As filed with the Securities and Exchange Registration No. 33-75974
Commission on February 28, 1997 Registration No. 811-2513
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
Post-Effective Amendment No. 6 To
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment to
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Variable Annuity Account C of Aetna Life Insurance and Annuity Company
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RC4A, Hartford, Connecticut 06156
Depositor's Telephone Number, including Area Code: (860) 273-7834
Susan E. Bryant, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RC4A, Hartford, Connecticut 06156
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
[ ] 60 days after filing pursuant to paragraph (a)(2) of Rule 485
[X] on May 1, 1997 pursuant to paragraph (a)(1) of Rule 485
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite number of securities under the Securities Act of 1933.
Registrant expects to file a Rule 24f-2 Notice for the fiscal year ended
December 31, 1996 on or before February 28, 1997.
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CROSS REFERENCE SHEET
FORM N-4
ITEM NO. PART A (PROSPECTUS) LOCATION
1 Cover Page............................. Cover Page
2 Definitions............................ Definitions
3 Synopsis............................... Prospectus Summary; Fee Table
4 Condensed Financial Information........ Condensed Financial Information
5 General Description of Registrant,
Depositor, and Portfolio Companies..... The Company; Variable Annuity
Account C; The Funds
6 Deductions and Expenses................ Charges and Deductions; The
Contract - Distribution
7 General Description of Variable
Annuity Contracts...................... General Description of Variable
Annuity Contracts; Miscellaneous
8 Annuity Period......................... Annuity Period
9 Death Benefit.......................... Death Benefit
10 Purchases and Contract Value........... The Contract
11 Redemptions............................ Withdrawals; Right to Cancel
12 Taxes.................................. Tax Status
13 Legal Proceedings...................... Miscellaneous - Legal
Proceedings
14 Table of Contents of the Statement
of Additional Information.............. Statement of Additional
Information - Table of Contents
<PAGE>
FORM N-4
ITEM NO. PART B (STATEMENT OF ADDITIONAL INFORMATION) LOCATION
15 Cover Page............................. Cover page
16 Table of Contents...................... Table of Contents
17 General Information and History........ General Information and History
18 Services............................... General Information and History;
Independent Auditors
19 Purchase of Securities Being Offered... Offering and Purchase of
Contracts
20 Underwriters........................... Offering and Purchase of
Contracts
21 Calculation of Performance Data........ Performance Data
22 Annuity Payments....................... Annuity Payments
23 Financial Statements................... Financial Statements
Part C (Other Information)
--------------------------
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
Variable Annuity Account C
Prospectus Dated:
May 1, 1997
Group Variable Retirement Annuity Contracts For Tax-Deferred Annuity Plans
(Section 403(b)), Qualified 401 Plans, and HR 10 Plans
The contracts offered in connection with this Prospectus are group installment
and single purchase payment variable annuity contracts (the "Contracts") issued
by Aetna Life Insurance and Annuity Company (the "Company"). The Contract is
designed to fund plans ("Plans") which provide for retirement income and which
may allow contributions entitled to tax-deferred treatment under certain
sections of the Internal Revenue Code of 1986, as amended (the "Code").
The Contract allows values to accumulate under a credited interest option or
variable options through Variable Annuity Account C (the "Separate Account") or
in a combination of credited interest and variable options. It also provides for
the payment of annuity benefits on a fixed or variable basis, or a combination
thereof.
The variable funding options currently available through the Separate Account
under the Contract described in this Prospectus are as follows:
(bullet) Aetna Variable Fund
(bullet) Aetna Income Shares
(bullet) Aetna Variable Encore Fund
(bullet) Aetna Investment Advisers Fund, Inc.
(bullet) American Century VP Capital Appreciation (formerly TCI Growth)
The credited interest options available for the accumulation of values are the
Guaranteed Accumulation Account and the Fixed Account. The Guaranteed
Accumulation Account and the Fixed Account are offered only in those states in
which they are approved.
Except as specifically mentioned, this Prospectus describes only the variable
options of the Contract. Information concerning the credited interest options is
found in Appendix I and Appendix II, respectively.
This Prospectus sets forth concisely the information about the Separate Account
that a prospective investor should know before investing. Additional information
about the Separate Account is contained in a Statement of Additional Information
("SAI") dated May 1, 1997, which has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The Table of Contents for
the SAI is printed in this Prospectus. An SAI may be obtained without charge by
indicating the request on the enrollment form or by calling 1-800-232-5422.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
AETNA VARIABLE FUND, AETNA INCOME SHARES, AETNA VARIABLE ENCORE FUND, AETNA
INVESTMENT ADVISERS FUND, INC., AMERICAN CENTURY VP CAPITAL APPRECIATION AND THE
GUARANTEED ACCUMULATION ACCOUNT. ALL PROSPECTUSES SHOULD BE READ AND RETAINED
FOR FUTURE REFERENCE.
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.
NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERS CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS............................................................... 4
PROSPECTUS SUMMARY........................................................ 6
FEE TABLE................................................................. 7
CONDENSED FINANCIAL INFORMATION........................................... 10
THE COMPANY............................................................... 12
VARIABLE ANNUITY ACCOUNT C................................................ 12
THE FUNDS................................................................. 12
Fund Investment Advisers.............................................. 13
Mixed and Shared Funding.............................................. 13
Fund Additions, Limitations and Substitutions......................... 13
Voting Rights......................................................... 14
THE CONTRACT
Contract Purchase..................................................... 14
Net Purchase Payments................................................. 15
Accumulation Units.................................................... 15
Net Investment Factor................................................. 16
Distribution.......................................................... 16
RIGHT TO CANCEL........................................................... 16
CHARGES AND DEDUCTIONS
Mortality and Expense Risk Charges.................................... 17
Fund Expenses......................................................... 17
Allocation and Transfer Fees.......................................... 17
Insurance Rider....................................................... 17
Sales and Administrative Expense Charge............................... 18
Termination Fee....................................................... 18
Premium Tax........................................................... 18
GENERAL DESCRIPTION OF VARIABLE ANNUITY CONTRACTS
Rights Under the Contract............................................. 19
Modification of the Contract.......................................... 19
Contract Owner Inquiries.............................................. 19
Telephone Transfers................................................... 20
Transfer of Ownership; Assignment..................................... 20
WITHDRAWALS............................................................... 20
REINVESTMENT PRIVILEGE.................................................... 21
ADDITIONAL WITHDRAWAL OPTIONS
General............................................................... 21
Estate Conservation Option............................................ 22
Systematic Withdrawal Option.......................................... 22
ANNUITY PERIOD
Annuity Period Elections.............................................. 23
403(B) Plans.......................................................... 24
401 and HR 10 Plans................................................... 24
Annuity Options....................................................... 24
2
<PAGE>
DEATH BENEFIT............................................................. 25
Accumulation Period................................................... 25
403(b) Plans.......................................................... 26
401 and HR 10 Plans................................................... 26
Annuity Period........................................................ 26
403(b) Plans.......................................................... 27
401 and HR 10 Plans................................................... 27
TAX STATUS
Federal Tax Status of the Company..................................... 27
Use of the Contract................................................... 27
Tax Status of Amounts Distributed Under the Contract.................. 27
MISCELLANEOUS
Performance
Reporting................................................................. 29
Legal Proceedings..................................................... 29
Legal Matters......................................................... 29
STATEMENT OF ADDITIONAL INFORMATION--TABLE OF CONTENTS.................... 30
APPENDIX I-GUARANTEED ACCUMULATION ACCOUNT................................ 31
APPENDIX II-FIXED ACCOUNT................................................. 32
3
<PAGE>
DEFINITIONS
As used in this Prospectus, the following terms have the meanings shown:
Account Value: The dollar value of amounts held in an Account as of any
Valuation Period, including the value of the Accumulation Units in the Funds,
the amounts held in GAA, and any amounts invested in the Fixed Account, plus
interest earned on those amounts, less any maintenance fees due, but
excluding amounts used for Annuity Options.
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 the Separate Account assets
attributable to each Fund used as a variable funding option.
Aggregate Purchase Payment(s): The sum of all Purchase Payment(s) made under a
Contract.
Annuitant: A natural person on whose life an Annuity payment is based.
Annuity: A series of payments for life, for a definite period, or combination of
the two.
Annuity Period: The period during which Annuity payments are made.
Annuity Unit: A unit of measure used to calculate the amount of each variable
annuity payment.
Code: Internal Revenue Code of 1986, as amended.
Company: Aetna Life Insurance and Annuity Company, sometimes referred to as "we"
or "us."
Contract: The group installment and single Purchase Payment contracts offered by
this Prospectus.
Contract Owner: The entity to which the Contract is issued. The Contract Owner
is usually the employer sponsoring a non-trusteed Plan or the trustee of a
trusteed Plan.
Contract Year: The period of 12 months measured from the Contract's effective
date or from any anniversary of such effective date.
Distributor(s): The registered broker-dealer(s) which have entered into selling
agreements with the Company to offer and sell the Contracts. The Company may
also serve as a Distributor.
Effective Date: The date on which the Company accepts and approves the Contract
application.
ERISA: Employee Retirement Income Security Act of 1974, as amended.
Funds: An open-end registered management investment company whose shares are
purchased by the Separate Account to fund the benefits provided by the
Contract.
GAA: Guaranteed Accumulation Account, one of the credited interest options
available in most jurisdictions for deposits under the Contract.
Home Office: The Company's principal executive offices located at 151 Farmington
Avenue, Hartford, Connecticut 06156.
Individual Account: A record established for each Participant to identify
Account Values accumulated on the Participant's behalf during the
Accumulation Period.
Individual or Plan Account Year: The period of 12 months measured from the date
an Individual or Plan Account is established or from any anniversary of such
date.
Market Value Adjustment: An amount deducted or added to amounts withdrawn early
from the Guaranteed Accumulation Account to reflect changes in the market
value of the investment since the date of deposit. See
4
<PAGE>
Appendix I and the prospectus for the Guaranteed Accumulation Account for a
discussion of how the market value adjustment is actually calculated.
Net Purchase Payments(s): The Purchase Payment(s) less all applicable
deductions.
Participant: An eligible person participating in a Plan.
Plan(s): Qualified tax-deferred retirement plans (a) adopted by public school
systems and certain tax-exempt organizations (Section 501(c)(3)
organizations) for their employees under Section 403(b) of the Code, (b)
established by employees for their employees under Section 401, and (c)
established by self-employed individuals. 401 Plans may be trusteed or
non-trusteed.
Plan Account: The record established for a Contract Owner of the Net Purchase
Payment(s) accumulated under a Contract where Individual Accounts are not
maintained.
Purchase Payment(s): The gross payment(s) made to the Company under a Contract.
SEC: Securities and Exchange Commission.
Separate Account: Variable Annuity Account C, an account whose assets are
segregated from other assets of the Company and which holds shares of the
Funds acquired for the Contracts. The Company holds title to the assets held
in the Separate Account.
Underwriter: The registered broker-dealer which contracts with other registered
broker-dealers on behalf of the Separate Account to offer and sell the
Contracts.
Valuation Period: The period of time from when the Company determines the
Accumulation Unit Value and Annuity Unit Value of a variable investment
option until the next time it determines such unit value. Currently, the
calculation occurs after 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.
Valuation Reserve: A reserve established pursuant to the insurance laws of
Connecticut to measure voting rights during the Annuity Period and the value
of a commutation right available under the "Payments for a Specified Period"
nonlifetime Annuity option when elected on a variable basis under the
Contract.
Variable Annuity Contract: An Annuity Contract providing for the accumulation of
values and for Annuity payments which vary in dollar amount with investment
results.
5
<PAGE>
PROSPECTUS SUMMARY
The Contract
The Contract offered is designed to provide retirement benefits to Participants
under Plans (a) adopted by public school systems and certain tax-exempt
organizations (Section 501(c)(3) organizations) for their employees under
Section 403(b) ("403(b)"), (b) established by employers for their employees
under Section 401 ("401"), and (c) established by self-employed individuals ("HR
10"). 401 Plans may be trusteed or non-trusteed.
Registration
Variable Annuity Account C is a separate account established by the Company and
is registered as a unit investment trust under the Investment Company Act of
1940. Assets of the Separate Account attributable to the Contract are invested
in shares of one or more of the Funds. (See "The Company," "Variable Annuity
Account C" and "The Funds.")
Purchase
The Contract may be purchased by completing the proper application form and
submitting it to the Company with the initial Purchase Payment. "The Contract -
Contract Purchase" outlines the complete process of purchasing a Variable
Annuity Contract.
Sales and Administrative Expenses
During the Accumulation Period, deductions are made from each installment
Purchase Payment made on behalf of a Participant for sales and administrative
expenses. For 403(b) Plans, the deduction is 6%; for HR 10 Plans, the deduction
is 1.75%; and for 401 Plans, the deduction is 5%. For 403(b) Plans, the total
deduction amounts to 6.4% of the Net Purchase Payment. The maximum total
deduction, expressed as a percentage of the Net Purchase Payment, is 1.8% for an
installment Purchase Payment HR 10 Plan. For 401 Plans, the total deduction
amounts to 5.3% of the Net Purchase Payment. Termination fees may also be
assessed upon withdrawal to reimburse the Company for administrative expenses in
handling withdrawals. (See "Charges and Deductions--Sales and Administrative
Expense Charge" and "Termination Fee.")
Withdrawals; Tax Status
The Contract Owner may withdraw all or a portion of the Contract or an
Individual Account value during the Accumulation Period by properly completing
and submitting to the Company a disbursement form provided by the Company.
Certain charges and deductions may be assessed upon withdrawal. (See "Charges
and Deductions.") The Code restricts full and partial withdrawals under 403(b)
plans in certain circumstances. These restrictions may be found under
"Withdrawals." A 10% federal penalty tax may also be imposed on a distribution
paid to a Participant. (See "Tax Status--Tax Status of Amounts Distributed Under
the Contract.")
Other Charges
Certain other charges are associated with this Contract such as the mortality
and expense risk charges, fund expenses, allocation and transfer fees, insurance
rider premiums, and premium tax. (See "Charges and Deductions" for a complete
explanation of these charges.)
Free Look Provision
The Contract Owner may cancel the Contract no later than ten days after
receiving it (or as otherwise allowed by state law) by returning it along with a
written notice of cancellation to the Company. Unless state law requires
otherwise, the amount you will receive on cancellation under this provision will
reflect the investment performance of the Purchase Payments deposited in the
Separate Account while invested. In certain cases, this may be less than the
amount of your Purchase Payments. (See "Right to Cancel.")
6
<PAGE>
FEE TABLE
(Based on year ended December 31, 1996)
The purpose of the Fee Table is to assist Contract Holders in understanding the
various costs and expenses that will be borne, directly or indirectly, under the
Contract. The information listed reflects the charges due under the Contract as
well as the fees and expenses deducted from the Funds. Additional information
regarding the charges and deductions assessed under the Contract can be found
under "Charges and Deductions" in this Prospectus. Charges and expenses shown do
not take into account premium taxes that may be applicable.
Contract Holder Transaction Expenses
- ------------------------------------
Sales and Administrative Expense Charge
(as a percentage of Purchase Payments)
403(b) Plans 6.00%
401 Plans 5.00%
HR 10 Plans 1.75%
Termination Fee (as a percentage of
amount withdrawn)
403(b) Plans 2% (first 5 Contract Years)
HR 10 Plans 2% (first 5 Contract Years)
401 Plans Completed
Contract Years Deduction
-------------- ---------
1 5%
2 4%
3 3%
4 2%
5 1%
5 or more 0%
Allocation and Transfer Fees(1) $0.00
Separate Account Annual Expenses
(Daily deductions, equal to the percentage shown on an annual basis, made from
amounts allocated to the variable options)
403(b) 401 HR 10
----- ---- -----
Mortality and Expense Risk Fees 1.25% 1.19% 1.25%
----- ---- -----
Total Separate Account Annual Expenses 1.25% 1.19% 1.25%
===== ==== =====
(1) The Company currently allows an unlimited number of transfers or allocation
changes without charge. However, the Company reserves the right to impose a
transfer fee of $10.00 for each transfer or allocation charge in excess of
12 during each Contract Year. (See "Transfers and Allocation Changes.")
7
<PAGE>
ANNUAL EXPENSES OF 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, 1996)
Investment
Advisory Other Total
Fees(1) Expenses(2) Fund
(after expense (after expense Annual
reimbursement) reimbursement) Expenses
-------------- --------------- --------
Aetna Variable Fund(3) 0.50% 0.06% 0.56%
Aetna Income Shares(3) 0.40% 0.08% 0.48%
Aetna Variable Encore Fund(3) 0.25% 0.10% 0.35%
Aetna Investment Advisers
Fund, Inc.(3) 0.50% 0.08% 0.58%
American Century VP
Capital Appreciation(4) 1.00% 0.00% 1.00%
(1) Certain of the unaffiliated Fund managers reimburse the Company for
administrative costs incurred in connection with administering the Fund as
a variable funding option under the Contract. These reimbursements are paid
out of the managers' investment advisory fees and are not charged to
investors.
(2) A mutual fund's "Other Expenses" include operating costs of the Fund. The
expenses are factored into the Fund's net asset value and are not deducted
from the Contract Holder's or Participant's Account Value.
(3) The Company provides administrative services to the Fund and assumes the
Fund's ordinary recurring direct costs under an Administrative Services
Agreement. The "Other Expenses" shown reflect the fee payable under that
Agreement.
(4) The Portfolio's investment adviser pays all expenses of the Portfolio
except brokerage commissions, taxes, interest, fees and expenses of the
non-interested directors (including counsel fees) and extraordinary
expenses. These expenses have historically represented a very small
percentage (less than 0.01%) of total net assets in a fiscal year.
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.
Assuming a 5% annual return on assets, you would have paid the following
expenses on a $1,000 investment:
403(b) Plans
<TABLE>
<CAPTION>
If you make a complete withdrawal of If you do not make a complete
your contract at the end applicable withdrawal of your contract or if you
time period: annuitize:
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>
Aetna Variable Fund $ $ $ $ $ $ $ $
Aetna Income Shares $ $ $ $ $ $ $ $
Aetna Variable Encore Fund $ $ $ $ $ $ $ $
Aetna Investment Advisers
Fund, Inc. $ $ $ $ $ $ $ $
American Century VP Capital
Appreciation $ $ $ $ $ $ $ $
</TABLE>
8
<PAGE>
401 Plans
<TABLE>
<CAPTION>
If you make a complete withdrawal of If you do not make a complete
your contract at the end of the withdrawal of your contract or if you
applicable time period: annuitize:
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>
Aetna Variable Fund $ $ $ $ $ $ $ $
Aetna Income Shares $ $ $ $ $ $ $ $
Aetna Variable Encore Fund $ $ $ $ $ $ $ $
Aetna Investment Advisers
Fund, Inc. $ $ $ $ $ $ $ $
American Century VP Capital
Appreciation $ $ $ $ $ $ $ $
</TABLE>
HR 10 Plans
<TABLE>
<CAPTION>
If you make a complete withdrawal of If you do not make a complete
your contract at the end of the withdrawal of your contract or if you
applicable time period: annuitize:
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>
Aetna Variable Fund $ $ $ $ $ $ $ $
Aetna Income Shares $ $ $ $ $ $ $ $
Aetna Variable Encore Fund $ $ $ $ $ $ $ $
Aetna Investment Advisers
Fund, Inc. $ $ $ $ $ $ $ $
American Century VP Capital
Appreciation $ $ $ $ $ $ $ $
</TABLE>
9
<PAGE>
CONDENSED FINANCIAL INFORMATION
This financial Information is provided for use by 403(b) and HR 10 Plans
(Selected data for accumulation units outstanding throughout each period)
The condensed financial information presented below for each of the years in the
ten-year period ended December 31, 1996 (as applicable), 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, 1996 and the Independent
Auditors' report thereon, are included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of
period $105.558 $107.925 $102.383 $97.165 $77.845 $76.311 $59.871 $52.885 $50.760
Value at end of period $137.869 $105.558 $107.925 $102.383 $97.165 $77.845 $76.311 $59.871 $52.885
Increase(decrease) in
value of accumulation
unit(1) 30.61% (2.19)% 5.41% 5.37% 24.82% 2.01% 27.46% 13.21% 4.19%
Number of accumulation
units outstanding a
end of period 6,364,000 13,966,072 21,148,863 24,201,565 20,948,226 18,362,906 17,142,820 16,455,396 16,497,406
AETNA INCOME SHARES
Value at beginning of
period $40.173 $42.283 $39.038 $36.789 $31.192 $28.943 $25.574 $24.061 $23.308
Value at end of period $46.913 $40.173 $42.283 $39.038 $36.789 $31.192 $28.943 $25.574 $24.061
Increase(decrease) in
value of accumulation
unit(1) 16.78% (4.99)% 8.31% 6.11% 17.94% 7.77% 13.17% 6.29% 3.23%
Number of accumulation
units outstanding at
end of period 2,377,622 5,108,720 8,210,666 8,507,292 7,844,412 6,984,793 6,202,834 5,955,293 5,372,271
AETNA VARIABLE ENCORE FUND
Value at beginning of
period $36.271 $35.282 $34.619 $33.812 $32.138 $30.012 $27.783 $26.171 $24.812
Value at end of period $37.988 $36.271 $35.282 $34.619 $33.812 $32.138 $30.012 $27.783 $26.171
Increase(decrease) in
value of accumulation 4.73% 2.80% 1.92% 2.39% 5.21% 7.08% 8.02% 6.16% 5.48%
unit(1)
Number of accumulation
units outstanding at
end of period 1,836,260 3,679,802 5,086,515 7,534,662 8,430,082 10,220,110 8,286,033 8,154,644 7,326,151
AETNA INVESTMENT ADVISERS FUND, INC.
Value at beginning of
period $14.270 $14.519 $13.379 $12.736 $10.896 $10.437 $10.000(2)
Value at end of period $17.9544 $14.288 $14.519 $13.379 $12.736 $10.896 $10.437
Increase(decrease) in
value of accumulation
unit(1) 25.82% (1.59)% 8.52% 5.05% 16.89% 4.40% 4.37%
Number of accumulation
units outstanding at
end of period 9,193,181 21,990,186 30,784,750 34,802,433 22,898,099 17,078,985 9,535,986
AMERICAN CENTURY VP CAPITAL APPRECIATION
(Formerly TCI Growth)
Value at beginning of
period $10.213 $10.463 $10.000(3)
Value at end of period $13.224 $10.213 $10.463
Increase(decrease) in
value of accumulation
unit(1) 29.47% (2.39)% 4.63%
Number of accumulation
units outstanding at
end of period 4,184,701 12,096,731 12,272,152
</TABLE>
(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year,
and dividing the result by the beginning Accumulation Unit value. These
figures do not reflect the deductions from Purchase Payments for sales
load. Inclusion of these charges would reduce the investment results shown.
(2) The initial Accumulation Unit value was established at $10.000 on
June 23, 1989, the date on which the Fund commenced operations.
(3) The initial Accumulation Unit value was established at $10.000 on
February 1, 1993, the date on which the Portfolio became available under
the Contract.
10
<PAGE>
CONDENSED FINANCIAL INFORMATION
This financial Information is provided for use by 401 Plans
(Selected data for accumulation units outstanding throughout each period)
The condensed financial information presented below for each of the years in the
ten-year period ended December 31, 1996 (as applicable), 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, 1996 and the Independent
Auditors' report thereon, are included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of $138.406 $141.424 $134.081 $127.171 $101.824 $99.758 $78.220 $69.051 $66.237
period
Value at end of period $180.879 $138.406 $141.424 $134.080 $127.171 $101.824 $99.758 $78.220 $69.051
Increase(decrease) in
value of accumulation 30.69% (2.13)% 5.48% 5.43% 24.89% 2.07% 27.54% 13.28% 4.25%
unit(1)
Number of accumulation
units outstanding at
end of period 549,056 1,258,166 1,616,018 1,829,160 1,956,479 2,169,721 2,496,795 3,030,548 3,740,739
AETNA INCOME SHARES
Value at beginning of $40.570 $42.675 $39.376 $37.086 $31.424 $29.142 $25.734 $24.197 $23.426
period
Value at end of period $47.405 $40.570 $42.675 $39.376 $37.086 $31.424 $29.142 $25.734 $24.197
Increase(decrease) in
value of accumulation 16.85% (4.93)% 8.38% 6.17% 18.02% 7.83% 13.24% 6.35% 9.29%
unit(1)
Number of accumulation
units outstanding at
end of period 72,902 181,535 241,551 263,105 283,119 251,861 248,678 284,650 251,513
AETNA VARIABLE ENCORE FUND
Value at beginning of $36.723 $35.701 $35.009 $34.172 $32.460 $30.295 $28.028 $26.387 $25.001
period
Value at end of period $38.485 $36.723 $35.701 $35.009 $34.172 $32.460 $30.295 $28.028 $26.387
Increase(decrease) in
value of accumulation 4.80% 2.88% 1.98% 2.45% 5.27% 7.15% 8.09% 6.22% 5.54%
unit(1)
Number of accumulation
units outstanding at
end of period 150,480 241,159 312,350 471,585 470,248 624,613 542,581 637,833 627,039
AETNA INVESTMENT ADVISERS FUND, INC.
Value at beginning of $14.336 $14.558 $13.407 $12.755 $10.906 $10.440 $10.000(2)
period
Value at end of period $18.024 $14.336 $14.558 $13.407 $12.755 $10.906 $10.440
Increase(decrease) in
value of accumulation 25.73% (1.52)% 8.59% 5.11% 16.86% 4.46% 4.40%
unit(1)
Number of accumulation
units outstanding at
end of period 393,613 756,261 1,142,268 1,129,453 725,598 619,748 470,302
AMERICAN CENTURY VP CAPITAL APPRECIATION (Formerly TCI Growth)
Value at beginning of $10.213 $10.469 $10.000(3)
period
Value at end of period $13.224 $10.213 $10.463
Increase(decrease) in
value of accumulation 29.47% (2.39)% 4.63%
unit(1)
Number of accumulation
units outstanding at
end of period 4,184,701 12,096,731 12,272,152
</TABLE>
(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year,
and dividing the result by the beginning Accumulation Unit value. These
figures do not reflect the deductions from Purchase Payments for sales
load. Inclusion of these charges would reduce the investment results shown.
(2) The initial Accumulation Unit value was established at $10.000 on
June 23, 1989, the date on which the Fund commenced operations.
(3) The initial Accumulation Unit value was established at $10.000 on February
1, 1993, the date on which the Portfolio became available under the
Contract.
11
<PAGE>
THE COMPANY
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 Inc.
VARIABLE ANNUITY ACCOUNT C
Variable Annuity Account C is a separate account established by the Company in
1976 pursuant to the insurance laws of the State of Connecticut. The Separate
Account was formed for the purpose of segregating assets attributable to the
variable portions of Contracts from other assets of the Company. The Separate
Account is registered as a unit investment trust under the Investment Company
Act of 1940, and meets the definition of "separate account" under the federal
securities laws.
Although the Company holds title to the assets of the Separate Account, such
assets are not chargeable with liabilities arising out of any other business the
Company may conduct. Income, gains or losses of the Separate Account are
credited to or charged against all 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.
THE FUNDS
The Contract Holder will designate some or all of the Funds described below as
variable funding options under the Contract. The Contract Holder, or the
Participant, if allowed by the Contract Holder may select one or more of the
Funds for investment of the Purchase Payments made on their behalf. All of the
Funds are diversified as defined in the Investment Company Act of 1940.
(bullet) Aetna Variable Fund seeks to maximize total return through
investments in a diversified portfolio of common stocks and
securities convertible into common stock.
(bullet) Aetna Income Shares seeks to maximize total return, consistent with
reasonable risk, through investments in a diversified portfolio
consisting primarily of debt securities.
(bullet) Aetna Variable Encore Fund seeks to provide high current return,
consistent with preservation of capital and liquidity, through
investment in high-quality money market instruments. An investment in
the Fund is neither insured nor guaranteed by the U.S. Government.
