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HARTFORD
LIFE INSURANCE COMPANY
GROUP VARIABLE ANNUITY CONTRACTS
[LOGO]
ISSUED BY HARTFORD LIFE INSURANCE COMPANY
WITH RESPECT TO DC-II
The group variable annuity contract (hereinafter the "contract" or
"contracts") described in this Prospectus are issued by Hartford Life
Insurance Company ("Hartford"). The contracts provide for both an Accumulation
Period and an Annuity Period.
The contracts are issued to Employers to allow their employees to
participate in a Tax-Deferred Annuity as described under Section 403(b) of the
Internal Revenue Code. Variable account Contributions are held in a series of
Hartford Life Insurance Company Separate Account Two ("DC-II") during the
Accumulation Period and during the Annuity Period.
The following Sub-Accounts are available under the contracts. Opposite each
Sub-Account is the name of the underlying investment for that Sub-Account.
Advisers Fund -- shares of Hartford Advisers Fund, Inc.
Sub-Account ("Advisers Fund")
Bond Fund Sub-Account -- shares of Hartford Bond Fund, Inc. ("Bond Fund")
Calvert Responsibly -- shares of Calvert Responsibly Invested Balanced
Invested Balanced Portfolio of Acacia Capital Corporation
Portfolio Sub-Account ("Calvert Responsibly Invested Balanced
Portfolio")
Capital Appreciation -- shares of Hartford Capital Appreciation Fund,
Fund Inc.,
Sub-Account -- ("Capital Appreciation Fund")
Dividend and Growth Fund -- shares of Hartford Dividend and Growth Fund,
Sub-Account Inc. ("Dividend and Growth Fund")
Index Fund Sub-Account -- shares of Hartford Index Fund, Inc. ("Index
Fund")
International -- shares of Hartford International Opportunities
Opportunities Fund Fund, Inc.
Sub-Account ("International Opportunities Fund")
Money Market Fund Sub- -- shares of HVA Money Market Fund, Inc. ("Money
Account Market Fund")
Mortgage Securities Fund -- shares of Hartford Mortgage Securities Fund,
Sub-Account Inc. ("Mortgage Securities Fund")
Stock Fund Sub-Account -- shares of Hartford Stock Fund, Inc. ("Stock
Fund")
This Prospectus sets forth the information concerning the Separate Account
that investors ought to know before investing. This Prospectus should be kept
for future reference. Additional information about the Separate Account has
been filed with the Securities and Exchange Commission and is available
without charge upon request. To obtain the Statement of Additional Information
send a written request to Hartford Life Insurance Company, Attn: RPVA
Administration, P. O. Box 2999, Hartford, CT 06104-2999. The Table of Contents
for the Statement of Additional Information may be found on page 30 of this
Prospectus. The Statement of Additional Information is incorporated by
reference to this Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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THIS PROSPECTUS IS NOT VALID UNLESS ATTACHED TO THE CURRENT PROSPECTUSES OF
THE APPLICABLE ELIGIBLE FUNDS LISTED ABOVE WHICH CONTAIN A FULL DESCRIPTION OF
THOSE FUNDS. INVESTORS ARE ADVISED TO RETAIN THESE PROSPECTUSES FOR FUTURE
REFERENCE.
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Prospectus Dated: May 1, 1997
Statement of Additional Information Dated: May 1, 1997
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TABLE OF CONTENTS
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SECTION PAGE
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GLOSSARY OF SPECIAL TERMS............................................... 3
FEE TABLE............................................................... 5
SUMMARY................................................................. 6
ACCUMULATION UNIT VALUES................................................ 8
PERFORMANCE RELATED INFORMATION......................................... 10
INTRODUCTION............................................................ 11
THE DC-II CONTRACT AND SEPARATE ACCOUNT TWO (DC-II)..................... 11
What is the DC-II contract?........................................... 11
Who can buy these contracts?.......................................... 11
What is the Separate Account and how does it operate?................. 11
OPERATION OF THE CONTRACT............................................... 12
How are Contributions credited?....................................... 12
May I make changes in the amounts of my Contributions and Sub-Account
allocations?......................................................... 12
May I transfer assets between Sub-Accounts?........................... 12
What happens if the Contract Owner fails to make Contributions?....... 13
May I assign or transfer the contract?................................ 13
How do I know what my account is worth?............................... 13
How is the Accumulation Unit value determined?........................ 14
How are the underlying Fund shares valued?............................ 14
PAYMENT OF BENEFITS..................................................... 14
What would my Beneficiary receive as death proceeds?.................. 14
How can a contract be redeemed or surrendered?........................ 14
Can payment of the redemption or surrender value ever be postponed
beyond the seven day period?......................................... 15
May I surrender once Annuity payments have started?................... 15
Can a contract be suspended by a Contract Owner?...................... 15
How do I elect an Annuity Commencement Date and Form of Annuity?...... 16
What is the minimum amount that I may select as an Annuity payment?... 16
How are contributions made to establish my Annuity account?........... 16
What are the available Annuity options under the contracts?........... 16
How are Variable Annuity payments determined?......................... 17
Can a contract be modified?........................................... 18
CHARGES UNDER THE CONTRACT.............................................. 19
How are the charges under these contracts made?....................... 19
Is there ever a time when the sales charges do not apply?............. 19
What do the sales charges cover?...................................... 19
What is the mortality, expense risk and administrative charge?........ 19
Are there any other administrative charges?........................... 20
Experience Rating of Contracts........................................ 20
How much are the deductions for Premium Taxes on these contracts?..... 20
What charges are made by the Funds?................................... 20
Are there any other deductions?....................................... 21
HARTFORD LIFE INSURANCE COMPANY AND THE FUNDS........................... 21
What is Hartford?..................................................... 21
What are the Funds?................................................... 21
Does Hartford have any interest in the Funds?......................... 23
FEDERAL TAX CONSIDERATIONS.............................................. 23
What are some of the federal tax consequences which affect these
contracts?........................................................... 23
MISCELLANEOUS........................................................... 28
What are my voting rights?............................................ 28
Will other contracts be participating in the Separate Account?........ 29
How are the contracts sold?........................................... 29
Who is the custodian of the Separate Account's assets?................ 29
Are there any material legal proceedings affecting the Separate
Account?............................................................. 29
Are you relying on any experts as to any portion of this
Prospectus?.......................................................... 29
How may I get additional information?................................. 29
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION............... 30
</TABLE>
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GLOSSARY OF SPECIAL TERMS
ACCUMULATION PERIOD: The period before the commencement of Annuity payments.
ACCUMULATION UNIT: An accounting unit of measure used to calculate values before
Annuity payments begin.
ANNUAL CONTRACT FEE: A fee charged for establishing and maintaining a
Participant's Individual Account under a contract.
ANNUITANT: A Participant on whose behalf Annuity payments are to be made under a
contract.
ANNUITY: A series of payments for life, or for life with a minimum number of
payments or a determinable sum guaranteed, or for a joint lifetime and
thereafter during the lifetime of the survivor, or for payments for a designated
period.
ANNUITY COMMENCEMENT DATE: The date on which Annuity payments are to commence.
ANNUITY PERIOD: The period following the commencement of Annuity payments.
ANNUITY UNIT: An accounting unit of measure in the Separate Account used to
calculate the amount of Variable Annuity payments.
BENEFICIARY: The person(s) designated to receive contract values in the event of
the Participant's or Annuitant's death.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: Securities and Exchange Commission.
CONTRACT OWNER: The Employer or entity owning the contract.
CONTRACT YEAR: A period of 12 months commencing with the effective date of the
contract or with any anniversary thereof.
CONTRIBUTION(S): The amount(s) paid or transferred to Hartford by the Contract
Owner on behalf of Participants pursuant to the terms of the contracts.
DATE OF COVERAGE: The date on which the application on behalf of a Participant
is received by Hartford.
DC VARIABLE ACCOUNT II: A series of Hartford Life Insurance Company Separate
Account Two.
EMPLOYER: A public school system or certain tax-exempt employers described in
Section 501(c)(3) of the Code.
FIXED ANNUITY: An Annuity providing for guaranteed payments which remain fixed
in amount throughout the payment period and which do not vary with the
investment experience of the Separate Account.
FUNDS: Currently, the Funds described commencing on page 21 of this Prospectus.
GENERAL ACCOUNT: The General Account of Hartford which consists of all assets of
Hartford other than those allocated to the separate accounts of Hartford.
HARTFORD: Hartford Life Insurance Company.
MINIMUM DEATH BENEFIT: The minimum amount payable upon the death of a
Participant prior to age 65 and before Annuity payments have commenced.
PARTICIPANT: Any employee of an Employer/Contract Owner electing to participate
in the contract.
PARTICIPANT'S CONTRACT YEAR: A period of twelve (12) months commencing with the
Date of Coverage of a Participant and each successive 12 month period
thereafter.
PARTICIPANT'S INDIVIDUAL ACCOUNT: An account to which the Separate Account
Accumulation Units held by the Contract Owner on behalf of Participant under the
contract are allocated.
PREMIUM TAX: A tax charged by a state or municipality on premiums, purchase
payments or contract values.
SEPARATE ACCOUNT: The separate account entitled Hartford Life Insurance Company
Separate Account Two ("DC-II").
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SUB-ACCOUNT: Accounts established within the Separate Account with respect to a
Fund.
TAX DEFERRED ANNUITY: An annuity contract purchased by an Employer on behalf of
its employees and which provides for special tax treatment under Section 403(b)
of the Internal Revenue Code.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined at the close of the New York Stock
Exchange (currently 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between successive Valuation Days.
VARIABLE ANNUITY: An Annuity providing for payments varying in amount in
accordance with the investment experience of the assets held in the underlying
securities of the Separate Account.
4
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FEE TABLE
SUMMARY
Contract Owner Transaction Expenses
(All Sub-Accounts)
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Sales Load Imposed on Purchases (as a percentage of premium
payments)....................................................... None
Transfer Fee...................................................... $ 5
Contingent Deferred Sales Load (as a percentage of amounts
withdrawn)
First through Third Year...................................... 5%
Fourth Year................................................... 0%
Annual Contract Fee (1)........................................... $ 30
Annual Expenses--Separate Account (as percentage of average
account value)
Mortality and Expense Risk (DC II)............................ 1.250%
</TABLE>
The Transfer Fee, Contingent Deferred Sales Charge, Annual Contract Fee and
Mortality and Expense Risk charge may be reduced or eliminated. See "Experience
Rating of Contracts," page 20.
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(1) The annual contract fee is a single $30 charge on a Contract. It is
deducted proportionally from the investment options in use at the time of
the charge. Pursuant to requirements of the 1940 Act, the policy fee has
been reflected in the Example by a method intended to show the "average"
impact of the policy fee on an investment in the Separate Account. In the
Example, the annual contract fee is approximated as a 0.11% annual asset
charge based on the experience of the Contracts.
