<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 1999
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. 25 /X/
AND/OR
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 26
------------------------
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, 1999 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
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<PAGE>
CROSS-REFERENCE SHEET
(FILE NO. 2-90201, TVIF CONTRACTS)
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<TABLE>
<CAPTION>
FORM N-4 ITEM PROSPECTUS CAPTION
---------------------------------------------------- ----------------------------------------------------
<C> <S> <C>
PART A
1. Cover Page.......................................... Cover Page
2. Definitions......................................... Definitions We Use in this Prospectus
3. Synopsis............................................ Table of Annual Expenses
4. Condensed Financial Information..................... Appendix A: Unit Value Information for the Separate
Account Funds; Performance Information for the
Separate Account Funds
5. General Description of Registrant, Depositor, and
Portfolio Companies............................... About Mutual of America and the Separate Account;
Underlying Funds Invested in by Our Separate
Account; Your Voting Rights for Meetings of the
Underlying Funds; Administrative Matters
6. Deductions.......................................... Table of Annual Expenses; Charges You Will Pay
7. General Description of Variable Annuity Contracts... Who May Purchase a Contract and Make Contributions;
Your Account Balance in the Separate Account
Funds; Our General Account
8. Annuity Period...................................... You May Obtain an Annuity with Your Account Balance
9. Death Benefit....................................... Our Payment of Account Balance to You or a
Beneficiary--Death Benefit Prior to Annuity
Commencement Date
10. Purchases and Contract Value........................ Who May Purchase a Contract and Make Contributions;
Your Account Balance in the Separate Account
Funds; Our General Account
11. Redemptions......................................... Your Account Balance in the Separate Account Funds;
Our Payment of Account Balance to You or a
Beneficiary; How to Contact Us and Give Us
Instructions
12. Taxes............................................... Federal Tax Information for Participants
13. Legal Proceedings................................... N/A (see Statement of Additional Information)
14. Table of Contents of the Statement of Additional
Information....................................... Our Statement of Additional Information
<CAPTION>
PART B STATEMENT OF ADDITIONAL INFORMATION CAPTION
----------------------------------------------------
<C> <S> <C>
15. Cover Page.......................................... Cover Page
16. Table of Contents................................... Table of Contents
17. General Information and History..................... N/A
18. Services............................................ N/A
19. Purchases of Securities Being Offered............... Distribution of the Contracts
20. Underwriters........................................ Distribution of the Contracts
21. Calculation of Performance Data..................... Yield and Performance Information
22. Annuity Payments.................................... N/A
23. Financial Statements................................ Financial Statements
</TABLE>
<PAGE>
PROSPECTUS
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VARIABLE ACCUMULATION ANNUITY CONTRACTS
(TDA, IRA AND FPA CONTRACTS)
Issued By
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
320 Park Avenue, New York, New York 10022
Through its
SEPARATE ACCOUNT NO. 2
-------------------------------------------------------------------------
THE CONTRACTS--We offer these group and individual variable accumulation annuity
contracts (CONTRACTS):
- group Tax-Deferred Annuity Contracts (TDA CONTRACTS);
- Individual Retirement Annuity Contracts (IRA CONTRACTS), including
Traditional IRA, Roth IRA,
SIMPLE IRA and SEP IRA Contracts; and
- individual Flexible Premium Deferred Annuity Contracts (FPA
CONTRACTS).
We no longer offer our group Voluntary Employee Contribution (VEC) Contract,
which we describe in Appendix B.
A PARTICIPANT or YOU means an employee under a TDA Contract or a person to whom
we have issued an IRA or FPA Contract. A Contract can help you accumulate funds
for retirement and other long-term financial needs. You may apply your Account
Balance to provide fixed monthly Annuity Payments that begin at a future date.
YOUR CONTRIBUTIONS--You may make Contributions in the amounts and at the
frequency you choose (subject to certain minimums), and some of the Contracts
permit your employer to make Contributions on your behalf. Under IRA and TDA
Contracts, the amount of your Contributions and those of your employer are
limited by Federal tax laws.
INVESTMENT ALTERNATIVES FOR YOUR ACCOUNT BALANCE--You may allocate your Account
Balance to any of the Funds of Mutual of America Separate Account No. 2 or to
our General Account, unless your employer's plan (if any) restricts allocations.
You may transfer all or any part of your Account Balance among the Investment
Alternatives at any time, without charge. The Separate Account Funds invest in
funds or portfolios of mutual funds (the UNDERLYING FUNDS), which currently are:
- MUTUAL OF AMERICA INVESTMENT CORPORATION: Equity Index, All America,
Mid-Cap Equity Index, Aggressive Equity, Composite, Bond, Mid-Term
Bond, Short-Term Bond and Money Market Funds;
- SCUDDER VARIABLE LIFE INVESTMENT FUND: Capital Growth, Bond and
International Portfolios;
- FIDELITY INVESTMENTS-REGISTERED TRADEMARK- VARIABLE INSURANCE PRODUCTS
FUNDS: Equity-Income Portfolio of the Variable Insurance Products
Fund, and Contrafund and Asset Manager Portfolios of the Variable
Insurance Products Fund II;
- CALVERT SOCIAL BALANCED PORTFOLIO of Calvert Variable Series, Inc.;
and
- AMERICAN CENTURY VP CAPITAL APPRECIATION FUND of American Century
Variable Portfolios, Inc.
WE DO NOT GUARANTEE THE INVESTMENT PERFORMANCE OF ANY SEPARATE ACCOUNT FUND. You
have the entire investment risk, including the risk of a decline in value, for
amounts you allocate to a Separate Account Fund.
We pay a fixed rate of interest on your Account Balance in our General Account,
and we change the rate from time to time. This Prospectus describes the Separate
Account Fund Investment Alternatives, but there is a brief description of the
General Account under "Our General Account".
STATEMENT OF ADDITIONAL INFORMATION--You may obtain at no charge a Statement of
Additional Information (an SAI), dated May 1, 1999, about the Contracts and the
Separate Account by writing to us at the address at the top of this page or by
calling 1-212-224-1600. We have filed the SAI with the Securities and Exchange
Commission and incorporate it into this Prospectus by reference. The table of
contents for the SAI is at the end of this Prospectus for your review.
PROSPECTUSES--You should read this Prospectus before you purchase a Contract or
become a Participant and keep it for future reference. This Prospectus is not
valid unless the prospectuses of the Underlying Funds, which you should also
read, are attached to it.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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DATED: MAY 1, 1999
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
Page
---------
TABLE OF ANNUAL EXPENSES............................................... 1
SUMMARY OF INFORMATION IN THIS PROSPECTUS.............................. 3
ABOUT MUTUAL OF AMERICA AND THE SEPARATE ACCOUNT....................... 9
UNDERLYING FUNDS INVESTED IN BY OUR SEPARATE ACCOUNT................... 10
CHARGES YOU WILL PAY................................................... 14
Administrative Charges............................................. 14
Distribution Expense Charge........................................ 14
Mortality and Expense Risk Charges................................. 15
Expenses of the Underlying Funds................................... 15
Premium Taxes...................................................... 15
WHO MAY PURCHASE A CONTRACT AND MAKE CONTRIBUTIONS..................... 16
Purchase of a Contract; Participation.............................. 16
Payment of Contributions........................................... 17
Allocation of Contributions........................................ 19
YOUR ACCOUNT BALANCE IN THE SEPARATE ACCOUNT FUNDS..................... 20
OUR PAYMENT OF ACCOUNT BALANCE TO YOU OR A BENEFICIARY................. 21
Your Right to Transfer Among Investment Alternatives............... 21
Your Right to Make Withdrawals, including by Specified Payments.... 21
How to Tell Us an Amount to Transfer or Withdraw................... 22
Loans under a TDA Contract......................................... 22
Death Benefit Prior to Annuity Commencement Date................... 23
Discontinuance or Termination of Contracts or Participation........ 24
When We May Postpone Payments...................................... 25
YOU MAY OBTAIN AN ANNUITY WITH YOUR ACCOUNT BALANCE.................... 26
Amount of Annuity Payments......................................... 26
Annuity Commencement Date.......................................... 26
Available Forms of Annuity......................................... 26
Death Benefit After Annuity Commencement Date...................... 27
Lump Sum for Small Annuity Payments................................ 28
OUR GENERAL ACCOUNT.................................................... 28
HOW TO CONTACT US AND GIVE US INSTRUCTIONS............................. 29
ADMINISTRATIVE MATTERS................................................. 30
Year 2000 Compliance............................................... 30
Confirmation Statements to Participants............................ 30
Designation of Beneficiary......................................... 30
Certain Administrative Provisions.................................. 31
Participation in Divisible Surplus................................. 32
FEDERAL TAX INFORMATION FOR PARTICIPANTS............................... 33
YOUR VOTING RIGHTS FOR MEETINGS OF THE UNDERLYING FUNDS................ 40
PERFORMANCE INFORMATION FOR THE SEPARATE ACCOUNT FUNDS................. 40
FUNDING AND OTHER CHANGES WE MAY MAKE.................................. 41
DEFINITIONS WE USE IN THIS PROSPECTUS.................................. 42
OUR STATEMENT OF ADDITIONAL INFORMATION................................ 44
APPENDIX A: UNIT VALUE INFORMATION FOR THE SEPARATE ACCOUNT FUNDS...... 45
APPENDIX B: VOLUNTARY EMPLOYEE CONTRIBUTION PROGRAM CONTRACTS.......... 47
</TABLE>
THIS PROSPECTUS IS NOT AN OFFERING IN ANY JURISDICTION WHERE WE MAY NOT LAWFULLY
OFFER THE CONTRACTS FOR SALE. WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR
OTHER PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS ABOUT THE
CONTRACTS OTHER THAN THOSE IN THIS PROSPECTUS. IF YOU RECEIVE UNAUTHORIZED
INFORMATION OR REPRESENTATIONS, YOU MUST NOT RELY ON THEM IN MAKING ANY PURCHASE
DECISION.
<PAGE>
TABLE OF ANNUAL EXPENSES
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The first part of the table below shows the expenses of the Separate
Account Funds during 1998 and the second part shows the expenses of
the Underlying Funds during 1998, except that we have estimated the
expenses of the Mid-Cap Equity Index Fund because it began
operations on May 1, 1999.
<TABLE>
<CAPTION>
INVESTMENT COMPANY
-----------------------------------------------
ALL AMERICA,
COMPOSITE,
BOND, MID-CAP FIDELITY
MID-TERM EQUITY ---------------------
BOND, AND INDEX AND VIP
MONEY SHORT-TERM EQUITY AGGRESSIVE EQUITY- VIP II
MARKET BOND INDEX EQUITY INCOME CONTRAFUND
------ ------------ ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
PARTICIPANT TRANSACTION EXPENSES
Sales Load or Deferred Sales
Load........................... None None None None None None
Surrender or Exchange Fees....... None None None None None None
ANNUAL CONTRACT FEE(1)............. $ 24 $ 24 $ 24 $ 24 $ 24 $ 24
------ ------ ---------- ---------- -------- ----------
------ ------ ---------- ---------- -------- ----------
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average net
assets)
Mortality and Expense Risk
Fees........................... .50% .50% .50% .50% .50% .50%
------ ------ ---------- ---------- -------- ----------
Account Fees and Expenses
Administrative
Charges (after
reimbursement)(2).......... .40% .40% .40% .40% .30% .30%
Distribution Expense
Charge..................... .35 .35 .35 .35 .35 .35
------ ------ ---------- ---------- -------- ----------
Total Account Fees and
Expenses..................... .75 .75 .75 .75 .65 .65
------ ------ ---------- ---------- -------- ----------
TOTAL SEPARATE ACCOUNT
EXPENSES....................... 1.25% 1.25% 1.25% 1.25% 1.15% 1.15%
------ ------ ---------- ---------- -------- ----------
------ ------ ---------- ---------- -------- ----------
UNDERLYING FUND ANNUAL EXPENSES
(as a percentage of average net
assets)(3)
Management Fees.................. .25% .50% .125% .85% .49% .59%
Other Expenses (after
reimbursement)(3).............. None None None None .09 .11
------ ------ ---------- ---------- -------- ----------
TOTAL UNDERLYING FUND EXPENSES
(AFTER REIMBURSEMENT).......... .25% .50% .125% .85% .58%(4) .70%(4)
------ ------ ---------- ---------- -------- ----------
------ ------ ---------- ---------- -------- ----------
<CAPTION>
SCUDDER AMERICAN
VIP II --------------------------------- CENTURY VP CALVERT
ASSET CAPITAL CAPITAL SOCIAL
MANAGER GROWTH BOND INTERNATIONAL APPRECIATION BALANCED
------- ------- ------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
PARTICIPANT TRANSACTION EXPENSES
Sales Load or Deferred Sales
Load........................... None None None None None None
Surrender or Exchange Fees....... None None None None None None
ANNUAL CONTRACT FEE(1)............. $ 24 $ 24 $ 24 $ 24 $ 24 $ 24
------- ------- ------- ------ ------ -----------
------- ------- ------- ------ ------ -----------
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average net
assets)
Mortality and Expense Risk
Fees........................... .50% .50% .50% .50% .50% .50%
------- ------- ------- ------ ------ -----------
Account Fees and Expenses
Administrative
Charges (after
reimbursement)(2).......... .30% .40% .40% .40% .20% .40%
Distribution Expense
Charge..................... .35 .35 .35 .35 .35 .35
------- ------- ------- ------ ------ -----------
Total Account Fees and
Expenses..................... .65 .75 .75 .75 .55 .75
------- ------- ------- ------ ------ -----------
TOTAL SEPARATE ACCOUNT
EXPENSES....................... 1.15% 1.25% 1.25% 1.25% 1.05% 1.25%
------- ------- ------- ------ ------ -----------
------- ------- ------- ------ ------ -----------
UNDERLYING FUND ANNUAL EXPENSES
(as a percentage of average net
assets)(3)
Management Fees.................. .54% .46% .47% .86% 1.00% .70%
Other Expenses (after
reimbursement)(3).............. .10% .04 .10 .18 None .18
------- ------- ------- ------ ------ -----------
TOTAL UNDERLYING FUND EXPENSES
(AFTER REIMBURSEMENT).......... .64%(4) .50% .57% 1.04% 1.00% .88%(5)
------- ------- ------- ------ ------ -----------
------- ------- ------- ------ ------ -----------
</TABLE>
- --------------------------
(1) You pay a monthly amount of $2.00, or 1/12 of 1.00% of your Account Balance
for the month if that amount would be less than $2.00. The above table
reflects for each Separate Account Fund the full monthly charge, as though
you had allocated the entire Account Balance only to that Fund. An employer
under a TDA Contract or a SEP-IRA or SIMPLE IRA Contract may elect to pay
your monthly charges, in which case we do not deduct the monthly
Participant charge. We waive the monthly charge in some circumstances. SEE
"Charges You Will Pay--Administrative Charges".
(2) The investment adviser for the American Century VP Capital Appreciation
Fund reimburses us at an annual rate of up to 0.20% for administrative
expenses, and the transfer agent and distributor for the Fidelity
Portfolios reimburse us at an annual rate of 0.10% for certain services we
provide. The administrative expense for the corresponding Separate Account
Funds would be 0.40% if the reimbursement arrangements ended. SEE "Charges
You Will Pay--Administrative Charges".
(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 prospectuses of the Underlying Funds, which are attached to this
Prospectus, more fully describe the Funds' management fees and other
expenses.
(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 reduced 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 1998 would have been 0.57%, 0.66% and 0.63%, respectively.
(5) The Portfolio's total operating expenses have been restated to reflect the
elimination of the performance adjustment in its management fees. The
restatement includes the addition of 0.01% in expenses to the Portfolio.
"Other Expenses" reflects an indirect fee, and the Portfolio's total
operating expenses for 1998 after reductions for fees paid indirectly would
be 0.86%.
1
<PAGE>
EXAMPLES
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The examples below show the expenses that you would pay, assuming a $1,000
investment and a 5% annual rate of return on assets. We do not impose a
surrender charge when you make a withdrawal of Account Balance. As a result, the
expenses would be the same whether or not you surrender the Account Balance 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 EQUITY INDEX AND MID-CAP EQUITY INDEX FUNDS
Expenses on a $1,000 investment, assuming a 5% annual return on assets:...... $ 15 $ 49 $ 85 $ 194
EXAMPLE FOR INVESTMENT COMPANY ALL AMERICA, BOND, SHORT-TERM BOND, MID-TERM
BOND AND COMPOSITE FUNDS
Expenses on a $1,000 investment, assuming a 5% annual return on assets:...... $ 19 $ 61 $ 106 $ 242
EXAMPLE FOR INVESTMENT COMPANY AGGRESSIVE EQUITY FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets:...... $ 23 $ 72 $ 126 $ 287
EXAMPLE FOR INVESTMENT COMPANY MONEY MARKET FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets:...... $ 17 $ 53 $ 92 $ 210
EXAMPLE FOR SCUDDER CAPITAL GROWTH FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets:...... $ 19 $ 61 $ 106 $ 242
EXAMPLE FOR SCUDDER BOND FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets:...... $ 20 $ 63 $ 110 $ 251
EXAMPLE FOR SCUDDER INTERNATIONAL FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets:...... $ 25 $ 78 $ 137 $ 312
EXAMPLE FOR FIDELITY VIP EQUITY-INCOME FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets:...... $ 19 $ 60 $ 105 $ 240
EXAMPLE FOR FIDELITY VIP II CONTRAFUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets:...... $ 20 $ 64 $ 112 $ 255
EXAMPLE FOR FIDELITY VIP II ASSET MANAGER FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets:...... $ 20 $ 62 $ 109 $ 247
EXAMPLE FOR CALVERT SOCIAL BALANCED FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets:...... $ 23 $ 73 $ 128 $ 291
EXAMPLE FOR AMERICAN CENTURY VP CAPITAL APPRECIATION FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets:...... $ 22 $ 70 $ 123 $ 281
</TABLE>
These examples are to assist you in understanding the various costs and expenses
that you will pay, directly or indirectly, under a Contract. The examples
reflect the expenses of the Separate Account, as well as those of the Underlying
Funds, as they were for the year ended December 31, 1998, except that the
expenses of the Mid-Cap Equity Index Fund are estimated because the Fund began
operations on May 1, 1999. ACTUAL EXPENSES FOR PERIODS AFTER 1998 MAY BE GREATER
OR LESS THAN THE EXPENSES ON WHICH WE BASED THE EXAMPLES.
We assumed a 5% annual rate of return in the examples for illustration purposes.
The 5% rate does not represent and is not a guarantee of the Separate Account
Funds' past or future investment performance. Each example also assumed an
annual contract fee of $1.19 per $1,000 of value in the Separate Account Fund,
based on an average Account Balance of $20,154. The expenses shown do not
include any premium taxes that may be payable.
ACCUMULATION UNIT VALUES FOR THE SEPARATE ACCOUNT FUNDS
- --------------------------------------------------------------------------------
For information about the Accumulation Unit values of each of the Separate
Account Funds over a period of time (other than for the Mid-Cap Equity Index
Fund, which commenced operations on May 1, 1999), you should see Appendix A to
this Prospectus. The Unit values reflect the investment performance and expenses
of the Underlying Funds and the charges we assess on the assets of the Separate
Account Funds.
2
<PAGE>
SUMMARY OF INFORMATION IN THIS PROSPECTUS
- --------------------------------------------------------------------------------
The discussion below is a summary of information in the Prospectus. The
references in the Summary direct you to particular sections in the Prospectus
where you will find more detailed explanations.
CONTRACTS WE OFFER
- --------------------------------------------------------------------------------
We offer the group and individual variable accumulation annuity contracts
described in this Prospectus to assist with retirement and long-term financial
planning by not-for-profit organizations and their employees. REFER TO "WHO MAY
PURCHASE A CONTRACT AND MAKE CONTRIBUTIONS--PURCHASE OF A CONTRACT;
PARTICIPATION." The three types of contracts are:
1. TAX DEFERRED ANNUITY CONTRACTS (TDA CONTRACTS).
We issue TDA Contracts to Contractholders that have adopted plans under Section
403(b) of the Code. A Contractholder must be a tax-exempt organization under
Section 501(c)(3) of the Code or an eligible public school or college, or an
association that represents a Section 501(c)(3) tax-exempt organization or
eligible public school or college or its employees.
You make Contributions under a TDA Contract through a voluntary salary reduction
agreement with your employer. Under Section 403(b) of the Code, you may defer
recognition of the Contributions you make by salary reduction, within certain
limits, for Federal income tax purposes.
2. INDIVIDUAL RETIREMENT ANNUITY CONTRACTS (IRA CONTRACTS).
Individuals who work (or formerly worked) for not-for-profit organizations and
their immediate family members may purchase IRA Contracts as a retirement
arrangement that qualifies for favorable Federal income tax treatment under the
Code. A married individual who is not a wage earner may purchase an IRA Contract
(a spousal IRA), and the individual's spouse (if a wage earner) may make
Contributions on behalf of the non-wage earning spouse. Individuals who have
adjusted gross income for Federal income tax purposes below certain levels are
eligible to purchase Roth IRAs.
An individual may purchase an IRA Contract directly from us, and must designate
whether the Contract is a Traditional IRA or a Roth IRA. An employee may
purchase a SEP IRA Contract under a Simplified Employee Pension (SEP) or may
purchase a SIMPLE IRA Contract under a Savings Incentive Match Plan for
Employees (SIMPLE), if the individual's employer has established one of those
plans.
For Federal income tax purposes:
- You may be able to deduct Contributions under a Traditional IRA Contract
or SEP IRA Contract, but there are limits on the amount that you may
deduct and restrictions on who may deduct IRA contributions. REFER TO
"FEDERAL TAX INFORMATION FOR PARTICIPANTS--TRADITIONAL IRA AND SEP IRA
CONTRACTS--DEDUCTION OF CONTRIBUTIONS FROM GROSS INCOME".
- You may not deduct Contributions under a Roth IRA for Federal income tax
purposes.
- You may exclude Contributions to a SIMPLE IRA from gross income for
Federal income tax purposes, within certain limits.
You do not pay Federal income tax on the earnings from Contributions to an IRA
Contract, other than a Roth IRA, until you begin receiving Annuity Payments or
otherwise withdraw all or a portion of your Account Balance. Under a Roth IRA,
you may withdraw earnings tax-free if the Roth IRA Contract is at least five
years old and you are 59 1/2 years old or older, or in certain other
circumstances. REFER TO "FEDERAL TAX INFORMATION FOR PARTICIPANTS".
3
<PAGE>
3. FLEXIBLE PREMIUM ANNUITY CONTRACTS (FPA CONTRACT).
Individuals who work (or formerly worked) for not-for-profit organizations,
their spouses and immediate family members may purchase FPA Contracts to
accumulate assets for retirement. If you are an individual (not a corporation,
for example), you make Contributions to an FPA Contract with "after-tax"
dollars. In other words, you may not deduct or exclude the amount of the
Contributions from your income for Federal income tax purposes. If you are an
individual, you do not pay Federal taxes on the earnings on Contributions to an
FPA Contract until you begin to receive Annuity Payments or otherwise withdraw
all or a portion of your Account Balance, in most circumstances. REFER TO
"FEDERAL TAX INFORMATION FOR PARTICIPANTS".
An employer may purchase FPA Contracts to serve as a depository for the
employer's deferred compensation obligations to employees (if the applicable
state insurance department has approved this use of our Contract). There is no
deferral of Federal income taxation of the earnings on Contributions for
employers who purchase FPA Contracts for deferred compensation obligations or
for other Contractholders who are not individuals. REFER TO "FEDERAL TAX
INFORMATION FOR PARTICIPANTS".
CONTRIBUTIONS DURING THE ACCUMULATION PERIOD
- --------------------------------------------------------------------------------
You may make Contributions at whatever times you select, but the timing will be
based on your payroll period if you make Contributions under a salary reduction
or payroll deduction agreement with your employer. The Code limits the amount of
Contributions to an IRA or TDA Contract, as described below.
MINIMUM REQUIRED. We from time to time will establish the minimum Contribution
that you may make under the Contracts. Currently, the minimum Contribution is
$10, except that there is no minimum for employer contributions under SEP IRAs
or for employer or Participant Contributions under SIMPLE IRAs. Your Plan may
require that your Contributions under a TDA Contract total $200 or more each
year.
WHO MAY MAKE CONTRIBUTIONS. The persons who may make Contributions, and the
manner in which Contributions should be sent to us, are as follows.
- Under an FPA Contract or under an IRA Contract other than a SIMPLE IRA,
you may make Contributions directly to us.
- Under an FPA Contract or Traditional IRA Contract, you may make
Contributions through a payroll deduction agreement with your employer.
- Under a TDA Contract or SIMPLE IRA Contract, you may make Contributions
only by salary reduction agreement with your employer.
- For both SEP IRAs and SIMPLE IRAs, the employer also may contribute
amounts on your behalf, within the limits established by the Code.
- Under a SIMPLE IRA, an employer must match certain Contributions by an
employee or make a Contribution for each employee who is eligible to
contribute under the SIMPLE.
We must receive each Contribution for you at our home office, along with
sufficient information to identify the person for whom the Contribution is made,
before we can credit the Contribution to your Account Balance. If an employer
sends us Contributions, we will apply the Contributions when we receive the
amounts at our home office or receive them by wire transfer of Federal funds
into our designated bank account. REFER TO "WHO MAY PURCHASE A CONTRACT AND MAKE
CONTRIBUTIONS--PAYMENT OF CONTRIBUTIONS" AND "FEDERAL TAX INFORMATION FOR
PARTICIPANTS".
TDA CONTRACT--LIMITS ON AMOUNTS. The maximum annual Contributions under TDA
Contracts are those amounts the Code permits for Plans. REFER TO "WHO MAY
PURCHASE A CONTRACT AND MAKE CONTRIBUTIONS-- PAYMENT OF CONTRIBUTIONS" AND
"FEDERAL TAX INFORMATION FOR PARTICIPANTS".
IRA CONTRACT--LIMITS ON AMOUNTS. The aggregate amount that you may contribute
to a Traditional IRA, SEP IRA and/or Roth IRA Contract is $2,000 per tax year,
or 100% of your compensation for the year if your compensation is less than
$2,000. You may contribute up to an additional $2,000 to a spousal IRA, minus
any contribution your spouse makes to the spousal IRA. For Roth IRAs, the $2,000
contribution
4
<PAGE>
amount is reduced or eliminated for Participants at certain Federal adjusted
gross income levels. Under a SIMPLE IRA, you may contribute up to $6,000 per
year through a salary reduction agreement with the employer. You also may make
Contributions by "rollover" to certain IRA Contracts. REFER TO "WHO MAY PURCHASE
A CONTRACT AND MAKE CONTRIBUTIONS--PAYMENT OF CONTRIBUTIONS" AND "FEDERAL TAX
INFORMATION FOR PARTICIPANTS".
If you have reached the age of 70 1/2, you may no longer make Contributions
(except by rollover from another IRA contract or eligible employer retirement
plan) to a Traditional IRA or SEP IRA Contract. There is no Participant age
limit for Contributions under a Roth IRA or a SIMPLE IRA, or for employer
contributions to a SEP IRA.
FPA CONTRACT--LIMITS ON AMOUNTS. There is no limit on the amount of
Contributions that you may make to an FPA Contract if you are an individual.
INVESTMENT ALTERNATIVES FOR YOUR ACCOUNT BALANCE
- --------------------------------------------------------------------------------
You may allocate Contributions among the General Account and one or more of the
Separate Account Funds (unless your Plan restricts use of any Alternative). You
may change your allocation instructions at any time for future Contributions.
THE GENERAL ACCOUNT. We pay interest on the portion of your Account Balance you
allocate to our General Account, at an effective annual rate of at least 3%. In
our discretion, we change the current rate of interest from time to time. We
have the full investment risk for amounts you allocate to the General Account.
We sometimes refer to the General Account Investment Alternative as the Interest
Accumulation Account.
This Prospectus serves as a disclosure document for the Separate Account
Investment Alternatives under the Contracts. You may refer to "Our General
Account" for a brief description of the General Account.
