<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Post-Effective Amendment No. 18
FORM S-6
File No. 33-11165
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM
N-8B-2
A. Exact name of trust: IDS Life Variable Life Separate Account
B. Name of depositor: IDS LIFE INSURANCE COMPANY
C. Complete address of depositor's principal executive offices:
IDS Tower 10, Minneapolis, Minnesota 55440-0010
D. Name and complete address of agent for service:
Mary Ellyn Minenko, Esq.
IDS Life Insurance Company
IDS Tower 10
Minneapolis, Minnesota 55440-0010
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on April 12, 1999 pursuant to paragraph (a)(1) of rule (485)
[ ] this post-effective amendment designates a new effective date for
a previously filed post effective amendment.
E. Title of securities being registered:
Flexible Premium Variable Life Insurance Policy
F. Approximate date of proposed public offering: not applicable.
<PAGE>
Prospectus March 31, 1999
Flexible Premium Variable Life Insurance Policy
IDS Life Variable Life Separate Account
Issued and sold by: IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440.
Telephone: 800-437-0602
web site address: http://www.americanexpress.com/advisors
This prospectus contains information about the insurance policy that you should
know before investing. You also will receive prospectuses for the underlying
funds that are investment options under your policy. Please read all
prospectuses carefully and keep them for future reference.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus. Any representation to
the contrary is a criminal offense.
An investment in this policy is not a deposit of a bank or financial institution
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. An investment in this policy involves investment
risk including possible loss of principal.
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Table of contents
Key terms
The policy in brief
The variable account
The funds
IDS Life Series Fund-Equity Portfolio
IDS Life Series Fund-Income Portfolio
IDS Life Series Fund-Money Market Portfolio
IDS Life Series Fund-Managed Portfolio
IDS Life Series Fund-Government Securities Portfolio
IDS Life Series Fund-International Equity Portfolio
AIM V.I. Growth and Income Fund
Putnam VT New Opportunities Fund - Class IA Shares
Relationship between funds and subaccounts
Rates of return of the funds and subaccounts
The trust
Estimated rates of return
Trust maturity
Roles of Smith Barney Inc. and IDS Life
The fixed account
Purchasing your policy
Application
Right to examine policy
Premiums
Keeping the policy in force
Death benefit guarantee
Grace period
Reinstatement
Loads, fees and charges
Premium expense charge
Monthly deduction
Note for Massachusetts and Montana residents Surrender charge Partial
surrender fee Mortality and expense risk charge Transaction charge Fund
expenses
Policy value
Fixed account value
Subaccount values
Death benefits
Change in death benefit option
Changes in specified amount
Misstatement of age or sex
Suicide
Beneficiary
Transfersbetween the fixed account and subaccounts Fixed account transfer
policies Minimum transfer amounts Maximum transfer amounts Maximum
number of transfers per year Two ways to request a transfer, loan or
surrender Automated transfers Automated dollar-cost averaging
Policy loans
Policy surrenders
Total surrenders
Partial surrenders
Allocations of partial surrenders
Effects of partial surrenders
Taxes
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Optional insurance benefits
Waiver of monthly deduction
Accidental death benefit
Other insured rider
Children's insurance rider
Automatic increase benefit rider
Accelerated benefit rider for terminal illness
Payment of policy proceeds
Federal taxes
IDS Life's tax status
Taxation of policy proceeds
Modified endowment contracts
Other tax considerations
IDS Life
Ownership
State regulation
Distribution of the policy
Legal proceedings
Year 2000
Experts
Management of IDS Life
Other fund managers
Other information
Voting rights
Reports
Policy illustrations
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Key terms
These terms can help you understand details about your policy.
Accumulation unit: An accounting unit used to calculate the policy value of the
subaccounts prior to the insured's death.
Attained insurance age: The insured's insurance age plus the number of policy
anniversaries since the policy date. Attained insurance age changes only on a
policy anniversary.
Cash surrender value: Proceeds received if you surrender the policy in full or
the amount payable if the insured's death occurs on or after the insured's
attained insurance age 100. The cash surrender value equals the policy value
minus any indebtedness and any applicable surrender charges.
Code: The Internal Revenue Code of 1986, as amended.
Close of business: Closing time of the New York Stock Exchange, normally 3 p.m.,
Central time.
Death benefit guarantee (DBG): A feature of the policy guaranteeing that the
policy will not lapse before the insured's attained insurance age 70 (or five
policy years, if later). The guarantee is in effect if you meet certain premium
payment requirements.
Fixed account: The general investment account of IDS Life. The fixed account is
made up of all of IDS Life's assets other than those held in any separate
account.
Fixed account value: The portion of the policy value that you allocate to the
fixed account, including indebtedness.
Funds: Mutual funds or portfolios, each with a different investment objective.
(See "The funds.") Each of the subaccounts of the variable account invests in a
specific one of these funds.
IDS Life: In this prospectus, "we," "us," "our" and "IDS Life" refer to IDS Life
Insurance Company.
Indebtedness: All existing loans on the policy plus interest that has either
been accrued or added to the policy loan.
Insurance age: The insured's age, based upon his or her last birthday on the
date of the application.
Insured: The person whose life is insured by the policy.
Maturity date: The insured's attained insurance age 100, if living.
Minimum monthly premium: The premium required to keep the DBG in effect. We show
the minimum monthly premium in your policy.
Monthly date: The same day each month as the policy date. If there is no monthly
date in a calendar month, the monthly date is the first day of the next calendar
month.
Net amount at risk: A portion of the death benefit, equal to the total current
death benefit minus the policy value. This is the amount to which we apply cost
of insurance rates in determining the monthly cost of insurance.
Net premium: The premium paid minus the premium expense charge.
Owner: The entity(ies) to which, or individual(s) to whom, we issue the policy
or to whom subsequently transfer ownership. In the prospectus "you" and "your"
refer to the owner.
Policy anniversary: The same day and month as the policy date each year the
policy remains in force.
Policy date: The date we issue the policy and from which we determine policy
anniversaries, policy years and policy months.
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Policy value: The sum of the fixed account value plus the variable account
value.
Proceeds: The amount payable under the policy as follows:
o Upon death of the insured prior to the insured's attained insurance age
100, proceeds will be the death benefit in effect as of the date of the
insured's death, minus any indebtedness.
o Upon the death of the insured on or after the insured's attained
insurance age 100, proceeds will be the cash surrender value.
o On surrender of the policy, the proceeds will be the cash surrender value.
Rate classification: A group of insureds that IDS Life expects will have similar
mortality experience.
Scheduled premium: A premium, you select at the time of application, of a level
amount, at a fixed interval of time.
Specified amount: An amount we use to determine the death benefit and the
proceeds payable upon death of the insured prior to the insured's attained
insurance age 100. We show the initial specified amount in your policy.
Subaccount(s): One or more of the investment divisions of the variable account,
each of which invests in a particular fund or trust.
Surrender charge: A charge we assess against the policy value at the time of
surrender, or if the policy lapses, during the first 10 years of the policy and
for 10 years after an increase in coverage.
Trust: A unit investment trust, which is part of Smith Barney Inc. Stripped
("Zero Coupon") U.S. Treasury Securities Fund, Series A. One subaccount of the
variable account invests in the trust, which contains certain debt obligations
of the United States.
Valuation date: A normal business day, Monday through Friday, on which the New
York Stock Exchange is open. We set the value of each subaccount at the close of
business on each valuation date.
Valuation period: The interval commencing at the close of business on each
valuation date and ending at the close of business on the next valuation date.
Variable account: IDS Life Variable Life Separate Account consisting of
subaccounts, each of which invests in a particular fund or unit investment
trust. The policy value in each subaccount depends on the performance of the
particular fund or trust.
Variable account value: The sum of the values that we allocate to the
subaccounts of the variable account.
The policy in brief
Purpose: The purpose of the policy is to provide life insurance protection on
the life of the insured and to build policy value. The policy provides a death
benefit that we pay to the beneficiary upon the insured's death. As in the case
of other life insurance policies, it may not be advantageous to purchase this
policy as a replacement for, or in addition to an existing life insurance
policy.
The policy allows you, as the owner, to allocate your net premiums, or transfer
policy value, to:
The variable account, consisting of subaccounts, each of which invests
in a fund or unit investment trust with a particular investment
objective. You may direct premiums to any or all of nine of these
subaccounts. Your policy's value may increase or decrease daily,
depending on the investment return. No minimum amount is guaranteed.
(p.)
The fixed account, which earns interest at rates that are adjusted
periodically by IDS Life. This rate will never be lower than 4.5%. (p.)
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Purchasing your policy: To apply, send a completed application and premium
payment to IDS Life's home office. You will need to provide medical and other
evidence that the person you propose to insure (yourself or someone else) is
insurable according to our underwriting rules before we can accept your
application. (p.)
Right to examine policy: You may return your policy for any reason and receive a
full refund of your premiums by mailing us the policy and a written request for
cancellation within a specified period. (p.)
Premiums: In applying for your policy, you state how much you intend to pay and
whether you will pay quarterly, semiannually or annually. You may also make
additional, unscheduled premium payments subject to certain limits. You cannot
make premium payments on or after the insured's attained insurance age 100. We
may refuse premiums in order to comply with the Code. (p.)
Death benefit guarantee (DBG): A feature of the policy guaranteeing the policy
will remain in force until the insured's attained insurance age 70 (or 5 policy
years, if later). The feature is in effect if you meet certain premium
requirements (p.)
Grace period: If the cash surrender value of your policy becomes less than the
amount needed to pay the monthly deduction and the DBG is not in effect, you
will have 61 days to pay a premium that raises the cash surrender value to an
amount sufficient to pay the monthly deduction. If you don't, the policy will
lapse. (p.)
Reinstatement: If your policy lapses, it can be reinstated within five years.
The reinstatement is subject to certain conditions including evidence of
insurability satisfactory to IDS Life and the payment of a sufficient premium.
The DBG cannot be reinstated. (p.)
Loads, fees and charges: You pay the following charges, either directly (such as
deductions from your premium payments or from your policy value), or indirectly
(as deductions from the underlying funds.) These charges primarily compensate
IDS Life for administering and distributing the policy as well as paying policy
benefits and assuming related risks:
o Premium expense charge -- 2.5% sales charge and 2.5% premium tax charge
deducted from each premium payment. This charge pays some distribution
expenses and state and local premium taxes.
o Monthly deduction -- charged against the value of your policy each
month, covering the cost of insurance, cost of issuing the policy,
certain administrative expenses, a death benefit guarantee charge and
optional insurance benefits.
o Surrender charge -- applies if you surrender your policy for its full
cash surrender value, or the policy lapses, during the first 10 years
and for 10 years after requesting an increase in the specified amount.
We base it based on the initial specified amount and on any increase in
the specified amount.
o Partial surrender fee -- applies if you surrender part of the value of
your policy; equals $25 or 2% of the amount surrendered, whichever, if
less.
o Mortality and expense risk charge -- applies only to the subaccounts;
equals, on an annual basis, 0.9% of the average daily net asset value
of the subaccounts.
o Transaction charge -- applies only to subaccount that invests in the
trust; equals, on an annual basis, 0.25% of its average daily net asset
value.
o Fund expenses - apply only to the underlying funds and consists of
investment management fees, taxes, brokerage commissions and
nonadvisory expenses. (p.)
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Death benefits: Prior to insured's attained insurance age 100, your policy's
death benefit can never be less than the specified amount in your policy
application, unless you change that amount or your policy has outstanding
indebtedness. The relationship between the policy value and the death benefit
depends on which of two options you choose:
o Option 1 level amount: The death benefit is the greater of the
specified amount or a percentage of policy value.
o Option 2 variable amount: The death benefit is the greater of the
specified amount plus the policy value or a percentage of policy value.
You may change the death benefit option or specified amount within certain
limits; doing so generally will affect policy charges. On or after the insured's
attained insurance age 100, the proceeds payable upon the death of the insured
will be the cash surrender value. (p.)
Transfers between the fixed account and subaccounts: You may, at no charge,
transfer policy value from one subaccount to another or between subaccounts and
the fixed account. (Certain restrictions apply to transfers involving the fixed
account.) You can request up to five transfers per year by phone or mail. You
can also arrange for automated transfers on a monthly, quarterly, semiannual or
annual basis. (p.)
Policy loans: You may borrow against your policy's cash surrender value. A
policy loan, even if repaid, can have a permanent effect on the death benefit
and policy value. A loan also may have tax consequences if your policy lapses or
you surrender it. (p.)
Policy surrenders: You may cancel the policy while it is in force and receive
its cash surrender value. The cash surrender value is the policy value minus
indebtedness, minus any applicable surrender charges. (p.)
Exchange right: For two years after the policy is issued, you can exchange it
for one that provides benefits that do not vary with the investment return of
the subaccounts. Because the policy itself offers a fixed return option, all you
need do is transfer all of the policy value in the subaccounts to the fixed
account. (p.)
Payment of policy proceeds: We will pay policy proceeds when you surrender the
policy or the insured dies. You or the beneficiary may choose whether you want
us to make a lump-sum payment or payments under one or more of certain options.
(p.)
Federal taxes: The death benefit is not considered part of the beneficiary's
income and thus is not subject to federal income taxes. Part or all of any
proceeds you receive through full or partial surrender, maturity, lapse, policy
loan or assignment of policy value may be subject to federal income tax as
ordinary income. Proceeds other than death benefits from certain policies,
classified as "modified endowments," are taxed differently from proceeds of
conventional life insurance contracts and also may be subject to an additional
10% IRS penalty tax if you are younger than 59 1/2. A policy is considered to be
a modified endowment if it was applied for or materially changed after June 21,
1988, and premiums paid in the early years exceed certain modified endowment
limits. (p.)
The variable account
We established the variable account on Oct. 16, 1985, under Minnesota law. It is
registered as a single unit investment trust under the Investment Company Act of
1940. The variable account consists of a number of subaccounts, each of which
invests in shares of a particular fund, or a trust. This registration does not
involve any SEC supervision of the account's management or investment practices
or policies.
The variable account meets the definition of a separate account under federal
securities laws. Income, capital gains or capital losses of each subaccount are
credited to or charged against the assets of that subaccount alone. State
insurance law provides that we will not charge a variable subaccount liabilities
of any other subaccount or of any other business conducted by IDS Life. Other
variable life insurance policies that are not described in this prospectus also
invest in subaccounts of the variable account. At all times, IDS Life will
maintain assets in the subaccounts with total market value at least equal to the
reserves and other liabilities required to cover insurance benefits under all
contracts participating in the subaccount.
<PAGE>
The U.S. Treasury and the IRS indicated they may provide additional guidance on
investment control. This concerns how many subaccounts an insurance company may
offer and how many exchanges among subaccounts it may allow before the owner
would be currently taxed on income earned within subaccount assets. We do not
know at this time what the additional guidance will be or when action will be
taken. We reserve the right to modify the policy, as necessary, so that the
owner will not be subject to current taxation as the owner of the subaccount
assets.
