<PAGE> 1
As filed with the Securities and Exchange Commission on March 1, 1999
Registration No. 33-64410
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
POST-EFFECTIVE AMENDMENT NO. 6
FORM S-6
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FOR THE REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
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A. Exact name of trust:
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE UNIVERSAL LIFE SEPARATE ACCOUNT - I
B. Name of depositor:
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
C. Complete address of depositor's principal executive office:
51 Madison Avenue
New York, New York 10010
D. Name and complete address of agent for service:
Carol Yee, Esq.
New York Life Insurance and
Annuity Corporation
51 Madison Avenue
New York, New York 10010
Copy to:
Jeffrey Puretz, Esq. Michael J. McLaughlin, Esq.
Dechert, Price & Rhoads Senior Vice President
1500 K Street, N. W. and General Counsel
Washington, D.C. 20036 New York Life Insurance Company
51 Madison Avenue
New York, New York 10010
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485.
[ ] on May 1, 1999 pursuant to paragraph (b) of Rule 485.
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
[x] on May 1, 1999 pursuant to paragraph (a)(1) of Rule 485.
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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E. Title of securities being registered:
Units of interest in a separate account under flexible premium variable
universal life insurance policies.
F. Approximate date of proposed public offering:
Not Applicable
G. Proposed maximum aggregate offering price to the public of the
securities being registered:
[ ] Check box if it is proposed that this filing will become effective on (date)
at (time) pursuant to Rule 487.
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CROSS REFERENCE SHEET
INFORMATION REQUIRED IN A PROSPECTUS
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<CAPTION>
Item of Form N-8B-2 Prospectus Caption
- ------------------- ------------------
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1 Cover Page; Basic Questions and Answers About Us and
Our Policy
2 Cover Page
3 Not Applicable
4 Sales and Other Agreements
5 The Separate Account
6 The Separate Account
9 Legal Proceedings
10 General Provisions of
the Policy; Death
Benefit Under the
Policy; Free Look
Provision; Exchange
Privilege; Cash Value
and Cash Surrender
Value; Policy Loan
Privilege; The
Separate Account; The
Fixed Account; Charges
Under the Policy;
Sales and Other
Agreements; When We
Pay Proceeds; Payment
Options; Our Rights;
Your Voting Rights;
Basic Questions and
Answers About Us and
Our Policy
11 The Separate Account;
MainStay VP Series
Fund, Inc.; The Alger
American Fund; Calvert
Variable Series, Inc.;
Fidelity Variable
Insurance Products
Fund and Fidelity
Variable Insurance
Products Fund II;
Janus Aspen Series;
Morgan Stanley Dean Witter
Universal Funds, Inc.
12 The Separate Account; Sales and Other Agreements
13 The Separate Account;
Charges Under the
Policy; MainStay VP
Series Fund, Inc.; The
Alger American Fund;
Calvert Variable Series, Inc.;
Fidelity Variable Insurance
Products Fund and
Fidelity Variable
Insurance Products
Fund II; Janus Aspen
Series; Morgan Stanley Dean Witter
Universal Funds, Inc.
14 Basic Questions and Answers About Us and Our Policy;
The Separate Account; Sales and Other Agreements
15 Basic Questions and Answers About Us and Our Policy;
General Provisions of the Policy
16 The Separate Account;
Investment Return;
Basic Questions and
Answers About Us and
Our Policy; MainStay
VP Series Fund, Inc.;
The Alger American Fund;
Calvert Variable Series, Inc.;
Fidelity Variable Insurance
Products Fund and
Fidelity Variable
Insurance Products
Fund II; Janus Aspen
Series; Morgan Stanley Dean Witter
Universal Funds, Inc.
</TABLE>
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<TABLE>
<CAPTION>
Item of Form N-8B-2 Prospectus Caption
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17 Cash Surrender Value; Policy Surrenders and Partial
Withdrawals; General Provisions of the Policy
18 The Separate Accounts;
MainStay VP Series
Fund, Inc.; The Alger
American Fund; Calvert
Variable Series, Inc.;
Fidelity Variable
Insurance Products
Fund and Fidelity
Variable Insurance
Products Fund II;
Janus Aspen Series;
Morgan Stanley Dean Witter
Universal Funds, Inc.;
Investment Return
19 Records and Reports
20 Not Applicable
21 Policy Loan Privilege
22 Not Applicable
23 Not Applicable
24 Additional Provisions of the Policy
25 What are NYLIAC and New York Life?
26 Not Applicable
27 What are NYLIAC and New York Life?
28 Directors and Principal Officers of NYLIAC
29 What are NYLIAC and New York Life?
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Not Applicable
37 Not Applicable
38 Sales and Other Agreements
39 Sales and Other Agreements
40 Not Applicable
41 Sales and Other Agreements
42 Not Applicable
</TABLE>
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<TABLE>
<CAPTION>
Item of Form N-8B-2 Prospectus Caption
- ------------------- ------------------
<S> <C>
43 Not Applicable
44 The Separate Account; Investment Return; General
Provisions of the Policy
45 Not Applicable
46 The Separate Account; Investment Return
47 The Separate Account;
MainStay VP Series
Fund, Inc.; The Alger
American Fund; Calvert
Variable Series, Inc.;
Fidelity Variable
Insurance Products
Fund and Fidelity
Variable Insurance
Products Fund II;
Janus Aspen Series;
Morgan Stanley Dean Witter
Universal Funds, Inc.
48 Not Applicable
49 Not Applicable
50 The Separate Account
51 Cover Page; Basic Questions and Answers About Us and
Our Policy
52 The Separate Accounts; Our Rights
53 Federal Income Tax Considerations
54 Not Applicable
55 Not Applicable
59 Financial Statements
</TABLE>
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NYLIAC VARIABLE UNIVERSAL LIFE SEPARATE ACCOUNT-I
PROSPECTUS DATED MAY 1, 1999
FOR
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
OFFERED BY
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A DELAWARE CORPORATION)
PRINCIPAL OFFICE
51 MADISON AVENUE, NEW YORK, NEW YORK 10010
This prospectus describes a flexible premium variable universal life
insurance policy which New York Life Insurance and Annuity Corporation
("NYLIAC") issues. The policy provides lifetime insurance protection for
individuals. The policy offers flexible premium payments, a choice of two death
benefit options, loan privileges, increases and decreases to the policy's face
amount of insurance and a choice of premium allocation alternatives, including a
guaranteed interest option and the following eighteen variable investment
divisions:
<TABLE>
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- -- MainStay VP Capital Appreciation
- -- MainStay VP Cash Management
- -- MainStay VP Convertible
- -- MainStay VP Government
- -- MainStay VP High Yield Corporate Bond
- -- MainStay VP International Equity
- -- MainStay VP Total Return
- -- MainStay VP Value
- -- MainStay VP Bond
- -- MainStay VP Growth Equity
- -- MainStay VP Indexed Equity
- -- Alger American Small Capitalization
- -- Calvert Social Balanced
- -- Fidelity VIP II Contrafund
- -- Fidelity VIP Equity-Income
- -- Janus Aspen Series Balanced
- -- Janus Aspen Series Worldwide Growth
- -- Morgan Stanley Dean Witter Emerging
Markets Equity
</TABLE>
We do not guarantee the investment performance of these investment divisions.
