<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1998
REGISTRATION NO. 2-90201
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933[X]
PRE-EFFECTIVE AMENDMENT NO. [_]
----
POST-EFFECTIVE AMENDMENT NO. 23[X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940[X]
AMENDMENT NO. 24
---------------
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
(EXACT NAME OF REGISTRANT)
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
320 PARK AVENUE NEW YORK, NEW YORK 10022
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICE INCLUDING ZIP CODE)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 224-1600
PATRICK A. BURNS, ESQ.
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
320 PARK AVENUE
NEW YORK, NEW YORK 10022
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
STANLEY M. LENKOWICZ
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
320 PARK AVENUE
NEW YORK, NEW YORK 10022
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of the Registration Statement.
---------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE
SPACE)
immediately upon filing pursuant to paragraph (b) of
Rule 485
X on May 1, 1998 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a) of Rule
485
on (date) pursuant to paragraph (a) of Rule 485
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
- -------------------------------------------------------------------------------
SEPARATE ACCOUNT NO. 2
Variable Accumulation Annuity Contracts
Issued By
Mutual of America Life Insurance Company
320 Park Avenue
New York, New York 10022
- -------------------------------------------------------------------------------
The group and individual variable accumulation annuity contracts ("Contracts")
offered by Mutual of America Life Insurance Company (the "Insurance Company")
and described in this Prospectus are designed to aid employees of
organizations in the not-for-profit field in retirement and long-term
financial planning by providing monthly Annuity Payments which begin at a
selected future date. The following four types of contracts are offered: (1) a
group Tax-Deferred Annuity Contract ("TDA Contract"); (2) a group Voluntary
Employee Contribution Contract ("VEC Contract"); (3) an Individual Retirement
Annuity Contract ("IRA Contract"), including Regular IRAs, Roth IRAs, SIMPLE
IRAs and SEP IRAs; and (4) an individual Flexible Premium Annuity Contract
("FPA Contract").
Participating employees under TDA or VEC Contracts, and the persons to whom
IRA or FPA Contracts are issued, are referred to in this Prospectus as
"Participants."
The Contracts permit Contributions to be made, generally, in whatever amounts
and at whatever frequency is desired by a Participant. Contributions may be
accumulated on behalf of a Participant on a completely variable basis, a
completely fixed basis or a combination variable and fixed basis. The basic
purpose of the variable accumulation aspect of the Contracts is to provide
Participants with an opportunity to accumulate amounts toward retirement, or
for other financial purposes, that will reflect the investment experience of
one or more of the distinct Funds comprising Mutual of America Separate
Account No. 2 ("Separate Account") to which Contributions may be allocated.
Contributions under the Contracts may be allocated in whole or in part to any
of the Funds of the Separate Account or to the General Account of the
Insurance Company (the "Investment Alternatives").
The assets in each Fund of the Separate Account are invested in shares of:
- -- one or more of the following eight Funds of Mutual of America Investment
Corporation (the "Investment Company"): Money Market Fund, All America Fund,
Equity Index Fund, Bond Fund, Short-Term Bond Fund, Mid-Term Bond Fund,
Composite Fund and Aggressive Equity Fund;
- -- one or more of the following Fidelity Investments(R) portfolios: Equity-
Income Portfolio of the Variable Insurance Products Fund and Contrafund and
Asset Manager Portfolios of the Variable Insurance Products Fund II
(collectively, the "Fidelity Portfolios");
- -- one or more of the following three portfolios of Scudder Variable Life
Investment Fund: Scudder Capital Growth Portfolio, Scudder Bond Portfolio,
and Scudder International Portfolio (collectively, the "Scudder
Portfolios");
- -- the American Century VP Capital Appreciation Fund (formerly known as the
TCI Growth Fund) of American Century Variable Portfolios, Inc.; and
- -- the Calvert Social Balanced Portfolio of Calvert Variable Series, Inc.
(formerly called the Calvert Responsibily Invested Balanced Portfolio).
The respective Prospectuses for the Investment Company, the Fidelity
Portfolios, the Scudder Portfolios, the American Century VP Capital
Appreciation Fund and the Calvert Social Balanced Portfolio, which are
attached to this Prospectus, describe the investment objectives and policies
of each of the variable accumulation Investment Alternatives, as well as the
risks relating to investments in each such Investment Alternative.
The value of a Participant's interest in the Separate Account will depend upon
the investment performance of the chosen Investment Alternative. THE INSURANCE
COMPANY DOES NOT GUARANTEE THE INVESTMENT PERFORMANCE OF ANY FUND OF THE
SEPARATE ACCOUNT. Accordingly, the Participant bears the entire investment
risk for any amounts allocated to the Separate Account.
Amounts accumulated under the Contracts may be applied to provide monthly
Annuity Payments on a fixed basis commencing at a future date selected by the
Participant.
This Prospectus generally describes only the variable portion of the
Contracts. For a brief summary of the fixed portion, see "The General
Account."
This Prospectus sets forth the information that a prospective investor should
know before investing. A Statement of Additional Information about the
Contracts and the Separate Account is available free by writing the Insurance
Company at the address above or by calling (212) 224-1600. The Statement of
Additional Information, which has the same date as the Prospectus, has been
filed with the Securities and Exchange Commission and is incorporated herein
by reference. The table of contents of the Statement of Additional Information
is included at the end of this Prospectus.
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Please read this Prospectus carefully for details on the Contracts being
offered and retain it for future reference. It is not valid unless attached to
the current prospectuses for the Investment Company, the Fidelity Portfolios,
Scudder Variable Life Investment Fund, American Century VP Capital
Appreciation Fund and the Calvert Social Balanced Portfolio.
Dated: May 1, 1998
<PAGE>
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Table of Annual Expenses............. 4
Unit Value Information............... 6
Definitions.......................... 8
Summary.............................. 9
Mutual of America Life Insurance Com-
pany................................ 12
The Separate Account................. 13
Investments of the Separate Account.. 13
Charges.............................. 16
Administrative Charges.............. 16
Distribution Expense Charge......... 16
Mortality and Expense Risk Charge... 17
Portfolio Company Expenses.......... 17
The Group and Individual Annuity Con-
tracts.............................. 19
General............................. 19
Payment of Contributions............ 19
Allocations of Contributions........ 21
Accumulation Units.................. 21
Transfers Among Investment Alterna-
tives.............................. 22
Withdrawals......................... 22
Specified Payments Options.......... 23
Death Benefits...................... 23
Discontinuance and Termination....... 24
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Discontinuance of TDA and VEC Contracts.............................. 24
Termination of Participation Under TDA Contracts..................... 24
Termination by the Insurance Company................................. 25
Postponement of Payments.............................................. 25
The Annuity Period.................................................... 25
General.............................................................. 25
Annuity Commencement Date............................................ 26
Available Forms of Annuity........................................... 26
Amount of Annuity Payments........................................... 27
Small Benefit Payments............................................... 27
The General Account................................................... 27
General Matters....................................................... 29
Federal Tax Matters................................................... 32
Voting Rights......................................................... 38
Performance Information............................................... 38
Funding and Other Changes............................................. 39
Other Variable Annuity Contracts...................................... 39
Table of Contents of the Statement of Additional Information.......... 40
Obtaining a Copy of the Statement of Additional Information........... 40
Order Form for Statement of Additional Information.................... 40
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
3
<PAGE>
TABLE OF ANNUAL EXPENSES
<TABLE>
<CAPTION>
Investment
Company
All America,
Bond,
Investment Short-Term Investment Investment Fidelity Fidelity
Company Bond, Company Company VIP Fidelity VIP II Scudder
Money Mid-Term Bond, Equity Aggressive Equity- VIP II Asset Capital Scudder
Market and Composite Index Equity Income Contrafund Manager Growth Bond
---------- -------------- ---------- ---------- -------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Contractowner
Transaction
Expenses
Sales Load
Imposed on
Purchases...... None None None None None None None None None
Deferred Sales
Load......... None None None None None None None None None
Surrender Fees.. None None None None None None None None None
Exchange Fee.... None None None None None None None None None
Annual Contract
Fee(1).......... $24 $24 $24 $24 $24 $24 $24 $24 $24
==== ==== ==== ==== ==== ==== ==== ==== ====
Separate Account
Annual Expenses
(as a percentage
of average
account value)
Mortality and
Expense Risk
Fees(2)........ .50% .50% .50% .50% .50% .50% .50% .50% .50%
---- ---- ---- ---- ---- ---- ---- ---- ----
Account Fees and Expenses
Administrative Charges
(after reim-
bursement)(2).. .40% .40% .40% .40% .30% .30% .30% .40% .40%
Distribution
Expense
Charge(2)...... .35 .35 .35 .35 .35 .35 .35 .35 .35
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Account
Fees and
Expenses....... .75 .75 .75 .75 .65 .65 .65 .75 .75
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Separate
Account
Expenses....... 1.25% 1.25% 1.25% 1.25% 1.15% 1.15% 1.15% 1.25% 1.25%
==== ==== ==== ==== ==== ==== ==== ==== ====
Portfolio Company
Annual Expenses
(as a percentage
of portfolio
company average
net assets)(3)
Management Fees. .25% .50% .125% .85% .50% .60% .55% .47% .48%
Other Expenses
(after
reimbursement)(3). None None None None .08 .11 .10% .04 .14
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Portfolio
Company
Expenses....... .25% .50% .125% .85% .58%(4) .71%(4) .65%(4) .51% .62%
==== ==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
American
Century VP Calvert
Scudder Capital Social
International Appreciation Balanced
------------- ------------ ----------
<S> <C> <C> <C>
Contractowner
Transaction
Expenses
Sales Load
Imposed on
Purchases...... None None None
Deferred Sales
Load......... None None None
Surrender Fees.. None None None
Exchange Fee.... None None None
Annual Contract
Fee(1).......... $24 $24 $24
============= ============ ==========
Separate Account
Annual Expenses
(as a percentage
of average
account value)
Mortality and
Expense Risk
Fees(2)........ .50% .50% .50%
------------- ------------ ----------
Account Fees and Expenses
Administrative Charges
(after reim-
bursement)(2).. .40% .20% .40%
Distribution
Expense
Charge(2)...... .35 .35 .35
------------- ------------ ----------
Total Account
Fees and
Expenses....... .75 .55 .75
------------- ------------ ----------
Total Separate
Account
Expenses....... 1.25% 1.05% 1.25%
============= ============ ==========
Portfolio Company
Annual Expenses
(as a percentage
of portfolio
company average
net assets)(3)
Management Fees. .83% 1.00% .69%
Other Expenses
(after
reimbursement)(3). .17 None .12
------------- ------------ ----------
Total Portfolio
Company
Expenses....... 1.00% 1.00% .81%(5)
============= ============ ==========
</TABLE>
- -------
(1) A monthly amount of $2.00 (but not to exceed 1/12 of 1% of the Account
Value in any month) is charged with respect to each Participant under a
Contract, regardless of the number of Investment Alternatives in which the
Participant is invested. Such amount is deducted from the net assets, if
any, in one or more of the Participant's Accounts or from such net assets
which have been allocated to one or more Funds of the Separate Account in
the order as described in "Charges--Administrative Charges" herein. The
above table reflects such amount for a full year for each fund or
portfolio as if no other Investment Alternatives were used. If the General
Account is used, the fee is deducted from it and there would be no fee
with respect to amounts allocated to any fund or portfolio. If the General
Account is not used, but more than one fund or portfolio is used, then the
second or additional fund(s) or portfolio(s) would not be charged. The
employer may elect to pay this Additional Amount in which case no amount
is deducted from the Participant's Account. See "Charges--Administrative
Charges."
(2) In accordance with a Fund Participation Agreement, the investment adviser
for American Century VP Capital Appreciation Fund reimburses the Insurance
Company at an annual rate of up to .20% for Administrative Expenses. If
the Fund Participation Agreement is terminated for sales of new Contracts,
the investment adviser's reimbursement obligation will terminate, and the
administrative charge to the American Century VP Capital Appreciation Fund
will be .40% instead of .20%. The Administrative Charges, Distribution
Expense Charge and Mortality and Expense Risk Fees items are more fully
described under "Charges--Administrative Charges"; "Charges--Distribution
Expense Charge"; and "Charges--Mortality and Expense Risk Charge." The
transfer agent and the distributor for the Fidelity Portfolios reimburse
the Insurance Company at a total annual rate of .10%, paid quarterly in
arrears, for certain services provided by the Insurance Company, and the
administration expense for the Fidelity VIP Funds would be an annual rate
of .40% if these service agreements were terminated.
(3) The investment adviser for the Investment Company voluntarily limits the
expenses of each Investment Company Fund to its investment advisory fee.
The investment adviser for the American Century VP Capital Appreciation
Fund pays the expenses of that Fund other than the investment advisory
fee. The expenses of the Portfolio Companies are more fully described in
the prospectuses of the Portfolio Companies, which are attached to this
Prospectus.
(4) A portion of the brokerage commissions that these Portfolios pay was used
to reduce their expenses. In addition, the Portfolios have entered into
arrangements with their custodian and transfer agent whereby interest
earned on uninvested cash balances was used to reduce custodian and
transfer agent expenses. Including these reductions, total operating
expenses for the VIP Equity-Income Portfolio and the VIP II Contrafund and
Asset Manager Portfolios for 1997 would have been .57%, .68% and .64%,
respectively.
(5) Total Expenses are based on expenses for fiscal year 1997 and have been
restated to reflect an increase in transfer agency expenses of 0.01%
expected to be incurred in 1998. Management fees may be adjusted based on
performance by the Portfolio's advisors, which could cause the fee to be
as high as .85% or as low as .55%, depending on performance. The Portfolio
indirectly pays expenses of 0.03%, and the Portfolio's total operating
expenses for 1997 would have been .78% with reductions to reflect fees
paid indirectly.
4
<PAGE>
EXAMPLES
The examples below show the expenses that would be borne by a Participant,
assuming a $1,000 investment and a 5% annual rate of return on assets. No
surrender charge is imposed upon the surrender of a contract, and therefore
the expenses would be the same whether or not the contract is surrendered at
the end of the applicable time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Example for Investment Company Money Market
Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:.................................. $16.92 $55.07 $ 99.59 $244.28
Example for Investment Company All America,
Bond, Short-Term Bond, Mid-Term Bond and Com-
posite Funds
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:.................................. $19.50 $63.31 $114.20 $278.47
Example for Investment Company Equity Index
Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:.................................. $15.63 $50.93 $ 92.21 $226.87
Example for Investment Company Aggressive Eq-
uity Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:.................................. $23.10 $74.74 $134.36 $324.91
Example for Fidelity VIP Equity-Income Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:.................................. $19.30 $62.66 $113.04 $275.76
Example for Fidelity VIP II Contra Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:.................................. $20.63 $66.92 $120.58 $293.24
Example for Fidelity VIP II Asset Manager Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:.................................. $20.02 $64.95 $117.10 $285.20
Example for Scudder Capital Growth Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:.................................. $19.61 $63.64 $114.78 $279.82
Example for Scudder Bond Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:.................................. $20.74 $67.24 $121.15 $294.57
Example for Scudder International Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:.................................. $24.64 $79.60 $142.89 $344.32
Example for American Century VP Capital Appre-
ciation Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:.................................. $22.59 $73.12 $131.50 $318.37
Example for Calvert Social Balanced Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:.................................. $22.69 $73.44 $132.07 $319.68
</TABLE>
The purpose of the above table is to assist the Participant in understanding
the various costs and expenses that a Participant will bear, directly or
indirectly, under a contract and the table reflects the expenses of the
Separate Account as well as the Investment Company Funds, the Fidelity VIP
Equity-Income Portfolio, the Fidelity VIP II Asset Manager and Contrafund
Portfolios, the Scudder Portfolios, the American Century VP Capital
Appreciation Fund (formerly known as the TCI Growth Fund) and the Calvert
Social Balanced Portfolio as they were for the year ended December 31, 1997.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE ON WHICH THE EXAMPLES WERE
BASED. The annual rate of return assumed in the examples is not an estimate or
guarantee of future investment performance. Each example also assumes an
annual contract fee of $1.25 per $1,000 of value in the Separate Account based
on an average account value of $19,146. See "Charges--Administrative Charges"
for a description of how such fee would be deducted from the Investment
Alternatives.
5
<PAGE>
UNIT VALUE INFORMATION
Shown below is condensed financial information for an Accumulation Unit
outstanding throughout the ten years during the period ended December 31,
1997. The information with respect to each of the years in the six year period
ended December 31, 1996, has been audited by the Funds' independent auditors,
Arthur Andersen LLP. Each of the years in the periods ended December 31, 1991
were audited by the Funds' previous auditors. THE ALL AMERICA FUND (PREVIOUSLY
CALLED THE "STOCK FUND") CHANGED ITS INVESTMENT OBJECTIVES AND POLICIES AND
ADDED SUBADVISERS ON MAY 1, 1994. Prior to January 1, 1998, the Calvert Social
Balanced Portfolio was known as the Calvert Responsibly Invested Portfolio,
and prior to May 1, 1995, the Portfolio was known as the Calvert Socially
Responsible Series. Prior to May 1, 1997, the American Century VP Capital
Appreciation Fund was known as the TCI Growth Fund.
<TABLE>
<CAPTION>
INVESTMENT COMPANY MONEY MARKET FUND
-------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period............. $ 1.87 $ 1.80 $ 1.72 $ 1.68 $ 1.65 $ 1.62 $ 1.54 $ 1.44 $ 1.33 $ 1.25
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Unit value, end of
year/period............. $ 1.95 $ 1.87 $ 1.80 $ 1.72 $ 1.68 $ 1.65 $ 1.62 $ 1.54 $ 1.44 $ 1.33
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Thousands of
accumulation units
outstanding, end of
year/period............. 16,831 17,511 17,502 17,653 15,815 16,545 15,656 13,972 8,570 4,870
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
<CAPTION>
INVESTMENT COMPANY ALL AMERICA FUND
---------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period............ $ 5.39 $ 4.52 $ 3.35 $ 3.36 $ 3.03 $ 2.97 $ 2.41 $ 2.47 $ 1.98 $ 1.82
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Unit value, end of
year/period............ $ 6.76 $ 5.39 $ 4.52 $ 3.35 $ 3.36 $ 3.03 $ 2.97 $ 2.41 $ 2.47 $ 1.98
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Thousands of
accumulation units
outstanding, end of
year/period............ 51,312 49,798 43,620 38,669 36,510 32,352 26,173 20,973 20,157 20,064
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
<CAPTION>
INVESTMENT COMPANY BOND FUND
---------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period............. $ 2.75 $ 2.69 $ 2.28 $ 2.39 $ 2.13 $ 1.99 $ 1.73 $ 1.67 $ 1.49 $ 1.40
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Unit value, end of
year/period............. $ 3.00 $ 2.75 $ 2.69 $ 2.28 $ 2.39 $ 2.13 $ 1.99 $ 1.73 $ 1.67 $ 1.49
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Thousands of
accumulation units
outstanding, end of
year/period............. 12,671 12,548 12,083 10,601 12,244 9,203 6,152 5,235 4,164 3,057
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
<CAPTION>
INVESTMENT COMPANY COMPOSITE FUND
---------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period............. $ 3.75 $ 3.39 $ 2.82 $ 2.95 $ 2.55 $ 2.43 $ 2.08 $ 2.04 $ 1.73 $ 1.60
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Unit value, end of
year/period............. $ 4.36 $ 3.75 $ 3.39 $ 2.82 $ 2.95 $ 2.55 $ 2.43 $ 2.08 $ 2.04 $ 1.73
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Thousands of
accumulation units
outstanding, end of
year/period............. 61,359 66,715 70,558 73,239 71,215 50,944 43,115 37,461 32,716 29,436
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT INVESTMENT INVESTMENT INVESTMENT
COMPANY COMPANY COMPANY COMPANY
EQUITY INDEX SHORT-TERM MID-TERM AGGRESSIVE
FUND BOND FUND BOND FUND EQUITY FUND
- --------------------------------- ----------------------------- ----------------------------- --------------------------
1997 1996 1995 1994 1993* 1997 1996 1995 1994 1993* 1997 1996 1995 1994 1993* 1997 1996 1995 1994*
---- ---- ---- ---- ----- ---- ---- ---- ---- ----- ---- ---- ---- ---- ----- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.72 $ 1.42 $ 1.05 $1.05 $1.00 $1.14 $1.10 $1.03 $1.03 $1.00 $1.19 $1.16 $1.01 $1.06 $1.00 $ 1.80 $ 1.43 $ 1.05 $1.00
====== ====== ====== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ====== ====== ====== =====
$ 2.26 $ 1.72 $ 1.42 $1.05 $1.05 $1.19 $1.14 $1.10 $1.03 $1.03 $1.26 $1.19 $1.16 $1.01 $1.06 $ 2.15 $ 1.80 $ 1.43 $1.05
====== ====== ====== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ====== ====== ====== =====
68,462 35,660 17,109 4,644 2,135 2,355 2,129 1,447 1,132 747 4,478 3,828 2,848 1,444 1,411 71,468 49,800 20,858 9,145
====== ====== ====== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ====== ====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
SCUDDER BOND FUND SCUDDER CAPITAL GROWTH FUND
- ----------------------------------------------------------- --------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1997 1996 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$11.48 $11.30 $ 9.69 $10.32 $ 9.30 $8.78 $7.54 $7.05 $6.39 $22.11 $18.64 $14.67 $16.46 $13.80 $13.09 $ 9.48 $10.35 $ 8.53
====== ====== ====== ====== ====== ===== ===== ===== ===== ====== ====== ====== ====== ====== ====== ====== ====== ======
$12.37 $11.48 $11.30 $ 9.69 $10.32 $9.30 $8.78 $7.54 $7.05 $29.64 $22.11 $18.64 $14.67 $16.46 $13.80 $13.09 $ 9.48 $10.35
====== ====== ====== ====== ====== ===== ===== ===== ===== ====== ====== ====== ====== ====== ====== ====== ====== ======
1,484 1,362 1,269 1,169 1,277 1,053 600 354 221 11,094 9,266 8,556 8,121 6,582 3,698 2,138 1,103 844
====== ====== ====== ====== ====== ===== ===== ===== ===== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
SCUDDER INTERNATIONAL FUND AMERICAN CENTURY VP CAPITAL APPRECIATION FUND
- ----------------------------------------------------------- --------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1997 1996 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$13.43 $11.85 $10.80 $11.06 $ 8.13 $8.48 $7.68 $8.41 $6.14 $11.53 $12.18 $ 9.39 $9.61 $8.81 $9.01 $6.40 $6.53 $5.11
====== ====== ====== ====== ====== ===== ===== ===== ===== ====== ====== ====== ===== ===== ===== ===== ===== =====
$14.46 $13.43 $11.85 $10.80 $11.06 $8.13 $8.48 $7.68 $8.41 $11.04 $11.53 $12.18 $9.39 $9.61 $8.81 $9.01 $6.40 $6.53
====== ====== ====== ====== ====== ===== ===== ===== ===== ====== ====== ====== ===== ===== ===== ===== ===== =====
8,205 7,688 7,269 8,610 5,400 2,262 1,849 1,644 721 4,510 7,264 8,061 6,361 5,946 5,280 3,056 1,518 791
====== ====== ====== ====== ====== ===== ===== ===== ===== ====== ====== ====== ===== ===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
FIDELITY FIDELITY
FIDELITY VIP VIP II VIP II ASSET
CALVERT SOCIAL BALANCED FUND EQUITY-INCOME FUND CONTRA FUND MANAGER FUND
- -------------------------------------------- -------------------- -------------------- --------------------
1997 1996 1995 1994 1993 1992 1991* 1997 1996 1995* 1997 1996 1995* 1997 1996 1995*
---- ---- ---- ---- ---- ---- ----- ---- ---- ----- ---- ---- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 2.23 $ 2.01 $1.57 $1.64 $1.54 $1.44 $1.32 $21.93 $19.43 $16.30 $16.59 $13.85 $11.43 $17.72 $15.66 $14.04
====== ====== ===== ===== ===== ===== ===== ====== ====== ====== ====== ====== ====== ====== ====== ======
$ 2.65 $ 2.23 $2.01 $1.57 $1.64 $1.54 $1.44 $27.77 $21.93 $19.43 $20.36 $16.59 $13.85 $21.14 $17.72 $15.66
====== ====== ===== ===== ===== ===== ===== ====== ====== ====== ====== ====== ====== ====== ====== ======
12,479 10,713 7,849 5,986 5,151 2,742 678 3,451 2,342 728 5,656 3,880 1,792 1,150 613 184
====== ====== ===== ===== ===== ===== ===== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
*The dates the Funds of the Separate Account commenced operation are as
follows: Investment Company Money Market, All America (previously "Stock"),
Bond and Composite Funds--January 1, 1985; Scudder Capital Growth, Bond and
International Funds and American Century VP Capital Appreciation Fund
(previously "TCI Growth Fund")--January 3, 1989; Calvert Social Balanced
Fund--May 13, 1991; Investment Company Equity Index, Short-Term Bond and Mid-
Term Bonds Funds--February 5, 1993; Investment Company Aggressive Equity
Fund--May 2, 1994; and Fidelity VIP Equity-Income Fund, and Fidelity VIP II
Contra and Asset Manager Funds--May 1, 1995.
7
<PAGE>
DEFINITIONS
Accumulation Period--For each Participant, the period from the date
Contributions are first made under a Contract to the Annuity Commencement
Date.
Accumulation Unit--A measure used to calculate the value of a Participant's
interest in each of the Funds of the Separate Account prior to the Annuity
Commencement Date. Each Fund of the Separate Account has its own distinct
Accumulation Unit value.
American Century VP Capital Appreciation Fund--The American Century VP Capital
Appreciation Fund of American Century Variable Portfolios, Inc. Prior to May
1, 1997, this Fund was known as the TCI Growth Fund of TCI Portfolios, Inc.
Annuitant--A person receiving, or who will receive, Annuity Payments under a
Contract. A Participant, or another person designated under a Contract to
receive Annuity Payments, a single sum payment or the commuted value of
remaining periodic payments, may be an Annuitant.
Annuity Commencement Date--The date on which annuity benefits become payable
with respect to a Participant, and as of which the amount of the first Annuity
Payment will be determined. The Annuity Commencement Date may be the date
elected by a Participant or imposed by operation of law or, if later, the
first Valuation Day as of which all required information and documentation
have been received by the Insurance Company. Sometimes referred to by the
Insurance Company as Benefit Commencement Date.
Annuity Payments--A series of payments under a Contract for life, for a
minimum period of time, for the joint lifetime of the Annuitant and another
person and thereafter for the life of the survivor, or for such other period
under options available from the Insurance Company.
Annuity Period--The period, beginning at the Annuity Commencement Date, during
which Annuity Payments are received by an Annuitant.
Calvert Social Balanced Portfolio--The Calvert Social Balanced Portfolio of
Calvert Variable Series, Inc. Prior to January 1, 1998, this Fund was known as
the Calvert Responsibly Invested Balanced Portfolio of Acacia Capital
Corporation.
Code--The Internal Revenue Code of 1986, as amended.
Contract(s)--One (or more) of the group and individual variable accumulation
annuity contracts described in this Prospectus.
Contractholder--The entity to which the Insurance Company has issued a TDA or
VEC Contract. The Contractholder of a TDA Contract may be an employer, or an
association representing employers or employees. The Contractholder of a VEC
Contract may be an employer, or the trustee of the Plan adopted by the
employer.
Contributions--The amounts contributed from time to time toward the purchase
of an annuity under a Contract.
Eligible Spouse--The person to whom a Participant is legally married at the
earlier of the Participant's (a) Annuity Commencement Date or (b) date of
death.
Fidelity Portfolios--The Fidelity VIP Equity-Income Portfolio and the Fidelity
VIP II Contrafund and Asset Manager Portfolios.
Fidelity VIP Equity-Income Portfolio--The Equity-Income Portfolio of Variable
Insurance Products Fund.
Fidelity VIP II Contrafund and Asset Manager Portfolios--The Contrafund
Portfolio and Asset Manager Portfolio of the Variable Insurance Products Fund
II.
Fund--According to the context, one of the sixteen subaccounts of the Separate
Account or one of the eight investment portfolios of the Investment Company.
General Account--All of the assets of the Insurance Company that are not in a
separate account, but rather are held as part of its general assets.
Insurance Company--Mutual of America Life Insurance Company.
Investment Alternatives--The General Account and the sixteen distinct Funds
comprising the Separate Account, namely, the Funds which invest in the Money
Market, All America, Equity Index, Bond, Short-Term Bond, Mid-Term Bond,
Composite and Aggressive Equity Funds of the Investment Company, in the three
Fidelity Portfolios, in the three Scudder Portfolios, in American Century VP
Capital Appreciation Fund and in the Calvert Social Balanced Portfolio
(formerly called the Calvert
8
<PAGE>
Responsibly Invested Balanced Portfolio). Under the Contracts, a Participant
may allocate Contributions among all of the Investment Alternatives.
Investment Company--Mutual of America Investment Corporation.
Participant--Under TDA and VEC Contracts, an employee or former employee
participating in a Plan and for whom Contributions have been or are being made
toward the purchase of an annuity. Under an IRA Contract, the individual, and
under an FPA Contract, the individual or employer, to whom the Contract is
issued.
Participant's Account Balance (or Account Balance)--The sum of the dollar
values of the Accumulation Units credited to a Participant in the Separate
Account and the value of amounts accumulated for the benefit of that
Participant in the General Account.
Plan--A retirement plan under which benefits are to be provided pursuant to
one of the Contracts described herein.
Plan Year--For TDA Contracts, the twelve-month period beginning each January
1; for VEC Contracts, the twelve-month period defined in a Plan.
Portfolio Companies--The Investment Company, Variable Insurance Products Fund,
Variable Insurance Products Fund II, Scudder Variable Life Investment Fund,
American Century Variable Portfolios, Inc. and Calvert Variable Series, Inc.
Scudder Portfolios--The following three portfolios of Scudder Variable Life
Investment Fund, namely, the Scudder Capital Growth Portfolio, the Scudder
Bond Portfolio and the Scudder International Portfolio.
Separate Account--Mutual of America Separate Account No. 2, a separate
investment account established by the Insurance Company to receive and invest
Contributions made under variable accumulation annuity contracts and other
variable contracts. The Separate Account is set aside and kept separate from
the other assets of the Insurance Company.
Valuation Day--Each day that the New York Stock Exchange is open for business.
Valuation Period--The period beginning on the close of business of each
Valuation Day and ending on the close of business on the next Valuation Day.
SUMMARY
The Following Summary Of Prospectus Information Should Be Read In Conjunction
With The Detailed Information Appearing Elsewhere In This Prospectus.
CONTRACTS OFFERED
The group and individual variable accumulation annuity contracts offered by
this Prospectus are issued by the Insurance Company and designed to aid in
retirement and long-term financial planning. The Contracts provide for the
accumulation of Contributions on a completely variable basis, a completely
fixed basis or a combination variable and fixed basis. Annuity Payments under
the Contracts will be made on a fixed basis only.
The four types of contracts described herein are summarized below:
1. Tax Deferred Annuity Contract ("TDA Contract"). A group contract designed
for use in connection with annuity purchase plans adopted pursuant to Section
403(b) of the Code by certain organizations that qualify for tax-exempt status
under Section 501(c)(3) of the Code or are eligible public schools or
colleges. TDA Contracts are issued to Contractholders, which typically are
such tax-exempt organizations or an association representing such organization
or its employees. Contributions ordinarily are made through voluntary salary
reduction arrangements. Participants under TDA Contracts may obtain certain
Federal income tax benefits provided under Section 403(b) of the Code (see
"Federal Tax Matters").
2. Voluntary Employee Contribution Contract ("VEC Contract"). A group contract
designed to provide annuity benefits to employees participating in a
retirement plan qualified for special Federal income tax treatment under
Sections 401(a) and 403(a) of the Code for Contributions prior to January 1,
1987 or transfers thereafter. VEC Contracts are issued to Contractholders,
which typically are employers or the trustees or administrators of their
retirement plans (see "Federal Tax Matters").
3. Individual Retirement Annuity Contract ("IRA Contract"). A contract
designed for use in connection with individual retirement arrangements that
qualify for favorable Federal income tax treatment under Sections 219, 408 and
408A of the Code, which permit Contributions to be made by a Participant for
the purpose of providing retirement income. An IRA Contract, including a
spousal IRA, that is purchased by an individual directly from the Insurance
Company must be designated as a regular IRA Contract (a "Regular IRA") or a
Roth IRA Contract (a "Roth IRA"). An IRA Contract may also be issued in
connection with a Simplified Employee Pension ("SEP") as defined in Section
408(k) of the Code or
9
<PAGE>
in connection with a Savings Incentive Match Plan for Employees ("SIMPLE") if
the employer has established such a plan. (Such IRA Contracts may be referred
to in this prospectus as "SEP IRAs" or "SIMPLE IRAs" and other IRAs as
"Regular IRAs.") Under a SEP, contributions are made by employers to the IRA
contracts of individual employees. Under a SIMPLE, a Participant may make
contributions through a salary reduction agreement with the Participant's
employer, and an employer may contribute amounts on behalf of a Participant.