The funds
You can direct your premiums to any of all of the subaccounts of the variable
account that invest in shares of the following funds:
IDS Life Series Fund, Inc.
IDS Life Series Fund, Inc., a Minnesota corporation, is a diversified, open-end
management investment company incorporated on May 8, 1985. The IDS Life Series
Fund International Equity Portfolio was added on October 24, 1994. IDS Life acts
as the investment manager and American Express Financial Corporation acts as the
investment advisor of the IDS Life Series Fund, Inc. American Express Trust
Company acts as custodian of the IDS Life Series Fund, Inc.'s investments.
o IDS Life Series Fund - Equity Portfolio
Objective: capital appreciation. Invests primarily in common
stocks and other securities convertible into common stock.
o IDS Life Series Fund - Income Portfolio
Objective: to maximize current income while attempting to conserve
the value of the investment and to continue the high level of
income for the longest period of time. At least 50% of net assets
normally will be invested in high-quality, lower-risk corporate
bonds, unrated corporate bonds believed to have the same
investment qualities and government bonds. Other investments may
include lower-rated corporate bonds, bonds and common stocks sold
together as a unit, preferred stock and foreign securities.
o IDS Life Series Fund - Money Market Portfolio
Objective: to provide maximum current income consistent with
liquidity and conservation of capital. Invests in relatively
short-term money market securities, such as marketable debt
securities issued or guaranteed as to principal and interest by
the U.S. government or its agencies or instrumentalities, bank
certificates of deposit, bankers' acceptances, letters of credit
and high-grade commercial paper.
o IDS Life Series Fund - Managed Portfolio
Objective: to maximize total investment return through a
combination of capital appreciation and current income. If the
investment manager believes the stock market will be moving
higher, it can emphasize stocks that offer potential for
appreciation. At other times, the manager may increase the
portfolio's holdings in bonds and money-market securities
providing high current income.
o IDS Life Series Fund - Government Securities Portfolio
Objective: to provide a high current return and safety of
principal. Invests primarily in debt obligations issued or
guaranteed as to principal and interest by
the U.S. government, its agencies and instrumentalities.
o IDS Life Series Fund - International Equity Portfolio
Objective: capital appreciation. Invests primarily in common
stocks of foreign issuers and foreign securities convertible into
common stock. Other investments may include certain international
bonds if the portfolio manager believes they have greater
potential for capital appreciation than equities.
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AIM Variable Insurance Funds, Inc.
AIM Variable Insurance Funds, Inc., a Maryland corporation, is an open-end,
series, management investment company incorporated on January 22, 1993. AIM
Advisors, Inc. acts as the investment advisor for AIM Variable Insurance Funds,
Inc.
o AIM V.I. Growth and Income Fund
Objective: growth of capital, with current income as a secondary
objective. The Fund seeks to achieve its objective by generally
investing at least 65% of its net assets in stocks of companies
believed by management to have the potential for above average
growth in revenues and earnings.
Putnam Variable Trust
Putnam Variable Trust is a Massachusetts business trust organized on September
24, 1987. Putnam Investment Management, Inc. ("Putnam Management") acts as the
investment manager for the Putnam Variable Trust.
o Putnam VT New Opportunities Fund - Class IA Shares
Objective: long term capital appreciation. Invests principally
in common stocks of companies in sectors of the economy which
Putnam Management believes possesses above-average, long-term
growth potential.
The investment managers and advisers cannot guarantee that the funds will meet
their investment objectives nor is there any guarantee that your policy value
will equal or exceed the total premiums you paid. You can find detailed
information about the funds, their investment objectives, policies and risks in
the accompanying fund prospectuses. Please read these prospectuses carefully and
consider, on a continuing basis, which funds best suit your long-term investment
needs. Some funds involve more risk than others, so please monitor your
investment.
The investment objectives and policies of some of the funds may be similar to
the investment objectives and policies of other funds that the investment
advisers or their affiliates manage. Although the objectives and policies may be
similar, the investment results of one funs may be higher or lower than the
results of the other fund. The investment manager or adviser cannot guarantee,
and makes no representation, that the investment results of similar funds will
be comparable even if the funds have the same investment adviser, manager or
sponsor.
Shares of the funds except the IDS Life Series Fund Portfolios are available to
serve as the underlying investment for variable life insurance policies,
variable annuities and qualified plans. Currently the shares of the IDS Life
Series Fund Portfolios are available to serve as the underlying investment for
variable life insurance only. However, in the future these shares also may be
available to serve as the underlying investment for variable life insurance
contracts, variable annuities and qualified plans. It is possible that in the
future it may not be an advantage for variable life insurance separate accounts,
variable annuity separate accounts, and/or qualified plans to invest in the
available funds simultaneously. Although IDS Life and the funds do not currently
foresee any such disadvantages, the boards of directors or trustees of the
appropriate funds will monitor events in order to identify any material
conflicts between such policy owners, contract owners and qualified plans to
determine what action, if any, they should take in response to a conflict. If a
board were to conclude that separate funds should be established for variable
life insurance, variable annuity and qualified plan separate accounts, the
variable life insurance policy holders would not bear any expenses associated
with establishing separate accounts. Please refer to the fund prospectuses for
risk disclosure regarding mixed and shared funding.
Diversification: The Internal Revenue Service (IRS) has issued final regulations
relating to the diversification requirements under Section 817(h) of the Code.
Each fund intends to comply with these requirements.
Relationship between funds and subaccounts
Each subaccount buys shares of the appropriate fund at net asset value without a
sales charge. Dividends and capital gain distributions from a fund are
reinvested at net asset value without a sales charge and held by the subaccount
as an asset. Each subaccount redeems fund shares without a charge to the extent
necessary to make death benefit or other payments under the policy.
<PAGE>
Rates of return of the fund and subaccounts
This section presents rates of return first for the funds, and then for the
corresponding subaccounts. Rates of return are different in the two cases
because those of the subaccounts reflect additional charges. All charges and
expenses mentioned in the section are explained fully under "Loads, fees and
charges."
Rates of return of the funds:
In the following table are average annual rates of return based on the actual
investment performance of the funds after deduction of applicable fund charges
(including the investment management fees and nonadvisory expenses) for the
periods indicated. These rates do not reflect charges that apply to the
subaccounts or the policy and therefore do not illustrate how actual investment
performance will affect policy benefits. Past performance does not guarantee
future results.
<TABLE>
<CAPTION>
Period ending 12/31/__
Fund 10 years or Since
1 year 3 years 5 years commencement
<S> <C> <C> <C> <C>
IDS Life Series Fund, Inc.
Equity Portfolio (Beta 0.__*) (1/86)** % % % %
Income Portfolio (1/86)
Money Market Portfolio (1/86)
Managed Portfolio (Beta 0.__*) (1/86)
Government Securities Portfolio (1/86)
International Equity Portfolio (10/94) --
Equity Income Portfolio ( )
AIM Variable Insurance Funds, Inc.
AIM V.I. Growth and Income Fund (5/94) -- --
Putnam Variable Trust
Putnam VT New Opportunities Fund-Class IA Shares (5/94) -- --
</TABLE>
* Beta is a volatility measure based on calculations of the fund's monthly
return compared to the S&P 500 Index. A beta less than 1 indicates
performance that is less volatile than the market; A beta more than 1
indicates performance that is more volatile than the market.
** (Commencement date of the fund.)
Rates of return of subaccounts
Average annual rates of return in the following table reflect all charges
incurred by the funds and charges against the subaccounts (including the
mortality and expense risk charge). The rates do not reflect the premium expense
charge, surrender charge or monthly deduction.
In the table below, you will see the date that the subaccount began operations
and the date that the subaccount began operations and the date the fund began
operations. For the subaccounts investing in the IDS Life Series Fund, Inc., the
subaccounts and the funds began operations at the same time, so the performance
for both is the same. For the subaccounts investing in other funds, the funds
began operations before the subaccounts, so the subaccount and fund performance
is different. In those cases, we show both the actual performance of the
subaccount and also performance from the commencement date of the fund as if the
subaccount had existed at that time.
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<TABLE>
<CAPTION>
Period ending 12/31/__
Since commencement Since commencement
of the subaccounts of the Funds
Subaccount Investing in: 1 year 3 years 5 years 10 years or 1 year 3 years 5 years 10 years or
Since since
commencement commencement
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IDS Life Series Fund,
Inc.-
U Equity (1/86; 1/86)*
V Income (1/86; 1/86)
W Money market (1/86;
1/86)
X Managed (1/86; 1/86)
Y Government Securities
(1/86; 1/86)
FEI Equity Income ( ;
_)
IL International Equity
(10/94; 10/94)
AIM Variable Insurance
Funds, Inc.
FGI Growth and Income Fund
(11/96; 5/94)
Putnam Variable Trust
FNO New Opportunities
Fund-Class IA Shares
(11/96; 5/94)
</TABLE>
* (Commencement date of the subaccount; commencement date of the fund.)
The trust
You can direct your premiums to one subaccount that invests in the Smith Barney
Inc. Stripped ("Zero Coupon") U.S. Treasury Securities Fund, Series A, a unit
investment trust. This trust matures in 2004.
Objective: to provide safety of capital and income through investment in a
portfolio consisting primarily of:
o bearer debt obligations issued by the United States that have been
stripped of their unmatured interest coupons,
o coupons stripped from debt obligations of the United States, and
o receipts and certificates for such stripped debt obligations and coupons.
The trust also will contain a Treasury note or notes providing interest income
to pay anticipated expenses of the trust.
U.S. Treasury securities that have been stripped of their unmatured interest
coupons are essentially bonds or notes that pay no interest. For this reason
they are purchased at a deep discount from their face value and, if held to
maturity, return the full face value.
Before maturity, the value of trust units will be more volatile than would the
value of units of a trust containing unstripped U.S. Treasury securities of
comparable maturities. The value may affect death benefits and policy value,
which will fluctuate accordingly.
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Estimated rates of return
Because amounts invested in stripped U.S. Treasury securities will grow to their
face values if held to maturity, we can estimate the compound rate of growth to
maturity, based on certain assumptions about trust expenses. We calculate the
net rate of return to maturity based on the estimated compound rate of growth in
the units and these charges. Since the value of the trust's units will vary
daily, reflecting the market value of the underlying securities, the compound
rate of growth to maturity and net rate of return to maturity will also vary
daily. Estimated net rates of return from [_________, 1999] to maturity for the
trust, taking account of anticipated expenses are:
Trust maturity date Net rate of return to maturity
Nov. 15, 2004 _____%
Rates of return to owners will be less than rates of return for trust units
themselves because the units are held in subaccounts of the variable account,
which are subject to charges not reflected in the above estimates. (See "Loads,
fees and charges" for a full discussion of applicable charges.)
Trust maturity
On the maturity date of a particular trust, the policy value allocated to the
subaccount that invests in the trust will automatically be reallocated to
Subaccount W, which invests in the IDS Life Series Fund--Money Market Portfolio,
unless you give us other directions in writing at least seven days before the
maturity date. We will notify you in writing 30 days before the trust matures.
Roles of Smith Barney Inc. and IDS Life
Smith Barney sponsors the trust and sells units to the subaccounts. Because the
trust invests in a specified portfolio, there is no investment manager. The
price of the trust's units includes a transaction charge that IDS Life pays
directly to Smith Barney out of our general account assets. This charge is
limited by agreement between IDS Life and Smith Barney and will not be greater
than that ordinarily paid by a dealer for similar securities. We will seek
reimbursement for the amounts we pay through a daily asset charge, described
under "Loads, fees and charges."
IDS Life will sell trust units to the extent necessary for us to provide
benefits and make reallocation under the policies. We will sell units to Smith
Barney, which has undertaken to maintain a secondary market in units of the
trust.
IDS Life and Smith Barney reserve the right to discontinue the sale of new units
of a trust and to create additional trusts in the future.
You can find more detailed information in the current prospectus for the Smith
Barney Inc. Stripped ("Zero Coupon") U.S. Treasury Securities Fund, Series A.
The fixed account
You can allocate premiums to the fixed account or transfer policy value from the
subaccounts to the fixed account (with certain restrictions, explained in
"Transfers between the fixed account and subaccounts").
The fixed account is the general investment account of IDS Life. It includes all
assets owned by IDS Life other than those in the variable account and other
separate accounts. Subject to applicable law, IDS Life has sole discretion to
decide how assets of the fixed account will be invested.
Placing policy value in the fixed account does not entitle you to share in the
fixed account's investment experience, nor does it expose you to the account's
investment risk. Instead, IDS Life guarantees that the policy value you place in
the fixed account will accrue interest at an effective annual rate of at least
4.5%, independent of the actual investment experience of the account. IDS Life
bears the full investment risk of amounts allocated to the fixed account. IDS
Life is not obligated to credit interest at any rate higher than 4.5%, although
we may do so at our sole discretion.
We will not credit interest in excess of 4.0% on any portion of policy value in
the fixed account against which you have a policy loan outstanding.
<PAGE>
Because of exemptive and exclusionary provisions, interests in the fixed account
have not been registered under the Securities Act of 1933 and the fixed account
has not been registered as an investment company under the Investment Company
Act of 1940. Accordingly, neither the fixed account nor any interests in it are
subject to the provisions of these Acts and the staff of the SEC has not
reviewed the disclosures in this prospectus relating to the fixed account.
Disclosures regarding the fixed account may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
Purchasing your policy
Application
To apply for coverage, complete an application and send it with your premium
payment to IDS Life's home office. In your application, you:
o select a specified amount of insurance;
o select a death benefit option;
o designate a beneficiary; and
o state how premiums are to be allocated among the fixed account and/or
the subaccounts.
Insurability: Before issuing your policy, we require satisfactory evidence of
the insurability of the person whose life you propose to insure (yourself or
someone else). Our underwriting department will review your application and any
medical information or other data required to determine whether the proposed
individual is insurable under our underwriting rules. We may decline your
application if we determine the individual is not insurable and we will return
any premium you have paid.
Age limit: IDS Life generally will not issue a policy to persons over the
insurance age of 75. We may, however, do so at our sole discretion.
Rate classification: The rate classification is based on the insured's health,
occupation or other relevant underwriting standards. This classification will
affect your monthly deduction and may affect the cost of certain optional
insurance benefits. (See "Loads, fees and charges" and "Optional insurance
benefits.")
Other conditions: In addition to proving insurability, you and the insured must
also meet certain conditions, stated in the application form, before coverage
will become effective and your policy will be delivered to you.
Incontestability: IDS Life will have two years from the effective date of your
policy to contest the truth of statements or representations in your
application. After the policy has been in force during the insured's lifetime
for two years from the policy date, we cannot contest the policy.
Death of the insured: If the insured dies before the policy is issued and:
o if all conditions stated in the application have not been met, IDS
Life's sole liability will be to return the premium paid plus any
interest earned.
o if all conditions stated in the application have been met, IDS Life's
liability will be the lesser of the death benefit applied for or
$150,000.
