As filed with the Securities and Exchange Commission
on April 29 , 1996
Registration No. 2-89550
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
PRE-EFFECTIVE AMENDMENT NO.
( )
POST-EFFECTIVE AMENDMENT NO. 22
(X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 16
(X)
(Check appropriate box or boxes)
FUTUREFUNDS SERIES ACCOUNT
(Exact name of Registrant)
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
(Name of Depositor)
8515 East Orchard Road
Englewood, Colorado 80111
(Address of Depositor's Principal Executive Officers) (Zip Code)
Depositor's Telephone Number, including Area Code:
(800) 537-2033
William T. McCallum
President and Chief Executive Officer
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
(Name and Address of Agent for Service)
Copy to:
James F. Jorden, Esq.
Jorden Burt Berenson & Johnson, LLP
1025 Thomas Jefferson Street, N.W., Suite 400 East
Washington, D.C. 20007-0805
It is proposed that this filing will become effective (check
appropriate space)
Immediately upon filing pursuant to paragraph (b) of Rule 485.
X On April 30, 1996 , pursuant to paragraph (b)
of Rule 485.
60 days after filing pursuant to paragraph (a) of Rule 485.
On , pursuant to paragraph (a)(i) of Rule 485.
75 days after filing pursuant to paragraph (a)(ii) of Rule
485.
On , pursuant to paragraph (a)(ii) of Rule
485.
If appropriate, check the following:
This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
The Registrant has chosen to register an indefinite number of securities in
accordance with Rule 24f-2. The Rule 24f-2 Notice for Registrant's most
recent fiscal year was filed on February 27, 1996.<PAGE>
FUTUREFUNDS SERIES ACCOUNT
Cross Reference Sheet
Showing Location in Prospectus
and Statement of Additional Information
As Required by Form N-4
FORM N-4 ITEM PROSPECTUS CAPTION
1. Cover Page.......................... Cover Page
2. Definitions......................... Glossary of Special Terms
3. Synopsis............................ Fee Table; Questions and
Answers about the Series
Account Variable Annuity
4. Condensed Financial Information..... Condensed Financial
Information
5. General Description of
Registrant, Depositor and
Portfolio Companies............... Great-West Life & Annuity
Insurance Company;
FutureFunds Series Account;
Investments of the Series
Account; Voting Rights
6. Deductions.......................... Administrative Charges;
Risk Charges, Premium
Taxes and Other
Deductions; Appendix A;
Distribution of the
Contracts
7. General Description of
Variable Annuity Contracts........ The Contracts; Investments
of the Series Account;
Statement of Additional
Information
8. Annuity Period...................... Annuity Options
9. Death Benefit....................... The Contracts-Accumulation
Period - Death Benefit;
Prior to Retirement Date;
Annuity Payments<PAGE>
10. Purchases and Contract Value........ The Contracts-General;
The Contracts-
Accumulation Period;
Distribution of the
Contracts; Cover Page;
Great-West Life & Annuity
Insurance Company
11. Redemptions......................... The Contracts-
Accumulation Period -
Total and Partial
Surrenders; Return
Privilege
12. Taxes............................... Federal Tax Consequences
13. Legal Proceedings................... Legal Proceedings
14. Table of Contents of
Statement of Additional
Information....................... Statement of Additional
Information
<PAGE>
STATEMENT OF ADDITIONAL
FORM N-4 ITEM INFORMATION CAPTION
15. Cover Page.......................... Cover Page
16. Table of Contents................... Table of Contents
17. General Information and
History........................... Not Applicable
18. Services............................ Custodian and Accountants
19. Purchase of Securities
Being Offered..................... Not Applicable
20. Underwriters........................ Underwriter
21. Calculation of
Performance Data.................. Calculation of Performance
Data
22. Annuity Payments.................... Not Applicable
23. Financial Statements................ Financial Statements<PAGE>
PART A
INFORMATION REQUIRED IN A
PROSPECTUS
<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL
INFORMATION
FUTUREFUNDS SERIES ACCOUNT
Of
Great-West Life & Annuity Insurance Company
GROUP VARIABLE ANNUITY CONTRACTS
Distributed by
The Great-West Life Assurance Company
8515 East Orchard Road, Englewood, Colorado 80111
(800) 468-8661 (U.S.) (303) 689-3360 (Englewood)
The group variable annuity contracts described in this prospectus
("Group Contracts") are designed and offered to provide retirement programs
that qualify for special federal income tax treatment for employees of
certain organizations. The Group Contracts may be issued in connection with
Contributions made by:
employers or employee organizations (such as non-profit entities defined
in Section 501(c) of the Internal Revenue Code of 1986, as amended ("Code"),
and governmental entities defined in Code Section 414(d)) to purchase
annuities for their employees under pension or profit-sharing plans described
in Section 401(a) of the Code,
employers or employee organizations to purchase annuities for their
employees under cash or deferred profit sharing plans described in Section
401(k) of the Code, state educational organizations and certain tax-exempt
organizations to purchase annuities for their employees under Section 403(b)
of the Code, and
certain state and local governmental entities and, for years beginning
after 1986, other tax-exempt organizations to purchase annuities for their
employees under a deferred compensation plan described in Section 457 of the
Code.
The Group Contracts are issued by Great-West Life & Annuity Insurance
Company ("GWL&A"). The Great-West Life Assurance Company ("Great-West")
is
the principal underwriter and distributor of the Group Contracts. The owner
of a Group Contract will be the employer, or may also be certain employer
associations or employee associations for contracts issued under Section
401(a), Section 401(k) or Section 403(b) retirement programs. Contributions
are made by the employer for employees desiring coverage under a Group
Contract. The amount of the Contributions will be determined by the employer.
A separate record (a "Participant Annuity Account") will be established in
the name of each participating employee (a "Participant") to reflect the
dollar values of Contributions made in each Participant's name. The Group
Contracts provide for a deferred annuity to begin at a future pre-selected
date (the "Annuity Commencement Date"). The Group Contracts also provide for
a death benefit. An initial Contribution under a Section 403(b) retirement
program may be canceled and returned at the employee's request within fifteen
days of the date of the Contribution.
Prior to the Annuity Commencement Date, the Contributions can
accumulate
on a variable basis, guaranteed basis, or a combination of both. To
accumulate on a variable basis, Contributions will be allocated to the
FUTUREFUNDS SERIES ACCOUNT (the "Series Account"), a segregated
investment
account of GWL&A. The value of the Contributions prior to the Annuity
Commencement Date and thus the amount accumulated to provide annuity
payments
will depend upon the investment performance of the Series Account.
The amount of annuity payments may also be variable based upon the
investment experience of the Series Account, or may be fixed without regard
to such experience, or may be a combination of both. The Series Account
currently has seventeen Investment Divisions available for allocation of
Contributions. Thirteen of the Investment Divisions invest in shares of the
portfolios of Maxim Series Fund Inc. ("Maxim"), a series, open-end management
investment company described beginning on page 2.
THIS PROSPECTUS IS ACCOMPANIED BY CURRENT PROSPECTUSES
FOR MAXIM
SERIES FUND,
INC., TCI GROWTH AND TCI BALANCED, FIDELITY VIP GROWTH AND
FIDELITY
VIP II
ASSET MANAGER PORTFOLIOS. THESE PROSPECTUSES PROVIDE
INFORMATION
A
PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING AND
SHOULD BE
KEPT FOR
FUTURE REFERENCE. ADDITIONAL INFORMATION ABOUT THE
GROUP
CONTRACTS HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN A
STATEMENT
OF
ADDITIONAL INFORMATION, DATED APRIL 30, 1996 ,
WHICH IS
INCORPORATED
HEREIN BY REFERENCE. THE STATEMENT OF ADDITIONAL
INFORMATION, THE
TABLE OF
CONTENTS OF WHICH IS SET FORTH ON THE LAST PAGE
OF THIS
PROSPECTUS, IS
AVAILABLE WITHOUT CHARGE UPON REQUEST BY WRITING OR
TELEPHONING
GWL&A AT
THE ADDRESS OR TELEPHONE NUMBER SET FORTH
ABOVE . THESE
SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE
COMMISSION
NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF
THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL
OFFENSE.
The date of this prospectus is April 30, 1996
the Money Market Portfolio, seeks preservation of capital, liquidity and
the highest possible current income consistent with the foregoing objectives
through investments in short-term money market securities. Shares of the
Money Market Portfolio are neither insured nor guaranteed by the U.S.
Government. Further, there is no assurance that the Portfolio will be able
to maintain a stable net asset value of $1.00 per share.
the Bond Portfolio, seeks to achieve maximum total return consistent
with the preservation of capital, through investment in an actively managed
portfolio of debt securities.
the Stock Index Portfolio, seeks to provide investment results, before
fees, that correspond to the total return of the S&P 500 Index and the S&P
MidCap Index, weighted according to their respective pro-rata shares of the
market;
the U.S. Government Securities Portfolio, seeks the highest level of
return consistent with preservation of capital and substantial credit
protection and seeks to achieve this objective by investing in
mortgage-related securities issued or guaranteed by an agency or
instrumentality of the U.S. Government, other U.S. agency and instrumentality
obligations, and in U.S. Treasury obligations;
the Small-Cap Index Portfolio, seeks to provide investment results,
before fees, that correspond to the total return of the Russell 2000 Index.
The Russell 2000 Index was developed in 1979 by the Frank Russell Company
to
track the stock market performance of a broadly diversified group of small
capitalization domestic stocks (currently those stocks with capitalization of
below $440 million);
the Mid-Cap Portfolio (Growth Fund I Investment Division), seeks to
provide long-term growth of capital through investment of at least 65% of
the Portfolio's assets in medium sized companies.
the Total Return Portfolio, seeks to obtain the highest possible total
return, a combination of income and capital appreciation, consistent with
reasonable risk;
the International Equity Portfolio, seeks to achieve long term capital
growth through a flexible policy of investing in stocks and debt obligations
of companies and governments outside the United States. Any income realized
will be incidental.
the Corporate Bond Portfolio, which seeks high total
investment
return by investing primarily in debt securities (including
convertibles), although up to 20% of its assets, at the time of
acquisition, may be invested in preferred stocks.
the Small-Cap Value Portfolio (Ariel Value Investment Division), seeks
to achieve long-term capital appreciation by investing primarily in common
stocks, although the Portfolio may also invest in other securities, including
restricted and preferred stocks.
the Maxim INVESCO Small-Cap Growth
Portfolio, seeks to
achieve long-term capital growth by investing its assets principally in a
diversified group of equity securities of emerging growth companies with
market capitalizations of $1 billion or less at the time of initial
purchase.
the Maxim INVESCO ADR Portfolio, seeks to achieve a high
total
return on investment through capital appreciation and current income, while
reducing risk through diversification by investing substantially all its
assets in foreign securities that are issued in the form of American
Depository Receipts ("ADRs") or foreign stocks that are registered with the
Securities and Exchange Commission and traded in the U.S.
the Maxim T. Rowe Price Equity/Income Portfolio, seeks to
provide
substantial dividend income and also capital appreciation by investing
primarily in dividend-paying common stocks of established companies.
The Series Account also has two Investment Divisions which invest in
shares of TCI Portfolios, Inc. ("TCI"), a diversified, series, open-end
management investment company which is a member of the Twentieth Century
family of mutual funds. These Investment Divisions invest in shares of one of
the following portfolios of TCI:
the TCI Growth Fund, which seeks capital growth by investment in
common
stocks (including securities convertible to common stocks) and other
securities that meet certain fundamental and technical standards and, in the
opinion of TCI's management, have better than average potential for
appreciation; and
the TCI Balanced Fund, which seeks capital growth and current income,
and it is the intention of TCI's management to maintain approximately 60% of
the assets of the TCI Balanced Fund in common stocks considered by TCI
management to have better-than-average prospects for appreciation and the
remaining assets in bonds and other fixed income securities.
The Series Account has two Investment Divisions which invest in shares
of Fidelity Variable Insurance Products Fund ("Fidelity VIP"), a diversified
management investment company offering insurance companies a selection of
investment vehicles for variable annuity insurance contracts. These
Investment Divisions invest in shares of one of the following portfolios of
Fidelity VIP:
the Fidelity VIP Growth Portfolio, seeks capital appreciation. The
Portfolio normally purchases common stocks, although its investments are not
restricted to any one type of security. Capital appreciation may also be
found in other types of securities including bonds and preferred stocks; and
the Fidelity VIP II Asset Manager Portfolio, seeks high total return
with reduced risk over the long-term by allocating its assets among domestic
and foreign stocks, bonds and short-term fixed-income instruments.
If the underlying plan document or program of any other Group
Policyholder does not permit investments in any Investment Division of the
Series Account, GWL&A shall restrict the availability of such Investment
Division in compliance with the Group Policyholder's request.
TABLE OF CONTENTS
Page
Fee Table . 5
Examples 7
Glossary of Special Terms 9
Questions and Answers About the Series Account Variable Annuity
11
Financial Highlights 14
Performance Related Information 16
Great-West Life & Annuity Insurance Company 19
FutureFunds Series Account 19
The Group Contracts 19
Accumulation Period 22
Investments of the Series Account 26
Administrative Charges, Risk Premiums and Other Deductions
30
Annuity Options 33
Federal Tax Consequences 36
Voting Rights 40
Distribution of the Group Contracts 41
Return Privilege 41
State Regulation 41
Restrictions Under the Texas Optional Retirement Program
41
Reports 41
Legal Proceedings 41
Legal Matters 42
Registration Statement 42
Statement of Additional Information 42
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchases (as a percentage of purchase
payments) None
Deferred Sales Load (as a percentage of amount distributed)
6% maximum
See footnote (1), page 7
Distribution Fees (as a percentage of purchase payments)
None
Exchange Fee None
TOTAL Contract Owner Transaction Expenses (as a percentage of purchase
payments) 6%
Annual Contract Fee $30 maximum
See footnote (2), page 7
Separate Account Annual Expenses (as a percentage of average account value)
Mortality Risk 1.00%
Expense Risk 0.25%
TOTAL Separate Account Annual Expenses 1.25%
Maxim Series Fund, Inc. Annual Expenses (as a percentage of Maxim Series
Fund, Inc. average net assets)
Money
Market
Bond Stock
Index U.S. Gov't.
Securities Small-Cap
Index
Management Fees .46% .60% .60%
.60%
.60%
Other Expenses None None None
None None
Total Maxim Series Fund, Inc Annual Expenses
.46%
.60%
.60%
.60%
.60%
International
Equity Total
Return Corporate
Bond
Mid-Cap
(Growth Fund I)
Management Fees1.00%.60%.90%.95%
Other Expenses.50%NoneNone.15%
Total Maxim Series Fund, Inc Annual Expenses
1.50%
.60%
.90%
1.10%
Maxim T. Rowe Price Equity/Income
Small-Cap Value
(Ariel Value) Maxim INVESCO
ADR Maxim INVESCO
Small-Cap Growth
Management Fees.80%1.00%1.00%.95%
Other Expenses.15%.35% .30% .15%
Total Maxim Series Fund, Inc Annual Expenses
.95%
1.35%
1.30%
1.10%
FEE TABLE (cont'd)
TCI Portfolios Annual Expenses (as a percentage of TCI Portfolios average net
assets)
TCI GrowthTCI Balanced
Management Fees1.00%1.00%
Other ExpensesNoneNone
TOTAL TCI Portfolios
Annual Expenses
1.00%
1.00%
Fidelity VIP Portfolios Annual Expenses (as a percentage of Fidelity VIP
Portfolios average net assets)
Fidelity VIP GrowthFidelity VIP II Asset Manager
Management Fees .61%.71%
Other Expenses.09%.08%
TOTAL Fidelity VIP Portfolio
Annual Expenses
.70%
.79%
EXAMPLES
Example 1:
If you do not take a distribution from your contract, or if you annuitize at
the end of the applicable time period you would pay the following expenses on
a $1,000 investment, assuming a 5% annual return on assets:
1 Year3 Year5 Year10 Year
Money Market Investment Division$18.42$59.86$108.09$264.21
Bond Investment Division$19.86$64.46
$116.23
$283.18
Stock Index Investment Division $19.86
$64.46
$116.23 $283.18
U.S. Government Securities
Investment Division
$19.86
$64.46
$116.23
$283.18
Small-Cap Index
Investment Division
$19.86
$64.46
$116.23
$283.18
Total Return Investment Division $19.86
$64.46
$116.23 $283.18
Mid-Cap (Growth Fund I) Investment Division
$25.00
$80.73
$144.87 $348.81
International Equity
Investment Division
$29.09
$93.58
$167.28
$399.00
Corporate Bond Investment Division $22.95
$74.25
$133.50 $322.95
Small-Cap Value (Ariel Value)
Investment Division $27.56 $88.78
$158.93
$380.41
Maxim INVESCO ADR Investment Division $29.09
$93.58
$167.28 $399.00
Maxim INVESCO Small-Cap Growth
Investment Division
$25.00
$80.73
$144.87
$348.81
Maxim T. Rowe Price Equity/Income
Investment Division
$23.46
$75.88
$136.36
$329.47
TCI Growth Investment Division $23.97
$77.50
$139.20 $335.95
TCI Balanced Investment Division $23.97
$77.50
$139.20 $335.95
Fidelity VIP Growth
Investment Division
$20.89
$67.73
$122.02
$296.57
Fidelity VIP II Asset Manager
Investment Division
$21.82
$70.67
$127.20
$308.51
The above Examples should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown,
subject to the guarantees in the Group Contracts.
The purpose of the table shown above is to assist the Group Policyholder in
understanding the various costs and expenses that a Group Policyholder will
bear directly or indirectly. (See "Administrative Charges, Risk Premiums
and Other Deductions" for more information pertaining to these costs and
expenses.)
Please note that while GWL&A currently intends to pay any Premium Tax levied
by any governmental entity, GWL&A reserves the right to, in the future and
with prior notice to Participants, deduct the Premium Tax, if any, from
Participant Annuity Account Values. (Please see "Administrative Charges,
Risk Premiums and Other Deductions" for more information.)
(1) The Securities and Exchange Commission requires that the deferred sales
load shown in the fee table and the examples be the maximum contingent
deferred sales load assessed. This charge does, however, vary by Group
Policyholder. Please consult with your employer or Great-West representative
for the fee that applies to your contract. (See "Administrative Charges,
Risk Premiums and Other Deductions: Contingent Deferred Sales Charge" for
more information.)
(2) The Securities and Exchange Commission requires that the annual contract
fee shown in the fee table be reflective of the contract fees collected
during the year. This charge is assumed to remain the same in each period
listed but does vary by Group Policyholder. Please consult with your employer
or Great-West representative for the fee that applies to your contract. (See
"Administrative Charges, Risk Premiums and Other Deductions: Contract
Maintenance Charge.")
EXAMPLES (cont'd)
Example 2:
If you take a distribution in whole from your contract at the end of
the applicable time period you would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets:
1 Year 3 Year 5 Year
10 Year
Money Market Investment Division $78.42
$119.86
$168.09 $264.21
Bond Investment Division $79.86 $124.46
$176.23
$283.18
Stock Index Investment Division $79.86
$124.46
$176.23 $283.18
U.S. Government Securities
Investment Division
$79.86
$124.46
$176.23
$283.18
Small-Cap Index
Investment Division
$79.86
$124.46
$176.23
$283.18
Total Return Investment Division $79.86
$124.46
$176.23 $283.18
Mid-Cap (Growth Fund I) Investment Division
$85.00
$140.73
$204.87 $348.81
International Equity
Investment Division
$89.09
$153.58
$227.28
$399.00
Corporate Bond Investment Division $82.95
$134.25
$193.50 $322.95
Small-Cap Value (Ariel Value)
Investment Division $87.56 $148.78
$218.93
$380.41
Maxim INVESCO ADR Investment Division $89.09
$153.58
$227.28 $399.00
Maxim INVESCO Small-Cap Growth
Investment Division
$85.00
$140.73
$204.87
$348.81
Maxim T. Rowe Price Equity/Income
Investment Division
$83.46
$135.88
$196.36
$329.47
TCI Growth Investment Division $83.97
$137.50
$199.20 $335.95
TCI Balanced Investment Division $83.97
$137.50
$199.20 $335.95
Fidelity VIP Growth
Investment Division
$80.89
$127.73
$182.02
$296.57
Fidelity VIP II Asset Manager
Investment Division
$81.82
$130.67
$187.20
$308.51
The above Examples should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown,
subject to the guarantees in the Group Contracts.
The purpose of the table shown above is to assist the Group Policyholder in
understanding the various costs and expenses that a Group Policyholder will
bear directly or indirectly. (See "Administrative Charges, Risk Premiums
and Other Deductions" for more information pertaining to these costs and
expenses.)
Please note that while GWL&A currently intends to pay any Premium Tax levied
by any governmental entity, GWL&A reserves the right to, in the future and
with prior notice to Participants, deduct the Premium Tax, if any, from
Participant Annuity Account Values. (Please see "Administrative Charges,
Risk Premiums and Other Deductions" for more information.)
(1) The Securities and Exchange Commission requires that the deferred sales
load shown in the fee table and the examples be the maximum contingent
deferred sales load assessed. This charge does, however, vary by Group
Policyholder. Please consult with your employer or Great-West representative
for the fee that applies to your contract. (See "Administrative Charges,
Risk Premiums and Other Deductions: Contingent Deferred Sales Charge" for
more information.)
(2) The Securities and Exchange Commission requires that the annual contract
fee shown in the fee table be reflective of the contract fees collected
during the year. This charge is assumed to remain the same in each period
listed but does vary by Group Policyholder. Please consult with your employer
or Great-West representative for the fee that applies to your contract. (See
"Administrative Charges, Risk Premiums and Other Deductions: Contract
Maintenance Charge.")
GLOSSARY OF SPECIAL TERMS
As used in this prospectus, the terms have the indicated meanings:
Accumulation Period: The period during which the Participant is covered under
this Group Contract prior to the Participant's Annuity Commencement Date.
Accumulation Unit: An accounting measure used to determine the Variable
Account Value before the Annuity Commencement Date.
Administrative Offices: The Administrative Offices of GWL&A are located at
8515 E. Orchard Rd., Englewood, Colorado 80111.
Annuity Commencement Date: The date on which annuity payments commence
under
an Annuity Option.
Annuity Unit: An accounting measure used to determine the dollar value of any
variable dollar annuity payment after the first payment.
Contribution(s): The total dollar amount(s) paid to purchase an annuity for
a Participant.
Fidelity VIP: Fidelity Variable Insurance Products Fund, a registered
management investment company in which assets of the Series Account may be
invested.
Fixed Annuity: An annuity with payments which remain fixed throughout the
payment period and which do not reflect the investment experience of a
separate account.
Group Contract: An agreement between GWL&A and the Group Policyholder
providing a fixed and/or variable annuity.
Investment Division: The Series Account is divided into investment divisions,
one for each designated Investment Portfolio maintained by Maxim, TCI or
Fidelity VIP and made available to the Series Account.
Investment Portfolio: The securities held in a portfolio of Maxim, TCI or
Fidelity VIP.
Maxim: Maxim Series Fund, Inc., a registered management investment company
in
which assets of the Series Account may be invested.
Participant: An employee who is covered under a Group Contract.
Participant Annuity Account: A separate record established in the name of
each Participant which reflects the total of the Participant's Guaranteed and
Variable Account Values.
Participant Annuity Account Value: The sum of the Participant's Guaranteed
and Variable Account Values.
Premium Tax: The amount of tax, if any, charged by a state or other
government authority on premiums.
Request: Any request in a form satisfactory to GWL&A and received by
GWL&A
at its Administrative Office, as required by any provision of the Group
Contract, and at other times as required by GWL&A.
Series Account: The segregated investment account of Great-West Life &
Annuity Insurance Company called "FUTUREFUNDS Series Account" existing
under
Colorado law and registered as a unit investment trust under the Investment
Company Act of 1940, as amended.
TCI: TCI Portfolios, Inc., a registered management investment company in
which assets of the Series Account may be invested.
Transfer: The transfers of all or a portion of a Participant Annuity Account
Value between and among the Variable and/or Guaranteed Sub-Accounts.
Transfer to Other Companies: The transfer of all or a portion of a
Participant Annuity Account Value to another company.
Valuation Date: The date on which the net asset value of Maxim, TCI, or
Fidelity VIP is determined, and the date on which any Contribution or
Request from the Participant/Group Policyholder will be processed by GWL&A.
A unit value is calculated once daily Monday through Friday except on
holidays on which the New York Stock Exchange is closed. Contributions and
Requests received after 4:00 p.m. EST/EDT will be deemed to have been
received on the next business day. On the day after Thanksgiving, however,
transactions submitted other than by automated voice response unit or by
computer link will not be processed.
Valuation Period: The period between the ending of two successive Valuation
Dates.
Variable Account: The account established under this Group Contract
providing for Variable Sub-Accounts.
Variable Account Value: The sum of the values of the Variable Sub-Accounts
credited to a Participant Annuity Account.
Variable Annuity: An annuity providing for payments, the amount of which will
vary in accordance with the changing values of securities held in the Series
Account.
Variable Sub-Account: A subdivision of the Variable Account containing the
value credited to a Participant from an Investment Division.
QUESTIONS AND ANSWERS ABOUT THE SERIES ACCOUNT VARIABLE
ANNUITY
What is the objective of the Group Contracts offered in this Prospectus?
The objective of the Group Contracts is to provide annuity retirement
programs that qualify for special federal income tax treatment for employees.
Under Section 401(a) plans (including plans sponsored by non-profit and
governmental entities) and under Section 401(k) plans, any employer and
certain employee organizations, such as labor unions, may purchase a Group
Contract. Employers eligible to purchase a Group Contract under Section
403(b) retirement programs include state educational institutions and certain
tax-exempt organizations that meet the requirements of Section 501(c)(3) of
the Code. In addition, under Section 403(b) programs, (i) certain
associations of state educational employees and associations of employees of
tax-exempt organizations may enter into a Group Contract for the benefit of
their members; and (ii) certain associations of state educational employers
and associations of tax-exempt employers may also enter into a Group Contract
for the benefit of employees or their employer members. Under Section 457
retirement programs of the Code, certain state and local governmental
entities and, for years beginning after 1986, other tax-exempt organizations
described in Section 457 are also eligible. (See "The Group Contracts;
Eligible Purchasers").
How can an employee obtain coverage under a Group Contract?
After purchasing a Group Contract, the employer will submit to GWL&A
an
application for any employee who desires coverage under the contract and is
eligible to participate in the employer's retirement program. An employee
should consult his/her employer for information concerning eligibility.
How is the amount of Contributions determined?
For Group Contracts issued under a Section 401(a) retirement program,
the employer or employee organization will make Contributions pursuant to its
underlying Federal or State qualified plan.
For Group Contracts issued under a Section 401(k) retirement program,
the employer will make Contributions pursuant to an underlying Section 401(k)
plan and either a salary reduction agreement with its employees or a cash or
deferred agreement.
For Group Contracts issued under an employer's Section 403(b)
retirement
program, the employer will make Contributions for its employees pursuant to
either a salary reduction agreement with those employees or an agreement to
forego a salary increase. In each case, the employee will decide his/her own
level and number of Contributions to be made under a Group Contract, except
with respect to employer-sponsored plans, under which the employer will make
Contributions pursuant to an underlying retirement plan.
For Group Contracts issued under a Section 457 retirement program,
the
employer will make Contributions pursuant to an underlying deferred
compensation plan.
The employer will report the amount paid as Contributions to GWL&A.
There is no minimum amount or number of Contributions.
How are Contributions allocated?
Contributions are allocated to the Series Account to accumulate on a
variable basis, to the Guaranteed Account to accumulate at a guaranteed rate
of return, or combination of both. The assets of the Series Account are
invested at net asset value (no sales charge) in shares of Maxim, TCI or
Fidelity VIP. See "Investments of the Series Account" for the
investment objectives and policies of those portfolios of Maxim, TCI and
Fidelity VIP which are available for Allocation of Contributions to the
Series Account. They are also described in full in the accompanying
prospectus for Maxim, TCI and Fidelity VIP.
How will a covered employee know the value of the Contribution made in
his/her name?
A Participant Annuity Account will be established in the name of each
Participant to reflect the dollar value of Contributions made in each
Participant's name. Participants will be furnished not less frequently than
annually a statement of the Participant Annuity Account Value established in
his/her name.
What elections are permitted under the Group Contracts?
Under the Group Contracts issued pursuant to Section 401(a) or Section
401(k) retirement programs, all Contributions are held for the exclusive
benefit of the Participants to the extent vested. All elections permitted
under the Group Contracts are made directly by the employer to GWL&A. The
underlying pension or profit sharing plan may, however, permit the
Participants to make certain of those elections indirectly through the
employer.
Under the Group Contracts issued pursuant to Section 403(b) retirement
programs, all Contributions are vested in the Participant when made, subject
to any limitations in the underlying retirement plan, and the Participant
makes all the elections permitted under the contract, except with respect to
employer-sponsored plans, under which elections are made directly by the
employer to GWL&A. The underlying retirement plan may, however, permit the
Participants to make certain of these elections indirectly through the
employer.
Under the Group Contracts issued pursuant to Section 457 retirement
programs, all Contributions remain property of the employer until made
available to a Participant by the employer's underlying deferred compensation
plan. All elections permitted under these Group Contracts are made directly
by the employer to GWL&A. An underlying deferred compensation plan may,
however, permit the Participants to make certain of those elections
indirectly through the employer.
What are the charges to Participants under the Group Contracts?
GWL&A deducts a "Contract Maintenance Charge" for administrative
expenses of not more than $30.00 annually from each Participant
Annuity Account Value. The Contract Maintenance Charge on Section 403(b)
Group Contracts will be waived for an initial period of no less than 12
months and up to 15 months, depending on the Participant's effective date.
There may also be a charge associated with the total or partial distribution
from a Participant Annuity Account prior to the Annuity Commencement Date.
The cumulative total of all Contingent Deferred Sales Charges applied to
any Participant Annuity Account will not exceed 6% of all Contributions made
within 72 months prior to the date of any distribution in whole or in part,
or, with respect to certain Sections 401(a) or 401(k) and 457 retirement
programs, 5% of the amount distributed. Participants in some programs will
not be assessed a Contingent Deferred Sales Charge. (See "Administrative
Charges, Risk Premiums and Other Deductions.") Certain redeemability
restrictions apply to Group Contracts issued under the Texas Optional
Retirement Program. (See "Restrictions Under the Texas Optional Retirement
Program.") There may also be redeemability restrictions applied to
Participants in Section 403(b) Group Contracts. (See "Federal Tax
Consequences: Section 403(b) Retirement Programs.") Upon a total or
partial distribution, a penalty tax may be imposed pursuant to Section 72(t)
of the Code. (See "Federal Tax Consequences.")
GWL&A also deducts from the net asset value of the Series Account an
amount, computed daily, equal to an annual rate of 1.25% for mortality and
expense risk guarantees.
GWL&A presently intends to pay any applicable state premium taxes as
a
result of the existence of the Participant Annuity Accounts. Applicable state
premium taxes range from 0 to 3.50% of the Contributions or the
Participant Annuity Account Value.
Maxim, TCI, and Fidelity VIP incur a charge against the net asset
value
for Investment Advisory Services and may incur other expenses.
What are the distribution rights under the Group Contracts?
A distribution in whole or in part may be taken from the Participant
Annuity Account up to 30 days prior to the Annuity Commencement Date, subject
to any limitations in the underlying retirement plan and subject to a
Contingent Deferred Sales Charge. (See "Accumulation Period: Total and
Partial Distribution" for a description of distribution procedures.) Under
certain circumstances, a Contingent Deferred Sales Charge will not be charged
to Participants who have participated for 15 or more years in the FutureFunds
Group Annuity Contract. (See "Administrative Charges, Risk Premiums and
Other
Deductions.")
Can Contributions be Transferred between the Variable and Fixed Sub-Accounts
Yes. All or a portion of a Participant Annuity Account Value held in
any
of the Variable Sub-Accounts or Daily Interest Guarantee Sub-Account may be
Transferred at any time prior to the Annuity Commencement Date by written or
telephone request. Transfers of all or a portion of a Participant Annuity
Account Value held in any of the Guaranteed Certificate Funds or
Guaranteed Fixed Funds may be made only at Certificate maturity.
(See
"Accumulation Period: Transfers Between Variable and Guaranteed
Sub-Accounts.")
What Annuity Options are available?
The Group Contracts provide for several annuity options payable on a
variable, fixed, or combination basis. An election of any annuity option(s)
must be made at least 30 days prior to the Participant's Annuity Commencement
Date. If no election is made, annuity payments will begin automatically on
the Annuity Commencement Date under an option providing for a life annuity
with 120 monthly payments certain. (See "Annuity Options.")
What are the voting rights under the Group Contracts?
Participants under Section 403(b) retirement programs and the employer
under Section 401(a), Section 401(k) and Section 457 retirement programs will
be entitled to instruct GWL&A to vote shares of Maxim, TCI or Fidelity VIP
held for their Participant Annuity Accounts. (See "Voting Rights.")
Is there a short-term cancellation right?
Yes. Within fifteen (15) days after a Participant Certificate is first
mailed, it may be canceled by the Participant for any reason by delivering or
mailing it, along with a Request to cancel, to GWL&A's Administrative Offices
or to an authorized agent of GWL&A. This cancellation right only applies to
Group Contracts issued under Section 403(b) retirement programs. (See "Return
Privilege.")
How will the Group Contracts be distributed?
The Group Contracts will be distributed through Great-West and will be
sold by duly licensed insurance agents of Great-West, independent insurance
brokers, and various other registered broker-dealers. (See "Distribution of
the Group Contracts.")
FINANCIAL HIGHLIGHTS
Selected Data for Accumulation Units
Outstanding Throughout Each Period
For the Years Ended December 31,
INVESTMENT DIVISION
1995 1994 1993 1992 1991 1990 1989
1988 1987 1986
MONEY MARKET 1
Value at beginning of period
$ 16.25 $ 15.84 $ 15.60 $ 15.26 $ 14.59 $ 13.71 $ 12.72
$ 11.98 $ 11.40 $ 10.83
Value at end of period
$ 16.96 $ 16.25 $ 15.84 $ 15.60 $ 15.26 $ 14.59 $ 13.71
$ 12.72 $ 11.98 $ 11.40
Increase (decrease) in value
of accumulation unit
$ 0.71 $ 0.41 $ 0.24 $ 0.34 $ 0.67 $ 0.88 $ 0.99
$ 0.74 $ 0.58 $ 0.57
Number of accumulation units
outstanding at end of period
2,880,571.67 2,277,816.08 684,669 787,941 901,603 846,538
723,266 755,640 572,824 200,603
BOND 1
Value at beginning of period
$ 22.89 $ 23.74 $ 22.14 $ 21.10 $ 18.63 $ 17.43 $ 15.60
$ 14.98 $ 14.75 $ 12.75
Value at end of period
$ 26.05 $ 22.89 $ 23.74 $ 22.14 $ 21.10 $ 18.63 $ 17.43
$ 15.60 $ 14.98 $ 14.75
Increase (decrease) in value
of accumulation unit
$ 3.16 $ (0.85) $ 1.60 $ 1.04 $ 2.47 $ 1.20 $ 1.83
$ 0.62 $ 0.23 $ 2.00
Number of accumulation units
outstanding at end of period
2,010,468.99 2,102,049. 2,301,785 1,995,291 2,067,966
1,765,573 1,524,813 1,269,165 983,061 779,668
STOCK INDEX 1-2
Value at beginning of period
$ 27.30 $ 27.61 $ 25.44 $ 24.33 $ 19.97 $ 20.34 $ 17.88
$ 15.35 $ 14.70 $ 13.13
Value at end of period
$ 36.57 $ 27.30 $ 27.61 $ 25.44 $ 24.33 $ 19.97 $ 20.34
$ 17.88 $ 15.35 $ 14.70
Increase (decrease) in value
of accumulation unit
$ 9.27 $ (0.31) $ 2.17 $ 1.11 $ 4.36 $ (0.37)$ 2.46
$ 2.53 $ 0.65 $ 1.57
Number of accumulation units
outstanding at end of period
7,636,165.40 7,589,448.89 9,325,064 8,106,011 8,262,908
6,501,628 5,369,016 4,400,397 3,749,307 1,981,839
U.S. GOVERNMENT SECURITIES 3
Value at beginning of period
$ 10.71 $ 11.21 $ 10.38 $ 10.00
Value at end of period
$ 12.29 $ 10.71 $ 11.21 $ 10.38
Increase (decrease) in value
of accumulation unit
$ 1.58 $ (.50) $ 0.83 $ 0.38
Number of accumulation units
outstanding at end of period
3,165,425.83 2,756,894.60 1,892,295 251,644
TCI GROWTH 3
Value at beginning of period
$ 11.53 $ 11.82 $ 10.85 $ 10.00
Value at end of period
$ 14.93 $ 11.53 $ 11.82 $ 10.85
Increase (decrease) in value
of accumulation unit
$ 3.40 $ (0.29) $ 0.97 $ 0.85
Number of accumulation units
outstanding at end of period
4,954,474.12 4,420,493.64 2,607,850 647,466
TCI BALANCED 3
Value at beginning of period
$ 10.83 $ 10.90 $ 10.25 $ 10.00
Value at end of period
$ 12.96 $ 10.83 $ 10.90 $ 10.25
Increase (decrease) in value
of accumulation unit
$ 2.13 $ (0.07) $ 0.65 $ 0.25
Number of accumulation units
outstanding at end of period
3,153,172.39 2,877,738.22 1,752,731 473,968
MID-CAP (GROWTH FUND I) 4
Value at beginning of period
$ 10.96 $ 10.00
Value at end of period
$ 13.70 $ 10.96
Increase (decrease) in value
of accumulation unit
$ 2.74 $ 0.96
Number of accumulation units
outstanding at end of period
1,715,174.42 788,758.55
SMALL-CAP INDEX 10
Value at beginning of period
$ 9.48 $ 10.00
Value at end of period
$ 11.82 $ 9.48
Increase (decrease) in value
of accumulation unit
$ 2.34 $ (0.52)
Number of accumulation units
outstanding at end of period
296,281.36 152,895.00
TOTAL RETURN 9
Value at beginning of period
$ 9.62 $ 10.00
Value at end of period
$ 11.66 $ 9.62
Increase (decrease) in value
of accumulation unit
$ 2.04 $ (0.38)
Number of accumulation units
outstanding at end of period
214,442.71 58,473.26
FINANCIAL HIGHLIGHTS
Selected Data for Accumulation Units
Outstanding Throughout Each Period
For the Years Ended December 31,
INVESTMENT DIVISION 1995 1994
INTERNATIONAL EQUITY 4
Value at beginning of period
$ 10.49 $ 10.00
Value at end of period
$ 11.29 $ 10.49
Increase (decrease) in value
of accumulation unit
$ 0.80 $ 0.49
Number of accumulation units
outstanding at end of period
1,645,237.34 1,075,821.94
FIDELITY VIP GROWTH 5
Value at beginning of period
$ 9.62 $ 10.00
Value at end of period
$ 12.86 $ 9.62
Increase (decrease) in value
of accumulation unit
$ 3.24 $ (0.38)
Number of accumulation units
outstanding at end of period
1,502,634.51 559,313.44
FIDELITY VIP II ASSET MANAGER 5
Value at beginning of period
$ 9.31 $ 10.00
Value at end of period
$ 10.76 $ 9.31
Increase (decrease) in value
of accumulation unit
$ 1.45 $ (0.69)
Number of accumulation units
outstanding at end of period
1,202,943.32 768,426.17
MAXIM T. ROWE PRICE
EQUITY/INCOME 8
Value at beginning of period
$ 9.85 $ 10.90
Value at end of period
$ 12.98 $ 9.85
Increase (decrease) in value
of accumulation unit
$ 3.13 $ (0.15)
Number of accumulation units
outstanding at end of period
550,610.66 16,574.29
SMALL-CAP VALUE
(ARIEL VALUE) 6
Value at beginning of period
$ 10.15 $ 10.00
Value at end of period
$ 11.58 $ 10.15
Increase (decrease) in value
of accumulation unit
$ 1.43 $ 0.15
Number of accumulation units
outstanding at end of period
30,919.44 .01
CORPORATE BOND 7
Value at beginning of period
$ 10.00
Value at end of period
$ 12.44
Increase (decrease) in value
of accumulation unit
$ 2.44
Number of accumulation units
outstanding at end of period
220,637.10
MAXIM INVESCO ADR 11
Value at beginning of period
$ 10.00
Value at end of period
$ 11.25
Increase (decrease) in value
of accumulation unit
$ 1.25
Number of accumulation units
outstanding at end of period
23,104.73
MAXIM INVESCO
SMALL-CAP GROWTH 12
Value at beginning of period
$ 10.00
Value at end of period
$ 13.09
Increase (decrease) in value
of accumulation unit
$ 3.09
Number of accumulation units
outstanding at end of period
210,982.04
Current Accumulation Unit Values can be obtained by calling GWL&A
toll-free at 1-800-523-4106
The dates listed below indicate the inception date of the
respective Investment Division in the contract.
1. The inception date for the Money Market, Bond and Stock Index
Investment Divisions is October 5, 1984
2. Prior to December 1, 1992, the Growth Investment Division
3. The inception date for the U.S. Government Securities, TCI
Growth and TCI Balanced Investment Divisions is August 1, 1992
4. Inception date for Growth Fund I and International Equity was
April 13, 1994
5. Inception date for Fidelity VIP Growth, Fidelity VIP II Asset
Manager was April 2 1, 1994
6. Inception date for Ariel Value was November 4 , 1994
7. Inception date for Corporate Bond was February 2, 1995
8. Inception date for T. Rowe Price Equity/Income was November 9,
1994.
9. Inception date for Total Return was April 20, 1994.
10. Inception date for Small Cap Index was March 15, 1994.
11. Inception date for INVESCO ADR was January 5, 1995.
12. Inception date for INVESCO Small-Cap Growth was January 9,
1995.
PERFORMANCE RELATED INFORMATION
From time to time, the Series Account may advertise certain performance
related information concerning its Investment Divisions. Performance
information about an Investment Division is based on the
Investment
Division's historical performance only and is not intended to indicate
future performance. The inception dates for each Investment Division and
the corresponding Maxim, TCI, and Fidelity VIP Portfolios are set forth
below, following the total return information.
Below is a table of performance related information for the Money Market
Investment Division for stated periods ended December 31, 1995:
INVESTMENT DIVISIONS Yield
Effective Yield
Money Market 4.17% 4.26%
Yield and effective yield for the Money Market Investment Division is for the
7-day period ended December 31, 1995. The yield calculation above takes
into account recurring charges against the Series Account and the Money
Market Portfolio (but does not take into account the Contingent Deferred
Sales Charge). The yield and effective yield information is annualized.
TOTAL RETURNS
For Section 401(a), 401(k) and 457 retirement programs where the
Contingent Deferred Sales Charge(*)is assessed at 6% of the prior 72 months
Contributions:
INVESTMENT
DIVISIONS
Before CDSC
1 Year
After
CDSC
1 Year
Before CDSC
5 Year
After CDSC
5 Year
Before CDSC
10 Year
or Since
Inception
After
CDSC
10 Year
or Since
Inception
Money Market
4.33%
-1.67%
3.00%
1.91%
4.54%
4.54%
Bond
13.73%
7.73%
6.88%
5.95%
7.35%
7.35%
Stock Index (1)
33.88%
27.88%12.80%
12.05%
10.73%
10.73%
U.S. Government Securities 14.61%
8.61%
7.48%
6.57%
7.47%
7.47%
Small-Cap Index
24.63%
18.63%
N/A
N/A
8.41%
5.73%
Total Return
21.14%
15.14%
10.07%
9.24%
7.69%
7.69%
Mid-Cap (Growth Fund I)
24.89%
18.89%
N/A
N/A
16.97%
14.38%
International Equity
7.53%
1.53%
N/A
N/A
6.40%
3.67%
Corporate Bond
28.53%
22.53%
N/A
N/A
22.26%
17.26%
Small-Cap Value (Ariel Value)
14.02%
8.02%
N/A
N/A
6.07%
3.33%
Maxim INVESCO ADR
14.00%
8.00%
N/A
N/A
10.59%
5.51%
Maxim INVESCO Small-Cap Growth
30.10%
24.10%
N/A
N/A
26.03%
21.05%
Maxim T. Rowe Price Equity/Income
31.72%
25.72%
N/A
N/A
25.02%
20.03%
TCI Growth
29.43%
23.43%
13.40%
12.67%
11.38%
11.38%
TCI Balanced
19.57%
13.57%
N/A
N/A
8.39%
7.42%
Fidelity VIP Growth
33.65%
27.65%
19.02%
18.42%
13.25%
13.25%
Fidelity VIP II Asset Manager
15.48%
9.48%
11.24%
10.44%
9.77%
9.18%
(1) Prior to December 1, 1992, the Growth Investment Division.
* The CDSC or Contingent Deferred Sales Charge, is deducted only when money
is withdrawn from the Group Contract, and not when the money is Transferred
between Investment Divisions. Therefore, the Series Account provides total
returns both before and after considering the CDSC.
For Section 403(b) and 457 retirement programs where the Contingent Deferred
Sales Charge (*) is assessed at 5% of the amount distributed:
INVESTMENT
DIVISIONS
Before
CDSC
1 Year
After
CDSC
1 Year
Before
CDSC
5 Year
After
CDSC
5 Year
Before CDSC
10 Year
or Since
Inception
After CDSC
10 Year
or Since
Inception
Money Market
4.33%
-0.88% 3.00%
2.17%
4.54%
4.22%
Bond
13.73%
8.04%
6.88%
6.01%
7.35%
7.02%
Stock Index (1)
33.88%
27.19%
12.80%
11.88%
10.73%
10.39%
U.S. Government Securities
14.61%
8.88%
7.48%
6.61%
7.47%
7.14%
Small-Cap Index
24.63%
18.40%
N/A
N/A
8.41%
5.77%
Total Return
21.14%
15.08%
10.07%
9.18%
7.69%
7.17%
Mid-Cap (Growth Fund I)
24.89%
18.64%
N/A
N/A
16.97%
14.01%
International Equity
7.53%
2.16%
N/A
N/A
6.40%
3.81%
Corporate Bond
28.53%
22.10%
N/A
N/A
22.26%
16.99%
Small-Cap Value (Ariel Value)
14.02%
8.32%
N/A
N/A
6.07%
3.49%
Maxim INVESCO ADR
14.00%
8.30%
N/A
N/A
10.59%
5.83%
Maxim INVESCO Small-Cap Growth
30.10%
23.59%
N/A
N/A
26.03%
20.60%
Maxim T. Rowe Price Equity/Income
31.72%
25.14%
N/A
N/A
25.02%
19.63%
TCI Growth
29.43%
22.95%
13.40%
12.48%
11.38%
10.82%
TCI Balanced
19.57%
13.59%
N/A
N/A
8.39%
7.21%
Fidelity VIP Growth
33.65%
26.97%
19.02%
18.05%
13.25%
12.75%
Fidelity VIP II Asset Manager
15.48%
9.71%
11.24%
10.33%
9.77%
9.06%
(1) Prior to December 1, 1992, the Growth Investment Division.
* The CDSC or Contingent Deferred Sales Charge, is deducted only when money
is withdrawn from the Group Contract, and not when the money is Transferred
between Investment Divisions. Therefore, the Series Account provides total
returns both before and after considering the CDSC. The CDSC for
Section
457 retirment programs diminishes over time, these factors are taken into
consideration in calculating the above returns. See "Administrative Charges,
Risk Premiums and Other Deductions - Contingent Deferred Sales
Charge".
For Section 403(b) and 457 retirement programs where the Contingent Deferred
Sales Charge (*) is not assessed:
INVESTMENT
DIVISIONS
Before CDSC
1 Year
After CDSC
1 Year
Before CDSC
5 Year
After CDSC
5 Year
Before CDSC
10 Year
or Since
Inception
After CDSC
10 Year
or Since
Inception
Money Market
4.33%
N/A
3.00%
N/A
4.54%
N/A
Bond
13.73%
N/A
6.88%
N/A
7.35%
N/A
Stock Index (1)
33.88%
N/A
12.80%
N/A
10.73%
N/A
U.S. Government Securities
14.61%
N/A
7.48%
N/A
7.47%
N/A
Small-Cap Index
24.63%
N/A
N/A
N/A
8.41%
N/A
Total Return
21.14%
N/A
10.07%
N/A
7.69%
N/A
Mid-Cap (Growth Fund I)
24.89%
N/A
N/A
N/A
16.97%
N/A
International Equity
7.53%
N/A
N/A
N/A
6.40%
N/A
Corporate Bond
28.53%
N/A
N/A
N/A
22.26%
N/A
Small-Cap Value (Ariel Value)
14.02%
N/A
N/A
N/A
6.07%
N/A
Maxim INVESCO ADR
14.00%
N/A
N/A
N/A
10.59%
N/A
Maxim INVESCO Small-Cap Growth
30.10%
N/A
N/A
N/A
26.03%
N/A
Maxim T. Rowe Price Equity/Income
31.72%
N/A
N/A
N/A
25.02%
N/A
TCI Growth
29.43%
N/A
13.40%
N/A
11.38%
N/A
TCI Balanced
19.57%
N/A
N/A
N/A
8.39%
N/A
Fidelity VIP Growth
33.65%
N/A
19.02%
N/A
13.25%
N/A
Fidelity VIP II Asset Manager
15.48%
N/A
11.24%
N/A
9.77%
N/A
(1) Prior to December 1, 1992, the Growth Investment Division.
* The CDSC or Contingent Deferred Sales Charge, is deducted only when money
is withdrawn from the Group Contract, and not when the money is Transferred
between Investment Divisions. Therefore, the Series Account provides total
returns both before and after considering the CDSC.
The tables above show total return for each Investment Division of
the Series Account calculated on the basis of the historical performance of
the corresponding Maxim, TCI, and Fidelity VIP Portfolios available under the
Contracts (calculated from inception for each corresponding Portfolio or ten
years, as applicable) and assume that the Portfolios were available under the
Contract for all of the periods shown (which they were not). Actual total
return is shown for periods after which the respective Portfolios became
available under the Contract. The returns shown reflect deductions for all
Series Account expenses and Portfolio expenses.
The following table sets forth the inception date of each Investment
Division and the inception date of the corresponding Maxim, TCI, and Fidelity
VIP Portfolio.
INVESTMENT DIVISION PORTFOLIO INCEPTION
DATE
INVESTMENT
DIVISION
INCEPTION IN CONTRACT
Money Market February 25, 1982
October 5, 1984
Bond July 1, 1982 October 5, 1984
Stock Index July 1, 1982
October 5, 1984
U.S. Government Securities April 4, 1985
August 1, 1992
Small-Cap Index December 1, 1993
March 15, 1994
Total Return August 6, 1987
April 20, 1994
Mid-Cap (Growth Fund I) December 31, 1993
April 13,
1994
International Equity December 1, 1993
April 13, 1994
Corporate Bond November 1, 1994
February 2, 1995
Small-Cap Value (Ariel Value)
December 1, 1993
November 4, 1994
Maxim INVESCO ADR
November 1, 1994 January 5, 1995
Maxim INVESCO Small-Cap Growth
November 1, 1994
January 9,
1995
Maxim T. Rowe Price Equity/Income
November 1, 1994
November 9,
1994
TCI Growth
November 20, 1987 August 1, 1992
TCI Balanced May 1, 1991 August 1, 1992
Fidelity VIP Growth
October 9, 1986 April 21, 1994
Fidelity VIP II Asset Manager
September 8, 1989 April
21,
1994
Performance Related Information
The Series Account may include total return in advertisements or other sales
material regarding the Money Market, Bond, Stock Index, U.S.
Government Securities, TCI Growth, TCI Balanced, Small-Cap Index,
Mid-Cap
(Growth Fund I), International Equity, Total Return, Corporate Bond,
Small-Cap Value (Ariel Value), Maxim T. Rowe Price
Equity/Income,
Maxim INVESCO ADR, Maxim INVESCO Small-Cap
Growth,
Fidelity VIP
Growth and the Fidelity VIP II Asset Manager Investment Divisions. When the
Series Account advertises the total return of one of these portfolios, it
will be calculated for one year, five years, and ten years or some other
relevant period if the portfolio has not been in existence for at least ten
years. Total return is measured by comparing the value of an investment in
the portfolio at the beginning of the relevant period to the value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions).
For the Money Market Investment Division, "yield" refers to the income
generated by an investment in the Money Market Investment Division over a
stated seven-day period. This income is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to
be generated each week over a 52-week period and is shown as a percentage of
the investment. The "effective yield" of the Money Market Investment Division
is calculated similarly but, when annualized, the income earned by an
investment in the Money Market Investment Division is assumed to be
reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
The yield and effective yield calculations for the Money Market Investment
Division includes all recurring charges under the Group Contracts (but does
not include the Contingent Deferred Sales Charge), and is lower than yield
and effective yield for Maxim which does not have comparable charges.
Total return for the Investment Divisions includes all charges under
the Group Contracts, including any Contingent Deferred Sales Charge, and
likewise, is lower than total return at the Maxim, TCI or Fidelity VIP level,
which has no comparable charges.
For more complete information on the method used to calculate yields,
effective yields, and total return of the respective Investment Divisions,
see the "Statement of Additional Information".
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
GWL&A is a stock life insurance company originally organized under the laws
of the state of Kansas as the National Interment Association. Its name was
changed to Ranger National Life Insurance Company in 1963 and to Insuramerica
Corporation prior to changing to its current name in February of 1982. In
September of 1990, GWL&A redomesticated and is now organized under the laws
of the state of Colorado.
GWL&A is authorized to engage in the sale of life insurance, accident and
health insurance and annuities. It is qualified to do business in Puerto
Rico, the District of Columbia and 49 states in the United States.
GWL&A is a wholly-owned subsidiary of The Great-West Life Assurance
Company. The Great-West Life Assurance Company is a subsidiary of
Great-West
Lifeco Inc., a holding company. Great-West Lifeco Inc. is in turn a
subsidiary of Power Financial Corporation, a financial services company.
Power Corporation of Canada, a holding and management company, has voting
control of Power Financial Corporation. Mr. Paul Desmarais, through a
group of private holding companies, which he controls, has voting control
of Power Corporation of Canada.
GWL&A has primary responsibility for administration of the Group
Contracts and the Series Account. Its Administrative Offices are located at
8515 E. Orchard Road, Englewood, Colorado 80111.
FUTUREFUNDS SERIES ACCOUNT (THE "SERIES ACCOUNT")
The Series Account was originally established by GWL&A under Kansas
law
on November 15, 1983. The Series Account now exists pursuant to Colorado law
as a result of the redomestication of GWL&A. The Series Account has been
registered with the Securities and Exchange Commission as a unit investment
trust pursuant to the provisions of the Investment Company Act of 1940, as
amended, and meets the definition of a "separate account" under the
federal securities laws. Such registration does not involve
supervision of the management of the Series Account or GWL&A by the
Securities and Exchange Commission.
The Series Account currently has seventeen Investment Divisions
available for allocation of Contributions. If, in the future, GWL&A
determines that marketing needs and investment conditions warrant, it may
establish additional Investment Divisions which will be made available to
existing Group Contract owners to the extent and on a basis to be determined
by GWL&A. Each Investment Division invests in shares of Maxim, TCI or
Fidelity VIP allocable to one of seventeen Investment Portfolios, each having
a specific investment objective. Maxim, TCI and Fidelity VIP also have other
portfolios which are not generally available for investment by the Series
Account.
GWL&A does not guarantee the investment performance of the Series
Account. The portion of the Participant Annuity Account Value attributable to
the Series Account and the amount of variable annuity payments depend on the
investment performance of Maxim, TCI and Fidelity VIP. Thus, the Participant
bears the full investment risk for all Contributions allocated to the Series
Account.
The Series Account is administered and accounted for as part of the
general business of GWL&A; but the income, capital gains, or capital losses
of each Variable Sub-Account are credited to or charged against the assets
held in that Variable Sub-Account in accordance with the terms of the Group
Contracts, without regard to other income, capital gains or capital losses of
any other Variable Sub-Account or arising out of any other business GWL&A
may
conduct. Under Colorado law, the assets of the Series Account are not
chargeable with liabilities arising out of any other business GWL&A may
conduct. Nevertheless, all obligations arising under the Group Contracts are
generally corporate obligations of GWL&A.
THE GROUP CONTRACTS
Eligible Purchasers
Section 401(a) Retirement Programs. Employers, including non-profit entities
defined in Code Section 501(c) and governmental entities defined in Code
Section 414(d) and Sections 3(32) and 4 of the Employment Retirement Income
Security Act of 1974 ("ERISA"), and certain employee organizations defined in
Sections 3(4) and 3(5) of ERISA, such as labor organizations, may purchase a
Group Contract.
Section 401(k) Retirement Programs. Any employer and certain employee
organizations defined in Sections 3(4) and 3(5) of ERISA, such as labor
organizations, may purchase a Group Contract.
Section 403(b) Retirement Programs. State educational institutions and
tax-exempt organizations under Section 501(c)(3) of the Code may purchase
Group Contracts. In addition, associations of state educational employees,
associations of state educational employers, associations of employees of
organizations that are tax-exempt under Section 501(c)(3) of the Code, and
associations of tax-exempt employers under Section 501(c)(3), may also
purchase Group Contracts. In order to be eligible, however, the association
must also meet the requirements of Sections 501(c)(3).
Section 457 Retirement Program. State governments, local governments, rural
electric cooperatives, political subdivisions, and agencies,
instrumentalities and certain affiliates of such entities may purchase the
Group Contracts. For years beginning after 1986, organizations (other than
a governmental unit) which are exempt from tax under the Code, and which
maintain a Section 457 Retirement Program, may also purchase the Group
Contracts.
Any of the organizations mentioned above wishing to purchase Group
Contracts must complete application forms which selling agents will forward
to GWL&A's Administrative Offices for acceptance. Where the purchaser is an
employee association, any employer of an association member employee can
obtain coverage by completing application forms and agreeing in writing to be
bound by the terms of the Group Contract. Likewise, where the purchaser is an
association of tax-exempt employers, any employer member can obtain coverage
by following the same procedures. GWL&A reserves the right to reject any
application.
Employee Coverage
The employer will submit to selling agents an application for any
employee who desires coverage under the Group Contract and is eligible to
participate in the employer's retirement program. GWL&A reserves the right to
reject any application. An employee should consult his/her employer for
information concerning eligibility.
Contributions
Section 401(a) Retirement Programs. Contributions will be made by the
employer or employee organization pursuant to the employer's or employee
organization's underlying pension or profit-sharing plan.
Section 401(k) Retirement Programs. Contributions will be made by the
employer pursuant to the employer's underlying profit sharing plan and the
Participant's election to execute a salary reduction agreement or a cash or
deferred agreement.
Section 403(b) Retirement Programs. The employer will make Contributions in
accordance with a salary reduction agreement with its employees or an
agreement to forego a salary increase, except with respect to
employer-sponsored plans under which the employer will make Contributions
pursuant to an underlying retirement plan.
Section 457 Retirement Programs. Contributions will be made by the employer
pursuant to the employer's underlying deferred compensation plan.
Under all retirement programs, the employer will report the amount paid as
Contributions on forms provided by GWL&A. Checks for Contributions should
be
made payable to the Great-West Life & Annuity Insurance Company. There is
no
minimum amount or number of Contributions and, for any Participant Annuity
Account, Contributions can be made until the Participant's Annuity
Commencement Date.
Participant Annuity Account
A Participant Annuity Account will be established in the name of each
Participant to reflect the dollar values of Contributions made in each
Participant's name. Participants will be furnished no less frequently than
annually with a statement of the Participant Annuity Account Value
established in his/her name.
Ownership
Section 401(a) Retirement Programs. The employer or employee organization
purchasing a Group Contract is the owner of the Contract. Employer
Contributions vest in accordance with the terms of the employer's or employee
organization's underlying plan. Any employee Contributions are immediately
vested in the Participant. Neither the employer, employee organization nor
the Participants can assign any interest in the Group Contract or the
Participant Annuity Account.
Section 401(k) Retirement Programs. The employer or employee organization
purchasing a Group Contract is the owner of the contract. All employer
Contributions credited to a Participant Annuity Account pursuant to the
Participant's election to execute a salary reduction agreement or a cash or
deferred agreement are vested in the Participant. Any matching employer
Contributions vest in accordance with the terms of the employer's underlying
plan. Neither the employer, employee organization nor the Participants can
assign any interest in the Group Contract or the Participant Annuity Account.
Section 403(b) Retirement Programs. The employer or association purchasing a
Group Contract is the owner of the contract for the benefit of the
Participants. Each Participant receives a Participant Certificate to evidence
his/her coverage under the Group Contract. All Contributions credited to a
Participant Annuity Account are vested in the Participant, subject to any
limitations in the underlying retirement plan. Interests in the Group
Contract or the Participant Annuity Accounts cannot be assigned by the
employer, association or the Participants.
Section 457 Retirement Programs. The employer is the owner of the Group
Contract. All Contributions made in the name of the Participants remain the
property of the employer and subject to the claims of the employer's general
creditors until made available to the Participant in accordance with the
terms of the employer's underlying deferred compensation plan. The employer
may assign or transfer a Group Contract to another person as permitted by
applicable law and only with the prior written consent of GWL&A, which
assumes no responsibility for the validity or effect of any assignment.
PAYMENTS OF ANY BENEFITS UNDER THE GROUP CONTRACT WILL
ONLY BE
MADE IF THEN
PERMITTED UNDER THE EMPLOYER'S DEFERRED COMPENSATION
PLAN AS
DETERMINED BY
THE EMPLOYER.
Elections Under the Group Contracts
The Group Contracts permit the election of the Annuity Commencement
Date, allocation of Contributions, Transfers, distributions in whole or in
part, and the election of annuity payment options. Under Section 403(b)
retirement programs (other than employer-sponsored plans), the Participants
make all the elections permitted under the Group Contracts. Under Section
401(a), Section 401(k), Section 457 and employer-sponsored 403(b) retirement
plans, all elections are made by the employer, or the employee organization.
The employer's underlying pension, profit sharing or deferred compensation
plan or Section 403(b) retirement plan may, however, permit the Participants
to make certain of those elections indirectly through the employer. A
Participant should consult his/her employer for information concerning
elections permitted under its profit sharing or deferred compensation plan.
Amendment of Group Contracts
Section 401(a), Section 401(k) and Section 457 Retirement Programs. The Group
Contracts may be modified at any time by written agreement between GWL&A
and
the employer, or the employee organization.
Section 403(b) Retirement Programs. The Group Contracts may be modified at
any time by written agreement between GWL&A and either the employer, if it
is
the owner of a Group Contract, or the association. No modification will,
however, affect the terms of the contract which are applicable to
Contributions paid prior to such modification without the written consent of
the Participants.
In addition, GWL&A reserves the right to amend the Group Contracts
without the consent of any person to meet the requirements of the Investment
Company Act of 1940 or other applicable federal or state laws or
regulations, or to modify the annuity rates for future Contributions. GWL&A
will notify the Participants of any such changes.
ACCUMULATION PERIOD
Allocation of Contributions
Initial Contributions will be applied after receipt at GWL&A's
Administrative Offices within two business days if the application form is
complete, or within five business days if the application form is incomplete.
If an incomplete application form is completed within five business days of
GWL&A's receipt, the initial Contribution will be applied within two business
days of the application's completion. If the initial Contribution cannot be
so applied, it will be returned at once unless the prospective purchaser
specifically consents to GWL&A retaining the purchase payment until the
application is made complete. Subsequent Contributions will be applied
pursuant to the allocation instructions in the completed application and will
be allocated upon receipt by GWL&A at its Administrative Offices on the day
received. There is no minimum amount or number of Contributions.
Contributions for a Participant are allocated to the Series Account to
accumulate on a variable basis, to the Guaranteed Account to accumulate on a
guaranteed rate of return, or a combination of both, according to the
instructions of the Participant under a Section 403(b) retirement program
(other than employer sponsored plans). The Participants make all the
elections permitted under the Group Contracts under Section 401(a), Section
401(k), Section 457, or employer-sponsored Section 403(b) retirement program
("Allocation Instructions"). Allocation Instructions may be changed
at
any time and will be effective the later of (1) the date specified on the
form and (2) the date the completed form is received and recorded by GWL&A
at
its Administrative Offices. GWL&A will allocate the Contributions based upon
the instructions in the application form. A change of Allocation Instructions
will be effective for Contributions which are received after GWL&A's receipt
and recording of the change.
Upon allocation to the appropriate Variable Sub-Account, the
Contributions are converted into Accumulation Units. The number of
Accumulation Units credited with respect to the initial Contribution under a
Participant Annuity Account is determined by dividing the amount allocated to
each Variable Sub-Account by the value of an Accumulation Unit for that
Variable Sub-Account on the day following GWL&A's receipt of the initial
Contribution and GWL&A's affirmative determination to establish that
Participant Annuity Account. The number of Accumulation Units with respect to
any additional Contribution to a Participant Annuity Account is determined by
dividing the amount allocated to the appropriate Variable Sub-Account by the
value of an Accumulation Unit for that Sub-Account on the day the
Contribution is accepted. Contributions received after 4:00 p.m., EST/EDT,
shall be deemed to have been received on the next Valuation Date. The number
of Accumulation Units so determined shall not be changed by any subsequent
change in the value of an Accumulation Unit, but the dollar value of an
Accumulation Unit will vary in amount depending upon the investment
experience of the applicable underlying mutual fund.
Dollar Cost Averaging
A Participant may, by Request, automatically Transfer amounts from
one Investment Division selected from among those being allowed under this
option to any of the other Investment Divisions at regular intervals. The
intervals between Transfers may be monthly, quarterly, semi-annually or
annually. The Transfer will be initiated one frequency period following the
date of the Request, and thereafter Transfers will continue on the same day
each interval unless terminated by you, or for other reasons as set forth in
the Contract. Transfers can only occur on dates the New York Stock Exchange
("NYSE") is open. If there are insufficient funds in the applicable
Investment Division on the date of Transfer, no Transfer will be made;
however, Dollar Cost Averaging will resume once there are sufficient funds in
the applicable Investment Division.
Automatic Transfers must meet the following conditions:
1. The minimum amount that can be Transferred out of the selected
Investment Division is $100 per month.
2. The Participant must
specify the percentage or dollar amount to be
Transferred, the Accumulation Unit Values will be determined on each Transfer
date.
Dollar Cost Averaging may be used to purchase Accumulation Units of
the
Investment Divisions over a period of time so fewer Accumulation Units are
purchased when prices are greater and more Accumulation Units when prices are
lower. Participation in Dollar Cost Averaging does not, however, assure a
greater profit, nor will it prevent or necessarily alleviate losses in a
declining market. The Participant, by Request, may cease Dollar Cost
Averaging at any time. The Company reserves the right to modify, suspend or
terminate Dollar Cost Averaging at any time.
The Rebalancer Option
The Participant may, by Request, automatically Transfer among the
Investment Divisions on a periodic basis by electing the Rebalancer Option.
This option automatically reallocates the Variable Account Value to maintain
a particular allocation among Investment Divisions selected by the
Participant. The amounts allocated in each Investment Division will increase
or decrease at different rates depending on the investment experience of the
Investment Division.
The Participant may Request that the rebalancing occur one time only, in
which case the Transfer will take place after it has been received and
processed by the Company as provided in the Contract. Rebalancing may also
be set up on a quarterly, semi-annual or annual basis, in which case the
first Transfer will be initiated one frequency period following the date of
the Request. On the Transfer date for the specified Request, assets will be
automatically reallocated to the selected funds. Rebalancing will continue
on the same day each interval unless terminated by you, or for other reasons
as set forth in the Contract. Transfers can only occur on dates the NYSE is
open. In order to participate in the Rebalancer Option, the Participant's
entire Variable Account Value must be included.
The Participant must specify the percentage of Variable Account Value to
be allocated to each Investment Division and the frequency of rebalancing.
The Participant, by Request, may modify the allocations or cease the
Rebalancer Option at any time. Participation in the Rebalancer Option and
Dollar Cost Averaging at the same time is not allowed. Participation in the
Rebalancer Option does not assure a greater profit, nor will it prevent or
necessarily alleviate losses in a declining market. The Company reserves the
right to modify, suspend, or terminate the Rebalancer Option at any time.
Valuation of Accumulation Units
Accumulation Units for each Variable Sub-Account are valued
separately,
but the method used for valuing Accumulation Units in each Variable
Sub-Account is the same. Initially, the value of each Accumulation Unit was
set at $10.00. Thereafter, the value of an Accumulation Unit in any Variable
Sub-Account on any Valuation Date equals the value of an Accumulation Unit in
that Sub-Account as of the immediately preceding Valuation Date multiplied by
the "Net Investment Factor" of that Variable Sub-Account for the current
Valuation Period. Accumulation Unit values are valued once each day that the
underlying mutual fund shares are valued.
The Net Investment Factor for each Variable Sub-Account for any
Valuation Period is determined by dividing (a) by (b), and subtracting (c)
from the result where:
(a) is the net result of:
(i) the net asset value per share of the underlying mutual fund shares
held in the Variable Sub-Account determined as of the end of the current
Valuation Period, plus
ii) the per share amount of any dividend (or, if applicable, capital
gain distributions) made by the underlying mutual fund on shares held in the
Variable Sub-Account if the "ex-dividend" date occurs during the current
Valuation Period, minus or plus
(iii) a per unit charge or credit for any taxes incurred by or
provided
for in the Variable Sub-Account, which is determined by GWL&A to have
resulted from the investment operations of the Variable Sub-Account; and
(b) is the net result of:
(i) the net asset value per share of the underlying mutual fund
shares
held in the Variable Sub-Account determined as of the end of the immediately
preceding Valuation Period, minus or plus
(ii) the per unit charge or credit for any taxes incurred by or
provided
for in the Variable Sub-Account for the immediately preceding Valuation
Period; and
(c) is an amount representing the Risk Charge deducted from each Variable
Sub-Account on a daily basis.
Such amount is equal to 1.25% on an annual basis of the daily net
asset
value of each Variable Sub-Account.
The Net Investment Factor may be greater than, less than, or equal to
one. Therefore, the Accumulation Unit Value may increase, decrease or remain
unchanged.
The net asset value per share referred to in paragraphs (a) (i) and
(b)
(i) above, reflect the investment performance of the underlying mutual fund
as well as the payment of underlying mutual fund expenses. (See "Investments
of the Series Account.")
Transfers Between Variable and Guaranteed Sub-Accounts
All or a portion of a Participant Annuity Account Value held in any of
the Variable Sub-Accounts and/or the Daily Interest Guaranteed Sub-Account
may be transferred at any time prior to the Participant's Annuity
Commencement Date by written or telephone request to GWL&A's
Administrative
Offices. Prior to Participant's Annuity Commencement Date, transfers of all
or a portion of a Participant Annuity Account Value held in any of
the
Guaranteed Certificate Funds or Guaranteed Fixed Funds may be
made
only at Certificate maturity by written or telephone request to GWL&A's
Administrative Offices. In order for telephone transfers to be accommodated,
a Telephone Transfer Form, signed by both the Contract Owner and the
Participant, must be on file with GWL&A. This form can be obtained at the
time the contract is signed, or at any time thereafter from the
Administrative Offices of GWL&A. The Transfer request shall be made by the
Participant under a Section 403(b) retirement program (other than an
employer-sponsored program) or by the employer or the employee organization
under a Section 401(a), Section 401(k), Section 457 or employer-sponsored
Section 403(b) retirement program. A Transfer will take effect on the later
of the date designated in the request or the date that the Transfer request
is received by GWL&A at its Administrative Offices. Transfer requests
received after 4:00 p.m., EST/EDT, shall be deemed to have been received on
the next following Valuation Date. If a Transfer request is received by GWL&A
within 30 days of the Annuity Commencement Date, GWL&A may delay the
Annuity
Commencement Date by not more than 30 days. Additional Transfer conditions
apply to Transfers to or from the Guaranteed Sub-Accounts.
Loans
Loans may be available under your contract. Consult your Plan
Administrator for complete details.
Total and Partial Distribution
A distribution in whole or in part may be taken from a Participant
Annuity Account under certain Section 403(b) retirement programs (other than
employer-sponsored plans) prior to the Participant's Annuity
Commencement Date by written request of the Participant. Certain Group
Contracts issued pursuant to Section 457 retirement programs will require the
signature of both the Participant and the owner for a total or partial
distribution. Under Group Contracts issued pursuant to Section 401(a),
Section 401(k), Section 457, or employer-sponsored Section 403(b) retirement
programs, the right to a total or partial distribution is subject to any
limitations or restrictions contained in the underlying retirement plan. A
Request must be received by GWL&A's Administrative Offices at least 30 days
prior to the Annuity Commencement Date. A request for partial distribution
must also specify the Variable and/or Guaranteed Sub-Account(s) from which
the partial distribution is to be made. The Participant Annuity Account Value
available for a distribution in whole or in part is the current value of the
Participant Annuity Account at the end of the Valuation Period for the
"effective date" of the request. The effective date is the later of the date
selected in the request or the date on which the Request is received by
GWL&A's Administrative Offices. Requests received after 4:00 p.m., EST/EDT,
shall be deemed to have been received on the next following Valuation Date.
The partial or total distribution will be made within seven days after GWL&A
receives the Request. The payment may be postponed as permitted by the
Investment Company Act of 1940. The amount payable upon a total distribution
may be applied to an Annuity Option ( See "Annuity Options")
instead of
a lump-sum payment. There are additional conditions that apply to a partial
or total distribution of a Participant Annuity Account's Guaranteed Account
Value. Restrictions on a partial or total distribution of a Participant
Annuity Account apply to Section 403(b) retirement programs (See
" Federal
Tax Consequences: Section 403(b) Retirement Programs").
There are certain charges imposed upon a partial or total
distribution
prior to the Annuity Commencement Date ( See "Administrative Charges,
Risk
Premiums and Other Deductions: Contingent Deferred Sales Charge") and there
may be certain tax consequences (See "Federal Tax Consequences:
Taxation
of Annuities in General").
Cessation of Contributions
If, in the judgment of either GWL&A or the employer, further
Contributions or Transfers to certain or all of the Variable and Guaranteed
Sub-Accounts should become inappropriate, either party may, upon 60 days
written notice to the other, direct that no future Contributions or Transfers
to such Sub-Account(s) be made. Where the owner of the Group Contract is an
association, the association may provide such notice with respect to all
Participants while the participating employers may also provide such notice
for their employee Participants only.
In the event that such written notice is given for any or all of the
Sub-Accounts, Contributions and Transfers made to such Sub-Account(s) prior
to the effective date of the notice (that date being called the "Date of
Cessation") may be maintained in such Sub-Account(s). Allocation
instructions must be changed to delete the affected Sub-Account(s). If no
change of allocation instructions is received, GWL&A may return all affected
Contributions or allocate such Contributions to a currently offered
Guaranteed Sub-Account.
In the event that a Date of Cessation is declared for all
Sub-Accounts,
no new Participant Annuity Accounts will be established or Contributions
accepted by GWL&A. In addition, under Section 401(a), Section 401(k), Section
457, or Section 403(b) retirement programs, an employer or employee
organization must, by Request, elect one of the following Cessation Options:
Cessation Option (1): GWL&A will maintain each Participant Annuity
Account Value until the value of an account is applied to a payment option.
Cessation Option (2): GWL&A will pay, within seven (7) days of the
Date
of Cessation of Deposits, the Variable Account Values of the Participant
Annuity Accounts as of the date the Request is received (at such later date
as may be specified in the Request) to either the Employer, the employee
organization or a person designated in writing by the employer or employee
organization as the successor insurer of the employer's deferred compensation
plan. GWL&A will pay the sum of the Guaranteed Contract Values of the
Participant Annuity Accounts as of the Date of Cessation to either the
employer, the employee organization or a person designated in writing by the
employer or the employee organization as the successor insurer of the
employer's or employee organization's deferred compensation plan, in 20 equal
quarterly installments. The amount of the installment will be the amount
determined by GWL&A on the date of the first such payment, but will not be
less than $514.80 for each $10,000 of Guaranteed Contract Value. The first
payment will be made (thirty) days after the date this Cessation Option is
elected.
If the employer or the employee organization has not elected a
cessation
option within thirty (30) days of the Date of Cessation, Cessation Option (1)
will be deemed to have been elected. CESSATION OPTION (2) MAY NOT BE
AVAILABLE IN ALL GROUP CONTRACTS.
Contract Termination
Section 401(a) Group Contracts contain a contract termination
provision.
Under this provision, either GWL&A or the contract holder may terminate the
Group Contract on at least sixty (60) days prior written notice (the
effective date of which shall be the "Contract Termination Date"). After the
Contract Termination Date, no Transfer shall be made, no payment option shall
be elected and no Contributions shall be accepted by GWL&A under the terms
of
the Group Contract.
GWL&A will pay, within seven (7) days of the Contract Termination Date,
the value of all monies held in the Variable Sub-Account as of the Contract
Termination Date to either the employer, the employee organization or to a
person or entity designated in writing by the employer or employee
organization.
Death Benefit
In the event of the death of the Participant prior to his/her Annuity
Commencement Date, and prior to age 70, a death benefit will be paid upon
receipt of proof of the death of the Participant. The death benefit is the
greater of the Participant Annuity Account Value or the sum of all
Contributions paid less any partial distributions. Where death occurs on or
after the Participant's 70th birthday, but prior to the Annuity Commencement
Date, a death benefit equal to the Participant Annuity Account Value will be
paid.
Under a Section 403(b) retirement program (other than an
employer-sponsored plan), the death benefit will be paid to the Beneficiary
designated by the Participant. Under a Section 401(a), a Section 401(k), a
Section 457, or employer-sponsored Section 403(b) retirement program the
employer or the employee organization will designate to whom the death
benefit will be paid pursuant to the terms of the employer's underlying plan.
The Participant should consult with his/her employer or employee organization
concerning the payment of the death benefit under the employer's or
employee's organization deferred compensation plan.
The payee may elect to receive the death benefit under any of the
Annuity Options, in the form of a lump-sum payment, or in the form of a
partial lump-sum payment with the balance applied towards any of the Annuity
Options. This election must be made within 60 days after GWL&A received
adequate proof of the Participant's death. If no election is made within the
60 day period, a lump-sum settlement will be made.
The Participant Annuity Account Value, for purposes of determination of
the death benefit, will be calculated as of the end of the Valuation Period
during which proof of death and an election by the Payee are received at
GWL&A's Administrative Offices. If no election is made, the Participant
Annuity Account Value will be determined as of 60 days after the date on
which proof of death is received.
If a lump-sum or partial lump-sum settlement is requested, the proceeds
will be paid within (seven) days of GWL&A's receipt of such election and
adequate proof of death. If any of the Annuity Options are elected, the
annuity payment shall commence thirty (thirty) days after the receipt of such
election and adequate proof of death. Annuity payments shall commence by the
later of (fifteen) days or the first day of the month after receipt of such
election and adequate proof of death. The payment of the death benefit will
be made in accordance with any applicable laws and regulations governing
payment of death benefits, subject to postponement in certain circumstances
as permitted by the Investment Company Act of 1940. (See "Federal Tax
Consequences: Taxation of Annuities in General" for certain
distribution-on-death rules that may be applicable to the payment of death
benefits).
The Participant under a Section 403(b) retirement program (other than an
employer-sponsored plan) may designate or change a beneficiary by filing a
Request with GWL&A at its Administrative Offices. Each change of beneficiary
revokes any previous designation. Unless otherwise provided in the
beneficiary designation, one of the following procedures will take place on
the death of a beneficiary: (1) if there is more than one primary surviving
beneficiary, the Participant Annuity Account Value will be shared equally
among them; (2) if any primary beneficiary dies before the Participant, that
beneficiary's interest will pass to any other named surviving primary
beneficiary or Beneficiaries, to be shared equally; (3) if there is no
surviving primary beneficiary, the Participant Annuity Account Value shall
pass to any surviving contingent beneficiary, and if more than one contingent
beneficiary, shall be shared equally among them; (4) if no beneficiary
survives the Participant, the Participant Annuity Account Value shall pass to
the Participant's estate; or (5) if the designation of beneficiary was not
adequately made, the Participant Annuity Account Value shall pass to the
Participant's estate.
INVESTMENTS OF THE SERIES ACCOUNT
Participating Mutual Funds
The Series Account invests in shares of Maxim, TCI, and Fidelity VIP,
open-end management investment companies, each of which are registered with
the Securities and Exchange Commission. Such registration does not involve
supervision of the management of Maxim, TCI or Fidelity by the Securities and
Exchange Commission. Shares of Maxim are also sold to the Pinnacle Series
Account, the Maxim Series Account, and the Retirement Plan Series
Account which are separate accounts established by GWL&A to receive
and
invest premiums paid under variable life and variable annuity contracts
issued by GWL&A. Shares of Maxim may be sold to other separate
accounts of GWL&A or its affiliates.Shares of TCI and Fidelity VIP are also
sold to other insurance companies to fund the benefits of variable annuity or
variable life insurance contracts.
It is conceivable that, in the future, it may be disadvantageous for
variable life insurance separate accounts and variable annuity separate
accounts to invest in Maxim, TCI, and Fidelity VIP simultaneously. Although
GWL&A, Maxim, TCI or Fidelity VIP currently do not foresee any such
disadvantages either to variable life insurance policyowners or to variable
annuity contract owners, the Boards of Directors of Maxim, TCI, and Fidelity
VIP intend to monitor events in order to identify any material conflicts
between such policyowners and contract owners and to determine what action,
if any, should be taken in response thereto. Such action could include the
sale of Maxim shares by one or more of GWL&A's separate accounts or the sale
of TCI or Fidelity VIP shares by other insurance companies, which could have
adverse consequences. Material conflicts could result from, for example, (1)
changes in state insurance laws, (2) changes in federal income tax
laws, (3) changes in the investment management of any portfolio of Maxim,
TCI, or Fidelity VIP, or (4) differences in voting instructions between those
given by policyowners and those given by contract owners.
Investment Advisers
The investment adviser for Maxim is Great-West (the "Investment
Adviser"), which is registered with the Securities and Exchange
Commission as an investment adviser. Great-West provides portfolio management
and investment advice to Maxim and administers its other affairs subject to
the supervision of Maxim's Board of Directors.
The Investment Advisory Agreement obligates the Investment Adviser to
provide investment advisory services and to pay all compensation of, and
furnish office space for, officers and employees of the Investment Adviser
connected with investment and economic research, trading and investment
management of Maxim. The Investment Advisory Agreement also obligates the
Investment Adviser to pay all other expenses incurred in its operation and
all of Maxim's general administrative expenses, except extraordinary
expenses. As compensation for its services to Maxim, the Investment Adviser
receives monthly compensation at the annual rate of 0.46% of the average
daily net assets of the Money Market Portfolio; 0.60% of the average daily
assets of the Bond Portfolio, the Stock Index Portfolio, the U.S. Government
Securities Portfolio, the Small Cap-Index Portfolio and the Total Return
Portfolio; 0.80% of the average daily net assets of the Maxim T.
Rowe
Price Equity/Income Portfolio; 0.90% of the average daily net assets of the
Corporate Bond Portfolio; 0.95% of the average daily net assets of the MidCap
Portfolio and the Maxim INVESCO Small-Cap Growth Portfolio;
1.00% of
the average daily net assets of the International Equity Portfolio, the
Small-Cap Value Portfolio and the Maxim INVESCO ADR
Portfolio.
With respect to the Mid-Cap Portfolio, International Equity,
Small-Cap Value Portfolio, Maxim INVESCO Small-Cap Growth,
Maxim INVESCO ADR and Maxim T. Rowe Price
Equity/Income
Portfolios, the Investment Adviser shall be responsible for all expenses
incurred in performing investment advisory services. Each of the Portfolios
shall pay all expenses incurred in its operation with respect to that
portfolio. However, the Investment Adviser shall pay any expenses of the
Portfolios which exceed an annual rate of 0.95% of the average daily net
assets of the Maxim T. Rowe Price Equity/Income Portfolio;
1.10% of
the average daily net assets of the Mid-Cap Portfolio and the
Maxim INVESCO Small-Cap Growth Portfolio; 1.35% of the
average daily
net assets of the Small-Cap Value Portfolio; and, 1.30% of the average daily
net assets of the International Equity Portfolio and Maxim
INVESCO ADR
Portfolio.
Investors Research Corporation ("Investors Research") is the investment
adviser for TCI. Investors Research has been the investment adviser of
Twentieth Century Investors, Inc., a registered investment company, since
1958. Additionally, Investors Research acts as the investment adviser for
Twentieth Century World Investors, Inc., a registered investment company, and
as an investment adviser to employee benefit plans and endowment funds.
Investors Research supervises and manages the investment portfolios of
TCI and directs the purchase and sale of its investment securities, subject
only to any directions of TCI's Board of Directors. Investors Research pays
all the expenses of TCI except brokerage, taxes, interest, fees and expenses
of non-interested directors (including counsel fees) and extraordinary
expenses. Twentieth Century Services, Inc., Twentieth Century Tower, 4500
Main Street, Kansas City, Missouri 64111, is transfer agent of TCI. It
provides facilities, equipment and personnel to TCI, and is paid for such
services by Investors Research. Certain administrative services that would
otherwise be performed by Twentieth Century Services, Inc., may be performed
by the insurance company that purchases TCI shares, and Investors Research
may pay it for such services.
For the foregoing services, Investors Research is paid a fee of 1% of
the average net assets of each series of TCI during the year. The fee is paid
and computed each month by multiplying 1% of the average daily closing net
asset values of the shares of each series of TCI during the previous month by
a fraction, the numerator of which is the number of days in the previous
month and the denominator of which is 365 (366 in leap years). Many
investment companies pay smaller investment management fees. However, most
if
not all companies also pay in addition certain of their own expenses, while
TCI expenses specified above are paid by Investors Research.
Investors Research and Twentieth Century Services, Inc. are both wholly
owned by Twentieth Century Companies, Inc. James E. Stowers, Jr., President
of TCI, controls Twentieth Century Companies, Inc. by virtue of his ownership
of a majority of its common stock.
Fidelity Management & Research Company ("FMR") is the investment
adviser
to Fidelity Variable Insurance Products Fund ("VIP"): VIP Growth Portfolio
and to Fidelity Variable Insurance Products Fund II ("VIP II"): VIP II Asset
Manager Portfolio. For its investment advisory services, FMR receives a
monthly fee from each of these Portfolios. As of December 31,
1995 ,
the VIP Growth and the VIP II Asset Manager Portfolios paid FMR the annual
fee rate of .62% and .72%, respectively, of each Portfolio's average daily
net assets.
FMR may, from time to time, agree to reimburse a Portfolio for
management fees and other expenses above a specified percentage of average
daily net assets. Reimbursement arrangements, which may be terminated at any
time without notice, will increase a Portfolio's yield. If FMR discontinues
a reimbursement arrangement, the affected Portfolio's expenses will go up and
its yield will be reduced. FMR retains the ability to be repaid by a
Portfolio for expense reimbursements if expenses fall below the limit prior
to the end of the fiscal year. Repayment by a Portfolio will lower its yield.
FMR has voluntarily agreed to temporarily limit the total expenses (including
the management fee, but generally excluding taxes, interest and extraordinary
expenses) of the Asset Manager Portfolio to 1.25% of the Portfolio's average
daily net assets. FMR has voluntarily agreed to reimburse the management fees
and all other expenses (excluding taxes, interest and extraordinary expenses)
of the VIP Growth Portfolio in excess of 1.50% of average daily net assets.
Sub-advisers
Janus Capital Corporation("Janus") serves as the sub-adviser
to
the Mid-Cap (Growth Fund I) Portfolio. As such, Janus is
responsible
for managing the investment and reinvestment of assets of the Mid-Cap
(Growth Fund I), subject to review and supervision of the Investment
Adviser and the Board of Directors. Janus bears all expenses in connection
with the performance of its services, such as compensating and furnishing
office space for its officers and employees connected with investment and
economic research, trading and investment management of the Mid-Cap
(Growth Fund I) Portfolio.
Janus is a Colorado corporation, registered as an investment adviser
with the Securities and Exchange Commission. Its principal address is 100
Fillmore Street Suite 300, Denver, Colorado 80206.
The Investment Adviser is responsible for compensating Janus, which
receives monthly compensation from the Investment Adviser at the annual rate
of 0.60% on the first $100 million and 0.55% on all amounts over $100 million
of the Mid-Cap (Growth Fund I) Portfolio assets.
Templeton Investment Counsel, Inc ("Templeton") serves as the
sub-adviser of the International Equity Portfolio. As such,
Templeton
is responsible for managing the investment and reinvestment of assets of the
International Equity Portfolio, subject to review and supervision of the
Investment Adviser and the Board of Directors. Templeton bears all expenses
in connection with the performance of its services, such as compensating and
furnishing office space for its officers and employees connected with
investment management of the International Equity Portfolio.
Templeton is an indirect subsidiary of Templeton Worldwide, Inc., which
in turn is a direct, wholly-owned subsidiary of Franklin Resources, Inc.
Templeton is a Florida corporation with its principal business address at
Broward Financial Centre, 500 East Broward Boulevard, Suite 2100, Fort
Lauderdale, Florida 33394.
