Supplement to Prospectus Dated May 1, 1997
Supplement dated March 10, 1998
This Supplement should be retained with the current Prospectus for your variable
annuity contract issued by American Skandia Life Assurance Corporation
("American Skandia"). If you do not have a current prospectus, please contact
American Skandia at 1-800-SKANDIA.
Notice of Proxy
Contract Owners with Account Value allocated to the Federated Utility Income
Sub-account and/or the Berger Capital Growth Sub-account as of March 9, 1998
("record date") will be receiving a solicitation of proxy as beneficial owners
of units of the respective Sub-accounts that invest in underlying shares of the
Federated Utility Income and/or Berger Capital Growth portfolios of American
Skandia Trust ("shareholders").
Shareholders of the Federated Utility Income portfolio are being asked to
reappoint American Skandia Investment Services, Incorporated as investment
manager of the portfolio, to appoint Neuberger&Berman Management Incorporated as
the new portfolio sub-advisor, to change the portfolio's investment objective
and certain fundamental investment restrictions, and to change the portfolio's
name to "Neuberger&Berman Mid-Cap Value"
Shareholders of the Berger Capital Growth portfolio are being asked to reappoint
American Skandia Investment Services, Incorporated as investment manager of the
portfolio, to appoint Neuberger&Berman Management Incorporated as the new
portfolio sub-advisor, to change the portfolio's investment objective and
certain fundamental investment restrictions, and to change the portfolio's name
to "Neuberger&Berman Mid-Cap Growth."
Contract Owners who choose to allocate Account Value to either the Federated
Utility Income Sub-account or the Berger Capital Growth Sub-account after the
record date will not receive a proxy solicitation and will not be entitled to
vote on the changes outlined above. Contract Owners should take this into
consideration if they are considering allocating Account Value to either the
Federated Utility Income Sub-account or the Berger Capital Growth Sub-account.
Proposed Substitution
On or about the date of this Supplement, American Skandia intends to file an
application with the Securities and Exchange Commission ("SEC") to substitute
the Neuberger&Berman Partners Sub-account and the underlying shares of the
Partners Portfolio of Neuberger&Berman Advisors Management Trust for the
Neuberger&Berman Mid-Cap Value Sub-account and the underlying shares of the
Neuberger&Berman Mid-Cap Value portfolio of American Skandia Trust ("AST").
In the application, American Skandia is seeking permission to allow transfers
from the Neuberger&Berman Partners Sub-account to any other investment options
available under the Annuity for a period of 30 days prior to any substitution
without the imposition of any transfer fee. Under the proposed substitution,
such transfers would not count in determining whether the maximum number of free
transfers has been exceeded. Furthermore, under the proposed substitution, the
transfer of Account Value from the Neuberger&Berman Partners Sub-account to the
Neuberger&Berman Mid-Cap Value Sub-account would likewise not be subject to a
transfer fee nor count in determining whether the maximum number of free
transfers have been exceeded. The proposed substitution will not affect your
rights or our obligations under the Annuity. American Skandia will bear any
expenses in connection with the proposed substitution.
In anticipation of the proposed substitution, the Neuberger&Berman Partners
Sub-account and the Partners Portfolio of the Neuberger&Berman Advisor
Management Trust will no longer be offered as an investment option in Annuities
issued on or after May 1, 1998. Contract Owners with Account Value allocated to
the Neuberger&Berman Partners Sub-account on May 1, 1998 may remain in the
Sub-Account until the earliest to occur of: (1) the date they transfer Account
Value out of the Neuberger&Berman Partners Sub-account; or (2) the date the
proposed substitution is completed. Contract Owners who have a dollar-cost
averaging, bank drafting, rebalancing or asset allocation program in effect as
of May 1, 1998 that includes the Neuberger&Berman Partners Sub-account will be
able to continue such pre-scheduled transactions until the date the proposed
substitution is completed.
ASL/CH2 (3/98)
Roth IRA/SEP IRA/SIMPLE IRA
The section of the Prospectus entitled "Purchasing Annuities - Uses of the
Annuity" is amended as follows:
The Annuity may be issued in connection with or purchased as a funding vehicle
for certain retirement plans designed to meet the requirements of various
sections of the Code. These include, but are not limited to: (a) Section 401
(corporate, association, or self-employed individuals' retirement plans); (b)
Section 403(b) (tax-sheltered annuities available to employees of certain
qualifying employers); (c) Section 408 (individual retirement accounts and
individual retirement annuities - "IRAs"; Simplified Employee Pensions - "SEPs";
and Savings Incentive Match Plans for Employees - "SIMPLE IRAs"); and (d)
Section 408A (Roth IRAs).
The section of the Prospectus entitled "Certain Tax Considerations - Penalty on
Distributions" is amended as follows:
With respect to Roth IRAs only, distributions are not subject to federal income
tax or the 10% penalty tax if five (5) tax years have passed since the first
contribution was made or any conversion from a traditional IRA was made, and the
distribution is made (a) once the taxpayer is age 59 1/2 or older, (b) upon the
death or disability of the taxpayer, or (c) for qualified first-time home buyer
expenses, subject to certain limitations. Distributions from a Roth IRA that are
not "qualified" as described above may be subject to a penalty tax.
The section of the Prospectus entitled "Certain Tax Considerations - Individual
Retirement Programs" is amended as follows:
Eligible individuals may maintain an individual retirement account or individual
retirement annuity ("IRA"). Subject to limitations, contributions of certain
amounts may be deductible from gross income. Such persons may also maintain a
form of IRA called a "Roth IRA". Contributions to a Roth IRA are not deductible
but, under certain circumstances, distributions from such an account are
tax-free. Purchasers of IRAs and Roth IRAs will receive a special disclosure
document, which describes limitations on eligibility, contributions,
transferability and distributions. It also describes the conditions under which
distributions from IRAs and qualified plans may be rolled over or transferred
into an IRA on a tax-deferred basis and the conditions under which distributions
from traditional IRAs may be rolled over to, or the traditional IRA itself may
be converted into a Roth IRA. Eligible employers that meet specified criteria
may establish savings incentive match plans for employees or Simplified Employee
Pensions using the employees' IRAs. These arrangements are known as SIMPLE IRAs
and others as SEP IRAs. Employer contributions that may be made to SIMPLE IRAs
and SEP IRAs are larger than the amounts that may be contributed to other IRAs,
and may be deductible to the employer.