Depending on current market conditions, you can make or lose money in any of the
investment divisions.
The death benefit may, and the cash surrender value of a policy will, go up
or down depending on the performance of the investment divisions. The policy
does not have a guaranteed minimum cash surrender value. While a policy is in
force, the policy's death benefit will never be less than its face amount, less
any outstanding policy debt. Although premiums are flexible, you may have to
make additional premiums to keep the policy in effect. The policy may terminate
if its cash surrender value is too small to pay the policy's monthly charges.
You can borrow against or withdraw money from the policy, within limits.
Loans and withdrawals will reduce the policy's death benefit and cash surrender
value. You can also surrender the policy. We will apply a surrender charge if
you surrender the policy during the first fifteen policy years. We may also
apply this charge if you request a reduction of the face amount or if the policy
terminates.
You may examine the policy for a limited period of time after it is
delivered and cancel it for a full refund of the greater of cash value or
premiums paid, less any loans and withdrawals. Replacing existing insurance with
this policy may not be to your advantage.
You should read this prospectus and keep it for future reference. It
contains information that you should know before investing. This prospectus is
valid only when attached to current prospectuses for the MainStay VP Series
Fund, Inc., The Alger American Fund, the Calvert Variable Series, Inc., the
Fidelity Variable Insurance Products Fund II, the Fidelity Variable Insurance
Products Fund, the Janus Aspen Series and the Morgan Stanley Dean Witter
Universal Funds, Inc. (the "Funds", each individually a "Fund").
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
DEFINITION OF TERMS................ 4
BASIC QUESTIONS AND ANSWERS ABOUT
US AND OUR POLICY................ 6
What are NYLIAC and New York
Life?......................... 6
What type of variable life
insurance policy does NYLIAC
offer?........................ 6
How is the policy available?..... 6
What is the Cash Value of the
policy?....................... 7
How is the value of an
Accumulation Unit
determined?................... 7
What is a net premium and how is
it applied?................... 7
What is the Fixed Account?....... 8
How long will the policy remain
in force?..................... 8
Is the amount of the death
benefit guaranteed?........... 8
Is the death benefit subject to
income taxes?................. 8
Does the policy have a Cash
Surrender Value?.............. 8
What is a modified endowment
contract?..................... 9
Can the policy become a modified
endowment contract?........... 9
What premiums are payable?....... 9
What are unscheduled premiums?... 9
When are premiums put into the
Fixed Account or the Separate
Account?...................... 10
How are net premiums allocated
among the Allocation
Alternatives?................. 10
Are there charges against the
policy?....................... 10
What is the loan privilege?...... 11
Do I have a right to cancel?..... 11
Can the policy be exchanged or
all amounts allocated to the
Fixed Account?................ 11
How is a person's age
calculated?................... 11
CHARGES UNDER THE POLICY........... 12
</TABLE>
<TABLE>
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PAGE
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Deductions from Premiums......... 12
Sales Expense Charge.......... 12
State Tax Charge.............. 12
Federal Tax Charge............ 12
Cash Value Charges............... 12
Expense Allocation............ 13
Monthly Contract Charge....... 13
Charge for Cost of Insurance
Protection................. 13
Separate Account Charges......... 14
Mortality and Expense Risk
Charge..................... 14
Administrative Charge......... 14
Other Charges for Federal
Income Taxes............... 14
Fund Charges..................... 14
Surrender Charges................ 17
Exceptions to Surrender
Charge..................... 18
How the policy works............. 19
THE SEPARATE ACCOUNT............... 19
MAINSTAY VP SERIES FUND, INC. ..... 20
THE ALGER AMERICAN FUND............ 20
CALVERT VARIABLE SERIES, INC. ..... 20
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND AND FIDELITY
VARIABLE INSURANCE PRODUCTS FUND
II............................... 21
JANUS ASPEN SERIES................. 21
MORGAN STANLEY DEAN WITTER
UNIVERSAL FUNDS, INC. ........... 22
PORTFOLIOS......................... 22
Additions, Deletions or
Substitutions of
Investments................... 26
Reinvestment..................... 27
GENERAL PROVISIONS OF THE POLICY... 27
Premiums......................... 27
Scheduled Premiums............... 27
Unscheduled Premiums............. 28
Termination...................... 28
Maturity Date.................... 28
DOLLAR COST AVERAGING.............. 29
AUTOMATIC ASSET REALLOCATION....... 30
INTEREST SWEEP..................... 30
</TABLE>
2
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
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<S> <C>
DEATH BENEFIT UNDER THE POLICY..... 31
Face Amount Changes.............. 33
Life Insurance Benefit Option
Changes....................... 33
CASH VALUE AND CASH SURRENDER
VALUE........................... 34
Cash Value....................... 34
Transfers........................ 34
Investment Return................ 34
Cash Surrender Value............. 35
Partial Withdrawals.............. 35
POLICY LOAN PRIVILEGE.............. 36
Source of Loan................... 36
Loan Interest.................... 36
Repayment........................ 37
Interest on Loaned Value......... 37
FREE LOOK PROVISION................ 37
EXCHANGE PRIVILEGE................. 38
Special New York Requirements.... 38
YOUR VOTING RIGHTS................. 38
OUR RIGHTS......................... 39
DIRECTORS AND PRINCIPAL OFFICERS OF
NYLIAC........................... 40
YEAR 2000 READINESS................ 42
THE FIXED ACCOUNT.................. 42
Interest Crediting............... 42
Transfers to Investment Divisions
and to the Fixed Account...... 42
Procedures for Telephone
Transfers..................... 43
FEDERAL INCOME TAX
CONSIDERATIONS................... 43
Tax Status of NYLIAC and the
Separate Account.............. 44
Charges for Taxes................ 44
Diversification Standards and
Control Issues................ 44
Life Insurance Status of
Policy........................ 45
Modified Endowment Contract
Status........................ 46
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Policy Surrenders and Partial
Withdrawals................... 46
Policy Loans and Interest
Deductions.................... 47
Corporate Alternative Minimum
Tax........................... 48
Exchanges or Assignments of
Policies...................... 48
STEP Program..................... 48
Other Tax Issues................. 48
Qualified Plans.................. 49
Withholding...................... 49
ADDITIONAL PROVISIONS OF THE
POLICY........................... 49
Reinstatement Option............. 49
Additional Benefits You Can Get
By Rider...................... 50
Payment Options.................. 52
Payees........................... 52
Proceeds at Interest Options
(Options 1A and 1B)........... 53
Life Income Option (Option 2).... 53
Beneficiary...................... 53
Assignment....................... 54
Limits on Our Rights to Challenge
the Policy.................... 54
Misstatement of Age or Sex....... 54
Suicide.......................... 54
When We Pay Proceeds............. 54
RECORDS AND REPORTS................ 55
SALES AND OTHER AGREEMENTS......... 55
LEGAL PROCEEDINGS.................. 55
INDEPENDENT ACCOUNTANTS............ 56
EXPERTS............................ 56
FINANCIAL STATEMENTS............... 56
FINANCIAL STATEMENTS............... F-1
APPENDIX A. Illustrations of Death
Benefits, Cash Surrender Values
and Accumulated Premiums......... A-1
</TABLE>
THIS PROSPECTUS IS NOT CONSIDERED AN OFFERING IN ANY STATE WHERE THE SALE
OF THIS POLICY CANNOT LAWFULLY BE MADE. NYLIAC DOES NOT AUTHORIZE ANY
INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING OTHER THAN AS DESCRIBED IN
THIS PROSPECTUS OR IN ANY ATTACHED SUPPLEMENT TO THIS PROSPECTUS OR IN ANY
SUPPLEMENTAL SALES MATERIAL NYLIAC PRODUCES.