The Investment Adviser is responsible for compensating Templeton, which
receives monthly compensation from the Investment Adviser at the annual rate
of 0.70% on the first $25 million, 0.55% on the next $25 million, 0.50% on
the next $50 million, and 0.40% all amounts over $100 million of the
International Equity Portfolio assets.
T. Rowe Price Associated, Inc. ("T. Rowe Price") serves as the
sub-adviser to the Maxim T. Rowe Price Equity/Income Portfolio.
T.
Rowe Price is a Maryland corporation, registered as an investment adviser
with the Securities and Exchange Commission. Its principal business address
is 100 East Pratt Street, Baltimore, Maryland 21202. T. Rowe Price receives
monthly compensation from the Investment Adviser at the annual rate of 0.50%
on the first $20 million of the average daily net assets, 0.40% on the next
$30 million of average daily net assets and 0.40% on all assets once total
average daily net assets exceed $50 million.
INVESCO Trust Company ("ITC") serves as the sub-adviser
of the
Maxim INVESCO Small-Cap Growth Portfolio. ITC is a Colorado
Trust
Company and an indirect wholly-owned subsidiary of INVESCO PLC. ITC is
registered as an investment adviser with the Securities and Exchange
Commission. Its principal business address is 7800 E. Union Avenue, Denver,
Colorado 80237. ITC receives monthly compensation from the Investment
Adviser
at the rate of 0.55% on the first $25 million of average daily net assets,
0.50% on the next $50 million of average daily net assets, 0.40% on the next
$25 million of average daily net assets, and 0.35% on all amounts over $100
million of average daily net assets.
INVESCO Capital Management, Inc ("ICMI") serves as the sub-adviser to
the Maxim INVESCO ADR Portfolio. ICMI is a Delaware
corporation and an
indirect wholly-owned subsidiary of INVESCO PLC. ICMI is registered as an
investment adviser with the Securities and Exchange Commission. Its principal
business address is 1315 Peachtree Street, Atlanta, Georgia 30309. ICMI
receives monthly compensation from the Investment Adviser at the annual rate
of 0.55% on the first $50 million of average daily net assets, 0.50% on the
next $50 million of average daily net assets, and 0.40% on assets over $100
million of average daily net assets.
Loomis, Sayles & Company, LP ("Loomis Sayles") serves as the
sub-adviser
to the Corporate Bond Portfolio. Loomis Sayles is a Delaware limited
partnership and is an indirect, majority-owned subsidiary company of New
England Mutual Life Insurance Company. Loomis Sayles is registered as an
investment adviser with the Securities and Exchange Commission. Its principal
business address is One Financial Center, Boston, Massachusetts 02111. Loomis
Sayles receives monthly compensation from the Investment Adviser at the
annual rate of 0.30% on all assets of the Corporate Bond Portfolio.
Ariel Capital Management , Inc.("Ariel") serves as the sub-adviser to
the Small-Cap Value (Ariel Value) Portfolio. Ariel is a privately
held
minority-owned money manager registered with the Securities and Exchange
Commission as an investment adviser. Its principal business address is 307
North Michigan Avenue, Chicago, Illinois 60601. Ariel receives monthly
compensation from the Investment Adviser at the annual rate of 0.40% on
assets up to $5 million of average daily net assets, 0.35% on the next $10
million of average daily net assets, 0.30% on the next $10 million of average
daily net assets, and 0.25% on assets over $25 million of average daily net
assets.
Reinvestment and Redemption
All dividend distributions of Maxim, TCI or Fidelity VIP will be
automatically reinvested in shares of Maxim, TCI or Fidelity VIP at their net
asset value on the date of distribution; all capital gains distributions of
Maxim, TCI or Fidelity VIP, if any, will likewise be reinvested at the net
asset value on the record date. GWL&A will redeem Maxim, TCI and Fidelity
VIP
shares at their net asset values to the extent necessary to make annuity or
other payments under the Group Contracts.
Substitution of Investments
GWL&A reserves the right, subject to compliance with the law as
currently applicable or subsequently changed, to make additions to, deletions
from or substitutions for the investments held by the Series Account. In the
future, GWL&A may establish additional Investment Divisions within the Series
Account. These Investment Divisions will be established if, and when, in the
sole discretion of GWL&A marketing needs and investment conditions warrant,
and will be made available under existing Group Contracts to the extent and
on a basis to be determined by GWL&A.
If shares of any of the Investment Portfolios of Maxim, TCI or Fidelity
VIP should no longer be available for investment, or if in the judgement of
GWL&A's management further investment in any of the Investment Portfolios'
shares should become inappropriate in view of the objectives of the Group
Contracts, then GWL&A may substitute shares of another mutual fund for shares
already purchased, or to be purchased in the future under the Group
Contracts. No substitution of securities held by the Series Account may take
place without prior approval of the Securities and Exchange Commission, and
prior notice to the employers and association owners of Group Contracts, and,
in addition, to the Participants under Section 403(b) retirement programs
(other than an employer-sponsored plan). In the event of a substitution, the
Participants under Section 403(b) retirement programs (other than an
employer-sponsored plan) or the employees or the employee organization under
Section 401(a), Section 401(k), Section 457, or employer-sponsored Section
403(b) retirement programs will be given the option of taking a distribution
of that portion of the Participant Annuity Account allocated to an Investment
Division in which the substitution is to occur without imposition of the
Contingent Deferred Sales Charge.
ADMINISTRATIVE CHARGES, RISK PREMIUMS AND OTHER
DEDUCTIONS
Contract Maintenance Charge
GWL&A has primary responsibility for the administration of all Group
Contracts and the Series Account. To compensate GWL&A for the cost it incurs
in providing administrative services, GWL&A may deduct a Contract
Maintenance
Charge of not more than $30 annually on the first day of each
calendar
year from each Participant Annuity Account. If a Participant Annuity Account
is established after that date, the Contract Maintenance Charge will be
deducted on the first day of the next quarter and will be pro-rated for the
year remaining. The deduction will be pro-rated between the Variable and
Guaranteed Contract Values of each Participant Annuity Account. No refund of
this charge will be made. The Contract Maintenance Charge on Section 403(b)
Group Contracts will be waived for an initial period of no less than 12
months and up to 15 months, depending on the Participant's effective date.
Contingent Deferred Sales Charge
In the circumstances described below, a Contingent Deferred Sales Charge
will be deducted on any total or partial distribution, Transfer to Other
Companies or a lump sum payment. The amount deducted will depend on the type
of retirement program for which the Group Contract was issued. However, a
Contingent Deferred Sales Charge "Free Amount" may be applied in some
circumstances. The Contingent Deferred Sales Charge "Free Amount" is an
amount against which the Contingent Deferred Sales Charge will not be
assessed. The "Free Amount" shall not exceed 10% of the Participant Annuity
Account Value at December 31 of the previous calendar year and will be
applied on the first distribution, payment or Transfer to Another Company
made in that year. All additional distributions, payments or Transfers to
Another Company during that calendar year will be subject to a Contingent
Deferred Sales Charge without application of any "Free Amount".
1. For Section 401(a) and 401(k) Retirement Programs
(a) For Group Contracts issued pursuant to a Section 401(k) retirement
program where the employer does not also maintain a Section 403(b) or Section
457 Group Contract with GWL&A, a Contingent Deferred Sales Charge will be
in
an amount equal to 6% of the amount Transferred to Another Company,
distributed or paid in excess of the "Free Amount". The cumulative total of
all Contingent Deferred Sales Charges applied to a Participant Annuity
Account will not exceed 6% of all Contributions made within 72 months prior
to the date of that partial or total distribution, Transfer or payment.
(b) For Group Contracts issued pursuant to a Section 401(a) profit-sharing
plan where the employer also maintains a Section 457 Group Contract with
GWL&A, the Contingent Deferred Sales Charge applicable is as described in
paragraph 3 (a) below.
(c) The Contingent Deferred Sales Charge applicable to Group Contracts issued
pursuant to a Section 401(a) profit-sharing plan where the employer also
maintains a Section 403(b) Group Contract with GWL&A is as described in
paragraph 2(a) below.
2. For Section 403(b) Retirement Programs.
(a) Under all Group Contracts issued prior to May 1, 1992 pursuant to Section
403(b) and for Group Contracts issued on or after May 1, 1992 to Section
403(b) retirement programs other than employer-sponsored plans, the
Contingent Deferred Sales Charge applicable will be in an amount equal to 6%
of the amount distributed, Transferred to Another Company or paid in excess
of the "Free Amount". The cumulative total of all Contingent Deferred Sales
Charges applied to a Participant Annuity Account will not exceed 6% of all
Contributions made within 72 months prior to the date of that partial or
total distribution, Transfer to Another Company or payment.
(b) For Group Contracts that were issued in exchange for Group Tax-Sheltered
Annuity or Group Deferred Compensation Annuity Contracts of the Great-West
Life Assurance Company, with respect to any partial or total distribution,
Transfer to Another Company or payment, the cumulative total of all
Contingent Deferred Sales Charges applied to a Participant Annuity Account
will not exceed an amount equal to:
(i) 6% of all Contributions (excluding the amount initially applied to a
Participant Annuity Account from the exchanged contract) made within 72
months prior to the date of that partial or total distribution, Transfer to
Another Company or payment, plus
(ii) an amount which is the result of multiplying the amount initially
applied to a Participant Annuity Account from the exchanged contract by the
appropriate percentage as chosen from the following chart:
If number of years of coverage
of Participant under Exchanged Contract
and this contract is: The percentage shall be:
Less than 5 years 6%
At least 5 years but less than 10 years 5%
At least 10 years 4%
(c) For Group Contracts issued pursuant to an employer-sponsored Section
403(b) retirement program on or after May 1, 1992, the Contingent Deferred
Sales Charge applicable is as described in paragraph 3 (a) below.
3. For Section 457 Retirement Programs.
(a) For Section 457 Group Contracts issued May 1, 1988 or thereafter and for
Section 457 Group Contracts issued prior to May 1, 1988 but amended to
incorporate the provision of this paragraph, the Contingent Deferred Sales
Charge will be in an amount equal to a percentage of the amount distributed,
Transferred to Another Company or paid in excess of the "Free Amount", if
any, based on the table below:
Years of Participation
in FutureFunds: The percentage shall be:
0 - 4 5%
5 - 9 4%
10 - 14 3%
15 or more 0%
(b) For Section 457 Group Contracts issued prior to May 1, 1988 which have
not been amended to incorporate the Contingent Deferred Sales Charge will be
in an amount equal to:
(i) 6% of all Contributions (excluding the amount initially applied to a
Participant Annuity Account from an exchanged contract) made within 72 months
prior to the withdrawal, plus
(ii) an amount equal to a percentage of the amount distributed, Transferred
to Another Company or paid in excess of the "Free Amount", if any, based on
the table below:
If number of years of coverage
of Participant under Exchanged Contract
and this Contract is: The percentage shall be:
Less than 5 years 6%
At least 5 years but less than 10 years 5%
At least 10 years 4%
4. General provisions applicable to the Contingent Deferred Sales Charge.
Regardless of which of the above-noted Contingent Deferred Sales Charge
schedules is in effect, the Contingent Deferred Sales Charge applied against
distributions, payments or Transfers to Another Company is deducted from the
withdrawal payment to the Participant. Thus, for example, if a Participant
requests a withdrawal of $100, and assuming that the entire withdrawal is
subject to 6% Contingent Deferred Sales Charge, the Participant would receive
a payment of $94. The Contingent Deferred Sales Charge shall not exceed 8.5%
of Contributions deposited by the Participant into the Group Contracts.
Additionally, the Code imposes (with certain exceptions) a penalty tax on
distributions prior to age 59 1/2. (See "Federal Tax Consequences").
The Contingent Deferred Sales Charge is paid to GWL&A to cover expenses
relating to the sale and distribution of the Group Contracts, including
commissions, the cost of preparing sales literature, and other promotional
activities. In certain circumstances, sales expenses associated with the sale
and distribution of a Group Contract may be reduced or eliminated and in such
event, the Contingent Deferred Sales Charge applicable to that Group Contract
may likewise be reduced. Whether such a reduction is available will be
determined by GWL&A based upon consideration of the following factors: (1)
size of the prospective group, (2) projected annual Contributions for all
Participants in the group, and (3) frequency of projected distributions.
GWL&A will notify a prospective purchaser of its eligibility for a reduction
of the Contingent Deferred Sales Charge prior to the acceptance of an
application for coverage.
It is possible that the Contingent Deferred Sales Charge will not be
sufficient to enable GWL&A to recover all of its distribution expenses. In
such case, the loss will be borne by GWL&A out of its general account assets,
which will include the profit, if any, derived by GWL&A from the mortality
and expense risk charges described herein.
Deductions for Premium Taxes
GWL&A presently intends to pay any Premium Tax levied by any
governmental entity as a result of the existence of the Participant Annuity
Account or the Series Account. GWL&A reserves the right to deduct the
Premium
Tax from Participant Annuity Account Values instead of GWL&A making the
Premium Tax payments. Notice will be given to all Participants prior to the
imposition of any such deductions from the Participant Annuity Account
Values. The applicable Premium Tax rates that states and other governmental
entities impose currently range from 0% to 3.5% and are subject to change by
the respective state legislatures, by administrative interpretations or by
judicial act. Such Premium Taxes will depend, among other things, on the
state of residence of a Participant and the insurance tax laws and status of
GWL&A in these states when the Premium Taxes are incurred.
Deductions for Assumption of Mortality and Expense Risks
GWL&A deducts from the daily net asset value of the Series Account an
amount, computed daily, which is equal to an annual rate of 1.25%, 1.00%
allocable to mortality risk and 0.25% allocable to expense risk. This charge
is designed to compensate GWL&A for its assumption of certain mortality,
death benefit and expense risks described below. The level of this charge is
guaranteed and will not change.
GWL&A's assumption of mortality risk guarantees that the annuity
payments made to the Beneficiary or other payee will not be affected by the
mortality experience (life span) of persons receiving such payment or of the
general population. GWL&A assumes this "mortality risk" by virtue of the fact
that annuity rates in effect at the time that any Contributions are made
cannot be changed. In addition, if a Participant should die prior to his/her
Annuity Commencement Date and 70th birthday, GWL&A is at risk to the extent
that the amount of all Contributions made, less any partial distributions,
exceed the Participant Annuity Account Value. (See " Accumulation
Period: Death Benefit.")
GWL&A's assumption of expense risks arises when GWL&A guarantees
that if
the charges for administrative expenses, which cannot be increased by GWL&A,
will be insufficient to cover administrative and sales expenses, GWL&A bears
that loss.
In certain circumstances, the risk of adverse mortality and expense
experience associated with a Group Contract may be reduced. In such event,
the mortality and expense risk charge applicable to that Group Contract may
likewise be reduced. Whether such a reduction is available will be determined
by GWL&A based upon consideration of the following factors: (1) size of the
prospective group, (2) projected annual Contributions for all Participants in
the group, (3) frequency of projected distributions, (4) type and frequency
of administrative and sales services provided, and (5) level of Contract
Maintenance Charge and Contingent Deferred Sales Charge. GWL&A will notify
a
prospective purchaser of its eligibility for a reduction of the mortality and
expense risk charge prior to the acceptance of an application for coverage.
If the 1.25% charge proves insufficient to cover administrative costs in
excess of the Contract Maintenance Charge made for administrative expenses,
plus any losses from the mortality risk, the loss will be borne by GWL&A;
conversely, if the amount deducted proves more than sufficient, the excess
will be a profit to GWL&A.
ANNUITY OPTIONS
An Annuity Commencement Date and the form of annuity payments
("Annuity
Options") may be elected at any time during the Accumulation Period. The
elections are made by the Participant under a Section 403(b) retirement
program (other than an employer-sponsored plan) or the employer or the
employee organization under a Section 401(a), a Section 401(k), Section 457
or employer-sponsored 403(b) retirement program. Under Section 403(b), 401(a)
and 401(k) retirement programs, the Annuity Commencement Date elected
generally must, to avoid the imposition of an excise tax, not be later than
April 1 of the calendar year following the calendar year in which the
Participant attains age 70 1/2, without regard to the actual retirement date
or termination of employment date. For Section 457 retirement programs, the
Annuity Commencement Date elected will generally be not later than April 1 of
the calendar year following the calendar year in which the Participant
attains age 70 1/2, or the Participant's retirement date if later than age 70
1/2. Under all of the above-noted retirement programs, it is the
responsibility of the Participant to file the necessary Request with GWL&A.
The Annuity Commencement Date may be postponed or accelerated, or the
election of any of the Annuity Options changed, upon Request received by
GWL&A at its Administrative Offices up to 30 days prior to the existing
Annuity Commencement Date. If any Annuity Commencement Date elected
would be
less than 30 days from the date that the Request is received, GWL&A may delay
the date elected by not more than 30 days.
The Group Contracts provide the Annuity Options described below, as well
as such other Annuity Options as GWL&A may choose to make available in the
future. Except as otherwise noted, the Annuity Options are payable on a
variable, fixed or combination basis. More than one Annuity Option may be
elected. If no Annuity Option is elected, the Group Contracts automatically
provide for variable life annuity (with respect to the variable portion of a
Participant Annuity Account) and/or a fixed life annuity (with respect to the
fixed portion of a Participant Annuity Account) with 120 monthly payments
guaranteed.
The level of annuity payments under the following options is based upon
the option selected and, depending on the option chosen, such factors as the
age at which payments begin and the frequency and duration of payments.
Option No. 1: Life Annuity
This option provides an annuity payable monthly during the lifetime of
the payee. It would be possible under this option for the Annuitant to
receive no annuity payment if he/she died prior to the date of the first
annuity payment, one annuity payment if the Annuitant died before the second
annuity payment, etc.
Option No. 2: Life Annuity with Payments Guaranteed for Designated Periods
This option provides an annuity payable monthly throughout the lifetime
of the payee with the guarantee that if, at the death of the payee, payments
have been made for less than the designated period, the Beneficiary will
receive payments for the remainder of the period. The designated period may
be 5, 10, 15, or 20 years. The period generally referred to as "Installment
Refund" is available only on a fixed- dollar payment basis.
Option No. 3: Joint and One-Half Survivor
This option provides an annuity payable during the joint lifetime of the
payee and a designated second person, and thereafter during the remaining
lifetime of the survivor. After the death of the payee, and while only the
designated second person is alive, the amount payable will be one-half the
amount paid while both were living. It would be possible under this option
for the payee and the Beneficiary to receive no annuity payment if both
persons died prior to the date of the first annuity payment, one annuity
payment if both persons died before the second annuity payment, etc.
Option No. 4: Income of Specified Payment (available only as fixed-dollar
payments)
Under this option, the amount of the periodic benefit is selected, which
amount will be paid to the payee in equal annual, semiannual, quarterly, or
monthly installments as elected; provided that the annuity payment period is
not less than 36 months nor more than 240 months.
Option No. 5: Income for Specified Period (available only as fixed-dollar
payments)
Under this Option, the duration of the periodic benefit is selected
(which may not be less than 36 months nor more than 240 months), and a
resulting annuity payment amount will be paid to the payee in equal annual,
semiannual, quarterly, or monthly installments, as elected.
Option No. 6: Systematic Withdrawal Payment Option (available only as
fixed-dollar payments)
Under this payment option, the amount, timing and method of payment will
be as elected by the payee and agreed to by GWL&A. Payments may be elected
on
a monthly, quarterly, semi-annual or annual basis. The minimum amount
initially applied to this option must be $20,000. There are charges and
restrictions which apply. Please see the "Systematic Withdrawal Payment
Option Rider" to the Group Contract.
Option No. 7: Access Annuity
Under this payment option, a single premium of $20,000 minimum, the
amount, timing and method of payment will be as elected by the payee and
agreed to by GWL&A. Payments may be elected on a monthly, quarterly,
semi-annual or annual basis. There are charges and restrictions which apply.
Please see the "Access Annuity Rider" to the Group Contract for additional
information.
Variable Annuity Payments
Variable annuity payments will be determined on the basis of: (i) the
Variable Account Value prior to the Annuity Commencement Date; (ii) the
annuity tables contained in the Group Contracts which reflect the age of the
Participant; (iii) the type of annuity option(s) selected; and (iv) the
investment performance of the underlying mutual fund. The Participant
receives the value of a fixed number of Annuity Units each month.
At a Participant's Annuity Commencement Date, the Participant Annuity
Account is credited with Annuity Units for each Variable Sub-Account on which
variable annuity payments are based. The number of Annuity Units to be
credited is determined by dividing the amount of the first monthly payment by
the value of an Annuity Unit as of the fifth Valuation Period prior to the
Annuity Commencement Date in each Variable Sub-Account selected. Although
the
number of Annuity Units is fixed by this process, the value of such units
will vary with the value of the underlying mutual fund.
The dollar amount of the first monthly variable annuity payment is
determined by applying the total value of the Accumulation Units credited to
a Participant Annuity Account valued as of the fifth Valuation Period prior
to the Annuity Commencement Date to the annuity tables contained in the Group
Contracts. Amounts shown in the tables are based on a modified 1971 Group
Annuity Mortality Table (set back five years) with an assumed investment
return at the rate of 3.5% per annum. The first annuity payment is determined
by multiplying the benefit per $1,000 of value shown in the Group Contract
tables by the number of thousands of dollars of value accumulated under the
Variable Account Value of a Participant Annuity Account. These annuity tables
vary according to the form of annuity selected and according to the age of
the Participant and his/her Annuity Commencement Date.
The 3.5% interest rate stated above is the measuring point for
subsequent annuity payments. If the actual Net Investment Rate (annualized)
exceeds 3.5%, the payment will increase at a rate equal to the amount of such
excess. Conversely, if the actual rate is less than 3.5%, annuity payments
will decrease. If the assumed rate of interest were to be increased, annuity
payments would start at a higher level but would increase more slowly or
decrease more rapidly.
The amount of the second and subsequent payment is determined by
multiplying the credited fixed number of Annuity Units by the appropriate
Annuity Unit value for the fifth Valuation Period preceding the date that
payment is due. The Annuity Unit value at the end of any Valuation Period is
determined by multiplying the Annuity Unit value for the immediately
preceding Valuation Period by the product of:
(a) the Net Investment Factor of the Variable Sub-Account for the Valuation
Period for which the Annuity Unit is being determined, and,
(b) a factor of .999905 to neutralize the assumed investment return of 3.5%
per year used in the annuity table.
The value of each Variable Sub-Account's Annuity Unit is set initially at
$10.00. The value of the Annuity Units is determined as of a
Valuation Period five (5) days' prior to the payment in order to permit
calculation of amounts of annuity payments and mailing of checks in advance
of their due date.
Fixed Annuity Payments
The guaranteed level of fixed annuity payments will be determined on the
basis of: (i) the Guaranteed Account Value prior to the Annuity Commencement
Date; (ii) the annuity tables contained in the Group Contracts which reflect
the age of the Participant; and (iii) the type of annuity option(s) elected.
The payment amount may be greater, however, if GWL&A is using a more
favorable table as of a Participant's Annuity Commencement Date.
Combination Variable and Fixed Annuity Payments
If an election is made to receive annuity payments on a combination
variable and fixed basis, the Variable Account Value of a Participant Annuity
Account will be applied to the variable annuity option elected and the
Guaranteed Account Value to the fixed annuity option.
Transfer to Effect Annuity Option Elected
If the Participant under a Section 403(b) retirement program (other than
an employer-sponsored plan) or the employer or the employee organization
under a Section 401(a), Section 401(k), Section 457 or employer-sponsored
403(b) retirement program wishes to apply all or part of the Guaranteed
Account Value of the Participant Annuity Account to a variable annuity
option, or all or a part of the Variable Account Value to a fixed annuity
option, a Request to Transfer must be received at GWL&A's Administrative
Office prior to the Participant's Annuity Commencement Date. This also
applies to a Beneficiary or payee who elects to receive a death benefit under
any of the annuity options, and one such Request to Transfer can be submitted
by the Beneficiary or payee after the death of the Participant.
Proof of Age and Survival
GWL&A may require proof of age or survival of any payee upon whose
age
or survival payments depend.
Frequency and Amount of Annuity Payments
Variable annuity payments will be paid as monthly installments; fixed
annuity payments will be paid annually, semiannually, quarterly or monthly,
as requested. However, if any payment to be made under any annuity option
will be less than $50, GWL&A may make the payments in the most frequent
interval which produces a payment of at least $50. If the net amount
available to apply under any Annuity Option is less than $2,000, GWL&A may
pay it in one lump sum. The maximum amount that may be applied under any
Annuity Option without the prior written consent of GWL&A is $1,000,000.00
FEDERAL TAX CONSEQUENCES
Introduction
The Group Contracts are designed for use by employee groups under
retirement programs which may qualify for special tax treatment under Section
401(a), Section 401(k), Section 403(b) or Section 457 of the Code.
The ultimate effect of federal income taxes on the Participant Annuity
Account Value, on annuity payments and on the economic benefit to the
Participant or Beneficiary depends upon GWL&A's tax status, on the type of
retirement program for which the Group Contract is purchased, and upon the
tax and employment status of the individual concerned. The Series Account is
taxed as a part of GWL&A; not as a "regulated investment company" under Part
I of Subchapter M of the Code. GWL&A is taxed as a life insurance company
as
described below.
It should be understood that the following discussion is not exhaustive,
and is not intended as tax advice. Special rules may apply to certain
situations not discussed here. GWL&A intends to comply with the
diversification requirements of Code Sections 817(h) and 818 to assure that
the Group Contracts will continue to be treated as annuity contracts for
Federal income tax purposes. The discussion is based upon GWL&A's
understanding of current federal income tax law and no representation is made
regarding the likelihood of continuation of current law or of the current
interpretations by the Internal Revenue Service. No attempt is made to
consider state or other tax laws. The Group Contractholder, Participants and
beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the contract comply with
applicable laws. For further information, consult a qualified tax adviser.
Taxation of GWL&A
GWL&A is taxed on its insurance business in the United States as a life
insurance company in accordance with Part I of Subchapter L of the Code.
Investment income and realized capital gains on the assets of Series Account
are reinvested and are taken into account in determining the Series Account
Value. Under existing federal income tax law, such amounts do not result in
any tax on GWL&A which will be chargeable to the Participant Annuity Account
or the Series Account. GWL&A reserves the right to make a deduction from the
Participant Annuity Account for taxes, if any, imposed with respect to such
items in the future.
Taxation of Annuities in General
Code Section 72 governs taxation of annuities in general. A Participant
is not taxed on increases (if any) in the value of a Participant Annuity
Account until some form of distribution is made. Under Section 72, a total
or partial distribution from a Participant Annuity Account will be treated as
ordinary income taxable to the extent the amounts held in the Participant
Annuity Account immediately before the distribution exceed the "investment in
the contract." The investment in the contract is that portion of the
Contributions to the Participant Annuity Account which was included in the
Participant's gross income in the year contributed, if any. If the
Participant begins receiving annuity payments, the Participant is taxed on
the portion of the payment that exceeds the investment in the contract.
However, because the Participant generally excludes Contributions from gross
income under these retirement programs, there generally will be no cost basis
(investment in the contract) in the Participant Annuity Account within the
meaning of Section 72 of the Code. Thus, the total amount of all payments
received will generally be taxable to the Participant. Ordinarily, such
taxable portion is taxed at ordinary income tax rates, subject to any income
averaging rules applicable to Participants receiving distributions from a
Section 401(a) or Section 401(k) plan.
Currently, none of the amounts contributed to a Section 457 plan
constitute cost basis in the contract. Thus, all amounts distributed to
Participants from a Section 457 plan are taxable at ordinary income rates.
No special averaging rules apply to distributions from Section 403(b) plans
or Section 457 plans.
If a Group Contract is held by a non-natural person (e.g. a
corporation), the investment gain on the contract is includable in the
entity's income each year unless certain exceptions apply. This rule does
not apply, in pertinent part, where the Group Contract is held under a
Section 401(a) plan, a Section 401(k) plan, or a Section 403(b) plan. Since
the employer maintaining a Section 457 plan is either a state or local
government or a tax-exempt organization, the employer will not be subject to
tax on the gain in the contract.
Section 401(a) Qualified Retirement Plans
Section 401(a) provides special tax treatment for pension,
profit-sharing and stock bonus plans established by employers or employee
organizations for their employees. All types of employers, including
for-profit organizations, tax-exempt organizations and state and local
governments, are allowed to establish and maintain Section 401(a) qualified
plans. Employer Contributions and any earnings thereon are currently
excluded from the Participant's gross income. Section 401(a) plans must
satisfy numerous qualification requirements, including limitations on
contributions. Generally, the total amount of employer and employee
contributions which can be contributed to all of the employer's qualified
plans is limited to the lesser of $30,000 or 25% of a Participant's
includable compensation. Distributions from the plan are subject to the
restrictions contained in the plan document and the Code. Participants
should consult with their employer or employee organization as to the
applicability of the above limitations and restrictions to their plan.
Section 401(k) Cash or Deferred Arrangements
Section 401(k) allows for-profit employers or employee organizations to
offer a cash or deferred arrangement to employees under a profit-sharing or
stock bonus plan. Generally, for tax years beginning after 1986, tax-exempt
organizations and state and local governments are not permitted to establish
Section 401(k) plans. However, under a grandfather rule, certain plans
adopted before certain dates in 1986 may continue to be offered by these
entities. Pre-tax salary reduction Contributions and any income thereon are
currently excluded from the Participant's gross income. Generally, the
maximum elective deferral amount that an individual may defer on a pre-tax
basis to one or more Section 401(k) plans is limited to $7,000 per year
(adjusted for cost-of-living increases) under Section 402(g). Elective
deferrals to a Section 401(k) plan must also be aggregated with elective
deferrals made by the Participant to a Section 403(b) plan or to a simplified
employee pension. For 1996, the total amount of elective deferrals which can
be contributed to all such plans is $9,500. The contribution limit in
Section 415 also apply. The amount which a highly compensated employee may
contribute may be further reduced to enable the plan to meet the
discrimination testing requirements. Amounts contributed to a Section 403(b)
annuity contract are subject to FICA and FUTA tax when contributed.
Pre-tax amounts deferred into the plan within the applicable limits, and
the net investment gain, if any, reflected in the Participant Annuity Account
Value are includible in a Participant's gross income only for the taxable
year when such amounts are paid to the Participant under the terms of the
plan. Employee contributions and earnings may not be distributed prior to
age 59 1/2, unless the Participant dies, becomes disabled, separates from
service or suffers a genuine financial hardship meeting the requirements of
the Code. Restrictions apply to the amount which may be distributed for
financial hardship. Participants should consult with their employer as to
the availability of benefits under the employer's plan.
Amounts contributed in excess of the above described limits, and the
earnings thereon, must be distributed from the plan and included in the
Participant's gross income in accordance with IRS rules and regulations.
Excess amounts which are not properly corrected can have severe adverse
consequences to the plan and may result in additional taxes to the
Participant.
Section 403(b) Tax Sheltered Annuities
Tax-exempt organizations described in Section 501(c)(3) and public
educational organizations are permitted to purchase Section 403(b)
tax-sheltered annuities for employees. Amounts contributed toward the
purchase of such annuities are excluded from the gross income of the
Participant in the year contributed to the extent that the contributions do
not exceed three separate, yet interrelated contribution limitations.
Federal income tax is deferred on contributions to the extent that the
aggregate amount contributed to a Section 430(b) plan per year for a
Participant does not exceed: (1) the exclusion allowance described in
Section 403(b)(2); (2) the contribution limit in Section 415; and (3) the
elective deferral limitation in Section 402(g) of the Code. Elective
deferrals to a Section 403(b) plan must also be aggregated with elective
deferrals made by the Participant to a Section 401(k) plan or to a simplified
employee pension. For 1996, the total amount of elective deferrals which can
be contributed to all such plans is $9,500. Amounts contributed to a Section
403(b) annuity contract are subject to FICA and FUTA tax when contributed.
The net investment gain, if any, reflected in a Participant Annuity
Account Value is not taxable until received by the Participant or his
beneficiary.
Amounts contributed in excess of the above described limits, and the
earnings thereon, must be distributed from the plan and included in the
Participant's gross income in accordance with IRS rules and regulations.
Excess amounts which are not properly corrected can have severe adverse
consequences to the plan and may result in additional taxes to the
Participant.
Pre-1989 contributions to a Section 403(b) annuity contract may be
distributed to an employee at any time, subject to a 10% penalty on
withdrawals prior to age 59 1/2, unless an exception applies under Section
72(t). Post-1988 contributions and earnings, and the earnings on the
December 31, 1988 account balance, may not be distributed prior to age 59
1/2, unless the Participant dies, becomes disabled, separates from service or
suffers a genuine financial hardship meeting the requirements of the Code.
Restrictions apply to the amount which may be distributed for financial
hardship.
Section 457 Deferred Compensation Plans
Section 457 allows state and local governmental employers to establish
and maintain an eligible deferred compensation plan for all employees and
independent contractors. Tax-exempt organizations may establish eligible
deferred compensation plans only for a select group of management or highly
compensated employees.
Federal income tax is deferred on contributions to a Section 457 plan to
the extent that the aggregate amount contributed per year for a Participant
does not exceed the lesser of $7,500 or 25% of a Participant's includable
compensation. Any elective deferral amount excluded from gross income by a
Participant under Section 401(k), Section 403(b) or a simplified employee
pension for the taxable year must be treated as an amount deferred under the
Section 457 plan. Amounts contributed are subject to FICA and FUTA tax when
contributed.
The net investment gain, if any, reflected in a Participant Annuity
Account Value is not taxable until received by the Participant or his
beneficiary.
Amounts contributed in excess of the above described limits, and the
earnings thereon, must be distributed from the plan and included in the
Participant's gross income. Excess amounts which are not properly corrected
can have severe adverse consequences to the plan and may result in additional
taxes to the Participant.
Contributions and earnings may not be distributed prior to age 70 1/2,
unless the Participant dies, becomes disabled, separates from service or
suffers a genuine unforeseeable emergency meeting the requirements of the
Code and plan document. Restrictions apply to the amount which may be
distributed for unforeseeable emergency.
Portability
When the participant is eligible to take a distribution from a Section
401(a) plan, Section 401(k) plan or Section 403(b) annuity, eligible rollover
distributions may be rolled over to an IRA or another qualified plan or
Section 403(b) annuity contract or custodial account as provided in the Code.
Amounts properly rolled over will not be included in gross income until a
subsequent distribution is made.
For Section 403(b) plans only, Revenue Ruling 90-24 allows participants
to transfer funds from one Section 403(b) annuity or custodial account to
another Section 403(b) annuity contract or custodial account with the same or
more stringent restrictions without incurring current taxation. If the
Section 403(b) plan is employer-sponsored, transfers under Rev. Rul. 90-24
may be restricted to 403(b) providers approved by the plan sponsor.
Amounts distributed from a Section 457 plan cannot be rolled over to an
IRA.
Required Beginning Date/Required Minimum Distributions
Distributions from each of these retirement programs must begin on or
before April 1 of the year after the Participant attains age 70 1/2. For
employees of governmental employers, the required beginning date is the later
of age 70 1/2 or separation from service.
All amounts in a Section 401(a), Section 401(k) and Section 457 plan and
amounts accruing after December 31, 1986 under Section 403(b) annuities must
be distributed in compliance with the minimum distribution requirements.
All distributions, regardless of when the amounts accrued, must satisfy the
"incidental benefit" or "minimum distribution incidental benefit" rule. If
the amount distributed does not meet the minimum requirements, a 50% penalty
tax on the amount which was required to be, but was not, distributed may be
imposed upon the employee by the IRS under Section 4974. These rules are
extremely complex, and the Participant should seek the advice of a competent
tax adviser.
Federal Taxation of Distributions
All payments received from a Section 401(a), Section 401(k) or Section
403(b) annuity contract are normally taxable in full as ordinary income to
the Participant. Since premiums derived from salary reduction have not been
previously taxed to the Participant, they cannot be treated as a cost basis
for the contract. The Participant will have a cost basis for the contract
only when after-tax contributions have been made.
If the Participant takes the entire value in the contract in a single
sum cash payment, the full amount received will be ordinary income in the
year of receipt unless after-tax contributions were made. If the
distribution includes after-tax contributions, the amount in excess of the
cost basis will be ordinary income. Section 72(e)(5). Special averaging
treatment is currently available for lump sum distributions from Section
401(a) and Section 401(k) plans only.
Amounts received before the annuity starting date by a Participant who
has made after-tax contributions are taxed under a rule that provides for pro
rata recovery of cost. Section 72(e)(9). If an employee who has a cost
basis for his contract receives life annuity or installment payments, the
cost basis will be recovered from the payments under the annuity rules of
Section 72. Typically, however, there is no cost basis and the full amount
received is taxed as ordinary income in the year distributed.
All amounts received from a Section 457 plan, whether in the form of
total or partial withdrawals or annuity payments are taxed in full as wages
to the Participant in the year distributed.
Penalty Taxes
Penalty taxes may apply to certain distributions from Section 401(a)
plans, Section 401(k) plans and Section 403(b) annuities. Distributions made
before the Participant attains age 59 1/2 are premature distributions and
subject to an additional tax equal to 10% of the amount of the distributions
which is includable in gross income in the tax year. However, under Code
Section 72(t), the penalty tax may not apply to distributions: (1) made to
a beneficiary on or after the death of the Participant; (2) attributable to
the employee's being disabled within the meaning of Code Section 72(m)(7);
(3) made as a part of a series of substantially equal periodic payments (at
least annually) for the life or life expectancy of the Participant or the
joint lives or life expectancies of the Participant and his designated
beneficiary; (4) made to a Participant on account of separation from service
after attaining age 55; (5) properly made to an alternate payee under a
qualified domestic relations order; (6) made to an Participant for medical
care, but not in excess of the amount allowable as a medical expense
deduction to the Participant for amounts paid during the taxable year for
medical care; (7) timely made to correct an excess aggregate contribution; or
(8) timely made to reduce an excess elective deferral.
If exception (3) above is applicable at the time of the distribution but
the series of payments is later modified (other than because of death or
disability) before the Participant reaches age 59 1/2 or, if after he reaches
age 59 1/2, within five years of the date of the first payment, the
Participant's tax for the year the modification occurs is increased by an
amount equal to the tax which, but for the exception, would have been imposed
plus interest for the deferral period.
If a Participant's aggregate retirement distributions from qualified
plans, tax sheltered annuities and individual retirement plans in a calendar
year exceed $150,000, a 15% excise tax may be imposed on the employee, in
addition to any income tax, on the excess portion of the distributions.
If the amount distributed during a tax year is less than the minimum
required distribution, there is an additional tax imposed on the Participant
equal to 50% of the amount that the distribution made in the year falls short
of the required amount.
No penalty taxes apply to distributions from a Section 457 plan.
Distributions on Death of Participant
Distributions made to a beneficiary from any of these retirement
programs upon the Participant's death must be made pursuant to the rules
contained in Section 401(a)(9) of the Code and the regulations thereunder.
Generally, if the Participant dies while receiving annuity payments or other
required minimum distributions under the plan and before the entire interest
in the account has been distributed, the remainder of his interest must be
distributed to the beneficiary at least as rapidly as under the method in
effect as of the Participant's date of death.
If the Participant dies before payments have begun, his entire interest
must generally be distributed within five (5) years after the date of death.
This five year rule applies to all non-individual beneficiaries. However, if
an individual other than the surviving spouse has been designated as
beneficiary, payments may be made over the life of that individual or over a
period not extending beyond the life expectancy of the beneficiary so long as
payments begin on or before December 31 of the year following the year of
death. If the beneficiary is the Participant's spouse, distributions are not
required to begin until the date the employee would have attained age 70 1/2.
If the spouse dies before distributions begin, the rules discussed above will
apply as if the spouse were the employee. Participants and beneficiaries
should seek competent tax or legal advice about the tax consequences of
distributions.
Federal Income Tax Withholding
Effective January 1, 1993, certain distributions from Section 401(a)
plans, Section 401(k) plans and Section 403(b) annuities are defined as
"eligible rollover distributions." Generally, any eligible rollover
distribution is subject to mandatory income tax withholding at the rate of
20% unless the employee elects to have the distribution paid as a direct
rollover to an IRA or to another qualified plan or Section 403(b) annuity
contract or custodial account, as applicable. With respect to distributions
other than eligible rollover distributions, amounts will be withheld from
annuity (periodic) payments at the rates applicable to wage payments and from
other distributions at a flat 10% rate, unless the Participant elects not to
have federal income tax withheld.
Distributions to a Participant from a Section 457 plan retain their
character as wages and are tax reported on Form W-2. Federal income taxes
must be withheld under the wage withholding rules. Participants cannot elect
not to have federal income tax withheld. Payments to beneficiaries are not
treated as wages and tax reported on Form 1099R. Federal income tax on
payments to beneficiaries will be withheld from annuity (periodic) payments
at the rates applicable to wage withholding, and from other distributions at
a flat 10% rate, unless the beneficiary elects not to have federal income tax
withheld.
VOTING RIGHTS
GWL&A will vote the shares held by the Investment Divisions of the
Series Account at regular and special meetings of shareholders of Maxim, TCI,
and Fidelity VIP. The Investment Company Act of 1940 (the "1940 Act") and the
regulations thereunder, as presently interpreted, require that the shares of
the applicable underlying mutual fund be voted in accordance with
instructions received from persons having voting interests in the Variable
Sub-Accounts and, accordingly, GWL&A will do so. However, if the 1940 Act
or
any regulation thereunder should be amended, or if the present interpretation
thereof should change, and as a result GWL&A determined that it is permitted
to vote the shares at its own discretion, GWL&A may elect to do so.
Prior to the Annuity Commencement Date, the Participant under a Section
403(b) retirement program or the employer under a Section 401(k) or Section
457 retirement program has the voting interest in the Variable Sub-Accounts.
After annuity payments begin under a variable annuity option, the payee will
have the voting interest.
The number of votes which a person has the right to cast will be
determined by applying his/her percentage interest in a Variable Sub-Account
to the total number of votes attributable to the Sub-Account. In determining
the number of votes, fractional shares will be recognized. During the annuity
payment period, the number of votes attributable to a Participant Annuity
Account will decrease as the assets held to fund the annuity payments
decrease.
Voting rights held in respect of a Variable Sub-Account of this Series
Account as to which no timely instructions are received, and shares that are
not otherwise attributable to persons having voting interests in the Variable
Sub-Accounts of this Series Account, will be voted by GWL&A in proportion to
the voting instructions which are received with respect to all Participant
Annuity Accounts participating in that Sub-Account of this Series Account.
Voting instructions to abstain on any item to be voted upon will be applied
on a pro rata basis to reduce the votes eligible to be cast. Each person
having a voting interest will receive proxy materials, reports and other
materials relating to the applicable underlying mutual fund.
DISTRIBUTION OF THE GROUP CONTRACTS
Great-West is the principal underwriter and the distributor of the Group
Contracts. Great-West is registered with the Securities and Exchange
Commission under the Securities and Exchange Act of 1934 as a broker-dealer
and is a member of the National Association of Securities Dealers, Inc.
("NASD"). Applications for the Group Contracts will be solicited by
duly-licensed insurance agents of Great-West, as well as by independent
registered insurance brokers who must also be NASD-registered broker-dealers
or representatives thereof.
The maximum commission as a percentage of the Contributions made under
a Group Contract payable to Great-West agents, independent registered
insurance brokers and other registered broker-dealers is 8.0%. An expense
allowance that will not exceed 40% of the maximum commission paid may also
be
paid.
Additionally, effective August 1, 1987, a maximum of 1% of Contributions
may also be paid as a persistency bonus to qualifying brokers.
RETURN PRIVILEGE
Within 15 days after a Participant Certificate under a Section 403(b)
retirement program is first mailed, it may be canceled for any reason by
delivering or mailing it together with a Request to cancel to GWL&A's
Administrative Offices or to an authorized agent of GWL&A. Upon cancellation,
GWL&A will refund all Contributions. No Contingent Deferred Sales Charge or
other charge will be deducted.
STATE REGULATION
As a life insurance company organized and operated under Colorado law,
GWL&A is subject to provisions governing such companies and to regulation by
the Colorado Commissioner of Insurance.
GWL&A's books and accounts are subject to review and examination by
the
Colorado Insurance Department at all times and a full examination of its
operations is conducted by the National Association of Insurance
Commissioners ("NAIC") at least once every three years.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT
PROGRAM
Section 36.105 of the Teacher Retirement System of Texas permits
Participants in the Texas Optional Retirement Program ("ORP") to redeem their
interest in a variable annuity contract issued under the ORP only upon
termination of employment in the Texas public institutions of higher
education, retirement or death. Accordingly, a Participant in the ORP will be
required to obtain a certificate of termination from his/her employer before
he/she can redeem his/her Participant Annuity Account.
REPORTS
As presently required by the 1940 Act and regulations
promulgated
thereunder, all Participants will be furnished, at least semi-annually, with
reports containing such information as may be required under the 1940 Act or
by any other applicable law or regulation. In addition, all Participants will
be furnished not less frequently than annually a with statement of the
Participant Annuity Account Value established in his/her name.
LEGAL PROCEEDINGS
The Series Account is not engaged in any litigation. GWL&A is not
involved in any litigation which would have material adverse effect on the
ability of GWL&A to perform its contract with the Series Account.
LEGAL MATTERS
The organization of GWL&A, its authority to issue variable annuity
contracts and the validity of the Group Contract have been passed upon by
R.B. Lurie, Vice-President, Counsel and Associate Secretary. Certain legal
matters relating to the Federal securities laws have been passed upon for
GWL&A by Jorden Burt Berenson & Johnson, LLP.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Group Contracts offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and amendments thereto
and exhibits filed as a part thereof, to all of which reference is hereby
made for further information concerning the Series Account, GWL&A and the
Group Contracts. Statements contained in this Prospectus as to the content of
Group Contracts and other legal instruments are summaries. For a complete
statement of the terms thereof reference is made to such instruments as
filed.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific
information and financial statements relating to the Series Account and
GWL&A. The Table of Contents of the Statement of Additional Information is
set forth below:
1. Custodian and Independent Auditors
2. Underwriter
3. Calculation of Performance Date
4. Financial Statements
Inquiries and requests for a Statement of Additional Information should
be directed to GWL&A in writing at 8515 E. Orchard Road, Englewood,
Colorado
80111, or by telephoning GWL&A at (800) 468-8661 (U.S.) or (303)
689-3360
(Englewood).
FUTUREFUNDS SERIES ACCOUNT
Of
Great-West Life & Annuity Insurance Company
GROUP VARIABLE ANNUITY CONTRACTS
Distributed by
The Great-West Life Assurance Company
8515 East Orchard Road, Englewood, Colorado 80111
(800) 468-8661 (U.S.) (303) 689-3360 (Englewood)
The group variable annuity contracts described in this prospectus
("Group Contracts") are designed and offered to provide retirement programs
that qualify for special federal income tax treatment for employees of
certain organizations. The Group Contracts may be issued in connection with
Contributions made by:
employers or employee organizations (such as non-profit entities defined
in Section 501(c) of the Internal Revenue Code of 1986, as amended ("Code"),
and governmental entities defined in Code Section 414(d)) to purchase
annuities for their employees under pension or profit-sharing plans described
in Section 401(a) of the Code,
employers or employee organizations to purchase annuities for their
employees under cash or deferred profit sharing plans described in Section
401(k) of the Code, state educational organizations and certain tax-exempt
organizations to purchase annuities for their employees under Section 403(b)
of the Code, and
certain state and local governmental entities and, for years beginning
after 1986, other tax-exempt organizations to purchase annuities for their
employees under a deferred compensation plan described in Section 457 of the
Code.
The Group Contracts are issued by Great-West Life & Annuity Insurance
Company ("GWL&A"). The Great-West Life Assurance Company ("Great-West")
is
the principal underwriter and distributor of the Group Contracts. The owner
of a Group Contract will be the employer, or may also be certain employer
associations or employee associations for contracts issued under Section
401(a), Section 401(k) or Section 403(b) retirement programs. Contributions
are made by the employer for employees desiring coverage under a Group
Contract. The amount of the Contributions will be determined by the employer.
A separate record (a "Participant Annuity Account") will be established in
the name of each participating employee (a "Participant") to reflect the
dollar values of Contributions made in each Participant's name. The Group
Contracts provide for a deferred annuity to begin at a future pre-selected
date (the "Annuity Commencement Date"). The Group Contracts also provide for
a death benefit. An initial Contribution under a Section 403(b) retirement
program may be canceled and returned at the employee's request within fifteen
days of the date of the Contribution.
Prior to the Annuity Commencement Date, the Contributions can
accumulate
on a variable basis, guaranteed basis, or a combination of both. To
accumulate on a variable basis, Contributions will be allocated to the
FUTUREFUNDS SERIES ACCOUNT (the "Series Account"), a segregated
investment
account of GWL&A. The value of the Contributions prior to the Annuity
Commencement Date and thus the amount accumulated to provide annuity
payments
will depend upon the investment performance of the Series Account.
The amount of annuity payments may also be variable based upon the
investment experience of the Series Account, or may be fixed without regard
to such experience, or may be a combination of both. The Series Account
currently has seventeen Investment Divisions available for allocation of
Contributions. Thirteen of the Investment Divisions invest in shares of the
portfolios of Maxim Series Fund Inc. ("Maxim"), a series, open-end management
investment company described beginning on page 2.
THIS PROSPECTUS IS ACCOMPANIED BY CURRENT PROSPECTUSES
FOR MAXIM
SERIES FUND,
INC., TCI GROWTH AND TCI BALANCED, FIDELITY VIP GROWTH AND
FIDELITY
VIP II
ASSET MANAGER PORTFOLIOS. THESE PROSPECTUSES PROVIDE
INFORMATION
A
PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING AND
SHOULD BE
KEPT FOR
FUTURE REFERENCE. ADDITIONAL INFORMATION ABOUT THE
GROUP
CONTRACTS HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN A
STATEMENT
OF
ADDITIONAL INFORMATION, DATED APRIL 30, 1996,
WHICH IS
INCORPORATED
HEREIN BY REFERENCE. THE STATEMENT OF ADDITIONAL
INFORMATION, THE
TABLE OF
CONTENTS OF WHICH IS SET FORTH ON THE LAST PAGE
OF THIS
PROSPECTUS, IS
AVAILABLE WITHOUT CHARGE UPON REQUEST BY WRITING OR
TELEPHONING
GWL&A AT
THE ADDRESS OR TELEPHONE NUMBER SET FORTH
ABOVE. THESE
SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE
COMMISSION
NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF
THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL
OFFENSE.
The date of this prospectus is April 30, 1996
the Money Market Portfolio, seeks preservation of capital, liquidity and
the highest possible current income consistent with the foregoing objectives
through investments in short-term money market securities. Shares of the
Money Market Portfolio are neither insured nor guaranteed by the U.S.
Government. Further, there is no assurance that the Portfolio will be able
to maintain a stable net asset value of $1.00 per share.
the Bond Portfolio, seeks to achieve maximum total return consistent
with the preservation of capital, through investment in an actively managed
portfolio of debt securities.
the Stock Index Portfolio, seeks to provide investment results, before
fees, that correspond to the total return of the S&P 500 Index and the S&P
MidCap Index, weighted according to their respective pro-rata shares of the
market;
the U.S. Government Securities Portfolio, seeks the highest level of
return consistent with preservation of capital and substantial credit
protection and seeks to achieve this objective by investing in
mortgage-related securities issued or guaranteed by an agency or
instrumentality of the U.S. Government, other U.S. agency and instrumentality
obligations, and in U.S. Treasury obligations;
the Small-Cap Index Portfolio, seeks to provide investment results,
before fees, that correspond to the total return of the Russell 2000 Index.
The Russell 2000 Index was developed in 1979 by the Frank Russell Company
to
track the stock market performance of a broadly diversified group of small
capitalization domestic stocks (currently those stocks with capitalization of
below $440 million);
the Mid-Cap Portfolio (Growth Fund I Investment Division), seeks to
provide long-term growth of capital through investment of at least 65% of
the Portfolio's assets in medium sized companies.
the Total Return Portfolio, seeks to obtain the highest possible total
return, a combination of income and capital appreciation, consistent with
reasonable risk;
the International Equity Portfolio, seeks to achieve long term capital
growth through a flexible policy of investing in stocks and debt obligations
of companies and governments outside the United States. Any income realized
will be incidental.
the Corporate Bond Portfolio, which seeks high total
investment
return by investing primarily in debt securities (including
convertibles), although up to 20% of its assets, at the time of
acquisition, may be invested in preferred stocks.
the Small-Cap Value Portfolio (Ariel Value Investment Division), seeks
to achieve long-term capital appreciation by investing primarily in common
stocks, although the Portfolio may also invest in other securities, including
restricted and preferred stocks.
the Maxim INVESCO Small-Cap Growth
Portfolio, seeks to
achieve long-term capital growth by investing its assets principally in a
diversified group of equity securities of emerging growth companies with
market capitalizations of $1 billion or less at the time of initial
purchase.
the Maxim INVESCO ADR Portfolio, seeks to achieve a high
total
return on investment through capital appreciation and current income, while
reducing risk through diversification by investing substantially all its
assets in foreign securities that are issued in the form of American
Depository Receipts ("ADRs") or foreign stocks that are registered with the
Securities and Exchange Commission and traded in the U.S.
the Maxim T. Rowe Price Equity/Income Portfolio, seeks to
provide
substantial dividend income and also capital appreciation by investing
primarily in dividend-paying common stocks of established companies.
The Series Account also has two Investment Divisions which invest in
shares of TCI Portfolios, Inc. ("TCI"), a diversified, series, open-end
management investment company which is a member of the Twentieth Century
family of mutual funds. These Investment Divisions invest in shares of one of
the following portfolios of TCI:
the TCI Growth Fund, which seeks capital growth by investment in
common
stocks (including securities convertible to common stocks) and other
securities that meet certain fundamental and technical standards and, in the
opinion of TCI's management, have better than average potential for
appreciation; and
the TCI Balanced Fund, which seeks capital growth and current income,
and it is the intention of TCI's management to maintain approximately 60% of
the assets of the TCI Balanced Fund in common stocks considered by TCI
management to have better-than-average prospects for appreciation and the
remaining assets in bonds and other fixed income securities.
The Series Account has two Investment Divisions which invest in shares
of Fidelity Variable Insurance Products Fund ("Fidelity VIP"), a diversified
management investment company offering insurance companies a selection of
investment vehicles for variable annuity insurance contracts. These
Investment Divisions invest in shares of one of the following portfolios of
Fidelity VIP:
the Fidelity VIP Growth Portfolio, seeks capital appreciation. The
Portfolio normally purchases common stocks, although its investments are not
restricted to any one type of security. Capital appreciation may also be
found in other types of securities including bonds and preferred stocks; and
the Fidelity VIP II Asset Manager Portfolio, seeks high total return
with reduced risk over the long-term by allocating its assets among domestic
and foreign stocks, bonds and short-term fixed-income instruments.
If the underlying plan document or program of any other Group
Policyholder does not permit investments in any Investment Division of the
Series Account, GWL&A shall restrict the availability of such Investment
Division in compliance with the Group Policyholder's request.
TABLE OF CONTENTS
Page
Fee Table . 5
Examples 7
Glossary of Special Terms 9
Questions and Answers About the Series Account Variable Annuity
11
Financial Highlights 14
Performance Related Information 16
Great-West Life & Annuity Insurance Company 19
FutureFunds Series Account 19
The Group Contracts 19
Accumulation Period 22
Investments of the Series Account 26
Administrative Charges, Risk Premiums and Other Deductions
30
Annuity Options 33
Federal Tax Consequences 36
Voting Rights 40
Distribution of the Group Contracts 41
Return Privilege 41
State Regulation 41
Restrictions Under the Texas Optional Retirement Program
41
Reports 41
Legal Proceedings 41
Legal Matters 42
Registration Statement 42
Statement of Additional Information 42
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchases (as a percentage of purchase
payments) None
Deferred Sales Load (as a percentage of amount distributed)
6% maximum
See footnote (1), page 7
Distribution Fees (as a percentage of purchase payments)
None
Exchange Fee None
TOTAL Contract Owner Transaction Expenses (as a percentage of purchase
payments) 6%
Annual Contract Fee $30 maximum
See footnote (2), page 7
Separate Account Annual Expenses (as a percentage of average account value)
Mortality Risk 0.76%
Expense Risk 0.19%
TOTAL Separate Account Annual Expenses 0.95%
Maxim Series Fund, Inc. Annual Expenses (as a percentage of Maxim Series
Fund, Inc. average net assets)
Money
Market
Bond Stock
Index U.S. Gov't.
Securities Small-Cap
Index
Management Fees .46% .60% .60%
.60%
.60%
Other Expenses None None None
None
None
Total Maxim Series Fund, Inc Annual Expenses
.46%
.60%
.60%
.60%
.60%
International
Equity Total
Return Corporate
Bond
Mid-Cap
(Growth Fund I)
Management Fees1.00%.60%.90%.95%
Other Expenses.50%NoneNone.15%
Total Maxim Series Fund, Inc Annual Expenses
1.50%
.60%
.90%
1.10%
Maxim T. Rowe Price Equity/Income
Small-Cap Value
(Ariel Value) Maxim INVESCO
ADR Maxim INVESCO
Small-Cap Growth
Management Fees.80%1.00%1.00%.95%
Other Expenses.15%.35% .30% .15%
Total Maxim Series Fund, Inc Annual Expenses
.95%
1.35%
1.30%
1.10%
FEE TABLE (cont'd)
TCI Portfolios Annual Expenses (as a percentage of TCI Portfolios average net
assets)
TCI GrowthTCI Balanced
Management Fees1.00%1.00%
Other ExpensesNoneNone
TOTAL TCI Portfolios
Annual Expenses
1.00%
1.00%
Fidelity VIP Portfolios Annual Expenses (as a percentage of Fidelity VIP
Portfolios average net assets)
Fidelity VIP GrowthFidelity VIP II Asset Manager
Management Fees .61%.71%
Other Expenses.09%.08%
TOTAL Fidelity VIP Portfolio
Annual Expenses
.70%
.79%
EXAMPLES
Example 1:
If you do not take a distribution from your contract, or if you annuitize at
the end of the applicable time period you would pay the following expenses on
a $1,000 investment, assuming a 5% annual return on assets:
1 Year3 Year5 Year10 Year
Money Market Investment Division$15.32$49.94$90.43$222.66
Bond Investment Division$16.77$54.58
$98.70
$242.20
Stock Index Investment Division $16.77
$54.58
$98.70 $242.20
U.S. Government Securities
Investment Division
$16.77
$54.58
$98.70
$242.20
Small-Cap Index
Investment Division
$16.77
$54.58
$98.70
$242.20
Total Return Investment Division $16.77
$54.58
$98.70 $242.20
Mid-Cap (Growth Fund I) Investment Division
$21.92
$71.00
$127.78 $309.83
International Equity
Investment Division
$26.02
$83.96
$150.52
$361.55
Corporate Bond Investment Division $19.86
$64.46
$116.23 $283.18
Small-Cap Value (Ariel Value)
Investment Division $24.49
$79.12
$142.04
$342.39
Maxim INVESCO ADR Investment Division $26.02
$83.96
$150.52 $361.55
Maxim INVESCO Small-Cap Growth
Investment Division
$21.92
$71.00
$127.78
$309.83
Maxim T. Rowe Price Equity/Income
Investment Division
$20.38
$66.10
$119.13
$289.90
TCI Growth Investment Division
$20.89
$67.73
$122.02 $296.57
TCI Balanced Investment Division
$20.89
$67.73
$122.02 $296.57
Fidelity VIP Growth
Investment Division
$17.80
$57.88
$104.58
$256.00
Fidelity VIP II Asset Manager
Investment Division
$18.73
$60.85
$109.84
$268.30
The above Examples should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown,
subject to the guarantees in the Group Contracts.
The purpose of the table shown above is to assist the Group Policyholder in
understanding the various costs and expenses that a Group Policyholder will
bear directly or indirectly. (See "Administrative Charges, Risk Premiums
and Other Deductions" for more information pertaining to these costs and
expenses.)
Please note that while GWL&A currently intends to pay any Premium Tax levied
by any governmental entity, GWL&A reserves the right to, in the future and
with prior notice to Participants, deduct the Premium Tax, if any, from
Participant Annuity Account Values. (Please see "Administrative Charges,
Risk Premiums and Other Deductions" for more information.)
(1) The Securities and Exchange Commission requires that the deferred sales
load shown in the fee table and the examples be the maximum contingent
deferred sales load assessed. This charge does, however, vary by Group
Policyholder. Please consult with your employer or Great-West representative
for the fee that applies to your contract. (See "Administrative Charges,
Risk Premiums and Other Deductions: Contingent Deferred Sales Charge" for
more information.)
(2) The Securities and Exchange Commission requires that the annual contract
fee shown in the fee table be reflective of the contract fees collected
during the year. This charge is assumed to remain the same in each period
listed but does vary by Group Policyholder. Please consult with your employer
or Great-West representative for the fee that applies to your contract. (See
"Administrative Charges, Risk Premiums and Other Deductions: Contract
Maintenance Charge.")
EXAMPLES (cont'd)
Example 2:
If you take a distribution in whole from your contract at the end of
the applicable time period you would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets:
1 Year 3 Year
5 Year 10
Year
Money Market Investment Division $75.32
$109.94
$150.43 $222.66
Bond Investment Division $76.77
$114.58
$158.70
$242.20
Stock Index Investment Division
$76.77
$114.58
$158.70 $242.20
U.S. Government Securities
Investment Division
$76.77
$114.68
$158.70
$242.20
Small-Cap Index
Investment Division
$76.77
$114.58
$159.70
$242.20
Total Return Investment Division
$76.77
$114.58
$158.70 $242.20
Mid-Cap (Growth Fund I) Investment Division
$81.92
$131.00
$187.78 $309.83
International Equity
Investment Division
$86.02
$143.96
$210.52
$361.55
Corporate Bond Investment Division
$79.86
$124.46
$176.23 $283.18
Small-Cap Value (Ariel Value)
Investment Division $84.49
$139.12
$202.04
$342.39
Maxim INVESCO ADR Investment Division $86.02
$143.96
$210.52 $361.55
Maxim INVESCO Small-Cap Growth
Investment Division
$81.92
$131.00
$187.78
$309.83
Maxim T. Rowe Price Equity/Income
Investment Division
$80.38
$126.10
$179.13
$289.90
TCI Growth Investment Division $80.89
$127.73
$182.02 $296.57
TCI Balanced Investment Division
$80.89
$127.73
$182.02 $296.57
Fidelity VIP Growth
Investment Division
$77.80
$117.88
$164.58
$256.00
Fidelity VIP II Asset Manager
Investment Division
$79.73
$120.85
$169.84
$268.30
The above Examples should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown,
subject to the guarantees in the Group Contracts.
The purpose of the table shown above is to assist the Group Policyholder in
understanding the various costs and expenses that a Group Policyholder will
bear directly or indirectly. (See "Administrative Charges, Risk Premiums
and Other Deductions" for more information pertaining to these costs and
expenses.)
Please note that while GWL&A currently intends to pay any Premium Tax levied
by any governmental entity, GWL&A reserves the right to, in the future and
with prior notice to Participants, deduct the Premium Tax, if any, from
Participant Annuity Account Values. (Please see "Administrative Charges,
Risk Premiums and Other Deductions" for more information.)
(1) The Securities and Exchange Commission requires that the deferred sales
load shown in the fee table and the examples be the maximum contingent
deferred sales load assessed. This charge does, however, vary by Group
Policyholder. Please consult with your employer or Great-West representative
for the fee that applies to your contract. (See "Administrative Charges,
Risk Premiums and Other Deductions: Contingent Deferred Sales Charge" for
more information.)
(2) The Securities and Exchange Commission requires that the annual contract
fee shown in the fee table be reflective of the contract fees collected
during the year. This charge is assumed to remain the same in each period
listed but does vary by Group Policyholder. Please consult with your employer
or Great-West representative for the fee that applies to your contract. (See
"Administrative Charges, Risk Premiums and Other Deductions: Contract
Maintenance Charge.")
GLOSSARY OF SPECIAL TERMS
As used in this prospectus, the terms have the indicated meanings:
Accumulation Period: The period during which the Participant is covered under
this Group Contract prior to the Participant's Annuity Commencement Date.
Accumulation Unit: An accounting measure used to determine the Variable
Account Value before the Annuity Commencement Date.
Administrative Offices: The Administrative Offices of GWL&A are located at
8515 E. Orchard Rd., Englewood, Colorado 80111.
Annuity Commencement Date: The date on which annuity payments commence
under
an Annuity Option.
Annuity Unit: An accounting measure used to determine the dollar value of any
variable dollar annuity payment after the first payment.
Contribution(s): The total dollar amount(s) paid to purchase an annuity for
a Participant.
Fidelity VIP: Fidelity Variable Insurance Products Fund, a registered
management investment company in which assets of the Series Account may be
invested.
Fixed Annuity: An annuity with payments which remain fixed throughout the
payment period and which do not reflect the investment experience of a
separate account.
Group Contract: An agreement between GWL&A and the Group Policyholder
providing a fixed and/or variable annuity.
Investment Division: The Series Account is divided into investment divisions,
one for each designated Investment Portfolio maintained by Maxim, TCI or
Fidelity VIP and made available to the Series Account.
Investment Portfolio: The securities held in a portfolio of Maxim, TCI or
Fidelity VIP.
Maxim: Maxim Series Fund, Inc., a registered management investment company
in
which assets of the Series Account may be invested.
Participant: An employee who is covered under a Group Contract.
Participant Annuity Account: A separate record established in the name of
each Participant which reflects the total of the Participant's Guaranteed and
Variable Account Values.
Participant Annuity Account Value: The sum of the Participant's Guaranteed
and Variable Account Values.
Premium Tax: The amount of tax, if any, charged by a state or other
government authority on premiums.
Request: Any request in a form satisfactory to GWL&A and received by
GWL&A
at its Administrative Office, as required by any provision of the Group
Contract, and at other times as required by GWL&A.
Series Account: The segregated investment account of Great-West Life &
Annuity Insurance Company called "FUTUREFUNDS Series Account" existing
under
Colorado law and registered as a unit investment trust under the Investment
Company Act of 1940, as amended.
TCI: TCI Portfolios, Inc., a registered management investment company in
which assets of the Series Account may be invested.
Transfer: The transfers of all or a portion of a Participant Annuity Account
Value between and among the Variable and/or Guaranteed Sub-Accounts.
Transfer to Other Companies: The transfer of all or a portion of a
Participant Annuity Account Value to another company.
Valuation Date: The date on which the net asset value of Maxim, TCI, or
Fidelity VIP is determined, and the date on which any Contribution or
Request from the Participant/Group Policyholder will be processed by GWL&A.
A unit value is calculated once daily Monday through Friday except on
holidays on which the New York Stock Exchange is closed. Contributions and
Requests received after 4:00 p.m. EST/EDT will be deemed to have been
received on the next business day. On the day after Thanksgiving, however,
transactions submitted other than by automated voice response unit or by
computer link will not be processed.
Valuation Period: The period between the ending of two successive Valuation
Dates.
Variable Account: The account established under this Group Contract
providing for Variable Sub-Accounts.
Variable Account Value: The sum of the values of the Variable Sub-Accounts
credited to a Participant Annuity Account.
Variable Annuity: An annuity providing for payments, the amount of which will
vary in accordance with the changing values of securities held in the Series
Account.
Variable Sub-Account: A subdivision of the Variable Account containing the
value credited to a Participant from an Investment Division.
QUESTIONS AND ANSWERS ABOUT THE SERIES ACCOUNT VARIABLE
ANNUITY
What is the objective of the Group Contracts offered in this Prospectus?
The objective of the Group Contracts is to provide annuity retirement
programs that qualify for special federal income tax treatment for employees.
Under Section 401(a) plans (including plans sponsored by non-profit and
governmental entities) and under Section 401(k) plans, any employer and
certain employee organizations, such as labor unions, may purchase a Group
Contract. Employers eligible to purchase a Group Contract under Section
403(b) retirement programs include state educational institutions and certain
tax-exempt organizations that meet the requirements of Section 501(c)(3) of
the Code. In addition, under Section 403(b) programs, (i) certain
associations of state educational employees and associations of employees of
tax-exempt organizations may enter into a Group Contract for the benefit of
their members; and (ii) certain associations of state educational employers
and associations of tax-exempt employers may also enter into a Group Contract
for the benefit of employees or their employer members. Under Section 457
retirement programs of the Code, certain state and local governmental
entities and, for years beginning after 1986, other tax-exempt organizations
described in Section 457 are also eligible. (See "The Group Contracts;
Eligible Purchasers").
How can an employee obtain coverage under a Group Contract?
After purchasing a Group Contract, the employer will submit to GWL&A
an
application for any employee who desires coverage under the contract and is
eligible to participate in the employer's retirement program. An employee
should consult his/her employer for information concerning eligibility.
How is the amount of Contributions determined?
For Group Contracts issued under a Section 401(a) retirement program,
the employer or employee organization will make Contributions pursuant to its
underlying Federal or State qualified plan.
For Group Contracts issued under a Section 401(k) retirement program,
the employer will make Contributions pursuant to an underlying Section 401(k)
plan and either a salary reduction agreement with its employees or a cash or
deferred agreement.
For Group Contracts issued under an employer's Section 403(b) retirement
program, the employer will make Contributions for its employees pursuant to
either a salary reduction agreement with those employees or an agreement to
forego a salary increase. In each case, the employee will decide his/her own
level and number of Contributions to be made under a Group Contract, except
with respect to employer-sponsored plans, under which the employer will make
Contributions pursuant to an underlying retirement plan.
For Group Contracts issued under a Section 457 retirement program, the
employer will make Contributions pursuant to an underlying deferred
compensation plan.
The employer will report the amount paid as Contributions to GWL&A.
There is no minimum amount or number of Contributions.
How are Contributions allocated?
Contributions are allocated to the Series Account to accumulate on a
variable basis, to the Guaranteed Account to accumulate at a guaranteed rate
of return, or combination of both. The assets of the Series Account are
invested at net asset value (no sales charge) in shares of Maxim, TCI or
Fidelity VIP. See "Investments of the Series Account" for the
investment objectives and policies of those portfolios of Maxim, TCI and
Fidelity VIP which are available for Allocation of Contributions to the
Series Account. They are also described in full in the accompanying
prospectus for Maxim, TCI and Fidelity VIP.
How will a covered employee know the value of the Contribution made in
his/her name?
A Participant Annuity Account will be established in the name of each
Participant to reflect the dollar value of Contributions made in each
Participant's name. Participants will be furnished not less frequently than
annually a statement of the Participant Annuity Account Value established in
his/her name.
What elections are permitted under the Group Contracts?
Under the Group Contracts issued pursuant to Section 401(a) or Section
401(k) retirement programs, all Contributions are held for the exclusive
benefit of the Participants to the extent vested. All elections permitted
under the Group Contracts are made directly by the employer to GWL&A. The
underlying pension or profit sharing plan may, however, permit the
Participants to make certain of those elections indirectly through the
employer.
Under the Group Contracts issued pursuant to Section 403(b) retirement
programs, all Contributions are vested in the Participant when made, subject
to any limitations in the underlying retirement plan, and the Participant
makes all the elections permitted under the contract, except with respect to
employer-sponsored plans, under which elections are made directly by the
employer to GWL&A. The underlying retirement plan may, however, permit the
Participants to make certain of these elections indirectly through the
employer.
Under the Group Contracts issued pursuant to Section 457 retirement
programs, all Contributions remain property of the employer until made
available to a Participant by the employer's underlying deferred compensation
plan. All elections permitted under these Group Contracts are made directly
by the employer to GWL&A. An underlying deferred compensation plan may,
however, permit the Participants to make certain of those elections
indirectly through the employer.
What are the charges to Participants under the Group Contracts?
GWL&A deducts a "Contract Maintenance Charge" for administrative
expenses of not more than $30.00 annually from each Participant Annuity
Account Value. The Contract Maintenance Charge on Section 403(b) Group
Contracts will be waived for an initial period of no less than 12 months and
up to 15 months, depending on the Participant's effective date. There may
also be a charge associated with the total or partial distribution from a
Participant Annuity Account prior to the Annuity Commencement Date.
The cumulative total of all Contingent Deferred Sales Charges applied to
any Participant Annuity Account will not exceed 6% of all Contributions made
within 72 months prior to the date of any distribution in whole or in part,
or, with respect to certain Sections 401(a) or 401(k) and 457 retirement
programs, 5% of the amount distributed. Participants in some programs will
not be assessed a Contingent Deferred Sales Charge. (See "Administrative
Charges, Risk Premiums and Other Deductions.") Certain redeemability
restrictions apply to Group Contracts issued under the Texas Optional
Retirement Program. (See "Restrictions Under the Texas Optional Retirement
Program.") There may also be redeemability restrictions applied to
Participants in Section 403(b) Group Contracts. (See "Federal Tax
Consequences: Section 403(b) Retirement Programs.") Upon a total or
partial distribution, a penalty tax may be imposed pursuant to Section 72(t)
of the Code. (See "Federal Tax Consequences.")
GWL&A also deducts from the net asset value of the Series Account an
amount, computed daily, equal to an annual rate of 0.95% for
mortality
and expense risk guarantees.
GWL&A presently intends to pay any applicable state premium taxes as a
result of the existence of the Participant Annuity Accounts. Applicable state
premium taxes range from 0 to 3.50% of the Contributions or the
Participant Annuity Account Value.
Maxim, TCI, and Fidelity VIP incur a charge against the net asset value
for Investment Advisory Services and may incur other expenses.
What are the distribution rights under the Group Contracts?
A distribution in whole or in part may be taken from the Participant
Annuity Account up to 30 days prior to the Annuity Commencement Date, subject
to any limitations in the underlying retirement plan and subject to a
Contingent Deferred Sales Charge. (See "Accumulation Period: Total and
Partial Distribution" for a description of distribution procedures.) Under
certain circumstances, a Contingent Deferred Sales Charge will not be charged
to Participants who have participated for 15 or more years in the FutureFunds
Group Annuity Contract. (See "Administrative Charges, Risk Premiums and
Other
Deductions.")
Can Contributions be Transferred between the Variable and Fixed Sub-Accounts
Yes. All or a portion of a Participant Annuity Account Value held in any
of the Variable Sub-Accounts or Daily Interest Guarantee Sub-Account may be
Transferred at any time prior to the Annuity Commencement Date by written or
telephone request. Transfers of all or a portion of a Participant Annuity
Account Value held in any of the Guaranteed Certificate Funds or
Guaranteed Fixed Funds may be made only at Certificate maturity. (See
" Accumulation Period: Transfers Between Variable and Guaranteed
Sub-Accounts.")
What Annuity Options are available?
The Group Contracts provide for several annuity options payable on a
variable, fixed, or combination basis. An election of any annuity option(s)
must be made at least 30 days prior to the Participant's Annuity Commencement
Date. If no election is made, annuity payments will begin automatically on
the Annuity Commencement Date under an option providing for a life annuity
with 120 monthly payments certain. (See "Annuity Options.")
What are the voting rights under the Group Contracts?
Participants under Section 403(b) retirement programs and the employer
under Section 401(a), Section 401(k) and Section 457 retirement programs will
be entitled to instruct GWL&A to vote shares of Maxim, TCI or Fidelity VIP
held for their Participant Annuity Accounts. (See "Voting Rights.")
Is there a short-term cancellation right?
Yes. Within fifteen (15) days after a Participant Certificate is first
mailed, it may be canceled by the Participant for any reason by delivering or
mailing it, along with a Request to cancel, to GWL&A's Administrative Offices
or to an authorized agent of GWL&A. This cancellation right only applies to
Group Contracts issued under Section 403(b) retirement programs. (See "Return
Privilege.")
How will the Group Contracts be distributed?
The Group Contracts will be distributed through Great-West and will be
sold by duly licensed insurance agents of Great-West, independent insurance
brokers, and various other registered broker-dealers. (See "Distribution of
the Group Contracts.")
FINANCIAL HIGHLIGHTS
Selected Data for Accumulation Units
Outstanding Throughout Each Period
For the Years Ended December 31,
INVESTMENT DIVISION
1995
MONEY MARKET 1
Value at beginning of period
$ 10.00
Value at end of period
$ 10.04
Increase (decrease) in value
of accumulation unit
$ 0.04
Number of accumulation units
outstanding at end of period
169,096.04
BOND 1
Value at beginning of period
$ 10.00
Value at end of period
$ 10.11
Increase (decrease) in value
of accumulation unit
$ 0.11
Number of accumulation units
outstanding at end of period
197,590.07
STOCK INDEX 1
Value at beginning of period
$ 10.00
Value at end of period
$ 10.30
Increase (decrease) in value
of accumulation unit
$ 0.30
Number of accumulation units
outstanding at end of period
937,180.75
U.S. GOVERNMENT SECURITIES 1
Value at beginning of period
$ 10.00
Value at end of period
$ 10.15
Increase (decrease) in value
of accumulation unit
$ 0.15
Number of accumulation units
outstanding at end of period
39,695.16
TCI GROWTH 1
Value at beginning of period
$ 10.00
Value at end of period
$ 9.92
Increase (decrease) in value
of accumulation unit
$ (0.08)
Number of accumulation units
outstanding at end of period
292,581.15
TCI BALANCED 1
Value at beginning of period
$ 10.00
Value at end of period
$ 10.18
Increase (decrease) in value
of accumulation unit
$ 0.18
Number of accumulation units
outstanding at end of period
84,634.10
MID-CAP (GROWTH FUND I) 1
Value at beginning of period
$ 10.00
Value at end of period
$ 10.34
Increase (decrease) in value
of accumulation unit
$ 0.34
Number of accumulation units
outstanding at end of period
194,687.27
SMALL-CAP INDEX 1
Value at beginning of period
$ 10.00
Value at end of period
$ 10.43
Increase (decrease) in value
of accumulation unit
$ 0.43
Number of accumulation units
outstanding at end of period
72,120.51
TOTAL RETURN 1
Value at beginning of period
$ 10.00
Value at end of period
$ 10.18
Increase (decrease) in value
of accumulation unit
$ 0.18
Number of accumulation units
outstanding at end of period
4,862.59
FINANCIAL HIGHLIGHTS
Selected Data for Accumulation Units
Outstanding Throughout Each Period
For the Years Ended December 31,
INVESTMENT DIVISION 1995
INTERNATIONAL EQUITY 1
Value at beginning of period
$ 10.00
Value at end of period
$ 10.36
Increase (decrease) in value
of accumulation unit
$ 0.36
Number of accumulation units
outstanding at end of period
290,190.44
FIDELITY VIP GROWTH 1
Value at beginning of period
$ 10.00
Value at end of period
$ 9.62
Increase (decrease) in value
of accumulation unit
$ (0.38)
Number of accumulation units
outstanding at end of period
164,201.34
FIDELITY VIP II ASSET MANAGER 1
Value at beginning of period
$ 10.00
Value at end of period
$ 10.49
Increase (decrease) in value
of accumulation unit
$ 0.49
Number of accumulation units
outstanding at end of period
118,138.13
MAXIM T. ROWE PRICE
EQUITY/INCOME 1
Value at beginning of period
$ 10.00
Value at end of period
$ 10.43
Increase (decrease) in value
of accumulation unit
$ 0.43
Number of accumulation units
outstanding at end of period
1,324.94
SMALL-CAP VALUE 1
(ARIEL VALUE)
Value at beginning of period
$ 10.00
Value at end of period
$ 10.48
Increase (decrease) in value
of accumulation unit
$ 0.48
Number of accumulation units
outstanding at end of period
164.60
CORPORATE BOND 1
Value at beginning of period
$ 10.00
Value at end of period
$ 10.30
Increase (decrease) in value
of accumulation unit
$ 0.30
Number of accumulation units
outstanding at end of period
269.42
MAXIM INVESCO ADR 1
Value at beginning of period
$ 10.00
Value at end of period
$ 10.41
Increase (decrease) in value
of accumulation unit
$ 0.41
Number of accumulation units
outstanding at end of period
1,130.83
MAXIM INVESCO
SMALL-CAP GROWTH 1
Value at beginning of period
$ 10.00
Value at end of period
$ 10.77
Increase (decrease) in value
of accumulation unit
$ 0.77
Number of accumulation units
outstanding at end of period
24,147.18
Current Accumulation Unit Values can be obtained by calling GWL&A
toll-free at 1-800-523-4106
1. The inception date for all Investment Divisions in this
Contract was December 4, 1995.
PERFORMANCE RELATED INFORMATION
From time to time, the Series Account may advertise certain performance
related information concerning its Investment Divisions. Performance
information about an Investment Division is based on the
Investment
Division's historical performance only and is not intended to indicate
future performance. The inception dates for each Investment Division and
the corresponding Maxim, TCI, and Fidelity VIP Portfolios are set forth
below, following the total return information.
Below is a table of performance related information for the Money Market
Investment Division for stated periods ended December 31,
1995 :
INVESTMENT DIVISIONS Yield
Effective Yield
Money Market 4.47% 4.57%
Yield and effective yield for the Money Market Investment Division is for the
7-day period ended December 31, 1995. The yield calculation above takes
into account recurring charges against the Series Account and the Money
Market Portfolio (but does not take into account the Contingent Deferred
Sales Charge). The yield and effective yield information is annualized.
TOTAL RETURNS
For Section 401(a), 401(k) and 457 retirement programs where the
Contingent Deferred Sales Charge(*)is assessed at 6% of the prior 72 months
Contributions:
INVESTMENT
DIVISIONS
Before CDSC
1 Year
After
CDSC
1 Year
Before CDSC
5 Year
After CDSC
5 Year
Before CDSC
10 Year
or Since
Inception
After
CDSC
10 Year
or Since
Inception
Money Market
4.57%
-1.43%
3.26%
2.18%
4.76%
4.76%
Bond
14.07%
8.07%
7.20%
6.27%
7.66%
7.66%
Stock Index (1)
34.26%
28.26%13.12%
12.38%
11.05%
11.05%
U.S. Government Securities 14.94%
8.94%
7.80%
6.90%
7.79%
7.79%
Small-Cap Index
24.98%
18.98%
N/A
N/A
8.83%
6.16%
Total Return
21.49%
15.49%
10.40%
9.58%
8.02%
8.02%
Mid-Cap (Growth Fund I)
25.24%
19.24%
N/A
N/A
17.24%
14.65%
International Equity
7.84%
1.84%
N/A
N/A
6.71%
3.99%
Corporate Bond
28.89%
22.89%
N/A
N/A
22.60%
17.60%
Small-Cap Value (Ariel Value)
14.35%
8.35%
N/A
N/A
6.37%
3.64%
Maxim INVESCO ADR
14.33%
8.33%
N/A
N/A
10.91%
5.83%
Maxim INVESCO Small-Cap Growth
30.47%
24.47%
N/A
N/A
26.39%
21.42%
Maxim T. Rowe Price Equity/Income
32.09%
26.09%
N/A
N/A
25.36%
20.38%
TCI Growth
29.80%
23.80%
13.73%
13.01%
11.71%
11.71%
TCI Balanced
19.93%
13.93%
N/A
N/A
8.71%
7.75%
Fidelity VIP Growth
34.02%
28.02%
19.58%
18.98%
13.69%
13.69%
Fidelity VIP II Asset Manager
15.78%
9.78%
11.63%
10.85%
10.15%
9.57%
(1) Prior to December 1, 1992, the Growth Investment Division.
* The CDSC or Contingent Deferred Sales Charge, is deducted only when money
is withdrawn from the Group Contract, and not when the money is Transferred
between Investment Divisions. Therefore, the Series Account provides total
returns both before and after considering the CDSC.
For Section 403(b) and 457 retirement programs where the Contingent Deferred
Sales Charge (*) is assessed at 5% of the amount distributed:
INVESTMENT
DIVISIONS
Before
CDSC
1 Year
After
CDSC
1 Year
Before
CDSC
5 Year
After
CDSC
5 Year
Before CDSC
10 Year
or Since
Inception
After CDSC
10 Year
or Since
Inception
Money Market
4.57%
-0.66% 3.26%
2.42%
4.76%
4.44%
Bond
14.07%
8.36%
7.20%
6.32%
7.66%
7.33%
Stock Index (1)
34.26%
27.55%
13.12%
12.20%
11.05%
10.72%
U.S. Government Securities
14.94%
9.20%
7.80%
6.93%
7.79%
7.46%
Small-Cap Index
24.98%
18.73%
N/A
N/A
8.83%
6.18%
Total Return
21.49%
15.41%
10.40%
9.50%
8.02%
7.49%
Mid-Cap (Growth Fund I)
25.24%
18.98%
N/A
N/A
17.24%
14.27%
International Equity
7.84%
2.45%
N/A
N/A
6.71%
4.12%
Corporate Bond
28.89%
22.44%
N/A
N/A
22.60%
17.32%
Small-Cap Value (Ariel Value)
14.35%
8.63%
N/A
N/A
6.37%
3.78%
Maxim INVESCO ADR
14.33%
8.61%
N/A
N/A
10.91%
6.13%
Maxim INVESCO Small-Cap Growth
30.47%
23.95%
N/A
N/A
26.39%
20.94%
Maxim T. Rowe Price Equity/Income
32.09
25.49%
N/A
N/A
25.36%
19.96%
TCI Growth
29.80%
23.31%
13.73%
12.81%
11.71%
11.15%
TCI Balanced
19.93%
13.93%
N/A
N/A
8.71%
7.52%
Fidelity VIP Growth
34.02%
27.32%
19.58%
18.60%
13.69%
13.19%
Fidelity VIP II Asset Manager
15.78%
9.99%
11.63%
10.73%
10.15%
9.44%
(1) Prior to December 1, 1992, the Growth Investment Division.
* The CDSC or Contingent Deferred Sales Charge, is deducted only when money
is withdrawn from the Group Contract, and not when the money is Transferred
between Investment Divisions. Therefore, the Series Account provides total
returns both before and after considering the CDSC. The CDSC for
Section
457 retirment programs diminishes over time, these factors are taken into
consideration in calculating the above returns. See "Administrative Charges,
Risk Premiums and Other Deductions - Contingent Deferred Sales
Charge".
For Section 403(b) and 457 retirement programs where the Contingent Deferred
Sales Charge (*) is not assessed:
INVESTMENT
DIVISIONS
Before CDSC
1 Year
After CDSC
1 Year
Before CDSC
5 Year
After CDSC
5 Year
Before CDSC
10 Year
or Since
Inception
After CDSC
10 Year
or Since
Inception
Money Market
4.57%
N/A
3.26%
N/A
4.76%
N/A
Bond
14.07%
N/A
7.20%
N/A
7.66%
N/A
Stock Index (1)
34.26%
N/A
13.12%
N/A
11.05%
N/A
U.S. Government Securities
14.94%
N/A
7.80%
N/A
7.79%
N/A
Small-Cap Index
24.98%
N/A
N/A
N/A
8.83%
N/A
Total Return
21.49%
N/A
10.40%
N/A
8.02%
N/A
Mid-Cap (Growth Fund I)
25.24%
N/A
N/A
N/A
17.24%
N/A
International Equity
7.84%
N/A
N/A
N/A
6.71%
N/A
Corporate Bond
28.89%
N/A
N/A
N/A
22.60%
N/A
Small-Cap (Ariel Value)
14.35%
N/A
N/A
N/A
6.37%
N/A
Maxim INVESCO ADR
14.33%
N/A
N/A
N/A
10.91%
N/A
Maxim INVESCO Small-Cap Growth
30.47%
N/A
N/A
N/A
26.39%
N/A
Maxim T. Rowe Price Equity/Income
32.09%
N/A
N/A
N/A
25.36%
N/A
TCI Growth
29.80%
N/A
13.73%
N/A
11.71%
N/A
TCI Balanced
19.93%
N/A
N/A
N/A
8.71%
N/A
Fidelity VIP Growth
34.02%
N/A
19.58%
N/A
13.69%
N/A
Fidelity VIP II Asset Manager
15.78%
N/A
11.63%
N/A
10.15%
N/A
(1) Prior to December 1, 1992, the Growth Investment Division.
* The CDSC or Contingent Deferred Sales Charge, is deducted only when money
is withdrawn from the Group Contract, and not when the money is Transferred
between Investment Divisions. Therefore, the Series Account provides total
returns both before and after considering the CDSC.
The tables above show total return for each Investment Division of
the Series Account calculated on the basis of the historical performance of
the corresponding Maxim, TCI, and Fidelity VIP Portfolios available under the
Contracts (calculated from inception for each corresponding Portfolio or ten
years, as applicable) and assume that the Portfolios were available under the
Contract for all of the periods shown (which they were not). Actual total
return is shown for periods after which the respective Portfolios became
available under the Contract. The returns shown reflect deductions for all
Series Account expenses and Portfolio expenses.
The following table sets forth the inception date of each Investment
Division and the inception date of the corresponding Maxim, TCI, and Fidelity
VIP Portfolio.