Right to examine policy
You may return your policy for any reason and receive a full refund of all
premiums paid. To do so, you must mail or deliver the policy to IDS Life or your
financial advisor with a written request for cancellation:
o by the 10th day after you receive it (15th day in Colorado, 20th day in
North Dakota) after IDS Life mails or personally delivers a written
notice of withdrawal right; or
o the 45th day after you sign your application.
On the date your request is postmarked or received, the policy will immediately
be considered void from the start.
<PAGE>
Premiums
Payment of premiums:
In applying for your policy, you decide how much you intend to pay and how often
you will make payments. During the first several policy years until the policy
value is sufficient to cover the surrender charge, IDS Life requires that you
pay premiums sufficient to keep the DBG in effect in order to keep the policy in
force.
You may schedule payments annually, semiannually or quarterly. (IDS Life must
approve payment at any other interval). We show this premium schedule in your
policy.
The scheduled premium serves only as an indication of your intent as to the
frequency and amount of future premium payments. You may skip scheduled premium
payments at any time if your cash surrender value is sufficient to pay the
monthly deduction or if you have paid the sufficient premiums to keep the DBG in
effect.
You may also change the amount and frequency of scheduled premium payments by
written request. IDS Life reserves the right to limit the amount of such
changes. Any change in the premium amount is subject to applicable tax laws and
regulations.
Although you have flexibility in paying premiums, the amount and frequency of
your payments will affect the policy value, cash surrender value and length of
time your policy will remain in force, as well as affect whether the DBG remains
in effect.
Premium limitations:
You may make unscheduled premium payments at any time and in any amount of at
least $25. IDS Life reserves the right to limit the number and amount of
unscheduled premium payments. No premium payments, scheduled or unscheduled, are
allowed on or after the insured's attained insurance age 100.
Also, in order to receive favorable tax treatment under the Code, premiums you
pay during the life of the policy must not exceed certain limitations. To comply
with the Code, we can either refuse excess premiums as you pay them or refund
excess premiums with interest no later than 60 days after the end of the policy
year in which they were paid.
Allocation of premiums:
Until the policy date, we hold all premiums in the fixed account and we credit
interest on the net premiums (gross premiums minus premium expense charge) at
the current fixed account rate. As of the policy date, we will allocate the net
premiums plus accrued interest to the account(s) you have selected in your
application. At that time, we will begin to assess the various loads, fees,
charges and expenses.
We convert any amount that you allocate to a subaccount into accumulation units
of that subaccount, as explained under "Policy value." Similarly, when you
transfer value between subaccounts, we convert accumulation units in one
subaccount into a cash value, which we then convert into accumulation units of
the second subaccount.
Your ability to allocate policy value to the trust may be limited by the
availability of trust units.
<PAGE>
Keeping the policy in force
Death benefit guarantee
The DBG provides that your policy will remain in force until insured's age 70
(or 5 policy years, if later) even if the cash surrender value is insufficient
to pay the monthly deduction. The DBG will stay in effect as long as:
o the sum of premiums paid; minus
o partial surrenders; minus
o any outstanding indebtedness
o equals or exceeds the minimum monthly premiums; times
o the number of months since policy date (including the current month)
If, on a monthly date, you have not paid enough premiums to keep the DBG in
effect, we will mail a notice to your last known address, asking you to pay a
premium sufficient to bring your total up to the required minimum. If you do not
pay this amount within 61 days, your policy will lapse (terminate) if the cash
surrender value is less than the amount needed to pay the monthly deduction.
Although the policy can be reinstated as explained below, the DBG cannot be
reinstated.
Grace period
If on a monthly date the cash surrender value of your policy is less than the
amount needed to pay the next monthly deduction and the DBG is not in effect,
you will have 61 days to pay the required premium amount. If you do not pay the
required premium, the policy will lapse.
IDS Life will mail a notice to your last known address, requesting payment of a
premium that will raise the cash surrender value to an amount sufficient to
cover the next three monthly deductions. If we receive this premium before the
end of the 61-day grace period, we will use the payment to cover all monthly
deductions and any other charges then due. We will add any balance to the policy
value and allocated in the same manner as other premium payments.
If a policy lapses with outstanding indebtedness, any excess of the outstanding
indebtedness over the premium paid generally will be taxable to the owner. (See
"Federal taxes.") If the insured dies during the grace period, any overdue
monthly deductions will be deducted from the death benefit.
Reinstatement
Your policy may be reinstated within five years after it lapses, unless you
surrendered it for cash. To reinstate, IDS Life will require:
o a written request;
o evidence satisfactory to IDS Life that the insured remains insurable;
o payment of a premium that will keep the policy in force for at least
three months;
o payment of the monthly deductions that were not collected during the
grace period; and
o payment or reinstatement of any indebtedness.
The effective date of a reinstated policy will be the monthly date on or next
following the day we accept your application for reinstatement. The suicide
period (see "Death benefits") will apply from the effective date of
reinstatement (except in Georgia, Oklahoma, Pennsylvania, South Carolina,
Tennessee and Virginia). Surrender charges will also be reinstated.
We will have two years from the effective date of reinstatement to contest the
truth of statements or representations in the reinstatement application.
<PAGE>
Loads, fees and charges
Policy charges compensate IDS Life for:
o providing the insurance benefits of the policy;
o issuing the policy;
o administering the policy;
o assuming certain risks in connection with the policy; and
o distributing the policy.
We deduct some of these charges from your premium payments. We deduct others
periodically from your policy value in the fixed and/or subaccounts. We may also
assess a charge if you surrender your policy or the policy lapses.
Premium expense charge
We deduct this charge from each premium payment. We credit the amount remaining
after the deduction, called the net premium, to the account(s) you have
selected. The premium expense charge has two parts:
Sales charge: 2.5% of each premium payment. It partially compensates IDS Life
for expenses in distributing the policy, including agents' commissions,
advertising and printing of prospectuses and sales literature. (The contingent
deferred sales charge, discussed under "Surrender charge," below also may
partially compensate these expenses.)
Premium tax charge: 2.5% of each premium payment. Compensates IDS Life for
paying taxes imposed by certain states and governmental subdivisions on premiums
received by insurance companies. All policies in all states are charged the
average rate of 2.5% even though state premium taxes vary from 2% to 3.5%. This
2.5% rate may be different than the actual premium tax IDS Life expects to pay
in your state.
Monthly deduction
On each monthly date we deduct from the value of your policy in the fixed and/or
subaccounts an amount equal to the sum of:
1. the cost of insurance for the policy month;
2. the policy fee shown in your policy;
3. the death benefit guarantee charge shown in your policy; and
4. charges for any optional insurance benefits provided by rider for the
policy month.
We explain each of the four components below.
You specify, in your policy application, what percentage of the monthly
deduction from 0% to 100% you want us to take from the fixed account and from
each of the subaccounts. You may change these percentages for future monthly
deductions by writing to us.
We will take monthly deductions will be taken from the fixed account and the
subaccounts on a pro rata basis if:
o you do not specify the accounts from which you want us to take the
monthly deduction;
o the value in the fixed account or any subaccount is insufficient to
pay the portion of the monthly deduction you have specified; or
o you purchased the policy in Texas.
If the cash surrender value of your policy is not enough to cover the monthly
deduction on a monthly anniversary, the policy may lapse. However, the policy
will not lapse if the DBG is in effect. (See "Death benefit guarantee," also
"Grace period" and "Reinstatement.")
<PAGE>
Components of the monthly deduction:
1. Cost of insurance: primarily, the cost of providing the death benefit under
your policy, which depends on:
o the amount of the death benefit;
o the policy value; and
o the statistical risk that the insured will die in a given period.
The cost of insurance for a policy month is calculated as:
[a x (b - c)] + d
where:
(a) is the monthly cost of insurance rate, based on the insured's sex, attained
insurance age (age at last policy anniversary) and rate classification.
Generally, the cost of insurance rate will increase as the insured's attained
insurance age increases.
We set the rates based on our expectations as to future mortality experience. We
may change the rates from time to time; any change will apply to all individuals
of the same rate classification. However, rates will not exceed the Guaranteed
Maximum Monthly Cost of Insurance Rates shown in your policy, which are based on
the 1980 Commissioners Standard Ordinary Smoker and Nonsmoker Mortality Tables,
Age Nearest Birthday.
If you purchase your policy on or after May 1, 1991 with an initial specified
amount of $350,000 or greater, your policy qualifies for lower cost of insurance
rates than policies purchased with a specified amount less than $350,000. In
addition, if you purchase your policy on or after May 1, 1993 (October 1, 1993
for policies purchased in New Jersey) and before November 20, 1997, it qualifies
for lower cost of insurance rates than policies purchased earlier. IDS Life
modified cost of insurance rates to reflect IDS Life and industry-wide changes
in mortality experience for all policies purchased on or after November 20,
1997. These modified cost of insurance rates effective November 20, 1997, do not
apply to policies purchased in New Jersey.
(b) is the death benefit on the monthly date divided by 1.0036748 (which reduces
IDS Life's net amount at risk, solely for computing the cost of insurance, by
taking into account assumed monthly earnings at an annual rate of 4.5%);
(c) is the policy value on the monthly date. At this point, the policy value has
been reduced by the policy fee, death benefit guarantee charge and any charges
for optional riders;
(d) is any flat extra insurance charges we assess as a result of special
underwriting considerations.
Note for Massachusetts and Montana residents
Please disregard all policy provisions in this prospectus that are based on the
sex of the insured. The policy will be issued on a unisex basis. Also disregard
references to mortality tables; the tables will be replaced with an 80% male,
20% female blend of the 1980 Commissioners Standard Ordinary Smoker and
Non-Smoker Mortality Tables, Age Nearest Birthday.
2. Policy fee: $5 per month. We waive this fee for policies purchased on or
after May 1, 1991 with an initial specified amount of $350,000 or more. This
charge reimburses IDS Life for expenses of issuing the policy, such as
processing the application (primarily underwriting) and setting up computer
records; and of administering the policy, such as processing claims, maintaining
records, making policy changes and communicating with owners. We reserve the
right to change the charge in the future, but guarantee that it will never
exceed $7.50 per month.
<PAGE>
3. Death benefit guarantee charge: 1 cent per $1,000 of the current specified
amount and 1 cent per $1,000 of coverage under any other insured rider. This
charge compensates IDS Life for the risk it assumes in providing the DBG. The
charge is included in the monthly deduction in the first five policy years or
until the insured's attained insurance age 70, whichever is later. We will not
deduct the charge if the DBG is no longer in effect. For any policy month in
which a waiver of monthly deduction rider pays the monthly deduction, the
minimum monthly premium will be zero. (See "Death benefit guarantee," for an
explanation of the minimum monthly premium and "Other insured rider," under
"Optional insurance benefits.")
4. Optional insurance benefit charges: charges for any optional benefits added
to the policy by rider. See "Optional insurance benefits."
Surrender charge
If you surrender your policy or the policy lapses during the first 10 policy
years and in the 10 years following an increase in specified amount, we will
assess a surrender charge. The surrender charge is the sum of two parts:
Contingent deferred issue and administrative expense charge:
Reimburses IDS Life for costs of issuing the policy, such as processing the
application (primarily underwriting) and setting up computer records. For the
initial specified amount, this charge is $4 per thousand dollars of initial
specified amount. It remains level during the first five policy years and then
decreases monthly until it is zero at the end of 10 policy years. If you
increase the specified amount of the policy, an additional charge will apply.
The additional charge will be $4 per thousand dollars of increase in specified
amount. It remains level during the first five years following the effective
date of the increase and then decreases monthly until it is zero at the end of
the 10th year following the increase.
Contingent deferred sales charge:
Partially compensates IDS Life for expenses of distributing the policy,
including financial advisors' commissions, advertising and printing the
prospectus and sales literature. For the initial specified amount, this charge
is the sum of 27.5% of premium payments up to a maximum amount shown in the
policy plus 6.5% of all other premium payments. The maximum amount shown in the
policy will be based on the insured's insurance age, sex, rate classification
and initial specified amount. If you increase the specified amount of the
policy, an additional charge will apply. The additional charge will be 6.5% of
all premium payments attributable to the increase.
Premiums attributable to the increase are calculated as
a x (b + c)
where:
(a) is the amount of the increase in the specified amount divided by the total
specified amount after the increase; (b) is the policy value on the date of the
increase; and (c) is all premium payments paid on or after the date of the
increase.
Maximum surrender charge:
The total surrender charge is subject to an overall upper limit or "maximum
surrender charge." We will share "maximum surrender charge" for the initial
specified amount in the policy. It is based on the insured's insurance age, sex,
rate classification and initial specified amount. The "maximum surrender charge"
for the initial specified amount will remain level during the first five policy
years and then decrease monthly until it is zero at the end of 10 policy years.
If you increase the specified amount, an "additional maximum surrender charge"
will apply. We will show the "additional maximum surrender charge" in a revised
policy. It will be based on the insured's attained insurance age, sex, rate
classification and the amount of the increase. The "additional maximum surrender
charge" will remain level during the first five years following the effective
date of the increase and then decrease monthly until it is zero at the end of
the 10th year following the increase.
If premium payments are equal to or somewhat higher than the premiums needed to
keep the DBG in effect, for several years the surrender charge generally will be
the charge described in the "Contingent deferred issue and administrative
expense charge" and "Contingent deferred sales charge" sections above. After
that, the "Maximum surrender charge" generally will apply. If you pay premium
payments at a significantly higher level, the "Maximum surrender charge"
generally will apply in all years.
<PAGE>
Partial surrender fee
If you surrender part of the value of your policy, we will charge you $25 (or 2%
of the amount surrendered, if less). This fee is guaranteed not to increase for
the duration of your policy.
Mortality and expense risk charge
This charge applies only to the subaccounts and not to the fixed account. It is
equal, on an annual basis, to 0.9% of the daily net asset value of the
subaccounts -- a level guaranteed for the life of the policy. Computed daily,
the charge compensates IDS Life for:
o Mortality risk -- the risk that the cost of insurance charge will be
insufficient to meet actual claims.
o Expense risk -- the risk that the policy fee and the contingent
deferred issue and administrative expense charge (described above) may
be insufficient to cover the cost of administering the policy.
Any profit from the mortality and expense risk charge would be available to IDS
Life for any proper corporate purpose including, among others, payment of sales
and distribution expenses, which we do not expect to be covered by the sales and
surrender charges discussed earlier. IDS Life will make us any further deficit
from its general assets.
Transaction charge
IDS Life makes a daily charge against the assets of the subaccount that invests
in the trust. This charge is intended to reimburse us for the transaction fee we
pay from our general account assets to Smith Barney on the sale of the trust
units to the subaccounts.
The asset charge is equivalent to an effective annual rate of 0.25% of the value
of the subaccounts investing in the trust. We can increase this amount in the
future, but it will not exceed an effective annual rate of 0.5% of the value of
these subaccounts. The charge will be based on our costs (taking into account
the interest we lose on the amounts paid to Smith Barney).
