<PAGE>
As filed with the Securities and Exchange Commission on June 1, 1999.
Registration Nos._____
811-5439
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 65
----------------------------------
VARIABLE ACCOUNT D
OF
FORTIS BENEFITS INSURANCE COMPANY
(Exact Name of Registrant)
---------------------------------
FORTIS BENEFITS INSURANCE COMPANY
(Name of Depositor)
500 Bielenberg Drive
Woodbury, Minnesota 55125
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code:
651-738-4000
---------------------------------
RHONDA J. SCHWARTZ, ESQ.
500 Bielenberg Drive
Woodbury, Minnesota 55125
(Name and Address of Agent for Service)
<PAGE>
It is proposed that this filing will be come effective (check appropriate box):
____immediately upon filing pursuant to paragraph (b) of Rule 485.
____on_____________________ pursuant to paragraph (b) of Rule 485.
___60 days after filing pursuant to paragraph (a)(1) of Rule 485.
____on________________ pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following box:
____ This post-effective amendment designated a new effective date for a
previously filed post-effective amendment.
--------------------------------------
The registrant hereby amends this registration statement on such dates as may be
necessary to delay its effective date until the registrant shall file another
amendment which specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
act of 1933 or until this registration statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
VARIABLE ACCOUNT D OF
FORTIS BENEFITS INSURANCE COMPANY
CROSS REFERENCE SHEET SHOWING LOCATION
OF INFORMATION IN PROSPECTUS OR
STATEMENT OF ADDITIONAL INFORMATION
Form N-4 Prospectus Caption
- -------- ------------------
1. Cover Page Cover Page
2. Definitions Special Terms Used in This
Prospectus
3. Synopsis of Highlights Summary; Information Concerning
Fees and Charges
4. Condensed Financial Summary -- Financial information
Information
5. General Description of Summary--Separate Account
Registrant, Depositor and Investment Options; Fortis
Portfolio Companies Benefits and the Separate
Account; Fixed Account
6. Deductions Summary--Charges and Deductions;
Charges and Deductions
7. General Description of Variable Accumulation Period; General
Annuity Contracts Provisions
8. Annuity Period The Annuity Period
9. Death Benefit Summary--Death Benefit;
Accumulation Period -- Benefit
Payable on Death of Annuitant or
Contract Owner
10. Purchases and Contract Value Accumulation Period -- Issuance
of a Contract and Purchase
Payments- Contract Value
11. Redemptions Summary--Total and Partial
Surrenders; Accumulation Period--
Total and Partial Surrenders
12. Taxes Summary--Tax Implications;
Federal Tax Matters
<PAGE>
FORM N-4 PROSPECTUS OR
-------- STATEMENT OF ADDITIONAL
(cont'd.) INFORMATION CAPTION
-----------------------
13. Legal Proceedings
None
14. Table of Contents of the Contents of the Statement of
Statement of Additional Information Additional Information
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and History Fortis Benefits
18. Services Services
19. Purchases of Securities Being Reduction of Charges
Offered
20. Underwriters Services
21. Calculation of Performance Data Appendix A
22. Annuity Payments Calculation of Annuity Payments
23. Financial Statements Financial Statements
<PAGE>
FORTIS
INCOME
PREFERRED
VARIABLE
ANNUITY
Individual Flexible
Premium Deferred
Variable Annuity Contract
PROSPECTUS DATED
September 1, 1999
FORTIS-R-
FORTIS BENEFITS INSURANCE COMPANY
MAILING ADDRESS: STREET ADDRESS: PHONE:
P.O. BOX 64272 500 BIELENBERG DRIVE 1-800-800-2000
ST. PAUL, MN 55164 WOODBURY, MN 55125 (EXTENSION 3057)
This prospectus describes an individual flexible premium deferred variable
annuity contract issued by Fortis Benefits Insurance Company ("Fortis
Benefits").
The contracts allow you to accumulate funds on a tax-deferred basis. You may
elect a guaranteed interest accumulation option through a fixed account or a
variable return accumulation option through a variable account, or a combination
of these two options. Under the variable return accumulation option, you can
choose among the following investment portfolios of Fortis Series Fund, Inc.:
<TABLE>
<S> <C>
Money Market Series S&P 500 Index Series
U.S. Government Securities Series Blue Chip Stock Series
Diversified Income Series Global Growth Series
Global Bond Series Growth Stock Series
High Yield Series International Stock Series
Asset Allocation Series Aggressive Growth Series
Global Asset Allocation Series Small Cap Value Series
Value Series Mid Cap Stock Series
Growth & Income Series Large Cap Growth Series
</TABLE>
The accompanying prospectus for these investment
portfolios describes the investment objectives, policies
and risks of each portfolio.
This prospectus gives you information about the contract
that you should know before investing. This prospectus
must be accompanied by a current prospectus for the
portfolios. All of the prospectuses should be read
carefully and kept for future reference.
A Statement of Additional Information, dated September
1, 1999, about the contracts has been filed with the
Securities and Exchange Commission and is available
without charge from Fortis Benefits at the address and
phone number printed above. The Table of Contents for
the Statement of Additional Information appears on page
21 of this prospectus.
THESE CONTRACTS ARE NOT OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, CREDIT UNION, BROKER-DEALER OR
OTHER FINANCIAL INSTITUTION. THEY ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. THEY
INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY
STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND
MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL
THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING
AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
100045 (9/99)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SPECIAL TERMS USED IN THIS PROSPECTUS................................. 3
INFORMATION CONCERNING FEES AND CHARGES............................... 4
SUMMARY............................................................... 6
FORTIS BENEFITS AND THE SEPARATE ACCOUNT.............................. 7
- Fortis Benefits/Fortis Financial Group Member................... 7
- The Separate Account............................................ 8
- The Portfolios.................................................. 8
ACCUMULATION PERIOD................................................... 8
- Issuance of a Contract and Purchase Payments.................... 8
- Contract Value.................................................. 9
- Allocation of Purchase Payments and Contract Value.............. 10
- Total and Partial Surrenders.................................... 10
- Telephone Transactions.......................................... 11
- Fortis Guaranteed PayoutPlan Benefit............................ 11
- Benefit Payable on Death of Contract Owner (or Annuitant)....... 11
THE ANNUITY PERIOD.................................................... 12
- Annuity Commencement Date....................................... 12
- Commencement of Annuity Payments................................ 12
- Relationship Between Subaccount Investment Performance and
Amount of Variable Annuity Payments............................ 13
- Annuity Options................................................. 13
- Death of Annuitant or Other Payee............................... 14
CHARGES AND DEDUCTIONS................................................ 14
- Premium Taxes................................................... 14
- Charges Against the Separate Account............................ 14
- Surrender Charge................................................ 14
- Nursing Care/Hospitalization Waiver of Surrender Charges........ 15
- Disability Waiver of Surrender Charges.......................... 15
- Miscellaneous................................................... 16
- Reduction of Charges............................................ 16
FIXED ACCOUNT......................................................... 16
- General Description............................................. 16
- Fixed Account Value............................................. 16
- Fixed Account Transfers, Total and Partial Surrenders........... 16
GENERAL PROVISIONS.................................................... 17
- The Contract.................................................... 17
- Postponement of Payments........................................ 17
- Misstatement of Age or Sex and Other Errors..................... 17
- Assignment and Ownership Rights................................. 17
- Beneficiary..................................................... 17
- Reports......................................................... 17
RIGHTS RESERVED BY FORTIS BENEFITS.................................... 17
DISTRIBUTION.......................................................... 18
FEDERAL TAX MATTERS................................................... 18
VOTING PRIVILEGES..................................................... 20
STATE REGULATION...................................................... 21
LEGAL MATTERS......................................................... 21
YEAR 2000 ISSUE....................................................... 21
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION....................... 21
APPENDIX A--Sample Death Benefit Calculations......................... A-1
APPENDIX B--Explanation of Expense Calculations....................... B-1
APPENDIX C--Pro Rata Adjustments...................................... C-1
</TABLE>
THE CONTRACTS ARE NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. FORTIS BENEFITS DOES NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATION REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS WHICH IS NOT
INCLUDED IN THIS PROSPECTUS, THE RELATED STATEMENT OF ADDITIONAL INFORMATION, OR
ANY SUPPLEMENTS THERETO OR IN ANY SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY
FORTIS BENEFITS.
<PAGE>
SPECIAL TERMS USED IN THIS PROSPECTUS
<TABLE>
<S> <C>
Accumulation The time period under a contract between the contract date and the Annuity Period.
Period
Accumulation A unit of measure used to calculate the interest of the contract owner in the Separate Account
Unit during the Accumulation Period.
Annuitant A person during whose life annuity payments are to be made by us under the contract. The
Annuitant is the person named in the application for the contract. If that person dies before
the annuity commencement date and there is an additional annuitant named in the application,
the additional annuitant will become the Annuitant. If there is no named additional annuitant,
or the additional annuitant has died before the annuitant who is named in the application, the
contract owner, if he or she is a natural person, will become the Annuitant.
Annuity Period The time period following the Accumulation Period, during which annuity payments are made by
us.
Annuity Unit A unit of measurement used to calculate variable annuity payments.
Fixed Annuity An annuity option under which we promise to pay the Annuitant or any other properly designated
Option payee one or more fixed payments.
Non-Qualified Contracts that do not qualify for the special federal income tax treatment applicable in
Contracts connection with certain retirement plans.
Qualified Contracts that are qualified for the special federal income tax treatment applicable in
Contracts connection with certain retirement plans.
Separate The segregated asset account referred to as Variable Account D of Fortis Benefits Insurance
Account Company established to receive and invest purchase payments made under contracts.
Valuation Date Each business day of Fortis Benefits except, with respect to any subaccount, days on which the
related portfolio does not value its shares. Generally, the portfolios value their shares on
each day the New York Stock Exchange is open.
Valuation The period that starts at the close of regular trading on the New York Stock Exchange on a
Period Valuation Date and ends at the close of regular trading on the exchange on the next succeeding
Valuation Date.
Variable An annuity option under which we promise to pay the Annuitant, or any other properly
Annuity Option designated payee, one or more payments which vary in amount in accordance with the net
investment experience of the subaccounts selected by the Annuitant.
</TABLE>
3
<PAGE>
INFORMATION CONCERNING FEES AND CHARGES
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Front End Sales Charge Imposed on
Purchases................................... 0%
Maximum Surrender Charge for Sales Expenses
(as a percentage of purchase payments)...... 8%(1)
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF YEARS
SINCE SURRENDER CHARGE AS A
PURCHASE PAYMENT WAS PERCENTAGE OF PURCHASE
CREDITED PAYMENT
- -------------------- -------------------------
<S> <C>
Less than 3 8%
At least 3 but less
than 4 7%
At least 4 but less
than 5 6%
At least 5 but less
than 6 5%
At least 6 but less
than 7 4%
At least 7 but less
than 8 3%
At least 8 but less
than 9 2%
9 or more 0%
</TABLE>
<TABLE>
<S> <C>
Other Surrender Fees....................... 0%
Exchange Fee............................... 0%
ANNUAL CONTRACT ADMINISTRATION CHARGE............. $0
SEPARATE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
Mortality and Expense Risk Charge.......... 1.40%
Fortis Guaranteed PayoutPlan Benefit
Expense Charge.............................. .35%
Separate Account Administrative Charge..... .10%
Total Separate Account Annual Expenses..... 1.85%
</TABLE>
- ------------------------
(1) This charge does not apply in certain cases such as partial surrenders each
year of up to 10% of "new purchase payments" as defined under the heading
"Surrender Charge" or, payment of a death benefit.
PORTFOLIO ANNUAL EXPENSES(A)
<TABLE>
<CAPTION>
MONEY US GOVERNMENT
FBIC AND FIRST FORTIS MARKET SECURITIES DIVERSIFIED INCOME GLOBAL BOND HIGH YIELD
- -------------------------------------- ----------- ----------------- -------------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Investment Advisory and Management
Fee.................................. 0.30% 0.47% 0.47% 0.75% 0.50%
Other Expenses........................ 0.05% 0.04% 0.05% 0.13% 0.06%
Total Series Fund Operating
Expenses............................. 0.35% 0.51% 0.52% 0.88% 0.56%
<CAPTION>
GLOBAL ASSET ASSET
FBIC AND FIRST FORTIS ALLOCATION ALLOCATION VALUE GROWTH & INCOME
- -------------------------------------- -------------- ------------ ---------- ------------------
<S> <C> <C> <C> <C>
Investment Advisory and Management
Fee.................................. 0.90% 0.47% 0.70% 0.64%
Other Expenses........................ 0.11% 0.04% 0.06% 0.03%
Total Series Fund Operating
Expenses............................. 1.01% 0.51% 0.76% 0.67%
</TABLE>
<TABLE>
<CAPTION>
S&P 500 BLUE CHIP MIDCAP STOCK
INDEX STOCK INTERNATIONAL STOCK SERIES
------------ ---------- -------------------- --------------
<S> <C> <C> <C> <C>
Investment Advisory and Management Fee...................... 0.40% 0.89% 0.85% 0.90%
Other Expenses.............................................. 0.06% 0.05% 0.09% 0.35%
Total Series Fund Operating
Expenses................................................... 0.46% 0.94% 0.94% 1.25%
<CAPTION>
SMALL CAP GLOBAL LARGE CAP GROWTH
VALUE SERIES GROWTH SERIES GROWTH STOCK
-------------- ----------- ---------------- ---------------
<S> <C>
Investment Advisory and Management Fee...................... 0.90% 0.70% 0.90% 0.61%
Other Expenses.............................................. 0.34% 0.05% 0.35% 0.04%
Total Series Fund Operating
Expenses................................................... 1.24% 0.75% 1.25% 0.65%
<CAPTION>
AGGRESSIVE
GROWTH
-------------
Investment Advisory and Management Fee...................... 0.68%
Other Expenses.............................................. 0.04%
Total Series Fund Operating
Expenses................................................... 0.72%
</TABLE>
- ------------------------
(a) As a percentage of portfolio average net assets based on 1998 historical
data.
4
<PAGE>
EXAMPLES
If you SURRENDER your contract in full at the end of any of the time periods
shown below, you would pay the following cumulative expenses on a $1,000
investment, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
IF ALL AMOUNTS ARE INVESTED IN ONE PORTFOLIO: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------ ------- ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Series......................................... 94 140 170 250
U.S. Government Securities Series........................... 96 145 178 266
Diversified Income Series................................... 96 145 179 267
Global Bond Series.......................................... 99 156 197 303
High Yield Series........................................... 96 146 181 271
Global Asset Allocation Series.............................. 101 160 203 315
Asset Allocation Series..................................... 96 145 178 266
Value Series................................................ 98 152 191 291
Growth & Income Series...................................... 97 149 186 282
S&P 500 Index Series........................................ 95 143 176 261
Blue Chip Stock Series...................................... 100 158 200 308
International Stock Series.................................. 100 158 200 308
Mid Cap Stock Series........................................ 103 167 215 338
Small Cap Value Series...................................... 103 166 215 337
Global Growth Series........................................ 98 152 190 290
Large Cap Growth Series..................................... 103 167 215 338
Growth Stock Series......................................... 97 149 185 280
Aggressive Growth Series.................................... 98 151 189 287
</TABLE>
If you COMMENCE AN ANNUITY payment option, or do NOT surrender your contract,
you would pay the following cumulative expenses on a $1,000 investment, assuming
a 5% annual return on assets:
<TABLE>
<CAPTION>
IF ALL AMOUNTS ARE INVESTED IN ONE PORTFOLIO: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------ ------- ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Series......................................... 22 68 116 250
U.S. Government Securities Series........................... 24 73 124 266
Diversified Income Series................................... 24 73 125 267
Global Bond Series.......................................... 27 84 143 303
High Yield Series........................................... 24 74 127 271
Global Asset Allocation Series.............................. 29 88 149 315
Asset Allocation Series..................................... 24 73 124 266
Value Series................................................ 26 80 137 291
Growth & Income Series...................................... 25 77 132 282
S&P 500 Index Series........................................ 23 71 122 261
Blue Chip Stock Series...................................... 28 86 146 308
International Stock Series.................................. 28 86 146 308
Mid Cap Stock Series........................................ 31 95 161 338
Small Cap Value Series...................................... 31 94 161 337
Global Growth Series........................................ 26 80 136 290
Large Cap Growth Series..................................... 31 95 161 338
Growth Stock Series......................................... 25 77 131 280
Aggressive Growth Series.................................... 26 79 135 287
</TABLE>
------------------------
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The foregoing tables and examples, prescribed by the SEC, are included to assist
contract owners in understanding the transaction and operating expenses imposed
directly or indirectly under the contracts and the portfolios. Amounts for state
premium taxes or similar assessments will also be deducted, where applicable.
See Appendix B for an explanation of the calculation set forth above.
5
<PAGE>
SUMMARY
The following summary should be read in conjunction with the detailed
information in this prospectus. This prospectus generally describes only the
portion of the contract involving the Separate Account. For a brief description
of Fortis Benefits' fixed account, please refer to the heading "Fixed Account"
in this prospectus. Variations from the information appearing in this prospectus
due to requirements particular to your state are described in supplements which
are attached to this prospectus, or in endorsements to the contract, as
appropriate.
The contract is designed to provide individuals with retirement benefits through
the accumulation of purchase payments on a fixed or variable basis, and by the
application of such accumulations to provide fixed or variable annuity payments.
FREE LOOK
You have the right to examine a contract during a "free look" period after you
receive the contract and return it for a refund of the amount of the then
current contract value. However, in certain states where required by state law
the refund will be in the amount of all purchase payments that have been made,
without interest or appreciation or depreciation. The "free look" period is
generally 10 days unless a longer time is specified on the face page of your
contract.
PURCHASE PAYMENTS
The initial purchase payment under a contract must be at least $25,000 ($10,000
for a contract which is part of a qualified plan). Additional purchase payments
must be at least $50. See "Issuance of a Contract and Purchase Payments."
ALLOCATION OF PURCHASE PAYMENTS
The initial purchase payment is allocated on the contract date, as specified by
you in the contract application, among one or more of the available investment
portfolios, or to the fixed account, or to both. Subsequent purchase payments
are allocated in the same way or pursuant to different allocation percentages
that you may subsequently request.
SEPARATE ACCOUNT INVESTMENT OPTIONS
Each of the subaccounts of the Separate Account invests in shares of a
corresponding investment portfolio. The investment objective of each of the
subaccounts of the Separate Account and that of the corresponding portfolio is
the same.
Contract value in each of the subaccounts of the Separate Account will vary to
reflect the investment experience of each of the corresponding portfolios, as
well as deductions for certain charges.
Each portfolio has a separate and distinct investment objective and is managed
by Fortis Advisers, Inc. or a subadviser of Fortis Advisers, Inc. For providing
investment management services to the portfolios, Fortis Advisers, Inc. receives
fees from Fortis Series based on the average daily net assets of each portfolio.
The portfolios also bear most of their other expenses. A full description of the
portfolios and their investment objectives, policies, and risks can be found in
the current prospectus for the portfolios, which accompanies this prospectus,
and the portfolios' Statement of Additional Information, which is available upon
request from Fortis Benefits at the address and phone number on the cover of
this prospectus.
TRANSFERS
During the Accumulation Period, you can transfer all or part of your contract
value from one subaccount to another or into the fixed account. Additionally,
during the Accumulation Period we may, in our discretion, permit a continuing
request for transfers of specified amounts automatically on a periodic basis.
There is currently no charge for any of these transfers. We reserve the right to
restrict the frequency of or otherwise condition, terminate, or impose charges
upon, transfers from a subaccount during the Accumulation Period. During the
Annuity Period, the person receiving annuity payments may make up to four
transfers (but not from a Fixed Annuity Option) during each year of the Annuity
Period. For a description of certain limitations on transfer rights, see
"Allocations of Purchase Payments and Contract Values--Transfers."
TOTAL OR PARTIAL SURRENDERS
All or part of the contract value of a contract may be surrendered by you before
the earlier of the Annuitant's death or the annuity commencement date. Amounts
surrendered may be subject to a surrender charge. See "Total and Partial
Surrenders," and "Surrender Charge." Particular attention should be paid to the
tax implications of any surrender, including possible penalties for premature
distributions. See "Federal Tax Matters."
CHARGES AND DEDUCTIONS
We deduct daily charges at a rate of 1.40% per annum of the value of the average
net assets in the Separate Account for the mortality and expense risks we
assume, .35% per annum for the investment market risk we assume associated with
the Fortis Guaranteed PayoutPlan benefit, and .10% per annum of the value of the
average net assets in the Separate Account to cover certain administrative
expenses. See "Mortality and Expense Risk Charge", "Investment Risk Expense
Charge" and "Administrative Expense Charge" under the heading "Charges Against
the Separate Account."
In order to permit investment of the entire purchase payment, we do not deduct
sales charges at the time of investment. However, a surrender charge is imposed
on certain total or partial surrenders of the contract to help defray expenses
relating to the sale of the contract, including commissions to registered
representatives and other promotional expenses. Certain amounts may be
surrendered without the imposition of any surrender charge. The amount of such
charge-free surrender depends on how much is being withdrawn and how recently
the purchase payments to which the surrender relates were made. The maximum
surrender charge is 8% of the purchase payment and reduces to zero over the nine
year period after the purchase payment is made. See "Charges and
Deductions--Surrender Charge."
Certain states and other jurisdictions impose premium taxes or similar
assessments upon us, either at the time purchase payments are made or when
contract value is applied to an annuity option. Where such taxes or assessments
are imposed by your state or other jurisdiction
6
<PAGE>
upon receipt of purchase payments, we will deduct a charge for these amounts
from the contract value upon surrender, payment of a death benefit, reduction of
the benefit under the Fortis Guaranteed PayoutPlan or annuitization of the
contract. In jurisdictions where such taxes or assessments are imposed at the
time of annuitization, we will deduct a charge for such amounts at that time.
FORTIS GUARANTEED PAYOUTPLAN BENEFIT
The contracts have a living benefit referred to as the Fortis Guaranteed
PayoutPlan. This benefit guarantees that you can, with certain limitations, make
withdrawals over the life of the contract up to the amount of your purchase
payments regardless of whether your contract value is less. (See "Accumulation
Period--Fortis Guaranteed PayoutPlan Benefit").
ANNUITY PAYMENTS
The contract provides several types of annuity benefits to Annuitants or their
beneficiaries, including Fixed and Variable Annuity Options. You have
considerable flexibility in choosing the annuity commencement date. However, the
tax implications of an annuity commencement date must be carefully considered,
including the possibility of penalties for commencing benefits either too soon
or too late. See "Annuity Commencement Date," "Annuity Options" and "Federal Tax
Matters" in this prospectus and "Taxation Under Certain Retirement Plans" in the
Statement of Additional Information.
DEATH BENEFIT
In the event of the death of the contract owner, or the Annuitant if the
contract owner is a non-natural person, prior to the annuity commencement date,
a death benefit is payable to the beneficiary of the contract. See "Benefit
Payable on Death of Contract Owner (or Annuitant)."
LIMITATIONS IMPOSED BY RETIREMENT PLANS
Certain rights a contract owner would otherwise have under a contract may be
limited by the terms of any employee benefit plan in connection with which the
contract is issued. These limitations may restrict such things as total and
partial surrenders, the amount or timing of purchase payments that may be made,
when annuity payments must start and the type of annuity options that may be
selected. Accordingly, you should familiarize yourself with these and all other
aspects of any retirement plan in connection with which a contract is issued.