IN CERTAIN STATES, DIFFERENT PROVISIONS MAY APPLY TO THE POLICY. PLEASE
REFER TO THE POLICY OR ASK YOUR REGISTERED REPRESENTATIVE FOR DETAILS REGARDING
YOUR PARTICULAR POLICY.
3
<PAGE> 9
DEFINITION OF TERMS
ACCUMULATION UNIT: An accounting unit used to calculate the values under the
policy held in the Separate Account.
ACCUMULATION VALUE: The value of Accumulation Units in the Investment Divisions
of the Separate Account. The Accumulation Value is equal to the sum of the
products of the current Accumulation Unit value(s) for each of the Investment
Divisions multiplied by the number of Accumulation Units held in the respective
Investment Divisions.
ALLOCATION ALTERNATIVES: The 18 Investment Divisions of the Separate Account
and the Fixed Account.
BENEFICIARY: The person(s) or entity(ies) you name to receive insurance
proceeds after the Insured dies.
BUSINESS DAY: Generally, any day on which NYLIAC is open and the New York Stock
Exchange ("NYSE") is open for trading. We are closed on national holidays,
Martin Luther King, Jr. Day and the Friday after Thanksgiving. In addition, we
may choose to close on the day immediately preceding or following a national
holiday. Our Business Day ends at 4:00 p.m. Eastern Time or the closing of the
NYSE, if earlier.
CASH SURRENDER VALUE: An amount payable to you upon surrender of the policy.
This amount is equal to the Cash Value less any surrender charges, any deferred
contract charges and any Policy Debt. However, for purposes of determining
whether the policy lapses, any deferred contract charge will not be considered
during the deferral period.
CASH VALUE: The sum of the Accumulation Value and the value in the Fixed
Account.
ELIGIBLE PORTFOLIOS ("PORTFOLIOS"): The mutual fund portfolios of the Funds
that are available for investment through the Investment Divisions of the
Separate Account.
FIXED ACCOUNT: The Allocation Alternative that credits interest at fixed rates
subject to a minimum guarantee. Amounts in the Fixed Account are part of
NYLIAC's general account, which is subject to the claims of its general
creditors.
GUIDELINE ANNUAL PREMIUM: On the Policy Date, it is the annual premium for the
benefits provided, based on guaranteed mortality and expense risk charges and an
interest rate of 4% (for surrender charge purposes only, an interest rate of 5%
is used). It is the same as "guideline level premium" as defined in Section 7702
of the Internal Revenue Code.
INSURED: Person whose life the policy insures.
INVESTMENT DIVISION: A division of the Separate Account. Each Investment
Division invests exclusively in shares of a specified Eligible Portfolio.
ISSUE DATE: The day we approve and issue the policy.
MONTHLY DEDUCTION DAY: The first Monthly Deduction Day will be the Issue Date.
If the Issue Date and the Policy Date are different, deductions made on the
Issue Date will include cost of insurance and administrative charges for the
period from the Policy Date to the Issue Date. Subsequent Monthly Deduction Days
will be on each monthly anniversary of the Policy Date.
POLICY DATA PAGE: Page 2 of the policy, containing the policy specifications.
POLICY DATE: The date we use to determine when your life insurance coverage
begins. We also use this date as the starting point for determining policy
anniversaries, Policy Years and Monthly Deduction Days (other than the first
Monthly Deduction Day which is based on your policy's Issue Date). Your Policy
Date will be the same as your Issue Date, unless you request otherwise.
Generally, you cannot choose a Policy Date that is
4
<PAGE> 10
more than six months before your policy's Issue Date. You can find your Policy
Date on the Policy Data Page.
POLICY DEBT: The amount of the obligation from a policyowner to NYLIAC from
outstanding loans. This amount includes any loan interest accrued to date.
POLICY YEAR: The twelve-month period starting with the Policy Date, and each
twelve-month period thereafter.
SEC GUIDELINE ANNUAL PREMIUM: Same as Guideline Annual Premium, except that the
calculation assumes 5% interest rate, Life Insurance Benefit Option 1, and
assumes that there are no riders. It is used for purposes of calculating
surrender charges.
SEPARATE ACCOUNT: NYLIAC Variable Universal Life Separate Account-I, a
segregated asset account NYLIAC established to receive and invest net premiums
paid under the policies.
5
<PAGE> 11
BASIC QUESTIONS AND ANSWERS ABOUT US AND OUR POLICY
1. WHAT ARE NYLIAC AND NEW YORK LIFE?
New York Life Insurance and Annuity Corporation ("NYLIAC") is a stock life
insurance company incorporated in Delaware in 1980. NYLIAC is licensed to sell
life, accident and health insurance and annuities in the District of Columbia
and all states. In addition to the policies described in this prospectus, NYLIAC
offers other life insurance policies and annuities. This prospectus includes
NYLIAC's financial statements.
NYLIAC is a wholly-owned subsidiary of New York Life Insurance Company
("New York Life"), a mutual life insurance company founded in New York in 1845.
NYLIAC held assets of $ billion at the end of 1998. New York Life has
invested in NYLIAC, and may, in order to maintain capital and surplus in
accordance with state requirements, occasionally make additional contributions
to NYLIAC.
2. WHAT TYPE OF VARIABLE LIFE INSURANCE POLICY DOES NYLIAC OFFER?
In this prospectus, we are offering a flexible premium variable universal
life insurance policy. The policy provides for a death benefit, Cash Surrender
Value, loan privileges and flexible premiums. It is called "flexible" because
you may select the timing and amount of premiums and adjust the death benefit by
increasing or decreasing the face amount (subject to certain restrictions). It
is called "variable" because the death benefit may, and the Cash Surrender Value
will, go up or down depending on the performance of the Investment Division(s)
to which Cash Value is allocated.
