
earnings growth are expected to accelerate.
Adviser: Massachusetts Financial Services
Company.
Management Fee: 0.75%.
The Growth with Income Series of the MFS Variable Insurance Trust will seek
long-term growth of capital and future income while providing more current
dividend income than is normally obtainable from a portfolio of only growth
stocks. The series invests, under normal market conditions, at least 65% of its
total assets in common stock and related securities, such as preferred stocks,
convertible securities and depositary receipts for those securities. While the
fund may invest in companies of any size, the fund generally focuses on
companies with larger market capitalizations that the series' adviser believes
have sustainable growth prospects and attractive valuations based on current and
expected earnings or cash flow. Adviser: Massachusetts Financial Services
Company. Management Fee: 0.75%.
The Research Series of the MFS Variable Insurance Trust will seek to provide
long-term growth of capital and future income. The series invests, under normal
market conditions, at least 80% of its total assets in common stocks and related
securities, such as preferred stocks, convertible securities and depositary
receipts. The series focuses on companies that the series' adviser believes have
favorable prospects for long-term growth, attractive valuations based on current
and expected earnings or cash flow, dominant or growing market share and
superior management.
Adviser: Massachusetts Financial Services Company.
Management Fee: 0.75%.
The Fixed Income Portfolio of the the Morgan Stanley Dean Witter Universal
Funds, Inc., seeks above-average total return over a market cycle of three to
five years by investing primarily in a diversified portfolio of U.S. government
and agency bonds, corporate bonds, mortgage backed securities, foreign bonds and
other fixed income securities and derivatives. The portfolio invests primarily
in investment grade securities, but may also invest a portion of its assets in
high yield securities, also known as junk bonds. The portfolio's average
weighted maturity will ordinarily exceed five years.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.40% of the first
$500 million plus 0.35% of the next $500 million plus 0.30% of the assets over
$1 billion.
The High Yield Portfolio of the Morgan Stanley Dean Witter Universal Funds,
Inc., seeks above-average total return over a market cycle of three to five
years by investing primarily in a diversified portfolio of high yield securities
of U. S. and foreign issuers (including emerging markets), including corporate
bonds and other fixed income securities and derivatives. High yield securities
are rated below investment grade and are commonly referred to as "junk bonds."
The portfolio's average weighted maturity will ordinarily exceed five years.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.50% of first $500
million plus 0.45% of next $500 million plus 0.40% of the assets over $1
billion.
The International Magnum Portfolio of the the Morgan Stanley Dean Witter
Universal Funds, Inc., seeks long-term capital appreciation by investing
primarily in equity securities of non-U.S. issuers domiciled in EAFE countries.
The countries in which the portfolio will invest are those comprising the Morgan
Stanley Capital International EAFE Index, which includes Australia, Japan, New
Zealand, most nations located in Western Europe and certain developed countries
in Asia, such as Hong Kong and Singapore. Collectively, we refer to these as the
EAFE countries. The portfolio may invest up to 5% of its total assets in
securities of issuers domiciled in non-EAFE countries. Under normal
circumstances, at least 65% of the total assets of the portfolio will be
invested in equity securities of issuers in at least three different EAFE
countries.
Adviser: MSDW Investment Management Inc. Management Fee: 0.80% of the first $500
million plus 0.75% of the next $500 million plus 0.70% of the assets over $1
billion.
The Managed Portfolio of the OCC Accumulation Trust seeks growth of capital over
time through investment in a portfolio consisting of common stocks, bonds and
cash equivalents, the percentages of which will vary based on the Adviser's
assessments of the relative outlook for such investments. Debt securities are
expected to be predominantly investment grade intermediate to long term U.S.
Government and corporate debt. The portfolio will also invest in high quality
short-term money market and cash equivalent securities and may invest almost all
of its assets in such securities when necessary to preserve capital. In
addition, the portfolio may also purchase foreign securities. These foreign
securities must be listed on a domestic or foreign securities exchange or
represented by American depository receipts.
Adviser: OpCap Advisers. Management Fee: 0.70% of first $400 million plus 0.75%
of next $400 million plus 0.70% of the assets over $800 million.
The Small Cap Portfolio of the OCC Accumulation Trust seeks capital appreciation
through investments in a diversified portfolio of stocks issued by small
companies. It will consist primarily of equity securities of companies with
market capitalizations of under $1 billion. Under normal circumstances at least
65% of the portfolio's assets will be invested in equity securities. The
majority of securities purchased by the portfolio will be traded on the New York
Stock Exchange, the American Stock Exchange or in the over-the-counter market.
The portfolio's holdings may also include options, warrants, bonds, notes and
convertible bonds. In addition, the portfolio may also purchase foreign
securities. Foreign securities must listed on a domestic or foreign securities
exchange or be represented by American depository receipts.
Adviser: OpCap Advisers.
Management Fee: 0.15% of the first $400 million plus 0.75% of the next $400
million plus 0.70% of assets
over $800 million.
The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., seeks
long-term capital growth through investment in common stocks of listed and over
the counter issues. The Growth Portfolio invests primarily in common stocks of
growth companies that are considered by the manager to be premier companies. In
the manager's view, characteristics of premier companies include one or more of
the following: dominant market share; leading brand recognition; proprietary
products or technology; low-cost production capability; and excellent management
with shareholder orientation. The manager of the Portfolio believes in long-term
investing and places great emphasis on the sustainability of the above
competitive advantages. Unless market conditions dictate otherwise, the manager
tries to keep the Portfolio fully invested in equity securities. Attempting to
enter and exit the market at strategic times is not a commonly used strategy for
this portfolio. However when, in the judgment of the Sub-Adviser market
conditions warrant, the portfolio may, for temporary defensive purposes, hold
part or all of its assets in cash, debt or money market instruments. The
portfolio may invest up to 10% of its assets in debt securities having a call on
common stocks that are rated below investment grade.
Adviser: Transamerica Occidental Life Insurance Company.
Sub-Adviser: Transamerica Investment Services, Inc.
Management Fee: 0.75%.
The Money Market Portfolio of the Transamerica Variable Insurance Fund, Inc.,
seeks to maximize current income from money market securities consistent with
liquidity and the preservation of principal. The portfolio invests primarily in
high quality U. S. dollar-denominated money market instruments with remaining
maturities of 13 months or less. These include: obligations issued or guaranteed
by the U. S. and foreign governments and their agencies and instrumentalities;
obligations of U. S. and foreign banks, or their foreign branches, and U. S.
savings banks; short-term corporate obligations, including commercial paper,
notes and bonds; other short-term debt obligations with remaining maturities of
397 days or less; and repurchase agreements involving any of the securities
mentioned above. The portfolio may also purchase other marketable,
non-convertible corporate debt securities of U. S. issuers. These investments
include bonds, debentures, floating rate obligations, and issues with optional
maturities.
Adviser: Transamerica Occidental Life Insurance Company.
Sub-Adviser: Transamerica Investment Services, Inc.
Management Fee: 0.35%.
Meeting investment objectives depends on various factors, including, but not
limited to, how well the portfolio managers anticipate changing economic and
market conditions. There is no assurance that any of these portfolios will
achieve their stated objectives.
An investment in the contract is not a deposit or obligation of, or guaranteed
or endorsed, by any bank. Nor is the contract federally insured by the Federal
Deposit Insurance Corporation or any other government agency. Investing in the
contract involves certain investment risks, including possible loss of
principal.
Since all of the portfolios are available to registered separate accounts
offering variable annuity and variable life products of Transamerica and to
other insurance companies as well, there is a possibility of a material
conflict. If such a conflict arises between the interests of the variable
account and one or more other separate accounts investing in the portfolios, the
affected insurance companies will take steps to resolve the matter. These steps
may include stopping their separate accounts from investing in the portfolios.
See the portfolios' prospectuses for greater detail on this subject.
You can find additional information concerning the investment objectives and
policies of all of the portfolios, the investment advisory services and
administrative services and charges in the current prospectuses for the
portfolios which accompany this prospectus.
Read the prospectuses of the portfolios which interest you carefully before you
make any decision concerning how you will invest in, or transfer monies among,
the variable sub-accounts.
Transamerica may receive payments from some or all of the portfolios or their
advisers, in varying amounts. These payments may be based on the amount of
assets allocated to the portfolios. The payments are for administrative or
distribution services.
Portfolios Not Publicly Available
The portfolios are open-end management investment companies, or portfolios or
series of, open-end management companies registered with the SEC under the 1940
Act, that are often referred to as mutual funds. This SEC registration does not
involve SEC supervision of the investments or investment policies of the
portfolios. Shares of the portfolios are not offered to the public but solely to
the insurance company separate accounts and other qualified purchasers as
limited by federal tax laws. These portfolios are not the same as mutual funds
that may have very similar names that are sold directly to the public, and the
performance of such publicly available funds, which have different portfolios
and expenses, should not be considered as an indication of the performance of
the portfolios. The assets of each portfolio are held separate from the assets
of the other portfolios. Each portfolio operates as a separate investment
vehicle. The income or losses of one portfolio have no effect on the investment
performance of another portfolio. The sub-accounts reinvest dividends and/or
capital gains distributions received from a portfolio in more shares of that
portfolio as retained assets. Addition, Deletion, or Substitution
Transamerica does not control the portfolios. For this reason, we cannot
guarantee that any of the variable sub-accounts offered under this contract or
any of the portfolios will always be available to you for investment purposes.
We retain the right to make changes in the variable account and in its
investments.
Transamerica reserves the right to eliminate the shares of any portfolio held by
a variable sub-account. We may also substitute shares of another portfolio or of
another investment company for the shares of any portfolio. We would do this if
the shares of the portfolio are no longer available for investment or if, in our
judgment, investment in any portfolio would be inappropriate in view of the
purposes of the variable account. To the extent required by the 1940 Act, if we
substitute shares in a variable sub-account that you own, we will provide you
with advance notice. We will also seek advance permission from the Commission.
This does not prevent the variable account from purchasing other securities for
other series or classes of variable annuity contracts. Nor does it prevent the
variable account from effecting an exchange between series or classes of
variable contracts on the basis of requests made by owners.
We reserve the right to create new variable sub-accounts for the contracts when,
in our sole discretion, marketing, tax, investment or other conditions warrant
that we do. Any new variable sub-accounts will be made available to existing
owners on a basis to be determined by us. Each additional variable sub-account
will purchase shares in a mutual fund portfolio or other investment vehicle. We
may also eliminate one or more variable sub-accounts if, in our sole discretion,
marketing, tax, investment or other conditions warrant that we do. So, in the
event any variable sub-account is eliminated, we will notify owners and request
a re-allocation of the amounts invested in the eliminated variable sub-account.
In the event of any substitution or change, we may make the changes in the
contract that we deem necessary or appropriate to reflect substitutions or
changes. Furthermore, if we believe it to be in the best interest of persons
having voting rights under the contracts, the variable account may be operated
as a management company under the 1940 Act or any other form permitted by law.
It may also be de-registered under such Act in the event that registration is no
longer required. Finally, it may also be combined with one or more other
separate accounts.
THE CONTRACT
The contract is a flexible purchase payment deferred variable annuity contract.
Other variable contracts are also available from Transamerica. The rights and
benefits of this contract are described below. They will also be described in
the individual contract or in the certificate and group contract. However, we
reserve the right to modify the individual contract and the group contract and
its underlying certificates if required by law. We also reserve the right to
give the owner the benefit of any federal or state statute, rule or regulation.
The obligations under the contract are obligations of Transamerica. The
contracts are available on a non-qualified basis and on a qualified basis.
Contracts available on a qualified basis are as follows:
1. rollover and contributory individual retirement annuities, also referred to
as IRAs under Code Sections 408(a) and 408(b);
2. conversion, rollover and contributory Roth IRAs under Code Section 408A;
3. simplified employee pension plans, also referred to as SEP/IRAs, that
qualify for special federal income tax treatment under Code Section 408(k);
4. rollover Code Section 403(b) annuities, including Rev. Rul. 90-24 transfers,
with no additional premiums; and
5. qualified pension and profit sharing plans intended to qualify under Code
Section 401.
Generally, qualified contracts contain certain restrictive provisions limiting
the timing and amount of purchase payments to, and distributions from, the
qualified contract.
Ownership
As the owner, you are entitled to the rights granted by the contract. If you
die, your rights belong to the joint owner, if any, and then to your
beneficiary. If there are joint owners, the one designated as the primary owner
will receive all mail and any tax reporting information.
For non-qualified contracts, the owner is entitled to designate the annuitant(s)
and, if the owner is an individual, as opposed to a trust, corporation or other
legal entity, the owner can change the annuitant(s) at any time before the
annuity date. Any such change will be subject to our then current underwriting
requirements. We reserve the right to reject any change of annuitants which has
been made without our prior written consent.
If the owner is not an individual, the annuitant(s) may not be changed once the
contract is issued. Different rules apply to qualified contracts.
For each contract, a different account will be established and values, benefits
and charges will be calculated separately. The various admini-strative rules
described below will apply separately to each contract, unless otherwise noted.
PURCHASE PAYMENTS
All purchase payments must be paid to our Service Center. A confirmation will be
issued to you, as the owner, upon the acceptance of each purchase payment.
The initial purchase payment must be at least $5,000 or, if for contributory
IRAs, SEP/IRAs and Roth IRAs, it must be for at least $2,000.
Your contract will be issued and your initial purchase payment generally will be
credited within two business days after the receipt of: sufficient information
to issue a contract and the initial purchase payment at our Service Center. For
us to issue you a contract, you must provide sufficient information in a form
acceptable to us. We reserve the right to reject any purchase payment or request
for issuance of a contract. Normally we will not issue contracts to owners,
joint owners, or annuitants more than 90 years old. Nor will we normally accept
purchase payments after any owners', or annuitants' if non-individual owner,
91st birthday. In our discretion we may waive these restrictions in appropriate
cases.
If the initial purchase payment allocated to the variable sub-account(s) cannot
be credited within two days of receipt because the information is incomplete, or
for any other reason, we will contact you. We will explain the reason for the
delay and will refund the initial purchase payment within five business days. If
you consent to us retaining the initial purchase payment we will credit it to
the variable sub-account of your choice as soon as the requirements are
fulfilled.
You may make additional purchase payments at any time before the annuity date.
They must be at least $200 each, or at least $100 if made through an automatic
purchase payment plan. If you elect to use this option additional purchase
payments will be automatically deducted from your bank account and allocated to
the contract. In addition, minimum allocation amounts apply. See Allocation of
Purchase Payments on page 22. Additional purchase payments are credited to the
contract as of the date we receive payment from you.
Total purchase payments for any contract may not exceed $1,000,000 without our
prior approval.
In no event may the sum of all purchase payments for a contract during any
taxable year exceed the limits imposed by any applicable federal or state law,
rules, or regulations.
Allocation of Purchase Payments
You specify how purchase payments will be allocated under the contract. You may
allocate purchase payments among one or more of the variable sub-accounts and
the general account options as long as the portions are whole number percentages
and any allocation percentage for a variable sub-account is at least 10%. In
addition, there is a minimum allocation of $100 to any variable sub-account and
the fixed account, and $1,000 to each guarantee period. We may waive this
minimum allocation amount under certain options and circumstances.
Each purchase payment will be subject to the allocation percentages in effect at
the time of receipt of such purchase payment. You may change the allocation
percentages for additional purchase payments at any time by submitting a request
for such change to our Service Center in a form and manner acceptable to us. Any
changes to the allocation percentages are subject to the limitations above. Any
change will take effect with the first purchase payment we receive which
accompanies your request. If we receive your request separately, all purchase
payments arriving after it will be subject to its terms. Your request will
continue in effect until you change it again.
Free Look Option
If you exercise the free look option, unless otherwise required by law, we will
refund:
1. the purchase payment allocated to any general account option, minus any
withdrawals; plus
2. the variable accumulated value as of the date your written notice to cancel
and your contract are received by us.
In certain jurisdictions, under certain conditions, we are legally required to
return either:
1. the purchase payments, minus any withdrawals; or
2. the greater of purchase payments minus any withdrawals, or the account value.
Any initial allocation you make to the variable account may be held in the money
market variable sub-account during the applicable free look period plus 5 days
for delivery. Any allocations you make to the money market variable sub-account
will automatically be transferred at the end of the free-look period plus 5 days
according to your requested allocation. This transfer will not count against the
18 transfers allowed free of charge during the first contract year.
Investment Option Limit
Currently, you may not allocate monies to more than eighteen investment options
over the life of the contract. Investment options include variable sub-accounts
and general account options. Each variable sub-account, each guarantee period of
the guarantee period account, and the fixed account that ever received a
transfer or purchase payment allocation counts as one towards this total of
eighteen limit. We may waive this limit in the future.
For example, if you make an allocation to the money market variable sub-account
and later transfer all of the funds out of this money market variable
sub-account, this would still count as one transfer for the purposes of the
limitation, even if it held no value. If you transfer from a variable
sub-account to another variable sub-account and later back to the first, the
count towards the limitation would be two, not three. If you select a guarantee
period and renew for the same term, the count will be one; but if you renew to a
guarantee period with a different term, the count will be two.
ACCOUNT VALUE
Before the annuity date, the account value is equal to:
a) the general account options accumulated value; plus
b) the variable accumulated value.
The variable accumulated value is determined at the end of each valuation day.
To determine the variable accumulated value on a day that is not a valuation
day, the value as of the end of the next valuation day will be used. The
variable accumulated value is expected to change from valuation period to
valuation period, reflecting how investments within selected portfolios
performed. The variable accumulated value will also reflect deductions for
charges and fees. A valuation period begins at the close of the New York Stock
Exchange (generally 4:00 p.m. ET) on each valuation day and ends at the close of
the New York Stock Exchange on the next succeeding valuation day. A valuation
day is each day that the New York Stock Exchange is open for regular business.
How Variable Accumulation Units Are Valued
Purchase payments allocated to a variable sub-account are credited to the
variable accumulated value in the form of variable accumulation units. The
number of variable accumulation units credited for each variable sub-account is
determined by dividing the purchase payment allocated to the variable
sub-account by the variable accumulation unit value for that variable
sub-account. In the case of the initial purchase payment, variable accumulation
units for that payment will be credited to the variable accumulated value within
two valuation days of the later of:
a) the date sufficient information, in an acceptable manner and form, is
received at our Service Center; or
b) the date our Service Center receives the initial purchase payment.
In the case of any additional purchase payment, variable accumulation units for
that payment will be credited at the end of the valuation period during which we
receive the payment. The value of a variable accumulation unit for each variable
sub-account is established at the end of each valuation period and is calculated
by multiplying the value of that unit at the end of the prior valuation period
by the variable sub-account's net investment factor for the valuation period.
The value of a variable accumulation unit can go either up or down.
The net investment factor is used to determine the value of accumulation and
annuity unit values for the end of a valuation period. The applicable formula
can be found in the Statement of Additional Information.
Transfers involving variable sub-accounts will result in the crediting and/or
cancellation of variable accumulation units having a total value equal to the
dollar amount being transferred to or from a particular variable sub-account.
The crediting and cancellation of such units is made using the variable
accumulation unit value of the applicable variable sub-account as of the end of
the valuation day in which the transfer is effective.
TRANSFERS
Before the Annuity Date
Before the annuity date, you may transfer all or any portion of the account
value among the variable sub-accounts and the general account options. Transfers
are restricted into or out of the fixed account.
Transfers among the variable sub-accounts and the general account options may be
made by submitting a request to our Service Center in a form and manner
acceptable to us. The transfer request must specify:
1. the variable sub-accounts and/or the general account options from which your
transfer is to be made;
2. the amount of your transfer; and
3. the variable sub-accounts and/or general account options to receive the
transferred amount.
The minimum amount which you may transfer from the variable sub-accounts and the
general account options is $1,000. Transfers among the variable sub-accounts are
also subject to the terms and conditions imposed by the portfolios.
When a transfer is made from a guarantee period before the end of its term, the
amount transferred may be subject to an interest adjustment. A transfer from a
guarantee period made within 30 days before the last day of its term will not be
subject to any interest adjustment.
We currently impose a transfer fee of $10 for each transfer in excess of 18 made
during the same contract year. We reserve the right to waive the transfer fee or
vary the number of transfers without charge. We may also choose not to count
transfers under certain options or services for purposes of the allowed number
without charge. See Other Restrictions below for additional limitations
regarding transfers. A transfer generally will be effective on the date the
request for transfer is received by our Service Center.
If a transfer reduces the value in a variable sub-account or guarantee period or
in the fixed account to less than $1,000, then we reserve the right to transfer
the remaining amount along with the amount requested to be transferred. We will
do this according to the transfer instructions provided by you. Under current
law, there will not be any tax liability for transfers within the contract.
Other Restrictions
We reserve the right without prior notice to modify, restrict, suspend or
eliminate the transfer privileges, including telephone transfers, at any time
and for any reason. For example, restrictions may be necessary to protect owners
from adverse impacts on portfolio management of large and/or numerous transfers
by market timers or others. We have determined that the movement of significant
variable sub-account values from one variable sub-account to another may prevent
the underlying portfolio from taking advantage of investment opportunities. This
is likely to arise when the volume of transfers is high, since each portfolio
must maintain a significant cash position in order to handle redemptions. Such
movement may also cause a substantial increase in portfolio transaction costs
which must be indirectly borne by owners. Therefore, we reserve the right to
require that all transfer requests be made by the owner and not by a third party
holding a power of attorney. We also require that each transfer you request be
made by a separate communication to us. We also reserve the right to require
that each transfer request be submitted in writing and be manually signed by
owners. We may choose not to allow telephone or facsimile transfer requests.
Telephone Transfers
We will allow telephone transfers if the owner has provided proper authorization
for such transfers in a form and manner acceptable to us. We reserve the right
to suspend telephone transfer privileges at any time, for some or all contracts,
for any reason. Withdrawals are not permitted by telephone.
We will employ reasonable procedures to confirm that instructions communicated
by telephone are genuine. If we follow such procedures, we will not be liable
for any losses due to unauthorized or fraudulent instructions. In the opinion of
certain government regulators, we may be liable for such losses if it does not
follow those procedures. The procedures we will follow for telephone transfers
may include requiring some form of personal identification before acting on
instructions received by telephone, providing written confirmation of the
transaction, and/or tape recording the instructions given by telephone.
Dollar Cost Averaging
Before the annuity date, you as the owner may request that amounts be
automatically transferred on a monthly basis from a source account, which is
currently either the money market sub-account or the fixed account, to any of
the variable sub-accounts. You can accomplish this by submitting a request to
our Service Center in a form and manner acceptable to us. Other source accounts
may be available; call our Service Center for information regarding
availability.
You may only dollar cost average from one source account at a time. The
transfers will begin when you request, but no sooner than one week following,
receipt of such request. For new variable
annuity contracts, dollar cost averaging transfers will not commence until the
later of:
a) 30 days after the contract effective date; or
b) the estimated end of the free look period which allows 5 days for delivery.
Transfers will continue for the number of consecutive months which you selected
unless:
1. you terminate the transfers;
2. we automatically terminate the transfers because there are insufficient
amounts in the source account; or
3. for other reasons that are described in the election form.
You may request that monthly transfers be continued for a specific length of
time. You can do this by giving notice to our Service Center in a form and
manner acceptable to us within 30 days before the last monthly transfer. If you
do not make a request to continue the monthly transfers, this option will
terminate automatically with the last transfer at the end of the length of time
you initially designated.
Eligibility Requirements for Dollar Cost Averaging
In order to be eligible for dollar cost averaging, the following conditions must
be met:
1. the value of your source account must be at least $5,000;
2. the minimum amount that you can transfer out of the source account is
$250 per month; and
3. the minimum amount you can transfer into any other variable sub-account is
the greater of $250 or 10% of the amount being transferred.
These limits may be changed for new elections of this service. Dollar cost
averaging transfers can not be made from a source account from which systematic
withdrawals or automatic payouts are also being made.
Currently, we do not charge for the dollar cost averaging option nor do they
count toward the number of transfers allowed without charge per contract year.
We may charge in the future for dollar cost averaging.
Dollar cost averaging transfers may not be made to or from the guarantee period
account or to the fixed account.
Dollar cost averaging may not be elected at the same time that automatic asset
rebalancing is in effect.
Special Dollar Cost Averaging Option
(May not be available in all states. See contract for availability of the fixed
account options.)
When you apply for the contract, you may elect to allocate the entire initial
purchase payment to either the six or twelve month special Dollar Cost Averaging
account of the fixed account. The initial purchase payment will be credited with
interest at a guaranteed fixed rate. Amounts will then be transferred from the
special Dollar Cost Averaging account to the sub-accounts and/or general account
options pro rata on a monthly basis for six or twelve months (depending on the
option you select) in the allocations you specified when you applied for the
contract. The four transfers per year limit does not apply to the special Dollar
Cost Averaging option.
Amounts from the sub-accounts and/or general account options may not be
transferred into the special Dollar Cost Averaging accounts. In addition, if you
request a transfer (other than a Dollar Cost Averaging transfer) or a withdrawal
from a special Dollar Cost Averaging account, any amounts remaining in the
special account will be transferred to the sub-accounts and/or general account
options according to your original allocation instructions. The special Dollar
Cost Averaging option will end and cannot be reelected.
Automatic Asset Rebalancing
After purchase payments have been allocated among the variable sub-accounts, the
performance of each variable sub-account may cause proportions of the values in
the variable sub-accounts to vary from the percentages which you initially
defined. As the owner, you may instruct us to automatically rebalance the
amounts in the variable account by reallocating amounts among the variable
sub-accounts, at the time, and in the percentages, specified in your
instructions to us and accepted by us. You may elect to have the rebalancing
done on an annual, semi-annual or quarterly basis. You may elect to have amounts
allocated among the variable sub-accounts using whole percentages, with a
minimum of 10% allocated to each variable sub-account. The guaranteed period
account and/or fixed account cannot be rebalanced.
You may elect to establish, change or terminate the automatic asset rebalancing
by submitting a request to our Service Center in a form and manner acceptable to
us. Automatic asset rebalancing currently will not count towards the number of
transfers without charge in a contract year. We reserve the right to discontinue
the automatic asset rebalancing service at any time for any reason. There is
currently no charge for the automatic asset rebalancing service. We may charge
for this service in the future, and may count the transfers toward those allowed
without charge.
Automatic asset rebalancing may not be elected at the same time that dollar cost
averaging is in effect.
After the Annuity Date
If a variable payment option is elected, you may make transfers among variable
sub-accounts after the annuity date by giving a written request to our Service
Center, subject to the following provisions:
1. transfers after the annuity date may be made no more than four times
during any contract year; and
2. the minimum amount transferred from one variable sub-account to another is
the amount supporting a current $75 monthly payment.
Transfers among variable sub-accounts after the annuity date will be processed
based on the formula outlined in the appendix in the Statement of Additional
Information.
CASH WITHDRAWALS
If you are the owner of a non-qualified contract you may withdraw all or part of
the cash surrender value at any time before the annuity date by giving a written
request to our Service Center. For qualified contracts, reference should be made
to the terms of the particular retirement plan or arrangement for any additional
limitations or restrictions, including prohibitions, on cash withdrawals. The
cash surrender value is equal to the account value, minus any account fee,
interest adjustment, contingent deferred sales load and premium tax charges. A
full surrender will result in a cash withdrawal payment equal to the cash
surrender value at the end of the valuation period during which the election is
received. It must be received along with all completed forms required at that
time by us. No surrenders or withdrawals may be made after the annuity date.
Partial withdrawals must be at least $1,000.
In the case of a partial withdrawal, you may direct our Service Center to
withdraw amounts from specific variable sub-accounts and/or from the general
account options. If you do not specify, the withdrawal will be taken pro rata
from the account value.
A partial withdrawal request cannot be fulfilled if it would reduce your account
value to less than $2,000. In such instances, you will be notified.
Any withdrawal requests, including surrender requests, generally will be
processed as of the end of the valuation period during which the request and all
completed forms are received. We will pay any cash withdrawal, settlement option
payment or lump sum death benefit due from the variable account and process of
any transfers within seven days from the date we receive your request. However,
we may postpone such payment if:
the New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
an emergency exists as defined by the Commission, or the
Commission requires that trading be restricted; or
the Commission permits a delay for the protection of owners.
The withdrawal request will be effective when we receive all required withdrawal
request forms. Payments to you for any monies derived from a purchase payment
which you made by check may be delayed until your check has cleared your bank.
When you make a withdrawal from a guarantee period before the end of its term,
the amount you withdraw may be subject to an interest adjustment.
We may delay payment of any withdrawal from the general account options for up
to six months after we receive the request for such withdrawal. If we delay
payment for more than 30 days, we will pay interest on the withdrawal amount up
to the date of payment.
Since you as the owner assume the investment risk for all amounts in the
variable account and because certain withdrawals are subject to a contingent
deferred sales load and other charges, the total amount paid upon surrender of
your contract may be more or less than the total purchase payments.
As owner, you may elect, under the systematic withdrawal option or automatic
payout option, but not both, to withdraw certain amounts on a periodic basis
from the variable sub-accounts before the annuity date.
The tax consequences of a withdrawal or surrender are discussed later in this
prospectus.
Systematic Withdrawal Option
Before the annuity date, you may elect to have withdrawals automatically made
from one or more variable sub-accounts on a monthly basis. Other distribution
modes may be permitted. The withdrawals will not begin until the later of:
a) 30 days after the contract effective date; or
b) the end of the free look period.
Withdrawals will be from the variable sub-accounts and/or the general account in
the percentage allocations that you specify. Unless you specify otherwise,
withdrawals will be pro rata based on account value. You cannot make systematic
withdrawals from a variable sub-account from which dollar cost averaging
transfers are being made. Likewise, systematic withdrawals cannot be used at the
same time that the automatic payment option is in effect. If you take systematic
withdrawals from the general account, applicable interest adjustments may apply
to withdrawals from the guarantee periods.
To be eligible for the systematic withdrawal option, the account value must be
at least $12,000 at the time of election. The minimum monthly amount that can be
withdrawn is $100. Currently you can elect any amount over $100 to be withdrawn
systematically. You may also make partial withdrawals while receiving systematic
withdrawals.
If the total of your withdrawals (systematic, automatic or partial) in a
contract year exceed the allowed amount to be withdrawn without charge for that
year, your account value will be charged any applicable contingent deferred
sales load which may apply.
The withdrawals will continue indefinitely unless you terminate them. If you
choose to terminate this option, you may not elect to use it again until the end
of the next 12 full months.
We reserve the right to impose an annual fee of up to $25 for processing
payments under this option. This fee, which is currently waived, will be
deducted in equal installments from each systematic withdrawal during a contract
year.
Systematic withdrawals may be taxable and, before age 59 1/2, subject to a 10%
federal tax penalty.
Automatic Payout Option
Before the annuity date, for certain qualified contracts, you may elect the
automatic payout option, hereafter referred to simply as APO to satisfy minimum
distribution requirements under the following sections of the Code:
401(a)(9);
403(b); and
408(b)(3).
For IRAs and SEP/IRAs this option may be elected no earlier than six months
before the calendar year in which you, as the owner, attain age 70 1/2. Payments
may not begin earlier than January of such calendar year.
For other qualified contracts, APO can be elected no earlier than six months
before the later of:
a) when you attain age 70 1/2; or
b) when you retire from employment.
Additionally, APO withdrawals may not begin before the later of:
a) 30 days after the contract effective date; or
b) the end of the free look period.
APO may be elected in any calendar month, but no later than the month of your
84th birthday.
Other Automatic Payout Option Information. Withdrawals will be from the variable
sub-accounts and/or the general account you designate and in the percentage
allocations you specify. If you do not indicate otherwise, withdrawals will be
pro rata from account value. You can not make withdrawals from a variable
sub-account from which you have designated that dollar cost averaging transfers
be made. The calculation of the APO amount will reflect the total account value
although the withdrawals are only from the variable sub-accounts. This
calculation and APO are based solely on the value in this contract. If you take
APO from the general account, applicable interest adjustments may apply to
withdrawals from the guarantee periods.
To be eligible for this option, you must meet the following conditions:
1. your account value must be at least $12,000 at the time at which you select
this option; and
2. the annual withdrawal amount is the larger of the required minimum
distribution under Code sections 401(a)(9) or 408(b)(3), or $500.
These conditions may change. Currently, withdrawals under this option are only
paid annually.
The withdrawals will continue indefinitely unless you terminate them. If there
are insufficient amounts in the variable account to make a withdrawal, this
option generally will terminate. Once terminated, APO may not be elected again.
DEATH BENEFIT
If death occurs before the annuity date and before any owner's or joint owner's
85th birthday, the death benefit will be equal to the greatest of: a) the
account value; or
b) the sum of all purchase payments less withdrawals taken, adjusted as
described below, and the applicable premium tax charges; or
c) the highest account value on any contract anniversary before the earlier of
the owner's or joint owner's 85th birthday, plus purchase payments made,
less withdrawals taken, adjusted as described below, and applicable premium
tax charges since that contract anniversary.
If death occurs before the annuity date and after either the deceased owner's or
joint owner's 85th birthday the death benefit will be equal to the account
value.
Payment of Death Benefit
The death benefit is generally payable upon receipt of proof of death of an
owner. Once we have received this proof, and the beneficiary has selected a
method of settlement, the death benefit generally will be paid within seven
days, or as soon thereafter as we have sufficient information to make the
payment.
The death benefit will be determined as of the end of the valuation period
during which our Service Center receives:
a) proof of death of the owner or joint owner; and
b) the written notice of the settlement option elected by the person to whom
the death benefit is payable.
If no settlement method is elected, the death benefit will be a lump sum
distributed within five years after an owner's death. No contingent deferred
sales load nor interest adjustment will apply.
Until the death benefit is paid, the account value allocated to the variable
account remains in the variable account, and fluctuates with investment
performance of the applicable portfolios. For this reason, the amount of the
death benefit depends on the account value at the time the death benefit is
paid, not at the time of death.
Designation of Beneficiaries
As owner, you may select one or more beneficiaries by designating the person or
persons to receive the amounts payable under the contract. The individuals you
designate will receive the percentage you establish if:
you die before the annuity date and there is no joint owner; or
you die after the annuity date and settlement option payments have begun
under a selected settlement option that guarantees payments for a certain
period of time.
If a beneficiary dies before the owner, that beneficiary's interest in the
annuity will end upon his or her death.
A beneficiary may be named or changed at any time in a form and manner
acceptable to us. Any change made to an irrevocable beneficiary must also
include the written consent of the beneficiary, except as otherwise required by
law.
If more than one beneficiary is named, each named beneficiary will share equally
in any benefits or rights granted by the contract unless the owner gives us
other instructions at the time the beneficiaries are named.
We may rely on any affidavit by any responsible person in determining the
identity or non-existence of any beneficiary not identified by name.
Death of Owner or Joint Owner Before the Annuity Date
If the owner or joint owner dies before the annuity date, we will pay the death
benefit as specified in this section. The entire death benefit must be
distributed within five years after the owner's death. If the owner is not an
individual, an annuitant's death will be treated as the death of the owner as
provided in Code Section 72 (s)(6). For example, the contract will remain in
force with the annuitant's surviving spouse as the new annuitant if:
The contract is owned by a trust; and
The beneficiary is either the annuitant's surviving spouse, or a trust
holding the contract solely for the benefit of such spouse.
The manner in which we will pay the death benefit depends on the status of the
persons involved in the contract. The death benefit will be payable to the first
person from the applicable list below:
If the owner is the annuitant:
The joint owner, if any; or
The beneficiary, if any
If the owner is not the annuitant:
The joint owner, if any; or
The beneficiary, if any; or
The annuitant; or
The joint annuitant; if any.
If the death benefit is payable to the owner's surviving spouse, or to a trust
for the sole benefit of such surviving spouse, we will continue the contract
with the owner's spouse as the new annuitant (if the owner was the annuitant)
and the new owner (if applicable), unless such spouse selects another option as
provided below.
If the death benefit is payable to someone other than the owner's surviving
spouse, we will pay the death benefit in a lump sum payment to, or for the
benefit of, such person within five years after the owner's death, unless such
person or persons selects another option as provided below.
In lieu of the automatic form of death benefit specified above, the person or
persons to whom the death benefit is payable may elect to receive it:
In a lump sum; or
As settlement option payments, provided the person making the election is
an individual. Such payments must begin within one year after the owner's
death and must be in equal amounts over a period of time not extending
beyond the individual's life or life expectancy.
Election of either option must be made no later than 60 days before the one-year
anniversary of the owner's death. Otherwise, the death benefit will be settled
under the appropriate automatic form of benefit specified above. If the person
to whom the death benefit is payable dies before the entire death benefit is
paid, we will pay the remaining death benefit in a lump sum to the payee named
by such person or, if no payee was named, to such person's estate.
If the death benefit is payable to a non-individual, subject to the special rule
for a trust for the sole benefit of a surviving spouse, we will pay the death
benefit in a lump sum within one year after the owner's death.
If the Annuitant Dies Before the Annuity Date
If an owner and an annuitant are not the same individual and the annuitant, or
the last of joint annuitants, dies before the annuity date, the owner will
become the annuitant until a new annuitant is selected.
Death After the Annuity Date
If an owner or the annuitant dies after the annuity date, any amounts payable
will continue to be distributed at least as rapidly as under the settlement and
payment option then in effect on the date of death.
Upon the owner's death after the annuity date, any remaining ownership rights
granted under the contract will pass to the person to whom the death benefit
would have been paid if the owner had died before the annuity date, as specified
above.
Survival Provision
The interest of any person to whom the death benefit is payable who dies at the
time of, or within 30 days after, the death of the owner will also terminate if
no benefits have been paid to such beneficiary, unless the owner had given us
written notice of some other arrangement.
CHARGES, FEES AND DEDUCTIONS
No deductions are currently made from purchase payments, although we reserve the
right to charge for any applicable premium tax charges. Therefore, the full
amount of the purchase payments are invested in one or more of the variable
sub-accounts and/or the general account options.
Contingent Deferred Sales Load/
Surrender Charge
No deduction for sales charges is made from purchase payments at the time they
are made. However, a contingent deferred sales load, or surrender charge, of up
to 6% of purchase payments may be imposed on certain withdrawals or surrenders.
This charge is designed to partially cover certain expenses incurred by us
relating to the sale of the contract, including commissions paid to
salespersons, the costs of preparation of sales literature and other promotional
costs and acquisition expenses.
The contingent deferred sales load/surrender charge percentage varies according
to the number of years between when a purchase payment was credited to the
contract and when the withdrawal is made. The amount of this charge is
determined by multiplying the amount withdrawn that is subject to the charge by
the contingent deferred sales load percentage according to the following table.
In no event will the total contingent deferred sales load/surrender charge
assessed against the contract exceed 6% of the total purchase payments.
Contingent
Deferred
Number of Years Sales Load As A
Since Receipt of Percentage of
Premium Premium
------- -------
Less than 2 years 6%
2 years but less than 3 years 5%
3 years but less than 4 years 5%
4 years but less than 5 years 4%
5 years but less than 6 years 4%
6 years but less than 7 years 2%
7 years or more 0%
Free Withdrawals-Allowed Amount
Beginning 30 days after the contract effective date, or the end of the free look
period, if later, you may make a withdrawal up to the allowed amount without
incurring a contingent deferred sales load/surrender charge each contract year
before the annuity date.
The allowed amount each contract year is equal to 15% of:
the total purchase payments received during the last seven years determined as
of the last contract anniversary; minus any withdrawals during the present
contract year.
In the first contract year, the 15% will be applied to the total purchase
payments at the time of the first withdrawal.
Purchase payments held for seven full years may be withdrawn without charge.
Withdrawals will be made first from purchase payments on a first-in/first-out
basis and then from earnings and last from credits. The allowed amount may vary
depending on the state in which your contract is issued. If the allowed amount
is not fully withdrawn or paid out during a contract year, it does not carry
over to the next contract year.
Free Withdrawals - Living Benefits Rider
When the contract is purchased, you, as the owner, may also elect, in certain
states, a Living Benefits Rider for an additional fee. This rider provides that
the contingent deferred sales load will be waived in any of the three following
instances:
(1) if you or the joint owner receive extended medical care in a qualifying
institution (as defined in the contract) for at least 60 consecutive days,
and the request for the withdrawal or surrender, together with proof of
such extended care, is received at our Service Center during the term of
such care, or within 90 days after the last day upon which you or joint
owner received such extended care; or
(2) if you or the joint owner receive medically required hospice or in-home
care for at least 60 consecutive days and such extended care is certified
by a qualified medical professional. You may also be required to submit
other evidence as required by us such as evidence of Medicare eligibility;
or
(3) if you or the joint owner are diagnosed as terminally ill by a qualified
medical professional after the first contract year and are reasonably
expected to die within 12 months.
Neither 1 nor 2 apply if you or the joint owner are receiving extended medical
care in a qualifying institution or receiving in-home care at the time the
contract is purchased. We reserve the right to not accept purchase payments
after you or the joint owner have qualified for any of these waivers. Under the
rider, you are the owner, or the annuitant if the contract is not owned by an
individual. Any withdrawals under the rider on which the contingent deferred
sales load is waived will not reduce the allowed amount for the contract year.
Any credits less than 12 months old will not be available for withdrawal under
the rider.
Other Free Withdrawals
In addition, no contingent deferred sales load is assessed:
upon annuitization after the first contract year to an option involving
life contingencies; or
upon payment of the death benefit before the annuity date.
Any applicable contingent deferred sales load will be deducted from the amount
requested for both partial withdrawals, including withdrawals under the
systematic withdrawal option or the APO, and full surrenders, unless you elect
to add the amount of the applicable load to the amount requested for a partial
withdrawal to cover the applicable contingent deferred sales load. The
contingent deferred sales load and any premium tax charge applicable to a
withdrawal from the guarantee period account will be deducted from the amount
withdrawn after the interest adjustment, if any, is applied and before payment
is made.
Administrative Charges
Account Fee. At the end of each contract year and before the annuity date, we
deduct an annual account fee as partial compensation for expenses relating to
the issue and maintenance of the contract and the variable account. The annual
account fee is equal to the lesser of $30 or 2% of the account value. The
account fee may be increased upon 30 days advance written notice, but in no
event may it exceed $60, or 2% of the account value, if less, per contract year.
If the contract is surrendered, the account fee, unless waived, will be deducted
from a full surrender before the application of any contingent deferred sales
load. The account fee will be deducted on a pro rata basis, based on values,
from the account value. The fee deductions will be based on both the variable
sub-accounts and the general account options. No interest adjustment will be
assessed on any deduction for the account fee taken from the guarantee period
account. The account fee for a contract year will be waived if the account value
exceeds $50,000 on the last business day of that contract year or as of the date
you, as owner, surrender the contract.
Annuity Fee. After the annuity date, an annual annuity fee of $30 to help cover
processing costs will be deducted in equal amounts from each variable payment
made during the year. This fee is $2.50 each month if monthly payments are made.
This fee will not be changed. No annuity fee will be deducted from fixed
payments. This fee may be waived.
Administrative Expense Charge. We also make a daily deduction for the
administrative expense charge from the variable account before and after the
contract effective date at an effective current annual rate of 0.15% of assets
held in each variable sub-account to reimburse us for administrative expenses.
We have the ability in most states to increase or decrease this charge, but the
charge is guaranteed not to exceed 0.35%. We will provide 30 days written notice
of any change in fees. The administrative charges do not bear any relationship
to the actual administrative costs of a particular contract. The administrative
expense charge is reflected in the variable accumulation or variable annuity
unit values for each variable sub-account.
Mortality and Expense Risk Charge
We deduct a charge for bearing certain mortality and expense risks under the
contracts. This is a daily charge at an effective annual rate of 1.20% of the
assets in the variable account. We guarantee that this charge of 1.20% will
never increase. The mortality and expense risk charge is reflected in the
variable accumulation and variable annuity unit values for each variable
sub-account.
Variable accumulated values and variable settlement option payments are not
affected by changes in actual mortality experience incurred by us. The mortality
risks assumed by us arise from our contractual obligations to make settlement
option payments determined in accordance with the settlement option tables and
other provisions contained in the contract and to pay death benefits before the
annuity date. The expense risk assumed by us is the risk that our actual
expenses in administering the contracts and the variable account will exceed the
amount recovered through the administrative expense charge, account fees,
transfer fees and any fees imposed for certain options and services.
If the mortality and expense risk charge is insufficient to cover actual costs
and risks assumed, we will bear these losses. If this charge is more than
sufficient, any excess will accrue to us. Currently, we expect a profit from
this charge.
We anticipate that the contingent deferred sales load will not generate
sufficient funds to pay the cost of distributing the contracts. To the extent
that the contingent deferred sales load is insufficient to cover the actual cost
of contract distribution, the deficiency will be met from our general corporate
assets which may include amounts, if any, derived from the mortality and expense
risk charge.
Living Benefits Rider Fee
If you, as the owner, elected the Living Benefits Rider when the contract was
purchased, a fee will be deducted at the end of each contract month while the
rider continues in force. The fee each month will be 1/12 of 0.05% of the
account value at that time. The fee is deducted from each variable sub-account
on a pro rata basis based on the value in each variable sub-account through the
cancellation of variable accumulation units. If there is insufficient variable
accumulated value, the fee will be deducted pro rata from the values in the
general account options. Any interest adjustments will apply. We reserve the
right to waive the interest adjustment for deduction from the guarantee period
account for this rider fee.
Premium Tax Charges
Currently there is no charge for premium taxes except upon annuitization.
However, we may be required to pay premium or retaliatory taxes currently
ranging from 0% to 5%. We reserve the right to deduct a charge for these premium
taxes from premium payments, from amounts withdrawn, or from amounts applied on
the annuity date. In some jurisdictions, charges for both direct premium taxes
and retaliatory premium taxes may be imposed at the same or different times with
respect to the same purchase payment, depending upon applicable law.
Transfer Fee
We currently impose a fee for each transfer in excess of the first 18 in a
single contract year. We will deduct the charge from the amount transferred.
This fee is $10 and will be used to help cover our costs of processing
transfers. We reserve the right to waive this fee or to not count transfers
under certain options and services as part of the number of allowed annual
transfers without charge.
Option and Service Fees
We reserve the right to impose reasonable fees for administrative expenses
associated with processing certain options and services. These fees would be
deducted from each use of the option or service during a contract year.
Taxes
No charges are currently made for taxes. However, we reserve the right to deduct
charges in the future for federal, state, and local taxes or the economic burden
resulting from the application of any tax laws that we determine to be
attributable to the contracts.
Portfolio Expenses
The value of the assets in the variable account reflects the value of portfolio
shares and therefore the fees and expenses paid by each portfolio. A complete
description of the fees, expenses, and deductions from the portfolios are found
in the portfolios' prospectuses.
Interest Adjustment
For a description of the interest adjustment applicable to early withdrawals and
transfers from the guaranteed period account, see The General Account Options --
the Guarantee Period Account in Appendix A of this prospectus.
Sales in Special Situations
We may sell the contracts in special situations that are expected to involve
reduced expenses for us. These instances may include:
sales in certain group arrangements, such as employee savings plans;
sales to current or former officers, directors and employees, and their
families, of Transamerica and its affiliates;
sales to officers, directors, and employees, and their families, and the
portfolios' investment advisers and their affiliates; or
sales to officers, directors, employees and sales agents also known as
registered representatives, and their families, and broker-dealers and
other financial institutions that have sales agreements with us to sell the
contracts.
In these situations:
1. the contingent deferred sales load may be reduced or waived;
2. the mortality and expense risk charge or administration charges may be
reduced or waived; and/or
3. certain amounts may be credited to the contract account value (for
examples, amounts related to commissions or sales compensation otherwise
payable to a broker-dealer may be credited to the contract account value.
These reductions in fees or charges or credits to account value will not
unfairly discriminate against any contract owner. These reductions in fees or
charges or credits to account value may be taxable and treated as purchase
payments for purposes of income tax and any possible premium tax charge.
DISTRIBUTION OF THE CONTRACT
Transamerica Securities Sales Corporation (TSSC), is the principal underwriter
of the contracts under a Distribution Agreement with Transamerica. TSSC may also
serve as an underwriter and distributor of other contracts issued through the
variable account and certain other separate accounts of Transamerica and
affiliates of Transamerica. TSSC is an indirect wholly-owned subsidiary of
Transamerica Corporation. TSSC is registered with the Commission as a
broker/dealer and is a member of the National Association of Securities Dealers,
Inc.(NASD). Its principal offices are located at 1150 South Olive Street, Los
Angeles, California 90015. TSSC may enter into sales agreements with
broker/dealers to solicit applications for the contracts through registered
representatives who are licensed to sell securities and variable insurance
products. Under the Sales Agreements, TSSC will pay broker-dealers compensation
based on a percentage of each purchase payment. The percentage may be up to 6%,
and in certain situations additional amounts for marketing allowances,
production bonuses, service fees, sales awards and meetings, and asset based
trailer commissions may be paid.
SETTLEMENT OPTION PAYMENTS
Annuity Date
The annuity date is the date that the annuitization phase of the contract
begins. On the annuity date, we will apply the annuity amount, defined below, to
provide payments under the settlement option selected by you. You select the
annuity date and you may change the date from time to time by giving notice to
our Service Center in a form and manner acceptable to us. Notice of each change
must be received by our Service Center at least 30 days before the then-current
annuity date. The annuity date cannot be earlier than the first contract
anniversary except for certain qualified contracts.
The latest annuity date which may be elected is the later of:
a) the first day of the calendar month immediately preceding the month of the
annuitant's or joint annuitants' 85th birthday; or
b) the first day of the month coinciding with or next following the tenth
contract anniversary, but in no event later than an annuitant's 97th
birthday.
The latest allowed annuity date may vary in certain jurisdictions.
The annuity date must be the first day of a calendar month. The first settlement
option payment will be on the first day of the month immediately following the
annuity date. Certain qualified contracts may have restrictions as to the
annuity date and the types of settlement options available.
Settlement Option Payments
The annuity amount is the account value, minus any interest adjustment, minus
any applicable contingent deferred sales load, and minus any applicable premium
tax charges. Any contingent deferred sales load will be waived if the settlement
option payments involve life contingencies and begin on or after the first
contract anniversary.
If the amount of the monthly payment from the settlement option you selected
would result in a monthly settlement option payment of less than $150, or if the
annuity amount is less than $5,000, we reserve the right to offer a less
frequent mode of payment or pay the cash surrender value in a cash payment.
Monthly settlement option payments from the variable payment option will further
be subject to a minimum monthly payment of $75 from each variable sub-account
from which such payments are made.
You may choose from the settlement options below. We may consent to other plans
of payment before the annuity date. For settlement options involving life
contingencies, the actual age and/or sex of the annuitant, or a joint annuitant
will affect the amount of each payment. Sex-distinct rates generally are not
allowed under certain qualified contracts and in some jurisdictions. We reserve
the right to ask for satisfactory proof of the annuitant's or joint annuitant's
age. We may delay settlement option payments until satisfactory proof is
received. Since payments to older annuitants are expected to be fewer in number,
the amount of each annuity payment shall be greater for older annuitants than
for younger annuitants.
You may choose from the two payment options described below. The annuity date
and settlement options available for qualified contracts may also be controlled
by endorsements, the plan or applicable law.
Election of Settlement Option Forms and Payment Options
Before the annuity date, and while the annuitant is living, you may, by written
request, change the settlement option or payment option. The request for change
must be received by our Service Center at least 30 days before the annuity date.
In the event that a settlement option form and payment option is not selected at
least 30 days before the annuity date, we will make settlement option payments
according to the 120 month period certain and life settlement option and the
applicable provisions of the contract.
Payment Options
You may elect a fixed or a variable payment option, or a combination of both, in
25% increments of the annuity amount.
Unless specified otherwise, the annuity amount in the variable account will be
used to provide a variable payment option and the amount in the general account
options will be used to provide a fixed payment option. In this event, the
initial allocation of variable annuity units for the variable sub-accounts will
be in proportion to the account value in the variable sub-accounts on the
annuity date.
Fixed Payment Option
A fixed payment option provides for payments which will remain constant
according to the terms of the settlement option you select. If you select a
fixed payment option, the portion of the annuity amount used to provide that
payment option will be transferred to the general account assets of
Transamerica. The amount of payments will be established by the fixed settlement
option which you select and by the age and sex, if sex-distinct rates are
allowed by law, of the annuitants. Payment amounts will not reflect investment
performance after the annuity date. The fixed payment amounts are determined by
applying the fixed settlement option purchase rate, which is specified in the
contract, to the portion of the annuity amount applied to the payment option.
Payments may vary after the death of an annuitant under some options; the
amounts of variances are fixed on the annuity date.
Variable Payment Option
A variable payment option provides for payments that vary in dollar amount,
based on the investment performance of the selected variable sub-accounts. The
variable settlement option purchase rate tables in the contract reflect an
assumed, but not guaranteed, annual interest rate of 5.35%. If the actual net
investment performance of the variable sub-accounts is less than 5.35%, then the
dollar amount of the actual payments will decrease. If the actual net investment
performance of the variable sub-accounts is higher than 5.35%, then the dollar
amount of the actual payments will increase. If the net investment performance
exactly equals the 5.35% rate, then the dollar amount of the actual payments
will remain constant. We may offer other assumed annual interest rates.
Variable payments will be based on the variable sub-accounts you select, and on
the monies which you allocate among them.
For further details as to the determination of variable payments, see the
Statement of Additional Information.
Settlement Option Forms
As owner, you may choose any of the settlement option forms described below.
Subject to our approval, you may select any other settlement option forms
offered by us in the future.
1. Life Annuity. Payments start on the first day of the month immediately
following the annuity date, if the annuitant is living. Payments end with the
payment due just before the annuitant's no payment will be made if the
annuitant dies after the annuity date but before the first payment is due;
only one payment will be made if the annuitant dies before the second payment
is due, and so forth.
2. Life and Contingent Annuity. Payments start on the first day of the month
immediately following the annuity date, if the annuitant is living. Payments
will continue for as long as the annuitant lives. After the annuitant dies,
payments will be made to the contingent annuitant for as long as the
contingent annuitant lives. The continued payments can be in the same amount
as the original payments, or in an amount equal to one-half or two-thirds
thereof. Payments will end with the payment due just before the death of the
contingent annuitant. There is no death benefit after both die. If the
contingent annuitant does not survive the annuitant, payments will end with
the payment due just before the death of the annuitant. It is possible that
no payments or very few payments will be made, if the annuitant and
contingent annuitant die shortly after the annuity date.
The written request for this form must:
a) name the contingent annuitant; and
b) state the percentage of payments to be made after the annuitant dies.
Once payments start under this settlement option form, the person named as
contingent annuitant for purposes of being the measuring life, may not be
changed. We will require proof of age for the annuitant and for the
contingent annuitant before payments start.
3. Life Annuity With Period Certain. Payments start on the first day of the
month immediately following the annuity date, if the annuitant is living.
Payments will be made for the longer of:
a) the annuitant's life; or
b) the period certain
The period certain may be 120, 180 or 240 months.
If the annuitant dies after all payments have been made for the period
certain, payments will cease with the payment that is paid just before the
annuitant dies. No death benefit will then be payable to the beneficiary.
If the annuitant dies during the period certain, the rest of the period
certain payments will be made to the beneficiary, unless you provide
otherwise.
The written request for this form must:
a) state the length of the period certain; and
b) name the beneficiary.
4. Joint and Survivor Annuity. Payments will be made starting on the first day
of the month immediately following the annuity date, if and for as long as
the annuitant and joint annuitant are living. After the annuitant or joint
annuitant dies, payments will continue as long as the survivor lives.
Payments end with the payment due just before the death of the survivor. The
continued payments can be in the same amount as the original payments, or in
an amount equal to one-half or two-thirds thereof. It is possible that no
payments or very few payments will be made under this arrangement if the
annuitant and joint annuitant both die shortly after the annuity date.