Fund expenses
The investment managers and advisers receive fees for their services to the
funds. The funds also pay taxes, brokerage commissions and nonadvisory expenses,
such as custodian and trustee fees, registration fees for shares, postage,
fidelity and security bond costs, legal fees and other miscellaneous fees and
charges. The table below will help you understand the expenses that the funds
pay.
<TABLE>
<CAPTION>
Annual operating expenses of the funds at
(management fees, and other expenses deducted as a percentage of average net assets as follows:)
IDS Life IDS Life Series
Series IDS Life Fund-International
Fund-Government Series Equity
IDS Life IDS Life Securities Fund-Equity (after expense
IDS Life IDS Life Series Series (after Income limitation)*
Series Series Fund-Money Fund-Managed* expense (after
Fund-Equity* Fund-Income* Market* limitation)* expense
limitation)*
<S> <C> <C> <C> <C> <C> <C> <C>
Management fees 0.70% 0.70% 0.50% 0.70% 0.70% 0.70%% 0.95%
Other expenses 0.02 0.04 0.10 0.02 0.10* 0.10* 0.10*
Total 0.72%** 0.74%** 0.60%** 0.72%** 0.80%** 0.80%** 1.05%**
<PAGE>
AIM V.I.
Growth and Putnam VT New
Income Fund*** Opportunities
-Class IA
Management fees 0.63% 0.58%
Other expenses 0.06 0.05
Total 0.69%+ 0.63%
</TABLE>
* IDS Life has agreed to a voluntary limit of 0.1%, on an annual basis, of
the average daily net assets of each of the IDS Life Series Fund Portfolios
for other expenses like taxes and brokerage commissions and for nonadvisory
expenses. If the 0.1% limitation had not been in place, these other
expenses would have been 0.19% for IDS Life Series Fund-Government
Securities Portfolio and 0.11% for IDS Life Series Fund-International
Equity Portfolio. IDS Life Series Fund-Equity Income Portfolio is new. IDS
Life plans to limit these expenses to 0.1%. IDS Life reserves the right to
discontinue limiting these other expenses at 0.1%. However, its present
intention is to continue the limit until the time that actual expenses are
less than the limit. Annualized operating expenses of underlying funds at
--------------
** Operating expenses of the underlying funds at Dec. 31, 1997. A I M
Advisers, Inc. ("AIM") may from time to time voluntarily waive or reduce
its respective fees. Effective May 1, 1998, the Funds reimburse AIM in an
amount up to 0.25% of the average net asset value of each Fund, for
expenses incurred in providing, or assuring that participating insurance
companies provide, certain administrative services. Currently, the fee only
applies to the average net asset value of each Fund in excess of the net
asset value of each Fund as calculated on April 30, 1998.
+ Operating expenses of the funds at Dec. 31, 1997.
IDS Life has entered into certain arrangements under which it is compensated by
the funds' advisors and/or distributors for the administrative services it
provides to these funds.
Other information on charges
IDS Life may reduce or eliminate various fees and charges when we incur lower
sales costs and/or perform fewer administrative services than usual.
Policy value
The value of your policy is the sum of values in the fixed account and each
subaccount of the variable account.
Fixed account value
The value in the fixed account on the policy date (when the policy is issued)
equals:
o the portion of your initial net premium allocated to the fixed account; plus
o interest accrued before the policy date; minus
o the portion of the monthly deduction for the first policy month allocated to
the fixed account.
On any later date, the value in the fixed account equals:
o the value on the previous monthly date; plus
o net premiums allocated to the fixed account since the last monthly
date; plus
o any transfers to the fixed account from the subaccounts, including
loan transfers, since the last monthly date; plus
o accrued interest on all of the above; minus
o any transfers from the fixed account to the subaccounts, including
loan repayment transfers, since the last monthly date; minus
o any partial surrenders or partial surrender fees allocated to the
fixed account since the last monthly date; minus
<PAGE>
o interest on any transfers or partial surrenders, from the date of the
transfer or surrender to the date of calculation; minus
o any portion of the monthly deduction for the coming month that is
allocated to the fixed account if the date of calculation is a monthly
date.
Subaccount values
The value in each subaccount changes daily, depending on the investment
performance of the fund or trust in which that subaccount invests and on other
factors detailed below. There is no guaranteed minimum subaccount value. You as
owner bear the entire investment risk.
Calculation of subaccount value: The value of each subaccount on the policy date
equals:
o the portion of your initial net premium allocated to the subaccount; plus
o interest accrued before the policy date; minus o the portion of the
monthly deduction for the first policy month allocated to that subaccount.
The value of each subaccount on each valuation date equals:
o the value of the subaccount on the preceding valuation date, multiplied
by the net investment factor for the current valuation period
(explained below); plus
o net premiums received and allocated to the subaccount during the
current valuation period; plus
o any transfers to the subaccount (from the fixed account or other
subaccounts, including loan repayment transfers) during the period;
minus
o any transfers from the subaccount including loan transfers during the
current valuation period; minus
o any partial surrenders and partial surrender fees allocated to the
subaccount during the period; minus
o any portion of the monthly deduction allocated to the subaccount
during the period.
The net investment factor measures the investment performance of a subaccount
from one valuation period to the next. Because performance may fluctuate, the
value of a subaccount may increase or decrease from day to day.
Accumulation units: We convert the policy value allocated to each subaccount
into accumulation units. Each time you direct a premium payment or transfer
policy value into one of the subaccounts, we credit a certain number of
accumulation units to your policy for that subaccount. Conversely, each time you
take a partial surrender or transfer value out of a subaccount, we subtract a
certain number of accumulation units.
Accumulation units are the true measure of investment value in each subaccount.
For subaccounts investing in the funds, they're related to, but not the same as,
the net asset value of the corresponding fund. The dollar value of each
accumulation unit can rise or fall daily, depending on the investment
performance of the underlying fund, on any change in the value of trust units
and on certain charges. Here is how unit values are calculated:
Number of units: To calculate the number of units for a particular subaccount,
we divide your investment (net premium or transfer amount) by the current
accumulation unit value.
Accumulation unit value: The current value for each subaccount equals the last
value times the current net investment factor.
Net investment factor: We determine the net investment factor at the end of
each valuation period. This factor equals
(a divided by b) - c
where:
(a) equals:
o net asset value per share of the fund or value of a unit of the
trust; plus
<PAGE>
o per-share amount of any dividend or capital gain distribution made by
the relevant fund to the subaccount; plus
o any credit or minus any charge for reserves to cover any tax liability
resulting from the investment operations of the subaccount.
(b) equals:
o net asset value per share of the fund or value of a unit of the trust
at the end of the preceding valuation period; plus
o any credit or minus any charge for reserves to cover any tax liability
in the preceding valuation period.
(c) is a percentage factor representing the mortality and expense risk charge
and, for the subaccount investing in the trust, the transaction charge, as
described in "Loads, fees and charges," above.
Factors that affect subaccount accumulation units:
Accumulation units may change in two ways; in number and in value. Here are the
factors that influence those changes:
The number of accumulation units you own may fluctuate due to:
o additional purchase payments allocated to the subaccounts;
o transfers into or out of the subaccount(s);
o partial surrenders and partial surrender fees;
o surrender charges; and/or
o pro rata portions of the monthly deductions
Accumulation unit values will fluctuate due to:
o changes in underlying fund(s) net asset value or the value of the trust;
o dividends distributed to the subaccount(s);
o capital gains or losses of underlying funds;
o fund operating expenses;
o mortality and expense risk charges; and/or
o the transaction charge for the subaccount investing in the trust.
Death benefits
When you purchase your policy, you decide on the minimum amount of protection
you want for the beneficiary if the insured dies. This amount is called the
specified amount. Your policy's death benefit can never be less than this amount
unless you change it or unless your policy has an outstanding indebtedness.
You also choose one of two death benefit options, which determines how the
policy's value will affect the amount paid to the beneficiary if the insured
dies while the policy is in force:
<PAGE>
Option 1 (level amount): Under this option, the policy's value is part of the
specified amount. The Option 1 death benefit is the greater of:
o the specified amount on the date of the insured's death; or
o the applicable percentage of the policy value on the date of death, if
death occurs on a valuation date, or on the next valuation date
following the date of death. (See table below.)
<TABLE>
<CAPTION>
Applicable percentage table
Insured's attained Applicable percentage of Insured's attained Applicable percentage of
insurance age policy value insurance age policy value
<S> <C> <C> <C>
40 or younger 250% 61 128%
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75 - 95 105
55 150 96 104
56 146 97 103
57 142 98 102
58 138 99 101
59 134 100 100
60 130
</TABLE>
The percentage is designed to ensure that the policy meets the provisions of
federal tax law which requires a minimum death benefit in relation to policy
value for your policy to qualify as life insurance.
Option 2 (variable amount): Under this option, the policy value is added to the
specified amount. The Option 2 death benefit is the greater of:
o the policy value plus the specified amount; or
o the applicable percentage of policy value (from the preceding table) on
the date of death, if death occurs on a valuation date, or on the next
valuation date following the date of death.
Examples: Option 1 Option 2
- --------- -------- --------
specified amount $100,000 $100,000
policy value $5,000 $5,000
death benefit $100,000 $105,000
policy value increases to $8,000 $8,000
death benefit $100,000 $108,000
policy value decreases to $3,000 $3,000
death benefit $100,000 $103,000
If you want to have premium payments and favorable investment performance
reflected partly in the form of an increasing death benefit, you should consider
Option 2. If you are satisfied with the specified amount of insurance protection
and prefer to have premium payments and favorable investment performance
reflected to the maximum extent in the policy value, you should consider Option
1. Under Option 1, the cost of insurance is lower because IDS Life's net amount
at risk is generally lower; for this reason the monthly deduction is less and a
larger portion of your premiums and investment returns is retained in the policy
value.
<PAGE>
Change in death benefit option
You may make a written request to change the death benefit option once per
policy year. A change in the death benefit option also will change the specified
amount. You do not need to provide additional evidence of insurability.
If you change from Option 1 to Option 2: The specified amount will decrease by
an amount equal to the policy value on the effective date of the change. You
cannot change from Option 1 to Option 2 if the resulting specified amount would
fall below the minimum amount shown in the policy.
The minimum specified amount for policies purchased on or after May 1, 1991 with
an initial specified amount of $350,000 or more is:
o $350,000 in the first policy year;
o $325,000 in years two to five;
o $300,000 in years six to 10; and
o $275,000 thereafter.
If you change from Option 2 to Option 1: The specified amount will increase by
an amount equal to the policy value on the effective date of the change.
An increase or decrease in specified amount resulting from a change in the death
benefit option will affect the following policy costs:
o Monthly deduction because the cost of insurance depends upon the
specified amount.
o Minimum monthly premium.
o Charges for certain optional insurance benefits.
The surrender charge will not be affected.
Changes in specified amount
Subject to certain limitations, you may make a written request to increase or
decrease the specified amount at any time. Changes in specified amount may have
tax implications, discussed in the section "Modified endowment contracts" under
"Federal taxes."
Increases: If you increase the specified amount, we may require additional
evidence of insurability that is satisfactory to us. The effective date of the
increase will be the monthly anniversary on or next following our approval of
the increase. The increase may not be less than $10,000, and we will not permit
an increase after the insured's attained insurance age 75.
An increase in the specified amount will have the following effects on policy
charges:
o Your monthly deduction will increase because the cost of insurance and
the death benefit guarantee charge both depend upon the specified
amount.
o Charges for certain optional insurance benefits will increase.
o The minimum monthly premium will increase if the DBG is in effect.
o The surrender charge will increase.
At the time of the increase in specified amount, the cash surrender value of
your policy must be sufficient to pay the monthly deduction on the next monthly
anniversary. The increased surrender charge will reduce the cash surrender
value. If the remaining cash surrender value is not sufficient to cover the
monthly deduction, we will require you to pay additional premiums within the
61-day grace period. If you do not, the policy will lapse unless the DBG is in
effect. Because the minimum monthly premium will increase, you may also have to
pay additional premiums to keep the DBG in effect.
<PAGE>
Decreases: Any decrease in specified amount will take effect on the monthly
anniversary on or next following our receipt of your written request. The
specified amount remaining after the decrease may not be less than the minimum
specified amount (currently $50,000 for the first two policy years, $40,000 in
years three through 10, and $25,000 thereafter). If, following a decrease in
specified amount, the policy would no longer qualify as life insurance under
federal tax law, the decrease may be limited to the extent necessary to meet
these requirements.
The minimum specified amount for policies purchased on or after May 1, 1991 with
an initial specified amount of $350,000 or more is:
o $350,000 in the first policy year;
o $325,000 in years two to five;
o $300,000 in years six to 10; and
o $275,000 thereafter.
A decrease in specified amount will affect your costs as follows:
o Your monthly deduction will decrease because the cost of insurance and
the DBG charge both depend upon the specified amount.
o Charges for certain optional insurance benefits will decrease.
o The minimum monthly premium will decrease if the DBG is in effect.
o The surrender charge will not change.
No surrender charge is imposed when you request a decrease in the specified
amount.
We will deduct decreases in the specified amount from the current specified
amount in this order:
o First from the portion due to the most recent increase;
o Next from portions due to the next most recent increases
successively; and
o Then from the initial specified amount when the policy was issued.
This procedure may affect the cost of insurance if we have applied different
rate classifications to the current specified amount. We will eliminate the rate
classification applicable to the most recent increase in the specified amount
first, then the rate classification applicable to the next most recent increase,
and so on.
Misstatement of age or sex
If the insured's age or sex has been misstated, the proceeds payable upon death
will be:
o the policy value on the date of death; plus
o the amount of insurance that would have been purchased by the cost of
insurance deducted for the policy month during which death occurred, if
that cost had been calculated using rates for the correct age and sex;
minus
o the amount of any outstanding indebtedness on the date of death.
Suicide
Suicide by the insured, whether sane or insane, within two years from policy
date is not covered by the policy. If suicide occurs, the only amount payable to
the beneficiary will be the premiums paid, minus the amount of any outstanding
indebtedness.
In Colorado and North Dakota, the suicide period is shortened to one year. In
Missouri, IDS Life must prove that the insured intended to commit suicide at the
time he or she applied for coverage.
<PAGE>
Beneficiary
Initially, the beneficiary will be the person you designate in your application
for the policy. You may change the beneficiary by giving written notice to IDS
Life, subject to requirements and restrictions stated in the policy. If you do
not designate a beneficiary, or if the designated beneficiary dies before the
insured, the beneficiary will be you or your estate.
Transfers between the fixed account and subaccounts
You may transfer policy values from one subaccount to another or between
subaccounts and the fixed account. For most transfers, we will process your
transfer request at the end of the valuation period during which we receive your
request. There is no charge for transfers. Before transferring policy value, you
should consider the risks involved in switching investments.
