VARIABLE ANNUITY ACCOUNT B OF AETNA LIFE INS & ANNUITY CO, 497, 1996-05-09

VARIABLE ANNUITY ACCOUNT B OF AETNA LIFE INS & ANNUITY CO
497, 1996-05-09

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PROSPECTUS
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This Prospectus describes the "Growth Plus (New York)" group and individual
deferred variable annuity contracts ("Contracts") issued by Aetna Life Insurance
and Annuity Company (the "Company"). The Contracts are available as (1)
nonqualified deferred annuity contracts, (2) Individual Retirement Annuities
under Section 408(b) of the Internal Revenue Code, or (3) qualified contracts
issued in connection with certain employer sponsored retirement plans.
(Availability of Contracts of the type identified in items (2) and (3) may be
subject to state regulatory approval.) In most states, group Contracts are
offered, generally to certain broker-dealers or banks which have agreed to act
as Distributors of the Contracts. Individuals who have established accounts with
those broker-dealers or banks are eligible to participate in the Contract.
Individual Contracts are offered only in those states where the group Contracts
are not authorized for sale. (See "Purchase.")

The Contracts provide that contributions may be allocated to the ALIAC
Guaranteed Account (the "Guaranteed Account"), a credited interest option, or to
one or more of the Subaccounts of Variable Annuity Account B, a separate account
of the Company. The Subaccounts invest directly in shares of the following
Funds:

- Federated American Leaders Fund II
- Federated Fund for U.S. Government
Securities II
- Federated Growth Strategies Fund II
- Federated High Income Bond Fund II
- Federated International Equity Fund
II
- Federated Prime Money Fund II
- Federated Utility Fund II

Except as specifically mentioned, this Prospectus describes only investments
through the Separate Account. The Guaranteed Account is described in the
Appendix to this Prospectus, as well as in the Guaranteed Account's prospectus.
The availability of the Funds and the Guaranteed Account is subject to
applicable regulatory authorization; not all options may be available in all
jurisdictions or under all Contracts. (See "Investment Options.")

This Prospectus provides investors with the information about the Separate
Account that they should know before investing in the Contracts. Additional
information about the Separate Account is contained in a Statement of Additional
Information ("SAI") which is available at no charge. The SAI has been filed with
the Securities and Exchange Commission and is incorporated herein by reference.
The Table of Contents for the SAI is printed on page 21 of this Prospectus. An
SAI may be obtained by indicating the request on your application or enrollment
form or by calling the number listed under the "Inquiries" section of the
Prospectus Summary.

THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE ALIAC GUARANTEED ACCOUNT. ALL PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.

THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED BY ANY BANK, NOR
ARE THEY INSURED BY THE FDIC; THEY ARE SUBJECT TO INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION ARE DATED MAY 1,
1996.
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
DEFINITIONS.......................................................................... DEFINITIONS - 1
PROSPECTUS SUMMARY................................................................... SUMMARY - 1
FEE TABLE............................................................................ FEE TABLE - 1
CONDENSED FINANCIAL INFORMATION...................................................... AUV HISTORY - 1
THE COMPANY.......................................................................... 1
VARIABLE ANNUITY ACCOUNT B........................................................... 1
INVESTMENT OPTIONS................................................................... 1
The Funds........................................................................ 1
Credited Interest Option......................................................... 3
PURCHASE............................................................................. 3
Contract Availability............................................................ 3
Purchasing Interests in the Contract............................................. 3
Purchase Payments................................................................ 3
Contract Rights.................................................................. 4
Designations of Beneficiary and Annuitant........................................ 4
Right to Cancel.................................................................. 4
CHARGES AND DEDUCTIONS............................................................... 5
Daily Deductions from the Separate Account....................................... 5
Mortality and Expense Risk Charge.......................................... 5
Administrative Charge...................................................... 5
Maintenance Fee.................................................................. 5
Reduction or Elimination of Administrative Charge and Maintenance Fee............ 5
Deferred Sales Charge............................................................ 5
Reduction or Elimination of the Deferred Sales Charge............................ 6
Fund Expenses.................................................................... 7
Premium and Other Taxes.......................................................... 7
CONTRACT VALUATION................................................................... 7
Account Value.................................................................... 7
Accumulation Units............................................................... 7
Net Investment Factor............................................................ 7
TRANSFERS............................................................................ 8
Dollar Cost Averaging Program.................................................... 8
Account Rebalancing Program...................................................... 8
WITHDRAWALS.......................................................................... 8
ADDITIONAL WITHDRAWAL OPTIONS........................................................ 9
DEATH BENEFIT DURING ACCUMULATION PERIOD............................................. 9
Death Benefit Amount............................................................. 10
Death Benefit Payment Options.................................................... 10
Nonqualified Contracts...................................................... 10
Qualified Contracts......................................................... 11
ANNUITY PERIOD....................................................................... 11
Annuity Period Elections......................................................... 11
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Partial Annuitization............................................................ 12
Annuity Options.................................................................. 12
Annuity Payments................................................................. 12
Charges Deducted During the Annuity Period....................................... 13
Death Benefit Payable During the Annuity Period.................................. 13
TAX STATUS........................................................................... 13
Introduction..................................................................... 13
Taxation of the Company.......................................................... 14
Tax Status of the Contract....................................................... 14
Taxation of Annuity Contracts.................................................... 15
Contracts Used with Certain Retirement Plans..................................... 17
MISCELLANEOUS........................................................................ 19
Distribution..................................................................... 19
Delay or Suspension of Payments.................................................. 19
Performance Reporting............................................................ 19
Voting Rights.................................................................... 20
Modification of the Contract..................................................... 20
Transfers of Ownership; Assignment............................................... 20
Involuntary Terminations......................................................... 20
Legal Matters and Proceedings.................................................... 21
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.................................. 21
APPENDIX--ALIAC GUARANTEED ACCOUNT................................................... 22
</TABLE>

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
PERSON TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING CONTAINED IN THIS PROSPECTUS EXCEPT AS OTHERWISE CONTAINED HEREIN.
<PAGE>
DEFINITIONS
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The following terms are defined as they are used in this Prospectus:

ACCOUNT: A record that identifies contract values accumulated on each
Certificate Holder's behalf during the Accumulation Period.

ACCOUNT VALUE: The total dollar value of amounts held in an Account as of each
Valuation Date during the Accumulation Period.

ACCOUNT YEAR: A period of twelve months measured from the date on which an
Account is established (the effective date) or from an anniversary of such
effective date.

ACCUMULATION PERIOD: The period during which Purchase Payment(s) credited to an
Account are invested to fund future annuity payments.

ACCUMULATION UNIT: A measure of the value of each Subaccount before annuity
payments begin.

ADJUSTED ACCOUNT VALUE: The Account Value, plus or minus the aggregate market
value adjustment for amounts allocated to the Guaranteed Account.

ANNUITANT: The person on whose life or life expectancy the annuity payments are
based.

ANNUITY: A series of payments for life, a definite period or a combination of
the two.

ANNUITY DATE: The date on which annuity payments begin.

ANNUITY PERIOD: The period during which annuity payments are made.

ANNUITY UNIT: A measure of the value of each Subaccount selected during the
Annuity Period.

BENEFICIARY(IES): The person or persons who are entitled to receive any death
benefit proceeds. Under Nonqualified Contracts, Individual Retirement Annuities,
and Section 403(b) Contracts, Beneficiary refers to the beneficiary named under
the Contract. Under Qualified Contracts sold in conjunction with 401(a) or 457
Plans, Beneficiary refers to the beneficiary under the plan.

CERTIFICATE: The document issued to a Certificate Holder for an Account
established under a group contract.

CERTIFICATE HOLDER (YOU): A person or entity who purchases an individual
Contract or acquires an interest under a group Contract. For Nonqualified
Contracts, we reserve the right to limit ownership to natural persons.

COMPANY (WE, US): Aetna Life Insurance and Annuity Company.

CONTRACT: The group and individual deferred, variable annuity contracts offered
by this Prospectus.

DISTRIBUTOR(S): The registered broker-dealer(s), or banks that may be acting as
broker-dealers without separate registration under the Securities Exchange Act
of 1934, which have entered into selling agreements with the Company to offer
and sell the Contracts. The Company may also serve as a Distributor.

FUND(S): An open-end registered management investment company whose shares are
purchased by the Separate Account to fund the benefits provided by the Contract.

GROUP CONTRACT HOLDER: The entity to which a group Contract is issued.

HOME OFFICE: The Company's principal executive offices located at 151 Farmington
Avenue, Hartford, Connecticut 06156.

INDIVIDUAL CONTRACT HOLDER: A person or entity who has purchased an individual
variable annuity contract (also referred to as a "Certificate Holder"). For
Nonqualified Contracts, we reserve the right to limit ownership to natural
persons.

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DEFINITIONS - 1
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INDIVIDUAL RETIREMENT ANNUITY: An individual or group variable deferred annuity
intended to qualify under Code Section 408(b).

NONQUALIFIED CONTRACT: A contract established to supplement an individual's
retirement income, or to provide an alternative investment option under an
Individual Retirement Account qualified under Code Section 408(a).

PURCHASE PAYMENT(S): The gross payment(s) made to the Company under an Account.

QUALIFIED CONTRACTS: Contracts available for use with plans entitled to special
federal income tax treatment under Code Sections 401(a), 403(b), 408(b) or 457.

REGISTERED REPRESENTATIVE: The individual who is registered with a broker-dealer
acting as Distributor to offer and sell securities, or who is an employee of a
bank acting as Distributor that is exempt from broker-dealer registration under
the Securities Exchange Act of 1934. Registered Representatives must also be
licensed as insurance agents to sell variable annuity contracts.

SEPARATE ACCOUNT: Variable Annuity Account B, a separate account established for
the purpose of funding variable annuity contracts issued by the Company.

SUBACCOUNT(S): The portion of the assets of the Separate Account that is
allocated to a particular Fund. Each Subaccount invests in the shares of only
one corresponding Fund.

SURRENDER VALUE: The amount payable upon the withdrawal of all or any portion of
an Account Value.

VALUATION DATE: The date and time at which the value of the Subaccount is
calculated. Currently, this calculation occurs at the close of business of the
New York Stock Exchange on any normal business day, Monday through Friday, that
the New York Stock Exchange is open.

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DEFINITIONS - 2
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PROSPECTUS SUMMARY
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CONTRACTS OFFERED

The Contracts described in this Prospectus are group and individual deferred
variable annuity contracts issued by Aetna Life Insurance and Annuity Company
(the "Company"). The purpose of the Contract is to accumulate values and to
provide benefits upon retirement. The Contracts are currently available for (1)
individual nonqualified purchases; (2) Individual Retirement Annuities; and (3)
purchases made in conjunction with employer sponsored retirement plans under
Sections 401(a), 403(b) or 457 of the Code. (Availability of Contracts of the
type identified in items (2) and (3) may be subject to state regulatory
approval.)

In most states, group Contracts are offered, generally to certain
broker-dealers or banks which have agreed to act as Distributors of the
Contracts. Individuals who have established accounts with those broker-dealers
or banks are eligible to participate in the Contract. Individual Contracts are
offered only in those states where the group Contracts are not authorized for
sale. Joint Certificate Holders are allowed only on Nonqualified Contracts. A
joint Certificate Holder must be the spouse of the other joint Certificate
Holder. In New York and Pennsylvania, the joint Certificate Holders do not need
to be spouses. References to "Certificate Holders" in this Prospectus mean both
of the Certificate Holders on joint Accounts.

CONTRACT PURCHASE

You may purchase an interest in the Contract by completing an application or
enrollment form and submitting it to the Company. Purchase Payments can be
applied to the Contract either through a lump-sum payment or through ongoing
contributions. (See "Purchase.")

FREE LOOK PERIOD

You may cancel the Contract or Certificate within 10 days after you receive
it (or longer if required by state law) by returning it to the Company along
with a written notice of cancellation. Unless state law requires otherwise, the
amount you will receive upon cancellation will reflect the investment
performance of the Subaccounts into which your Purchase Payments were deposited.
In some cases this may be more or less than the amount of your Purchase
Payments. Under a Contract issued as an Individual Retirement Annuity, you will
receive a refund of your Purchase Payment. (See "Purchase--Right to Cancel.")

INVESTMENT OPTIONS

The Company has established Variable Annuity Account B, a registered unit
investment trust, for the purpose of funding the variable portion of the
Contracts. The Separate Account is divided into Subaccounts which invest
directly in shares of the Funds described herein. The Contract allows investment
in any or all of the Subaccounts, as well as in the Guaranteed Account described
below. For a complete list of the Funds available under the Contracts, and a
description of the investment objectives of each of the Funds and their
investment advisers, see "Investment Options--The Funds" in this Prospectus, as
well as the prospectuses for each of the Funds.

The Guaranteed Account is the credited interest option available under the
Contract which allows you to earn a fixed rate of interest, if held for the
guaranteed term. (See the Appendix to this Prospectus.)

CHARGES AND DEDUCTIONS

Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charge and an administrative charge), as well as any annual maintenance fee,
transfer fees and premium and other taxes. The Funds also incur certain fees and
expenses which are deducted directly from the Funds. A deferred sales charge may
apply upon a full or partial withdrawal of the Account Value. (See the Fee Table
and "Charges and Deductions.")

