As filed with the Securities and Exchange Registration No.
Commission on October 29, 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM S-6
TO REGISTRATION STATEMENT
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
- --------------------------------------------------------------------------------
Variable Life Account C of Aetna Life Insurance and Annuity Company
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, TS31, Hartford, Connecticut 06l56
(Complete Address of Depositor's Principal Executive Offices)
- --------------------------------------------------------------------------------
Julie E. Rockmore, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, TS31, Hartford, Connecticut 06l56
(Name and Complete Address of Agent for Service)
- --------------------------------------------------------------------------------
It is proposed that the public offering will commence as soon as practicable
after effectiveness of this filing.
The securities being registered hereby are interests under variable life
insurance policies or certificates.
The Registrant hereby amends this Registration Statement on such dates as may be
necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to Section 8(a), may determine.
<PAGE>
VARIABLE LIFE ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Cross Reference Sheet
<TABLE>
<CAPTION>
N-8B-2
Item No. Part I - Prospectus
<S> <C>
1 Cover Page; The Separate Account; The Company and Management
2 Cover Page; The Separate Account; The Company and Management
3 Not Applicable
4 Distribution of the Certificates
5 The Separate Account; The Company and Management
6 The Separate Account; The Company and Management
7 Not Applicable
8 Not Applicable
9 Additional Information - Legal Matters
10 The Separate Account; Certificate Rights; Certificate Choices;
Additional Information; Miscellaneous Certificate Provisions;
Termination or Change in Coverage; Allocation of Premiums -
Fund Additions, Deletions or Substitutions
11 Allocation of Premiums - The Funds
12 Allocation of Premiums - The Funds
13 Charges & Fees
14 Certificate Choices
15 Allocation of Premiums; Certificate Choices; Certificate Values
16 The Separate Account; Allocation of Premiums - The Funds;
Certificate Values
17 Certificate Rights
18 The Separate Account
19 Additional Information - Reports to Owners
20 Not Applicable
21 Certificate Rights - Certificate Loans
22 Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
N-8B-2
Item No. Part I - Prospectus
<S> <C>
23 The Company and Management
24 Not Applicable
25 The Company and Management
26 Not Applicable
27 The Company and Management
28 The Company and Management
29 The Company and Management
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Additional Information - State Regulation
36 Not Applicable
37 Not Applicable
38 Additional Information - Distribution of the Certificates
39 The Company and Management
40 Not Applicable
41 The Company and Management
42 Not Applicable
43 Not Applicable
44 Charges & Fees; Certificate Values
45 Not Applicable
46 The Separate Account; Certificate Values
47 Not Applicable
48 Not Applicable
49 Not Applicable
50 The Separate Account
51 Cover Page; Certificate Choices
52 Allocation of Premiums - Fund Additions, Deletions or
Substitutions; Termination or Change in Coverage
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
N-8B-2
Item No. Part I - Prospectus
<S> <C>
53 Tax Matters
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements of Separate Account; Financial Statements
of Insurance Company
</TABLE>
<PAGE>
<PAGE>
Variable Life Account C
Aetna Life Insurance and Annuity Company (the "Company")
151 Farmington Avenue
Hartford, Connecticut 06156
(800)-677-4636
Prospectus Dated , 1999
Flexible Premium Group Variable Universal Life Insurance for New York State
United Teachers Benefit Trust
("NYSUT Benefit Trust")
This Prospectus describes Certificates that provide life insurance coverage for
eligible Members of New York State United Teachers "NYSUT" and their spouses and
children. The Company issues the Certificates under a group Policy held by NYSUT
Benefit Trust.
The Certificates allow you to make flexible premium payments, as long as you pay
enough premiums to:
o cover charges; or
o qualify for the Certificate's No Lapse Coverage, which is available during the
first 5 years after the Certificate's issuance or after a coverage increase.
You may choose (and later change) whether the amount of the Certificate's death
benefit coverage generally remains constant or varies with the Certificate's
account value. We pay the death benefit when the insured person dies. You also
may choose to (a) borrow from the Certificate; (b) surrender the Certificate in
whole or part; (c) increase or decrease insurance coverage; and (d) elect
certain optional supplemental benefits. These choices are subject to limitations
described in this Prospectus.
Your account value is the amount of Net Premiums you pay, increased (or
decreased) by the investment return (positive or negative) the Net Premiums
earn, less the charges described in this Prospectus. You decide whether your
account value is invested in Variable Life Account C under one or more Variable
Options, and/or in the Fixed Account. The account value you invest in each
Variable Option is not guaranteed and will vary with the investment performance
of an associated Fund. The attached Fund prospectuses provide detailed
information about these associated Funds.
The Variable Options are:
<TABLE>
<S> <C>
o Aetna Ascent VP o Janus Aspen Aggressive Growth Portfolio
o Aetna Balanced VP, Inc. o Janus Aspen Balanced Portfolio
o Aetna Income Shares d/b/a Aetna Bond VP o Janus Aspen Growth Portfolio
o Aetna Crossroads VP o Janus Aspen Worldwide Growth Portfolio
o Aetna Variable Fund d/b/a Aetna Growth and o Oppenheimer Global Securities Fund/VA
Income VP o Oppenheimer Strategic Bond Fund/VA
o Aetna Index Plus Large Cap VP o Portfolio Partners (PPI) MFS Emerging
o Aetna Legacy VP Equities Portfolio
o Aetna Variable Encore Fund d/b/a Aetna o Portfolio Partners (PPI) MFS Research Growth Portfolio
Money Market VP o Portfolio Partners (PPI) MFS Value Equity Portfolio
o Fidelity Variable Insurance Products o Portfolio Partners (PPI) Scudder International
Fund (VIP) Equity-Income Portfolio Growth Portfolio
o Fidelity Variable Insurance Products Fund II o Portfolio Partners (PPI) T.Rowe Price Growth
(VIP II)--Contrafund Portfolio Equity Portfolio
</TABLE>
Net Premiums allocated to the Fixed Account earn fixed rates of interest. We
determine these rates periodically, but we guarantee that they will never be
less than 4% a year.
i
<PAGE>
Replacing existing insurance or supplementing an existing flexible premium
variable life insurance policy with a Certificate may not be in your best
interest. The Certificates have a "free look" period during which you may return
the Certificate to us for a refund. (See Right of Certificate Examination.)
In certain circumstances, NYSUT Benefit Trust or the Company may terminate the
group Policy and outstanding Certificates (including your coverage) without your
consent. (See Termination or Change in Coverage.) Also, NYSUT Benefit Trust, by
agreement with the Company, may make changes in the Certificate (and your
coverage) without your consent. Your consent is required, however, if such
changes result in a reduction in benefits or an increase in guaranteed charges.
You should read the Prospectus and the attached prospectus for any available
Fund if you are considering buying a Certificate or exercising elections under a
Certificate. You should also keep them for future reference. You can obtain any
Fund's Statement of Additional Information ("SAI"), which provides more
information about a Fund, by calling (800) 677-4636.
Additional Disclosure Information. The SEC has not approved or disapproved
these securities or determined if this Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Getting Additional Information. This Prospectus and other information about
Variable Life Account C required to be filed with the Securities and Exchange
Commission (SEC) can be found in the SEC's web site at http://www.sec.gov. You
can get copies of this information by visiting the SEC's Public Reference Room
or writing the SEC Public Reference Section, Washington, D.C. 20549-6009, and
paying a duplicating fee. You can get information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330.
ii
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Definitions .......................................................... v
The Separate Account ................................................. 1
Charges & Fees ....................................................... 1
Premium Load ....................................................... 1
Charges and Fees Assessed Against the Total Account Value........... 1
Monthly Deduction ................................................ 1
Cost of Insurance ................................................ 2
Certificate Fee .................................................. 2
Charges for Supplemental Benefits ................................ 2
Transfer and Partial Surrender Charges ........................... 2
Charges Assessed Against the Separate Account ...................... 3
Mortality and Expense Risk Charge ................................ 3
Charges Assessed Against the Underlying Funds ...................... 3
Allocation of Premiums ............................................... 5
The Funds .......................................................... 5
Mixed and Shared Funding; Conflicts of Interest .................... 7
Fund Additions, Deletions or Substitutions ......................... 7
Limits Imposed by the Funds ........................................ 7
Fixed Account ...................................................... 7
Certificate Choices .................................................. 9
Premium Payments ................................................... 9
Commencement of Coverage ........................................... 9
5-Year No Lapse Coverage Provision ................................. 10
Death Benefit Options .............................................. 10
Transfers .......................................................... 11
Telephone Transfers ................................................ 11
Transfer Limitations ............................................... 11
Automated Transfers (Dollar Cost Averaging) ........................ 12
Termination or Change in Coverage .................................... 13
Certificate Values ................................................... 15
Total Account Value ................................................ 15
Accumulation Unit Value ............................................ 15
Maturity Value ..................................................... 15
Certificate Rights ................................................... 16
Full Surrenders .................................................... 16
Partial Surrenders ................................................. 16
Paid-Up Nonforfeiture Option ....................................... 16
Grace Period ....................................................... 17
Reinstatement of a Lapsed Certificate .............................. 17
Certificate Loans .................................................. 18
Certificate Changes .................................................. 19
Increase in Specified Amount ....................................... 19
Decrease in Specified Amount ....................................... 19
Change in Death Benefit Option ..................................... 19
Right of Certificate Examination ................................... 20
Supplemental Benefits .............................................. 20
Certificate Settlement ............................................... 20
Settlement Options ................................................. 21
Calculation of Variable Payment Settlement Option Values ........... 22
The Company and Management ........................................... 22
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Additional Information ............................................ 26
Reports to Owners ............................................... 26
Right to Instruct Voting of Fund Shares ......................... 26
State Regulation ................................................ 26
Legal Matters ................................................... 26
The Registration Statement ...................................... 26
Distribution of the Certificates ................................ 26
Independent Auditors ............................................ 27
Year 2000 ....................................................... 27
Tax Matters ....................................................... 28
Federal Tax Status of the Company ............................... 28
Life Insurance Qualification .................................... 28
General Rules ................................................... 29
Modified Endowment Contracts .................................... 29
Diversification Standards ....................................... 30
Investor Control ................................................ 30
Withholding ..................................................... 30
Other Tax Considerations ........................................ 30
Miscellaneous Certificate Provisions .............................. 31
The Certificates ................................................ 31
Payment and Deferral of Benefits ................................ 31
Suicide and Incontestability .................................... 32
Protection of Proceeds .......................................... 32
Nonparticipation ................................................ 32
Changes in Owner and Beneficiary; Assignment .................... 32
Performance Reporting and Advertising ........................... 32
Illustrations of Death Benefit and Total Account Values......... 33
Financial Statements of Separate Account .......................... S-1
Financial Statements of the Company ............................... F-1
</TABLE>
This prospectus does not constitute an offer in any jurisdiction where
prohibited. No dealer, salesman or other person is authorized to give any
information or make any representation in connection with this offering other
than those contained in this prospectus, or other sales material authorized by
the company and, if given or made, such other information or representations
must not be relied upon.
The purpose of the Certificates is to provide insurance protection. Life
insurance is a long-term investment. Owners should consider their need for
insurance coverage and the Certificates' long-term investment potential. We do
not claim that the Certificates are in any way similar or comparable to an
investment in a mutual fund.
iv
<PAGE>
Definitions
Accumulation Unit: A unit used to measure the value of the Owner's interest in
each applicable Variable Option.
Attained Age: An Insured's age (as of his or her closest birthday) nearest the
Certificate Issue Date, plus the number of full Certificate Years elapsed.
Amount at Risk: The Death Benefit under a Certificate divided by 1.0032737,
minus the Certificate's Total Account Value.
Annuitant: A person whose life determines the amount of life contingent annuity
payments.
Annuity: A series of payments for life or for a definite period.
Basic Monthly Premium: The minimum amount of premium that you must pay to keep
the 5-year No Lapse Coverage in effect, assuming there have been no Certificate
Loans or Partial Surrenders.
Certificate Loan: The amount received by borrowing from the Total Account
Value.
Certificate Year/Certificate Anniversary: The first Certificate Year is the
12-month period beginning on the Issue Date of the Certificate. Your Certificate
Anniversary is the Certificate Issue Date plus 1 year, 2 years, etc.
Company: Aetna Life Insurance and Annuity Company.
Cost of Insurance: A monthly charge related to the Company's expected mortality
cost for an Insured's basic insurance coverage under a Certificate. This charge
does not include any supplemental benefit provisions that you elect through a
Certificate rider. The charge is equal to the Amount at Risk for the Insured on
the Monthly Deduction Day, multiplied by that Insured's monthly Cost of
Insurance rate.
Death Benefit: The amount we pay following an Insured's death. We describe this
payment in the Death Benefit Options section. Payment of the Death Benefit is
subject to all provisions contained in the Certificate.
Death Benefit Option: Either of the two methods that you may elect for
determining a Death Benefit.
Fixed Account: A non-variable funding option available under the Certificates
that guarantees a minimum interest rate of 4% per year.
Fixed Account Value: The portion of a Certificate's Total Account Value held in
the Fixed Account. The Fixed Account Value is part of the general assets of the
Company.
Full Surrender: Your right to terminate a Certificate in exchange for payment
of its Surrender Value.
Fund(s): One or more of the mutual funds (open-end management investment
companies or a separate series thereof) available under the Certificate. Our
Separate Account purchases shares of the Funds to fund the benefits provided by
the Certificates.
v
<PAGE>
Grace Period: The 61-day period beginning on any Monthly Deduction Day on which
a Certificate's Surrender Value is insufficient to cover the current Monthly
Deduction. A similar Grace Period also applies if the amount of any loan and any
accrued loan interest exceeds the Total Account Value. The Certificate will
lapse without value at the end of the Grace Period unless a sufficient payment
is received by the Company or unless the 5-year No Lapse Coverage is in effect.
Home Office: The Company's principal executive offices at 151 Farmington
Avenue, Hartford, Connecticut 06156.
Insured: The person on whose life a Certificate is issued. For initial or
continued coverage, an Insured must be (a) a Member or (b) an Insured Member's
spouse. However, we do not offer coverage for an Insured Member's spouse if the
spouse's Attained Age is 80 or older at the Issue Date of the spouse's
Certificate.
Issue Date: The Issue Date for a Certificate, or for a Specified Amount
increase, is stated in the Certificate Specifications or Supplemental
Certificate Specifications in your Certificate.
Loan Account Value: The sum of all unpaid Certificate Loans. To repay
Certificate Loans in full, you must pay the Loan Account Value plus any accrued
interest.
Loan Value: 90% of the Total Account Value of a Certificate.
Maturity Date: The Certificate Anniversary on which the Insured's Attained Age
is 100.
Member: An eligible member of NYSUT or a NYSUT agency fee payer.
Monthly Deduction: A monthly charge assessed against the Total Account Value.
The Monthly Deduction includes the Cost of Insurance, the Certificate fee and
any charges for supplemental benefit riders.
Monthly Deduction Day: The first Monthly Deduction Day is the Issue Date.
Monthly Deduction Days occur each month thereafter on the same day as the Issue
Date of the Certificate.
Net Premium: The Net Premium equals the amount of the premium you pay less the
then-current Premium Load deduction.
Net Single Premium: The amount required to purchase a guaranteed benefit (using
the Insured's Age and premium class) if the Net Premium is allocated to the
Fixed Account. The Net Single Premium is determined using a guaranteed interest
rate of 4% per year and the Certificate's guaranteed maximum Cost of Insurance
rates.
No Lapse Coverage: A provision in the Certificate providing that, if at least
the Basic Monthly Premiums are paid, a Certificate will remain in force for a
period of at least 5 years beginning on the (a) Issue Date or (b) the Issue Date
of an increase in Specified Amount. Under this provision, the Certificate
remains in force even if the Surrender Value is insufficient to pay the current
Monthly Deduction.
Owner: The person to whom a Certificate is issued. The Owner is entitled to
exercise all rights under the Certificate, and is also referred to as "you."
Unless otherwise specified in the Certificate or application form, the
Certificate is owned by the Insured.
Partial Surrender: The amount you receive in cash by surrendering a part of a
Certificate.
vi
<PAGE>
Planned Premiums: Premiums we agree to bill.
Policy: The group life insurance contract owned by NYSUT Benefit Trust,
pursuant to which the Certificates are issued. The Certificates are subject to
the terms of the Policy.
Pro-Rata Basis: In the same proportion that each of the Variable Options and the
Fixed Account Value under a Certificate bear to the sum of Certificate's
Separate Account Value and Fixed Account Value.
SEC: Securities and Exchange Commission.
Separate Account: A separate account maintained by the Company for the purpose
of funding the Certificates; Variable Life Account C.
Separate Account Value: The portion of a Certificate's Total Account Value
attributable to the variable portion of the Certificate. The variable portion of
the Certificate includes all amounts held in one or more of the Variable
Options.