(bullet) Aetna Investment Advisers Fund, Inc. is a managed mutual fund which
seeks to maximize investment return consistent with reasonable safety
of principal by investing in one or more of the following asset
classes: stocks, bonds and cash equivalents based on the Company's
judgment of which of those sectors or mix thereof offers the best
investment prospects.
(bullet) American Century VP Capital Appreciation (formerly TCI Growth) seeks
capital growth by investing in common stocks (including securities
convertible into common stocks) and other securities that meet
certain fundamental and technical standards of selection and, in the
opinion of American Century management, have better than average
potential for appreciation. American Century tries to stay fully
invested in such securities, regardless of the movement of prices
generally. The Portfolio
12
<PAGE>
may invest in foreign securities. Foreign investing involves risks
that differ from those involved in domestic investing. See the Fund's
prospectus for a discussion of these risks.
There is no assurance that the Funds will achieve their investment objectives.
Contract Holders bear the full investment risk of investment in the Funds
selected.
Some of the above Funds may use instruments known as derivatives as part of
their investment strategies as described in their respective prospectuses. The
use of certain derivatives such as inverse floaters and principal only debt
instruments may involve higher risk of volatility to a Fund. The use of leverage
in connection with derivatives can also increase risk of losses. See the
prospectus for the Funds for a discussion of the risks associated with an
investment in those Funds. More comprehensive information, including a
discussion of potential risks, is found in the current prospectus for each Fund
which is distributed with and must accompany this Prospectus. Contract Holders
and Participants should read the accompanying prospectuses carefully before
investing. Additional prospectuses and Statements of Additional Information for
this Prospectus and each of the Funds can be obtained from the Company's Home
Office at the address and telephone number listed on the cover of this
Prospectus.
Fund Investment Advisers
Fund Investment Adviser
---- ------------------
Aetna Variable Fund Aetna Life Insurance and Annuity
Company (ALIAC)*
Aetna Income Shares ALIAC*
Aetna Variable Encore Fund ALIAC*
Aetna Investment Advisers Fund, Inc. ALIAC*
American Century VP Capital Appreciation American Century Investment
(formerly TCI Growth) Management, Inc.
*Aeltus Investment Management, Inc., subadviser
Mixed and Shared Funding
Shares of the Funds are sold to the Company for funding variable annuities. The
Funds may be sold to other 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 policies through variable life separate accounts sponsored by us
or by third parties. This is referred to as "mixed funding."
It is conceivable that, in the future, it may be disadvantageous for variable
annuity separate accounts and variable life separate accounts to invest in these
Funds simultaneously, since the interests of the contract holders or policy
owners may differ. Each Fund's Board of Trustees or Directors has agreed to
monitor events in order to identify any material irreconcilable conflicts that
may possibly arise and to determine what action, if any, should be taken in
response thereto. If such a conflict were to occur, one of the separate accounts
might withdraw its investment in a Fund. This might force that Fund to sell
portfolio securities at disadvantageous prices.
Fund Additions, Limitations and Substitutions
We may, from time to time, add additional Funds as eligible variable funding
options under the Contracts. In such event, the Contract Holder or you, if
permitted by the Contract Holder, be permitted to select from these other Funds,
subject to any conditions that may be imposed in connection with those options.
In addition, the Company may substitute funds if approved by a majority vote of
all persons having an interest through the Separate Account in the affected
Fund.
13
<PAGE>
The Company's current policy is to allow only Aetna Variable Fund, Aetna Income
Shares and Aetna Investment Advisers Fund, Inc. to be used as variable
investment options during the Annuity Period. (See "Annuity Period Elections.")
The Contract Holder may decide to offer only a select number of Funds under its
Plan.
Voting Rights
Each Contract Owner may direct the Company in the voting of shares at meetings
of shareholders of the appropriate Fund(s). The number of votes to which each
Contract Owner may give direction will be determined as of the record date.
The number of votes each Contract Owner is entitled to direct with respect to a
particular Fund during the Accumulation Period is equal to the portion of the
current value 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 applicable to the portion of the Contract
attributable to that Fund, divided by the net asset value of one share of the
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.
Unless otherwise provided by the Plan, Participants and Annuitants of 403(b)
Plans have a fully vested (100%) interest in the benefits provided under the
Contract. Therefore, such Participants and Annuitants may instruct the Contract
Owner how to direct the Company to cast the votes for the portion of the
Contract value or Valuation Reserve attributable to their Individual Accounts.
Votes attributable to those Participants and Annuitants who do not instruct the
Contract Owner will be cast by the Company in the same proportion as votes for
which instructions have been received by the Contract Owner. Votes attributable
to Contract Owners who do not direct the Company will be cast by the Company in
the same proportion as the votes for which directions have been received by the
Company.
Contract Owners, or Participants and Annuitants entitled to instruct the casting
of votes, 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 their participation under the Contract and stating the right to
instruct the Contract Owner how such votes shall be cast.
THE CONTRACT
Contract Purchase
An organization eligible to establish retirement annuity contracts under
Sections 403(b), 401 and HR 10 of the Code may acquire one or both group
Contracts for its Plan by filling out the appropriate master application forms
and returning them to the Company or to a Distributor for delivery to the
Company. Once we approve the application, a group Contract (or Contracts) is
issued to the organization as Contract Holder. The Contract Holder exercises all
rights under the Contracts. (See "Rights Under the Contract.") A Single Purchase
Payment Contract will be issued for lump-sum transfers of amounts accumulated
under a preexisting Plan. An installment Purchase Payment Contract will be
issued for continuing, periodic payments.
Employees of the Contract Holder may fill out an enrollment form or forms and
return them to the Company or to a Distributor for delivery to the Company for
review, acceptance or rejection. The Company must accept or reject an
application within two business days of its receipt. If the application is
incomplete, the Company may hold it and any accompanying Purchase Payment for
five days.
Purchase Payments may be held for longer periods only with the consent of the
Contract Holder or Participant pending acceptance of the application. If the
application is accepted, a Contract will be issued to the Contract Holder or the
Purchase Payment will be accepted. Any Purchase Payment accompanying the
application or
14
<PAGE>
received prior to acceptance of the application, will be invested as of the
date of acceptance. If the application is rejected, the application and any
Purchase Payments will be returned to the Contract Holder.
A single master group Contract is issued to cover all present and future
Participants. Contracts may be issued in either allocated or unallocated form.
An allocated Contract provides for the establishment of individual Accounts, but
all Purchase Payments are applied to a single Plan Account.
Purchase Payments under an HR 10 Plan will be those required to fulfill the
terms of the Plan but annual Aggregate Purchase Payments must be at least
$4,000. Purchase Payments under a 401 Plan will be those required to fulfill the
terms of the Plan. The Code imposes a maximum limit on annual Purchase Payments
which may be excluded from a Participant's gross income. For 403(b) Plan
Participants, such limit must be calculated in accordance with Sections 403(b),
415 and 402(g) of the Code. In addition, Purchase Payments will be excluded from
a Participant's gross income only if the 403(b) Plan meets certain Code
non-discrimination requirements. For HR 10 Plans, the Purchase Payments made on
behalf of a Participant in a defined contribution Plan are determined by the
Plan contribution formula. Generally, Code Section 415 imposes an annual limit
of the lesser of $30,000 or 25% of includible compensation for each Participant.
Purchase Payments for a defined benefit Plan are determined on an actuarial
basis to provide Plan benefits for all Participants. These Purchase Payments are
held in a single Plan Account. Under Code Section 415, a Plan can provide annual
benefits of the lesser of $125,000 (for 1997) or 100% of includible compensation
for each Participant.
Net Purchase Payments
Each Purchase Payment is forwarded to the Company through a Distributor. After
the deductions from a Purchase Payment are made, the Net Purchase Payment, to
the extent it is to be accumulated on a variable basis, is placed in the
Separate Account and credited to the Contract.
The Contract Owner or, if permitted by a Plan, the Participant may elect to have
the Net Purchase Payment(s) accumulate (a) on a variable basis by allocation to
one of more of the available Funds; (b) on a fixed basis under one or more of
the available credited interest options; or (c) in a combination of any of the
available investment options. The Net Purchase Payment(s) must be allocated to
the respective options in increments of whole percentage amounts.
The Contract Owner or, if permitted by a Plan, the Participant may elect to
change the allocation of future Net Purchase Payments to any investment option
described above.
Accumulation Units
Each Net Purchase Payment allocated to one or more of the available Funds is
credited to the Contract in the form of Accumulation Units. The number of
Accumulation Units credited is determined by dividing the applicable portion of
the Net Purchase Payment by that Contract's Accumulation Unit value of the
appropriate Fund. The Accumulation Unit value used is computed for the Valuation
Period in which the Purchase Payment and a completed application are received at
the Home Office and accepted by the Company. Accumulation Units will be credited
within two business days of receipt of the initial application unless the
application has not been accepted. In that event, Purchase Payments will be
credited at the Accumulation Unit value next determined after acceptance of the
application. Subsequent Purchase Payments (if any) received by the Company by
the close of business of the New York Stock Exchange will be credited at the
Accumulation Unit value next determined following receipt of the payment. Shares
in the Funds are purchased by the Separate Account at the net asset value next
determined by the Fund following receipt of Net Purchase Payments by the
Separate Account. The value of Accumulation Units attributable to the Funds will
be affected by the investment performance, expenses and charges of those Funds.
Generally, if the net asset value of the Fund increases, so does the
Accumulation Unit value; however, performance of the Separate Account is reduced
by charges and deductions under the Contract.
Accumulation Units are valued separately for each Fund. Therefore, a Contact
Owner or, if permitted by a Plan, a Participant who has elected to have the Net
Purchase Payment(s) invested in a combination of Funds will have Accumulation
Units credited from more than one source. The value of the Contract or
Individual Account is determined by adding the value of any Accumulation Units
attributable to the Fund(s) to the value of any amount attributable to a
credited interest option.
15
<PAGE>
Net Investment Factor
The value of an Accumulation Unit for any Valuation Period is calculated by
multiplying the Accumulation Unit value for the immediately preceding Valuation
Period by the net investment factor of the appropriate investment option for the
current period.
The net investment factor is calculated separately for each Fund in which assets
of the Separate Account are invested.
The net investment rate equals (a) the net assets of the Fund held by the
Separate Account at the end of Valuation Period, minus (b) the net assets of the
Fund held by the Separate Account at the beginning of a Valuation Period, plus
or minus (c) taxes or provision for taxes, if any, attributable to the operation
of the Separate Account, divided by (d) the value of the Fund's Accumulation and
Annuity Units held by the Separate Account at the beginning of the Valuation
Period, minus (e) the applicable daily charge for the Annuity mortality and
expense risks. The net investment rate may be more or less than zero.
The net investment rate is then added to 1.0000000 to arrive at the net
investment factor.
Distribution
The Company will serve as Underwriter for the securities sold by this
Prospectus. The Company is registered as a broker-dealer with the Securities and
Exchange Commission 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 ("Distributors"), including at least one affiliate of
the Company, to offer and sell the Contracts. All persons offering and selling
the Contracts must be registered representatives of the Distributors and must
also be licensed as insurance agents to sell variable annuity contracts. These
registered representatives may also provide service to Participants in
connection with establishing their Accounts under the Contract.
Persons offering and selling the Contracts may receive commissions in connection
with the sale of the Contracts. The maximum percentage amount that the Company
ever paid as commission with respect to any given Purchase Payment is with
respect to those made during the first year of Purchase Payments under a
Contract. That percentage amount will range from 2% to 6% of those Purchase
Payments. The Company may also pay renewal commissions on Purchase Payments made
after the first year and asset-based service fees. In limited circumstances we
also pay certain of these professionals profit-sharing and compensation,
overrides or reimbursement for expenses. The average of all payments made by the
Company is estimated to equal approximately 3% of the total Purchase Payments
made over the estimated life of an average Contract. In addition, some sales
personnel may receive various types of non-cash compensation as special sales
incentives, including trips and educational and/or business seminars.
Supervisory and other management personnel of the Company may receive
compensation that will vary based on the relative profitability to the Company
of the funding options you select. Funding options that invest in Funds advised
by the Company or its affiliates are generally more profitable to the Company.
The Company may also reimburse the Distributor for certain expenses. The name of
the Distributor and the registered representative responsible for your Account
are set forth on your enrollment form.
RIGHT TO CANCEL
A Participant may cancel his or her participation under the Contract by
returning the certificate no later than ten days after receiving it (or as
otherwise allowed by state law) along with a written notice of cancellation to
the Company. The Company will produce a refund not later than seven days after
it receives the certificate and the written notice at its Home Office. Unless
the applicable state law requires a refund of Purchase Payment(s), the Company
will refund the Purchase Payment(s) plus any increase or minus any decrease in
the value attributable to any Purchase Payments allocated to the variable
option(s).
16
<PAGE>
CHARGES AND DEDUCTIONS
Mortality and Expense Risk Charges
During the Accumulation and Annuity Periods, the Company makes a daily deduction
from the variable portion of Contract values for mortality and expense risks.
The mortality risk charge is to compensate the Company for the risk it assumes
when it promises to continue making payments for the lives of individual
Annuitants according to Annuity rates specified in the Contact at issue. The
expense risk charge is to compensate us for the risk that actual expenses for
costs incurred under the Contract will exceed the maximum costs that can be
charged under the Contract.
Under 401 Contracts, the daily deduction is equivalent to 1.19% per year. For
403(b) and HR 10 Plans, the daily deduction is equivalent to 1.25%. For the year
ended December 31, 1996, the Company received $_______ for mortality and expense
risks from Contracts funded through the Separate Account.
Fund Expenses
Most expenses incurred in the operations of the Funds are borne by that Fund.
Each Fund has an investment adviser and pays an investment advisory fee, which
is deducted daily from each Fund's net assets. Fund advisers may reimburse the
Funds they advise for some or all of these expenses. For further details on each
Fund's expenses, you and the Contract Holder should read the accompanying
prospectus for each Fund and refer to the Fee Table in this Prospectus.
Allocation and Transfer Fees
The Company currently permits an unlimited number of allocation changes during
each calendar year, without charge. The Company reserves the right to charge a
fee of not more than $10, deducted from the Individual or Plan Account value,
for each allocation change that exceeds 12 in a calendar year.
The Company also currently permits an unlimited number of free transfers per
calendar year of accumulated values in the Individual or Plan Account. Transfers
of not less than $500 may be made among the available Funds or from any of the
Funds to a credited interest option. The Company reserves the right to charge a
fee of not more than $10, deducted from the Individual or Plan Account value,
for each transfer that exceeds 12 in a calendar year. Any transfer will be based
on the Accumulation Unit value next determined after a proper request is
received by the Company at its Home Office.
Insurance Rider
For 403(b) Plans, a minimum death benefit guarantee may be purchased in
connection with an Individual Account at the option of the Contract Owner or, if
permitted by a plan, the Participant. This guarantee provides that if the
Participant dies before Annuity payments commence, the death benefit will never
be less than an amount equal to the Purchase Payments (less any partial
redemptions) made on behalf of the Participant, regardless of the value of the
Participant's Individual Account at the time of death. The premium for this
rider is 1% of each Purchase Payment made on behalf of a Participant for whom
the rider is elected.
Contracts issued to 401 Plans include the preretirement minimum death benefit
guarantee. This guarantee provides that should the Participant die before
Annuity payments commence, the Company will pay the beneficiary the greater of
(a) the value of the Participant's Individual Account, or (b) 100% of the
Purchase Payments (less any partial redemptions) made on behalf of the
Participant. The premium for this rider is included in the Contract sales and
administrative expense charge.
17
<PAGE>
Sales and Administrative Expense Charge
During the Accumulation Period, deductions are made from each installment
Purchase Payment made on behalf of a Participant for sales and administrative
expenses. This deduction is made from the balance of each Purchase Payment after
premium taxes and insurance rider premiums are deducted.
For 403(b) Plans, a percentage deduction of 6% will be deducted from the balance
of each installment Purchase Payment made on behalf of a Participant after the
deductions for premium tax and insurance rider premium, if applicable, are made.
Exclusive of any premium tax or premium for the insurance rider, the total
deduction amounts to 6.4% of the Net Purchase Payment.
After premium taxes, if applicable, are deducted, a sales and administrative
expense charge of 5% is deducted from the balance of each installment Purchase
Payment made on behalf of a Participant in a 401 Plan, and 1.75% from the
balance of each installment Purchase Payment under an HR 10 Plan. Exclusive of
any premium tax, the total deduction amounts to 5.3% of the Net Purchase Payment
under a 401 Plan and 1.8% of the Net Purchase Payment under an HR 10 Plan.
Termination Fee
A termination fee may be deducted to reimburse the Company for administrative
expenses in handling Contract withdrawals.
Under a 403(b) and 401 Plan, there is no fee for termination of an Individual
Account. Under an HR 10 Plan, there is no fee for termination of an Individual
Account due to the death of the Participant.
If an installment Purchase Payment Contract is terminated before five years'
Aggregate Purchase Payments have been made or before the tenth anniversary of
the Contract, a termination fee of 2% of the 403(b) or HR 10 Plan Contract value
will be deducted. For 401 Plans, the termination fee is a graded amount based on
the number of Contact years for which Aggregate Purchase Payments have been
received. The following table reflects this termination fee under 401 Plan
Contracts.
Completed
Contract Years Deduction
-------------- ---------
1 5%
2 4%
3 3%
4 2%
5 1%
More than 5 0%
Premium Tax
Several states and municipalities impose a premium tax on annuities. These taxes
currently range from 0% to 4%. The Company reserves the right to deduct premium
tax against Purchase Payments or Contract Values at any time but no earlier than
when we have a tax liability under state law. The Company's current practice is
to deduct for premium taxes at the time of complete withdrawal or annuitization.
In addition to the premium tax, the Company reserves the right to assess a
charge for any state or federal taxes due against the Contract or the Separate
Account assets. (See "Tax Status.")
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 upon our determination of when such tax is due. We will absorb any
municipal premium tax that 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.
GENERAL DESCRIPTION OF VARIABLE ANNUITY CONTRACTS
Rights under the Contract
All rights under the Contract rest with the Contract Owner, which is usually the
employer. In the case of a trusteed Plan, the Plan trustee will be the Contract
Owner. Benefits available to Participants are governed exclusively by the
provisions of the Plan. Some of the options and elections under the Contract may
not be available to Participants under the provisions of the Plan. Generally,
for 403(b) Plans, elections may be made by Participants; for 401 and HR Plans,
elections must be made by the Contract Owner.
Modification of the Contract
The Company may modify the Contract when it deems an amendment appropriate,
subject to the limitations described below, by giving written notice to the
Contract Owner 30 days before the effective date of the change. The following
Contract provisions may be considered material by the Company and cannot be
changed without the approval of appropriate state or federal regulatory
authorities:
(a) transfers among investment options;
(b) notification to the Contract Owner;
(c) conditions governing payments of withdrawal values;
(d) terms of Annuity options; and
(e) death benefit payments.
In addition the Company may not modify the Contract during the first year it is
in force, except with the approval of the Contact Owner. For 401 Plans, the
effective date of a modification will be the next Contract anniversary. However,
changes to items (a) through (f) listed below will apply only to new
Participants enrolled under a Contract after the effective date of the
modification:
(a) the Annuity Options;
(b) increasing the mortality and expense risk charges;
(c) increasing the deduction from Purchase Payment(s) for sales and
administrative expenses;
(d) increasing the termination fee (if applicable);
(e) the preretirement minimum death benefit (if applicable); and
(f) the maximum allocation and transfer fees.
If the Contract Owner has not accepted the proposed change at the time of the
effective date, no new Participants may be enrolled under the Contract. However,
additional Purchase Payments may continue to be made on behalf of Participants
already enrolled under the Contract.
No modification may affect any Annuity commencing prior to the effective date of
such modification unless deemed necessary for the Plan or Contract to comply
with the requirements of the Code or other laws and regulations affecting the
Plan or Contract.
Contract Owner Inquiries
A Contract Owner may direct inquiries to a local representative of the
Distributor or may write directly to the Company at its Home Office.
19
<PAGE>
Telephone Transfers
The Participant automatically has the right to make transfers among Funds by
telephone. The Company has enacted procedures to prevent abuses of Individual
Account transactions via the 800 number. The procedures include requiring the
use of a personal identification number (PIN) to execute transactions. The
Participant is responsible for safeguarding his or her PIN, and for keeping
account information confidential. If the Company fails to follow its procedures,
it would be liable for any losses to the Participant's Individual Account
resulting from the failure. To ensure authenticity, the Company records all
calls on the 800 line. Note: all Individual Account information and transactions
permitted are subject to the terms of the Plan(s).
Transfer of Ownership; Assignment
Unless contrary to applicable law, assignment of the Contract or Individual or
Plan Account is prohibited.
WITHDRAWALS
The Participant of a 403(b) Plan, subject to the restrictions below, or the
Contract Owner of a 401 or HR 10 Plan may withdraw all or a portion of the
Individual or Plan Account value during the Accumulation Period by properly
completing and submitting to the Company's Home Office a disbursement form
provided by the Company. (If permitted by a Plan, Participants may request to
withdraw all or a portion of their Individual Account.)
Effective January 1, 1989, the Code imposes restrictions on full or partial
withdrawals from 403(b) Individual Accounts attributable to Purchase Payments
made on or after January 1, 1989, under a salary reduction agreement, and to any
earnings on the entire 403(b) Individual Account credited on and after January
1, 1989. Withdrawals of these amounts are allowed only if the Participant (a)
has died; (b) has become disabled, as defined in the Code; (c) has attained age
59 1/2; or (d) has separated from service. Withdrawals are also allowed if the
Participant can show "hardship," as defined by the Internal Revenue Service
("IRS"), but the withdrawal is limited to the lesser of Purchase Payments made
on or after January 1, 1989, or the amount necessary to relieve the hardship.
Even if a withdrawal is permitted under these provisions, a 10% federal tax
penalty may be assessed on the withdrawn amount if it does not otherwise meet
the exceptions to the penalty tax provisions (see "Tax Status of Amounts
Distributed Under the Contract"). (A 20% income tax may be withheld from amounts
paid directly to a Participant. See "Tax Status of Amounts Distributed Under the
Contracts.")
Under the Code, a Participant may request a full or partial withdrawal of an
amount equal to the Individual Account value as of December 31, 1988 (the
"grandfathered" amount), subject to the terms of the 403(b) Plan. Although the
Code withdrawal restrictions do not apply to this amount, a 10% federal penalty
tax may be assessed on the withdrawn amount if it does not otherwise meet the
exceptions to the penalty tax provisions (see "Tax Status of Amounts Distributed
Under the Contract"). (A 20% income tax may be withheld from amounts paid
directly to a Participant. See "Tax Status of Amounts Distributed Under the
Contracts.")
The Company believes that the Code withdrawal restrictions do not apply to
tax-free transfers pursuant to Revenue Ruling 90-24. The Company further
believes that the withdrawal restrictions will not apply to any "grandfathered"
amount which is transferred pursuant to Revenue Ruling 90-24 into another 403(b)
Contract. Revenue Ruling 90-24 provides that a direct transfer from one 403(b)
investment to another 403(b) investment is not a distribution and is not taxable
if after the transfer, the transferred funds continue to be subject to the same
or more stringent distribution requirements.
The amount paid, in the case of a full withdrawal of the Contract, will be the
value of the Plan Account or all Individual Accounts, less the applicable
termination fee. The amount paid for any partial withdrawal, where a percentage
of the value of a Plan or Individual Account is requested, will be the
percentage requested less any applicable termination fee. For any partial
withdrawal where a specific dollar amount is requested, the amount
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paid will be the amount requested; sufficient Accumulation Units will be
cancelled to cover both the specific withdrawal amount requested and any
applicable termination fee.
The value of the Accumulation Units cancelled for a withdrawal will be
determined as of the end of the Valuation Period in which a disbursement form
properly completed by the Contract Owner or, if permitted, by a Plan, the
Participant is received at the Company's Home Office or on such later date as
the disbursement form may specify. Disbursement forms are available from the
Company and its local representatives.
For any partial withdrawal, unless requested otherwise by the Contract Owner or
Participant, the value of the Accumulation Units cancelled will be withdrawn
from the respective investment options in the same proportions as their
respective values to the total value of the Plan or Individual Account.
Payments for withdrawal requests will be made in accordance with SEC
requirements, but not normally later than seven calendar days after a properly
completed disbursement form is received at the Company's Home Office or within
seven calendar days of the date the disbursement form may specify. Payments may
be delayed for: (a) any period in which the New York Stock Exchange ("Exchange")
is closed (other than customary weekend and holiday closings) or in which
trading on the Exchange is restricted; (b) any period in which an emergency
exists where disposal of securities held by the Funds is not reasonably
practicable or it is not reasonably practicable for the value of the assets of
the Funds to be fairly determined; or (c) such other periods as the SEC may by
order permit for the protection of Contract Owners and Participants. The
conditions under which restricted trading or an emergency exists shall be
determined by the rules and regulations of the SEC.
REINVESTMENT PRIVILEGE
The Contract Owner or, if permitted by a Plan, a Participant may elect to
reinvest all or a portion of the proceeds received from the full withdrawal of a
Plan or Individual Account within 30 days after such withdrawal. Accumulation
Units will be credited to the Plan or Individual Account for the amount
reinvested, as well as for any applicable termination fee imposed at the time of
withdrawal. Such reinvested amounts will be reallocated to the applicable
investment options in the same proportion as they were allocated at the time of
the withdrawal.
The number of Accumulation Units credited will be based upon the Accumulation
Unit value(s) next computed following receipt at the Company's Home Office of
the reinvestment request along with the amount to be reinvested. The
reinvestment privilege may be used only once. A Contract Owner or Participant
contemplating reinvestment should seek competent advice regarding the tax
consequences associated with such a transaction.
ADDITIONAL WITHDRAWAL OPTIONS
General
The Company has certain distribution options available which are not considered
Annuity options. These options are the Estate Conservation Option ("ECO") and
the Systematic Withdrawal Option ("SWO"). These options are available to
Participants with Account Values of at least $25,000 at the time of election and
area available at certain ages as described below. Under SWO, the Participant
receives a series of partial withdrawals from the account based on the payment
method selected. It is designed for those who want a periodic income while
retaining investment flexibility for amounts accumulating under the Contract.
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.
Under ECO, the Company calculates the minimum distribution amount required by
law and pays you that amount once a year.
Since ECO and SWO are not Annuity options, the Individual or Plan Account
remains in the Accumulation Period, retains all the rights and flexibility
described in this prospectus, and is subject to all other Contract charges. The
value of the Accumulation Units cancelled will be withdrawn from the respective
investment
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options in the same proportions as their respective values have to the total
value of the Individual or Participant's portion of the Plan Account. The
Company reserves the right to discontinue the availability of these options
and to change the terms for future elections.
Once elected, these options may be revoked by the 401 or HR 10 Plan Contract
Owner or Participant of a 403(b) Plan at any time, but only by submitting a
written request to the Company's Home Office. Any revocation will apply only to
the amounts not yet paid. Once ECO or SWO is revoked, it may not be elected
again.
SWO is different from ECO in the following ways: (1) SWO payments are made for a
fixed dollar amount or fixed time period, whereas ECO payments vary in dollar
amount and can continue indefinitely during the Contract Holder's or
Participant's lifetime and (2) generally, SWO payments will be higher than
expected ECO payments. Participants should carefully assess their future income
needs when considering the election of these distribution options.
Participants should determine the availability of ECO and SWO under their Plan
(by checking with the Contract Owner), and verify the terms and conditions that
may apply. Participants should also consult their tax advisor prior to
requesting the election of these options due to the potential for adverse tax
consequences.
In the event of the Participant's death, payments may be continued if allowed by
the Plan.