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SUMMARY - 1
<PAGE>
TRANSFERS

Prior to the Annuity Date, and subject to certain limitations, Account
Values may be transferred among the Subaccounts and the Guaranteed Account.
Currently transfers are without charge. However, the Company reserves the right
to charge up to $10 if more than 12 transfers are made in a calendar year.
Transfers can be requested in writing or by telephone in accordance with the
Company's transfer procedures. (Transfers from the Guaranteed Account may be
restricted and subject to a market value adjustment. See the Appendix.)

The Company also offers a Dollar Cost Averaging Program and an Account
Rebalancing Program. The Dollar Cost Averaging Program permits the automatic
transfer of amounts from any of the Subaccounts and the one-year Guaranteed
Account term to any of the other Subaccounts on a monthly or quarterly basis.
The Account Rebalancing Program allows Certificate Holders to have portions of
their Account Value automatically reallocated annually to a specified
percentage. (See "Transfers.")

WITHDRAWALS

All or a part of the Account Value may be withdrawn prior to the Annuity
Date by properly completing a disbursement form and sending it to the Company.
Certain charges may be assessed upon withdrawal. Amounts withdrawn from the
Guaranteed Account may be subject to a market value adjustment. (See the
Appendix.) The taxable portion of the withdrawal may also be subject to income
tax and a federal tax penalty. (See "Withdrawals.")

The Contract also offers certain Additional Withdrawal Options during the
Accumulation Period to persons meeting certain criteria. Additional Withdrawal
Options are not available in all states and may not be suitable in every
situation. (See "Additional Withdrawal Options.")

GUARANTEED DEATH BENEFIT

These Contracts contain a guaranteed death benefit feature. Upon the death
of the Annuitant, the Account Value may be increased under certain
circumstances. (See "Death Benefit During Accumulation Period.")

After Annuity Payments have commenced, a death benefit may be payable to the
Beneficiary depending upon the terms of the Contract and the Annuity Option
selected. (See "Death Benefit Payable During the Annuity Period.")

THE ANNUITY PERIOD

On the Annuity Date, you may elect to begin receiving Annuity Payments.
Annuity Payments can be made on either a fixed, variable or combination fixed
and variable basis. If a variable payout is selected, the payments will continue
to vary with the investment performance of the Subaccount(s) selected. The
Company reserves the right to limit the number of Subaccounts that may be
available during the Annuity Period. (See "Annuity Period.")

TAXES

Earnings are not generally taxed until you or your Beneficiary(ies) actually
receive a distribution from the Contract. A 10% federal tax penalty may be
imposed on certain withdrawals. (See "Tax Status.")

INQUIRIES

Questions, inquiries or requests for additional information can be directed
to your agent or local representative, or you may contact the Company as
follows:

<TABLE>
<S> <C>
- Write to: Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156-5996
Attention: Customer Service

- Call Customer Service: 1-800-531-4547 (for automated transfers or changes
in the allocation of
Account Values, call: 1-800-262-3862)
</TABLE>

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SUMMARY - 2
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FEE TABLE
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This Fee Table describes the various charges and expenses associated with the
Contract. No sales charge is paid upon purchase of the Contract. All costs that
are borne directly or indirectly under the Subaccounts and Funds are shown
below. Some expenses may vary as explained under "Charges and Deductions." The
charges and expenses shown below do not include premium taxes that may be
applicable. For more information regarding expenses paid out of assets of a
particular Fund, see the Fund's prospectus.

DIRECT CHARGES. These charges are deducted directly from the Account Value. They
include:

DEFERRED SALES CHARGE. The deferred sales charge is deducted as a
percentage of each Purchase Payment withdrawn. The amount of the deferred
sales charge is calculated as follows:

<TABLE>
<CAPTION>
CONTRACTS OR CERTIFICATES ISSUED
IN NEW YORK:
DEFERRED
SALES
YEARS FROM RECEIPT OF CHARGE
PURCHASE PAYMENT DEDUCTION
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<S> <C>
Less than 1 7%
1 or more but less than 2 6%
2 or more but less than 3 5%
3 or more but less than 4 4%
4 or more but less than 5 3%
5 or more but less than 6 2%
6 or more but less than 7 1%
7 or more 0%
</TABLE>

<TABLE>
<S> <C>
ANNUAL MAINTENANCE FEE.................................................................... $ 30.00
The maintenance fee will generally be deducted annually from each Account. The maintenance
fee is waived when the Account Value is $50,000 or more on the date the maintenance fee is
due. The amount shown is the MAXIMUM maintenance fee that can be deducted under the
Contract.
TRANSFER CHARGE........................................................................... $ 0.00
We currently allow an unlimited number of transfers without charge. However, we reserve
the right to impose a fee of $10 for each transfer in excess of 12 per year.
</TABLE>

INDIRECT CHARGES. Each Subaccount pays these expenses out of its assets. The
charges are reflected in the Subaccount's daily Accumulation Unit Value and are
not charged directly to an Account. They include:

DURING THE ACCUMULATION PERIOD:

<TABLE>
<S> <C>
MORTALITY AND EXPENSE RISK CHARGE......................................................... 1.25%
ADMINISTRATIVE CHARGE..................................................................... 0.15%
---------
TOTAL SUBACCOUNT ANNUAL EXPENSES.......................................................... 1.40%
---------
---------
</TABLE>

DURING THE ANNUITY PERIOD:

<TABLE>
<S> <C>
MORTALITY AND EXPENSE RISK CHARGE......................................................... 1.25%
ADMINISTRATIVE CHARGE..................................................................... 0.00%
---------
We currently do not impose an Administrative Charge during the Annuity Period. However, we
reserve the right to deduct a daily charge of not more than 0.25% per year from the
Subaccounts.
TOTAL SUBACCOUNT ANNUAL EXPENSES.......................................................... 1.25%
---------
---------
</TABLE>

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FEE TABLE - 1
<PAGE>
ANNUAL EXPENSES OF THE FUNDS

The following table illustrates the advisory fees and other expenses applicable
to the Funds. Except as noted, the following figures are a percentage of average
net assets and, except where otherwise indicated, are based on figures for the
year ended December 31, 1995. A Fund's "Other Expenses" include operating costs
of the Fund. These expenses are reflected in the Fund's net asset value and are
not deducted from the Account Value.

<TABLE>
<CAPTION>
INVESTMENT
ADVISORY TOTAL
FEES(1) OTHER EXPENSES ANNUAL
(AFTER EXPENSE (AFTER EXPENSE FUND
REIMBURSEMENT) REIMBURSEMENT) EXPENSES
-------------- -------------- -----------
<S> <C> <C> <C>
Federated American Leaders Fund II(2) 0.00% 0.85% 0.85%
Federated Fund for U.S. Government
Securities II(2) 0.00% 0.80% 0.80%
Federated Growth Strategies Fund II(2) 0.00% 0.85% 0.85%
Federated High Income Bond Fund II(2) 0.00% 0.80% 0.80%
Federated International Equity Fund
II(2) 0.00% 1.25% 1.25%
Federated Prime Money Fund II(2) 0.00% 0.80% 0.80%
Federated Utility Fund II(2) 0.00% 0.85% 0.85%
</TABLE>

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(1) Certain of the unaffiliated Fund advisers reimburse the Company for
administrative costs incurred in connection with administering the Funds as
variable funding options under the Contract. These reimbursements are paid
out of the investment advisory fees and are not charged to investors.
(2) The management fee for each of the Funds has been reduced to reflect a
voluntary waiver of the management fee. The Adviser can terminate this
voluntary waiver at any time in its sole discretion. The maximum management
fee for each of the Funds is as follows: 0.50%--Prime Money Fund II;
0.60%--High Income Bond Fund II and the Fund for U.S. Government Securities
II; 0.75%-- American Leaders Fund II, Growth Strategies Fund II and Utility
Fund II; and 1.00%--International Equity Fund II.

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FEE TABLE - 2
<PAGE>
HYPOTHETICAL ILLUSTRATION (EXAMPLE)

THIS EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES
AND/OR RETURN MAY BE MORE OR LESS THAN THOSE SHOWN BELOW.

The following Examples illustrate the expenses that would have been paid
assuming a $1,000 investment in the Contract and a 5% return on assets. For the
purposes of these Examples, the maximum maintenance fee of $30.00 that can be
deducted under the Contract has been converted to a percentage of assets equal
to 0.051%.

<TABLE>
<CAPTION>
CONTRACTS OR CERTIFICATES ISSUED IN NEW YORK
-----------------------------------------------------------------------------
EXAMPLE A EXAMPLE B
------------------------------------- -------------------------------------

IF YOU WITHDRAW THE ENTIRE ACCOUNT IF YOU DO NOT WITHDRAW THE ACCOUNT
VALUE AT THE END OF THE PERIODS VALUE, OR IF YOU ANNUITIZE AT THE END
SHOWN, YOU WOULD PAY THE FOLLOWING OF THE PERIODS SHOWN, YOU WOULD PAY
EXPENSES, INCLUDING ANY APPLICABLE THE FOLLOWING EXPENSES (NO DEFERRED
DEFERRED SALES CHARGE: SALES CHARGE IS REFLECTED):*
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Federated American Leaders Fund II $85 $105 $140 $264 $23 $72 $123 $264
Federated Fund for U.S. Government
Securities II $84 $104 $137 $259 $23 $70 $121 $259
Federated Growth Strategies Fund II $85 $105 $140 $264 $23 $72 $123 $264
Federated High Income Bond Fund II $84 $104 $137 $259 $23 $70 $121 $259
Federated International Equity Fund II $89 $117 $160 $303 $27 $84 $143 $303
Federated Prime Money Fund II $84 $104 $137 $259 $23 $70 $121 $259
Federated Utility Fund II $85 $105 $140 $264 $23 $72 $123 $264
</TABLE>

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* This Example would not apply if a nonlifetime variable annuity option is
selected, and a lump sum settlement is requested within three years after
annuity payments start, since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any deferred
sales charge that would then apply. (Refer to Example A.)

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FEE TABLE - 3
<PAGE>
CONDENSED FINANCIAL INFORMATION
(SELECTED DATA FOR ACCUMULATION UNITS OUTSTANDING THROUGHOUT EACH PERIOD)
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THE CONDENSED FINANCIAL INFORMATION PRESENTED BELOW FOR THE TWO YEARS ENDED
DECEMBER 31, 1995 IS DERIVED FROM THE FINANCIAL STATEMENTS OF THE SEPARATE
ACCOUNT, WHICH FINANCIAL STATEMENTS HAVE BEEN AUDITED BY KPMG PEAT MARWICK LLP,
INDEPENDENT AUDITORS. THE FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1995 AND THE INDEPENDENT AUDITORS' REPORT THEREON, ARE INCLUDED IN
THE STATEMENT OF ADDITIONAL INFORMATION.

<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
FEDERATED AMERICAN LEADERS FUND II
Value at beginning of period $ 9.838 $10.000
Value at end of period $12.971 $ 9.838
Increase (decrease) in value of accumulation
units(1) 31.84% (1.62)%(2)
Number of accumulation units outstanding at end of
period 2,057,364 188,708
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
Value at beginning of period $10.073 $10.000
Value at end of period $10.804 $10.073
Increase (decrease) in value of accumulation
units(1) 7.25% 0.73%(2)
Number of accumulation units outstanding at end of
period 417,293 12,714
FEDERATED GROWTH STRATEGIES FUND II
Value at beginning of period $10.000
Value at end of period $10.277
Increase (decrease) in value of accumulation
units(1) 2.77%(3)
Number of accumulation units outstanding at end of
period 17,503
FEDERATED HIGH INCOME BOND FUND II
Value at beginning of period $ 9.814 $10.000
Value at end of period $11.640 $ 9.814
Increase (decrease) in value of accumulation
units(1) 18.61% (1.86)%(2)
Number of accumulation units outstanding at end of
period 1,020,321 31,309
FEDERATED INTERNATIONAL EQUITY FUND II
Value at beginning of period $10.000
Value at end of period $10.255
Increase (decrease) in value of accumulation
units(1) 2.55%(4)
Number of accumulation units outstanding at end of
period 158,319
FEDERATED PRIME MONEY FUND II
Value at beginning of period $10.033 $10.000
Value at end of period $10.406 $10.033
Increase (decrease) in value of accumulation
units(1) 3.71% 0.33%(5)
Number of accumulation units outstanding at end of
period 554,934 51,949
FEDERATED UTILITY FUND II
Value at beginning of period $ 9.881 $10.000
Value at end of period $12.095 $ 9.881
Increase (decrease) in value of accumulation
units(1) $22.40% (1.19)%(2)
Number of accumulation units outstanding at end of
period 727,601 41,191
</TABLE>

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AUV HISTORY - 1
<PAGE>
THE COMPANY
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Aetna Life Insurance and Annuity Company (the "Company") is the issuer of
the Contract, and as such, it is responsible for providing the insurance and
annuity benefits under the Contract. The Company is a stock life insurance
company organized under the insurance laws of the State of Connecticut in 1976.
Through a merger, it succeeded to the business of Aetna Variable Annuity Life
Insurance Company (formerly Participating Annuity Life Insurance Company, an
Arkansas life insurance company organized in 1954). The Company is engaged in
the business of issuing life insurance policies and variable annuity contracts
in all states of the United States. The Company's principal executive offices
are located at 151 Farmington Avenue, Hartford, Connecticut 06156.