Annual Fund Operating Expenses
(as a percentage of net assets)
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TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
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<S> <C> <C> <C>
Hartford Bond Fund.............................. 0.490% 0.030% 0.520%
Hartford Stock Fund............................. 0.441% 0.016% 0.457%
HVA Money Market Fund........................... 0.423% 0.021% 0.444%
Hartford Advisers Fund.......................... 0.615% 0.017% 0.632%
Hartford Capital Appreciation Fund.............. 0.629% 0.017% 0.646%
Hartford Mortgage Securities Fund............... 0.424% 0.029% 0.453%
Hartford Index Fund............................. 0.374% 0.019% 0.393%
Calvert Responsibly Invested Balanced Portfolio
(1)........................................... 0.710% 0.130% 0.840%
Hartford International Opportunities Fund....... 0.691% 0.095% 0.786%
Hartford Dividend & Growth Fund................. 0.709% 0.017% 0.726%
</TABLE>
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(1) The figures shown above for the Calvert Responsibly Invested Balanced
Portfoli reflect anticipated expenses for fiscal year 1997 and reflect a
proposed increase in transfer agency fees. Actual total operating expenses
in 1996 were 0.81%.
EXAMPLE
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If you surrender your Contract If you annuitize your Contract If you do not surrender your
at the end of the applicable at the end of the applicable Contract, you would pay the
time period, you would pay the time period, you would pay the following expenses on a $1,000
following expenses on a $1,000 following expenses on a $1,000 investment, assuming a 5%
investment, assuming a 5% investment, assuming a 5% annual return on assets:
annual return on assets: annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bond Fund................ $ 71 $ 114 $ 102 $ 222 $ 18 $ 58 $ 101 $ 220 $ 19 $ 60 $ 102 $ 222
Stock Fund............... 70 112 99 215 17 56 98 213 19 58 99 215
HVA Money Market Fund.... 70 112 98 213 17 56 97 212 18 57 98 213
Advisers Fund............ 72 118 108 234 19 62 107 232 20 63 108 234
Capital Appreciation
Fund................... 72 118 109 235 19 62 108 234 21 64 109 235
Mortgage Securities
Fund................... 70 112 99 214 17 56 98 213 19 58 99 214
Index Fund(1)............ 65 96 69 152 13 40 69 152 13 40 69 152
Calvert Responsibly
Invested Balanced
Portfolio.............. 74 124 119 255 21 68 118 254 23 70 119 255
International
Opportunities Fund..... 73 122 116 250 21 67 115 248 22 68 116 250
Dividend & Growth Fund... 73 120 113 244 20 65 112 242 21 66 113 244
</TABLE>
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(1) For this Table, the Hartford Index Fund combined expenses are limited to
1.25%
The purpose of this table is to assist the Contract Owner in understanding
various costs and expenses that a Contract Owner will bear directly or
indirectly. The table reflects expenses of the Separate Account and underlying
Funds. Premium taxes may also be applicable.
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
5
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SUMMARY
A. CONTRACTS OFFERED
Group contracts are offered for issuance to Employers to allow Employee
participation and special tax treatment under Section 403(b) of the Code.
The contracts available with respect to DC-II are limited to plans
established and sponsored by Employers for their Employees. The contract is
normally issued to the Employer or to the trustee or custodian of the Employer's
Plan.
B. ACCUMULATION PERIOD UNDER THE CONTRACTS
During the Accumulation Period under the contracts, Contributions made by
the Contract Owner to the contracts are used to purchase variable account
interests. Contributions allocated to purchase variable interests may, after the
deductions described hereafter, be invested in selected Sub-Accounts of DC-II.
C. CONTINGENT DEFERRED SALES CHARGES
No deduction for sales expense is made at the time of allocation of
Contributions to the contracts. A deduction for contingent deferred sales
charges is made if there is any surrender of contract values during the first 3
Participant Contract Years. During the first 3 years, a maximum deduction of 5%
will be made against the full amount of any such surrender. Such charges will in
no event ever exceed 8.50% when applied as a percentage against the sum of all
Contributions to a Participant's Individual Account. The amount or term of the
contingent deferred sales charge may be reduced (see "Charges Under the Contract
- -- Experience Rating of Contracts," page 20.)
No deduction for contingent deferred sales charges will be made in certain
cases. (See "Is there ever a time when the sales charges do not apply?"
commencing on page 19.)
Hartford reserves the right to limit any increase in the Contributions made
to a Participant's Individual Account under any contract to no more than three
times the total Contributions made on behalf of such Participant during the
initial 12 consecutive months following the Date of Coverage. Increases in
excess of those described will be accepted only with the consent of Hartford and
subject to the then current deductions being made under the contracts.
D. TRANSFER BETWEEN ACCOUNTS
During the Accumulation Period a Participant may allocate monies held in the
Separate Account among the available Sub-Accounts of the Separate Account.
Currently there is no charge for transfers, but Hartford reserves the right to
impose a fee of up to $5.00 for each such transfer. However, there may be
additional restrictions under certain circumstances. (See "May I transfer assets
between Sub-Accounts?" commencing on page 12.)
E. ANNUITY PERIOD UNDER THE CONTRACTS
Contract values held with respect to Participant's Individual Accounts with
respect to DC-II at the end of the Accumulation Period will, at the direction of
the Participant, be allocated to establish Annuitants' Accounts to provide Fixed
and/or Variable Annuities under the contracts. (See "How are contributions made
to establish my Annuity account?" commencing on page 16.) However, Hartford will
not assume responsibility in determining or monitoring minimum distributions
beginning at age 70 1/2.
F. MINIMUM DEATH BENEFITS
A Minimum Death Benefit is provided in the event of death of the Participant
prior to the earlier of Participant's 65th birthday or the Annuity Commencement
Date (see "What would my Beneficiary receive as death proceeds?" commencing on
page 14).
G. ANNUITY OPTIONS
The Annuity Commencement Date will not be deferred beyond the Participant's
75th birthday or such earlier date as may be required by applicable law and/or
regulation. If a Participant does not elect otherwise,
6
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Hartford reserves the right to begin Annuity payments automatically at age 65
under an option providing for a life Annuity with 120 monthly payments certain.
(See "What are the available Annuity options under the contracts?" commencing on
page 16).
H. DEDUCTIONS FOR PREMIUM TAXES
Deductions will be made during the Accumulation Period and Annuity Period,
as appropriate, for the payment of any Premium Taxes that may be levied against
the contract by a state or other governmental entity. The range is generally
between 0% and 3.50%. (See "Charges Under the Contract, " page 19).
I. ASSET CHARGE IN THE SEPARATE ACCOUNT
During both the Accumulation Period and the Annuity Period a charge is made
by Hartford for providing the mortality, expense and administrative undertakings
under the contracts. Such charge is an annual rate of 1.25% (.85% for mortality,
.15% for expense and .25% for administrative undertakings) of the average daily
net assets of DC-II. The rate charged for the mortality, expense, and
administrative undertakings under the contracts may be reduced (see "Charges
Under the Contract -- Experience Rating of Contracts," page 20). The rate
charged for the mortality, expense, and administrative undertakings may be
periodically increased by Hartford subject to a maximum annual rate of 2.00%,
provided, however, that no such increase will occur unless the Commission shall
have first approved any such increase. (See "Charges Under the Contract," page
19.)
J. ANNUAL CONTRACT FEE
An Annual Contract Fee may be charged against the value of each
Participant's Individual Account under a contract at the end of a Participant's
Contract Year. The maximum Annual Contract Fee is $30.00 per year on all
contracts (See "Charges Under The Contract," page 19). The Annual Contract Fee
may be reduced or waived (see "Charges Under the Contract -- Experience Rating
of Contracts," page 20).
K. FUND FEES AND CHARGES
The Funds are subject to certain fees, charges and expenses. See the
accompanying prospectuses for the Funds.
L. MINIMUM PAYMENT
The minimum Contribution that may be made on behalf of a Participant's
Individual Account under a contract is $30.00.
M. PAYMENT ALLOCATION TO DC-II
The contracts permit the allocation of Contributions, in multiples of ten
percent of each Contribution, among the several Sub-Accounts of DC-II. There is
no minimum amount that may be allocated to or invested in Accumulation Units of
any Sub-Account in the Separate Account.
N. VOTING RIGHTS OF CONTRACT OWNERS
Contract Owners and/or vested Participants will have the right to vote on
matters affecting the underlying Fund to the extent that proxies are solicited
by such Fund. If a Contract Owner does not vote, Hartford shall vote such
interest in the same proportion as shares of the Fund for which instructions
have been received by Hartford (see "What are my voting rights?" commencing on
page 28).
7
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PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance related information
concerning its Sub-Accounts. Performance information about the Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
The Advisers Fund, Bond Fund, Calvert Responsibly Invested Balanced
Portfolio, Capital Appreciation Fund, Dividend and Growth Fund, Index Fund,
International Opportunities Fund, Money Market Fund, Mortgage Securities Fund,
and Stock Fund Sub-Accounts may include total return in advertisements or other
sales material.
When a Sub-Account advertises its standardized total return, it will usually
be calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period (assuming the deduction of any contingent
deferred sales charge and Annual Contract Fee which would be payable if the
investment were redeemed at the end of the period). Total return figures are net
of all Fund level management fees and charges, the mortality and expense risk
charge and the Annual Contract Fee.
The Bond Fund and Mortgage Securities Fund Sub-Accounts may advertise yield
in addition to total return. The yield will be computed in the following manner:
The net investment income per unit earned during a recent 30 day period is
divided by the unit value on the last day of the period. This figure reflects
the recurring charges on the Separate Account level including the Annual
Contract Fee and the mortality and expense risk charge.
The Money Market Fund Sub-Account may advertise yield and effective yield.
The yield of the Sub-Account is based upon the income earned by the Sub-Account
over a seven-day period and then annualized, I.E., the income earned in the
period is assumed to be earned every seven days over a 52-week period and stated
as a percentage of the investment. Effective yield is calculated similarly but
when annualized, the income earned by the investment is assumed to be reinvested
in Sub-Account units and thus compounded in the course of a 52-week period.
Yield and effective yield reflect the recurring charges on the Separate Account
level including the Annual Contract Fee and the mortality and expense risk
charge.
Total return at the Separate Account level includes all contract charges:
contingent deferred sales charges, mortality and expense risk charges, and the
Annual Contract Fee and is therefore lower than total return at the Fund level,
with no comparable charges. Likewise, yield at the Separate Account level
includes all recurring charges (except sales charges), and is therefore lower
than yield at the Fund level, with no comparable charges.
10
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INTRODUCTION
This Prospectus has been designed to provide you with the necessary
information to make a decision on purchasing a contract offered by Hartford in
Separate Account Two (DC-II), or an interest therein, issued in conjunction with
a Tax-Deferred Annuity plan of an Employer. This Prospectus describes only the
elements of the contracts pertaining to the variable portion of the contract.
The contracts may contain a General Account option which is not described in
this Prospectus. Please read the Glossary of Special Terms on page 3 prior to
reading this Prospectus to familiarize yourself with the terms being used.
THE DC-II CONTRACT AND
SEPARATE ACCOUNT TWO (DC-II)
WHAT IS THE DC-II CONTRACT?
The contracts are group variable annuity contracts under which variable
account Contributions are held in a series of Hartford Life Insurance Company
Separate Account Two ("DC-II") during both the Accumulation Period and the
Annuity Period. The contracts are issued to Employers to allow their employees
to participate in a Tax-Deferred Annuity as described under Section 403(b) of
the Internal Revenue Code.
During the Accumulation Period under the contracts, Contributions made by
the Employer to the contracts are used to purchase variable account interests.
Contributions allocated to purchase variable interests may, after the
deductions described hereafter, be invested in selected Sub-Accounts of DC-II.
WHO CAN BUY THESE CONTRACTS?
