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Filed Pursuant to Rule 497(e)
File No. 33-64240
SUPPLEMENT DATED FEBRUARY 10, 1998 TO THE
PROSPECTUS DATED MAY 1, 1997 FOR THE
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
Effective February 10, 1998, the section in the prospectus captioned
Introduction under the Federal Tax Status section is amended to include the
following:
The policy may be purchased on a nonqualified tax basis ("Nonqualified Policy")
or purchased and used in connection with plans qualifying for favorable tax
treatment ("Qualified Policy"). The Qualified Policy was designed for use by
individuals whose premium payments are comprised of proceeds from and/or
contributions under retirement plans which are intended to qualify as plans
entitled to special income tax treatment under Sections 401(a), 401(k), 403(a),
403(b), 408, 408A or 457 of the Code. The ultimate effect of federal income
taxes on the amounts held under a policy, or annuity payments, and on the
economic benefit to the owner, an annuitant, or the beneficiary depends on the
type of retirement plan, on the tax and employment status of the individual
concerned and on our tax status. In addition, certain requirements must be
satisfied in purchasing a Qualified Policy with proceeds from a tax-qualified
plan and receiving distributions from a Qualified Policy in order to continue
receiving favorable tax treatment. Therefore, purchasers of Qualified Policies
should seek legal and tax advice regarding the suitability of a policy for their
situation, the applicable requirements, and the tax treatment of the rights and
benefits of a policy. The following discussion assumes that Qualified Policies
are purchased with proceeds from and/or contributions under retirement plans
that receive the intended special federal income tax treatment.
Effective February 10, 1998, the section in the prospectus captioned Taxation of
Qualified Plans under the Federal Tax Status section is amended to include the
following:
SIMPLE IRAS
Beginning January 1, 1997, certain small employers may establish SIMPLE plans as
provided by Section 408(p) of the Code, under which employees may elect to defer
a percentage of compensation up to $6,000 (as increased for cost of living
adjustments). The sponsoring employer is required to make matching or
non-elective contributions on behalf of employees. Distributions from SIMPLE
IRAs are subject to the same restrictions that apply to IRA distributions and
are taxed as ordinary income. Subject to certain exceptions, premature
distributions prior to age 59 1/2 are subject to a 10 percent penalty tax, which
is increased to 25 percent if the distribution occurs within the first two years
after the commencement of the employee's participation in the plan. The failure
of the SIMPLE IRA to meet Code requirements may result in adverse tax
consequences.
ROTH IRAS
Effective January 1, 1998, section 408A of the Code permits certain eligible
individuals to contribute to a Roth IRA. Contributions to a Roth IRA, which are
subject to certain limitations, are not deductible and must be made in cash or
as a rollover or transfer from another Roth IRA or other IRA. A rollover from or
conversion of an IRA to a Roth IRA may be subject to tax and other special rules
may apply. Distributions from a Roth IRA generally are not taxed, except that,
once aggregate distributions exceed contributions to the Roth IRA, income tax
and a 10 percent penalty tax may apply to distributions made (1) before age 59
1/2 (subject to certain exceptions) or (2) during the five taxable years
starting with the year in which the first contribution is made to the Roth IRA.
Effective February 10, 1998, the section in the prospectus captioned Minimum
Distribution Requirements ("MDR") for IRAs under the Federal Tax Status section
is amended to include the following:
No minimum distribution is required from a Roth IRA during your life, although
upon your death certain distribution requirements apply.
The Code Minimum Distribution Requirements also apply to distribution from
qualified plans other than IRAs. For qualified plans under section 401(a),
401(k), 403(a), 403(b), and 457, the Code requires that distributions generally
must commence no later than the later of April 1 of the calendar year following
the calendar year in which the owner (or plan participant) (i) reaches age 701/2
or (ii) retires, and must be made in a specified form or manner. If the plan
participant is a "5% owner" (as defined in the Code), distributions generally
must begin no later than the date described in (i). You are responsible for
ensuring that distributions from such plans satisfy the Code minimum
distribution requirements.