The policy is a legal contract between you and NYLIAC. The entire contract
consists of the policy, the application and any riders to the policy.
3. HOW IS THE POLICY AVAILABLE?
The policy is available as a non-qualified policy. This means that the
policy is not available as a qualified policy for use in connection with certain
employee retirement plans that qualify for special federal income tax treatment.
The policy may in the future be available as a qualified policy. The minimum
face amount of a policy is $50,000. Increases must be for at least $5,000 and
are subject to NYLIAC's maximum retention limits. In New Jersey and New York,
increases are allowed once each Policy Year. Generally, the Insured may not be
older than age 80 as of the Policy Date. Before we issue any policy or increase
the policy's face amount, you must give us satisfactory evidence of
insurability. For certain eligible groups under employer-sponsored plans, we may
issue the policy and face amount increases based on our simplified underwriting
rules and procedures.
In some states, policies may be purchased in connection with the Severance
Trust Executive Program ("STEP"), a non-qualified employee benefit plan. STEP
policies are issued on a unisex basis. In Massachusetts and Montana, we also
issue the policy only on a unisex basis. For policies issued on a unisex basis,
you should disregard any reference in this prospectus that makes a distinction
based on the gender of the Insured.
6
<PAGE> 12
4. WHAT IS THE CASH VALUE OF THE POLICY?
The Cash Value is determined by (1) the amount and timing of premiums, (2)
the investment experience of the Investment Divisions you selected, (3) the
interest credited to amounts in the Fixed Account, and (4) any partial
withdrawals and charges imposed on the policy. You bear the investment risk of
any depreciation in value of the assets underlying the Investment Divisions but
you also reap the benefit of any appreciation in their value.
5. HOW IS THE VALUE OF AN ACCUMULATION UNIT DETERMINED?
We calculate an Accumulation Unit each day the New York Stock Exchange
("NYSE") is open for business. We do this at the close of the NYSE (currently
4:00 p.m. Eastern Time). We determine the value of an Accumulation Unit by
multiplying the value of that unit on the prior day when the NYSE was open by
the net investment factor. The net investment factor we use to calculate the
value of an Accumulation Unit is equal to:
(a/b) - c
Where:a = the sum of:
(1) the net asset value of a Portfolio share held in the
Separate Account for that Investment Division determined at
the end of the current day on which we calculate the
Accumulation Unit value, plus
(2) the per share amount of any dividends or capital gain
distributions made by the Portfolio for shares held on the
Separate Account for that Investment Division if the
ex-dividend date occurs since the end of the immediately
preceding day on which we calculate an Accumulation Unit
value for that Investment Division.
b = the net asset value of a Portfolio share held in the Separate
Account for that Investment Division determined as of the end
of the immediately preceding day on which we calculated an
Accumulation Unit value for that Investment Division.
c = a factor representing the mortality and expense risk charges
and the administrative charges. This factor is currently equal,
on an annual basis, to .70% (.60% for mortality and expense
risk and .10% for administrative charges) of the daily net
asset value of a Portfolio share in the Separate Account for
that Investment Division. This factor is deducted on a daily
basis.
The net investment factor may be greater or less than one. Therefore, the
value of an Accumulation Unit may increase or decrease.
6. WHAT IS A NET PREMIUM AND HOW IS IT APPLIED?
When you give us a premium payment, we deduct the sales expense, state tax
and federal tax charges from your premium. We call the remainder the "net
premium". You may allocate this net premium among the 19 Allocation
Alternatives. The Allocation Alternatives consist of 18 Investment Divisions and
the Fixed Account. The 18 Investment Divisions are listed on the first page of
the prospectus.
7
<PAGE> 13
7. WHAT IS THE FIXED ACCOUNT?
As an alternative to the Investment Divisions, you may allocate or transfer
amounts to the Fixed Account. We will credit net premiums allocated to, and any
amounts transferred to, the Fixed Account with a fixed interest rate. We will
set the interest rate in advance at least annually. This rate will never be less
than 4% per year. Interest accrues daily and is credited on each Monthly
Deduction Day. All net premiums allocated or amounts transferred less amounts
withdrawn, transferred from or charged against the Fixed Account, receive the
interest rate in effect at that time. Different rates may apply to loaned and
unloaned funds.
8. HOW LONG WILL THE POLICY REMAIN IN FORCE?
The policy does not automatically terminate if you do not pay the scheduled
premiums. Payment of these premiums does not guarantee the policy will remain in
force. The policy terminates only when the Cash Surrender Value is insufficient
to pay the policy's monthly deductions or where there is any outstanding Policy
Debt that exceeds the Cash Value less surrender charges and deferred contract
charge, and a late period expires without sufficient payment. In New York,
policies issued on or after May 1, 1995 will terminate at the Insured's age 100.
Additional provisions apply to policies with a Guaranteed Minimum Death Benefit
rider. For details see ADDITIONAL PROVISIONS OF THE POLICY--Additional Benefits
You Can Get By Rider--Guaranteed Minimum Death Benefit Rider at page .
9. IS THE AMOUNT OF THE DEATH BENEFIT GUARANTEED?
As long as the policy remains in force, the death benefit will be equal to
the amount calculated under the applicable life insurance benefit option you
selected, plus any death benefit payable on the primary Insured under a rider,
and less any Policy Debt. See DEATH BENEFIT UNDER THE POLICY at page .
Additional provisions apply to policies with a Guaranteed Minimum Death Benefit
rider. For details see ADDITIONAL PROVISIONS OF THE POLICY--Additional Benefits
You Can Get By Rider--Guaranteed Minimum Death Benefit Rider at page .
10. IS THE DEATH BENEFIT SUBJECT TO INCOME TAXES?
The Beneficiary may generally exclude the death benefit paid under a policy
from his/her gross income for federal income tax purposes. For details see
FEDERAL INCOME TAX CONSIDERATIONS at page .
11. DOES THE POLICY HAVE A CASH SURRENDER VALUE?
You may surrender the policy at any time and receive its Cash Surrender
Value. We also allow partial withdrawals subject to certain restrictions. The
Cash Surrender Value of a policy fluctuates with the investment performance of
the Investment Divisions in which the policy has Accumulation Value and the
amount held in the Fixed Account. It may increase or decrease daily.
For federal income tax purposes, you are not usually taxed on increases in
the Cash Surrender Value until you actually surrender the policy. However, you
may be taxed on all or a part of the amount distributed for certain partial
withdrawals and policy loans. For details see CASH VALUE AND CASH SURRENDER
VALUE--Cash Surrender Value at page and FEDERAL INCOME TAX CONSIDERATIONS at
page .