THE SEPARATE ACCOUNT. The Separate Account has Funds, or sub-accounts. The name
of each Fund corresponds to the name of its Underlying Fund. When you allocate
Contributions or transfer Account Balance to a Separate Account Fund, the Fund
purchases shares in its Underlying Fund. A Separate Account Fund is called a
"variable option", because you have the investment risk that your Account
Balance in the Fund will increase or decrease based on the investment
performance of the Underlying Fund. The Mid-Cap Equity Index Fund will be
available to you following approval by your State's insurance department.
UNDERLYING FUNDS INVESTED IN BY THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
The Separate Account Funds currently invest in seventeen Underlying Funds, which
have different investment objectives, investment policies and risks. You should
refer to "Underlying Funds Invested in by Our Separate Account" for more
information about the Underlying Funds' investment objectives, and to the
prospectuses of the Underlying Funds that are attached to this Prospectus.
CHARGES UNDER THE CONTRACTS
- --------------------------------------------------------------------------------
We deduct several charges from the net assets of each Separate Account Fund.
REFER TO "CHARGES YOU WILL PAY". The charges include:
- an administrative expense charge at an annual rate of 0.40% (except that
currently the annual rate for the American Century VP Capital
Appreciation Fund is 0.20% and the annual rate for the Funds that invest
in the Fidelity Portfolios is 0.30%);
- a charge at an annual rate of 0.35% for expenses related to the
distribution of the Contracts; and
- a charge at an annual rate of 0.50% for assuming certain mortality and
expense risks under the Contracts.
5
<PAGE>
We also deduct from your Account Balance a monthly administrative expense
charge. The charge is $2.00 if you have an Account Balance of $2,400 or more
during the month, or 1/12 of 1% of the Account Balance (which will be less than
$2.00) if your Account Balance is less than $2,400 in any month. Under a TDA
Contract, if your employer uses our Hotline system we waive this charge each
month your Employer's total Contract assets are $5 million or more or there are
at least 500 Participants. REFER TO "CHARGES YOU WILL PAY--ADMINISTRATIVE
CHARGES".
RESERVATION OF RIGHTS. We reserve the right to increase or decrease the
administrative expense charge, the monthly administrative charge and the expense
risk charge within the limits imposed under the Contracts, and the right to
deduct from Contributions any applicable State premium taxes. State insurance
provisions or federal securities laws may limit the amount of any additional
charges that we may impose.
EXPENSES OF THE UNDERLYING FUNDS. A Separate Account Fund's value is based on
the shares it owns of the Underlying Fund. As a result, the investment
management fees and other expenses the Underlying Funds pay will impact the
value of the Separate Account Funds. You should refer to the attached
prospectuses of the Underlying Funds for a complete description of their
expenses and deductions from net assets.
ACCESS TO YOUR ACCOUNT BALANCE BY TRANSFERS, WITHDRAWALS OR LOANS
- --------------------------------------------------------------------------------
During the Accumulation Period, you may transfer all or a portion of your
Account Balance among the Investment Alternatives. If you have an outstanding
loan under a TDA Contract, your Account Balance in the General Account after a
transfer must be at least equal to the loan collateral amount. REFER TO "OUR
PAYMENT OF ACCOUNT BALANCE TO YOU OR A BENEFICIARY--YOUR RIGHT TO TRANSFER AMONG
INVESTMENT ALTERNATIVES".
During the Accumulation Period, you may withdraw all or a portion of your
Account Balance under all Contracts except TDA Contracts. A TDA Participant
generally may not withdraw Account Balance until the Participant has reached the
age of 59 1/2, under restrictions in the Code and the TDA Contract. We may take
up to seven days following receipt of your withdrawal request to process the
request and mail a check to you. REFER TO "OUR PAYMENT OF ACCOUNT BALANCE TO YOU
OR A BENEFICIARY--YOUR RIGHT TO MAKE WITHDRAWALS, INCLUDING BY SPECIFIED
PAYMENTS".
You may have taxable income upon any withdrawal of your Account Balance, except
in the case of certain withdrawals from Roth IRA Contracts. You will be taxed at
ordinary income tax rates on the amount withdrawn, except for the portion of the
withdrawal that is considered to be a return of your after-tax Contributions (if
any). The taxable portion of withdrawals, and in certain cases the nontaxable
portion of withdrawals from Roth IRAs, may be subject to a 10% tax penalty, or
25% for SIMPLE IRAs in limited cases. The tax penalty is not due if you have
reached the age of 59 1/2, are disabled or in certain other circumstances
(including special rules for IRA Contracts). REFER TO "FEDERAL TAX INFORMATION
FOR PARTICIPANTS".
The Code imposes minimum distribution requirements for IRA Contracts, other than
Roth IRAs, and for TDA Contracts when you reach a certain age or in some other
circumstances. You may be required to make partial withdrawals of Account
Balance, or may choose to begin receiving Annuity Payments, to meet the minimum
distribution requirements.
We currently do not assess a charge for transfers or withdrawals under the
Contracts. We reserve the right, however, to impose a charge for transfers or
withdrawals in the future.
We make available a loan option under TDA Contracts. If you have a loan under a
TDA Contract, we restrict your transfers or withdrawals from the General Account
of the loan collateral amount.
OUR SPECIFIED PAYMENTS OPTION. You may instruct us to withdraw a certain amount
(at least $100) each month from the Investment Alternatives you name. Under an
FPA or IRA Contract, you must be age 59 1/2 or older to elect this Option. Under
a TDA Contract, to elect this Option you must either have reached age 59 1/2 or
terminated employment with the Plan sponsor after reaching age 55.
6
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HOW TO MAKE ALLOCATION CHANGES, TRANSFERS AND WITHDRAWALS
- --------------------------------------------------------------------------------
IN WRITING. You may give instructions in writing on our forms to change your
allocations among Investment Alternatives for future Contributions, to transfer
your Account Balance among Investment Alternatives or to make any withdrawals of
Account Balance. If you are married and under a TDA Plan, you may need the
written consent of your Eligible Spouse for any withdrawal. REFER TO "HOW TO
CONTACT US AND GIVE US INSTRUCTIONS".
BY TELEPHONE. Using a Personal Identification Number (PIN) we have assigned,
you may call us at 1-800-468-3785. If you are a TDA Participant, you should make
withdrawal requests to our Regional Office that services your Plan, and you may
not make withdrawals by telephone. You may not request rollover of an IRA
Contract by telephone. REFER TO "HOW TO CONTACT US AND GIVE US INSTRUCTIONS".
OUR HOME OFFICE, PROCESSING CENTER AND REGIONAL OFFICES. Our home office
address is 320 Park Avenue, New York, New York 10022. The address for our
Financial Transaction Processing Center, where you may send requests for
allocation changes or transfers among Investment Alternatives, is 1150 Broken
Sound Parkway NW, Boca Raton, FL 33487. You may check the address for the
Regional Office that provides other services for your Contract by calling
1-800-468-3785 or by visiting our Website at www.mutualofamerica.com.
CONFIRMATION STATEMENTS. We will send you confirmation statements (which may be
part of your quarterly statements) for your allocation changes and for your
Contributions, transfers of Account Balance and withdrawals of Account Balance.
You must promptly notify us of any error in a confirmation statement or you will
give up your right to have us correct the error. REFER TO "ADMINISTRATIVE
MATTERS--CONFIRMATION STATEMENTS TO PARTICIPANTS".
DEATH BENEFITS DURING THE ACCUMULATION PERIOD
- --------------------------------------------------------------------------------
If you were to die before the Annuity Commencement Date, we will pay a death
benefit to your Beneficiary. Under an FPA Contract when you are not the
Annuitant, we will pay the death benefit upon the first to occur of your death
and the Annuitant's death.
The death benefit amount will be your Account Balance as of the date we receive
proof of your death (or the death of the Annuitant, if different) and the
election of the Beneficiary(ies) telling us how we should pay the death benefit.
The Beneficiary selects the form of death benefit, which may be a lump sum, a
form of annuity or fixed payments. Under an FPA or IRA Contract, if your
Eligible Spouse is the Beneficiary and the death benefit is due upon your death,
your surviving spouse may be able to continue the Contract instead of receiving
a death benefit. REFER TO "OUR PAYMENT OF ACCOUNT BALANCE TO YOU OR A
BENEFICIARY--DEATH BENEFIT PRIOR TO ANNUITY COMMENCEMENT DATE".
ANNUITANTS AND BENEFICIARIES
- --------------------------------------------------------------------------------
Under a TDA Contract or IRA Contract, you must be the Annuitant. Under an FPA
Contract, you may be the Annuitant or may name another person as the Annuitant,
and you may not change the Annuitant once you have named the Annuitant. When a
Beneficiary elects to receive a death benefit due in the form of an annuity, the
Beneficiary may be the Annuitant or may name another person as the Annuitant.
You or a Beneficiary also may name a joint Annuitant.
You may designate a Beneficiary or Beneficiaries to receive any death benefit
due during the Accumulation Period or to receive any remaining payments (or
their commuted value) due during the Annuity Period. You may change the
Beneficiary by giving us written notice on a form we provide. A TDA Plan may
provide that if you have an Eligible Spouse, your Eligible Spouse will be the
Beneficiary unless the spouse has consented in writing to the designation of
another Beneficiary. REFER TO "ADMINISTRATIVE MATTERS--DESIGNATION OF
BENEFICIARY".
7
<PAGE>
ANNUITY COMMENCEMENT DATE AND AMOUNT OF MONTHLY ANNUITY PAYMENT
- --------------------------------------------------------------------------------
Under IRA and TDA Contracts, the Annuity Commencement Date must be after you
have reached the age of 55. Annuity Payments will be fixed at the same amount
every month and will be based on your Account Balance at the Annuity
Commencement Date and the form of annuity you select. Each Contract contains
tables of annuity purchase rates. We guarantee that the monthly amount of the
Annuity Payment, for the form of annuity you select, will never be less
favorable than the guaranteed rate in the Contract. REFER TO "YOU MAY OBTAIN AN
ANNUITY WITH YOUR ACCOUNT BALANCE". You may choose to make withdrawals of your
Account Balance, instead of electing to receive Annuity Payments.
FORMS OF ANNUITY AVAILABLE. We offer several forms of annuity, some of which
have guaranteed minimum time periods for payments. If an Annuitant (and
contingent Annuitant if a joint and survivor annuity) dies before the minimum
period has ended, the Beneficiary will receive the remaining Annuity Payments
due. A life annuity protects an Annuitant from outliving the time period for
receiving monthly payments, because the payments continue for the life of the
Annuitant.
You may select the annuity form when you designate the Annuity Commencement
Date. A TDA Plan may require that if you are married, you will receive a joint
and survivor annuity with your Eligible Spouse, unless the Eligible Spouse
consents in writing to another form of annuity. REFER TO "YOU MAY OBTAIN AN
ANNUITY WITH YOUR ACCOUNT BALANCE--AVAILABLE FORMS OF ANNUITY".
CANCELLATION RIGHT
- --------------------------------------------------------------------------------
You may surrender for cancellation an IRA or FPA Contract or a TDA Certificate
within ten days after you have received it (or within a longer period if your
State requires it). We will refund all Contributions you allocated to the
General Account, plus the value on the surrender date of your Account Balance
allocated to the Separate Account, unless your State requires that all
Contributions to the Separate Account be refunded.
8
<PAGE>
ABOUT MUTUAL OF AMERICA AND THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
We are a mutual life insurance company organized under the laws of the State of
New York. We are authorized to transact business in 50 states and the District
of Columbia. Our home office address is 320 Park Avenue, New York, New York
10022. The Insurance Company was incorporated in 1945 as a nonprofit retirement
association to provide retirement and other benefits for non-profit
organizations and their employees in the health and welfare field. In 1978 we
reorganized as a mutual life insurance company.
We provide 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. We invest the assets we derive from our business as permitted under
applicable state law. As of December 31, 1998, we had total assets, on a
consolidated basis, of approximately $10.1 billion. We are registered as a
broker-dealer under the Securities Exchange Act of 1934, and also are registered
as an investment adviser under the Investment Advisers Act of 1940.
Our operations as a life insurance company are reviewed periodically by various
independent rating agencies. These agencies, such as A.M. Best Company, Standard
& Poor's Insurance Rating Service and Duff & Phelps Credit Rating Company,
publish their ratings. From time to time we reprint and distribute the rating
reports in whole or in part, or summaries of them, to the public. The ratings
concern our operation as a life insurance company and do not imply any
guarantees of performance of the Separate Account.
OUR SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
We established the Separate Account under a resolution adopted by our Board of
Directors 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). The Commission does not supervise
the management or investment practices or policies of the Separate Account or
Mutual of America. The 1940 Act, however, does regulate certain actions by the
Separate Account.
We divide the Separate Account into distinct Funds. Each Fund invests its assets
in an Underlying Fund, and the name of each Separate Account Fund reflects the
name of the corresponding Underlying Fund.
The assets of the Separate Account are our property. The Separate Account assets
attributable to Participants' Account Balances and any other annuity contracts
funded through the Separate Account cannot be charged with liabilities from
other businesses that we conduct. The income, capital gains and capital losses
of each Fund of the Separate Account are credited to, or charged against, the
net assets held in that Fund. We separately determine each Fund's net assets,
without regard to the income, capital gains and capital losses from any of the
other Funds of the Separate Account or from any other business that we conduct.
The Separate Account and Mutual of America are subject to supervision and
regulation by the Superintendent of Insurance of the State of New York, and by
the insurance regulatory authorities of each State.
OTHER VARIABLE ANNUITY CONTRACTS WE ISSUE
- --------------------------------------------------------------------------------
In addition to the Contracts described in this Prospectus, we offer other
individual and group variable annuity contracts, some of which are not described
in this Prospectus but which also participate in the Separate Account.
9
<PAGE>
UNDERLYING FUNDS INVESTED IN BY OUR SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
Below are summaries of the Underlying Funds' investment objectives and certain
investment policies. The Underlying Funds sell their shares to the separate
accounts of insurance companies and do not offer them for sale to the general
public.
You will find more detailed information about the Underlying Funds in their
current prospectuses, which are attached to this Prospectus. You should read
each prospectus for a complete evaluation of the Underlying Funds, their
investment objectives, principal investment strategies and the risks related to
those strategies.
EQUITY INDEX FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The investment objective of the Equity Index Fund is to provide investment
results that correspond to the performance of the Standard & Poor's Composite
Index of 500 Stocks (the S&P 500 INDEX-REGISTERED TRADEMARK-).* The Fund invests
primarily in common stocks that are included in the S&P 500 Index.
ALL AMERICA FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The investment objective of the All America Fund is to outperform the S&P 500
Index by investing in a diversified portfolio of primarily common stocks.
The Fund invests approximately 60% of its assets (the INDEXED ASSETS) to provide
investment results that correspond to the performance of the S&P 500 Index. The
Fund invests the remaining approximately 40% of its assets (the ACTIVE ASSETS)
to seek to achieve a high level of total return, through both appreciation of
capital and, to a lesser extent, current income, by means of a diversified
portfolio of primarily common stocks with a broad exposure to the market.
MID-CAP EQUITY INDEX FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The investment objective of the Mid-Cap Equity Index Fund is to provide
investment results that correspond to the performance of the S&P MidCap 400
Index-Registered Trademark-.* The Fund invests primarily in common stocks that
are included in the S&P MidCap 400 Index.
AGGRESSIVE EQUITY FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The investment objective of the Aggressive Equity Fund is capital appreciation,
by investing approximately 50% of its assets in companies believed to possess
above-average growth potential and approximately 50% of its assets 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. In utilizing the investment styles of growth and value stock
selection, the Adviser anticipates that the percentage of the Fund's assets in
either category will range between 40% and 60%.
COMPOSITE FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The investment objective of the Composite Fund is to achieve as high a total
rate of return, through both appreciation of capital and current income, as is
consistent with prudent investment risk by means of a diversified portfolio of
publicly-traded common stocks, debt securities and money market instruments. The
Fund seeks to achieve long-term growth of its capital and increasing income by
investments in
- ------------------------
* Standard & Poor's, S&P, S&P 500 and S&P MidCap 400 are trademarks of The
McGraw-Hill Companies, Inc. and have been licensed for use by the Investment
Company. Standard & Poor's does not sponsor, endorse, sell or promote the
Equity Index Fund, All America Fund or Mid-Cap Equity Index Fund. It has no
obligation or liability for the sale or operation of the Funds and makes no
representations as to the advisability of investing in the Funds.
10
<PAGE>
common stock and other equity-type securities, and a high level of current
income through investments in publicly-traded debt securities and money market
instruments.
BOND FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The primary investment objective of the Bond Fund is to provide as high a level
of current income over time as is believed to be consistent with prudent
investment risk. A secondary objective is preservation of capital.
The Bond Fund seeks to achieve its objective by investing primarily in
investment grade, publicly-traded debt securities, such as bonds, U.S.
Government and agency securities, including mortgage-backed securities, and zero
coupon securities.
MID-TERM BOND FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The primary investment objective of the Mid-Term Bond Fund is to provide as high
a level of current income over time as is believed to be consistent with prudent
investment risk. A secondary objective is preservation of capital. The average
maturity of the Fund's securities holdings will be between three and seven
years.
The Mid-Term Bond Fund seeks to achieve its objective by investing primarily in
investment grade, publicly-traded debt securities, such as bonds, U.S.
Government and agency securities, including mortgage-backed securities, and zero
coupon securities.
SHORT-TERM BOND FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The primary investment objective of the Short-Term Bond Fund is to provide as
high a level of current income over time as is believed to be consistent with
prudent investment risk. A secondary objective is preservation of capital. The
average maturity of the Fund's securities holdings will be between one and three
years.
The Short-Term Bond Fund seeks to achieve its objective by investing primarily
in investment grade, publicly-traded debt securities, such as bonds, U.S.
Government and agency securities, including mortgage-backed securities, and in
money market instruments.
MONEY MARKET FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The investment objective of the Money Market Fund is the realization of high
current income to the extent consistent with the maintenance of liquidity,
investment quality and stability of capital.
The Money Market Fund invests only in money market instruments and other
short-term securities. Neither the Federal Deposit Insurance Corporation nor any
other U.S. Government agency insures or guarantees the Separate Account's
investments in shares of the Money Market Fund.
SCUDDER CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
The investment objective of Scudder Capital Growth Portfolio is to maximize
long-term capital growth through a broad and flexible investment program.
The Portfolio invests in marketable securities, principally common stocks and,
consistent with its objective of long-term capital growth, preferred stocks. The
Portfolio may invest up to 25% of its assets in short-term debt instruments,
depending on market and economic conditions.
SCUDDER BOND PORTFOLIO
- --------------------------------------------------------------------------------
The investment objective of the Scudder Bond Portfolio is to invest for a high
level of income consistent with a high quality portfolio of debt securities.
11
<PAGE>
To attempt to achieve its objective, the Portfolio invests principally in
investment grade bonds, including those issued by the U.S. Government and its
agencies and by corporations, and other notes and bonds paying high current
income. The Portfolio may invest up to 20% of its assets in non-investment grade
debt securities.
SCUDDER INTERNATIONAL PORTFOLIO
- --------------------------------------------------------------------------------
The investment objective of the Scudder International Portfolio is long-term
growth of capital primarily through diversified holdings of marketable foreign
equity investments.
The Portfolio invests primarily in equity securities of established companies
that do business primarily outside the United States and that are listed on
foreign exchanges. In the event of exceptional conditions abroad, the Portfolio
may temporarily invest all or a portion of its assets in Canadian or U.S.
Government obligations or currencies, or securities of companies incorporated in
and having their principal activities in Canada or the United States.
FIDELITY VIP EQUITY-INCOME PORTFOLIO
- --------------------------------------------------------------------------------
The investment objective of the Equity-Income Portfolio is reasonable income by
investing primarily in income-producing equity securities. In choosing these
securities, the Portfolio also considers the potential for capital appreciation.
The Portfolio's goal is to achieve a yield that exceeds the composite yield on
the securities comprising the S&P 500 Index.
FIDELITY VIP II CONTRAFUND PORTFOLIO
- --------------------------------------------------------------------------------
The investment objective of the Contrafund Portfolio is capital appreciation. It
seeks to increase the value of an investment in the Portfolio over the long term
by investing in securities of companies whose value its adviser believes is not
fully recognized by the public. These securities may be issued by domestic or
foreign companies and many may not be well known. The Portfolio normally invests
primarily in common stocks.
FIDELITY VIP II ASSET MANAGER PORTFOLIO
- --------------------------------------------------------------------------------
The investment objective of the Asset Manager Portfolio is high total return
with reduced risk over the long term by allocating its assets among domestic and
foreign stocks, bonds and short-term and money market instruments.
The Portfolio's adviser normally allocates the Portfolio's assets among the
three asset classes within the following investment parameters: 0-50% in
short-term/money market instruments; 20-60% in bonds; and 30-70% in stocks. The
expected "neutral mix", which the Portfolio's adviser would expect over the long
term, is 10% in short-term/money market instruments, 40% in bonds and 50% in
stocks.
CALVERT SOCIAL BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
The investment objective of Calvert Social Balanced Portfolio is to achieve a
competitive total return through an actively managed non-diversified portfolio
of stocks, bonds and money market instruments that offer income and capital
growth opportunity and satisfy the social concern criteria established for the
Portfolio.
AMERICAN CENTURY VP CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
The investment objective of the American Century VP Capital Appreciation Fund is
capital growth by investing primarily in common stocks that meet certain
fundamental and technical standards of selection and have, in the opinion of the
Fund's manager, better-than-average prospects for appreciation.
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INVESTMENT ADVISERS FOR THE UNDERLYING FUNDS
- --------------------------------------------------------------------------------
MUTUAL OF AMERICA INVESTMENT CORPORATION: The Investment Company receives
investment advice from Mutual of America Capital Management Corporation (the
ADVISER), an indirect wholly-owned subsidiary of Mutual of America. For the
Active Assets of the All America Fund, the Adviser has entered into subadvisory
agreements with Palley-Needelman Asset Management, Inc., Oak Associates, Ltd.
and Fred Alger Management, Inc. Each of these subadvisers provides investment
advice for approximately 10% of the net assets of the All America Fund.
SCUDDER VARIABLE LIFE INVESTMENT FUND: The Scudder Capital Growth, Bond and
International Portfolios receive investment advice from Scudder Kemper
Investments, Inc.
FIDELITY PORTFOLIOS: The Equity-Income Portfolio, Contrafund Portfolio and Asset
Manager Portfolio receive investment advice from Fidelity Management & Research
Company.
CALVERT SOCIAL BALANCED PORTFOLIO: The Portfolio receives investment advice from
Calvert Asset Management Company, Inc., which has entered into a subadvisory
agreement with NCM Capital Management Group, Inc. for the equity portion of the
Portfolio.
AMERICAN CENTURY VP CAPITAL APPRECIATION FUND: The Fund receives investment
advice from American Century Investment Management, Inc.
SHARED AND MIXED FUND ARRANGEMENTS. Shares of the Fidelity Portfolios, the
Scudder Portfolios, the American Century VP Capital Appreciation Fund and the
Calvert Social Balanced Portfolio (together, the SHARED FUNDS) currently are
available to the separate accounts of a number of insurance companies. Shares of
Mutual of America Investment Corporation and shares of certain of the Shared
Funds (together, the MIXED FUNDS) currently are available to separate accounts
for both variable annuity and variable life insurance products.
The Board of Directors (or Trustees) of each Shared and Mixed Fund is
responsible for monitoring that Fund for the existence of any material
irreconcilable conflict between the interests of participants in all separate
accounts that invest in the Fund. The Board must determine what action, if any,
the Fund should take in response to an irreconcilable conflict. If we believe
that a response does not sufficiently protect our Contractholders or
Participants, we will take appropriate action, and we may modify or reduce the
Investment Alternatives available to you.
13
<PAGE>
CHARGES YOU WILL PAY
- --------------------------------------------------------------------------------
ADMINISTRATIVE CHARGES
- --------------------------------------------------------------------------------
We perform all administrative functions in connection with the Contracts,
including receiving and allocating Contributions, making Annuity Payments as
they become due, and preparing and filing all reports that the Separate Account
is required to file. The expenses we incur for 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 professional services, and costs associated with
determining the unit values of the Separate Account Funds.
We may increase or decrease the daily and monthly administrative charges
described below, subject to any limitations in the Contract or a Plan. The
aggregate fees and charges we impose under the Contracts must be reasonable in
relation to the services we provide, the expenses we expect to incur, and the
risks we have assumed.
SEPARATE ACCOUNT CHARGE. We deduct, on each Valuation Day, from the value of
the net assets in each Fund of the Separate Account a charge for administrative
expenses at an annual rate of 0.40%, except that we reduce the administrative
charge to the extent we receive a reimbursement for administrative expenses.
- For the Separate Account Fund that invests in the American Century VP
Capital Appreciation Fund, the annual rate currently is 0.20%, because
the adviser for the American Century VP Capital Appreciation Fund
reimburses us at an annual rate of up to 0.20% for administrative
expenses.
- For the Funds that invest in the Fidelity Portfolios, the annual rate
currently is 0.30%, because the transfer agent and distributor for the
Fidelity Portfolios reimburse us at an aggregate annual rate of 0.10%
for administrative expenses.
PARTICIPANT CHARGE. We make an additional deduction for administrative expenses
each month from each Participant's Account Balance, except that under a TDA
Contract, the employer may elect to pay this charge on behalf of its
Participants. The charge is $2.00 per month, except that we will reduce the
charge to 1/12 of 1.00% if your Account Balance for the month is less than
$2,400.
We waive the charge under a TDA Contract for any month if:
- You are paying the monthly charge under another TDA Contract or a 403(b)
Thrift Contract with us; or
- Your employer uses our Hotline system and during that month the
employer's Contract assets were at least $5 million or there were at
least 500 active Participants under the Contract.
We deduct the monthly charge from your Account Balance allocated to the General
Account, if any. If you do not have any Account Balance in the General Account,
we will deduct the charge from your Account Balance allocated to one or more of
the Separate Account Funds, in a prescribed order we have established. (SEE the
Statement of Additional Information for the order of the Funds.)
DISTRIBUTION EXPENSE CHARGE
- --------------------------------------------------------------------------------
As principal underwriter, we perform all distribution and sales functions and
bear all distribution and sales expenses relative to the Contracts. These
expenses include the payment of that portion of the salaries of our registered
representatives attributable to the sale and distribution of Contracts, as well
as expenses for preparation of sales literature and other promotional
activities.
We deduct, on each Valuation Day, from the net assets in each Fund of the
Separate Account a charge at an annual rate of 0.35% to cover anticipated
distribution expenses.
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MORTALITY AND EXPENSE RISK CHARGES
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We bear certain mortality and expense risks under the Contracts. The mortality
risk we assume arises from our guarantee to make Annuity Payments in accordance
with the annuity tables provided in a Contract, regardless of how long an
Annuitant lives and regardless of any improvement in life expectancy generally.
Our mortality risk is that Annuitants as a class will live longer than we had
estimated actuarially, and as a result we make Annuity Payments for longer than
we had anticipated. Our assumption of this risk relieves Participants
(Annuitants) of the risk that they will outlive the funds that they have
accumulated for their retirement.
We assume certain expense risks under the Contracts. The expense risks we assume
arise from our guarantees in the Contracts to make Annuity Payments in
accordance with annuity tables in the Contracts. We have estimated expenses we
expect to incur over the lengthy period that we may make Annuity Payments. We
assume the risk that expenses will be higher than we estimated.
On each Valuation Day, for assuming the mortality risks we make a deduction at
an annual rate of 0.35% of the net assets in each Fund and for assuming the
expense risks we make a deduction at an annual rate of 0.15% of the net assets
in each Fund. We guarantee that we will not increase the mortality risk charge
during the life of a Contract, and we have the right to increase the expense
risk charge, subject to any limitations in a Plan or the Contract.
EXPENSES OF THE UNDERLYING FUNDS
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Participants and the Separate Account Funds do not directly pay the advisory
fees and other expenses of the Underlying Funds. These fees and expenses are
deducted by the Underlying Funds and will impact the value of the shares the
Separate Account Funds own.