Settlement Option(s): The method(s) by which payment may be made (a) from a
Death Benefit, (b) at the Maturity Date, or (c) at the Full Surrender of a
Certificate.
Specified Amount: The amount chosen by the Owner at enrollment that is used in
determining the Death Benefit. The Owner may increase or decrease the Specified
Amount as described in this Prospectus.
Surrender Value: The Total Account Value on the date of surrender, less (a) the
Loan Account Value and (b) any accrued interest.
Total Account Value: The sum of the (a) Fixed Account Value, the (b) Separate
Account Value and the (c) Loan Account Value.
Valuation Date: The date and time when we calculate the Accumulation Unit Value
of a Variable Option. Currently, this calculation occurs after the close of
business of the New York Stock Exchange on any normal business day, Monday
through Friday, that the New York Stock Exchange is open.
Valuation Period: The period of time between successive Valuation Dates.
Variable Option: One or more of the variable funding options available under
the Certificate as described in this Prospectus.
we, our, us, Company: Aetna Life Insurance and Annuity Company.
Written Request: A request in writing, in a form satisfactory to us and
received by us at the Home Office.
you, your: The person entitled to purchase or exercise any rights or privileges
under a Certificate or a Settlement Option. This is generally the Owner (or,
during a Settlement Option, the payee).
vii
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THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
The Separate Account
Our Variable Life Account C is the Separate Account that supports the Variable
Options. If you allocate any of your Total Account Value to the Variable
Options, that value is invested in the Separate Account. The Separate Account
purchases shares of the Funds to fund the benefits provided by the Certificates.
We describe the currently available Funds, their investment objectives, and
their investment advisers in this Prospectus. Each Fund also has a prospectus,
which contains complete descriptions of the Fund's investment objectives,
investment restrictions and other material information relating to an investment
in the Fund. Any and all Fund distributions for Fund shares held by the Separate
Account will be reinvested in additional Fund shares at net asset value.
We created Variable Life Account C in 1999 under Connecticut law. Prior to
December 31, 1999, amounts invested in the Variable Options were supported by
our Variable Life Account B, which was created in 1986 under Connecticut law. We
hold the Separate Account's assets to satisfy the claims of the Certificate
Owners to the extent that they have allocated amounts to the Separate Account.
Our other creditors could reach only those Separate Account assets (if any) that
are in excess of the amount of our reserves and liabilities under the
Certificates with respect to the Separate Account. The Company is responsible
for meeting all obligations to Owners under the Certificates.
The Separate Account is registered with the SEC as a unit investment trust under
the Investment Company Act of 1940 (the "1940 Act") and meets the definition of
separate account under the federal securities laws. The registration of the
Separate Account involves no approval or disapproval by the SEC of the Separate
Account or the Company's management or investment practices or policies. The
Company does not guarantee the Separate Account's investment performance.
Charges & Fees
Premium Load
We deduct a charge equal to 8% of the premium before the premium is allocated to
the Certificate's Total Account Value. We use the proceeds of this charge to
cover certain expenses and taxes associated with the sales, start-up and
maintenance of the Certificates. We reserve the right to increase this charge to
not more than 10% under both new and previously-issued Certificates.
Charges and Fees Assessed Against the Total Account Value
When we assess charges and fees against the Total Account Value, we deduct them
from each of a Certificate's Variable Options and the Fixed Account Value on a
Pro Rata Basis. This means we deduct charges in proportion to the amount of
Total Account Value you then have in each of the investment options.
Monthly Deduction. The Monthly Deduction includes the Cost of Insurance, a
Certificate fee, and any charges for supplemental benefits. We deduct the first
Monthly Deduction on the Issue Date, even if the Issue Date is earlier than the
date the application form for a Certificate is signed. Monthly Deductions then
occur on each Monthly Deduction Day thereafter. If the Certificate's issuance is
delayed due to underwriting requirements, we will not assess charges until we
complete the underwriting and approve the application for the Certificate.
For a discussion of when insurance coverage and investment performance commence
under a Certificate, see Commencement of Coverage.
1
<PAGE>
Cost of Insurance. The Cost of Insurance charge is based on (a) the cost of our
base insurance rates under a Certificate and (b) our Amount at Risk, on the date
of the deduction. (Base insurance rates do not include any supplemental benefits
you elect through a Certificate rider.)
The Cost of Insurance charge is equal to (a) the Certificate's Amount at Risk on
the Monthly Deduction Day, (b) multiplied by a monthly Cost of Insurance rate.
Our Amount at Risk at any time is approximately the difference between the
Certificate's then-applicable Death Benefit and its Total Account Value. An
increase in the Total Account Value or a decrease in the Death Benefit will
result in a smaller Cost of Insurance charge. A decrease in the Total Account
Value or an increase in the Death Benefit will result in a larger Cost of
Insurance charge.
The Cost of Insurance rate generally increases over the life of a Certificate.
The rate is based on the Insured's Attained Age and risk class. The Cost of
Insurance rates for "standard risk" Insureds will not exceed those based on a
50% male/50% female blend under the 1980 Commissioners Standard Ordinary
Mortality Table, smoker or non-smoker (1980 Tables). "Substandard risk" Insureds
have monthly deductions based on Cost of Insurance rates that may be higher than
those in the 1980 Tables. A table of guaranteed maximum Cost of Insurance rates
per $1,000 of the Amount at Risk is included in each Certificate. We may adjust
the monthly Cost of Insurance rates from time to time, but they will never
exceed the applicable guaranteed maximum rates.
Current cost of insurance rates are generally lowest for Certificates having
Specified Amounts of at least $250,000. We expect to review our current cost of
insurance rates at least annually in light of the actual mortality experience of
participants under the NYSUT Benefit Trust group Policy. In many cases, we
expect that these periodic reviews will result in upward or downward revisions
to the current Cost of Insurance rates. These rate revisions will apply both to
previously and subsequently-issued Certificates. We use the same Cost of
Insurance rates for male and female insureds. Our rates will generally be lower
for non-smokers than for smokers. We also offer preferred Cost of Insurance
rates for both smokers and non-smokers who meet more stringent requirements than
do standard risk smokers and non-smokers, respectively. If an Insured classified
"smoker" changes his or her smoking habits so as to fall within our non-smoker
category, he or she may make a Written Request for reclassification after the
first Certificate Year.
We base Cost of Insurance rates for an increase in Specified Amount on the
Insured's risk class at the time of the increase. You must provide evidence of
insurability.
Certificate Fee. The Monthly Deduction also includes a Certificate fee of $14 a
month during the first Certificate Year, or the first year of an increase in
Specified Amount. This fee starts on the Issue Date of the Certificate and the
date of the increase. The Certificate fee then drops to $6 a month. We use the
proceeds of this charge for administrative expenses, such as risk underwriting
and Certificate issuance, premium billing and collection, Certificate value
calculation, confirmation of Certificate transactions, and periodic reports to
Owners. We reserve the right to raise this charge, both for new and
previously-issued Certificates. The maximum charge is $19 a month during the
first Certificate Year (whether from the Issue Date of the Certificate or after
an increase in Specified Amount) and $11 a month thereafter. We do not expect
the monthly Certificate fee to exceed our actual annual administrative costs
over time.
Charges for Supplemental Benefits. The Monthly Deduction includes a supplemental
benefits charge if you elect any supplemental benefits. (You may elect
supplemental benefits by adding riders to the Certificate.) The amount of this
charge varies depending on the riders you select. The charge is described in
each applicable Certificate rider.
Transfer and Partial Surrender Charges. We reserve the right to charge an
administrative fee of up to $25 for each transfer between investment options in
excess of 12 transfers per year. For Partial Surrenders, we reserve the right to
charge an administrative fee of $25 or, if less, 2% of the surrender amount.
We are not currently assessing this charge.
2
<PAGE>
Charges Assessed Against the Separate Account
Mortality and Expense Risk Charge. We deduct a mortality and expense risk charge
from the Separate Account Value. This charge compensates the Company for the
aggregate mortality and expense risk assumed in connection with the
Certificates. The mortality risk assumed by the Company is that Insureds, as a
group, may live for a shorter period of time than estimated. If so, the Company
could end up paying more in Death Benefits than it collects with Cost of
Insurance charges. The expense risk assumed is that the expenses incurred (a)
issuing and administering the Certificates and (b) operating the Separate
Account will be greater than the administrative charges that the Company can
impose for such expenses. We expect to earn a profit from this charge. The
mortality and expense risk charge currently equals an annual rate of 0.85% of
the average daily net assets of the Separate Account during the first 10
Certificate years, and 0% thereafter. This charge is deducted daily. Because we
first offered the Certificates for sale in 1997, the planned reduction after the
tenth year is not yet in effect for any outstanding Certificate. The Company
reserves the right to increase or decrease the rate or period of the mortality
and expense risk charge, if it believes that circumstances have changed so that
current charges are no longer appropriate. However, we guarantee that the annual
rate of this charge will never exceed (a) 1.25% during the first 10 Certificate
years or (b) 0.40% thereafter.
The Separate Account currently is not subject to any taxes. However, if taxes
are assessed against the Separate Account, we reserve the right to assess the
amount of the taxes against the Separate Account Value.
Charges Assessed Against the Underlying Funds
The following table illustrates the investment advisory fees, other expenses and
total expenses paid by each of the Funds as a percentage of average net assets.
These amounts are based on figures for the year ended December 31, 1998, unless
otherwise indicated:
<TABLE>
<CAPTION>
Total Fund Net Fund
Annual Annual
Expenses Expenses
Investment Without Total After
Advisory Other Waivers or Waivers and Waivers or
Fees(1) Expenses Reductions Reductions Reductions
------------ ---------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP(2)(3) 0.60% 0.15% 0.75% 0.00% 0.75%
Aetna Balanced VP, Inc.(3) 0.50% 0.09% 0.59% -- 0.59%
Aetna Bond VP(3) 0.40% 0.10% 0.50% -- 0.50%
Aetna Crossroads VP(2)(3) 0.60% 0.15% 0.75% 0.00% 0.75%
Aetna Growth and Income VP(3) 0.50% 0.08% 0.58% -- 0.58%
Aetna Index Plus Large Cap VP(2)(3) 0.35% 0.10% 0.45% 0.00% 0.45%
Aetna Legacy VP(2)(3) 0.60% 0.16% 0.76% 0.00% 0.76%
Aetna Money Market VP(3) 0.25% 0.09% 0.34% -- 0.34%
Fidelity VIP Equity-Income Portfolio(4) 0.49% 0.09% 0.58% 0.01% 0.57%
Fidelity VIP II Contrafund Portfolio(4) 0.59% 0.11% 0.70% 0.04% 0.66%
Janus Aspen Aggressive Growth Portfolio(5) 0.72% 0.03% 0.75% 0.00% 0.75%
Janus Aspen Balanced Portfolio(5) 0.72% 0.02% 0.74% 0.00% 0.74%
Janus Aspen Growth Portfolio(5) 0.72% 0.03% 0.75% 0.07% 0.68%
Janus Aspen Worldwide Growth Portfolio(5) 0.67% 0.07% 0.74% 0.02% 0.72%
Oppenheimer Global Securities Fund/VA(6) 0.68% 0.06% 0.74% -- 0.74%
Oppenheimer Strategic Bond Fund/VA(6) 0.74% 0.06% 0.80% -- 0.80%
PPI MFS Emerging Equities Portfolio(7) 0.68% 0.13% 0.81% 0.00% 0.83%
PPI MFS Research Growth Portfolio(7) 0.70% 0.15% 0.85% -- 0.85%
PPI MFS Value Equity Portfolio(7) 0.65% 0.25% 0.90% -- 0.90%
PPI Scudder International Growth Portfolio(7) 0.80% 0.20% 1.00% -- 1.00%
PPI T. Rowe Price Growth Equity Portfolio(7) 0.60% 0.15% 0.75% -- 0.75%
</TABLE>
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<PAGE>
(1) Certain of the fund advisers reimburse the company for administrative costs
incurred in connection with administering the funds as variable funding
options under the contract. These reimbursements are paid out of the
management fees and are not charged to investors.
(2) The investment adviser is contractually obligated through December 31, 1999
to waive all or a portion of its investment advisory fee and/or its
administrative services fee and/or to reimburse a portion of other expenses
in order to ensure that the portfolio's Total Fund Annual Expenses do not
exceed the percentage reflected under Net Fund Annual Expenses After Waivers
or Reductions.
(3) Prior to May 1, 1998, the portfolio's investment adviser provided
administrative services to the portfolio and assumed the portfolio's
ordinary recurring direct costs under an administrative services agreement.
After that date, the portfolio's investment adviser provided administrative
services but no longer assumed all of the portfolio's ordinary recurring
direct costs under an administrative services agreement. The administrative
fee is 0.075% on the first $5 billion in assets and 0.050% on all assets
over $5 billion. The "Other Expenses" shown are not based on actual figures
for the year ended December 31, 1998, but reflect the fee payable under the
new administrative services agreement and estimates the portfolio's ordinary
recurring direct costs.
(4) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds, or the investment adviser
on behalf of certain funds, have entered into arrangements with their
custodian whereby credits realized as a result of uninvested cash balances
were used to reduce custodian expenses. These credits are included under
Total Waivers and Reductions.
(5) All expenses are stated both with and without contractual waivers and fee
reductions by Janus Capital. Fee reductions for the Aggressive Growth,
Balanced, Growth and Worldwide Growth Portfolios reduce the Management fee
to the level of the corresponding Janus retail fund. Other waivers, if
applicable, are first applied against the Management Fee and then against
Other Expenses. Janus Capital has agreed to continue the other waivers and
fee reduction until at least the next annual renewal of the advisory
agreement.
(6) Fee waiver/expense reimbursement obligations do not apply to these
portfolios.
(7) The investment adviser has agreed to reimburse the portfolios for expenses
and/or waive its fees, so that, through at least April 30, 2000, the
aggregate of each portfolio's expenses will not exceed the combined
investment advisory fees and other expenses shown under the Net Fund Annual
Expenses After Waivers or Reductions column above. For the PPI MFS Emerging
Equities Portfolio, the Total Fund Annual Expenses Without Waivers or
Reductions for 1998 were less than the percentage reflected under the Net
Fund Annual Expenses After Waivers or Reductions column. Nevertheless, the
investment adviser will waive fees and/or reimburse expenses if that
portfolio's Total Fund Annual Expenses Without Waivers or Reductions for
1999 exceed the percentage reflected under the Net Fund Annual Expenses
After Waivers or Reductions column.
4
<PAGE>
Allocation of Premiums
You may allocate all or a part of your Net Premiums to the Funds currently
available through the Separate Account under your Certificate. You also may
allocate all or a part of your Net Premiums to the Fixed Account.
The Funds
The investment objectives of the Funds are described below. The investment
results of the Funds are likely to differ significantly and there is no
assurance that any of the Funds will achieve their respective investment
objectives. Shares of the Funds will rise and fall in value and you could lose
money by investing in the Funds. Shares of the Funds are not bank deposits and
are not guaranteed, endorsed or insured by any financial institution, the
Federal Deposit Insurance Corporation or any other government agency. Unless
otherwise noted, all Funds are diversified, as defined under the Investment
Company Act of 1940. Refer to the Fund prospectuses for additional information.
Fund prospectuses may be obtained, free of charge, from our Home Office at the
address and phone number listed on the cover page of the Prospectus, or by
contacting the SEC at its web site, or by contacting the SEC Public Reference
Room.
o Aetna Balanced VP, Inc. seeks to maximize investment return, consistent with
reasonable safety of principal by investing in a diversified portfolio of one
or more of the following asset classes: stocks, bonds, and cash equivalents,
based on the investment adviser's judgment of which of those sectors or mix
thereof offers the best investment prospects.(1)
o Aetna Income Shares d/b/a Aetna Bond VP seeks to maximize total return,
consistent with reasonable risk, through investments in a diversified
portfolio consisting primarily of debt securities. It is anticipated that
capital appreciation and investment income will both be major factors in
achieving total return.(1)
o Aetna Variable Fund d/b/a Aetna Growth and Income VP seeks to maximize total
return through investments in a diversified portfolio of common stocks and
securities convertible into common stock. It is anticipated that capital
appreciation and investment income will both be major factors in achieving
total return.(1)
o Aetna Variable Encore Fund d/b/a Aetna Money Market VP seeks to provide high
current return, consistent with preservation of capital and liquidity, through
investment in high-quality money market instruments. An investment in the Fund
is neither insured nor guaranteed by the U.S. Government.(1)
o Aetna Generation Portfolios, Inc.--Aetna Ascent VP seeks to provide capital
appreciation. The Portfolio is designed for investors who generally have an
investment horizon exceeding 15 years and who have a high level of risk
tolerance.(1)
o Aetna Generation Portfolios, Inc.--Aetna Crossroads VP seeks to provide total
return (i.e., income and capital appreciation, both realized and unrealized).