8
<PAGE> 14
12. WHAT IS A MODIFIED ENDOWMENT CONTRACT?
A modified endowment contract is a life insurance policy under which the
cumulative premiums paid during the first seven Policy Years are greater than
the cumulative premiums payable under a hypothetical policy providing for
guaranteed benefits upon the payment of seven level annual premiums. Certain
changes to the policy can subject it to retesting for a new seven-year period.
If your policy is determined to be a modified endowment contract, any
distributions during your lifetime, including collateral assignments, loans and
partial withdrawals, are taxable if there is a gain in the policy. In addition,
you may also incur a penalty tax if the distribution occurs when you are not yet
age 59 1/2.
13. CAN THE POLICY BECOME A MODIFIED ENDOWMENT CONTRACT?
The policy may become a modified endowment contract. We currently test a
policy at issue to determine whether it will be classified as a modified
endowment contract. This at-issue test examines the policy for the first seven
contract years. We base the test on the benefits applied for in the policy
application and the initial premium requested, and on the assumption that there
are no increases in premiums or changes in benefit structure during the period.
We also have procedures to monitor whether a policy may become a modified
endowment contract after issue. For details see FEDERAL INCOME TAX
CONSIDERATIONS--Modified Endowment Contract Status at page .
14. WHAT PREMIUMS ARE PAYABLE?
The Policy Data Page shows the amount and interval of any scheduled
premiums. A scheduled premium does not have to be paid to keep the policy in
force if there is enough Cash Surrender Value to cover the charges made on the
Monthly Deduction Day. You may increase or decrease the amount of any scheduled
premium subject to the limits we set. However, you may not make a premium
payment which would jeopardize the policy's qualification as "life insurance"
under Section 7702 of the Internal Revenue Code. You may also change the
frequency of premiums subject to our minimum premium rules. Scheduled premiums
end on the policy anniversary on which the Insured is age 95.
15. WHAT ARE UNSCHEDULED PREMIUMS?
While the Insured is living, you may pay unscheduled premiums at any time
before the policy anniversary on which the Insured is age 95. Any unscheduled
premiums must equal at least $50. However, you may not make a premium payment
which would jeopardize the policy's qualification as "life insurance" under
Section 7702 of the Internal Revenue Code. Unscheduled premiums also include the
proceeds of an exchange made in accordance with Section 1035 of the Internal
Revenue Code. If an unscheduled premium would result in an increase in the death
benefit greater than the increase in the Cash Value, we reserve the right to
require proof of insurability before accepting that premium and applying it to
the policy. We also reserve the right to limit the number and amount of any
unscheduled premiums. In certain states, an unscheduled premium may be made once
each Policy Year. For details see GENERAL PROVISIONS OF THE POLICY--Premiums at
page .
9
<PAGE> 15
16. WHEN ARE PREMIUMS PUT INTO THE FIXED ACCOUNT OR THE SEPARATE ACCOUNT?
When we receive a premium, we deduct a sales expense charge not to exceed
the amount shown on the Policy Data Page. We also deduct the state tax and
federal tax charges. We will apply the balance of the premium (the net premium)
to the Separate Account and the Fixed Account, in accordance with your
allocation election in effect at the time when the premium is received. We will
do this before any other deductions which may be due are made. (Deductions are
described in greater detail in Question 18, "Are there charges against the
policy?")
17. HOW ARE NET PREMIUMS ALLOCATED AMONG THE ALLOCATION ALTERNATIVES?
You may allocate net premiums to any number of Allocation Alternatives. You
may also raise or lower the percentages of the net premium (which must be in
whole number percentages) allocated to each Allocation Alternative at the time
you make a premium payment. We will allocate net premiums to the MainStay VP
Cash Management Investment Division until the end of the free look period.
Thereafter, we will allocate net premiums in accordance with your instructions.
(In the District of Columbia we allocate the net premium entirely to the
MainStay VP Cash Management Investment Division upon issuance of the policy. On
the later of 20 days after the policy is delivered or 45 days after the
application is executed, we allocate the net premium according to the
policyowner's instructions.)
18. ARE THERE CHARGES AGAINST THE POLICY?
We deduct three charges from each premium, whether scheduled or
unscheduled. A sales expense charge not to exceed 5% is used to partially cover
sales expenses. We also deduct 2% and 1.25% for state tax and federal tax
charges, respectively. We allocate each premium, net of these charges, to the
Fixed Account or the Investment Divisions. Each becomes a part of the Cash
Value. For details see DEDUCTIONS FROM PREMIUMS at page .
On each Monthly Deduction Day, we make the following deductions from the
policy's Cash Value:
(a) A monthly contract charge not to exceed, on an annual basis, the
amount shown on the Policy Data Page. (In the first Policy Year, the excess
of the monthly charge over the amount of the monthly charge applicable in
renewal years is deferred to the earlier of the first policy anniversary or
surrender of the policy. However, if the policy is surrendered in the first
Policy Year, the full amount deferred is deducted).
(b) The monthly cost of insurance; and
(c) The monthly cost for any riders attached to the policy.
We may also make a deduction for any temporary flat extras as set forth on
the Policy Data Page. A temporary flat extra is a charge per $1,000 of the face
amount made against the Cash Value for the amount of time specified on the
Policy Data Page. It is designed to cover the risk of substandard mortality
experience which is not permanent in nature.
The Monthly Deduction Day is shown on the Policy Data Page. The first
Monthly Deduction Day is the Issue Date of the Policy. Subsequent Monthly
Deduction Days will be on each monthly anniversary of the Policy Date.
10
<PAGE> 16
Some deductions are made on a daily basis against the assets of the
Investment Divisions. We assess daily charges, calculated at an annual rate of
.60% and .10% of the value of the assets of each Investment Division, for
mortality and expense risks and administrative charges, respectively. We may
change the mortality and expense risk charge at our option subject to a maximum
charge of .90%. Similarly, we may calculate tax assessments daily. Currently, we
are not making any charges for income taxes, but we may make charges in the
future against the Investment Divisions for federal income taxes attributable to
them.
Additionally, upon a surrender or requested decrease in the policy's face
amount, including decreases caused by a change in the life insurance benefit
option, we assess a surrender charge. A partial withdrawal or a change in the
life insurance benefit option may result in a decrease in face amount. We deduct
the surrender charge from the Cash Value at the time of surrender or decrease.
Partial withdrawals of Cash Value are also subject to a charge not to
exceed the lesser of $25 or 2% of the amount withdrawn. For details see CHARGES
UNDER THE POLICY at page and FEDERAL INCOME TAX CONSIDERATIONS at page .
19. WHAT IS THE LOAN PRIVILEGE?
Using the policy as sole security, you can borrow any amount up to the loan
value of the policy. The loan value on any given date is equal to (i) 90% of the
Cash Value, less applicable surrender charges and less any deferred contract
charges, less (ii) any Policy Debt.