INVESTMENT DIVISION PORTFOLIO INCEPTION
DATE
INVESTMENT
DIVISION
INCEPTION IN CONTRACT
Money Market February 25, 1982
December 4,
1995
Bond July 1, 1982 December 4, 1995
Stock Index July 1, 1982
December 4, 1995
U.S. Government Securities April 4, 1985
December 4,
1995
Small-Cap Index December 1, 1993
December 4, 1995
Total Return August 6, 1987
December 4, 1995
Mid-Cap (Growth Fund I)
December 31, 1993
December
4, 1995
International Equity December 1, 1993
December 4,
1995
Corporate Bond November 1, 1994
December 4,
1995
Small-Cap Value (Ariel Value) December 1, 1993
December 4, 1995
Maxim INVESCO ADR November 1, 1994
December 4,
1995
Maxim INVESCO Small-Cap Growth November 1,
1994
December 4,
1995
Maxim T. Rowe Price Equity/Income
November 1, 1994
December 4,
1995
TCI Growth November 20, 1987
December 4,
1995
TCI Balanced May 1, 1991 December 4, 1995
Fidelity VIP Growth October 9, 1986
December 4, 1995
Fidelity VIP II Asset Manager
September 8, 1989
December 4,
1995
Performance Related Information
The Series Account may include total return in advertisements or other sales
material regarding the Money Market, Bond, Stock Index, U.S.
Government Securities, TCI Growth, TCI Balanced, Small-Cap Index,
Mid-Cap
(Growth Fund I), International Equity, Total Return, Corporate Bond,
Small-Cap Value (Ariel Value), Maxim T. Rowe Price
Equity/Income,
Maxim INVESCO ADR, Maxim INVESCO Small-Cap
Growth,
Fidelity VIP
Growth and the Fidelity VIP II Asset Manager Investment Divisions. When the
Series Account advertises the total return of one of these portfolios, it
will be calculated for one year, five years, and ten years or some other
relevant period if the portfolio has not been in existence for at least ten
years. Total return is measured by comparing the value of an investment in
the portfolio at the beginning of the relevant period to the value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions).
For the Money Market Investment Division, "yield" refers to the income
generated by an investment in the Money Market Investment Division over a
stated seven-day period. This income is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to
be generated each week over a 52-week period and is shown as a percentage of
the investment. The "effective yield" of the Money Market Investment Division
is calculated similarly but, when annualized, the income earned by an
investment in the Money Market Investment Division is assumed to be
reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
The yield and effective yield calculations for the Money Market Investment
Division includes all recurring charges under the Group Contracts (but does
not include the Contingent Deferred Sales Charge), and is lower than yield
and effective yield for Maxim which does not have comparable charges. Total
return for the Investment Divisions includes all charges under the Group
Contracts, including any Contingent Deferred Sales Charge, and likewise, is
lower than total return at the Maxim, TCI or Fidelity VIP level, which has no
comparable charges.
For more complete information on the method used to calculate yields,
effective yields, and total return of the respective Investment Divisions,
see the "Statement of Additional Information".
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
GWL&A is a stock life insurance company originally organized under the laws
of the state of Kansas as the National Interment Association. Its name was
changed to Ranger National Life Insurance Company in 1963 and to Insuramerica
Corporation prior to changing to its current name in February of 1982. In
September of 1990, GWL&A redomesticated and is now organized under the laws
of the state of Colorado.
GWL&A is authorized to engage in the sale of life insurance, accident and
health insurance and annuities. It is qualified to do business in Puerto
Rico, the District of Columbia and 49 states in the United States.
GWL&A is a wholly-owned subsidiary of The Great-West Life Assurance
Company. The Great-West Life Assurance Company is a subsidiary of
Great-West
Lifeco Inc., a holding company. Great-West Lifeco Inc. is in turn a
subsidiary of Power Financial Corporation, a financial services company.
Power Corporation of Canada, a holding and management company, has voting
control of Power Financial Corporation. Mr. Paul Desmarais, through a
group of private holding companies, which he controls, has voting control
of Power Corporation of Canada.
GWL&A has primary responsibility for administration of the Group
Contracts and the Series Account. Its Administrative Offices are located at
8515 E. Orchard Road, Englewood, Colorado 80111.
FUTUREFUNDS SERIES ACCOUNT (THE "SERIES ACCOUNT")
The Series Account was originally established by GWL&A under Kansas
law
on November 15, 1983. The Series Account now exists pursuant to Colorado law
as a result of the redomestication of GWL&A. The Series Account has been
registered with the Securities and Exchange Commission as a unit investment
trust pursuant to the provisions of the Investment Company Act of 1940, as
amended, and meets the definition of a "separate account" under the
federal securities laws. Such registration does not involve
supervision of the management of the Series Account or GWL&A by the
Securities and Exchange Commission.
The Series Account currently has seventeen Investment Divisions
available for allocation of Contributions. If, in the future, GWL&A
determines that marketing needs and investment conditions warrant, it may
establish additional Investment Divisions which will be made available to
existing Group Contract owners to the extent and on a basis to be determined
by GWL&A. Each Investment Division invests in shares of Maxim, TCI or
Fidelity VIP allocable to one of seventeen Investment Portfolios, each having
a specific investment objective. Maxim, TCI and Fidelity VIP also have other
portfolios which are not generally available for investment by the Series
Account.
GWL&A does not guarantee the investment performance of the Series
Account. The portion of the Participant Annuity Account Value attributable to
the Series Account and the amount of variable annuity payments depend on the
investment performance of Maxim, TCI and Fidelity VIP. Thus, the Participant
bears the full investment risk for all Contributions allocated to the Series
Account.
The Series Account is administered and accounted for as part of the
general business of GWL&A; but the income, capital gains, or capital losses
of each Variable Sub-Account are credited to or charged against the assets
held in that Variable Sub-Account in accordance with the terms of the Group
Contracts, without regard to other income, capital gains or capital losses of
any other Variable Sub-Account or arising out of any other business GWL&A
may
conduct. Under Colorado law, the assets of the Series Account are not
chargeable with liabilities arising out of any other business GWL&A may
conduct. Nevertheless, all obligations arising under the Group Contracts are
generally corporate obligations of GWL&A.
THE GROUP CONTRACTS
Eligible Purchasers
Section 401(a) Retirement Programs. Employers, including non-profit entities
defined in Code Section 501(c) and governmental entities defined in Code
Section 414(d) and Sections 3(32) and 4 of the Employment Retirement Income
Security Act of 1974 ("ERISA"), and certain employee organizations defined in
Sections 3(4) and 3(5) of ERISA, such as labor organizations, may purchase a
Group Contract.
Section 401(k) Retirement Programs. Any employer and certain employee
organizations defined in Sections 3(4) and 3(5) of ERISA, such as labor
organizations, may purchase a Group Contract.
Section 403(b) Retirement Programs. State educational institutions and
tax-exempt organizations under Section 501(c)(3) of the Code may purchase
Group Contracts. In addition, associations of state educational employees,
associations of state educational employers, associations of employees of
organizations that are tax-exempt under Section 501(c)(3) of the Code, and
associations of tax-exempt employers under Section 501(c)(3), may also
purchase Group Contracts. In order to be eligible, however, the association
must also meet the requirements of Sections 501(c)(3).
Section 457 Retirement Program. State governments, local governments, rural
electric cooperatives, political subdivisions, and agencies,
instrumentalities and certain affiliates of such entities may purchase the
Group Contracts. For years beginning after 1986, organizations (other than
a governmental unit) which are exempt from tax under the Code, and which
maintain a Section 457 Retirement Program, may also purchase the Group
Contracts.
Any of the organizations mentioned above wishing to purchase Group
Contracts must complete application forms which selling agents will forward
to GWL&A's Administrative Offices for acceptance. Where the purchaser is an
employee association, any employer of an association member employee can
obtain coverage by completing application forms and agreeing in writing to be
bound by the terms of the Group Contract. Likewise, where the purchaser is an
association of tax-exempt employers, any employer member can obtain coverage
by following the same procedures. GWL&A reserves the right to reject any
application.
Employee Coverage
The employer will submit to selling agents an application for any
employee who desires coverage under the Group Contract and is eligible to
participate in the employer's retirement program. GWL&A reserves the right to
reject any application. An employee should consult his/her employer for
information concerning eligibility.
Contributions
Section 401(a) Retirement Programs. Contributions will be made by the
employer or employee organization pursuant to the employer's or employee
organization's underlying pension or profit-sharing plan.
Section 401(k) Retirement Programs. Contributions will be made by the
employer pursuant to the employer's underlying profit sharing plan and the
Participant's election to execute a salary reduction agreement or a cash or
deferred agreement.
Section 403(b) Retirement Programs. The employer will make Contributions in
accordance with a salary reduction agreement with its employees or an
agreement to forego a salary increase, except with respect to
employer-sponsored plans under which the employer will make Contributions
pursuant to an underlying retirement plan.
Section 457 Retirement Programs. Contributions will be made by the employer
pursuant to the employer's underlying deferred compensation plan.
Under all retirement programs, the employer will report the amount paid as
Contributions on forms provided by GWL&A. Checks for Contributions should
be
made payable to the Great-West Life & Annuity Insurance Company. There is
no
minimum amount or number of Contributions and, for any Participant Annuity
Account, Contributions can be made until the Participant's Annuity
Commencement Date.
Participant Annuity Account
A Participant Annuity Account will be established in the name of each
Participant to reflect the dollar values of Contributions made in each
Participant's name. Participants will be furnished no less frequently than
annually with a statement of the Participant Annuity Account Value
established in his/her name.
Ownership
Section 401(a) Retirement Programs. The employer or employee organization
purchasing a Group Contract is the owner of the Contract. Employer
Contributions vest in accordance with the terms of the employer's or employee
organization's underlying plan. Any employee Contributions are immediately
vested in the Participant. Neither the employer, employee organization nor
the Participants can assign any interest in the Group Contract or the
Participant Annuity Account.
Section 401(k) Retirement Programs. The employer or employee organization
purchasing a Group Contract is the owner of the contract. All employer
Contributions credited to a Participant Annuity Account pursuant to the
Participant's election to execute a salary reduction agreement or a cash or
deferred agreement are vested in the Participant. Any matching employer
Contributions vest in accordance with the terms of the employer's underlying
plan. Neither the employer, employee organization nor the Participants can
assign any interest in the Group Contract or the Participant Annuity Account.
Section 403(b) Retirement Programs. The employer or association purchasing a
Group Contract is the owner of the contract for the benefit of the
Participants. Each Participant receives a Participant Certificate to evidence
his/her coverage under the Group Contract. All Contributions credited to a
Participant Annuity Account are vested in the Participant, subject to any
limitations in the underlying retirement plan. Interests in the Group
Contract or the Participant Annuity Accounts cannot be assigned by the
employer, association or the Participants.
Section 457 Retirement Programs. The employer is the owner of the Group
Contract. All Contributions made in the name of the Participants remain the
property of the employer and subject to the claims of the employer's general
creditors until made available to the Participant in accordance with the
terms of the employer's underlying deferred compensation plan. The employer
may assign or transfer a Group Contract to another person as permitted by
applicable law and only with the prior written consent of GWL&A, which
assumes no responsibility for the validity or effect of any assignment.
PAYMENTS OF ANY BENEFITS UNDER THE GROUP CONTRACT WILL
ONLY BE
MADE IF THEN
PERMITTED UNDER THE EMPLOYER'S DEFERRED COMPENSATION
PLAN AS
DETERMINED BY
THE EMPLOYER.
Elections Under the Group Contracts
The Group Contracts permit the election of the Annuity Commencement
Date, allocation of Contributions, Transfers, distributions in whole or in
part, and the election of annuity payment options. Under Section 403(b)
retirement programs (other than employer-sponsored plans), the Participants
make all the elections permitted under the Group Contracts. Under Section
401(a), Section 401(k), Section 457 and employer-sponsored 403(b) retirement
plans, all elections are made by the employer, or the employee organization.
The employer's underlying pension, profit sharing or deferred compensation
plan or Section 403(b) retirement plan may, however, permit the Participants
to make certain of those elections indirectly through the employer. A
Participant should consult his/her employer for information concerning
elections permitted under its profit sharing or deferred compensation plan.
Amendment of Group Contracts
Section 401(a), Section 401(k) and Section 457 Retirement Programs. The Group
Contracts may be modified at any time by written agreement between GWL&A
and
the employer, or the employee organization.
Section 403(b) Retirement Programs. The Group Contracts may be modified at
any time by written agreement between GWL&A and either the employer, if it
is
the owner of a Group Contract, or the association. No modification will,
however, affect the terms of the contract which are applicable to
Contributions paid prior to such modification without the written consent of
the Participants.
In addition, GWL&A reserves the right to amend the Group Contracts
without the consent of any person to meet the requirements of the Investment
Company Act of 1940 or other applicable federal or state laws or
regulations, or to modify the annuity rates for future Contributions. GWL&A
will notify the Participants of any such changes.
ACCUMULATION PERIOD
Allocation of Contributions
Initial Contributions will be applied after receipt at GWL&A's
Administrative Offices within two business days if the application form is
complete, or within five business days if the application form is incomplete.
If an incomplete application form is completed within five business days of
GWL&A's receipt, the initial Contribution will be applied within two business
days of the application's completion. If the initial Contribution cannot be
so applied, it will be returned at once unless the prospective purchaser
specifically consents to GWL&A retaining the purchase payment until the
application is made complete. Subsequent Contributions will be applied
pursuant to the allocation instructions in the completed application and will
be allocated upon receipt by GWL&A at its Administrative Offices on the day
received. There is no minimum amount or number of Contributions.
Contributions for a Participant are allocated to the Series Account to
accumulate on a variable basis, to the Guaranteed Account to accumulate on a
guaranteed rate of return, or a combination of both, according to the
instructions of the Participant under a Section 403(b) retirement program
(other than employer sponsored plans). The Participants make all the
elections permitted under the Group Contracts under Section 401(a), Section
401(k), Section 457, or employer-sponsored Section 403(b) retirement program
("Allocation Instructions"). Allocation Instructions may be changed
at
any time and will be effective the later of (1) the date specified on the
form and (2) the date the completed form is received and recorded by GWL&A
at
its Administrative Offices. GWL&A will allocate the Contributions based upon
the instructions in the application form. A change of Allocation Instructions
will be effective for Contributions which are received after GWL&A's receipt
and recording of the change.
Upon allocation to the appropriate Variable Sub-Account, the
Contributions are converted into Accumulation Units. The number of
Accumulation Units credited with respect to the initial Contribution under a
Participant Annuity Account is determined by dividing the amount allocated to
each Variable Sub-Account by the value of an Accumulation Unit for that
Variable Sub-Account on the day following GWL&A's receipt of the initial
Contribution and GWL&A's affirmative determination to establish that
Participant Annuity Account. The number of Accumulation Units with respect to
any additional Contribution to a Participant Annuity Account is determined by
dividing the amount allocated to the appropriate Variable Sub-Account by the
value of an Accumulation Unit for that Sub-Account on the day the
Contribution is accepted. Contributions received after 4:00 p.m., EST/EDT,
shall be deemed to have been received on the next Valuation Date. The number
of Accumulation Units so determined shall not be changed by any subsequent
change in the value of an Accumulation Unit, but the dollar value of an
Accumulation Unit will vary in amount depending upon the investment
experience of the applicable underlying mutual fund.
Dollar Cost Averaging
A Participant may, by Request, automatically Transfer amounts from
one Investment Division selected from among those being allowed under this
option to any of the other Investment Divisions at regular intervals. The
intervals between Transfers may be monthly, quarterly, semi-annually or
annually. The Transfer will be initiated one frequency period following the
date of the Request, and thereafter Transfers will continue on the same day
each interval unless terminated by you, or for other reasons as set forth in
the Contract. Transfers can only occur on dates the New York Stock Exchange
("NYSE") is open. If there are insufficient funds in the applicable
Investment Division on the date of Transfer, no Transfer will be made;
however, Dollar Cost Averaging will resume once there are sufficient funds in
the applicable Investment Division.
Automatic Transfers must meet the following conditions:
1. The minimum amount that can be Transferred out of the selected
Investment Division is $100 per month.
2. The Participant must specify the percentage or dollar amount
to be
Transferred, the Accumulation Unit Values will be determined on each Transfer
date.
Dollar Cost Averaging may be used to purchase Accumulation Units of the
Investment Divisions over a period of time so fewer Accumulation Units are
purchased when prices are greater and more Accumulation Units when prices are
lower. Participation in Dollar Cost Averaging does not, however, assure a
greater profit, nor will it prevent or necessarily alleviate losses in a
declining market. The Participant, by Request, may cease Dollar Cost
Averaging at any time. The Company reserves the right to modify, suspend or
terminate Dollar Cost Averaging at any time.
The Rebalancer Option
The Participant may, by Request, automatically Transfer among the
Investment Divisions on a periodic basis by electing the Rebalancer Option.
This option automatically reallocates the Variable Account Value to maintain
a particular allocation among Investment Divisions selected by the
Participant. The amounts allocated in each Investment Division will increase
or decrease at different rates depending on the investment experience of the
Investment Division.
The Participant may Request that the rebalancing occur one time only, in
which case the Transfer will take place after it has been received and
processed by the Company as provided in the Contract. Rebalancing may also
be set up on a quarterly, semi-annual or annual basis, in which case the
first Transfer will be initiated one frequency period following the date of
the Request. On the Transfer date for the specified Request, assets will be
automatically reallocated to the selected funds. Rebalancing will continue
on the same day each interval unless terminated by you, or for other reasons
as set forth in the Contract. Transfers can only occur on dates the NYSE is
open. In order to participate in the Rebalancer Option, the Participant's
entire Variable Account Value must be included.
The Participant must specify the percentage of Variable Account Value to
be allocated to each Investment Division and the frequency of rebalancing.
The Participant, by Request, may modify the allocations or cease the
Rebalancer Option at any time. Participation in the Rebalancer Option and
Dollar Cost Averaging at the same time is not allowed. Participation in the
Rebalancer Option does not assure a greater profit, nor will it prevent or
necessarily alleviate losses in a declining market. The Company reserves the
right to modify, suspend, or terminate the Rebalancer Option at any time.
Valuation of Accumulation Units
Accumulation Units for each Variable Sub-Account are valued separately,
but the method used for valuing Accumulation Units in each Variable
Sub-Account is the same. Initially, the value of each Accumulation Unit was
set at $10.00. Thereafter, the value of an Accumulation Unit in any Variable
Sub-Account on any Valuation Date equals the value of an Accumulation Unit in
that Sub-Account as of the immediately preceding Valuation Date multiplied by
the "Net Investment Factor" of that Variable Sub-Account for the current
Valuation Period. Accumulation Unit values are valued once each day that the
underlying mutual fund shares are valued.
The Net Investment Factor for each Variable Sub-Account for any
Valuation Period is determined by dividing (a) by (b), and subtracting (c)
from the result where:
(a) is the net result of:
(i) the net asset value per share of the underlying mutual fund shares
held in the Variable Sub-Account determined as of the end of the current
Valuation Period, plus
ii) the per share amount of any dividend (or, if applicable, capital
gain distributions) made by the underlying mutual fund on shares held in the
Variable Sub-Account if the "ex-dividend" date occurs during the current
Valuation Period, minus or plus
(iii) a per unit charge or credit for any taxes incurred by or provided
for in the Variable Sub-Account, which is determined by GWL&A to have
resulted from the investment operations of the Variable Sub-Account; and
(b) is the net result of:
(i) the net asset value per share of the underlying mutual fund shares
held in the Variable Sub-Account determined as of the end of the immediately
preceding Valuation Period, minus or plus
(ii) the per unit charge or credit for any taxes incurred by or provided
for in the Variable Sub-Account for the immediately preceding Valuation
Period; and
(c) is an amount representing the Risk Charge deducted from each Variable
Sub-Account on a daily basis.
Such amount is equal to 0 .95% on an annual basis of the
daily net
asset value of each Variable Sub-Account.
The Net Investment Factor may be greater than, less than, or equal to
one. Therefore, the Accumulation Unit Value may increase, decrease or remain
unchanged.
The net asset value per share referred to in paragraphs (a) (i) and (b)
(i) above, reflect the investment performance of the underlying mutual fund
as well as the payment of underlying mutual fund expenses. (See "Investments
of the Series Account.")
Transfers Between Variable and Guaranteed Sub-Accounts
All or a portion of a Participant Annuity Account Value held in any of
the Variable Sub-Accounts and/or the Daily Interest Guaranteed Sub-Account
may be transferred at any time prior to the Participant's Annuity
Commencement Date by written or telephone request to GWL&A's
Administrative
Offices. Prior to Participant's Annuity Commencement Date, transfers of all
or a portion of a Participant Annuity Account Value held in any of
the
Guaranteed Certificate Funds or Guaranteed Fixed Funds may be
made
only at Certificate maturity by written or telephone request to GWL&A's
Administrative Offices. In order for telephone transfers to be accommodated,
a Telephone Transfer Form, signed by both the Contract Owner and the
Participant, must be on file with GWL&A. This form can be obtained at the
time the contract is signed, or at any time thereafter from the
Administrative Offices of GWL&A. The Transfer request shall be made by the
Participant under a Section 403(b) retirement program (other than an
employer-sponsored program) or by the employer or the employee organization
under a Section 401(a), Section 401(k), Section 457 or employer-sponsored
Section 403(b) retirement program. A Transfer will take effect on the later
of the date designated in the request or the date that the Transfer request
is received by GWL&A at its Administrative Offices. Transfer requests
received after 4:00 p.m., EST/EDT, shall be deemed to have been received on
the next following Valuation Date. If a Transfer request is received by GWL&A
within 30 days of the Annuity Commencement Date, GWL&A may delay the
Annuity
Commencement Date by not more than 30 days. Additional Transfer conditions
apply to Transfers to or from the Guaranteed Sub-Accounts.
Loans
Loans may be available under your contract. Consult your Plan
Administrator for complete details.
Total and Partial Distribution
A distribution in whole or in part may be taken from a Participant
Annuity Account under certain Section 403(b) retirement programs (other than
employer-sponsored plans) prior to the Participant's Annuity
Commencement Date by written request of the Participant. Certain Group
Contracts issued pursuant to Section 457 retirement programs will require the
signature of both the Participant and the owner for a total or partial
distribution. Under Group Contracts issued pursuant to Section 401(a),
Section 401(k), Section 457, or employer-sponsored Section 403(b) retirement
programs, the right to a total or partial distribution is subject to any
limitations or restrictions contained in the underlying retirement plan. A
Request must be received by GWL&A's Administrative Offices at least 30 days
prior to the Annuity Commencement Date. A request for partial distribution
must also specify the Variable and/or Guaranteed Sub-Account(s) from which
the partial distribution is to be made. The Participant Annuity Account Value
available for a distribution in whole or in part is the current value of the
Participant Annuity Account at the end of the Valuation Period for the
"effective date" of the request. The effective date is the later of the date
selected in the request or the date on which the Request is received
by GWL&A's Administrative Offices. Requests received after 4:00 p.m.,
EST/EDT, shall be deemed to have been received on the next following
Valuation Date. The partial or total distribution will be made within seven
days after GWL&A receives the Request. The payment may be postponed as
permitted by the Investment Company Act of 1940. The amount payable upon a
total distribution may be applied to an Annuity Option ( See
"Annuity
Options") instead of a lump-sum payment. There are additional conditions that
apply to a partial or total distribution of a Participant Annuity Account's
Guaranteed Account Value. Restrictions on a partial or total distribution of
a Participant Annuity Account apply to Section 403(b) retirement programs
(See " Federal Tax Consequences: Section 403(b) Retirement
Programs").
There are certain charges imposed upon a partial or total distribution
prior to the Annuity Commencement Date (See "Administrative Charges,
Risk
Premiums and Other Deductions: Contingent Deferred Sales Charge") and there
may be certain tax consequences (See "Federal Tax Consequences: Taxation of
Annuities in General").
Cessation of Contributions
If, in the judgment of either GWL&A or the employer, further
Contributions or Transfers to certain or all of the Variable and Guaranteed
Sub-Accounts should become inappropriate, either party may, upon 60 days
written notice to the other, direct that no future Contributions or Transfers
to such Sub-Account(s) be made. Where the owner of the Group Contract is an
association, the association may provide such notice with respect to all
Participants while the participating employers may also provide such notice
for their employee Participants only.
In the event that such written notice is given for any or all of the
Sub-Accounts, Contributions and Transfers made to such Sub-Account(s) prior
to the effective date of the notice (that date being called the "Date of
Cessation") may be maintained in such Sub-Account(s). Allocation
instructions must be changed to delete the affected Sub-Account(s). If no
change of allocation instructions is received, GWL&A may return all affected
Contributions or allocate such Contributions to a currently offered
Guaranteed Sub-Account.
In the event that a Date of Cessation is declared for all Sub-Accounts,
no new Participant Annuity Accounts will be established or Contributions
accepted by GWL&A. In addition, under Section 401(a), Section 401(k), Section
457, or Section 403(b) retirement programs, an employer or employee
organization must, by Request, elect one of the following Cessation Options:
Cessation Option (1): GWL&A will maintain each Participant Annuity
Account Value until the value of an account is applied to a payment option.
Cessation Option (2): GWL&A will pay, within seven (7) days of the Date
of Cessation of Deposits, the Variable Account Values of the Participant
Annuity Accounts as of the date the Request is received (at such later date
as may be specified in the Request) to either the Employer, the employee
organization or a person designated in writing by the employer or employee
organization as the successor insurer of the employer's deferred compensation
plan. GWL&A will pay the sum of the Guaranteed Contract Values of the
Participant Annuity Accounts as of the Date of Cessation to either the
employer, the employee organization or a person designated in writing by the
employer or the employee organization as the successor insurer of the
employer's or employee organization's deferred compensation plan, in 20 equal
quarterly installments. The amount of the installment will be the amount
determined by GWL&A on the date of the first such payment, but will not be
less than $514.80 for each $10,000 of Guaranteed Contract Value. The first
payment will be made (thirty) days after the date this Cessation Option is
elected.
If the employer or the employee organization has not elected a cessation
option within thirty (30) days of the Date of Cessation, Cessation Option (1)
will be deemed to have been elected. CESSATION OPTION (2) MAY NOT BE
AVAILABLE IN ALL GROUP CONTRACTS.
Contract Termination
Section 401(a) Group Contracts contain a contract termination provision.
Under this provision, either GWL&A or the contract holder may terminate the
Group Contract on at least sixty (60) days prior written notice (the
effective date of which shall be the "Contract Termination Date"). After the
Contract Termination Date, no Transfer shall be made, no payment option shall
be elected and no Contributions shall be accepted by GWL&A under the terms
of
the Group Contract.
GWL&A will pay, within seven (7) days of the Contract Termination Date,
the value of all monies held in the Variable Sub-Account as of the Contract
Termination Date to either the employer, the employee organization or to a
person or entity designated in writing by the employer or employee
organization.
Death Benefit
In the event of the death of the Participant prior to his/her Annuity
Commencement Date, and prior to age 70, a death benefit will be paid upon
receipt of proof of the death of the Participant. The death benefit is the
greater of the Participant Annuity Account Value or the sum of all
Contributions paid less any partial distributions. Where death occurs on or
after the Participant's 70th birthday, but prior to the Annuity Commencement
Date, a death benefit equal to the Participant Annuity Account Value will be
paid.
Under a Section 403(b) retirement program (other than an
employer-sponsored plan), the death benefit will be paid to the Beneficiary
designated by the Participant. Under a Section 401(a), a Section 401(k), a
Section 457, or employer-sponsored Section 403(b) retirement program the
employer or the employee organization will designate to whom the death
benefit will be paid pursuant to the terms of the employer's underlying plan.
The Participant should consult with his/her employer or employee organization
concerning the payment of the death benefit under the employer's or
employee's organization deferred compensation plan.
The payee may elect to receive the death benefit under any of the
Annuity Options, in the form of a lump-sum payment, or in the form of a
partial lump-sum payment with the balance applied towards any of the Annuity
Options. This election must be made within 60 days after GWL&A received
adequate proof of the Participant's death. If no election is made within the
60 day period, a lump-sum settlement will be made.
The Participant Annuity Account Value, for purposes of determination of
the death benefit, will be calculated as of the end of the Valuation Period
during which proof of death and an election by the Payee are received at
GWL&A's Administrative Offices. If no election is made, the Participant
Annuity Account Value will be determined as of 60 days after the date on
which proof of death is received.
If a lump-sum or partial lump-sum settlement is requested, the proceeds
will be paid within (seven) days of GWL&A's receipt of such election and
adequate proof of death. If any of the Annuity Options are elected, the
annuity payment shall commence thirty (thirty) days after the receipt of such
election and adequate proof of death. Annuity payments shall commence by the
later of (fifteen) days or the first day of the month after receipt of such
election and adequate proof of death. The payment of the death benefit will
be made in accordance with any applicable laws and regulations governing
payment of death benefits, subject to postponement in certain circumstances
as permitted by the Investment Company Act of 1940. (See " Federal Tax
Consequences: Taxation of Annuities in General" for certain
distribution-on-death rules that may be applicable to the payment of death
benefits).
The Participant under a Section 403(b) retirement program (other than an
employer-sponsored plan) may designate or change a beneficiary by filing a
Request with GWL&A at its Administrative Offices. Each change of beneficiary
revokes any previous designation. Unless otherwise provided in the
beneficiary designation, one of the following procedures will take place on
the death of a beneficiary: (1) if there is more than one primary surviving
beneficiary, the Participant Annuity Account Value will be shared equally
among them; (2) if any primary beneficiary dies before the Participant, that
beneficiary's interest will pass to any other named surviving primary
beneficiary or Beneficiaries, to be shared equally; (3) if there is no
surviving primary beneficiary, the Participant Annuity Account Value shall
pass to any surviving contingent beneficiary, and if more than one contingent
beneficiary, shall be shared equally among them; (4) if no beneficiary
survives the Participant, the Participant Annuity Account Value shall pass to
the Participant's estate; or (5) if the designation of beneficiary was not
adequately made, the Participant Annuity Account Value shall pass to the
Participant's estate.
INVESTMENTS OF THE SERIES ACCOUNT
Participating Mutual Funds
The Series Account invests in shares of Maxim, TCI, and Fidelity VIP,
open-end management investment companies, each of which are registered with
the Securities and Exchange Commission. Such registration does not involve
supervision of the management of Maxim, TCI or Fidelity by the Securities and
Exchange Commission. Shares of Maxim are also sold to the Pinnacle Series
Account, the Maxim Series Account, and the Retirement Plan Series
Account which are separate accounts established by GWL&A to receive
and
invest premiums paid under variable life and variable annuity contracts
issued by GWL&A. Shares of Maxim may be sold to other separate
accounts of GWL&A or its affiliates.Shares of TCI and Fidelity VIP are also
sold to other insurance companies to fund the benefits of variable annuity or
variable life insurance contracts.
It is conceivable that, in the future, it may be disadvantageous for
variable life insurance separate accounts and variable annuity separate
accounts to invest in Maxim, TCI, and Fidelity VIP simultaneously. Although
GWL&A, Maxim, TCI or Fidelity VIP currently do not foresee any such
disadvantages either to variable life insurance policyowners or to variable
annuity contract owners, the Boards of Directors of Maxim, TCI, and Fidelity
VIP intend to monitor events in order to identify any material conflicts
between such policyowners and contract owners and to determine what action,
if any, should be taken in response thereto. Such action could include the
sale of Maxim shares by one or more of GWL&A's separate accounts or the sale
of TCI or Fidelity VIP shares by other insurance companies, which could have
adverse consequences. Material conflicts could result from, for example, (1)
changes in state insurance laws, (2) changes in federal income tax laws, (3)
changes in the investment management of any portfolio of Maxim, TCI, or
Fidelity VIP, or (4) differences in voting instructions between those given
by policyowners and those given by contract owners.
Investment Advisers
The investment adviser for Maxim is Great-West (the "Investment
Adviser"), which is registered with the Securities and Exchange
Commission as an investment adviser. Great-West provides portfolio management
and investment advice to Maxim and administers its other affairs subject to
the supervision of Maxim's Board of Directors.
The Investment Advisory Agreement obligates the Investment Adviser to
provide investment advisory services and to pay all compensation of, and
furnish office space for, officers and employees of the Investment Adviser
connected with investment and economic research, trading and investment
management of Maxim. The Investment Advisory Agreement also obligates the
Investment Adviser to pay all other expenses incurred in its operation and
all of Maxim's general administrative expenses, except extraordinary
expenses. As compensation for its services to Maxim, the Investment Adviser
receives monthly compensation at the annual rate of 0.46% of the average
daily net assets of the Money Market Portfolio; 0.60% of the average daily
assets of the Bond Portfolio, the Stock Index Portfolio, the U.S. Government
Securities Portfolio, the Small Cap-Index Portfolio and the Total Return
Portfolio; 0.80% of the average daily net assets of the Maxim T.
Rowe
Price Equity/Income Portfolio; 0.90% of the average daily net assets of the
Corporate Bond Portfolio; 0.95% of the average daily net assets of the MidCap
Portfolio and the Maxim INVESCO Small-Cap Growth Portfolio;
1.00% of
the average daily net assets of the International Equity Portfolio, the
Small-Cap Value Portfolio and the Maxim INVESCO ADR
Portfolio.
With respect to the Mid-Cap Portfolio, International Equity,
Small-Cap Value Portfolio, Maxim INVESCO Small-Cap Growth,
Maxim INVESCO ADR and Maxim T. Rowe Price
Equity/Income
Portfolios, the Investment Adviser shall be responsible for all expenses
incurred in performing investment advisory services. Each of the Portfolios
shall pay all expenses incurred in its operation with respect to that
portfolio. However, the Investment Adviser shall pay any expenses
of
the Portfolios which exceed an annual rate of 0.95% of the average daily net
assets of the Maxim T. Rowe Price Equity/Income Portfolio;
1.10% of
the average daily net assets of the Mid-Cap Portfolio and the Maxim
INVESCO Small-Cap Growth Portfolio; 1.35% of the average daily net assets of
the Small-Cap Value Portfolio; and, 1.30% of the average daily net
assets of the International Equity Portfolio and Maxim INVESCO
ADR
Portfolio.
Investors Research Corporation ("Investors Research") is the investment
adviser for TCI. Investors Research has been the investment adviser of
Twentieth Century Investors, Inc., a registered investment company, since
1958. Additionally, Investors Research acts as the investment adviser for
Twentieth Century World Investors, Inc., a registered investment company, and
as an investment adviser to employee benefit plans and endowment funds.
Investors Research supervises and manages the investment portfolios of
TCI and directs the purchase and sale of its investment securities, subject
only to any directions of TCI's Board of Directors. Investors Research pays
all the expenses of TCI except brokerage, taxes, interest, fees and expenses
of non-interested directors (including counsel fees) and extraordinary
expenses. Twentieth Century Services, Inc., Twentieth Century Tower, 4500
Main Street, Kansas City, Missouri 64111, is transfer agent of TCI. It
provides facilities, equipment and personnel to TCI, and is paid for such
services by Investors Research. Certain administrative services that would
otherwise be performed by Twentieth Century Services, Inc., may be performed
by the insurance company that purchases TCI shares, and Investors Research
may pay it for such services.
For the foregoing services, Investors Research is paid a fee of 1% of
the average net assets of each series of TCI during the year. The fee is paid
and computed each month by multiplying 1% of the average daily closing net
asset values of the shares of each series of TCI during the previous month by
a fraction, the numerator of which is the number of days in the previous
month and the denominator of which is 365 (366 in leap years). Many
investment companies pay smaller investment management fees. However, most
if
not all companies also pay in addition certain of their own expenses, while
TCI expenses specified above are paid by Investors Research.
Investors Research and Twentieth Century Services, Inc. are both wholly
owned by Twentieth Century Companies, Inc. James E. Stowers, Jr., President
of TCI, controls Twentieth Century Companies, Inc. by virtue of his ownership
of a majority of its common stock.
Fidelity Management & Research Company ("FMR") is the investment
adviser
to Fidelity Variable Insurance Products Fund ("VIP"): VIP Growth Portfolio
and to Fidelity Variable Insurance Products Fund II ("VIP II"): VIP II Asset
Manager Portfolio. For its investment advisory services, FMR receives a
monthly fee from each of these Portfolios. As of December 31,
1995 ,
the VIP Growth and the VIP II Asset Manager Portfolios paid FMR the annual
fee rate of .62% and .72%, respectively, of each Portfolio's average daily
net assets.
FMR may, from time to time, agree to reimburse a Portfolio for
management fees and other expenses above a specified percentage of average
daily net assets. Reimbursement arrangements, which may be terminated at any
time without notice, will increase a Portfolio's yield. If FMR discontinues
a reimbursement arrangement, the affected Portfolio's expenses will go up and
its yield will be reduced. FMR retains the ability to be repaid by a
Portfolio for expense reimbursements if expenses fall below the limit prior
to the end of the fiscal year. Repayment by a Portfolio will lower its yield.
FMR has voluntarily agreed to temporarily limit the total expenses (including
the management fee, but generally excluding taxes, interest and extraordinary
expenses) of the Asset Manager Portfolio to 1.25% of the Portfolio's average
daily net assets. FMR has voluntarily agreed to reimburse the management fees
and all other expenses (excluding taxes, interest and extraordinary expenses)
of the VIP Growth Portfolio in excess of 1.50% of average daily net assets.
Sub-advisers
Janus Capital Corporation("Janus") serves as the sub-adviser to the
Mid-Cap (Growth Fund I) Portfolio. As such, Janus is responsible for
managing the investment and reinvestment of assets of the Mid-Cap
(Growth
Fund I) , subject to review and supervision of the Investment Adviser and
the Board of Directors. Janus bears all expenses in connection with the
performance of its services, such as compensating and furnishing office space
for its officers and employees connected with investment and economic
research, trading and investment management of the Mid-Cap (Growth
Fund
I) Portfolio.
Janus is a Colorado corporation, registered as an investment adviser
with the Securities and Exchange Commission. Its principal address is 100
Fillmore Street Suite 300, Denver, Colorado 80206.
The Investment Adviser is responsible for compensating Janus, which
receives monthly compensation from the Investment Adviser at the annual rate
of 0.60% on the first $100 million and 0.55% on all amounts over $100 million
of the Mid-Cap (Growth Fund I) Portfolio assets.
Templeton Investment Counsel, Inc ("Templeton") serves as the
sub-adviser of the International Equity Portfolio. As such,
Templeton
is responsible for managing the investment and reinvestment of assets of the
International Equity Portfolio, subject to review and supervision of the
Investment Adviser and the Board of Directors. Templeton bears all expenses
in connection with the performance of its services, such as compensating and
furnishing office space for its officers and employees connected with
investment management of the International Equity Portfolio.
Templeton is an indirect subsidiary of Templeton Worldwide, Inc., which
in turn is a direct, wholly-owned subsidiary of Franklin Resources, Inc.
Templeton is a Florida corporation with its principal business address at
Broward Financial Centre, 500 East Broward Boulevard, Suite 2100, Fort
Lauderdale, Florida 33394.
The Investment Adviser is responsible for compensating Templeton, which
receives monthly compensation from the Investment Adviser at the annual rate
of 0.70% on the first $25 million, 0.55% on the next $25 million, 0.50% on
the next $50 million, and 0.40% all amounts over $100 million of the
International Equity Portfolio assets.
T. Rowe Price Associated, Inc. ("T. Rowe Price") serves as the
sub-adviser to the Maxim T. Rowe Price Equity/Income Portfolio.
T.
Rowe Price is a Maryland corporation, registered as an investment adviser
with the Securities and Exchange Commission. Its principal business address
is 100 East Pratt Street, Baltimore, Maryland 21202. T. Rowe Price receives
monthly compensation from the Investment Adviser at the annual rate of 0.50%
on the first $20 million of the average daily net assets, 0.40% on the next
$30 million of average daily net assets and 0.40% on all assets once total
average daily net assets exceed $50 million.
INVESCO Trust Company ("ITC") serves as the sub-adviser of the
Maxim INVESCO Small-Cap Growth Portfolio. ITC is a Colorado Trust
Company
and an indirect wholly-owned subsidiary of INVESCO PLC. ITC is registered
as
an investment adviser with the Securities and Exchange Commission. Its
principal business address is 7800 E. Union Avenue, Denver, Colorado 80237.
ITC receives monthly compensation from the Investment Adviser at the rate of
0.55% on the first $25 million of average daily net assets, 0.50% on the next
$50 million of average daily net assets, 0.40% on the next $25 million of
average daily net assets, and 0.35% on all amounts over $100 million of
average daily net assets.
INVESCO Capital Management, Inc ("ICMI") serves as the sub-adviser to
the Maxim INVESCO ADR Portfolio. ICMI is a Delaware
corporation and an
indirect wholly-owned subsidiary of INVESCO PLC. ICMI is registered as an
investment adviser with the Securities and Exchange Commission. Its principal
business address is 1315 Peachtree Street, Atlanta, Georgia 30309. ICMI
receives monthly compensation from the Investment Adviser at the annual rate
of 0.55% on the first $50 million of average daily net assets, 0.50% on the
next $50 million of average daily net assets, and 0.40% on assets over $100
million of average daily net assets.
Loomis, Sayles & Company, LP ("Loomis Sayles") serves as the
sub-adviser
to the Corporate Bond Portfolio. Loomis Sayles is a Delaware limited
partnership and is an indirect, majority-owned subsidiary company of New
England Mutual Life Insurance Company. Loomis Sayles is registered as an
investment adviser with the Securities and Exchange Commission. Its principal
business address is One Financial Center, Boston, Massachusetts 02111. Loomis
Sayles receives monthly compensation from the Investment Adviser at the
annual rate of 0.30% on all assets of the Corporate Bond Portfolio.
Ariel Capital Management , Inc.("Ariel") serves as the sub-adviser to
the Small-Cap Value (Ariel Value) Portfolio. Ariel is a privately
held
minority-owned money manager registered with the Securities and Exchange
Commission as an investment adviser. Its principal business address is 307
North Michigan Avenue, Chicago, Illinois 60601. Ariel receives monthly
compensation from the Investment Adviser at the annual rate of 0.40% on
assets up to $5 million of average daily net assets, 0.35% on the next $10
million of average daily net assets, 0.30% on the next $10 million of average
daily net assets, and 0.25% on assets over $25 million of average daily net
assets.
Reinvestment and Redemption
All dividend distributions of Maxim, TCI or Fidelity VIP will be
automatically reinvested in shares of Maxim, TCI or Fidelity VIP at their net
asset value on the date of distribution; all capital gains distributions of
Maxim, TCI or Fidelity VIP, if any, will likewise be reinvested at the net
asset value on the record date. GWL&A will redeem Maxim, TCI and Fidelity
VIP
shares at their net asset values to the extent necessary to make annuity or
other payments under the Group Contracts.
Substitution of Investments
GWL&A reserves the right, subject to compliance with the law as
currently applicable or subsequently changed, to make additions to, deletions
from or substitutions for the investments held by the Series Account. In the
future, GWL&A may establish additional Investment Divisions within the Series
Account. These Investment Divisions will be established if, and when, in the
sole discretion of GWL&A marketing needs and investment conditions warrant,
and will be made available under existing Group Contracts to the extent and
on a basis to be determined by GWL&A.
If shares of any of the Investment Portfolios of Maxim, TCI or Fidelity
VIP should no longer be available for investment, or if in the judgement of
GWL&A's management further investment in any of the Investment Portfolios'
shares should become inappropriate in view of the objectives of the Group
Contracts, then GWL&A may substitute shares of another mutual fund for shares
already purchased, or to be purchased in the future under the Group
Contracts. No substitution of securities held by the Series Account may take
place without prior approval of the Securities and Exchange Commission, and
prior notice to the employers and association owners of Group Contracts, and,
in addition, to the Participants under Section 403(b) retirement programs
(other than an employer-sponsored plan). In the event of a substitution, the
Participants under Section 403(b) retirement programs (other than an
employer-sponsored plan) or the employees or the employee organization under
Section 401(a), Section 401(k), Section 457, or employer-sponsored Section
403(b) retirement programs will be given the option of taking a distribution
of that portion of the Participant Annuity Account allocated to an Investment
Division in which the substitution is to occur without imposition of the
Contingent Deferred Sales Charge.
ADMINISTRATIVE CHARGES, RISK PREMIUMS AND OTHER
DEDUCTIONS
Contract Maintenance Charge
GWL&A has primary responsibility for the administration of all Group
Contracts and the Series Account. To compensate GWL&A for the cost it incurs
in providing administrative services, GWL&A may deduct a Contract
Maintenance
Charge of not more than $30 annually on the first day of each
calendar
year from each Participant Annuity Account. If a Participant Annuity Account
is established after that date, the Contract Maintenance Charge will be
deducted on the first day of the next quarter and will be pro-rated for the
year remaining. The deduction will be pro-rated between the Variable and
Guaranteed Contract Values of each Participant Annuity Account. No refund of
this charge will be made. The Contract Maintenance Charge on Section 403(b)
Group Contracts will be waived for an initial period of no less than 12
months and up to 15 months, depending on the Participant's effective date.
Contingent Deferred Sales Charge
In the circumstances described below, a Contingent Deferred Sales Charge
will be deducted on any total or partial distribution, Transfer to Other
Companies or a lump sum payment. The amount deducted will depend on the type
of retirement program for which the Group Contract was issued. However, a
Contingent Deferred Sales Charge "Free Amount" may be applied in some
circumstances. The Contingent Deferred Sales Charge "Free Amount" is an
amount against which the Contingent Deferred Sales Charge will not be
assessed. The "Free Amount" shall not exceed 10% of the Participant Annuity
Account Value at December 31 of the previous calendar year and will be
applied on the first distribution, payment or Transfer to Another Company
made in that year. All additional distributions, payments or Transfers to
Another Company during that calendar year will be subject to a Contingent
Deferred Sales Charge without application of any "Free Amount".
1. For Section 401(a) and 401(k) Retirement Programs
(a) For Group Contracts issued pursuant to a Section 401(k) retirement
program where the employer does not also maintain a Section 403(b) or Section
457 Group Contract with GWL&A, a Contingent Deferred Sales Charge will be
in
an amount equal to 6% of the amount Transferred to Another Company,
distributed or paid in excess of the "Free Amount". The cumulative total of
all Contingent Deferred Sales Charges applied to a Participant Annuity
Account will not exceed 6% of all Contributions made within 72 months prior
to the date of that partial or total distribution, Transfer or payment.
(b) For Group Contracts issued pursuant to a Section 401(a) profit-sharing
plan where the employer also maintains a Section 457 Group Contract with
GWL&A, the Contingent Deferred Sales Charge applicable is as described in
paragraph 3 (a) below.
(c) The Contingent Deferred Sales Charge applicable to Group Contracts issued
pursuant to a Section 401(a) profit-sharing plan where the employer also
maintains a Section 403(b) Group Contract with GWL&A is as described in
paragraph 2(a) below.
2. For Section 403(b) Retirement Programs.
(a) Under all Group Contracts issued prior to May 1, 1992 pursuant to Section
403(b) and for Group Contracts issued on or after May 1, 1992 to Section
403(b) retirement programs other than employer-sponsored plans, the
Contingent Deferred Sales Charge applicable will be in an amount equal to 6%
of the amount distributed, Transferred to Another Company or paid in excess
of the "Free Amount". The cumulative total of all Contingent Deferred Sales
Charges applied to a Participant Annuity Account will not exceed 6% of all
Contributions made within 72 months prior to the date of that partial or
total distribution, Transfer to Another Company or payment.
(b) For Group Contracts that were issued in exchange for Group Tax-Sheltered
Annuity or Group Deferred Compensation Annuity Contracts of the Great-West
Life Assurance Company, with respect to any partial or total distribution,
Transfer to Another Company or payment, the cumulative total of all
Contingent Deferred Sales Charges applied to a Participant Annuity Account
will not exceed an amount equal to:
(i) 6% of all Contributions (excluding the amount initially applied to a
Participant Annuity Account from the exchanged contract) made within 72
months prior to the date of that partial or total distribution, Transfer to
Another Company or payment, plus
(ii) an amount which is the result of multiplying the amount initially
applied to a Participant Annuity Account from the exchanged contract by the
appropriate percentage as chosen from the following chart:
If number of years of coverage
of Participant under Exchanged Contract
and this contract is: The percentage shall be:
Less than 5 years 6%
At least 5 years but less than 10 years 5%
At least 10 years 4%
(c) For Group Contracts issued pursuant to an employer-sponsored Section
403(b) retirement program on or after May 1, 1992, the Contingent Deferred
Sales Charge applicable is as described in paragraph 3 (a) below.
3. For Section 457 Retirement Programs.
(a) For Section 457 Group Contracts issued May 1, 1988 or thereafter and for
Section 457 Group Contracts issued prior to May 1, 1988 but amended to
incorporate the provision of this paragraph, the Contingent Deferred Sales
Charge will be in an amount equal to a percentage of the amount distributed,
Transferred to Another Company or paid in excess of the "Free Amount", if
any, based on the table below:
Years of Participation
in FutureFunds: The percentage shall be:
0 - 4 5%
5 - 9 4%
10 - 14 3%
15 or more 0%
(b) For Section 457 Group Contracts issued prior to May 1, 1988 which have
not been amended to incorporate the Contingent Deferred Sales Charge will be
in an amount equal to:
(i) 6% of all Contributions (excluding the amount initially applied to a
Participant Annuity Account from an exchanged contract) made within 72 months
prior to the withdrawal, plus
(ii) an amount equal to a percentage of the amount distributed, Transferred
to Another Company or paid in excess of the "Free Amount", if any, based on
the table below:
If number of years of coverage
of Participant under Exchanged Contract
and this Contract is: The percentage shall be:
Less than 5 years 6%
At least 5 years but less than 10 years 5%
At least 10 years 4%
4. General provisions applicable to the Contingent Deferred Sales Charge.
Regardless of which of the above-noted Contingent Deferred Sales Charge
schedules is in effect, the Contingent Deferred Sales Charge applied against
distributions, payments or Transfers to Another Company is deducted from the
withdrawal payment to the Participant. Thus, for example, if a Participant
requests a withdrawal of $100, and assuming that the entire withdrawal is
subject to 6% Contingent Deferred Sales Charge, the Participant would receive
a payment of $94. The Contingent Deferred Sales Charge shall not exceed 8.5%
of Contributions deposited by the Participant into the Group Contracts.
Additionally, the Code imposes (with certain exceptions) a penalty tax on
distributions prior to age 59 1/2. (See "Federal Tax Consequences").
The Contingent Deferred Sales Charge is paid to GWL&A to cover expenses
relating to the sale and distribution of the Group Contracts, including
commissions, the cost of preparing sales literature, and other promotional
activities. In certain circumstances, sales expenses associated with the sale
and distribution of a Group Contract may be reduced or eliminated and in such
event, the Contingent Deferred Sales Charge applicable to that Group Contract
may likewise be reduced. Whether such a reduction is available will be
determined by GWL&A based upon consideration of the following factors: (1)
size of the prospective group, (2) projected annual Contributions for all
Participants in the group, and (3) frequency of projected distributions.
GWL&A will notify a prospective purchaser of its eligibility for a reduction
of the Contingent Deferred Sales Charge prior to the acceptance of an
application for coverage.
It is possible that the Contingent Deferred Sales Charge will not be
sufficient to enable GWL&A to recover all of its distribution expenses. In
such case, the loss will be borne by GWL&A out of its general account assets,
which will include the profit, if any, derived by GWL&A from the mortality
and expense risk charges described herein.
Deductions for Premium Taxes
GWL&A presently intends to pay any Premium Tax levied by any
governmental entity as a result of the existence of the Participant Annuity
Account or the Series Account. GWL&A reserves the right to deduct the
Premium
Tax from Participant Annuity Account Values instead of GWL&A making the
Premium Tax payments. Notice will be given to all Participants prior to the
imposition of any such deductions from the Participant Annuity Account
Values. The applicable Premium Tax rates that states and other governmental
entities impose currently range from 0% to 3.5% and are subject to
change by the respective state legislatures, by administrative
interpretations or by judicial act. Such Premium Taxes will depend, among
other things, on the state of residence of a Participant and the insurance
tax laws and status of GWL&A in these states when the Premium Taxes are
incurred.
Deductions for Assumption of Mortality and Expense Risks
GWL&A deducts from the daily net asset value of the Series Account an
amount, computed daily, which is equal to an annual rate of 0.95%,
0.76% allocable to mortality risk and 0.19% allocable to expense risk.
This charge is designed to compensate GWL&A for its assumption of certain
mortality, death benefit and expense risks described below. The level of this
charge is guaranteed and will not change.
GWL&A's assumption of mortality risk guarantees that the annuity
payments made to the Beneficiary or other payee will not be affected by the
mortality experience (life span) of persons receiving such payment or of the
general population. GWL&A assumes this "mortality risk" by virtue of the fact
that annuity rates in effect at the time that any Contributions are made
cannot be changed. In addition, if a Participant should die prior to his/her
Annuity Commencement Date and 70th birthday, GWL&A is at risk to the extent
that the amount of all Contributions made, less any partial distributions,
exceed the Participant Annuity Account Value. (See " Accumulation
Period: Death Benefit.")
GWL&A's assumption of expense risks arises when GWL&A guarantees
that if
the charges for administrative expenses, which cannot be increased by GWL&A,
will be insufficient to cover administrative and sales expenses, GWL&A bears
that loss.
In certain circumstances, the risk of adverse mortality and expense
experience associated with a Group Contract may be reduced. In such event,
the mortality and expense risk charge applicable to that Group Contract may
likewise be reduced. Whether such a reduction is available will be determined
by GWL&A based upon consideration of the following factors: (1) size of the
prospective group, (2) projected annual Contributions for all Participants in
the group, (3) frequency of projected distributions, (4) type and frequency
of administrative and sales services provided, and (5) level of Contract
Maintenance Charge and Contingent Deferred Sales Charge. GWL&A will notify
a
prospective purchaser of its eligibility for a reduction of the mortality and
expense risk charge prior to the acceptance of an application for coverage.
If the 0 .95% charge proves insufficient to cover
administrative
costs in excess of the Contract Maintenance Charge made for administrative
expenses, plus any losses from the mortality risk, the loss will be borne by
GWL&A; conversely, if the amount deducted proves more than sufficient, the
excess will be a profit to GWL&A.
ANNUITY OPTIONS
An Annuity Commencement Date and the form of annuity payments
("Annuity
Options") may be elected at any time during the Accumulation Period. The
elections are made by the Participant under a Section 403(b) retirement
program (other than an employer-sponsored plan) or the employer or the
employee organization under a Section 401(a), a Section 401(k), Section 457
or employer-sponsored 403(b) retirement program. Under Section 403(b), 401(a)
and 401(k) retirement programs, the Annuity Commencement Date elected
generally must, to avoid the imposition of an excise tax, not be later than
April 1 of the calendar year following the calendar year in which the
Participant attains age 70 1/2, without regard to the actual retirement date
or termination of employment date. For Section 457 retirement programs, the
Annuity Commencement Date elected will generally be not later than April 1 of
the calendar year following the calendar year in which the Participant
attains age 70 1/2, or the Participant's retirement date if later than age 70
1/2. Under all of the above-noted retirement programs, it is the
responsibility of the Participant to file the necessary Request with GWL&A.
The Annuity Commencement Date may be postponed or accelerated, or the
election of any of the Annuity Options changed, upon Request received by
GWL&A at its Administrative Offices up to 30 days prior to the existing
Annuity Commencement Date. If any Annuity Commencement Date elected
would be
less than 30 days from the date that the Request is received, GWL&A may delay
the date elected by not more than 30 days.
The Group Contracts provide the Annuity Options described below, as well
as such other Annuity Options as GWL&A may choose to make available in the
future. Except as otherwise noted, the Annuity Options are payable on a
variable, fixed or combination basis. More than one Annuity Option may be
elected. If no Annuity Option is elected, the Group Contracts automatically
provide for variable life annuity (with respect to the variable portion of a
Participant Annuity Account) and/or a fixed life annuity (with respect to the
fixed portion of a Participant Annuity Account) with 120 monthly payments
guaranteed.
The level of annuity payments under the following options is based upon
the option selected and, depending on the option chosen, such factors as the
age at which payments begin and the frequency and duration of payments.
Option No. 1: Life Annuity
This option provides an annuity payable monthly during the lifetime of
the payee. It would be possible under this option for the Annuitant to
receive no annuity payment if he/she died prior to the date of the first
annuity payment, one annuity payment if the Annuitant died before the second
annuity payment, etc.
Option No. 2: Life Annuity with Payments Guaranteed for Designated Periods
This option provides an annuity payable monthly throughout the lifetime
of the payee with the guarantee that if, at the death of the payee, payments
have been made for less than the designated period, the Beneficiary will
receive payments for the remainder of the period. The designated period may
be 5, 10, 15, or 20 years. The period generally referred to as "Installment
Refund" is available only on a fixed- dollar payment basis.
Option No. 3: Joint and One-Half Survivor
This option provides an annuity payable during the joint lifetime of the
payee and a designated second person, and thereafter during the remaining
lifetime of the survivor. After the death of the payee, and while only the
designated second person is alive, the amount payable will be one-half the
amount paid while both were living. It would be possible under this option
for the payee and the Beneficiary to receive no annuity payment if both
persons died prior to the date of the first annuity payment, one annuity
payment if both persons died before the second annuity payment, etc.
Option No. 4: Income of Specified Payment (available only as fixed-dollar
payments)
Under this option, the amount of the periodic benefit is selected, which
amount will be paid to the payee in equal annual, semiannual, quarterly, or
monthly installments as elected; provided that the annuity payment period is
not less than 36 months nor more than 240 months.
Option No. 5: Income for Specified Period (available only as fixed-dollar
payments)
Under this Option, the duration of the periodic benefit is selected
(which may not be less than 36 months nor more than 240 months), and a
resulting annuity payment amount will be paid to the payee in equal annual,
semiannual, quarterly, or monthly installments, as elected.
Option No. 6: Systematic Withdrawal Payment Option (available only as
fixed-dollar payments)
Under this payment option, the amount, timing and method of payment will
be as elected by the payee and agreed to by GWL&A. Payments may be elected
on
a monthly, quarterly, semi-annual or annual basis. The minimum amount
initially applied to this option must be $20,000. There are charges and
restrictions which apply. Please see the "Systematic Withdrawal Payment
Option Rider" to the Group Contract.
Option No. 7: Access Annuity
Under this payment option, a single premium of $20,000 minimum, the
amount, timing and method of payment will be as elected by the payee and
agreed to by GWL&A. Payments may be elected on a monthly, quarterly,
semi-annual or annual basis. There are charges and restrictions which apply.
Please see the "Access Annuity Rider" to the Group Contract for additional
information.
Variable Annuity Payments
Variable annuity payments will be determined on the basis of: (i) the
Variable Account Value prior to the Annuity Commencement Date; (ii) the
annuity tables contained in the Group Contracts which reflect the age of the
Participant; (iii) the type of annuity option(s) selected; and (iv) the
investment performance of the underlying mutual fund. The Participant
receives the value of a fixed number of Annuity Units each month.
At a Participant's Annuity Commencement Date, the Participant Annuity
Account is credited with Annuity Units for each Variable Sub-Account on which
variable annuity payments are based. The number of Annuity Units to be
credited is determined by dividing the amount of the first monthly payment by
the value of an Annuity Unit as of the fifth Valuation Period prior to the
Annuity Commencement Date in each Variable Sub-Account selected. Although
the
number of Annuity Units is fixed by this process, the value of such units
will vary with the value of the underlying mutual fund.
The dollar amount of the first monthly variable annuity payment is
determined by applying the total value of the Accumulation Units credited to
a Participant Annuity Account valued as of the fifth Valuation Period prior
to the Annuity Commencement Date to the annuity tables contained in the Group
Contracts. Amounts shown in the tables are based on a modified 1971 Group
Annuity Mortality Table (set back five years) with an assumed investment
return at the rate of 3.5% per annum. The first annuity payment is determined
by multiplying the benefit per $1,000 of value shown in the Group Contract
tables by the number of thousands of dollars of value accumulated under the
Variable Account Value of a Participant Annuity Account. These annuity tables
vary according to the form of annuity selected and according to the age of
the Participant and his/her Annuity Commencement Date.
The 3.5% interest rate stated above is the measuring point for
subsequent annuity payments. If the actual Net Investment Rate (annualized)
exceeds 3.5%, the payment will increase at a rate equal to the amount of such
excess. Conversely, if the actual rate is less than 3.5%, annuity payments
will decrease. If the assumed rate of interest were to be increased, annuity
payments would start at a higher level but would increase more slowly or
decrease more rapidly.
The amount of the second and subsequent payment is determined by
multiplying the credited fixed number of Annuity Units by the appropriate
Annuity Unit value for the fifth Valuation Period preceding the date that
payment is due. The Annuity Unit value at the end of any Valuation Period is
determined by multiplying the Annuity Unit value for the immediately
preceding Valuation Period by the product of:
(a) the Net Investment Factor of the Variable Sub-Account for the Valuation
Period for which the Annuity Unit is being determined, and,
(b) a factor of .999905 to neutralize the assumed investment return of 3.5%
per year used in the annuity table.
The value of each Variable Sub-Account's Annuity Unit is set initially at
$10.00 . The value of the Annuity Units is determined as of a
Valuation Period five (5) days' prior to the payment in order to permit
calculation of amounts of annuity payments and mailing of checks in advance
of their due date.
Fixed Annuity Payments
The guaranteed level of fixed annuity payments will be determined on the
basis of: (i) the Guaranteed Account Value prior to the Annuity Commencement
Date; (ii) the annuity tables contained in the Group Contracts which reflect
the age of the Participant; and (iii) the type of annuity option(s) elected.
The payment amount may be greater, however, if GWL&A is using a more
favorable table as of a Participant's Annuity Commencement Date.
Combination Variable and Fixed Annuity Payments
If an election is made to receive annuity payments on a combination
variable and fixed basis, the Variable Account Value of a Participant Annuity
Account will be applied to the variable annuity option elected and the
Guaranteed Account Value to the fixed annuity option.
Transfer to Effect Annuity Option Elected
If the Participant under a Section 403(b) retirement program (other than
an employer-sponsored plan) or the employer or the employee organization
under a Section 401(a), Section 401(k), Section 457 or employer-sponsored
403(b) retirement program wishes to apply all or part of the Guaranteed
Account Value of the Participant Annuity Account to a variable annuity
option, or all or a part of the Variable Account Value to a fixed annuity
option, a Request to Transfer must be received at GWL&A's Administrative
Office prior to the Participant's Annuity Commencement Date. This also
applies to a Beneficiary or payee who elects to receive a death benefit under
any of the annuity options, and one such Request to Transfer can be submitted
by the Beneficiary or payee after the death of the Participant.
Proof of Age and Survival
GWL&A may require proof of age or survival of any payee upon whose
age
or survival payments depend.
Frequency and Amount of Annuity Payments
Variable annuity payments will be paid as monthly installments; fixed
annuity payments will be paid annually, semiannually, quarterly or monthly,
as requested. However, if any payment to be made under any annuity option
will be less than $50, GWL&A may make the payments in the most frequent
interval which produces a payment of at least $50. If the net amount
available to apply under any Annuity Option is less than $2,000, GWL&A may
pay it in one lump sum. The maximum amount that may be applied under any
Annuity Option without the prior written consent of GWL&A is $1,000,000.00
FEDERAL TAX CONSEQUENCES
Introduction
The Group Contracts are designed for use by employee groups under
retirement programs which may qualify for special tax treatment under Section
401(a), Section 401(k), Section 403(b) or Section 457 of the Code.
The ultimate effect of federal income taxes on the Participant Annuity
Account Value, on annuity payments and on the economic benefit to the
Participant or Beneficiary depends upon GWL&A's tax status, on the type of
retirement program for which the Group Contract is purchased, and upon the
tax and employment status of the individual concerned. The Series Account is
taxed as a part of GWL&A; not as a "regulated investment company" under Part
I of Subchapter M of the Code. GWL&A is taxed as a life insurance company
as
described below.
It should be understood that the following discussion is not exhaustive,
and is not intended as tax advice. Special rules may apply to certain
situations not discussed here. GWL&A intends to comply with the
diversification requirements of Code Sections 817(h) and 818 to assure that
the Group Contracts will continue to be treated as annuity contracts for
Federal income tax purposes. The discussion is based upon GWL&A's
understanding of current federal income tax law and no representation is made
regarding the likelihood of continuation of current law or of the current
interpretations by the Internal Revenue Service. No attempt is made to
consider state or other tax laws. The Group Contractholder, Participants and
beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the contract comply with
applicable laws. For further information, consult a qualified tax adviser.
Taxation of GWL&A
GWL&A is taxed on its insurance business in the United States as a life
insurance company in accordance with Part I of Subchapter L of the Code.
Investment income and realized capital gains on the assets of Series Account
are reinvested and are taken into account in determining the Series Account
Value. Under existing federal income tax law, such amounts do not result in
any tax on GWL&A which will be chargeable to the Participant Annuity Account
or the Series Account. GWL&A reserves the right to make a deduction from the
Participant Annuity Account for taxes, if any, imposed with respect to such
items in the future.
Taxation of Annuities in General
Code Section 72 governs taxation of annuities in general. A Participant
is not taxed on increases (if any) in the value of a Participant Annuity
Account until some form of distribution is made. Under Section 72, a total
or partial distribution from a Participant Annuity Account will be treated as
ordinary income taxable to the extent the amounts held in the Participant
Annuity Account immediately before the distribution exceed the "investment in
the contract." The investment in the contract is that portion of the
Contributions to the Participant Annuity Account which was included in the
Participant's gross income in the year contributed, if any. If the
Participant begins receiving annuity payments, the Participant is taxed on
the portion of the payment that exceeds the investment in the contract.
However, because the Participant generally excludes Contributions from gross
income under these retirement programs, there generally will be no cost basis
(investment in the contract) in the Participant Annuity Account within the
meaning of Section 72 of the Code. Thus, the total amount of all payments
received will generally be taxable to the Participant. Ordinarily, such
taxable portion is taxed at ordinary income tax rates, subject to any income
averaging rules applicable to Participants receiving distributions from a
Section 401(a) or Section 401(k) plan.
Currently, none of the amounts contributed to a Section 457 plan
constitute cost basis in the contract. Thus, all amounts distributed to
Participants from a Section 457 plan are taxable at ordinary income rates.
No special averaging rules apply to distributions from Section 403(b) plans
or Section 457 plans.
If a Group Contract is held by a non-natural person (e.g. a
corporation), the investment gain on the contract is includable in the
entity's income each year unless certain exceptions apply. This rule does
not apply, in pertinent part, where the Group Contract is held under a
Section 401(a) plan, a Section 401(k) plan, or a Section 403(b) plan. Since
the employer maintaining a Section 457 plan is either a state or local
government or a tax-exempt organization, the employer will not be subject to
tax on the gain in the contract.
Section 401(a) Qualified Retirement Plans
Section 401(a) provides special tax treatment for pension,
profit-sharing and stock bonus plans established by employers or employee
organizations for their employees. All types of employers, including
for-profit organizations, tax-exempt organizations and state and local
governments, are allowed to establish and maintain Section 401(a) qualified
plans. Employer Contributions and any earnings thereon are currently
excluded from the Participant's gross income. Section 401(a) plans must
satisfy numerous qualification requirements, including limitations on
contributions. Generally, the total amount of employer and employee
contributions which can be contributed to all of the employer's qualified
plans is limited to the lesser of $30,000 or 25% of a Participant's
includable compensation. Distributions from the plan are subject to the
restrictions contained in the plan document and the Code. Participants
should consult with their employer or employee organization as to the
applicability of the above limitations and restrictions to their plan.
Section 401(k) Cash or Deferred Arrangements
Section 401(k) allows for-profit employers or employee organizations to
offer a cash or deferred arrangement to employees under a profit-sharing or
stock bonus plan. Generally, for tax years beginning after 1986, tax-exempt
organizations and state and local governments are not permitted to establish
Section 401(k) plans. However, under a grandfather rule, certain plans
adopted before certain dates in 1986 may continue to be offered by these
entities. Pre-tax salary reduction Contributions and any income thereon are
currently excluded from the Participant's gross income. Generally, the
maximum elective deferral amount that an individual may defer on a pre-tax
basis to one or more Section 401(k) plans is limited to $7,000 per year
(adjusted for cost-of-living increases) under Section 402(g). Elective
deferrals to a Section 401(k) plan must also be aggregated with elective
deferrals made by the Participant to a Section 403(b) plan or to a simplified
employee pension. For 1996, the total amount of elective deferrals which can
be contributed to all such plans is $9,500. The contribution limit in
Section 415 also apply. The amount which a highly compensated employee may
contribute may be further reduced to enable the plan to meet the
discrimination testing requirements. Amounts contributed to a Section 403(b)
annuity contract are subject to FICA and FUTA tax when contributed.
Pre-tax amounts deferred into the plan within the applicable limits, and
the net investment gain, if any, reflected in the Participant Annuity Account
Value are includible in a Participant's gross income only for the taxable
year when such amounts are paid to the Participant under the terms of the
plan. Employee contributions and earnings may not be distributed prior to
age 59 1/2, unless the Participant dies, becomes disabled, separates from
service or suffers a genuine financial hardship meeting the requirements of
the Code. Restrictions apply to the amount which may be distributed for
financial hardship. Participants should consult with their employer as to
the availability of benefits under the employer's plan.
Amounts contributed in excess of the above described limits, and the
earnings thereon, must be distributed from the plan and included in the
Participant's gross income in accordance with IRS rules and regulations.
Excess amounts which are not properly corrected can have severe adverse
consequences to the plan and may result in additional taxes to the
Participant.
Section 403(b) Tax Sheltered Annuities
Tax-exempt organizations described in Section 501(c)(3) and public
educational organizations are permitted to purchase Section 403(b)
tax-sheltered annuities for employees. Amounts contributed toward the
purchase of such annuities are excluded from the gross income of the
Participant in the year contributed to the extent that the contributions do
not exceed three separate, yet interrelated contribution limitations.
Federal income tax is deferred on contributions to the extent that the
aggregate amount contributed to a Section 430(b) plan per year for a
Participant does not exceed: (1) the exclusion allowance described in
Section 403(b)(2); (2) the contribution limit in Section 415; and (3) the
elective deferral limitation in Section 402(g) of the Code. Elective
deferrals to a Section 403(b) plan must also be aggregated with elective
deferrals made by the Participant to a Section 401(k) plan or to a simplified
employee pension. For 1996, the total amount of elective deferrals which can
be contributed to all such plans is $9,500. Amounts contributed to a Section
403(b) annuity contract are subject to FICA and FUTA tax when contributed.
The net investment gain, if any, reflected in a Participant Annuity
Account Value is not taxable until received by the Participant or his
beneficiary.
Amounts contributed in excess of the above described limits, and the
earnings thereon, must be distributed from the plan and included in the
Participant's gross income in accordance with IRS rules and regulations.
Excess amounts which are not properly corrected can have severe adverse
consequences to the plan and may result in additional taxes to the
Participant.
Pre-1989 contributions to a Section 403(b) annuity contract may be
distributed to an employee at any time, subject to a 10% penalty on
withdrawals prior to age 59 1/2, unless an exception applies under Section
72(t). Post-1988 contributions and earnings, and the earnings on the
December 31, 1988 account balance, may not be distributed prior to age 59
1/2, unless the Participant dies, becomes disabled, separates from service or
suffers a genuine financial hardship meeting the requirements of the Code.
Restrictions apply to the amount which may be distributed for financial
hardship.
Section 457 Deferred Compensation Plans
Section 457 allows state and local governmental employers to establish
and maintain an eligible deferred compensation plan for all employees and
independent contractors. Tax-exempt organizations may establish eligible
deferred compensation plans only for a select group of management or highly
compensated employees.
Federal income tax is deferred on contributions to a Section 457 plan to
the extent that the aggregate amount contributed per year for a Participant
does not exceed the lesser of $7,500 or 25% of a Participant's includable
compensation. Any elective deferral amount excluded from gross income by a
Participant under Section 401(k), Section 403(b) or a simplified employee
pension for the taxable year must be treated as an amount deferred under the
Section 457 plan. Amounts contributed are subject to FICA and FUTA tax when
contributed.
The net investment gain, if any, reflected in a Participant Annuity
Account Value is not taxable until received by the Participant or his
beneficiary.
Amounts contributed in excess of the above described limits, and the
earnings thereon, must be distributed from the plan and included in the
Participant's gross income. Excess amounts which are not properly corrected
can have severe adverse consequences to the plan and may result in additional
taxes to the Participant.
Contributions and earnings may not be distributed prior to age 70 1/2,
unless the Participant dies, becomes disabled, separates from service or
suffers a genuine unforeseeable emergency meeting the requirements of the
Code and plan document. Restrictions apply to the amount which may be
distributed for unforeseeable emergency.
Portability
When the participant is eligible to take a distribution from a Section
401(a) plan, Section 401(k) plan or Section 403(b) annuity, eligible rollover
distributions may be rolled over to an IRA or another qualified plan or
Section 403(b) annuity contract or custodial account as provided in the Code.
Amounts properly rolled over will not be included in gross income until a
subsequent distribution is made.
For Section 403(b) plans only, Revenue Ruling 90-24 allows participants
to transfer funds from one Section 403(b) annuity or custodial account to
another Section 403(b) annuity contract or custodial account with the same or
more stringent restrictions without incurring current taxation. If the
Section 403(b) plan is employer-sponsored, transfers under Rev. Rul. 90-24
may be restricted to 403(b) providers approved by the plan sponsor.
Amounts distributed from a Section 457 plan cannot be rolled over to an
IRA.
Required Beginning Date/Required Minimum Distributions
Distributions from each of these retirement programs must begin on or
before April 1 of the year after the Participant attains age 70 1/2. For
employees of governmental employers, the required beginning date is the later
of age 70 1/2 or separation from service.
All amounts in a Section 401(a), Section 401(k) and Section 457 plan and
amounts accruing after December 31, 1986 under Section 403(b) annuities must
be distributed in compliance with the minimum distribution requirements.
All distributions, regardless of when the amounts accrued, must satisfy the
"incidental benefit" or "minimum distribution incidental benefit" rule. If
the amount distributed does not meet the minimum requirements, a 50% penalty
tax on the amount which was required to be, but was not, distributed may be
imposed upon the employee by the IRS under Section 4974. These rules are
extremely complex, and the Participant should seek the advice of a competent
tax adviser.
Federal Taxation of Distributions
All payments received from a Section 401(a), Section 401(k) or Section
403(b) annuity contract are normally taxable in full as ordinary income to
the Participant. Since premiums derived from salary reduction have not been
previously taxed to the Participant, they cannot be treated as a cost basis
for the contract. The Participant will have a cost basis for the contract
only when after-tax contributions have been made.
If the Participant takes the entire value in the contract in a single
sum cash payment, the full amount received will be ordinary income in the
year of receipt unless after-tax contributions were made. If the
distribution includes after-tax contributions, the amount in excess of the
cost basis will be ordinary income. Section 72(e)(5). Special averaging
treatment is currently available for lump sum distributions from Section
401(a) and Section 401(k) plans only.
Amounts received before the annuity starting date by a Participant who
has made after-tax contributions are taxed under a rule that provides for pro
rata recovery of cost. Section 72(e)(9). If an employee who has a cost
basis for his contract receives life annuity or installment payments, the
cost basis will be recovered from the payments under the annuity rules of
Section 72. Typically, however, there is no cost basis and the full amount
received is taxed as ordinary income in the year distributed.
All amounts received from a Section 457 plan, whether in the form of
total or partial withdrawals or annuity payments are taxed in full as wages
to the Participant in the year distributed.
Penalty Taxes
Penalty taxes may apply to certain distributions from Section 401(a)
plans, Section 401(k) plans and Section 403(b) annuities. Distributions made
before the Participant attains age 59 1/2 are premature distributions and
subject to an additional tax equal to 10% of the amount of the distributions
which is includable in gross income in the tax year. However, under Code
Section 72(t), the penalty tax may not apply to distributions: (1) made to
a beneficiary on or after the death of the Participant; (2) attributable to
the employee's being disabled within the meaning of Code Section 72(m)(7);
(3) made as a part of a series of substantially equal periodic payments (at
least annually) for the life or life expectancy of the Participant or the
joint lives or life expectancies of the Participant and his designated
beneficiary; (4) made to a Participant on account of separation from service
after attaining age 55; (5) properly made to an alternate payee under a
qualified domestic relations order; (6) made to an Participant for medical
care, but not in excess of the amount allowable as a medical expense
deduction to the Participant for amounts paid during the taxable year for
medical care; (7) timely made to correct an excess aggregate contribution; or
(8) timely made to reduce an excess elective deferral.
If exception (3) above is applicable at the time of the distribution but
the series of payments is later modified (other than because of death or
disability) before the Participant reaches age 59 1/2 or, if after he reaches
age 59 1/2, within five years of the date of the first payment, the
Participant's tax for the year the modification occurs is increased by an
amount equal to the tax which, but for the exception, would have been imposed
plus interest for the deferral period.
If a Participant's aggregate retirement distributions from qualified
plans, tax sheltered annuities and individual retirement plans in a calendar
year exceed $150,000, a 15% excise tax may be imposed on the employee, in
addition to any income tax, on the excess portion of the distributions.
If the amount distributed during a tax year is less than the minimum
required distribution, there is an additional tax imposed on the Participant
equal to 50% of the amount that the distribution made in the year falls short
of the required amount.
No penalty taxes apply to distributions from a Section 457 plan.
Distributions on Death of Participant
Distributions made to a beneficiary from any of these retirement
programs upon the Participant's death must be made pursuant to the rules
contained in Section 401(a)(9) of the Code and the regulations thereunder.
Generally, if the Participant dies while receiving annuity payments or other
required minimum distributions under the plan and before the entire interest
in the account has been distributed, the remainder of his interest must be
distributed to the beneficiary at least as rapidly as under the method in
effect as of the Participant's date of death.
If the Participant dies before payments have begun, his entire interest
must generally be distributed within five (5) years after the date of death.
This five year rule applies to all non-individual beneficiaries. However, if
an individual other than the surviving spouse has been designated as
beneficiary, payments may be made over the life of that individual or over a
period not extending beyond the life expectancy of the beneficiary so long as
payments begin on or before December 31 of the year following the year of
death. If the beneficiary is the Participant's spouse, distributions are not
required to begin until the date the employee would have attained age 70 1/2.
If the spouse dies before distributions begin, the rules discussed above will
apply as if the spouse were the employee. Participants and beneficiaries
should seek competent tax or legal advice about the tax consequences of
distributions.
Federal Income Tax Withholding
Effective January 1, 1993, certain distributions from Section 401(a)
plans, Section 401(k) plans and Section 403(b) annuities are defined as
"eligible rollover distributions." Generally, any eligible rollover
distribution is subject to mandatory income tax withholding at the rate of
20% unless the employee elects to have the distribution paid as a direct
rollover to an IRA or to another qualified plan or Section 403(b) annuity
contract or custodial account, as applicable. With respect to distributions
other than eligible rollover distributions, amounts will be withheld from
annuity (periodic) payments at the rates applicable to wage payments and from
other distributions at a flat 10% rate, unless the Participant elects not to
have federal income tax withheld.
Distributions to a Participant from a Section 457 plan retain their
character as wages and are tax reported on Form W-2. Federal income taxes
must be withheld under the wage withholding rules. Participants cannot elect
not to have federal income tax withheld. Payments to beneficiaries are not
treated as wages and tax reported on Form 1099R. Federal income tax on
payments to beneficiaries will be withheld from annuity (periodic) payments
at the rates applicable to wage withholding, and from other distributions at
a flat 10% rate, unless the beneficiary elects not to have federal income tax
withheld.
VOTING RIGHTS
GWL&A will vote the shares held by the Investment Divisions of the
Series Account at regular and special meetings of shareholders of Maxim, TCI,
and Fidelity VIP. The Investment Company Act of 1940 (the "1940 Act") and the
regulations thereunder, as presently interpreted, require that the shares of
the applicable underlying mutual fund be voted in accordance with
instructions received from persons having voting interests in the Variable
Sub-Accounts and, accordingly, GWL&A will do so. However, if the 1940 Act
or
any regulation thereunder should be amended, or if the present interpretation
thereof should change, and as a result GWL&A determined that it is permitted
to vote the shares at its own discretion, GWL&A may elect to do so.
Prior to the Annuity Commencement Date, the Participant under a Section
403(b) retirement program or the employer under a Section 401(k) or Section
457 retirement program has the voting interest in the Variable Sub-Accounts.
After annuity payments begin under a variable annuity option, the payee will
have the voting interest.
The number of votes which a person has the right to cast will be
determined by applying his/her percentage interest in a Variable Sub-Account
to the total number of votes attributable to the Sub-Account. In determining
the number of votes, fractional shares will be recognized. During the annuity
payment period, the number of votes attributable to a Participant Annuity
Account will decrease as the assets held to fund the annuity payments
decrease.
Voting rights held in respect of a Variable Sub-Account of this Series
Account as to which no timely instructions are received, and shares that are
not otherwise attributable to persons having voting interests in the Variable
Sub-Accounts of this Series Account, will be voted by GWL&A in proportion to
the voting instructions which are received with respect to all Participant
Annuity Accounts participating in that Sub-Account of this Series Account.
Voting instructions to abstain on any item to be voted upon will be applied
on a pro rata basis to reduce the votes eligible to be cast. Each person
having a voting interest will receive proxy materials, reports and other
materials relating to the applicable underlying mutual fund.
DISTRIBUTION OF THE GROUP CONTRACTS
Great-West is the principal underwriter and the distributor of the Group
Contracts. Great-West is registered with the Securities and Exchange
Commission under the Securities and Exchange Act of 1934 as a broker-dealer
and is a member of the National Association of Securities Dealers, Inc.
("NASD"). Applications for the Group Contracts will be solicited by
duly-licensed insurance agents of Great-West, as well as by independent
registered insurance brokers who must also be NASD-registered broker-dealers
or representatives thereof.
The maximum commission as a percentage of the Contributions made under
a Group Contract payable to Great-West agents, independent registered
insurance brokers and other registered broker-dealers is 8.0%. An expense
allowance that will not exceed 40% of the maximum commission paid may also
be
paid.
Additionally, effective August 1, 1987, a maximum of 1% of Contributions
may also be paid as a persistency bonus to qualifying brokers.
RETURN PRIVILEGE
Within 15 days after a Participant Certificate under a Section 403(b)
retirement program is first mailed, it may be canceled for any reason by
delivering or mailing it together with a Request to cancel to GWL&A's
Administrative Offices or to an authorized agent of GWL&A. Upon cancellation,
GWL&A will refund all Contributions. No Contingent Deferred Sales Charge or
other charge will be deducted.
STATE REGULATION
As a life insurance company organized and operated under Colorado law,
GWL&A is subject to provisions governing such companies and to regulation by
the Colorado Commissioner of Insurance.
GWL&A's books and accounts are subject to review and examination by
the
Colorado Insurance Department at all times and a full examination of its
operations is conducted by the National Association of Insurance
Commissioners ("NAIC") at least once every three years.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT
PROGRAM
Section 36.105 of the Teacher Retirement System of Texas permits
Participants in the Texas Optional Retirement Program ("ORP") to redeem their
interest in a variable annuity contract issued under the ORP only upon
termination of employment in the Texas public institutions of higher
education, retirement or death. Accordingly, a Participant in the ORP will be
required to obtain a certificate of termination from his/her employer before
he/she can redeem his/her Participant Annuity Account.
REPORTS
As presently required by the 1940 Act and regulations
promulgated
thereunder, all Participants will be furnished, at least semi-annually, with
reports containing such information as may be required under the 1940 Act or
by any other applicable law or regulation. In addition, all Participants will
be furnished not less frequently than annually a with statement of the
Participant Annuity Account Value established in his/her name.
LEGAL PROCEEDINGS
The Series Account is not engaged in any litigation. GWL&A is not
involved in any litigation which would have material adverse effect on the
ability of GWL&A to perform its contract with the Series Account.
LEGAL MATTERS
The organization of GWL&A, its authority to issue variable annuity
contracts and the validity of the Group Contract have been passed upon by
R.B. Lurie, Vice-President, Counsel and Associate Secretary. Certain legal
matters relating to the Federal securities laws have been passed upon for
GWL&A by Jorden Burt Berenson & Johnson, LLP.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Group Contracts offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and amendments thereto
and exhibits filed as a part thereof, to all of which reference is hereby
made for further information concerning the Series Account, GWL&A and the
Group Contracts. Statements contained in this Prospectus as to the content of
Group Contracts and other legal instruments are summaries. For a complete
statement of the terms thereof reference is made to such instruments as
filed.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific
information and financial statements relating to the Series Account and
GWL&A. The Table of Contents of the Statement of Additional Information is
set forth below:
1. Custodian and Independent Auditors
2. Underwriter
3. Calculation of Performance Date
4. Financial Statements
Inquiries and requests for a Statement of Additional Information should
be directed to GWL&A in writing at 8515 E. Orchard Road, Englewood,
Colorado
80111, or by telephoning GWL&A at (800) 468-8661 (U.S.) or (303)
689-3360
(Englewood).
FUTUREFUNDS SERIES ACCOUNT
Of
Great-West Life & Annuity Insurance Company
GROUP VARIABLE ANNUITY CONTRACTS
Distributed by
The Great-West Life Assurance Company
8515 East Orchard Road, Englewood, Colorado 80111
(800) 468-8661 (U.S.) (303) 689-3360 (Englewood)
The group variable annuity contracts described in this prospectus
("Group Contracts") are designed and offered to provide retirement programs
that qualify for special federal income tax treatment for employees of
certain organizations. The Group Contracts may be issued in connection with
Contributions made by:
employers or employee organizations (such as non-profit entities defined
in Section 501(c) of the Internal Revenue Code of 1986, as amended ("Code"),
and governmental entities defined in Code Section 414(d)) to purchase
annuities for their employees under pension or profit-sharing plans described
in Section 401(a) of the Code,
employers or employee organizations to purchase annuities for their
employees under cash or deferred profit sharing plans described in Section
401(k) of the Code, state educational organizations and certain tax-exempt
organizations to purchase annuities for their employees under Section 403(b)
of the Code, and
certain state and local governmental entities and, for years beginning
after 1986, other tax-exempt organizations to purchase annuities for their
employees under a deferred compensation plan described in Section 457 of the
Code.
The Group Contracts are issued by Great-West Life & Annuity Insurance
Company ("GWL&A"). The Great-West Life Assurance Company ("Great-West")
is
the principal underwriter and distributor of the Group Contracts. The owner
of a Group Contract will be the employer, or may also be certain employer
associations or employee associations for contracts issued under Section
401(a), Section 401(k) or Section 403(b) retirement programs. Contributions
are made by the employer for employees desiring coverage under a Group
Contract. The amount of the Contributions will be determined by the employer.
A separate record (a "Participant Annuity Account") will be established in
the name of each participating employee (a "Participant") to reflect the
dollar values of Contributions made in each Participant's name. The Group
Contracts provide for a deferred annuity to begin at a future pre-selected
date (the "Annuity Commencement Date"). The Group Contracts also provide for
a death benefit. An initial Contribution under a Section 403(b) retirement
program may be canceled and returned at the employee's request within fifteen
days of the date of the Contribution.
Prior to the Annuity Commencement Date, the Contributions can
accumulate
on a variable basis, guaranteed basis, or a combination of both. To
accumulate on a variable basis, Contributions will be allocated to the
FUTUREFUNDS SERIES ACCOUNT (the "Series Account"), a segregated
investment
account of GWL&A. The value of the Contributions prior to the Annuity
Commencement Date and thus the amount accumulated to provide annuity
payments
will depend upon the investment performance of the Series Account.
The amount of annuity payments may also be variable based upon the
investment experience of the Series Account, or may be fixed without regard
to such experience, or may be a combination of both. The Series Account
currently has seventeen Investment Divisions available for allocation of
Contributions. Thirteen of the Investment Divisions invest in shares of the
portfolios of Maxim Series Fund Inc. ("Maxim"), a series, open-end management
investment company described beginning on page 2.
THIS PROSPECTUS IS ACCOMPANIED BY CURRENT PROSPECTUSES
FOR MAXIM
SERIES FUND,
INC., TCI GROWTH AND TCI BALANCED, FIDELITY VIP GROWTH AND
FIDELITY
VIP II
ASSET MANAGER PORTFOLIOS. THESE PROSPECTUSES PROVIDE
INFORMATION
A
PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING AND
SHOULD BE
KEPT FOR
FUTURE REFERENCE. ADDITIONAL INFORMATION ABOUT THE
GROUP
CONTRACTS HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN A
STATEMENT
OF
ADDITIONAL INFORMATION, DATED APRIL 30, 1996,
WHICH IS
INCORPORATED
HEREIN BY REFERENCE. THE STATEMENT OF ADDITIONAL
INFORMATION, THE
TABLE OF
CONTENTS OF WHICH IS SET FORTH ON THE LAST PAGE
OF THIS
PROSPECTUS, IS
AVAILABLE WITHOUT CHARGE UPON REQUEST BY WRITING OR
TELEPHONING
GWL&A AT
THE ADDRESS OR TELEPHONE NUMBER SET FORTH
ABOVE . THESE
SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE
COMMISSION
NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF
THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL
OFFENSE.
