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PROSPECTUS SUPPLEMENT
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
VEL II ACCOUNT
(Supplement to Prospectus Dated April 30, 1996 and Revised August 30, 1996)
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The Policies offered by this prospectus may be issued in connection with
tax-sheltered annuity plans ("TSA Plans") of certain public school systems and
organizations that are tax exempt under Section 501(c)(3) of the Internal
Revenue Code ("Code").
Under the provisions of Section 403(b) of the Code, payments made for annuity
policies purchased for employees under TSA Plans are excludable from the gross
income of such employees, to the extent that the aggregate purchase payments in
any year do not exceed the maximum contribution permitted under the Code. In a
Private Letter Ruling, the IRS has taken the position that the purchase of a
variable life insurance policy by the employer as part of a TSA Plan will not
violate the "incidental benefit" rules of Section 403(b) and the regulations
thereunder. The Private Letter Ruling also stated that the use of current or
accumulated contributions to purchase a variable life insurance policy will not
result in current taxation of the premium payments for the variable life
insurance policy, except for the current cost of the life insurance protection.
A policy qualifying under Section 403(b) of the Code must provide that
withdrawals or other distributions attributable to salary reduction
contributions (including earnings) may not begin before the employee attains age
59 1/2, separates from service, dies, or becomes disabled. In the case of
hardship, a Policyowner may withdraw amounts contributed by salary reduction,
but not the earnings on such amounts. Even though a distribution may be
permitted under these rules (e.g., for hardship or after separation from
service), it may nonetheless be subject to a 10% penalty tax as a premature
distribution, in addition to income tax.
Supplement dated March 14, 1997
VEL 93
