PROSPECTUS
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VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
ISSUED BY
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
320 PARK AVENUE, NEW YORK, NEW YORK 10022
THROUGH ITS
SEPARATE ACCOUNT NO. 3
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THE POLICIES - We offer variable universal life insurance policies (POLICIES),
without a sales charge. The Policies are designed to provide you with life
insurance protection, while giving you flexibility in the timing and amount of
premiums you pay. You also have some flexibility in the amount of insurance
coverage available to you.
In this Prospectus, a POLICYOWNER or YOU means a person to whom we have issued
a Policy. You should note that the purchase of a Policy as a replacement for
any existing insurance coverage you have may not be advisable.
INVESTMENT ALTERNATIVES FOR YOUR ACCOUNT BALANCE - You may allocate your
Account Balance to any of the Funds of Mutual of America Separate Account No.
3 (the SEPARATE ACCOUNT) or to our General Account. You may transfer all or
any part of your Account Balance among the Funds and the Separate Account at
any time, without charge.
The Separate Account Funds invest in similarly named funds or portfolios of
mutual funds (the UNDERLYING FUNDS), which will have varying investment
returns and performance. The Underlying Funds currently are:
o MUTUAL OF AMERICA INVESTMENT CORPORATION: Equity Index Fund, All America
Fund, Mid-Cap Equity Index Fund, Aggressive Equity Fund, Composite Fund,
Bond Fund, Mid-Term Bond Fund, Short-Term Bond Fund and Money Market
Fund;
o SCUDDER VARIABLE LIFE INVESTMENT FUND: Capital Growth Portfolio, Bond
Portfolio and International Portfolio;
o VARIABLE INSURANCE PRODUCTS FUNDS OF FIDELITY INVESTMENTS(R):
Equity-Income Portfolio of the Variable Insurance Products Fund, and
Contrafund Portfolio and Asset Manager Portfolio of the Variable
Insurance Products Fund II;
o CALVERT SOCIAL BALANCED PORTFOLIO of Calvert Variable Series, Inc.; and
o AMERICAN CENTURY VP CAPITAL APPRECIATION FUND of American Century Variable
Portfolios, Inc.
WE DO NOT GUARANTEE THE INVESTMENT PERFORMANCE OF ANY SEPARATE ACCOUNT FUND.
You bear the entire investment risk, including the risk of a decline in value,
for amounts you allocate to a Separate Account Fund.
We pay a fixed rate of interest on your Account Balance in our General
Account, and we change the rate from time to time. This Prospectus describes
the Separate Account Fund Investment Alternatives, but there is a brief
description of the General Account under the heading "Our General Account".
PROSPECTUSES - You should read this Prospectus carefully before you purchase a
Policy, and you should keep it for future reference. Attached to this
Prospectus are the prospectuses for the Underlying Funds. This Prospectus is
not valid unless the prospectuses of the Underlying Funds are attached to it.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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DATED: MAY 1, 2000
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TABLE OF CONTENTS
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INTRODUCTION AND SUMMARY ........................................... 1
ASSUMPTION OF AMERICAN LIFE POLICIES ............................... 5
PURCHASE OF A POLICY ............................................... 6
Policy Issue ...................................................... 6
Basic Death Benefit Plan .......................................... 6
Supplemental Insurance Benefits ................................... 7
Changes in the Face Amount of Your Policy ......................... 7
PAYMENT OF PREMIUMS ................................................ 8
Scheduled Premiums ................................................ 8
Unscheduled Premiums .............................................. 9
Limitation on Premiums ............................................ 9
Allocation of Premiums ............................................ 9
Dollar Cost Averaging ............................................. 9
Policy Lapse and Reinstatement .................................... 9
UNDERLYING FUNDS INVESTED IN BY OUR SEPARATE ACCOUNT ............... 10
Investment Advisers for the Underlying Funds ...................... 13
YOUR ACCOUNT BALANCE IN THE SEPARATE ACCOUNT FUNDS ................. 14
OUR GENERAL ACCOUNT ................................................ 15
ACCESS TO YOUR ACCOUNT BALANCE ..................................... 16
Surrender of Policy ............................................... 16
Partial Withdrawals of Account Balance ............................ 16
Your Right to Transfer Among Investment Alternatives .............. 16
How to Tell Us an Amount for Transfers or Partial Withdrawals ..... 16
Policy Loans ...................................................... 17
Accelerated Benefit for Terminal Illness .......................... 18
Maturity Benefit .................................................. 19
When We May Postpone Payments ..................................... 19
INSURANCE BENEFITS UPON DEATH OF INSURED PERSON .................... 20
Death Proceeds .................................................... 20
Basic Death Benefit ............................................... 20
Corridor Percentages .............................................. 20
Payment Options ................................................... 21
CHARGES AND DEDUCTIONS YOU WILL PAY ................................ 22
Cost of Insurance Charges ......................................... 22
Administrative Charges ............................................ 23
Mortality and Expense Risks Charges ............................... 23
Supplemental Insurance Benefits Fee ............................... 23
Accelerated Benefit Fee ........................................... 23
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Premium and Other Taxes ....................................... 24
Changes in Policy Cost Factors ................................ 24
Fees and Expenses of Underlying Funds ......................... 24
HOW TO CONTACT US AND GIVE US INSTRUCTIONS ..................... 25
Contacting Mutual of America .................................. 25
Requests by Telephone ......................................... 25
Where You Should Direct Requests .............................. 25
ABOUT MUTUAL OF AMERICA AND OUR SEPARATE ACCOUNT NO. 3 ......... 26
FEDERAL TAX CONSIDERATIONS ..................................... 27
Obtaining Tax Advice .......................................... 27
Tax Status of the Policies .................................... 27
Tax Treatment of Policy Benefits and Access of Account Balance 28
Policy Loan Interest .......................................... 29
Estate Taxes .................................................. 30
YOUR VOTING RIGHTS FOR MEETINGS OF THE UNDERLYING FUNDS ........ 30
USE OF STANDARD & POOR'S INDICES ............................... 30
FUNDING AND OTHER CHANGES WE MAY MAKE .......................... 31
ADMINISTRATIVE MATTERS ......................................... 31
Notices, Confirmation Statements and Reports to Policyowners .. 31
Miscellaneous Policy Provisions ............................... 32
Distribution of the Policies .................................. 32
OTHER INFORMATION .............................................. 33
OUR EXECUTIVE OFFICERS AND DIRECTORS ........................... 34
DEFINITIONS WE USE IN THIS PROSPECTUS .......................... 36
POLICY ILLUSTRATIONS ........................................... 39
Face Amount $100,000........................................... 40
Face Amount $500,000........................................... 48
FINANCIAL STATEMENTS ........................................... 52
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THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
WE MAY NOT LAWFULLY OFFER THE POLICIES FOR SALE. WE HAVE NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE IN THIS PROSPECTUS. IF ANY PERSON GIVES OR
MAKES ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS TO YOU, YOU MUST NOT
RELY ON THEM IN MAKING YOUR DECISION OF WHETHER OR NOT TO PURCHASE A POLICY.
<PAGE>
SUPPLEMENT TO PROSPECTUS
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VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
ISSUED BY
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
320 PARK AVENUE
NEW YORK, NEW YORK 10022
THROUGH
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 3
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**THIS SUPPLEMENT IS FOR MASSACHUSETTS POLICIES ONLY**
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ALL REFERENCES IN THE PROSPECTUS TO "SCHEDULED PREMIUMS" ARE CHANGED TO
"PLANNED PREMIUMS". ALL REFERENCES IN THE PROSPECTUS TO "UNSCHEDULED
PREMIUMS", AND ACCOMPANYING TEXT PERTAINING TO UNSCHEDULED PREMIUMS, ARE
DELETED.
THE DISCUSSION IN THE PROSPECTUS IS SUPPLEMENTED BY THE FOLLOWING:
You will select an amount of planned premiums under your policy, based on
the initial Face Amount and payment intervals you have chosen. YOU NEED NOT
PAY PLANNED PREMIUMS, AND YOUR POLICY WILL NOT LAPSE SO LONG AS YOUR
ACCOUNT BALANCE IS SUFFICIENT TO PAY APPLICABLE CHARGES WHEN DUE.
Failure to pay one or more planned premiums will not necessarily cause your
Policy to lapse; timely payment of all such premiums will not assure that
your Policy will continue in force. Whether your Policy continues in force
or lapses does not depend on whether planned premiums have been paid, but
rather on whether, on each Monthly Anniversary Day, your Account Balance
(which will vary with the performance of our Investment Accounts) is
sufficient to permit the deduction of all charges due on that day.
You may increase the amount of premiums paid under your policy at any time,
except that such additional amounts must be equal to at least $50 each and
are limited to an aggregate of $10,000 during any Policy Year. In addition,
if these additional amounts would increase the policy's Basic Death
Benefit, then evidence of insurability would be required. SEE "Insurance
Benefits Upon Death of Insured Person" in this Prospectus.
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SUPPLEMENT, DATED MAY 1, 2000
TO PROSPECTUS, DATED MAY 1, 2000
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INTRODUCTION AND SUMMARY
THE DISCUSSION BELOW IS A SUMMARY OF INFORMATION IN THE PROSPECTUS. The
references in the Summary direct you to particular sections in the Prospectus
where you will find more detailed explanations. You will find definitions
under "Definitions We Use in This Prospectus".
THE POLICY WE OFFER
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The Policy is a variable universal life insurance policy. It enables you,
within certain limits, to accommodate changes in your insurance needs and
changes in your financial condition. REFER TO "PURCHASE OF A POLICY".
As a life insurance policy, the Policy provides for:
o a death benefit, based either on the Face Amount of the Policy, or on
the Face Amount of the Policy plus the Account Balance, depending on the
type of Basic Death Benefit you select for your Policy,
o Policy Loans,
o a variety of death proceeds payment options, and
o other features traditionally associated with life insurance, such as
optional supplemental benefits.
As a variable universal life policy, the Policy provides for:
o an Account Balance that varies based on the Investment Alternatives you
select,
o allocation of your premiums and transfer of your Account Balance among
the Investment Alternatives, and
o flexibility in the timing and amount of premium payments and, subject to
certain restrictions, the amount of insurance coverage.
We may issue a Policy to you only if your state's insurance department has
approved our policy form and we may legally sell the Policy to you.
YOUR PREMIUM PAYMENTS
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We will provide you with an amount of scheduled premiums, based on the initial
Face Amount you select. We will send you premium notices for scheduled
premiums, unless you have authorized withdrawals from your banking account or
other account or unless premiums are payable under a Payroll Deduction
Program.
You may adjust the timing and amount of your premium payments to suit your
individual circumstances, within certain limits. You may pay unscheduled
premiums, skip scheduled premiums, or increase or decrease your scheduled
premium. Each scheduled or unscheduled premium must be at least $50, except
that there is no minimum scheduled premium for Policies with a Payroll
Deduction Rider. REFER TO "PAYMENT OF PREMIUMS".
CHOICE OF BASIC DEATH BENEFIT
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You may choose as your Basic Death Benefit either a Face Amount Plan, which
generally provides a level death benefit equal to the Face Amount, or a Face
Amount Plus Plan, which provides for a death benefit that varies as your
Account Balance changes. Subject to certain restrictions, you may change from
one Plan to the other while the insured is still living. We pay a death
benefit to the beneficiary upon the death of the insured person under the
Policy. REFER TO "INSURANCE BENEFITS UPON DEATH OF INSURED PERSON".
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SUPPLEMENTAL BENEFITS BY RIDER TO POLICY
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We may make available one or more supplemental insurance benefits under your
Policy, each by the addition of a rider for which you would pay an additional
monthly fee. REFER TO "PURCHASE OF A POLICY -- SUPPLEMENTAL INSURANCE
BENEFITS".
INVESTMENT ALTERNATIVES FOR YOUR ACCOUNT BALANCE
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You may allocate your premiums among the General Account and one or more of
the Separate Account Funds. You may change your allocation instructions at any
time for future premiums. You may transfer all or part of your Account Balance
among the available Investment Alternatives at any time. REFER TO "ACCESS TO
YOUR ACCOUNT BALANCE".
THE GENERAL ACCOUNT. We pay interest on the portion of your Account Balance
you allocate to our General Account, at an effective annual rate of at least
3%. In our discretion, we change the current rate of interest from time to
time. We have the full investment risk for amounts you allocate to the General
Account. We sometimes refer to the General Account Investment Alternative as
the Interest Accumulation Account.
This Prospectus serves as a disclosure document for the Separate Account
Investment Alternatives under the Policies. REFER TO "OUR GENERAL ACCOUNT" FOR
A BRIEF DESCRIPTION OF THE GENERAL ACCOUNT.
THE SEPARATE ACCOUNT. The Separate Account has Funds, or sub-accounts. The
name of each Fund corresponds to the name of its Underlying Fund. When you
allocate premiums or transfer Account Balance to a Separate Account Fund, the
Fund purchases shares in its Underlying Fund. A Separate Account Fund is
called a "variable option", because you have the investment risk that your
Account Balance in the Fund will increase or decrease based on the investment
performance of the Underlying Fund.
UNDERLYING FUNDS INVESTED IN BY THE SEPARATE ACCOUNT
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The Separate Account Funds currently invest in seventeen Underlying Funds,
which have different investment objectives, investment policies and risks. YOU
SHOULD REFER TO "UNDERLYING FUNDS INVESTED IN BY OUR SEPARATE ACCOUNT" FOR
MORE INFORMATION ABOUT THE UNDERLYING FUNDS' INVESTMENT OBJECTIVES, AND TO THE
PROSPECTUSES OF THE UNDERLYING FUNDS THAT ARE ATTACHED TO THIS PROSPECTUS.
CHARGES UNDER YOUR POLICY
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We deduct several charges from the net assets of each Separate Account Fund.
REFER TO "CHARGES AND DEDUCTIONS YOU WILL PAY". The charges include:
o an administrative expense charge at an annual rate of 0.40% (except that
currently the annual rate for the American Century VP Capital
Appreciation Fund is 0.20% and the annual rate for the Funds that invest
in the Fidelity Portfolios is 0.30%); and
o a risk charge at an annual rate of 0.35% for assuming certain mortality
risks under the Policies, and a charge at an annual rate of 0.15% for
assuming certain expense risks under the Policies.
We deduct certain monthly charges directly from your Account Balance. REFER TO
"CHARGES AND DEDUCTIONS YOU WILL PAY". The monthly charges include:
o an administrative expense charge of $2.00 if you have an Account Balance
of $2,400 or more during the month, or 1/12 of 1% of the Account Balance
(which will be less than $2.00) if your Account Balance is less than
$2,400 for that month, except that we waive the charge if your Account
Balance is less than $300 for the month.
o a cost of insurance charge to pay for the life insurance we provide
under the Policy; and
o a deduction to pay the cost of any riders to your Policy.
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Cost of insurance rates will depend on the age of the insured person at the
beginning of the most recent Policy Year and whether the insured person is in
a standard or substandard premium class. For Policies without a Payroll
Deduction Rider, the gender of the insured person will impact cost of
insurance rates, with different rates for men and women. For Policies with a
Payroll Deduction Rider, cost of insurance rates are unisex.
EXPENSES OF THE UNDERLYING FUNDS. A Separate Account Fund's value is based on
the shares it owns of the Underlying Fund. As a result, the investment
management fees and other expenses the Underlying Funds pay will impact the
value of the Separate Account Funds. You should refer to the attached
prospectuses of the Underlying Funds for a complete description of their
expenses and deductions from net assets.
During 1999, the Underlying Funds incurred the following total operating
expenses as a percentage of net assets:
Mutual of America Investment Corporation Funds: Money Market -- .25%; Equity
Index -- .125%; each of All America, Bond, Short-Term Bond, Mid-Term Bond and
Composite -- .50%; and Aggressive Equity -- .85%. The expenses shown are
management fees. The Funds' adviser voluntarily pays the Funds' operating
expenses other than transaction costs and extraordinary expenses.
Scudder Variable Life Portfolios: Capital Growth -- .49% (.46% management fee
and .03% other expenses); Bond -- .57% (.48% management fee and .09% other
expenses); International -- 1.03% (.85% management fee and .18% other
expenses).
Fidelity Portfolios: VIP Equity-Income -- .57% (.48% management fee and .09%
other expenses); VIP II Contrafund -- .67% (.58% management fee and .09%
other expenses); and VIP II Asset Manager -- .63% (.53% management fee and
.10% other expenses).
Calvert Social Balanced Portfolio -- .89% (.70% management fee and .19%
other expenses).
American Century VP Capital Appreciation Fund -- 1.00% as a management fee.
The Fund's adviser pays its operating expenses other than transaction costs,
fees of non-interested directors and extraordinary expenses.
PARTIAL WITHDRAWALS AND SURRENDER OF POLICY; TRANSFERS OF ACCOUNT BALANCE
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You may make partial withdrawals of your Account Balance (minus any Policy
Loans) or surrender the Policy and receive the Surrender Proceeds due under
the Policy. You may take any of these actions prior to the Maturity Date of
the Policy when the insured person is still living. We may take up to seven
days following receipt of your withdrawal request to process the request and
mail a check to you. REFER TO "ACCESS TO YOUR ACCOUNT BALANCE".
You may transfer all or a portion of your Account Balance among the Investment
Alternatives. REFER TO "ACCESS TO YOUR ACCOUNT BALANCE -- YOUR RIGHT TO
TRANSFER AMONG INVESTMENT ALTERNATIVES".
We currently do not assess a charge for transfers or withdrawals under the
Policies. We reserve the right, however, to impose a charge for transfers or
withdrawals in the future.
YOUR RIGHT TO BORROW FROM THE POLICY
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You may borrow up to 95% of your Account Balance in the General Account, minus
any existing Policy Loans. Each Policy Loan must be for at least $500, and you
must assign the Policy to us as collateral. We will charge you interest on the
Policy Loan, and we may change the interest rate from time to time. We deduct
any Policy Loans from the amount otherwise due you upon the surrender or
maturity of the Policy or from the death proceeds due upon the death of the
insured person. REFER TO "ACCESS TO YOUR ACCOUNT BALANCE -- POLICY LOANS".
HOW TO MAKE AN ALLOCATION CHANGE, TRANSFER, WITHDRAWAL, SURRENDER OR POLICY
LOAN REQUEST
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IN WRITING. You may give instructions in writing on our forms for allocation
changes, transfers of Account Balance among Investment Alternatives, partial
withdrawals of Account Balance, surrender of the Policy and Policy Loans.
REFER TO "HOW TO CONTACT US AND GIVE US INSTRUCTIONS".
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BY TELEPHONE. Using a Personal Identification Number (PIN) we have assigned,
you may call us at 1-800-468-3785 for certain transactions and information.
REFER TO "HOW TO CONTACT US AND GIVE US INSTRUCTIONS".
OUR HOME OFFICE, PROCESSING CENTER AND REGIONAL OFFICES. Our home office
address is 320 Park Avenue, New York, New York 10022. The address for our
Financial Transaction Processing Center, where you may send requests for
allocation changes or transfers among Investment Alternatives, is 1150 Broken
Sound Parkway NW, Boca Raton, FL 33487. You may check the address for the
Regional Office that provides services for your Policy by calling
1-800-468-3785 or by visiting our web site at www.mutualofamerica.com.
CONFIRMATION STATEMENTS. We will send you confirmation statements (which may
be your quarterly statements) for your allocation changes and for your
premiums, transfers and withdrawals of Account Balance and Policy Loans. You
must promptly notify us of any error in a confirmation statement, or you will
give up your right to have us correct the error. REFER TO "NOTICES,
CONFIRMATION STATEMENTS AND REPORTS TO POLICYOWNERS".
ACCELERATED BENEFIT FOR TERMINAL ILLNESS
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Depending on the laws of your state, an Accelerated Benefit may be available
to you under your Policy or by rider to the Policy. Under this Benefit, you
may receive a portion of the Death Proceeds that would be payable if the
insured person died. The Accelerated Benefit is available only when the
insured person is determined to have less than one year to live. We will
deduct from the Accelerated Benefit an administrative fee of up to $250 at the
time we pay the Benefit. REFER TO "ACCESS TO YOUR ACCOUNT BALANCE --
ACCELERATED BENEFIT FOR TERMINAL ILLNESS" AND "CHARGES AND DEDUCTIONS YOU WILL
PAY -- ACCELERATED BENEFIT FEE".
YOUR INITIAL RIGHT TO RETURN POLICY
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For a period of 10 days after you receive your Policy (or a longer period if
required by applicable state law when you purchase a Policy by direct mail or
as a replacement policy), you may return it and have your premiums returned.
REFER TO "PURCHASE OF A POLICY -- POLICY ISSUE".
FEDERAL TAX CONSIDERATIONS
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For purposes of Federal income taxation, you are treated as not receiving your
Account Balance until you take a distribution from the Policy. As a
consequence, you do not pay taxes on the investment income and interest
credited to your Account Balance until you withdraw all or a portion of your
Account Balance. This information about Federal taxation is based on our
belief that a Policy we issue on a standard premium class basis should meet
the Code's definition of a life insurance contract. There is less guidance
available to determine whether a Policy issued on a substandard premium class
basis would satisfy that definition.
DISTRIBUTIONS UNDER THE POLICY. Your tax treatment for Policy withdrawals
and loans depends on whether or not your Policy is a "Modified Endowment
Policy".
If your Policy is not a Modified Endowment Contract:
o distributions are treated first as a return of investment (premiums) in
the Policy and then a disbursement of taxable income;
o Policy Loans are not treated as distributions; and
o neither distributions nor Policy Loans are subject to the 10% penalty
tax.
Your Policy may be treated as a special type of life insurance called a
"Modified Endowment Contract", if the cumulative premiums you have paid are
considered, under the Code, to be too large compared to the death benefit
payable. The Code imposes an annual limit on premiums, calculated on a
cumulative basis, that can be paid into a Policy during the first seven years,
or during the seven years after a material change to the Policy.
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If your Policy is a Modified Endowment Contract:
o all pre-death distributions, including Policy Loans, are treated first
as a distribution of taxable income and then as a return of investment
(premiums) in the Policy; and
o if you have not reached the age of 59 1/2, a distribution usually is
subject to a 10% penalty tax.
If you send us a premium that would cause your Policy to become a Modified
Endowment Contract, we will notify you. Our notice will state that unless you
request a refund of the excess premium, your Policy will become a Modified
Endowment Contract. REFER TO "FEDERAL TAX CONSIDERATIONS".
DEATH BENEFITS. Your beneficiary receives death benefits payable under the
Policy free from Federal income tax, except in limited circumstances. If you
are the Policyowner and also the insured person, the death benefit amount will
be included in your estate in most circumstances.
ASSUMPTION OF AMERICAN LIFE POLICIES
As part of a consolidation of our insurance operations, we have entered into
an assumption reinsurance agreement with our wholly-owned subsidiary, The
American Life Insurance Company of New York ("American Life"). Under this
agreement, American Life is ceding and Mutual of America is assuming
substantially all of American Life's outstanding individual business,
including variable universal life insurance policies ("American Life
Policies"). We believe that by combining all of our insurance operations into
one entity, we will enhance service to our contract and policy owners and
obtain economies of scale.
We intend to sell the outstanding common stock of American Life to a third
party. An additional offer of assumption to remaining American Life
Policyowners may occur in connection with our sale of America Life. In the
majority of states, American Life Policyowners have the right to opt out of
the assumption by providing timely notice to American Life. In the remaining
states, American Life Policyowners must consent to the assumption before it
can occur.