The date of this prospectus is April 30, 1996
the Money Market Portfolio, seeks preservation of capital, liquidity and
the highest possible current income consistent with the foregoing objectives
through investments in short-term money market securities. Shares of the
Money Market Portfolio are neither insured nor guaranteed by the U.S.
Government. Further, there is no assurance that the Portfolio will be able
to maintain a stable net asset value of $1.00 per share.
the Bond Portfolio, seeks to achieve maximum total return consistent
with the preservation of capital, through investment in an actively managed
portfolio of debt securities.
the Stock Index Portfolio, seeks to provide investment results, before
fees, that correspond to the total return of the S&P 500 Index and the S&P
MidCap Index, weighted according to their respective pro-rata shares of the
market;
the U.S. Government Securities Portfolio, seeks the highest level of
return consistent with preservation of capital and substantial credit
protection and seeks to achieve this objective by investing in
mortgage-related securities issued or guaranteed by an agency or
instrumentality of the U.S. Government, other U.S. agency and instrumentality
obligations, and in U.S. Treasury obligations;
the Small-Cap Index Portfolio, seeks to provide investment results,
before fees, that correspond to the total return of the Russell 2000 Index.
The Russell 2000 Index was developed in 1979 by the Frank Russell Company
to
track the stock market performance of a broadly diversified group of small
capitalization domestic stocks (currently those stocks with capitalization of
below $440 million);
the Mid-Cap Portfolio (Growth Fund I Investment Division), seeks to
provide long-term growth of capital through investment of at least 65% of
the Portfolio's assets in medium sized companies.
the Total Return Portfolio, seeks to obtain the highest possible total
return, a combination of income and capital appreciation, consistent with
reasonable risk;
the International Equity Portfolio, seeks to achieve long term capital
growth through a flexible policy of investing in stocks and debt obligations
of companies and governments outside the United States. Any income realized
will be incidental.
the Corporate Bond Portfolio, which seeks high total
investment
return by investing primarily in debt securities (including
convertibles), although up to 20% of its assets, at the time of
acquisition, may be invested in preferred stocks.
the Small-Cap Value Portfolio (Ariel Value Investment Division), seeks
to achieve long-term capital appreciation by investing primarily in common
stocks, although the Portfolio may also invest in other securities, including
restricted and preferred stocks.
the Maxim INVESCO Small-Cap Growth
Portfolio, seeks to
achieve long-term capital growth by investing its assets principally in a
diversified group of equity securities of emerging growth companies with
market capitalizations of $1 billion or less at the time of initial
purchase.
the Maxim INVESCO ADR Portfolio, seeks to achieve a high
total
return on investment through capital appreciation and current income, while
reducing risk through diversification by investing substantially all its
assets in foreign securities that are issued in the form of American
Depository Receipts ("ADRs") or foreign stocks that are registered with the
Securities and Exchange Commission and traded in the U.S.
the Maxim T. Rowe Price Equity/Income Portfolio, seeks to
provide
substantial dividend income and also capital appreciation by investing
primarily in dividend-paying common stocks of established companies.
The Series Account also has two Investment Divisions which invest in
shares of TCI Portfolios, Inc. ("TCI"), a diversified, series, open-end
management investment company which is a member of the Twentieth Century
family of mutual funds. These Investment Divisions invest in shares of one of
the following portfolios of TCI:
the TCI Growth Fund, which seeks capital growth by investment in
common
stocks (including securities convertible to common stocks) and other
securities that meet certain fundamental and technical standards and, in the
opinion of TCI's management, have better than average potential for
appreciation; and
the TCI Balanced Fund, which seeks capital growth and current income,
and it is the intention of TCI's management to maintain approximately 60% of
the assets of the TCI Balanced Fund in common stocks considered by TCI
management to have better-than-average prospects for appreciation and the
remaining assets in bonds and other fixed income securities.
The Series Account has two Investment Divisions which invest in shares
of Fidelity Variable Insurance Products Fund ("Fidelity VIP"), a diversified
management investment company offering insurance companies a selection of
investment vehicles for variable annuity insurance contracts. These
Investment Divisions invest in shares of one of the following portfolios of
Fidelity VIP:
the Fidelity VIP Growth Portfolio, seeks capital appreciation. The
Portfolio normally purchases common stocks, although its investments are not
restricted to any one type of security. Capital appreciation may also be
found in other types of securities including bonds and preferred stocks; and
the Fidelity VIP II Asset Manager Portfolio, seeks high total return
with reduced risk over the long-term by allocating its assets among domestic
and foreign stocks, bonds and short-term fixed-income instruments.
If the underlying plan document or program of any other Group
Policyholder does not permit investments in any Investment Division of the
Series Account, GWL&A shall restrict the availability of such Investment
Division in compliance with the Group Policyholder's request.
TABLE OF CONTENTS
Page
Fee Table . 5
Examples 7
Glossary of Special Terms 9
Questions and Answers About the Series Account Variable Annuity
11
Performance Related Information 14
Great-West Life & Annuity Insurance Company
14
FutureFunds Series Account 15
The Group Contracts 15
Accumulation Period 17
Investments of the Series Account 23
Administrative Charges, Risk Premiums and Other Deductions
26
Annuity Options 30
Federal Tax Consequences 33
Voting Rights 38
Distribution of the Group Contracts 38
Return Privilege 39
State Regulation 39
Restrictions Under the Texas Optional Retirement
Program
39
Reports 39
Legal Proceedings 39
Legal Matters 39
Registration Statement 39
Statement of Additional Information 40
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchases (as a percentage of purchase
payments) None
Deferred Sales Load (as a percentage of amount
distributed)
6% maximum
See footnote (1), page 7
Distribution Fees (as a percentage of purchase
payments)
None
Exchange Fee None
TOTAL Contract Owner Transaction Expenses (as a percentage of purchase
payments) 6%
Annual Contract Fee $30 maximum
See footnote (2), page 7
Separate Account Annual Expenses (as a percentage of average account value)
Mortality Risk 0.60%
Expense Risk 0.15%
TOTAL Separate Account Annual Expenses
0 .75%
Maxim Series Fund, Inc. Annual Expenses (as a percentage of Maxim Series
Fund, Inc. average net assets)
Money
Market
Bond Stock
Index U.S. Gov't.
Securities Small-Cap
Index
Management Fees .46% .60%
.60%
.60%
.60%
Other Expenses None None None
None
None
Total Maxim Series Fund, Inc Annual Expenses
.46%
.60%
.60%
.60%
.60%
International
Equity Total
Return Corporate
Bond
Mid-Cap
(Growth Fund I)
Management Fees1.00%.60%.90%.95%
Other Expenses.50%NoneNone.15%
Total Maxim Series Fund, Inc Annual Expenses
1.50%
.60%
.90%
1.10%
Maxim T. Rowe Price Equity/Income
Small-Cap Value
(Ariel Value) Maxim INVESCO
ADR Maxim INVESCO
Small-Cap Growth
Management Fees.80%1.00%1.00%.95%
Other Expenses.15%.35% .30% .15%
Total Maxim Series Fund, Inc Annual Expenses
.95%
1.35%
1.30%
1.10%
FEE TABLE (cont'd)
TCI Portfolios Annual Expenses (as a percentage of TCI Portfolios average net
assets)
TCI GrowthTCI Balanced
Management Fees1.00%1.00%
Other ExpensesNoneNone
TOTAL TCI Portfolios
Annual Expenses
1.00%
1.00%
Fidelity VIP Portfolios Annual Expenses (as a percentage of Fidelity VIP
Portfolios average net assets)
Fidelity VIP GrowthFidelity VIP II Asset Manager
Management Fees .61%.71%
Other Expenses.09%.08%
TOTAL Fidelity VIP Portfolio
Annual Expenses
.70%
.79%
EXAMPLES
Example 1:
If you do not take a distribution from your contract, or if you annuitize at
the end of the applicable time period you would pay the following expenses on
a $1,000 investment, assuming a 5% annual return on assets:
1 Year3 Year5 Year10 Year
Money Market Investment Division$13.25$43.27$78.52$194.25
Bond Investment Division$14.70$47.94
$86.87
$214.19
Stock Index Investment Division $14.70
$47.94
$86.87 $214.19
U.S. Government Securities
Investment Division
$14.70
$47.94
$86.87
$214.19
Small-Cap Index
Investment Division
$14.70
$47.94
$86.87
$214.19
Total Return Investment Division $14.70
$47.94
$86.87 $214.19
Growth Fund I Investment Division $19.86
$64.46
$116.23 $283.18
International Equity
Investment Division
$23.97
$77.50
$139.20
$335.95
Corporate Bond Investment Division $17.80
$57.88
$104.58 $256.00
Ariel Value Investment Division $22.43
$72.63
$130.64 $316.41
INVESCO ADR Investment Division $23.97
$77.50
$139.20 $335.95
INVESCO Small-Cap Growth
Investment Division
$19.86
$64.46
$116.23
$283.18
T. Rowe Price Equity/Income
Investment Division
$18.32
$59.53
$107.50
$262.85
TCI Growth Investment Division $18.83
$61.18
$110.42 $269.66
TCI Balanced Investment Division $18.83
$61.18
$110.42 $269.66
Fidelity VIP Growth
Investment Division
$15.73
$51.26
$92.80
$228.27
Fidelity VIP II Asset Manager
Investment Division
$16.66
$54.25
$98.11
$240.82
The above Examples should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown,
subject to the guarantees in the Group Contracts.
The purpose of the table shown above is to assist the Group Policyholder in
understanding the various costs and expenses that a Group Policyholder will
bear directly or indirectly. (See "Administrative Charges, Risk Premiums
and Other Deductions" for more information pertaining to these costs and
expenses.)
Please note that while GWL&A currently intends to pay any Premium Tax levied
by any governmental entity, GWL&A reserves the right to, in the future and
with prior notice to Participants, deduct the Premium Tax, if any, from
Participant Annuity Account Values. (Please see "Administrative Charges,
Risk Premiums and Other Deductions" for more information.)
(1) The Securities and Exchange Commission requires that the deferred sales
load shown in the fee table and the examples be the maximum contingent
deferred sales load assessed. This charge does, however, vary by Group
Policyholder. Please consult with your employer or Great-West representative
for the fee that applies to your contract. (See "Administrative Charges,
Risk Premiums and Other Deductions: Contingent Deferred Sales Charge" for
more information.)
(2) The Securities and Exchange Commission requires that the annual contract
fee shown in the fee table be reflective of the contract fees collected
during the year. This charge is assumed to remain the same in each period
listed but does vary by Group Policyholder. Please consult with your employer
or Great-West representative for the fee that applies to your contract. (See
"Administrative Charges, Risk Premiums and Other Deductions: Contract
Maintenance Charge.")
EXAMPLES (cont'd)
Example 2:
If you take a distribution in whole from your contract at the end of
the applicable time period you would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets:
1 Year 3 Year 5 Year
10
Year
Money Market Investment Division $73.25
$103.27
$138.52 $194.25
Bond Investment Division $74.70 $107.94
$146.87
$214.19
Stock Index Investment Division $74.70
$107.94
$146.87 $214.19
U.S. Government Securities
Investment Division
$74.70
$107.94
$146.87
$214.19
Small-Cap Index
Investment Division
$74.70
$107.94
$146.87
$214.19
Total Return Investment Division $74.70
$107.94
$146.87 $214.19
Growth Fund I Investment Division $79.86
$124.46
$176.23 $283.18
International Equity
Investment Division
$83.97
$137.50
$199.20
$335.95
Corporate Bond Investment Division $77.80
$117.88
$164.58 $256.00
Ariel Value Investment Division
$82.43
$132.63
$290.64 $316.41
INVESCO ADR Investment Division $83.97
$137.50
$199.20 $335.95
INVESCO Small-Cap Growth
Investment Division
$79.86
$124.46
$176.23
$283.18
T. Rowe Price Equity/Income
Investment Division
$78.32
$119.53
$167.50
$262.85
TCI Growth Investment Division $78.83
$121.18
$170.42 $269.66
TCI Balanced Investment Division $78.83
$121.18
$170.42 $269.66
Fidelity VIP Growth
Investment Division
$75.73
$111.26
$152.80
$228.27
Fidelity VIP II Asset Manager
Investment Division
$76.66
$114.25
$158.11
$240.82
The above Examples should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown,
subject to the guarantees in the Group Contracts.
The purpose of the table shown above is to assist the Group Policyholder in
understanding the various costs and expenses that a Group Policyholder will
bear directly or indirectly. (See "Administrative Charges, Risk Premiums
and Other Deductions" for more information pertaining to these costs and
expenses.)
Please note that while GWL&A currently intends to pay any Premium Tax levied
by any governmental entity, GWL&A reserves the right to, in the future and
with prior notice to Participants, deduct the Premium Tax, if any, from
Participant Annuity Account Values. (Please see "Administrative Charges,
Risk Premiums and Other Deductions" for more information.)
(1) The Securities and Exchange Commission requires that the deferred
sales
load shown in the fee table and the examples be the maximum contingent
deferred sales load assessed. This charge does, however, vary by Group
Policyholder. Please consult with your employer or Great-West representative
for the fee that applies to your contract. <R.(See "Administrative Charges,
Risk Premiums and Other Deductions: Contingent Deferred Sales Charge" for
more information.)
(2) The Securities and Exchange Commission requires that the annual contract
fee shown in the fee table be reflective of the contract fees collected
during the year. This charge is assumed to remain the same in each period
listed but does vary by Group Policyholder. Please consult with your employer
or Great-West representative for the fee that applies to your contract. (See
"Administrative Charges, Risk Premiums and Other Deductions: Contract
Maintenance Charge.")
GLOSSARY OF SPECIAL TERMS
As used in this prospectus, the terms have the indicated meanings:
Accumulation Period: The period during which the Participant is covered under
this Group Contract prior to the Participant's Annuity Commencement Date.
Accumulation Unit: An accounting measure used to determine the Variable
Account Value before the Annuity Commencement Date.
Administrative Offices: The Administrative Offices of GWL&A are located at
8515 E. Orchard Rd., Englewood, Colorado 80111.
Annuity Commencement Date: The date on which annuity payments commence
under
an Annuity Option.
Annuity Unit: An accounting measure used to determine the dollar value of any
variable dollar annuity payment after the first payment.
Contribution(s): The total dollar amount(s) paid to purchase an annuity for
a Participant.
Fidelity VIP: Fidelity Variable Insurance Products Fund, a registered
management investment company in which assets of the Series Account may be
invested.
Fixed Annuity: An annuity with payments which remain fixed throughout the
payment period and which do not reflect the investment experience of a
separate account.
Group Contract: An agreement between GWL&A and the Group Policyholder
providing a fixed and/or variable annuity.
Investment Division: The Series Account is divided into investment divisions,
one for each designated Investment Portfolio maintained by Maxim, TCI or
Fidelity VIP and made available to the Series Account.
Investment Portfolio: The securities held in a portfolio of Maxim, TCI or
Fidelity VIP.
Maxim: Maxim Series Fund, Inc., a registered management investment company
in
which assets of the Series Account may be invested.
Participant: An employee who is covered under a Group Contract.
Participant Annuity Account: A separate record established in the name of
each Participant which reflects the total of the Participant's Guaranteed and
Variable Account Values.
Participant Annuity Account Value: The sum of the Participant's Guaranteed
and Variable Account Values.
Premium Tax: The amount of tax, if any, charged by a state or other
government authority on premiums.
Request: Any request in a form satisfactory to GWL&A and received by
GWL&A
at its Administrative Office, as required by any provision of the Group
Contract, and at other times as required by GWL&A.
Series Account: The segregated investment account of Great-West Life &
Annuity Insurance Company called "FUTUREFUNDS Series Account" existing
under
Colorado law and registered as a unit investment trust under the Investment
Company Act of 1940, as amended.
TCI: TCI Portfolios, Inc., a registered management investment company in
which assets of the Series Account may be invested.
Transfer: The transfers of all or a portion of a Participant Annuity Account
Value between and among the Variable and/or Guaranteed Sub-Accounts.
Transfer to Other Companies: The transfer of all or a portion of a
Participant Annuity Account Value to another company.
Valuation Date: The date on which the net asset value of Maxim, TCI, or
Fidelity VIP is determined, and the date on which any Contribution or
Request from the Participant/Group Policyholder will be processed by GWL&A.
A unit value is calculated once daily Monday through Friday except on
holidays on which the New York Stock Exchange is closed. Contributions and
Requests received after 4:00 p.m. EST/EDT will be deemed to have been
received on the next business day. On the day after Thanksgiving, however,
transactions submitted other than by automated voice response unit or by
computer link will not be processed.
Valuation Period: The period between the ending of two successive Valuation
Dates.
Variable Account: The account established under this Group Contract
providing for Variable Sub-Accounts.
Variable Account Value: The sum of the values of the Variable Sub-Accounts
credited to a Participant Annuity Account.
Variable Annuity: An annuity providing for payments, the amount of which will
vary in accordance with the changing values of securities held in the Series
Account.
Variable Sub-Account: A subdivision of the Variable Account containing the
value credited to a Participant from an Investment Division.
QUESTIONS AND ANSWERS ABOUT THE SERIES ACCOUNT VARIABLE
ANNUITY
What is the objective of the Group Contracts offered in this Prospectus?
The objective of the Group Contracts is to provide annuity retirement
programs that qualify for special federal income tax treatment for employees.
Under Section 401(a) plans (including plans sponsored by non-profit and
governmental entities) and under Section 401(k) plans, any employer and
certain employee organizations, such as labor unions, may purchase a Group
Contract. Employers eligible to purchase a Group Contract under Section
403(b) retirement programs include state educational institutions and certain
tax-exempt organizations that meet the requirements of Section 501(c)(3) of
the Code. In addition, under Section 403(b) programs, (i) certain
associations of state educational employees and associations of employees of
tax-exempt organizations may enter into a Group Contract for the benefit of
their members; and (ii) certain associations of state educational employers
and associations of tax-exempt employers may also enter into a Group Contract
for the benefit of employees or their employer members. Under Section 457
retirement programs of the Code, certain state and local governmental
entities and, for years beginning after 1986, other tax-exempt organizations
described in Section 457 are also eligible. (See "The Group Contracts;
Eligible Purchasers").
How can an employee obtain coverage under a Group Contract?
After purchasing a Group Contract, the employer will submit to GWL&A
an
application for any employee who desires coverage under the contract and is
eligible to participate in the employer's retirement program. An employee
should consult his/her employer for information concerning eligibility.
How is the amount of Contributions determined?
For Group Contracts issued under a Section 401(a) retirement program,
the employer or employee organization will make Contributions pursuant to its
underlying Federal or State qualified plan.
For Group Contracts issued under a Section 401(k) retirement program,
the employer will make Contributions pursuant to an underlying Section 401(k)
plan and either a salary reduction agreement with its employees or a cash or
deferred agreement.
For Group Contracts issued under an employer's Section 403(b) retirement
program, the employer will make Contributions for its employees pursuant to
either a salary reduction agreement with those employees or an agreement to
forego a salary increase. In each case, the employee will decide his/her own
level and number of Contributions to be made under a Group Contract, except
with respect to employer-sponsored plans, under which the employer will make
Contributions pursuant to an underlying retirement plan.
For Group Contracts issued under a Section 457 retirement program, the
employer will make Contributions pursuant to an underlying deferred
compensation plan.
The employer will report the amount paid as Contributions to GWL&A.
There is no minimum amount or number of Contributions.
How are Contributions allocated?
Contributions are allocated to the Series Account to accumulate on a
variable basis, to the Guaranteed Account to accumulate at a guaranteed rate
of return, or combination of both. The assets of the Series Account are
invested at net asset value (no sales charge) in shares of Maxim, TCI or
Fidelity VIP. See "Investments of the Series Account" for the
investment objectives and policies of those portfolios of Maxim, TCI and
Fidelity VIP which are available for Allocation of Contributions to the
Series Account. They are also described in full in the accompanying
prospectus for Maxim, TCI and Fidelity VIP.
How will a covered employee know the value of the Contribution made in
his/her name?
A Participant Annuity Account will be established in the name of each
Participant to reflect the dollar value of Contributions made in each
Participant's name. Participants will be furnished not less frequently than
annually a statement of the Participant Annuity Account Value established in
his/her name.
What elections are permitted under the Group Contracts?
Under the Group Contracts issued pursuant to Section 401(a) or Section
401(k) retirement programs, all Contributions are held for the exclusive
benefit of the Participants to the extent vested. All elections permitted
under the Group Contracts are made directly by the employer to GWL&A. The
underlying pension or profit sharing plan may, however, permit the
Participants to make certain of those elections indirectly through the
employer.
Under the Group Contracts issued pursuant to Section 403(b) retirement
programs, all Contributions are vested in the Participant when made, subject
to any limitations in the underlying retirement plan, and the Participant
makes all the elections permitted under the contract, except with respect to
employer-sponsored plans, under which elections are made directly by the
employer to GWL&A. The underlying retirement plan may, however, permit the
Participants to make certain of these elections indirectly through the
employer.
Under the Group Contracts issued pursuant to Section 457 retirement
programs, all Contributions remain property of the employer until made
available to a Participant by the employer's underlying deferred compensation
plan. All elections permitted under these Group Contracts are made directly
by the employer to GWL&A. An underlying deferred compensation plan may,
however, permit the Participants to make certain of those elections
indirectly through the employer.
What are the charges to Participants under the Group Contracts?
GWL&A deducts a "Contract Maintenance Charge" for administrative
expenses of not more than $30.00 annually from each Participant
Annuity Account Value. The Contract Maintenance Charge on Section 403(b)
Group Contracts will be waived for an initial period of no less than 12
months and up to 15 months, depending on the Participant's effective date.
There may also be a charge associated with the total or partial distribution
from a Participant Annuity Account prior to the Annuity Commencement Date.
The cumulative total of all Contingent Deferred Sales Charges applied to
any Participant Annuity Account will not exceed 6% of all Contributions made
within 72 months prior to the date of any distribution in whole or in part,
or, with respect to certain Sections 401(a) or 401(k) and 457 retirement
programs, 5% of the amount distributed. Participants in some programs will
not be assessed a Contingent Deferred Sales Charge. (See "Administrative
Charges, Risk Premiums and Other Deductions.") Certain redeemability
restrictions apply to Group Contracts issued under the Texas Optional
Retirement Program. (See "Restrictions Under the Texas Optional Retirement
Program.") There may also be redeemability restrictions applied to
Participants in Section 403(b) Group Contracts. (See " Federal Tax
Consequences: Section 403(b) Retirement Programs.") Upon a total or
partial distribution, a penalty tax may be imposed pursuant to Section 72(t)
of the Code. (See "Federal Tax Consequences.")
GWL&A also deducts from the net asset value of the Series Account an
amount, computed daily, equal to an annual rate of 0 .75% for
mortality
and expense risk guarantees.
GWL&A presently intends to pay any applicable state premium taxes as a
result of the existence of the Participant Annuity Accounts. Applicable state
premium taxes range from 0 to 3.50% of the Contributions or the
Participant Annuity Account Value.
Maxim, TCI, and Fidelity VIP incur a charge against the net asset value
for Investment Advisory Services and may incur other expenses.
What are the distribution rights under the Group Contracts?
A distribution in whole or in part may be taken from the Participant
Annuity Account up to 30 days prior to the Annuity Commencement Date, subject
to any limitations in the underlying retirement plan and subject to a
Contingent Deferred Sales Charge. (See "Accumulation Period: Total and
Partial Distribution" for a description of distribution procedures.) Under
certain circumstances, a Contingent Deferred Sales Charge will not be charged
to Participants who have participated for 15 or more years in the FutureFunds
Group Annuity Contract. (See "Administrative Charges, Risk Premiums and
Other
Deductions.")
Can Contributions be Transferred between the Variable and Fixed Sub-Accounts
Yes. All or a portion of a Participant Annuity Account Value held in any
of the Variable Sub-Accounts or Daily Interest Guarantee Sub-Account may be
Transferred at any time prior to the Annuity Commencement Date by written or
telephone request. Transfers of all or a portion of a Participant Annuity
Account Value held in any of the Guaranteed Certificate Funds or
Guaranteed Fixed Funds may be made only at Certificate maturity. (See
" Accumulation Period: Transfers Between Variable and Guaranteed
Sub-Accounts.")
What Annuity Options are available?
The Group Contracts provide for several annuity options payable on a
variable, fixed, or combination basis. An election of any annuity option(s)
must be made at least 30 days prior to the Participant's Annuity Commencement
Date. If no election is made, annuity payments will begin automatically on
the Annuity Commencement Date under an option providing for a life annuity
with 120 monthly payments certain. (See "Annuity Options.")
What are the voting rights under the Group Contracts?
Participants under Section 403(b) retirement programs and the employer
under Section 401(a), Section 401(k) and Section 457 retirement programs will
be entitled to instruct GWL&A to vote shares of Maxim, TCI or Fidelity VIP
held for their Participant Annuity Accounts. (See "Voting Rights.")
Is there a short-term cancellation right?
Yes. Within fifteen (15) days after a Participant Certificate is first
mailed, it may be canceled by the Participant for any reason by delivering or
mailing it, along with a Request to cancel, to GWL&A's Administrative Offices
or to an authorized agent of GWL&A. This cancellation right only applies to
Group Contracts issued under Section 403(b) retirement programs. (See "Return
Privilege.")
How will the Group Contracts be distributed?
The Group Contracts will be distributed through Great-West and will be
sold by duly licensed insurance agents of Great-West, independent insurance
brokers, and various other registered broker-dealers. (See "Distribution of
the Group Contracts.")
PERFORMANCE RELATED INFORMATION
From time to time, the Series Account may advertise certain performance
related information concerning its Investment Divisions. Performance
information about an Investment Division is based on the
Investment
Division's historical performance only and is not intended to indicate
future performance.
The Series Account may include total return in advertisements or other sales
material regarding the Money Market, Bond, Stock Index, U.S.
Government Securities, TCI Growth, TCI Balanced, Small-Cap Index,
Mid-Cap
(Growth Fund I), International Equity, Total Return, Corporate Bond,
Small-Cap Value (Ariel Value), Maxim T. Rowe Price
Equity/Income,
Maxim INVESCO ADR, Maxim INVESCO Small-Cap
Growth,
Fidelity VIP
Growth and the Fidelity VIP II Asset Manager Investment Divisions. When the
Series Account advertises the total return of one of these portfolios, it
will be calculated for one year, five years, and ten years or some other
relevant period if the portfolio has not been in existence for at least ten
years. Total return is measured by comparing the value of an investment in
the portfolio at the beginning of the relevant period to the value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions).
For the Money Market Investment Division, "yield" refers to the income
generated by an investment in the Money Market Investment Division over a
stated seven-day period. This income is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to
be generated each week over a 52-week period and is shown as a percentage of
the investment. The "effective yield" of the Money Market Investment Division
is calculated similarly but, when annualized, the income earned by an
investment in the Money Market Investment Division is assumed to be
reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
The yield and effective yield calculations for the Money Market Investment
Division includes all recurring charges under the Group Contracts (but
does not include the Contingent Deferred Sales Charge), and is lower than
yield and effective yield for Maxim which does not have comparable
charges. Total return for the Investment Divisions includes all
charges under the Group Contracts, including any Contingent Deferred Sales
Charge, and likewise, is lower than total return at the Maxim, TCI or
Fidelity VIP level, which has no comparable charges.
For more complete information on the method used to calculate yields,
effective yields, and total return of the respective Investment Divisions,
see the "Statement of Additional Information".
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
GWL&A is a stock life insurance company originally organized under the laws
of the state of Kansas as the National Interment Association. Its name was
changed to Ranger National Life Insurance Company in 1963 and to Insuramerica
Corporation prior to changing to its current name in February of 1982. In
September of 1990, GWL&A redomesticated and is now organized under the laws
of the state of Colorado.
GWL&A is authorized to engage in the sale of life insurance, accident and
health insurance and annuities. It is qualified to do business in Puerto
Rico, the District of Columbia and 49 states in the United States.
GWL&A is a wholly-owned subsidiary of The Great-West Life Assurance
Company. The Great-West Life Assurance Company is a subsidiary of
Great-West
Lifeco Inc., a holding company. Great-West Lifeco Inc. is in turn a
subsidiary of Power Financial Corporation, a financial services company.
Power Corporation of Canada, a holding and management company, has voting
control of Power Financial Corporation. Mr. Paul Desmarais, through a
group of private holding companies, which he controls, has voting control
of Power Corporation of Canada.
GWL&A has primary responsibility for administration of the Group
Contracts and the Series Account. Its Administrative Offices are located at
8515 E. Orchard Road, Englewood, Colorado 80111.
FUTUREFUNDS SERIES ACCOUNT (THE "SERIES ACCOUNT")
The Series Account was originally established by GWL&A under Kansas
law
on November 15, 1983. The Series Account now exists pursuant to Colorado law
as a result of the redomestication of GWL&A. The Series Account has been
registered with the Securities and Exchange Commission as a unit investment
trust pursuant to the provisions of the Investment Company Act of 1940, as
amended, and meets the definition of a "separate account" under the
federal securities laws. Such registration does not involve
supervision of the management of the Series Account or GWL&A by the
Securities and Exchange Commission.
The Series Account currently has seventeen Investment Divisions
available for allocation of Contributions. If, in the future, GWL&A
determines that marketing needs and investment conditions warrant, it may
establish additional Investment Divisions which will be made available to
existing Group Contract owners to the extent and on a basis to be determined
by GWL&A. Each Investment Division invests in shares of Maxim, TCI or
Fidelity VIP allocable to one of seventeen Investment Portfolios, each having
a specific investment objective. Maxim, TCI and Fidelity VIP also have other
portfolios which are not generally available for investment by the Series
Account.
GWL&A does not guarantee the investment performance of the Series
Account. The portion of the Participant Annuity Account Value attributable to
the Series Account and the amount of variable annuity payments depend on the
investment performance of Maxim, TCI and Fidelity VIP. Thus, the Participant
bears the full investment risk for all Contributions allocated to the Series
Account.
The Series Account is administered and accounted for as part of the
general business of GWL&A; but the income, capital gains, or capital losses
of each Variable Sub-Account are credited to or charged against the assets
held in that Variable Sub-Account in accordance with the terms of the Group
Contracts, without regard to other income, capital gains or capital losses of
any other Variable Sub-Account or arising out of any other business GWL&A
may
conduct. Under Colorado law, the assets of the Series Account are not
chargeable with liabilities arising out of any other business GWL&A may
conduct. Nevertheless, all obligations arising under the Group Contracts are
generally corporate obligations of GWL&A.
THE GROUP CONTRACTS
Eligible Purchasers
Section 401(a) Retirement Programs. Employers, including non-profit entities
defined in Code Section 501(c) and governmental entities defined in Code
Section 414(d) and Sections 3(32) and 4 of the Employment Retirement Income
Security Act of 1974 ("ERISA"), and certain employee organizations defined in
Sections 3(4) and 3(5) of ERISA, such as labor organizations, may purchase a
Group Contract.
Section 401(k) Retirement Programs. Any employer and certain employee
organizations defined in Sections 3(4) and 3(5) of ERISA, such as labor
organizations, may purchase a Group Contract.
Section 403(b) Retirement Programs. State educational institutions and
tax-exempt organizations under Section 501(c)(3) of the Code may purchase
Group Contracts. In addition, associations of state educational employees,
associations of state educational employers, associations of employees of
organizations that are tax-exempt under Section 501(c)(3) of the Code, and
associations of tax-exempt employers under Section 501(c)(3), may also
purchase Group Contracts. In order to be eligible, however, the association
must also meet the requirements of Sections 501(c)(3).
Section 457 Retirement Program. State governments, local governments, rural
electric cooperatives, political subdivisions, and agencies,
instrumentalities and certain affiliates of such entities may purchase the
Group Contracts. For years beginning after 1986, organizations (other than
a governmental unit) which are exempt from tax under the Code, and which
maintain a Section 457 Retirement Program, may also purchase the Group
Contracts.
Any of the organizations mentioned above wishing to purchase Group
Contracts must complete application forms which selling agents will forward
to GWL&A's Administrative Offices for acceptance. Where the purchaser is an
employee association, any employer of an association member employee can
obtain coverage by completing application forms and agreeing in writing to be
bound by the terms of the Group Contract. Likewise, where the purchaser is an
association of tax-exempt employers, any employer member can obtain coverage
by following the same procedures. GWL&A reserves the right to reject any
application.
Employee Coverage
The employer will submit to selling agents an application for any
employee who desires coverage under the Group Contract and is eligible to
participate in the employer's retirement program. GWL&A reserves the right to
reject any application. An employee should consult his/her employer for
information concerning eligibility.
Contributions
Section 401(a) Retirement Programs. Contributions will be made by the
employer or employee organization pursuant to the employer's or employee
organization's underlying pension or profit-sharing plan.
Section 401(k) Retirement Programs. Contributions will be made by the
employer pursuant to the employer's underlying profit sharing plan and the
Participant's election to execute a salary reduction agreement or a cash or
deferred agreement.
Section 403(b) Retirement Programs. The employer will make Contributions in
accordance with a salary reduction agreement with its employees or an
agreement to forego a salary increase, except with respect to
employer-sponsored plans under which the employer will make Contributions
pursuant to an underlying retirement plan.
Section 457 Retirement Programs. Contributions will be made by the employer
pursuant to the employer's underlying deferred compensation plan.
Under all retirement programs, the employer will report the amount paid as
Contributions on forms provided by GWL&A. Checks for Contributions should
be
made payable to the Great-West Life & Annuity Insurance Company. There is
no
minimum amount or number of Contributions and, for any Participant Annuity
Account, Contributions can be made until the Participant's Annuity
Commencement Date.
Participant Annuity Account
A Participant Annuity Account will be established in the name of each
Participant to reflect the dollar values of Contributions made in each
Participant's name. Participants will be furnished no less frequently than
annually with a statement of the Participant Annuity Account Value
established in his/her name.
Ownership
Section 401(a) Retirement Programs. The employer or employee organization
purchasing a Group Contract is the owner of the Contract. Employer
Contributions vest in accordance with the terms of the employer's or employee
organization's underlying plan. Any employee Contributions are immediately
vested in the Participant. Neither the employer, employee organization nor
the Participants can assign any interest in the Group Contract or the
Participant Annuity Account.
Section 401(k) Retirement Programs. The employer or employee organization
purchasing a Group Contract is the owner of the contract. All employer
Contributions credited to a Participant Annuity Account pursuant to the
Participant's election to execute a salary reduction agreement or a cash or
deferred agreement are vested in the Participant. Any matching employer
Contributions vest in accordance with the terms of the employer's underlying
plan. Neither the employer, employee organization nor the Participants can
assign any interest in the Group Contract or the Participant Annuity Account.
Section 403(b) Retirement Programs. The employer or association purchasing a
Group Contract is the owner of the contract for the benefit of the
Participants. Each Participant receives a Participant Certificate to evidence
his/her coverage under the Group Contract. All Contributions credited to a
Participant Annuity Account are vested in the Participant, subject to any
limitations in the underlying retirement plan. Interests in the Group
Contract or the Participant Annuity Accounts cannot be assigned by the
employer, association or the Participants.
Section 457 Retirement Programs. The employer is the owner of the Group
Contract. All Contributions made in the name of the Participants remain the
property of the employer and subject to the claims of the employer's general
creditors until made available to the Participant in accordance with the
terms of the employer's underlying deferred compensation plan. The employer
may assign or transfer a Group Contract to another person as permitted by
applicable law and only with the prior written consent of GWL&A, which
assumes no responsibility for the validity or effect of any assignment.
PAYMENTS OF ANY BENEFITS UNDER THE GROUP CONTRACT WILL
ONLY BE
MADE IF THEN
PERMITTED UNDER THE EMPLOYER'S DEFERRED COMPENSATION
PLAN AS
DETERMINED BY
THE EMPLOYER.
Elections Under the Group Contracts
The Group Contracts permit the election of the Annuity Commencement
Date, allocation of Contributions, Transfers, distributions in whole or in
part, and the election of annuity payment options. Under Section 403(b)
retirement programs (other than employer-sponsored plans), the Participants
make all the elections permitted under the Group Contracts. Under Section
401(a), Section 401(k), Section 457 and employer-sponsored 403(b) retirement
plans, all elections are made by the employer, or the employee organization.
The employer's underlying pension, profit sharing or deferred compensation
plan or Section 403(b) retirement plan may, however, permit the Participants
to make certain of those elections indirectly through the employer. A
Participant should consult his/her employer for information concerning
elections permitted under its profit sharing or deferred compensation plan.
Amendment of Group Contracts
Section 401(a), Section 401(k) and Section 457 Retirement Programs. The Group
Contracts may be modified at any time by written agreement between GWL&A
and
the employer, or the employee organization.
Section 403(b) Retirement Programs. The Group Contracts may be modified at
any time by written agreement between GWL&A and either the employer, if it
is
the owner of a Group Contract, or the association. No modification will,
however, affect the terms of the contract which are applicable to
Contributions paid prior to such modification without the written consent of
the Participants.
In addition, GWL&A reserves the right to amend the Group Contracts
without the consent of any person to meet the requirements of the Investment
Company Act of 1940 or other applicable federal or state laws or
regulations, or to modify the annuity rates for future Contributions. GWL&A
will notify the Participants of any such changes.
ACCUMULATION PERIOD
Allocation of Contributions
Initial Contributions will be applied after receipt at GWL&A's
Administrative Offices within two business days if the application form is
complete, or within five business days if the application form is incomplete.
If an incomplete application form is completed within five business days of
GWL&A's receipt, the initial Contribution will be applied within two business
days of the application's completion. If the initial Contribution cannot be
so applied, it will be returned at once unless the prospective purchaser
specifically consents to GWL&A retaining the purchase payment until the
application is made complete. Subsequent Contributions will be applied
pursuant to the allocation instructions in the completed application and will
be allocated upon receipt by GWL&A at its Administrative Offices on the day
received. There is no minimum amount or number of Contributions.
Contributions for a Participant are allocated to the Series Account to
accumulate on a variable basis, to the Guaranteed Account to accumulate on a
guaranteed rate of return, or a combination of both, according to the
instructions of the Participant under a Section 403(b) retirement program
(other than employer sponsored plans). The Participants make all the
elections permitted under the Group Contracts under Section 401(a), Section
401(k), Section 457, or employer-sponsored Section 403(b) retirement program
("Allocation Instructions"). Allocation Instructions may be changed
at
any time and will be effective the later of (1) the date specified on the
form and (2) the date the completed form is received and recorded by GWL&A
at
its Administrative Offices. GWL&A will allocate the Contributions based upon
the instructions in the application form. A change of Allocation Instructions
will be effective for Contributions which are received after GWL&A's receipt
and recording of the change.
Upon allocation to the appropriate Variable Sub-Account, the
Contributions are converted into Accumulation Units. The number of
Accumulation Units credited with respect to the initial Contribution under a
Participant Annuity Account is determined by dividing the amount allocated to
each Variable Sub-Account by the value of an Accumulation Unit for that
Variable Sub-Account on the day following GWL&A's receipt of the initial
Contribution and GWL&A's affirmative determination to establish that
Participant Annuity Account. The number of Accumulation Units with respect to
any additional Contribution to a Participant Annuity Account is determined by
dividing the amount allocated to the appropriate Variable Sub-Account by the
value of an Accumulation Unit for that Sub-Account on the day the
Contribution is accepted. Contributions received after 4:00 p.m., EST/EDT,
shall be deemed to have been received on the next Valuation Date. The number
of Accumulation Units so determined shall not be changed by any subsequent
change in the value of an Accumulation Unit, but the dollar value of an
Accumulation Unit will vary in amount depending upon the investment
experience of the applicable underlying mutual fund.
Dollar Cost Averaging
A Participant may, by Request, automatically Transfer amounts from
one Investment Division selected from among those being allowed under this
option to any of the other Investment Divisions at regular intervals. The
intervals between Transfers may be monthly, quarterly, semi-annually or
annually. The Transfer will be initiated one frequency period following the
date of the Request, and thereafter Transfers will continue on the same day
each interval unless terminated by you, or for other reasons as set forth in
the Contract. Transfers can only occur on dates the New York Stock Exchange
("NYSE") is open. If there are insufficient funds in the applicable
Investment Division on the date of Transfer, no Transfer will be made;
however, Dollar Cost Averaging will resume once there are sufficient funds in
the applicable Investment Division.
Automatic Transfers must meet the following conditions:
1. The minimum amount that can be Transferred out of the selected
Investment Division is $100 per month.
2. The Participant must specify the percentage or dollar amount
to be
Transferred, the Accumulation Unit Values will be determined on each Transfer
date.
Dollar Cost Averaging may be used to purchase Accumulation Units of the
Investment Divisions over a period of time so fewer Accumulation Units are
purchased when prices are greater and more Accumulation Units when prices are
lower. Participation in Dollar Cost Averaging does not, however, assure a
greater profit, nor will it prevent or necessarily alleviate losses in a
declining market. The Participant, by Request, may cease Dollar Cost
Averaging at any time. The Company reserves the right to modify, suspend or
terminate Dollar Cost Averaging at any time.
The Rebalancer Option
The Participant may, by Request, automatically Transfer among the
Investment Divisions on a periodic basis by electing the Rebalancer Option.
This option automatically reallocates the Variable Account Value to maintain
a particular allocation among Investment Divisions selected by the
Participant. The amounts allocated in each Investment Division will increase
or decrease at different rates depending on the investment experience of the
Investment Division.
The Participant may Request that the rebalancing occur one time only, in
which case the Transfer will take place after it has been received and
processed by the Company as provided in the Contract. Rebalancing may also
be set up on a quarterly, semi-annual or annual basis, in which case the
first Transfer will be initiated one frequency period following the date of
the Request. On the Transfer date for the specified Request, assets will be
automatically reallocated to the selected funds. Rebalancing will continue
on the same day each interval unless terminated by you, or for other reasons
as set forth in the Contract. Transfers can only occur on dates the NYSE is
open. In order to participate in the Rebalancer Option, the Participant's
entire Variable Account Value must be included.
The Participant must specify the percentage of Variable Account Value to
be allocated to each Investment Division and the frequency of rebalancing.
The Participant, by Request, may modify the allocations or cease the
Rebalancer Option at any time. Participation in the Rebalancer Option and
Dollar Cost Averaging at the same time is not allowed. Participation in the
Rebalancer Option does not assure a greater profit, nor will it prevent or
necessarily alleviate losses in a declining market. The Company reserves the
right to modify, suspend, or terminate the Rebalancer Option at any time.
Valuation of Accumulation Units
Accumulation Units for each Variable Sub-Account are valued separately,
but the method used for valuing Accumulation Units in each Variable
Sub-Account is the same. Initially, the value of each Accumulation Unit was
set at $10.00. Thereafter, the value of an Accumulation Unit in any Variable
Sub-Account on any Valuation Date equals the value of an Accumulation Unit in
that Sub-Account as of the immediately preceding Valuation Date multiplied by
the "Net Investment Factor" of that Variable Sub-Account for the current
Valuation Period. Accumulation Unit values are valued once each day that the
underlying mutual fund shares are valued.
The Net Investment Factor for each Variable Sub-Account for any
Valuation Period is determined by dividing (a) by (b), and subtracting (c)
from the result where:
(a) is the net result of:
(i) the net asset value per share of the underlying mutual fund shares
held in the Variable Sub-Account determined as of the end of the current
Valuation Period, plus
ii) the per share amount of any dividend (or, if applicable, capital
gain distributions) made by the underlying mutual fund on shares held in the
Variable Sub-Account if the "ex-dividend" date occurs during the current
Valuation Period, minus or plus
(iii) a per unit charge or credit for any taxes incurred by or provided
for in the Variable Sub-Account, which is determined by GWL&A to have
resulted from the investment operations of the Variable Sub-Account; and
(b) is the net result of:
(i) the net asset value per share of the underlying mutual fund shares
held in the Variable Sub-Account determined as of the end of the immediately
preceding Valuation Period, minus or plus
(ii) the per unit charge or credit for any taxes incurred by or provided
for in the Variable Sub-Account for the immediately preceding Valuation
Period; and
(c) is an amount representing the Risk Charge deducted from each Variable
Sub-Account on a daily basis.
Such amount is equal to 0 .75% on an annual basis of the
daily net
asset value of each Variable Sub-Account.
The Net Investment Factor may be greater than, less than, or equal to
one. Therefore, the Accumulation Unit Value may increase, decrease or remain
unchanged.
The net asset value per share referred to in paragraphs (a) (i) and (b)
(i) above, reflect the investment performance of the underlying mutual fund
as well as the payment of underlying mutual fund expenses. (See "Investments
of the Series Account.")
Transfers Between Variable and Guaranteed Sub-Accounts
All or a portion of a Participant Annuity Account Value held in any of
the Variable Sub-Accounts and/or the Daily Interest Guaranteed Sub-Account
may be transferred at any time prior to the Participant's Annuity
Commencement Date by written or telephone request to GWL&A's
Administrative
Offices. Prior to Participant's Annuity Commencement Date, transfers of all
or a portion of a Participant Annuity Account Value held in any of
the
Guaranteed Certificate Funds or Guaranteed Fixed Funds may be
made
only at Certificate maturity by written or telephone request to GWL&A's
Administrative Offices. In order for telephone transfers to be accommodated,
a Telephone Transfer Form, signed by both the Contract Owner and the
Participant, must be on file with GWL&A. This form can be obtained at the
time the contract is signed, or at any time thereafter from the
Administrative Offices of GWL&A. The Transfer request shall be made by the
Participant under a Section 403(b) retirement program (other than an
employer-sponsored program) or by the employer or the employee organization
under a Section 401(a), Section 401(k), Section 457 or employer-sponsored
Section 403(b) retirement program. A Transfer will take effect on the later
of the date designated in the request or the date that the Transfer request
is received by GWL&A at its Administrative Offices. Transfer requests
received after 4:00 p.m., EST/EDT, shall be deemed to have been received on
the next following Valuation Date. If a Transfer request is received by GWL&A
within 30 days of the Annuity Commencement Date, GWL&A may delay the
Annuity
Commencement Date by not more than 30 days. Additional Transfer conditions
apply to Transfers to or from the Guaranteed Sub-Accounts.
Loans
Loans may be available under your contract. Consult your Plan
Administrator for complete details.
Total and Partial Distribution
A distribution in whole or in part may be taken from a Participant
Annuity Account under certain Section 403(b) retirement programs (other than
employer-sponsored plans) prior to the Participant's Annuity
Commencement Date by written request of the Participant. Certain Group
Contracts issued pursuant to Section 457 retirement programs will require the
signature of both the Participant and the owner for a total or partial
distribution. Under Group Contracts issued pursuant to Section 401(a),
Section 401(k), Section 457, or employer-sponsored Section 403(b) retirement
programs, the right to a total or partial distribution is subject to any
limitations or restrictions contained in the underlying retirement plan. A
Request must be received by GWL&A's Administrative Offices at least 30 days
prior to the Annuity Commencement Date. A request for partial distribution
must also specify the Variable and/or Guaranteed Sub-Account(s) from which
the partial distribution is to be made. The Participant Annuity Account Value
available for a distribution in whole or in part is the current value of the
Participant Annuity Account at the end of the Valuation Period for the
"effective date" of the request. The effective date is the later of the date
selected in the request or the date on which the Request is received by
GWL&A's Administrative Offices. Requests received after 4:00 p.m., EST/EDT,
shall be deemed to have been received on the next following Valuation Date.
The partial or total distribution will be made within seven days after GWL&A
receives the Request. The payment may be postponed as permitted by the
Investment Company Act of 1940. The amount payable upon a total distribution
may be applied to an Annuity Option ( See "Annuity Options")
instead of
a lump-sum payment. There are additional conditions that apply to a partial
or total distribution of a Participant Annuity Account's Guaranteed Account
Value. Restrictions on a partial or total distribution of a Participant
Annuity Account apply to Section 403(b) retirement programs (See
" Federal
Tax Consequences: Section 403(b) Retirement Programs").
There are certain charges imposed upon a partial or total distribution
prior to the Annuity Commencement Date (See "Administrative Charges, Risk
Premiums and Other Deductions: Contingent Deferred Sales Charge") and there
may be certain tax consequences (See "Federal Tax Consequences: Taxation of
Annuities in General").
Cessation of Contributions
If, in the judgment of either GWL&A or the employer, further
Contributions or Transfers to certain or all of the Variable and Guaranteed
Sub-Accounts should become inappropriate, either party may, upon 60 days
written notice to the other, direct that no future Contributions or Transfers
to such Sub-Account(s) be made. Where the owner of the Group Contract is an
association, the association may provide such notice with respect to all
Participants while the participating employers may also provide such notice
for their employee Participants only.
In the event that such written notice is given for any or all of the
Sub-Accounts, Contributions and Transfers made to such Sub-Account(s) prior
to the effective date of the notice (that date being called the "Date of
Cessation") may be maintained in such Sub-Account(s). Allocation
instructions must be changed to delete the affected Sub-Account(s). If no
change of allocation instructions is received, GWL&A may return all affected
Contributions or allocate such Contributions to a currently offered
Guaranteed Sub-Account.
In the event that a Date of Cessation is declared for all Sub-Accounts,
no new Participant Annuity Accounts will be established or Contributions
accepted by GWL&A. In addition, under Section 401(a), Section 401(k), Section
457, or Section 403(b) retirement programs, an employer or employee
organization must, by Request, elect one of the following Cessation Options:
Cessation Option (1): GWL&A will maintain each Participant Annuity
Account Value until the value of an account is applied to a payment option.
Cessation Option (2): GWL&A will pay, within seven (7) days of the Date
of Cessation of Deposits, the Variable Account Values of the Participant
Annuity Accounts as of the date the Request is received (at such later date
as may be specified in the Request) to either the Employer, the employee
organization or a person designated in writing by the employer or employee
organization as the successor insurer of the employer's deferred compensation
plan. GWL&A will pay the sum of the Guaranteed Contract Values of the
Participant Annuity Accounts as of the Date of Cessation to either the
employer, the employee organization or a person designated in writing by the
employer or the employee organization as the successor insurer of the
employer's or employee organization's deferred compensation plan, in 20 equal
quarterly installments. The amount of the installment will be the amount
determined by GWL&A on the date of the first such payment, but will not be
less than $514.80 for each $10,000 of Guaranteed Contract Value. The first
payment will be made (thirty) days after the date this Cessation Option is
elected.
If the employer or the employee organization has not elected a cessation
option within thirty (30) days of the Date of Cessation, Cessation Option (1)
will be deemed to have been elected. CESSATION OPTION (2) MAY NOT BE
AVAILABLE IN ALL GROUP CONTRACTS.
Contract Termination
Section 401(a) Group Contracts contain a contract termination provision.
Under this provision, either GWL&A or the contract holder may terminate the
Group Contract on at least sixty (60) days prior written notice (the
effective date of which shall be the "Contract Termination Date"). After the
Contract Termination Date, no Transfer shall be made, no payment option shall
be elected and no Contributions shall be accepted by GWL&A under the terms
of
the Group Contract.
GWL&A will pay, within seven (7) days of the Contract Termination Date,
the value of all monies held in the Variable Sub-Account as of the Contract
Termination Date to either the employer, the employee organization or to a
person or entity designated in writing by the employer or employee
organization.
Death Benefit
In the event of the death of the Participant prior to his/her Annuity
Commencement Date, and prior to age 70, a death benefit will be paid upon
receipt of proof of the death of the Participant. The death benefit is the
greater of the Participant Annuity Account Value or the sum of all
Contributions paid less any partial distributions. Where death occurs on or
after the Participant's 70th birthday, but prior to the Annuity Commencement
Date, a death benefit equal to the Participant Annuity Account Value will be
paid.
Under a Section 403(b) retirement program (other than an
employer-sponsored plan), the death benefit will be paid to the Beneficiary
designated by the Participant. Under a Section 401(a), a Section 401(k), a
Section 457, or employer-sponsored Section 403(b) retirement program the
employer or the employee organization will designate to whom the death
benefit will be paid pursuant to the terms of the employer's underlying plan.
The Participant should consult with his/her employer or employee organization
concerning the payment of the death benefit under the employer's or
employee's organization deferred compensation plan.
The payee may elect to receive the death benefit under any of the
Annuity Options, in the form of a lump-sum payment, or in the form of a
partial lump-sum payment with the balance applied towards any of the Annuity
Options. This election must be made within 60 days after GWL&A received
adequate proof of the Participant's death. If no election is made within the
60 day period, a lump-sum settlement will be made.
The Participant Annuity Account Value, for purposes of determination of
the death benefit, will be calculated as of the end of the Valuation Period
during which proof of death and an election by the Payee are received at
GWL&A's Administrative Offices. If no election is made, the Participant
Annuity Account Value will be determined as of 60 days after the date on
which proof of death is received.
If a lump-sum or partial lump-sum settlement is requested, the proceeds
will be paid within (seven) days of GWL&A's receipt of such election and
adequate proof of death. If any of the Annuity Options are elected, the
annuity payment shall commence thirty (thirty) days after the receipt of such
election and adequate proof of death. Annuity payments shall commence by the
later of (fifteen) days or the first day of the month after receipt of such
election and adequate proof of death. The payment of the death benefit will
be made in accordance with any applicable laws and regulations governing
payment of death benefits, subject to postponement in certain circumstances
as permitted by the Investment Company Act of 1940. (See " Federal Tax
Consequences: Taxation of Annuities in General" for certain
distribution-on-death rules that may be applicable to the payment of death
benefits).
The Participant under a Section 403(b) retirement program (other than an
employer-sponsored plan) may designate or change a beneficiary by filing a
Request with GWL&A at its Administrative Offices. Each change of beneficiary
revokes any previous designation. Unless otherwise provided in the
beneficiary designation, one of the following procedures will take place on
the death of a beneficiary: (1) if there is more than one primary surviving
beneficiary, the Participant Annuity Account Value will be shared equally
among them; (2) if any primary beneficiary dies before the Participant, that
beneficiary's interest will pass to any other named surviving primary
beneficiary or Beneficiaries, to be shared equally; (3) if there is no
surviving primary beneficiary, the Participant Annuity Account Value shall
pass to any surviving contingent beneficiary, and if more than one contingent
beneficiary, shall be shared equally among them; (4) if no beneficiary
survives the Participant, the Participant Annuity Account Value shall pass to
the Participant's estate; or (5) if the designation of beneficiary was not
adequately made, the Participant Annuity Account Value shall pass to the
Participant's estate.
INVESTMENTS OF THE SERIES ACCOUNT
Participating Mutual Funds
The Series Account invests in shares of Maxim, TCI, and Fidelity VIP,
open-end management investment companies, each of which are registered with
the Securities and Exchange Commission. Such registration does not involve
supervision of the management of Maxim, TCI or Fidelity by the Securities and
Exchange Commission. Shares of Maxim are also sold to the Pinnacle Series
Account, the Maxim Series Account, and the Retirement Plan Series
Account which are separate accounts established by GWL&A to receive
and
invest premiums paid under variable life and variable annuity contracts
issued by GWL&A. Shares of Maxim may be sold to other separate
accounts of GWL&A or its affiliates.Shares of TCI and Fidelity VIP are also
sold to other insurance companies to fund the benefits of variable annuity or
variable life insurance contracts.
It is conceivable that, in the future, it may be disadvantageous for
variable life insurance separate accounts and variable annuity separate
accounts to invest in Maxim, TCI, and Fidelity VIP simultaneously. Although
GWL&A, Maxim, TCI or Fidelity VIP currently do not foresee any such
disadvantages either to variable life insurance policyowners or to variable
annuity contract owners, the Boards of Directors of Maxim, TCI, and Fidelity
VIP intend to monitor events in order to identify any material conflicts
between such policyowners and contract owners and to determine what action,
if any, should be taken in response thereto. Such action could include the
sale of Maxim shares by one or more of GWL&A's separate accounts or the sale
of TCI or Fidelity VIP shares by other insurance companies, which could have
adverse consequences. Material conflicts could result from, for example, (1)
changes in state insurance laws, (2) changes in federal income tax
laws, (3) changes in the investment management of any portfolio of Maxim,
TCI, or Fidelity VIP, or (4) differences in voting instructions between those
given by policyowners and those given by contract owners.
Investment Advisers
The investment adviser for Maxim is Great-West (the "Investment
Adviser"), which is registered with the Securities and Exchange
Commission as an investment adviser. Great-West provides portfolio management
and investment advice to Maxim and administers its other affairs subject to
the supervision of Maxim's Board of Directors.
The Investment Advisory Agreement obligates the Investment Adviser to
provide investment advisory services and to pay all compensation of, and
furnish office space for, officers and employees of the Investment Adviser
connected with investment and economic research, trading and investment
management of Maxim. The Investment Advisory Agreement also obligates the
Investment Adviser to pay all other expenses incurred in its operation and
all of Maxim's general administrative expenses, except extraordinary
expenses. As compensation for its services to Maxim, the Investment Adviser
receives monthly compensation at the annual rate of 0.46% of the average
daily net assets of the Money Market Portfolio; 0.60% of the average daily
assets of the Bond Portfolio, the Stock Index Portfolio, the U.S. Government
Securities Portfolio, the Small Cap-Index Portfolio and the Total Return
Portfolio; 0.80% of the average daily net assets of the Maxim T.
Rowe
Price Equity/Income Portfolio; 0.90% of the average daily net assets of the
Corporate Bond Portfolio; 0.95% of the average daily net assets of the MidCap
Portfolio and the Maxim INVESCO Small-Cap Growth Portfolio;
1.00% of
the average daily net assets of the International Equity Portfolio, the
Small-Cap Value Portfolio and the Maxim INVESCO ADR
Portfolio.
With respect to the Mid-Cap Portfolio, International Equity,
Small-Cap Value Portfolio, Maxim INVESCO Small-Cap Growth,
Maxim INVESCO ADR and Maxim T. Rowe Price
Equity/Income
Portfolios, the Investment Adviser shall be responsible for all expenses
incurred in performing investment advisory services. Each of the Portfolios
shall pay all expenses incurred in its operation with respect to that
portfolio. However, the Investment Adviser shall pay any expenses
of
the Portfolios which exceed an annual rate of 0.95% of the average daily net
assets of the Maxim T. Rowe Price Equity/Income Portfolio;
1.10% of
the average daily net assets of the Mid-Cap Portfolio and the
Maxim INVESCO Small-Cap Growth Portfolio; 1.35% of the
average daily
net assets of the Small-Cap Value Portfolio; and, 1.30% of the average daily
net assets of the International Equity Portfolio and Maxim
INVESCO ADR
Portfolio.
Investors Research Corporation ("Investors Research") is the investment
adviser for TCI. Investors Research has been the investment adviser of
Twentieth Century Investors, Inc., a registered investment company, since
1958. Additionally, Investors Research acts as the investment adviser for
Twentieth Century World Investors, Inc., a registered investment company, and
as an investment adviser to employee benefit plans and endowment funds.
Investors Research supervises and manages the investment portfolios of
TCI and directs the purchase and sale of its investment securities, subject
only to any directions of TCI's Board of Directors. Investors Research pays
all the expenses of TCI except brokerage, taxes, interest, fees and expenses
of non-interested directors (including counsel fees) and extraordinary
expenses. Twentieth Century Services, Inc., Twentieth Century Tower, 4500
Main Street, Kansas City, Missouri 64111, is transfer agent of TCI. It
provides facilities, equipment and personnel to TCI, and is paid for such
services by Investors Research. Certain administrative services that would
otherwise be performed by Twentieth Century Services, Inc., may be performed
by the insurance company that purchases TCI shares, and Investors Research
may pay it for such services.
For the foregoing services, Investors Research is paid a fee of 1% of
the average net assets of each series of TCI during the year. The fee is paid
and computed each month by multiplying 1% of the average daily closing net
asset values of the shares of each series of TCI during the previous month by
a fraction, the numerator of which is the number of days in the previous
month and the denominator of which is 365 (366 in leap years). Many
investment companies pay smaller investment management fees. However, most
if
not all companies also pay in addition certain of their own expenses, while
TCI expenses specified above are paid by Investors Research.
Investors Research and Twentieth Century Services, Inc. are both wholly
owned by Twentieth Century Companies, Inc. James E. Stowers, Jr., President
of TCI, controls Twentieth Century Companies, Inc. by virtue of his ownership
of a majority of its common stock.
Fidelity Management & Research Company ("FMR") is the investment
adviser
to Fidelity Variable Insurance Products Fund ("VIP"): VIP Growth Portfolio
and to Fidelity Variable Insurance Products Fund II ("VIP II"): VIP II Asset
Manager Portfolio. For its investment advisory services, FMR receives a
monthly fee from each of these Portfolios. As of December 31,
1995,
the VIP Growth and the VIP II Asset Manager Portfolios paid FMR the annual
fee rate of .62% and .72%, respectively, of each Portfolio's average daily
net assets.
FMR may, from time to time, agree to reimburse a Portfolio for
management fees and other expenses above a specified percentage of average
daily net assets. Reimbursement arrangements, which may be terminated at any
time without notice, will increase a Portfolio's yield. If FMR discontinues
a reimbursement arrangement, the affected Portfolio's expenses will go up and
its yield will be reduced. FMR retains the ability to be repaid by a
Portfolio for expense reimbursements if expenses fall below the limit prior
to the end of the fiscal year. Repayment by a Portfolio will lower its yield.
FMR has voluntarily agreed to temporarily limit the total expenses (including
the management fee, but generally excluding taxes, interest and extraordinary
expenses) of the Asset Manager Portfolio to 1.25% of the Portfolio's average
daily net assets. FMR has voluntarily agreed to reimburse the management fees
and all other expenses (excluding taxes, interest and extraordinary expenses)
of the VIP Growth Portfolio in excess of 1.50% of average daily net assets.
Sub-advisers
Janus Capital Corporation("Janus") serves as the sub-adviser
to
the Mid-Cap (Growth Fund I) Portfolio. As such, Janus is
responsible
for managing the investment and reinvestment of assets of the Mid-Cap
(Growth Fund I) , subject to review and supervision of the Investment
Adviser and the Board of Directors. Janus bears all expenses in connection
with the performance of its services, such as compensating and furnishing
office space for its officers and employees connected with investment and
economic research, trading and investment management of the Mid-Cap
(Growth Fund I) Portfolio.
Janus is a Colorado corporation, registered as an investment adviser
with the Securities and Exchange Commission. Its principal address is 100
Fillmore Street Suite 300, Denver, Colorado 80206.
The Investment Adviser is responsible for compensating Janus, which
receives monthly compensation from the Investment Adviser at the annual rate
of 0.60% on the first $100 million and 0.55% on all amounts over $100 million
of the Mid-Cap (Growth Fund I) Portfolio assets.
Templeton Investment Counsel, Inc ("Templeton") serves as the
sub-adviser of the International Equity Portfolio. As such,
Templeton
is responsible for managing the investment and reinvestment of assets of the
International Equity Portfolio, subject to review and supervision of the
Investment Adviser and the Board of Directors. Templeton bears all expenses
in connection with the performance of its services, such as compensating and
furnishing office space for its officers and employees connected with
investment management of the International Equity Portfolio.
Templeton is an indirect subsidiary of Templeton Worldwide, Inc., which
in turn is a direct, wholly-owned subsidiary of Franklin Resources, Inc.
Templeton is a Florida corporation with its principal business address at
Broward Financial Centre, 500 East Broward Boulevard, Suite 2100, Fort
Lauderdale, Florida 33394.
The Investment Adviser is responsible for compensating Templeton, which
receives monthly compensation from the Investment Adviser at the annual rate
of 0.70% on the first $25 million, 0.55% on the next $25 million, 0.50% on
the next $50 million, and 0.40% all amounts over $100 million of the
International Equity Portfolio assets.
T. Rowe Price Associated, Inc. ("T. Rowe Price") serves as the
sub-adviser to the Maxim T. Rowe Price Equity/Income Portfolio.
T.
Rowe Price is a Maryland corporation, registered as an investment adviser
with the Securities and Exchange Commission. Its principal business address
is 100 East Pratt Street, Baltimore, Maryland 21202. T. Rowe Price receives
monthly compensation from the Investment Adviser at the annual rate of 0.50%
on the first $20 million of the average daily net assets, 0.40% on the next
$30 million of average daily net assets and 0.40% on all assets once total
average daily net assets exceed $50 million.
INVESCO Trust Company ("ITC") serves as the sub-adviser of the
Maxim INVESCO Small-Cap Growth Portfolio. ITC is a Colorado Trust
Company
and an indirect wholly-owned subsidiary of INVESCO PLC. ITC is registered
as
an investment adviser with the Securities and Exchange Commission. Its
principal business address is 7800 E. Union Avenue, Denver, Colorado 80237.
ITC receives monthly compensation from the Investment Adviser at the rate of
0.55% on the first $25 million of average daily net assets, 0.50% on the next
$50 million of average daily net assets, 0.40% on the next $25 million of
average daily net assets, and 0.35% on all amounts over $100 million of
average daily net assets.
INVESCO Capital Management, Inc ("ICMI") serves as the sub-adviser to
the Maxim INVESCO ADR Portfolio. ICMI is a Delaware
corporation and an
indirect wholly-owned subsidiary of INVESCO PLC. ICMI is registered as an
investment adviser with the Securities and Exchange Commission. Its principal
business address is 1315 Peachtree Street, Atlanta, Georgia 30309. ICMI
receives monthly compensation from the Investment Adviser at the annual rate
of 0.55% on the first $50 million of average daily net assets, 0.50% on the
next $50 million of average daily net assets, and 0.40% on assets over $100
million of average daily net assets.
Loomis, Sayles & Company, LP ("Loomis Sayles") serves as the
sub-adviser
to the Corporate Bond Portfolio. Loomis Sayles is a Delaware limited
partnership and is an indirect, majority-owned subsidiary company of New
England Mutual Life Insurance Company. Loomis Sayles is registered as an
investment adviser with the Securities and Exchange Commission. Its principal
business address is One Financial Center, Boston, Massachusetts 02111. Loomis
Sayles receives monthly compensation from the Investment Adviser at the
annual rate of 0.30% on all assets of the Corporate Bond Portfolio.
Ariel Capital Management , Inc.("Ariel") serves as the sub-adviser to
the Small-Cap Value (Ariel Value) Portfolio. Ariel is a privately
held
minority-owned money manager registered with the Securities and Exchange
Commission as an investment adviser. Its principal business address is 307
North Michigan Avenue, Chicago, Illinois 60601. Ariel receives monthly
compensation from the Investment Adviser at the annual rate of 0.40% on
assets up to $5 million of average daily net assets, 0.35% on the next $10
million of average daily net assets, 0.30% on the next $10 million of average
daily net assets, and 0.25% on assets over $25 million of average daily net
assets.
Reinvestment and Redemption
All dividend distributions of Maxim, TCI or Fidelity VIP will be
automatically reinvested in shares of Maxim, TCI or Fidelity VIP at their net
asset value on the date of distribution; all capital gains distributions of
Maxim, TCI or Fidelity VIP, if any, will likewise be reinvested at the net
asset value on the record date. GWL&A will redeem Maxim, TCI and Fidelity
VIP
shares at their net asset values to the extent necessary to make annuity or
other payments under the Group Contracts.
Substitution of Investments
GWL&A reserves the right, subject to compliance with the law as
currently applicable or subsequently changed, to make additions to, deletions
from or substitutions for the investments held by the Series Account. In the
future, GWL&A may establish additional Investment Divisions within the Series
Account. These Investment Divisions will be established if, and when, in the
sole discretion of GWL&A marketing needs and investment conditions warrant,
and will be made available under existing Group Contracts to the extent and
on a basis to be determined by GWL&A.
If shares of any of the Investment Portfolios of Maxim, TCI or Fidelity
VIP should no longer be available for investment, or if in the judgement of
GWL&A's management further investment in any of the Investment Portfolios'
shares should become inappropriate in view of the objectives of the Group
Contracts, then GWL&A may substitute shares of another mutual fund for shares
already purchased, or to be purchased in the future under the Group
Contracts. No substitution of securities held by the Series Account may take
place without prior approval of the Securities and Exchange Commission, and
prior notice to the employers and association owners of Group Contracts, and,
in addition, to the Participants under Section 403(b) retirement programs
(other than an employer-sponsored plan). In the event of a substitution, the
Participants under Section 403(b) retirement programs (other than an
employer-sponsored plan) or the employees or the employee organization under
Section 401(a), Section 401(k), Section 457, or employer-sponsored Section
403(b) retirement programs will be given the option of taking a distribution
of that portion of the Participant Annuity Account allocated to an Investment
Division in which the substitution is to occur without imposition of the
Contingent Deferred Sales Charge.
ADMINISTRATIVE CHARGES, RISK PREMIUMS AND OTHER
DEDUCTIONS
Contract Maintenance Charge
GWL&A has primary responsibility for the administration of all Group
Contracts and the Series Account. To compensate GWL&A for the cost it incurs
in providing administrative services, GWL&A may deduct a Contract
Maintenance
Charge of not more than $30 annually on the first day of each
calendar
year from each Participant Annuity Account. If a Participant Annuity Account
is established after that date, the Contract Maintenance Charge will be
deducted on the first day of the next quarter and will be pro-rated for the
year remaining. The deduction will be pro-rated between the Variable and
Guaranteed Contract Values of each Participant Annuity Account. No refund of
this charge will be made. The Contract Maintenance Charge on Section 403(b)
Group Contracts will be waived for an initial period of no less than 12
months and up to 15 months, depending on the Participant's effective date.
Contingent Deferred Sales Charge
In the circumstances described below, a Contingent Deferred Sales Charge
will be deducted on any total or partial distribution, Transfer to Other
Companies or a lump sum payment. The amount deducted will depend on the type
of retirement program for which the Group Contract was issued. However, a
Contingent Deferred Sales Charge "Free Amount" may be applied in some
circumstances. The Contingent Deferred Sales Charge "Free Amount" is an
amount against which the Contingent Deferred Sales Charge will not be
assessed. The "Free Amount" shall not exceed 10% of the Participant Annuity
Account Value at December 31 of the previous calendar year and will be
applied on the first distribution, payment or Transfer to Another Company
made in that year. All additional distributions, payments or Transfers to
Another Company during that calendar year will be subject to a Contingent
Deferred Sales Charge without application of any "Free Amount".
1. For Section 401(a) and 401(k) Retirement Programs
(a) For Group Contracts issued pursuant to a Section 401(k) retirement
program where the employer does not also maintain a Section 403(b) or Section
457 Group Contract with GWL&A, a Contingent Deferred Sales Charge will be
in
an amount equal to 6% of the amount Transferred to Another Company,
distributed or paid in excess of the "Free Amount". The cumulative total of
all Contingent Deferred Sales Charges applied to a Participant Annuity
Account will not exceed 6% of all Contributions made within 72 months prior
to the date of that partial or total distribution, Transfer or payment.
(b) For Group Contracts issued pursuant to a Section 401(a) profit-sharing
plan where the employer also maintains a Section 457 Group Contract with
GWL&A, the Contingent Deferred Sales Charge applicable is as described in
paragraph 3 (a) below.
(c) The Contingent Deferred Sales Charge applicable to Group Contracts issued
pursuant to a Section 401(a) profit-sharing plan where the employer also
maintains a Section 403(b) Group Contract with GWL&A is as described in
paragraph 2(a) below.
2. For Section 403(b) Retirement Programs.
(a) Under all Group Contracts issued prior to May 1, 1992 pursuant to Section
403(b) and for Group Contracts issued on or after May 1, 1992 to Section
403(b) retirement programs other than employer-sponsored plans, the
Contingent Deferred Sales Charge applicable will be in an amount equal to 6%
of the amount distributed, Transferred to Another Company or paid in excess
of the "Free Amount". The cumulative total of all Contingent Deferred Sales
Charges applied to a Participant Annuity Account will not exceed 6% of all
Contributions made within 72 months prior to the date of that partial or
total distribution, Transfer to Another Company or payment.
(b) For Group Contracts that were issued in exchange for Group Tax-Sheltered
Annuity or Group Deferred Compensation Annuity Contracts of the Great-West
Life Assurance Company, with respect to any partial or total distribution,
Transfer to Another Company or payment, the cumulative total of all
Contingent Deferred Sales Charges applied to a Participant Annuity Account
will not exceed an amount equal to:
(i) 6% of all Contributions (excluding the amount initially applied to a
Participant Annuity Account from the exchanged contract) made within 72
months prior to the date of that partial or total distribution, Transfer to
Another Company or payment, plus
(ii) an amount which is the result of multiplying the amount initially
applied to a Participant Annuity Account from the exchanged contract by the
appropriate percentage as chosen from the following chart:
If number of years of coverage
of Participant under Exchanged Contract
and this contract is: The percentage shall be:
Less than 5 years 6%
At least 5 years but less than 10 years 5%
At least 10 years 4%
(c) For Group Contracts issued pursuant to an employer-sponsored Section
403(b) retirement program on or after May 1, 1992, the Contingent Deferred
Sales Charge applicable is as described in paragraph 3 (a) below.
3. For Section 457 Retirement Programs.
(a) For Section 457 Group Contracts issued May 1, 1988 or thereafter and for
Section 457 Group Contracts issued prior to May 1, 1988 but amended to
incorporate the provision of this paragraph, the Contingent Deferred Sales
Charge will be in an amount equal to a percentage of the amount distributed,
Transferred to Another Company or paid in excess of the "Free Amount", if
any, based on the table below:
Years of Participation
in FutureFunds: The percentage shall be:
0 - 4 5%
5 - 9 4%
10 - 14 3%
15 or more 0%
(b) For Section 457 Group Contracts issued prior to May 1, 1988 which have
not been amended to incorporate the Contingent Deferred Sales Charge will be
in an amount equal to:
(i) 6% of all Contributions (excluding the amount initially applied to a
Participant Annuity Account from an exchanged contract) made within 72 months
prior to the withdrawal, plus
(ii) an amount equal to a percentage of the amount distributed, Transferred
to Another Company or paid in excess of the "Free Amount", if any, based on
the table below:
If number of years of coverage
of Participant under Exchanged Contract
and this Contract is: The percentage shall be:
Less than 5 years 6%
At least 5 years but less than 10 years 5%
At least 10 years 4%
4. General provisions applicable to the Contingent Deferred Sales Charge.
Regardless of which of the above-noted Contingent Deferred Sales Charge
schedules is in effect, the Contingent Deferred Sales Charge applied against
distributions, payments or Transfers to Another Company is deducted from the
withdrawal payment to the Participant. Thus, for example, if a Participant
requests a withdrawal of $100, and assuming that the entire withdrawal is
subject to 6% Contingent Deferred Sales Charge, the Participant would receive
a payment of $94. The Contingent Deferred Sales Charge shall not exceed 8.5%
of Contributions deposited by the Participant into the Group Contracts.
Additionally, the Code imposes (with certain exceptions) a penalty tax on
distributions prior to age 59 1/2. (See "Federal Tax Consequences").
The Contingent Deferred Sales Charge is paid to GWL&A to cover expenses
relating to the sale and distribution of the Group Contracts, including
commissions, the cost of preparing sales literature, and other promotional
activities. In certain circumstances, sales expenses associated with the sale
and distribution of a Group Contract may be reduced or eliminated and in such
event, the Contingent Deferred Sales Charge applicable to that Group Contract
may likewise be reduced. Whether such a reduction is available will be
determined by GWL&A based upon consideration of the following factors: (1)
size of the prospective group, (2) projected annual Contributions for all
Participants in the group, and (3) frequency of projected distributions.
GWL&A will notify a prospective purchaser of its eligibility for a reduction
of the Contingent Deferred Sales Charge prior to the acceptance of an
application for coverage.
It is possible that the Contingent Deferred Sales Charge will not be
sufficient to enable GWL&A to recover all of its distribution expenses. In
such case, the loss will be borne by GWL&A out of its general account assets,
which will include the profit, if any, derived by GWL&A from the mortality
and expense risk charges described herein.
Deductions for Premium Taxes
GWL&A presently intends to pay any Premium Tax levied by any
governmental entity as a result of the existence of the Participant Annuity
Account or the Series Account. GWL&A reserves the right to deduct the
Premium
Tax from Participant Annuity Account Values instead of GWL&A making the
Premium Tax payments. Notice will be given to all Participants prior to the
imposition of any such deductions from the Participant Annuity Account
Values. The applicable Premium Tax rates that states and other governmental
entities impose currently range from 0% to 3.5% and are subject to
change by the respective state legislatures, by administrative
interpretations or by judicial act. Such Premium Taxes will depend, among
other things, on the state of residence of a Participant and the insurance
tax laws and status of GWL&A in these states when the Premium Taxes are
incurred.
Deductions for Assumption of Mortality and Expense Risks
GWL&A deducts from the daily net asset value of the Series Account an
amount, computed daily, which is equal to an annual rate of 0.75%, 0.60%
allocable to mortality risk and 0.15% allocable to expense risk. This
charge is designed to compensate GWL&A for its assumption of certain
mortality, death benefit and expense risks described below. The level of this
charge is guaranteed and will not change.
GWL&A's assumption of mortality risk guarantees that the annuity
payments made to the Beneficiary or other payee will not be affected by the
mortality experience (life span) of persons receiving such payment or of the
general population. GWL&A assumes this "mortality risk" by virtue of the fact
that annuity rates in effect at the time that any Contributions are made
cannot be changed. In addition, if a Participant should die prior to his/her
Annuity Commencement Date and 70th birthday, GWL&A is at risk to the extent
that the amount of all Contributions made, less any partial distributions,
exceed the Participant Annuity Account Value. (See " Accumulation
Period: Death Benefit.")
GWL&A's assumption of expense risks arises when GWL&A guarantees
that if
the charges for administrative expenses, which cannot be increased by GWL&A,
will be insufficient to cover administrative and sales expenses, GWL&A bears
that loss.
In certain circumstances, the risk of adverse mortality and expense
experience associated with a Group Contract may be reduced. In such event,
the mortality and expense risk charge applicable to that Group Contract may
likewise be reduced. Whether such a reduction is available will be determined
by GWL&A based upon consideration of the following factors: (1) size of the
prospective group, (2) projected annual Contributions for all Participants in
the group, (3) frequency of projected distributions, (4) type and frequency
of administrative and sales services provided, and (5) level of Contract
Maintenance Charge and Contingent Deferred Sales Charge. GWL&A will notify
a
prospective purchaser of its eligibility for a reduction of the mortality and
expense risk charge prior to the acceptance of an application for coverage.
If the 0 .75% charge proves insufficient to cover
administrative
costs in excess of the Contract Maintenance Charge made for administrative
expenses, plus any losses from the mortality risk, the loss will be borne by
GWL&A; conversely, if the amount deducted proves more than sufficient, the
excess will be a profit to GWL&A.
ANNUITY OPTIONS
An Annuity Commencement Date and the form of annuity payments
("Annuity
Options") may be elected at any time during the Accumulation Period. The
elections are made by the Participant under a Section 403(b) retirement
program (other than an employer-sponsored plan) or the employer or the
employee organization under a Section 401(a), a Section 401(k), Section 457
or employer-sponsored 403(b) retirement program. Under Section 403(b), 401(a)
and 401(k) retirement programs, the Annuity Commencement Date elected
generally must, to avoid the imposition of an excise tax, not be later than
April 1 of the calendar year following the calendar year in which the
Participant attains age 70 1/2, without regard to the actual retirement date
or termination of employment date. For Section 457 retirement programs, the
Annuity Commencement Date elected will generally be not later than April 1 of
the calendar year following the calendar year in which the Participant
attains age 70 1/2, or the Participant's retirement date if later than age 70
1/2. Under all of the above-noted retirement programs, it is the
responsibility of the Participant to file the necessary Request with GWL&A.
The Annuity Commencement Date may be postponed or accelerated, or the
election of any of the Annuity Options changed, upon Request received by
GWL&A at its Administrative Offices up to 30 days prior to the existing
Annuity Commencement Date. If any Annuity Commencement Date elected
would be
less than 30 days from the date that the Request is received, GWL&A may delay
the date elected by not more than 30 days.
The Group Contracts provide the Annuity Options described below, as well
as such other Annuity Options as GWL&A may choose to make available in the
future. Except as otherwise noted, the Annuity Options are payable on a
variable, fixed or combination basis. More than one Annuity Option may be
elected. If no Annuity Option is elected, the Group Contracts automatically
provide for variable life annuity (with respect to the variable portion of a
Participant Annuity Account) and/or a fixed life annuity (with respect to the
fixed portion of a Participant Annuity Account) with 120 monthly payments
guaranteed.
The level of annuity payments under the following options is based upon
the option selected and, depending on the option chosen, such factors as the
age at which payments begin and the frequency and duration of payments.
Option No. 1: Life Annuity
This option provides an annuity payable monthly during the lifetime of
the payee. It would be possible under this option for the Annuitant to
receive no annuity payment if he/she died prior to the date of the first
annuity payment, one annuity payment if the Annuitant died before the second
annuity payment, etc.
Option No. 2: Life Annuity with Payments Guaranteed for Designated Periods
This option provides an annuity payable monthly throughout the lifetime
of the payee with the guarantee that if, at the death of the payee, payments
have been made for less than the designated period, the Beneficiary will
receive payments for the remainder of the period. The designated period may
be 5, 10, 15, or 20 years. The period generally referred to as "Installment
Refund" is available only on a fixed- dollar payment basis.
Option No. 3: Joint and One-Half Survivor
This option provides an annuity payable during the joint lifetime of the
payee and a designated second person, and thereafter during the remaining
lifetime of the survivor. After the death of the payee, and while only the
designated second person is alive, the amount payable will be one-half the
amount paid while both were living. It would be possible under this option
for the payee and the Beneficiary to receive no annuity payment if both
persons died prior to the date of the first annuity payment, one annuity
payment if both persons died before the second annuity payment, etc.
Option No. 4: Income of Specified Payment (available only as fixed-dollar
payments)
Under this option, the amount of the periodic benefit is selected, which
amount will be paid to the payee in equal annual, semiannual, quarterly, or
monthly installments as elected; provided that the annuity payment period is
not less than 36 months nor more than 240 months.
Option No. 5: Income for Specified Period (available only as fixed-dollar
payments)
Under this Option, the duration of the periodic benefit is selected
(which may not be less than 36 months nor more than 240 months), and a
resulting annuity payment amount will be paid to the payee in equal annual,
semiannual, quarterly, or monthly installments, as elected.
Option No. 6: Systematic Withdrawal Payment Option (available only as
fixed-dollar payments)
Under this payment option, the amount, timing and method of payment will
be as elected by the payee and agreed to by GWL&A. Payments may be elected
on
a monthly, quarterly, semi-annual or annual basis. The minimum amount
initially applied to this option must be $20,000. There are charges and
restrictions which apply. Please see the "Systematic Withdrawal Payment
Option Rider" to the Group Contract.
Option No. 7: Access Annuity
Under this payment option, a single premium of $20,000 minimum, the
amount, timing and method of payment will be as elected by the payee and
agreed to by GWL&A. Payments may be elected on a monthly, quarterly,
semi-annual or annual basis. There are charges and restrictions which apply.
Please see the "Access Annuity Rider" to the Group Contract for additional
information.
Variable Annuity Payments
Variable annuity payments will be determined on the basis of: (i) the
Variable Account Value prior to the Annuity Commencement Date; (ii) the
annuity tables contained in the Group Contracts which reflect the age of the
Participant; (iii) the type of annuity option(s) selected; and (iv) the
investment performance of the underlying mutual fund. The Participant
receives the value of a fixed number of Annuity Units each month.
At a Participant's Annuity Commencement Date, the Participant Annuity
Account is credited with Annuity Units for each Variable Sub-Account on which
variable annuity payments are based. The number of Annuity Units to be
credited is determined by dividing the amount of the first monthly payment by
the value of an Annuity Unit as of the fifth Valuation Period prior to the
Annuity Commencement Date in each Variable Sub-Account selected. Although
the
number of Annuity Units is fixed by this process, the value of such units
will vary with the value of the underlying mutual fund.
The dollar amount of the first monthly variable annuity payment is
determined by applying the total value of the Accumulation Units credited to
a Participant Annuity Account valued as of the fifth Valuation Period prior
to the Annuity Commencement Date to the annuity tables contained in the Group
Contracts. Amounts shown in the tables are based on a modified 1971 Group
Annuity Mortality Table (set back five years) with an assumed investment
return at the rate of 3.5% per annum. The first annuity payment is determined
by multiplying the benefit per $1,000 of value shown in the Group Contract
tables by the number of thousands of dollars of value accumulated under the
Variable Account Value of a Participant Annuity Account. These annuity tables
vary according to the form of annuity selected and according to the age of
the Participant and his/her Annuity Commencement Date.
The 3.5% interest rate stated above is the measuring point for
subsequent annuity payments. If the actual Net Investment Rate (annualized)
exceeds 3.5%, the payment will increase at a rate equal to the amount of such
excess. Conversely, if the actual rate is less than 3.5%, annuity payments
will decrease. If the assumed rate of interest were to be increased, annuity
payments would start at a higher level but would increase more slowly or
decrease more rapidly.
The amount of the second and subsequent payment is determined by
multiplying the credited fixed number of Annuity Units by the appropriate
Annuity Unit value for the fifth Valuation Period preceding the date that
payment is due. The Annuity Unit value at the end of any Valuation Period is
determined by multiplying the Annuity Unit value for the immediately
preceding Valuation Period by the product of:
(a) the Net Investment Factor of the Variable Sub-Account for the Valuation
Period for which the Annuity Unit is being determined, and,
(b) a factor of .999905 to neutralize the assumed investment return of 3.5%
per year used in the annuity table.
The value of each Variable Sub-Account's Annuity Unit is set initially at
$10.00. The value of the Annuity Units is determined as of a
Valuation Period five (5) days' prior to the payment in order to permit
calculation of amounts of annuity payments and mailing of checks in advance
of their due date.
Fixed Annuity Payments
The guaranteed level of fixed annuity payments will be determined on the
basis of: (i) the Guaranteed Account Value prior to the Annuity Commencement
Date; (ii) the annuity tables contained in the Group Contracts which reflect
the age of the Participant; and (iii) the type of annuity option(s) elected.
The payment amount may be greater, however, if GWL&A is using a more
favorable table as of a Participant's Annuity Commencement Date.
Combination Variable and Fixed Annuity Payments
If an election is made to receive annuity payments on a combination
variable and fixed basis, the Variable Account Value of a Participant Annuity
Account will be applied to the variable annuity option elected and the
Guaranteed Account Value to the fixed annuity option.
Transfer to Effect Annuity Option Elected
If the Participant under a Section 403(b) retirement program (other than
an employer-sponsored plan) or the employer or the employee organization
under a Section 401(a), Section 401(k), Section 457 or employer-sponsored
403(b) retirement program wishes to apply all or part of the Guaranteed
Account Value of the Participant Annuity Account to a variable annuity
option, or all or a part of the Variable Account Value to a fixed annuity
option, a Request to Transfer must be received at GWL&A's Administrative
Office prior to the Participant's Annuity Commencement Date. This also
applies to a Beneficiary or payee who elects to receive a death benefit under
any of the annuity options, and one such Request to Transfer can be submitted
by the Beneficiary or payee after the death of the Participant.
Proof of Age and Survival
GWL&A may require proof of age or survival of any payee upon whose
age
or survival payments depend.
Frequency and Amount of Annuity Payments
Variable annuity payments will be paid as monthly installments; fixed
annuity payments will be paid annually, semiannually, quarterly or monthly,
as requested. However, if any payment to be made under any annuity option
will be less than $50, GWL&A may make the payments in the most frequent
interval which produces a payment of at least $50. If the net amount
available to apply under any Annuity Option is less than $2,000, GWL&A may
pay it in one lump sum. The maximum amount that may be applied under any
Annuity Option without the prior written consent of GWL&A is $1,000,000.00
FEDERAL TAX CONSEQUENCES
Introduction
The Group Contracts are designed for use by employee groups under
retirement programs which may qualify for special tax treatment under Section
401(a), Section 401(k), Section 403(b) or Section 457 of the Code.
The ultimate effect of federal income taxes on the Participant Annuity
Account Value, on annuity payments and on the economic benefit to the
Participant or Beneficiary depends upon GWL&A's tax status, on the type of
retirement program for which the Group Contract is purchased, and upon the
tax and employment status of the individual concerned. The Series Account is
taxed as a part of GWL&A; not as a "regulated investment company" under Part
I of Subchapter M of the Code. GWL&A is taxed as a life insurance company
as
described below.
It should be understood that the following discussion is not exhaustive,
and is not intended as tax advice. Special rules may apply to certain
situations not discussed here. GWL&A intends to comply with the
diversification requirements of Code Sections 817(h) and 818 to assure that
the Group Contracts will continue to be treated as annuity contracts for
Federal income tax purposes. The discussion is based upon GWL&A's
understanding of current federal income tax law and no representation is made
regarding the likelihood of continuation of current law or of the current
interpretations by the Internal Revenue Service. No attempt is made to
consider state or other tax laws. The Group Contractholder, Participants and
beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the contract comply with
applicable laws. For further information, consult a qualified tax adviser.
Taxation of GWL&A
GWL&A is taxed on its insurance business in the United States as a life
insurance company in accordance with Part I of Subchapter L of the Code.