TAX IMPLICATIONS
The tax implications for contract owners, Annuitants and beneficiaries, and
those of any related employee benefit plan can be quite important. A brief
discussion of some of these is set out under "Federal Tax Matters" in this
prospectus and "Taxation Under Certain Retirement Plans" in the Statement of
Additional Information, but such discussion is not comprehensive. Therefore, you
should consider these matters carefully and consult a qualified tax adviser
before making purchase payments or taking any other action in connection with a
contract or any related employee benefit plan. Failure to do so could result in
serious adverse tax consequences which might otherwise have been avoided.
QUESTIONS AND OTHER COMMUNICATIONS
Any question about procedures or the contract should be directed to your sales
representative, or Fortis Benefits' home office: P.O. Box 64272, St. Paul,
Minnesota 55164; 1-800-800-2000 (Ext. 3057). For certain current information
relating to contract values such as subaccount unit values, interest rates in
the fixed account, and your contract value, call 1-800-800-2000 (ext. 5448).
Purchase payments and written requests should be mailed or delivered to the same
home office address. All communications should include the contract number, the
contract owner's name and, if different, the Annuitant's name. The number for
telephone transfers is 1-800-800-2000 (Ext. 3057).
Any purchase payment or other communication, except a 10-day cancellation
notice, is deemed received at our home office on the actual date of receipt
there in proper form unless received (1) after the close of regular trading on
the New York Stock Exchange, or (2) on a date that is not a Valuation Date. In
either of these two cases, the date of receipt will be deemed to be the next
Valuation Date.
FINANCIAL AND PERFORMANCE INFORMATION
This prospectus contains no Accumulation Unit information for the applicable
subaccounts of the Separate Account because no contracts had been sold as of
December 31, 1998 and therefore no Accumulation Units had been issued as of that
date.
Audited financial statements of the available subaccounts of the Separate
Account are not included in the Statement of Additional Information because
those subaccounts have not yet commenced operations, have no assets or
liabilities, and have received no income nor incurred any expenses as of the
date of this prospectus.
Advertising and other sales materials may include yield and total return figures
for the subaccounts of the Separate Account. These figures are based on
historical results and are not intended to indicate future performance. "Yield"
is the income generated by an investment in the subaccount over a period of time
specified in the advertisement. This rate of return is assumed to be earned over
a full year and is shown as a percentage of the investment. "Total Return" is
the total change in value of an investment in the subaccount over a period of
time specified in the advertisement. The rate of return shown would produce that
change in value over the specified period, if compounded annually. Yield figures
do not reflect the surrender charge and yield and total return figures do not
reflect premium tax charges. This makes the performance shown more favorable.
FORTIS BENEFITS AND THE SEPARATE ACCOUNT
FORTIS BENEFITS/FORTIS FINANCIAL GROUP MEMBER
Fortis Benefits Insurance Company is the issuer of the contracts. At the end of
1998, Fortis Benefits had approximately $99 billion of total life insurance in
force. Fortis Benefits is a Minnesota corporation founded in 1910. It is
qualified to sell life insurance and annuity contracts in the District of
Columbia and in all states except New York. Fortis Benefits is an indirectly
wholly-owned subsidiary of Fortis, Inc., which is itself indirectly owned 50% by
Fortis (NL)N.V. and 50% by Fortis (B). Fortis, Inc. manages the United States
operations for these two companies.
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Fortis Benefits is a member of the Fortis Financial Group. This Group is a joint
effort by Fortis Benefits, Fortis Advisers, Inc., Fortis Investors, Inc. and
Fortis Insurance Company (formerly Time Insurance Company) to offer financial
products through the management, marketing and servicing of mutual funds,
annuities, life insurance and disability income products.
Fortis (NL)N.V. is a diversified financial services company headquartered in
Utrecht, The Netherlands, where its insurance operations began in 1847. Fortis
(B) is a diversified financial services company headquartered in Brussels,
Belgium, where its insurance operations began in 1824. Fortis (NL)N.V. and
Fortis (B) have merged their operating companies under the trade name of Fortis.
The Fortis group of companies is active in insurance, banking, financial
services, and real estate development in the Netherlands, Belgium, the United
States, Western Europe, and the Pacific Rim. The Fortis group of companies had
approximately $390 billion in assets at the end of 1998.
All of the guarantees and commitments under the contracts are general
obligations of Fortis Benefits, regardless of whether you have allocated the
contract value to the Separate Account or to the fixed account. None of Fortis
Benefits' affiliated companies has any legal obligation to back Fortis Benefits'
obligations under the contracts.
THE SEPARATE ACCOUNT
The Separate Account is a segregated investment account of Fortis Benefits.
Fortis Benefits established Variable Account D under Minnesota insurance law as
of October 14, 1987. The assets allocated to the Separate Account are the
exclusive property of Fortis Benefits. The Separate Account is an integral part
of Fortis Benefits. However, the Separate Account is registered with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940. Registration does not involve supervision of the
management, or investment practices, or policies of the Separate Account or of
Fortis Benefits by the Securities and Exchange Commission.
All income, gains and losses, whether or not realized, from assets allocated to
the Separate Account are credited to or charged against the Separate Account
without regard to other income, gains or losses of Fortis Benefits. Assets in
the Separate Account representing reserves and liabilities will not be
chargeable with liabilities arising out of any other business of Fortis
Benefits. Fortis Benefits may accumulate in the Separate Account proceeds from
charges under variable annuity contracts and other amounts in excess of the
Separate Account assets representing reserves and liabilities. Fortis Benefits
may from time to time transfer to its general account any of such excess
amounts.
The Separate Account has subaccounts. The assets in each subaccount are invested
exclusively in a distinct class (or series) of stock issued by the portfolios,
each of which represents a separate investment portfolio within the Separate
Account. Income and both realized and unrealized gains or losses from the assets
of each subaccount of the Separate Account are credited to or charged against
that subaccount without regard to income, gains or losses, from any other
subaccount of the Separate Account or arising out of any other business we may
conduct. We may add or eliminate new subaccounts as new portfolios are added or
are eliminated.
THE PORTFOLIOS
You may choose from among a number of different portfolios. Each portfolio is a
mutual fund available for purchase only as a funding vehicle for benefits under
variable life insurance and variable annuity products. These variable life
insurance and variable annuity products are issued by Fortis Benefits and by
other life insurance companies. Each portfolio corresponds to one of the
subaccounts of the Separate Account. The assets of each portfolio are separate
from the assets of other portfolios. In addition, each portfolio operates as a
separate investment portfolio whose investment performance has no effect on the
investment performance of any other portfolio. More detailed information for
each investment portfolio is available to you. This information includes the
investment policies, investment restrictions, charges, and risks attendant to
investing in each portfolio is available to you. This information also includes
other aspects of each portfolio's operations. You can find this information in
the current prospectus for each portfolio. These portfolio prospectuses must
accompany this prospectus, and you should read them in conjunction with it. You
can obtain a copy of each prospectus from us, free of charge, by calling
1-800-800-2000, ext. 3057, or by writing P.O. Box 64272, St. Paul, Minnesota
55164.
As noted, the investment portfolios may be available to registered separate
accounts of other participating insurance companies. These portfolios may also
be available to the Separate Account and other separate accounts of Fortis
Benefits. Although Fortis Benefits does not anticipate any disadvantages to
this, there is a possibility that a material conflict may arise between the
interest of the Separate Account and one or more of the other separate accounts
participating in the portfolios. For example, a conflict may occur due to (1) a
change in law affecting the operations of variable life and variable annuity
separate accounts, (2) differences in the voting instructions of the contract
owners and those of other companies, or (3) some other reason. In the event of
conflict, Fortis Benefits will take any steps necessary to protect the contract
owners and variable annuity payees.
We purchase and redeem portfolio shares for the Separate Account at their net
asset value without any sales or redemption charges. We automatically reinvest
dividends or capital gain distributions attributable to contracts in shares of
the portfolio from which they are received at that portfolio's net asset value
on the date paid. These dividends and distributions will have the effect of
reducing the net asset value of each share of the corresponding portfolio and
increasing, by an equivalent value, the number of shares outstanding of that
portfolio. However, the value of the interests of contract owners, Annuitants
and beneficiaries in the corresponding subaccount will not change as a result of
any these dividends and distributions.
ACCUMULATION PERIOD
ISSUANCE OF A CONTRACT AND PURCHASE PAYMENTS
We reserve the right to reject any application for a contract or any purchase
payment for any reason. If we accept your issuing instructions in the form
received, we will credit the initial purchase payment within two Valuation Dates
after the later of (1) receipt of the issuing instructions or (2) receipt of the
initial purchase payment at our home office. If we cannot apply the initial
purchase payment within five
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Valuation Dates after receipt because the issuing instructions are incomplete,
we will return the initial purchase payment unless you consent to our retaining
the initial purchase payment and applying it as of the end of the Valuation
Period in which the necessary requirements are fulfilled. The initial purchase
payment must be at least $25,000 ($10,000 for a contract issued as a part of a
qualified plan).
The date that we apply the initial purchase payment to the purchase of the
contract is the contract date. The contract date is the date used to determine
contract years, regardless of when we deliver the contract. Our crediting of
investment experience in the Separate Account, or a fixed rate of return in the
fixed account, begins as of the contract date, even if that date is delayed due
to an incomplete application.
We will accept additional purchase payments at any time after the contract date
and prior to the annuity commencement date, as long as the Annuitant is living.
You must transmit purchase payments (together with any required information
identifying the proper contracts and accounts to be credited with purchase
payments) to our home office. We will apply additional purchase payments to the
contract, and add to the contract value as of the end of the Valuation Period in
which we receive the payments.
Each additional purchase payment must be at least $50. The total of all purchase
payments for all contracts having the same owner or annuitant may not exceed $1
million (not more than $500,000 allocated to the fixed account) without our
prior approval. We reserve the right to modify this limitation at any time.
You may make purchase payments in excess of the initial minimum by monthly draft
against a bank account if you have completed and returned to us a special
authorization form. You may get the form from your sales representative or from
our home office. We can also arrange for you to make purchase payments by wire
transfer, payroll deduction, military allotment, direct deposit and billing.
Purchase payments by check should be made payable to Fortis Benefits Insurance
Company.
We may cancel any contract with a contract value of less than $1,000. We will
provide the contract owner with 90 days' written notice so that additional
purchase payments may be made in order to raise the contract value above the
applicable minimum. Otherwise, we may cancel the contract as of the end of the
Valuation Period which includes the next anniversary of the contract date. We
will consider this a surrender of the contract and impose the same charges we
would impose upon a surrender. See "Total and Partial Surrenders." So long as
the contract value remains above $1,000, no additional purchase payments under a
contract are ever required.
CONTRACT VALUE
Contract value is the total of any Separate Account value in all the subaccounts
of the Separate Account, plus any fixed account value. For a discussion of how
fixed account value is calculated, see "The Fixed Account."
The contract does not guarantee a minimum Separate Account value. The Separate
Account value will reflect the investment experience of the chosen subaccounts
of the Separate Account, all purchase payments made, any partial surrenders, and
all charges assessed in connection with the contract. Therefore, the Separate
Account value changes from Valuation Period to Valuation Period. Subject to the
exception provided under the Fortis Guaranteed PayoutPlan benefit (see
"Accumulation Period--Fortis Guaranteed PayoutPlan Benefit"), you bear the
entire investment risk for the contract value that you allocate to the Separate
Account.
DETERMINATION OF SEPARATE ACCOUNT VALUE. A contract's Separate Account value is
based on Accumulation Unit values, that we determine on each Valuation Date. The
value of an Accumulation Unit for a subaccount on any Valuation Date is equal to
the previous value of that subaccount's Accumulation Unit multiplied by that
subaccount's net investment factor (discussed directly below) for the Valuation
Period ending on that Valuation Date. Purchase payments applied to a given
subaccount will be used to purchase Accumulation Units at the unit value of that
subaccount next determined after receipt of a purchase payment. See "Allocation
of Purchase Payments and Contract Value-- Allocation of Purchase Payments."
At the end of any Valuation Period, a contract's Separate Account value in a
subaccount is equal to:
- The number of Accumulation Units in the subaccount; times
- The value of one Accumulation Unit for that subaccount.
The number of Accumulation Units in each subaccount is equal to:
- The initial Accumulation Units purchased on the contract date; plus
- Accumulation Units purchased at the time that additional purchase payments
are allocated to the subaccount; plus
- Accumulation Units purchased through transfers from another subaccount or
from the fixed account; less
- Accumulation Units redeemed to pay for the portion of any partial
surrenders allocated to the subaccount; less
- Accumulation Units redeemed as part of a transfer to another subaccount or
to the fixed account; less
- Accumulation Units redeemed to pay charges under the contract.
NET INVESTMENT FACTOR. The net investment factor for a subaccount is determined
by dividing (1) the net asset value per share of the portfolio shares held by
the subaccount, determined at the end of the current Valuation Period, plus the
per share amount of any dividend or capital gains distribution made with respect
to the portfolio shares held by the subaccount during the current Valuation
Period, minus a per share charge for the increase, plus a per share credit for
the decrease, in any income taxes assessed which we determine to have resulted
from the investment operations of the subaccount or any other taxes which are
attributable to the contract, by (2) the net asset value per share of the
portfolio shares held in the subaccount as determined at the end of the previous
Valuation Period, and subtracting from that result a factor representing the
mortality risk, expense risk and administrative expense charge.
A subaccount's net investment factor for a Valuation Period is an index number
that reflects certain charges to a contract and the investment
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performance of the subaccount during the Valuation Period. If the net investment
factor is greater than one, the subaccount's Accumulation Unit value has
increased. If the net investment factor is less than one, the subaccount's
Accumulation Unit value has decreased.
DETERMINATION OF FIXED ACCOUNT VALUE. We guarantee a contract's fixed account
value. Therefore, we bear the investment risk for amounts allocated to the fixed
account, except to the extent that we may vary the current interest rate
(subject to the 3% effective annual minimum).
The contract's fixed account value on any Valuation Date is equal to the
following amounts, in each case increased by accrued interest:
- The amount of purchase payments or transferred amounts allocated to the
fixed account; less
- The amount of any transfers or surrenders out of the fixed account.
ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
ALLOCATION OF PURCHASE PAYMENTS. In your application for a contract, you may
allocate purchase payments, or portions of payments, to the:
- available subaccounts of the Separate Account, or
- to the fixed account, or
- to both
Percentages must be in whole numbers and the total allocation must equal 100%.
The percentage allocations for future purchase payments may be changed, without
charge, at any time by sending a written request to our home office. Changes in
the allocation of future purchase payments will be effective on the date we
receive your written request.
TRANSFERS. You may transfer contract value:
- from one available subaccount to another, or
- into the fixed account.
You may request transfers by either (1) a written request sent to our home
office, or by (2) a telephone transfer as described below. Currently, we do not
charge for any transfer.
All or part of the contract value in one or more subaccounts of the Separate
Account may be transferred at one time. We may permit a continuing request for
transfers automatically and on a periodic basis. However, we reserve the right
to restrict the frequency of transfers or to otherwise condition, terminate, or
impose charges (not to exceed $25 per transfer) upon transfers out of a
subaccount during the Accumulation Period. Currently, our only restriction on
the frequency of transfers is a prohibition of making transfers INTO the fixed
account within six months of a transfer out of the fixed account. We restrict
transfers of contract value FROM the fixed account in both amount and timing.
See "Fixed Account--Fixed Account Transfers, Total and Partial Surrenders." We
will count all transfers between and among the subaccounts of the Separate
Account and the fixed account as one transfer if all the transfer requests are
made at the same time as part of one request. We will execute the transfers and
determine all values in connection with transfers as of the end of the Valuation
Period in which we receive the transfer request.
Certain restrictions on very substantial allocations to any one subaccount are
set forth under "Limitations on Allocations" in the Statement of Additional
Information.
TOTAL AND PARTIAL SURRENDERS
TOTAL SURRENDERS. You may surrender all of the cash surrender value at any time
prior to the annuity commencement date. You must request total surrender by a
written request sent to Fortis Benefits' home office. We reserve the right to
require that the contract be returned to us prior to making payment, although
this will not affect our determination of the amount of the cash surrender
value. Cash surrender value is:
- the contract value at the end of the Valuation Period during which we
receive the written request for the total surrender at our home office,
less
- any applicable surrender charge.
For a discussion of these charges and the circumstances under which they apply,
see "Surrender Charge."
We must receive written consent of all collateral assignees and irrevocable
beneficiaries prior to any total surrender. We will generally pay surrenders
from the Separate Account within seven days of the date of receipt by our home
office of the written request. However, we may postpone payments in certain
circumstances. See "Postponement of Payment."
Since the contract owner assumes the investment risk with respect to amounts
allocated to the Separate Account, and because certain surrenders are subject to
a surrender charge, the amount we pay upon total surrender of the cash surrender
value (taking into account any prior partial surrenders) may be more or less
than the total purchase payments you made. After a surrender of the cash
surrender value or at any time the contract value is zero, (unless at such time
the contract is still in Living Benefit Status--see "Accumulation Period--
Fortis Guaranteed PayoutPlan Benefit.") all rights of the contract owner,
Annuitant, and any beneficiary, will terminate.
PARTIAL SURRENDERS. At any time during the life of the Annuitant and prior to
the commencement date, you may surrender a portion of the fixed account and/or
the Separate Account. You must request partial surrender by a written request to
our home office. The minimum partial surrender amount is $500, including any
surrender charge. We will surrender the entire cash surrender value under the
contract if the total contract value in both the Separate Account and fixed
account would be less than $1,000 after the partial surrender.
You should specify the subaccounts of the Separate Account or the fixed account
that you wish to partially surrender. If you do not specify, we take the partial
surrender from the subaccounts and the fixed account on a pro rata basis.
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We will surrender Accumulation Units from the Separate Account and/ or dollar
amounts from the fixed account so that the total amount of the partial surrender
equals the dollar amount of the partial surrender request. We will reduce the
partial surrender by the amount of any applicable surrender charge. The partial
surrender will be effective at the end of the Valuation Period in which we
receive the written request for partial surrender at our home office. Payments
will generally be made within seven days of the effective date of such request,
although certain delays are permitted. See "Postponement of Payment."
The Internal Revenue Code provides that a penalty tax will be imposed on certain
premature surrenders. For a discussion of this and other tax implications of
total and partial surrenders, including withholding requirements, see "Federal
Tax Matters." Also, under tax deferred annuity contracts pursuant to Section
403(b) of the Internal Revenue Code, no distributions of voluntary salary
reduction amounts will be permitted prior to one of the following events:
attainment of age 59 1/2 by the employee or the employee's separation from
service, death, disability or hardship. (Hardship distributions will be limited
to the lesser of the amount of the hardship or the amount of salary reduction
contributions, exclusive of earnings thereon.) This restriction does not apply
to amounts transferred to another investment alternative permitted under a
Section 403(b) retirement arrangement or to amounts attributable to premium
payments received prior to January 1, 1989.
TELEPHONE TRANSACTIONS
You or your representative may make certain requests under the contract by
telephone if we have a written telephone authorization on file. These include
requests for (1) transfers, (2) withdrawals, and (3) changes in purchase payment
allocation instructions, dollar-cost averaging, portfolio rebalancing programs,
and systematic withdrawals. Our home office will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These
procedures may include, among others, (1) requiring some form of personal
identification such as your address and social security number prior to acting
upon instructions received by telephone, (2) providing written confirmation of
such transactions, and/or (3) tape recording of telephone instructions. Your
request for telephone transactions authorizes us to record telephone calls. We
may be liable for any losses due to unauthorized or fraudulent instructions if
we do not employ reasonable procedures. If we do employ reasonable procedures,
we will not be liable for any losses due to unauthorized or fraudulent
instructions. We reserve the right to place limits, including dollar limits, on
telephone transactions.
FORTIS GUARANTEED PAYOUTPLAN BENEFIT
The contract provides a living benefit referred to as the Fortis Guaranteed
PayoutPlan benefit. This benefit guarantees that your available withdrawals over
the life of your contract will be no less than the amount of your purchase
payments, regardless of your contract value, so long as your contract remains in
Living Benefit Status. The maximum withdrawal which you may make at any time
under this living benefit is the lesser of:
- 7% of your purchase payments less the sum of prior withdrawals during the
current contract year.
- the sum of your purchase payments less the sum of prior withdrawals.
Your contract remains in Living Benefit Status if the following conditions are
met:
- you have not made withdrawals in any contract year totalling more than 7%
of your purchase payments, and
- the total amount of all of your withdrawals from your contract have not
been more than your aggregate purchase payments.
If either limitation is exceeded, your contract is no longer in Living Benefit
Status and this status cannot be regained. So long as your contract is in Living
Benefit Status, it will not terminate by reason of withdrawals under this
benefit reducing the contract value to zero or less. However, in such case the
provisions described below relating to Automatic Periodic Benefit Payments
apply.
If your contract remains in Living Benefit Status, as described above, but your
contract value declines to $1000 or less, we will pay you any remaining living
benefit on a periodic basis. No further purchase payments may be made. The
frequency of such payments may be among those then offered by us, which will
include at least annual payments. These periodic payments will continue until
the sum of your withdrawals, including Automatic Periodic Benefit Payments,
equals the sum of your purchase payments. While Automatic Benefit Payments are
being made, any death benefit otherwise payable under your contract will
continue to apply.
BENEFIT PAYABLE ON DEATH OF CONTRACT OWNER (OR ANNUITANT)
If the owner dies prior to the annuity commencement date, we will pay a death
benefit to the beneficiary. If the contract owner is a non-natural person, then
we will pay a death benefit upon the death of the Annuitant prior to the annuity
commencement date. In such case, if more than one Annuitant has been named, we
will pay the death benefit payable upon the death of an Annuitant only upon the
death of the last survivor of the persons so named.
The term "decedent" in the death benefit description below refers to the death
of the contract owner unless the contract owner is a non-natural person, in
which case it refers to the death of the Annuitant. Also, the death benefit
description refers to the age of the contract owner. If the contract owner is a
non-natural person, the relevant age will instead be that of the Annuitant.
Additionally, the death benefit description makes reference to "Pro Rata
Adjustments." A pro rata adjustment is calculated separately for each
withdrawal, creating a decrease in the death benefit proportional to the
decrease the withdrawal makes in the contract value. Pro rata adjustments are
made for amounts withdrawn for partial surrenders and any associated surrender
charge (which is deemed to be an amount withdrawn), but not for any contract
fee-related surrenders.
The death benefit will equal the greatest of (1), (2) or (3):
(1) The contract value as of the date used for valuing the death
benefit.
(2) The sum or all purchase payments made, reduced by any prior
withdrawals and previously imposed surrender charges.
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(3) If the decedent dies prior to the date the owner reaches age 86,
the amount of the death benefit is the less of (a) and (b), as follows:
(a) the sum of:
(i) the accumulation (without interest) of purchase payments, reduced by
pro rata adjustments for any withdrawals; plus
(ii) an amount equal to interest on such net accumulation value, as it is
adjusted for each applicable purchase payment, and pro rata
adjustment, at an effective annual rate of 5.0% (3.0% for contracts
issued in Oregon);
or
(b) 200% of (a)(i).