We may suspend or modify the transfer privilege at any time. Transfers involving
the fixed account are subject to the restrictions below.
Fixed account transfer policies
o You must make transfers from the fixed account during a 30-day period
starting on a policy anniversary, except for automated transfers, which can
be set up for monthly, quarterly or semiannual transfer periods.
o If we receive your request to transfer amounts from the fixed account
within 30 days before the policy anniversary, the transfer will become
effective on the anniversary.
o If we receive your request on or within 30 days after the policy
anniversary, the transfer will be effective on the day we receive it.
o We will not accept requests for transfers from the fixed account at any
other time.
o If you made a transfer from the fixed account to one or more subaccounts,
you may not make a transfer from any subaccount back to the fixed account
until the next policy anniversary. We will waive this limitation once
during the first two policy years if you exercise the policy's right to
exchange provision. (See "Exchange right.")
Minimum transfer amounts
From a subaccount to another subaccount or the fixed account:
o For mail and phone transfers -- $250 or the entire subaccount balance,
whichever is less.
o For automated transfers -- $50.
From the fixed account to a subaccount:
o $250 or the entire fixed account balance minus any outstanding
indebtedness, whichever is less.
o For automated transfers -- $50.
Maximum transfer amounts
From a subaccount to another subaccount or the fixed account:
o None.
From the fixed account to a subaccount:
o Entire fixed account balance minus any outstanding indebtedness.
<PAGE>
Maximum number of transfers per year
We reserve the right to limit mail and telephone transfers to five per policy
year. Twelve automated transfers per policy are allowed.
Two ways to request a transfer, loan or surrender
Provide your name, policy number, Social Security Number or Taxpayer
Identification Number when you request a transfer.
1 By letter
Regular mail:
IDS Life Insurance Company
P.O. Box 499
Minneapolis, MN 55440
Express mail:
IDS Life Insurance Company
733 Marquette Ave.
Minneapolis, MN 55402
2 By phone
Call between 7 a.m. and 6 p.m. Central Time:
1-800-437-0602 (toll free) or
(612) 671-4738 (Minneapolis)
TTY service for the hearing impaired:
1-800-285-8846 (toll free)
o We answer phone requests promptly, but you may experience delays when
call volume is unusually high. If you are unable to get through, use
mail procedure as an alternative.
o We will honor any telephone transfer or surrender request we believe is
authentic and we will use reasonable procedures to confirm that it is.
These procedures include asking identifying questions and tape
recording calls. As long as we follow these procedures, IDS Life and
its affiliates will not be liable for any loss resulting from
fraudulent requests.
o We make telephone transfers available automatically. If you do not want
telephone transfers to be made from your account, please write to IDS
Life and tell us.
Automated transfers
In addition to written and phone requests, you can arrange to have policy value
transferred from one account to another automatically. Your financial advisor
can help you set up an automated transfer.
Automated transfer policies:
o Minimum automated transfer: $50
o Only one automated transfer arrangement can be in effect at any time.
You can transfer policy values to one or more subaccounts and the fixed
account, but you can transfer from only one account.
o You can start or stop this service by written request. You must allow
seven days for us to change any instructions that currently are in
place.
o You cannot make automated transfers from the fixed account in an amount
that, if continued, would deplete the fixed account within 12 months.
<PAGE>
o If you made a transfer from the fixed account to one or more
subaccounts, you may not make a transfer from any subaccount back to
the fixed account until the next policy anniversary.
o If you submit your automated transfer request with an application for a
policy, automated transfers will not take effect until the policy is
issued.
o If the value of the account from which you are transferring policy
value is less than the $50 minimum, we will stop the transfer
arrangement automatically.
o Automated transfers are subject to all other policy provisions and
terms including provisions relating to the transfer of money between
the fixed account and the subaccounts.
Automated dollar-cost averaging
You can use automated transfers to take advantage of dollar-cost averaging --
investing a fixed amount at regular intervals. For example, you might have a set
amount transferred monthly from a relatively conservative subaccount to a more
aggressive one, or to several others.
This systematic approach can help you benefit from fluctuations in accumulation
unit value, caused by fluctuations in the market value of the underlying fund.
Since you invest the same amount each period, you automatically acquire more
units when the market value falls, fewer units when it rises. The potential
effect is to lower your average cost per unit. There is no charge for
dollar-cost averaging.
How dollar-cost averaging works
Amount Accumulation Number of units
Month invested unit value purchased
Jan $100 $20 5.00
Feb 100 16 6.25
Mar 100 9 11.11
Apr 100 5 20.00
May 100 7 14.29
June 100 10 10.00
July 100 15 6.67
Aug 100 20 5.00
Sept 100 17 5.88
Oct 100 12 8.33
(footnotes to table) By investing an equal number of dollars each month...
(arrow in table pointing to April) you automatically buy more units when the per
unit market price is low.
(arrow in table pointing to August) and fewer units when the per unit market
price is high.
You have paid an average price of only $10.81 per unit over the 10 months, while
the average market price actually was $13.10.
Dollar-cost averaging does not guarantee that any variable subaccount will gain
in value, nor will it protect against a decline in value if market prices fall.
Because this strategy involves continuous investing, your success with
dollar-cost averaging will depend upon your willingness to continue to invest
regularly through periods of low price levels. Dollar-cost averaging can be an
effective way to help meet your long-term goals.
<PAGE>
Policy loans
You may borrow against your policy by written or telephone request. (See chart
under "Transfers between the fixed account and subaccounts" for address and
phone numbers for your requests.) We will process your loan request at the end
of valuation period during which we receive your request. (Loans by telephone
are limited by $50,000.)
Interest rate: The interest rate for policy loans is 6.1% payable in advance,
which is equivalent to a 6.5% effective rate. For policies purchased on or after
May 1, 1993 (October 1, 1993 for New Jersey), we expect to reduce the loan
interest rate after a policy's 10th anniversary to 4.3% payable in advance,
equivalent to a 4.5% effective rate.
Minimum loan: $500 ($200 for Connecticut residents) or the remaining loan value,
whichever is less.
Maximum loan:
o In Texas, 100% of the policy value in the fixed account, minus a pro
rata portion of surrender charges.
o In Virginia, 90% of the policy value minus surrender charges.
o In all other states, 85% of the policy value minus surrender charges.
We will compute the maximum loan value as of the end of the valuation period
during which we receive your loan request. The amount available at any time for
a new loan is the maximum loan value less any existing indebtedness. When we
compute the amount available, we reserve the right to deduct from the loan value
interest for the period until the next policy anniversary and monthly deductions
that we will take until the next policy anniversary.
Payment of loaned funds: Generally, we will pay loans within seven days after we
receive your request (with certain exceptions - see "Deferral of payments,"
under "Payment of policy proceeds").
Allocation of loans to accounts: If you do not specify whether the loan is to
come from the fixed account or the subaccounts, we will take it from the
subaccounts and the fixed account in proportion to their values, minus
indebtedness. When we make a loan from a subaccount, we redeem accumulation
units and transfer the proceeds into the fixed account. We will credit the
loaned amount with 4.5% annual interest.
Repayments: We will allocate loan repayments to subaccounts and/or the fixed
account using the premium allocation percentages in effect unless you tell us
otherwise. Repayments must be in amounts of at least $25.
Overdue interest: If you do not pay accrued interest when it is due, we will
increase the amount of indebtedness in the fixed account to cover the amount
due. Interest added to a policy loan will be charged the same interest rate as
the loan itself. We will take such interest from the fixed account and/or
subaccounts, using the monthly deduction allocation percentages. If the value in
the fixed account or any subaccount is not enough to pay the allocated interest,
we will take all of the interest from all of the accounts in proportion to their
value, minus indebtedness.
Effects of policy loans: If you do not repay your loan, it will reduce the death
benefit and policy value. Even if you do repay it, your loan can have a
permanent effect on death benefits and policy values, because money you borrow
against the subaccounts will not share in the investment results of the relevant
fund(s) or trust(s).
A loan may terminate the DBG. We deduct the loan amount from the total premiums
you pay, which may reduce the total below the level required to keep the DBG in
effect.
Taxes: If your policy lapses or you surrender it with an outstanding
indebtedness, and the amount of outstanding indebtedness plus the cash surrender
value is more than the sum of premiums you paid, you generally will be liable
for taxes on the excess. (See "Federal taxes.")
<PAGE>
Policy surrenders
You may surrender your policy in full or in part by written or telephone
request. (See chart under "Transfers between the fixed account and
subaccounts.") We will process your surrender request at the end of the
valuation period during which we receive your request. We may require that you
return your policy.
We normally will process your payment within seven days; however, we reserve the
right to defer payment. (See "Deferral of payments," under "Payment of policy
proceeds.")
Total surrenders: If you totally surrender your policy, you receive its cash
surrender value -- the policy value minus outstanding indebtedness and
applicable surrender charges. (See "Loads, fees and charges.") We will compute
the value of each subaccount as of the end of the valuation period during which
we receive your request.
Partial surrenders: After the first policy year, you may surrender any amount
from $500 up to 85% of the policy's cash surrender value. (Partial surrenders by
telephone are limited to $50,000.) We will charge you a partial surrender fee,
described under "Loads, fees and charges."
Allocation of partial surrenders: Unless you specify otherwise, IDS Life will
make partial surrenders from the fixed account and subaccounts in proportion to
their values at the end of the valuation period during which we receive your
request. In determining these proportions, we first subtract the amount of any
outstanding indebtedness from the fixed account value.
Effects of partial surrenders:
A partial surrender will reduce the policy value by the amount of the partial
surrender and fee.
A partial surrender will reduce the death benefit by the amount of the partial
surrender and fee, or, if the death benefit is based on the applicable
percentage of policy value, by an amount equal to the applicable percentage
times the amount of the partial surrender.
A partial surrender may terminate the DBG. We deduct the surrender amount from
total premiums you paid, which may reduce the total below the level required to
keep the DBG in effect.
If Option 1 is in effect, a partial surrender will reduce the specified amount
by the amount of the partial surrender and fee. IDS Life will deduct this
decrease from the current specified amount in this order:
o First from the specified amount provided by the most recent increase;
o Next from the next most recent increases successively;
o Then from the initial specified amount when the policy was issued.
Because they reduce the specified amount, partial surrenders may affect the cost
of insurance. IDS Life will not allow a partial surrender if it would reduce the
specified amount below the required minimum. (See "Decreases" under "Death
benefits.")
o If Option 2 is in effect, a partial surrender does not affect the
specified amount.
Taxes:
Upon surrender, you generally will be liable for taxes on any excess of the cash
surrender value plus outstanding indebtedness over the premium paid. (See
"Federal taxes.")
Exchange right
For two years after the policy is issued, you can exchange it for one that
provides benefits that do not vary with the investment return of the
subaccounts. Because the policy itself offers a fixed return option, all you
need to do is transfer all of the policy value in the subaccounts to the fixed
account. We automatically will credit all future premium payments to the fixed
account unless you request a different allocation.
A transfer for this purpose will not count against the five-transfers-per-year
limit. Also, we will waive any restrictions on transfers into the fixed account
for this type of transfer.
There is be no effect on the policy's death benefit, specified amount, net
amount at risk, rate classification or issue age. Only the method of funding the
policy value will be affected.
<PAGE>
Paid-up insurance option
You may request that we use the cash surrender value of the policy to purchase
an amount of paid-up insurance. You may make your request in writing during the
30 days before any policy anniversary. The paid-up insurance policy will take
effect as of the policy anniversary and will mature on the original policy's
maturity date. You will forfeit all rights to make future premium payments and
all riders will terminate.
The amount and cash surrender value of the paid-up insurance will be based on
the cost of insurance rates guaranteed in the policy and on the fixed account
guaranteed interest rate. The paid-up policy's death benefit amount, minus its
cash surrender value, cannot be greater than your current policy's death
benefit, minus its policy value (both as of the date of the paid-up policy's
purchase). The amount of paid-up insurance will remain level and will not be
less than required by law.
Any cash surrender value that is not used to purchase the paid-up insurance
amount will be paid to you. At any time before the insured's death, you may
surrender the paid-up insurance for its cash surrender value.
Optional insurance benefits
You may choose to add the following benefits to your policy, in the form of
riders (if you meet certain requirements). More detailed information on these
benefits is in your policy.
Waiver of monthly deduction (WMD): Under WMD, we will waive the monthly
deduction if the insured becomes totally disabled.
Accidental death benefit (ADB): ADB provides an additional death benefit if the
insured's death is caused by accidental injury.
Other insured rider (OIR): OIR provides a level, adjustable death benefit on the
life of each other insured covered.
Children's insurance rider (CIR): CIR provides level term care on each eligible
child.
Automatic Increase Benefit Rider (AIB): AIB provides an increase in the
specified amount at a designated percentage on each policy anniversary until
insured's attained age 65. This rider is not available in New Jersey.
Accelerated Benefit Rider for Terminal Illness (ABRTI): If the insured is
terminally ill and death is expected to occur within 6 months, the rider
provides that you can withdraw a portion of the death benefit prior to death.
This rider is not available in all states.
Payment of policy proceeds
Proceeds will be paid when:
o you surrender the policy;
o the insured dies; or
o the policy maturity date is reached, which occurs when the insured
reaches attained insurance age 100.
We pay all proceeds by check. We will compute the amount of the death benefit
proceeds and pay it in a single sum unless you select one of the payment options
below. We will pay interest at a rate not less than 4% per year (8% in Arkansas
and Colorado) on single sum death proceeds, from the date of the insured's death
to the settlement date (the date on which we pay proceeds in a lump sum or first
place them under a payment option).
Payment options:
During the insured's lifetime, you may request in writing that we pay policy
proceeds under one or more of the three payment options below. (The beneficiary
may also select a payment option, unless you say that he or she cannot.) You
decide how much of the proceeds will be placed under each option (minimum:
$5,000). We will transfer any such amount to IDS Life's general account. Unless
we agree otherwise, we must make payments under all options to a natural person.
<PAGE>
You also may make a written request to us to change a prior choice of payment
option or, if we agree, to elect a payment option other than the three below.
If you elect a payment option for pre-death proceeds, payments under this option
may be subject to federal income tax as ordinary income. If you elect Option A,
the full pre-death proceeds will be taxed as a full surrender or maturity as
described in "Taxation of policy proceeds" and also may be subject to an
additional 10% penalty tax if the policy is a modified endowment. The interest
paid under Option A will be ordinary income subject to income tax in the year
earned. The interest payments will not be subject to the 10% penalty tax.
If you elect Option B or Option C for payment of pre-death proceeds, any
indebtedness at the time of election will be taxed as a partial surrender as
described in "Taxation of policy proceeds" and may also be subject to an
additional 10% penalty tax if the policy is a modified endowment. We will use
the remainder of the proceeds to make payments under the option elected. A
portion of each payment will be taxed as ordinary income and a portion of each
payment will be considered a return of the investment in the policy and will not
be taxed. We describe an owner's investment in the policy in "Taxation of policy
proceeds". All payments we make after the investment in the policy is fully
recovered will be subject to tax. Amounts we pay under Option B or Option C that
are subject to tax may also be subject to an additional 10% penalty tax. (See
"Penalty tax.")