Investment income and realized capital gains on the assets of Series Account
are reinvested and are taken into account in determining the Series Account
Value. Under existing federal income tax law, such amounts do not result in
any tax on GWL&A which will be chargeable to the Participant Annuity Account
or the Series Account. GWL&A reserves the right to make a deduction from the
Participant Annuity Account for taxes, if any, imposed with respect to such
items in the future.
Taxation of Annuities in General
Code Section 72 governs taxation of annuities in general. A Participant
is not taxed on increases (if any) in the value of a Participant Annuity
Account until some form of distribution is made. Under Section 72, a total
or partial distribution from a Participant Annuity Account will be treated as
ordinary income taxable to the extent the amounts held in the Participant
Annuity Account immediately before the distribution exceed the "investment in
the contract." The investment in the contract is that portion of the
Contributions to the Participant Annuity Account which was included in the
Participant's gross income in the year contributed, if any. If the
Participant begins receiving annuity payments, the Participant is taxed on
the portion of the payment that exceeds the investment in the contract.
However, because the Participant generally excludes Contributions from gross
income under these retirement programs, there generally will be no cost basis
(investment in the contract) in the Participant Annuity Account within the
meaning of Section 72 of the Code. Thus, the total amount of all payments
received will generally be taxable to the Participant. Ordinarily, such
taxable portion is taxed at ordinary income tax rates, subject to any income
averaging rules applicable to Participants receiving distributions from a
Section 401(a) or Section 401(k) plan.
Currently, none of the amounts contributed to a Section 457 plan
constitute cost basis in the contract. Thus, all amounts distributed to
Participants from a Section 457 plan are taxable at ordinary income rates.
No special averaging rules apply to distributions from Section 403(b) plans
or Section 457 plans.
If a Group Contract is held by a non-natural person (e.g. a
corporation), the investment gain on the contract is includable in the
entity's income each year unless certain exceptions apply. This rule does
not apply, in pertinent part, where the Group Contract is held under a
Section 401(a) plan, a Section 401(k) plan, or a Section 403(b) plan. Since
the employer maintaining a Section 457 plan is either a state or local
government or a tax-exempt organization, the employer will not be subject to
tax on the gain in the contract.
Section 401(a) Qualified Retirement Plans
Section 401(a) provides special tax treatment for pension,
profit-sharing and stock bonus plans established by employers or employee
organizations for their employees. All types of employers, including
for-profit organizations, tax-exempt organizations and state and local
governments, are allowed to establish and maintain Section 401(a) qualified
plans. Employer Contributions and any earnings thereon are currently
excluded from the Participant's gross income. Section 401(a) plans must
satisfy numerous qualification requirements, including limitations on
contributions. Generally, the total amount of employer and employee
contributions which can be contributed to all of the employer's qualified
plans is limited to the lesser of $30,000 or 25% of a Participant's
includable compensation. Distributions from the plan are subject to the
restrictions contained in the plan document and the Code. Participants
should consult with their employer or employee organization as to the
applicability of the above limitations and restrictions to their plan.
Section 401(k) Cash or Deferred Arrangements
Section 401(k) allows for-profit employers or employee organizations to
offer a cash or deferred arrangement to employees under a profit-sharing or
stock bonus plan. Generally, for tax years beginning after 1986, tax-exempt
organizations and state and local governments are not permitted to establish
Section 401(k) plans. However, under a grandfather rule, certain plans
adopted before certain dates in 1986 may continue to be offered by these
entities. Pre-tax salary reduction Contributions and any income thereon are
currently excluded from the Participant's gross income. Generally, the
maximum elective deferral amount that an individual may defer on a pre-tax
basis to one or more Section 401(k) plans is limited to $7,000 per year
(adjusted for cost-of-living increases) under Section 402(g). Elective
deferrals to a Section 401(k) plan must also be aggregated with elective
deferrals made by the Participant to a Section 403(b) plan or to a simplified
employee pension. For 1996, the total amount of elective deferrals which can
be contributed to all such plans is $9,500. The contribution limit in
Section 415 also apply. The amount which a highly compensated employee may
contribute may be further reduced to enable the plan to meet the
discrimination testing requirements. Amounts contributed to a Section 403(b)
annuity contract are subject to FICA and FUTA tax when contributed.
Pre-tax amounts deferred into the plan within the applicable limits, and
the net investment gain, if any, reflected in the Participant Annuity Account
Value are includible in a Participant's gross income only for the taxable
year when such amounts are paid to the Participant under the terms of the
plan. Employee contributions and earnings may not be distributed prior to
age 59 1/2, unless the Participant dies, becomes disabled, separates from
service or suffers a genuine financial hardship meeting the requirements of
the Code. Restrictions apply to the amount which may be distributed for
financial hardship. Participants should consult with their employer as to
the availability of benefits under the employer's plan.
Amounts contributed in excess of the above described limits, and the
earnings thereon, must be distributed from the plan and included in the
Participant's gross income in accordance with IRS rules and regulations.
Excess amounts which are not properly corrected can have severe adverse
consequences to the plan and may result in additional taxes to the
Participant.
Section 403(b) Tax Sheltered Annuities
Tax-exempt organizations described in Section 501(c)(3) and public
educational organizations are permitted to purchase Section 403(b)
tax-sheltered annuities for employees. Amounts contributed toward the
purchase of such annuities are excluded from the gross income of the
Participant in the year contributed to the extent that the contributions do
not exceed three separate, yet interrelated contribution limitations.
Federal income tax is deferred on contributions to the extent that the
aggregate amount contributed to a Section 430(b) plan per year for a
Participant does not exceed: (1) the exclusion allowance described in
Section 403(b)(2); (2) the contribution limit in Section 415; and (3) the
elective deferral limitation in Section 402(g) of the Code. Elective
deferrals to a Section 403(b) plan must also be aggregated with elective
deferrals made by the Participant to a Section 401(k) plan or to a simplified
employee pension. For 1996, the total amount of elective deferrals which can
be contributed to all such plans is $9,500. Amounts contributed to a Section
403(b) annuity contract are subject to FICA and FUTA tax when contributed.
The net investment gain, if any, reflected in a Participant Annuity
Account Value is not taxable until received by the Participant or his
beneficiary.
Amounts contributed in excess of the above described limits, and the
earnings thereon, must be distributed from the plan and included in the
Participant's gross income in accordance with IRS rules and regulations.
Excess amounts which are not properly corrected can have severe adverse
consequences to the plan and may result in additional taxes to the
Participant.
Pre-1989 contributions to a Section 403(b) annuity contract may be
distributed to an employee at any time, subject to a 10% penalty on
withdrawals prior to age 59 1/2, unless an exception applies under Section
72(t). Post-1988 contributions and earnings, and the earnings on the
December 31, 1988 account balance, may not be distributed prior to age 59
1/2, unless the Participant dies, becomes disabled, separates from service or
suffers a genuine financial hardship meeting the requirements of the Code.
Restrictions apply to the amount which may be distributed for financial
hardship.
Section 457 Deferred Compensation Plans
Section 457 allows state and local governmental employers to establish
and maintain an eligible deferred compensation plan for all employees and
independent contractors. Tax-exempt organizations may establish eligible
deferred compensation plans only for a select group of management or highly
compensated
employees.
Federal income tax is deferred on contributions to a Section 457 plan to
the extent that the aggregate amount contributed per year for a Participant
does not exceed the lesser of $7,500 or 25% of a Participant's includable
compensation. Any elective deferral amount excluded from gross income by a
Participant under Section 401(k), Section 403(b) or a simplified employee
pension for the taxable year must be treated as an amount deferred under the
Section 457 plan. Amounts contributed are subject to FICA and FUTA tax when
contributed.
The net investment gain, if any, reflected in a Participant Annuity
Account Value is not taxable until received by the Participant or his
beneficiary.
Amounts contributed in excess of the above described limits, and the
earnings thereon, must be distributed from the plan and included in the
Participant's gross income. Excess amounts which are not properly corrected
can have severe adverse consequences to the plan and may result in additional
taxes to the Participant.
Contributions and earnings may not be distributed prior to age 70 1/2,
unless the Participant dies, becomes disabled, separates from service or
suffers a genuine unforeseeable emergency meeting the requirements of the
Code and plan document. Restrictions apply to the amount which may be
distributed for unforeseeable emergency.
Portability
When the participant is eligible to take a distribution from a Section
401(a) plan, Section 401(k) plan or Section 403(b) annuity, eligible rollover
distributions may be rolled over to an IRA or another qualified plan or
Section 403(b) annuity contract or custodial account as provided in the Code.
Amounts properly rolled over will not be included in gross income until a
subsequent distribution is made.
For Section 403(b) plans only, Revenue Ruling 90-24 allows participants
to transfer funds from one Section 403(b) annuity or custodial account to
another Section 403(b) annuity contract or custodial account with the same or
more stringent restrictions without incurring current taxation. If the
Section 403(b) plan is employer-sponsored, transfers under Rev. Rul. 90-24
may be restricted to 403(b) providers approved by the plan sponsor.
Amounts distributed from a Section 457 plan cannot be rolled over to an
IRA.
Required Beginning Date/Required Minimum Distributions
Distributions from each of these retirement programs must begin on or
before April 1 of the year after the Participant attains age 70 1/2. For
employees of governmental employers, the required beginning date is the later
of age 70 1/2 or separation from service.
All amounts in a Section 401(a), Section 401(k) and Section 457 plan and
amounts accruing after December 31, 1986 under Section 403(b) annuities must
be distributed in compliance with the minimum distribution requirements.
All distributions, regardless of when the amounts accrued, must satisfy the
"incidental benefit" or "minimum distribution incidental benefit" rule. If
the amount distributed does not meet the minimum requirements, a 50% penalty
tax on the amount which was required to be, but was not, distributed may be
imposed upon the employee by the IRS under Section 4974. These rules are
extremely complex, and the Participant should seek the advice of a competent
tax adviser.
Federal Taxation of Distributions
All payments received from a Section 401(a), Section 401(k) or Section
403(b) annuity contract are normally taxable in full as ordinary income to
the Participant. Since premiums derived from salary reduction have not been
previously taxed to the Participant, they cannot be treated as a cost basis
for the contract. The Participant will have a cost basis for the contract
only when after-tax contributions have been made.
If the Participant takes the entire value in the contract in a single
sum cash payment, the full amount received will be ordinary income in the
year of receipt unless after-tax contributions were made. If the
distribution includes after-tax contributions, the amount in excess of the
cost basis will be ordinary income. Section 72(e)(5). Special averaging
treatment is currently available for lump sum distributions from Section
401(a) and Section 401(k) plans only.
Amounts received before the annuity starting date by a Participant who
has made after-tax contributions are taxed under a rule that provides for pro
rata recovery of cost. Section 72(e)(9). If an employee who has a cost
basis for his contract receives life annuity or installment payments, the
cost basis will be recovered from the payments under the annuity rules of
Section 72. Typically, however, there is no cost basis and the full amount
received is taxed as ordinary income in the year distributed.
All amounts received from a Section 457 plan, whether in the form of
total or partial withdrawals or annuity payments are taxed in full as wages
to the Participant in the year distributed.
Penalty Taxes
Penalty taxes may apply to certain distributions from Section 401(a)
plans, Section 401(k) plans and Section 403(b) annuities. Distributions made
before the Participant attains age 59 1/2 are premature distributions and
subject to an additional tax equal to 10% of the amount of the distributions
which is includable in gross income in the tax year. However, under Code
Section 72(t), the penalty tax may not apply to distributions: (1) made to
a beneficiary on or after the death of the Participant; (2) attributable to
the employee's being disabled within the meaning of Code Section 72(m)(7);
(3) made as a part of a series of substantially equal periodic payments (at
least annually) for the life or life expectancy of the Participant or the
joint lives or life expectancies of the Participant and his designated
beneficiary; (4) made to a Participant on account of separation from service
after attaining age 55; (5) properly made to an alternate payee under a
qualified domestic relations order; (6) made to an Participant for medical
care, but not in excess of the amount allowable as a medical expense
deduction to the Participant for amounts paid during the taxable year for
medical care; (7) timely made to correct an excess aggregate contribution; or
(8) timely made to reduce an excess elective deferral.
If exception (3) above is applicable at the time of the distribution but
the series of payments is later modified (other than because of death or
disability) before the Participant reaches age 59 1/2 or, if after he reaches
age 59 1/2, within five years of the date of the first payment, the
Participant's tax for the year the modification occurs is increased by an
amount equal to the tax which, but for the exception, would have been imposed
plus interest for the deferral period.
If a Participant's aggregate retirement distributions from qualified
plans, tax sheltered annuities and individual retirement plans in a calendar
year exceed $150,000, a 15% excise tax may be imposed on the employee, in
addition to any income tax, on the excess portion of the distributions.
If the amount distributed during a tax year is less than the minimum
required distribution, there is an additional tax imposed on the Participant
equal to 50% of the amount that the distribution made in the year falls short
of the required amount.
No penalty taxes apply to distributions from a Section 457 plan.
Distributions on Death of Participant
Distributions made to a beneficiary from any of these retirement
programs upon the Participant's death must be made pursuant to the rules
contained in Section 401(a)(9) of the Code and the regulations thereunder.
Generally, if the Participant dies while receiving annuity payments or other
required minimum distributions under the plan and before the entire interest
in the account has been distributed, the remainder of his interest must be
distributed to the beneficiary at least as rapidly as under the method in
effect as of the Participant's date of death.
If the Participant dies before payments have begun, his entire interest
must generally be distributed within five (5) years after the date of death.
This five year rule applies to all non-individual beneficiaries. However, if
an individual other than the surviving spouse has been designated as
beneficiary, payments may be made over the life of that individual or over a
period not extending beyond the life expectancy of the beneficiary so long as
payments begin on or before December 31 of the year following the year of
death. If the beneficiary is the Participant's spouse, distributions are not
required to begin until the date the employee would have attained age 70 1/2.
If the spouse dies before distributions begin, the rules discussed above will
apply as if the spouse were the employee. Participants and beneficiaries
should seek competent tax or legal advice about the tax consequences of
distributions.
Federal Income Tax Withholding
Effective January 1, 1993, certain distributions from Section 401(a)
plans, Section 401(k) plans and Section 403(b) annuities are defined as
"eligible rollover distributions." Generally, any eligible rollover
distribution is subject to mandatory income tax withholding at the rate of
20% unless the employee elects to have the distribution paid as a direct
rollover to an IRA or to another qualified plan or Section 403(b) annuity
contract or custodial account, as applicable. With respect to distributions
other than eligible rollover distributions, amounts will be withheld from
annuity (periodic) payments at the rates applicable to wage payments and from
other distributions at a flat 10% rate, unless the Participant elects not to
have federal income tax withheld.
Distributions to a Participant from a Section 457 plan retain their
character as wages and are tax reported on Form W-2. Federal income taxes
must be withheld under the wage withholding rules. Participants cannot elect
not to have federal income tax withheld. Payments to beneficiaries are not
treated as wages and tax reported on Form 1099R. Federal income tax on
payments to beneficiaries will be withheld from annuity (periodic) payments
at the rates applicable to wage withholding, and from other distributions at
a flat 10% rate, unless the beneficiary elects not to have federal income tax
withheld.
VOTING RIGHTS
GWL&A will vote the shares held by the Investment Divisions of the
Series Account at regular and special meetings of shareholders of Maxim, TCI,
and Fidelity VIP. The Investment Company Act of 1940 (the "1940 Act") and the
regulations thereunder, as presently interpreted, require that the shares of
the applicable underlying mutual fund be voted in accordance with
instructions received from persons having voting interests in the Variable
Sub-Accounts and, accordingly, GWL&A will do so. However, if the 1940 Act
or
any regulation thereunder should be amended, or if the present interpretation
thereof should change, and as a result GWL&A determined that it is permitted
to vote the shares at its own discretion, GWL&A may elect to do so.
Prior to the Annuity Commencement Date, the Participant under a Section
403(b) retirement program or the employer under a Section 401(k) or Section
457 retirement program has the voting interest in the Variable Sub-Accounts.
After annuity payments begin under a variable annuity option, the payee will
have the voting interest.
The number of votes which a person has the right to cast will be
determined by applying his/her percentage interest in a Variable Sub-Account
to the total number of votes attributable to the Sub-Account. In determining
the number of votes, fractional shares will be recognized. During the annuity
payment period, the number of votes attributable to a Participant Annuity
Account will decrease as the assets held to fund the annuity payments
decrease.
Voting rights held in respect of a Variable Sub-Account of this Series
Account as to which no timely instructions are received, and shares that are
not otherwise attributable to persons having voting interests in the Variable
Sub-Accounts of this Series Account, will be voted by GWL&A in proportion to
the voting instructions which are received with respect to all Participant
Annuity Accounts participating in that Sub-Account of this Series Account.
Voting instructions to abstain on any item to be voted upon will be applied
on a pro rata basis to reduce the votes eligible to be cast. Each person
having a voting interest will receive proxy materials, reports and other
materials relating to the applicable underlying mutual fund.
DISTRIBUTION OF THE GROUP CONTRACTS
Great-West is the principal underwriter and the distributor of the Group
Contracts. Great-West is registered with the Securities and Exchange
Commission under the Securities and Exchange Act of 1934 as a broker-dealer
and is a member of the National Association of Securities Dealers, Inc.
("NASD"). Applications for the Group Contracts will be solicited by
duly-licensed insurance agents of Great-West, as well as by independent
registered insurance brokers who must also be NASD-registered broker-dealers
or representatives thereof.
The maximum commission as a percentage of the Contributions made under
a Group Contract payable to Great-West agents, independent registered
insurance brokers and other registered broker-dealers is 8.0%. An expense
allowance that will not exceed 40% of the maximum commission paid may also
be
paid.
Additionally, effective August 1, 1987, a maximum of 1% of Contributions
may also be paid as a persistency bonus to qualifying brokers.
RETURN PRIVILEGE
Within 15 days after a Participant Certificate under a Section 403(b)
retirement program is first mailed, it may be canceled for any reason by
delivering or mailing it together with a Request to cancel to GWL&A's
Administrative Offices or to an authorized agent of GWL&A. Upon cancellation,
GWL&A will refund all Contributions. No Contingent Deferred Sales Charge or
other charge will be deducted.
STATE REGULATION
As a life insurance company organized and operated under Colorado law,
GWL&A is subject to provisions governing such companies and to regulation by
the Colorado Commissioner of Insurance.
GWL&A's books and accounts are subject to review and examination by
the
Colorado Insurance Department at all times and a full examination of its
operations is conducted by the National Association of Insurance
Commissioners ("NAIC") at least once every three years.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT
PROGRAM
Section 36.105 of the Teacher Retirement System of Texas permits
Participants in the Texas Optional Retirement Program ("ORP") to redeem their
interest in a variable annuity contract issued under the ORP only upon
termination of employment in the Texas public institutions of higher
education, retirement or death. Accordingly, a Participant in the ORP will be
required to obtain a certificate of termination from his/her employer before
he/she can redeem his/her Participant Annuity Account.
REPORTS
As presently required by the 1940 Act and regulations
promulgated
thereunder, all Participants will be furnished, at least semi-annually, with
reports containing such information as may be required under the 1940 Act or
by any other applicable law or regulation. In addition, all Participants will
be furnished not less frequently than annually a with statement of the
Participant Annuity Account Value established in his/her name.
LEGAL PROCEEDINGS
The Series Account is not engaged in any litigation. GWL&A is not
involved in any litigation which would have material adverse effect on the
ability of GWL&A to perform its contract with the Series Account.
LEGAL MATTERS
The organization of GWL&A, its authority to issue variable annuity
contracts and the validity of the Group Contract have been passed upon by
R.B. Lurie, Vice-President, Counsel and Associate Secretary. Certain legal
matters relating to the Federal securities laws have been passed upon for
GWL&A by Jorden Burt Berenson & Johnson, LLP.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Group Contracts offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and amendments thereto
and exhibits filed as a part thereof, to all of which reference is hereby
made for further information concerning the Series Account, GWL&A and the
Group Contracts. Statements contained in this Prospectus as to the content of
Group Contracts and other legal instruments are summaries. For a complete
statement of the terms thereof reference is made to such instruments as
filed.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific
information and financial statements relating to the Series Account and
GWL&A. The Table of Contents of the Statement of Additional Information is
set forth below:
1. Custodian and Independent Auditors
2. Underwriter
3. Calculation of Performance Date
4. Financial Statements
Inquiries and requests for a Statement of Additional Information should
be directed to GWL&A in writing at 8515 E. Orchard Road, Englewood,
Colorado
80111, or by telephoning GWL&A at (800) 468-8661 (U.S.) or (303)
689-3360
(Englewood).
FUTUREFUNDS SERIES ACCOUNT
Of
Great-West Life & Annuity Insurance Company
GROUP VARIABLE ANNUITY CONTRACTS
Distributed by
The Great-West Life Assurance Company
8515 East Orchard Road, Englewood, Colorado 80111
(800) 468-8661 (U.S.) (303) 689-3360 (Englewood)
The group variable annuity contracts described in this prospectus
("Group Contracts") are designed and offered to provide retirement programs
that qualify for special federal income tax treatment for employees of
certain organizations. The Group Contracts may be issued in connection with
Contributions made by:
employers or employee organizations (such as non-profit entities defined
in Section 501(c) of the Internal Revenue Code of 1986, as amended ("Code"),
and governmental entities defined in Code Section 414(d)) to purchase
annuities for their employees under pension or profit-sharing plans described
in Section 401(a) of the Code,
employers or employee organizations to purchase annuities for their
employees under cash or deferred profit sharing plans described in Section
401(k) of the Code, state educational organizations and certain tax-exempt
organizations to purchase annuities for their employees under Section 403(b)
of the Code, and
certain state and local governmental entities and, for years beginning
after 1986, other tax-exempt organizations to purchase annuities for their
employees under a deferred compensation plan described in Section 457 of the
Code.
The Group Contracts are issued by Great-West Life & Annuity Insurance
Company ("GWL&A"). The Great-West Life Assurance Company ("Great-West")
is
the principal underwriter and distributor of the Group Contracts. The owner
of a Group Contract will be the employer, or may also be certain employer
associations or employee associations for contracts issued under Section
401(a), Section 401(k) or Section 403(b) retirement programs. Contributions
are made by the employer for employees desiring coverage under a Group
Contract. The amount of the Contributions will be determined by the employer.
A separate record (a "Participant Annuity Account") will be established in
the name of each participating employee (a "Participant") to reflect the
dollar values of Contributions made in each Participant's name. The Group
Contracts provide for a deferred annuity to begin at a future pre-selected
date (the "Annuity Commencement Date"). The Group Contracts also provide for
a death benefit. An initial Contribution under a Section 403(b) retirement
program may be canceled and returned at the employee's request within fifteen
days of the date of the Contribution.
Prior to the Annuity Commencement Date, the Contributions can
accumulate
on a variable basis, guaranteed basis, or a combination of both. To
accumulate on a variable basis, Contributions will be allocated to the
FUTUREFUNDS SERIES ACCOUNT (the "Series Account"), a segregated
investment
account of GWL&A. The value of the Contributions prior to the Annuity
Commencement Date and thus the amount accumulated to provide annuity
payments
will depend upon the investment performance of the Series Account.
The amount of annuity payments may also be variable based upon the
investment experience of the Series Account, or may be fixed without regard
to such experience, or may be a combination of both. The Series Account
currently has seventeen Investment Divisions available for allocation of
Contributions. Thirteen of the Investment Divisions invest in shares of the
portfolios of Maxim Series Fund Inc. ("Maxim"), a series, open-end management
investment company described beginning on page 2.
THIS PROSPECTUS IS ACCOMPANIED BY CURRENT PROSPECTUSES
FOR MAXIM
SERIES FUND,
INC., TCI GROWTH AND TCI BALANCED, FIDELITY VIP GROWTH AND
FIDELITY
VIP II
ASSET MANAGER PORTFOLIOS. THESE PROSPECTUSES PROVIDE
INFORMATION
A
PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING AND
SHOULD BE
KEPT FOR
FUTURE REFERENCE. ADDITIONAL INFORMATION ABOUT THE
GROUP
CONTRACTS HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN A
STATEMENT
OF
ADDITIONAL INFORMATION, DATED APRIL 30, 1996,
WHICH IS
INCORPORATED
HEREIN BY REFERENCE. THE STATEMENT OF ADDITIONAL
INFORMATION, THE
TABLE OF
CONTENTS OF WHICH IS SET FORTH ON THE LAST PAGE
OF THIS
PROSPECTUS, IS
AVAILABLE WITHOUT CHARGE UPON REQUEST BY WRITING OR
TELEPHONING
GWL&A AT
THE ADDRESS OR TELEPHONE NUMBER SET FORTH
ABOVE . THESE
SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE
COMMISSION
NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF
THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL
OFFENSE.
The date of this prospectus is April 30, 1996
the Money Market Portfolio, seeks preservation of capital, liquidity and
the highest possible current income consistent with the foregoing objectives
through investments in short-term money market securities. Shares of the
Money Market Portfolio are neither insured nor guaranteed by the U.S.
Government. Further, there is no assurance that the Portfolio will be able
to maintain a stable net asset value of $1.00 per share.
the Bond Portfolio, seeks to achieve maximum total return consistent
with the preservation of capital, through investment in an actively managed
portfolio of debt securities.
the Stock Index Portfolio, seeks to provide investment results, before
fees, that correspond to the total return of the S&P 500 Index and the S&P
MidCap Index, weighted according to their respective pro-rata shares of the
market;
the U.S. Government Securities Portfolio, seeks the highest level of
return consistent with preservation of capital and substantial credit
protection and seeks to achieve this objective by investing in
mortgage-related securities issued or guaranteed by an agency or
instrumentality of the U.S. Government, other U.S. agency and instrumentality
obligations, and in U.S. Treasury obligations;
the Small-Cap Index Portfolio, seeks to provide investment results,
before fees, that correspond to the total return of the Russell 2000 Index.
The Russell 2000 Index was developed in 1979 by the Frank Russell Company
to
track the stock market performance of a broadly diversified group of small
capitalization domestic stocks (currently those stocks with capitalization of
below $440 million);
the Mid-Cap Portfolio (Growth Fund I Investment Division), seeks to
provide long-term growth of capital through investment of at least 65% of
the Portfolio's assets in medium sized companies.
the Total Return Portfolio, seeks to obtain the highest possible total
return, a combination of income and capital appreciation, consistent with
reasonable risk;
the International Equity Portfolio, seeks to achieve long term capital
growth through a flexible policy of investing in stocks and debt obligations
of companies and governments outside the United States. Any income realized
will be incidental.
the Corporate Bond Portfolio, which seeks high total
investment
return by investing primarily in debt securities (including
convertibles), although up to 20% of its assets, at the time of
acquisition, may be invested in preferred stocks.
the Small-Cap Value Portfolio (Ariel Value Investment Division), seeks
to achieve long-term capital appreciation by investing primarily in common
stocks, although the Portfolio may also invest in other securities, including
restricted and preferred stocks.
the Maxim INVESCO Small-Cap Growth
Portfolio, seeks to
achieve long-term capital growth by investing its assets principally in a
diversified group of equity securities of emerging growth companies with
market capitalizations of $1 billion or less at the time of initial
purchase.
the Maxim INVESCO ADR Portfolio, seeks to achieve a high
total
return on investment through capital appreciation and current income, while
reducing risk through diversification by investing substantially all its
assets in foreign securities that are issued in the form of American
Depository Receipts ("ADRs") or foreign stocks that are registered with the
Securities and Exchange Commission and traded in the U.S.
the Maxim T. Rowe Price Equity/Income Portfolio, seeks to
provide
substantial dividend income and also capital appreciation by investing
primarily in dividend-paying common stocks of established companies.
The Series Account also has two Investment Divisions which invest in
shares of TCI Portfolios, Inc. ("TCI"), a diversified, series, open-end
management investment company which is a member of the Twentieth Century
family of mutual funds. These Investment Divisions invest in shares of one of
the following portfolios of TCI:
the TCI Growth Fund, which seeks capital growth by investment in
common
stocks (including securities convertible to common stocks) and other
securities that meet certain fundamental and technical standards and, in the
opinion of TCI's management, have better than average potential for
appreciation; and
the TCI Balanced Fund, which seeks capital growth and current income,
and it is the intention of TCI's management to maintain approximately 60% of
the assets of the TCI Balanced Fund in common stocks considered by TCI
management to have better-than-average prospects for appreciation and the
remaining assets in bonds and other fixed income securities.
The Series Account has two Investment Divisions which invest in shares
of Fidelity Variable Insurance Products Fund ("Fidelity VIP"), a diversified
management investment company offering insurance companies a selection of
investment vehicles for variable annuity insurance contracts. These
Investment Divisions invest in shares of one of the following portfolios of
Fidelity VIP:
the Fidelity VIP Growth Portfolio, seeks capital appreciation. The
Portfolio normally purchases common stocks, although its investments are not
restricted to any one type of security. Capital appreciation may also be
found in other types of securities including bonds and preferred stocks; and
the Fidelity VIP II Asset Manager Portfolio, seeks high total return
with reduced risk over the long-term by allocating its assets among domestic
and foreign stocks, bonds and short-term fixed-income instruments.
If the underlying plan document or program of any other Group
Policyholder does not permit investments in any Investment Division of the
Series Account, GWL&A shall restrict the availability of such Investment
Division in compliance with the Group Policyholder's request.
TABLE OF CONTENTS
Page
Fee Table . 5
Examples 7
Glossary of Special Terms 9
Questions and Answers About the Series Account Variable Annuity
11
Performance Related Information 14
Great-West Life & Annuity Insurance Company
14
FutureFunds Series Account 15
The Group Contracts 15
Accumulation Period 17
Investments of the Series Account 23
Administrative Charges, Risk Premiums and Other Deductions
26
Annuity Options 30
Federal Tax Consequences 33
Voting Rights 38
Distribution of the Group Contracts 38
Return Privilege 39
State Regulation 39
Restrictions Under the Texas Optional Retirement
Program
39
Reports 39
Legal Proceedings 39
Legal Matters 39
Registration Statement 39
Statement of Additional Information 40
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchases (as a percentage of purchase
payments) None
Deferred Sales Load (as a percentage of amount
distributed)
6% maximum
See footnote (1), page 7
Distribution Fees (as a percentage of purchase
payments)
None
Exchange Fee None
TOTAL Contract Owner Transaction Expenses (as a percentage of purchase
payments) 6%
Annual Contract Fee $30 maximum
See footnote (2), page 7
Separate Account Annual Expenses (as a percentage of average account value)
Mortality Risk 0.52%
Expense Risk 0.13%
TOTAL Separate Account Annual Expenses
0 .65%
Maxim Series Fund, Inc. Annual Expenses (as a percentage of Maxim Series
Fund, Inc. average net assets)
Money
Market
Bond Stock
Index U.S. Gov't.
Securities Small-Cap
Index
Management Fees .46% .60%
.60%
.60%
.60%
Other Expenses None None None
None
None
Total Maxim Series Fund, Inc Annual Expenses
.46%
.60%
.60%
.60%
.60%
International
Equity Total
Return Corporate
Bond
Mid-Cap
(Growth Fund I)
Management Fees1.00%.60%.90%.95%
Other Expenses.50%NoneNone.15%
Total Maxim Series Fund, Inc Annual Expenses
1.50%
.60%
.90%
1.10%
Maxim T. Rowe Price Equity/Income
Small-Cap Value
(Ariel Value) Maxim INVESCO
ADR Maxim INVESCO
Small-Cap Growth
Management Fees.80%1.00%1.00%.95%
Other Expenses.15%.35% .30% .15%
Total Maxim Series Fund, Inc Annual Expenses
.95%
1.35%
1.30%
1.10%
FEE TABLE (cont'd)
TCI Portfolios Annual Expenses (as a percentage of TCI Portfolios average net
assets)
TCI GrowthTCI Balanced
Management Fees1.00%1.00%
Other ExpensesNoneNone
TOTAL TCI Portfolios
Annual Expenses
1.00%
1.00%
Fidelity VIP Portfolios Annual Expenses (as a percentage of Fidelity VIP
Portfolios average net assets)
Fidelity VIP GrowthFidelity VIP II Asset Manager
Management Fees .61%.71%
Other Expenses.09%.08%
TOTAL Fidelity VIP Portfolio
Annual Expenses
.70%
.79%
EXAMPLES
Example 1:
If you do not take a distribution from your contract, or if you annuitize at
the end of the applicable time period you would pay the following expenses on
a $1,000 investment, assuming a 5% annual return on assets:
1 Year3 Year5 Year10 Year
Money Market Investment Division$12.21$39.92$72.51$179.83
Bond Investment Division$13.66$44.61
$80.91
$199.98
Stock Index Investment Division $13.66
$44.61
$80.91 $199.98
U.S. Government Securities
Investment Division
$13.66
$44.61
$80.91
$199.98
Small-Cap Index
Investment Division
$13.66
$44.61
$80.91
$199.98
Total Return Investment Division $13.66
$44.61
$80.91 $199.98
Growth Fund I Investment Division
$18.83
$61.18
$110.42 $269.66
International Equity
Investment Division
$22.95
$74.25
$133.50
$322.95
Corporate Bond Investment Division $16.77
$54.58
$98.70 $242.20
Ariel Value Investment Division
$21.41
$69.37
$124.90 $303.22
INVESCO ADR Investment Division $22.95
$74.25
$133.50 $322.95
INVESCO Small-Cap Growth
Investment Division
$18.83
$61.18
$110.42
$269.66
T. Rowe Price Equity/Income
Investment Division
$17.28
$56.23
$101.64
$249.12
TCI Growth Investment Division $17.80
$57.88
$104.58 $256.00
TCI Balanced Investment Division $17.80
$57.88
$104.58 $256.00
Fidelity VIP Growth
Investment Division
$14.70
$47.94
$86.87
$214.19
Fidelity VIP II Asset Manager
Investment Division
$15.63
$50.93
$92.21
$226.87
The above Examples should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown,
subject to the guarantees in the Group Contracts.
The purpose of the table shown above is to assist the Group Policyholder in
understanding the various costs and expenses that a Group Policyholder will
bear directly or indirectly. (See "Administrative Charges, Risk Premiums
and Other Deductions" for more information pertaining to these costs and
expenses.)
Please note that while GWL&A currently intends to pay any Premium Tax levied
by any governmental entity, GWL&A reserves the right to, in the future and
with prior notice to Participants, deduct the Premium Tax, if any, from
Participant Annuity Account Values. (Please see "Administrative Charges,
Risk Premiums and Other Deductions" for more information.)
(1) The Securities and Exchange Commission requires that the deferred sales
load shown in the fee table and the examples be the maximum contingent
deferred sales load assessed. This charge does, however, vary by Group
Policyholder. Please consult with your employer or Great-West representative
for the fee that applies to your contract. (See "Administrative Charges,
Risk Premiums and Other Deductions: Contingent Deferred Sales Charge" for
more information.)
(2) The Securities and Exchange Commission requires that the annual contract
fee shown in the fee table be reflective of the contract fees collected
during the year. This charge is assumed to remain the same in each period
listed but does vary by Group Policyholder. Please consult with your employer
or Great-West representative for the fee that applies to your contract. (See
"Administrative Charges, Risk Premiums and Other Deductions: Contract
Maintenance Charge.")
EXAMPLES (cont'd)
Example 2:
If you take a distribution in whole from your contract at the end of
the applicable time period you would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets:
1 Year 3 Year
5 Year
10 Year
Money Market Investment Division
$72.21
$99.92
$132.51 $179.83
Bond Investment Division $73.66
$104.61
$140.91
$199.98
Stock Index Investment Division
$73.66
$104.61
$140.91 $199.98
U.S. Government Securities
Investment Division
$73.66
$104.61
$140.91
$199.98
Small-Cap Index
Investment Division
$73.66
$104.61
$140.91
$199.98
Total Return Investment Division
$73.66
$104.61
$140.91 $199.98
Growth Fund I Investment Division
$78.83
$121.18
$170.42 $269.66
International Equity
Investment Division
$82.95
$134.25
$193.50
$322.95
Corporate Bond Investment Division
$76.77
$114.58
$158.70 $242.20
Ariel Value Investment Division
$81.41
$129.37
$184.90 $303.22
INVESCO ADR Investment Division
$82.95
$134.25
$193.50 $322.95
INVESCO Small-Cap Growth
Investment Division
$78.83
$121.18
$170.42
$269.66
T. Rowe Price Equity/Income
Investment Division
$77.28
$116.23
$161.64
$249.12
TCI Growth Investment Division
$77.80
$117.88
$164.58 $256.00
TCI Balanced Investment Division
$77.80
$117.88
$164.58 $256.00
Fidelity VIP Growth
Investment Division
$74.70
$107.94
$146.87
$214.19
Fidelity VIP II Asset Manager
Investment Division
$75.63
$110.93
$152.21
$226.87
The above Examples should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown,
subject to the guarantees in the Group Contracts.
The purpose of the table shown above is to assist the Group Policyholder in
understanding the various costs and expenses that a Group Policyholder will
bear directly or indirectly. (See "Administrative Charges, Risk Premiums
and Other Deductions" for more information pertaining to these costs and
expenses.)
Please note that while GWL&A currently intends to pay any Premium Tax levied
by any governmental entity, GWL&A reserves the right to, in the future and
with prior notice to Participants, deduct the Premium Tax, if any, from
Participant Annuity Account Values. (Please see "Administrative Charges,
Risk Premiums and Other Deductions" for more information.)
(1) The Securities and Exchange Commission requires that the deferred sales
load shown in the fee table and the examples be the maximum contingent
deferred sales load assessed. This charge does, however, vary by Group
Policyholder. Please consult with your employer or Great-West representative
for the fee that applies to your contract. (See "Administrative Charges,
Risk Premiums and Other Deductions: Contingent Deferred Sales Charge" for
more information.)
(2) The Securities and Exchange Commission requires that the annual contract
fee shown in the fee table be reflective of the contract fees collected
during the year. This charge is assumed to remain the same in each period
listed but does vary by Group Policyholder. Please consult with your employer
or Great-West representative for the fee that applies to your contract. (See
"Administrative Charges, Risk Premiums and Other Deductions: Contract
Maintenance Charge.")
GLOSSARY OF SPECIAL TERMS
As used in this prospectus, the terms have the indicated meanings:
Accumulation Period: The period during which the Participant is covered under
this Group Contract prior to the Participant's Annuity Commencement Date.
Accumulation Unit: An accounting measure used to determine the Variable
Account Value before the Annuity Commencement Date.
Administrative Offices: The Administrative Offices of GWL&A are located at
8515 E. Orchard Rd., Englewood, Colorado 80111.
Annuity Commencement Date: The date on which annuity payments commence
under
an Annuity Option.
Annuity Unit: An accounting measure used to determine the dollar value of any
variable dollar annuity payment after the first payment.
Contribution(s): The total dollar amount(s) paid to purchase an annuity for
a Participant.
Fidelity VIP: Fidelity Variable Insurance Products Fund, a registered
management investment company in which assets of the Series Account may be
invested.
Fixed Annuity: An annuity with payments which remain fixed throughout the
payment period and which do not reflect the investment experience of a
separate account.
Group Contract: An agreement between GWL&A and the Group Policyholder
providing a fixed and/or variable annuity.
Investment Division: The Series Account is divided into investment divisions,
one for each designated Investment Portfolio maintained by Maxim, TCI or
Fidelity VIP and made available to the Series Account.
Investment Portfolio: The securities held in a portfolio of Maxim, TCI or
Fidelity VIP.
Maxim: Maxim Series Fund, Inc., a registered management investment company
in
which assets of the Series Account may be invested.
Participant: An employee who is covered under a Group Contract.
Participant Annuity Account: A separate record established in the name of
each Participant which reflects the total of the Participant's Guaranteed and
Variable Account Values.
Participant Annuity Account Value: The sum of the Participant's Guaranteed
and Variable Account Values.
Premium Tax: The amount of tax, if any, charged by a state or other
government authority on premiums.
Request: Any request in a form satisfactory to GWL&A and received by
GWL&A
at its Administrative Office, as required by any provision of the Group
Contract, and at other times as required by GWL&A.
Series Account: The segregated investment account of Great-West Life &
Annuity Insurance Company called "FUTUREFUNDS Series Account" existing
under
Colorado law and registered as a unit investment trust under the Investment
Company Act of 1940, as amended.
TCI: TCI Portfolios, Inc., a registered management investment company in
which assets of the Series Account may be invested.
Transfer: The transfers of all or a portion of a Participant Annuity Account
Value between and among the Variable and/or Guaranteed Sub-Accounts.
Transfer to Other Companies: The transfer of all or a portion of a
Participant Annuity Account Value to another company.
Valuation Date: The date on which the net asset value of Maxim, TCI, or
Fidelity VIP is determined, and the date on which any Contribution or
Request from the Participant/Group Policyholder will be processed by GWL&A.
A unit value is calculated once daily Monday through Friday except on
holidays on which the New York Stock Exchange is closed. Contributions and
Requests received after 4:00 p.m. EST/EDT will be deemed to have been
received on the next business day. On the day after Thanksgiving, however,
transactions submitted other than by automated voice response unit or by
computer link will not be processed.
Valuation Period: The period between the ending of two successive Valuation
Dates.
Variable Account: The account established under this Group Contract
providing for Variable Sub-Accounts.
Variable Account Value: The sum of the values of the Variable Sub-Accounts
credited to a Participant Annuity Account.
Variable Annuity: An annuity providing for payments, the amount of which will
vary in accordance with the changing values of securities held in the Series
Account.
Variable Sub-Account: A subdivision of the Variable Account containing the
value credited to a Participant from an Investment Division.
QUESTIONS AND ANSWERS ABOUT THE SERIES ACCOUNT VARIABLE
ANNUITY
What is the objective of the Group Contracts offered in this Prospectus?
The objective of the Group Contracts is to provide annuity retirement
programs that qualify for special federal income tax treatment for employees.
Under Section 401(a) plans (including plans sponsored by non-profit and
governmental entities) and under Section 401(k) plans, any employer and
certain employee organizations, such as labor unions, may purchase a Group
Contract. Employers eligible to purchase a Group Contract under Section
403(b) retirement programs include state educational institutions and certain
tax-exempt organizations that meet the requirements of Section 501(c)(3) of
the Code. In addition, under Section 403(b) programs, (i) certain
associations of state educational employees and associations of employees of
tax-exempt organizations may enter into a Group Contract for the benefit of
their members; and (ii) certain associations of state educational employers
and associations of tax-exempt employers may also enter into a Group Contract
for the benefit of employees or their employer members. Under Section 457
retirement programs of the Code, certain state and local governmental
entities and, for years beginning after 1986, other tax-exempt organizations
described in Section 457 are also eligible. (See "The Group Contracts;
Eligible Purchasers").
How can an employee obtain coverage under a Group Contract?
After purchasing a Group Contract, the employer will submit to GWL&A
an
application for any employee who desires coverage under the contract and is
eligible to participate in the employer's retirement program. An employee
should consult his/her employer for information concerning eligibility.
How is the amount of Contributions determined?
For Group Contracts issued under a Section 401(a) retirement program,
the employer or employee organization will make Contributions pursuant to its
underlying Federal or State qualified plan.
For Group Contracts issued under a Section 401(k) retirement program,
the employer will make Contributions pursuant to an underlying Section 401(k)
plan and either a salary reduction agreement with its employees or a cash or
deferred agreement.
For Group Contracts issued under an employer's Section 403(b) retirement
program, the employer will make Contributions for its employees pursuant to
either a salary reduction agreement with those employees or an agreement to
forego a salary increase. In each case, the employee will decide his/her own
level and number of Contributions to be made under a Group Contract, except
with respect to employer-sponsored plans, under which the employer will make
Contributions pursuant to an underlying retirement plan.
For Group Contracts issued under a Section 457 retirement program, the
employer will make Contributions pursuant to an underlying deferred
compensation plan.
The employer will report the amount paid as Contributions to GWL&A.
There is no minimum amount or number of Contributions.
How are Contributions allocated?
Contributions are allocated to the Series Account to accumulate on a
variable basis, to the Guaranteed Account to accumulate at a guaranteed rate
of return, or combination of both. The assets of the Series Account are
invested at net asset value (no sales charge) in shares of Maxim, TCI or
Fidelity VIP. See "Investments of the Series Account" for the
investment objectives and policies of those portfolios of Maxim, TCI and
Fidelity VIP which are available for Allocation of Contributions to the
Series Account. They are also described in full in the accompanying
prospectus for Maxim, TCI and Fidelity VIP.
How will a covered employee know the value of the Contribution made in
his/her name?
A Participant Annuity Account will be established in the name of each
Participant to reflect the dollar value of Contributions made in each
Participant's name. Participants will be furnished not less frequently than
annually a statement of the Participant Annuity Account Value established in
his/her name.
What elections are permitted under the Group Contracts?
Under the Group Contracts issued pursuant to Section 401(a) or Section
401(k) retirement programs, all Contributions are held for the exclusive
benefit of the Participants to the extent vested. All elections permitted
under the Group Contracts are made directly by the employer to GWL&A. The
underlying pension or profit sharing plan may, however, permit the
Participants to make certain of those elections indirectly through the
employer.
Under the Group Contracts issued pursuant to Section 403(b) retirement
programs, all Contributions are vested in the Participant when made, subject
to any limitations in the underlying retirement plan, and the Participant
makes all the elections permitted under the contract, except with respect to
employer-sponsored plans, under which elections are made directly by the
employer to GWL&A. The underlying retirement plan may, however, permit the
Participants to make certain of these elections indirectly through the
employer.
Under the Group Contracts issued pursuant to Section 457 retirement
programs, all Contributions remain property of the employer until made
available to a Participant by the employer's underlying deferred compensation
plan. All elections permitted under these Group Contracts are made directly
by the employer to GWL&A. An underlying deferred compensation plan may,
however, permit the Participants to make certain of those elections
indirectly through the employer.
What are the charges to Participants under the Group Contracts?
GWL&A deducts a "Contract Maintenance Charge" for administrative
expenses of not more than $30.00 annually from each Participant Annuity
Account Value. The Contract Maintenance Charge on Section 403(b) Group
Contracts will be waived for an initial period of no less than 12 months and
up to 15 months, depending on the Participant's effective date. There may
also be a charge associated with the total or partial distribution from a
Participant Annuity Account prior to the Annuity Commencement Date.
The cumulative total of all Contingent Deferred Sales Charges applied to
any Participant Annuity Account will not exceed 6% of all Contributions made
within 72 months prior to the date of any distribution in whole or in part,
or, with respect to certain Sections 401(a) or 401(k) and 457 retirement
programs, 5% of the amount distributed. Participants in some programs will
not be assessed a Contingent Deferred Sales Charge. (See "Administrative
Charges, Risk Premiums and Other Deductions.") Certain redeemability
restrictions apply to Group Contracts issued under the Texas Optional
Retirement Program. (See "Restrictions Under the Texas Optional Retirement
Program.") There may also be redeemability restrictions applied to
Participants in Section 403(b) Group Contracts. (See " Federal Tax
Consequences: Section 403(b) Retirement Programs.") Upon a total or
partial distribution, a penalty tax may be imposed pursuant to Section 72(t)
of the Code. (See "Federal Tax Consequences.")
GWL&A also deducts from the net asset value of the Series Account an
amount, computed daily, equal to an annual rate of 0 .65% for
mortality
and expense risk guarantees.
GWL&A presently intends to pay any applicable state premium taxes as a
result of the existence of the Participant Annuity Accounts. Applicable state
premium taxes range from 0 to 3.50% of the Contributions or the
Participant Annuity Account Value.
Maxim, TCI, and Fidelity VIP incur a charge against the net asset value
for Investment Advisory Services and may incur other expenses.
What are the distribution rights under the Group Contracts?
A distribution in whole or in part may be taken from the Participant
Annuity Account up to 30 days prior to the Annuity Commencement Date, subject
to any limitations in the underlying retirement plan and subject to a
Contingent Deferred Sales Charge. (See "Accumulation Period: Total and
Partial Distribution" for a description of distribution procedures.) Under
certain circumstances, a Contingent Deferred Sales Charge will not be charged
to Participants who have participated for 15 or more years in the FutureFunds
Group Annuity Contract. (See "Administrative Charges, Risk Premiums and
Other
Deductions.")
Can Contributions be Transferred between the Variable and Fixed Sub-Accounts
Yes. All or a portion of a Participant Annuity Account Value held in any
of the Variable Sub-Accounts or Daily Interest Guarantee Sub-Account may be
Transferred at any time prior to the Annuity Commencement Date by written or
telephone request. Transfers of all or a portion of a Participant Annuity
Account Value held in any of the Guaranteed Certificate Funds or
Guaranteed Fixed Funds may be made only at Certificate maturity. (See
" Accumulation Period: Transfers Between Variable and Guaranteed
Sub-Accounts.")
What Annuity Options are available?
The Group Contracts provide for several annuity options payable on a
variable, fixed, or combination basis. An election of any annuity option(s)
must be made at least 30 days prior to the Participant's Annuity Commencement
Date. If no election is made, annuity payments will begin automatically on
the Annuity Commencement Date under an option providing for a life annuity
with 120 monthly payments certain. (See "Annuity Options.")
What are the voting rights under the Group Contracts?
Participants under Section 403(b) retirement programs and the employer
under Section 401(a), Section 401(k) and Section 457 retirement programs will
be entitled to instruct GWL&A to vote shares of Maxim, TCI or Fidelity VIP
held for their Participant Annuity Accounts. (See "Voting Rights.")
Is there a short-term cancellation right?
Yes. Within fifteen (15) days after a Participant Certificate is first
mailed, it may be canceled by the Participant for any reason by delivering or
mailing it, along with a Request to cancel, to GWL&A's Administrative Offices
or to an authorized agent of GWL&A. This cancellation right only applies to
Group Contracts issued under Section 403(b) retirement programs. (See "Return
Privilege.")
How will the Group Contracts be distributed?
The Group Contracts will be distributed through Great-West and will be
sold by duly licensed insurance agents of Great-West, independent insurance
brokers, and various other registered broker-dealers. (See "Distribution of
the Group Contracts.")
PERFORMANCE RELATED INFORMATION
From time to time, the Series Account may advertise certain performance
related information concerning its Investment Divisions. Performance
information about an Investment Division is based on the
Investment
Division's historical performance only and is not intended to indicate
future performance.
The Series Account may include total return in advertisements or other sales
material regarding the Money Market , Bond, Stock Index, U.S.
Government Securities, TCI Growth, TCI Balanced, Small-Cap Index,
Mid-Cap
(Growth Fund I), International Equity, Total Return, Corporate Bond,
Small-Cap Value (Ariel Value), Maxim T. Rowe Price
Equity/Income,
Maxim INVESCO ADR, Maxim INVESCO Small-Cap
Growth,
Fidelity VIP
Growth and the Fidelity VIP II Asset Manager Investment Divisions. When the
Series Account advertises the total return of one of these portfolios, it
will be calculated for one year, five years, and ten years or some other
relevant period if the portfolio has not been in existence for at least ten
years. Total return is measured by comparing the value of an investment in
the portfolio at the beginning of the relevant period to the value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions).
For the Money Market Investment Division, "yield" refers to the income
generated by an investment in the Money Market Investment Division over a
stated seven-day period. This income is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to
be generated each week over a 52-week period and is shown as a percentage of
the investment. The "effective yield" of the Money Market Investment Division
is calculated similarly but, when annualized, the income earned by an
investment in the Money Market Investment Division is assumed to be
reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
The yield and effective yield calculations for the Money Market Investment
Division includes all recurring charges under the Group Contracts (but
does not include the Contingent Deferred Sales Charge), and is lower than
yield and effective yield for Maxim which does not have comparable
charges. Total return for the Investment Divisions includes all
charges under the Group Contracts, including any Contingent Deferred Sales
Charge, and likewise, is lower than total return at the Maxim, TCI or
Fidelity VIP level, which has no comparable charges.
For more complete information on the method used to calculate yields,
effective yields, and total return of the respective Investment Divisions,
see the "Statement of Additional Information".
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
GWL&A is a stock life insurance company originally organized under the laws
of the state of Kansas as the National Interment Association. Its name was
changed to Ranger National Life Insurance Company in 1963 and to Insuramerica
Corporation prior to changing to its current name in February of 1982. In
September of 1990, GWL&A redomesticated and is now organized under the laws
of the state of Colorado.
GWL&A is authorized to engage in the sale of life insurance, accident and
health insurance and annuities. It is qualified to do business in Puerto
Rico, the District of Columbia and 49 states in the United States.
GWL&A is a wholly-owned subsidiary of The Great-West Life Assurance
Company. The Great-West Life Assurance Company is a subsidiary of
Great-West
Lifeco Inc., a holding company. Great-West Lifeco Inc. is in turn a
subsidiary of Power Financial Corporation, a financial services company.
Power Corporation of Canada, a holding and management company, has voting
control of Power Financial Corporation. Mr. Paul Desmarais, through a
group of private holding companies, which he controls, has voting control
of Power Corporation of Canada.
GWL&A has primary responsibility for administration of the Group
Contracts and the Series Account. Its Administrative Offices are located at
8515 E. Orchard Road, Englewood, Colorado 80111.
FUTUREFUNDS SERIES ACCOUNT (THE "SERIES ACCOUNT")
The Series Account was originally established by GWL&A under Kansas
law
on November 15, 1983. The Series Account now exists pursuant to Colorado law
as a result of the redomestication of GWL&A. The Series Account has been
registered with the Securities and Exchange Commission as a unit investment
trust pursuant to the provisions of the Investment Company Act of 1940, as
amended, and meets the definition of a "separate account" under the
federal securities laws. Such registration does not involve
supervision of the management of the Series Account or GWL&A by the
Securities and Exchange Commission.
The Series Account currently has seventeen Investment Divisions
available for allocation of Contributions. If, in the future, GWL&A
determines that marketing needs and investment conditions warrant, it may
establish additional Investment Divisions which will be made available to
existing Group Contract owners to the extent and on a basis to be determined
by GWL&A. Each Investment Division invests in shares of Maxim, TCI or
Fidelity VIP allocable to one of seventeen Investment Portfolios, each having
a specific investment objective. Maxim, TCI and Fidelity VIP also have other
portfolios which are not generally available for investment by the Series
Account.
GWL&A does not guarantee the investment performance of the Series
Account. The portion of the Participant Annuity Account Value attributable to
the Series Account and the amount of variable annuity payments depend on the
investment performance of Maxim, TCI and Fidelity VIP. Thus, the Participant
bears the full investment risk for all Contributions allocated to the Series
Account.
The Series Account is administered and accounted for as part of the
general business of GWL&A; but the income, capital gains, or capital losses
of each Variable Sub-Account are credited to or charged against the assets
held in that Variable Sub-Account in accordance with the terms of the Group
Contracts, without regard to other income, capital gains or capital losses of
any other Variable Sub-Account or arising out of any other business GWL&A
may
conduct. Under Colorado law, the assets of the Series Account are not
chargeable with liabilities arising out of any other business GWL&A may
conduct. Nevertheless, all obligations arising under the Group Contracts are
generally corporate obligations of GWL&A.
THE GROUP CONTRACTS
Eligible Purchasers
Section 401(a) Retirement Programs. Employers, including non-profit entities
defined in Code Section 501(c) and governmental entities defined in Code
Section 414(d) and Sections 3(32) and 4 of the Employment Retirement Income
Security Act of 1974 ("ERISA"), and certain employee organizations defined in
Sections 3(4) and 3(5) of ERISA, such as labor organizations, may purchase a
Group Contract.
Section 401(k) Retirement Programs. Any employer and certain employee
organizations defined in Sections 3(4) and 3(5) of ERISA, such as labor
organizations, may purchase a Group Contract.
Section 403(b) Retirement Programs. State educational institutions and
tax-exempt organizations under Section 501(c)(3) of the Code may purchase
Group Contracts. In addition, associations of state educational employees,
associations of state educational employers, associations of employees of
organizations that are tax-exempt under Section 501(c)(3) of the Code, and
associations of tax-exempt employers under Section 501(c)(3), may also
purchase Group Contracts. In order to be eligible, however, the association
must also meet the requirements of Sections 501(c)(3).
Section 457 Retirement Program. State governments, local governments, rural
electric cooperatives, political subdivisions, and agencies,
instrumentalities and certain affiliates of such entities may purchase the
Group Contracts. For years beginning after 1986, organizations (other than
a governmental unit) which are exempt from tax under the Code, and which
maintain a Section 457 Retirement Program, may also purchase the Group
Contracts.
Any of the organizations mentioned above wishing to purchase Group
Contracts must complete application forms which selling agents will forward
to GWL&A's Administrative Offices for acceptance. Where the purchaser is an
employee association, any employer of an association member employee can
obtain coverage by completing application forms and agreeing in writing to be
bound by the terms of the Group Contract. Likewise, where the purchaser is an
association of tax-exempt employers, any employer member can obtain coverage
by following the same procedures. GWL&A reserves the right to reject any
application.
Employee Coverage
The employer will submit to selling agents an application for any
employee who desires coverage under the Group Contract and is eligible to
participate in the employer's retirement program. GWL&A reserves the right to
reject any application. An employee should consult his/her employer for
information concerning eligibility.
Contributions
Section 401(a) Retirement Programs. Contributions will be made by the
employer or employee organization pursuant to the employer's or employee
organization's underlying pension or profit-sharing plan.
Section 401(k) Retirement Programs. Contributions will be made by the
employer pursuant to the employer's underlying profit sharing plan and the
Participant's election to execute a salary reduction agreement or a cash or
deferred agreement.
Section 403(b) Retirement Programs. The employer will make Contributions in
accordance with a salary reduction agreement with its employees or an
agreement to forego a salary increase, except with respect to
employer-sponsored plans under which the employer will make Contributions
pursuant to an underlying retirement plan.
Section 457 Retirement Programs. Contributions will be made by the employer
pursuant to the employer's underlying deferred compensation plan.
Under all retirement programs, the employer will report the amount paid as
Contributions on forms provided by GWL&A. Checks for Contributions should
be
made payable to the Great-West Life & Annuity Insurance Company. There is
no
minimum amount or number of Contributions and, for any Participant Annuity
Account, Contributions can be made until the Participant's Annuity
Commencement Date.
Participant Annuity Account
A Participant Annuity Account will be established in the name of each
Participant to reflect the dollar values of Contributions made in each
Participant's name. Participants will be furnished no less frequently than
annually with a statement of the Participant Annuity Account Value
established in his/her name.
Ownership
Section 401(a) Retirement Programs. The employer or employee organization
purchasing a Group Contract is the owner of the Contract. Employer
Contributions vest in accordance with the terms of the employer's or employee
organization's underlying plan. Any employee Contributions are immediately
vested in the Participant. Neither the employer, employee organization nor
the Participants can assign any interest in the Group Contract or the
Participant Annuity Account.
Section 401(k) Retirement Programs. The employer or employee organization
purchasing a Group Contract is the owner of the contract. All employer
Contributions credited to a Participant Annuity Account pursuant to the
Participant's election to execute a salary reduction agreement or a cash or
deferred agreement are vested in the Participant. Any matching employer
Contributions vest in accordance with the terms of the employer's underlying
plan. Neither the employer, employee organization nor the Participants can
assign any interest in the Group Contract or the Participant Annuity Account.
Section 403(b) Retirement Programs. The employer or association purchasing a
Group Contract is the owner of the contract for the benefit of the
Participants. Each Participant receives a Participant Certificate to evidence
his/her coverage under the Group Contract. All Contributions credited to a
Participant Annuity Account are vested in the Participant, subject to any
limitations in the underlying retirement plan. Interests in the Group
Contract or the Participant Annuity Accounts cannot be assigned by the
employer, association or the Participants.
Section 457 Retirement Programs. The employer is the owner of the Group
Contract. All Contributions made in the name of the Participants remain the
property of the employer and subject to the claims of the employer's general
creditors until made available to the Participant in accordance with the
terms of the employer's underlying deferred compensation plan. The employer
may assign or transfer a Group Contract to another person as permitted by
applicable law and only with the prior written consent of GWL&A, which
assumes no responsibility for the validity or effect of any assignment.
PAYMENTS OF ANY BENEFITS UNDER THE GROUP CONTRACT WILL
ONLY BE
MADE IF THEN
PERMITTED UNDER THE EMPLOYER'S DEFERRED COMPENSATION
PLAN AS
DETERMINED BY
THE EMPLOYER.
Elections Under the Group Contracts
The Group Contracts permit the election of the Annuity Commencement
Date, allocation of Contributions, Transfers, distributions in whole or in
part, and the election of annuity payment options. Under Section 403(b)
retirement programs (other than employer-sponsored plans), the Participants
make all the elections permitted under the Group Contracts. Under Section
401(a), Section 401(k), Section 457 and employer-sponsored 403(b) retirement
plans, all elections are made by the employer, or the employee organization.
The employer's underlying pension, profit sharing or deferred compensation
plan or Section 403(b) retirement plan may, however, permit the Participants
to make certain of those elections indirectly through the employer. A
Participant should consult his/her employer for information concerning
elections permitted under its profit sharing or deferred compensation plan.
Amendment of Group Contracts
Section 401(a), Section 401(k) and Section 457 Retirement Programs. The Group
Contracts may be modified at any time by written agreement between GWL&A
and
the employer, or the employee organization.
Section 403(b) Retirement Programs. The Group Contracts may be modified at
any time by written agreement between GWL&A and either the employer, if it
is
the owner of a Group Contract, or the association. No modification will,
however, affect the terms of the contract which are applicable to
Contributions paid prior to such modification without the written consent of
the Participants.
In addition, GWL&A reserves the right to amend the Group Contracts
without the consent of any person to meet the requirements of the Investment
Company Act of 1940 or other applicable federal or state laws or regulations,
or to modify the annuity rates for future Contributions. GWL&A will notify
the Participants of any such changes.
ACCUMULATION PERIOD
Allocation of Contributions
Initial Contributions will be applied after receipt at GWL&A's
Administrative Offices within two business days if the application form is
complete, or within five business days if the application form is incomplete.
If an incomplete application form is completed within five business days of
GWL&A's receipt, the initial Contribution will be applied within two business
days of the application's completion. If the initial Contribution cannot be
so applied, it will be returned at once unless the prospective purchaser
specifically consents to GWL&A retaining the purchase payment until the
application is made complete. Subsequent Contributions will be applied
pursuant to the allocation instructions in the completed application and will
be allocated upon receipt by GWL&A at its Administrative Offices on the day
received. There is no minimum amount or number of Contributions.
Contributions for a Participant are allocated to the Series Account to
accumulate on a variable basis, to the Guaranteed Account to accumulate on a
guaranteed rate of return, or a combination of both, according to the
instructions of the Participant under a Section 403(b) retirement program
(other than employer sponsored plans). The Participants make all the
elections permitted under the Group Contracts under Section 401(a), Section
401(k), Section 457, or employer-sponsored Section 403(b) retirement program
("Allocation Instructions"). Allocation Instructions may be changed
at
any time and will be effective the later of (1) the date specified on the
form and (2) the date the completed form is received and recorded by GWL&A
at
its Administrative Offices. GWL&A will allocate the Contributions based upon
the instructions in the application form. A change of Allocation Instructions
will be effective for Contributions which are received after GWL&A's receipt
and recording of the change.
Upon allocation to the appropriate Variable Sub-Account, the
Contributions are converted into Accumulation Units. The number of
Accumulation Units credited with respect to the initial Contribution under a
Participant Annuity Account is determined by dividing the amount allocated to
each Variable Sub-Account by the value of an Accumulation Unit for that
Variable Sub-Account on the day following GWL&A's receipt of the initial
Contribution and GWL&A's affirmative determination to establish that
Participant Annuity Account. The number of Accumulation Units with respect to
any additional Contribution to a Participant Annuity Account is determined by
dividing the amount allocated to the appropriate Variable Sub-Account by the
value of an Accumulation Unit for that Sub-Account on the day the
Contribution is accepted. Contributions received after 4:00 p.m., EST/EDT,
shall be deemed to have been received on the next Valuation Date. The number
of Accumulation Units so determined shall not be changed by any subsequent
change in the value of an Accumulation Unit, but the dollar value of an
Accumulation Unit will vary in amount depending upon the investment
experience of the applicable underlying mutual fund.
Dollar Cost Averaging
A Participant may, by Request, automatically Transfer amounts from
one Investment Division selected from among those being allowed under this
option to any of the other Investment Divisions at regular intervals. The
intervals between Transfers may be monthly, quarterly, semi-annually or
annually. The Transfer will be initiated one frequency period following the
date of the Request, and thereafter Transfers will continue on the same day
each interval unless terminated by you, or for other reasons as set forth in
the Contract. Transfers can only occur on dates the New York Stock Exchange
("NYSE") is open. If there are insufficient funds in the applicable
Investment Division on the date of Transfer, no Transfer will be made;
however, Dollar Cost Averaging will resume once there are sufficient funds in
the applicable Investment Division.
Automatic Transfers must meet the following conditions:
1. The minimum amount that can be Transferred out of the selected
Investment Division is $100 per month.
2. The Participant must specify the percentage or dollar amount
to be
Transferred, the Accumulation Unit Values will be determined on each Transfer
date.
Dollar Cost Averaging may be used to purchase Accumulation Units of the
Investment Divisions over a period of time so fewer Accumulation Units are
purchased when prices are greater and more Accumulation Units when prices are
lower. Participation in Dollar Cost Averaging does not, however, assure a
greater profit, nor will it prevent or necessarily alleviate losses in a
declining market. The Participant, by Request, may cease Dollar Cost
Averaging at any time. The Company reserves the right to modify, suspend or
terminate Dollar Cost Averaging at any time.
The Rebalancer Option
The Participant may, by Request, automatically Transfer among the
Investment Divisions on a periodic basis by electing the Rebalancer Option.
This option automatically reallocates the Variable Account Value to maintain
a particular allocation among Investment Divisions selected by the
Participant. The amounts allocated in each Investment Division will increase
or decrease at different rates depending on the investment experience of the
Investment Division.
The Participant may Request that the rebalancing occur one time only, in
which case the Transfer will take place after it has been received and
processed by the Company as provided in the Contract. Rebalancing may also
be set up on a quarterly, semi-annual or annual basis, in which case the
first Transfer will be initiated one frequency period following the date of
the Request. On the Transfer date for the specified Request, assets will be
automatically reallocated to the selected funds. Rebalancing will continue
on the same day each interval unless terminated by you, or for other reasons
as set forth in the Contract. Transfers can only occur on dates the NYSE is
open. In order to participate in the Rebalancer Option, the Participant's
entire Variable Account Value must be included.
The Participant must specify the percentage of Variable Account Value to
be allocated to each Investment Division and the frequency of rebalancing.
The Participant, by Request, may modify the allocations or cease the
Rebalancer Option at any time. Participation in the Rebalancer Option and
Dollar Cost Averaging at the same time is not allowed. Participation in the
Rebalancer Option does not assure a greater profit, nor will it prevent or
necessarily alleviate losses in a declining market. The Company reserves the
right to modify, suspend, or terminate the Rebalancer Option at any time.
Valuation of Accumulation Units
Accumulation Units for each Variable Sub-Account are valued separately,
but the method used for valuing Accumulation Units in each Variable
Sub-Account is the same. Initially, the value of each Accumulation Unit was
set at $10.00. Thereafter, the value of an Accumulation Unit in any Variable
Sub-Account on any Valuation Date equals the value of an Accumulation Unit in
that Sub-Account as of the immediately preceding Valuation Date multiplied by
the "Net Investment Factor" of that Variable Sub-Account for the current
Valuation Period. Accumulation Unit values are valued once each day that the
underlying mutual fund shares are valued.
The Net Investment Factor for each Variable Sub-Account for any
Valuation Period is determined by dividing (a) by (b), and subtracting (c)
from the result where:
(a) is the net result of:
(i) the net asset value per share of the underlying mutual fund shares
held in the Variable Sub-Account determined as of the end of the current
Valuation Period, plus
ii) the per share amount of any dividend (or, if applicable, capital
gain distributions) made by the underlying mutual fund on shares held in the
Variable Sub-Account if the "ex-dividend" date occurs during the current
Valuation Period, minus or plus
(iii) a per unit charge or credit for any taxes incurred by or provided
for in the Variable Sub-Account, which is determined by GWL&A to have
resulted from the investment operations of the Variable Sub-Account; and
(b) is the net result of:
(i) the net asset value per share of the underlying mutual fund shares
held in the Variable Sub-Account determined as of the end of the immediately
preceding Valuation Period, minus or plus
(ii) the per unit charge or credit for any taxes incurred by or provided
for in the Variable Sub-Account for the immediately preceding Valuation
Period; and
(c) is an amount representing the Risk Charge deducted from each Variable
Sub-Account on a daily basis.
Such amount is equal to 0 .65% on an annual basis of the
daily net
asset value of each Variable Sub-Account.
The Net Investment Factor may be greater than, less than, or equal to
one. Therefore, the Accumulation Unit Value may increase, decrease or remain
unchanged.
The net asset value per share referred to in paragraphs (a) (i) and (b)
(i) above, reflect the investment performance of the underlying mutual fund
as well as the payment of underlying mutual fund expenses. (See "Investments
of the Series Account.")
Transfers Between Variable and Guaranteed Sub-Accounts
All or a portion of a Participant Annuity Account Value held in any of
the Variable Sub-Accounts and/or the Daily Interest Guaranteed Sub-Account
may be transferred at any time prior to the Participant's Annuity
Commencement Date by written or telephone request to GWL&A's
Administrative
Offices. Prior to Participant's Annuity Commencement Date, transfers of all
or a portion of a Participant Annuity Account Value held in any of
the
Guaranteed Certificate Funds or Guaranteed Fixed Funds may be
made
only at Certificate maturity by written or telephone request to GWL&A's
Administrative Offices. In order for telephone transfers to be accommodated,
a Telephone Transfer Form, signed by both the Contract Owner and the
Participant, must be on file with GWL&A. This form can be obtained at the
time the contract is signed, or at any time thereafter from the
Administrative Offices of GWL&A. The Transfer request shall be made by the
Participant under a Section 403(b) retirement program (other than an
employer-sponsored program) or by the employer or the employee organization
under a Section 401(a), Section 401(k), Section 457 or employer-sponsored
Section 403(b) retirement program. A Transfer will take effect on the later
of the date designated in the request or the date that the Transfer request
is received by GWL&A at its Administrative Offices. Transfer requests
received after 4:00 p.m., EST/EDT, shall be deemed to have been received on
the next following Valuation Date. If a Transfer request is received by GWL&A
within 30 days of the Annuity Commencement Date, GWL&A may delay the
Annuity
Commencement Date by not more than 30 days. Additional Transfer conditions
apply to Transfers to or from the Guaranteed Sub-Accounts.
Loans
Loans may be available under your contract. Consult your Plan
Administrator for complete details.
Total and Partial Distribution
A distribution in whole or in part may be taken from a Participant
Annuity Account under certain Section 403(b) retirement programs (other than
employer-sponsored plans) prior to the Participant's Annuity
Commencement Date by written request of the Participant. Certain Group
Contracts issued pursuant to Section 457 retirement programs will require the
signature of both the Participant and the owner for a total or partial
distribution. Under Group Contracts issued pursuant to Section 401(a),
Section 401(k), Section 457, or employer-sponsored Section 403(b) retirement
programs, the right to a total or partial distribution is subject to any
limitations or restrictions contained in the underlying retirement plan. A
Request must be received by GWL&A's Administrative Offices at least 30 days
prior to the Annuity Commencement Date. A request for partial distribution
must also specify the Variable and/or Guaranteed Sub-Account(s) from which
the partial distribution is to be made. The Participant Annuity Account Value
available for a distribution in whole or in part is the current value of the
Participant Annuity Account at the end of the Valuation Period for the
"effective date" of the request. The effective date is the later of the date
selected in the request or the date on which the Request is received
by GWL&A's Administrative Offices. Requests received after 4:00 p.m.,
EST/EDT, shall be deemed to have been received on the next following
Valuation Date. The partial or total distribution will be made within seven
days after GWL&A receives the Request. The payment may be postponed as
permitted by the Investment Company Act of 1940. The amount payable upon a
total distribution may be applied to an Annuity Option ( See
"Annuity
Options") instead of a lump-sum payment. There are additional conditions that
apply to a partial or total distribution of a Participant Annuity Account's
Guaranteed Account Value. Restrictions on a partial or total distribution of
a Participant Annuity Account apply to Section 403(b) retirement programs
(See " Federal Tax Consequences: Section 403(b) Retirement
Programs").
There are certain charges imposed upon a partial or total distribution
prior to the Annuity Commencement Date (See "Administrative Charges,
Risk
Premiums and Other Deductions: Contingent Deferred Sales Charge") and there
may be certain tax consequences (See "Federal Tax Consequences: Taxation of
Annuities in General").
Cessation of Contributions
If, in the judgment of either GWL&A or the employer, further
Contributions or Transfers to certain or all of the Variable and Guaranteed
Sub-Accounts should become inappropriate, either party may, upon 60 days
written notice to the other, direct that no future Contributions or Transfers
to such Sub-Account(s) be made. Where the owner of the Group Contract is an
association, the association may provide such notice with respect to all
Participants while the participating employers may also provide such notice
for their employee Participants only.
In the event that such written notice is given for any or all of the
Sub-Accounts, Contributions and Transfers made to such Sub-Account(s) prior
to the effective date of the notice (that date being called the "Date of
Cessation") may be maintained in such Sub-Account(s). Allocation
instructions must be changed to delete the affected Sub-Account(s). If no
change of allocation instructions is received, GWL&A may return all affected
Contributions or allocate such Contributions to a currently offered
Guaranteed Sub-Account.
In the event that a Date of Cessation is declared for all Sub-Accounts,
no new Participant Annuity Accounts will be established or Contributions
accepted by GWL&A. In addition, under Section 401(a), Section 401(k), Section
457, or Section 403(b) retirement programs, an employer or employee
organization must, by Request, elect one of the following Cessation Options:
Cessation Option (1): GWL&A will maintain each Participant Annuity
Account Value until the value of an account is applied to a payment option.
Cessation Option (2): GWL&A will pay, within seven (7) days of the Date
of Cessation of Deposits, the Variable Account Values of the Participant
Annuity Accounts as of the date the Request is received (at such later date
as may be specified in the Request) to either the Employer, the employee
organization or a person designated in writing by the employer or employee
organization as the successor insurer of the employer's deferred compensation
plan. GWL&A will pay the sum of the Guaranteed Contract Values of the
Participant Annuity Accounts as of the Date of Cessation to either the
employer, the employee organization or a person designated in writing by the
employer or the employee organization as the successor insurer of the
employer's or employee organization's deferred compensation plan, in 20 equal
quarterly installments. The amount of the installment will be the amount
determined by GWL&A on the date of the first such payment, but will not be
less than $514.80 for each $10,000 of Guaranteed Contract Value. The first
payment will be made (thirty) days after the date this Cessation Option is
elected.
If the employer or the employee organization has not elected a cessation
option within thirty (30) days of the Date of Cessation, Cessation Option (1)
will be deemed to have been elected. CESSATION OPTION (2) MAY NOT BE
AVAILABLE IN ALL GROUP CONTRACTS.
Contract Termination
Section 401(a) Group Contracts contain a contract termination provision.
Under this provision, either GWL&A or the contract holder may terminate the
Group Contract on at least sixty (60) days prior written notice (the
effective date of which shall be the "Contract Termination Date"). After the
Contract Termination Date, no Transfer shall be made, no payment option shall
be elected and no Contributions shall be accepted by GWL&A under the terms
of
the Group Contract.
GWL&A will pay, within seven (7) days of the Contract Termination Date,
the value of all monies held in the Variable Sub-Account as of the Contract
Termination Date to either the employer, the employee organization or to a
person or entity designated in writing by the employer or employee
organization.
Death Benefit
In the event of the death of the Participant prior to his/her Annuity
Commencement Date, and prior to age 70, a death benefit will be paid upon
receipt of proof of the death of the Participant. The death benefit is the
greater of the Participant Annuity Account Value or the sum of all
Contributions paid less any partial distributions. Where death occurs on or
after the Participant's 70th birthday, but prior to the Annuity Commencement
Date, a death benefit equal to the Participant Annuity Account Value will be
paid.
Under a Section 403(b) retirement program (other than an
employer-sponsored plan), the death benefit will be paid to the Beneficiary
designated by the Participant. Under a Section 401(a), a Section 401(k), a
Section 457, or employer-sponsored Section 403(b) retirement program the
employer or the employee organization will designate to whom the death
benefit will be paid pursuant to the terms of the employer's underlying plan.
The Participant should consult with his/her employer or employee organization
concerning the payment of the death benefit under the employer's or
employee's organization deferred compensation plan.
The payee may elect to receive the death benefit under any of the
Annuity Options, in the form of a lump-sum payment, or in the form of a
partial lump-sum payment with the balance applied towards any of the Annuity
Options. This election must be made within 60 days after GWL&A received
adequate proof of the Participant's death. If no election is made within the
60 day period, a lump-sum settlement will be made.
The Participant Annuity Account Value, for purposes of determination of
the death benefit, will be calculated as of the end of the Valuation Period
during which proof of death and an election by the Payee are received at
GWL&A's Administrative Offices. If no election is made, the Participant
Annuity Account Value will be determined as of 60 days after the date on
which proof of death is received.
If a lump-sum or partial lump-sum settlement is requested, the proceeds
will be paid within (seven) days of GWL&A's receipt of such election and
adequate proof of death. If any of the Annuity Options are elected, the
annuity payment shall commence thirty (thirty) days after the receipt of such
election and adequate proof of death. Annuity payments shall commence by the
later of (fifteen) days or the first day of the month after receipt of such
election and adequate proof of death. The payment of the death benefit will
be made in accordance with any applicable laws and regulations governing
payment of death benefits, subject to postponement in certain circumstances
as permitted by the Investment Company Act of 1940. (See " Federal Tax
Consequences: Taxation of Annuities in General" for certain
distribution-on-death rules that may be applicable to the payment of death
benefits).
The Participant under a Section 403(b) retirement program (other than an
employer-sponsored plan) may designate or change a beneficiary by filing a
Request with GWL&A at its Administrative Offices. Each change of beneficiary
revokes any previous designation. Unless otherwise provided in the
beneficiary designation, one of the following procedures will take place on
the death of a beneficiary: (1) if there is more than one primary surviving
beneficiary, the Participant Annuity Account Value will be shared equally
among them; (2) if any primary beneficiary dies before the Participant, that
beneficiary's interest will pass to any other named surviving primary
beneficiary or Beneficiaries, to be shared equally; (3) if there is no
surviving primary beneficiary, the Participant Annuity Account Value shall
pass to any surviving contingent beneficiary, and if more than one contingent
beneficiary, shall be shared equally among them; (4) if no beneficiary
survives the Participant, the Participant Annuity Account Value shall pass to
the Participant's estate; or (5) if the designation of beneficiary was not
adequately made, the Participant Annuity Account Value shall pass to the
Participant's estate.
INVESTMENTS OF THE SERIES ACCOUNT
Participating Mutual Funds
The Series Account invests in shares of Maxim, TCI, and Fidelity VIP,
open-end management investment companies, each of which are registered with
the Securities and Exchange Commission. Such registration does not involve
supervision of the management of Maxim, TCI or Fidelity by the Securities and
Exchange Commission. Shares of Maxim are also sold to the Pinnacle Series
Account, the Maxim Series Account, and the Retirement Plan Series
Account which are separate accounts established by GWL&A to receive
and
invest premiums paid under variable life and variable annuity contracts
issued by GWL&A. Shares of Maxim may be sold to other separate
accounts of GWL&A or its affiliates.Shares of TCI and Fidelity VIP are also
sold to other insurance companies to fund the benefits of variable annuity or
variable life insurance contracts.
It is conceivable that, in the future, it may be disadvantageous for
variable life insurance separate accounts and variable annuity separate
accounts to invest in Maxim, TCI, and Fidelity VIP simultaneously. Although
GWL&A, Maxim, TCI or Fidelity VIP currently do not foresee any such
disadvantages either to variable life insurance policyowners or to variable
annuity contract owners, the Boards of Directors of Maxim, TCI, and Fidelity
VIP intend to monitor events in order to identify any material conflicts
between such policyowners and contract owners and to determine what action,
if any, should be taken in response thereto. Such action could include the
sale of Maxim shares by one or more of GWL&A's separate accounts or the sale
of TCI or Fidelity VIP shares by other insurance companies, which could have
adverse consequences. Material conflicts could result from, for example, (1)
changes in state insurance laws, (2) changes in federal income tax
laws, (3) changes in the investment management of any portfolio of Maxim,
TCI, or Fidelity VIP, or (4) differences in voting instructions between those
given by policyowners and those given by contract owners.
Investment Advisers
The investment adviser for Maxim is Great-West (the "Investment
Adviser"), which is registered with the Securities and Exchange
Commission as an investment adviser. Great-West provides portfolio management
and investment advice to Maxim and administers its other affairs subject to
the supervision of Maxim's Board of Directors.
The Investment Advisory Agreement obligates the Investment Adviser to
provide investment advisory services and to pay all compensation of, and
furnish office space for, officers and employees of the Investment Adviser
connected with investment and economic research, trading and investment
management of Maxim. The Investment Advisory Agreement also obligates the
Investment Adviser to pay all other expenses incurred in its operation and
all of Maxim's general administrative expenses, except extraordinary
expenses. As compensation for its services to Maxim, the Investment Adviser
receives monthly compensation at the annual rate of 0.46% of the average
daily net assets of the Money Market Portfolio; 0.60% of the average daily
assets of the Bond Portfolio, the Stock Index Portfolio, the U.S. Government
Securities Portfolio, the Small Cap-Index Portfolio and the Total Return
Portfolio; 0.80% of the average daily net assets of the Maxim T.
Rowe
Price Equity/Income Portfolio; 0.90% of the average daily net assets of the
Corporate Bond Portfolio; 0.95% of the average daily net assets of the MidCap
Portfolio and the Maxim INVESCO Small-Cap Growth Portfolio;
1.00% of
the average daily net assets of the International Equity Portfolio, the
Small-Cap Value Portfolio and the Maxim INVESCO ADR
Portfolio.
With respect to the Mid-Cap Portfolio, International Equity,
Small-Cap Value Portfolio, Maxim INVESCO Small-Cap Growth,
Maxim INVESCO ADR and Maxim T. Rowe Price
Equity/Income
Portfolios, the Investment Adviser shall be responsible for all expenses
incurred in performing investment advisory services. Each of the Portfolios
shall pay all expenses incurred in its operation with respect to that
portfolio. However, the Investment Adviser shall pay any expenses
of
the Portfolios which exceed an annual rate of 0.95% of the average daily net
assets of the Maxim T. Rowe Price Equity/Income Portfolio;
1.10% of
the average daily net assets of the Mid-Cap Portfolio and the
Maxim INVESCO Small-Cap Growth Portfolio; 1.35% of the
average daily
net assets of the Small-Cap Value Portfolio; and, 1.30% of the average daily
net assets of the International Equity Portfolio and Maxim
INVESCO ADR
Portfolio.
Investors Research Corporation ("Investors Research") is the investment
adviser for TCI. Investors Research has been the investment adviser of
Twentieth Century Investors, Inc., a registered investment company, since
1958. Additionally, Investors Research acts as the investment adviser for
Twentieth Century World Investors, Inc., a registered investment company, and
as an investment adviser to employee benefit plans and endowment funds.
Investors Research supervises and manages the investment portfolios of
TCI and directs the purchase and sale of its investment securities, subject
only to any directions of TCI's Board of Directors. Investors Research pays
all the expenses of TCI except brokerage, taxes, interest, fees and expenses
of non-interested directors (including counsel fees) and extraordinary
expenses. Twentieth Century Services, Inc., Twentieth Century Tower, 4500
Main Street, Kansas City, Missouri 64111, is transfer agent of TCI. It
provides facilities, equipment and personnel to TCI, and is paid for such
services by Investors Research. Certain administrative services that would
otherwise be performed by Twentieth Century Services, Inc., may be performed
by the insurance company that purchases TCI shares, and Investors Research
may pay it for such services.
For the foregoing services, Investors Research is paid a fee of 1% of
the average net assets of each series of TCI during the year. The fee is paid
and computed each month by multiplying 1% of the average daily closing net
asset values of the shares of each series of TCI during the previous month by
a fraction, the numerator of which is the number of days in the previous
month and the denominator of which is 365 (366 in leap years). Many
investment companies pay smaller investment management fees. However, most
if
not all companies also pay in addition certain of their own expenses, while
TCI expenses specified above are paid by Investors Research.
Investors Research and Twentieth Century Services, Inc. are both wholly
owned by Twentieth Century Companies, Inc. James E. Stowers, Jr., President
of TCI, controls Twentieth Century Companies, Inc. by virtue of his ownership
of a majority of its common stock.
Fidelity Management & Research Company ("FMR") is the investment
adviser
to Fidelity Variable Insurance Products Fund ("VIP"): VIP Growth Portfolio
and to Fidelity Variable Insurance Products Fund II ("VIP II"): VIP II Asset
Manager Portfolio. For its investment advisory services, FMR receives a
monthly fee from each of these Portfolios. As of December 31,
1995,
the VIP Growth and the VIP II Asset Manager Portfolios paid FMR the annual
fee rate of .62% and .72%, respectively, of each Portfolio's average daily
net assets.
FMR may, from time to time, agree to reimburse a Portfolio for
management fees and other expenses above a specified percentage of average
daily net assets. Reimbursement arrangements, which may be terminated at any
time without notice, will increase a Portfolio's yield. If FMR discontinues
a reimbursement arrangement, the affected Portfolio's expenses will go up and
its yield will be reduced. FMR retains the ability to be repaid by a
Portfolio for expense reimbursements if expenses fall below the limit prior
to the end of the fiscal year. Repayment by a Portfolio will lower its yield.
FMR has voluntarily agreed to temporarily limit the total expenses (including
the management fee, but generally excluding taxes, interest and extraordinary
expenses) of the Asset Manager Portfolio to 1.25% of the Portfolio's average
daily net assets. FMR has voluntarily agreed to reimburse the management fees
and all other expenses (excluding taxes, interest and extraordinary expenses)
of the VIP Growth Portfolio in excess of 1.50% of average daily net assets.
Sub-advisers
Janus Capital Corporation("Janus") serves as the sub-adviser to the
Mid-Cap (Growth Fund I) Portfolio. As such, Janus is responsible for
managing the investment and reinvestment of assets of the Mid-Cap
(Growth
Fund I), subject to review and supervision of the Investment Adviser and
the Board of Directors. Janus bears all expenses in connection with the
performance of its services, such as compensating and furnishing office space
for its officers and employees connected with investment and economic
research, trading and investment management of the Mid-Cap (Growth
Fund
I) Portfolio.
Janus is a Colorado corporation, registered as an investment adviser
with the Securities and Exchange Commission. Its principal address is 100
Fillmore Street Suite 300, Denver, Colorado 80206.
The Investment Adviser is responsible for compensating Janus, which
receives monthly compensation from the Investment Adviser at the annual rate
of 0.60% on the first $100 million and 0.55% on all amounts over $100 million
of the Mid-Cap (Growth Fund I) Portfolio assets.
Templeton Investment Counsel, Inc ("Templeton") serves as the
sub-adviser of the International Equity Portfolio. As such,
Templeton
is responsible for managing the investment and reinvestment of assets of the
International Equity Portfolio, subject to review and supervision of the
Investment Adviser and the Board of Directors. Templeton bears all expenses
in connection with the performance of its services, such as compensating and
furnishing office space for its officers and employees connected with
investment management of the International Equity Portfolio.
Templeton is an indirect subsidiary of Templeton Worldwide, Inc., which
in turn is a direct, wholly-owned subsidiary of Franklin Resources, Inc.
Templeton is a Florida corporation with its principal business address at
Broward Financial Centre, 500 East Broward Boulevard, Suite 2100, Fort
Lauderdale, Florida 33394.
The Investment Adviser is responsible for compensating Templeton, which
receives monthly compensation from the Investment Adviser at the annual rate
of 0.70% on the first $25 million, 0.55% on the next $25 million, 0.50% on
the next $50 million, and 0.40% all amounts over $100 million of the
International Equity Portfolio assets.
T. Rowe Price Associated, Inc. ("T. Rowe Price") serves as the
sub-adviser to the Maxim T. Rowe Price Equity/Income Portfolio.
T.
Rowe Price is a Maryland corporation, registered as an investment adviser
with the Securities and Exchange Commission. Its principal business address
is 100 East Pratt Street, Baltimore, Maryland 21202. T. Rowe Price receives
monthly compensation from the Investment Adviser at the annual rate of 0.50%
on the first $20 million of the average daily net assets, 0.40% on the next
$30 million of average daily net assets and 0.40% on all assets once total
average daily net assets exceed $50 million.
INVESCO Trust Company ("ITC") serves as the sub-adviser of the
Maxim INVESCO Small-Cap Growth Portfolio. ITC is a Colorado Trust
Company
and an indirect wholly-owned subsidiary of INVESCO PLC. ITC is registered
as
an investment adviser with the Securities and Exchange Commission. Its
principal business address is 7800 E. Union Avenue, Denver, Colorado 80237.