The resulting amount (the lesser of (a) and (b)) will be referred to as the
"Roll-Up Amount."
If the decedent dies on or after the date the owner reaches age 86, the
amount of the death benefit is equal to:
(a) the "Roll-Up Amount" as of the date the owner reached age 86,
plus
(b) the accumulation (without interest) of purchase payments
made on or after the date the owner reached age 86, reduced by
(c) pro rata adjustments for any withdrawals made on or after the
date the owner reached age 86.
There is a limit on the amount of the death benefit that we will pay in excess
of the contract value. The excess payable by us upon the death of any one person
on all annuity policies issued by us will not be more than $500,000. The excess
reduction will be applied entirely under any contract offered by this prospectus
if the other contracts do not contain a similar limitation or on a proportionate
basis where there are multiple contracts containing a similar limitation.
The pro rata adjustments referred to above are more fully described in Appendix
C at the end of this prospectus.
See also Appendix A for sample death benefit calculation.
The death benefit may be reduced by premium taxes where such taxes were imposed
upon receipt of purchase payments and were paid by us in behalf of the contract
owner. For further information, see "Charges and Deductions--Premium Taxes."
The value of the death benefit is determined as of the end of the Valuation
Period in which we receive, at our home office, proof of death and the written
request as to the manner of payment. Upon receipt of these items, the death
benefit generally will be paid within seven days. Under certain circumstances,
payment of the death benefit may be postponed. See "Postponement of Payment." If
we do not receive a written request for a settlement method, we will pay the
death benefit in a single sum, based on values determined at that time.
The beneficiary may (1) receive a single sum payment which terminates the
contract, or (2) select an annuity option. If the beneficiary selects an annuity
option, he or she will have all the rights and privileges of an Annuitant under
the contract. If the beneficiary desires an annuity option, the election should
be made within 60 days of the date the death benefit becomes payable. Failure to
make a timely election can result in unfavorable tax consequences. For further
information, see "Federal Tax Matters."
We accept any of the following as proof of death: (1) a copy of a certified
death certificate; (2) a copy of a certified decree of a court of competent
jurisdiction as to the finding of death; (3) a written statement by a medical
doctor who attended the deceased at the time of death.
The Internal Revenue Code requires that a Non-Qualified Contract contain certain
provisions about an owner's death. We discuss these provisions below under
"Federal Tax Matters--Required Distributions for Non-Qualified Contracts." It is
imperative that written notice of the death of the contract owner be promptly
transmitted to us at our home office, so that we can make arrangements for
distribution of the entire interest in the contract to the beneficiary in a
manner that satisfies the Internal Revenue Code requirements. Failure to satisfy
these requirements may result in the contract not being treated as an annuity
contract for federal income tax purposes with possible adverse tax consequences.
THE ANNUITY PERIOD
ANNUITY COMMENCEMENT DATE
You may specify an annuity commencement date in your application. The annuity
commencement date marks the beginning of the period during which an Annuitant
receives annuity payments under the contract. Except for contracts issued in
connection with life insurance policies issued by Fortis Benefits, the annuity
commencement date must be at least two years after the contract date.
The Internal Revenue Code may impose penalty taxes on amounts distributed either
too soon or too late depending on the type of retirement arrangement involved.
See "Federal Tax Matters." You should consider this carefully in selecting or
changing an annuity commencement date.
You must submit a written request to us in order to advance or defer the annuity
commencement date. We must receive the request at our home office at least 30
days before the then-scheduled annuity commencement date. The new annuity
commencement date must also be at least 30 days after we receive the written
request. You have no right to make any total or partial surrender during the
Annuity Period.
COMMENCEMENT OF ANNUITY PAYMENTS
We may pay the entire contract value, rather than apply the amount to an annuity
option if the contract value at the end of the Valuation Period that contains
the annuity commencement date is less than $5,000.We would make the payment in a
single sum to the Annuitant or other properly designated payee and cancel the
contract. We would not impose any charge other than the premium tax charge.
Otherwise, we will apply (1) the fixed account value to provide a Fixed Annuity
Option and (2) the Separate Account value in any subaccount
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to provide a Variable Annuity Option using the same subaccount, unless you have
notified us by written request to apply the fixed account value and Separate
Account value in different proportions. We must receive written request at our
home office at least 30 days before the annuity commencement date.
We will make annuity payments under a Fixed or Variable Annuity Option on a
monthly basis to the Annuitant or other properly-designated payee, unless we
agree to a different payment schedule. If you name more than one person as an
Annuitant, you may elect to name one of such persons to be the sole Annuitant as
of the annuity commencement date. We reserve the right to change the frequency
of any annuity payment so that each payment will be at least $50.
The amount of each annuity payment will depend on (1) the amount of contract
value applied to an annuity option, (2) the form of annuity selected and (3) the
age of the Annuitant. For information concerning the relationship between the
Annuitant's sex and the amount of annuity payments, including special
requirements in connection with employee benefit plans, see "Calculation of
Annuity Payments" in the Statement of Additional Information. The Statement of
Additional Information also contains detailed information about how the amount
of each annuity payment is computed.
The dollar amount of any fixed annuity payments is specified during the entire
period of annuity payments according to the provisions of the annuity option
selected.
The dollar amount of variable annuity payments varies during the annuity period
based on changes in Annuity Unit values for the subaccounts that you choose to
use in connection with your payments.
RELATIONSHIP BETWEEN SUBACCOUNT INVESTMENT PERFORMANCE AND AMOUNT OF VARIABLE
ANNUITY PAYMENTS
The amount of an annuity payment depends on the average effective net investment
return of a subaccount during the period since the preceding payment as follows:
- if the return is HIGHER than 3% annually, the Annuity Unit value will
INCREASE, and the second payment will be HIGHER than the first; and
- if the return is LOWER than 3% annually, the Annuity Unit value will
DECREASE, and the second payment will be LOWER than the first.
"Net investment return," for this purpose, refers to the subaccount's overall
investment performance, after deduction of the mortality and expense risk,
investment risk and administrative expense charges, which are assessed at an
annual rate of 1.85%.
We guarantee that the amount of each variable annuity payment after the first
payment will not be affected by variations in our mortality experience or our
expenses.
TRANSFERS. A person receiving annuity payments may make up to four transfers a
year among subaccounts or from subaccounts to the fixed account. The current
procedures for these transfers are the same as we describe above under
"Allocation of Purchase Payments and Contract Value--Transfers." We do not
permit transfers out of the fixed account during the Annuity Period.
ANNUITY OPTIONS
You may select an annuity option or change a previous selection by written
request. We must receive your request at least 30 days before the annuity
commencement date. You may select one annuity form, although payments under that
form may be on a combination fixed and variable basis. If no annuity form
selection is in effect on the annuity commencement date, we usually
automatically apply Option B (described below), with payments guaranteed for ten
years. However, federal pension law may require that we make default payments
under certain retirement plans pursuant to plan provisions and/or federal law.
Tax laws and regulations may impose further restrictions to assure that the
primary purpose of the plan is distribution of the accumulated funds to the
employee.
Your contract offers the following options for fixed and variable annuity
payments. Under each of the options, we make payments as of the first Valuation
Date of each monthly period, starting with the annuity commencement date.
OPTION A, LIFE ANNUITY. We make no payments after the annuitant dies. It is
possible for the annuitant to receive only one payment under this option if the
annuitant dies before the second payment is due.
OPTION B, LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 YEARS OR 20 YEARS. We
continue payments as long as the annuitant lives. If the annuitant dies before
we have made all of the guaranteed payments, we continue installments of the
guaranteed payments to the beneficiary.
OPTION C, JOINT AND FULL SURVIVOR ANNUITY. We continue payments as long as
either the annuitant or the joint annuitant is alive. We stop payments when both
the annuitant and the joint annuitant have died. It is possible for the payee or
payees to receive only one payment under this option if both annuitants die
before the second payment is due.
OPTION D, JOINT AND ONE-HALF CONTINGENT SURVIVOR ANNUITY. We continue payments
as long as either the annuitant or the joint annuitant is alive. If the
annuitant dies first, we continue payments to the joint annuitant at one-half
the original amount. If the joint annuitant dies first, we continue payments to
the annuitant at the original full amount. We stop payments when both the
annuitant and the joint annuitant have died. It is possible for the payee or
payees to receive only one payment under this option if both annuitants die
before the second payment is due.
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We also have other annuity options available. You can get information about
these from your sales representative or by calling or writing to our home
office.
DEATH OF ANNUITANT OR OTHER PAYEE
Under most annuity options offered by us, the amounts, if any, payable on the
death of the annuitant during the Annuity Period are the continuation of annuity
payments for any remaining guarantee period or for the life of any joint
annuitant. In all cases, the person entitled to receive payments also receives
any rights and privileges under the annuity form in effect.
Additional rules applicable to such distributions under Non-Qualified Contracts
are described under "Federal Tax Matters--Required Distributions for
Non-Qualified Contracts". Though the rules there described do not apply to
contracts issued in connection with qualified plans, similar rules apply to the
plans themselves.
CHARGES AND DEDUCTIONS
PREMIUM TAXES
We deduct state premium taxes as follows:
- when imposed on purchase payments, we pay the amount on your behalf and
deduct the amount from your contract value upon (1) our payment of
surrender proceeds or death benefit or (2) annuitization of a contract; or
(3) reduction of the benefit under the Fortis Guaranteed PayoutPlan
benefit or
- when imposed at the time annuity payments begin, we deduct the amount from
your contract value
Applicable premium tax rates depend upon your place of residence. Currently,
premium taxes and similar assessments range from 0% to 3.5% of purchase payments
or the amount annuitized. Rates can change by legislation, administrative
interpretations, or judicial acts.
CHARGES AGAINST THE SEPARATE ACCOUNT
We will assess certain charges against the Separate Account. These charges will
be assessed as a percentage of the net assets of the Separate Account. These
charges compensate us for contract risks and for administrative expenses.
MORTALITY AND EXPENSE RISK CHARGE. We assess each subaccount of the Separate
Account with a daily charge for mortality and expense risk. This charge is a
nominal annual rate of 1.40% of the average daily net assets of the Separate
Account. We guarantee not to increase this charge for the duration of the
contract. We assess this charge daily when we determine the value of an
Accumulation Unit. This charge is assessed during both the Accumulation Period
and the Annuity Period.
The mortality risk we bear arises from our obligation to make annuity payments
(determined in accordance with the annuity tables and other provisions contained
in the contract) for the full life of all Annuitants regardless of how long all
Annuitants or any individual Annuitant might live. This assures that neither an
Annuitant's own longevity, nor an improvement in life expectancy generally, will
have an adverse effect on the annuity payments the Annuitant will receive under
the contract. This relieves the Annuitant from the risk that he or she will
outlive the funds accumulated for retirement.
In addition, we bear a mortality risk in that we guarantee to pay a death
benefit in a single sum (which may also be taken in the form of an annuity
option) upon the death of the contract owner prior to the annuity commencement
date. We do not impose a surrender charge upon payment of a death benefit. This
places a further mortality risk on us.
The expense risk we assume is that actual expenses incurred in connection with
issuing and administering the contracts will exceed the limits on administrative
charges set in the contracts.
We bear the loss if the administrative charges and the mortality and expense
risk charge are insufficient to cover the expenses and costs assumed.
Conversely, we profit if the amount deducted proves more than sufficient.
INVESTMENT RISK CHARGE. We bear an investment market risk associated with the
Fortis Guaranteed PayoutPlan benefit. With this benefit, we bear the risk that
the investment performance is insufficient to cover the guarantee of the return
of your purchase payments. We assess each subaccount of the Separate Account
with a daily charge for this risk at a nominal annual rate of .35% of the
average daily net assets of the Separate Account.
ADMINISTRATIVE EXPENSE CHARGE. We assess each subaccount of the Separate Account
with a daily charge at a nominal annual rate of .10% of the average daily net
assets of the subaccount. We assess this charge during both the Accumulation
Period and the Annuity Period. The daily administrative expense charge helps
cover administrative expenses such as:
- issuing contracts,
- establishing and maintaining records relating to contracts,
- making regulatory filings and furnishing confirmation notices,
- voting materials and other communications,
- providing computer, actuarial and accounting services, and
- processing contract transactions.
The daily administrative expense charge is designed to defray expenses incurred.
There is no necessary relationship between the amount of administrative charges
assessed on a given contract and the amount of expenses actually incurred for
that contract.
TAX CHARGE. We currently impose no charge for taxes payable by us in connection
with this contract, other than for applicable premium taxes. We reserve the
right to impose a charge for any other taxes that may become payable by us in
the future for the contracts or the Separate Account.
The charges against the Separate Account described above are for the purposes
described. We may receive a profit as a result of these charges.
SURRENDER CHARGE
We do not deduct a sales charge from purchase payments. We deduct surrender
charges on certain total or partial surrenders. We use the revenue from
surrender charges to partially pay our expenses in the
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sale of the contracts, including (1) commissions (2) promotional, distribution,
and marketing expenses, and (3) costs of printing and distribution of
prospectuses and sales material.
FREE SURRENDERS. You can withdraw the following amounts from the contract
without a surrender charge:
- Any purchase payments that we received more than nine years before the
surrender date and that you have not previously surrendered;
- In any contract year, up to 10% of the purchase payments that we received
less than nine years before the surrender date (whether or not you have
previously surrendered the purchase payments).
Surrender charges do not apply to contract earnings. Therefore, we deem purchase
payments not subject to a surrender charge as withdrawn first. If all purchase
payments have been withdrawn, the remaining earnings can be withdrawn without a
surrender charge. We assume that all purchase payments are withdrawn before
earnings are withdrawn. However, for federal income tax purposes, certain
partial surrenders will be deemed to come first from earnings. See "Federal Tax
Matters."
We do not impose a surrender charge on (1) annuitization or (2) payment of a
single sum because the contract value is less than the minimum required to
provide an annuity on the annuity commencement date or (3) payment of any death
benefit.
In addition, we have an administrative policy to waive surrender charges for
full surrenders of contracts that have been in force for at least ten years if
the amount then subject to the surrender charge is less than 25% of the contract
value. We have offered these contracts since 1999. Therefore, we have made no
waivers. We reserve the right to change or terminate this practice at any time,
both for new and for previously issued contracts.
AMOUNT OF SURRENDER CHARGE. We only apply surrender charges if the amount being
withdrawn exceeds the sum of the amounts listed above under Free Surrenders. The
surrender charges are:
<TABLE>
<CAPTION>
NUMBER OF YEARS
SINCE SURRENDER CHARGE AS A
PURCHASE PAYMENT WAS PERCENTAGE OF PURCHASE
CREDITED PAYMENT
- -------------------- -------------------------
<S> <C>
Less than 3 8%
At least 3 but less
than 4 7%
At least 4 but less
than 5 6%
At least 5 but less
than 6 5%
At least 6 but less
than 7 4%
At least 7 but less
than 8 3%
At least 8 but less
than 9 2%
9 or more 0%
</TABLE>
We anticipate the surrender charge will not be sufficient to cover our
distribution expenses. To the extent that the surrender charge is insufficient,
we will pay such costs from our general account assets. Those assets will
include any profit that we derive from the mortality and expense risk charge.
NURSING CARE/HOSPITALIZATION WAIVER OF SURRENDER CHARGES. We do not deduct
surrender charges for a total or partial withdrawal:
- after a covered person has been confined in a hospital or skilled health
care facility for at least 60 consecutive days and the covered person
continues to be confined in the hospital or skilled care facility when the
request is made; or
- within 60 days following a covered person's discharge from a hospital or
skilled health care facility after confinement of at least 60 consecutive
days.
Confinement must begin after the effective date of this provision.
Covered persons are the contract owner or owners and the spouse of any contract
owner if the spouse is the Annuitant. We will not waive surrender charges when a
confinement is due to (1) substance abuse, (2) mental or personality disorders
without a demonstrable organic disease. We consider a degenerative brain disease
such as Alzheimer's Disease an organic disease.
We provide this nursing care/hospitalization waiver of surrender charges by
means of a rider to the contract. This rider has not been approved in all
states. When you apply for a contract you should check with your Fortis Benefits
representative to determine if this rider is available in your state.
DISABILITY WAIVER OF SURRENDER CHARGES. WE WILL waive surrender charges on
total or partial surrenders under the following circumstances:
(1) if you become totally disabled after the contract is issued, or
(2) if the owner is a non-natural person and the Annuitant becomes
totally disabled after the contract is issued.
However, waivers of surrender charges are subject to the following conditions:
(1) We will only waive surrender charges on total or partial
surrenders of purchase payments that were made prior to the owner's or the
Annuitant's total disability, and
(2) the owner's or the Annuitant's total disability must have begun
before the owner or the Annuitant has reached age 64, and
(3) the owner's or the Annuitant's total disability must have been
continuous for a period of twelve months or more.
This benefit terminates on the 65th birthday of the owner, or the 65th birthday
of the Annuitant if the owner is a non-natural person.
"Total Disability" means:
- the inability to engage in an occupation for compensation or profit.
"Occupation" has one of two definitions. The applicable definition depends on
the length of the disability. "Occupation" is defined as:
(1) the inability to perform the substantial and material duties of
the owner's or the Annuitant's regular occupation during the first twelve
months of disability, and
(2) any job suited to the owner's or the Annuitant's education,
training, or experience after the first twelve months of disability.
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We provide this "Disability Waiver of Surrender Charges" by attaching a rider to
the contract. This rider has not been approved in all states. You should check
with your sales representative to determine if this rider is available in your
state.
MISCELLANEOUS
The Separate Account invests in shares of the portfolios. Therefore, the net
assets of the Separate Account will reflect the investment advisory fees and
certain other expenses incurred by the portfolios and described in their
prospectuses.
REDUCTION OF CHARGES
We will not impose a surrender charge under any contract owned by:
(A) Fortis, Inc. or its subsidiaries, and the following persons
associated with such companies, if at the contract issue date they are:
(1) officers and directors;
(2) employees; or
(3) spouses of any such persons or any of such persons'
children, grandchildren, parents, grandparents, or siblings--or spouses of any
of these persons;
(B) Series Fund directors, officers, or their spouses (or such
persons' children, grandchildren, parents or grandparents or spouses of any such
persons); and
(C) representatives or employees (or their spouses) of Fortis
Investors (including agencies) or of other broker-dealers having a sales
agreement with Fortis Investors (or such persons' children, grandchildren,
parents, or grandparents--or spouses of any such persons).
FIXED ACCOUNT
You may allocate purchase payments and transfer contract value to the fixed
account. In this case, purchase payments and transfers of contract value are
held in our general account.
Because of exemptive and exclusionary provisions, interests in the fixed account
have not been registered under the Securities Act of 1933, and the fixed account
has not been registered as an investment company under the Investment Company
Act of 1940. Accordingly, neither the fixed account, nor any interests therein,
are subject to the provisions of these acts. As a result, the staff of the
Securities and Exchange Commission has not reviewed the disclosures in this
prospectus relating to the fixed account.
Disclosures regarding the fixed account may, however, be subject to certain
generally applicable provisions of federal securities law relating to the
accuracy and completeness of statements made in prospectuses. This prospectus is
generally intended to serve as a disclosure document only for the aspects of the
contract involving the Separate Account and contains only selected information
regarding the fixed account. More information regarding the fixed account may be
obtained from our home office or from your sales representative.
GENERAL DESCRIPTION
Our obligations with respect to the fixed account are supported by our general
account. Subject to applicable law, we have sole discretion over the investment
of assets in our general account.
Fortis Benefits guarantees that contract value in the fixed account will accrue
interest at an effective annual rate of at least 3%, independent of the actual
investment experience of the general account. We may, at our sole discretion,
credit higher rates of interest, although we are not obligated to credit
interest in excess of the guaranteed annual rate of 3%. Any interest rate in
excess of 3% per year with respect to any amount in the fixed account pursuant
to a contract will not be modified more than once each calendar year. Any higher
rate of interest will be quoted at an effective annual rate. The rate of any
excess interest initially or subsequently credited to any amount can vary. This
will depend on when the amount was originally allocated to the fixed account.
Once credited, excess interest will be guaranteed and will be added to the
contract value in the fixed account (from which deductions for fees and charges
may be made).
Charges under the contract are the same as those applied to the Separate
Account. However, the 1.85% annual charge for mortality and expense risk,
investment expense risk and for administrative expenses is not imposed on
amounts of contract value in the fixed account.
FIXED ACCOUNT VALUE
The contract's fixed account value on any Valuation Date is the sum of the:
- purchase payments allocated to the fixed account, plus
- any transfers from the Separate Account, plus
- interest credited to the fixed account, less
- any surrenders, surrender charges or transfers to the Separate Account.
FIXED ACCOUNT TRANSFERS, TOTAL AND PARTIAL SURRENDERS
With respect to total and partial surrenders, amounts in the fixed account are
generally subject to the same rights and limitations as amounts allocated to the
subaccounts of the Separate Account. Therefore, with respect to total and
partial surrenders, amounts in the fixed account are also subject to the same
charges as amounts allocated to the subaccounts of the Separate Account. See
"Fortis Benefits and The Separate Account--Total and Partial Surrenders."
Transfers out of the fixed account have special limitations. Prior to the
annuity commencement date, you may transfer part or all of the contract value
from the fixed account to the Separate Account, provided that (1) no more than
one transfer is made each contract year, (2) no more than 50% of the fixed
account value is transferred at any time (unless the balance in the fixed
account after the transfer would be less than $1,000, in which case up to the
entire balance may be transferred) and (3) at least $500 is transferred at any
one time (or, if less, the entire amount in the fixed account). However, we may
permit a continuing request for transfer of lesser specified amounts
automatically on a periodic basis. We reserve the right to discontinue or modify
any such arrangements at our discretion.
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No transfers from the fixed account may be made after the annuity commencement
date.
GENERAL PROVISIONS
THE CONTRACT
The entire contract includes any application, amendment, rider, endorsement and
revised contract pages. Only the President, Secretary and Registrar of Fortis
Benefits can agree to change or waive any provision of a contract. Any change or
waiver must be in writing and signed by one of these representatives of Fortis
Benefits.
The contracts are non-participating and do not share in dividends or earnings of
Fortis Benefits.
POSTPONEMENT OF PAYMENTS
With respect to amounts in the subaccounts of the Separate Account, payment of
any amount due upon a total or partial surrender, death or under an annuity
option will ordinarily be made within seven days after all documents required
for such payment are received by us at our home office.
However, we may defer the determination, application or payment of any death
benefit, partial or total surrender or annuity payment, to the extent dependent
on Accumulation or Annuity Unit values as follows: (1) for any period during
which the New York Stock Exchange is closed (other than customary weekend and
holiday closings) or trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission, (2) for any period during
which any emergency exists as a result of which it is not reasonably practicable
for us to determine the investment experience for the contract, or (3) for such
other periods as the Securities and Exchange Commission may by order permit for
the protection of investors.
Additionally, we may defer for up to 15 days the payment of any amount
attributable to a purchase payment made by check to allow the check reasonable
time to clear. We may also defer payment of surrender proceeds payable out of
the fixed account for a period of up to 6 months.