The Company is a wholly owned subsidiary of Aetna Retirement Holdings, Inc.,
which is in turn a wholly owned subsidiary of Aetna Retirement Services, Inc.
and an indirect wholly owned subsidiary of Aetna Life and Casualty Company.

VARIABLE ANNUITY ACCOUNT B
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The Company established Variable Annuity Account B (the "Separate Account")
in 1976 as a segregated asset account for the purpose of funding its variable
annuity contracts. The Separate Account is registered as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"), and meets the
definition of "separate account" under federal securities laws. The Separate
Account is divided into "subaccounts" which do not invest directly in stocks,
bonds or other investments. Instead, each Subaccount buys and sells shares of a
corresponding Fund.

Although the Company holds title to the assets of the Separate Account, such
assets are not chargeable with liabilities of any other business conducted by
the Company. Income, gains or losses of the Separate Account are credited to or
charged against the assets of the Separate Account without regard to other
income, gains or losses of the Company. All obligations arising under the
Contracts are general corporate obligations of the Company.

INVESTMENT OPTIONS
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- --------------------------------------------------------------------------------

THE FUNDS

Purchase Payments may be allocated to one or more of the Subaccounts as
designated on the application or enrollment form. In turn, the Subaccounts
invest in the corresponding Funds at net asset value.

The availability of Funds may be subject to regulatory authorization. In
addition, the Company may add or withdraw Funds, as permitted by applicable law.
Not all Funds may be available in all jurisdictions or under all Contracts.

Subject to state regulatory approval, if the shares of any Fund should no
longer be available for investment by the Separate Account or if in the judgment
of the Company, further investment in such shares should become inappropriate in
view of the purpose of the Contract, we may cease to make such Fund shares
available for investment under the Contract prospectively. The Company may,
alternatively, substitute shares of another Fund for shares already acquired.
The Company reserves the right to substitute shares of another Fund for shares
already acquired without a proxy vote. Any elimination, substitution or addition
of Funds will be done in accordance with applicable state and federal securities
laws.

The investment results of the Funds described below are likely to differ
significantly and there is no assurance that any of the Funds will achieve their
respective investment objectives. Except where otherwise noted, all of the Funds
are diversified, as defined in the 1940 Act.

- -FEDERATED INSURANCE SERIES--FEDERATED AMERICAN LEADERS FUND II (FORMERLY IMS
EQUITY GROWTH AND INCOME FUND) seeks to achieve long-term growth of capital and
to provide income. The Fund pursues its investment objective by investing,
under normal circumstances, at least 65% of its total assets in common stock of
"blue-chip" companies. "Blue-chip" companies

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1
<PAGE>
generally are top-quality, established growth companies which, in the opinion
of the Adviser meet certain criteria.(1)

- -FEDERATED INSURANCE SERIES--FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(FORMERLY IMS U.S. GOVERNMENT BOND FUND) seeks to provide current income. The
Fund pursues its investment objective by investing at least 65% of the value of
its total assets in securities issued or guaranteed as to payment of principal
and interest by the U.S. government, its agencies or instrumentalities.(1)

- -FEDERATED INSURANCE SERIES--FEDERATED GROWTH STRATEGIES FUND II (FORMERLY IMS
GROWTH STOCK FUND) seeks capital appreciation. The Fund pursues its objective
by investing at least 65% of its assets in equity securities of companies with
prospects for above-average growth in earnings and dividends or companies where
significant fundamental changes are taking place. Equity securities include
common stocks, preferred stocks, and securities (including debt securities)
that are convertible into common stocks.(1)

- -FEDERATED INSURANCE SERIES--FEDERATED HIGH INCOME BOND FUND II (FORMERLY IMS
CORPORATE BOND FUND) seeks high current income by investing primarily in a
diversified portfolio of professionally managed fixed income securities. The
fixed-income securities in which the Fund intends to invest are lower-rated
corporate debt obligations (commonly known as "junk bonds" or "high yield, high
risk bonds" which involve significant degree of risk). (See the Fund's
prospectus for a discussion of the risk factors involved in investing in
lower-rated corporate debt obligations).(1)

- -FEDERATED INSURANCE SERIES--FEDERATED INTERNATIONAL EQUITY FUND II (FORMERLY
IMS INTERNATIONAL STOCK FUND) seeks total return on its assets by investing at
least 65% of its assets (and under normal market conditions, substantially all
of its assets) in equity securities of issuers located in at least three
different countries outside of the United States, investing in non-U.S.
securities carries substantial risks in addition to those associated with
domestic investments.(1)

- -FEDERATED INSURANCE SERIES--FEDERATED PRIME MONEY FUND II (FORMERLY IMS PRIME
MONEY FUND) seeks to provide current income consistent with stability of
principal and liquidity. The Fund pursues its investment objective by investing
exclusively in a portfolio of money market instruments maturing in 397 days or
less. The average maturity of the money market instruments in the Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less. An
investment in this Fund is neither insured nor guaranteed by the U.S.
government.(1)

- -FEDERATED INSURANCE SERIES--FEDERATED UTILITY FUND II (FORMERLY IMS UTILITY
FUND) seeks to achieve high current income and moderate capital appreciation by
investing primarily in a professionally managed and diversified portfolio of
equity and debt securities of utility companies. Under normal market
conditions, the Fund will invest at least 65% of its total assets in securities
of utility companies.(1)

(1) Federated Advisers is the investment adviser for each of the Funds.

RISKS ASSOCIATED WITH INVESTMENT IN THE FUNDS. Some of the Funds may use
instruments known as derivatives as part of their investment strategies. The use
of certain derivatives may involve high risk of volatility to a Fund, and the
use of leverage in connection with such derivatives can also increase risk of
losses. Some of the Funds may also invest in foreign or international securities
which involve greater risks than U.S. investments.

More comprehensive information, including a discussion of potential risks,
is found in the respective Fund prospectuses which accompany this Prospectus.
You should read the Fund prospectuses and consider carefully, and on a
continuing basis, which Fund or combination of Funds is best suited to your
long-term investment objectives.

CONFLICTS OF INTEREST (MIXED AND SHARED FUNDING). Shares of the Funds are
sold to each of the Subaccounts for funding the variable annuity contracts
issued by the Company. Shares of the Funds may also be sold to other insurance
companies for the same purpose. This is referred to as "shared funding." Shares
of the Funds may also be used for funding variable life insurance contracts
issued by the Company or by third parties. This is referred to as "mixed
funding."

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2
<PAGE>
of Directors or Trustees has agreed to monitor events in order to identify any
material irreconcilable conflicts which might arise and to determine what
action, if any, should be taken to address such conflict.

CREDITED INTEREST OPTION

Purchase Payments may be allocated to the ALIAC Guaranteed Account (the
"Guaranteed Account"). Through the Guaranteed Account, we guarantee stipulated
rates of interest for stated periods of time. Amounts must remain in the
Guaranteed Account for specified periods to receive the quoted interest rates,
or a market value adjustment (which may be positive or negative) will be
applied. (See the Appendix.)

PURCHASE
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- --------------------------------------------------------------------------------

CONTRACT AVAILABILITY

The Contracts are offered as (1) nonqualified deferred annuity contracts;
(2) Individual Retirement Annuities; or (3) Qualified Contracts used in
conjunction with certain employer sponsored retirement plans. Individual
Retirement Annuities are currently available as rollovers, and may permit
ongoing contributions subject to state regulatory approval. Additionally,
availability of the Qualified Contracts described under item (3) is subject to
state regulatory approval.

Eligible persons seeking to invest and accumulate money for retirement can
purchase individual interests in group Contracts, or, where required by state
law, they may purchase individual Contracts. In most states, group Contracts are
offered, generally to certain broker-dealers or banks which have agreed to act
as Distributors of the Contracts, and individual accounts are established by the
Company for each Certificate Holder. In some states, an individual Contract will
be owned by the Certificate Holder. In both cases, a Certificate Holder's
interest in the Contract is known as his or her "Account."

The maximum issue age for the Annuitant is 90 (age 80 for those Contracts or
Certificates issued in the state of New York, and age 85 for those Contracts or
Certificates issued in the state of Pennsylvania).

JOINT CERTIFICATE HOLDERS. Nonqualified Contracts may be purchased by
spouses as joint Certificate Holders. In New York and Pennsylvania, the joint
Certificate Holders do not need to be spouses. References to "Certificate
Holders" in this Prospectus mean both of the Certificate Holders on joint
Accounts. Tax law prohibits the purchase of Qualified Contracts by joint
Certificate Holders.

PURCHASING INTERESTS IN THE CONTRACT

GROUP CONTRACTS. Groups will generally consist of those eligible
individuals who have established an Account with a broker-dealer or bank which
has agreed to act as a Distributor for the Contracts. The Contract application
must be completed by the prospective group Contract Holder and sent to the
Company at its Home Office. Once we approve the Contract application, a group
Contract is issued to the group Contract Holder. Certificate Holders may
purchase interests in a group Contract by submitting an enrollment form. Once
the enrollment form is accepted a Certificate will be issued.

INDIVIDUAL CONTRACTS. Certain states will not allow a group Contract due to
provisions in their insurance laws. In those states where individual Contracts
are offered, eligible persons will submit an individual application to the
Company. In those states, an individual will be issued a Contract rather than a
Certificate.

Regardless of whether you have purchased a group or individual Contract, the
Company must accept or reject the application or enrollment form within two
business days of receipt. If these items are incomplete, the Company may hold
any forms and accompanying Purchase Payments for five days. Purchase Payments
may be held for longer periods only with the consent of the Certficiate Holder,
pending acceptance of the application or enrollment form. If the application or
enrollment form is rejected, the application or enrollment form and any Purchase
Payments will be returned to the Certificate Holder.

PURCHASE PAYMENTS

You may make Purchase Payments under the Contract in one lump sum, through
periodic payments or as a transfer from a pre-existing plan.

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3
<PAGE>
time of the subsequent payment. A Purchase Payment of more than $1,000,000 will
be allowed only with the Company's consent. We also reserve the right to reject
any Purchase Payment to a prospective or existing Account without advance
notice.

For Qualified Contracts the Code imposes a maximum limit on annual Purchase
Payments which may be excluded from a participant's gross income. (See "Tax
Status.")

ALLOCATION OF PURCHASE PAYMENTS. Purchase Payments will initially be
allocated to the Subaccounts or the Guaranteed Account as specified on the
application or enrollment form. Changes in such allocation may be made in
writing or by telephone transfer. Allocations must be in whole percentages, and
there may be limitations on the number of investment options that can be
selected during the Accumulation Period. (See "Transfers.")

CONTRACT RIGHTS

Under individual Contracts, Certificate Holders have all Contract rights.

Under group Contracts, the group Contract Holder has title to the Contract
and generally only the right to accept or reject any modifications to the
Contract. You have all other rights to your Account under the Contract. However,
under a Nonqualified Contract, if you and the Annuitant are not the same, and
the Annuitant dies first, a different provision applies. In this case, your
rights are automatically transferred to the Beneficiary. (See "Death Benefit.")

Joint Certificate Holders have equal rights under the Contract and with
respect to their Account. On the death of a joint Certificate Holder prior to
the Annuity Date, the surviving Certificate Holder may retain all ownership
rights under the Contract or elect to have the proceeds distributed. (See "Death
Benefit.") All rights under the Contract must be exercised by both joint
Certificate Holders with the exception of transfers among investment options; at
our discretion, one joint Certificate Holder can select additional investment
options or change investment options after the Account has been established.

DESIGNATIONS OF BENEFICIARY AND ANNUITANT

For Qualified Contracts issued in conjunction with a Code Section 403(b) tax
deferred annuity program subject to the Employee Retirement Income Security Act
(ERISA), the spouse of a married participant must be the Beneficiary of at least
50% of the Account Value. If the married participant is age 35 or older, the
participant may name an alternate Beneficiary provided the participant furnishes
a waiver and spousal consent which meets the requirements of ERISA Section 205.
The participant on whose behalf the Account was established must be the
Annuitant.

For Qualified Contracts issued as an Individual Retirement Annuity, you must
be the Annuitant. For Nonqualified Contracts, you may (but need not) select a
different person as the Annuitant. (See "Purchase-- Contract Availability.")

RIGHT TO CANCEL

You may cancel the Contract or Certificate without penalty by returning it
to the Company with a written notice of your intent to cancel. In most states,
you have ten days to exercise this right; some states allow you longer. Unless
state law requires otherwise, the amount you will receive upon cancellation will
reflect the investment performance of the Subaccounts into which your Purchase
Payments were deposited. In some cases this may be more or less than the amount
of your Purchase Payments; therefore, you bear the entire investment risk for
amounts allocated among the Subaccounts during the free look period. Under
Contracts issued as Individual Retirement Annuities, you will receive a refund
of your Purchase Payment. Account Values will be determined as of the Valuation
Date on which we receive your request for cancellation at our Home Office.

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4
<PAGE>
CHARGES AND DEDUCTIONS
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- --------------------------------------------------------------------------------

DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT

MORTALITY AND EXPENSE RISK CHARGE. The Company makes a daily deduction from
each of the Subaccounts for the mortality and expense risk charge. The charge is
equal, on an annual basis, to 1.25% of the daily net assets of the Subaccounts
and compensates the Company for the assumption of the mortality and expense
risks under the Contract. The mortality risks are those assumed for our promise
to make lifetime payments according to annuity rates specified in the Contract.
The expense risk is the risk that the actual expenses for costs incurred under
the Contract will exceed the maximum costs that can be charged under the
Contract.

