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NATIONWIDE LIFE INSURANCE COMPANY
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED THROUGH NATIONWIDE VARIABLE ACCOUNT
(SUPPLEMENT DATED FEBRUARY 4, 1997 TO THE PROSPECTUS DATED MAY 1, 1996)
THIS SUPPLEMENT IS FOR USE ONLY WITH CONTRACTS ISSUED TO INDIVIDUAL RETIREMENT
ACCOUNTS THAT ARE DESCRIBED IN SECTION 408(a) OF THE INTERNAL REVENUE CODE (THE
"CODE") AND WHICH ALSO SATISFY THE DEFINITION OF SIMPLE RETIREMENT ACCOUNTS IN
SECTION 408(p) OF THE CODE (AS ENACTED IN SECTION 1421 OF THE SMALL BUSINESS JOB
PROTECTION ACT OF 1996).
1. The section entitled "GLOSSARY OF SPECIAL TERMS" in the prospectus is amended
by adding the following:
SIMPLE IRA - An Individual Retirement Account as defined by Section 408(a) or
and Individual Retirement Annuity as defined by Section 408(b) of the Code, to
which the only contributions that can be made are contributions under a SIMPLE
Plan and rollovers or transfers from another SIMPLE IRA.
SIMPLE PLAN - The Savings Incentive Match Plan for Employees of Small Employers.
This plan is a written arrangement established under Section 408(p) of the Code
which provides a simplified tax-favored retirement plan for Small Employers. In
a SIMPLE Plan, each employee may choose whether to have the Small Employer make
payments as contributions under the SIMPLE Plan or to receive these payments
directly in cash. A Small Employer that chooses to establish a SIMPLE Plan must
make either matching contributions or non-elective contributions. All
contributions under a SIMPLE Plan are made to SIMPLE IRAs.
SMALL EMPLOYER - An employer that had no more than 100 employees who earned
$5,000 or more in compensation during the preceding calendar year.
TWO-YEAR PERIOD - The Two-Year Period begins on the first day in which
contributions made by a Small Employer are deposited into the individual
employee's SIMPLE IRA.
2. The section entitled "SUMMARY OF CONTRACT EXPENSES" in the prospectus is
amended by adding the following footnote:
3 The Contingent Deferred Sales Charge is waived for those Contracts
issued under a SIMPLE IRA Plan. Withdrawals may be made from the
Contract at any time without the imposition of any Contingent Deferred
Sales Charge. Any additional references throughout the prospectus to
the Contingent Deferred Sales Charge do not apply to Contracts issued
under SIMPLE IRA Plans, as required by Federal tax law, such charges do
not apply to Contracts issued under SIMPLE IRA Plans.
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3. The "EXAMPLE" Chart in the prospectus is amended with respect to Contracts
issued as SIMPLE IRAs as follows:
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1,000 investment and 5% annual return. These
dollar figures are illustrative only and should not be considered a
representation of past or future expenses. Actual expenses may be greater or
lesser than those shown below.
<TABLE>
<CAPTION>
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IF YOU SURRENDER YOUR IF YOU DO NOT SURRENDER IF YOU ANNUITIZE YOUR
CONTRACT AT THE END OF THE YOUR CONTRACT AT THE END OF CONTRACT AT THE END OF THE
APPLICABLE TIME PERIOD THE APPLICABLE TIME PERIOD APPLICABLE TIME PERIOD
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1 YR. 3 YRS. 5 YRS. 10 YRS. 1 YR. 3 YRS. 5 YRS. 10 YRS. 1 YR. 3 YRS. 5 YRS. 10 YRS.
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American Century: 22 68 117 250 22 68 117 250 * 68 117 250
Benham Short-Term
Government
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American Century: 22 67 115 247 22 67 115 247 * 67 115 247
Income & Growth
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American Century: 25 77 132 282 25 77 132 282 * 77 132 282
Twentieth Century
Growth
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American Century: 33 102 172 359 33 102 172 359 * 102 172 359
Twentieth Century
International Growth
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American Century: 25 77 132 282 25 77 132 282 * 77 132 282
Twentieth Century
Ultra
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Delchester 23 72 123 264 23 72 123 264 * 72 123 264
Fund-Inst'l
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Dreyfus A Bonds Plus 25 77 132 281 25 77 132 281 * 77 132 281
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Dreyfus S & P 500 20 63 109 234 20 63 109 234 * 63 109 234
Index Fund (Formerly
Peoples Index Fund,
Inc.)
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The Dreyfus Third 26 81 139 294 26 81 139 294 * 81 139 294
Century Fund, Inc.