Federal tax on some or all those amounts may be deferred (or excluded from
income in connection with a SIMPLE) until Annuity Payments commence (see
"Federal Tax Matters").
4. Flexible Premium Annuity Contract ("FPA Contract"). A contract designed to
provide Annuity Payments that begin at a future date to an individual, or as a
depository for employer deferred compensation obligations. The FPA Contract
may be used in connection with retirement arrangements whether or not they
qualify for special tax treatment under the Code (see "Federal Tax Matters").
CONTRIBUTIONS
In general, Contributions under the Contracts may be made in whatever amounts
and at whatever frequency is desired by Participants. The minimum Contribution
that may be made under each of the Contracts, except TDA Contracts, is the
minimum set from time to time by the Insurance Company, currently $10.
However, there is no minimum employer contribution for an IRA issued in
connection with a SEP or for employer or Participant contributions for an IRA
issued in connection with a SIMPLE. Salary reduction contributions under TDAs
will be permitted if the total annual contribution is $200 or more. The
maximum annual Contributions under TDA, VEC and IRA Contracts are those
amounts permitted under the Code for Plans or arrangements funded by those
Contracts (see "The Group and Individual Annuity Contracts--Payment of
Contributions" and "Federal Tax Matters").
Under IRA and FPA Contracts, the Insurance Company may, in its sole
discretion, terminate the Contract and return amounts accumulated thereunder
to the Participant if prior to the Annuity Commencement Date no Contributions
have been made for three consecutive years and the Participant's Account
Balance is less than $500 in the case of FPA Contracts and either $2,000 or
the amount necessary to provide monthly Annuity Payments of at least $20 under
the form of annuity selected by the Participant in the case of IRA Contracts.
The Insurance Company may not, on that basis, terminate the Contract of an IRA
or FPA Participant who has not attained the age of 59 1/2.
Participants under the Contracts may allocate Contributions made on their
behalf among the Investment Alternatives provided in the Contracts, which
include the General Account and the sixteen distinct Funds of the Separate
Account.
This Prospectus is intended as a disclosure document for the variable portion
of the Contracts only. See "The General Account" for a brief summary of the
fixed portion of the Contracts.
THE SEPARATE ACCOUNT
Contributions made pursuant to the Contracts and allocated on a variable basis
are deposited in the Separate Account. The Separate Account is divided into
sixteen Funds, or sub-accounts, each one of which corresponds to one of the
eight Funds of the Investment Company, or one of the Fidelity Portfolios, or
one of the three Scudder Portfolios, or the American Century VP Capital
Appreciation Fund or the Calvert Social Balanced Portfolio, in which Separate
Account assets are invested. The objective of the variable accumulation aspect
of the Contracts is to provide a return on amounts contributed that will
reflect the investment experience of the chosen Funds. The value of the
Contributions accumulated for a Participant in the Separate Account prior to
the Annuity Commencement Date will vary with the investment experience of the
chosen Funds.
THE INVESTMENT ALTERNATIVES
The Investment Alternatives to which Contributions may be allocated are the
General Account and the sixteen Funds of the Separate Account, which invest in
the eight separate investment funds of Mutual of America Investment
Corporation: the Money Market Fund, which invests in money market instruments
and other short-term debt securities; the All America Fund, which invests
approximately 60% of its assets in publicly traded common stocks in the same
manner as the Equity Index Fund (see below) and approximately 40% of its
assets in other publicly traded common stocks; the Aggressive Equity Fund,
which also invests in publicly traded common stocks; the Bond Fund, which
invests in publicly traded debt securities; the Short-Term Bond Fund which
invests in publicly traded debt securities which will produce a portfolio with
an average maturity of one to three years; the Mid-Term Bond Fund which
invests in publicly traded debt securities which will produce a portfolio with
an average maturity of three to seven years; the Composite Fund, which invests
in all of the above types of investments; and the Equity Index Fund which
invests in publicly traded common stocks comparable to the Standard &
10
<PAGE>
Poor's Composite Index of 500 Stocks* (the "S&P 500 Index"); the Fidelity VIP
Equity-Income Portfolio, which invests primary in income-producing equity
securities; the Fidelity VIP II Contrafund Portfolio, which invests mainly in
securities of companies that are undervalued or out-of-favor; and Fidelity VIP
II Asset Manager, which allocates its assets among domestic and foreign
stocks, bonds and short-term fixed-income instruments; the following three
portfolios of Scudder Variable Life Investment Fund (collectively, the
"Scudder Portfolios"): the Scudder Capital Growth Portfolio, which invests
primarily in publicly traded equity securities; the Scudder Bond Portfolio,
which invests primarily in publicly traded debt securities; and the Scudder
International Portfolio, which invests primarily in marketable foreign equity
securities; in the American Century VP Capital Appreciation Fund of American
Century Variable Portfolios, Inc., which invests primarily in publicly traded
common stocks; and in the Calvert Social Balanced Portfolio of Calvert
Variable Series, Inc., which invests in stocks, bonds and money market
instruments selected with a concern for the social impact of each investment.
(See "Investments of the Separate Account.")
REINVESTMENT
Distributions of the Portfolio Companies to the Separate Account are
automatically reinvested in additional Portfolio Company shares at net asset
value.
CHARGES
Certain charges will be deducted in connection with the operation of the
Contracts and the Separate Account.
Administrative Charges. The Insurance Company will make a deduction each
Valuation Day from the net assets of each Fund of the Separate Account for
administrative expenses at an annual rate of .40%, except that in the case of
the Fund of the Separate Account which invests in the American Century VP
Capital Appreciation Fund, the annual rate shall be .20% (the Fund's
investment adviser reimburses the Insurance Company at an annual rate of up to
.20% for administrative expenses), and in the case of the Separate Account
Funds that invest in the Fidelity Portfolios, the annual rate shall be
approximately .30% (the transfer agent and distributor for the Fidelity
Portfolios reimburse the Insurance Company at an aggregate annual rate of
.10%, paid quarterly in arrears, for administrative expenses). An additional
deduction for administrative expenses of $2.00 per month will also be made
with respect to each Participant under a Contract except that such charge
shall not exceed 1/12 of 1% of the Account Value in any month. Such amount
will be deducted from the net assets, if any, in the Participant's Account
which have been allocated to the General Account. If no net assets have been
allocated to such Account, such amount will be deducted from the net assets
which have been allocated to one or more Funds of the Separate Account, in the
following order: (a) Investment Company Money Market Fund, (b) Investment
Company Short-Term Bond Fund, (c) Investment Company Mid-Term Bond Fund, (d)
Investment Company Bond Fund, (e) Scudder Bond Fund, (f) Investment Company
Composite Fund, (g) Fidelity VIP II Asset Manager Fund, (h) Calvert Social
Balanced Portfolio, (i) Fidelity VIP Equity-Income Fund, (j) Investment
Company All America Fund, (k) Investment Company Equity Index Fund, (l)
Fidelity VIP II Contra Fund, (m) Investment Company Aggressive Equity Fund,
(n) Scudder Capital Growth Fund, (o) Scudder International Fund, and (p)
American Century VP Capital Appreciation Fund. The Employer may elect to pay
the additional deduction in which case there would be no deduction from a
Participant's Account. These daily and monthly charges may increase or
decrease during the life of the Contract, but may not exceed costs (see
"Charges--Administrative Charges").
Distribution Expense Charge. The Insurance Company will make a deduction each
Valuation Day from the net assets of each Fund of the Separate Account for
expenses associated with the distribution of the Contracts at an annual rate
of .35% (see "Charges--Distribution Expense Charge").
Mortality and Expense Risk Charge. For assuming certain mortality risks under
the Contracts, the Insurance Company will make a deduction each Valuation Day
at an annual rate of .35% of the net assets of each Fund of the Separate
Account. The Mortality Risk Charge is guaranteed not to increase during the
life of the Contract. For assuming certain Expense Risks under the Contracts
with respect to expenses it expects to incur over the life of the Contracts,
the Insurance Company will make a deduction each Valuation Day at an annual
rate of .15% of the net assets of each Fund of the Separate Account (see
"Charges--Mortality and Expense Risk Charge").
Portfolio Company Expenses. The value of the assets in the Separate Account
will reflect the value of the Portfolio Companies in which such assets are
invested, and therefore the fees and expenses paid by the Investment Company,
the
- -------
* "Standard & Poor's 500," "S&P" and "S&P 500" are trademarks of Standard &
Poor's Corporation. The Fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's Corporation. Refer to the Mutual of America Investment
Corporation Prospectus for a complete description of the disclaimers and
limitations relating to Standard & Poor's Corporation.
11
<PAGE>
Fidelity Portfolios, the Scudder Portfolios, American Century VP Capital
Appreciation Fund or Calvert Social Balanced Portfolio, as the case may be. A
complete description of the expenses and deductions from the Investment
Company Funds, the Fidelity Portfolios, the Scudder Portfolios, the American
Century VP Capital Appreciation Fund and Calvert Social Balanced Fund is found
in their respective prospectuses attached to this Prospectus.
TRANSFERS AND WITHDRAWALS
Generally, at any time prior to the Annuity Commencement Date, a Participant
under the Contracts may transfer any or all of the Participant's Account
Balance from the Separate Account to the General Account, or from the General
Account to the Separate Account, or among the Funds of the Separate Account.
(See "Transfers Among Investment Alternatives" and "The General Account.") In
addition, a Participant may (unless, under a TDA or VEC Contract, a Plan
provides otherwise) withdraw all or a portion of the Participant's Account
Balance at any time prior to the Annuity Commencement Date. (See "Withdrawals"
and "The General Account.") Transfers or withdrawals from the General Account
may be restricted in the event a Participant has obtained a loan under the TDA
or VEC plan or arrangement and such loan is secured by all or a portion of the
Participant's interest in the General Account (see "Loans"). No withdrawals
are permitted after the Annuity Commencement Date. The Insurance Company may
take up to seven days following receipt of a Participant's withdrawal request
to process the request and mail a check to the Participant.
No charge is currently assessed for transfers or withdrawals made under the
Contracts. The Insurance Company reserves the right, however, to impose a
charge for transfers or withdrawals in the future. Certain withdrawals may be
subject to a tax penalty, and withdrawals of certain salary reduction
contributions and the earnings thereon from a TDA are subject to certain
restrictions (see "Withdrawals" and "Federal Tax Matters").
CANCELLATION RIGHT
An IRA or FPA Contract or a TDA Certificate may be surrendered for
cancellation within ten days after receipt. The Insurance Company will refund
all Contributions allocated to the General Account without deductions plus the
value on the date of surrender of all Contributions allocated to the Separate
Account. Several states, however, require that all Contributions be refunded
without deductions. You should consult the Contract for applicable provisions.
CONTACTING THE INSURANCE COMPANY
All written requests and notices required by the Contracts, and any questions
or inquiries, should be addressed to:
Mutual of America Life Insurance Company
Eldon Wonacott
Senior Vice President
320 Park Avenue
New York, New York 10022
or to your appropriate Regional Office. You can check the address for your
Regional Office by calling 1-800-468-3785.
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
The Insurance Company is a mutual life insurance company organized under the
laws of the State of New York. It is authorized to transact business in 50
states and the District of Columbia. The address of the Insurance Company's
home office is 320 Park Avenue, New York, New York 10022.
The Insurance Company was incorporated in 1945 as a nonprofit retirement
association to provide retirement and other benefits for non-profit
organizations and their employees in the health and welfare field. In 1978 the
Insurance Company reorganized as a mutual life insurance company. As a result
of federal tax legislation, effective January 1, 1998 the Insurance Company's
pension operations became subject to corporate income tax.
The Insurance Company provides group and individual annuities and related
services for the pension, retirement and long-range savings needs of non-
profit, social welfare, charitable, religious, educational and government
organizations and their employees. The Insurance Company invests the assets it
derives from its business in the manner permitted under applicable state law.
As of December 31, 1997, the Insurance Company had total assets, on a
consolidated basis, of approximately $9.5 billion. The Insurance Company is
registered as a broker-dealer under the Securities Exchange Act of 1934, and
also is registered as an investment adviser under the Investment Advisers Act
of 1940.
The Insurance Company's operations as a life insurance company are reviewed
periodically by various independent rating agencies such as A.M. Best &
Company, Standard and Poor's Insurance Rating Service, Moody's Investor
Services and
12
<PAGE>
Duff & Phelps Credit Rating Company. Such agencies publish their ratings. From
time to time the Insurance Company reprints and distributes these rating
reports, in whole or in part or summaries of them, to be given to the public.
The ratings concern the Insurance Company's operation as a life insurance
company and do not imply any guarantees of performance of the Separate
Account.
THE SEPARATE ACCOUNT
The Separate Account was established pursuant to a resolution adopted by the
Board of Directors of the Insurance Company on September 22, 1983. The
Separate Account is registered with the Securities and Exchange Commission
("Commission") as a unit investment trust under the Investment Company Act of
1940 ("1940 Act"). Registration with the Commission does not involve
supervision of management or investment practices or policies of the Separate
Account or the Insurance Company by the Commission.
The Separate Account is divided into sixteen distinct Funds corresponding to
the funds, portfolios or series of the Portfolio Companies in which the assets
in such Funds are invested. The assets of the Separate Account are the
property of the Insurance Company. The Separate Account assets attributable to
the Contracts and to other annuity contracts funded by the Separate Account
are not chargeable with liabilities arising out of any other business the
Insurance Company may conduct. The income, capital gains and capital losses of
each Fund of the Separate Account are credited to or charged against the net
assets held in that Fund, without regard to the income, capital gains and
capital losses arising out of the business conducted by any of the other Funds
of the Separate Account or out of any other business that the Insurance
Company may conduct.
The Insurance Company does not guarantee the investment performance of the
Separate Account as a whole, or any of the Funds. The amount credited to a
Participant in the Separate Account, and thus the amount available to provide
annuity benefits, will depend upon the value of the assets held in the Fund(s)
of the Separate Account selected by the Participant. Accordingly, the
Participant bears the full investment risk for all amounts allocated to the
Separate Account.
The Separate Account and the Insurance Company are subject to supervision and
regulation by the Superintendent of Insurance of the State of New York, and by
the insurance regulatory authorities of each State in which it is licensed to
do business.
INVESTMENTS OF THE SEPARATE ACCOUNT
Contributions will be allocated among one or more Funds of the Separate
Account for investment at net asset value in shares of the Funds of the
Investment Company, the Fidelity Portfolios, the Scudder Portfolios, the
American Century VP Capital Appreciation Fund, or the Calvert Social Balanced
Portfolio, selected by the Participant. A summary of investment objectives of
the Portfolio Companies invested in by the Funds of the Separate Account
follows. More detailed information, including risks, charges and expenses, may
be found in the current prospectuses for Mutual of America Investment
Corporation, the Fidelity Portfolios, Scudder Variable Life Investment Fund,
American Century VP Capital Appreciation Fund and the Calvert Social Balanced
Portfolio, which are attached to this Prospectus. Each applicable prospectus
should be read for a complete evaluation of the Investment Alternatives.
Shares of the Portfolio Companies are sold to the separate accounts of
insurance companies and are not offered for sale to the general public.
Investments in the Money Market Fund and in the other Portfolio Companies are
neither insured nor guaranteed by the U.S. Government.
MONEY MARKET FUND OF THE INVESTMENT COMPANY
The investment objective of the Money Market Fund is the realization of high
current income to the extent consistent with the maintenance of liquidity,
investment quality and stability of capital. The Money Market Fund invests
only in money market instruments and other short-term debt securities.
ALL AMERICA FUND OF THE INVESTMENT COMPANY
The investment objective of the All America Fund is to outperform the S&P 500
Index. The objective for approximately 60% of the assets of the All America
Fund (the "Indexed Assets") is to provide investment results that to the
extent practical correspond to the price and yield performance of publicly
traded common stocks in the aggregate, as represented by the S&P 500 Index.
The Indexed Assets will be invested in the same manner as the Equity Index
Fund.
The investment objective for the remaining approximately 40% of the assets
(the "Active Assets") is to achieve a high level of total return, through both
appreciation of capital and, to a lesser extent, current income, by means of a
diversified portfolio of securities that may include common stocks, securities
convertible into common stocks, bonds and money market instruments. The Active
Assets are invested by three subadvisers and Mutual of America Capital
Management Corporation
13
<PAGE>
(the "Adviser"). The Adviser allocates the Active Assets to maintain, to the
extent practicable under current market conditions, approximately equal
amounts among the subadvisers and the Adviser. See "Charges--Portfolio Company
Expenses".
EQUITY INDEX FUND OF THE INVESTMENT COMPANY
The investment objective of the Equity Index Fund is to provide investment
results to the extent practical that correspond to the price and yield
performance of publicly traded common stocks in the aggregate, as represented
by the S&P 500 Index.
BOND FUND OF THE INVESTMENT COMPANY
The primary investment objective of the Bond Fund is to provide as high a
level of current income over time as is believed to be consistent with prudent
investment risk. A secondary objective is preservation of capital. The assets
of the Bond Fund will consist primarily of publicly-traded debt securities,
such as bonds, notes, debentures and equipment trust certificates. The Bond
Fund generally will invest primarily in securities rated in the four highest
categories by a nationally recognized rating service or in instruments of
comparable quality. The Bond Fund may also invest to a limited extent in
lower-rated or unrated securities, and these may be subject to greater market
and financial risk than higher quality (lower yield) issues.
SHORT-TERM BOND FUND OF THE INVESTMENT COMPANY
The primary investment objective of the Short-Term Bond Fund is to provide as
high a level of current income over time as is believed to be consistent with
prudent investment risk. A secondary objective is preservation of capital. The
assets of the Short-Term Bond Fund will consist primarily of publicly-traded
debt securities, such as bonds, notes, debentures and equipment trust
certificates which will produce a portfolio with an average maturity of one to
three years. The Short-Term Bond Fund generally will invest primarily in
securities rated in the four highest categories by a nationally recognized
rating service or in instruments of comparable quality. The Short-Term Bond
Fund may also invest to a limited extent in lower-rated or unrated securities,
and these may be subject to greater market and financial risk than higher
quality (lower yield) issues.
MID-TERM BOND FUND OF THE INVESTMENT COMPANY
The primary investment objective of the Mid-Term Bond Fund is to provide as
high a level of current income over time as is believed to be consistent with
prudent investment risk. A secondary objective is preservation of capital. The
assets of the Mid-Term Bond Fund will consist primarily of publicly-traded
debt securities, such as bonds, notes, debentures and equipment trust
certificates which will produce a portfolio with an average maturity of three
to seven years. The Mid-Term Bond Fund generally will invest primarily in
securities rated in the four highest categories by a nationally recognized
rating service or in instruments of comparable quality. The Mid-Term Bond Fund
may also invest to a limited extent in lower-rated or unrated securities, and
these may be subject to greater market and financial risk than higher quality
(lower yield) issues.
COMPOSITE FUND OF THE INVESTMENT COMPANY
The investment objective of the Composite Fund is to achieve as high a total
rate of return, through both appreciation of capital and current income, as is
consistent with prudent investment risk by means of a diversified portfolio of
publicly-traded common stocks, publicly-traded debt securities and money
market instruments. The Fund will seek to achieve long-term growth of its
capital and increasing income by investments in common stock and other equity-
type securities, and a high level of current income through investments in
publicly-traded debt securities and money market instruments.
AGGRESSIVE EQUITY FUND OF THE INVESTMENT COMPANY
The Aggressive Equity Fund will be divided by the Adviser into two segments so
as to utilize two investment styles.
The investment objective for approximately 50% of the assets of the Fund (the
"Aggressive Growth Portfolio") is to achieve capital appreciation by investing
in companies believed to possess above-average growth potential. Growth can be
in the areas of earnings or gross sales which can be measured in either
dollars or in unit volume. Growth potential is often sought in smaller, less
well-known companies in new and emerging areas of the economy, but may also be
found in large companies in mature or declining industries that have been
revitalized and hold a strong industry or market position. See "Charges--
Portfolio Company Expenses".
The investment objective for the other approximately 50% of the assets of the
Fund (the "Aggressive Value Portfolio") is to achieve capital appreciation by
investing in companies believed to possess valuable assets or whose securities
are undervalued in the marketplace in relation to factors such as the
company's assets, earnings, or growth potential.
14
<PAGE>
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Equity-Income Portfolio seeks reasonable income by investing primarily in
income-producing equity securities. In choosing these securities, the
Portfolio will also consider the potential for capital appreciation. The
Portfolio's goal is to achieve a yield which exceeds the composite yield on
the securities comprising the S&P 500 Index.
FIDELITY VIP II CONTRAFUND PORTFOLIO
Contrafund Portfolio is a growth fund. It seeks to increase the value of an
investment in the Portfolio over the long-term by investing mainly in
securities of companies that are undervalued or out-of-favor. These securities
may be issued by domestic or foreign companies and many may not be well known.
The Portfolio usually invests primarily in common stock and securities
convertible into common stock, but it has the flexibility to invest in any
type of security that may produce capital appreciation.
FIDELITY VIP II ASSET MANAGER PORTFOLIO
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. The Portfolio's adviser will normally
allocate the Portfolio's assets among the three asset classes within the
following investment parameters: 0-50% in short-term/money market instruments;
20-60% in bonds; and 30-70% in stocks. The expected "neutral mix", which the
Portfolio's adviser would expect over the long-term, is 10% in short-
term/money market instruments, 40% in bonds and 50% in stocks.
SCUDDER CAPITAL GROWTH PORTFOLIO
The Scudder Capital Growth Portfolio seeks to maximize long-term capital
growth through a broad and flexible investment program. The Portfolio invests
in marketable securities, principally common stocks and, consistent with its
objective of long-term capital growth, preferred stocks. However, in order to
reduce risk, as market or economic conditions periodically warrant, the
Portfolio may also invest up to 25% of its assets in short-term debt
instruments. It is impossible to accurately predict how long such alternate
strategies may be utilized.
SCUDDER BOND PORTFOLIO
The Scudder Bond Portfolio pursues a policy of investing for a high level of
income consistent with a high quality portfolio of debt securities. Under
normal circumstances, the Portfolio invests at least 65% of its assets in
bonds, including those of the U.S. Government and its agencies, and those of
corporations and other notes and bonds paying high current income. Under
normal market conditions, the Portfolio will invest at least 65% of its assets
in securities rated within the three highest quality rating categories of
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation
("S&P"), or if unrated, in bonds judged by the Portfolio's adviser to be of
comparable quality at the time of purchase. The Portfolio may invest up to 20%
of its assets in debt securities rated lower than Baa or BBB or, if unrated,
of equivalent quality as determined by the Portfolio's adviser, but will not
purchase bonds rated below B3 by Moody's or B- by S&P or their equivalent.
SCUDDER INTERNATIONAL PORTFOLIO
The Scudder International Portfolio seeks long-term growth of capital
primarily through diversified holdings of marketable foreign equity
investments. The Portfolio invests primarily in equity securities of
established companies which do business primarily outside the United States
and which are listed on foreign exchanges. Investing in foreign securities may
involve a greater degree of risk than investing in domestic securities. The
Portfolio has no present intention of altering its general policy of being
primarily invested under normal conditions in foreign securities. However, in
the event of exceptional conditions abroad, the Portfolio may temporarily
invest all or a portion of its assets in Canadian or U.S. Government
obligations or currencies, or securities of companies incorporated in and
having their principal activities in Canada or the United States. It is
impossible to accurately predict how long such alternate strategies may be
utilized.
AMERICAN CENTURY VP CAPITAL APPRECIATION FUND
The American Century VP Capital Appreciation Fund seeks capital growth by
investing primarily in common stocks (including securities convertible into
common stock) and other securities that meet certain fundamental and technical
standards of selection and have, in the opinion of the Fund's manager, better-
than-average prospects for appreciation. It may purchase securities only of
companies that have a record of at least three years' continuous operation.
All securities must be listed on major stock exchanges or traded over-the-
counter. Prior to May 1, 1997, this Fund was known as the TCI Growth Fund.
CALVERT SOCIAL BALANCED PORTFOLIO
Calvert Social Balanced Portfolio seeks to achieve a total return above the
rate of inflation through an actively managed non-diversified portfolio of
common and preferred stocks, bonds and money market instruments which offer
income and capital growth opportunity and which satisfy the social concern
criteria established for the Portfolio. This Fund was called the Calvert
Responsibly Invested Balanced Portfolio prior to January 1, 1998.
15
<PAGE>
SHARED FUND ARRANGEMENTS
Shares of the Fidelity Portfolios, the Scudder Portfolios, the American
Century VP Capital Appreciation Fund and the Calvert Social Balanced Portfolio
(together, the "Shared Funds") currently are available to the separate
accounts of a number of insurance companies. The Board of Directors of each
Shared Fund is responsible for monitoring that Fund for the existence of any
material irreconcilable conflict between the interests of the policyowners of
all separate accounts investing in the Fund and determining what action, if
any, should be taken in response. If the Insurance Company believes that a
Shared Fund's response to any of those events insufficiently protects
Contractholders, it will take appropriate action. If any material
irreconcilable conflict arises, the Investment Alternatives may be modified or
reduced. See "Charter-- FMR and its Affiliates" in the Fidelity Portfolios
prospectus, "Investment Concept of the Fund" in the Scudder Variable Life
Investment Fund prospectus, "Shareholders of American Century Variable
Portfolios, Inc." in the American Century VP Capital Appreciation Fund
prospectus and "Purchase and Redemption of Shares" in the Calvert Social
Balanced Portfolio prospectus for a further discussion of the risks associated
with the offering of Shared Fund shares to the Separate Account and the
separate accounts of other insurance companies.
CHARGES
The value of Accumulation Units reflects a deduction on each Valuation Day for
administrative and distribution expenses, and the mortality and expense risk
assumed by the Insurance Company. The following charges will be deducted on a
daily basis (based on annual rates) in determining the Accumulation Unit value
for each of the Funds of the Separate Account.
ADMINISTRATIVE CHARGES
The Insurance Company performs all administrative functions in connection with
the Contracts, including receiving and allocating Contributions in accordance
with the Contracts, making Annuity Payments as they become due, and preparing
and filing all reports required to be filed by the Separate Account. Expenses
incurred by the Insurance Company in connection with its administrative
functions include, but are not limited to, items such as state or other taxes,
salaries, rent, postage, telephone, travel, office equipment, costs of outside
legal, actuarial, accounting and other outside professional services, and
costs associated with determining the net asset value of the Separate Account.
The Insurance Company will make a deduction each Valuation Day from the value
of the net assets in each Fund of the Separate Account for administrative
expenses (the provisions of the Contracts include the amount of this charge
with the Distribution Expense Charge, described below) at an annual rate of
.40%, except that in the case of the Fund of the Separate Account which
invests in the American Century VP Capital Appreciation Fund, the annual rate
shall be .20% (the Fund's investment adviser reimburses the Insurance Company
at an additional annual rate of up to .20% for administrative expenses) and in
the case of the Funds that invest in the Fidelity Portfolios, the annual rate
shall be approximately .30% (the transfer agent and distributor for the
Fidelity Portfolios reimburse the Insurance Company at an aggregate annual
rate of .10%, paid quarterly in arrears, for administrative expenses). An
additional deduction for administrative expenses of $2.00 will be made on the
next to last Valuation Day of the month, or on another Valuation Day on or
about that time that is administratively convenient, from each Participant's
Account except that such charge shall not exceed 1/12 of 1% of the Account
Value in any month. Such amount will be deducted from the net assets, if any,
in the Participant's Account which have been allocated to the General Account.
If no net assets have been allocated to such Account, such amount will be
deducted from the net assets which have been allocated to one or more Funds of
the Separate Account in the following order: (a) Investment Company Money
Market Fund, (b) Investment Company Short-Term Bond Fund, (c) Investment
Company Mid-Term Bond Fund, (d) Investment Company Bond Fund, (e) Scudder Bond
Fund, (f) Investment Company Composite Fund, (g) Fidelity VIP II Asset Manager
Fund, (h) Calvert Social Balanced Fund, (i) Fidelity VIP Equity-Income Fund,
(j) Investment Company All America Fund, (k) Investment Company Equity Index
Fund, (l) Fidelity VIP II Contra Fund, (m) Investment Company Aggressive
Equity Fund, (n) Scudder Capital Growth Fund, (o) Scudder International Fund,
and (p) American Century VP Capital Appreciation Fund. The Employer may elect
to pay the additional amount in which case there would be no deduction from a
Participant's Account. THE INSURANCE COMPANY MAY INCREASE OR DECREASE THESE
DAILY AND MONTHLY CHARGES DURING THE LIFE OF THE CONTRACT, BUT THESE CHARGES
MAY NOT EXCEED COSTS.
DISTRIBUTION EXPENSE CHARGE
As principal underwriter, the Insurance Company performs all distribution and
sales functions and bears all distribution and sales expenses relative to the
Contracts. These expenses include the payment of that portion of the salaries
of registered representatives of the Insurance Company attributable to the
sale and distribution of Contracts, as well as expenses for preparation of
sales literature and other promotional activities.
16
<PAGE>
The Insurance Company will make a deduction each Valuation Day from the value
of the net assets in each Fund of the Separate Account at an annual rate of
.35% to cover anticipated distribution expenses, not to exceed, with respect
to any Participant, 9% of the total Contributions.
MORTALITY AND EXPENSE RISK CHARGE
The Insurance Company assumes certain mortality and expense risks under the
Contracts. The mortality risks arise from the Insurance Company's guarantees
in the Contracts to make Annuity Payments in certain instances in accordance
with annuity tables provided in the Contracts, regardless of how long a
Participant lives and regardless of any improvement in life expectancy
generally. Thus, the Insurance Company assumes the risk that Participants, as
a class, may live longer than has been actuarially estimated, so that payments
will continue for longer than had been anticipated. This assumption of risk by
the Insurance Company relieves Participants of the risk that they will outlive
the funds that have been accumulated for their retirement.
For assuming the mortality risks associated with the Contracts, the Insurance
Company will, each Valuation Day, make a deduction at an annual rate of .35%
of the value of the net assets in each Fund. This charge will apply with
respect to a Participant during the Accumulation Period. The Insurance Company
guarantees that the mortality risk charge will not increase during the life of
a Contract.
The Insurance Company assumes certain expense risks under the Contracts. The
expense risks arise from the Insurance Company's guarantees in the Contracts
to make Annuity Payments in certain instances in accordance with annuity
tables provided in the Contracts, regardless of whether its estimates of
expenses it expects to incur, over the lengthy period that Annuity payments
may be made will turn out to be correct. Thus, the Insurance Company assumes
the risk that expenses will be higher than estimated.
For assuming the expense risks associated with the Contracts, the Insurance
Company will, each Valuation Day, make a deduction at an annual rate of .15%
of the value of the net assets in each Fund. This charge will apply with
respect to a Participant during the Accumulation Period.
PORTFOLIO COMPANY EXPENSES
The value of the assets in the Separate Account will reflect the value of the
shares of the Portfolio Companies in which such assets are invested, and
therefore will take into account the fees and expenses paid by the Investment
Company, Fidelity Portfolios, Scudder Portfolios, American Century VP Capital
Appreciation Fund or Calvert Social Balanced Portfolio, as the case may be.
Each Fund of the Investment Company receives investment advice from Mutual of
America Capital Management Corporation (the "Adviser"), an indirect wholly-
owned subsidiary of the Insurance Company. The Adviser receives from each such
Fund a fee calculated as a daily charge at the annual rate of .25% of the
value of the net assets in the Money Market Fund; .125% of the value of the
net assets in the Equity Index Fund; .50% of the value of the net assets in
the All America, Bond, Short-Term Bond, Mid-Term Bond and Composite Funds; and
.85% of the value of the net assets in the Aggressive Equity Fund of the
Investment Company. For 1997, the Adviser paid all of the expenses of the
Investment Company Funds other than advisory fees, brokers' commissions,
transfer taxes and other fees relating to portfolio transactions. The Adviser
limits the Investment Company Funds' expenses in this manner. See "The Funds'
Expenses" in the Investment Company prospectus.
The Adviser, with respect to three-quarters of the Active Assets of the All
America Fund, has entered into subadvisory agreements (each a "Subadvisory
Agreement") with three professional advisers: Palley-Needelman Asset
Management, Inc. ("Palley-Needelman"); Oak Associates, Ltd. ("Oak Associates")
and Fred Alger Management, Inc. ("Alger Management"). The Adviser at its own
expense will pay to the Subadvisers an amount calculated as a daily charge at
the following annual rates: Palley-Needelman, .30%; Oak Associates, .30%; and
Alger Management, .45%; of the value of the net assets for which each
Subadviser is providing investment advisory services.