The written request for this form must:
a) name the joint annuitant; and
b) state the percentage of continued payments to be made upon the first
death.
Once payments start under this settlement option form, the person named as
joint annuitant, for the purpose of being the measuring life, may not be
changed. We will need proof of age for the annuitant and joint annuitant
before payments start.
5. Other Forms of Payment. We can provide benefits under any other settlement
option not described in this section as long as we agree to these options and
they comply with any applicable state or federal law or regulation. Requests
for any other settlement option must be made in writing to our Service Center
at least 30 days before the annuity date.
After the annuity date:
a) you will not be allowed to make any changes in the settlement option and
payment option;
b) no additional purchase payments will be accepted under the contract; and
c) no further withdrawals will be allowed.
As the owner of a non-qualified contract, you may, at any time after the
contract date, write to us at our Service Center to change the payee of
benefits being provided under the contract. The effective date of change in
payee will be the latter of:
a) the date we receive the written request for such change; or
b) the date specified by you.
As the owner of a qualified contract, you may not change payees, except as
permitted by the plan, arrangement or federal law.
FEDERAL TAX MATTERS
Introduction
The following discussion is a general description of federal tax considerations
relating to the contract and is not intended as tax advice. This discussion is
not intended to address the tax consequences resulting from all of the
situations in which a person may be entitled to or may receive a distribution
under the contract. If you are concerned about these tax implications, you
should consult a competent tax adviser before initiating any transaction. This
discussion is based upon Transamerica's understanding of the present federal
income tax laws as they are currently interpreted by the Internal Revenue
Service, or simply, the IRS. No representation is made as to the likelihood of
the continuation of the present federal income tax laws or of the current
interpretation by the IRS. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
The contract may be purchased on a non-tax qualified basis, as a non-qualified
contract, or purchased and used in connection with plans or arrangements
qualifying for special tax treatment as a qualified contract. Qualified
contracts are designed for use in connection with plans or arrangements entitled
to special income tax treatment under Code Sections 401, 403(b), 408 and 408A.
The ultimate effect of federal income taxes on the amounts held under a
contract, on settlement option payments, and on the economic benefit to the
owner, the annuitant, or the beneficiary may depend on:
the type of retirement plan or arrangement for which the contract is
purchased;
the tax and employment status of the individual concerned; or
Transamerica's tax status.
In addition, certain requirements must be satisfied when purchasing a qualified
contract with proceeds from a tax qualified retirement plan or other
arrangement. Certain requirements must also be met when receiving distributions
from a qualified contract, in order to continue receiving favorable tax
treatment. Therefore, purchasers of qualified contracts should seek competent
legal and tax advice regarding the suitability of the contract for their
individual situation, the applicable requirements, and the tax treatment of the
rights and benefits of the contract. The following discussion is based on the
assumption that the contract qualifies as an annuity for federal income tax
purposes and that all purchase payments made
to qualified contracts are in compliance with all requirements under the Code
and the specific retirement plan or arrangement.
Purchase Payments
At the time the initial purchase payment is paid, as prospective purchaser, you
must specify whether you are purchasing a non-qualified contract or a qualified
contract. If the initial purchase payment is derived from an exchange, transfer,
conversion or surrender of another annuity contract, we may require that the
prospective purchaser provide information with regard to the federal income tax
status of the previous annuity contract. We will require that persons purchase
separate contracts if they desire to invest monies qualifying for different
annuity tax treatment under the Code. Each such separate contract would require
the minimum initial purchase payment previously described. Additional purchase
payments under a contract must qualify for the same federal income tax treatment
as the initial purchase payment under the contract. We will not accept an
additional purchase payment under a contract if the federal income tax treatment
of such purchase payment would be different from that of the initial purchase
payment.
Taxation of Annuities
In General. Code Section 72 governs taxation of annuities in general.
Transamerica believes that an owner who is a natural person generally is not
taxed on increases in the value of a contract until distribution occurs by
withdrawing all or part of the account value for example, via withdrawals or
settlement option payments. For this purpose, the assignment, pledge, or
agreement to assign or pledge any portion of the account value, and in the case
of a qualified contract, any portion of an interest in the plan, generally will
be treated as a distribution. The taxable portion of a distribution is taxable
as ordinary income.
The owner of any contract who is not a natural person generally must include in
income any increase in the excess of the account value over the "investment in
the contract" during the taxable year. There are some exceptions to this rule
and a
<PAGE>
prospective owner that is not a natural person should discuss these with a
competent tax adviser.
The following discussion generally applies to a contract owned by a natural
person.
Withdrawals. With respect to non-qualified contracts, partial withdrawals,
including withdrawals under the systematic withdrawal option, are generally
treated as taxable income to the extent that the account value immediately
before the withdrawal exceeds the investment in the contract at that time. The
investment in the contract generally equals the amount of non-deductible
purchase payments made.
In the case of a withdrawal from qualified contracts, including withdrawals
under the systematic withdrawal option or the automatic payout option, a ratable
portion of the amount received is taxable, generally based on the ratio of the
investment in the contract to the individual's total accrued benefit under the
retirement plan or arrangement. The investment in the contract generally equals
the amount of non-deductible purchase payments made by or on behalf of any
individual. For certain qualified contracts, the investment in the contract can
be zero. Special tax rules applicable to certain distributions from qualified
contracts are discussed below, under Qualified Contracts.
If a partial withdrawal from the guarantee period account is subject to an
interest adjustment, the account value immediately before the withdrawal will
not be altered to take into account the interest adjustment. As a result, for
purposes of determining the taxable portion of a partial withdrawal, the account
value will be treated as including the amount deducted from the guarantee period
account due to the interest adjustment.
Full surrenders are treated as taxable income to the extent that the amount
received exceeds the investment in the contract.
Settlement Option Payments. Although the tax consequences may vary depending on
the settlement option elected under the contract, in general a ratable portion
of each payment that represents the amount by which the account value exceeds
the investment in the contract will be taxed based on the ratio of the
investment in the contract to the total benefit payable; after the investment in
the contract is recovered, the full amount of any additional settlement option
payments is taxable.
For variable payments, the taxable portion is generally determined by an
equation that establishes a specific dollar amount of each payment that is not
taxed. The dollar amount is determined by dividing the investment in the
contract by the total number of expected periodic payments. However, the entire
distribution will be taxable once the recipient has recovered the dollar amount
of his or her investment in the contract.
For fixed payments, in general there is no tax on the portion of each payment
which represents the same ratio that the investment in the contract bears to the
total expected value of the payments for the term selected. However, the
remainder of each settlement option payment is taxable. Once the investment in
the contract has been fully recovered, the full amount of any additional
settlement option payments is taxable. If settlement option payments cease as a
result of an annuitant's death before full recovery of the investment in the
contract, consult a competent tax adviser regarding deductibility of the
unrecovered amount.
Withholding. The Code requires Transamerica to withhold federal income tax from
withdrawals. However, except for certain qualified contracts, an owner will be
entitled to elect, in writing, not to have tax withholding apply. Withholding
applies to the portion of the distribution which is includible in income and
subject to federal income tax. The federal income tax withholding rate is 10%,
or 20% in the case of certain qualified plans, of the taxable amount of the
distribution. Withholding applies only if the taxable amount of the distribution
is at least $200. Some states also require withholding for state income taxes.
The withholding rate varies according to the type of distribution and the
owner's tax status. Eligible rollover distributions from Section 401(a) plans
and Section 403(b) tax sheltered annuities are subject to mandatory federal
income tax withholding at the rate of 20%. An eligible rollover distribution is
the taxable portion of any distribution from such a plan, except for certain
distributions or settlement option payments made in a specified form. The 20%
mandatory withholding does not apply, however, if the owner chooses a direct
rollover from the plan to another tax-qualified plan or to an IRA described in
Code Section 408.
The federal income tax withholding rate for a distribution that is not an
eligible rollover distribution is 10% of the taxable amount of the distribution.
Penalty Tax. A federal income tax penalty equal to 10% of the amount treated as
taxable income may be imposed. In general, however, there is no penalty tax on
distributions:
1. made on or after the date on which the owner attains age 59 1/2;
2. made as a result of death or disability of the owner; or
3. received in substantially equal periodic payments as a life annuity or a
joint and survivor annuity for the life(ves) or life expectancy(ies) of the
owner and a designated beneficiary.
Other exceptions to the tax penalty may apply to certain distributions from a
qualified contract.
Taxation of Death Benefit Proceeds. Amounts may be distributed from the contract
because of the death of an owner. Generally such amounts are includible in the
income of the recipient as follows:
1. if distributed in a lump sum, they are taxed in the same manner as a full
surrender as described above; or
2. if distributed under a settlement option, they are taxed in the same manner
as settlement option payments, as described above.
For these purposes, the investment in the contract is not affected by the
owner's death. That is, the investment in the contract remains the amount of any
purchase payments paid which are not excluded from gross income.
Transfers, Assignments, or Exchanges of the Contract. For non-qualified
contracts, a transfer of ownership of a contract, the designation of an
annuitant, payee, or other beneficiary who is not also the owner, or the
exchange of a contract may result in certain tax consequences to the owner that
are not discussed herein. An owner contemplating any such designation, transfer,
assignment, or exchange should contact a competent tax adviser with respect to
the potential tax effects of such a transaction. Qualified contracts may not be
assigned or transferred, except as permitted by the Code or the Employee
Retirement Income Security Act of 1974, also referred to as ERISA.
Multiple Contracts. All deferred non-qualified contracts that are issued by
Transamerica or its affiliates to the same owner during any calendar year are
treated as one contract for purposes of determining the amount includible in
gross income under Code Section 72(e). In addition, the Treasury Department has
specific authority to issue regulations that prevent the avoidance of Section
72(e) through the serial purchase of contracts or otherwise. Congress has also
indicated that the Treasury Department may have authority to treat the
combination purchase of an immediate annuity contract and separate deferred
annuity contracts as a single annuity contract under its general authority to
prescribe rules that may be necessary to enforce the income tax laws.
Qualified Contracts
In General. The qualified contracts are designed for use with several types of
retirement plans and arrangements. The tax rules applicable to participants and
beneficiaries in retirement plans or arrangements vary according to the type of
plan and the terms and conditions of the plan. Special tax treatment may be
available for certain types of contributions and distributions. Adverse tax
consequences may result from contributions in excess of specified limits;
distributions before age 59 1/2, subject to certain exceptions; distributions
that do not conform to specified commencement and minimum distribution rules;
and in other specified circumstances.
We make no attempt to provide more than general information about use of the
contracts with the various types of retirement plans. Owners and participants
under retirement plans, as well as annuitants and beneficiaries, are cautioned
that the rights of any person to any benefits under qualified contracts may be
subject to the terms and conditions of the plans themselves, regardless of the
terms and conditions of the contract (including any endorsements) issued in
connection with such a plan. Some retirement plans are subject to distribution
and other requirements that are not incorporated in the administration of the
contracts. Owners are responsible for determining that contributions and other
transactions with respect to the contracts satisfy applicable law. Purchasers of
contracts for use with any retirement plan should consult their legal counsel
and tax adviser regarding the suitability of the contract.
For qualified plans under Section 401(a), 403(a) and 403(b), the Code requires
that distributions generally must commence no later than the later of April 1 of
the calendar year following the calendar year in which the owner or plan
participant:
a) reaches age 70 1/2; or
b) retires and distribution must be made in a specified manner.
If the plan participant is a 5 percent owner, as defined in the Code,
distributions generally must begin no later than April 1 of the calendar year
following the calendar year in which the owner or plan participant reaches age
70 1/2. For IRAs and SEP/IRAs described in Section 408, distributions generally
must commence no later than the later of April 1 of the calendar year following
the calendar year in which the owner or plan participant reaches age 70 1/2.
Roth IRAs under Section 408A do not require distributions at any time before the
owner's death.
Qualified Pension and Profit Sharing Plans. Code Section 401(a) permits
employers to establish various types of retirement plans for employees. Such
retirement plans may permit the purchase of the contract in order to provide
retirement savings under the plans. Adverse tax consequences to the plan, to the
participant or to both may result if this contract is assigned or transferred to
any individual as a means to provide benefits payments. If you are buying a
contract for use with such plans, you should seek competent advice. Advice you
receive should address the suitability of the proposed plan documents and the
contract to your specific needs.
Individual Retirement Annuities (IRA), Simplified Employee Plans (SEP) and Roth
IRAs. The sale of a contract for use with any IRA may be subject to special
disclosure requirements of the Internal Revenue Service (IRS). If you purchase a
contract for use with an IRA you will be provided with supplemental information
required by the IRS or other appropriate agency.
You will have the right to cancel your purchase within 7 days of whichever is
earliest:
a) the establishment of your IRA; or
b) your purchase.
If you intend to make such a purchase, you should seek competent advice as to
the suitability of the contract you are considering purchasing for use with an
IRA.
The contract is designed for use with IRA rollovers and contributory IRAs. A
contributory IRA is a contract to which initial and subsequent purchase payments
are subject to limitations imposed by the Code. Code Section 408 permits
eligible individuals to contribute to an individual retirement program known as
an Individual Retirement Annuity or Individual Retirement Account (referred to
as an IRA). Also, distributions from certain other types of qualified plans may
be rolled over on a tax-deferred basis into an IRA.
Earnings in an IRA are not taxed until distribution. IRA contributions are
limited each year to the lesser of $2,000 or 100% of the owner's compensation,
including earned income as defined in Code Section 401(c)(2). These
contributions may be deductible in whole or in part depending on the
individual's adjusted gross income and whether or not the individual is
considered an active participant in a qualified plan. The limit on the amount
contributed to an IRA does not apply to distributions from certain other types
of qualified plans that are rolled over on a tax-deferred basis into an IRA.
Amounts in the IRA, other than nondeductible contributions, are taxed when
distributed from the IRA. Distributions before age 59 1/2, unless certain
exceptions apply, are subject to a 10% penalty tax.
Eligible employers that meet specified criteria under Code Section 408(k) could
establish simplified employee pension plans, referred to as SEP/IRAs, for their
employees using IRAs. Employer contributions that may be made to such plans are
larger than the amounts that may be contributed to regular IRAs, and may be
deductible to the employer. SEP/IRAs are subject to certain Code requirements
regarding participation and amounts of contributions.
The contract may also be used for Roth IRA conversions and contributory Roth
IRAs. A contributory Roth IRA is a contract to which initial and subsequent
purchase payments are subject to limitations imposed by the Code. Code Section
408A permits eligible individuals to contribute to an individual retirement
program known as a Roth IRA, although contributions are not tax deductible. In
addition, distributions from a non-Roth IRA may be converted to a Roth IRA. A
non-Roth IRA is an individual retirement account or annuity described in Section
408(a) or 408(b), other than a Roth IRA. Distributions from a Roth IRA generally
are not taxed, except that, once total distributions exceed contributions to the
Roth IRA, income tax and a 10% penalty tax may apply to distributions you take:
1. before age 59 1/2, subject to certain exceptions; or
2. during the five taxable years starting with the year in which you first
contributed to the Roth IRA.
If you intend to purchase such a contract, you should seek competent advice as
to the suitability of the contract for use with Roth IRAs.
Tax Sheltered Annuities. Under Code Section 403(b), payments made by public
school systems and certain tax exempt organizations to purchase annuity
contracts for their employees are excludable from the gross income of the
employee, subject to certain limitations. However, these payments may be subject
to Social Security and Medicare (FICA) taxes.
Code Section 403(b)(11) restricts the distribution under Code Section 403(b)
annuity contracts of:
1. elective contributions made in years beginning after December 31, 1988;
2. earnings on those contributions; and
3. earnings in such years on amounts held as of the last year beginning before
January 1, 1989.
Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not be
distributed in the case of hardship. Pre-1989 contributions and earnings through
December 31, 1989 are not subject to the restrictions described above. However,
funds transferred to a qualified contract from a Section 403(b)(7) custodial
account will be subject to the restrictions.
Restrictions under Qualified Contracts. There may be other restrictions that
apply to the election, commencement, or distribution of benefits under qualified
contracts, or under the terms of the plans under which contracts are issued. A
qualified contract will be amended as necessary to conform to the requirements
of the Code.
Taxation of Transamerica
Transamerica is taxed as a life insurance company under Part I of Subchapter L
of the Code. Since the variable account is not an entity separate from
Transamerica, and its operations form a part of Transamerica, it will not be
taxed separately as a regulated investment company under Subchapter M of the
Code. Investment income and realized capital gains are automatically applied to
increase reserves under the contracts. Under existing federal income tax law,
Transamerica believes that the variable account investment income and realized
net capital gains will not be taxed to the extent that such income and gains are
applied to increase the reserves under the contracts.
Accordingly, Transamerica does not anticipate that it will incur any federal
income tax liability attributable to the variable account and, therefore, we do
not intend to make provisions for any such taxes. However, if changes in the
federal tax laws or interpretations thereof result in Transamerica being taxed
on income or gains arising from the variable account, then Transamerica may
impose a charge against the variable account (with respect to some or all
contracts) in order to set aside provisions to pay such taxes.
Tax Status of the Contract
Diversification Requirements. Code Section 817(h) requires that with respect to
non-qualified contracts, the investments of the portfolios be adequately
diversified in accordance with Treasury regulations in order for the contracts
to qualify as annuity contracts under federal tax law. The variable account,
through the portfolios, intends to comply with the diversification requirements
prescribed by the Treasury in Reg. Sec. 1.817-5, which affect how the
portfolios' assets may be invested.
In certain circumstances, owners of variable annuity contracts may be considered
the owners, for federal income tax purposes, of the assets of the separate
accounts used to support their contracts. In those circumstances, income and
gains from the separate account assets would be includible in the variable
contract owner's gross income. The IRS has stated in published rulings that a
variable contract owner will be considered the owner of separate account assets
if the contract owner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets.
The Treasury Department has also announced, in connection with the issuance of
regulations concerning diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control for the
investments of a segregated asset account may cause the investor, as the owner,
rather than the insurance company, to be treated as the owner of the assets in
the account." This announcement also stated that guidance would be issued by way
of regulations or rulings on the "extent to which policyholders may direct their
investments to particular sub-accounts without being treated as owners of the
underlying assets."
The ownership rights under the contract are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that contract owners were not owners of separate account assets. For example,
the owner has additional flexibility in allocating premium payments and account
values. These differences could result in an owner being treated as the owner of
a pro rata portion of the assets of the variable account. In addition,
Transamerica does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. Transamerica therefore reserves the right to modify the contract as
necessary to attempt to prevent an owner from being considered the owner of a
pro rata share of the assets of the variable account.
Required Distributions. In order to be treated as an annuity contract for
federal income tax purposes, Code Section 72(s) requires any non-qualified
contract to provide that:
a) if any owner dies on or after the annuity date but before the time the
entire interest in the contract has been distributed, the remaining portion
of such interest will be distributed at least as rapidly as under the
method of distribution being used as of the date of that owner's death; and
b) if any owner dies before the annuity date, the entire interest in the
contract will be distributed within five years after the date of the
owner's death. These requirements will be considered satisfied as to any
portion of the owner's interest, which is payable to or for the benefit of
a designated beneficiary.
This interest is distributed over the life of the designated beneficiary, or
over a period not extending beyond the life expectancy of that beneficiary,
provided that such distributions begin within one year of the owner's death.
The owner's designated beneficiary refers to a natural person designated by the
owner as a beneficiary. Upon the owner's death, ownership of the contract passes
to the "designated beneficiary." However, if the owner's "designated
beneficiary" is the surviving spouse of the deceased owner, the contract may be
continued with the surviving spouse as the new owner.
The non-qualified contracts contain provisions which are intended to comply with
the requirements of Code Section 72(s), although no regulations interpreting
these requirements have yet been issued. All provisions in the contract will be
interpreted to maintain this tax qualification. We may make changes in order to
maintain this qualification or to conform the contract to any applicable changes
in the tax qualification requirements. We will provide you with a copy of any
changes made to the contract.
Possible Changes in Taxation
Legislation has been proposed in the pas that, if enacted, would adversely
modify the federal taxation of certain insurance and annuity contracts. For
example, one proposal would tax transfers among investment options and tax
exchanges involving variable contracts. A second proposal would reduce the
investment in the contract under cash value life insurance and certain annuity
contracts by certain amounts, thereby increasing the amount of income for
purposes of computing gain. Although the likelihood of there being any changes
is uncertain, there is always the possibility that the tax treatment of the
contracts could be changed by legislation or other means. Moreover, it is also
possible that any change could be retroactive, that is, effective before the
date of the change. You should consult a tax adviser with respect to legislative
developments and their effect on the contract.
Other Tax Consequences
As noted above, the foregoing discussion of the federal income tax consequences
is not exhaustive and special rules are provided with respect to other tax
situations not discussed in this prospectus. Further, the federal income tax
consequences discussed herein reflect Transamerica's understanding of current
law and the law may change. Federal estate and gift tax consequences and state
and local estate, inheritance, and other tax consequences of ownership or
receipt of distributions under the contract depend on the individual
circumstances of each owner or recipient of the distribution. A competent tax
adviser should be consulted for further information.
PERFORMANCE DATA
From time to time, Transamerica may advertise yields and average annual total
returns for the variable sub-accounts. In addition, Transamerica may advertise
the effective yield of the money market variable sub-account. These figures will
be based on historical information and are not intended to indicate future
performance.
The yield of the money market variable sub-account refers to the annualized
income generated by an investment in that variable sub-account over a specified
seven-day period. The yield is calculated by assuming that the income generated
for that seven-day period is generated each seven-day period over a 52-week
period and is shown as a percentage of the investment. The effective yield is
calculated similarly but, when annualized, the income earned by an investment in
that variable sub-account is assumed to be reinvested. The effective yield will
be slightly higher than the yield because of the compounding effect of this
assumed reinvestment. The yield of a variable sub-account, other than the money
market variable sub-account, refers to the annualized income generated by an
investment in the variable sub-account over a specified thirty-day period. The
yield is calculated by assuming that the income generated by the investment
during that thirty-day period is generated each thirty-day period over a
twelve-month period and is shown as a percentage of the investment.
The yield calculations do not reflect the effect of any contingent deferred
sales load or premium taxes that may be applicable to a particular contract. To
the extent that the contingent deferred sales load or premium taxes are
applicable to a particular contract, the yield of that contract will be reduced.
For additional information regarding yields and total returns, please refer to
the Statement of Additional Information.
The average annual total return of a variable sub-account refers to return
quotations assuming an investment has been held in the variable sub-account for
various periods of time including, but not limited to, a period measured from
the date the variable sub-account commenced operations. When a variable
sub-account has been in operation for 1, 5, and 10 years, respectively, the
average annual total return for these periods will be provided. The average
annual total return quotations will represent the average annual compounded
rates of return that would equate an initial investment of $1,000 to the
redemption value of that investment, including the deduction of any applicable
contingent deferred sales load but excluding deduction of any premium taxes, as
of the last day of each of the periods for which total return quotations are
provided.
Performance information for any variable sub-account reflects only the
performance of a hypothetical contract under which account value is allocated to
a variable sub-account during a particular time period on which the calculations
are based. Performance information should be considered in light of the
investment objectives and policies and characteristics of the portfolios in
which the variable sub-account invests, and the market conditions during the
given time period, and should not be considered as a representation of what may
be achieved in the future. For a description of the methods used to determine
yield and total returns, see the Statement of Additional Information. Reports
and promotional literature may also contain other information including:
1. the ranking of any variable sub-account derived from rankings of variable
annuity separate accounts or their investment products tracked by Lipper
Analytical Services, Inc., VARDS, IBC/Donoghue's Money Fund Report,
Financial Planning Magazine, Money Magazine, Bank Rate Monitor, Standard
and Poor's Indices, Dow Jones Industrial Average, and other rating
services, companies, publications, or other persons who rank separate
accounts or other investment products on overall performance or other
criteria; and
2. the effect of tax deferred compounding on variable sub-account investment
returns, or returns in general, which may be illustrated by graphs, charts,
or otherwise, and which may include a comparison, at various points in
time, of the return from an investment in a contract, or returns in
general, on a tax-deferred basis, assuming one or more tax rates, with the
return on a currently taxable basis. Other ranking services and indices may
be used.
In its advertisements and sales literature, Transamerica may discuss, and may
illustrate by graphs, charts, or through other means of written communication:
the implications of longer life expectancy for retirement planning;
the tax and other consequences of long-term investment in the contract;
the effects of the contract's lifetime payout options; and
the operation of certain special investment features of the contract --
such as the dollar cost averaging option.
Transamerica may explain and depict in charts, or other graphics, the effects of
certain investment strategies, such as allocating purchase payments between the
general account options and a variable sub-account. Transamerica may also
discuss the Social Security system and its projected payout levels and
retirement plans generally, using graphs, charts and other illustrations.
Transamerica may from time to time also disclose average annual total return in
non-standard formats and cumulative non-annualized total return for the variable
sub-accounts. The non-standard average annual total return and cumulative total
return will assume that no contingent deferred sales load is applicable.
Transamerica may from time to time also disclose yield, standard total returns,
and non-standard total returns for any or all variable sub-accounts.
All non-standard performance data will only be disclosed if the standard
performance data is also disclosed. For additional information regarding the
calculation of other performance data, please refer to the Statement of
Additional Information. Transamerica may also advertise performance figures for
the variable sub-accounts based on the performance of a portfolio before the
time the variable account commenced operations.
YEAR 2000 ISSUE
Many computer software systems in use today cannot distinguish the year 2000
from the year 1900 because dates are encoded using the standard six-place format
that allows entry of only the last two digits of the year. This is commonly
known as the "Year 2000 Problem".
Regarding our systems and software that administer the contracts, we believe
that our own internal systems will be Year 2000 ready. Additionally, we require
third party vendors that supply software or administrative services to us in
connection with the contract administration, to certify that such software
and/or services will be Year 2000 ready.
The "Year 2000 Problem" could adversely impact the portfolios if the computer
systems used by the portfolios' investment adviser, sub-adviser, custodian and
transfer agent (including service providers' systems) do not accurately process
date information on or after January 1, 2000. The investment advisers are
addressing this issue by testing the computer systems they use to ensure that
those systems will operate properly on or after
<PAGE>
January 1, 2000, and seeking assurances from other service providers they use
that their computer systems will be adapted to address the "Year 2000 Problem"
in time to prevent adverse consequences on or after January 1, 2000. However,
especially when taking into account interaction with other systems, it is
difficult to predict with precision that there will be no disruption of services
in connection with the year 2000.
We continue to believe that we will achieve Year 2000 readiness. However, the
size and complexity of our systems and the need for them to interface with other
systems internally and with those of our customers, vendors, partners,
governmental agencies and other outside parties, creates the possibility that
some systems may experience Year 2000 problems. Although we believe we will be
properly prepared for the date change, we are also developing contingency plans
to minimize any potential disruptions to operations, especially from externally
interfaced systems over which we have limited or no control.
This issue could also adversely impact the value of the securities that the
portfolios invest in if the issuing companies' systems do not operate properly
on or after January 1, 2000, and this risk could be heightened for portfolios
that invest internationally. Refer to the prospectuses for the portfolios for
more information.
The above information is subject to the Year 2000 Readiness Disclosure Act. This
act may limit your legal rights in the event of a dispute.
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the variable account.
Transamerica is involved in various kinds of routine litigation which, in
management's judgment, are not of material importance to Transamerica's assets
or to the variable account.
LEGAL MATTERS
The organization of Transamerica, its authority to issue the contract and the
validity of the form of the contract have been passed upon by James W. Dederer,
General Counsel and Secretary of Transamerica.
ACCOUNTANTS AND FINANCIAL
STATEMENTS
The consolidated financial statements of Transamerica at December 31, 1998 and
1997, and the financial statements of Separate Account VA-6 at December 31, 1998
and for the period then ended, appearing in the Statement of Additional
Information have been audited by Ernst & Young LLP, Independent Auditors, as set
forth in their reports appearing in the Statement of Additional Information. The
financial statements audited by Ernst & Young LLP have been included in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
VOTING RIGHTS
To the extent required by applicable law, all portfolio shares held in the
variable account will be voted by Transamerica at regular and special
shareholder meetings of the respective portfolio. The shares will be voted in
accordance with instructions received from persons having voting interests in
the corresponding variable sub-account. If, however, the 1940 Act or any
regulation thereunder should be amended, or if the present interpretation
thereof should change, or if Transamerica determines that it is allowed to vote
all portfolio shares in its own right, Transamerica may elect to do so.
The person with the voting interest is the owner. The number of votes which are
available to an owner will be calculated separately for each variable
sub-account. Before the annuity date, that number will be determined by applying
his or her percentage interest, if any, in a particular variable sub-account to
the total number of votes attributable to that variable sub-account. The owner
holds a voting interest in each variable sub-account to which the account value
is allocated. After the annuity date, the number of votes decreases as
settlement option payments are made and as the reserves for the contract
decrease.
The number of votes of a portfolio will be determined as of the date coincident
with the date established by that portfolio for determining shareholders
eligible to vote at the meeting of the portfolios. Voting instructions will be
solicited by written communication before such meeting in accordance with
procedures established by the respective portfolios. Shares for which no timely
instructions are received and shares held by Transamerica for which owners have
no beneficial interest will be voted in proportion to the voting instructions
which are received with respect to all contracts participating in the variable
sub-account. Voting instructions to abstain on any item to be voted upon will be
applied on a pro rata basis.
Each person or entity having a voting interest in a variable sub-account will
receive proxy material, reports and other material relating to the appropriate
portfolio.
It should be noted that generally the portfolios are not required, and do not
intend, to hold annual or other regular meetings of shareholders.
AVAILABLE INFORMATION
Transamerica has filed a registration statement with the Securities and Exchange
Commission under the 1933 Act relating to the contract offered by this
prospectus. This prospectus has been filed as a part of the Registration
Statement and does not contain all of the information set forth in the
Registration Statement and exhibits thereto.
Reference is hereby made to such Registration Statement and exhibits for further
information relating to Transamerica and the contract. Statements contained in
this prospectus, as to the content of the contract and other legal instruments,
are summaries. For a complete statement of the terms thereof, reference is made
to the instruments filed as exhibits to the Registration Statement. The
Registration Statement and the exhibits thereto may be inspected and copied at
the office of the Commission, located at 450 Fifth Street, N.W., Washington, D.C
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more details
concerning the subjects discussed in this prospectus. The following is the Table
of Contents for that Statement:
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
THE CONTRACT .................................................................................... 3
NET INVESTMENT FACTOR ........................................................................... 3
VARIABLE PAYMENT OPTIONS......................................................................... 3
Variable Annuity Units and Payments.............................................................. 3
Variable Annuity Unit Value...................................................................... 3
Transfers After the Annuity Date................................................................. 4
GENERAL PROVISIONS............................................................................... 4
IRS Required Distributions.............................................................. 4
Non-Participating....................................................................... 4
Misstatement of Age or Sex.............................................................. 4
Proof of Existence and Age.............................................................. 4
Annuity Data............................................................................ 4
Assignment.............................................................................. 5
Annual Report........................................................................... 5
Incontestability........................................................................ 5
Entire Contract......................................................................... 5
Changes in the Contract................................................................. 5
Protection of Benefits.................................................................. 5
Delay of Payments....................................................................... 5
Notices and Directions.................................................................. 6
CALCULATION OF YIELDS AND TOTAL RETURNS ......................................................... 6
Money Market Sub-Account Yield Calculation.............................................. 6
Other Sub-Account Yield Calculations.................................................... 7
Standard Total Return Calculations...................................................... 7
Adjusted Historical Portfolio Performance Data.......................................... 8
Other Performance Data.................................................................. 8
HISTORICAL PERFORMANCE DATA...................................................................... 8
General Limitations..................................................................... 8
Historical Performance Data............................................................. 8
DISTRIBUTION OF THE CONTRACT.....................................................................18
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS...........................................................18
STATE REGULATION.................................................................................18
RECORDS AND REPORTS..............................................................................18
FINANCIAL STATEMENTS.............................................................................18
APPENDIX.........................................................................................19
</TABLE>
<PAGE>
Appendix A
THE GENERAL ACCOUNT OPTIONS
(Not available in all states)
This prospectus is generally intended to serve as a disclosure document only for
the contract and the variable account. For complete details regarding the
general account options, see the contract itself.
The account value allocated to the general account options becomes part of the
general account of Transamerica, which supports insurance and annuity
obligations. Because of exemptive and exclusionary provisions, interests in the
general account have not been registered under the Securities Act of 1933 (the
"1933 Act"), nor is the general account registered as an investment company
under the 1940 Act.
Accordingly, neither the general account nor any interests therein are generally
subject to the provisions of the 1933 Act or the 1940 Act, and Transamerica has
been advised that the staff of the Securities and Exchange Commission has not
reviewed the disclosures in this prospectus which relate to the general account
options.
The general account options are part of the general account of Transamerica. The
general account of Transamerica consists of all the general assets of
Transamerica, other than those in the variable account, or in any other separate
account. Transamerica has sole discretion to invest the assets of its general
account subject to applicable law.
The allocation or transfer of funds to the general account options does not
entitle the owner to share in the investment performance of Transamerica's
general account.
There are two general account options: the fixed account and the guarantee
period account, as described below. These options are not available in all
states.
THE FIXED ACCOUNT
Currently, we guarantee that we will credit interest at a rate of not less than
3% per year, compounded annually, to amounts allocated to the fixed account
under the contracts. However, we reserve the right to change the minimum rate
according to state insurance law. We may credit interest at a rate in excess of
3% per year.
There is no specific formula for the determination of excess interest credits.
Some of the factors that we may consider in determining whether to credit excess
interest to amounts allocated to the fixed account and the amount in that
account are:
general economic trends;
rates of return currently available;
returns anticipated on the company's investments;
regulatory and tax requirements; and
competitive factors.
Any interest credited to amounts allocated to the fixed account in excess of 3%
per year will be determined at the sole discretion of Transamerica. The owner
assumes the risk that interest credited to the fixed account allocations may not
exceed the minimum guarantee of 3% for any given year.
Rates of interest credited to the fixed account will be guaranteed for at least
twelve months and will vary according to the timing and class of the allocation,
transfer or renewal. At any time after the end of the twelve month period for a
particular allocation, we may change the annual rate of interest for that class;
this new annual rate of interest will remain in effect for at least twelve
months. New purchase payments made to the contract which are allocated to the
fixed account may receive different rates of interest.
These rates of interest may differ from those interest rates credited to amounts
transferred from the variable sub-accounts or guarantee period account and from
those credited to amounts remaining in the fixed account and receiving renewal
rates. These rates of interest may also differ from rates for allocations
applied under certain options and services we may be offering.
Transfers
Each contract year, as the owner, you may transfer a percentage of the value of
the fixed account to variable sub-accounts or to the guarantee period accounts.
The maximum percentage that may be transferred will be declared annually by us.
This percentage will be determined by us at our sole discretion, but will not be
less than 10% of the value of the fixed account on the preceding contract
anniversary and will be declared each year. Currently, this percentage is 25%.
As the owner, you are limited to four transfers from the fixed account each
contract year, and the total of all such transfers cannot exceed the current
maximum. If we permit dollar cost averaging from the fixed account to the
variable sub-accounts, the above restrictions are not applicable.
Generally, transfers may not be made from any variable sub-account to the fixed
account for the six-month period following any transfer from the fixed account
to one or more of the variable sub-accounts. Additionally, transfers may not be
made from the fixed account to:
1. any guarantee period;
2. the Transamerica VIF Money Market Sub-Account; or
3. any variable sub-account identified by Transamerica and investing in a
portfolio of fixed income investments.
We reserve the right to modify the limitations on transfers to and from the
fixed account and to defer transfers from the fixed account for up to six months
from the date of request.
Special Dollar Cost Averaging Option
(May not be available in all states. See contract for availability of the fixed
account options.)
When you apply for the contract, you may elect to allocate the entire initial
purchase payment to either the six or twelve month special Dollar Cost Averaging
account of the fixed account. The initial purchase payment will be credited with
interest at a guaranteed fixed rate. Amounts will then be transferred from the
special Dollar Cost Averaging account to the sub-accounts and/or general account
options pro rata on a monthly basis for six or twelve months (depending on the
option you select) in the allocations you specified when you applied for the
contract. The four transfers per year limit does not apply to the special Dollar
Cost Averaging option.
Amounts from the sub-accounts and/or general account options may not be
transferred into the special Dollar Cost Averaging accounts. In addition, if you
request a transfer (other than a Dollar Cost Averaging transfer) or a withdrawal
from a special Dollar Cost Averaging account, any amounts remaining in the
special account will be transferred to the sub-accounts and/or general account
options according to your original allocation instructions. The special Dollar
Cost Averaging option will end and cannot be reelected.
THE GUARANTEE PERIOD ACCOUNT
The guarantee period account provides guaranteed fixed rates of interest
compounded annually for specific guarantee periods. Amounts allocated to the
guarantee period account will be credited with interest of no less than 3% per
year. Amounts withdrawn from a guarantee period before the end of its guarantee
period will be subject to an interest adjustment, as explained below.
Each guarantee period offers a specified duration with a corresponding
guaranteed interest rate. Currently we are offering three, five and seven year
guarantee periods but these may change at any time.
The owner bears the risk that, after the initial guarantee period, Transamerica
will not credit interest in excess of 3% per year to amounts allocated to the
guarantee period account.
Each amount allocated or transferred to the guarantee period account will
establish a new guarantee period of a duration selected by the owner from among
those then being offered by us. Every guarantee period we offer will have a
duration of at least one year. The minimum amount that may be allocated or
transferred to a guarantee period is $1,000. Purchase payments allocated to a
guarantee period will be credited on the date the payment is received at our
service center. Any amount transferred from another guarantee period or from a
variable sub-account to a guarantee period will establish a new guarantee period
as of the effective date of the transfer. The guarantee period account and/or
the fixed account may not be available in all states.
Guarantee Period
Each guarantee period will have its own guaranteed interest rate and expiration
date. The guaranteed interest rate applicable to a guarantee period will depend
on the date the guarantee period is established, the duration you choose and the
class of that guarantee period. A guarantee period chosen may not extend beyond
the annuity date.
We reserve the right to limit the maximum number of guarantee periods that may
be in effect at any one time.
We will establish effective annual rates of interest for each guarantee period.
The effective annual rate of interest we establish for a guarantee period will
remain in effect for the duration of the guarantee period. Interest will be
credited to a guarantee period based on its daily balance at a daily rate which
is equivalent to the guaranteed interest rate applicable to that guarantee
period for amounts held during the entire guarantee period.
Amounts withdrawn or transferred from a guarantee period before its expiration
date will be subject to an interest adjustment as described below. In no event
will the effective annual rate of interest applicable to a guarantee period be
less than 3% per year.
Interest Adjustment
If any amount is withdrawn or transferred from a guarantee period before its
expiration date, excluding withdrawals for the purpose of paying the death
benefit, the amount withdrawn or transferred will be subject to an interest
adjustment. The interest adjustment reflects the impact that changing interest
rates have on the value of money invested at a fixed interest rate. The interest
adjustment is computed by multiplying the amount withdrawn or transferred by the
following factor:
[(1 + I) divided by (1 + J + 0.005)]N/12 -1 where:
I is the guaranteed interest rate in effect;
J is the current interest rate available for a period equal to the number
of years remaining in the guarantee period at the time of withdrawal or
transfer; fractional years are rounded up to the next full year; and
N is the number of full months remaining in the term at the time the
withdrawal or transfer request is processed
In general, the interest adjustment will operate to decrease the value upon
withdrawal or transfer when the guaranteed interest rate in effect for that
allocation is lower than the current interest rate, as of the date of the
transaction, that would apply for a guarantee period equal to the number of full
years remaining in the guarantee period as of that date. For purposes of
determining the interest adjustment, if we do not offer a guarantee period of
that duration, the applicable current interest rate will be determined by linear
interpolation between current interest rates for the two time periods closest to
the duration remaining that are available. If the current interest rate thus
determined plus 1/2 of one percent is greater than the guaranteed interest rate,
the interest adjustment will be negative and amount withdrawn or transferred
will be decreased. However, the value will never be decreased below the initial
allocation plus daily interest at 3% interest per year. There are no positive
interest adjustments.
Expiration of a Guarantee Period
At least 45 days, but not more than 60 days, before the expiration date of a
guarantee period, we will notify you as to the options available when a
guarantee period expires. You may elect one of the following:
1. transfer the amount held in that guarantee period to a new guarantee period
from among those being offered by us at such time; or
2. transfer the amount held in that guaranteed period to one or more variable
sub-accounts or to another general account option then available.
We must receive your notice electing one of these at our service center by the
expiration date of the guarantee period. If such election has not been received
by us at our service center, the amount held in that guarantee period will
remain in the guaranteed period account. A new guarantee period of the same
duration as the expiring guarantee period, if offered, will automatically be
established by us with a new guaranteed interest rate declared by us for that
guarantee period. The new guarantee period will start on the day following the
expiration date of the previous guarantee period.
If we are not currently offering a guarantee period having the same duration as
the expiring guarantee period, the new guarantee period will be the next longer
duration, or if we are not offering a guarantee period longer than the duration
of the expiring guarantee period, the next shorter duration. However, no
guarantee period can extend beyond the annuity date.
If the amount held in an expiring guarantee period is less than $1,000, we
reserves the right to transfer such amount to the money market variable
sub-account.
<PAGE>
Appendix B
Example of Variable Accumulation Unit Value Calculations
Suppose the net asset value per share of a portfolio at the end of the current
valuation period is $20.15; at the end of the immediately preceding valuation
period it was $20.10; the valuation period is one day; and no dividends or
distributions caused the portfolio to go "ex-dividend" during the current
valuation period. $20.15 divided by $20.10 is 1.002488.
Subtracting the one day risk factor for mortality and expense risk charge and
the administrative expense charge of .00367% (the daily equivalent of the
current charge of 1.35% on an annual basis) gives a net investment factor of
1.00245.
If the value of the variable accumulation unit for the immediately preceding
valuation period had been 15.500000, the value for the current valuation period
would be 15.53798 (15.5 x 1.00245).
Example of Variable Annuity Unit Value Calculations
Suppose the circumstances of the first example exist, and the value of a
variable annuity unit for the immediately preceding valuation period had been
13.500000.
If the first variable annuity payment is determined by using an annuity payment
based on an assumed interest rate of 4% per year, the value of the variable
annuity unit for the current valuation period would be 13.53163 (13.5 x 1.00245
(the net investment factor) x 0.999893).
0.999893 is the factor, for a one day valuation period, that neutralizes the
assumed rate of four percent (4%) per year used to establish the variable
annuity rates found in the contract.
Example of Variable Annuity Payment Calculations
Suppose that the account is currently credited with 3,200.000000 variable
accumulation units of a particular variable sub-account.
Also suppose that the variable accumulation unit value and the variable annuity
unit value for the particular variable sub-account for the valuation period
which ends immediately preceding the first day of the month is 15.500000 and
13.500000 respectively, and that the variable annuity rate for the age and
elected is $5.73 per $1,000.
Then the first variable annuity payment would be:
3,200 x 15.5 x 5.73 divided by 1,000 = $284.21,
and the number of variable annuity units credited for future payments would be:
284.21 divided by 13.5 = 21.052444.
For the second monthly payment, suppose that the variable annuity unit value on
the 10th day of the second month is 13.565712. Then the second variable annuity
payment would be
$285.59 (21.052444 x 13.565712).
<PAGE>
Appendix C
CONDENSED FINANCIAL INFORMATION
Certain of the following condensed financial information is derived from the
financial statements of the variable account. You should read the data in
conjunction with the financial statements, related notes, and other financial
information included in the Statement of Additional Information.
The following table sets forth certain information regarding the sub-accounts
for the period from January 1, 1998, the inception of the sub-accounts through
December 31, 1998. The variable account received its first deposits on January
12, 1998. The variable accumulation unit values and the number of variable
accumulation units outstanding for each sub-account for the periods shown are as
follows:
<PAGE>
<TABLE>
<CAPTION>
Year Ending December 31, 1998
Alger American Alliance VPF Alliance VPF Dreyfus VIF Cap Dreyfus VIF
Income & Growth Growth & Income Premier Growth Appreciation Growth Small Cap
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
<S> <C> <C> <C> <C> <C>
at Beginning of Period $10.00 $10.00 $10.00 $10.00 $10.00
Accumulation Unit Value
at End of Period $13.12 $11.88 $14.46 $12.73 $9.57
Number of Accumulation
Units Outstanding
at End of Period 309,748.942 339,540.067 427,648.138 376,620.359 275,526.474
Janus Aspen Janus Aspen MFS MFS MFS
Balanced Worldwide Growth Emerging Growth Growth & Income Research
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
at Beginning of Period$10.00 $10.00 $10.00 $10.00 $10.00
Accumulation Unit Value
at End of Period $13.24 $12.65 $13.21 $12.06 $12.15
Number of Accumulation
Units Outstanding
at End of Period 368,928.321 450,342.300 298,213.933 342,844.524 151,312.906
MSDW MSDW MSDW UF OCC Accumulation OCC Accumulation
UF Fixed Income UF High Yield International Magnum Trust Managed Trust Small Cap
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
at Beginning of Period$10.00 $10.00 $10.00 $10.00 $10.00
Accumulation Unit Value
at End of Period $10.60 $10.31 $10.71 $10.54 $8.97
Number of Accumulation
Units Outstanding
at End of Period 259,236.465 272,870.757 94,555.328 199,167.982 47,897.168
Transamerica Transamerica
VIF Growth VIF Money Market
Sub-Account Sub-Account
Accumulation Unit Value
at Beginning of Period$10.00 $1.00
Accumulation Unit Value
at End of Period $14.12 $1.04
Number of Accumulation
Units Outstanding
at End of Period 1,424,841.423 4,129,893.964
<PAGE>
</TABLE>
Appendix D
DEFINITIONS
Account Value: The sum of the variable accumulated value and the general account
options accumulated value.
Annuity Date: The date on which the annuitization phase of the contract begins.
Cash Surrender Value: The amount we will pay to the owner if the contract is
surrendered on or before the annuity date. The cash surrender value is equal to:
the account value; less any account fee, interest adjustment, contingent
deferred sales load, and premium tax charges.
Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued under it.
Contingent Deferred Sales Load: A charge equal to a percentage of purchase
payments withdrawn from the contract that are less than seven years old. See
Contingent Deferred Sales Load/Surrender Charge on page 30 for the specific
percentages.
Contract Anniversary: The anniversary of the contract effective date each year.
Contract Effective Date: The effective date of the contract as shown in the
contract.
Contract Year: A 12-month period starting on the contract effective date and
ending with the day before the contract anniversary, and each 12-month period
thereafter.
Fixed Account: An account which credits a rate of interest for a period of at
least twelve months for each allocation or transfer.
General Account: The assets of Transamerica that are not allocated to a separate
account.
General Account Options: The fixed account and the guarantee period account
offered by us to which the owner may allocate purchase payments and transfers.
General Account Options Accumulated Value: The total dollar value of all amounts
the owner allocates or transfers to any general account options; plus interest
credited; less any amounts withdrawn, applicable fees or premium tax charges,
and/or transfers out to the variable account before the annuity date.
Guaranteed Interest Rate: The annual effective rate of interest after daily
compounding credited to a guarantee period.
Guarantee Period: The number of years that a guaranteed rate of interest will be
credited to a guarantee period.
Guarantee Period Account: An account which credits a guaranteed rate of interest
for a specified guarantee period. There may be several guarantee periods offered
under the guarantee period account, each with a different guaranteed rate of
interest.
Living Benefits Rider: Also called a "Waiver of Contingent Deferred Sales Load"
rider in some contracts, it provides benefits described on page 32.
Portfolio: The investment portfolio underlying each variable sub-account in
which we will invest any
amounts the owner allocates to that variable sub-account.
Service Center: Transamerica's Annuity Service Center, at P.O. Box 31848,
Charlotte, North Carolina 28231-1848, telephone 800-258-4260.
Status, Qualified and Non-Qualified: The contract has a qualified status if it
is issued in connection with a retirement plan or program. Otherwise, the status
is non-qualified.
Surrender Charge: See Contingent Deferred Sales Load.
Valuation Day: Any day the New York Stock Exchange is open. To determine the
value of an asset on a day that is not a valuation day, we will use the value of
that asset as of the end of the next valuation day.
Valuation Period: The time interval between the closing, which is generally 4:00
p.m. Eastern Time of the New York Stock Exchange on consecutive valuation days.
Variable Account: Separate Account VA-6, a separate account established and
maintained by Transamerica for the investment of a portion of its assets
pursuant to Section 58-7-95 of the North Carolina Insurance Code.
Variable Accumulation Unit: A unit of measure used to determine the variable
accumulated value before the annuity date. The value of a variable accumulation
unit varies with each variable sub-account.
Variable Accumulated Value: The total dollar value of all variable accumulation
units under the contract before the annuity date.
Variable Sub-Account(s): One or more divisions of the variable account which
invests solely in shares of one of the underlying portfolios.
<PAGE>
Appendix E
Transamerica Life Insurance and Annuity Company
DISCLOSURE STATEMENT
for Individual Retirement Annuities
The following information is being provided to you, the owner, in accordance
with the requirements of the Internal Revenue Service (IRS). This Disclosure
Statement contains information about opening and maintaining an Individual
Retirement Account or Annuity (IRA), and summarizes some of the financial and
tax consequences of establishing an IRA.
Part I of this Disclosure Statement discusses Traditional IRAs, while Part II
addresses Roth IRAs. Because the tax consequences of the two categories of IRAs
differ significantly, it is important that you review the correct part of this
Disclosure Statement to learn about your particular IRA. This Disclosure
Statement does not discuss Education IRAs or SIMPLE-IRAs, except as necessary in
the context of discussing other types of IRAs.
Your Transamerica Life Insurance and Annuity Company's Individual Retirement
Annuity, also referred to as a Transamerica Life IRA Contract has been approved
as to form by the IRS. In addition, we are using an IRA and a Roth IRA
Endorsement based on the IRS-approved text. Please note that IRS approval
applies only to the form of the contract and does not represent a determination
of the merits of such IRA contract.
It may be necessary for us to amend your Transamerica Life IRA or Roth IRA
Contract in order for us to obtain or maintain IRS approval of its tax
qualification. In addition, laws and regulations adopted in the future may
require changes to your contract in order to preserve its status as an IRA. We
will send you a copy of any such amendment.
No contribution to a Transamerica Life IRA will be accepted under a SIMPLE plan
established by any employer pursuant to Internal Revenue Code Section 408(p). No
transfer or rollover of funds attributable to contributions made by an employer
to your SIMPLE IRA under the employer's SIMPLE plan may be transferred or rolled
over to your Transamerica Life IRA before the expiration of the two year period
beginning on the date you first participated in the employer's SIMPLE plan. In
addition, depending on the annuity contract you purchased, contributory IRAs may
or may not be available.
This Disclosure Statement includes the non-technical explanation of some of the
changes made by the Tax Reform Act of 1986 applicable to IRAs and more recent
changes made by the Small Business Job Protection Act of 1996, the Health
Insurance Portability and Accountability Act of 1996, the Tax Relief Act of 1997
and the IRS Restructuring and Reform Act of 1998.
The information provided applies to contributions made and distributions
received after December 31, 1986, and reflects the relevant provisions of the
Code as in effect on January 1, 1999. This Disclosure Statement is not intended
to constitute tax advice, and you should consult a tax professional if you have
questions about your own circumstances.
Revocation of Your IRA or Roth IRA
You have the right to revoke your Traditional IRA or Roth IRA issued by us
during the seven calendar day period following its establishment. The
establishment of your Traditional IRA or Roth IRA contract will be the contract
effective date. This seven day calendar period may or may not coincide with the
free look period of your contract.
In order to revoke your Traditional IRA or Roth IRA, you must notify us in
writing and you must mail or deliver your revocation to us postage prepaid, at:
401 North Tryon Street, Charlotte, NC 28202. The date of the postmark, or the
date of certification or registration if sent by certified or registered mail,
will be considered your revocation date. If you revoke your Traditional IRA or
Roth IRA during the seven day period, an amount equal to your premium will be
returned to you without any adjustment.
Definitions
Code - Internal Revenue Code of 1986, as amended, and regulations issued
thereunder. Contributions - Purchase payments paid to your contract.
Contract - The annuity policy, certificate or contract which you purchased.
Compensation - For purposes of determining allowable contributions, the term
compensation includes all earned income, including net earnings from
self-employment and alimony or separate maintenance payments received under a
decree of divorce or separate maintenance and includable in your gross income,
but does not include deferred compensation or any amount received as a pension
or annuity.
Regular Contributions - In General
As is more fully discussed below, for 1998 and later years, the maximum total
amount that you may contribute for any tax year to your regular IRAs and your
regular Roth IRAs combined is $2,000, or if less, your compensation for that
year. Once you attain age 70 1/2, this limit is reduced to zero only for your
regular IRAs, not for your Roth IRAs, but the separate limit on Roth IRA
contributions can be reduced to zero for taxpayers with adjusted gross income,
also referred to as AGI, above certain levels, as described below in Part II,
Section 1. While your Roth IRA contributions are never deductible, your regular
IRA contributions are fully deductible, unless you, or your spouse, is an active
participant in some form of tax-qualified retirement plan for the tax year. In
the latter case, any deductible portion of your regular IRA contributions for
each year is subject to the limits that are described below in Part I, Section
2, and any remaining regular IRA contributions for that year must be reported to
the IRS as nondeductible IRA contributions, along with your Roth IRA
contributions.
IRA PART I: TRADITIONAL IRAs
The rules that apply to a Traditional Individual Retirement Account or Annuity,
which is referred to in this Disclosure Statement simply as an "IRA" or as a
"Traditional IRA" and which includes a regular or Spousal IRA and a rollover
IRA, generally also apply to IRAs under Simplified Employee Pension plans or
SEP-IRAs, unless specific rules for SEP-IRAs are stated.
1. Contributions
(a) Regular IRA. Regular IRA contributions must be in cash and are subject to
the limits described above. Such contributions are also subject to the minimum
amount under the Transamerica IRA contract. In addition, any of your regular
contributions to an IRA for a tax year must be made by the due date, not
including extensions, for your federal tax return for that tax year. See also
Part II, Section 4 below about recharacterizing IRA and Roth IRA contributions
by such date.
(b) Spousal IRA. If you and your spouse file a joint federal income tax return
for the taxable year and if your spouse's compensation, if any, includable in
gross income for the year is less than the compensation includable in your gross
income for the year, you and your spouse may each establish your own separate
regular IRA, and Roth IRA, and may make contributions to such IRAs for your
spouse that are not limited by your spouse's lower amount of compensation.
Instead, the limit for the total contribution to spousal IRAs that can be made
by you or your spouse for the tax year is:
1. $2,000; or
2. if less, the total combined compensation for both you and your spouse
reduced by any deductible IRA contributions and any Roth IRA contributions
for such year.
As with any regular IRA contributions, those for your spouse cannot be made for
any tax year in which your spouse has attained age 70 1/2, must be in cash, and
must be made by the due date, not including extensions, for your federal income
tax return for that tax year.
(c) Rollover IRA. Rollover contributions to a Traditional IRA are unlimited in
dollar amount. These can include rollover contributions of eligible
distributions received by you from another Traditional IRA or tax-qualified
retirement plan. Generally, any distribution from a tax-qualified retirement
plans, such as a pension or profit sharing plan, Code Section 401(k) plan, H.R.