You should refer to "Table of Annual Expenses" in this Prospectus, which shows
the expenses of the Underlying Funds for the most recent calendar year. The
prospectuses of the Underlying Funds, which are attached to this Prospectus,
contain a complete description of the Underlying Funds' fees and expenses.
PREMIUM TAXES
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We currently do not deduct state premium taxes from your or your employer's
Contributions. We reserve the right to deduct all or a portion of the amount of
any applicable taxes, including state premium taxes, from Contributions prior to
their allocation among the Investment Alternatives. Currently, most state
premium taxes range from 2% to 4%.
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WHO MAY PURCHASE A CONTRACT AND MAKE CONTRIBUTIONS
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PURCHASE OF A CONTRACT; PARTICIPATION
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TDA CONTRACT. We issue TDA Contracts to employers or other entities that are
seeking a funding vehicle for group tax-sheltered annuity purchase arrangements
established under Section 403(b) of the Code. Contractholders must be
organizations that qualify for tax-exempt status under Section 501(c)(3) of the
Code or are eligible public schools or colleges, or associations that represent
such entities or their employees.
If you are an employee of an employer that has adopted a tax-sheltered annuity
purchase arrangement funded by a TDA Contract, you may become a Participant by
completing our application form.
IRA CONTRACT. We issue IRA Contracts to individuals who are (or were) employees
of an organization that qualifies for tax-exempt status under the Code and to
these individuals' immediate family members. Each purchaser must complete the
prescribed application and make an initial Contribution of at least the minimum
required amount. We do not, however, require an initial Contribution for SEP IRA
Contracts.
To purchase a Roth IRA, an individual must have Federal adjusted gross income
below a certain level and must designate the Contract as a Roth IRA. To purchase
a SEP IRA or SIMPLE IRA, the individual must be eligible to participate in the
SEP or SIMPLE adopted by the individual's employer.
FPA CONTRACT. We issue FPA Contracts to individuals who currently work for or
formerly worked for organizations that are tax-exempt under the Code and to
these individuals' spouses and certain family members. Each purchaser must
complete the prescribed application and make an initial Contribution of at least
the minimum required amount. We also may issue an FPA Contract to a tax-exempt
organization, which may use the Contract to accumulate funds to meet its
deferred compensation obligations.
A person to whom we issue an FPA Contract, whether or not such person is the
Annuitant, will be the owner of the Contract and will possess all the rights
under the Contract. For example, the employer to whom we issue an FPA Contract
for deferred compensation purposes is the owner of the Contract and may receive
all payments under the Contract.
ACCEPTANCE OF INITIAL CONTRIBUTIONS. When we receive your completed
application, together with an initial Contribution (when required) and any other
necessary information, we will accept the application and Contribution and issue
the IRA or FPA Contract or TDA Certificate, or reject them, within two business
days of receipt. If you did not properly complete the application, we will
retain the Contribution for up to five business days while we attempt to obtain
the information necessary to complete the application. We will accept the
Contribution within two business days after we receive the completed
application.
If we do not receive a completed application for you within five business days,
we will return the Contribution at the end of that period unless we obtain
consent to hold the Contribution for a longer period from you, if the
application is for an FPA or IRA Contract where you send Contributions directly
to us, or we notify your employer on your behalf if the application is for an
IRA or FPA Contract or for participation under a TDA Contract where your
employer sends Contributions to us. We enter into agreements with employers that
use our electronic processing system and that make Contributions to a SEP IRA or
SIMPLE IRA or that have payroll deduction or salary reduction programs for the
forwarding of application information and Contributions to us.
CANCELLATION OF CONTRACT. You may surrender a TDA Certificate, IRA Contract or
FPA Contract for cancellation within ten days after receipt. We will refund all
Contributions you allocated to the General Account, plus the value on the date
of surrender of your Account Balance credited to the Separate Account. Several
states, however, require that the amount of Contributions be refunded without
deductions, and you should consult the Contract for applicable provisions. We
will return to your employer any Contributions that were sent to us by your
employer on your behalf.
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PAYMENT OF CONTRIBUTIONS
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TDA CONTRACTS. You make Contributions under a salary reduction arrangement you
enter into with your employer. In addition, we also will accept on your behalf a
single sum transfer from any tax-deferred annuity arrangement maintained under
Section 403(b) of the Code or certain custodial accounts maintained under
Section 403(b)(7) of the Code.
The amount of your Contributions may not be greater than the amount permitted
under applicable state or Federal law (SEE "Federal Tax Information for
Participants"). A Plan may require a minimum Contribution per year of $200 for
each Participant. We will not accept Contributions for you if you have
terminated participation under the Contract or if the TDA Contract has been
discontinued.
IRA CONTRACTS. The method of making Contributions depends on the type of IRA
Contract.
- For Traditional IRA, Roth IRA and SEP IRA Contracts, you may make
Contributions directly to us.
- Under a Traditional IRA Contract, you also may make Contributions under
a payroll deduction agreement between you and your employer, in which
case the employer forwards to us on your behalf the amounts deducted
from your salary.
- For a SIMPLE IRA Contract, you may make Contributions only by salary
reduction under the SIMPLE adopted by your employer.
The Code limits the amount of your total Contributions (excluding rollovers)
under a Traditional IRA, SEP IRA or Roth IRA Contract during a tax year to the
LESSER of $2,000 and 100% of your compensation for that year.
The Code limits the amount of Contributions to a Roth IRA as follows:
- 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.
This $2,000 amount is reduced by contributions to other IRAs during the
tax year, other than rollovers and salary reduction contributions to a
SIMPLE.
- The $2,000 Roth IRA contribution limit declines in fixed amounts until
it becomes zero for a single individual with adjusted gross income
between $95,000 and $110,000 and for a married individual filing a joint
return with adjusted gross income between $150,000 and $160,000.
The Code limits Participant Contributions to a SIMPLE IRA, as follows:
- You may contribute up to $6,000 per year (or 100% of compensation if
less), and this amount will be increased in future years for
cost-of-living adjustments.
- 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 1999, as adjusted in future
years for cost-of-living increases.
Code provisions also regulate an employer's Contributions to a SIMPLE IRA:
- 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 matching a Contribution, the employer may make a
"nonelective" Contribution to each Participant's SIMPLE IRA. 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 1999 (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.
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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
employee.
At any age you may make Contributions to a Roth IRA, as long as you are eligible
based on Federal adjusted gross income requirements. You may not make any
Contributions to a Traditional IRA or SEP IRA Contract beginning in the tax year
you reach age 70 1/2, with the following exceptions:
- You may purchase an IRA Contract, or you may use an existing IRA
Contract, to receive rollover Contributions from certain other plans, as
described below, even after age 70 1/2.
- 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 reached age 70 1/2.
You may make Contributions to an IRA Contract (other than a SIMPLE IRA) by
ROLLOVER of eligible distributions from certain other pension or retirement
arrangements that qualify for favorable tax treatment under the Code, under the
following rules:
- Generally, amounts that you roll 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 rollover.
- 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 "Federal Tax Information for
Participants--Obtaining Tax Advice".
- You may roll over amounts to a SIMPLE IRA only from another SIMPLE IRA.
Special rules apply for rollovers to a Roth IRA or for conversions from a
Traditional IRA to a Roth IRA. If you have adjusted gross income of $100,000 or
less for a tax year, you can roll over or "convert" a Regular IRA to a Roth IRA
Contract, subject to the following:
- You may not directly transfer distributions from an employer-sponsored
plan to a Roth IRA, but you may roll over eligible distributions first
to a Traditional IRA and subsequently to a Roth IRA.
- You must include in gross income amounts rolled over from a Regular IRA
to a Roth IRA (excluding "after-tax" Contributions), but no early
withdrawal penalty applies to the taxable amount. If you converted a
Traditional IRA to a Roth IRA during 1998, you 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.
- You will owe a penalty tax on withdrawals of amounts that were rolled
over to a Roth IRA from a Traditional IRA if the withdrawal is made
within five tax years after the rollover, even if the amount withdrawn
is nontaxable. SEE "Federal Tax Information for Participants--Roth IRA
Contracts--Special Penalty Tax on Withdrawals of Rollover or Conversion
Contributions".
- Individuals considering converting or rolling over a Traditional IRA to
a Roth IRA should take into account various issues, including state and
local tax consequences. SEE "Federal Tax Information for
Participants--Obtaining Tax Advice."
FPA CONTRACT. You may make Contributions directly to us, or your employer may
make Contributions to us on your behalf under a payroll deduction agreement. You
may make Contributions at whatever intervals and in whatever amounts you select,
except that each Contribution must be at least $10. (From time to time we may
change this minimum.)
If an employer purchases an FPA Contract as a depository for employee deferred
compensation obligations that do not constitute deferrals under an eligible
deferred compensation plan as defined in
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Section 457(b) of the Code, there are no limits on the amount of compensation
that employees may defer. However, amounts deferred under the Contract are
subject to a substantial risk of forfeiture by the employees, including by the
claims of the employer's creditors.
ALLOCATION OF CONTRIBUTIONS
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You may allocate Contributions among the Investment Alternatives, except that a
TDA Plan may limit use of Separate Account Funds in some circumstances. The
Mid-Cap Equity Index Fund may not be available to Participants in all States,
due to state insurance department regulatory filings.
We receive your Contribution when your check is delivered to our home office or
your employer transfers Federal funds into the bank account we have designated
for the employer's use. We will allocate a Contribution when we receive it
according to instructions sent with the Contribution, or if no instructions are
sent, on the basis of your allocation request currently on file at our home
office. Your request for allocation must specify the percentage, in any whole
percentage from 0% to 100%, of each Contribution to be allocated to each of the
Investment Alternatives. The percentages you give us must add up to 100%.
You may change the allocation instructions for future Contributions from time to
time. You should periodically review your allocations in light of market
conditions and your retirement plans and needs.
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YOUR ACCOUNT BALANCE IN THE SEPARATE ACCOUNT FUNDS
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ACCUMULATION UNITS IN SEPARATE ACCOUNT FUNDS
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We use Accumulation Units to represent Account Balances in each Separate Account
Fund. We separately value the Accumulation Unit for each Fund of the Separate
Account.
We determine your Account Balance in the Separate Account as of any Valuation
Day by multiplying the number of Accumulation Units credited to you in each Fund
of the Separate Account by the Accumulation Unit value of that Fund at the end
of the Valuation Day.
Investment experience by the Separate Account Funds does not impact the number
of Accumulation Units credited to your Account Balance. The value of an
Accumulation Unit for a Fund, however, will change as a result of the Fund's
investment experience, in the manner described below.
CALCULATION OF ACCUMULATION UNIT VALUES
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We determine Accumulation Unit values for the Funds as of the close of business
on each Valuation Day (generally at the close of the New York Stock Exchange). A
Valuation Period is from the close of a Valuation Day until the close of the
next Valuation Day.
The dollar value of an Accumulation Unit for each Fund of the Separate Account
will vary from Valuation Period to Valuation Period. The changes in Accumulation
Unit values for the Separate Account Funds will reflect:
- changes in the net asset values of the Underlying Funds, depending on
the investment experience and expenses of the Underlying Funds, and
- Separate Account charges under the Contracts, with the annual rates
calculated as a daily charge. (SEE "Charges You Will Pay".)
You may refer to "Appendix A: Unit Value Information for the Separate Account
Funds" in this Prospectus to review changes in Accumulation Unit values for each
Fund over a period of time (except for the Mid-Cap Equity Index Fund, which
began operations on May 1, 1999).
ACCUMULATION UNIT VALUES FOR TRANSACTIONS
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When you allocate Contributions to a Separate Account Fund or transfer any
Account Balance to a Fund, we credit Accumulation Units to your Account Balance.
When you withdraw or transfer any Account Balance from a Separate Account Fund,
we cancel Accumulation Units from your Account Balance.
The Accumulation Unit value for a transaction is the Unit value for the
Valuation Period during which we receive the Contribution or request. As a
result, we will effect the transaction at the Accumulation Unit value we
determine at the NEXT CLOSE of a Valuation Day (generally the close of the New
York Stock Exchange on that business day).
We calculate the number of Accumulation Units for a particular Fund by dividing
the dollar amount you have allocated to, or withdrawn from, the Fund during the
Valuation Period by the applicable Accumulation Unit value for that Valuation
Period. We round the resulting number of Accumulation Units to two decimal
places.
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OUR PAYMENT OF ACCOUNT BALANCE TO YOU OR A BENEFICIARY
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YOUR RIGHT TO TRANSFER AMONG INVESTMENT ALTERNATIVES
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You may transfer all or a portion of your Account Balance among Funds of the
Separate Account, and between the Separate Account and the General Account,
unless your Plan limits transfers. There are no tax consequences to you for
transfers among Investment Alternatives. We currently do not impose a charge for
transfers, but we reserve the right to impose a transfer charge in the future.
YOUR RIGHT TO MAKE WITHDRAWALS, INCLUDING BY SPECIFIED PAYMENTS
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Under an IRA or FPA Contract, you may withdraw your Account Balance in whole or
in part, at any time during the Accumulation Period.
Under a TDA Contract, your right to withdraw all or any portion of your Account
Balance is restricted by Federal tax law. If you are under age 59 1/2, you will
not be able to withdraw Account Balance, except in circumstances such as death
or disability, hardship, or termination of employment. (There are special rules
permitting withdrawal of Contributions made on or before January 1, 1989 and
withdrawal of earnings and interest credited to your Account Balance by that
date.) When you make a withdrawal for hardship, you may not withdraw post-1988
earnings or interest on your Contributions under a salary reduction agreement.
In addition, consent of your Eligible Spouse may be required for withdrawals
under TDA Contracts.
A full withdrawal results in a surrender of your IRA or FPA Contract or a
termination of your participation under a TDA Contract. We may take up to seven
days following receipt of your withdrawal request to process the request and
mail a check to you.
SPECIFIED PAYMENTS OPTION. If you have reached age 59 1/2, or if you are under
a TDA Contract and ended your employment with the employer after first reaching
age 55, you may elect to make withdrawals of Account Balance by telling us a set
amount to be withdrawn each month. You must specify an amount, which may not be
less than $100, and must tell us the Investment Alternatives from which the
withdrawals should be taken. We will send the Specified Payments to you, except
that we will send the Specified Payments to the Annuitant if you have an FPA
Contract and have named someone else as the Annuitant.
When you are receiving Specified Payments under a TDA Contract, you may not make
Contributions and your employer may not make Contributions on your behalf. When
you are receiving Specified Payments under an IRA or FPA Contract, you may not
make payroll deduction Contributions, but you (and your employer under an IRA)
may make single sum Contributions. You also may transfer Account Balance among
Investment Alternatives and make other withdrawals when receiving Specified
Payments.
Specified Payments will continue until the earliest of:
- your death;
- our receipt of your written request to change or end the Specified
Payments;
- the decline in your Account Balance (or in any Investment Alternative
that you have designated for withdrawals) so that the remaining balance
is not large enough to cover the next Specified Payment due; or
- your Annuity Commencement Date.
If you are subject to the minimum distribution rules under the Code, the
Specified Payments for the year should at least total the minimum required
annual distribution. (SEE "Federal Tax Information for Participants--Minimum
Distributions Under TDA and IRA Contracts.")
INCOME TAX CONSEQUENCES OF WITHDRAWALS. You should consider the possible
Federal income tax consequences of any withdrawal, including withdrawals under
the Specified Payments Option. You will be taxed at ordinary income tax rates on
the portion of your withdrawal that is taxable. You will not be taxed on the
amount of any Contributions you made with "after-tax" dollars, but there are
special rules under
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the Code for determining whether a withdrawal, or portion of a withdrawal, will
be considered a return to you of after-tax Contributions (SEE "Federal Tax
Information for Participants").
Your withdrawals under a Roth IRA Contract that are made after the five year
period beginning with the tax year in which the Roth IRA Contract was first
issued are not taxable if:
- you have reached age 59 1/2, or
- the withdrawals are to pay for qualified first-time home buyer expenses
of up to $10,000 per lifetime, or
- you have died or become disabled.
A withdrawal that does not meet these requirements is nevertheless not taxable
if it is not more than the amount of your Contributions to the Roth IRA and
contributions to other Roth IRAs you own. SEE the discussion on Roth IRA
Contracts under "Federal Tax Information for Participants".
PENALTY TAX ON TAXABLE PORTION OF WITHDRAWALS AND ON CERTAIN ROTH IRA
WITHDRAWALS. There is a 10% Federal penalty tax on the taxable amount of
withdrawals you make during the Accumulation Period, unless
- you have reached age 59 1/2,
- you are disabled or have died,
- the distributions are Annuity Payments over your life (or life
expectancy) or over the joint lives (or joint life expectancies) of you
and the Beneficiary, or
- in certain other circumstances. SEE "Federal Tax Information for
Participants" for a listing of other circumstances when the penalty is
not due.
The 10% penalty you pay increases to 25% if you make a withdrawal from a SIMPLE
IRA during the first two years of your participation in the employer's SIMPLE.
You may owe a 10% penalty tax on withdrawals of amounts that you converted or
rolled over to a Roth IRA from a Traditional IRA, even though the withdrawal is
tax-free to you. SEE "Federal Tax Information for Participants".
OUR RIGHT TO IMPOSE A DEFERRED SALES CHARGE. Currently, we do not impose a
contingent deferred sales charge or any other withdrawal charge on withdrawals
you make, whether complete or partial. Subject to State insurance law
limitations and the terms of your Contract and any Plan, we reserve the right to
impose a deferred sales charge or other charges on withdrawals in the future.
HOW TO TELL US AN AMOUNT TO TRANSFER OR WITHDRAW
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To tell us the amount of your Account Balance to transfer or withdraw, you may
specify to us:
- the dollar amount to be taken from each Investment Alternative,
- for Separate Account Funds, the number of Accumulation Units to be
transferred or withdrawn, or
- the percentage of your Account Balance in a particular Investment
Alternative to be transferred or withdrawn.
For transfers, you also must specify the Investment Alternative(s) to which you
are moving the transferred amount. Your request for a transfer or withdrawal is
not binding on us until we receive all information necessary to process your
request.
LOANS UNDER A TDA CONTRACT
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We make available a loan option under a TDA Contract. You have the right to
borrow funds using your Account Balance as collateral. The amount of the loan
permitted is governed by Section 72(p) of the Code and the Contract terms. We
will transfer an amount sufficient to serve as collateral for your loan from the
Separate Account to the General Account, unless you already have allocated the
necessary
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Account Balance to the General Account. We will not permit you to make
withdrawals or transfers of the collateral amount while the loan is outstanding.
There are no income tax consequences to you from obtaining a loan under the TDA
Contract, unless you do not make repayments when they are due.
DEATH BENEFIT PRIOR TO ANNUITY COMMENCEMENT DATE
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We will pay a death benefit to your Beneficiary during the Accumulation Period
upon your death or, under an FPA Contract when you are not the Annuitant, upon
the death of either you or the Annuitant, whichever comes first. Under a TDA
Contract, the employer's Plan may require you, if you are married, to have your
Eligible Spouse as the Beneficiary, unless you designate a different Beneficiary
with the written consent of your spouse. See "Administrative
Matters--Designation of Beneficiary".
We will pay the death benefit after we have received:
- due proof of your (or under an FPA Contract, if different, the
Annuitant's) death;
- notification of election by the Beneficiary(ies) of the form in which we
are to pay the death benefit; and
- all other information and documentation necessary for us to process the
death benefit request.
The amount of the death benefit will be the value of your Account Balance as of
the date on which we receive the items listed above. Until then, your Account
Balance will remain allocated as it was on the date of death. (If you were the
Annuitant and your Eligible Spouse is the Beneficiary, special rules apply as
described below).
FORM OF PAYMENT OF DEATH BENEFIT. The Beneficiary will elect the form of death
benefit. Payout options include a lump sum or annuity payments, but the Code
imposes special requirements on the payment of a death benefit, as described
below.
In addition, Participants under IRA Contracts (other than Roth IRAs) and TDA
Contracts are required to begin taking minimum distributions after they reach a
certain age (called the REQUIRED BEGINNING DATE), and certain requirements
depend on whether the Participant had reached that age at the time of death.
When minimum distribution requirements are applicable, they can be satisfied by
withdrawals from other eligible IRA or TDA contracts, as the case may be.
Beneficiaries should consult their tax advisers for any additional rules that
may apply in their particular circumstances. See "Federal Tax Information for
Participants--Minimum Distributions under TDA and IRA Contracts".
In general, any method of distribution that a Beneficiary selects must comply
with ONE of the following.
(A) FIVE YEAR RULE. The general rule is that we must pay the entire death
benefit to the Beneficiary by December 31 of the year that is five years
after the Participant's death (or Annuitant's death, if applicable), unless
we pay the death benefit in accordance with (b), (c) or (d) below.
(B) LIFE ANNUITY RULE. If a Beneficiary selects a life annuity, the entire death
benefit must generally be distributed to the Beneficiary in the form of
Annuity Payments that begin within one year of your (or the Annuitant's)
death and are payable over a period of time that is not more than the
Beneficiary's life or life expectancy, whichever is longer.
(C) COMMENCEMENT OF MINIMUM DISTRIBUTIONS. If a Participant under an IRA (other
than a Roth IRA) or TDA Contract dies after reaching the Required Beginning
Date, the method of distribution the Beneficiary selects may not be slower
than the method of distribution that was in effect before the Participant
died.
(D) BENEFICIARY IS YOUR ELIGIBLE SPOUSE. Your spouse may be able to continue an
FPA or IRA Contract.
- Under an FPA Contract when you are the Annuitant, a Beneficiary who is
your Eligible Spouse may choose to be considered as the Participant for
purposes of determining when distributions must begin. In effect, your
spouse can be substituted as the Participant under the FPA Contract, and
the death benefit distribution requirements will not apply until the
spouse's death.
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- Under an IRA Contract, the spouse may use your Required Beginning Date
for determining when minimum distributions must begin. Alternatively,
the spouse may take over the IRA Contract and make Contributions to the
Contract, in which case the minimum distribution rules will be based on
the spouse's Required Beginning Date, and the death benefit distribution
requirements will not apply until the spouse's death.
DISCONTINUANCE OR TERMINATION OF CONTRACTS OR PARTICIPATION
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DISCONTINUANCE OF TDA CONTRACTS. A Contractholder may discontinue a TDA
Contract on the first of a month with at least 31 days notice to us. We may
discontinue all or part of a Contract upon at least 31 days' notice to the
Contractholder, during which time the Contractholder may cure any remediable
defaults, if (1) the Contractholder does not follow the terms of the Contract,
or (2) we determine 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 we offer that incorporates that modification. We
also have the right to discontinue a Contract if a Contractholder for an entire
Plan Year does not send us any Contributions for Participants. When a TDA
Contract is discontinued:
- The Contractholder's obligations under the Contract continue, except
that the Contractholder may not send us any more Contributions.
- Amounts accumulated for Participants remain under the Contract, until
withdrawn or transferred.
- We may transfer all amounts accumulated under the Contract to another
insurance company or other financial institution. A transfer may be made
in any manner to which the Contractholder and we agree in writing, and
may require the consent of Participants and Beneficiaries. A Participant
or Beneficiary who does not consent to the transfer may choose to leave
the accumulated amounts on deposit with us, or may withdraw the amount
in whole or in part (subject to any Federal tax law restrictions on
withdrawals).
TERMINATION OF PARTICIPATION UNDER TDA CONTRACTS. Your participation under a
TDA Contract terminates if:
- you are no longer eligible to participate under the Contract due to
termination of employment with the Contractholder, including by death or
retirement; or
- you or the Contractholder gives us notice that you no longer desire to
participate under the Contract; or
- you do not make any Contributions for three consecutive years, your
Account Balance is less than $2,000, and we elect to deem that a
termination has occurred.
Contributions may no longer be made by you or on your behalf upon termination of
your participation. Termination of participation will not deprive you of your
Account Balance or change your rights to make transfers or withdrawals.
Termination also will not prevent you from electing to receive Annuity Payments,
or having a death benefit paid to your Beneficiary.
TERMINATION OF IRA AND FPA CONTRACTS. We may, in our sole discretion, return
your Account Balance and terminate an IRA or FPA Contract prior to the Annuity
Commencement Date if:
- you have not made Contributions for three consecutive years,
- your Account Balance is less than the specified minimum for FPA
Contracts of $500 and for IRA Contracts of either $2,000 or the amount
needed to provide monthly Annuity Payments of at least $20 under the
form of annuity you selected, AND
- you have reached the age 59 1/2.
Before we elect to terminate an IRA or FPA Contract, we will notify you of our
intention to do so and provide a period of 90 days during which you may make
additional Contributions to reach the specified minimum. We will pay your
Account Balance to you in a single sum if we terminate your IRA or FPA Contract.
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WHEN WE MAY POSTPONE PAYMENTS
- --------------------------------------------------------------------------------
We will pay any amounts due from the Separate Account for a withdrawal
(including a Specified Payments Option withdrawal), death benefit or
termination, and will transfer any amount from the Separate Account to the
General Account, within seven days, unless:
- 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
- The Commission by order permits postponement for the protection of
Participants; or
- 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.
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YOU MAY OBTAIN AN ANNUITY WITH YOUR ACCOUNT BALANCE
- --------------------------------------------------------------------------------
AMOUNT OF ANNUITY PAYMENTS
- --------------------------------------------------------------------------------
At your Annuity Commencement Date, we will apply your Account Balance to
purchase a stream of monthly Annuity Payments (an annuity). Once Annuity
Payments have begun, you may no longer make Contributions, transfers or
withdrawals under the Contract and your employer may no longer make
Contributions on your behalf. You may elect to receive your Account Balance by
making partial or full withdrawals, including under the Specified Payments
Option, instead of receiving Annuity Payments.
We will fix the amount of each Annuity Payment and guarantee payment, according
to the form of annuity you select. The amount of the Annuity Payments depends on
the annuity form you choose, the applicable annuity purchase rates and your
Account Balance. The life expectancy of the Annuitant(s) is a factor we use in
determining the amount of the monthly Annuity Payments, if the form of annuity
requires us to make payments for the life of the Annuitant (or joint lives of
the Annuitant and joint Annuitant).
We guarantee that the purchase rates we use to determine the amount of Annuity
Payments will never be less favorable for you than the guaranteed rates in the
Contract. We also guarantee that we will not increase expense charges under the
Contracts for the Annuity Payments, regardless of our actual expenses.
We will issue to Contractholders of TDA Contracts for delivery to each
Participant 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 we issue to you.
We will send Annuity Payments directly to Annuitants at their last known
address, as filed with us by a Participant or Contractholder.
ANNUITY COMMENCEMENT DATE
- --------------------------------------------------------------------------------
You must notify us of the Annuity Commencement Date in advance, according to our
procedures. For IRAs and SEP IRAs, we must receive notice of an election at
least 30 days in advance.
TDA CONTRACTS. You may elect an Annuity Commencement Date that is your:
- normal retirement date (generally, when you reach age 65); or
- early retirement date (up to 10 years before your normal retirement
date, but you must be at least age 55); or
- later retirement date (any time after your normal retirement date).
IRA CONTRACTS. You may elect an Annuity Commencement Date that is the first day
of any calendar month on or after the date you attain age 55. For SEP IRAs and
SIMPLE IRAs, the Annuity Commencement Date must be no EARLIER than the last to
occur of the following: the first day of the calendar month in which you attain
age 55, the 30th day following the day you stop working for the employer that
sponsors the SEP or SIMPLE, or the 30th day following the day that we receive at
our home office the last employer contribution due under the SEP or SIMPLE.
FPA CONTRACT. You may elect an Annuity Commencement Date that is the first day
of any calendar month.
AVAILABLE FORMS OF ANNUITY
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For a TDA Contract, an employer's Plan may contain these special rules for
determining the annuity form:
- If you have an Eligible Spouse on the Annuity Commencement Date, you
will receive Annuity Payments in the form of a Joint and Survivor
Annuity, as described below, with your Eligible Spouse as joint
Annuitant, unless you, at least ninety days before the Annuity
Commencement
26
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Date, select in writing one of the other annuity forms listed below and
your Eligible Spouse consents to the form selected.
- If you do not have an Eligible Spouse on the Annuity Commencement Date,
you will receive Annuity Payments in the form of a 10 Years Certain and
Continuous Annuity form, as described below, unless you, before the
Annuity Commencement Date, select in writing a different annuity form.