20. DO I HAVE A RIGHT TO CANCEL?
You have the right to cancel the policy at any time during the free look
period and receive a refund. The free look period begins on the date you receive
the policy. It ends 20 days later (or as otherwise required by state law). You
may return the policy to our Principal Office (address listed on the first page
of this prospectus), to any of our agency offices, or to the registered
representative who sold you the policy. For details see FREE LOOK PROVISION at
page
21. CAN THE POLICY BE EXCHANGED OR ALL AMOUNTS ALLOCATED TO THE FIXED
ACCOUNT?
You have the right during the first two Policy Years to either (1) transfer
all of the policy's Accumulation Value to the Fixed Account, or (2) exchange the
policy for a permanent fixed benefit policy we offer for this purpose. Similar
rights are available during the first two years after an increase in the
policy's face amount. Policies issued in Colorado, Massachusetts and New York
have special rights when NYLIAC changes the objective of an Investment Division.
See your policy for additional details, as well as EXCHANGE PRIVILEGE at page
and OUR RIGHTS at page .
22. HOW IS A PERSON'S AGE CALCULATED?
When we refer to a person's age on any date, we mean his or her age on the
nearest birthday. However, the cost of insurance charges will be based on the
Insured's age on the birthday which is nearest to the prior policy anniversary.
11
<PAGE> 17
CHARGES UNDER THE POLICY
We deduct certain charges to compensate us for providing the insurance
benefits under the policy, for any riders, for administering the policy, for
assuming certain risks, and for incurring certain expenses in distributing the
policy.
DEDUCTIONS FROM PREMIUMS
When we receive a premium, whether scheduled or unscheduled, we will deduct
a sales expense charge not to exceed the amount shown on the Policy Data Page.
We will also deduct a state tax charge, which is an amount equal to the expected
average state tax, and a federal tax charge. The net premium will be applied to
the Separate Account and Fixed Account in accordance with your allocation
election in effect at that time, and before any other deductions which may be
due are made.
SALES EXPENSE CHARGE
We will deduct a sales expense charge which will not exceed 5% of any
premium and is in addition to the surrender charge (for a discussion of the
surrender charge, see SURRENDER CHARGES at page ). The sales expense charge is
currently eliminated after the tenth Policy Year. We reserve the right to impose
this charge after Policy Year 10. The amount of the sales expense charge in a
Policy Year is not necessarily related to our actual sales expenses for that
particular year. To the extent that sales expenses are not covered by the sales
expense charge and the surrender charge, they will be recovered from NYLIAC's
surplus, including any amounts derived from the mortality and expense risk
charge or the cost of insurance charge. For a discussion of the commissions paid
under the policy, see SALES AND OTHER AGREEMENTS at page .
STATE TAX CHARGE
Various states impose certain taxes on premiums insurance companies
receive. These taxes vary from state to state. We deduct a charge of 2% to cover
these taxes. We reserve the right to increase this charge (except in New Jersey)
consistent with changes in applicable law.
FEDERAL TAX CHARGE
NYLIAC's federal tax obligations will increase based upon premiums received
under the policies. We deduct 1.25% of each premium to cover this federal tax
charge. We reserve the right to increase this charge consistent with changes in
applicable law and subject to any required approval of the Securities and
Exchange Commission (the "SEC").
CASH VALUE CHARGES
On each Monthly Deduction Day, we deduct a monthly contract charge, a cost
of insurance charge, and a rider charge for the cost of any additional riders.
We deduct these charges from the Accumulation Value and the value in the Fixed
Account in proportion to the non-loaned Cash Value in the Separate Account and
the Fixed Account.
12
<PAGE> 18
EXPENSE ALLOCATION
For policies where we receive the application on or after November 20,
1998, you can tell us how you want us to deduct the policy's monthly cash value
charges. You can instruct us to deduct these cash value charges from the
MainStay VP Cash Management Investment Division and/or the Fixed Account. If the
value in the MainStay VP Cash Management Investment Division and/or Fixed
Account you have chosen is insufficient to pay these charges, we will deduct as
much of the charges as possible from these investment options. We will then
deduct the remainder from the amounts in all of the Investment Divisions and the
amount not held as collateral for a loan in the Fixed Account in proportion to
the amounts in these investment options.
If you do not provide us with any instructions on how you would like your
expenses allocated, we will deduct the charges from the amount in all of the
Investment Divisions and the amount not held as collateral for a loan in the
Fixed Account in proportion to the amounts in these Investment Divisions.
MONTHLY CONTRACT CHARGE
In the first Policy Year, there is a charge currently equal to $300 on an
annual basis to compensate us for costs incurred in providing certain
administrative services including premium collection, recordkeeping, processing
claims and communicating with policyowners. In subsequent Policy Years, the
charge currently is equal to $72 on an annual basis. These charges are not
designed to produce a profit. These charges may increase or decrease, but they
will never exceed $324 on an annual basis in the first Policy Year and $96 in
each subsequent Policy Year. These charges are deducted on each Monthly
Deduction Day. In the first Policy Year, the excess of the annual charge over
the amount of the annual charge applicable in renewal years (currently $228) is
advanced to your Accumulation Value and deduction is deferred to the earlier of
(1) the first policy anniversary or (2) surrender of the policy.
CHARGE FOR COST OF INSURANCE PROTECTION
A charge for the cost of insurance protection is deducted on each Monthly
Deduction Day. The charge is based on such factors as the gender, duration,
underwriting class, and issue age of the Insured, the life insurance benefit
option in effect at that time, the face amount and the Cash Value of the policy.
This charge is also based on future expectations of such factors as investment
income, mortality, expenses and persistency. The charge varies monthly because
it is determined by adding the amount of any applicable flat extra charge to the
applicable cost of insurance rates and then multiplying by the amount at risk
each policy month. Any change in the cost of insurance rates will be in
accordance with the procedures and standards on file with all appropriate
officials, including the Superintendent of Insurance of the State of New York.
For the initial face amount, the monthly cost of insurance rates will be
reviewed whenever the rates for new issues change, but in any event, at least
once every five years, and not more frequently than annually. The cost of
insurance rates will never exceed the guaranteed rates shown in the policy. For
increases in face amount, the cost of insurance rates will vary based on the
Insured's gender, underwriting class, attained age as of the nearest birthday at
the time of the increase and the duration from the date of the increase, not the
current attained age. The charge for cost of insurance protection
13
<PAGE> 19
and any charge for any optional benefits added by rider are deducted from the
Cash Value.
Under an increase in face amount, new cost of insurance rates apply to the
new coverage segment based on the underwriting classification and rating for the
increase. Elected decreases in face amount reduce or cancel prior segments and
their associated cost of insurance rates on a last-in-first-out basis.
SEPARATE ACCOUNT CHARGES
MORTALITY AND EXPENSE RISK CHARGE
We charge the Investment Divisions for the mortality and expense risks we
assume. We deduct a daily charge at an annual rate of .60% of the value of each
Investment Division's assets. We may change the mortality and expense risk
charge, subject to a maximum of .90%.
The mortality risk we assume is that the group of lives insured under our
policies may, on average, live for shorter periods of time than we estimated.