10 or Keogh plan, or a Traditional IRA can be rolled over to a Traditional IRA
unless it is a required minimum distribution as discussed below in Part I,
Section 4(a) or it is part of a series of payments to be paid to you over your
life, life expectancy or a period of at least 10 years. In addition,
distributions of "after-tax" plan contributions, i.e., amounts which are not
subject to federal income tax when distributed from a tax-qualified retirement
plan, are not eligible to be rolled over to an IRA. If a distribution from a
tax-qualified plan or a Traditional IRA is paid to you and you want to roll over
all or part of the eligible distributed amount to a Transamerica Life
Traditional IRA, the rollover must be accomplished within 60 days of the date
you receive the amount to be rolled over. However, you may roll over any amount
from one Traditional IRA into another Traditional IRA only once in any 365-day
period.
A timely rollover of an eligible distributed amount that has been paid to you
directly will prevent its being taxable to you at the time of distribution; that
is, none of it will be includable in your gross income until you withdraw some
amount from your rollover IRA. However, any such distribution directly to you
from a tax-qualified retirement plan is generally subject to a mandatory 20%
withholding tax.
By contrast, a direct transfer from a tax-qualified retirement plan to a
Traditional IRA is considered a "direct" rollover and is not subject to any
mandatory withholding tax, or other federal income tax, upon the direct
transfer. If you elect to make such a "direct" rollover from a tax-qualified
plan to a Transamerica Life Traditional IRA, the transferred amount will be
deposited directly into your rollover IRA.
Strict limitations apply to rollovers, and you should seek competent tax advice
in order to comply with all the rules governing rollovers.
(d) Direct Transfers from another Traditional IRA. You may make an initial or
subsequent contribution to your Transamerica Life Traditional IRA by directing
the fiduciary or issuer of any of your existing IRAs to make a direct transfer
of all or part of such IRAs in cash to your Transamerica Life Traditional IRA.
Such a direct transfer between Traditional IRAs is not considered a rollover ,
e.g., for purposes of the 1-year waiting period or withholding.
(e) Simplified Employee Pension Plan, or SEP-IRA. If an IRA is established that
meets the requirements of a SEP-IRA, generally your employer may contribute an
amount not to exceed the lesser of 15% of your includable compensation ($160,000
for 1999, adjusted for inflation thereafter) or $30,000, even after you attain
age 70 1/2. The amount of such contribution is not includable in your income for
federal income tax purposes. In the case of a SEP-IRA that has a grandfathered
qualifying form of salary reduction, referred to as a SARSEP, that was
established by an employer before 1997, generally any employee, including a
self-employed individual, who:
1. has worked for the employer for 3 of the last 5 preceding tax years;
2. is at least age 21; and
3. has received from the employer compensation of at least $400 for the
current tax year, adjusted for inflation after 1999.
is eligible to make a before tax salary reduction contribution to the SARSEP for
the current tax year of up to $10,000, adjusted for inflation after 1998,
subject to the overall limits for SEP-IRA contributions.
Your employer is not required to make a SEP-IRA contribution in any year nor
make the same percentage contribution each year. But if contributions are made,
they must be made to the SEP-IRA for all eligible employees and must not
discriminate in favor of highly compensated employees. If these rules are not
met, any SEP-IRA contributions by the employer could be treated as taxable to
the employees and could result in adverse tax consequences to the participating
employee. For further details about SARSEPs and SEP-IRAs, e.g., for computing
contribution limits for self-employed individuals, see IRS Publication 590, as
indicated below.
(f) Responsibility of the Owner. Contributions, rollovers, or transfers to any
IRA must be made in accordance with the appropriate sections of the Code. It is
your full and sole responsibility to determine the tax deductibility of any
contribution to your Traditional IRA, and to make such contributions in
accordance with the Code. Transamerica does not provide tax advice, and assumes
no liability for the tax consequences of any contribution to your Transamerica
Life Traditional IRA.
2. Deductibility of Contributions for a Regular IRA
(a) General Rules. The deductible portion of the contributions made to the
regular IRAs for you, or your spouse, for a tax year depends on whether you, or
your spouse, is an "active participant" in some type of a tax-qualified
retirement plan for such year, as described in Section 2(b) immediately below.
If you and your spouse file a joint return for a tax year and neither of you is
an active participant for such year, then the permissible contributions to the
regular IRAs for each of you are fully deductible up to $2,000 each, i.e., your
combined deductible IRA contribution limit for the tax year could be $4,000.
Similarly, if you are not married, or treated as such, for the tax year and you
are not an active participant for such year, the permissible contributions to
your regular IRAs for the tax year are fully deductible up to $2,000. For
instance, if you and your spouse file separate returns for the tax year and you
did not live together at any time during such tax year, then you are treated as
unmarried for such year, and if you were not an active participant for the tax
year, then your deductible limit for your regular IRA contribution is $2,000,
even if your spouse was an active participant for such year.
If you are an active participant for the tax year, then your $2,000 limit is
subject to a phase-out rule if your AGI for such year exceeds a Threshold Level,
depending on your tax filing status and the calendar year. If, however, you are
not an active participant for the tax year but your spouse is, then your $2,000
limit is subject to the phase-out rule only if your AGI exceeds a higher
Threshold Level. See Part I, Section 2(c), below.
(b) Active Participant. You are an "active participant" for a year if you
participate in some type of tax-qualified retirement plan. For example, if you
participate in a qualified pension or profit sharing plan, a Code Section 401(k)
plan, certain government plans, a tax-sheltered arrangement under Code Section
403, a SIMPLE plan or a SEP-IRA plan, you are considered to be an active
participant. Your Form W-2 for the year should indicate your participation
status.
(c) Adjusted Gross Income, also referred to as AGI. If you are an active
participant, you must look at your AGI for the year, or if you and your spouse
file a joint tax return, you use your combined AGI, to determine whether you can
make a deductible IRA contribution for that taxable year. The instructions for
your tax return will show you how to calculate your AGI for this purpose. If you
are at or below a certain AGI level, called the Threshold Level, you are treated
as if you were not an active participant and you can make a deductible
contribution under the same rules as a person who is not an active participant.
If you are an active participant for the tax year, then your Threshold Level
depends upon whether you are a married taxpayer filing a joint tax return, an
unmarried taxpayer, or a married taxpayer filing a separate tax return. If you
are a married taxpayer but file a separate tax return, the Threshold Level is
$0. If you are a married taxpayer filing a joint tax return, or an unmarried
taxpayer, your Threshold Level depends upon the taxable year, and can be
determined using the appropriate table below:
<PAGE>
Married Filing Jointly Unmarried
Taxable Threshold Taxable Threshold
Year Level Year Level
1998 $50,000 1998 $30,000
1999 $51,000 1999 $31,000
2000 $52,000 2000 $32,000
2001 $53,000 2001 $33,000
2002 $54,000 2002 $34,000
2003 $60,000 2003 $40,000
2004 $65,000 2004 $45,000
2005 $70,000 2005 and
2006 $75,000 thereafter $50,000
2007 and
thereafter $80,000
<PAGE>
68
69
Beginning in 1998, if you are not an active participant for the tax year but
your spouse is, and you are not treated as unmarried for filing purposes, then
your Threshold Level is $150,000.
If your AGI is less than $10,000 above your Threshold Level, or $20,000 for
married taxpayers filing jointly for the taxable year beginning on or after
January 1, 2007, you will still be able to make a deductible contribution, but
it will be limited in amount. The amount by which your AGI exceeds your
Threshold Level is called your Excess AGI. The Maximum Allowable Deduction is
$2,000, even for Spousal IRAs. You can calculate your Deduction Limit as
follows:
10,000 - Excess AGI x Maximum Allowable Deduction = Deduction Limit 10,000
- -------------------
For taxable years beginning on or after January 1, 2007, married taxpayers
filing jointly should substitute 20,000 for 10,000 in the numerator and
denominator of the above equation.
You must round up any computation of the Deduction Limit to the next highest $10
level, that is, to the next highest number which ends in zero. For example, if
the result is $1,525, you must round it up to $1,530. If the final result is
below $200 but above zero, your Deduction Limit is $200. Your Deduction Limit
cannot in any event exceed 100% of your compensation.
3. Nondeductible Contributions to Regular IRAs
The amounts of your regular IRA contributions which are not deductible will be
nondeductible contributions to such IRAs. You may also choose to make a
nondeductible contribution to your regular IRA, even if you could have deducted
part or all of the contribution. Interest or other earnings on your regular IRA
contributions, whether from deductible or nondeductible contributions, will not
be taxed until taken out of your IRA and distributed to you.
If you make a nondeductible contribution to an IRA, you must report the amount
of the nondeductible contribution to the IRS as a part of your tax return for
the year, e.g., on Form 8606.
4. Distributions
(a) Required Minimum Distributions, or simply, RMD. Distributions from your
Traditional IRAs must be made or begin no later than April 1 of the calendar
year following the calendar year in which you attain age 70 1/2, the required
beginning date. You may take RMDs from any Traditional IRA you maintain, but not
from any Roth IRA, as long as:
a) distributions begin when required;
b) distributions are made at least once a year; and
c) the amount to be distributed is not less than the minimum required under
current federal tax law.
If you own more than one Traditional IRA, you can choose whether to take your
RMD from one Traditional IRA or a combination of your Traditional IRAs. A
distribution may be made at once in a lump sum, as qualifying partial
withdrawals or as qualifying settlement option payments. Qualifying partial
withdrawals and settlement option payments must be made in equal or
substantially equal amounts over:
a) your life or the joint lives of you and your beneficiary; or
b) a period not exceeding your life expectancy, as redetermined annually under
IRS tables in the income tax regulations, or the joint life expectancy of
you and your beneficiary, as redetermined annually, if that beneficiary is
your spouse.
Also, special rules may apply if your designated beneficiary, other than your
spouse, is more than ten years younger than you.
If qualifying settlement option payments start before the April 1 following the
year you turn age 70 1/2, then the annuity date of such settlement option
payments will be treated as the required beginning date for purposes of the RMD
provisions, above, and the death benefit provisions, below.
If you die before the entire interest in your Traditional IRAs is distributed to
you, but after your required beginning date, the entire interest in your
Traditional IRAs must be distributed to your beneficiaries at least as rapidly
as under the method in effect at your death. If you die before your required
beginning date and if you have a designated beneficiary, distributions to your
designated beneficiary can be made in substantially equal installments over the
life or life expectancy of the designated beneficiary, beginning by December 31
of the calendar year that is one year after the year of your death. Otherwise,
if you die before your required beginning date and your surviving spouse is not
your designated beneficiary, distributions must be completed by December 31 of
the calendar year that is five years after the year of your death.
If your designated beneficiary is your surviving spouse, and you die before your
required beginning date, your surviving spouse can become the new
owner/annuitant and can continue the Transamerica Life Traditional IRA on the
same basis as before your death. If your surviving spouse does not wish to
continue the contract as his or her IRA, he or she may elect to receive the
death benefit in the form of qualifying settlement option payments in order to
avoid the 5-year rule. Such payments must be made in substantially equal amounts
over your spouse's life or a period not extending beyond his or her life
expectancy. Your surviving spouse must elect this option and begin receiving
payments no later than the later of the following dates:
a) December 31 of the year following the year you died; or
b) December 31 of the year in which you would have reached the required
beginning date if you had not died.
Either you or, if applicable, your beneficiary, is responsible for assuring that
the RMD is taken in a timely manner and that the correct amount is distributed.
(b) Taxation of IRA Distributions. Because nondeductible Traditional IRA
contributions are made using income which has already been taxed, that is, they
are not deductible contributions, the portion of the Traditional IRA
distributions consisting of nondeductible contributions will not be taxed again
when received by you. If you make any nondeductible contributions to your
Traditional IRAs, each distribution from any of your Traditional IRAs will
consist of a nontaxable portion, return of nondeductible contributions, and a
taxable portion, return of deductible contributions, if any, and earnings.
Thus, if you receive a distribution from any of your Traditional IRAs and you
previously made deductible and nondeductible contributions to such IRAs, you may
not take a Traditional IRA distribution which is entirely tax-free. The
following formula is used to determine the nontaxable portion of your
distributions for a taxable year.
Remaining nondeductible contributions
Divided by
Year-end total adjusted Traditional IRA balances
Multiplied by
Total distributions
for the year
Equals:
Nontaxable distributions
for the year
To figure the year-end total adjusted Traditional IRA balance, you must treat
all of your Traditional IRAs as a single Traditional IRA. This includes all
regular IRAs, as well as SEP-IRAs, SIMPLE IRAs and Rollover IRAs, but not Roth
IRAs. You also add back to your year-end total Traditional IRA balances,
specifically the distributions taken during the year from your Traditional IRAs.
Please refer to IRS Publication 590, Individual Retirement Arrangements for
instructions, including worksheets, that can assist you in these calculations.
Transamerica Life Insurance and Annuity Company will report all distributions
from your Transamerica Traditional IRA to the IRS as fully taxable income to
you.
Even if you withdraw all of the assets in your Traditional IRAs in a lump sum,
you will not be entitled to use any form of lump sum treatment or income
averaging to reduce the federal income tax on your distribution. Also, no
portion of your distribution qualifies as a capital gain. Moreover, any
distribution made before you reach age 59 1/2, may be subject to a 10% penalty
tax on early distributions, as indicated below.
(c) Withholding. Unless you elect not to have withholding apply, federal income
tax will be withheld from your Traditional IRA distributions. If you receive
distributions under a settlement option, tax will be withheld in the same manner
as taxes withheld on wages, calculated as if you were married and claim three
withholding allowances. If you are receiving any other type of distribution, tax
will be withheld in the amount of 10% of the distribution. If payments are
delivered to foreign countries, federal income, tax will generally be withheld
at a 10% rate unless you certify to Transamerica that you are not a U. S.
citizen residing abroad or a tax avoidance expatriate as defined in Code Section
877. Such certification may result in mandatory withholding of federal income
taxes at a different rate.
5. Penalty Taxes
(a) Excess Contributions. If at the end of any taxable year the total regular
IRA contributions you made to your Traditional IRAs and your Roth IRAs, other
than rollovers or transfers, exceed the maximum allowable deductible and
nondeductible contributions for that year, the excess contribution amount will
be subject to a nondeductible 6% excise penalty tax. Such penalty tax cannot
exceed 6% of the value of your IRAs at the end of such year.
However, if you withdraw the excess contribution, plus any earnings on it,
before the due date for filing your federal income tax return, including
extensions, for the taxable year in which you made the excess contribution, the
excess contribution will not be subject to the 6% penalty tax. The amount of the
excess contribution withdrawn will not be considered an early distribution, nor
otherwise be includible in your gross income if you have not taken a deduction
for the excess amount.
However, the earnings withdrawn will be taxable income to you and may be subject
to the 10% penalty tax on early distributions. Alternatively, excess
contributions for one year may be withdrawn in a later year or may be carried
forward as regular IRA contributions in the following year to the extent that
the excess, when aggregated with your regular IRA contributions, if any, for the
subsequent year, does not exceed the maximum allowable deductible and
nondeductible amount for that year. The 6% excise tax will be imposed on excess
contributions in each subsequent year they are neither returned to you nor
applied as permissible regular IRA contributions for such year.
(b) Early Distributions. Since the purpose of an IRA is to accumulate funds for
retirement, your receipt or use of any portion of your IRA before you attain age
59 1/2 constitutes an early distribution subject to a 10% penalty tax unless the
distribution occurs as a result of your death or disability or is part of a
series of substantially equal payments made over your life expectancy or the
joint life expectancies of you and your beneficiary, as determined from IRS
tables in the income tax regulations.
Also, the 10% penalty tax will not apply if distributions are used to pay for
medical expenses in excess of 7.5% of your AGI or if distributions are used to
pay for health insurance premiums for you, your spouse and/or your dependents if
you are an unemployed individual who is receiving unemployment compensation
under federal or state programs for at least 12 consecutive weeks. Effective for
distributions made in 1998 or later, the 10% penalty tax also will not apply to
an early distribution made to pay for certain qualifying first-time homebuyer
expenses of you or certain family members, or for certain qualifying higher
education expenses for you or certain family members.
First-time homebuyer expenses must be paid within 120 days of the distribution
from the IRA and include up to $10,000 of the costs of acquiring, constructing,
or reconstructing a principal residence, including any usual or reasonable
settlement, financing or other closing costs. Higher education expenses include
tuition, fees, books, supplies, and equipment required for enrollment,
attendance, and room and board at a post-secondary educational institution. The
amount of an early distribution, excluding any nondeductible contribution
included therein, is includable in your gross income and may be subject to the
10% penalty tax unless you transfer it to another IRA as a qualifying rollover
contribution.
(c) Failure To Satisfy RMD. If the RMD rules described above in Part I, Section
4(a) apply to you and if the amount distributed during a calendar year is less
than the minimum amount required to be distributed, you will be subject to a
penalty tax equal to 50% of the excess of the amount required to be distributed
over the amount actually distributed.
(d) Policy Loans and Prohibited Transactions. If you or any beneficiary engage
in any prohibited transaction, such as any sale, exchange or leasing of any
property between you and the Traditional IRA, or any interference with the
independent status of such IRA, the Traditional IRA will lose its tax exemption
and be treated as having been distributed to you. The value of the entire
Traditional IRA, excluding any nondeductible contributions included therein,
will be includable in your gross income; and, if at the time of the prohibited
transaction you are under age 59 1/2, you may also be subject to the 10% penalty
tax on early distributions, as described above in Part I, Section 5(b).
If you borrow from or pledge your Traditional IRA, or your benefits under the
contract, as security for a loan, the portion borrowed or pledged as security
will cease to be tax-qualified, the value of that portion will be treated as
distributed to you, and you will have to include the value of the portion
borrowed or pledged as security in your income that year for federal tax
purposes. You may also be subject to the 10% penalty tax on early distributions.
(e) Overstatement or Understatement of Nondeductible Contributions. If you
overstate your nondeductible Traditional IRA contributions on your federal
income tax return, without reasonable cause, you may be subject to a reporting
penalty. Such a penalty also applies for failure to file any form required by
the IRS to report nondeductible contributions. These penalties are in addition
to any ordinary income or penalty taxes, interest, and penalties for which you
may be liable if you underreport income upon receiving a distribution from your
Traditional IRA. See Part I, Section 4(b) above for the tax treatment of such
distributions.
IRA PART II: ROTH IRAs
1. Contributions
(a) Regular Roth IRA. You may make contributions to a regular Roth IRA in any
amount up to the contribution limits described in Part II, Section 3, below.
Such contributions are also subject to the minimum amount under the Transamerica
Life Roth IRA contract. Such contribution must be in cash. Your contribution for
a tax year must be made by the due date, not including extensions, for your
federal income tax return for that tax year. Unlike Traditional IRAs, you may
continue making Roth IRA contributions after reaching age 70 1/2 to the extent
that your AGI does not exceed the levels described below.
(b) Spousal Roth IRA. If you and your spouse file a joint federal income tax
return for the taxable year and if your spouse's compensation, if any,
includable in gross income for the year is less than the compensation includable
in your gross income for the year, you and your spouse may each establish your
own individual Roth IRA and may make contributions to those Roth IRAs in
accordance with the rules and limits for contributions contained in the Code,
which are described in Part II, Section 3, below. Such contributions must be in
cash. Your contribution to a Spousal Roth IRA for a tax year must be made by the
due date, not including extensions, for your federal income tax return for that
tax year.
(c) Rollover Roth IRA. You may make contributions to a Rollover Roth IRA within
60 days after receiving a distribution from an existing Roth IRA, subject to
certain limitations discussed in Part II, Section 3, below.
(d) Transfer Roth IRA. You may make an initial or subsequent contribution to
your Transamerica Life Roth IRA by directing a fiduciary or issuer of any of
your existing Roth IRAs to make a direct transfer of all or a portion of the
assets from such Roth IRAs to your Transamerica Life Roth IRA.
(e) Conversion Roth IRA. You may make contributions to a Conversion Roth IRA
within 60 days of receiving a distribution from an existing Traditional IRA or
by instructing the fiduciary or issuer of any of your existing Traditional IRAs
to make a direct transfer of all or a portion of the assets from such a
Traditional IRA to your Transamerica Life Roth IRA, subject to certain
restrictions and subject to income tax on some or all of the converted amounts.
If your AGI, not including the conversion amount, is greater than $100,000 for
the tax year, or if you are married and you and your spouse file separate tax
returns, you may not convert or transfer any amount from a Traditional IRA to a
Roth IRA.
(f) Responsibility of the Owner. Contributions, rollovers, transfers or
conversions to a Roth IRA must be made in accordance with the appropriate
sections of the Code. It is your full and sole responsibility to make
contributions to your Roth IRA in accordance with the Code. Transamerica Life
Insurance and Annuity Company does not provide tax advice, and assumes no
liability for the tax consequences of any contribution to your Roth IRA.
2. Deductibility of Contributions
Your Roth IRA permits only nondeductible after-tax contributions. However,
distributions from your Roth IRA are generally not subject to federal income
tax. See Part II, 4(b) below. This is unlike a Traditional IRA, which permits
deductible and nondeductible contributions, but which provides that most
distributions are subject to federal income tax.
3. Contribution Limits
Contributions for each taxable year to all Traditional and Roth IRAs may not
exceed the lesser of 100% of your compensation or $2,000 for any calendar year,
subject to AGI phase-out rules described below in Section 3(a). Rollover,
transfer and conversion contributions, if properly made, do not count towards
your maximum annual contribution limit, nor do employer contributions to a
SEP-IRA or SIMPLE IRA.
(a) Regular Roth IRAs. The maximum amount you may contribute to a regular Roth
IRA will depend on the amount of your AGI for the calendar year. Your maximum
$2,000 contribution limit begins to phase out when your AGI reaches $95,000 as
unmarried or $150,000 when married filing jointly. Under this phase out, your
maximum regular Roth IRA contributions generally will not be less than $200;
however, no contribution is allowed if your AGI exceeds $110,000 as unmarried or
$160,000 when married filing jointly. If you are married and you and your spouse
file separate tax returns, your maximum regular Roth IRA contribution phases out
between $0 and $10,000. If you are married but you and your spouse lived apart
for the entire taxable year and file separate federal income tax returns, your
maximum contribution is calculated as if you were not married. You should
consult your tax adviser to determine your maximum contribution.
You may make contributions to a regular Roth IRA after age 70 1/2, subject to
the phase-out rules. Regular Roth IRA contributions for a tax year should be
reported on your tax return for that year, specifically, on Form 8606.
(b) Spousal Roth IRAs. Contributions to your lower-earning spouse's Spousal Roth
IRA may not exceed the lesser of:
1. 100% of both spouses' combined compensation minus any Roth IRA or
deductible Traditional IRA contribution for the spouse with the higher
compensation for the year; or
2. $2,000, as reduced by the phase-out rules described above for regular Roth
IRAs.
A maximum of $4,000 may be contributed to both spouses' Roth IRAs. Contributions
can be divided between the spouses' Roth IRAs as you and your spouse wish, but
no more than $2,000 in regular Roth IRA contributions can be contributed to
either individual's Roth IRA each year.
(c) Rollover Roth IRAs. There is no limit on the amounts that you may rollover
from one Roth IRA into another Roth IRA, including your Transamerica Life Roth
IRA. You may roll over a distribution from any single Roth IRA to another Roth
IRA only once in any 365-day period.
(d) Transfer Roth IRAs. There is no limit on amounts that you may transfer
directly from one Roth IRA into another Roth IRA, including your Transamerica
Life Roth IRA. Such a direct transfer does not constitute a rollover for
purposes of the 1-year waiting period.
(e) Conversion Roth IRAs. There is no limit on amounts that you may convert from
your Traditional IRA into your Transamerica Life Roth IRA if you are eligible to
open a Conversion Roth IRA as described in Part II, Section 1(e), above. In the
case of a conversion from a SIMPLE-IRA, the conversion may only be done after
the expiration of your 2-year participation period described in Code Section
72(t)(6). However, the distribution proceeds from your Traditional IRA are
includable in your taxable income to the extent that they represent a return of
deductible contributions and earnings on any contributions. The distribution
proceeds from your Traditional IRA are not subject to the 10% early distribution
penalty tax, described below, if the distribution proceeds are deposited to your
Roth IRA within 60 days.
You can also make contributions to a Roth IRA by instructing the fiduciary or
issuer, custodian or trustee of your existing Traditional IRAs to transfer the
assets in your Traditional IRAs to the Roth IRA, which can be a successor to
your existing Traditional IRAs. The transfer will be treated as a distribution
from your Traditional IRAs, and that amount will be includable in your taxable
income to the extent that it represents a return of deductible contributions and
earnings on any contributions, but will not be subject to the 10% early
distribution penalty tax.
If you converted from a Traditional IRA to a Roth IRA during 1998, the income
reportable upon distribution from the Traditional IRA may be reportable entirely
for 1998 or reportable ratably over four years beginning in 1998.
4. Recharacterization of IRA Contributions
(a) Eligibility. By making a timely transfer and election, you generally can
treat a contribution made to one type of IRA as made to a different type of IRA
for a taxable year. For example, if you make contributions to a Roth IRA and
later discover that you are not eligible to make Roth IRA contributions, you may
recharacterize all or a portion of the contribution as a Traditional IRA
contribution by the filing due date, including extensions, for the applicable
tax year.
You may not recharacterize amounts paid into a Traditional IRA that represented
tax-free rollovers or transfers, or employer contributions.
(b) Election. You may elect to recharacterize a contribution amount made to one
type of IRA by simply making a trustee-to-trustee transfer of such amount, plus
net income attributable to it, to a second type of IRA on or before the federal
income tax due date, including extensions, for the tax year for which the
contribution was initially made. After the recharacterization has been made, you
may not revoke or modify the election.
(c) Taxation of a Recharacterization. For federal income tax purposes, a
recharacterized contribution will be treated as having been contributed to the
transferee IRA, rather than to the transferor IRA, on the same date and for the
same tax year that the contribution was initially made to the transferor IRA. A
recharacterized transfer is not considered a rollover for purposes of the 1-year
waiting period.
The transfer of the contribution amount being recharacterized must include the
net income attributable to such amount. If such amount has experienced net
losses as of the time of the recharacterization transfer, the amount
transferred, the original contribution amount less any losses, will generally
constitute a transfer of the entire contribution amount. You must treat the
contribution amount as made to the transferee IRA on your federal income tax
return for the year to which the original contribution amount related.
For reconversions following a recharacterization, see Publication 590 and
Treasury Regulation Section 1.408A-5.
5. Distributions
(a) Required Minimum Distribution, or simply, RMD. Unlike a Traditional IRA,
there are no rules that require that any distribution be made to you from your
Roth IRA during your lifetime.
If you die before the entire value of your Roth IRA is distributed to you, the
balance of your Roth IRA must be distributed by December 31 of the calendar year
that is five years after your death. However, if you die and you have a
designated beneficiary, your beneficiary may elect to take distributions in the
form of qualifying settlement option payments in substantially equal
installments over the life or life expectancy of the designated beneficiary,
beginning by December 31 of the calendar year that is one year after your death.
If your beneficiary is your surviving spouse, he or she can become the new
owner/annuitant and can continue the Transamerica Life Roth IRA on the same
basis as before your death. If your surviving spouse does not wish to continue
the Transamerica Life Roth IRA as his or her Roth IRA, he or she may elect to
receive the death benefit in the form of qualifying settlement option payments
in order to avoid the 5-year distribution requirement. Such payments must be
made in substantially equal amounts over your spouse's life or a period not
extending beyond his or her life expectancy. Your surviving spouse must elect
this option and begin receiving payments no later than the later of the
following dates:
a) December 31 of the year following the year you died; or
b) December 31 of the year in which you would have reached age 70 1/2.
Your beneficiary is responsible for assuring that the RMD following your death
is taken in a timely manner and that the correct amount is distributed.
(b) Taxation of Roth IRA Distributions. The amounts that you withdraw from your
Roth IRA are generally tax-free. For federal income tax purposes, all of your
Roth IRAs are aggregated and Roth IRA distributions are treated as made first
from Roth IRA contributions and second from earnings. Distributions that are
treated as made from Roth IRA contributions are treated as made first from
regular Roth IRA contributions, which are always tax-free, and second from
conversion or rollover Roth IRA contributions on a first-in, first-out basis. A
distribution allocable to a particular conversion or rollover Roth IRA
contribution is treated as consisting first of the portion, if any, of the
conversion contribution that was previously includible in gross income by reason
of the conversion.
In any event, since the purpose of a Roth IRA is to accumulate funds for
retirement, your receipt or use of Roth IRA earnings before you attain age 59
1/2 , or within 5 years of your first contribution to the Roth IRA, including a
contribution rolled over, transferred or converted from a Traditional IRA, will
generally be treated as an early distribution subject to regular income tax and
to the 10% penalty tax described below in Section 6(b).
No income tax will apply to earnings that are withdrawn before you attain age 59
1/2, but which are withdrawn five or more years after the first contribution to
the Roth IRA, including a rollover or transfer contribution or conversion from a
Traditional IRA, where the withdrawal is made:
a) upon your death or disability; or
b) to pay qualified first-time homebuyer expenses of you or certain family
members.
No portion of your Roth IRA distribution qualifies as a capital gain. There is
also a separate 5-year rule for the recapture of the 10% penalty tax that is
described below in Section 6(b) and that applies to any Roth IRA distribution
made before age 59 1/2 if any conversion or rollover contribution has been made
to any Roth IRA owned by the individual within the 5 most recent taxable years,
even if this current distribution from the Roth IRA is otherwise tax-free under
the rules described in this Subsection 5(b).
(c) Withholding. If the distribution from your Roth IRA is subject to federal
income tax, unless you elect not to have withholding apply, federal income tax
will be withheld from your Roth IRA distributions. If you receive distributions
under a settlement option, tax will be withheld in the same manner as taxes
withheld on wages, calculated as if you were married and claim three withholding
allowances. If you are receiving any other type of distribution, tax will be
withheld in the amount of 10% of the amount of the distribution. If payments are
delivered to foreign countries, federal income tax will generally be withheld at
a 10% rate unless you certify to Transamerica Life Insurance and Annuity Company
that you are not a U. S. citizen residing abroad or a "tax avoidance expatriate"
as defined in Code Section 877. Such certification may result in mandatory
withholding of federal income taxes at a different rate. 6. Penalty Taxes
(a) Excess Contributions. If at the end of any taxable year your total regular
Roth IRA contributions, other than rollovers, transfers or conversions, exceed
the maximum allowable contributions for that year, taking into account
Traditional IRA contributions, the excess contribution amount will be subject to
a nondeductible 6% excise penalty tax. Such penalty tax cannot exceed 6% of the
value of your Roth IRAs at the end of such year. However, if you withdraw the
excess contribution, plus any earnings on it, before the due date for filing
your federal income tax return, including extensions, for the taxable year in
which you made the excess contribution, the excess contribution will not be
subject to the 6% penalty tax.
The amount of the excess contribution withdrawn will not be considered an early
distribution, but the earnings withdrawn will be taxable income to you and may
be subject to the 10% penalty tax on early distributions. Alternatively, excess
contributions for one year may be withdrawn in a later year or may be carried
forward as Roth IRA contributions in a later year to the extent that the excess,
when aggregated with your regular Roth IRA contributions, if any, for the
subsequent year, does not exceed the maximum allowable contribution for that
year. The 6% excise tax will be imposed on excess contributions in each
subsequent year they are neither returned to you nor applied as permissible
regular Roth IRA contributions for such year.
(a) Early Distributions. Since the purpose of a Roth IRA is to accumulate funds
for retirement, your receipt or use of any portion of your Roth IRA before you
attain age 59 1/2 constitutes an early distribution subject to the 10% penalty
tax on the earnings in your Roth IRA. This penalty tax will not apply if the
distribution occurs as a result of your death or disability or is part of a
series of substantially equal payments made over your life expectancy or the
joint life expectancies of you and your beneficiary, as determined from IRS
tables in the income tax regulations. Also, the 10% penalty tax will not apply
if distributions are used to pay for medical expenses in excess of 7.5% of your
AGI; or if distributions are used to pay for health insurance premiums for you,
your spouse and/or your dependents if you are an unemployed individual who is
receiving unemployment compensation under federal or state programs for at least
12 consecutive weeks.
The 10% penalty tax also will not apply to an early distribution made to pay for
certain qualifying first-time homebuyer expenses for you or certain family
members, or for certain qualifying higher education expenses for you or certain
family members. First-time homebuyer expenses must be paid within 120 days of
the distribution from the Roth IRA and include up to $10,000 of the costs of
acquiring, constructing, or reconstructing a principle residence, including any
usual or reasonable settlement, financing or other closing costs. Higher
education expenses include tuition, fees, books, supplies, and equipment
required for enrollment, attendance, and room and board at a post-secondary
educational institution.
There is also a separate 5-year recapture rule for the 10% penalty tax in the
case of a Roth IRA distribution made before age 59 1/2 that is made within 5
years after a conversion or rollover contribution from a Traditional IRA. This
recapture rule exists because such a prior Roth IRA contribution avoided the 10%
penalty tax when it was rolled over or converted from the Traditional IRA. Under
this 5-year recapture rule, any Roth IRA distribution made before age 59 1/2
that is attributable to any conversion or rollover contribution from a
Traditional IRA made within the previous 5 years to any of the individual's Roth
IRAs is generally subject to the 10% penalty tax, and its exceptions, to the
extent that such prior Roth IRA contribution was subject to ordinary tax upon
the conversion or rollover, even if the Roth IRA distribution is otherwise
tax-free.
Under the distribution ordering rules for a Roth IRA, all of an individual's
Roth IRAs and distributions therefrom are treated as made: first from regular
Roth IRA contributions; then from conversion or rollover Roth IRA contributions
on a first-in, first-out basis; and last from earnings. However, whenever any
Roth IRA distribution amount is attributable to any conversion or rollover
contribution made within the 5 most recent tax years, this distributed amount is
attributed first to the taxable portion of such prior contribution, for purposes
of determining the amount of this Roth IRA distribution that is subject to the
recapture of the 10% penalty tax, unless some exception to the penalty tax
applies
to the current Roth IRA distribution, such as age 59 1/2, disability or certain
health, education or homebuyer expenses, as described above in this Subsection
6(b).
(c) Failure to Satisfy RMDs Upon Death. If the RMD rules described above in Part
II, Section 4(a) apply to the beneficiary of your Roth IRA after your death and
if the amount distributed during a calendar year is less than the minimum amount
required to be distributed, your beneficiary will be subject to a penalty tax
equal to 50% of the excess of the amount required to be distributed over the
amount actually distributed.
(d) Policy Loans and Prohibited Transactions. If you or any beneficiary engage
in any prohibited transaction, such as any sale, exchange or leasing of any
property between you and the Roth IRA, or any interference with the independent
status of the Roth IRA, the Roth IRA will lose its tax exemption and be treated
as having been distributed to you. The value of any earnings on your Roth IRA
contributions will be includable in your gross income; and if at the time of the
prohibited transaction, you are under age 591/2 you may also be subject to the
10% penalty tax on early distributions, as described above in Part II, Section
5(b). If you borrow from or pledge your Roth IRA, or your benefits under the
contract, as a security for a loan, the portion borrowed or pledged as security
will cease to be tax-qualified, the value of that portion will be treated as
distributed to you, and you may be subject to the 10% penalty tax on early
distributions from a Roth IRA.
IRA PART III: OTHER INFORMATION
(1) Federal Estate and Gift Taxes
Any amount in or distributed from your Traditional and/or Roth IRAs upon your
death may be subject to federal estate tax, although certain credits and
deductions may be available. The exercise or non-exercise of an option that
would pay a survivor an annuity at or after your death should not be considered
a transfer for federal gift tax purposes.
(2) Tax Reporting
You must report contributions to, and distributions from, your Traditional IRA
and Roth IRA, including the year-end aggregate account balance of all
Traditional IRAs and Roth IRAs, on your federal income tax return for the year
specifically on IRS Form 8606. For Traditional IRAs, you must designate on the
return how much of your annual contribution is deductible and how much is
nondeductible. You need not file IRS Form 5329 with your income tax return for a
particular year unless for that year you are subject to a penalty tax because
there has been an excess contribution to, an early distribution from, or
insufficient RMDs from your Traditional IRA or Roth IRA, as applicable.
(3) Vesting
Your interest in your Traditional IRA or Roth IRA is nonforfeitable at all
times.
(4) Exclusive Benefit
Your interest in your Traditional IRA or Roth IRA is for the exclusive benefit
of you and your beneficiaries.
(5) IRS Publication 590
Additional information about your Traditional IRA or Roth IRA or about SEP-IRAs
and SIMPLE-IRAs can be obtained from any district office of the IRS or by
calling 1-800-TAX-FORM for a free copy of IRS Publication 590, Individual
Retirement Arrangements.
<PAGE>
TRANSAMERICA SERIESsm
TRANSAMERICA CLASSICsm VARIABLE ANNUITY
Contract Form 4-701, Certificate Form TCG-311; Group Annuity Contract Form
TGP-711 The contract is not available in all states.
Issued by Transamerica Life Insurance and Annuity Company
401 North Tryon Street, Suite 700, Charlotte, North Carolina, 28202
VIM 119-599
2
<PAGE>
19
STATEMENT OF ADDITIONAL INFORMATION FOR
TRANSAMERICA SERIES sm
TRANSAMERICA CLASSIC sm
VARIABLE ANNUITY
Separate Account VA-6
Issued By
Transamerica Life Insurance and Annuity Company
This statement of additional information expands upon subjects discussed in
the May 1, 1999, prospectus for the Transamerica Classic Variable Annuity
("contract") issued by Transamerica Life Insurance and Annuity Company
("Transamerica") through Separate Account VA-6. You may obtain a free copy of
the prospectus by writing to: Transamerica Life Insurance and Annuity Company,
401 North Tryon Street, Charlotte, NC 28202 or calling 800-420-7749. Terms used
in the current prospectus for the contract are incorporated into this statement.
The contract will be issued as a certificate under a group annuity contract
in some states and as an individual annuity contract in other states. The term
"contract" as used herein refers to both the individual contract and the
certificates issued under the group contract.
This Statement of Additional Information is not a prospectus and should be read
only in conjunction with the prospectus for the contract and the portfolios.
Dated May 1, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
THE CONTRACT .................................................................................... 3
NET INVESTMENT FACTOR ........................................................................... 3
VARIABLE PAYMENT OPTIONS......................................................................... 3
Variable Annuity Units and Payments.............................................................. 3
Variable Annuity Unit Value...................................................................... 3
Transfers After the Annuity Date................................................................. 4
GENERAL PROVISIONS............................................................................... 4
IRS Required Distributions.................................................................. 4
Non-Participating........................................................................... 4
Misstatement of Age or Sex.................................................................. 4
Proof of Existence and Age.................................................................. 4
Annuity Data................................................................................ 4
Assignment.................................................................................. 5
Annual Report............................................................................... 5
Incontestability............................................................................ 5
Entire Contract............................................................................. 5
Changes in the Contract..................................................................... 5
Protection of Benefits...................................................................... 5
Delay of Payments........................................................................... 5
Notices and Directions...................................................................... 6
CALCULATION OF YIELDS AND TOTAL RETURNS ......................................................... 6
Money Market Sub-Account Yield Calculation.................................................. 6
Other Sub-Account Yield Calculations........................................................ 7
Standard Total Return Calculations.......................................................... 7
Adjusted Historical Portfolio Performance Data.............................................. 8
Other Performance Data...................................................................... 8
HISTORICAL PERFORMANCE DATA...................................................................... 8
General Limitations......................................................................... 8
Adjusted Historical Performance Data........................................................ 8
DISTRIBUTION OF THE CONTRACT..................................................................... 18
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS........................................................... 18
STATE REGULATION................................................................................. 18
RECORDS AND REPORTS.............................................................................. 18
FINANCIAL STATEMENTS............................................................................. 18
APPENDIX......................................................................................... 19
</TABLE>
<PAGE>
THE CONTRACT
The following pages provides additional information about the contract
which may be of interest to some owners.
NET INVESTMENT FACTOR
For any sub-account of the variable account, the net investment factor for
a valuation period, before the annuity date, is (a) divided by (b), minus (c)
minus (d):
Where (a) is:
The net asset value per share held in the sub-account, as of the end of the
valuation period; plus or minus the per-share amount of any dividend or
capital gain distributions if the "ex-dividend" date occurs in the
valuation period; plus or minus a per-share charge or credit as we may
determine, as of the end of the valuation period, for taxes.
Where (b) is:
The net asset value per share held in the sub-account as of the end of the
last prior valuation period.
Where (c) is:
The daily mortality and expense risk charge of 0.00329% (1.20% annually)
times the number of calendar days in the current valuation period.
Where (d) is:
The daily administrative expense charge, currently 0.000411% (0.15%
annually) times the number of calendar days in the current valuation
period. This charge may be increased, but will not exceed 0.00096% (0.35%
annually).
A valuation day is defined as any day that the New York Stock Exchange is open.
VARIABLE PAYMENT OPTIONS
The variable payment option provide for payments that fluctuate in dollar
amount, based on the investment performance of the elected variable
sub-account(s).
Variable Annuity Units and Payments
For the first monthly payment, the number of variable annuity units
credited in each variable sub-account will be determined by dividing: (a) the
product of the portion of the value to be applied to the variable sub-account
and the variable annuity purchase rate specified in the contract; by (b) the
value of one variable annuity unit in that sub-account on the annuity date.
The amount of each subsequent variable payment equals the product of the
number of variable annuity units in each variable sub-account and the variable
sub-account's variable annuity unit value as of the tenth day of the month
before the payment due date. The amount of each payment may vary.
Variable Annuity Unit Value
The value of a variable annuity unit in a variable sub-account on any
valuation day is determined as described below.
The net investment factor for the valuation period (for the appropriate
payment frequency) just ended is multiplied by the value of the variable annuity
unit for the sub-account on the preceding valuation day. The net investment
factor after the annuity date is calculated in the same manner as before the
annuity date and then multiplied by an interest factor. The interest factor
equals (.999893)n where n is the number of days since the preceding valuation
day. This compensates for the 4% interest assumption built into the variable
annuity purchase rates. We may offer assumed interest rates other than 4%. The
appropriate interest factor will be applied to compensate for the assumed
interest rate.
Transfers After the Annuity Date
After the annuity date, you may transfer variable annuity units from one
sub-account to another, subject to certain limitations (See "Transfers" page 29
of the prospectus). The dollar amount of each subsequent monthly annuity payment
after the transfer must be determined using the new number of variable annuity
units multiplied by the variable sub-account's variable annuity unit value on
the tenth day of the month preceding payment. We reserve the right to change
this day of the month.
The formula used to determine a transfer after the annuity date can be
found in the Appendix to this statement of additional information.
GENERAL PROVISIONS
IRS Required Distributions
If any owner under a non-qualified contract dies before the entire interest
in the contract is distributed, the value generally must be distributed to the
designated beneficiary so that the contract qualifies as an annuity under the
Code. (See "Federal Tax Matters" page 44 of the prospectus.)
Non-Participating
The contract is non-participating. No dividends are payable and the
contract will not share in our profits or surplus earnings.
Misstatement of Age or Sex
If the age or sex of the annuitant or any other measuring life has been
misstated, the settlement option payments under the contract will be whatever
the annuity amount applied on the annuity date would purchase on the basis of
the correct age or sex of the annuitant and/or other measuring life. Where
required by law, rule or regulation, we may only consider the age of the
annuitant and/or other measuring life. Any overpayments or underpayments by us
as a result of any such misstatement may be respectively charged against or
credited to the settlement option payment or payments to be made after the
correction so as to adjust for such overpayment or underpayment.
Proof of Existence and Age
Before making any payment under the contract, we may require proof of the
existence and/or proof of the age of an owner and/or an annuitant or any other
measuring life, or any other information deemed necessary in order to provide
benefits under the contract.
Annuity Data
We will not be liable for obligations which depend on receiving information
from a payee or measuring life until such information is received in a
satisfactory form.
Assignment
No assignment of a contract will be binding on us unless made in writing
and given to us at our Service Center. We are not responsible for the adequacy
of any assignment. Your rights and the interest of any annuitant or
non-irrevocable beneficiary will be subject to the rights of any assignee of
record.
Annual Report
At least once each contract year prior to the annuity date, you will be
given a report of the current account value allocated to each sub-account of the
variable account and any general account option. This report will also include
any other information required by law or regulation. After the annuity date, a
confirmation will be provided with every variable annuity payment.
Incontestability
Each contract is incontestable from the contract effective date except in
certain states where medical questions are required on the application for the
optional Living Benefits Rider.
Entire Contract
We have issued the contract in consideration and acceptance of the payment
of the initial purchase payment and certain required information in an
acceptable form and manner or, where state law requires, the application. In
those states that require a written application, a copy of the application is
attached to and is part of the contract and along with the contract constitutes
the entire contract.
The group annuity contract has been issued to a trust organized under
Missouri law. However, the sole purpose of the trust is to hold the group
annuity contract. You have all rights and benefits under the individual
certificate issued under the group contract.
Changes in the Contract
Only two authorized officers of Transamerica, acting together, have the
authority to bind us or to make any change in the individual contract or the
group contract or individual certificates thereunder and then only in writing.
We will not be bound by any promise or representation made by any other persons.
We may change or amend the individual contract or the group contract or
individual certificates thereunder if such change or amendment is necessary for
the individual contract or the group contract or individual certificates
thereunder to comply with any state or federal law, rule or regulation.
Protection of Benefits
To the extent permitted by law, no benefit (including death benefits) under
the contract will be subject to any claim or process of law by any creditor.
Delay of Payments
Payment of any cash withdrawal, lump sum death benefit, or variable payment
or transfer due from the variable account will occur within seven days from the
date the election becomes effective, except that we may be permitted to postpone
such payment if: (1) the New York Stock Exchange is closed for other than usual
weekends or holidays, or trading on the Exchange is otherwise restricted; or (2)
an emergency exists as defined by the Securities and Exchange Commission
(Commission), or the Commission requires that trading be restricted; or (3) the
Commission permits a delay for the protection of owners.
In addition, while it is our intention to process all transfers from the
sub-accounts immediately upon receipt of a transfer request, we have the right
to delay effecting a transfer from a variable sub-account for up to seven days.
We may delay effecting such a transfer if there is a delay of payment from an
affected portfolio. If this happens, then we will calculate the dollar value or
number of units involved in the transfer from a variable sub-account on or as of
the date we receive a transfer request in an acceptable form and manner, but
will not process the transfer to the transferee sub-account until a later date
during the seven-day delay period when the portfolio underlying the transferring
sub-account obtains liquidity to fund the transfer request through sales of
portfolio securities, new purchase payments, transfers by investors or
otherwise. During this period, the amount transferred would not be invested in a
variable sub-account.
We may delay payment of any withdrawal from any general account options for
a period of not more than six months after we receive the request for such
withdrawal. If we delay payment for more than 30 days, we will pay interest on
the withdrawal amount up to the date of payment. (See "Cash Withdrawals" page 31
of the prospectus.)
Notices and Directions
We will not be bound by any authorization, direction, election or notice
which is not in a form and manner acceptable to us and received at our Service
Center.
Any written notice requirement by us to you will be satisfied by our
mailing of any such required written notice, by first-class mail, to your last
known address as shown on our records.
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Sub-Account Yield Calculation
In accordance with regulations adopted by the Commission, we are required
to compute the money market sub-account's current annualized yield for a
seven-day period in a manner which does not take into consideration any realized
or unrealized gains or losses on shares of the money market series or on its
portfolio securities. This current annualized yield is computed by determining
the net change (exclusive of realized gains and losses on the sale of securities
and unrealized appreciation and depreciation) in the value of a hypothetical
account having a balance of one unit of the money market sub-account at the
beginning of such seven-day period, dividing such net change in account value by
the value of the account at the beginning of the period to determine the base
period return and annualizing this quotient on a 365-day basis. The net change
in account value reflects the deductions for the annual account fee, the
mortality and expense risk charge and administrative expense charges and income
and expenses accrued during the period. Because of these deductions, the yield
for the money market sub-account of the variable account will be lower than the
yield for the money market series or any comparable substitute funding vehicle.
The Commission also permits us to disclose the effective yield of the money
market sub-account for the same seven-day period, determined on a compounded
basis. The effective yield is calculated by compounding the unannualized base
period return by adding one to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting one from the result.
The yield on amounts held in the money market sub-account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The money market sub-account's actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity of the
money market series or substitute funding vehicle, the types and quality of
portfolio securities held by the money market series or substitute funding
vehicle, and operating expenses. In addition, the yield figures do not reflect
the effect of any contingent deferred sales load (of up to 6% of purchase
payments) that may be applicable to a contract.
Other Sub-Account Yield Calculations
We may from time to time disclose the current annualized yield of one or
more of the variable sub-accounts (except the money market sub-account) for
30-day periods. The annualized yield of a sub-account refers to the income
generated by the sub-account over a specified 30-day period. Because this yield
is annualized, the yield generated by a sub-account 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 variable 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 attributable to the shares owned by the sub-account.
b = expenses for the sub-account accrued for the period (net of
reimbursements). c = the average daily number of variable accumulation
units outstanding during the period. d = the maximum offering price per
variable accumulation unit on the last day of the period.
Net investment income will be determined in accordance with rules
established by the Commission. Accrued expenses will include all recurring fees
that are charged to all contracts. The yield calculations do not reflect the
effect of any contingent deferred sales load that may be applicable to a
particular contract. Contingent deferred sales loads range from 6% to 0% of the
amount of account value withdrawn depending on the elapsed time since the
receipt of each purchase payment.
Because of the charges and deductions imposed by the variable account, the
yield for the sub-account will be lower than the yield for the corresponding
portfolio. The yield on amounts held in the variable sub-accounts 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. The
variable sub-account's actual yield will be affected by the types and quality of
portfolio securities held by the portfolio, and its operating expenses.
Standard Total Return Calculations
We may from time to time also disclose average annual total returns for one
or more of the sub-accounts for various periods of time. Average annual total
return quotations are computed by finding the average annual compounded rates of
return over one, five and ten year periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P{1 + T}n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the one, five or
ten-year period at the end of the one, five, or
ten-year period (or fractional portion of such
period).
All recurring fees are recognized in the ending redeemable value. The
standard average annual total return calculations will reflect the effect of any
contingent deferred sales load that may be applicable to a particular period.
Adjusted Historical Portfolio Performance Data
We may also disclose "historical" performance data for a portfolio, for
periods before the variable sub-account commenced operations. Such performance
information will be calculated based on the performance of the portfolio and the
assumption that the sub-account was in existence for the same periods as those
indicated for the portfolio, with a level of contract charges currently in
effect.
This type of adjusted historical performance data may be disclosed on both
an average annual total return and a cumulative total return basis. Moreover, it
may be disclosed assuming that the contract is not surrendered (i.e., with no
deduction for the contingent deferred sales load) and assuming that the contract
is surrendered at the end of the applicable period (i.e., reflecting a deduction
for any applicable contingent deferred sales load).
Other Performance Data
We may from time to time also disclose average annual total returns in a
non-standard format in conjunction with the standard described above. The
non-standard format will be identical to the standard format except that the
contingent deferred sales load percentage will be assumed to be 0%.
Transamerica may from time to time also disclose cumulative total returns
in conjunction with the standard format described above. The cumulative returns
will be calculated using the following formula assuming that the contingent
deferred sales load percentage will be 0%.
CTR = {ERV/P} - 1
Where:
CTR = the cumulative total return net of sub-account recurring
charges for the period.
ERV = ending redeemable value of a hypothetical $1,000 payment
at the beginning of the one, five, or
ten-year period at the end of the one, five, or ten-year
period (or fractional portion of the period).
P = a hypothetical initial payment of $1,000.
All non-standard performance data will be advertised only if the standard
performance data is also disclosed.
HISTORICAL PERFORMANCE DATA
General Limitations
The figures below represent past performance and are not indicative of
future performance. The figures may reflect the waiver of advisory fees and
reimbursement of other expenses which may not continue in the future.
Portfolio information, including historical daily net asset values and
capital gains and dividends distributions regarding each portfolio, has been
provided by that portfolio. The adjusted historical sub-account performance data
is derived from the data provided by the portfolios. We have no reason to doubt
the accuracy of the figures provided by the portfolios. We have not verified
these figures.
Adjusted Historical Performance Data
The charts below show adjusted historical performance data for the
sub-accounts for the periods, prior to the inception of the sub-accounts, based
on the performance of the corresponding portfolios since their inception date,
with a level of charges equal to those currently assessed under the contract.
These figures are not an indication of the future performance of the
sub-accounts. The date next to each sub-account name indicates the date of
commencement of operation of the corresponding portfolio.
Notes:
1. On September 16, 1994, an investment company which had commenced operations
on August 1, 1988, called Quest for Value Accumulation Trust (the "Old
Trust") was effectively divided into two investment funds - The Old Trust
and the present OCC Accumulation Trust (the "Present Trust") at which time
the Present Trust commenced operations. The total net assets of the Small
Cap Portfolio immediately after the transaction were $139,812,573 in the
Old Trust and $8,129,274 in the Present Trust. For the period prior to
September 16, 1994, the performance figures for the Small Cap Portfolio of
the Present Trust reflect the performance of the Small Cap Portfolio of the
Old Trust.
2. The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., is
the successor to Separate Account Fund C of Transamerica Occidental Life
Insurance Company, a management investment company funding variable
annuities, through a reorganization on November 1, 1996. Accordingly, the
performance data for the Transamerica VIF Growth Portfolio includes
performance of its predecessor.
3. On September 16, 1994, an investment company which had commenced operations
on August 1, 1988, called Quest for Value Accumulation Trust (the "Old
Trust") was effectively divided into two investment funds - The Old Trust
and the present OCC Accumulation Trust (the "Present Trust") at the time of
the transaction there was $682,601,380 in the Old Trust and $51,345,102 in
the Present Trust. For the period prior to September 16, 1994, the
performance figures for the Managed Portfolio of the Present Trust reflect
the performance of the Managed Portfolio of the Old Trust.
Adjusted Historical Performance Data Charts
1. Average Annual Total Returns - Assuming surrender but no Living Benefits
Rider
2. Average Annual Total Returns - Assuming surrender and Living Benefits Rider
3. Average Annual Total Returns - Assuming no surrender or Living Benefits Rider
4. Average Annual Total Returns - Assuming no surrender but reflecting Living
Benefits Rider
5. Cumulative Returns - Assuming surrender but no Living Benefits Rider
6. Cumulative Returns - Assuming surrender and Living Benefits Rider
7. Cumulative Returns - Assuming no surrender or Living Benefits Rider
8. Cumulative Returns - Assuming no surrender but reflecting Living Benefits
Rider
<PAGE>
1. Average Annual Total Returns - Assuming surrender but no Living Benefits
Rider
Average annual total returns for periods since inception of the portfolio,
including adjusted historical performance, for each sub-account are as follows.
These figures include mortality and expense charges of 1.20% per annum,
administrative expense charge of 0.15% per annum, an account fee of $30 per
annum adjusted for average account size and the applicable contingent deferred
sales load (maximum of 6% of purchase payments) and do not reflect any fee
deduction for the optional Living Benefits Rider.