The group variable annuity contracts offered under this Prospectus are
offered for use in annuity purchase plans according to Section 403(b) of the
Code as adopted by public school systems and certain tax-exempt organizations
described in Section 501(c)(3) of the Code. A group contract is issued to an
Employer to provide a tax-deferred annuity plan for its employees.
WHAT IS THE SEPARATE ACCOUNT AND HOW DOES IT OPERATE?
Separate Account Two (DC-II) is organized as a unit investment trust type of
investment company and has been registered as such with the Commission under
the Investment Company Act of 1940, as amended. (On March 31, 1988, DC-II was
transferred to Separate Account Two and became a series thereof). Registration
of the Separate Account with the Commission does not involve supervision of
the management or investment practices or policies of the Separate Account or
of Hartford by the Commission. However, Hartford and the Separate Account are
subject to supervision and regulation by the Department of Insurance of the
State of Connecticut. The Separate Account meets the definition of "separate
account" under federal securities law. Under Connecticut law, the assets of
the Separate Account attributable to the contracts offered under this
Prospectus are held for the benefit of the owners of, and the persons entitled
to payments under, those contracts. Also, in accordance with the contracts,
the assets in the Separate Account attributable to contracts participating in
the Separate Account are not chargeable with liabilities arising out of any
other business Hartford may conduct. So, you will not be affected by the rate
of return of Hartford's general account, nor by the investment performance of
any of Hartford's other separate accounts.
Your contributions are allocated to one or more Sub-Accounts of the Separate
Account. Each Sub-Account is invested exclusively in the assets of one
underlying Fund. Contributions and proceeds of transfers between Sub-Accounts
are applied to purchase shares in the appropriate Fund at net asset value
determined as of the end of the Valuation Period during which the payments
were received or the transfer made. All distributions from the Fund are
reinvested at net asset value. The value of your investment during the
Accumulation Period will therefore vary in accordance with the net income and
fluctuation in the individual investments within the underlying Fund portfolio
or portfolios. During the Variable Annuity payout period, both your annuity
payments and reserve values will vary in accordance with these factors.
HARTFORD DOES NOT GUARANTEE THE INVESTMENT RESULTS OF THE SUB-ACCOUNTS OR
ANY OF THE UNDERLYING INVESTMENTS. THERE IS NO ASSURANCE THAT THE VALUE OF A
CONTRACT DURING THE YEARS PRIOR TO RETIREMENT OR
11
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THE AGGREGATE AMOUNT OF THE VARIABLE ANNUITY PAYMENTS WILL EQUAL THE SUM OF
ALL CONTRIBUTIONS MADE UNDER THE CONTRACT. SINCE EACH UNDERLYING FUND HAS
DIFFERENT INVESTMENT OBJECTIVES, EACH IS SUBJECT TO DIFFERENT RISKS. THESE
RISKS ARE MORE FULLY DESCRIBED IN THE ACCOMPANYING FUNDS' PROSPECTUSES.
Hartford reserves the right, subject to compliance with the law, to
substitute the shares of any other registered investment company for the
shares of any Fund held by the Separate Account. Substitution may occur if
shares of the Fund(s) become unavailable or due to changes in applicable law
or interpretations of law. Current law requires notification to you of any
such substitution and approval of the Commission. Hartford also reserves the
right, subject to compliance with the law to offer additional Sub-Accounts
with differing investment objectives, and to make existing Sub-Account options
unavailable under the contracts in the future.
The Separate Account may be subject to liabilities arising from a series of
Sub-Accounts whose assets are attributable to other variable annuity contracts
or variable life insurance policies offered by the Separate Account which are
not described in this Prospectus.
Hartford may offer additional Separate Account Options from time to time
under these contracts. Such new options will be subject to the then in effect
charges, fees, and or transfer restrictions for the contracts for such
additional separate accounts.
OPERATION OF THE CONTRACT
HOW ARE CONTRIBUTIONS CREDITED?
The contract will cover present and future employees of the Employer who
elect to participate in the contract. The net Contributions to a Participant's
Individual Account under a contract are applied to purchase Accumulation Units
in the selected Sub-Accounts. In order to reflect such Contribution on behalf
of a Participant, except with respect to an initial Contribution, there is
credited to each Participant's Individual Account under a contract such
Sub-Account Accumulation Units with respect to DC-II determined by dividing
the net Contribution by the appropriate Accumulation Unit value next computed
following receipt of the payment by Hartford at its home office, P. O. Box
2999, Hartford, CT 06104-2999.
The number of Accumulation Units purchased is determined by dividing the
Contribution amount by the appropriate Accumulation Unit Value on the date the
Contribution is credited to the Participant's Individual Account. Initial
Contributions are credited to the Participants Individual Account within two
days of receipt of a properly completed application and the initial
Contribution. Subsequent Contributions are credited to a Participant's
Individual Account on the date following receipt of the Contribution by
Hartford at its home office, P. O. Box 2999, Hartford, CT 06104-2999 (or other
address as directed). If an application or any other information is incomplete
when received, Contributions will be credited to the Participant's Individual
Account within five business days. If an initial Contribution is not credited
within five business days it will be immediately returned unless you have been
informed of the delay and request that the Contribution not be returned.
Subsequent payments cannot be credited on the same day of receipt unless they
are accompanied by adequate instructions.
The number of Sub-Account Accumulation Units will not change because of a
subsequent change in an Accumulation Unit's value, but the dollar value of an
Accumulation Unit will vary to reflect the investment experience of the
appropriate Fund shares that serve as the underlying investment for the
Separate Account.
MAY I MAKE CHANGES IN THE AMOUNTS OF MY CONTRIBUTIONS AND SUB-ACCOUNT
ALLOCATIONS?
Yes, changes in the amounts of your Contributions may be made and the
contract permits the allocation of Contributions, in multiples of 10%, among
the several Sub-Accounts of DC-II. There is no minimum amount that may be
allocated to any Sub-Account in the Separate Account. Such changes must be
requested in the form and manner prescribed by Hartford.
MAY I TRANSFER ASSETS BETWEEN SUB-ACCOUNTS?
Yes, during the Accumulation Period you may transfer the values of your
Sub-Account allocations from one or more Sub-Accounts to another.
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The following transfer restrictions apply to contracts issued or amended on
or after May 1, 1992.
Transfers of assets presently held in the General Account, or which were
held in the General Account at any time during the preceding 3 months, to the
Money Market Fund Sub-Account are prohibited.
Similarly, transfers of assets presently held in the Money Market Fund
Sub-Account, or which were held in the Money Market Fund Sub-Account or the
General Account during the preceding 3 months, to the General Account are
prohibited.
Transfers between Sub-Accounts and changes in Sub-Account allocations may be
made by written request or by calling 1-800-771-3051. Any transfers or changes
made in writing will be effected as of the date the request is received by
Hartford at its home office, P. O. Box 2999, Hartford, CT 06104-2999.
Telephone transfer changes may not be permitted in some states. The policy of
Hartford and its agents and affiliates is that they will not be responsible
for losses resulting from acting upon telephone requests reasonably believed
to be genuine. Hartford will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine; otherwise Hartford may be
liable for any losses due to unauthorized or fraudulent instructions. The
procedures Hartford follows for transactions initiated by telephone include
requirements that Participant's provide certain identifying information. All
transfer instructions by telephone are recorded. Each transfer may be subject
to a $5.00 transfer fee (see "Charges Under the Contract -- Experience Rating
of Contracts," page 20).
In addition, the right, with respect to a Participant's Individual Account,
to transfer monies between Sub-Accounts is subject to modification if Hartford
determines, in its sole opinion, that the exercise of that right by the
Contract Owner/ Participant is, or would be, to the disadvantage of other
Contract Owners/Participants. Any modification could be applied to transfers
to or from the same or all of the Sub-Accounts and could include, but not be
limited to, the requirement of a minimum time period between each transfer,
not accepting transfer requests of an agent acting under a power of attorney
on behalf of more than one Participant or Contract Owner, or limiting the
dollar amount that may be transferred between Sub-Accounts by a Contract
Owner/Participant at any one time. Such restrictions may be applied in any
manner reasonably designed to prevent any use of the transfer right which is
considered by Hartford to be to the disadvantage of other Contract
Owners/Participants.
WHAT HAPPENS IF THE CONTRACT OWNER FAILS TO MAKE CONTRIBUTIONS?
A contract will be deemed paid-up within 30 days after any anniversary date
of the contract if the Contract Owner has not remitted a Contribution to
Hartford during the preceding 12 month period. Effective with a change of the
contract to paid-up status, no further Contributions will be accepted by
Hartford and each Participant's Individual Account will be considered an
inactive account until the commencement of Annuity payments or until the value
of the Participant's Individual Account is disbursed or applied in accordance
with the termination provisions (see "How can a contract be redeemed or
surrendered" commencing on page 14). Once a contract has been placed on a
paid-up status it may not be reinstated. Persons receiving Annuity payments at
the time of any change to paid-up status will continue to receive their
payments.
MAY I ASSIGN OR TRANSFER THE CONTRACT?
The group contracts and a Participant's interest therein may not be
assigned, transferred or pledged.
HOW DO I KNOW WHAT MY ACCOUNT IS WORTH?
The value of the Accumulation Units in DC-II representing an interest in the
appropriate Fund shares that are held under the contract were initially
established on the date that Contributions were first contributed to the
appropriate Sub-Account of the Separate Account. The value of the respective
Accumulation Units for any subsequent day is determined by multiplying the
Accumulation Unit value for the preceding day by the net investment factor of
the appropriate Sub-Accounts (see "How is the Accumulation Unit value
determined?" below).
The value of a Participant's Individual Account under a contract at any time
prior to the commencement of Annuity payments can be determined by multiplying
the total number of Sub-Account Accumulation Units credited to a Participant's
Individual Account by the current Accumulation Unit value for the respective
Sub-Account. There is no assurance that the value in the Sub-Accounts will
equal or exceed the Contributions made by the Contract Owner to such
Sub-Accounts.
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HOW IS THE ACCUMULATION UNIT VALUE DETERMINED?
The Accumulation Unit value for each Sub-Account will vary to reflect the
investment experience of the applicable Fund and will be determined on each
"Valuation Day" by multiplying the Accumulation Unit value of the particular
Sub-Account on the preceding Valuation Day by a "Net Investment Factor" for
that Sub-Account for the Valuation Period then ended. The Net Investment
Factor for each of the Sub-Accounts is equal to the net asset value per share
of the corresponding Fund at the end of the Valuation Period (plus the per
share amount of any dividends or capital gains by that Fund if the ex-dividend
date occurs in the Valuation Period then ended) divided by the net asset value
per share of the corresponding Fund at the beginning of the Valuation Period
and subtracting from that amount the amount of any charges assessed during the
Valuation Period then ending. You should refer to the prospectuses for the
Funds which accompany this Prospectus for a description of how the assets of
each Fund are valued since each determination has a direct bearing on the
Accumulation Unit value of the Sub-Account and therefore the value of a
contract. The Accumulation Unit value is affected by the performance of the
underlying Fund(s), expenses and deduction of the charges described in this
Prospectus.
HOW ARE THE UNDERLYING FUND SHARES VALUED?
The shares of the Fund are valued at net asset value on a daily basis. A
complete description of the valuation method used in valuing Fund shares may
be found in the accompanying prospectus for each Fund.
PAYMENT OF BENEFITS
WHAT WOULD MY BENEFICIARY RECEIVE AS DEATH PROCEEDS?