When we assume an American Life Policy, we become the issuer in place of
American Life and have all of the obligations and hold all of the assets under
the assumed Policy through our General Account and Separate Account No. 3. The
Policy described in this Prospectus is identical to the American Life Policy,
except for the identity of the issuer and its separate account and the right
under the Policy to participate in our divisible surplus. Account balances,
unit values and number of accumulation units in each Separate Account Fund are
not changed by assumption.
We will issue a Certificate of Assumption to each American Life Policyowner
whose policy is being assumed by us. The Certificate in effect will cause the
American Life Policy to be exchanged for our Policy. The terms POLICYOWNER and
YOU in this Prospectus include owners of Policies we have assumed.
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PURCHASE OF A POLICY
POLICY ISSUE
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An applicant must submit to us a completed application for a Policy. The
minimum Face Amount for a Policy is $25,000, except that the minimum Face
Amount is $5,000 for any Policy with a Payroll Deduction Rider. We reserve the
right to decline to issue a Policy with a Face Amount of more than $1 million.
An employee participating in a Payroll Deduction Program may apply for
insurance for his or her spouse and minor children, or the spouse and minor
children may apply as owners of Policies. All Policies we issue in connection
with a Payroll Deduction Program will have a Payroll Deduction Rider.
Before issuing a Policy, we will require evidence of insurability
satisfactory to us.
o If the person to be insured is less than age 50 and the Policy would
have a Face Amount of $100,000 or less, we ordinarily will determine
insurability based on information from the application.
o We usually will require a medical underwriting for a Policy with a Face
Amount above $100,000 or if the person to be insured is age 50 or older.
We may use outside sources to verify information contained in the application.
A person who does not meet standard underwriting requirements still may be
eligible to purchase a Policy, but we will increase the cost of insurance
charges on the Policy to reflect the additional mortality risks we assume in
insuring a person who is a "substandard risk". A person who is a "substandard
risk" has a greater mortality risk based on unfavorable health
characteristics.
For applications under a Payroll Deduction Program, we may use group
underwriting standards based on the nature of the employer's business and the
percentage of employees participating in the Program. Group underwriting
standards provide for guaranteed issue of a Policy in certain circumstances.
We will issue a Policy following our determination of the insurability and
rating class of the person to be insured and our approval of the application.
The Policy generally will be effective on the date our underwriting
requirements have been met and we receive the first scheduled premium payment.
The Policy Specification Pages of your Policy will show the Policy Issue Date.
RIGHT TO EXAMINE POLICY. You have a right to examine the Policy. If, for any
reason, you are not satisfied with the Policy, you may cancel it by returning
it to us within 10 days after you receive it, along with a written request for
cancellation. Upon cancellation, we will refund any premiums that were paid on
the Policy. Some states may require us to provide you with a longer period to
examine the Policy. For example, you may have up to 30 days if you purchased
the Policy in response to a direct mailing or the Policy is replacing another
life insurance policy.
AVAILABILITY OF POLICY. This Prospectus is an offer to sell you a Policy only
if you live in a state or jurisdiction where the insurance department has
approved sales of the Policy. We anticipate that the Policy will not be
available in all states until sometime in the second half of the year 2000.
BASIC DEATH BENEFIT PLAN
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In your application for a Policy, you will choose a Basic Death Benefit. You
have the option of either a Face Amount Plan or a Face Amount Plus Plan. SEE
"Insurance Benefits Upon Death of Insured Person".
Under a Face Amount Plan:
o the death benefit generally will be the Face Amount, and
o premiums you pay and increases in your Account Balance from investment
performance of the Funds will reduce the amount for which we are "at
risk" in providing insurance coverage and on which we impose cost of
insurance charges (SEE "Charges and Deductions You Will Pay").
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Under a Face Amount Plus Plan:
o the death benefit generally will be the Face Amount PLUS the Account
Balance, and
o premiums you pay and increases in your Account Balance from investment
performance of the Funds will increase the death benefit while leaving
unchanged the amount for which we are at risk and on which you must pay
cost of insurance charges.
CHANGE OF BASIC DEATH BENEFIT PLAN. You may request a change in your Basic
Death Benefit plan. When we make the change, the Basic Death Benefit payable
on the effective date of the change is the same as it would have been without
the requested change, as follows:
o if you have a Face Amount Plan, you can change it to a Face Amount Plus
Plan, which will decrease your Policy's Face Amount by the amount of the
Account Balance; and
o if you have a Face Amount Plus Plan, you may be able to change it to a
Face Amount Plan, which would increase your Policy's Face Amount by the
amount of the Account Balance, except that we may require current
evidence of insurability prior to approving a change from a Face Amount
Plus Plan to a Face Amount Plan.
A change in Basic Death Benefit plan will become effective as of the first
Monthly Anniversary Day on or after we receive at our Processing Office your
Written Request (which, in the case of a change that would increase your
Policy's Face Amount, may include evidence acceptable to us of current
insurability).
SUPPLEMENTAL INSURANCE BENEFITS
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We may make one or more supplemental insurance benefits available by rider to
your Policy, including ones providing accidental death coverage and coverage
for children of an insured person. Currently, supplemental insurance benefits
are available only for Policies with Payroll Deduction Riders. We will charge
you a monthly fee for any supplemental insurance benefits you select. SEE
"Charges and Deductions You Will Pay -- Supplemental Insurance Benefits Fee".
Under an accidental death benefit rider, if the insured person dies as a
result of an accidental bodily injury, we will pay an accidental death benefit
equal to the initial Face Amount of the Policy, up to a maximum of $200,000.
You may obtain insurance for all your unmarried dependent children between 14
days and 18 years of age under a children's term rider. After we have issued a
rider we automatically insure each additional child when 14 days old at no
increase in premium. Insurance continues to age 21 of the child or to age 65
of the primary insured, whichever is earlier. Upon reaching age 21, each
covered child has the opportunity of purchasing $5,000 of life insurance for
each $1,000 of children's term rider. For a Policy purchased when a child
reaches age 21, we will charge premiums at our standard rates then in effect.
CHANGES IN THE FACE AMOUNT OF YOUR POLICY
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From time to time, your life insurance needs may change. The Policy permits
you to increase or decrease the Face Amount of your Policy in certain
circumstances. To change your Face Amount, you must submit to our Processing
Office a Written Request.
o A change in Face Amount may not cause the Face Amount to be less than
$25,000 ($5,000 for Policies with a Payroll Deduction Rider) and may not
cause the Policy to cease to qualify as life insurance under the Code.
o We reserve the right to limit the amount of any increase or decrease.
o The current minimum for any requested change in Face Amount is $5,000.
If the insured person is not living on the proposed effective date of a
change, the change will not take effect. After a change in Face Amount, we
will send you new Policy Specifications Pages to reflect the
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<PAGE>
change. Certain reductions in Face Amount may cause your Policy to become a
Modified Endowment Contract. SEE "Federal Tax Considerations".
Your request for an increase in Face Amount must be accompanied by evidence
satisfactory to us that the insured person is insurable. Cost of insurance
charges on the additional Face Amount will be based on the insured person's
premium class at the time of the increase. An increase in Face Amount will be
effective only if and when we expressly approve it.
The effective date of a decrease in Face Amount will be the first Monthly
Anniversary Day on or after the date we receive your request. A decrease in
Face Amount will first reduce any prior increases in Face Amount, in reverse
of the order in which they occurred (in other words, the most recent Face
Amount increase will be the first reduced), and then will reduce the original
Face Amount.
PAYMENT OF PREMIUMS
SCHEDULED PREMIUMS
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For your convenience, we will specify a "scheduled premium" to be paid at
intervals you select in your application. We will send you notices of when you
should pay scheduled premiums, unless you have authorized withdrawals from
your bank or other account to pay scheduled premiums or your Policy has a
Payroll Deduction Rider. If your Policy does not have a Payroll Deduction
Rider, your scheduled premium must be at least $50.
If your Policy has a Payroll Deduction Rider:
o there is no minimum amount of scheduled premiums;
o on each of your pay dates, scheduled premiums for each Policy you own
and, if applicable, each Policy owned by your spouse and minor children,
will be deducted from your payroll amount; and
o if your employer's participation in a Payroll Deduction Program ends or
you terminate employment with the employer, we will require scheduled
premiums to be paid not more frequently than monthly.
We will advise you prior to Policy issuance whether or not the payment of
proposed scheduled premiums for your Policy would cause the Policy to be a
Modified Endowment Contract. SEE "Federal Tax Considerations". We permit you
to pay scheduled premiums, even if the payment would increase the Basic Death
Benefit as a result of the Corridor Percentages described below. SEE
"Insurance Benefits Upon Death of Insured Person."
CHANGES IN SCHEDULED PREMIUMS. You ordinarily may change the amount or timing
of your scheduled premiums at any time. You may skip or reduce scheduled
premiums, but the amount of any scheduled premiums you pay must be at least
equal to the minimum for your Policy. We will require evidence of insurability
for an increase in scheduled premiums when the increase would increase your
Policy's Basic Death Benefit. SEE "Insurance Benefits Upon Death of Insured
Person" below.
EFFECT OF PAYING SCHEDULED PREMIUMS. Your failure to pay one or more scheduled
premiums will not necessarily cause your Policy to lapse; timely payment of
all scheduled premiums will not assure that your Policy will continue in
force. Whether your Policy continues in force or lapses does not depend on
whether scheduled premiums have been made, but instead on whether on each
Monthly Anniversary Day, your Account Balance is sufficient to permit the
deduction of all charges due on that day. SEE "Lapse and Reinstatement" below.
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UNSCHEDULED PREMIUMS
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You ordinarily may pay unscheduled premiums of at least $50 at any time, but
you may not pay more than $10,000 in unscheduled premiums during any Policy
Year (premiums in addition to the amount of scheduled premiums for that Year).
We will require evidence of insurability if the unscheduled premium would
increase the Policy's Basic Death Benefit. SEE "Insurance Benefits Upon Death
of Insured Person" below.
LIMITATION ON PREMIUMS
----------------------------------------------------------------------------
We will refuse to accept and will return to you premium payments, or any
portion thereof, (whether scheduled or unscheduled) that would cause your
Policy to lose its status as a life insurance policy under the Code. SEE
"Federal Tax Considerations".
ALLOCATION OF PREMIUMS
----------------------------------------------------------------------------
You may allocate your premium among the Investment Alternatives. The Mid-Cap
Equity Index Fund may not be available to Policyowners in all states, due to
insurance department regulatory filings.
You may tell us how to allocate your premium by sending us instructions with
the premium. If you do not send instructions, or we receive the premium for a
Policy with a Payroll Deduction Rider, we will allocate the premium on the
basis of your allocation request currently on file at our home office. Your
request for allocation must specify the percentage, in any whole percentage
from 0% to 100%, of each premium to be allocated to each of the Investment
Alternatives.
You may change the allocation instructions for future premiums, at any time.
You should periodically review your allocations in light of market conditions
and your financial needs. A change in allocation will be effective when we
have received it and had the opportunity to act on your request.
DOLLAR COST AVERAGING
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We offer a Dollar Cost Averaging program that allows you to authorize
automatic monthly transfers of a specified percentage or dollar amount from
the General Account to any of the Separate Account Funds. Each transfer under
the Dollar Cost Averaging program must be at least $100, and you must schedule
at least 12 transfers. We may discontinue the program at any time. Your
participation in the Dollar Cost Averaging program will automatically end if
your Account Balance in the General Account, minus any outstanding Policy
Loans, is insufficient to support the next scheduled transfer. You may request
termination of participation in the program at any time. We do not charge you
a fee for participating in our Dollar Cost Averaging program.
Dollar cost averaging generally reduces the risk of purchasing at the top of a
market cycle. This effect occurs from investing over a period of time instead
of investing only on one day. Your average cost of purchasing Accumulation
Units in the Separate Account Funds is reduced to less than the average value
of the Units on the same purchase dates, because you are credited with more
Units when the Unit values are lower than when Unit values are higher. Dollar
cost averaging does not assure you of a profit, nor does it protect against
losses in a declining market.
POLICY LAPSE AND REINSTATEMENT
----------------------------------------------------------------------------
If our deduction of monthly charges when due would result in your Account
Balance, minus any outstanding Policy Loans, being less than zero, a 61-day
"grace period" will begin. The Policy will remain in effect during the grace
period. If the insured person dies during the grace period, any Death Proceeds
due will be reduced by the amount of any overdue monthly deduction.
We will mail a notice to you and any assignee on our records, informing you of
when the grace period will expire and the minimum amount of premium payment
that must be paid prior to the end of the grace period in order to prevent the
Policy from lapsing. If we do not receive payment in our Processing Office
prior to the expiration of the grace period, the Policy will lapse and have no
value.
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<PAGE>
You can reinstate a lapsed Policy during the insured person's lifetime if all
of the following conditions are met:
(a) The Policy lapsed because the grace period ended without the required
payment having been made.
(b) The Policy is reinstated within three years of the end of the grace
period.
(c) The Policy has not been surrendered.
(d) We receive from you evidence that the insured person is insurable by our
standards.
(e) You pay, at time of reinstatement, premiums sufficient to keep the Policy
in effect for at least two months.
(f) You pay any insurance charges not paid during the grace period.
(g) We approve the reinstatement in accordance with our established guidelines
for reinstatement.
Reinstatement of a lapsed Policy will become effective on the date we approve
it. The Account Balance on the effective date of reinstatement will be
whatever the premium paid at such time will provide. We base cost of insurance
charges subsequent to a reinstatement upon the insured person's premium class
as of the reinstatement rather than his or her premium class when we initially
issued the Policy.
UNDERLYING FUNDS INVESTED IN BY OUR SEPARATE ACCOUNT
Below are summaries of the Underlying Funds' investment objectives and certain
investment policies. The Underlying Funds sell their shares to the separate
accounts of insurance companies and do not offer them for sale to the general
public. You will find more detailed information about the Underlying Funds in
their current prospectuses, which are attached to this Prospectus. You should
read each prospectus for a complete evaluation of the Underlying Funds, their
investment objectives, principal investment strategies and the risks related
to those strategies.
EQUITY INDEX FUND OF THE INVESTMENT COMPANY
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The investment objective of the Equity Index Fund is to provide investment
results that correspond to the performance of the Standard & Poor's Composite
Index of 500 Stocks (the S&P 500 INDEX(R)).* The Fund invests primarily in
common stocks that are included in the S&P 500 Index.
ALL AMERICA FUND OF THE INVESTMENT COMPANY
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The investment objective of the All America Fund is to outperform the S&P 500
Index, by investing in a diversified portfolio of primarily common stocks.
The Fund invests approximately 60% of its assets (the INDEXED ASSETS) to
provide investment results that correspond to the performance of the S&P 500
Index. The Fund invests the remaining approximately 40% of its assets (the
ACTIVE ASSETS) to seek to achieve a high level of total return, through both
appreciation of capital and, to a lesser extent, current income, by means of a
diversified portfolio of primarily common stocks with a broad exposure to the
market.
----------
* "Standard & Poor's," "S&P," "S&P 500" and "S&P MidCap 400" are trademarks of
The McGraw-Hill Companies, Inc. and have been licensed for use by the
Investment Company. Standard & Poor's does not sponsor, endorse, sell or
promote the Equity Index Fund, All America Fund or Mid-Cap Equity Index Fund.
It has no obligation or liability for the sale or operation of the Funds and
makes no representations as to the advisability of investing in the Funds.
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MID-CAP EQUITY INDEX FUND OF THE INVESTMENT COMPANY
----------------------------------------------------------------------------
The investment objective of the Mid-Cap Equity Index Fund is to provide
investment results that correspond to the performance of the S&P MidCap 400
Index(R). The Fund invests primarily in common stocks that are included in the
S&P MidCap 400 Index.
AGGRESSIVE EQUITY FUND OF THE INVESTMENT COMPANY
----------------------------------------------------------------------------
The investment objective of the Aggressive Equity Fund is capital
appreciation, by investing in companies believed to possess above-average
growth potential and in companies believed to possess valuable assets or whose
securities are undervalued in the marketplace in relation to factors such as
the company's assets, earnings or growth potential.
COMPOSITE FUND OF THE INVESTMENT COMPANY
----------------------------------------------------------------------------
The investment objective of the Composite Fund is to achieve as high a total
rate of return, through both appreciation of capital and current income, as is
consistent with prudent investment risk by means of a diversified portfolio of
publicly-traded common stocks, debt securities and money market instruments.
The Fund seeks to achieve long-term growth of its capital and increasing
income by investments in common stock and other equity-type securities, and a
high level of current income through investments in publicly-traded debt
securities and money market instruments.
BOND FUND OF THE INVESTMENT COMPANY
----------------------------------------------------------------------------
The primary investment objective of the Bond Fund is to provide as high a
level of current income over time as is believed to be consistent with prudent
investment risk. A secondary objective is preservation of capital.
The Bond Fund seeks to achieve its objective by investing primarily in
investment grade, publicly-traded debt securities, such as bonds, U.S.
Government and agency securities, including mortgage-backed securities, and
zero coupon securities.
MID-TERM BOND FUND OF THE INVESTMENT COMPANY
----------------------------------------------------------------------------
The primary investment objective of the Mid-Term Bond Fund is to provide as
high a level of current income over time as is believed to be consistent with
prudent investment risk. A secondary objective is preservation of capital. The
average maturity of the Fund's securities holdings will be between three and
seven years.
The Mid-Term Bond Fund seeks to achieve its objective by investing primarily
in investment grade, publicly-traded debt securities, such as bonds, U.S.
Government and agency securities, including mortgage-backed securities, and
zero coupon securities.
SHORT-TERM BOND FUND OF THE INVESTMENT COMPANY
----------------------------------------------------------------------------
The primary investment objective of the Short-Term Bond Fund is to provide as
high a level of current income over time as is believed to be consistent with
prudent investment risk. A secondary objective is preservation of capital. The
average maturity of the Fund's securities holdings will be between one and
three years.
The Short-Term Bond Fund seeks to achieve its objective by investing primarily
in investment grade, publicly-traded debt securities, such as bonds, U.S.
Government and agency securities, including mortgage-backed securities, and in
money market instruments.
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MONEY MARKET FUND OF THE INVESTMENT COMPANY
----------------------------------------------------------------------------
The investment objective of the Money Market Fund is the realization of high
current income to the extent consistent with the maintenance of liquidity,
investment quality and stability of capital.
The Money Market Fund invests only in money market instruments and other
short-term securities. Neither the Federal Deposit Insurance Corporation nor
any other U.S. Government agency insures or guarantees investments by the
Separate Account in shares of the Money Market Fund.
FIDELITY VIP EQUITY-INCOME PORTFOLIO
----------------------------------------------------------------------------
The investment objective of the Equity-Income Portfolio is reasonable income
by investing primarily in income-producing equity securities. In choosing
these securities, the Portfolio also considers the potential for capital
appreciation. The Portfolio's goal is to achieve a yield that exceeds the
composite yield on the securities comprising the S&P 500 Index.
FIDELITY VIP II CONTRAFUND PORTFOLIO
----------------------------------------------------------------------------
The investment objective of the Contrafund Portfolio is capital appreciation.
It seeks to increase the value of an investment in the Portfolio over the long
term by investing in securities of companies whose value its adviser believes
is not fully recognized by the public. These securities may be issued by
domestic or foreign companies and many may not be well known. The Portfolio
normally invests primarily in common stocks.
FIDELITY VIP II ASSET MANAGER PORTFOLIO
----------------------------------------------------------------------------
The investment objective of the Asset Manager Portfolio is high total return
with reduced risk over the long term by allocating its assets among domestic
and foreign stocks, bonds and short-term and money-market instruments.
The Portfolio's adviser normally allocates the Portfolio's assets among the
three asset classes within the following investment parameters: 0-50% in
short-term/money market instruments; 20-60% in bonds; and 30-70% in stocks.
The expected "neutral mix", which the Portfolio's adviser would expect over
the long term, is 10% in short-term/money market instruments, 40% in bonds and
50% in stocks.
SCUDDER CAPITAL GROWTH PORTFOLIO
----------------------------------------------------------------------------
The investment objective of the Scudder Capital Growth Portfolio is to
maximize long-term capital growth through a broad and flexible investment
program.
The Portfolio invests in marketable securities, principally common stocks and,
consistent with its objective of long-term capital growth, preferred stocks.
The Portfolio may invest up to 20% of its assets in intermediate to longer
term debt instruments, depending on market and economic conditions.
SCUDDER BOND PORTFOLIO
----------------------------------------------------------------------------
The investment objective of the Scudder Bond Portfolio is to provide a high
level of income consistent with a high quality portfolio of debt securities.
To achieve its objective, the Portfolio invests principally in investment
grade bonds, including those issued by the U.S. Government and its agencies
and by corporations, and other notes and bonds paying high current income. The
Portfolio may invest up to 20% of its assets in non-investment grade debt
securities.
SCUDDER INTERNATIONAL PORTFOLIO
----------------------------------------------------------------------------
The investment objective of the Scudder International Portfolio is to seek
long-term growth of capital primarily through diversified holdings of
marketable foreign equity investments.
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<PAGE>
The Portfolio invests primarily in equity securities of established companies
that do business primarily outside the United States and that are listed on
foreign exchanges. In the event of exceptional conditions abroad, the
Portfolio may temporarily invest all or a portion of its assets in Canadian or
U.S. Government obligations or currencies, or securities of companies
incorporated in and having their principal activities in Canada or the United
States.
AMERICAN CENTURY VP CAPITAL APPRECIATION FUND
----------------------------------------------------------------------------
The investment objective of the American Century VP Capital Appreciation Fund
is capital growth by investing primarily in common stocks that meet certain
fundamental and technical standards of selection and have, in the opinion of
the Fund's manager, better-than-average prospects for appreciation.
CALVERT SOCIAL BALANCED PORTFOLIO
----------------------------------------------------------------------------
The investment objective of Calvert Social Balanced Portfolio is to achieve a
competitive total return through an actively managed non-diversified portfolio
of stocks, bonds and money market instruments that offer income and capital
growth opportunity and satisfy the social concern criteria established for the
Portfolio.
SHARED AND MIXED FUND ARRANGEMENTS. Shares of the Fidelity Portfolios, the
Scudder Portfolios, the American Century VP Capital Appreciation Fund and the
Calvert Social Balanced Portfolio (together, the SHARED FUNDS) currently are
available to the separate accounts of a number of insurance companies. Shares
of Mutual of America Investment Corporation and shares of certain of the
Shared Funds (together, the MIXED FUNDS) currently are available to separate
accounts for both variable annuity and variable life insurance products.
The Board of Directors (or Trustees) of each Shared and Mixed Fund is
responsible for monitoring that Fund for the existence of any material
irreconcilable conflict between the interests of participants in all separate
accounts that invest in the Fund. The Board must determine what action, if
any, the Fund should take in response to an irreconcilable conflict. If we
believe that a response does not sufficiently protect our Policyowners, we
will take appropriate action, and we may modify or reduce the Investment
Alternatives available to you.
INVESTMENT ADVISERS FOR THE UNDERLYING FUNDS
----------------------------------------------------------------------------
MUTUAL OF AMERICA INVESTMENT CORPORATION: The Investment Company receives
investment advice from Mutual of America Capital Management Corporation (the
ADVISER), an indirect wholly-owned subsidiary of Mutual of America. For the
Active Assets of the All America Fund, the Adviser has entered into
subadvisory agreements with Oak Associates, Ltd. and Fred Alger Management,
Inc. Each of these subadvisers provides investment advice for approximately
10% of the All America Fund's assets.