The Portfolio is designed for investors who generally have an investment
horizon exceeding 10 years and who have a moderate level of risk tolerance.(1)
o Aetna Generation Portfolios, Inc.--Aetna Legacy VP seeks to provide total
return consistent with preservation of capital. The Portfolio is designed for
investors who generally have an investment horizon exceeding five years and
who have a low level of risk tolerance.(1)
o Aetna Variable Portfolios, Inc.--Aetna Index Plus Large Cap VP seeks to
outperform the total return performance of the Standard & Poor's 500 Composite
Index (S&P 500), while maintaining a market level of risk.(1)
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<PAGE>
o Fidelity Variable Insurance Products Fund--Equity-Income Portfolio seeks
reasonable income. The Fund will also consider the potential for capital
appreciation. The Fund seeks a yield which exceeds the composite yield on the
securities comprising the S&P 500.(2)
o Fidelity Variable Insurance Products Fund II--ContraFund Portfolio seeks long
term capital appreciation by investing primarily in common stocks of companies
whose value the investment adviser believes is not fully recognized by the
public.(2)
o Janus Aspen Series--Aggressive Growth Portfolio is a nondiversified portfolio
that seeks long-term growth of capital. The Portfolio pursues its investment
objective by investing primarily in common stocks selected for their growth
potential, and normally invests at least 50% of its equity assets in
medium-sized companies. Medium-sized companies are those whose market
capitalizations at the time of investment fall within the range of companies
in the S&P MidCap 400 Index. Market capitalization is a commonly used measure
of the size and value of a company. The market capitalizations within the
Index will vary, but as of December 31, 1998, they ranged from approximately
$142 million to $73 billion.(3)
o Janus Aspen Series--Balanced Portfolio seeks long-term capital growth,
consistent with preservation of capital and balanced by current income. The
Portfolio pursues its investment objective by normally investing 40%-60% of
its assets in securities selected primarily for their growth potential and
40%-60% of its assets in securities selected primarily for their income
potential. This Portfolio normally invests at least 25% of its assets in
fixed-income securities.(3)
o Janus Aspen Series--Growth Portfolio seeks long-term growth of capital in a
manner consistent with the preservation of capital. The Portfolio pursues its
investment objective by investing primarily in common stocks selected for
their growth potential. Although the Portfolio can invest in companies of any
size, it generally invests in larger, more established issuers.(3)
o Janus Aspen Series--Worldwide Growth Portfolio seeks long-term growth of
capital in a manner consistent with the preservation of capital. The Portfolio
pursues its investment objective by investing primarily in common stocks of
companies of any size throughout the world. The Portfolio normally invests in
issuers from at least five different countries, including the United States.
The Portfolio may at times invest in fewer than five countries or even a
single country.(3)
o Oppenheimer Global Securities Fund/VA seeks long-term capital appreciation by
investing a substantial portion of its assets in securities of foreign
issuers, "growth-type" companies, cyclical industries and special situations
which are considered to have appreciation possibilities.(4)
o Oppenheimer Strategic Bond Fund/VA seeks a high level of current income
principally derived from interest on debt securities and seeks to enhance such
income by writing covered call options on debt securities.(4)
o Portfolio Partners, Inc. (PPI)--MFS Emerging Equities Portfolio seeks to
provide long-term growth of capital.(5a)
o Portfolio Partners, Inc. (PPI)--MFS Research Growth Portfolio seeks long-term
growth of capital and future income.(5a)
o Portfolio Partners, Inc. (PPI)--MFS Value Equity Portfolio seeks capital
appreciation.(5a)
o Portfolio Partners, Inc. (PPI)--Scudder International Growth Portfolio seeks
long-term growth of capital primarily through a diversified portfolio of
marketable foreign equity securities with high growth potential.(5b)
o Portfolio Partners, Inc. (PPI)--T. Rowe Price Growth Equity Portfolio seeks
long-term capital growth and, secondarily, increasing dividend income.(5c)
6
<PAGE>
Investment Advisers for each of the Funds:
(1)Aeltus Investment Management, Inc.
(2)Fidelity Management & Research Company
(3)Janus Capital Corporation
(4)OppenheimerFunds, Inc.
(5)Aetna Life Insurance and Annuity Company (adviser)
(a)Massachusetts Financial Services Company (subadviser)
(b)Scudder Kemper Investments, Inc. (subadviser)
(c)T. Rowe Price Associates, Inc. (subadviser)
Mixed and Shared Funding; Conflicts of Interest
The Funds only sell shares to separate accounts of insurance companies that may
or may not be affiliated with the Company. These separate accounts may fund
variable annuity contracts or variable life insurance policies, such as the
Certificates described in this Prospectus. We currently do not foresee any
disadvantages to you arising out of this. Nevertheless, differences in treatment
under tax and other laws, as well as other considerations, could cause the
interests of various contract owners to conflict. For example, violation of the
federal tax laws by one separate account investing in the Funds could cause the
contracts funded through another separate account to lose their tax-deferred
status, unless remedial action were taken. However, each Fund has advised us
that its board of trustees (or directors) intends to monitor events in order to
identify any material irreconcilable conflicts that possibly may arise and to
determine what action, if any, should be taken in response. If we believe that a
Fund's response to any such event insufficiently protects Certificate holders,
we will see to it that appropriate action to protect is taken. If it becomes
necessary for any separate account to replace shares of any Fund in which it
invests, that Fund may have to liquidate securities in its portfolio on a
disadvantageous basis.
Fund Additions, Deletions or Substitutions
Orders for the purchase of Fund shares may be subject to acceptance by the Fund.
The Company may add additional Funds as investment options under your
Certificate at any time. The Company also has the right to replace shares of a
Fund with shares of another Fund if the Company believes that the Fund is no
longer appropriate as an investment option under the Certificate. The Company
may also stop accepting premium allocations to a Fund at any time. If the
Company stops accepting premium allocations to a Fund, and shares of that Fund
are not replaced with shares of another Fund, amounts you have deposited in that
Fund could stay in the Fund. Also, any dividends or capital gains earned on that
Fund could be reinvested in the Fund. To do any of these actions, the Company
must comply with (a) the terms of the 1940 Act and (b) any insurance laws or
regulations applicable at the time. The Company will provide notice to you
before replacing a Fund or closing a Fund to new payments. The Company will also
provide notice about any new Fund that is added.
Limits Imposed by the Funds
Orders for the purchase of shares of a Fund may be subject to acceptance by the
Fund. We reserve the right to reject, without prior notice, any transfer request
directed to a particular Fund if the Separate Account's investment in that Fund
is not accepted by the Fund for any reason.
Fixed Account
The Company has not registered interests in the Fixed Account with the SEC,
based on an exclusion under the Securities Act of 1933. The SEC has not reviewed
the disclosures in this Prospectus relating to the Fixed Account. These
disclosures, however, may be subject to certain anti-fraud provisions of the
federal securities laws relating to the accuracy and completeness of the
statements. The Fixed Account available under the Certificates is a fixed
7
<PAGE>
funding option. We credit interest on amounts in the Fixed Account (the Fixed
Account Value) at rates that we declare from time to time. We determine these
rates in our sole discretion. We guarantee a 4% minimum annual interest rate,
compounded monthly. Current interest rates may also vary depending on when you
allocate an amount to the Fixed Account.
The Fixed Account is supported by the general assets of the Company. The general
assets of the Company include all assets of the Company except those held in
legally-segregated separate accounts sponsored by the Company or its affiliates.
The Company invests the assets attributable to the Fixed Account in investments
chosen by the Company, as applicable law permits. Fixed Account assets and
investments, and any investment income they generate, are solely the property of
the Company.
8
<PAGE>
Certificate Choices
Premium Payments
The Certificates are flexible premium variable universal life insurance. This
means that you have the right to decide, within certain limits,
o when to make premium payments; and
o the amount of the payments.
Each Certificate specifies Planned Premiums and Basic Monthly Premiums. If you
fail to pay your premiums, your Certificate may not remain in force (lapse).
However, payment of Planned or Basic Monthly Premiums does not guarantee that
your Certificate will remain in force. Your Certificate remains in force only as
long as (a) your Surrender Value is adequate to cover the Monthly Deductions
under the Certificate or (b) you have made enough premium payments to keep the
5-year No Lapse Coverage provision of your Certificate in effect. (See No Lapse
Coverage.) Your Surrender Value is increased by your premium payments and any
positive investment returns they generate. Your Surrender Value is decreased by
the charges we deduct, and any negative investment returns you experience.
Planned Premiums are those premiums you request and we agree to bill on an
annual, semiannual, quarterly or other periodic basis. You can also arrange
pre-authorized automatic monthly check payments, or salary or pension deduction
arrangements through the Member's employer. You may change your Planned Premium
at any time by submitting a Written Request to us. Premiums paid by payroll
deduction are generally forwarded by your employer to NYSUT Benefit Trust, which
forwards them to us. We are not responsible for errors and delays caused by, or
other conduct of, your employer or NYSUT Benefit Trust.
We may require evidence of insurability if payment of any premium would increase
the difference between the Death Benefit and the Total Account Value (thus
increasing our Amount at Risk). If you fail to provide satisfactory evidence of
insurability, we will refund the refused premium.
We may also refuse to accept any premium payment (other than one required to
keep a Certificate in force) if it would cause the Certificate to fail to be
treated as life insurance for federal income tax purposes. Additionally, if you
pay premiums in excess of the Planned Premium, or increase your Planned Premium
too much, you may cause the Certificate to be classified as a "Modified
Endowment Contract" for federal income tax purposes. (See Tax Matters.) In that
case, we will notify you and, if you wish to avoid Modified Endowment Contract
status, we will refund the excess premium.
When we refuse or refund excess premiums, we do not (a) pay interest on the
premiums or (b) increase or decrease the premiums to give effect to their
investment in the Funds.
Commencement of Coverage
The insurance coverage under a Certificate starts when:
o we approve the insurance based on the application and any other information
required to be submitted by the Insured;
o we or our representative receives at least the first Basic Monthly Premium;
and
o the Insured is eligible for coverage.
9
<PAGE>
Therefore, coverage may not commence until some time after you submit an
application for a Certificate. We may offer immediate temporary fixed insurance
coverage. This coverage may be available if, with your application (a) you
submit at least the full first Basic Monthly Premium for the billing frequency,
or a completed Payroll Deduction Authorization, and (b) certain other
requirements are met. For more information about the availability, terms and
conditions of this coverage, you should consult your Aetna representative, who
can also provide you with a copy of our conditional receipt.
The Issue Date of a Certificate is generally the date that we approve a
Certificate. You may request that we backdate a Certificate. We may grant this
request, under limited circumstances, by assigning an Issue Date that is up to 6
months earlier than otherwise would apply. You may desire backdating, for
example, so that you can purchase coverage at lower Cost of Insurance rates
based on a younger insurance age. For a backdated Certificate, you must pay the
cost of insurance and other charges from the requested Issue Date to the Issue
Date that would have applied without backdating. Of course, because the
Certificate was not in effect prior to the original Issue Date, you would not
receive insurance coverage or be credited with interest or investment return for
periods prior to the original Issue Date of your Certificate.
Your initial premium payment starts earning a return in the Separate Account or
the Fixed Account on the later of the (a) Issue Date of the Certificate or (b)
the date that we receive at least the first Basic Monthly Premium at our Home
Office. After the first premium payment, you must send all premiums to our Home
Office. We deem all premiums, except the first one, received when we actually
receive them at the Home Office, together with any identifying information we
require from the Member's employer or NYSUT Benefit Trust. We allocate your
premium payment as you direct, effective at the end of the Valuation Period in
which we receive the payment.
You may reallocate your future premium payments at any time. You must use whole
percentages when changing allocations. We effect the change with the next
premium payment after we receive your request. We will send you confirmation of
the change. (See Transfers.)
5-Year No Lapse Coverage Provision
Your Certificate includes a 5-year No Lapse Coverage Provision. If you pay the
specified amount of premiums, this provision provides that during the 5-year
period after either the (a) Issue Date or (b) the Issue Date of any Specified
Amount increase, your Certificate will not enter a Grace Period--and therefore
will not terminate. We calculate the specified amount of premiums you must pay
as follows: the sum of premiums paid within the 5-year period must equal or
exceed (a) the sum of the Basic Monthly Premiums for each Certificate Month from
the start of the period, including the current month; plus (b) any Partial
Surrenders since the start of the period; plus (c) any increase in the Loan
Account Value since the start of the period.
The 5-year No Lapse Coverage Provision is lost if (a) you have not paid the
specified amount of premiums on any Monthly Deduction Day within the applicable
5-year period, and (b) the Surrender Value of your Certificate is less than the
Monthly Deduction for that day. This means that the Certificate will enter the
Grace Period. You must then make additional premium payments to prevent the
termination of the Certificate. (See Grace Period.)
While your Certificate is operating under the 5-year No Lapse Coverage
Provision, we keep track of the amount of all Monthly Deductions that we do not
collect. When you pay Net Premiums at a later date, we deduct these uncollected
amounts from any Surrender Value created by your Net Premium payments.
Your Certificate's 5-year No Lapse Coverage Provision no longer operates at the
end of the applicable 5-year period. At that time your Certificate may lapse
unless you pay sufficient premiums to permit us to collect the full amount of
previously uncollected Monthly Deductions, if any. (See Grace Period.)
Death Benefit Options
At the time of enrollment, you must choose between the two available Death
Benefit Options.
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<PAGE>
Under Option 1, the Death Benefit will be the greater of: (a) the Specified
Amount or (b) the applicable percentage of the Total Account Value. The
applicable percentage is 250% through age 40, and decreases yearly to 100% at
age 95. Option 1 generally provides a level Death Benefit.
Under Option 2, the Death Benefit will be the greater of: (a) the Specified
Amount plus the Total Account Value or (b) the applicable percentage (described
above) of the Total Account Value. Option 2 provides a varying Death Benefit
which increases or decreases over time, depending upon the amount of premiums
paid and the investment performance of the Fund(s) you choose.
We calculate the Death Benefit payable under either Option as of the date of
death of the Insured. We reduce the Death Benefit by (a) the amount necessary to
repay any Loan Account Value in full, with all accrued interest; (b) if the
Certificate is within the Grace Period, the amount required to keep the
Certificate in force through the date of death; and (c) the amount of any other
Monthly Deductions that we were unable to collect. (See 5-year No Lapse Coverage
Provision.)
Transfers
You may transfer all or part of your Separate Account Value in any Variable
Option to any other Variable Option or to the Fixed Account. You must make all
transfers before the Certificate's Maturity Date. We reserve the right to (a)
charge an administrative fee of $25 for each transfer over 12 per year and (b)
limit the total number of Variable Options you may elect to 15 over the lifetime
of the Certificate.
You may also request a transfer of a portion of the Fixed Account Value to one
or more of the Variable Options. You must make this request within the 45-day
period following a Certificate Anniversary. We allow this type of transfer only
once within this 45-day period, and we must receive your request at the Home
Office within the 45-day period. We effect the transfer at the end of the
Valuation Period in which we receive your request at our Home Office. The amount
of any such transfer cannot exceed the greater of 25% of the Fixed Account Value
or $500.
Telephone Transfers
You may request a transfer of account values either by Written Request (as set
forth above) or by telephone. All transfers must comply with the terms of the
Certificate.
We currently accept transfer instructions on each Valuation Date. Once we accept
instructions, you may not rescind them. You may give new telephone instructions,
however, on the following day. The Company will not execute a transfer if the
transfer instructions are not in good order. The Company will notify you in this
event.
We will use reasonable procedures, such as (a) requiring identifying information
from callers, (b) recording telephone instructions, and (c) providing written
confirmation of transactions, in order to confirm that telephone instructions
are genuine. You are responsible for the results of any telephone instructions
that we reasonably believe to be genuine, even if losses result from errors in
the communication of instructions. As a result of this procedure, the Owner will
bear the risk of loss. If the Company does not use reasonable procedures, as
described above, we may be liable for losses that result from any unauthorized
instructions.
Transfer Limitations
The Certificate is not designed to serve as a vehicle for frequent trading in
response to short-term fluctuations in the market. Such frequent trading can
disrupt management of a Fund and raise its expenses. This in turn can have an
adverse effect on fund performance.
We reserve the right to restrict, in our sole discretion and without prior
notice, transfers initiated by a market-timing organization or individual or
other party authorized to give transfer instructions on behalf of multiple
Owners. Such restrictions could include: (a) Not accepting transfer instructions
from an agent acting on behalf of
11
<PAGE>
more than one Owner; and (b) not accepting preauthorized transfer forms from
market timers or other entities acting on behalf of more than one Owner at a
time.
We further reserve the right to impose, without prior notice, restrictions on
transfers that we determine, in our sole discretion, will disadvantage or
potentially hurt the rights or interests of other Owners.