The contracts provide that in the event the Participant dies before the
selected Annuity Commencement Date or the Participant's age 65 (whichever
occurs first) the Minimum Death Benefit payable on such contract will be the
greater of (a) the value of the Participant's Account determined as of the day
written proof of death of such person is received by, or (b) 100% of the total
Contributions made to such contract, reduced by any prior partial surrenders.
The benefit may be taken by the Beneficiary in a single sum, in which case
payment will be made within seven days of receipt of proof of death by
Hartford, unless subject to postponement as explained below. In lieu of
payment in one sum, a Beneficiary may elect that the amount be applied under
any settlement options available in Hartford's individual variable annuities
then being issued provided any such option must provide that a death benefit
will be distributed within five years of the death; or, if the benefit is
payable over a period not extending beyond the life expectancy of the
Beneficiary or over the life of the Beneficiary, such benefit must commence
within one year of the date of death. The contract further provides that if
the Beneficiary is the spouse of the Participant, such spouse may elect, in
lieu of the death benefit, to be treated as the Participant.
An election to receive death benefits under a form of Annuity must be made
prior to a lump sum settlement with Hartford and within one year after the
death by written notice to Hartford at its offices in Hartford, Connecticut.
Benefit proceeds due on death may be applied to provide variable payments,
fixed payments, or a combination of variable and fixed payments. No election
to provide Annuity payments will become operative unless the initial Annuity
payment is at least $20.00 on either a variable or fixed basis, or $20.00 on
each basis when a combination benefit is elected. The manner in which the
Annuity payments are determined and in which they may vary from month to month
are the same as applicable to a Participant's Individual Account after
retirement (see "How are contributions made to establish my Annuity account?"
commencing on page 16).
HOW CAN A CONTRACT BE REDEEMED OR SURRENDERED?
THERE ARE CERTAIN RESTRICTIONS ON SECTION 403(b) TAX-SHELTERED ANNUITIES. AS
OF DECEMBER 31, 1988, ALL SECTION 403(b) ANNUITIES HAVE LIMITS ON FULL AND
PARTIAL SURRENDERS. CONTRIBUTIONS TO THE CONTRACT MADE AFTER DECEMBER 31, 1988
AND ANY
INCREASES IN CASH VALUE AFTER DECEMBER 31, 1988 MAY NOT BE DISTRIBUTED UNLESS
THE CONTRACT OWNER/EMPLOYEE HAS (A) ATTAINED AGE 59 1/2, (B) TERMINATED
EMPLOYMENT, (C) DIED, (D) BECOME DISABLED, OR (E) EXPERIENCED FINANCIAL
HARDSHIPS.
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<PAGE>
DISTRIBUTIONS DUE TO FINANCIAL HARDSHIP OR SEPARATION FROM SERVICE MAY STILL
BE SUBJECT TO A PENALTY TAX OF 10%.
HARTFORD WILL NOT ASSUME ANY RESPONSIBILITY IN DETERMINING WHETHER A
WITHDRAWAL IS PERMISSIBLE, WITH OR WITHOUT TAX PENALTY, IN ANY PARTICULAR
SITUATION; OR IN MONITORING WITHDRAWAL REQUESTS REGARDING PRE OR POST JANUARY
1, 1989 ACCOUNT VALUES.
On termination of Contributions to a contract by the Contract Owner on
behalf of a Participant prior to the selected Annuity Commencement Date for
such Participant, the Participant will have the following options:
1.To continue a Participant's Individual Account in force under the
contract. Under this option, when the selected Annuity Commencement Date
arrives, the Participant will begin to receive Annuity payments under the
selected Annuity option under the contract. (See "What are the available
Annuity options under the contracts?" commencing on page 16.) At any time in
the interim, a Participant may surrender the Participant's Individual
Account for a lump sum cash settlement in accordance with 3. below.
2.To provide Annuity payments immediately. The values in the Participant's
Individual Account may be applied, subject to contractual provisions, to
provide for Fixed or Variable Annuity payments, or a combination thereof,
commencing immediately, under the selected Annuity option under the
contract. (See "What are the available Annuity options under the contracts?"
commencing on page 16).
3.To surrender the Participant's Individual Account under the contract for
a lump sum cash settlement, in which event the Annual Contract Fee and
any applicable contingent deferred sales charges will be deducted (See "How
are the charges under these contracts made?" commencing on page 19). The
amount received will be the net termination value next computed after
receipt by Hartford at its home office, P. O. Box 2999, Hartford, CT
06104-2999, of a written surrender request for complete surrender. Payment
will normally be made as soon as possible but not later than seven days
after the written request is received by Hartford.
4.In the case of a partial surrender the amount requested is either taken
out of the specified Sub-Account(s) or if no Sub-Account(s) are
specified, the requested amount is taken out of all applicable Sub-
Account(s) on a pro rata basis. Within this context, the contingent deferred
sales charges are taken as a percentage of the amount withdrawn (see "How
are the charges under these contracts made?" commencing on page 19). If the
contingent deferred sales charges have been experience rated (see "Charges
Under the Contract -- Experience Rating of Contracts," page 20), any amounts
not subject to the contingent deferred sales charge will be deemed to be
surrendered last.
CAN PAYMENT OF THE REDEMPTION OR SURRENDER VALUE EVER BE POSTPONED BEYOND THE
SEVEN DAY PERIOD?
Yes. It may be postponed whenever (a) the New York Stock Exchange is closed,
except for holidays or weekends, or trading on the New York Stock Exchange is
restricted as determined by the Commission; (b) the Commission permits
postponement and so orders; or (c) the Commission determines that an emergency
exists making valuation of the amounts or disposal of securities not
reasonably practicable.
MAY I SURRENDER ONCE ANNUITY PAYMENTS HAVE STARTED?
Except with respect to Option 5 (on a variable payout), once Annuity
payments have commenced, no surrender of a life Annuity benefit can be made
for the purpose of receiving a partial withdrawal or a lump sum settlement in
lieu thereof. Any surrender out of Option 5 will be subject to contingent
deferred sales charges, if applicable.
CAN A CONTRACT BE SUSPENDED BY A CONTRACT OWNER?
A contract may be suspended by the Contract Owner by giving written notice
at least 90 days prior to the effective date of such suspension to Hartford at
its home office, P. O. Box 2999, Hartford, CT 06104-2999. A contract will be
suspended automatically on its anniversary if the Contract Owner fails to
assent to any modification of a contract, as described under the caption "Can
a contract be modified?" which modifications would have become effective on or
before that anniversary. Upon suspension, Contributions will continue to be
accepted by Hartford under the contract, and subject to the terms thereof, as
they are applicable to Participant's Individual Accounts under the contracts
prior to such suspension, but no Contributions will be accepted on behalf of
any new Participant's Individual Accounts.
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<PAGE>
Annuitants at the time of any suspension will continue to receive their
Annuity payments. The suspension of a contract will not preclude a Participant
from applying an existing Participant's Individual Accounts under DC-II to the
purchase of Fixed or Variable Annuity benefits.
HOW DO I ELECT AN ANNUITY COMMENCEMENT DATE AND FORM OF ANNUITY?
The Participant selects an Annuity Commencement Date, usually between their
50th and 75th birthdays, and an Annuity Option. The Annuity Commencement Date
may not be deferred beyond a Participant's 75th birthday or such earlier date
may be required by applicable law and/or regulation. The Annuity Commencement
Date and/or the Annuity option may be changed from time to time, but any such
change must be made at least 30 days prior to the date on which Annuity
payments are scheduled to begin. Annuity payments will normally be made on the
first business day of each month.
The contract contains five optional annuity forms, which may be selected on
either a Fixed or Variable Annuity basis, or a combination thereof. If a
Participant does not elect otherwise, Hartford reserves the right to begin
Annuity payments at age 65 under Option 2 with 120 monthly payments certain.
However, Hartford will not assume responsibility in determining or monitoring
minimum distributions beginning at age 70 1/2.
When an annuity is purchased, unless otherwise specified, DC-II Accumulation
Unit values will be applied to provide a Variable Annuity under DC-II.
WHAT IS THE MINIMUM AMOUNT THAT I MAY SELECT AS AN ANNUITY PAYMENT?
The minimum Annuity payment is $20.00. No election may be made which results
in a first payment of less than $20.00. If at any time Annuity payments are or
become less than $20.00, Hartford has the right to change the frequency of
payment to intervals that will result in payments of at least $20.00.
HOW ARE CONTRIBUTIONS MADE TO ESTABLISH MY ANNUITY ACCOUNT?
During the Annuity Period, Contract values are applied to establish a Fixed
and/or Variable Annuity.
WHAT ARE THE AVAILABLE ANNUITY OPTIONS UNDER THE CONTRACTS?
OPTION 1: LIFE ANNUITY
A life annuity is an Annuity payable during the lifetime of the Annuitant
and terminating with the last monthly payment preceding the death of the
Annuitant. This option offers the maximum level of monthly payments of any of
the other life annuity options (Options 2-4) since there is no guarantee of a
minimum number of payments nor a provision for a death benefit payable to a
Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity
payment, two if he died before the due date of the third Annuity payment, etc.
*OPTION 2: LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that payments will be made for a minimum of 120,
180 or 240 months, as elected. If, at the death of the Annuitant, payments
have been made for less than the minimum elected number of months, then any
remaining guaranteed monthly payments will be paid in one sum to the
Beneficiary or Beneficiaries designated unless other provisions will have been
made and approved by Hartford.
*OPTION 3: UNIT REFUND LIFE ANNUITY
This Annuity option is an Annuity payable monthly during the lifetime of the
Annuitant terminating with the last payment due prior to the death of the
Annuitant except that an additional payment will be made to the Beneficiary or
Beneficiaries if (a) below exceeds (b) below:
total amount applied under the option
(a) = at the Annuity Commencement Date
--------------------------------------------------------------------
Annuity Unit value at the Annuity Commencement Date
number of Annuity Units represented by number of monthly
(b) = each monthly Annuity Payment made X Annuity Payments made
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The amount of the additional payments will be determined by multiplying such
excess by the Annuity Unit value as of the date that proof of death is
received by Hartford.
OPTION 4: JOINT AND LAST SURVIVOR ANNUITY
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
At the Annuitant's death, payments will continue to be made to the
contingent annuitant, if living for the remainder of the contingent
annuitant's's life. When the Annuity is purchased, the Annuitant elects what
percentage (50%, 66 2/3% or 100%) of the monthly Annuity payment will continue
to be paid to the contingent annuitant.
It would be possible under this Option for an Annuitant and designated
second person in the event of the common or simultaneous death of the parties
to receive only payment in the event of death prior to the due date for the
second payment and so on.
*OPTION 5: PAYMENTS FOR A DESIGNATED PERIOD
An amount payable monthly for the number of years selected. Under the
contracts the minimum number of years is five.
In the event of the Annuitant's death prior to the end of the designated
period, any then remaining balance of proceeds will be paid in one sum to the
Beneficiary or Beneficiaries designated unless other provisions will have been
made and approved by Hartford. Option 5 is an option that does not involve
life contingencies and thus no mortality guarantee.
Surrenders are subject to the limitations set forth in the contract and any
applicable contingent deferred sales charges (see "How are the charges under
these contracts made?" commencing on page 19).