Fidelity VIP Equity-Income Portfolio, Fidelity VIP II Contrafund Portfolio and
Fidelity VIP II Asset Manager Portfolio receive investment advice from
Fidelity Management & Research Company ("FMR"). FMR receives from each
Portfolio a fee, calculated as a daily charge and payable monthly, that is a
sum of two components multiplied by average net assets. The components are a
group fee rate based on the monthly average net assets of all the mutual funds
advised by FMR, which cannot exceed .52% and declines as assets rise, and an
individual fund fee rate. The effective group fee rate as of December 31, 1997
was .30%, and the individual fund fee rates for the Equity-Income, Contrafund
and Asset Manager of Portfolios are .20%, .30% and .25%, respectively. In the
case of the Funds that invest in the Fidelity Portfolios, the annual rate
charged for administration services is approximately .30%. Fidelity
Investments Institutional Operations Company, Inc.,
17
<PAGE>
the transfer agent for the Fidelity Portfolios, reimburses the Insurance
Company at an annual rate of .04%, and Fidelity Distributors Corporation,
directly or through Fidelity Management & Research Company, pays compensation
for distribution expenses at an annual rate of .06%, each quarterly in
arrears. The reimbursement at the rate of .04% is limited to a maximum for any
calendar quarter of $1,000,000 payable to the Insurance Company and its
wholly-owned subsidiary, The American Life Insurance Company of New York
("American Life"). The quarterly reimbursement at the rate of .06% will be
made so long as the aggregate amount of the investment by the separate
accounts of the Insurance Company and American Life in the Fidelity Portfolios
during the quarter equals at least $100 million in average net assets. The
Insurance Company will reduce the administrative charge for the Separate
Account Funds that invest in the Fidelity Portfolios to the extent the
Insurance Company receives a reimbursement for expenses for such Funds.
Each Scudder Portfolio receives investment advice from Scudder, Kemper
Investments, Inc., and Scudder, Kemper Investments, Inc. receives from each
such Scudder Portfolio a fee calculated as a daily charge at the annual rate
of .475% of the average net assets in the Scudder Bond Portfolio, .475% of
average net assets for the first $500,000,000 and .450% for over $500,000,000
in the Scudder Capital Growth Portfolio, and .875% of the average net assets
in the Scudder International Portfolio for the first $500,000,000 and .725%
for over $500,000,000. Also, there may be deducted from each Scudder Portfolio
up to an additional .275% of the value of the assets in the Scudder Capital
Growth Portfolio and the Scudder Bond Portfolio, and up to .625% of the value
of the assets in the Scudder International Portfolio, for expenses incurred by
such Portfolio. Pursuant to a Participation Agreement between Scudder and the
Insurance Company, the Insurance Company will make a capital contribution to
the Scudder Portfolios in the amount of its pro rata portion, allocated among
insurance companies that purchase shares of the portfolios, of the expenses of
the Capital Growth and Bond Portfolios which exceed .75% of their average net
assets, and, for the International Portfolio, which exceed 1.5% of its average
net assets.
The American Century VP Capital Appreciation Fund receives investment advice
from American Century Investment Management, Inc., and American Century
Investment Management, Inc. receives from the American Century VP Capital
Appreciation Fund a fee calculated as a daily charge at the annual rate of
1.00% of the assets of the American Century VP Capital Appreciation Fund. Many
investment companies pay smaller management fees than the aforesaid fee paid
by the American Century VP Capital Appreciation Fund to American Century
Investment Management, Inc. However, American Century Variable Portfolios,
Inc. has stated in the prospectus for the American Century VP Capital
Appreciation Fund, which is attached to this Prospectus, that most, if not
all, of such companies also pay, in addition, certain of their own expenses,
while all American Century VP Capital Appreciation Fund's expenses except
brokerage, taxes, interest, fees and expenses of non-interested directors
(including counsel fees) and extraordinary expenses are paid by American
Century Investment Management, Inc.
Pursuant to the Fund Participation Agreement among the Insurance Company,
American Century Variable Portfolios, Inc. and American Century Investment
Management, Inc., American Century Investment Management, Inc. pays the
Insurance Company for certain administrative savings resulting from that
agreement. Currently, that payment is an amount equal to .20% per annum of the
average amount of the Separate Account's investment in American Century VP
Capital Appreciation Fund, provided the aggregate amount of the Separate
Account's investment and the investments of other separate accounts of the
Insurance Company in the American Century VP Capital Appreciation Fund for
that month exceeds $10 million. The administrative fees assessed against the
Separate Account Fund holding shares of American Century VP Capital
Appreciation Fund are reduced by the full amount of such payments to the
Insurance Company.
Calvert Social Balanced Portfolio receives investment advice from Calvert
Asset Management Company, Inc., and NCM Capital Management Group, Inc. is the
Sub-Advisor for the equity portion of the Portfolio. Calvert Asset Management
Company, Inc. receives from Calvert Social Balanced Portfolio a monthly base
fee, computed on a daily basis at an annual rate of 0.70% (subject to
adjustment as described below) of average net assets of the Portfolio. Calvert
Asset Management Company, Inc. pays, at its own expense, the fee of the Sub-
Advisor. Calvert Asset Management Company, Inc. and the Sub-Advisor may earn
(or have their fees reduced by) performance fee adjustments based on the
extent to which the Portfolio exceeds or trails the Lipper Balanced Funds
Index. The performance adjustment could cause the annual rate to be as high as
.85% or as low as .55% of average net assets.
A complete description of the fees and expenses paid by the Investment Company
Funds, the Fidelity Portfolios, the Scudder Portfolios, the American Century
VP Capital Appreciation Fund and Calvert Social Balanced Portfolio is found in
their respective prospectuses attached to this Prospectus.
18
<PAGE>
THE GROUP AND INDIVIDUAL ANNUITY CONTRACTS
GENERAL
TDA and VEC Contracts. TDA and VEC Contracts are issued by the Insurance
Company to Contractholders seeking a funding vehicle for group annuity
purchase plans. Any employee of an employer which has adopted a Plan funded by
a TDA Contract is eligible to become a Participant under the Contract, as of
the effective date of the Contract or the first day of any calendar month
thereafter, by making an application to the Insurance Company on its
prescribed form. As a result of the Tax Reform Act of 1986, the Insurance
Company has amended its VEC Contracts so that no Contributions on or after
January 1, 1987 may be made. The VEC Contract may be continued for existing
accounts and may be used to accept transfers from other plans or carriers.
IRA Contract. IRA Contracts are issued to eligible individuals who complete
the prescribed application, make an initial Contribution of an amount
specified by the Insurance Company from time to time, and are accepted for
participation by the Insurance Company. The contribution requirement will be
waived for IRA contracts issued in connection with a SEP. Employees of
organizations qualifying for tax-exempt status under the Code, and their
spouses, are eligible to apply for an IRA Contract. To purchase a Roth IRA, an
individual must be eligible under the applicable federal adjusted gross income
limit. To purchase an IRA issued in connection with a SEP or SIMPLE, an
individual must be eligible to participate in a SEP or SIMPLE adopted by the
individual's employer.
FPA Contract. FPA Contracts are issued, upon completion of the prescribed
application and payment of an initial Contribution of an amount specified by
the Insurance Company from time to time, to individuals, their spouses and
certain family members now or formerly affiliated with organizations that are
tax-exempt under the Code. The Contract may also be issued to such a tax-
exempt organization itself, which may use the Contract to accumulate funds for
subsequent payment of deferred compensation obligations of the organization.
The person to whom an FPA Contract is issued, whether or not such person is
the Annuitant, will be the owner of the Contract, and will possess all the
rights thereunder. (For example, the employer to whom an FPA Contract is
issued for deferred compensation purposes is the owner of the Contract, and
entitled to all payments thereunder.)
Cancellation of Contract. A TDA Certificate, IRA Contract or FPA Contract may
be surrendered for cancellation within ten days after receipt. The Insurance
Company will refund all Contributions allocated to the General Account without
deductions plus the value on the date of surrender of all Contributions
allocated to the Separate Account. Several states, however, require that all
Contributions be refunded without deductions. You should consult the Contract
for applicable provisions.
PAYMENT OF CONTRIBUTIONS
TDA Contracts. Contributions ordinarily are made, as elected by Participants,
pursuant to salary reduction arrangements. However, a single sum transfer from
another group annuity contract funded by the Insurance Company, or from any
tax-deferred annuity plan maintained under Section 403(b) of the Code or
certain custodial accounts maintained under Section 403(b)(7) of the Code
generally will also be acceptable on behalf of a Participant.
The amount of any Contributions with respect to a Participant may not be less
than $200 on an annual basis nor greater than any amount permitted under
applicable state or Federal law (see "Federal Tax Matters"). No further
Contributions may be made on behalf of a Participant who has terminated
participation under the Contract nor by a Participant under a TDA Contract
that has been discontinued.
VEC Contracts. A Contractholder can remit to the Insurance Company on behalf
of a Participant, in a single sum, an amount that arises from a transfer from
another voluntary employee contribution plan, or from a contract between a
Contractholder and the Insurance Company, or between the Contractholder and
another insurance company. Contributions may not be made on behalf of a
Participant under a VEC Contract on and after January 1, 1987.
IRA Contracts. For Regular IRA, Roth IRA and SEP IRA Contracts, a Participant
may make Contributions directly to the Insurance Company. Under a Regular IRA
Contract, a Participant also may make Contributions under a payroll deduction
agreement between the Participant and the Participant's employer, in which
case the employer forwards to the Insurance Company on behalf of the
Participant the amounts deducted from the Participant's salary. For a SIMPLE
IRA Contract, a Participant may make Contributions only by salary reduction
under the SIMPLE adopted by the Participant's employer.
The maximum amount of a Participant's total Contributions (excluding
rollovers) under a Regular IRA, SEP IRA and Roth IRA Contract during a
Participant's tax year cannot be greater than $2,000 (or 100% of compensation
if less). A single individual with adjusted gross income of $95,000 or less,
and a married individual who files a joint tax return with adjusted
gross income of $150,000 or less, may contribute up to $2,000 to a Roth IRA.
The $2,000 Roth IRA contribution limit
19
<PAGE>
phases out between adjusted gross income of $95,000 and $110,000 for a single
individual and $150,000 and $160,000 for a married individual filing a joint
return. State income tax provisions may vary from the federal rules. See
"Federal Tax Matters--Obtaining Tax Advice."
A Participant may make Contributions to a SIMPLE IRA of up to $6,000 per year
(or 100% of compensation if less). The $6,000 limit will be adjusted for cost-
of-living increases in the future. If an individual has more than one
employer, the maximum amount that an employee may contribute under a SIMPLE
IRA and other salary reduction arrangements in any year is $10,000 for 1998
(to be adjusted for cost-of-living increases in the future). The employee's
contributions are made through a salary reduction agreement with the employer
that the employee may terminate at any time.
Employer contributions are limited by the Code for both SEP IRAs and SIMPLE
IRAs. Under a SEP, an employer can contribute to the employee's SEP IRA an
amount up to 15% of the employee's compensation (with compensation limited to
$160,000), but not more than $30,000. These limits may be reduced, however, by
contributions that the employer makes to other tax-qualified plans for the
Participant. Under a SIMPLE, an employer generally must match an employee's
contribution in an amount equal to 3% of the employee's compensation, but the
employer may lower the percentage to as low as 1% for two years out of a five
year period. Instead of making a matching Contribution, the employer may make
a "nonelective contribution" to each SIMPLE IRA under the plan. The amount of
the nonelective contribution is equal to 2% of compensation for each eligible
employee, whether or not the employee has made Contributions during the year.
The maximum amount of compensation considered for each employee in this
calculation is $160,000 for 1998 (to be adjusted for cost-of-living increases
in the future). An employer must notify its employees of an election to reduce
the percentage of the employer's matching Contributions or to make a
nonelective contribution instead of matching contributions for the coming
year.
A Participant may not make any Contributions to a Regular IRA or SEP IRA
Contract beginning in the tax year the Participant reaches age 70 1/2, but a
Policyowner at any age may make Contributions to a Roth IRA, provided the
Policyowner has earned income and is eligible based on his or her adjusted
gross income. An individual may purchase an IRA Contract, or a Participant may
use an existing IRA Contract, to receive "roll over" Contributions from
certain other plans, as described below, even after age 70 1/2. In addition,
an employer may make contributions for its employee under a SEP IRA or a
SIMPLE IRA, and an employee may contribute to a SIMPLE IRA, after the employee
has attained age 70 1/2.
A Participant may make Contributions to an IRA Contract (other than a SIMPLE
IRA) by "roll over" from certain other pension or retirement arrangements that
qualify for favorable tax treatment under the Code. Generally, amounts that a
Participant rolls over will not be subject to the limitations on the amount of
Contributions during a tax year, except for the portion that represents
Contributions made for the same tax year as the roll-over. Qualified plans and
arrangements include other IRA contracts, SEP IRAs and SIMPLE IRAs, tax-
sheltered annuities under Code Section 403(b), and pension and profit-sharing
plans, including 401(k) plans, under Code Section 401(a). Not all
distributions from these plans and arrangements may be rolled over to an IRA
Contract, and the tax implications of rolling over distributions may vary
depending on federal tax rules that apply to the plan or arrangement. See
"Obtaining Tax Advice". An individual can roll over a Regular IRA to a Roth
IRA Contract, provided the individual's adjusted gross income is $100,000 or
less. Distributions from an employer-sponsored plan may not be transferred
directly to a Roth IRA, but such distributions can be rolled over first to a
Regular IRA and subsequently to a Roth IRA. Amounts rolled over from a Regular
IRA to a Roth IRA are includable in the Policyowner's income (excluding
"after-tax" Contributions), but there is no early withdrawal penalty applied
to the taxable amount. If a Policyowner converts a Regular IRA to a Roth IRA
during 1998, the Policyowner may include one-fourth of the resulting taxable
income in each of the 1998, 1999, 2000 and 2001 tax years for federal income
tax purposes. For purposes of qualifying for tax-free distributions from a
Roth IRA, the Policyowner is subject to a separate five-year holding period
for amounts attributable in any year to conversion to a Roth IRA. Individuals
considering converting a Regular IRA to a Roth IRA should consider various
issues, including state and local tax consequences. See "Federal Tax Matters--
Obtaining Tax Advice." A Participant may roll over amounts to a SIMPLE IRA
only from another SIMPLE IRA.
FPA Contract. Contributions are made by a Participant directly to the
Insurance Company or by the Participant's employer under a salary deduction
agreement, at whatever intervals and in whatever amounts are desired, except
that the amount of any Contribution may not be less than the minimum set by
the Insurance Company, currently $10. If prior to the Annuity Commencement
Date no Contributions are made by a Participant for three consecutive years,
the Participant's Account Balance is less than $500, and the Participant has
attained age 59 1/2, the Insurance Company may, in its sole discretion, return
the Participant's Account Balance and terminate the Contract.
Acceptance of Initial Contributions. If an initial Contribution is received
together with a completed application and other necessary information, it will
be accepted within two business days of receipt. If the application is not
duly completed, the Insurance Company will retain the Contribution for up to
five business days while attempting to obtain the information necessary to
complete the application; the Contribution will then be accepted within two
business days of receipt of the
20
<PAGE>
completed application. If a completed application is not received within five
business days, however, the Insurance Company will return the Contribution at
the end of that period, unless the individual applicant (under an FPA or IRA
Contract where Contributions are remitted directly by the Participant),
Contractholder (under TDA or VEC Contracts), or employer (under an IRA
Contract where Contributions are remitted by the Participant's employer)
consents to the Insurance Company holding the Contribution until additional
information is provided.
Limitation on Deferrals. FPA Contracts used as a depository for employee
deferred compensation obligations in connection with such obligations which
come into existence after August 16, 1986 and which are not "eligible"
deferred compensation plans as defined in Section 457(b) of the Code, are
subject to the provisions of Section 457(f), including substantial risk of
forfeiture.
ALLOCATIONS OF CONTRIBUTIONS
Contributions under the Contract may be allocated in whole or in part among
the General Account and the sixteen Funds of the Separate Account.
Contributions will be allocated on the basis of a request made to the
Insurance Company and currently on file at its home office (see "General
Matters--Contacting the Insurance Company"). A Participant's request for
allocation will specify the percentage, in any whole percentage from 0% to
100%, of each Contribution to be allocated to each of the Investment
Alternatives. The request for allocation of Contributions among the Investment
Alternatives may be changed from time to time, and amounts may be transferred
among those alternatives. A Participant should make periodic reviews of all
allocations in light of market conditions, the Participant's retirement plans,
and overall estate planning requirements.
ACCUMULATION UNITS
Contributions under the Contracts, other than initial Contributions, which are
allocated to the Separate Account on behalf of a Participant, will be credited
to an individual accumulation account maintained for such Participant with
respect to each of the chosen Funds of the Separate Account in the form of the
Accumulation Units as of the Valuation Period during which the Contributions
are received by the Insurance Company. The number of Accumulation Units in a
Fund of the Separate Account credited to the account of a Participant is
determined by dividing the amount allocated to that Fund of the Separate
Account on behalf of such Participant by the Accumulation Unit value for that
Fund of the Separate Account for the Valuation Period during which the
Contribution is received. The value of the Accumulation Units of each Fund of
the Separate Account will vary with the investment experience of that Fund.
The number of Accumulation Units in a Participant's individual account will
fluctuate in accordance with amounts allocated to or withdrawn from the Funds
of the Separate Account. The net change in Accumulation Units is determined by
adjusting the number of Accumulation Units in the Funds of the Separate
Account as of the end of the previous Valuation Period by adding or deducting
Accumulation Units with respect to Contributions made to or amounts withdrawn
from the respective Funds of the Separate Account during that Valuation
Period. The number of Accumulation Units to be so added or deducted is the
number obtained by dividing the amounts so allocated or withdrawn by the
Accumulation Unit value for that Valuation Period.
The Accumulation Units in each Fund of the Separate Account are valued
separately. The value of an Accumulation Unit in each Fund of the Separate
Account corresponding to a Fund of the Investment Company originally was set
arbitrarily at one dollar. The value of an Accumulation Unit in the Fund of
the Separate Account corresponding to one of the Fidelity Portfolios, Scudder
Portfolios, American Century VP Capital Appreciation Fund or Calvert Social
Balanced Portfolio originally was established by deducting expenses of the
Separate Account applicable to that portfolio or fund from the applicable unit
value established by the respective Portfolio Company portfolio or fund or
series as of the end of the last Valuation Day immediately preceding the day
when the first investment was made by the Separate Account in the Portfolio
Company portfolio or fund. For any Valuation Period, the value of an
Accumulation Unit in a Fund of the Separate Account is the amount obtained by
multiplying the value of an Accumulation Unit in that Fund as of the preceding
Valuation Period, by that Fund's Accumulation Unit Change Factor (described
below) for that Valuation Period. The dollar value of an Accumulation Unit in
each Fund of the Separate Account, therefore, will vary from Valuation Period
to Valuation Period, depending on the investment experience of the Fund.
The Accumulation Unit Change Factor for each Fund of the Separate Account for
any Valuation Period is determined as:
(a) the ratio of (i) the asset value of that Fund at the end of the current
Valuation Period, before any amounts are allocated to or withdrawn from the
Fund with respect to that Valuation Period, to (ii) the asset value of the
Fund at the end of the preceding Valuation Period, after all allocations
and withdrawals were made for that period, divided by
(b) 1.000000 plus the component of the annual rate of mortality and expense
risk, distribution expense and administrative charges (which does not
include the monthly administrative charge per Participant which is $2.00
but in no event to exceed 1/12 of 1% of the Account Value in any month)
against a Fund's assets for the number of days from the end of the
preceding Valuation Period to the end of the current Valuation Period (see
"Charges").
21
<PAGE>
The value of the Accumulation Units credited to the account of a Participant
in the Separate Account for any Valuation Period prior to the Annuity
Commencement Date is determined by multiplying the number of Accumulation
Units credited to such Participant in each chosen Fund of the Separate Account
by the Accumulation Unit value for each chosen Fund at the end of the
Valuation Period.
TRANSFERS AMONG INVESTMENT ALTERNATIVES
Prior to the Annuity Commencement Date, Participants may elect, subject to the
conditions described below, to transfer amounts among Investment Alternatives.
Thus, amounts may be transferred among Funds of the Separate Account, and
between the Separate Account and the General Account. A Participant may
express the amount sought to be transferred as a dollar amount, or as a number
of Accumulation Units, or as a percentage of the value of the Participant's
investment in the selected Investment Alternative. Transfers may not be made
after the Annuity Commencement Date. No charges are currently imposed for
transfers, but the Insurance Company reserves the right to impose such charges
in the future.
Any transfers from a Fund of the Separate Account will result in the
cancellation of Accumulation Units in that Fund on the basis of the current
Accumulation Unit value for the Valuation Period during which the request is
received. Transfers to a Fund of the Separate Account from either the General
Account or another Fund of the Separate Account will be credited to that Fund
based on the current Accumulation Unit value for the Valuation Period during
which the transferred amount is received (see "Postponement of Payments").
No request for a transfer will be binding on the Insurance Company until it
receives all information necessary to process the request.
WITHDRAWALS
A Participant may (unless, under a TDA or VEC Contract, a Plan provides
otherwise), prior to the Annuity Commencement Date, elect to withdraw the
Participant's Account Balance in whole or in part. To be valid, a partial
withdrawal request must specify from which of the Investment Alternatives the
withdrawal is to be made. A Participant may express the amount sought to be
withdrawn as a dollar amount, a number of Accumulation Units, or a percentage
of the value of the Participant's investment in the selected Investment
Alternative. No withdrawals are permitted after the Annuity Commencement Date.
The withdrawal or distribution of funds from a TDA Plan is subject to
restrictions. In general, a Participant under age 59 1/2 will not be able to
withdraw or receive a distribution of either Contributions made on and after
January 1, 1989 under a salary reduction agreement, or interest and investment
earnings credited on and after January 1, 1989 for salary reduction
contributions, whenever made, except in specified circumstances. These
circumstances generally include death or disability, hardship, and termination
of employment. If a Participant makes a withdrawal for hardship, he may not
withdraw the post-1988 earnings on the amounts which were contributed under a
salary reduction agreement. In addition, spousal consent may be required for
withdrawals.
In the case of either a partial or complete withdrawal from the Separate
Account, the Insurance Company will pay to the requesting Participant the
lesser of (a) the amount specified in the withdrawal request or (b) the amount
that, as of the date the Insurance Company received the withdrawal request,
represents the value of the Accumulation Units credited to the account of the
Participant in the Funds of the Separate Account from which withdrawal is
sought. The Investment Company will reduce the number of Accumulation Units
credited to the account of a Participant by the number of Accumulation Units
obtained by dividing the amount withdrawn from that Fund by the Accumulation
Unit value in effect for the Valuation Period during which the request is
received.
Loans. The Insurance Company will make available to the employer a TDA or VEC
loan option. If the employer elects to adopt the loan provision in the
Contract, Participants shall have the right to borrow funds utilizing TDA or
VEC Plan Account Balances as collateral. The amount of the loan permitted is
governed by Section 72(p) of the Code and the Regulations thereunder and the
Contract terms. An amount sufficient to serve as loan collateral will be
transferred from the Separate Account to the General Account, if appropriate,
and withdrawals and transfers of such collateral will not be permitted while
the loan is outstanding.
No request for withdrawal will be binding on the Insurance Company until it
receives all information necessary to process the request.
Other Considerations. Currently, withdrawals under the Contracts, whether
complete or partial, are not subject to any contingent deferred sales charge,
or any other withdrawal charge. The Insurance Company reserves the right,
however, to impose such charges in the future.
22
<PAGE>
Tax Consequences. Participants should consider the possible Federal income tax
consequences of any withdrawal. Generally, a Participant will be taxed at
ordinary income tax rates on the taxable amount withdrawn, except that
withdrawals from a Roth IRA Contract that is more than five years old are tax-
free if the Participant is over age 59 1/2, the withdrawals are to pay for
qualified first-time home buyer expenses (limited to $10,000 per lifetime), or
the Participant has died or become disabled. For a Roth IRA distribution that
does not meet those requirements, so long as the distribution does not exceed
the contributions (without earnings) to all Roth IRAs, there is no taxable
portion. This is because for Roth IRAs, contributions are treated as withdrawn
first. However, pending federal legislation, which would be effective as of
January 1, 1998, would change some of these rules for Roth IRAs. For
distributions from Contracts other than Roth IRAs, a Participant will not be
taxed on the amount of Contributions made by the Participant with after-tax
dollars, but there are special rules for determining whether a withdrawal, or
portion of a withdrawal, will be considered a return to the Participant of
after-tax Contributions. See "Federal Tax Matters."
In addition to being subject to income taxation, the taxable amount of certain
withdrawals may be subject to a penalty tax. Generally, for Roth IRAs the
penalty tax only applies to the taxable portion of a withdrawal; however,
pending federal legislation, which if adopted would be effective as of January
1, 1998, would change some rules for Roth IRAs. See "Federal Tax Matters--
Penalty Taxes".
SPECIFIED PAYMENTS OPTIONS
A Participant in a TDA, VEC or IRA Contract may elect after attaining age 59
1/2 (or, in the case of a TDA or VEC Contract, early retirement after age 55)
to specify an amount (which may not be less than $100) to be withdrawn from
the Participant's Account Balance and paid each month to the Participant (see
"General Matters--Contacting the Insurance Company"). The withdrawals and
payments will be made, as designated by the Participant, from either the
General or Separate Account, or both (see "Postponement of Payments").
During the period that payments under the Specified Payments Option
("Specified Payments") are received by a Participant, Contributions may be
made on that Participant's behalf. In addition, transfers of amounts among
Investment Alternatives and other withdrawals from a Participant's account may
continue to be made (see "Transfers Among Investment Alternatives" and
"Withdrawals").
Specified Payments will continue until the earliest of (a) the death of the
Participant; (b) receipt by the Insurance Company of the Participant's written
request to modify or discontinue the specified payments; (c) depletion of the
Participant's Account Balance, or of any portion thereof, so that the
remaining balance is insufficient to pay the next installment coming due; or
(d) the Participant's Annuity Commencement Date.
Tax Consequences. Participants should consider the possible Federal income tax
consequences of electing the Specified Payments Option. Generally, a
Participant will be taxed at ordinary income tax rates on each Specified
Payment subject to non-taxable recovery of prior non-deductible Contributions
(except under Roth IRAs in certain circumstances). In addition, payment may be
subject to a tax penalty (see "Federal Tax Matters").
A Participant receiving payment pursuant to the Specified Payments Option may
cancel those payments at any time and elect to receive the Participant's
Account Balance as a single sum payment.
If the Participant is subject to the minimum distribution rules of Section
401(a)(9) of the Code, the minimum Specified Payments for the year must at
least total the required annual distribution.
DEATH BENEFITS
Death benefits generally will be paid in accordance with the following rules
under IRA, TDA, VEC and FPA Contracts in which the Participant is the
Annuitant. Under an FPA Contract in which the Annuitant is not the
Participant, the following rules will apply as if the Annuitant were the
Participant.
Death After Annuity Commencement. If a Participant dies on or after his or her
Annuity Commencement Date, the Participant's designated beneficiary will be
entitled to receive the death benefit (if any) provided by the form of annuity
in effect on the Participant's date of death (see "The Annuity Period--
Available Forms of Annuity" and "General Matters--Designation of
Beneficiary").
Death Prior to Annuity Commencement. If a Participant dies prior to the
Annuity Commencement Date, the Insurance Company will pay a death benefit to a
designated beneficiary (see "General Matters--Designation of Beneficiary").
Under employer-maintained TDA and VEC Contracts, the death benefit will be
paid to the spouse unless elected otherwise with spousal consent.
The death benefit will be paid by the Insurance Company after it has received
(1) due proof of death; (2) notification of an election by the beneficiary of
the form in which the death benefit is to be paid; and (3) all other
information and documentation necessary to process the death benefit request.
The amount of the death benefit will be the value of the
23
<PAGE>
Participant's Account Balance as of the date on which the Insurance Company
receives such information. Until the Insurance Company receives the items in
(1)-(3), the Participant's Account Balance will remain allocated as it was on
the date of death of the Participant (unless the beneficiary is the spouse and
special rules apply).
The beneficiary may choose to receive the death benefit under any of the
following methods of payment: (1) a lump sum, (2) an annuity in a form offered
by the Insurance Company at the time the election is made, or (3) monthly
payments of a specified dollar amount (at least $100) as elected by the
beneficiary, such payments to continue until the death of the beneficiary or
until all benefits are paid; upon the death of the beneficiary, any amounts
remaining unpaid will be paid to the beneficiary's estate.
Any method of distribution selected by the beneficiary must comply with one of
the following rules:
(a) Five Year Rule. Unless (b), (c) or (d) below apply, the entire value of the
death benefit must generally be distributed to the beneficiary within five
years of the Participant's death. Special rules apply if the beneficiary is
the Participant's surviving spouse (see "Federal Tax Matters--Obtaining Tax
Advice").
(b) Life Annuity Rule. Unless (a), (c) or (d) apply, the entire value of the
death benefit must generally be distributed to the beneficiary in the form
of annuity payments commencing within one year of the Participant's death
and payable over a period of time that does not exceed the beneficiary's
life or life expectancy (whichever is longer). Special rules apply if the
beneficiary is the Participant's surviving spouse (see "Federal Tax
Matters--Obtaining Tax Advice").
(c) Commencement of Minimum Distributions. If a Participant under an IRA, TDA
or VEC Contract, other than a Roth IRA Contract, dies prior to the Annuity
Commencement Date, but after he or she has begun to receive required
minimum distributions from the Contract, the method of distribution
selected by the beneficiary after the Participant's death may not be slower
than the method of distribution that was in effect before the Participant
died, unless (d) applies (see "Federal Tax Matters--Other Matters").
(d) Alternative Method of Distribution. A beneficiary will not be required to
receive a distribution from an IRA or TDA Contract under (a), (b) or (c) to
the extent that the required distribution is withdrawn from another
contract of the same type in accordance with applicable IRS regulations
(see "Federal Tax Matters--Obtaining Tax Advice").
DISCONTINUANCE AND TERMINATION
DISCONTINUANCE OF TDA AND VEC CONTRACTS
TDA and VEC Contracts provide that a Contractholder may discontinue a Contract,
at its discretion, as of the first day of a calendar month that is at least 31
days after notice of such intention to discontinue is received by the Insurance
Company. The Insurance Company may discontinue a TDA or VEC Contract, in whole
or in part, if (1) the Contractholder fails to abide by the terms or
requirements of the Contract, or (2) the Insurance Company determines that a
modification of the Contract is necessary to comply with Federal or state
requirements, including the Employee Retirement Income Security Act of 1974, as
amended, and the Contractholder refuses to accept a substantially similar
contract offered by the Company that incorporates that modification.
Discontinuance of a Contract by the Insurance Company will be effective as of a
date specified by the Insurance Company, provided that the Insurance Company
must give a Contractholder at least 31 days' advance written notice in which to
cure any remediable defaults. In addition, the Insurance Company has the right
to discontinue a TDA or VEC Contract if, during any Plan Year, no Contributions
are made on behalf of any of the Participants.
Discontinuance of a TDA or VEC Contract will not relieve the Contractholder of
its obligations under the Contract, nor will it deprive Participants of the
amounts accumulated on their behalf, which remain allocated to them, and all
provisions of the Contract will continue to apply, except that (1) no further
Contributions will be made by the Contractholder, and (2) the Insurance Company
may transfer to another insurance company or other financial institution all
amounts accumulated under the Contract and allocated to Participants and
beneficiaries. Such transfer may be made in any manner to which the
Contractholder and the Insurance Company agree in writing, and to the extent
consented to by any Participant or beneficiaries. In the event of a transfer
described in clause (2) above, amounts accumulated for the benefit of a
Participant or beneficiary, who does not consent to the transfer may, as
elected by that person, be left on deposit with the Insurance Company, or
withdrawn in whole or in part (see "Withdrawals").
TERMINATION OF PARTICIPATION UNDER TDA CONTRACTS
If, during the Accumulation Period, a TDA Contract Participant is no longer
eligible to participate under the Contract for any reason other than death or
retirement (for example, due to termination of employment), or if notice is
given that the Participant no longer desires to participate under the Contract,
a termination with respect to that Participant will be deemed to have occurred.
In addition, if no Contributions are made by a Participant for three
consecutive years and the Participant's Account Balance is less than $2,000,
the Insurance Company, in its discretion, may deem that such a termination has
24
<PAGE>
occurred. Upon receipt by the Insurance Company, or a Participant (where the
Insurance Company deems a termination to have occurred), of notice of
termination, Contributions may no longer be made on behalf of a Participant.
Termination will not deprive a Participant of the amounts accumulated on the
Participant's behalf, or the Participant's rights to make transfers or
withdrawals (see "Transfers Among Investment Alternatives" and "Withdrawals").
Termination also will not prevent a Participant from electing to receive
annuity benefits (see "The Annuity Period"), or having a death benefit paid on
the Participant's behalf (see "Death Benefits").