Automated Transfers (Dollar Cost Averaging)
Dollar Cost Averaging describes an automated system of investing the same amount
of money at regular intervals over a period of time. Dollar Cost Averaging is
based on the principle that acquiring Accumulation Units with the same amount of
money at fixed intervals results in acquiring more units when prices are low and
fewer units when prices are high.
You may establish a Dollar Cost Averaging program for either a 1, 2 or 3 year
period. Under your program, you may make automated transfers of amounts on a
monthly or quarterly basis. You may transfer amounts from the Aetna Money Market
VP Fund Variable Option to any other Variable Option through a Written Request
or other method acceptable to the Company. We do not permit Dollar Cost
Averaging to or from the Fixed Account. You must have a minimum of $5,000
allocated to the Aetna Money Market VP Variable Option in order to enroll in the
Dollar Cost Averaging program. The minimum automated transfer amount is $50 per
month. There is no additional charge for this program. You may start or stop
participation in the Dollar Cost Averaging program at any time, but you must
give the Company at least 30 days' notice to change any automated transfer
instructions that are currently in place. We include automated transfers when we
determine the number of charge-free transfers that you can make. The Company
reserves the right to suspend or modify automated transfer privileges at any
time.
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<PAGE>
Termination or Change in
Coverage
Your Certificate, and all coverage thereunder, may be terminated without your
consent if any of the following occur. Your Certificate could be terminated even
if your Certificate's 5-year No Lapse Coverage is still in effect, and even if
you have paid enough premiums to prevent your Certificate from lapsing.
(1) NYSUT may notify the Company that NYSUT wishes to terminate the group
Policy. NYSUT Benefit Trust has agreed to provide each Insured with advance
notice of Policy cancellation or discontinuance. NYSUT Benefit Trust must mail
or deliver the notice to the Insured at the last known address of record at
least 15 days before the effective date of the Policy cancellation or
discontinuance. Prior to the termination date, you could exercise your rights to
make a Full Surrender or to convert your Certificate to paid-up fixed life
insurance. (See Paid-Up Nonforfeiture Option.)
(2) We may terminate the group Policy, and your Certificate, if NYSUT Benefit
Trust stops sending payroll deduction premiums to us. In this event, we could
terminate the group Policy and your Certificate regardless of (a) whether you
paid premiums for your Certificate by payroll deduction, (b) the amount of
premium you paid, or (c) the available Surrender Value under your Certificate.
Prior to any termination, we would provide NYSUT Benefit Trust with an
opportunity to cure the problem in accordance with the terms of the group
Policy.
(3) We also will terminate your Certificate immediately when the Insured ceases
to be within at least one of the categories of persons that is eligible for
coverage under a Certificate. Those eligibility requirements are set forth above
under Definitions--Insured. A non-member Insured who (a) is eligible only as the
spouse of an Insured Member and (b) loses eligibility may elect to become a
Member within 31 days after loss of eligibility. In this event, we will continue
the Certificate uninterrupted. We must receive notice of your election at the
Home Office within the 31-day period. Otherwise, we will pay you the
Certificate's Surrender Value that we calculate at the end of the last Valuation
Period during which the Certificate was in force.
If your Certificate terminates for one of the above reasons, you have the option
of converting your coverage to an individual policy. We make the conversion
privilege available only within the 31-day period following (a) termination of
the group Policy by NYSUT Benefit Trust or us, or (b) termination of a
Certificate upon the Insured's ineligibility for continued coverage. You may
convert your Certificate to any substantially comparable flexible premium
general account life insurance policy that we offer for these purposes under the
terms of your Certificate. Term insurance is not available. We must receive
notice of your conversion and the first premium under the conversion policy at
the Home Office within the 31-day period.
Upon conversion, you receive the same amount of insurance that you had under
your Certificate. The terms of the conversion policy, however, may involve
additional charges or may not be as attractive to you as those under the
Certificate. We reserve the right to permit you to pay only the initial premium
for the conversion policy at the time of conversion. If the initial premium for
the conversion policy is less than the Surrender Value under the terminating
Certificate, we will distribute to you the rest of the Surrender Value as of the
Certificate's termination date. You may be required to pay income taxes with
respect to a partial distribution in connection with a conversion or any other
distribution of Surrender Value following termination of a Certificate.
(See Tax Matters.)
The Company will notify the Owner of the right to convert. We will require no
evidence of insurability.
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<PAGE>
If we receive a timely conversion request, and the Insured dies during the time
allowed for conversion, we will pay as a death benefit the amount that could
have been converted. If we have not received a conversion request, we only pay a
Death Benefit if the Insured dies within the 31-day conversion period. We pay
the Death Benefit to the Beneficiary designated by the Insured. If there is no
designated beneficiary, we may pay from the Death Benefit up to $500 to any
person that we believe is entitled to this money because that person incurred
funeral expenses incident to the death of the Insured.
NYSUT Benefit Trust, by agreement with us, may make changes in your Certificate
(and your coverage) without your consent. Your consent is required if a change
results in a reduction in benefit or an increase in guaranteed charges.
We reserve the right at any time to cease issuing new Certificates to any class
of Members or their relations.
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Certificate Values
Total Account Value
If you allocate amounts under a Certificate to a Variable Option of the Separate
Account, we credit you with Accumulation Units of that Variable Option. The
number of Accumulation Units we credit is determined by dividing (a) the amount
you allocate by (b) the appropriate current Accumulation Unit Value. Each
Variable Option has a unique Accumulation Unit Value. If you select a
combination of Variable Options, we credit you with Accumulation Units for each
Variable Option that you select.
We determine the Total Account Value of your Certificate as follows:
o for any Variable Option, we multiply the total number of Accumulation Units
credited to the Certificate by the current Accumulation Unit Value for that
Variable Option;
o for a combination of Variable Options, we total the resulting values; and
o we add any Fixed Account Value and any Loan Account Value.
The value of an Accumulation Unit varies based on the positive or negative
investment performance of the related Fund and the charges we deduct. We do not
increase or decrease the number of Accumulation Units credited to a Certificate
based on any subsequent changes in the value of an Accumulation Unit. We
increase the number of Accumulation Units you hold for a Variable Option when
you allocate Net Premiums or other account value to that Variable Option.
Similarly, we cancel Accumulation Units in a Variable Option when (a) you remove
any account value from a Variable Option (such as upon transfer, Full or Partial
Surrender, or Certificate Loan) or (b) we make a Monthly Deduction. The number
of units we cancel is determined by dividing (a) the amount of account value
removed by (b) the appropriate current Accumulation Unit Value.
The Fixed Account Value includes (a) all amounts allocated to the Fixed Account
under a Certificate and (b) any interest credited thereon. We reduce the Fixed
Account Value by amounts removed from the Fixed Account, such as upon a
transfer, Full or Partial Surrender, Certificate Loan or Monthly Deduction.
We will advise you at least annually as to (a) the number of Accumulation Units
then credited to your Certificate, (b) the current Accumulation Unit Values, (c)
the Separate Account Value, (d) the Fixed Account Value, and (e) the Total
Account Value. (See Reports to Owners.)
Accumulation Unit Value
We determine the value of an Accumulation Unit for any Valuation Period by
multiplying (a) the value of an Accumulation Unit for the immediately preceding
Valuation Period by (b) the sum of 1 plus the net investment rate for the
current period for the appropriate Variable Option.
The net investment rate equals (a) the value of the net assets of the Variable
Option held in the Separate Account at the end of a Valuation Period (before any
adjustment for amounts allocated to or removed from the Variable Option during
the period); plus or minus (b) the value of the net assets of the Variable
Option held in the Separate Account at the beginning of that Valuation Period,
adjusted by any taxes or provisions for taxes attributable to the operation of
the Separate Account (with any federal tax liability offset by foreign tax
credits to the extent allowed); divided by (c) the value of the Variable
Option's Accumulation Units held in the Separate Account at the beginning of the
Valuation Period; minus (d) the rate of any applicable daily charge for
mortality and expense risk.
Maturity Value
The Maturity Value of a Certificate is the Surrender Value on the Maturity
Date. You may apply all or part of the Surrender Value to one or more of the
Settlement Options. (See Certificate Settlement.)
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Certificate Rights
Full Surrenders
By Written Request, you may surrender your Certificate for its Surrender Value
at any time before the Maturity Date. The Insured must be alive to surrender
your Certificate. All insurance coverage under the Certificate ends on the date
of the Full Surrender. The Surrender Value equals the Total Account Value on the
date of surrender, less the Loan Account Value and less any unpaid accrued
interest. We may require return of the Certificate for a Full Surrender.
We compute the Surrender Value as of the end of the Valuation Period in which we
receive your Written Request for surrender.
Partial Surrenders
By Written Requests, you may partially surrender your Certificate at any time
(a) after the first Certificate Year and (b) before the Maturity Date.
The minimum amount of any Partial Surrender is $500. We may also charge an
administrative fee of $25 or, if less, 2% of the amount surrendered. We deduct
any Partial Surrender and any related administration charge on a Pro-Rata Basis
from each investment option in use under the Certificate.
If the Death Benefit Option for a Certificate is Option 1, your Partial
Surrender reduces the Total Account Value, Death Benefit, and Specified Amount
of your Certificate. The Total Account Value and Specified Amount are each
reduced by the amount of the surrender. We will not allow a Partial Surrender if
the Specified Amount will be reduced below the minimum Specified Amount set
forth in the Certificate Specifications. Your Partial Surrender may not reduce
the Specified Amount, however, if the Death Benefit for the Certificate
immediately prior to the surrender is determined based on the applicable
percentage of the Total Account Value.
If your Specified Amount is reduced from above $250,000 to less than $250,000,
your current Cost of Insurance rate may also increase. (See Cost of Insurance.)
A Specified Amount reduction also reduces the required Basic Monthly Premium for
the 5-year No Lapse Coverage. We determine the future premium required to
maintain the 5-year No Lapse Coverage based on the new Specified Amount. We will
deliver to you a supplemental Certificate Specifications page that states the
amount of this future premium.
If the Death Benefit Option for a Certificate is Option 2, your Partial
Surrender reduces both the Total Account Value and the Death Benefit, but not
the Specified Amount. The Total Account Value and the Death Benefit are each
reduced by the amount of the surrender.
Paid-Up Nonforfeiture Option
By Written Request, you may elect, at any time before the Maturity Date, to
continue your Certificate as fixed (non-variable) paid-up life insurance.
We apply your Surrender Value as a Net Single Premium to determine the Specified
Amount of the paid-up insurance. We base the cost of the paid-up insurance on
the guaranteed maximum Cost of Insurance rates in the Certificate and an
interest rate of 4% compounded annually. The Specified Amount of the paid-up
insurance cannot exceed the Death Benefit under the Certificate as of the
effective date of the paid-up insurance. Excess Surrender Value is distributed
to you and is treated as a partial distribution for federal income tax purposes.
(See Tax Matters.) The effective date of the paid-up coverage is the first
Monthly Deduction Day that occurs on or after our receipt of your Written
Request.
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We allow Full Surrenders and Certificate Loans, as described in this Prospectus,
if you continue your Certificate in force as paid-up insurance. All supplemental
rider benefits terminate and are not available with the paid-up coverage. The
Surrender Value of the paid-up insurance is the Net Single Premium for that
insurance on the date of surrender, less any outstanding loan balance. Partial
Surrenders are not available.
Under this option, we pay proceeds upon death of the Insured or maturity that
equal (a) the Specified Amount, less (b) any Certificate Loans and accrued
unpaid interest under the paid-up insurance. See "Tax Matters" for a discussion
of possible tax consequences resulting from your electing the paid-up
nonforfeiture option.
Grace Period
If your Surrender Value is insufficient to allow a Monthly Deduction on the
Monthly Deduction Day, we allow you 61 days of grace for payment of an amount
sufficient to allow the Monthly Deduction.
If your Surrender Value is insufficient because of outstanding loans, and you
have paid sufficient premiums to meet the conditions of the 5-year No Lapse
Coverage period, we may require payment of the amount equal to the lesser of (1)
or (2) where:
(1) is the amount necessary to meet the loan-related conditions of the No Lapse
Coverage provision; or
(2) is an amount sufficient to cover the Monthly Deduction(s) that would result
in the Surrender Value being greater than zero.
If you have not paid sufficient premiums to meet the conditions of the 5-year No
Lapse Coverage period, we may require payment of the amount necessary to keep
your Certificate in force for the current month plus two additional months.
If you do not make payment within the 61-day Grace Period, the Certificate will
terminate without value at the end of the Grace Period. This termination is
effective on the Monthly Deduction Day for the first unpaid Monthly Deduction.
We will mail written notice to your last address known to us at least 31 days
before termination of a Certificate. We will also mail this notice to the last
known address of any assignee of record.
During the days of grace, this Certificate stays in force. If the Insured's
death occurs during the days of grace, we deduct from the Death Benefit the
amount required to keep a Certificate in force.
Reinstatement of a Lapsed Certificate
You may reinstate a Certificate terminated after its Grace Period. Upon
reinstatement, we calculate the Certificate Year as if there had never been a
lapse in coverage. You must apply for reinstatement (a) within 5 years after the
date of termination and (b) before the Maturity Date.
Also, we must receive (a) evidence of the Insured's current insurability that is
satisfactory to us, and (b) a premium payment that at least equals the following
amount: the sum of (1) and (2), where (1) is any portion of the Loan Account
Value plus accrued interest on the date of lapse exceeding the Total Account
Value on the date of lapse and (2) is a premium payment sufficient to keep the
Certificate in force for the current month plus 2 additional months.
If we reinstate your Certificate within a 5-year No Lapse Coverage period, all
values, including the Loan Account Value, are reinstated as they were on the
date of lapse.
If we reinstate your Certificate after a 5-year No Lapse Coverage period has
expired, the coverage would be reinstated on the Monthly Deduction Day following
our approval. We first apply your payment to pay any positive excess of (1) over
(2), where (1) is the Loan Account Value plus accrued interest on the date of
lapse, and (2) is the Total Account Value on the date of lapse. We treat any
remainder as a premium. The Total Account Value at reinstatement is the Net
Premium paid, less the Monthly Deduction for that day. We do not reinstate any
Loan Account Value.
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We restart Monthly Deductions and investment performance on the Monthly
Deduction Day on or first following our approval of the reinstatement. We pay
the reinstated Death Benefit if the Insured dies prior to that date, but only if
we have received (a) a reinstatement request and (b) all payments and
information required for us to grant the request.
We must consent before we reinstate any supplemental benefit rider. If the
Certificate lapsed within a 5-year No Lapse Coverage period, and that period has
not yet expired by the time of reinstatement, we will reinstate any Certificate
Loan Value and consider as due any prior uncollected Monthly Deductions. (See
5-year No Lapse Coverage Provision.) We will also restore any portion of the No
Lapse Coverage period that still remains by the time of reinstatement. In that
case, you may put the No Lapse Coverage into effect for any time during such
remaining period, provided you have paid at least the cumulative amount of all
Basic Monthly Premiums required to date for this purpose. This cumulative amount
includes any amount of unpaid Basic Monthly Premiums due for periods prior to
the reinstatement.
A reinstatement may result in restarting the test used for determining whether
the Certificate is a Modified Endowment Contract. (See Tax Matters.)
Certificate Loans
We grant loans at any time (a) after the expiration of the Right of Certificate
Examination and (b) before the Maturity Date. The amount of the loan may not be
more than the Loan Value. The Loan Value is 90% of the Total Account Value,
unless state law otherwise requires. We transfer the amount of the loan out of
the Fixed Account and any Variable Options on a Pro-Rata Basis. We instead hold
the amount of the loan as part of the Loan Account Value. We effect loans and
loan repayments as of the end of the Valuation Period in which we receive the
Written Request for the loan or the repayment.
You may repay the loan in full or in part at any time prior to the Maturity
Date, as long as the Certificate is in force and the Insured is alive. The
amount necessary to repay all loans in full is the Loan Account Value plus any
accrued interest. Unless you specifically instruct us otherwise, we consider
Additional Premiums received as loan repayments. Subject to state regulatory
approval, unless you specifically instruct us otherwise, we will allocate loan
repayments received to the Fixed Account and the Separate Account according to
the premium allocation currently in effect. The full Surrender Value under this
Certificate equals (a) the Total Account Value on the date of surrender, (b)
less the Loan Account Value plus any accrued interest. If you do not repay a
loan prior to the Maturity Date, the amount payable at the Maturity Date equals
(a) the Total Account Value on the Maturity Date, (b) less the Loan Account
Value on the Maturity Date plus any accrued interest.
Subject to state regulatory approval, interest earned on the Loan Account Value
will be credited to the Fixed Account Value and the Separate Account Value
according to the premium payment allocation currently in effect. The amount of
interest you earn on the Loan Account Value and the amount of interest we charge
on a loan depends on whether the loan is considered preferred. Beginning in the
11th Certificate Year and on each Certificate Anniversary thereafter, that
portion of the Loan Value attributable to the Separate Account Value will be
considered preferred (Preferred Loans). All other loans will be considered
non-preferred (non-Preferred Loans).