Estate Conservation Option
The Company will calculate and distribute an annual amount using the method
contained in the Code's minimum distribution regulations. The annual
distribution is determined by dividing the value of the Individual or
Participant's portion of the Plan Account, by a life expectancy factor. The
factor will be based on either the Participant's life expectancy or the joint
life expectancies of the Participant and the Participant's designated
beneficiary, as directed by the Contract Owner, and based on tables in IRS
regulations. If ECO is based only on the Participant's life expectancy, the full
value of the Individual or Participant's portion of the Plan Account must be
distributed in the year following the Participant's death as required by current
IRS regulations. Factors will be calculated for each year's distribution. The
value of the Individual or Participant's portion of the Plan Account to be used
in this calculation is the value on the December 31st prior to the year for
which payment is being made. This calculation will be changed, if necessary, to
conform to changes in the Code or applicable regulations.
The first distribution may not be made before the calendar year in which the
Participant attains age 70 1/2, or retires, if later. If the Company maintains a
separate record of a 403(b) Participant's Individual Account value as of
December 31, 1986, this amount is not required to be distributed until the
Participant attains age 75, or retires, if later. In this instance, minimum
distributions made to a retired Participant in or after the year the Participant
attains age 70 1/2 but before the Participant attains age 75, will be calculated
only on amounts contributed after December 31, 1986, and any earnings credited
after that date. If the Participant has received any distribution from his or
her Account, other than distributions required under Code minimum distribution
requirements, the excess amount taken will reduce the December 31, 1986 account
balance.
At the time of ECO election, the total aggregate value of all Individual
Accounts or portions of Plan Accounts to which ECO is applied must be $25,000 or
more.
Systematic Withdrawal Option
The Company will distribute a portion of the Contract, as directed by the
Contract Owner annually. The Company reserves the right to provide payments more
frequently. For 403(b) Participants, payments are also available monthly,
quarterly, or semi-annually. No election may be made that would result in a
payment of less than $500. For 403(b) Participants, the minimum payment amount
is $250.
At the time of SWO election, the total aggregate value of all Individual
Accounts or portions of Plan Accounts to which SWO is applied must be $25,000 or
more.
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The annual minimum SWO distribution, or maximum SWO time period, will be
determined, as directed by the Contract Holder, by a life expectancy factor from
tables designated by the IRS. The factor will be based on either the
Participant's life expectancy or the joint life expectancies of the Participant
and Participant's spouse. Factors will be reduced by 1 (one) for each
distribution year.
For 403(b) Participants, payment may not begin until the Participant attains age
59 1/2 (or age 55 if the Participant has separated from service with the
Contract Holder). For 401 or HR 10 Plans, payments may not begin until the
calendar year in which the Contract Owner attains age 70 1/2 or retires,
whichever is later.
One of following distribution methods may be elected:
(a) Specified Payment--Payments of a designated dollar amount. The annual
dollar amount chosen cannot be greater than 10% of the cash value
applied to SWO. The specified payment minimum distribution is
determined by dividing the value of the Individual Account by the life
expectancy factor. The value of the Individual Account to be used in
this calculation is the value on the December 31st prior to the year
for which the payment is being made. The specified payment amount will
remain constant unless a higher amount is required under Code
distribution requirements. If the dollar amount chosen is less than the
Code's minimum distribution, the Company will calculate and pay the
minimum distribution amount.
(b) Specified Period--payments for a designated time period. The specified
period must be at least 10 years but no greater than the Participant's
life expectancy factor. Each annual distribution is determined by
dividing the Individual Account or total portions of the Plan Accounts
value by the number of years remaining in the elected period. The value
to be used in this calculation is the value on the December 31st prior
to the year for which the payment is being made. For payments made more
often than annually, the annual payment result (calculated above) is
divided by the number of payments due each year.
(c) Specified Percentage (403(b) Participants only)--payments of a
designated percentage. The specified percentage chosen cannot be
greater than 10% of the amount applied to SWO. The Participant may
change the specified percentage elected every six months. Each annual
distribution is determined by multiplying the Contract value by the
percentage chosen. The value to be used in this calculation is the
value on the December 31st prior to the year for which payment is being
made. For payments made more often than annually, the annual payment
result (calculated above) is divided by the number of payments due each
year. Payments will be made each year until the year the Participant
attains age 70 1/2 or retires, whichever is later.
ANNUITY PERIOD
Annuity Period Elections
The Participant of a 403(b) Plan or the Contract Owner of a 401 or HR 10 Plan
must notify the Company in writing of the Annuity start date and Annuity Option
elected. Until a date and option are elected, the Individual or Plan Account
will continue in the Accumulation Period.
The Contract Owner or, if permitted by a Plan, the Participant may give written
notice to the Company at least 30 days prior to the start of Annuity payments
electing or changing (a) the date on which Annuity payments are to begin; (b)
the Annuity option; (c) whether the payments are to be made monthly, quarterly,
semiannually or annually; and (d) the investment option(s) used to provide
Annuity payments (i.e., a fixed annuity using the general account, Aetna
Variable Fund, Aetna Income Shares, Aetna Investment Advisers Fund, Inc., or any
combination thereof). Aetna Variable Encore Fund and American Century VP
Capital Appreciation cannot be used as investment options during the Annuity
Period. Once Annuity Payments begin, the Annuity Option may not be changed, nor
may transfers be made among funding options.
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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 (3 1/2% per
annum, unless a 5% annual rate is elected). 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 by more than 5% on an annualized
basis. Annuity payments would decline if the rate failed to increase by 5%. Use
of the 3 1/2% assumed rate causes a lower first payment but subsequent payment
would increase more rapidly or decline more slowly as changes occur in the net
investment rate.
No election may be made that would result in a first Annuity payment of less
than $20 or total yearly Annuity payments of less than $100. If the value of the
Individual or Plan Account is insufficient to elect an option for the minimum
amount specified, a lump-sum payment must be elected.
When payments start, the age of the Annuitant plus the number of years for which
payments are guaranteed must not exceed 95.
In determining the amount of benefit payments, the minimum distribution
incidental death benefit rule described in IRS regulations* must be satisfied.
This distribution rule does not apply to 401, HR 10, and certain 403(b) Plans if
any of the Annuity Options under (b) below are elected with the spouse as the
sole beneficiary. (See "Annuity Options.") 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.
The Participant will be subject to a 50% federal penalty tax on the amount of
distribution required each year which is not distributed under the Code's
minimum distribution rules.
* This rule assures that any death benefits payable under the Plan are
incidental to the primary purpose of the Plan which is to provide retirement
benefits or deferred compensation to the Participant. The amount to be
distributed under this rule is determined based on the Participant's age and
tables contained in the IRS regulations.
403(b) Plans
Distributions of the Individual Account values as of December 31, 1986, must
generally begin by age 75 or retirement, whichever is later. Distributions of
the Individual Account value attributable to contributions made on and after
January 1, 1987, and any earnings on the entire Individual Account after that
date must begin by April 1 of the calendar year following the calendar year in
which the Participant attains age 70 1/2 or retires, whichever is later. This
distribution date may be further deferred if allowed under federal law or
regulations.
401 and HR 10 Plans
The retirement date and the Annuity options available to Participants are
normally established by the terms of the Plan, subject to applicable provisions
of the Code.
Except for 5% owners, distributions for all 401 and HR10 Plan Participants must
begin no later than April 1 of the calendar year following the calendar year in
which the Participant attains age 70 1/2 or retires, if later. For all 5%
owners, such distributions must begin by April 1 of the calendar year following
the calendar year in which you attain age 70 1/2. These distribution dates may
be further deferred if allowed under federal law or regulations.
Annuity Options
Lifetime:
(a) Life Annuity--an Annuity with payments guaranteed to the date of the
Annuitant's death. This option may be elected with payments guaranteed
for 5, 10, 15 or 20 years, or such other periods as we
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may offer at the time of annuitization. Because it provides a specified
minimum number of Annuity payments, the election of a guaranteed payment
period results in somewhat lower payments.
(b) Life Income Based Upon the Lives of Two Payees--An Annuity will be paid
during the lives of the Annuitant and a second Annuitant. Payments will
continue until both Annuitants have died. When this option is chosen, a
choice must be made of:
(i) 100% of the payment to continue after the first death;
(ii) 662/3% of the payment to continue after the first death;
(iii) 50% of the payment to continue after the first death;
(iv) Payments for a minimum of 120 months, with 100% of the payment
to continue after the first death; or
(v) 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.
Because (iv) provides a specified minimum number of Annuity payments,
the election of the guaranteed payment period results in somewhat
lower payments.
If a lifetime option is elected without a guaranteed minimum payment period, it
is possible that only one Annuity payment will be made if the Annuitant under
(a), or the surviving Annuitant under (b) (i), (ii), (iii) or (v) should die
prior to the due date of the second Annuity payment.
Payments under any lifetime Annuity option will be determined without regard to
the sex of the Annuitant(s). Such Annuity payments will be based solely on the
age of the Annuitant(s).
Once lifetime annuity payments begin, neither the Contract Holder nor the
annuitant can elect to receive a lump-sum settlement.
Nonlifetime:
Payments for a Specified Period--an Annuity with payments to be made for
one to thirty years, as selected. If this option is elected on a variable
basis, the Contract Owner or the 403(b) Annuitant 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. This option is not
available on a variable basis under a Contract which provides for immediate
Annuity benefits.
The Company makes a daily deduction for mortality and expense risks from any
Contract values held on a variable basis (See "Mortality and Expense Risk
Charges.") Therefore, electing the nonlifetime option on a variable basis will
result in a deduction being made even though the Company assumes no mortality
risk.
The Company may make available to Contact Owners and other payees optional
methods of payment in addition to the Annuity options described.
DEATH BENEFIT
Accumulation Period
A portion or all of any death proceeds may be (a) paid to the beneficiary in a
lump sum; (b) applied under any of the Annuity Options; (c) subject to
applicable provisions of the Code, left in the variable investment options; (d)
subject to applicable provisions of the Code, left on deposit in the Company's
general account with the beneficiary electing to receive monthly, quarterly,
semiannual or annual interest payments at the interest rate then currently being
credited on such deposits. (The balance on deposit can be withdrawn at any time
or applied under any "Annuity Option.") Any lump-sum payment paid during the
Accumulation Period will normally be
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made within seven calendar days after proof of death acceptable to the Company
and a request for payment are received at the Company's Home Office.
Until the election of method of payment, amounts will remain invested as they
were before the death, and the beneficiary will assume all rights under the
Contract; however, the Code requires that distributions begin within a certain
time period, as described below. If no elections are made concerning
distribution, no distributions will be made. Failure to commence distribution
within the above time periods can result in tax penalties.
403(b) Plans
If the beneficiary is the surviving spouse, the beneficiary has until the
Participant would have attained age 70 1/2 to begin Annuity payments, to receive
a lump-sum distribution, or to begin receiving distributions under ECO or SWO.
If the beneficiary is not the surviving spouse, either Annuity payments must
begin within one year of the Participant's death, or the entire value must be
distributed within five years of the Participant's death.
In no event may payments to any beneficiary extend beyond the life of the
beneficiary or any period certain greater than the beneficiary's life
expectancy.
401 and HR 10 Plans
If the Participant's beneficiary under the Plan is the surviving spouse, the
Code allows a Plan to give the Participant's beneficiary until the Participant
would have attained age 70 1/2 to begin Annuity payments or to receive a
lump-sum distribution.
If the Participant's beneficiary under the Plan is not the surviving spouse, the
Plan must provide that either Annuity payments begin within one year of the
Participant's year of death, or the entire value must be distributed within five
years of the Participant's year of death.
In no event may payments to any Participant's beneficiary extend beyond the life
of the Participant's beneficiary or any period certain greater than the
Participant's beneficiary's life expectancy.
If a lump-sum distribution is elected, the beneficiary will receive the value of
the Contract determined as of the Valuation Period in which proof of death
acceptable to us and a request for payment are received at the Home Office. If
an Annuity Option is elected, the value applied to the Annuity Options is
determined in the same manner as a lump-sum distribution; the amount of payout
will depend on the annuity option elected and the investment option(s) used to
provide such payments. (See "Annuity Period.") If amounts are left in the
variable investment options, the account value will continue to be affected by
the investment performance of the investment option(s) selected. If amounts are
left on deposit in the general account, the principal amount is guaranteed but
interest payments may vary. In general, regardless of the method of payment,
payments received by your beneficiaries after your death are taxed in the same
manner as if you had received those payments. (See "Tax Status.")
Annuity Period
Should an Annuitant die after Annuity payments have begun, any death benefit
payable will depend upon the terms of the Contract and the Annuity option
selected.
If lifetime option (a) or (b) was elected without a guaranteed minimum payment
period under the Contract, Annuity payments will cease upon the death of the
Annuitant under a Life Annuity or the death of the surviving Annuitant under
options (b)(i),(ii), (iii), or (v).
Under the Contract, if lifetime option (a) or (b) was elected with a guaranteed
minimum payment period and the death of the Annuitant under option (a) or the
death of the surviving Annuitant under options (b)(iv) occurs prior to the end
of that period, the Company will pay to the designated beneficiary in lump sum,
unless
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otherwise requested, the present value of the guaranteed Annuity payments
remaining. Such value will be determined as of the Valuation Date on which proof
of death acceptable to the Company and a request for payment are received at its
Home Office. The value will be reduced by any payments made after the date of
death.
If the nonlifetime option was elected under the Contract 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. Such value will be determined as of the valuation
date on which proof of death acceptable to the Company and a request for payment
are received at the Home Office.
403(b) Plans
If the Annuitant dies after Annuity payments have commenced and if there is a
death benefit payable under the Annuity option elected, the remaining values
must be distributed to the beneficiary at least as rapidly as under the original
method of distribution.
401 and HR 10 Plans
Under the Code, if the Annuitant under a Plan dies after Annuity payments have
commenced and if there is a death benefit payable under the Annuity option
elected, the remaining values must be distributed to the Participant's
beneficiary under the Plan at least as rapidly as under the original method of
distribution.
TAX STATUS
Federal Tax Status of the Company
The Company is taxed as a life insurance company in accordance with the Code.
For federal income tax purposes, the operations of the Separate Account form a
part of the Company's total operations and are not taxed independently, although
operations of the Separate Account are treated separately for accounting and
financial statement purposes. Under the current provisions of the Code, the
investment income and realized capital gains of the Separate Account (i.e.,
income and capital gains distributed to the Separate Account by the Funds) will
not be taxable to the Company to the extent such amounts are credited to the
Contracts. Based on this, no charge is being made currently to the Separate
Account for federal income taxes. However, the Company reserves the right to
make a deduction for federal income taxes attributable to the Contracts should
such taxes be imposed in the future.
Use of the Contract
The Contract is intended to provide retirement benefits to Participants under:
(1) Plans adopted by public school systems and certain tax-exempt
organizations (Section 501(c)(3) organizations) for their employees
under Section 403(b), and
(2) HR 10 Plans established by self-employed individuals, and
(3) Corporate 401 Plans established by employers to provide retirement
benefits to their employees.
Some of the options and elections under the Contract may not be available to
Participants under the provisions of the Plan.
Tax Status of Amounts Distributed Under the Contract
The following description of the federal income tax status of amounts
distributed under the Contracts is not exhaustive and is not intended to cover
all situations. Contract Owners and Participants should seek advice from their
tax advisers as to the application of federal (and where applicable, state and
local) tax laws to amounts received by them and by their beneficiaries under the
Contracts.
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The Code imposes a 10% penalty tax on the taxable portion of any distribution
unless made when (a) the Participant has attained age 59 1/2, (b) the
Participant has become disabled, (c) the Participant has died, (d) the
Participant has attained age 55 and has separated from service with the Plan
sponsor, (e) the distribution amount is rolled over into an Individual
Retirement Account ("IRA") in accordance with terms of the Code, or
alternatively, for 403(b) Plans, into either a 403(b) Plan or an IRA in
accordance with terms of the Code, or (f) the distribution amount is annuitized
over the life or life expectancy of the Participant or the joint lives or life
expectancies of the Participant and beneficiary, provided the Participant has
separated from service with the Plan sponsor. In addition, the penalty tax is
abated for the amount of a distribution equal to unreimbursed medical expenses
incurred by the Participant that qualify for deduction as specified in the Code.
Whether the Participant elects a lump sum or Annuity payments, if a Participant
has made after-tax contributions to the Plan, the Participant will have a cost
basis (equal to such contributions) which can be recovered tax-free from
distributions from the Plan.
A 20% federal income tax may be withheld from any distributions paid directly to
a Participant, under a 403(b) Plan (see below); any state income taxes due will
also be withheld unless the Company is notified otherwise. The Company will
report to the IRS the taxable portion of all distributions whether or not income
taxes are withheld.
a. Accumulation Period
The Purchase Payments and investment results of the Separate Account
credited to the value of the Contract are not taxable to Participants
until distributed. Special provisions of the Code may afford more
favorable tax treatment for lump-sum distributions under 401 and HR 10
Plans.
Certain payees (a Participant, surviving spouse, and former spouse, if
entitled to benefits under certain divorce orders) entitled to a
distribution under this Contract on or after January 1, 1993, may elect
a direct rollover of an eligible rollover distribution. A direct
rollover is the payment by the Company to another eligible retirement
plan. The election of a direct rollover must be made in accordance with
the Company's procedures.
An eligible rollover distribution is a distribution of all or any
portion of an amount payable except for any distribution: (1) that is
one of a series of equal payments (made at least once a year) for the
life/life expectancy of the payee or payee and beneficiary, or for a
period of ten years or more; (2) that is a required minimum
distribution under Code Section 401(a)(9); and (3) any distribution or
portion thereof that is not taxable. For a Participant in a 403(b)
plan, an eligible retirement plan is another 403(b) plan or an
individual retirement annuity/account. For a surviving spouse, an
eligible retirement plan is an individual retirement annuity/account.
If a direct rollover of an eligible rollover distribution is made, the
Company must report the amount of the distribution to the IRS and the
Participant, but is not required to withhold any federal or state
income tax. If an eligible rollover distribution is paid to the payee
(as defined above), the Company must withhold 20% federal income tax
and any required state income tax. For taxable amounts that are not
eligible rollover distributions, if payable to the Participant, he or
she has the right to choose not to have federal income tax withheld.
If a Participant receives a payment prior to reaching age 59 1/2, and
does not roll the payment over, in addition to the tax withholding, a
10% penalty tax on the taxable portion of the payment may apply (unless
the payment is subject to an exception listed above).
b. Annuity Period
Annuity payments will generally be fully taxable to Participants as
ordinary income when received.
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MISCELLANEOUS
Performance Reporting
From time to time, the Company may advertise different types of historical
performance for the variable funding options under the Separate Account. The
Company may advertise the "standardized average annual total returns,"
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
variable funding option 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, sales and
administrative expense charges and the termination fee). "Non-standardized
returns" will be calculated in a similar manner, except that non-standardized
figures will not reflect the deduction of any applicable termination fee (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 Separate Account or the Funds. Further details
regarding performance reporting and advertising are described in the Statement
of Additional Information.
Legal Proceedings
The Company knows of no material legal proceedings pending to which the Separate
Account is a party or which would materially affect the Separate Account.
Legal Matters
The validity of the securities offered by this Prospectus has been passed upon
by Counsel to the Company.
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CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
The following items are the contents of the Statement of Additional Information:
General Information and History .......................................... 2
Variable Annuity Account C ............................................... 2
Offering and Purchase of Contracts ....................................... 3
Performance Data ......................................................... 3
General ............................................................ 3
Average Annual Total Return Quotations.............................. 4
Annuity Payments.......................................................... 6
Sales Material and Advertising............................................ 7
Independent Auditors...................................................... 7
Financial Statements of the Separate Account.............................. S-1
Financial Statements for Aetna Life Insurance and Annuity Company......... F-1
30
<PAGE>
APPENDIX I
GUARANTEED ACCUMULATION ACCOUNT
The Guaranteed Accumulation Account ("GAA") is a credited interest option
available during the Accumulation Period under the Contracts. Contract Holders
should read the accompanying GAA prospectus carefully before investing. This
Appendix is a summary of GAA and is not intended to replace the GAA prospectus.
Amounts allocated to Long-Term Classifications of GAA are held in a
noninsulated, nonunitized Separate Account. Amounts allocated to Short-Term
Classifications of GAA are held in the Company's general account.
GAA is a credited interest option in which the Company guarantees stipulated
rates of interest for stated periods of time on amounts directed to GAA. 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 over the period of one year. This option
guarantees the minimum interest rate specified in the Contract.
During a specified period of time, amounts may be applied to any or all of
available Guaranteed Terms within the Short-Term and Long-Term Classifications.
The Short-Term Classification consists of all Guaranteed Terms of 3 years or
less and the Long-Term Classification consists of all Guaranteed Terms of 10
years or less, but greater than 3 years.
Withdrawals or transfers from a Guaranteed Term prior to the end of that
Guaranteed Term 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 Contract Holder or, if applicable, the
Participant receiving an amount which is less than the amount paid into GAA.
Mortality and Expense Risk Charges
The Company makes 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.
Transfers are permitted from Guaranteed Terms of one Classification to available
Guaranteed Terms of another Classification. The Company will apply an MVA to GAA
transfers made before the end of a Guaranteed Term. Transfers of GAA values at a
maturity are not counted as one of the 12 free transfers of accumulated values
in the Individual or Plan Account.
By giving notice to the Company at its Home Office at least 30 days before
Annuity payments begin, the Contract Holder or, if permitted by the plan, the
Participant may elect to have amounts which have been accumulating under GAA
transferred to Aetna Variable Fund, Aetna Income Shares, Aetna Investment
Advisers Fund, Inc., or any combination thereof, to provide variable Annuity
payments. GAA cannot be used as an investment option during the Annuity Period.
Reinvestment Privilege
Any amounts reinvested in GAA will be applied to the current deposit period.
Amounts are proportionately reinvested to the Classifications in the same manner
as they were allocated prior to withdrawal. Any negative MVA amount applied to a
withdrawal is not included in the reinvestment.
31
<PAGE>
APPENDIX II
FIXED ACCOUNT
The Fixed Account is an investment option available during the Accumulation
Period under the Contracts. The following summarizes material information
concerning the fixed account that is offered as an option under the Contract.
Additional information may be found in your Contract. Amounts allocated to the
Fixed Account are held in the Company's general account that supports insurance
and Annuity obligations. Interests in the Fixed Account have not been registered
with the SEC in reliance on exemptions under the Securities Act of 1933, as
amended. Disclosure in this prospectus regarding the Fixed Account, however, may
be subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of the statements.
Disclosure in this Appendix regarding the Fixed Account has not been reviewed by
the SEC.
Fixed Account
This option guarantees that amounts allocated to this option will earn the
minimum interest rates specified in the Contract. The Company may credit a
higher interest rate from time to time. The Company's determination of interest
rates reflects the investment income earned on invested assets and the
amortization of any capital gains and/or losses realized on the sale of invested
assets. Under this option, the Company assumes the risk of investment gain or
loss by guaranteeing Net Purchase Payment values and promising a minimum
interest rate and Annuity payment.
Amounts applied to the Fixed Account will earn the interest rate in effect when
actually applied to the Fixed Account.
Mortality and Expense Risk Charges
The Fixed Account will reflect a compound interest rate credited by the Company.
The interest rate quoted is an annual effective yield. The Company makes no
deductions from the credited interest rate for mortality and expense risks;
these risks are considered in determining the credited rate.
Transfers Among Investment Options
Transfers from the Fixed Account to any other available investment option are
allowed in each calendar year during the Accumulation Period. The amount which
may be transferred may vary at the Company's discretion; however, it will never
be less than 10% of the amount held under the Fixed Account.
By giving notice to the Company at its Home Office at least 30 days before
Annuity payments begin, the Contract Owner or, if permitted by the Plan, the
Participant may elect to have amounts which have been accumulating under the
Fixed Account transferred to Aetna Variable Fund, Aetna Income Shares, Aetna
Investment Advisers Fund, Inc. ,or any combination thereof, to provide variable
Annuity payments.
32
<PAGE>
VARIABLE ANNUITY ACCOUNT C
PROSPECTUS
DATED MAY 1, 1997
Group 403(b), 401, and HR 10 Plans
Aetna Life Insurance and Annuity Company
Customer Service
151 Farmington Avenue
Hartford, Connecticut 06156-1268
Telephone: 1-800-232-5422
Form No. PROS.75974-97 May 1997
<PAGE>
- ------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT C
- ------------------------------------------------------------------------------
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Statement of Additional Information dated May 1, 1997
Group Variable Retirement Annuity Contracts for Tax-Deferred Annuity Plans
(Section 403(b)), Qualified 401 Plans, and HR 10 Plans
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current prospectus for Variable Annuity Account C (the
"Separate Account") dated May 1, 1997.
A free prospectus is available upon request from the local Aetna Life Insurance
and Annuity Company office or by writing to or calling:
Aetna Life Insurance and Annuity Company
Customer Service
151 Farmington Avenue
Hartford, Connecticut 06156
1-800-531-4547
Read the prospectus before you invest. Terms used in this Statement of
Additional Information shall have the same meaning as in the prospectus.
TABLE OF CONTENTS
Page
General Information and History........................................... 2
Variable Annuity Account C................................................ 2
Offering and Purchase of Contracts........................................ 3
Performance Data.......................................................... 3
General.............................................................. 3
Average Annual Total Return Quotations............................... 4
Annuity Payments.......................................................... 6
Sales Material and Advertising............................................ 7
Independent Auditors...................................................... 7
Financial Statements of the Separate Account.............................. S-1
Financial Statements of Aetna Life Insurance and Annuity Company.......... F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Life Insurance and Annuity Company (the "Company") is a stock life
insurance company which was 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 organized in 1954). As of December 31, 1996, the Company had
assets of $___ billion (subject to $____ billion of customer and other
liabilities, $___ billion of shareholder equity) which includes $___ billion in
assets held in the Company's separate accounts. The Company had $__ billion in
assets under management, including $__ billion in its mutual funds. As of
____________________, it ranked among the top __% of all U.S. life insurance
companies by size. 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 Inc. The Company
is engaged in the business of issuing life insurance policies and annuity
contracts in all states of the United States. The Company's Home Office is
located at 151 Farmington Avenue, Hartford, Connecticut 06156.
In addition to serving as the principal underwriter and the depositor for the
Separate Account, the Company is also a registered investment adviser under
the Investment Advisers Act of 1940, and a registered broker-dealer under the
Securities Exchange Act of 1934. The Company provides investment advice to
several of the registered management investment companies offered as variable
investment options under the Contracts funded by the Separate Account (see
"Variable Annuity Account C" below).
Other than the mortality and expense risk charges and administrative expense
charge described in the prospectus, all expenses incurred in the operations of
the Separate Account are borne by the Company. See "Charges and Deductions" in
the prospectus. The Company receives reimbursement for certain administrative
costs from some unaffiliated sponsors of the Funds used as funding options under
the Contract. These fees generally range up to 0.25%.
The assets of Separate Account are held by the Company. The Separate Account has
no custodian. However, the Funds in whose shares the assets of the Separate
Account are invested each have custodians, as discussed in their respective
prospectuses.
VARIABLE ANNUITY ACCOUNT C
Variable Annuity Account C (the "Separate Account") is a separate account
established by the Company for the purpose of funding variable annuity contracts
issued by the Company. The Separate Account is registered with the Securities
and Exchange Commission as a unit investment trust under the Investment Company
Act of 1940, as amended. The assets of the Separate Account will be invested
exclusively in shares of the mutual funds described in the prospectus. Purchase
Payments made under the Contract may be allocated to one or more of the Funds.
The Company may make additions to, deletions from or substitutions of available
investment options as permitted by law and subject to the conditions in the
Contract. The availability of the Funds is subject to applicable regulatory
authorization. Not all Funds are available in all jurisdictions or under all
Contracts.
2
<PAGE>
The Funds currently available under the Contract are as follows:
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
American Century VP Capital Appreciation (formerly TCI Growth)
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, is contained in the
prospectuses and statements of additional information for each of the Funds.
OFFERING AND PURCHASE OF CONTRACTS
The Company is both the depositor and the principal underwriter for the
securities sold by the prospectus. The Company offers the Contracts through life
insurance agents licensed to sell variable annuities who are registered
representatives of the Company or of other registered broker-dealers who have
sales agreements with the Company. The offering of the Contracts is continuous.