Under an IRA or FPA Contract, you select the form of annuity at the time you
designate an Annuity Commencement Date.
You may select a form of annuity from the following list. You will be the
Annuitant, unless under an FPA Contract you named someone else as the Annuitant.
TEN YEARS CERTAIN AND CONTINUOUS FORM. This annuity form provides for monthly
Annuity Payments to the Annuitant, continuing until the LATER OF the month of
the Annuitant's death and the end of 10 years (the certain period). If the
Annuitant dies before the end of the 10 year certain period, the Annuitant's
Beneficiary will receive the monthly Annuity Payments until the end of the 10
year period. If the Beneficiary dies before the end of the 10 year period, we
will pay the commuted value of the remaining Annuity Payments to the payee named
by you.
JOINT AND 66 2/3% SURVIVOR LIFE WITH TEN YEAR PERIOD CERTAIN FORM. This annuity
form provides a monthly Annuity Payment during the lifetime of the Annuitant and
66 2/3% of that monthly Annuity Payment to the joint Annuitant after the
Annuitant's death if the joint Annuitant survives the Annuitant. If both the
Annuitant and the joint Annuitant die before the end of the ten year period,
payments continue in the amount last paid until the end of ten years (the
certain period) to the Beneficiary. If a person named as an Annuitant's joint
annuitant dies prior to the Annuity Commencement Date, your election of this
annuity form is cancelled automatically.
FULL CASH REFUND FORM. This annuity form provides for monthly Annuity Payments
to the Annuitant, continuing until the month of the Participant's death. If the
aggregate amount of the monthly Annuity Payments that we made to you is less
than your Account Balance at the Annuity Commencement Date, we will pay the
difference to the Beneficiary. The Beneficiary may elect to receive the amount
in a lump sum or as an annuity in the Ten Years Certain and Continuous Form.
We will calculate any commuted value on the basis of compound interest at a rate
we determine that is consistent with the interest assumption for the annuity
rates we used to determine the Annuity Payments.
In addition to the forms of annuity listed above, we may in our discretion offer
additional forms of annuity as of your Annuity Commencement Date. As of the date
of this Prospectus, we are offering the following additional forms of annuity
and have the right to discontinue offering these forms at any time.
PERIOD CERTAIN AND CONTINUOUS ANNUITY. Same as the Ten Years Certain and
Continuous annuity above, except that the period may be for three or five years
or for some other period we approve.
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%, and the
Period Certain may be different, as elected by the Annuitant.
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. We make a monthly Annuity Payment until the death of
the Annuitant. No amount is payable to any contingent Annuitant or Beneficiary.
DEATH BENEFIT AFTER ANNUITY COMMENCEMENT DATE
- --------------------------------------------------------------------------------
If an Annuitant (and the joint Annuitant if the form is a joint annuity) dies on
or after the Annuity Commencement Date, your Beneficiary will receive the death
benefit (if any) provided by the form of annuity under which Annuity Payments
were made. SEE "Available Forms of Annuity" above.
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<PAGE>
LUMP SUM FOR SMALL ANNUITY PAYMENTS
- --------------------------------------------------------------------------------
TDA CONTRACTS. If your monthly Annuity Payment would be less than $20, or if
you terminate employment and are eligible for a benefit that would be less than
$20 a month under the Ten Years Certain and Continuous Form of Annuity
(described above), we may elect to pay to you a single sum instead of providing
Annuity Payments. The amount will be the Account Balance, except that we will
not make a single sum payment if the amount due would exceed $5,000 (or such
other maximum amount prescribed by law). We may make this payment on or before
your Annuity Commencement Date.
IRA AND FPA CONTRACTS. Under IRA and FPA Contracts, if the annuity benefit
payable would be less than $20 each month, we may elect to pay the Account
Balance in a single payment to the Annuitant.
OUR GENERAL ACCOUNT
- --------------------------------------------------------------------------------
SCOPE OF PROSPECTUS
- --------------------------------------------------------------------------------
We have not registered the Contracts under the Securities Act of 1933 for
allocations to the General Account, nor is the General Account registered as an
investment company under the 1940 Act. The staff of the Commission has not
reviewed the disclosures in this Prospectus that relate to the General Account.
Disclosures regarding the fixed portion of the Contracts and the General
Account, however, generally are subject to certain provisions of the Federal
securities laws relating to the accuracy and completeness of statements made in
prospectuses. This Prospectus serves as a disclosure document for the variable,
or Separate Account, interests under the Contracts. For more details regarding
the General Account, see the Contracts themselves.
GENERAL DESCRIPTION
- --------------------------------------------------------------------------------
Amounts you allocate to the General Account become part of our general assets.
Our General Account supports our insurance and annuity obligations. The General
Account consists of all of our general assets, other than those in the Separate
Account and other segregated asset accounts.
We bear the full investment risk for all amounts that Participants allocate to
the General Account. We have sole discretion to invest the assets of the General
Account, subject to applicable law. Your allocation of Account Balance to the
General Account does not entitle you to share in the investment experience of
the General Account.
We guarantee that we will credit interest to Participant Account Balances in the
General Account at an effective annual rate of at least 3%. In our sole
discretion, we may credit a higher rate of interest to Participant Account
Balances in the General Account, although WE ARE NOT OBLIGATED TO CREDIT
INTEREST IN EXCESS OF 3% PER YEAR. We will send you notice when we change the
current rate. We credit interest daily and compound it annually.
For TDA Contracts, SEP and SIMPLE IRAs and payroll deduction IRA Contracts, when
the employer uses electronic media, in compliance with our established rules and
requirements, for the transmission and receipt of certain information regarding
Participants, Contributions and other Contract information, we reserve the right
to credit a higher interest rate for amounts allocated to the General Account
than the rate otherwise set.
TRANSFERS AND WITHDRAWALS
- --------------------------------------------------------------------------------
You may transfer any portion of your Account Balance to or from the General
Account and, to the extent permitted by the Code and the Plan, may withdraw any
portion of your Account Balance from the General Account prior to the Annuity
Commencement Date. See "Your Right to Transfer Among Investment Alternatives"
and "Your Right to Make Withdrawals, including by Specified Payments" under "Our
Payment of Account Balance to You or a Beneficiary". We have the right to delay
transfers and withdrawals from the General Account for up to six months
following the date that we receive the transaction request.
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<PAGE>
HOW TO CONTACT US AND GIVE US INSTRUCTIONS
- --------------------------------------------------------------------------------
CONTACTING MUTUAL OF AMERICA
- --------------------------------------------------------------------------------
Participants and TDA Contractholders must send in writing all notices, requests
and elections required or permitted under the Contracts, except that you may
give certain instructions by telephone, as described below. Our home office
address is:
Mutual of America Life Insurance Company
320 Park Avenue
New York, New York 10022
You can check the address for your Regional Office by calling 1-800-468-3785 or
by visiting our Website at www.mutualofamerica.com.
TRANSFERS, ALLOCATION CHANGES AND WITHDRAWALS BY TELEPHONE
- --------------------------------------------------------------------------------
You may make requests by telephone for transfers or withdrawals of Account
Balance or to change the Investment Alternatives to which we will allocate your
future Contributions, except that we do not accept telephone requests for
withdrawals under TDA Contracts or for IRA rollovers.
You must use a Personal Identification Number (PIN) to make telephone requests.
We will automatically send you a PIN, and your use of the PIN constitutes your
agreement to use the PIN in accordance with our rules and requirements. You may
call us to change or cancel the PIN that we have assigned. Our toll-free
telephone number for requests is 1-800-468-3785.
On any Valuation Day, we will consider requests by telephone that we receive by
4 p.m. Eastern Time (or the close of the New York Stock Exchange, if earlier) as
received that day. We will consider requests that we receive after 4 p.m. (or
the Exchange close) as received the next Valuation Day. We reserve the right to
suspend or terminate at any time the right of Participants to request transfers
or reallocations by telephone.
Although our failure to follow reasonable procedures may result in our liability
for any losses due to unauthorized or fraudulent telephone transfers, we will
not be liable for following instructions communicated by telephone that we
reasonably believe to be genuine. We will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. Those
procedures are to confirm your Social Security number, check the Personal
Identification Number, tape record all telephone transactions and provide
written confirmation of telephone transactions.
WHERE YOU SHOULD DIRECT REQUESTS
- --------------------------------------------------------------------------------
You should request an allocation change or a transfer of any portion of your
Account Balance among Investment Alternatives by calling 1-800-468-3785 or
sending a written request to our Processing Center. The address is:
Mutual of America Life Insurance Company
Financial Transaction Processing Center
1150 Broken Sound Parkway NW
Boca Raton, FL 33487
For withdrawals, you must make your request according to our procedures, which
we may change from time to time. Under our current procedures, you may make a
withdrawal request:
- under an IRA Contract by writing to your Regional Office or by calling
our 800 number, except that a request for rollover to another IRA must
be in writing,
- under an FPA Contract by calling our 800 number or writing to our Home
Office, and
- under a TDA Contract by writing to your Regional Office.
You should use our forms to submit written requests to us.
29
<PAGE>
ADMINISTRATIVE MATTERS
- --------------------------------------------------------------------------------
YEAR 2000 COMPLIANCE
- --------------------------------------------------------------------------------
Many of the services that we provide to Participants and Contractholders depend
on the proper functioning of our computer and computer-based systems, as well as
those of our service providers. Many computer software programs, as initially
developed, could not distinguish the year 2000 from the year 1900. If not
corrected, 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.
We have performed a comprehensive review of our computer systems, made the
necessary modifications or replacements and successfully completed system
testing of our in-house software, the largest and most critical project under
our Year 2000 program. For the balance of 1999, we will continue to monitor and
verify Year 2000 compliance. We also have contacted our vendors and service
providers as to the status of their Year 2000 compliance. Vendors and service
providers whose systems are material to our operations have confirmed they are,
or expect to be, Year 2000 compliant. Although we anticipate that our computer
systems and those of our providers will be adapted in time for the year 2000, it
is possible Year 2000 problems still may occur. We have developed written
contingency plans to ensure our business continuity through the year 2000.
CONFIRMATION STATEMENTS TO PARTICIPANTS
- --------------------------------------------------------------------------------
We will send you a confirmation statement each time you change your allocation
instructions, we receive a new Contribution from or for you, or you transfer any
portion of your Account Balance among the Investment Alternatives. The
confirmation for a new Contribution or transfer of Account Balance may be an
individual statement for FPA and certain IRA Contracts or may be part of your
next quarterly (or monthly, if applicable) account statement for TDA and certain
IRA Contracts. You must notify us of any error in a statement within 30 days
after the date we processed the change or transaction, or within 30 days after
the end of the period covered by the quarterly (or monthly) statement that
serves as the confirmation statement, or you will give up your right to have us
correct the error.
DESIGNATION OF BENEFICIARY
- --------------------------------------------------------------------------------
You may designate a Beneficiary, subject to any limits under a TDA Plan or the
Code. You may change the Beneficiary while you are living, either before or
after the Annuity Commencement Date, by providing us (or your employer when the
employer has agreed to hold such information) with written notice of the change.
The designation or change in designation will take effect when we (or your
employer, if applicable) receive the notice, whether or not you are living at
the time we receive the notice. We will not be liable for any payment or
settlement we make before we receive the notice of Beneficiary or change of
Beneficiary.
Some TDA Plans require that if a TDA Participant is legally married, the
Beneficiary will be the Eligible Spouse unless we have received the Eligible
Spouse's consent to permit another Beneficiary. The consent must:
- be in writing,
- be signed by the Eligible Spouse and witnessed either by a notary public
or a Plan representative,
- agree to your election to waive any qualified preretirement survivor
annuity and qualified joint and survivor annuity forms of benefit that
otherwise would be applicable, and
- agree to the designation of a Beneficiary other than your Eligible
Spouse.
If you want to make subsequent Beneficiary designations or selections of forms
of annuity benefit, your Eligible Spouse must provide written consent in the
same manner.
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<PAGE>
If no Beneficiary designated by you is living at the time of your death during
the Accumulation Period (or the Annuitant under an FPA Contract, if different,
dies during the Accumulation Period), or when the Annuitant dies (and the joint
Annuitant, if any dies) during the Annuity Period, we will pay a single sum
payment or the commuted value of any remaining periodic payments to a
Beneficiary or Beneficiaries determined under the Contract. The Contract lists
classes of Beneficiaries in an order of preference. We will pay the surviving
family member(s) in the first class of Beneficiaries we find, in this order:
- your spouse; your children; your parents; and your brothers and sisters.
If we do not find family members in these classes, we will pay the executors or
administrators of your estate.
CERTAIN ADMINISTRATIVE PROVISIONS
- --------------------------------------------------------------------------------
ASSIGNMENT OF CONTRACTS. There are restrictions on assignments of the Contract
or Participants' interests under the Contracts.
- Contractholders and Participants under TDA and IRA Contracts may not
assign or transfer the Contract or any rights under a Contract, except
as otherwise required by law.
- The Contractholder (owner) of an FPA Contract may assign the Contract.
An assignment will not be binding on us until we have recorded it, and
an assignment will not apply to payments we make before we record the
assignment.
MODIFICATION OR AMENDMENT OF CONTRACTS. Our rights and obligations under a
Contract cannot be changed or waived, unless one of our duly authorized officers
signs a written agreement to the change or waiver. No amendment or endorsement
will affect the amount or terms of any Annuity Payments we provide under a
Contract that commenced before the amendment or endorsement.
- We may change a TDA Contract at any time by amendment or replacement,
upon not less than 31 days' written advance notice to the
Contractholder, without the consent of any Participant or the consent of
any other person who is or may become entitled to benefits under the
Contract. Any change we make may not affect the amount or the terms of
Annuity Payments that began before such change.
- By accepting an IRA Contract, you delegate to us 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 we determine from time to time are necessary or appropriate. If the
effect would be to substantially change the costs or benefits under the
Contract, we may not make changes without your consent.
EVIDENCE OF SURVIVAL. When payment of a benefit is contingent upon the survival
of any person, we may require that evidence of that person's survival be
furnished to us, either by personal endorsement of the check drawn for payment,
or by other means satisfactory to us.
MISSTATEMENT OF INFORMATION. If we pay a benefit under a Contract based on
information that you or a Beneficiary misstated to us, we will recalculate the
benefit when we learn of the misstatement. We will adjust the amount of the
benefit payments, or the amount applied to provide the benefit, or both, to the
proper amount we determine based on the corrected information.
If we underpaid benefits due to any misstatement, we will pay the amount of the
underpayment in full with the next payment due under the Contract. If we
overpaid any benefits due to a misstatement, we will deduct the overpayment to
the extent possible from payments as they become due under the Contract. We will
include interest on the amount of any underpayments or charge interest on
overpayments, at the effective rate then required under State insurance law
provisions.
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INFORMATION AND DETERMINATION. Contractholders and Participants, as
appropriate, must furnish us with the facts and information that we 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. A
TDA Contractholder should report to us any determination that the Contractholder
makes pursuant to the terms of the Plan, if any. We may rely on reports and
other information furnished by Contractholders or Participants, and we are not
obligated to inquire as to the accuracy or completeness of such reports and
information.
PARTICIPATION IN DIVISIBLE SURPLUS
- --------------------------------------------------------------------------------
We are a mutual life insurance company and consequently have no stockholders.
Contractholders or Participants share in our earnings with respect to amounts
they allocate to our General Account. We can give no assurance as to the amount
of divisible surplus, if any, that will be available for distribution under the
Contracts in the future. Determination of surplus is within the sole discretion
of our Board of Directors.
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FEDERAL TAX INFORMATION FOR PARTICIPANTS
- --------------------------------------------------------------------------------
For Federal income tax purposes, the Separate Account is not separate from us,
and its operations are considered part of our operations. Under existing Federal
income tax law, we do not pay taxes on the net investment income and realized
capital gains earned by the Separate Account. We reserve the right, however, to
make a deduction for taxes if in the future we must pay tax on the Separate
Account's operations.
OBTAINING TAX ADVICE
- --------------------------------------------------------------------------------
THE DESCRIPTION BELOW OF THE CURRENT FEDERAL TAX STATUS AND CONSEQUENCES FOR
PARTICIPANTS UNDER THE CONTRACTS DOES NOT COVER EVERY POSSIBLE SITUATION AND IS
FOR INFORMATION PURPOSES ONLY. TAX PROVISIONS AND REGULATIONS MAY CHANGE AT ANY
TIME. Tax results may vary depending upon your individual situation, and special
rules may apply to you in certain cases. You also may be subject to State and
local taxes, which may not correspond to the Federal tax provisions, especially
for Roth IRAs.
For these reasons, you or Beneficiary should consult a qualified tax adviser for
complete tax information, including advice concerning the form of IRA Contract
to purchase and methods for determining the minimum required distributions under
IRA Contracts (other than Roth IRAs) and TDA Contracts.
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 for this information.
PAYMENTS UNDER ANNUITY CONTRACTS GENERALLY
- --------------------------------------------------------------------------------
Section 72 of the Code describes the income taxation of payments under annuity
contracts, either during the accumulation period or after the annuity
commencement date. We intend that the provisions of Section 72 will apply to
payments we make under FPA and IRA Contracts issued directly to individual
Participants or under TDA Contracts. Other provisions of the Code may apply to
payments we make under an FPA Contract issued to an employer for its deferred
compensation plan obligations.
SPECIAL TREATMENT FOR WITHDRAWALS UNDER ROTH IRAS. The discussion below on the
taxation of IRA Contract withdrawals is applicable to IRA Contracts, other than
distributions from Roth IRA Contracts. Participants receive special tax
treatment for withdrawals from Roth IRA Contracts, as discussed under "Roth IRA
Contracts--Qualified Distributions" and "Roth IRA Contracts--Nonqualified
Distributions; When Penalty Tax is Not Due".
GENERAL RULES FOR WITHDRAWALS UNDER CONTRACTS OTHER THAN ROTH IRAS. The general
rule is that you must receive a payment under a Contract or Plan in order to be
subject to income taxation. If you are an individual, you do not include in
gross income the interest and investment earnings we credit to your Account
Balance until you withdraw or otherwise receive such amounts. If the owner of an
FPA Contract is not a natural person, or if requirements of the Code relating to
deferred compensation are not met, then the owner may be required to include in
gross income the interest and investment earnings on amounts under the Contract.
When you receive a distribution or Annuity Payments, all or part of the payments
will be taxable to you as ordinary income. An important factor in determining
the taxable portion is whether you have an INVESTMENT IN THE CONTRACT, which
generally is the amount of after-tax Contributions (not deducted or excluded
from gross income) that you have made and not previously withdrawn. You must
report to the IRS the amount of your after-tax Contributions to an IRA Contract,
other than for a Roth IRA, and you are responsible for determining the
investment in the IRA Contract. See "Traditional IRA and SEP IRA
Contracts--Deduction of Contributions from Gross Income".
The following are general concepts, and you should refer to the discussions
below for your type of Contract.
- If you do not have an investment in the contract, you must include in
gross income the entire amount received during the tax year.
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<PAGE>
- If you do have an investment in the contract, you may be able to exclude
from gross income a portion of the Annuity Payments or other
distribution received.
- The amount you may exclude from gross income each year represents a
partial return of your Contributions that were not tax deductible or
excludable when made.
- The EXCLUSION RATIO is a method of determining the percentage of a
distribution that you may exclude from gross income for a tax year. The
percentage you may exclude is calculated by dividing your investment in
the contract by your expected return from the Contract.
- The EXPECTED RETURN is the present (or discounted) value of the Annuity
Payments or other periodic payments we expect to make to you.
DISTRIBUTIONS UNDER AN FPA CONTRACT
- --------------------------------------------------------------------------------
ANNUITY PAYMENTS. If you begin to receive Annuity Payments, or another form of
periodic payments such as an installment method for a fixed period or a fixed
amount, you may apply the exclusion ratio method to determine the amount to
exclude from gross income for the tax year of the distribution.
After we make Annuity Payments or other periodic distributions for a sufficient
period of time, you will receive back all of your investment in the contract.
Thereafter, you must include in gross income the entire amount of the Annuity
Payments or other periodic distributions, except that a Participant whose
Annuity Commencement Date was before January 1, 1987 may continue to use the
exclusion ratio method.
WITHDRAWALS. If you make cash withdrawals, you may not use the exclusion ratio
and may owe tax on up to the entire amount of the withdrawal. You must include
in gross income the amount withdrawn to the extent that the value of the FPA
Contract immediately before the withdrawal is greater than your investment in
the contract. In effect, you must treat withdrawals as first being withdrawals
of the increase in value under the Contract, and you are taxed on the entire
amount of interest and earnings under the FPA Contract before you may recover
the investment in the contract. A different method may be applicable for
withdrawals under FPA Contracts issued on or before August 14, 1982 (SEE
"Obtaining Tax Advice").
LUMP SUM PAYMENTS. If you receive a single lump sum payment, you must include
in gross income, for the tax year in which you receive the lump sum, the
difference between the amount of the lump sum payment and the amount of your
investment in the contract.
DISTRIBUTIONS UNDER TDA AND IRA CONTRACTS (OTHER THAN ROTH IRAS)
- --------------------------------------------------------------------------------
A TDA Participant who makes Contributions by salary reduction does not have any
investment in the contract. A Participant under an IRA Contract (other than a
Roth IRA) who makes any "after-tax" Contributions will have an investment in the
contract.
ANNUITY PAYMENTS. If you have an investment in the contract and begin to
receive Annuity Payments, or another form of periodic payments such as an
installment method for a fixed period or a fixed amount, you may apply the
exclusion ratio method to determine the amount to exclude from gross income for
the tax year of the distribution. The exclusion ratio method continues to apply
until you recover the investment in the contract. After that time, you will have
to include the full amount of each Annuity Payment in gross income for each
taxable year.
WITHDRAWALS. If you receive amounts (that are not Annuity Payments) under an
IRA or TDA Contract and you have an investment in the contract, you generally
may exclude a portion of the payments from gross income. You may exclude from
gross income an amount determined by dividing your investment in the contract by
your vested Account Balance as of the date of the distribution and multiplying
by the amount of the distribution. The Internal Revenue Service may indicate
another date for valuing your Account Balance for this purpose.
LUMP SUM PAYMENTS. If you receive a single lump sum payment of the Account
Balance under an IRA or TDA Contract, you must include in gross income, for the
tax year in which you receive the payment, the difference between the amount of
the payment and your investment in the contract, if any.
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TDA CONTRACTS--EXCLUSION OF CONTRIBUTIONS FROM GROSS INCOME
- --------------------------------------------------------------------------------
We offer the TDA Contract for use with tax-sheltered annuity arrangements
designed to meet the provisions of Section 403(b) of the Code. Under Section
403(b), Participants who are employees of public schools and organizations that
are exempt from tax under Section 501(c)(3) of the Code may exclude from their
gross income the Contributions applied to purchase annuity contracts on their
behalf. This exclusion is subject to the following limits:
- The aggregate Contributions per year for each employee cannot exceed the
"exclusion allowance" set forth in Section 403(b)(2) of the Code or, if
applicable, the contribution limitation in Section 415(c) of the Code.
- For Contributions under a salary reduction agreement, an additional
limitation contained in Section 402(g) of the Code is applicable.
Contributions that you may exclude usually are limited to the smallest amount
under these provisions. In general, the limitations are as follows:
- The total Contribution for a year cannot exceed the excess of 20% of the
employee's includable compensation for that year (prior to any reduction
for salary reduction contributions made during the year), multiplied by
the employee's years of service, minus any amounts contributed by the
employer and excludable from the employee's gross income for any prior
taxable years;
- Contributions cannot exceed the lesser of $30,000 or 25% of your
includable compensation, with compensation limited to $160,000 for 1999
(to be indexed for inflation in subsequent years);
- Your contributions through salary reduction may not exceed $10,000 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.)
Under certain circumstances, the tax law may allow you to make special elections
that would increase the amount of Contributions you may exclude from gross
income.
TRADITIONAL IRA AND SEP IRA CONTRACTS--DEDUCTION OF CONTRIBUTIONS FROM GROSS
INCOME
- --------------------------------------------------------------------------------
You may deduct from gross income your Contributions to a Traditional or SEP IRA
Contract up to a maximum of $2,000 or 100% of annual compensation, whichever is
less. The deductible amount depends on whether or not you participate (and if
you are married, whether or not your spouse participates) in a pension or
profit-sharing plan, a tax-sheltered annuity arrangement, a SEP, a SIMPLE or an
eligible 457 plan (a PENSION ARRANGEMENT) and, if so, on your Federal adjusted
gross income (AGI).
- If you are not-married and do not participate in a pension arrangement,
or if you are married and neither you nor your spouse participates in a
pension arrangement, you may deduct the maximum deductible amount.
- When (1) you (whether or not married) participate in a pension
arrangement, or if you are married and do not participate in a pension
arrangement but your spouse participates in a pension arrangement, and
(2) you have AGI over a specified amount, then you either will not be
able to deduct Contributions, or the amount that you may deduct will be
reduced.
The maximum deductible amount is reduced in 1999 by $1 for every $5 of your
AGI over $31,000 if not married, or over $51,000 if married and filing jointly
(with these amounts increasing each year until 2007), or $0 if married and
filing separately. As a result, you may not deduct Contributions under an IRA
Contract once your AGI for 1999 reaches $41,000 if you are not married, or
$61,000 if you are married and filing jointly (such amounts to increase each
year until 2007) or $10,000 if married and filing separately.
- If you are married, participate in a pension arrangement, and make
Contributions to a spousal IRA of up to $2,000 (minus any amount the
spouse contributes to an IRA for the same tax year) for a spouse who
does not participate in a pension arrangement, you may deduct the
35
<PAGE>
Contribution to the spousal IRA from gross income if you and your spouse
file a joint federal income tax return and your combined AGI is not more
than $150,000. The deduction is reduced by $1 for every $5 of AGI over
$150,000, and the deduction is zero at $160,000.
NON-DEDUCTIBLE CONTRIBUTIONS. If you do not qualify to deduct all or part of
your Contributions to an IRA under the above rules, you may still make
non-deductible Contributions. The maximum non-deductible Contribution is $2,000
or 100% of annual compensation, whichever is less, reduced by the amount of your
deductible contribution for the year and by any contribution you make to a Roth
IRA, other than rollovers to a Roth IRA. You also may make non-deductible
Contributions up to $2,000 to a spousal IRA for your spouse for any tax year,
reduced by any contributions to an IRA (including a Roth IRA) made by your
spouse for the same tax year and any deductible Contribution for the year.
Excess Contributions may result in adverse income tax consequences to you.
If you make a non-deductible contribution to an IRA, you must report the amount
of that contribution to the IRS when filing an income tax return for the year.
You are responsible for maintaining your own records regarding non-deductible
contributions. We will presume that all Contributions to our Traditional IRA and
SEP IRA Contracts are deductible, including for tax reporting purposes. When we
make distributions to you, it is your responsibility to make any appropriate
adjustments when you report the distributions to the IRS on your income tax
return for the year of distribution.
These limits on Contributions, however, do not apply to tax-free rollovers from
other qualified retirement plans. (See "Who May Purchase a Contract and Make
Contributions--Payment of Contributions".)
SIMPLE IRAS--EXCLUSION OF CONTRIBUTIONS FROM GROSS INCOME; ROLLOVER LIMITATION
- --------------------------------------------------------------------------------
You may exclude Contributions to a SIMPLE IRA from gross income for Federal
income tax purposes.
During the first two years of participation in a SIMPLE, you may rollover
amounts from a SIMPLE IRA only to another SIMPLE IRA. After the two year period,
you may rollover amounts from a SIMPLE IRA to any IRA (other than a Roth IRA).
PENALTY TAXES FOR WITHDRAWALS
- --------------------------------------------------------------------------------
In addition to ordinary income taxation, Section 72 of the Code imposes a
penalty tax on premature withdrawals, which are withdrawals before you have
reached age 59 1/2. This penalty tax is equal to 10% of the amount of the
premature withdrawal that you include in gross income. However, if you make any
withdrawals from a SIMPLE IRA within the first two years of your participation
in the employer's SIMPLE, the early withdrawal penalty increases to 25% from
10%. Other Federal income tax penalties may apply to amounts or withdrawals
under IRA and TDA Contracts. See "Obtaining Tax Advice".