If the amount deducted for mortality and expense risks is not sufficient to
cover the mortality costs and expense shortfalls, the loss is borne by the
Company. If the deduction is more than sufficient, the excess may be used to
recover distribution expenses relating to the Contracts and as a source of
profit to the Company. The Company expects to make a profit from the mortality
and expense risk charge.

ADMINISTRATIVE CHARGE. During the Accumulation Period, the Company makes a
daily deduction from each of the Subaccounts for an administrative charge. The
charge is equal, on an annual basis, to 0.15% of the daily net assets of the
Subaccounts and compensates the Company for administrative expenses that exceed
revenues from the maintenance fee described below. The charge is set at a level
which does not exceed the average expected cost of the administrative services
to be provided while the Contract is in force. The Company does not expect to
make a profit from this charge.

During the Annuity Period, the Company reserves the right to make a
deduction for the administrative charge of an amount equal, on an annual basis,
to a maximum of 0.25% of the daily net assets of the Subaccounts. There is
currently no administrative charge during the Annuity Period. Once an Annuity
Option is elected, the charge will be established and will be effective during
the entire Annuity Period.

MAINTENANCE FEE

During the Accumulation Period, the Company will deduct an annual
maintenance fee from the Account Value. The maintenance fee is to reimburse the
Company for some of its administrative expenses relating to the establishment
and maintenance of the Accounts.

The maximum maintenance fee deducted under the Contract is $30. The
maintenance fee will be deducted on a pro rata basis from each investment option
in which you have an interest. If your entire Account Value is withdrawn, the
full maintenance fee will be deducted at the time of withdrawal. The maintenance
fee will not be deducted (either annually or upon withdrawal) if your Account
Value is $50,000 or more on the day the maintenance fee is due.

REDUCTION OR ELIMINATION OF ADMINISTRATIVE CHARGE AND MAINTENANCE FEE

The administrative charge and maintenance fee will be reduced or eliminated
when sales of the Contracts are made to individuals or to a group of individuals
in such a manner that results in savings of administrative expenses. The
entitlement to such a reduction will be based on:

(1) the size and type of group of individuals to whom the Contract is offered;
and

(2) the amount of expected Purchase Payments.

Any reduction or elimination of the administrative charge or maintenance
fees will not be unfairly discriminatory against any person. We will make any
reduction in the administrative charge or annual maintenance fees according to
our own rules in effect at the time an application for a Contract is approved.
We reserve the right to change these rules from time to time.

DEFERRED SALES CHARGE

Withdrawals of all or a portion of the Account Value may be subject to a
deferred sales charge. The deferred sales charge is a percentage of Purchase
Payments withdrawn from the Subaccounts and the Guaranteed Account and is based
on the number of years which have elapsed since the Purchase Payment was made.
The deferred sales charge for each Purchase Payment is determined by multiplying
the Purchase Payment withdrawn by the appropriate percentage, in accordance with
the schedule set forth in the tables below.

Withdrawals are taken first against Purchase Payments, then against any
increase in value. However, the deferred sales charge only applies to the
Purchase

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5
<PAGE>
Payment (not to any associated changes in value). To satisfy a partial
withdrawal, the deferred sales charge is calculated as if the Purchase Payments
are withdrawn from the Subaccounts in the same order they were applied to the
Account. Partial withdrawals from the Guaranteed Account will be treated as
described in the Appendix and the prospectus for the Guaranteed Account. The
total charge will be the sum of the charges applicable for all of the Purchase
Payments withdrawn.

<TABLE>
<CAPTION>
CONTRACTS OR CERTIFICATES ISSUED IN NEW YORK
DEFERRED
SALES
YEARS SINCE RECEIPT OF CHARGE
PURCHASE PAYMENT DEDUCTION
- ---------------------------------------- ---------
<S> <C>
Less than 1 7%
1 or more but less than 2 6%
2 or more but less than 3 5%
3 or more but less than 4 4%
4 or more but less than 5 3%
5 or more but less than 6 2%
6 or more but less than 7 1%
7 or more 0%
</TABLE>

A deferred sales charge will not be deducted from any portion of a Purchase
Payment withdrawn if the withdrawal is:

- - applied to provide Annuity benefits;

- - paid to a Beneficiary due to the Annuitant's death before Annuity Payments
start, up to a maximum of the Purchase Payment(s) in the Account on the
Annuitant's date of death;

- - made due to the election of an Additional Withdrawal Option (see "Additional
Withdrawal Options");

- - paid upon a full withdrawal where the Account Value is $2,500 or less and no
amount has been withdrawn during the prior 12 months; or

- - paid if we close out your Account when the value is less than $2,500.

After the first Account Year, you may withdraw all or a portion of your
Purchase Payments without a deferred sales charge, provided that (1) such
withdrawal occurs within three years of the Annuitant's admission to a licensed
nursing care facility (including non-licensed facilities in New Hampshire) and
(2) the Annuitant has spent at least 45 consecutive days in such facility. This
waiver of deferred sales charge does not apply if the Annuitant is in a nursing
care facility at the time the Account is established. It will also not apply if
otherwise prohibited by state law.

The Company does not anticipate that the deferred sales charge will cover
all sales and administrative expenses which it incurs in connection with the
Contract. The difference will be covered by the general assets of the Company
which are attributable, in part, to mortality and expense risk charges under the
Contract described above.

FREE WITHDRAWALS. At least 12 months after the date the first Purchase
Payment is applied to your Account, you may withdraw up to 15% of your current
Account Value during each calendar year without imposition of a deferred sales
charge. The free withdrawal applies only to the first partial or full withdrawal
in each calendar year. The free withdrawal amount will be based on the Account
Value calculated on the Valuation Date next following our receipt of your
request for withdrawal. If your withdrawal exceeds the applicable free
withdrawal allowance, we will deduct a deferred sales charge on the excess
amount. (See the Appendix for a discussion of withdrawals from the Guaranteed
Account.) This provision may not be exercised if you have elected the Systematic
Withdrawal Option or Estate Conservation Option. (See "Additional Withdrawal
Options.")

REDUCTION OR ELIMINATION OF THE DEFERRED SALES CHARGE

We may reduce or eliminate the deferred sales charge when sales of the
Contracts are made to individuals or a group of individuals in such a manner
that results in savings of sales expenses. The entitlement to such a reduction
in the deferred sales charge will be based on the following:

(1) the size and type of group of individuals to whom the Contract is offered;

(2) the amount of expected Purchase Payments; and

(3) whether there is a prior or existing relationship with the Company such as
being an employee of the Company or an affiliate, receiving distributions or
making internal transfers from other Contracts issued by the Company, or
making transfers of amounts held under qualified plans sponsored by the
Company or an affiliate.

Any reduction or elimination of the deferred sales charge will not be
unfairly discriminatory against any person.

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FUND EXPENSES

Each Fund incurs certain expenses which are paid out of its net assets.
These expenses include, among other things, the investment advisory or
"management" fee. The expenses of the Funds are set forth in the Fee Table in
this Prospectus and described more fully in the accompanying Fund prospectuses.

PREMIUM AND OTHER TAXES

Several states and municipalities impose a premium tax on Annuities. These
taxes currently range from 0% to 4%. Ordinarily, any state premium tax will be
deducted from the Account Value when it is applied to an Annuity Option.
However, we reserve the right to deduct state premium tax from the Purchase
Payment(s) or from the Account Values at any time, but no earlier than when we
have a tax liability under state law.

Any municipal premium tax assessed at a rate in excess of 1% will be
deducted from the Purchase Payment(s) or from the amount applied to an Annuity
Option based on our determination of when such tax is due. We will absorb any
municipal premium tax which is assessed at 1% or less. We reserve the right,
however, to reflect this added expense in our Annuity purchase rates for
residents of such municipalities.

CONTRACT VALUATION
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ACCOUNT VALUE

Until the Annuity Date, the Account Value is the total dollar value of
amounts held in the Account as of any Valuation Date. The Account Value at any
given time is based on the value of the units held in each Subaccount, plus the
value of amounts held in the Guaranteed Account.

ACCUMULATION UNITS

The value of your interests in a Subaccount is expressed as the number of
"Accumulation Units" that you hold multiplied by an "Accumulation Unit Value"
(or "AUV") for each unit. The AUV on any Valuation Date is determined by
multiplying the value on the immediately preceding Valuation Date by the net
investment factor of that Subaccount for the period between the immediately
preceding Valuation Date and the current Valuation Date. (See "Net Investment
Factor" below.) The Accumulation Unit Value will be affected by the investment
performance, expenses and charges of the applicable Fund and is reduced each day
by a percentage that accounts for the daily assessment of mortality and expense
risk charges and the administrative charge.

Initial Purchase Payments will be credited to your Account as described
under "Purchasing Interests in the Contract." Each subsequent Purchase Payment
(or amount transferred) will be credited to your Account at the AUV computed on
the next Valuation Date following our receipt of your payment or transfer
request. The value of an Accumulation Unit may increase or decrease.

NET INVESTMENT FACTOR

The net investment factor is used to measure the investment performance of a
Subaccount from one Valuation Date to the next. The net investment factor for a
Subaccount for any valuation period is equal to the sum of 1.0000 plus the net
investment rate. The net investment rate equals:

(a) the net assets of the Fund held by the Subaccount on the current Valuation
Date, minus

(b) the net assets of the Fund held by the Subaccount on the preceding Valuation
Date, plus or minus

(d) divided by the total value of the Subaccount's Accumulation and Annuity
Units on the preceding Valuation Date;

(e) minus a daily charge at the annual effective rate of 1.25% for mortality and
expense risks, and an administrative charge of 0.15% during the Accumulation
Period and up to 0.25% during the Annuity Period (currently 0% during the
Annuity Period).

The net investment rate may be either positive or negative.

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TRANSFERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

At any time prior to the Annuity Date, you can transfer amounts held under
your Account from one Subaccount to another. Transfers from the Guaranteed
Account may be subject to certain restrictions and to a market value adjustment.
(See the Appendix.) A request for transfer can be made either in writing or by
telephone. The telephone transfer privilege is available automatically; no
special election is necessary. All transfers must be in accordance with the
terms of the Contract.

The Company currently allows unlimited transfers of accumulated amounts to
available investment options. Twelve free transfers are allowed per calendar
year. Thereafter, the Company reserves the right to charge up to $10 for each
additional transfer. The Company currently does not impose this charge. The
total number of investment options that you may select during the Accumulation
Period may be limited, as set forth on your application or enrollment form. Any
transfer will be based on the Accumulation Unit Value next determined after the
Company receives a valid transfer request at its Home Office. Transfers are
currently not available during the Annuity Period; however, they may become
available during the second half of 1996. (See "Annuity Options.")

DOLLAR COST AVERAGING PROGRAM

You may establish automated transfers of Account Values on a monthly or
quarterly basis through the Company's Dollar Cost Averaging Program. Dollar cost
averaging is a system for investing a fixed amount of money at regular intervals
over a period of time. The Dollar Cost Averaging Program permits the transfer of
amounts from any of the variable funding options and the one-year Guaranteed
Term to any of the variable investment options. A market value adjustment will
not be applied to dollar cost averaging transfers from the one-year Guaranteed
Term. (See the Appendix for a discussion of the restrictions and features
attributable to the Guaranteed Account.)

Dollar cost averaging does not ensure a profit nor guarantee against loss in
a declining market. You should consider your financial ability to continue
purchases through periods of low price levels. For additional information,
please refer to the "Inquiries" section of the Prospectus Summary, which
describes how you can obtain further information.

The Dollar Cost Averaging Program is not available to individuals who have
elected an Additional Withdrawal Option or the Account Rebalancing Program.

ACCOUNT REBALANCING PROGRAM

The Account Rebalancing Program allows you to have portions of your Account
Value automatically reallocated annually to a specified percentage. Only Account
Values accumulating in the Subaccounts can be rebalanced. You may participate in
this program by completing the Account Rebalancing section of the application or
enrollment form, or by sending a written request to the Company at its Home
Office.

The Account Rebalancing Program is not available to Certificate Holders who
have elected the Dollar Cost Averaging Program, and the Account Rebalancing
Program does not ensure a profit nor guarantee against loss in a declining
market.

WITHDRAWALS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

All or a portion of your Account Value may be withdrawn at any time during
the Accumulation Period, subject to the withdrawal restrictions under Section
403(b) Contracts described below. To request a withdrawal, you must properly
complete a disbursement form and send it to our Home Office. Payments for
withdrawal requests will be made in accordance with SEC requirements, but
normally not later than seven calendar days following our receipt of a
disbursement form.

Withdrawals may be requested in one of the following forms:

- -FULL WITHDRAWAL OF AN ACCOUNT: The amount paid for a full withdrawal will be
the Adjusted Account Value minus any applicable deferred sales charge and
maintenance fee due.

- -PARTIAL WITHDRAWALS: (Percentage): The amount paid will be the percentage of
the Adjusted Account Value requested minus any applicable deferred sales
charge.

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<PAGE>
- -PARTIAL WITHDRAWALS: (Specified Dollar Amount): The amount paid will be the
dollar amount requested. However, the amount withdrawn from your Account will
equal the amount you request plus any applicable deferred sales charge and plus
or minus any applicable market value adjustment.