SCUDDER VARIABLE LIFE INVESTMENT FUND: The Scudder Capital Growth, Bond and
International Portfolios receive investment advice from Scudder Kemper
Investments, Inc.
FIDELITY PORTFOLIOS: The Equity-Income Portfolio, Contrafund Portfolio and
Asset Manager Portfolio receive investment advice from Fidelity Management &
Research Company.
CALVERT SOCIAL BALANCED PORTFOLIO: The Portfolio receives investment advice
from Calvert Asset Management Company, Inc., which has entered into a
subadvisory agreement with NCM Capital Management Group, Inc. for the equity
portion of the Portfolio.
AMERICAN CENTURY VP CAPITAL APPRECIATION FUND: The Fund receives investment
advice from American Century Investment Management, Inc.
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<PAGE>
YOUR ACCOUNT BALANCE IN THE SEPARATE ACCOUNT FUNDS
ACCUMULATION UNITS IN SEPARATE ACCOUNT FUNDS
----------------------------------------------------------------------------
We use Accumulation Units to represent Account Balances in each Separate
Account Fund. We separately value the Accumulation Unit for each Fund of the
Separate Account.
We determine your Account Balance in the Separate Account as of any Valuation
Day by multiplying the number of Accumulation Units credited to you in each
Fund of the Separate Account by the Accumulation Unit value of that Fund at
the end of the Valuation Day.
Investment experience by the Separate Account Funds does not impact the number
of Accumulation Units credited to your Account Balance. The value of an
Accumulation Unit for a Fund, however, will change as a result of the Fund's
investment experience, in the manner described below.
CALCULATION OF ACCUMULATION UNIT VALUES
----------------------------------------------------------------------------
We determine Accumulation Unit values for the Funds as of the close of
business on each Valuation Day (generally at the close of the New York Stock
Exchange). A Valuation Period is from the close of a Valuation Day until the
close of the next Valuation Day.
The dollar value of an Accumulation Unit for each Fund of the Separate Account
will vary from Valuation Period to Valuation Period. The changes in
Accumulation Unit values for the Separate Account Funds will reflect:
o changes in the net asset values of the Underlying Funds, depending on
the investment experience and expenses of the Underlying Funds, and
o Separate Account charges under the Policies, with the annual rates
calculated as a daily charge. (SEE "Charges and Deductions You Will
Pay".)
ACCUMULATION UNIT VALUES FOR TRANSACTIONS
----------------------------------------------------------------------------
When you allocate premiums to a Separate Account Fund or transfer any Account
Balance to a Fund, we credit Accumulation Units to your Account Balance. When
you withdraw or transfer any Account Balance from a Separate Account Fund, we
cancel Accumulation Units from your Account Balance.
The Accumulation Unit value for a transaction is the Unit value for the
Valuation Period during which we receive the premium or request. As a result,
we will effect the transaction at the Accumulation Unit value we determine at
the NEXT CLOSE of a Valuation Day (generally the close of the New York Stock
Exchange on that business day).
We calculate the number of Accumulation Units for a particular Fund by
dividing the dollar amount you have allocated to, or withdrawn from, the Fund
during the Valuation Period by the applicable Accumulation Unit value for that
Valuation Period. We round the resulting number of Accumulation Units to two
decimal places.
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OUR GENERAL ACCOUNT
SCOPE OF PROSPECTUS
----------------------------------------------------------------------------
This Prospectus serves as a disclosure document for the variable, or Separate
Account, interests under the Policies. We have not registered the Policies
under the Securities Act of 1933 for allocations to the General Account, nor
is the General Account registered as an investment company under the 1940 Act.
The staff of the Commission has not reviewed the disclosures in this
Prospectus that relate to the General Account. Disclosures regarding the fixed
portion of the Policies and the General Account, however, generally are
subject to certain provisions of the Federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
GENERAL DESCRIPTION
----------------------------------------------------------------------------
Amounts that you allocate to the General Account become part of our general
assets. Our General Account supports our insurance and annuity obligations.
The General Account consists of all of our general assets, other than those in
the Separate Account and other segregated asset accounts.
We bear the full investment risk for all amounts that Policyowners allocate to
the General Account. We have sole discretion to invest the assets of the
General Account, subject to applicable law. Your allocation of Account Balance
to the General Account does not entitle you to share in the investment
experience of the General Account.
We guarantee that we will credit interest to Policyowners' Account Balances in
the General Account at an effective annual rate of at least 3%. In our sole
discretion, we may credit a higher rate of interest to Account Balances in the
General Account, although WE ARE NOT OBLIGATED TO CREDIT INTEREST IN EXCESS OF
3% PER YEAR. Your initial Policy Specification Pages will show the initial
current interest rate, and we will send you notice when we change the current
rate. We credit interest daily and compound it annually. The interest rates
may be different for your Account Balance in the General Account representing
borrowed and unborrowed amounts under your Policy. SEE "Access to Your Account
Balance -- Policy Loans".
TRANSFERS AND WITHDRAWALS
----------------------------------------------------------------------------
You may transfer any portion of your Account Balance to or from the General
Account and may withdraw any portion of your Account Balance from the General
Account, except that you may not withdraw from the General Account the amount
of any Policy Loans you have outstanding. SEE "Your Right to Transfer Among
Investment Alternatives" and "Policy Loans" under "Access to Your Account
Balance" below. We have the right to delay transfers and withdrawals from the
General Account for up to six months following the date that we receive the
transaction request.
-15-
<PAGE>
ACCESS TO YOUR ACCOUNT BALANCE
You may obtain all or part of your Account Balance by surrendering your
Policy, by making a partial withdrawal from your Policy or by taking a Policy
Loan. You also may transfer all or any part of your Account Balance among the
available Investment Alternatives. If the insured person has a terminal
illness, you may be eligible to obtain an Accelerated Benefit payment, as
described below. Certain of these transactions may have tax consequences, and
some transactions may cause your Policy to become a Modified Endowment
Contract. SEE "Federal Tax Considerations" below.
SURRENDER OF POLICY
----------------------------------------------------------------------------
You may surrender your Policy and obtain the Surrender Proceeds at any time
prior to the Maturity Date. Surrender Proceeds equal your Account Balance
minus any Policy Loans you have outstanding at the time of surrender. To
surrender your Policy, you must submit the Policy and a Written Request to our
Processing Office, and the insured person must be alive on the surrender date.
We will calculate the Surrender Proceeds as of the Valid Transaction Date of
the surrender, and all insurance benefits under your Policy will then cease.
PARTIAL WITHDRAWALS OF ACCOUNT BALANCE
----------------------------------------------------------------------------
You may withdraw any portion of your Account Balance (before the death of the
insured person). A partial withdrawal must be in an amount of at least $500,
may not reduce the Account Balance to less than $100, and cannot exceed the
Account Balance minus any Policy Loans. We reserve the right to limit the
number of partial withdrawals in one Policy Year, although we do not currently
impose a limit.
A partial withdrawal will affect both your Account Balance and the amount
of your Basic Death Benefit.
o If you have a Face Amount Plan, we will reduce both your Account Balance
and your Face Amount by the amount of any withdrawal, and we will send
you revised Policy Specification Pages reflecting the Face Amount
decrease. The reduction in amount of insurance due to a withdrawal
generally will be applied in the order of the effective dates of such
amounts of insurance, the most recent first. We will not permit a
partial withdrawal that would reduce the Face Amount below the minimum
for the Policy.
o If you have a Face Amount Plus Plan, we will reduce your Account Balance
by the amount of the withdrawal.
YOUR RIGHT TO TRANSFER AMONG INVESTMENT ALTERNATIVES
----------------------------------------------------------------------------
You may transfer all or a portion of your Account Balance among Funds of the
Separate Account, and between the Separate Account and the General Account.
There are no tax consequences to you for transfers among Investment
Alternatives. We currently do not impose a charge for transfers, but we
reserve the right to impose a transfer charge in the future. SEE "How to
Contact Us and Give Us Instructions -- Requests by Telephone or Internet"
below.
HOW TO TELL US AN AMOUNT FOR TRANSFERS OR PARTIAL WITHDRAWALS
----------------------------------------------------------------------------
To tell us the amount of your Account Balance to transfer or withdraw, you
may specify to us:
o the dollar amount to be taken from each Investment Alternative,
o for Separate Account Funds, the number of Accumulation Units to be
transferred or withdrawn, or
o the percentage of your Account Balance in a particular Investment
Alternative to be transferred or withdrawn.
-16-
<PAGE>
For transfers, you also must specify the Investment Alternative(s) to which
you are moving the transferred amount. You should use the form we provide to
give us instructions. Your request for a transfer or withdrawal is not binding
on us until we receive all information necessary to process your request.
POLICY LOANS
----------------------------------------------------------------------------
You may request a Policy Loan only on your Account Balance in the General
Account. You will pay interest on the Policy Loan, but the amount we hold in
the General Account as collateral for your Policy Loan will accrue interest at
a rate equal to the interest you pay on the Policy Loan minus 2%.
We will grant you a Policy Loan if you meet all of the following
conditions.
o We receive at our Processing Office your Written Request for a loan.
o The amount of the requested loan is 95% or less of your Account Balance
in the General Account minus any existing Policy Loans you have.
o The amount of the requested loan is at least $500.
o The sole security for the loan will be the Policy.
o You have assigned the Policy to us in a form acceptable to us.
o Your Policy is in effect.
The interest rate on a Policy Loan will be the maximum interest rate that we
can charge under applicable law, and the rate will change from time to time.
The maximum interest rate is the greater of:
o our guaranteed rate of interest (3% per annum) plus 1% per year, or
o the "Published Monthly Average" for the calendar month ending two months
before the date on which the rate is determined. The Published Monthly
Average is the Term Monthly Average Corporates yield shown in Moody's
Corporate Bond Yield Averages published by Moody's Investors Service,
Inc., or any successor thereto or, if that Moody's average is no longer
published, a substantially similar average, as established by insurance
regulation in the jurisdiction in which the Policy is delivered.
A new interest rate for Policy Loans will be effective beginning on the next
January 1 following a change in the maximum rate.
o We determine the maximum rate of interest on Policy Loans on each
December 1 after the Policy is issued.
o We may increase the Policy Loan interest rate whenever the maximum
interest rate increases by 0.5% or more a year.
o We will reduce the Policy Loan interest rate whenever the maximum
interest rate decreases by 0.5% or more a year.
We will notify you, and any assignee on our records:
o at the time you take a Policy Loan, of the initial rate of interest on
that loan, and
o at least 28 days before an interest rate increase, of the terms of that
increase.
We will include in each notice the substance of the Policy provisions
permitting an adjustable maximum interest rate, and we will specify the
frequency of interest rate determinations, as permitted by law.
Interest on Policy Loans accrues daily. Interest is due and payable at the end
of the Policy Month in which the loan is made and at the end of each following
Policy Month. Any interest that you do not pay when due becomes part of the
Policy Loan and increases the loan amount outstanding.
If your Policy Loans exceed your Account Balance on any Monthly Anniversary
Day, the grace period provisions of your Policy will apply. We will notify you
of the minimum payment you will have to make
-17-
<PAGE>
to prevent the Policy from lapsing at the end of the grace period. SEE "How to
Purchase a Policy and Pay Premiums -- Policy Lapse and Reinstatement".
Depending on the percentage of your Account Balance that you request as a
Policy Loan, by taking a Loan you will increase the possibility of lapsing the
Policy and incurring adverse tax consequences. SEE "Federal Tax Considerations
-- Tax Treatment of Policy Benefits and Access of Account Balance".
We will not terminate your Policy in a Policy Year solely as the result of a
change in the interest rate on a Policy Loan during the Policy Year, or in
other words if the Policy Loans exceed your Account Balance only because we
increased the interest rate due on Policy Loans. We will maintain coverage
during that Policy Year until the time at which the Policy otherwise would
have terminated if there had been no interest rate change during that Policy
Year.
You can repay Policy Loans in part or in full at any time if the insured
person is living and your Policy is in effect. If you do not repay a Policy
Loan, we will deduct the Policy Loan from your Surrender Proceeds or Maturity
Proceeds or from the Death Proceeds we pay to your beneficiary(ies).
ACCELERATED BENEFIT FOR TERMINAL ILLNESS
----------------------------------------------------------------------------
You may be eligible, under the terms of your Policy or a rider to your Policy,
to receive a lump-sum Accelerated Benefit, when the insured person is
determined to have a terminal illness (a state of health where the insured
person's life expectancy is 12 months or less). We will deduct a fee when we
pay the Accelerated Benefit. SEE "Charges and Deductions You Will Pay --
Accelerated Benefit Fee".
The amount of the Accelerated Benefit will be the LESSER OF:
o $200,000, or
o the present value (discounted for a one-year period) of 50% of the Death
Proceeds that would be payable upon the Valid Transaction Date as of
which the Accelerated Benefit is calculated.
The interest rate we use in discounting the Accelerated Benefit will not be
more than THE GREATER OF:
o the current yield on 90-day U.S. treasury bills on the Valid Transaction
Date, or
o the then-current maximum rate of interest on Policy Loans.
For the Accelerated Benefit to be payable, the following requirements must
be met.
(a) We must receive at our Processing Office:
o the Policy or, if applicable, the Accelerated Benefit rider;
o your Written Request for payment of the Accelerated Benefit;
o the Written Consent of all irrevocable beneficiaries, if any, under the
Policy; and
o evidence satisfactory to us of the insured person's terminal illness.
(b) The Policy must be in force on the date of your request and must not have
been assigned, other than to us as security for a Policy Loan.
(c) The insured person's terminal illness must not be a consequence of
intentionally self-inflicted injuries.
If the insured person dies before we pay a requested Accelerated Benefit, we
will instead pay the Death Proceeds to the beneficiary in accordance with the
Policy.
The required evidence of terminal illness may include, but is not limited
to:
(a) a certification of state of health by a licensed physician who:
o has examined the insured person,
o is qualified to provide that certification, and
o is neither the Policyowner, the insured person, nor a family member of
either; and
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<PAGE>
(b) a second opinion or examination by a physician we designate, which will be
at our expense.
After we make an Accelerated Benefit payment, your Policy will continue in
force, but amounts otherwise payable under the Policy and any riders to it
will be reduced.
o The amounts will decrease by the percentage of the Death Proceeds
"accelerated" under the Accelerated Benefit. We calculate the percentage
by dividing the Accelerated Benefit by the Death Proceeds at the Valid
Transaction Date. We reduce the Policy's Face Amount, Account Balance,
Policy Loans and any Proceeds payable after the Accelerated Benefit
payment by that percentage.
o We will base subsequent premiums and cost of insurance charges under the
Policy on the Account Balance and Face Amount that are in effect after
the payment of the Accelerated Benefit.
MATURITY BENEFIT
----------------------------------------------------------------------------
The Maturity Date for a Policy occurs when the insured person attains the age
of 100. If on the Maturity Date the insured person is living and the Policy is
still in effect, the Maturity Proceeds become payable. The Maturity Proceeds
are equal to your Account Balance, minus any Policy Loans and unpaid monthly
deductions.
We will pay Maturity Proceeds in one lump sum, unless you have selected an
optional payment plan for the Proceeds. A lump sum payment will include
interest from the Maturity Date to the date of payment.
The minimum amount of each payment under any optional payment plan is $100.
Once we have begun making payments under any of these optional payment plans,
the payment plan may not be changed.
The payment plans available for Maturity Proceeds are the same as those
available for Death Proceeds. SEE "Insurance Benefits Upon Death of Insured
Person -- Payment Options".
WHEN WE MAY POSTPONE PAYMENTS
----------------------------------------------------------------------------
We will pay any amounts due from the Separate Account for a partial
withdrawal, death benefit or surrender and will transfer any amount from the
Separate Account to the General Account, within seven days, unless:
o The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on that Exchange is restricted as determined by the
Commission; or
o The Commission by order permits postponement for the protection of
Policyowners; or
o An emergency exists, as determined by the Commission, as a result of
which disposal of securities is not reasonably practicable or it is not
reasonably practicable to determine the value of the Separate Account's
net assets.
-19-
<PAGE>
INSURANCE BENEFITS UPON DEATH OF INSURED PERSON
DEATH PROCEEDS
----------------------------------------------------------------------------
When we receive due proof of the death of the insured person (while the Policy
is in effect), the Death Proceeds become payable to the beneficiary. We
calculate the Death Proceeds as of the date of the insured person's death. The
beneficiary(ies) should provide us with written proof of death as soon as is
reasonably possible.
The Death Proceeds under a Policy are equal to:
o the Basic Death Benefit, plus any insurance benefits payable under any
riders to the Policy, MINUS
o the sum of any Policy Loans and unpaid monthly deductions before the
death of the insured person.
BASIC DEATH BENEFIT
----------------------------------------------------------------------------
Your Policy has as its Basic Death Benefit plan either a Face Amount Plan or a
Face Amount Plus Plan. SEE "Basic Death Benefit Plan" under "How to Purchase a
Policy and Pay Premiums".
The Face Amount Plan provides a fixed death benefit, because the Basic Death
Benefit is the Face Amount (unless the Corridor Percentage applies). The Face
Amount Plus Plan provides a variable death benefit, because your Account
Balance, which is a factor in the amount of the death proceeds due, will vary.
Under the Face Amount Plan, the Basic Death Benefit will be the GREATER of
o the Policy's Face Amount on the date of the insured person's death, or
o the Policy's Account Balance on the date of the insured person's death
multiplied by the appropriate Corridor Percentage from the Corridor
Percentage Chart set forth below.
Under the Face Amount Plus Plan, the Basic Death Benefit will be the
GREATER of
o the Face Amount on the date of the insured person's death plus the
Account Balance on that date, or
o the Account Balance on the date of the insured person's death multiplied
by the appropriate Corridor Percentage from the Corridor Percentage
Chart set forth below.
CORRIDOR PERCENTAGES
----------------------------------------------------------------------------
Corridor Percentages are based upon the age of the insured person at the date
of death. The purpose of the Corridor Percentages is to ensure that a Policy
will qualify as life insurance under the Code, at the time the insured person
dies.
The Corridor Percentages require us to provide a death benefit that is greater
than the Account Balance, or in other words to maintain an amount for which we
are "at risk", until the insured person reaches age 95. The percentages shown
below reflect requirements under the Code, and we reserve the right to change
them if the Code is revised.
-20-
<PAGE>
CORRIDOR PERCENTAGE CHART
<TABLE>
<CAPTION>
ATTAINED CORRIDOR ATTAINED CORRIDOR ATTAINED CORRIDOR
AGE PERCENTAGE AGE PERCENTAGE AGE PERCENTAGE
- --------- ------------ --------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
0-40 250% 54 157% 68 117%
41 243 55 150 69 116
42 236 56 146 70 115
43 229 57 142 71 113
44 222 58 138 72 111
45 215 59 134 73 109
46 209 60 130 74 107
47 203 61 128 75 to 90 105
48 197 62 126 91 104
49 191 63 124 92 103
50 185 64 122 93 102
51 178 65 120 94 101
52 171 66 119 95 or older 100
53 164 67 118
</TABLE>
PAYMENT OPTIONS
----------------------------------------------------------------------------
We will pay Death Proceeds in one lump sum, unless you selected an optional
payment plan for the Proceeds or the beneficiary selects an optional payment
plan. A lump sum payment will include interest from the date of death to the
date of payment, at the rate of interest we are then crediting for amounts
under the Interest Payments plan described below.
You may choose an optional payment plan for all or any part of Death Benefit
Proceeds that will become payable under your Policy, and you may modify your
selection from time to time, when the insured person is living. The minimum
amount of each payment under any optional payment plan is $100.
If you change a beneficiary, your previous selection of an optional payment
plan will no longer be in effect unless you make a Written Request that it
continue. You must send a choice or change of optional payment plan in writing
to our Processing Office.
Once the Proceeds are applied under any of the optional plans, the payments
are not affected by the investment experience of any Separate Account Fund. In
addition, the beneficiary may not change the form of payment plan once we have
begun making payments.
The optional payment plans available under the Policy are:
INTEREST PAYMENTS PLAN. We hold the Proceeds and pay interest to the payee at
an effective rate of at least 3% compounded yearly. We will pay the principal
amount to the payee after the term of years specified when the Interest
Payment plan is elected.
LIFE PAYMENTS PLAN. We make equal monthly payments for a guaranteed minimum
period to a payee, who must be a natural person for whom we have been provided
written proof of the date of birth. If the payee lives longer than the minimum
period, payments will continue for the lifetime of the payee. The minimum
period can be either ten years or until the sum of the payments equals the
amount of Proceeds applied under this plan. If the payee dies before the end
of the guaranteed period, we will discount the amount of remaining guaranteed
payments for the minimum period at an effective rate of 3% compounded yearly.
We will pay the discounted amount in one lump sum to the payee's estate,
unless otherwise provided.
PAYMENTS FOR A FIXED PERIOD PLAN. We make payments for a period of no more
than 25 years in annual, semi-annual, quarterly or monthly installments. The
payments include interest at an effective rate of at least 3% compounded
yearly. We may credit an effective annual rate of interest of more than 3%,
and to the extent and for the period we do so, the payments will be greater.
PAYMENTS OF A FIXED AMOUNT PLAN. We make equal annual, semi-annual,
quarterly or monthly payments until all of the Proceeds have been paid. We
credit the unpaid balance with interest at an effective rate of
-21-
<PAGE>
at least 3% compounded yearly. The final payment under this option is any
balance equal to or less than one fixed amount payment.
We also have a Specified Payments Option available, which allows you to
designate a fixed amount (at least $100) to withdraw each month.
CHARGES AND DEDUCTIONS YOU WILL PAY
COST OF INSURANCE CHARGES
----------------------------------------------------------------------------
On each Monthly Anniversary Day under a Policy, we deduct charges to
compensate us for the life insurance coverage we will be providing in the next
month. The amount we deduct is equal to:
o the amount for which we are "at risk", which is the Policy's Basic Death
Benefit minus the Account Balance as of the Monthly Anniversary Day,
divided by $1,000, TIMES
o the cost per $1,000 of insurance coverage for the insured person, also
called the "cost of insurance rate". The rate will be no greater than
permitted under the 1980 Commissioners Standard Ordinary mortality table
for the insured person's premium class.
Cost of insurance rates will vary according to the insured person's age and
premium class, and may vary by gender, meaning whether the insured person is
male or female.
o If your Policy does not have a Payroll Deduction Rider, the rates vary
according to the insured person's gender.
o If your Policy has a Payroll Deduction Rider or if applicable state law
requires unisex rates for any Policy, cost of insurance rates are
unisex, meaning that the same rates apply for male and female insured
persons of the same age and rating classification.
Unisex rates are more favorable to males than gender based rates, and gender
based rates are more favorable to females than unisex rates. The guaranteed
maximum cost of insurance rates for Policies with a Payroll Deduction Rider
also are unisex.
We separately calculate cost of insurance for the amount at risk under a
Policy's initial Face Amount and for the additional amount at risk under each
increase in the Face Amount. For the initial Face Amount, we use the premium
class on the Issue Date. For any increase in Face Amount, we use the premium
class in effect at the time of that increase.
We determine cost of insurance rates based on our estimates of future cost
factors such as mortality, investment income, expenses, and the length of time
Policies stay in force. We have the right to adjust our cost of insurance
rates from time to time. Any adjustments we make will be on a uniform basis.
If the insured person's premium class is standard, the rates we use will never
be greater than the guaranteed cost of insurance rates shown in your Policy
Specification Pages.