TERMINATION BY THE INSURANCE COMPANY
VEC Contract. Under VEC Contracts, if, on or before (1) the first anniversary
of the effective date of the Contract, or (2) such other date as may be
communicated to the Contractholder by the Insurance Company, the Contractholder
does not provide evidence satisfactory to the Insurance Company that the Plan
pursuant to which the Contract is issued qualifies for the tax treatment
specified under Sections 401(a) and 403(a) of the Code, then
(a) no further amounts may thereafter by remitted under the Contract on
behalf of Participants;
(b) the Insurance Company will withdraw and pay to the Contractholder the
amounts accumulated under the Contract as of the date of withdrawal; and
(c) upon such withdrawal and payment, the Insurance Company will terminate
the Contract.
IRA and FPA Contracts. The Insurance Company may, in its sole discretion,
return a Participant's Account Balance and terminate an IRA or FPA Contract
prior to the Annuity Commencement Date if no Contributions have been made by
Participant for three consecutive years, the Participant's Account Balance is
less than a specified minimum, and the Participant has attained age 59 1/2. For
FPA Contracts the specified minimum Account Balance is $500. For IRA Contracts
the specified minimum is either $2,000 or the amount necessary to provide
monthly Annuity Payments of at least $20 under the form of annuity selected by
the Participant. The Insurance Company will not exercise its option to
terminate an IRA or FPA Contract without notifying the Participant of the
Insurance Company's intention to do so, and providing a period of 90 days
during which additional Contributions may be made for the purpose of reaching
the required minimum Account Balance and avoiding termination. Amounts
withdrawn in connection with the termination of an IRA or FPA Contract will be
paid to the Participant in a single sum.
POSTPONEMENT OF PAYMENTS
Payment of any amounts due from the Separate Account in connection with a
withdrawal, payment pursuant to the Specified Payment Option, death benefit,
termination, or transfer of any amount from the Separate Account to the General
Account will occur within seven days, unless:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on that Exchange is restricted as determined by the
Commission; or
2. The Commission by order permits postponement for the protection of
Participants; or
3. An emergency exists, as determined by the Commission, as a result of which
disposal of securities is not reasonably practicable or it is not reasonably
practicable to determine the value of the Separate Account's net assets.
THE ANNUITY PERIOD
GENERAL
As of the Annuity Commencement Date, the amount credited to a Participant in
the Separate Account will be transferred to the General Account and, together
with any amount previously credited to the Participant in that Account, will be
applied to provide a monthly annuity benefit. The amount of each Annuity
Payment will be fixed and guaranteed by the Insurance Company in accordance
with the tables of annuity purchase rates contained in the Contracts.
The level of Annuity Payments made to Annuitants under the Contracts will not
be affected by the mortality experience (death rate) of persons receiving such
payments, or of the general population. The Insurance Company assumes the
"mortality risk" by virtue of the annuity purchase rates incorporated in the
Contract. In addition, the Insurance Company guarantees that it will not
increase charges under the Contracts with respect to Annuity Payments
regardless of its actual expenses.
Accordingly, Annuity Payments will be made in a fixed and guaranteed amount
that is in no way dependent upon the investment experience of the Separate
Account. The amount of monthly payments depends only on the form of annuity
chosen, the applicable annuity purchase rates contained in the Contract and the
total amount applied to purchase the annuity.
Once Annuity Payments have commenced with respect to a Participant, no further
Contributions may be made on behalf of that Participant. In addition, neither
transfers to the Separate Account, nor withdrawals of any kind, are permitted
on behalf of an Annuitant receiving Annuity Payments.
25
<PAGE>
A Participant may elect to receive the Participant's Account Balance as of the
Annuity Commencement Date in a lump sum in lieu of receiving Annuity Payments.
The Insurance Company will issue to Contractholders of TDA and VEC Contracts
for delivery to each Participant thereunder an individual certificate setting
forth the amount and terms of payment of their annuity benefits. The benefits
to which an IRA or FPA Contract Participant is entitled generally are set
forth in the Contract issued to the Participant.
Payment of benefits under the Contracts will be made by the Insurance Company
directly to Annuitants at their last known address filed with the Insurance
Company by a Participant or Contractholder.
ANNUITY COMMENCEMENT DATE
The Annuity Period with respect to a Participant may begin on the Annuity
Commencement Date selected in the following manner:
TDA and VEC Contracts. Participants under TDA and VEC Contracts may elect an
Annuity Commencement Date that is either such Participant's Normal Retirement
Date (the first day of the calendar month coincident with or next following
such Participant's 65th birthday); Early Retirement Date (the first day of any
calendar month within the ten-year period immediately preceding the
Participant's Normal Retirement Date, but no earlier than age 55); or Later
Retirement Date (the first day of any calendar month following such
Participant's Normal Retirement Date) but with respect to VEC Contracts,
generally no later than age 70 for Participants who are no longer actively at
work.
IRA Contract. A Participant may elect an Annuity Commencement Date that is the
first day of any calendar month that is on or after the date on which the
Participant attains age 55. For SEP-IRAs and SIMPLE IRAs, the Annuity
Commencement Date must be no earlier than the latest of the following: the
first day of the calendar month in which the Participant attains age 55, the
30th day following the day the Participant stops working for the employer that
sponsors the SEP or SIMPLE, and the 30th day following the day that the last
employer contribution due under the SEP or SIMPLE is received at the Insurance
Company's home office.
FPA Contract. A Participant may elect an Annuity Commencement Date that is the
first day of any calendar month.
Annuity Commencement Date elections must be made in advance, in the manner
described under "General Matters--Contacting the Insurance Company." For IRAs
and SEP-IRAs, such election must be made 30 days in advance.
AVAILABLE FORMS OF ANNUITY
Annuity Payments will be made under one of the forms of annuity benefits
described below. Under TDA and VEC Contracts, unless an election to the
contrary is made prior to the Annuity Commencement Date, a Participant who
does not have an Eligible Spouse at the Annuity Commencement Date will have
annuity benefits paid in the Ten Years Certain and Continuous Form described
below, and a Participant who has an Eligible Spouse will have annuity benefits
paid on the Joint and Survivor Form described below. Under the VEC and some
employer sponsored TDA plans, consent of the spouse is required if payment is
to be made in any form other than the joint and survivor form. Under IRA and
FPA Contracts, the form in which Annuity Payments will be made is the form
selected by a Participant at the time the Participant designates an Annuity
Commencement Date. A Participant may select a form of annuity from the
following list:
Ten Years Certain and Continuous Form. An annuity payable monthly until the
first day of the month in which the death of the Participant occurs, or, the
end of the specified period of 120 months, whichever is later. If the
Participant dies prior to the end of the specified period, payments in the
same amount will be continued to the Participant's beneficiary until the end
of that period (see "General Matters--Designation of Beneficiary"). If the
Participant elects this form and dies before the Annuity Commencement Date,
the election will be cancelled.
Joint and Survivor Form. An annuity payable monthly until the first day of the
month in which the death of the survivor of the Participant and the
Participant's Eligible Spouse occurs or the end of a period of 120 months,
whichever is later. If the Participant dies during the Annuity Period, and the
Eligible Spouse is living, payments in the amount of 66 2/3% of those payable
to the Participant will be made to the Eligible Spouse. If the Eligible Spouse
dies prior to the end of the specified period, payments will be made to the
Participant's beneficiary (see "General Matters--Designation of Beneficiary").
Under TDA and VEC Contracts, a Participant who has an Eligible Spouse at the
Annuity Commencement Date will be presumed to have elected this annuity option
unless the Participant notifies the Insurance Company to the contrary within
ninety days prior to that date. If the Eligible Spouse dies before the
Participant's Annuity Commencement Date, the election of this form of annuity
will be automatically cancelled, and the Ten Years Certain and Continuous Form
will be paid unless the Participant elects an alternate form prior to the
Annuity Commencement Date.
26
<PAGE>
Full Cash Refund Form. An annuity payable monthly until the first day of the
month in which the death of the Participant occurs. If, at the date of the
Participant's death, the total amount of the annuity benefits received by the
Participant is less than the amount of the Participant's Account Balance as of
the Annuity Commencement Date, the difference between these two amounts will
become payable in cash as a death benefit to the Participant's beneficiary.
Such death benefit may be paid in a lump sum, or as an annuity in the Ten
Years Certain and Continuous Form, or in a combination thereof, as elected by
the beneficiary (see "General Matters--Designation of Beneficiary").
In addition to the forms of annuity listed above, the Insurance Company, in
its discretion, may be offering additional forms of annuity at the Annuity
Commencement Date. As of the date of this Prospectus, the Insurance Company is
offering the following additional forms of annuity, which also would be
available for selection by Participants. The Insurance Company has the right
to discontinue offering these forms at any time.
PERIOD CERTAIN AND CONTINUOUS ANNUITY. Same as the Period Certain and
Continuous Annuity above, except that the period may be for three or five
years as well.
JOINT AND SURVIVOR LIFE WITH PERIOD CERTAIN ANNUITY: Same as the Joint and
Survivor Life with Period Certain Annuity above, except that the percentage to
the contingent Annuitant may be 50%, 75% or 100%, rather than 66 2/3%.
JOINT AND SURVIVOR LIFE ANNUITY. Same as the Joint and Survivor Life With
Period Certain Annuity above, except that payments will end upon the death of
the survivor as between the Annuitant and the contingent Annuitant (there is
no guaranteed minimum payment period).
NON-REFUND LIFE ANNUITY. The Insurance Company makes a monthly Annuity Payment
until the death of the Annuitant. No amount is payable to any contingent
Annuitant or Beneficiary.
AMOUNT OF ANNUITY PAYMENTS
The amount of monthly Annuity Payments under the Contracts will be determined
on the basis of the application of the Participant's Account Balance to the
annuity purchase tables contained in the Contracts in accordance with the form
of annuity benefit selected. The Insurance Company guarantees that the rates
used to determine the amount of Annuity Payments will never be less favorable
for an Annuitant than the guaranteed rate provided in the Contracts.
SMALL BENEFIT PAYMENTS
TDA and VEC Contracts. Under TDA and VEC Contracts, if the initial monthly
payment under an annuity benefit payable under the Contract would be less than
$20, or if any Participant terminates employment and is eligible for a benefit
determined to be less than $20 a month under the Ten Years Certain and
Continuous Form of Annuity (described above), the Insurance Company may, at
its option, in lieu of making the monthly annuity benefit payments which would
otherwise be payable to the Participant commencing on the Participant's
Annuity Commencement Date, pay to the Participant on the Participant's Annuity
Commencement Date in a single sum the actuarially equivalent value of the
Participant's monthly annuity benefit that would otherwise be payable on the
Ten Years Certain and Continuous Form, provided that single sum does not
exceed $5,000 (or such other maximum amount that may hereafter be provided by
law). The Insurance Company may make this payment as of any date that is on or
before the Participant's Annuity Commencement Date. Under VEC Contracts, for
purposes of determining whether monthly annuity benefits payable to a
Participant are less than $20, a Participant's monthly annuity benefits will
be deemed to include any annuity benefit paid with respect to that Participant
under any other Contract between the Contractholder and the Insurance Company
or between the Contractholder and another insurance company that serves as the
funding vehicle for a pension plan meeting the requirements of Section 401(a)
and 403(a) of the Code.
IRA and FPA Contracts. Under IRA and FPA Contracts, if the annuity benefit
payable is less than $20 each month, the Insurance Company may, at its option,
pay the present value of the annuity benefit in one payment to the Annuitant.
THE GENERAL ACCOUNT
Contributions allocated and transfers made to the Insurance Company's General
Account become part of the general assets of the Insurance Company, which
support insurance and annuity obligations. Because of exemptive and
exclusionary provisions, interests in the General Account have not been
registered under the Securities Act of 1933 ("1933 Act") nor is the General
Account registered as an investment company under the 1940 Act. Accordingly,
neither the General Account nor any interests therein are subject generally to
the provisions of the 1933 or 1940 Acts and the Insurance Company has been
advised that the staff of the Commission has not reviewed the disclosures in
this Prospectus which relate to the General
27
<PAGE>
Account. Disclosures regarding the fixed portion of the Contracts and the
General Account, however, may be subject to certain generally applicable
provisions of the Federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
SCOPE OF PROSPECTUS
The Contracts provide for accumulation of Contributions on a completely fixed
basis, a completely variable basis, or a combination fixed and variable basis,
and for the payment of annuity benefits on a fixed basis only. This
Prospectus, however, is generally intended to serve as a disclosure document
for the variable portion of the Contracts only. For complete details regarding
the General Account, see the Contracts themselves.
GENERAL DESCRIPTION
The General Account consists of all of the general assets of the Insurance
Company, other than those in the Separate Account and other segregated asset
accounts. Amounts are allocated to the General Account at the election of
Participants in the form of Contributions, or as transfers from the Separate
Account. The Insurance Company bears the full investment risk for all amounts
allocated to the General Account (whereas Participants bear the investment
risk for amounts allocated to the Separate Account). The Insurance Company has
sole discretion to invest the assets of the General Account, subject to
applicable law. There are no limits on withdrawals or transfers to another
Investment Alternative from the General Account (subject to applicable federal
tax law restrictions, with respect to the amount a Participant can withdraw in
cash). The Insurance Company does not guarantee that this will always be the
case. The Insurance Company guarantees that it will credit interest to amounts
accumulated for Participants in the General Account at an effective annual
rate of at least 3%. The Insurance Company may, at its sole discretion, credit
a higher rate of interest to amounts allocated to the General Account,
although the Insurance Company IS NOT OBLIGATED TO CREDIT INTEREST IN EXCESS
OF 3% PER YEAR. Under TDA Contracts where employers elect to use electronic
media, such as a computer terminal, personal computer or other electronic
device located at the employer's place of business, to transmit and receive to
and from the Insurance Company, relevant and necessary information with
respect to the TDA contract, subject to the Insurance Company's established
rules and requirements with respect to accessing computer information, the
Insurance Company reserves the right to credit such contracts with a different
rate of interest in the General Account than contracts which do not use such
electronic computer processing. Any amount held in the General Account does
not entitle a Participant to share in the investment experience of the General
Account.
TRANSFERS AND WITHDRAWALS
Prior to a Participant's Annuity Commencement Date, amounts may be transferred
from the Funds of the Separate Account to the General Account, and from the
General Account to the Funds of the Separate Account. No charge is currently
imposed for such transfers. The Insurance Company reserves the right, however,
to impose additional charges on transfers in the future.
Partial or complete withdrawals may be made from the General Account prior to
a Participant's Annuity Commencement Date. In the case of such withdrawals,
the Insurance Company will pay the lesser of (a) the amount specified in the
withdrawal request, and (b) the amount that, as of the date of payment, then
represents the accumulation in the General Account credited to the
Participant. No charge is currently imposed on such transfers.
Transfers and withdrawals from the General Account may be delayed for up to
six months following the date that the Insurance Company receives such
requests. Withdrawals with respect to TDA or VEC Contracts may be subject to
written spousal consent under applicable rules.
ANNUITY PAYMENTS
All Annuity Payments under the Contracts are made in the form of a fixed
annuity from the General Account. The Insurance Company does not credit
discretionary interest in excess of the guaranteed rate of 3% to Annuity
Payments. The Annuitant must rely on the annuity purchase tables provided in
the Contracts to determine the amount of Annuity Payments.
28
<PAGE>
GENERAL MATTERS
CONTACTING THE INSURANCE COMPANY
Except as provided in the following paragraph, all notices, requests and
elections required to be given or made under the Contracts must be in writing
and mailed or delivered to the Insurance Company's home office at the
following address:
Mutual of America Life Insurance Company
Eldon Wonacott, Senior Vice President
320 Park Avenue
New York, New York 10022
or to your appropriate Regional Office. You can check the address for your
Regional Office by calling 1-800-468-3785.
TRANSFERS, WITHDRAWALS AND REALLOCATIONS BY TELEPHONE
Requests by Participants for transfers or withdrawals, or changes in the
formula for allocation of Contributions, may be made by telephone in lieu of
the written procedure described above. Requests by telephone, however, may be
made only if a Participant has received a Personal Identification Number,
which the Insurance Company provides automatically, and agreed to use it in
accordance with the applicable rules and requirements. Thereafter, the
Participant may contact the Insurance Company by telephone (800-468-3785) and
request the desired transaction or change. Transfers requested by telephone
will go into effect on the day on which the request is made, if received by 4
P.M. Eastern Standard Time (or Daylight Savings Time, as applicable), at the
next calculated price. The Insurance Company reserves the right to suspend or
terminate the right to request transfers, withdrawals or reallocations by
telephone at any time. Because of requirements for written spousal consent,
telephone withdrawal under TDA and VEC Contracts may not be permitted.
Although failure to follow reasonable procedures may result in the Insurance
Company's liability for any losses due to unauthorized or fraudulent telephone
transfers, it will not be liable for following instructions communicated by
telephone that it reasonably believes to be genuine. The Insurance Company
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Those procedures shall consist of confirming the
Participant's Social Security number, checking the Personal Identification
Number, tape recording all telephone transactions and providing written
confirmation thereof.
YEAR 2000 COMPLIANCE
Many of the services that the Company provides to Participants and
Contractholders depend on the proper functioning of its computer and computer-
based systems, as well as those of its outside service providers. Many
computers cannot distinguish the year 2000 from the year 1900, and this
inability could potentially have an adverse impact on the handling of
Participant and Contractholder purchase, exchange and redemption transactions,
the crediting of accumulation units, accounting and other recordkeeping
services. The Company has performed a comprehensive review of its computer
systems and is in the process of modifying or replacing any of its systems
that cannot recognize the year 2000. It expects to significantly complete
modifications and replacements by the end of 1998 and to perform appropriate
systems testing during the 1999 calendar year. It also is in the process of
confirming with its outside service providers that their systems will be
similarly modified or replaced to address the year 2000 issue. The Company
anticipates that its computer systems and those of its outside service
providers will be adapted in time for the year 2000.
DESIGNATION OF BENEFICIARY
Under the Contracts, a Participant may designate (with the right to change
such designation from time to time) a beneficiary to receive any payments with
respect to a Participant becoming due to a beneficiary under the Contract. The
Participant may change the beneficiary while the Participant is living by
providing the Insurance Company (or the Participant's Employer where the
Employer has agreed to retain such information) with written notice of such
change. Such designation or change in designation will take effect as of the
date of receipt of notice by the Insurance Company or the Participant's
Employer where the Employer has agreed to retain such information, whether or
not the Participant is living at the time of such receipt. The Insurance
Company will not be liable, however, as to any payment or settlement made
prior to receiving such notice.
In the case of a married Participant in a VEC Plan or an employer sponsored
TDA, the beneficiary shall be the Eligible Spouse unless, on the date of
death, there is in effect a written consent, signed by the Eligible Spouse and
witnessed either by a notary public or Plan representative, to such
Participant's election to waive any qualified preretirement survivor annuity
and qualified joint and survivor annuity forms of benefit which otherwise
would be applicable and designate a beneficiary other than such Eligible
Spouse. Such other beneficiary designation or form of benefit selected cannot
be changed by the Participant unless the Eligible Spouse provides written
consent in the manner described above.
If no designated beneficiary survives the Participant, the Insurance Company
will pay any single sum payment or the commuted value of any remaining
periodic payments to the first surviving class of the following classes of
successive
29
<PAGE>
preference beneficiaries: (a) the Participant's surviving spouse; (b) the
Participant's surviving children; (c) the Participant's surviving parents; (d)
the Participant's surviving brothers and sisters; and (e) the executors or
administrators of the Participant's estate. Any commuted value will be
determined on the basis of compound interest at a rate, determined by the
Insurance Company, that is consistent with the interest assumption of the
rates used to determine the amount payable under the annuity benefit (see
"Amount of Annuity Payments").
ASSIGNMENT OF CONTRACTS
TDA, VEC and IRA Contracts. Except as otherwise required by law, no assignment
of TDA, VEC or IRA Contracts, nor transfer of any rights conferred thereunder,
is permitted.
FPA Contract. An FPA Contract may be assigned by the person to whom it was
issued. However, no assignment will be binding on the Insurance Company until
it has been recorded by the Insurance Company, and no assignment will apply to
payments made before such recording.
THE INSURANCE COMPANY'S LIABILITY
The Insurance Company's liability for the payment of annuity benefits (see
"The Annuity Period"), death benefits (see "Death Benefits"), and withdrawals
(see "Withdrawals") is limited to the payments provided under the Contracts
that arise from Participants' Account Balances.
Upon exhaustion of all amounts held under a TDA or VEC Contract by withdrawals
or by transfers upon discontinuance of the Contract (see "Discontinuance and
Termination"), that Contract will terminate and the Insurance Company will be
relieved of all further liability thereunder, except with respect to any
annuity benefits provided on or before the date the Contract was terminated.
Upon withdrawal and payment of a Participant's Account Balance upon
termination of an IRA or FPA (see "Discontinuance and Termination"), the
Insurance Company will be released from all further liability with respect to
that Participant.
The Insurance Company may rely on the reports and other information furnished
by Contractholders or Participants as required under the Contracts, and need
not inquire as to the accuracy or completeness of such reports and information
(see "Information and Determination").
MODIFICATION OF CONTRACTS
Contracts may not be modified as to the Insurance Company, nor may any of the
rights or requirements of the Insurance Company be waived, except in writing
and by a duly authorized officer of the Insurance Company.
A TDA or VEC Contract may be changed at any time by the Insurance Company by
written notice, amendment or replacement upon at least 31 days' written
advance notice to the Contractholder without the consent of any Participant,
or any other person who is, or may become, entitled to benefits under the
Contract, provided that such change shall not affect the amount or the terms
of the annuity benefits provided thereunder before such change.
AMENDMENT OF IRA CONTRACT
By accepting an IRA Contract, a Participant delegates to the Insurance Company
the power to amend or replace that Contract to conform it to the provisions of
any law, regulations, or material administrative rulings pertaining to
individual retirement annuities, and to make such other changes in the
Contract that, as determined by the Insurance Company, are from time to time
necessary or appropriate. No changes may be made without the consent of the
Participant, however, if the effect would be to change substantially the costs
or benefits under the Contract, and no amendment will affect the amount or
terms of any annuity benefit provided thereunder before the change. An
endorsement or amendment of an IRA Contract or a waiver of any of its
provisions will be valid only when made in writing by the Insurance Company
and signed by an officer of the Insurance Company.
EVIDENCE OF SURVIVAL
When payment of an annuity benefit is contingent upon the survival of any
person, evidence of that person's survival must be furnished to the Insurance
Company, either by the personal endorsement of the check drawn for payment, or
by other means satisfactory to the Insurance Company.
MISSTATEMENT OF INFORMATION
If a benefit provided under one of the Contracts was based on information that
has been misstated, the benefit will not be invalidated, but the amount of the
benefit payments or the amount applied to provide the benefit, or both, will
be adjusted to the proper amount as determined on the basis of the corrected
information.
30
<PAGE>
The amount of any underpayments by the Insurance Company due to any
misstatement shall be paid in full with the next payment due with respect to
the Participant under the Contract. The amount of any overpayments by the
Insurance Company due to any misstatement will be deducted to the extent
possible from the payments thereafter falling due with respect to the
Participant. Interest, based on an annual effective rate of 5%, will be
included in the amount of any underpayments or overpayments.
INFORMATION AND DETERMINATION
Contractholders and Participants, as appropriate, will furnish the Insurance
Company with the facts and information that the Insurance Company may require
for the operation of the Contract including, upon request, the original or
photocopy of any pertinent records held by the Contractholder or Participant.
Any determination that a Contractholder is to make under a TDA or VEC Contract
will be made pursuant to the terms of the Contract and will be reported by the
Contractholder to the Insurance Company.
NON-ALIENATION OF BENEFITS UNDER VEC AND IRA CONTRACTS
To the extent permitted by law, no amount payable with respect to a
Participant under a VEC or IRA Contract may be assigned (either in law or at
equity), alienated or be subject to attachment, garnishment, levy (other than
a Federal tax levy made pursuant to Section 6331 of the Code), or other legal
or equitable process, and no such amount will in any way be subject to any
legal process which would subject it to the payment of any claim against the
Participant or beneficiary (see "Designation of Beneficiary").
CLAIMS OF CREDITORS UNDER FPA CONTRACTS
To the extent permitted by law, no payment made by the Insurance Company
pursuant to an FPA Contract will be subject to the claims of any creditors. In
addition, no payment will be subject to any legal process to enforce any such
claim.
ALTERNATE PAYMENT OF BENEFITS
The Insurance Company may make payment due to a payee who is physically or
mentally incompetent to receive such payments, or is a minor, to certain other
persons in accordance with the Contracts. Upon making these alternate
payments, the Insurance Company will be discharged from all liability with
respect to payments due to the payee. Payments to a minor will be limited to
$250 a month until either (a) a guardian is appointed or (b) the minor has
attained majority.
CLAIM PROCEDURES UNDER TDA AND VEC CONTRACTS
In order to receive annuity benefits under TDA and VEC Contracts, Participants
or beneficiaries thereunder must bring to the attention of the Insurance
Company or the Contractholder such person's right to claim such benefits. If
the Contractholder has received the claim directly, the Contractholder must
notify the Insurance Company of the claim on the prescribed form furnished to
the Contractholder for that purpose. The Insurance Company will have 90 days
after receipt of the claim within which to render a decision, and may extend
this period, upon written notice to the claimant, for an additional 90 days if
there are special circumstances that require such an extension.
In the event a claim is denied in whole or in part, the Insurance Company will
give notice to the Contractholder or claimant, as appropriate, of such denial
in sufficient detail so that the claimant may be informed of the reason or
reasons for the denial, the specific reference to the Contract or Plan
provision on which the denial was based, any additional information that may
be necessary to perfect the claim and the reasons therefor, and the procedure
for reviewing denied claims.
In the event a claim is denied in whole or in part, a claimant or the
claimant's representative has 60 days in which to appeal to the Insurance
Company for review thereof. The request for review must be made in writing,
either directly to the Insurance Company, or to the Contractholder for
transmission to the Insurance Company. A claimant will have a right to review
all pertinent documents and to contest the decision in writing. The Insurance
Company will render a decision on review no later than 60 days after its
receipt of the request for review unless special circumstances require
extension, in which case the decision may, upon written notice to the
claimant, be rendered within 120 days from the Insurance Company's receipt of
the request for review. The Insurance Company's decision on review will be in
writing and include specific reasons with specific reference to the Contract
or Plan provisions on which it is based.
PARTICIPATION IN DIVISIBLE SURPLUS
The Insurance Company is a mutual life insurance company and, therefore, has
no stockholders. The Contractholders or Participants share in the earnings of
the Insurance Company. No assurance can be given as to the amount of divisible
surplus, if any, that will be available for distribution under the Contracts
in the future. The determination of such surplus is within the sole discretion
of the Insurance Company's Board of Directors. Under usual circumstances,
separate accounts receive little benefit from and contribute little to
divisible surplus.
31
<PAGE>
FEDERAL TAX MATTERS
For Federal income tax purposes, the Separate Account is not an entity
separate from the Insurance Company, and its operations are considered part of
the Insurance Company. Accordingly, it will not be taxed separately as a
"Regulated Investment Company" under Subchapter M of the Code. Under existing
Federal income tax law, no taxes are due on the net investment income and
realized capital gains earned by the Separate Account. The Insurance Company
reserves the right to make a deduction for takes if in the future the
Insurance Company must pay tax on the Separate Account's operations.
PAYMENTS UNDER ANNUITY CONTRACTS GENERALLY
Section 72 of the Code describes the income taxation of annuity payments. Its
provisions apply to payments made under annuity contracts purchased in
conjunction with a Section 403(b) plan, payments made under a retirement plan
meeting the requirements of Section 401(a) or 403(a), and, effective January
1, 1987, payments made under annuity contracts issued as individual retirement
annuities under Section 408(b) of the Code. Other provisions of the Code may
be applicable to payments made under an employer's deferred compensation plan.
It is intended that the provisions of Section 72 will be applicable to
payments made under Contracts offered by this Prospectus to the extent they
are issued directly to an individual Participant, i.e., the FPA and IRA
Contracts, or in conjunction with a plan described above, i.e., the TDA and
VEC Contracts.
NOTE REGARDING ROTH IRAS. The discussion under "Federal Tax Matters" on the
taxation of IRA Contract withdrawals is applicable to IRA Contracts, other
than distributions from Roth IRA Contracts. See "Roth IRA Contracts--Qualified
Distributions" for a discussion of Roth IRA withdrawals that are tax-free and
"Roth IRA Contracts--Nonqualified Distributions; When Penalty Tax Not
Applicable" for a discussion of Roth IRA withdrawals that are not qualified
distributions and may result in taxable income for the Participant and the
imposition of a penalty tax on the taxable amount withdrawn.
Generally, Participants must receive a payment under a Contract or plan in
order to be subject to income taxation. Interest, earnings or other
accumulations credited to a Participant's accounts are not required to be
included in a Participant's gross income until received by the Participant.
(Such interest, earnings or other accumulations may, in some cases, be subject
to income taxation prior to receipt if the owner of the Contract is not a
natural person or if the applicable requirements of the Code pertaining to
deferral of compensation are not met. See "Obtaining Tax Advice.") Once
annuity payments are received by a Participant, all or part of such payments
will be taxable to such Participant as ordinary income. Special income tax
treatment may be available if a payment constitutes a "lump sum distribution"
made from or under a retirement plan meeting the requirements of Section
401(a) of the Code.
Whether a Participant must include all of the Annuity Payments he has received
in a taxable year in his taxable income depends upon a number of variables. If
a Participant does not have an "investment in the contract," the total amount
received by such Participant during a tax year is includable in his gross
income. If a Participant does have an "investment in the contract," the
portion of the Annuity Payments received which must be included in the
Participant's gross income is determined under the "exclusion ratio" method to
the extent this method is available.
ANNUITY PAYMENTS UNDER AN FPA CONTRACT
A Participant who begins to receive Annuity Payments on or after the Annuity
Commencement Date may apply the "exclusion ratio" method to determine the
percentage of the total of such Payments received during the tax year which is
not subject to income taxation. This percentage is calculated by dividing the
Participant's "investment in the contract" (the total of all of his non-
deductible Contributions) by the "expected return" from the Contract (the
present discounted value of the expected stream of Annuity Payments). The
amount thus excluded from gross income each year represents a partial return
of the Participant's previously non-deductible Contributions.
If the Annuity Commencement Date under the FPA Contract falls on or after
January 1, 1987, the entire amount of the Annuity Payments received by a
Participant each year must be included in gross income once all of the
Participant's investment in the contract," i.e., the sum of the Participant's
non-deductible Contributions, has been recovered under the "exclusion ratio"
method. A Participant whose Annuity Commencement Date was on or before
December 31, 1986 can continue to exclude the applicable percentage of Annuity
Payments, determined as described above, received during each tax year even
though his or her "investment in the contract" has been totally recovered.
WITHDRAWALS UNDER AN FPA CONTRACT
The "exclusion ratio" method is only applicable to amounts received as an
annuity, e.g., Annuity Payments or another form of periodic payments, such as
an installment method for a fixed period or a fixed amount. If a Participant
receives payment under the FPA Contract which are not Annuity Payments (or
otherwise are not amounts received as an annuity), e.g., by
32
<PAGE>
making cash withdrawals prior to the Annuity Commencement Date, the entire
amount of such payments must be included in the Participant's gross income in
the tax year in which received to the extent that the value of the FPA
Contract immediately before the payment exceeds the Participant's "investment
in the contract." This method causes the interest or earnings credited under
the FPA Contract to be taxed to the Participant before his "investment in the
contract" may be recovered. This rule is applicable to FPA Contracts issued on
or after August 14, 1982. A different method may be applicable with respect to
non-annuity payments made under FPA Contracts issued before that date (see
"Obtaining Tax Advice").
LUMP SUM DISTRIBUTIONS UNDER AN FPA CONTRACT
A Participant who receives a single lump sum payment in lieu of Annuity
Payments must include the difference between the amount of the lump sum
payment and the amount of his "investment in the contract" in gross income for
the tax year in which the single lump sum payment is received.
ANNUITY PAYMENTS UNDER VEC, TDA AND IRA CONTRACTS
The "exclusion ratio" method is also applicable to Annuity Payments made on or
after the Annuity Commencement date under IRA, TDA and VEC Contracts. Under an
IRA Contract, a Participant's "investment in the contract" is generally equal
to the total of his non-deductible Contributions made since January 1, 1987.
With respect to a VEC Contract, a Participant's "investment in the contract"
is equal to the total of the Participant's non-deductible Contributions which
are made in accordance with the provisions of a retirement plan which meets
the requirements of either Section 401(a) or Section 403(a) of the Code. With
respect to a TDA Contract, a Participant's "investment in the contract" would
generally be represented by the total amount of Contributions made which were
not excludable from a Participant's gross income, i.e., Contributions which
are in excess of the applicable limitations set forth in Section 403(b) of the
Code. In each case, the "expected return" is equal to the present discounted
value of the expected stream of Annuity Payments. As is the case with Annuity
Payments beginning on or after January 1, 1987 under an FPA Contract, the
"exclusion ratio" method continues to apply until the "investment in the
contract" has been recovered by the Participant. After that time, the
Participant will have to include the full amount of each Annuity Payment in
his income for each taxable year. In addition, if Annuity Payments from a TDA
Contract or a VEC Contract began before July 2, 1986, the "three year cost
recovery" rule may be applicable (see "Obtaining Tax Advice").