Preferred Loans earn interest at a rate of 4.0% and are charged interest at a
rate of 4.0%. In other words, the interest rate credited equals the interest
rate charged.
Non-Preferred Loans earn interest at a rate of no less than 6.0% and are
currently charged interest at a rate of 8%.
We may credit interest in excess of these rates, in our sole discretion.
Accordingly, since we credit the Loan Account Value with interest rather than
with the investment experience of the Funds, a loan may permanently affect the
amount of your Death Benefit and the Certificate's Surrender Value, even if you
repay the loan.
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Loan interest is due and payable on (a) each Certificate Anniversary, (b) the
date the Certificate ends or (c) upon full repayment of the Loan Account Value.
We add any interest not paid when due to the Loan Account Value on the
Certificate Anniversary. Any amount of unpaid interest bears interest on the
same terms.
For a discussion of the federal income tax consequences of Certificate Loans,
see Tax Matters.
Certificate Changes
You may make certain changes to your Certificate, as described below, by
submitting a Written Request. We will send you supplemental Certificate
Specifications once the change is completed. If you decrease a Specified Amount
larger than $250,000 to less than $250,000 (or vice-versa), you can cause an
increase (or decrease) in your current Cost of Insurance Rate. (See Monthly
Deduction.)
Increase in Specified Amount
We allow increases in Specified Amounts at any time while a Certificate is in
force. We may require you to provide satisfactory evidence of insurability. Your
Surrender Value immediately after an increase must be at least 3 times the sum
of (a) the most recent Monthly Deduction from the Total Account Value and (b)
the Specified Amount of the increase multiplied by the applicable Cost of
Insurance rate divided by 1000. You must request Specified Amount increases in
multiples of $1,000. We show any maximum limit on your Specified Amount in the
Certificate Specifications.
We also show the Issue Date for any increase in the supplemental Certificate
Specifications. We restart the 5-year period of the No Lapse Coverage provision
applicable to the increase on the Issue Date of the increase. We determine the
Basic Monthly Premium after the increase based on the Insured's Attained Age and
new Specified Amount.
For possible tax consequences of an increase in Specified Amount, see Tax
Matters.
Decrease in Specified Amount
You may decrease the Specified Amount of a Certificate after the first
Certificate Year. We do not allow a decrease in the Specified Amount if (a) your
Specified Amount is reduced below the minimum Specified Amount set forth in the
Certificate Specifications or (b) your Certificate would be treated as other
than life insurance for income tax purposes.
The Issue Date of the decrease is the Monthly Deduction Day on or next following
the date on which we receive your Written Request. The decrease reduces any past
increases in the reverse order in which the increases occurred. (We follow this
same order for decreases in Specified Amount resulting from changes in Death
Benefit Option or a Partial Surrender.) If the 5-year No Lapse Coverage
provision is still applicable, we adjust the Basic Monthly Premium for that
purpose based on the reduced Specified Amount.
A Specified Amount decrease can cause a Certificate to be taxed as a Modified
Endowment Contract. For a discussion of tax considerations in connection with
Specified Amount decreases, see Tax Matters.
Change in Death Benefit Option
We allow changes from Option 1 to Option 2 at any time while a Certificate is in
force. We reduce the Specified Amount to equal the Specified Amount less the
Total Account Value at the time of the change. We also allow changes from Option
2 to Option 1 at any time while a Certificate is in force. We increase the
Specified Amount to equal the Specified Amount plus the Total Account Value as
of the date of the change. If the Death Benefit at the time of the change is
determined based on the applicable percentage of the Total Account Value, we may
calculate the new Specified Amount differently from the foregoing description.
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We do not allow a change in the Death Benefit Option if (a) the Specified Amount
is reduced below the minimum Specified Amount set forth in the Certificate
Specifications or (b) your Certificate would be treated as other than life
insurance for income tax purposes. Also, we may require evidence of
insurability. We effect the change on the Monthly Deduction Day on or next
following the date on which we receive your Written Request. In cases where we
require evidence of insurability, we must also approve the increase.
Following any change in Death Benefit Option, we will adjust the Basic Monthly
Premium so that it will be based on the new Specified Amount. A change in Death
Benefit Option may restart the test for determining whether a Certificate is a
Modified Endowment Contract for federal income tax purposes. (See Tax Matters.)
Right of Certificate Examination
Your Certificate includes a 10-day free look period. If for any reason you are
dissatisfied with your Certificate, you may return it to us or to our
representative within 10 days of receipt for a refund. If you return your
Certificate, we will deem it void from its beginning. We will refund to you an
amount equal to (a) the premiums paid or (b) where permitted by state law, the
premiums paid, adjusted for any positive or negative investment performance in
the Variable Options you selected (but not deducting any charges made under the
Certificate).
Supplemental Benefits
The supplemental benefits currently available as riders to a Certificate are
listed below. Your Aetna representative can provide you with additional
information about these riders. The riders contain other terms and conditions.
o Disability Benefit Rider--provides for a credit of the benefit amount
described in the rider if the covered Insured is totally disabled. As a
general matter, you may not increase the Specified Amount of your Certificate
while we are providing benefits under this rider.
o Accelerated Death Benefit Rider--provides for the advance payment to you of a
portion of the Specified Amount if the Insured provides requisite evidence
that the Insured has less than one year to live. There is no charge for this
rider.
o Accidental Death Benefit Rider--provides for the payment of up to $200,000 to
provide a double Death Benefit if the Insured dies as a result of an accident
as defined in the rider.
o Child Insurance Rider--provides for non-participating term life insurance on
the child(ren) of the Insured.
We may make other riders for supplemental benefits available under the
Certificate from time to time. We will set forth the charges for such riders in
your Certificate Specifications. You may add or cancel supplemental benefit
riders at any time, pursuant to our procedures then in effect. Any change you
make in supplemental benefits may cause us to revise the amount of the Basic
Monthly Premium. If so, we will provide you with supplemental Certificate
Specifications that set forth the new amount. A change in supplemental benefit
rider coverage may also have tax consequences. (See Tax Matters.)
Certificate Settlement
The Company generally pays proceeds in a lump sum upon (a) the death of the
Insured, (b) a Full Surrender or (c) maturity. You may elect one or more of the
Settlement Options discussed below. We may agree to other Settlement Options at
our discretion.
You may make a Written Request to elect, change or revoke a Settlement Option
before payments begin under any Settlement Option. We give effect to your
request upon its receipt at our Home Office. If you have not elected a
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Settlement Option when your proceeds become payable, your payee may make the
election. We must consent to the election of any Settlement Option if the
Certificate has been assigned. We pay any excess Death Benefit due as elected.
The payee is entitled to exercise any rights and privileges that are permitted
under a Settlement Option.
You may not elect a fixed or variable Settlement Option that results in (a) a
first payment of less than $50 or (b) total yearly payments of less than $250.
You must elect a lump-sum payment if your selected payment option fails to meet
these minimum requirements. We may refuse to permit a Settlement Option if (a)
the payee is not a natural person or (b) the Annuitant's age (plus the number of
years for which any payments under the annuity option chosen) exceeds 95 years.
The several Settlement Options may differ in their tax consequences.
Settlement Options
The Settlement Options listed below are available under the Certificates.
Options 1, 2 and 3 are available on either a fixed payment or a variable payment
basis. We determine the amount of the first payment under Options 1, 2 and 3
(whether on a fixed or variable basis) based on the option chosen, using the
annuity rates specified in the Certificate. This rate is the same regardless of
whether an Annuitant is male or female.
For a fixed Settlement Option, the amount of the first and each subsequent
payment is the same. We base that amount on an interest rate of at least 3%.
Our then current settlement option rate could provide higher payments on a
comparable fixed premium annuity at the time payments commence. If so, we use
the higher rate for fixed Settlement Options under a Certificate.
For a variable Settlement Option, we determine the first payment using an
assumed interest rate of 3.5% or 5%, as specified by you or the payee.
Subsequent payments then vary based on Fund performance, as discussed below
under Calculation of Variable Payment Settlement Option Values. If you elect 5%,
the initial payment is higher, but subsequent payments increase less with
favorable Fund performance (and decrease more with unfavorable Fund performance)
than if 3.5% is elected.
Once payments begin you cannot make withdrawals from or changes to Settlement
Options 1, 2 and 3, except to the extent noted below for Option 1.
Option 1 -- We provide payments for a stated number of years, but no more than
30. You must select a payment period of at least 5 years. If variable payments
are selected, you may withdraw all or a portion of the remaining payments at any
time.
Option 2 -- We provide payments for the lifetime of the Annuitant. If you chose,
we also will guarantee payments for a number of years from 5 to 30, or provide a
"cash refund" upon the Annuitant's death. The cash refund election is available
only if you allocate the entire amount on a fixed basis. The amount of the cash
refund is (a) the amount applied to the option at the time of settlement, less
(b) the total amount of payments received under the option prior to the
Annuitant's death.
Option 3 -- Life Income Based Upon the Lives of Two Annuitants--We provide
payments during the joint lifetimes of two Annuitants. We continue payments
until both Annuitants have died. When you select this option, you must choose
from among the following payment methods: (a) 100%, 66-2/3% or 50% of the
payment continues after the first death; (b) payments for a minimum of 5 to 30
years, with 100% of the payment to continue after the first death; (c) 100% of
the payment to continue to the surviving Annuitant if the survivor is the
original payee, and 50% of the payment to continue to the survivor if the
surviving Annuitant is the second payee; or (d) 100% of the payment to continue
after the first death, with a "cash refund" feature comparable to that described
for Option 2 above.
Option 4 -- We provide payment of interest on the sum left with us at 3%, or
such higher rate as we may, in our sole discretion, declare. After commencement
of this option, the payee may make a Written Request to receive all
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or a portion of the amount held under this option as a lump sum or have it
applied to one or more of the other available Settlement Options.
Upon the death of the Annuitant(s) (or the payee under Option 4), we will pay
(a) the current value of the funds held under Option 4 and (b) the present value
of any remaining guaranteed payments under the other Options. We continue paying
any remaining guaranteed payments to the beneficiary unless the beneficiary
elects to receive the present value of any remaining guaranteed payments in a
lump sum. If the beneficiary subsequently dies, we will pay the present value of
any remaining guaranteed payments in one sum to the beneficiary's' estate.
You may elect to receive monthly payments as described above, or elect to
receive quarterly, semi-annual or annual payments instead.
Calculation of Variable Payment Settlement Option Values
Variable Settlement Options are supported by the available Funds of the
Company's Variable Annuity Account B (Account B). Account B is a separate
account very similar to the Separate Account, except that Account B supports
variable annuity benefits, rather than variable life insurance benefits. We
reserve the right to permit a maximum of only four Funds to be used at any one
time for a Settlement Option. We will provide an Account B prospectus in
connection with selection of a Settlement Option. That prospectus describes the
available Funds, the costs and expenses of the Funds, and the charges imposed on
Account B. Account B may differ from the Separate Account in terms of the (a)
Funds available for selection and (b) charges imposed. Accordingly, you should
review the Account B prospectus, as well as the prospectuses for Account B's
underlying Funds, prior to selecting any variable payment Settlement Option.
We determine the amount of each variable annuity payment after the first payment
by a formula described in the Certificates. This formula is generally used by
actuaries for making these types of calculations. Speaking generally, the
formula works as follows: if the total return of the Fund for any month, less a
mortality and expense risk deduction currently equivalent to an annual rate of
1.25%, exceeds the Settlement Option's assumed interest rate (3.5% or 5%, as
discussed above), the next variable payment will be larger than the previous
one. On the other hand, if the Fund's total return for any month, as adjusted
for the mortality and expense risk deduction, is less than the assumed interest
rate, the next variable payment will be smaller than the previous one. The
amount of any increase or decrease in variable annuity payments does not bear a
direct relationship to the Fund's total returns. We expect to make a profit on
the mortality and expense risk deduction.
You may make transfers among Funds under our administrative procedures in effect
at the time. Currently, we limit the number of transfers to four per Calendar
Year, but we can change this limit in the future.
The Company and Management
Aetna Life Insurance and Annuity Company is a stock life insurance company
organized under the insurance laws of the State of Connecticut in 1976. Through
a merger, it succeeded to the business of Aetna Variable Annuity Life Insurance
Company (formerly Participating Annuity Life Insurance Company, an Arkansas life
insurance company organized in 1954). The Company is engaged in the business of
issuing life insurance policies and variable annuity contracts. The Company is
an indirect wholly-owned subsidiary of Aetna, Inc., a publicly traded healthcare
and financial services company, whose principal offices are at the same location
as the Company's Home Office.
The Company serves as the principal underwriter for the securities offered
hereunder and also acts as the principal underwriter for Variable Life Account B
and Variable Annuity Accounts B, C and G (separate accounts of the
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Company registered as unit investment trusts), and Variable Annuity Account I (a
separate account of Aetna Insurance Company of America registered as a unit
investment trust). Additionally, the Company is registered as an investment
adviser under the Investment Advisers Act of 1940 and, as such, is the
investment adviser for Portfolio Partners, Inc. The Company is also the
depositor of Variable Life Account B and Variable Annuity Accounts B, C and G.
The following are the Directors and Executive Officers of Aetna Life Insurance
and Annuity Company. Unless otherwise indicated, the principal business address
for all individuals is the Company's Home Office.
<TABLE>
<CAPTION>
Name & Address Position with the Company Business Experience During the Past 5 Years
- --------------------- ------------------------------------ -------------------------------------------------------------
<S> <C> <C>
Thomas J. McInerney Director, President and Chairman, President (since October 1998) Aetna Investment Adviser
Executive Committee (Principal Holding Company, Inc., Aetna Retail Holding Company, Inc.,
Executive Officer) Aetna Services Holding Company, Inc.; President (since
September 1997) Aetna Life Insurance and Annuity
Company; President (since September 1997) Aetna
Insurance Company of America; President (since September
1997) Aetna Retirement Holdings, Inc.; President (since
August 1997) Aetna Retirement Services, Inc.; Executive
Vice President (since August 1997) Aetna Inc., Aetna
Services, Inc. and Aetna Life Insurance Company; Vice
President, Strategy (March 1997--August 1997) Aetna
Inc., Aetna Services, Inc. and Aetna Life Insurance
Company; Vice President, Sales (December 1996--March
1997) and Vice President, National Accounts (April
1996--March 1997) Aetna US Healthcare Inc.; Vice
President, Strategy, Finance, & Administration (July
1995--April 1996) Aetna Inc.; Vice President, Guaranteed
Products (November 1992--July 1995) Aetna Life Insurance
Company.
Shaun P. Mathews Director and Senior Vice President President (January 1998--February 1999) Aetna Investment
Services, Inc.; Senior Vice President (since June 1999)
Aetna Retirement Holdings, Inc.; Senior Vice President
(since June 1999) Aetna Retirement Holdings, Inc.; Senior
Vice President (since October 1998) Aetna Investment
Adviser Holding Company, Inc., Aetna Retail Holding
Company, Inc., Aetna Services Holding Company, Inc.;
Senior Vice President, Product and Brand Management
(since September 1998), Senior Vice President, Product
Management (September 1997--September 1998), Vice
President, Products Group (February 1996--September
1997), Senior Vice President, Strategic Markets and
Products (February 1993--February 1996) Aetna Life
Insurance and Annuity Company.
</TABLE>
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<TABLE>
<CAPTION>
Name & Address Position with the Company Business Experience During the Past 5 Years
- ---------------------- ----------------------------------- --------------------------------------------------------------
<S> <C> <C>
Catherine Hale Smith Director, Chief Financial Officer Senior Vice President (since October 1998) Aetna
and Senior Vice President Investment Adviser Holding Company, Inc., Aetna Retail
Holding Company, Inc., Aetna Services Holding Company,
Inc.; Chief Financial Officer and Senior Vice President,
Business Strategy and Finance (since February 1998)
Aetna Life Insurance and Annuity Company; Director and
Senior Vice President (since March 1999), Chief
Financial Officer (since February 1998) Aetna Retirement
Services, Inc.; Vice President, Strategy, Finance and
Administration, Financial Relations (September
1996--February 1998), Aetna Inc.; Chief of Staff,
Health/Group Life, Strategy and Communication (April
1993--September 1996) Aetna Life Insurance Company.