A description of the manner in which Contracts are purchased may be found in the
prospectus under the section titled "The Contract."
PERFORMANCE DATA
GENERAL
From time to time, the Company may advertise different types of historical
performance for the variable investment options available under the Contracts
issued by the Company in connection with Plans described in the prospectus. The
Company may advertise the "standardized average annual total returns,"
calculated in a manner prescribed by the Securities and Exchange Commission (the
"standardized return"), as well as "non-standardized returns," both of which are
described below.
The standardized and non-standardized total return figures are computed
according to a formula in which a hypothetical initial Purchase Payment of
$1,000 is applied to the various variable investment options under the Contract,
and then related to the ending redeemable values over one, five and ten year
periods (or fractional periods thereof). The redeemable value is then divided by
the initial investment and this quotient is taken to the Nth root (N represents
the number of years in the period) and 1 is subtracted from the result which is
then expressed as a percentage, carried to at least the nearest hundredth of a
percent. The standardized figures reflect the deduction of all recurring charges
during each period (e.g., mortality and expense risk charges, sales and
administrative expense charges, and the termination fee).
These charges will be deducted on a pro rata basis in the case of fractional
periods.
The non-standardized figures will be calculated in a similar manner, except that
they will not reflect the deduction of any applicable termination fee (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.
If a Fund was in existence prior to the date it became available under the
Contract, standardized and non-standardized total returns may include periods
prior to such date. These figures are calculated by adjusting the actual returns
of the Fund to reflect the charges that would have been assessed under the
Contract had that Fund been available under the Contract during that period.
3
<PAGE>
Investment results will fluctuate over time, and any presentation of the total
return quotations for any prior period should not be considered as a
representation of how the variable investment options will perform in any future
period. Additionally, the Individual Account Value upon redemption may be more
or less than your original cost.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - Standardized and Non-Standardized
The tables shown below reflect the average annual standardized and
non-standardized total return quotation figures for the periods ended December
31, 1996 for the variable investment options available under the Contracts.
Table A reflects the total return quotations for Contracts issued under 403(b)
Plans; Table B reflects the total return quotations for Contracts issued under
401 Plans; and Table C reflects the total return quotations for Contracts issued
under HR 10 Plans. The standardized returns for 403(b) Contracts assume a
mortality and expense risk charge of 1.25%, a sales and administrative expense
charge of 6.00% and the applicable termination fee. The standardized returns for
401 Contracts assume a mortality and expense risk charge of 1.19%, a sales and
administrative expense charge of 5.00% and the applicable termination fee. The
standardized returns for HR 10 Contracts assume a mortality and expense risk
charge of 1.25%, a sales and administrative expense charge of 1.75% and the
applicable termination fee.
The non-standardized returns assume the same charges but do not include the
termination fee. For those variable investment options where results are not
available for the full calendar period indicated, the percentage shown is an
average annual return since inception (denoted with an asterisk).
4
<PAGE>
TABLE A
403(b) Plans
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Fund
STANDARDIZED NON-STANDARDIZED Inception
Date
---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPTION 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund 04/30/75
---------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares 06/01/78
---------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund 09/01/75
---------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc. 06/23/89
---------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital
Appreciation 11/20/87
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TABLE B
401 Plans
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Fund
STANDARDIZED NON-STANDARDIZED Inception
Date
---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPTION 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund 04/30/75
---------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares 06/01/78
---------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund 09/01/75
---------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc. 06/23/89
---------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital
Appreciation 11/20/87
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TABLE C
HR 10 Plans
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Fund
STANDARDIZED NON-STANDARDIZED Inception
Date
---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPTION 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund 04/30/75
---------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares 06/01/78
---------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund 09/01/75
---------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc. 06/23/89
---------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital
Appreciation 11/20/87
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included in the Standardized and Non-Standardized figures. These
figures represent historical performance and should not be considered a
projection of future performance.
5
<PAGE>
ANNUITY PAYMENTS
When Annuity payments are to begin, the value of the Contract or Individual
Account is determined using Accumulation Unit values as of the tenth Valuation
Period before the first Annuity payment is due. Such value (less any applicable
premium tax) is applied to provide an Annuity in accordance with the Annuity and
investment options elected.
The Annuity option tables found in the Contract show, for each form of Annuity,
the amount of the first Annuity payment for each $1,000 of value applied.
Thereafter, variable Annuity payments fluctuate as the Annuity Unit value(s)
fluctuates with the investment experience of the selected investment option(s).
The first payment and subsequent payments also vary depending on the assumed net
investment rate selected (3.5% 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 increases by more than 5% on an annual
basis. Annuity payments would decline if the rate failed to increase by 5%. Use
of the 3.5% 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.
When the Annuity Period begins, the Annuitant is credited with a fixed number of
Annuity Units (which does not change thereafter) in each of the designated
investment options. This number is calculated by dividing (a) by (b), where (a)
is the amount of the first Annuity payment based on a particular investment
option, and (b) is the then current Annuity Unit value for that investment
option. As noted, Annuity Unit values fluctuate from one Valuation Period to the
next; such fluctuations reflect changes in the net investment factor for the
appropriate Fund(s) (with a ten Valuation Period lag which gives the Company
time to process Annuity payments) and a mathematical adjustment which offsets
the assumed net investment rate of 3.5% or 5% per annum.
The operation of all these factors can be illustrated by the following
hypothetical example. These procedures will be performed separately for the
investment options selected during the Annuity Period.
EXAMPLE:
Assume that, at the date Annuity payments are to commence, there are 3,000
Accumulation Units credited under a particular Contract or Individual Account
and that the value of an Accumulation Unit for the tenth Valuation Period prior
to retirement was $13.650000. This produces a total value of $40,950.
Assume also that no premium tax is payable and that the Annuity table in the
Contract provides, for the option elected, a first monthly variable Annuity
payment of $6.68 per $1000 of value applied; the Annuitant's first monthly
payment would thus be 40.950 multiplied by $6.68, or $273.55.
Assume then that the value of an Annuity Unit for the Valuation Period in which
the first payment was due was $13.400000. When this value is divided into the
first monthly payment, the number of Annuity Units is determined to be 20.414.
The value of this number of Annuity Units will be paid in each subsequent month.
If the net investment factor with respect to the appropriate Fund is 1.0015000
as of the tenth Valuation Period preceding the due date of the second monthly
payment, multiplying this factor by .9999058* (to neutralize the assumed net
investment rate of 3.5% per annum built into the number of Annuity Units
determined above) produces a result of 1.0014057. This is then multiplied by the
Annuity Unit value for the prior Valuation Period (assume such value to be
$13.504376) to produce an Annuity Unit value of $13.523359 for the Valuation
Period in which the second payment is due.
6
<PAGE>
The second monthly payment is then determined by multiplying the number of
Annuity Units by the current Annuity Unit value, or 20.414 times $13.523359,
which produces a payment of $276.07.
*If an assumed net investment rate of 5% is elected, the appropriate factor to
neutralize such assumed rate would be .9998663.
SALES MATERIAL AND ADVERTISING
The Company may include hypothetical illustrations in its sales literature that
explain the mathematical principles of dollar cost averaging, compounded
interest, tax deferred accumulation, and the mechanics of variable annuity
contracts. The Company may also discuss the difference between variable annuity
contracts and other types of savings or investment products, including, but not
limited to, personal savings accounts and certificates of deposit.
We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the variable investment options to
established market indices such as the Standard & Poor's 500 Stock Index and the
Dow Jones Industrial Average or to the percentage change in values of other
management investment companies that have investment objectives similar to the
variable investment options being compared.
We may publish in advertisements and reports, the ratings and other information
assigned to us by one or more independent rating organizations such as A.M. Best
Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors
Services, Inc. The purpose of the ratings is to reflect our financial strength
and/or claims-paying ability. We may also quote ranking services such as
Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable
Insurance Products Performance Analysis Service (VIPPAS), which rank variable
annuity or life subaccounts or their underlying funds by performance and/or
investment objective. We may illustrate in advertisements the performance of the
underlying funds, if accompanied by performance which also shows the performance
of such funds reduced by applicable charges under the Separate Account. We may
also show in advertisements the portfolio holdings of the underlying funds,
updated at various intervals. From time to time, we will quote articles from
newspapers and magazines or other publications or reports, including, but not
limited to The Wall Street Journal, Money magazine, USA Today and The VARDS
Report.
The Company may provide in advertising, sales literature, periodic publications
or other materials information on various topics of interest to current and
prospective Contract Holders or Participants. These topics may include the
relationship between sectors of the economy and the economy as a whole and its
effect on various securities markets, investment strategies and techniques (such
as value investing, market timing, dollar cost averaging, asset allocation,
constant ratio transfer and account rebalancing), the advantages and
disadvantages of investing in tax-deferred and taxable investments, customer
profiles and hypothetical purchase and investment scenarios, financial
management and tax and retirement planning, and investment alternatives to
certificates of deposit and other financial instruments, including comparison
between the Contracts and the characteristics of and market for such financial
instruments.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are the
independent auditors for the Separate Account and for the Company. The services
provided to the Separate Account include primarily the examination of the
Separate Account's financial statements and the review of filings made with the
SEC.
7
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT C
Index
Independent Auditors' Report.............................................. S-
Statement of Assets and Liabilities....................................... S-
Statement of Operations................................................... S-
Statements of Changes in Net Assets....................................... S-
Notes to Financial Statements ............................................ S-
Condensed Financial Information........................................... S-
FINANCIAL STATEMENTS OF VARIABLE ANNUITY ACCOUNT C AND AETNA LIFE
INSURANCE AND ANNUITY COMPANY TO BE FILED BY AMENDMENT
S-1
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
VARIABLE ANNUITY ACCOUNT C
VARIABLE ANNUITY CONTRACTS
issued by
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Hartford, Connecticut
Form No. SAI.75974 ALIAC Ed. MAY 1997
<PAGE>
VARIABLE ANNUITY ACCOUNT C
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- ------------------------------------------
(a) Financial Statements: *
(1) Included in Part A:
Condensed Financial Information
(2) Included in Part B:
Financial Statements of Variable Annuity Account C:
- Independent Auditors' Report
- Statement of Assets and Liabilities as of December 31, 1996
- Statement of Operations for the year ended December 31, 1996
- Statements of Changes in Net Assets for the years ended
December 31, 1996 and 1995
- Notes to Financial Statements
Financial Statements of the Depositor:
- Independent Auditors' Report
- Consolidated Balance Sheets as of December 31, 1996 and 1995
- Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994 - Consolidated Statements
of Changes in Shareholder's Equity for the years ended
December 31, 1996, 1995 and 1994
- Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
- Notes to Consolidated Financial Statements
(b) Exhibits
(1) Resolution of the Board of Directors of Aetna Life Insurance
and Annuity Company establishing Variable Annuity Account C(1)
(2) Not applicable
(3.1) Form of Broker-Dealer Agreement(2)
(3.2) Alternative Form of Wholesaling Agreement and Related Selling
Agreement(2)
(4.1) Form of Variable Annuity Contract (HR10-DUA-GIA)
(4.2) Form of Variable Annuity Contract (GA-UPA-GO)
(5) Not applicable
(6.1) Certificate of Incorporation and By-Laws of Aetna Life
Insurance and Annuity Company(3)
(6.2) Amendment of Certificate of Incorporation of Aetna Life
Insurance and Annuity Company(4)
(7) Not applicable
(8) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Investors Research Corporation and TCI
Portfolios, Inc. dated July 29, 1992 and amended December 22,
1992 and June 1, 1994(2)
<PAGE>
(9) Opinion of Counsel*
(10.1) Consent of Independent Auditors*
(10.2) Consent of Counsel*
(11) Not applicable
(12) Not applicable
(13) Schedule for Computation of Performance Data*
(14) Not applicable
(15.1) Powers of Attorney(4)
(15.2) Authorization for Signatures(2)
(27) Financial Data Schedule*
*To be filed by amendment
1. Incorporated by reference to Post-Effective Amendment No. 6 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on
April 22, 1996.
2. Incorporated by reference to Post-Effective Amendment No. 5 to Registration
Statement on Form N-4 (File No. 33-75986) filed electronically on April 12,
1996.
3. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-1 (File No. 33-60477), as filed electronically on April
15, 1996.
4. Incorporated by reference to Post-Effective Amendment No. 12 to Registration
Statement on Form N-4 (File No. 33-75964), as filed electronically on
February 11, 1997.
<PAGE>
Item 25. Directors and Officers of the Depositor
- ------------------------------------------------
Name and Principal
Business Address* Positions and Offices with Depositor
- ------------------ ------------------------------------
Daniel P. Kearney Director and President
Timothy A. Holt Director, Senior Vice President and Chief Financial
Officer
Christopher J. Burns Director and Senior Vice President
Laura R. Estes Director and Senior Vice President
Gail P. Johnson Director and Vice President
John Y. Kim Director and Senior Vice President
Shaun P. Mathews Director and Vice President
Glen Salow Director and Vice President
Creed R. Terry Director and Vice President
Deborah Koltenuk Vice President and Treasurer, Corporate Controller
Frederick D. Kelsven Vice President and Chief Compliance Officer
Kirk P. Wickman Vice President, General Counsel and Secretary
* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
- ----------------------------------------------------------------------------
Incorporated herein by reference to Item 26 of Post-Effective Amendment
No. 12 to the Registration Statement on Form N-4 (File No. 33-75964), as filed
electronically on February 11, 1997.
<PAGE>
Item 27. Number of Contract Owners
- ----------------------------------
As of December 31,1996, there were 600,951 individuals holding interests in
variable annuity contracts funded through Variable Annuity Account C.
Item 28. Indemnification
- ------------------------
Reference is hereby made to Section 33-771(f) of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and Section 33-776(4)
regarding indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide in general that Connecticut corporations
incorporated prior to January 1, 1997 shall indemnify their officers, directors,
employees and agents against "liability" (defined as the obligation to pay a
judgment, settlement, penalty, fine, excise tax in the case of an employee
benefit plan or reasonable expenses incurred with respect to a proceeding). In
the case of a proceeding by or in the right of the corporation, indemnification
is limited to reasonable expenses incurred in connection with the proceeding
against the corporation to which the individual was named a party. The
corporation's obligation to provide such indemnification does not apply unless
(1) the individual has met the standard of conduct set forth in Section 33-771;
and (2) a determination is made (by majority vote of a quorum of the board of
directors who were not parties to the proceeding, or if a quorum cannot be
obtained, by a committee of the board selected as described in Section
33-775(b)(2); by special legal counsel selected by the board of directors or
members thereof as described in Section 33-775(b)(3); by shareholders) that the
individual met the standard set forth in Section 33-771; or (3) the court, upon
application by the individual, determines in view of all the circumstances that
such person is reasonably entitled to be indemnified. Also, unless limited by
its Certificate of Incorporation, a corporation must indemnify an individual who
was wholly successful on the merits or otherwise against reasonable expenses
incurred by him in connection with a proceeding to which he was a party because
of his relationship as director, officer, employee or agent of the corporation.
The statute does specifically authorize a corporation to procure indemnification
insurance on behalf of an individual who is or was a director, officer, employer
or agent of the corporation. Consistent with the statute, Aetna Inc. has
procured insurance from Lloyd's of London and several major United States excess
insurers for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor.
Item 29. Principal Underwriter
- ------------------------------
(a) In addition to serving as the principal underwriter and depositor for
the Registrant, Aetna Life Insurance and Annuity Company (ALIAC) also
acts as the principal underwriter and investment adviser for Aetna
Variable Encore Fund, Aetna Variable Fund, Aetna Series Fund, Inc.,
Aetna Generation Portfolios, Inc., Aetna Income Shares, Aetna
Investment Advisers Fund, Inc., Aetna GET Fund, and Aetna Variable
Portfolios, Inc. (all registered management investment companies under
the 1940 Act). Additionally, ALIAC acts as the principal underwriter
and depositor for Variable Life Account B and Variable Annuity Accounts
B and G (separate accounts of ALIAC registered as unit investment
<PAGE>
trusts under the 1940 Act). ALIAC is also the principal underwriter for
Variable Annuity Account I (a separate account of Aetna Insurance
Company of America registered as a unit investment trust under the 1940
Act).
(b) See Item 25 regarding the Depositor.
(c) Compensation as of December 31, 1996:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Underwriting Compensation on
Name of Discounts and Redemption or Brokerage
Principal Underwriter Commissions Annuitization Commissions Compensation*
- --------------------- ---------------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Aetna Life Insurance $1,325,661 $96,924,599
and Annuity Company
</TABLE>
* Compensation shown in column 5 includes deductions for mortality and
expense risk guarantees and contract charges assessed to cover costs
incurred in the sales and administration of the contracts issued under
Variable Annuity Account C.
Item 30. Location of Accounts and Records
- -----------------------------------------
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules under it relating to the securities
described in and issued under this Registration Statement are located at the
home office of the Depositor as follows:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
Item 31. Management Services
- ----------------------------
Not applicable
Item 32. Undertakings
- ---------------------
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement on
Form N-4 as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than
sixteen months old for as long as payments under the variable annuity
contracts may be accepted;
<PAGE>
(b) to include as part of any application to purchase a contract offered by
a prospectus which is part of this registration statement on Form N-4,
a space that an applicant can check to request a Statement of
Additional Information; and
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.
(d) The Company hereby represents that it is relying upon and complies
with the provisions of Paragraphs (1) through (4) of the SEC Staff's
No-Action Letter dated November 22, 1988 with respect to language
concerning withdrawal restrictions applicable to plans established
pursuant to Section 403(b) of the Internal Revenue Code. See American
Counsel of Life Insurance; SEC No-Action Letter, [1989 Transfer
Binder] Fed. SEC. L. Rep. (CCH) P. 78,904 at 78,523 (November 22,
1988).
(e) Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(f) Aetna Life Insurance and Annuity Company represents that the fees and
charges deducted under the contracts covered by this registration
statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed
by the insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Variable Annuity Account C of Aetna Life Insurance and
Annuity Company, has duly caused this Post-Effective Amendment No. 6 to its
Registration Statement on Form N-4 (File No. 33-75974) to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Hartford,
State of Connecticut, on the 28th day of February, 1997.
VARIABLE ANNUITY ACCOUNT C OF AETNA LIFE
INSURANCE AND ANNUITY COMPANY
(Registrant)
By: AETNA LIFE INSURANCE AND ANNUITY COMPANY
(Depositor)
By: Daniel P. Kearney*
------------------------------------------
Daniel P. Kearney
President
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 6 to the Registration Statement on Form N-4 (File No. 33-75974) has been
signed by the following persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
Daniel P. Kearney* Director and President )
- ---------------------------- Principal executive officer) )
Daniel P. Kearney
)
Timothy A. Holt* Director, Senior Vice ) February
- --------------------------- President and Chief 28, 1997
Timothy A. Holt Financial Officer )
)
Christopher J. Burns* Director )
- ----------------------------
Christopher J. Burns )
)
Laura R. Estes* Director )
- ----------------------------
Laura R. Estes )
)
Gail P. Johnson* Director )
- ----------------------------
Gail P. Johnson )
)
John Y. Kim* Director )
- ----------------------------
John Y. Kim )
)
<PAGE>
Shaun P. Mathews* Director )
- ----------------------------
Shaun P. Mathews )
)
Glen Salow* Director )
- ----------------------------
Glen Salow )
)
Creed R. Terry* Director )
- ----------------------------
Creed R. Terry )
)
Deborah Koltenuk* Vice President and
Treasurer, Corporate
- ---------------------------- Controller )
Deborah Koltenuk )
By: /s/Julie E. Rockmore
-----------------------------------
*Julie E. Rockmore
Attorney-in-Fact
<PAGE>
VARIABLE ANNUITY ACCOUNT C
EXHIBIT INDEX
Exhibit No. Exhibit Page
- ----------- ------- ----
99-B.1 Resolution of the Board of Directors of Aetna Life
Insurance and Annuity Company establishing Variable
Annuity Account C *
99-B.3.1 Form of Broker-Dealer Agreement *
99-B.3.2 Alternative Form of Wholesaling Agreement and
Related Selling Agreement *
99-B.4.1 Form of Variable Annuity Contract (HR10-DUA-GIA) --------
99-B.4.2 Form of Variable Annuity Contract (GA-UPA-GO) --------
99-B.6.1 Certificate of Incorporation and By-Laws of Depositor *
99-B.6.2 Amendment of Certificate of Incorporation of Depositor *
99-B.8 Fund Participation Agreement between Aetna Life Insurance
and Annuity Company, Investors Research Corporation
and TCI Portfolios, Inc. dated July 29, 1992 and amended
December 22, 1992 and June 1, 1994 *
99-B.9 Opinion of Counsel **
99-B.10.1 Consent of Independent Auditors **
99-B.10.2 Consent of Counsel **
99-B.13 Schedule for Computation of Performance Data **
99-B.15.1 Powers of Attorney *
99-B.15.2 Authorization for Signatures *
27 Financial Data Schedule **
*Incorporated by reference
**To be filed by amendment
EXHIBIT 4.1
Aetna Life Insurance and Annuity Company
Home Office: 151 FARMINGTON AVE.
HARTFORD, CONNECTICUT 06156
(203) 273-0123
Herein called Aetna.
Agrees to pay benefits as provided in this contract due any participant in
the Plan named below.
This contract is issued to the Contract Owner in return for an
application and the payment of stipulated payments as provided herein.
The provisions in the following pages form a part of this contract as
fully as if recited in their entirety over the signatures below.
DETAILS OF VARIABLE PROVISIONS MAY BE FOUND IN THE VALUATION PROVISIONS
AND RETIREMENT ANNUITY PROVISIONS OF THIS CONTRACT.
Aetna has caused this contract to be signed at its Home Office on the
Execution Date.
/s/ Stephen B. Middlebrook /s/ William O. Bailey
Secretary President
GROUP DEPOSIT ADMINISTRATION CONTRACT
ACTIVE LIFE FUND IN SEPARATE ACCOUNT
AND GENERAL ACCOUNT
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT.
<PAGE>
COVER SHEET
This Contract is a legal contract between the Contract Owner and Aetna.
READ THIS CONTRACT CAREFULLY. The cover sheet is only a brief outline of some of
the important features of the contract. The cover sheet is not the insurance
contract. Only the actual contract provisions will control. The contract itself
sets forth, in detail, the right and obligations of both the Contract Owner and
Aetna. IT IS THEREFORE IMPORTANT THAT YOU READ THE CONTRACT CAREFULLY.
TABLE OF CONTENTS
ARTICLE I
DEFINITION OF CERTAIN TERMS
ARTICLE II
STIPULATED PAYMENTS,
VALUATION, AND DISCONTINUANCE
STIPULATED PAYMENTS
2.01 Stipulated Payments................................................ 5
2.02 Application of Stipulated Payments................................. 5
2.03 Active Life Fund................................................... 5
2.04 Allocated Contract - Participant's Individual Accounts............. 6
2.05 Unallocated Contract............................................... 6
2.06 Transfer between Accounts.......................................... 7
2.07 Transfers between Participants' Individual Accounts................ 7
VALUATION
2.08 Net Investment Rate and Net Investment Factor...................... 8
2.09 Accumulation Unit Value............................................ 8
2.10 Annuity Unit Value................................................. 8
DISCONTINUANCE OF STIPULATED PAYMENTS
2.11 Suspension......................................................... 9
2.12 Change to a Paid-Up Contract....................................... 9
2.13 Transfer of Active Life Fund....................................... 9
ARTICLE III
GENERAL PROVISIONS
3.01 Change of Contract by Aetna....................................... 10
3.02 Change of Contract by Mutual Agreement - Retroactive Changes...... 10
3.03 Contract.......................................................... 11
3.04 Individual Certificates........................................... 11
3.05 Conversion to Individual Contract................................. 11
3.06 Sum Payable at Death.............................................. 11
3.07 Designation of Beneficiary........................................ 11
3.08 Facility of Payment............................................... 12
3.09 Evidence of Survival.............................................. 12
3.10 Misstatements and Adjustments..................................... 12
3.11 Assignment........................................................ 12
3.12 Basis of Reserves................................................. 12
<PAGE>
3.13 Termination of Contract........................................... 13
3.14 Data to be furnished Aetna........................................ 13
3.15 Relation of this Contract to the Separate Account................. 13
3.16 Grace Period...................................................... 14
3.17 Reinstatement from Paid-up Status................................. 14
ARTICLE IV
RETIREMENT ANNUITY PROVISIONS
4.01 Notice to Effect a Retirement Annuity............................. 14
4.02 Optional Annuity Forms, Election of Option........................ 14
4.03 Allocation of Annuity, Variable and Fixed Annuities............... 15
4.04 Frequency of Payments............................................. 16
4.05 Description of Tables............................................. 16
<PAGE>
Article I
DEFINITION OF CERTAIN TERMS
1. PLAN - the document, including any amendments, referenced to on the
Specifications page. This is referred to for reference purposes only and in
the event of a conflict between the provisions of the Plan and this
Contract, for the purposes of this Contract, the provisions of this
Contract shall prevail.
2. PLAN YEAR - the period of time specified in the Plan, usually 12 months,
commencing with the Plan effective date or any anniversary thereof.
3. CONTRACT YEAR - the period of 12 months measured from the Contract
Effective Date or any Anniversary of the Contract Effective Date.
4. PARTICIPANT - a person who participates in the Plan.
5. NEW PARTICIPANT - a person who has not been a Participant in the Plan for
the preceding Plan Year.
6. ANNUITANT - a Participant on whose life a Retirement Annuity has been
effected.
7. RETIREMENT ANNUITY - a series of payments provided under this Contract
with respect to a Participant.
8. ANNUITY COMMENCEMENT DATE - the date on which Retirement Annuity payments
commence with respect to a Participant under the terms of the Plan.
9. SEPARATE ACCOUNT - those assets of Aetna in the Separate Account
established by Aetna pursuant to the Connecticut Insurance Law for this
class of contracts which provide variable benefits and which are
represented by shares of Aetna Variable Fund, Inc., Aetna Variable Encore
Fund, Inc., and Aetna Income Shares, Inc.1
10. FUND - Aetna Variable Fund, Inc., an open-end diversified investment
company registered under the Investment Company Act of 1940.1
11. ENCORE FUND - Aetna Variable Encore Fund, Inc., an open-end diversified
investment company registered under the Investment Company Act of 1940.1
12. INCOME SHARES - Aetna Income Shares, Inc., an open-end diversified
investment company registered under the Investment Company Act of 1940.1
13. GENERAL ACCOUNT - all assets of Aetna other than those in separate accounts.
14. VALUATION DATE - each business day of the New York Stock Exchange.
15. VALUATION PERIOD - the period of time from the end of one Valuation Date to
the end of the next. Aetna will determine the Accumulation Unit Values and
Annuity Unit Values pursuant to applicable regulatory provisions as of the
end of each such Valuation Period.
- --------------------
(1) Aetna may from time to time increase or decrease the number of mutual fund
options available to Contract Owners. In the event that occurs, the provisions
of this Contract shall be read in such a way as to be consistent with such
expansion or reduction. In no event will any fund share substitutions be made
without approval by the majority vote of all persons having an interest,
through the Separate Account, in the affected mutual fund.
4
<PAGE>
Article II
STIPULATED PAYMENTS, VALUATION, AND DISCONTINUANCE
STIPULATED PAYMENTS
2.01 - Stipulated Payments
Aetna shall receive only such stipulated payments from the Contract Owner as are
made in accordance with the requirements of the Plan. In no event shall the
total annual stipulated payments exceed any limit imposed by applicable sections
of the Internal Revenue Code (e.g., ss.ss. 219, 401(j), 408, 415, etc.).
Stipulated Payments for this Contract may be paid annually, semi-annually,
quarterly, monthly, or more frequently than monthly with the consent of Aetna. A
change in method of payment may be made only once in any Contract Year and must
be requested in writing to the Home Office of Aetna. Such stipulated payments
will be applied by Aetna to provide accumulation units in accordance with
Section 2.02.