We deduct cost of insurance charges from your Account Balance, if any, in our
General Account. If you do not have sufficient Account Balance allocated to
the General Account, we will deduct the charges from your Account Balance
allocated to one or more of the Separate Account Funds. We look to the Funds
in the following order:
(a) Investment Company Money Market Fund, (b) Investment Company
Short-Term Bond Fund, (c) Investment Company Mid-Term Bond Fund, (d)
Investment Company Bond Fund, (e) Scudder Bond Fund, (f) Investment
Company Composite Fund, (g) Fidelity VIP II Asset Manager Fund, (h)
Calvert Social Balanced Fund, (i) Fidelity VIP Equity-Income Fund, (j)
Investment Company All America Fund, (k) Investment Company Equity Index
Fund, (l) Investment Company Mid-Cap Equity Index Fund, (m) Fidelity VIP
II Contra Fund, (n) Investment Company
-22-
<PAGE>
Aggressive Equity Fund, (o) Scudder Capital Growth Fund, (p) Scudder
International Fund, and (q) American Century VP Capital Appreciation Fund.
ADMINISTRATIVE CHARGES
----------------------------------------------------------------------------
We deduct, on each Valuation Day, from the value of the net assets in each
Fund of the Separate Account a charge for administrative expenses at an annual
rate of 0.40%, except that we reduce the administrative charge to the extent
we receive a reimbursement for administrative expenses.
o For the Separate Account Fund that invests in the American Century VP
Capital Appreciation Fund, the annual rate currently is 0.20%, because
the adviser for the American Century VP Capital Appreciation Fund
reimburses us at an annual rate of 0.20% for administrative expenses.
o For the Funds that invest in the Fidelity Portfolios, the annual rate
currently is 0.30%, because the transfer agent and distributor for the
Fidelity Portfolios reimburse us at an aggregate annual rate of 0.10%
for administrative expenses.
o We make an additional deduction for administrative expenses, on each
Monthly Anniversary Day, from your Account Balance. The charge is $2.00
per month, except that we will reduce the charge to 1/12 of 1.00% if
your Account Balance for the month is less than $2,400, and we waive the
charge if your Account Balance is under $300. We deduct the
administrative expense charge from your Account Balance in the same
manner as described above for cost of insurance charges.
o We reserve the right to increase our administrative charges if the
revenues from these charges are insufficient to cover our costs of
administering the Policies. In no event will we increase the .40% charge
to more than an annual rate of .65% or the $2.00 per month charge to
more than $10 per month.
MORTALITY AND EXPENSE RISKS CHARGES
----------------------------------------------------------------------------
We deduct, on each Valuation Day, from the value of the net assets in each
Fund of the Separate Account a charge for mortality and expense risks we
assume under the Policies. The mortality risk charge, at an annual rate of
0.35%, compensates us for assuming the risk that insured persons may live for
a shorter period of time than we estimated. The expense risk charge, at an
annual rate of 0.15%, compensates us for the risk that our expenses in
administering the Policies will be greater than we estimated. We will realize
a gain from these charges to the extent that they are not needed to provide
benefits and pay expenses under the Policies.
SUPPLEMENTAL INSURANCE BENEFITS FEE
----------------------------------------------------------------------------
We deduct the cost of any supplemental benefits you may have from your Account
Balance on each Monthly Anniversary Day. The current monthly cost per thousand
of coverage for the accidental death benefit rider is $.10. The total monthly
cost per $1,000 of coverage for all covered children under a children's term
rider currently is $.60. The maximum insurance coverage per child currently is
$5,000. SEE "How to Purchase a Policy and Pay Premiums -- Supplemental
Insurance Benefits".
ACCELERATED BENEFIT FEE
----------------------------------------------------------------------------
We deduct a one-time administrative fee from the Accelerated Benefit when we
pay the Accelerated Benefit. The amount of the Accelerated Benefit fee is $250
"(or a lesser amount when required by your state). SEE "Access to Your Account
Balance -- Accelerated Benefit for Terminal Illness".
-23-
<PAGE>
PREMIUM AND OTHER TAXES
----------------------------------------------------------------------------
We currently do not deduct state premium taxes from your premium payments. We
reserve the right to deduct all or a portion of the amount of any applicable
taxes, including state premium taxes, from premiums prior to any allocation of
those premiums among the General Account and the Separate Account Funds.
Currently, most state premium taxes range from 2% to 4%. SEE "Federal Tax
Considerations".
CHANGES IN POLICY COST FACTORS
----------------------------------------------------------------------------
From time to time we may make adjustments in policy cost factors, which
include interest credited on amounts in our General Account, cost of insurance
deductions and administrative charges. We base adjustments upon changes in our
expectations for our investment earnings, mortality of insured persons,
persistency (how long Policies stay in effect), expenses, and taxes. We make
any adjustments "by class", meaning that all Policies within the same class
will have the same adjustment.
We determine changes in policy cost factors for a Policy in accordance with
procedures and standards on file with the insurance regulator of the
jurisdiction in which we delivered the Policy. We review policy cost factors
for in-force Policies once every five Policy Years, or whenever we change the
premiums or factors for comparable new Policies. We will never make a change
in the guaranteed cost of insurance rates and the Guaranteed Rate of Interest
shown on the Specification Pages of your Policy that would be unfavorable to
you.
FEES AND EXPENSES OF UNDERLYING FUNDS
----------------------------------------------------------------------------
Each Separate Account Fund purchases shares of an Underlying Fund at net asset
value. That net asset value reflects investment management and other fees and
expenses incurred by that Underlying Fund. Detailed information concerning
those fees and expenses is set forth in the prospectuses for the Underlying
Funds that are attached to this Prospectus.
-24-
<PAGE>
HOW TO CONTACT US AND GIVE US INSTRUCTIONS
CONTACTING MUTUAL OF AMERICA
----------------------------------------------------------------------------
You should send in writing all notices, requests and elections required or
permitted under the Policies, except that you may give certain instructions by
telephone, as described below. Our home office address is:
Mutual of America Life Insurance Company
320 Park Avenue
New York, New York 10022
You can check the address for your Regional Office by calling 1-800-468-3785
or by visiting our Website at www.mutualofamerica.com, and you can check for
the appropriate Processing Office by calling our 800 number.
REQUESTS BY TELEPHONE
----------------------------------------------------------------------------
You may make requests by telephone for transfers of Account Balance among
Investment Alternatives, withdrawals of Account Balance, Policy Loans, or to
change the Investment Alternatives to which we will allocate your future
Premiums. On any Valuation Day, we will consider requests by telephone that we
receive by 4 p.m. Eastern Time (or the close of the New York Stock Exchange,
if earlier) as received that day. We will consider requests that we receive
after 4 p.m. (or the Exchange close) as received the next Valuation Day.
You must use a Personal Identification Number (PIN) to make telephone
requests. We automatically send a PIN to you, and your use of the PIN
constitutes your agreement to use the PIN in accordance with our rules and
requirements. You may call us to change or cancel the PIN that we have
assigned. We reserve the right to suspend or terminate at any time, without
notice, the right of Policyowners to request transfers or reallocations by
telephone. We also reserve the right not to accept, or to revoke, powers of
attorney or other trading authorizations granted by any Policyowner to a third
party.
Although our failure to follow reasonable procedures may result in our
liability for any losses due to unauthorized or fraudulent telephone
transactions, we will not be liable for following instructions communicated by
telephone that we reasonably believe to be genuine. We will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Those procedures are to confirm your Social Security number, check the
Personal Identification Number, tape record all telephone transactions and
provide written confirmation of transactions.
WHERE YOU SHOULD DIRECT REQUESTS
----------------------------------------------------------------------------
You may make requests for allocation changes or transfers of Account Balance
by calling 1-800-468-3785 or by writing to our Processing Center. For
withdrawals and Policy Loans, you must make your request according to our
procedures, which we may change from time to time. Under our current
procedures, you should make a withdrawal or loan request to our 800 number or
in writing to our Processing Center. The address for our Processing Center is:
Mutual of America Life Insurance Company
Financial Transaction Processing Center
1150 Broken Sound Parkway NW
Boca Raton, FL 33487
You should use our forms to submit written requests to us.
-25-
<PAGE>
ABOUT MUTUAL OF AMERICA AND OUR SEPARATE ACCOUNT NO. 3
MUTUAL OF AMERICA
----------------------------------------------------------------------------
We are a mutual life insurance company organized under the laws of the State
of New York. We are authorized to transact business in 50 states and the
District of Columbia. Our home office address is 320 Park Avenue, New York,
New York 10022. The Insurance Company was incorporated in 1945 as a nonprofit
retirement association to provide retirement and other benefits for non-profit
organizations and their employees in the health and welfare field. In 1978 we
reorganized as a mutual life insurance company.
We sell individual and group life insurance and annuities, including variable
accumulation annuity contracts and variable life insurance policies. We also
provide group and individual annuities and related services for the pension,
retirement, and long-range savings needs of corporate, charitable, religious,
educational and government organizations and their employees. We invest the
assets we derives from our business as permitted under applicable state law.
As of December 31, 1999, we had total assets, on a consolidated basis, of
approximately $11 billion. We are registered as a broker-dealer under the
Securities Exchange Act of 1934, and also are registered as an investment
adviser under the Investment Advisers Act of 1940.
Our operations as a life insurance company are reviewed periodically by
various independent rating agencies. These agencies, such as A.M. Best
Company, Standard & Poor's Insurance Rating Service and Duff & Phelps Credit
Rating Company, publish their ratings. From time to time we reprint and
distribute the rating reports in whole or in part, or summaries of them, to
the public. The ratings concern our operation as a life insurance company and
do not imply any guarantees of performance of the Separate Account.
THE SEPARATE ACCOUNT
----------------------------------------------------------------------------
We established the Separate Account under a resolution of our Board of
Directors adopted on June 25, 1998. The Separate Account is registered with
the Securities and Exchange Commission (COMMISSION) as a unit investment trust
under the Investment Company Act of 1940 (1940 ACT). The Commission does not
supervise the management or investment practices or policies of the Separate
Account or Mutual of America. The 1940 Act, however, does regulate certain
actions by the Separate Account.
We divide the Separate Account into distinct Funds. Each Fund invests its
assets in an Underlying Fund, and the name of each Separate Account Fund
reflects the name of the corresponding Underlying Fund.
The assets of the Separate Account are our property. The Separate Account
assets attributable to Policyowners' Account Balances and any other policies
funded through the Separate Account cannot be charged with liabilities from
other businesses that we conduct. The income, capital gains and capital losses
of each Fund of the Separate Account are credited to, or charged against, the
net assets held in that Fund. We separately determine each Fund's net assets,
without regard to the income, capital gains and capital losses from any of the
other Funds of the Separate Account or from any other business that we
conduct.
The Separate Account and Mutual of America are subject to supervision and
regulation by the Superintendent of Insurance of the State of New York, and by
the insurance regulatory authorities of each State in which we are licensed to
do business.
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<PAGE>
FEDERAL TAX CONSIDERATIONS
For Federal income tax purposes, the Separate Account is not separate from us,
and its operations are considered part of our operations. Under existing
Federal income tax law, we do not pay taxes on the net investment income and
realized capital gains earned by the Separate Account. We reserve the right,
however, to make a deduction for taxes if in the future we must pay tax on the
Separate Account's operations.
OBTAINING TAX ADVICE
----------------------------------------------------------------------------
THE DESCRIPTION BELOW OF THE CURRENT FEDERAL TAX STATUS AND CONSEQUENCES FOR
POLICYOWNERS DOES NOT COVER EVERY POSSIBLE SITUATION AND IS FOR INFORMATION
PURPOSES ONLY. TAX PROVISIONS AND REGULATIONS MAY CHANGE AT ANY TIME. The
discussion below of Federal tax considerations is based upon our understanding
of current Federal income tax laws as they are currently interpreted and is
not intended as tax advice. We do not make any guarantee regarding the tax
status of any Policy or any transaction involving a Policy.
Tax results may vary depending upon your individual situation, and special
rules may apply to you in certain cases. You also may be subject to State and
local taxes, which may not correspond to the Federal tax provisions. For these
reasons, you should consult a qualified tax adviser for detailed information
and advice regarding the tax consequences to you of purchasing a Policy or of
effecting any transaction under a Policy.
TAX STATUS OF THE POLICIES
----------------------------------------------------------------------------
Section 7702 of the Code defines "insurance contract" for Federal income tax
purposes. The Secretary of the Treasury (the TREASURY) is authorized to
formulate regulations that implement Section 7702. The Treasury has proposed
regulations and issued other interim guidance, but it has not adopted final
regulations. Accordingly, guidance concerning how Section 7702 is to be
applied is limited. If a Policy were determined not to be a life insurance
contract for purposes of Section 7702, that Policy would not provide the tax
advantages normally provided by a life insurance policy.
We believe that a Policy issued on the basis of a standard premium class
should meet the Section 7702 definition of a life insurance contract. Our
interpretation is based primarily on IRS Notice 88-128 and the proposed
mortality charge regulations under Section 7702 issued on July 5, 1991.
For a Policy issued on a substandard basis (in other words, the insured
person's premium class indicates a higher than standard mortality risk), there
is less guidance as to whether the Policy would meet the Section 7702
definition of life insurance contract. Particularly if the Policyowner pays
the full amount of premiums permitted under the Policy, there may be a
question as to whether the Policy is a life insurance policy.
If it is subsequently determined that a Policy we have issued does not satisfy
Section 7702, we may take whatever steps are appropriate and reasonable to
attempt to cause that Policy to comply with Section 7702. For this purpose, we
reserve the right to restrict Policy transactions as necessary to attempt to
qualify the Policy as a life insurance contract under Section 7702.
Section 817(h) of the Code requires that the Separate Account's investments be
"adequately diversified" in accordance with Treasury regulations in order for
the Policy to qualify as a life insurance contract under Section 7702 of the
Code. The Separate Account, through the Underlying Funds, intends to comply
with the diversification requirements prescribed in Treasury Regulation
Section 1.817-5. We believe that the Separate Account meets the
diversification requirement, and we will monitor continued compliance with the
requirement.
The Treasury has announced that the diversification regulations do not provide
guidance concerning the issue of the number of investment options and switches
among such options a Policyowner may have before being considered to have
investment control and thus to be the owner of the related assets in the
Separate Account. If the Treasury provides additional guidance on this issue,
the Policy may need to be modified to comply with that guidance. Accordingly,
we reserve the right to modify the Policy as necessary to attempt
-27-
<PAGE>
to prevent the Policyowner from being considered the owner of the assets of
the Separate Account or otherwise to qualify the Policy for favorable tax
treatment.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS AND ACCESS OF ACCOUNT BALANCE
----------------------------------------------------------------------------
IN GENERAL. Proceeds and Account Balance increases should be treated in a
manner consistent with a fixed-benefit life insurance policy for Federal
income tax purposes. You will not be considered to have received the Account
Balance, including investment earnings and interest earned, until there is a
distribution of Account Balance.
The tax consequences of distributions from, and loans taken from or secured
by, a Policy depend on whether the Policy is classified as a MODIFIED
ENDOWMENT CONTRACT, discussed below. Depending on the circumstances, the
exchange of a Policy, a change in the Policy's Basic Death Benefit option, a
Policy Loan, a partial withdrawal, a surrender, a change in ownership, a
change of insured person, the payment of an Accelerated Benefit or an
assignment of the Policy may have Federal income tax consequences. In
addition, Federal, state and local transfer and other tax consequences of
ownership or receipt of Policy proceeds depend on the circumstances of each
Policyowner or beneficiary.
When you receive a distribution under the Policy, an important factor in
determining whether all or any portion of the distribution is taxable to you
is your INVESTMENT IN THE POLICY. Your investment in the Policy generally is
the amount of premiums or other consideration you have paid for the Policy
which you have not previously withdrawn.
DEATH BENEFITS. The death benefit under the Policy should be excludable from
the gross income of the beneficiary under Section 101(a)(1) of the Code.
SURRENDER OR LAPSE OF POLICY; MATURITY PROCEEDS. Upon a complete surrender or
lapse of a Policy or when benefits are paid at the Maturity Date, if the
amount you receive plus the amount of your outstanding Policy Loans exceeds
your total investment in the Policy, the excess will be treated as ordinary
income subject to tax, regardless of whether the Policy is considered to be a
Modified Endowment Contract.
DISTRIBUTIONS FROM A POLICY THAT IS NOT A MODIFIED ENDOWMENT CONTRACT. The
general rule is that a distribution from a Policy that is not a Modified
Endowment Contract is tax-free to you up to the amount of your investment in
the Policy. Any distribution or portion of a distribution that exceeds the
investment in the Policy is taxable income to you. In effect, all
distributions are treated as first a return to you of your investment in the
Policy, prior to the return to you of interest and earnings on your Account
Balance.
An exception to this general rule applies if:
o the Policy's death benefit decreases, or any other change occurs that
reduces benefits under the Policy, during the first 15 years after the
Policy was issued, and
o the decrease or change results in a cash distribution to the Policyowner
in order for the Policy to continue to comply with the limits defined in
Section 7702.
In such a case, the cash distribution will be taxed in whole or in part as
ordinary income (to the extent of any gain in the Policy) under rules
prescribed in Section 7702.
Loans from, or secured by, a Policy that is not a Modified Endowment Contract
are not treated as distributions. Instead, such loans are treated as
indebtedness of the Policyowner.
CHARACTERIZATION AS A MODIFIED ENDOWMENT CONTRACT. Section 7702A of the Code
establishes a class of life insurance contracts designated as Modified
Endowment Contracts. A Policy is considered to be a Modified Endowment
Contract if it fails the "seven pay test" described below. A Policy that fails
the test is treated in effect as an investment contract rather than a life
insurance policy when loans or withdrawals are made from the Policy. SEE
"Distributions from a Policy that is a Modified Endowment Contract" below.
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The seven pay test is failed if the cumulative amount of premiums paid under a
Policy at any time during its first seven years (or seven years from the date
of a material change to the Policy) is greater than the cumulative amount of
seven-pay premiums that would have been paid on or before that time.
"Seven-pay premiums" are the seven level annual premiums that would be payable
if the Policy provided for paid-up future benefits after the payment of those
premiums. The determination of whether a Policy will be a Modified Endowment
Contract after a material change generally depends upon the relationship of
the death benefit and Account Balance at the time of that change and the
additional premiums paid in the seven years following the material change. If
the death benefit under a Policy is reduced by a decrease in the Face Amount
or a partial withdrawal during either the first seven years after Policy
issuance or a material change to the Policy, the seven-pay test will be
recalculated as though the new death benefit had applied since the Policy was
issued or materially changed. Due to the Policy's payment flexibility,
classification as a Modified Endowment Contract will depend on the individual
circumstances of each Policy.
If a premium is credited to your Policy that would cause the Policy to become
a Modified Endowment Contract, we will notify you that unless you request a
refund of the excess premium, the Policy will become a Modified Endowment
Contract. Our notification will provide you with instructions and the time
requirements for making the request.
The rules relating to whether a Policy will be treated as a Modified Endowment
Contract are extremely complex and cannot be described adequately in this
summary. Therefore, a current or prospective Policyowner should consult with a
competent advisor to determine whether a particular transaction will cause the
Policy to be treated as a Modified Endowment Contract.
DISTRIBUTIONS FROM A POLICY THAT IS A MODIFIED ENDOWMENT CONTRACT. A Policy
classified as Modified Endowment Contract is subject to the tax rules below.
In effect, all distributions are treated as first a return to you of interest
and earnings on your Account Balance, prior to the return to you of your
investment in the Policy.
1) All distributions you receive under the Policy, including Surrender
Proceeds, partial withdrawals and distributions within two years before the
Policy became a Modified Endowment Contract, are treated as taxable
ordinary income to you, in an amount up to:
o your Account Balance immediately before the distribution, minus
o your investment in the Policy at that time.
2) Second, any loans you take from or secure by the Policy are treated as
distributions and are taxed as described in 1) above, and past due loan
interest that is added to the loan amount is treated as a loan.
3) A 10 percent additional income tax is imposed on the portion of any
distribution that is included in your taxable income in accordance with 1)
above, unless the distribution or loan
o is made when you are age 59 1/2 or older,
o is attributable to you becoming disabled, or
o is part of a series of substantially equal periodic payments for your
life (or life expectancy) or the joint lives (or joint life
expectancies) of the you and your beneficiary.
All Modified Endowment Contracts that we (or any affiliates of ours) issue to
the same Policyowner during any calendar year are treated as one Modified
Endowment Contract for purposes of determining the amount includable in the
Policyowner's gross income under Section 72(e) of the Code.
POLICY LOAN INTEREST
----------------------------------------------------------------------------
If you are an individual, you may not deduct personal interest paid on any
loan under a Policy, in most circumstances. Interest on any loan under a
Policy owned by a taxpayer and covering the life of any individual who is an
officer or employee of that taxpayer, or who is financially interested in the
business carried on by that taxpayer, will not be tax deductible to the extent
the aggregate amount of the loans under Policies covering that individual
exceeds $50,000. The deduction of interest on Policy Loans also may be subject
to other restrictions under Section 264 of the Code.
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ESTATE TAXES
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The Death Proceeds payable under the Policy are includable in the insured
person's gross estate for federal estate tax purposes if the Death Proceeds
are paid:
o to the insured person's estate, or
o to a beneficiary other than the estate and the insured person either
possessed incidents of ownership in the Policy at the time of death or
transferred incidents of ownership in the Policy to another person
within three years of death.
Death Proceeds paid to a surviving spouse as beneficiary are not includable in
your Federal gross estate because of a 100% estate tax marital deduction. In
addition, Death Proceeds paid to a tax-exempt charity may not be taxable in
your estate because of the allowance of an estate tax charitable deduction.
When Death Proceeds are paid to other beneficiaries, whether or not any
Federal estate tax is payable on that amount depends on a variety of factors,
including the size of the gross estate. There is an estate tax credit that is
equivalent to an exemption of $675,000 in 2000, which will increase in
increments until 2006, when it will reach the equivalent of an exemption of $1
million.
If you are not the insured person, and your death occurs before the death of
the insured person, the value of the Policy, as determined under Internal
Revenue Service regulations, is includable in your gross estate for Federal
estate tax purposes.
YOUR VOTING RIGHTS FOR MEETINGS OF THE UNDERLYING FUNDS
We will vote the shares of the Underlying Funds owned by the Separate Account
at regular and special meetings of the shareholders of the Underlying Funds.
We will cast our votes according to instructions we receive from Policyowners.
The number of Underlying Fund shares that we may vote at a meeting of
shareholders will be determined as of a record date set by the Board of
Directors or Trustees of the Underlying Fund. If permitted under Federal
securities laws, we may instead vote the shares of the Underlying Funds held
by our Separate Account in our own discretion.
We will vote 100% of the shares that a Separate Account Fund owns. If you do
not send us voting instructions, we will vote the shares attributable to your
Account Balance in the same proportion as we vote shares for which we have
received voting instructions from Policyowners. We will determine the number
of Accumulation Units attributable to each Policyowner for purposes of giving
voting instructions as of the same record date used by the Underlying Fund.
Each Policyowner who has the right to give us voting instructions for a
shareholders' meeting of an Underlying Fund will receive information about the
matters to be voted on, including the Underlying Fund's proxy statement and a
voting instructions form to return to us.