* ON QUALIFIED PLANS, OPTIONS 2, 3 AND 5 ARE AVAILABLE ONLY IF THE GUARANTEED
PAYMENT PERIOD IS LESS THAN THE LIFE EXPECTANCY OF THE ANNUITANT AT THE TIME
THE OPTION BECOMES EFFECTIVE. SUCH LIFE EXPECTANCY SHALL BE COMPUTED ON THE
BASIS OF THE MORTALITY TABLE PRESCRIBED BY THE IRS, OR IF NONE IS PRESCRIBED,
THE MORTALITY TABLE THEN IN USE BY HARTFORD.
- --------------------------------------------------------------------------------
UNDER ANY OF THE ANNUITY OPTIONS ABOVE, EXCEPT OPTION 5 (ON A VARIABLE BASIS),
NO SURRENDERS ARE PERMITTED AFTER ANNUITY PAYMENTS COMMENCE.
- --------------------------------------------------------------------------------
HOW ARE VARIABLE ANNUITY PAYMENTS DETERMINED?
The value of the Annuity Unit for each Sub-Account in the Separate Account
for any day is determined by multiplying the value for the preceding day by
the product of (1) the net investment factor (see "How is the Accumulation
Unit value determined?" commencing on page 14) for the day for which the
Annuity Unit value is being calculated, and (2) a factor to neutralize the
assumed net investment rate discussed below.
When Annuity payments are to commence, the value of the contract is
determined as the product of the value of the Accumulation Unit credited to
each Sub-Account no earlier than the close of business on the fifth business
day preceding the date the first Annuity payment is due and the number of
Accumulation Units credited to each Sub-Account as of the date the Annuity is
to commence.
The first monthly payment varies according to the form of Annuity selected.
The contract cites Annuity tables derived from the 1983a Individual Annuity
Mortality Table with an assumed interest rate ("A.I.R.") of 4.00% or 5.00% per
annum. The total first monthly Annuity payment is determined by multiplying
the value (expressed in thousands of dollars) of a Sub-Account (less any
applicable premium taxes) by the amount of the first monthly payment per
$1,000 of value obtained from the tables in the contracts. With respect to
fixed annuities only, the current rate will be applied if it is higher than
the rate under the tables in the contract.
Level Annuity payments would be produced if the net investment rate remained
constant and equal to the A.I.R. In fact, payments will vary up or down in the
proportion that the net investment rate varies up or down from the A.I.R. A
higher A.I.R. may produce a higher initial payment but more slowly rising and
more rapidly falling subsequent payments than would a lower interest rate
assumption.
The amount of the first monthly Annuity payment, determined as described
above, is divided by the value of an Annuity Unit for the appropriate
Sub-Account as of the close of business on the fifth business day
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preceding the day on which the payment is due in order to determine the number
of Annuity Units represented by the first payment. This number of Annuity
Units remains fixed during the Annuity Period, and in each subsequent month
the dollar amount of the Annuity payment is determined by multiplying this
fixed number of Annuity Units by the then current Annuity Unit value.
The Annuity payments will be made on the first day of each month following
selection. The Annuity Unit value used in calculating the amount of the
Annuity payments will be based on an Annuity Unit value determined as of the
close of business on a day not more than the fifth business day preceding the
date of the Annuity payment.
Here is an example of how a variable annuity is determined:
ILLUSTRATION OF ANNUITY PAYMENTS:
(UNISEX) AGE 65, LIFE ANNUITY WITH 120 PAYMENTS CERTAIN
<TABLE>
<C> <S> <C>
1. Net amount applied........................................ $ 139,782.50
2. Initial monthly income per $1,000 of payment applied...... 6.13
3. Initial monthly payment (1 X 2 DIVIDED BY 1,000)......... $ 856.87
4. Annuity Unit Value........................................ 3.125
5. Number of monthly annuity units (3 DIVIDED BY 4)......... 274.198
6. Assume annuity unit value for second month equal to....... 2.897
7. Second monthly payment (6 X 5)............................ $ 794.35
8. Assume annuity unit value for third month equal to........ 3.415
9. Third month payment (8 X 5)............................... $ 936.39
</TABLE>
The above figures are simply to illustrate the calculation of a variable
annuity and have no bearing on the actual record of any Separate Account.
CAN A CONTRACT BE MODIFIED?
The contracts may, subject to any federal and state regulatory restrictions,
be modified at any time by written agreement between the Contract Owner and
Hartford. No modification will affect the amount or term of any Annuities
begun prior to the effective date of the modification, unless it is required
to conform the contract to, or give the Contract Owner the benefit of, any
federal or state statutes or any rule or regulation of the U.S. Treasury
Department or the Internal Revenue Service.
On or after the fifth anniversary of any contract Hartford may change, from
time to time, any or all of the terms of the contracts by giving 90 days
advance written notice to the Contract Owner, except that the Annuity tables,
guaranteed interest rates and the contingent deferred sales charges which are
applicable at the time a Participant's Individual Account is established under
a contract, will continue to be applicable. In addition, the limitations on
the deductions for the Mortality, Expense Risks and Administrative
Undertakings and the Annual Contract Fee will continue to apply in all
Contract Years.
At any time Hartford reserves the right to modify the contract, if such
modification: (i) is necessary to make the contract or the Separate Account
comply with any law or regulation issued by a governmental agency to which
Hartford is subject; or (ii) is necessary to assure continued qualification of
the contract under the Code or other federal or state laws relating to
retirement annuities or annuity contracts; or (iii) is necessary to reflect a
change in the operation of the Separate Account or the Sub-Account(s); (iv)
provides additional Separate Account options; or (v) withdraws Separate
Account options. In the event of any such modification Hartford will provide
notice to the Contract Owner or to the payee(s) during the Annuity period.
Hartford may also make appropriate endorsement in the contract to reflect such
modification.
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CHARGES UNDER THE CONTRACT
HOW ARE THE CHARGES UNDER THESE CONTRACTS MADE?
No deduction for sales expense is made at the time of allocation of
Contributions to the contracts. A deduction for contingent deferred sales
charges is made if there is any surrender of contract values during the first
three Participant Contract Years. During the first 3 years thereof, a maximum
deduction of 5% will be made against the full amount of any such surrender.
Such charges will in no event ever exceed 8.50% when applied as a percentage
against the sum of all Contributions to a Participant's Individual Account.
The amount or term of the contingent deferred sales charge may be reduced (see
"Charges Under the Contract -- Experience Rating of Contracts," page 20).
In the case of a redemption in which you request a certain dollar amount be
withdrawn, the sales charge is deducted from the amount withdrawn and the
balance is paid to you. Example: You request a total withdrawal, your account
value is $1,000 and the applicable sales load is 5%. Your Sub-Accounts will be
surrendered by $1,000 and you will receive $950 (I.E., the $1,000 total
withdrawal less the 5% sales charge). This is the method applicable on a full
surrender of your contract. In the case of a partial redemption in which you
request to receive a specified amount, the sales charge will be calculated on
the total amount that must be withdrawn from your Sub-Account(s) in order to
provide you with the amount requested. Example: You request to receive $1,000
and the applicable sales load is 5%. You Sub-Account(s) will be reduced by
$1,052.63 (I.E., a total withdrawal of $1,052.63 which results in a $52.63
sales charge ($1,052.63 x 5%) and a net amount paid to you of $1,000 as
requested).
IS THERE EVER A TIME WHEN THE SALES CHARGES DO NOT APPLY?
No deduction for contingent deferred sales charges will be made on
contracts: (1) in the event of death of a Participant, or (2) if the value of
a Participant's Individual Account is paid out under one of the available
Annuity options under the contracts (except that a surrender out of Annuity
Option 5 is subject to sales charges, if applicable).
WHAT DO THE SALES CHARGES COVER?
The contingent deferred sales charges, when applicable, will be used to
cover expenses relating to the sale and distribution of the contracts,
including commissions paid to any distribution organization and its sales
personnel, the cost of preparing sales literature and other promotional
activities. It is anticipated that direct commissions paid on the sale of the
contracts will not exceed .50% of a Contribution. To the extent that these
charges do not cover such distribution expenses they will be borne by Hartford
from its general assets, including surplus or possible profit from mortality
and expense risk charges.
WHAT IS THE MORTALITY, EXPENSE RISK AND ADMINISTRATIVE CHARGE?
Although Variable Annuity payments made under the contracts will vary in
accordance with the investment performance of the underlying Fund shares held
in the Sub-Account(s), the payments will not be affected by (a) Hartford's
actual mortality experience among Annuitants before or after retirement or (b)
Hartford's actual expenses, including certain administrative expenses, if
greater than the deductions provided for in the contracts because of the
mortality and expense undertakings by Hartford.
In providing an expense undertaking with respect to DC-II, Hartford assumes
the risk that the deductions for contingent deferred sales charges, and the
Annual Contract Fee under the contracts may be insufficient to cover the
actual future costs.
The mortality undertaking provided by Hartford under the contracts, assuming
the selection of one of the forms of life annuities, is to make monthly
Annuity payments (determined in accordance with the annuity tables and other
provisions contained in the contract) regardless of how long all Annuitants
may live and regardless of how long all Annuitants as a group may live. This
undertaking assures that neither the longevity of an Annuitant nor an
improvement in life expectancy will have any adverse effect on the monthly
Annuity payments the Annuitant will receive under the contract. It thus
relieves the Participant from the risk that they will outlive the funds
accumulated. The mortality undertaking is based on Hartford's present
actuarial determination of expected mortality rates among all Annuitants.
If actual experience among Annuitants deviates from Hartford's actuarial
determination of expected mortality rates among Annuitants because, as a
group, their longevity is longer than anticipated, Hartford
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<PAGE>
must provide amounts from its general funds to fulfill its contract
obligations. In that event, a loss will fall on Hartford. Conversely, if
longevity among Annuitants is lower than anticipated, a gain will result to
Hartford. Hartford also assumes the liability for payment of the Minimum Death
Benefit provided under the contract.
The administrative undertaking provided by Hartford assures the Contract
Owner that administration will be provided throughout the entire life of the
contract.
For assuming these risks Hartford presently charges 1.25% (.85% for
mortality, .15% for expense and .25% for administrative undertaking) of the
average daily net assets of DC-II. The rate charged for the mortality, expense
and administrative undertakings under the contracts may be reduced (see
"Charges Under the Contract -- Experience Rating of Contracts," page 20). The
rate charged for the mortality, expense and administrative undertakings may be
periodically increased by Hartford subject to a maximum annual rate of 2.00%,
provided, however, that no such increase will occur unless the Commission
shall have first approved such increase.
ARE THERE ANY OTHER ADMINISTRATIVE CHARGES?
There will be an Annual Contract Fee deduction from the value of each
Participant's Individual Account under the contracts. The maximum Annual
Contract Fee is $30 per year but may be reduced or waived (see "-- Experience
Rating of Contracts," page 20).
The Annual Contract Fee will be deducted from the value of each such Account
on the last business day of each Participant's Contract Year, provided,
however, that if the value of a Participant's Individual Account is redeemed
in full at any time before the last business day of the Participant's Contract
Year, then the Annual Contract Fee charge will be deducted from the proceeds
of such redemption. No deduction for the Annual Contract Fee will be made
during the Annuity Period under the contracts.