2.02 - Application of Stipulated Payments
Total annual stipulated payments made shall be only those required by the terms
of the Plan. The total contributions received for a Contract Year as determined
by Aetna, based on information supplied by the Contract Owner, shall be subject
to the following deductions:
1. A percentage sufficient to pay premium taxes, if any, if Aetna
determines any such tax may be due and payable by reason of the receipt
of such contributions. If, in the opinion of Aetna, any such premium
taxes are due and payable at a Participant's Annuity Commencement Date
when benefits are purchased and such premium taxes have not previously
been deducted, a deduction will be made at such time. If Aetna
determines that any premium taxes are due and payable at any other
time, such premium taxes may be deducted at any time from the Active
Life Fund or from Contributions.
2. 6.75% of the first $30,000.00 of annual stipulated payments.
3.75% of the next $15,000.00 of annual stipulated payments.
1.75% of annual stipulated payment over $45,000.00.
The stipulated payments after deductions specified above (hereafter referred to
as net stipulated payments) shall be applied as of the last day of the Valuation
Period in which the payment is received by Aetna at its Home Office, to provide
accumulation units on the basis of the then current value of such units. Such
application will be made separately for net stipulated payments allocated to (a)
the General Account, (b) the Separate Account invested in Fund Shares, (c) the
Separate Account invested in Encore Fund Shares, and (d) the Separate Account
invested in Income Shares in accordance with the instructions of the Contract
Owner.
The number of accumulation units provided in each investment medium by any such
application shall be determined by dividing the net stipulated payments for the
applicable investment medium by the dollar value of one accumulation unit in
that investment medium. The number of accumulation units so determined will not
be affected by any subsequent changes in the dollar value of accumulation units.
2.03 - Active Life Fund
The Active Life Fund under this Contract shall at any time consist of the sum of
all accumulation units purchased by stipulated payments made to this Contract
and not yet allocated to effect annuities or surrendered to provide specific
benefits. At least once in each Contract Year, Aetna shall inform the
5
<PAGE>
Contract Owner of the dollar value of an accumulation unit, and the number of
such units in the Active Life Fund.
2.04 - Allocated Contract - Participant's Individual Accounts
The provisions of this Section shall apply if the Plan is a defined contribution
plan (as defined in section 414(i) of the Internal Revenue Code).
On the basis of information supplied by the Contract Owner Aetna will maintain
individual records of accumulation units credited to Participants under the Plan
in Individual Accounts. Benefits will be purchased or provided only in such
amounts and under such conditions as called for by the Plan. Participants'
rights to such Individual Account shall be limited to those provided by the Plan
and by this Contract.
The Participant's Individual Account will be, at all times, 100% vested. Upon
termination of employment, termination of the Contract, or death, each
Participant (or beneficiary in the event of death), shall have one of the
following options with respect to the Participant's Individual Account:
(a) To leave the accumulated value of the Participant's Individual Account in
the Contract, in which case the number of accumulation units in such
Account will remain fixed unless increased in accordance with the Contract,
but the value thereof will vary as described in the Contract,
or
(b) To receive the accumulated value of the Participant's Individual Account
payable in the manner provided by the Plan, either as a lump sum or in
accordance with the Settlement Options of Article IV.
Option (a) above will be effective unless and until option (b) is elected,
provided, however, that death shall cause option (b) to become effective. In the
event option (b) above is elected or becomes effective, the accumulated value
will be on the basis of the accumulation unit value determined within seven days
of the date on which written application for the benefit is received by Aetna.
When a Participant or beneficiary becomes entitled to a benefit in accordance
with the Plan the Contract Owner will notify Aetna as to the manner of payment
of any benefit and the disposition to be made of such Individual Account.
2.05 - Unallocated Contract
The provisions of this Section shall apply if the Plan is a defined benefit plan
(as defined in section 401(j) of the Internal Revenue Code).
Any portion of net stipulated payments consisting of Participant contributions
shall be allocated to a Participant's Contribution Individual Account in behalf
of the contributing Participant.
If on any anniversary of any Contract Year the value of the accumulation units
in the Active Life Fund is below an amount equal to Participant Contributions,
if any, accumulated with interest as provided by the Plan, and not yet applied
to provide benefits, a stipulated payment is immediately due. The amount of the
stipulated payment shall be such that the net stipulated payment will be
sufficient to liquidate 110% of the deficiency. If such deficiency is not
liquidated within 31 days after Aetna has notified the Contract Owner, the
Contract will become Paid-Up as provided in Section 2.11.
6
<PAGE>
Upon termination of employment, termination of the Contract, or death, subject
to the adequacy of the Active Life Fund, each Participant (or beneficiary in the
event of death), who has not retired and who has not already received benefits
shall have one of the following options with respect to Participant
contributions, plus interest thereon as provided by the Plan, and with respect
to any nonforfeitable Employer provided benefits in accordance with the Plan:
(a) To receive, at retirement, a monthly income.
or
(b) To receive the value of the Participant's contributions accumulated with
interest as provided by the Plan, plus any nonforfeitable Employer provided
benefits in accordance with the Plan, payable in the manner provided by the
Plan, either as a lump sum or in accordance with the Settlement Options of
Article IV.
Option (a) above will be effective unless and until option (b) is elected,
provided however, that death shall cause option (b) to become effective. When a
Participant or beneficiary becomes entitled to a benefit in accordance with the
Plan the Contract Owner will notify Aetna as to the manner of payment of any
benefit.
2.06 - Transfer between Accounts
The Contract Owner may elect during the accumulation period to transfer
accumulation units credited to the contract in the Separate Account. Any units
held in the Separate Account invested in Fund shares may be transferred to be
invested in Encore fund shares or Income Shares within the Separate Account, or
may be transferred to the General Account. Any units held in the Separate
Account invested in Encore Fund shares may be transferred to be invested in Fund
shares or Income Shares within the Separate Account or may be transferred to the
General Account. Any units held in the Separate Account invested in Income
Shares may be transferred to be invested in Fund shares or Encore Fund shares
within the Separate Account or may be transferred to the General Account. At the
commencement of annuity payments, any accumulation units held in the Separate
Account invested in Encore Fund shares will be transferred to Fund shares held
in the Separate Account, unless requested to be transferred to the General
Account or Income Shares. Accumulation units credited to the contract in the
General Account may be transferred from the General Account only in accord with
the Allocation of Annuity provision of Section 4.03. Transfers may be elected
only after a three (3) calendar month period subsequent to the Date of Execution
or to a prior transfer. The value of accumulation units to be transferred must
be at least $500. If the transferred amount would result in the balance
remaining of less than $500. Aetna shall have the right to transfer such
remaining balance. All such transfers will be made without any expense
deductions being made at the time of transfer. All such transfers will be
effective on the last day of the Valuation Period in which written request for
transfer is received by Aetna.
Accumulation units provided by the election of Option (a) Section 2.04 can be
transferred only with the consent of the Participant.
2.07 - Transfers between Participants' Individual Accounts
If Section 2.04 is applicable and if the Plan provides that forfeitures are to
be reallocated and applied to increase Participants' benefits, Aetna shall apply
the then value of forfeited Individual Accounts as specified by the Contract
Owner to provide accumulation units for Participants' Individual Accounts for
Participants entitled thereto under the terms of the plan without any expense
deductions being made. This shall be done once each year on the Contract
anniversary, or at such other time mutually agreeable between the Contract Owner
and Aetna.
7
<PAGE>
VALUATION
2.08 - Net Investment Rate and Net Investment Factor
(a) The net investment (interest) rate for the Active Life Fund held in the
General Account is a guaranteed rate as below, compounded annually:
Contract Years 1-10 Thereafter
Guaranteed Rate 4% 3.5%
In addition, by action of its Board of Directors, Aetna may increase the net
investment (interest) rate at such time and for such period as the Directors may
determine.
(b) The Net Investment Rate(s) for each of the funds held in the Separate
Account for any Valuation Period is equal to the gross investment rate of
each such fund for the period less a deduction for each day of the
Valuation Period (at an effective annual rate of 1.25%) plus or minus an
adjustment for any taxes, or a reserve for such taxes, attributable to the
operations of the Separate Account. Such gross investment rate is equal to
(i) the investment income and capital gains and losses, both realized and
unrealized, of each fund minus an investment advisory fee accrued by each
fund for each day of the Valuation Period, divided by (ii) the amount of
net assets of each fund at the beginning of the Valuation Period. Such
gross investment rate may be either positive or negative. The deduction
from the gross investment rate and the deduction for the investment
advisory fee may not exceed in the aggregate an effective annual rate of
1.5%
(c) The net investment factor for each of the funds in the Separate Account is
the sum of 1.0000000 and the net investment rate for that fund.
2.09 - Accumulation Unit Value
The value of the General Account accumulation unit at any time will be
determined by Aetna according to its established method of computing net
earnings in the General Account for this class of contracts. Aetna guarantees
that the value of the portion of this Contract in the General Account will not
be less, at any time, than such value based on General Account accumulation unit
values calculated in accordance with the guaranteed interest rates shown in
Section 2.08(a). The value of the accumulation units for the Fund, Encore Fund,
and Income Shares within the Separate Account can be determined by multiplying
the value of such units at the end of the immediately preceding Valuation Period
by the appropriate net investment factor for the current Valuation Period.
2.10 - Annuity Unit Value
The value of the General Account annuity unit is fixed at $10.00. The value of
the Separate Account annuity unit in either Fund shares or Income Shares is
determined by multiplying the value of the appropriate Separate Account annuity
unit for the preceding period by (a) .9999058 (if the Contract Owner had
selected an assumed net investment rate of 3.5% per annum) or .9998663 (if the
Contract Owner had selected an assumed net investment rate of 5% per annum) for
each day of the Valuation Period and (b) the net investment factor of the
Separate Account for the tenth Valuation Period immediately preceding the period
for which the value is being calculated.
8
<PAGE>
DISCONTINUANCE OF STIPULATED PAYMENTS
2.11 - Suspension
This Contract shall be suspended automatically on any anniversary of the
Effective Date if:
(a) The Contract Owner gives prior written notice to Aetna to transfer all of
the Active Life Fund in accordance with Section 2.13.
(b) The Contract Owner fails to assent to any modification of this Contract
initiated by Aetna as provided in Section 3.01 which modification would
have been effective on such anniversary.
(c) Payment of the deficiency as provided in Section 2.05 is not made within 31
days after Aetna has notified the Contract Owner.
Effective with suspension, no further stipulated payments will be payable to or
accepted by Aetna under this Contract, and the Contract will become paid-up
unless election is made prior to the date of suspension for transfer in
accordance with Section 2.13.
2.12 - Change to a Paid-Up Contract
If this Contract becomes paid-up as provided in Section 2.11, or if the Contract
Owner gives written notice to Aetna in advance of any anniversary of the
Effective Date to change to a paid-up Contract, subsequent to such anniversary
no further stipulated payments will be accepted by Aetna and no new Participants
will become eligible to receive benefits under this Contract. On the date on
which this Contract becomes paid-up, if Aetna has received written notification
by the Contract Owner that the Plan is being continued, all benefits earned
under the terms of the Plan on that date will be treated by Aetna in accordance
with the provisions of the Plan. If such written notification has not been
received by Aetna on the date on which this Contract becomes paid-up, or if on
or after such date the Plan is terminated, each Participant in the Plan will
receive a 100% vested interest in all benefits earned under the terms of the
Plan to the extent of the adequacy of the Active Life Fund.
2.13 - Transfer of Active Life Fund
If before this Contract is suspended under Section 2.11, the Contract Owner
files a written certification with Aetna stating that;
(a) all benefits under the Plan other than those being provided in connection
with previously effected Retirement Annuities are to be provided through
another funding agency, and that
(b) the Plan will, in the opinion of the Contract Owner, continue to retain its
qualified status under Section 401 of the Internal Revenue Code
then, Aetna will be entitled to rely conclusively upon such certification and
will pay to the specified funding agency or to the Contract Owner the value of
all or part, in the event of a partial transfer, of the number of accumulation
units in the Active Life Fund, as of the date of such payment. The amount to be
transferred will exclude the value of that portion of the Active Life Fund
consisting of Participant's Contribution Individual Accounts. If the number of
Contract Years for which periodic contributions were received is less than five,
the value of the payment will be reduced by 2%.
9
<PAGE>
The date of the payment will be the date specified by the Contract Owner,
provided that Aetna reserves the right to change the date of payment to a date
not later than 30 days after Aetna's receipt of the Contract Owner's request. If
the value of the General Account accumulation units to be paid exceeds
$1,000,000, Aetna reserves the right to pay the excess over $1,000,000 in
monthly installments over a period not to exceed 12 months; each such
installment shall be the value of a number of General Account accumulation units
determined by dividing (i) the total number of such units subject to periodic
transfer by (ii) the number of installments. The dollar amount paid each month
will be determined in accordance with the terms of the Contract.
That portion of the Active Life Fund consisting of Participant's Contribution
Individual Accounts may be transferred, provided each Participant having such an
Account consents in writing to the transfer. In the event any Participant does
not consent to such transfer, the Participant's Contribution Individual Account
shall be treated in accordance with Section 2.04.
Aetna reserves the right to defer payment of any transfer payment in accord with
the deferment provisions of applicable federal and state statutes.
Article III
GENERAL PROVISIONS
SECTION 3.01 - Change of Contract by Aetna
On the first day of the second Contract Year and any date thereafter, Aetna,
upon written notice given 30 days in advance to the Contract Owner may change
any of the terms of this Contract. Such change will not become effective until
approved by the Insurance Department of the jurisdiction in which the Contract
is delivered, and further provided that (a) any such change will not affect in
any way the amount or terms of any Retirement Annuity effected prior to the
effective date of such change and (b) any such change that shall affect Sections
2.02 - Application of Stipulated Payments, 2.08 - Net Investment Rate and Net
Investment Factor, 2.09 - Accumulation Unit Value, 2.10 - Annuity Unit Value,
and 4.05 - Annuity Tables, shall only affect such Sections as they apply to
accumulation units provided by stipulated payments made or to be made on behalf
of Participants who enter the Plan on or after the effective date of such
change.
SECTION 3.02 - Change of Contract by Mutual Agreement - Retroactive Changes
A. By agreement in writing, the Contract Owner and Aetna may change, from time
to time, any or all of the terms of this Contract provided that any such
change will not in any way affect the amount or terms of any Retirement
Annuity already effected prior to the effective date of such change.
B. Notwithstanding any of the terms of this Contract, the Contract Owner and
Aetna, by an agreement in writing on any date agreed upon by the Contract
Owner and Aetna may change, from time to time, any terms of this Contract
if it is deemed necessary or appropriate to do so in order to enable the
Plan or Contract to comply with the requirements of the Internal Revenue
Code, the provisions of the Employee Retirement Income Security Act of 1974
subsequent amendments thereto and regulations promulgated thereunder, which
change may be made retroactive to the Effective Date or any date
thereafter.
C. Consent of any Participant or beneficiary shall not be required to make any
change in this Contract.
10
<PAGE>
SECTION 3.03 - Contract
This Contract and the application of the Contract Owner, a copy of which is
attached hereto and made a part hereof, will constitute the entire Contract.
Only the President, a Vice President, the Secretary or an Assistant Secretary
has the power on behalf of Aetna to make or modify this Contract.
SECTION 3.04 - Individual Certificates
Where required by law, Aetna shall issue a certificate to the Contract Owner for
delivery to each Participant making contributions and to each Annuitant. Each
such certificate shall set forth the benefits to which such Participant or
Annuitant is entitled under this Contract. Certificates described in this
section shall not constitute a part of this Contract.
SECTION 3.05 - Conversion to Individual Contract
Upon termination of participation in the Plan, the Participant who is entitled
to a benefit in accordance with the terms of the Plan may elect, if the Plan so
permits or the Contract Owner so requests, to convert to an individual annuity
contract. The individual annuity contract will be of the form then currently
issued for this class of Annuitant, at a duration equivalent to the lesser of
the number of full years (a) such Participant has been in the Plan or (b) this
Contract has been in force. If the method set forth in the individual annuity
contract for determining the value of an accumulation unit is the same method
set forth in the Valuation Provisions of Article III, a number of accumulation
units designated by the Contract Owner may be transferred from the Contract to
the individual annuity contract. Any accumulation units not so transferred will
remain in force under this Contract.
SECTION 3.06 - Sum Payable at Death
Upon receipt of proof of the death of a Participant prior to the Annuity
Commencement Date, Aetna agrees to pay certain Contract values to the
beneficiary. If this is an Allocated Contract pursuant to Section 2.04, the
payment at death will be the sum of the Participant's Individual Account. If
this is an Unallocated Contract pursuant to Section 2.05, the payment at death
will be his vested accrued benefit being held under this Contract. Any payment
by reason of death may be taken in a lump sum or under any settlement options
available in individual annuities then being issued by Aetna.
SECTION 3.07 - Designation of Beneficiary
Subject to the terms of the Plan the Contract Owner or each Participant shall
have the sole right to designate the beneficiary to which any death benefit
hereunder will be payable and, from time to time, without the consent of such
beneficiary, change the beneficiary designated by sending written notice of such
change to Aetna. After such notice is received the change will take effect as of
the date the Participant signed such written notice, whether or not the
Participant is living on the date such notice is received by Aetna, but without
prejudice to Aetna on account of any payment made by it before such notice. If
at the death of a Participant there is more than one beneficiary designated and
in such designation the Participant has failed to specify their respective
interests, the beneficiaries will share equally. If any designated beneficiary
predeceases the Participant, the rights and interests of such beneficiary will
thereupon terminate.
In the event the designated beneficiary predeceases the Participant or if no
beneficiary has been named, the amount of any death benefit will be paid to the
executors or administrators of the Participant's estate except
11
<PAGE>
that Aetna may in such case, at its option, pay such amount to the wife or the
husband, if living; if not living, in equal shares to the then living children
of the Participant; if none, to either parent of the Participant, or to both
equally, if both are living; if neither parent is living, in equal shares to
the then living brothers and sisters of such Participant.
SECTION 3.08 - Facility of Payment
If any payee under this Contract is a minor or, in the opinion of Aetna,
physically or mentally incapable of giving valid receipt and discharge for any
payment due under this Contract, then Aetna may, at its option, make payment
thereof in installments of not more than $50 per month to the person or persons
who, in its opinion, are caring for and supporting such payee until claim is
made by a duly appointed guardian or other legal representative of such payee.
Payment to such person or persons will constitute a complete discharge of the
liability of Aetna to the extent of such payments and it will assume no
responsibility for the proper application of the money paid.
SECTION 3.09 - Evidence of Survival
Aetna will have the right to require of any person entitled to a payment under
this Contract, satisfactory evidence that such person is living on the date
which such payment is due.
SECTION 3.10 - Misstatements and Adjustments
If the age, sex, or any relevant fact relating to any person is found to be
misstated, the amounts of the payments under a Retirement Annuity shall be
adjusted based on the correct information. Unless another adjustment
satisfactory to the Contract Owner and Aetna is made the correct payments shall
be calculated based upon the date such Retirement Annuity was effected. The
dollar amount of any underpayment made by Aetna shall be added to the next
payment due, and the dollar amount of any overpayment made by Aetna shall be
deducted from the next payment or payments due until recovered by Aetna. If
further payments due are insufficient to recover any overpayments, any remainder
of such overpayments shall be charged against the value of any forfeitures
becoming available thereafter. Any adjustment made in accordance with this
Section shall be binding upon any person affected thereby. Any reductions in the
amount of payments under Retirement Annuity required by any governmental
regulations shall be calculated using the interest and mortality basis which was
used in the calculation of the first payment, unless another basis is mutually
agreed upon by Aetna and the Contract Owner.
SECTION 3.11 - Assignment
Except as may be contrary to law, no payments under this Contract of benefits
arising under the Plan are assignable or subject to any claims of any creditor.
SECTION 3.12 - Basis of Reserves
The reserve held under this Contract as of any date will be at least equal to
100% of the dollar value as of such date of the accumulation units held in the
Active Life Fund, plus the reserve for such
Retirement Annuities as have been effected under this Contract computed in
accordance with applicable valuation statutes.
12
<PAGE>
SECTION 3.13 - Termination of Contract
This Contract will terminate at the close of the first day upon which the
performance and fulfillments by Aetna of all its duties and obligations arising
hereunder have been completed.
SECTION 3.14 - Data to be furnished Aetna
The Contract Owner shall furnish all information which Aetna may reasonably
require for the administration of this Contract. If the Contract Owner cannot
furnish any required item of information, Aetna may request any person concerned
to furnish such information. Aetna shall not be liable for the fulfillment of
any obligations in any way dependent on such information until it receives such
information.
Information furnished to Aetna may be corrected for demonstrated errors therein
unless Aetna has already acted to its prejudice by relying on such information.
Any records prepared by Aetna from information furnished to Aetna as described
above shall constitute prima facie evidence as to the accuracy of the
information recorded thereon.
Aetna will accept as proof of death any one of the following criteria:
(a) a copy of a certified death certificate;
(b) a copy of a certified decree of a court of competent jurisdiction as to the
finding of death;
(c) a written statement from a medical doctor who attended the deceased at or
near the time of death; or
(d) any other proof satisfactory to Aetna.
Aetna will accept as evidence of age:
(a) a copy of a certified birth certificate;
(b) a copy of a certified baptismal certificate;
(c) certified copies of two statements of birth, such as passports or insurance
contracts of other companies; or
(d) any other proof satisfactory to Aetna.
3.15 - Relation of this Contract to the Separate Account
Aetna shall have exclusive and absolute ownership and control of the assets of
both its General Account and its Separate Accounts. Neither the Contract Owner
nor Participants shall have individual or equitable ownership of investments or
other assets of either of said Accounts, and the records and accounts kept by
Aetna in connection with this Contract shall not be deemed to constitute
recognition of ownership by the Contract Owner or Participants of any portion of
said Accounts. All funds attributable to this Contract and becoming part of any
Account shall be invested or reinvested by Aetna in such class or classes of
investments, and in such extent as Aetna at its sole discretion may determine.
The method of determination by Aetna of the value of an accumulation unit will
be binding upon the Contract Owner and any Participant.
13
<PAGE>
3.16 - Grace Periode Period
If any stipulated payment after the first called for in accordance with the
terms of the Plan is unpaid after the date it must be paid in accordance with
the provisions of the Employee Retirement Income Security Act of 1974, in the
absence of a request for surrender for value in accordance with the terms of
this Contract, this Contract will not terminate but will assume the status of a
paid-up Contract in accordance with Sections 2.11 and 2.12.
3.17 - Reinstatement from Paid-up Status
If this Contract has assumed the status of a paid-up Contract in accordance with
Sections 2.11 and 2.12 it may be reinstated with the consent of Aetna, provided
that the Plan still retains its qualified status and the Contract has not been
surrendered for value.
Article IV
RETIREMENT ANNUITY PROVISIONS
4.01 - Notice to Effect a Retirement Annuity
When a Participant is eligible for a Retirement Annuity in accordance with the
Plan, the Contract Owner shall notify Aetna to effect an annuity for such
Participant. On the Participant's Annuity Commencement Date Aetna shall allocate
such accumulation units as are necessary to provide benefits as specified by the
plan and apply them, after deduction for any premium taxes due (and not deducted
pursuant to Section 2.02 when contributions were first received), to provide a
Retirement Annuity on the applicable Optional Annuity Form. In the absence of an
election of an Optional Annuity
Form in accordance with Section 4.02, the Retirement Annuity will be in
accordance with Option 5 with payments reducing to 50% of the original amount,
or if the Participant does not have a spouse, in accordance with Option 4 with a
fixed period of 120 monthly payments.
If some of the Plan assets are not funded by this Contract, the Discontinuance
provisions of Article II have not been in effect, the Plan is a qualified plan
under Section 401 of the Internal Revenue Code, and all Contributions were made
on behalf of the Participant in accordance with Article II; then Aetna will
accept a Contribution from such Plan assets, subject to Aetna's then published
limits as to amount, to effect additional annuity units on behalf of the
Participant. Such additional Contribution will be reduced by any applicable
premium taxes payable and by a further deduction as determined by Aetna under
its then current rules, such additional deduction not to exceed 5% of the amount
remaining after reduction by any applicable premium taxes. The Contract Owner
will direct what portions of the additional contribution will be applied to
effect a fixed dollar annuity and a variable annuity. Such additional
contribution must be received by Aetna at least 30 days prior to the
Participant's Annuity Commencement Date.
4.02 - Optional Annuity Forms, Election of Option
OPTION 1 - Payment of interest on funds left with Aetna - The amount due may be
left on deposit with Aetna in its General Account and a sum will be paid
annually, semi-annually, quarterly or monthly, as selected, which shall be equal
to the net investment rate for the period multiplied by the amount remaining on
deposit. Election of this option shall constitute election of fixed income. This
option is available only to beneficiaries.
14
<PAGE>
OPTION 2 - Payments of a Fixed Dollar Amount - The amount due may be paid in
equal annual, semi-annual, quarterly or monthly installments of a designated
dollar amount (not less than $60.00 per annum per $1,000 of the original amount
due) until the remaining balance is less than the amount of one installment. To
determine the remaining balance in either account at the end of any Valuation
Period such balance at the end of the previous period is decreased by the amount
of any installment paid during the period and the result multiplied by the net
investment factor for the period. If the remaining balance at any time is less
than the amount of one installment, such balance will be paid and will be the
final payment under the option.
OPTION 3 - Payments for a Fixed Period - An amount payable in annual,
semi-annual, quarterly or monthly installments for the number of years selected
which may be from 1 to 30 years.
OPTION 4 -Life Income- Payments for a fixed period, if any, and life thereafter
as elected. No payments will become due after death, except during any remaining
fixed period.
OPTION 5 - Joint and Last Survivor Annuity - Payment for the joint lifetime of
two payees with the option of electing (a) payments at 100%, (b) payments
reducing to 66 2/3%, or (c) payments reducing to 50% of the original amount when
either payee dies. No payments will become due after the surviving payee's
death.
The amount of the first payment under Options 3, 4 and 5 will be determined in
accordance with Section 4.05. No payments will be made under any of these
options prior to receipt by Aetna of satisfactory evidence of the date of birth
of the Annuitant and any joint Annuitant.
If any beneficiary dies while receiving payments, the present values of the
current dollar amount on the date of death of any remaining guaranteed number of
payments, or any then remaining balance of proceeds under Options 1, 2 or 3,
will be paid in one sum to the estate of the beneficiary. Calculations for such
present value of guaranteed payments remaining will assume a net investment rate
of 3.5% per annum for General Account options and 3.5% per annum or 5% per annum
for all Separate Account options, whichever was elected by the Contract Owner
for the calculation of the first payment.
Election of Option - If provided by the Plan, in lieu of the Normal Annuity Form
specified in Section 4.01 the Participant may elect any one of the Optional
Annuity Forms except Option 1, but such election may be made only in writing and
must be received at the Home Office of Aetna at least 30 days prior to the
Annuity Commencement Date.
SECTION 4.03 - Allocation of Annuity, Variable and Fixed Annuities
Unless provided otherwise by the Plan, accumulation units shall be allocated to
provide a variable annuity, a fixed annuity, or a combination of both, as
elected by the Participant provided such election is made in writing and
received at the Home Office of Aetna at least 30 days prior to the Annuity
Commencement Date. In the absence of such an election or Plan provision to the
contrary, when a Retirement Annuity is effected for a Participant, if Section
2.05 is applicable, it will be a variable annuity; if Section 2.04 is
applicable, General Account accumulation units in the Participant's Individual
Account will be used to provide a fixed dollar annuity and Separate Account
accumulation units will be used to provide a variable annuity.
When a Retirement Annuity is effected for a Participant in accordance with
Section 4.01 to the extent possible the fixed dollar annuity portion (annuity
units in the General Account) will be provided by application of the appropriate
number of General Account accumulation units and the variable annuity
15
<PAGE>
portion (annuity units in the Separate Account) will be provided by application
of the appropriate number of Separate Account accumulation units.