USE OF STANDARD & POOR'S INDICES
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. (S&P), makes
no representation or warranty, express or implied, to the Separate Account or
the Policyowners regarding the advisability of investing in, or allocating
Account Balance to, the Investment Company Equity Index, All America or
Mid-Cap Equity Index Funds (together, the INDEXED PORTFOLIOS) or the ability
of the S&P 500 Index or the S&P MidCap 400 Index to track general stock market
performance. S&P has no obligation to take the needs of the Indexed Portfolios
or the owners of the Indexed Portfolios into consideration in determining,
composing or calculating the S&P 500 Index or the S&P MidCap 400 Index. S&P is
not responsible for and has not participated in the calculation of the net
asset values of the Indexed Portfolios, the amount of the shares of the
Indexed Portfolios or the timing of the issuance or sale of the Indexed
Portfolios. S&P has no obligation or liability in connection with the
administration, marketing or trading of the Indexed Portfolios.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO
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RESULTS TO BE OBTAINED BY THE INDEXED PORTFOLIOS, OWNERS OF THE INDEXED
PORTFOLIOS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX,
THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR
IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX,
THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY
USE OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
FUNDING AND OTHER CHANGES WE MAY MAKE
We reserve the right to make certain changes to the Separate Account Funds and
to the Separate Account's operations. In making changes, we will comply with
applicable law and will obtain the approval of Policyowners, if required. We
may:
o create new investment funds of the Separate Account at any time;
o to the extent permitted by state and federal law, modify, combine or
remove investment funds in the Separate Account;
o transfer assets we have determined to be associated with the class of
contracts to which the Policies belong from one investment fund of the
Separate Account to another investment fund;
o create additional separate accounts or combine any two or more accounts
including the Separate Account;
o transfer assets we have determined to be associated with the class of
contracts to which the Policies belong from the Separate Account to
another separate account of ours by withdrawing the same percentage of
each investment in the Separate Account, with appropriate adjustments to
avoid odd lots and fractions;
o operate the Separate Account as a diversified, open-end management
investment company under the 1940 Act, or in any other form permitted by
law, and designate an investment advisor for its management, which may
be us, an affiliate of ours or another person;
o deregister the Separate Account under the 1940 Act; and
o operate the Separate Account under the general supervision of a
committee, any or all the members of which may be interested persons (as
defined in the 1940 Act) of ours or our affiliates, or discharge the
committee for the Separate Account.
If our exercise of any of these rights results in a material change to the
Investment Alternatives of the Separate Account, we will advise you of the
change.
ADMINISTRATIVE MATTERS
NOTICES, CONFIRMATION STATEMENTS AND REPORTS TO POLICYOWNERS
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Approximately 20 days before a scheduled premium, we will send you a notice of
the amount and due date of that scheduled premium, except that we will not
send notices for scheduled premiums payable under a Payroll Deduction Program
or if you have authorized withdrawals from your bank or other account to pay
scheduled premiums.
Within 30 days after each calendar quarter, we will send you a statement
showing your Account Balance, premiums received, charges incurred and
information concerning any Policy Loans as of the end of the
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quarter. We will send you a confirmation statement within five business days
after any transaction involving purchase, sale or transfer of Accumulation
Units and for any change in allocation instructions. If your Policy has a
Payroll Deduction Rider, however, your quarterly statement, which we will send
within five business days of quarter-end, will serve as the confirmation
statement for your purchase transactions. You must notify us of any error in a
statement within 30 days after the date we processed the allocation change or
transaction, or within 30 days after the end of the period covered by the
quarterly statement that serves as the confirmation statement, or you will
give up your right to have us correct the error.
We also will send to you annual and semi-annual reports for each Underlying
Fund, which will include financial statements.
MISCELLANEOUS POLICY PROVISIONS
----------------------------------------------------------------------------
LIMIT ON RIGHT TO CONTEST. We will not contest the insurance coverage under
a Policy after it has been in force: (a) for two years from the Issue Date
with respect to the initial amount of insurance coverage;
(b) for two years from the effective date of an increase in the amount of
insurance requiring evidence of insurability; and
(c) for two years from the effective date of the reinstatement with respect to
any amount of insurance that was reinstated.
If we contest a Face Amount increase or a reinstatement, the contest will be
based only on the application for that increase or reinstatement.
SUICIDE EXCLUSION. If the insured person commits suicide within two years from
the Issue Date, we will not pay the Death Proceeds that would otherwise be
payable under a Policy. We will pay no more than (a) the sum of the Account
Balance and any insurance charges; minus (b) the sum of any Policy Loans. If
there was an increase in the Basic Death Benefit for which we had the right to
require (or did require) evidence of insurability (other than an increase due
solely to a change in the Basic Death Benefit plan) and if the insured person
commits suicide within two years from the effective date of that increase,
then with respect to that increase we will pay no more than the insurance
charges deducted for that increase.
MISREPRESENTATION OR MISSTATEMENT OF AGE OR SEX. If a misrepresentation is
made on the application for your Policy or if the age or sex of the insured
person is misstated on your Policy Specifications Pages, then the Proceeds
payable upon proof of the death of the insured person will be that which would
have been purchased by the most recent monthly deduction for the cost of
insurance on the basis of the correct age and sex or as adjusted for the
misrepresentation.
ASSIGNMENT. You must notify us in writing if you assign your Policy. No
assignment will be binding on us until we receive and record it at our
Processing Office. An assignment will not apply to any payment made before the
assignment was recorded. We will not be responsible for the validity of any
assignment.
PARTICIPATION IN DIVISIBLE SURPLUS. We are a mutual life insurance company and
consequently have no stockholders. Policyowners share in our earnings with
respect to amounts they allocate to our General Account. We can give no
assurance as to the amount of divisible surplus, if any, that will be
available for distribution under the Contracts in the future. The
determination of such surplus is within the sole discretion of our Board of
Directors.
DISTRIBUTION OF THE POLICIES
----------------------------------------------------------------------------
We offer the Policies continuously without a sales charge through our
employees. These employees receive a salary from us and do not receive
commissions for sales of the Policies. All persons engaged in selling the
Policies are our licensed agents and are duly qualified registered
representatives of Mutual of America. Each sales representative will be
eligible to receive a yearly cash incentive payment based in part on aggregate
sales by all representatives in the representative's regional office compared
to sales targets we established for the office in that year. Our attainment of
overall financial and sales objectives also can affect the payment.
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Representatives and certain staff from the top five regional offices will
receive a trip to a conference site to attend a sales meeting.
Because the Policies have no sales load, the costs of distribution will
necessarily be paid out of our profits, including any profits from the
Policies' mortality and expense risks charges. We also serve as principal
underwriter for the Mutual of America Investment Corporation and for variable
accumulation annuity contracts we offer through our Separate Account No. 2.
OTHER INFORMATION
LEGAL PROCEEDINGS
----------------------------------------------------------------------------
From time to time we may engage in litigation. In our judgment, our current
litigation is not of material importance in relation to our total assets. The
Separate Account is not a party to any pending legal proceedings.
LEGAL MATTERS
----------------------------------------------------------------------------
Patrick A. Burns, Senior Executive Vice President and General Counsel of
Mutual of America, has passed upon all matters of applicable state law
relating to the Policies, including our right to issue the Policies. Jones &
Blouch L.L.P., Washington, D.C., has passed upon certain legal matters
relating to Federal securities laws that are applicable to our offering of the
Policies.
EXPERTS
----------------------------------------------------------------------------
The audited financial statements included in this prospectus have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of that firm as experts in giving the report.
ADDITIONAL INFORMATION AVAILABLE
----------------------------------------------------------------------------
We have filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933 relating to the offering of
Policies described in this Prospectus. This Prospectus does not include all
the information contained in that registration statement. You may obtain the
omitted information at the principal office of the Securities and Exchange
Commission in Washington, D.C. upon payment of their prescribed fee.
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OUR EXECUTIVE OFFICERS AND DIRECTORS
The name and position of each of our executive officers and directors, and his
or her principal occupation during the past five years, are set forth below.
The business address of each person listed below is 320 Park Avenue, New York,
NY 10022 unless otherwise noted.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES PRINCIPAL OCCUPATION
NAME WITH MUTUAL OF AMERICA DURING PAST FIVE YEARS
- ------------------------------ ------------------------ ---------------------------------------------
<S> <C> <C>
OFFICERS-DIRECTORS:
William J. Flynn Chairman of the Board Chairman of the Board, Mutual of America
Thomas J. Moran President, Chief President, Chief Executive Officer and
Executive Officer and Director, Mutual of America
Director
Manfred Altstadt Senior Executive Vice Senior Executive Vice President and Chief
President, Chief Financial Officer, Mutual of America;
Financial Officer and Director since September 1998
Director
Patrick A. Burns Senior Executive Vice Senior Executive Vice President and General
President, General Counsel, Mutual of America; Director since
Counsel and Director September 1998
Salvatore R. Curiale Senior Executive Vice Senior Executive Vice President, Mutual of
President and Director America since March 1995; prior thereto,
Superintendent of Insurance, State of New
York; Director since September 1998
DIRECTORS:
Clifford L. Alexander, Jr. Director President, Alexander & Associates, Inc.
Washington, DC
Patricia A. Cahill Director Chief Executive Officer, Catholic Health
Denver, Colorado Initiatives
Roselyn P. Epps, MD Director Medical and Public Health Consultant
Bethesda, Maryland
Dudley H. Hafner Director Executive Vice President (Past)
Dallas, Texas American Heart Association
Earle H. Harbison, Jr. Director Chairman, Harbison Corporation
St. Louis, Missouri
Frances R. Hesselbein Director Chairman, The Drucker Foundation
New York, New York
William Kahn Director Professor, George Warren Brown
St. Louis, Missouri School of Social Work, Washington
University
LaSalle D. Leffall, Jr., MD Director Charles R. Drew Professor of Surgery,
Washington, DC Howard University Hospital
Michael A. Pelavin Director President, Pelavin & Powers, P.C.
Flint, Michigan
Fioravante G. Perrotta Director Partner (Past), Rogers & Wells
New York, New York
Francis H. Schott Director Senior Vice President and Chief Economist
New York, New York (Past), The Equitable Life Assurance Society
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES PRINCIPAL OCCUPATION
NAME WITH MUTUAL OF AMERICA DURING PAST FIVE YEARS
- ---------------------------- -------------------------- ----------------------------------------------
<S> <C> <C>
DIRECTORS: (CONTINUED)
O. Stanley Smith, Jr. Director Chairman and Chief Executive Officer,
Columbia, South Carolina Constan Development Company
Sheila M. Smythe Director Executive Vice President of the University
Valhalla, New York and Dean of the Graduate School of Health
Sciences, New York Medical College
Elie Wiesel Director Andrew W. Mellon Professor in the
New York, New York Humanities, Boston University; Founder, The
Elie Wiesel Foundation for Humanity
EXECUTIVE OFFICERS:
Diane M. Aramony Senior Vice President, Senior Vice President, Corporate Secretary
Corporate Secretary and and Assistant to the Chairman, Mutual of
Assistant to the America, since September 1998; prior
Chairman thereto, Senior Vice President
William Breneisen Executive Vice President, Executive Vice President, Office of
Office of Technology Technology, Mutual of America, since March
1996; prior thereto, Senior Vice President
Jeremy J. Brown Executive Vice President Executive Vice President and Chief Actuary,
and Chief Actuary Mutual of America, since March 1997; prior
thereto, Consulting Actuary, Milliman &
Robertson
William S. Conway Executive Vice President, Executive Vice President, Marketing and
Marketing and Corporate Corporate Communications, Mutual of
Communications America, since October 1998; prior thereto,
Executive Vice President, Marketing
William A. DeMilt Executive Vice President, Executive Vice President, Real Estate, Mutual
Real Estate Management of America, since May 1997; prior thereto,
Executive Vice President and Treasurer
Thomas E. Gilliam Executive Vice President Executive Vice President and Assistant to the
and Assistant to the President and Chief Executive Officer,
President and Chief Mutual of America
Executive Officer
John R. Greed Executive Vice President Executive Vice President and Treasurer,
and Treasurer Mutual of America, since May 1997; Senior
Vice President from July 1996 to May
1997; prior thereto, Partner, Arthur
Andersen LLP
Gregory A. Kleva, Jr. Executive Vice President Executive Vice President and Deputy General
and Deputy General Counsel, Mutual of America
Counsel
George L. Medlin Executive Vice President, Executive Vice President, Internal Audit,
Internal Audit Mutual of America, since March 1998; prior
thereto, Senior Vice President
</TABLE>
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<PAGE>
DEFINITIONS WE USE IN THIS PROSPECTUS
ACCELERATED BENEFIT -- The portion of the Death Proceeds payable before the
death of the insured person when the insured person is determined to have a
terminal illness and is expected to live for one year or less.
ACCOUNT BALANCE -- The value of a Policyowner's Accumulation Units in the
Separate Account Funds plus the value of amounts held in the General Account
for the Policyowner. As used in this Prospectus, the term "Account Balance"
may mean all or any part of your total Account Balance.
ACCUMULATION UNIT -- A measure we use to calculate the value of a
Policyowner's interest in each of the Funds of the Separate Account. Each Fund
has its own Accumulation Unit value.
BASIC DEATH BENEFIT -- The primary component of the Death Proceeds payable
upon the death of the insured person when the Policy is in effect. The Basic
Death Benefit is the greater of:
o the Face Amount under a Face Amount Policy, or the Face Amount plus the
Account Balance under a Face Amount Plus Policy (you select the type of
Policy upon purchase), and
o the Account Balance times the applicable Corridor Percentage.
BENEFICIARY -- The person(s) you designate in your application or in a change
of beneficiary form filed with us to receive the Death Proceeds payable upon
the death of the insured person.
BUSINESS DAY -- Any day the New York Stock Exchange is open for trading. For
purposes of determining a Valid Transaction Date, our Business Day will end as
of the close of business of the New York Stock Exchange (normally 4:00 p.m.
Eastern Time).
CODE -- The Internal Revenue Code of 1986, as amended, or any corresponding
provisions of future United States revenue laws. Depending on the context, the
term Code includes the regulations adopted by the Internal Revenue Service for
the Code section being discussed.
CORRIDOR PERCENTAGE -- A percentage established under the Code, based on the
insured person's age. The Corridor Percentage is multiplied by your Account
Balance to establish the minimum death benefit amount required for the Policy
to be treated as life insurance under the Code.
DEATH PROCEEDS -- An amount equal to the sum of the Basic Death Benefit and
amounts payable under any policy riders, minus the sum of any Policy Loans and
any unpaid monthly deductions, subject to any applicable adjustments for
misrepresentation, suicide or misstatement of age and/or sex.
FACE AMOUNT -- The amount of life insurance coverage as set forth on the
Policy Specification Pages of your Policy. The Face Amount must be at least
$25,000, except that the minimum Face Amount is $5,000 for Policies issued
with a Payroll Deduction Rider.
FIDELITY PORTFOLIOS -- The Equity-Income Portfolio of the Variable Insurance
Products Fund (FIDELITY VIP) and the Contrafund and Asset Manager Portfolios
of the Variable Insurance Products Fund II (FIDELITY VIP II).
FUND OF THE SEPARATE ACCOUNT (OR FUND) -- One of the subaccounts of the
Separate Account. Each Fund's name corresponds to the name of the Underlying
Fund in which it invests.
GENERAL ACCOUNT -- Assets we own that are not in a separate account, but
rather are held as part of our general assets. We sometimes refer to the
General Account as the INTEREST ACCUMULATION ACCOUNT, because amounts you
allocate to the General Account earn interest at a fixed rate that we change
from time to time.
INSURED PERSON -- The person on whose life a Policy is issued, or in other
words the person whose death will trigger payment of a death benefit under
your Policy.
INSURED PERSON'S AGE -- The insured person's age as of his or her last
birthday preceding the Policy Date. The insured person's "attained age" at any
time is the age on the Policy Date plus the number of successive twelve month
periods elapsed since the Policy Date.
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<PAGE>
INVESTMENT ALTERNATIVES -- Our General Account and the Funds of the Separate
Account. You may allocate your premiums and transfer your Account Balance
among the Investment Alternatives.
INVESTMENT COMPANY -- Mutual of America Investment Corporation.
ISSUE DATE -- The date as of which we issued a Policy to you, as shown on the
Policy Specification Pages of your Policy.
MATURITY DATE -- The Policy Anniversary on which the insured person's attained
age equals 100.
MONTHLY ANNIVERSARY DAY -- The same day each month as the day on which the
Policy Date occurred.
PAYROLL DEDUCTION PROGRAM -- A program established by an employer under which
it agrees with its participating employees to deduct on each pay date from the
employees' salaries the scheduled premium payments for Policies owned by the
employees, their spouses or minor children. The employer remits the premiums
to us.
PAYROLL DEDUCTION RIDER -- A rider to a Policy issued under a Payroll
Deduction Program. If required by your State, we will incorporate the
provisions regarding Payroll Deduction into your Policy in lieu of issuing a
rider.
POLICY ANNIVERSARY -- The day each calendar year which is the anniversary of
the Policy Date.
POLICY DATE -- The effective date of the Policy, as shown on the Policy
Specification Pages of your Policy, which will not be later than the 28th day
of any month. The Policy goes into effect as of 12:01 a.m. on the Policy Date.
POLICY LOAN -- The outstanding principal and unpaid accrued interest for any
loan in effect under a Policy.
POLICY MONTH -- The period beginning on the Policy Date or any Monthly
Anniversary Day and ending immediately before the next Monthly Anniversary
Day.
POLICYOWNER -- The person designated on the Policy Specification Pages of your
Policy as the owner.
POLICY YEAR -- The twelve-month period beginning on (a) the Policy Date, or
(b) each Policy Anniversary.
PREMIUM CLASS -- The mortality risk class of the insured person that we used
in setting rates for cost of insurance charges.
PROCEEDS -- The amount we will pay upon (a) surrender of the Policy, (b) the
death of the insured person or (c) the Maturity Date, which amount will vary
depending on the type of Proceeds being paid.
PROCESSING OFFICE -- The office of Mutual of America shown on the cover page
of this Prospectus, or any other location we may announce by advance written
notice to Policyowners, a field office we have designated, our toll-free
telephone facility or our Financial Transaction Processing Center, depending
on the transaction requested.
SCHEDULED PREMIUMS -- Premiums in the amount and at the intervals specified in
your Policy.
SCUDDER PORTFOLIOS -- The following three portfolios of the Scudder Variable
Life Investment Fund: Capital Growth Portfolio, Bond Portfolio and
International Portfolio.
SEPARATE ACCOUNT -- Mutual of America Separate Account No. 3, a separate
account of Mutual of America maintained under the laws of New York State and
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940. The assets of the Separate Account are set aside and kept
separate from our other assets.
UNDERLYING FUNDS -- The funds or portfolios that are invested in by the
Separate Account Funds.
UNSCHEDULED PREMIUMS -- Premiums other than scheduled premiums that you are
permitted to pay under your Policy.
VALID TRANSACTION DATE -- The Business Day on which all of the requirements
for the completion of a transaction have been met. This includes receipt by us
at our Processing Office of all information, remittances,
-37-
<PAGE>
notices and papers necessary to process the requested transaction. If
requirements are met on a day that is not a Business Day, or after the close
of a Business Day, the Valid Transaction Date will be the next following
Business Day.
VALUATION DAY -- Each day that the New York Stock Exchange is open for
business until the close of the New York Stock Exchange that day.
VALUATION PERIOD -- A period beginning on the close of business of a Valuation
Day and ending on the close of the next Valuation Day.
WE, US, OUR, MUTUAL OF AMERICA -- Refer to Mutual of America Life Insurance
Company.
WRITTEN REQUEST -- A written request on an administrative form provided by us
or in a form otherwise acceptable to us.
YOU, YOUR -- Refer to a Policyowner.
-38-
<PAGE>
POLICY ILLUSTRATIONS
We have prepared the following tables to help show you how Account Balance and
Death Proceeds under a Policy change with investment performance. The
illustrations cover:
o both a Face Amount Plan and a Face Amount Plus Plan, for Face Amounts
of $100,000 and $500,000,
o both gender based cost of insurance rates applicable to standard
Policies and unisex cost of insurance rates applicable to Policies with
a Payroll Deduction Rider for Face Amounts of $100,000, and
o both our current cost of insurance rates and our guaranteed cost of
insurance rates.
The tables illustrate how Account Balance, which reflects all applicable
charges and deductions, and Death Proceeds of a Policy issued on an insured
person of a specified age would vary over time if the investment return on the
assets of each Underlying Fund was a uniform, after-tax, annual rate of 0%, 6%
or 12%. The annual rate is assumed to be gross, or in other words is before
fees or expenses incurred by each Underlying Fund, other than transaction
expenses such as brokerage commissions. The Account Balance and Death Proceeds
would be different from those shown if the returns averaged 0%, 6% or 12%, but
fluctuated over and under those averages throughout the years.
The charges reflected in the tables using current cost of insurance charges
include those for monthly deductions for administration ($2 per month) and
cost of insurance, and daily charges for mortality and expense risks (0.50% on
an annual basis) and administration (0.40%, except that an administration fee
of 0.20% is shown for the American Century VP Capital Appreciation Fund and an
administrative fee of .30% is shown for the Fidelity VIP Funds, because of
current reimbursement arrangements).
The charges reflected in the tables using guaranteed cost of insurance charges
include maximum monthly deductions for administration ($10 per month) and cost
of insurance, daily charges for mortality and expense risks (0.50% on an
annual basis) and the maximum administration fee (0.65%, except that an
administration fee of 0.45% is shown for the American Century VP Capital
Appreciation Fund and an administrative fee of .55% is shown for the Fidelity
VIP Funds, based on current reimbursement arrangements).
A simple average of the investment management fees and other expenses of the
available Underlying Funds is reflected in all the tables. That average total
expense figure is 0.57%, based upon the 1999 expense ratios of the Underlying
Funds. The expenses of the Underlying Funds may fluctuate from year to year,
but we have assumed they remain constant for purposes of these tables. The
Adviser for the Investment Company voluntarily pays the expenses of each Fund
of the Investment Company other than its investment advisory fee and portfolio
transaction expenses. If the Investment Company Funds paid all of their
expenses, the average total expense figure would be higher and the death
benefit and account balance numbers in the illustrations would be lower.
After subtracting the average total expenses for the Underlying Funds and the
current expenses of the Separate Account Funds, the gross annual investment
returns shown in the illustrations of 0%, 6% and 12% are reduced to -1.44%,
4.56% and 10.56%. After subtracting the average total expenses for the
Underlying Funds and maximum expenses for the Separate Account Funds, the
gross annual investment returns shown in the illustrations of 0%, 6% and 12%
are reduced to -1.69%, 4.31% and 10.31%.
The tables assume that the insured person is a standard risk (non-smoker),
that scheduled premiums of the amounts specified in notes following the tables
are paid on each Policy Anniversary and that no transfers, partial
withdrawals, Policy Loans, changes in Basic Death Benefit plan or changes in
Face Amount are made.
The tables reflect the fact that no charges for federal, state or local taxes
are currently made against the Separate Account. If such a charge is made in
the future, it would take a higher gross rate of return to produce after-tax
returns of 0%, 6% and 12% than it does now. The tables show Account Balances
and Death Proceeds using current cost of insurance rates and using the maximum
cost of insurance rates (based on the 1980 Commissioners Standard Ordinary
Smoker/Nonsmoker Mortality Tables).