For any partial withdrawal, the value of the Accumulation Units canceled
will be withdrawn proportionately from the Guaranteed Account or each Subaccount
in which your Account is invested, unless you request otherwise in writing. All
amounts paid will be based on your Account Value as of the next Valuation Date
after we receive a request for withdrawal at our Home Office, or on such later
date as the disbursement form may specify. Taxes or tax penalties may be due on
the amount withdrawn. (See "Tax Status.")

The tax treatment of withdrawals from each Nonqualified Contract may be
affected if you own other annuity contracts issued by us (or our affiliates)
that were purchased on or after October 21, 1988. (See "Tax Status.")

WITHDRAWAL RESTRICTIONS FROM 403(B) PLANS. Under Section 403(b) Contracts,
the withdrawal of salary reduction contributions and earnings on such
contributions is generally prohibited prior to the participant's death,
disability, attainment of age 59 1/2, separation from service or financial
hardship. (See "Tax Status.")

ADDITIONAL WITHDRAWAL OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

The Company offers certain withdrawal options under the Contract that are
not considered Annuity Options ("Additional Withdrawal Options"). To exercise
these options, your Account Value must meet the minimum dollar amounts and age
criteria applicable to that option.

The Additional Withdrawal Options currently available under the Contract
include the following:

- -SWO--SYSTEMATIC WITHDRAWAL OPTION. SWO is a series of partial withdrawals from
your Account based on a payment method you select. It is designed for those who
want a periodic income while retaining investment flexibility for amounts
accumulated under a Contract.

- -ECO--ESTATE CONSERVATION OPTION. ECO offers the same investment flexibility as
SWO but is designed for those who want to receive only the minimum distribution
that the Code requires each year. ECO is only available under Qualified
Contracts. Under ECO, the Company calculates the minimum distribution amount
required by law, generally at age 70 1/2, and pays you that amount once a year.
(See "Tax Status.")

Other Additional Withdrawal Options may be added from time to time.
Additional information relating to any of the Additional Withdrawal Options may
be obtained from your local representative or from the Company at its Home
Office.

If you select one of the Additional Withdrawal Options, you will retain all
of the rights and flexibility permitted under the Contract during the
Accumulation Period. Your Account Value will continue to be subject to the
charges and deductions described in this Prospectus.

Once you elect an Additional Withdrawal Option, you may revoke it any time
by submitting a written request to our Home Office. Once an option is revoked,
it may not be elected again, nor may any other Additional Withdrawal Option be
elected unless permitted by the Code. The Company reserves the right to
discontinue the availability of one or all of these Additional Withdrawal
Options at any time, and/or to change the terms of future elections.

DEATH BENEFIT DURING ACCUMULATION PERIOD
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9
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designated Beneficiary. Any other Beneficiary designation on record with the
Company at the time of death will be treated as a contingent Beneficiary.

The amount of death benefit proceeds will be determined as of the date of
death. Under some circumstances, the amount of the death benefit is guaranteed,
as described below.

DEATH BENEFIT AMOUNT

Upon the death of the Annuitant, the death benefit proceeds will be the
greatest of:

(1) the total Purchase Payment(s) applied to the Account, minus the sum of all
amounts withdrawn, annuitized or deducted from such Account;

(2) the highest step-up value as of the date of death. The step-up value is
determined on each anniversary of the Effective Date, up to the Annuitant's
85th birthday. Each step-up value is calculated as the Account Value on the
Effective Date anniversary, increased by Purchase Payments applied, and
decreased by partial withdrawals, annuitizations and deductions taken from
the Account since the Effective Date anniversary; or

(3) the Account Value as of the date of death.

The excess, if any, of the guaranteed death benefit value over the Account
Value is determined as of the date of death. Any excess amount will be deposited
and allocated to the money market Subaccount available under the Contract. The
Account Value on the claim date plus any excess amount deposited into the
Account becomes the Certificate Holder's Account Value. The claim date is the
date we receive valid proof of death and the Beneficiary's claim at our Home
Office.

Upon the death of a spousal Beneficiary who continued the Account in his or
her own name, the amount of the death benefit proceeds will be equal to the
Adjusted Account Value, less any deferred sales charge applicable to any
Purchase Payments made after we receive proof of death.

Under Nonqualifed Contracts only, if the Certificate Holder is not the
Annuitant and dies, the amount of death benefit proceeds will be equal to the
Adjusted Account Value on the claim date. Full or partial withdrawals may be
subject to a deferred sales charge.

For amounts held in the Guaranteed Account, see the Appendix for a
discussion of the calculation of death benefit proceeds.

DEATH BENEFIT PAYMENT OPTIONS

Death benefit proceeds may be paid to the Beneficiary as described below. If
you die and no Beneficiary exists, the death benefit will be paid in a lump sum
to your estate. Prior to any election, the Account Value will remain in the
Account and the Account Value will continue to be affected by the investment
performance of the investment option(s) selected. The Beneficiary has the right
to allocate or transfer any amount to any available investment option (subject
to a market value adjustment, as applicable). The Code requires that
distributions begin within a certain time period, as described below. If no
elections are made, no distributions will be made. Failure to commence
distribution within those time periods can result in tax penalties.

NONQUALIFIED CONTRACTS. Under a Nonqualified Contract, if you die, or if
you are a nonnatural person and the Annuitant dies, and the Beneficiary is your
surviving spouse, he or she automatically becomes the successor Certificate
Holder. The successor Certificate Holder may exercise all rights under the
Account and (1) continue in the Accumulation Period; (2) elect to apply some or
all of the Adjusted Account Value to any of the Annuity Options; or (3) receive
at any time a lump sum payment equal to all or a portion of the Adjusted Account
Value. If you die and you are not the Annuitant, any applicable deferred sales
charge will be applied if a lump sum payment is elected. Under the Code,
distributions are not required until the successor Certificate Holder's death.

If you die and the Beneficiary is not your surviving spouse, he or she may
elect option (2) or (3) above. According to the Code, any portion of the
Adjusted Account Value not distributed in installments over the life or life
expectancy beginning within one year of your death, must be paid within five
years of your death. (See "Tax Status of the Contract.")

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Option within 60 days of the date of death, the gain, if any, will be includable
in the Beneficiary's income in the year the Annuitant dies.

If SWO is in effect, payments will cease at the Certificate Holder's or
Annuitant's death. A Beneficiary, however, may elect to continue SWO.

QUALIFIED CONTRACTS. Under a Qualified Contract, the death benefit is paid
at the death of the participant, who is the Annuitant under the Contract. The
Beneficiary has the following options: (1) apply some or all of the Adjusted
Account Value to any of the Annuity Options, subject to the distribution rules
in Code Section 401(a)(9), or (2) receive at any time a lump sum payment equal
to all or a portion of the Adjusted Account Value. If the Account was
established in conjunction with a Section 401(a) qualified pension or profit
sharing plan or a Section 457 deferred compensation plan, payment will be made,
as directed by the Certificate Holder, to either the Certificate Holder or to
the plan beneficiary.

If ECO or SWO is in effect and the participant dies before the required
beginning date for minimum distributions, payments will cease. A Beneficiary, or
the Certificate Holder on behalf of a plan Beneficiary, may elect ECO or SWO
provided the election would satisfy the Code minimum distribution rules.

If ECO or SWO is in effect and the participant dies after the required
beginning date for minimum distributions, payments will continue as permitted
under the Code minimum distribution rules, unless the option is revoked.

Death benefit payments must satisfy the distribution rules in Code Section
401(a)(9). (See "Tax Status of the Contract.")

ANNUITY PERIOD
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ANNUITY PERIOD ELECTIONS

You must notify us in writing of the date you want Annuity Payments to start
(the "Annuity Date") and the Annuity Option elected. Payments may not begin
earlier than one year after purchase, or, unless we consent, later than the
later of (a) the first day of the month following the Annuitant's 85th birthday,
or (b) the tenth anniversary of the last Purchase Payment (fifth anniversary for
Contracts issued in Pennsylvania). For Contracts or Certificates issued in New
York, Annuity Payments may not begin later than the time period specified in
(a).

Annuity Payments will not begin until you have selected an Annuity Date and
an Annuity Option. Until a date and option are elected, the Account will
continue in the Accumulation Period.

The Code generally requires that for Qualified Contracts, minimum annual
distributions of the Account Value must begin by April 1st of the calendar year
following the calendar year in which a participant attains age 70 1/2. In
addition, distributions must be in a form and amount sufficient to satisfy the
Code requirements. These requirements may be satisfied by the election of
certain Annuity Options or Additional Withdrawal Options. (See "Tax Status.")
For Nonqualified Contracts, failure to select an Annuity Option and an Annuity
Date, or postponement of the Annuity Date past the Annuitant's 85th birthday or
tenth anniversary of your last Purchase Payment may have adverse tax
consequences. You should consult with a qualified tax adviser if you are
considering such a course of action.

At least 30 days prior to the Annuity Date, you must notify us in writing of
the following:

- - the date on which you would like Annuity Payments to begin;

- - the Annuity Option under which you want payments to be calculated and paid;

- - whether the payments are to be made monthly, quarterly, semi-annually or
annually; and

Once Annuity Payments begin, the Annuity Option may not be changed, nor may
transfers currently be made among the investment option(s) selected. (See
"Annuity Options" below for more information about transfers during the Annuity
Period.)

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PARTIAL ANNUITIZATION

You may elect an Annuity Option with respect to a portion of your Account
Value, while leaving the remaining portion of your Account Value invested in the
Accumulation Period. The Code and the regulations thereunder do not specifically
address the tax treatment applicable to payments provided pursuant to the
exercise of this option. The Company takes the position that payments provided
pursuant to this option are taxable as annuity payments, and not as a
withdrawal. However, because the tax treatment of such payments is currently
unclear, you should consult with a qualified tax adviser if you are considering
a partial annuitization of your Account.

ANNUITY OPTIONS

You may choose one of the following Annuity Options:

LIFETIME ANNUITY OPTIONS:

- -OPTION 1--Life Annuity--An annuity with payments ending on the Annuitant's
death.

- -OPTION 2--Life Annuity with Guaranteed Payments-- An annuity with payments
guaranteed for 5, 10, 15 or 20 years, or such other periods as the Company may
offer at the time of annuitization.

- -OPTION 3--Life Income Based Upon the Lives of Two Annuitants--An Annuity will
be paid during the lives of the Annuitant and a second Annuitant, with 100%,
66 2/3% or 50% of the payment to continue after the first death, or 100% of the
payment to continue at the death of the second Annuitant and 50% of the payment
to continue at the death of the Annuitant.

- -OPTION 4--Life Income Based Upon the Lives of Two Annuitants--An annuity with
payments for a minimum of 120 months, with 100% of the payment to continue
after the first death.

If Option 1 or 3 is elected, it is possible that only one Annuity Payment
will be made if the Annuitant under Option 1, or the surviving Annuitant under
Option 3, should die prior to the due date of the second Annuity Payment. Once
lifetime Annuity Payments begin, the Certificate Holder cannot elect to receive
a lump-sum settlement.

NONLIFETIME ANNUITY OPTION:

Under the nonlifetime option, payments may be made for generally 5-30 years,
as selected. If this option is elected on a variable basis, the Certificate
Holder may request at any time during the payment period that the present value
of all or any portion of the remaining variable payments be paid in one sum.
However, any lump-sum elected before three years of payments have been completed
will be treated as a withdrawal during the Accumulation Period and any
applicable deferred sales charge will be assessed. (See "Charges and
Deductions-- Deferred Sales Charge.") If the nonlifetime option is elected on a
fixed basis, you cannot elect to receive a lump-sum settlement.

We may also offer additional Annuity Options under your Contract from time
to time. Later in 1996, subject to state regulatory approval, the Company
expects to offer additional Annuity Options and enhanced versions of the Annuity
Options listed above. These additional Annuity Options and enhanced versions of
the existing options will have additional Subaccounts available and will allow
transfers between Subaccounts during the Annuity Period. Please refer to the
Contract or Certificate, or call the number listed in the "Inquiries" section of
the Prospectus Summary, to determine which options are available and the terms
of such options. It is not expected that these additional or enhanced options
will be made available to those who have already commenced receiving Annuity
Payments.

ANNUITY PAYMENTS

DATE PAYOUTS START. When payments start, the age of the Annuitant plus the
number of years for which payments are guaranteed must not exceed 95. For
Qualified Contracts only, Annuity Payments may not extend beyond (a) the life of
the Annuitant, (b) the joint lives of the Annuitant and beneficiary, (c) a
period certain greater than the Annuitant's life expectancy, or (d) a period
certain greater than the joint life expectancies of the Annuitant and
Beneficiary.

AMOUNT OF EACH ANNUITY PAYMENT. The amount of each payment depends on how
you allocate your Account Value between fixed and variable payouts. No election
may be made that would result in the first Annuity Payment of less than $50, or
total yearly Annuity Payments of less than $250 (less if required by state law).
If the Account Value on the Annuity Date is insufficient to elect an option for
the minimum amount specified, a lump-sum payment must be elected. We reserve the
right to increase the minimum first Annuity Payment amount

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and the minimum annual Annuity Payment amount based on increases reflected in
the Consumer Price Index-Urban (CPI-U), since July 1, 1993.