Kirk P. Wickman Senior Vice President, General Senior Vice President, General Counsel and Corporate
Counsel and Corporate Secretary Secretary (since June 1999) Aetna Retirement Holdings, Inc.,
Aetna Investment Adviser Holding Company, Inc., Aetna
Retail Holding Company, Inc., Aetna Services Holding
Company, Inc.; Senior Vice President, General Counsel
and Corporate Secretary (since April 1999) Aetna
Retirement Services, Inc.; Vice President, General
Counsel and Corporate Secretary (October 1998--June
1999) Aetna Investment Advisor Holding Company, Inc.,
Aetna Retail Holding Company, Inc., Aetna Services
Holding Company, Inc.; Vice President, General Counsel
and Assistant Secretary (April 1997-- April 1999) Aetna
Retirement Services, Inc.; Vice President, General
Counsel and Corporate Secretary (December 1996--June
1999) Aetna Retirement Holdings, Inc.; Senior Vice
President (since March 1999), General Counsel and
Corporate Secretary (since November 1996), Vice
President (November 1996--March 1999) Aetna Life
Insurance and Annuity Company; Vice President and
Counsel (June 1992--November 1996) Aetna Life Insurance
Company.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Name & Address Position with the Company Business Experience During the Past 5 Years
- ------------------------ ------------------------------------- --------------------------------------------------------------
<S> <C> <C>
Deborah Koltenuk Vice President, Corporate Vice President, Corporate Controller, and Assistant Treasurer
Controller, and Assistant Treasurer (since July 1999) Aetna Retirement Services, Inc.; Vice
President, Corporate Controller, and Assistant Treasurer
(since June 1999) Aetna Investment Adviser Holding
Company, Inc., Aetna Retail Holding Company, Inc., Aetna
Services Holding Company, Inc., Aetna Life Insurance and
Annuity Company, Aetna Insurance Company of America; Vice
President, Corporate Controller and Assistant Treasurer,
(April 1999--July 1999) Aetna Retirement Services, Inc.;
Vice President, Treasurer and Corporate Controller
(October 1998--June 1999) Aetna Investment Adviser Holding
Company, Inc., Aetna Retail Holding Company, Inc., Aetna
Services Holding Company, Inc.; Vice President and
Controller (April 1997--April 1999) Aetna Retirement
Services, Inc.; Vice President, Treasurer and Corporate
Controller (July 1996--June 1999) Aetna Life Insurance and
Annuity Company; Vice President, Treasurer and Corporate
Controller (September 1996--June 1999) Aetna Retirement
Holdings, Inc.; Director (January 1997--March 1998), Vice
President and Treasurer, Corporate Controller (April
1997-- June 1999) Aetna Insurance Company of America; Vice
President, Investment Financial Reporting and Securities
Operations (April 1996--July 1996) Aetna Life Insurance
Company; Vice President, Investment Planning and Financial
Reporting (October 1994--April 1996) The Aetna Casualty
and Surety Company and The Standard Fire and Insurance
Company; Assistant Vice President, Finance and
Administration (June 1994--October 1994) Aetna Life
Insurance Company.
Therese A. Squillacote Vice President and Chief Vice President and Chief Compliance Officer (since February
Compliance Officer 1999) Aetna Insurance Company of America; Vice President
and Chief Compliance Officer (since December 1998) Aetna
Life Insurance and Annuity Company; Vice President and
Chief Compliance Officer (since December 1998) Aetna
Investment Services, Inc.; Chief Compliance Officer (since
December 1998) Systematized Benefits Administrators, Inc.;
Vice President, Compliance (since March 1998) Aetna
Financial Services, Inc.; Compliance Manager (May 1997 to
December 1998) Aetna Life Insurance and Annuity Company;
Registered Principal (since July 1997) Aetna Investment
Services, Inc.; Director, Compliance (December 1995 to May
1997) Connecticut General Life Insurance Company;
Registered Principal (December 1995 to May 1997) CIGNA
Financial Advisors, Inc.; Chief Compliance Officer
(September 1989 to December 1995) G.R. Phelps & Co., Inc.;
Chief Compliance Officer (December 1992 to December 1995)
Connecticut Mutual Financial Services, Inc.
</TABLE>
Directors, officers and employees of the Company are covered by a blanket
fidelity bond in the amount of $60 million issued by Aetna Casualty and Surety
Company.
25
<PAGE>
Additional Information
Reports to Owners
The Company maintains all records relating to the Separate Account and the
Certificates. At least once in each Certificate Year, the Company will send you
a report containing the Certificate Values (see Total Account Value) as of the
most recent Certificate Anniversary. If you allocate any portion of your Total
Account Value to the Separate Account, we will send you those additional
periodic reports that the SEC requires us to send to you. (See Right to Instruct
Voting of Fund Shares.)
Right to Instruct Voting of Fund Shares
You are entitled to instruct us how to vote Fund shares held in the Variable
Options of the Separate Account and attributable to your Certificate at meetings
of shareholders of the Funds. The number of votes for which you may give
directions will be determined as of the record date for the meeting. The number
of votes you are entitled to direct with respect to a particular Fund is equal
to (a) your Total Account Value invested in that Fund divided by (b) the net
asset value of one share of that Fund. Fractional votes will be recognized. The
Separate Account will vote all shares of each Fund that it holds of record in
the same proportion as those shares for which we have received instructions from
owners participating in that Fund through the Separate Account. If you are
entitled to give us voting instructions, we will send you proxy material and a
form for providing such instructions. In certain cases, we may disregard
instructions relating to changes in a Fund's investment manager or its
investment policies. We will advise you if we do and detail the reasons in our
next report to Certificate owners. We reserve the right to modify these
procedures in any manner consistent with applicable legal requirements and
interpretations as in effect from time to time.
State Regulation
The Company, in its sole discretion, selects the states where it will offer the
Certificates for sale. One or more eligible purchasers must reside in a selected
state. The Company is subject to regulation and supervision by the Insurance
Department of the State of Connecticut, which periodically examines its affairs.
The Company is also subject to the insurance laws and regulations of all other
jurisdictions where it is authorized to do business. We are required to submit
annual statements of our operations, including financial statements, to the
insurance departments of those jurisdictions for the purposes of determining
solvency and compliance with local insurance laws and regulations.
Legal Matters
The Company knows of no material legal proceedings pending (a) to which either
the Separate Account or the Company is a party or (b) that would materially
affect the Separate Account. Counsel to the Company passed upon the legal
validity of the securities described in this Prospectus.
The Registration Statement
We filed a Registration Statement under the Securities Act of 1933 with the SEC
relating to the offering described in this Prospectus. Consistent with SEC rules
and regulations, we did not include in this Prospectus all of the information
set forth in the Registration Statement. You may obtain information omitted from
the Prospectus at the SEC's principal office in Washington, DC, upon payment of
the SEC's prescribed fees.
Distribution of the Certificates
The Company serves as principal underwriter of the securities sold by this
Prospectus, as defined by the federal securities laws. Aetna Investment
Services, Inc. ("Aetna Services"), an affiliate of the Company, distributes the
Certificates. The Company and Aetna Services are registered as broker-dealers
with the SEC and are members of
26
<PAGE>
the National Association of Securities Dealers, Inc. All persons offering or
selling the Certificates will be (a) registered representatives of Aetna
Services, and (b) licensed as the Company's insurance agents to sell variable
life insurance. The Company and NYSUT Benefit Trust entered into an agreement
that calls (a) for NYSUT Benefit Trust to exclusively endorse the Certificate to
Members for supplemental group variable universal life insurance and (b) for
NYSUT Benefit Trust to perform administrative services. The administrative
services NYSUT Benefit Trust performs includes making available NYSUT Benefit
Trust payroll slots to facilitate premium remittances to the Company. Under the
agreement, the Company paid NYSUT Benefit Trust $70,000 in 1998 and will pay
NYSUT Benefit Trust $100,000 in 1999. NYSUT Benefit Trust indicated to the
Company that it intends to use these amounts to enhance benefits to its members.
Salespersons selling Certificates may earn salaries or commissions. The maximum
sales commission paid for Certificate distribution is 25% of the first year
premium up to 12 Basic Monthly Premiums. For an increase in Specified Amount,
the maximum sales commission is 25% of 12 times the amount of Basic Monthly
Premium attributable to the increase. The maximum sales commission on all other
premiums is 2% through the 15th Certificate year, or the 15th year following a
Specified Amount increase. Some sales personnel may receive various types of
non-cash compensation as special sales incentives, including trips and
educational and/or business seminars. However, all such compensation will be
paid in accordance with NASD rules.
Independent Auditors
KPMG LLP, CityPlace II, Hartford, Connecticut, are the independent auditors for
the Separate Account and for the Company. The independent auditors provide
services to the Separate Account that include primarily the examination of the
Separate Account's financial statements and the review of filings made with the
SEC.
Year 2000 Readiness
As a healthcare and financial services enterprise, Aetna Inc. (referred to
collectively with its affiliates and subsidiaries as "Aetna"), is dependent on
information technology ("IT") systems and other systems and facilities, such as
telephones, building access control systems and heating and ventilation
equipment ("embedded systems") to conduct its business. The Company also has
business relationships with financial institutions, financial intermediaries,
public utilities and other critical vendors, as well as regulators and
customers, who are themselves reliant on IT and embedded systems to conduct
their businesses.
In 1997, the Company's ultimate parent, Aetna, organized a multi-disciplinary
Year 2000 Project Team, including outside consultants. The Year 2000 Project
Team and Aetna's businesses and subsidiaries, including the Company, have
developed and are currently executing a comprehensive plan designed to make
their mission-critical IT systems and embedded systems Year 2000 ready. Outside
consultants have reviewed Aetna's overall process, plan and progress to date.
Aetna's plan for IT systems consists of five phases: (i) assessment, (ii)
remediation, (iii) testing, (iv) implementation and (v) Year 2000 approval. At
year end 1997, Aetna including the Company, had substantially completed the
assessment phase for all of its IT systems. Aetna completed the remediation,
testing and approval of substantially all of its IT systems and those of its
subsidiaries, including all of the IT systems of the Company by June 30, 1999.
The costs of these efforts will not affect the separate account.
The Company also faces the risk that one or more of its critical suppliers
("external relationships") will not be able to interact with the Company due to
the third party's inability to resolve its own Year 2000 issues, including those
associated with its own external relationships. The Company, its affiliates and
the mutual funds that serve as investment options for the separate account also
have relationships with investment advisers, broker dealers, transfer agents,
custodians or other securities industry participants or other service providers
that are not affiliated with Aetna. The Company has completed its inventory of
external relationships and risk rated each external relationship based upon the
potential business impact, available alternatives and cost of substitution. In
the case of mission-critical suppliers such as certain banks, telecommunications
providers and other utilities, mutual fund
27
<PAGE>
companies, IT vendors and financial market data providers, either Aetna or the
Company is engaged in discussions with the third parties and is attempting to
obtain detailed information as to those parties' Year 2000 plans and state of
readiness. A significant portion of the Company's critical external
relationships have informed the Company that they are not aware of any Year 2000
related reason that they will not be able to perform their obligations to the
Company in all material respects.
Tax Matters
The following discussion reflects our understanding of current federal income
tax laws. These laws are complex, and tax results may vary among individuals.
This discussion is general in nature, and you should not consider it as tax
advice. You should seek competent tax advice if you are considering the purchase
of a Certificate or exercising elections under a Certificate. Please note that
your taxable income is not reduced by premium payments you pay by payroll
deduction.
Federal Tax Status of the Company
The Company is taxed as a life insurance company under the Internal Revenue Code
of 1986, as amended ("Code"). The Separate Account is not a separate entity from
the Company. Therefore, the Separate Account is not taxed separately as a
"regulated investment company", but is taxed as part of the Company. Investment
income and realized capital gains attributable to the Separate Account are
automatically applied to increase reserves under the Certificate. Because of
this, under existing federal income tax law we believe that any such income and
gains will not be taxed to the extent that such income and gains are applied to
increase reserves under the Certificates. In addition, any foreign tax credits
attributable to the Separate Account will first be used to reduce any income
taxes imposed on the Separate Account before being used by the Company.
In summary, we do not expect that we will incur any federal income tax liability
attributable to the Separate Account and we do not intend to make provisions for
any such taxes. However, if changes in the federal tax laws or their
interpretation result in our being taxed in income or gains attributable to the
Separate Account, then we may impose a charge against the Separate Account (with
respect to some or all of the Certificates) to set aside provisions to pay such
taxes.
Life Insurance Qualification
A Certificate is treated as "life insurance" for federal income tax purposes if
(a) it meets the definition of life insurance under Section 7702 of the Code and
(b) the investments of the underlying Funds satisfy certain investment
diversification requirements under Section 817(h) of the Code. We believe that
the Certificates will meet these requirements and that:
o the death benefit that the beneficiary receives under your Certificate or
riders to your Certificate will not be subject to federal income tax; and
o increases in your Certificate's Total Account Value as a result of interest or
investment experience will not be subject to federal income tax unless and
until there is a distribution from your Certificate, such as a surrender or a
partial surrender.
The federal income tax consequences of a distribution from your Certificate can
be affected by whether your Certificate is a Modified Endowment Contract
(discussed below). In all cases, however, the character of all income that we
describe below as taxable to the payee will be ordinary income (as opposed to
capital gain).
28
<PAGE>
Among other things, Section 7702 places limits on the amount of premium payments
that you may make under a Certificate. For that reason, we will accept only that
portion of any premium payment that will not exceed those limits. We will return
to you, or apply as you and we otherwise agree, any portion of the premium
payment that exceeds the then-applicable limitations.
We intend to comply with Sections 7702 and 817(h) of the Code. For that reason,
we reserve the right to make any changes to the Certificate or group policy that
we believe are necessary to ensure compliance. We will apply any changes
uniformly to affected Owners and make changes only after giving you advance
written notice. In some cases, we may need to distribute to you amounts from
your Certificate to assure that it continues to qualify and be taxed as life
insurance. Any amounts we distribute to you may be includible in your taxable
income.
General Rules
As long as your Certificate remains in force during the insured person's
lifetime, as a non-modified endowment contract, a Certificate loan will be
treated as indebtedness, and no part of the loan proceeds will be subject to
current federal income tax. Interest you pay on the loan generally is considered
"personal interest," and will not be tax deductible.
After the first 15 Certificate years, the proceeds from a partial surrender will
not be subject to federal income tax except to the extent such proceeds exceed
your "basis" in your Certificate. (Your basis generally will equal the premiums
you have paid, less the amount of any previous distributions from your
Certificate that were not taxable.) During the first 15 Certificate years, the
proceeds from a partial surrender, under limited circumstances, could be subject
to federal income tax, under a complex formula, to the extent that your Total
Account Value exceeds your basis in your Certificate. This result may occur even
if the total amount of distributions from the Certificate to that date does not
exceed total premiums paid to that date.
On the maturity date or upon full surrender, any excess in the amount of
proceeds we pay (including amounts we use to discharge any Certificate loan)
over your basis in the Certificate, will be subject to federal income tax. In
addition, if a Certificate terminates after a grace period while there is a
policy loan outstanding, the cancellation of such loan and accrued loan interest
will be treated as a distribution and could be subject to tax under the above
rules.
Modified Endowment Contracts
A Certificate will be a Modified Endowment Contract if it fails the "7-pay
test." A Certificate fails the 7-pay test if, at any time in the first seven
Certificate Years, the amount paid into the Certificate exceeds the amount that
would have been paid had the Certificate been designed to become paid up after
payment of seven equal annual premiums. A new 7-pay test begins at any time a
material change takes effect. A material change, for example, may include a
change in death benefit option, the selection of additional rider benefits, an
increase in your Certificate's specified amount of coverage, and certain other
changes.
In the event of a reduction in future benefits during the first seven
Certificate Years (or within the first seven Certificate Years after a material
change), we recalculate the 7-pay test retroactively based on the reduced level
of benefits. (For example, a reduction in future benefits could result if you
request a decrease in Specified Amount, Partial Surrender or termination of
additional benefits under a Rider.) If the premiums previously paid are greater
than the recalculated 7-pay test limit, the Certificate will be a Modified
Endowment Contract.
A Certificate received in exchange for a Modified Endowment Contract will also
be a Modified Endowment Contract.
If the Certificate is a Modified Endowment Contract, the proceeds of any Partial
Surrender, Certificate Loans, assignments, pledges or other distributions from
the Certificate will be currently includable in the Certificate Owner's income
to the extent that the Certificate's Total Account Value immediately before
payment exceeds total premiums paid (increased by the amount of distributions
previously taxed and reduced by untaxed amounts previously distributed from the
Certificate). All Modified Endowment Contracts that you purchase from the
29
<PAGE>
Company (and its affiliates) during the same calendar year, will be aggregated
for purposes of determining the taxable portion of distributions from the
Certificate.
Distributions during any Certificate year in which a Certificate becomes a
Modified Endowment Contract and any subsequent Certificate Year will be taxed as
described above. In addition, distributions from a Certificate within two years
before it becomes a Modified Endowment Contract may also be subject to tax in
this manner. Thus, a distribution made from a Certificate that is not a Modified
Endowment Contract could later become taxable as a distribution from a Modified
Endowment Contract.
If the Certificate is a Modified Endowment Contract, a penalty will apply to the
taxable portion of most distributions, unless the Owner has reached the age of
59 1/2. The penalty tax does not, however, apply to any full or partial
distributions that are made while the Owner is disabled (within the meaning of
the Code) or that are part of a series of equal periodic payments made not less
frequently than annually for the life or life expectancy of such Owner or the
joint lives (or joint life expectancies) of such Owner and his or her
beneficiary (i.e., an annuity).