Death benefit proceeds applied to any payment option are not considered part of
the beneficiary's income and therefore are not subject to federal income tax.
Payments of interest under Option A will be ordinary income subject to tax.
Under Option B or Option C, a portion of each payment will be ordinary income,
subject to tax and a portion of each payment will be considered a return of the
beneficiary's investment in the policy. The beneficiary's investment in the
policy is the death benefit proceeds applied to the payment option. All payments
we make after the investment in the policy is fully recovered will be subject to
tax.
Option A -- Interest payments: We will pay interest on any proceeds placed under
this option at a rate of 4% per year compounded annually, at regular intervals
and for a period that is agreeable to both you and us. At the end of any payment
interval, you may withdraw proceeds in amounts of at least $100. At any time,
you may withdraw all of the proceeds that remain or you may place them under a
different payment option approved by us.
Option B -- Payments for a specified period: We will make fixed monthly payments
for any number of years you specify. Here are examples of monthly payments for
each $1,000 placed under this option:
Payment period Monthly payment per $1,000
(years) placed under Option B
5 $18.32
10 10.06
15 7.34
20 6.00
25 5.22
30 4.72
We will furnish monthly amounts for other payment periods at your request,
without charge.
Option C -- Lifetime income: We will make monthly payments for the life of the
person (payee) who is to receive the income. Payment will be guaranteed for 10,
15 or 20 years.
<PAGE>
We will base the amount of each monthly payment per $1,000 placed under this
option on the table of settlement rates in effect at the time of the first
payment. The amount depends on the sex and adjusted age of the payee on that
date. Adjusted age means the age of the payee (on the payee's nearest birthday)
minus an adjustment as follows:
<TABLE>
<CAPTION>
Calendar year of payee's Adjustment Calendar year of payee's Adjustment
birth birth
<S> <C> <C> <C>
Before 1920 0 1945 - 1949 6
1920 - 1924 1 1950 - 1959 7
1925 - 1929 2 1960 - 1969 8
1930 - 1934 3 1970 - 1979 9
1935 - 1939 4 1980 - 1989 10
1940 - 1944 5 After 1989 11
</TABLE>
The amount of each monthly payment per $1,000 placed under this option will not
be less than amounts shown in the next table.
We will furnish monthly amounts for any adjusted age not shown at your request,
without charge.
<TABLE>
<CAPTION>
Adjusted age payee Life income per $1,000 with payments guaranteed for
- ---------------------------- --------------------------------------------------------------------------------
10 years 15 years 20 years
Male Female Male Female Male Female
- ---------------------------- ------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
50 $4.81 $4.47 $4.74 $4.45 $4.65 $4.40
55 5.20 4.80 5.09 4.74 4.94 4.87
60 5.70 5.22 5.51 5.12 5.25 4.98
65 6.35 5.77 5.98 5.58 5.54 5.32
70 7.14 6.50 6.47 6.12 5.77 5.63
75 8.00 7.40 6.87 6.64 5.91 5.85
</TABLE>
Deferral of payments:
We reserve the right to defer payments of cash surrender value, policy loans or
variable death benefits in excess of the specified amount if:
o the payments derive from a premium payment made by a check that has not
cleared the banking system (we have not collected good payment);
o the NYSE is closed (other than customary weekend and holiday closings);
o in accordance with SEC rules, trading on the NYSE is restricted or,
because of an emergency, it is not practical to dispose of securities
held in the subaccount or determine the value of the subaccount's net
assets.
We may delay the payment of any loans or surrenders from the fixed account up to
six months from the date we receive the request. If we postpone the payment of
surrender proceeds more than 30 days, we will pay you interest on the amount
surrendered at an annual rate of 3% for the period of postponement.
Federal taxes
The following is a general discussion of the policy's federal income tax
implications. It is not intended as tax advice. Because the effect of taxes on
the value and benefits of your policy depends on your individual situation as
well as IDS Life's tax status, YOU SHOULD CONSULT A TAX ADVISOR TO FIND OUT HOW
THESE GENERAL CONSIDERATIONS APPLY TO YOU. The discussion is based on our
understanding of federal income tax laws as the Internal Revenue Service (IRS)
currently interprets them; both the laws and their interpretation may change.
We intend the policy to qualify as a life insurance policy for federal income
tax purposes. To that end, the provisions of the policy are to be interpreted to
ensure or maintain this tax qualification. IDS Life reserves the right to change
the policy in order to ensure that it will continue to qualify as life insurance
for tax purposes. We will send you a copy of any changes.
<PAGE>
IDS Life's tax status
The IRS taxes IDS Life as a life insurance company under the Code. For federal
income tax purposes, we consider the subaccounts a part of IDS Life, although we
treat their operations separately in accounting and financial statements. We
reinvest the investment income from the subaccounts and it becomes part of the
subaccounts' value. The IRS does not tax IDS Life on this investment income,
including realized capital gains. Therefore, IDS Life does not charge the
subaccounts for our federal income taxes. IDS Life reserves the right to make
such a charge in the future if there is a change in the tax treatment of
variable life insurance contracts or in IDS Life's tax status as we currently
understand it.
Taxation of policy proceeds
The IRS does not consider the death benefit to be part of the beneficiary's
income and therefore it is not subject to federal income taxes.
The IRS may tax part or all of any pre-death proceeds that you receive through
full surrender or maturity, lapse, partial surrender, policy loan or assignment
of policy value or payment options as ordinary income. (See the following
table.) In some cases, the tax liability depends on whether the policy is a
modified endowment (explained following the table). The taxable amount also may
be subject to an additional 10% penalty tax if the policy is a modified
endowment.
<TABLE>
<CAPTION>
Source of proceeds Taxable portion of pre-death proceeds
<S> <C>
Full surrender: Amount you receive plus any indebtedness, minus your
investment in the policy.*
Lapse: Any outstanding indebtedness minus your investment in the
policy.*
Partial surrenders Lesser of:
(modified endowments): the amount you receive or policy value minus your
investment in the policy.*
Policy loans and assignments Lesser of:
(modified endowments): the amount of the loan / assignment or policy value minus
your investment in the policy.*
Partial surrenders Generally, if the amount you receive is greater than your
(other policies): investment in the policy,* the amount in excess of your
investment is taxable. However, during the first 15 policy
years, a different amount may be taxable if the partial surrender
results in or is caused by a reduction in benefits.
Policy loans and assignments None
(other policies)
Payment options: If we pay proceeds of the policy under one of the
payment options, see the "Payment option" section for tax
information.
</TABLE>
* The owner's investment is equal to premiums paid, minus the nontaxable portion
of any previous partial surrenders, plus the taxable portion of any previous
policy loans.
<PAGE>
Modified endowment contracts
In 1988, Congress created a new class of life insurance policies called
"Modified Endowment Contracts." The IRS taxes these policies differently from
conventional life insurance contracts.
Your policy is a modified endowment contract if:
o you apply for it or materially change it on or after June 21, 1988 and
o the premiums you pay in the first seven years of the policy, or the
first seven years following a material change, exceed certain limits.
Also, any life insurance policy you receive in exchange for a modified endowment
is itself a modified endowment.
We have procedures for monitoring whether your policy may become a modified
endowment contract. We calculate modified endowment limits when we issue the
policy. We base these limits on the benefits we provide under the policy and on
the risk classification of the insured. We recalculate these limits later if
certain increases or reductions in benefits occur.
Increases in benefits: We recalculate limits when an increase is a "material
change." Almost any increase you request, such as an increase in specified
amount, the addition of a rider benefit or an increase in an existing rider
benefit, is a material change. An automatic increase under the terms of you
policy, such as an increase in death benefit due to operation of the applicable
percentage table described in the "Death benefits" section or an increase in
policy value growth under Option 2, generally is not a material change. A policy
becomes a modified endowment if premiums you pay in the early years following a
material change exceed the recalculated limits.
Reductions in benefits: When you reduce benefits within seven years after issue
or after the most recent material change, we recalculate the limits as if the
reduced level of benefits had always been in effect. In most cases, this
recalculation will further restrict the amount of premium you can pay without
exceeding modified endowment limits. If the premiums you have already paid
exceed the recalculated limits, the policy becomes a modified endowment even if
you do not pay any further premiums.
Distributions affected: Modified endowment rules apply to distributions in the
year the policy becomes a modified endowment and in all subsequent years. In
addition, the rules apply to distributions taken two years before the policy
becomes a modified endowment, which are presumed to be taken in anticipation of
that event.
Serial purchase of modified endowments: The IRS treats all modified endowments
issued by the same insurer (or affiliated companies of the insurer) to the same
owner during any calendar year as one policy for purposes of determining the
amount of any loan or distribution that is taxable.
Penalty tax: If a policy is a modified endowment, the taxable portion of
pre-death proceeds from a full surrender, maturity, lapse, partial surrender,
policy loan or assignment of policy value or certain payment options may be
subject to a 10% penalty tax unless:
o the distribution occurs after the owner attains age 59-1/2;
o the distribution is attributable to the owner becoming
disabled (within the meaning of Code Section 72(m)(7); or
o the distribution is part of a series of substantially equal periodic
payments made at least once a year over the life (or life expectancy)
of the owner or over the joint lives (or life expectancies) of the
owner and the owner's beneficiary.
Other tax considerations
Interest paid on policy loans: If you use a loan for personal purposes, interest
paid on the loan is not tax-deductible. Other rules apply if you use the loan
for trade or business or investment purposes or if a business or corporation
owns the policy from which the loan is taken.
Policy changes: Changing ownership, exchanging or assigning the policy may have
tax consequences, depending on the circumstances.
<PAGE>
Other taxes: Federal estate tax, state and local estate tax, inheritance tax,
gift tax and other tax consequences of ownership or receipt of policy proceeds
will also depend on the circumstances.
Qualified retirement plans: The policy may be used in conjunction with certain
qualified plans. Since the rules governing such use are complex, a purchaser
should consult a competent pension consultant.
On July 6, 1983, the Supreme Court held in Arizona Governing Committee v. Norris
that optional annuity benefits provided under an employee's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. Since the policy's cost of
insurance rates and purchase rates for certain settlement options distinguish
between men and women, employers and employee organizations should consult with
legal counsel before purchasing the policy for any employment-related insurance
or benefit program. Rates that do not distinguish between men and women are
available when required for employment-related programs in all states except
Illinois, Michigan, New Jersey, South Carolina and Texas.
IDS Life
IDS Life is a stock life insurance company organized under the laws of the State
of Minnesota in 1957. Our address is IDS Tower 10, Minneapolis, MN 55440.
IDS Life conducts a conventional life insurance business in the District of
Columbia and all states except New York. A wholly owned subsidiary of IDS Life,
IDS Life Insurance Company of New York, conducts a substantially identical
business in New York.
IDS Life has been in the variable annuity business since 1968 and has sold a
number of different variable annuity contracts and variable life insurance
policies, utilizing other separate accounts, unit investment trusts and mutual
funds.
Ownership
IDS Life is a wholly owned subsidiary of American Express Financial Corporation
(AEFC). AEFC, a Delaware corporation, is a wholly-owned subsidiary of American
Express Company.
The AEFC family of companies offers not only insurance and annuities, but also
mutual funds, investment certificates and a broad range of financial management
services.
Besides managing investments for all funds in the IDS MUTUAL FUND GROUP, AEFC
also manages investments for itself and its subsidiaries, IDS Certificate
Company and IDS Life Insurance Company. Total assets under management on
______________ were more than $__________ billion.
State regulation
IDS Life is subject to the laws of Minnesota governing insurance companies and
to regulation by the Minnesota Department of Commerce. In addition, IDS Life is
subject to regulation under the insurance laws of other jurisdictions in which
it operates. IDS Life files an annual statement in a prescribed form with
Minnesota's Department of Commerce and in each state in which IDS Life does
business. IDS Life's books and accounts are subject to review by the Minnesota
Department of Commerce at all times and a full examination of its operations is
conducted periodically. Such regulation does not, however, involve any
supervision of management or investment practices or policies.
Distribution of the policy
IDS Life is the sole distributor of the policy. IDS Life is registered as a
broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. (NASD). Representatives of IDS
Life are licensed insurance and annuity agents and are registered with the NASD
as representatives of IDS Life.
IDS Life pays its representatives a commission of up to 50% of the initial
minimum monthly premium (annualized) when they sell the policy, plus 3% of all
premiums in excess of 12 times the minimum monthly premium. At the end of policy
years one through 10, IDS Life pays a service fee not greater than 0.3% of the
policy value, net of indebtedness. IDS Life pays additional commissions if an
increase in coverage occurs. IDS Life also pays approximately 27% of the total
representative's commission to the field vice presidents and district sales
managers of the selling representative.
<PAGE>
Legal proceedings
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which IDS Life and do business involving insurers' sales
practices, alleged agent misconduct, failure to properly supervise agents, and
other matters. IDS Life and AEFC, life other life and health insurers, from time
to time are involved in such litigation. In December 1996, an action of this
type was brought against IDS Life and its parent, AEFC. A second action was
filed in March, 1997. The plaintiffs purport to represent a class consisting of
all persons who replaced existing IDS Life policies with new IDS Life policies
from and after January 1, 1985. The complaint puts at issue various alleged
sales practices and misrepresentations, alleged breaches of fiduciary duties and
alleged violations of consumer fraud statutes. Plaintiffs seek damages in an
unspecified amount and also seek to establish a claims resolution facility for
the determination of individual issues.
On October 13, 1998, an action entitled Richard W. And Elizabeth J. Thoresen vs.
American Express Financial Corporation, American Centurion Life Assurance
Company, American Enterprise Life Insurance Company, American Partners Life
Insurance Company, IDS Life Insurance Company and IDS Life Insurance Company of
New York was commenced in Minnesota State Court. The action was brought by
individuals who purchased an annuity in a qualified plan. They allege that the
sale of annuities in tax-deferred contributory retirement plans (e.g., IRAs) is
never appropriate. The plaintiffs purport to represent a class consisting of all
persons who made similar purchases. The plaintiffs seek damages in an
unspecified amount.
IDS Life believes it has meritorious defenses to these and other actions arising
in connection with the conduct of its business activities and intends to defend
them vigorously. IDS Life is a defendant in various other lawsuits, none of
which, in IDS Life's opinion will result in a material liability.
Year 2000
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of the variable account.
The variable account has no computer systems of its own but is dependent upon
the systems maintained by AEFC and certain other third parties.