If Annuity Payments are to be made on a variable basis, the first and
subsequent payments will vary depending on the assumed net investment rate
selected (3 1/2% or 5% per annum). Selection of a 5% rate causes a higher first
payment, but Annuity Payments will increase thereafter only to the extent that
the net investment rate exceeds 5% on an annualized basis. Annuity Payments
would decline if the rate were below 5%. Use of the 3 1/2% assumed rate causes a
lower first payment, but subsequent payments would increase more rapidly or
decline more slowly as changes occur in the net investment rate. (See the
Statement of Additional Information for further discussion on the impact of
selecting an assumed net investment rate.)

CHARGES DEDUCTED DURING THE ANNUITY PERIOD

We make a daily deduction for mortality and expense risks from any amounts
held on a variable basis. Therefore, electing the nonlifetime option on a
variable basis will result in a deduction being made even though we assume no
mortality risk. We may also deduct a daily administrative charge from amounts
held under the variable options. This charge, established when a variable
Annuity Option is elected, will not exceed 0.25% per year of amounts held on a
variable basis. Once established, the charge will be effective during the entire
Annuity Period. (See "Charges and Deductions.")

DEATH BENEFIT PAYABLE DURING THE
ANNUITY PERIOD

If an Annuitant dies after Annuity Payments have begun, any death benefit
payable will depend on the terms of the Contract and the Annuity Option
selected. If Option 1 or Option 3 was elected, Annuity Payments will cease on
the death of the Annuitant under Option 1 or the death of the surviving
Annuitant under Option 3.

If Lifetime Option 2 or Option 4 was elected and the death of the Annuitant
under Option 2, or the surviving Annuitant under Option 4, occurs prior to the
end of the guaranteed minimum payment period, we will pay to the Beneficiary in
a lump sum, unless otherwise requested, the present value of the guaranteed
annuity payments remaining.

If the nonlifetime option was elected, and the Annuitant dies before all
payments are made, the value of any remaining payments may be paid in a lump-sum
to the Beneficiary (unless otherwise requested), and no deferred sales charge
will be imposed.

If the Annuitant dies after Annuity Payments have begun and if there is a
death benefit payable under the Annuity Option elected, the remaining value must
be distributed to the Beneficiary at least as rapidly as under the original
method of distribution.

Any lump-sum payment paid under the applicable lifetime or nonlifetime
Annuity Options will be made within seven calendar days after proof of death
acceptable to us, and a request for payment are received at our Home Office. The
value of any death benefit proceeds will be determined as of the next Valuation
Date after we receive acceptable proof of death and a request for payment.

TAX STATUS
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INTRODUCTION

The following provides a general discussion and is not intended as tax
advice. This discussion reflects the Company's understanding of current federal
income tax law. Such laws may change in the future, and it is possible that any
change could be retroactive (i.e., effective prior to the date of the change).
The Company makes no guarantee regarding the tax treatment of any contract or
transaction involving a Contract.

The Contract may be purchased on a non-tax qualified basis ("Nonqualified
Contract") or purchased and used in connection with certain retirement
arrangements entitled to special income tax treatment under Section 401(a),
403(b), 408(b) or 457 of the Code ("Qualified Contracts"). The ultimate effect
of federal income taxes on the amounts held under a Contract, on Annuity
Payments, and on the economic benefit to the Contract Holder, Certificate Holder
or Beneficiary may depend upon the tax status of the individual concerned. Any
person concerned about these tax implications should consult a competent tax
adviser before initiating any transaction.

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TAXATION OF THE COMPANY

The Company is taxed as a life insurance company under the Code. Since the
Separate Account is not an entity separate from the Company, it will not be
taxed separately as a "regulated investment company" under the Code. Investment
income and realized capital gains are automatically applied to increase reserves
under the Contracts. Under existing federal income tax law, the Company believes
that the Separate 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, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Separate Account and, therefore, the
Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretation thereof result in the Company
being taxed on income or gains attributable to the Separate Account, then the
Company may impose a charge against the Separate Account (with respect to some
or all Contracts) in order to set aside provisions to pay such taxes.

TAX STATUS OF THE CONTRACT

Diversification. Section 817(h) of the Code requires that with respect to
Nonqualified Contracts, the investments of the Funds be "adequately diversified"
in accordance with Treasury Regulations in order for the Contracts to qualify as
annuity contracts under federal tax law. The Separate Account, through the
Funds, intends to comply with the diversification requirements prescribed by the
Treasury in Reg. Sec. 1.817-5, which affects how the Funds' assets may be
invested.

In addition, 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 these 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 owner possesses incidents of investment control over the 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 owners were not owners of separate account assets. For example, a
Certificate Holder has additional flexibility in allocating premium payments and
account values. In addition, the number of funds provided under the Contract is
significantly greater than the number of funds offered in contracts on which
rulings have been issued. These differences could result in a Certificate Holder
being treated as the owner of a pro rata portion of the assets of the Separate
Account. The Company reserves the right to modify the Contract as necessary to
attempt to prevent a Certificate Holder from being considered the owner of a pro
rata share of the assets of the Separate Account.

REQUIRED DISTRIBUTIONS--NONQUALIFIED CONTRACTS: In order to be treated as an
annuity contract for federal income tax purposes, Section 72(s) of the Code
requires Nonqualified Contracts to provide that (a) if any Certificate Holder
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 in effect
at the time of the Certificate Holder's death, and (b) if any Certificate Holder
dies prior to the Annuity Date, the entire interest in the Contract will be
distributed within five years after the date of such Certificate Holder's death.
These requirements will be considered satisfied as to any portion of a
Certificate Holder's interest which is payable to or for the benefit of a
"designated beneficiary" and which is distributed over the life of such
"designated beneficiary" or over a period not extending beyond the life
expectancy of that beneficiary, provided that such distributions begin within
one year of the Certificate Holder's death. The "designated beneficiary" refers
to a natural person designated by the Certificate Holder as a Beneficiary and to
whom ownership of the contract passes by reason of death. However, if the
"designated beneficiary" is the surviving spouse of the deceased Certificate
Holder, the Account may be continued with the surviving spouse as the new
Certificate Holder.

The Nonqualifed Contracts contain provisions which are intended to comply
with the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code Section 72(s) when clarified by regulation or
otherwise.

The discussion under "Taxation of Annuities" below is based on the
assumption that the Contract qualifies as an annuity contract for federal income
tax purposes.

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REQUIRED DISTRIBUTIONS--QUALIFIED CONTRACTS: The Code has required
distribution rules for Section 401(a), 403(b) and 457 Plans and Individual
Retirement Annuities. Distributions must generally begin by April 1 of the
calendar year following the calendar year in which the participant attains age
70 1/2. For governmental or church 401(a), 403(b) or 457 plans, distributions
must begin by April 1 of the calendar year following the calendar year the
participant attains age 70 1/2 or retires, whichever occurs later. Under 403(b)
plans, if the Company maintains separate records, distribution of amounts held
as of December 31, 1986 must generally begin by the end of the calendar year in
which the participant attains age 75 (or retires, if later, for governmental or
church plans). However, special rules require that some or all of the balance be
distributed earlier if any distributions are taken in excess of the minimum
required amount.

To comply with these provisions, distributions must be in a form and amount
sufficient to satisfy the minimum distribution and minimum distribution
incidental death benefit rules specified in Section 401(a) (9) of the Code.

In general, annuity payments must be distributed over the participant's life
or the joint lives of the participant and beneficiary, or over a period not
greater than the participant's life expectancy or the joint life expectancies of
the participant and beneficiary. Also, any distribution under a Section 457 Plan
payable over a period of more than one year must be made in substantially
nonincreasing amounts.

If the participant dies on or after the required beginning date for minimum
distributions, distributions to the beneficiary must be made at least as rapidly
as the method of distribution in effect at the time of the participant's death.
However, if the required minimum distribution is calculated each year based on
the participant's single life expectancy or the joint life expectancies of the
participant and beneficiary, the regulations for Code Section 401(a)(9) provide
specific rules for calculating the required minimum distributions at the
participant's death. For example, if ECO was elected with the calculation based
on the participant's single life expectancy, and the life expectancy is
recalculated each year, the recalculated life expectancy becomes zero in the
calendar year following the participant's death and the entire remaining
interest must be distributed to the beneficiary by December 31 of the year
following the participant's death. However, a spousal beneficiary, other than
under a Section 457 Plan, has certain rollover rights which can only be
exercised in the year of the participant's death. The rules are complex and the
participant should consult a tax adviser before electing the method of
calculation to satisfy the minimum distribution requirements.

If the participant dies before the required beginning date for minimum
distributions, the entire interest must be distributed by December 31 of the
calendar year containing the fifth anniversary of the date of the participant's
death. Alternatively, payments may be made over the life of the beneficiary or
over a period not extending beyond the life expectancy of the beneficiary, not
to exceed 15 years for a non-spousal beneficiary under a Section 457 Plan,
provided the distribution begins to a non-spouse beneficiary by December 31 of
the calendar year following the calendar year of the participant's death. If
payments are made to a spousal beneficiary, distributions must begin by the
later of December 31 of the calendar year following the calendar year of the
death or December 31 of the calendar year in which the participant would have
attained age 70 1/2.

An exception applies for a spousal beneficiary under an Individual
Retirement Annuity. In lieu of taking a distribution under these rules, a
spousal Beneficiary may elect to treat the Account as his or her own IRA and
defer taking a distribution until his or her age 70 1/2. The surviving spouse is
deemed to have made such an election if the surviving spouse makes a rollover to
or from the Account or fails to take a distribution within the required time
period.

If the participant or beneficiary fails to take the required minimum
distribution for any tax year, a 50% excise tax is imposed on the required
amount that was not distributed.

TAXATION OF ANNUITY CONTRACTS

IN GENERAL: Section 72 of the Code governs taxation of annuities in
general. The Company believes that a Certificate Holder under a Nonqualified
Contract who is a natural person generally is not taxed on increases in the
Account Value until distribution occurs by withdrawing all or part of such
Account Value (e.g., withdrawals or Annuity Payments under the Annuity Option
elected). The taxable portion of a distribution (in the form of a single sum
payment or an Annuity) is taxable as ordinary income.

NON-NATURAL HOLDERS OF A NONQUALIFIED CONTRACT: If the Certificate Holder is
not a natural person, a

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Nonqualified Contract is not treated as an annuity for income tax purposes and
the "income on the contract" for the taxable year is currently taxable as
ordinary income. "Income on the contract" is any increase over the year in the
Surrender Value, adjusted for amounts previously distributed and amounts
previously included in income. There are some exceptions to the rule and a
non-natural person should consult with its tax adviser prior to purchasing this
Contract. A non-natural person exempt from federal income taxes should consult
with its tax adviser regarding treatment of "income on the contract" for
purposes of the unrelated business income tax.

The following discussion generally applies to Qualified Contracts or
Nonqualified Contracts owned by a natural person.

WITHDRAWALS: In the case of a withdrawal under a Qualified Contract,
including withdrawals under SWO or ECO, the amount taxable is generally based on
the ratio of the "investment in the contract" to Account Value. The "investment
in the contract" generally equals the amount of any nondeductible Purchase
Payments paid by or on behalf of any individual less any amount received
previously which was excludable from gross income. For a Qualified Contract, the
"investment in the contract" can be zero. Special tax rules may be available for
certain distributions from a Qualified Contract.

With respect to Nonqualified Contracts, partial withdrawals, including
withdrawals under SWO, 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 Account Value immediately before a withdrawal
may have to be increased by any positive market value adjustment (MVA) that
results from such a withdrawal. There is, however, no definitive guidance on the
proper tax treatment of MVAs in these circumstances, and a Certificate Holder
should contact a competent tax advisor with respect to the potential tax
consequences of any MVA that arises as a result of a partial withdrawal.

Full withdrawals of a Nonqualified Contract are treated as taxable income to
the extent that the amount received exceeds the "investment in the contract."

ANNUITY PAYMENTS: Although the tax consequences may vary depending on the
Annuity Payment elected under the Contract, in general, only the portion of the
Annuity Payment that represents the amount by which the Account Value exceeds
the "investment in the contract" will be taxed; after the "investment in the
contract" is recovered, the full amount of any additional annuity payments is
taxable. For variable Annuity 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 annuity 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 Annuity Payments for the term of the
payments; however, the remainder of each Annuity Payment is taxable. Once the
"investment in the contract" has been fully recovered, the full amount of any
additional Annuity Payments is taxable. If Annuity Payments cease as a result of
an Annuitant's death before full recovery of the "investment in the contract,"
consult a competent tax advisor regarding deductibility of the unrecovered
amount.

PENALTY TAX: In the case of a distribution pursuant to a Nonqualified
Contract, or a Qualified Contract other than a Qualified Contract sold in
conjunction with a Code Section 457 Plan, there may be imposed a federal income
tax penalty equal to 10% of the amount treated as taxable income.

In general, there is no penalty tax on distributions from a Nonqualified
Contract: (1) made on or after the date on which the taxpayer attains age
59 1/2; (2) made as a result of the death of the Certificate Holder; (3)
attributable to the taxpayer's total and permanent disability; (4) received in
substantially equal periodic payments (at least annually) over the life or life
expectancy of the taxpayer or the joint lives or joint life expectancies of the
taxpayer and a "designated beneficiary;" or (5) allocable to "investment in the
contract" before August 14, 1982.