MISSTATEMENT OF AGE OR SEX AND OTHER ERRORS
If the Annuitant's age or sex was misstated, we pay the amount that the purchase
payments paid would have purchased at the correct age and sex. If we make any
overpayment because of incorrect information about age or sex, or any other
miscalculation, we deduct the overpayment from the next payment due. We add
underpayments to the next payment. We will credit or charge the amount of any
adjustment with interest at the rate of 3% annually.
ASSIGNMENT AND OWNERSHIP RIGHTS
Owners and payees may assign their rights and interests under a Qualified
Contract only in certain narrow circumstances referred to in the contract.
Contract owners and other payees may assign their rights and interests under
Non-Qualified Contracts, including their ownership rights.
We take no responsibility for the validity of any assignment. Owners and payees
must make a change in ownership rights in writing and send it to our home
office. The change will be effective on the date made, although we are not bound
by a change until the date we record it.
The rights under a contract are subject to any assignment of record at our home
office. An assignment or pledge of a contract may have adverse tax consequences.
See below under "Federal Tax Matters."
BENEFICIARY
You may name or change a beneficiary or a contingent beneficiary before the
annuity commencement date. You must send a written request of the change to
Fortis Benefits. Certain retirement programs may require spousal consent to name
or change a beneficiary. Applicable tax laws and regulations may limit the right
to name a beneficiary other than the spouse. We are not responsible for the
validity of any change. A change will take effect as of the date it is signed
but will not affect any payment we make or action we take before receiving the
written request. We also need the consent of any irrevocably named person before
making a requested change.
Upon the death of a contract owner, or the Annuitant if the Annuitant is an
non-natural person, prior to the annuity commencement date the beneficiary will
be deemed to be as follows:
- If there is any surviving contract owner, the surviving contract owner
will be the beneficiary (this overrides any other beneficiary
designation).
- If there is no surviving contract owner, the beneficiary will be the
beneficiary designated by the contract owner.
- If there is no surviving contract owner and no surviving beneficiary who
has been designated by the contract owner, the estate of the last
surviving contract owner will be the beneficiary.
REPORTS
We will mail to the contract owner, at the last known address of record, any
report required by applicable law or regulation. You should therefore give us
prompt written notice of any address change. Each contract owner will also be
sent an annual and a semi-annual report for the portfolios and a list of the
portfolio securities held in each portfolio. All reports will be mailed to the
person receiving payments during the Annuity Period, rather than to the contract
owner.
RIGHTS RESERVED BY FORTIS BENEFITS
We reserve the right to make certain changes if, in our judgement, they would
best serve the interests of contract owners and Annuitants or would be
appropriate in carrying out the purposes of the contract. We will make any
change only as permitted by applicable laws. We will obtain your approval of the
changes and approval from any appropriate regulatory authority if required by
law. Examples of the changes we may make include:
- To operate the Separate Account in any form permitted under the Investment
Company Act of 1940 or in any other form permitted by law.
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- To transfer any assets in any subaccount to another subaccount, or to one
or more separate accounts, or to the fixed account; or to add, combine or
remove subaccounts in the Separate Account.
- To substitute, for the portfolio shares held in any subaccount, the shares
of another portfolio or the shares of another investment company or any
other investment permitted by law.
- To make any changes required by the Internal Revenue Code or by any other
applicable law in order to continue treatment of the contract as an
annuity.
- To change the time or times of day at which a Valuation Date is deemed to
have ended.
- To make any other necessary technical changes in the contract in order to
conform with any action the above provisions permit us to take, including
to change the way us assess charges, but without increasing, as to any
then outstanding contract, the aggregate amount of the types of charges
that we have guaranteed.
DISTRIBUTION
Fortis Investors, Inc. ("Fortis Investors") is the principal underwriter of the
contracts. The contracts will be sold by individuals who are licensed by state
insurance authorities to sell the contracts of Fortis Benefits and (1) are
registered representatives of Fortis Investors or (2) are registered
representatives of other broker-dealer firms, or (3) are representatives of
other firms that are exempt from broker-dealer regulation. Fortis Investors and
any other broker-dealer firms are (1) registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 as broker-dealers
and (2) members of the National Association of Securities Dealers, Inc.
Fortis Investors will pay an allowance to its registered representatives and
selling brokers in varying amounts. Fortis Investors does not expect the
allowances under normal circumstances to exceed 6.25% of purchase payments plus
a servicing fee of .25% of contract value per year, starting in the first
contract year.
Fortis Investors may, under certain flexible compensation arrangements, pay
lesser or greater selling allowances and larger or smaller service fees to its
registered representatives and other broker dealer firms than as set forth
above. However, in such case, such flexible compensation arrangements will have
actuarial present values that are approximately equivalent to the amounts of the
selling allowances and service fees set forth above. Additionally, registered
representatives, broker-dealer firms and exempt firms may qualify for additional
compensation based upon meeting certain production standards. Fortis Investors
may "chargeback" commissions paid to others if the contract upon which the
commission was paid is surrendered or canceled within certain specified time
periods.
Fortis Benefits or Fortis Investors may also provide additional compensation to
broker-dealers in connection with sales of contracts. Compensation may include
financial assistance to broker-dealers in connection with (1) conferences, (2)
sales or training programs for their employees, (3) seminars for the public, (4)
advertising, (5) sales campaigns regarding contracts, and (6) other
broker-dealer sponsored programs or events. Compensation may also include trips
taken by invited sales representatives and their family members to locations
within or without the United States for business meetings or seminars. Fortis
Benefits or Fortis Investors may pay travel expenses that arise from these
trips.
Fortis Investors is an indirect subsidiary of Fortis (NL)N.V. and Fortis (B).
Fortis Investors is under common control with Fortis Benefits. Fortis Investors'
principal business address is the same as that of our home office.
FEDERAL TAX MATTERS
The following description is a general summary of the tax rules, primarily
related to federal income taxes. These rules are based on laws, regulations and
interpretations that are subject to change at any time. This summary is not
comprehensive. We do not intend it as tax advice. Federal estate and gift tax
considerations, as well as state and local taxes, may also be material. You
should consult a qualified tax adviser as to the tax implications of taking any
action under a contract or related retirement plan.
NON-QUALIFIED CONTRACTS
Section 72 of the Internal Revenue Code (the "Code") governs the taxation of
annuities in general. Neither you nor any other person may exclude or deduct
purchase payments under Non-Qualified Contracts from gross income. However, you
are not currently taxed, until receipt, on any increase in the accumulated value
of a Non-Qualified Contract that results from (1) the investment performance of
the Separate Account or (2) interest credited to the fixed account. Contract
owners who are not natural persons ARE taxed annually for any increase in the
contract value subject to certain exceptions. You may wish to discuss this with
your tax adviser.
The following discussion applies generally to contracts owned by natural
persons.
In general, surrenders or partial withdrawals under contracts are taxed as
ordinary income to the extent of the accumulated income or gain under the
contract. If you assign or pledge any part of the contract value, you pay on the
value so pledged or assigned to the same extent as a partial withdrawal.
With respect to annuity payment options, the tax consequences may vary depending
on the option elected under the contract. Until the "investment in the contract"
is recovered, generally only the portion of the annuity payment that represents
the amount by which the contract value exceeds the "investment in the contract"
will be taxed. In general, "investment in the contract" is the aggregate amount
of purchase payments made. After recovery of the "investment in the contract",
the full amount of any additional annuity payments is taxable.
For variable annuity payments, in general the taxable portion of each annuity
payment (prior to recovery of the "investment in the contract") is the amount of
the payment less the nontaxable portion. The nontaxable portion of each payment
is the "investment in the contract" divided by the total number of expected
annuity payments.
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For fixed annuity payments in general, prior to recovery of the "investment in
the contract," there is no tax on the amount of each payment that bears the same
ratio to such payment that the "investment in the contract" bears to the total
expected return under the contract. The remainder of each annuity payment is
taxable. The taxable portion of a distribution (in the form of an annuity or a
single sum payment) is taxed as ordinary income.
For purposes of determining the amount of taxable income resulting from
distributions, all contracts, and other annuity contracts, we or our affiliates
issue to you within the same calendar year will be treated as if they were a
single contract.
You, or any other payee, will pay a 10% penalty on the taxable portion of a
"premature distribution." Generally, an amount is a "premature distribution"
UNLESS the distribution is:
- made on or after you or another payee reach age 59 1/2, or is
- made to a beneficiary on or after your death, or is
- made upon your disability or that of another payee, or is
- part of a series of substantially equal annuity payments for your life or
life expectancy, or the life or life expectancy of you or your beneficiary
Premature distributions may result, for example, from:
- an early annuity commencement date
- an early surrender or partial surrender of a contract
- an assignment of a contract
- the early death of an annuitant other than you or another person receiving
annuity payments under the contract
If you transfer ownership of a contract, or designate an Annuitant or a payee
other than yourself, you may have certain income or gift tax consequences that
are beyond the scope of this discussion. If you are contemplating any transfer
or assignment of a contract, you should contact a competent tax adviser.
REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS
In order that a Non-Qualified Contract be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code requires:
- if any person receiving annuity payments dies on or after the annuity
commencement date but prior to the time the entire interest in the
contract has been distributed, the remaining portion of such interest will
be distributed at least as rapidly as under the method of distribution
being used as of the date of the person's death; and
- if you die prior to the annuity commencement date, the entire interest in
the contract will be distributed:
- within five years after your death, or
- as annuity payments that will begin within one year of your death and
will be made over your designated beneficiary's life or over a period
not extending beyond the life expectancy of that beneficiary.
However, if the contract owner's designated beneficiary is the surviving spouse,
the surviving spouse may continue the contract as the new contract owner. Where
the contract owner or other person receiving payments is not a natural person,
the required distributions under Section 72(s) apply on the death of the primary
Annuitant.
The Internal Revenue Service has not issued regulations interpreting the
requirements of Section 72(s). However, it has issued proposed regulations
interpreting similar requirements for qualified plans. We intend to review and
modify the contract if necessary to ensure that it complies with the
requirements of Section 72(s) when clarified by regulation or otherwise.
Generally, the above requirements will be satisfied with a single sum payment
where the death occurs prior to the annuity commencement date. A single sum
payment will be subject to proof of the contract owner's death. The beneficiary,
however, may elect by written request to receive an annuity option instead of a
lump sum payment. However, if the election is not made within 60 days of the
date the single sum death benefit otherwise becomes payable, the IRS may
disregard the election for tax purposes and tax the beneficiary as if a single
sum payment had been made.
QUALIFIED CONTRACTS
The contract may be used with several types of tax-qualified plans. The tax
rules applicable to contract owners, Annuitants and other payees vary according
to the type of plan and the terms and conditions of the plan itself. In general,
purchase payments made under a tax qualified plan on your behalf are excludible
from your gross income during the Accumulation Period. The portion, if any, of
any purchase payment that is not excluded from your gross income during the
Accumulation Period constitutes your "investment in the contract".
When annuity payments begin, you will receive back your "investment in the
contract," if any, as a tax-free return of capital. The Code provides which
portion of each payment is taxable and which portion is tax free. These rules
may vary depending on the type of tax qualified plan.
The contracts are available in connection with the following types of retirement
plans:
- Section 403(b) annuity plans for employees of certain tax-exempt
organizations and public education institutions;
- Section 401 or 403(a) qualified pension, profit-sharing or annuity plans;
- individual retirement annuities ("IRAs") under Section 408(b);
- simplified employee pension plans ("SEPs") under Section 408(k);
- SIMPLE IRA Plans under Section 408(p); and
- Section 457 unfunded deferred compensation plans of tax-exempt
organizations and private employer unfunded deferred compensation plans.
19
<PAGE>
WITHHOLDING
Annuity payments and other amounts received under contracts are subject to
income tax withholding unless the recipient elects not to have taxes withheld.
The amounts withheld will vary among recipients depending on the tax status of
the individual and the type of payments from which taxes are withheld.
Despite the recipient's election, the Code may require withholding from certain
payments outside the United States. The Code may also require withholding from
certain distributions from certain types of qualified retirement plans unless
the proceeds are transferred directly from the qualified retirement plan to
another qualified retirement plan. Moreover, special "backup withholding" rules
may require that we disregard the recipient's election if the recipient fails to
supply us with a "TIN" or taxpayer identification number (social security number
for individuals), or if the Internal Revenue Service notifies us that the TIN
provided by the recipient is incorrect.
PORTFOLIO DIVERSIFICATION
The United States Treasury Department has adopted regulations under Section
817(h) of the Code that set forth diversification requirements for the
investments underlying the Non-Qualified Contracts. We believe that the
investments will satisfy these requirements. Failure to do so would result in
immediate taxation to you or another person of all income credited to
Non-Qualified Contracts. Also, current regulations do not provide guidance as to
any circumstances in which control over allocation of values among different
investment alternatives may cause you or another person to be treated as the
owners of Separate Account assets for tax purposes. We reserve the right to
amend the contracts in any way necessary to avoid any such result. The Treasury
Department has stated that it expects to establish standards in this regard
through regulations or rulings. Such standards may apply only prospectively,
although retroactive application is possible if the Treasury Department
considered such standards not to embody a new position.
CERTAIN EXCHANGES
Section 1035 of the Code provides generally that no gain or loss will be
recognized upon the exchange of a life insurance or annuity contract for an
annuity contract. Thus, a properly completed exchange pursuant to the special
annuity contract exchange form we provide for this purpose is not generally a
taxable event under the Code. Moreover, your investment in the contract will be
the same as your investment in the contract you exchanged out of. However, an
exchange from an investment that is not a life insurance or annuity contract may
be a taxable event.
Various provisions of the tax laws may "grandfather" certain annuity contracts.
For example, certain annuity contracts issued before January 19, 1985 may not be
subject to the distribution rules of Code Section 72(s), and certain
distributions from contracts issued before the same date may not be subject to
the 10% penalty tax for premature distributions. In addition, if a contract
contained principal on August 13, 1982, that principal may generally be
withdrawn in a partial distribution before the withdrawal of any taxable gain in
the contract. These provisions may be lost if a grandfathered contract is
exchanged for a non-grandfathered contract.
Certain contract exchanges are subject to Code Section 1035. Where an exchange
is subject to this Code Section, certain grandfathered provisions may be
preserved. If your exchange is subject to Section 1035, we may be able to assist
you in preserving grandfathered provisions by "tracking" amounts accumulated
through past purchase payments. Payments made before or after the effective date
of the Tax Equity and Fiscal Responsibility Act of 1982 may have different tax
consequences. Therefore, you must provide us with an accurate history of your
past purchase payments.
TAX LAW RESTRICTIONS AFFECTING SECTION 403(B) PLANS
Section 403(b)(11) of the Internal Revenue Code restricts the distribution under
Section 403(b) annuity contracts of:
(1) elective contributions made for years beginning after December 31, 1988;
(2) earnings on those contributions; and
(3) earnings on amounts held as of December 31, 1988.
Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, we may not distribute income attributable to elective
contributions which accrues after December 31, 1988.
VOTING PRIVILEGES
In accordance with our view of current applicable law, we will vote shares of
each of the portfolios attributable to a contract at regular and special
meetings of the shareholders of a portfolio. We will vote those shares in
proportion to instructions we receive from the persons having the voting
interest in the contract as of the record date for the corresponding portfolio
shareholders meeting. Contract owners have the voting interest during the
Accumulation Period. Persons receiving annuity payments have the voting interest
during the Annuity Period, and beneficiaries have the voting interest after the
death of the Annuitant or contract owner. However, if the Investment Company Act
of 1940 or any rules thereunder should be amended or if the present
interpretation thereof should change, and as a result we determine that we are
permitted to vote shares of the portfolios in our own right, we may elect to do
so.
We determine the number of shares of a portfolio attributable to a contract as
follows:
- During the Accumulation Period, we divide the amount of contract value in
a subaccount by the net asset value of one share of the portfolio
corresponding to that subaccount. We make this calculation as of the
record date for the applicable portfolio.
- During the Annuity Period, or after the death of the Annuitant or owner,
we make a similar calculation. However, for subaccount value we use the
liability for future variable annuity payments allocable to that
subaccount as of the record date for the applicable portfolio. We
calculate the liability for future variable annuity payments on the basis
of the following on the record date:
20
<PAGE>
- mortality assumptions,
- the assumed interest rate used in determining the number of Annuity
Units under the contract, and
- the applicable Annuity Unit value.
During the Annuity Period, the number of votes attributable to a contract will
generally decrease since funds set aside to make the annuity payments will
decrease.
Under certain contracts, we will vote portfolio shares according to instructions
we receive from the contract owner. However, we adjust this policy where the
Annuitant or payee is not the contract owner. Under this circumstance, the
Annuitant or payee may instruct the contract owner who, in turn, relays this
instruction to us. We will vote those portfolio shares that we can attribute to
the purchase payments of the Annuitant or payee in accordance with the
instruction relayed to us. In addition, in certain circumstances such as an
employee benefit plan, we allow the Annuitant or payee to direct how we vote
additional shares beyond those that we can attribute to the purchase payments of
the Annuitant or payee. However, we do so only to the extent authorized by the
contract. We compute the number of shares that may be attributed to the
Annuitant of payee on a basis consistent with that for attributing portfolio
shares to contract owners, as described above.
Contract owners are to instruct Fortis Benefits to vote in accordance with such
directions from Annuitants and payees. Furthermore, contract owners are to
instruct us to vote shares of any portfolio for which directions could have been
but were not received from Annuitants and other payees in the same proportion as
other shares in that portfolio attributable to the contract owner which are to
be voted in accordance with directions received from Annuitants and other
payees. The contract owner may instruct us as to the voting of any other shares
attributable to contracts as the contract owner may determine. The Separate
Account and Fortis Benefits do not have any obligation to determine whether or
not voting directions are requested or received by a contract owner or whether
or not a contract owner has instructed us in accordance with directions given by
Annuitants and other payees.
We will vote shares for which we have not received timely instructions, and any
shares attributable to excess amounts we have accumulated in the related
subaccount, in proportion to the voting instructions which we receive for all
contracts and other variable annuity contracts participating in a portfolio. To
the extent that we or any affiliated company holds any shares of a portfolio,
those shares will be voted in the same proportion as instructions for that
portfolio from all our policy owners holding voting interests in that portfolio.
Shares held by separate accounts other than the Separate Account will in general
be voted in accordance with instructions of participants in such other separate
accounts. This diminishes the relative voting influence of the contracts.
Each person having a voting interest in a subaccount of the Separate Account
will receive proxy material, reports and other materials relating to the
appropriate portfolio. Under the procedures described above, these persons may
give instructions regarding:
- the election of the Board of Directors of the portfolios,
- ratification of the selection of a portfolio's independent auditors,
- the approval of the investment managers of a portfolio,
- changes in fundamental investment policies of a portfolio, and
- all other matters that are put to a vote of portfolio shareholders
STATE REGULATION
We are subject to regulation and supervision by the Commerce Department of the
State of Minnesota, which periodically examines our affairs. We are also subject
to the insurance laws and regulations of all jurisdictions where we are
authorized to do business. We intend to satisfy the necessary requirements to
sell contracts in the District of Columbia and in all states other than New York
as soon as possible.
LEGAL MATTERS
David A. Peterson, Esquire, Vice President and Assistant General Counsel with
our legal department has passed on the legality of the contracts described in
this prospectus. Messrs. Freedman, Levy, Kroll & Simonds, Washington, D.C., have
advised Fortis Benefits on certain federal securities law matters.
YEAR 2000 ISSUES
At Fortis Benefits, we use computer systems to process policy transactions and
valuations. We need to adjust these computer systems so that we may continue to
administer policies after the Year 2000. Fortis Benefits is devoting all
resources necessary to make these systems modifications, and we expect that the
necessary changes will be completed on time, with no disruption to our policy
servicing operations. However, as with most system conversion projects, risks
and uncertainties exist. In part, this is due to our necessary reliance on third
party vendors. Nonperformance by any of these entities, or other unforeseen
circumstances, could have a material adverse impact on our ability to service
policies. As such, we are closely monitoring these entities to avoid any
unforeseen circumstances. See the Note entitled "Year 2000" in the Fortis
Financial Statements in the Statement of Additional Information.
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Fortis Benefits................................
<S> <C>
Calculation of Annuity Payments................
Services.......................................
Safekeeping of Separate Account Assets.........
Experts........................................
Principal Underwriter..........................
Limitation On Allocations......................
Change of Investment Adviser or Investment
Policy........................................
Taxation Under Certain Retirement Plans........
Other Information..............................
Financial Statements...........................
APPENDIX A--Performance Information............
</TABLE>
21
<PAGE>
APPENDIX A--SAMPLE DEATH BENEFIT CALCULATIONS
<TABLE>
<CAPTION>
Date of Death is the 3rd Contract Anniversary: Example 1 Example 2
----------- -----------
<S> <C> <C>
a. Purchase Payments Made Prior to Date of Death $ 30,000 $ 30,000
b. Purchase Payments Made Prior to Date of Death, accumulated at 5% $ 34,729 $ 34,729
c. Contract Value on Date of Death $ 25,000 $ 37,000
Death Benefit is the larger of a, b, and c $ 34,729 $ 37,000
<CAPTION>
Date of Death is the 5th Contract Anniversary: Example 1 Example 2
----------- -----------
<S> <C> <C>
a. Purchase Payments Made Prior to Date of Death $ 30,000 $ 30,000
b. Purchase Payments Made Prior to Date of Death, accumulated at 5% $ 38,288 $ 38,288
c. Contract Value on Date of Death $ 40,000 $ 45,000
Death Benefit is larger of a, b, and c $ 40,000 $ 45,000
<CAPTION>
Date of Death is the 10th Contract Anniversary: Example 1 Example 2
----------- -----------
<S> <C> <C>
a. Purchase Payments Made Prior to Date of Death $ 30,000 $ 30,000
b. Purchase Payments Made Prior to Date of Death, accumulated at 5% $ 48,867 $ 48,867
c. Contract Value on Date of Death $ 25,000 $ 60,000
Death Benefit is the larger of a, b, and c $ 48,867 $ 60,000
</TABLE>
A-1
<PAGE>
APPENDIX B--EXPLANATION OF EXPENSE CALCULATIONS
The expense for a given year is calculated by multiplying the projected
beginning of the year policy value by the total expense rate. The total expense
rate is the sum of the variable account expense rate plus the total portfolio
expense rate plus the annual administrative charge rate.
The policy values are projected by assuming a single payment of $1,000 grows at
an annual rate equal to 5% reduced by the total expense rate described above.
For example, the 3 year expense for the Growth Stock Series, is calculated as
follows:
<TABLE>
<S> <C> <C>
Total Variable Account Annual Expenses 1.85%
+ Total Series Fund Operating Expenses .65%
= Total Expense Rate 2.50%
</TABLE>
Year 1 Beginning Policy Value = $1000.00
Year 1 Expense = 1000.00 X .0250 = $25.00
Year 2 Beginning Policy Value = $1025.00
Year 2 Expense = 1025.00 X .0250 = $25.63
Year 3 Beginning Policy Value = $1050.62
Year 3 Expense = 1050.62 X .0250 = $26.27
So the cumulative expenses for years 1-3 for the Growth Stock Series are equal
to $25.00 + $25.63 + $26.27 = $76.90
If the contract is surrendered, the surrender charge is the surrender charge
percentage times the purchase payment minus the 10% free withdrawal amount:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Surrender Charge (Initial 10% Free Surrender
Percentage X Premium - Withdrawal) = Charge
</TABLE>
0.08 x ($1000.00 - $100.00) = $72.00
So the total expense if surrendered is $76.90 + $72.00 = $148.90
B-1
<PAGE>
APPENDIX C--PRO RATA ADJUSTMENTS
Pro rata adjustments are made for withdrawals in calculating the death benefit
payable under the contract. The benefit is described under the section of this
prospectus entitled Benefit Payable on Death of Contract Owner (or Annuitant).