<TABLE>
<CAPTION>
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
SUB-ACCOUNT For the For the For the 5-year For the 10-year For the period
(date of commencement 1-year 3-year period period ending period ending from
of operation of period ending ending 12/31/98 12/31/98 commencement of
corresponding portfolio) 12/31/98 12/31/98 portfolio
operations to
12/31/98
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Janus Aspen Worldwide Growth 22.03% 23.97% 19.27% NA 21.99%
(9/13/93)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MSDW UF International Magnum 2.34% NA NA NA 4.20%
(1/2/97)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Dreyfus VIF Small Cap (8/31/90) -9.90% 6.76% 10.83% NA 35.30%
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
OCC Accumulation Trust Small 0.52% 14.44% 17.12% 17.67% 17.31%
Cap (8/1/88) (1)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MFS VIT Emerging Growth 27.28% 21.46% NA NA 23.99%
(7/24/95)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Alliance VPF Premier Growth 40.83% 31.75% 25.78% NA 23.57%
(6/26/92)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Dreyfus VIF Capital 23.26% 25.23% 21.51% NA 19.64%
Appreciation (4/5/93)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MFS VIT Research (7/26/95) 16.49% 19.28% NA NA 19.96%
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Transamerica VIF Growth 36.19% 36.25% 32.58% 24.69% NA
(2/26/69) (2)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Alger American Income & Growth 25.45% 26.56% 19.72% 13.98% 13.87%
(11/15/88)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Alliance VPF Growth & Income 14.10% 21.85% 19.14% NA 14.35%
(1/14/91)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MFS VIT Growth w/ Income 15.52% 22.79% NA NA 23.34%
(10/9/95)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Janus Aspen Balanced (9/13/93) 27.32% 21.27% 17.07% NA 17.47%
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
OCC Accumulation Trust Managed -15.42% 6.92% 6.47% 11.61% 11.25%
(8/1/88)(3)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MSDW UF High Yield (1/2/97) -1.77% NA NA NA 5.15%
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MSDW UF Fixed Income (1/2/97) 1.29% NA NA NA 4.98%
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Transamerica VIF Money Market NA NA NA NA -1.52%*
(1/2/98)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
*Non-annualized year-to-date return
2. Average Annual Total Returns - Assuming surrender and reflecting Living
Benefits Rider
Average annual total returns for periods since inception of the portfolio,
including adjusted historical performance, for each sub-account are as follows.
These figures include mortality and expense charges of 1.20% per annum,
administrative expense charge of 0.15% per annum, an account fee of $30 per
annum adjusted for average account size, the applicable contingent deferred
sales load (maximum 6% of purchase payments) and optional Living Benefits Rider
fee of 0.05% per annum.
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
SUB-ACCOUNT For the For the 3-year For the For the For the period from
(date of commencement of 1-year period period ending 5-year period 10-year period commencement of
operation of ending 12/31/98 ending ending 12/31/98 portfolio operations
corresponding portfolio) 12/31/98 12/31/98 to 12/31/98
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Worldwide 21.98% 23.92% 19.22% NA 21.93%
Growth (9/12/93)(9/13/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MSDW UF International 2.29% NA NA NA 4.15%
Magnum (1/2/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Small Cap -9.95% 6.71% 10.78% NA 35.25%
(8/31/90)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust -15.47% 6.87% 6.42% 11.56% 11.20%
Small Cap (8/1/88) (1)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Emerging Growth 27.23% 21.41% NA NA 23.94%
(7/24/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Premier 40.78% 31.70% 25.73% NA 23.52%
Growth (6/26/92)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Capital 23.21% 25.18% 21.46% NA 19.59%
Appreciation (4/5/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Research (7/26/95) 16.44% 19.23% NA NA 19.91%
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Growth 36.14% 36.19% 32.53% 24.64% NA
(2/26/69) (2)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alger American Income & 25.40% 26.51% 19.67% 13.93% 13.82%
Growth (11/15/88)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Growth & 14.05% 21.80% 19.09% NA 14.30%
Income (1/14/91)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Growth w/ Income 15.47% 22.74% NA NA 23.29%
(10/9/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Balanced 27.27% 21.22% 17.02% NA 17.42%
(9/13/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 0.47% 14.39% 17.07% 17.62% 17.26%
Managed (8/1/88)(3)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MSDW UF High Yield (1/2/97) -1.82% NA NA NA 5.10%
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MSDW UF Fixed Income 1.24% NA NA NA 4.93%
(1/2/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Money NA NA NA NA -1.57%*
Market (1/2/98)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
*Non-annualized year-to-date return
3. Average Annual Total Returns - Assuming no surrender or Living Benefits Rider
Non-standard average annual total returns for periods since inception of
the portfolio, including adjusted historical performance, for each sub-account
are as follows. These figures include mortality and expense charges of 1.20% per
annum, administrative expense charge of 0.15% per annum and an account fee of
$30 per annum adjusted for average account size, but do not reflect any
applicable contingent deferred sales load (maximum of 6% of purchase payments)
and do not reflect any fee deduction for the optional Living Benefits Rider.
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
SUB-ACCOUNT For the For the 3-year For the For the For the period from
(date of commencement of 1-year period period ending 5-year period 10-year period commencement of
operation of ending 12/31/98 ending ending 12/31/98 portfolio operations
corresponding portfolio) 12/31/98 12/31/98 to 12/31/98
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Worldwide 27.13% 24.88% 19.61% NA 22.26%
Growth (9/13/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MSDW UF International 7.44% #DIV/0! #DIV/0! NA 6.62%
Magnum (1/2/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Small Cap -4.80% 7.99% 11.28% NA 35.30%
(8/31/90)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust -10.32% 8.15% 7.00% 11.61% 11.25%
Small Cap (8/1/88) (1)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Emerging Growth 32.38% 22.41% NA NA 24.72%
(7/24/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Premier 45.93% 32.57% 26.06% NA 23.65%
Growth (6/26/92)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Capital 28.36% 26.13% 21.82% NA 19.90%
Appreciation (4/5/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Research (7/26/95) 21.59% 20.27% NA NA 20.75%
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Growth 41.29% 37.00% 32.79% 24.69% NA
(2/26/69) (2)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alger American Income & 30.55% 27.44% 20.05% 13.98% 13.87%
Growth (11/15/88)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Growth & 19.20% 22.80% 19.48% NA 14.35%
Income (1/14/91)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Growth w/ Income 20.62% 23.72% NA NA 24.16%
(10/9/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Balanced 32.42% 22.22% 17.43% NA 17.79%
(9/13/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 5.62% 15.51% 17.48% 17.67% 17.31%
Managed (8/1/88) (3)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MSDW UF High Yield (1/2/97) 3.33% NA NA NA 7.55%
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MSDW UF Fixed Income 6.39% NA NA NA 7.39%
(1/2/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Money NA NA NA NA 3.58%*
Market (1/2/98)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
*Non-annualized year-to-date return
4. Average Annual Total Returns - Assuming no surrender but reflecting Living
Benefits Rider
Non-standard average annual total returns for periods since inception of
the portfolio, including adjusted historical performance, for each sub-account
are as follows. These figures include mortality and expense charges of 1.20% per
annum, administrative expense charge of 0.15% per annum and, an account fee of
$30 per annum adjusted for average account size, but do not reflect any
applicable contingent deferred sales load (maximum 6% of purchase payments).
They do reflect deduction of the fee for the optional Living Benefits Rider Fee
of 0.05% per annum.
- ------------------------------- --------------- -------------- --------------- --------------- ----------------------
SUB-ACCOUNT For the For the For the For the For the period from
(date of commencement of 1-year period 3-year 5-year period 10-year commencement of
operation of ending period ending period ending portfolio operations
corresponding portfolio) 12/31/98 ending 12/31/98 12/31/98 to 12/31/98
12/31/98
- ------------------------------- --------------- -------------- --------------- --------------- ----------------------
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth 27.08% 24.83% 19.56% NA 22.21%
(9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF International Magnum 7.39% NA NA NA 6.57%
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap -4.85% 7.94% 11.23% NA 35.25%
(8/31/90)
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small 5.57% 15.46% 17.43% 17.62% 17.26%
Cap (8/1/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 32.33% 22.36% NA NA 24.67%
(7/24/95)
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth 45.88% 32.52% 26.01% NA 23.60%
(6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 28.31% 26.08% 21.77% NA 19.85%
Appreciation (4/5/93)
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Research 21.54% 20.22% NA NA 20.70%
(7/26/95)
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 41.24% 36.95% 32.74% 24.64% N/A
(2/26/69) (2)
- ---------------------------------------------------------------------------------------------------------------------
Alger American Income & 30.50% 27.39% 20.00% 13.93% 13.82%
Growth (11/15/88)
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & Income 19.15% 22.75% 19.43% NA 14.30%
(1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 20.57% 23.67% NA NA 24.11%
(10/9/95)
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced (9/13/93) 32.37% 22.17% 17.38% NA 17.74%
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust -10.37% 8.10% 6.95% 11.56% 11.20%
Managed (8/1/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield (1/2/97) 3.28% NA NA NA 7.50%
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income (1/2/97) 6.34% NA NA NA 7.34%
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market NA NA NA NA 3.53%*
(1/2/98)
- ---------------------------------------------------------------------------------------------------------------------
*Non-annualized year-to-date return
5. Cumulative Returns - Assuming surrender but no Living Benefits Rider
Adjusted historical cumulative total returns for periods since inception of
the portfolio for each sub-account are as follows. These figures include
mortality and expenses charges of 1.20% per annum, administrative expenses
charge of 0.15% per annum, an account fee of $30 per annum adjusted for average
account size and the applicable contingent deferred sales load (maximum of 6% of
purchase payments) and do not reflect any fee deduction for the optional Living
Benefits Rider.
- --------------------------- --------------- ---------------- ---------------- ---------------- ----------------------
SUB-ACCOUNT For the 1- For the 3- For the 5- For the 10- For the period from
(date of commencement of year period year period year period year period commencement of
operation of ending ending 12/31/98 ending 12/31/98 ending 12/31/98 portfolio operations
corresponding portfolio) 12/31/98 to 12/31/98
- --------------------------- --------------- ---------------- ---------------- ---------------- ----------------------
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide 22.03% 90.52% 141.40% NA 186.94%
Growth (9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF International 2.34% NA NA NA 8.56%
Magnum (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap -9.90% 21.69% 67.24% NA 1145.17%
(8/31/90)
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 0.52% 49.87% 120.36% 408.96% 428.19%
Small Cap (8/1/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 27.28% 79.17% NA NA 109.73%
(7/24/95)
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier 40.83% 128.72% 214.88% NA 297.57%
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 23.26% 96.41% 164.93% NA 180.23%
Appreciation (4/5/93)
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Research (7/26/95) 16.49% 69.71% NA NA 86.99%
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 36.19% 152.91% 309.56% 808.27% N/A
(2/26/69) (2)
- ---------------------------------------------------------------------------------------------------------------------
Alger American Income & 25.45% 102.72% 145.91% 270.18% 273.01%
Growth (11/15/88)
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & 14.10% 80.93% 140.07% NA 191.18%
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 15.52% 85.12% NA NA 97.03%
(10/9/95)
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 27.32% 78.33% 119.90% NA 134.96%
(9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust -15.42% 22.25% 36.83% 199.96% 203.83%
Managed (8/1/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield -1.77% NA NA NA 10.55%
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income 1.29% NA NA NA 10.20%
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money NA NA NA NA -1.52%
Market (1/2/98)
- ---------------------------------------------------------------------------------------------------------------------
6. Cumulative Returns - Assuming surrender and Living Benefits Rider
Adjusted historical cumulative total returns for periods since inception of
the portfolio for each sub-account are as follows. These figures include
mortality and expense charges of 1.20% per annum, administrative expense charge
of 0.15% per annum, an account fee of $30 per annum adjusted for average account
size, the applicable contingent deferred sales load (maximum 6% of purchase
payments) and the optional Living Benefits Rider Fee of 0.05% per annum.
- --------------------------- ---------------- ---------------- --------------- --------------- -----------------------
SUB-ACCOUNT For the 1- For the 3-year For the For the For the period from
(date of commencement of year period period ending 5-year period 10-year commencement of
operation of ending 12/31/98 ending period ending portfolio operations
corresponding portfolio) 12/31/98 12/31/98 12/31/98 to 12/31/98
- --------------------------- ---------------- ---------------- --------------- --------------- -----------------------
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide 21.98% 90.29% 140.89% NA 186.31%
Growth (9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF International 2.29% NA NA NA 8.46%
Magnum (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap -9.95% 21.51% 66.86% NA 1141.33%
(8/31/90)
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 0.47% 49.67% 119.88% 406.80% 425.84%
Small Cap (8/1/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 27.23% 78.95% NA NA 109.43%
(7/24/95)
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier 40.78% 128.45% 214.25% NA 296.51%
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 23.21% 96.18% 164.38% NA 179.55%
Appreciation (4/5/93)
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Research (7/26/95) 16.44% 69.49% NA NA 86.72%
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 36.14% 152.63% 308.78% 804.63% N/A
(2/26/69) (2)
- ---------------------------------------------------------------------------------------------------------------------
Alger American Income & 25.40% 102.48% 145.39% 268.56% 271.36%
Growth (11/15/88)
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & 14.05% 80.70% 139.56% NA 190.17%
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 15.47% 84.89% NA NA 96.77%
(10/9/95)
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 27.27% 78.10% 119.42% NA 134.42%
(9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust -15.47% 22.07% 36.50% 198.61% 202.41%
Managed (8/1/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield -1.82% NA NA NA 10.44%
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income 1.24% NA NA NA 10.09%
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money NA NA NA NA -1.57%
Market (1/2/98)
- ---------------------------------------------------------------------------------------------------------------------
7. Cumulative Returns - Assuming no surrender or Living Benefits Rider
Adjusted historical non-standard cumulative total returns for periods since
inception of the portfolio for each sub-account are as follow. These figures
include mortality and expense charges of 1.20% per annum, administrative expense
charge of 0.15% per annum and an account fee of $30 per annum adjusted for
average account size but do not reflect any applicable contingent deferred sales
load (maximum of 6% of purchase payments) and do not reflect any fee deduction
for the optional Living Benefits Rider.
- ---------------------------- ---------------- ---------------- --------------- --------------- ----------------------
SUB-ACCOUNT For the 1- For the 3-year For the For the For the period from
(date of commencement of year period period ending 5-year period 10-year commencement of
operation of ending 12/31/98 ending period ending portfolio operations
corresponding portfolio) 12/31/98 12/31/98 12/31/98 to 12/31/98
- ---------------------------- ---------------- ---------------- --------------- --------------- ----------------------
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide 27.13% 94.77% 144.80% NA 190.34%
Growth (9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF International 7.44% NA NA NA 13.66%
Magnum (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap -4.80% 25.94% 70.64% NA 1145.17%
(8/31/90)
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 5.62% 54.12% 123.76% 408.96% 428.19%
Small Cap (8/1/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 32.38% 83.42% NA NA 113.98%
(7/24/95)
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier 45.93% 132.97% 218.28% NA 299.27%
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 28.36% 100.66% 168.33% NA 183.63%
Appreciation (4/5/93)
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Research (7/26/95) 21.59% 73.96% NA NA 91.24%
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 41.29% 157.16% 312.96% 808.27% N/A
(2/26/69) (2)
- ---------------------------------------------------------------------------------------------------------------------
Alger American Income & 30.55% 106.97% 149.31% 270.18% 273.01%
Growth (11/15/88)
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & 19.20% 85.18% 143.47% NA 191.18%
Income (1/14/91)
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 20.62% 89.37% NA NA 101.28%
(10/9/95)
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 32.42% 82.58% 123.30% NA 138.36%
(9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust -10.32% 26.50% 40.23% 199.96% 203.83%
Managed (8/1/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield (1/2/97) 3.33% NA NA NA 15.65%
- ---------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income 6.39% NA NA NA 15.30%
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money NA NA NA NA 3.58%
Market (1/2/98)
- ---------------------------------------------------------------------------------------------------------------------
<PAGE>
8. Cumulative Returns - Assuming no surrender but reflecting Living Benefits
Rider
Adjusted historical non-standard cumulative total returns for periods since
inception of the portfolio for each sub-account are as follow. These figures
include mortality and expense charges of 1.20% per annum, administrative expense
charge of 0.15% per annum and an account fee of $30 per annum adjusted for
average account size, but do not reflect any applicable contingent deferred
sales load (maximum 6% of purchase payments). They do reflect deductions of the
fee for the optional Living Benefits Rider Fee of 0.05% per annum.
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
SUB-ACCOUNT For the For the 3-year For the For the For the period from
(date of commencement of 1-year period period ending 5-year period 10-year period commencement of
operation of ending 12/31/98 ending ending 12/31/98 portfolio operations
corresponding portfolio) 12/31/98 12/31/98 to 12/31/98
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Worldwide 27.08% 94.54% 144.29% NA 189.71%
Growth (9/13/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MSDW UF International 7.39% NA NA NA 13.56%
Magnum (1/2/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Small Cap -4.85% 25.76% 70.26% NA 1141.33%
(8/31/90)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust 5.57% 53.92% 123.28% 406.80% 425.84%
Small Cap (8/1/88)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Emerging Growth 32.33% 83.20% NA NA 113.68%
(7/24/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Premier 45.88% 132.70% 217.65% NA 298.21%
Growth (6/26/92)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Dreyfus VIF Capital 28.31% 100.43% 167.78% NA 182.95%
Appreciation (4/5/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Research (7/26/95) 21.54% 73.74% NA NA 90.97%
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Growth 41.24% 156.88% 312.18% 804.63% N/A
(2/26/69)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alger American Income & 30.50% 106.73% 148.79% 268.56% 271.36%
Growth (11/25/88)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Alliance VPF Growth & 19.15% 84.95% 142.96% NA 190.17%
Income (1/14/91)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MFS VIT Growth w/ Income 20.57% 89.14% NA NA 101.02%
(10/9/95)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Janus Aspen Balanced 32.37% 82.35% 122.82% NA 137.82%
(9/13/93)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
OCC Accumulation Trust -10.37% 26.32% 39.90% 198.61% 202.41%
Managed (8/1/88)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MSDW UF High Yield (1/2/97) 3.28% NA NA NA 15.54%
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
MSDW UF Fixed Income 6.34% NA NA NA 15.19%
(1/2/97)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
Transamerica VIF Money NA NA NA NA 3.53%
(1/2/98)
- ---------------------------- --------------- ---------------- --------------- ---------------- ----------------------
</TABLE>
DISTRIBUTION OF THE CONTRACT
Transamerica Securities Sales Corporation ("TSSC") is principal underwriter
of the contracts under a Distribution Agreement with Transamerica. TSSC may also
serve as principal underwriter and distributor of other contracts issued through
the variable account and certain other separate accounts of Transamerica and
affiliates of Transamerica. TSSC is an indirect wholly-owned subsidiary of
Transamerica Insurance Corporation. TSSC is registered with the Commission as a
broker-dealer and is a member of the National Association of Securities Dealers,
Inc. ("NASD"). Transamerica pays TSSC for acting as the principal underwriter
under a distribution agreement.
TSSC has entered into sales agreements with other broker-dealers to solicit
applications for the contracts through registered representatives who are
licensed to sell securities and variable insurance products. These agreements
provide that applications for the contracts may be solicited by registered
representatives of the broker-dealers appointed by Transamerica to sell its
variable life insurance and variable annuities. These broker-dealers are
registered with the Commission and are members of the NASD. The registered
representatives are authorized under applicable state regulations to sell
variable life insurance and variable annuities.
Under the agreements, applications for contracts will be sold by
broker-dealers which will receive compensation as described in the prospectus.
The offering of the contracts is expected to be continuous and TSSC does
not anticipate discontinuing the offering of the contracts. However, TSSC
reserves the right to discontinue the offering of the contracts.
During fiscal year 1998, $36,643,441 in commissions were paid to TSSC as
underwriter of the contracts; no amounts were retained by TSSC. Under the sales
agreements, TSSC will pay broker-dealers compensation based on a percentage of
each purchase payment. This percentage may be up to 4% and in certain situations
additional amounts for marketing allowances, production bonuses, service fees,
sales awards and meetings, and asset based trailer commissions may be paid.
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
Title to assets of the variable account is held by Transamerica. The assets
of the variable account are kept separate and apart from Transamerica general
account assets. Records are maintained of all purchases and redemptions of
portfolio shares held by each of the sub-accounts.
STATE REGULATION
We are subject to the insurance laws and regulations of all the states
where we are licensed to operate. The availability of certain contract rights
and provisions depends on state approval and/or filing and review processes.
Where required by state law or regulation, the contract will be modified
accordingly.
RECORDS AND REPORTS
All records and accounts relating to the variable account will be
maintained by us or by our Service Office. As presently required by the
provisions of the 1940 Act and regulations promulgated thereunder which pertain
to the variable account, reports containing such information as may be required
under the 1940 Act or by other applicable law or regulation will be sent to
owners semi-annually at their last known address of record.
FINANCIAL STATEMENTS
This Statement of Additional Information contains the financial statements
of the variable account as of and for the period ended December 31, 1998.
The financial statements for Transamerica included in this statement of
additional information should be considered only as bearing on our ability to
meet our obligations under the contracts. They should not be considered as
bearing on the investment performance of the assets in the variable account.
<PAGE>
APPENDIX
Accumulation Transfer Formula
Transfers after the annuity date are implemented according to the
following formulas:
(1) Determine the number of units to be transferred from the variable
sub-account as follows:
= AT/AUV1
(2) Determine the number of variable accumulation units remaining in
such variable sub-account (after the transfer):
= UNIT1 AT/AUV1
(3) Determine the number of variable accumulation units in the
transferee variable sub-account (after the transfer):
= UNIT2 + AT/AUV2
(4) Subsequent variable accumulation payments will reflect the changes
in variable accumulation units in each variable sub-account as of the
next variable accumulation payment's due date.
Where:
(AUV1) is the variable accumulation unit value of the variable
sub-account that the transfer is being made from as of the end of the
valuation period in which the transfer request was received.
(AUV2) is the variable accumulation unit value of the variable
sub-account that the transfer is being made to as of the end of the
valuation period in which the transfer request was received.
(UNIT1) is the number of variable accumulation units in the variable
sub-account that the transfer is being made from, before the transfer.
(UNIT2) is the number of variable accumulation units in the variable
sub-account that the transfer is being made to, before the transfer.
(AT) is the dollar amount being transferred from the variable
sub-account.
3
<PAGE>
1
PROFILE
of the
TRANSAMERICA CATALYSTsm VARIABLE ANNUITY
Issued by
Transamerica Life Insurance and Annuity Company
May 1, 1999
This Profile is a summary of some of the more important points that you
should know and consider before purchasing the contract. The contract
is more fully described in the full prospectus that accompanies this
Profile. Please read the prospectus carefully.
1. The Contract. The Transamerica Catalystsm Variable Annuity is a contract
between you and Transamerica Life Insurance and Annuity Company that allows you
to invest your purchase payments in your choice of 17 mutual fund portfolios
("portfolios") in the variable account and two general account options. The
portfolios are professionally managed and you can gain or lose money invested in
a portfolio, but you could also earn more than investing in the general account
options. We guarantee the safety of money invested in the general account
options. Certain portfolios and general account options may not be available in
all states.
The contract is a deferred annuity and it has two phases: the accumulation phase
and the annuitization phase. During the accumulation phase, you can make
additional payments to your contract, transfer money among the investment
options, and withdraw some or all of your investment. During this phase, your
earnings accumulate on a tax-deferred basis for individuals, but some or all of
any money you withdraw may be taxable and/or subject to penalty. Tax deferral is
not available for non-qualified contracts owned by corporations and some trusts.
During the annuitization phase, we will make periodic payments to you. The
dollar amount of the payments may depend on the amount of money invested and
earned during the accumulation phase and on other factors, such as the
annuitant's age and sex.
2. Annuity Payments. You can generally decide when to end the accumulation phase
and begin receiving annuity payments from us. You may choose fixed payments,
where the dollar amount of each payment generally remains the same, or variable
payments, where the dollar amount of each payment may increase or decrease based
on the investment performance of the portfolios you select. You can choose among
payments for the lifetime of an individual, or payments for the longer of one
lifetime or a guaranteed period of 10, 15, or 20 years, or payments for one
lifetime and the lifetime of another individual.
3. Purchasing a Contract. Generally you must invest at least $5,000 ($2,000 for
IRAs) to purchase a contract. You can make additional payments of at least $200
each ($100 each if made under an automatic payment plan deducted from your bank
account). When you make a payment, we currently add a credit of 3.25% of the
payment to your account value. We may vary this percentage. You may cancel your
contract during the free look period.
The Transamerica Catalyst Variable Annuity is designed for long-term
tax-deferred accumulation of assets, generally for retirement and other
long-term goals. Individuals in high tax brackets get the most benefit from the
tax deferral feature. You should not invest in the contract for short-term
purposes or if you cannot take the risk of losing some of your investment.
<PAGE>
4. Investment Options. VARIABLE ACCOUNT: You can invest in any of the following
17 portfolios:
<TABLE>
<CAPTION>
----------------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alger American Income & Growth MFS VIT Research
----------------------------------------------- -------------------------------------------------
----------------------------------------------- -------------------------------------------------
Alliance VPF Growth & Income MSDW UF Fixed Income
----------------------------------------------- -------------------------------------------------
----------------------------------------------- -------------------------------------------------
Alliance VPF Premier Growth MSDW UF High Yield
----------------------------------------------- -------------------------------------------------
----------------------------------------------- -------------------------------------------------
Dreyfus VIF Capital Appreciation MSDW UF International Magnum
----------------------------------------------- -------------------------------------------------
----------------------------------------------- -------------------------------------------------
Dreyfus VIF Small Cap OCC Accumulation Trust Managed
----------------------------------------------- -------------------------------------------------
----------------------------------------------- -------------------------------------------------
Janus Aspen Series Balanced OCC Accumulation Trust Small Cap
----------------------------------------------- -------------------------------------------------
----------------------------------------------- -------------------------------------------------
Janus Aspen Series Worldwide Growth Transamerica VIF Growth
----------------------------------------------- -------------------------------------------------
----------------------------------------------- -------------------------------------------------
MFS VIT Emerging Growth Transamerica VIF Money Market
----------------------------------------------- -------------------------------------------------
----------------------------------------------- -------------------------------------------------
MFS VIT Growth with Income
----------------------------------------------- -------------------------------------------------
</TABLE>
You can earn or lose money in any of these portfolios. These portfolios are
described in their own prospectuses. All portfolios may not be available in all
states.
GENERAL ACCOUNT: You can also allocate payments to the general account options,
where we guarantee the principal invested plus an annual interest rate of at
least 3%. The general account options include a fixed account and guarantee
period options.
5. Expenses. We make certain charges and deductions in order to provide the
benefits and features available under the contract:
If you withdraw your money within seven years of investing it, there
may be a contingent deferred sales load of up to 8% of the amount
invested.
We deduct an annual account fee of no more than $30 (the fee is waived
for account values over $50,000).
We deduct insurance and administrative charges of 1.35% per year from
your average daily value in the variable account.
If you elect the Guaranteed Minimum Death Benefit Rider, we will
deduct a monthly fee equal to 1/12 of 0.20% of the account value.
If you elect the Living Benefits Rider (or Waiver of Contingent
Deferred Sales Load Rider in some states), we will deduct a monthly fee
equal to 1/12 of 0.05% of the account value.
The first 18 transfers each year are free (then we will deduct a $10
fee for each additional transfer).
Advisory fees are also deducted by the portfolios' managers, and the
portfolios pay other expenses which, in total, range from 0.60% to
1.15% of the amounts in the portfolios.
There might be premium tax charges ranging from 0 to 5% of your
investment and/or amounts you use to purchase annuity benefits
(depending on your state's law).
The following chart shows these charges (not including the optional Living
Benefits Rider fee, any transfer fees or premium taxes). The $30 annual account
fee is included in the first column as a charge of 0.075%. The third column is
the sum of the first two columns. The examples in the last two columns show the
total amounts you would be charged if you invested $1,000, a 3.25% credit was
added to the investment and it grew 5% each year, and you withdrew your entire
investment after one year or 10 years. Year one includes the contingent deferred
sales load and year 10 does not.
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Total Total Total
Annual Annual Total Expenses Expenses
Insurance Portfolio Annual at End of at End of
Charges Charges Charges 1 Year 10 Years
------------------------------------------------------------------
- -----------------------------------------
<S> <C> <C> <C> <C> <C>
Alger American Income & Growth 1.425% 0.70% 2.125 $94 $254
Alliance VPF Growth & Income 1.425% 0.73% 2.155 $95 $257
Alliance VPF Premier Growth 1.425% 1.06% 2.485 $98 $291
Dreyfus VIF Capital Appreciation 1.425% 0.81% 2.235 $95 $265
Dreyfus VIF Small Cap 1.425% 0.77% 2.195 $95 $261
Janus Aspen Series Balanced 1.425% 0.74% 2.165 $95 $258
Janus Aspen Series Worldwide Growth 1.425% 0.72% 2.145 $94 $256
MFS Emerging Growth 1.425% 0.85% 2.275 $96 $270
MFS Growth & Income 1.425% 0.88% 2.305 $96 $273
MFS Research 1.425% 0.86 % 2.285 $96 $271
MSDW UF Fixed Income 1.425% 0.70% 2.125 $94 $254
MSDW UF High Yield 1.425% 0.80% 2.225 $95 $264
MSDW UF International Magnum 1.425% 1.15% 2.575 $99 $300
OCC Accumulation Trust Managed 1.425% 0.82% 2.245 $95 $266
OCC Accumulation Trust Small Cap 1.425% 0.88% 2.305 $96 $273
Transamerica VIF Growth 1.425% 0.85% 2.275 $96 $270
Transamerica VIF Money Market 1.425% 0.60% 2.025 $93 $243
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The Annual Portfolio Charges above are for the year ended December 31, 1998 and
reflect any expense reimbursements or fee waivers. Expenses may be higher or
lower in the future. See the "Variable Account Fee Table" in the Transamerica
Catalyst Variable Annuity prospectus for more detailed information.
6. Federal Income Taxes. Individuals generally are not taxed on increases in the
account value until a distribution occurs (e.g., a withdrawal or annuity
payment) or is deemed to occur (e.g., a pledge, loan, or assignment of the
contract). If you withdraw money, earnings come out first and are taxed.
Generally, some portion (sometimes all) of any distribution or deemed
distribution is taxable as ordinary income. In some cases, income taxes will be
withheld from distributions. If you are under age 59 1/2 when you withdraw
money, an additional 10% federal tax penalty may apply on the withdrawn
earnings. Certain owners of non-qualified contracts that are not individuals may
be currently taxed on increases in the account value, whether distributed or
not. Qualified contracts are subject to special income tax rules depending on
the plan or arrangement.
7. Access to Your Money. You can generally take money out at any time during the
accumulation phase. We may assess a contingent deferred sales load of up to 8%
of a purchase payment, but no contingent deferred sales load will be assessed on
money that has been in the contract for seven years or longer. In certain cases,
if you elect the Living Benefits Rider when you purchase the contract, the
contingent deferred sales load may be waived if you are in a hospital or nursing
home for a long period or, in some states, if you are diagnosed with a terminal
illness, or if you are receiving medically required in-home care (if the
contingent deferred sales load is waived, any credit less than 12 months old
will be forfeited). Subject to certain conditions, each contract year you may
withdraw up to 10% of purchase payments received less than seven years ago,
without incurring a contingent deferred sales load. Withdrawals from qualified
contracts may be subject to severe restrictions and, in certain circumstances,
prohibited.
You may have to pay income taxes on amounts you withdraw and there may also be a
10% tax penalty if you make withdrawals before you are 59 1/2 years old.
If you withdraw money from a guarantee period prematurely, you may forfeit some
of the interest that you earned, but you will always receive the principal you
invested plus 3% interest, less any contingent deferred sales load that may
apply. 8. Past Investment Performance. The value of the money you allocate to
the portfolios will go up or down, depending on the investment performance of
the portfolios you select. The following chart shows the adjusted past
investment performance on a year-by-year basis for each portfolio. These figures
have already been reduced by the insurance charges, the account fee, the
advisory fee and all the expenses of the portfolios. These figures do not
include the contingent deferred sales load, the fee for the optional Living
Benefits Rider, any transfer fees or premium taxes, which would reduce
performance if applied. The credit we add to the account value is not included
in these figures.
Past performance is no guarantee of future performance or earnings.
<TABLE>
<CAPTION>
CALENDAR YEAR
----------------------------------------------------------------
SUB-ACCOUNT 1998 1997 1996 1995 1994
----------------------------------------------------------------
- -------------------------------------------
<S> <C> <C> <C> <C> <C>
Alger American Income & Growth 30.55% 34.37% 17.98% 33.23% -9.59%
Alliance VPF Growth & Income 19.20% 26.98% 22.34% 33.96% -1.85%
Alliance VPF Premier Growth 45.93% 31.98% 20.97% 42.82% -4.34%
Dreyfus VIF Capital Appreciation 28.36% 26.29% 23.78% 31.65% 1.57%
Dreyfus VIF Small Cap -4.80% 15.10% 14.94% 27.56% 6.22%
Janus Aspen Series Balanced 32.42% 20.38% 14.54% 23.03% -0.59%
Janus Aspen Series Worldwide Growth 27.13% 20.43% 27.22% 25.58% 0.09%
MFS Emerging Growth 32.38% 20.11% 15.36% NA NA
MFS Growth & Income 20.62% 27.96% 22.69% NA NA
MFS Research 21.59% 18.64% 20.60% NA NA
MSDW UF Fixed Income 6.39% NA NA NA NA
MSDW UF High Yield 3.33% NA NA NA NA
MSDW UF International Magnum 7.44% NA NA NA NA
OCC Accumulation Trust Managed 5.62% 20.57% 21.03% 43.52% 1.16%
OCC Accumulation Trust Small Cap -10.32% 20.52% 17.03% 13.60% -2.42%
Transamerica VIF Growth 41.29% 44.45% 26.00% 51.34% 6.10%
Transamerica VIF Money Market NA NA NA NA NA
- -----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------
SUB-ACCOUNT 1993 1992 1991 1990 1989
----------------------------------------------------------------
- -------------------------------------------
Alger American Income & Growth 8.78% 7.09% 21.77% -1.15% 5.88%
Alliance VPF Growth & Income 10.11% 6.40% NA NA NA
Alliance VPF Premier Growth 11.03% NA NA NA NA
Dreyfus VIF Capital Appreciation NA NA NA NA NA
Dreyfus VIF Small Cap 65.82% 69.04% 156.16% NA NA
Janus Aspen Series Balanced NA NA NA NA NA
Janus Aspen Series Worldwide Growth NA NA NA NA NA
MFS Emerging Growth NA NA NA NA NA
MFS Growth & Income NA NA NA NA NA
MFS Research NA NA NA NA NA
MSDW UF Fixed Income NA NA NA NA NA
MSDW UF High Yield NA NA NA NA NA
MSDW UF International Magnum NA NA NA NA NA
OCC Accumulation Trust Managed 8.82% 16.96% 43.94% -5.01% 30.69%
OCC Accumulation Trust Small Cap 17.82% 19.77% 46.05% -11.06% 16.68%
Transamerica VIF Growth 20.98% 12.19% 39.32% -12.05% 32.24%
Transamerica VIF Money Market NA NA NA NA NA
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
9. Death Benefit. If you or your joint owner die during the accumulation phase,
a death benefit will be paid to your beneficiary.
If you or your joint owner die before either of you turn 80 the death benefit
will be the greater of: (1) the contract's account value reduced by any credits
less than 12 months old; or (2) the sum of all purchase payments less
withdrawals and applicable premium taxes. If death occurs after your or your
joint owner's 80th birthday, the death benefit is equal to the contract's
account value reduced by any credits less than 12 months old.
If you elect the Guaranteed Minimum Death Benefit Rider the death benefit will
be as described below. If you or your joint owner die before either of you turn
85, the death benefit will be the greatest of three amounts: (1) the account
value; (2) the sum of all purchase payments less the proportion of withdrawals
taken and applicable premium tax charges; or (3) the highest account value on
any contract anniversary prior to the earlier of your or your joint owner's 85th
birthday, plus purchase payments made, less the proportion of withdrawals taken
and premium tax charges since that contract anniversary. If death occurs after
your or your joint owner's 85th birthday, the death benefit will be the greater
of two amounts: (1) the account value; or (2) the highest account value on any
contract anniversary prior to the earlier of your or your joint owner's 85th
birthday, plus purchase payments made, less the proportion of withdrawals taken
and premium tax charges since that contract anniversary.
10. Other Information. The Transamerica Catalyst Variable Annuity offers other
features you might be interested in. Some of these features are as follows:
Free Look. After you get your contract, you have 10 days to look it over and
decide if it is really right for you (this period may be longer in certain
states). If you decide not to keep the contract, you can cancel it during this
period by delivering a written notice of cancellation and returning the contract
to the Service Center at the address listed in item 11 below. Unless otherwise
required by law, we will refund the purchase payments allocated to any general
account option (less any withdrawals) plus the value in the variable account as
of the date the written notice and the contract are received by our Service
Center.
Telephone Transfers. You can generally arrange to transfer money between the
investments in your contract by telephone.
Dollar Cost Averaging. You can instruct us to automatically transfer money from
either the money market sub-account or the fixed account to any of the other
variable sub-accounts each month. This is intended to give you a lower average
cost per share or unit than a single one time investment.
Automatic Rebalancing Option. The performance of each sub-account may cause the
allocation of value among the sub-accounts to change. You may instruct us to
periodically automatically rebalance the amounts in the sub-accounts by
reallocating amounts among them.
Systematic Withdrawal Option. You can arrange to have us send you money
automatically each month out of your contract, during the accumulation phase.
There are limits on the amounts, and the payments may be taxable, and, prior to
age 59 1/2, subject to the penalty tax. If the total amount of withdrawals
(including systematic withdrawals) made in a contract year exceed the allowed
amount to be withdrawn without a charge for that year, any applicable contingent
deferred sales load will then apply.
Automatic Payout Option. For qualified contracts, many pension and retirement
plans require that minimum amounts be distributed from the plan at certain ages.
You can arrange to have such amounts distributed automatically during the
accumulation phase.
Living Benefits Rider. If you elect this option, we will waive the applicable
contingent deferred sales load if you or the joint owner: (a) receive extended
medical care in a qualifying institution for at least 60 consecutive days; (b)
receive medically required hospice or in-home care for at least 60 consecutive
days,
(c) are diagnosed as terminally ill after the first contract year and are
reasonably expected to die within 12 months.
Guaranteed Minimum Death Benefit Rider. The option Rider, if elected, provides
that if you or the joint owner dies, a Guaranteed Minimum Death Benefit will be
paid. If death occurs before the owner's 85th birthday, the Guaranteed Minimum
Death Benefit is the greatest of: (a) the account value; (b) the sum of all
purchase payments less withdrawals taken and applicable premium tax charges; or
(c) the highest account value on any contract anniversary plus purchase payments
made, less withdrawals taken and premium tax charges since that contract
anniversary. If death occurs after the owner's 85th birthday, the Guaranteed
Minimum Death Benefit is the greatest of: (a) the account value; or (b) the
highest account value on any contract anniversary before either owner's 85th
birthday, plus purchase payments made, less withdrawals taken and premium tax
charges since that contract anniversary.
These features may not be available in all states and may not be suitable for
your particular situation.
11. Inquiries. If you need further information or have any questions about the
contract, please write or call:
Transamerica Annuity Service Center
401 North Tryon Street, Suite 700
Charlotte, North Carolina 28202
800-420-7749
4
<PAGE>
2
PROSPECTUS FOR THE
TRANSAMERICA SERIESsm CATALYST VARIABLE ANNUITY
A Flexible Premium Deferred Variable Annuity
Issued By
Transamerica Life Insurance
and
Annuity Company
Offering 17 Sub-Accounts within the Variable Account
Designated as Separate Account VA-6
In Addition to:
A Fixed Account
&
A Guarantee Period Account
<TABLE>
<CAPTION>
<S> <C> <C>
This prospectus contains Portfolios Associated with Sub-Accounts
information you should Alger American Income and Growth
know before investing. Alliance VPF Growth and Income
Alliance VPF Premier Growth
Please keep this prospectus Dreyfus VIF Capital Appreciation
for future reference. Dreyfus VIF Small Cap
Janus Aspen Series Series Balanced
You can obtain more information about Janus Aspen Series Series Worldwide Growth
the contract by requesting a copy of the MFS VIT Emerging Growth
Statement of Additional Information ("SAI") MFS VIT Growth with Income
dated May 1, 1999. The SAI is available MFS VIT Research
free by writing to Transamerica Life MSDW UF Fixed Income
Insurance and Annuity Company, MSDW UF High Yield
MSDW UF International Magnum
Annuity Service Center, OCC Accumulation Trust Managed
401 N. Tryon St., Suite 700, OCC Accumulation Trust Small Cap
Charlotte, NC 28202 or Transamerica VIF Growth
by calling 800-420-7749. Transamerica VIF Money Market
</TABLE>
The current SAI has been filed with the
Securities and Exchange Commission and is
incorporated by reference into this
prospectus. The table of contents of the
SAI is included at the end of this
prospectus.
The SEC's web site is http://www.sec.gov
Transamerica's web site is
http://www.transamerica.com
Neither the SEC nor any state securities commission has approved this investment
offering or determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
May 1, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SUMMARY.....................................................................................................4
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT...................................15
Transamerica Life Insurance and Annuity Company...................................................15
Published Ratings.................................................................................15
Insurance Marketplace Standards Association.......................................................15
The Variable Account..............................................................................15
THE PORTFOLIOS.............................................................................................16
THE CONTRACT...............................................................................................20
PURCHASE PAYMENTS..........................................................................................21
Allocation of Purchase Payments...................................................................22
Free Look Option..................................................................................22
Investment Option Limit...........................................................................22
How Credits Are Applied...........................................................................22
ACCOUNT VALUE..............................................................................................23
How Variable Accumulation Units Are Valued........................................................23
TRANSFERS..................................................................................................24
Before the Annuity Date...........................................................................24
Other Restrictions................................................................................24
Telephone Transfers...............................................................................25
Dollar Cost Averaging.............................................................................25
Eligibility Requirement for Dollar Cost Averaging ................................................25
Special Dollar Cost Averaging Option..............................................................26
Automatic Asset Rebalancing.......................................................................26
After the Annuity Date............................................................................26
CASH WITHDRAWALS...........................................................................................26
Systematic Withdrawal Option......................................................................27
Automatic Payment Option (APO)....................................................................28
DEATH BENEFIT..............................................................................................29
Payment of Death Benefit..........................................................................29
Designation of Beneficiaries......................................................................30
Death of Owner of Joint Owner Before Annuity Date.................................................30
If Annuitant Dies Before Annuity Date.............................................................31
Death After Annuity Date..........................................................................31
Survival Provision................................................................................31
CHARGES, FEES AND DEDUCTIONS...............................................................................31
Contingent Deferred Sales Load/Surrender Charge...................................................31
Free Withdrawal - Allowed Amount..................................................................32
Free Withdrawal - Living Benefits Rider...........................................................32
Other Free Withdrawals............................................................................32
Administrative Charges............................................................................33
Mortality and Expense Risk Charge.................................................................33
Living Benefits Rider Fee.........................................................................34
Guaranteed Minimum Death Benefit Rider Fee .......................................................34
Premium Tax Charges...............................................................................34
Transfer Fee......................................................................................34
Option and Service Fees...........................................................................34
Taxes.............................................................................................34
Portfolio Expenses................................................................................34
Interest Adjustment...............................................................................34
Sales in Special Situations.......................................................................34
DISTRIBUTION OF THE CONTRACT...............................................................................35
SETTLEMENT OPTION PAYMENTS.................................................................................35
Annuity Date......................................................................................35
Settlement Option Payments........................................................................36
Election of Settlement Option Forms and Payment Options...........................................36
Payment Options...................................................................................36
Fixed Payment Option..............................................................................36
Variable Payment Option...........................................................................36
Settlement Option Forms...........................................................................37
FEDERAL TAX MATTERS........................................................................................38
Introduction......................................................................................38
Purchase Payments.................................................................................39
Taxation of Annuities.............................................................................39
Qualified Contracts...............................................................................41
Taxation of Transamerica .........................................................................43
Tax Status of Contract............................................................................43
Possible Changes in Taxation......................................................................44
Other Tax Consequences............................................................................44
PERFORMANCE DATA...........................................................................................44
YEAR 2000 ISSUE............................................................................................46
LEGAL PROCEEDINGS..........................................................................................46
LEGAL MATTERS..............................................................................................47
ACCOUNTANTS AND FINANCIAL STATEMENTS.......................................................................47
VOTING RIGHTS..............................................................................................47
AVAILABLE INFORMATION......................................................................................47
STATEMENT OF ADDITIONAL INFORMATION - TABLE OF CONTENTS....................................................48
APPENDIX A ................................................................................................49
The General Account Options.......................................................................49
Fixed Account ....................................................................................49
Special Dollar Cost Averaging Option..............................................................50
The Guarantee Period Account .....................................................................50
APPENDIX B.................................................................................................53
Example of Variable Accumulation Unit Value Calculations..........................................53
Example of Variable Annuity Unit Value Calculations...............................................53
Example of Variable Annuity Payment Calculations..................................................53
APPENDIX C.................................................................................................54
Condensed Financial Information...................................................................54
APPENDIX D.................................................................................................55
Definitions.......................................................................................55
APPENDIX E.................................................................................................57
Disclosure Statement for Individual Retirement Annuities..........................................57
</TABLE>
<PAGE>
12
<PAGE>
SUMMARY
The Contract
The Transamerica Seriessm Transamerica Catalystsm Variable Annuity is a flexible
purchase payment deferred annuity. It is designed to aid:
your long-term financial planning needs; and
your long-term retirement needs
The contract may be used in connection with a retirement plan which qualifies
as:
a retirement program under Sections 403(b), 408 or 408A of the Code;
with various types of qualified pension and profit sharing plans under
Section 401 of the Code; or
with non-qualified plans.
Some qualified contracts may not be available in all states or in all
situations.
The contract is issued by Transamerica Life Insurance and Annuity Company, an
indirect wholly-owned subsidiary of Transamerica Corporation.
The principal office for Transamerica Life Insurance and Annuity Company is:
401 North Tryon Street
Charlotte, North Carolina
28202
We will issue the contract as:
a certificate under a group annuity contract in some states; and
as an individual annuity contract in other states.
The term contract as used in this prospectus refers to either:
the individual annuity contract; or
to a certificate issued under a group annuity contract.
The term owner refers to:
the owner or owners of the individual contract; or
the owner or owners of the certificate.
We will establish and maintain an account for each contract. Each owner will
receive either:
an individual annuity contract; or
a certificate evidencing the owner's coverage under a group annuity
contract.
The contract provides that the account value, after certain adjustments, will be
applied to a settlement option on a future date you select. This date will be
the annuity date.
You may allocate all or portions of your purchase payments to:
one or more variable sub-accounts; or
the general account options.
At the time of each purchase payment we will add a credit to your account value
in an amount equal to a percentage of each purchase payment.
Sub-Account Values Will Vary According to Investment Experience. The account
value prior to the annuity date, except for amounts in the general account
options, will vary depending on the investment experience of each of the
variable sub-accounts selected by you as the owner. All benefits and values
provided under the contract, when based on the investment experience of the
variable account, are variable and are not guaranteed as to dollar amount.
Therefore, prior to the annuity date, you bear the entire investment risk under
the contract for amounts allocated to the variable account.
There is no guaranteed or minimum cash surrender value on amounts allocated to
the variable account, so the proceeds of a surrender could be less than the
amount invested.
The initial purchase payment for each contract must be at least $5,000, or, if
for contributory IRAs, SEP/IRAs and Roth IRAs, $2,000. Generally each additional
purchase payment must be at least $1,000, unless an automatic purchase payment
plan is selected. See Purchase Payments on page 21.
The Variable Account
The variable account is a separate account, designated Separate Account VA-6,
that is subdivided into variable sub-accounts. Assets of each variable
sub-account are invested in a specified mutual fund portfolio. The variable
sub-accounts currently available for investment are:
Alger American Income & Growth Alliance VPF Growth & Income Alliance VPF Premier
Growth Dreyfus VIF Capital Appreciation Dreyfus VIF Small Cap Janus Aspen Series
Balanced Janus Aspen Series Worldwide Growth MFS VIT Emerging Growth MFS VIT
Growth with Income MFS VIT Research
MSDW UF Fixed Income
MSDW UF High Yield
MSDW UF International Magnum
OCC Accumulation Trust Managed
OCC Accumulation Trust Small Cap
Transamerica VIF Growth
Transamerica VIF Money Market
The portfolios pay their investment advisers and administrators certain fees
charged against the assets of each portfolio. The variable accumulated value, if
any, of a contract and the amount of any variable settlement option payments
will vary to reflect the investment performance of the variable sub-accounts to
which amounts have been allocated. Additionally, applicable charges are
deducted. For more information see Charges, Fees and Deductions on page 31, The
Portfolios on page 16, and the accompanying portfolio prospectuses.
<PAGE>
<TABLE>
<CAPTION>
Sales Load(1)
<S> <C>
Sales Load Imposed on Purchase Payments 0%
Maximum Contingent Deferred Sales Load(2) 8%
Range of Contingent Deferred Sales Load Over Time:
Contingent Deferred
Years Since Sales Load
Purchase Payment Receipt as a percentage of purchase payment
Less than 1 year 8%
1 year but less than 2 years 8%
2 years but less than 3 years 7%
3 years but less than 4 years 6%
4 years but less than 5 years 5%
5 years but less than 6 years 4%
6 years but less 7 years 3%
7 or more years 0%
<PAGE>
Other Contract Expenses
Transfer Fee, first 18 per contract year(3) 0 Fees For Other Services
and Options(4) 0 Account Fee(5) $30 Living Benefits Rider Fee, if
elected(6) 0.05% Guaranteed Minimum Death Benefit Rider Fee, if
elected(6) 0.20%
Variable Account Annual Expenses(7)
as a percentage of the variable accumulated value
Mortality and Expense Risk Charge 1.20%
Administrative Expense Charge(8) 0.15%
Total Variable Account Annual Expenses 1.35%
Portfolio Expenses
</TABLE>
<TABLE>
<CAPTION>
as a percentage of assets after fee waiver and/or expense reimbursement(9)
Total Portfolio
Management Other Annual
Portfolio Fees Expenses Expenses
<S> <C> <C> <C>
Alger American Income & Growth 0.625% 0.075% 0.70%
Alliance VPF Growth & Income 0.625% 0.105% 0.73%
Alliance VPF Premier Growth 0.97% 0.09% 1.06%
Dreyfus VIF Capital Appreciation 0.75% 0.06% 0.81%
Dreyfus VIF Small Cap 0.75% 0.02% 0.77%
Janus Aspen Series Balanced 0.72% 0.02% 0.74%
Janus Aspen Series Worldwide Growth 0.65% 0.07% 0.72%
MFS VIT Emerging Growth 0.75% 0.10% 0.85%
MFS VIT Growth with Income 0.75% 0.13% 0.88%
MFS VIT Research 0.75% 0.11% 0.86%
MSDW UF Fixed Income 0.06% 0.64% 0.70%
MSDW UF High Yield 0.15% 0.65% 0.80%
MSDW UF International Magnum 0.15% 1.00% 1.15%
OCC Accumulation Trust Managed 0.78% 0.04% 0.82%
OCC Accumulation Trust Small Cap 0.15% 0.08% 0.88%
Transamerica VIF Growth 0.64% 0.21% 0.85%
Transamerica VIF Money Market 0.00% 0.60% 0.60%
</TABLE>
Expense information regarding the portfolios has been provided by the
portfolios. In preparing the tables above and below and the examples that
follow, we have relied on the figures provided by the portfolios. We have no
reason to doubt the accuracy of that information, but we have not verified those
figures. These figures are for the year ended December 31, 1998. Actual expenses
in future years may be higher or lower than these figures.
Notes to Fee Table:
1. The contingent deferred sales load applies to each contract, regardless of
how the account value is allocated between the variable account and the
general account options.
2. A portion of the purchase payments may be withdrawn each contract year
without imposition of any contingent deferred sales load, and after seven
years, a purchase payment may be withdrawn free of any contingent deferred
sales load. See Charges, Fees and Deductions on page 31.
3. A transfer fee of $10 will be imposed for each transfer in excess of 18 in a
contract year.
4. We currently do not impose fees for any other services, or options.
However, we reserve the right to impose a fee for various services and
options including dollar cost averaging, systematic withdrawals, automatic
payouts, asset allocation and asset rebalancing.
5. The current account fee is $30, or 2% of the account value, if less, per
contract year. This fee will be waived for account values over $50,000.
This limit may be changed in the future. The fee may be changed, but it may
not exceed $60, or 2% of the account value, if less.
6. If the owner elects a rider, the rider fee will be deducted at the rate of
1/12 of the annual fee at the end of each contract month based on the
account value at that time.
7. The variable account annual expenses do not apply to the general account
options.
8. The current annual administrative expense charge of 0.15% may be increased to
no more than 0.35%.
9. From time to time, the portfolios' investment advisers, each in its own
discretion, may voluntarily waive all or part of their fees and/or
voluntarily assume certain portfolio expenses. The expenses shown in the
Portfolio Expenses table are the expenses paid for 1998. The expenses shown
in that table reflect a portfolio's adviser's waivers of fees or
reimbursement of expenses, if applicable. It is anticipated that such
waivers or reimbursements will continue for calendar year 1999. Without
such waivers or reimbursements, the annual expenses for 1998 for certain
portfolios would have been, as a percentage of assets, as follows:
<TABLE>
<CAPTION>
Management Other Total Portfolio
Fee Expenses Annual Expense
<S> <C> <C> <C>
Alliance VPF Premier Growth 1.00 0.09 1.09
Janus Aspen Series Worldwide Growth 0.67 0.07 0.74
MSDW UF Fixed Income 0.40 0.64 1.04
MSDW UF High Yield 0.50 0.65 1.15
MSDW UF International Magnum 0.80 1.00 1.80
Transamerica VIF Growth 0.75 0.21 0.96
Transamerica VIF Money Market 0.35 2.68 3.03
</TABLE>
<PAGE>
Examples
The following tables show the total expenses an owner would incur in various
situations assuming a $1,000 investment and a 5% annual return on assets.
These examples assume an average account value of $40,000 and, therefore, a
deduction of 0.075% has been made to reflect the $30 account fee, and a 3.25%
credit added to the $1000 purchase payment. These examples also assume that all
amounts were allocated to the variable sub-account indicated. These examples
also assume that no transfer fees or other option or service fees or premium tax
charges have been assessed. Premium tax charges may be applicable. See Premium
Tax Charges on page 34.
Examples 1 through 3 show expenses for contracts without the optional Living
Benefit Rider and the Guaranteed Minimum Death Benefit Rider based on fee
waivers and reimbursements for the portfolios for 1998. There is no guarantee
that any fee waivers or expense reimbursements will continue in the future. For
annuitizations before the first contract anniversary, and for annuitizations
under a form that does not include life contingencies, the contingent deferred
sales load may apply. Expense examples in column 1 illustrate this occurrence.