ITC receives monthly compensation from the Investment Adviser at the rate of
0.55% on the first $25 million of average daily net assets, 0.50% on the next
$50 million of average daily net assets, 0.40% on the next $25 million of
average daily net assets, and 0.35% on all amounts over $100 million of
average daily net assets.
INVESCO Capital Management, Inc ("ICMI") serves as the sub-adviser to
the Maxim INVESCO ADR Portfolio. ICMI is a Delaware
corporation and an
indirect wholly-owned subsidiary of INVESCO PLC. ICMI is registered as an
investment adviser with the Securities and Exchange Commission. Its principal
business address is 1315 Peachtree Street, Atlanta, Georgia 30309. ICMI
receives monthly compensation from the Investment Adviser at the annual rate
of 0.55% on the first $50 million of average daily net assets, 0.50% on the
next $50 million of average daily net assets, and 0.40% on assets over $100
million of average daily net assets.
Loomis, Sayles & Company, LP ("Loomis Sayles") serves as the
sub-adviser
to the Corporate Bond Portfolio. Loomis Sayles is a Delaware limited
partnership and is an indirect, majority-owned subsidiary company of New
England Mutual Life Insurance Company. Loomis Sayles is registered as an
investment adviser with the Securities and Exchange Commission. Its principal
business address is One Financial Center, Boston, Massachusetts 02111. Loomis
Sayles receives monthly compensation from the Investment Adviser at the
annual rate of 0.30% on all assets of the Corporate Bond Portfolio.
Ariel Capital Management , Inc.("Ariel") serves as the sub-adviser to
the Small-Cap Value (Ariel Value) Portfolio. Ariel is a privately
held
minority-owned money manager registered with the Securities and Exchange
Commission as an investment adviser. Its principal business address is 307
North Michigan Avenue, Chicago, Illinois 60601. Ariel receives monthly
compensation from the Investment Adviser at the annual rate of 0.40% on
assets up to $5 million of average daily net assets, 0.35% on the next $10
million of average daily net assets, 0.30% on the next $10 million of average
daily net assets, and 0.25% on assets over $25 million of average daily net
assets.
Reinvestment and Redemption
All dividend distributions of Maxim, TCI or Fidelity VIP will be
automatically reinvested in shares of Maxim, TCI or Fidelity VIP at their net
asset value on the date of distribution; all capital gains distributions of
Maxim, TCI or Fidelity VIP, if any, will likewise be reinvested at the net
asset value on the record date. GWL&A will redeem Maxim, TCI and Fidelity
VIP
shares at their net asset values to the extent necessary to make annuity or
other payments under the Group Contracts.
Substitution of Investments
GWL&A reserves the right, subject to compliance with the law as
currently applicable or subsequently changed, to make additions to, deletions
from or substitutions for the investments held by the Series Account. In the
future, GWL&A may establish additional Investment Divisions within the Series
Account. These Investment Divisions will be established if, and when, in the
sole discretion of GWL&A marketing needs and investment conditions warrant,
and will be made available under existing Group Contracts to the extent and
on a basis to be determined by GWL&A.
If shares of any of the Investment Portfolios of Maxim, TCI or Fidelity
VIP should no longer be available for investment, or if in the judgement of
GWL&A's management further investment in any of the Investment Portfolios'
shares should become inappropriate in view of the objectives of the Group
Contracts, then GWL&A may substitute shares of another mutual fund for shares
already purchased, or to be purchased in the future under the Group
Contracts. No substitution of securities held by the Series Account may take
place without prior approval of the Securities and Exchange Commission, and
prior notice to the employers and association owners of Group Contracts, and,
in addition, to the Participants under Section 403(b) retirement programs
(other than an employer-sponsored plan). In the event of a substitution, the
Participants under Section 403(b) retirement programs (other than an
employer-sponsored plan) or the employees or the employee organization under
Section 401(a), Section 401(k), Section 457, or employer-sponsored Section
403(b) retirement programs will be given the option of taking a distribution
of that portion of the Participant Annuity Account allocated to an Investment
Division in which the substitution is to occur without imposition of the
Contingent Deferred Sales Charge.
ADMINISTRATIVE CHARGES, RISK PREMIUMS AND OTHER
DEDUCTIONS
Contract Maintenance Charge
GWL&A has primary responsibility for the administration of all Group
Contracts and the Series Account. To compensate GWL&A for the cost it incurs
in providing administrative services, GWL&A may deduct a Contract
Maintenance
Charge of not more than $30 annually on the first day of each
calendar
year from each Participant Annuity Account. If a Participant Annuity Account
is established after that date, the Contract Maintenance Charge will be
deducted on the first day of the next quarter and will be pro-rated for the
year remaining. The deduction will be pro-rated between the Variable and
Guaranteed Contract Values of each Participant Annuity Account. No refund of
this charge will be made. The Contract Maintenance Charge on Section 403(b)
Group Contracts will be waived for an initial period of no less than 12
months and up to 15 months, depending on the Participant's effective date.
Contingent Deferred Sales Charge
In the circumstances described below, a Contingent Deferred Sales Charge
will be deducted on any total or partial distribution, Transfer to Other
Companies or a lump sum payment. The amount deducted will depend on the type
of retirement program for which the Group Contract was issued. However, a
Contingent Deferred Sales Charge "Free Amount" may be applied in some
circumstances. The Contingent Deferred Sales Charge "Free Amount" is an
amount against which the Contingent Deferred Sales Charge will not be
assessed. The "Free Amount" shall not exceed 10% of the Participant Annuity
Account Value at December 31 of the previous calendar year and will be
applied on the first distribution, payment or Transfer to Another Company
made in that year. All additional distributions, payments or Transfers to
Another Company during that calendar year will be subject to a Contingent
Deferred Sales Charge without application of any "Free Amount".
1. For Section 401(a) and 401(k) Retirement Programs
(a) For Group Contracts issued pursuant to a Section 401(k) retirement
program where the employer does not also maintain a Section 403(b) or Section
457 Group Contract with GWL&A, a Contingent Deferred Sales Charge will be
in
an amount equal to 6% of the amount Transferred to Another Company,
distributed or paid in excess of the "Free Amount". The cumulative total of
all Contingent Deferred Sales Charges applied to a Participant Annuity
Account will not exceed 6% of all Contributions made within 72 months prior
to the date of that partial or total distribution, Transfer or payment.
(b) For Group Contracts issued pursuant to a Section 401(a) profit-sharing
plan where the employer also maintains a Section 457 Group Contract with
GWL&A, the Contingent Deferred Sales Charge applicable is as described in
paragraph 3 (a) below.
(c) The Contingent Deferred Sales Charge applicable to Group Contracts issued
pursuant to a Section 401(a) profit-sharing plan where the employer also
maintains a Section 403(b) Group Contract with GWL&A is as described in
paragraph 2(a) below.
2. For Section 403(b) Retirement Programs.
(a) Under all Group Contracts issued prior to May 1, 1992 pursuant to Section
403(b) and for Group Contracts issued on or after May 1, 1992 to Section
403(b) retirement programs other than employer-sponsored plans, the
Contingent Deferred Sales Charge applicable will be in an amount equal to 6%
of the amount distributed, Transferred to Another Company or paid in excess
of the "Free Amount". The cumulative total of all Contingent Deferred Sales
Charges applied to a Participant Annuity Account will not exceed 6% of all
Contributions made within 72 months prior to the date of that partial or
total distribution, Transfer to Another Company or payment.
(b) For Group Contracts that were issued in exchange for Group Tax-Sheltered
Annuity or Group Deferred Compensation Annuity Contracts of the Great-West
Life Assurance Company, with respect to any partial or total distribution,
Transfer to Another Company or payment, the cumulative total of all
Contingent Deferred Sales Charges applied to a Participant Annuity Account
will not exceed an amount equal to:
(i) 6% of all Contributions (excluding the amount initially applied to a
Participant Annuity Account from the exchanged contract) made within 72
months prior to the date of that partial or total distribution, Transfer to
Another Company or payment, plus
(ii) an amount which is the result of multiplying the amount initially
applied to a Participant Annuity Account from the exchanged contract by the
appropriate percentage as chosen from the following chart:
If number of years of coverage
of Participant under Exchanged Contract
and this contract is: The percentage shall be:
Less than 5 years 6%
At least 5 years but less than 10 years 5%
At least 10 years 4%
(c) For Group Contracts issued pursuant to an employer-sponsored Section
403(b) retirement program on or after May 1, 1992, the Contingent Deferred
Sales Charge applicable is as described in paragraph 3 (a) below.
3. For Section 457 Retirement Programs.
(a) For Section 457 Group Contracts issued May 1, 1988 or thereafter and for
Section 457 Group Contracts issued prior to May 1, 1988 but amended to
incorporate the provision of this paragraph, the Contingent Deferred Sales
Charge will be in an amount equal to a percentage of the amount distributed,
Transferred to Another Company or paid in excess of the "Free Amount", if
any, based on the table below:
Years of Participation
in FutureFunds: The percentage shall be:
0 - 4 5%
5 - 9 4%
10 - 14 3%
15 or more 0%
(b) For Section 457 Group Contracts issued prior to May 1, 1988 which have
not been amended to incorporate the Contingent Deferred Sales Charge will be
in an amount equal to:
(i) 6% of all Contributions (excluding the amount initially applied to a
Participant Annuity Account from an exchanged contract) made within 72 months
prior to the withdrawal, plus
(ii) an amount equal to a percentage of the amount distributed, Transferred
to Another Company or paid in excess of the "Free Amount", if any, based on
the table below:
If number of years of coverage
of Participant under Exchanged Contract
and this Contract is: The percentage shall be:
Less than 5 years 6%
At least 5 years but less than 10 years 5%
At least 10 years 4%
4. General provisions applicable to the Contingent Deferred Sales Charge.
Regardless of which of the above-noted Contingent Deferred Sales Charge
schedules is in effect, the Contingent Deferred Sales Charge applied against
distributions, payments or Transfers to Another Company is deducted from the
withdrawal payment to the Participant. Thus, for example, if a Participant
requests a withdrawal of $100, and assuming that the entire withdrawal is
subject to 6% Contingent Deferred Sales Charge, the Participant would receive
a payment of $94. The Contingent Deferred Sales Charge shall not exceed 8.5%
of Contributions deposited by the Participant into the Group Contracts.
Additionally, the Code imposes (with certain exceptions) a penalty tax on
distributions prior to age 59 1/2. (See "Federal Tax Consequences").
The Contingent Deferred Sales Charge is paid to GWL&A to cover expenses
relating to the sale and distribution of the Group Contracts, including
commissions, the cost of preparing sales literature, and other promotional
activities. In certain circumstances, sales expenses associated with the sale
and distribution of a Group Contract may be reduced or eliminated and in such
event, the Contingent Deferred Sales Charge applicable to that Group Contract
may likewise be reduced. Whether such a reduction is available will be
determined by GWL&A based upon consideration of the following factors: (1)
size of the prospective group, (2) projected annual Contributions for all
Participants in the group, and (3) frequency of projected distributions.
GWL&A will notify a prospective purchaser of its eligibility for a reduction
of the Contingent Deferred Sales Charge prior to the acceptance of an
application for coverage.
It is possible that the Contingent Deferred Sales Charge will not be
sufficient to enable GWL&A to recover all of its distribution expenses. In
such case, the loss will be borne by GWL&A out of its general account assets,
which will include the profit, if any, derived by GWL&A from the mortality
and expense risk charges described herein.
Deductions for Premium Taxes
GWL&A presently intends to pay any Premium Tax levied by any
governmental entity as a result of the existence of the Participant Annuity
Account or the Series Account. GWL&A reserves the right to deduct the
Premium
Tax from Participant Annuity Account Values instead of GWL&A making the
Premium Tax payments. Notice will be given to all Participants prior to the
imposition of any such deductions from the Participant Annuity Account
Values. The applicable Premium Tax rates that states and other governmental
entities impose currently range from 0% to 3.5% and are subject to
change by the respective state legislatures, by administrative
interpretations or by judicial act. Such Premium Taxes will depend, among
other things, on the state of residence of a Participant and the insurance
tax laws and status of GWL&A in these states when the Premium Taxes are
incurred.
Deductions for Assumption of Mortality and Expense Risks
GWL&A deducts from the daily net asset value of the Series Account an
amount, computed daily, which is equal to an annual rate of 0.65%,
0.52% allocable to mortality risk and 0.13% allocable to expense risk.
This charge is designed to compensate GWL&A for its assumption of certain
mortality, death benefit and expense risks described below. The level of this
charge is guaranteed and will not change.
GWL&A's assumption of mortality risk guarantees that the annuity
payments made to the Beneficiary or other payee will not be affected by the
mortality experience (life span) of persons receiving such payment or of the
general population. GWL&A assumes this "mortality risk" by virtue of the fact
that annuity rates in effect at the time that any Contributions are made
cannot be changed. In addition, if a Participant should die prior to his/her
Annuity Commencement Date and 70th birthday, GWL&A is at risk to the extent
that the amount of all Contributions made, less any partial distributions,
exceed the Participant Annuity Account Value. (See " Accumulation
Period: Death Benefit.")
GWL&A's assumption of expense risks arises when GWL&A guarantees
that if
the charges for administrative expenses, which cannot be increased by GWL&A,
will be insufficient to cover administrative and sales expenses, GWL&A bears
that loss.
In certain circumstances, the risk of adverse mortality and expense
experience associated with a Group Contract may be reduced. In such event,
the mortality and expense risk charge applicable to that Group Contract may
likewise be reduced. Whether such a reduction is available will be determined
by GWL&A based upon consideration of the following factors: (1) size of the
prospective group, (2) projected annual Contributions for all Participants in
the group, (3) frequency of projected distributions, (4) type and frequency
of administrative and sales services provided, and (5) level of Contract
Maintenance Charge and Contingent Deferred Sales Charge. GWL&A will notify
a
prospective purchaser of its eligibility for a reduction of the mortality and
expense risk charge prior to the acceptance of an application for coverage.
If the 0.65% charge proves insufficient to cover
administrative
costs in excess of the Contract Maintenance Charge made for administrative
expenses, plus any losses from the mortality risk, the loss will be borne by
GWL&A; conversely, if the amount deducted proves more than sufficient, the
excess will be a profit to GWL&A.
ANNUITY OPTIONS
An Annuity Commencement Date and the form of annuity payments
("Annuity
Options") may be elected at any time during the Accumulation Period. The
elections are made by the Participant under a Section 403(b) retirement
program (other than an employer-sponsored plan) or the employer or the
employee organization under a Section 401(a), a Section 401(k), Section 457
or employer-sponsored 403(b) retirement program. Under Section 403(b), 401(a)
and 401(k) retirement programs, the Annuity Commencement Date elected
generally must, to avoid the imposition of an excise tax, not be later than
April 1 of the calendar year following the calendar year in which the
Participant attains age 70 1/2, without regard to the actual retirement date
or termination of employment date. For Section 457 retirement programs, the
Annuity Commencement Date elected will generally be not later than April 1 of
the calendar year following the calendar year in which the Participant
attains age 70 1/2, or the Participant's retirement date if later than age 70
1/2. Under all of the above-noted retirement programs, it is the
responsibility of the Participant to file the necessary Request with GWL&A.
The Annuity Commencement Date may be postponed or accelerated, or the
election of any of the Annuity Options changed, upon Request received by
GWL&A at its Administrative Offices up to 30 days prior to the existing
Annuity Commencement Date. If any Annuity Commencement Date elected
would be
less than 30 days from the date that the Request is received, GWL&A may delay
the date elected by not more than 30 days.
The Group Contracts provide the Annuity Options described below, as well
as such other Annuity Options as GWL&A may choose to make available in the
future. Except as otherwise noted, the Annuity Options are payable on a
variable, fixed or combination basis. More than one Annuity Option may be
elected. If no Annuity Option is elected, the Group Contracts automatically
provide for variable life annuity (with respect to the variable portion of a
Participant Annuity Account) and/or a fixed life annuity (with respect to the
fixed portion of a Participant Annuity Account) with 120 monthly payments
guaranteed.
The level of annuity payments under the following options is based upon
the option selected and, depending on the option chosen, such factors as the
age at which payments begin and the frequency and duration of payments.
Option No. 1: Life Annuity
This option provides an annuity payable monthly during the lifetime of
the payee. It would be possible under this option for the Annuitant to
receive no annuity payment if he/she died prior to the date of the first
annuity payment, one annuity payment if the Annuitant died before the second
annuity payment, etc.
Option No. 2: Life Annuity with Payments Guaranteed for Designated Periods
This option provides an annuity payable monthly throughout the lifetime
of the payee with the guarantee that if, at the death of the payee, payments
have been made for less than the designated period, the Beneficiary will
receive payments for the remainder of the period. The designated period may
be 5, 10, 15, or 20 years. The period generally referred to as "Installment
Refund" is available only on a fixed- dollar payment basis.
Option No. 3: Joint and One-Half Survivor
This option provides an annuity payable during the joint lifetime of the
payee and a designated second person, and thereafter during the remaining
lifetime of the survivor. After the death of the payee, and while only the
designated second person is alive, the amount payable will be one-half the
amount paid while both were living. It would be possible under this option
for the payee and the Beneficiary to receive no annuity payment if both
persons died prior to the date of the first annuity payment, one annuity
payment if both persons died before the second annuity payment, etc.
Option No. 4: Income of Specified Payment (available only as fixed-dollar
payments)
Under this option, the amount of the periodic benefit is selected, which
amount will be paid to the payee in equal annual, semiannual, quarterly, or
monthly installments as elected; provided that the annuity payment period is
not less than 36 months nor more than 240 months.
Option No. 5: Income for Specified Period (available only as fixed-dollar
payments)
Under this Option, the duration of the periodic benefit is selected
(which may not be less than 36 months nor more than 240 months), and a
resulting annuity payment amount will be paid to the payee in equal annual,
semiannual, quarterly, or monthly installments, as elected.
Option No. 6: Systematic Withdrawal Payment Option (available only as
fixed-dollar payments)
Under this payment option, the amount, timing and method of payment will
be as elected by the payee and agreed to by GWL&A. Payments may be elected
on
a monthly, quarterly, semi-annual or annual basis. The minimum amount
initially applied to this option must be $20,000. There are charges and
restrictions which apply. Please see the "Systematic Withdrawal Payment
Option Rider" to the Group Contract.
Option No. 7: Access Annuity
Under this payment option, a single premium of $20,000 minimum, the
amount, timing and method of payment will be as elected by the payee and
agreed to by GWL&A. Payments may be elected on a monthly, quarterly,
semi-annual or annual basis. There are charges and restrictions which apply.
Please see the "Access Annuity Rider" to the Group Contract for additional
information.
Variable Annuity Payments
Variable annuity payments will be determined on the basis of: (i) the
Variable Account Value prior to the Annuity Commencement Date; (ii) the
annuity tables contained in the Group Contracts which reflect the age of the
Participant; (iii) the type of annuity option(s) selected; and (iv) the
investment performance of the underlying mutual fund. The Participant
receives the value of a fixed number of Annuity Units each month.
At a Participant's Annuity Commencement Date, the Participant Annuity
Account is credited with Annuity Units for each Variable Sub-Account on which
variable annuity payments are based. The number of Annuity Units to be
credited is determined by dividing the amount of the first monthly payment by
the value of an Annuity Unit as of the fifth Valuation Period prior to the
Annuity Commencement Date in each Variable Sub-Account selected. Although
the
number of Annuity Units is fixed by this process, the value of such units
will vary with the value of the underlying mutual fund.
The dollar amount of the first monthly variable annuity payment is
determined by applying the total value of the Accumulation Units credited to
a Participant Annuity Account valued as of the fifth Valuation Period prior
to the Annuity Commencement Date to the annuity tables contained in the Group
Contracts. Amounts shown in the tables are based on a modified 1971 Group
Annuity Mortality Table (set back five years) with an assumed investment
return at the rate of 3.5% per annum. The first annuity payment is determined
by multiplying the benefit per $1,000 of value shown in the Group Contract
tables by the number of thousands of dollars of value accumulated under the
Variable Account Value of a Participant Annuity Account. These annuity tables
vary according to the form of annuity selected and according to the age of
the Participant and his/her Annuity Commencement Date.
The 3.5% interest rate stated above is the measuring point for
subsequent annuity payments. If the actual Net Investment Rate (annualized)
exceeds 3.5%, the payment will increase at a rate equal to the amount of such
excess. Conversely, if the actual rate is less than 3.5%, annuity payments
will decrease. If the assumed rate of interest were to be increased, annuity
payments would start at a higher level but would increase more slowly or
decrease more rapidly.
The amount of the second and subsequent payment is determined by
multiplying the credited fixed number of Annuity Units by the appropriate
Annuity Unit value for the fifth Valuation Period preceding the date that
payment is due. The Annuity Unit value at the end of any Valuation Period is
determined by multiplying the Annuity Unit value for the immediately
preceding Valuation Period by the product of:
(a) the Net Investment Factor of the Variable Sub-Account for the Valuation
Period for which the Annuity Unit is being determined, and,
(b) a factor of .999905 to neutralize the assumed investment return of 3.5%
per year used in the annuity table.
The value of each Variable Sub-Account's Annuity Unit is set initially at
$10.00. The value of the Annuity Units is determined as of a
Valuation Period five (5) days' prior to the payment in order to permit
calculation of amounts of annuity payments and mailing of checks in advance
of their due date.
Fixed Annuity Payments
The guaranteed level of fixed annuity payments will be determined on the
basis of: (i) the Guaranteed Account Value prior to the Annuity Commencement
Date; (ii) the annuity tables contained in the Group Contracts which reflect
the age of the Participant; and (iii) the type of annuity option(s) elected.
The payment amount may be greater, however, if GWL&A is using a more
favorable table as of a Participant's Annuity Commencement Date.
Combination Variable and Fixed Annuity Payments
If an election is made to receive annuity payments on a combination
variable and fixed basis, the Variable Account Value of a Participant Annuity
Account will be applied to the variable annuity option elected and the
Guaranteed Account Value to the fixed annuity option.
Transfer to Effect Annuity Option Elected
If the Participant under a Section 403(b) retirement program (other than
an employer-sponsored plan) or the employer or the employee organization
under a Section 401(a), Section 401(k), Section 457 or employer-sponsored
403(b) retirement program wishes to apply all or part of the Guaranteed
Account Value of the Participant Annuity Account to a variable annuity
option, or all or a part of the Variable Account Value to a fixed annuity
option, a Request to Transfer must be received at GWL&A's Administrative
Office prior to the Participant's Annuity Commencement Date. This also
applies to a Beneficiary or payee who elects to receive a death benefit under
any of the annuity options, and one such Request to Transfer can be submitted
by the Beneficiary or payee after the death of the Participant.
Proof of Age and Survival
GWL&A may require proof of age or survival of any payee upon whose
age
or survival payments depend.
Frequency and Amount of Annuity Payments
Variable annuity payments will be paid as monthly installments; fixed
annuity payments will be paid annually, semiannually, quarterly or monthly,
as requested. However, if any payment to be made under any annuity option
will be less than $50, GWL&A may make the payments in the most frequent
interval which produces a payment of at least $50. If the net amount
available to apply under any Annuity Option is less than $2,000, GWL&A may
pay it in one lump sum. The maximum amount that may be applied under any
Annuity Option without the prior written consent of GWL&A is $1,000,000.00
FEDERAL TAX CONSEQUENCES
Introduction
The Group Contracts are designed for use by employee groups under
retirement programs which may qualify for special tax treatment under Section
401(a), Section 401(k), Section 403(b) or Section 457 of the Code.
The ultimate effect of federal income taxes on the Participant Annuity
Account Value, on annuity payments and on the economic benefit to the
Participant or Beneficiary depends upon GWL&A's tax status, on the type of
retirement program for which the Group Contract is purchased, and upon the
tax and employment status of the individual concerned. The Series Account is
taxed as a part of GWL&A; not as a "regulated investment company" under Part
I of Subchapter M of the Code. GWL&A is taxed as a life insurance company
as
described below.
It should be understood that the following discussion is not exhaustive,
and is not intended as tax advice. Special rules may apply to certain
situations not discussed here. GWL&A intends to comply with the
diversification requirements of Code Sections 817(h) and 818 to assure that
the Group Contracts will continue to be treated as annuity contracts for
Federal income tax purposes. The discussion is based upon GWL&A's
understanding of current federal income tax law and no representation is made
regarding the likelihood of continuation of current law or of the current
interpretations by the Internal Revenue Service. No attempt is made to
consider state or other tax laws. The Group Contractholder, Participants and
beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the contract comply with
applicable laws. For further information, consult a qualified tax adviser.
Taxation of GWL&A
GWL&A is taxed on its insurance business in the United States as a life
insurance company in accordance with Part I of Subchapter L of the Code.
Investment income and realized capital gains on the assets of Series Account
are reinvested and are taken into account in determining the Series Account
Value. Under existing federal income tax law, such amounts do not result in
any tax on GWL&A which will be chargeable to the Participant Annuity Account
or the Series Account. GWL&A reserves the right to make a deduction from the
Participant Annuity Account for taxes, if any, imposed with respect to such
items in the future.
Taxation of Annuities in General
Code Section 72 governs taxation of annuities in general. A Participant
is not taxed on increases (if any) in the value of a Participant Annuity
Account until some form of distribution is made. Under Section 72, a total
or partial distribution from a Participant Annuity Account will be treated as
ordinary income taxable to the extent the amounts held in the Participant
Annuity Account immediately before the distribution exceed the "investment in
the contract." The investment in the contract is that portion of the
Contributions to the Participant Annuity Account which was included in the
Participant's gross income in the year contributed, if any. If the
Participant begins receiving annuity payments, the Participant is taxed on
the portion of the payment that exceeds the investment in the contract.
However, because the Participant generally excludes Contributions from gross
income under these retirement programs, there generally will be no cost basis
(investment in the contract) in the Participant Annuity Account within the
meaning of Section 72 of the Code. Thus, the total amount of all payments
received will generally be taxable to the Participant. Ordinarily, such
taxable portion is taxed at ordinary income tax rates, subject to any income
averaging rules applicable to Participants receiving distributions from a
Section 401(a) or Section 401(k) plan.
Currently, none of the amounts contributed to a Section 457 plan
constitute cost basis in the contract. Thus, all amounts distributed to
Participants from a Section 457 plan are taxable at ordinary income rates.
No special averaging rules apply to distributions from Section 403(b) plans
or Section 457 plans.
If a Group Contract is held by a non-natural person (e.g. a
corporation), the investment gain on the contract is includable in the
entity's income each year unless certain exceptions apply. This rule does
not apply, in pertinent part, where the Group Contract is held under a
Section 401(a) plan, a Section 401(k) plan, or a Section 403(b) plan. Since
the employer maintaining a Section 457 plan is either a state or local
government or a tax-exempt organization, the employer will not be subject to
tax on the gain in the contract.
Section 401(a) Qualified Retirement Plans
Section 401(a) provides special tax treatment for pension,
profit-sharing and stock bonus plans established by employers or employee
organizations for their employees. All types of employers, including
for-profit organizations, tax-exempt organizations and state and local
governments, are allowed to establish and maintain Section 401(a) qualified
plans. Employer Contributions and any earnings thereon are currently
excluded from the Participant's gross income. Section 401(a) plans must
satisfy numerous qualification requirements, including limitations on
contributions. Generally, the total amount of employer and employee
contributions which can be contributed to all of the employer's qualified
plans is limited to the lesser of $30,000 or 25% of a Participant's
includable compensation. Distributions from the plan are subject to the
restrictions contained in the plan document and the Code. Participants
should consult with their employer or employee organization as to the
applicability of the above limitations and restrictions to their plan.
Section 401(k) Cash or Deferred Arrangements
Section 401(k) allows for-profit employers or employee organizations to
offer a cash or deferred arrangement to employees under a profit-sharing or
stock bonus plan. Generally, for tax years beginning after 1986, tax-exempt
organizations and state and local governments are not permitted to establish
Section 401(k) plans. However, under a grandfather rule, certain plans
adopted before certain dates in 1986 may continue to be offered by these
entities. Pre-tax salary reduction Contributions and any income thereon are
currently excluded from the Participant's gross income. Generally, the
maximum elective deferral amount that an individual may defer on a pre-tax
basis to one or more Section 401(k) plans is limited to $7,000 per year
(adjusted for cost-of-living increases) under Section 402(g). Elective
deferrals to a Section 401(k) plan must also be aggregated with elective
deferrals made by the Participant to a Section 403(b) plan or to a simplified
employee pension. For 1996, the total amount of elective deferrals which can
be contributed to all such plans is $9,500. The contribution limit in
Section 415 also apply. The amount which a highly compensated employee may
contribute may be further reduced to enable the plan to meet the
discrimination testing requirements. Amounts contributed to a Section 403(b)
annuity contract are subject to FICA and FUTA tax when contributed.
Pre-tax amounts deferred into the plan within the applicable limits, and
the net investment gain, if any, reflected in the Participant Annuity Account
Value are includible in a Participant's gross income only for the taxable
year when such amounts are paid to the Participant under the terms of the
plan. Employee contributions and earnings may not be distributed prior to
age 59 1/2, unless the Participant dies, becomes disabled, separates from
service or suffers a genuine financial hardship meeting the requirements of
the Code. Restrictions apply to the amount which may be distributed for
financial hardship. Participants should consult with their employer as to
the availability of benefits under the employer's plan.
Amounts contributed in excess of the above described limits, and the
earnings thereon, must be distributed from the plan and included in the
Participant's gross income in accordance with IRS rules and regulations.
Excess amounts which are not properly corrected can have severe adverse
consequences to the plan and may result in additional taxes to the
Participant.
Section 403(b) Tax Sheltered Annuities
Tax-exempt organizations described in Section 501(c)(3) and public
educational organizations are permitted to purchase Section 403(b)
tax-sheltered annuities for employees. Amounts contributed toward the
purchase of such annuities are excluded from the gross income of the
Participant in the year contributed to the extent that the contributions do
not exceed three separate, yet interrelated contribution limitations.
Federal income tax is deferred on contributions to the extent that the
aggregate amount contributed to a Section 430(b) plan per year for a
Participant does not exceed: (1) the exclusion allowance described in
Section 403(b)(2); (2) the contribution limit in Section 415; and (3) the
elective deferral limitation in Section 402(g) of the Code. Elective
deferrals to a Section 403(b) plan must also be aggregated with elective
deferrals made by the Participant to a Section 401(k) plan or to a simplified
employee pension. For 1996, the total amount of elective deferrals which can
be contributed to all such plans is $9,500. Amounts contributed to a Section
403(b) annuity contract are subject to FICA and FUTA tax when contributed.
The net investment gain, if any, reflected in a Participant Annuity
Account Value is not taxable until received by the Participant or his
beneficiary.
Amounts contributed in excess of the above described limits, and the
earnings thereon, must be distributed from the plan and included in the
Participant's gross income in accordance with IRS rules and regulations.
Excess amounts which are not properly corrected can have severe adverse
consequences to the plan and may result in additional taxes to the
Participant.
Pre-1989 contributions to a Section 403(b) annuity contract may be
distributed to an employee at any time, subject to a 10% penalty on
withdrawals prior to age 59 1/2, unless an exception applies under Section
72(t). Post-1988 contributions and earnings, and the earnings on the
December 31, 1988 account balance, may not be distributed prior to age 59
1/2, unless the Participant dies, becomes disabled, separates from service or
suffers a genuine financial hardship meeting the requirements of the Code.
Restrictions apply to the amount which may be distributed for financial
hardship.
Section 457 Deferred Compensation Plans
Section 457 allows state and local governmental employers to establish
and maintain an eligible deferred compensation plan for all employees and
independent contractors. Tax-exempt organizations may establish eligible
deferred compensation plans only for a select group of management or highly
compensated
employees.
Federal income tax is deferred on contributions to a Section 457 plan to
the extent that the aggregate amount contributed per year for a Participant
does not exceed the lesser of $7,500 or 25% of a Participant's includable
compensation. Any elective deferral amount excluded from gross income by a
Participant under Section 401(k), Section 403(b) or a simplified employee
pension for the taxable year must be treated as an amount deferred under the
Section 457 plan. Amounts contributed are subject to FICA and FUTA tax when
contributed.
The net investment gain, if any, reflected in a Participant Annuity
Account Value is not taxable until received by the Participant or his
beneficiary.
Amounts contributed in excess of the above described limits, and the
earnings thereon, must be distributed from the plan and included in the
Participant's gross income. Excess amounts which are not properly corrected
can have severe adverse consequences to the plan and may result in additional
taxes to the Participant.
Contributions and earnings may not be distributed prior to age 70 1/2,
unless the Participant dies, becomes disabled, separates from service or
suffers a genuine unforeseeable emergency meeting the requirements of the
Code and plan document. Restrictions apply to the amount which may be
distributed for unforeseeable emergency.
Portability
When the participant is eligible to take a distribution from a Section
401(a) plan, Section 401(k) plan or Section 403(b) annuity, eligible rollover
distributions may be rolled over to an IRA or another qualified plan or
Section 403(b) annuity contract or custodial account as provided in the Code.
Amounts properly rolled over will not be included in gross income until a
subsequent distribution is made.
For Section 403(b) plans only, Revenue Ruling 90-24 allows participants
to transfer funds from one Section 403(b) annuity or custodial account to
another Section 403(b) annuity contract or custodial account with the same or
more stringent restrictions without incurring current taxation. If the
Section 403(b) plan is employer-sponsored, transfers under Rev. Rul. 90-24
may be restricted to 403(b) providers approved by the plan sponsor.
Amounts distributed from a Section 457 plan cannot be rolled over to an
IRA.
Required Beginning Date/Required Minimum Distributions
Distributions from each of these retirement programs must begin on or
before April 1 of the year after the Participant attains age 70 1/2. For
employees of governmental employers, the required beginning date is the later
of age 70 1/2 or separation from service.
All amounts in a Section 401(a), Section 401(k) and Section 457 plan and
amounts accruing after December 31, 1986 under Section 403(b) annuities must
be distributed in compliance with the minimum distribution requirements.
All distributions, regardless of when the amounts accrued, must satisfy the
"incidental benefit" or "minimum distribution incidental benefit" rule. If
the amount distributed does not meet the minimum requirements, a 50% penalty
tax on the amount which was required to be, but was not, distributed may be
imposed upon the employee by the IRS under Section 4974. These rules are
extremely complex, and the Participant should seek the advice of a competent
tax adviser.
Federal Taxation of Distributions
All payments received from a Section 401(a), Section 401(k) or Section
403(b) annuity contract are normally taxable in full as ordinary income to
the Participant. Since premiums derived from salary reduction have not been
previously taxed to the Participant, they cannot be treated as a cost basis
for the contract. The Participant will have a cost basis for the contract
only when after-tax contributions have been made.
If the Participant takes the entire value in the contract in a single
sum cash payment, the full amount received will be ordinary income in the
year of receipt unless after-tax contributions were made. If the
distribution includes after-tax contributions, the amount in excess of the
cost basis will be ordinary income. Section 72(e)(5). Special averaging
treatment is currently available for lump sum distributions from Section
401(a) and Section 401(k) plans only.
Amounts received before the annuity starting date by a Participant who
has made after-tax contributions are taxed under a rule that provides for pro
rata recovery of cost. Section 72(e)(9). If an employee who has a cost
basis for his contract receives life annuity or installment payments, the
cost basis will be recovered from the payments under the annuity rules of
Section 72. Typically, however, there is no cost basis and the full amount
received is taxed as ordinary income in the year distributed.
All amounts received from a Section 457 plan, whether in the form of
total or partial withdrawals or annuity payments are taxed in full as wages
to the Participant in the year distributed.
Penalty Taxes
Penalty taxes may apply to certain distributions from Section 401(a)
plans, Section 401(k) plans and Section 403(b) annuities. Distributions made
before the Participant attains age 59 1/2 are premature distributions and
subject to an additional tax equal to 10% of the amount of the distributions
which is includable in gross income in the tax year. However, under Code
Section 72(t), the penalty tax may not apply to distributions: (1) made to
a beneficiary on or after the death of the Participant; (2) attributable to
the employee's being disabled within the meaning of Code Section 72(m)(7);
(3) made as a part of a series of substantially equal periodic payments (at
least annually) for the life or life expectancy of the Participant or the
joint lives or life expectancies of the Participant and his designated
beneficiary; (4) made to a Participant on account of separation from service
after attaining age 55; (5) properly made to an alternate payee under a
qualified domestic relations order; (6) made to an Participant for medical
care, but not in excess of the amount allowable as a medical expense
deduction to the Participant for amounts paid during the taxable year for
medical care; (7) timely made to correct an excess aggregate contribution; or
(8) timely made to reduce an excess elective deferral.
If exception (3) above is applicable at the time of the distribution but
the series of payments is later modified (other than because of death or
disability) before the Participant reaches age 59 1/2 or, if after he reaches
age 59 1/2, within five years of the date of the first payment, the
Participant's tax for the year the modification occurs is increased by an
amount equal to the tax which, but for the exception, would have been imposed
plus interest for the deferral period.
If a Participant's aggregate retirement distributions from qualified
plans, tax sheltered annuities and individual retirement plans in a calendar
year exceed $150,000, a 15% excise tax may be imposed on the employee, in
addition to any income tax, on the excess portion of the distributions.
If the amount distributed during a tax year is less than the minimum
required distribution, there is an additional tax imposed on the Participant
equal to 50% of the amount that the distribution made in the year falls short
of the required amount.
No penalty taxes apply to distributions from a Section 457 plan.
Distributions on Death of Participant
Distributions made to a beneficiary from any of these retirement
programs upon the Participant's death must be made pursuant to the rules
contained in Section 401(a)(9) of the Code and the regulations thereunder.
Generally, if the Participant dies while receiving annuity payments or other
required minimum distributions under the plan and before the entire interest
in the account has been distributed, the remainder of his interest must be
distributed to the beneficiary at least as rapidly as under the method in
effect as of the Participant's date of death.
If the Participant dies before payments have begun, his entire interest
must generally be distributed within five (5) years after the date of death.
This five year rule applies to all non-individual beneficiaries. However, if
an individual other than the surviving spouse has been designated as
beneficiary, payments may be made over the life of that individual or over a
period not extending beyond the life expectancy of the beneficiary so long as
payments begin on or before December 31 of the year following the year of
death. If the beneficiary is the Participant's spouse, distributions are not
required to begin until the date the employee would have attained age 70 1/2.
If the spouse dies before distributions begin, the rules discussed above will
apply as if the spouse were the employee. Participants and beneficiaries
should seek competent tax or legal advice about the tax consequences of
distributions.
Federal Income Tax Withholding
Effective January 1, 1993, certain distributions from Section 401(a)
plans, Section 401(k) plans and Section 403(b) annuities are defined as
"eligible rollover distributions." Generally, any eligible rollover
distribution is subject to mandatory income tax withholding at the rate of
20% unless the employee elects to have the distribution paid as a direct
rollover to an IRA or to another qualified plan or Section 403(b) annuity
contract or custodial account, as applicable. With respect to distributions
other than eligible rollover distributions, amounts will be withheld from
annuity (periodic) payments at the rates applicable to wage payments and from
other distributions at a flat 10% rate, unless the Participant elects not to
have federal income tax withheld.
Distributions to a Participant from a Section 457 plan retain their
character as wages and are tax reported on Form W-2. Federal income taxes
must be withheld under the wage withholding rules. Participants cannot elect
not to have federal income tax withheld. Payments to beneficiaries are not
treated as wages and tax reported on Form 1099R. Federal income tax on
payments to beneficiaries will be withheld from annuity (periodic) payments
at the rates applicable to wage withholding, and from other distributions at
a flat 10% rate, unless the beneficiary elects not to have federal income tax
withheld.
VOTING RIGHTS
GWL&A will vote the shares held by the Investment Divisions of the
Series Account at regular and special meetings of shareholders of Maxim, TCI,
and Fidelity VIP. The Investment Company Act of 1940 (the "1940 Act") and the
regulations thereunder, as presently interpreted, require that the shares of
the applicable underlying mutual fund be voted in accordance with
instructions received from persons having voting interests in the Variable
Sub-Accounts and, accordingly, GWL&A will do so. However, if the 1940 Act
or
any regulation thereunder should be amended, or if the present interpretation
thereof should change, and as a result GWL&A determined that it is permitted
to vote the shares at its own discretion, GWL&A may elect to do so.
Prior to the Annuity Commencement Date, the Participant under a Section
403(b) retirement program or the employer under a Section 401(k) or Section
457 retirement program has the voting interest in the Variable Sub-Accounts.
After annuity payments begin under a variable annuity option, the payee will
have the voting interest.
The number of votes which a person has the right to cast will be
determined by applying his/her percentage interest in a Variable Sub-Account
to the total number of votes attributable to the Sub-Account. In determining
the number of votes, fractional shares will be recognized. During the annuity
payment period, the number of votes attributable to a Participant Annuity
Account will decrease as the assets held to fund the annuity payments
decrease.
Voting rights held in respect of a Variable Sub-Account of this Series
Account as to which no timely instructions are received, and shares that are
not otherwise attributable to persons having voting interests in the Variable
Sub-Accounts of this Series Account, will be voted by GWL&A in proportion to
the voting instructions which are received with respect to all Participant
Annuity Accounts participating in that Sub-Account of this Series Account.
Voting instructions to abstain on any item to be voted upon will be applied
on a pro rata basis to reduce the votes eligible to be cast. Each person
having a voting interest will receive proxy materials, reports and other
materials relating to the applicable underlying mutual fund.
DISTRIBUTION OF THE GROUP CONTRACTS
Great-West is the principal underwriter and the distributor of the Group
Contracts. Great-West is registered with the Securities and Exchange
Commission under the Securities and Exchange Act of 1934 as a broker-dealer
and is a member of the National Association of Securities Dealers, Inc.
("NASD"). Applications for the Group Contracts will be solicited by
duly-licensed insurance agents of Great-West, as well as by independent
registered insurance brokers who must also be NASD-registered broker-dealers
or representatives thereof.
The maximum commission as a percentage of the Contributions made under
a Group Contract payable to Great-West agents, independent registered
insurance brokers and other registered broker-dealers is 8.0%. An expense
allowance that will not exceed 40% of the maximum commission paid may also
be
paid.
Additionally, effective August 1, 1987, a maximum of 1% of Contributions
may also be paid as a persistency bonus to qualifying brokers.
RETURN PRIVILEGE
Within 15 days after a Participant Certificate under a Section 403(b)
retirement program is first mailed, it may be canceled for any reason by
delivering or mailing it together with a Request to cancel to GWL&A's
Administrative Offices or to an authorized agent of GWL&A. Upon cancellation,
GWL&A will refund all Contributions. No Contingent Deferred Sales Charge or
other charge will be deducted.
STATE REGULATION
As a life insurance company organized and operated under Colorado law,
GWL&A is subject to provisions governing such companies and to regulation by
the Colorado Commissioner of Insurance.
GWL&A's books and accounts are subject to review and examination by
the
Colorado Insurance Department at all times and a full examination of its
operations is conducted by the National Association of Insurance
Commissioners ("NAIC") at least once every three years.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT
PROGRAM
Section 36.105 of the Teacher Retirement System of Texas permits
Participants in the Texas Optional Retirement Program ("ORP") to redeem their
interest in a variable annuity contract issued under the ORP only upon
termination of employment in the Texas public institutions of higher
education, retirement or death. Accordingly, a Participant in the ORP will be
required to obtain a certificate of termination from his/her employer before
he/she can redeem his/her Participant Annuity Account.
REPORTS
As presently required by the 1940 Act and regulations
promulgated
thereunder, all Participants will be furnished, at least semi-annually, with
reports containing such information as may be required under the 1940 Act or
by any other applicable law or regulation. In addition, all Participants will
be furnished not less frequently than annually a with statement of the
Participant Annuity Account Value established in his/her name.
LEGAL PROCEEDINGS
The Series Account is not engaged in any litigation. GWL&A is not
involved in any litigation which would have material adverse effect on the
ability of GWL&A to perform its contract with the Series Account.
LEGAL MATTERS
The organization of GWL&A, its authority to issue variable annuity
contracts and the validity of the Group Contract have been passed upon by
R.B. Lurie, Vice-President, Counsel and Associate Secretary. Certain legal
matters relating to the Federal securities laws have been passed upon for
GWL&A by Jorden Burt Berenson & Johnson, LLP.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Group Contracts offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and amendments thereto
and exhibits filed as a part thereof, to all of which reference is hereby
made for further information concerning the Series Account, GWL&A and the
Group Contracts. Statements contained in this Prospectus as to the content of
Group Contracts and other legal instruments are summaries. For a complete
statement of the terms thereof reference is made to such instruments as
filed.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific
information and financial statements relating to the Series Account and
GWL&A. The Table of Contents of the Statement of Additional Information is
set forth below:
1. Custodian and Independent Auditors
2. Underwriter
3. Calculation of Performance Date
4. Financial Statements
Inquiries and requests for a Statement of Additional Information should
be directed to GWL&A in writing at 8515 E. Orchard Road, Englewood,
Colorado
80111, or by telephoning GWL&A at (800) 468-8661 (U.S.) or (303)
689-3360
(Englewood).
FUTUREFUNDS SERIES ACCOUNT
Of
Great-West Life & Annuity Insurance Company
GROUP VARIABLE ANNUITY CONTRACTS
Distributed by
The Great-West Life Assurance Company
8515 East Orchard Road, Englewood, Colorado 80111
(800) 468-8661 (U.S.) (303) 689-3360 (Englewood)
The group variable annuity contracts described in this prospectus
("Group Contracts") are designed and offered to provide retirement programs
that qualify for special federal income tax treatment for employees of
certain organizations. The Group Contracts may be issued in connection with
Contributions made by:
employers or employee organizations (such as non-profit entities defined
in Section 501(c) of the Internal Revenue Code of 1986, as amended ("Code"),
and governmental entities defined in Code Section 414(d)) to purchase
annuities for their employees under pension or profit-sharing plans described
in Section 401(a) of the Code,
employers or employee organizations to purchase annuities for their
employees under cash or deferred profit sharing plans described in Section
401(k) of the Code, state educational organizations and certain tax-exempt
organizations to purchase annuities for their employees under Section 403(b)
of the Code, and
certain state and local governmental entities and, for years beginning
after 1986, other tax-exempt organizations to purchase annuities for their
employees under a deferred compensation plan described in Section 457 of the
Code.
The Group Contracts are issued by Great-West Life & Annuity Insurance
Company ("GWL&A"). The Great-West Life Assurance Company ("Great-West")
is
the principal underwriter and distributor of the Group Contracts. The owner
of a Group Contract will be the employer, or may also be certain employer
associations or employee associations for contracts issued under Section
401(a), Section 401(k) or Section 403(b) retirement programs. Contributions
are made by the employer for employees desiring coverage under a Group
Contract. The amount of the Contributions will be determined by the employer.
A separate record (a "Participant Annuity Account") will be established in
the name of each participating employee (a "Participant") to reflect the
dollar values of Contributions made in each Participant's name. The Group
Contracts provide for a deferred annuity to begin at a future pre-selected
date (the "Annuity Commencement Date"). The Group Contracts also provide for
a death benefit. An initial Contribution under a Section 403(b) retirement
program may be canceled and returned at the employee's request within fifteen
days of the date of the Contribution.
Prior to the Annuity Commencement Date, the Contributions can
accumulate
on a variable basis, guaranteed basis, or a combination of both. To
accumulate on a variable basis, Contributions will be allocated to the
FUTUREFUNDS SERIES ACCOUNT (the "Series Account"), a segregated
investment
account of GWL&A. The value of the Contributions prior to the Annuity
Commencement Date and thus the amount accumulated to provide annuity
payments
will depend upon the investment performance of the Series Account.
The amount of annuity payments may also be variable based upon the
investment experience of the Series Account, or may be fixed without regard
to such experience, or may be a combination of both. The Series Account
currently has seventeen Investment Divisions available for allocation of
Contributions. Thirteen of the Investment Divisions invest in shares of the
portfolios of Maxim Series Fund Inc. ("Maxim"), a series, open-end management
investment company described beginning on page 2.
THIS PROSPECTUS IS ACCOMPANIED BY CURRENT PROSPECTUSES
FOR MAXIM
SERIES FUND,
INC., TCI GROWTH AND TCI BALANCED, FIDELITY VIP GROWTH AND
FIDELITY
VIP II
ASSET MANAGER PORTFOLIOS. THESE PROSPECTUSES PROVIDE
INFORMATION
A
PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING AND
SHOULD BE
KEPT FOR
FUTURE REFERENCE. ADDITIONAL INFORMATION ABOUT THE
GROUP
CONTRACTS HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN A
STATEMENT
OF
ADDITIONAL INFORMATION, DATED APRIL 30, 1996,
WHICH IS
INCORPORATED
HEREIN BY REFERENCE. THE STATEMENT OF ADDITIONAL
INFORMATION, THE
TABLE OF
CONTENTS OF WHICH IS SET FORTH ON THE LAST PAGE
OF THIS
PROSPECTUS, IS
AVAILABLE WITHOUT CHARGE UPON REQUEST BY WRITING OR
TELEPHONING
GWL&A AT
THE ADDRESS OR TELEPHONE NUMBER SET FORTH
ABOVE . THESE
SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE
COMMISSION
NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF
THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL
OFFENSE.
The date of this prospectus is April 30, 1996
the Money Market Portfolio, seeks preservation of capital, liquidity and
the highest possible current income consistent with the foregoing objectives
through investments in short-term money market securities. Shares of the
Money Market Portfolio are neither insured nor guaranteed by the U.S.
Government. Further, there is no assurance that the Portfolio will be able
to maintain a stable net asset value of $1.00 per share.
the Bond Portfolio, seeks to achieve maximum total return consistent
with the preservation of capital, through investment in an actively managed
portfolio of debt securities.
the Stock Index Portfolio, seeks to provide investment results, before
fees, that correspond to the total return of the S&P 500 Index and the S&P
MidCap Index, weighted according to their respective pro-rata shares of the
market;
the U.S. Government Securities Portfolio, seeks the highest level of
return consistent with preservation of capital and substantial credit
protection and seeks to achieve this objective by investing in
mortgage-related securities issued or guaranteed by an agency or
instrumentality of the U.S. Government, other U.S. agency and instrumentality
obligations, and in U.S. Treasury obligations;
the Small-Cap Index Portfolio, seeks to provide investment results,
before fees, that correspond to the total return of the Russell 2000 Index.
The Russell 2000 Index was developed in 1979 by the Frank Russell Company
to
track the stock market performance of a broadly diversified group of small
capitalization domestic stocks (currently those stocks with capitalization of
below $440 million);
the Mid-Cap Portfolio (Growth Fund I Investment Division), seeks to
provide long-term growth of capital through investment of at least 65% of
the Portfolio's assets in medium sized companies.
the Total Return Portfolio, seeks to obtain the highest possible total
return, a combination of income and capital appreciation, consistent with
reasonable risk;
the International Equity Portfolio, seeks to achieve long term capital
growth through a flexible policy of investing in stocks and debt obligations
of companies and governments outside the United States. Any income realized
will be incidental.
the Corporate Bond Portfolio, which seeks high total
investment
return by investing primarily in debt securities (including
convertibles), although up to 20% of its assets, at the time of
acquisition, may be invested in preferred stocks.
the Small-Cap Value Portfolio (Ariel Value Investment Division), seeks
to achieve long-term capital appreciation by investing primarily in common
stocks, although the Portfolio may also invest in other securities, including
restricted and preferred stocks.
the Maxim INVESCO Small-Cap Growth
Portfolio, seeks to
achieve long-term capital growth by investing its assets principally in a
diversified group of equity securities of emerging growth companies with
market capitalizations of $1 billion or less at the time of initial
purchase.
the Maxim INVESCO ADR Portfolio, seeks to achieve a high
total
return on investment through capital appreciation and current income, while
reducing risk through diversification by investing substantially all its
assets in foreign securities that are issued in the form of American
Depository Receipts ("ADRs") or foreign stocks that are registered with the
Securities and Exchange Commission and traded in the U.S.
the Maxim T. Rowe Price Equity/Income Portfolio, seeks to
provide
substantial dividend income and also capital appreciation by investing
primarily in dividend-paying common stocks of established companies.
The Series Account also has two Investment Divisions which invest in
shares of TCI Portfolios, Inc. ("TCI"), a diversified, series, open-end
management investment company which is a member of the Twentieth Century
family of mutual funds. These Investment Divisions invest in shares of one of
the following portfolios of TCI:
the TCI Growth Fund, which seeks capital growth by investment in
common
stocks (including securities convertible to common stocks) and other
securities that meet certain fundamental and technical standards and, in the
opinion of TCI's management, have better than average potential for
appreciation; and
the TCI Balanced Fund, which seeks capital growth and current income,
and it is the intention of TCI's management to maintain approximately 60% of
the assets of the TCI Balanced Fund in common stocks considered by TCI
management to have better-than-average prospects for appreciation and the
remaining assets in bonds and other fixed income securities.
The Series Account has two Investment Divisions which invest in shares
of Fidelity Variable Insurance Products Fund ("Fidelity VIP"), a diversified
management investment company offering insurance companies a selection of
investment vehicles for variable annuity insurance contracts. These
Investment Divisions invest in shares of one of the following portfolios of
Fidelity VIP:
the Fidelity VIP Growth Portfolio, seeks capital appreciation. The
Portfolio normally purchases common stocks, although its investments are not
restricted to any one type of security. Capital appreciation may also be
found in other types of securities including bonds and preferred stocks; and
the Fidelity VIP II Asset Manager Portfolio, seeks high total return
with reduced risk over the long-term by allocating its assets among domestic
and foreign stocks, bonds and short-term fixed-income instruments.
If the underlying plan document or program of any other Group
Policyholder does not permit investments in any Investment Division of the
Series Account, GWL&A shall restrict the availability of such Investment
Division in compliance with the Group Policyholder's request.
TABLE OF CONTENTS
Page
Fee Table . 5
Examples 7
Glossary of Special Terms 9
Questions and Answers About the Series Account Variable Annuity
11
Performance Related Information 14
Great-West Life & Annuity Insurance Company
14
FutureFunds Series Account 15
The Group Contracts 15
Accumulation Period 17
Investments of the Series Account 23
Administrative Charges, Risk Premiums and Other Deductions
26
Annuity Options 30
Federal Tax Consequences 33
Voting Rights 38
Distribution of the Group Contracts 38
Return Privilege 39
State Regulation 39
Restrictions Under the Texas Optional Retirement
Program
39
Reports 39
Legal Proceedings 39
Legal Matters 39
Registration Statement 39
Statement of Additional Information 40
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchases (as a percentage of purchase
payments) None
Deferred Sales Load (as a percentage of amount distributed)
6% maximum
See footnote (1), page 7
Distribution Fees (as a percentage of purchase payments)
None
Exchange Fee None
TOTAL Contract Owner Transaction Expenses (as a percentage of purchase
payments) 6%
Annual Contract Fee $30 maximum
See footnote (2), page 7
Separate Account Annual Expenses (as a percentage of average account value)
Mortality Risk 0.44%
Expense Risk 0.11%
TOTAL Separate Account Annual Expenses
0 .55%
Maxim Series Fund, Inc. Annual Expenses (as a percentage of Maxim Series
Fund, Inc. average net assets)
Money
Market
Bond Stock
Index U.S. Gov't.
Securities Small-Cap
Index
Management Fees .46% .60% .60%
.60%
.60%
Other Expenses None None None
None
None
Total Maxim Series Fund, Inc Annual Expenses
.46%
.60%
.60%
.60%
.60%
International
Equity Total
Return Corporate
Bond
Mid-Cap
(Growth Fund I)
Management Fees1.00%.60%.90%.95%
Other Expenses.50%NoneNone.15%
Total Maxim Series Fund, Inc Annual Expenses
1.50%
.60%
.90%
1.10%
Maxim T. Rowe Price Equity/Income
Small-Cap Value
(Ariel Value) Maxim INVESCO
ADR Maxim INVESCO
Small-Cap Growth
Management Fees.80%1.00%1.00%.95%
Other Expenses.15%.35% .30% .15%
Total Maxim Series Fund, Inc Annual Expenses
.95%
1.35%
1.30%
1.10%
FEE TABLE (cont'd)
TCI Portfolios Annual Expenses (as a percentage of TCI Portfolios average net
assets)
TCI GrowthTCI Balanced
Management Fees1.00%1.00%
Other ExpensesNoneNone
TOTAL TCI Portfolios
Annual Expenses
1.00%
1.00%
Fidelity VIP Portfolios Annual Expenses (as a percentage of Fidelity VIP
Portfolios average net assets)
Fidelity VIP GrowthFidelity VIP II Asset Manager
Management Fees .61%.71%
Other Expenses.09%.08%
TOTAL Fidelity VIP Portfolio
Annual Expenses
.70%
.79%
EXAMPLES
Example 1:
If you do not take a distribution from your contract, or if you annuitize at
the end of the applicable time period you would pay the following expenses on
a $1,000 investment, assuming a 5% annual return on assets:
1 Year3 Year5 Year10 Year
Money Market Investment Division$11.17$36.57$66.48$165.27
Bond Investment Division$12.63$41.26
$74.92
$185.62
Stock Index Investment Division
$12.63
$41.26
$74.92 $185.62
U.S. Government Securities
Investment Division
$12.63
$41.26
$74.92
$185.62
Small-Cap Index
Investment Division
$12.63
$41.26
$74.92
$185.62
Total Return Investment Division
$12.63
$41.26
$74.92 $185.62
Growth Fund I Investment Division
$17.80
$57.88
$104.58 $256.00
International Equity
Investment Division
$21.92
$71.00
$127.78
$309.83
Corporate Bond Investment Division
$15.73
$51.26
$92.80 $228.27
Ariel Value Investment Division
$20.38
$66.10
$119.13 $289.90
INVESCO ADR Investment Division
$21.92
$71.00
$127.78 $309.83
INVESCO Small-Cap Growth
Investment Division
$17.80
$57.88
$104.58
$256.00
T. Rowe Price Equity/Income
Investment Division
$16.25
$52.92
$95.76
$235.25
TCI Growth Investment Division
$16.77
$54.58
$98.70 $242.20
TCI Balanced Investment Division
$16.77
$54.58
$98.70 $242.20
Fidelity VIP Growth
Investment Division
$13.66
$44.61
$80.91
$199.98
Fidelity VIP II Asset Manager
Investment Division
$14.60
$47.61
$86.27
$212.78
The above Examples should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown,
subject to the guarantees in the Group Contracts.
The purpose of the table shown above is to assist the Group Policyholder in
understanding the various costs and expenses that a Group Policyholder will
bear directly or indirectly. (See "Administrative Charges, Risk Premiums
and Other Deductions" for more information pertaining to these costs and
expenses.)
Please note that while GWL&A currently intends to pay any Premium Tax levied
by any governmental entity, GWL&A reserves the right to, in the future and
with prior notice to Participants, deduct the Premium Tax, if any, from
Participant Annuity Account Values. (Please see "Administrative Charges,
Risk Premiums and Other Deductions" for more information.)
(1) The Securities and Exchange Commission requires that the deferred sales
load shown in the fee table and the examples be the maximum contingent
deferred sales load assessed. This charge does, however, vary by Group
Policyholder. Please consult with your employer or Great-West representative
for the fee that applies to your contract. (See " Administrative Charges,
Risk Premiums and Other Deductions: Contingent Deferred Sales Charge" for
more information.)
(2) The Securities and Exchange Commission requires that the annual contract
fee shown in the fee table be reflective of the contract fees collected
during the year. This charge is assumed to remain the same in each period
listed but does vary by Group Policyholder. Please consult with your employer
or Great-West representative for the fee that applies to your contract. (See
"Administrative Charges, Risk Premiums and Other Deductions: Contract
Maintenance Charge.")
EXAMPLES (cont'd)
Example 2:
If you take a distribution in whole from your contract at the end of
the applicable time period you would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets:
1 Year 3 Year
5 Year 10
Year
Money Market Investment Division $71.17
$96.56
$126.48 $165.27
Bond Investment Division $72.63
$101.26
$134.92
$185.62
Stock Index Investment Division
$72.63
$101.26
$134.92 $185.62
U.S. Government Securities
Investment Division
$72.63
$101.26
$134.92
$185.62
Small-Cap Index
Investment Division
$72.63
$101.26
$134.92
$185.62
Total Return Investment Division
$72.63
$101.26
$134.92 $185.62
Growth Fund I Investment Division
$77.80
$117.88
$164.58 $256.00
International Equity
Investment Division
$81.92
$131.00
$187.78
$309.83
Corporate Bond Investment Division
$75.73
$111.26
$152.80 $228.27
Ariel Value Investment Division
$80.38
$126.10
$179.13 $289.90
INVESCO ADR Investment Division
$81.92
$131.00
$187.78 $309.83
INVESCO Small-Cap Growth
Investment Division
$77.80
$117.88
$164.58
$256.00
T. Rowe Price Equity/Income
Investment Division
$76.25
$112.92
$155.76
$235.25
TCI Growth Investment Division
$76.77
$114.58
$158.70 $242.20
TCI Balanced Investment Division
$76.77
$114.58
$158.70 $242.20
Fidelity VIP Growth
Investment Division
$73.66
$104.61
$140.91
$199.98
Fidelity VIP II Asset Manager
Investment Division
$74.60
$107.61
$146.27
$212.78
The above Examples should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown,
subject to the guarantees in the Group Contracts.
The purpose of the table shown above is to assist the Group Policyholder in
understanding the various costs and expenses that a Group Policyholder will
bear directly or indirectly. (See "Administrative Charges, Risk Premiums
and Other Deductions" for more information pertaining to these costs and
expenses.)
Please note that while GWL&A currently intends to pay any Premium Tax levied
by any governmental entity, GWL&A reserves the right to, in the future and
with prior notice to Participants, deduct the Premium Tax, if any, from
Participant Annuity Account Values. (Please see "Administrative Charges,
Risk Premiums and Other Deductions" for more information.)
(1) The Securities and Exchange Commission requires that the deferred sales
load shown in the fee table and the examples be the maximum contingent
deferred sales load assessed. This charge does, however, vary by Group
Policyholder. Please consult with your employer or Great-West representative
for the fee that applies to your contract. (See " Administrative Charges,
Risk Premiums and Other Deductions: Contingent Deferred Sales Charge" for
more information.)
(2) The Securities and Exchange Commission requires that the annual contract
fee shown in the fee table be reflective of the contract fees collected
during the year. This charge is assumed to remain the same in each period
listed but does vary by Group Policyholder. Please consult with your employer
or Great-West representative for the fee that applies to your contract. (See
"Administrative Charges, Risk Premiums and Other Deductions: Contract
Maintenance Charge.")
GLOSSARY OF SPECIAL TERMS
As used in this prospectus, the terms have the indicated meanings:
Accumulation Period: The period during which the Participant is covered under
this Group Contract prior to the Participant's Annuity Commencement Date.
Accumulation Unit: An accounting measure used to determine the Variable
Account Value before the Annuity Commencement Date.
Administrative Offices: The Administrative Offices of GWL&A are located at
8515 E. Orchard Rd., Englewood, Colorado 80111.
Annuity Commencement Date: The date on which annuity payments commence
under
an Annuity Option.
Annuity Unit: An accounting measure used to determine the dollar value of any
variable dollar annuity payment after the first payment.
Contribution(s): The total dollar amount(s) paid to purchase an annuity for
a Participant.
Fidelity VIP: Fidelity Variable Insurance Products Fund, a registered
management investment company in which assets of the Series Account may be
invested.
Fixed Annuity: An annuity with payments which remain fixed throughout the
payment period and which do not reflect the investment experience of a
separate account.
Group Contract: An agreement between GWL&A and the Group Policyholder
providing a fixed and/or variable annuity.
Investment Division: The Series Account is divided into investment divisions,
one for each designated Investment Portfolio maintained by Maxim, TCI or
Fidelity VIP and made available to the Series Account.
Investment Portfolio: The securities held in a portfolio of Maxim, TCI or
Fidelity VIP.
Maxim: Maxim Series Fund, Inc., a registered management investment company
in
which assets of the Series Account may be invested.
Participant: An employee who is covered under a Group Contract.
Participant Annuity Account: A separate record established in the name of
each Participant which reflects the total of the Participant's Guaranteed and
Variable Account Values.
Participant Annuity Account Value: The sum of the Participant's Guaranteed
and Variable Account Values.
Premium Tax: The amount of tax, if any, charged by a state or other
government authority on premiums.
Request: Any request in a form satisfactory to GWL&A and received by
GWL&A
at its Administrative Office, as required by any provision of the Group
Contract, and at other times as required by GWL&A.
Series Account: The segregated investment account of Great-West Life &
Annuity Insurance Company called "FUTUREFUNDS Series Account" existing
under
Colorado law and registered as a unit investment trust under the Investment
Company Act of 1940, as amended.
TCI: TCI Portfolios, Inc., a registered management investment company in
which assets of the Series Account may be invested.
Transfer: The transfers of all or a portion of a Participant Annuity Account
Value between and among the Variable and/or Guaranteed Sub-Accounts.
Transfer to Other Companies: The transfer of all or a portion of a
Participant Annuity Account Value to another company.
Valuation Date: The date on which the net asset value of Maxim, TCI, or
Fidelity VIP is determined, and the date on which any Contribution or
Request from the Participant/Group Policyholder will be processed by GWL&A.
A unit value is calculated once daily Monday through Friday except on
holidays on which the New York Stock Exchange is closed. Contributions and
Requests received after 4:00 p.m. EST/EDT will be deemed to have been
received on the next business day. On the day after Thanksgiving, however,
transactions submitted other than by automated voice response unit or by
computer link will not be processed.
Valuation Period: The period between the ending of two successive Valuation
Dates.
Variable Account: The account established under this Group Contract
providing for Variable Sub-Accounts.
Variable Account Value: The sum of the values of the Variable Sub-Accounts
credited to a Participant Annuity Account.
Variable Annuity: An annuity providing for payments, the amount of which will
vary in accordance with the changing values of securities held in the Series
Account.
Variable Sub-Account: A subdivision of the Variable Account containing the
value credited to a Participant from an Investment Division.
QUESTIONS AND ANSWERS ABOUT THE SERIES ACCOUNT VARIABLE
ANNUITY
What is the objective of the Group Contracts offered in this Prospectus?
The objective of the Group Contracts is to provide annuity retirement
programs that qualify for special federal income tax treatment for employees.
Under Section 401(a) plans (including plans sponsored by non-profit and
governmental entities) and under Section 401(k) plans, any employer and
certain employee organizations, such as labor unions, may purchase a Group
Contract. Employers eligible to purchase a Group Contract under Section
403(b) retirement programs include state educational institutions and certain
tax-exempt organizations that meet the requirements of Section 501(c)(3) of
the Code. In addition, under Section 403(b) programs, (i) certain
associations of state educational employees and associations of employees of
tax-exempt organizations may enter into a Group Contract for the benefit of
their members; and (ii) certain associations of state educational employers
and associations of tax-exempt employers may also enter into a Group Contract
for the benefit of employees or their employer members. Under Section 457
retirement programs of the Code, certain state and local governmental
entities and, for years beginning after 1986, other tax-exempt organizations
described in Section 457 are also eligible. (See "The Group Contracts;
Eligible Purchasers").
How can an employee obtain coverage under a Group Contract?
After purchasing a Group Contract, the employer will submit to GWL&A
an
application for any employee who desires coverage under the contract and is
eligible to participate in the employer's retirement program. An employee
should consult his/her employer for information concerning eligibility.
How is the amount of Contributions determined?
For Group Contracts issued under a Section 401(a) retirement program,
the employer or employee organization will make Contributions pursuant to its
underlying Federal or State qualified plan.
For Group Contracts issued under a Section 401(k) retirement program,
the employer will make Contributions pursuant to an underlying Section 401(k)
plan and either a salary reduction agreement with its employees or a cash or
deferred agreement.
For Group Contracts issued under an employer's Section 403(b) retirement
program, the employer will make Contributions for its employees pursuant to
either a salary reduction agreement with those employees or an agreement to
forego a salary increase. In each case, the employee will decide his/her own
level and number of Contributions to be made under a Group Contract, except
with respect to employer-sponsored plans, under which the employer will make
Contributions pursuant to an underlying retirement plan.
For Group Contracts issued under a Section 457 retirement program, the
employer will make Contributions pursuant to an underlying deferred
compensation plan.
The employer will report the amount paid as Contributions to GWL&A.
There is no minimum amount or number of Contributions.
How are Contributions allocated?
Contributions are allocated to the Series Account to accumulate on a
variable basis, to the Guaranteed Account to accumulate at a guaranteed rate
of return, or combination of both. The assets of the Series Account are
invested at net asset value (no sales charge) in shares of Maxim, TCI or
Fidelity VIP. See "Investments of the Series Account" for the
investment objectives and policies of those portfolios of Maxim, TCI and
Fidelity VIP which are available for Allocation of Contributions to the
Series Account. They are also described in full in the accompanying
prospectus for Maxim, TCI and Fidelity VIP.
How will a covered employee know the value of the Contribution made in
his/her name?
A Participant Annuity Account will be established in the name of each
Participant to reflect the dollar value of Contributions made in each
Participant's name. Participants will be furnished not less frequently than
annually a statement of the Participant Annuity Account Value established in
his/her name.
What elections are permitted under the Group Contracts?
Under the Group Contracts issued pursuant to Section 401(a) or Section
401(k) retirement programs, all Contributions are held for the exclusive
benefit of the Participants to the extent vested. All elections permitted
under the Group Contracts are made directly by the employer to GWL&A. The
underlying pension or profit sharing plan may, however, permit the
Participants to make certain of those elections indirectly through the
employer.
Under the Group Contracts issued pursuant to Section 403(b) retirement
programs, all Contributions are vested in the Participant when made, subject
to any limitations in the underlying retirement plan, and the Participant
makes all the elections permitted under the contract, except with respect to
employer-sponsored plans, under which elections are made directly by the
employer to GWL&A. The underlying retirement plan may, however, permit the
Participants to make certain of these elections indirectly through the
employer.
Under the Group Contracts issued pursuant to Section 457 retirement
programs, all Contributions remain property of the employer until made
available to a Participant by the employer's underlying deferred compensation
plan. All elections permitted under these Group Contracts are made directly
by the employer to GWL&A. An underlying deferred compensation plan may,
however, permit the Participants to make certain of those elections
indirectly through the employer.
What are the charges to Participants under the Group Contracts?
GWL&A deducts a "Contract Maintenance Charge" for administrative
expenses of not more than $30.00 annually from each Participant Annuity
Account Value. The Contract Maintenance Charge on Section 403(b) Group
Contracts will be waived for an initial period of no less than 12 months and
up to 15 months, depending on the Participant's effective date. There may
also be a charge associated with the total or partial distribution from a
Participant Annuity Account prior to the Annuity Commencement Date.
The cumulative total of all Contingent Deferred Sales Charges applied to
any Participant Annuity Account will not exceed 6% of all Contributions made
within 72 months prior to the date of any distribution in whole or in part,
or, with respect to certain Sections 401(a) or 401(k) and 457 retirement
programs, 5% of the amount distributed. Participants in some programs will
not be assessed a Contingent Deferred Sales Charge. (See "Administrative
Charges, Risk Premiums and Other Deductions.") Certain redeemability
restrictions apply to Group Contracts issued under the Texas Optional
Retirement Program. (See "Restrictions Under the Texas Optional Retirement
Program.") There may also be redeemability restrictions applied to
Participants in Section 403(b) Group Contracts. (See " Federal Tax
Consequences: Section 403(b) Retirement Programs.") Upon a total or
partial distribution, a penalty tax may be imposed pursuant to Section 72(t)
of the Code. (See "Federal Tax Consequences.")
GWL&A also deducts from the net asset value of the Series Account an
amount, computed daily, equal to an annual rate of 0.55% for
mortality
and expense risk guarantees.
GWL&A presently intends to pay any applicable state premium taxes as a
result of the existence of the Participant Annuity Accounts. Applicable state
premium taxes range from 0 to 3.50% of the Contributions or the
Participant Annuity Account Value.
Maxim, TCI, and Fidelity VIP incur a charge against the net asset value
for Investment Advisory Services and may incur other expenses.
What are the distribution rights under the Group Contracts?
A distribution in whole or in part may be taken from the Participant
Annuity Account up to 30 days prior to the Annuity Commencement Date, subject
to any limitations in the underlying retirement plan and subject to a
Contingent Deferred Sales Charge. (See "Accumulation Period: Total and
Partial Distribution" for a description of distribution procedures.) Under
certain circumstances, a Contingent Deferred Sales Charge will not be charged
to Participants who have participated for 15 or more years in the FutureFunds
Group Annuity Contract. (See "Administrative Charges, Risk Premiums and
Other
Deductions.")
Can Contributions be Transferred between the Variable and Fixed Sub-Accounts
Yes. All or a portion of a Participant Annuity Account Value held in any
of the Variable Sub-Accounts or Daily Interest Guarantee Sub-Account may be
Transferred at any time prior to the Annuity Commencement Date by written or
telephone request. Transfers of all or a portion of a Participant Annuity
Account Value held in any of the Guaranteed Certificate Funds or
Guaranteed Fixed Funds may be made only at Certificate maturity. (See
" Accumulation Period: Transfers Between Variable and Guaranteed
Sub-Accounts.")
What Annuity Options are available?
The Group Contracts provide for several annuity options payable on a
variable, fixed, or combination basis. An election of any annuity option(s)
must be made at least 30 days prior to the Participant's Annuity Commencement
Date. If no election is made, annuity payments will begin automatically on
the Annuity Commencement Date under an option providing for a life annuity
with 120 monthly payments certain. (See "Annuity Options.")
What are the voting rights under the Group Contracts?
Participants under Section 403(b) retirement programs and the employer
under Section 401(a), Section 401(k) and Section 457 retirement programs will
be entitled to instruct GWL&A to vote shares of Maxim, TCI or Fidelity VIP
held for their Participant Annuity Accounts. (See "Voting Rights.")
Is there a short-term cancellation right?
Yes. Within fifteen (15) days after a Participant Certificate is first
mailed, it may be canceled by the Participant for any reason by delivering or
mailing it, along with a Request to cancel, to GWL&A's Administrative Offices
or to an authorized agent of GWL&A. This cancellation right only applies to
Group Contracts issued under Section 403(b) retirement programs. (See "Return
Privilege.")
How will the Group Contracts be distributed?
The Group Contracts will be distributed through Great-West and will be
sold by duly licensed insurance agents of Great-West, independent insurance
brokers, and various other registered broker-dealers. (See "Distribution of
the Group Contracts.")
PERFORMANCE RELATED INFORMATION
From time to time, the Series Account may advertise certain performance
related information concerning its Investment Divisions. Performance
information about an Investment Division is based on the
Investment
Division's historical performance only and is not intended to indicate
future performance.
The Series Account may include total return in advertisements or other sales
material regarding the Money Market, Bond, Stock Index, U.S.
Government Securities, TCI Growth, TCI Balanced, Small-Cap Index,
Mid-Cap
(Growth Fund I) , International Equity, Total Return, Corporate Bond,
Small-Cap Value (Ariel Value), Maxim T. Rowe Price
Equity/Income,
Maxim INVESCO ADR, Maxim INVESCO Small-Cap
Growth,
Fidelity VIP
Growth and the Fidelity VIP II Asset Manager Investment Divisions. When the
Series Account advertises the total return of one of these portfolios, it
will be calculated for one year, five years, and ten years or some other
relevant period if the portfolio has not been in existence for at least ten
years. Total return is measured by comparing the value of an investment in
the portfolio at the beginning of the relevant period to the value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions).
For the Money Market Investment Division, "yield" refers to the income
generated by an investment in the Money Market Investment Division over a
stated seven-day period. This income is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to
be generated each week over a 52-week period and is shown as a percentage of
the investment. The "effective yield" of the Money Market Investment Division
is calculated similarly but, when annualized, the income earned by an
investment in the Money Market Investment Division is assumed to be
reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
The yield and effective yield calculations for the Money Market Investment
Division includes all recurring charges under the Group Contracts (but
does not include the Contingent Deferred Sales Charge), and is lower than
yield and effective yield for Maxim which does not have comparable
charges. Total return for the Investment Divisions includes all
charges under the Group Contracts, including any Contingent Deferred Sales
Charge, and likewise, is lower than total return at the Maxim, TCI or
Fidelity VIP level, which has no comparable charges.
For more complete information on the method used to calculate yields,
effective yields, and total return of the respective Investment Divisions,
see the "Statement of Additional Information".
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
GWL&A is a stock life insurance company originally organized under the laws
of the state of Kansas as the National Interment Association. Its name was
changed to Ranger National Life Insurance Company in 1963 and to Insuramerica
Corporation prior to changing to its current name in February of 1982. In
September of 1990, GWL&A redomesticated and is now organized under the laws
of the state of Colorado.
GWL&A is authorized to engage in the sale of life insurance, accident and
health insurance and annuities. It is qualified to do business in Puerto
Rico, the District of Columbia and 49 states in the United States.
GWL&A is a wholly-owned subsidiary of The Great-West Life Assurance
Company. The Great-West Life Assurance Company is a subsidiary of
Great-West
Lifeco Inc., a holding company. Great-West Lifeco Inc. is in turn a
subsidiary of Power Financial Corporation, a financial services company.
Power Corporation of Canada, a holding and management company, has voting
control of Power Financial Corporation. Mr. Paul Desmarais, through a
group of private holding companies, which he controls, has voting control
of Power Corporation of Canada.
GWL&A has primary responsibility for administration of the Group
Contracts and the Series Account. Its Administrative Offices are located at
8515 E. Orchard Road, Englewood, Colorado 80111.
FUTUREFUNDS SERIES ACCOUNT (THE "SERIES ACCOUNT")
The Series Account was originally established by GWL&A under Kansas
law
on November 15, 1983. The Series Account now exists pursuant to Colorado law
as a result of the redomestication of GWL&A. The Series Account has been
registered with the Securities and Exchange Commission as a unit investment
trust pursuant to the provisions of the Investment Company Act of 1940, as
amended, and meets the definition of a "separate account" under the
federal securities laws. Such registration does not involve
supervision of the management of the Series Account or GWL&A by the
Securities and Exchange Commission.
The Series Account currently has seventeen Investment Divisions
available for allocation of Contributions. If, in the future, GWL&A
determines that marketing needs and investment conditions warrant, it may
establish additional Investment Divisions which will be made available to
existing Group Contract owners to the extent and on a basis to be determined
by GWL&A. Each Investment Division invests in shares of Maxim, TCI or
Fidelity VIP allocable to one of seventeen Investment Portfolios, each having
a specific investment objective. Maxim, TCI and Fidelity VIP also have other
portfolios which are not generally available for investment by the Series
Account.
GWL&A does not guarantee the investment performance of the Series
Account. The portion of the Participant Annuity Account Value attributable to
the Series Account and the amount of variable annuity payments depend on the
investment performance of Maxim, TCI and Fidelity VIP. Thus, the Participant
bears the full investment risk for all Contributions allocated to the Series
Account.
The Series Account is administered and accounted for as part of the
general business of GWL&A; but the income, capital gains, or capital losses
of each Variable Sub-Account are credited to or charged against the assets
held in that Variable Sub-Account in accordance with the terms of the Group
Contracts, without regard to other income, capital gains or capital losses of
any other Variable Sub-Account or arising out of any other business GWL&A
may
conduct. Under Colorado law, the assets of the Series Account are not
chargeable with liabilities arising out of any other business GWL&A may
conduct. Nevertheless, all obligations arising under the Group Contracts are
generally corporate obligations of GWL&A.
THE GROUP CONTRACTS
Eligible Purchasers
Section 401(a) Retirement Programs. Employers, including non-profit entities
defined in Code Section 501(c) and governmental entities defined in Code
Section 414(d) and Sections 3(32) and 4 of the Employment Retirement Income
Security Act of 1974 ("ERISA"), and certain employee organizations defined in
Sections 3(4) and 3(5) of ERISA, such as labor organizations, may purchase a
Group Contract.
Section 401(k) Retirement Programs. Any employer and certain employee
organizations defined in Sections 3(4) and 3(5) of ERISA, such as labor
organizations, may purchase a Group Contract.
Section 403(b) Retirement Programs. State educational institutions and
tax-exempt organizations under Section 501(c)(3) of the Code may purchase
Group Contracts. In addition, associations of state educational employees,
associations of state educational employers, associations of employees of
organizations that are tax-exempt under Section 501(c)(3) of the Code, and
associations of tax-exempt employers under Section 501(c)(3), may also
purchase Group Contracts. In order to be eligible, however, the association
must also meet the requirements of Sections 501(c)(3).
Section 457 Retirement Program. State governments, local governments, rural
electric cooperatives, political subdivisions, and agencies,
instrumentalities and certain affiliates of such entities may purchase the
Group Contracts. For years beginning after 1986, organizations (other than
a governmental unit) which are exempt from tax under the Code, and which
maintain a Section 457 Retirement Program, may also purchase the Group
Contracts.
Any of the organizations mentioned above wishing to purchase Group
Contracts must complete application forms which selling agents will forward
to GWL&A's Administrative Offices for acceptance. Where the purchaser is an
employee association, any employer of an association member employee can
obtain coverage by completing application forms and agreeing in writing to be
bound by the terms of the Group Contract. Likewise, where the purchaser is an
association of tax-exempt employers, any employer member can obtain coverage
by following the same procedures. GWL&A reserves the right to reject any
application.
Employee Coverage
The employer will submit to selling agents an application for any
employee who desires coverage under the Group Contract and is eligible to
participate in the employer's retirement program. GWL&A reserves the right to
reject any application. An employee should consult his/her employer for
information concerning eligibility.
Contributions
Section 401(a) Retirement Programs. Contributions will be made by the
employer or employee organization pursuant to the employer's or employee
organization's underlying pension or profit-sharing plan.
Section 401(k) Retirement Programs. Contributions will be made by the
employer pursuant to the employer's underlying profit sharing plan and the
Participant's election to execute a salary reduction agreement or a cash or
deferred agreement.
Section 403(b) Retirement Programs. The employer will make Contributions in
accordance with a salary reduction agreement with its employees or an
agreement to forego a salary increase, except with respect to
employer-sponsored plans under which the employer will make Contributions
pursuant to an underlying retirement plan.
Section 457 Retirement Programs. Contributions will be made by the employer
pursuant to the employer's underlying deferred compensation plan.
Under all retirement programs, the employer will report the amount paid as
Contributions on forms provided by GWL&A. Checks for Contributions should
be
made payable to the Great-West Life & Annuity Insurance Company. There is
no
minimum amount or number of Contributions and, for any Participant Annuity
Account, Contributions can be made until the Participant's Annuity
Commencement Date.
Participant Annuity Account
A Participant Annuity Account will be established in the name of each
Participant to reflect the dollar values of Contributions made in each
Participant's name. Participants will be furnished no less frequently than
annually with a statement of the Participant Annuity Account Value
established in his/her name.
Ownership
Section 401(a) Retirement Programs. The employer or employee organization
purchasing a Group Contract is the owner of the Contract. Employer
Contributions vest in accordance with the terms of the employer's or employee
organization's underlying plan. Any employee Contributions are immediately
vested in the Participant. Neither the employer, employee organization nor
the Participants can assign any interest in the Group Contract or the
Participant Annuity Account.
Section 401(k) Retirement Programs. The employer or employee organization
purchasing a Group Contract is the owner of the contract. All employer
Contributions credited to a Participant Annuity Account pursuant to the
Participant's election to execute a salary reduction agreement or a cash or
deferred agreement are vested in the Participant. Any matching employer
Contributions vest in accordance with the terms of the employer's underlying
plan. Neither the employer, employee organization nor the Participants can
assign any interest in the Group Contract or the Participant Annuity Account.
Section 403(b) Retirement Programs. The employer or association purchasing a
Group Contract is the owner of the contract for the benefit of the
Participants. Each Participant receives a Participant Certificate to evidence
his/her coverage under the Group Contract. All Contributions credited to a
Participant Annuity Account are vested in the Participant, subject to any
limitations in the underlying retirement plan. Interests in the Group
Contract or the Participant Annuity Accounts cannot be assigned by the
employer, association or the Participants.
Section 457 Retirement Programs. The employer is the owner of the Group
Contract. All Contributions made in the name of the Participants remain the
property of the employer and subject to the claims of the employer's general
creditors until made available to the Participant in accordance with the
terms of the employer's underlying deferred compensation plan. The employer
may assign or transfer a Group Contract to another person as permitted by
applicable law and only with the prior written consent of GWL&A, which
assumes no responsibility for the validity or effect of any assignment.
PAYMENTS OF ANY BENEFITS UNDER THE GROUP CONTRACT WILL
ONLY BE
MADE IF THEN
PERMITTED UNDER THE EMPLOYER'S DEFERRED COMPENSATION
PLAN AS
DETERMINED BY
THE EMPLOYER.
Elections Under the Group Contracts
The Group Contracts permit the election of the Annuity Commencement
Date, allocation of Contributions, Transfers, distributions in whole or in
part, and the election of annuity payment options. Under Section 403(b)
retirement programs (other than employer-sponsored plans), the Participants
make all the elections permitted under the Group Contracts. Under Section
401(a), Section 401(k), Section 457 and employer-sponsored 403(b) retirement
plans, all elections are made by the employer, or the employee organization.
The employer's underlying pension, profit sharing or deferred compensation
plan or Section 403(b) retirement plan may, however, permit the Participants
to make certain of those elections indirectly through the employer. A
Participant should consult his/her employer for information concerning
elections permitted under its profit sharing or deferred compensation plan.
Amendment of Group Contracts
Section 401(a), Section 401(k) and Section 457 Retirement Programs. The Group
Contracts may be modified at any time by written agreement between GWL&A
and
the employer, or the employee organization.
Section 403(b) Retirement Programs. The Group Contracts may be modified at
any time by written agreement between GWL&A and either the employer, if it
is
the owner of a Group Contract, or the association. No modification will,
however, affect the terms of the contract which are applicable to
Contributions paid prior to such modification without the written consent of
the Participants.
In addition, GWL&A reserves the right to amend the Group Contracts
without the consent of any person to meet the requirements of the Investment
Company Act of 1940 or other applicable federal or state laws or
regulations, or to modify the annuity rates for future Contributions. GWL&A
will notify the Participants of any such changes.
ACCUMULATION PERIOD
Allocation of Contributions
Initial Contributions will be applied after receipt at GWL&A's
Administrative Offices within two business days if the application form is
complete, or within five business days if the application form is incomplete.
If an incomplete application form is completed within five business days of
GWL&A's receipt, the initial Contribution will be applied within two business
days of the application's completion. If the initial Contribution cannot be
so applied, it will be returned at once unless the prospective purchaser
specifically consents to GWL&A retaining the purchase payment until the
application is made complete. Subsequent Contributions will be applied
pursuant to the allocation instructions in the completed application and will
be allocated upon receipt by GWL&A at its Administrative Offices on the day
received. There is no minimum amount or number of Contributions.
Contributions for a Participant are allocated to the Series Account to
accumulate on a variable basis, to the Guaranteed Account to accumulate on a
guaranteed rate of return, or a combination of both, according to the
instructions of the Participant under a Section 403(b) retirement program
(other than employer sponsored plans). The Participants make all the
elections permitted under the Group Contracts under Section 401(a), Section
401(k), Section 457, or employer-sponsored Section 403(b) retirement program
("Allocation Instructions"). Allocation Instructions may be changed
at
any time and will be effective the later of (1) the date specified on the
form and (2) the date the completed form is received and recorded by GWL&A
at
its Administrative Offices. GWL&A will allocate the Contributions based upon
the instructions in the application form. A change of Allocation Instructions
will be effective for Contributions which are received after GWL&A's receipt
and recording of the change.
Upon allocation to the appropriate Variable Sub-Account, the
Contributions are converted into Accumulation Units. The number of
Accumulation Units credited with respect to the initial Contribution under a
Participant Annuity Account is determined by dividing the amount allocated to
each Variable Sub-Account by the value of an Accumulation Unit for that
Variable Sub-Account on the day following GWL&A's receipt of the initial
Contribution and GWL&A's affirmative determination to establish that
Participant Annuity Account. The number of Accumulation Units with respect to
any additional Contribution to a Participant Annuity Account is determined by
dividing the amount allocated to the appropriate Variable Sub-Account by the
value of an Accumulation Unit for that Sub-Account on the day the
Contribution is accepted. Contributions received after 4:00 p.m., EST/EDT,
shall be deemed to have been received on the next Valuation Date. The number
of Accumulation Units so determined shall not be changed by any subsequent
change in the value of an Accumulation Unit, but the dollar value of an
Accumulation Unit will vary in amount depending upon the investment
experience of the applicable underlying mutual fund.
Dollar Cost Averaging
A Participant may, by Request, automatically Transfer amounts from
one Investment Division selected from among those being allowed under this
option to any of the other Investment Divisions at regular intervals. The
intervals between Transfers may be monthly, quarterly, semi-annually or
annually. The Transfer will be initiated one frequency period following the
date of the Request, and thereafter Transfers will continue on the same day
each interval unless terminated by you, or for other reasons as set forth in
the Contract. Transfers can only occur on dates the New York Stock Exchange
("NYSE") is open. If there are insufficient funds in the applicable
Investment Division on the date of Transfer, no Transfer will be made;
however, Dollar Cost Averaging will resume once there are sufficient funds in
the applicable Investment Division.