Diversification Standards
Section 817(h) of the Code provides that separate account investments (or the
investments of a mutual fund, the shares of which are owned by separate accounts
of insurance companies) underlying the Certificate must be "adequately
diversified" in accordance with Treasury regulations. The Treasury Department
has issued regulations prescribing the diversification requirements in
connection with variable contracts. Our failure to comply with these regulations
would disqualify your Certificate as a life insurance policy under Section 7702
of the Code. If this were to occur, you would be subject to federal income tax
on the income under the Certificate for the period of the disqualification and
for subsequent periods. Also, if the Insured died during the period of the
disqualification, a portion of the death benefit proceeds would be considered
taxable income for the recipient. The Separate Account, through the Funds,
intends to comply with these requirements.
Investor Control
The IRS has stated in published rulings that a variable contract owner will be
considered the owner of separate account assets if the owner possesses incidents
of investment control over the assets. In these circumstances, income and gains
from the separate account assets would be includible in the variable contract
owner's gross income. The Treasury announced that it will issue guidance
regarding the extent to which owners could direct their investments among
subaccounts without being treated as owners of the underlying assets of the
separate account. It is possible that the Treasury's position, when announced,
may adversely affect the tax treatment of existing contracts.
The Company reserves the right to modify the Certificate as necessary to attempt
to prevent a holder from being considered the federal tax owner of a pro rata
share of the assets of the Separate Account.
Withholding
Generally, we are required to withhold income tax from any portion of a
distribution we make to you that is includable in your income. However, we will
not withhold income tax if you provide us with a written election request before
we make the distribution. If you request that we not withhold tax from the
distribution, or if enough tax is not withheld, you may have to pay these taxes
later. You may also have to pay penalties if your withholding and estimated tax
payments are insufficient.
Other Tax Considerations
Changes you make to your Certificate (for example, a decrease in benefits) may
have other effects on your Certificate. Such effects may include limiting the
amount of premiums that you can pay under your Certificate, as well as the
amount of Total Account Value that you may maintain under your Certificate.
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<PAGE>
If the insured person is the Certificate's owner, the death benefit under a
Certificate will generally be includable in the owner's estate for purposes of
federal estate tax. If the owner is not the insured person, under certain
conditions, an amount approximately equal to the cash surrender value of the
Certificate would be includable in the owner's estate, if the owner died before
the insured. Federal estate tax is integrated with federal gift tax under a
unified rate schedule. In general, estates less than $650,000 (or larger amounts
specified in the Code to commence in certain future years) will not incur a
federal estate tax liability. In addition, an unlimited marital deduction may be
available for federal estate tax purposes.
As a general rule, if a "transfer" is made to a person two or more generations
younger than the Certificate's owner, a generation skipping tax may be payable
at rates similar to the maximum estate tax rate in effect at the time. The
generation skipping tax provisions generally apply to "transfers" that would be
subject to the gift and estate tax rules. Individuals are generally allowed an
aggregate generation skipping tax exemption of $1 million. Because these rules
are complex, you should consult with a qualified tax adviser for specific
information, especially where benefits are passing to younger generations.
The particular situation of each Certificate owner, insured person or
beneficiary will determine how ownership or receipt of Certificate proceeds will
be treated for purposes of federal estate and generation skipping taxes, as well
as state and local estate, inheritance, transfer, income and other taxes. We do
not intend for the foregoing summary to be complete or to cover all situations.
You should consult counsel and other advisors for more complete information.
Finally, The U.S. Congress frequently considers legislation that, if enacted,
could change the tax treatment of life insurance policies. In addition, the
Treasury Department may amend existing regulations, issue regulations on the
qualification of life insurance and modified endowment contracts, or adopt new
interpretations of existing law. State and local tax law or, if you are not a
U.S. citizen and resident, foreign tax law, may also affect the tax consequences
to you, the insured person or your beneficiary, and are subject to change. Any
changes in federal, state, local or foreign tax law or interpretation could have
a retroactive effect. We suggest you consult a qualified tax adviser.
Misc. Certificate Provisions
The Certificates
We consider your variable life insurance contract to consist of the following
documents: (a) the Certificate you receive; (b) the related group Policy owned
by NYSUT Benefit Trust; (c) the application form you completed to purchase your
Certificate; (d) any applications for any changes we approve; and (e) any
riders. Copies of all applications are attached to and made a part of the
Certificate. Only the Company's President, Executive Vice President or the
Corporate Secretary may agree with you to a change in the Certificate or the
Policy. Any change in the Certificate or the Policy must be in writing.
Payment and Deferral of Benefits
We pay all benefits at our Home Office. We may require you to submit your
Certificate to our Home Office before we grant Certificate Loans, make changes
or pay benefits.
We ordinarily make payments of any Separate Account Value within 7 days after
our receipt of your Written Request. However, the Company reserves the right to
suspend or postpone the date of any payment of any benefit or values for any
Valuation Period (a) when the New York Stock Exchange is closed (except holidays
or weekends); (b) when trading on the Exchange is restricted; (c) when the SEC
determines an emergency exists so that it is not reasonably practicable for the
Fund to dispose of the securities it holds or to determine the value of the
Funds' net
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<PAGE>
assets. In these instances, we also may defer payment from the Separate Account
of Full Surrender and Partial Surrender Values, any Death Benefit in excess of
the current Specified Amount, and any portion of the Loan Value.
We may defer payment of any Fixed Account Value for up to 6 months, except when
used to pay amounts due us. We may also delay payment of the Death Benefit if
the Certificate is being contested.
Suicide and Incontestability
In most states, we pay only a limited benefit if the Insured dies by suicide
within 2 years from the Issue Date of a Certificate. Generally, this benefit
consists of a refund of premiums paid, subject to any positive or negative
adjustment to reflect investment performance in the Separate Account. In most
states, if the Insured dies by suicide within 2 years from the Issue Date of any
increase in coverage, we pay as to that increase only the amount of prior
Monthly Deductions that were attributable to that increase.
In most states, we will not contest any coverage under a Certificate after it
has been in force for 2 years from its Issue Date, because of statements made in
the initial application form or any subsequent application. However, if the Age
of the Insured is misstated, regardless how long the coverage has been in
effect, we will adjust the amount of the Death Benefit to reflect the coverage
that would have been purchased by the most recent pre-Maturity Date Monthly
Deduction at the correct Age.
Protection of Proceeds
To the extent provided by law, the proceeds of the Certificate are not subject
to (a) claims by a beneficiary's creditors or (b) any legal process against any
beneficiary.
Nonparticipation
The Certificate is not entitled to share in the divisible surplus of the
Company. We will pay no dividends to you.
Changes in Owner and Beneficiary; Assignment
Unless otherwise stated in the Certificate, you may change the Owner and/or the
beneficiary or beneficiaries, or both, at any time while the Certificate is in
force. You must make a request for these types of changes by Written Request.
After we agree to the change in writing, the change takes effect as of the date
on which your Written Request was signed. On the insured's death, we pay Death
Benefit proceeds to each named beneficiary as specified in your then effective
beneficiary designation. We pay all proceeds to the Owner or the Owner's estate
if no named beneficiary is living at the date of the Insured's death. If there
is no designated beneficiary, as required by state law we may pay from the Death
Benefit up to $500 to any person that we believe is entitled to this money
because that person incurred funeral expenses incident to the death of the
Insured.
You may assign a Certificate. We will not consider an assignment of a
Certificate binding on us unless the assignment is made in writing and received
by us at our Home Office. We use reasonable procedures to confirm that the
assignment is authentic, including verification of signature. If we fail to
follow our procedures, we would be liable for any losses to you directly
resulting from the failure. Otherwise, we are not responsible for the validity
of any assignment. The rights of the Owner and the interest of the beneficiary
are subject to the rights of any assignee of record.
Assignment or change of Owner can have adverse tax consequences. (See Tax
Matters.)
Performance Reporting and Advertising
From time to time, the Company may advertise different types of historical
performance for the Variable Options of the Separate Account available under the
Certificates. We may also distribute sales literature that compares (a) to (b)
or to (c), where: (a) is the percentage change in Accumulation Unit Values for
any of the Variable Options; (b) is established market indices such as the
Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average; and (c)
is the percentage change in values of other mutual funds that have investment
objectives similar to the Variable Option being compared.
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Illustrations of Death Benefit and Total Account Values
The following pages provide a hypothetical illustration of how the Option 1
Death Benefit and Total Account Values can change over time for a Certificate.
This hypothetical illustration is based on a Certificate issued to an Age 45,
preferred risk, non-smoker Insured. The second column in each table shows the
accumulated values of the premiums paid at an annual interest rate of 5%. The
remaining columns show the hypothetical Death Benefits, Total Account Values and
Surrender Values assuming that the investment return on the assets held in each
Fund is a uniform gross annual rate of either 0%, 6%, and 12%. Additional
assumptions are listed on each illustration.
We provide two pages of values. The first page illustrates the assumption that
the maximum rates for all charges under the Certificate, including the
guaranteed maximum Cost of Insurance rates, are charged in all years. The
maximum allowable charges under the Certificate include (a) 1.25% for years
1-10, and 0.40% for the 11th year and after, for mortality and expense risk in
all Certificate Years, and (b) 10% of each premium as the maximum premium load,
and (c) $19 a month during the first Certificate Year and $11 a month thereafter
for the maximum Certificate Fee.
The second page illustrates the assumption that the current rates for all
charges, including the scale of Cost of Insurance rates for a $250,000 Specified
Amount, are charged in all years. Current cost of insurance rates are generally
lowest for Certificates having Specified Amounts of at least $250,000. The
current charges imposed under the Certificates include (a) 0.85% for mortality
and expense risk in Certificate Years 1 through 10 only, and as is currently
planned, 0% thereafter, (b) 8% of each premium as the current premium load, and
(c) $14 a month during the first Certificate Year and $6 a month thereafter as
the current Certificate Fee. We expect to review our current cost of insurance
rates at least annually in light of the actual mortality experience of
participants under the NYSUT group Certificate.
The values shown in these illustrations vary according to assumptions used for
charges and gross rates of investment return. You may experience actual
investment returns and charges that are higher or lower than those illustrated.
The annual charge for Fund expenses reflected in both sets of illustrations is
%. This figure assumes that Total Account Values have been allocated equally
among all Funds and represent a fixed, unweighted average of the investment
advisory fees charged to each of the Funds as of December 31, 1998 (without
waivers or deductions) and other operating expenses (without waivers or
deductions) for the year then ended.
After deduction of charges, the illustrated gross annual investment rates of
return of 0%, 6% and 12% correspond to approximate net annual rates of %,
% and %, respectively, during the first 10 Certificate Years, and
%, % and %, respectively, thereafter on a current basis. On a
guaranteed basis, the illustrated gross annual investment rates of return of
0%, 6% and 12% correspond to approximate net annual rates of %, % and
% during the first 10 years and %, % and % during the 11th
year and after, respectively.
The Death Benefit and Total Account Values would be different from those shown
if the gross annual investment rates of return averaged 0%, 6%, and 12% over a
period of years, but fluctuated above and below those averages for individual
Certificate Years. The illustrations also assume payment of premiums as
indicated, no Certificate Loans, no increases or decreases in Specified Amount,
no Death Benefit Option changes, no Partial Surrenders and no supplemental rider
benefits.
The hypothetical values shown in the tables do not reflect any Separate Account
charges for federal income taxes, since we are not currently making such
charges. However, we may make such charges in the future. In that event, the
gross annual investment rate of return would have to exceed 0%, 6%, or 12% by an
amount sufficient to cover the tax charges in order to produce the Death Benefit
and Total Account Values shown.
Upon request, we will provide a comparable personalized illustration based upon
the Age and underwriting classification of the proposed Insured, including the
Specified Amount and premium requested, the proposed frequency of premium
payments and any available riders requested. We may charge a fee of $25 for each
illustration. The hypothetical gross annual investment return assumed in such an
illustration will not exceed 12%.
33
<PAGE>
FLEXIBLE PREMIUM
VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE
UNISEX AGE 45
$1,548.48 ANNUAL BASIC PREMIUM
PREFERRED NONSMOKER RISK
FACE AMOUNT $250,000
DEATH BENEFIT OPTION 1 (GUARANTEED VALUES)
<TABLE>
<CAPTION>
Premiums Death Benefit
Accumulated Gross Annual Investment Total Account Value Surrender Value
at Returns of Annual Investment Returns of Annual Investment Returns of
Certificate 5% Interest --------------------------------- ------------------------------ -------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------------- ------------ ---------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20
25
30
20 Age 65
</TABLE>
Assumes no policy loan has been made and no supplemental rider benefits have
been elected. If premiums are paid more frequently than annually, the Death
Benefits, Total Account Values and Surrender Values would be less than those
illustrated. Zeros indicate that the Certificate lapses if additional premiums
are not paid.
The investment results are illustrative only and should not be considered a
representation of past or future investments results.
Actual investment results may be more or less than those shown and will depend
on a number of factors including the Certificate Owner's allocations, and the
Fund's rate of return. The Total Account Value and Surrender Value for a
Certificate would be different from those shown in the actual investment rates
of return averaged 0%, 6%, and 12% over a period of years, but fluctuated above
or below those averages for individual years.
34
<PAGE>
FLEXIBLE PREMIUM
VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE
UNISEX AGE 45
$1,548.48 ANNUAL BASIC PREMIUM
PREFERRED NONSMOKER RISK
FACE AMOUNT $250,000
DEATH BENEFIT OPTION 1 (CURRENT VALUES)
<TABLE>
<CAPTION>
Premiums Death Benefit
Accumulated Gross Annual Investment Total Account Value Surrender Value
at Returns of Annual Investment Returns of Annual Investment Returns of
Certificate 5% Interest ------------------------------ -------------------------------- ------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ------------- ------------ ---------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20
25
30
20 Age 65
</TABLE>
Assumes no policy loan has been made and no supplemental rider benefits have
been elected. If premiums are paid more frequently than annually, the Death
Benefits, Total Account Values and Surrender Values would be less than those
illustrated. Zeros indicate that the Certificate lapses if additional premiums
are not paid.
The investment results are illustrative only and should not be considered a
representation of past or future investments results.
Actual investment results may be more or less than those shown and will depend
on a number of factors including the Certificate Owner's allocations, and the
Fund's rate of return. The Total Account Value and Surrender Value for a
Certificate would be different from those shown in the actual investment rates
of return averaged 0%, 6%, and 12% over a period of years, but fluctuated above
or below those averages for individual years.
35
<PAGE>
VARIABLE LIFE ACCOUNT C
As of the date of this prospectus, there are no assets attributable to Variable
Life Account C. Therefore, a financial statement of Variable Life Account C is
not presented herein.
S-1
<PAGE>
FINANCIAL STATEMENTS
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
To be filed by amendment.
F-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
UNDERTAKING PURSUANT TO RULE 484
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
REPRESENTATION, PURSUANT TO SECTION 26(e)(2)(A) OF
THE INVESTMENT COMPANY ACT OF 1940
REGISTRANT MAKES THE FOLLOWING REPRESENTATION:
Aetna Life Insurance and Annuity Company represents that the fees and charges
deducted under the policies covered by this registration statement, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the insurance company.