AEFC has conducted a comprehensive review of its computer systems and business
processes to identify the major systems that could be affected by the Year 200
issue. AEFC is taking steps to resolve any potential problems including
modification to existing software and the purchase of new software. There
measures are scheduled to be completed and tested on a timely basis. AEFC's goal
is to complete internal remediation and testing of each system by the end of
1998 and to continue compliance efforts through 1999. AEFC also is evaluating
the Year 2000 readiness of unaffiliated investment managers and other third
parties whose system failures could have an impact on the variable account's
operations. AEFC does not know the potential materiality of any such impact at
this time.
Experts
[to be filed by amendment]
Management of IDS Life
Directors
David R. Hubers
Director since September 1989; president and chief executive officer, AEFC,
since August 1993, and director, AEFC, since January 1984; senior vice
president, Finance and chief financial officer, AEFC, from January 1984 to
August 1993.
Richard W. Kling
Director since February 1984; president since March 1994. Executive vice
president, Marketing and Products from January 1988 to March 1994; senior vice
president, AEFC, since May 1994; director of IDS Life Series Fund, Inc. and
chairman of the board of managers of IDS Life Variable Annuity Funds A and B.
<PAGE>
Paul F. Kolkman
Director since May 1984; executive vice president since March 1994; vice
president, Finance from May 1984 to March 1994; vice president, AEFC, since
January 1987.
James A. Mitchell
Chairman of the board since March 1994; director since July 1984; chief
executive officer since November 1986; president from July 1984 to March 1994;
executive vice president, AEFC, since March 1994; director, AEFC, since July
1984; senior vice president, AEFC, from July 1984 to March 1994.
Barry J. Murphy
Director and executive vice president, Client Service, since March 1994; senior
vice president, Operations, Travel Related Services (TRS), a subsidiary of
American Express Company, since July 1992; vice president, TRS, from November
1989 to July 1992; chief operating officer, TRS, from March 1988 to November
1989.
Stuart A. Sedlacek
Director, senior vice president and chief financial officer of AEFC since
January 1998; vice president, Assured Assets, AEFC from 1994 to 1997.
Officers other than directors
Jeffrey S. Horton
Vice president and treasurer since December 1997; vice president and corporate
treasurer, AEFC, since December 1997; controller, American Express Technologies
- - Financial Services, AEFC, from July 1997 to December 1997; controller, Risk
Management Products, AEFC, from May 1994 to July 1997; director of finance and
analysis, Corporate Treasury, AEFC, from June 1990 to May 1994.
William A. Stoltzmann
Vice president, general counsel and secretary since 1985; vice president and
assistant general counsel, AEFC, since November 1985.
The address for all of the directors and principal officers is: IDS Tower 10,
Minneapolis, MN 55440-0010.
The officers, employees and sales force of IDS Life are bonded, in the amount of
$100 million, by virtue of a blanket fidelity bond issued to American Express
Company by Saint Paul Fire and Marine, the lead underwriter.
Other fund managers
A I M Advisors, Inc.
A I M Advisors, Inc. ("A I M") was organized in 1976 and is headquartered in
Houston, Texas. A I M is a wholly-owned subsidiary of AIM Management Group Inc.,
a holding company engaged in the financial services business and an indirect
wholly-owned subsidiary of AMVESCAP PLC.
Putnam Investment Management, Inc.
Putnam Management has been managing mutual funds since 1937. Today, the firm
serves as the investment manager for the funds in the Putnam Family, with nearly
$182 billion in assets under management in over 9 million shareholder accounts
at December 31, 1997.
Smith Barney Inc.
Smith Barney, sponsor of the trust, a Delaware corporation and a subsidiary of
The Travelers Inc., is engaged in the underwriting, securities and commodities
brokerage business, and is a member of the NYSE, other major securities
exchanges and commodity exchanges and the National Association of Securities
Dealers, Inc. The sponsor sponsors seven open-end investment companies and three
closed-end investment companies as well as a variety of unit investment trusts.
The sponsor has acted as principal underwriter and managing underwriter of other
investment companies. The sponsor, in addition to participating as a member of
various selling groups or as an agent of other investment companies, executes
orders on behalf of investment companies for the purchase and sale of securities
of such companies and sells securities to such companies in its capacity as a
broker or dealer in securities.
<PAGE>
Other information
The variable account has filed a registration statement with the SEC. For
further information concerning the policy, the variable account and IDS Life,
please refer to the registration statement. You can find the registration
statement on the SEC's web site at http://www.sec.gov.
Voting rights
As a policy owner with investments in any subaccount, you may vote on important
fund matters. Each share of a fund has one vote. On some issues, such as
election of directors of IDS Life Series Fund, all shares of the IDS Life Series
Fund Portfolios vote together as one series. When electing directors, all shares
of IDS Life Series Fund Portfolios have cumulative voting rights. Cumulative
voting means that shareholders are entitled to a number of votes equal to the
number of shares they hold multiplied by the number of directors to be elected
and they have the right to divide votes among candidates.
On an issue affecting only one fund -- for example, a fundamental investment
restriction pertaining only to that fund -- its shares vote as a separate
series. If shareholders of a particular fund vote approval of an agreement, the
agreement becomes effective with respect to that fund, whether or not it is
approved by shareholders of the other funds.
IDS Life is the owner of all fund shares and therefore holds all voting rights.
However, IDS Life will vote the shares of each fund according to instructions we
receive from owners. If we do not receive timely instructions from you, we will
vote your shares in the same proportion as the shares for which we do receive
instructions. IDS Life also will vote fund shares that are not otherwise
attributable to owners the same proportion as those shares in that subaccount
for which we receive instructions.
We determine the number of fund shares in each subaccount for which you may give
instructions by applying your percentage interest in the subaccount to the total
number of votes attributable to the subaccount. We will determine that number as
of a date we choose that is 60 days or less before the meeting of the fund. We
will send you notice of each shareholder meeting, together with any proxy
solicitation materials and a statement of the number of votes for which you are
entitled to give instructions.
Under certain conditions, IDS Life may disregard voting instructions that would
change the goals of one or more of the funds or would result in approval or
disapproval of an investment advisory contract. If IDS Life does disregard
voting instructions, we will advise you of that action and the reasons for in
our next report to owners.
Generally, ownership of units of a unit investment trust does not involve the
exercise of voting rights. However, unit holders in the trust may vote for
removal of the trustee or for amendment or termination of the trust indenture.
In the event of such a vote, IDS Life, as the owner of the units, would solicit
voting instructions from owners under the same procedures used for votes
affecting the fund.
Reports
At least once a year IDS Life will mail to you, at your last known address of
record, a report containing all information required by law or regulation,
including a statement showing the current policy value.
Policy illustrations
The following tables illustrate how policy values, cash surrender values and
death benefits may change with the investment experience of the subaccount. The
tables show how these amounts might vary, for a 35-year-old male nonsmoker,
under Death Benefit Option 1, if:
o the annual rate of return of the Fund is 0%, 6% or 12%
o the cost of insurance rates and policy fees are current rates and fees
for policies purchased:
- on or after November 20, 1997
- on or after May 1, 1993 (October 1, 1993 for New Jersey)
and before November 20, 1997; and
- before May 1, 1993 (October 1, 1993 for New Jersey); and
o the cost of insurance rates and policy fees are guaranteed rates
and fees.
<PAGE>
This type of illustration involves a number of detailed assumptions. (See chart,
"Understanding the illustrations.") To the extent that your own circumstances
differ from those assumed in the illustrations, your expected results would also
differ.
Upon request, we will furnish you with comparable tables illustrating death
benefits, policy values and cash surrender values based on the actual age of the
person you propose to insure and on an initial specified amount and premium
payment schedule. In addition, after you have purchased a policy, you may
request illustrations based on policy values at the time of request.
Understanding the illustrations:
Rates of return: assumes to be uniform, gross, after-tax, annual rates of 0%, 6%
or 12% for the fund. Results would differ depending on allocations among the
subaccounts, if returns averaged 0%, 6% and 12% for the funds as a whole but
differed across individual funds.
Insured: assumes to be a male insurance age 35, in a standard rate
classification, qualifying for the nonsmoker rate. Results would be lower if the
insured were in a substandard rate classification or did not qualify for the
non-smoker rate.
Premiums: assumes a $900 premium is paid in full at the beginning of each policy
year. Results would differ if premiums were paid on a different schedule.
Policy loans and partial withdrawals: assumes that none have been made. (Since
we assume indebtedness is zero, the cash surrender value in all cases equals the
policy value minus the surrender charge.)
Effect of expenses and charges: The net investment return of the subaccounts,
shown in the tables, is lower than the gross, after-tax return of the fund
because we deducted the expenses paid by the fund and charges made against the
subaccounts. These include:
o the daily investment management fee paid by the funds, assumed to be
equivalent to an annual rate of 0.7% of the fund's average daily net
assets;
o the daily mortality and expense risk charge, equivalent to 0.9% of the
daily net asset value of the subaccounts annually; and
o a nonadvisory expense charge of 0.1% of each fund's average daily net
assets for direct expenses incurred by the fund.
After deduction of the expenses and charges described above, the illustrated
gross annual investment rates of return correspond to the following approximate
net annual rates of return:
<TABLE>
<CAPTION>
Net annual rate of
Net annual rate of Net annual rate of return for "Current
Gross annual investment return for "Guaranteed return for "Current costs assumed"
rate costs assumed" costs assumed" illustration, years 11
of return illustration illustration, years 1-10 and after
<S> <C> <C> <C>
0% -1.69% -1.69% -1.24%
6 4.21 4.21 4.68
12 10.11 10.11 10.61
</TABLE>
Taxes: Results shown in the tables reflect the fact that IDS Life does not
currently charge the subaccounts for federal income tax. If we take such a
charge in the future, the portfolios will have to earn more than they do now in
order to produce the death benefits and policy values illustrated.
<PAGE>
<TABLE>
<CAPTION>
Illustration Policies purchased on or after November 20, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------- ------------------------------------------------------------ ------------------------------------
Initial specified amount $100,000 Male - age 35 Current costs assumed
Death benefit Option 1 nonsmoker annual premium $900
- ---------------------------------- ------------------------------------------------------------ ------------------------------------
Premium Death benefit (1)(2) Policy value (1)(2) Cash surrender value (1)(2)
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of with annual annual investment return of annual investment return of annual investment return of
policy interest
year at 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ---------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 945 $ 100,000 $ 100,000 $ 100,000 $ 608 $ 657 $ 694 $ 0 $ 0 $ 46
2 1,937 100,000 100,000 100,000 1,206 1,330 1,459 479 602 732
3 2,979 100,000 100,000 100,000 1,783 2,026 2,290 998 1,241 1,505
4 4,073 100,000 100,000 100,000 2,341 2,742 3,195 1,496 1,898 2,351
5 5,222 100,000 100,000 100,000 2,878 3,478 4,182 1,977 2,577 3,281
6 6,428 100,000 100,000 100,000 3,396 4,234 5,258 2,675 3,513 4,537
7 7,694 100,000 100,000 100,000 3,895 5,012 6,434 3,354 4,471 5,893
8 9,024 100,000 100,000 100,000 4,373 5,810 7,717 4,012 5,450 7,356
9 10,420 100,000 100,000 100,000 4,829 6,630 9,119 4,649 6,450 8,938
10 11,886 100,000 100,000 100,000 5,259 7,467 10,646 5,259 7,467 10,646
11 13,425 100,000 100,000 100,000 5,664 8,321 12,314 5,664 8,321 12,314
12 15,042 100,000 100,000 100,000 6,044 9,195 14,136 6,004 9,195 14,136
13 16,739 100,000 100,000 100,000 6,396 10,087 16,128 6,396 10,087 16,128
14 18,521 100,000 100,000 100,000 6,719 10,994 18,305 6,719 10,994 18,305
15 20,392 100,000 100,000 100,000 7,013 11,919 20,689 7,013 11,919 20,684
16 22,356 100,000 100,000 100,000 7,272 12,858 23,297 7,272 12,858 23,297
17 24,419 100,000 100,000 100,000 7,496 13,809 25,153 7,496 13,809 25,153
18 26,585 100,000 100,000 100,000 7,679 14,768 29,281 7,679 14,768 29,281
19 28,859 100,000 100,000 100,000 7,816 15,731 32,707 7,816 15,731 32,707
20 31,247 100,000 100,000 100,000 7,905 16,697 36,467 7,905 16,697 36,467
age 60 45,102 100,000 100,000 100,000 7,422 21,390 61,691 7,422 21,390 61,691
age 65 62,785 100,000 100,000 125,819 4,830 25,402 103,130 4,830 25,402 103,130
</TABLE>
(1) Assumes no policy loans or partial withdrawals have been made.
(2) Assumes a $900 premium is paid at the beginning of each policy year. Values
will be different if premiums are paid in different amounts or with a
different frequency.
The above hypothetical investment results are illustrative only and you should
not consider them to be a representation of past or future investment results.
Actual investment results may be more or less than those shown. The death
benefit, policy value and cash surrender value would be different from those
shown if returns averaged 0%, 6% and 12% over a period of years, but fluctuated
above and below those averages for individual policy years. We do not represent
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
Illustration Policies purchased on or after May 1, 1993 and before November 20, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------- ------------------------------------------------------------ ------------------------------------
Initial specified amount $100,000 Male - age 35 Current costs assumed
Death benefit Option 1 nonsmoker annual premium $900
- ---------------------------------- ------------------------------------------------------------ ------------------------------------
Premium Death benefit (1)(2) Policy value (1)(2) Cash surrender value (1)(2)
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of with annual annual investment return of annual investment return of annual investment return of
policy interest
year at 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ---------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 945 $ 100,000 $ 100,000 $ 100,000 $ 605 $ 648 $ 691 $ 0 $ 0 $ 43
2 1,937 100,000 100,000 100,000 1,200 1,323 1,452 473 596 725
3 2,979 100,000 100,000 100,000 1,775 2,017 2,280 989 1,231 1,494
4 4,073 100,000 100,000 100,000 2,329 2,729 3,181 1,485 1,885 2,337
5 5,222 100,000 100,000 100,000 2,864 3,461 4,163 1,963 2,560 3,262
6 6,428 100,000 100,000 100,000 3,379 4,214 5,234 2,659 3,493 4,513
7 7,694 100,000 100,000 100,000 3,876 4,988 6,404 3,335 4,447 5,864
8 9,024 100,000 100,000 100,000 4,351 5,782 7,681 3,990 5,422 8,894
9 10,420 100,000 100,000 100,000 4,802 6,595 9,074 4,622 6,415 9,591
10 11,886 100,000 100,000 100,000 5,227 7,425 10,591 5,227 7,425 10,591
11 13,425 100,000 100,000 100,000 5,627 8,272 12,247 5,627 8,272 12,247
12 15,042 100,000 100,000 100,000 6,001 9,138 14,057 6,001 9,138 14,057
13 16,739 100,000 100,000 100,000 6,349 10,021 16,036 6,349 10,021 16,036
14 18,521 100,000 100,000 100,000 6,666 10,920 18,198 6,666 10,920 18,198
15 20,392 100,000 100,000 100,000 6,953 11,834 21,563 6,953 11,834 20,563
16 22,356 100,000 100,000 100,000 7,205 12,761 23,150 7,205 12,761 23,150
17 24,419 100,000 100,000 100,000 7,421 13,699 25,983 7,421 13,699 25,983
18 26,585 100,000 100,000 100,000 7,597 14,645 29,086 7,597 14,645 29,086
19 28,859 100,000 100,000 100,000 7,726 15,594 33,485 7,726 15,594 32,485
20 31,247 100,000 100,000 100,000 7,806 16,543 36,213 7,806 16,543 36,213
age 60 45,102 100,000 100,000 100,000 7,274 21,139 61,221 7,274 21,139 61,221
age 65 62,785 100,000 100,000 124,847 4,629 25,020 102,334 4,629 25,020 102,334
</TABLE>
(1) Assumes no policy loans or partial withdrawals have been made.