Automatic Transfers must meet the following conditions:
1. The minimum amount that can be Transferred out of the selected
Investment Division is $100 per month.
2. The Participant must specify the percentage or dollar
amount to be
Transferred, the Accumulation Unit Values will be determined on each Transfer
date.
Dollar Cost Averaging may be used to purchase Accumulation Units of
the
Investment Divisions over a period of time so fewer Accumulation Units are
purchased when prices are greater and more Accumulation Units when prices are
lower. Participation in Dollar Cost Averaging does not, however, assure a
greater profit, nor will it prevent or necessarily alleviate losses in a
declining market. The Participant, by Request, may cease Dollar Cost
Averaging at any time. The Company reserves the right to modify, suspend or
terminate Dollar Cost Averaging at any time.
The Rebalancer Option
The Participant may, by Request, automatically Transfer among the
Investment Divisions on a periodic basis by electing the Rebalancer Option.
This option automatically reallocates the Variable Account Value to maintain
a particular allocation among Investment Divisions selected by the
Participant. The amounts allocated in each Investment Division will increase
or decrease at different rates depending on the investment experience of the
Investment Division.
The Participant may Request that the rebalancing occur one time only, in
which case the Transfer will take place after it has been received and
processed by the Company as provided in the Contract. Rebalancing may also
be set up on a quarterly, semi-annual or annual basis, in which case the
first Transfer will be initiated one frequency period following the date of
the Request. On the Transfer date for the specified Request, assets will be
automatically reallocated to the selected funds. Rebalancing will continue
on the same day each interval unless terminated by you, or for other reasons
as set forth in the Contract. Transfers can only occur on dates the NYSE is
open. In order to participate in the Rebalancer Option, the Participant's
entire Variable Account Value must be included.
The Participant must specify the percentage of Variable Account Value to
be allocated to each Investment Division and the frequency of rebalancing.
The Participant, by Request, may modify the allocations or cease the
Rebalancer Option at any time. Participation in the Rebalancer Option and
Dollar Cost Averaging at the same time is not allowed. Participation in the
Rebalancer Option does not assure a greater profit, nor will it prevent or
necessarily alleviate losses in a declining market. The Company reserves the
right to modify, suspend, or terminate the Rebalancer Option at any time.
Valuation of Accumulation Units
Accumulation Units for each Variable Sub-Account are valued separately,
but the method used for valuing Accumulation Units in each Variable
Sub-Account is the same. Initially, the value of each Accumulation Unit was
set at $10.00. Thereafter, the value of an Accumulation Unit in any Variable
Sub-Account on any Valuation Date equals the value of an Accumulation Unit in
that Sub-Account as of the immediately preceding Valuation Date multiplied by
the "Net Investment Factor" of that Variable Sub-Account for the current
Valuation Period. Accumulation Unit values are valued once each day that the
underlying mutual fund shares are valued.
The Net Investment Factor for each Variable Sub-Account for any
Valuation Period is determined by dividing (a) by (b), and subtracting (c)
from the result where:
(a) is the net result of:
(i) the net asset value per share of the underlying mutual fund shares
held in the Variable Sub-Account determined as of the end of the current
Valuation Period, plus
ii) the per share amount of any dividend (or, if applicable, capital
gain distributions) made by the underlying mutual fund on shares held in the
Variable Sub-Account if the "ex-dividend" date occurs during the current
Valuation Period, minus or plus
(iii) a per unit charge or credit for any taxes incurred by or provided
for in the Variable Sub-Account, which is determined by GWL&A to have
resulted from the investment operations of the Variable Sub-Account; and
(b) is the net result of:
(i) the net asset value per share of the underlying mutual fund shares
held in the Variable Sub-Account determined as of the end of the immediately
preceding Valuation Period, minus or plus
(ii) the per unit charge or credit for any taxes incurred by or provided
for in the Variable Sub-Account for the immediately preceding Valuation
Period; and
(c) is an amount representing the Risk Charge deducted from each Variable
Sub-Account on a daily basis.
Such amount is equal to 0.55% on an annual basis of the
daily net
asset value of each Variable Sub-Account.
The Net Investment Factor may be greater than, less than, or equal to
one. Therefore, the Accumulation Unit Value may increase, decrease or remain
unchanged.
The net asset value per share referred to in paragraphs (a) (i) and (b)
(i) above, reflect the investment performance of the underlying mutual fund
as well as the payment of underlying mutual fund expenses. (See "Investments
of the Series Account.")
Transfers Between Variable and Guaranteed Sub-Accounts
All or a portion of a Participant Annuity Account Value held in any of
the Variable Sub-Accounts and/or the Daily Interest Guaranteed Sub-Account
may be transferred at any time prior to the Participant's Annuity
Commencement Date by written or telephone request to GWL&A's
Administrative
Offices. Prior to Participant's Annuity Commencement Date, transfers of all
or a portion of a Participant Annuity Account Value held in any of
the
Guaranteed Certificate Funds or Guaranteed Fixed Funds may be
made
only at Certificate maturity by written or telephone request to GWL&A's
Administrative Offices. In order for telephone transfers to be accommodated,
a Telephone Transfer Form, signed by both the Contract Owner and the
Participant, must be on file with GWL&A. This form can be obtained at the
time the contract is signed, or at any time thereafter from the
Administrative Offices of GWL&A. The Transfer request shall be made by the
Participant under a Section 403(b) retirement program (other than an
employer-sponsored program) or by the employer or the employee organization
under a Section 401(a), Section 401(k), Section 457 or employer-sponsored
Section 403(b) retirement program. A Transfer will take effect on the later
of the date designated in the request or the date that the Transfer request
is received by GWL&A at its Administrative Offices. Transfer requests
received after 4:00 p.m., EST/EDT, shall be deemed to have been received on
the next following Valuation Date. If a Transfer request is received by GWL&A
within 30 days of the Annuity Commencement Date, GWL&A may delay the
Annuity
Commencement Date by not more than 30 days. Additional Transfer conditions
apply to Transfers to or from the Guaranteed Sub-Accounts.
Loans
Loans may be available under your contract. Consult your Plan
Administrator for complete details.
Total and Partial Distribution
A distribution in whole or in part may be taken from a Participant
Annuity Account under certain Section 403(b) retirement programs (other than
employer-sponsored plans) prior to the Participant's Annuity
Commencement Date by written request of the Participant. Certain Group
Contracts issued pursuant to Section 457 retirement programs will require the
signature of both the Participant and the owner for a total or partial
distribution. Under Group Contracts issued pursuant to Section 401(a),
Section 401(k), Section 457, or employer-sponsored Section 403(b) retirement
programs, the right to a total or partial distribution is subject to any
limitations or restrictions contained in the underlying retirement plan. A
Request must be received by GWL&A's Administrative Offices at least 30 days
prior to the Annuity Commencement Date. A request for partial distribution
must also specify the Variable and/or Guaranteed Sub-Account(s) from which
the partial distribution is to be made. The Participant Annuity Account Value
available for a distribution in whole or in part is the current value of the
Participant Annuity Account at the end of the Valuation Period for the
"effective date" of the request. The effective date is the later of the date
selected in the request or the date on which the Request is received
by GWL&A's Administrative Offices. Requests received after 4:00 p.m.,
EST/EDT, shall be deemed to have been received on the next following
Valuation Date. The partial or total distribution will be made within seven
days after GWL&A receives the Request. The payment may be postponed as
permitted by the Investment Company Act of 1940. The amount payable upon a
total distribution may be applied to an Annuity Option ( See
"Annuity
Options") instead of a lump-sum payment. There are additional conditions that
apply to a partial or total distribution of a Participant Annuity Account's
Guaranteed Account Value. Restrictions on a partial or total distribution of
a Participant Annuity Account apply to Section 403(b) retirement programs
(See " Federal Tax Consequences: Section 403(b) Retirement
Programs").
There are certain charges imposed upon a partial or total distribution
prior to the Annuity Commencement Date (See "Administrative Charges,
Risk
Premiums and Other Deductions: Contingent Deferred Sales Charge") and there
may be certain tax consequences (See "Federal Tax Consequences: Taxation of
Annuities in General").
Cessation of Contributions
If, in the judgment of either GWL&A or the employer, further
Contributions or Transfers to certain or all of the Variable and Guaranteed
Sub-Accounts should become inappropriate, either party may, upon 60 days
written notice to the other, direct that no future Contributions or Transfers
to such Sub-Account(s) be made. Where the owner of the Group Contract is an
association, the association may provide such notice with respect to all
Participants while the participating employers may also provide such notice
for their employee Participants only.
In the event that such written notice is given for any or all of the
Sub-Accounts, Contributions and Transfers made to such Sub-Account(s) prior
to the effective date of the notice (that date being called the "Date of
Cessation") may be maintained in such Sub-Account(s). Allocation
instructions must be changed to delete the affected Sub-Account(s). If no
change of allocation instructions is received, GWL&A may return all affected
Contributions or allocate such Contributions to a currently offered
Guaranteed Sub-Account.
In the event that a Date of Cessation is declared for all Sub-Accounts,
no new Participant Annuity Accounts will be established or Contributions
accepted by GWL&A. In addition, under Section 401(a), Section 401(k), Section
457, or Section 403(b) retirement programs, an employer or employee
organization must, by Request, elect one of the following Cessation Options:
Cessation Option (1): GWL&A will maintain each Participant Annuity
Account Value until the value of an account is applied to a payment option.
Cessation Option (2): GWL&A will pay, within seven (7) days of the Date
of Cessation of Deposits, the Variable Account Values of the Participant
Annuity Accounts as of the date the Request is received (at such later date
as may be specified in the Request) to either the Employer, the employee
organization or a person designated in writing by the employer or employee
organization as the successor insurer of the employer's deferred compensation
plan. GWL&A will pay the sum of the Guaranteed Contract Values of the
Participant Annuity Accounts as of the Date of Cessation to either the
employer, the employee organization or a person designated in writing by the
employer or the employee organization as the successor insurer of the
employer's or employee organization's deferred compensation plan, in 20 equal
quarterly installments. The amount of the installment will be the amount
determined by GWL&A on the date of the first such payment, but will not be
less than $514.80 for each $10,000 of Guaranteed Contract Value. The first
payment will be made (thirty) days after the date this Cessation Option is
elected.
If the employer or the employee organization has not elected a cessation
option within thirty (30) days of the Date of Cessation, Cessation Option (1)
will be deemed to have been elected. CESSATION OPTION (2) MAY NOT BE
AVAILABLE IN ALL GROUP CONTRACTS.
Contract Termination
Section 401(a) Group Contracts contain a contract termination provision.
Under this provision, either GWL&A or the contract holder may terminate the
Group Contract on at least sixty (60) days prior written notice (the
effective date of which shall be the "Contract Termination Date"). After the
Contract Termination Date, no Transfer shall be made, no payment option shall
be elected and no Contributions shall be accepted by GWL&A under the terms
of
the Group Contract.
GWL&A will pay, within seven (7) days of the Contract Termination Date,
the value of all monies held in the Variable Sub-Account as of the Contract
Termination Date to either the employer, the employee organization or to a
person or entity designated in writing by the employer or employee
organization.
Death Benefit
In the event of the death of the Participant prior to his/her Annuity
Commencement Date, and prior to age 70, a death benefit will be paid upon
receipt of proof of the death of the Participant. The death benefit is the
greater of the Participant Annuity Account Value or the sum of all
Contributions paid less any partial distributions. Where death occurs on or
after the Participant's 70th birthday, but prior to the Annuity Commencement
Date, a death benefit equal to the Participant Annuity Account Value will be
paid.
Under a Section 403(b) retirement program (other than an
employer-sponsored plan), the death benefit will be paid to the Beneficiary
designated by the Participant. Under a Section 401(a), a Section 401(k), a
Section 457, or employer-sponsored Section 403(b) retirement program the
employer or the employee organization will designate to whom the death
benefit will be paid pursuant to the terms of the employer's underlying plan.
The Participant should consult with his/her employer or employee organization
concerning the payment of the death benefit under the employer's or
employee's organization deferred compensation plan.
The payee may elect to receive the death benefit under any of the
Annuity Options, in the form of a lump-sum payment, or in the form of a
partial lump-sum payment with the balance applied towards any of the Annuity
Options. This election must be made within 60 days after GWL&A received
adequate proof of the Participant's death. If no election is made within the
60 day period, a lump-sum settlement will be made.
The Participant Annuity Account Value, for purposes of determination of
the death benefit, will be calculated as of the end of the Valuation Period
during which proof of death and an election by the Payee are received at
GWL&A's Administrative Offices. If no election is made, the Participant
Annuity Account Value will be determined as of 60 days after the date on
which proof of death is received.
If a lump-sum or partial lump-sum settlement is requested, the proceeds
will be paid within (seven) days of GWL&A's receipt of such election and
adequate proof of death. If any of the Annuity Options are elected, the
annuity payment shall commence thirty (thirty) days after the receipt of such
election and adequate proof of death. Annuity payments shall commence by the
later of (fifteen) days or the first day of the month after receipt of such
election and adequate proof of death. The payment of the death benefit will
be made in accordance with any applicable laws and regulations governing
payment of death benefits, subject to postponement in certain circumstances
as permitted by the Investment Company Act of 1940. (See " Federal Tax
Consequences: Taxation of Annuities in General" for certain
distribution-on-death rules that may be applicable to the payment of death
benefits).
The Participant under a Section 403(b) retirement program (other than an
employer-sponsored plan) may designate or change a beneficiary by filing a
Request with GWL&A at its Administrative Offices. Each change of beneficiary
revokes any previous designation. Unless otherwise provided in the
beneficiary designation, one of the following procedures will take place on
the death of a beneficiary: (1) if there is more than one primary surviving
beneficiary, the Participant Annuity Account Value will be shared equally
among them; (2) if any primary beneficiary dies before the Participant, that
beneficiary's interest will pass to any other named surviving primary
beneficiary or Beneficiaries, to be shared equally; (3) if there is no
surviving primary beneficiary, the Participant Annuity Account Value shall
pass to any surviving contingent beneficiary, and if more than one contingent
beneficiary, shall be shared equally among them; (4) if no beneficiary
survives the Participant, the Participant Annuity Account Value shall pass to
the Participant's estate; or (5) if the designation of beneficiary was not
adequately made, the Participant Annuity Account Value shall pass to the
Participant's estate.
INVESTMENTS OF THE SERIES ACCOUNT
Participating Mutual Funds
The Series Account invests in shares of Maxim, TCI, and Fidelity VIP,
open-end management investment companies, each of which are registered with
the Securities and Exchange Commission. Such registration does not involve
supervision of the management of Maxim, TCI or Fidelity by the Securities and
Exchange Commission. Shares of Maxim are also sold to the Pinnacle Series
Account, the Maxim Series Account, and the Retirement Plan Series
Account which are separate accounts established by GWL&A to receive
and
invest premiums paid under variable life and variable annuity contracts
issued by GWL&A. Shares of Maxim may be sold to other separate
accounts of GWL&A or its affiliates.Shares of TCI and Fidelity VIP are also
sold to other insurance companies to fund the benefits of variable annuity or
variable life insurance contracts.
It is conceivable that, in the future, it may be disadvantageous for
variable life insurance separate accounts and variable annuity separate
accounts to invest in Maxim, TCI, and Fidelity VIP simultaneously. Although
GWL&A, Maxim, TCI or Fidelity VIP currently do not foresee any such
disadvantages either to variable life insurance policyowners or to variable
annuity contract owners, the Boards of Directors of Maxim, TCI, and Fidelity
VIP intend to monitor events in order to identify any material conflicts
between such policyowners and contract owners and to determine what action,
if any, should be taken in response thereto. Such action could include the
sale of Maxim shares by one or more of GWL&A's separate accounts or the sale
of TCI or Fidelity VIP shares by other insurance companies, which could have
adverse consequences. Material conflicts could result from, for example, (1)
changes in state insurance laws, (2) changes in federal income tax
laws, (3) changes in the investment management of any portfolio of Maxim,
TCI, or Fidelity VIP, or (4) differences in voting instructions between those
given by policyowners and those given by contract owners.
Investment Advisers
The investment adviser for Maxim is Great-West (the "Investment
Adviser"), which is registered with the Securities and Exchange
Commission as an investment adviser. Great-West provides portfolio management
and investment advice to Maxim and administers its other affairs subject to
the supervision of Maxim's Board of Directors.
The Investment Advisory Agreement obligates the Investment Adviser to
provide investment advisory services and to pay all compensation of, and
furnish office space for, officers and employees of the Investment Adviser
connected with investment and economic research, trading and investment
management of Maxim. The Investment Advisory Agreement also obligates the
Investment Adviser to pay all other expenses incurred in its operation and
all of Maxim's general administrative expenses, except extraordinary
expenses. As compensation for its services to Maxim, the Investment Adviser
receives monthly compensation at the annual rate of 0.46% of the average
daily net assets of the Money Market Portfolio; 0.60% of the average daily
assets of the Bond Portfolio, the Stock Index Portfolio, the U.S. Government
Securities Portfolio, the Small Cap-Index Portfolio and the Total Return
Portfolio; 0.80% of the average daily net assets of the Maxim T.
Rowe
Price Equity/Income Portfolio; 0.90% of the average daily net assets of the
Corporate Bond Portfolio; 0.95% of the average daily net assets of the MidCap
Portfolio and the Maxim INVESCO Small-Cap Growth Portfolio;
1.00% of
the average daily net assets of the International Equity Portfolio, the
Small-Cap Value Portfolio and the Maxim INVESCO ADR
Portfolio.
With respect to the Mid-Cap Portfolio, International Equity,
Small-Cap Value Portfolio, Maxim INVESCO Small-Cap Growth,
Maxim INVESCO ADR and Maxim T. Rowe Price
Equity/Income
Portfolios, the Investment Adviser shall be responsible for all expenses
incurred in performing investment advisory services. Each of the Portfolios
shall pay all expenses incurred in its operation with respect to that
portfolio. However, the Investment Adviser shall pay any expenses
of
the Portfolios which exceed an annual rate of 0.95% of the average daily net
assets of the Maxim T. Rowe Price Equity/Income Portfolio;
1.10% of
the average daily net assets of the Mid-Cap Portfolio and the
Maxim INVESCO Small-Cap Growth Portfolio; 1.35% of the
average daily
net assets of the Small-Cap Value Portfolio; and, 1.30% of the average daily
net assets of the International Equity Portfolio and Maxim
INVESCO ADR
Portfolio.
Investors Research Corporation ("Investors Research") is the investment
adviser for TCI. Investors Research has been the investment adviser of
Twentieth Century Investors, Inc., a registered investment company, since
1958. Additionally, Investors Research acts as the investment adviser for
Twentieth Century World Investors, Inc., a registered investment company, and
as an investment adviser to employee benefit plans and endowment funds.
Investors Research supervises and manages the investment portfolios of
TCI and directs the purchase and sale of its investment securities, subject
only to any directions of TCI's Board of Directors. Investors Research pays
all the expenses of TCI except brokerage, taxes, interest, fees and expenses
of non-interested directors (including counsel fees) and extraordinary
expenses. Twentieth Century Services, Inc., Twentieth Century Tower, 4500
Main Street, Kansas City, Missouri 64111, is transfer agent of TCI. It
provides facilities, equipment and personnel to TCI, and is paid for such
services by Investors Research. Certain administrative services that would
otherwise be performed by Twentieth Century Services, Inc., may be performed
by the insurance company that purchases TCI shares, and Investors Research
may pay it for such services.
For the foregoing services, Investors Research is paid a fee of 1% of
the average net assets of each series of TCI during the year. The fee is paid
and computed each month by multiplying 1% of the average daily closing net
asset values of the shares of each series of TCI during the previous month by
a fraction, the numerator of which is the number of days in the previous
month and the denominator of which is 365 (366 in leap years). Many
investment companies pay smaller investment management fees. However, most
if
not all companies also pay in addition certain of their own expenses, while
TCI expenses specified above are paid by Investors Research.
Investors Research and Twentieth Century Services, Inc. are both wholly
owned by Twentieth Century Companies, Inc. James E. Stowers, Jr., President
of TCI, controls Twentieth Century Companies, Inc. by virtue of his ownership
of a majority of its common stock.
Fidelity Management & Research Company ("FMR") is the investment
adviser
to Fidelity Variable Insurance Products Fund ("VIP"): VIP Growth Portfolio
and to Fidelity Variable Insurance Products Fund II ("VIP II"): VIP II Asset
Manager Portfolio. For its investment advisory services, FMR receives a
monthly fee from each of these Portfolios. As of December 31,
1995,
the VIP Growth and the VIP II Asset Manager Portfolios paid FMR the annual
fee rate of .62% and .72%, respectively, of each Portfolio's average daily
net assets.
FMR may, from time to time, agree to reimburse a Portfolio for
management fees and other expenses above a specified percentage of average
daily net assets. Reimbursement arrangements, which may be terminated at any
time without notice, will increase a Portfolio's yield. If FMR discontinues
a reimbursement arrangement, the affected Portfolio's expenses will go up and
its yield will be reduced. FMR retains the ability to be repaid by a
Portfolio for expense reimbursements if expenses fall below the limit prior
to the end of the fiscal year. Repayment by a Portfolio will lower its yield.
FMR has voluntarily agreed to temporarily limit the total expenses (including
the management fee, but generally excluding taxes, interest and extraordinary
expenses) of the Asset Manager Portfolio to 1.25% of the Portfolio's average
daily net assets. FMR has voluntarily agreed to reimburse the management fees
and all other expenses (excluding taxes, interest and extraordinary expenses)
of the VIP Growth Portfolio in excess of 1.50% of average daily net assets.
Sub-advisers
Janus Capital Corporation("Janus") serves as the sub-adviser to the
Mid-Cap (Growth Fund I) Portfolio. As such, Janus is responsible for
managing the investment and reinvestment of assets of the Mid-Cap
(Growth
Fund I) , subject to review and supervision of the Investment Adviser and
the Board of Directors. Janus bears all expenses in connection with the
performance of its services, such as compensating and furnishing office space
for its officers and employees connected with investment and economic
research, trading and investment management of the Mid-Cap (Growth
Fund
I) Portfolio.
Janus is a Colorado corporation, registered as an investment adviser
with the Securities and Exchange Commission. Its principal address is 100
Fillmore Street Suite 300, Denver, Colorado 80206.
The Investment Adviser is responsible for compensating Janus, which
receives monthly compensation from the Investment Adviser at the annual rate
of 0.60% on the first $100 million and 0.55% on all amounts over $100 million
of the Mid-Cap (Growth Fund I) Portfolio assets.
Templeton Investment Counsel, Inc ("Templeton") serves as the
sub-adviser of the International Equity Portfolio. As such,
Templeton
is responsible for managing the investment and reinvestment of assets of the
International Equity Portfolio, subject to review and supervision of the
Investment Adviser and the Board of Directors. Templeton bears all expenses
in connection with the performance of its services, such as compensating and
furnishing office space for its officers and employees connected with
investment management of the International Equity Portfolio.
Templeton is an indirect subsidiary of Templeton Worldwide, Inc., which
in turn is a direct, wholly-owned subsidiary of Franklin Resources, Inc.
Templeton is a Florida corporation with its principal business address at
Broward Financial Centre, 500 East Broward Boulevard, Suite 2100, Fort
Lauderdale, Florida 33394.
The Investment Adviser is responsible for compensating Templeton, which
receives monthly compensation from the Investment Adviser at the annual rate
of 0.70% on the first $25 million, 0.55% on the next $25 million, 0.50% on
the next $50 million, and 0.40% all amounts over $100 million of the
International Equity Portfolio assets.
T. Rowe Price Associated, Inc. ("T. Rowe Price") serves as the
sub-adviser to the Maxim T. Rowe Price Equity/Income Portfolio.
T.
Rowe Price is a Maryland corporation, registered as an investment adviser
with the Securities and Exchange Commission. Its principal business address
is 100 East Pratt Street, Baltimore, Maryland 21202. T. Rowe Price receives
monthly compensation from the Investment Adviser at the annual rate of 0.50%
on the first $20 million of the average daily net assets, 0.40% on the next
$30 million of average daily net assets and 0.40% on all assets once total
average daily net assets exceed $50 million.
INVESCO Trust Company ("ITC") serves as the sub-adviser of the
Maxim INVESCO Small-Cap Growth Portfolio. ITC is a Colorado Trust
Company
and an indirect wholly-owned subsidiary of INVESCO PLC. ITC is registered
as
an investment adviser with the Securities and Exchange Commission. Its
principal business address is 7800 E. Union Avenue, Denver, Colorado 80237.
ITC receives monthly compensation from the Investment Adviser at the rate of
0.55% on the first $25 million of average daily net assets, 0.50% on the next
$50 million of average daily net assets, 0.40% on the next $25 million of
average daily net assets, and 0.35% on all amounts over $100 million of
average daily net assets.
INVESCO Capital Management, Inc ("ICMI") serves as the sub-adviser to
the Maxim INVESCO ADR Portfolio. ICMI is a Delaware
corporation and an
indirect wholly-owned subsidiary of INVESCO PLC. ICMI is registered as an
investment adviser with the Securities and Exchange Commission. Its principal
business address is 1315 Peachtree Street, Atlanta, Georgia 30309. ICMI
receives monthly compensation from the Investment Adviser at the annual rate
of 0.55% on the first $50 million of average daily net assets, 0.50% on the
next $50 million of average daily net assets, and 0.40% on assets over $100
million of average daily net assets.
Loomis, Sayles & Company, LP ("Loomis Sayles") serves as the
sub-adviser
to the Corporate Bond Portfolio. Loomis Sayles is a Delaware limited
partnership and is an indirect, majority-owned subsidiary company of New
England Mutual Life Insurance Company. Loomis Sayles is registered as an
investment adviser with the Securities and Exchange Commission. Its principal
business address is One Financial Center, Boston, Massachusetts 02111. Loomis
Sayles receives monthly compensation from the Investment Adviser at the
annual rate of 0.30% on all assets of the Corporate Bond Portfolio.
Ariel Capital Management , Inc.("Ariel") serves as the sub-adviser to
the Small-Cap Value (Ariel Value) Portfolio. Ariel is a privately
held
minority-owned money manager registered with the Securities and Exchange
Commission as an investment adviser. Its principal business address is 307
North Michigan Avenue, Chicago, Illinois 60601. Ariel receives monthly
compensation from the Investment Adviser at the annual rate of 0.40% on
assets up to $5 million of average daily net assets, 0.35% on the next $10
million of average daily net assets, 0.30% on the next $10 million of average
daily net assets, and 0.25% on assets over $25 million of average daily net
assets.
Reinvestment and Redemption
All dividend distributions of Maxim, TCI or Fidelity VIP will be
automatically reinvested in shares of Maxim, TCI or Fidelity VIP at their net
asset value on the date of distribution; all capital gains distributions of
Maxim, TCI or Fidelity VIP, if any, will likewise be reinvested at the net
asset value on the record date. GWL&A will redeem Maxim, TCI and Fidelity
VIP
shares at their net asset values to the extent necessary to make annuity or
other payments under the Group Contracts.
Substitution of Investments
GWL&A reserves the right, subject to compliance with the law as
currently applicable or subsequently changed, to make additions to, deletions
from or substitutions for the investments held by the Series Account. In the
future, GWL&A may establish additional Investment Divisions within the Series
Account. These Investment Divisions will be established if, and when, in the
sole discretion of GWL&A marketing needs and investment conditions warrant,
and will be made available under existing Group Contracts to the extent and
on a basis to be determined by GWL&A.
If shares of any of the Investment Portfolios of Maxim, TCI or Fidelity
VIP should no longer be available for investment, or if in the judgement of
GWL&A's management further investment in any of the Investment Portfolios'
shares should become inappropriate in view of the objectives of the Group
Contracts, then GWL&A may substitute shares of another mutual fund for shares
already purchased, or to be purchased in the future under the Group
Contracts. No substitution of securities held by the Series Account may take
place without prior approval of the Securities and Exchange Commission, and
prior notice to the employers and association owners of Group Contracts, and,
in addition, to the Participants under Section 403(b) retirement programs
(other than an employer-sponsored plan). In the event of a substitution, the
Participants under Section 403(b) retirement programs (other than an
employer-sponsored plan) or the employees or the employee organization under
Section 401(a), Section 401(k), Section 457, or employer-sponsored Section
403(b) retirement programs will be given the option of taking a distribution
of that portion of the Participant Annuity Account allocated to an Investment
Division in which the substitution is to occur without imposition of the
Contingent Deferred Sales Charge.
ADMINISTRATIVE CHARGES, RISK PREMIUMS AND OTHER
DEDUCTIONS
Contract Maintenance Charge
GWL&A has primary responsibility for the administration of all Group
Contracts and the Series Account. To compensate GWL&A for the cost it incurs
in providing administrative services, GWL&A may deduct a Contract
Maintenance
Charge of not more than $30 annually on the first day of each
calendar
year from each Participant Annuity Account. If a Participant Annuity Account
is established after that date, the Contract Maintenance Charge will be
deducted on the first day of the next quarter and will be pro-rated for the
year remaining. The deduction will be pro-rated between the Variable and
Guaranteed Contract Values of each Participant Annuity Account. No refund of
this charge will be made. The Contract Maintenance Charge on Section 403(b)
Group Contracts will be waived for an initial period of no less than 12
months and up to 15 months, depending on the Participant's effective date.
Contingent Deferred Sales Charge
In the circumstances described below, a Contingent Deferred Sales Charge
will be deducted on any total or partial distribution, Transfer to Other
Companies or a lump sum payment. The amount deducted will depend on the type
of retirement program for which the Group Contract was issued. However, a
Contingent Deferred Sales Charge "Free Amount" may be applied in some
circumstances. The Contingent Deferred Sales Charge "Free Amount" is an
amount against which the Contingent Deferred Sales Charge will not be
assessed. The "Free Amount" shall not exceed 10% of the Participant Annuity
Account Value at December 31 of the previous calendar year and will be
applied on the first distribution, payment or Transfer to Another Company
made in that year. All additional distributions, payments or Transfers to
Another Company during that calendar year will be subject to a Contingent
Deferred Sales Charge without application of any "Free Amount".
1. For Section 401(a) and 401(k) Retirement Programs
(a) For Group Contracts issued pursuant to a Section 401(k) retirement
program where the employer does not also maintain a Section 403(b) or Section
457 Group Contract with GWL&A, a Contingent Deferred Sales Charge will be
in
an amount equal to 6% of the amount Transferred to Another Company,
distributed or paid in excess of the "Free Amount". The cumulative total of
all Contingent Deferred Sales Charges applied to a Participant Annuity
Account will not exceed 6% of all Contributions made within 72 months prior
to the date of that partial or total distribution, Transfer or payment.
(b) For Group Contracts issued pursuant to a Section 401(a) profit-sharing
plan where the employer also maintains a Section 457 Group Contract with
GWL&A, the Contingent Deferred Sales Charge applicable is as described in
paragraph 3 (a) below.
(c) The Contingent Deferred Sales Charge applicable to Group Contracts issued
pursuant to a Section 401(a) profit-sharing plan where the employer also
maintains a Section 403(b) Group Contract with GWL&A is as described in
paragraph 2(a) below.
2. For Section 403(b) Retirement Programs.
(a) Under all Group Contracts issued prior to May 1, 1992 pursuant to Section
403(b) and for Group Contracts issued on or after May 1, 1992 to Section
403(b) retirement programs other than employer-sponsored plans, the
Contingent Deferred Sales Charge applicable will be in an amount equal to 6%
of the amount distributed, Transferred to Another Company or paid in excess
of the "Free Amount". The cumulative total of all Contingent Deferred Sales
Charges applied to a Participant Annuity Account will not exceed 6% of all
Contributions made within 72 months prior to the date of that partial or
total distribution, Transfer to Another Company or payment.
(b) For Group Contracts that were issued in exchange for Group Tax-Sheltered
Annuity or Group Deferred Compensation Annuity Contracts of the Great-West
Life Assurance Company, with respect to any partial or total distribution,
Transfer to Another Company or payment, the cumulative total of all
Contingent Deferred Sales Charges applied to a Participant Annuity Account
will not exceed an amount equal to:
(i) 6% of all Contributions (excluding the amount initially applied to a
Participant Annuity Account from the exchanged contract) made within 72
months prior to the date of that partial or total distribution, Transfer to
Another Company or payment, plus
(ii) an amount which is the result of multiplying the amount initially
applied to a Participant Annuity Account from the exchanged contract by the
appropriate percentage as chosen from the following chart:
If number of years of coverage
of Participant under Exchanged Contract
and this contract is: The percentage shall be:
Less than 5 years 6%
At least 5 years but less than 10 years 5%
At least 10 years 4%
(c) For Group Contracts issued pursuant to an employer-sponsored Section
403(b) retirement program on or after May 1, 1992, the Contingent Deferred
Sales Charge applicable is as described in paragraph 3 (a) below.
3. For Section 457 Retirement Programs.
(a) For Section 457 Group Contracts issued May 1, 1988 or thereafter and for
Section 457 Group Contracts issued prior to May 1, 1988 but amended to
incorporate the provision of this paragraph, the Contingent Deferred Sales
Charge will be in an amount equal to a percentage of the amount distributed,
Transferred to Another Company or paid in excess of the "Free Amount", if
any, based on the table below:
Years of Participation
in FutureFunds: The percentage shall be:
0 - 4 5%
5 - 9 4%
10 - 14 3%
15 or more 0%
(b) For Section 457 Group Contracts issued prior to May 1, 1988 which have
not been amended to incorporate the Contingent Deferred Sales Charge will be
in an amount equal to:
(i) 6% of all Contributions (excluding the amount initially applied to a
Participant Annuity Account from an exchanged contract) made within 72 months
prior to the withdrawal, plus
(ii) an amount equal to a percentage of the amount distributed, Transferred
to Another Company or paid in excess of the "Free Amount", if any, based on
the table below:
If number of years of coverage
of Participant under Exchanged Contract
and this Contract is: The percentage shall be:
Less than 5 years 6%
At least 5 years but less than 10 years 5%
At least 10 years 4%
4. General provisions applicable to the Contingent Deferred Sales Charge.
Regardless of which of the above-noted Contingent Deferred Sales Charge
schedules is in effect, the Contingent Deferred Sales Charge applied against
distributions, payments or Transfers to Another Company is deducted from the
withdrawal payment to the Participant. Thus, for example, if a Participant
requests a withdrawal of $100, and assuming that the entire withdrawal is
subject to 6% Contingent Deferred Sales Charge, the Participant would receive
a payment of $94. The Contingent Deferred Sales Charge shall not exceed 8.5%
of Contributions deposited by the Participant into the Group Contracts.
Additionally, the Code imposes (with certain exceptions) a penalty tax on
distributions prior to age 59 1/2. (See "Federal Tax Consequences").
The Contingent Deferred Sales Charge is paid to GWL&A to cover expenses
relating to the sale and distribution of the Group Contracts, including
commissions, the cost of preparing sales literature, and other promotional
activities. In certain circumstances, sales expenses associated with the sale
and distribution of a Group Contract may be reduced or eliminated and in such
event, the Contingent Deferred Sales Charge applicable to that Group Contract
may likewise be reduced. Whether such a reduction is available will be
determined by GWL&A based upon consideration of the following factors: (1)
size of the prospective group, (2) projected annual Contributions for all
Participants in the group, and (3) frequency of projected distributions.
GWL&A will notify a prospective purchaser of its eligibility for a reduction
of the Contingent Deferred Sales Charge prior to the acceptance of an
application for coverage.
It is possible that the Contingent Deferred Sales Charge will not be
sufficient to enable GWL&A to recover all of its distribution expenses. In
such case, the loss will be borne by GWL&A out of its general account assets,
which will include the profit, if any, derived by GWL&A from the mortality
and expense risk charges described herein.
Deductions for Premium Taxes
GWL&A presently intends to pay any Premium Tax levied by any
governmental entity as a result of the existence of the Participant Annuity
Account or the Series Account. GWL&A reserves the right to deduct the
Premium
Tax from Participant Annuity Account Values instead of GWL&A making the
Premium Tax payments. Notice will be given to all Participants prior to the
imposition of any such deductions from the Participant Annuity Account
Values. The applicable Premium Tax rates that states and other governmental
entities impose currently range from 0% to 3.5% and are subject to
change by the respective state legislatures, by administrative
interpretations or by judicial act. Such Premium Taxes will depend, among
other things, on the state of residence of a Participant and the insurance
tax laws and status of GWL&A in these states when the Premium Taxes are
incurred.
Deductions for Assumption of Mortality and Expense Risks
GWL&A deducts from the daily net asset value of the Series Account an
amount, computed daily, which is equal to an annual rate of 0.55%,
0.44% allocable to mortality risk and 0.11% allocable to expense risk.
This charge is designed to compensate GWL&A for its assumption of certain
mortality, death benefit and expense risks described below. The level of this
charge is guaranteed and will not change.
GWL&A's assumption of mortality risk guarantees that the annuity
payments made to the Beneficiary or other payee will not be affected by the
mortality experience (life span) of persons receiving such payment or of the
general population. GWL&A assumes this "mortality risk" by virtue of the fact
that annuity rates in effect at the time that any Contributions are made
cannot be changed. In addition, if a Participant should die prior to his/her
Annuity Commencement Date and 70th birthday, GWL&A is at risk to the extent
that the amount of all Contributions made, less any partial distributions,
exceed the Participant Annuity Account Value. (See " Accumulation
Period: Death Benefit.")
GWL&A's assumption of expense risks arises when GWL&A guarantees
that if
the charges for administrative expenses, which cannot be increased by GWL&A,
will be insufficient to cover administrative and sales expenses, GWL&A bears
that loss.
In certain circumstances, the risk of adverse mortality and expense
experience associated with a Group Contract may be reduced. In such event,
the mortality and expense risk charge applicable to that Group Contract may
likewise be reduced. Whether such a reduction is available will be determined
by GWL&A based upon consideration of the following factors: (1) size of the
prospective group, (2) projected annual Contributions for all Participants in
the group, (3) frequency of projected distributions, (4) type and frequency
of administrative and sales services provided, and (5) level of Contract
Maintenance Charge and Contingent Deferred Sales Charge. GWL&A will notify
a
prospective purchaser of its eligibility for a reduction of the mortality and
expense risk charge prior to the acceptance of an application for coverage.
If the 0.55% charge proves insufficient to cover
administrative
costs in excess of the Contract Maintenance Charge made for administrative
expenses, plus any losses from the mortality risk, the loss will be borne by
GWL&A; conversely, if the amount deducted proves more than sufficient, the
excess will be a profit to GWL&A.
ANNUITY OPTIONS
An Annuity Commencement Date and the form of annuity payments
("Annuity
Options") may be elected at any time during the Accumulation Period. The
elections are made by the Participant under a Section 403(b) retirement
program (other than an employer-sponsored plan) or the employer or the
employee organization under a Section 401(a), a Section 401(k), Section 457
or employer-sponsored 403(b) retirement program. Under Section 403(b), 401(a)
and 401(k) retirement programs, the Annuity Commencement Date elected
generally must, to avoid the imposition of an excise tax, not be later than
April 1 of the calendar year following the calendar year in which the
Participant attains age 70 1/2, without regard to the actual retirement date
or termination of employment date. For Section 457 retirement programs, the
Annuity Commencement Date elected will generally be not later than April 1 of
the calendar year following the calendar year in which the Participant
attains age 70 1/2, or the Participant's retirement date if later than age 70
1/2. Under all of the above-noted retirement programs, it is the
responsibility of the Participant to file the necessary Request with GWL&A.
The Annuity Commencement Date may be postponed or accelerated, or the
election of any of the Annuity Options changed, upon Request received by
GWL&A at its Administrative Offices up to 30 days prior to the existing
Annuity Commencement Date. If any Annuity Commencement Date elected
would be
less than 30 days from the date that the Request is received, GWL&A may delay
the date elected by not more than 30 days.
The Group Contracts provide the Annuity Options described below, as well
as such other Annuity Options as GWL&A may choose to make available in the
future. Except as otherwise noted, the Annuity Options are payable on a
variable, fixed or combination basis. More than one Annuity Option may be
elected. If no Annuity Option is elected, the Group Contracts automatically
provide for variable life annuity (with respect to the variable portion of a
Participant Annuity Account) and/or a fixed life annuity (with respect to the
fixed portion of a Participant Annuity Account) with 120 monthly payments
guaranteed.
The level of annuity payments under the following options is based upon
the option selected and, depending on the option chosen, such factors as the
age at which payments begin and the frequency and duration of payments.
Option No. 1: Life Annuity
This option provides an annuity payable monthly during the lifetime of
the payee. It would be possible under this option for the Annuitant to
receive no annuity payment if he/she died prior to the date of the first
annuity payment, one annuity payment if the Annuitant died before the second
annuity payment, etc.
Option No. 2: Life Annuity with Payments Guaranteed for Designated Periods
This option provides an annuity payable monthly throughout the lifetime
of the payee with the guarantee that if, at the death of the payee, payments
have been made for less than the designated period, the Beneficiary will
receive payments for the remainder of the period. The designated period may
be 5, 10, 15, or 20 years. The period generally referred to as "Installment
Refund" is available only on a fixed- dollar payment basis.
Option No. 3: Joint and One-Half Survivor
This option provides an annuity payable during the joint lifetime of the
payee and a designated second person, and thereafter during the remaining
lifetime of the survivor. After the death of the payee, and while only the
designated second person is alive, the amount payable will be one-half the
amount paid while both were living. It would be possible under this option
for the payee and the Beneficiary to receive no annuity payment if both
persons died prior to the date of the first annuity payment, one annuity
payment if both persons died before the second annuity payment, etc.
Option No. 4: Income of Specified Payment (available only as fixed-dollar
payments)
Under this option, the amount of the periodic benefit is selected, which
amount will be paid to the payee in equal annual, semiannual, quarterly, or
monthly installments as elected; provided that the annuity payment period is
not less than 36 months nor more than 240 months.
Option No. 5: Income for Specified Period (available only as fixed-dollar
payments)
Under this Option, the duration of the periodic benefit is selected
(which may not be less than 36 months nor more than 240 months), and a
resulting annuity payment amount will be paid to the payee in equal annual,
semiannual, quarterly, or monthly installments, as elected.
Option No. 6: Systematic Withdrawal Payment Option (available only as
fixed-dollar payments)
Under this payment option, the amount, timing and method of payment will
be as elected by the payee and agreed to by GWL&A. Payments may be elected
on
a monthly, quarterly, semi-annual or annual basis. The minimum amount
initially applied to this option must be $20,000. There are charges and
restrictions which apply. Please see the "Systematic Withdrawal Payment
Option Rider" to the Group Contract.
Option No. 7: Access Annuity
Under this payment option, a single premium of $20,000 minimum, the
amount, timing and method of payment will be as elected by the payee and
agreed to by GWL&A. Payments may be elected on a monthly, quarterly,
semi-annual or annual basis. There are charges and restrictions which apply.
Please see the "Access Annuity Rider" to the Group Contract for additional
information.
Variable Annuity Payments
Variable annuity payments will be determined on the basis of: (i) the
Variable Account Value prior to the Annuity Commencement Date; (ii) the
annuity tables contained in the Group Contracts which reflect the age of the
Participant; (iii) the type of annuity option(s) selected; and (iv) the
investment performance of the underlying mutual fund. The Participant
receives the value of a fixed number of Annuity Units each month.
At a Participant's Annuity Commencement Date, the Participant Annuity
Account is credited with Annuity Units for each Variable Sub-Account on which
variable annuity payments are based. The number of Annuity Units to be
credited is determined by dividing the amount of the first monthly payment by
the value of an Annuity Unit as of the fifth Valuation Period prior to the
Annuity Commencement Date in each Variable Sub-Account selected. Although
the
number of Annuity Units is fixed by this process, the value of such units
will vary with the value of the underlying mutual fund.
The dollar amount of the first monthly variable annuity payment is
determined by applying the total value of the Accumulation Units credited to
a Participant Annuity Account valued as of the fifth Valuation Period prior
to the Annuity Commencement Date to the annuity tables contained in the Group
Contracts. Amounts shown in the tables are based on a modified 1971 Group
Annuity Mortality Table (set back five years) with an assumed investment
return at the rate of 3.5% per annum. The first annuity payment is determined
by multiplying the benefit per $1,000 of value shown in the Group Contract
tables by the number of thousands of dollars of value accumulated under the
Variable Account Value of a Participant Annuity Account. These annuity tables
vary according to the form of annuity selected and according to the age of
the Participant and his/her Annuity Commencement Date.
The 3.5% interest rate stated above is the measuring point for
subsequent annuity payments. If the actual Net Investment Rate (annualized)
exceeds 3.5%, the payment will increase at a rate equal to the amount of such
excess. Conversely, if the actual rate is less than 3.5%, annuity payments
will decrease. If the assumed rate of interest were to be increased, annuity
payments would start at a higher level but would increase more slowly or
decrease more rapidly.
The amount of the second and subsequent payment is determined by
multiplying the credited fixed number of Annuity Units by the appropriate
Annuity Unit value for the fifth Valuation Period preceding the date that
payment is due. The Annuity Unit value at the end of any Valuation Period is
determined by multiplying the Annuity Unit value for the immediately
preceding Valuation Period by the product of:
(a) the Net Investment Factor of the Variable Sub-Account for the Valuation
Period for which the Annuity Unit is being determined, and,
(b) a factor of .999905 to neutralize the assumed investment return of 3.5%
per year used in the annuity table.
The value of each Variable Sub-Account's Annuity Unit is set initially at
$10.00. The value of the Annuity Units is determined as of a
Valuation Period five (5) days' prior to the payment in order to permit
calculation of amounts of annuity payments and mailing of checks in advance
of their due date.
Fixed Annuity Payments
The guaranteed level of fixed annuity payments will be determined on the
basis of: (i) the Guaranteed Account Value prior to the Annuity Commencement
Date; (ii) the annuity tables contained in the Group Contracts which reflect
the age of the Participant; and (iii) the type of annuity option(s) elected.
The payment amount may be greater, however, if GWL&A is using a more
favorable table as of a Participant's Annuity Commencement Date.
Combination Variable and Fixed Annuity Payments
If an election is made to receive annuity payments on a combination
variable and fixed basis, the Variable Account Value of a Participant Annuity
Account will be applied to the variable annuity option elected and the
Guaranteed Account Value to the fixed annuity option.
Transfer to Effect Annuity Option Elected
If the Participant under a Section 403(b) retirement program (other than
an employer-sponsored plan) or the employer or the employee organization
under a Section 401(a), Section 401(k), Section 457 or employer-sponsored
403(b) retirement program wishes to apply all or part of the Guaranteed
Account Value of the Participant Annuity Account to a variable annuity
option, or all or a part of the Variable Account Value to a fixed annuity
option, a Request to Transfer must be received at GWL&A's Administrative
Office prior to the Participant's Annuity Commencement Date. This also
applies to a Beneficiary or payee who elects to receive a death benefit under
any of the annuity options, and one such Request to Transfer can be submitted
by the Beneficiary or payee after the death of the Participant.
Proof of Age and Survival
GWL&A may require proof of age or survival of any payee upon whose
age
or survival payments depend.
Frequency and Amount of Annuity Payments
Variable annuity payments will be paid as monthly installments; fixed
annuity payments will be paid annually, semiannually, quarterly or monthly,
as requested. However, if any payment to be made under any annuity option
will be less than $50, GWL&A may make the payments in the most frequent
interval which produces a payment of at least $50. If the net amount
available to apply under any Annuity Option is less than $2,000, GWL&A may
pay it in one lump sum. The maximum amount that may be applied under any
Annuity Option without the prior written consent of GWL&A is $1,000,000.00
FEDERAL TAX CONSEQUENCES
Introduction
The Group Contracts are designed for use by employee groups under
retirement programs which may qualify for special tax treatment under Section
401(a), Section 401(k), Section 403(b) or Section 457 of the Code.
The ultimate effect of federal income taxes on the Participant Annuity
Account Value, on annuity payments and on the economic benefit to the
Participant or Beneficiary depends upon GWL&A's tax status, on the type of
retirement program for which the Group Contract is purchased, and upon the
tax and employment status of the individual concerned. The Series Account is
taxed as a part of GWL&A; not as a "regulated investment company" under Part
I of Subchapter M of the Code. GWL&A is taxed as a life insurance company
as
described below.
It should be understood that the following discussion is not exhaustive,
and is not intended as tax advice. Special rules may apply to certain
situations not discussed here. GWL&A intends to comply with the
diversification requirements of Code Sections 817(h) and 818 to assure that
the Group Contracts will continue to be treated as annuity contracts for
Federal income tax purposes. The discussion is based upon GWL&A's
understanding of current federal income tax law and no representation is made
regarding the likelihood of continuation of current law or of the current
interpretations by the Internal Revenue Service. No attempt is made to
consider state or other tax laws. The Group Contractholder, Participants and
beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the contract comply with
applicable laws. For further information, consult a qualified tax adviser.
Taxation of GWL&A
GWL&A is taxed on its insurance business in the United States as a life
insurance company in accordance with Part I of Subchapter L of the Code.
Investment income and realized capital gains on the assets of Series Account
are reinvested and are taken into account in determining the Series Account
Value. Under existing federal income tax law, such amounts do not result in
any tax on GWL&A which will be chargeable to the Participant Annuity Account
or the Series Account. GWL&A reserves the right to make a deduction from the
Participant Annuity Account for taxes, if any, imposed with respect to such
items in the future.
Taxation of Annuities in General
Code Section 72 governs taxation of annuities in general. A Participant
is not taxed on increases (if any) in the value of a Participant Annuity
Account until some form of distribution is made. Under Section 72, a total
or partial distribution from a Participant Annuity Account will be treated as
ordinary income taxable to the extent the amounts held in the Participant
Annuity Account immediately before the distribution exceed the "investment in
the contract." The investment in the contract is that portion of the
Contributions to the Participant Annuity Account which was included in the
Participant's gross income in the year contributed, if any. If the
Participant begins receiving annuity payments, the Participant is taxed on
the portion of the payment that exceeds the investment in the contract.
However, because the Participant generally excludes Contributions from gross
income under these retirement programs, there generally will be no cost basis
(investment in the contract) in the Participant Annuity Account within the
meaning of Section 72 of the Code. Thus, the total amount of all payments
received will generally be taxable to the Participant. Ordinarily, such
taxable portion is taxed at ordinary income tax rates, subject to any income
averaging rules applicable to Participants receiving distributions from a
Section 401(a) or Section 401(k) plan.
Currently, none of the amounts contributed to a Section 457 plan
constitute cost basis in the contract. Thus, all amounts distributed to
Participants from a Section 457 plan are taxable at ordinary income rates.
No special averaging rules apply to distributions from Section 403(b) plans
or Section 457 plans.
If a Group Contract is held by a non-natural person (e.g. a
corporation), the investment gain on the contract is includable in the
entity's income each year unless certain exceptions apply. This rule does
not apply, in pertinent part, where the Group Contract is held under a
Section 401(a) plan, a Section 401(k) plan, or a Section 403(b) plan. Since
the employer maintaining a Section 457 plan is either a state or local
government or a tax-exempt organization, the employer will not be subject to
tax on the gain in the contract.
Section 401(a) Qualified Retirement Plans
Section 401(a) provides special tax treatment for pension,
profit-sharing and stock bonus plans established by employers or employee
organizations for their employees. All types of employers, including
for-profit organizations, tax-exempt organizations and state and local
governments, are allowed to establish and maintain Section 401(a) qualified
plans. Employer Contributions and any earnings thereon are currently
excluded from the Participant's gross income. Section 401(a) plans must
satisfy numerous qualification requirements, including limitations on
contributions. Generally, the total amount of employer and employee
contributions which can be contributed to all of the employer's qualified
plans is limited to the lesser of $30,000 or 25% of a Participant's
includable compensation. Distributions from the plan are subject to the
restrictions contained in the plan document and the Code. Participants
should consult with their employer or employee organization as to the
applicability of the above limitations and restrictions to their plan.
Section 401(k) Cash or Deferred Arrangements
Section 401(k) allows for-profit employers or employee organizations to
offer a cash or deferred arrangement to employees under a profit-sharing or
stock bonus plan. Generally, for tax years beginning after 1986, tax-exempt
organizations and state and local governments are not permitted to establish
Section 401(k) plans. However, under a grandfather rule, certain plans
adopted before certain dates in 1986 may continue to be offered by these
entities. Pre-tax salary reduction Contributions and any income thereon are
currently excluded from the Participant's gross income. Generally, the
maximum elective deferral amount that an individual may defer on a pre-tax
basis to one or more Section 401(k) plans is limited to $7,000 per year
(adjusted for cost-of-living increases) under Section 402(g). Elective
deferrals to a Section 401(k) plan must also be aggregated with elective
deferrals made by the Participant to a Section 403(b) plan or to a simplified
employee pension. For 1996, the total amount of elective deferrals which can
be contributed to all such plans is $9,500. The contribution limit in
Section 415 also apply. The amount which a highly compensated employee may
contribute may be further reduced to enable the plan to meet the
discrimination testing requirements. Amounts contributed to a Section 403(b)
annuity contract are subject to FICA and FUTA tax when contributed.
Pre-tax amounts deferred into the plan within the applicable limits, and
the net investment gain, if any, reflected in the Participant Annuity Account
Value are includible in a Participant's gross income only for the taxable
year when such amounts are paid to the Participant under the terms of the
plan. Employee contributions and earnings may not be distributed prior to
age 59 1/2, unless the Participant dies, becomes disabled, separates from
service or suffers a genuine financial hardship meeting the requirements of
the Code. Restrictions apply to the amount which may be distributed for
financial hardship. Participants should consult with their employer as to
the availability of benefits under the employer's plan.
Amounts contributed in excess of the above described limits, and the
earnings thereon, must be distributed from the plan and included in the
Participant's gross income in accordance with IRS rules and regulations.
Excess amounts which are not properly corrected can have severe adverse
consequences to the plan and may result in additional taxes to the
Participant.
Section 403(b) Tax Sheltered Annuities
Tax-exempt organizations described in Section 501(c)(3) and public
educational organizations are permitted to purchase Section 403(b)
tax-sheltered annuities for employees. Amounts contributed toward the
purchase of such annuities are excluded from the gross income of the
Participant in the year contributed to the extent that the contributions do
not exceed three separate, yet interrelated contribution limitations.
Federal income tax is deferred on contributions to the extent that the
aggregate amount contributed to a Section 430(b) plan per year for a
Participant does not exceed: (1) the exclusion allowance described in
Section 403(b)(2); (2) the contribution limit in Section 415; and (3) the
elective deferral limitation in Section 402(g) of the Code. Elective
deferrals to a Section 403(b) plan must also be aggregated with elective
deferrals made by the Participant to a Section 401(k) plan or to a simplified
employee pension. For 1996, the total amount of elective deferrals which can
be contributed to all such plans is $9,500. Amounts contributed to a Section
403(b) annuity contract are subject to FICA and FUTA tax when contributed.
The net investment gain, if any, reflected in a Participant Annuity
Account Value is not taxable until received by the Participant or his
beneficiary.
Amounts contributed in excess of the above described limits, and the
earnings thereon, must be distributed from the plan and included in the
Participant's gross income in accordance with IRS rules and regulations.
Excess amounts which are not properly corrected can have severe adverse
consequences to the plan and may result in additional taxes to the
Participant.
Pre-1989 contributions to a Section 403(b) annuity contract may be
distributed to an employee at any time, subject to a 10% penalty on
withdrawals prior to age 59 1/2, unless an exception applies under Section
72(t). Post-1988 contributions and earnings, and the earnings on the
December 31, 1988 account balance, may not be distributed prior to age 59
1/2, unless the Participant dies, becomes disabled, separates from service or
suffers a genuine financial hardship meeting the requirements of the Code.
Restrictions apply to the amount which may be distributed for financial
hardship.
Section 457 Deferred Compensation Plans
Section 457 allows state and local governmental employers to establish
and maintain an eligible deferred compensation plan for all employees and
independent contractors. Tax-exempt organizations may establish eligible
deferred compensation plans only for a select group of management or highly
compensated
employees.
Federal income tax is deferred on contributions to a Section 457 plan to
the extent that the aggregate amount contributed per year for a Participant
does not exceed the lesser of $7,500 or 25% of a Participant's includable
compensation. Any elective deferral amount excluded from gross income by a
Participant under Section 401(k), Section 403(b) or a simplified employee
pension for the taxable year must be treated as an amount deferred under the
Section 457 plan. Amounts contributed are subject to FICA and FUTA tax when
contributed.
The net investment gain, if any, reflected in a Participant Annuity
Account Value is not taxable until received by the Participant or his
beneficiary.
Amounts contributed in excess of the above described limits, and the
earnings thereon, must be distributed from the plan and included in the
Participant's gross income. Excess amounts which are not properly corrected
can have severe adverse consequences to the plan and may result in additional
taxes to the Participant.
Contributions and earnings may not be distributed prior to age 70 1/2,
unless the Participant dies, becomes disabled, separates from service or
suffers a genuine unforeseeable emergency meeting the requirements of the
Code and plan document. Restrictions apply to the amount which may be
distributed for unforeseeable emergency.
Portability
When the participant is eligible to take a distribution from a Section
401(a) plan, Section 401(k) plan or Section 403(b) annuity, eligible rollover
distributions may be rolled over to an IRA or another qualified plan or
Section 403(b) annuity contract or custodial account as provided in the Code.
Amounts properly rolled over will not be included in gross income until a
subsequent distribution is made.
For Section 403(b) plans only, Revenue Ruling 90-24 allows participants
to transfer funds from one Section 403(b) annuity or custodial account to
another Section 403(b) annuity contract or custodial account with the same or
more stringent restrictions without incurring current taxation. If the
Section 403(b) plan is employer-sponsored, transfers under Rev. Rul. 90-24
may be restricted to 403(b) providers approved by the plan sponsor.
Amounts distributed from a Section 457 plan cannot be rolled over to an
IRA.
Required Beginning Date/Required Minimum Distributions
Distributions from each of these retirement programs must begin on or
before April 1 of the year after the Participant attains age 70 1/2. For
employees of governmental employers, the required beginning date is the later
of age 70 1/2 or separation from service.
All amounts in a Section 401(a), Section 401(k) and Section 457 plan and
amounts accruing after December 31, 1986 under Section 403(b) annuities must
be distributed in compliance with the minimum distribution requirements.
All distributions, regardless of when the amounts accrued, must satisfy the
"incidental benefit" or "minimum distribution incidental benefit" rule. If
the amount distributed does not meet the minimum requirements, a 50% penalty
tax on the amount which was required to be, but was not, distributed may be
imposed upon the employee by the IRS under Section 4974. These rules are
extremely complex, and the Participant should seek the advice of a competent
tax adviser.
Federal Taxation of Distributions
All payments received from a Section 401(a), Section 401(k) or Section
403(b) annuity contract are normally taxable in full as ordinary income to
the Participant. Since premiums derived from salary reduction have not been
previously taxed to the Participant, they cannot be treated as a cost basis
for the contract. The Participant will have a cost basis for the contract
only when after-tax contributions have been made.
If the Participant takes the entire value in the contract in a single
sum cash payment, the full amount received will be ordinary income in the
year of receipt unless after-tax contributions were made. If the
distribution includes after-tax contributions, the amount in excess of the
cost basis will be ordinary income. Section 72(e)(5). Special averaging
treatment is currently available for lump sum distributions from Section
401(a) and Section 401(k) plans only.
Amounts received before the annuity starting date by a Participant who
has made after-tax contributions are taxed under a rule that provides for pro
rata recovery of cost. Section 72(e)(9). If an employee who has a cost
basis for his contract receives life annuity or installment payments, the
cost basis will be recovered from the payments under the annuity rules of
Section 72. Typically, however, there is no cost basis and the full amount
received is taxed as ordinary income in the year distributed.
All amounts received from a Section 457 plan, whether in the form of
total or partial withdrawals or annuity payments are taxed in full as wages
to the Participant in the year distributed.
Penalty Taxes
Penalty taxes may apply to certain distributions from Section 401(a)
plans, Section 401(k) plans and Section 403(b) annuities. Distributions made
before the Participant attains age 59 1/2 are premature distributions and
subject to an additional tax equal to 10% of the amount of the distributions
which is includable in gross income in the tax year. However, under Code
Section 72(t), the penalty tax may not apply to distributions: (1) made to
a beneficiary on or after the death of the Participant; (2) attributable to
the employee's being disabled within the meaning of Code Section 72(m)(7);
(3) made as a part of a series of substantially equal periodic payments (at
least annually) for the life or life expectancy of the Participant or the
joint lives or life expectancies of the Participant and his designated
beneficiary; (4) made to a Participant on account of separation from service
after attaining age 55; (5) properly made to an alternate payee under a
qualified domestic relations order; (6) made to an Participant for medical
care, but not in excess of the amount allowable as a medical expense
deduction to the Participant for amounts paid during the taxable year for
medical care; (7) timely made to correct an excess aggregate contribution; or
(8) timely made to reduce an excess elective deferral.
If exception (3) above is applicable at the time of the distribution but
the series of payments is later modified (other than because of death or
disability) before the Participant reaches age 59 1/2 or, if after he reaches
age 59 1/2, within five years of the date of the first payment, the
Participant's tax for the year the modification occurs is increased by an
amount equal to the tax which, but for the exception, would have been imposed
plus interest for the deferral period.
If a Participant's aggregate retirement distributions from qualified
plans, tax sheltered annuities and individual retirement plans in a calendar
year exceed $150,000, a 15% excise tax may be imposed on the employee, in
addition to any income tax, on the excess portion of the distributions.
If the amount distributed during a tax year is less than the minimum
required distribution, there is an additional tax imposed on the Participant
equal to 50% of the amount that the distribution made in the year falls short
of the required amount.
No penalty taxes apply to distributions from a Section 457 plan.
Distributions on Death of Participant
Distributions made to a beneficiary from any of these retirement
programs upon the Participant's death must be made pursuant to the rules
contained in Section 401(a)(9) of the Code and the regulations thereunder.
Generally, if the Participant dies while receiving annuity payments or other
required minimum distributions under the plan and before the entire interest
in the account has been distributed, the remainder of his interest must be
distributed to the beneficiary at least as rapidly as under the method in
effect as of the Participant's date of death.
If the Participant dies before payments have begun, his entire interest
must generally be distributed within five (5) years after the date of death.
This five year rule applies to all non-individual beneficiaries. However, if
an individual other than the surviving spouse has been designated as
beneficiary, payments may be made over the life of that individual or over a
period not extending beyond the life expectancy of the beneficiary so long as
payments begin on or before December 31 of the year following the year of
death. If the beneficiary is the Participant's spouse, distributions are not
required to begin until the date the employee would have attained age 70 1/2.
If the spouse dies before distributions begin, the rules discussed above will
apply as if the spouse were the employee. Participants and beneficiaries
should seek competent tax or legal advice about the tax consequences of
distributions.
Federal Income Tax Withholding
Effective January 1, 1993, certain distributions from Section 401(a)
plans, Section 401(k) plans and Section 403(b) annuities are defined as
"eligible rollover distributions." Generally, any eligible rollover
distribution is subject to mandatory income tax withholding at the rate of
20% unless the employee elects to have the distribution paid as a direct
rollover to an IRA or to another qualified plan or Section 403(b) annuity
contract or custodial account, as applicable. With respect to distributions
other than eligible rollover distributions, amounts will be withheld from
annuity (periodic) payments at the rates applicable to wage payments and from
other distributions at a flat 10% rate, unless the Participant elects not to
have federal income tax withheld.
Distributions to a Participant from a Section 457 plan retain their
character as wages and are tax reported on Form W-2. Federal income taxes
must be withheld under the wage withholding rules. Participants cannot elect
not to have federal income tax withheld. Payments to beneficiaries are not
treated as wages and tax reported on Form 1099R. Federal income tax on
payments to beneficiaries will be withheld from annuity (periodic) payments
at the rates applicable to wage withholding, and from other distributions at
a flat 10% rate, unless the beneficiary elects not to have federal income tax
withheld.
VOTING RIGHTS
GWL&A will vote the shares held by the Investment Divisions of the
Series Account at regular and special meetings of shareholders of Maxim, TCI,
and Fidelity VIP. The Investment Company Act of 1940 (the "1940 Act") and the
regulations thereunder, as presently interpreted, require that the shares of
the applicable underlying mutual fund be voted in accordance with
instructions received from persons having voting interests in the Variable
Sub-Accounts and, accordingly, GWL&A will do so. However, if the 1940 Act
or
any regulation thereunder should be amended, or if the present interpretation
thereof should change, and as a result GWL&A determined that it is permitted
to vote the shares at its own discretion, GWL&A may elect to do so.
Prior to the Annuity Commencement Date, the Participant under a Section
403(b) retirement program or the employer under a Section 401(k) or Section
457 retirement program has the voting interest in the Variable Sub-Accounts.
After annuity payments begin under a variable annuity option, the payee will
have the voting interest.
The number of votes which a person has the right to cast will be
determined by applying his/her percentage interest in a Variable Sub-Account
to the total number of votes attributable to the Sub-Account. In determining
the number of votes, fractional shares will be recognized. During the annuity
payment period, the number of votes attributable to a Participant Annuity
Account will decrease as the assets held to fund the annuity payments
decrease.
Voting rights held in respect of a Variable Sub-Account of this Series
Account as to which no timely instructions are received, and shares that are
not otherwise attributable to persons having voting interests in the Variable
Sub-Accounts of this Series Account, will be voted by GWL&A in proportion to
the voting instructions which are received with respect to all Participant
Annuity Accounts participating in that Sub-Account of this Series Account.
Voting instructions to abstain on any item to be voted upon will be applied
on a pro rata basis to reduce the votes eligible to be cast. Each person
having a voting interest will receive proxy materials, reports and other
materials relating to the applicable underlying mutual fund.
DISTRIBUTION OF THE GROUP CONTRACTS
Great-West is the principal underwriter and the distributor of the Group
Contracts. Great-West is registered with the Securities and Exchange
Commission under the Securities and Exchange Act of 1934 as a broker-dealer
and is a member of the National Association of Securities Dealers, Inc.
("NASD"). Applications for the Group Contracts will be solicited by
duly-licensed insurance agents of Great-West, as well as by independent
registered insurance brokers who must also be NASD-registered broker-dealers
or representatives thereof.
The maximum commission as a percentage of the Contributions made under
a Group Contract payable to Great-West agents, independent registered
insurance brokers and other registered broker-dealers is 8.0%. An expense
allowance that will not exceed 40% of the maximum commission paid may also
be
paid.
Additionally, effective August 1, 1987, a maximum of 1% of Contributions
may also be paid as a persistency bonus to qualifying brokers.
RETURN PRIVILEGE
Within 15 days after a Participant Certificate under a Section 403(b)
retirement program is first mailed, it may be canceled for any reason by
delivering or mailing it together with a Request to cancel to GWL&A's
Administrative Offices or to an authorized agent of GWL&A. Upon cancellation,
GWL&A will refund all Contributions. No Contingent Deferred Sales Charge or
other charge will be deducted.
STATE REGULATION
As a life insurance company organized and operated under Colorado law,
GWL&A is subject to provisions governing such companies and to regulation by
the Colorado Commissioner of Insurance.
GWL&A's books and accounts are subject to review and examination by
the
Colorado Insurance Department at all times and a full examination of its
operations is conducted by the National Association of Insurance
Commissioners ("NAIC") at least once every three years.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT
PROGRAM
Section 36.105 of the Teacher Retirement System of Texas permits
Participants in the Texas Optional Retirement Program ("ORP") to redeem their
interest in a variable annuity contract issued under the ORP only upon
termination of employment in the Texas public institutions of higher
education, retirement or death. Accordingly, a Participant in the ORP will be
required to obtain a certificate of termination from his/her employer before
he/she can redeem his/her Participant Annuity Account.
REPORTS
As presently required by the 1940 Act and regulations
promulgated
thereunder, all Participants will be furnished, at least semi-annually, with
reports containing such information as may be required under the 1940 Act or
by any other applicable law or regulation. In addition, all Participants will
be furnished not less frequently than annually a with statement of the
Participant Annuity Account Value established in his/her name.
LEGAL PROCEEDINGS
The Series Account is not engaged in any litigation. GWL&A is not
involved in any litigation which would have material adverse effect on the
ability of GWL&A to perform its contract with the Series Account.
LEGAL MATTERS
The organization of GWL&A, its authority to issue variable annuity
contracts and the validity of the Group Contract have been passed upon by
R.B. Lurie, Vice-President, Counsel and Associate Secretary. Certain legal
matters relating to the Federal securities laws have been passed upon for
GWL&A by Jorden Burt Berenson & Johnson, LLP.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Group Contracts offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and amendments thereto
and exhibits filed as a part thereof, to all of which reference is hereby
made for further information concerning the Series Account, GWL&A and the
Group Contracts. Statements contained in this Prospectus as to the content of
Group Contracts and other legal instruments are summaries. For a complete
statement of the terms thereof reference is made to such instruments as
filed.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific
information and financial statements relating to the Series Account and
GWL&A. The Table of Contents of the Statement of Additional Information is
set forth below:
1. Custodian and Independent Auditors
2. Underwriter
3. Calculation of Performance Date
4. Financial Statements
Inquiries and requests for a Statement of Additional
Information should be directed to GWL&A in writing at 8515 E. Orchard Road,
Englewood, Colorado 80111, or by telephoning GWL&A at (800) 468-8661
(U.S.) or (303) 689-3360 (Englewood).
FUTUREFUNDS SERIES ACCOUNT
Individual Flexible Premium Variable Annuity Contracts
issued by
Great-West Life & Annuity Insurance Company
8515 E. Orchard Road
Englewood, Colorado 80111
Telephone: (800) 468-8661 (U.S.)
(303) 689-3360 (Englewood)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a Prospectus and should
be read in conjunction with the Prospectus, dated April 30, 1996,
which is available without charge by contacting Great-West Life & Annuity
Insurance Company ("GWL&A") at the above address or at the above telephone
number.
April 30, 1996
TABLE OF CONTENTS
Page
CUSTODIAN AND INDEPENDENT AUDITORS B-3
UNDERWRITER B-3
CALCULATION OF PERFORMANCE DATA
B-3
FINANCIAL STATEMENTS B-6
CUSTODIAN AND INDEPENDENT AUDITORS
A. Custodian
The assets of FutureFunds Series Account (the "Series Account")
are
held by Great-West Life & Annuity Insurance Company ("GWL&A"). The assets
of
the Series Account are kept physically segregated and held separate and apart
from the general account of GWL&A. GWL&A maintains records of all
purchases
and redemptions of shares of the Fund. Additional protection for the assets
of the Series Account is afforded by blanket fidelity bonds issued to The
Great-West Life Assurance Company ("Great-West") in the amount of $25
million, which covers all officers and employees of GWL&A.
B. Independent Auditors
The accounting firm of Deloitte & Touche LLP performs certain
accounting and auditing services for GWL&A and the Series Account. The
principal business address of Deloitte & Touche LLP is 555 Seventeenth
Street, Suite 3600, Denver, Colorado 80202-3942.
The statement of assets and liabilities of FutureFunds Series
Account as of December 31, 1995, the related statement of operation then
ended, the statements of changes in net asset for each of the two years in
the period then ended and the consolidated financial statements of GWL&A at
December 31, 1995 and 1994 and for each of the three years in the period
ended December 31, 1995, included in this Statement of Additional
Information have been audited by Deloitte & Touche LLP, independent auditors,
as set forth in their report appearing herein and are included in reliance
upon such report given upon the authority of such firm as experts in
accounting and auditing.
UNDERWRITER
The offering of the Contracts is made on a continuous basis by
Great-West, an affiliate of GWL&A. No payments were made to Great-West for
the years 1993 through 1995.
CALCULATION OF PERFORMANCE DATA
A. Yield and Effective Yield Quotations for the Money Market Investment
Division
The yield quotation for the Money Market Investment Division set
forth in the Prospectus is for the seven-day period ended December 31, 1995
and is computed by determining the net change, exclusive of capital changes,
in the value of a hypothetical pre-existing account having a balance of one
Accumulation Unit in the Money Market Investment Division at the beginning of
the period, subtracting a hypothetical charge reflecting deductions from
Participant accounts, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return, and
then multiplying the base period return by (365/7) with the resulting yield
figure carried to the nearest hundredth of one percent.
The effective yield quotation for the Money Market Investment Division
set forth in the Prospectus is for the seven-day period ended December 31,
1995 and is carried to the nearest hundredth of one percent, computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one Accumulation Unit
in the Money Market Investment Division at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from Participant
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power
equal to 365 divided by 7, and subtracting 1 from the result, according to
the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN +1 365/7]-1.
For purposes of the yield and effective yield computations, the
hypothetical charge reflects all deductions that are charged to all
Participant accounts in proportion to the length of the base period, and for
any fees that vary with the size of the account, the account size is assumed
to be the Money Market Investment Division's mean account size. The specific
percentage applicable to a particular withdrawal would depend on a number of
factors including the length of time the Contract Owner has participated
under the Contracts. (See Administrative Charges, Risk Charges and Other
Deductions in the prospectus.) No deductions or sales loads are assessed
upon annuitization under the Contracts. Realized gains and losses from the
sale of securities and unrealized appreciation and depreciation of the Money
Market Investment Division and the Fund are excluded from the calculation of
yield.
B. Total Return Quotations for All Investment Divisions
The total return quotations for all Investment Divisions set forth in
the Prospectus are average annual total return quotations for the one, five
and ten year periods ended December 31, 1995, or since inception if the
portfolio has not been in existence for at least the above listed period of
time. The quotations are computed by finding the average annual compounded
rates of return over the relevant periods that would equate the initial
amount invested to the ending redeemable value, according to the following
formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value of a
hypothetical
$1,000
payment made at the beginning of the particular period at the end of the
particular period
For purposes of the total return quotations for these Investment Divisions,
the calculations take into effect all fees that are charged to the Contract
Value , and for any fees that vary with the size of the account, the account
size is assumed to be the respective Investment Divisions' mean account size.
The calculations also assume a complete redemption as of the end of the
particular period.
The yield quotations for these Investment Divisions set forth in the
Prospectus are based on the thirty-day period ended on December 31, 1995, and
are computed by dividing the net investment income per Accumulation Unit
earned during the period by the maximum offering price per unit on the last
day of the period, according to the following formula:
YIELD = 2[((a-b)cd +1)6 -1]
Where: a = net investment income earned during the period
by
the
corresponding portfolio of the Fund attributable to shares owned by the
Investment Division.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of Accumulation Units
outstanding during the period.
d = the maximum offering price per Accumulation Unit
on the
last day of the period.
For purposes of the yield quotations for these Investment Divisions, the
calculations take into effect all fees that are charged to the Contract
Value, and for any fees that vary with the size of the account, the account
size is assumed to be the respective Investment Divisions' mean account
size.
FINANCIAL STATEMENTS
The consolidated financial statements of GWL&A as contained herein
should be considered only as bearing upon GWL&A's ability to meet its
obligations under the Contracts, and they should not be considered as bearing
on the investment performance of the Series Account. The interest of
Contract Owners under the Contracts are affected solely by the investment
results of the Series Account.
FUTUREFUNDS SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Financial Statements for the Years
Ended December 31, 1995 and 1994
and Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Contract Owners
of FutureFunds Series Account
of Great-West Life & Annuity Insurance Company:
We have audited the accompanying statement of assets and liabilities of
FutureFunds Series Account of Great-West Life & Annuity Insurance Company
as
of December 31, 1995, the related statement of operations for the year then
ended and the statements of changes in net assets for each of the two years
in the period then ended, including each of the investment divisions. These
financial statements are the responsibility of the Series Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of FutureFunds Series Account of Great-West
Life & Annuity Insurance Company at December 31, 1995, the results of its
operations for the year then ended and the changes in its net assets for each
of the two years in the period then ended in conformity with generally
accepted accounting principles.
February 7, 1996
FUTUREFUNDS SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF
ASSETS
AND LIABILITIES
DECEMBER 31, 1995 ASSETS:
Shares Cost Value
Investments in mutual funds:
Fidelity Investments - Variable Insurance Products Fund/Asset Manager
855,874 $ 12,146,125 $ 13,514,247
Fidelity Investments - Variable Insurance Products Fund/Growth
665,895 16,568,321 19,444,135
Maxim Series Fund, Inc. - Affiliated
Bond 43,480,290 53,169,823 53,483,453 Corporate Bond 1,904,375
2,136,991 2,194,111 International Equity 18,158,111 19,591,319
20,692,021 INVESCO ADR 207,508 218,376 233,543
INVESCO Small-Cap Growth 2,157,655 2,581,266 2,747,508 Mid-Cap
17,800,700
20,004,225 24,099,497 Money Market 42,140,943 42,164,465
42,169,460 Small-Cap Index 3,442,442 3,515,553 4,020,672
Small-Cap Value 328,650 346,505 350,633 Stock Index 143,503,203
200,673,991 284,083,523 T. Rowe Price Equity/Income 5,174,256
5,874,249 6,536,462
Total Return 1,776,323 2,152,926 2,303,745 U.S. Government
Securities 33,298,352 37,487,202 36,633,157
TCI Portfolios, Inc. - TCI Balanced 5,660,603 33,816,376 39,850,642
TCI Portfolios, Inc. - TCI Growth 6,174,658 56,666,908 74,466,371
Total investments $ 509,114,621 626,823,180
Other assets and liabilities:
Premiums due and accrued 27,483,928
Due to Great-West Life & Annuity Insurance Company (63,504)
Other liabilities (111)
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL (Note
5) $
654,243,493
See notes to financial statements.
FUTUREFUNDS SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF
OPERATIONS
YEAR ENDED DECEMBER 31, 1995
VIP VIP Corporate International INVESCO Asset Manager Growth Bond
Bond Equity ADR Investment Investment Investment Investment
Investment Investment Division Division Division Division Division
Division
INVESTMENT INCOME $ 165,467 $ 33,827 $ 3,115,701 $ 94,398 $ 342,869
$ 1,082
EXPENSES-mortality and expense risks by category (Note 3)
1.25 130,014 145,876 630,664 8,957 204,872 996 0.95 904 1,137 1,408
2 2,138 5
NET INVESTMENT INCOME (LOSS)
34,549 (113,186) 2,483,629 85,439 135,859 81 NET REALIZED AND
UNREALIZED GAIN ON INVESTMENTS: Net realized gain (loss) on
investments
30,077 (25,163) (15,151) (2,675) (24,131) 656 Net change in
unrealized appreciation on investments 1,529,002 2,682,819 4,009,103
57,120 1,130,221 15,167
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 1,559,079
2,657,656
3,993,952 54,445 1,106,090 15,823
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$ 1,593,628 $ 2,544,470 $ 6,477,581 $ 139,884 $ 1,241,949 $ 15,904
See notes to financial statements.
(Continued)
FUTUREFUNDS SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF
OPERATIONS
YEAR ENDED DECEMBER 31, 1995
INVESCO Small-Cap Money Small-Cap Small-Cap Stock Growth Mid-Cap
Market
Index Value Index Investment Investment Investment Investment
Investment Investment Division Division Division Division Division
Division
INVESTMENT INCOME
$ 97,001 $ 641,768 $ 2,146,352 $ 112,818
$19,021 $ 6,683,122
EXPENSES-mortality and expense risks by category (Note 3) 1.25 11,954
199,152 484,599 33,136 1,493 3,037,186 0.95 180 1,417 404 535 1
6,916
NET INVESTMENT INCOME
84,867 441,199 1,661,349 79,147 17,527 3,639,020 NET REALIZED
AND
UNREALIZED GAIN ON INVESTMENTS: Net realized gain on
investments
5,225 36,835 13,032 981 939,850 Net change in
unrealized appreciation on investments 166,242 3,559,183 508,944 3,915
65,708,126
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
171,467 3,596,018 521,976 4,896 66,647,976 NET INCREASE IN
NET
ASSETS RESULTING FROM OPERATIONS
$ 256,334 $ 4,037,217 $ 1,661,349 $ 601,123 $ 22,423
$ 70,286,996 See notes to
financial statements.
(Continued)
FUTUREFUNDS SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF
OPERATIONS
YEAR ENDED DECEMBER 31, 1995
U.S. T. Rowe Price Total Government TCI TCI Equity/Income Return
Securities Balanced Growth Investment Investment Investment
Investment Investment Total Division Division Division Division
Division
FutureFunds
INVESTMENT INCOME
$ 131,512 $ 116,357 $ 2,203,948 $ 903,566 $ 58,710
$ 16,867,519
EXPENSES-mortality and expense risks by category (Note 3) 1.25 33,174
18,278 404,129 438,823 787,705 6,571,008
0.95 9 35 281 612 1,976 17,960
NET INVESTMENT INCOME (LOSS)
98,329 98,044 1,799,538 464,131 (730,971) 10,278,551 NET REALIZED
AND
UNREALIZED GAIN ON INVESTMENTS:
Net realized gain (loss) on investments
(919) 610 16,105 36,664 (42,295) 969,701 Net change in
unrealized appreciation on investments
662,891 168,092 2,562,425 5,751,111 16,202,614 104,716,975
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
661,972 168,702 2,578,530 5,787,775 16,160,319 105,686,676
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$ 760,301 $ 266,746 $ 4,378,068 $ 6,251,906 $ 15,429,348 $ 115,965,227
See notes to financial statements.
(Concluded)
FUTUREFUNDS SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF
CHANGES
IN NET ASSETS
YEARS ENDED DECEMBER 31, 1995 and 1994
VIP VIP
Asset Manager Growth Bond
Investment Investment Investment
Division (D) Division (D) Division
1995 1994 1995 1994 1995 1994
FROM OPERATIONS:
Net investment income (loss)
$ 34,549 $ (24,655) $ (113,186) $ (19,694) $ 2,483,629
$ 2,177,036
Net realized gain (loss) on investments
30,077 (27) (25,163) 2,551 (15,151) (345,269) Net change in
unrealized appreciation (depreciation) on investments
1,529,002 (160,880) 2,682,819 192,995 4,009,103 (3,761,985)
Increase (decrease) in net assets resulting from operations
1,593,628 (185,562) 2,544,470 175,852 6,477,581 (1,930,218)
FROM UNIT TRANSACTIONS (by category): Variable annuity
contract:
Purchase payments
1.25 3,467,691 1,138,831 4,140,551 815,939 6,004,310 7,868,735
0.95 19,845 19,742 8,564
Redemption
1.25 (288,498) (28,806) (482,399) (24,541) (5,121,131) (3,679,086)
0.95 (44,000)
Net transfers from (to) other annuity contracts 1.25 1,036,346
6,229,118 7,706,489 4,412,775 (3,096,529) (8,787,531)
0.95 1,195,697 1,598,527 2,018,422
Increase (decrease) in net assets resulting from unit transactions
5,431,081 7,339,143 12,982,910 5,204,173 (230,364) (4,597,882)
INCREASE (DECREASE) IN NET ASSETS
7,024,709 7,153,581 15,527,380 5,380,025 6,247,217 (6,528,100)
NET ASSETS:
Beginning of period
7,153,581 5,380,025 48,114,156 54,642,256 End of period
$ 14,178,290 $ 7,153,581 $ 20,907,405 $ 5,380,025
$ 54,361,373 $ 48,114,156
(D) The Investment Division commenced operations on April 21, 1994.
See notes to financial statements.
(Continued)
FUTUREFUNDS SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF
CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1995 and 1994 INVESCO
Corporate
International INVESCO Small-Cap Bond Equity ADR Growth Investment
Investment Investment Investment Division (I) Division (B) Division
(G) Division (H)
1995 1995 1994 1995 1995
FROM OPERATIONS:
Net investment income
$ 85,439 $ 135,859 $ 6,369 $ 81 $ 84,867
Net realized gain (loss) on investments
(2,675) (24,131) (127) 656 5,225
Net change in unrealized appreciation (depreciation) on
investments
57,120 1,130,221 (29,519) 15,167 166,242 Increase (decrease)
in net assets resulting from operations
139,884 1,241,949 (23,277) 15,904 256,334 FROM UNIT
TRANSACTIONS (by category): Variable annuity contract:
Purchase payments
1.25 286,506 5,781,016 1,617,804 75,172 652,960 0.95 382 42,885
237 6,746
Redemptions
1.25 (130,103) (589,919) (46,136) (4,719) (81,754) 0.95 (2,000)
Net transfers from other annuity contracts 1.25 2,447,415
899,778 9,737,999 173,776 1,945,259 0.95 2,356 2,915,034 11,225
242,080
Increase in net assets resulting from unit transactions 2,606,556 9,046,794
11,309,667 255,691 2,765,291 INCREASE IN NET ASSETS
2,746,440 10,288,743 11,286,390 271,595 3,021,625 NET ASSETS:
Beginning of period
11,286,390
End of period
$ 2,746,440 $ 21,575,133 $ 11,286,390 $ 271,595
$ 3,021,625
(B) The Investment Division commenced operations on April 13, 1994.
(G) The Investment Division commenced operations on January 5, 1995.
(H) The Investment Division commenced operations on January 9, 1995.
(I) The Investment Division commenced operations on February 2, 1995.
See notes to financial statements.
(Continued)
FUTUREFUNDS SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENTS OF
CHANGES
IN NET ASSETS
YEARS ENDED DECEMBER 31, 1995 and 1994
Small-Cap Mid-Cap Money Market
Index
Investment Investment Investment
Division (B) Division Division (A)
1995 1994 1995 1994 1995 1994
FROM OPERATIONS:
Net investment income
$ 441,199 $ 3,845 $ 1,661,349 $ 640,323 $ 79,147 $ 1,454 Net realized gain
on investments
36,835 2 13,032 57
Net change in unrealized appreciation (depreciation) on investments
3,559,183 536,089 508,944 (3,825)
Increase (decrease) in net assets resulting from operations
4,037,217 539,936 1,661,349 640,323 601,123 (2,314) FROM UNIT
TRANSACTIONS:
Variable annuity contract:
Purchase payments
1.25 6,167,319 1,153,950 9,733,808 9,618,391 859,915 239,290
0.95 34,500 54,828 12,222
Redemptions
1.25 (470,569) (89,125) (8,569,592) (4,899,737)
(69,840) (17,250)
0.95
Net transfers from other annuity contracts 1.25 5,186,537
7,043,525 9,017,657 20,812,663 676,471 1,229,653
0.95 1,906,503 1,640,292 725,484
Increase in net assets resulting from unit transactions 12,824,290
8,108,350 11,876,993 25,531,317 2,204,252 1,451,693
INCREASE IN NET ASSETS
16,861,507 8,648,286 13,538,342 26,171,640 2,805,375 1,449,379
NET ASSETS:
Beginning of period
8,648,286 37,018,675 10,847,035 1,449,379 End of period
$ 25,509,793 $ 8,648,286 $ 50,557,017 $ 37,018,675
$ 4,254,754 $ 1,449,379
(A) The Investment Division commenced operations on March 15, 1994.
(B) The Investment Division commenced operations on April 13, 1994.
See notes to financial statements. (Continued)
FUTUREFUNDS SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF
CHANGES IN
NET ASSETS
YEARS ENDED DECEMBER 31, 1995 and 1994
Small-Cap Stock T. Rowe Price
Value Index Equity/Income
Investment Investment Investment
Division (E) Division Division (F)
1995 1994 1995 1994 1995 1994
FROM OPERATIONS:
Net investment income (loss)
$ 17,527 $ (3) $ 3,639,020 $ 5,745,905 $ 98,329 $ 616 Net realized gain
(loss) on investments
981 (99) 939,850 3,549,699 (919) (7)
Net change in unrealized appreciation (depreciation) on investments
3,915 213 65,708,126 (10,287,509) 662,891 (678) Increase (decrease)
in net assets resulting from operations
22,423 111 70,286,996 (991,905) 760,301 (69) FROM UNIT
TRANSACTIONS:
Variable annuity contract:
Purchase payments
1.25 44,436 21,090,186 36,511,373 1,224,629 3,599 0.95 37,063
2,724
Redemptions
1.25 (155) (13,550,775) (12,990,437) (167,053) (1,389)
0.95 (64,815)
Net transfers from (to) other annuity contracts
1.25 291,267 (111) (5,650,367) (72,768,148) 5,165,135 161,079
0.95 1,682 9,554,596 10,767
Increase (decrease) in net assets resulting from unit transactions
337,230 (111) 11,415,888 (49,247,212) 6,236,202 163,289
INCREASE (DECREASE) IN NET ASSETS
359,653 0 81,702,884 (50,239,117) 6,996,503 163,220 NET ASSETS:
Beginning of period
207,183,447 257,422,564 163,220
End of period
$ 359,653 $ 0 $ 288,886,331 $ 207,183,447 $ 7,159,723
$ 163,220
(E) The Investment Division commenced operations on November 4, 1994.
(F) The Investment Division commenced operations on November 9, 1994.
See notes to financial statements.