Under the death benefit set forth as (3) in "Benefit Payable on Death of
Contract Owner (or Annuitant)", the pro rata adjustment for a given withdrawal
is equal to:
(a) the withdrawn amount, divided by
(b) the contract value immediately before the amount was withdrawn, the result
multiplied by
(c) the quantity equal to:
(i) the "Roll-Up Amount" prior to the withdrawal, plus
(ii) any purchase payments made on or after the date either the contract
owner first reaches his or her 86th birthday and before the given
withdrawal, reduced by
(iii) pro rata adjustments for any withdrawals made on or after the date
either the contract owner first reaches his or her 86th birthday and
before the given withdrawal.
C-1
<PAGE>
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<PAGE>
Individual Flexible Premium Deferred Variable Annuity Contracts
(Income Preferred Annuity)
Issued by
FORTIS BENEFITS INSURANCE COMPANY
STATEMENT OF ADDITIONAL INFORMATION
September 1, 1999
This Statement of Additional Information is not a Prospectus. It is intended
that this Statement of Additional information be read in conjunction with the
Prospectus for a flexible premium deferred variable annuity contract
("Contract"), dated September 1, 1999. A copy of the Prospectus may be obtained
without charge from Fortis Investors, Inc. 1-800-800-2000, ext. 3057; mailing
address: P.O. Box 64272, St. Paul, MN 55164. The Contracts are issued by Fortis
Benefits through its Variable Account D (the "Separate Account").
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Fortis Benefits...............................................................2
Calculation of Annuity Payments...............................................2
Services
- Safekeeping of Separate Account Assets...................................3
- Principal Underwriter ...................................................3
Limitation on Allocations.....................................................4
Change of Investment Adviser or Investment Policy.............................4
Taxation Under Certain Retirement Plans.......................................4
Other Information.............................................................8
Financial Statements..........................................................9
Appendix A - Performance Information........................................A-1
</TABLE>
In order to supplement the description in the Prospectus, the following provides
additional information about the Contract and other matters which may be of
interest to Contract Owners, Annuitants and Beneficiaries. Terms used in this
Statement of Additional Information have the same meanings as are defined in the
Prospectus under the heading "Special Terms Used in This Prospectus."
1
<PAGE>
FORTIS BENEFITS
Fortis Benefits Insurance Company, the issuer of the Contracts, is a Minnesota
corporation qualified to sell life insurance and annuity contracts in the
District of Columbia and in all states except New York. Fortis Benefits is a
wholly-owned subsidiary of Interfinancial Company, Inc., which itself is a
wholly-owned subsidiary of Fortis, Inc. Fortis, Inc. is a corporation based in
New York, which manages the United States operations of Fortis(NL) N.V. and
Fortis (B). Fortis, Inc. is wholly-owned by AMEV/VSB 1990. The latter is 50%
owned by Fortis (NL) N.V. and 50% owned, through certain subsidiaries, by Fortis
(B).
Fortis (NL) N.V. is a publicly-traded, multi-national insurance and financial
services group headquartered in The Netherlands. Fortis (NL) N.V. is an
international financial services firm that has been in business since 1847. It
is one of the largest holding companies in Europe with subsidiary companies in
twelve countries on four continents. Fortis (NL) N.V. is the third largest
insurance company in the Netherlands. Fortis (B) is a multi-national insurance,
real estate and financial services firm that has been in business since 1824. It
has subsidiary companies in eight countries. Fortis (B) is one of the largest
life insurance companies in Belgium. Fortis (NL) N.V. and Fortis (B) have
combined assets of approximately $390 billion.
Best's Insurance Reports has assigned Fortis Benefits a rating of A (Excellent)
for financial position and operating performance. Fortis Benefits has a rating
of AA from Standard & Poor's. As defined by Standard & Poor's, insurers rated AA
offer "excellent financial security." These ratings represent such rating
agencies' independent opinion of Fortis Benefits' financial strength and ability
to meet policy holder obligations, but have no relevance to the performance and
quality of the assets in Subaccounts of the Variable Account.
CALCULATION OF ANNUITY PAYMENTS
FIXED ANNUITY OPTION
The amount of each annuity payment under a Fixed Annuity Option is fixed and
guaranteed by Fortis Benefits. Monthly fixed annuity payments will start as of
the end of the Valuation Period that contains the Annuity Commencement Date. At
that time, the Contract Value of the Contract is computed and that portion of
the Contract Value which will be applied to the Fixed Annuity Option selected is
determined. The amount of the first monthly payment under the Fixed Annuity
Option selected will be at least as large as would result from using the annuity
tables contained in the Contract to apply such amount of Contract Value to the
annuity form selected. The dollar amounts of any fixed annuity payments after
the first are specified during the entire period of annuity payments according
to the provisions of the annuity form selected.
VARIABLE ANNUITY OPTION
ANNUITY UNITS. To the extent a Variable Annuity Option has been selected, we
convert the Accumulation Units for each Subaccount of the Separate Account into
Annuity Units for each Subaccount at their values determined as of the end of
the Valuation Period which contains the Annuity Commencement Date. As of such
time, any Fixed Account Value to be applied to a Variable Annuity Option is also
converted to Annuity Units in the Subaccounts selected based on the then-current
Annuity Unit value. The initial number of Annuity Units in each Subaccount is
determined by dividing the amount of the initial monthly variable annuity
payment (see "Variable Annuity Option--Variable Annuity Payments," below)
allocable to that Subaccount by the value of one Annuity Unit in that Subaccount
as of the time of the conversion. The number of Annuity Units for each
Subaccount will remain constant, as long as an annuity remains in force and the
allocation among the Subaccounts has not changed.
The value of each Subaccount's Annuity Units will vary to reflect the investment
experience of that Subaccount as well as charges deducted from the Subaccount.
The value of each Subaccount's Annuity Units is equal to the prior value of the
Subaccount's Annuity Units multiplied by the net investment factor for that
Subaccount
(discussed in the Prospectus under "Contract Value") for the Valuation Period
ending on that Valuation Date, with an offset for the 3% assumed interest rate
used in the annuity tables of the Contract.
2
<PAGE>
VARIABLE% ANNUITY PAYMENTS. Variable annuity payments start at the end of the
Valuation Period that contains the Annuity Commencement Date, and will vary in
amount as the related Annuity Unit values vary. The amount of the first monthly
payment is shown on the annuity tables contained in the Contract for each $1,000
of Contract Value applied to the Variable Annuity Option selected as of the end
of such Valuation Period. The first variable annuity payment is, in effect,
allocated among the Subaccounts in the same proportion as the Contract Value is
allocated among the Subaccounts upon commencement of annuity payments.
Payments after the first will vary in amount and are determined on the first
Valuation Date of each subsequent monthly period. If the monthly payment under
the annuity form selected is based on the value of Annuity Units of a single
Subaccount, the monthly payment is found by multiplying the number of the
Contract's Annuity Units for that Subaccount by the Annuity Unit value of such
Subaccount as of the first Valuation Date in each monthly period following the
Annuity Commencement Date. If the monthly payment under the Variable Annuity
Option selected is based upon the value of Annuity Units in more than one
Subaccount, this is repeated for each applicable Subaccount. The sum of these
payments is the variable annuity payment.
GENDER OF ANNUITANT
The amount of each annuity payment ordinarily will be higher for a male
Annuitant than for a female Annuitant of the same age with an otherwise
identical Contract. This is because, statistically, females tend to have longer
life expectancies than males. However, there will be no differences between male
and female Annuitants in any jurisdiction, including Montana and Massachusetts,
where such differences are not permitted. We will also make available Contracts
with no such differences in connection with certain employer-sponsored benefit
plans. Employers should be aware that, under most such plans, Contracts that
make distinctions based on gender are prohibited by law.
SERVICES
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
Title to the assets of the Separate Account is held by Fortis Benefits. The
assets of the Separate Account are kept segregated and held separate and apart
from Fortis Benefit's other assets. Fortis Advisers, Inc., an affiliate of
Fortis Benefits, maintains records of all purchases and redemptions of shares of
Fortis Series Fund, Inc. held by each of the Subaccounts of the Separate
Account.
PRINCIPAL UNDERWRITER
Fortis Investors, Inc. ("Fortis Investors"), the principal underwriter of the
Contracts, is a Minnesota corporation and a member of the Securities Investors
Protection Corporation. The offering of the Contracts is continuous, and Fortis
Investors does not anticipate discontinuing the offering of the Contracts,
although it reserves the right to do so. Fortis Benefits paid a total of
$30,567,607, $30,705,769 and $32,874,801 to Fortis Investors for annuity
contract distribution services during 1996, 1997 and 1998 respectively. Of these
totals, the sums of $7,531,629, $5,091,431 and $5,389,151 for the years 1996,
1997 and 1998 respectively, was not reallowed to other broker-dealers. Contracts
will be issued for Annuitants from ages zero to ninety in all states, except
that the maximum age is 74 1/2 in Washington state. Contracts are not currently
available in New Jersey and New York.
LIMITATION ON ALLOCATIONS
Under the Contract, Fortis Benefits reserves the right to control the amount of
any assets in any investment alternative. Pursuant to this authority, Fortis
Benefits has established the following administrative procedures for the
protection of the interests of all investors participating in Fortis Series'
Portfolios: a Contract Owner may not invest, allocate, transfer or exchange
Contract Value into any Subaccount if the value allocated to that Subaccount
under the Contract (and under any other insurance or annuity contracts directly
or indirectly controlled by the same person, jointly or individually) would
immediately thereafter equal 25% or more of the related Fortis Series
Portfolio's net assets. Fortis Benefits reserves the right to modify these
procedures at any time.
3
<PAGE>
CHANGE OF INVESTMENT ADVISER OR INVESTMENT POLICY
Unless otherwise required by law or regulation, and subject to Fortis Advisers,
Inc.'s right to terminate its investment advisory arrangements with Fortis
Series, neither the investment adviser nor any investment policy may be changed
without the consent of Fortis Benefits. No investment policy will be changed
unless a statement of change is filed with and approved by the Commerce
Commissioner of the State of Minnesota. If required, approval of or change of
any investment objective will be filed with the Insurance Department of each
state where Contracts have been delivered. The Contract Owner (or, after annuity
payments start, the Annuitant) will be notified of any material investment
policy change which has been approved. Notification of an investment policy
change will be provided to Contract Owners prior to its implementation by the
Separate Account if Contract Owner comment or vote is required for such change.
TAXATION UNDER CERTAIN RETIREMENT PLANS
Federal income tax information concerning the purchase of Contracts for specific
types of retirement plans is set forth below. You should also refer to "Federal
Tax Matters" in the Prospectus. The tax information provided is not
comprehensive, and you should consult a qualified tax adviser before taking any
action in connection with a retirement plan.
SECTION 403(b) ANNUITIES FOR EMPLOYEES OF CERTAIN TAX-EXEMPT ORGANIZATIONS OR
PUBLIC EDUCATIONAL INSTITUTIONS
PURCHASE PAYMENTS. Under Section 403(b) of the Internal Revenue Code ("Code"),
payments made by certain employers (i.e., tax-exempt organizations meeting the
requirements of Section 501(c)(3) of the Code, or public educational
institutions) to purchase Contracts for their employees are excludible from the
gross income of employees to the extent that such aggregate purchase payments do
not exceed certain limitations prescribed by the Code. This is the case whether
the purchase payments are a result of voluntary salary reduction amounts or
employer contributions. Salary reduction payments are, however, subject to FICA
(social security) taxes.
TAXATION OF DISTRIBUTIONS. Distributions from a Section 403(b) tax-deferred
annuity contract are taxed as ordinary income to the recipient as described
under "Federal Tax Matters" in the Prospectus. Taxable distributions received
before the employee attains age 59 1/2 generally are subject to a 10% penalty
tax in addition to regular income tax. Certain distributions are excepted from
this penalty tax, including distributions following the employee's death,
disability, separation from service after age 55, separation from service at any
age if the distribution is in the form of an annuity for the life (or life
expectancy) of the employee (or the employee and Beneficiary) and distributions
not in excess of deductible medical expenses. In addition, no distributions of
voluntary salary reduction amounts made for years after December 31, 1988 (plus
earnings thereon and earnings on Contract values as of December 31, 1988) will
be permitted prior to one of the following events: attainment of age 59 1/2 by
the employee or the employee's separation from service, death, disability or
hardship. (Hardship distributions will be limited to the lesser of the amount of
the hardship or the amount of salary reduction contributions, exclusive of
earnings thereon.)
REQUIRED DISTRIBUTIONS. Generally, distributions from Section 403(b) annuities
must commence not later than April 1 of the calendar year following the calendar
year in which the employee attains age 70 1/2, and such distributions must be
made over a period that does not exceed the life expectancy of the employee (or
the employee and Beneficiary). A penalty tax of 50% would be imposed on any
amount by which the minimum required distribution in any year exceeded the
amount actually distributed in that year. In addition, in the event that the
employee dies before his or her entire interest in the Contract has been
distributed, the employee's entire interest must be distributed in accordance
with rules similar to those applicable upon the death of the Contract Owner in
the case of a Non-Qualified Contract, as described in the Prospectus. Certain of
these and other provisions are incorporated in a special endorsement attached to
Contracts that are intended to qualify under Section 403(b), and reference
should be made to that endorsement for its complete terms.
TAX FREE EXCHANGES AND ROLLOVERS. The Code provides for the tax-free exchange of
one Section 403(b) annuity contract for another Section 403(b) annuity contract,
and the IRS has ruled (Revenue Ruling 90-24) that amounts transferred may
qualify as tax-free transfers under certain circumstances. In addition, Section
403(b)(8) of the Code permits tax-free rollovers from Section 403(b) programs to
individual retirement annuities or other Section 403(b) programs under certain
circumstances.
4
<PAGE>
SECTION 401 QUALIFIED PENSION, PROFIT-SHARING OR ANNUITY PLANS
PURCHASE PAYMENTS. Subject to certain limitations prescribed by the Code,
purchase payments made by an employer (or a self-employed individual) under a
pension, profit-sharing or annuity plan qualified under Section 401 or
Section 403(a) of the Code are generally deductible by the employer and
excluded from the taxable income of the employee for federal income tax
purposes, whether made under a salary reduction agreement or directly by
employer contributions. Salary reduction payments are, however, subject to
FICA (social security) taxes. Purchase payments made directly by an employee
generally are made on an after-tax basis.
TAXATION OF DISTRIBUTIONS. Distributions from Contracts purchased under these
qualified plans are taxable as ordinary income, except to the extent allocable
to an employee's after-tax contributions, as described under "Federal Tax
Matters--Qualified Plans," in the Prospectus. However, if an employee or other
payee receives a "lump sum" distribution, as defined in the Code, from an exempt
employees' trust, the taxable portion of the distribution may be subject to
special tax treatment. For most individuals receiving lump sum distributions
after attaining age 59 1/2, the rate of tax may be determined under a special
5-year income averaging provision. Those who attained age 50 by January 1, 1986
may instead elect to use a 10-year income averaging provision based on the
income tax rates in effect for 1986. Taxable distributions received prior to
attainment of age 59 1/2 under a Contract purchased under a qualified plan are
subject to the same 10% penalty tax (and the same exceptions) as described above
with respect to Section 403(b) annuity contracts.
REQUIRED DISTRIBUTIONS. The minimum distribution requirements for these
qualified plans are generally the same as described above with respect to
Section 403(b) annuity contracts.
TAX-FREE ROLLOVERS. If, within 60 days of receipt, an employee who receives a
single sum distribution transfers all of the taxable amount received to
another plan qualified under Section 401 or 403(a), or to an individual
retirement account or annuity as provided for under the Code, the transferred
amount will not be taxed in the year of distribution. Certain "partial"
distributions may also qualify for tax-free rollover treatment, but only if
transferred to an individual retirement account or annuity. However, income
tax may be required to be withheld from the distribution unless the
distribution is transferred directly from the qualified plan to an individual
retirement account or annuity.
INDIVIDUAL RETIREMENT ANNUITIES
PURCHASE PAYMENTS. Individuals may make contributions for individual retirement
annuity ("IRA") Contracts. Deductible contributions for any year may be made up
to the lesser of $2,000 or 100% of compensation for individuals who (1) are not
(and whose spouses are not) active participants in another retirement plan, (2)
are unmarried and have adjusted gross income of $25,000 or less, or (3) are
married and have adjusted gross income of $40,000 or less. An individual may
also establish an IRA for his or her spouse if they file a joint return for the
taxable year and his or her spouse earns less than the individual does for that
year. The annual purchase payments for both spouses' Contracts cannot exceed the
lesser of $4,000 or 100% of the couple's combined earned income, and no more
than $2,000 may be contributed to either spouse's IRA for any year. Individuals
who are active participants in other retirement plans and whose adjusted gross
income (with certain special adjustment) exceed the cut-off point ($25,000 for
unmarried, $40,000 for married persons filing jointly, and $0 for married
persons filing a separate return) by less than $10,000 are entitled to make
deductible IRA contributions in proportionately reduced amounts. For example, a
married individual who is an active participant in another retirement plan and
files a separate tax return is entitled to a partial IRA deduction if the
individual's adjusted gross income is less than $10,000 and no IRA deduction if
his or her adjusted gross income is equal to or greater than $10,000.
An individual may make non-deductible IRA contributions to the extent of (1) the
lesser of $2,000 ($4,000 in the case of a spousal IRA) or 100% of compensation
over (2) the IRA deductible contribution made with respect to the individual.
An individual may not make any contributions to his/her own IRA for the year in
which he/she reaches age 70 1/2 or for any year thereafter. Contributions to a
spouse's IRA may not be made for any year in which that spouse reaches age 70
1/2 or for any year thereafter.
TAXATION OF DISTRIBUTIONS. Distributions from IRA Contracts are taxed as
ordinary income to the recipient, although special rules exist for the tax-free
return of non-deductible contributions. In addition, taxable distributions
received under an IRA Contract
5
<PAGE>
prior to age 59 1/2 are subject to a 10% penalty tax in addition to regular
income tax. Certain distributions are exempted from this penalty tax including
distributions following the owner's death or disability or distribution in the
form of an annuity for the life (or life expectancy) of the owner (or the owner
and beneficiary), or distributions not in excess of deductible medical expenses
or certain distributions to pay health insurance premiums after an extended
period of unemployment.
REQUIRED DISTRIBUTIONS. The minimum distribution requirements for IRAs are
generally the same as described above with respect to Section 403(b) annuity
contracts. Certain of these and other provisions are incorporated in a special
endorsement attached to IRA Contracts, and reference should be made to that
endorsement for its complete terms.
TAX-FREE ROLLOVERS. The Code permits funds to be transferred in a tax-free
rollover from a qualified employer pension, profit-sharing, annuity, bond
purchase or tax-deferred annuity plan to an IRA Contract if certain conditions
ARE met, and if the rollover of assets is completed within 60 days after the
distribution from the qualified plan is received. In addition, not more
frequently than once every twelve months, amounts may be rolled over tax-free
from one IRA to another, subject to the 60-day limitation and other
requirements. The once-per-year limitation on rollovers does not apply to direct
transfers of funds between IRA custodians or trustees.
SIMPLIFIED EMPLOYEE PENSION PLANS
PURCHASE PAYMENTS. Under Section 408(k) of the Code, employers may establish a
type of IRA plan referred to as a simplified employee pension plan (SEP).
Employer contributions to a SEP cannot exceed the lesser of $24,000 or 15% of
the employee's earned income. Employees of certain small employers may have
contributions made to a special kind of SEP (SARSEP) on their behalf on a salary
reduction basis if the SARSEP plan was in effect on December 31, 1996. These
salary reduction contributions may not exceed $9,500 in 1997, which is indexed
for inflation. Employees of tax-exempt organizations and state or local
government agencies have never been eligible for the salary reduction type of
SEP.
TAXATION OF DISTRIBUTIONS. Generally, distribution payments from SEPs are
subject to the same distribution rules described above for IRAs.
REQUIRED DISTRIBUTIONS. SEP distributions are subject to the same minimum
required distribution rules described above for IRAs.
TAX-FREE ROLLOVERS. Generally, rollovers and direct transfers may be made to and
from SEPs in the same manner as described above for IRAs, subject to the same
conditions and limitations. Rollovers to other IRAs, excluding SIMPLE IRAs are
also possible. Special rules apply if the rollover is from a SARSEP IRA.
PURCHASE PAYMENTS: Under Section 408(p) of the Code, small employers may
establish a type of IRA plan referred to as a Savings Incentive Match Plan for
Employees (SIMPLE Plan). An employee may contribute annually through his or her
employer a pre-tax salary reduction contribution not to exceed the lesser of
$6,000 or 100% of compensation. The employer must annually either (1) match the
employee contribution dollar for dollar up to 3% of pay, or (2) make a 2% of pay
contribution for each eligible employee regardless of whether the employee makes
any salary reduction contribution. In two out of every five years, the employer
has the option to reduce the matching contribution as low as 1% of pay but
advance notice must be provided to employees.
TAXATION OF DISTRIBUTIONS: Generally, distributions from SIMPLE IRA Plans are
subject to the same distribution rules described above for IRAs. However, if an
individual withdraws any amount from his SIMPLE IRA Plan within the first two
years of his or her commencement of participation in the employer's SIMPLE IRA
Plan, the 10% penalty tax for premature distribution, if such tax applies, will
be increased to 25%.
REQUIRED DISTRIBUTIONS: SIMPLE distributions are subject to the same minimum
distribution rules described above for IRAs.
TAX-FREE ROLLOVERS: Generally, rollovers and direct transfers may be made to and
from SIMPLE IRAs in the same manner as described above for IRAs, subject to the
same conditions and limitations. Rollovers or transfers to other IRAs, other
than SIMPLE IRAs, are also possible but only after the second anniversary of
commencement of participation in the employer's SIMPLE IRA Plan.
6
<PAGE>
SECTION 457 UNFUNDED DEFERRED COMPENSATION PLANS OF PUBLIC EMPLOYERS AND
TAX-EXEMPT ORGANIZATIONS
PURCHASE PAYMENTS. Under Section 457 of the Code, all individuals who perform
services for a state or local government or governmental agency may participate
in a deferred compensation program. Other tax-exempt employers may establish
unfunded deferred compensation plans under Section 457 for employees and/or
independent contractors.
Though not actually a qualified plan as that term is normally used, this type of
program allows individuals to defer the receipt of compensation that otherwise
would be currently payable and therefore to defer the payment of federal income
taxes on such amounts. Assuming that the program meets the requirements to be
considered an eligible deferred compensation plan (an "EDCP"), an individual may
contribute (and thereby defer from current income for tax purposes) the lesser
of $7,500 or 33-1/3% of the individual's includible compensation. (Includible
compensation means compensation from the employer which would be currently
includible in gross income for federal tax purposes.) In addition, during the
last three years before an individual attains normal retirement age, additional
"catch-up" deferrals are permitted.