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periodic payments (at least annually) over his or her life or life expectancy or
the joint lives or joint life expectancies of the participant and plan
beneficiary, provided the participant has separated from service with the plan
sponsor. In addition, the penalty tax does not apply for the amount of a
distribution equal to unreimbursed medical expenses incurred by the participant
that qualify for deduction as specified in the Code. The Code may impose other
penalty taxes in other circumstances.

In general, the same exceptions described in the preceding paragraph will
apply to distributions made from an Individual Retirement Annuity. However, the
exceptions for separation from service under (d) above and unreimbursed medical
expenses will not apply.

TAXATION OF DEATH BENEFIT PROCEEDS: Amounts may be distributed from the
Contract because of the death of a Certificate Holder or the Annuitant.
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 an Annuity
Option, they are taxed in the same manner as Annuity Payments, as described
above.

TRANSFERS, ASSIGNMENTS OR EXCHANGES OF THE CONTRACT: A transfer of
ownership of a Contract, the designation of an Annuitant, payee or other
Beneficiary who is not also a Certificate Holder, the selection of certain
Annuity Dates, or the exchange of a Contract may result in certain tax
consequences. The assignment, pledge, or agreement to assign or pledge any
portion of the Account Value generally will be treated as a distribution. The
assignment or transfer of ownership of a Qualified Contract generally is not
allowed. Anyone contemplating any such designation, transfer, assignment,
selection, or exchange should contact a competent tax adviser with respect to
the potential tax effects of such a transaction.

MULTIPLE CONTRACTS: All deferred nonqualified annuity contracts that are
issued by the Company (or its affiliates) to the same owner during any calendar
year are treated as one annuity contract for purposes of determining the amount
includible in gross income under Section 72(e) of the Code. In addition, the
Treasury Department has specific authority to issue regulations that prevent the
avoidance of Section 72(e) through the serial purchase of annuity 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 as may be necessary to enforce the income
tax laws.

CONTRACTS USED WITH CERTAIN RETIREMENT PLANS

QUALIFIED CONTRACTS IN GENERAL

The Qualified Contract is designed for use as an Individual Retirement
Annuity or as a Contract used in connection with certain employer sponsored
retirement plans. The tax rules applicable to participants and beneficiaries in
Qualified Contracts are complex. Special favorable 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;
aggregate distributions in excess of a specified annual amount; and in other
specified circumstances.

The Company makes no attempt to provide more than general information about
use of the Contracts with the various types of retirement plans. Participants
and beneficiaries under Qualified Contracts may be subject to the terms and
conditions of the retirement plans themselves, in addition to the terms and
conditions of the Contract issued in connection with such plans. Some retirement
plans are subject to distribution and other requirements that are not
incorporated in the provisions of the Contracts. Purchasers are responsible for
determining that contributions, distributions and other transactions with
respect to the Contracts satisfy applicable laws, and should consult their legal
counsel and tax adviser regarding the suitability of the Contract.

SECTION 457 PLANS

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17
<PAGE>
particular plan, the employer may be entitled to draw on deferred amounts for
purposes unrelated to its Section 457 plan obligations. In general, all amounts
received under a Section 457 plan are taxable and reportable to the IRS as
taxable income. Also, all amounts except death benefit proceeds are subject to
federal income tax withholding as wages. If we make payments directly to a
participant on behalf of the employer as owner, we will withhold federal taxes
(and state taxes, if applicable).

The Code imposes a maximum limit on annual Purchase Payments which may be
excluded from the participant's gross income. Such limit is generally the lesser
of $7,500 or 33 1/3% of the participant's includible compensation (25% of gross
compensation).

SECTION 401(A) PLANS

Section 401(a) permits corporate employers to establish various types of
retirement plans for employees, and permits self-employed individuals to
establish various types of retirement plans for themselves and for their
employees. These retirement plans may permit the purchase of the Contract to
accumulate 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 an individual except to a participant as a means to provide
benefit payments.

The Code imposes a maximum limit on annual Purchase Payments that may be
excluded from a participant's gross income. Such limit must be calculated under
the Plan by the employer in accordance with Section 415 of the Code. This limit
is generally the lesser of 25% of the participant's compensation or $30,000. In
addition, Purchase Payments will be excluded from a participant's gross income
only if the Section 401(a) Plan meets certain nondiscrimination requirements.

All distributions will be taxed as they are received unless the distribution
is rolled over to another plan of the same type or to an individual retirement
annuity/account ("IRA") in accordance with the Code, or unless the participant
has made after-tax contributions to the plan, which are not taxed upon
distribution. The Code has specific rules that apply, depending on the type of
distribution received, if after-tax contributions were made.

In general, payments received by a beneficiary after the participant's death
are taxed in the same manner as if the participant had received those payments,
except that a limited death benefit exclusion may apply.

SECTION 403(B) PLANS

Under Section 403(b), contributions made by public school systems or
nonprofit healthcare organizations and other Section 501(c)(3) tax exempt
organizations to purchase annuity contracts for their employees are generally
excludable from the gross income of the employee.

In order to be excludable from taxable income, total annual contributions
made by the participant and his or her employer cannot exceed either of two
limits set by the Code. The first limit, under Section 415, is generally the
lesser of 25% of includible compensation or $30,000. The second limit, which is
the exclusion allowance under Section 403(b), is usually calculated according to
a formula that takes into account the participant's length of employment and any
pretax contributions to certain other retirement plans. These two limits apply
to the participant's contributions as well as to any contributions made by the
employer on behalf of the participant. There is an additional limit that
specifically limits salary reduction contributions to generally no more than
$9,500 annually (subject to indexing); a participant's own limit may be higher
or lower, depending on certain conditions. In addition, Purchase Payments will
be excluded from a participant's gross income only if the Plan meets certain
nondiscrimination requirements.

Section 403(b)(11) restricts the distribution under Section 403(b) contracts
of: (1) salary reduction contributions made after December 31, 1988; (2)
earnings on those contributions; and (3) earnings during such period on amounts
held as of December 31, 1988. Distribution of those amounts may only occur upon
death of the participant, attainment of age 59 1/2, separation from service,
total and permanent disability, or financial hardship. In addition, income
attributable to salary reduction contributions may not be distributed in the
case of hardship.

INDIVIDUAL RETIREMENT ANNUITIES AND SIMPLIFIED EMPLOYEE PENSION PLANS

Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity,
hereinafter 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. Employers may establish Simplified Employee Pension (SEP) Plans and
contribute to an IRA owned by the employee. Purchasers of a Qualified Contract
for use with IRAs will be provided with

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18
<PAGE>
supplemental information required by the Internal Revenue Service. Purchasers
should seek competent advice as to the suitability of the Contract for use with
IRAs.

WITHHOLDING

Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients may be provided
the opportunity to elect not to have tax withheld from distributions; however,
certain distributions from Section 401(a) Plans and Section 403(b) tax-deferred
annuities are subject to mandatory 20% federal income tax withholding. We will
report to the IRS the taxable portion of all distributions.

MISCELLANEOUS
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DISTRIBUTION

The Company will serve as the Principal Underwriter for the securities sold
by this Prospectus. The Company is registered as a broker-dealer with the
Securities and Exchange Commission ("SEC") and is a member of the National
Association of Securities Dealers, Inc. ("NASD"). As Underwriter, the Company
will contract with one or more registered broker-dealers, or with banks that may
be acting as broker-dealers without separate registration under the Securities
Exchange Act of 1934 pursuant to legal and regulatory exceptions
("Distributors") to offer and sell the Contracts. The Company and one or more of
its affiliates may also sell the Contracts directly. All individuals offering
and selling the Contracts must either be registered representatives of a
broker-dealer, or employees of a bank exempt from registration under the
Securities Exchange Act of 1934, and must also be licensed as insurance agents
to sell variable annuity contracts.

Federated Securities Corp. ("FSC"), an affiliate of the adviser to the Funds
in the Federated Insurance Series, may enter into agreements with some of the
Distributors to provide services to customers in connection with the Funds
acquired through the Contracts. These services will include providing customers
with information concerning the Funds, their investment objectives, policies and
limitations; portfolio securities; performance, responding to customer inquiries
and providing such other services as the parties may agree. Fees paid by FSC to
Distributors for these services may be based on the total number of assets in
the Funds attributable to the Distributor's customers.

PAYMENT OF COMMISSIONS. Commissions will be paid to Distributors who sell
the Contracts. Distributors will be paid commissions, up to an amount currently
equal to 6.5% of Purchase Payments for promotional or distribution expenses
associated with the marketing of the Contracts.

DELAY OR SUSPENSION OF PAYMENTS

The Company reserves the right to suspend or postpone the date of payment
for any benefit or values (a) on any Valuation Date on which the New York Stock
Exchange ("Exchange") is closed (other than customary weekend and holiday
closings) or when trading on the Exchange is restricted; (b) when an emergency
exists, as determined by the SEC, so that disposal of securities held in the
Subaccounts is not reasonably practicable or is not reasonably practicable for
the value of the Subaccount's assets; or (c) during such other periods as the
SEC may by order permit for the protection of investors. The conditions under
which restricted trading or an emergency exists shall be determined by the rules
and regulations of the SEC.

PERFORMANCE REPORTING

From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account. The Company may
advertise the "standardized average annual total returns" of the Subaccounts,
calculated in a manner prescribed by the SEC, as well as the "non-standardized
returns." "Standardized average annual total returns" are computed according to
a formula in which a hypothetical investment of $1,000 is applied to the
Subaccount and then related to the ending redeemable values over the most recent
one, five and ten-year periods (or since inception, if less than ten years).
Standardized returns will reflect the reduction of all recurring charges during
each period (e.g., mortality and expense risk charges, annual maintenance fees,
administrative charge and any applicable deferred sales charge).
"Non-standardized returns" will be calculated in a similar manner, except that

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<PAGE>
non-standardized figures will not reflect the deduction of any applicable
deferred sales charge (which would decrease the level of performance shown if
reflected in these calculations). The non-standardized figures may also include
monthly, quarterly, year-to-date and three-year periods.

The Company may also advertise certain ratings, rankings or other
information related to the Company, the Subaccounts or the Funds. Further
details regarding performance reporting and advertising are described in the
Statement of Additional Information.

VOTING RIGHTS

Each Contract Holder may direct us in the voting of shares at shareholders'
meetings of the appropriate Funds(s). The number of votes to which each Contract
Holder may give direction will be determined as of the record date. The number
of votes each Contract Holder is entitled to direct with respect to a particular
Fund during the Accumulation Period equals the portion of the Account Values(s)
of the Contract attributable to that Fund, divided by the net asset value of one
share of that Fund. During the Annuity Period, the number of votes is equal to
the valuation reserve for the portion of the Contract attributable to that Fund,
divided by the net asset value of one share of that Fund. In determining the
number of votes, fractional votes will be recognized. Where the value of the
Contract or valuation reserve relates to more than one Fund, the calculation of
votes will be performed separately for each Fund.

If you are a Certificate Holder under a group Contract, you have a fully
vested (100%) interest in the benefits provided to you under your Account.
Therefore, you may instruct the group Contract Holder how to direct the Company
to cast the votes for the portion or the value of valuation reserve attributable
to your Account. Votes attributable to those Certificate Holders who do not
instruct the group Contract Holder will be cast by the Company in the same
proportion as votes for which instructions have been received by the group
Contract Holder. Votes attributable to individual or group Contract Holders who
do not direct us will be cast by us in the same proportion as votes for which
directions we have received.

You will receive a notice of each meeting of shareholders, together with any
proxy solicitation materials, and a statement of the number of votes
attributable to your Account.

MODIFICATION OF THE CONTRACT

The Company may change the Contract as required by federal or state law. In
addition, the Company may, upon 30 days written notice to the Contract Holder,
make other changes to group Contracts that would apply only to individuals who
become Certificate Holders under that Contract after the effective date of such
changes. If the Contract Holder does not agree to a change, no new Certificate
Holders will be covered under the Contract. Certain changes will require the
approval of appropriate state or federal regulatory authorities.

TRANSFERS OF OWNERSHIP; ASSIGNMENT

Assignments or transfers of ownership of a Qualified Contract generally are
not allowed except as permitted under the Code, incident to a divorce. The
prohibition does not apply to a Qualified Contract sold in conjunction with (1)
a Section 457 deferred compensation plan, or (2) a Section 401(a) plan where the
Contract is owned by a trustee. We will accept assignments or transfers of
ownership of a Nonqualified Contract or a Qualified Contract where assignments
or transfers of ownership are not prohibited, with proper notification. The date
of any such transfer will be the date we receive the notification at our Home
Office. (Refer to "Tax Status" for general tax information.) If you are
contemplating a transfer of ownership or assignment you should consult a tax
adviser due to the potential for tax liability.

No assignment of a Contract will be binding on us unless made in writing and
sent to us at our Home Office. The Company will use reasonable procedures to
confirm that the assignment is authentic, including verification of signature.
If the Company fails to follow its procedures, it would be liable for any losses
to you directly resulting from the failure. Otherwise, we are not responsible
for the validity of any assignment. The rights of the Certificate Holder and the
interest of the Annuitant and any Beneficiary will be subject to the rights of
any assignee of record.

INVOLUNTARY TERMINATIONS

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<PAGE>
deducted for involuntary terminations. The Company does not intend to exercise
this right in cases where the Account Value is reduced to $2,500 or less solely
due to investment performance.