(Continued)
FUTUREFUNDS SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF
CHANGES IN
NET ASSETS
YEARS ENDED DECEMBER 31, 1995 and 1994
Total U.S. Government TCI
Return Securities Balanced
Investment Investment Investment
Division (C) Division Division
1995 1994 1995 1994 1995 1994
FROM OPERATIONS:
Net investment income
$ 98,044 $ 11,045 $ 1,799,538 $ 1,197,488 $ 464,131
$ 332,525
Net realized gain (loss) on investments
610 10 16,105 (67,507) 36,664 (3,364)
Net change in unrealized appreciation (depreciation) on investments
168,092 (17,273) 2,562,425 (2,444,417) 5,751,111 (506,778)
Increase (decrease) in net assets resulting from operations
266,746 (6,218) 4,378,068 (1,314,436) 6,251,906 (177,617)
FROM UNIT TRANSACTIONS:
Variable annuity contract:
Purchase payments
1.25 450,232 90,130 5,318,730 7,383,717 5,757,119 7,090,289
0.95 2,569 4,443 12,547
Redemptions
1.25 (13,622) (11,156) (2,106,664) (2,336,076) (2,015,728) (1,426,309)
0.95 (4,000)
Net transfers from (to) other annuity contracts 1.25 1,234,959
489,831 1,765,151 4,595,086 (298,270) 6,576,632
0.95 46,541 394,083 845,265
Increase in net assets resulting from unit transactions
1,720,679 568,805 5,375,743 9,642,727 4,296,933 12,240,612
INCREASE IN NET ASSETS
1,987,425 562,587 9,753,811 8,328,291 10,548,839 12,062,995
NET ASSETS:
Beginning of period
562,587 29,539,213 21,210,922 31,165,620 19,102,625 End of period
$ 2,550,012 $ 562,587 $ 39,293,024 $ 29,539,213 $ 41,714,459 $ 31,165,620
(C) The Investment Division commenced operations on April 20, 1994.
See notes to financial statements.
(Continued)
FUTUREFUNDS SERIES ACCOUNT OF
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF
CHANGES IN
NET ASSETS
YEARS ENDED DECEMBER 31, 1995 and 1994
TCI Growth Investment
Total Division
FutureFunds 1995 1994 1995 1994
FROM OPERATIONS:
Net investment income (loss)
$ (730,971) $ (539,608) $ 10,278,551 $ 9,532,646
Net realized gain (loss) on investments
(42,295) (2,387) 969,701 3,133,532
Net change in unrealized appreciation (depreciation) on investments
16,202,614 (487,151) 104,716,975 (16,970,718) Increase (decrease)
in net assets resulting from operations
15,429,348 (1,029,146) 115,965,227 (4,304,540) FROM UNIT
TRANSACTIONS:
Variable annuity contract:
Purchase payments
1.25 11,572,719 14,796,515 82,627,299 88,328,563
0.95 30,220 289,517
Redemptions
1.25 (2,926,025) (2,563,504) (36,588,546) (28,113,552)
0.95 (2,000) (116,815)
Net transfers from (to) other annuity contracts
1.25 (1,083,104) 8,963,681 27,417,970 (11,303,748) 0.95 2,891,180
25,999,734
Increase in net assets resulting from unit transactions
10,482,990 21,196,692 99,629,159 48,911,263 INCREASE IN NET
ASSETS
25,912,338 20,167,546 215,594,386 44,606,723 NET ASSETS:
Beginning of period
50,984,528 30,816,982 438,649,107 394,042,384 End of period
$ 76,896,866 $ 50,984,528 $ 654,243,493 $ 438,649,107 (Concluded)
FUTUREFUNDS SERIES ACCOUNT OF GREAT-WEST LIFE & ANNUITY
INSURANCE
COMPANY
NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31,
1995 AND 1994
1.HISTORY OF THE SERIES ACCOUNT
The FutureFunds Series Account of Great-West Life & Annuity Insurance
Company
(the Series Account) is a separate account of Great-West Life & Annuity
Insurance Company (the Company) and was established under Kansas law on
November 15, 1983. In 1990, the Series Account was amended to conform to
and
comply with Colorado law in connection with the Company's redomestication to
the State of Colorado. The Series Account is registered with the Securities
and Exchange Commission as a unit investment trust under the provisions of
the Investment Company Act of 1940, as amended.
The Series Account has various investment divisions which invest in shares of
an open-end management investment companies as follows:
FutureFunds Series Account Investment Division Mutual Fund Investment
VIP Asset Manager Fidelity Investments - Variable Insurance Products
Fund-Asset Manager VIP Growth Fidelity Investments - Variable Insurance
Products Fund-Growth Bond Maxim Series Fund, Inc. -Bond Corporate Bond
Maxim Series Fund, Inc. - Corporate Bond International Equity Maxim Series
Fund, Inc. - International Equity INVESCO ADR Maxim Series Fund, Inc. -
INVESCO ADR INVESCO Small-Cap Growth Maxim Series Fund, Inc. -
INVESCO
Small-Cap Growth Mid-Cap Maxim Series Fund, Inc. - Mid-Cap Money
Market
Maxim Series Fund, Inc. - Money Market Small-Cap Index Maxim Series Fund,
Inc. - Small-Cap Index Small-Cap Value Maxim Series Fund, Inc. - Small-Cap
Value Stock Index Maxim Series Fund, Inc. - Stock Index T. Rowe Price
Equity/Income Maxim Series Fund, Inc. - T. Rowe Price Equity/Income Total
Return Maxim Series Fund, Inc. - Total Return U.S. Government Securities
Maxim Series Fund, Inc. - U.S. Government Securities TCI Balanced TCI
Portfolios, Inc. - TCI Balanced TCI Growth TCI Portfolios, Inc. - TCI
Growth
2.SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies of the Series
Account which are in accordance with the accounting principles generally
accepted in the investment company industry:
a.Security Transactions - Security transactions are recorded on the trade
date. Cost of investments sold is determined on the basis of identified
cost.
Dividend income is accrued as of the ex-dividend date and expenses are
accrued on a daily basis.
b. Security Valuation - The investments in shares of the Funds are valued
at the closing net asset value per share as determined by each portfolio at
year end.
The cost of investments represents shares of the Funds which were purchased
by the Series Account. Purchases are made at the net asset value from net
purchase payments or through reinvestment of all distributions from the
Funds.
c. Federal Income Taxes - The Series Account income is automatically
applied to increase contract reserves. Under the existing federal income tax
law, this income is not taxed to the extent that it is applied to increase
reserves under a contract. The Company reserves the right to charge the
Series Account for federal income taxes attributed to the Series Account if
such taxes are imposed in the future.
3. CHARGES UNDER THE CONTRACTS
a. Contract Maintenance Charge - To compensate the Company for
administrative services, a contract maintenance charge of not more than $60
is deducted from each participant's account on the first day of each calendar
year. If the account is established after the beginning of the year, the
charge is deducted on the first day of the next calendar quarter and is
prorated for the portion of the year remaining.
b. Charges Incurred for Total or Partial Surrenders - Pursuant to the
contract, charges will be made for total or partial surrenders of a contract
in excess of the "free amount" before the retirement date by a deduction from
a participant's account. The "free amount" is an amount equal to 10% of the
participant account value at December 31 of the calendar year prior to the
partial or total surrender.
c. Deductions for Premium Taxes - The Company presently intends to pay
any
premium tax levied by any governmental entity as a result of the existence of
the participant accounts or the Series Account.
d. Deductions for Assumption of Mortality and Expense Risk - The Company
deducts an amount, computed daily, from the net asset value of the Series
Account investments, equal to an annual rate of 1.25% or .95% depending on
the size of the contract. This charge is designed to compensate the Company
for its assumption of certain mortality, death benefit and expense risks.
The level of this charge is guaranteed and will not change.
4. RELATED PARTY SERVICES
The Company's parent, The Great-West Life Assurance Company, serves as
investment advisor to Maxim Series Fund, Inc. Fees are assessed against the
average daily net asset value of the Funds to compensate The Great-West Life
Assurance Company for investment advisory services.
5. COMPONENTS OF NET ASSETS APPLICABLE TO OUTSTANDING
UNITS OF
CAPITAL
The following is a summary of the net assets applicable to outstanding units
of capital at December 31, 1995, for each investment division.
Total Variable
Annuity
Contract
Units
Unit Value
Liabilities
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL:
Investment
Division:
VIP - Asset Manager
1.25 1,202,943.323618 $ 10.756029 $ 12,938,893
VIP - Asset Manager
0.95 118,138.127389 10.491083 1,239,397
VIP - Growth
1.25 1,502,634.507564 12.862558 19,327,724
VIP - Growth
0.95 164,201.338402 9.620388 1,579,681
Bond
1.25 2,010,468.988418 26.045220 52,363,107
Bond
0.95 197,590.071067 10.113190 1,998,266
Corporate Bond
1.25 220,637.095156 12.435189 2,743,664
Corporate Bond
0.95 269.415212 10.303538 2,776
International Equity
1.25 1,645,237.335759 11.286865 18,569,572 International Equity
0.95 290,190.435813 10.357201 3,005,561
INVESCO ADR
1.25 23,104.731253 11.245288 259,819
INVESCO ADR
0.95 1,130.828656 10.413172 11,776
INVESCO Small-Cap Growth
1.25 210,982.035617 13.089152 2,761,576
INVESCO Small-Cap Growth
0.95 24,147.182960 10.769328 260,049
Mid-Cap
1.25 1,715,174.421805 13.699883 23,497,689
Mid-Cap
0.95 194,687.274174 10.335055 2,012,104
Money Market
1.25 2,880,571.673328 16.961854 48,859,836
Money Market
0.95 169,096.042086 10.036786 1,697,181
Small-Cap Index
1.25 296,281.355288 11.820544 3,502,207
Small-Cap Index
0.95 72,120.513877 10.434575 752,547
Small-Cap Value
1.25 30,919.435680 11.576180 357,929
Small-Cap Value
0.95 164.597517 10.477011 1,724
Stock Index
1.25 7,636,165.397063 36.567281 279,233,806
Stock Index
0.95 937,180.746230 10.299534 9,652,525
T. Rowe Price Equity/Income
1.25 550,610.658884 12.978136 7,145,900
T. Rowe Price Equity/Income
0.95 1,324.941918 10.432536 13,823
Total Return
1.25 214,442.707422 11.660493 2,500,508
Total Return
0.95 4,862.589525 10.180686 49,504
U.S. Government Securities
1.25 3,165,425.828384 12.285913 38,890,146
U.S. Government Securities
0.95 39,695.162685 10.149300 402,878
TCI Balanced
1.25 3,153,172.390810 12.956160 40,853,006
TCI Balanced
0.95 84,634.099319 10.178559 861,453
TCI Growth
1.25 4,954,474.115882 14.934949 73,994,818
TCI Growth
0.95 292,581.145500 9.918781 2,902,048
TOTAL $ 654,243,493
6. SELECTED DATA
The following is a summary of selected data for a unit of capital of the
Series Account at the beginning and end of the year and the number of units
outstanding at December 31, 1995, 1994, 1993, 1992 and 1991: VIP VIP VIP
VIP Corporate Corporate Asset Manager Asset Manager Growth Growth Bond
Bond Bond Bond 1.25 0.95 1.25 0.95 1.25 0.95 1.25 0.95 1995 (D) (J) (D)
(J) (J) (I) (J) Beginning Unit Value $ 9.31 $ 10.00 $
9.62 $ 10.00 $ 22.89 $ 10.00 $
10.00 $ 10.00 Ending Unit Value $ 10.76 $
10.49 $ 12.86 $ 9.62 $ 26.05 $ 10.11 $
12.44 $ 10.30 Number of Units Outstanding
1,202,943.32 118,138.13 1,502,634.51 164,201.34 2,010,468.99 197,590.07
220,637.10 269.42 1994 Beginning Unit Value $
10.00 $ 10.00 $ 23.74 Ending Unit Value
$ 9.31 $ 9.62 $ 22.89
Number of Units Outstanding 768,426.17 559,313.44 2,102,049.13
1993 Beginning Unit Value $ 22.14
Ending Unit Value $ 23.74 Number of Units
Outstanding 2,301,785.20
1992 Beginning Unit Value $ 21.10
Ending Unit Value $ 22.14 Number of Units
Outstanding 1,995,291.18 1991 Beginning Unit Value
$ 18.63 Ending Unit Value $ 21.10
Number of Units Outstanding 2,067,965.90 (D) The
Investment Division commenced operations on April 21, 1994, at a unit value
of $10.00. (I) The Investment Division commenced operations on February
2, 1995, at a unit value of $10.00. (J) The Investment Division
commenced operations on December 4, 1995, at a unit value of $10.00.
(Continued)
6. SELECTED DATA (continued) The following is a
summary of selected
data for a unit of capital of the Series Account at the beginning and end of
the year and the number of units outstanding at December 31, 1995, 1994,
1993, 1992 and 1991: INVESCO INVESCO International International
INVESCO INVESCO Small-Cap Small-Cap Equity Equity ADR ADR Growth
Growth
Mid-Cap Mid-Cap 1.25 0.95 1.25 0.95 1.25 0.95 1.25 0.95 1995 (B) (J) (G)
(J) (H) (J) (B) (J) Beginning Unit Value $ 10.49 $ 10.00 $
10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.96 $
10.00 Ending Unit Value $ 11.29 $ 10.36 $
11.25 $ 10.41 $ 13.09 $ 10.77 $ 13.70 $
10.34 Number of Units Outstanding 1,645,237.34 290,190.44
23,104.73 1,130.83 210,982.04 24,147.18 1,715,174.42 194,687.27
1994 Beginning Unit Value $ 10.00 $ 10.00
Ending Unit Value $ 10.49 $ 10.96 Number
of Units Outstanding 1,075,821.94 788,758.55 1993
Beginning Unit Value Ending Unit Value
Number of Units Outstanding 1992 Beginning Unit
Value Ending Unit Value
Number of Units Outstanding 1991
Beginning Unit Value Ending Unit Value
Number of Units Outstanding (B) The Investment Division commenced
operations on April 13, 1994, at a unit value of $10.00. (G) The
Investment Division commenced operations on January 5, 1995, at a unit value
of $10.00. (H) The Investment Division commenced operations on January 9,
1995, at a unit value of $10.00. (J) The Investment Division commenced
operations on December 4, 1995, at a unit value of $10.00.
(Continued)
6. SELECTED DATA (continued) The following is a
summary of selected
data for a unit of capital of the Series Account at the beginning and end of
the year and the number of units outstanding at December 31, 1995, 1994,
1993, 1992 and 1991: Money Money Small-Cap Small-Cap Small-Cap
Small-Cap
Stock Stock Market Market Index Index Value Value Index Index 1.25 0.95
1.25 0.95 1.25 0.95 1.25 0.95 1995 (J) (A) (J) (E) (J) (J) Beginning Unit
Value $ 16.25 $ 10.00 $ 9.48 $ 10.00 $
10.15 $ 10.00 $ 27.30 $ 10.00 Ending Unit
Value $ 16.96 $ 10.04 $ 11.82 $ 10.43 $
11.58 $ 10.48 $ 36.57 $ 10.30 Number of Units
Outstanding 2,880,571.67 169,096.04 296,281.36 72,120.51 30,919.44 164.60
7,636,165.40 937,180.75 1994 Beginning Unit Value $
15.84 $ 10.00 $ 10.00 $ 27.61 Ending
Unit Value $ 16.25 $ 9.48 $ 10.15 $ 27.30
Number of Units Outstanding 2,277,816.08 152,895.00 0.01
7,589,448.89 1993 Beginning Unit Value $ 15.60
$ 25.44 Ending Unit Value $ 15.84 $
27.61 Number of Units Outstanding 684,668.93 9,325,064.15
1992 Beginning Unit Value $ 15.26 $
24.33 Ending Unit Value $ 15.60 $ 25.44
Number of Units Outstanding 787,941.29 8,106,010.86
1991 Beginning Unit Value $ 14.59 $ 19.97
Ending Unit Value $ 15.26 $ 24.33 Number
of Units Outstanding 901,602.83 8,262,907.65 (A) The Investment
Division commenced operations on March 15, 1994, at a unit value of $10.00.
(E) The Investment Division commenced operations on November 4, 1994, at
a
unit value of $10.00. (J) The Investment Division commenced operations on
December 4, 1995, at a unit value of $10.00.
(Continued)
6. SELECTED DATA (continued) The following is a
summary of selected
data for a unit of capital of the Series Account at the beginning and end of
the year and the number of units outstanding at December 31, 1995, 1994,
1993, 1992 and 1991: U.S. U.S. T. Rowe Price T. Rowe Price Total
Total Government Government TCI TCI Equity/Income Equity/Income Return
Return Securities Securities Balanced Balanced 1.25 0.95 1.25 0.95 1.25
0.95 1.25 0.95 1995 (F) (J) (C) (J) (J) (J) Beginning Unit Value $
9.85 $ 10.00 $ 9.62 $ 10.00 $
10.71 $ 10.00 $ 10.83 $ 10.00 Ending
Unit Value $ 12.98 $ 10.43 $ 11.66 $ 10.18
$ 12.29 $ 10.15 $ 12.96 $ 10.18
Number of Units Outstanding 550,610.66 1,324.94 214,442.71 4,862.59
3,165,425.83 39,695.16 3,153,172.39 84,634.10 1994
Beginning Unit Value $ 10.00 $ 10.00 $ 11.21
$ 10.90 Ending Unit Value $ 9.85 $
9.62 $ 10.71 $ 10.83 Number of Units
Outstanding 16,574.29 58,473.26 2,756,894.60 2,877,738.22 1993
Beginning Unit Value $ 10.38 $ 10.25
Ending Unit Value $ 11.21 $ 10.90
Number of Units Outstanding 1,892,295.35 1,752,730.91
1992 Beginning Unit Value $ 10.00 $ 10.00
Ending Unit Value $ 10.38 $ 10.25
Number of Units Outstanding 251,644.29 473,967.51
1991 Beginning Unit Value Ending Unit Value
Number of Units Outstanding (C) The Investment
Division commenced operations on April 20, 1994, at a unit value of $10.00.
(F) The Investment Division commenced operations on November 9, 1994, at
a unit value of $10.00. (J) The Investment Division commenced operations
on December 4, 1995, at a unit value of $10.00.
(Continued)
6. SELECTED DATA (continued) The following is a
summary of selected
data for a unit of capital of the Series Account at the beginning and end of
the year and the number of units outstanding at December 31, 1995, 1994,
1993, 1992 and 1991:
TCI TCI Growth Growth 1.25 0.95 1995 (J) Beginning Unit Value $
11.53 $ 10.00 Ending Unit Value $ 14.93 $
9.92 Number of Units Outstanding 4,954,474.12 292,581.15
1994 Beginning Unit Value $ 11.82 Ending Unit Value $
11.53 Number of Units Outstanding 4,420,493.64 1993
Beginning Unit Value $ 10.85 Ending Unit Value $
11.82 Number of Units Outstanding 2,607,850.29 1992 Beginning
Unit Value $ 10.00 Ending Unit Value $ 10.85
Number of Units Outstanding 647,465.54 1991 Beginning Unit Value
Ending Unit Value Number of Units Outstanding (J) The
Investment Division commenced operations on December 4, 1995, at a unit value
of $10.00. (Concluded)
7. CHANGE IN SHARES The following is a summary of the net change in
total
investment shares held in each of the respective mutual funds:
For the year ended December 31,
1995 1994
Fidelity Investments - VIP Asset Manager
384,110 471,764
Fidelity Investments - VIP Growth
437,035 228,860
Maxim Series Fund, Inc. - Bond
1,668,582 (2,683,233)
Maxim Series Fund, Inc. - Corporate Bond
1,904,375
Maxim Series Fund, Inc. - International Equity
8,349,759 9,808,352
Maxim Series Fund, Inc. - INVESCO ADR
207,508
Maxim Series Fund, Inc. - INVESCO Small-Cap Growth
2,157,655
Maxim Series Fund, Inc. - Mid-Cap
10,521,836 7,278,864
Maxim Series Fund, Inc. - Money Market
11,146,171 20,183,221
Maxim Series Fund, Inc. - Small-Cap Index
1,968,345 1,474,097
Maxim Series Fund, Inc. - Small-Cap Value
309,527 19,123
Maxim Series Fund, Inc. - Stock Index
6,987,871 (28,632,946)
Maxim Series Fund, Inc. - T. Rowe Price Equity/Income
5,053,016 121,240
Maxim Series Fund, Inc. - Total Return
1,342,515 433,808
Maxim Series Fund, Inc. - U.S. Government Securities
6,659,737 7,517,805
TCI Portfolios, Inc. - TCI Balanced
726,220 1,794,111
TCI Portfolios, Inc. - TCI Growth
883,084 1,998,012
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 1995, 1994 AND 1993
AND INDEPENDENT AUDITORS' REPORT
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder
of Great-West Life & Annuity Insurance Company:
We have audited the accompanying consolidated balance sheets of
Great-West Life & Annuity Insurance Company (a wholly-owned
subsidiary of The Great-West Life Assurance Company) and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of income, stockholder's equity, and cash flows for each of the
three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Great-West Life & Annuity
Insurance Company and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 19, 1996
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
ASSETS
1995
1994
INVESTMENTS:
Fixed Maturities:
Held-to-maturity, at amortized cost
(fair value $2,158,043 and $4,135,248)
$ 2,054,204
$4,293,985
Available for sale, at fair value
(amortized cost $6,087,969 and $2,997,087)
6,263,187
2,824,703
Common stock
9,440
5,222
Mortgage loans on real estate
1,713,195
2,011,059
Real estate
60,454
43,663
Policy loans
2,237,745
1,905,013
Short-term investments
134,835
706,920
Total Investments
12,473,060
11,790,565
Cash
90,939
131,621
Reinsurance receivable
333,924
295,148
Deferred policy acquisition costs
278,526
297,092
Investment income due and accrued
211,922
195,817
Other assets
40,038
55,579
Premiums in course of collection
85,990
84,478
Deferred income taxes
168,941
210,407
Separate account assets
3,998,878
2,554,836
TOTAL ASSETS
$17,682,218
$15,615,543
See notes to consolidated financial statements.
LIABILITIES AND STOCKHOLDER'S EQUITY
1995
1994
POLICY BENEFIT LIABILITIES:
Policy reserves
$10,845,935
$10,334,456
Policy and contract claims
359,791
338,515
Policyholders' funds
154,872
144,262
Experience refunds
83,562
70,359
Provision for policyholders'dividends
47,760
41,840
GENERAL LIABILITIES:
Due to Parent Corporation
149,974
159,117
Repurchase agreements
372,965
564,160
Commercial paper
84,854
89,686
Other liabilities
453,889
420,154
Undistributed earnings on
participating business
136,617
120,927
Separate account liabilities
3,998,878
2,554,836
Total Liabilities
16,689,097
14,838,312
STOCKHOLDER'S EQUITY:
Preferred stock, $1 par value,
50,000,000 shares authorized:
Series A, cumulative,
1500 shares authorized, liquidation value of
$100,000 per share, 600 shares issued and
outstanding 60,000 60,000
Series B, cumulative,
1500 shares authorized, liquidation value of
$100,000 per share, 200 shares issued and
outstanding 20,000 20,000
Series C, cumulative,
1500 shares authorized, none outstanding
Series D, cumulative,
1500 shares authorized, none outstanding
Series E, non-cumulative,
2,000,000 shares authorized,
liquidation value of $20.90
41,800 41,800
per share, issued, and outstanding
Common stock, $1 par value;
50,000,000 shares authorized;
7,032,000 shares issued and
outstanding 7,032 7,032
Additional paid-in capital
657,265
657,265
Net unrealized gains (losses) on
securities available-for-sale
58,763
(78,427)
Retained earnings
148,261
69,561
Total Stockholder's Equity
993,121
777,231
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY
$17,682,218
$15,615,543
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994,
AND 1993
(Dollars in Thousands)
1995
1994
1993
REVENUES:
Annuity contract charges and
premiums
$79,816
$61,122
$63,210
Life, accident, and health premiums
earned (net of premiums ceded totaling
$60,880,
$48,115
and $254,969)
987,611
938,947
632,961
Net investment income
835,046
767,646
791,424
Net realized gains (losses) on
investments
7,465
(71,939)
25,342
1,909,938
1,695,776
1,512,937
BENEFITS AND EXPENSES:
Life and other policy benefits (net
of reinsurance recoveries totaling
$43,574,
$18,937,
and $151,598)
557,469
548,950
390,562
Increase in reserves
98,797
64,834
59,873
Interest paid or credited to
contractholders
562,263
529,118
623,417
Provision for policyholders' share
of earnings (losses)
on participating business
2,027
(725)
(1,498)
Dividends to policyholders
48,150
42,094
34,474
1,268,706
1,184,271
1,106,828
Commissions
122,926
120,058
90,472
Operating expenses
314,810
261,311
196,820
Premium taxes
26,884
27,402
23,129
1,733,326
1,593,042
1,417,249
INCOME BEFORE INCOME TAXES
176,612
102,734
95,688
PROVISION FOR INCOME TAXES:
Current
88,366
65,070
76,672
Deferred
(39,434)
(36,614)
(45,620)
48,932
28,456
31,052
NET INCOME
$127,680
$74,278
$64,636
See notes to consolidated financial
statements.
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S
EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994, AND
1993 (Dollars in Thousands)
Net Additional
Unrealized Retained
Preferred Stock
Common Stock
Paid-In
Gains
Earnings
Shares
Amount
Shares
Amount
Capital
(Losses)
(Deficit)
Total
BALANCE, JANUARY 1, 1993
2,000,800
$121,800
7,028,217
$7,028
$647,199
$0
$(7,063)
$768,964
Issuance of common stock
3,783
4
496
500
Capital contributions
9,098
9,098
Dividends
(21,852)
(21,852)
Net income
64,636
64,636
BALANCE, DECEMBER 31, 1993
2,000,800
121,800
7,032,000
7,032
656,793
0
35,721
821,346
Adjustment to beginning
balance for change in
accounting method for investment
securities
6,515
6,515
Change in net unrealized
gains (losses)
(84,942)
(84,942)
Capital contributions
472
472
Dividends
(40,438)
(40,438)
Net income
74,278
74,278
BALANCE, DECEMBER 31, 1994
2,000,800
121,800
7,032,000
7,032
657,265
(78,427)
69,561
777,231
Change in net unrealized
gains (losses)
137,190
137,190
Dividends
(48,980)
(48,980)
Net income
127,680
127,680
BALANCE, DECEMBER 31,
1995
2,000,800
$121,800
7,032,000
$7,032
$657,265
$58,763
$148,261
$993,121
See notes to consolidated financial
statements.
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994,
AND 1993
(Dollars in Thousands)
1995
1994
1993
OPERATING ACTIVITIES:
Net income
$127,680
$74,278
$64,636
Adjustments to reconcile net
income to net cash provided by
operating activities:
Gain (loss) allocated to
par policyholders
2,027
(725)
(1,498)
Amortization of
investments
26,725
36,978
36,782
Realized losses (gains) on
disposal of investments
and write-downs of
mortgage loans and real estate
(7,465)
71,939
(25,342)
Amortization
49,464
29,197
34,115
Deferred income taxes
(39,763)
(38,631)
(56,959)
Changes in assets and
liabilities:
Policy benefit
liabilities
346,975
93,998
438,809
Reinsurance receivable
(38,776)
(25,868)
352,106
Accrued interest and
other receivables
(17,617)
(26,032)
(19,817)
Other, net
8,834
96,950
119,284
Net cash provided by operating activities
458,084
312,084
942,116
INVESTING ACTIVITIES:
Proceeds from sales,
maturities, and redemptions of
investments:
Fixed maturities
4,744,309
Held-to-maturity
Sales
18,821
16,014
Maturities and redemptions
655,993
1,034,324
Available-for-sale
Sales
4,211,649
1,753,445
Maturities and redemptions
253,747
141,299
Mortgage loans
260,960
291,102
339,406
Real estate
4,401
29,868
22,974
Common stock
178
Purchases of investments:
Fixed maturities
(5,494,534)
Held-to-maturity
(490,228)
(673,567)
Available-for-sale
(4,932,566)
(2,606,028)
Mortgage loans
(683)
(9)
(52,917)
Real estate
(5,302)
(9,253)
(14,303)
Common stock
(4,218)
(2,063)
Net cash used in
investing activities
(27,426)
(24,690)
(455,065)
(Continued)
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994,
AND 1993
(Dollars in Thousands)
1995
1994
1993
FINANCING ACTIVITIES:
Contract withdrawals, net of
deposits
$(217,190)
$(238,166)
$(590,118)
Due to Parent Corporation
(9,143)
(13,078)
(149,510)
Dividends paid
(48,980)
(40,438)
(21,852)
Net commercial paper (repayments)
borrowings
(4,832)
89,686
Net repurchase agreements
(repayments) borrowings
(191,195)
(39,244)
311,937
Net cash used in
financing activities
(471,340)
(241,240)
(449,543)
NET INCREASE IN CASH
(40,682)
46,154
37,508
CASH, BEGINNING OF YEAR
131,621
85,467
47,959
CASH, END OF YEAR
$90,939
$131,621
$85,467
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Income taxes
$83,841
$68,892
$87,778
Interest
17,016
12,229
7,438
See notes to consolidated financial
statements.
(Concluded)
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization - Great-West Life & Annuity Insurance Company
(the Company) is a wholly-owned subsidiary of The Great-West Life
Assurance Company (the Parent Corporation). The Company is an
insurance company domiciled in the State of Colorado. The Company
offers a wide range of life insurance, health insurance, and
retirement and investment products to individuals, businesses,
and other private and public organizations throughout the United States.
Basis of Presentation - The preparation of financial
statements in conformity with generally accepted accounting principles
equires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. The consolidated financial statements include
the accounts of the Company and its subsidiaries. All material intercompany
transactions and balances have been eliminated.
Certain reclassifications have been made to the 1994 and 1993
financial statements to conform with the basis of presentation
used in 1995.
Investments - Investments are reported as follows:
1. Management determines the classification of fixed
maturities at the time of purchase. Fixed maturities are classified as
held-to-maturity when the Company has the positive intent and ability to hold
the securities to maturity.
Held-to-maturity securities are stated at amortized cost unless fair value is
less than cost and the decline is deemed to be other than temporary, in which
case they are written down to fair
value and a new cost basis is established. Fixed maturities not classified
as held-to-maturity are classified as available-for-sale. Available-for-sale
securities are carried at fair value, with the net unrealized gains and
losses reported as a separate component of stockholder's equity. The net
unrealized gains and losses in derivative financial instruments used to hedge
available-for-sale securities is included in the separate component of
stockholderns equity.
The amortized cost of fixed maturities classified as
held-to-maturity or available-for-sale is adjusted for
amortization of premiums and accretion of discounts using the effective
interest method over the life of the related bonds. Such
amortization is included in interest income from investments. Realized gains
and losses, and declines in value judged to be other-than-temporary are
included in net realized gains (losses) on investments.
2. Mortgage loans on real estate are carried at their unpaid balances
adjusted for any unamortized premiums or discounts and any valuation
reserves. Interest income is accrued on the unpaid principal balance.
Discounts and premiums are amortized to income using the effective interest
method. Accrual of interest is discontinued on any impaired loans where
collection of interest is doubtful.
The Company maintains an allowance for credit losses at
a level that, in managementns opinion, is sufficient to
absorb possible credit losses on its impaired loans and to provide adequate
provision for any possible future losses in the portfolio. Managementns
judgement is based on past loss experience, current and projected economic
conditions, and extensive situational analysis of each individual loan.
Effective January 1, 1995, the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 114 "Accounting by Creditors for
Impairment of a Loan" and SFAS No. 118 "Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures". In accordance with
these standards, a mortgage loan is considered to be impaired when it is
probable that the Company will be unable to collect all amounts due according
to the contractual terms of the loan agreement. The measurement of impaired
loans is based on the fair value of the collateral. As the Company was
already providing for impairment of loans through an allowance for credit
losses, the implementation of these statements had no material effect on the
Company's financial statements.
3. Real estate is carried at the lower of cost or fair value. In
March 1995, the FASB issued SFAS No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" to be effective for fiscal years beginning after December 15, 1995. The
effect of adopting this statement is not expected to be material.
4. Policy loans are carried at their unpaid balances.
5. Short-term investments include securities purchased with initial
maturities of one year or less and are carried at amortized cost. The
Company considers short-term investments to be available-for-sale and
amortized cost approximates fair value.
Gains and losses realized on disposal of investments are
determined on a specific identification basis.
Cash - Cash includes only amounts in demand deposit accounts.
Deferred Policy Acquisition Costs - Policy acquisition costs,
which consist of sales commissions and other costs that vary with
and are primarily related to the production of new and renewal
business, have been deferred to the extent recoverable. Deferred costs
associated with the annuity products are being amortized over the life of
the contracts in proportion to the emergence of gross profits. Retrospective
adjustments of these amounts are made
when the Company revises its estimates of current or future gross profits.
Deferred costs associated with traditional life
insurance are amortized over the premium paying period of the related
policies in proportion to premium revenues recognized. Amortization of
deferred policy acquisition costs totalled $48,054, $28,199, and $32,611 in
1995, 1994, and 1993, respectively.
Separate Account - Separate account assets and related liabilities are
carried at fair value. The Companyns separate accounts invest in shares of
Maxim Series Fund, Inc., a diversified, open-end management investment
company which is an affiliate of the Company, shares of other external mutual
funds, or government or corporate bonds.
Life Insurance and Annuity Reserves - Life insurance and annuity policy
reserves with life contingencies of $4,675,175, and $3,995,927 at December
31, 1995 and 1994, respectively, are computed on the basis of estimated
mortality, investment yield, withdrawals, future maintenance and settlement
expenses, and retrospective experience rating premium refunds. Annuity
contract reserves without life contingencies of $6,170,760, and $6,338,529 at
December 31, 1995 and 1994, respectively, are established
at the contractholder's account value.
Reinsurance - Policy reserves ceded to other insurance companies are
carried as reinsurance receivable on the balance sheet (See Note 3).
The cost of reinsurance related to long-duration contracts is accounted
for over the life of the underlying reinsured policies using assumptions
consistent with those used to account for the underlying policies.
Policy and Contract Claims - Policy and contract claims include
provisions for reported claims in process of settlement,
valued in accordance with the terms of the related policies and
contracts, as well as provisions for claims incurred and unreported based
primarily on prior experience of the Company.
Participating Fund Account - Participating life and annuity
policy reserves are $3,339,316 and $2,917,273 at December 31, 1995
and 1994, respectively. Participating business approximates 46%
of the Company's ordinary life insurance in force and 84% of ordinary life
insurance premium income at December 31, 1995.
The liability for undistributed earnings on participating
business was increased by $15,690 in 1995, which represented $2,027 of
earnings on participating business and adjustments of $13,663
to reflect the net unrealized gains on securities classified as
available-for-sale, net of certain adjustments to policy reserves and income
taxes.
The amount of dividends to be paid from undistributed earnings
on participating business is determined annually by the Board of Directors.
Amounts allocable to participating policyholders are consistent with
established Company practice.
The Company has established a Participating Policyholder Experience
Account (PPEA) for the benefit of all participating policyholders which is
included in the accompanying consolidated balance sheet. Earnings associated
with the operation of the PPEA are credited to the benefit of all
participating policyholders. In the event that the assets of the PPEA are
insufficient to provide contractually guaranteed benefits, the Company must
provide such benefits from its general assets.
The Company has also established a Participation Fund Account
(PFA) for the benefit of the participating policyholders previously
transferred to the Company from the Parent under an assumption reinsurance
transaction. The PFA is part of the PPEA. The assets and liabilities
associated with these policies are segregated in the accounting records of
the Company to assure the continuation of current policyholder dividend
expectations. Earnings derived
from the operation of the PFA accrue solely for the benefit of the acquired
participating policyholders.
Recognition of Premium Income and Benefits and Expenses - Life insurance
premiums are recognized as earned. Annuity premiums
with life contingencies are recognized as received. Accident and
health premiums are earned on a monthly pro rata basis. Revenues for annuity
and other contracts without significant life
contingencies consist of contract charges for the cost of insurance, contract
administration, and surrender fees that have been assessed against the
contract account balance during the period. Benefits and expenses on
policies with life contingencies are associated with premium income by means
of the provision for future policy benefit reserves, resulting in recognition
of profits over the life of the contracts. The average crediting rate on
annuity products was approximately 7.2% in 1995.
Income Taxes - Income taxes are recorded using the asset and
liability approach which requires, among other provisions, the recognition
of deferred tax assets and liabilities for expected future tax consequences
of events that have been recognized in the Company's financial statements or
tax returns. In estimating future tax consequences, all expected future
events (other than the enactments or changes in the tax laws or rules) are
considered. Deferred tax assets are recorded net of a valuation allowance to
the extent that management estimates that recovery of the asset is not more
likely than not.
Repurchase Agreements - The Company enters into repurchase agreements
with third-party broker-dealers in which the Company sells securities and
agrees to repurchase substantially similar securities at a specified date
and price. Such agreements are accounted for as collateralized borrowings.
Interest expense on repurchase agreements is recorded at the coupon interest
rate on the underlying securities. The repurchase fee received or paid is
amortized over the term of the related agreement and recognized as an
adjustment to investment income.
Derivatives - The Company engages in hedging activities to
manage interest rate and foreign exchange risk (See Note 6).
2. RELATED-PARTY TRANSACTIONS
Reinsurance Transactions - The Company entered into a series of
reinsurance transactions with the Parent Corporation during 1993 and prior
years intended to make the Company the underwriter and administrator of all
life and health insurance, annuity products, and related services with
respect to United States policyholders.
A May 1, 1993, reinsurance transaction resulted in the Company
recapturing certain group life and health business previously ceded to the
Parent under a coinsurance agreement, as follows:
Assets
Liabilities and
Stockholder's Equity
Bonds
$217,254
Policy reserves
$253,479
Mortgage loans
27,182
Cash and short-term
investments
5,607
Investment income
due & accrued
3,436
$253,479
$253,479
In addition, effective December 31, 1993, the Company recaptured
certain participating life business also previously ceded to the Parent
Corporation, as follows:
Assets
Liabilities and
Stockholder's Equity
Bonds
$171,005
Policy reserves
$180,000
Cash and short-term
investments
8,087
Investment income
due & accrued
908
$180,000
$180,000
From 1989 to 1993, the Company has assumed most of the United States
business of the Parent Corporation. During this period, the Parent
Corporation had recorded estimated tax liabilities for certain United States
federal income taxes in its financial statements. On December 31, 1993 and
December 30, 1994, the Parent Corporation transferred assets with an
estimated fair value of $82,800 and $9,391, respectively, to the Company in
exchange for the Company agreeing to assume the estimated tax liabilities of
the Parent Corporation, and the issuance of shares of the Company's common
stock.
Fees and Expenses - The Company and the Parent Corporation have a number
of service agreements whereby the Parent Corporation administers,
distributes, and underwrites business for the Company and administers the
Company's investment portfolio. Certain operating expenses represent
allocations made by the Parent Corporation to the Company for services
provided pursuant to these service agreements. These transactions are
summarized as follows:
Years Ended December 31,
1995
1994
1993
Investment management expense
(included in net
investment income)
$15,182
$13,841
$17,767
Administrative and underwriting
payments (included
in operating expenses)
301,529
269,020
199,947
Other - At December 31, 1995 and 1994, due to Parent Corporation
includes $27,814 and $35,388 due on demand and $122,160 and $123,729 of
notes
payable which bear interest and mature at
various dates. These notes may be prepaid in whole or in part at any time
without penalty; the issuer may not demand payment before the maturity date.
The Company also has available an arrangement to obtain advances from the
Parent Corporation to fund short-term liquidity needs. The due on demand to
the Parent Corporation bears interest at the public bond rate (6.4% and 8.5%
at December 31, 1995 and 1994, respectively) while the remainder bear
interest at various rates.
3. REINSURANCE
In the normal course of business, the Company seeks to limit
its exposure to loss on any single insured and to recover a
portion of benefits paid by ceding risks to other insurance enterprises under
excess coverage and co-insurance contracts. The Company retains a maximum
of
$1.5 million of coverage per individual life.
Reinsurance contracts do not relieve the Company from its obligations to
policyholders. Failure of reinsurers to honor their obligations could result
in losses to the Company; consequently, allowances are established for
amounts deemed uncollectible. The Company evaluates the financial condition
of its reinsurers
and monitors concentrations of credit risk arising from similar geographic
regions, activities, or economic characteristics of
the reinsurers to minimize its exposure to significant losses from reinsurer
insolvencies. At December 31, 1995 and 1994, reinsurance
receivables with a carrying value of $333,924, and $295,148, respectively,
were due primarily from the Parent Corporation.
Total reinsurance premiums assumed from the Parent Corporation
were $1,606 and $2,438, and $0, in 1995, 1994, and 1993, respectively.
The Company considers all accident and health policies to be
short-duration contracts. The following schedule details life insurance in
force and life and accident/health premiums:
Assumed
Ceded
Primarily
Percentage
Primarily to
From
of
Amount
Gross
the Parent
Other
Net
Assumed
to
Amount
Corporation
Companies
Amount
Net
December 31, 1995:
Life insurance in force:
Individual
$22,388,520
$7,200,882
$3,476,784
$18,664,422
18.6%
Group
48,415,592
1,954,313
50,369,905
3.9%
Total
$70,804,112
$7,200,882
$5,431,097
$69,034,327
Premiums:
Life insurance
$339,342
$51,688
$21,028
$308,682
6.8%
Accident/health
623,626
9,192
64,495
678,929
9.5%
Total
$962,968
$60,880
$85,523
$987,611
December 31, 1994:
Life insurance in force:
Individual
$21,461,590
$7,411,811
$3,415,596
$17,465,375
19.6%
Group
48,948,669
2,102,228
51,050,897
4.1%
Total
$70,410,259
$7,411,811
$5,517,824
$68,516,272
Premiums:
Life insurance
$322,263
$42,946
$22,009
$301,326
7.3%
Accident/health
579,650
5,169
63,140
637,621
9.9%
Total
$901,913
$48,115
$85,149
$938,947
December 31, 1993:
Life insurance in force:
Individual
$17,131,994
$7,797,389
$3,142,723
$12,477,328
25.2%
Group
37,789,859
2,108,314
39,898,173
5.3%
Total
$54,921,853
$7,797,389
$5,251,037
$52,375,501
Premiums:
Life insurance
$283,707
$112,798
$18,753
$189,662
9.9%
Accident/health
524,747
142,171
60,723
443,299
13.7%
Total
$808,454
$254,969
79,476
$632,961
4. NET INVESTMENT INCOME
Net investment income is summarized as follows:
Years Ended December 31,
1995
1994
1993
Investment income:
Bonds and short-term
investments
$592,062
$555,103
$545,926
Mortgage loans on real
estate
171,008
182,544
220,477
Real estate
3,936
5,700
9,265
Policy loans
163,547
116,060
91,529
930,553
859,407
867,197
Investment expenses,
including interest on
amounts charged by the
Parent Corporation
of $10,778, $11,145, and
$7,250
95,507
91,761
75,773
Net investment income
$835,046
$767,646
$791,424
5. NET REALIZED GAINS (LOSSES) ON
INVESTMENTS
Net realized gains (losses) on
investments are as follows:
Years Ended December 31,
1995
1994
1993
Net realized gains
(losses):
Bonds
$28,166
$(39,775)
$68,884
Mortage loans on real
estate
1,309
2,120
(98)
Real estate
(10)
(102)
(102)
Bond provisions
(5,000)
(3,200)
(4,456)
Mortgage loan provisions
(15,877)
(27,918)
(38,089)
Real estate provisions
(1,123)
(3,064)
(797)
Net realized gains
(losses) on investments
$7,465
$(71,939)
$25,342
6. SUMMARY OF INVESTMENTS
Fixed maturities owned at December 31,
1995 are summarized as follows:
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Fair
Carrying Cost
Gains
Losses
Value
Value
Held-to-Maturity:
U.S. Treasury
Securities and
obligations of U.S.
Government Agencies:
Collateralized
mortgage obligations
$
$
$
$
$
Direct mortgage pass-through
certificates
Other
11,107
1,093
12,200
11,107
Collateralized
mortgage obligations
Public utilities
269,671
22,084
95
291,660
269,671
Corporate bonds
1,732,046
83,583
5,867
1,809,762
1,732,046
Foreign governments
18,596
1,087
12
19,671
18,596
State and
municipalities
22,784
1,966
24,750
22,784
$2,054,204
$109,813
$5,974
$2,158,043
$2,054,204
Available-for-Sale:
U.S. Treasury
Securities and
obligations
of U.S.
Government Agencies:
Collateralized
mortgage obligations
$561,475
$9,983
$1,948
$569,510
$569,510
Direct mortgage pass-through
certificates
794,056
11,980
2,233
803,803
803,803
Other
561,736
7,703
39
569,400
569,400
Collateralized
mortgage obligations
490,074
18,044
3,304
504,814
504,814
Public utilities
581,482
16,607
2,425
595,664
595,664
Corporate bonds
2,943,918
121,537
26
3,065,429
3,065,429
Foreign governments
141,362
5,021
5,644
140,739
140,739
State and
municipalities
13,866
22
60
13,828
13,828
$6,087,969
$190,897
$15,679
$6,263,187
$6,263,187
6.SUMMARY OF INVESTMENTS (Continued)
Fixed maturities owned at December 31, 1994 are summarized as
follows:
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Fair Carrying Cost
Gains
Losses
Value
Value
Held-to-Maturity:
U.S. Treasury
Securities and
obligations
of U.S.
Government Agencies:
Collateralized
mortgage obligations
$521,408
$389
$33,018
$488,779
$521,408
Direct
mortgage pass-through
certificates
69,559
617
1,001
69,175
69,559
Other
85,406
246
923
84,729
85,406
Collateralized
mortgage obligations
309,869
1,205
14,208
296,866
309,869
Public utilities
457,758
2,898
14,340
446,316
457,758
Corporate bonds
2,757,612
14,701
111,410
2,660,903
2,757,612
Foreign governments
90,690
47
3,950
86,787
90,690
State and
municipalities
1,683
10
1,693
1,683
$4,293,985
$20,113
$178,850
$4,135,248
$4,293,985
Available-for-Sale:
U.S. Treasury
Securities and
obligations
of U.S.
Government Agencies:
Collateralized
mortgage obligations
$80,531
$
$3,798
$76,733
$76,733
Direct
mortgage pass-through
certificates
759,815
871
49,462
711,224
711,224
Other
198,651
9
2,654
196,006
196,006
Collateralized
mortgage obligations
203,036
6,379
196,657
196,657
Public utilities
325,383
193
26,379
299,197
299,197
Corporate bonds
1,119,726
3,253
65,398
1,057,581
1,057,581
Foreign governments
298,597
17
21,826
276,788
276,788
State and
municipalities
11,348
831
10,517
10,517
$2,997,087
$4,343
$176,727
$2,824,703
$2,824,703
Most of the collateralized mortgage obligations consist of
planned amortization classes with final stated maturities of three to thirty
years and average lives of less than one to twelve
years. Prepayments on all mortgage-backed securities are monitored
monthly and amortization of the premium and/or the accretion of the discount
associated with the purchase of such securities is adjusted by such
prepayments.
The cumulative effect as of January 1, 1994 of adopting SFAS
No. 115 "Accounting for Certain Investments in Debt and Equity Securities,"
increased the opening balance of stockholders'
equity by $6,515 to reflect the net unrealized gains on securities classified
as available-for-sale (previously carried at the
lower of aggregate amortized cost or fair value) and the
corresponding adjustments to deferred policy acquisition costs, policy
reserves, and amounts allocable to the liability for undistributed earnings
on participating business, all net of income taxes.
In November 1995, the Financial Accounting Standards Board
issued a special report entitled nA Guide to Implementation of SFAS
115 on Accounting for Certain Investments in Debt and Equity
Securitiesn. In accordance with the adoption of this guidance, the Company
reassessed the classification of its investment portfolio in December 1995
and reclassed securities totalling $2,119,814
from held-to-maturity to available-for-sale. In connection with
this reclassification, an unrealized gain, net of related
adjustments (see above), of $23,449 was recognized in stockholderns equity at
the date of transfer.
The estimated fair value of fixed maturities that are publicly traded
are obtained from an independent pricing service. To determine fair value
for fixed maturities not actively traded, the Company utilized discounted
cash flows at determined current market spread rates on investments of
similar quality and term.
The amortized cost and estimated fair value of fixed maturity
investments at December 31, 1995, by projected maturity, are shown below.
Actual maturities will likely differ from these projections because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
Held-to-
Maturity
Available-
for-Sale
Amortized
Estimated
Amortized
Estimated
Cost
Fair Value Cost
Fair Value Due in one year or
less
$287,565
$293,666
$326,032
$337,792
Due after one year
through five years
838,993
877,949
1,452,442
1,495,755
Due after five years
through ten years
537,365
575,896
1,023,894
1,064,871
Due after ten years
159,064
173,487
522,002
542,559
Mortgage-backed
securities
1,845,605
1,878,127
Asset-backed
securities
231,217
237,045
917,994
944,083
$2,054,204
$2,158,043
$6,087,969
$6,263,187
During the years ended December 31, 1995 and 1994,
available-for-sale securities with a fair value at the date of sale of
$4,211,649 and $1,753,445 were sold. The realized gains and losses on such
sales totaled $39,755 and $15,516 for 1995 and $7,030 and $50,612 for 1994.
During 1995 and 1994, held-to-maturity securities with an amortized cost of
$18,087 and $15,300 were sold due to credit deterioration with insignificant
realized gains and losses. Gains on securities which were called for
redemption by the respective issuers prior to maturity were $2,990 and $3,093
in 1995 and 1994, respectively.
At December 31, 1995 and 1994, pursuant to fully
collateralized securities lending arrangements, the Company had loaned
$343,351 and $0 of fixed maturities, respectively.
The Company makes limited use of derivative financial
instruments to manage interest rate and foreign exchange risk. Such hedging
activity consists of interest rate swap agreements, interest rate floors and
caps, and foreign currency exchange contracts. Interest rate floors and caps
are interest rate protection instruments that require the payment by a
counter-party to the Company of an interest differential. This differential
represents the difference between current interest rates and an agreed-upon
rate, the strike rate, applied to a notional principal amount. Interest rate
swap agreements are used to convert the interest rate on certain fixed
maturities from a floating rate to a fixed rate. Interest rate swap
transactions generally involve the exchange of fixed and floating rate
interest payment obligations without the exchange of the underlying principal
amounts. Foreign currency exchange contracts are used to hedge the foreign
exchange rate risk associated with bonds denominated in other than U.S.
dollars. The differential paid or received on interest rate and amounts
received under interest rate floor and cap agreements are recognized as an
adjustment to net investment income on the accrual method. Gains and losses
on foreign exchange contracts are deferred and recognized in net investment
income when the hedged transactions are realized.
Although derivative financial instruments taken alone may
expose the Company to varying degrees of market and credit risk when used
solely for hedging purposes, these instruments typically
reduce overall market and interest rate risk. The Company controls
the credit risk of its financial contracts through credit
approvals, limits, and monitoring procedures. As the Company generally
enters nto transactions only with high quality institutions, no losses
associated with non-performance on derivative financial instruments have
occurred or are expected to occur.
The following table summarizes the financial hedge
instruments:
Notional
Strike/Swap
December 31, 1995
Amount
Rate
Maturity
Interest Rate Floor
$100,000
4.5%
[LIBOR]
1999
Interest Rate Cap
100,000
11.0% [CMT]
2000
Interest Rate Swaps
165,000
6.203% to
9.35%
01/98 to
2/2002
Foreign Currency
Exchange Contracts
66,650
N/A
10/96 to
09/98
Notional
Strike
December 31, 1994
Amount
Rate
Maturity
Interest Rate Floor
$100,000
4.5%
[LIBOR]
1999
Interest Rate Swaps
150,000
6.275% to
10.644%
01/95 -
01/2000
Foreign Currency
Exchange Contracts
70,991
N/A
10/96 -
09/98
LIBOR - London Interbank Offered Rate
CMT - Constant Maturity Treasury Rate
The Company has established specific investment guidelines
designed to emphasize a diversified and geographically dispersed
portfolio of mortgages collateralized by commercial and industrial
properties located in the United States. The Company's policy is to obtain
collateral sufficient to provide loan-to-value ratios of not greater than 75%
at the inception of the mortgages. At
December 31, 1995 approximately 28% and 11% of the Company's mortgage
loans
were collateralized by real estate located in California and Illinois,
respectively.
At December 31, 1995, the recorded investment in loans that
were considered to be impaired under SFAS No. 114 was $23,678 including
$3,254 of loans with a related allowance for credit losses of $654.
Additionally, loans totaling $6,481 were on a non-accrual basis. The average
recorded investment in impaired loans during the year ended December 31, 1995
was approximately $29,150. For the year ended December 31, 1995, the
Company recognized interest income on those impaired loans of $675. Interest
income received and recorded using the cash basis method of recognition
during 1995 totalled $857.
As part of an active loan management policy and in the
interest of maximizing the future return of each individual loan, the Company
may from time to time alter the original terms of certain loans. These
restructured loans, all performing in accordance with their modified terms,
aggregated $89,160 and $102,538 at December 31, 1995 and 1994, respectively.
The following table presents changes in the allowance for
credit losses since January 1, 1995 (date of the adoption of SFAS No. 114):
Balance at January 1, 1995
$57,987
Provision for loan losses
15,877
Direct chargeoffs
(10,480)
Recoveries
610
Balance at December 31, 1995
$63,994
7. COMMERCIAL PAPER
The Company has a commercial paper program which is partially supported
by a $50,000 standby letter-of-credit. At December 31, 1995, commercial
paper outstanding has maturities ranging from 25 to 160 days and interest
rates ranging from 5.7% to 5.9%. At December 31, 1994, maturities ranged
from 40 to 120 days and interest rates ranged from 5.4% to 6.4%
8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table provides estimated fair value for all
assets and liabilities and hedge contracts considered to be financial
instruments:
December 31,
1995
1994
Estimated
Carrying
Estimated
Carrying
Fair
Amount
Fair
Value
Amount
Value
ASSETS:
Fixed maturities
and short-term
investments
$8,452,226
$8,556,065
$7,825,608
$7,666,871
Mortgage loans
on real estate
1,713,195
1,749,514
2,011,059
2,037,694
Policy loans
2,237,745
2,237,745
1,905,013
1,905,013
Common stock
9,440
9,440
5,222
5,222
LIABILITIES:
Annuity contract
reserves
without life
contingencies
6,170,760
6,268,749
6,338,529
6,286,966
Policyholders'
funds
154,872
154,872
144,262
144,262
Due to Parent
Corporation
149,974
152,347
159,117
159,334
Repurchase agreements
372,965
372,965
564,160
564,160
Commercial paper
84,854
84,854
89,686
89,686
HEDGE CONTRACTS:
Interest rate
floor
84
1,320
88
76
Interest rate cap
90
90
Interest rate swaps
10,052
10,052
(771)
(771)
Foreign currency
exchange contracts
(4,604)
(4,604)
(4,345)
(4,345)
The estimated fair value of financial instruments has been determined
using available market information and appropriate valuation methodologies.
However, considerable judgement is necessarily required to interpret market
data to develop the estimates of fair value. Accordingly, the estimates
presented
are not necessarily indicative of the amounts the Company could
realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
Mortgage loans fair value estimates generally are based on a discounted
cash flow basis. A discount rate "matrix" is incorporated whereby the
discount rate used in valuing a specific mortgage generally corresponds to
that mortgage's remaining
term. The rates selected for inclusion in the discount rate "matrix" reflect
rates that the Company would quote if placing loans representative in size
and quality to those currently in the portfolio.
Policy loans accrue interest generally at variable rates with
no fixed maturity dates and, therefore, estimated fair value approximates
carrying value.
The fair value of annuity contract reserves without life contingencies
is estimated by discounting the cash flows to maturity of the contracts,
utilizing current credited rates for similar products.
The estimated fair value of policyholder's funds is the same
as the carrying amount as the Company can change the crediting rates with 30
days notice.
The estimated fair value of due to Parent Corporation is based
on discounted cash flows at current market spread rates on high quality
investments.
The carrying value of repurchase agreements and commercial
paper is a reasonable estimate of fair value due to the short-term
nature of the liabilities.
The estimated fair value of financial hedge instruments, all
of which are held for other than trading purposes, is the
estimated amount the Company would receive or pay to terminate the
agreement at each year-end, taking into consideration current interest rates
and other relevant factors. Included in the net gain (loss) position for
interest rates swaps are $0 and $2,985 of
unrealized losses in 1995 and 1994, respectively. Included in the net loss
position for foreign currencies exchange contracts are $5,497 and $4,504 loss
exposures in 1995 and 1994, respectvely.
See note 6 for additional information on policies regarding estimated
fair value of fixed maturities.
9. FEDERAL INCOME TAXES
The following is a reconciliation between the federal income
tax
rate and the Companyns effective rate:
1995
1994
1993
Federal tax rate
35.0%
35.0%
35.0%
Change in tax rate resulting
from:
Investment income not
subject to federal tax
(0.5)
(1.0)
(1.2)
Effect of tax rate change
on net deferred tax assets
(1.8)
Change in valuation
allowance
(7.8)
(6.9)
1.0
State and environmental
taxes
0.7
0.9
Other, net
0.3
(0.3)
(0.5)
Total
27.7%
27.7%
32.5%
Temporary differences which give rise to the deferred tax
assets
and liabilities as of December 31, 1995 and 1994 are as
follows:
1995
1994
Deferred Tax
Asset
Deferred Tax
Liability
Deferred Tax
Asset
Deferred Tax
Liability
Policyholder
reserves
$162,073
$
$119,764
$
Deferred policy
acquisition costs
55,542
62,040
Deferred acquisition
cost proxy tax
58,481
45,422
Investment assets
16,372
97,249
Net operating loss
carryforwards
17,588
22,666
Tax credits and
other
4,786
2,564
Subtotal
242,928
71,914
287,665
62,040
Valuation allowance
(2,073)
(15,218)
Total Deferred Taxes
$240,855
$71,914
$272,447
$62,040
Amounts related to investment assets above include $33,735 and $(47,493)
related to the unrealized gains (losses) on the Company's fixed maturities
available-for-sale at December 31, 1995 and 1994, respectively.
The Company files a separate tax return and, therefore, losses incurred
by subsidiaries cannot be offset against operating income of the Company. At
December 31, 1995, the Companyns subsidiaries have approximately $50,251 of
net operating loss carryforwards, expiring through the year 2010. The tax
benefit of subsidiariesn net operating loss carryforwards, net of a
valuation allowance of $419 are included in the deferred tax assets.
The Company's valuation allowance was decreased in 1995 and
1994 by $13,145 and $6,278, respectively, primarily as a result of
taxable income in subsidiaries which was greater than expected and the
resulting re-evaluation by management of future estimated
taxable income in the subsidiaries.
Under pre-1984 life insurance company income tax laws, a portion of life
insurance company gain from operations was not subject to current income
taxation but was accumulated, for tax purposes, in a memorandum account
designated as "policyholders' surplus account." The aggregate accumulation
in the account is $7,742 and the Company does not anticipate any transactions
which would cause any part of the amount to become taxable. Accordingly, no
provision has been made for possible future federal income
taxes on this accumulation.
The Internal Revenue Service is currently auditing tax years
1988 to 1991, inclusive. In the opinion of Company management, amounts paid
or accrued are adequate, however, it is possible that the Companyns estimate
may change as a result of the completion of the IRS audits.
10. STOCKHOLDER'S EQUITY, DIVIDEND RESTRICTIONS, AND OTHER
MATTERS
All of the Company's outstanding series of preferred stock are owned by
the Parent Corporation. The dividend rate on the Series A Stated Rate
Auction Preferred Stock (STRAPS) is 7.3% through December 30, 2002. The
Series A STRAPS are redeemable at the option of the Company on or after
December 29, 2002 at a price of $100,000 per share, plus accumulated and
unpaid dividends.
Through December 30, 1995, the Series B STRAPS had a 7%
dividend rate. Thereafter, the Company will, at its option, select
future dividend periods. Future dividend rates will be fixed by a
market auction process with dividend rates dependent upon the
Company. If auctions are undersubscribed or otherwise unsuccessful, the
dividend rate is fixed by formula. The Company has the flexibility of
specifying, before each auction, the rights of redemption which it has during
the succeeding dividend period. These redemption rights are factored into
the auctions which set dividend rates.
The Series B STRAPS are redeemable at the option of the
Company at a price of $100,000 per share, plus accumulated and unpaid
dividends.
The Company's Series E 7.5% non-cumulative preferred shares
are redeemable by the Company after April 1, 1999. The shares are
not redeemable at the option of the holder at any time. The
shares are convertible into common shares at the option of the holder on or
after September 30, 1999, at a conversion price negotiated between the holder
and the Company or at a formula determined conversion price in accordance
with the share conditions.
On December 31, 1993, the Company issued 3,783 shares of
common stock to the Parent Corporation in connection with an
assumption of estimated tax liabilities. The Company also received $472 and
$9,098 of contributed capital in the form of deferred tax
assets from the Parent Corporation during 1994 and 1993,
respectively, in connection with the 1993 reinsurance transactions (see Note
2).
The Company's net income and capital and surplus, as
determined in accordance with statutory accounting principles and practices
for December 31 are as follows:
1995
1994
1993
(Unaudited)
Net Income
$114,931
$70,091
$55,995
Capital and Surplus
653,479
621,589
628,944
The maximum amount of dividends which can be paid to
stockholders by insurance companies domiciled in the State of Colorado is
subject to restrictions relating to statutory surplus and statutory net gain
from operations. Statutory surplus and net gains from operations at December
31, 1995 were $524,647 and $119,299 (unaudited), respectively. The Company
should be able to pay up to $119,299 (unaudited) of dividends without
regulatory approval in 1996.
Dividends of $9,217, $7,475, and $9,335, were paid on
preferred stock in 1995, 1994, and 1993, respectively. In addition,
dividends of $39,763, $32,963, and $12,517 were paid on common stock in 1995,
1994 and 1993, respectively. Dividends are
paid as determined by the Board of Directors.
The Company is involved in various legal proceedings which
arise in the ordinary course of its business. In the opinion of
management, after consultation with counsel, the resolution of these
proceedings should not have a material adverse effect on its financial
position or results of operations.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The financial statements for FutureFunds Series
Account
for
the years ended 1995 and 1994 and the consolidated financial statements for
Great-West Life & Annuity Insurance Company for the years ended December
31,
1995, 1994 and 1993 are included in Part B.
(b) Exhibits
Items (1) through (3), (6) and (8) are incorporated by
reference to registrant's Form S-6 Registration Statement filed February 21,
1984 and Pre-Effective Amendment No. 1 thereto filed June 29, 1984.
Item (9) is incorporated by reference to registrant's
Post-Effective Amendment No. 7 to Form N-4 registration statement filed on
April 30, 1987.
Items (4), (5) and (13) are incorporated by reference to
registrant's Post-Effective Amendment No. 11 to Form N-4 registration
statement filed on May 1, 1989.
(7) Not Applicable
(10) (a) Written Consent of Jorden Burt
Berenson
&
Johnson, LLP
(b) Written Consent of Deloitte & Touche LLP
(c) Written Consent of Ruth B. Lurie
(11) Not Applicable
(12) Not Applicable
Item 25. Directors and Officers of the Depositor
Position and
Offices
Name Principal Business Address
with
Depositor
James Balog 2205 North Southwinds Boulevard
Director
Vero Beach, Florida 39263
James W. Burns, O.C. (4)
Director
Orest T. Dackow (3)
Director
Paul Desmarais, Jr. (4)
Director
Robert G. Graham 77 Avenue Road
Director
Penthouse No. 6
Toronto, Ontario M5R 3R8
Robert Gratton (5)
Chairman
N. Berne Hart 2552 East Alameda Avenue
Director
Denver, Colorado 80209
Kevin P. Kavanagh (1)
Director
William Mackness 61 Waterloo Street
Director
Winnipeg, Manitoba R3N 053
William T. McCallum (3)
Director,
President and
Chief Executive Officer
Jerry E.A. Nickerson H.B. Nickerson & Sons Limited
Director
P.O. Box 130
275 Commercial Street
North Sydney, Nova Scotia B2A 3M2
P. Michael Pitfield, P.C., Q.C. (4)
Director
Michel Plessis-Belair, F.C.A. (4)
Director
Ross J. Turner Genstar Investment Corporation
Director
950 Tower Lane
Metro Tower, Suite 1170
Foster City, California 94404
Brian E. Walsh Trinity L.P.
Director
115 Putnam Ave.
Greenwich, Connecticut
Robert D. Bond (3) Senior
Vice-President, Financial
Services
John T. Hughes (3) Senior
Vice-President, Chief
Investment Officer
D. Craig Lennox (3)
Senior
Vice-President,
General Counsel and Secretary
Dennis Low (3)
Executive
Vice-President,
Financial Services
Alan D. MacLennan (2)
Executive
Vice-President,
Employee Benefits
James D. Motz (2)
Senior
Vice-President,
Employee Benefits Operations
Douglas L. Wooden (3)
Senior
Vice-President,
Chief Financial Officer and Treasurer
______________________________________
(1) 100 Osborne Street North, Winnipeg, Manitoba, Canada R3C 3A5.
(2) 8505 East Orchard Road, Englewood, Colorado 80111.
(3) 8515 East Orchard Road, Englewood, Colorado 80111.
(4) Power Corporation of Canada, 751 Victoria Square, Montreal, Quebec,
Canada H2Y 2J3.
(5) Power Financial Corporation, 751 Victoria Square, Montreal,
Quebec,
Canada H2Y 2J3.
Item 26. Persons controlled by or under common control with the Depositor
or
Registrant
See attached organizational chart.
Item 27. Number of Contractowners
On February 29, 1996, there were 25 owners of non-qualified
contracts and 39,291 of qualified contracts offered by Registrant
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
ORGANIZATIONAL CHART
Power Corporation of Canada
100% - 171263 Canada Inc.
68.4% - Power Financial Corporation
86.4% - Great-West Lifeco Inc.
99.4% - The Great-West Life Assurance Company
100% - Great-West Life & Annuity Insurance Company
100% - GW Capital Management, Inc.
100% - Financial Administrative Services Corporation
100% - Employee Benefit Services, Inc.
100% - One Health Plan of Illinois, Inc.
100% - One Health Plan of Texas, Inc.
100% - One Health Plan of California, Inc.
100% - Great-West Benefit Services, Inc.
13% - Private Healthcare Systems, Inc.
100% - Benefits Communication Corporation
100% - BenefitsCorp Equities, Inc.
94% - Maxim Series Fund, Inc.
100% - GWL Properties Inc.
100% - Great-West Realty Investments Inc.
50% - Westkin Properties Ltd.
100% - Confed Admin Services, Inc.
Item 28. Indemnification
Provisions exist under the Colorado General Corporation Code
and
the Bylaws of GWL&A whereby GWL&A may indemnify a director, officer, or
controlling person of GWL&A against liabilities arising under the Securities
Act of 1933. The following excerpts contain the substance of these
provisions:
Colorado Business Corporation Act
Article 109 - INDEMNIFICATION
Section 7-109-101. Definitions.
As used in this Article:
(1) "Corporation" includes any domestic or
foreign entity
that is a predecessor of the corporation by reason of a merger,
consolidation, or other transaction in which the predecessor's existence
ceased upon consummation of the transaction.
(2) "Director" means an individual who is or was a
director
of a corporation or an individual who, while a director of a corporation, is
or was serving at the corporation's request as a director, officer, partner,
trustee, employee, fiduciary or agent of another domestic or foreign
corporation or other person or employee benefit plan. A director is
considered to be serving an employee benefit plan at the corporation's
request if his or her duties to the corporation also impose duties on or
otherwise involve services by, the director to the plan or to participants in
or beneficiaries of the plan.
(3) "Expenses" includes counsel fees.
(4) "Liability" means the obligation incurred with
respect
to
a proceeding to pay a judgment, settlement, penalty, fine, including an
excise tax assessed with respect to an employee benefit plan, or reasonable
expenses.
(5) "Official capacity" means, when used with
respect to
a
director, the office of director in the corporation and, when used with
respect to a person other than a director as contemplated in Section
7-109-107, means the office in the corporation held by the officer or the
employment, fiduciary, or agency relationship undertaken by the employee,
fiduciary, or agent on behalf of the corporation. "Official capacity" does
not include service for any other domestic or foreign corporation or other
person or employee benefit plan.
(6) "Party" includes a person who was, is, or is
threatened
to be made a named defendant or respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or
completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
Section 7-109-102. Authority to indemnify directors.
(1) Except as provided in subsection (4) of this
section, a
corporation may indemnify a person made a party to the proceeding because the
person is or was a director against liability incurred in any proceeding if:
(a) The person conducted himself or
herself in good
faith;
(b) The person reasonably believed:
(I) In the case of conduct in an
official
capacity
with the corporation, that his or her conduct was in the corporation's best
interests; or
(II) In all other cases, that his
or her conduct
was
at least not opposed to the corporation's best interests; and
(c) In the case of any criminal
proceeding, the
person
had no reasonable cause to believe his or her conduct was unlawful.
(2) A director's conduct with respect to an employee
benefit
plan for a purpose the director reasonably believed to be in the interests of
the participants in or beneficiaries of the plan is conduct that satisfies
the requirements of subparagraph (II) of paragraph (b) of subsection (1) of
this section. A director's conduct with respect to an employee benefit plan
for a purpose that the director did not reasonably believe to be in the
interests of the participants in or beneficiaries of the plan shall be deemed
not to satisfy the requirements of subparagraph (a) of subsection (1) of this
section.
(3) The termination of any proceeding by judgment,
order,
settlement, or conviction, or upon a plea of nolo contendere or its
equivalent, is not, of itself, determinative that the director did not meet
the standard of conduct described in this section.
(4) A corporation may not indemnify a director
under this
section:
(a) In connection with a proceeding by or
in the right
of the corporation in which the director was adjudged liable to the
corporation; or
(b) In connection with any proceeding
charging that
the
director derived an improper personal benefit, whether or not involving
action in his official capacity, in which proceeding the director was
adjudged liable on the basis that he or she derived an improper personal
benefit.
(5) Indemnification permitted under this section
in
connection with a proceeding by or in the right of a corporation is limited
to reasonable expenses incurred in connection with the proceeding.
Section 7-109-103. Mandatory Indemnification of Directors.
Unless limited by the articles of incorporation,
a
corporation shall be required to indemnify a person who is or was a director
of the corporation and who was wholly successful, on the merits or otherwise,
in defense of any proceeding to which he was a party, against reasonable
expenses incurred by him in connection with the proceeding.
Section 7-109-104. Advance of Expenses to Directors.
(1) A corporation may pay for or reimburse the
reasonable
expenses incurred by a director who is a party to a proceeding in advance of
the final disposition of the proceeding if:
(a) The director furnishes the corporation
a written
affirmation of his good-faith belief that he has met the standard of conduct
described in Section 7-109-102;
(b) The director furnishes the corporation
a written
undertaking, executed personally or on the director's behalf, to repay the
advance if it is ultimately determined that he or she did not meet such
standard of conduct; and
(c) A determination is made that the facts
then know
to
those making the determination would not preclude indemnification under this
article.
(2) The undertaking required by paragraph (b) of
subsection
(1) of this section shall be an unlimited general obligation of the director,
but need not be secured and may be accepted without reference to financial
ability to make repayment.
(3) Determinations and authorizations of payments
under
this
section shall be made in the manner specified in Section 7-109-106.
Section 7-109-105. Court-Ordered Indemnification of Directors.
(1) Unless otherwise provided in the articles of
incorporation, a director who is or was a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to another court of
competent jurisdiction. On receipt of an application, the court, after
giving any notice the court considers necessary, may order indemnification in
the following manner:
(a) If it determines the director is
entitled to
mandatory indemnification under section 7-109-103, the court shall order
indemnification, in which case the court shall also order the corporation to
pay the director's reasonable expenses incurred to obtain court-ordered
indemnification.
(b) If it determines that the director is
fairly and
reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not the director met the standard of conduct set
forth in section 7-109-102 (1) or was adjudged liable in the circumstances
described in Section 7-109-102 (4), the court may order such indemnification
as the court deems proper; except that the indemnification with respect to
any proceeding in which liability shall have been adjudged in the
circumstances described Section 7-109-102 (4) is limited to reasonable
expenses incurred in connection with the proceeding and reasonable expenses
incurred to obtain court-ordered indemnification.
Section 7-109-106. Determination and Authorization of
Indemnification of Directors.
(1) A corporation may not indemnify a director under
Section
7-109-102 unless authorized in the specific case after a determination has
been made that indemnification of the director is permissible in the
circumstances because he has met the standard of conduct set forth in
Section 7-109-102. A corporation shall not advance expenses to a director
under Section 7-109-104 unless authorized in the specific case after the
written affirmation and undertaking required by Section 7-109-104(1)(a) and
(1)(b) are received and the determination required by Section 7-109-104(1)(c)
has been made.
(2) The determinations required to be made
subsection (1)
of
this section shall be made:
(a) By the board of directors by a majority
vote of
those present at a meeting at which a quorum is present, and only those
directors not parties to the proceeding shall be counted in satisfying the
quorum.
(b) If a quorum cannot be obtained, by a
majority
vote
of a committee of the board of directors designated by the board of
directors, which committee shall consist of two or more directors not parties
to the proceeding; except that directors who are parties to the proceeding
may participate in the designation of directors for the committee.
(3) If a quorum cannot be obtained as contemplated
in
paragraph (a) of subsection (2) of this section, and the committee cannot be
established under paragraph (b) of subsection (2) of this section, or even if
a quorum is obtained or a committee designated, if a majority of the
directors constituting such quorum or such committee so directs, the
determination required to be made by subsection (1) of this section shall be
made:
(a) By independent legal counsel selected by
a vote
of
the board of directors or the committee in the manner specified in paragraph
(a) or (b) of subsection (2) of this section or, if a quorum of the full
board cannot be obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote of the full board of
directors; or
(b) By the shareholders.
(4) Authorization of indemnification and evaluation
as to
reasonableness of expenses shall be made in the same manner as the
determination that indemnification is permissible; except that, if the
determination that indemnification is permissible is made by independent
legal counsel, authorization of indemnification and advance of expenses shall
be made by the body that selected such counsel.
Section 7-109-107. Indemnification of Officers, Employees,
Fiduciaries, and Agents.
(1) Unless otherwise provided in the articles of
incorporation:
(a) An officer is entitled to mandatory
indemnification
under section 7-109-103, and is entitled to apply for court-ordered
indemnification under section 7-109-105, in each case to the same extent as
a director;
(b) A corporation may indemnify and advance
expenses to
an officer, employee, fiduciary, or agent of the corporation to the same
extent as a director; and
(c) A corporation may indemnify and advance
expenses to
an officer, employee, fiduciary, or agent who is not a director to a greater
extent, if not inconsistent with public policy, and if provided for by its
bylaws, general or specific action of its board of directors or shareholders,
or contract.
Section 7-109-108. Insurance.
A corporation may purchase and maintain
insurance on
behalf of a person who is or was a director, officer, employee, fiduciary, or
agent of the corporation and who, while a director, officer, employee,
fiduciary, or agent of the corporation, is or was serving at the request of
the corporation as a director, officer, partner, trustee, employee,
fiduciary, or agent of any other domestic or foreign corporation or other
person or of an employee benefit plan against any liability asserted against
or incurred by the person in that capacity or arising out of his or her
status as a director, officer, employee, fiduciary, or agent whether or not
the corporation would have the power to indemnify the person against such
liability under the Section 7-109-102, 7-109-103 or 7-109-107. Any such
insurance may be procured from any insurance company designated by the board
of directors, whether such insurance company is formed under the laws of this
state or any other jurisdiction of the United States or elsewhere, including
any insurance company in which the corporation has an equity or any other
interest through stock ownership or otherwise.
Section 7-109-109. Limitation of Indemnification of Directors.
(1) A provision concerning a corporation's
indemnification
of, or advance of expenses to, directors that is contained in its articles of
incorporation or bylaws, in a resolution of its shareholders or board of
directors, or in a contract, except for an insurance policy or otherwise, is
valid only to the extent the provision is not inconsistent with Sections
7-109-101 to 7-109-108. If the articles of incorporation limit
indemnification or advance of expenses, indemnification or advance of
expenses are valid only to the extent not inconsistent with the articles of
incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a
corporation's power to pay or reimburse expenses incurred by a director in
connection with an appearance as a witness in a proceeding at a time when he
or she has not been made a named defendant or respondent in the proceeding.
Section 7-109-110. Notice to Shareholders of Indemnification of
Director.
If a corporation indemnifies or advances
expenses to a
director under this article in connection with a proceeding by or in the
right of the corporation, the corporation shall give written notice of the
indemnification or advance to the shareholders with or before the notice of
the next shareholders' meeting. If the next shareholder action is taken
without a meeting at the instigation of the board of directors, such notice
shall be given to the shareholders at or before the time the first
shareholder signs a writing consenting to such action.
Bylaws of GWL&A
Article II, Section 11. Indemnification of Directors.
The Company may, by resolution of the Board of
Directors,
indemnify and save harmless out of the funds of the Company to the extent
permitted by applicable law, any director, officer, or employee of the
Company or any member or officer of any committee, and his heirs, executors
and administrators, from and against all claims, liabilities, costs, charges
and expenses whatsoever that any such director, officer, employee or any such
member or officer sustains or incurs in or about any action, suit, or
proceeding that is brought, commenced, or prosecuted against him for or in
respect of any act, deed, matter or thing whatsoever made, done, or permitted
by him in or about the execution of his duties of his office or employment
with the Company, in or about the execution of his duties as a director or
officer of another company which he so serves at the request and on behalf of
the Company, or in or about the execution of his duties as a member or
officer of any such Committee, and all other claims, liabilities, costs,
charges and expenses that he sustains or incurs, in or about or in relation
to any such duties or the affairs of the Company, the affairs of such
Committee, except such claims, liabilities, costs, charges or expenses as are
occasioned by his own wilful neglect or default. The Company may, by
resolution of the Board of Directors, indemnify and save harmless out of the
funds of the Company to the extent permitted by applicable law, any director,
officer, or employee of any subsidiary corporation of the Company on the same
basis, and within the same constraints as, described in the preceding
sentence.
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 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.
Item 29. Principal Underwriter
(a) The Great-West Life Assurance Company ("Great-West")
currently
distributes securities of Great-West Variable Annuity Account A, Maxim Series
Account and Pinnacle Series Account in addition to those of the Registrant.
(b) Directors and Officers of Great-West
Position and
Offices
Name Principal Business Address
with
Underwriter
James W. Burns, O.C. (4)
Chairman
Orest T. Dackow (3) Director
Andre Desmarais (4) Director
Paul Desmarais, C.C. (4)
Director
Paul Desmarais, Jr. (4) Director
Robert G. Graham 77 Avenue Road
Director
Penthouse No.6
Toronto, Ontario M5R 3R8
Robert Gratton (5)
Director
N. Berne Hart 2552 East Alameda Avenue
Director
Denver, Colorado 80209
Charles H. Hollenberg, Ontario Cancer Treatment
Director
M.D., O.C. and Research Foundation
620 University Avenue
Toronto, Ontario M5G 2L7
Kevin P. Kavanagh (1) Director
J. Blair MacAulay Fraser & Beatty
Director
Barristers & Solicitors
P.O. Box 100
First Canadian Place
Toronto, Ontario M5X 1B2
William Mackness 61 Waterloo Street
Director
Winnipeg, Manitoba R3N 053
The Right Hon. 5238 45 B Avenue Director
D.F. Mazankowski Vegreville, Alberta T9C 1S5
William T. McCallum (3) Director,
President and Chief
Executive Officer, U.S. Operations
Raymond L. McFeetors (1)
Director,
President and
Chief Executive Officer; President and Chief Executive Officer, Canadian
Operations
Randall L. Moffat Moffat Communications Limited
Director
3rd Floor, CKY Building
Winnipeg, Manitoba R3G 0L7
Jerry E.A. Nickerson H.B. Nickerson & Sons Limited
Director
P.O. Box 130
275 Commercial Street
North Sydney, Nova Scotia B2A 3M2
P. Michael Pitfield, P.C., Q.C. (4)
Director
Michel Plessis-Belair, F.C.A. (4)
Director
Guy St-Germain, C.M. Placements Laugerma Inc.
Director
48 Robert Street
Outremont, Quebec H3S 2P2
Robert D. Bond (3)
Senior Vice-President,
Financial
Services (U.S.)
Denis J. Devos (1) Senior
Vice-President,
Individual Insurance and Investment (Canada)
James R. Grant (1) Senior
Vice-President, Group
(Canada)
Mitchell T.G. Graye (1) Senior
Vice-President, Chief
Financial Officer (Canada)
John T. Hughes (3)
Senior Vice-President,
Chief
Investment Officer (U.S.)
D. Craig Lennox (3) Senior
Vice-President, General
Counsel and Secretary
Dennis Low (3) Executive
Vice-President,
Financial Services (U.S.)
Alan D. MacLennan (2) Executive
Vice-President,
Employee Benefits (U.S.)
David E. Morrison (1) Senior
Vice-President and
Actuary (Canada)
James D. Motz (2) Senior
Vice-President, Employee
Benefits Operations (U.S.)
Peter G. Munro (1)
Senior Vice-President,
Chief
Investment Office (Canada)
Douglas L. Wooden (3) Senior
Vice-President, Chief
Financial Officer (U.S.)
________________________________________
(1) 100 Osborne Street North, Winnipeg, Manitoba, Canada R3C 3A5.
(2) 8505 East Orchard Road, Englewood, Colorado 80111.
(3) 8515 East Orchard Road, Englewood, Colorado 80111.
(4) Power Corporation of Canada, 751 Victoria Square, Montreal, Quebec,
Canada H2Y 2J3.
(5) Power Financial Corporation, 751 Victoria Square, Montreal,
Quebec,
Canada H2Y 2J3.
(c) Commissions and other compensation received by Principal
Underwriter during registrant's last fiscal year:
Net
Name of Underwriting Compensation
Principal Discounts and on
Brokerage
Underwriter Commissions Redemption
Commissions Compensation
Great-West -0- -0-
-0-
- -0-
Item 30. Location of Accounts and Records
All accounts, books, or other documents required to be
maintained
by Section 31(a) of the 1940 Act and the rules promulgated thereunder are
maintained by the registrant through GWL&A, 8515 E. Orchard Road,
Englewood,
Colorado 80111.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Registrant undertakes to file a post-effective amendment
to
this Registration Statement as frequently as is necessary to ensure that the
audited financial statements in the Registration Statement are never more
than 16 months old for so long as payments under the variable annuity
contracts may be accepted.
(b) Registrant undertakes to include either (1) as part of
any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2)
a postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of
Additional Information.
(c) Registrant undertakes to deliver any Statement of
Additional
Information and any financial statements required to be made available under
this form promptly upon written or oral request.
(d) Registrant represents that in connection with its
offering of
Group Contracts as funding vehicles for retirement plans meeting the
requirement of Section 403(b) of the Internal Revenue Code of 1986, as
amended, Registrant is relying on the no-action letter issued by the Office
of Insurance Products and legal Compliance, Division of Investment
Management, to the American Council of Life Insurance dated November 28,
1988
(Ref. No. IP-6-88), and that the provisions of paragraphs (1) - (4) thereof
have been complied with.
(e) Registrant represents that in connection with its
offering of
Group Contracts as funding vehicles under the Texas Optional Retirement
Program, Registrant is relying on the exceptions provided in Rule 6c-7 of the
Investment Company Act of 1940 and that the provisions of paragraphs (a) -(d)
thereof have been complied with.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf, in the City of Denver,
State of Colorado, on this 19 day of April, 1996.
FUTUREFUNDS SERIES ACCOUNT
(Registrant)
By: /s/ William T. McCallum
William T. McCallum, President
and Chief Executive Officer of
Great-West Life & Annuity
Insurance Company
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
(Depositor)
By: /s/ William T. McCallum
William T. McCallum, President
and Chief Executive Officer
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities with Great-West
Life & Annuity Insurance Company and on the dates indicated:
Signature and Title Date
/s/ Robert Gratton*
April 19 , 1996
Director and Chairman of the
Board (Robert Gratton)
/s/ William T. McCallum
April 19 , 1996
Director, President and Chief Executive
Officer (William T. McCallum)
S-1
Signature and Title Date
/s/ Douglas L. Wooden
April 19 , 1996
Principal Financial Officer
(Douglas L. Wooden)
/s/ Douglas L. Wooden
April 19 , 1996
Senior Vice-President and
Treasurer (Douglas L. Wooden)
/s/ James Balog*
April 19 , 1996
Director, (James Balog)
/s/ James W. Burns*
April 19 , 1996
Director, (James W. Burns)
/s/ Orest T. Dackow*
April 19 , 1996
Director (Orest T. Dackow)
/s/ Paul Desmarais, Jr.*
April 19 , 1996
Director (Paul Desmarais, Jr.)
/s/ Robert G. Graham*
April 19 , 1996
Director (Robert G. Graham)
/s/ N. Berne Hart*
April 19 , 1996
Director (N. Berne Hart)
/s/ Kevin P. Kavanagh*
April 19 , 1996
Director (Kevin P. Kavanagh)
S-2
Signature and Title Date
/s/ William Mackness*
April 19 , 1996
Director (William Mackness)
/s/ Jerry E.A. Nickerson*
April 19 , 1996
Director (Jerry E.A. Nickerson)
/s/ P. Michael Pitfield*
April 19 , 1996
Director (P. Michael Pitfield)
April , 1996
Director (Michel Plessis-Belair)
/s/ Ross J. Turner*
April 19 , 1996
Director (Ross J. Turner)
/s/ Brian E. Walsh*
April 19 , 1996
Director (Brian E. Walsh)
*By: /s/ D. C. Lennox
April 19 , 1996
D. C. Lennox
Attorney-in-fact pursuant to Powers of Attorney filed under
Post-Effective Amendment Nos. 14, 20 and 22 to this Registration
Statement.
S-3
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, B.E.Walsh, a Member of the Board of
Directors of Great-West Life & Annuity Insurance Company, a Colorado
corporation, do hereby constitute and appoint each of D.C. Lennox and G.R.
Derback as my true and lawful attorney and agent for me and in my name and on
my behalf to do, individually and without the concurrence of the other
attorney and agent, any and all acts and things and to execute any and all
instruments which either said attorney and agent may deem necessary or
desirable to enable Great-West Life & Annuity Insurance Company and
FutureFunds Series Accounts, a separate and distinct fund governed under the
provisions of the Colorado Insurance Code by Great-West Life & Annuity
Insurance Company, to comply with the Securities Act of 1933 and the
Investment Company Act of 1940 and any rules, regulations, and requirements
of the Securities and Exchange Commission thereunder, in connection with the
registration under said Acts of variable annuity contracts, including
specifically, but without limiting the generality of the foregoing, power and
authority to sign my name, in my capacity as a Member of the Board of
Directors of Great-West Life & Annuity Insurance Company, to the Registration
Statement (Form N-4) of Great-West Life & Annuity Insurance Company and
FutureFunds Series Account (Registration No. 2-89550), and to any and all
amendments thereto, and I hereby ratify and confirm all that either said
attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
20 day of October , 1995.
/s/ Brian E. Walsh
Member , Board of Directors
Great-West Life & Annuity
Insurance Company
Witness:
/s/ M. Canty
M. Canty
EXHIBIT 10 (a)
WRITTEN CONSENT OF JORDEN BURT BERENSON & JOHNSON,
LLP
April 23, 1996
Great West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
Ladies and Gentlemen:
We hereby consent to the use of our name under the caption "Legal
Matters" in the Prospectuses contained in Post-Effective Amendment No. 22 to
the Registration Statement on Form N-4 (File No. 2-89550) filed by Great-West
Life & Annuity Insurance Company and FutureFunds Series Account with the
Securities and Exchange Commission under the Securities Act of 1933 and the
Investment Company Act of 1940.
Very truly yours,
/s/ Jorden Burt Berenson & Johnson LLP
Jorden Burt Berenson & Johnson LLP
EXHIBIT 10 (b)
WRITTEN CONSENT OF DELOITTE & TOUCHE LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 22 to Registration
Statement No. 2-89550 of FutureFunds Series Account on Form N-4 of our report
dated February 7, 1996 on the financial statements of FutureFunds Series
Account and our report dated January 19, 1996 on the consolidated financial
statements of Great-West Life & Annuity Insurance Company appearing in the
Statement of Additional Information, which is part of such Registration
Statement, and to the reference to us under the caption "Independent
Auditors" in such Statement of Additional Information.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
April 25, 1996
EXHIBIT 10 (c)
WRITTEN CONSENT OF RUTH B. LURIE
April 25, 1996
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
Re: FutureFunds Series Account
Gentlemen:
I hereby consent to the use of my name under the caption "Legal Matters"
in the Prospectus for FutureFunds Series Account contained Post-Effective
Amendment No. 22 to the Registration Statement on Form N-4 (File No.
2-89550)
filed by Great-West Life & Annuity Insurance Company and FutureFunds Series
Account with the Securities and Exchange Commission under the Securities Act
of 1933, the Investment Company Act of 1940 and the amendments thereto.
Sincerely,
/s/ Ruth B. Lurie
Ruth B. Lurie
Vice President, Counsel
and Associate Secretary
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