WITHDRAWALS UNDER VEC, TDA AND IRA CONTRACTS
Participants who receive payments under an IRA, TDA or VEC Contract on and
after July 2, 1986 which are not "amounts received as an annuity" or which are
received before the Annuity Commencement Date and who have an "investment in
the contract" generally may exclude only a portion of such payments from gross
income. The portion which may be excluded from gross income is generally
determined by dividing the Participant's "investment in the contract" by the
value of his vested account balance (or, in the case of a retirement plan
which is a defined benefit pension plan, the value of the vested accrued
benefit) as of the date of the distribution. The Internal Revenue Service may
indicate another date for valuing account balances for such purposes. It
should be noted that the value of a Participant's account balance on an
applicable valuation date under a VEC Contract issued in conjunction with a
defined benefit pension plan may be used in lieu of the present value of a
Participant's total vested accrued benefit under such plan if the "separate
contract" requirements of Section 72 are met (see "Obtaining Tax Advice"). A
special rule may apply with respect to Participant Contributions made before
January 1, 1987 which constitute part of the "investment in the contract."
Generally, such Contributions may be withdrawn prior to the Annuity
Commencement Date and not be subject to income taxation (earnings are subject
to taxation) if a Participant could have made such a withdrawal under the
terms of the retirement plan on or before May 5, 1986 without separating from
service (see "Obtaining Tax Advice" and "The Group and Individual Annuity
Contracts--Withdrawals").
LUMP SUM PAYMENTS UNDER VEC, TDA AND IRA CONTRACTS
Participants who receive a single sum payment of their entire account balance
under either an IRA, TDA or VEC Contract must include the entire amount of
such payment in their gross income in the tax year in which such payment was
received. However, any "investment in the contract" which has not been
recovered prior to the payment of such lump sum may be excluded from gross
income for such tax year.
QUALIFICATION OF CONTRACTS GENERALLY
The methods of taxation described above are only applicable to payments made
under Contracts issued in conjunction with plans which satisfy the
requirements of the Code.
Qualification of FPA Contracts Under the Code. FPA Contracts are issued on a
non-tax qualified basis and are generally intended for use by Participants for
personal financial planning purposes. FPA Contracts may also be issued in
conjunction
33
<PAGE>
with an employer's non-tax qualified deferred compensation plan (see
"Obtaining Tax Advice"). It is intended that the FPA Contracts will meet the
requirements for annuity contracts set forth in Section 72 of the Code, e.g.,
the requirements with respect to pre- and post-death distributions.
Qualification of VEC Contracts Under the Code. Generally, VEC Contracts are
issued in conjunction with tax qualified retirement plans which meet the
requirements of Section 401(a) or Section 403(a) of the Code. They are
intended to be used as funding vehicles for the after-tax employee
Contributions which were made under the provisions of such plans and within
the applicable limitations of the federal tax law. (See "Obtaining Tax
Advice.")
Qualification of TDA Contracts Under the Code. The TDA Contract is offered for
use with plans designed to meet the provisions of Section 403(b) of the Code.
Under Section 403(b), Contributions applied toward the purchase of annuity
contracts on behalf of employees of public schools and organizations exempt
from tax under Section 501(c)(3) of the Code are excludable from the gross
income of such employees. However, this exclusion is limited to the extent
that the aggregate Contributions per year for such employees cannot exceed the
"exclusion allowance" set forth in Section 403(b)(2) or, if applicable, the
contribution limitation set forth in Section 415(c) of the Code. If
Contributions are made under a salary reduction agreement an additional
limitation, set forth in Section 402(g) of the Code, is applicable. Generally,
contributions are limited to the least of these applicable limits. In general,
these limitations are as follows:
(1) The total Contribution for a year cannot exceed the excess of 20% of the
employee's includable compensation for that year multiplied by the employee's
years of service minus any amounts contributed by his employer and excludable
from the employee's gross income for any prior taxable years;
(2) The Contributions to the Plan cannot exceed the lesser of $30,000 or 25%
of a Participant's includable compensation, with compensation limited to
$160,000 for 1998 (to be indexed for inflation in subsequent years);
(3) Amounts which are contributed through salary reduction are limited to
$9,500 per year. (A special "catch-up," available to employees with 15 or more
years of service with the employer who have not made maximum contributions in
prior years may increase that amount by up to $3,000 per year, to a maximum
"catch-up" of $15,000.)
In addition, under certain circumstances the tax law may allow special
elections which would permit an increased exclusion allowance.
Qualification of IRA Contracts Under the Code. The IRA Contract is designed to
meet the requirements described in Section 408(b) of the Code.
Generally, the maximum allowable deduction which a Participant may take for
Contributions to an IRA Contract is $2,000 or 100% of annual compensation,
whichever is less. If a Participant participates in a pension plan, a tax-
deferred annuity contract, a SEP, a SIMPLE, or an eligible 457 plan (a pension
arrangement), and the Participant has an adjusted gross income (AGI) over a
specified amount, the Participant will not be entitled to the maximum
allowable deductible contribution. A Participant's allowable deductible
contribution will be reduced by $1 for every $5 by which the Participant's AGI
for 1998 exceeds $30,000, or $50,000 if married and filing jointly (such
amounts to increase each year until 2007), or $0 if married and filing
separately. As a consequence, a Participant will not be entitled to any tax
deductions for Contributions under an IRA Contract once the Participant's
adjusted gross income for 1998 reaches $40,000, or $60,000 if the Participant
is married and filing jointly (such amounts to increase each year until 2007)
or $10,000 if married and filing separately. If a Participant is married and
the spouse does not participate in a pension arrangement, the spouse may make
a Contribution to a spousal IRA, deductible to the same extent as the
Contribution for the Participant, even if the Participant participates in a
pension arrangement.
A Participant who is not entitled to deduct all or part of his Contributions
to an IRA under the above rules may still make non-deductible contributions of
up to $2,000 or 100% of his annual compensation, whichever is less, reduced by
the amount of the Participant's deductible contribution for the year. As with
deductible contributions, the earnings on the non-deductible contributions
will not be subject to taxation until withdrawn.
If a Participant makes a non-deductible contribution, the Participant must
report the amount of that contribution to the IRS when filing an income tax
return for the year. Participants who make non-deductible contributions to
IRAs are responsible for maintaining their own records regarding such
contributions. All contributions will be presumed by the Insurance Company to
be deductible, including for tax reporting purposes, when distributions occur,
and it is the responsibility of the Participant to make any appropriate
adjustments when reporting such distributions to the IRS on an income tax
return for the year of distribution.
A Participant may contribute up to $2,000 to an IRA on behalf of the
Participant for any tax year and may contribute up to $2,000 to a spousal IRA
for the Participant's spouse for any tax year (less any contributions to an
IRA made by the spouse). Excess Contributions may result in adverse income tax
consequences to a Participant.
34
<PAGE>
A Participant's Contributions to a SIMPLE IRA are excluded from gross income
for Federal income tax purposes.
These limits on Contributions, however, do not apply to tax-free rollovers
from other qualified retirement plans (see "Payment of Contributions").
SIMPLE IRAS--ROLLOVER LIMITATION
During the first two years of participation in a SIMPLE, a Participant may
rollover amounts from a SIMPLE IRA only to another SIMPLE IRA. After the two
year period, a Participant may rollover amounts from a SIMPLE IRA to any IRA.
PENALTY TAXES
TDA, IRA and VEC Contracts
In addition to ordinary income taxation, Section 72 of the Code imposes a
penalty tax on premature withdrawals from TDA, IRA and VEC Contracts. This
penalty tax is equal to 10% of the amount of the premature withdrawal which is
includable in gross income. However, if a Participant makes any withdrawals
from a SIMPLE IRA within the first two years of the Participant's
participation in the employer's SIMPLE, the early withdrawal penalty is
increased to 25% from 10%. In the circumstances described below, no penalty
tax will be imposed. The penalty tax applies to payments made to Participants
under the above Contracts prior to age 59 1/2 unless the distribution is made
under one of the following circumstances:
1. The Participant has died.
2. The Participant has become disabled.
3. The withdrawals are annuity payments made over the life (or life
expectancy) of the Participant or the joint lives (or joint life
expectancies) of the Participant and his beneficiary.
4. The withdrawals are to pay medical expenses of the Participant, or of
the Participant's spouse or dependents, if the medical expenses would be
deductible by the Participant for federal income tax purposes. (Medical
expenses generally are deductible if they are not covered by health
insurance or otherwise reimbursed and they exceed 7.5% of the taxpayer's
adjusted gross income.)
5. The withdrawals are to pay health insurance premiums for the
Participant, or the Participant's spouse or dependents, if the Policyowner
has received unemployment compensation for at least 12 weeks and certain
other eligibility requirements are met.
6. The withdrawals are for the payment of qualifying post-secondary
(college) education expenses.
7. The withdrawal is for qualified first-time home buyer expenses (up to
$10,000 per lifetime). OR
8. To a Participant who is at least 55 years old and has ended employment
with the employer who maintains the Contract. This exception does not
apply for IRA Contracts.
Other federal income tax penalties may be applicable to amounts accumulated or
distributed under IRA Contracts (see "Obtaining Tax Advice").
Roth IRA Contracts--Qualified Distributions
Any distribution that is a "qualified distribution" from a Roth IRA Contract
is tax-free and penalty tax free for the Participant. A qualified distribution
is a distribution made:
1. After the end of the five-year period beginning with the year in which
the Participant first contributed to the Roth IRA Contract (except that if
a Participant rolls over amounts under an IRA Contract to a Roth IRA
Contract, the amounts converted in any year are subject to a separate
five-year holding period); and
2. In one of the following circumstances:
a) The Participant is age 59 1/2 or older; or
b) The Participant has died; or
c) The Participant has become disabled; or
d) For qualified first-time home buyer expenses (up to $10,000 per
lifetime).
Legislation is pending before Congress that would make certain changes to the
definition of "qualified distribution" from a Roth IRA. Due to the pending
legislation, individuals should establish separate Roth IRA Contracts for any
conversion or rollovers made in different years, and a separate Roth IRA
Contract for other Roth IRA contributions.
35
<PAGE>
Roth IRA Contracts--Non-Qualified Distributions; When Penalty Tax Not
Applicable
Any withdrawal by a Participant that is not a "qualified distribution" is
first considered to be a return of after-tax Contributions, which are not
subject to taxation or the 10% penalty tax. After a Participant has recovered
all Contributions under the Roth IRA Contract, the Participant will be taxed
at ordinary income rates on the amount of investment earnings withdrawn and
may be subject to the penalty tax on the taxable amount. (For purposes of this
Rule, the Participant can aggregate all his or her Roth IRA contracts.)
There is no penalty tax for withdrawals that are not Qualified Distributions
if one of the Regular IRA exceptions to the penalty tax applies. See "IRA
Contracts--No Penalty Tax For Withdrawals Before Age 59 1/2 If:" above.
Legislation is pending before Congress, which if adopted would be effective as
of January 1, 1998, that would change some of these rules for Roth IRAs. In
particular, for any withdrawal from a Roth IRA within 5 years of a conversion
or rollover from another IRA, the 10% penalty tax would apply even if the
amount withdrawn is not taxable. Also, for conversions or rollovers from
another IRA which are made during 1998, the penalty tax would be increased to
20% for withdrawals within 5 years of the conversion or rollover even if the
withdrawal is not taxable. If rollovers or conversions are made to the same
Roth IRA contract as other Roth IRA contributions, the 5 year period would
start from the most recent conversion or rollover and withdrawals would be
treated as being made first from the conversion or rollover amounts. As a
consequence, individuals should establish separate Roth IRA contracts for any
conversion or rollovers made in different years, and a separate Roth IRA
contract for other Roth IRA contributions.
FPA Contracts
Since January 1, 1987, a 10% penalty tax has been imposed on premature
withdrawals made from an FPA Contract which has been issued since January 18,
1985. This penalty tax is applicable to the amount of the premature withdrawal
which is includable in gross income. This penalty tax will be imposed on the
taxable portion of payments made before a Participant attains age 59 1/2
unless the distribution is made under one of the following circumstances:
1. On account of a Participant's death or disability;
2. As part of a series of substantially equal periodic payments made over the
Participant's life (or life expectancy) or over the joint lives (or joint life
expectancies) of a Participant and his beneficiary;
3. From amounts which are attributable to Contributions made prior to August
14, 1982;
4. From a Contract purchased in conjunction with a plan that meets the
requirements of Section 401(a) or was issued under an IRA or TDA;
5. Under an immediate annuity contract; or
6. Under a Contract purchased for an employee by a plan upon its termination,
provided the plan met the requirements of Section 401(a) or Section 403(a) of
the Code.
A 5% penalty tax was applicable to premature payments received before 1987
under FPA Contracts as well as to premature payments received after December
31, 1982 under FPA Contracts issued before January 19, 1985 (see "Obtaining
Tax Advice").
Other federal income tax penalties may be applicable to amounts accumulated or
distributed under VEC, IRA and TDA Contracts (see "Obtaining Tax Advice").
OTHER MATTERS
Minimum Distributions
The Code contains a series of rules which require that minimum distributions
under IRA, VEC, and TDA Contracts commence by a certain time. However, for
Roth IRAs, no distributions are required until the death of the Participant.
Generally, such rules provide that distributions under a VEC Contract must
begin no later than April 1 of the year following the year in which the
Participant attains age 70 1/2, unless the Participant has not terminated his
employment.
Distributions under IRA Contracts (other than Roth IRAs) must begin by April 1
of the year following the year in which the Participant attains age 70 1/2,
even if such Participant does not retire.
Distributions under TDA Contracts are subject to similar rules. In general,
benefits accruing after December 31, 1986 must be distributed beginning by
April 1 of the year following the year the Participant attains age 70 1/2,
unless the Participant is still employed. Distributions of a Participant's
pre-1987 account balance generally must begin in the year after the
Participant reaches age 75.
36
<PAGE>
If minimum distribution requirements are not met, a penalty tax equal to 50%
of the difference between the required minimum and the actual distribution may
be applicable (see "Obtaining Tax Advice").
Estate Taxes
In general, a death benefit, consisting of amounts payable to a Participant's
beneficiary (see "Death Benefits") may be includable in the Participant's
estate for federal estate tax purposes. (See "Obtaining Tax Advice.")
WITHHOLDING ON ANNUITY PAYMENTS AND OTHER DISTRIBUTIONS
FPA and IRA Contracts
Federal income tax withholding on Annuity Payments and other distributions
(such as lump sum distributions or premature withdrawals) is required. In
addition, certain states require withholding if federal withholding is
applicable. However, recipients of Annuity Payments or other distributions
under the Contracts are generally permitted to make an election not to have
federal income tax withheld. Such an election may be revoked by the
Participant at any time. If such election is revoked, withholding will
commence.
The withholding rate utilized by the Insurance Company will be applied only
against the taxable portion of the Annuity Payments or of the other
distributions. This rate will be determined based upon the nature of the
distribution(s). Federal tax will be withheld from Annuity Payments pursuant
to the Annuitant's withholding certificate. If no withholding certificate is
filed with the Insurance Company, federal tax will be withheld from Annuity
Payments on the basis that the Annuitant is married with three withholding
exemptions. Federal tax on withdrawals other than Annuity Payments will be
withheld in general at a flat 10% rate of the amount withdrawn. Future IRS
Regulations may also require the withholding of the full 10% penalty tax (see
"Penalty Taxes" above) under some circumstances.
TDA and VEC Contracts
Most withdrawals are subject to automatic 20% federal income tax withholding
unless the participant elects to have the withdrawal paid directly, as a tax-
free rollover, to another eligible plan or an IRA. The same rules generally
apply to payments of death benefits to a surviving spouse beneficiary, or to
payments to a spouse or former spouse in connection with a divorce or
separation decree or court order, except that a surviving spouse may only have
a direct rollover made to an IRA. The required 20% federal tax withholding
cannot be waived if a direct rollover is not elected.
The rules do not apply to all payments. The automatic 20% withholding does not
apply to any distribution that is (a) one of a series of substantially equal
periodic payments (not less frequently than annually) made (1) for the life
(or life expectancy) of the Participant or the joint lives (or joint life
expectancies) of the Participant and the Participant's designated beneficiary,
or (2) for a specified period of 10 years or more, or (b) a minimum
distribution required under Section 401(a)(9) of the Code. In general, tax
withholding at different rates (generally 10%) does apply to such payments but
payees can generally elect to have withholding waived. Death benefit payments
to non-spouse beneficiaries generally are subject to tax withholding at
different rates, but payees can elect to have withholding waived. Certain
small payments may also be exempt from direct rollover and tax withholding
rules.
When withdrawals or benefit payments are to be made, participants (or
beneficiaries) will be given detailed information and advised of their
elections. That information should be carefully reviewed. In addition, certain
states require withholding if federal withholding is applicable.
OBTAINING TAX ADVICE
THIS DESCRIPTION OF THE CURRENT FEDERAL TAX STATUS AND CONSEQUENCES FOR
PARTICIPANTS UNDER THE CONTRACTS IS NOT EXHAUSTIVE AND IS FOR INFORMATION
PURPOSES ONLY, AND TAX PROVISIONS AND REGULATIONS MAY CHANGE AT ANY TIME. This
description does not cover all situations involving the purchase of an annuity
or the election of an option under the Contracts. A Participant's tax results
may vary depending upon individual situations, and special rules may apply in
certain cases. A Participant also may be subject to State and local taxes. The
tax provisions in some states do not correspond to the Federal tax provisions
for IRAs. IN PARTICULAR, A NUMBER OF STATES DO NOT CURRENTLY FOLLOW FEDERAL
TAX PROVISIONS FOR ROTH IRAS. For these reasons, a Participant should consult
a qualified tax adviser for complete tax information, including advice
concerning the various forms of IRA Contracts available. This Prospectus does
not discuss the requirements and limitations under the Code applicable to
employers in establishing and maintaining SEPs and SIMPLEs or for the
deductibility of employer contributions. Employers should consult their own
qualified tax advisers.
37
<PAGE>
VOTING RIGHTS
In accordance with the Insurance Company's view of present applicable law and
so long as the Commission continues to interpret the 1940 Act as requiring
pass-through voting privileges, the Insurance Company will vote the shares of
the Investment Company Funds, the Fidelity Portfolios, the Scudder Portfolios,
the American Century VP Capital Appreciation Fund and Calvert Social Balanced
Portfolio held in the Separate Account at regular and special meetings of the
shareholders of such funds or portfolios according to instructions received
from persons having the right to instruct the Insurance Company on how to vote
the shares, as defined below. The Insurance Company will vote shares for which
it has not received instructions in the same proportion as the Insurance
Company votes shares for which the Insurance Company has received
instructions, except for shares owned by the Insurance Company representing
"seed" money, which will be voted in the Insurance Company's discretion. The
Insurance Company exercises discretion with respect to less than 1% of the
voting interest in the Separate Account. If the Investment Company Act of 1940
should be amended, or if the present interpretation thereof should change, and
as a result the Insurance Company determines that it is permitted to vote the
shares of the Investment Company Funds, the Fidelity Portfolios, the Scudder
Portfolios, the American Century VP Capital Appreciation Fund and Calvert
Social Balanced Portfolio in its own discretion, it may elect to do so.
The person having the right to give voting instructions to the Insurance
Company is the following: under an individual Contract, the person to whom the
Contract is issued and for whom an amount is accumulated in the Separate
Account, and, under a group Contract, the individual for whom amounts are
accumulated in the Separate Account.
Each person having the right to give voting instructions to the Insurance
Company will receive periodic reports relating to any of the Investment
Company Funds, the Fidelity Portfolios, the Scudder Portfolios, the American
Century VP Capital Appreciation Fund and Calvert Social Balanced Portfolio for
which he or she has the right to give voting instructions, including proxy
material and a form with which to give voting instructions.
PERFORMANCE INFORMATION
MONEY MARKET FUND
From time to time, quotations of the "yield" and "effective yield" of the
Separate Account's Money Market Fund may be included in advertisements, sales
literature or shareholder reports. Both yield figures are based on the
historical performance of the Fund and show the performance of a hypothetical
investment and are not intended to indicate future performance. The yield of
the Money Market Fund refers to the net investment income generated by the
Fund over a specified seven-day period (the ending date of which will be
stated). This income is then annualized. That is, the amount of income
generated by the Fund during that week is assumed to be generated during each
week in such a 52-week period and is shown as a percentage. The effective
yield is expressed similarly but, when annualized, the income earned by an
investment in the Fund is assumed to be reinvested. The effective yield will
be slightly higher than the yield because of the compounding effect of this
assumed reinvestment. Yield and effective yield for the Money Market Fund will
vary based on, among other things, changes in the market conditions, the level
of interest rates and the level of the Money Market Fund's portfolio expenses.
OTHER FUNDS
From time to time, quotations of a Fund's "total return" may be included in
advertisements, sales literature or shareholder reports. Total return figures
are based on the historical performances of the Fund and show the performance
of a hypothetical investment and are not intended to indicate future
performance. The total return of a Fund refers to return assuming an
investment has been held in the Fund for one, five and ten years and for the
life of the Fund (the ending date of which will be stated). The total return
quotations are expressed in terms of average annual compounded rates of return
for all periods quoted and assume that all dividends and capital gains
distributions were reinvested. Total return for a Fund will vary based on,
among other things, changes in market conditions and the level of the Fund's
expenses.
For a detailed description of the methods used to determine yield and total
return for the Separate Account's Funds, see the Statement of Additional
Information.
38
<PAGE>
FUNDING AND OTHER CHANGES
The Insurance Company reserves the right, subject to compliance with
applicable law, including approval of Participants if so required, (1) to
create new investment funds of the Separate Account at any time; (2) to
transfer assets determined by the Insurance Company to be associated with the
class of contracts to which the Contracts belong from the Separate Account to
another separate account of the Insurance Company by withdrawing the same
percentage of each investment in the Separate Account with appropriate
adjustments to avoid odd lots and fractions; (3) to create additional separate
investment accounts or combine any two or more accounts including the Separate
Account; (4) to operate the Separate Account as a diversified, open-end
management investment company under the 1940 Act, or in any other form
permitted by law, and to designate an investment adviser in connection
therewith, which may be the Insurance Company, an affiliate of the Insurance
Company or another person; (5) to deregister the Separate Account under the
1940 Act; and (6) to operate the Separate Account under the general
supervision of a committee any or all the members of which may be interested
persons (as defined in the 1940 Act) of the Insurance Company or an affiliate,
or to discharge the committee of one or more of the Separate Accounts.
OTHER VARIABLE ANNUITY CONTRACTS
In addition to the Contracts described in this Prospectus, the Insurance
Company offers other individual and group variable annuity contracts, some of
which are not described in this Prospectus but which also participate in the
Separate Account.
39
<PAGE>
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
<S> <C>
Distribution of the Contracts
Money Market Yield Calculation
Performance Information
Safekeeping of Separate Account Assets
State Regulation
Periodic Reports
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Legal Proceedings
Legal Matters
Experts
Additional Information
Financial Statements
</TABLE>
OBTAINING A COPY OF THE STATEMENT OF ADDITIONAL INFORMATION
To receive a copy of the Statement of Additional Information at no charge, the
Participant may as an alternative to calling (212) 224-1600, detach the Form
included below and mail it to Mutual of America Life Insurance Company, 320
Park Avenue, New York, New York 10022.
- -------------------------------------------------------------------------------
ORDER FORM FOR STATEMENT OF ADDITIONAL INFORMATION
To: Mutual of America Life Insurance Company
Please send me a copy of the Statement of Additional Information dated May 1,
1998 for the Tax-Deferred Annuity Plan, Voluntary Employee Contribution
Program, Individual Retirement Annuity and Flexible Premium Annuity offered by
Mutual of America. My name and address are as follows:
---------------------------------------------------
Name
---------------------------------------------------
Street Address
---------------------------------------------------
City State Zip
40
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
TAX-DEFERRED ANNUITY PLAN
VOLUNTARY EMPLOYEE CONTRIBUTION PROGRAM
INDIVIDUAL RETIREMENT ANNUITY
FLEXIBLE PREMIUM ANNUITY
OFFERED BY
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
320 PARK AVENUE
NEW YORK NEW YORK 10022
---------------
This Statement of Additional Information expands upon subjects discussed in
the current Prospectus for the Tax-Deferred Annuity Plan, Voluntary Employee
Contribution Program, Individual Retirement Annuity and Flexible Premium
Annuity Contracts ("Contracts") offered by Mutual of America Life Insurance
Company. You may obtain a copy of the Prospectus dated May 1, 1998, by calling
(212) 224-1600, or writing to Mutual of America Life Insurance Company, 320
Park Avenue, New York, New York 10022. Terms used in the current Prospectus
for the Contracts are incorporated in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACTS.
Dated: May 1, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DISTRIBUTION OF THE CONTRACTS.............................................. 2
MONEY MARKET YIELD CALCULATION............................................. 2
PERFORMANCE INFORMATION.................................................... 2
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS..................................... 5
STATE REGULATION........................................................... 5
PERIODIC REPORTS........................................................... 6
LEGAL PROCEEDINGS.......................................................... 6
LEGAL MATTERS.............................................................. 6
EXPERTS.................................................................... 6
ADDITIONAL INFORMATION..................................................... 6
FINANCIAL STATEMENTS....................................................... 6
</TABLE>
<PAGE>
DISTRIBUTION OF THE CONTRACTS
The Insurance Company offers the Contracts for sale on a continuous basis
through certain employees of the Insurance Company. The only compensation paid
for sales of the Contracts is in the form of salary. The Insurance Company is
registered with the Commission as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. All persons engaged in
selling the Contracts are licensed agents of the Insurance Company and are
duly qualified registered representatives.
MONEY MARKET YIELD CALCULATION
In accordance with regulations adopted by the Securities and Exchange
Commission, the Insurance Company is required to disclose the current
annualized yield of the Money Market Fund of the Separate Account for a seven-
day period in a manner which does not take into consideration any realized or
unrealized gains on losses or shares of the Money Market Fund of the
Investment Company or on its portfolio securities. This current annualized
yield is computed by determining the net change (exclusive of realized gains
and losses on the sale of securities and unrealized appreciation and
depreciation) in the value of a hypothetical account having a balance of one
unit of the Money Market Fund of the Separate Account at the beginning of such
seven-day period, dividing such net change in account value by the value of
the account at the beginning of the period to determine the base period return
and annualizing this quotient on a 365-day basis. The net change in account
value reflects the deductions for administrative and distribution expenses or
services and the mortality and expense risk charge and income and expenses
accrued during the period. Because of these deductions, the yield for the
Money Market Fund of the Separate Account will be lower than the yield for the
Money Market Fund of the Investment Company.
The Securities and Exchange Commission also permits the Insurance Company to
disclose the effective yield of the Money Market Fund of the Separate Account
for the same seven-day period, determined on a compounded basis. The effective
yield is calculated by compounding the unannualized base period return by
adding one to the base period return, raising the sum to a power equal to 365
divided by seven, and subtracting one from the result.
The yield on amounts held in the Money Market Fund of the Separate Account
normally will fluctuate on a daily basis. Therefore, the disclosed yield for
any given past period is not an indication or representation of future yield
or rates of return. The Money Market Fund of the Separate Account's actual
yield is affected by changes in interest rates on money market securities,
average portfolio maturity of the Money Market Fund of the Investment Company,
the types and quality of portfolio securities held by the Money Market Fund of
the Investment Company, and its operating expenses.
PERFORMANCE INFORMATION
MONEY MARKET FUND
From time to time, quotations of the performance of the Separate Account's
Money Market Fund may be included in advertisements, sales literature or
shareholder reports. These performance figures are calculated in the following
manner:
A. Yield is the net annualized yield based on a specified seven calendar-days
calculated at simple interest rates. Yield is calculated by determining the
net change, exclusive of capital changes, in the value of a hypothetical
preexisting account having a balance of one share at the beginning of the
period and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return. The yield is
annualized by multiplying the base period return by 365/7. The yield figure
is stated to the nearest hundredth of one percent.
B. Effective yield is the net annualized yield for a specified seven calendar-
days assuming a reinvestment of the income or compounding. Effective yield
is calculated by the same method as yield except the yield figure is
compounded by adding 1, raising the sum to a power equal to 365 divided by
7, and subtracting one from the result, according to the following formula:
Effective Yield = [(Base Period Return +1) 365/7]-1.
The current yield of the Money Market Fund of the Separate Account for the
seven-day period ended December 31, 1997 was 4.39%.
As described above, yield and effective yield are based on historical earnings
and show the performance of a hypothetical investment and are not intended to
indicate future performance. Yield and effective yield will vary based on
changes in market conditions and the level of expenses.
SAI-2
<PAGE>
In connection with communicating its total return to current or prospective
Participants, the Money Market Fund also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indices which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs.
BOND FUNDS
From time to time, quotations of the yield of the Separate Account's
Investment Company Bond Funds and Scudder Bond Fund may be included in
advertisements, sales literature or shareholder reports. Yield is computed by
annualizing net investment income, as determined by the Commission's formula,
calculated on a per accumulation unit basis, for a recent one month or 30-day
period and dividing that amount by the unit value of the Fund at the end of
the period.
FUNDS OTHER THAN MONEY MARKET
From time to time, quotations of a Fund's "total return" may be included in
advertisements, sales literature or shareholder reports. These performance
figures are calculated in the following manner:
A. Average Annual Total Return is the average annual compounded rate of return
for the periods of one year, five years and ten years, if applicable, all
ended on the date of a recent calendar quarter. In addition, the total
return for the life of the Fund is given. Total return quotations reflect
changes in the price of a Fund's shares and assume that all dividends and
capital gains distributions during the respective periods were reinvested
in Fund shares. Total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment over such periods,
according to the following formula (total return is then expressed as a
percentage):
T = (ERV divided by P)to the 1st power divided by the Nth power - 1
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at the
beginning of the applicable period.
B. Cumulative Total Return is the compound rate of return on a hypothetical
initial investment of $1,000 for a specified period. Cumulative total
return quotations reflect changes in the price of a Fund's shares and
assume that all dividends and capital gains distributions during the period
were reinvested in Fund shares. Cumulative total return is calculated by
finding the compound rates of return of a hypothetical investment over such
periods, according to the following formula (cumulative total return is
then expressed as a percentage):
C = (ERV divided by P) - 1.
C = Cumulative Total Return
P = hypothetical initial payment of $1,000
ERV = ending redeemable value: ERV is the value, at the end of the applicable
period, of a hypothetical $1,000 investment made at the beginning of the
applicable period.
SAI-3
<PAGE>
AVERAGE ANNUAL
TOTAL RETURN FOR PERIODS
ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
FUND ONE YEAR FIVE YEARS TEN YEARS LIFE OF THE FUND
---- -------- ---------- --------- ----------------
Investment Company All America............ 24.9% 17.1% 13.6% 14.9%(1)
<S> <C> <C> <C> <C>
Investment Company Equity Index........... 31.1 N/A N/A 17.7 (2)
Investment Company Bond................... 8.7 6.8 7.5 7.9 (1)
Investment Company Short-Term Bond........ 4.4 N/A N/A 3.4 (2)
Investment Company Mid-Term Bond.......... 5.7 N/A N/A 4.6 (2)
Investment Company Composite.............. 15.9 11.0 10.1 11.1 (1)
Investment Company Aggressive Equity...... 19.4 N/A N/A 22.9 (3)
Fidelity VIP Equity-Income................ 26.3 18.5 15.2 13.3 (4)
Fidelity VIP II Contra.................... 22.5 N/A N/A 26.4 (5)
Fidelity VIP II Asset Manager............. 19.1 11.6 N/A 11.5 (6)
Scudder Capital Growth.................... 33.7 16.3 15.4 14.3 (7)
Scudder Bond.............................. 7.3 5.6 7.2 6.9 (7)
Scudder International..................... 7.5 12.1 10.4 8.5 (8)
American Century VP Capital Appreciation.. (4.5) 4.4 7.2 7.9 (9)
Calvert Responsibly Invested Balanced..... 18.3 11.2 10.2 9.5 (10)
CUMULATIVE TOTAL RETURN FOR PERIODS
ENDED DECEMBER 31, 1997
<CAPTION>
FUND ONE YEAR FIVE YEARS TEN YEARS LIFE OF THE FUND
---- -------- ---------- --------- ----------------
Investment Company All America............ 24.9% 119.9% 257.4% 505.1%(1)
<S> <C> <C> <C> <C>
Investment Company Equity Index........... 31.1 N/A N/A 123.0 (2)
Investment Company Bond................... 8.7 38.7 105.8 168.7 (1)
Investment Company Short-Term Bond........ 4.4 N/A N/A 17.9 (2)
Investment Company Mid-Term Bond.......... 5.7 N/A N/A 24.5 (2)
Investment Company Composite.............. 15.9 68.8 162.2 290.7 (1)
Investment Company Aggressive Equity...... 19.4 N/A N/A 112.8 (3)
Fidelity VIP Equity-Income................ 26.3 133.6 312.4 306.4 (4)
Fidelity VIP II Contra.................... 22.5 N/A N/A 102.1 (5)
Fidelity VIP II Asset Manager............. 19.1 72.8 N/A 121.9 (6)
Scudder Capital Growth.................... 33.7 112.9 320.5 429.1 (7)
Scudder Bond.............................. 7.3 31.1 99.6 130.7 (7)
Scudder International..................... 7.5 76.9 168.3 138.2 (8)
American Century VP Capital Appreciation.. (4.5) 23.8 101.1 115.2 (9)
Calvert Responsibly Invested Balanced..... 18.3 70.2 163.2 178.4 (10)
</TABLE>
- -------
(1) For the period beginning January 1, 1985 (commencement of operations)
(2) For the period beginning February 5, 1993 (commencement of operations)
(3) For the period beginning May 2, 1994 (commencement of operations)
(4) For the period beginning October 9, 1986 (commencement of operations)
(5) For the period beginning January 3, 1995 (commencement of operations)
(6) For the period beginning September 6, 1989 (commencement of operations)
(7) For the period beginning July 16, 1985 (commencement of operations)
(8) For the period beginning May 1, 1987 (commencement of operations)
(9) For the period beginning November 20, 1987 (commencement of operations)
(10) For the period beginning September 2, 1986 (commencement of operations)
The returns for the All America Fund (previously called the "Stock Fund")
prior to May 1, 1994 reflect the results of that Fund prior to a change in its
investment objectives and policies and the addition of subadvisers on that
date. The commencement dates for the Funds reflect the commencement dates for
the underlying fund or portfolio. Separate Account charges have been deducted
for funds or portfolios which commenced operations prior to the commencement
of operations of the corresponding Fund of the Separate Account.