An owner would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
<TABLE>
<CAPTION>
Example 1: If the owner surrenders the contract at the end of the applicable
time period:
------------------------------------------------
1 Year 3 Years 5 Years 10 Years
------------------------------------------------
-------------------------------------------------
<S> <C> <C> <C> <C>
Alger American Income & Growth $94 $132 $163 $254
Alliance VPF Growth & Income $95 $133 $164 $257
Alliance VPF Premier Growth $98 $143 $182 $291
Dreyfus VIF Capital Appreciation $95 $135 $169 $265
Dreyfus VIF Small Cap $95 $134 $167 $261
Janus Aspen Series Balanced $95 $133 $165 $258
Janus Aspen Series Worldwide Growth $94 $132 $164 $256
MFS Emerging Growth $96 $136 $171 $270
MFS Growth & Income $97 $137 $172 $273
MFS Research $96 $137 $177 $271
MSDW UF Fixed Income $94 $132 $163 $254
MSDW UF High Yield $95 $135 $168 $264
MSDW UF International Magnum $99 $146 $186 $300
OCC Accumulation Trust Managed $95 $135 $169 $266
OCC Accumulation Trust Small Cap $96 $137 $172 $273
Transamerica VIF Growth $96 $136 $171 $270
Transamerica VIF Money Market $93 $129 $158 $243
-------------------------------------------------------------------------------------------------
<PAGE>
Example 2: If the owner does not surrender and does not annuitize the contract:
------------------------------------------------
1 Year 3 Years 5 Years 10 Years
------------------------------------------------
-------------------------------------------------
Alger American Income & Growth $22 $69 $118 $254
Alliance VPF Growth & Income $23 $70 $119 $257
Alliance VPF Premier Growth $26 $80 $137 $291
Dreyfus VIF Capital Appreciation $23 $72 $124 $265
Dreyfus VIF Small Cap $23 $71 $122 $261
Janus Aspen Series Balanced $23 $70 $120 $258
Janus Aspen Series Worldwide Growth $22 $69 $119 $256
MFS Emerging Growth $24 $73 $126 $270
MFS Growth & Income $24 $74 $127 $273
MFS Research $24 $74 $126 $271
MSDW UF Fixed Income $22 $69 $118 $254
MSDW UF High Yield $23 $72 $123 $264
MSDW UF International Magnum $27 $83 $141 $300
OCC Accumulation Trust Managed $23 $72 $124 $266
OCC Accumulation Trust Small Cap $24 $74 $127 $273
Transamerica VIF Growth $24 $73 $126 $270
Transamerica VIF Money Market $21 $66 $113 $243
-------------------------------------------------------------------------------------------------
Example 3: If the owner elects to annuitize at the end of the applicable period
under a Settlement Option with life contingencies:
------------------------------------------------
1 Year 3 Years 5 Years 10 Years
------------------------------------------------
-------------------------------------------------
Alger American Income & Growth $22 $69 $118 $254
Alliance VPF Growth & Income $23 $70 $119 $257
Alliance VPF Premier Growth $26 $80 $137 $291
Dreyfus VIF Capital Appreciation $23 $72 $124 $265
Dreyfus VIF Small Cap $23 $71 $122 $261
Janus Aspen Series Balanced $23 $70 $120 $258
Janus Aspen Series Worldwide Growth $22 $69 $119 $256
MFS Emerging Growth $24 $73 $126 $270
MFS Growth & Income $24 $74 $127 $273
MFS Research $24 $74 $126 $271
MSDW UF Fixed Income $22 $69 $118 $254
MSDW UF High Yield $23 $72 $123 $264
MSDW UF International Magnum $27 $83 $141 $300
OCC Accumulation Trust Managed $23 $72 $124 $266
OCC Accumulation Trust Small Cap $24 $74 $127 $273
Transamerica VIF Growth $24 $73 $126 $270
Transamerica VIF Money Market $21 $66 $113 $243
-------------------------------------------------------------------------------------------------
<PAGE>
Examples 4 through 6 show expenses for contracts with the optional Living
Benefits Rider and the Guaranteed Minimum Death Benefit Rider, based on the fee
waivers and reimbursements for the portfolios for 1998. There is no guarantee
that fee waivers or expense reimbursements will continue in the future. For
annuitizations before the first contract anniversary and for annuitizations
under a form that does not include life contingencies, a contingent deferred
sales load may apply. Examples in column 4 illustrate this occurrence.
An owner would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
Example 4: If the owner surrenders the contract at the end of the applicable
time period:
-----------------------------------------------------
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------
-------------------------------------------------
Alger American Income & Growth $97 $140 $176 $280
Alliance VPF Growth & Income $97 $140 $177 $283
Alliance VPF Premier Growth $101 $151 $194 $317
Dreyfus VIF Capital Appreciation $98 $143 $182 $291
Dreyfus VIF Small Cap $96 $142 $180 $287
Janus Aspen Series Balanced $97 $141 $178 $284
Janus Aspen Series Worldwide Growth $97 $140 $177 $282
MFS Emerging Growth $98 $144 $184 $295
MFS Growth & Income $99 $145 $185 $298
MFS Research $98 $144 $184 $296
MSDW UF Fixed Income $97 $140 $176 $280
MSDW UF High Yield $98 $143 $181 $290
MSDW UF International Magnum $101 $153 $199 $325
OCC Accumulation Trust Managed $98 $143 $182 $292
OCC Accumulation Trust Small Cap $99 $145 $185 $298
Transamerica VIF Growth $98 $144 $184 $295
Transamerica VIF Money Market $96 $136 $171 $270
------------------------------------------------------------------------------------------------------
Example 5: If the owner does not surrender and does not annuitize the contract:
-----------------------------------------------------
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------
-------------------------------------------------
Alger American Income & Growth $25 $77 $131 $280
Alliance VPF Growth & Income $25 $77 $132 $283
Alliance VPF Premier Growth $29 $88 $149 $317
Dreyfus VIF Capital Appreciation $26 $80 $137 $291
Dreyfus VIF Small Cap $26 $79 $135 $287
Janus Aspen Series Balanced $25 $78 $133 $284
Janus Aspen Series Worldwide Growth $25 $77 $132 $282
MFS Emerging Growth $26 $81 $139 $295
MFS Growth & Income $27 $82 $140 $298
MFS Research $26 $81 $139 $296
MSDW UF Fixed Income $25 $77 $131 $280
MSDW UF High Yield $26 $80 $136 $290
MSDW UF International Magnum $29 $90 $154 $325
OCC Accumulation Trust Managed $26 $80 $137 $292
OCC Accumulation Trust Small Cap $27 $82 $140 $298
Transamerica VIF Growth $26 $81 $139 $295
Transamerica VIF Money Market $24 $73 $126 $270
------------------------------------------------------------------------------------------------------
Example 6: If the owner elects to annuitize at the end of the applicable period
under a Settlement Option with life contingencies:
-----------------------------------------------------
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------
-------------------------------------------------
Alger American Income & Growth $25 $77 $131 $280
Alliance VPF Growth & Income $25 $77 $132 $283
Alliance VPF Premier Growth $29 $88 $149 $317
Dreyfus VIF Capital Appreciation $26 $80 $137 $291
Dreyfus VIF Small Cap $26 $79 $135 $287
Janus Aspen Series Balanced $25 $78 $133 $284
Janus Aspen Series Worldwide Growth $25 $77 $132 $282
MFS Emerging Growth $26 $81 $139 $295
MFS Growth & Income $27 $82 $140 $298
MFS Research $26 $81 $139 $296
MSDW UF Fixed Income $25 $77 $131 $280
MSDW UF High Yield $26 $80 $136 $290
MSDW UF International Magnum $29 $90 $154 $325
OCC Accumulation Trust Managed $26 $80 $137 $292
OCC Accumulation Trust Small Cap $27 $82 $140 $298
Transamerica VIF Growth $26 $81 $139 $295
Transamerica VIF Money Market $24 $73 $126 $270
------------------------------------------------------------------------------------------------------
</TABLE>
These examples should not be considered representations of past or future
expenses. Actual expenses paid may be greater or less than those shown, subject
to the guarantees in the contract. The assumed 5% annual rate of return is
hypothetical and should not be considered a representation of past or future
annual returns, which may be greater or less than this assumed rate.
<PAGE>
72
Condensed Financial Information
You will find condensed financial information on each sub-account in Appendix C
on page 55. You will find the full financial statements and reports of
independent auditors for the variable account in the Statement of Additional
Information.
General Account Options
There are two types of general account options:
the fixed account; and
the guarantee period account.
The amounts in the fixed account will be credited interest at a rate of not less
than 3% annually. We may credit interest at a rate in excess of 3% at our
discretion for any class. Each interest rate will be guaranteed to be credited
for at least 12 months.
The other general account option, the guarantee period account, provides
specified rates of interest for specified terms, currently three, five and seven
years. These rates are subject to interest adjustments on early withdrawals or
transfers which, if applicable, could reduce the interest credited to the 3%
minimum rate.
The general account options are not available in all states. Refer to the
contract for limitations.
Investment Options Limit
Currently, you may not elect more than a total of 18 investment options over the
life of the contract. Investment options include variable sub-accounts and
general account options.
Transfers Before the Annuity Date
Prior to the annuity date, you may transfer values between the variable
sub-accounts and the general account options. For transfers after the annuity
date, see After the Annuity Date on page 27.
Transfers out of the fixed account are restricted to four per contract year and
to a limited percentage of the fixed account value. We may allow more frequent
transfers under certain services and options, for example, dollar cost
averaging. Transfers out of a guarantee period prior to the end of the term may
be subject to an interest adjustment which may reduce interest credited to the
3% minimum rate.
We currently impose a transfer fee of $10 for each transfer in excess of 18 made
during the same contract year.
Withdrawals
You may withdraw all or part of the cash surrender value on or before the
annuity date. The cash surrender value of your contract is the account value
less any account fee, interest adjustment, contingent deferred sales load and
premium tax charges. The account fee generally will be deducted on a full
surrender of a contract if the account value is then less than $50,000. We may
delay payment of any withdrawal from the general account options for up to six
months.
Withdrawals may be taxable, subject to withholding and a penalty tax.
Withdrawals from qualified contracts may be subject to severe restrictions and,
in certain circumstances, prohibited. See Federal Tax Matters on page 39.
Contingent Deferred Sales Load/
Surrender Charge
We do not deduct a sales charge when purchase payments are made, although
premium tax charges may be deducted. However, if any part of the account value
is withdrawn, we may deduct a contingent deferred sales load, or surrender
charge, of up to 8% of purchase payments. After we have held a purchase payment
for seven years, you may withdraw it without charge. See Contingent Deferred
Sales Load/Surrender Charge on page 32.
In most states, you may elect, for an extra charge, an optional Living Benefits
Rider. It provides that we will waive the contingent deferred sales load in
certain circumstances. We do not assess the contingent deferred sales load on
payment of the death benefit, on transfers within the contract, or on certain
annuitizations.
Also, beginning 30 days from the contract effective date, or at the end of the
free look period if this ends later, you may withdraw any portion of the allowed
amount each contract year without imposition of any contingent deferred sales
load/surrender charge. The allowed amount for each contract year, determined as
of the last contract anniversary, is equal to 10% of purchase payments received
during the last seven years, less any withdrawals already taken that contract
year.
All purchase payments not previously withdrawn that have been held at least
seven years are not subject to a contingent deferred sales load. In calculating
the contingent deferred sales load, we will consider withdrawals to be taken
first from purchase payments, on a first in/first out basis, and then from
earnings and last from any credits.
Other Charges and Deductions
We deduct:
a mortality and expense risk charge of 1.20% annually of the assets in
the variable account; and
an administrative expense charge of 0.15% annually of these assets.
The administrative expense charge may change, but we guarantee it won't exceed a
maximum effective annual rate of 0.35%.
We deduct an account fee of currently $30, or 2% of the account value,
if less, at the end of each contract year and upon surrender.
This fee may change, but we guarantee that it won't exceed the lesser of $60, or
2% of the account value, per contract year. If the account value is more than
$50,000 on the last business day of a contract year, or as of the date the
contract is surrendered, we will waive the account fee for that year.
After the annuity date, we will deduct the annual annuity fee of $30 in equal
installments from each periodic payment under the variable payment option.
For each transfer in excess of 18 during a contract year, we will impose
a transfer fee of $10. See Transfer Fee on page 35.
We do not currently deduct charges for premium taxes, including retaliatory
premium taxes, except
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for annuitizations. But we could impose such charges in some jurisdictions.
Depending on the applicability of such taxes, we could deduct the charges from
purchase payments, from amounts withdrawn, and/or upon annuitization. See
Premium Tax Charges on page 34.
In addition, amounts withdrawn or transferred out of a guarantee period account
prior to the end of its term may be subject to an interest adjustment.
Living Benefits Rider. If, as the owner, you elect the Living Benefits Rider, we
will deduct an annual fee of 0.05% of the account value at the end of each
contract month. The rate is 1/12 times 0.05% times the account value. The Living
Benefit Rider is not available in all states, or may be called a Waiver of
Contingent Deferred Sales Load Rider.
Guaranteed Minimum Death Benefit. If, as the owner, you elect the Guaranteed
Minimum Death Benefit Rider, referred to as the GMDB Rider, we will deduct the
appropriate annual fee at the end of each contract month. The monthly rate is
1/12 times the annual fee times the account value. The annual fee is 0.20% of
the account value. You may only elect this Rider before the contract effective
date. It cannot be reinstated if cancelled. It may not be available in all
states.
Currently, we do not deduct fees for any other services or options under the
contract. However, we do reserve the right to impose fees to cover processing
for certain services and options in the future. This may include dollar cost
averaging, systematic withdrawals, automatic payouts, asset allocation and asset
rebalancing.
Variable Account Fee Table
The purpose of this table is to assist you in understanding the various costs
and expenses that you, as the owner will bear directly and indirectly. The table
reflects expenses of the variable account as well as of the mutual fund
portfolios. The table assumes that the entire account value is in the variable
account. You should consider the information below together with the narrative
provided under the heading Charges, Fees and Deductions on page 31 of this
prospectus, and with the prospectuses for the portfolios. In addition to the
expenses listed below, premium tax charges may be applicable.
Settlement Option Payments
Settlement option payments will be made either on a fixed basis or a variable
basis or a combination of a fixed and variable basis, as you select. You have
flexibility in choosing the annuity date, but it may generally not be a date
later than an annuitant's 85th birthday or the tenth contract anniversary,
whichever occurs last. Certain qualified contracts may have restrictions as to
the annuity date and the types of settlement options available.
Four settlement options are available under the contract:
1. life annuity;
2. life and contingent annuity;
3. life annuity with period certain; or
4. joint and survivor annuity.
Death of Owner Before the Annuity Date
If an owner dies prior to the annuity date and before either the owner's or a
joint owner's 80th birthday, the death benefit for the contract will be the
greater of:
a) the account value reduced by credits less than 12 months old; or
b) the sum of all purchase payments, less withdrawals taken and applicable
premium tax charges.
If you, as owner, die before the annuity date and after either your or a joint
owner's 80th birthday, the death benefit will be the account value less any
credits less than 12 months old.
If you elected the Guaranteed Minimum Death Benefit Rider, and you die before
the annuity date and before you or a joint owner turn 85, the death benefit will
be the greatest of three amounts:
1. the account value;
2. the sum of all purchase payments, less withdrawals taken and applicable
premium tax charges; or
3. the highest account value on any contract anniversary prior to the earlier
of your or a joint owner's 85th birthday, plus purchase payments made, less
withdrawals taken
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1. and premium tax charges since that contract anniversary.
If you elected the Guaranteed Minimum Death Benefit Rider, and you die before
the annuity date and after your or a joint owner's 85th birthday, the death
benefit will be the greater of two amounts:
1. the account value; or
2. the highest account value on any contract anniversary prior to the earlier
of your or the joint owner's 85th birthday, plus purchase payments, less
withdrawals taken and premium tax charges since that contract anniversary.
The death benefit will generally be paid within seven days of receipt of the
required proof of death of an owner and election of the method of settlement or
as soon thereafter as we have sufficient information to make the payment, but if
no settlement method is elected the death benefit will be distributed within
five years after the owner's death. No contingent deferred sales load is
imposed. The death benefit may be paid as either a lump sum or as a settlement
option. Amounts in the guarantee period account will not be subject to interest
adjustments in calculating the death benefit.
If the owner is not a natural person, we will treat the annuitant as the owner
for purposes of the death benefit.
Federal Income Tax Consequences
An owner who is a natural person generally should not be taxed on increases in
the account value until a distribution under the contract occurs. Taxable
events, for example, would occur with a withdrawal or settlement option payment,
or as the result of a pledge, loan, or assignment of a contract. Generally, a
portion, up to 100%, of any distribution or deemed distribution is taxable as
ordinary income. The taxable portion of distributions is generally subject to
income tax withholding unless the recipient elects otherwise. Withholding is
mandatory for certain qualified contracts. In addition, a federal penalty tax
may apply to certain distributions. See Federal Tax Matters on page 39.
Right to Cancel
As the owner, you have the right to examine the contract for a limited period,
known as a "free look period." You may cancel the contract during this period by
delivering or mailing a written notice of cancellation, or sending a telegram to
our Service Center. You must return the contract before midnight of the tenth
day after receipt of the contract, or longer in some situations or if required
by state law. Notice given by mail and the return of the contract by mail will
be effective on the date received by us. Unless otherwise required by law, we
will refund the purchase payments allocated to any general account option, minus
any withdrawals, plus the variable accumulated value as of the date your written
notice to cancel and your contract are received by us. We will not include any
credits in the amount paid. See Purchase Payments on page 22.
Questions
We will answer your questions about procedures or the contract if you write to:
The Transamerica Annuity Service Center
P.O. Box 31848
Charlotte, North Carolina
28231-1848
Or call us at: 1- 800-258-4260
All inquiries should include the contract number and the owner's name.
Please Note: The foregoing summary is qualified in its entirety by the detailed
information in the remainder of this prospectus and in the prospectuses for the
portfolios. Please refer to this prospectus and the portfolio prospectuses for
more detailed information. With respect to qualified contracts, the requirements
of a particular retirement plan, an endorsement to the contract, or limitations
or penalties imposed by the Code or the Employee Retirement Income Security Act
of 1974, as amended, may impose additional limits or restrictions. These limits
or restrictions may be on purchase payments, withdrawals, distributions, or
benefits, or on other provisions of the contract. This prospectus does not
describe such limitations or restrictions. See Federal Tax Matters on page 39.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
AND THE VARIABLE ACCOUNT
Transamerica Life Insurance and Annuity Company
Transamerica Life Insurance and Annuity Company, or Transamerica, is a stock
life insurance company incorporated under the laws of the State of California in
1966. The company moved to North Carolina in 1994. It is principally engaged in
the sale of life insurance and annuity policies. The address of Transamerica is
401 North Tryon Street, Charlotte, North Carolina 28202.
On February 18, 1999, Transamerica Corporation announced that it had signed a
merger agreement with AEGON N.V., one of the world's leading international
insurance groups, providing for AEGON's acquisition of all of Transamerica's
outstanding common stock for a combination of cash and AEGON stock worth $9.7
billion. The closing of the transaction is expected to occur during the summer
of 1999.
Transamerica Corporation indirectly owns the issuing company, Transamerica Life
Insurance and Annuity Company.
Published Ratings
Transamerica may from time to time publish its ratings in advertisements, sales
literature and reports to owners. We receive ratings and other information from
one or more independent rating organizations such as A.M. Best Company, Standard
& Poor's, Moody's, and Duff & Phelps. The ratings reflect the financial strength
and/or claims-paying ability of Transamerica. These ratings should not be
considered as bearing on the investment performance of the variable account.
Ratings and investment performance are unrelated. Each year the A.M. Best
Company reviews the financial status of thousands of insurers, resulting in the
assignment of Best's Ratings. These ratings reflect A.M. Best's current opinion
of the relative financial strength and operating performance of an insurance
company in comparison to the norms of the life/health insurance industry.
In addition, the claims-paying ability of Transamerica as measured by Standard &
Poor's Insurance Ratings Services, Moody's, or Duff & Phelps may be referred to
in advertisements or sales literature or in reports to owners. These ratings are
opinions provided by the companies named above. These opinions relate to how
well they have determined Transamerica is prepared, from a financial standpoint,
to meet our insurance and annuity obligations. The terms of our obligations are
stated within the general account options of this contract. These ratings do not
reflect the investment performance of the variable account or the degree of risk
associated with an investment in the variable account.
Insurance Marketplace Standards
Association
In recent years, the insurance industry has recognized the need to develop
specific principles and practices to help maintain the highest standards of
marketplace behavior and enhance credibility with consumers. As a result, the
industry established the Insurance Marketplace Standards Association (IMSA).
As an IMSA member, we agree to follow a set of standards in our advertising,
sales and service for individual life insurance and annuity products. The IMSA
logo, which you will see on our advertising and promotional materials,
demonstrates that we take our commitment to ethical conduct seriously.
The Variable Account
Separate Account VA-6 of Transamerica, also referred to as the variable account
was established by Transamerica as a separate account under the laws of the
State of North Carolina following June 11, 1996, resolutions adopted by
Transamerica's Board of Directors. The variable account is registered with the
Securities and Exchange Commission, hereafter referred to simply as the
Commission under the Investment Company Act of 1940 as a unit investment trust.
It meets the definition of a separate account under the federal securities laws.
However, the Commission does not supervise the management or the investment
practices or policies of the variable account.
The assets of the variable account are owned by Transamerica, but they are held
separately from the other assets of Transamerica. Section 58-7-95 of the North
Carolina Insurance Law provides that the assets of a separate account are not
chargeable with liabilities incurred in any other business operation of the
insurance company. This is the case except to the extent that assets in the
separate account exceed the reserves and other liabilities of the separate
account.
Income, gains and losses incurred on the assets in the variable account, whether
or not realized, are credited to or charged against the variable account without
regard to other income, gains or losses of Transamerica. Therefore, the
investment performance of the variable account is entirely independent of the
investment performance of Transamerica's general account assets or any other
separate account maintained by Transamerica.
The variable account currently has 17 variable sub-accounts available under the
contract, each of which invests solely in a specific corresponding portfolio. At
our discretion, we may make changes to the variable sub-accounts.
THE PORTFOLIOS
Each of the variable sub-accounts offered under the contract invests exclusively
in one of the portfolios. Descriptions of each portfolio's investment objective
follow. The management fees listed below are specified in each portfolio
adviser's contract before any fee waivers.
The Income and Growth Portfolio of The Alger American Fund seeks, primarily, a
high level of dividend income. Capital appreciation is a secondary objective of
the portfolio. The portfolio invests in dividend paying equity securities, such
as common or preferred stocks, preferably those which the Manager believes also
offer opportunities for capital appreciation.
Manager: Fred Alger Management, Inc. Management Fee: 0.625%.
The Growth and Income Portfolio of the Alliance Variable Products Series Fund,
Inc., seeks reasonable current income and reasonable opportunity for
appreciation through investments primarily in dividend-paying common stocks of
good quality. Whenever the economic outlook is unfavorable for investment in
common stock, this portfolio may invest in other types of securities, such as
bonds, convertible bonds, preferred stock and convertible preferred stocks. The
portfolio managers will purchase and sell portfolio securities at times and in
amounts as management deems advisable in light of market, economic and other
conditions.
Adviser: Alliance Capital Management L.P.
Management Fee: 0.63%.
The Premier Growth Portfolio of Alliance Variable Products Series Fund, Inc.,
seeks growth of capital by pursuing aggressive investment policies. Since this
portfolio's investments will be made based upon their potential for capital
appreciation, current income will not be a high priority for this portfolio. The
portfolio will invest mainly in the equity securities, such as common stocks,
securities convertible into common stocks and rights and warrants to subscribe
for or purchase common stocks. Equity investments will be of a limited number of
large, carefully selected, high-quality U.S. companies. In the Adviser's
judgement, the companies chosen will be those which are likely to achieve
superior earnings growth. Approximately 25 companies believed by the Adviser to
show superior potential for capital appreciation will usually constitute
approximately 70% of the portfolio's net assets at any one time. The portfolio
thus differs from more typical equity mutual funds by investing most of its
assets in a relatively small number of intensively researched companies. Under
normal circumstances the portfolio will invest at least 85% of the value of its
total assets in the equity securities of U.S. companies.
Adviser: Alliance Capital Management L.P.
Management Fee: 1.00%.
The Capital Appreciation Portfolio of the Dreyfus Variable Investment Fund is a
diversified portfolio seeking long-term capital growth and preservation of
principal. Current income is a secondary investment objective. During periods of
strong market momentum, the portfolio will invest aggressively to increase its
holdings in: common stocks of foreign and domestic issuers, common stocks with
warrants attached and debt securities of foreign governments. Generally, the
portfolio will invest in large cap companies, defined as those with market
capitalizations exceeding $500 million. These companies will also be selected on
the basis of their potential to achieve predictable, above average earnings
growth.
Adviser: The Dreyfus Corporation.
Sub-Adviser: Fayez Sarofim & Co.
Management Fee: 0.75%.
The Small Cap Portfolio of the Dreyfus Variable Investment Fund seeks to
maximize capital appreciation by investing principally in common stocks of
domestic and foreign issuers. Under normal market conditions, the portfolio will
invest at least 65% of its total assets in companies with market capitalizations
of less than $1.5 billion at the time of purchase. Companies selected for this
portfolio will include those thought to possess new or innovative products or
services which are expected to propel growth in future earnings.
Adviser: The Dreyfus Corporation.
Management Fee: 0.75%.
The Balanced Portfolio of the Janus Aspen Series seeks long-term capital growth
consistent with preservation of capital and current income. Normally, this
diversified portfolio invests 40-60% of its assets in securities selected
primarily for their growth potential. The balance of its holdings is invested in
securities selected primarily for their capacity to generate income. Such
holdings are likely to consist of bonds and preferred stocks. Typically, at
least 25% of this portfolio is made up of fixed-income securities.
Adviser: Janus Capital Corporation. Management Fee: 0.75% of the first $300
million plus 0.70% of the next $200 million plus 0.65% of the assets over $500
million.
The Worldwide Growth Portfolio of the Janus Aspen Series seeks long-term growth
of capital in a manner consistent with the preservation of capital. It is a
diversified portfolio that pursues its objective primarily through investments
in common stocks of foreign and domestic issuers. The portfolio has the
flexibility to invest on a worldwide basis in companies and other organizations
of any size, regardless of country of origin or place of principal business
activity. The portfolio normally invests in issuers from at least five different
countries, including the United States. The portfolio may at times invest in
fewer than five countries or even a single country.
Adviser: Janus Capital Corporation. Management Fee: 0.75% of the first $300
million plus 0.70% of the next $200 million plus 0.65% of the assets over $500
million.
The Emerging Growth Series of the MFS Variable Insurance Trust will seek
long-term growth of capital. The series invests, under normal market conditions,
at least 65% of its total assets in common stocks and related securities, such
as preferred stocks, convertible securities and depositary receipts for those
securities, of emerging growth companies. These companies are companies that the
series' adviser believes are either early in their life cycle but have the
potential to become major enterprises or are major enterprises whose rates of
earnings growth are expected to accelerate.
Adviser: Massachusetts Financial Services
Company.
Management Fee: 0.75%.
The Growth with Income Series of the MFS Variable Insurance Trust will seek
long-term growth of capital and future income while providing more current
dividend income than is normally obtainable from a portfolio of only growth
stocks. The series invests, under normal market conditions, at least 65% of its
total assets in common stock and related securities, such as preferred stocks,
convertible securities and depositary receipts for those securities. While the
fund may invest in companies of any size, the fund generally focuses on
companies with larger market capitalizations that the series' adviser believes
have sustainable growth prospects and attractive valuations based on current and
expected earnings or cash flow.
Adviser: Massachusetts Financial Services Company.
Management Fee: 0.75%.
The Research Series of the MFS Variable Insurance Trust will seek to provide
long-term growth of capital and future income. The series invests, under normal
market conditions, at least 80% of its total assets in common stocks and related
securities, such as preferred stocks, convertible securities and depositary
receipts. The series focuses on companies that the series' adviser believes have
favorable prospects for long-term growth, attractive valuations based on current
and expected earnings or cash flow, dominant or growing market share and
superior management.
Adviser: Massachusetts Financial Services Company.
Management Fee: 0.75%.
The Fixed Income Portfolio of the Morgan Stanley Dean Witter Universal Funds,
Inc., seeks above-average total return over a market cycle of three to five
years by investing primarily in a diversified portfolio of U.S. government and
agency bonds, corporate bonds, mortgage backed securities, foreign bonds and
other fixed income securities and derivatives. The portfolio invests primarily
in investment grade securities, but may also invest a portion of its assets in
high yield securities, also known as junk bonds. The portfolio's average
weighted maturity will ordinarily exceed five years.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.40% of the first
$500 million plus 0.35% of the next $500 million plus 0.30% of the assets over
$1 billion.
The High Yield Portfolio of the Morgan Stanley Dean Witter Universal Funds,
Inc., seeks above-average total return over a market cycle of three to five
years by investing primarily in a diversified portfolio of high yield securities
of U. S. and foreign issuers (including emerging markets), including corporate
bonds and other fixed income securities and derivatives. High yield securities
are rated below investment grade and are commonly referred to as "junk bonds."
The portfolio's average weighted maturity will ordinarily exceed five years.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.50% of first $500
million plus 0.45% of next $500 million plus 0.40% of the assets over $1
billion.
The International Magnum Portfolio of the Morgan Stanley Dean Witter Universal
Funds, Inc., seeks long-term capital appreciation by investing primarily in
equity securities of non-U.S. issuers domiciled in EAFE countries. The countries
in which the portfolio will invest are those comprising the Morgan Stanley
Capital International EAFE Index, which includes Australia, Japan, New Zealand,
most nations located in Western Europe and certain developed countries in Asia,
such as Hong Kong and Singapore. Collectively, we refer to these as the EAFE
countries. The portfolio may invest up to 5% of its total assets in securities
of issuers domiciled in non-EAFE countries. Under normal circumstances, at least
65% of the total assets of the portfolio will be invested in equity securities
of issuers in at least three different EAFE countries. Adviser: MSDW Investment
Management Inc. Management Fee: 0.80% of the first $500 million plus 0.75% of
the next $500 million plus 0.70% of the assets over $1 billion.
The Managed Portfolio of the OCC Accumulation Trust seeks growth of capital over
time through investment in a portfolio consisting of common stocks, bonds and
cash equivalents, the percentages of which will vary based on the Adviser's
assessments of the relative outlook for such investments. Debt securities are
expected to be predominantly investment grade intermediate to long term U.S.
Government and corporate debt. The portfolio will also invest in high quality
short-term money market and cash equivalent securities and may invest almost all
of its assets in such securities when necessary to preserve capital. In
addition, the portfolio may also purchase foreign securities. These foreign
securities must be listed on a domestic or foreign securities exchange or
represented by American depository receipts.
Adviser: OpCap Advisers. Management Fee: 0.70% of first $400 million plus 0.75%
of next $400 million plus 0.70% of the assets over $800 million.
The Small Cap Portfolio of the OCC Accumulation Trust seeks capital appreciation
through investments in a diversified portfolio of stocks issued by small
companies. It will consist primarily of equity securities of companies with
market capitalizations of under $1 billion. Under normal circumstances at least
65% of the portfolio's assets will be invested in equity securities. The
majority of securities purchased by the portfolio will be traded on the New York
Stock Exchange, the American Stock Exchange or in the over-the-counter market.
The portfolio's holdings may also include options, warrants, bonds, notes and
convertible bonds. In addition, the portfolio may also purchase foreign
securities. Foreign securities must listed on a domestic or foreign securities
exchange or be represented by American depository receipts.
Adviser: OpCap Advisers. Management Fee: 0.15% of the first $400 million plus
0.75% of the next $400 million plus 0.70% of assets over $800 million.
The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., seeks
long-term capital growth through investment in common stocks of listed and over
the counter issues. The Growth Portfolio invests primarily in common stocks of
growth companies that are considered by the manager to be premier companies. In
the manager's view, characteristics of premier companies include one or more of
the following: dominant market share; leading brand recognition; proprietary
products or technology; low-cost production capability; and excellent management
with shareholder orientation. The manager of the Portfolio believes in long-term
investing and places great emphasis on the sustainability of the above
competitive advantages. Unless market conditions dictate otherwise, the manager
tries to keep the Portfolio fully invested in equity securities. Attempting to
enter and exit the market at strategic times is not a commonly used strategy for
this portfolio. However when, in the judgment of the Sub-Adviser market
conditions warrant, the portfolio may, for temporary defensive purposes, hold
part or all of its assets in cash, debt or money market instruments. The
portfolio may invest up to 10% of its assets in debt securities having a call on
common stocks that are rated below investment grade.
Adviser: Transamerica Occidental Life Insurance Company.
Sub-Adviser: Transamerica Investment Services, Inc.
Management Fee: 0.75%.
The Money Market Portfolio of the Transamerica Variable Insurance Fund, Inc.,
seeks to maximize current income from money market securities consistent with
liquidity and the preservation of principal. The portfolio invests primarily in
high quality U. S. dollar-denominated money market instruments with remaining
maturities of 13 months or less. These include: obligations issued or guaranteed
by the U. S. and foreign governments and their agencies and instrumentalities;
obligations of U. S. and foreign banks, or their foreign branches, and U. S.
savings banks; short-term corporate obligations, including commercial paper,
notes and bonds; other short-term debt obligations with remaining maturities of
397 days or less; and repurchase agreements involving any of the securities
mentioned above. The portfolio may also purchase other marketable,
non-convertible corporate debt securities of U. S. issuers. These investments
include bonds, debentures, floating rate obligations, and issues with optional
maturities. Adviser: Transamerica Occidental Life Insurance Company.
Sub-Adviser: Transamerica Investment Services, Inc. Management Fee: 0.35%.
Meeting investment objectives depends on various factors, including, but not
limited to, how well the portfolio managers anticipate changing economic and
market conditions. There is no assurance that any of these portfolios will
achieve their stated objectives.
An investment in the contract is not a deposit or obligation of, or guaranteed
or endorsed, by any bank. Nor is the contract federally insured by the Federal
Deposit Insurance Corporation or any other government agency. Investing in the
contract involves certain investment risks, including possible loss of
principal.
Since all of the portfolios are available to registered separate accounts
offering variable annuity and variable life products of Transamerica and to
other insurance companies as well, there is a possibility of a material
conflict. If such a conflict arises between the interests of the variable
account and one or more other separate accounts investing in the portfolios, the
affected insurance companies will take steps to resolve the matter. These steps
may include stopping their separate accounts from investing in the portfolios.
See the portfolios' prospectuses for greater detail on this subject.
You can find additional information concerning the investment objectives and
policies of all of the portfolios, the investment advisory services and
administrative services and charges in the current prospectuses for the
portfolios which accompany this prospectus.
Read the prospectuses of the portfolios which interest you carefully before you
make any decision concerning how you will invest in, or transfer monies among,
the variable sub-accounts.
Transamerica may receive payments from some or all of the portfolios or their
advisers, in varying amounts. These payments may be based on the amount of
assets allocated to the portfolios. The payments are for administrative or
distribution services.
<PAGE>
Portfolios Not Publicly Available
The portfolios are open-end management investment companies, or portfolios or
series of, open-end management companies registered with the SEC under the 1940
Act, that are often referred to as mutual funds. This SEC registration does not
involve SEC supervision of the investments or investment policies of the
portfolios. Shares of the portfolios are not offered to the public but solely to
the insurance company separate accounts and other qualified purchasers as
limited by federal tax laws. These portfolios are not the same as mutual funds
that may have very similar names that are sold directly to the public, and the
performance of such publicly available funds, which have different portfolios
and expenses, should not be considered as an indication of the performance of
the portfolios. The assets of each portfolio are held separate from the assets
of the other portfolios. Each portfolio operates as a separate investment
vehicle. The income or losses of one portfolio have no effect on the investment
performance of another portfolio. The sub-accounts reinvest dividends and/or
capital gains distributions received from a portfolio in more shares of that
portfolio as retained assets.
Addition, Deletion, or Substitution
Transamerica does not control the portfolios. For this reason, we cannot
guarantee that any of the variable sub-accounts offered under this contract or
any of the portfolios will always be available to you for investment purposes.
We retain the right to make changes in the variable account and in its
investments.
Transamerica reserves the right to eliminate the shares of any portfolio held by
a variable sub-account. We may also substitute shares of another portfolio or of
another investment company for the shares of any portfolio. We would do this if
the shares of the portfolio are no longer available for investment or if, in our
judgment, investment in any portfolio would be inappropriate in view of the
purposes of the variable account. To the extent required by the 1940 Act, if we
substitute shares in a variable sub-account that you own, we will provide you
with advance notice. We will also seek advance permission from the Commission.
This does not prevent the variable account from purchasing other securities for
other series or classes of variable annuity contracts. Nor does it prevent the
variable account from effecting an exchange between series or classes of
variable contracts on the basis of requests made by owners.
We reserve the right to create new variable sub-accounts for the contracts when,
in our sole discretion, marketing, tax, investment or other conditions warrant
that we do. Any new variable sub-accounts will be made available to existing
owners on a basis to be determined by us. Each additional variable sub-account
will purchase shares in a mutual fund portfolio or other investment vehicle. We
may also eliminate one or more variable sub-accounts if, in our sole discretion,
marketing, tax, investment or other conditions warrant that we do. So, in the
event any variable sub-account is eliminated, we will notify owners and request
a re-allocation of the amounts invested in the eliminated variable sub-account.
In the event of any substitution or change, we may make the changes in the
contract that we deem necessary or appropriate to reflect substitutions or
changes. Furthermore, if we believe it to be in the best interest of persons
having voting rights under the contracts, the variable account may be operated
as a management company under the 1940 Act or any other form permitted by law.
It may also be de-registered under such Act in the event that registration is no
longer required. Finally, it may also be combined with one or more other
separate accounts.
THE CONTRACT
The contract is a flexible purchase payment deferred variable annuity contract.
Other variable contracts are also available from Transamerica. The rights and
benefits of this contract are described below. They will also be described in
the individual contract or in the certificate and group contract. However, we
reserve the right to modify the individual contract and the group contract and
its underlying certificates if required by law. We also reserve the right to
give the owner the benefit of any federal or state statute, rule or regulation.
The obligations under the contract are obligations of Transamerica. The
contracts are available on a non-qualified basis and on a qualified basis.
Contracts available on a qualified basis are as follows:
1. rollover and contributory individual retirement annuities, also
referred to as IRAs under Code
Sections 408(a) and 408(b);
2. conversion, rollover and contributory Roth IRAs under Code Section 408A;
3. simplified employee pension plans, also referred to as SEP/IRAs, that
qualify for special federal income tax treatment under Code Section 408(k);
4. rollover Code Section 403(b) annuities, including Rev. Rul. 90-24
transfers, with no additional
premiums; and
5. qualified pension and profit sharing plans intended to qualify under Code
Section 401.
Generally, qualified contracts contain certain restrictive provisions limiting
the timing and amount of purchase payments to, and distributions from, the
qualified contract.
Ownership
As the owner, you are entitled to the rights granted by the contract. If you
die, your rights belong to the joint owner, if any, and then to your
beneficiary. If there are joint owners, the one designated as the primary owner
will receive all mail and any tax reporting information.
For non-qualified contracts, the owner is entitled to designate the annuitant(s)
and, if the owner is an individual, as opposed to a trust, corporation or other
legal entity, the owner can change the annuitant(s) at any time before the
annuity date. Any such change will be subject to our then current underwriting
requirements. We reserve the right to reject any change of annuitants which has
been made without our prior written consent.
If the owner is not an individual, the annuitant(s) may not be changed once the
contract is issued. Different rules apply to qualified contracts.
For each contract, a different account will be established and values, benefits
and charges will be calculated separately. The various admini-strative rules
described below will apply separately to each contract, unless otherwise noted.
PURCHASE PAYMENTS
All purchase payments must be paid to our Service Center. A confirmation will be
issued to you, as the owner, upon the acceptance of each purchase payment. The
initial purchase payment must be at least $5,000 or, if for contributory IRAs,
SEP/IRAs and Roth IRAs, it must be for at least $2,000.
Your contract will be issued and your initial purchase payment generally will be
credited within two business days after the receipt of: sufficient information
to issue a contract and the initial purchase payment at our Service Center. For
us to issue you a contract, you must provide sufficient information in a form
acceptable to us. We reserve the right to reject any purchase payment or request
for issuance of a contract. Normally we will not issue contracts to owners,
joint owners, or annuitants more than 80 years old. Nor will we normally accept
purchase payments after any owners', or annuitants' if non-individual owner,
81st birthday. In our discretion we may waive these restrictions in appropriate
cases.
If the initial purchase payment allocated to the variable sub-account(s) cannot
be credited within two days of receipt because the information is incomplete,
false or inconsistent, we will contact you. We will explain the reason for the
delay and will refund the initial purchase payment within five business days. If
you consent to us retaining the initial purchase payment we will credit it to
the variable sub-account of your choice as soon as the requirements are
fulfilled.
You may make additional purchase payments at any time prior to the annuity date.
They must be at least $200 each, or at least $100 if made through an automatic
purchase payment plan. If you elect to use this option additional purchase
payments will be automatically deducted from your bank account and allocated to
the contract. In addition, minimum allocation amounts apply. See Allocation of
Purchase Payments below. Additional purchase payments are credited to the
contract as of the date we receive payment from you.
Total purchase payments for any contract may not exceed $1,000,000 without our
prior approval.
In no event may the sum of all purchase payments for a contract during any
taxable year exceed the limits imposed by any applicable federal or state law,
rules, or regulations.
Allocation of Purchase Payments
You specify how purchase payments will be allocated under the contract. You may
allocate purchase payments among one or more of the variable sub-accounts and
the general account options as long as the portions are whole number percentages
and any allocation percentage for a variable sub-account is at least 10%. In
addition, there is a minimum allocation of $100 to any variable sub-account and
the fixed account, and $1,000 to each guarantee period. We may waive this
minimum allocation amount under certain options and circumstances.
Each purchase payment will be subject to the allocation percentages in effect at
the time of receipt of such purchase payment. You may change the allocation
percentages for additional purchase payments at any time by submitting a request
for such change to our Service Center in a form and manner acceptable to us. Any
changes to the allocation percentages are subject to the limitations above. Any
change will take effect with the first purchase payment we receive which
accompanies your request. If we receive your request separately, all purchase
payments arriving after it will be subject to its terms. Your request will
continue in effect until you change it again.
Free Look Option
If you exercise the free look option, unless otherwise required by law, we will
refund:
1. the purchase payments allocated to any general account options, minus any
withdrawals; plus
2. the variable accumulated value as of the date your written notice to cancel
and your contract are received by us.
In certain jurisdictions, under certain conditions, we are legally required to
return either:
1. purchase payments, minus any withdrawals; or
2. the greater of purchase payments (minus any withdrawals) or the account
value.
Credits will not be included in the amount paid, but this recapture of the
credit amount will never be more than the maximum contingent deferred sales
load. Any initial allocation you make to the variable account may be held in the
money market variable sub-account during the applicable free look period plus 5
days for delivery. Any allocations you make to the money market variable
sub-account will automatically be transferred at the end of the free look period
plus 5 days according to your requested allocation. This transfer will not count
against the 18 transfers allowed free of charge during the first contract year.
Investment Option Limit
Currently, you may not allocate monies to more than eighteen investment options
over the life of the contract. Investment options include variable sub-accounts
and general account options. Each variable sub-account, each guarantee period of
the guarantee period account, and the fixed account that ever received a
transfer or purchase payment allocation counts as one towards this total of
eighteen limit. We may waive this limit in the future.
For example, if you make an allocation to the money market variable sub-account
and later transfer all of the funds out of this money market variable
sub-account, this would still count as one transfer for the purposes of the
limitation, even if it held no value. If you transfer from a variable
sub-account to another variable sub-account and later back to the first, the
count towards the limitation would be two, not three. If you select a guarantee
period and renew for the same term, the count will be one; but if you renew to a
guarantee period with a different term, the count will be two.
How Credits Are Applied
We add a credit to your account value with each purchase payment received. This
credit is funded from our general account. Each credit is allocated to the
account value at the same time as the applicable purchase payment. Credits are
applied to the investment options in the same ratio as the applicable purchase
payment. The amount available as a death benefit or upon waiver of the
contingent deferred sales load under the Living Benefits Rider does not include
credits applied in the immediately preceding 12 months, and the amount returned,
if you exercise your right to cancel the contract during the free-look period,
does not include any credits applied. However, the recapture of the credit
amount will never be more than the maximum contingent deferred sales load.
The credit is expressed and payable only as a percentage of purchase payments.
Currently the percentage is 3.25%. We may vary this percentage.
Examples. The following examples illustrate how a 3.25% credit works.
Suppose you invest $10,000 in a contract. We immediately credit an additional
3.25%, or $325, so your account value begins at $10,325. Assume that in six
months the account value increases by 5%, so it is $10,841 (($10,325 x 0.05=
$516.25) + $10,325 = $10,841). At that point in time, the death benefit would be
$10,516 ($10,841 less the $325 credit). Note that although the credit is not
included in the death benefit, the $16.25 of earnings on the credit is included.
The cash surrender value would be $10,841 minus the contingent deferred sales
load of 8%, in addition to other applicable deductions. Assume that at the end
of twelve months, the account value has increased by 10% so it is $11,357.50
(($10,325 x .10=$1,032.50) + $10,325=$11,357.50). The death benefit at that time
would be the full account value of $11,357.50 and the cash surrender value would
be $11,357.50 minus the contingent deferred sales load of 8% and other
applicable deductions.
A decrease in value works in a similar manner. Again suppose you invest $10,000
and we credit a 3.25%, or $325, credit, and the account value decreases 10% in
six months, so your account value is $9292.50 ($10,325 minus $1,032.50). Your
death benefit at that point in time would be $10,000, since it is never less
than your purchase payments, less any partial withdrawals and premium taxes.
Your cash surrender value would be the account value of $9,292.50 minus the
contingent deferred sales load of 8% and other applicable deductions.
In the case of multiple purchase payments, for purposes of the credit, the most
recent purchase payment is deemed to be withdrawn first. Suppose you make a
$10,000 purchase payment in January 1999 (getting a $325 credit) and a $20,000
purchase payment in June 1999 (getting a $650 credit). If you die in March 2000
(more than 12 months after the January 1999 purchase payment, but less than 12
months after the June 1999 purchase payment), the $650 credit for the June
purchase payment has not vested (since it is less than 12 months old) so the
full $650 is deducted in calculating the death benefit. However, the death
benefit would include any earnings attributable to that credit. The $325 credit
for the January payment is over 12 months old so it (and any earnings on it) is
included in the death benefit.
ACCOUNT VALUE
Before the annuity date, the account value is equal to:
a) the general account options accumulated value; plus
b) the variable accumulated value.
The variable accumulated value is determined at the end of each valuation day.
To determine the variable accumulated value on a day that is not a valuation
day, the value as of the end of the next valuation day will be used. The
variable accumulated value is expected to change from valuation period to
valuation period, reflecting how investments within selected portfolios
performed. The variable accumulated value will also reflect deductions for
charges and fees. A valuation period begins at the close of the New York Stock
Exchange (generally 4:00 p.m. ET) on each valuation day and ends at the close of
the New York Stock Exchange on the next succeeding valuation day. A valuation
day is each day that the New York Stock Exchange is open for regular business.
How Variable Accumulation Units Are Valued
Purchase payments allocated to a variable sub-account are credited to the
variable accumulated value in the form of variable accumulation units. The
number of variable accumulation units credited for each variable sub-account is
determined by dividing the purchase payment allocated to the variable
sub-account by the variable accumulation unit value for that variable
sub-account. In the case of the initial purchase payment, variable accumulation
units for that payment will be credited to the variable accumulated value within
two valuation days of the later of:
a) the date sufficient information, in an acceptable manner and form, is
received at our Service Center; or
b) the date our Service Center receives the initial purchase payment.
In the case of any additional purchase payment, variable accumulation units for
that payment will be credited at the end of the valuation period during which we
receive the payment. The value of a variable accumulation unit for each variable
sub-account is established at the end of each valuation period and is calculated
by multiplying the value of that unit at the end of the prior valuation period
by the variable sub-account's net investment factor for the valuation period.
The value of a variable accumulation unit can go either up or down.
The net investment factor is used to determine the value of accumulation and
annuity unit values for the end of a valuation period. The applicable formula
can be found in the Statement of Additional Information.
Transfers involving variable sub-accounts will result in the crediting and/or
cancellation of variable accumulation units having a total value equal to the
dollar amount being transferred to or from a particular variable sub-account.
The crediting and cancellation of such units is made using the variable
accumulation unit value of the applicable variable sub-account as of the end of
the valuation day in which the transfer is effective.
TRANSFERS
Before the Annuity Date
Before the annuity date, you may transfer all or any portion of the account
value among the variable sub-accounts and the general account options. Transfers
are restricted into or out of the fixed account.
Transfers among the variable sub-accounts and the general account options may be
made by submitting a request to our Service Center in a form and manner
acceptable to us. The transfer request must specify:
1. the variable sub-accounts and/or the general account options from which
your transfer is to be made;
2. the amount of your transfer; and
3. the variable sub-accounts and/or general account options to receive the
transferred amount.
The minimum amount which you may transfer from the variable sub-accounts and the
general account options is $1,000. Transfers among the variable sub-accounts are
also subject to the terms and conditions imposed by the portfolios.
When a transfer is made from a guarantee period before the end of its term, the
amount transferred may be subject to an interest adjustment. A transfer from a
guarantee period made within 30 days before the last day of its term will not be
subject to any interest adjustment.
We currently impose a transfer fee of $10 for each transfer in excess of 18 made
during the same contract year. We reserve the right to waive the transfer fee or
vary the number of transfers without charge. We may also choose not to count
transfers under certain options or services for purposes of the allowed number
without charge. See Other Restrictions below for additional limitations
regarding transfers. A transfer generally will be effective on the date the
request for transfer is received by our Service Center.
If a transfer reduces the value in a variable sub-account or guarantee period or
in the fixed account to less than $1,000, then we reserve the right to transfer
the remaining amount along with the amount requested to be transferred. We will
do this according to the transfer instructions provided by you. Under current
law, there will not be any tax liability for transfers within the contract.
Other Restrictions
We reserve the right without prior notice to modify, restrict, suspend or
eliminate the transfer privileges, including telephone transfers, at any time
and for any reason. For example, restrictions may be necessary to protect owners
from adverse impacts on portfolio management of large and/or numerous transfers
by market timers or others. We have determined that the movement of significant
variable sub-account values from one variable sub-account to another may prevent
the underlying portfolio from taking advantage of investment opportunities. This
is likely to arise when the volume of transfers is high, since each portfolio
must maintain a significant cash position in order to handle redemptions. Such
movement may also cause a substantial increase in portfolio transaction costs
which must be indirectly borne by owners. Therefore, we reserve the right to
require that all transfer requests be made by the owner and not by a third party
holding a power of attorney. We also require that each transfer you request be
made by a separate communication to us. We also reserve the right to require
that each transfer request be submitted in writing and be manually signed by
owners. We may choose not to allow telephone or facsimile transfer requests.
Telephone Transfers
We will allow telephone transfers if the owner has provided proper authorization
for such transfers in a form and manner acceptable to us. We reserve the right
to suspend telephone transfer privileges at any time, for some or all contracts,
for any reason. Withdrawals are not permitted by telephone.
We will employ reasonable procedures to confirm that instructions communicated
by telephone are genuine. If we follow such procedures, we will not be liable
for any losses due to unauthorized or fraudulent instructions. In the opinion of
certain government regulators, we may be liable for such losses if it does not
follow those procedures. The procedures we will follow for telephone transfers
may include requiring some form of personal identification prior to acting on
instructions received by telephone, providing written confirmation of the
transaction, and/or tape recording the instructions given by telephone.
Dollar Cost Averaging
Prior to the annuity date, you as the owner may request that amounts be
automatically transferred on a monthly basis from a source account, which is
currently either the money market sub-account or the fixed account, to any of
the variable sub-accounts. You can accomplish this by submitting a request to
our Service Center in a form and manner acceptable to us. Other source accounts
may be available; call our Service Center for information regarding
availability.
You may only dollar cost average from one source account at a time. The
transfers will begin when you request, but no sooner than one week following,
receipt of such request. For new variable annuity contracts, dollar cost
averaging transfers will not commence until the later of:
a) 30 days after the contract effective date; or
b) the estimated end of the free look period which allows 5 days for delivery.
Transfers will continue for the number of consecutive months which you selected
unless:
1. you terminate the transfers;
2. we automatically terminate the transfers because there are insufficient
amounts in the source account; or
3. for other reasons that are described in the election form.
You may request that monthly transfers be continued for a specific length of
time. You can do this by giving notice to our Service Center in a form and
manner acceptable to us within 30 days prior to the last monthly transfer. If
you do not make a request to continue the monthly transfers, this option will
terminate automatically with the last transfer at the end of the length of time
you initially designated.
Eligibility Requirements for Dollar Cost Averaging
In order to be eligible for dollar cost averaging, the following conditions must
be met:
1. the value of your source account must be at least $5,000;
2. the minimum amount that you can transfer out of the source account is $250
per month; and
3. the minimum amount you can transfer into any other variable sub-account is
the greater of $250 or 10% of the amount being transferred.
These limits may be changed for new elections of this service. Dollar cost
averaging transfers can not be made from a source account from which systematic
withdrawals or automatic payouts are also being made.
Currently, we do not charge for the dollar cost averaging option nor do they
count toward the number of transfers allowed without charge per contract year.
We may charge in the future for dollar cost averaging.
Dollar cost averaging transfers may not be made to or from the guarantee period
account or to the fixed account.
Dollar cost averaging may not be elected at the same time that automatic asset
rebalancing is in effect.
Special Dollar Cost Averaging Option
(May not be available in all states. See contract for availability of the fixed
account options.)
When you apply for the contract, you may elect to allocate the entire initial
purchase payment to either the six or twelve month special Dollar Cost Averaging
account of the fixed account. The initial purchase payment will be credited with
interest at a guaranteed fixed rate. Amounts will then be transferred from the
special Dollar Cost Averaging account to the sub-accounts and/or general account
options pro rata on a monthly basis for six or twelve months (depending on the
option you select) in the allocations you specified when you applied for the
contract. The four transfers per year limit does not apply to the special Dollar
Cost Averaging option.
Amounts from the sub-accounts and/or general account options may not be
transferred into the special Dollar Cost Averaging accounts. In addition, if you
request a transfer (other than a Dollar Cost Averaging transfer) or a withdrawal
from a special Dollar Cost Averaging account, any amounts remaining in the
special account will be transferred to the sub-accounts and/or general account
options according to your original allocation instructions. The special Dollar
Cost Averaging option will end and cannot be reelected.
Automatic Asset Rebalancing
After purchase payments have been allocated among the variable sub-accounts, the
performance of each variable sub-account may cause proportions of the values in
the variable sub-accounts to vary from the percentages which you initially
defined. As the owner, you may instruct us to automatically rebalance the
amounts in the variable account by reallocating amounts among the variable
sub-accounts, at the time, and in the percentages, specified in your
instructions to us and accepted by us. You may elect to have the rebalancing
done on an annual, semi-annual or quarterly basis. You may elect to have amounts
allocated among the variable sub-accounts using whole percentages, with a
minimum of 10% allocated to each variable sub-account. The guaranteed period
account and/or fixed account cannot be rebalanced.
You may elect to establish, change or terminate the automatic asset rebalancing
by submitting a request to our Service Center in a form and manner acceptable to
us. Automatic asset rebalancing currently will not count towards the number of
transfers without charge in a contract year. We reserve the right to discontinue
the automatic asset rebalancing service at any time for any reason. There is
currently no charge for the automatic asset rebalancing service. We may charge
for this service in the future, and may count the transfers toward those allowed
without charge.
Automatic asset rebalancing may not be elected at the same time that dollar cost
averaging is in effect.
After the Annuity Date
If a variable payment option is elected, you may make transfers among variable
sub-accounts after the annuity date by giving a written request to our Service
Center, subject to the following provisions:
1. transfers after the annuity date may be made no more than four times
during any contract year; and
2. the minimum amount transferred from one variable sub-account to another is
the amount supporting a current $75 monthly payment.
Transfers among variable sub-accounts after the annuity date will be processed
based on the formula outlined in the appendix in the Statement of Additional
Information.
CASH WITHDRAWALS
If you are the owner of a non-qualified contract you may withdraw all or part of
the cash surrender value at any time prior to the annuity date by giving a
written request to our Service Center. For qualified contracts, reference should
be made to the terms of the particular retirement plan or arrangement for any
additional limitations or restrictions, including prohibitions, on cash
withdrawals. The cash surrender value is equal to the account value, minus any
account fee, interest adjustment, contingent deferred sales load and premium tax
charges. A full surrender will result in a cash withdrawal payment equal to the
cash surrender value at the end of the valuation period during which the
election is received. It must be received along with all completed forms
required at that time by us. No surrenders or withdrawals may be made after the
annuity date. Partial withdrawals must be at least $1,000.