A. Variable Annuity - A variable annuity is an annuity with payments varying
in amount in accordance with the net investment results of the Separate
Account reserves invested in Fund shares or Income Shares as described in
the Valuation provisions of Article II. After the first monthly payment for
a variable annuity has been determined in accordance with the provisions of
the Contract, a number of Separate Account annuity units is determined by
dividing the first monthly payment by the appropriate Separate Account
annuity unit value on the Annuity Commencement Date. Once variable annuity
payments have begun, the number of annuity units remains fixed.
The dollar amount of the second and subsequent variable annuity payments is
not predetermined and may change from month to month. The actual amount of
each variable annuity payment after the first is determined by multiplying
the number of Separate Account annuity units by the appropriate (Fund
shares or Income Shares) Separate Account annuity unit value as described
in the Valuation provisions of Article II for the Valuation Period in which
the payment is due.
Aetna guarantees that the dollar amount of variable annuity payments shall not
be affected by variation in the actual mortality or expense experience of Aetna.
B. Fixed Dollar Annuity - A fixed dollar annuity is an annuity with payments
which remain fixed as to dollar amount throughout the payment period. As in
the case of the variable annuity, a number of annuity units is determined
when payments commence. Since the General Account annuity unit value is
always $10.00, payments after the first will always be the same as the
first monthly payment.
SECTION 4.04 - Frequency of Payments
Annuity payments under this Contract will be made monthly, except that, if such
payments would amount to less than $20 each, Aetna reserves the right to make
payments at less frequent intervals, but not less frequently than annually;
provided, however, that if on the Annuity Commencement Date the annual rate of
payment to any payee is less than $100, Aetna may make such other settlement as
may be equitable to the payee.
TABLES
SECTION 4.05 - Description of Tables
The Tables contained herein show the amount of the first monthly payment under
Options 3, 4 and 5 that can be provided by a number of accumulation units having
a value of $1,000 after deduction of any premium taxes payable. The dollar value
of the accumulation units applied will be calculated on the basis of the
accumulation unit value as of the last day of the tenth Valuation Period
preceding the Annuity Commencement Date and such value will be reduced by any
premium taxes payable before application to effect a Retirement Annuity. The
amount of each monthly payment will depend upon the sex and age of the person
with respect to whom the Retirement Annuity is effected at the Annuity
Commencement Date.
Age, as used above, shall mean age nearest birthday at the Annuity Commencement
Date.
16
<PAGE>
The tables are based on The Annuity Table for 1949 for males, set back one year
for males and six years for females, and a net investment rate of 3.5% per annum
for the General Account and Separate Account (FV columns of rates) and 5% per
annum for the Separate Account (V columns of rates). The Owner may elect prior
to the Annuity Commencement Date that variable annuity payments be based on an
assumed net investment rate of 3.5% per annum or 5% per annum. In the absence of
such election, the net investment rate of 3.5% per annum will be used.
17
<PAGE>
AMOUNT OF FIRST MONTHLYPAYMENT
FOR EACH $1,000 AFTER DEDUCTION OF ANY PREMIUM TAXES
OPTION THREE PAYMENTS FOR A FIXED PERIOD
<TABLE>
<CAPTION>
Years Amount of Payments Years Amount of Payments Years Amount of Payments
of Pay- of Pay- of Pay-
ments FV V ments FV V ments FV V
------- ------ ------ ------- ----- ----- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $84.65 $85.21 11 $9.09 $9.77 21 $5.56 $6.33
2 43.05 43.64 12 8.46 9.16 22 5.39 6.17
3 29.19 29.80 13 7.94 8.64 23 5.24 6.02
4 22.27 22.89 14 7.49 8.20 24 5.09 5.88
5 18.12 18.74 15 7.10 7.82 25 4.96 5.76
6 15.35 15.99 16 6.76 7.49 26 4.84 5.65
7 13.38 14.02 17 6.47 7.20 27 4.73 5.54
8 11.90 12.56 18 6.20 6.94 28 4.63 5.45
9 10.75 11.42 19 5.97 6.71 29 4.53 5.36
10 9.83 10.51 20 5.75 6.51 30 4.45 5.28
</TABLE>
OPTION FOUR LIFE INCOME WITH
<TABLE>
<CAPTION>
Payments Guaranteed for a Fixed Period of Months
-----------------------------------------------------------------------------------------
Age of Payee None 120 180 240
Male Female FV V FV V FV V FV V
---- ------ ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 55 $4.98 $5.89 $4.89 $5.78 $4.77 $5.65 $4.62 $5.48
51 56 5.08 5.99 4.98 5.86 4.85 5.71 4.68 5.53
52 57 5.18 6.09 5.07 5.95 4.93 5.79 4.74 5.59
53 58 5.30 6.20 5.17 6.04 5.01 5.86 4.80 5.64
54 59 5.41 6.32 5.27 6.14 5.09 5.94 4.86 5.70
55 60 5.54 6.44 5.37 6.24 5.17 6.02 4.92 5.75
56 61 5.67 6.57 5.48 6.34 5.26 6.10 4.98 5.80
57 62 5.80 6.71 5.59 6.45 5.35 6.18 5.04 5.86
58 63 5.95 6.85 5.71 6.56 5.44 6.26 5.10 5.91
59 64 6.10 7.00 5.83 6.68 5.53 6.35 5.16 5.97
60 65 6.27 7.16 5.96 6.80 5.62 6.43 5.22 6.02
61 66 6.44 7.34 6.09 6.93 5.72 6.52 5.27 6.07
62 67 6.63 7.52 6.23 7.06 5.81 6.61 5.33 6.12
63 68 6.82 7.72 6.38 7.20 5.91 6.70 5.38 6.17
64 69 7.04 7.93 6.53 7.35 6.00 6.79 5.43 6.21
65 70 7.26 8.16 6.68 7.50 6.10 6.88 5.47 6.25
66 71 7.50 8.40 6.84 7.65 6.19 6.97 5.52 6.29
67 72 7.76 8.66 7.01 7.81 6.28 7.05 5.55 6.33
68 73 8.04 8.94 7.18 7.97 6.37 7.14 5.59 6.36
69 74 8.34 9.24 7.35 8.13 6.46 7.22 5.62 6.39
70 75 8.67 9.56 7.52 8.30 6.54 7.29 5.65 6.41
71 76 9.01 9.91 7.70 8.47 6.62 7.36 5.67 6.43
72 77 9.39 10.29 7.88 8.64 6.69 7.43 5.69 6.45
73 78 9.79 10.69 8.05 8.80 6.76 7.49 5.71 6.47
74 79 10.22 11.13 8.22 8.97 6.81 7.55 5.72 6.48
75 80 10.69 11.60 8.39 9.13 6.87 7.60 5.73 6.49
</TABLE>
The FV columns above assume a net investment rate of
3.5% per annum. The V columns above assume a net
investment rate of 5% per annum. Rates for ages not
shown will be provided on request.
18
<PAGE>
AMOUNT OF FIRST MONTHLY PAYMENT
FOR EACH $1,000 AFTER DEDUCTION OF ANY PREMIUM TAXES
OPTION FIVE JOINT AND LAST SURVIVOR ANNUITY
100% TO THE SURVIVOR
NO FIXED PERIOD
<TABLE>
<CAPTION>
Age of Payee
--------------------------------------------------------------------------------------------------------------
Age of
Secondary Male 45 Male 50 Male 55 Male 60 Male 65 Male 70 Male 75
Payee Female 50 Female 55 Female 60 Female 65 Female 70 Female 75 Female 80
Male Female FV V FV V FV V FV V FV V FV V FV V
- ---- ------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 55 $4.10 $5.00 $4.27 $5.16 $4.43 $5.31 $4.57 $5.44 $4.69 $5.57 $4.79 $5.67 $4.86 $5.75
55 60 4.21 5.11 4.43 5.31 4.65 5.51 4.86 5.71 5.04 5.90 5.20 6.06 5.32 6.19
60 65 4.30 5.20 4.57 5.44 4.86 5.71 5.15 5.99 5.43 6.26 5.68 6.52 5.88 6.73
65 70 4.38 5.28 4.69 5.57 5.04 5.90 5.43 6.26 5.83 6.65 6.21 7.04 6.56 7.38
70 75 4.44 5.34 4.79 5.67 5.20 6.06 5.68 6.52 6.21 7.04 6.78 7.59 7.33 8.14
75 80 4.48 5.38 4.86 5.75 5.32 6.19 5.88 6.73 6.56 7.38 7.33 8.14 8.16 8.96
80 85 -- -- 4.91 5.81 5.41 6.29 6.03 6.90 6.82 7.66 7.80 8.62 8.95 9.76
</TABLE>
JOINT AND LAST SURVIVOR ANNUITY
50% TO THE SURVIVOR
NO FIXED PERIOD
<TABLE>
<CAPTION>
Age of Payee
--------------------------------------------------------------------------------------------------------------
Age of
Secondary Male 45 Male 50 Male 55 Male 60 Male 65 Male 70 Male 75
Payee Female 50 Female 55 Female 60 Female 65 Female 70 Female 75 Female 80
Male Female FV V FV V FV V FV V FV V FV V FV V
- ---- ------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 55 $4.75 $5.67 $4.98 $5.89 $5.24 $6.15 $5.55 $6.47 $5.91 $6.84 $6.32 $7.29 $6.79 $7.81
55 60 4.99 5.91 5.24 6.15 5.54 6.44 5.88 6.78 6.28 7.20 6.76 7.70 7.30 8.28
60 65 5.26 6.20 5.55 6.47 5.88 6.78 6.27 7.16 6.73 7.63 7.27 8.19 7.90 8.86
65 70 5.59 6.54 5.91 6.84 6.28 7.20 6.73 7.63 7.26 8.16 7.90 8.80 8.65 9.58
70 75 5.96 6.95 6.32 7.29 6.76 7.70 7.27 8.19 7.90 8.80 8.67 9.56 9.57 10.48
75 80 6.37 7.42 6.79 7.81 7.30 8.28 7.90 8.86 8.65 9.58 9.57 10.48 10.69 11.60
80 85 -- -- 7.30 8.39 7.88 8.94 8.59 9.61 9.49 10.46 10.61 11.56 12.00 12.92
</TABLE>
The FV columns above assume a net investment rate of
3.5% per annum. The V columns above assume a net
investment rate of 5% per annum. Rates for ages not
shown will be provided on request.
19
<PAGE>
Aetna Life Insurance and Annuity Company
Home Office: 151 FARMINGTON AVE.
HARTFORD, CONNECTICUT 06156
(203) 273-0123
GROUP DEPOSIT ADMINISTRATION CONTRACT
ACTIVE LIFE FUND IN SEPARATE ACCOUNT
AND GENERAL ACCOUNT
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE
NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT.
<PAGE>
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract is hereby endorsed as follows:
The following Section under GENERAL PROVISIONS is amended as follows:
The following paragraph is added to the end of Control of Contract and
Individual Accounts or Data to be furnished Aetna, as applicable:
Any payment(s) made under this Contract to other than the Contract Owner must be
in compliance with the provisions of the Retirement Equity Act of 1984 (REA). At
the time payment is requested or an Annuity Option is elected by the Contract
Owner, Aetna will require the Contract Owner to certify the payment option is
elected in compliance with REA. In the absence of such certification, payment
will be made to the Contract Owner. For Designation of Beneficiary the current
provision is deleted and replaced with the following: The beneficiary shall be
the Contract Owner.
The following condition is added to the RETIREMENT ANNUITY PROVISIONS or the
ANNUITY PROVISIONS of the Contract as follows:
The Contract Owner may tell Aetna, on behalf of a Participant, to pay all or any
portion of the Participant's value in the Contract (minus any premium tax) as a
premium for an Annuity Option.
Required Distribution to Participant: Distribution to the Participant must begin
in the form of periodic payments no later than the April 1 following the
calendar year in which the Participant attains age 70 1/2, or such later age as
may be allowed under federal law or regulations. In lieu of an Annuity election,
the Contract Owner may direct Aetna to make a lump sum payment. In no event may
any Annuity Option extend beyond:
a) The life of the Annuitant;
b) The lives of the Annuitant and the Annuitant's beneficiary under the Plan;
c) Any certain period greater than the Annuitant's life expectancy as
determined according to regulations under Code Section 401(a)(9); or
d) Any certain period greater than the life expectancy of the Annuitant and
the Annuitant's beneficiary under the Plan, as determined according to
regulations under Code Section 401(a)(9).
In no event may payments to the Participant's beneficiary under the Plan under
an Annuity Option extend beyond:
a) The life of the Participant's beneficiary determined as of the date
payments are to commence; or
b) Any certain period greater than the Participant's beneficiary's life
expectancy as determined by regulations under Code Section 401(a)(9).
RETIREMENT ANNUITY PROVISIONS or ANNUITY PROVISIONS: Add to the Joint and Last
Survivor Annuity or Life Income for Two Payees Option a new subsection as
follows:
100% of the payment to continue to the survivor if the survivor is the
Annuitant and 50% of the payment to continue to the survivor if the
survivor is the second Annuitant.
1
<PAGE>
LIFE INCOME FOR TWO PAYEES
JOINT AND 1/2 CONTINGENT LIFE INCOME ANNUITY
NO MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Age of Second Annuitant
<TABLE>
<CAPTION>
Age of
Annuitant 45 50 55 60 65 70 75 80 85
- ----------- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $3.86 $3.89 $3.93 $3.94 $3.96 $3.97 $3.98 $3.98 $3.98
50 4.02 4.10 4.15 4.18 4.21 4.23 4.24 4.25 4.26
55 4.22 4.31 4.42 4.48 4.53 5.57 4.59 4.61 4.61
60 4.43 4.56 4.70 4.84 4.93 4.99 5.04 5.07 5.09
65 4.69 4.84 5.02 5.22 5.42 5.54 5.63 5.69 5.73
70 4.99 5.17 5.39 5.65 5.93 6.23 6.40 6.52 6.60
75 5.33 5.54 5.82 6.14 6.52 6.95 7.40 7.64 7.81
80 5.70 5.96 6.29 6.69 7.17 7.75 8.41 9.08 9.45
85 6.07 6.38 6.75 7.24 7.84 8.59 9.49 10.51 11.50
</TABLE>
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
Age of Second Annuitant
<TABLE>
<CAPTION>
Age of
Annuitant 45 50 55 60 65 70 75 80 85
- ----------- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $4.80 $4.83 $4.86 $4.88 $4.89 $4.90 $4.91 $4.92 $4.92
50 4.95 5.02 5.06 5.10 5.13 5.15 5.16 5.17 5.18
55 5.14 5.23 5.32 5.38 5.43 5.46 5.49 5.51 5.52
60 5.36 5.47 5.59 5.72 5.80 5.86 5.91 5.95 5.97
65 5.63 5.77 5.93 6.10 6.29 6.41 6.50 6.56 6.60
70 5.96 6.12 6.31 6.54 6.81 7.08 7.25 7.37 7.46
75 6.35 6.54 6.77 7.06 7.42 7.81 8.25 8.49 8.66
80 6.79 7.01 7.30 7.66 8.11 8.65 9.28 9.93 10.29
85 7.26 7.53 7.86 8.29 8.85 9.55 10.41 11.39 12.37
</TABLE>
These Annuity rates are based on mortality from 1983 Table a.
Endorsed and made a part of the Contract on the effective date of the Contract.
/s/ Dan Kearney
President
Aetna Life Insurance and
Annuity Company
2
<PAGE>
Aetna Life Insurance and Annuity Company
ENDORSEMENT
This contract is hereby endorsed to add the Section ANNUITY PAYMENT GUARANTEE to
the SETTLEMENT PROVISIONS to read as follows:
"ANNUITY The Annuity Payment Guarantee may be elected at the time election
PAYMENT of the first, second, or fourth option is made. Such election may
GUARANTEE only be made if election is made for a variable annuity based on
an assumed annual net investment rate of 3.5%. If said Annuity
Payment Guarantee is elected, the first monthly payment for the
variable annuity will be calculated in accord with the contract
provisions but the payee will only receive a first payment of 87%
of the calculated first monthly payment. Aetna further guarantees
that any future payment due after the first monthly payment will
be the greater of (a) or (b) where (a) is 87% of the first monthly
payment calculated in accord with the contract provisions, and (b)
is the payment due after the first calculated in accord with
contract provisions but calculated on the basis of the first
payment being only 87% of the first monthly payment."
Endorsed and made a part of this contract on the later of January
1, 1980 or the Date of Issue of this contract.
/s/ William O. Bailey
President
<PAGE>
Aetna Life Insurance and Annuity Company
ENDORSEMENT
This Contract is endorsed to provide the following:
On the tenth anniversary of the effective date of this Contract any
termination or surrender fee which may apply shall be 0%.
Endorsed and made a part of this Contract on July 1, 1985.
/s/ William O. Bailey
President
<PAGE>
Aetna Life Insurance and Annuity Company
ENDORSEMENT
This Contract is hereby endorsed to include the following new provisions:
During any calendar year, Aetna may be told to change the investment mix
twelve times. Should Aetna allow additional changes, each may be subject
to a fee of up to $10.
Twelve transfers of Current Value (excluding transfers from the GA
Account at the end of a Guaranteed Term) can be made during a calendar
year period. Should Aetna allow additional transfers, each may be subject
to a fee of up to $10.
Endorsed and made a part of this Contract effective May 1, 1989.
/s/ John J. Martin
President
Aetna Life Insurance and Annuity Company
<PAGE>
Aetna Life Insurance and Annuity Company
ENDORSEMENT
This Contract is hereby endorsed to delete the previous Guaranteed Accumulation
Account (GA Account) Endorsement and replace it with the following:
Add to the GENERAL DEFINITIONS Section of the Contract the following paragraphs:
Maturity Date: The last day of a GA Account Term.
Matured Term Value: The amount payable on a GA Account Term's Maturity
Date.
Nonunitized Separate Account: An account set up by Aetna under Tile 38,
Sec. 38-154a, of the Connecticut General Statutes, which is used to hold
assets for GA Account Terms greater than three years. The Owner or
Participant, as applicable, does not participate in the investment gain or
loss from the assets held in the GA Account.
The Guaranteed Accumulation Account (GA Account) is amended and restated as
follows:
The GA Account guarantees stipulated rates of interest for stated periods
of time (see (1) and (3) below). Amounts withdrawn before the end of a
Guaranteed Term may be subject to a Market Value Adjustment (MVA) (see (7)
below).
(1) Deposit Period - A calendar month, a calendar quarter, or any other period
of time specified by Aetna during which Net Purchase Payment(s) and
transfers are accepted into the GA Account for one or more Guaranteed
Terms.
(2) Guaranteed Term (Term) - The period of time for which interest rates are
guaranteed on Net Purchase Payment(s) and on transfers made into a Deposit
Period of the GA Account. Terms are offered at Aetna's discretion for
various lengths of time ranging up to and including ten years.
(3) Guaranteed Term Classifications - The grouping of Terms according to their
time to maturity. The following are the Classifications:
(a) Short Term: Terms of up to and including 3 years; or
(b) Long Term: Terms of greater than 3 years and up to and including
10 years.
During a Deposit Period, Aetna may make available one or more Terms
within a Classification. The Owner has the option to allocate Net
Purchase Payment(s) and
1
<PAGE>
transfers into any or all of the available Deposit Period Terms. If no
specific direction is given, Net Purchase Payment(s) and transfers will
go into available Terms on a pro rata basis within the Classification(s)
previously chosen by the Owner. At least one Term in the Short Term
Classification will be available each Deposit Period.
(4) Guaranteed GA Account Interest Rates (Guaranteed Rates) - Aetna will
declare all interest rate(s) applicable to a specific Term at the start of
the Deposit Period for that Term. These rate(s) are guaranteed by Aetna for
that Deposit Period and the ensuing Term and are not based on the actual
investment experience of the underlying assets in the GA Account. The
Guaranteed Rates are annual effective yields. The interest is credited
daily at a rate that will produce the guaranteed annual effective yield
over the period of a year. No annual rate will ever be less than 4%.
For Terms of one year or less, one Guaranteed Interest Rate is set and
announced for that full Term. For other Terms, there may be two or more
rates. The rate(s) will be set and announced prior to the Deposit Period
for that Term and will not be subject to change.
(5) Withdrawals from GA Account - Full or partial surrenders may be requested
at any time from the GA Account. However, amounts withdrawn prior to the
Maturity Date of a Term to satisfy a surrender request may be subject to an
MVA (see (7) below).
Full and partial surrenders are satisfied by withdrawing amounts from
each of the Fund(s), the Fixed Account, the GA Account Short Term
Classification and the GA Account Long Term Classification on a pro rata
basis. However, the Owner or Participant, as applicable, may specify a
particular order in which investment options will be liquidated in order
to satisfy a partial surrender request.
For purposes of withdrawals, Terms within the GA Account Short Term and
Long Term Classifications are considered as two separate investment
options. Any withdrawal which is a surrender will be subject to the
Maintenance Fee and Surrender Fee as appropriate. Also, amounts will be
removed within a GA Account Classification starting with the Term still
in effect with the oldest Deposit Period.
Amounts may be transferred at any time subject to Contract specifications
(see (9) below). Amounts transferred prior to the Maturity Date of a Term
are subject to an MVA (see (7) below). Fund(s) will be removed within the
elected Classification starting with the Term still in effect with the
oldest Deposit Period.
During the Deposit Period and the 90 days following the close of the
Deposit Period, any amounts applied to the GA Account during that Deposit
Period may not be withdrawn unless due to:
2
<PAGE>
(a) A full or partial surrender;
(b) A payment of a premium for an Annuity Option; or
(c) The Sum Payable at Death provision.
(6) Maturity Date/Reinvestment - For all GA Account Term(s) existing as of the
effective date of this endorsement in addition to GA Account Term(s)
announced subsequent to that date, the Owner or Participant, as applicable,
will be mailed a notice at least 18 calendar days before a Term's Maturity
Date. This notice will contain the current Deposit Period's Guaranteed
Rate(s), Term(s) and a projected Matured Term Value.
The Matured Term Value may be surrendered or transferred on the Term's
Maturity Date without an MVA. If no specific direction is given by the
Owner or Participant, as applicable, prior to the Maturity Date, each
Matured Term Value will be reinvested in a Term of the same duration. In
the event that a Term of the same duration is unavailable, each Matured
Term Value will automatically be reinvested in the next shortest Term
available in the same Classification during the then current Deposit
Period. If however, only one Term is available within the Classification,
then the Matured Term Value will automatically be reinvested in that
Term. Within two business days after the Maturity Date, the Owner or
Participant, as applicable, will be mailed a confirmation statement. This
statement will state the Terms and Guaranteed Rates which will apply to
the reinvested Matured Term Value.
During the calendar month following the Term's Maturity Date, one
exception is allowed to the 90 day transfer restriction and MVA under (5)
and (7). This exception is applicable to each Matured Term Value plus any
interest accrued thereon, provided no part of the Matured Term Value was
transferred on the Maturity Date.
During this calendar month period, the Owner or Participant, as
applicable, may notify Aetna's Home Office to transfer or surrender all
or part of the Matured Term Value plus any interest accrued thereon from
the GA Account without an MVA. This provision only applies to the first
such request received from the Owner or Participant, as applicable,
during this period for any Matured Term Value. The Matured Term Value
plus any interest accrued thereon may be transferred upon such request
without an MVA:
(a) To any other Terms of the GA Account available in the current Deposit
Period; or
(b) To any other allowable Fund(s).
3
<PAGE>
If no such notification is given, the Matured Term Value will remain
subject to the terms and conditions of the new Term. All surrender and
transfer requests will be processed as of the date they are received in
good order at Aetna's Home Office.
If this Contract is issued under a Tax Deferred Annuity Plan (see
Specifications page) the above notice will be sent to the Participant(s).
(7) Market Value Adjustment (MVA) - There will be an MVA for a withdrawal
from the GA Account before the end of a Term when the withdrawal is due
to:
(a) A transfer;
(b) A full or partial surrender; or
(c) A payment of a premium for Annuity Option 2.
The amount of the withdrawal will be adjusted to a market value amount as
described below.
The market value adjusted amount will be equal to the amount withdrawn
multiplied by the following ratio:
x
-----
365
(1+i)
------------
x
-----
365
(1+j)
Where: i is the Deposit Yield
j is the Current Yield
x is the number of days remaining, (computed from Wednesday of the
week of withdrawal) in the Guaranteed Term.
The Deposit Period Yield will be determined as follows:
(bullet) At the close of the last business day of each week of the Deposit
Period, a yield will be computed as the average of the yields on that
day of U.S. Treasury Notes which mature in the last three months of
the Guaranteed Term.
(bullet) The Deposit Period Yield is the average of those yields for the
Deposit Period. If withdrawal is made prior to the close of the
Deposit Period, it is the average of those yields on each week
preceding withdrawal.
4
<PAGE>
The Current yield is the average of the yields on the last business day of the
week preceding withdrawal on the same U.S. Treasury Notes included in the
Deposit Period Yield.
In the event that no U.S. Treasury Notes which mature in the last three months
of the Guaranteed Term exist, Aetna reserves the right to use the U.S. Treasury
Notes that mature in a following quarter.
Full and partial surrenders as well as transfers made within six months of the
date of death of the Participant under the Sum Payable at Death provision will
be the greater of:
(bullet) The aggregate MVA amount which is the sum of all market value
adjusted amounts calculated due to a withdrawal of amounts (for
surrender or transfer) from Terms prior to the end of those Terms.
The aggregate MVA may be either positive or negative; or
(bullet) The applicable portion of the Current Value in the GA Account.
After the six month period, the surrender or transfer will be the aggregate MVA
amount (i.e. including all MVAs).
The greater of the aggregate MVA amount or the applicable portion of the Current
Value in the GA Account is applied to amounts withdrawn from the GA Account for
payment of a premium under Annuity Options 3 or 4.
Aetna may make any change to this provision with 30 days advance written notice
to the Owner or Participant, as applicable. Any such change shall become
effective for Purchase Payment(s), transfers or reinvestments made to any new
Term by any present or future Participant.
(8) Deposits to the GA Account - All amounts in the GA Account under the
Short Term Classification are made to the General Account.
All amounts in the GA Account under the Long Term Classifications are
made to a Nonunitized Separate Account. There are no discrete units for
this Nonunitized Separate Account. The Owner or Participant, as
applicable, does not participate in the gain or loss from the assets held
in the Nonunitized Separate Account. Such gain or loss is borne entirely
by Aetna. These assets may be chargeable with liabilities arising out of
any other business of Aetna.
For Terms under both the Short Term and Long Term Classifications, Aetna
guarantees stipulated interest rates to be credited to the GA Account.
All assets of Aetna including amounts made to the GA Account are
available to meet the guarantees under the GA Account.
5
<PAGE>
(9) Before an Annuity Option is elected, all or any portion of the Current
Value may be transferred from any Fund or GA Account:
(a) To any other allowable Fund;
(b) To the Fixed Account; or
(c) To Terms of the GA Account available in the current Deposit Period.
Amounts in a specific GA Account Term cannot be transferred to the
Deposit Period of another Term within the same Classification except at
the Term's maturity (see (6)).
Amounts applied to Classifications of the GA Account may not be
transferred to the Fund(s) or to the Fixed Account during the Deposit
Period or for 90 days after the close of the Deposit Period.
Transfers from Terms of the GA Account are subject to the Withdrawal and
MVA provisions (see (5) and (7)).
Twelve transfers of Current Value can be made during a calendar year
period. The Transfer of any portion of the GA Account value at the
Maturity Date of a Term is not counted for this purpose. Aetna may allow
additional transfers, but each may be subject to a fee of up to $10.
Endorsed and made a part of this Contract on May 1, 1991 or the effective date
of the Contract whichever is later.