EXPERIENCE RATING OF CONTRACTS
Certain of the charges and fees described in this Prospectus may be reduced
("experience rated") for contracts depending on some or all of the following
factors: the total number of Participants, the sum of all Participants'
Individual Account values, the sum of all Participants' Individual Account
values which are allocated to funds managed by affiliates of Hartford,
anticipated present or future expense levels, anticipated present or future
commission levels, and whether or not Hartford is an exclusive annuity
contract provider. Experience rating of a contract may be discontinued in the
event of a change in the applicable factors. Hartford, in its discretion, may
experience rate a contract (either prospectively or retrospectively) by: (1)
reducing the amount or term of any applicable contingent deferred sales
charge, (2) reducing the amount of, or waiving, the Annual Contract Fee, (3)
reducing the amount of, or waiving, the Transfer Fee, (4) reducing the
mortality, expense and administrative risk charge, or (5) by any combination
of the above. Reductions in these charges will not be unfairly discriminatory
against any person, including the affected contractholders/Participants funded
by the Separate Account. Experience rating credits have been given on certain
cases. Participants in contracts receiving experience rating credits will
receive notification regarding any reduction in charges or fees.
HOW MUCH ARE THE DEDUCTIONS FOR PREMIUM TAXES ON THESE CONTRACTS?
A deduction is also made for Premium Taxes, if applicable, imposed by a
state or other governmental entity. Certain states impose a Premium Tax,
ranging up to 3.50%. On any contract subject to a Premium Taxes, Hartford will
pay the taxes when imposed by the applicable taxing authorities. Hartford, at
its sole discretion, will deduct the taxes from Contributions when received,
from the proceeds at surrender, or from the amount applied to effect an
Annuity at the time Annuity payments commence.
WHAT CHARGES ARE MADE BY THE FUNDS?
Deductions are made from assets of the Funds to pay for management fees and
the operating expenses of the Funds. A full description of the Funds, their
investment policies and restrictions, risks, charges and expenses and all
other aspects of their operation is contained in the accompanying prospectuses
for the Funds.
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<PAGE>
ARE THERE ANY OTHER DEDUCTIONS?
Reallocation of monies between or among Sub-Accounts under the contracts is
not currently subject to a charge. However, reserves the right to charge a fee
of up to $5.00 for each such transfer.
HARTFORD LIFE INSURANCE COMPANY
AND THE FUNDS
WHAT IS HARTFORD?
Hartford Life Insurance Company ("Hartford") is a stock life insurance
company engaged in the business of writing health and life insurance, both
individual and group, in all states of the United States and the District of
Columbia. Hartford was originally incorporated under the laws of Massachusetts
on June 5, 1902, and was subsequently redomiciled to Connecticut. Its offices
are located in Simsbury, Connecticut; however, its mailing address is P. O.
Box 2999, Hartford, CT 06104-2999. Hartford is a subsidiary of Hartford Fire
Insurance Company, one of the largest multiple lines insurance carriers in the
United States. Hartford is ultimately owned by ITT Hartford Group, Inc., a
Delaware corporation. Subject to shareholder approval on May 2, 1997, the name
of ITT Hartford Group, Inc. will change to The Hartford Financial Services
Group, Inc.
Hartford is rated A+ (superior) by A.M. Best and Company, Inc., on the basis
of its financial soundness and operating performance. Hartford is rated AA by
Standard & Poor's and AA+ by Duff and Phelps, on the basis of its claims
paying ability. These ratings do not apply to the investment performance of
the Sub-Accounts of the Separate Account. The ratings apply to Hartford's
ability to meet its insurance obligations, including those described in this
Prospectus.
WHAT ARE THE FUNDS?
Hartford Stock Fund, Inc. was organized on March 11, 1976. The Calvert
Responsibly Invested Balanced Portfolio is a series of the Acacia Capital
Corporation, which was incorporated on September 27, 1982. Hartford Advisers
Fund, Inc., Hartford Bond Fund, Inc., Hartford U.S. Government Money Market
Fund, Inc. and HVA Money Market Fund, Inc. were all organized on December 1,
1982. Hartford Index Fund, Inc. was organized on May 16, 1983. Hartford
Capital Appreciation Fund, Inc. was organized on September 20, 1983. Hartford
Mortgage Securities Fund, Inc. was organized on October 5, 1984. Hartford
International Opportunities Fund, Inc. was organized on January 25, 1990.
Hartford Dividend and Growth Fund, Inc. was organized on March 16, 1994.
The investment objectives of each of the Funds are as follows:
HARTFORD ADVISERS FUND, INC.
Seeks maximum long-term total rate of return consistent with prudent
investment risk by investing in common stock and other equity securities,
bonds and other debt securities, and money market instruments.
HARTFORD BOND FUND, INC.
To achieve maximum current income consistent with preservation of capital by
investing primarily in fixed-income securities. Up to 20% of the total assets
of this Fund may be invested in debt securities rated in the highest category
below investment grade ("Ba" by Moody's Investor Services, Inc. or "BB" by
Standard & Poor's) or, if unrated, are determined to be of comparable quality
by the Fund's investment adviser. Securities rated below investment grade are
commonly referred to as "high yield-high risk securities" or "junk bonds." For
more information concerning the risks associated with investing in such
securities, please refer to the section in the accompanying prospectus for the
Hartford Funds entitled "Hartford Bond Fund, Inc. -- Investment Policies."
HARTFORD CAPITAL APPRECIATION FUND, INC.
Seeks growth of capital by investing in securities selected solely on the
basis of potential for capital appreciation; income, if any, is an incidental
consideration.
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<PAGE>
HARTFORD DIVIDEND AND GROWTH FUND, INC.
Seeks a high level of current income consistent with growth of capital and
reasonable investment risk.
HARTFORD INDEX FUND, INC.
Seeks to provide investment results that correspond to the price and yield
performance of publicly-traded common stocks in the aggregate, as represented
by the Standard & Poor's 500 Composite Stock Price Index. *
HARTFORD INTERNATIONAL OPPORTUNITIES FUND, INC.
Seeks long-term total rate of return consistent with prudent investment risk
through investment primarily in equity securities issued by non-U.S.
companies.
HARTFORD MORTGAGE SECURITIES FUND, INC.
Seeks maximum current income consistent with safety of principal and
maintenance of liquidity by investing primarily in mortgage-related
securities, including securities issued by the Government National Mortgage
Association.
HARTFORD STOCK FUND, INC.
Seeks long-term capital growth primarily through capital appreciation, with
income a secondary consideration, by investing primarily in equity securities.
HVA MONEY MARKET FUND, INC.
Seeks maximum current income consistent with liquidity and preservation of
capital.
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
Seeks to achieve a total return above the rate of inflation through an
actively managed, nondiversified portfolio of common and preferred stocks,
bonds, and money market instruments which offer income and capital growth
opportunities and which satisfy the social criteria established for the
Portfolio.
* "STANDARD & POOR'S-REGISTERED TRADEMARK-", "S&P-REGISTERED TRADEMARK-", "S&P
500-REGISTERED TRADEMARK-", "STANDARD & POOR'S 500", AND "500" ARE TRADEMARKS
OF THE MCGRAW-HILL COMPANIES, INC. AND HAVE BEEN LICENSED FOR USE BY HARTFORD
LIFE INSURANCE COMPANY AND AFFILIATES. THE HARTFORD INDEX FUND, INC. ("INDEX
FUND") IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S AND
STANDARD & POOR'S MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF
INVESTING IN THE INDEX FUND.
ALL FUNDS
The Hartford Funds are available only to serve as the underlying investment
for the variable annuity contracts and variable life insurance contracts
issued by Hartford.
It is conceivable that in the future it may be disadvantageous for variable
annuity separate accounts and variable life insurance separate accounts to
invest in the Funds simultaneously. Although Hartford and the Funds do not
currently foresee any such disadvantages either to variable annuity Contract
Owners or to variable life insurance Policy Owners, the Funds' Board of
Directors intends to monitor events in order to identify any material
conflicts between such Contract Owners and Policy Owners and to determine what
action, if any, should be taken in response thereto. If the Board of Directors
of the Funds were to conclude that separate funds should be established for
variable life and variable annuity separate accounts, the variable annuity
Contract Owners would not bear any expenses attendant to the establishment of
such separate funds.
Shares of Calvert Responsibly Invested Balanced Portfolio, a series of
Acacia Capital Corporation, which is unaffiliated with Hartford, are offered
to other unaffiliated separate accounts. Hartford and the Board of Trustees of
Acacia Capital Corporation intend to monitor events to identify any material
irreconcilable conflicts which may arise and to determine what action, if any,
should be taken in response thereto.
Hartford reserves the right, subject to compliance with the law, to
substitute the shares of any other registered investment company for the
shares of any Fund held by the Separate Account. Substitution may occur if
shares of the Fund(s) become unavailable or due to changes in applicable law
or interpretations of
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<PAGE>
law. Current law requires notification to you of any such substitution and
approval of the Commission. Hartford also reserves the right, subject to
compliance with the law to offer additional Funds with differing investment
objectives.
The Hartford Index Fund was not available under contracts issued prior to
May 1, 1987 unless separately applied for by a Contract Owner. The Hartford
Dividend and Growth Fund was not available under contracts issued prior to May
1, 1995.
All of the Hartford Funds are sponsored by Hartford and are incorporated
under the laws of the State of Maryland. HL Investment Advisors, Inc. ("HL
Advisors") serves as the investment adviser to each of the Hartford Funds.
Wellington Management Company, L.L.P. serves as sub-investment adviser for
Hartford Advisers Fund, Hartford Capital Appreciation Fund, Hartford Dividend
and Growth Fund, Hartford International Opportunities Fund and Hartford Stock
Fund.
In addition, HL Advisors has entered an investment services agreement with
Hartford Investment Management Company, Inc. ("HIMCO"), pursuant to which
HIMCO will provide certain investment services to Hartford Bond Fund, Hartford
Index Fund, Hartford Mortgage Securities Fund and HVA Money Market Fund.
Calvert Asset Management Company serves as investment adviser and manages
the fixed-income portion of the Calvert Responsibly Invested Balanced
Portfolio. The sub-advisor to the Portfolio is NCM Capital Management Group,
Inc. ("NCM"). NCM manages the equity portion of the Portfolio.
A full description of the Funds, their investment policies and restrictions,
risks, charges and expenses and all other aspects of their operations is
contained in the accompanying Funds' prospectuses, which should be read in
conjunction with this Prospectus before investing, and in the Funds' Statement
of Additional Information which may be ordered from Hartford.
DOES HARTFORD HAVE ANY INTEREST IN THE FUNDS?
As of December 31, 1996, certain Hartford group pension contracts held
direct interest in shares as follows:
<TABLE>
<CAPTION>
PERCENT OF
SHARES TOTAL SHARES
---------- ------------
<S> <C> <C>
Hartford Advisers Fund, Inc....................... 18,752,510 0.69%
Hartford Bond Fund, Inc........................... 47,060 0.01%
Hartford Capital Appreciation Fund, Inc........... 15,519,596 1.79%
Hartford Dividend and Growth Fund, Inc............ 443,556 0.08%
Hartford Index Fund, Inc.......................... 16,432,999 6.30%
Hartford International Opportunities Fund, Inc.... 7,835,802 1.11%
Hartford Mortgage Securities Fund, Inc............ 17,408,850 5.65%
Hartford Stock Fund, Inc.......................... 92,167 0.01%
HVA Money Market Fund, Inc........................ 31,633 0.01%
</TABLE>
FEDERAL TAX CONSIDERATIONS
WHAT ARE SOME OF THE FEDERAL TAX CONSEQUENCES WHICH AFFECT THESE CONTRACTS?
A. GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING
TO THE ACTUAL STATUS OF THE CONTRACT OWNER INVOLVED AND THE TYPE OF PLAN UNDER
WHICH THE CONTRACT IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A
PERSON, EMPLOYER OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A CONTRACT
DESCRIBED HEREIN.
It should be understood that any detailed description of the federal income
tax consequences regarding the purchase of these contracts cannot be made in
this Prospectus and that special tax rules may be applicable with respect to
certain purchase situations not discussed herein. For detailed information, a
qualified tax adviser should always be consulted. This discussion is based on
Hartford's understanding of existing federal income tax laws as they are
currently interpreted.
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<PAGE>
B. HARTFORD AND SEPARATE ACCOUNT TWO (DC-II)
DC-II is taxed as part of Hartford which is taxed as a life insurance
company in accordance with the Internal Revenue Code of 1986, as amended (the
"Code"). Accordingly, DC-II will not be taxed as a "regulated investment
company" under Subchapter M of the Code. Investment income and any realized
capital gains on the assets of DC-II are reinvested and are taken into account
in determining the value of the Accumulation and Annuity Units. (See "How is
the Accumulation Unit value determined?" commencing on page 14.) As a result,
such investment income and realized capital gains are automatically applied to
increase reserves under the contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by DC-II with respect to qualified or non-qualified contracts.
C. INFORMATION REGARDING TAX QUALIFIED PLANS
The tax rules applicable to tax qualified contract owners, including
restrictions on contributions and distributions, taxation of distributions and
tax penalties, vary according to the type of plan as well as the terms and
conditions of the plan itself. Various tax penalties may apply to
contributions in excess of specified limits, to distributions in excess of
specified limits, distributions which do not satisfy certain requirements and
certain other transactions with respect to qualified plans. Accordingly, this
summary provides only general information about the tax rules associated with
use of the contract by a qualified plan. Contract owners, plan participants
and beneficiaries are cautioned that the rights and benefits of any person to
benefits are controlled by the terms and conditions of the plan regardless of
the terms and conditions of the contract. Some qualified plans are subject to
distribution and other requirements which are not incorporated into Hartford's
administrative procedures. Owners, participants and beneficiaries are
responsible for determining that contributions, distributions and other
transactions comply with applicable law. Because of the complexity of these
rules, owners, participants and beneficiaries are encouraged to consult their
own tax advisers as to specific tax consequences.
1. QUALIFIED PENSION PLANS
Provisions of the Code permit eligible employers to establish pension or
profit sharing plans (described in Section 401(a) and 401(k), if applicable,
and exempt from taxation under Section 501(a) of the Code), and Simplified
Employee Pension Plans (described in Section 408(k)). Such plans are subject
to limitations on the amount that may be contributed, the persons who may be
eligible and the time when distributions must commence. Corporate employers
intending to use these contracts in connection with such plans should seek
competent advice.
2. TAX SHELTERED ANNUITIES UNDER SECTION 403(B)
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations
specified in Section 501(c)(3) of the Code to purchase annuity contracts, and,
subject to certain limitations, exclude such contributions from gross income.
Generally, such contributions may not exceed the lesser of $9,500 or 20% of
the employees "includable compensation" for his most recent full year of
employment, subject to other adjustments. Special provisions may allow some
employees to elect a different overall limitation.
Tax-sheltered annuity programs under Section 403(b) are subject to a
PROHIBITION AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO
CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT unless such
distribution is made:
a) after the participating employee attains age 59 1/2;
b) upon separation from service;
c) upon death or disability, or
d) in the case of hardship.
The above restrictions apply to distributions of employee contributions made
after December 31, 1988, earnings on those contributions, and earnings on
amounts attributable to employee contributions held as of
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<PAGE>
December 31, 1988. They do not apply to distributions of any employer or other
after-tax contributions, employee contributions made on or before December 31,
1988, and earnings credited to employee contributions before December 31,
1988.
3. DEFERRED COMPENSATION PLANS UNDER SECTION 457
Employees and independent contractors performing services for such employers
may contribute on a before tax basis to the Deferred Compensation Plan of
their employer in accordance with the employer's plan and Section 457 of the
Code. Section 457 places limitations on contributions to Deferred Compensation
Plans maintained by a State ("State" means a State, a political sub-division
of a State, and an agency or instrumentality of a State or political
sub-division of a State) or other tax-exempt organization. Generally, the
limitation is 33 1/3% of includable compensation (typically 25% of gross
compensation) or $7,500 (indexed), whichever is less. The plan may also
provide for additional "catch-up" deferrals during the three taxable years
ending before a Participant attains normal retirement age.
An employee electing to participate in a Deferred Compensation Plan should
understand that his or her rights and benefits are governed strictly by the
terms of the plan and that the employer is the legal owner of any contract
issued with respect to the plan. The employer, as owner of the contract(s),
retains all voting and redemption rights which may accrue to the contract(s)
issued with respect to the plan. The participating employee should look to the
terms of his or her plan for any charges in regard to participating therein
other than those disclosed in this Prospectus. Participants should also be
aware that effective August 20, 1996, the Small Business Job Protection Act of
1996 requires that all assets and income of an eligible Deferred Compensation
Plan established by a governmental employer which is a State, a political
subdivision of a State, or any agency or instrumentality of a State or
political subdivision of a State, must be held in trust (or under certain
specified annuity contracts or custodial accounts) for the exclusive benefit
of Participants and their Beneficiaries. Special transition rules apply to
such governmental Deferred Compensation Plans already in existence on August
20, 1996, and provide that such plans need not establish a trust before
January 1, 1999. However, this requirement does not apply to amounts under a
Deferred Compensation Plan of a tax-exempt (non-governmental) organization and
such amounts will be subject to the claims of such tax-exempt employer's
general creditors.
In general, distributions from a Section 457 Deferred Compensation Plan are
prohibited unless made after the participating employee attains the age
specified in the plan, separates from service, dies, or suffers an
unforeseeable financial emergency. Present federal tax law does not allow
tax-free transfers or rollovers for amounts accumulated in a Section 457 plan
except for transfers to other Section 457 plans in limited cases.
4. INDIVIDUAL RETIREMENT ANNUITIES UNDER SECTION 408
Section 408 of the Code permits eligible individuals to establish individual
retirement programs through the purchase of Individual Retirement Annuities
("IRAs"). IRAs are subject to limitations on the amount that may be
contributed, the contributions that may be deducted from taxable income, the
persons who may be eligible and the time when distributions may commence.
Also, distributions from certain qualified plans may be "rolled-over" on a
tax-deferred basis into an IRA.
5. TAX PENALTIES
Distributions from retirement plans are generally taxed under Section 72 of
the Code. Under these rules, a portion of each distribution may be excludable
from income. The excludable amount is the portion of the distribution which
bears the same ratio as the after-tax contributions bear to the expected
return.
A. PREMATURE DISTRIBUTION
Distributions from a qualified plan before the Participant attains age
59 1/2 are generally subject to an additional tax equal to 10% of the taxable
portion of the distribution. The 10% penalty does not apply to distributions
made after the employee's death, on account of disability, for eligible
medical expenses and distributions in the form of a life annuity and, except
in the case of an IRA, certain distributions after separation from service at
or after age 55. A life annuity is defined as a scheduled series of
substantially equal periodic payments for the life or life expectancy of the
Participant (or the joint lives or life expectancies of the Participant and
Beneficiary).
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<PAGE>
B. MINIMUM DISTRIBUTION TAX
If the amount distributed is less than the minimum required distribution for
the year, the Participant is subject to a 50% tax on the amount that was not
properly distributed.
An individual's interest in a retirement plan must generally be distributed,
or begin to be distributed, not later than April 1 of the calendar year
following the later of (i) the calendar year in which the individual attains
age 70 1/2 or (ii) the calendar year in which the individual retires from
service with the employer sponsoring the plan ("required beginning date").
However, the required beginning date for an individual who is a five (5)
percent owner (as defined in the Code), or who is the owner of an IRA, is
April 1 of the calendar year following the calendar year in which the
individual attains age 70 1/2. The entire interest of the Participant must be
distributed beginning no later than this required beginning date over a period
which may not extend beyond a maximum of the life expectancy of the
Participant and a designated Beneficiary. Each annual distribution must equal
or exceed a "minimum distribution amount" which is determined by dividing the
account balance by the applicable life expectancy. This account balance is
generally based upon the account value as of the close of business on the last
day of the previous calendar year. In addition, minimum distribution
incidental benefit rules may require a larger annual distribution.
If an individual dies before reaching his or her required beginning date,
the individual's entire interest must generally be distributed within five
years of the individual's death. However, this rule will be deemed satisfied,
if distributions begin before the close of the calendar year following the
individual's death to a designated Beneficiary (or over a period not extending
beyond the life expectancy of the beneficiary). If the Beneficiary is the
individual's surviving spouse, distributions may be delayed until the
individual would have attained age 70 1/2.
If an individual dies after reaching his or her required beginning date or
after distributions have commenced, the individual's interest must generally
be distributed at least as rapidly as under the method of distribution in
effect at the time of the individual's death.
C. EXCESS DISTRIBUTION TAX
If the aggregate distributions from all IRAs and certain other qualified
plans in a calendar year exceed the greater of (i) $150,000, or (ii) $112,500
as indexed for inflation, a penalty tax of 15% is generally imposed on the
excess portion of the distribution.
D. FEDERAL INCOME TAX WITHHOLDING
That portion of a distribution from a tax-qualified retirement plan or Tax
Sheltered Annuity which is taxable income to the recipient is subject to
federal income tax withholding, pursuant to Section 3405 of the Code. The
application of this provision is summarized below:
1. ELIGIBLE ROLLOVER DISTRIBUTIONS
a. The Unemployment Compensation Amendments Act of 1992 requires that
federal income taxes be withheld from certain distributions from
tax-qualified retirement plans and from tax-sheltered annuities under
Section 403(b). These provisions DO NOT APPLY to distributions from
individual retirement annuities under section 408(b) or from deferred
compensation programs under section 457.
b. If any portion of a distribution is an "eligible rollover distribution",
the law requires that 20% of that amount be withheld. This amount is sent
to the IRS as withheld income taxes. The following types of payments DO
NOT constitute an eligible rollover distribution (and, therefore, the
mandatory withholding rules will not apply):
-- the non-taxable portion of the distribution;
-- distributions which are part of a series of equal (or substantially
equal) payments made at least annually for your lifetime (or your
life expectancy), or your lifetime and your Beneficiary's lifetime
(or life expectancies), or for a period of ten years or more.
-- required minimum distributions made pursuant to section 401(a)(9) of
the Code.
c. However, these mandatory withholding requirements do not apply in the
event of all or a portion of any eligible rollover distribution is paid
in a "direct rollover". A direct rollover is the direct payment of
26
<PAGE>
an eligible rollover distribution or portion thereof to an individual
retirement arrangement or annuity (IRA) or to another qualified employer
plan. IF A DIRECT ROLLOVER IS ELECTED, NO INCOME TAX WILL BE WITHHELD.
d. If any portion of a distribution is not an eligible rollover
distribution but is taxable, the mandatory withholding rules described
above do not apply. In this case, the voluntary withholding rules
described below apply.