FPA CONTRACTS--WHEN NO PENALTY TAX IS DUE
- --------------------------------------------------------------------------------
The taxable amount of a withdrawal you make before you reach age 59 1/2 is not
subject to a penalty tax if:
1. You have died or become disabled;
2. The withdrawal is part of a series of substantially equal periodic payments
made over your life (or life expectancy) or over the joint lives (or joint
life expectancies) of you and the Beneficiary;
3. The withdrawn amount is attributable to Contributions made prior to August
14, 1982;
4. The Contract was purchased in conjunction with a plan that meets the
requirements of Section 401(a) or was issued under an IRA or TDA (but such
payment may be subject to a similar tax applicable to premature distributions
from such retirement plans);
5. The withdrawal is under an immediate annuity contract; or
6. The Contract was 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.
36
<PAGE>
For premature payments received under FPA Contracts issued before January 19,
1985, the penalty tax may be only 5% and additional exceptions may apply to
certain amounts (see "Obtaining Tax Advice").
TDA AND IRA CONTRACTS--WHEN NO PENALTY TAX IS DUE
- --------------------------------------------------------------------------------
The taxable amount of a withdrawal you make before you reach age 59 1/2 is not
subject to a penalty tax if:
1. You have died or become disabled.
2. The withdrawals are Annuity Payments made over your life (or life
expectancy) or the joint lives (or joint life expectancies) of you and the
Beneficiary.
3. The withdrawals are to pay your medical expenses, or of your spouse or
dependents, if the medical expenses would be deductible by you for Federal
income tax purposes. (Generally, a taxpayer may deduct medical expenses if
they are not covered by health insurance or otherwise reimbursed and they
exceed 7.5% of the taxpayer's adjusted gross income.)
4. Under an IRA Contract, the withdrawal is to pay your health insurance
premiums, or the premiums for your spouse or dependents, if you have received
unemployment compensation for at least 12 weeks and you meet certain other
eligibility requirements.
5. Under an IRA Contract, the withdrawal is for the payment of qualifying
post-secondary (college) education expenses.
6. Under an IRA Contract, the withdrawal is for qualified first-time home buyer
expenses (up to $10,000 per lifetime), OR
7. Under a TDA Contract, the withdrawal is to you when you have reached 55
years old and subsequently ended your employment with the employer who
maintains the Contract.
ROTH IRA CONTRACTS--QUALIFIED DISTRIBUTIONS. You receive tax-free any
distribution that is a QUALIFIED DISTRIBUTION from a Roth IRA Contract. The
distribution also is penalty tax free, except for certain withdrawals from
rollover or conversion Contributions as described below.
A qualified distribution is a distribution made:
1. After the end of the five-year period beginning with the year in which you
first contributed to the Roth IRA Contract; AND
2. In one of the following circumstances:
a) You are age 59 1/2 or older; or
b) You have died or become disabled; or
c) For qualified first-time home buyer expenses (up to $10,000 per lifetime).
ROTH IRA CONTRACTS--NON-QUALIFIED DISTRIBUTIONS; WHEN PENALTY TAX IS NOT
DUE. Any withdrawal by you that is not a "qualified distribution" is first
considered to be a return of your after-tax Contributions. Withdrawals of
after-tax Contributions are not subject to taxation or, except as noted below
for rollover or conversion Contributions, subject to the 10% penalty tax. After
you have recovered all Contributions under the Roth IRA Contract, you 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, you must aggregate all of your Roth IRA contracts.)
There is no penalty tax for withdrawals that are not Qualified Distributions if
one of the Traditional IRA exceptions to the penalty tax applies. See "TDA and
IRA Contracts--When No Penalty Tax is Due" above.
ROTH IRA CONTRACTS--SPECIAL PENALTY TAX ON WITHDRAWALS OF ROLLOVER OR CONVERSION
CONTRIBUTIONS. Your withdrawal from a Roth IRA Contract is subject to the 10%
penalty for premature withdrawals, even though the amount withdrawn is not
taxable, if:
- the amount withdrawn was rolled over or converted from a Regular IRA
Contract, and
37
<PAGE>
- the withdrawal is within the 5 tax year period beginning with the tax
year in which you made the rollover or conversion.
Each rollover or conversion contribution has its own separate 5 tax year period
for purposes of this special penalty tax. If you make Contributions from
rollovers or conversions to the same Roth IRA Contract to which you make other
Contributions, then:
- your withdrawals will be considered to come first from Contributions
other than the rollover or conversion Contributions, and
- withdrawals of rollover or conversion Contributions will be considered
to come first from the oldest of these Contributions, for purposes of
calculating the 5 tax year period.
MINIMUM DISTRIBUTIONS UNDER TDA AND IRA CONTRACTS
- --------------------------------------------------------------------------------
The Code contains a series of rules that require you (or your Beneficiary) to
take minimum distributions under IRA and TDA Contracts beginning at a certain
time (called the REQUIRED BEGINNING DATE). For Roth IRAs, however, distributions
are not required until the death of the Participant. Generally, you may take the
required amount from the TDA or IRA Contract we have issued, or from other TDA
or IRA contracts that you have.
Distributions under IRA Contracts (other than Roth IRAs) must begin by April 1
of the year following the year in which you reach age 70 1/2, even if you do not
retire.
Distributions under TDA Contracts must begin by April 1 of the year following
the year you attain age 70 1/2, unless you are still employed by the TDA
Contractholder (employer). However, distributions of your pre-1987 Account
Balance (if any) generally must begin in the year after you reach age 75.
You may elect to calculate the required minimum distribution amount by one of
several methods, and you should consult a tax adviser in making the election. We
will provide explanatory information to Participants before their Required
Beginning Dates. If you do not satisfy the minimum distribution requirements,
you may owe a penalty tax equal to 50% of the difference between the required
minimum and the actual amount you withdrew.
Federal tax law provisions concerning distributions upon the death of a
Participant may reduce the period over which a Beneficiary may take or defer
receipt of the death benefit. SEE "Our Payment of Account Balance to You or a
Beneficiary--Death Benefit Prior to Annuity Commencement Date".
ESTATE TAXES; TAX LIABILITY OF BENEFICIARY FOR DEATH BENEFIT
- --------------------------------------------------------------------------------
The death benefit payable to your Beneficiary is included in your estate for
Federal estate tax purposes in most circumstances. An exception to this rule may
apply for an FPA Contract if you did not own or control the Contract at the time
of (and for a period before) death. SEE "Obtaining Tax Advice."
A Beneficiary will not receive a "stepped-up basis" for the increase in value
under your Contract over the amount of your Contributions. The gain under a
Contract is called "income in respect of a decedent" (IRD), and the Beneficiary
may owe income tax at ordinary income rates on the IRD when the Beneficiary
receives the death benefit. SEE "Obtaining Tax Advice." If your estate pays any
estate tax on the death benefit, the Beneficiary may be able to credit the
estate tax paid against the income tax the Beneficiary owes. A Beneficiary
should consult a tax adviser for a complete explanation of the rules that will
apply to the Beneficiary's particular situation.
WITHHOLDING ON ANNUITY PAYMENTS AND OTHER DISTRIBUTIONS
- --------------------------------------------------------------------------------
We are required to withhold Federal income tax on Annuity Payments and other
distributions, such as lump sum distributions or withdrawals. In addition,
certain states require us to withhold if Federal withholding is applicable. In
some instances, you may elect to have us not withhold Federal income tax.
When you (or a Beneficiary) request withdrawals or Annuity Payments, we will
give detailed information and advise you (or your Beneficiary) of possible
elections to be made. Participants and Beneficiaries should carefully review
information they receive from us.
38
<PAGE>
FPA AND IRA CONTRACTS. We are required to withhold Federal income tax on
Annuity Payments and other distributions, such as partial or lump sum
withdrawals, unless the recipient has provided us with a valid election not to
have Federal income tax withheld. You at any time may revoke an election not to
withhold. If you revoke an election, we will begin withholding.
We will withhold only against the taxable portion of the Annuity Payments or of
the other distributions. The rate we use will be determined based upon the
nature of the distribution(s).
- For Annuity Payments, we will withhold Federal tax in accordance with
the Annuitant's withholding certificate. If an Annuitant does not file a
withholding certificate with us, we will withhold Federal tax from
Annuity Payments on the basis that the Annuitant is married with three
withholding exemptions.
- For most withdrawals, we will withhold Federal tax at a flat 10% rate of
the amount withdrawn.
TDA CONTRACTS. Most withdrawals are subject to automatic 20% federal income tax
withholding unless you elect to have us pay the withdrawal 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 Beneficiary may have a
direct rollover made to an IRA.
The automatic 20% withholding does not apply to any distribution that is:
- one of a series of substantially equal periodic payments (not less
frequently than annually) made for
DIAMONDyour life (or life expectancy) or the joint lives (or joint
life expectancies) of you and your Beneficiary, or
DIAMONDa specified period of 10 years or more, or
- a minimum distribution required under Section 401(a)(9) of the Code.
Tax withholding at different rates, usually 10%, generally does apply to these
payments, but payees may be able to elect to waive withholding. Death benefit
payments to non-spouse Beneficiaries generally are subject to tax withholding at
different rates, but such payees also can elect to waive withholding. Certain
small payments may be exempt from direct rollover and tax withholding rules.
39
<PAGE>
YOUR VOTING RIGHTS FOR MEETINGS OF THE UNDERLYING FUNDS
- --------------------------------------------------------------------------------
We will vote the shares of the Underlying Funds owned by the Separate Account at
regular and special meetings of the shareholders of the Underlying Funds. We
will cast our votes according to instructions we receive from Participants. The
number of Underlying Fund shares that we may vote at a meeting of shareholders
will be determined as of a record date set by the Board of Directors or Trustees
of the Underlying Fund.
We will vote 100% of the shares that a Separate Account Fund owns. If you do not
send us voting instructions, we will vote the shares attributable to your
Account Balance in the same proportion as we vote shares for which we have
received voting instructions from Participants. We will determine the number of
Accumulation Units attributable to each Participant for purposes of giving
voting instructions as of the same record date used by the Underlying Fund.
Each Participant who has the right to give us voting instructions for a
shareholders' meeting of an Underlying Fund will receive information about the
matters to be voted on, including the Underlying Fund's proxy statement and a
voting instructions form to return to us.
We may elect to vote the shares of the Underlying Funds held by our Separate
Account in our own discretion if the Investment Company Act of 1940 is amended,
or if the present interpretation of the Act changes with respect to our voting
of these shares.
PERFORMANCE INFORMATION FOR THE SEPARATE ACCOUNT FUNDS
- --------------------------------------------------------------------------------
MONEY MARKET FUND
- --------------------------------------------------------------------------------
From time to time, we may include quotations of the YIELD and EFFECTIVE YIELD of
the Separate Account's Money Market Fund in advertisements, sales literature or
reports to Participants. These yield figures show historical performance of the
Fund assuming a hypothetical investment for the period indicated in the yield
quotation. Yield figures do not 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 (with the ending
date stated). We then annualize this income. That is, we assume that the
amount of income the Fund generates during that week is generated during
each week in a 52-week period and we show the income as a percentage.
- The effective yield is calculated similarly to yield, except that when
we annualize income, we assume that the income earned by an investment
in the Fund is 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 its
expenses and the performance of the Investment Company Money Market Fund, which
reflects (among other things) changes in market conditions and the level of its
expenses.
TOTAL RETURN OF FUNDS
- --------------------------------------------------------------------------------
From time to time, we include quotations of a Separate Account Fund's TOTAL
RETURN in advertisements, sales literature or reports to Participants. Total
return figures for a Fund show historical performance of a Fund assuming a
hypothetical investment and that amounts under a Contract were allocated to the
Separate Account Fund when it commenced operations. Total return figures do not
indicate future performance.
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 Separate Account Fund
will vary based on its expenses and the performance of its Underlying Fund,
which reflects (among other things) changes in market conditions and the level
of the Underlying Fund's expenses.
40
<PAGE>
FUNDING AND OTHER CHANGES WE MAY MAKE
- --------------------------------------------------------------------------------
We reserve the right to make certain changes to the Separate Account Funds and
to the Separate Account's operations. In making changes, we will comply with
applicable law and will obtain the approval of Participants and/or the
Contractholders, if required. We may:
- create new investment funds of the Separate Account at any time;
- to the extent permitted by State and Federal law, modify, combine or
remove investment funds in the Separate Account;
- transfer assets we have determined to be associated with the class of
contracts to which the Contracts belong from one investment fund of the
Separate Account to another investment fund;
- create additional separate accounts or combine any two or more accounts
including the Separate Account;
- transfer assets we have determined to be associated with the class of
contracts to which the Contracts belong from the Separate Account to
another separate account of ours by withdrawing the same percentage of
each investment in the Separate Account, with appropriate adjustments to
avoid odd lots and fractions;
- operate the Separate Account as a diversified, open-end management
investment company under the 1940 Act, or in any other form permitted by
law, and designate an investment advisor for its management, which may
be us, an affiliate of ours or another person;
- deregister the Separate Account under the 1940 Act; and
- operate the Separate Account under the general supervision of a
committee, any or all the members of which may be interested persons (as
defined in the 1940 Act) of ours or our affiliates, or discharge the
committee for the Separate Account.
41
<PAGE>
DEFINITIONS WE USE IN THIS PROSPECTUS
- --------------------------------------------------------------------------------
ACCOUNT BALANCE--The value of a Participant's Accumulation Units in the Separate
Account Funds plus the value of amounts held in the General Account for the
Participant, during the Accumulation Period. Depending on its use in this
Prospectus, the term "Account Balance" may mean all or any part of your total
Account Balance.
ACCUMULATION PERIOD--For a Participant, the period under a Contract when
Contributions are made or held for the Participant. The Accumulation Period ends
at the Annuity Commencement Date, or the date the Participant withdraws the
Account Balance in full before the Annuity Commencement Date.
ACCUMULATION UNIT--A measure we use to calculate the value of a Participant's
interest in each of the Funds of the Separate Account. Each Fund has its own
Accumulation Unit value.
ANNUITANT--A person who is receiving Annuity Payments or who will receive
Annuity Payments after the Annuity Commencement Date. We use the life expectancy
of the Annuitant(s) as a factor in determining the amount of monthly Annuity
Payments for annuities with a life contingency.
ANNUITY COMMENCEMENT DATE--The date Annuity Payments become payable under a
Contract or become payable as the death benefit for a Beneficiary. A
Participant, or a Beneficiary entitled to a death benefit, selects the Annuity
Commencement Date. All of your Account Balance is used to provide Annuity
Payments.
ANNUITY PAYMENTS--A series of equal monthly payments from us to an Annuitant.
The amount of the Annuity Payments will depend on your Account Balance on the
Annuity Commencement Date and the form of annuity selected. The Annuity Payments
may be for the Annuitant's life, for a minimum period of time, for the joint
lifetime of the Annuitant and the Annuitant's joint Annuitant, or for such other
specified period as we may permit.
BENEFICIARY(IES)--The person(s) named by a Participant to receive (1) the death
benefit under the Contract if during the Accumulation Period the Participant
dies (or if the Participant is not the Annuitant, if the Annuitant dies first),
or (2) after the Annuity Commencement Date, any remaining Annuity Payments (or
their commuted value) if the Annuitant dies and the joint Annuitant, if any,
dies.
CODE--The Internal Revenue Code of 1986, as amended. Depending on the context,
the term Code includes the regulations adopted by the Internal Revenue Service
for the Code section being discussed.
CONTRACT(S)--One (or more) of the group (TDA) and individual (IRA and FPA)
variable accumulation annuity contracts described in this Prospectus.
CONTRACTHOLDER--An entity to which we have issued a TDA Contract. The
Contractholder may be an employer, or an association representing employers or
employees.
CONTRIBUTIONS--Amounts contributed from time to time under a Contract during the
Accumulation Period.
ELIGIBLE SPOUSE--The person to whom a Participant or Annuitant is legally
married.
FIDELITY PORTFOLIOS--The Equity-Income Portfolio of the Variable Insurance
Products Fund (FIDELITY VIP) and the Contrafund and Asset Manager Portfolios of
the Variable Insurance Products Fund II (FIDELITY VIP II).
FUND OF THE SEPARATE ACCOUNT (OR FUND)--One of the subaccounts of the Separate
Account. Each Fund's name corresponds to the name of the Underlying Fund in
which it invests.
GENERAL ACCOUNT--Assets we own that are not in a separate account, but rather
are held as part of our general assets. We sometimes refer to the General
Account as the INTEREST ACCUMULATION ACCOUNT, because amounts you allocate to
the General Account earn interest at a fixed rate that we change from time to
time.
42
<PAGE>
INVESTMENT ALTERNATIVES--Our General Account and the Funds of the Separate
Account. You may allocate your Contributions and transfer your Account Balance
among the Investment Alternatives, subject to any limitations under a Plan.
INVESTMENT COMPANY--Mutual of America Investment Corporation.
PARTICIPANT--Under a TDA Contract, an employee or former employee for whom we
have received Contributions under a Plan. Under an IRA Contract, the individual,
and under an FPA Contract, the individual or employer, to whom we issued a
Contract.
PLAN--For some TDA Contracts and for SEP IRA and SIMPLE IRA Contracts, a
retirement plan adopted by an employer for which a Contract has been purchased
to provide benefits.
ROTH IRA--An IRA Contract designated as a Roth IRA, in accordance with Code
Section 408A.
SCUDDER PORTFOLIOS--The following three portfolios of the Scudder Variable Life
Investment Fund: the Capital Growth Portfolio, the Bond Portfolio and the
International Portfolio.
SEPARATE ACCOUNT--Mutual of America Separate Account No. 2, a separate account
we established to receive and invest deposits made under variable accumulation
annuity contracts. The assets of the Separate Account are set aside and kept
separate from our other assets.
SEP IRA--An IRA Contract purchased by an employee in connection with a
Simplified Employee Pension (SEP) adopted by the employer.
SIMPLE IRA--An IRA Contract purchased by an employee under a Savings Incentive
Match Plan for Employees (SIMPLE) adopted by the employer.
TRADITIONAL IRA--An IRA Contract other than a Roth IRA, SEP IRA or SIMPLE IRA
Contract.
UNDERLYING FUNDS--The funds or portfolios that are invested in by the Separate
Account Funds.
VALUATION DAY--Each day that the New York Stock Exchange is open for business
until the close of the New York Stock Exchange that day.
VALUATION PERIOD--A period beginning on the close of business of a Valuation Day
and ending on the close of the next Valuation Day.
WE, US, OUR, MUTUAL OF AMERICA--Refer to Mutual of America Life Insurance
Company.
YOU, YOUR--Refer to a Participant.
43
<PAGE>
OUR STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
The Statement of Additional Information contains more information about the
Contracts and our operations.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Distribution of the Contracts Legal Proceedings
Calculation of Accumulation Unit Legal Matters
Values Experts
Yield and Performance Information Additional Information
Safekeeping of Separate Account Assets Financial Statements
State Regulation
Periodic Reports
</TABLE>
HOW TO OBTAIN A STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
You may receive a copy of the Statement of Additional Information at no charge
by calling (212) 224-1600 or by completing the Form below and mailing it to
Mutual of America Life Insurance Company, 320 Park Avenue, New York, New York
10022.
The Securities and Exchange Commission has an Internet web site at
http://www.sec.gov. You may obtain our Registration Statement for the Contracts,
including the SAI, and the Separate Account's semi-annual and annual financial
statement reports through the Commission's Internet site. You also may obtain
copies of these documents, upon your payment of a duplicating fee, by writing to
the Commission's Public Reference Section, Washington, DC 20549-6009.
(PLEASE CUT HERE)
- --------------------------------------------------------------------------------
To: Mutual of America Life Insurance Company
Please send me a copy of the Statement of Additional Information dated May 1,
1999 for the Tax-Deferred Annuity Plan, Individual Retirement Annuity and
Flexible Premium Annuity Contracts offered by Mutual of America, and for the
Voluntary Employee Contribution Program Contracts. My name and address are as
follows:
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Street Address
- --------------------------------------------------------------------------------
City State Zip
44
<PAGE>
APPENDIX A
UNIT VALUE INFORMATION FOR THE SEPARATE ACCOUNT FUNDS
- --------------------------------------------------------------------------------
The tables below show changes in Accumulation Unit values and in the number of
units outstanding for each Separate Account Fund for the period from the
commencement of operations of that Fund to December 31, 1998. (The Mid-Cap
Equity Index Fund is not included because it began operations on May 1, 1999.)
Arthur Andersen LLP, the Funds' independent auditor, has audited the information
below for each of the years in the seven year period ended December 31, 1998.
The Funds' previous auditor audited information for each of the three years in
the period ended December 31, 1991. The Investment Company's financial
statements for the year ended December 31, 1998, along with Arthur Andersen
LLP's report thereon, are available to you by calling 1-800-468-3785.
We calculate Accumulation Unit values from the net asset values of the
Underlying Funds. The All America Fund (previously called the Stock Fund) of the
Investment Company changed its name and 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 Balanced
Portfolio, and prior to May 1, 1995, that Portfolio was known as the Calvert
Socially Responsible Series and had a different subadviser. Before May 1, 1997,
the American Century VP Capital Appreciation Fund was called the TCI Growth
Fund.
<TABLE>
<CAPTION>
INVESTMENT COMPANY ALL AMERICA FUND
-------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year.... $ 6.76 $ 5.39 $ 4.52 $ 3.35 $ 3.36 $ 3.03 $ 2.97 $ 2.41 $ 2.47
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Unit value, end of year.......... $ 8.09 $ 6.76 $ 5.39 $ 4.52 $ 3.35 $ 3.36 $ 3.03 $ 2.97 $ 2.41
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Thousands of accumulation units
outstanding, end of year........ 49,275 51,312 49,798 43,620 38,669 36,510 32,352 26,173 20,973
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1989
---------
<S> <C>
Unit value, beginning of year.... $ 1.98
---------
---------
Unit value, end of year.......... $ 2.47
---------
---------
Thousands of accumulation units
outstanding, end of year........ 20,157
---------
---------
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY COMPOSITE FUND
-------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year.... $ 4.36 $ 3.75 $ 3.39 $ 2.82 $ 2.95 $ 2.55 $ 2.43 $ 2.08 $ 2.04
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Unit value, end of year.......... $ 4.93 $ 4.36 $ 3.75 $ 3.39 $ 2.82 $ 2.95 $ 2.55 $ 2.43 $ 2.08
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Thousands of accumulation units
outstanding, end of year........ 59,833 61,359 66,715 70,558 73,239 71,215 50,944 43,115 37,461
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1989
---------
<S> <C>
Unit value, beginning of year.... $ 1.73
---------
---------
Unit value, end of year.......... $ 2.04
---------
---------
Thousands of accumulation units
outstanding, end of year........ 32,716
---------
---------
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY BOND FUND
-------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year.... $ 3.00 $ 2.75 $ 2.69 $ 2.28 $ 2.39 $ 2.13 $ 1.99 $ 1.73 $ 1.67
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Unit value, end of year.......... $ 3.17 $ 3.00 $ 2.75 $ 2.69 $ 2.28 $ 2.39 $ 2.13 $ 1.99 $ 1.73
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Thousands of accumulation units
outstanding, end of year........ 17,746 12,671 12,548 12,083 10,601 12,244 9,203 6,152 5,235
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1989
---------
<S> <C>
Unit value, beginning of year.... $ 1.49
---------
---------
Unit value, end of year.......... $ 1.67
---------
---------
Thousands of accumulation units
outstanding, end of year........ 4,164
---------
---------
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY MONEY MARKET FUND
-------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year.... $ 1.95 $ 1.87 $ 1.80 $ 1.72 $ 1.68 $ 1.65 $ 1.62 $ 1.54 $ 1.44
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Unit value, end of year.......... $ 2.03 $ 1.95 $ 1.87 $ 1.80 $ 1.72 $ 1.68 $ 1.65 $ 1.62 $ 1.54
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Thousands of accumulation units
outstanding, end of year........ 19,121 16,831 17,511 17,502 17,653 15,815 16,545 15,656 13,972
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1989
---------
<S> <C>
Unit value, beginning of year.... $ 1.33
---------
---------
Unit value, end of year.......... $ 1.44
---------
---------
Thousands of accumulation units
outstanding, end of year........ 8,570
---------
---------
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY INVESTMENT COMPANY
EQUITY INDEX FUND MID-TERM BOND FUND
------------------------------------------------------------------ --------------------
1998 1997 1996 1995 1994 1993* 1998 1997
--------- --------- --------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
period.......................... $ 2.26 $ 1.72 $ 1.42 $ 1.05 $ 1.05 $ 1.00 $ 1.26 $ 1.19
--------- --------- --------- --------- --------- ----- --------- ---------
--------- --------- --------- --------- --------- ----- --------- ---------
Unit value, end of period........ $ 2.86 $ 2.26 $ 1.72 $ 1.42 $ 1.05 $ 1.05 $ 1.32 $ 1.26
--------- --------- --------- --------- --------- ----- --------- ---------
--------- --------- --------- --------- --------- ----- --------- ---------
Thousands of accumulation units
outstanding, end of period...... 94,019 68,462 35,660 17,109 4,644 2,135 7,325 4,478
--------- --------- --------- --------- --------- ----- --------- ---------
--------- --------- --------- --------- --------- ----- --------- ---------
<CAPTION>
1996 1995 1994 1993*
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Unit value, beginning of
period.......................... $ 1.16 $ 1.01 $ 1.06 $ 1.00
--------- --------- --------- -----
--------- --------- --------- -----
Unit value, end of period........ $ 1.19 $ 1.16 $ 1.01 $ 1.06
--------- --------- --------- -----
--------- --------- --------- -----
Thousands of accumulation units
outstanding, end of period...... 3,828 2,848 1,444 1,411
--------- --------- --------- -----
--------- --------- --------- -----
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
INVESTMENT COMPANY AGGRESSIVE EQUITY
SHORT-TERM BOND FUND FUND
------------------------------------------------------------------ --------------------
1998 1997 1996 1995 1994 1993* 1998 1997
--------- --------- --------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
period.......................... $ 1.19 $ 1.14 $ 1.10 $ 1.03 $ 1.03 $ 1.00 $ 2.15 $ 1.80
--------- --------- --------- --------- --------- ----- --------- ---------
--------- --------- --------- --------- --------- ----- --------- ---------
Unit value, end of period........ $ 1.24 $ 1.19 $ 1.14 $ 1.10 $ 1.03 $ 1.03 $ 2.02 $ 2.15
--------- --------- --------- --------- --------- ----- --------- ---------
--------- --------- --------- --------- --------- ----- --------- ---------
Thousands of accumulation units
outstanding, end of period...... 3,164 2,355 2,129 1,447 1,132 747 63,176 71,468
--------- --------- --------- --------- --------- ----- --------- ---------
--------- --------- --------- --------- --------- ----- --------- ---------
<CAPTION>
1996 1995 1994*
--------- --------- -----------
<S> <C> <C> <C>
Unit value, beginning of
period.......................... $ 1.43 $ 1.05 $ 1.00
--------- --------- -----
--------- --------- -----
Unit value, end of period........ $ 1.80 $ 1.43 $ 1.05
--------- --------- -----
--------- --------- -----
Thousands of accumulation units
outstanding, end of period...... 49,800 20,858 9,145
--------- --------- -----
--------- --------- -----
</TABLE>
<TABLE>
<CAPTION>
SCUDDER BOND FUND
-------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year.... $ 12.37 $ 11.48 $ 11.30 $ 9.69 $ 10.32 $ 9.30 $ 8.78 $ 7.54 $ 7.05
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Unit value, end of year.......... $ 13.02 $ 12.37 $ 11.48 $ 11.30 $ 9.69 $ 10.32 $ 9.30 $ 8.78 $ 7.54
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Thousands of accumulation units
outstanding, end of year........ 1,757 1,484 1,362 1,269 1,169 1,277 1,053 600 354
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1989
---------
<S> <C>
Unit value, beginning of year.... $ 6.39
---------
---------
Unit value, end of year.......... $ 7.05
---------
---------
Thousands of accumulation units
outstanding, end of year........ 221
---------
---------
</TABLE>
<TABLE>
<CAPTION>
SCUDDER CAPITAL GROWTH FUND
-------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year.... $ 29.64 $ 22.11 $ 18.64 $ 14.67 $ 16.46 $ 13.80 $ 13.09 $ 9.48 $ 10.35
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Unit value, end of year.......... $ 36.07 $ 29.64 $ 22.11 $ 18.64 $ 14.67 $ 16.46 $ 13.80 $ 13.09 $ 9.48
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Thousands of accumulation units
outstanding, end of year........ 11,462 11,094 9,266 8,556 8,121 6,582 3,698 2,138 1,103
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1989
---------
<S> <C>
Unit value, beginning of year.... $ 8.53
---------
---------
Unit value, end of year.......... $ 10.35
---------
---------
Thousands of accumulation units
outstanding, end of year........ 844
---------
---------
</TABLE>
<TABLE>
<CAPTION>
SCUDDER INTERNATIONAL FUND
-------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year.... $ 14.46 $ 13.43 $ 11.85 $ 10.80 $ 11.06 $ 8.13 $ 8.48 $ 7.68 $ 8.41
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Unit value, end of year.......... $ 16.93 $ 14.46 $ 13.43 $ 11.85 $ 10.80 $ 11.06 $ 8.13 $ 8.48 $ 7.68
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Thousands of accumulation units
outstanding, end of year........ 8,004 8,205 7,688 7,269 8,610 5,400 2,262 1,849 1,644
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1989
---------
<S> <C>
Unit value, beginning of year.... $ 6.14
---------
---------
Unit value, end of year.......... $ 8.41
---------
---------
Thousands of accumulation units
outstanding, end of year........ 721
---------
---------
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
VIP II
ASSET
FIDELITY VIP FIDELITY VIP II MANAGER
EQUITY-INCOME FUND CONTRA FUND FUND
------------------------------------------ ------------------------------------------ ---------
1998 1997 1996 1995* 1998 1997 1996 1995* 1998
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
period.......................... $ 27.77 $ 21.93 $ 19.43 $ 16.30 $ 20.36 $ 16.59 $ 13.85 $ 11.43 $ 21.14
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Unit value, end of period........ $ 30.65 $ 27.77 $ 21.93 $ 19.43 $ 26.16 $ 20.36 $ 16.59 $ 13.85 $ 24.04
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Thousands of accumulation units
outstanding, end of period...... 4,018 3,491 2,342 728 6,742 5,656 3,880 1,792 1,488
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1997 1996 1995*
--------- --------- ---------
<S> <C> <C> <C>
Unit value, beginning of
period.......................... $ 17.72 $ 15.66 $ 14.04
--------- --------- ---------
--------- --------- ---------
Unit value, end of period........ $ 21.14 $ 17.72 $ 15.66
--------- --------- ---------
--------- --------- ---------
Thousands of accumulation units
outstanding, end of period...... 1,150 613 184
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
CALVERT SOCIAL BALANCED FUND
--------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991*
--------- --------- --------- --------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
period.......................... $ 2.65 $ 2.23 $ 2.01 $ 1.57 $ 1.64 $ 1.54 $ 1.44 $ 1.32
--------- --------- --------- --------- --------- ----- ----- -----
--------- --------- --------- --------- --------- ----- ----- -----
Unit value, end of period........ $ 3.04 $ 2.65 $ 2.23 $ 2.01 $ 1.57 $ 1.64 $ 1.54 $ 1.44
--------- --------- --------- --------- --------- ----- ----- -----
--------- --------- --------- --------- --------- ----- ----- -----
Thousands of accumulation units
outstanding, end of period...... 14,257 12,479 10,713 7,849 5,986 5,151 2,742 678
--------- --------- --------- --------- --------- ----- ----- -----
--------- --------- --------- --------- --------- ----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
AMERICAN CENTURY VP CAPITAL APPRECIATION FUND
-------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year.... $ 11.04 $ 11.53 $ 12.18 $ 9.39 $ 9.61 $ 8.81 $ 9.01 $ 6.40 $ 6.53
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Unit value, end of year.......... $ 10.69 $ 11.04 $ 11.53 $ 12.18 $ 9.39 $ 9.61 $ 8.81 $ 9.01 $ 6.40
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Thousands of accumulation units
outstanding, end of year........ 3,303 4,510 7,264 8,061 6,361 5,946 5,280 3,056 1,518
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1989
---------
<S> <C>
Unit value, beginning of year.... $ 5.11
---------
---------
Unit value, end of year.......... $ 6.53
---------
---------
Thousands of accumulation units
outstanding, end of year........ 791
---------
---------
</TABLE>
* The dates the Funds of the Separate Account commenced operation are as
follows:Investment Company Money Market, All America, Bond and Composite
Funds--January 1, 1985;Scudder Capital Growth, Bond and International Funds
and American Century VP Capital Appreciation Fund-- January 3, 1989; Calvert
Social Balanced Fund--May 13, 1991; Investment Company Equity Index,
Short-Term Bond and Mid-Term Bond Funds--February 5, 1993; Investment Company
Aggressive Equity Fund--May 2, 1994; Fidelity VIP Equity-Income Fund and
Fidelity VIP II Contra and Asset Manager Funds--May 1, 1995; and Investment
Company Mid-Cap Equity Index Fund--May 1, 1999.