SAI-4
<PAGE>
The above figures for the Money Market and other Funds, both for average
annual total return and cumulative total return, reflect charges made to the
Separate Account, including a monthly service charge (a $2.00 monthly contract
fee assessed as a cost per $1,000 based on the average account balance for all
individually allocated contracts). The monthly contract fee is deducted
initially from any net assets in the Participant's Account which have been
allocated to the General Account. If no net assets are allocated to such
Account, the monthly contract fee would be deducted from the net assets of the
Participant's Account which have been allocated to one of the Funds of the
Separate Account in the following order: (a) Investment Company Money Market,
(b) Investment Company Short-Term Bond, (c) Investment Company Mid-Term Bond,
(d) Investment Company Bond, (e) Scudder Bond, (f) Investment Company
Composite, (g) Fidelity VIP II Asset Manager, (h) Calvert Social Balanced
Portfolio, (i) Fidelity VIP Equity-Income, (j) Investment Company All America,
(k) Investment Company Equity Index, (l) Fidelity VIP II Contra, (m)
Investment Company Aggressive Equity, (n) Scudder Capital Growth, (o) Scudder
International, and (p) American Century VP Capital Appreciation. As such, the
allocation of the net assets of a Participant's Account would determine
whether any monthly contract fee would be charged against a Separate Account
Fund.
The actual treatment of the monthly contract fee and its effect on total
return would depend on the Participant's actual allocation. If a Participant
has net assets in the General Account, the monthly contract fee would be
deducted from the General Account, not any Separate Account Fund. Accordingly,
the illustration of such a Participant's net assets held in any of the Funds
of the Separate Account would experience a higher total return than shown
above. If a Participant has no assets allocated to the General Account, but
has net assets allocated to more than one Fund of the Separate Account, the
fee would only be deducted from one of the Funds so that an illustration of
total return figures of the other Funds would be higher than shown above and
the Separate Account Fund from which the fee was deducted would illustrate a
lower total return than shown above. If a Participant has no assets in the
General Account, but has net assets allocated only to one Fund of the Separate
Account, then after deduction of the monthly contract fee, an illustration of
such a total return figure would be lower than that shown above.
Performance figures, when used, are based on historical earnings and are not
guaranteed. They are not necessarily indicative of the future investment
performance of a particular Fund. Total return and yield for a Fund will vary
based on changes in market conditions and the level of the Fund's expenses.
Unit values will fluctuate so shares, when redeemed, may be worth more or less
than their original cost.
In connection with communicating its total return to current or prospective
Participants, a Fund also may compare these figures to the performance of
other variable annuity accounts tracked by mutual fund rating services or to
other unmanaged indices which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs.
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
Title to assets of the Separate Account is held by the Insurance Company.
Records are maintained of all purchases and redemptions of eligible Portfolio
Companies shares held by each of the Funds of the Separate Account.
STATE REGULATION
The Insurance Company is subject to regulation by the New York State
Superintendent of Insurance ("Superintendent") as well as by the insurance
departments of all the other states and jurisdictions in which it does
business.
The Insurance Company must file with the Superintendent an annual statement on
a form promulgated by the National Association of Insurance Commissioners. It
must also file with New York and other states a separate statement with
respect to any separate accounts that it may maintain, including the Separate
Account. The Insurance Company's books and assets are subject to review and
examination by the Superintendent and the Superintendent's agents at all
times, and a full examination into the affairs of the Insurance Company is
made at least every five years. A full examination of the Insurance Company's
operations may also be conducted periodically by other states.
The laws of New York and of other states in which the Insurance Company is
licensed to transact business provide specifically for regulation and
supervision of the variable annuity activities of life insurance companies.
Included in such regulations are requirements relating to mandatory contract
provisions and approval of contract form. Such state regulation does not
involve any supervision or control over the investment policies of the
Separate Account, or the selection of investments therefor, except for
verification that any such investments are permissible under applicable law.
SAI-5
<PAGE>
Generally, the states in which the Insurance Company does business apply the
laws of New York in determining permissible investments for the Insurance
Company.
PERIODIC REPORTS
Prior to a Participant's Annuity Commencement Date, the Participant will be
provided by the Insurance Company, at least quarterly, with a statement as of
a specified date covering the period since the last statement. The statement
will set forth, for the covered period: (1) the Deferred Compensation deposits
made on behalf of the Participant under 457 Contracts, or Contributions made
for the purchase of an annuity under other Contracts, to the Separate and
General Accounts; the date such Deferred Compensation was deducted from the
Participant's salary or Contribution made and the date it was credited to the
Participant's account; (2) the interest accrued on amounts allocated for the
Participant to the General Account; (3) the number and dollar value of
Accumulation Units credited to the Participant in each Fund of the Separate
Account; and (4) the total amounts of all withdrawals and transfers from each
Account and each Fund. Employers have been informed that payment must be
remitted to the Insurance Company within seven days of the date it has been
withheld from the Participant's pay. The statement also will specify the
Participant's Account Balance available to provide a periodic benefit, cash
return, or death benefit with respect to the Participant. The Insurance
Company will transmit to Participants, at least semi-annually, reports showing
the financial condition of the Separate Account, and a schedule of investments
held in each Fund of the Investment Company.
LEGAL PROCEEDINGS
The Insurance Company is engaged in litigation of various kinds which in its
judgment is not of material importance in relation to its total assets. There
are no legal proceedings pending to which the Separate Account is a party.
LEGAL MATTERS
All matters of applicable state law pertaining to the Contracts, including the
Insurance Company's right to issue the Contracts thereunder, have been passed
upon by Patrick A. Burns, Senior Executive Vice President and General Counsel
of the Insurance Company. Legal matters relating to the Federal securities
laws have been passed upon by Stanley M. Lenkowicz, Senior Vice President and
Deputy General Counsel of the Insurance Company.
EXPERTS
The financial statements included in this Statement of Additional Information
have been audited by the Insurance Company's independent public accountants,
Arthur Andersen LLP, as indicated in their reports with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
giving said reports.
ADDITIONAL INFORMATION
A registration statement has been filed with the Commission under the
Securities Act of 1933, as amended, with respect to the Contracts discussed in
this Statement of Additional Information. Not all of the information set forth
in the registration statement, amendments and exhibits thereto has been
included in this Statement of Additional Information or in the current
Prospectus for the Contracts. Statements contained herein concerning the
content of the Contracts and other legal instruments are intended to be
summaries. For a complete statement of the terms of those documents, reference
should be made to the materials filed with the Commission.
FINANCIAL STATEMENTS
To the extent that Participants under the Contracts are participating in the
investment performance of the Separate Account, the amounts of Participants'
Account Balances and annuity payments are affected primarily by the investment
results of the chosen Fund(s) of the Separate Account.
The financial statements of the Insurance Company that are included in this
Statement of Additional Information should be considered only as bearing on
the ability of the Insurance Company to meet its obligations under the
Contracts. They should not be considered as bearing on the investment
performance of the assets held in the Separate Account.
SAI-6
<PAGE>
Financial Statements of the Separate Account for 1997 are included as follows:
<TABLE>
<S> <C>
Statement of Assets and Liabilities................................... V
Statement of Operations............................................... VII
Statements of Changes in Net Assets................................... IX
Notes to Financial Statements......................................... XII
Report of Independent Public Accountants.............................. XVI
Financial Statements of the Insurance Company for 1997 are included as follows:
Report of Independent Public Accountants.............................. SAI-8
Consolidated Statements of Financial Condition........................ SAI-9
Consolidated Statements of Operations and Surplus..................... SAI-10
Consolidated Statements of Cash Flows................................. SAI-11
Notes to Consolidated Financial Statements............................ SAI-12
</TABLE>
SAI-7
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
INVESTMENT COMPANY
---------------------------------------------------
MONEY MARKET ALL AMERICA EQUITY INDEX BOND
FUND FUND FUND FUND
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Assets:
Investments in Mutual of
America Investment
Corporation at market
value
(Cost:
Money Market Fund --
$33,424,720
All America Fund --
$273,073,807
Equity Index Fund --
$120,918,440
Bond Fund --
$37,857,784)
(Notes 1 and 2)......... $32,847,132 $347,116,077 $153,966,219 $37,979,161
Due From (To) Mutual of
America General
Account................. 1,459 (427,556) 493,450 (8,060)
----------- ------------ ------------ -----------
Net Assets............... $32,848,591 $346,688,521 $154,459,669 $37,971,101
=========== ============ ============ ===========
Unit Value at December
31, 1997 (Note 5)....... $ 1.95 $ 6.76 $ 2.26 $ 3.00
====== ====== ====== ======
Number of Units
Outstanding at December
31, 1997 (Note 5)....... 16,831,293 51,312,383 68,461,583 12,671,471
=========== ============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
-----------------------------------------------
AGGRESSIVE
SHORT-TERM MID-TERM COMPOSITE EQUITY
BOND FUND BOND FUND FUND FUND
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Assets:
Investments in Mutual of
America Investment
Corporation at market value
(Cost:
Short-Term Bond Fund --
$2,823,723
Mid-Term Bond Fund --
$6,010,147
Composite Fund --
$277,684,362
Aggressive Equity Fund --
$145,068,534)
(Notes 1 and 2).............. $2,756,382 $5,638,323 $267,467,587 $153,734,203
Due From (To) Mutual of
America General Account...... 51,726 2,774 48,562 82,639
---------- ---------- ------------ ------------
Net Assets.................... $2,808,108 $5,641,097 $267,516,149 $153,816,842
========== ========== ============ ============
Unit Value at December 31,
1997 (Note 5)................ $ 1.19 $ 1.26 $ 4.36 $ 2.15
====== ====== ====== ======
Number of Units Outstanding at
December 31, 1997
(Note 5)..................... 2,354,989 4,478,213 61,359,153 71,468,257
========== ========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
V
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SCUDDER AMERICAN CENTURY CALVERT
--------------------------------------- ---------------- -------------
CAPITAL VP CAPITAL
BOND GROWTH INTERNATIONAL APPRECIATION RESPONSIBLY
FUND FUND FUND FUND INVESTED FUND
----------- ------------ ------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Scudder
Portfolios, American
Century VP Capital
Appreciation Fund and
Calvert Responsibly
Invested Portfolio at
market value
(Cost:
Scudder Bond Fund --
$18,341,309
Scudder Capital Growth
Fund -- $232,108,072
Scudder International
Fund -- $103,157,411
American Century VP
Capital Appreciation
Fund -- $49,903,872
Calvert Responsibly
Invested Fund --
$28,569,357)
(Notes 1 and 2)........ $18,301,206 $328,836,635 $118,904,168 $49,521,243 $32,998,938
Due From (To) Mutual of
America General
Account................ 46,687 (3,016) (224,195) 256,004 43,544
----------- ------------ ------------ ----------- -----------
Net Assets.............. $18,347,893 $328,833,619 $118,679,973 $49,777,247 $33,042,482
=========== ============ ============ =========== ===========
Unit Value at December
31, 1997 (Note 5)...... $ 12.37 $ 29.64 $ 14.46 $ 11.04 $ 2.65
======= ======= ======= ======= ======
Number of Units
Outstanding at
December 31, 1997 (Note
5)..................... 1,483,509 11,093,827 8,204,725 4,510,083 12,478,750
=========== ============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
----------------------------------------
VIP VIP II VIP II
EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND
------------- ------------ -------------
<S> <C> <C> <C>
Assets:
Investments in Fidelity Portfolios at
market value
(Cost:
VIP Equity-Income Fund --
$80,156,668
VIP II Contra Fund -- $89,492,657
VIP II Asset Manager Fund --
$21,735,892)
(Notes 1 and 2)..................... $96,838,403 $115,077,349 $24,238,728
Due From (To) Mutual of America
General Account..................... 122,065 51,690 60,586
----------- ------------ -----------
Net Assets........................... $96,960,468 $115,129,039 $24,299,314
=========== ============ ===========
Unit Value at December 31, 1997 (Note
5).................................. $ 27.77 $ 20.36 $ 21.14
======= ======= =======
Number of Units Outstanding at
December 31, 1997 (Note 5).......... 3,491,209 5,655,675 1,149,512
=========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
VI
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INVESTMENT COMPANY
---------------------------------------------------------
MONEY MARKET ALL AMERICA EQUITY INDEX BOND
FUND FUND FUND FUND
------------ ----------- ------------ -----------------
<S> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends.............. $2,049,430 $42,544,942 $ 3,236,502 $ 2,438,040
---------- ----------- ------------ -----------
Total income............ 2,049,430 42,544,942 3,236,502 2,438,040
---------- ----------- ------------ -----------
Expenses (Note 3):
Fees................... 408,624 3,929,915 1,385,683 429,987
Administrative
expenses.............. 78,791 186,667 75,353 62,095
---------- ----------- ------------ -----------
Total Expenses.......... 487,415 4,116,582 1,461,036 492,082
---------- ----------- ------------ -----------
Net Investment Income
(Loss)................. 1,562,015 38,428,360 1,775,466 1,945,958
---------- ----------- ------------ -----------
Net Realized and
Unrealized Gain (Loss)
on Investments (Note
1):
Net realized gain
(loss) on
investments........... 132,331 6,823,750 1,092,959 111,901
Net unrealized
appreciation
(depreciation) of
investments........... (446,463 ) 22,669,697 24,542,212 889,880
---------- ----------- ------------ -----------
Net Realized and
Unrealized Gain (Loss)
on Investments......... (314,132) 29,493,447 25,635,171 1,001,781
---------- ----------- ------------ -----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations........ $1,247,883 $67,921,807 $ 27,410,637 $ 2,947,739
========== =========== ============ ===========
<CAPTION>
INVESTMENT COMPANY
---------------------------------------------------------
SHORT-TERM MID-TERM COMPOSITE AGGRESSIVE EQUITY
BOND FUND BOND FUND FUND FUND
------------ ----------- ------------ -----------------
<S> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends.............. $ 172,696 $ 349,575 $ 59,200,271 $15,310,328
---------- ----------- ------------ -----------
Total income............ 172,696 349,575 59,200,271 15,310,328
---------- ----------- ------------ -----------
Expenses (Note 3):
Fees................... 31,767 61,348 3,220,012 1,614,189
Administrative
expenses.............. 7,591 9,891 254,611 64,978
---------- ----------- ------------ -----------
Total Expenses.......... 39,358 71,239 3,474,623 1,679,167
---------- ----------- ------------ -----------
Net Investment Income
(Loss)................. 133,338 278,336 55,725,648 13,631,161
---------- ----------- ------------ -----------
Net Realized and
Unrealized Gain (Loss)
on Investments (Note
1):
Net realized gain
(loss) on
investments........... 17,305 (98,969) 3,228,464 808,445
Net unrealized
appreciation
(depreciation) of
investments........... (40,822) 101,700 (20,441,501) 5,321,047
---------- ----------- ------------ -----------
Net Realized and
Unrealized Gain (Loss)
on Investments......... (23,517) 2,731 (17,213,037) 6,129,492
---------- ----------- ------------ -----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations........ $ 109,821 $ 281,067 $ 38,512,611 $19,760,653
========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
VII
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
AMERICAN
SCUDDER CENTURY CALVERT
------------------------------------- ------------ -----------
CAPITAL VP CAPITAL RESPONSIBLY
BOND GROWTH INTERNATIONAL APPRECIATION INVESTED
FUND FUND FUND FUND FUND
---------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends.............. $1,026,890 $18,425,109 $ 2,549,505 $ 1,349,408 $2,295,190
---------- ----------- ----------- ----------- ----------
Total income............ 1,026,890 18,425,109 2,549,505 1,349,408 2,295,190
---------- ----------- ----------- ----------- ----------
Expenses (Note 3):
Fees................... 197,813 3,396,783 1,478,900 624,080 356,798
Administrative
expenses.............. 37,701 98,960 22,343 15,260 50,968
---------- ----------- ----------- ----------- ----------
Total Expenses.......... 235,514 3,495,743 1,501,243 639,340 407,766
---------- ----------- ----------- ----------- ----------
Net Investment Income
(Loss)................. 791,376 14,929,366 1,048,262 710,068 1,887,424
---------- ----------- ----------- ----------- ----------
Net Realized and
Unrealized Gain (Loss)
on Investments (Note
1):
Net realized gain
(loss) on
investments........... (87,907) 3,989,169 10,918,585 1,238,144 235,099
Net unrealized
appreciation
(depreciation) of
investments........... 447,914 53,719,471 (3,147,476) (4,227,421) 2,600,706
---------- ----------- ----------- ----------- ----------
Net Realized and
Unrealized Gain (Loss)
on Investments......... 360,007 57,708,640 7,771,109 (2,989,277) 2,835,805
---------- ----------- ----------- ----------- ----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations........ $1,151,383 $72,638,006 $ 8,819,371 $(2,279,209) $4,723,229
========== =========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
---------------------------------------
VIP VIP II VIP II
EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND
------------- ----------- -------------
<S> <C> <C> <C>
Investment Income and Expenses:
Income (Notes 1 and 4):
Dividends............................ $ 5,695,825 $ 2,303,885 $1,433,986
----------- ----------- ----------
Total income.......................... 5,695,825 2,303,885 1,433,986
----------- ----------- ----------
Expenses (Note 3):
Fees................................. 886,449 1,111,011 204,162
Administrative expenses.............. 109,597 64,722 34,946
----------- ----------- ----------
Total Expenses........................ 996,046 1,175,733 239,108
----------- ----------- ----------
Net Investment Income (Loss).......... 4,699,779 1,128,152 1,194,878
----------- ----------- ----------
Net Realized and Unrealized Gain
(Loss) on Investments (Note 1):
Net realized gain (loss) on invest-
ments............................... 278,906 992,567 25,536
Net unrealized appreciation (depreci-
ation) of investments............... 11,806,259 16,333,421 1,637,367
----------- ----------- ----------
Net Realized and Unrealized Gain
(Loss) on Investments................ 12,085,165 17,325,988 1,662,903
----------- ----------- ----------
Net Increase (Decrease) in Net Assets
Resulting from Operations............ $16,784,944 $18,454,140 $2,857,781
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
VIII
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INVESTMENT COMPANY
-------------------------------------------------------------------------------
MONEY MARKET FUND ALL AMERICA FUND EQUITY INDEX FUND
------------------------ -------------------------- -------------------------
1997 1996 1997 1996 1997 1996
----------- ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ 1,562,015 $ 849,780 $ 38,428,360 $ 10,418,234 $ 1,775,466 $ 1,456,309
Net realized gain
(loss) on
investments........... 132,331 73,658 6,823,750 2,431,185 1,092,959 476,262
Net unrealized
appreciation
(depreciation) of
investments........... (446,463) 278,840 22,669,697 28,344,476 24,542,212 6,045,598
----------- ----------- ------------ ------------ ------------ -----------
Net Increase (Decrease)
in net assets resulting
from operations........ 1,247,883 1,202,278 67,921,807 41,193,895 27,410,637 7,978,169
----------- ----------- ------------ ------------ ------------ -----------
From Unit Transactions:
Contributions.......... 5,788,009 6,015,021 31,724,926 30,608,222 22,975,577 11,517,471
Withdrawals............ (4,229,179) (4,077,160) (21,956,687) (15,824,928) (6,932,093) (6,193,918)
Net transfers.......... (2,770,906) 1,853,101) 360,521 15,311,478 49,789,027 23,679,496
----------- ----------- ------------ ------------ ------------ -----------
Net Increase (Decrease)
from unit
transactions........... (1,212,076) 84,760 10,128,760 30,094,772 65,832,511 29,003,049
----------- ----------- ------------ ------------ ------------ -----------
Net Increase (Decrease)
in Net Assets.......... 35,807 1,287,038 78,050,567 71,288,667 93,243,148 36,981,218
Net Assets:
Beginning of Year....... 32,812,784 31,525,746 268,637,954 197,349,287 61,216,521 24,235,303
----------- ----------- ------------ ------------ ------------ -----------
End of Year............. $32,848,591 $32,812,784 $346,688,521 $268,637,954 $154,459,669 $61,216,521
=========== =========== ============ ============ ============ ===========
<CAPTION>
INVESTMENT COMPANY
-------------------------------------------------------------------------------
BOND FUND SHORT-TERM BOND FUND MID-TERM BOND FUND
------------------------ -------------------------- -------------------------
1997 1996 1997 1996 1997 1996
----------- ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ 1,945,958 $ 1,790,689 $ 133,338 $ 63,539 $ 278,336 $ 558,997
Net realized gain
(loss) on
investments........... 111,901 68,629 17,305 7,065 (98,969) (2,132)
Net unrealized
appreciation
(depreciation) of
investments........... 889,880 (1,221,188) (40,822) (1,966) 101,700 (455,047)
----------- ----------- ------------ ------------ ------------ -----------
Net Increase (Decrease)
in net assets resulting
from operations........ 2,947,739 638,130 109,821 68,638 281,067 101,818
----------- ----------- ------------ ------------ ------------ -----------
From Unit Transactions:
Contributions.......... 4,701,303 5,112,307 668,221 650,490 813,398 953,690
Withdrawals............ (4,020,196) (3,323,187) (647,104) (229,391) (586,994) (231,712)
Net transfers.......... (136,699) (435,017) 252,496 344,727 585,047 424,626
----------- ----------- ------------ ------------ ------------ -----------
Net Increase (Decrease)
from unit
transactions........... 544,408 1,354,103 273,613 765,826 811,451 1,146,604
----------- ----------- ------------ ------------ ------------ -----------
Net Increase (Decrease)
in Net Assets.......... 3,492,147 1,992,233 383,434 834,464 1,092,518 1,248,422
Net Assets:
Beginning of Year....... 34,478,954 32,486,721 2,424,674 1,590,210 4,548,579 3,300,157
----------- ----------- ------------ ------------ ------------ -----------
End of Year............. $37,971,101 $34,478,954 $ 2,808,108 $ 2,424,674 $ 5,641,097 $ 4,548,579
=========== =========== ============ ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
IX
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INVESTMENT COMPANY
-----------------------------------------------------
COMPOSITE FUND AGGRESSIVE EQUITY FUND
-------------------------- -------------------------
1997 1996 1997 1996
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ 55,725,648 $ 28,222,090 $ 13,631,161 $11,952,409
Net realized gain
(loss) on
investments........... 3,228,464 2,739,162 808,445 201,936
Net unrealized
appreciation
(depreciation) of
investments........... (20,441,501) (6,525,946) 5,321,047 547,221
------------ ------------ ------------ -----------
Net Increase (Decrease)
in net assets resulting
from operations........ 38,512,611 24,435,306 19,760,653 12,701,566
------------ ------------ ------------ -----------
From Unit Transactions:
Contributions.......... 23,905,684 28,326,960 29,301,342 16,800,622
Withdrawals............ (24,479,468) (22,088,981) (9,246,392) 506,734
Net transfers.......... (20,666,992) (19,948,521) 24,458,890 29,646,189
------------ ------------ ------------ -----------
Net Increase (Decrease)
from unit
transactions........... (21,240,776) (13,710,542) 44,513,840 46,953,545
------------ ------------ ------------ -----------
Net Increase (Decrease)
in Net Assets.......... 17,271,835 10,724,764 64,274,493 59,655,111
Net Assets:
Beginning of Year....... 250,244,314 239,519,550 89,542,349 29,887,238
------------ ------------ ------------ -----------
End of Year............. $267,516,149 $250,244,314 $153,816,842 $89,542,349
============ ============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
SCUDDER
--------------------------------------------------------------------------------
BOND FUND CAPITAL GROWTH FUND INTERNATIONAL FUND
------------------------ -------------------------- --------------------------
1997 1996 1997 1996 1997 1996
----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ 791,376 $ 1,097,001 $ 14,929,366 $ 13,273,666 $ 1,048,262 $ 850,382
Net realized gain
(loss) on
investments........... (87,907) (110,077) 3,989,169 1,971,672 10,918,585 3,882,634
Net unrealized
appreciation
(depreciation) of
investments........... 447,914 (788,323) 53,719,471 15,612,266 (3,147,476) 7,289,627
----------- ----------- ------------ ------------ ------------ ------------
Net Increase (Decrease)
in net assets resulting
from operations........ 1,151,383 198,601 72,638,006 30,857,604 8,819,371 12,022,643
----------- ----------- ------------ ------------ ------------ ------------
From Unit Transactions:
Contributions.......... 2,487,844 2,640,943 34,121,380 27,988,093 15,851,344 14,517,884
Withdrawals............ (1,538,662) (1,287,365) (19,076,131) (13,712,456) (9,604,601) (8,408,505)
Net transfers.......... 610,052 (259,197) 36,296,377 262,723 377,532 (1,008,537)
----------- ----------- ------------ ------------ ------------ ------------
Net Increase (Decrease)
from unit
transactions........... 1,559,234 1,094,381 51,341,626 14,538,360 6,624,275 5,100,842
----------- ----------- ------------ ------------ ------------ ------------
Net Increase (Decrease)
in Net Assets.......... 2,710,617 1,292,982 123,979,632 45,395,964 15,443,646 17,123,485
Net Assets:
Beginning of Year....... 15,637,276 14,344,294 204,853,987 159,458,023 103,236,327 86,112,842
----------- ----------- ------------ ------------ ------------ ------------
End of Year............. $18,347,893 $15,637,276 $328,833,619 $204,853,987 $118,679,973 $103,236,327
=========== =========== ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
X
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
AMERICAN CENTURY CALVERT
-------------------------- --------------------------
VP CAPITAL
APPRECIATION FUND RESPONSIBLY INVESTED FUND
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ 710,068 $ 9,827,488 $ 1,887,424 $ 1,505,706
Net realized gain
(loss) on
investments........... 1,238,144 3,898,097 235,099 72,424
Net unrealized
appreciation
(depreciation) of
investments........... (4,227,421) (18,669,322) 2,600,706 439,874
------------ ------------ ------------ ------------
Net Increase (Decrease)
in net assets resulting
from operations........ (2,279,209) (4,943,737) 4,723,229 2,018,004
------------ ------------ ------------ ------------
From Unit Transactions:
Contributions.......... 8,707,773 16,360,753 6,373,996 4,807,906
Withdrawals............ (6,920,015) (7,283,773) (2,497,692) (1,198,222)
Net transfers.......... (33,483,832) (18,548,118) 521,192 2,535,811
------------ ------------ ------------ ------------
Net Increase (Decrease)
from unit
transactions........... (31,696,074) (9,471,138) 4,397,496 6,145,495
------------ ------------ ------------ ------------
Net Increase (Decrease)
in Net Assets.......... (33,975,283) (14,414,875) 9,120,725 8,163,499
Net Assets:
Beginning of Year....... 83,752,530 98,167,405 23,921,757 15,758,258
------------ ------------ ------------ ------------
End of Year............. $ 49,777,247 $ 83,752,530 $ 33,042,482 $ 23,921,757
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
-----------------------------------------------------------------------------
VIP VIP II VIP II
EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND
------------------------ ------------------------- ------------------------
1997 1996 1997 1996 1997 1996
----------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ 4,699,779 $ 465,381 $ 1,128,152 $ (316,979) $ 1,194,878 $ 147,067
Net realized gain
(loss) on
investments........... 278,906 36,749 992,567 106,747 25,536 17,488
Net unrealized
appreciation
(depreciation) of
investments........... 11,806,259 4,033,446 16,333,421 8,757,016 1,637,367 726,606
----------- ----------- ------------ ----------- ----------- -----------
Net Increase (Decrease)
in net assets resulting
from operations........ 16,784,944 4,535,576 18,454,140 8,546,784 2,857,781 891,161
----------- ----------- ------------ ----------- ----------- -----------
From Unit Transactions:
Contributions.......... 16,485,680 11,293,855 21,050,465 13,486,367 5,663,920 2,540,371
Withdrawals............ (5,431,923) (154,620) (6,172,824) 89,022 (1,306,235) (659,754)
Net transfers.......... 17,763,089 21,543,664 17,442,009 17,419,557 6,221,869 5,212,637
----------- ----------- ------------ ----------- ----------- -----------
Net Increase (Decrease)
from unit
transactions........... 28,816,846 32,682,899 32,319,650 30,994,946 10,579,554 7,093,254
----------- ----------- ------------ ----------- ----------- -----------
Net Increase (Decrease)
in Net Assets.......... 45,601,790 37,218,475 50,773,790 39,541,730 13,437,335 7,984,415
Net Assets:
Beginning of Year....... 51,358,678 14,140,203 64,355,249 24,813,519 10,861,979 2,877,564
----------- ----------- ------------ ----------- ----------- -----------
End of Year............. $96,960,468 $51,358,678 $115,129,039 $64,355,249 $24,299,314 $10,861,979
=========== =========== ============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
XI
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
Separate Account No. 2 of Mutual of America Life Insurance Company ("the
Company") was established in conformity with New York Insurance Law and
commenced operations on June 4, 1984. On October 31, 1986, Separate Account
No. 2 was reorganized into a unit investment trust consisting of four Funds:
the Money Market Fund, the All America Fund, the Bond Fund and the Composite
Fund. These Funds invest in corresponding funds of Mutual of America
Investment Corporation ("Investment Company"). Prior to May 2, 1994, the All
America Fund was known as the Stock Fund and had different investment
objectives and no sub-advisors.
On January 3, 1989, the following Funds became available to Separate Account
No. 2 as investment alternatives: Scudder Bond, Scudder Capital Growth,
Scudder International and VP Capital Appreciation Fund (formerly TCI Growth).
The Scudder Funds invest in corresponding portfolios of Scudder Variable Life
Investment Fund ("Scudder"). The VP Capital Appreciation Fund invests in a
corresponding fund of American Century Variable Portfolios Inc. ("American
Century"). Effective May 13, 1991, the Calvert Responsibly Invested Balanced
Portfolio became available as an investment alternative. The Calvert
Responsibly Invested Fund invests in a corresponding fund of the Calvert
Responsibly Invested Balanced Portfolio of Acacia Capital Corporation
("Calvert").
On February 5, 1993 the Mutual of America Equity Index, Short-Term Bond and
Mid-Term Bond Funds became available to Separate Account No. 2 as investment
alternatives. On May 2, 1994 the Mutual of America Aggressive Equity Fund
became available as an investment option. These Funds invest in corresponding
funds of the Investment Company.
On May 1, 1995, Fidelity Investments Equity-Income, Contrafund and Asset
Manager Portfolios became available. The Fidelity Equity-Income Portfolio
invests in a corresponding portfolio of Fidelity Variable Insurance Products
Fund and the Contrafund and Asset Manager Portfolios invest in corresponding
portfolios of Fidelity Variable Insurance Products Fund II (collectively
"Fidelity").
Separate Account No. 2 was formed by the Company to support the operations
of the Company's group and individual variable accumulation annuity contracts
("Contracts"). The assets of Separate Account No. 2 are the property of the
Company. The portion of Separate Account No. 2's assets applicable to the
Contracts will not be charged with liabilities arising out of any other
business the Company may conduct.
The significant accounting policies of Separate Account No. 2 are as
follows:
Investment Valuation -- Investments are made in shares of the Investment
Company, Scudder, American Century, Calvert and Fidelity and are valued at the
reported net asset values of the respective funds or portfolios.