In the case of a partial withdrawal, you may direct our Service Center to
withdraw amounts from specific variable sub-accounts and/or from the general
account options. If you do not specify, the withdrawal will be taken pro rata
from account value.
A partial withdrawal request cannot be fulfilled if it would reduce your account
value to less than $2,000. In such instances, you will be notified.
Any withdrawal requests, including surrender requests, generally will be
processed as of the end of the valuation period during which the request and all
completed forms are received. We will pay any cash withdrawal, settlement option
payment or lump sum death benefit due from the variable account and process of
any transfers within seven days from the date we receive your request. However,
we may postpone such payment if:
the New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
an emergency exists as defined by the Commission, or the Commission
requires that trading be restricted; or
the Commission permits a delay for the protection of owners.
The withdrawal request will be effective when we receive all required withdrawal
request forms. Payments to you for any monies derived from a purchase payment
which you made by check may be delayed until your check has cleared your bank.
When you make a withdrawal from a guarantee period before the end of its term,
the amount you withdraw may be subject to an interest adjustment.
We may delay payment of any withdrawal from the general account options for up
to six months after we receive the request for such withdrawal. If we delay
payment for more than 30 days, we will pay interest on the withdrawal amount up
to the date of payment.
Since you as the owner assume the investment risk for all amounts in the
variable account and because certain withdrawals are subject to a contingent
deferred sales load and other charges, the total amount paid upon surrender of
your contract may be more or less than the total purchase payments.
As owner, you may elect, under the systematic withdrawal option or automatic
payout option, but not both, to withdraw certain amounts on a periodic basis
from the variable sub-accounts before the annuity date.
The tax consequences of a withdrawal or surrender are discussed later in this
prospectus.
Systematic Withdrawal Option
Before the annuity date, you may elect to have withdrawals automatically made
from one or more variable sub-accounts on a monthly basis. Other distribution
modes may be permitted. The withdrawals will not begin until the later of:
a) 30 days after the contract effective date; or
b) the end of the free look period.
Withdrawals will be from the variable sub-accounts and/or general the general
account in the percentage allocations that you specify. Unless you specify
otherwise, withdrawals will be pro rata based on account value. You cannot make
systematic withdrawals from a variable sub-account from which dollar cost
averaging transfers are being made. Likewise, systematic withdrawals cannot be
used at the same time that the automatic payment option is in effect. If you
take systematic withdrawals from the general account, applicable interest
adjustments may apply to withdrawals from the guarantee periods.
To be eligible for the systematic withdrawal option, the account value must be
at least $12,000 at the time of election. The minimum monthly amount that can be
withdrawn is $100. Currently you can elect any amount over $100 to be withdrawn
systematically. You may also make partial withdrawals while receiving systematic
withdrawals.
If the total of your withdrawals (systematic, automatic or partial) in a
contract year exceed the allowed amount to be withdrawn without charge for that
year, your account value will be charged any applicable contingent deferred
sales load which may apply.
The withdrawals will continue indefinitely unless you terminate them. If you
choose to terminate this option, you may not elect to use it again until the end
of the next 12 full months.
We reserve the right to impose an annual fee of up to $25 for processing
payments under this option. This fee, which is currently waived, will be
deducted in equal installments from each systematic withdrawal during a contract
year.
Systematic withdrawals may be taxable and, prior to age 59 1/2, subject to a 10%
federal tax penalty.
Automatic Payout Option
Before the annuity date, for certain qualified contracts, you may elect the
automatic payout option, hereafter referred to simply as APO to satisfy minimum
distribution requirements under the following sections of the Code:
401(a)(9);
403(b); and
408(b)(3).
For IRAs and SEP/IRAs this option may be elected no earlier than six months
before the calendar year in which you, as the owner, attain age 70 1/2. Payments
may not begin earlier than January of such calendar year.
For other qualified contracts, APO can be elected no earlier than six months
before the latter of:
a) when you attain age 70 1/2; or
b) when you retire from employment
Additionally, APO withdrawals may not begin before the later of:
a) 30 days after the contract effective date; or
b) the end of the free look period.
APO may be elected in any calendar month, but no later than the month of your
84th birthday.
Other Automatic Payout Option Information. Withdrawals will be from the variable
sub-accounts and/or the general account you designate and in the percentage
allocations you specify. If you do not indicate otherwise, withdrawals will be
pro rata from account value. You can not make withdrawals from a variable
sub-account from which you have designated that dollar cost averaging transfers
be made. The calculation of the APO amount will reflect the total account value
although the withdrawals are only from the variable sub-accounts. This
calculation and APO are based solely on the value in this contract. If you take
APO from the general account, applicable interest adjustments may apply to
withdrawals from the guarantee periods.
To be eligible for this option, you must meet the following conditions:
1. your account value must be at least $12,000 at the time at which you
select this option; and
2. the annual withdrawal amount is the larger of the required minimum
distribution under Code sections 401(a)(9) or 408(b)(3), or $500.
These conditions may change. Currently, withdrawals under this option are only
paid annually.
The withdrawals will continue indefinitely unless you terminate them. If there
are insufficient amounts in the variable account to make a withdrawal, this
option generally will terminate. Once terminated, APO may not be elected again.
DEATH BENEFIT
If an owner dies before the annuity date, a death benefit is payable. If death
occurs prior to any owner's or joint owner's 80th birthday, the death benefit
will be equal to the greater of:
a) the account value reduced by any credits less than 12 months old; or
b) the sum of all purchase payments made to the contract minus withdrawals and
applicable premium tax charges.
If the owner or joint owner dies before the annuity date and after either the
deceased owner's or joint owner's 80th birthday, the death benefit will be the
account value minus any credits less than 12 months old. For purposes of
calculating a death benefit, the account value is determined as of the date the
benefit is paid. If the owner is not a natural person, such as a trust,
corporation or other legal entity, the annuitants will be treated as the owners
for purposes of the death benefit. For example, if the owner is a trust that
allows a person or persons other than the trustee to exercise the ownership
rights under the contract, such a person or persons must be named as an
annuitant. Named parties will be treated as the owner, or owners, so the death
benefit will be determined based on the age of the annuitant.
If the Guaranteed Minimum Death Benefit (GMDB) Rider is elected and if death
occurs before the annuity date and prior to any owner's or joint owner's 85th
birthday, the death benefit will be equal to the greatest of:
a) the account value; or
b) the sum of all purchase payments less withdrawals taken, adjusted as
described below, and the applicable premium tax charges; or
c) the highest account value on any contract anniversary prior to the earlier
of the owner's or joint owner's 85th birthday, plus purchase payments made,
less withdrawals taken, adjusted as described below, and applicable premium
tax charges since that contract anniversary.
If the GMDB Rider is elected and if death occurs before the annuity date and
after either the deceased owner's or joint owner's 85th birthday the death
benefit will be equal to the greater of:
a) the account value; or
b) the highest account value on any contract anniversary prior to the earlier
of the owner's or joint owner's 85th birthday plus purchase payments made,
less withdrawals taken, adjusted as described below, and any applicable
premium tax charges since that anniversary.
Upon any withdrawal, the amount of the death benefit under the GMDB Rider will
be reduced. The amount of that reduction will depend upon whether the account
value is more or less than the guaranteed minimum death benefit on the date of
withdrawal. If the account value is equal to or more than the guaranteed minimum
death benefit, such benefit will be reduced by the dollar amount of any
withdrawals. If the account value is less than the guaranteed minimum death
benefit, such benefit will be reduced proportionately to the reduction in the
account value. For example, if the withdrawal reduces the account value by 20%,
then the guaranteed minimum death benefit will also be reduced by 20%.
An ownership change will be subject to our current underwriting rules and may
decrease the death benefit. However, such reduction will never decrease the
death benefit below the account value, minus any credits less than 12 months
old.
Payment of Death Benefit
The death benefit is generally payable upon receipt of proof of death of an
owner. Once we have received this proof, and the beneficiary has selected a
method of settlement, the death benefit generally will be paid within seven
days, or as soon thereafter as we have sufficient information to make the
payment.
The death benefit will be determined as of the end of the valuation period
during which our Service Center receives:
a) proof of death of the owner or joint owner; and
b) the written notice of the settlement option elected by the person to whom
the death benefit is payable.
If no settlement method is elected, the death benefit will be a lump sum
distributed within five years after an owner's death. No contingent deferred
sales load nor interest adjustment will apply.
Until the death benefit is paid, the account value allocated to the variable
account remains in the variable account, and fluctuates with investment
performance of the applicable portfolios. For this reason, the amount of the
death benefit depends on the account value at the time the death benefit is
paid, not at the time of death.
Designation of Beneficiaries
As owner, you may select one or more beneficiaries by designating the person or
persons to receive the amounts payable under the contract. The individuals you
designate will receive the percentage you establish if:
you die before the annuity date and there is no joint owner; or
you die after the annuity date and settlement option payments have begun
under a selected settlement option that guarantees payments for a certain
period of time.
If a beneficiary dies before the owner, that beneficiary's interest in the
annuity will end upon his or her death.
A beneficiary may be named or changed at any time in a form and manner
acceptable to us. Any change made to an irrevocable beneficiary must also
include the written consent of the beneficiary, except as otherwise required by
law.
If more than one beneficiary is named, each named beneficiary will share equally
in any benefits or rights granted by the contract unless the owner gives us
other instructions at the time the beneficiaries are named.
We may rely on any affidavit by any responsible person in determining the
identity or non-existence of any beneficiary not identified by name.
Death of Owner or Joint Owner Before the Annuity Date
If the owner or joint owner dies before the annuity date, we will pay the death
benefit as specified in this section. The entire death benefit must be
distributed within five years after the owner's death. If the owner is not an
individual, an annuitant's death will be treated as the death of the owner as
provided in Code Section 72 (s)(6). For example, the contract will remain in
force with the annuitant's surviving spouse as the new annuitant if:
The contract is owned by a trust; and
The beneficiary is either the annuitant's surviving spouse, or a trust
holding the contract solely for the benefit of such spouse.
The manner in which we will pay the death benefit depends on the status of the
persons involved in the contract. The death benefit will be payable to the first
person from the applicable list below:
If the owner is the annuitant:
The joint owner, if any; or
The beneficiary, if any
If the owner is not the annuitant:
The joint owner, if any; or
The beneficiary, if any; or
The annuitant; or
The joint annuitant; if any.
If the death benefit is payable to the owner's surviving spouse, or to a trust
for the sole benefit of such surviving spouse, we will continue the contract
with the owner's spouse as the new annuitant (if the owner was the annuitant)
and the new owner (if applicable), unless such spouse selects another option as
provided below.
If the death benefit is payable to someone other than the owner's surviving
spouse, we will pay the death benefit in a lump sum payment to, or for the
benefit of, such person within five years after the owner's death, unless such
person or persons selects another option as provided below.
In lieu of the automatic form of death benefit specified above, the person or
persons to whom the death benefit is payable may elect to receive it:
In a lump sum; or
As settlement option payments, provided the person making the election is
an individual. Such payments must begin within one year after the owner's
death and must be in equal amounts over a period of time not extending
beyond the individual's life or life expectancy.
Election of either option must be made no later than 60 days prior to the
one-year anniversary of the owner's death. Otherwise, the death benefit will be
settled under the appropriate automatic form of benefit specified above.
If the person to whom the death benefit is payable dies before the entire death
benefit is paid, we will pay the remaining death benefit in a lump sum to the
payee named by such person or, if no payee was named, to such person's estate.
If the death benefit is payable to a non-individual, subject to the special rule
for a trust for the sole benefit of a surviving spouse, we will pay the death
benefit in a lump sum within one year after the owner's death.
If the Annuitant Dies Before the Annuity Date
If an owner and an annuitant are not the same individual and the annuitant, or
the last of joint annuitants, dies before the annuity date, the owner will
become the annuitant until a new annuitant is selected.
Death after the Annuity Date
If an owner or the annuitant dies after the annuity date, any amounts payable
will continue to be distributed at least as rapidly as under the settlement and
payment option then in effect on the date of death.
Upon the owner's death after the annuity date, any remaining ownership rights
granted under the contract will pass to the person to whom the death benefit
would have been paid if the owner had died before the annuity date, as specified
above.
Survival Provision
The interest of any person to whom the death benefit is payable who dies at the
time of, or within 30 days after, the death of the owner will also terminate if
no benefits have been paid to such beneficiary, unless the owner had given us
written notice of some other arrangement.
CHARGES, FEES AND DEDUCTIONS
No deductions are currently made from purchase payments, although we reserve the
right to charge for any applicable premium tax charges. Therefore, the full
amount of the purchase payments are invested in one or more of the variable
sub-accounts and/or the general account options.
Contingent Deferred Sales Load/
Surrender Charge
No deduction for sales charges is made from purchase payments at the time they
are made. However, a contingent deferred sales load, or surrender charge, of up
to 8% of purchase payments may be imposed on certain withdrawals or surrenders
to partially cover certain expenses incurred by us relating to the sale of the
contract, including commissions paid to salespersons, the costs of preparation
of sales literature and other promotional costs and acquisition expenses.
The contingent deferred sales load/surrender charge percentage varies according
to the number of years between when a purchase payment was credited to the
contract and when the withdrawal is made. The amount of this charge is
determined by multiplying the amount withdrawn that is subject to the sales load
by the contingent deferred sales load/surrender charge percentage according to
the following table. In no event will the total contingent deferred sales
load/surrender charge assessed against the contract exceed 8% of the total
purchase payments.
Contingent
Deferred
Sales Load As A
Percentage of
Premium
Number of Years
Since Receipt of
Premium
Less than 2 years 8%
2 years but less than 3 years 7%
3 years but less than 4 years 6%
4 years but less than 5 years 5%
5 years but less than 6 years 4%
6 years but less than 7 years 3%
7 years or more 0%
Free Withdrawals-Allowed Amount
Beginning 30 days after the contract effective date, or the end of the free look
period, if later, you may make a withdrawal up to the allowed amount without
incurring a contingent deferred sales load each contract year before the annuity
date.
The allowed amount each contract year is equal to 10% of:
the total purchase payments received during the last seven years determined as
of the last contract anniversary; minus
any withdrawals during the present contract year.
In the first contract year, the 10% will be applied to the total purchase
payments at the time of the first withdrawal.
Purchase payments held for seven full years may be withdrawn without charge.
Withdrawals will be made first from purchase payments on a first-in/first-out
basis and then from earnings and last from credits. The allowed amount may vary
depending on the state in which your contract is issued. If the allowed amount
is not fully withdrawn or paid out during a contract year, it does not carry
over to the next contract year.
Free Withdrawals - Living Benefits Rider
When the contract is purchased, you, as the owner, may also elect, in certain
states, a Living Benefits Rider for an additional fee. This rider provides that
the contingent deferred sales load will be waived in any of the three following
instances: (1) if you or the joint owner receive extended medical care in a
qualifying institution (as defined in
the contract) for at least 60 consecutive days, and the request for the
withdrawal or surrender, together with proof of such extended care, is
received at our Service Center during the term of such care, or within 90
days after the last day upon which you or joint owner received such
extended care; or
(2) if you or the joint owner receive medically required hospice or in-home
care for at least 60 consecutive days and such extended care is certified
by a qualified medical professional. You may also be required to submit
other evidence as required by us such as evidence of Medicare eligibility;
or
(3) if you or the joint owner are diagnosed as terminally ill by a qualified
medical professional after the first contract year and are reasonably
expected to die within 12 months.
Neither 1 nor 2 apply if you or the joint owner are receiving extended medical
care in a qualifying institution or receiving in-home care at the time the
contract is purchased.
We reserve the right to not accept purchase payments after you or the joint
owner have qualified for any of these waivers. Under the rider, you are the
owner, or the annuitant if the contract is not owned by an individual. Any
withdrawals under the rider on which the contingent deferred sales load is
waived will not reduce the allowed amount for the contract year. Any credits
less than 12 months old will not be available for withdrawal under the rider.
Other Free Withdrawals
In addition, no contingent deferred sales load is assessed:
upon annuitization after the first contract year to an option involving
life contingencies; or
upon payment of the death benefit before the annuity date.
Any applicable contingent deferred sales load will be deducted from the amount
requested for both partial withdrawals, including withdrawals under the
systematic withdrawal option or the APO, and full surrenders, unless you elect
to add the amount of the applicable load to the amount requested for a partial
withdrawal to cover the applicable contingent deferred sales load. The
contingent deferred sales load and any premium tax charge applicable to a
withdrawal from the guarantee period account will be deducted from the amount
withdrawn after the interest adjustment, if any, is applied and before payment
is made.
Administrative Charges
Account Fee. At the end of each contract year and before the annuity date, we
deduct an annual account fee as partial compensation for expenses relating to
the issue and maintenance of the contract and the variable account. The annual
account fee is equal to the lesser of $30 or 2% of the account value. The
account fee may be increased upon 30 days advance written notice, but in no
event may it exceed $60, or 2% of the account value, if less, per contract year.
If the contract is surrendered, the account fee, unless waived, will be deducted
from a full surrender before the application of any contingent deferred sales
load. The account fee will be deducted on a pro rata basis, based on values,
from the account value. The fee deductions will be based on both the variable
sub-accounts and the general account options. No interest adjustment will be
assessed on any deduction for the account fee taken from the guarantee period
account. The account fee for a contract year will be waived if the account value
exceeds $50,000 on the last business day of that contract year or as of the date
you, as owner, surrender the contract.
Annuity Fee. After the annuity date, an annual annuity fee of $30 to help cover
processing costs will be deducted in equal amounts from each variable payment
made during the year. This fee is $2.50 each month if monthly payments are made.
This fee will not be changed. No annuity fee will be deducted from fixed
payments. This fee may be waived.
Administrative Expense Charge. We also make a daily deduction for the
administrative expense charge from the variable account before and after the
contract effective date at an effective current annual rate of 0.15% of assets
held in each variable sub-account to reimburse us for administrative expenses.
We have the ability in most states to increase or decrease this charge, but the
charge is guaranteed not to exceed 0.35%. We will provide 30 days written notice
of any change in fees. The administrative charges do not bear any relationship
to the actual administrative costs of a particular contract. The administrative
expense charge is reflected in the variable accumulation or variable annuity
unit values for each variable sub-account.
Mortality and Expense Risk Charge
We deduct a charge for bearing certain mortality and expense risks under the
contracts. This is a daily charge at an effective annual rate of 1.20% of the
assets in the variable account. We guarantee that this charge of 1.20% will
never increase. The mortality and expense risk charge is reflected in the
variable accumulation and variable annuity unit values for each variable
sub-account.
Variable accumulated values and variable settlement option payments are not
affected by changes in actual mortality experience incurred by us. The mortality
risks assumed by us arise from our contractual obligations to make settlement
option payments determined in accordance with the settlement option tables and
other provisions contained in the contract and to pay death benefits prior to
the annuity date.
The expense risk assumed by us is the risk that our actual expenses in
administering the contracts and the variable account will exceed the amount
recovered through the administrative expense charge, account fees, transfer fees
and any fees imposed for certain options and services.
If the mortality and expense risk charge is insufficient to cover actual costs
and risks assumed, we will bear these losses. If this charge is more than
sufficient, any excess will accrue to us. Currently, we expect a profit from
this charge.
We anticipate that the contingent deferred sales load will not generate
sufficient funds to pay the cost of distributing the contracts. To the extent
that the contingent deferred sales load is insufficient to cover the actual cost
of contract distribution, the deficiency will be met from general corporate
assets which may include amounts, if any, derived from the mortality and expense
risk charge.
Living Benefits Rider Fee
If you, as the owner, elected the Living Benefits Rider when the contract was
purchased, a fee will be deducted at the end of each contract month while the
rider continues in force. The fee each month will be 1/12 of 0.05% of the
account value at that time. The fee is deducted from each variable sub-account
on a pro rata basis based on the value in each variable sub-account through the
cancellation of variable accumulation units. If there is insufficient variable
accumulated value, the fee will be deducted pro rata from the values in the
general account options. Any interest adjustments will apply. We reserve the
right to waive the interest adjustment for deduction from the guarantee period
account for this rider fee.
Guaranteed Minimum Death Benefit Rider Fee
If you elect the Guaranteed Minimum Death Benefit (GMDB) Rider, a fee will be
deducted at the end of each contract month while the rider continues in force in
the amount of 1/12 of 0.20% of the account value at that time. The account value
is the sum of the variable accumulated value and the general account options
accumulated value. The GMDB Rider fee is deducted first from the variable
accumulated value by taking a deduction from each variable sub-account pro rata
based on the value in each variable sub-account through the cancellation of
variable accumulation units. If there is insufficient variable accumulated
value, the remainder of the fee will be deducted pro rata from the values in the
general account options. Any interest adjustment will apply, although we reserve
the right to waive the interest adjustment.
Premium Tax Charges
Currently there is no charge for premium taxes except upon annuitization.
However, we may be required to pay premium or retaliatory taxes currently
ranging from 0% to 5%. We reserve the right to deduct a charge for these premium
taxes from premium payments, from amounts withdrawn, or from amounts applied on
the annuity date. In some jurisdictions, charges for both direct premium taxes
and retaliatory premium taxes may be imposed at the same or different times with
respect to the same purchase payment, depending upon applicable law.
Transfer Fee
We currently impose a fee for each transfer in excess of the first 18 in a
single contract year. We will deduct the charge from the amount transferred.
This fee is $10 and will be used to help cover our costs of processing
transfers. We reserve the right to waive this fee or to not count transfers
under certain options and services as part of the number of allowed annual
transfers without charge.
Option and Service Fees
We reserve the right to impose reasonable fees for administrative expenses
associated with processing certain options and services. These fees would be
deducted from each use of the option or service during a contract year.
Taxes
No charges are currently made for taxes. However, we reserve the right to deduct
charges in the future for federal, state, and local taxes or the economic burden
resulting from the application of any tax laws that we determine to be
attributable to the contracts.
Portfolio Expenses
The value of the assets in the variable account reflects the value of portfolio
shares and therefore the fees and expenses paid by each portfolio. A complete
description of the fees, expenses, and deductions from the portfolios are found
in the portfolios' prospectuses.
Interest Adjustment
For a description of the interest adjustment applicable to early withdrawals and
transfers from the guaranteed period account, see The General Account Options --
the Guarantee Period Account in Appendix A of this prospectus.
Sales in Special Situations
We may sell the contracts in special situations that are expected to involve
reduced expenses for us. These instances may include:
sales in certain group arrangements, such as employee savings plans;
sales to current or former officers, directors and employees, and their
families, of Transamerica and its affiliates;
sales to officers, directors, and employees, and their families, and the
portfolios' investment advisers and their affiliates; or
sales to officers, directors, employees and sales agents also known as
registered representatives, and their families, and broker-dealers and
other financial institutions that have sales agreements with us to sell the
contracts.
In these situations:
1. the contingent deferred sales load may be reduced or waived;
2. the mortality and expense risk charge or administration charges may be
reduced or waived; and/or
3. certain amounts may be credited to the contract account value (for
examples, amounts related to commissions or sales compensation otherwise
payable to a broker-dealer may be credited to the contract account value.
These reductions in fees or charges or credits to account value will not
unfairly discriminate against any contract owner. These reductions in fees or
charges or credits to account value may be taxable and treated as purchase
payments for purposes of income tax and any possible premium tax charge.
DISTRIBUTION OF THE CONTRACT
Transamerica Securities Sales Corporation (TSSC), is the principal underwriter
of the contracts under a Distribution Agreement with Transamerica. TSSC may also
serve as an underwriter and distributor of other contracts issued through the
variable account and certain other separate accounts of Transamerica and
affiliates of Transamerica. TSSC is an indirect wholly-owned subsidiary of
Transamerica Corporation. TSSC is registered with the Commission as a
broker/dealer and is a member of the National Association of Securities Dealers,
Inc.(NASD). Its principal offices are located at 1150 South Olive Street, Los
Angeles, California 90015. TSSC may enter into sales agreements with
broker/dealers to solicit applications for the contracts through registered
representatives who are licensed to sell securities and variable insurance
products.
Under the Sales Agreements, TSSC will pay broker-dealers compensation based on a
percentage of each purchase payment. The percentage may be up to 4%, and in
certain situations additional amounts for marketing allowances, production
bonuses, service fees, sales awards and meetings, and asset based trailer
commissions may be paid.
SETTLEMENT OPTION PAYMENTS
Annuity Date
The annuity date is the date that the annuitization phase of the contract
begins. On the annuity date, we will apply the annuity amount, defined below, to
provide payments under the settlement option selected by you. You select the
annuity date and you may change the date from time to time by giving notice to
our Service Center in a form and manner acceptable to us. Notice of each change
must be received by our Service Center at least 30 days prior to the
then-current annuity date. The annuity date cannot be earlier than the first
contract anniversary except for certain qualified contracts.
The latest annuity date which may be elected is the later of:
a) the first day of the calendar month immediately preceding the month of
the annuitant's or joint annuitants' 85th birthday
b) the first day of the month coinciding with or next following the tenth
contract anniversary.
The latest allowed annuity date may vary in certain jurisdictions.
The annuity date must be the first day of a calendar month. The first settlement
option payment will be on the first day of the month immediately following the
annuity date. Certain qualified contracts may have restrictions as to the
annuity date and the types of settlement options available.
Settlement Option Payments
The annuity amount is the account value, minus any interest adjustment, minus
any applicable contingent deferred sales load, and minus any applicable premium
tax charges. Any contingent deferred sales load will be waived if the settlement
option payments involve life contingencies and begin on or after the first
contract anniversary.
If the amount of the monthly payment from the settlement option you selected
would result in a monthly settlement option payment of less than $150, or if the
annuity amount is less than $5,000, we reserve the right to offer a less
frequent mode of payment or pay the cash surrender value in a cash payment.
Monthly settlement option payments from the variable payment option will further
be subject to a minimum monthly payment of $75 from each variable sub-account
from which such payments are made.
You may choose from the settlement options below. We may consent to other plans
of payment before the annuity date. For settlement options involving life
contingencies, the actual age and/or sex of the annuitant, or a joint annuitant
will affect the amount of each payment. Sex-distinct rates generally are not
allowed under certain qualified contracts and in some jurisdictions. We reserve
the right to ask for satisfactory proof of the annuitant's or joint annuitant's
age. We may delay settlement option payments until satisfactory proof is
received. Since payments to older annuitants are expected to be fewer in number,
the amount of each annuity payment shall be greater for older annuitants than
for younger annuitants.
You may choose from the two payment options described below. The annuity date
and settlement options available for qualified contracts may also be controlled
by endorsements, the plan or applicable law.
Election of Settlement Option Forms and Payment Options
Before the annuity date, and while the annuitant is living, you may, by written
request, change the settlement option or payment option. The request for change
must be received by our Service Center at least 30 days prior to the annuity
date.
In the event that a settlement option form and payment option is not selected at
least 30 days before the annuity date, we will make settlement option payments
according to the 120 month period certain and life settlement option and the
applicable provisions of the contract.
Payment Options
You may elect a fixed or a variable payment option, or a combination of both, in
25% increments of the annuity amount.
Unless specified otherwise, the annuity amount in the variable account will be
used to provide a variable payment option and the amount in the general account
options will be used to provide a fixed payment option. In this event, the
initial allocation of variable annuity units for the variable sub-accounts will
be in proportion to the account value in the variable sub-accounts on the
annuity date.
Fixed Payment Option
A fixed payment option provides for payments which will remain constant
according to the terms of the settlement option you select. If you select a
fixed payment option, the portion of the annuity amount used to provide that
payment option will be transferred to the general account assets of
Transamerica. The amount of payments will be established by the fixed settlement
option which you select and by the age and sex, if sex-distinct rates are
allowed by law, of the annuitants. Payment amounts will not reflect investment
performance after the annuity date. The fixed payment amounts are determined by
applying the fixed settlement option purchase rate, which is specified in the
contract, to the portion of the annuity amount applied to the payment option.
Payments may vary after the death of an annuitant under some options; the
amounts of variances are fixed on the annuity date.
Variable Payment Option
A variable payment option provides for payments that vary in dollar amount,
based on the investment performance of the selected variable sub-accounts. The
variable settlement option purchase rate tables in the contract reflect an
assumed, but not guaranteed, annual interest rate of 5.35%. If the actual net
investment performance of the variable sub-accounts is less than 5.35%, then the
dollar amount of the actual payments will decrease. If the actual net investment
performance of the variable sub-accounts is higher than 5.35%, then the dollar
amount of the actual payments will increase. If the net investment performance
exactly equals the 5.35% rate, then the dollar amount of the actual payments
will remain constant. We may offer other assumed annual interest rates.
Variable payments will be based on the variable sub-accounts you select, and on
the monies which you allocate among them.
For further details as to the determination of variable payments, see the
Statement of Additional Information.
Settlement Option Forms
As owner, you may choose any of the settlement option forms described below.
Subject to our approval, you may select any other settlement option forms
offered by us in the future.
1. Life Annuity. Payments start on the first day of the month immediately
following the annuity date, if the annuitant is living. Payments end with the
payment due just before the annuitant's death. There is no death benefit. It
is possible that no payment will be made if the annuitant dies after the
annuity date but before the first payment is due; only one payment will be
made if the annuitant dies before the second payment is due, and so forth.
2. Life and Contingent Annuity. Payments start on the first day of the month
immediately following the annuity date, if the annuitant is living. Payments
will continue for as long as the annuitant lives. After the annuitant dies,
payments will be made to the contingent annuitant for as long as the
contingent annuitant lives. The continued payments can be in the same amount
as the original payments, or in an amount equal to one-half or two-thirds
thereof. Payments will end with the payment due just before the death of the
contingent annuitant. There is no death benefit after both die. If the
contingent annuitant does not survive the annuitant, payments will end with
the payment due just before the death of the annuitant. It is possible that
no payments or very few payments will be made, if the annuitant and
contingent annuitant die shortly after the annuity date. The written request
for this form must:
a) name the contingent annuitant; and
b) state the percentage of payments to be made after the annuitant dies.
Once payments start under this settlement option form, the person named as
contingent annuitant for purposes of being the measuring life, may not be
changed. We will require proof of age for the annuitant and for the
contingent annuitant before payments start.
3. Life Annuity With Period Certain. Payments start on the first day of the
month immediately following the annuity date, if the annuitant is living.
Payments will be made for the longer of:
a) the annuitant's life; or
b) the period certain
The period certain may be 120, 180 or 240 months.
If the annuitant dies after all payments have been made for the period
certain, payments will cease with the payment that is paid just before the
annuitant dies. No death benefit will then be payable to the beneficiary.
If the annuitant dies during the period certain, the rest of the period
certain payments will be made to the beneficiary, unless you provide
otherwise.
The written request for this form must:
a) state the length of the period certain; and
b) name the beneficiary.
4. Joint and Survivor Annuity. Payments will be made starting on the first day
of the month immediately following the annuity date, if and for as long as
the annuitant and joint annuitant are living. After the annuitant or joint
annuitant dies, payments will continue as long as the survivor lives.
Payments end with the payment due just before the death of the survivor. The
continued payments can be in the same amount as the original payments, or in
an amount equal to one-half or two-thirds thereof. It is possible that no
payments or very few payments will be made under this arrangement if the
annuitant and joint annuitant both die shortly after the annuity date.
The written request for this form must:
a) name the joint annuitant; and
b) state the percentage of continued payments to be made upon the first
death.
Once payments start under this settlement option form, the person named as
joint annuitant, for the purpose of being the measuring life, may not be
changed. We will need proof of age for the annuitant and joint annuitant
before payments start.
5. Other Forms of Payment. We can provide benefits under any other settlement
option not described in this section as long as we agree to these options and
they comply with any applicable state or federal law or regulation. Requests
for any other settlement option must be made in writing to our Service Center
at least 30 days before the annuity date.
After the annuity date:
a) you will not be allowed to make any changes in the settlement option and
payment option;
b) no additional purchase payments will be accepted under the contract; and
c) no further withdrawals will be allowed.
As the owner of a non-qualified contract, you may, at any time after the
contract date, write to us at our Service Center to change the payee of
benefits being provided under the contract. The effective date of change in
payee will be the latter of:
a) the date we receive the written request for such change; or
b) the date specified by you.
As the owner of a qualified contract, you may not change payees, except as
permitted by the plan, arrangement or federal law.
FEDERAL TAX MATTERS
Introduction
The following discussion is a general description of federal tax considerations
relating to the contract and is not intended as tax advice. This discussion is
not intended to address the tax consequences resulting from all of the
situations in which a person may be entitled to or may receive a distribution
under the contract. If you are concerned about these tax implications, you
should consult a competent tax adviser before initiating any transaction. This
discussion is based upon Transamerica's understanding of the present federal
income tax laws as they are currently interpreted by the Internal Revenue
Service, or simply, the IRS. No representation is made as to the likelihood of
the continuation of the present federal income tax laws or of the current
interpretation by the IRS. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
The contract may be purchased on a non-tax qualified basis, as a non-qualified
contract, or purchased and used in connection with plans or arrangements
qualifying for special tax treatment as a qualified contract. Qualified
contracts are designed for use in connection with plans or arrangements entitled
to special income tax treatment under Code Sections 401, 403(b), 408 and 408A.
The ultimate effect of federal income taxes on the amounts held under a
contract, on settlement option payments, and on the economic benefit to the
owner, the annuitant, or the beneficiary may depend on:
the type of retirement plan or arrangement for which the contract is
purchased;
the tax and employment status of the individual concerned; or
Transamerica's tax status.
In addition, certain requirements must be satisfied when purchasing a qualified
contract with proceeds from a tax qualified retirement plan or other
arrangement. Certain requirements must also be met when receiving distributions
from a qualified contract, in order to continue receiving favorable tax
treatment. Therefore, purchasers of qualified contracts should seek competent
legal and tax advice regarding the suitability of the contract for their
individual situation, the applicable requirements, and the tax treatment of the
rights and benefits of the contract. The following discussion is based on the
assumption that the contract qualifies as an annuity for federal income tax
purposes and that all purchase payments made to qualified contracts are in
compliance with all requirements under the Code and the specific retirement plan
or arrangement.
Purchase Payments
At the time the initial purchase payment is paid, as prospective purchaser, you
must specify whether you are purchasing a non-qualified contract or a qualified
contract. If the initial purchase payment is derived from an exchange, transfer,
conversion or surrender of another annuity contract, we may require that the
prospective purchaser provide information with regard to the federal income tax
status of the previous annuity contract. We will require that persons purchase
separate contracts if they desire to invest monies qualifying for different
annuity tax treatment under the Code. Each such separate contract would require
the minimum initial purchase payment previously described. Additional purchase
payments under a contract must qualify for the same federal income tax treatment
as the initial purchase payment under the contract. We will not accept an
additional purchase payment under a contract if the federal income tax treatment
of such purchase payment would be different from that of the initial purchase
payment.
Taxation of Annuities
In General. Code Section 72 governs taxation of annuities in general.
Transamerica believes that an owner who is a natural person generally is not
taxed on increases in the value of a contract until distribution occurs by
withdrawing all or part of the account value for example, via withdrawals or
settlement option payments. For this purpose, the assignment, pledge, or
agreement to assign or pledge any portion of the account value, and in the case
of a qualified contract, any portion of an interest in the plan, generally will
be treated as a distribution. The taxable portion of a distribution is taxable
as ordinary income.
The owner of any contract who is not a natural person generally must include in
income any increase in the excess of the account value over the "investment in
the contract" during the taxable year. There are some exceptions to this rule
and a prospective owner that is not a natural person should discuss these with a
competent tax adviser.
The following discussion generally applies to a contract owned by a natural
person.
Withdrawals. With respect to non-qualified contracts, partial withdrawals,
including withdrawals under the systematic withdrawal option, are generally
treated as taxable income to the extent that the account value immediately
before the withdrawal exceeds the investment in the contract at that time. The
investment in the contract generally equals the amount of non-deductible
purchase payments made.
In the case of a withdrawal from qualified contracts, including withdrawals
under the systematic withdrawal option or the automatic payout option, a ratable
portion of the amount received is taxable, generally based on the ratio of the
investment in the contract to the individual's total accrued benefit under the
retirement plan or arrangement. The investment in the contract generally equals
the amount of non-deductible purchase payments made by or on behalf of any
individual. For certain qualified contracts, the investment in the contract can
be zero. Special tax rules applicable to certain distributions from qualified
contracts are discussed below, under Qualified Contracts.
If a partial withdrawal from the guarantee period account is subject to an
interest adjustment, the account value immediately before the withdrawal will
not be altered to take into account the interest adjustment. As a result, for
purposes of determining the taxable portion of a partial withdrawal, the account
value will be treated as including the amount deducted from the guarantee period
account due to the interest adjustment.
Full surrenders are treated as taxable income to the extent that the amount
received exceeds the investment in the contract.
Settlement Option Payments. Although the tax consequences may vary depending on
the settlement option elected under the contract, in general a ratable portion
of each payment that represents the amount by which the account value exceeds
the investment in the contract will be taxed based on the ratio of the
investment in the contract to the total benefit payable; after the investment in
the contract is recovered, the full amount of any additional settlement option
payments is taxable.
For variable payments, the taxable portion is generally determined by an
equation that establishes a specific dollar amount of each payment that is not
taxed. The dollar amount is determined by dividing the investment in the
contract by the total number of expected periodic payments. However, the entire
distribution will be taxable once the recipient has recovered the dollar amount
of his or her investment in the contract.
For fixed payments, in general there is no tax on the portion of each payment
which represents the same ratio that the investment in the contract bears to the
total expected value of the payments for the term selected. However, the
remainder of each settlement option payment is taxable. Once the investment in
the contract has been fully recovered, the full amount of any additional
settlement option payments is taxable. If settlement option payments cease as a
result of an annuitant's death before full recovery of the investment in the
contract, consult a competent tax adviser regarding deductibility of the
unrecovered amount.
Withholding. The Code requires Transamerica to withhold federal income tax from
withdrawals. However, except for certain qualified contracts, an owner will be
entitled to elect, in writing, not to have tax withholding apply. Withholding
applies to the portion of the distribution which is includible in income and
subject to federal income tax. The federal income tax withholding rate is10%, or
20% in the case of certain qualified plans, of the taxable amount of the
distribution. Withholding applies only if the taxable amount of the distribution
is at least $200. Some states also require withholding for state income taxes.
The withholding rate varies according to the type of distribution and the
owner's tax status. Eligible rollover distributions from Section 401(a) plans
and Section 403(b) tax sheltered annuities are subject to mandatory federal
income tax withholding at the rate of 20%. An eligible rollover distribution is
the taxable portion of any distribution from such a plan, except for certain
distributions or settlement option payments made in a specified form. The 20%
mandatory withholding does not apply, however, if the owner chooses a direct
rollover from the plan to another
tax-qualified plan or to an IRA described in Code Section 408.
The federal income tax withholding rate for a distribution that is not an
eligible rollover distribution is 10% of the taxable amount of the distribution.
Penalty Tax. A federal income tax penalty equal to 10% of the amount treated as
taxable income may be imposed. In general, however, there is no penalty tax on
distributions:
1. made on or after the date on which the owner attains age 59 1/2;
2. made as a result of death or disability of the owner; or
3. received in substantially equal periodic payments as a life annuity or a
joint and survivor annuity for the life(ves) or life expectancy(ies) of the
owner and a designated beneficiary.
Other exceptions to the tax penalty may apply to certain distributions from a
qualified contract.
Taxation of Death Benefit Proceeds. Amounts may be distributed from the contract
because of the death of an owner. Generally such amounts are includible in the
income of the recipient as follows:
1. if distributed in a lump sum, they are taxed in the same manner as a full
surrender as described above; or
2. if distributed under a settlement option, they are taxed in the same manner
as settlement option payments, as described above.
For these purposes, the investment in the contract is not affected by the
owner's death. That is, the investment in the contract remains the amount of any
purchase payments paid which are not excluded from gross income.
Transfers, Assignments, or Exchanges of the Contract. For non-qualified
contracts, a transfer of ownership of a contract, the designation of an
annuitant, payee, or other beneficiary who is not also the owner, or the
exchange of a contract may result in certain tax consequences to the owner that
are not discussed herein. An owner
<PAGE>
contemplating any such designation, transfer, assignment, or exchange should
contact a competent tax adviser with respect to the potential tax effects of
such a transaction. Qualified contracts may not be assigned or transferred,
except as permitted by the Code or the Employee Retirement Income Security Act
of 1974, also referred to as ERISA.
Multiple Contracts. All deferred non-qualified contracts that are issued by
Transamerica or its affiliates to the same owner during any calendar year are
treated as one contract for purposes of determining the amount includible in
gross income under Code Section 72(e). In addition, the Treasury Department has
specific authority to issue regulations that prevent the avoidance of Section
72(e) through the serial purchase of contracts or otherwise. Congress has also
indicated that the Treasury Department may have authority to treat the
combination purchase of an immediate annuity contract and separate deferred
annuity contracts as a single annuity contract under its general authority to
prescribe rules that may be necessary to enforce the income tax laws.
Qualified Contracts
In General. The qualified contracts are designed for use with several types of
retirement plans and arrangements. The tax rules applicable to participants and
beneficiaries in retirement plans or arrangements vary according to the type of
plan and the terms and conditions of the plan. Special tax treatment may be
available for certain types of contributions and distributions. Adverse tax
consequences may result from contributions in excess of specified limits;
distributions prior to age 59 1/2, subject to certain exceptions; distributions
that do not conform to specified commencement and minimum distribution rules;
and in other specified circumstances.
We make no attempt to provide more than general information about use of the
contracts with the various types of retirement plans. Owners and participants
under retirement plans, as well as annuitants and beneficiaries, are cautioned
that the rights of any person to any benefits under qualified contracts may be
subject to the terms and conditions of the plans themselves, regardless of the
terms and conditions of the contract (including any endorsements) issued in
connection with such a plan. Some retirement plans are subject to distribution
and other requirements that are not incorporated in the administration of the
contracts. Owners are responsible for determining that contributions and other
transactions with respect to the contracts satisfy applicable law. Purchasers of
contracts for use with any retirement plan should consult their legal counsel
and tax adviser regarding the suitability of the contract.
For qualified plans under Section 401(a), 403(a) and 403(b), the Code requires
that distributions generally must commence no later than the later of April 1 of
the calendar year following the calendar year in which the owner or plan
participant:
a) reaches age 70 1/2; or
b) retires and distribution must be made in a specified manner.
If the plan participant is a 5 percent owner, as defined in the Code,
distributions generally must begin no later than April 1 of the calendar year
following the calendar year in which the owner or plan participant reaches age
70 1/2. For IRAs and SEP/IRAs described in Section 408, distributions generally
must commence no later than the later of April 1 of the calendar year following
the calendar year in which the owner or plan participant reaches age 70 1/2.
Roth IRAs under Section 408A do not require distributions at any time prior to
the owner's death.
Qualified Pension and Profit Sharing Plans. Code Section 401(a) permits
employers to establish various types of retirement plans for employees. Such
retirement plans may permit the purchase of the contract in order to provide
retirement savings under the plans. Adverse tax consequences to the plan, to the
participant or to both may result if this contract is assigned or transferred to
any individual as a means to provide benefits payments. If you are buying a
contract for use with such plans, you should seek competent advice. Advice you
receive should address the suitability of the proposed plan documents and the
contract to your specific needs.
Individual Retirement Annuities (IRA), Simplified Employee Plans (SEP) and Roth
IRAs. The sale of a contract for use with any IRA may be subject to special
disclosure requirements of the Internal Revenue Service (IRS). If you purchase a
contract for use with an IRA you will be provided with supplemental information
required by the IRS or other appropriate agency.
You will have the right to cancel your purchase within 7 days of whichever is
earliest:
a) the establishment of your IRA; or
b) your purchase.
If you intend to make such a purchase, you should seek competent advice as to
the suitability of the contract you are considering purchasing for use with an
IRA.
The contract is designed for use with IRA rollovers and contributory IRAs. A
contributory IRA is a contract to which initial and subsequent purchase payments
are subject to limitations imposed by the Code. Code Section 408 permits
eligible individuals to contribute to an individual retirement program known as
an Individual Retirement Annuity or Individual Retirement Account (referred to
as an IRA). Also, distributions from certain other types of qualified plans may
be rolled over on a tax-deferred basis into an IRA.
Earnings in an IRA are not taxed until distribution. IRA contributions are
limited each year to the lesser of $2,000 or 100% of the owner's compensation,
including earned income as defined in Code Section 401(c)(2). These
contributions may be deductible in whole or in part depending on the
individual's adjusted gross income and whether or not the individual is
considered an active participant in a qualified plan. The limit on the amount
contributed to an IRA does not apply to distributions from certain other types
of qualified plans that are rolled over on a tax-deferred basis into an IRA.
Amounts in the IRA, other than nondeductible contributions, are taxed when
distributed from the IRA. Distributions prior to age 59 1/2, unless certain
exceptions apply, are subject to a 10% penalty tax.
Eligible employers that meet specified criteria under Code Section 408(k) could
establish simplified employee pension plans, referred to as SEP/IRAs, for their
employees using IRAs. Employer contributions that may be made to such plans are
larger than the amounts that may be contributed to regular IRAs, and may be
deductible to the employer. SEP/IRAs are subject to certain Code requirements
regarding participation and amounts of contributions.
The contract may also be used for Roth IRA conversions and contributory Roth
IRAs. A contributory Roth IRA is a contract to which initial and subsequent
purchase payments are subject to limitations imposed by the Code. Code Section
408A permits eligible individuals to contribute to an individual retirement
program known as a Roth IRA, although contributions are not tax deductible. In
addition, distributions from a non-Roth IRA may be converted to a Roth IRA. A
non-Roth IRA is an individual retirement account or annuity described in Section
408(a) or 408(b), other than a Roth IRA. Distributions from a Roth IRA generally
are not taxed, except that, once total distributions exceed contributions to the
Roth IRA, income tax and a 10% penalty tax may apply to distributions you take:
1. before age 59 1/2, subject to certain exceptions; or
2. during the five taxable years starting with the year in which you first
contributed to the Roth IRA.
If you intend to purchase such a contract, you should seek competent advice as
to the suitability of the contract for use with Roth IRAs.
Tax Sheltered Annuities. Under Code Section 403(b), payments made by public
school systems and certain tax exempt organizations to purchase annuity
contracts for their employees are excludable from the gross income of the
employee, subject to certain limitations. However, these payments may be subject
to Social Security and Medicare (FICA) taxes.
Code Section 403(b)(11) restricts the distribution under Code Section 403(b)
annuity contracts of:
1. elective contributions made in years beginning after December 31, 1988;
2. earnings on those contributions; and
3. earnings in such years on amounts held as of the last year beginning before
January 1, 1989.
Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
Pre-1989 contributions and earnings through December 31, 1989 are not subject to
the restrictions described above. However, funds transferred to a qualified
contract from a Section 403(b)(7) custodial account will be subject to the
restrictions.
Restrictions under Qualified Contracts. There may be other restrictions that
apply to the election, commencement, or distribution of benefits under qualified
contracts, or under the terms of the plans under which contracts are issued. A
qualified contract will be amended as necessary to conform to the requirements
of the Code.
Taxation of Transamerica
Transamerica is taxed as a life insurance company under Part I of Subchapter L
of the Code. Since the variable account is not an entity separate from
Transamerica, and its operations form a part of Transamerica, it will not be
taxed separately as a regulated investment company under Subchapter M of the
Code. Investment income and realized capital gains are automatically applied to
increase reserves under the contracts. Under existing federal income tax law,
Transamerica believes that the variable account investment income and realized
net capital gains will not be taxed to the extent that such income and gains are
applied to increase the reserves under the contracts.
Accordingly, Transamerica does not anticipate that it will incur any federal
income tax liability attributable to the variable account and, therefore, we do
not intend to make provisions for any such taxes. However, if changes in the
federal tax laws or interpretations thereof result in Transamerica being taxed
on income or gains arising from the variable account, then Transamerica may
impose a charge against the variable account (with respect to some or all
contracts) in order to set aside provisions to pay such taxes.
Tax Status of the Contract
Diversification Requirements. Code Section 817(h) requires that with respect to
non-qualified contracts, the investments of the portfolios be adequately
diversified in accordance with Treasury regulations in order for the contracts
to qualify as annuity contracts under federal tax law. The variable account,
through the portfolios, intends to comply with the diversification requirements
prescribed by the Treasury in Reg. Sec. 1.817-5, which affect how the
portfolios' assets may be invested.
In certain circumstances, owners of variable annuity contracts may be considered
the owners, for federal income tax purposes, of the assets of the separate
accounts used to support their contracts. In those circumstances, income and
gains from the separate account assets would be includible in the variable
contract owner's gross income. The IRS has stated in published rulings that a
variable contract owner will be considered the owner of separate account assets
if the contract owner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets.
The Treasury Department has also announced, in connection with the issuance of
regulations concerning diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control for the
investments of a segregated asset account may cause the investor, as the owner,
rather than the insurance company, to be treated as the owner of the assets in
the account." This announcement also stated that guidance would be issued by way
of regulations or rulings on the "extent to which policyholders may direct their
investments to particular sub-accounts without being treated as owners of the
underlying assets."
The ownership rights under the contract are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that contract owners were not owners of separate account assets. For example,
the owner has additional flexibility in allocating premium payments and account
values. These differences could result in an owner being treated as the owner of
a pro rata portion of the assets of the variable account. In addition,
Transamerica does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. Transamerica therefore reserves the right to modify the contract as
necessary to attempt to prevent an owner from being considered the owner of a
pro rata share of the assets of the variable account.
Required Distributions. In order to be treated as an annuity contract for
federal income tax purposes, Code Section 72(s) requires any non-qualified
contract to provide that:
a) if any owner dies on or after the annuity date but prior to the time the
entire interest in the contract has been distributed, the remaining portion
of such interest will be distributed at least as rapidly as under the
method of distribution being used as of the date of that owner's death; and
b) if any owner dies prior to the annuity date, the entire interest in the
contract will be distributed within five years after the date of the
owner's death. These requirements will be considered satisfied as to any
portion of the owner's interest, which is payable to or for the benefit of
a designated beneficiary.
This interest is distributed over the life of the designated beneficiary, or
over a period not extending beyond the life expectancy of that beneficiary,
provided that such distributions begin within one year of the owner's death.
The owner's designated beneficiary refers to a natural person designated by the
owner as a beneficiary. Upon the owner's death, ownership of the contract passes
to the "designated beneficiary." However, if the owner's "designated
beneficiary" is the surviving spouse of the deceased owner, the contract may be
continued with the surviving spouse as the new owner.
The non-qualified contracts contain provisions which are intended to comply with
the requirements of Code Section 72(s), although no regulations interpreting
these requirements have yet been issued. All provisions in the contract will be
interpreted to maintain this tax qualification. We may make changes in order to
maintain this qualification or to conform the contract to any applicable changes
in the tax qualification requirements. We will provide you with a copy of any
changes made to the contract.
Possible Changes in Taxation
Legislation has been proposed in the past that, if enacted, would adversely
modify the federal taxation of certain insurance and annuity contracts. For
example, one proposal would tax transfers among investment options and tax
exchanges involving variable contracts. A second proposal would reduce the
investment in the contract under cash value life insurance and certain annuity
contracts by certain amounts, thereby increasing the amount of income for
purposes of computing gain. Although the likelihood of there being any changes
is uncertain, there is always the possibility that the tax treatment of the
contracts could be changed by legislation or other means. Moreover, it is also
possible that any change could be retroactive, that is, effective prior to the
date of the change. You should consult a tax adviser with respect to legislative
developments and their effect on the contract.
Other Tax Consequences
As noted above, the foregoing discussion of the federal income tax consequences
is not exhaustive and special rules are provided with respect to other tax
situations not discussed in this prospectus. Further, the federal income tax
consequences discussed herein reflect Transamerica's understanding of current
law and the law may change. Federal estate and gift tax consequences and state
and local estate, inheritance, and other tax consequences of ownership or
receipt of distributions under the contract depend on the individual
circumstances of each owner or recipient of the distribution. A competent tax
adviser should be consulted for further information.
PERFORMANCE DATA
From time to time, Transamerica may advertise yields and average annual total
returns for the variable sub-accounts. In addition, Transamerica may advertise
the effective yield of the money market variable sub-account. These figures will
be based on historical information and are not intended to indicate future
performance.
The yield of the money market variable sub-account refers to the annualized
income generated by an investment in that variable sub-account over a specified
seven-day period. The yield is calculated by assuming that the income generated
for that seven-day period is generated each seven-day period over a 52-week
period and is shown as a percentage of the investment. The effective yield is
calculated similarly but, when annualized, the income earned by an investment in
that variable sub-account is assumed to be reinvested. The effective yield will
be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
The yield of a variable sub-account, other than the money market variable
sub-account, refers to the annualized income generated by an investment in the
variable sub-account over a specified thirty-day period. The yield is calculated
by assuming that the income generated by the investment during that thirty-day
period is generated each thirty-day period over a twelve-month period and is
shown as a percentage of the investment.
The yield calculations do not reflect the effect of any contingent deferred
sales load or premium taxes that may be applicable to a particular contract. To
the extent that the contingent deferred sales load or premium taxes are
applicable to a particular contract, the yield of that contract will be reduced.
For additional information regarding yields and total returns, please refer to
the Statement of Additional Information.
The average annual total return of a variable sub-account refers to return
quotations assuming an investment has been held in the variable sub-account for
various periods of time including, but not limited to, a period measured from
the date the variable sub-account commenced operations. When a variable
sub-account has been in operation for 1, 5, and 10 years, respectively, the
average annual total return for these periods will be provided. The average
annual total return quotations will represent the average annual compounded
rates of return that would equate an initial investment of $1,000 to the
redemption value of that investment, including the deduction of any applicable
contingent deferred sales load but excluding deduction of any premium taxes, as
of the last day of each of the periods for which total return quotations are
provided.
Performance information for any variable sub-account reflects only the
performance of a hypothetical contract under which account value is allocated to
a variable sub-account during a particular time period on which the calculations
are based. Performance information should be considered in light of the
investment objectives and policies and characteristics of the portfolios in
which the variable sub-account invests, and the market conditions during the
given time period, and should not be considered as a representation of what may
be achieved in the future. For a description of the methods used to determine
yield and total returns, see the Statement of Additional Information.
Reports and promotional literature may also contain other information including:
1. the ranking of any variable sub-account derived from rankings of variable
annuity separate accounts or their investment products tracked by Lipper
Analytical Services, Inc., VARDS, IBC/Donoghue's Money Fund Report,
Financial Planning Magazine, Money Magazine, Bank Rate Monitor, Standard
and Poor's Indices, Dow Jones Industrial Average, and other rating
services, companies, publications, or other persons who rank separate
accounts or other investment products on overall performance or other
criteria; and
2. the effect of tax deferred compounding on variable sub-account investment
returns, or returns in general, which may be illustrated by graphs, charts,
or otherwise, and which may include a comparison, at various points in
time, of the return from an investment in a contract, or returns in
general, on a tax-deferred basis, assuming one or more tax rates, with the
return on a currently taxable basis. Other ranking services and indices may
be used.
In its advertisements and sales literature, Transamerica may discuss, and may
illustrate by graphs, charts, or through other means of written communication:
the implications of longer life expectancy for retirement planning;
the tax and other consequences of long-term investment in the contract;
the effects of the contract's lifetime payout options; and
the operation of certain special investment features of the contract --
such as the dollar cost averaging option.