46
<PAGE>
APPENDIX B
VOLUNTARY EMPLOYEE CONTRIBUTION PROGRAM
VARIABLE ACCUMULATION ANNUITY CONTRACTS
- --------------------------------------------------------------------------------
A Voluntary Employee Contribution Contract (VEC CONTRACT or CONTRACT) is a group
contract. It is designed to provide annuity benefits to employees participating
in a retirement plan that qualifies for special Federal income tax treatment
under Sections 401(a) and 403(a) of the Code (a VEC PLAN). Contractholders
typically are employers, or the trustees of employers' retirement plans.
NO NEW CONTRACTS OR CONTRIBUTIONS. As a result of the Tax Reform Act of 1986,
we: (1) ceased issuing new VEC Contracts as of January 1, 1987; and (2) amended
previously issued VEC Contracts to prohibit new Contributions on or after
January 1, 1987.
TRANSFERS FROM OTHER PLANS OR CARRIERS. A Contractholder can remit to us on
your behalf, in a single sum, an amount transferred from another voluntary
employee contribution plan, or from a contract between a Contractholder and us,
or between the Contractholder and another insurance company.
LOANS. We made available a loan option under the VEC Contracts. If the employer
elected to adopt the loan provision in the Contract, Participants have the right
to borrow funds utilizing 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, as well as the Contract terms. We will transfer from the Separate
Account to the General Account an amount sufficient to serve as loan collateral,
if the Participant's account value in the General Account is not adequate for
collateral.
AVAILABLE INVESTMENT ALTERNATIVES. The Investment Alternatives available under
a VEC Contract are limited to those available under our VEC Contracts as of
January 1, 1987. These Alternatives are the General Account and the following
Separate Account Funds: Investment Company Money Market, All America, Bond and
Composite Funds.
Refer to "About Mutual of America Life Insurance Company", "About Our Separate
Account", "Underlying Funds Invested in by Our Separate Account" and "Our
General Account" in the Prospectus for additional information about the five
available Investment Alternatives.
TRANSFERS AND WITHDRAWALS. VEC Participants may make transfers between the
available Investment Alternatives and may make withdrawals of all or part of
their Account Balances at any time prior to the Annuity Commencement Date,
unless the employer's plan provides otherwise. If you have an outstanding loan,
we restrict the Participant's transfers or withdrawals of the loan collateral
amount in the General Account. We may take up to seven days following receipt of
your withdrawal request to process the request and mail a check to the
Participant. We do not currently charge for transfers or withdrawals made under
VEC Contracts. We reserve the right, however, to impose a charge for transfers
or withdrawals in the future.
For information about Separate Account Fund unit values, refer to "Your Account
Balance in the Separate Account Funds" in the Prospectus.
SPECIFIED PAYMENTS OPTION. If the employer's plan permits, a Participant in a
VEC Contract may elect after attaining age 59 1/2, or upon 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. The Participant must designate the available Investment
Alternative(s) from which we should make the withdrawals.
CHARGES UNDER THE CONTRACTS. Refer to "Table of Annual Expenses" and "Charges
You Will Pay" in the Prospectus, for a description of the Contract and
Participant charges under the Contracts.
DEATH BENEFIT PRIOR TO ANNUITY COMMENCEMENT. If a Participant dies prior to the
Annuity Commencement Date, we will pay a death benefit to the Beneficiary the
Participant designated to us. The Eligible Spouse will be the Beneficiary,
unless the Participant designated a different Beneficiary with the written
consent of the Eligible Spouse. See "Administrative Matters--Designation of
Beneficiary" in the Prospectus.
47
<PAGE>
See "Our Payment of Account Balance to You or a Beneficiary--Death Benefit Prior
to Annuity Commencement Date" for additional information about the death benefit
we will pay. In general, VEC Contracts are subject to the same rules as TDA
Contracts.
TERMINATION BY MUTUAL OF AMERICA. If, upon our request, the Contractholder does
not provide evidence satisfactory to us 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 we will withdraw and pay to the
Contractholder the amounts accumulated under the Contract as of the date of
withdrawal; and the Contract will terminate.
ELECTION OF ANNUITY COMMENCEMENT DATE. Unless the employer's plan provides
otherwise, Participants may elect an Annuity Commencement Date that is either
the 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 generally no later than
age 70 1/2 for Participants who are no longer actively at work.
AVAILABLE FORMS OF ANNUITY. 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
normal form of annuity specified by the employer's plan, and a Participant who
has an Eligible Spouse will have annuity benefits paid on the Joint and Survivor
Form, with the Eligible Spouse as the Joint Annuitant. Consent of the spouse is
required if payment is to be made in any other form. See "You May Obtain an
Annuity with Your Account Balance--Available Forms of Annuity" and
"Administrative Matters Under the Contracts--Designation of Beneficiary" in the
Prospectus.
SMALL BENEFIT PAYMENTS. If your monthly annuity benefit payable under the
Contract would be less than $20, or if any Participant terminates employment and
is eligible for a benefit that would be less than $20 a month under the Ten
Years Certain and Continuous Form of Annuity, we may elect to 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). We may make this payment on or before
the Participant's Annuity Commencement Date. For purposes of determining whether
monthly annuity benefits payable to you 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 Mutual of America 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.
FEDERAL INCOME TAXATION OF ANNUITY PAYMENTS. The "exclusion ratio" method is
applicable to Annuity Payments made on or after the Annuity Commencement date.
The percentage the Participant may exclude is determined by dividing the
Participant's "investment in the contract" by the "expected return". Your
"investment in the contract" is equal to the total of your non-deductible
Contributions which are made in accordance with the provisions of a retirement
plan that meets the requirements of either Section 401(a) or Section 403(a) of
the Code. The "expected return" is equal to the present discounted value of the
expected stream of Annuity Payments. 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 VEC Contract began before July 2, 1986, the "three
year cost recovery" rule may be applicable (SEE "Federal Tax Information for
Participants--Obtaining Tax Advice" in the Prospectus).
FEDERAL INCOME TAXATION OF WITHDRAWALS. Participants who receive payments under
a VEC Contract on and after July 2, 1986 that are not "amounts received as an
annuity" or that are received before the Participant's Annuity Commencement Date
generally may exclude only a portion of such payments from gross income. The
portion that a Participant may exclude 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
48
<PAGE>
benefit) as of the date of the distribution. The Internal Revenue Service may
indicate another date for valuing account balances for such purposes.
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 "Federal Tax Information for Participants--Obtaining Tax Advice" in
the Prospectus). A special rule may apply with respect to Participant's
Contributions made before January 1, 1987 that constitute part of the
"investment in the contract." Generally, such Contributions may be withdrawn
prior to the Annuity Commencement Date and will 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 terminating employment.
FEDERAL INCOME TAXATION OF LUMP SUM PAYMENTS. Participants who receive a single
sum payment of their entire account balance under a 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, a Participant may exclude from gross income
any "investment in the contract" that the Participant had not recovered prior to
the payment of the lump sum.
PENALTY TAXES. A penalty tax may be due on premature withdrawals under VEC
Contracts. VEC Contracts are generally subject to the same rules as TDA
Contracts. In the Prospectus, SEE "Federal Tax Information for
Participants--Penalty Taxes for Withdrawals".
WITHHOLDING. We are required to withhold Federal income taxes from withdrawals
under the Contracts. VEC Contracts are generally subject to the same rules as
TDA Contracts. In the Prospectus, SEE "Federal Tax Information for
Participants--Withholding on Annuity Payments and Other Distributions".
CONTRACT ADMINISTRATION AND OTHER MATTERS. See "How to Contact Us and Give Us
Instructions", "Your Voting Rights for Meetings of the Underlying Funds",
"Performance Information for the Separate Account Funds", "Funding and Other
Changes We May Make", "Other Variable Annuity Contracts We Issue " and "How to
Obtain a Statement of Additional Information" in the Prospectus.
49
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
FOR
VARIABLE ACCUMULATION ANNUITY CONTRACTS
(TDA, IRA AND FPA CONTRACTS)
Issued By
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
320 Park Avenue
New York, New York 10022
Through its
SEPARATE ACCOUNT NO. 2
- --------------------------------------------------------------------------------
This Statement of Additional Information expands upon subjects we discuss in the
current Prospectus for the Tax-Deferred Annuity Plan, Individual Retirement
Annuity and Flexible Premium Annuity Contracts that we offer, as well as the
Voluntary Employee Contribution Program Contracts (together, the Contracts).
You may obtain a copy of the Prospectus, dated May 1, 1999, by calling
1-800-468-3785 or by writing to Mutual of America Life Insurance Company, 320
Park Avenue, New York, New York 10022, Attn: Eldon Wonacott. The prospectus
contains definitions of various terms, and we incorporate those terms by
reference into this Statement of Additional Information.
This Statement Of Additional Information Is Not A Prospectus And You Should Read
It In Conjunction With The Prospectus For The Contracts.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
---------
Distribution of the Contracts........................................ 2
Calculation of Accumulation Unit Values.............................. 2
Yield and Performance Information.................................... 2
Safekeeping of Separate Account Assets............................... 7
State Regulation..................................................... 7
Periodic Reports..................................................... 8
Legal Proceedings.................................................... 8
Legal Matters........................................................ 8
Experts.............................................................. 8
Additional Information............................................... 9
Financial Statements................................................. 9
</TABLE>
- --------------------------------------------------------------------------------
Dated: May 1, 1999
<PAGE>
DISTRIBUTION OF THE CONTRACTS
- --------------------------------------------------------------------------------
We offer the Contracts for sale on a continuous basis through certain of our
employees. The only compensation we pay for sales of the Contracts is in the
form of salary. We also serve as principal underwriter of the Contracts.
We are registered with the Securities and Exchange Commission ("Commission") as
a broker-dealer and are a member of the National Association of Securities
Dealers, Inc. All persons engaged in selling the Contracts are our licensed
agents and are duly qualified registered representatives.
CALCULATION OF ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
When a Participant allocates or transfers Account Balance to a Separate Account
Fund, the Participant's interest in the Fund is represented by Accumulation
Units. Each Fund's Accumulation Units have a different value, based on the value
of the Fund's investment in shares of the related Underlying Fund and the
charges we deduct from the Separate Account. To determine the change in a Fund's
Accumulation Unit value from the close of one Valuation Day to the close of the
next Valuation Day (which we call a Valuation Period), we use an Accumulation
Unit Change Factor. The Accumulation Unit Change Factor for each Fund of the
Separate Account for any Valuation Period is:
(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 Separate Account administrative charges
against the Fund's assets for the number of days from the end of the
preceding Valuation Period to the end of the current Valuation Period.
YIELD AND PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
MONEY MARKET FUND
- --------------------------------------------------------------------------------
Regulations adopted by the Commission require us to disclose the current
annualized yield of the Money Market Fund of the Separate Account for a
seven-day period in a manner that does not take into consideration any realized
or unrealized gains or losses on shares of the Money Market Fund of the
Investment Company or on its portfolio securities. This is called YIELD. The
Commission also permits us 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. This is called the EFFECTIVE YIELD.
Yield and effective yield reflect our deductions from the Separate Account Fund
for administrative and distribution expenses or services and the mortality and
expense risk charge accrued during the period. Because of these deductions, the
yield for the Money Market Fund
- 2 -
<PAGE>
of the Separate Account will be lower than the yield for the Money Market Fund
of the Investment Company.
From time to time, we will include quotations of the yield or performance of the
Separate Account's Money Market Fund 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 accumulation unit 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 (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 29, 1998 was 3.61%.
Yield and effective yield are based on historical earnings and show the
performance of a hypothetical investment. The yield on amounts held in the Money
Market Fund of the Separate Account normally will fluctuate on a daily basis,
and therefore the yield for any past period is not an indication or
representation of future yield. The Money Market Fund's actual yield and
effective yield are 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.
When communicating total return to current or prospective Participants, we also
may compare the Money Market Fund's figures to the performance of other variable
annuity accounts tracked by mutual fund rating services or to unmanaged indices
that may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
BOND FUNDS
- --------------------------------------------------------------------------------
From time to time, we may include quotations of the yield of the Separate
Account's Investment Company Bond Funds and Scudder Bond Fund 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.
- 3 -
<PAGE>
FUNDS OTHER THAN MONEY MARKET
- --------------------------------------------------------------------------------
From time to time, we may include quotations of a Fund's TOTAL RETURN 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/P)(1/n) - 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 value of a Fund's unit values 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/P) - 1.
Where:
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.
- 4 -
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
FIVE LIFE OF INCEPTION
FUND ONE YEAR YEARS TEN YEARS FUND DATE
- ------------------------------ --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Investment Company Equity
Index....................... 26.6% 22.0% N/A 19.2% 02/05/93
Investment Company All
America..................... 19.4% 18.9% 14.7% 15.1% 01/01/85
Investment Company Aggressive
Equity...................... (6.6)% N/A N/A 15.9% 05/02/94
Investment Company
Composite................... 12.7% 10.5% 10.6% 11.1% 01/01/85
Investment Company Bond....... 5.6% 5.6% 7.5% 7.6% 01/01/85
Investment Company Mid-Term
Bond........................ 4.8% 4.3% N/A 4.6% 02/05/93
Investment Company Short-Term
Bond........................ 4.1% 3.6% N/A 3.5% 02/05/93
Scudder Capital Growth........ 21.4% 16.7% 15.1% 15.1% 01/03/89
Scudder Bond.................. 5.0% 4.5% 7.0% 7.0% 01/03/89
Scudder International......... 16.7% 8.6% 10.3% 10.3% 01/03/89
Fidelity VIP Equity-Income.... 10.1% N/A N/A 18.5% 05/01/95
Fidelity VIP II Contra........ 28.1% N/A N/A 25.0% 05/01/95
Fidelity VIP II Asset
Manager..................... 13.4% N/A N/A 15.5% 05/01/95
Calvert Social Balanced....... 14.5% 12.9% N/A 12.2% 05/23/93
American Century VP Capital
Appreciation................ (3.4)% 1.9% 7.3% 6.6% 01/03/89
</TABLE>
CUMULATIVE TOTAL RETURNS
FOR PERIODS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
FIVE LIFE OF INCEPTION
FUND ONE YEAR YEARS TEN YEARS FUND DATE
- ------------------------------ --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Investment Company Equity
Index....................... 26.6% 169.8% N/A 182.7% 02/05/93
Investment Company All
America..................... 19.4% 138.1% 294.1% 652.6% 01/01/85
Investment Company Aggressive
Equity...................... (6.6)% N/A N/A 99.2% 05/02/94
Investment Company
Composite................... 12.7% 65.1% 175.1% 335.4% 01/01/85
Investment Company Bond....... 5.6% 41.2% 105.1% 180.3% 01/01/85
Investment Company Mid-Term
Bond........................ 4.8% 23.4% N/A 30.6% 02/05/93
Investment Company Short-Term
Bond........................ 4.1% 19.1% N/A 22.8% 02/05/93
Scudder Capital Growth........ 21.4% 116.4% 309.2% 309.2% 01/03/89
Scudder Bond.................. 5.0% 24.7% 97.1% 97.1% 01/03/89
Scudder International......... 16.7% 51.2% 165.8% 165.8% 01/03/89
Fidelity VIP Equity-Income.... 10.1% N/A N/A 86.4% 05/01/95
Fidelity VIP II Contra........ 28.1% N/A N/A 126.7% 05/01/95
Fidelity VIP II Asset
Manager..................... 13.4% N/A N/A 69.2% 05/01/95
Calvert Social Balanced....... 14.5% 83.2% N/A 51.1% 05/13/91
American Century VP Capital
Appreciation................ (3.4)% 9.9% 101.9% 89.5% 01/03/89
</TABLE>
The returns for the All America Fund (previously called the "Stock Fund") prior
to May 1, 1994 reflect the results of the Underlying Fund prior to a change in
its investment objectives and policies and the addition of subadvisers on that
date. The commencement dates are for the Funds in Separate Account No. 2. The
Mid-Cap Equity Index Fund is not included in the tables because it commenced
operations on May 1, 1999.
- 5 -
<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. In the above table, we deducted the
$2.00 monthly contract fee from each Separate Account Fund, calculated as a cost
per $1,000 based on the average Account Balance for all of our individually
allocated contracts. For any Participant, the actual treatment of the monthly
contract fee and its effect on total return will depend on the Participant's
actual allocation of Account Balance.
If you have Account Balance in the General Account, the monthly contract fee
would be deducted from the General Account, not any Separate Account Fund.
Accordingly, the illustration of your Account Balance held in any of the Funds
of the Separate Account would experience a higher total return than shown above.
If you do not have Account Balance allocated to the General Account, but you do
have Account Balance 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 you do not have any Account Balance in the General Account, we will deduct
the $2.00 monthly charge from your Account Balance allocated to one or more of
the Separate Account Funds, in the following order:
(a) Investment Company Money Market Fund,
(b) Investment Company Short-Term Bond Fund,
(c) Investment Company Mid-Term Bond Fund,
(d) Investment Company Bond Fund,
(e) Scudder Bond Fund,
(f) Investment Company Composite Fund,
(g) Fidelity VIP II Asset Manager Fund,
(h) Calvert Social Balanced Fund,
(i) Fidelity VIP Equity-Income Fund,
(j) Investment Company All America Fund,
(k) Investment Company Equity Index Fund,
(l) Investment Company Mid-Cap Equity Index Fund,
(m) Fidelity VIP II Contra Fund,
(n) Investment Company Aggressive Equity Fund,
(o) Scudder Capital Growth Fund,
(p) Scudder International Fund, and
(q) American Century VP Capital Appreciation Fund.
Performance figures are based on historical earnings and are not guaranteed to
reoccur. 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
- 6 -
<PAGE>
performance of the Underlying Fund. Unit values will fluctuate so that, when
redeemed, they may be worth more or less than their original cost.
When communicating total return to current or prospective Participants, we also
may compare a Fund's figures to the performance of other variable annuity
accounts tracked by mutual fund rating services or to unmanaged indices that may
assume reinvestment of dividends but generally do not reflect deductions for
administrative and management costs.
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
- --------------------------------------------------------------------------------
We hold title to the Separate Account's assets, including shares of the
Underlying Funds. We maintain records of all purchases and redemptions of
Underlying Fund shares by each of the Separate Account Funds.
STATE REGULATION
- --------------------------------------------------------------------------------
We are 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 we does business.
We must file with the Superintendent an annual statement on a form specified by
the National Association of Insurance Commissioners. We also must file with New
York and other states a separate statement covering the separate accounts that
we maintain, including the Separate Account. Our books and assets are subject to
review and examination by the Superintendent and the Superintendent's agents at
all times. The Superintendent makes a full examination into our affairs at least
every five years. Other states also may periodically conduct a full examination
of our operations.
The laws of New York and of other states in which we are licensed to transact
business specifically provide for regulation and supervision of the variable
annuity activities of life insurance companies. Regulations require certain
contract provisions and require us to obtain approval of contract forms. 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. Generally, the states in which we do business apply the laws of
New York in determining permissible investments for us.
- 7 -
<PAGE>
PERIODIC REPORTS
- --------------------------------------------------------------------------------
Prior to your Annuity Commencement Date, we will provide you, 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) Amounts added to your Account Balance, which will be Deferred Compensation
deposits under 457 Contracts or Contributions under Thrift, IRA, FPA and TDA
Contracts made by you or on your behalf, including
- the allocation of contributed amounts to the Separate and General
Accounts;
- the date Deferred Compensation was deducted from your salary or the
Contribution was made; and
- the date the amount was credited to your account.
(2) Interest accrued on amounts allocated for you to the General Account.
(3) The number and dollar value of Accumulation Units credited to you in each
Fund of the Separate Account; and
(4) The total amounts of all withdrawals and transfers from the General Account
and each Fund.
We have advised Employers that they should remit your Contributions to us within
seven days of the date the Contribution was withheld from your pay.
The statement we send to you also will specify your Account Balance available to
provide a periodic benefit, cash return or death benefit. We will transmit to
Participants, at least semi-annually, reports showing the financial condition of
the Separate Account and showing the schedules of investments held in each
Underlying Fund.
LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
We are engaged in litigation of various kinds, which in our judgment is not of
material importance in relation to our 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 our
right to issue the Contracts, have been passed upon by Patrick A. Burns, Senior
Executive Vice President and General Counsel of Mutual of America. Legal matters
relating to Federal securities laws have been passed upon by Stanley M.
Lenkowicz, Senior Vice President and Deputy General Counsel of Mutual of
America.
EXPERTS
- --------------------------------------------------------------------------------
Arthur Andersen LLP, our independent public accountants, have audited the
financial statements included in this Statement of Additional Information, as
indicated in their reports relating to the statements. We have included the
reports of Arthur Andersen LLP in reliance upon the authority of the firm as
experts in giving such reports.
- 8 -
<PAGE>
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
We have filed with the Commission a registration statement under the Securities
Act of 1933, as amended, concerning to the Contracts. 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. The Commission has an Internet website
at http://www.sec.gov, or you may write to the Commission's Public Reference
Section, Washington, DC 20549-6009 and obtain copies upon payment of a
duplicating fee.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
When you allocate Account Balance to the Separate Account Funds, the value of
the Account Balance in those Funds is impacted primarily by the investment
results of the Underlying Fund(s). Financial Statements of the Separate Account
for 1998 are included as follows:
Financial Statements of the Separate Account for 1998 are included as follows:
<TABLE>
<S> <C>
Statement of Assets and Liabilities.................................... 10
Statement of Operations................................................ 12
Statements of Changes in Net Assets.................................... 14
Notes to Financial Statements.......................................... 17
Report of Independent Public Accountants............................... 23
</TABLE>
You should consider our financial statements included in this Statement of
Additional Information as bearing on our ability to meet our obligations under
the Contracts and to support our General Account.