Investment Transactions -- Investment transactions are recorded on the trade
date. Realized gains and losses on sales of investments are determined based
on the average cost of the investment sold.
Federal Income Taxes -- Separate Account No. 2 and its operations are
treated as part of the Company which is exempt from federal income taxes under
Section 501(c)(4) of the Internal Revenue Code through 1997.
2. INVESTMENTS
The number of shares owned by Separate Account No. 2 and their respective
net asset values (rounded to the nearest cent) per share at December 31, 1997
are as follows:
<TABLE>
<CAPTION>
NUMBER OF NET ASSET
SHARES VALUE
----------- ---------
<S> <C> <C>
Investment Company Funds:
Money Market Fund................................. 27,914,026 $ 1.18
All America Fund.................................. 128,057,391 2.71
Equity Index Fund................................. 74,092,038 2.08
Bond Fund......................................... 26,610,232 1.43
Short-Term Bond Fund.............................. 2,699,652 1.02
Mid-Term Bond Fund................................ 6,245,148 0.90
Composite Fund.................................... 164,912,475 1.62
Aggressive Equity Fund............................ 95,652,782 1.61
</TABLE>
XII
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF NET ASSET
SHARES VALUE
---------- ---------
<S> <C> <C>
Scudder Portfolios:
Bond Portfolio...................................... 2,663,931 $ 6.87
Capital Growth Portfolio--Class "A"................. 15,939,730 20.63
International Portfolio--Class "A".................. 8,426,943 14.11
American Century VP Capital Appreciation Fund........ 5,115,831 9.68
Calvert Responsibly Invested Balanced Portfolio...... 16,649,313 1.98
Fidelity Portfolios:
Equity-Income--"Initial" Class...................... 3,988,402 24.28
Contrafund--"Initial" Class......................... 5,771,181 19.94
Asset Manager--"Initial" Class...................... 1,345,848 18.01
</TABLE>
3. EXPENSES
Administrative Charges -- In connection with its administrative functions,
the Company deducts daily, at an annual rate of .40%, an amount from the value
of the net assets of all funds except the American Century VP Capital
Appreciation Fund for which the annual rate is .20% and, effective in 1997,
each Fidelity fund, for which the annual rate is .30%.
In addition, a deduction of up to $2.00 may be made at the end of each month
from a participant's account, except that such charge shall not exceed 1/12 of
1% of the balance in such account in any month.
Distribution Expense Charge -- As principal underwriter, the Company
performs all distribution and sales functions and bears all distribution and
sales expenses relative to the Contracts. For providing these services, the
Company deducts daily, at an annual rate of .35%, an amount from the value of
the net assets of each fund to cover such expenses.
Mortality and Expense Risk Charge -- The Company assumes the risk to make
annuity payments in accordance with annuity tables provided in the Contracts
regardless of how long a participant lives and also assumes certain expense
risks associated with such annuity payments. For assuming this risk, the
Company deducts daily, at an annual rate of .50%, an amount from the value of
the net assets of each fund.
4. DIVIDENDS
All dividend distributions are reinvested in additional shares of the
respective funds or portfolios at net asset value. On December 31, 1997 a
dividend distribution was made by the Investment Company to shareholders of
record as of December 30, 1997. Prior thereto, the Investment Company declared
and paid a dividend distribution on September 15, 1997. The combined amount of
these dividends was as follows:
<TABLE>
<S> <C>
Money Market Fund.............................................. $2,049,430
All America Fund............................................... 42,544,942
Equity Index Fund.............................................. 3,236,502
Bond Fund...................................................... 2,438,040
Short-Term Bond Fund........................................... 172,696
Mid-Term Bond Fund............................................. 349,575
Composite Fund................................................. 59,200,271
Aggressive Equity Fund......................................... 15,310,328
</TABLE>
On January 29, 1997, February 26, 1997, April 28, 1997, July 29, 1997 and
October 29, 1997, dividends were paid by the Scudder Bond Portfolio. The
combined amount of the dividends was $1,026,890.
On January 29, 1997, February 26, 1997, April 28, 1997, July 29, 1997 and
October 29, 1997, dividends were paid by the Scudder Capital Growth Portfolio.
The combined amount of the dividends was $18,425,109.
On February 26, 1997 a dividend was paid by the Scudder International
Portfolio. The amount of the dividend was $2,549,505.
On March 29, 1997 a dividend was paid by the American Century VP Capital
Appreciation Fund. The amount of the dividend was $1,349,408.
On December 31, 1997 a dividend was paid by the Calvert Responsibly Invested
Portfolio. The amount of the dividend was $2,295,190.
XIII
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
On February 7, 1997 a dividend was paid by the Fidelity Equity-Income
Portfolio. The amount of the dividend was $5,695,825.
On February 7, 1997, a dividend was paid by the Fidelity Contrafund
Portfolio. The amount of the dividend was $2,303,885.
On February 7, 1997, a dividend was paid by the Fidelity Asset Manager
Portfolio. The amount of the dividend was $1,433,986.
5. FINANCIAL HIGHLIGHTS
Shown below are financial highlights for a Unit outstanding throughout each
of the five years ended December 31, 1997, or, if not in existence a full
year, the initial period ended December 31:
<TABLE>
<CAPTION>
INVESTMENT COMPANY MONEY MARKET FUND
---------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year......... $1.87 $1.80 $1.72 $1.68 $1.65
======= ======= ======= ======= =======
Unit value, end of year............... $1.95 $1.87 $1.80 $1.72 $1.68
======= ======= ======= ======= =======
Thousands of units outstanding, end of
year................................. 16,831 17,511 17,502 17,653 15,815
======= ======= ======= ======= =======
<CAPTION>
INVESTMENT COMPANY ALL AMERICA FUND
---------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year......... $5.39 $4.52 $3.35 $3.36 $3.03
======= ======= ======= ======= =======
Unit value, end of year............... $6.76 $5.39 $4.52 $3.35 $3.36
======= ======= ======= ======= =======
Thousands of units outstanding, end of
year................................. 51,312 49,798 43,620 38,669 36,510
======= ======= ======= ======= =======
<CAPTION>
INVESTMENT COMPANY EQUITY INDEX FUND
---------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year/period.. $1.72 $1.42 $1.05 $1.05 $1.00
======= ======= ======= ======= =======
Unit value, end of year/period........ $2.26 $1.72 $1.42 $1.05 $1.05
======= ======= ======= ======= =======
Thousands of units outstanding, end of
year/period.......................... 68,462 35,660 17,109 4,644 2,135
======= ======= ======= ======= =======
<CAPTION>
INVESTMENT COMPANY BOND FUND
---------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year......... $2.75 $2.69 $2.28 $2.39 $2.13
======= ======= ======= ======= =======
Unit value, end of year............... $3.00 $2.75 $2.69 $2.28 $2.39
======= ======= ======= ======= =======
Thousands of units outstanding, end of
year................................. 12,671 12,548 12,083 10,601 12,244
======= ======= ======= ======= =======
<CAPTION>
INVESTMENT COMPANY SHORT-TERM BOND FUND
---------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year/period.. $1.14 $1.10 $1.03 $1.03 $1.00
======= ======= ======= ======= =======
Unit value, end of year/period........ $1.19 $1.14 $1.10 $1.03 $1.03
======= ======= ======= ======= =======
Thousands of units outstanding, end of
year/period.......................... 2,355 2,129 1,447 1,132 747
======= ======= ======= ======= =======
<CAPTION>
INVESTMENT COMPANY MID-TERM BOND FUND
---------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year/period.. $1.19 $1.16 $1.01 $1.06 $1.00
======= ======= ======= ======= =======
Unit value, end of year/period........ $1.26 $1.19 $1.16 $1.01 $1.06
======= ======= ======= ======= =======
Thousands of units outstanding, end of
year/period.......................... 4,478 3,828 2,848 1,444 1,411
======= ======= ======= ======= =======
<CAPTION>
INVESTMENT COMPANY COMPOSITE FUND
---------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year......... $3.75 $3.39 $2.82 $2.95 $2.55
======= ======= ======= ======= =======
Unit value, end of year............... $4.36 $3.75 $3.39 $2.82 $2.95
======= ======= ======= ======= =======
Thousands of units outstanding, end of
year................................. 61,359 66,715 70,558 73,239 71,215
======= ======= ======= ======= =======
</TABLE>
XIV
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
INVESTMENT COMPANY
AGGRESSIVE EQUITY FUND
--------------------------
1997 1996 1995 1994
------ ------ ------ -----
<S> <C> <C> <C> <C>
Unit value, beginning of
year/period............ $1.80 $1.43 $1.05 $1.00
====== ====== ====== =====
Unit value, end of
year/period............ $2.15 $1.80 $1.43 $1.05
====== ====== ====== =====
Thousands of units
outstanding, end of
year/period............ 71,468 49,800 20,858 9,145
====== ====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
SCUDDER BOND FUND
----------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year.............. $11.48 $11.30 $9.69 $10.32 $9.30
====== ====== ====== ====== ======
Unit value, end of year.................... $12.37 $11.48 $11.30 $9.69 $10.32
====== ====== ====== ====== ======
Thousands of units outstanding, end of
year...................................... 1,484 1,362 1,269 1,169 1,277
====== ====== ====== ====== ======
<CAPTION>
SCUDDER CAPITAL GROWTH FUND
----------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year.............. $22.11 $18.64 $14.67 $16.46 $13.80
====== ====== ====== ====== ======
Unit value, end of year.................... $29.64 $22.11 $18.64 $14.67 $16.46
====== ====== ====== ====== ======
Thousands of units outstanding, end of
year...................................... 11,094 9,266 8,556 8,121 6,582
====== ====== ====== ====== ======
<CAPTION>
SCUDDER INTERNATIONAL FUND
----------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year.............. $13.43 $11.85 $10.80 $11.06 $8.13
====== ====== ====== ====== ======
Unit value, end of year.................... $14.46 $13.43 $11.85 $10.80 $11.06
====== ====== ====== ====== ======
Thousands of units outstanding, end of
year...................................... 8,205 7,688 7,269 8,610 5,400
====== ====== ====== ====== ======
<CAPTION>
AMERICAN CENTURY
----------------------------------
VP CAPITAL APPRECIATION FUND
----------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year.............. $11.53 $12.18 $9.39 $9.61 $8.81
====== ====== ====== ====== ======
Unit value, end of year.................... $11.04 $11.53 $12.18 $9.39 $9.61
====== ====== ====== ====== ======
Thousands of units outstanding, end of
year...................................... 4,510 7,264 8,061 6,361 5,946
====== ====== ====== ====== ======
<CAPTION>
CALVERT
----------------------------------
RESPONSIBLY INVESTED FUND
----------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year.............. $2.23 $2.01 $1.57 $1.64 $1.54
====== ====== ====== ====== ======
Unit value, end of year.................... $2.65 $2.23 $2.01 $1.57 $1.64
====== ====== ====== ====== ======
Thousands of units outstanding, end of
year...................................... 12,479 10,713 7,849 5,986 5,151
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
-----------------------------------------
EQUITY-INCOME FUND CONTRA FUND
-------------------- --------------------
1997 1996 1995 1997 1996 1995
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period........................ $21.93 $19.43 $16.30 $16.59 $13.85 $11.43
====== ====== ====== ====== ====== ======
Unit value, end of year/period...... $27.77 $21.93 $19.43 $20.36 $16.59 $13.85
====== ====== ====== ====== ====== ======
Thousands of units outstanding, end
of year/period..................... 3,491 2,342 728 5,656 3,880 1,792
====== ====== ====== ====== ====== ======
<CAPTION>
FIDELITY
--------------------
ASSET MANAGER FUND
--------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year/period..................... $17.72 $15.66 $14.04
====== ====== ======
Unit value, end of year/period........................... $21.14 $17.72 $15.66
====== ====== ======
Thousands of units outstanding, end of year/period....... 1,150 613 184
====== ====== ======
</TABLE>
XV
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mutual of America Life Insurance Company:
We have audited the accompanying statement of assets and liabilities of
Mutual of America Separate Account No. 2 as of December 31, 1997, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Separate Account's management. Our responsibility is to express an opinion
on these financial statements and financial highlights 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, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Mutual of America Separate Account No. 2 as of December 31, 1997, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
New York, New York
February 20, 1998
XVI
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mutual of America Life Insurance Company:
We have audited the accompanying consolidated statements of financial
condition of Mutual of America Life Insurance Company and its subsidiaries as
of December 31, 1997 and 1996, and the related consolidated statements of
operations and surplus and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 1, the accompanying statutory-basis financial statements
were prepared in conformity with the accounting practices prescribed or
permitted by the State of New York Insurance Department which practices differ
from generally accepted accounting principles. The variances between such
practices and generally accepted accounting principles and the effects on the
accompanying financial statements are described in Note 9.
In our opinion, because of the effects of the matter described in the third
paragraph and more fully discussed in Note 9, the financial statements
referred to above do not present fairly, in conformity with generally accepted
accounting principles, the financial position of Mutual of America Life
Insurance Company and its subsidiaries as of December 31, 1997 and 1996, or
the results of their operations or their cash flows for the years then ended.
Furthermore, in our opinion, the supplemental data included in Note 9
reconciling net income and surplus as shown in the financial statements to net
income and surplus as determined in conformity with generally accepted
accounting principles, present fairly, in all material respects, the
information shown therein.
However, in our opinion, the statutory-basis consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Mutual of America Life Insurance Company and its subsidiaries as
of December 31, 1997 and 1996, and the results of their operations and their
cash flows for the years then ended in conformity with accounting practices
prescribed or permitted by the State of New York Insurance Department.
/s/ Arthur Andersen LLP
New York, New York
February 20, 1998
SAI-8
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
ASSETS
GENERAL ACCOUNT ASSETS
Bonds and notes................................ $4,795,022,564 $5,109,395,855
Common stocks.................................. 413,939,170 145,172,800
Preferred stocks............................... 59,466,239 --
Cash and short-term investments................ 67,164,422 60,485,338
Guaranteed funds transferable (Note 3)......... 121,130,991 130,203,690
Mortgage loans................................. 41,315,430 65,163,626
Real estate.................................... 331,991,341 335,968,808
Policy loans................................... 97,854,314 89,917,870
Other invested assets.......................... 20,137,960 11,045,421
Investment income accrued...................... 79,087,631 94,055,387
Receivables.................................... 9,307,851 9,580,928
Other assets................................... 31,266,929 19,007,108
-------------- --------------
Total general account assets................. 6,067,684,842 6,069,996,831
SEPARATE ACCOUNT ASSETS.......................... 3,456,072,983 2,627,081,163
-------------- --------------
TOTAL ASSETS..................................... $9,523,757,825 $8,697,077,994
============== ==============
LIABILITIES AND SURPLUS
GENERAL ACCOUNT LIABILITIES
Insurance and annuity reserves................. $4,929,073,256 $5,174,017,708
Other contract liabilities and reserves........ 11,303,835 11,951,980
Dividends payable to contract and policyhold-
ers........................................... 106,329 106,352
Note payable (Note 5).......................... 137,021,175 137,021,175
Interest maintenance reserve................... 253,944,200 145,613,609
Other liabilities.............................. 95,801,345 62,564,315
-------------- --------------
Total general account liabilities............ 5,427,250,140 5,531,275,139
SEPARATE ACCOUNT RESERVES AND OTHER LIABILITIES.. 3,456,072,983 2,627,081,163
-------------- --------------
Total liabilities............................ 8,883,323,123 8,158,356,302
-------------- --------------
ASSET VALUATION RESERVE.......................... 116,494,396 107,676,296
-------------- --------------
SURPLUS
Assigned surplus............................... 1,150,000 1,150,000
Unassigned surplus............................. 522,790,306 429,895,396
-------------- --------------
Total surplus................................ 523,940,306 431,045,396
-------------- --------------
TOTAL LIABILITIES AND SURPLUS.................... $9,523,757,825 $8,697,077,994
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
SAI-9
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
INCOME
Annuity considerations and
deposits................. $ 740,959,658 $ 685,402,916
Life and disability
insurance premiums....... 28,214,541 30,154,993
-------------- --------------
Total considerations and
premiums............... 769,174,199 715,557,909
Net investment income
(Notes 2 and 3).......... 456,410,794 436,332,446
Other, net................ (336,265) (187,381)
-------------- --------------
Total income............ 1,225,248,728 1,151,702,974
-------------- --------------
DEDUCTIONS
Increase in insurance and
annuity reserves......... 5,924,707 80,297,961
Annuity and surrender
benefits................. 973,365,824 865,685,476
Death and disability
benefits................. 20,161,949 19,333,435
Operating expenses........ 162,523,520 142,394,578
-------------- --------------
Total deductions........ 1,161,976,000 1,107,711,450
-------------- --------------
Net gain before
dividends.............. 63,272,728 43,991,524
DIVIDENDS TO CONTRACT AND
POLICYHOLDERS.............. 147,104 108,611
-------------- --------------
NET GAIN FROM
OPERATIONS............. 63,125,624 43,882,913
FEDERAL INCOME TAX BENEFIT.. 367,818 1,745,523
NET REALIZED CAPITAL GAINS
(NOTE 2)................... 10,778,415 9,547,354
-------------- --------------
NET INCOME.............. 74,271,857 55,175,790
SURPLUS TRANSACTIONS
Change in asset valuation
reserve.................. (8,818,100) (19,382,401)
Change in net unrealized
capital gains............ 32,160,963 10,374,635
Change in non-admitted
assets and other, net.... (4,719,810) (12,611,478)
-------------- --------------
Net change in surplus... 92,894,910 33,556,546
SURPLUS, AT BEGINNING OF
YEAR....................... 431,045,396 397,488,850
-------------- --------------
SURPLUS, AT END OF YEAR..... $ 523,940,306 $ 431,045,396
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
SAI-10
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- --------------
<S> <C> <C>
CASH PROVIDED
Premium and annuity funds received.......... $ 769,846,793 $ 715,557,893
Investment income received.................. 437,472,096 403,131,642
Other, net.................................. (1,619,142) 12,911,463
--------------- --------------
Total receipts............................ 1,205,699,747 1,131,600,998
--------------- --------------
Benefits paid............................... 989,719,884 885,558,323
Dividends paid to contract and
policyholders.............................. 147,127 129,824
Insurance and operating expenses paid....... 146,405,004 154,475,421
Net transfers to separate accounts.......... 251,401,753 156,282,807
--------------- --------------
Total payments............................ 1,387,673,768 1,196,446,375
--------------- --------------
Net cash used by operations............... (181,974,021) (64,845,377)
Proceeds from long-term investments sold,
matured or repaid.......................... 10,907,067,504 2,870,529,799
Proceeds from dollar roll transactions--
repurchase agreements...................... 700,714,763 --
Federal income tax benefit on securities
transactions............................... -- 7,961,776
Other, net.................................. 44,741,139 (3,279,684)
--------------- --------------
Total cash provided....................... 11,470,549,385 2,810,366,514
--------------- --------------
CASH APPLIED
Cost of long-term investments acquired...... 10,730,606,933 2,848,212,981
Repayment of dollar roll transactions--
repurchase agreements...................... 700,714,763 --
Other, net.................................. 32,548,605 1,681,098
--------------- --------------
Total cash applied........................ 11,463,870,301 2,849,894,079
--------------- --------------
Net change in cash and short-term
investments.............................. 6,679,084 (39,527,565)
CASH AND SHORT-TERM INVESTMENTS
Beginning of year........................... 60,485,338 100,012,903
--------------- --------------
End of year................................. $ 67,164,422 $ 60,485,338
=============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
SAI-11
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying financial statements include the consolidated accounts of
Mutual of America Life Insurance Company ("Mutual of America") and its wholly
owned subsidiaries (collectively referred to as the "Company"). Significant
intercompany balances and transactions have been eliminated in consolidation.
Nature of Operations
Mutual of America provides retirement and employee benefit plans in the small
to medium size case area, principally to employees in the not-for-profit
social health and welfare field. In recent years, through a wholly owned
subsidiary, the Company has expanded the scope of the field it serves to
include for-profit organizations in the small to medium size case area. The
principal insurance companies in the group are licensed in all fifty states
and the District of Columbia. Operations are conducted primarily through a
network of regional field offices staffed by salaried consultants.
Basis of Presentation
The financial statements are presented in conformity with statutory accounting
practices prescribed or permitted by the State of New York Insurance
Department, which practices differ from generally accepted accounting
principles ("GAAP"). The variances between such practices and GAAP and the
effects on the accompanying financial statements are described in Note 9. The
ability of the Company to fulfill its obligations to contractholders and
policyholders is of primary concern to insurance regulatory authorities. As
such, the financial statements are oriented to the insuring public.
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Certain 1996 amounts included in the accompanying consolidated financial
statements have been reclassified to conform with the 1997 presentation.
Accounting policies applied in the preparation and presentation of these
financial statements follow.
Asset Valuations
Investment valuations are prescribed by the National Association of Insurance
Commissioners ("NAIC"). Bonds qualifying for amortization are stated at
amortized cost; short-term investments in good standing are stated at cost.
Fair value for these securities (approximately $4.9 billion in 1997 and $5.2
billion in 1996) is determined by reference to market prices quoted by the
NAIC. If quoted market prices are not available, fair value is determined
using quoted prices for similar securities. All other bonds and short-term
notes are stated at market value which approximates fair value.
Common stocks and preferred stocks in good standing are stated at market
value, which approximates fair value. Market value is determined by reference
to valuations quoted by the NAIC. Unrealized gains and losses are applied
directly to unassigned surplus.
Mortgage loans are carried at amortized indebtedness. Fair value for these
loans (approximately $46.8 million in 1997 and $67.8 million in 1996) is
determined by discounting the expected future cash flows using the current
rate at which similar loans would be made to borrowers with similar credit
ratings and remaining maturities. Impairments of individual assets that are
considered other than temporary are recognized when incurred. There were no
impairments recorded during 1997 or 1996.
Real estate investments are carried at the lower of cost, including capital
improvements, net of accumulated depreciation, or market and are depreciated
on a straight line basis over 39 years. Tenant improvements on real estate
investments are depreciated over the shorter of the lease term or the
estimated life of the improvement. Company occupied real estate is carried at
cost, net of accumulated depreciation.
SAI-12
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Policy loans are stated at the unpaid balance of the loan. The majority of
such loans are issued with variable interest rates which are periodically
adjusted based on changes in the rates credited to these policies and
therefore are considered to be stated at fair value.
Certain other assets, such as furniture and fixtures and prepaid expenses, are
excluded from the consolidated statements of financial condition ("non-
admitted assets").
Interest Maintenance and Asset Valuation Reserves
Realized gains and losses, net of applicable taxes, arising from changes in
interest rates are accumulated in the Interest Maintenance Reserve ("IMR") and
are amortized into net investment income over the estimated remaining life of
the investment sold. All other realized gains and losses are reported in the
consolidated statements of operations and surplus.
An Asset Valuation Reserve ("AVR") applying to the specific risk
characteristics of all invested asset categories excluding cash, policy loans
and investment income accrued has been established based on a statutory
formula. Realized and unrealized gains and losses arising from changes in the
creditworthiness of the borrower are included in the appropriate subcomponent
of the AVR. Changes in the AVR are applied directly to unassigned surplus.
Guaranteed Funds Transferable
Guaranteed funds transferable consist of funds held by a former reinsurer and
are stated at the total principal amount of future guaranteed transfers to
Mutual of America, which approximates fair value.
Separate Account Operations
Certain annuity considerations may be invested at the participant's discretion
in separate accounts; either a multifund account, which is managed by Mutual
of America Capital Management Corporation, or certain other funds, which are
managed by outside investment advisors. All of the funds' investment
experience, including net realized and unrealized capital gains in the
separate accounts (net of investment advisory fees and administration fees
assessed), is allocated to participants. Investments held in the separate
accounts are stated at market value, which approximates fair value.
Participants' corresponding equity in the separate accounts are reported as
liabilities in the accompanying statements. Premiums and benefits related to
the separate accounts are combined with the general account in the
accompanying statements. Net operating gains are offset by increases to
reserve liabilities in the respective separate accounts.
Insurance and Annuity Reserves
Reserves for annuity contracts are computed on the net single premium method
and represent the estimated present value of future retirement benefits. These
reserves are based on mortality and interest rate assumptions (ranging
predominately from 5.00% to 9.25%) which meet or exceed statutory
requirements. Reserves for contractual funds not yet used for the purchase of
annuities are accumulated at various interest rates which, during 1997 and
1996, ranged from 4.00% to 5.50% and 4.00% to 5.75%, respectively and are
deemed sufficient to provide for contractual surrender values of these funds.
Reserves for life and disability insurance are based on mortality, morbidity
and interest rate assumptions which meet statutory requirements.
Contractual funds not yet used to purchase retirement annuities and other
deposit liabilities are stated at their cash surrender value, which
approximates fair value ($7.0 billion and $6.3 billion), at December 31, 1997
and 1996, respectively. The fair value of annuity contracts (approximately
$1.5 billion and $1.4 billion at December 31, 1997 and 1996, respectively) was
determined by discounting expected future retirement benefits using current
mortality tables and interest rates based on the duration of expected future
benefits. Weighted average interest rates of 6.12% and 6.92% were used at
December 31, 1997 and 1996, respectively.
Premiums, Annuity Considerations, Investment Income and Expenses
Insurance premiums and annuity considerations derived from defined
contribution plans are recognized as income when due. Voluntary savings-type
and defined benefit considerations and other deposits are recognized as income
when received. Group life and disability insurance premiums are recognized as
income over the contract period.
SAI-13
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
General account investment income is reported as earned and is presented net
of related investment expenses; operating expenses, including acquisition
costs for new business and income taxes, are charged to operations as
incurred.
Dividends
Dividends are based on formulas and scales approved by the Board of Directors
and are accrued currently for payment subsequent to plan anniversary dates.
2. FIXED MATURITY AND EQUITY SECURITIES
The statement values and NAIC market values of investments in fixed maturity
securities (bonds and notes) at December 31, 1997 are shown below. Excluding
U.S. government and government agency investments, the Company is not exposed
to any significant concentration of credit risk.
<TABLE>
<CAPTION>
GROSS GROSS NAIC
STATEMENT UNREALIZED UNREALIZED MARKET
CATEGORY VALUE GAINS LOSSES VALUE
-------- ---------- ---------- ---------- ----------
(000'S OMITTED)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies......... $2,414,115 $ 7,846 $ 412 $2,421,549
Obligations of states and political
subdivisions...................... 13,421 1,704 -- 15,125
Debt securities issued by foreign
governments....................... 101,186 4,624 28 105,782
Corporate securities............... 2,329,186 25,640 9,123 2,345,703
---------- ------- ------ ----------
Total............................ $4,857,908 $39,814 $9,563 $4,888,159
========== ======= ====== ==========
</TABLE>
Short-term fixed maturity securities with a statement value and NAIC market
value of $62.9 million at December 31, 1997 are included in the above table.
As of December 31, 1997, the Company had $6.2 million (par value $6.0 million)
of its long-term fixed maturity securities on deposit with various state
regulatory agencies.
The statement values and NAIC market values of investments in fixed maturity
securities by contractual maturity (except for mortgage-backed securities
which are stated at expected maturity) at December 31, 1997 are shown below.
Expected maturities may differ from contractual maturities because borrowers
may have the right to prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
NAIC
STATEMENT MARKET
VALUE VALUE
---------- ----------
(000'S OMITTED)
<S> <C> <C>
Due in one year or less............................. $ 243,500 $ 243,908
Due after one year through five years............... 1,230,723 1,238,587
Due after five years through ten years.............. 1,485,001 1,494,532
Due after ten years................................. 1,898,684 1,911,132
---------- ----------
Total $4,857,908 $4,888,159
========== ==========
</TABLE>
Proceeds from the sale of investments in fixed maturity securities during 1997
were $11.1 billion. Gross gains of $145.1 million and gross losses of $16.0
million were realized on these sales, of which $126.4 million of gains were
accumulated (net of applicable tax expense of $2.7 million) in the IMR. Such
amounts will be amortized into net investment income over the estimated
remaining life of the investment sold. During the year, $18.0 million of the
IMR was amortized and included in net investment income.
SAI-14
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The statement values and NAIC market values of investments in fixed maturity
securities at December 31, 1996, are as follows:
<TABLE>
<CAPTION>
GROSS GROSS NAIC
STATEMENT UNREALIZED UNREALIZED MARKET
CATEGORY VALUE GAINS LOSSES VALUE
-------- ---------- ---------- ---------- ----------
(000'S OMITTED)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies......... $2,136,817 $ 6,160 $ 3,955 $2,139,022
Obligations of states and political
subdivisions...................... 48,755 1,645 -- 50,400
Debt securities issued by foreign
governments....................... 159,543 7,479 1,812 165,210
Corporate securities............... 2,839,125 63,492 41,289 2,861,328
---------- ------- ------- ----------
Total............................ $5,184,240 $78,776 $47,056 $5,215,960
========== ======= ======= ==========
</TABLE>
Short-term fixed maturity securities with a statement value and NAIC market
value of $74.8 million at December 31, 1996, are included in the above table.
As of December 31, 1996, the Company had $6.2 million (par value $6.0 million)
of its long-term fixed maturity securities on deposit with various state
regulatory agencies.
Proceeds from the sale of investments in fixed maturity securities during 1996
were $2.9 billion. Gross gains of $29.5 million and gross losses of $28.1
million were realized on those sales, of which $3.2 million of gains were
accumulated (net of applicable tax benefits of $1.8 million) in the IMR. Such
amounts will be amortized into net investment income over the estimated
remaining life of the investment sold. During 1996, $20.9 million of the IMR
was amortized and included in net investment income.
Net realized capital gains (losses) reflected in the statements of operations
for the years ended December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(000'S OMITTED)
<S> <C> <C>
Equity securities (common and preferred stocks).......... $19,606 $11,217
Mortgage loans........................................... (8,828) (1,670)
------- -------
Net realized capital gains............................. $10,778 $ 9,547
======= =======
</TABLE>
At December 31, 1997 and 1996, net unrealized appreciation of equity
securities was $44.1 million and $14.1 million, respectively.
3. REINSURANCE AND RELATED TRANSACTIONS
In 1980, Mutual of America terminated a reinsurance arrangement and assumed
direct ownership of funds held by the reinsurer and direct liability for the
contractual obligations of the reinsurer. Such amounts are reported as
guaranteed funds transferable and as insurance and annuity reserves in the
consolidated statements of financial condition.
The guaranteed funds are transferable to Mutual of America over time and are
stated at the total principal amount of future guaranteed transfers to Mutual
of America of $121.1 million and $130.2 million at December 31, 1997 and 1996,
respectively.
The guaranteed interest and other allocated investment earnings on the funds
held by the reinsurer, amounting to $33.8 million and $12.3 million in 1997
and 1996, respectively, are included in net investment income. Such amounts
include participating dividends from a contingency fund that was previously
held by the reinsurer (but not recorded as an asset of Mutual of America) of
$25.9 million and $3.7 million in 1997 and 1996, respectively. The 1997 amount
includes the receipt of a $21.5 million special dividend related to the
termination of the contingency fund previously held by the reinsurer.
SAI-15
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. REAL ESTATE
In October 1992, Mutual of America purchased an office building for its new
corporate headquarters. The purchase price of the building was fully financed.
During the reconstruction period, interest costs on the debt incurred to
acquire the building were deferred and capitalized as a construction cost as
permitted by the State of New York Insurance Department. The Company occupies
approximately one-third of this office building as its corporate headquarters
and leases the remaining space. Depreciation expense for 1997 and 1996 was
$5.2 million and $5.0 million, respectively.
During the initial lease-up period, pro-rated interest costs relating to the
portion of the building not yet leased were also deferred and capitalized as a
construction cost. During 1996, interest costs of $1.5 million were
capitalized. Real estate consists of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(000'S OMITTED)
<S> <C> <C>
Company occupied......................................... $110,912 $113,876
Investment real estate................................... 221,079 222,093
-------- --------
Total.................................................. $331,991 $335,969
======== ========
</TABLE>
5. NOTE PAYABLE
In connection with the acquisition of its new corporate headquarters, Mutual
of America obtained a $135.0 million, seven-year, 6.91% fixed rate secured
term note. Fair value of the note was approximately $137.0 million at December
31, 1997 and 1996. The note matures and is payable in full on October 15, 1999
and is not redeemable prior to that date. Interest on the note is payable
semiannually in April and October. The terms of the note require that Mutual
of America pledge collateral, consisting of securities issued by the United
States Government or its agencies. The aggregate book and market values of the
collateral must be maintained at a level greater than or equal to 100% and
110%, respectively, of the outstanding balance of the note. At December 31,
securities with a book and market value of approximately $167.9 million and
$167.5 million in 1997 and $165.5 million and $164.9 million in 1996,
respectively, were pledged as collateral.