/s/ John J. Martin
President
Aetna Life Insurance and Annuity Company
<PAGE>
Aetna Life Insurance and Annuity Company
ENDORSEMENT
This Contract is hereby endorsed as follows:
The definition of Separate Account under the Definition of Certain Terms or
General Definitions section of the contract is hereby amended to read as
follows:
Separate Account: An account which buys and holds shares of the Fund(s).
Income, gains or losses, realized or unrealized are credited or charged
to this account without regard to other income, gains or losses of Aetna.
Aetna owns the assets held in a separate account and is not a trustee as
to such amounts. These accounts generally are not guaranteed and are held
at market value. The assets of such accounts, to the extent of reserves
and other contract liabilities of the account, shall not be charged with
other Aetna liabilities.
Endorsed and made a part of the Contract.
/s/ Edmund F. Kelly
President
Aetna Life Insurance and Annuity
<PAGE>
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract is hereby endorsed.
The term Valuation Period under Definitions is amended to read as follows:
The period of time for which a Fund determines its net asset value,
usually from 4:15 p.m. Eastern time each day the New York Stock Exchange
is open until 4:15 p.m. the next such day, or such other day that one or
more of the Funds determines its net asset value.
Endorsed and made a part of the Contract.
/s/ G. G. Benanav
President
Aetna Life Insurance and Annuity Company
Aetna Variable Annuity Life Insurance Company
Home Office: LITTLE ROCK, ARKANSAS
Executive Office: HARTFORD, CONNECTICUT 06115
Herein called Aetna
Agrees to pay benefits as provided herein with respect to any person entitled
thereto as a participant in the Plan named below.
This contract is issued to the Contract Owner in consideration of the
application therefor and of the payment by the Contract Owner of contributions
as provided herein.
Provisions contained in subsequent pages hereof form a part of this contract as
fully as if recited in their entirety over the signatures hereto affixed.
IN WITNESS WHEREOF, Aetna has caused this contract to be executed at its
Executive Office on the Execution Date.
/s/ Larry D. Gilbertson /s/ Donald M. Johnson
Secretary President
GROUP RETIREMENT ANNUITY CONTRACT
ACTIVE LIFE FUND IN SEPARATE ACCOUNT
AND GENERAL ACCOUNT INDIVIDUAL ALLOCATIONS
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT,
WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT,
ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT.
One of the Aetna Life & Casualty Companies
<PAGE>
SPECIFICATIONS
(HEREIN CALLED THE PLAN)
THIS CONTRACT IS ISSUED TO
(HEREIN CALLED THE CONTRACT OWNER)
GROUP ANNUITY CONTRACT NO.
CONTRACT EFFECTIVE DATE
EXECUTION DATE
THIS CONTRACT IS DELIVERED IN
AND IS SUBJECT TO THE LAWS OF THAT JURISDICTION
Item 1 Normal Annuity Form, Section 2.01 - Option
Item 2 Investment Rate, Section 2.05: Table I -
Table II -
Item 3 Margin deduction for each day of a Valuation Period,
Section 3.05 -
Item 4 Investment Rate Factor, Section 3.07 -
Item 5 Interest Rate, Section 4.12 Variable Annuities -
Fixed Annuities -
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
Definition of Certain Terms
ARTICLE II
Retirement Annuity Provisions.................................... 5
2.01 Notice to Effect an Annuity...................................... 5
2.02 Optional Annuity Forms, Election of Option....................... 5
2.03 Allocation of Annuity............................................ 6
A. Variable Annuity........................................... 6
B. Fixed Dollar Annuity....................................... 7
2.04 Frequency of Payments............................................ 7
2.05 Description of Tables............................................ 7
Table I.......................................................... 9
Table II......................................................... 11
ARTICLE III
Contributions, Valuation, and Discontinuance
Contributions
3.01 Contributions.................................................... 13
3.02 Application of Contributions..................................... 13
3.03 Participant's Individual Account................................. 13
3.04 Active Life Fund................................................. 14
Valuation
3.05 Net Investment Rate and Net Investment Factor.................... 14
3.06 Accumulation Unit Value.......................................... 14
3.07 Annuity Unit Value............................................... 14
3.08 Experience Rating................................................ 15
Discontinuance of Contributions
3.09 Suspension....................................................... 15
3.10 Change to a Paid-Up Contract..................................... 15
3.11 Transfer of Active Life Fund..................................... 16
ARTICLE IV
General Provisions
4.01 Change of Contract by Aetna...................................... 17
4.02 Change of Contract by Mutual Agreement - Retroactive Changes..... 17
4.03 Contract......................................................... 18
4.04 Individual Certificates.......................................... 18
3
<PAGE>
4.05 Conversion to Individual Contract................................ 18
4.06 Death Benefit.................................................... 18
4.07 Designation of Beneficiary....................................... 19
4.08 Facility of Payment.............................................. 19
4.09 Evidence of Survival............................................. 19
4.10 Misstatements and Adjustments.................................... 19
4.11 Assignments...................................................... 20
4.12 Basis of Reserves................................................ 20
4.13 Termination of Contract.......................................... 20
4.14 Data to be furnished to Aetna.................................... 20
4.15 Relation of this Contract to the Separate Account................ 21
4
<PAGE>
Article I
DEFINITION OF CERTAIN TERMS
1. CONTRACT YEAR - the period of 12 months commencing with either the Effective
Date or any anniversary thereof.
2. PARTICIPANT - a person who participates in the Plan.
3. ANNUITANT - a participant on whose life a Retirement Annuity has been
effected.
4. RETIREMENT ANNUITY - a series of payments provided under this Contract with
respect to a Participant.
5. ANNUITY COMMENCEMENT DATE - the date on which Retirement Annuity payments
commence with respect to a Participant under the terms of the Plan.
6. SEPARATE ACCOUNT - those assets of Aetna in the separate account
established by Aetna pursuant to the Arkansas Insurance Code, for this
class of contracts which provide variable benefits.
7. GENERAL ACCOUNT - all assets of Aetna other than those in separate accounts.
8. VALUATION DATE - each date as of which the Accumulation Unit Value or
Annuity Unit Value is determined pursuant to applicable regulatory
provisions or company procedures.
9. VALUATION PERIOD - the period from one Valuation Date to the next.
Article II
RETIREMENT ANNUITY PROVISIONS
SECTION 2.01 - Notice to Effect an Annuity
When a Participant is eligible for a Retirement Annuity in accordance with the
Plan, the Contract Owner shall notify Aetna to effect an annuity for such
Participant. On the Participant's Annuity Commencement Date Aetna shall apply
such portion of the value of the Participant's Individual Account as designated
by the Contract Owner to provide a Retirement Annuity on the applicable Optional
Annuity Form. In the absence of an election of an Optional Annuity Form in
accordance with Section 2.02, the Retirement Annuity will be on the Normal
Annuity Form as set forth in Item 1 of the Specifications.
SECTION 2.02 - Optional Annuity Forms, Election of Option
OPTION A - Life Annuity - An annuity payable monthly during the lifetime of an
Annuitant, ceasing with the last payment due prior to the Annuitant's death.
OPTION B - Life Annuity with 60, 120 or 180 Monthly Payments Guaranteed - an
annuity payable monthly during the lifetime of an Annuitant, with a guarantee
that if, at the death of the Annuitant, payments have been made for less than
60, 120 or 180 months as
5
<PAGE>
selected, payments will be continued thereafter to the Annuitant's beneficiary
during the remainder of said period. If a beneficiary dies while receiving
annuity payments, the then present value of the current dollar amount of the
remaining guaranteed number of annuity payments commuted on the basis of the
investment rate or rates on which the accumulation units were applied to
provide a Retirement Annuity, shall be paid in a lump sum to the estate of the
beneficiary.
OPTION C - Unit Refund Life Annuity - An annuity payable monthly during the
lifetime of an Annuitant, ceasing with the last payment due prior to the death
of the Annuitant, provided that, at the death of the Annuitant, the beneficiary
will receive an additional payment of the then dollar value of the number of
annuity units equal to the excess, if any, of (a) over (b) where (a) is the
total amount applied under the option divided by the annuity unit value at the
Annuity Commencement Date and (b) is the number of annuity units represented by
each payment multiplied by the number of payments made.
OPTION D - Joint and Last Survivor Annuity - An annuity payable monthly during
the lifetime of an Annuitant and thereafter during any remaining lifetime of a
designated second person.
The amount of the first payment under any of these options will be determined in
accordance with Section 2.05. No payments will be made under any of these
options prior to receipt by Aetna of satisfactory evidence of the date of birth
of the Annuitant and any joint Annuitant.
Election of Option - If provided by the Plan, in lieu of the Normal Annuity Form
Specified in Section 2.01 the Participant may elect any one of the Optional
Annuity Forms, but such election may be made only on a form acceptable to Aetna
and filed at its Home Office at least 30 days prior to the Annuity Commencement
Date.
SECTION 2.03 - Allocation of Annuity, Variable and Fixed Annuities
Unless provided otherwise by the Plan, the Participant's Individual Account may
be applied to provide a variable annuity, a fixed annuity, or a combination of
both, as elected by the Participant provided such election is made on a form
acceptable to Aetna and filed at its Home Office at least 30 days prior to the
Annuity Commencement Date.
In the absence of such an election, when a Retirement Annuity is effected for a
Participant, General Account accumulation units in the Participant's Individual
Account will be used to provide a fixed dollar annuity and Separate Account
accumulation units will be used to provide a variable annuity.
A. Variable Annuity - A variable annuity is an annuity with payments
varying in amount in accordance with the net investment results of the
Separate Account as described in the Valuation provisions of Article
III. After the first monthly payment for a variable annuity has been
determined in accordance with the
6
<PAGE>
provisions of the Contract, a number of Separate Account annuity units
is determined by dividing the first monthly payment by the Separate
Account annuity unit value on the Annuity Commencement Date. Once
variable annuity payments have begun, the number of annuity units
remains fixed.
The dollar amount of the second and subsequent variable annuity
payments is not predetermined and may change from month to month. The
actual amount of each variable annuity payments is not predetermined
and may change from month to month. The actual amount of each variable
annuity payment after the first is determined by multiplying the number
of Separate Account annuity units by the Separate Account annuity unit
value as described in the Valuation provisions of Article III for the
Valuation Period in which the payment is due.
Aetna guarantees that the dollar amount of variable annuity payments
shall not be affected by variation in the actual mortality experience
of payees from the mortality assumption, including any age adjustments,
as used in determining the first monthly payment.
B. Fixed Dollar Annuity - A fixed dollar annuity is an annuity with
payments which remain fixed as to dollar amount throughout the payment
period. As in the case of the variable annuity, a number of annuity
units is determined when payments commence. Since the General Account
annuity unit value is always $10.00, payments after the first will
never be less than the first monthly payment.
Aetna may, from time to time, by action of its Board of Directors,
increase the number of General Account annuity units to the extent that
such units are applicable to a guaranteed period of benefits, and the
value of such additional units will be payable only during the
guaranteed period.
SECTION 2.04 - Frequency of Payments
Annuity payments under this Contract will be made monthly, except that, if such
payments would amount to less than $25 each, Aetna reserves the right to make
payments at less frequent intervals; provided, however, that if at any time the
annual rate of payment to any payee is less than $100, Aetna may make such other
settlement as may be equitable to the payee.
TABLES
SECTION 2.05 - Description of Tables
The Tables contained herein show the dollar value of accumulation units required
to effect a variable annuity and a fixed annuity with a first monthly payment of
$1.00 under each of the Optional Annuity Forms. The dollar value of the
accumulation units applied will be calculated on the basis of the accumulation
unit value as of the last day of the tenth
7
<PAGE>
Valuation Period preceding the Annuity Commencement Date. The amount of each
monthly payment will depend upon the sex and adjusted age of the person with
respect to whom the Retirement Annuity is effected at the Annuity Commencement
Date. Adjusted age is determined as follows:
<TABLE>
<CAPTION>
Calendar Year of Birth Before 1901 1901-1915 1916 - 1935 1936 - 1955 1956 - 1975
<S> <C> <C> <C> <C> <C>
Adjusted Age is Actual Age plus 1 minus 1 minus 2 minus 3
</TABLE>
Actual age, as used above, shall mean age nearest birthday at the Annuity
Commencement Date.
The amounts shown in Tables I and II are based on the Progressive Annuity Table,
assuming year of birth 1900, and the investment rate set forth in Item 2 of the
Specifications.
If it would produce greater benefits, Aetna agrees that the first monthly
payment to the Annuitant will be determined on the same mortality and interest
basis used in determining rates for immediate annuities then being issued for
this class of Annuitant.
8
<PAGE>
Table I - VARIABLE ANNUITIES
DOLLAR VALUE REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
If so provided in the preceding paragraph of this Section 2.05, the following
amounts must be increased by the premium taxes payable at the time benefits are
purchased.
Options A, B and C - Single Life Annuities
<TABLE>
<CAPTION>
Monthly Payments Guaranteed
-------------------------------------------------------------
Adjusted Age
Male Female None 60 120 180 Unit Refund
- -------------------------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
50 54 $210.85 $211.36 $213.06 $216.23 $220.90
51 55 206.73 207.30 209.18 212.68 217.38
52 56 202.54 203.17 205.26 209.12 213.91
53 57 198.27 198.97 201.28 205.55 210.30
54 58 193.93 194.70 197.26 201.96 206.62
55 59 189.51 190.37 193.20 198.39 202.99
56 60 185.03 185.98 189.11 194.82 199.23
57 61 180.48 181.54 185.00 191.28 195.40
58 62 175.87 177.04 180.87 187.77 191.64
59 63 171.21 172.50 176.73 184.31 187.75
60 64 166.49 167.93 172.59 180.91 183.78
61 65 161.73 163.32 168.47 177.58 179.90
62 66 156.93 158.69 164.37 174.34 175.90
63 67 152.09 154.05 160.30 171.19 171.81
64 68 147.23 149.40 156.28 168.16 167.86
65 69 142.35 144.75 152.31 165.25 163.76
66 70 137.46 140.11 148.42 162.48 159.58
67 71 132.57 135.50 144.62 159.86 155.59
68 72 127.67 130.91 140.92 157.40 151.42
69 73 122.79 126.37 137.32 155.12 147.16
70 74 117.93 121.89 133.86 153.01 143.19
71 75 113.11 117.47 130.54 151.09 138.97
72 76 108.32 113.13 127.37 149.36 134.66
73 77 103.57 108.88 124.37 147.82 130.74
74 78 98.89 104.73 121.55 146.46 126.52
75 79 94.27 100.69 118.92 145.29 122.18
</TABLE>
9
<PAGE>
Option D - Joint and Survivor Life Annuity
<TABLE>
<CAPTION>
Adjusted Age of
Second Annuitant Adjusted Age of Annuitant
------------------------------------------------------------------------------------------
M-51 M-56 M-58 M-61 M-63 M-66 M-71
Male Female F-55 F-60 F-62 F-65 F-67 F-70 F-75
- ---- ------ ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
50 54 $237.79 $229.86 $227.15 $223.59 $221.57 $218.92 $215.73
55 59 229.05 218.34 214.55 209.38 206.35 202.42 197.39
57 61 225.97 214.14 209.85 204.01 200.50 195.93 190.01
60 64 221.91 208.43 203.38 196.39 192.18 186.50 179.02
62 66 219.55 204.99 199.50 191.72 186.96 180.56 171.88
65 69 216.52 200.49 194.31 185.42 179.85 172.21 161.64
70 74 212.71 194.65 187.42 176.84 170.06 160.43 146.43
</TABLE>
The dollar value required for any combination of ages not shown will be quoted
upon request.
10
<PAGE>
Table II - FIXED ANNUITIES
DOLLAR VALUE REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
If so provided in the preceding paragraph of this Section 2.05, the following
amounts must be increased by the premium taxes payable at the time benefits are
purchased.
Options A, B and C - Single Life Annuities
<TABLE>
<CAPTION>
Adjusted Age Monthly Payments Guaranteed
Male Female None 60 120 180 Unit Refund
---- ------ ---- -- --- --- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
50 54 $210.85 $211.36 $213.06 $216.23 $220.90
51 55 206.73 207.30 209.18 212.68 217.38
52 56 202.54 203.17 205.26 209.12 213.91
53 57 198.27 198.97 201.28 205.55 210.30
54 58 193.93 194.70 197.26 201.96 206.62
55 59 189.51 190.37 193.20 198.39 202.99
56 60 185.03 185.98 189.11 194.82 199.23
57 61 180.48 181.54 185.00 191.28 195.40
58 62 175.87 177.04 180.87 187.77 191.64
59 63 171.21 172.50 176.73 184.31 187.75
60 64 166.49 167.93 172.59 180.91 183.78
61 65 161.73 163.32 168.47 177.58 179.90
62 66 156.93 158.69 164.37 174.34 175.90
63 67 152.09 154.05 160.30 171.19 171.81
64 68 147.23 149.40 156.28 168.16 167.86
65 69 142.35 144.75 152.31 165.25 163.76
66 70 137.46 140.11 148.42 162.48 159.58
67 71 132.57 135.50 144.62 159.86 155.59
68 72 127.67 130.91 140.92 157.40 151.42
69 73 122.79 126.37 137.32 155.12 147.16
70 74 117.93 121.89 133.86 153.01 143.19
71 75 113.11 117.47 130.54 151.09 138.97
72 76 108.32 113.13 127.37 149.36 134.66
73 77 103.57 108.88 124.37 147.82 130.74
74 78 98.89 104.73 121.55 146.46 126.52
75 79 94.27 100.69 118.92 145.29 122.18
</TABLE>
11
<PAGE>
Option D - Joint and Survivor Life Annuity
<TABLE>
<CAPTION>
Adjusted Age of Second
Annuitant Adjusted Age of Annuitant
--------------------------------------------------------------------------------------
M-51 M-56 M-58 M-61 M-63 M-66 M-71
Male Female F-55 F-60 F-62 F-65 F-67 F-70 F-75
---- ------ ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
50 54 $237.79 $229.86 $227.15 $223.59 $221.57 $218.92 $215.73
55 59 229.05 218.34 214.55 209.38 206.35 202.42 197.39
57 61 225.97 214.14 209.85 204.01 200.50 195.93 190.01
60 64 221.91 208.43 203.38 196.39 192.18 186.50 179.02
62 66 219.55 204.99 199.50 191.72 186.96 180.56 171.88
65 69 216.52 200.49 194.31 185.42 179.85 172.21 161.64
70 74 212.71 194.65 187.42 176.84 170.06 160.43 146.43
</TABLE>
The dollar value required for any combination of ages not shown will be quoted
upon request.
12
<PAGE>
Article III
CONTRIBUTIONS, VALUATION, AND DISCONTINUANCE
CONTRIBUTIONS
SECTION 3.01 - Contributions
Aetna shall receive such contributions from the Contract Owner as are made in
accordance with the requirements of the Plan. Such contributions will be applied
by Aetna to provide accumulation units in accordance with Section 3.02.
SECTION 3.02 - Application of Contributions
The net contribution shall be equal to the total contribution less 8% and the
percentages for premium taxes payable at the time contributions are made.
The net contribution shall be applied as of the last day of the Valuation Period
in which the contribution is received by Aetna, to provide accumulation units on
the basis of the then current value of such units, such application being made
separately for net contributions allocated to the General Account and the
Separate Account in accordance with the instructions of the Contract Owner.
The number of accumulation units provided in each Account and credited to a
Participant's Individual Account, by any such application shall be determined by
dividing the net contribution for that Account applicable to that Participant by
the dollar value of one accumulation unit in that Account. The number of
accumulation units so determined will not be affected by any subsequent changes
in the dollar value of accumulation units.
SECTION 3.03 - Participant's Individual Account
A Participant's Individual Account under this Contract shall, at any time,
consist of a number of accumulation units equal to the number provided by the
application of the net contributions described in Section 3.02 in accordance
with the Plan, plus any additional units credited in accordance with Section
3.08. Benefits will be purchased or provided only in such amounts and under such
conditions as called for by the Plan. No Participant shall have any specific
rights to such Individual Account. The amount payable to, or applied to provide
benefits for, a Participant or beneficiary, shall be limited to the value of the
Participant's Individual Account.
When a Participant or beneficiary becomes entitled to a benefit in accordance
with the Plan the Contract Owner will notify Aetna as to the manner of payment
of any benefit and the disposition to be made of such Individual Account.
13
<PAGE>
SECTION 3.04 - Active Life Fund
The Active Life Fund under this Contract shall, at any time consist of the sum
of all Participant's Individual Accounts. At least once in each Contract Year
after the first, Aetna shall inform the Contract Owner of the then dollar value
of an accumulation unit, and the number of such units in each Individual
Account.
VALUATION
SECTION 3.05 - Net Investment Rate and Net Investment Factor
(a) The net investment rate for the General Account is a guaranteed rate as
below, compounded annually:
Contract Years 10 Thereafter
Guaranteed Rate 4% 3 1/2%
In addition, by action of its Board of Directors, Aetna may increase the net
investment rate at such time and for such period as the Directors may determine.
(b) The net investment rate for any Valuation Period for the Separate Account
is equal to the gross investment rate for that Account for the Valuation
Period less a margin deduction for each day of the Valuation Period as set
forth in Item 3 of the Specifications. Such gross investment rate is equal
to (i) the investment income and capital gains and losses, both realized
and unrealized, on the assets of the Separate Account, divided by (ii) the
amount of such assets at the beginning of the Valuation Period. Such gross
investment rate may be either positive or negative.
(c) The net investment factor for each Account is the sum of 1.0000000 and the
net investment rate for the Account.
SECTION 3.06 - Accumulation Unit Value
The value of an accumulation unit on May 3, 1996 was fixed at $10.00. The value
of an accumulation unit in each Account on the last day of any Valuation Period
thereafter is determined by multiplying such value on the last day of the
immediately preceding Valuation Period by the net investment factor for that
Account for the current Valuation Period.
SECTION 3.07 - Annuity Unit Value
The value of a General Account annuity unit is fixed at $10.00. The value of a
Separate Account annuity unit for the Valuation Period ending May 17, 1966 was
fixed at $10.00. For any period thereafter the value of a Separate Account
annuity unit is determined by
14
<PAGE>
multiplying the value of the Separate Account annuity unit for the preceding
Valuation Period by the product of (a) 1.0000000 decreased by the product of
the investment rate factor set forth in Item 4 of the Specifications and the
number of days in the Valuation Period and (b) the net investment factor of the
Separate Account for the tenth Valuation Period preceding the period for which
the value is being calculated.
SECTION 3.08 - Experience Rating
Aetna may apply an experience credit to this Contract at the end of any Contract
Year. Any such credit shall be applied in such manner as may be specified by the
Contract Owner and agreed to be Aetna.
DISCONTINUANCE OF CONTRIBUTIONS
SECTION 3.09 - Suspension
This Contract shall be suspended automatically on any anniversary of the
Effective Date if:
(a) The Contract Owner gives prior written notice to Aetna to transfer the
Active Life Fund in accordance with Section 3.11.
(b) If the Contract Owner fails to assent to any modification of this
Contract initiated by Aetna as provided in Section 4.01, which
modification would have been effective on such anniversary.
(c) Aetna has given written notice 90 days in advance of such anniversary
to the Contract Owner of suspension because the total number of active
Participants at any time is less than 25.
The Contract may also be suspended, or terminated as to new Participants, upon
written notice by the Contract Owner given Aetna at its Home Office 90 days in
advance of the effective date of such suspension.
Effective with such suspension, no new Participants may enter the Plan but
further contributions will be accepted by Aetna under the Contract as they are
applicable to Participants in the Plan prior to such suspension, subject to (c)
above. However, if the Contract Owner elects to transfer the Active Life Fund in
accordance with Section 3.11, no further contributions of any kind shall be
accepted by Aetna.
SECTION 3.10 - Change to a Paid-Up Contract
If the Contract Owner gives written notice to Aetna in advance of any
anniversary of the Effective Date to change to a paid-up Contract, subsequent to
such anniversary, no further contributions will be accepted by Aetna and no new
Participants will become eligible to receive benefits under this Contract. On
the date on which this Contract becomes paid-up,
15
<PAGE>
if Aetna has received written notification by the Contract Owner that the Plan
is being continued, all benefits earned under the terms of the Plan on that
date will be treated by Aetna in accordance with the provisions of the Plan.
If such written notification has not been received by Aetna on the date on
which this Contract becomes paid-up, or if on or after such date the Plan is
terminated, each Participant in the Plan will received a 100% vested interest
in all benefits earned under the terms of the Plan to the extent of the
adequacy of the Active Life Fund.
SECTION 3.11 - Transfer of Active Life Fund
If before this Contract is suspended under Section 3.09, the Contract Owner
files a written certification with Aetna stating
(a) in the case of a Plan qualified under Section 401 of the
Internal Revenue Code that
(i) all benefits under the Plan other than those being
provided in connection with previously effected
Retirement Annuities are to be provided through
another funding agency, and that
(ii) the Plan will, in the opinion of the Contract Owner,
continue to retain its qualified status under
Section 401 of the Internal Revenue Code
or
(b) in the case of a non-qualified Plan of deferred compensation
that
(i) the Contract Owner desires to liquidate this
Contract and receive the value thereof
then Aetna, being entitled to rely conclusively upon such certification will pay
to the specified funding agency (in the event (a) above is applicable) or to the
Contract Owner (in the event (b) above is applicable) the value of the number of
accumulation units in the Active Life Fund as of the date of such transfer,
provided, however that such value will be reduced by the excess of any sales and
administrative costs applicable to the Contract over amounts previously deducted
as provided in Section 3.02, such reduction not to exceed a percentage of the
value of the Active Life Fund as determined by entering the following table with
the number of Contract Years for which contributions were received:
Number of Contract Years 1 2 3 4 5 6 or more
Percentage 5% 4% 3% 2% 1% 0%
16
<PAGE>
The date of the transfer will be the date specified by the Contract Owner,
provided that Aetna reserves the right to change the date of transfer to a date
not later than 30 days after Aetna's receipt of the Contract Owner's request. If
the value of the accumulative units to be transferred exceeds $1,000,000, Aetna
reserves the right to transfer the excess over $1,000,000 in monthly
installments over a period not to exceed 12 months; each such installment shall
be the value of a number of General Account and Separate Account accumulation
units determined by dividing (i) the total number of such units subject to
periodic transfer by (ii) the number of installments. The dollar amount
transferred each month will be determined in accordance with the terms of the
Contract.
Article IV
GENERAL PROVISIONS
SECTION 4.01 - Change of Contract by Aetna
On the first anniversary of the Effective Date and the first day of any Contract
Year thereafter, Aetna, upon written notice given 90 days in advance to the
Contract Owner, may from time to time, change any of the terms of this Contract,
provided that (a) any such change will not affect in any way the amount or terms
of any Retirement Annuity effected prior to the effective date of such change
and (b) any such change shall not affect Sections 2.05 Annuity Tables, 3.02
Application of Contributions, 3.05 Net Investment Rate and Net Investment
Factor, 3.06 Accumulation Unit Value, 3.07 Annuity Unit Value, and 3.08
Experience Rating as they apply to accumulation units provided by contributions
made on behalf of Participants who were in the Plan prior to the effective date
of such change to the extent that such contributions in any year are not in
excess of twice the first annual contribution made on behalf of such
Participant.
SECTION 4.02 - Change of Contract by Mutual Agreement - Retroactive Changes
A. By agreement in writing, the Contract Owner and Aetna may change, from
time to time, any or all of the terms of this Contract provided that
any such change will not in any way affect the amount or terms of any
Retirement Annuity already effected prior to the effective date of such
change.
B. Notwithstanding any of the terms of this Contract, the Contract Owner
and Aetna, by an agreement in writing on any date agreed upon by the
Contract Owner and Aetna may change, from time to time, any terms of
this Contract if it is deemed necessary or appropriate to do so in
order to enable the Plan or Contract to comply with the requirements of
Section 401 of the Internal Revenue Code which change may be made
retroactive to the Effective Date or any date thereafter.
C. Consent of any Participant or beneficiary shall not be requisite to
any change in this Contract.