Financial Statements of Mutual of America for 1998 are included as follows:
<TABLE>
<S> <C>
Report of Independent Public Accountants............................... 24
Consolidated Statements of Financial Condition......................... 25
Consolidated Statements of Operations and Surplus...................... 26
Consolidated Statements of Cash Flows.................................. 27
Notes to Consolidated Financial Statements............................. 28
</TABLE>
- 9 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MUTUAL OF AMERICA
---------------------------------------------------------------
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--$39,380,057
All America Fund--$314,846,209
Equity Index Fund--$208,860,111
Bond Fund--$57,089,249)
(Notes 1 and 2)............................... $38,794,254 $ 400,667,622 $ 268,859,036 $ 56,229,192
Due From (To) Mutual of America General
Account....................................... 60,443 (1,972,421) 427,185 53,002
------------- -------------- -------------- ----------------
Net Assets...................................... $38,854,697 $ 398,695,201 $ 269,286,221 $ 56,282,194
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
Unit Value at December 31, 1998 (Note 5)........ $ 2.03 $ 8.09 $ 2.86 $ 3.17
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
Number of Units Outstanding at December 31, 1998
(Note 5)...................................... 19,121,114 49,275,431 94,019,102 17,745,706
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
MUTUAL OF AMERICA
---------------------------------------------------------------
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--$3,989,514
Mid-Term Bond Fund--$10,128,129
Composite Fund--$279,954,844
Aggressive Equity Fund--$126,609,916)
(Notes 1 and 2)............................... $ 3,915,558 $ 9,709,998 $ 294,734,308 $ 127,225,340
Due From (To) Mutual of America General
Account....................................... 22,080 (15,440) 158,200 144,542
------------- -------------- -------------- ----------------
Net Assets...................................... $ 3,937,638 $ 9,694,558 $ 294,892,508 $ 127,369,882
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
Unit Value at December 31, 1998 (Note 5)........ $ 1.24 $ 1.32 $ 4.93 $ 2.02
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
Number of Units Outstanding at December 31, 1998
(Note 5)...................................... 3,164,391 7,325,150 59,833,037 63,175,525
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 10 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SCUDDER AMERICAN CENTURY
--------------------------------------------- ----------------
CAPITAL VP CAPITAL
BOND GROWTH INTERNATIONAL APPRECIATION
FUND FUND FUND FUND
------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Assets:
Investments in Scudder Portfolios and American
Century VP Capital Appreciation Fund at market
value
(Cost:
Scudder Bond Fund--$22,860,803
Scudder Capital Growth Fund-- $269,953,351
Scudder International Fund-- $122,545,170
American Century VP Capital Appreciation
Fund--$37,696,440)
(Notes 1 and 2)............................... $ 22,876,887 $ 413,363,547 $ 135,499,688 $ 35,269,693
Due From (To) Mutual of America General
Account....................................... 989 91,296 (18,735) 24,550
------------- -------------- -------------- ----------------
Net Assets...................................... $ 22,877,876 $ 413,454,843 $ 135,480,953 $ 35,294,243
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
Unit Value at December 31, 1998 (Note 5)........ $ 13.02 $ 36.07 $ 16.93 $ 10.69
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
Number of Units Outstanding at December 31, 1998
(Note 5)...................................... 1,757,491 11,462,117 8,004,295 3,302,870
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
CALVERT FIDELITY
------------- ------------------------------------------------
SOCIAL VIP VIP II VIP II
BALANCED EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND FUND
------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Assets:
Investments in Calvert Responsibly Invested
Portfolio and Fidelity Portfolios at market
value
(Cost:
Calvert Responsibly Invested Portfolio--
$36,579,163
VIP Equity-Income Fund--$102,105,966
VIP II Contra Fund--$122,795,284
VIP II Asset Manager Fund-- $32,517,836)
(Notes 1 and 2)............................. $ 43,340,973 $ 123,143,902 $ 175,975,729 $ 35,916,658
Due From (To) Mutual of America General
Account....................................... 9,166 9,264 359,027 (149,852)
------------- -------------- -------------- ----------------
Net Assets...................................... $ 43,350,139 $ 123,153,166 $ 176,334,756 $ 35,766,806
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
Unit Value at December 31, 1998 (Note 5)........ $ 3.04 $ 30.65 $ 26.16 $ 24.04
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
Number of Units Outstanding at December 31, 1998
(Note 5)...................................... 14,257,171 4,018,401 6,741,574 1,487,673
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 11 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MUTUAL OF AMERICA
-------------------------------------------------------------
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........................................ $ 1,752,196 $ 47,402,384 $ 20,729,224 $ 3,838,355
------------- ------------- ------------- ----------------
Total income....................................... 1,752,196 47,402,384 20,729,224 3,838,355
------------- ------------- ------------- ----------------
Expenses (Note 3):
Fees............................................. 439,058 4,632,136 2,649,161 568,911
Administrative Expenses.......................... 71,769 178,081 121,206 65,912
------------- ------------- ------------- ----------------
Total Expenses..................................... 510,827 4,810,217 2,770,367 634,823
------------- ------------- ------------- ----------------
Net Investment Income (Loss)....................... 1,241,369 42,592,167 17,958,857 3,203,532
------------- ------------- ------------- ----------------
Net Realized and Unrealized Gain (Loss) on
Investments (Note 1):
Net realized gain (loss) on investments.......... 94,044 10,190,529 3,546,239 196,930
Net unrealized appreciation (depreciation) of
investments.................................... (8,215) 12,779,143 26,951,145 (981,434)
------------- ------------- ------------- ----------------
Net Realized and Unrealized Gain (Loss) on
Investments...................................... 85,829 22,969,672 30,497,384 (784,504)
------------- ------------- ------------- ----------------
Net Increase (Decrease) in Net Assets Resulting
from Operations.................................. $ 1,327,198 $ 65,561,839 $ 48,456,241 $ 2,419,028
------------- ------------- ------------- ----------------
------------- ------------- ------------- ----------------
<CAPTION>
MUTUAL OF AMERICA
-------------------------------------------------------------
AGGRESSIVE
SHORT-TERM MID-TERM COMPOSITE EQUITY
BOND FUND BOND FUND FUND FUND
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Investment Income and Expenses:
Income (Notes 1 and 4):
Dividends........................................ $ 179,684 $ 508,247 $ 12,314,050 $ 1,141,598
------------- ------------- ------------- ----------------
Total income....................................... 179,684 508,247 12,314,050 1,141,598
------------- ------------- ------------- ----------------
Expenses (Note 3):
Fees............................................. 41,775 92,737 3,545,242 1,700,257
Administrative Expenses.......................... 8,743 11,324 207,511 57,962
------------- ------------- ------------- ----------------
Total Expenses..................................... 50,518 104,061 3,752,753 1,758,219
------------- ------------- ------------- ----------------
Net Investment Income (Loss)....................... 129,166 404,186 8,561,297 (616,621)
------------- ------------- ------------- ----------------
Net Realized and Unrealized Gain (Loss) on
Investments (Note 1):
Net realized gain (loss) on investments.......... 3,822 (28,267) 554,735 (632,431)
Net unrealized appreciation (depreciation) of
investments.................................... (6,616) (46,309) 24,996,236 (8,050,244)
------------- ------------- ------------- ----------------
Net Realized and Unrealized Gain (Loss) on
Investments...................................... (2,794) (74,576) 25,550,971 (8,682,675)
------------- ------------- ------------- ----------------
Net Increase (Decrease) in Net Assets Resulting
from Operations.................................. $ 126,372 $ 329,610 $ 34,112,268 $ (9,299,296)
------------- ------------- ------------- ----------------
------------- ------------- ------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 12 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
AMERICAN
SCUDDER CENTURY CALVERT
------------------------------------------ ------------- ------------
CAPITAL VP CAPITAL SOCIAL
BOND GROWTH INTERNATIONAL APPRECIATION BALANCED
FUND FUND FUND FUND FUND
------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Investment Income and Expenses:
Income (Notes 1 and 4):
Dividends............................... $ 1,222,480 $ 21,046,614 $ 15,648,053 $ 2,169,052 $ 3,132,097
------------ ------------- ------------- ------------- ------------
Total income.............................. 1,222,480 21,046,614 15,648,053 2,169,052 3,132,097
------------ ------------- ------------- ------------- ------------
Expenses (Note 3):
Fees.................................... 252,137 4,669,765 1,625,423 406,935 475,473
Administrative Expenses................. 36,639 95,388 16,719 8,081 60,528
------------ ------------- ------------- ------------- ------------
Total Expenses............................ 288,776 4,765,153 1,642,142 415,016 536,001
------------ ------------- ------------- ------------- ------------
Net Investment Income (Loss).............. 933,704 16,281,461 14,005,911 1,754,036 2,596,096
------------ ------------- ------------- ------------- ------------
Net Realized and Unrealized Gain (Loss) on
Investments (Note 1):
Net realized gain (loss) on
investments........................... (12,188) 7,179,053 7,712,372 (1,068,586) 276,019
Net unrealized appreciation
(depreciation) of investments......... 56,186 46,681,634 (2,792,240) (2,044,118) 2,332,229
------------ ------------- ------------- ------------- ------------
Net Realized and Unrealized Gain (Loss) on
Investments............................. 43,998 53,860,687 4,920,132 (3,112,704) 2,608,248
------------ ------------- ------------- ------------- ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations............... $ 977,702 $ 70,142,148 $ 18,926,043 $ (1,358,668) $ 5,204,344
------------ ------------- ------------- ------------- ------------
------------ ------------- ------------- ------------- ------------
</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........................................................ $ 6,472,639 $ 6,753,142 $ 3,312,566
------------- ------------- --------------
Total income....................................................... 6,472,639 6,753,142 3,312,566
------------- ------------- --------------
Expenses (Note 3):
Fees............................................................. 1,322,031 1,599,575 355,427
Administrative Expenses.......................................... 144,647 69,906 54,809
------------- ------------- --------------
Total Expenses..................................................... 1,466,678 1,669,481 410,236
------------- ------------- --------------
Net Investment Income (Loss)....................................... 5,005,961 5,083,661 2,902,330
------------- ------------- --------------
Net Realized and Unrealized Gain (Loss) on Investments (Note 1):
Net realized gain (loss) on investments.......................... 853,854 2,644,396 (12,448)
Net unrealized appreciation (depreciation) of investments........ 4,356,202 27,595,754 895,986
------------- ------------- --------------
Net Realized and Unrealized Gain (Loss) on Investments............. 5,210,056 30,240,150 883,538
------------- ------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations.... $10,216,017 $ 35,323,811 $ 3,785,868
------------- ------------- --------------
------------- ------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 13 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
INVESTMENT COMPANY
--------------------------------------------------------------------------
MONEY MARKET FUND ALL AMERICA FUND EQUITY INDEX FUND
---------------------- ------------------------ ------------------------
1998 1997 1998 1997 1998 1997
---------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net
Assets:
From Operations:
Net investment income
(loss)..................... $1,241,369 $1,562,015 $42,592,167 $38,428,360 $17,958,857 $ 1,775,466
Net realized gain (loss) on
investments................ 94,044 132,331 10,190,529 6,823,750 3,546,239 1,092,959
Net unrealized appreciation
(depreciation) of
investments................ (8,215) (446,463) 12,779,143 22,669,697 26,951,145 24,542,212
---------- ---------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in net
assets resulting from
operations.................... 1,327,198 1,247,883 65,561,839 67,921,807 48,456,241 27,410,637
---------- ---------- ----------- ----------- ----------- -----------
From Unit Transactions:
Contributions................ 7,176,418 5,788,009 33,052,837 31,724,926 38,144,487 22,975,557
Withdrawals.................. (4,295,360) (4,229,179) (27,468,692) (21,956,687) (16,569,868) (6,932,093)
Net transfers................ 1,797,850 (2,770,906) (19,139,304) 360,521 44,795,692 49,789,027
---------- ---------- ----------- ----------- ----------- -----------
Net Increase (Decrease) from
unit transactions............. 4,678,908 (1,212,076) (13,555,159) 10,128,760 66,370,311 65,832,511
---------- ---------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in Net
Assets........................ 6,006,106 35,807 52,006,680 78,050,567 114,826,552 93,243,148
Net Assets:
Beginning of Year.............. 32,848,591 32,812,784 346,688,521 268,637,954 154,459,669 61,216,521
---------- ---------- ----------- ----------- ----------- -----------
End of Year.................... $38,854,697 $32,848,591 $398,695,201 $346,688,521 $269,286,221 $154,459,669
---------- ---------- ----------- ----------- ----------- -----------
---------- ---------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
------------------------------------------------------------------
BOND FUND SHORT-TERM BOND FUND MID-TERM BOND FUND
---------------------- -------------------- --------------------
1998 1997 1998 1997 1998 1997
---------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss)......... $3,203,532 $1,945,958 $ 129,166 $ 133,338 $ 404,186 $ 278,336
Net realized gain (loss) on
investments........................ 196,930 111,901 3,822 17,305 (28,267) (98,969)
Net unrealized appreciation
(depreciation) of investment....... (981,434) 889,880 (6,616) (40,822) (46,309) 101,700
---------- ---------- --------- --------- --------- ---------
Net Increase (Decrease) in net assets
resulting from operations............. 2,419,028 2,947,739 126,372 109,821 329,610 281,067
---------- ---------- --------- --------- --------- ---------
From Unit Transactions:
Contributions........................ 7,033,074 4,701,303 734,187 668,221 1,120,290 813,398
Withdrawals.......................... (4,982,221) (4,020,196) (427,168) (647,104) (627,755) (586,994)
Net transfers........................ 13,841,212 (136,699) 696,139 252,496 3,231,316 585,047
---------- ---------- --------- --------- --------- ---------
Net Increase (Decrease) from unit
transactions.......................... 15,892,065 544,408 1,003,158 273,613 3,723,851 811,451
---------- ---------- --------- --------- --------- ---------
Net Increase (Decrease) in Net
Assets................................ 18,311,093 3,492,147 1,129,530 383,434 4,053,461 1,092,518
Net Assets:
Beginning of Year...................... 37,971,101 34,478,954 2,808,108 2,424,674 5,641,097 4,548,579
---------- ---------- --------- --------- --------- ---------
End of Year............................ $56,282,194 $37,971,101 $3,937,638 $2,808,108 $9,694,558 $5,641,097
---------- ---------- --------- --------- --------- ---------
---------- ---------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 14 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
INVESTMENT COMPANY
--------------------------------------------------
COMPOSITE FUND AGGRESSIVE EQUITY FUND
------------------------ ------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss)........................... $ 8,561,297 $55,725,648 $ (616,621) $13,631,161
Net realized gain (loss) on investments................ 554,735 3,228,464 (632,431) 808,445
Net unrealized appreciation (depreciation) of
investments.......................................... 24,996,236 (20,441,501) (8,050,244) 5,321,047
----------- ----------- ----------- -----------
Net Increase (Decrease) in net assets resulting from
operations.............................................. 34,112,268 38,512,611 (9,299,296) 19,760,653
----------- ----------- ----------- -----------
From Unit Transactions:
Contributions.......................................... 25,635,215 23,905,684 28,696,822 29,301,342
Withdrawals............................................ (23,076,061) (24,479,468) (12,588,115) (9,246,392)
Net transfers.......................................... (9,295,063) (20,666,992) (33,256,371) 24,458,890
----------- ----------- ----------- -----------
Net Increase (Decrease) from unit transactions........... (6,735,909) (21,240,776) (17,147,664) 44,513,840
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets.................... 27,376,359 17,271,835 (26,446,960) 64,274,493
Net Assets:
Beginning of Year........................................ 267,516,149 250,244,314 153,816,842 89,542,349
----------- ----------- ----------- -----------
End of Year.............................................. $294,892,508 $267,516,149 $127,369,882 $153,816,842
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
SCUDDER
--------------------------------------------------------------------------
BOND FUND CAPITAL GROWTH FUND INTERNATIONAL FUND
---------------------- ------------------------ ------------------------
1998 1997 1998 1997 1998 1997
---------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss)....... $ 933,704 $ 791,376 $16,281,461 $14,929,366 $14,005,911 $ 1,048,262
Net realized gain (loss) on
investments...................... (12,188) (87,907) 7,179,053 3,989,169 7,712,372 10,918,585
Net unrealized appreciation
(depreciation) of investments.... 56,186 447,914 46,681,634 53,719,471 (2,792,240) (3,147,476)
---------- ---------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in net assets
resulting from operations........... 977,702 1,151,383 70,142,148 72,638,006 18,926,043 8,819,371
---------- ---------- ----------- ----------- ----------- -----------
From Unit Transactions:
Contributions...................... 3,111,360 2,487,844 45,075,165 34,121,380 15,352,696 15,851,344
Withdrawals........................ (1,812,991) (1,538,662) (27,386,892) (19,076,131) (11,406,891) (9,604,601)
Net transfers...................... 2,253,912 610,052 (3,209,197) 36,296,377 (6,070,868) 377,532
---------- ---------- ----------- ----------- ----------- -----------
Net Increase (Decrease) from unit
transactions........................ 3,552,281 1,559,234 14,479,076 51,341,626 (2,125,063) 6,624,275
---------- ---------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in Net
Assets.............................. 4,529,983 2,710,617 84,621,224 123,979,632 16,800,980 15,443,646
Net Assets:
Beginning of Year.................... 18,347,893 15,637,276 328,833,619 204,853,987 118,679,973 103,236,327
---------- ---------- ----------- ----------- ----------- -----------
End of Year.......................... $22,877,876 $18,347,893 $413,454,843 $328,833,619 $135,480,953 $118,679,973
---------- ---------- ----------- ----------- ----------- -----------
---------- ---------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 15 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
AMERICAN CENTURY
------------------------ CALVERT
----------------------
VP CAPITAL
APPRECIATION FUND SOCIAL BALANCED FUND
------------------------ ----------------------
1998 1997 1998 1997
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss)............................. $ 1,754,036 $ 710,068 $2,596,096 $1,887,424
Net realized gain (loss) on investments.................. (1,068,586) 1,238,144 276,019 235,099
Net unrealized appreciation (depreciation) of
investments............................................ (2,044,118) (4,227,421) 2,332,229 2,600,706
----------- ----------- ---------- ----------
Net Increase (Decrease) in net assets resulting from
operations................................................ (1,358,668) (2,279,209) 5,204,344 4,723,229
----------- ----------- ---------- ----------
From Unit Transactions:
Contributions............................................ 5,340,709 8,707,773 7,547,920 6,373,996
Withdrawals.............................................. (4,483,088) (6,920,015) (2,809,892) (2,497,692)
Net transfers............................................ (13,981,957) (33,483,832) 365,285 521,192
----------- ----------- ---------- ----------
Net Increase (Decrease) from unit transactions............. (13,124,336) (31,696,074) 5,103,313 4,397,496
----------- ----------- ---------- ----------
Net Increase (Decrease) in Net Assets...................... (14,483,004) (33,975,283) 10,307,657 9,120,725
Net Assets:
Beginning of Year.......................................... 49,777,247 83,752,530 33,042,482 23,921,757
----------- ----------- ---------- ----------
End of Year................................................ $35,294,243 $49,777,247 $43,350,139 $33,042,482
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
-------------------------------------------------------------------------
VIP VIP II VIP II
EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND
----------------------- ------------------------ ----------------------
1998 1997 1998 1997 1998 1997
----------- ---------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss)........ $ 5,005,961 $4,699,779 $ 5,083,661 $ 1,128,152 $2,902,330 $1,194,878
Net realized gain (loss) on
investments....................... 853,854 278,906 2,644,396 992,567 (12,448) 25,536
Net unrealized appreciation
(depreciation) of investments..... 4,356,202 11,806,259 27,595,754 16,333,421 895,986 1,637,367
----------- ---------- ----------- ----------- ---------- ----------
Net Increase (Decrease) in net assets
resulting from operations............ 10,216,017 16,784,944 35,323,811 18,454,140 3,785,868 2,857,781
----------- ---------- ----------- ----------- ---------- ----------
From Unit Transactions:
Contributions....................... 22,499,025 16,485,680 25,700,149 21,050,465 8,419,597 5,663,920
Withdrawals......................... (9,180,957) (5,431,923) (11,133,735) (6,172,824) (2,785,815) (1,306,235)
Net transfers....................... 2,658,613 17,763,089 11,315,492 17,442,009 2,047,842 6,221,869
----------- ---------- ----------- ----------- ---------- ----------
Net Increase (Decrease) from unit
transactions......................... 15,976,681 28,816,846 25,881,906 32,319,650 7,681,624 10,579,554
----------- ---------- ----------- ----------- ---------- ----------
Net Increase (Decrease) in Net
Assets............................... 26,192,698 45,601,790 61,205,717 50,773,790 11,467,492 13,437,335
Net Assets:
Beginning of Year..................... 96,960,468 51,358,678 115,129,039 64,355,249 24,299,314 10,861,979
----------- ---------- ----------- ----------- ---------- ----------
End of Year........................... $123,153,166 $96,960,468 $176,334,756 $115,129,039 $35,766,806 $24,299,314
----------- ---------- ----------- ----------- ---------- ----------
----------- ---------- ----------- ----------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 16 -
<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. 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 Social Balanced Fund (formerly, Calvert Responsibly Invested
Balanced Portfolio) became available as an investment alternative. The Calvert
Social Balanced Fund invests in a corresponding fund of Calvert Social Balanced
Portfolio of Calvert Variable Series, Inc. (formerly, 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. 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 Portfolio and Asset Manager Portfolio 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.
- 17 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)
FEDERAL INCOME TAXES--Separate Account No. 2 will be treated as a part of the
Company and will not be taxed separately as a "regulated investment company"
under existing law. The Company is taxed as a life insurance company under the
life insurance tax provisions of the Internal Revenue Code of 1986. No provision
for income taxes is required in the accompanying financial statements.
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, 1998 are as
follows:
<TABLE>
<CAPTION>
NUMBER OF NET ASSET
SHARES VALUE
-------------- -----------
<S> <C> <C>
Investment Company Funds:
Money Market Fund............................................ 32,754,324 $ 1.18
All America Fund............................................. 138,352,892 2.90
Equity Index Fund............................................ 109,673,279 2.45
Bond Fund.................................................... 39,470,522 1.42
Short-Term Bond Fund......................................... 3,804,353 1.03
Mid-Term Bond Fund........................................... 10,667,632 0.91
Composite Fund............................................... 165,687,292 1.78
Aggressive Equity Fund....................................... 84,338,638 1.51
Scudder Portfolios:
Bond Portfolio............................................... 3,325,129 6.88
Capital Growth Portfolio--Class "A".......................... 17,259,438 23.95
International Portfolio--Class "A"........................... 9,306,297 14.56
American Century VP Capital Appreciation Fund.................. 3,910,166 9.02
Calvert Social Balanced Portfolio.............................. 20,281,223 2.14
Fidelity Portfolios:
Equity-Income--"Initial" Class............................... 4,844,371 25.42
Contrafund--"Initial" Class.................................. 7,200,316 24.44
Asset Manager--"Initial" Class............................... 1,977,790 18.16
</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 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
- 18 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. EXPENSES (CONTINUED)
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, 1998 a dividend
distribution was made by the Investment Company to shareholders of record as of
December 30, 1998. Prior thereto, the Investment Company declared and paid a
dividend distribution on September 15, 1998. The combined amount of these
dividends was as follows:
<TABLE>
<S> <C>
Money Market Fund.......................................... $ 1,752,196
All America Fund........................................... 47,402,384
Equity Index Fund.......................................... 20,792,224
Bond Fund.................................................. 3,838,355
Short-Term Bond Fund....................................... 179,684
Mid-Term Bond Fund......................................... 508,247
Composite Fund............................................. 12,314,050
Aggressive Equity Fund..................................... 1,141,598
</TABLE>
On January 28, 1998, February 25, 1998, April 28, 1998, July 29, 1998 and
October 28, 1998, dividends were paid by the Scudder Bond Portfolio. The
combined amount of the dividends was $1,222,480.
On January 28, 1998, February 25, 1998, April 28, 1998, July 29, 1998 and
October 28, 1998, dividends were paid by the Scudder Capital Growth Portfolio.
The combined amount of the dividends was $21,046,614.
On February 25, 1998, a dividend was paid by the Scudder International
Portfolio. The amount of the dividend was $15,648,053.
On March 13, 1998, a dividend was paid by the American Century VP Capital
Appreciation Fund. The amount of the dividend was $2,169,052.
On December 30, 1998, a dividend was paid by the Calvert Social Balanced
Portfolio. The amount of the dividend was $3,132,097.
On February 6, 1998, a dividend was paid by the Fidelity Equity-Income
Portfolio. The amount of the dividend was $6,472,639.
On February 6, 1998, a dividend was paid by the Fidelity Contrafund Portfolio.
The amount of the dividend was $6,753,142.
- 19 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. DIVIDENDS (CONTINUED)
On February 6, 1998, a dividend was paid by the Fidelity Asset Manager
Portfolio. The amount of the dividend was $3,312,566.
5. FINANCIAL HIGHLIGHTS
Shown below are financial highlights for a Unit outstanding throughout each of
the five years ended December 31, 1998, or, if not in existence a full year, the
initial period ended December 31:
<TABLE>
<CAPTION>
INVESTMENT COMPANY MONEY MARKET FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 1.95 $ 1.87 $ 1.80 $ 1.72 $ 1.68
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 2.03 $ 1.95 $ 1.87 $ 1.80 $ 1.72
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 19,121 16,831 17,511 17,502 17,653
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
INVESTMENT COMPANY ALL AMERICA FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 6.76 $ 5.39 $ 4.52 $ 3.35 $ 3.36
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 8.09 $ 6.76 $ 5.39 $ 4.52 $ 3.35
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 49,275 51,312 49,798 43,620 38,669
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
INVESTMENT COMPANY EQUITY INDEX FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 2.26 $ 1.72 $ 1.42 $ 1.05 $ 1.05
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 2.86 $ 2.26 $ 1.72 $ 1.42 $ 1.05
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 94,019 68,462 35,660 17,109 4,644
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
INVESTMENT COMPANY BOND FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 3.00 $ 2.75 $ 2.69 $ 2.28 $ 2.39
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 3.17 $ 3.00 $ 2.75 $ 2.69 $ 2.28
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 17,746 12,671 12,548 12,083 10,601
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
INVESTMENT COMPANY SHORT-TERM BOND FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 1.19 $ 1.14 $ 1.10 $ 1.03 $ 1.03
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 1.24 $ 1.19 $ 1.14 $ 1.10 $ 1.03
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 3,164 2,355 2,129 1,447 1,132
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- 20 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
INVESTMENT COMPANY MID-TERM BOND FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 1.26 $ 1.19 $ 1.16 $ 1.01 $ 1.06
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 1.32 $ 1.26 $ 1.19 $ 1.16 $ 1.01
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 7,325 4,478 3,828 2,848 1,444
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
INVESTMENT COMPANY COMPOSITE FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 4.36 $ 3.75 $ 3.39 $ 2.82 $ 2.95
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 4.93 $ 4.36 $ 3.75 $ 3.39 $ 2.82
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 59,833 61,359 66,715 70,558 73,239
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
INVESTMENT COMPANY AGGRESSIVE EQUITY FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 2.15 $ 1.80 $ 1.43 $ 1.05 $ 1.00
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 2.02 $ 2.15 $ 1.80 $ 1.43 $ 1.05
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 63,176 71,468 49,800 20,858 9,145
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
SCUDDER BOND FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 12.37 $ 11.48 $ 11.30 $ 9.69 $ 10.32
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 13.02 $ 12.37 $ 11.48 $ 11.30 $ 9.69
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 1,757 1,484 1,362 1,269 1,169
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
SCUDDER CAPITAL GROWTH FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 29.64 $ 22.11 $ 18.64 $ 14.67 $ 16.46
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 36.07 $ 29.64 $ 22.11 $ 18.64 $ 14.67
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 11,462 11,094 9,266 8,556 8,121
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
SCUDDER INTERNATIONAL FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 14.46 $ 13.43 $ 11.85 $ 10.80 $ 11.06
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 16.93 $ 14.46 $ 13.43 $ 11.85 $ 10.80
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 8,004 8,205 7,688 7,269 8,610
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- 21 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
AMERICAN CENTURY
-----------------------------------------------------
VP CAPITAL APPRECIATION FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 11.04 $ 11.53 $ 12.18 $ 9.39 $ 9.61
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 10.69 $ 11.04 $ 11.53 $ 12.18 $ 9.39
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 3,303 4,510 7,264 8,061 6,361
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
CALVERT
-----------------------------------------------------
SOCIAL BALANCED FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 2.65 $ 2.23 $ 2.01 $ 1.57 $ 1.64
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 3.04 $ 2.65 $ 2.23 $ 2.01 $ 1.57
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 14,257 12,479 10,713 7,849 5,986
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
FIDELITY
------------------------------------------
VIP EQUITY-INCOME FUND
------------------------------------------
1998 1997 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 27.77 $ 21.93 $ 19.43 $ 16.30
--------- --------- --------- ---------
--------- --------- --------- ---------
Unit value, end of year..................................... $ 30.65 $ 27.77 $ 21.93 $ 19.43
--------- --------- --------- ---------
--------- --------- --------- ---------
Thousands of units outstanding, end of year................. 4,018 3,491 2,342 728
--------- --------- --------- ---------
--------- --------- --------- ---------
<CAPTION>
FIDELITY
------------------------------------------
VIP II CONTRA FUND
------------------------------------------
1998 1997 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 20.36 $ 16.59 $ 13.85 $ 11.43
--------- --------- --------- ---------
--------- --------- --------- ---------
Unit value, end of year..................................... $ 26.16 $ 20.36 $ 16.59 $ 13.85
--------- --------- --------- ---------
--------- --------- --------- ---------
Thousands of units outstanding, end of year................. 6,742 5,656 3,880 1,792
--------- --------- --------- ---------
--------- --------- --------- ---------
<CAPTION>
FIDELITY
------------------------------------------
VIP II ASSET MANAGER FUND
------------------------------------------
1998 1997 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 21.14 $ 17.72 $ 15.66 $ 14.04
--------- --------- --------- ---------
--------- --------- --------- ---------
Unit value, end of year..................................... $ 24.04 $ 21.14 $ 17.72 $ 15.66
--------- --------- --------- ---------
--------- --------- --------- ---------
Thousands of units outstanding, end of year................. 1,488 1,150 613 184
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- 22 -
<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, 1998, 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, 1998, 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.