The amounts which are deferred may be used by the employer to purchase the
Contracts offered by this Prospectus. The Contract is owned by the employer and
is subject to the claims of the employer's creditors. The employee has no rights
or interest in the Contract and is entitled only to payment in accordance with
the EDCP provisions.
TAXATION OF DISTRIBUTIONS. Amounts received by an individual from an EDCP are
includible in gross income for the taxable year in which such amounts are paid
or otherwise made available.
DISTRIBUTIONS BEFORE SEPARATION FROM SERVICE. Distributions generally are not
permitted under an EDCP prior to separation from service or reaching age 70 1/2,
except in cases of severe financial hardship. Hardship distributions are
includible in the gross income of the individual in the year in which paid.
REQUIRED DISTRIBUTIONS. The distribution requirements for these qualified plans
are generally the same as described above with respect to Section 403(b) annuity
contracts. However, if distributions do not commence before the employee's
death, the entire interest in the Contract must be distributed within 15 years
if the beneficiary is not the employee's surviving spouse.
TAX-FREE TRANSFERS. The Code permits the tax-free direct transfer of EDCP
amounts to another EDCP, subject to certain conditions. Any transfer must be
with employer consent.
PRIVATE EMPLOYER UNFUNDED DEFERRED COMPENSATION PLANS
PURCHASE PAYMENTS. Private taxable employers may establish unfunded,
non-qualified deferred compensation plans for a select group of management or
highly compensated employees and/or for independent contractors. Certain
arrangements of tax-exempt employers entered into prior to August 16, 1986, and
not subsequently modified, are also subject to the rules for private taxable
employer deferred compensation plans discussed below. (Unfunded deferred
compensation plans of other tax-exempt employers are generally subject to the
requirements of Section 457.)
These types of programs allow individuals to defer receipt of up to 100% of
compensation which would otherwise be includible in income and therefore to
defer the payment of federal income taxes on such amounts. Purchase payments
made by the employer, however are not immediately deductible by the employer,
and the employer is currently taxed on any increase in Contract Value.
Deferred compensation plans represent a contractual promise on the part of the
employer to pay current compensation at some future time. The Contract is owned
by the employer and is subject to the claims of the employer's creditors. The
individual has no right or interest in the Contract and is entitled only to
payment from the employer's general assets in accordance with plan provisions.
7
<PAGE>
TAXATION OF DISTRIBUTIONS. Amounts received by an individual from a private
employer deferred compensation plan are includible in gross income for the
taxable year in which such amounts are paid or otherwise made available.
OTHER INFORMATION
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933 as amended, with respect to the
Contracts discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Contracts and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.
Fortis Benefits relies upon an SEC No-Action letter dated December 22, 1988
providing relief from certain restrictions provided in the Investment Company
Act of 1940 relative to restrictions on redemptions and it complies with its
conditions.
FINANCIAL STATEMENTS
The financial statements of Fortis Benefits that are included in this Statement
of Additional Information should be considered only as bearing on the ability of
Fortis Benefits to meet its obligations under the Contracts. This Statement of
Additional Information contains no financial statements for the Subaccounts of
the Variable Account because the available Subaccounts of the Variable Account
have not yet commenced operations, has no assets or liabilities, and has
received no income nor incurred any expenses as of the date of this Statement of
Additional Information.
8
<PAGE>
APPENDIX A
PERFORMANCE INFORMATION
In advertising and other sales material for the Contracts, yield and total
return information for the Subaccounts of the Separate Account may be included.
The information below provides investment results for the indicated Subaccounts
of the Separate Account. The results shown in this section are not an estimate
or guarantee of future investment performance, and do not represent the actual
experience of amounts invested by a particular Participant.
Fortis Benefits may advertise its relative performance as compiled by outside
organizations. Following is a list of ratings services which may be referred to
in advertisements, along with the category in which the applicable Subaccount is
included:
<TABLE>
<CAPTION>
PORTFOLIO NAME RATING SERVICE CATEGORY
<S> <C> <C>
International Stock Morningstar Publications, Inc. Foreign Stock
Subaccount Lipper Analytical Services, Inc. International Fund
Variable Annuity Research & Data Service International Stock
Global Growth Morningstar Publications, Inc. World Stock
Subaccount Lipper Analytical Services, Inc. Global Fund
Variable Annuity Research & Data Service International Stock
Global Asset Morningstar Publications, Inc. International Hybrid
Allocation Subaccount Lipper Analytical Services, Inc. Global Flexible Portfolio
Variable Annuity Research & Data Service Balanced/International
Aggressive Growth Morningstar Publications, Inc. Small Growth
Subaccount Lipper Analytical Services, Inc. Small Cap Fund
Variable Annuity Research & Data Service Aggressive Growth
Small Cap Value Morningstar Publications, Inc. Small Value
Subaccount Lipper Analytical Services, Inc. Small Cap Fund
Variable Annuity Research & Data Service Small Company Funds
Growth Stock Morningstar Publications, Inc. Mid Cap Growth
Subaccount Lipper Analytical Services, Inc. Mid Cap Fund
Variable Annuity Research & Data Service Growth
Mid Cap Stock Morningstar Publications, Inc. Mid Cap Blend
Subaccount Lipper Analytical Services, Inc. Mid Cap Fund
Variable Annuity Research & Data Service All Equity Funds
Large Cap Growth Morningstar Publications, Inc. Large Blend
Subaccount Lipper Analytical Services, Inc. Growth Fund
Variable Annuity Research & Data Service Growth
Blue Chip Stock Morningstar Publications, Inc. Large Blend
Subaccount Lipper Analytical Services, Inc. Growth Fund
Variable Annuity Research & Data Service Growth
S&P 500 Index Morningstar Publications, Inc. Large Blend
Subaccount Lipper Analytical Services, Inc. Index Fund
Variable Annuity Research & Data Service Growth and Income Funds
Growth & Income Morningstar Publications, Inc. Mid Cap Blend
Subaccount Lipper Analytical Services, Inc. Growth & Income
Variable Annuity Research & Data Service Growth and Income
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C> <C>
Value Subaccount Morningstar Publications, Inc. Large Blend
Lipper Analytical Services, Inc. Growth & Income
Variable Annuity Research & Data Service Equity-Income
Asset Allocation Morningstar Publications, Inc . Domestic Hybrid
Subaccount Lipper Analytical Services, Inc. Flexible Portfolio
Variable Annuity Research & Data Service Balanced
Global Bond Morningstar Publications, Inc. International Bond
Subaccount Lipper Analytical Services, Inc. Global Income
Variable Annuity Research & Data Service International Bonds
High Yield Morningstar Publications, Inc. High Yield Bond
Subaccount Lipper Analytical Services, Inc. High Current Yield
Variable Annuity Research & Data Service Corporate Bond High Yield
Diversified Income Morningstar Publications, Inc. Intermediate-Term Bond
Subaccount Lipper Analytical Services, Inc. Corp Debt BBB Rated
Variable Annuity Research & Data Service Corporate Bond General Funds
U.S. Government Morningstar Publications, Inc. Intermediate Government
Subaccount Lipper Analytical Services, Inc. Intermediate U.S. Govt.
Variable Annuity Research & Data Service Government Bond General Funds
Money Market Morningstar Publications, Inc. Money Market
Subaccount Lipper Analytical Services, Inc. Money Market
Variable Annuity Research & Data Service Money Market
</TABLE>
A-2
<PAGE>
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENT AND EXHIBITS
a. Financial Statements included in Part B:
The following financial statements of Variable Account D:
Report of Ernst & Young LLP, independent auditors for
Variable Account D.
Statement of Net Assets as of December 31, 1998.
Statements of Changes in Net Assets for the years ended
December 31, 1998 and 1997.
Notes to Financial Statements
The following financial statements of Fortis Benefits Insurance
Company: (to be filed by pre-effective amendment)
Audited Financials:
Report of Ernst & Young LLP, independent auditors for Fortis
Benefits Insurance Company.
Balance Sheets of Fortis Benefits Insurance Company as of
December 31, 1998 and 1997.
Statements of Income, Statements of Changes in Shareholder's
Equity and Statements of Cash Flows of Fortis Benefits
Insurance Company for the years ended December 31, 1998,
1997 and 1996.
Notes to Financial Statements for Fortis Benefits Insurance
Company.
Unaudited Financials:
Balance Sheet for the nine months ended at June 30, 1999.
Statement of Income for the three months ended June 30,
1999.
Statements of Income and Statements of Cash Flow for the six
months ended June 30, 1999 and 1998.
Notes to Financial Statements.
There are no financial statements included in Part A.
<PAGE>
b. Exhibits:
1. Resolution of the Board of Directors of Fortis
Benefits Insurance Company effecting the
establishment of Variable Account D (incorporated by
reference from Form N-4 of Fortis Benefits and its
Variable Account D filed on December 31, 1987, File
No. 33-19421).
2. Not applicable
3. (a) Form of Principal Underwriter and
Administrative Servicing Agreement
(incorporated by reference from Form N-4
registration statement, File No.
33-73986, filed on January 11, 1994).
(b) Form of Amendment to Principal Underwriter
and Administrative Servicing Agreement
(incorporated by reference from Form N-4
registration statement, File No. 33-73986,
filed on January 11, 1994).
(c) Form of Dealer Sales Agreement (incorporated
by reference from Post- Effective Amendment
No. 12 to Form N-4 registration statement of
Fortis Benefits and its Variable Account D
filed on December 22, 1994, File No.
33-19421).
4. (a) Form of Variable Annuity Contract - filed herewith.
(b) Form of Guaranteed Living Benefit Rider - filed
herewith.
(c) Form of IRA Endorsement incorporated by
reference from Pre-Effective Amendment No. 1
to Form N-4 registration statement of Fortis
Benefits and its Variable Account D filed on
April 18, 1988).
(d) Tax Deferred Annuity Loan Agreement Form
(incorporated by reference from Post
Effective Amendment No. 9 to Form N-4
registration of Fortis Benefits and its
Variable Account D statement filed April 29,
1993, File No. 33-19421).
(e) Form of Section 403(b) Annuity Endorsement
(incorporated by reference from
Post-Effective Amendment No. 3 to Form N-4
registration statement of Fortis Benefits
and its Variable Account D filed on March 1,
1990, File No. 33-19421).
(f) Nursing Care/Hospitalization Waiver of
Surrender Charge Rider (incorporated by
reference from Post-Effective Amendment No.
13 to Form N-4 registration statement of
Fortis Benefits and its Variable Account D
filed April 27, 1995, File No., 33-19421).
5. (a) Form of Application for Variable Annuity Contract -
filed herewith.
(b) Annuity Contract Exchange Form (incorporated by
reference from Pre-
<PAGE>
Effective Amendment No. 1 to Form N-4 registration
statement of Fortis Benefits and its Variable
Account D filed on April 18, 1988, File No. 33-
19421).
6. (a) Articles of Incorporation of depositor
(incorporated by reference from Form S-6
Registration Statement of Fortis Benefits
and its Variable Account C filed on March
17, 1986, File No. 33-03919).
(b) By-laws of depositor (incorporated by reference
from Form S-6 Registration Statement of Fortis
Benefits and its Variable Account C filed on March
17, 1986, File No. 33-03919).
(c) Certificate of Amendment to Articles of
Incorporation and By-laws of depositor dated
November 21, 1991 (incorporated by reference
from Post-Effective Amendment No 6 to Form
N-4 registration statement of Fortis
Benefits and its Variable Account D filed on
March 2, 1992, File No. 33-19421).
7. None.
8. None.
9. Opinion and consent of John W. Norton, Esq, as to the
legality of the securities being registered (incorporated by
reference from Post-Effective Amendment No. 2 to Form N-4
registration statement of Fortis Benefits and its Variable
Account D filed on April 28, 1989, File No. 33-19421).
10. (a) Consent of Ernst & Young LLP-- to be filed by
Pre-Effective Amendment.
(b) Power of Attorney for Messrs. Freedman and
Clayton (incorporated by reference from Form
S-6 Registration Statement of Fortis
Benefits and its Variable Account C filed on
December 17, 1993, File No. 33-73138).
11. Not applicable.
12. Not applicable.
13. Schedules of computation of each performance quotation
provided in the registration statement pursuant to Item 21 -
none.
14. Financial Data Schedule --previously filed.
Item 25. DIRECTORS AND OFFICERS OF FORTIS BENEFITS
The directors, executive officers, and, to the extent responsible for variable
annuity operations, other officers of Fortis Benefits are listed below.
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL OFFICES WITH DEPOSITOR
BUSINESS ADDRESS ----------------------
------------------
OFFICER-DIRECTOR
----------------
<S> <C>
Robert Brian Pollock (2) President and Chief
Executive Officer
Benjamin Cutler (5) Executive Vice President--Fortis
Healthcare
Dean C. Kopperud (1) Executive Vice President--Fortis
Financial Group
Michael John Peninger (4) Senior Vice President - Chief
Financial Officer
OTHER DIRECTORS
---------------
Allen Royal Freedman (2) Chairman of the Board
J. Kerry Clayton (2)
Arie Aristide Fakkert (3)
A.W. Feagin (6)
OTHER OFFICERS
Peggy L. Ettestad (1) Senior Vice President - Life
Operations
Rhonda J. Schwartz (1) Vice President and General
Counsel -- Life and Investment
Products
Jon H. Nicholson (1) Senior Vice President -
Annuities
Melinda S. Urion (1) Senior Vice President and Chief
Financial Officer
Dickson W. Lewis (1) Senior Vice President--
Distribution and Marketing
</TABLE>
- ---------------------------
(1) Address: Fortis Benefits Insurance Company, P. O. Box 64271, St.
Paul, MN 55164.
(2) Address: Fortis, Inc., One Chase Manhattan Plaza, New York, NY 10005.
(3) Address: Fortis AMEV, Archmideslaan 10, 3584 BA Utrecht, The
Netherlands.
<PAGE>
(4) Address: 2323 Grand Avenue, Kansas City, MO 64108.
(5) Address: 515 West Wells, Milwaukee, WI 53201.
(6) Address: 230 Wesley Dobbs Ave., Atlanta, GA 30303
Item 26. PERSONS CONTROLLED BY OR UNDER CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Variable Accounts C and D of Fortis Benefits Insurance Company are separate
accounts of Fortis Benefits. These separate accounts, certain separate accounts
assumed from St. Paul Life Insurance Company, and Fortis Series Fund, Inc. may
be deemed to be controlled by Fortis Benefits, although Fortis Benefits follows
voting instructions of variable insurance contract owners with respect to voting
on certain important matters in connection with these entities. All of these
entities are created under Minnesota law and are the funding media for variable
life insurance and annuity contracts issued or assumed by Fortis Benefits.
The chart indicating the persons controlled by or under common control with
Fortis Benefits is hereby incorporated by reference from the response to Item 26
in Post-Effective Amendment No. 24 to the Form N-4 registration statement of
Fortis Benefits and its Variable Account D filed on April 28, 1994, File No. 33-
37577. Fortis Benefits has no subsidiaries.
Item 27. NUMBER OF CONTRACT OWNERS
As of June 1, 1999 there were no Contract owners.
Item 28. INDEMNIFICATION
Pursuant to the Principal Underwriter and Administrative Servicing Agreement
filed as Exhibit 3(a) and (b) to this Registration Statement and incorporated by
this reference, Fortis Benefits has agreed to indemnify Fortis Investors (and
its agents, employees, and controlling persons) for damages and expenses arising
out of certain material misstatements and omissions in connection with the offer
and sale of the Contracts, unless the misstatement or omission was based on
information supplied by Fortis Investors; provided, however, that no such
indemnity will be made to Fortis Investors or its controlling persons for
liabilities to which they would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of reckless disregard of their obligations under such agreement. This
indemnity could apply to certain directors, officers or controlling persons of
the Separate Account by virtue of the fact that they are also agents, employees
or controlling persons of Fortis Investors. Pursuant to the Principal
Underwriter and Servicing Agreement, Fortis Investors has agreed to indemnify
Variable Account D, Fortis Benefits, and each of its officers, directors and
controlling persons for damages and expenses (1) arising out of certain material
misstatements and omissions in connection with the offer and sale of the
Contracts, if the misstatement or omission was based on information furnished by
Fortis Investors or (2) otherwise arising out of Fortis Investors' negligence,
bad faith, willful misfeasance or reckless disregard of its responsibilities.
Pursuant to its Dealer Sales Agreements, a form of which is filed as Exhibit 3
(c) and (d) to this registration statement and is incorporated herein by this
reference, firms that sell the Contracts agree to indemnify Fortis Benefits,
Fortis Investors, the Separate Account, and their officers, directors,
employees, agents, and controlling persons from liabilities and expenses arising
out of the wrongful conduct or omissions of said selling firm or its officers,
directors, employees, controlling persons or agents.
Also, Fortis Benefit's By-Laws (see Article VI, Section 5 thereof, which is
incorporated herein by reference from Exhibit 6(b) to this Registration
Statement) provide for indemnity and payment of expenses of Fortis
<PAGE>
Benefit's officers, directors and employees in connection with certain legal
proceedings, judgments, and settlements arising by reason of their service as
such, all to the extent and in the manner permitted by law. Applicable Minnesota
law generally permits payment of such indemnification and expenses in a civil
proceeding if it appears that the person seeking indemnification has acted in
good faith and in a manner that he reasonably believed to be in, or not opposed
to, the best interests of Fortis Benefits and if such person has received no
improper personal benefit, or in a criminal proceeding if the person seeking
indemnification also has no reasonable cause of believe his conduct was
unlawful.
Insofar as indemnification for any liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of Fortis
Benefits or the Separate Account pursuant to the foregoing provisions, or
otherwise, Fortis Benefits and the Separate Account have been advised that in
the opinion of the Securities and Exchange Commission such indemnification may
be against public policy as expressed in the Act and may be, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Fortis Benefits of expenses incurred or
paid by a director, officer or controlling person of Fortis Benefits or the
Separate Account in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, Fortis Benefits
will submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITERS
(a) Fortis Investors, Inc. is the principal underwriter for Variable
Account D. Fortis Investors, Inc. also acts as the principal
underwriter for the following registered investment companies (in
addition to Variable Account D and Fortis Series Fund, Inc.):
Variable Account C of Fortis Benefits, Variable Account A of
First Fortis Life Insurance Company, Fortis Advantage Portfolios,
Inc., Fortis Equity Portfolios, Inc., Fortis Growth Fund, Inc.,
Fortis Fiduciary Fund, Inc., Fortis Tax-Free Portfolios, Inc.,
Fortis Money Portfolios, Inc., Fortis Income Portfolios, Inc.,
Fortis Worldwide Portfolios, Inc., and Special Portfolios, Inc.
(b) The following table sets forth certain information regarding
the officers and directors of the principal underwriter, Fortis
Investors, Inc.:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
------------------- ---------------------
<S> <C>
Roger W. Arnold * Sr. Vice President
Robert W. Beltz, Jr.* Vice President and Director
Jeffrey R. Black * Business Development and
Sales Desk Officer
Mark C. Cadalbert* Compliance Officer
Tamara L. Fagely* Vice President
<PAGE>
Dawn Gores* Marketing Officer
Joanne M. Herron* Assistant Treasurer
John E. Hite* Secretary and
Vice President
Carol M. Houghtby* Vice President, Treasurer and
Director
Dean C. Kopperud* President and Director
Christine D. Pawlenty * Custom Solutions Group Officer
Mary B. Petersen * 2nd Vice President
Jennifer R. Relien* Assistant Secretary
</TABLE>
- ------------------------
* Address: 500 Bielenberg Drive, Woodbury, Mn 55125.
(c) None
Item 30. LOCATION OF ACCOUNTS AND RECORDS
The records required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and Rules 31a-1 and 31a-3 thereunder are maintained by Fortis
Benefits Insurance Company, Fortis Investors, Inc. and Fortis Advisers, Inc., at
500 Bielenberg Drive, Woodbury, Minnesota 55125.
Item 31. MANAGEMENT SERVICES
None.
Item 32. UNDERTAKINGS
The Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more
than 16 months old for so long as payments under the variable
annuity contracts may be accepted;
(b) to include either (1) as part of any application to purchase a
Contract offered by the Prospectus, a space that an applicant can
check to request a Statement of Additional Information, or (2) a
toll-free phone number, postcard, or similar written
communication affixed to or included in the Prospectus that the
applicant can call or remove to send for a Statement of
Additional Information;
<PAGE>
(c) to deliver any Statement of Additional Information and any
financial statements required to be made available under this
Form promptly upon written or oral request.
Fortis Benefits Insurance Company represents:
(a) that the fees and charges imposed under the provisions of the
Contract covered by this registration statement, in the
aggregate, are reasonable in relation to the services to be
rendered by the Registrant associated with the Contracts, the
expenses to be incurred by the Registrant associated with the
Contracts, and the risks assumed by the Registrant associated
with the Contracts.
The Registrant intends to rely on the no-action response dated November 28, 1988
from Ms. Angela C. Goelzer of the Commission staff to the American Council of
Life Insurance concerning the redeemability of Section 403(b) annuity contracts
and the Registrant has complied with the provisions of paragraphs (1) - (4)
thereof.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has caused this amended Registration Statement to be signed
on its behalf in the City of St. Paul, State of Minnesota on this 26th day of
May, 1999.
VARIABLE ACCOUNT D OF
FORTIS BENEFITS INSURANCE COMPANY
(Registrant)
By: FORTIS BENEFITS INSURANCE COMPANY
By: /s/
--------------------------------------
Robert Brian Pollock, President
FORTIS BENEFITS INSURANCE COMPANY
By: /s/
--------------------------------------
Robert Brian Pollock, President
As required by the Securities Act of 1933 and the Investment Company Act of
1940, this Registration Statement has been signed by the following persons, in
the capacities indicated, on May 26, 1999.
Signature Title With Fortis Benefits
- --------- --------------------------
*
------------------------
Allen R. Freedman Chairman of the Board
*
------------------------ Director
J. Kerry Clayton
- ------------------------- Director
Arie Aristide Fakkert
- ------------------------ Director
Alan W. Feagin
/s/
- ------------------------- Director
Dean C. Kopperud
/s/
- ------------------------- President and Director (Chief
Robert Brian Pollock Executive Officer)
/s/
- ------------------------- Executive Vice President and
Michael John Peninger Director
/s/
- ------------------------- Treasurer (Principal Accounting
Larry M. Cains Officer and Principal Financial
Officer)
*By: /s/
------------------------
Robert Brian Pollock
Attorney-in-Fact
<PAGE>
Exhibit Index
EXHIBIT NO.
4(a) Form of Variable Annuity Contract
4(b) Form of Guaranteed Living Benefit Rider
5(a) Form of Application for Variable Annuity Contract
<PAGE>
FORTIS BENEFITS INSURANCE COMPANY
St. Paul, Minnesota
A STOCK COMPANY
[FORTIS INCOME PREFERRED ANNUITY]
We will pay the Annuitant the first of a series of annuity payments on the
Annuity Commencement Date. Subsequent payments will be paid on the same day of
each month according to the provisions of this contract. THE AMOUNT AND DURATION
OF THE DEATH BENEFIT MAY BE VARIABLE OR FIXED UNDER SPECIFIED CONDITIONS, AND
MAY INCREASE OR DECREASE DEPENDING ON INVESTMENT RESULTS OF THE SUBACCOUNTS OF
THE SEPARATE ACCOUNT.