17
<PAGE>
SECTION 4.03 - Contract
This Contract and the application of the Contract Owner, a copy of which is
attached hereto and made a part hereof, will constitute the entire Contract. All
statements made by the Contract Owner will be deemed representations and not
warranties, and no statement will void any payment under this Contract or be
used in defense of a claim unless it is contained in the application of the
Contract Owner. Only the President, a Vice President, the Secretary or an
Assistant Secretary has the power on behalf of Aetna to make or modify this
Contract.
SECTION 4.04 - Individual Certificates
Aetna shall issue a certificate to the Contract Owner for delivery to each
Participant. Each such certificate shall set forth in substance the benefits to
which such Participant is entitled under this Contract. Certificates described
in this section shall not constitute a part of this Contract.
SECTION 4.05 - Conversion to Individual Contract
Upon termination of participation in the Plan, the Participant who is entitled
to a benefit in accordance with the terms of the Plan may elect, if the Plan so
permits or the Contract Owner so requests, to convert to an individual annuity
contract. The individual annuity contract will be of the form then currently
issued for this class of Annuitant, at a duration equivalent to the lesser of
the number of full years (a) such Participant has been in the Plan or (b) this
Contract has been in force. If the method set forth in the individual annuity
contract for determining the value of an accumulation unit is the same method as
set forth in Valuation Provisions of Article III, a number of accumulation units
designated by the Contract Owner may be transferred from the Contract to the
individual annuity contract. Any accumulation units not so transferred will
remain in force under this Contract.
SECTION 4.06 - Death Benefit
Upon receipt of proof satisfactory to the Company of the death of a Participant
before the Annuity Commencement Date, the Company will determine, as of the date
of receipt of such proof, the greater of (a) the accumulated value of the
Participant's individual Account, or (b) the sum of all contributions made on
behalf of the Participant. Payment of the greater of (a) or (b) will be made to
the Beneficiary of the Participant within seven days of the date of
determination. The death benefit may be taken in one lump sum or under any of
the settlement options available in Aetna's individual annuities then being
issued.
SECTION 4.07 - Designation of Beneficiary
Each Participant shall have the sole right to designate the beneficiary to which
any death benefit hereunder will be payable and, from time to time, without the
consent of such
18
<PAGE>
beneficiary, change the beneficiary designated by filing written notice of such
change with Aetna on a written form satisfactory to Aetna. After such notice
is so filed the change will relate back to and take effect as of the date the
Participant signed such written notice, whether or not the Participant is
living on the date such notice is received by Aetna, but without prejudice to
Aetna on account of any payment made by it before such notice. If at the death
of a Participant there is more than one beneficiary designated and in such
designation the Participant has failed to specify their respective interests,
the beneficiaries will share equally. If any designated beneficiary predeceases
the Participant, the rights and interests of such beneficiary will thereupon
terminate.
In the event the designated beneficiary predeceases the Participant or if no
beneficiary has been named, the amount of any death benefit will be paid to the
executors or administrators of the Participant's estate except that Aetna may in
such case, at its option, pay such amount to the wife or the husband, if living;
if not living, in equal shares to the then living children of the Participant;
if none, to either parent of the Participant, or to both equally, if both are
living; if neither parent is living, equal shares to the then living brothers
and sisters of such Participant.
SECTION 4.08 - Facility of Payment
If any payee under this Contract is, in the opinion of Aetna, physically or
mentally incapable of giving valid receipt and discharge for any payment due
under this Contract, then Aetna may, at its option, make payment thereof in
installments of not more than $50 per month to the person or persons who, in its
opinion, are caring for and supporting such payee until claim is made by a duly
appointed guardian or other legal representative of such payee. Payment to such
person or persons will constitute a complete discharge of the liability of Aetna
to the extent of such payments and it will assume no responsibility for the
proper application of the money paid.
SECTION 4.09 - Evidence of Survival
Aetna will have the right to require of any person entitled to a payment under
this Contract, satisfactory evidence that such person is living on the date on
which such payment is due.
SECTION 4.10 - Misstatements and Adjustments
If the age, sex, or any relevant fact relating to any person is found to be
misstated, the amounts of the payments under a Retirement Annuity shall be those
which are provided by the value of the accumulation units allocated to effect
such Retirement Annuity on the basis of the correct information, without
changing the date such Retirement Annuity was effected unless another adjustment
satisfactory to the Contract Owner and Aetna is made. Any adjustment made in
accordance with this Section shall be conclusive upon any person affected
thereby. The dollar amount of any underpayment made by Aetna shall be added to
the next payment due, and the dollar amount of any overpayment made by Aetna
shall
19
<PAGE>
be deducted from the next payment or payments due until recovered by Aetna.
If there are no further payments due, or if the total of such payments is
less than the overpayments, any remainder of such overpayments shall be charged
against the value of any forfeitures becoming available thereafter.
SECTION 4.11 - Assignments
Except insofar as may be contrary to any applicable laws, all payments under
this Contract of benefits arising under the Plan are not assignable or subject
to any claims of any creditor.
No assignment of this Contract will be binding on Aetna unless and until such
assignment is accepted by Aetna at its Home Office.
SECTION 4.12 - Basis of Reserves
The reserve held under this Contract as of any date will be at least equal to
100% of the dollar value as of such date of the accumulation units held in the
Active Life Fund, plus the reserve for such Retirement Annuities as have been
effected under this Contract. The dollar amount of the reserve held for the
Active Life Fund shall be the dollar value, as of such date, of the accumulation
units then constituting the Active Life Fund plus the reserve required for any
guaranteed minimum death benefit.
Reserves for annuities involving life contingencies shall be computed on the
basis of the Progressive Annuity Table, assuming births in the year 1900 and
interest per annum at the rate set forth in Item 5 of the Specifications, using
the sex and adjusted age of the payee as determined under Section 2.05.
SECTION 4.13 - Termination of Contract
This Contract will terminated at the close of the first day upon which the
performance and fulfillment by Aetna of all its duties and obligations arising
hereunder have been completed.
SECTION 4.14 - Data to be furnished to Aetna
The Contract Owner shall furnish all information which Aetna may reasonably
require for the administration of this Contract. If the Contract Owner cannot
furnish any required item of information. Aetna may request the person concerned
to furnish such information. Aetna shall not be liable for the fulfillment of
any obligations in any way dependent on such information until it receives such
information in form satisfactory to it.
Information furnished to Aetna may be corrected for demonstrated errors therein
unless Aetna has already acted to its prejudice by relying on such information.
Any records
20
<PAGE>
prepared by Aetna from information furnished to Aetna as described above shall
constitute prima facie evidence as to the truth of the information recorded
thereon.
SECTION 4.15 - Relation of this Contract to the Separate Account
Aetna shall have exclusive and absolute ownership and control of the assets of
both its General Account and its Separate Account. Neither the Contract Owner
nor any Participant shall have any individual or equitable ownership of any
investments or other assets of either of said Accounts and the records and
accounts kept by Aetna in connection with this Contract shall not be deemed to
constitute any recognition of any ownership by the Contract Owner or any
Participant of any portion of any said Accounts. All funds attributable to this
Contract and becoming part of either Account shall be invested or reinvested by
Aetna in such class or classes of investments, and in such extent as Aetna at
its sole discretion may determine. The method of determination by Aetna of the
value of an accumulation unit will be conclusive upon the Contract Owner and any
Participant.
21
<PAGE>
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract is hereby endorsed as follows:
The following Section under GENERAL PROVISIONS is amended as follows:
The following paragraph is added to the end of Control of Contract and
Individual Accounts or Data to be furnished Aetna, as applicable:
Any payment(s) made under this Contract to other than the Contract Owner must be
in compliance with the provisions of the Retirement Equity Act of 1984 (REA). At
the time payment is requested or an Annuity Option is elected by the Contract
Owner, Aetna will require the Contract Owner to certify the payment option is
elected in compliance with REA. In the absence of such certification, payment
will be made to the Contract Owner. For Designation of Beneficiary the current
provision is deleted and replaced with the following: The beneficiary shall be
the Contract Owner.
The following condition is added to the RETIREMENT ANNUITY PROVISIONS or the
ANNUITY PROVISIONS of the Contract as follows:
The Contract Owner may tell Aetna, on behalf of a Participant, to pay all or any
portion of the Participant's value in the Contract (minus any premium tax) as a
premium for an Annuity Option.
Required Distribution to Participant: Distribution to the Participant must begin
in the form of periodic payments no later than the April 1 following the
calendar year in which the Participant attains age 70 1/2, or such later age as
may be allowed under federal law or regulations. In lieu of an Annuity election,
the Contract Owner may direct Aetna to make a lump sum payment. In no event may
any Annuity Option extend beyond:
a) The life of the Annuitant;
b) The lives of the Annuitant and the Annuitant's beneficiary under the Plan;
c) Any certain period greater than the Annuitant's life expectancy as
determined according to regulations under Code Section 401(a)(9); or
d) Any certain period greater than the life expectancy of the Annuitant and
the Annuitant's beneficiary under the Plan, as determined according to
regulations under Code Section 401(a)(9).
In no event may payments to the Participant's beneficiary under the Plan under
an Annuity Option extend beyond:
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a) The life of the Participant's beneficiary determined as of the date
payments are to commence; or
b) Any certain period greater than the Participant's beneficiary's life
expectancy as determined by regulations under Code Section 401(a)(9).
RETIREMENT ANNUITY PROVISIONS or ANNUITY PROVISIONS: Add to the Joint and Last
Survivor Annuity or Life Income for Two Payees Option a new subsection as
follows:
100% of the payment to continue to the survivor if the survivor is the
Annuitant and 50% of the payment to continue to the survivor if the
survivor is the second Annuitant.
2
<PAGE>
LIFE INCOME FOR TWO PAYEES
JOINT AND 1/2 CONTINGENT LIFE INCOME ANNUITY
NO MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Age of Second Annuitant
<TABLE>
<CAPTION>
Age of
Annuitant 45 50 55 60 65 70 75 80 85
--------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $3.86 $3.89 $3.93 $3.94 $3.96 $3.97 $3.98 $3.98 $3.98
50 4.02 4.10 4.15 4.18 4.21 4.23 4.24 4.25 4.26
55 4.22 4.31 4.42 4.48 4.53 5.57 4.59 4.61 4.61
60 4.43 4.56 4.70 4.84 4.93 4.99 5.04 5.07 5.09
65 4.69 4.84 5.02 5.22 5.42 5.54 5.63 5.69 5.73
70 4.99 5.17 5.39 5.65 5.93 6.23 6.40 6.52 6.60
75 5.33 5.54 5.82 6.14 6.52 6.95 7.40 7.64 7.81
80 5.70 5.96 6.29 6.69 7.17 7.75 8.41 9.08 9.45
85 6.07 6.38 6.75 7.24 7.84 8.59 9.49 10.51 11.50
</TABLE>
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
Age of Second Annuitant
<TABLE>
<CAPTION>
Age of
Annuitant 45 50 55 60 65 70 75 80 85
--------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $4.80 $4.83 $4.86 $4.88 $4.89 $4.90 $4.91 $4.92 $4.92
50 4.95 5.02 5.06 5.10 5.13 5.15 5.16 5.17 5.18
55 5.14 5.23 5.32 5.38 5.43 5.46 5.49 5.51 5.52
60 5.36 5.47 5.59 5.72 5.80 5.86 5.91 5.95 5.97
65 5.63 5.77 5.93 6.10 6.29 6.41 6.50 6.56 6.60
70 5.96 6.12 6.31 6.54 6.81 7.08 7.25 7.37 7.46
75 6.35 6.54 6.77 7.06 7.42 7.81 8.25 8.49 8.66
80 6.79 7.01 7.30 7.66 8.11 8.65 9.28 9.93 10.29
85 7.26 7.53 7.86 8.29 8.85 9.55 10.41 11.39 12.37
</TABLE>
3
<PAGE>
These Annuity rates are based on mortality from 1983 Table a.
Endorsed and made a part of the Contract on the effective date of the Contract.
/s/ Dan Kearney
President
Aetna Life Insurance and Annuity Company
4
<PAGE>
AETNA VARIABLE ANNUITY LIFE INSURANCE COMPANY
ENDORSEMENT
-----------
In lieu of the language now appearing in the attached contract, Section 3.01 is
hereby endorsed to read as follows:
"Aetna shall receive such contributions from the Contract Owner as are made
pursuant to the Plan. The total contribution will be subject to a percentage
deduction in an amount necessary to cover state premium taxes, if any, payable
by Aetna on such contribution. The total contribution will also be allocated to
each Participant and subject to a further deduction of 1% of the allocated share
for each Participant having a Guaranteed Death Benefit Rider. The amount
resulting from these deductions will be the Basic Contribution. The Net
Contribution shall be equal to the Basic Contribution minus 6% of such Basic
Contribution.
"Such Net Contribution will be applied to provide accumulation units for
Participants in accord with Section 3.02 below and the instructions of the
Contract Owner."
In lieu of the language now appearing in the attached contract, Section 3.02 is
hereby endorsed to read as follows:
"The Net Contribution for each Participant shall be applied as of the last day
of the Valuation Period in which the Contribution is received by Aetna to
provide accumulation units on the basis of the then current value of such units,
such application being made separately for Net Contributions allocated to (i)
the General Account, (ii) the Separate Account and invested in Fund shares, and
(iii) the Separate Account and invested in Encore Fund Shares, in accord with
instructions of the Contract Owner.
"The number of accumulation units provided in each funding medium, and credited
to a Participant's Individual Account, by any such application shall be
determined by dividing the Net Contribution for the applicable funding medium
for each Participant by the dollar value of one accumulation unit in that
funding medium. The number of accumulation units so determined will not be
affected by any subsequent changes in the dollar value of accumulation units."
In lieu of the language now appearing in the attached contract, Section 3.05(b)
is hereby endorsed to read as follows:
"The Net Investment Rate for any Valuation Period of the Separate Account is
equal to the gross investment rate of the Fund(s) underlying that Account for
the Period less a margin deduction for each day of the Valuation Period (at an
effective annual rate of 1.25%) plus or minus an adjustment for any taxes or a
reserve for any such taxes attributable to the operations of the Separate
Account. Such gross investment rate is
1
<PAGE>
equal to (i) the investment income and capital gains and losses, both realized
and unrealized of the Fund(s), minus an investment advisory fee accrued by the
Fund(s) for each day of the Valuation Period, divided by (ii) the amount of net
assets of the Fund(s) at the beginning of the Valuation Period. Such gross
investment rate may be either positive or negative. The margin deduction from
the gross investment rate and the percentage deduction for the investment
advisory fee may not exceed in the aggregate an effective annual rate of 1.5%."
In lieu of the language now appearing in the attached contract, Section 3.11 is
hereby endorsed to read as follows:
"The Contract Owner may file a written request with Aetna electing to liquidate
this Contract and receive its accumulated value, minus 2% of such accumulated
value if such election is received during the first five contract years. Such
accumulated value will be the value of the accumulation units in the Active Life
Fund determined in accord with the Contract provisions as of the end of the
Valuation Period in which the written request is received by Aetna."
In lieu of the language now appearing in the attached contract, Section 4.06 is
hereby endorsed to read as follows:
"Upon receipt of proof of the death of a Participant prior to the Annuity
Commencement Date, Aetna agrees to pay to the Beneficiary the accumulated value
of the Participant's Individual Account determined as of the Valuation Period in
which such proof is received, unless a larger amount shall be due under the
provisions of a Guaranteed Death Benefit Rider.
"The Contract Owner may designate on individual statements of Participant being
submitted whether a Guaranteed Death Benefit Rider is desired for any individual
Participant. If so designated, any death benefit payable with respect to such
Participant will be in accord with the provisions of this Contract and such
rider. Any death benefit payable may be taken in a lump sum or under any
settlement options available in individual annuities then being issued by
Aetna."
Endorsed and made a part of this contract on the Contract Effective Date.
/s/ W. O. Bailey
President
2
<PAGE>
AETNA VARIABLE ANNUITY LIFE INSURANCE COMPANY
ENDORSEMENT
The VALUATION PROVISIONS of this contract are hereby endorsed to add the
following provisions:
NET STIPU- After a three calendar month period subsequent to the Date of
LATED Issue or to a prior change in allocation, the Owner may elect
PAYMENT during the accumulation period to change the allocation
ALLOCATIONS percentages for future Annuity Stipulated Payments to any
allocation then allowed by Aetna. Any such allocation change will
be allowed only if any allocated portion of the mode Annuity
Stipulated Payment meets the then minimum amount required by
Aetna. A request for such change must be made in writing in a form
satisfactory to Aetna and will not take effect until received at
the Executive Office of Aetna.
TRANSFER The Owner may elect during the accumulation period that
OF ACCUM- accumulation unitscredited to this contract in the Separate
ULATION Account may be transferred to the General Account. Such transfer
UNITS may be elected after a three calendar month period subsequent to
the Date of Issue or to a prior transfer. The value of
accumulation units requested to be transferred must be $500, or
greater. If the requested amount to be transferred would result in
a remaining value of accumulation units of less than $500. Aetna
shall have the right to transfer the total number of accumulation
units. Accumulation units in the General Account may not be
transferred to the Separate Account.
Any request for transfer must be in a form satisfactory to Aetna
and will be effective on the last day of the Valuation Period in
which the acceptable written request is received at the Executive
Office of Aetna. All such transfers will be made without deduction
of premium taxes and without application of the deduction from the
Basic Stipulated Payment stated in the Valuation Provisions of
this contract.
The contract is hereby endorsed to allow the Owner prior to the commencement of
Annuity payments, if the contract contains seven (7) annuity options rather than
four (4) optional annuity forms, to elect that annuity proceeds be applied under
any one of the first six (6) annuity options rather than any one of the first
four (4) annuity options.
The contract is hereby endorsed to void and remove from the contract any
provision, if such a provision is presently applicable, relating to Aetna
applying an experience credit to the contract.
1
<PAGE>
The contract is hereby endorsed to allow the Owner prior to the commencement of
annuity payments to select that the first monthly payment of a variable annuity
be determined on the basis of 5% assumed investment rate rather than 3 1/2%
assumed investment rate. All relevant provisions and subsequent actions under
the contract shall operate on the basis of such selection of 5% assumed
investment rate on a variable annuity in the same manner as would apply to 3
1/2% assumed investment rate.
Endorsed and made a part of this contract on the later of April 28, 1975 or the
Date of Issue of this contract.
/s/ William O. Bailey
President
2
<PAGE>
AETNA VARIABLE ANNUITY LIFE INSURANCE COMPANY
ENDORSEMENT
This contract is hereby endorsed to revise or add, as appropriate, the second
sentence to the Separate Account provision of the definitions provisions as
follows:
"Reserves for any variable benefits shall be maintained in the Separate Account
and invested in shares of the Fund and Encore Fund."
This contract is hereby endorsed to add the following provisions, if such
provisions are not presently in this contract, to the definitions provisions of
this contract:
"Fund: Aetna Variable Fund, Inc., an open-end diversified investment
company registered under the Investment Company Act of 1940."
"Encore Fund: Aetna Variable Encore Fund, Inc., an open-end diversified
investment company registered under the Investment Company Act
of 1940."
This contract is hereby endorsed so that the Allocation of Annuity Stipulated
Payments section, if there be such a section in this contract, of the
Specifications page shall be changed to read as follows:
"Allocation percentages of the General Account and Separate Account-Fund Shares
and Separate Account-Encore Fund Shares shall be as shown on the application or
as subsequently changed, and such change shall be effective when it is received
by the Company."
This contract, if this be a deferred annuity contract, is hereby endorsed to
revise or add, as appropriate, the Transfer of Accumulation Units provision of,
or to, the Valuation Provisions of this contract, or as previously endorsed, to
read as follows:
"The Owner may elect during the accumulation period to transfer accumulation
units credited to this contract in the Separate Account. Any units held in the
Separate Account invested in Fund shares may be transferred to be invested in
Encore Fund shares in the Separate Account or may be transferred to the General
Account. Any units held in the Separate Account invested in Encore Fund shares
may be transferred to be invested in Fund shares in the Separate Account or may
be transferred to the General Account. At the commencement of annuity payments,
any accumulation units held in the Separate Account invested in Encore Fund
shares will be transferred to Fund shares held in the Separate Account, unless
requested to be transferred to the General Account. Accumulations units credited
to the contract in the General Account may be transferred from the General
Account only in accord with the Allocation of Annuity provision of the
Settlement Provisions. Any transfer may be elected after a three (3) calendar
month period subsequent to the Date of Issue or to a prior transfer. The value
of accumulation
1
<PAGE>
units to be transferred must be $500, or greater. If the transferred amount
would result in the balance remaining of less than $500, Aetna shall have the
right to transfer such remaining balance. All such transfers will be made
without any expense or premium tax deductions being made at the time of
transfer. All such transfers will be effective on the last day of the Valuation
Period in which written request for transfer is received at the Executive
Office of Aetna."
This contract is hereby endorsed to revise the second and third paragraphs of
the Loan Values provision, if there be such a provision in this contract, of the
Stipulated Payments and Non-Forfeiture Provisions of this contract to read as
follows:
"In the event the Owner obtains a loan pursuant to this provision, unless
requested otherwise, such loan will be allocated to contract loan accounts
maintained with respect to the General Account, the Fund and the Encore Fund in
the same relation that the net termination value for each such funding medium
has to the sum of the Net Termination Value at the end of the Valuation Period
in which the loan is made and the amount of such loan. There will be allocated
to each contract loan account such number of accumulation units as are equal to
the value of that portion of the loan allocated to such account (or the due date
of such unpaid loan interest).
If at any time the indebtedness, including unpaid interest thereon, with respect
to any funding medium exceeds the net termination value for such medium, the
excess will be considered a loan with respect to the other funding media in the
same relation that the net termination value for each such funding medium has to
the sum of their net termination values."
Endorsed and made a part of this contract on the later of September 1, 1975 or
the Date of Issue of this Contract.
/s/ Donald M. Johnson
President
2
<PAGE>
AETNA VARIABLE ANNUITY LIFE INSURANCE COMPANY
ENDORSEMENT
This contract is hereby endorsed as follows:
All references on the face page of the contract to "Home Office - Little Rock,
Arkansas" is hereby void.
All references on the face page of the contract to "Executive Office - Hartford,
Connecticut" is hereby changed to read "Home Office - Hartford, Connecticut".
All references in the contract to actions taken, or items to be received, at the
Executive Office shall hereby be changed to read at the Home Office. If there be
any reference in the contract definition of Separate Account to "the laws of
Arkansas", it shall be changed to read as "the laws of Connecticut".
Endorsed and made a part of this contract on the later of January 1, 1977 or the
Date of Issue of this contract.
/s/ W. O. Bailey
President
<PAGE>
Aetna Life Insurance and Annuity Company
ENDORSEMENT
This contract is hereby endorsed to add the Section ANNUITY PAYMENT GUARANTEE to
the SETTLEMENT PROVISIONS to read as follows:
"ANNUITY The Annuity Payment Guarantee may be elected at the time election
PAYMENT of the first, second, or fourth option is made. Such election may
GUARANTEE only be made if election is made for a variable annuity based on
an assumed annual net investment rate of 3.5%. If said Annuity
Payment Guarantee is elected, the first monthly payment for the
variable annuity will be calculated in accord with the contract
provisions but the payee will only receive a first payment of 87%
of the calculated first monthly payment. Aetna further guarantees
that any future payment due after the first monthly payment will
be the greater of (a) or (b) where (a) is 87% of the first monthly
payment calculated in accord with the contract provisions, and (b)
is the payment due after the first calculated in accord with
contract provisions but calculated on the basis of the first
payment being only 87% of the first monthly payment."
Endorsed and made a part of this contract on the later of January
1, 1980 or the Date of Issue of this contract.
/s/ William O. Bailey
President
<PAGE>
AETNA VARIABLE ANNUITY LIFE INSURANCE COMPANY
ENDORSEMENT
Article III, Section 3.02, "Application of Contributions" is hereby
endorsed and revised to read as follows:
"SECTION 3.02 - Application of Contributions
The net contribution shall be equal to the total contribution less 7%
and a percentage of the total contribution sufficient to cover premium
taxes, if any, payable by Aetna because of the receipt of such
contribution.
The net contribution for each Participant shall be applied as of the
last day of the Valuation Period in which the contribution is received
by Aetna to provide accumulation units on the basis of the then current
value of such units, such application being made separately for net
contributions allocated to (i) the General Account, (ii) the Separate
Account and invested in Fund shares, and (iii) the Separate Account and
invested in Encore Fund shares, in accord with instructions of the
Contract Owner.
The number of accumulation units provided in each funding medium, and
credited to a Participant' s Individual Account, by any such
application shall be determined by dividing the net contribution for
the applicable funding medium for each Participant by the dollar value
of one accumulation unit in that funding medium. The number of
accumulation units so determined will not be affected by any subsequent
changes in the dollar value of accumulation units."
Article III, Section 305(b) Is hereby endorsed and revised to read as
follows:
"The Net Investment Rate for any Valuation Period of the Separate
Account is equal to the gross investment rate of the Fund(s) underlying that
Account for the Period less a margin deduction for each day of the Valuation
Period (at an effective annual rate of 1.25%) plus or minus an adjustment for
any taxes or a reserve for any such taxes attributable to the operations of the
Separate Account. Such gross investment rate is equal to (i) the investment
income and capital gains and losses, both realized and unrealized of the
Fund(s), minus an investment advisory fee accrued by the Fund(s) for each day of
the Valuation Period, divided by (ii) the amount of net assets of the Fund(s) at
the be of the Valuation Period. Such gross investment rate may be either
positive or negative. The margin deduction from the gross investment rate and
the percentage
1
<PAGE>
deduction for the investment advisory fee may not exceed in the aggregate an
effective annual rate of 1.5%."
Endorsed and made a part of this contract on the later of January 1,
1979 or the Date of Issue of this contract.
/s/ William O. Bailey
President
2
<PAGE>
Aetna Life Insurance and Annuity Company
ENDORSEMENT
This Contract is endorsed to provide the following:
On the tenth anniversary of the effective date of this Contract any
termination or surrender fee which may apply shall be 0%.
Endorsed and made a part of this Contract on July 1, 1985.
/s/ William O. Bailey
President
<PAGE>
Aetna Life Insurance and Annuity Company
ENDORSEMENT
This Contract is hereby endorsed to include the following new provisions:
During any calendar year, Aetna may be told to change the investment mix
twelve times. Should Aetna allow additional changes, each may be subject
to a fee of up to $10.
Twelve transfers of Current Value (excluding transfers from the GA
Account at the end of a Guaranteed Term) can be made during a calendar
year period. Should Aetna allow additional transfers, each may be subject
to a fee of up to $10.
Endorsed and made a part of this Contract effective May 1, 1989.
/s/ John J. Martin
President
Aetna Life Insurance and Annuity Company
<PAGE>
Aetna Life Insurance and Annuity Company
ENDORSEMENT
This Contract is hereby endorsed as follows:
The definition of Separate Account under the Definition of Certain Terms or
General Definitions section of the contract is hereby amended to read as
follows:
Separate Account: An account which buys and holds shares of the Fund(s).
Income, gains or losses, realized or unrealized are credited or charged
to this account without regard to other income, gains or losses of Aetna.
Aetna owns the assets held in a separate account and is not a trustee as
to such amounts. These accounts generally are not guaranteed and are held
at market value. The assets of such accounts, to the extent of reserves
and other contract liabilities of the account, shall not be charged with
other Aetna liabilities.
Endorsed and made a part of the Contract.
/s/ Edmund F. Kelly
President
Aetna Life Insurance and Annuity
<PAGE>
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract is hereby endorsed.
The term Valuation Period under Definitions is amended to read as follows:
The period of time for which a Fund determines its net asset value,
usually from 4:15 p.m. Eastern time each day the New York Stock Exchange
is open until 4:15 p.m. the next such day, or such other day that one or
more of the Funds determines its net asset value.
Endorsed and made a part of the Contract.
/s/ G. G. Benanav
President
Aetna Life Insurance and Annuity Company