6. PENSION PLAN AND POSTRETIREMENT BENEFITS
The Company has a qualified, non-contributory defined benefit pension plan
covering virtually all employees. Benefits are generally based on years of
service and final average salary. The Company's funding policy is to
contribute annually, at a minimum, the amount necessary to satisfy the funding
requirements under the Employee Retirement Income Security Act of 1974
("ERISA"). The Company also maintains two non-qualified defined benefit plans.
The first provides benefits to employees whose total compensation exceeds the
maximum allowable compensation limits for qualified retirement plans under
ERISA. The Company also maintains a non-qualified defined benefit pension plan
for non-employee members of the Board of Directors.
Pension expense for all pension plans in 1997 and 1996 was $5.4 million and
$3.7 million, respectively. Prior to 1997 pension plan expense was computed on
a modified GAAP basis. Effective January 1, 1997 the expense and liability
related to all of the Company's pension plans and its long term incentive
compensation plan (described below) are calculated in accordance with GAAP.
This change resulted in a charge to surplus, net of the change in the prepaid
pension cost, of $9.7 million at January 1, 1997.
The components of net pension expense related to all of the Company's pension
plans are as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(000'S OMITTED)
<S> <C> <C>
Service cost............................................. $ 4,596 $ 3,347
Interest cost on projected benefit obligation............ 5,159 3,729
Return on plan assets.................................... (7,734) (5,164)
Asset gain deferred...................................... 2,265 883
Amortization of initial net asset........................ (211) (211)
Amortization of unrecognized loss........................ 1,291 1,146
------- -------
Net pension expense.................................... $ 5,366 $ 3,730
======= =======
</TABLE>
SAI-16
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The assumptions used to calculate the net pension expense were:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Expected long-term rate of return on assets.................. 11.30% 11.30%
Discount rate................................................ 7.25% 7.75%
Rate of increase in compensation levels...................... 4.00% 4.00%
</TABLE>
The funded status of all of the Company's pension plans at December 31, 1997
and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(000'S OMITTED)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $59,311 in 1997 and $43,563 in 1996..... $(62,753) $(52,113)
======== ========
Projected benefit obligation........................... $(77,027) $(60,351)
Plan assets at fair value.............................. 58,324 43,717
-------- --------
Projected benefit obligation in excess of plan assets.. (18,703) (16,634)
Remaining unrecognized initial net asset............... (841) (1,052)
Unrecognized prior service cost........................ 5,177 5,823
Unrecognized net loss from past experience different
from that assumed..................................... 17,546 30,625
-------- --------
Prepaid pension cost, end of year...................... $ 3,179 $ 18,762
======== ========
</TABLE>
The Company funds the qualified non-contributory defined benefit pension plan
in accordance with the requirements of ERISA. Plan assets at fair value for
the qualified pension plan were $47.1 million and $40.1 million at December
31, 1997 and 1996, respectively. The actuarial present value of accumulated
benefits for the qualified pension plan were $50.0 million and $43.9 million
at December 31, 1997 and 1996, respectively.
For financial reporting purposes, the prepaid pension cost at December 31,
1997 and 1996, has been classified as a non-admitted asset. At December 31,
1997 all of the qualified pension plan assets are invested in one of the
Company's separate accounts (consisting primarily of equity securities) and
participation in certain other funds managed by outside investment advisors.
Benefit payments from the plans made on behalf of retirees were approximately
$4.6 million in 1997 and $9.1 million in 1996. Periodic annuity benefits are
covered by annuities purchased by the plan from the Company. During 1997 and
1996, the Company made contributions to the qualified plan of $4.4 million and
$7.5 million, respectively.
In addition to the above noncontributory plans, all employees may participate
in a 401(k) savings plan under which the Company matches half of the
employees' basic contribution up to 6% of salary. The cost of this plan was
approximately $1.6 million and $1.5 million in 1997 and 1996, respectively.
The Company also has a long-term performance based incentive compensation plan
for certain employees. Shares are granted each year and generally vest over a
three-year period. The value of such shares is based upon increases in the
Company's statutory surplus and the maintenance of certain financial ratios.
Compensation expense accrued in 1997 related to this plan was $3.0 million.
The Company has two defined benefit postretirement plans covering
substantially all salaried employees. Employees may become eligible for such
benefits upon attainment of retirement age while in the employ of the Company
and upon satisfaction of service requirements. One plan provides medical and
dental benefits and the second plan provides life insurance benefits. The
postretirement plans are contributory for those individuals who retire with
less than twenty years of eligible service, with retiree contributions
adjusted annually and contain other cost-sharing features, such as deductibles
and coinsurance.
SAI-17
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of net postretirement benefit cost are as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(000'S OMITTED)
<S> <C> <C>
Service cost.............................................. $ 600 $ 538
Interest cost on projected benefit obligation............. 1,175 1,101
------- -------
Net postretirement benefit cost........................... $ 1,775 $ 1,639
======= =======
</TABLE>
The following table shows the plans' combined status reconciled with the
amounts reported in the Company's consolidated statements of financial
condition:
<TABLE>
<CAPTION>
1997 1996
------- -------
(000'S OMITTED)
<S> <C> <C>
Accumulated postretirement
benefit obligation
("APBO"):
Retirees.................. $ 5,911 $ 5,242
Fully eligible active plan
participants............. 3,456 3,149
Other active plan
participants............. 6,239 5,280
------- -------
Total APBO.............. 15,606 13,671
Plan assets at fair value... -- --
------- -------
APBO in excess of plan
assets..................... 15,606 13,671
Unrecognized net loss....... (4,920) (3,825)
------- -------
Accrued postretirement
obligation................. $10,686 $ 9,846
======= =======
</TABLE>
The weighted average annual assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) for the medical plan is
approximately 7.75% in 1997. The health care cost trend rate assumption has a
significant affect on the amounts reported. For example, increasing the
assumed health care cost trend rate by one percentage point in each year would
increase the accumulated postretirement obligation for the plan as of December
31, 1997 by $2.0 million and the aggregate of the service and interest cost
components of the net periodic benefit cost for 1997 by $.3 million.
The weighted average discount rate used in determining the APBO was 7.25% at
December 31, 1997 and 7.75% at December 31, 1996.
7. COMMITMENTS AND CONTINGENCIES
Rental expenses were $16.7 million and $17.0 million in 1997 and 1996,
respectively. The approximate minimum rental commitments under noncancellable
operating leases are as follows: 1998, $2.9 million, 1999, $2.3 million, 2000,
$1.6 million, 2001, $1.1 million, and 2002, $1.1 million. Such leases are
principally for leased office space, furniture and equipment. Certain office
space leases provide for adjustments to reflect changes in real estate taxes
and other operating expenses.
The Company is involved in various legal actions which have arisen in the
course of the Company's business. In the opinion of management, the ultimate
liability with respect to such lawsuits as well as other contingencies is not
considered to be material in relation to the Company's consolidated financial
statements.
8. FEDERAL INCOME TAXES
Mutual of America's pension business (the core of its operations) is exempt
from Federal income taxation under Section 501(a) of the Internal Revenue Code
("Code"). The tax benefit for the Company arises principally from the
operating results of its taxable life insurance subsidiary, The American Life
Insurance Company of New York, and is calculated in accordance with the Code
(as amended). Mutual of America and its life insurance subsidiary file federal
tax returns on a separate company basis. Mutual of America's non-insurance
subsidiaries file a consolidated tax return.
SAI-18
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As a result of recent legislation, Mutual of America's pension business will
become subject to federal income tax beginning January 1, 1998. This tax
legislation provides for certain special transition rules which moderate the
impact of taxation going forward. In the opinion of management, this change
will not have a significant impact on the Company's financial strength.
9. RECONCILIATION OF STATUTORY BASIS FINANCIAL RESULTS TO A GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES BASIS
The accompanying financial statements are presented in conformity with
statutory accounting practices prescribed or permitted by the State of New
York Insurance Department which practices differ from GAAP. The variances
between such practices and GAAP and the effects on the accompanying financial
statements follow:
Asset Valuations and Investment Income Recognition
GAAP requires the Company's bonds and notes to be classified as either held to
maturity ("HTM") or available for sale ("AFS"); whereas for statutory
accounting no such classification is required. In addition, for GAAP, AFS
bonds and notes are carried at their fair market value with the unrealized
gains and losses applied directly to surplus; whereas for statutory accounting
all bonds and notes are carried at their amortized cost.
Realized capital gains and losses, net of applicable taxes, arising from
changes in interest rates are recognized in income currently for GAAP
accounting, rather than accumulated in the IMR and amortized into income over
the remaining life of the security sold for statutory accounting.
Additionally, capital gains and losses are not recognized when a security is
sold and the same or substantially the same security is repurchased, unless
the repurchase occurs after a reasonable exposure to market risk.
A general formula based Asset Valuation Reserve (AVR) is recorded for
statutory accounting purposes, whereas such reserves are established under
GAAP only when an asset's impairment is considered to be other than temporary.
Certain assets, principally furniture and fixtures and prepaid expenses, for
statutory accounting, are excluded from the statement of financial condition
by a charge to surplus; whereas under GAAP, such assets are carried at their
amortized cost.
Policy Acquisition Costs
Under GAAP, policy acquisition costs that are directly related to and vary
with the production of new business are deferred and amortized over the
estimated life of the applicable policies, rather than being expensed as
incurred.
Insurance and Annuity Reserves
Under statutory accounting practices the interest rates and mortality and
morbidity assumptions used are those which are prescribed or permitted by the
State of New York Insurance Department. Under GAAP, for annuities the interest
rate assumptions used are generally those assumed in the pricing of the
contract at issue; for disability benefits the interest rates assumed are
those anticipated to be earned over the duration of the benefit period.
Mortality and morbidity assumptions are based on Company experience.
Premium Recognition
Insurance contracts that do not subject the insurer to significant mortality
or morbidity risk are considered, under GAAP, to be primarily investment
contracts. GAAP requires all amounts received from policyholders under these
investment contracts to be recorded as a policyholder deposit rather than as
premium income.
Deferred Income Taxes
GAAP requires that a deferred tax asset or liability be established to provide
for temporary differences between the tax and financial reporting bases of
assets and liabilities. Deferred income taxes are not recorded for statutory
accounting purposes.
SAI-19
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tables that follow provide a reconciliation of the 1997 and 1996 statutory
financial results reflected in the accompanying financial statements to a GAAP
basis (000's omitted):
<TABLE>
<CAPTION>
RECONCILIATION OF STATUTORY TO GAAP SURPLUS 1997 1996
------------------------------------------- -------- --------
<S> <C> <C>
Statutory Surplus....................................... $523,940 $431,045
Market value adjustment related to AFS bonds and
notes................................................ 160,980 84,569
Realized capital gains................................ 163,422 32,674
AVR................................................... 116,494 107,676
Deferred policy acquisition costs..................... 36,905 39,854
Policy reserve adjustments............................ (17,510) (21,290)
Non-admitted assets................................... 9,563 30,222
Federal income taxes.................................. (20,571) (6,915)
Other................................................. 1,135 555
-------- --------
GAAP Surplus............................................ $974,358 $698,390
======== ========
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION OF STATUTORY TO GAAP NET INCOME 1997 1996
---------------------------------------------- -------- --------
<S> <C> <C>
Statutory Net Income.................................... $ 74,272 $ 55,176
Investment income adjustments......................... (8,020) (14,562)
Realized capital gains................................ 145,791 33,555
Policy reserve adjustments............................ 3,781 (4,071)
Deferred acquisition costs............................ 2,518 2,393
Deferred income taxes................................. (6,559) (3,756)
Dividend related to termination of contingency fund
(Note 3)............................................. (20,920) --
Other................................................. (4,485) (3,370)
-------- --------
GAAP Net Income......................................... $186,378 $ 65,365
======== ========
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION OF GAAP TO STATUTORY PREMIUMS 1997 1996
-------------------------------------------- -------- --------
<S> <C> <C>
GAAP Premium Income...................................... $104,129 $ 63,372
Premiums from investment contracts..................... 665,045 652,186
-------- --------
Statutory Premium Income................................. $769,174 $715,558
======== ========
</TABLE>
SAI-20
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements
Financial statements for 1997 for Mutual of America Separate Account
No. 2 and Mutual of America Life Insurance Company are included in
Part B of this Registration Statement.
(b) Exhibits
4I. Form of Endorsement to Contract for Roth IRA
5I. Form of Application for Roth IRA Contract
10. Consent of Arthur Andersen LLP, Independent
Accountants.
C-1
<PAGE>
Item 25. Directors and Officers of the Depositor
---------------------------------------
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address With Depositor
- ------------------ ---------------------
<S> <C>
Clifford L. Alexander, Jr. Director
Washington, D.C.
Patricia A. Cahill Director
Denver, Colorado
Roselyn P. Epps, M.D. Director
Bethesda, Maryland
Dudley H. Hafner Director
Dallas, Texas
Earle H. Harbison, Jr. Director
St. Louis, Missouri
Frances R. Hesselbein Director
New York, New York
William Kahn Director
St. Louis, Missouri
LaSalle D. Leffall, Jr., M.D. Director
Washington, D.C.
Michael A. Pelavin Director
Flint, Michigan
Fioravante G. Perotta Director
New York, New York
Alan B. Reed Director
Buffalo Grove, Illinois
Francis H. Schott Director
New York, New York
O. Stanley Smith, Jr. Director
Columbia, South Carolina
Sheila M. Smythe Director
Valhalla, New York
Elie Wiesel Director
New York, New York
Officers-Directors
------------------
William J. Flynn Chairman of the Board
Thomas J. Moran President and Chief Executive
Officer
Richard J. Ciecka Vice Chairman of the Board
Other Officers
--------------
Manfred Altstadt Senior Executive Vice President
and Chief Financial Officer
Diane M. Aramony Senior Vice President,
Human Resources
Meyer Baruch Senior Vice President, State
Compliance and Government Regulations,
since July 1996; prior thereto,
Assistant Chief of the Life Insurance
and Companies Bureau of the New York
State Insurance Department
Deborah Swinford Becker Senior Vice President and
Associate General Counsel
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C>
Nicholas A. Branchina Senior Vice President and
Associate Treasurer
William Breneisen Executive Vice President,
Office of Technology
Jeremy J. Brown Executive Vice President and Chief
Actuary, since April, 1997; prior
thereto, Consulting Actuary with
Milliman & Robertson
Allen J. Bruckheimer Senior Vice President and
Associate Treasurer
Patrick Burke Senior Vice President,
Special Markets
Patrick A. Burns Senior Executive Vice President
and General Counsel
Sean Carroll Senior Vice President, Facilities
Management, since March 1998; prior
thereto, Vice President
John Cerrato Senior Vice President, Corporate
Services
Edward Cole Senior Vice President,
MIS Operations
William S. Conway Executive Vice President, Marketing
Rita Conyers Executive Vice President,
Corporate Communications and
Training
Salvatore R. Curiale Senior Executive Vice President,
Technical Operations
Linda DeHooge Senior Vice President and
Assistant Secretary
William A. DeMilt Executive Vice President
Real Estate Management
Warren A. Essner Senior Vice President and
Assistant to the President and
Chief Executive Officer
James E. Flynn Senior Vice President, Marketing
</TABLE>
C-3
<PAGE>
<TABLE>
<S> <C>
Michael Gallagher Senior Vice President, Direct
Boca Raton, FL Response/Marketing
Harold J. Gannon Senior Vice President, Corporate Tax
Gordon Gaspard Senior Vice President,
Technical Services
Robert Giaquinto Senior Vice President,
MIS Operations
Thomas E. Gilliam Executive Vice President and Assistant
to the Vice Chairman
John R. Greed Executive Vice President and Treasurer
since May 1997; Senior Vice President
and Deputy Treasurer, July 1996 to May
1997, prior thereto, partner,
Arthur Andersen LLP
Thomas A. Harwood Senior Vice President,
Competition and Asset Retention
Raymond J. Hayes Senior Vice President,
Employee Benefits
Sandra Hersko Senior Vice President,
Technical Administration
Edward J. T. Kenney Senior Vice President and Assistant to
the President and Chief Executive
Officer
Gregory A. Kleva, Jr. Executive Vice President and
Deputy General Counsel
Stephanie J. Kopp Executive Vice President
and Corporate Secretary
Robert Kordecki Senior Vice President,
National Accounts
Amir Lear Senior Vice President, Office of the
Chief Financial Officer
Stanley M. Lenkowicz Senior Vice President and
Deputy General Counsel
Robert W. Maull Senior Vice President and Corporate
Actuary
George L. Medlin Executive Vice President, Internal
Audit, since March 1998; prior
thereto, Senior Vice President
Lynn M. Nadler Senior Vice President, Training
Boca Raton, FL and Leadership Development
</TABLE>
C-4
<PAGE>
<TABLE>
<S> <C>
Roger F. Napoleon Senior Vice President and
Associate General Counsel
Theodore J. O'Dell Senior Vice President and
Controller
James C. Peterson Senior Vice President, Training
and Leadership Development
William Rose Senior Vice President,
Field Operations
Dennis J. Routledge Senior Vice President,
LAN/Telecommunications
Robert W. Ruane Senior Vice President,
Corporate Communications
William G. Shannon Senior Vice President,
Individual Financial Planning
Walter W. Siegel Senior Vice President and Actuary
Joan M. Squires Senior Vice President, Business
Applications
Henry F. White, Jr. Senior Vice President and Deputy
General Counsel
Eldon Wonacott Senior Vice President, Field
Administration
Raymond Yeager Senior Vice President,
MIS Operations
</TABLE>
The business address of all officers and directors is 320 Park Avenue, New
York, New York 10022, unless otherwise noted.
Item 27. Number of Holders of Securities
-------------------------------
As of March 31, 1998, there were 169,943 Participants in Separate
Account No. 2, 82,475 of whom were attributable to Contracts registered under
SEC File No. 2-90201; 84,050 of whom were attributable to Contracts registered
under SEC File No. 33-11023; and 3,418 of whom were attributable to Contracts
registered under SEC File No. 33-5609.
Item 32. Undertakings
------------
The Insurance Company represents that the fees and charges deducted
under the Contracts, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by the Insurance Company.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this post-amendment to Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this post-effective amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
the State of New York, the 29th day of April, 1998.
MUTUAL OF AMERICA SEPARATE
ACCOUNT NO. 2 Registrant)
MUTUAL OF AMERICA LIFE
INSURANCE COMPANY (Depositor)
By: /s/ Manfred Altstadt
--------------------
Manfred Altstadt
Senior Executive Vice
President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated on April 29, 1998.
Signature Title
*
__________________________ Chairman of the Board;
William J. Flynn Director
* Chief Executive Officer and
__________________________ President; Director
Thomas J. Moran (Principal Executive Officer)
Senior Executive Vice
President and Chief
Financial Officer
Principal Financial and
/s/ Manfred Altstadt Accounting Officer)
- --------------------
Manfred Altstadt
*
__________________________ Director
Clifford L. Alexander, Jr.
*
__________________________ Director
Patricia A. Cahill
*
__________________________ Director
Richard J. Ciecka
C-6
<PAGE>
__________________________ Director
Roselyn P. Epps, M.D.
__________________________ Director
Dudley H. Hafner
__________________________ Director
Earle H. Harbison, Jr.
*
___________________________ Director
Frances R. Hesselbein
*
___________________________ Director
William Kahn
*
___________________________ Director
LaSalle D. Leffall, Jr., M.D.
___________________________ Director
Michael A. Pelavin
___________________________ Director
Fioravante G. Perrotta
___________________________ Director
Alan B. Reed
___________________________ Director
Francis H. Schott
*
___________________________ Director
O. Stanley Smith, Jr.
___________________________ Director
Sheila M. Smythe
*
___________________________ Director
Elie Wiesel
*By /s/ Manfred Altstadt
--------------------
Manfred Altstadt
Attorney-in-Fact
C-7
<PAGE>
EXHIBIT INDEX
No. Page
- --- ----
99.4I. Form of Endorsement to Contract for Roth IRA
99.5I. Form of Application for Roth IRA Contract
99.10. Consent of Arthur Andersen LLP, Independent
Accountants.
<PAGE>
EXHIBIT 99.4I
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
320 PARK AVENUE, NEW YORK, NY 10022 o (212) 224-1600
(hereafter called the "Company")
ENDORSEMENT
Effective as of the Date of Issue of this contract, the following changes are
made to this contract.
1. The "REQUIRED BEGINNING DATE" provision in Section 2 of the contract is
deleted.
2. The "DISTRIBUTIONS" provision in Section 2 of the contract is changed to
read:
DISTRIBUTIONS
All payments, withdrawals and distributions under this contract will be
subject to the following rules:
(A) RETIREMENT BENEFIT. Except as otherwise provided, the Accumulation
Value of this contract will be distributed to you under a method of
payment selected by you and permitted by the contract.
(B) DEATH BENEFIT AFTER ANNUITY COMMENCEMENT DATE. If you die on or after
your Annuity Commencement Date, your beneficiary will be entitled to
whatever death benefit is provided by the annuity option that is in
effect when you die.
(C) DEATH BENEFIT BEFORE ANNUITY COMMENCEMENT DATE. If you die before your
Annuity Commencement Date, your beneficiary will be entitled to a
death benefit equal to the Accumulation Value of this contract.
Subject to the following rules, the beneficiary may elect to receive
this death benefit under any method of payment permitted by this
contract. However, the method of payment chosen by your beneficiary
must comply with one of the following distribution rules, unless the
beneficiary elects to use the Alternative Method of distribution
described in paragraph (D) below:
(1) FIVE YEAR RULE. Except as provided below, the entire value of the
death benefit must be distributed to your beneficiary by December
31 of the calendar year that contains the fifth anniversary of
your death. However, if your beneficiary is your surviving
spouse, and the spouse dies before receiving any part of the
death benefit, the spouse's beneficiary is not required to
receive the death benefit until December 31 of the calendar year
that contains the fifth anniversary of the spouse's death.
(2) LIFE ANNUITY RULE. Except as provided below, the entire value of
the death benefit must be distributed to your beneficiary in the
form of annuity payments over a period of time that does not
exceed the beneficiary's life or life expectancy (whichever is
longer). If your beneficiary is your surviving spouse, the
spouse's life expectancy may be recalculated annually for this
purpose as provided in subparagraph (E)(2) below.
Unless your beneficiary is your surviving spouse, these annuity
payments must commence no later than December 31 of the calendar
year next following the calendar year in which you died. If your
beneficiary is your surviving spouse, the spouse must begin to
receive the annuity payments by the later of (a) December 31 of
the calendar year next following the calendar year in which you
died, or (b) December 31 of the calendar year in which you would
have attained age 70-1/2.
However, if your beneficiary is your surviving spouse, and the
spouse dies before he or she begins to receive annuity payments,
the death benefit must be distributed to the spouse's beneficiary
in the form of annuity payments over the life or life expectancy
of the spouse's beneficiary (whichever is longer). These annuity
payments must commence by the later of (a) December 31 of the
calendar year next following the calendar year in which your
spouse died, or (b) December 31 of the calendar year in which
your spouse would have attained age 70-1/2.
(D) ALTERNATIVE METHOD. Your beneficiary will not be required to receive a
distribution from this contract under paragraph (C) above to the
extent that the required distribution is withdrawn from another
individual retirement arrangement pursuant to the "alternative method"
of distribution described in IRS Notice 88-38, 1988-1 C.B. 524.
3814-IRA-END(ROTH) Page 1
<PAGE>
(E) DETERMINATION OF LIFE EXPECTANCY
(1) METHOD OF CALCULATION. For the purpose of choosing a payment
schedule under subparagraph (C)(2), life expectancies will be
calculated (and if applicable, recalculated) in accordance with
Tables V and VI in Section 1.72-9 of the Federal Income Tax
Regulations.
(2) RECALCULATION OF LIFE EXPECTANCY. Your surviving spouse may
annually recalculate his or her life expectancy for the purpose
of choosing a payment schedule under subparagraph (C)(2) above.
However, if your spouse initially selects a method of payment
based on his or her recalculated life expectancy, he or she may
not subsequently choose a slower payment schedule.
(F) COMPLIANCE WITH MINIMUM DISTRIBUTION REQUIREMENTS. Any method of
payment chosen by you or your beneficiary must comply with the minimum
distribution requirements of Code Sections 408(b)(3) and 408A(c)(5),
the Federal Income Tax Regulations thereunder, and any subsequent
pronouncements. The Company assumes no responsibility for determining
whether any method of payment selected under this contract complies
with the applicable minimum distribution rules.
3. The "CONTRIBUTIONS" provision in Section 3 of the contract is changed to
read:
CONTRIBUTIONS
No contributions may be made under this contract except:
o amounts designated as ROTH IRA contributions under a ROTH IRA
arrangement described in Section 408A(b) of the Internal Revenue Code
(herein called the "Code"); and
o rollover amounts transferred on your behalf and designated as ROTH IRA
contributions under Code Section 408A(c).
All contributions pursuant to this contract must be made to the Company's
Home Office. Any person who makes a contribution is entitled to an official
receipt.
The first contribution pursuant to this contract must be made on or before
the Effective Date shown on the face page to place the contract in force.
Thereafter, contributions may be made at any time, except that no
contributions may be made by you or on your behalf on or after your Annuity
Commencement Date.
The total contributed by you or on your behalf for any taxable year
pursuant to a ROTH IRA arrangement may not exceed the maximum contribution
permitted for that year by Code Section 408A(c).
The Company assumes no responsibility for determining whether the amounts
contributed under this contract comply with any applicable contribution
limits or requirements.
This endorsement executed at New York, N.Y. this ____________ day
of________________________ 19 .
MUTUAL OF AMERICA
LIFE INSURANCE COMPANY
/s/ Marion Amrhein
---------------------------------
Title: Vice President
3814-IRA-END(ROTH) Page 2
<PAGE>
EXHIBIT 99.5I
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MUTUAL OF AMERICA LIFE INSURANCE COMPANY APPLICATION FORM
320 PARK AVENUE NEW YORK NY 10022-6839 ROTH-IRA
A registered broker/dealer and distributor of variable contracts
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SOCIAL SECURITY # APPLICANT'S NAME First Initial Last
- ------------------------------------------------------------------------------------------------------------------------------------
MAILING ADDRESS Street and Number (Include Apartment Number) City State Zip Code
- ------------------------------------------------------------------------------------------------------------------------------------
IF FOREIGN RESIDENT Province Country
- ------------------------------------------------------------------------------------------------------------------------------------
DATE OF BIRTH |_| MALE INITIAL CONTRIBUTION DISTRIBUTION # I elect to make contributions by:
|_| FEMALE $ 1937 |_| Preauthorized |_| direct payment
/ / Checking
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
ALLOCATION OF CONTRIBUTIONS
====================================================================================================================================
Show the percentage of your contributions you want to place in the interest account and/or investment funds. Use whole numbers only,
and make sure the percentages total 100%.
Amounts you place in the interest account will be credited with the rate of interest currently applicable to that account. Your
balance in any investment fund will fluctuate to recognize investment results.
================= ======================================================================================================
INTEREST ACCOUNT INVESTMENT FUNDS
================= ======================================================================================================
MUTUAL OF AMERICA MUTUAL OF AMERICA
- ----------------- ------------------------------------------------------------------------------------------------------
Interest Money Market All America Equity Index Short-Term
Accumulation Fund Fund Fund Bond Fund
Account % % % % %
- ----------------- ------------------------------------------------------------------------------------------------------
Mid-Term Bond Composite Aggressive Equity
Bond Fund Fund Fund Fund
% % % %
------------------------------------------------------------------------------------------------------
SCUDDER AMERICAN EQUITY
------------------------------------------------------------------------------------------------------
Scudder Scudder Scudder American Century
Capital Growth Bond International VP Capital
Fund Fund Fund Appreciation Fund
% % % %
------------------------------------------------------------------------------------------------------
FIDELITY CALVERT
------------------------------------------------------------------------------------------------------
Fidelity VIP II Fidelity VIP Fidelity VIP II Calvert
Asset Manager Equity-Income Contrafund Social Balanced
Fund Fund Fund
% % % %
------------------------------------------------------------------------------------------------------
REPLACEMENT
Is the contract applied for intended to replace another contract?..... |_| Yes |_| No
If yes, Company______________________________Contract/Account Number___________________ Amount $_______________
====================================================================================================================================
BENEFICIARY DESIGNATIONS (Please Read Reverse Side Before Completing This Section)
====================================================================================================================================
Beneficiary Type: Beneficiary Type:
|_| Primary |_| Primary |_| Secondary
Relationship: Relationship:
|_| Spouse |_| Child |_| Parent |_| Estate |_| Other |_| Spouse |_| Child |_| Parent |_| Estate |_| Other
- ------------------------------------------------------------------------------------------------------------------------------------
FULL NAME First Initial Last FULL NAME First Initial Last
- ------------------------------------------------------------------------------------------------------------------------------------
DATE OF BIRTH (Optional) SOCIAL SECURITY # (Optional) DATE OF BIRTH (Optional) SOCIAL SECURITY # (Optional)
/ / / /
- ------------------------------------------------------------------------------------------------------------------------------------
ADDRESS Street ADDRESS Street
- ------------------------------------------------------------------------------------------------------------------------------------
City State Zip Code City State Zip Code
- ------------------------------------------------------------------------------------------------------------------------------------
IF FOREIGN RESIDENT Province Country BENEFIT PERCENT IF FOREIGN RESIDENT Province Country BENEFIT PERCENT
% %
- ------------------------------------------------------------------------------------------------------------------------------------
APPLICANT MUST COMPLETE REVERSE SIDE
6827 11/97
</TABLE>
<PAGE>
================================================================================
BENEFICIARY DESIGNATIONS
================================================================================
The ROTH IRA provides that if you die before the date payments begin under your
ROTH IRA contract, the Accumulation Value of your contract on the date Mutual of
America receives due proof of death will be payable as a death benefit. Please
name one or more beneficiaries on this application to receive any death benefits
payable.
If you wish to name an organization or an estate to receive any benefits
payable, show the name of the organization or the estate in the section labeled
"FULL NAME" in the portion of this form provided for naming beneficiaries.
You have the right to change your beneficiary at any time. Use the Mutual of
America form, CHANGE OF BENEFICIARY DESIGNATION.
DIVISION OF BENEFITS
IF A NAMED BENEFICIARY is living at the time of your death, any benefits will be
paid to that person. IF YOU NAME MORE THAN ONE PRIMARY BENEFICIARY, Mutual of
America will pay the benefits in equal shares to the surviving primary
beneficiaries. If no primary beneficiary is living upon your death, Mutual of
America will pay the benefits to the SECONDARY BENEFICIARY. IF YOU NAME MORE
THAN ONE SECONDARY BENEFICIARY, Mutual of America will pay the benefits in equal
shares to the surviving SECONDARY BENEFICIARIES. If you wish to provide payment
in proportions other than equal shares, you must state the percentage you wish
each beneficiary to receive.
ORDER OF PAYMENT OF BENEFITS
IF NO NAMED BENEFICIARY is living at the time of your death, any benefits
payable under the terms of the plan will be paid to the first surviving class of
the following preference beneficiaries: (a) your spouse; (b) your children in
equal shares; (c) your parents in equal shares; (d) your brothers and sisters in
equal shares; and (e) the executors or administrators of your estate.
================================================================================
STATEMENT AND SIGNATURE
================================================================================
I acknowledge that: (a) I have received a copy of the current Prospectus; (b) I
have read the Prospectus and understand its terms; (c) I am familiar with the
objectives of the Investment Funds; (d) my election or authorization made under
my ROTH IRA contract as part of this application is subject to the conditions
and limitations set forth in the Prospectus; (e) I may not roll over
contributions or transfer amounts from existing annuity contracts or IRA type
arrangements other than as described in Section 408A(c) of the Internal Revenue
Code; (f) I have determined that the ROTH IRA applied for above is suitable to
(i) my investment objectives and (ii) my financial situation; and (g) account
transaction information sent to me will be conclusive unless I make any needed
correction by calling 1-800-468-3785 no later than four weeks from the date of
the transaction at issue.
I UNDERSTAND THAT: (A) ANY AMOUNTS PLACED IN THE INTEREST ACCUMULATION ACCOUNT
WILL EARN INTEREST AT THE RATES DETERMINED BY MUTUAL OF AMERICA; AND (B) ANY
AMOUNTS PLACED IN THE INVESTMENT FUNDS ARE NOT GUARANTEED AS TO FIXED DOLLAR
AMOUNTS AND MAY INCREASE OR DECREASE IN VALUE BASED UPON THE FUNDS' INVESTMENT
RESULTS.
I AFFIRM THAT THE ABOVE INFORMATION IS CORRECT:
________________________________________ _________________________
Signature of Applicant Date
Signed at: _____________________________________________________________________
(City and State)
================================================================================
FOR INTERNAL USE ONLY
================================================================================
________________________________________ _________________________
Print Name of Registered Representative Regional Office Location
________________________________________ _________________________
Signature of Registered Representative Date
<PAGE>
EXHIBIT 99.10
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of Registration
Statement No. 2-90201.
ARTHUR ANDERSEN LLP
New York, New York
April 29, 1998