THE CONTRACT VALUE OF THE SEPARATE ACCOUNT UNDER THIS POLICY INCREASES OR
DECREASES DEPENDING ON INVESTMENT RESULTS OF THE SUBACCOUNTS OF THE SEPARATE
ACCOUNT. THERE IS NO GUARANTEED MINIMUM CONTRACT VALUE IN THE SEPARATE ACCOUNT.
THE FIXED ACCOUNT DOES HAVE GUARANTEED MINIMUM CONTRACT VALUE.
This contract is issued in consideration of the payment of the Purchase Payment
shown on the contract data page.
Signed at the Home Office, St. Paul, Minnesota, on the contract date.
RIGHT TO RETURN CONTRACT
You may cancel this contract by delivering or mailing a Written notice or
sending a telegram to the company and returning the contract before midnight of
the tenth day after the date You receive it. Notice given by mail and return of
the contract by mail are effective on being postmarked, properly addressed, and
postage prepaid. The company must return the sum of (a) the difference between
the premiums paid including any contract fees or other charges and the amounts
allocated to any Separate Accounts including the fixed account under the
contract and (b) the cash value of the contract, or if the contract does not
have a cash value, the reserve for the contract, on the date the returned
contract is received by the company or its agent. The company must return the
payment within 10 days after it receives notice of cancellation and the returned
contract.
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
SENIOR VICE PRESIDENT SENIOR VICE PRESIDENT
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY--NON-PARTICIPATING. NO DIVIDENDS.
ALL PAYMENTS AND VALUES PROVIDED BY THE SEPARATE ACCOUNT ARE VARIABLE, MAY
INCREASE OR DECREASE, AND ARE NOT GUARANTEED AS TO AMOUNT. PAYMENTS AND VALUES
PROVIDED BY THE FIXED ACCOUNT ARE GUARANTEED AS FOUND IN THE CONTRACT. THE
VARIABLE PROVISIONS OF THIS CONTRACT ARE FOUND ON PAGE 6.
IP99
<PAGE>
READ YOUR CONTRACT CAREFULLY
This contract is a legal contract between the contract owner and Fortis Benefits
Insurance Company.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Page #
Annuitant....................................................................2
Assignment...................................................................4
Beneficiary...............................................................4, 5
Death Benefit........................................................9, 10, 11
Definitions...............................................................2, 3
Fixed Account................................................................6
Fixed Annuity Payments......................................................12
General Provisions........................................................4, 5
Purchase Payments............................................................5
Separate Account...........................................................6,7
Surrenders...............................................................7,8,9
Termination..................................................................5
Transfers....................................................................7
Variable Annuity Payments...................................................12
</TABLE>
Any contract amendments or endorsements follow the contract data page.
Additional benefits added by rider follow the Optional Annuity Forms Tables.
<PAGE>
CONTRACT DATA PAGE
ANNUITANT: JOHN DOE
OWNER: JOHN DOE
CONTRACT NUMBER: A12300
BENEFICIARY AT ISSUE: JANE DOE
CONTRACT AND ISSUE DATE: MAY 1, 1998
ANNUITY COMMENCEMENT DATE: MARCH 1, 2040
THE SURRENDER CHARGE IS [8% of each Purchase Payment for the first three years
and decreases to 7%, 6%, 5%, 4%, 3%, 2% in years four through nine,
respectively.] Details can be found on pages 7 through 9.
THE MINIMUM CONTRACT VALUE IS [$1000].
THE MAXIMUM ASSET CHARGE FACTOR IS [1.85%] annually, or [0.0050685%] daily (for
the Separate Account only).
<TABLE>
<CAPTION>
CURRENT MAXIMUM
------- -------
<S> <C> <C>
TRANSFER CHARGE $0.00 $25.00
</TABLE>
INITIAL PURCHASE PAYMENT: [$25,000]
FUTURE ALLOCATION OF NET PURCHASE PAYMENTS
Shown below is the Net Purchase Payment allocation You selected at the contract
Issue Date:
<TABLE>
<CAPTION>
[SUBACCOUNT(S)] [PERCENTAGE(S)]
--------------- ---------------
<S> <C> <C>
[DIVERSIFIED INCOME]
[GROWTH STOCK]
[ASSET ALLOCATION]
[MONEY MARKET]
[U.S. GOVERNMENT]
[GLOBAL GROWTH]
[AGGRESSIVE GROWTH]
[GROWTH AND INCOME]
[HIGH YIELD]
[GLOBAL ASSET ALLOCATION]
[INTERNATIONAL STOCK]
[GLOBAL BOND]
[SERIES VALUE]
[S&P 500 INDEX]
[BLUE CHIP STOCK]
[SERIES MIDCAP STOCK]
[SERIES LARGE CAP GROWTH]
[SERIES SMALL CAP VALUE]
[FIXED ACCOUNT]
[ ]
[ ]
[ ]
[ ]
[ ]
</TABLE>
<PAGE>
DEFINITIONS
WE, US, OUR
Fortis Benefits Insurance Company.
YOU, YOUR
The owner of this contract, or after the annuity commencement date, the
Annuitant.
ACCUMULATION UNIT
A unit of measurement used to calculate the value of Your interest in the
Separate Account before the annuity commencement date.
ANNUITANT
The person or persons named in the Application and on whose life the first
annuity payment is to be made. If such person dies before the Annuity
Commencement Date and there is an additional annuitant named in the Application
who survives, the additional annuitant shall become the Annuitant. If there is
no named additional annuitant, or the additional annuitant has predeceased the
annuitant named in the Application, the owner, if he or she is a natural person,
shall become the Annuitant. The contract owner is not permitted to name more
than one annuitant under a contract used in connection with a retirement plan
that receives favorable tax treatment under the Internal Revenue Code.
ANNIVERSARY, ANNIVERSARIES
After the contract date, the same day and month in each subsequent year.
ANNUITY UNIT
A unit of measurement to calculate Variable Annuity payments.
APPLICATION
The document You signed, if any, to apply for this contract.
BENEFICIARY
The person entitled to receive benefits as per the terms of the contract in case
of the death of the Annuitant or the contract owner, as applicable.
CONTRACT VALUE
The total of the fixed account value and the Separate Account value.
CONTRACT YEAR
A period of 12 consecutive months beginning on the Issue Date or any Anniversary
thereafter.
DESIGNATED BENEFICIARY
The person designated as the Beneficiary by the contract owner.
FIXED ANNUITY
An annuity under which We promise to pay the Annuitant or other properly
designated payee one or more fixed payments.
FUND
The "Fund" or "Funds" are those investment portfolios available under the
contract to which the owner may allocate Net Purchase Payments, each of which
is, or is a series of, a management investment company registered under the
Investment Company Act of 1940.
HOME OFFICE
Our office at 500 Bielenberg Drive, Woodbury, Minnesota 55125; 1-800-800-2000,
extension 3057; Mailing address: P.O. Box 64272, St. Paul, Minnesota 55164.
ISSUE DATE
The date on which this contract becomes effective as shown on the contract data
page.
2
<PAGE>
NET PURCHASE PAYMENT
The gross amount of the Purchase Payment less any applicable premium taxes.
PURCHASE PAYMENT
An amount paid to the company under this contract as consideration for the
benefits described herein.
SEPARATE ACCOUNT
A segregated investment account entitled Variable Account D, established by Us
pursuant to applicable law.
SUBACCOUNT
The subaccounts of the Separate Account to which Contract Value may be allocated
and earn a return. Each subaccount invests all of its assets in a different Fund
having the same investment policies and objectives as that subaccount.
VALUATION DATE
All business days except, with respect to any Subaccount, days on which the
related Fund does not value its shares.
VALUATION PERIOD
The period beginning with the close of business on a Valuation Date and ending
at the close of business for the next Valuation Date.
VARIABLE ANNUITY
An annuity under which We promise to pay the Annuitant or other properly
designated payee one or more payments which vary in amount in accordance with
the net investment experience of the applicable Subaccounts You select to
measure the value of the payment.
WRITTEN, IN WRITING
A written request or notice, signed and dated, and received at Our Home Office.
The form and content of the request or notice must be acceptable to Us.
3
<PAGE>
GENERAL PROVISIONS
THE CONTRACT
This contract along with any attached riders or application constitute the
entire contract. Any change or waiver of this contract or its provisions must be
made In Writing and signed by Our President, Secretary, and Registrar.
CONTROL
You may, during the lifetime of the Annuitant and without the consent of any
Beneficiary, assign or surrender this contract, amend or modify it with Our
Written consent, and exercise, receive and enjoy every other right, benefit and
privilege contained in this contract except as otherwise provided herein.
INCONTESTABILITY
This contract will be incontestable from the contract date.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Annuitant has been misstated, any amount payable will
be that which the Purchase Payments paid would have purchased at the correct age
and sex. If We have made any overpayments because of incorrect information about
age or sex, or any error or miscalculation, We will deduct the overpayment from
the next payment(s) due. We add underpayments to the next payment. The amount of
any adjustment will be paid or charged with interest at the rate of 3% per year.
ASSIGNMENT AND OWNERSHIP RIGHTS
If this contract is owned by a trust, custodian or employer, the ownership can
be assigned to the Annuitant. Contract ownership may also be assigned if the
owner is the Annuitant. We take no responsibility for the validity of any
assignment.
An ownership change must be made In Writing and a copy must be sent to Our Home
Office. The change will be effective on the date it was made as soon as We
record it, although We are not bound by a change until the date it is recorded.
Owner and Beneficiary rights are subject to any assignment of record at Our Home
Office.
If this contract is part of a qualified plan under the Internal Revenue Code,
the ownership cannot be changed in any way unless the change is consistent with
the definition of annuity in 401(g) of the Internal Revenue Code, as amended. In
this case, the contract cannot be discounted, assigned, or pledged as collateral
or security for a loan, or for any other reason to a person other than Us,
except by the trustee of an employee trust qualified under the Internal Revenue
Code, the custodian of a custodial account treated as such, or the employer
under a qualified non-trusteed pension plan.
SETTLEMENT
All benefits under this contract are payable from Our Home Office.
NON-PARTICIPATING
This contract is non-participating and does not share in Our surplus earnings.
OWNERSHIP OF THE ASSETS
We will have exclusive and absolute ownership and control of Our assets,
including all assets allocated to the Separate Account. That portion of the
assets of the Separate Account equal to the reserves and other contract
liabilities with respect to the Separate Account shall not be chargeable with
liabilities arising out of any other business We may conduct.
BENEFICIARY
Before the annuity commencement date and while the Annuitant is living, You may
name or change a Beneficiary, a successor beneficiary, or the successor owner by
giving Us Written notice of the change. We are not responsible for the validity
of any change. A change will take effect as of the date it is signed but will
not affect any payments We make or action We take before receiving Your notice.
We need the consent of any irrevocably named person before making a requested
change.
4
<PAGE>
In the event of the death of a contract owner or Annuitant prior to the annuity
commencement date, the Beneficiary will be as follows. The Beneficiary shall be
the surviving owner, if any, notwithstanding that the beneficiary designated by
the contract owner(s) may be different. Otherwise, the Beneficiary will be the
beneficiary designated by the contract owner. If there is no such Designated
Beneficiary in effect or if such Designated Beneficiary is no longer living, the
estate of the last surviving contract owner will be the Beneficiary.
REPORTS
At least once a year We will send You a report containing information required
by the Investment Company Act of 1940 and applicable state laws.
VALUES AND BENEFITS
The values and benefits payable under this contract are at least equal to the
minimum values and benefits required by the statutes of the state in which this
contract is delivered.
RIGHTS RESERVED BY US
When required by law, We will obtain Your approval of changes and We will gain
approval from any appropriate regulatory authority. Such approval may not be
required in all cases, however. Examples of the changes We may make include:
(1) To make the contract meet the requirements of the Investment Company Act of
1940.
(2) To operate the Separate Account in any form permitted by law.
(3) To transfer any assets in any Subaccount to another Subaccount, or to one or
more Separate Accounts, or to the fixed account.
(4) To add, combine or remove Subaccounts in the Separate Account.
(5) To substitute for the Fund shares held in any Subaccount, the shares of
another Fund or the shares of another investment company or any other
investment permitted by law.
(6) To make any changes as required by the Internal Revenue Code or by any
other applicable law in order to continue treatment of the contract as
an annuity.
PURCHASE PAYMENTS
The Purchase Payment shown on the contract data page is due on or before the
contract date. We will accept additional Purchase Payments of at least $50 at
any time after the contract date. We reserve the right to refuse a Purchase
Payment for any reason.
ALLOCATION OF PURCHASE PAYMENTS
The initial allocation of Purchase Payments is shown on the contract data page.
The percentage allocation for future Purchase Payments between the accounts may
be changed at any time by Written notice. Changes in allocations of prior
Purchase Payments are subject to the Transfer provision. Changes in the
allocation will be effective on the date We receive Your notice. The allocation
may be 100% to any account or may be divided among the accounts in whole
percentage points totaling 100%.
TERMINATION
This contract remains in force until surrendered for its full value, or all
annuity payments have been made, or the death benefit has been paid.
If the Contract Value is less than the Minimum Contract Value shown on the Data
Page, We may cancel this contract on any Valuation Date. We will notify You at
least 90 days in advance of Our intention to cancel this contract. This
cancellation is considered a total surrender of this contract, subject to the
surrender charges.
5
<PAGE>
FIXED ACCOUNT
Purchase payments will be allocated to the fixed account in the percentage You
specified. Interest will be credited to the account at rates We determine. We
will not change interest rates with respect to any amount more than once each
calendar year. The interest credited will not be less than 3% per year.
FIXED ACCOUNT VALUE
The fixed account value on any Valuation Date is:
(1) The sum of Your Net Purchase Payments allocated to the fixed account.
(2) PLUS any transfers from the Separate Account.
(3) PLUS interest credited as specified above.
(4) MINUS any surrenders and any surrender charges allocated to the fixed
account.
(5) MINUS any transfers to the Separate Account.
SEPARATE ACCOUNT
SUBACCOUNTS
The Separate Account has several Subaccounts, each investing in one of the
corresponding Funds. Net Purchase Payments are initially allocated to the
Subaccounts and the fixed account as shown on the contract data page.
We will use the Net Purchase Payments to purchase Fund shares applicable to the
Subaccounts at their net asset value. We will be the owner of all Fund shares
purchased with the Net Purchase Payment.
SUBACCOUNT ACCUMULATION UNITS
Purchase Payments received under this contract and allocated to the Separate
Account will be credited in the form of Subaccount Accumulation Units. The
number of Subaccount Accumulation Units is found by dividing the amount of the
Net Purchase Payment allocated to the Subaccount by the Subaccount Accumulation
Unit value at the end of the Valuation Period in which the Purchase Payment was
received at the Home Office. The value of each Subaccount Accumulation Unit was
arbitrarily set as of the date the Subaccount first purchased the Fund shares.
Subsequent values on any Valuation Date are equal to the previous Subaccount
Accumulation Unit value times the net investment factor for the Valuation Period
ending on that Valuation Date.
SEPARATE ACCOUNT VALUE
Your Separate Account value is the total of the values of Your interest in each
Subaccount, which for that Subaccount is equal to:
(1) the number of Subaccount Accumulation Units.
(2) TIMES the Subaccount Accumulation Unit value.
Your Separate Account value will vary from Valuation Date to Valuation Date
reflecting the total value of Your interest in the Subaccounts.
NET INVESTMENT FACTOR
The net investment factor is an index number which reflects charges to this
contract and the investment performance during a Valuation Period. If the net
investment factor is greater than one, the Subaccount Accumulation Unit value
has increased. If it is less than one, then the Subaccount Accumulation Unit
value has decreased.
6
<PAGE>
The net investment factor for a Subaccount is determined by dividing (1) by (2),
and then subtracting (3) from the result, where:
(1) is the net result of:
(a) the net asset value per share of the Fund shares held in the
Subaccount, determined at the end of the current Valuation Period.
(b) PLUS the per share amount of any dividend or capital gain distributions
made on the Fund shares held in the Subaccount during the current
Valuation Period.
(c) MINUS a per share charge for the increase PLUS a per share credit
for the decrease, in any income taxes reserved for which We determine
to have resulted from the investment operations of the Subaccount or
any other taxes which are applicable to this contract.
(2) is the net asset value per share of the Fund shares held in the Subaccount,
determined at the beginning of the current Valuation Period.
(3) is a factor representing the mortality risk, expense risk, and
administrative expense charge. We will determine the asset charge factor
annually, but in no event may it exceed the Maximum Asset Charge Factor as
specified on the contract data page.
PREMIUM TAXES
Premium taxes, if any, levied by any unit of government will be deducted from
the Contract Value.
CONTRACT VALUE
Your Contract Value is the total of the fixed account value and the Separate
Account value.
TRANSFERS
We will make transfers at the end of the Valuation Period in which We receive
Your request for the transfer, subject to the following restrictions. We reserve
the right to restrict the frequency of, or otherwise modify, condition,
terminate, or impose charges upon transfers. The current and maximum transfer
charges are shown on the contract data page. In addition, the Funds may impose
transfer charges.
Before the annuity commencement date, You may transfer part or all of the fixed
account value from the fixed account to the Separate Account subject to the
following:
(1) You may only make a transfer once each Contract Year.
(2) No more than 50% of the fixed account value may be transferred unless
the balance after the transfer would be less than $1,000. If the value
is less than $1,000, You may transfer the entire balance to the
Separate Account.
(3) You must transfer at least $500 or the total fixed account value, if less.
No transfers from the fixed account may be made after the annuity commencement
date.
SURRENDERS
TOTAL SURRENDER
At any time prior to the annuity commencement date and during the lifetime of
the Annuitant, You may surrender this contract by sending Us a Written request.
The amount payable on surrender is:
(1) the Contract Value at the end of the Valuation Period in which We receive
Your request;
(2) MINUS any applicable surrender charge.
7
<PAGE>
Upon payment of the above surrender amount, this contract is terminated and We
have no further obligation under this contract.
All collateral assignees must consent to any surrender. We may require that this
contract be returned to Our Home Office prior to making payment.
PARTIAL SURRENDER
At any time prior to the annuity commencement date and during the lifetime of
the Annuitant, You may surrender a portion of the fixed account value and/or the
Separate Account value by sending Us a Written request.
You must surrender an amount equal to at least $500 including any surrender
charge. The remaining Contract Value, if any, must be greater than the minimum
stated on the Contract Data Page.
We will surrender Subaccount Accumulation Units from the Separate Account,
and/or dollar amounts from the fixed account, so that the total amount
surrendered equals the sum of the following:
(1) the dollar amount of Your partial surrender request.
(2) PLUS any surrender charges.
You must specify the accounts from which surrender is to be made. Surrenders
will be made effective at the end of the Valuation Period in which We receive
Your request. If You do not specify, the partial surrender will be taken from
the Subaccounts and the fixed account on a pro rata basis.
SURRENDER CHARGES
ORDER OF SURRENDER
For purposes of determining surrender charges, the Contract Value is divided
into the following categories:
(1) New Purchase Payments - Purchase Payments We received within nine years
of the date of surrender or partial surrender.
(2) Old Purchase Payments - Purchase Payments not defined as new Purchase
Payments.
(3) Earnings - the current contract value minus the Purchase Payments which
have not been withdrawn. (Purchase Payments are deemed withdrawn before
earnings.)
Surrenders will be taken from the Contract Value available in the following
order:
(1) Old Purchase Payments.
(2) New Purchase Payments.
(3) Earnings.
FREE SURRENDER
Surrenders taken from the following amounts are not subject to a surrender
charge:
(1) Old Purchase Payments not already surrendered.
(2) In each Contract Year, 10% of all new Purchase Payments.
(3) Earnings.
AMOUNT OF SURRENDER CHARGE
A surrender charge is imposed on the withdrawal of any Purchase Payment less
than nine years old which is not eligible for a free surrender. The amount of
the surrender charge is determined separately for each Purchase Payment and is
expressed as a percentage of the Purchase Payment as follows:
8
<PAGE>
<TABLE>
<CAPTION>
Number of Years Since Surrender Charge as a
Purchase Payment was Credited Percentage of Purchase Payment
----------------------------- ------------------------------
<S> <C>
[Less than 3 8%
At least 3 but less than 4 7%
At least 4 but less than 5 6%
At least 5 but less than 6 5%
At least 6 but less than 7 4%
At least 7 but less than 8 3%
At least 8 but less than 9 2%
9 or more 0%]
</TABLE>
GENERAL SURRENDER PROVISIONS
The amount surrendered, minus any charges, will normally be paid to You within 7
days of:
(1) receipt of Your Written request; and
(2) receipt of Your contract, if required.
We have the right to defer payment of surrenders from the fixed account for up
to 6 months from the date We receive Your request.
DEATH BENEFIT
DEATH BENEFIT BEFORE THE ANNUITY COMMENCEMENT DATE
A death benefit will be paid to the Beneficiary if, prior to the annuity
commencement date:
(1) the contract owner dies, or
(2) the last remaining Annuitant dies, leaving no surviving contract owner who
is a natural person.
Subsection (3), below, refers to the age of the contract owner. If the contract
owner is a nonnatural person (for example, a corporation or a trust), the
relevant age will instead be that of the Annuitant.
Subsections (2) and (3 ), below, refer to withdrawals which include partial
surrenders and any associated surrender charges (which shall be deemed to be
amounts withdrawn).
Subsection (3), below, refers to Pro Rata Adjustments. Where indicated, a Pro
Rata Adjustment is calculated separately for each withdrawal, creating a
decrease in the death benefit proportional to the decrease the withdrawal makes
in the Contract Value.
The death benefit will equal the greatest of (1), (2), or (3):
(1) The Contract Value as of the date used for valuing the death benefit.
(2) The sum of Net Purchase Payments made reduced for all prior withdrawals.
(3) If the decedent dies prior to the date You reach age [86], the amount of
the death benefit is the lesser of (a) and (b) as follows:
(a) the sum of:
9
<PAGE>
I. the accumulation (without interest) of Net Purchase Payments
reduced by Pro Rata Adjustments for any withdrawals; plus
II. an amount equal to interest on such net accumulation value, as
it is adjusted for each applicable Net Purchase Payment and Pro
Rata Adjustment, at an effective annual rate of [5%]; or
(b) 200% of (a)I.
The resulting amount (the lesser of (a) and (b)) will be referred to as the
"Roll-up Amount."
If the decedent dies on or after the date You reached age [86], the amount
of the death benefit is equal to:
(a) The "Roll-up Amount" as of the date You reached age [86]; plus
(b) the accumulation (without interest) of Net Purchase Payments made
on or after the date You reached age [86]; reduced by
(c) Pro Rata Adjustments for any withdrawals made on or after the date You
reached age [86].
The Pro Rata Adjustment for this item (3) for a given withdrawal is equal
to:
(a) the withdrawn amount; divided by
(b) the Contract Value immediately before the amount was withdrawn; the
result multiplied by
(c) the quantity equal to:
I. the Roll-up Amount prior to the withdrawal; plus
II. any Net Purchase Payments made on or after the date You reached
age [86] and before the given withdrawal; reduced by
III. Pro Rata Adjustments for any withdrawals made on or after the
date You reached age [86] and before the given withdrawal.