-39-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
<TABLE>
<CAPTION>
MALE ISSUE AGE 35 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT $100,000
USING OUR CURRENT COST OF INSURANCE CHARGES
DEATH BENEFIT ACCOUNT BALANCE
PREMIUMS ----------------------------------- -------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
POLICY AT 5% INTEREST GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
YEAR PER YEAR(1) RETURN OF RETURN OF
- ------------------- --------------- ----------------------------------- -------------------------------
0% 6% 12% 0% 6% 12%
----------- ----------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ............... $ 1,365 $100,000 $100,000 $100,000 $ 1,093 $ 1,164 $ 1,236
2 ............... 2,798 100,000 100,000 100,000 2,162 2,373 2,594
3 ............... 4,303 100,000 100,000 100,000 3,204 3,626 4,085
4 ............... 5,883 100,000 100,000 100,000 4,222 4,927 5,724
5 ............... 7,542 100,000 100,000 100,000 5,215 6,279 7,529
6 ............... 9,285 100,000 100,000 100,000 6,186 7,684 9,517
7 ............... 11,114 100,000 100,000 100,000 7,133 9,145 11,708
8 ............... 13,035 100,000 100,000 100,000 8,058 10,665 14,126
9 ............... 15,051 100,000 100,000 100,000 8,961 12,248 16,795
10 .............. 17,169 100,000 100,000 100,000 9,832 13,887 19,733
11 .............. 19,392 100,000 100,000 100,000 10,651 15,563 22,951
12 .............. 21,727 100,000 100,000 100,000 11,439 17,301 26,502
13 .............. 24,178 100,000 100,000 100,000 12,198 19,104 30,424
14 .............. 26,752 100,000 100,000 100,000 12,917 20,968 34,751
15 .............. 29,455 100,000 100,000 100,000 13,609 22,906 39,539
16 .............. 32,292 100,000 100,000 100,000 14,263 24,913 44,834
17 .............. 35,272 100,000 100,000 100,000 14,860 26,977 50,684
18 .............. 38,401 100,000 100,000 100,000 15,422 29,120 57,169
19 .............. 41,686 100,000 100,000 105,563 15,969 31,365 64,368
20 .............. 45,135 100,000 100,000 113,558 16,501 33,718 72,330
30 (age 65) ..... 90,689 100,000 100,000 260,864 18,329 62,816 213,823
35 (age 70) ..... 123,287 100,000 100,000 412,489 15,166 82,822 355,594
40 (age 75) ..... 164,892 100,000 116,570 627,153 6,472 108,944 586,124
</TABLE>
(1) Assumes that a premium of $1,300 is paid at the beginning of each Policy
Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for illustration
purposes only, and you should not view them as indicative of past or future
investment rates of return. We do not make any representation that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of time. Actual rates of return may be more or less than
those shown.
o The death benefits and Account Balances would be different from the amounts
shown if the rates of return averaged 0%, 6% or 12% over a period of years,
but varied above or below those averages in individual policy years.
o The death benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-40-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 35 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT $100,000
USING OUR GUARANTEED COST OF INSURANCE CHARGES
----------------------------------------------
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT BALANCE
PREMIUMS ----------------------------------- -------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
POLICY AT 5% INTEREST GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
YEAR PER YEAR(1) RETURN OF RETURN OF
- ------------------- --------------- -------------------------------------- ------------------------------
0% 6% 12% 0% 6% 12%
------------ ------------ ------------ --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ............... $ 1,365 $ 100,000 $ 100,000 $ 100,000 $ 1,055 $ 1,125 $ 1,196
2 ............... 2,798 100,000 100,000 100,000 2,073 2,279 2,493
3 ............... 4,303 100,000 100,000 100,000 3,043 3,449 3,889
4 ............... 5,883 100,000 100,000 100,000 3,978 4,649 5,405
5 ............... 7,542 100,000 100,000 100,000 4,869 5,868 7,042
6 ............... 9,285 100,000 100,000 100,000 5,715 7,108 8,811
7 ............... 11,114 100,000 100,000 100,000 6,520 8,370 10,727
8 ............... 13,035 100,000 100,000 100,000 7,272 9,645 12,797
9 ............... 15,051 100,000 100,000 100,000 7,975 10,934 15,056
10 .............. 17,169 100,000 100,000 100,000 8,640 12,250 17,536
11 .............. 19,392 100,000 100,000 100,000 9,258 13,597 20,253
12 .............. 21,727 100,000 100,000 100,000 9,820 14,966 23,224
13 .............. 24,178 100,000 100,000 100,000 10,337 16,371 26,491
14 .............. 26,752 100,000 100,000 100,000 10,802 17,804 30,077
15 .............. 29,455 100,000 100,000 100,000 11,214 19,268 34,024
16 .............. 32,292 100,000 100,000 100,000 11,578 20,765 38,373
17 .............. 35,272 100,000 100,000 100,000 11,884 22,290 43,166
18 .............. 38,401 100,000 100,000 100,000 12,125 23,836 48,453
19 .............. 41,686 100,000 100,000 100,000 12,291 25,397 54,290
20 .............. 45,135 100,000 100,000 100,000 12,382 26,978 60,750
30 (age 65) ..... 90,689 100,000 100,000 212,364 7,454 43,275 174,069
35 (age 70) ..... 123,287 0 100,000 329,698 0 50,917 284,222
40 (age 75) ..... 164,892 0 100,000 492,031 0 56,904 459,842
</TABLE>
(1) Assumes that a premium of $1,300 is paid at the beginning of each
Policy Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for illustration
purposes only, and you should not view them as indicative of past or future
investment rates of return. We do not make any representation that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of time. Actual rates of return may be more or less than
those shown.
o The Death Benefits and Account Balances would be different from the amounts
shown if the rates of return averaged 0%, 6% or 12% over a period of years,
but varied above or below those averages in individual policy years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-41-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
WITH PAYROLL DEDUCTION RIDER
MALE/FEMALE ISSUE AGE 35 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT $100,000
USING OUR CURRENT COST OF INSURANCE CHARGES
-------------------------------------------
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT BALANCE
PREMIUMS -------------------------------------- -------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
POLICY AT 5% INTEREST GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
YEAR PER YEAR(1) RETURN OF RETURN OF
- ------------------- --------------- -------------------------------------- -------------------------------
0% 6% 12% 0% 6% 12%
------------ ------------ ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ............... $ 1,313 $ 100,000 $ 100,000 $ 100,000 $ 1,056 $ 1,125 $ 1,194
2 ............... 2,691 100,000 100,000 100,000 2,088 2,292 2,504
3 ............... 4,138 100,000 100,000 100,000 3,105 3,513 3,954
4 ............... 5,657 100,000 100,000 100,000 4,098 4,779 5,549
5 ............... 7,252 100,000 100,000 100,000 5,066 6,095 7,302
6 ............... 8,928 100,000 100,000 100,000 6,011 7,461 9,233
7 ............... 10,686 100,000 100,000 100,000 6,933 8,882 11,361
8 ............... 12,533 100,000 100,000 100,000 7,833 10,359 13,708
9 ............... 14,472 100,000 100,000 100,000 8,712 11,897 16,298
10 .............. 16,508 100,000 100,000 100,000 9,558 13,487 19,147
11 .............. 18,646 100,000 100,000 100,000 10,362 15,122 22,276
12 .............. 20,891 100,000 100,000 100,000 11,135 16,817 25,726
13 .............. 23,248 100,000 100,000 100,000 11,879 18,574 29,535
14 .............. 25,723 100,000 100,000 100,000 12,584 20,389 33,734
15 .............. 28,322 100,000 100,000 100,000 13,271 22,283 38,387
16 .............. 31,050 100,000 100,000 100,000 13,920 24,244 43,529
17 .............. 33,915 100,000 100,000 100,000 14,511 26,258 49,205
18 .............. 36,924 100,000 100,000 100,000 15,077 28,356 55,499
19 .............. 40,082 100,000 100,000 100,000 15,627 30,552 62,487
20 .............. 43,399 100,000 100,000 110,254 16,163 32,852 70,225
30 (age 65) ..... 87,201 100,000 100,000 253,755 18,308 61,297 207,996
35 (age 70) ..... 118,545 100,000 100,000 401,844 15,733 80,760 346,417
40 (age 75) ..... 158,550 100,000 113,650 611,875 8,288 106,215 571,846
</TABLE>
(1) Assumes that a premium of $1,250 is paid at the beginning of each
Policy Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for illustration
purposes only, and you should not view them as indicative of past or future
investment rates of return. We do not make any representation that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of time. Actual rates of return may be more or less than
those shown.
o The Death Benefits and Account Balances would be different from the amounts
shown if the rates of return averaged 0%, 6% or 12% over a period of years,
but varied above or below those averages in individual policy years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-42-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
WITH PAYROLL DEDUCTION RIDER
MALE/FEMALE ISSUE AGE 35 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT $100,000
USING OUR GUARANTEED COST OF INSURANCE CHARGES
----------------------------------------------
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT BALANCE
PREMIUMS -------------------------------------- -------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
POLICY AT 5% INTEREST GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
YEAR PER YEAR(1) RETURN OF RETURN OF
- ------------------- --------------- -------------------------------------- ------------------------------
0% 6% 12% 0% 6% 12%
------------ ------------ ------------ --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ............... $ 1,313 $ 100,000 $ 100,000 $ 100,000 $ 1,006 $ 1,073 $ 1,141
2 ............... 2,691 100,000 100,000 100,000 1,976 2,173 2,378
3 ............... 4,138 100,000 100,000 100,000 2,912 3,300 3,721
4 ............... 5,657 100,000 100,000 100,000 3,801 4,443 5,166
5 ............... 7,252 100,000 100,000 100,000 4,647 5,603 6,725
6 ............... 8,928 100,000 100,000 100,000 5,450 6,782 8,410
7 ............... 10,686 100,000 100,000 100,000 6,212 7,980 10,232
8 ............... 12,533 100,000 100,000 100,000 6,934 9,200 12,208
9 ............... 14,472 100,000 100,000 100,000 7,606 10,431 14,358
10 .............. 16,508 100,000 100,000 100,000 8,241 11,686 16,718
11 .............. 18,646 100,000 100,000 100,000 8,830 12,964 19,301
12 .............. 20,891 100,000 100,000 100,000 9,373 14,271 22,134
13 .............. 23,248 100,000 100,000 100,000 9,873 15,611 25,245
14 .............. 25,723 100,000 100,000 100,000 10,319 16,974 28,659
15 .............. 28,322 100,000 100,000 100,000 10,714 18,364 32,410
16 .............. 31,050 100,000 100,000 100,000 11,058 19,783 36,542
17 .............. 33,915 100,000 100,000 100,000 11,344 21,225 41,091
18 .............. 36,924 100,000 100,000 100,000 11,572 22,692 46,111
19 .............. 40,082 100,000 100,000 100,000 11,735 24,178 51,653
20 .............. 43,399 100,000 100,000 100,000 11,823 25,677 57,780
30 (age 65) ..... 87,201 100,000 100,000 202,760 7,597 41,341 166,196
35 (age 70) ..... 118,545 0 100,000 272,081 0 48,741 272,081
40 (age 75) ..... 158,550 0 100,000 441,346 0 54,596 441,346
</TABLE>
(1) Assumes that a premium of $1,250 is paid at the beginning of each Policy
Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for illustration
purposes only, and you should not view them as indicative of past or future
investment rates of return. We do not make any representation that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of time. Actual rates of return may be more or less than
those shown.
o The Death Benefits and Account Balances would be different from the amounts
shown if the rates of return averaged 0%, 6% or 12% over a period of years,
but varied above or below those averages in individual policy years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-43-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 35 FACE AMOUNT PLUS PLAN
STANDARD NON-SMOKER FACE AMOUNT $100,000
USING OUR CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT BALANCE
PREMIUMS ------------------------------------ -------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
POLICY AT 5% INTEREST GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
YEAR PER YEAR(1) RETURN OF RETURN OF
- --------------- --------------- ------------------------------------ -------------------------------
0% 6% 12% 0% 6% 12%
----------- ----------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ........... $ 2,205 $101,871 $101,990 $ 102,109 $ 1,871 $ 1,990 $ 2,109
2 ........... 4,520 103,712 104,068 104,439 3,712 4,068 4,439
3 ........... 6,951 105,514 106,228 107,001 5,514 6,228 7,001
4 ........... 9,504 107,278 108,474 109,821 7,278 8,474 9,821
5 ........... 12,184 109,005 110,811 112,927 9,005 10,811 12,927
6 ........... 14,998 110,695 113,241 116,347 10,695 13,241 16,347
7 ........... 17,953 112,349 115,770 120,116 12,349 15,770 20,116
8 ........... 21,056 113,967 118,402 124,271 13,967 18,402 24,271
9 ........... 24,314 115,550 121,142 128,851 15,550 21,142 28,851
10 .......... 27,734 117,086 123,982 133,890 17,086 23,982 33,890
11 .......... 31,326 118,553 126,903 139,411 18,553 26,903 39,411
12 .......... 35,097 119,974 129,932 145,488 19,974 29,932 45,488
13 .......... 39,057 121,352 133,075 152,183 21,352 33,075 52,183
14 .......... 43,215 122,674 136,324 159,546 22,674 36,324 59,546
15 .......... 47,581 123,952 139,696 167,662 23,952 39,696 67,662
16 .......... 52,165 125,177 143,186 176,596 25,177 43,186 76,596
17 .......... 56,978 126,325 146,773 186,411 26,325 46,773 86,411
18 .......... 62,032 127,420 150,487 197,223 27,420 50,487 97,223
19 .......... 67,339 128,488 154,358 209,166 28,488 54,358 109,166
20 .......... 72,910 129,528 158,393 222,356 29,528 58,393 122,356
30 (age 65) . 146,498 135,208 205,623 455,305 35,208 105,623 355,305
35 (age 70) . 199,156 133,011 232,755 688,298 33,011 132,755 588,298
40 (age 75) . 266,364 125,119 259,942 1,065,472 25,119 159,942 965,472
</TABLE>
(1) Assumes that a premium of $2,100 is paid at the beginning of each
Policy Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for illustration
purposes only, and you should not view them as indicative of past or future
investment rates of return. We do not make any representation that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of time. Actual rates of return may be more or less than
those shown.
o The Death Benefits and Account Balances would be different from the amounts
shown if the rates of return averaged 0%, 6% or 12% over a period of years,
but varied above or below those averages in individual policy years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-44-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 35 FACE AMOUNT PLUS PLAN
STANDARD NON-SMOKER FACE AMOUNT $100,000
USING OUR GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT BALANCE
PREMIUMS ----------------------------------- ------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
POLICY AT 5% INTEREST GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
YEAR PER YEAR(1) RETURN OF RETURN OF
- ------------------- --------------- ----------------------------------- ------------------------------
0% 6% 12% 0% 6% 12%
----------- ----------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ............... $ 2,205 $101,831 $101,949 $102,067 $ 1,831 $ 1,949 $ 2,067
2 ............... 4,520 103,603 103,951 104,313 3,603 3,951 4,313
3 ............... 6,951 105,304 105,994 106,741 5,304 5,994 6,741
4 ............... 9,504 106,948 108,092 109,380 6,948 8,092 9,380
5 ............... 12,184 108,524 110,234 112,237 8,524 10,234 12,237
6 ............... 14,998 110,034 112,425 115,360 10,034 12,425 15,360
7 ............... 17,953 111,481 114,684 118,779 11,481 14,684 18,779
8 ............... 21,056 112,864 117,004 122,512 12,864 17,004 22,512
9 ............... 24,314 114,188 119,387 126,593 14,188 19,387 26,593
10 .............. 27,734 115,466 121,848 131,069 15,466 21,848 31,069
11 .............. 31,326 116,687 124,379 135,968 16,687 24,379 35,968
12 .............. 35,097 117,839 126,970 141,322 17,839 26,970 41,322
13 .............. 39,057 118,936 129,635 147,190 18,936 29,635 47,190
14 .............. 43,215 119,967 132,366 153,612 19,967 32,366 53,612
15 .............. 47,581 120,933 135,166 160,646 20,933 35,166 60,646
16 .............. 52,165 121,835 138,037 168,354 21,835 38,037 68,354
17 .............. 56,978 122,663 140,970 176,793 22,663 40,970 76,793
18 .............. 62,032 123,405 143,957 186,027 23,405 43,957 86,027
19 .............. 67,339 124,052 146,986 196,124 24,052 46,986 96,124
20 .............. 72,910 124,604 150,060 207,174 24,604 50,060 107,174
30 (age 65) ..... 146,498 123,265 181,346 394,798 23,265 81,346 294,798
35 (age 70) ..... 199,156 115,435 194,055 574,624 15,435 94,055 474,624
40 (age 75) ..... 266,364 0 199,449 856,519 0 99,449 756,519
</TABLE>
(1) Assumes that a premium of $2,100 is paid at the beginning of each Policy
Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for illustration
purposes only, and you should not view them as indicative of past or future
investment rates of return. We do not make any representation that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of time. Actual rates of return may be more or less than
those shown.
o The Death Benefits and Account Balances would be different from the amounts
shown if the rates of return averaged 0%, 6% or 12% over a period of years,
but varied above or below those averages in individual policy years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-45-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
WITH PAYROLL DEDUCTION RIDER
MALE/FEMALE ISSUE AGE 35 FACE AMOUNT PLUS PLAN
STANDARD NON-SMOKER FACE AMOUNT $100,000
USING OUR CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT BALANCE
PREMIUMS ------------------------------------ -------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
POLICY AT 5% INTEREST GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
YEAR PER YEAR(1) RETURN OF RETURN OF
- ------------------- --------------- ------------------------------------ -------------------------------
0% 6% 12% 0% 6% 12%
----------- ----------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ............... $ 2,100 $101,786 $101,899 $ 102,013 $ 1,786 $ 1,899 $ 2,013
2 ............... 4,305 103,541 103,881 104,234 3,541 3,881 4,234
3 ............... 6,620 105,271 105,952 106,689 5,271 5,952 6,689
4 ............... 9,051 106,964 108,106 109,391 6,964 8,106 9,391
5 ............... 11,604 108,620 110,345 112,366 8,620 10,345 12,366
6 ............... 14,284 110,241 112,674 115,642 10,241 12,674 15,642
7 ............... 17,098 111,827 115,098 119,252 11,827 15,098 19,252
8 ............... 20,053 113,378 117,619 123,230 13,378 17,619 23,230
9 ............... 23,156 114,894 120,243 127,615 14,894 20,243 27,615
10 .............. 26,414 116,365 122,963 132,438 16,365 22,963 32,438
11 .............. 29,834 117,779 125,769 137,733 17,779 25,769 37,733
12 .............. 33,426 119,149 128,679 143,561 19,149 28,679 43,561
13 .............. 37,197 120,476 131,697 149,979 20,476 31,697 49,979
14 .............. 41,157 121,747 134,815 157,037 21,747 34,815 57,037
15 .............. 45,315 122,988 138,064 164,828 22,988 38,064 64,828
16 .............. 49,681 124,176 141,423 173,404 24,176 41,423 73,404
17 .............. 54,265 125,287 144,875 182,821 25,287 44,875 82,821
18 .............. 59,078 126,359 148,459 193,208 26,359 48,459 93,208
19 .............. 64,132 127,403 152,194 204,679 27,403 52,194 104,679
20 .............. 69,439 128,420 156,088 217,348 28,420 56,088 117,348
30 (age 65) ..... 139,522 134,251 201,934 441,405 34,251 101,934 341,405
35 (age 70) ..... 189,673 132,616 228,694 665,946 32,616 128,694 565,946
40 (age 75) ..... 253,680 125,815 256,071 1,029,907 25,815 156,071 929,907
</TABLE>
(1) Assumes that a premium of $2,000 is paid at the beginning of each Policy
Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for illustration
purposes only, and you should not view them as indicative of past or future
investment rates of return. We do not make any representation that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of time. Actual rates of return may be more or less than
those shown.
o The Death Benefits and Account Balances would be different from the amounts
shown if the rates of return averaged 0%, 6% or 12% over a period of years,
but varied above or below those averages in individual policy years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-46-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
WITH PAYROLL DEDUCTION RIDER
MALE/FEMALE ISSUE AGE 35 FACE AMOUNT PLUS PLAN
STANDARD NON-SMOKER FACE AMOUNT $100,000
USING OUR GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT BALANCE
PREMIUMS ----------------------------------- ------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
POLICY AT 5% INTEREST GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
YEAR PER YEAR(1) RETURN OF RETURN OF
- ------------------- --------------- ----------------------------------- ------------------------------
0% 6% 12% 0% 6% 12%
----------- ----------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ............... $ 2,100 $101,734 $101,845 $101,957 $ 1,734 $ 1,845 $ 1,957
2 ............... 4,305 103,411 103,741 104,084 3,411 3,741 4,084
3 ............... 6,620 105,031 105,686 106,395 5,031 5,686 6,395
4 ............... 9,051 106,585 107,670 108,893 6,585 7,670 8,893
5 ............... 11,604 108,073 109,695 111,595 8,073 9,695 11,595
6 ............... 14,284 109,498 111,762 114,542 9,498 11,762 14,542
7 ............... 17,098 110,862 113,888 117,766 10,862 13,888 17,766
8 ............... 20,053 112,170 116,082 121,297 12,170 16,082 21,297
9 ............... 23,156 113,419 118,333 125,155 13,419 18,333 25,155
10 .............. 26,414 114,623 120,657 129,385 14,623 20,657 29,385
11 .............. 29,834 115,772 123,044 134,013 15,772 23,044 34,013
12 .............. 33,426 116,865 125,497 139,080 16,865 25,497 39,080
13 .............. 37,197 117,904 128,020 144,632 17,904 28,020 44,632
14 .............. 41,157 118,878 130,601 150,706 18,878 30,601 50,706
15 .............. 45,315 119,788 133,245 157,355 19,788 33,245 57,355
16 .............. 49,681 120,635 135,954 164,639 20,635 35,954 64,639
17 .............. 54,265 121,408 138,718 172,610 21,408 38,718 72,610
18 .............. 59,078 122,109 141,540 181,340 22,109 41,540 81,340
19 .............. 64,132 122,727 144,409 190,895 22,727 44,409 90,895
20 .............. 69,439 123,251 147,317 201,345 23,251 47,317 101,345
30 (age 65) ..... 139,522 122,447 177,467 379,495 22,447 77,467 279,495
35 (age 70) ..... 189,673 115,593 190,287 550,776 15,593 90,287 450,776
40 (age 75) ..... 253,680 101,446 196,948 820,017 1,446 96,948 720,017
</TABLE>
(1) Assumes that a premium of $2,000 is paid at the beginning of each Policy
Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for illustration
purposes only, and you should not view them as indicative of past or future
investment rates of return. We do not make any representation that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of time. Actual rates of return may be more or less than
those shown.