CONTENTS OF THE
REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
o The facing sheet
o A cross-reference sheet
o One prospectus consisting of 45 pages
<PAGE>
o The undertaking to file reports
o The undertaking pursuant to Rule 484
o Representation pursuant to Section 26(e)(2)(A) of the Investment
Company Act of 1940
o The signatures
o Written consents of the following persons:
A. Consent of Counsel (included as part of Exhibit 2 below)
B. Actuarial Consent (included as part of Exhibit 6 below)
C. Consent of Independent Auditors (included as Exhibit 7 below)
The following Exhibits:
1. Exhibits required by paragraph A of instructions to exhibits for Form
N-8B-2:
(1) Resolution establishing Variable Life Account C
(2) Not Applicable
(3)(i) Master General Agent Agreement(1)
(3)(ii) Life Insurance General Agent Agreement(1)
(3)(iii) Broker Agreement(1)
(3)(iv) Life Insurance Broker-Dealer Agreement(1)
(3)(v) Restated and Amended Third Party Administration and
Transfer Agent Agreement(2)
(4) Not Applicable
(5)(i) Group Policy (70262-97)(3)
(5)(ii) Endorsement ( ) to Group Policy*
(5)(iii) Certificate (70263-97) Under Group Policy(3)
(5)(iv) Endorsement ( ) to Certificate*
(5)(v) Disability Benefit Rider (70264-97)(3)
(5)(vi) Accelerated Death Benefit Rider (70265-97)(3)
(5)(vii) Accidental Death Benefit Rider (70266-97)(3)
(5)(viii) Accelerated Death Benefit Disclosure Statement
(DISC/NYSUT)(3)
(5)(ix) Children Insurance Rider Term Insurance (70267-97)(3)
(6)(i) Certificate of Incorporation of Aetna Life Insurance and
Annuity Company, Depositor(4)
(6)(ii) Amendment of Certificate of Incorporation of Aetna Life
Insurance and Annuity Company, Depositor(5)
(6)(iii) By-Laws as amended September 17, 1997 of Aetna Life Insurance and
Annuity Company(6)
(7) Not Applicable
(8)(i) Fund Participation Agreement by and among Aetna Life Insurance
and Annuity Company and Aetna Variable Fund, Aetna Variable
Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna
GET Fund on behalf of each of its series, Aetna Generation
Portfolios, Inc. on behalf of each of its series, Aetna Variable
Portfolios, Inc. on behalf of each of its series, and Aeltus
Investment Management, Inc. dated as of May 1, 1998(7)
<PAGE>
(8)(ii) Amendment dated November 9, 1998 to Fund Participation Agreement
by and among Aetna Life Insurance and Annuity Company and Aetna
Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares,
Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its
series, Aetna Generation Portfolios, Inc. on behalf of each of
its series, Aetna Variable Portfolios, Inc. on behalf of each of
its series, and Aeltus Investment Management, Inc. dated as of
May 1, 1998(8)
(8)(iii) Second Amendment dated ________, 1999 to Fund Participation
Agreement by and among Aetna Life Insurance and Annuity Company
and Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income
Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each
of its series, Aetna Generation Portfolios, Inc. on behalf of
each of its series, Aetna Variable Portfolios, Inc. on behalf of
each of its series, and Aeltus Investment Management, Inc. dated
as of May 1, 1998 and amended on November 9, 1998*
(8)(iv) Service Agreement between Aeltus Investment Management, Inc. and
Aetna Life Insurance and Annuity Company in connection with the
sale of shares of Aetna Variable Fund, Aetna Variable Encore
Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET
Fund on behalf of each of its series, Aetna Generation
Portfolios, Inc. on behalf of each of its series, and Aetna
Variable Portfolios, Inc. on behalf of each of its series dated
as of May 1, 1998(7)
(8)(v) Amendment dated November 4, 1998 to Service Agreement between
Aeltus Investment Management, Inc. and Aetna Life Insurance and
Annuity Company in connection with the sale of shares of Aetna
Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares,
Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its
series, Aetna Generation Portfolios, Inc. on behalf of each of
its series and Aetna Variable Portfolios, Inc. on behalf of each
of its series dated as of May 1, 1998(8)
(8)(vi) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996
and March 1, 1996(9)
(8)(vii) Fifth Amendment dated as of May 1, 1997 to the Fund Participation
Agreement between Aetna Life Insurance and Annuity Company,
Variable Insurance Products Fund and Fidelity Distributors
Corporation dated February 1, 1994 and amended on December 15,
1994, February 1, 1995, May 1, 1995, January 1, 1996 and March 1,
1996(9)
(8)(viii) Sixth Amendment dated November 6, 1997 to the Fund Participation
Agreement between Aetna Life Insurance and Annuity Company,
Variable Insurance Products Fund and Fidelity Distributors
Corporation dated February 1, 1994 and amended on December 15,
1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1,
1996 and May 1, 1997(10)
(8)(ix) Seventh Amendment dated as of May 1, 1998 to the Fund
Participation Agreement between Aetna Life Insurance and Annuity
Company, Variable Insurance Products Fund and Fidelity
Distributors Corporation dated February 1, 1994 and amended
<PAGE>
on December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996, March 1, 1996, May 1, 1997 and November 6, 1997(7)
(8)(x) Eighth Amendment dated _________, 1999 to Fund Participation
Agreement between Aetna Life Insurance and Annuity Company,
Variable Insurance Products Fund and Fidelity Distributors
Corporation dated February 1, 1994 and amended on December 15,
1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1,
1996, May 1, 1997, November 6, 1997 and May 1, 1998*
(8)(xi) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund II and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996
and March 1,1996(5)
(8)(xii) Fifth Amendment dated as of May 1, 1997 to the Fund Participation
Agreement between Aetna Life Insurance and Annuity Company,
Variable Insurance Products Fund II and Fidelity Distributors
Corporation dated February 1, 1994 and amended on December 15,
1994, February 1, 1995, May 1, 1995, January 1, 1996, and March
1, 1996(9)
(8)(xiii) Sixth Amendment dated as of January 20, 1998 to the Fund
Participation Agreement between Aetna Life Insurance and Annuity
Company, Variable Insurance Products Fund II and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996, March 1, 1996 and May 1, 1997(11)
(8)(xiv) Seventh Amendment dated as of May 1, 1998 to the Fund
Participation Agreement between Aetna Life Insurance and Annuity
Company, Variable Insurance Products Fund II and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996, March 1, 1996, May 1, 1997 and January 20, 1998(7)
(8)(xv) Eighth Amendment dated ___________, 1999 to Fund Participation
Agreement between Aetna Life Insurance and Annuity Company,
Variable Insurance Products Fund II and Fidelity Distributors
Corporation dated February 1, 1994 and amended on December 15,
1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1,
1996, May 1, 1997, January 20, 1998 and May 1, 1998*
(8)(xvi) Service Agreement between Aetna Life Insurance and Annuity
Company and Fidelity Investment Institutional Operations Company
dated as of November 1, 1995(12)
(8)(xvii) Amendment dated January 1, 1997 to Service Agreement between
Aetna Life Insurance and Annuity Company and Fidelity Investment
Institutional Operations Company dated as of November 1, 1995(9)
(8)(xviii) Service Contract between Fidelity Distributors Corporation and
Aetna Life Insurance and Annuity Company dated May 2, 1997(8)
(8)(xix) Fund Participation Agreement among Janus Aspen Series and Aetna
Life Insurance and Annuity Company and Janus Capital Corporation
dated December 8, 1997(13)
(8)(xx) Amendment dated October 12, 1998 to Fund Participation Agreement
among Janus Aspen Series and Aetna Life Insurance and Annuity
Company and Janus Capital Corporation dated December 8, 1997(8)
<PAGE>
(8)(xxi) Second Amendment dated __________, 1999 to Fund Participation
Agreement among Janus Aspen Series and Aetna Life Insurance and
Annuity Company and Janus Capital Corporation dated December 8,
1997 and amended on October 12, 1997*
(8)(xxii) Service Agreement between Janus Capital Corporation and Aetna
Life Insurance and Annuity Company dated December 8, 1997(13)
(8)(xxiii) Fund Participation Agreement dated March 11, 1997 between Aetna
Life Insurance and Annuity Company and Oppenheimer Variable
Annuity Account Funds and Oppenheimer Funds, Inc.(14)
(8)(xxiv) Amendment dated _____________, 1999 between Aetna Life Insurance
and Annuity Company and Oppenheimer Variable Annuity Account
Funds and Oppenheimer Funds, Inc. dated March 11, 1997*
(8)(xxv) Service Agreement effective as of March 11, 1997 between
Oppenheimer Funds, Inc. and Aetna Life Insurance and Annuity
Company(14)
(9) Not Applicable
(10)(i) Application for Group Variable Universal Life Insurance
(Application for Group Policy) (70262-1997NYAPP)(3)
(10)(ii) Life Insurance Pre-APP (70272-97)(3)
(10)(iii) Group Life Insurance Application (70272-97(A)ZNY)(3)
(10)(iv) Supplement (70268-97(5/98)) to Application for Variable Life
Insurance(3)
(11) Issuance, Transfer and Redemption Procedures(15)
2. Opinion and Consent of Counsel*
3. Not Applicable
4. Not Applicable
5. Not Applicable
6. Actuarial Opinion and Consent*
7. Consent of Independent Auditors*
8. (a)Powers of Attorney (included on signature page)
(b)Certificate of Resolution Authorizing Signature by Power
of Attorney(16)
*To be filed by amendment
1. Incorporated by reference to Post-Effective Amendment No. 2 to Registration
Statement on Form S-6 (File No. 33-76004), as filed on February 16, 1996.
2. Incorporated by reference to Post-Effective Amendment No. 5 to Registration
Statement on Form S-6 (File No. 33-75248), as filed on July 29, 1997.
3. Incorporated by reference to Post-Effective Amendment No. 2 to Registration
Statement on Form S-6 (File No. 333-15817), as filed on April 16, 1998.
4. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-1 (File No. 33-60477), as filed on April 15, 1996.
5. Incorporated by reference to Post-Effective Amendment No. 12 to Registration
Statement on Form N-4 (File No. 33-75964), as filed on February 11, 1997.
<PAGE>
6. Incorporated by reference to Post-Effective Amendment No. 12 to Registration
Statement on Form N-4 (File No. 33-91846), as filed on October 30, 1997.
7. Incorporated by reference to Registration Statement on Form N-4 (File No.
333-56297), as filed on June 8, 1998.
8. Incorporated by reference to Post-Effective Amendment No. 2 to Registration
Statement on Form N-4 (File No. 333-56297), as filed on December 14, 1998.
9. Incorporated by reference to Post-Effective Amendment No. 30 to Registration
Statement on Form N-4 (File No. 33-34370), as filed on September 29, 1997.
10. Incorporated by reference to Post-Effective Amendment No. 16 to Registration
Statement on Form N-4 (File No. 33-75964), as filed on February 9, 1998.
11. Incorporated by reference to Post-Effective Amendment No. 7 to Registration
Statement on Form S-6 (File No. 33-75248), as filed on February 24, 1998.
12. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-88720), as filed on June 28, 1996.
13. Incorporated by reference to Post-Effective Amendment No. 10 to Registration
Statement on Form N-4 (File No. 33-75992), as filed on December 31, 1997.
14. Incorporated by reference to Post-Effective Amendment No. 27 to Registration
Statement on Form N-4 (File No. 33-34370), as filed on April 16, 1997.
15. Incorporated by reference to Registration Statement on Form S-6 (File No.
333-27337), as filed on May 16, 1997.
16. A certified copy of the resolution adopted by the Depositor's Board of
Directors authorizing filings pursuant to a power of attorney as required by
Rule 478 under the Securities Act of 1933 is incorporated by reference to
Post-Effective Amendment No. 5 to Registration Statement on Form N-4 (File
No. 33-75986), as filed on April 12, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Variable Life Account C of Aetna Life Insurance and Annuity Company, has duly
caused this Registration Statement on Form S-6 to be signed on its behalf by the
undersigned, thereunto duly authorized, and the seal of the Depositor to be
hereunto affixed and attested, all in the City of Hartford, and State of
Connecticut, on this 29th day of October, 1999.
VARIABLE LIFE ACCOUNT C OF
AETNA LIFE INSURANCE AND
ANNUITY COMPANY
(Registrant)
(SEAL)
ATTEST: /s/ Karen A. Peddle
--------------------
Karen A. Peddle
Assistant Corporate Secretary
By: AETNA LIFE INSURANCE AND
ANNUITY COMPANY
(Depositor)
By: /s/ Thomas J. McInerney
----------------------------------
Thomas J. McInerney
Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated and on the dates indicated. Each person whose signature appears below
constitutes and appoints Kirk P. Wickman, Julie E. Rockmore, J. Neil McMurdie
and Michael A. Pignatella and each of them individually, such person's true and
lawful attorneys and agents with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities, to sign for such person and in such person's name and capacity
indicated below, any and all amendments to this Registration Statement, hereby
ratifying and confirming such person's signature as it may be signed by said
attorneys to any and all amendments.
Signature Title Date
/s/ Thomas J. McInerney Director and President ) October
- -------------------------- (Principal Executive Officer) ) 29, 1999
Thomas J. McInerney )
<PAGE>
/s/ Catherine H. Smith Director and Chief Financial Officer )
- -------------------------- )
Catherine H. Smith )
/s/ Shaun P. Mathews Director )
- ------------------------- )
Shaun P. Mathews )
/s/ Deborah Koltenuk Vice President, Corporate Controller, and )
- ------------------------- Assistant Treasurer )
Deborah Koltenuk
<PAGE>
VARIABLE LIFE ACCOUNT C
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit
<S> <C> <C>
99-1(1) Resolution Establishing Variable Life Account C
--------
99-1(5)(ii) Endorsement ( ) to Group Policy *
99-1(5)(iv) Endorsement ( ) to Certificate *
99-1(8)(iii) Second Amendment dated ________, 1999 to Fund Participation *
Agreement by and among Aetna Life Insurance and Annuity
Company and Aetna Variable Fund, Aetna Variable Encore
Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna
GET Fund on behalf of each of its series, Aetna Generation
Portfolios, Inc. on behalf of each of its series, Aetna
Variable Portfolios, Inc. on behalf of each of its series,
and Aeltus Investment Management, Inc. dated as of May 1,
1998 and amended on November 9, 1998
99-1(8)(x) Eighth Amendment dated __________, 1999 to Fund Participation *
Agreement between Aetna Life Insurance and Annuity Company,
Variable Insurance Products Fund and Fidelity Distributors
Corporation dated February 1, 1994 and amended on December 15,
1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1,
1996, May 1, 1997, November 6, 1997 and May 1, 1998
99-1(8)(xv) Eighth Amendment dated ___________, 1999 to Fund Participation *
Agreement between Aetna Life Insurance and Annuity Company,
Variable Insurance Products Fund II and Fidelity Distributors
Corporation dated February 1, 1994 and amended on December 15,
1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1,
1996, May 1, 1997, January 20, 1998 and May 1, 1998
99-1(8)(xxi) Second Amendment dated __________, 1999 to Fund Participation *
Agreement among Janus Aspen Series and Aetna Life Insurance and
Annuity Company and Janus Capital Corporation dated December 8,
1997 and amended on October 12, 1997
</TABLE>
*To be filed by amendment
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit
<S> <C> <C>
99-1(8)(xxiv) Amendment dated _____________, 1999 between Aetna Life *
Insurance and Annuity Company and Oppenheimer Variable
Annuity Account Funds and Oppenheimer Funds, Inc. dated
March 11, 1997
99-2 Opinion and Consent of Counsel *
99-6 Actuarial Consent *
99-7 Consent of Independent Auditors *
</TABLE>
*To be filed by amendment
Exhibit 99-1(1)
SECRETARY CERTIFICATE
AETNA LIFE INSURANCE AND ANNUITY COMPANY
I, Rose-Marie DeRensis, the duly elected Assistant Corporate Secretary of Aetna
Life Insurance and Annuity Company (the "Company"), do hereby certify to the
following:
That the attached resolutions, entitled "Variable Life Account C,"
adopted by the Executive Committee of the Board of Directors of the
Company on August 31, 1999, attached hereto as Attachment A, are a true
and correct copy, are currently in full force and effect, and have not
been amended, revoked or superceded.
Date: October 29, 1999 By: /s/ Rose-Marie DeRensis
----------------------- -----------------------------
Rose-Marie DeRensis
Assistant Corporate Secretary
(Corporate Seal)
<PAGE>
Attachment A
UNANIMOUS WRITTEN CONSENT OF
THE EXECUTIVE COMMITTEE OF
THE BOARD OF DIRECTORS OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
The undersigned, being all of the members of the Executive Committee of the
Board of Directors of Aetna Life Insurance and Annuity Company, a Connecticut
corporation (the "Company"), being authorized by Article IV, Section 1, of the
Bylaws of the Company to exercise all of the powers of the Board of Directors of
the Company when the Board is not in session, do hereby consent to the following
actions being taken in lieu of a meeting, pursuant to Section 33-749(a) of the
Connecticut Business Corporation Act:
VARIABLE LIFE ACCOUNT C
RESOLVED: That the officers of this Company are hereby severally authorized to
take such action as they may severally deem necessary or appropriate
(1) to create a new separate account, to be called Variable Life
Account C, for the purpose of receiving a transfer of certain assets
from the Company's Variable Life Account B, and of funding certain
group variable life insurance policies; (2) to make any filings under
applicable law, whether federal, state or otherwise, which may be
deemed necessary or appropriate to the transfer of these assets and
the operations of that separate account; and (3) to further the
purpose and operations of that separate account; and any actions,
heretofore taken consistent with the above are hereby ratified and
confirmed.
RESOLVED: That the following Standards of Suitability are hereby adopted with
respect to the group variable life insurance business to be written
by this Company: no recommendation shall be made to an applicant to
purchase a variable life insurance policy and no such policy shall be
issued in the absence of reasonable grounds to believe that the
purchase of such policy is not unsuitable for such applicant on the
basis of information furnished after reasonable inquiry of such
applicant concerning the applicant's insurance and investment
objectives, financial situation and needs, and any other information
known to the Company or to the agent making the recommendation.
IN WITNESS WHEREOF, the undersigned have executed this consent as of the 31st
day of August, 1999.
/s/ Shaun P. Mathews /s/ Catherine H. Smith
- ------------------------- -------------------------------
Shaun P. Mathews Catherine H. Smith