The expense risk we assume is that our costs of issuing and administering
policies may be more than we estimated.
If these charges are insufficient to cover assumed risks, the loss will be
deducted from NYLIAC's surplus. Conversely, if the charge proves more than
sufficient, any excess will be added to the NYLIAC surplus.
ADMINISTRATIVE CHARGE
We charge the Investment Divisions a daily charge for providing policy
administrative services equal, on an annual basis, to .10% of the average daily
net asset value of the Separate Account. This charge is not designed to produce
a profit and is guaranteed not to increase.
OTHER CHARGES FOR FEDERAL INCOME TAXES
We do not currently make any charge against the Investment Divisions for
federal income taxes attributable to them. However, we reserve the right to make
such a charge in order to provide for the future federal income tax liability of
the Investment Divisions. For more information on charges for federal income
taxes, see FEDERAL INCOME TAX CONSIDERATIONS at page .
FUND CHARGES
Each Investment Division of the Separate Account purchases shares of the
corresponding Portfolio at net asset value. The net asset value reflects the
investment advisory fees and other expenses that are deducted from the assets of
the Portfolio. The advisory fees and other expenses are not fixed or specified
under the terms of the policy, and they may vary from year to year. These fees
and expenses are described in the Funds' prospectuses. The following chart
reflects fees and charges that are provided by the Fund or its agents, which are
based on 1998 expenses, and may reflect estimated changes:
14
<PAGE> 20
The chart on the following two pages summarizes the 1998 Separate Account
charges applicable to a policy, as well as the charges at the Fund level:(a)
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD MAINSTAY VP
CAPITAL CASH MAINSTAY VP MAINSTAY VP CORPORATE INTERNATIONAL
APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT BOND EQUITY
------------ ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average net assets)
Mortality and Expense Risk
Charges.......................
Administrative Charges..........
Total Separate Account Annual
Expenses......................
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT
(as a % of average net assets)
Advisory Fees...................
Administration Fees.............
Other Expenses..................
Total Fund Annual Expenses......
<CAPTION>
MAINSTAY VP
TOTAL MAINSTAY VP MAINSTAY VP
RETURN VALUE BOND
----------- ----------- -----------
<S> <C> <C> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average net assets)
Mortality and Expense Risk
Charges.......................
Administrative Charges..........
Total Separate Account Annual
Expenses......................
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT
(as a % of average net assets)
Advisory Fees...................
Administration Fees.............
Other Expenses..................
Total Fund Annual Expenses......
</TABLE>
- ------------
15
<PAGE> 21
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP ALGER AMERICAN CALVERT FIDELITY VIP
GROWTH INDEXED SMALL SOCIAL FIDELITY VIP II EQUITY-
EQUITY EQUITY CAPITALIZATION BALANCED CONTRAFUND INCOME
----------- ----------- -------------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average net assets)
Mortality and Expense Risk
Charges.......................
Administrative Charges..........
Total Separate Account Annual
Expenses......................
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT
(as a % of average net assets)
Advisory Fees...................
Administration Fees.............
Other Expenses..................
Total Fund Annual Expenses......
<CAPTION>
JANUS ASPEN MORGAN STANLEY
JANUS ASPEN SERIES DEAN WITTER
SERIES WORLDWIDE EMERGING
BALANCED GROWTH MARKETS EQUITY
----------- ----------- --------------
<S> <C> <C> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average net assets)
Mortality and Expense Risk
Charges.......................
Administrative Charges..........
Total Separate Account Annual
Expenses......................
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT
(as a % of average net assets)
Advisory Fees...................
Administration Fees.............
Other Expenses..................
Total Fund Annual Expenses......
</TABLE>
- ------------
16
<PAGE> 22
SURRENDER CHARGES
During the first 15 Policy Years, a surrender charge will be assessed on a
complete surrender or decrease in face amount, including decreases caused by a
change in the life insurance benefit option or partial withdrawals on policies
with Life Insurance Benefit Option 1. This surrender charge is in addition to
the sales expense charge discussed on page .
The surrender charge in the first Policy Year is equal to:
(A) 25% of premiums paid to date up to the Guideline Annual Premium,
as determined in accordance with applicable SEC rules, for the first year;
plus
(B) 5% of premiums paid in that year that are in excess of the SEC
Guideline Annual Premium for the first year but not in excess of the sum of
the SEC Guideline Annual premium through the sixth Policy Year.
The surrender charge in and after the second Policy Year is equal to the
applicable percentage shown in the table below multiplied by the Base Surrender
Charge. The Base Surrender Charge is equal to:
(A) 25% of the lesser of (i) the premiums paid to date or (ii) the SEC
Guideline Annual Premium for the first Policy Year; plus
(B) 5% of the lesser of (i) premiums paid in excess of the SEC
Guideline Annual Premium for the first Policy Year or (ii) the sum of the
SEC Guideline Annual Premiums for the first six Policy Years minus the SEC
Guideline Annual premium for the first Policy Year.
<TABLE>
<CAPTION>
YEAR SURRENDER CHARGE
---- ----------------
<S> <C>
2-6.................................................. 100%
7.................................................. 90%
8.................................................. 80%
9.................................................. 70%
10.................................................. 60%
11.................................................. 50%
12.................................................. 40%
13.................................................. 30%
14.................................................. 20%
15.................................................. 10%
16+................................................. 0%
</TABLE>
During the first two Policy Years, the surrender charge is further limited
to the sum of:
(A) 30% of all premiums paid during the first two Policy Years up to
one SEC Guideline Annual Premium; plus
(B) 10% of all premiums in the first two Policy Years in excess of one
SEC Guideline Annual Premium, but not more than two SEC Guideline Annual
Premiums; plus
(C) 9% of all premium payments in the first two Policy Years in excess
of two SEC Guideline Annual Premiums; less
17
<PAGE> 23
(D) any sales expense charges deducted from such premiums; less
(E) any surrender charge previously deducted.
Surrender charges and surrender charge periods are calculated separately
for the initial face amount and for each increase in the face amount, except
ones caused by a change in the life insurance benefit option. Premium payments
after an increase will be allocated between the initial face amount and the
increase based on the relative SEC Guideline Annual Premiums. A decrease in face
amount will result in the imposition of a surrender charge equal to the
difference between the surrender charge that would have been payable on a
complete surrender prior to the decrease and the surrender charge which would be
payable on a complete surrender after the decrease.
For example, assume a policy with a $100,000 face amount is to be decreased
to a $50,000 face amount. If a complete surrender of the policy prior to the
decrease would result in a surrender charge of $1,250 and a complete Surrender
of the $50,000 remaining face amount after the decrease would result in a
surrender charge of $750, the surrender charge imposed in connection with the
decrease will be $500 ($1,250-$750). Where, because of increases in face amount,
there are multiple schedules of surrender charges, the charge applied will be
based first on the surrender charge associated with the last increase in face
amount, then on each prior increase, in the reverse order in which the increases
occurred, and then to the initial face amount.