2. NON-ELIGIBLE ROLLOVER DISTRIBUTIONS
A. NON-PERIODIC DISTRIBUTIONS
The portion of a non-periodic distribution which constitutes taxable income
will be subject to federal income tax withholding unless the recipient elects
not to have taxes withheld. If an election not to have taxes withheld is not
provided, 10% of the taxable distribution will be withheld as federal income
tax. Election forms will be provided at the time distributions are requested.
B. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN
ONE YEAR)
The portion of a periodic distribution which constitutes taxable income will
be subject to federal income tax withholding as if the recipient were married
claiming three exemptions. A recipient may elect not to have income taxes
withheld or have income taxes withheld at a different rate by providing a
completed election form. Election forms will be provided at the time
distributions are requested.
3. SECTION 457 PLANS
In general, distributions from plans described in Section 457 of the Code
are subject to regular wage withholding rules.
E. DIVERSIFICATION REQUIREMENTS
Section 817 of the Code provides that a variable annuity contract will not
be treated as an annuity contract for any period during which the investments
made by the separate account or underlying fund are not adequately diversified
in accordance with regulations prescribed by the Treasury. If a contract is
not treated as an annuity contract, the Contract Owner will be subject to
income tax on the annual increases in cash value.
The Treasury has issued diversification regulations which generally require,
among other things, that no more than 55% of the value of the total assets of
the segregated assets account underlying a variable contract is represented by
any one investment, no more than 70% is represented by any two investment, no
more than 80% is represented by any three investments, and no more than 90% is
represented by any four investments. In determining whether the
diversification standards are met, all securities of the same issuer, all
interests in the same real property project, and all interests in the same
commodity are each treated as a single investment. In addition, in the case of
government securities, each government agency or instrumentality shall be
treated as a separate issuer.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, the company may comply within a reasonable period and avoid the
taxation of contract income on an ongoing basis. However, either the company
or the contract owner must agree to pay the tax due for the period during
which the diversification requirements were not met.
Hartford monitors the diversification of investments in the separate
accounts and tests for diversification as required by the Code. Hartford
intends to administer all contracts subject to the diversification
requirements in a manner that will maintain adequate diversification.
F. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT
In order for a variable annuity contract to qualify for tax deferral, assets
in the segregated asset accounts supporting the variable contract must be
considered to be owned by the insurance company and not by the variable
contract owner. The Internal Revenue Service has issued several rulings which
discuss investor
27
<PAGE>
control. The Service has ruled that incidents of ownership by the contract
owner, such as the ability to select and control investments in a separate
account, will cause the contract owner to be treated as the owner of the
assets for tax purposes.
Further, in the explanation to the temporary Section 817 diversification
regulations, the Treasury Department noted that the temporary regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." The explanation further indicates that "the temporary regulations
provide that in appropriate cases a segregated asset account may include
multiple sub-accounts, but do not specify the extent to which policyholders
may direct their investments to particular sub-accounts without being treated
as the owners of the underlying assets. Guidance on this and other issues will
be provided in regulations or revenue rulings under Section 817(d), relating
to the definition of "variable contract." The final regulations issued under
Section 817 did not provide guidance regarding investor control, and as of the
date of this Prospectus, no other such guidance has been issued. Further,
Hartford does not know if or in what form such guidance will be issued. In
addition, although regulations are generally issued with prospective effect,
it is possible that regulations may be issued with retroactive effect. Due to
the lack of specific guidance regarding the issue of investor control, there
is necessarily some uncertainty regarding whether a Contract Owner could be
considered the owner of the assets for tax purposes. Hartford reserves the
right to modify the contracts, as necessary, to prevent Contract Owners from
being considered the owners of the assets in the separate accounts.
G. NON-NATURAL PERSONS, CORPORATIONS
The annual increase in the value of the contract is currently includable in
gross income of a non-natural person. There is an exception for annuities held
by structured settlement companies and annuities held by an employer with
respect to a terminated pension plan. A non-natural person which is a
tax-exempt entity for federal tax purposes will not be subject to income tax
as a result of this provision.
H. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to annuity purchasers that are U.S. citizens or
residents. Purchasers that are not U.S. citizens or residents will generally
be subject to U.S. federal income tax and withholding on annuity distributions
at a 30% rate, unless a lower treaty rate applies. In addition, purchasers may
be subject to state premium tax, other state and/or municipal taxes, and taxes
that may be imposed by the purchaser's country of citizenship or residence.
Prospective purchasers are advised to consult with a qualified tax adviser
regarding U.S., state, and foreign taxation with respect to an annuity
purchase.
MISCELLANEOUS
WHAT ARE MY VOTING RIGHTS?
Hartford shall notify the Contract Owner of any Fund shareholders' meeting
if the shares held for the Contract Owner's accounts may be voted at such
meetings. Hartford Life shall also send proxy materials and a form of
instruction by means of which the Contract Owner can instruct Hartford with
respect to the voting of the Fund shares held for the Contract Owner's
account. In connection with the voting of Fund shares held by it, Hartford
shall arrange for the handling and tallying of proxies received from Contract
Owners. Hartford as such, shall have no right, except as hereinafter provided,
to vote any Fund shares held by it hereunder which may be registered in its
name or the names of its nominees. Hartford will, however, vote the Fund
shares held by it in accordance with the instructions received from the
Contract Owners for whose accounts the Fund shares are held. If a Contract
Owner desires to attend any meeting at which shares held for the Contract
Owner's benefit may be voted, the Contract Owner may request Hartford to
furnish a proxy or otherwise arrange for the exercise of voting rights with
respect to the Fund shares held for such Contract Owner's account. In the
event that the Contract Owner gives no instructions or leaves the manner of
voting discretionary, Hartford will vote such shares of the appropriate Fund,
including any of its own shares, in the same proportion as shares of that Fund
for which instructions have been received.
28
<PAGE>
Every Participant under a contract issued with respect to DC-II who has a
full (100%) vested interest under a group contract, shall receive proxy
material and a form of instruction by means of which Participants may instruct
the Contract Owner with respect to the number of votes attributable to his
individual participation under a group contract.
A Contract Owner or Participant, as appropriate, is entitled to one full or
fractional vote for each full or fractional Accumulation or Annuity Unit
owned. The Contract Owner has voting rights throughout the life of the
contract. The vested Participant has voting rights for as long as
participation in the contract continues. Voting rights attach only to Separate
Account interests.
During the Annuity period under a contract the number of votes will decrease
as the assets held to fund Annuity benefits decrease.
WILL OTHER CONTRACTS BE PARTICIPATING IN THIS SEPARATE ACCOUNT?
In addition to the contracts described in this Prospectus, other forms of
group annuities are sold providing benefits which vary in accordance with the
investment experience of the Separate Account.
HOW ARE THE CONTRACTS SOLD?
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account.
HSD is a wholly-owned subsidiary of Hartford. The principal business address
of HSD is the same as that of Hartford.
The securities will be sold by salespersons of HSD who represent Hartford as
insurance and Variable Annuity agents and who are registered representatives
or Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Commission under the Securities Exchange Act of
1934 as a Broker-Dealer and is a member of the National Association of
Securities Dealers, Inc.
Compensation will be paid by Hartford to registered representatives for the
sale of contracts up to a maximum of 0.5% on all Contributions and 0.25%
annually on Participants' Individual Account Values. Sales compensation may be
reduced.
WHO IS THE CUSTODIAN OF THE SEPARATE ACCOUNT'S ASSETS?
Hartford is the custodian of the Separate Account's assets.
ARE THERE ANY MATERIAL LEGAL PROCEEDINGS AFFECTING THE SEPARATE ACCOUNT?
There are no material legal proceedings to which the Separate Account is a
party. Counsel with respect to federal laws and regulations applicable to the
issue and sale of the contracts and with respect to Connecticut law is Lynda
Godkin, General Counsel, Hartford Life Insurance Companies, P. O. Box 2999,
Hartford, CT 06104-2999.
ARE YOU RELYING ON ANY EXPERTS AS TO ANY PORTION OF THIS PROSPECTUS?
The audited consolidated financial statements and financial statement
schedules included in this Prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports. Reference is made to said report on the consolidated
financial statements of Hartford Life Insurance Company (the Depositor), which
includes an explanatory paragraph with respect to the change in method of
accounting for debt and equity securities as of January 1, 1994, as discussed
in Note 2 of Notes to Consolidated Financial Statements. The principal
business address of Arthur Andersen LLP is One Financial Plaza, Hartford,
Connecticut 06103.
HOW MAY I GET ADDITIONAL INFORMATION?
Inquiries will be answered by calling your representative or by writing:
Hartford Life Insurance Company
Attn: RPVA Administration
P. O. Box 2999
Hartford, CT 06104-2999
29
<PAGE>
TABLE OF CONTENTS
FOR
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION PAGE
- ------------------------------------------------------------ ----
<S> <C>
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY..............
SAFEKEEPING OF ASSETS.......................................
INDEPENDENT PUBLIC ACCOUNTANTS..............................
DISTRIBUTION OF CONTRACTS...................................
CALCULATION OF YIELD AND RETURN.............................
PERFORMANCE COMPARISONS.....................................
FINANCIAL STATEMENTS........................................
</TABLE>
30
<PAGE>
This form must be completed for all tax-sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The Hartford variable annuity contract which you have recently purchased is
subject to certain restrictions imposed by the Tax Reform Act of 1986.
Contributions to the contract after December 31, 1988 and any increases in cash
value after December 31, 1988 may not be distributed to you unless you have:
a. attained age 59 1/2
b. terminated employment
c. died, or
d. become disabled.
Distributions of post December 31, 1988 contributions may also be made if you
have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made because of financial
hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than the Hartford variable annuity. Please refer to your
Plan.
Please complete the following and return to:
Hartford Life Insurance Company
Attn: RPVA Administration
P. O. Box 2999
Hartford, CT 06104-2999
Name of Contract Owner/Participant _____________________________________________
Address ________________________________________________________________________
City or Plan/School District ___________________________________________________
Date: __________________________________________________________________________
<PAGE>
To obtain a Statement of Additional
Information, complete the form below and mail to:
Attn: RPVA Administration
Hartford Life Insurance Companies
P. O. Box 2999
Hartford, CT 06104-2999
Please send a Statement of Additional
Information for Separate Account Two (DC-II) (Form
HV-1874-12) to me at the following address.
__________________________________________
(name)
__________________________________________
(address)
__________________________________________
(city/state) (zip code)
<PAGE>
PRINCIPAL UNDERWRITER
Hartford Securities Distribution Company, Inc. (HSD)
Hartford Plaza, Hartford, CT 06115
HARTFORD
INDEPENDENT AUDITORS FOR HARTFORD
LIFE INSURANCE COMPANY AND
SEPARATE ACCOUNT
TWO
LIFE INSURANCE
Arthur Andersen LLP
Hartford, Connecticut 06103
COMPANY
INSURER
Hartford Life Insurance Company
SEPARATE ACCOUNT TWO
Executive Offices: P.O. Box 2999
DC VARIABLE ACCOUNT-II
Hartford, CT 06104-2999
PROSPECTUS
INCLUDING THE PROSPECTUS OF
THE FUNDS
MAY 1, 1997
Group Variable Annuity Contracts
[LOGO]
HV-1874-12
HARTFORD LIFE INSURANCE COMPANY
BULK RATE
P.O. BOX 2999, HARTFORD, CT 06104-2999
U.S. POSTAGE
PAID
PERMIT NO. 1
HARTFORD, CONN.