o The Death Benefits and Account Balances would be different from the amounts
shown if the rates of return averaged 0%, 6% or 12% over a period of years,
but varied above or below those averages in individual policy years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-47-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 45 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT $500,000
USING OUR CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT BALANCE
PREMIUMS ------------------------------------ ---------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
POLICY AT 5% INTEREST GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
YEAR PER YEAR(1) RETURN OF RETURN OF
- ------------------ --------------- ------------------------------------ ----------------------------------
0% 6% 12% 0% 6% 12%
----------- ----------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 .............. $ 10,763 $500,000 $500,000 $ 500,000 $ 8,735 $ 9,306 $ 9,878
2 .............. 22,063 500,000 500,000 500,000 17,251 18,943 20,705
3 .............. 33,929 500,000 500,000 500,000 25,613 28,991 32,652
4 .............. 46,388 500,000 500,000 500,000 33,713 39,360 45,728
5 .............. 59,470 500,000 500,000 500,000 41,615 50,128 60,122
6 .............. 73,206 500,000 500,000 500,000 49,325 61,321 75,987
7 .............. 87,628 500,000 500,000 500,000 56,743 72,859 93,388
8 .............. 102,772 500,000 500,000 500,000 63,931 84,822 112,561
9 .............. 118,673 500,000 500,000 500,000 71,049 97,392 133,862
10 ............. 135,370 500,000 500,000 500,000 78,049 110,549 157,480
11 ............. 152,901 500,000 500,000 500,000 84,833 124,234 183,597
12 ............. 171,308 500,000 500,000 500,000 91,311 138,395 212,435
13 ............. 190,636 500,000 500,000 500,000 97,542 153,115 244,369
14 ............. 210,930 500,000 500,000 500,000 103,487 168,398 279,752
15 ............. 232,239 500,000 500,000 500,000 109,107 184,252 318,992
16 ............. 254,614 500,000 500,000 500,000 114,414 200,733 362,592
17 ............. 278,107 500,000 500,000 526,123 119,326 217,827 411,034
18 ............. 302,775 500,000 500,000 585,289 123,899 235,635 464,515
19 ............. 328,676 500,000 500,000 649,107 128,098 254,197 523,473
20 (age 65) .... 355,872 500,000 500,000 717,920 131,845 273,536 588,459
25 (age 70) .... 513,663 500,000 500,000 1,191,399 143,148 385,056 1,027,068
30 (age 75) .... 715,048 500,000 568,318 1,864,143 136,688 531,138 1,742,189
</TABLE>
(1) Assumes that a premium of $10,250 is paid at the beginning of each Policy
Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for illustration
purposes only, and you should not view them as indicative of past or future
investment rates of return. We do not make any representation that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of time. Actual rates of return may be more or less than
those shown.
o The Death Benefits and Account Balances would be different from the amounts
shown if the rates of return averaged 0%, 6% or 12% over a period of years,
but varied above or below those averages in individual policy years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-48-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 45 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT $500,000
USING OUR GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT BALANCE
PREMIUMS -------------------------------------- ---------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
POLICY AT 5% INTEREST GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
YEAR PER YEAR(1) RETURN OF RETURN OF
- ----------------- --------------- -------------------------------------- ---------------------------------
0% 6% 12% 0% 6% 12%
------------ ------------ ------------ --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ............. $ 10,763 $ 500,000 $ 500,000 $ 500,000 $ 7,709 $ 8,246 $ 8,783
2 ............. 22,063 500,000 500,000 500,000 15,064 16,621 18,246
3 ............. 33,929 500,000 500,000 500,000 22,157 25,224 28,555
4 ............. 46,388 500,000 500,000 500,000 28,945 34,017 39,755
5 ............. 59,470 500,000 500,000 500,000 35,437 43,019 51,955
6 ............. 73,206 500,000 500,000 500,000 41,642 52,250 65,279
7 ............. 87,628 500,000 500,000 500,000 47,516 61,675 79,810
8 ............. 102,772 500,000 500,000 500,000 53,015 71,262 95,648
9 ............. 118,673 500,000 500,000 500,000 58,098 80,984 112,916
10 ............ 135,370 500,000 500,000 500,000 62,777 90,864 131,806
11 ............ 152,901 500,000 500,000 500,000 67,011 100,877 152,490
12 ............ 171,308 500,000 500,000 500,000 70,759 111,003 175,176
13 ............ 190,636 500,000 500,000 500,000 74,083 121,317 200,187
14 ............ 210,930 500,000 500,000 500,000 76,890 131,758 227,777
15 ............ 232,239 500,000 500,000 500,000 79,188 142,361 258,321
16 ............ 254,614 500,000 500,000 500,000 80,884 153,074 292,195
17 ............ 278,107 500,000 500,000 500,000 81,933 163,895 329,884
18 ............ 302,775 500,000 500,000 500,000 82,287 174,823 371,968
19 ............ 328,676 500,000 500,000 500,000 81,796 185,786 419,035
20 (age 65) ... 355,872 500,000 500,000 574,503 80,405 196,794 470,904
25 (age 70) ... 513,663 500,000 500,000 945,419 56,616 252,765 815,016
30 (age 75) ... 715,048 0 500,000 1,458,996 0 309,839 1,363,548
</TABLE>
(1) Assumes that a premium of $10,250 is paid at the beginning of each Policy
Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for illustration
purposes only, and you should not view them as indicative of past or future
investment rates of return. We do not make any representation that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of time. Actual rates of return may be more or less than
those shown.
o The Death Benefits and Account Balances would be different from the amounts
shown if the rates of return averaged 0%, 6% or 12% over a period of years,
but varied above or below those averages in individual policy years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-49-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 45 FACE AMOUNT PLUS PLAN
STANDARD NON-SMOKER FACE AMOUNT $500,000
USING OUR CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT BALANCE
PREMIUMS ------------------------------------- ---------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
POLICY AT 5% INTEREST GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
YEAR PER YEAR(1) RETURN OF RETURN OF
- ------------------- --------------- ------------------------------------- ----------------------------------
0% 6% 12% 0% 6% 12%
----------- ------------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ............... $ 16,380 $513,982 $ 514,873 $ 515,764 $ 13,982 $ 14,873 $ 15,764
2 ............... 33,579 527,644 530,301 533,067 27,644 30,301 33,067
3 ............... 51,638 541,050 546,371 552,132 41,050 46,371 52,132
4 ............... 70,600 554,084 562,990 573,022 54,084 62,990 73,022
5 ............... 90,510 566,811 580,243 595,990 66,811 80,243 95,990
6 ............... 111,415 579,236 598,161 621,257 79,236 98,161 121,257
7 ............... 133,366 591,244 616,649 648,939 91,244 116,649 148,939
8 ............... 156,414 602,900 635,796 679,354 102,900 135,796 179,354
9 ............... 180,615 614,389 655,816 712,980 114,389 155,816 212,980
10 .............. 206,026 625,653 676,688 750,094 125,653 176,688 250,094
11 .............. 232,707 636,575 698,327 790,938 136,575 198,327 290,938
12 .............. 260,723 647,043 720,645 835,777 147,043 220,645 335,777
13 .............. 290,139 657,122 743,736 885,098 157,122 243,736 385,098
14 .............. 321,026 666,758 767,571 939,310 166,758 267,571 439,310
15 .............. 353,457 675,899 792,125 998,867 175,899 292,125 498,867
16 .............. 387,510 684,550 817,430 1,064,333 184,550 317,430 564,333
17 .............. 423,265 692,601 843,397 1,136,205 192,601 343,397 636,205
18 .............. 460,808 700,119 870,117 1,215,223 200,119 370,117 715,223
19 .............. 500,229 707,052 897,564 1,302,078 207,052 397,564 802,078
20 (age 65) ..... 541,620 713,290 925,649 1,397,472 213,290 425,649 897,472
25 (age 70) ..... 781,770 733,107 1,075,279 2,036,090 233,107 575,279 1,536,090
30 (age 75) ..... 1,088,268 727,339 1,234,477 3,059,122 227,339 734,477 2,559,122
</TABLE>
(1) Assumes that a premium of $15,600 is paid at the beginning of each Policy
Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for illustration
purposes only, and you should not view them as indicative of past or future
investment rates of return. We do not make any representation that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of time. Actual rates of return may be more or less than
those shown.
o The Death Benefits and Account Balances would be different from the amounts
shown if the rates of return averaged 0%, 6% or 12% over a period of years,
but varied above or below those averages in individual policy years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-50-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 45 FACE AMOUNT PLUS PLAN
STANDARD NON-SMOKER FACE AMOUNT $500,000
USING OUR GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT BALANCE
PREMIUMS ------------------------------------ ---------------------------------
END OF ACCUMULATED ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
POLICY AT 5% INTEREST GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
YEAR PER YEAR(1) RETURN OF RETURN OF
- ------------------ --------------- ------------------------------------ ----------------------------------
0% 6% 12% 0% 6% 12%
----------- ----------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 .............. $ 16,380 $512,899 $513,755 $ 514,613 $ 12,899 $ 13,755 $ 14,613
2 .............. 33,579 523,342 527,858 530,479 25,342 27,858 30,479
3 .............. 51,638 537,397 542,384 547,792 37,397 42,384 47,792
4 .............. 70,600 549,010 557,291 566,636 49,010 57,291 66,636
5 .............. 90,510 560,189 572,595 587,170 60,189 72,595 87,170
6 .............. 111,415 570,941 588,312 609,567 70,941 88,312 109,567
7 .............. 133,366 581,214 604,400 633,957 81,214 104,400 133,957
8 .............. 156,414 590,957 620,814 660,482 90,957 120,814 160,482
9 .............. 180,615 600,119 637,504 689,299 100,119 137,504 189,299
10 ............. 206,026 608,710 654,485 720,644 108,710 154,485 220,644
11 ............. 232,707 616,681 671,706 754,713 116,681 171,706 254,713
12 ............. 260,723 623,981 689,117 791,726 123,981 189,117 291,726
13 ............. 290,139 630,683 706,787 832,048 130,683 206,787 332,048
14 ............. 321,026 636,677 724,605 875,895 136,677 224,605 375,895
15 ............. 353,457 641,975 742,577 923,629 141,975 242,577 423,629
16 ............. 387,510 646,470 760,587 975,524 146,470 260,587 475,524
17 ............. 423,265 650,116 778,575 1,031,948 150,116 278,575 531,948
18 ............. 460,808 652,869 796,479 1,093,302 152,869 296,479 593,302
19 ............. 500,229 654,564 814,110 1,159,906 154,564 314,110 659,906
20 (age 65) .... 541,620 655,161 831,397 1,232,238 155,161 331,397 732,238
25 (age 70) .... 781,770 639,375 908,915 1,699,258 139,375 408,915 1,199,258
30 (age 75) .... 1,088,268 580,049 953,143 2,402,960 80,049 453,143 1,902,960
</TABLE>
(1) Assumes that a premium of $15,600 is paid at the beginning of each Policy
Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for illustration
purposes only, and you should not view them as indicative of past or future
investment rates of return. We do not make any representation that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of time. Actual rates of return may be more or less than
those shown.
o The Death Benefits and Account Balances would be different from the amounts
shown if the rates of return averaged 0%, 6% or 12% over a period of years,
but varied above or below those averages in individual policy years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-51-
<PAGE>
FINANCIAL STATEMENTS
The Separate Account had not commenced operations as of December 31, 1999.
Accordingly, no financial statements of the Separate Account are included in
the Prospectus.
Below are the consolidated financial statements of Mutual of America for the
year ended December 31, 1999. You should consider these financial statements
as bearing upon the ability of Mutual of America to meet its obligations under
the Policies. You should not consider them as bearing upon the investment
experience of the Separate Account Funds.
<TABLE>
<S> <C>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY - YEAR ENDED DECEMBER 31, 1999
PAGE
----
Report of Independent Public Accountants ................................ 53
Consolidated Statements of Financial Condition .......................... 54
Consolidated Statements of Operations and Surplus ....................... 55
Consolidated Statements of Cash Flows ................................... 56
Notes to Consolidated Financial Statements .............................. 57
</TABLE>
-52-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mutual of America Life Insurance Company:
We have audited the accompanying consolidated statements of financial
condition of Mutual of America Life Insurance Company and its subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of
operations and surplus and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1, these financial statements were prepared in
conformity with the accounting practices prescribed or permitted by the State of
New York Insurance Department. Such practices differ from generally accepted
accounting principles. The variances between such practices and generally
accepted accounting principles and the effects on the accompanying financial
statements are described in Note 10.
In our opinion, because of the effects of the matter described in the third
paragraph and more fully discussed in Note 10, the financial statements referred
to above do not present fairly, in conformity with generally accepted accounting
principles, the financial position of Mutual of America Life Insurance Company
and its subsidiaries as of December 31, 1999 and 1998, or the results of their
operations or their cash flows for the years then ended. Furthermore, in our
opinion, the supplemental data included in Note 10 reconciling net income and
surplus as shown in the financial statements to net income and retained earnings
as determined in conformity with generally accepted accounting principles,
present fairly, in all material respects, the information shown therein.
However, in our opinion, the statutory-basis consolidated financial
statements referred to above present fairly, in all material respects, the
financial position of Mutual of America Life Insurance Company and its
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting practices prescribed or permitted by the State of New York Insurance
Department.
ARTHUR ANDERSEN LLP
New York, New York
February 21, 2000
53
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------------ ------------------
<S> <C> <C>
ASSETS
GENERAL ACCOUNT ASSETS
Bonds and notes ............................... $ 4,698,493,596 $ 4,874,244,008
Common stocks ................................. 412,828,363 339,524,394
Preferred stocks .............................. 40,520,250 55,771,462
Cash and short-term investments ............... 81,598,028 98,685,966
Guaranteed funds transferable ................. 137,269,179 115,902,196
Mortgage loans ................................ 18,498,896 19,289,253
Real estate ................................... 318,584,447 324,024,030
Policy loans .................................. 103,466,616 100,633,395
Other invested assets ......................... 29,993,141 33,606,096
Investment income accrued ..................... 91,290,190 90,018,584
Other assets .................................. 19,928,775 19,211,099
--------------- ---------------
Total general account assets ................ 5,952,471,481 6,070,910,483
SEPARATE ACCOUNT ASSETS ........................ 4,999,885,459 4,039,275,044
--------------- ---------------
TOTAL ASSETS ................................... $10,952,356,940 $10,110,185,527
=============== ===============
LIABILITIES AND SURPLUS
GENERAL ACCOUNT LIABILITIES
Insurance and annuity reserves ................ $ 4,861,766,733 $ 4,925,407,081
Other contractholders liabilities and reserves 9,023,083 12,086,713
Note payable .................................. -- 137,021,175
Interest maintenance reserve .................. 181,876,278 213,674,120
Other liabilities ............................. 101,358,313 69,404,220
--------------- ---------------
Total general account liabilities ........... 5,154,024,407 5,357,593,309
SEPARATE ACCOUNT RESERVES AND OTHER LIABILITIES 4,999,885,459 4,039,275,044
--------------- ---------------
Total liabilities ........................... 10,153,909,866 9,396,868,353
--------------- ---------------
ASSET VALUATION RESERVE ........................ 117,678,424 118,485,383
--------------- ---------------
SURPLUS
Assigned surplus .............................. 1,150,000 1,150,000
Unassigned surplus ............................ 679,618,650 593,681,791
--------------- ---------------
Total surplus ............................... 680,768,650 594,831,791
--------------- ---------------
TOTAL LIABILITIES AND SURPLUS .................. $10,952,356,940 $10,110,185,527
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
54
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------------- ----------------
<S> <C> <C>
INCOME
Annuity considerations and deposits ..................... $ 897,476,235 $ 824,131,791
Life and disability insurance premiums .................. 28,357,570 27,318,300
-------------- --------------
Total considerations and premiums ..................... 925,833,805 851,450,091
Separate account investment and administration fees ..... 50,578,828 43,186,358
Net investment income ................................... 422,480,668 414,565,840
Other, net .............................................. (2,308,256) (1,966,715)
-------------- --------------
Total income .......................................... 1,396,585,045 1,307,235,574
-------------- --------------
DEDUCTIONS
Increase in insurance and annuity reserves .............. 42,211,501 81,812,257
Annuity and surrender benefits .......................... 1,101,981,780 999,743,408
Death and disability benefits ........................... 19,047,964 20,153,378
Operating expenses ...................................... 159,023,774 151,448,387
-------------- --------------
Total deductions ...................................... 1,322,265,019 1,253,157,430
-------------- --------------
Net gain before dividends ............................. 74,320,026 54,078,144
DIVIDENDS TO CONTRACTHOLDERS AND POLICYHOLDERS ........... (89,247) (117,182)
-------------- --------------
Net gain from operations .............................. 74,230,779 53,960,962
FEDERAL INCOME TAX BENEFIT ............................... 512,749 1,150,189
NET REALIZED CAPITAL GAINS ............................... 20,883,616 16,642,540
-------------- --------------
Net income ............................................ 95,627,144 71,753,691
SURPLUS TRANSACTIONS
Change in:
Asset valuation reserve ............................... 806,959 (1,990,987)
Unrealized capital gains, net ......................... 2,661,765 7,239,633
Non-admitted assets and other, net .................... (13,159,009) (6,110,852)
-------------- --------------
Net change in surplus ................................ 85,936,859 70,891,485
SURPLUS
Beginning of year ....................................... 594,831,791 523,940,306
-------------- --------------
End of year ............................................. $ 680,768,650 $ 594,831,791
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
55
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------------- ----------------
<S> <C> <C>
CASH PROVIDED
Premium and annuity funds received .......................... $ 921,742,410 $ 851,727,947
Investment income received .................................. 358,766,660 338,956,078
Separate account investment and administrative fees ......... 50,599,178 43,186,358
Other, net .................................................. (803,915) 1,739,776
-------------- --------------
Total receipts ............................................ 1,330,304,333 1,235,610,159
-------------- --------------
Benefits paid ............................................... 1,114,262,529 1,019,888,124
Insurance and operating expenses paid ....................... 154,815,653 155,490,995
Net transfers to separate accounts .......................... 115,750,222 84,395,589
-------------- --------------
Total payments ............................................ 1,384,828,404 1,259,774,708
-------------- --------------
Net cash used by operations ............................... (54,524,071) (24,164,549)
Proceeds from long-term investments sold, matured or repaid . 1,761,621,032 4,672,189,185
Other, net .................................................. 33,954,730 47,407,939
-------------- --------------
Total cash provided ....................................... 1,741,051,691 4,695,432,575
-------------- --------------
CASH APPLIED
Cost of long-term investments acquired ...................... 1,592,252,620 4,606,240,005
Repayment of note payable ................................... 135,000,000 --
Other, net .................................................. 30,887,009 57,671,026
-------------- --------------
Total cash applied ........................................ 1,758,139,629 4,663,911,031
-------------- --------------
Net change in cash and short-term investments ............. (17,087,938) 31,521,544
CASH AND SHORT-TERM INVESTMENTS
Beginning of year ........................................... 98,685,966 67,164,422
-------------- --------------
End of year ................................................. $ 81,598,028 $ 98,685,966
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
56
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the consolidated accounts of
Mutual of America Life Insurance Company ("Mutual of America") and its wholly
owned subsidiaries (collectively referred to as the "Company"). Significant
intercompany balances and transactions have been eliminated in consolidation.
NATURE OF OPERATIONS
Mutual of America provides retirement and employee benefit plans in the
small to medium size company market, principally to employees in the
not-for-profit social health and welfare field. In recent years, through a
wholly owned subsidiary, the Company has expanded to include for-profit
organizations in the small to medium size company market. The principal
insurance companies in the group are licensed in all fifty states and the
District of Columbia. Operations are conducted primarily through a network of
regional field offices staffed by salaried consultants.
REORGANIZATION -- In September 1999, Mutual of America submitted a Plan of
Reorganization ("the Plan") to the State of New York Insurance Department ("New
York Department") whereby Mutual of America would prepare for the sale of The
American Life Insurance Company of New York ("American Life") a wholly owned
subsidiary of Mutual of America. In preparation for such a sale, the Plan
indicates that during the period from January 1, 2000 through June 30, 2000,
Mutual of America would assume (via an assumption reinsurance agreement)
virtually all of American Life's in force business. Mutual of America would then
sell the stock of American Life to a third party. Effective October 1, 1999,
virtually all new business has been written by Mutual of America. On January 1,
2000, approximately 95% of American Life's in force group business totaling
approximately $190.0 million of insurance and annuity reserves was assumed by
Mutual of America.
BASIS OF PRESENTATION
The financial statements are presented in conformity with statutory
accounting practices prescribed or permitted by the State of New York Insurance
Department. Such practices differ from generally accepted accounting principles
("GAAP"). The variances between such practices and GAAP and the effects on the
accompanying financial statements are described in Note 10. The ability of the
Company to fulfill its obligations to contractholders and policyholders is of
primary concern to insurance regulatory authorities. As such, the financial
statements are oriented to the insuring public.
In 1999, the National Association of Insurance Commissioners ("NAIC")
adopted codified statutory accounting principles (Codification). Codification
will change, to some extent, current prescribed statutory accounting practices
and may result in changes to the accounting practices that the Company uses to
prepare its statutory financial statements going forward. Before Codification
becomes effective for the Company, the New York Insurance Department must adopt
Codification as the prescribed basis of accounting for its domestic insurers.
The New York Insurance Department has not yet reached a decision as to whether
it will adopt Codification. Adoption by the New York Insurance Department would
not have a material adverse effect on the Company's operating results and
financial position.
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates.
Certain 1998 amounts included in the accompanying consolidated financial
statements have been reclassified to conform to the 1999 presentation.
ASSET VALUATIONS
BONDS AND NOTES -- Investment valuations are prescribed by the NAIC. Bonds
qualifying for amortization are stated at amortized cost. Short-term investments
in good standing are stated at cost. All other bonds and short-term notes are
stated at market value. Unrealized gains and losses on valuation of bonds and
short-term investments are recorded directly to unassigned surplus.
COMMON AND PREFERRED STOCKS -- Common stocks in good standing are stated at
market value. Market value is determined by reference to valuations quoted by
the NAIC. Unrealized gains and losses are recorded directly to unassigned
surplus.
-57-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
GUARANTEED FUNDS TRANSFERABLE -- Guaranteed funds transferable consists of
funds held with a former reinsurer and is stated at the total principal amount
of future guaranteed transfers to Mutual of America.
MORTGAGE LOANS -- Mortgage loans are carried at amortized indebtedness.
Impairments of individual assets that are considered other than temporary are
recognized when incurred. There were no impairments recorded during 1999 or
1998.
REAL ESTATE -- Real estate, which is classified as Company occupied
property, is carried at cost, including capital improvements, net of accumulated
depreciation, and depreciated on a straight-line basis over 39 years. Tenant
improvements on real estate investments are depreciated over the shorter of the
lease term or the estimated life of the improvement.
POLICY LOANS -- Policy loans are stated at the unpaid principal balance of
the loan.
OTHER ASSETS -- Certain other assets, such as furniture and fixtures and
prepaid expenses, are considered "non-admitted assets" and excluded from the
consolidated statements of financial condition.
INSURANCE AND ANNUITY RESERVES
Reserves for annuity contracts are computed on the net single premium
method and represent the estimated present value of future retirement benefits.
These reserves are based on mortality and interest rate assumptions (ranging
predominately from 5.00% to 9.25%), which meet or exceed statutory requirements.
Reserves for contractual funds not yet used for the purchase of annuities are
accumulated at various interest rates, which, during 1999 and 1998, averaged
4.75% and 5.50%, respectively, and are deemed sufficient to provide for
contractual surrender values for these funds. Reserves for life and disability
insurance are based on mortality, morbidity and interest rate assumptions which
meet statutory requirements.
INTEREST MAINTENANCE AND ASSET VALUATION RESERVES
Realized gains and losses, net of applicable taxes, arising from changes in
interest rates are accumulated in the Interest Maintenance Reserve ("IMR") and
are amortized into net investment income over the estimated remaining life of
the investment sold. All other realized gains and losses are reported in the
consolidated statements of operations.
An Asset Valuation Reserve ("AVR") applying to the specific risk
characteristics of all invested asset categories excluding cash, policy loans
and investment income accrued has been established based on a statutory formula.
Realized and unrealized gains and losses arising from changes in the
creditworthiness of the borrower are included in the appropriate subcomponent of
the AVR. Changes in the AVR are recorded directly to unassigned surplus.