(2) Assumes a $900 premium is paid at the beginning of each policy year. Values
will be different if premiums are paid in different amounts or with a
different frequency.
The above hypothetical investment results are illustrative only and you should
not consider them to be a representation of past or future investment results.
Actual investment results may be more or less than those shown. The death
benefit, policy value and cash surrender value would be different from those
shown if returns averaged 0%, 6% and 12% over a period of years, but fluctuated
above and below those averages for individual policy years. We do not represent
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
Illustration
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------- ------------------------------------------------------------ ------------------------------------
Initial specified amount $100,000 Male - age 35 Guaranteed costs assumed
Death benefit Option 1 nonsmoker annual premium $900
- ---------------------------------- ------------------------------------------------------------ ------------------------------------
Premium Death benefit (1)(2) Policy value (1)(2) Cash surrender value (1)(2)
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of with annual annual investment return of annual investment return of annual investment return of
policy interest
year at 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ---------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 945 $ 100,000 $ 100,000 $ 100,000 $ 575 $ 617 $ 659 $ 0 $ 0 $ 11
2 1,937 100,000 100,000 100,000 1,141 1,261 1,386 414 533 658
3 2,979 100,000 100,000 100,000 1,687 1,921 2,175 901 1,135 1,389
4 4,073 100,000 100,000 100,000 2,213 2,598 3,033 1,369 1,754 2,189
5 5,222 100,000 100,000 100,000 2,720 3,293 3,968 1,819 2,392 3,067
6 6,428 100,000 100,000 100,000 3,196 3,996 4,976 2,475 3,275 4,255
7 7,694 100,000 100,000 100,000 3,654 4,718 6,076 3,113 4,178 5,535
8 9,024 100,000 100,000 100,000 4,082 5,450 7,267 3,722 5,089 6,906
9 10,420 100,000 100,000 100,000 4,493 6,203 8,570 4,313 6,022 8,390
10 11,886 100,000 100,000 100,000 4,876 6,966 9,986 4,876 6,966 9,986
11 13,425 100,000 100,000 100,000 5,231 7,742 11,527 5,231 7,742 11,527
12 15,042 100,000 100,000 100,000 5,559 8,531 13,208 5,559 8,531 13,208
13 16,739 100,000 100,000 100,000 5,849 9,323 15,034 5,849 9,323 15,034
14 18,521 100,000 100,000 100,000 6,114 10,129 17,030 6,114 10,129 17,030
15 20,392 100,000 100,000 100,000 6,341 10,940 19,206 6,341 10,940 19,206
16 22,356 100,000 100,000 100,000 6,521 11,745 21,573 6,521 11,745 21,573
17 24,419 100,000 100,000 100,000 6,667 12,557 24,163 6,667 12,557 24,163
18 26,585 100,000 100,000 100,000 6,766 13,364 26,993 6,766 13,364 26,993
19 28,859 100,000 100,000 100,000 6,809 14,158 30,082 6,809 14,158 30,082
20 31,247 100,000 100,000 100,000 6,786 14,929 33,454 6,786 14,929 33,454
age 60 45,102 100,000 100,000 100,000 5,533 18,272 55,886 5,533 18,272 55,863
age 65 62,785 100,000 100,000 113,155 1,437 19,813 92,750 1,437 19,813 92,750
</TABLE>
(1) Assumes no policy loans or partial withdrawals have been made.
(2) Assumes a $900 premium is paid at the beginning of each policy year. Values
will be different if premiums are paid in different amounts or with a
different frequency.
The above hypothetical investment results are illustrative only and you should
not consider them to be a representation of past or future investment results.
Actual investment results may be more or less than those shown. The death
benefit, policy value and cash surrender value would be different from those
shown if returns averaged 0%, 6% and 12% over a period of years, but fluctuated
above and below those averages for individual policy years. We do not represent
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
Illustration Policies purchased before May 1, 1993
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------- ------------------------------------------------------------ ------------------------------------
Initial specified amount $100,000 Male - age 35 Current costs assumed
Death benefit Option 1 nonsmoker annual premium $900
- ---------------------------------- ------------------------------------------------------------ ------------------------------------
Premium Death benefit (1)(2) Policy value (1)(2) Cash surrender value (1)(2)
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of with annual annual investment return of annual investment return of annual investment return of
policy interest
year at 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ---------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 945 $ 100,000 $ 100,000 $ 100,000 $ 605 $ 648 $ 691 $ 0 $ 0 $ 43
2 1,937 100,000 100,000 100,000 1,200 1,323 1,452 473 596 725
3 2,979 100,000 100,000 100,000 1,775 2,017 2,280 989 1,231 1,494
4 4,073 100,000 100,000 100,000 2,329 2,729 3,181 1,485 1,885 2,337
5 5,222 100,000 100,000 100,000 2,864 3,461 4,163 1,963 2,560 3,262
6 6,428 100,000 100,000 100,000 3,368 4,202 5,222 2,647 3,481 4,501
7 7,694 100,000 100,000 100,000 3,853 4,964 6,379 3,312 4,424 5,839
8 9,024 100,000 100,000 100,000 4,309 5,737 7,633 3,948 5,377 7,273
9 10,420 100,000 100,000 100,000 4,746 6,534 9,006 4,566 6,354 8,826
10 11,886 100,000 100,000 100,000 5,155 7,343 10,500 5,155 7,343 10,500
11 13,425 100,000 100,000 100,000 5,536 8,167 12,127 5,536 8,167 12,127
12 15,042 100,000 100,000 100,000 5,890 9,006 13,902 5,890 9,006 13,902
13 16,739 100,000 100,000 100,000 6,206 9,850 15,932 6,206 9,850 15,832
14 18,521 100,000 100,000 100,000 6,495 10,712 17,945 6,495 10,712 17,945
15 20,392 100,000 100,000 100,000 6,747 11,581 20,250 6,747 11,581 20,250
16 22,356 100,000 100,000 100,000 6,964 12,458 22,769 6,964 12,458 22,769
17 24,419 100,000 100,000 100,000 7,134 13,334 25,519 7,134 13,334 25,519
18 26,585 100,000 100,000 100,000 7,258 14,210 28,526 7,258 14,210 28,526
19 28,859 100,000 100,000 100,000 7,325 15,076 31,813 7,325 15,076 31,813
20 31,247 100,000 100,000 100,000 7,327 15,923 35,405 7,327 15,923 35,405
age 60 45,102 100,000 100,000 100,000 6,474 19,997 58,664 6,474 19,997 58,664
age 65 62,785 100,000 100,000 110,666 3,077 22,796 90,710 3,077 22,796 90,710
</TABLE>
(1) Assumes no policy loans or partial withdrawals have been made.
(2) Assumes a $900 premium is paid at the beginning of each policy year. Values
will be different if premiums are paid in different amounts or with a
different frequency.
The above hypothetical investment results are illustrative only and you should
not consider them to be a representation of past or future investment results.
Actual investment results may be more or less than those shown. The death
benefit, policy value and cash surrender value would be different from those
shown if returns averaged 0%, 6% and 12% over a period of years, but fluctuated
above and below those averages for individual policy years. We do not represent
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
<PAGE>
(REG2)
PART II
UNDERTAKINGS TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission hereto or hereafter duly adopted pursuant to authority conferred in
2that section.
RULE 484 UNDERTAKING
The By-Laws of IDS Life Insurance Company provide that:
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party, by reason of the fact that he is or was a Manager
of Variable Annuity Funds A and B, director, officer, employee or agent of this
Corporation, or is or was serving at the direction of the Corporation as a
Manager of Variable Annuity Funds A and B, director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
to any threatened, pending or completed action, suit or proceeding, wherever
brought, to the fullest extent permitted by the laws of the State of Minnesota,
as now existing or hereafter amended, provided that this Article shall not
indemnify or protect any such Manager of Variable Annuity Funds A and B,
director, officer, employee or agent against any liability to the Corporation or
its security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence, in the performance of his duties or
by reason of his reckless disregard of his obligations and duties.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF 1940
The sponsoring insurance company represents that the fees and charges deducted
under the contract, 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.
<PAGE>
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 18 TO
REGISTRATION STATEMENT NO. 33-11165
This Post-Effective Amendment No. 18 comprises the following papers and
documents:
The facing sheet.
The prospectus consisting of 44 pages.
The undertakings to file reports.
The signatures.
The following exhibits:
1. A. Copies of all exhibits required by paragraph A of instructions for
Exhibits in Form N-8B-2 to the Registration Statement.
(1) (a) Resolution of Board of Directors of IDS Life Insurance
Company establishing the Trust, adopted May 9, 1985, filed
electronically as Exhibit 1(a) to Post-Effective Amendment No.
12, File No. 33-11165 is incorporated herein by reference.
(b) Resolution of Board of Directors of IDS Life Insurance
Company reconstituting the Trust, adopted October 16, 1985,
filed electronically as Exhibit 1(b) to Post-Effective
Amendment No. 12, File No. 33-11165 is incorporated herein
by reference.
(2) Not applicable.
(3) (a) Not applicable.
(b) (1) Form of Division Vice President's Employment
Agreement dated November 1991, filed electronically as
Exhibit 3(b)1 to Post Effective Amendment No. 13, File
No. 33-11165 is incorporated herein by reference.
(2) Form of District Manager's Rider to IDS Life Insurance
Company, Personal Financial Planner's Agreement dated
November 1986, filed electronically as Exhibit 3(b)2 to
Post Effective Amendment No. 13, File No. 33-11165 is
incorporated herein by reference.
(3) Form of Personal Financial Planner's Agreement dated
November 1986, filed electronically as Exhibit 3(b)3 to
Post Effective Amendment No. 13, File No. 33-11165 is
incorporated herein by reference.
(c) Schedules of Sales Commissions incorporated by reference to
Registrant's original Registration Statement for the
Variable Account on Form N-8B-2 (File No. 811-4298; May 10,
1985).
(4) Not applicable.
(5) Flexible Premium Variable Life Insurance Policy filed with the
Original Registration Statement (File No. 33-11165) on December
31, 1986 and incorporated herein by reference.
<PAGE>
(6) (a) Certificate of Incorporation of IDS Life Insurance
Company, dated July 23, 1957, filed electronically as
Exhibit 1.A.(6)(a) to Post-Effective Amendment No. 12, File
No. 33-11165 is incorporated herein by reference.
(b) Amended By-Laws of IDS Life Insurance Company, filed
electronically to Post-Effective Amendment No. 12, File No.
33-11165 is incorporated herein by reference.
(7) Not applicable.
(8) (a) Form of Investment Management and Services Agreement
dated December 17, 1985 between IDS Life and IDS Life Series
Fund, Inc., filed electronically as Exhibit 8(a) to
Post-Effective Amendment No. 13, File No. 33-11165 is
incorporated herein by reference.
(b) Form of Investment Advisory Agreement dated July 11, 1984
between IDS Life and IDS Financial Services Inc. relating to
the Variable Accounts, filed electronically as Exhibit 8(a)
to Post-Effective Amendment No. 13, File No. 33-11165 is
incorporated herein by reference.
(9) None.
(10) Application form for the Flexible Premium Variable Life Insurance
Policy filed electronically as Exhibit 1.A.(10) to Registrant's
Form N-8B-2 with Post-Effective Amendment No. 11, File No.
33-11165 is incorporated herein by reference.
(11) IDS Life Insurance Company's Description of Transfer and
Redemption Procedures and Method of Conversion to Fixed Benefit
Policies filed electronically as Exhibit 1.A.(11) to Registrant's
Form N-8B-2 with Post-Effective Amendment No. 11, File No.
33-11165 is incorporated herein by reference.
B. (1) Not applicable.
(2) Not applicable.
C. Not applicable.
2. Opinion of counsel to be filed by amendment.
3. Financial Statement Schedules to be filed by amendment.
4. Not applicable.
5. Financial Data Schedules to be filed by amendment.
6. Actuarial opinion of James M. Jensen to be filed by amendment.
7. (a) Written actuarial consent of James M. Jensen to be filed by amendment.
(b) Written auditor consent of Ernst & Young LLP to be filed by amendment.
(c) Power of Attorney to sign amendments to this Registration Statement
dated March 12, 1997, filed as Exhibit 7(d) to Post-Effective
Amendment No. 15, File No. 33-11165 is incorporated herein by
reference.
(d) Power of Attorney to sign amendments to this Registration Statement
date April 8, 1998, is filed electronically as Exhibit 7(d) to
Post-Effective Amendment No. 15; File No. 33-11165 is incorporated
herein by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 IDS Life Insurance Company on behalf of the Registrant has
duly caused this Amendment to its Registration Statement to be signed on behalf
of the Registrant by the undersigned, thereunto duly authorized, in the City of
Minneapolis, and State of Minnesota on the 22nd day of January, 1999.
IDS Life Variable Life Separate Account
(Registrant)
By IDS Life Insurance Company
(Sponsor)
By /s/ Richard W. Kling*
Richard W. Kling, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed by the following persons in the
capacities indicated on the 22nd day of January, 1999.
Signature Title
/s/ James A. Mitchell* Chairman of the Board
James A. Mitchell and Chief Executive Officer
/s/ Richard W. Kling* Director, President and
Richard W. Kling Chief Executive Officer
/s/ David R. Hubers* Director
David R. Hubers
/s/ Paul F. Kolkman* Director and Executive Vice
Paul F. Kolkman President
/s/ Barry J. Murphy* Director and Executive Vice
Barry J. Murphy President, Client Service
/s/ Stuart A. Sedlacek* Chief Financial Officer and
Stuart A. Sedlacek President, Assured Assets
/s/ Philip C. Wentzel** Director, Vice President and Controller
Philip C. Wentzel
/s/ Jeffrey S. Horton** Vice President and Treasurer
Jeffrey S. Horton
*Signed pursuant to Power of Attorney dated March 12, 1997 filed as Exhibit No.
7(d) to Post-Effective Amendment No. 15, File No. 33-11165 is incorporated
herein by reference.
**Signed pursuant to Power of Attorney dated April 8, 1998, filed electronically
as an Exhibit to Post-Effective Amendment No. 17, File No. 33-11165.
By:
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