Transamerica may explain and depict in charts, or other graphics, the effects of
certain investment strategies, such as allocating purchase payments between the
general account options and a variable sub-account. Transamerica may also
discuss the Social Security system and its projected payout levels and
retirement plans generally, using graphs, charts and other illustrations.
Transamerica may from time to time also disclose average annual total return in
non-standard formats and cumulative non-annualized total return for the variable
sub-accounts. The non-standard average annual total return and cumulative total
return will assume that no contingent deferred sales load is applicable.
Transamerica may from time to time also disclose yield, standard total returns,
and non-standard total returns for any or all variable sub-accounts.
All non-standard performance data will only be disclosed if the standard
performance data is also disclosed. For additional information regarding the
calculation of other performance data, please refer to the Statement of
Additional Information.
Transamerica may also advertise performance figures for the variable
sub-accounts based on the performance of a portfolio prior to the time the
variable account commenced operations.
YEAR 2000 ISSUE
Many computer software systems in use today cannot distinguish the year 2000
from the year 1900 because dates are encoded using the standard six-place format
that allows entry of only the last two digits of the year. This is commonly
known as the "Year 2000 Problem".
Regarding our systems and software that administer the contracts, we believe
that our own internal systems will be Year 2000 ready. Additionally, we require
third party vendors that supply software or administrative services to us in
connection with the contract administration, to certify that such software
and/or services will be Year 2000 ready.
The "Year 2000 Problem" could adversely impact the portfolios if the computer
systems used by the portfolios' investment adviser, sub-adviser, custodian and
transfer agent (including service providers' systems) do not accurately process
date information on or after January 1, 2000. The investment advisers are
addressing this issue by testing the computer systems they use to ensure that
those systems will operate properly on or after January 1, 2000, and seeking
assurances from other service providers they use that their computer systems
will be adapted to address the "Year 2000 Problem" in time to prevent adverse
consequences on or after January 1, 2000. However, especially when taking into
account interaction with other systems, it is difficult to predict with
precision that there will be no disruption of services in connection with the
year 2000.
We continue to believe that we will achieve Year 2000 readiness. However, the
size and complexity of our systems and the need for them to interface with other
systems internally and with those of our customers, vendors, partners,
governmental agencies and other outside parties, creates the possibility that
some systems may experience Year 2000 problems. Although we believe we will be
properly prepared for the date change, we are also developing contingency plans
to minimize any potential disruptions to operations, especially from externally
interfaced systems over which we have limited or no control.
This issue could also adversely impact the value of the securities that the
portfolios invest in if the issuing companies' systems do not operate properly
on or after January 1, 2000, and this risk could be heightened for portfolios
that invest internationally. Refer to the prospectuses for the portfolios for
more information.
The above information is subject to the Year 2000 Readiness Disclosure Act. This
act may limit your legal rights in the event of a dispute.
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the variable account.
Transamerica is involved in various kinds of routine litigation which, in
management's judgment, are not of material importance to Transamerica's assets
or to the variable account.
LEGAL MATTERS
The organization of Transamerica, its authority to issue the contract and the
validity of the form of the contract have been passed upon by James W. Dederer,
General Counsel and Secretary of Transamerica.
ACCOUNTANTS AND FINANCIAL
STATEMENTS
The consolidated financial statements of Transamerica at December 31, 1998 and
1997, and the financial statements of Separate Account VA-6 at December 31, 1998
and for the period then ended, appearing in the Statement of Additional
Information have been audited by Ernst & Young LLP, Independent Auditors, as set
forth in their reports appearing in the Statement of Additional Information. The
financial statements audited by Ernst & Young LLP have been included in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
VOTING RIGHTS
To the extent required by applicable law, all portfolio shares held in the
variable account will be voted by Transamerica at regular and special
shareholder meetings of the respective portfolio. The shares will be voted in
accordance with instructions received from persons having voting interests in
the corresponding variable sub-account. If, however, the 1940 Act or any
regulation thereunder should be amended, or if the present interpretation
thereof should change, or if Transamerica determines that it is allowed to vote
all portfolio shares in its own right, Transamerica may elect to do so.
The person with the voting interest is the owner. The number of votes which are
available to an owner will be calculated separately for each variable
sub-account. Before the annuity date, that number will be determined by applying
his or her percentage interest, if any, in a particular variable sub-account to
the total number of votes attributable to that variable sub-account. The owner
holds a voting interest in each variable sub-account to which the account value
is allocated. After the annuity date, the number of votes decreases as
settlement option payments are made and as the reserves for the contract
decrease.
The number of votes of a portfolio will be determined as of the date coincident
with the date established by that portfolio for determining shareholders
eligible to vote at the meeting of the portfolios. Voting instructions will be
solicited by written communication prior to such meeting in accordance with
procedures established by the respective portfolios.
Shares for which no timely instructions are received and shares held by
Transamerica for which owners have no beneficial interest will be voted in
proportion to the voting instructions which are received with respect to all
contracts participating in the variable sub-account. Voting instructions to
abstain on any item to be voted upon will be applied on a pro rata basis.
Each person or entity having a voting interest in a variable sub-account will
receive proxy material, reports and other material relating to the appropriate
portfolio.
It should be noted that generally the portfolios are not required, and do not
intend, to hold annual or other regular meetings of shareholders.
AVAILABLE INFORMATION
Transamerica has filed a registration statement with the Securities and Exchange
Commission under the 1933 Act relating to the contract offered by this
prospectus. This prospectus has been filed as a part of the Registration
Statement and does not contain all of the information set forth in the
Registration Statement and exhibits thereto.
Reference is hereby made to such Registration Statement and exhibits for further
information relating to Transamerica and the contract. Statements contained in
this prospectus, as to the content of the contract and other legal instruments,
are summaries. For a complete statement of the terms thereof, reference is made
to the instruments filed as exhibits to the Registration Statement. The
Registration Statement and the exhibits thereto may be inspected and copied at
the office of the Commission, located at 450 Fifth Street, N.W., Washington,
D.C.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more details
concerning the subjects discussed in this prospectus. The following is the Table
of Contents for that Statement:
TABLE OF CONTENTS Page
<S> <C>
THE CONTRACT .................................................................................... 3
NET INVESTMENT FACTOR ........................................................................... 3
VARIABLE PAYMENT OPTIONS......................................................................... 3
Variable Annuity Units and Payments.............................................................. 3
Variable Annuity Unit Value...................................................................... 3
Transfers After the Annuity Date................................................................. 4
GENERAL PROVISIONS............................................................................... 4
IRS Required Distributions.............................................................. 4
Non-Participating....................................................................... 4
Misstatement of Age or Sex.............................................................. 4
Proof of Existence and Age.............................................................. 4
Annuity Data............................................................................ 4
Assignment.............................................................................. 5
Annual Report........................................................................... 5
Incontestability........................................................................ 5
Entire Contract......................................................................... 5
Changes in the Contract................................................................. 5
Protection of Benefits.................................................................. 5
Delay of Payments....................................................................... 5
Notices and Directions.................................................................. 6
CALCULATION OF YIELDS AND TOTAL RETURNS ......................................................... 6
Money Market Sub-Account Yield Calculation.............................................. 6
Other Sub-Account Yield Calculations.................................................... 7
Standard Total Return Calculations...................................................... 7
Adjusted Historical Portfolio Performance Data.......................................... 8
Other Performance Data.................................................................. 8
HISTORICAL PERFORMANCE DATA...................................................................... 8
General Limitations..................................................................... 8
Adjusted Historical Performance Data.................................................... 8
DISTRIBUTION OF THE CONTRACT.....................................................................18
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS...........................................................18
STATE REGULATION.................................................................................18
RECORDS AND REPORTS..............................................................................18
FINANCIAL STATEMENTS.............................................................................18
APPENDIX.........................................................................................19
</TABLE>
<PAGE>
Appendix A
THE GENERAL ACCOUNT OPTIONS
(Not available in all states)
This prospectus is generally intended to serve as a disclosure document only for
the contract and the variable account. For complete details regarding the
general account options, see the contract itself.
The account value allocated to the general account options becomes part of the
general account of Transamerica, which supports insurance and annuity
obligations. Because of exemptive and exclusionary provisions, interests in the
general account have not been registered under the Securities Act of 1933 (the
"1933 Act"), nor is the general account registered as an investment company
under the 1940 Act.
Accordingly, neither the general account nor any interests therein are generally
subject to the provisions of the 1933 Act or the 1940 Act, and Transamerica has
been advised that the staff of the Securities and Exchange Commission has not
reviewed the disclosures in this prospectus which relate to the general account
options.
The general account options are part of the general account of Transamerica. The
general account of Transamerica consists of all the general assets of
Transamerica, other than those in the variable account, or in any other separate
account. Transamerica has sole discretion to invest the assets of its general
account subject to applicable law.
The allocation or transfer of funds to the general account options does not
entitle the owner to share in the investment performance of Transamerica's
general account.
There are two general account options: the fixed account and the guarantee
period account, as described below. These options are not available in all
states.
THE FIXED ACCOUNT
Currently, we guarantee that we will credit interest at a rate of not less than
3% per year, compounded annually, to amounts allocated to the fixed account
under the contracts. However, we reserve the right to change the minimum rate
according to state insurance law. We may credit interest at a rate in excess of
3% per year.
There is no specific formula for the determination of excess interest credits.
Some of the factors that we may consider in determining whether to credit excess
interest to amounts allocated to the fixed account and the amount in that
account are:
general economic trends;
rates of return currently available;
returns anticipated on the company's investments;
regulatory and tax requirements; and
competitive factors.
Any interest credited to amounts allocated to the fixed account in excess of 3%
per year will be determined at the sole discretion of Transamerica. The owner
assumes the risk that interest credited to the fixed account allocations may not
exceed the minimum guarantee of 3% for any given year.
Rates of interest credited to the fixed account will be guaranteed for at least
twelve months and will vary according to the timing and class of the allocation,
transfer or renewal. At any time after the end of the twelve month period for a
particular allocation, we may change the annual rate of interest for that class;
this new annual rate of interest will remain in effect for at least twelve
months. New purchase payments made to the contract which are allocated to the
fixed account may receive different rates of interest.
These rates of interest may differ from those interest rates credited to amounts
transferred from the variable sub-accounts or guarantee period account and from
those credited to amounts remaining in the fixed account and receiving renewal
rates. These rates of interest may also differ from rates for allocations
applied under certain options and services we may be offering.
Transfers
Each contract year, as the owner, you may transfer a percentage of the value of
the fixed account to variable sub-accounts or to the guarantee period accounts.
The maximum percentage that may be transferred will be declared annually by us.
This percentage will be determined by us at our sole discretion, but will not be
less than 10% of the value of the fixed account on the preceding contract
anniversary and will be declared each year. Currently, this percentage is 25%.
As the owner, you are limited to four transfers from the fixed account each
contract year, and the total of all such transfers cannot exceed the current
maximum. If we permit dollar cost averaging from the fixed account to the
variable sub-accounts, the above restrictions are not applicable.
Generally, transfers may not be made from any variable sub-account to the fixed
account for the six-month period following any transfer from the fixed account
to one or more of the variable sub-accounts.
Additionally, transfers may not be made from the fixed account to:
1. any guarantee period;
2. the Transamerica VIF Money Market Sub-Account; or
3. any variable sub-account identified by Transamerica and investing in a
portfolio of fixed income investments.
We reserve the right to modify the limitations on transfers to and from the
fixed account and to defer transfers from the fixed account for up to six months
from the date of request.
SPECIAL DOLLAR COST AVERAGING OPTION
(May not be available in all states. See contract for availability of the fixed
account options.)
When you apply for the contract, you may elect to allocate the entire initial
purchase payment to either the six or twelve month special Dollar Cost Averaging
account of the fixed account. The initial purchase payment will be credited with
interest at a guaranteed fixed rate. Amounts will then be transferred from the
special Dollar Cost Averaging account to the sub-accounts and/or general account
options pro rata on a monthly basis for six or twelve months (depending on the
option you select) in the allocations you specified when you applied for the
contract. The four transfers per year limit does not apply to the special Dollar
Cost Averaging option.
Amounts from the sub-accounts and/or general account options may not be
transferred into the special Dollar Cost Averaging accounts. In addition, if you
request a transfer (other than a Dollar Cost Averaging transfer) or a withdrawal
from a special Dollar Cost Averaging account, any amounts remaining in the
special account will be transferred to the sub-accounts and/or general account
options according to your original allocation instructions. The special Dollar
Cost Averaging option will end and cannot be reelected.
THE GUARANTEE PERIOD ACCOUNT
The guarantee period account provides guaranteed fixed rates of interest
compounded annually for specific guarantee periods. Amounts allocated to the
guarantee period account will be credited with interest of no less than 3% per
year. Amounts withdrawn from a guarantee period prior to the end of its
guarantee period will be subject to an interest adjustment, as explained below.
Each guarantee period offers a specified duration with a corresponding
guaranteed interest rate. Currently we are offering three, five and seven year
guarantee periods but these may change at any time.
The owner bears the risk that, after the initial guarantee period, Transamerica
will not credit interest in excess of 3% per year to amounts allocated to the
guarantee period account.
Each amount allocated or transferred to the guarantee period account will
establish a new guarantee period of a duration selected by the owner from among
those then being offered by us. Every guarantee period we offer will have a
duration of at least one year. The minimum amount that may be allocated or
transferred to a guarantee period is $1,000. Purchase payments allocated to a
guarantee period will be credited on the date the payment is received at our
service center. Any amount transferred from another guarantee period or from a
variable sub-account to a guarantee period will establish a new guarantee period
as of the effective date of the transfer. The guarantee period account and/or
the fixed account may not be available in all states.
Guarantee Period
Each guarantee period will have its own guaranteed interest rate and expiration
date. The guaranteed interest rate applicable to a guarantee period will depend
on the date the guarantee period is established, the duration you choose and the
class of that guarantee period. A guarantee period chosen may not extend beyond
the annuity date.
We reserve the right to limit the maximum number of guarantee periods that may
be in effect at any one time.
We will establish effective annual rates of interest for each guarantee period.
The effective annual rate of interest we establish for a guarantee period will
remain in effect for the duration of the guarantee period. Interest will be
credited to a guarantee period based on its daily balance at a daily rate which
is equivalent to the guaranteed interest rate applicable to that guarantee
period for amounts held during the entire guarantee period. Amounts withdrawn or
transferred from a guarantee period prior to its expiration date will be subject
to an interest adjustment as described below. In no event will the effective
annual rate of interest applicable to a guarantee period be less than 3% per
year.
Interest Adjustment
If any amount is withdrawn or transferred from a guarantee period prior to its
expiration date, excluding withdrawals for the purpose of paying the death
benefit, the amount withdrawn or transferred will be subject to an interest
adjustment. The interest adjustment reflects the impact that changing interest
rates have on the value of money invested at a fixed interest rate. The interest
adjustment is computed by multiplying the amount withdrawn or transferred by the
following factor:
[(1 + I) divided by (1 + J + 0.005)]N/12 -1 where:
I is the guaranteed interest rate in effect;
J is the current interest rate available for a period equal to the number
of years remaining in the guarantee period at the time of withdrawal or
transfer; fractional years are rounded up to the next full year; and
N is the number of full months remaining in the term at the time the
withdrawal or transfer request is processed
In general, the interest adjustment will operate to decrease the value upon
withdrawal or transfer when the guaranteed interest rate in effect for that
allocation is lower than the current interest rate, as of the date of the
transaction, that would apply for a guarantee period equal to the number of full
years remaining in the guarantee period as of that date. For purposes of
determining the interest adjustment, if we do not offer a guarantee period of
that duration, the applicable current interest rate will be determined by linear
interpolation between current interest rates for the two time periods closest to
the duration remaining. If the current interest rate thus determined plus 1/2 of
one percent is greater than the guaranteed interest rate, the interest
adjustment will be negative and amount withdrawn or transferred will be
decreased. However, the value will never be decreased below the initial
allocation plus daily interest at 3% interest per year. There are no positive
interest adjustments.
Expiration of a Guarantee Period
At least 45 days, but not more than 60 days, prior to the expiration date of a
guarantee period, we will notify you as to the options available when a
guarantee period expires. You may elect one of the following:
1. transfer the amount held in that guarantee period to a new guarantee period
from among those being offered by us at such time; or
2. transfer the amount held in that guaranteed period to one or more variable
sub-accounts or to another general account option then available.
We must receive your notice electing one of these at our service center by the
expiration date of the guarantee period. If such election has not been received
by us at our service center, the amount held in that guarantee period will
remain in the guaranteed period account. A new guarantee period of the same
duration as the expiring guarantee period, if offered, will automatically be
established by us with a new guaranteed interest rate declared by us for that
guarantee period. The new guarantee period will start on the day following the
expiration date of the previous guarantee period.
If we are not currently offering a guarantee period having the same duration as
the expiring guarantee period, the new guarantee period will be the next longer
duration, or if we are not offering a guarantee period longer than the duration
of the expiring guarantee period, the next shorter duration. However, no
guarantee period can extend beyond the annuity date.
If the amount held in an expiring guarantee period is less than $1,000, we
reserves the right to transfer such amount to the money market variable
sub-account.
<PAGE>
Appendix B
Example of Variable Accumulation Unit Value Calculations
Suppose the net asset value per share of a portfolio at the end of the current
valuation period is $20.15; at the end of the immediately preceding valuation
period it was $20.10; the valuation period is one day; and no dividends or
distributions caused the portfolio to go "ex-dividend" during the current
valuation period. $20.15 divided by $20.10 is 1.002488.
Subtracting the one day risk factor for mortality and expense risk charge and
the administrative expense charge of .00367% (the daily equivalent of the
current charge of 1.35% on an annual basis) gives a net investment factor of
1.00245.
If the value of the variable accumulation unit for the immediately preceding
valuation period had been 15.500000, the value for the current valuation period
would be 15.53798 (15.5 x 1.00245).
Example of Variable Annuity Unit Value Calculations
Suppose the circumstances of the first example exist, and the value of a
variable annuity unit for the immediately preceding valuation period had been
13.500000.
If the first variable annuity payment is determined by using an annuity payment
based on an assumed interest rate of 4% per year, the value of the variable
annuity unit for the current valuation period would be 13.53163 (13.5 x 1.00245
(the net investment factor) x 0.999893).
0.999893 is the factor, for a one day valuation period, that neutralizes the
assumed rate of four percent (4%) per year used to establish the variable
annuity rates found in the contract.
Example of Variable Annuity Payment Calculations
Suppose that the account is currently credited with 3,200.000000 variable
accumulation units of a particular variable sub-account.
Also suppose that the variable accumulation unit value and the variable annuity
unit value for the particular variable sub-account for the valuation period
which ends immediately preceding the first day of the month is 15.500000 and
13.500000 respectively, and that the variable annuity rate for the age and
elected is $5.73 per $1,000.
Then the first variable annuity payment would be:
3,200 x 15.5 x 5.73 divided by 1,000 = $284.21,
and the number of variable annuity units credited for future payments would be:
284.21 divided by 13.5 = 21.052444.
For the second monthly payment, suppose that the variable annuity unit value on
the 10th day of the second month is 13.565712. Then the second variable annuity
payment would be
$285.59 (21.052444 x 13.565712).
<PAGE>
Appendix C
CONDENSED FINANCIAL INFORMATION
The following condensed financial information is derived from the financial
statements of the variable account. You should read the data in conjunction with
the financial statements, related notes, and other financial information
included in the Statement of Additional Information. The financial statements
and reports of independent auditors for the variable account and Transamerica
are contained in the Statement of Additional Information.
The following table sets forth certain information regarding the sub-accounts
for the period from January 1, 1998, the inception of the sub-accounts through
December 31, 1998. The variable account received its first deposits on January
12, 1998. The variable accumulation unit values and the number of variable
accumulation units outstanding for each sub-account for the periods shown are as
follows:
<PAGE>
<TABLE>
<CAPTION>
Year Ending December 31, 1998
Alger American Alliance VPF Alliance VPF Dreyfus VIF Cap Dreyfus VIF
Income & Growth Growth & Income Premier Growth Appreciation Growth Small Cap
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
<S> <C> <C> <C> <C> <C>
at Beginning of Period $10.00 $10.00 $10.00 $10.00 $10.00
Accumulation Unit Value
at End of Period $13.12 $11.88 $14.46 $12.73 $9.57
Number of Accumulation
Units Outstanding
at End of Period 309,748.942 339,540.067 427,648.138 376,620.359 275,526.474
Janus Aspen Series Janus Aspen Series MFS MFS MFS
Balanced Worldwide Growth Emerging Growth Growth & Income Research
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
at Beginning of Period$10.00 $10.00 $10.00 $10.00 $10.00
Accumulation Unit Value
at End of Period $13.24 $12.65 $13.21 $12.06 $12.15
Number of Accumulation
Units Outstanding
at End of Period 368,928.321 450,342.300 298,213.933 342,844.524 151,312.906
MSDW MSDW MSDW UF OCC Accumulation OCC Accumulation
UF Fixed Income UF High Yield International Magnum Trust Managed Trust Small Cap
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
Accumulation Unit Value
at Beginning of Period$10.00 $10.00 $10.00 $10.000 $10.000
Accumulation Unit Value
at End of Period $10.60 $10.31 $10.71 $10.54 $8.97
Number of Accumulation
Units Outstanding
at End of Period 259,236.465 272,870.757 94,555.328 199,167.982 47,897.168
Transamerica Transamerica
VIF Growth VIF Money Market
Sub-Account Sub-Account
Accumulation Unit Value
at Beginning of Period$10.00 $1.00
Accumulation Unit Value
at End of Period $14.12 $1.04
Number of Accumulation
Units Outstanding
at End of Period 1,424,841.423 4,129,893.964
</TABLE>
<PAGE>
Appendix D
DEFINITIONS
Account Value: The sum of the variable accumulated value and the general account
options accumulated value.
Annuity Date: The date on which the annuitization phase of the contract begins.
Cash Surrender Value: The amount we will pay to the owner if the contract is
surrendered on or before the annuity date. The cash surrender value is equal to:
the account value; less any account fee, interest adjustment, contingent
deferred sales load, and premium tax charges.
Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued under it.
Contingent Deferred Sales Load: A charge equal to a percentage of purchase
payments wihtdrawn that are less than 7 years old. See Contingent Deferred Sales
Load/Surrender Charge on page 32 for the specific percentages.
Contract Anniversary: The anniversary of the contract effective date each year.
Contract Effective Date: The effective date of the contract as shown in the
contract.
Contract Year: A 12-month period starting on the contract effective date and
ending with the day before the contract anniversary, and each 12-month period
thereafter.
Fixed Account: An account which credits a rate of interest for a period of at
least twelve months for each allocation or transfer.
General Account: The assets of Transamerica that are not allocated to a separate
account.
General Account Options: The fixed account and the guarantee period account
offered by us to which the owner may allocate purchase payments and transfers.
General Account Options Accumulated Value: The total dollar value of all amounts
the owner allocates or transfers to any general account options; plus interest
credited; less any amounts withdrawn, applicable fees or premium tax charges,
and/or transfers out to the variable account prior to the annuity date.
Guaranteed Interest Rate: The annual effective rate of interest after daily
compounding credited to a guarantee period.
Guaranteed Minimum Death Benefit Rider: Also called a GMDB Rider, it must be
elected before the contract effective date and provides for the benefits
described on page 34 at the fee described on page 6. If cancelled cannot be
reinstated.
Guarantee Period: The number of years that a guaranteed rate of interest will be
credited to a guarantee
period.
Guarantee Period Account: An account which credits a guaranteed rate of interest
for a specified guarantee period. There may be several guarantee periods offered
under the guarantee period account, each with a different guaranteed rate of
interest.
Living Benefits Rider: Also called a "Waiver of Contingent Deferred Sales Load"
rider in some contracts, it provides benefits described on page 33.
Portfolio: The investment portfolio underlying each variable sub-account in
which we will invest any amounts the owner allocates to that variable
sub-account.
Service Center: Transamerica's Annuity Service Center, at P.O. Box 31848,
Charlotte, North Carolina 28231-1848, telephone 800-258-4260.
Status, Qualified and Non-Qualified: The contract has a qualified status if it
is issued in connection with a retirement plan or program. Otherwise, the status
is non-qualified.
Surrender Charge: See Contingent Deferred Sales Load.
Valuation Day: Any day the New York Stock Exchange is open. To determine the
value of an asset on a day that is not a valuation day, we will use the value of
that asset as of the end of the next valuation day.
Valuation Period: The time interval between the closing, which is generally 4:00
p.m. Eastern Time of the New York Stock Exchange on consecutive valuation days.
Variable Account: Separate Account VA-6, a separate account established and
maintained by Transamerica for the investment of a portion of its assets
pursuant to Section 58-7-95 of the North Carolina Insurance Code.
Variable Accumulation Unit: A unit of measure used to determine the variable
accumulated value before the annuity date. The value of a variable accumulation
unit varies with each variable sub-account.
Variable Accumulated Value: The total dollar value of all variable accumulation
units under the contract prior to the annuity date.
Variable Sub-Account(s): One or more divisions of the variable account which
invests solely in shares of one of the underlying portfolios.
<PAGE>
Appendix E
Transamerica Life Insurance and Annuity Company
DISCLOSURE STATEMENT
for Individual Retirement Annuities
The following information is being provided to you, the owner, in accordance
with the requirements of the Internal Revenue Service (IRS). This Disclosure
Statement contains information about opening and maintaining an Individual
Retirement Account or Annuity (IRA), and summarizes some of the financial and
tax consequences of establishing an IRA.
Part I of this Disclosure Statement discusses Traditional IRAs, while Part II
addresses Roth IRAs. Because the tax consequences of the two categories of IRAs
differ significantly, it is important that you review the correct part of this
Disclosure Statement to learn about your particular IRA. This Disclosure
Statement does not discuss Education IRAs or SIMPLE-IRAs, except as necessary in
the context of discussing other types of IRAs.
Your Transamerica Life Insurance and Annuity Company's Individual Retirement
Annuity, also referred to as a Transamerica Life IRA Contract has been approved
as to form by the IRS. In addition, we are using an IRA and a Roth IRA
Endorsement based on the IRS-approved text. Please note that IRS approval
applies only to the form of the contract and does not represent a determination
of the merits of such IRA contract.
It may be necessary for us to amend your Transamerica Life IRA or Roth IRA
Contract in order for us to obtain or maintain IRS approval of its tax
qualification. In addition, laws and regulations adopted in the future may
require changes to your contract in order to preserve its status as an IRA. We
will send you a copy of any such amendment.
No contribution to a Transamerica Life IRA will be accepted under a SIMPLE plan
established by any employer pursuant to Internal Revenue Code Section 408(p). No
transfer or rollover of funds attributable to contributions made by an employer
to your SIMPLE IRA under the employer's SIMPLE plan may be transferred or rolled
over to your Transamerica Life IRA prior to the expiration of the two year
period beginning on the date you first participated in the employer's SIMPLE
plan. In addition, depending on the annuity contract you purchased, contributory
IRAs may or may not be available.
This Disclosure Statement includes the non-technical explanation of some of the
changes made by the Tax Reform Act of 1986 applicable to IRAs and more recent
changes made by the Small Business Job Protection Act of 1996, the Health
Insurance Portability and Accountability Act of 1996, the Tax Relief Act of 1997
and the IRS Restructuring and Reform Act of 1998.
The information provided applies to contributions made and distributions
received after December 31, 1986, and reflects the relevant provisions of the
Code as in effect on January 1, 1999. This Disclosure Statement is not intended
to constitute tax advice, and you should consult a tax professional if you have
questions about your own circumstances.
Revocation of Your IRA or Roth IRA
You have the right to revoke your Traditional IRA or Roth IRA issued by us
during the seven calendar day period following its establishment. The
establishment of your Traditional IRA or Roth IRA contract will be the contract
effective date. This seven day calendar period may or may not coincide with the
free look period of your contract.
In order to revoke your Traditional IRA or Roth IRA, you must notify us in
writing and you must mail or deliver your revocation to us postage prepaid, at:
401 North Tryon Street, Charlotte, NC 28202. The date of the postmark, or the
date of certification or registration if sent by certified or registered mail,
will be considered your revocation date. If you revoke your Traditional IRA or
Roth IRA during the seven day period, an amount equal to your premium will be
returned to you without any adjustment.
Definitions
Code - Internal Revenue Code of 1986, as amended, and regulations issued
thereunder.
Contributions - Purchase payments paid to your contract.
Contract - The annuity policy, certificate or contract which you purchased.
Compensation - For purposes of determining allowable contributions, the term
compensation includes all earned income, including net earnings from
self-employment and alimony or separate maintenance payments received under a
decree of divorce or separate maintenance and includable in your gross income,
but does not include deferred compensation or any amount received as a pension
or annuity.
Regular Contributions - In General
As is more fully discussed below, for 1998 and later years, the maximum total
amount that you may contribute for any tax year to your regular IRAs and your
regular Roth IRAs combined is $2,000, or if less, your compensation for that
year. Once you attain age 70 1/2, this limit is reduced to zero only for your
regular IRAs, not for your Roth IRAs, but the separate limit on Roth IRA
contributions can be reduced to zero for taxpayers with adjusted gross income,
also referred to as AGI, above certain levels, as described below in Part II,
Section 1. While your Roth IRA contributions are never deductible, your regular
IRA contributions are fully deductible, unless you, or your spouse, is an active
participant in some form of tax-qualified retirement plan for the tax year. In
the latter case, any deductible portion of your regular IRA contributions for
each year is subject to the limits that are described below in Part I, Section
2, and any remaining regular IRA contributions for that year must be reported to
the IRS as nondeductible IRA contributions, along with your Roth IRA
contributions.
IRA PART I: TRADITIONAL IRAs
The rules that apply to a Traditional Individual Retirement Account or Annuity,
which is referred to in this Disclosure Statement simply as an "IRA" or as a
"Traditional IRA" and which includes a regular or Spousal IRA and a rollover
IRA, generally also apply to IRAs under Simplified Employee Pension plans or
SEP-IRAs, unless specific rules for SEP-IRAs are stated.
1. Contributions
(a) Regular IRA. Regular IRA contributions must be in cash and are subject to
the limits described above. Such contributions are also subject to the minimum
amount under the Transamerica IRA contract. In addition, any of your regular
contributions to an IRA for a tax year must be made by the due date, not
including extensions, for your federal tax return for that tax year. See also
Part II, Section 4 below about recharacterizing IRA and Roth IRA contributions
by such date.
(b) Spousal IRA. If you and your spouse file a joint federal income tax return
for the taxable year and if your spouse's compensation, if any, includable in
gross income for the year is less than the compensation includable in your gross
income for the year, you and your spouse may each establish your own separate
regular IRA, and Roth IRA, and may make contributions to such IRAs for your
spouse that are not limited by your spouse's lower amount of compensation.
Instead, the limit for the total contribution to spousal IRAs that can be made
by you or your spouse for the tax year is:
1. $2,000; or
2. if less, the total combined compensation for both you and your spouse
reduced by any deductible IRA contributions and any Roth IRA contributions
for such year.
As with any regular IRA contributions, those for your spouse cannot be made for
any tax year in which your spouse has attained age 70 1/2, must be in cash, and
must be made by the due date, not including extensions, for your federal income
tax return for that tax year.
(c) Rollover IRA. Rollover contributions to a Traditional IRA are unlimited in
dollar amount. These can include rollover contributions of eligible
distributions received by you from another Traditional IRA or tax-qualified
retirement plan. Generally, any distribution from a tax-qualified retirement
plans, such as a pension or profit sharing plan, Code Section 401(k) plan, H.R.
10 or Keogh plan, or a Traditional IRA can be rolled over to a Traditional IRA
unless it is a required minimum distribution as discussed below in Part I,
Section 4(a) or it is part of a series of payments to be paid to you over your
life, life expectancy or a period of at least 10 years. In addition,
distributions of "after-tax" plan contributions, i.e., amounts which are not
subject to federal income tax when distributed from a tax-qualified retirement
plan, are not eligible to be rolled over to an IRA. If a distribution from a
tax-qualified plan or a Traditional IRA is paid to you and you want to roll over
all or part of the eligible distributed amount to a Transamerica Life
Traditional IRA, the rollover must be accomplished within 60 days of the date
you receive the amount to be rolled over. However, you may roll over any amount
from one Traditional IRA into another Traditional IRA only once in any 365-day
period.
A timely rollover of an eligible distributed amount that has been paid to you
directly will prevent its being taxable to you at the time of distribution; that
is, none of it will be includable in your gross income until you withdraw some
amount from your rollover IRA. However, any such distribution directly to you
from a tax-qualified retirement plan is generally subject to a mandatory 20%
withholding tax.
By contrast, a direct transfer from a tax-qualified retirement plan to a
Traditional IRA is considered a "direct" rollover and is not subject to any
mandatory withholding tax, or other federal income tax, upon the direct
transfer. If you elect to make such a "direct" rollover from a tax-qualified
plan to a Transamerica Life Traditional IRA, the transferred amount will be
deposited directly into your rollover IRA.
Strict limitations apply to rollovers, and you should seek competent tax advice
in order to comply with all the rules governing rollovers.
(d) Direct Transfers from another Traditional IRA. You may make an initial or
subsequent contribution to your Transamerica Life Traditional IRA by directing
the fiduciary or issuer of any of your existing IRAs to make a direct transfer
of all or part of such IRAs in cash to your Transamerica Life Traditional IRA.
Such a direct transfer between Traditional IRAs is not considered a rollover ,
e.g., for purposes of the 1-year waiting period or withholding.
(e) Simplified Employee Pension Plan, or SEP-IRA. If an IRA is established that
meets the requirements of a SEP-IRA, generally your employer may contribute an
amount not to exceed the lesser of 15% of your includable compensation ($160,000
for 1999, adjusted for inflation thereafter) or $30,000, even after you attain
age 70 1/2. The amount of such contribution is not includable in your income for
federal income tax purposes. In the case of a SEP-IRA that has a grandfathered
qualifying form of salary reduction, referred to as a SARSEP, that was
established by an employer prior to 1997, generally any employee, including a
self-employed individual, who:
1. has worked for the employer for 3 of the last 5 preceding tax years;
2. is at least age 21; and
3. has received from the employer compensation of at least $400 for the
current tax year, adjusted for inflation after 1999.
is eligible to make a before tax salary reduction contribution to the SARSEP for
the current tax year of up to $10,000, adjusted for inflation after 1998,
subject to the overall limits for SEP-IRA contributions.
Your employer is not required to make a SEP-IRA contribution in any year nor
make the same percentage contribution each year. But if contributions are made,
they must be made to the SEP-IRA for all eligible employees and must not
discriminate in favor of highly compensated employees. If these rules are not
met, any SEP-IRA contributions by the employer could be treated as taxable to
the employees and could result in adverse tax consequences to the participating
employee. For further details about SARSEPs and SEP-IRAs, e.g., for computing
contribution limits for self-employed individuals, see IRS Publication 590, as
indicated below.
(f) Responsibility of the Owner. Contributions, rollovers, or transfers to any
IRA must be made in accordance with the appropriate sections of the Code. It is
your full and sole responsibility to determine the tax deductibility of any
contribution to your Traditional IRA, and to make such contributions in
accordance with the Code. Transamerica does not provide tax advice, and assumes
no liability for the tax consequences of any contribution to your Transamerica
Life Traditional IRA.
2. Deductibility of Contributions for a Regular IRA
(a) General Rules. The deductible portion of the contributions made to the
regular IRAs for you, or your spouse, for a tax year depends on whether you, or
your spouse, is an "active participant" in some type of a tax-qualified
retirement plan for such year, as described in Section 2(b) immediately below.
If you and your spouse file a joint return for a tax year and neither of you is
an active participant for such year, then the permissible contributions to the
regular IRAs for each of you are fully deductible up to $2,000 each, i.e., your
combined deductible IRA contribution limit for the tax year could be $4,000.
Similarly, if you are not married, or treated as such, for the tax year and you
are not an active participant for such year, the permissible contributions to
your regular IRAs for the tax year are fully deductible up to $2,000. For
instance, if you and your spouse file separate returns for the tax year and you
did not live together at any time during such tax year, then you are treated as
unmarried for such year, and if you were not an active participant for the tax
year, then your deductible limit for your regular IRA contribution is $2,000,
even if your spouse was an active participant for such year.
If you are an active participant for the tax year, then your $2,000 limit is
subject to a phase-out rule if your AGI for such year exceeds a Threshold Level,
depending on your tax filing status and the calendar year. If, however, you are
not an active participant for the tax year but your spouse is, then your $2,000
limit is subject to the phase-out rule only if your AGI exceeds a higher
Threshold Level. See Part I, Section 2(c), below.
(b) Active Participant. You are an "active participant" for a year if you
participate in some type of tax-qualified retirement plan. For example, if you
participate in a qualified pension or profit sharing plan, a Code Section 401(k)
plan, certain government plans, a tax-sheltered arrangement under Code Section
403, a SIMPLE plan or a SEP-IRA plan, you are considered to be an active
participant. Your Form W-2 for the year should indicate your participation
status.
(c) Adjusted Gross Income, also referred to as AGI. If you are an active
participant, you must look at your AGI for the year, or if you and your spouse
file a joint tax return, you use your combined AGI, to determine whether you can
make a deductible IRA contribution for that taxable year. The instructions for
your tax return will show you how to calculate your AGI for this purpose. If you
are at or below a certain AGI level, called the Threshold Level, you are treated
as if you were not an active participant and you can make a deductible
contribution under the same rules as a person who is not an active participant.
If you are an active participant for the tax year, then your Threshold Level
depends upon whether you are a married taxpayer filing a joint tax return, an
unmarried taxpayer, or a married taxpayer filing a separate tax return. If you
are a married taxpayer but file a separate tax return, the Threshold Level is
$0. If you are a married taxpayer filing a joint tax return, or an unmarried
taxpayer, your Threshold Level depends upon the taxable year, and can be
determined using the appropriate table below:
<PAGE>
Married Filing Jointly Unmarried
Taxable Threshold Taxable Threshold
Year Level Year Level
1998 $50,000 1998 $30,000
1999 $51,000 1999 $31,000
2000 $52,000 2000 $32,000
2001 $53,000 2001 $33,000
2002 $54,000 2002 $34,000
2003 $60,000 2003 $40,000
2004 $65,000 2004 $45,000
2005 $70,000 2005 and
2006 $75,000 thereafter $50,000
2007 and
thereafter $80,000
<PAGE>
Beginning in 1998, if you are not an active participant for the tax year but
your spouse is, and you are not treated as unmarried for filing purposes, then
your Threshold Level is $150,000.
If your AGI is less than $10,000 above your Threshold Level, or $20,000 for
married taxpayers filing jointly for the taxable year beginning on or after
January 1, 2007, you will still be able to make a deductible contribution, but
it will be limited in amount. The amount by which your AGI exceeds your
Threshold Level is called your Excess AGI. The Maximum Allowable Deduction is
$2,000, even for Spousal IRAs. You can calculate your Deduction Limit as
follows:
10,000 - Excess AGI x Maximum Allowable Deduction = Deduction Limit 10,000
- -------------------
For taxable years beginning on or after January 1, 2007, married taxpayers
filing jointly should substitute 20,000 for 10,000 in the numerator and
denominator of the above equation.
You must round up any computation of the Deduction Limit to the next highest $10
level, that is, to the next highest number which ends in zero. For example, if
the result is $1,525, you must round it up to $1,530. If the final result is
below $200 but above zero, your Deduction Limit is $200. Your Deduction Limit
cannot in any event exceed 100% of your compensation.
3. Nondeductible Contributions to Regular IRAs
The amounts of your regular IRA contributions which are not deductible will be
nondeductible contributions to such IRAs. You may also choose to make a
nondeductible contribution to your regular IRA, even if you could have deducted
part or all of the contribution. Interest or other earnings on your regular IRA
contributions, whether from deductible or nondeductible contributions, will not
be taxed until taken out of your IRA and distributed to you.
If you make a nondeductible contribution to an IRA, you must report the amount
of the nondeductible contribution to the IRS as a part of your tax return for
the year, e.g., on Form 8606.
4. Distributions
(a) Required Minimum Distributions, or simply, RMD. Distributions from your
Traditional IRAs must be made or begin no later than April 1 of the calendar
year following the calendar year in which you attain age 70 1/2, the required
beginning date. You may take RMDs from any Traditional IRA you maintain, but not
from any Roth IRA, as long as:
a) distributions begin when required;
b) distributions are made at least once a year; and
c) the amount to be distributed is not less than the minimum required under
current federal tax law.
If you own more than one Traditional IRA, you can choose whether to take your
RMD from one Traditional IRA or a combination of your Traditional IRAs. A
distribution may be made at once in a lump sum, as qualifying partial
withdrawals or as qualifying settlement option payments. Qualifying partial
withdrawals and settlement option payments must be made in equal or
substantially equal amounts over:
a) your life or the joint lives of you and your beneficiary; or
b) a period not exceeding your life expectancy, as redetermined annually under
IRS tables in the income tax regulations, or the joint life expectancy of
you and your beneficiary, as redetermined annually, if that beneficiary is
your spouse.
Also, special rules may apply if your designated beneficiary, other than your
spouse, is more than ten years younger than you.
If qualifying settlement option payments start prior to the April 1 following
the year you turn age 70 1/2, then the annuity date of such settlement option
payments will be treated as the required beginning date for purposes of the RMD
provisions, above, and the death benefit provisions, below.
If you die before the entire interest in your Traditional IRAs is distributed to
you, but after your required beginning date, the entire interest in your
Traditional IRAs must be distributed to your beneficiaries at least as rapidly
as under the method in effect at your death. If you die before your required
beginning date and if you have a designated beneficiary, distributions to your
designated beneficiary can be made in substantially equal installments over the
life or life expectancy of the designated beneficiary, beginning by December 31
of the calendar year that is one year after the year of your death. Otherwise,
if you die before your required beginning date and your surviving spouse is not
your designated beneficiary, distributions must be completed by December 31 of
the calendar year that is five years after the year of your death.
If your designated beneficiary is your surviving spouse, and you die before your
required beginning date, your surviving spouse can become the new
owner/annuitant and can continue the Transamerica Life Traditional IRA on the
same basis as before your death. If your surviving spouse does not wish to
continue the contract as his or her IRA, he or she may elect to receive the
death benefit in the form of qualifying settlement option payments in order to
avoid the 5-year rule. Such payments must be made in substantially equal amounts
over your spouse's life or a period not extending beyond his or her life
expectancy. Your surviving spouse must elect this option and begin receiving
payments no later than the later of the following dates:
a) December 31 of the year following the year you died; or
b) December 31 of the year in which you would have reached the required
beginning date if you had not died.
Either you or, if applicable, your beneficiary, is responsible for assuring that
the RMD is taken in a timely manner and that the correct amount is distributed.
(b) Taxation of IRA Distributions. Because nondeductible Traditional IRA
contributions are made using income which has already been taxed, that is, they
are not deductible contributions, the portion of the Traditional IRA
distributions consisting of nondeductible contributions will not be taxed again
when received by you. If you make any nondeductible contributions to your
Traditional IRAs, each distribution from any of your Traditional IRAs will
consist of a nontaxable portion, return of nondeductible contributions, and a
taxable portion, return of deductible contributions, if any, and earnings.
Thus, if you receive a distribution from any of your Traditional IRAs and you
previously made deductible and nondeductible contributions to such IRAs, you may
not take a Traditional IRA distribution which is entirely tax-free. The
following formula is used to determine the nontaxable portion of your
distributions for a taxable year.
Remaining nondeductible contributions
Divided by
Year-end total adjusted Traditional IRA balances
Multiplied by
Total distributions for the year
Equals:
Nontaxable distributions for the year
To figure the year-end total adjusted Traditional IRA balance, you must treat
all of your Traditional IRAs as a single Traditional IRA. This includes all
regular IRAs, as well as SEP-IRAs, SIMPLE IRAs and Rollover IRAs, but not Roth
IRAs. You also add back to your year-end total Traditional IRA balances,
specifically the distributions taken during the year from your Traditional IRAs.
Please refer to IRS Publication 590, Individual Retirement Arrangements for
instructions, including worksheets, that can assist you in these calculations.
Transamerica Life Insurance and Annuity Company will report all distributions
from your Transamerica Traditional IRA to the IRS as fully taxable income to
you.
Even if you withdraw all of the assets in your Traditional IRAs in a lump sum,
you will not be entitled to use any form of lump sum treatment or income
averaging to reduce the federal income tax on your distribution. Also, no
portion of your distribution qualifies as a capital gain. Moreover, any
distribution made before you reach age 59 1/2, may be subject to a 10% penalty
tax on early distributions, as indicated below.
(c) Withholding. Unless you elect not to have withholding apply, federal income
tax will be withheld from your Traditional IRA distributions. If you receive
distributions under a settlement option, tax will be withheld in the same manner
as taxes withheld on wages, calculated as if you were married and claim three
withholding allowances. If you are receiving any other type of distribution, tax
will be withheld in the amount of 10% of the distribution. If payments are
delivered to foreign countries, federal income, tax will generally be withheld
at a 10% rate unless you certify to Transamerica that you are not a U. S.
citizen residing abroad or a tax avoidance expatriate as defined in Code Section
877. Such certification may result in mandatory withholding of federal income
taxes at a different rate.
5. Penalty Taxes
(a) Excess Contributions. If at the end of any taxable year the total regular
IRA contributions you made to your Traditional IRAs and your Roth IRAs, other
than rollovers or transfers, exceed the maximum allowable deductible and
nondeductible contributions for that year, the excess contribution amount will
be subject to a nondeductible 6% excise penalty tax. Such penalty tax cannot
exceed 6% of the value of your IRAs at the end of such year.
However, if you withdraw the excess contribution, plus any earnings on it,
before the due date for filing your federal income tax return, including
extensions, for the taxable year in which you made the excess contribution, the
excess contribution will not be subject to the 6% penalty tax. The amount of the
excess contribution withdrawn will not be considered an early distribution, nor
otherwise be includible in your gross income if you have not taken a deduction
for the excess amount.
However, the earnings withdrawn will be taxable income to you and may be subject
to the 10% penalty tax on early distributions. Alternatively, excess
contributions for one year may be withdrawn in a later year or may be carried
forward as regular IRA contributions in the following year to the extent that
the excess, when aggregated with your regular IRA contributions, if any, for the
subsequent year, does not exceed the maximum allowable deductible and
nondeductible amount for that year. The 6% excise tax will be imposed on excess
contributions in each subsequent year they are neither returned to you nor
applied as permissible regular IRA contributions for such year.
(b) Early Distributions. Since the purpose of an IRA is to accumulate funds for
retirement, your receipt or use of any portion of your IRA before you attain age
59 1/2 constitutes an early distribution subject to a 10% penalty tax unless the
distribution occurs as a result of your death or disability or is part of a
series of substantially equal payments made over your life expectancy or the
joint life expectancies of you and your beneficiary, as determined from IRS
tables in the income tax regulations.
Also, the 10% penalty tax will not apply if distributions are used to pay for
medical expenses in excess of 7.5% of your AGI or if distributions are used to
pay for health insurance premiums for you, your spouse and/or your dependents if
you are an unemployed individual who is receiving unemployment compensation
under federal or state programs for at least 12 consecutive weeks. Effective for
distributions made in 1998 or later, the 10% penalty tax also will not apply to
an early distribution made to pay for certain qualifying first-time homebuyer
expenses of you or certain family members, or for certain qualifying higher
education expenses for you or certain family members.
First-time homebuyer expenses must be paid within 120 days of the distribution
from the IRA and include up to $10,000 of the costs of acquiring, constructing,
or reconstructing a principal residence, including any usual or reasonable
settlement, financing or other closing costs. Higher education expenses include
tuition, fees, books, supplies, and equipment required for enrollment,
attendance, and room and board at a post-secondary educational institution. The
amount of an early distribution, excluding any nondeductible contribution
included therein, is includable in your gross income and may be subject to the
10% penalty tax unless you transfer it to another IRA as a qualifying rollover
contribution.
(c) Failure To Satisfy RMD. If the RMD rules described above in Part I, Section
4(a) apply to you and if the amount distributed during a calendar year is less
than the minimum amount required to be distributed, you will be subject to a
penalty tax equal to 50% of the excess of the amount required to be distributed
over the amount actually distributed.
(d) Policy Loans and Prohibited Transactions. If you or any beneficiary engage
in any prohibited transaction, such as any sale, exchange or leasing of any
property between you and the Traditional IRA, or any interference with the
independent status of such IRA, the Traditional IRA will lose its tax exemption
and be treated as having been distributed to you. The value of the entire
Traditional IRA, excluding any nondeductible contributions included therein,
will be includable in your gross income; and, if at the time of the prohibited
transaction you are under age 59 1/2, you may also be subject to the 10% penalty
tax on early distributions, as described above in Part I, Section 5(b).
If you borrow from or pledge your Traditional IRA, or your benefits under the
contract, as security for a loan, the portion borrowed or pledged as security
will cease to be tax-qualified, the value of that portion will be treated as
distributed to you, and you will have to include the value of the portion
borrowed or pledged as security in your income that year for federal tax
purposes. You may also be subject to the 10% penalty tax on early distributions.
(e) Overstatement or Understatement of Nondeductible Contributions. If you
overstate your nondeductible Traditional IRA contributions on your federal
income tax return, without reasonable cause, you may be subject to a reporting
penalty. Such a penalty also applies for failure to file any form required by
the IRS to report nondeductible contributions. These penalties are in addition
to any ordinary income or penalty taxes, interest, and penalties for which you
may be liable if you underreport income upon receiving a distribution from your
Traditional IRA. See Part I, Section 4(b) above for the tax treatment of such
distributions.
IRA PART II: ROTH IRAs
1. Contributions
(a) Regular Roth IRA. You may make contributions to a regular Roth IRA in any
amount up to the contribution limits described in Part II, Section 3, below.
Such contributions are also subject to the minimum amount under the Transamerica
Life Roth IRA contract. Such contribution must be in cash. Your contribution for
a tax year must be made by the due date, not including extensions, for your
federal income tax return for that tax year. Unlike Traditional IRAs, you may
continue making Roth IRA contributions after reaching age 70 1/2 to the extent
that your AGI does not exceed the levels described below.
(b) Spousal Roth IRA. If you and your spouse file a joint federal income tax
return for the taxable year and if your spouse's compensation, if any,
includable in gross income for the year is less than the compensation includable
in your gross income for the year, you and your spouse may each establish your
own individual Roth IRA and may make contributions to those Roth IRAs in
accordance with the rules and limits for contributions contained in the Code,
which are described in Part II, Section 3, below. Such contributions must be in
cash. Your contribution to a Spousal Roth IRA for a tax year must be made by the
due date, not including extensions, for your federal income tax return for that
tax year.
(c) Rollover Roth IRA. You may make contributions to a Rollover Roth IRA within
60 days after receiving a distribution from an existing Roth IRA, subject to
certain limitations discussed in Part II, Section 3, below.
(d) Transfer Roth IRA. You may make an initial or subsequent contribution to
your Transamerica Life Roth IRA by directing a fiduciary or issuer of any of
your existing Roth IRAs to make a direct transfer of all or a portion of the
assets from such Roth IRAs to your Transamerica Life Roth IRA.
(e) Conversion Roth IRA. You may make contributions to a Conversion Roth IRA
within 60 days of receiving a distribution from an existing Traditional IRA or
by instructing the fiduciary or issuer of any of your existing Traditional IRAs
to make a direct transfer of all or a portion of the assets from such a
Traditional IRA to your Transamerica Life Roth IRA, subject to certain
restrictions and subject to income tax on some or all of the converted amounts.
If your AGI, not including the conversion amount, is greater than $100,000 for
the tax year, or if you are married and you and your spouse file separate tax
returns, you may not convert or transfer any amount from a Traditional IRA to a
Roth IRA.
(f) Responsibility of the Owner. Contributions, rollovers, transfers or
conversions to a Roth IRA must be made in accordance with the appropriate
sections of the Code. It is your full and sole responsibility to make
contributions to your Roth IRA in accordance with the Code. Transamerica Life
Insurance and Annuity Company does not provide tax advice, and assumes no
liability for the tax consequences of any contribution to your Roth IRA.
2. Deductibility of Contributions
Your Roth IRA permits only nondeductible after-tax contributions. However,
distributions from your Roth IRA are generally not subject to federal income
tax. See Part II, 4(b) below. This is unlike a Traditional IRA, which permits
deductible and nondeductible contributions, but which provides that most
distributions are subject to federal income tax.
3. Contribution Limits
Contributions for each taxable year to all Traditional and Roth IRAs may not
exceed the lesser of 100% of your compensation or $2,000 for any calendar year,
subject to AGI phase-out rules described below in Section 3(a). Rollover,
transfer and conversion contributions, if properly made, do not count towards
your maximum annual contribution limit, nor do employer contributions to a
SEP-IRA or SIMPLE IRA.
(a) Regular Roth IRAs. The maximum amount you may contribute to a regular Roth
IRA will depend on the amount of your AGI for the calendar year. Your maximum
$2,000 contribution limit begins to phase out when your AGI reaches $95,000 as
unmarried or $150,000 when married filing jointly. Under this phase out, your
maximum regular Roth IRA contributions generally will not be less than $200;
however, no contribution is allowed if your AGI exceeds $110,000 as unmarried or
$160,000 when married filing jointly. If you are married and you and your spouse
file separate tax returns, your maximum regular Roth IRA contribution phases out
between $0 and $10,000. If you are married but you and your spouse lived apart
for the entire taxable year and file separate federal income tax returns, your
maximum contribution is calculated as if you were not married. You should
consult your tax adviser to determine your maximum contribution.
You may make contributions to a regular Roth IRA after age 70 1/2, subject to
the phase-out rules. Regular Roth IRA contributions for a tax year should be
reported on your tax return for that year, specifically, on Form 8606.
(b) Spousal Roth IRAs. Contributions to your lower-earning spouse's Spousal Roth
IRA may not exceed the lesser of:
1. 100% of both spouses' combined compensation minus any Roth IRA or
deductible Traditional IRA contribution for the spouse with the higher
compensation for the year; or
2. $2,000, as reduced by the phase-out rules described above for regular Roth
IRAs.
A maximum of $4,000 may be contributed to both spouses' Roth IRAs. Contributions
can be divided between the spouses' Roth IRAs as you and your spouse wish, but
no more than $2,000 in regular Roth IRA contributions can be contributed to
either individual's Roth IRA each year.
(c) Rollover Roth IRAs. There is no limit on the amounts that you may rollover
from one Roth IRA into another Roth IRA, including your Transamerica Life Roth
IRA. You may roll over a distribution from any single Roth IRA to another Roth
IRA only once in any 365-day period.
(d) Transfer Roth IRAs. There is no limit on amounts that you may transfer
directly from one Roth IRA into another Roth IRA, including your Transamerica
Life Roth IRA. Such a direct transfer does not constitute a rollover for
purposes of the 1-year waiting period.
(e) Conversion Roth IRAs. There is no limit on amounts that you may convert from
your Traditional IRA into your Transamerica Life Roth IRA if you are eligible to
open a Conversion Roth IRA as described in Part II, Section 1(e), above. In the
case of a conversion from a SIMPLE-IRA, the conversion may only be done after
the expiration of your 2-year participation period described in Code Section
72(t)(6). However, the distribution proceeds from your Traditional IRA are
includable in your taxable income to the extent that they represent a return of
deductible contributions and earnings on any contributions. The distribution
proceeds from your Traditional IRA are not subject to the 10% early distribution
penalty tax, described below, if the distribution proceeds are deposited to your
Roth IRA within 60 days.