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Federated Bond Fund 26 80 137 291 26 80 137 291 * 80 137 291
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Evergreen Total 27 83 142 302 27 83 142 302 * 83 142 302
Return Fund
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Fidelity Advisor 30 92 157 330 30 92 157 330 * 982 157 330
Fund Equity Income
Fund
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Fidelity Advisor 31 96 163 342 31 96 163 342 * 96 163 342
Fund Growth
Opportunities Fund
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Fidelity Advisor 27 82 140 298 27 82 140 298 * 82 140 298
High Yield Fund
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Fidelity Advisor 30 92 157 330 30 92 157 330 * 92 157 330
Income & Growth Fund
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Fidelity Asset 25 77 131 279 25 77 131 279 * 77 131 279
Manager(TM)
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Fidelity 22 67 116 248 22 67 116 248 * 67 116 248
Equity-Income
Fund
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Fidelity Magellan 25 77 131 279 25 77 131 279 * 77 131 279
Fund
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Fidelity Puritan Fund 23 70 120 258 23 70 120 258 * 70 120 258
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Fidelity VIP High 22 68 117 251 22 68 117 251 * 68 117 251
Income Portfolio
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Janus Fund 24 75 128 273 24 75 128 273 * 75 128 273
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Janus Twenty Fund 25 78 133 284 25 78 133 284 * 78 133 284
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Janus Worldwide Fund 28 85 145 307 28 85 145 307 * 85 145 307
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MFS(R) World 32 97 164 344 32 97 164 344 * 97 164 344
Governments Fund
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Nationwide(R) Bond Fund22 68 117 251 22 68 117 251 * 68 117 251
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Nationwide(R) Fund 21 66 113 243 21 66 113 243 * 66 113 243
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Nationwide(R) Growth 22 67 114 246 22 67 114 246 * 67 114 246
Fund
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Nationwide(R) Money 21 65 112 242 21 65 112 242 * 65 112 242
Market Fund
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</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nationwide(R) U.S. 26 80 137 290 26 80 137 290 * 80 137 290
Government Income
Fund
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Neuberger & Berman 24 73 125 266 24 73 125 266 * 73 125 266
Guardian Fund, Inc.
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Neuberger & Berman 22 68 117 250 22 68 117 250 * 68 117 250
Limited Maturity
Bond Fund
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Neuberger & Berman 24 73 126 268 24 73 126 268 * 73 126 268
Partners Fund, Inc.
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Oppenheimer Global 27 84 143 303 27 84 143 303 * 84 143 303
Fund
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Phoenix Balanced 25 78 133 284 25 78 133 284 * 78 133 284
Fund Series
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Strong Total Return 27 82 140 297 27 82 140 297 * 82 140 297
Fund, Inc.
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Templeton Foreign 27 82 140 298 27 82 140 298 * 82 140 298
Fund - Class I
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Warburg Pincus 28 86 146 309 28 86 146 309 * 86 146 309
Emerging Growth Fund
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</TABLE>
The purpose of the Summary of Contract Expenses and Example is to assist the
Contract Owner in understanding the various costs and expenses both direct and
indirect. The expenses of the Variable Account as well as those of the
underlying Mutual Funds are reflected in the Example chart above. For more
complete descriptions of the expenses of the Variable Account, see "Variable
Account Charges, Purchase Payments, and Other Deductions." For more complete
information regarding expenses paid out of the assets of a particular underlying
Mutual Fund, see the underlying Mutual Fund's prospectus. Deductions for premium
taxes may also apply but are not reflected in the Example chart shown above (see
"Premium Taxes").
4. A new provision entitled "TAXATION OF SIMPLE IRA PLANS" is added to the
prospectus after the provision entitled "QUALIFIED PLANS, INDIVIDUAL RETIREMENT
ANNUITIES, AND INDIVIDUAL RETIREMENT ACCOUNTS". The new provision reads as
follows:
TAXATION OF SIMPLE IRA PLANS
Generally, distributions from a SIMPLE IRA are taxed in the same manner as an
IRA described under Sections 408(a) and 408(b) of the Code (see "Qualified
Plans, Individual Retirement Annuities And Individual Retirement Accounts").
However, any payment or distribution received from a SIMPLE IRA during the
Two-Year Period beginning on the date on which the individual first participated
in any SIMPLE Plan maintained by the individual's employer, will be taxed
according to Section 72(t)(6) of the Code.
A SIMPLE IRA may receive contributions under a qualified salary reduction
arrangement only. Therefore, a SIMPLE IRA cannot receive rollover distributions
from non-SIMPLE IRA individual retirement accounts or individual retirement
annuities; stock bonus, pension, or profit sharing plans; Section 403(b) plans;
or any source, other than another SIMPLE IRA.
Distributions from SIMPLE IRAs generally are includible in income similar to the
manner in which Distributions from IRAs are included in income. Section 72(t)(6)
of the Code provides that the rate of additional penalty tax is increased from
10% to 25% for withdrawals taken prior to age 59 1/2 during the Two-Year Period.
If, however, one of the exceptions to the application of the tax under Section
72(t) applies (for example, those amounts paid after age 59 1/2, after death, or
as part of a series of substantially equal payments), the exception also applies
to distributions within the Two-Year Period and the 25% additional penalty tax
rate does not apply.
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Distributions from a SIMPLE IRA during the Two-Year Period generally qualify as
rollover contributions (and thus are not includible in gross income) only if the
distributions are paid into another SIMPLE IRA and satisfy all other
requirements as specified in Section 408(d)(3) of the Code for treatment as
rollover contributions.
Any amount in a SIMPLE IRA can be transferred to another SIMPLE IRA in a
tax-free trustee-to-trustee transfer during the Two-Year Period. If however,
during the Two-Year Period, an amount is paid from a SIMPLE IRA directly to the
trustee of an IRA that is not a SIMPLE IRA, the payment will be treated as a
distribution from the SIMPLE IRA and as a contribution to another IRA, and thus
will not qualify as a rollover contribution. After the expiration of the
Two-Year Period, any amount in a SIMPLE IRA can be transferred in a tax-free
trustee-to-trustee transfer to another IRA that was not established as a SIMPLE
IRA.
For information regarding eligibility to establish or participate in a SIMPLE
IRA Plan, limitations on permissible amounts of Purchase Payments, and tax
consequences of Distributions from SIMPLE IRA Plans, the purchasers of such
Contracts should seek competent advice. The terms of such Plans may limit the
rights available under the Contract.
Any Distribution from a SIMPLE IRA that is eligible for rollover treatment will
be subject to federal tax withholding at the statutory rate (currently 20%)
unless the Distribution is made directly to an appropriate Plan as described
above.
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