LEGAL MATTERS AND PROCEEDINGS

The Company knows of no material legal proceedings pending to which the
Separate Account or the Company is a party or which would materially affect the
Separate Account. The validity of the securities offered by this Prospectus has
been passed upon by Susan E. Bryant, Esq., Counsel to the Company.

CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
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- --------------------------------------------------------------------------------

The Statement of Additional Information contains more specific information
on the Separate Account and the Contract, as well as the financial statements of
the Separate Account and the Company. A list of the contents of the SAI is set
forth below:

<TABLE>
<S> <C>
General Information and History
Variable Annuity Account B
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations
Annuity Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
</TABLE>

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21
<PAGE>
APPENDIX
ALIAC GUARANTEED ACCOUNT
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THE ALIAC GUARANTEED ACCOUNT (THE "GUARANTEED ACCOUNT") IS A CREDITED INTEREST
OPTION AVAILABLE DURING THE ACCUMULATION PERIOD UNDER THE CONTRACTS. THIS
APPENDIX IS A SUMMARY OF THE GUARANTEED ACCOUNT AND IS NOT INTENDED TO REPLACE
THE GUARANTEED ACCOUNT PROSPECTUS. YOU SHOULD READ THE ACCOMPANYING GUARANTEED
ACCOUNT PROSPECTUS CAREFULLY BEFORE INVESTING.

The Guaranteed Account is a credited interest option in which we guarantee
stipulated rates of interest for stated periods of time on amounts directed to
the Guaranteed Account. For guaranteed terms of one year or less, a guaranteed
rate is credited for the full term. For guaranteed rates of greater than one
year, the initial guaranteed rate is credited from the date of deposit to the
end of a specified period within the guaranteed term. The interest rate
stipulated is an annual effective yield; that is, it reflects a full year's
interest. Interest is credited daily at a rate that will provide the guaranteed
annual effective yield for one year. Guaranteed interest rates will never be
less than an annual effective rate of 3%.

During a deposit period, amounts may be applied to any of the available
guaranteed terms. Purchase Payments received after the initial payment will be
allocated in the same proportions as the last allocation, if no new allocation
instructions are received with the Purchase Payment. If the same guaranteed
term(s) are not available, the next shortest term will be used. If no shorter
guaranteed term is available, the next longer guaranteed term will be used.

Except for transfers from the one-year Guaranteed Term in connection with
the Dollar Cost Averaging Program and withdrawals taken in connection with an
Estate Conservation or Systematic Withdrawal distribution option, withdrawals or
transfers from a guaranteed term before the guaranteed term matures may be
subject to a market value adjustment ("MVA"). An MVA reflects the change in the
value of the investment due to changes in interest rates since the date of
deposit. When interest rates increase after the date of deposit, the value of
the investment decreases, and the MVA is negative. Conversely, when interest
rates decrease after the date of deposit, the value of the investment increases,
and the MVA is positive. It is possible that a negative MVA could result in the
Certificate Holder receiving an amount which is less than the amount paid into
the Guaranteed Account

For partial withdrawals during the Accumulation Period, amounts to be
withdrawn from the Guaranteed Account will be withdrawn on a pro rata basis from
each group of deposits having the same length of time until the Maturity Date
("Guaranteed Term Group"). Within a Guaranteed Term Group, the amount will be
withdrawn first from the oldest Deposit Period, then from the next oldest, and
so on until the amount requested is satisfied.

As a Guaranteed Term matures, assets accumulating under the Guaranteed
Account may be (a) transferred to a new Guaranteed Term, (b) transferred to
other available investment options, or (c) withdrawn. Amounts withdrawn may be
subject to a deferred sales charge. If no direction is received by the Company
at its Home Office by the maturity date of a guaranteed term, the amount from
the maturing guaranteed term will be transferred to the current deposit period
for a similar length guaranteed term. If the same guaranteed term is no longer
available the next shortest guaranteed term available in the current deposit
period will be used. If no shorter guaranteed term is available, the next longer
guaranteed term will be used.

If you do not provide instructions concerning the maturity value of a
maturing guaranteed term, the maturity value transfer provision applies. This
provision allows you to transfer without an MVA to available guaranteed terms of
the current deposit period or to other available investment options, or
surrender without an MVA (if applicable, a deferred sales charge is assessed on
the surrendered amount). The provision is available only during the calendar
month immediately following a guaranteed term maturity date and only applies to
the first transaction regardless of the amount involved in the transaction.

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<PAGE>
MORTALITY AND EXPENSE RISK CHARGES

We make no deductions from the credited interest rate for mortality and
expense risks; these risks are considered in determining the credited rate.

TRANSFERS

Amounts applied to a guaranteed term during a deposit period may not be
transferred to any other funding option or to another guaranteed term during
that deposit period or for 90 days after the close of that deposit period. This
does not apply to (1) amounts transferred on the Maturity Date or under the
maturity value transfer provision; (2) amounts transferred from the Guaranteed
Account before the Maturity Date due to the election of an Annuity Option, (3)
amounts transferred from the one-year Guaranteed Term in connection with the
Dollar Cost Averaging Program; and (4) amounts distributed under the Estate
Conservation or Systematic Withdrawal distribution. Transfers after the 90-day
period are permitted from guaranteed term(s) to other guaranteed term(s)
available during a deposit period or to other available investment options.
Except for transactions described in items (1), (3) and (4) above, amounts
withdrawn or transferred from the Guaranteed Account prior to the maturity date
will be subject to a Market Value Adjustment. However, only a positive aggregate
MVA will be applied to transfers made due to annuitization under one of the
lifetime Annuity Options described in item (2) above.

The Certificate Holder may select a maximum of 18 different investment
options during the Accumulation Period. Under the Guaranteed Account, each
guaranteed term is counted as one funding option. If a guaranteed term matures,
and is renewed for the same term, it will not count as an additional investment
option.

Transfers of the Guaranteed Account values on or within one calendar month
of a term's maturity date are not counted as one of the 12 free transfers of
accumulated values in the Account.

By notifying us at least 30 days prior to the Annuity Date, you may elect a
variable annuity and have amounts that have been accumulating under the
Guaranteed Account transferred to one or more of the Subaccounts available
during the Annuity Period. The Guaranteed Account cannot be used as an
investment option during the Annuity Period. Transfers made due to the election
of a lifetime Annuity Option will be subject to only a positive aggregate MVA.

DEATH BENEFIT

Full and partial withdrawals and transfers made from the Guaranteed Account
within six months after the date of the Annuitant's death will be the greater
of:

(1) the aggregate MVA amount (i.e., the sum of all market value adjusted amounts
calculated due to a withdrawal of amounts) which may be greater or less than
the Account Value of those amounts; or

(2) the applicable portion of the Account Value attributable to the Guaranteed
Account.

After the six-month period, the surrender or transfer amount will be
adjusted for the aggregate MVA amount, which may be greater or less than the
Account Value of those amounts.

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23
<PAGE>

Aetna
Marathon Plus-Registered
Trademark-

Variable Annuity
Account B

Prospectus Dated: May 1, 1996

[LOGO]

Aetna Life Insurance and Annuity Company

34370-4

<PAGE>
PROSPECTUS
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This Prospectus describes the "Aetna Marathon Plus" group and individual
deferred variable annuity contracts ("Contracts") issued by Aetna Life Insurance
and Annuity Company (the "Company"). The Contracts are available as (1)
nonqualified deferred annuity contracts, (2) Individual Retirement Annuities
under Section 408(b) of the Internal Revenue Code, or (3) qualified contracts
issued in connection with certain employer sponsored retirement plans.
(Availability of Contracts of the type identified in items (2) and (3) may be
subject to state regulatory approval.) In most states, group Contracts are
offered, generally to certain broker-dealers or banks which have agreed to act
as Distributors of the Contracts. Individuals who have established accounts with
those broker-dealers or banks are eligible to participate in the Contract.
Individual Contracts are offered only in those states where the group Contracts
are not authorized for sale. (See "Purchase.")

- Aetna Variable Fund - Fidelity VIP Overseas Portfolio
- Aetna Income Shares - Fidelity VIP II Asset Manager
- Aetna Variable Encore Fund Portfolio
- Aetna Investment Advisers Fund, - Fidelity VIP II Contrafund
Inc. Portfolio
- Aetna Ascent Variable Portfolio - Fidelity VIP II Index 500 Portfolio
- Aetna Crossroads Variable Portfolio - Fidelity VIP II Investment Grade
- Aetna Legacy Variable Portfolio Bond Portfolio
- Alger American Balanced Portfolio - Janus Aspen Aggressive Growth
- Alger American Growth Portfolio Portfolio
- Alger American Income and Growth - Janus Aspen Balanced Portfolio
Portfolio - Janus Aspen Flexible Income
- Alger American Leveraged AllCap Portfolio
Portfolio - Janus Aspen Growth Portfolio
- Alger American MidCap Growth - Janus Aspen Short-Term Bond
Portfolio Portfolio
- Alger American Small Cap Portfolio - Janus Aspen Worldwide Growth
- Federated American Leaders Fund II Portfolio
- Federated Fund for U.S. Government - Lexington Emerging Markets Fund,
Securities II Inc.
- Federated High Income Bond Fund II - Lexington Natural Resources Trust
- Federated Utility Fund II - MFS Emerging Growth Series
- Fidelity VIP Equity-Income - MFS Research Series
Portfolio - MFS Total Return Series
- Fidelity VIP Growth Portfolio - MFS World Governments Series
- Fidelity VIP High Income Portfolio - TCI Balanced (a Twentieth Century
fund)
- TCI Growth (a Twentieth Century
fund)
- TCI International (a Twentieth
Century fund)

This Prospectus provides investors with the information about the Separate
Account that they should know before investing in the Contracts. Additional
information about the Separate Account is contained in a Statement of Additional
Information ("SAI") which is available at no charge. The SAI has been filed with
the Securities and Exchange Commission and is incorporated herein by reference.
The Table of Contents for the SAI is printed on page 24 of this Prospectus. An
SAI may be obtained by indicating the request on your application or enrollment
form or by calling the number listed under the "Inquiries" section of the
Prospectus Summary.

THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE ALIAC GUARANTEED ACCOUNT. ALL PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.

<TABLE>
<S> <C>
DEFINITIONS.......................................................................... DEFINITIONS - 1
PROSPECTUS SUMMARY................................................................... SUMMARY - 1
FEE TABLE............................................................................ FEE TABLE - 1
CONDENSED FINANCIAL INFORMATION...................................................... AUV HISTORY - 1
THE COMPANY.......................................................................... 1
VARIABLE ANNUITY ACCOUNT B........................................................... 1
INVESTMENT OPTIONS................................................................... 1
The Funds........................................................................ 1
Credited Interest Option......................................................... 5
PURCHASE............................................................................. 5
Contract Availability............................................................ 5
Purchasing Interests in the Contract............................................. 6
Purchase Payments................................................................ 6
Contract Rights.................................................................. 6
Designations of Beneficiary and Annuitant........................................ 7
Right to Cancel.................................................................. 7
CHARGES AND DEDUCTIONS............................................................... 7
Daily Deductions from the Separate Account....................................... 7
Mortality and Expense Risk Charge.......................................... 7
Administrative Charge...................................................... 7
Maintenance Fee.................................................................. 8
Reduction or Elimination of Administrative Charge and Maintenance Fee............ 8
Deferred Sales Charge............................................................ 8
Reduction or Elimination of the Deferred Sales Charge............................ 9
Fund Expenses.................................................................... 9
Premium and Other Taxes.......................................................... 9
CONTRACT VALUATION................................................................... 10
Account Value.................................................................... 10
Accumulation Units............................................................... 10
Net Investment Factor............................................................ 10
TRANSFERS............................................................................ 10
Dollar Cost Averaging Program.................................................... 11
Account Rebalancing Program...................................................... 11
WITHDRAWALS.......................................................................... 11
ADDITIONAL WITHDRAWAL OPTIONS........................................................ 12
DEATH BENEFIT DURING ACCUMULATION PERIOD............................................. 13
Death Benefit Amount............................................................. 12
Death Benefit Payment Options.................................................... 13
Nonqualified Contracts...................................................... 13
Qualified Contracts......................................................... 13
ANNUITY PERIOD....................................................................... 14
Annuity Period Elections......................................................... 14
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Partial Annuitization............................................................ 14
Annuity Options.................................................................. 15
Annuity Payments................................................................. 15
Charges Deducted During the Annuity Period....................................... 16
Death Benefit Payable During the Annuity Period.................................. 16
TAX STATUS........................................................................... 16
Introduction..................................................................... 16
Taxation of the Company.......................................................... 16
Tax Status of the Contract....................................................... 17
Taxation of Annuity Contracts.................................................... 18
Contracts Used with Certain Retirement Plans..................................... 20
MISCELLANEOUS........................................................................ 22
Distribution..................................................................... 22
Delay or Suspension of Payments.................................................. 22
Performance Reporting............................................................ 22
Voting Rights.................................................................... 23
Modification of the Contract..................................................... 23
Transfers of Ownership; Assignment............................................... 23
Involuntary Terminations......................................................... 24
Legal Matters and Proceedings.................................................... 24
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.................................. 25
APPENDIX--ALIAC GUARANTEED ACCOUNT................................................... 26
</TABLE>