You can also make contributions to a Roth IRA by instructing the fiduciary or
issuer, custodian or trustee of your existing Traditional IRAs to transfer the
assets in your Traditional IRAs to the Roth IRA, which can be a successor to
your existing Traditional IRAs. The transfer will be treated as a distribution
from your Traditional IRAs, and that amount will be includable in your taxable
income to the extent that it represents a return of deductible contributions and
earnings on any contributions, but will not be subject to the 10% early
distribution penalty tax.
If you converted from a Traditional IRA to a Roth IRA during 1998, the income
reportable upon distribution from the Traditional IRA may be reportable entirely
for 1998 or reportable ratably over four years beginning in 1998.
4. Recharacterization of IRA Contri-butions
(a) Eligibility. By making a timely transfer and election, you generally can
treat a contribution made to one type of IRA as made to a different type of IRA
for a taxable year. For example, if you make contributions to a Roth IRA and
later discover that you are not eligible to make Roth IRA contributions, you may
recharacterize all or a portion of the contribution as a Traditional IRA
contribution by the filing due date, including extensions, for the applicable
tax year.
You may not recharacterize amounts paid into a Traditional IRA that represented
tax-free rollovers or transfers, or employer contributions.
(b) Election. You may elect to recharacterize a contribution amount made to one
type of IRA by simply making a trustee-to-trustee transfer of such amount, plus
net income attributable to it, to a second type of IRA on or before the federal
income tax due date, including extensions, for the tax year for which the
contribution was initially made. After the recharacterization has been made, you
may not revoke or modify the election.
(c) Taxation of a Recharacterization. For federal income tax purposes, a
recharacterized contribution will be treated as having been contributed to the
transferee IRA, rather than to the transferor IRA, on the same date and for the
same tax year that the contribution was initially made to the transferor IRA. A
recharacterized transfer is not considered a rollover for purposes of the 1-year
waiting period.
The transfer of the contribution amount being recharacterized must include the
net income attributable to such amount. If such amount has experienced net
losses as of the time of the recharacterization transfer, the amount
transferred, the original contribution amount less any losses, will generally
constitute a transfer of the entire contribution amount. You must treat the
contribution amount as made to the transferee IRA on your federal income tax
return for the year to which the original contribution amount related.
For reconversions following a recharacterization, see Publication 590 and
Treasury Regulation Section 1.408A-5.
5. Distributions
(a) Required Minimum Distribution, or simply, RMD. Unlike a Traditional IRA,
there are no rules that require that any distribution be made to you from your
Roth IRA during your lifetime.
If you die before the entire value of your Roth IRA is distributed to you, the
balance of your Roth IRA must be distributed by December 31 of the calendar year
that is five years after your death. However, if you die and you have a
designated beneficiary, your beneficiary may elect to take distributions in the
form of qualifying settlement option payments in substantially equal
installments over the life or life expectancy of the designated beneficiary,
beginning by December 31 of the calendar year that is one year after your death.
If your beneficiary is your surviving spouse, he or she can become the new
owner/annuitant and can continue the Transamerica Life Roth IRA on the same
basis as before your death. If your surviving spouse does not wish to continue
the Transamerica Life Roth IRA as his or her Roth IRA, he or she may elect to
receive the death benefit in the form of qualifying settlement option payments
in order to avoid the 5-year distribution requirement. Such payments must be
made in substantially equal amounts over your spouse's life or a period not
extending beyond his or her life expectancy. Your surviving spouse must elect
this option and begin receiving payments no later than the later of the
following dates:
a) December 31 of the year following the year you died; or
b) December 31 of the year in which you would have reached age 70 1/2.
Your beneficiary is responsible for assuring that the RMD following your death
is taken in a timely manner and that the correct amount is distributed.
(b) Taxation of Roth IRA Distributions. The amounts that you withdraw from your
Roth IRA are generally tax-free. For federal income tax purposes, all of your
Roth IRAs are aggregated and Roth IRA distributions are treated as made first
from Roth IRA contributions and second from earnings. Distributions that are
treated as made from Roth IRA contributions are treated as made first from
regular Roth IRA contributions, which are always tax-free, and second from
conversion or rollover Roth IRA contributions on a first-in, first-out basis. A
distribution allocable to a particular conversion or rollover Roth IRA
contribution is treated as consisting first of the portion, if any, of the
conversion contribution that was previously includible in gross income by reason
of the conversion.
In any event, since the purpose of a Roth IRA is to accumulate funds for
retirement, your receipt or use of Roth IRA earnings before you attain age 59
1/2 , or within 5 years of your first contribution to the Roth IRA, including a
contribution rolled over, transferred or converted from a Traditional IRA, will
generally be treated as an early distribution subject to regular income tax and
to the 10% penalty tax described below in Section 6(b).
No income tax will apply to earnings that are withdrawn before you attain age 59
1/2, but which are withdrawn five or more years after the first contribution to
the Roth IRA, including a rollover or transfer contribution or conversion from a
Traditional IRA, where the withdrawal is made:
a) upon your death or disability; or
b) to pay qualified first-time homebuyer expenses of you or certain family
members.
No portion of your Roth IRA distribution qualifies as a capital gain. There is
also a separate 5-year rule for the recapture of the 10% penalty tax that is
described below in Section 6(b) and that applies to any Roth IRA distribution
made prior to age 59 1/2 if any conversion or rollover contribution has been
made to any Roth IRA owned by the individual within the 5 most recent taxable
years, even if this current distribution from the Roth IRA is otherwise tax-free
under the rules described in this Subsection 5(b).
(c) Withholding. If the distribution from your Roth IRA is subject to federal
income tax, unless you elect not to have withholding apply, federal income tax
will be withheld from your Roth IRA distributions. If you receive distributions
under a settlement option, tax will be withheld in the same manner as taxes
withheld on wages, calculated as if you were married and claim three withholding
allowances. If you are receiving any other type of distribution, tax will be
withheld in the amount of 10% of the amount of the distribution. If payments are
delivered to foreign countries, federal income tax will generally be withheld at
a 10% rate unless you certify to Transamerica Life Insurance and Annuity Company
that you are not a U. S. citizen residing abroad or a "tax avoidance expatriate"
as defined in Code Section 877. Such certification may result in mandatory
withholding of federal income taxes at a different rate.
6. Penalty Taxes
(a) Excess Contributions. If at the end of any taxable year your total regular
Roth IRA contributions, other than rollovers, transfers or conversions, exceed
the maximum allowable contributions for that year, taking into account
Traditional IRA contributions, the excess contribution amount will be subject to
a nondeductible 6% excise penalty tax. Such penalty tax cannot exceed 6% of the
value of your Roth IRAs at the end of such year. However, if you withdraw the
excess contribution, plus any earnings on it, before the due date for filing
your federal income tax return, including extensions, for the taxable year in
which you made the excess contribution, the excess contribution will not be
subject to the 6% penalty tax.
The amount of the excess contribution withdrawn will not be considered an early
distribution, but the earnings withdrawn will be taxable income to you and may
be subject to the 10% penalty tax on early distributions. Alternatively, excess
contributions for one year may be withdrawn in a later year or may be carried
forward as Roth IRA contributions in a later year to the extent that the excess,
when aggregated with your regular Roth IRA contributions, if any, for the
subsequent year, does not exceed the maximum allowable contribution for that
year. The 6% excise tax will be imposed on excess contributions in each
subsequent year they are neither returned to you nor applied as permissible
regular Roth IRA contributions for such year.
(a) Early Distributions. Since the purpose of a Roth IRA is to accumulate funds
for retirement, your receipt or use of any portion of your Roth IRA before you
attain age 59 1/2 constitutes an early distribution subject to the 10% penalty
tax on the earnings in your Roth IRA. This penalty tax will not apply if the
distribution occurs as a result of your death or disability or is part of a
series of substantially equal payments made over your life expectancy or the
joint life expectancies of you and your beneficiary, as determined from IRS
tables in the income tax regulations. Also, the 10% penalty tax will not apply
if distributions are used to pay for medical expenses in excess of 7.5% of your
AGI; or if distributions are used to pay for health insurance premiums for you,
your spouse and/or your dependents if you are an unemployed individual who is
receiving unemployment compensation under federal or state programs for at least
12 consecutive weeks.
The 10% penalty tax also will not apply to an early distribution made to pay for
certain qualifying first-time homebuyer expenses for you or certain family
members, or for certain qualifying higher education expenses for you or certain
family members. First-time homebuyer expenses must be paid within 120 days of
the distribution from the Roth IRA and include up to $10,000 of the costs of
acquiring, constructing, or reconstructing a principle residence, including any
usual or reasonable settlement, financing or other closing costs. Higher
education expenses include tuition, fees, books, supplies, and equipment
required for enrollment, attendance, and room and board at a post-secondary
educational institution.
There is also a separate 5-year recapture rule for the 10% penalty tax in the
case of a Roth IRA distribution made prior to age 59 1/2 that is made within 5
years after a conversion or rollover contribution from a Traditional IRA. This
recapture rule exists because such a prior Roth IRA contribution avoided the 10%
penalty tax when it was rolled over or converted from the Traditional IRA. Under
this 5-year recapture rule, any Roth IRA distribution made prior to age 59 1/2
that is attributable to any conversion or rollover contribution from a
Traditional IRA made within the previous 5 years to any of the individual's Roth
IRAs is generally subject to the 10% penalty tax, and its exceptions, to the
extent that such prior Roth IRA contribution was subject to ordinary tax upon
the conversion or rollover, even if the Roth IRA distribution is otherwise
tax-free.
Under the distribution ordering rules for a Roth IRA, all of an individual's
Roth IRAs and distributions therefrom are treated as made: first from regular
Roth IRA contributions; then from conversion or rollover Roth IRA contributions
on a first-in, first-out basis; and last from earnings. However, whenever any
Roth IRA distribution amount is attributable to any conversion or rollover
contribution made within the 5 most recent tax years, this distributed amount is
attributed first to the taxable portion of such prior contribution, for purposes
of determining the amount of this Roth IRA distribution that is subject to the
recapture of the 10% penalty tax, unless some exception to the penalty tax
applies to the current Roth IRA distribution, such as age 59 1/2, disability or
certain health, education or homebuyer expenses, as described above in this
Subsection 6(b).
(c) Failure to Satisfy RMDs Upon Death. If the RMD rules described above in Part
II, Section 4(a) apply to the beneficiary of your Roth IRA after your death and
if the amount distributed during a calendar year is less than the minimum amount
required to be distributed, your beneficiary will be subject to a penalty tax
equal to 50% of the excess of the amount required to be distributed over the
amount actually distributed.
(d) Policy Loans and Prohibited Transactions. If you or any beneficiary engage
in any prohibited transaction, such as any sale, exchange or leasing of any
property between you and the Roth IRA, or any interference with the independent
status of the Roth IRA, the Roth IRA will lose its tax exemption and be treated
as having been distributed to you. The value of any earnings on your Roth IRA
contributions will be includable in your gross income; and if at the time of the
prohibited transaction, you are under age 591/2 you may also be subject to the
10% penalty tax on early distributions, as described above in Part II, Section
5(b). If you borrow from or pledge your Roth IRA, or your benefits under the
contract, as a security for a loan, the portion borrowed or pledged as security
will cease to be tax-qualified, the value of that portion will be treated as
distributed to you, and you may be subject to the 10% penalty tax on early
distributions from a Roth IRA.
IRA PART III: OTHER INFORMATION
(1) Federal Estate and Gift Taxes
Any amount in or distributed from your Traditional and/or Roth IRAs upon your
death may be subject to federal estate tax, although certain credits and
deductions may be available. The exercise or non-exercise of an option that
would pay a survivor an annuity at or after your death should not be considered
a transfer for federal gift tax purposes.
(2) Tax Reporting
You must report contributions to, and distributions from, your Traditional IRA
and Roth IRA, including the year-end aggregate account balance of all
Traditional IRAs and Roth IRAs, on your federal income tax return for the year
specifically on IRS Form 8606. For Traditional IRAs, you must designate on the
return how much of your annual contribution is deductible and how much is
nondeductible. You need not file IRS Form 5329 with your income tax return for a
particular year unless for that year you are subject to a penalty tax because
there has been an excess contribution to, an early distribution from, or
insufficient RMDs from your Traditional IRA or Roth IRA, as applicable.
(3) Vesting
Your interest in your Traditional IRA or Roth IRA is nonforfeitable at all
times.
(4) Exclusive Benefit
Your interest in your Traditional IRA or Roth IRA is for the exclusive benefit
of you and your beneficiaries.
(5) IRS Publication 590
Additional information about your Traditional IRA or Roth IRA or about SEP-IRAs
and SIMPLE-IRAs can be obtained from any district office of the IRS or by
calling 1-800-TAX-FORM for a free copy of IRS Publication 590, Individual
Retirement Arrangements.
<PAGE>
Please forward, without charge, a copy of the Statement of Additional
Information concerning the Transamerica Seriessm - Transamerica Catalystsm
Variable Annuity issued by Transamerica Life Insurance and Annuity Company to:
Please print or type and fill in all information:
- -------------------------------------------------------------------------
Name
- -------------------------------------------------------------------------
Address
- -------------------------------------------------------------------------
City/State/Zip
- -------------------------------------------------------------------------
Date: ________________________ Signed: ______________________________
Return to Transamerica Life Insurance and Annuity Company, Annuity Service
Center, 401 North Tryon Street, Suite 700, Charlotte, North Carolina 28202.
<PAGE>
TRANSAMERICA SERIES sm
TRANSAMERICA CATALYST sm VARIABLE ANNUITY
Contract Form 4-703, Certificate Form TCG-313; Group Annuity Contract Form
TGP-713 The contract is not available in all states.
Issued by Transamerica Life Insurance and Annuity Company
401 North Tryon Street, Suite 700, Charlotte, North Carolina, 28202
VIM 135-599
5
<PAGE>
19
STATEMENT OF ADDITIONAL INFORMATION FOR
TRANSAMERICA SERIES sm
TRANSAMERICA CATALYST sm
VARIABLE ANNUITY
Separate Account VA-6
Issued By
Transamerica Life Insurance and Annuity Company
This statement of additional information expands upon subjects discussed in
the May 1, 1999, prospectus for the Transamerica Catalyst Variable Annuity
("contract") issued by Transamerica Life Insurance and Annuity Company
("Transamerica") through Separate Account VA-6. You may obtain a free copy of
the prospectus by writing to: Transamerica Life Insurance and Annuity Company,
401 North Tryon Street, Charlotte, NC 28202 or calling 800-420-7749. Terms used
in the current prospectus for the contract are incorporated into this statement.
The contract will be issued as a certificate under a group annuity contract
in some states and as an individual annuity contract in other states. The term
"contract" as used herein refers to both the individual contract and the
certificates issued under the group contract.
This Statement of Additional Information is not a prospectus and should be read
only in conjunction with the prospectus for the contract and the portfolios.
Dated May 1, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
THE CONTRACT .................................................................................... 3
NET INVESTMENT FACTOR ........................................................................... 3
VARIABLE PAYMENT OPTIONS......................................................................... 3
Variable Annuity Units and Payments.............................................................. 3
Variable Annuity Unit Value...................................................................... 3
Transfers After the Annuity Date................................................................. 4
GENERAL PROVISIONS............................................................................... 4
IRS Required Distributions.................................................................. 4
Non-Participating........................................................................... 4
Misstatement of Age or Sex.................................................................. 4
Proof of Existence and Age.................................................................. 4
Annuity Data................................................................................ 4
Assignment.................................................................................. 5
Annual Report............................................................................... 5
Incontestability............................................................................ 5
Entire Contract............................................................................. 5
Changes in the Contract..................................................................... 5
Protection of Benefits...................................................................... 5
Delay of Payments........................................................................... 5
Notices and Directions...................................................................... 6
CALCULATION OF YIELDS AND TOTAL RETURNS ......................................................... 6
Money Market Sub-Account Yield Calculation.................................................. 6
Other Sub-Account Yield Calculations........................................................ 7
Standard Total Return Calculations.......................................................... 7
Adjusted Historical Portfolio Performance Data.............................................. 8
Other Performance Data...................................................................... 8
HISTORICAL PERFORMANCE DATA...................................................................... 8
General Limitations......................................................................... 8
Adjusted Historical Performance Data........................................................ 8
DISTRIBUTION OF THE CONTRACT..................................................................... 18
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS........................................................... 18
STATE REGULATION................................................................................. 18
RECORDS AND REPORTS.............................................................................. 18
FINANCIAL STATEMENTS............................................................................. 18
APPENDIX......................................................................................... 19
</TABLE>
<PAGE>
THE CONTRACT
The following pages provides additional information about the contract
which may be of interest to some owners.
NET INVESTMENT FACTOR
For any sub-account of the variable account, the net investment factor for
a valuation period, before the annuity date, is (a) divided by (b), minus (c)
minus (d):
Where (a) is:
The net asset value per share held in the sub-account, as of the end of the
valuation period; plus or minus the per-share amount of any dividend or
capital gain distributions if the "ex-dividend" date occurs in the
valuation period; plus or minus a per-share charge or credit as we may
determine, as of the end of the valuation period, for taxes.
Where (b) is:
The net asset value per share held in the sub-account as of the end of the
last prior valuation period.
Where (c) is:
The daily mortality and expense risk charge of 0.00329% (1.20% annually)
times the number of calendar days
in the current valuation period.
Where (d) is:
The daily administrative expense charge, currently 0.000411% (0.15%
annually) times the number of calendar days in the current valuation
period. This charge may be increased, but will not exceed 0.00096% (0.35%
annually).
A valuation day is defined as any day that the New York Stock Exchange is open.
VARIABLE PAYMENT OPTIONS
The variable payment option provide for payments that fluctuate in dollar
amount, based on the investment performance of the elected variable
sub-account(s).
Variable Annuity Units and Payments
For the first monthly payment, the number of variable annuity units
credited in each variable sub-account will be determined by dividing: (a) the
product of the portion of the value to be applied to the variable sub-account
and the variable annuity purchase rate specified in the contract; by (b) the
value of one variable annuity unit in that sub-account on the annuity date.
The amount of each subsequent variable payment equals the product of the
number of variable annuity units in each variable sub-account and the variable
sub-account's variable annuity unit value as of the tenth day of the month
before the payment due date. The amount of each payment may vary.
Variable Annuity Unit Value
The value of a variable annuity unit in a variable sub-account on any
valuation day is determined as described below.
The net investment factor for the valuation period (for the appropriate
payment frequency) just ended is multiplied by the value of the variable annuity
unit for the sub-account on the preceding valuation day. The net investment
factor after the annuity date is calculated in the same manner as before the
annuity date and then multiplied by an interest factor. The interest factor
equals (.999893)n where n is the number of days since the preceding valuation
day. This compensates for the 4% interest assumption built into the variable
annuity purchase rates. We may offer assumed interest rates other than 4%. The
appropriate interest factor will be applied to compensate for the assumed
interest rate.
Transfers After the Annuity Date
After the annuity date, you may transfer variable annuity units from one
sub-account to another, subject to certain limitations (See "Transfers" page 29
of the prospectus). The dollar amount of each subsequent monthly annuity payment
after the transfer must be determined using the new number of variable annuity
units multiplied by the variable sub-account's variable annuity unit value on
the tenth day of the month preceding payment. We reserve the right to change
this day of the month.
The formula used to determine a transfer after the annuity date can be
found in the Appendix to this statement of additional information.
GENERAL PROVISIONS
IRS Required Distributions
If any owner under a non-qualified contract dies before the entire interest
in the contract is distributed, the value generally must be distributed to the
designated beneficiary so that the contract qualifies as an annuity under the
Code. (See "Federal Tax Matters" page 44 of the prospectus.)
Non-Participating
The contract is non-participating. No dividends are payable and the
contract will not share in our profits or surplus earnings.
Misstatement of Age or Sex
If the age or sex of the annuitant or any other measuring life has been
misstated, the settlement option payments under the contract will be whatever
the annuity amount applied on the annuity date would purchase on the basis of
the correct age or sex of the annuitant and/or other measuring life. Where
required by law, rule or regulation, we may only consider the age of the
annuitant and/or other measuring life. Any overpayments or underpayments by us
as a result of any such misstatement may be respectively charged against or
credited to the settlement option payment or payments to be made after the
correction so as to adjust for such overpayment or underpayment.
Proof of Existence and Age
Before making any payment under the contract, we may require proof of the
existence and/or proof of the age of an owner and/or an annuitant or any other
measuring life, or any other information deemed necessary in order to provide
benefits under the contract.
Annuity Data
We will not be liable for obligations which depend on receiving information
from a payee or measuring life until such information is received in a
satisfactory form.
Assignment
No assignment of a contract will be binding on us unless made in writing
and given to us at our Service Center. We are not responsible for the adequacy
of any assignment. Your rights and the interest of any annuitant or
non-irrevocable beneficiary will be subject to the rights of any assignee of
record.
Annual Report
At least once each contract year prior to the annuity date, you will be
given a report of the current account value allocated to each sub-account of the
variable account and any general account option. This report will also include
any other information required by law or regulation. After the annuity date, a
confirmation will be provided with every variable annuity payment.
Incontestability
Each contract is incontestable from the contract effective date except in
certain states where medical questions are required on the application for the
optional Living Benefits Rider.
Entire Contract
We have issued the contract in consideration and acceptance of the payment
of the initial purchase payment and certain required information in an
acceptable form and manner or, where state law requires, the application. In
those states that require a written application, a copy of the application is
attached to and is part of the contract and along with the contract constitutes
the entire contract.
The group annuity contract has been issued to a trust organized under
Missouri law. However, the sole purpose of the trust is to hold the group
annuity contract. You have all rights and benefits under the individual
certificate issued under the group contract.
Changes in the Contract
Only two authorized officers of Transamerica, acting together, have the
authority to bind us or to make any change in the individual contract or the
group contract or individual certificates thereunder and then only in writing.
We will not be bound by any promise or representation made by any other persons.
We may change or amend the individual contract or the group contract or
individual certificates thereunder if such change or amendment is necessary for
the individual contract or the group contract or individual certificates
thereunder to comply with any state or federal law, rule or regulation.
Protection of Benefits
To the extent permitted by law, no benefit (including death benefits) under
the contract will be subject to any claim or process of law by any creditor.
Delay of Payments
Payment of any cash withdrawal, lump sum death benefit, or variable payment
or transfer due from the variable account will occur within seven days from the
date the election becomes effective, except that we may be permitted to postpone
such payment if: (1) the New York Stock Exchange is closed for other than usual
weekends or holidays, or trading on the Exchange is otherwise restricted; or (2)
an emergency exists as defined by the Securities and Exchange Commission
(Commission), or the Commission requires that trading be restricted; or (3) the
Commission permits a delay for the protection of owners.
In addition, while it is our intention to process all transfers from the
sub-accounts immediately upon receipt of a transfer request, we have the right
to delay effecting a transfer from a variable sub-account for up to seven days.
We may delay effecting such a transfer if there is a delay of payment from an
affected portfolio. If this happens, then we will calculate the dollar value or
number of units involved in the transfer from a variable sub-account on or as of
the date we receive a transfer request in an acceptable form and manner, but
will not process the transfer to the transferee sub-account until a later date
during the seven-day delay period when the portfolio underlying the transferring
sub-account obtains liquidity to fund the transfer request through sales of
portfolio securities, new purchase payments, transfers by investors or
otherwise. During this period, the amount transferred would not be invested in a
variable sub-account.
We may delay payment of any withdrawal from any general account options for
a period of not more than six months after we receive the request for such
withdrawal. If we delay payment for more than 30 days, we will pay interest on
the withdrawal amount up to the date of payment. (See "Cash Withdrawals" page 31
of the prospectus.)
Notices and Directions
We will not be bound by any authorization, direction, election or notice
which is not in a form and manner acceptable to us and received at our Service
Center.
Any written notice requirement by us to you will be satisfied by our
mailing of any such required written notice, by first-class mail, to your last
known address as shown on our records.
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Sub-Account Yield Calculation
In accordance with regulations adopted by the Commission, we are required
to compute the money market sub-account's current annualized yield for a
seven-day period in a manner which does not take into consideration any realized
or unrealized gains or losses on shares of the money market series or on its
portfolio securities. This current annualized yield is computed by determining
the net change (exclusive of realized gains and losses on the sale of securities
and unrealized appreciation and depreciation) in the value of a hypothetical
account having a balance of one unit of the money market sub-account at the
beginning of such seven-day period, dividing such net change in account value by
the value of the account at the beginning of the period to determine the base
period return and annualizing this quotient on a 365-day basis. The net change
in account value reflects the deductions for the annual account fee, the
mortality and expense risk charge and administrative expense charges and income
and expenses accrued during the period. Because of these deductions, the yield
for the money market sub-account of the variable account will be lower than the
yield for the money market series or any comparable substitute funding vehicle.
The Commission also permits us to disclose the effective yield of the money
market sub-account for the same seven-day period, determined on a compounded
basis. The effective yield is calculated by compounding the unannualized base
period return by adding one to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting one from the result.
The yield on amounts held in the money market sub-account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The money market sub-account's actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity of the
money market series or substitute funding vehicle, the types and quality of
portfolio securities held by the money market series or substitute funding
vehicle, and operating expenses. In addition, the yield figures do not reflect
the effect of any contingent deferred sales load (of up to 8% of purchase
payments) that may be applicable to a contract.
Other Sub-Account Yield Calculations
We may from time to time disclose the current annualized yield of one or
more of the variable sub-accounts (except the money market sub-account) for
30-day periods. The annualized yield of a sub-account refers to the income
generated by the sub-account over a specified 30-day period. Because this yield
is annualized, the yield generated by a sub-account 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 variable 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 attributable to the shares owned by the sub-account.
b = expenses for the sub-account accrued for the period (net of
reimbursements). c = the average daily number of variable accumulation
units outstanding during the period. d = the maximum offering price per
variable accumulation unit on the last day of the period.
Net investment income will be determined in accordance with rules
established by the Commission. Accrued expenses will include all recurring fees
that are charged to all contracts. The yield calculations do not reflect the
effect of any contingent deferred sales load that may be applicable to a
particular contract. Contingent deferred sales loads range from 8% to 0% of the
amount of account value withdrawn depending on the elapsed time since the
receipt of each purchase payment.
Because of the charges and deductions imposed by the variable account, the
yield for the sub-account will be lower than the yield for the corresponding
portfolio. The yield on amounts held in the variable sub-accounts 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. The
variable sub-account's actual yield will be affected by the types and quality of
portfolio securities held by the portfolio, and its operating expenses.
Standard Total Return Calculations
We may from time to time also disclose average annual total returns for one
or more of the sub-accounts for various periods of time. Average annual total
return quotations are computed by finding the average annual compounded rates of
return over one, five and ten year periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P{1 + T}n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the one, five or
ten-year period at the end of the one, five, or
ten-year period (or fractional portion of such
period).
All recurring fees are recognized in the ending redeemable value. The
standard average annual total return calculations will reflect the effect of any
contingent deferred sales load that may be applicable to a particular period.
Adjusted Historical Portfolio Performance Data
We may also disclose "historical" performance data for a portfolio, for
periods before the variable sub-account commenced operations. Such performance
information will be calculated based on the performance of the portfolio and the
assumption that the sub-account was in existence for the same periods as those
indicated for the portfolio, with a level of contract charges currently in
effect.
This type of adjusted historical performance data may be disclosed on both
an average annual total return and a cumulative total return basis. Moreover, it
may be disclosed assuming that the contract is not surrendered (i.e., with no
deduction for the contingent deferred sales load) and assuming that the contract
is surrendered at the end of the applicable period (i.e., reflecting a deduction
for any applicable contingent deferred sales load).
Other Performance Data
We may from time to time also disclose average annual total returns in a
non-standard format in conjunction with the standard described above. The
non-standard format will be identical to the standard format except that the
contingent deferred sales load percentage will be assumed to be 0%.
Transamerica may from time to time also disclose cumulative total returns
in conjunction with the standard format described above. The cumulative returns
will be calculated using the following formula assuming that the contingent
deferred sales load percentage will be 0%.
CTR = {ERV/P} - 1
Where:
CTR = the cumulative total return net of sub-account recurring
charges for the period.
ERV = ending redeemable value of a hypothetical $1,000 payment
at the beginning of the one, five, or
ten-year period at the end of the one, five, or ten-year
period (or fractional portion of the
period).
P = a hypothetical initial payment of $1,000.
All non-standard performance data will be advertised only if the standard
performance data is also disclosed.
HISTORICAL PERFORMANCE DATA
General Limitations
The figures below represent past performance and are not indicative of
future performance. The figures may reflect the waiver of advisory fees and
reimbursement of other expenses which may not continue in the future.
Portfolio information, including historical daily net asset values and
capital gains and dividends distributions regarding each portfolio, has been
provided by that portfolio. The adjusted historical sub-account performance data
is derived from the data provided by the portfolios. We have no reason to doubt
the accuracy of the figures provided by the portfolios. We have not verified
these figures.
Historical Performance Data
The charts below show historical performance data for the sub-accounts,
including adjusted historical performance for the periods prior to the January
1, 1998 inception of the sub-accounts, based on the performance of the
corresponding portfolios since their inception date, with a level of charges
equal to those currently assessed under the contract. These figures are not an
indication of the future performance of the sub-accounts. The date next to each
sub-account name indicates the date of commencement of operation of the
corresponding portfolio.
Notes:
1. On September 16, 1994, an investment company which had commenced operations
on August 1, 1988, called Quest for Value Accumulation Trust (the "Old
Trust") was effectively divided into two investment funds - The Old Trust
and the present OCC Accumulation Trust (the "Present Trust") at which time
the Present Trust commenced operations. The total net assets of the Small
Cap Portfolio immediately after the transaction were $139,812,573 in the
Old Trust and $8,129,274 in the Present Trust. For the period prior to
September 16, 1994, the performance figures for the Small Cap Portfolio of
the Present Trust reflect the performance of the Small Cap Portfolio of the
Old Trust.
2. The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., is
the successor to Separate Account Fund C of Transamerica Occidental Life
Insurance Company, a management investment company funding variable
annuities, through a reorganization on November 1, 1996. Accordingly, the
performance data for the Transamerica VIF Growth Portfolio includes
performance of its predecessor.
3. On September 16, 1994, an investment company which had commenced operations
on August 1, 1988, called Quest for Value Accumulation Trust (the "Old
Trust") was effectively divided into two investment funds - The Old Trust
and the present OCC Accumulation Trust (the "Present Trust") at the time of
the transaction there was $682,601,380 in the Old Trust and $51,345,102 in
the Present Trust. For the period prior to September 16, 1994, the
performance figures for the Managed Portfolio of the Present Trust reflect
the performance of the Managed Portfolio of the Old Trust.
Adjusted Historical Performance Data Charts
1. Average Annual Total Returns - Assuming surrender but no Living Benefits
Rider
2. Average Annual Total Returns - Assuming surrender and Living Benefits
Rider
3. Average Annual Total Returns - Assuming no surrender or Living Benefits
Rider
4. Average Annual Total Returns - Assuming no surrender but reflecting
Living Benefits Rider
5. Cumulative Returns - Assuming surrender but no Living Benefits Rider
6. Cumulative Returns - Assuming surrender and Living Benefits Rider
7. Cumulative Returns - Assuming no surrender or Living Benefits Rider
8. Cumulative Returns - Assuming no surrender but reflecting Living
Benefits Rider
<PAGE>
1. Average Annual Total Returns - Assuming surrender but no Living Benefits
Rider
Average annual total returns for periods since inception of the portfolio,
including adjusted historical performance, for each sub-account are as follows.
These figures include mortality and expense charges of 1.20% per annum,
administrative expense charge of 0.15% per annum, an account fee of $30 per
annum adjusted for average account size and the applicable contingent deferred
sales load (maximum of 8% of purchase payments) and do not reflect any fee
deduction for the optional Living Benefits Rider. Any credit is not reflected in
this calculation.
<TABLE>
<CAPTION>
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
SUB-ACCOUNT For the For the For the 5-year For the 10-year For the period
(date of commencement 1-year 3-year period period ending period ending from
of operation of period ending ending 12/31/98 12/31/98 commencement of
corresponding portfolio) 12/31/98 12/31/98 portfolio
operations to
12/31/98
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Janus Aspen Series Worldwide 19.93% 23.52% 19.17% N/A 21.97%
Growth (9/13/93)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MSDW UF International Magnum 0.24% N/A N/A N/A 3.18%
(1/2/97)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Dreyfus VIF Small Cap (8/31/90) -12.00% 6.16% 10.69% N/A 35.30%
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
OCC Accumulation Trust Small -17.52% 6.32% 6.30% 11.61 11.25%
Cap (8/1/88) (1)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MFS VIT Emerging Growth 25.18% 20.99% N/A N/A 23.80%
(7/24/95)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Alliance VPF Premier Growth 38.73% 31.36% 25.70% N/A 23.53%
(6/26/92)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Dreyfus VIF Capital 21.16% 24.80% 21.41% N/A 19.63%
Appreciation (4/25/93)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MFS VIT Research 14.39% 18.80% N/A N/A 19.75%
(7/26/95)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Transamerica VIF Growth 34.09% 35.88% 32.50% 24.69% N/A
(2/26/69) (2)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Alger American Income & Growth 23.35% 26.13% 19.61% 13.98% 13.87%
(11/15/88)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Alliance VPF Growth & Income 12.00% 21.39% 19.03% N/A 14.35%
(1/14/91)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MFS VIT Growth w/ Income 13.42% 22.33% N/A N/A 23.12%
(10/9/95)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Janus Aspen Series Balanced 25.22% 20.80% 16.95% N/A 17.46%
(9/13/93)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
OCC Accumulation Trust Managed -1.58% 13.91% 17.00% 17.67% 17.31%
(8/1/88) (3)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MSDW UF High Yield -3.87% N/A N/A N/A 4.15%
(1/2/97)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MSDW UF Fixed Income (1/2/97) -0.81% N/A N/A N/A 3.98%
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Transamerica VIF Money Market N/A N/A N/A N/A -3.62%
(1/2/98)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
2. Average Annual Total Returns - Assuming surrender and reflecting Living Benefits Rider
Average annual total returns for periods since inception of the portfolio,
including adjusted historical performance, for each sub-account are as follows.
These figures include mortality and expense charges of 1.20% per annum,
administrative expense charge of 0.15% per annum, an account fee of $30 per
annum adjusted for average account size, the applicable contingent deferred
sales load (maximum 8% of purchase payments) and optional Living Benefits Rider
fee of 0.05% per annum. Any credit is not reflected in this calculation.
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
SUB-ACCOUNT For the For the For the 5-year For the 10-year For the period
(date of commencement of 1-year 3-year period period ending period ending from
operation of period ending ending 12/31/98 12/31/98 commencement of
corresponding portfolio) 12/31/98 12/31/98 portfolio
operations to
12/31/98
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Janus Aspen Series Worldwide 19.88% 23.47% 19.12% N/A 21.92%
Growth (9/13/93)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MSDW UF International Magnum 0.19% N/A N/A N/A 3.13%
(1/2/97)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Dreyfus VIF Small Cap (8/31/90) -12.05% 6.11% 10.64% N/A 35.25%
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
OCC Accumulation Trust Small -17.57% 6.27% 6.25% 11.56% 11.20%
Cap (8/1/88) (1)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MFS VIT Emerging Growth 25.13% 20.94% N/A N/A 23.75%
(7/24/95)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Alliance VPF Premier Growth 38.68% 31.31% 25.65% N/A 23.48%
(6/26/92)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Dreyfus VIF Capital 21.11% 24.75% 21.36% N/A 19.58%
Appreciation (4/25/93)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MFS VIT Research 14.34% 18.75% N/A N/A 19.70%
(7/26/95)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Transamerica VIF Growth 34.04% 35.83% 32.45% 24.64% N/A
(2/26/69) (2)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Alger American Income & Growth 23.30% 26.08% 19.56% 13.93% 13.82%
(11/15/88)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Alliance VPF Growth & Income 11.95% 21.34% 18.98% N/A 14.30%
(1/14/91)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MFS VIT Growth w/ Income 13.37% 22.28% N/A N/A 23.07%
(10/9/95)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Janus Aspen Series Balanced 25.17% 20.75% 16.90% N/A 17.40%
(9/13/93)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
OCC Accumulation Trust Managed -1.63% 13.86% 16.95% 17.62% 17.26%
(8/1/88) (3)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MSDW UF High Yield -3.92% N/A N/A N/A 4.09%
(1/2/97)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MSDW UF Fixed Income (1/2/97) -0.86% N/A N/A N/A 3.92%
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Transamerica VIF Money Market N/A N/A N/A N/A -3.67%
(1/2/98)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
3. Average Annual Total Returns - Assuming no surrender or Living Benefits Rider
Non-standard average annual total returns for periods since inception of
the portfolio, including adjusted historical performance, for each sub-account
are as follows. These figures include mortality and expense charges of 1.20% per
annum, administrative expense charge of 0.15% per annum and an account fee of
$30 per annum adjusted for average account size, but do not reflect any
applicable contingent deferred sales load (maximum of 8% of purchase payments)
and do not reflect any fee deduction for the optional Living Benefits Rider. Any
credit is not reflected in this calculation.
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
SUB-ACCOUNT For the For the For the 5-year For the 10-year For the period
(date of commencement 1-year 3-year period period ending period ending from
of operation of period ending ending 12/31/98 12/31/98 commencement of
corresponding portfolio) 12/31/98 12/31/98 portfolio
operations to
12/31/98
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Janus Aspen Series Worldwide 27.13% 24.88% 19.61% N/A 22.26%
Growth (9/13/93)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MSDW UF International Magnum 7.44% N/A N/A N/A 6.62%
(1/2/97)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Dreyfus VIF Small Cap (8/31/90) -4.80% 7.99% 11.28% N/A 35.30%
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
OCC Accumulation Trust Small -10.32% 8.15% 7.00% 11.61% 11.25%
Cap (8/1/88) (1)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MFS VIT Emerging Growth 32.38% 22.41% N/A N/A 24.72%
(7/24/95)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Alliance VPF Premier Growth 45.93% 32.57% 26.06% N/A 23.65%
(6/26/92)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Dreyfus VIF Capital 28.36% 26.13% 21.82% N/A 19.90%
Appreciation (4/25/93)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MFS VIT Research 21.59% 20.27% N/A N/A 20.75%
(7/26/95)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Transamerica VIF Growth 41.29% 37.00% 32.79% 24.69% N/A
(2/26/69) (2)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Alger American Income & Growth 30.55% 27.44% 20.05% 13.98% 13.87%
(11/15/88)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Alliance VPF Growth & Income 19.20% 22.80% 19.48% N/A 14.35%
(1/14/91)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MFS VIT Growth w/ Income 20.62% 23.72% N/A N/A 24.16%
(10/9/95)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Janus Aspen Series Balanced 32.42% 22.22% 17.43% N/A 17.79%
(9/13/93)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
OCC Accumulation Trust Managed 5.62% 15.51% 17.48% 17.67% 17.31%
(8/1/88) (3)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MSDW UF High Yield 3.33% N/A N/A N/A 7.55%
(1/2/97)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MSDW UF Fixed Income (1/2/97) 6.39% N/A N/A N/A 7.39%
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Transamerica VIF Money Market N/A N/A N/A N/A 3.58%
(1/2/98)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
4. Average Annual Total Returns - Assuming no surrender but reflecting Living Benefits Rider
Non-standard average annual total returns for periods since inception of
the portfolio, including adjusted historical performance, for each sub-account
are as follows. These figures include mortality and expense charges of 1.20% per
annum, administrative expense charge of 0.15% per annum and, an account fee of
$30 per annum adjusted for average account size, but do not reflect any
applicable contingent deferred sales load (maximum 8% of purchase payments).
They do reflect deduction of the fee for the optional Living Benefits Rider Fee
of 0.05% per annum. Any credit is not reflected in this calculation.
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
SUB-ACCOUNT For the For the For the 5-year For the 10-year For the period
(date of commencement 1-year 3-year period period ending period ending from
of operation of period ending ending 12/31/98 12/31/98 commencement of
corresponding portfolio) 12/31/98 12/31/98 portfolio
operations to
12/31/98
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide 27.08% 24.83% 19.56% N/A 22.21%
Growth (9/13/93)
- ----------------------------------------------------------------------------------------------------------------------
MSDW UF International Magnum 7.39% N/A N/A N/A 6.57%
(1/2/97)
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap -4.85% 7.94% 11.23% N/A 35.25%
(8/31/90)
- ----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small -10.37% 8.10% 6.95% 11.56% 11.20%
Cap (8/1/88) (1)
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 32.33% 22.36% N/A N/A 24.67%
(7/24/95)
- ----------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth 45.88% 32.52% 26.01% N/A 23.60%
(6/26/92)
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 28.31% 26.08% 21.77% N/A 19.85%
Appreciation (4/25/93)
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Research 21.54% 20.22% N/A N/A 20.70%
(7/26/95)
- ----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 41.24% 36.95% 32.74% 24.64% N/A
(2/26/69) (2)
- ----------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth 30.50% 27.39% 20.00% 13.93% 13.82%
(11/15/88)
- ----------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & Income 19.15% 22.75% 19.43% N/A 14.30%
(1/14/91)
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 20.57% 23.67% N/A N/A 24.11%
(10/9/95)
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced 32.37% 22.17% 17.38% N/A 17.74%
(9/13/93)
- ----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed 5.57% 15.46% 17.43% 17.62% 17.26%
(8/1/88) (3)
- ----------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield 3.28% N/A N/A N/A 7.50%
(1/2/97)
- ----------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income (1/2/97) 6.34% N/A N/A N/A 7.34%
- ----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market N/A N/A N/A N/A 3.53%
(1/2/98)
- ----------------------------------------------------------------------------------------------------------------------
5. Cumulative Returns - Assuming surrender but no Living Benefits Rider
Adjusted historical cumulative total returns for periods since inception of
the portfolio for each sub-account are as follows. These figures include
mortality and expenses charges of 1.20% per annum, administrative expenses
charge of 0.15% per annum, an account fee of $30 per annum adjusted for average
account size and the applicable contingent deferred sales load (maximum of 8% of
purchase payments) and do not reflect any fee deduction for the optional Living
Benefits Rider. Any credit is not reflected in this calculation.
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
SUB-ACCOUNT For the 1- For the 3- For the 5- For the 10- For the period
(date of commencement year period year period year period year period from
of operation of ending ending ending 12/31/98 ending 12/31/98 commencement of
corresponding portfolio) 12/31/98 12/31/98 portfolio
operations to
12/31/98
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide 19.93% 89.37% 141.20% N/A 186.74%
Growth (9/13/93)
- ----------------------------------------------------------------------------------------------------------------------
MSDW UF International Magnum 0.24% N/A N/A N/A 6.46%
(1/2/97)
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap -12.00% 20.54% 67.04% N/A 1145.17%
(8/31/90)
- ----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small -17.52% 21.10% 36.63% 199.96% 203.83%
Cap (8/1/88) (1)
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 25.18% 78.02% N/A N/A 108.58%
(7/24/95)
- ----------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth 38.73% 127.57% 214.68% N/A 296.57%
(6/26/92)
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 21.16% 95.26% 164.73% N/A 180.03%
Appreciation (4/25/93)
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Research 14.39% 68.56% N/A N/A 85.84%
(7/26/95)
- ----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 34.09% 151.76% 309.36% 808.27% N/A
(2/26/69) (2)
- ----------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth 23.35% 101.57% 145.71% 270.18% 273.01%
(11/15/88)
- ----------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & Income 12.00% 79.78% 139.87% N/A 191.18%
(1/14/91)
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 13.42% 83.97% N/A N/A 95.88%
(10/9/95)
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced 25.22% 77.18% 119.70% N/A 134.76%
(9/13/93)
- ----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed -1.58% 48.72% 120.16% 408.96% 428.19%
(8/1/88) (3)
- ----------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield -3.87% N/A N/A N/A 8.45%
(1/2/97)
- ----------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income (1/2/97) -0.81% N/A N/A N/A 8.10%
- ----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market N/A N/A N/A N/A -3.62%
(1/2/98)
- ----------------------------------------------------------------------------------------------------------------------
6. Cumulative Returns - Assuming surrender and Living Benefits Rider
Adjusted historical cumulative total returns for periods since inception of
the portfolio for each sub-account are as follows. These figures include
mortality and expense charges of 1.20% per annum, administrative expense charge
of 0.15% per annum, an account fee of $30 per annum adjusted for average account
size, the applicable contingent deferred sales load (maximum 8% of purchase
payments) and the optional Living Benefits Rider Fee of 0.05% per annum. Any
credit is not reflected in this calculation.
- --------------------------------- -------------- --------------- --------------- ------------------ ------------------
SUB-ACCOUNT For the 1- For the For the For the 10-year For the period
(date of commencement year period 3-year period 5-year period period ending from
of operation of ending ending ending 12/31/98 commencement of
corresponding portfolio) 12/31/98 12/31/98 12/31/98 portfolio
operations to
12/31/98
- --------------------------------- -------------- --------------- --------------- ------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide 19.88% 89.14% 140.69% N/A 186.11%
Growth (9/13/93)
- ----------------------------------------------------------------------------------------------------------------------
MSDW UF International Magnum 0.19% N/A N/A N/A 6.36%
(1/2/97)
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap -12.05% 20.36% 66.66% N/A 1141.33%
(8/31/90)
- ----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small -17.57% 20.92% 36.30% 198.61% 202.41%
Cap (8/1/88) (1)
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 25.13% 77.80% N/A N/A 108.28%
(7/24/95)
- ----------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth 38.68% 127.30% 214.05% N/A 295.51%
(6/26/92)
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 21.11% 95.03% 164.18% N/A 179.35%
Appreciation (4/25/93)
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Research 14.34% 68.34% N/A N/A 85.57%
(7/26/95)
- ----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 34.04% 151.48% 308.58% 804.63% N/A
(2/26/69) (2)
- ----------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth 23.30% 101.33% 145.19% 268.56% 271.36%
(11/15/88)
- ----------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & Income 11.95% 79.55% 139.36% N/A 190.17%
(1/14/91)
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 13.37% 83.74% N/A N/A 95.62%
(10/9/95)
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced 25.17% 76.95% 119.22% N/A 134.22%
(9/13/93)
- ----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed -1.63% 48.52% 119.68% 406.80% 425.84%
(8/1/88) (3)
- ----------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield -3.92% N/A N/A N/A 8.34%
(1/2/97)
- ----------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income (1/2/97) -0.86% N/A N/A N/A 7.99%
- ----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market N/A N/A N/A N/A -3.67%
(1/2/98)
- ----------------------------------------------------------------------------------------------------------------------
7. Cumulative Returns - Assuming no surrender or Living Benefits Rider
Adjusted historical non-standard cumulative total returns for periods since
inception of the portfolio for each sub-account are as follow. These figures
include mortality and expense charges of 1.20% per annum, administrative expense
charge of 0.15% per annum and an account fee of $30 per annum adjusted for
average account size but do not reflect any applicable contingent deferred sales
load (maximum of 8% of purchase payments) and do not reflect any fee deduction
for the optional Living Benefits Rider. Any credit is not reflected in this
calculation.
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
SUB-ACCOUNT For the 1- For the For the 5-year For the 10-year For the period
(date of commencement year period 3-year period period ending period ending from
of operation of ending ending 12/31/98 12/31/98 commencement of
corresponding portfolio) 12/31/98 12/31/98 portfolio
operations to
12/31/98
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide 27.13% 94.77% 144.80% N/A 190.34%
Growth (9/13/93)
- ----------------------------------------------------------------------------------------------------------------------
MSDW UF International Magnum 7.44% N/A N/A N/A 13.66%
(1/2/97)
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Ca -4.80% 25.94% 70.64% N/A 1145.17%
(8/31/90)
- ----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small -10.32% 26.50% 40.23% 199.96% 203.83%
Cap (8/1/88) (1)
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 32.38% 83.42% N/A N/A 113.98%
(7/24/95)
- ----------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth 45.93% 132.97% 218.28% N/A 299.27%
(6/26/92)
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 28.36% 100.66% 168.33% N/A 183.63%
Appreciation (4/25/93)
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Research 21.59% 73.96% N/A N/A 91.24%
(7/26/95)
- ----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 41.29% 157.16% 312.96% 808.27% N/A
(2/26/69) (2)
- ----------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth 30.55% 106.97% 149.31% 270.18% 273.01%
(11/15/88)
- ----------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & Income 19.20% 85.18% 143.47% N/A 191.18%
(1/14/91)
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 20.62% 89.37% N/A N/A 101.28%
(10/9/95)
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced 32.42% 82.58% 123.30% N/A 138.36%
(9/13/93)
- ----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed 5.62% 54.12% 123.76% 408.96% 428.19%
(8/1/88) (3)
- ----------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield 3.33% N/A N/A N/A 15.65%
(1/2/97)
- ----------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income (1/2/97) 6.39% N/A N/A N/A 15.30%
- ----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market N/A N/A N/A N/A 3.58%
(1/2/98)
- ----------------------------------------------------------------------------------------------------------------------
<PAGE>
8. Cumulative Returns - Assuming no surrender but reflecting Living Benefits Rider
Adjusted historical non-standard cumulative total returns for periods since
inception of the portfolio for each sub-account are as follow. These figures
include mortality and expense charges of 1.20% per annum, administrative expense
charge of 0.15% per annum and an account fee of $30 per annum adjusted for
average account size, but do not reflect any applicable contingent deferred
sales load (maximum 8% of purchase payments). They do reflect deductions of the
fee for the optional Living Benefits Rider Fee of 0.05% per annum. Any credit is
not reflected in this calculation.
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
SUB-ACCOUNT For the For the For the 5-year For the 10-year For the period
(date of commencement 1-year 3-year period period ending period ending from
of operation of period ending ending 12/31/98 12/31/98 commencement of
corresponding portfolio) 12/31/98 12/31/98 portfolio
operations to
12/31/98
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Janus Aspen Series Worldwide 27.08% 94.54% 144.29% N/A 189.71%
Growth (9/13/93)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MSDW UF International Magnum 7.39% N/A N/A N/A 13.56%
(1/2/97)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Dreyfus VIF Small Cap (8/31/90) -4.85% 25.76% 70.26% N/A 1141.33%
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
OCC Accumulation Trust Small -10.37% 26.32% 39.90% 198.61% 202.41%
Cap (8/1/88) (1)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MFS VIT Emerging Growth 32.33% 83.20% N/A N/A 113.68%
(7/24/95)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Alliance VPF Premier Growth 45.88% 132.70% 217.65% N/A 298.21%
(6/26/92)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Dreyfus VIF Capital 28.31% 100.43% 167.78% N/A 182.95%
Appreciation (4/25/93)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MFS VIT Research 21.54% 73.74% N/A N/A 90.97%
(7/26/95)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Transamerica VIF Growth 41.24% 156.88% 312.18% 804.63% N/A
(2/26/69) (2)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Alger American Income & Growth 30.50% 106.73% 148.79% 268.56% 271.36%
(11/15/88)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Alliance VPF Growth & Income 19.15% 84.95% 142.96% N/A 190.17%
(1/14/91)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MFS VIT Growth w/ Income 20.57% 89.14% N/A N/A 101.02%
(10/9/95)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Janus Aspen Series Balanced 32.37% 82.35% 122.82% N/A 137.82%
(9/13/93)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
OCC Accumulation Trust Managed 5.57% 53.92% 123.28% 406.80% 425.84%
(8/1/88) (3)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MSDW UF High Yield 3.28% N/A N/A N/A 15.54%
(1/2/97)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
MSDW UF Fixed Income (1/2/97) 6.34% N/A N/A N/A 15.19%
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
Transamerica VIF Money Market N/A N/A N/A N/A 3.53%
(1/2/98)
- --------------------------------- -------------- --------------- ---------------- ----------------- ------------------
</TABLE>
DISTRIBUTION OF THE CONTRACT
Transamerica Securities Sales Corporation ("TSSC") is principal underwriter
of the contracts under a Distribution Agreement with Transamerica. TSSC may also
serve as principal underwriter and distributor of other contracts issued through
the variable account and certain other separate accounts of Transamerica and
affiliates of Transamerica. TSSC is an indirect wholly-owned subsidiary of
Transamerica Insurance Corporation. TSSC is registered with the Commission as a
broker-dealer and is a member of the National Association of Securities Dealers,
Inc. ("NASD"). Transamerica pays TSSC for acting as the principal underwriter
under a distribution agreement.
TSSC has entered into sales agreements with other broker-dealers to solicit
applications for the contracts through registered representatives who are
licensed to sell securities and variable insurance products. These agreements
provide that applications for the contracts may be solicited by registered
representatives of the broker-dealers appointed by Transamerica to sell its
variable life insurance and variable annuities. These broker-dealers are
registered with the Commission and are members of the NASD. The registered
representatives are authorized under applicable state regulations to sell
variable life insurance and variable annuities.
Under the agreements, applications for contracts will be sold by
broker-dealers which will receive compensation as described in the prospectus.
The offering of the contracts is expected to be continuous and TSSC does
not anticipate discontinuing the offering of the contracts. However, TSSC
reserves the right to discontinue the offering of the contracts.
During fiscal year 1998, $3,847,836 in commissions were paid to TSSC as
underwriter of Separate Accounts VA-6, VA-6NY and VA-7; no amounts were retained
by TSSC. Under the sales agreements, TSSC will pay broker-dealers compensation
based on a percentage of each purchase payment. This percentage may be up to 6%
and in certain situations additional amounts for marketing allowances,
production bonuses, service fees, sales awards and meetings, and asset based
trailer commissions may be paid.
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
Title to assets of the variable account is held by Transamerica. The assets
of the variable account are kept separate and apart from Transamerica general
account assets. Records are maintained of all purchases and redemptions of
portfolio shares held by each of the sub-accounts.
STATE REGULATION
We are subject to the insurance laws and regulations of all the states
where we are licensed to operate. The availability of certain contract rights
and provisions depends on state approval and/or filing and review processes.
Where required by state law or regulation, the contract will be modified
accordingly.
RECORDS AND REPORTS
All records and accounts relating to the variable account will be
maintained by us or by our Service Office. As presently required by the
provisions of the 1940 Act and regulations promulgated thereunder which pertain
to the variable account, reports containing such information as may be required
under the 1940 Act or by other applicable law or regulation will be sent to
owners semi-annually at their last known address of record.
FINANCIAL STATEMENTS
This Statement of Additional Information contains the financial statements
of the variable account as of and for the period ended December 31, 1998.
The financial statements for Transamerica included in this statement of
additional information should be considered only as bearing on our ability to
meet our obligations under the contracts. They should not be considered as
bearing on the investment performance of the assets in the variable account.
<PAGE>
APPENDIX
Accumulation Transfer Formula
Transfers after the annuity date are implemented according to the
following formulas:
(1) Determine the number of units to be transferred from the variable
sub-account as follows:
= AT/AUV1
(2) Determine the number of variable accumulation units remaining in
such variable sub-account (after the transfer):
= UNIT1 AT/AUV1
(3) Determine the number of variable accumulation units in the
transferee variable sub-account (after the transfer):
= UNIT2 + AT/AUV2
(4) Subsequent variable accumulation payments will reflect the changes
in variable accumulation units in each variable sub-account as of the
next variable accumulation payment's due date.
Where:
(AUV1) is the variable accumulation unit value of the variable
sub-account that the transfer is being made from as of the end of the
valuation period in which the transfer request was received.
(AUV2) is the variable accumulation unit value of the variable
sub-account that the transfer is being made to as of the end of the
valuation period in which the transfer request was received.
(UNIT1) is the number of variable accumulation units in the variable
sub-account that the transfer is being made from, before the transfer.
(UNIT2) is the number of variable accumulation units in the variable
sub-account that the transfer is being made to, before the transfer.
(AT) is the dollar amount being transferred from the variable
sub-account.