[SIGNATURE]
New York, New York
February 19, 1999
- 23 -
<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, 1998 and 1997, 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, 1998 and 1997, 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, 1998 and 1997, 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.
[SIGNATURE]
New York, New York
February 19, 1999
- 24 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------------- ------------------
<S> <C> <C>
ASSETS
GENERAL ACCOUNT ASSETS
Bonds and notes...................................................... $ 4,874,244,008 $ 4,795,022,564
Common stocks........................................................ 339,524,394 413,939,170
Preferred stocks..................................................... 55,771,462 59,466,239
Cash and short-term investments...................................... 98,685,966 67,164,422
Guaranteed funds transferable (Note 3)............................... 115,902,196 121,130,991
Mortgage loans....................................................... 19,289,253 41,315,430
Real estate.......................................................... 324,024,030 331,991,341
Policy loans......................................................... 100,633,395 97,854,314
Other invested assets................................................ 33,606,096 20,137,960
Investment income accrued............................................ 90,018,584 79,087,631
Receivables.......................................................... 8,363,971 9,307,851
Other assets......................................................... 10,847,128 31,266,929
------------------- ------------------
Total general account assets....................................... 6,070,910,483 6,067,684,842
SEPARATE ACCOUNT ASSETS................................................ 4,039,275,044 3,456,072,983
------------------- ------------------
TOTAL ASSETS........................................................... $ 10,110,185,527 $ 9,523,757,825
------------------- ------------------
------------------- ------------------
LIABILITIES AND SURPLUS
GENERAL ACCOUNT LIABILITIES
Insurance and annuity reserves....................................... $ 4,925,407,081 $ 4,929,073,256
Other contract liabilities and reserves.............................. 12,086,713 11,303,835
Dividends payable to contract and policyholders...................... 93,791 106,329
Note payable (Note 5)................................................ 137,021,175 137,021,175
Interest maintenance reserve......................................... 213,674,120 253,944,200
Other liabilities.................................................... 69,310,429 95,801,345
------------------- ------------------
Total general account liabilities.................................. 5,357,593,309 5,427,250,140
SEPARATE ACCOUNT RESERVES AND OTHER LIABILITIES........................ 4,039,275,044 3,456,072,983
------------------- ------------------
Total liabilities.................................................. 9,396,868,353 8,883,323,123
------------------- ------------------
ASSET VALUATION RESERVE................................................ 118,485,383 116,494,396
------------------- ------------------
SURPLUS
Assigned surplus..................................................... 1,150,000 1,150,000
Unassigned surplus................................................... 593,681,791 522,790,306
------------------- ------------------
Total surplus...................................................... 594,831,791 523,940,306
------------------- ------------------
TOTAL LIABILITIES AND SURPLUS.......................................... $ 10,110,185,527 $ 9,523,757,825
------------------- ------------------
------------------- ------------------
</TABLE>
See accompanying notes to consolidated financial statements.
- 25 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------------ ------------------
<S> <C> <C>
INCOME
Annuity considerations and deposits.................................... $ 824,131,791 $ 740,959,658
Life and disability insurance premiums................................. 27,318,300 28,214,541
------------------ ------------------
Total considerations and premiums.................................... 851,450,091 769,174,199
Separate account investment and administration fees.................... 43,186,358 35,376,990
Net investment income (Notes 2 and 3).................................. 414,565,840 441,059,670
Other, net............................................................. (1,966,715) (336,265)
------------------ ------------------
Total income......................................................... 1,307,235,574 1,245,274,594
------------------ ------------------
DEDUCTIONS
Increase in insurance and annuity reserves............................. 81,812,257 41,301,697
Annuity and surrender benefits......................................... 999,743,408 973,365,824
Death and disability benefits.......................................... 20,153,378 20,161,949
Operating expenses..................................................... 151,448,387 147,172,396
------------------ ------------------
Total deductions..................................................... 1,253,157,430 1,182,001,866
------------------ ------------------
Net gain before dividends............................................ 54,078,144 63,272,728
DIVIDENDS TO CONTRACT AND POLICYHOLDERS.................................. 117,182 147,104
------------------ ------------------
Net gain from operations............................................. 53,960,962 63,125,624
FEDERAL INCOME TAX BENEFIT............................................... 1,150,189 367,818
NET REALIZED CAPITAL GAINS (Note 2)...................................... 16,642,540 10,778,415
------------------ ------------------
Net income........................................................... 71,753,691 74,271,857
SURPLUS TRANSACTIONS
Change in asset valuation reserve...................................... (1,990,987) (8,818,100)
Change in net unrealized capital gains................................. 7,239,633 32,160,963
Change in non-admitted assets and other, net........................... (6,110,852) (4,719,810)
------------------ ------------------
Net change in surplus................................................ 70,891,485 92,894,910
SURPLUS, AT BEGINNING OF YEAR............................................ 523,940,306 431,045,396
------------------ ------------------
SURPLUS, AT END OF YEAR.................................................. $ 594,831,791 $ 523,940,306
------------------ ------------------
------------------ ------------------
</TABLE>
See accompanying notes to consolidated financial statements.
- 26 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------------ -------------------
<S> <C> <C>
CASH PROVIDED
Premium and annuity funds received................................... $ 851,727,947 $ 769,846,793
Investment income received........................................... 338,956,078 437,472,096
Separate account investment and administrative fees.................. 43,186,358 35,376,990
Other, net........................................................... 1,739,776 (1,619,142)
------------------ -------------------
Total receipts..................................................... 1,235,610,159 1,241,076,737
------------------ -------------------
Benefits paid........................................................ 1,019,758,402 989,719,884
Dividends paid to contract and policyholders......................... 129,722 147,127
Insurance and operating expenses paid................................ 155,490,995 146,405,004
Net transfers to separate accounts................................... 84,395,589 286,778,743
------------------ -------------------
Total payments..................................................... 1,259,774,708 1,423,050,758
------------------ -------------------
Net cash used by operations........................................ (24,164,549) (181,974,021)
Proceeds from long-term investments sold, matured or repaid.......... 4,672,189,185 10,907,067,504
Proceeds from dollar roll transactions--repurchase agreements........ -- 700,714,763
Other, net........................................................... 47,407,939 44,741,139
------------------ -------------------
Total cash provided................................................ 4,695,432,575 11,470,549,385
------------------ -------------------
CASH APPLIED
Cost of long-term investments acquired............................... 4,606,240,005 10,730,606,933
Repayment of dollar roll transactions--repurchase agreements......... -- 700,714,763
Other, net........................................................... 57,671,026 32,548,605
------------------ -------------------
Total cash applied................................................. 4,663,911,031 11,463,870,301
------------------ -------------------
Net change in cash and short-term investments...................... 31,521,544 6,679,084
CASH AND SHORT-TERM INVESTMENTS
Beginning of year.................................................... 67,164,422 60,485,338
------------------ -------------------
End of year.......................................................... $ 98,685,966 $ 67,164,422
------------------ -------------------
------------------ -------------------
</TABLE>
See accompanying notes to consolidated financial statements.
- 27 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
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 1997 amounts included in the accompanying consolidated financial
statements have been reclassified to conform with the 1998 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 $5.0 billion in 1998 and $4.9 billion
in 1997) is determined by reference to market prices quoted
- 28 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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 $19.6 million in 1998 and $46.8 million in 1997) 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 1998 or 1997.
Real estate, which is classified as Company occupied property, is carried at
cost, including capital improvements, net of accumulated depreciation, and
depreciated on a straight line basis over 39 years. Tenant improvements on real
estate investments are depreciated over the shorter of the lease term or the
estimated life of the improvement.
Policy loans 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.
- 29 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. Charges for investment advisory fees and administration fees
are assessed as a percentage of the assets under management and vary based upon
the investment objectives of the fund and level of administrative services
provided. During 1998 and 1997 such fees were equal to approximately 1.10% of
the total average assets under management.
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 1998 and 1997, averaged
5.00% and 5.50%, 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 ($7.6 billion and $7.0 billion), at December 31, 1998 and 1997,
respectively. The fair value of annuity contracts (approximately $1.6 billion
and $1.5 billion at December 31, 1998 and 1997, 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 5.38% and 6.12% were used at December 31, 1998 and
1997, 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.
- 30 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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, 1998 are shown below. Excluding
U.S. government and government agency investments, the Company is not exposed to
any significant concentration of credit risk.
<TABLE>
<CAPTION>
GROSS GROSS
STATEMENT UNREALIZED UNREALIZED NAIC
CATEGORY VALUE GAINS LOSSES MARKET VALUE
- ---------------------------------------------------------- ------------- ----------- ----------- -------------
(000'S OMITTED)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies.................... $ 2,030,666 $ 15,527 $ 1,071 $ 2,045,122
Obligations of states and political subdivisions.......... 10,727 2,086 -- 12,813
Debt securities issued by foreign governments............. 106,243 6,112 -- 112,355
Corporate securities...................................... 2,834,819 50,542 33,067 2,852,294
------------- ----------- ----------- -------------
Total................................................. $ 4,982,455 $ 74,267 $ 34,138 $ 5,022,584
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>
Short-term fixed maturity securities with a statement value and NAIC market
value of $108.2 million at December 31, 1998 are included in the above table. As
of December 31, 1998, 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, 1998 are shown below. Expected
maturities may differ from
- 31 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
2. FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
contractual maturities because borrowers may have the right to prepay
obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
STATEMENT NAIC
VALUE MARKET VALUE
------------- -------------
(000'S OMITTED)
<S> <C> <C>
Due in one year or less..................................... $ 261,253 $ 263,498
Due after one year through five years....................... 1,553,255 1,567,426
Due after five years through ten years...................... 1,417,466 1,498,422
Due after ten years......................................... 1,750,481 1,693,238
------------- -------------
Total................................................... $ 4,982,455 $ 5,022,584
------------- -------------
------------- -------------
</TABLE>
Proceeds from the sale of investments in fixed maturity securities during 1998
were $4.2 billion. Gross gains of $20.0 million and gross losses of $6.0 million
were realized on these sales, of which $14.0 million of gains were accumulated
in the IMR. Such amounts will be amortized into net investment income over the
estimated remaining life of the investment sold.
During 1998, $54.2 million of the IMR was amortized and included in net
investment income. Included in IMR amortization income for the year is a $34.5
million net adjustment related to realized capital gains that should have been
exempted from IMR since they were associated with higher than normal general
account withdrawal activity (including transfers to the Separate Account) that
occurred last year.
The statement values and NAIC market values of investments in fixed maturity
securities at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
STATEMENT UNREALIZED UNREALIZED NAIC
CATEGORY VALUE GAINS LOSSES MARKET 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.
- 32 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
2. FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
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 those sales, of which $126.4 million of gains were
accumulated (net of applicable tax benefits 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 1997, $18.0 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, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
(000'S OMITTED)
<S> <C> <C>
Equity securities (common and preferred stocks).................... $ 16,010 $ 19,606
Mortgage loans and other........................................... 633 (8,828)
--------- ---------
Net realized capital gains..................................... $ 16,643 $ 10,778
--------- ---------
--------- ---------
</TABLE>
At December 31, 1998 and 1997, net unrealized appreciation of common equity
securities was $51.3 million and $44.1 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 $115.9 million and $121.1 million at December 31, 1998 and 1997,
respectively.
The guaranteed interest and other allocated investment earnings on the funds
held by the reinsurer, amounting to $12.2 million and $33.8 million in 1998 and
1997, 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
in 1997. This amount includes the receipt of a $21.5 million special dividend
related to the termination of the contingency fund previously held by the
reinsurer.
4. REAL ESTATE
Real estate consists primarily of an office building that Mutual of America
purchased for its corporate headquarters. The purchase price of the building was
fully financed. The Company occupies approximately one-third of this office
building as its corporate headquarters and leases the remaining space.
Depreciation expense for 1998 and 1997 was $5.2 million in both years.
- 33 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
5. NOTE PAYABLE
In connection with the acquisition of its corporate headquarters, Mutual of
America obtained a $135.0 million, seven-year, 6.91% fixed rate secured term
note. Fair value of the note was approximately $137.0 million at December 31,
1998 and 1997. 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 $166.7 million and $169.9 million
in 1998 and $167.9 million and $167.5 million in 1997, 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 pension plans. The first
provides benefits to employees whose total compensation exceeds the maximum
allowable compensation limits for qualified retirement plans under ERISA. The
second provides benefits to non-employee members of the Board of Directors.
The Company has two defined benefit postretirement plans covering substantially
all salaried employees. Employees may become eligible for such benefits upon
attainment of retirement age while in the employ of the Company and upon
satisfaction of service requirements. One plan provides medical and dental
benefits and the second plan provides life insurance benefits. The
postretirement plans are contributory for those individuals who retire with less
than twenty years of eligible service, with retiree contributions adjusted
annually and contain other cost-sharing features, such as deductibles and
coinsurance.
Pension expense for all pension plans in 1998 and 1997 was $8.9 million and $5.4
million, respectively. The 1998 amount includes $2.8 million of expense related
to the lump-sum settlement of approximately $24.2 million in pension benefits
during the year. 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.
- 34 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
6. PENSION PLAN AND POSTRETIREMENT BENEFITS (CONTINUED)
The components of net pension expense related to all of the Company's pension
plans are as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
(000'S OMITTED)
<S> <C> <C>
Service cost........................................................ $ 5,353 $ 4,596
Interest cost on projected benefit obligation....................... 6,189 5,159
Expected return on plan assets...................................... (6,870) (5,469)
Amortization of initial net asset................................... (211) (211)
Amortization of unrecognized loss................................... 1,639 1,291
Settlement loss..................................................... 2,768 --
--------- ---------
Net pension expense............................................. $ 8,868 $ 5,366
--------- ---------
--------- ---------
</TABLE>
The funded status of all of the Company's pension plans at December 31, 1998 and
1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
(000'S OMITTED)
<S> <C> <C>
Projected benefit obligation..................................... $ (93,544) $ (77,322)
Plan assets at fair value........................................ 60,470 58,619
---------- ----------
Projected benefit obligation in excess of plan assets............ (33,074) (18,703)
Remaining unrecognized initial net asset......................... (450) (841)
Unrecognized prior service cost.................................. 4,564 5,177
Unrecognized net loss from past experience different from that
assumed........................................................ 40,079 17,546
---------- ----------
Prepaid pension cost, end of year................................ $ 11,119 $ 3,179
---------- ----------
---------- ----------
</TABLE>
For financial reporting purposes, the prepaid pension cost at December 31, 1998
and 1997, has been classified as a non-admitted asset. At December 31, 1998 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.
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 6.80% and 7.25% at December 31, 1998 and 1997,
respectively. This .45% decrease in the discount rate together with a change in
employee mortality and turnover rates resulted in a $17.3 million increase in
the projected benefit obligation (PBO) for the year. The assumed rate of
increase in future compensation levels was 4.00% in 1998 and 1997. The
- 35 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
6. PENSION PLAN AND POSTRETIREMENT BENEFITS (CONTINUED)
assumed long-term rate of return on assets used in determining the net periodic
pension cost was 11.30% in 1998 and 1997. The change in the PBO during 1998 and
1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
(000'S OMITTED)
<S> <C> <C>
January 1 balance................................................. $ 77,322 $ 60,351
Service cost...................................................... 5,353 4,596
Interest cost..................................................... 6,189 5,159
Change in assumptions............................................. 17,298 7,850
Actuarial loss.................................................... 11,775 4,326
Benefits and expenses paid........................................ (24,393) (4,960)
---------- ---------
December 31 balance............................................... $ 93,544 $ 77,322
---------- ---------
---------- ---------
</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 $52.3 million and $47.4 million at December 31, 1998
and 1997, respectively. The actuarial present value of accumulated benefits for
the qualified pension plan were $32.6 million and $50.0 million at December 31,
1998 and 1997, respectively. During 1998 and 1997, the Company made
contributions to the qualified plan of $13.3 million and $4.4 million,
respectively.
The change in plan assets for all of the Company's pension plans is as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
(000'S OMITTED)
<S> <C> <C>
January 1 balance................................................. $ 58,619 $ 43,718
Employer contributions............................................ 16,807 12,127
Return on Plan assets............................................. 9,437 7,734
Benefits and expenses paid........................................ (24,393) (4,960)
---------- ---------
December 31 balance............................................... $ 60,470 $ 58,619
---------- ---------
---------- ---------
</TABLE>
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
$1.7 million and $1.6 million in 1998 and 1997, respectively. The Company also
has a long-term performance based incentive compensation plan for certain
employees. Shares are granted each year and generally vest over a three-year
period. The value of such shares is based upon increases in the Company's
statutory surplus and the maintenance of certain financial ratios. Compensation
expense recognized in 1998 and 1997 related to this plan was $3.2 million and
$3.0 million respectively.
- 36 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
6. PENSION PLAN AND POSTRETIREMENT BENEFITS (CONTINUED)
The components of net postretirement benefit cost are as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
(000'S OMITTED)
<S> <C> <C>
Service cost.......................................................... $ 609 $ 600
Interest cost on projected benefit obligation......................... 1,272 1,175
Actuarial loss........................................................ 156 --
--------- ---------
Net postretirement benefit cost....................................... $ 2,037 $ 1,775
--------- ---------
--------- ---------
</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>
1998 1997
--------- ---------
(000'S OMITTED)
<S> <C> <C>
Accumulated postretirement benefit obligation ("APBO"):
Retirees......................................................... $ 7,854 $ 5,911
Fully eligible active plan participants.......................... 3,367 3,456
Other active plan participants................................... 6,817 6,239
--------- ---------
Total APBO................................................... 18,038 15,606
Plan assets at fair value.......................................... -- --
--------- ---------
APBO in excess of plan assets...................................... 18,038 15,606
Unrecognized net loss.............................................. (5,615) (4,920)
--------- ---------
Accrued postretirement obligation.................................. $ 12,423 $ 10,686
--------- ---------
--------- ---------
</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 7.00% in 1998. 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, 1998
by $1.3 million and the aggregate of the service and interest cost components of
the net periodic benefit cost for 1998 by $.3 million.
The discount rate used in determining the APBO was 6.80% at December 31, 1998
and 7.25% at December 31, 1997.
7. COMMITMENTS AND CONTINGENCIES
Rental expenses were $17.3 million and $16.7 million in 1998 and 1997,
respectively. The approximate minimum rental commitments under noncancelable
operating leases are as follows: 1999, $2.8 million, 2000, $2.1 million, 2001,
$1.7 million, 2002, $1.6 million and 2003,
- 37 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
$1.0 million, and 2004 and beyond, $.8 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 was exempt from federal income taxation
under Section 501(a) of the Internal Revenue Code ("Code") in 1997. Effective
January 1, 1998 Mutual of America's pension business became subject to federal
income tax. Mutual of America and its life subsidiary file federal tax returns
on a separate company basis. Mutual of America's non-insurance subsidiaries file
a consolidated tax return. The Federal income tax benefit for the year ended
December 31, 1998 amounted to $1.2 million as compared to benefit of $.4 million
in 1997. The 1998 and 1997 tax benefits reflected in the accompanying statements
of operations and surplus arose principally from the operating results of its
insurance and non-insurance subsidiaries.
The difference between the actual tax benefit reflected in the accompanying
consolidated statements of operations and the expected tax provision computed by
applying the statutory rate of 35% to operating income arises principally from
the differing statutory and tax treatment of IMR income and realized capital
gains and losses on investment transactions and from the differences between the
tax and statutory basis of Mutual of America's assets and liabilities. Such
differences resulted from transition rules under the Code as of January 1, 1998,
which accompanied the change in taxation of Mutual of America's pension
business. These transition rules will moderate Mutual of America's tax expense
over the next several years.
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
- 38 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
9. RECONCILIATION OF STATUTORY BASIS FINANCIAL RESULTS TO A GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES BASIS (CONTINUED)
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.
- 39 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
9. RECONCILIATION OF STATUTORY BASIS FINANCIAL RESULTS TO A GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES BASIS (CONTINUED)
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.
The tables that follow provide a reconciliation of the 1998 and 1997 statutory
financial results reflected in the accompanying financial statements to a GAAP
basis (000's omitted):
<TABLE>
<CAPTION>
RECONCILIATION OF STATUTORY TO GAAP SURPLUS 1998 1997
- -------------------------------------------------------------- ------------- -----------
<S> <C> <C>
STATUTORY SURPLUS............................................. $ 594,832 $ 523,940
Market value adjustment related to AFS bonds and notes...... 170,821 160,980
Realized capital gains...................................... 136,019 163,422
AVR......................................................... 118,485 116,494
Deferred policy acquisition costs........................... 39,761 36,905
Policy reserve adjustments.................................. (21,815) (17,510)
Non-admitted assets......................................... 16,196 9,563
Federal income taxes........................................ 163,130 (20,571)
Other....................................................... 1,663 1,135
------------- -----------
GAAP SURPLUS.................................................. $ 1,219,092 $ 974,358
------------- -----------
------------- -----------
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION OF STATUTORY TO GAAP NET INCOME 1998 1997
- ---------------------------------------------------------------- ----------- -----------
<S> <C> <C>
STATUTORY NET INCOME............................................ $ 71,754 $ 74,272
Investment income adjustments................................. (52,750) (8,020)
Realized capital gains........................................ 25,342 145,791
Policy reserve adjustments.................................... (3,463) 3,781
Deferred acquisition costs.................................... 5,969 2,518
Deferred income taxes......................................... 237,051 (6,559)
Dividend related to termination of contingency fund (Note
3).......................................................... -- (20,920)
Other......................................................... (1,488) (4,485)
----------- -----------
GAAP NET INCOME................................................. $ 282,415 $ 186,378
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION OF GAAP TO STATUTORY PREMIUMS 1998 1997
- ---------------------------------------------------------------- ----------- -----------
<S> <C> <C>
GAAP PREMIUM INCOME............................................. $ 61,073 $ 104,129
Premiums from investment contracts............................ 790,377 665,045
----------- -----------
STATUTORY PREMIUM INCOME........................................ $ 851,450 $ 769,174
----------- -----------
----------- -----------
</TABLE>
- 40 -
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
- --------------------------------------------------------------------------------
(a) Financial Statements
Financial statements for 1998 for Mutual of American Separate Account No. 2 and
Mutual of America Life Insurance Company are included in this Post-Effective
Amendment to Registration Statement.
(b) Exhibits
10(b) Consent of Independent Public Accountants
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS AND
OFFICES WITH
NAME AND PRINCIPAL BUSINESS ADDRESS DEPOSITOR
- ----------------------------------------------------------------------- -------------------
<S> <C>
Clifford L. Alexander, Jr.
Washington, D.C. Director
Patricia A. Cahill
Denver, Colorado Director
Roselyn P. Epps, M.D.
Bethesda, Maryland Director
Dudley H. Hafner
Dallas, Texas Director
Earle H. Harbison, Jr.
St. Louis, Missouri Director
Frances R. Hesselbein
New York, New York Director
William Kahn
St. Louis, Missouri Director
LaSalle D. Leffall, Jr., M.d.
Washington, D.C. Director
Michael A. Pelavin
Flint, Michigan Director
Fioravante G. Perotta
New York, New York Director
Francis H. Schott
New York, New York Director
O. Stanley Smith, Jr.
Columbia, South Carolina Director
Sheila M. Smythe
Valhalla, New York Director
Elie Wiesel
New York, New York Director
</TABLE>
OFFICERS-DIRECTORS
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR
- ----------------------------------- ---------------------------------------------------------------------------
<S> <C>
William J. Flynn Chairman of the Board
Thomas J. Moran President and Chief Executive Officer
Manfred Altstadt Senior Executive Vice President and Chief Financial Officer
Patrick A. Burns Senior Executive Vice President and General Counsel
Salvatore R. Curiale Senior Executive Vice President, Technical Operations
</TABLE>
C-1
<PAGE>
OTHER OFFICERS
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR
- ----------------------------------- ---------------------------------------------------------------------------
<S> <C>
Diane M. Aramony Senior Vice President, Corporate Secretary and Assistant to the Chairman
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
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 Williman & Robertson
Allen J. Bruckheimer Senior Vice President and Associate Treasurer
Patrick Burke Senior Vice President, Special Markets
Sean Carroll Senior Vice President, Facilities Management, since March 1998; prior
thereto, Vice President
William S. Conway Executive Vice President, Marketing and Corporate Communications
William A. DeMilt Executive Vice President, Real Estate Management
Warren A. Essner Senior Vice President, Corporate Services
James E. Flynn Senior Vice President, Marketing
Michael Gallagher Senior Vice President, Direct Response and Technical Communications
Boca Raton, FL
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 President and Chief Executive
Officer
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
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
Robert Kordecki Senior Vice President, National Accounts
Stanley M. Lenkowicz Senior Vice President and Deputy General Counsel
Daniel LeSaffre Senior Vice President, Human Resources and Training since January 1999;
prior thereto, FBI
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 N. Nadler Senior Vice President, Training--Boca
Boca Raton, FL
Roger F. Napoleon Senior Vice President and Associate General Counsel
James C. Peterson Senior Vice President, Training--New York 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 and Direct Response
William G. Shannon Senior Vice President, Individual Financial Planning
Walter W. Siegel Senior Vice President and Actuary
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR
- ----------------------------------- ---------------------------------------------------------------------------
<S> <C>
Joan M. Squires Senior Vice President, Business Applications
Eldon Wonacott Senior Vice President, Field Administration
Raymond Yeager Senior Vice President, MIS Operations
Boca Raton, FL
</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 187,786 Participants in Separate Account No. 2,
91,657 of whom were attributable to Contracts registered under SEC File No.
2-90201; 92,428 of whom were attributable to Contracts registered under SEC File
No. 33-11023; and 3,701 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-3
<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 the requirements
for effectiveness of this post-effective 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 28th day of April, 1999.
<TABLE>
<S> <C> <C>
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
</TABLE>
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 28, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S> <C>
*
- ------------------------------ Chairman of the Board;
William J. Flynn Director
Chief Executive Officer
* and
- ------------------------------ President; Director
Thomas J. Moran (Principal
Executive Officer)
Senior Executive Vice
President
/s/ MANFRED ALTSTADT and Chief Financial
- ------------------------------ Officer;
Manfred Altstadt Director (Principal
Financial
and Accounting Officer)
*
- ------------------------------ Director
Clifford L. Alexander, Jr.
Senior Executive Vice
* President
- ------------------------------ and General Counsel;
Patrick A. Burns Director
*
- ------------------------------ Director
Patricia A. Cahill
* Senior Executive Vice
- ------------------------------ President, Technical
Salvatore R. Curiale Operations; Director
*
- ------------------------------ Director
Roselyn P. Epps, M.D.
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S> <C>
*
- ------------------------------ 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
Francis H. Schott
*
- ------------------------------ Director
O. Stanley Smith, Jr.
*
- ------------------------------ Director
Sheila M. Smythe
*
- ------------------------------ Director
Elie Wiesel
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ MANFRED ALTSTADT
-------------------------
Manfred Altstadt
ATTORNEY-IN-FACT
</TABLE>
C-5
<PAGE>
EXHIBIT 99.10(b)
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.
New York, New York
April 28, 1999