Irrespective of the above, in no event will the amount payable as a death
benefit under this contract result in the excess of:
(1) the total amount of the death benefit paid on all Fortis Benefits Insurance
Company annuity policies upon the death of the Owner, over
(2) the total Contract Value as of the date of valuation of the death
benefit on all such Fortis Benefits Insurance Company annuity policies
exceeding [$500,000.00]. The excess reduction will be applied entirely under
this contract if there are no other Fortis annuity contracts, or if such other
contracts do not contain a similar limitation. If such other contracts contain a
similar limitation, this limitation will be applied on a proportionate basis to
all such contracts with this limitation.
The death benefit will be paid when We receive:
(1) proof of the decedent's death; and
(2) a Written request from the Beneficiary for either a single sum or payment
under an annuity form.
We will pay a single sum to the Beneficiary unless an annuity option is chosen.
DEATH BENEFIT ON OR AFTER THE ANNUITY COMMENCEMENT DATE
If the Annuitant dies on or after the annuity commencement date, the Beneficiary
will receive the death benefit, if any, as provided by the annuity form in
effect.
10
<PAGE>
DISTRIBUTION OF PROCEEDS AT DEATH OF OWNER
If the owner under a non-qualified contract dies prior to the Annuitant and
before the annuity commencement date, the death benefit must be distributed to
the Beneficiary, if then alive, either (1) within five years after the date of
Your death, or (2) over some period not greater than the life or expected life
of the Beneficiary, with annuity payments beginning within one year after the
date of Your death. The person named as Your beneficiary in the Application
shall be considered the Designated Beneficiary for the purposes of Section 72(s)
of the Internal Revenue Code and if no person then living has been so named,
then the Annuitant will automatically be the Designated Beneficiary for this
purpose. In all cases, any such Designated Beneficiary will not be entitled to
exercise any rights prohibited by applicable federal income tax law.
These mandatory distribution requirements will not apply when the Designated
Beneficiary is the spouse of the deceased owner, if the spouse elects to
continue this contract in the spouse's own name, as owner. When the deceased
owner was also the Annuitant, the surviving spouse (if the Designated
Beneficiary) may elect to be named as both owner and Annuitant and continue this
contract.
If the payee dies after the annuity commencement date and before all of the
payments under the Annuity Form have been distributed, the remaining amount
payable, if any, must be distributed at least as rapidly as the method of
distribution then in effect.
PROOF OF DEATH
We accept any of the following as proof of death:
(1) A copy of a certified death certificate.
(2) A copy of a certified decree of a court of competent jurisdiction as to the
finding of death.
(3) A Written statement by a medical doctor who attended the deceased at the
time of death.
(4) Any other proof satisfactory to Us.
PAYMENT OF BENEFITS
GENERAL
On the annuity commencement date, the Contract Value will be applied, as
specified by the contact owner, to provide payments to the Annuitant under one
or more of the annuity options provided in the contract or under such other
settlement options as may be agreed to by Us. If more than one person is named
as Annuitant, due to the designation of multiple Annuitants, the contract owner
may elect to name one of such persons to be the sole Annuitant as of the annuity
commencement date.
APPLICATION OF CONTRACT VALUE
We apply the fixed account value to provide a Fixed Annuity, and the Separate
Account value to provide a Variable Annuity, unless You tell Us In Writing to
apply fixed and Separate Account values in different proportions. If the
Contract Value on the annuity commencement date is less than $5,000, We may pay
the Contract Value in a single sum and cancel this contract.
ANNUITY COMMENCEMENT DATE
The annuity commencement date is selected by You and stated in the Application.
You may change the annuity commencement date at any time if We receive Written
notice at least 30 days before both the current annuity commencement date and
the new annuity commencement date.
If the annuity commencement date does not occur on a Valuation Date that is at
least two years after the Issue Date, We reserve the right to change the annuity
commencement date to the first Valuation Date that is at least two years after
the Issue Date.
FREQUENCY AND AMOUNT OF PAYMENTS
Annuity payments will be made monthly unless We agree to a different payment
schedule. We reserve the right to change the frequency of either a Fixed Annuity
payment or a Variable Annuity payment so that each payment will be at least $50.
11
<PAGE>
FIXED ANNUITY PAYMENTS
Fixed annuity payments start at the end of the Valuation Period that contains
the annuity commencement date. The amount of a first monthly payment for the
annuity form selected will be at least as favorable as the annuity tables of
this contract for each $1,000 of Contract Value applied as of the end of such
Valuation Period.
We may, as of the annuity commencement date, offer for sale, single premium
immediate annuity contracts. If so, the annuity benefits available under this
contract will be at least as favorable as the benefit available by using the
Contract Value to purchase one of Our single premium immediate annuities.
The dollar amount of any payments after the first payment are specified during
the entire period of annuity payments, according to the provisions of the
annuity form selected.
VARIABLE ANNUITY PAYMENTS
ANNUITY UNITS
We convert the Subaccount Accumulation Units into Subaccount Annuity Units at
the values determined at the end of the Valuation Period which contains the
annuity commencement date. The number of Subaccount Annuity Units remains
constant, as long as an annuity remains in force and allocation among the
Subaccounts has not changed.
Each Subaccount Annuity Unit value was arbitrarily set at $10 when the
Subaccount first converted Subaccount Accumulation Units into Annuity Units.
Subsequent values on any Valuation Date are equal to the previous Subaccount
Annuity Unit value times the net investment factor for that Subaccount for the
Valuation Period ending on that Valuation Date, with an offset for the 3%
assumed interest rate used in the annuity tables of this contract.
Variable annuity payments start on the end of the Valuation Period that contains
the annuity commencement date. The amount of a first monthly payment for the
illustrated annuity forms, is shown in the annuity tables of this contract for
each $1,000 of Contract Value applied as of the end of such Valuation Period.
Payments after the first payment will vary in amount and are determined on the
first Valuation Date of each subsequent payment period. If the payment under the
annuity form selected is based on the variable Annuity Unit value of a single
Subaccount, the payment is found by multiplying the Subaccount Annuity Unit
value on the payment date by the number of Subaccount Annuity Units.
If the payment under the annuity form selected is based upon variable Annuity
Unit values of more than one Subaccount, the above procedure is repeated for
each applicable Subaccount. The sum of these payments is the Variable Annuity
payment.
We guarantee that the amount of each payment after the first payment will not be
affected by variations in expense or mortality experience.
OPTIONAL ANNUITY FORMS
You may select an annuity form or change a previous selection. The selection or
change must be In Writing and received by Us at least 30 days before the annuity
commencement date. If no annuity form selection is in effect on the annuity
commencement date, We automatically apply Option B, with payments guaranteed for
10 years.
The following options are available for the Fixed Annuity payments and the
Variable Annuity payments:
OPTION A. Life Annuity - Payments are made as of the first Valuation Date of
each monthly period during the Annuitant's life, starting with the annuity
commencement date. No payments will be made after the Annuitant dies.
12
<PAGE>
OPTION B. Life Annuity with Payments Guaranteed for 10 Years or 20 Years -
Payments are made as of the first Valuation Date of each monthly period starting
on the annuity commencement date. Payments will continue as long as the
Annuitant lives. If the Annuitant dies before all of the guaranteed payments
have been made, We will continue installments of the guaranteed payments to the
Beneficiary.
OPTION C. Joint and Full Survivor Annuity - Payments are made as of the first
Valuation Date of each monthly period starting with the annuity commencement
date. Payments will continue as long as either the Annuitant or the joint
Annuitant is alive. Payments will stop when both the Annuitant and the joint
Annuitant have died.
We also have other annuity forms available and information about them can be
obtained by Writing to Us.
The annuity tables show the amount of the first annuity payment, for each $1,000
of Contract Value applied under Options A, B, and C.
OPTION TABLES
Installments shown are for an initial monthly payment for each $1,000 of
Contract Value applied under an option. Age, as used in these tables, is age as
of nearest birthday on the annuity commencement date. Rates for monthly payments
for ages and periods certain not shown, if allowed by Us, will be computed on an
actuarially equivalent basis.
ACTUARIAL BASIS
Installments shown in these tables are based on the 1983 Table a (20/80
Male/Female) and with compound interest at the effective rate of 3% per year.
OPTIONS A AND B
<TABLE>
<CAPTION>
-----------------------------------------------------------------
10 Year Period 20 Year Period
Age Life Only Certain and Life Certain and Life
-----------------------------------------------------------------
<S> <C> <C> <C>
50 3.97 3.95 3.87
51 4.04 4.01 3.93
52 4.10 4.08 3.98
53 4.18 4.14 4.04
54 4.25 4.22 4.10
55 4.33 4.29 4.16
56 4.42 4.37 4.22
57 4.51 4.46 4.28
58 4.61 4.55 4.35
59 4.71 4.64 4.42
60 4.82 4.74 4.49
61 4.93 4.85 4.56
62 5.06 4.96 4.63
63 5.19 5.07 4.70
64 5.33 5.20 4.77
65 5.48 5.32 4.83
66 5.64 5.46 4.90
67 5.81 5.60 4.97
68 6.00 5.75 5.03
69 6.19 5.91 5.09
70 6.41 6.07 5.15
71 6.64 6.24 5.20
72 6.88 6.42 5.25
73 7.15 6.60 5.29
74 7.44 6.79 5.33
75 7.76 6.99 5.37
-----------------------------------------------------------------
</TABLE>
OPTION C
13
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
JOINT ANNUITANT AGE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 55 60 65 70
50 3.55 3.66 3.75 3.82 3.87
ANNUITANT 55 3.66 3.81 3.95 4.07 4.16
AGE 60 3.75 3.95 4.15 4.34 4.49
65 3.82 4.07 4.34 4.61 4.87
70 3.87 4.16 4.49 4.87 5.25
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
FORTIS BENEFITS INSURANCE COMPANY
St. Paul, Minnesota
A Stock Company
[INCOME PREFERRED GUARANTEED LIVING BENEFIT RIDER]
This rider is a part of the annuity contract to which it is attached. It takes
effect on the rider effective date. If none is listed on the contract data page,
the rider effective date will be the contract Issue Date. Any provision in the
contract that is not in conflict with this rider remains in effect. Any charge
for this rider is included on the contract data page.
This rider provides a living benefit in the form of the right to make partial
surrenders each Contract Year of up to [7%] of Your Net Purchase Payments, if
Your contract remains in Living Benefit Status as described below.
LIVING BENEFIT STATUS
Your contract remains in Living Benefit Status if the following conditions are
met:
1. You have not made partial surrenders during any Contract Year totaling more
than [7%] of Your Net Purchase Payments; and
2. The total amount of partial surrenders since the Issue Date has not been
more than Your total Net Purchase Payments.
If either condition is exceeded, the contract is no longer in Living Benefit
Status, and such status may not be regained. While the contract is in Living
Benefit Status, your contract will not terminate due to the contract value being
reduced to less than the minimum specified in the contract to which this rider
is attached. However, if the Contract Value declines to less than such minimum,
the Automatic Periodic Benefit Payments provision below will apply.
MAXIMUM LIVING BENEFIT
The maximum partial surrender You may make at any one time as a living benefit
under this rider is the lesser of the following:
1. [7%] of Your Net Purchase Payments minus the sum of any partial surrenders
You made during the current Contract Year;
2. The sum of Your Net Purchase Payments minus the sum of prior partial
surrenders.
AUTOMATIC PERIODIC BENEFIT PAYMENT
If partial surrenders under the living benefit provision of this rider reduce
the Contract Value to less than the minimum specified in the contract to which
this rider is attached, We will pay to You any remaining maximum living benefit
on a periodic basis. Payments will continue until the sum of your partial
surrenders and Automatic Periodic Benefit Payments equals the sum of Your Net
Purchase Payments, at which time this rider and the contract to which it is
attached will terminate. During such Automatic Periodic Benefit Payment period,
no further Purchase Payments will be accepted, and any death benefit otherwise
payable under the contract will continue to apply.
Signed for the Company to take effect on the rider effective date.
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
SENIOR VICE PRESIDENT SENIOR VICE PRESIDENT
LBR99
<PAGE>
FORTIS BENEFITS INSURANCE COMPANY
FORTIS INCOME PREFERRED ANNUITY
<TABLE>
<CAPTION>
<S><C>
- ---------------------------------------------------------------- ----------------------------------------------------------------
1. OWNER 5. BENEFICIARY
- ---------------------------------------------------------------- ----------------------------------------------------------------
PRIMARY
Name Name
-------------------------------------------------------- --------------------------------------------------------
Last First Middle Last First Middle
Address Address
-------------------------------------------------------- --------------------------------------------------------
Street Street
-------------------------------------------------------- --------------------------------------------------------
City State Zip City State Zip
Phone Date of Birth
-------------------------------------------------------- --------------------------------------------------
/ / Citizen of U.S.
Soc. Sec. # -----------------------------------------------------
------------------------ / / Resident Alien Relationship Social Security # (Optional)
of U.S.
Date of Birth / / Other CONTINGENT
---------------------- -------------
Sex: / / Male / / Female ------------------ Name
--------------------------------------------------------
- ---------------------------------------------------------------- Last First Middle
2. CO-OWNER (OPTIONAL) Address
- ---------------------------------------------------------------- --------------------------------------------------------
Street
Name
-------------------------------------------------------- --------------------------------------------------------
Last First Middle City State Zip
Address Date of Birth
-------------------------------------------------------- ---------------------------------------------------
Street
-----------------------------------------------------
-------------------------------------------------------- Relationship Social Security # (Optional)
City State Zip
/ / Additional beneficiary information attached.
Phone
-------------------------------------------------------- ----------------------------------------------------------------
/ / Citizen of U.S. 6. TYPE OF PLAN REQUESTED
Soc. Sec. # ----------------------------------------------------------------
------------------------ / / Resident Alien For annual IRA contributions, indicate on the check the year for
of U.S. which the contribution is made.
Date of Birth / / Other
---------------------- ------------- / / NON-QUALIFIED
Sex: / / Male / / Female ------------------
/ / QUALIFIED (check appropriate box)
- ----------------------------------------------------------------
3. ANNUITANT (IF OTHER THAN OWNER) / / Traditional IRA / / Roth IRA
- ----------------------------------------------------------------
/ / Direct Transfer / / Direct Transfer
Name
-------------------------------------------------------- / / Rollover / / Rollover
Last First Middle
/ / Direct Rollover
Address (IRA Rollover from Employer Plan)
--------------------------------------------------------
Street / / SEP-IRA (including SARSEP)
-------------------------------------------------------- / / 403(b) (TDA, TSA)
City State Zip
/ / KEY Plan
Phone (complete and attach First Trust Key Plan document):
--------------------------------------------------------
/ / Profit Sharing / / Money Purchase
/ / Citizen of U.S.
Soc. Sec. # / / SIMPLE IRA
------------------------ / / Resident Alien
of U.S. / / Other Employer Qualified Plan
Date of Birth / / Other
---------------------- ------------- (Employer's Name)
------------------ ---------------------------------------
Sex: / / Male / / Female
- ---------------------------------------------------------------- / / Other
4. ADDITIONAL ANNUITANT (OPTIONAL) ---------------------------------------------------
- -----------------------------------------------------------------
(Employer's Name)
Name ---------------------------------------
--------------------------------------------------------
Last First Middle ----------------------------------------------------------------
Address 7. Annuitization
-------------------------------------------------------- ----------------------------------------------------------------
Street
The age of the Annuitant at which lifetime
-------------------------------------------------------- income payments begin:
City State Zip ---------------------------
Phone ----------------------------------------------------------------
-------------------------------------------------------- 8. Telephone Transfer Authorization
----------------------------------------------------------------
/ / Citizen of U.S.
Soc. Sec. # / / I have read the telephone transfer authorization terms in
------------------------ / / Resident Alien the prospectus and elect telephone transfers. (If this box
of U.S. is checked it is not necessary to complete the telephone
Date of Birth / / Other transfer section of the Variable Annuity Service Request
---------------------- ------------- Form.)
------------------
Sex: / / Male / / Female
42360 APPLICATION CONTINUES
<PAGE>
<CAPTION>
- ---------------------------------------------------------------- ----------------------------------------------------------------
9. BILLING (PERSON OR ENTITY SENDING PURCHASE PAYMENTS FOR 11. REPLACEMENT
ANNUITY)
- ---------------------------------------------------------------- ----------------------------------------------------------------
Name Will this annuity replace or change any existing life insurance
-------------------------------------------------------- or annuity in this or any other company?
Last First Middle
/ / Yes / / No If yes, list insurance company.
Address
-------------------------------------------------------- ----------------------------------------------------------------
Street
----------------------------------------------------------------
-------------------------------------------------------- 12. SPECIAL REQUESTS
City State Zip ----------------------------------------------------------------
/ / Send Bill / / Pre-Authorized Check-form attached / / Check if additional forms are attached.
Will this be added to an existing retirement plan? ----------------------------------------------------------------
/ / Yes / / No If yes, please list: ----------------------------------------------------------------
- ---------------------------------------------------------------- ----------------------------------------------------------------
Employer name
----------------------------------------------------------------
- ----------------------------------------------------------------
Employer address ----------------------------------------------------------------
- ---------------------------------------------------------------- ----------------------------------------------------------------
10. PURCHASE PAYMENT/PAYMENT ALLOCATION
- ---------------------------------------------------------------- ----------------------------------------------------------------
13. SUITABILITY
/ / Single Purchase Payment $__________________________________ ----------------------------------------------------------------
/ / Additional Purchase Payments of $__________ per____________
(Note: Must be completed with each application unless you
PAYMENT ALLOCATION: USE WHOLE %. MUST TOTAL 100% provide suitability information to your broker/dealer on
a different form.)
(191) ____ % Lazard - International Stock
(186) ____ % Fortis - Global Growth ----------------------------------------------------------------
(190) ____ % Morgan Stanley - Global Asset Allocation Employer
(187) ____ % Fortis - Aggressive Growth
(198) ____ % Berger - Small Cap Value Series ----------------------------------------------------------------
(182) ____ % Fortis - Growth Stock Business address
(196) ____ % Dreyfus - MidCap Stock Series
(197) ____ % Alliance - Large Cap Growth Series ----------------------------------------------------------------
(195) ____ % T. Rowe Price - Blue Chip Stock City State Zip
(194) ____ % Dreyfus - S&P 500 Index
(188) ____ % Fortis - Growth & Income ----------------------------------------------------------------
(193) ____ % Fortis - Value Occupation Age
(183) ____ % Fortis - Asset Allocation
(192) ____ % Mercury - Global Bond Are you associated with or employed by an NASD member?
(189) ____ % Fortis - High Yield / / Yes / / No
(181) ____ % Fortis Diversified Income
(185) ____ % Fortis - U.S. Government Securities Estimated Annual Income (all sources) $_________ / / Declined
(184) ____ % Fortis - Money Market
(150) ____ % Fortis - Fixed Account Estimated Net Worth
____ % (exclusive of family residence) $_________ / / Declined
____ %
____ % Other________________________ Estimated Tax Bracket _________% / / Declined
(100)% TOTAL INVESTMENT OBJECTIVES:
- ------
(If no allocations are indicated, the total purchase payment will / / Safety of Principal
be allocated to the Money Market Subaccount.) / / Income (cash generating)
/ / Growth (long term capital appreciation)
/ / Diversification
/ / Other (please specify)_______________________________
I HEREBY REPRESENT MY ANSWERS TO THE ABOVE QUESTIONS TO BE TRUE TO THE BEST OF
MY KNOWLEDGE. I UNDERSTAND THAT ANNUITY PAYMENTS AND CONTRACT VALUES UNDER THE
VARIABLE ACCOUNT PROVISIONS OF THE CONTRACT BEING APPLIED FOR ARE VARIABLE, AND
ARE NOT GUARANTEED AS TO THE DOLLAR AMOUNT. RECEIPT OF A PROSPECTUS FOR THE
ANNUITY PRODUCT HEREBY APPLIED FOR IS ACKNOWLEDGED.
IF I LIVE IN A COMMUNITY PROPERTY STATE, I MAY NEED MY SPOUSE'S WRITTEN CONSENT
WHENEVER I NAME A PERSON OTHER THAN MY SPOUSE AS MY BENEFICIARY. I AM
RESPONSIBLE TO KNOW IF CONSENT IS NEEDED AND TO OBTAIN CONSENT IF REQUIRED.
ANY PERSON WHO KNOWINGLY PRESENTS A FALSE OR FRAUDULENT CLAIM FOR PAYMENT OF A
LOSS OR BENEFIT OR KNOWINGLY PRESENTS FALSE INFORMATION IN AN APPLICATION FOR
INSURANCE IS GUILTY OF A CRIME AND MAY BE SUBJECT TO FINES AND CONFINEMENT IN
PRISON.
42360 APPLICATION CONTINUES
<PAGE>
- ---------------------------------------------------------------- ----------------------------------------------------------------
14. REGISTERED REPRESENTATIVE STATEMENTS 16. DEALER/REPRESENTATIVE INFORMATION
- ---------------------------------------------------------------- ----------------------------------------------------------------
Will this annuity replace or change any existing life insurance ----------------------------------------------------------------
or annuity in this or any other company? Representative's name (please print)
/ / Yes / / No ----------------------------------------------------------------
Name of Broker/Dealer
If yes, please attach a Client Replacement Disclosure Letter
(Form 99134) with any other necessary transfer paperwork and ----------------------------------------------------------------
state replacement form, if required. Client account number at dealer (if applicable)
- ---------------------------------------------------------------- ----------------------------------------------------------------
Branch Office address
- ----------------------------------------------------------------
----------------------------------------------------------------
- ---------------------------------------------------------------- Representative's signature
- ---------------------------------------------------------------- ----------------------------------------------------------------
Representative's number
- ----------------------------------------------------------------
----------------------------------------------------------------
/ / Please check if: Representative's phone number
Your client qualifies for exemption from the surrender charge
because they are included in one of the categories listed ----------------------------------------------------------------
under the exemption terms in the prospectus; and you waive (In Florida, also present a Florida license I.D. #)
commissions on this annuity.
----------------------------------------------------------------
- ---------------------------------------------------------------- Authorized signature of Broker/Dealer
15. SIGNATURES
- ---------------------------------------------------------------- ----------------------------------------------------------------
17. MAIL APPLICATION TO:
(FOR MINNESOTA RESIDENTS) I HEREBY ACKNOWLEDGE RECEIPT OF THE ----------------------------------------------------------------
MINNESOTA GUARANTY ASSOCIATION DISCLOSURE NOTICE.
Make check payable to:
- ---------------------------------------------------------------- Fortis Benefits Insurance Company
Owner(s)
APPLICATIONS WITH PAYMENT:
- ---------------------------------------------------------------- Fortis Benefits Insurance Company
Owner(s) CM-9709
St. Paul, Minnesota 55170-9709
- ----------------------------------------------------------------
Annuitant(s) APPLICATIONS WITHOUT PAYMENT:
- ---------------------------------------------------------------- Fortis Benefits Insurance Company
Annuitant(s) P.O. Box 64272
St. Paul, Minnesota 55164
- ----------------------------------------------------------------
Date FOR OVERNIGHT DELIVERY:
Fortis Benefits Insurance Company
- ---------------------------------------------------------------- 500 Bielenberg Drive
State in which application is signed Woodbury, Minnesota 55125
Attn: Annuities
</TABLE>
42360