SEPARATE ACCOUNT OPERATIONS
Certain annuity considerations may be invested at the participant's
discretion in separate accounts. Separate accounts offered include a multifund
account managed by Mutual of America Capital Management Corporation (a wholly
owned subsidiary), or certain other funds managed by outside investment
advisors. All fund investment experience, including net realized and unrealized
capital gains in the separate accounts (net of investment advisory fees and
administration fees assessed), accrues directly to participants and are not
reflected in the Company's consolidated statements of operations. Charges for
investment advisory fees and administration fees are assessed as a percentage of
the assets under management and vary based upon the investment objectives of the
fund and level of administrative services provided. During both 1999 and 1998
such fees were equal to approximately 1.10% of the total average assets under
management. Investment advisory and administrative fees are included in the
consolidated statement of operations.
Investments held in the separate accounts are stated at market value.
Participants' corresponding equity in the separate accounts is reported as
liabilities in the accompanying statements. Premiums and benefits related to the
separate accounts are combined with the general account in the accompanying
statements. Net operating gains are offset by increases to reserve liabilities
in the respective separate accounts.
PREMIUMS AND ANNUITY CONSIDERATIONS
Insurance premiums and annuity considerations derived from defined
contribution plans are recognized as income when due. Voluntary savings-type and
defined benefit considerations and other deposits are recognized as income when
received. Group life and disability insurance premiums are recognized as income
over the contract period.
-58-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
INVESTMENT INCOME AND EXPENSES
General account investment income is reported as earned and is presented
net of related investment expenses. Operating expenses, including acquisition
costs for new business and income taxes, are charged to operations as incurred.
DIVIDENDS
Dividends are based on formulas and scales approved by the Board of
Directors and are accrued currently for payment subsequent to plan anniversary
dates.
2. INVESTMENTS
VALUATION
The statement values and NAIC market values of investments in fixed
maturity securities (bonds and notes) and equity securities at December 31, 1999
and 1998 are shown below. Excluding U.S. government and government agency
investments, the Company is not exposed to any significant concentration of
credit risk.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------------------------
GROSS UNREALIZED
STATEMENT ---------------------- NAIC MARKET
VALUE GAINS LOSSES VALUE
-------------- ---------- ----------- --------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury securities and obligations of U.S. Government corporations and
agencies .................................................................. $ 1,882.9 $ 3.7 $ 29.0 $ 1,857.6
Obligations of states and political subdivisions ........................... 11.1 .1 .5 10.7
Debt securities issued by foreign governments .............................. 90.1 .1 5.3 84.9
Corporate securities ....................................................... 2,753.3 2.9 174.0 2,582.2
Other ...................................................................... 54.2 -- -- 54.2
----------- ------- -------- -----------
Total ................................................................... $ 4,791.6 $ 6.8 $ 208.8 $ 4,589.6
=========== ======= ======== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------------------------
GROSS UNREALIZED
STATEMENT ---------------------- NAIC MARKET
VALUE GAINS LOSSES VALUE
-------------- ---------- ----------- --------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury securities and obligations of U.S. Government corporations and
agencies .................................................................. $ 2,030.7 $ 15.5 $ 1.1 $ 2,045.1
Obligations of states and political subdivisions ........................... 10.7 2.1 -- 12.8
Debt securities issued by foreign governments .............................. 106.2 6.1 -- 112.3
Corporate securities ....................................................... 2,834.8 50.5 33.0 2,852.3
---------- ------- ------ ----------
Total ................................................................... $ 4,982.4 $ 74.2 $ 34.1 $ 5,022.5
========== ======= ====== ==========
</TABLE>
Short-term fixed maturity securities with a statement value and NAIC market
value of $93.1 million and $108.2 million at December 31, 1999 and 1998,
respectively, are included in the above tables. As of December 31, 1999, the
Company had $6.0 million (1998 - $6.2 million) with a par value $6.0 million
(1998 - $6.0 million) of its long-term fixed maturity securities on deposit with
various state regulatory agencies.
At December 31, 1999 and 1998 net unrealized appreciation of common equity
securities was $87.6 million and $51.4 million, respectively.
MATURITIES
The statement values and NAIC market values of investments in fixed
maturity securities by contractual maturity (except for mortgage-backed
securities which are stated at expected maturity) at December 31, 1999 are
shown below. Expected
-59-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. INVESTMENTS -- (Continued)
maturities may differ from contractual maturities because borrowers may have the
right to prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
--------------------------
STATEMENT NAIC
VALUE MARKET VALUE
------------ -------------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less ....................... $ 234.2 $ 226.3
Due after one year through five years ......... 1,456.3 1,396.9
Due after five years through ten years ........ 1,285.4 1,230.4
Due after ten years ........................... 1,815.7 1,736.0
---------- ----------
Total ........................................ $ 4,791.6 $ 4,589.6
========== ==========
</TABLE>
REALIZED INVESTMENT GAINS
Sales of fixed maturity securities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1999 1998
-------------- --------------
(IN MILLIONS)
<S> <C> <C>
Fixed maturity securities
Proceeds ...................... $ 1,557.8 $ 4,164.6
Gross realized gains .......... 5.6 20.0
Gross realized losses ......... 20.9 6.0
</TABLE>
Sales of investments in fixed maturity securities resulted in $15.3 million
of losses and $14.0 million of gains being accumulated in IMR in 1999 and 1998,
respectively. Such amounts will be amortized into net investment income over the
estimated remaining life of the investment sold. During 1999 and 1998, $16.5
million and $54.2 million of the IMR was amortized and included in net
investment income. Included in IMR amortization income for 1998 is a $34.5
million net adjustment related to realized capital gains that should have been
exempted from IMR since they were associated with higher than normal general
account withdrawal activity (including transfers to the Separate Accounts) that
occurred in 1997.
Net realized capital gains reflected in the statements of operations for
the years ended December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1999 1998
---------- ----------
(IN MILLIONS)
<S> <C> <C>
Equity securities (common and preferred stock) $ 20.9 $ 16.0
Mortgage loans and other ...................... -- .6
------ -------
Net realized capital gains ................... $ 20.9 $ 16.6
====== =======
</TABLE>
3. GUARANTEED FUNDS TRANSFERABLE
In 1980, Mutual of America terminated a reinsurance arrangement and assumed
direct ownership of funds held by the former reinsurer and direct liability for
the contractual obligations to policyholders. The liability to such
policyholders is included as insurance and annuity reserves in the consolidated
statements of financial condition. The principal amount of the funds held by the
former reinsurer is guaranteed to earn at least 3.125% per year.
The guaranteed funds are transferable to Mutual of America over time and
are stated at the total principal amount of future guaranteed transfers to
Mutual of America of $137.3 million and $115.9 million at December 31, 1999 and
1998, respectively. The actual interest and other allocated investment earnings
on these funds amounted to $44.3 million and $12.2 million in 1999 and 1998,
respectively, and are included in net investment income. Income in 1999 included
a $33.2 million special one-time dividend declared in connection with the
insurer's demutualization-related asset transfers and the formation of a
corporate account.
-60-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. REAL ESTATE
Real estate consists primarily of an office building that Mutual of America
purchased for its corporate headquarters. The purchase price of the building was
fully financed. The Company occupies approximately one-third of this office
building as its corporate headquarters and leases the remaining space.
Depreciation expense for 1999 and 1998 was $5.2 million for both years.
5. NOTE PAYABLE
In connection with the acquisition of its corporate headquarters, Mutual of
America obtained a $135.0 million, seven-year, 6.91% fixed rate secured term
note. The note matured and was paid in full on October 15, 1999. Interest on the
note was payable semiannually in April and October.
6. PENSION PLAN AND POSTRETIREMENT BENEFITS
PENSION BENEFIT AND OTHER BENEFIT PLANS
The Company has a qualified, non-contributory defined benefit pension plan
covering virtually all employees. Benefits are generally based on years of
service and final average salary. The Company's funding policy is to contribute
annually, at a minimum, the amount necessary to satisfy the funding requirements
under the Employee Retirement Income Security Act of 1974 ("ERISA"). The Company
also maintains two non-qualified defined benefit pension plans. The first
provides benefits to employees whose total compensation exceeds the maximum
allowable compensation limits for qualified retirement plans under ERISA. The
second provides benefits to non-employee members of the Board of Directors.
The Company has two defined benefit postretirement plans covering
substantially all salaried employees. Employees may become eligible for such
benefits upon attainment of retirement age while in the employ of the Company
and upon satisfaction of service requirements. One plan provides medical and
dental benefits and the second plan provides life insurance benefits. The
postretirement plans are contributory for those individuals who retire with less
than twenty years of eligible service; with retiree contributions adjusted
annually and contain other cost-sharing features, such as deductibles and
coinsurance.
The components of net periodic benefit costs are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
PENSION BENEFITS OTHER BENEFITS
--------------------- -------------------
1999 1998 1999 1998
---------- ---------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Service cost .............................. $ 6.3 $ 5.3 $ .8 $ .6
Interest cost on PBO ...................... 6.6 6.2 1.5 1.3
Expected return on plan assets ............ (7.0) (6.9) -- --
Amortization of initial net asset ......... (.1) (.2) -- --
Amortization of unrecognized net loss ..... 2.9 1.6 .3 .1
Settlement loss ........................... -- 2.8 -- --
------- ------- ------ ------
NET BENEFIT EXPENSE ....................... $ 8.7 $ 8.8 $ 2.6 $ 2.0
======= ======= ====== ======
</TABLE>
-61-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. PENSION PLAN AND POSTRETIREMENT BENEFITS -- (Continued)
The change in the projected benefit obligation and plan assets are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
PENSION BENEFITS OTHER BENEFITS
----------------------- -----------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
CHANGE IN PROJECTED BENEFIT OBLIGATION (PBO):
PBO, beginning of year: ......................... $ 93.5 $ 77.3 $ 18.0 $ 15.6
Service cost .................................. 6.3 5.3 .8 .6
Interest cost ................................. 6.7 6.2 1.5 1.3
Change in assumptions ......................... (26.5) 17.3 (3.8) 1.1
Actuarial loss ................................ .8 11.8 3.1 --
Benefits and expenses paid .................... (1.6) (24.4) (.8) (.6)
-------- -------- -------- --------
PBO, end of year ................................ $ 79.2 $ 93.5 $ 18.8 $ 18.0
======== ======== ======== ========
CHANGE IN PLAN ASSETS:
Plan assets, beginning of year .................. $ 60.4 $ 58.6 $ -- $ --
Employer contributions ........................ 19.0 16.8 -- --
Return on plan assets ......................... 11.0 9.4 -- --
Benefits and expenses paid .................... (1.5) (24.4) -- --
-------- -------- -------- --------
Plan assets, end of year ........................ 88.9 60.4 -- --
-------- -------- -------- --------
Plan assets in excess of (lower than) PBO ....... $ 9.7 $ (33.1) $ (18.8) $ (18.0)
======== ========= ========= =========
</TABLE>
At December 31, 1999 all of the qualified pension plan assets are invested
in one of the Company's separate accounts (consisting primarily of equity
securities) and participation in certain other funds managed by outside
investment advisors. For financial reporting purposes, the prepaid benefit cost
at December 31, 1999 and 1998, has been classified as a non-admitted asset. The
prepaid (accrued) benefit cost is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
PENSION BENEFITS OTHER BENEFITS
----------------------- -------------------------
1999 1998 1999 1998
---------- ------------ ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Plan assets in excess of (lower than) PBO ................... $ 9.7 $ (33.1) $ (18.8) $ (18.0)
Remaining unrecognized initial net asset .................... (.3) (.5) -- --
Unrecognized prior service cost ............................. 3.9 4.6 -- --
Unrecognized net loss from past experience different from
that assumed ............................................... 8.1 40.1 3.8 5.6
------- --------- --------- ---------
PREPAID (ACCRUED) BENEFIT COST, END OF YEAR ................. $ 21.4 $ 11.1 $ (15.0) $ (12.4)
======= ========= ========= =========
</TABLE>
The Company funds the qualified non-contributory defined benefit pension
plan in accordance with the requirements of ERISA. Plan assets at fair value for
the qualified pension plan were $72.9 million and $52.3 million at December 31,
1999 and 1998, respectively. The actuarial present value of accumulated benefits
for the qualified pension plan were $37.5 million and $32.6 million at December
31, 1999 and 1998, respectively. During 1999 and 1998, the Company made
contributions to the qualified plan of $11.5 million and $13.3 million,
respectively.
-62-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. PENSION PLAN AND POSTRETIREMENT BENEFITS -- (Continued)
The assumptions used in determining the aggregate projected benefit
obligation for pension and other benefit plans were as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
ASSUMPTIONS AT DECEMBER 31
----------------------------------------------
PENSION BENEFITS OTHER BENEFITS
---------------------- ----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Discount rate .......................... 8.20% 6.80% 8.20% 6.80%
Expected return on plan assets ......... 11.30% 11.30% 8.75% 11.30%
Rate of compensation increase .......... 4.00% 4.00% 4.00% 4.00%
</TABLE>
The health care cost trend rate assumption has an affect on the amounts
reported. For example, increasing the assumed health care cost trend rate by one
percentage point in each year would increase the accumulated postretirement
obligation for the plan as of December 31, 1999 by $2.6 million and the
aggregate of the service and interest cost components of the net periodic
benefit cost for 1999 by $.4 million.
SAVINGS AND OTHER INCENTIVE PLANS
All employees may participate in a Company sponsored savings plan under
which the Company matches a portion of the employee's contributions up to 6% of
salary. The Company contributed $1.8 million and $1.7 million in 1999 and 1998,
respectively. The Company also has a long-term performance based incentive
compensation plan for certain employees. Shares are granted each year and
generally vest over a three-year period. The value of such shares is based upon
increases in the Company's statutory surplus and the maintenance of certain
financial ratios. Compensation expense recognized in 1999 and 1998 related to
this plan was $5.0 million and $3.2 million respectively.
7. COMMITMENTS AND CONTINGENCIES
Rental expenses were $18.4 million and $17.3 million in 1999 and 1998,
respectively. The approximate minimum rental commitments under noncancelable
operating leases are as follows: $3.3 million in 2000, $3.0 million in 2001,
$2.8 million in 2002, $2.2 million in 2003, $1.6 million in 2004, and $1.5
million thereafter. Such leases are principally for leased office space,
furniture and equipment. Certain office space leases provide for adjustments to
reflect changes in real estate taxes and other operating expenses.
The Company is involved in various legal actions that have arisen in the
course of the Company's business. In the opinion of management, the ultimate
liability with respect to such lawsuits as well as other contingencies is not
considered to be material in relation to the Company's consolidated financial
statements.
8. FEDERAL INCOME TAXES
Mutual of America's pension business was exempt from federal income
taxation under Section 501(a) of the Internal Revenue Code ("Code") through
1997. Effective January 1, 1998 Mutual of America's pension business became
subject to federal income tax. Mutual of America and its life subsidiary file
federal income tax returns on a separate company basis. Mutual of America's
non-insurance subsidiaries file a consolidated income tax return. The Federal
income tax benefit for 1999 amounted to $.5 million as compared to a benefit of
$1.2 million in 1998. The 1999 and 1998 tax benefits reflected in the
accompanying statements of operations and surplus arose principally from the
operating results of its insurance and non-insurance subsidiaries.
The difference between the actual tax provision (benefit) reflected in the
accompanying consolidated statements of operations and the expected amounts
computed by applying the statutory rate of 35% to operating income arises
principally from the differing statutory and tax treatment of IMR income and
realized capital gains and losses on investment transactions and from the
differences between the tax and statutory basis of Mutual of America's assets
and liabilities. Such differences resulted from transition rules under the Code
as of January 1, 1998, which accompanied the change in taxation of Mutual of
America's pension business. These transition rules will moderate Mutual of
America's tax expense over the next several years. At December 31, 1999 Mutual
of America had a net operating loss carry forward of approximately $59.2 million
that expires in 2018.
-63-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments have been determined by
using available market information and the valuation methodologies described
below. Considerable judgment is often required in interpreting market data to
develop estimates of fair value. Accordingly, the estimates presented herein may
not necessarily be indicative of amounts that could be realized in a current
market exchange. The use of different assumptions or valuation methodologies may
have a material effect on the estimated fair value amounts.
Amounts related to the Company's financial instruments were are follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------
STATEMENT ESTIMATED
VALUE FAIR VALUE
-------------- --------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Bonds and notes ......................... $ 4,698.5 $ 4,496.5
Common stock ............................ 412.8 412.8
Preferred stock ......................... 40.5 40.5
Cash and short term investments ......... 81.6 81.6
Guaranteed funds transferable ........... 137.3 134.6
Mortgage loans .......................... 18.5 18.1
Policy loans ............................ 103.5 103.5
LIABILITIES
Insurance and annuity reserves .......... $ 4,861.7 $ 4,711.3
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------
STATEMENT ESTIMATED
VALUE FAIR VALUE
-------------- --------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Bonds and notes ......................... $ 4,874.2 $ 4,914.4
Common stock ............................ 339.5 339.5
Preferred stock ......................... 55.8 55.8
Cash and short term investments ......... 98.7 98.7
Guaranteed funds transferable ........... 115.9 120.9
Mortgage loans .......................... 19.3 19.6
Policy loans ............................ 100.6 100.6
LIABILITIES
Insurance and annuity reserves .......... $ 4,925.4 $ 5,094.7
Note payable ............................ 137.0 137.0
</TABLE>
FIXED MATURITIES AND EQUITY SECURITIES -- Fair value for fixed maturities
is determined by reference to market prices quoted by the NAIC. If quoted market
prices are not available, fair value is determined using quoted prices for
similar securities. Market value for equity securities is determined by
reference to valuations quoted by the NAIC.
CASH AND SHORT TERM INVESTMENTS -- The carrying value for cash and
short-term investments approximates fair values due to the short-term maturities
of these instruments.
MORTGAGE LOANS -- Fair value for mortgage loans is determined by
discounting the expected future cash flows using the current rate at which
similar loans would be made to borrowers with similar credit ratings and
remaining maturities.
POLICY LOANS -- The majority of policy loans are issued with variable
interest rates which are periodically adjusted based on changes in rates
credited to the underlying policies and therefore are considered to be stated at
fair value.
INSURANCE AND ANNUITY RESERVES -- Contractual funds not yet used to
purchase retirement annuities and other deposit liabilities are stated at their
cash surrender value. General account policies are issued with variable interest
rates that are periodically adjusted based on changes in underlying economic
conditions.
-64-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (Continued)
The fair value of annuity contracts (approximately $1.3 billion and $1.6
billion at December 31, 1999 and 1998, respectively) was determined by
discounting expected future retirement benefits using current mortality tables
and interest rates based on the duration of expected future benefits. Weighted
average interest rates of 7.83% and 5.38% were used at December 31, 1999 and
1998, respectively.
NOTE PAYABLE -- The fair value of long-term debt was determined by
discounting expected future cash flows using current interest rates for
instruments with similar terms and maturities.
10. RECONCILIATION OF STATUTORY BASIS FINANCIAL RESULTS TO A GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES BASIS
The accompanying financial statements are presented in conformity with
statutory accounting practices prescribed or permitted by the State of New York
Insurance Department which practices differ from GAAP. The variances between
such practices and GAAP and the effects on the accompanying financial statements
follow:
ASSET VALUATIONS AND INVESTMENT INCOME RECOGNITION
GAAP requires the Company's bonds and notes to be classified as either held
to maturity ("HTM") or available for sale ("AFS"); whereas for statutory
accounting no such classification is required. In addition, for GAAP, AFS bonds
and notes are carried at their fair market value with the unrealized gains and
losses applied directly to surplus; whereas for statutory accounting all bonds
and notes are carried at their amortized cost.
Realized capital gains and losses, net of applicable taxes, arising from
changes in interest rates are recognized in income currently for GAAP
accounting, rather than accumulated in the IMR and amortized into income over
the remaining life of the security sold for statutory accounting. Additionally,
capital gains and losses are not recognized when a security is sold and the same
or substantially the same security is repurchased, unless the repurchase occurs
after a reasonable exposure to market risk.
A general formula based Asset Valuation Reserve (AVR) is recorded for
statutory accounting purposes, whereas such reserves are established under GAAP
only when an asset's impairment is considered to be other than temporary.
Certain assets, principally furniture and fixtures and prepaid expenses,
for statutory accounting, are excluded from the statement of financial condition
by a charge to surplus; whereas under GAAP, such assets are carried at their
amortized cost.
POLICY ACQUISITION COSTS
Under GAAP, policy acquisition costs that are directly related to and vary
with the production of new business are deferred and amortized over the
estimated life of the applicable policies, rather than being expensed as
incurred.
INSURANCE AND ANNUITY RESERVES
Under statutory accounting practices the interest rates and mortality and
morbidity assumptions used are those which are prescribed or permitted by the
State of New York Insurance Department. Under GAAP, for annuities the interest
rate assumptions used are generally those assumed in the pricing of the contract
at issue; for disability benefits the interest rates assumed are those
anticipated to be earned over the duration of the benefit period. Mortality and
morbidity assumptions are based on Company experience.
PREMIUM RECOGNITION
Insurance contracts that do not subject the insurer to significant
mortality or morbidity risk are considered, under GAAP, to be primarily
investment contracts. GAAP requires all amounts received from policyholders
under these investment contracts to be recorded as a policyholder deposit rather
than as premium income.
DEFERRED INCOME TAXES
GAAP requires that a deferred tax asset or liability be established to
provide for temporary differences between the tax and financial reporting bases
of assets and liabilities. Deferred income taxes are not recorded for statutory
accounting purposes.
-65-
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. RECONCILIATION OF STATUTORY BASIS FINANCIAL RESULTS TO A GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES BASIS -- (Continued)
The tables that follow provide a reconciliation of the 1999 and 1998
statutory financial results reflected in the accompanying financial statements
to a GAAP basis:
<TABLE>
<CAPTION>
RECONCILIATION OF STATUTORY TO GAAP SURPLUS 1999 1998
- ---------------------------------------------------------------- ------------ ------------
(IN MILLIONS)
<S> <C> <C>
STATUTORY SURPLUS ......................................... $ 680.8 $ 594.9
Market value adjustment related to AFS bonds and notes ... (204.4) 170.9
Realized capital gains ................................... 111.3 136.0
AVR ...................................................... 117.7 118.5
Deferred policy acquisition costs ........................ 49.8 39.7
Policy reserve adjustments ............................... (23.4) (21.9)
Non-admitted assets ...................................... 29.6 16.2
Federal income taxes ..................................... 303.9 163.1
Other .................................................... .4 1.7
---------- ----------
GAAP SURPLUS .............................................. $ 1,065.7 $ 1,219.1
========== ==========
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION OF STATUTORY TO GAAP NET INCOME 1999 1998
- ------------------------------------------------ ----------- -----------
<S> <C> <C>
STATUTORY NET INCOME ..................... $ 95.6 $ 71.8
Investment income adjustments ........... (9.8) (52.8)
Realized capital gains (losses) ......... (14.9) 25.3
Policy reserve adjustments .............. (1.6) (3.5)
Deferred acquisition costs .............. 3.2 6.0
Deferred income taxes ................... 13.9 237.1
Other ................................... (3.1) (1.5)
-------- --------
GAAP NET INCOME .......................... $ 83.3 $ 282.4
======== ========
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION OF GAAP TO STATUTORY PREMIUMS 1999 1998
- --------------------------------------------------- ----------- -----------
<S> <C> <C>
GAAP PREMIUM INCOME ......................... $ 61.0 $ 61.1
Premiums from investment contracts ......... 864.8 790.4
-------- --------
STATUTORY PREMIUM INCOME .................... $ 925.8 $ 851.5
======== ========
</TABLE>
-66-