The percentages specified above and/or the Policy Year in which the
surrender charge is reduced may vary for individuals having a life expectancy of
less than 20 years either at the time that a policy is issued or the face amount
is increased.
EXCEPTIONS TO SURRENDER CHARGE
There are a number of exceptions to the imposition of a surrender charge,
including but not limited to, cancellation of a policy by us, the payment of
proceeds upon the death of the Insured, or a required Internal Revenue Code
minimum distribution for the policy.
18
<PAGE> 24
HOW THE POLICY WORKS
This example is based on the illustration from page A-1, assuming a 6%
hypothetical gross annual investment return and current charges in the first
Policy Year:
<TABLE>
<S> <C> <C>
Scheduled Annual Premium........................................
less: Sales expense charge (5%)..............................
State tax charge (2%)..................................
Federal tax charge (1.25%).............................
equals: Net premium............................................
plus: Net investment performance (varies monthly)............
less: Monthly contract charges ($6 per month currently)......
less: Charges for cost of insurance (varies monthly).........
equals: Cash Value.............................................
less: Surrender charge (25% of premium up to SEC Guideline
Annual Premium plus 5% of excess premiums paid)........
less: Balance of first year monthly contract charge(1).......
equals: Cash Surrender Value(at end of year 1).................
</TABLE>
- ------------
(1) In the first Policy Year, the excess of the annual charge over the annual
charge applicable in renewal years is advanced to your Accumulation Value
and deduction is deferred to the earlier of the first policy anniversary or
surrender of the policy.
THE SEPARATE ACCOUNT
The Separate Account was established as of June 4, 1993, pursuant to
resolutions of the NYLIAC Board of Directors. The Separate Account is registered
as a unit investment trust with the SEC under the Investment Company Act of
1940, but such registration does not mean that the SEC supervises the
management, or the investment practices or policies, of the Separate Account.
Although the assets of the Separate Account belong to NYLIAC, these assets
are held separately from the other assets of NYLIAC. The Separate Account's
assets are not chargeable with liabilities incurred in any of NYLIAC's other
business operations (except to the extent that assets in the Separate Account
exceed the reserves and other liabilities of the Separate Account). The income,
capital gains and capital losses incurred on the assets of the Separate Account
are credited to or are charged against the assets of the Separate Account,
without regard to the income, capital gains or capital losses arising out of any
other business NYLIAC may conduct. Therefore, the investment performance of the
Separate Account is entirely independent of both the investment performance of
NYLIAC's Fixed Account and the performance of any other separate account.
The Separate Account currently has 18 Investment Divisions which invest
premiums solely in the corresponding Eligible Portfolios of the Funds.
Investment Divisions may, subject to any required regulatory approvals, be added
or deleted at our discretion.
NYLIAC may accumulate in the Separate Account the charge for mortality and
expense risks, monthly charges assessed against the policy and investment
results applicable to those assets that are in excess of net assets supporting
the policies.
19
<PAGE> 25
MAINSTAY VP SERIES FUND, INC.
The Separate Account currently invests in eleven Portfolios of the MainStay
VP Series Fund, a diversified open-end management investment company.
MacKay-Shields, Monitor and Madison Square provide investment advisory
services to these Portfolios in accordance with the policies, programs and
guidelines established by the Board of Directors of the MainStay VP Series Fund.
As compensation for such services, the MainStay VP Series Fund pays each
investment adviser a fee. The Portfolios, their investment advisers and the fees
are listed in the table below.
<TABLE>
<CAPTION>
INVESTMENT ADVISERS PORTFOLIOS ADVISORY FEE
- ------------------------------------- ------------------------------------- ----
(AS A PERCENTAGE
OF THE AGGREGATE
DAILY NET
ASSETS)
<S> <C> <C>
MacKay-Shields Financial Corporation MainStay VP Capital Appreciation .36%
("MacKay-Shields") MainStay VP Cash Management .25%
MainStay VP Convertible .36%
MainStay VP Government .30%
MainStay VP High Yield Corporate Bond .30%
MainStay VP International Equity .60%
MainStay VP Total Return .32%
MainStay VP Value .36%
Monitor Capital Advisors, Inc.
("Monitor") MainStay VP Indexed Equity .10%
Madison Square Advisors, Inc. MainStay VP Bond .25%
("Madison Square") MainStay VP Growth Equity .25%
</TABLE>
See the prospectus for the MainStay VP Series Fund which is attached to this
prospectus.
THE ALGER AMERICAN FUND
The Separate Account currently invests in the Alger American Small
Capitalization Portfolio of The Alger American Fund. Currently, the Alger
American Small Capitalization Portfolio is the only Portfolio available through
The Alger American Fund for investment by the Separate Account.
Fred Alger Management, Inc. ("FAM") provides investment advisory services
to the Alger American Small Capitalization Portfolio in accordance with the
policies, programs and guidelines established by the Board of Trustees of The
Alger American Fund. As compensation for such services, The Alger American Fund
pays FAM a fee in the form of a daily charge at an annual rate of .85% of the
average daily net assets of the Portfolio. See the prospectus for The Alger
American Fund which is attached to this prospectus.
CALVERT VARIABLE SERIES, INC.
The Separate Account currently invests in the Calvert Social Balanced
Portfolio of the Calvert Variable Series. Currently, the Calvert Social Balanced
Portfolio is the only
20
<PAGE> 26
Portfolio available through the Calvert Variable Series for investment by the
Separate Account.
Calvert Asset Management Company, Inc. ("CAM") provides investment advisory
services to the Calvert Social Balanced Portfolio in accordance with the
policies, programs and guidelines established by the Board of Directors of the
Calvert Variable Series. As compensation for such services, the Calvert Variable
Series pays CAM a fee in the form of a daily charge at an annual rate of .70% of
the first $500 million of the average daily net assets of the Calvert Social
Balanced Portfolio, .65% of the next $500 million of average daily net assets of
the Portfolio, and .60% of the average daily net assets of the Portfolio in
excess of $1 billion. This fee may be reduced or increased by up to 0.15%,
depending on the performance of the Calvert Social Balanced Portfolio relative
to the Lipper Balanced Funds Index. See the prospectus for the Calvert Variable
Series which is attached to this prospectus.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND AND
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Separate Account currently invests in the Fidelity VIP II Contrafund
and Fidelity VIP Equity-Income Portfolios of the Fidelity Variable Insurance
Products Funds. Currently, the Fidelity VIP II Contrafund and Fidelity VIP
Equity-Income Portfolios are the only Eligible Portfolios available through the
Fidelity Funds for investment by the Separate Account.
Fidelity Management and Research Company ("FMR") provides investment
advisory services to the Fidelity VIP II Contrafund and Fidelity VIP
Equity-Income Portfolios in accordance with the policies, programs and
guidelines established by the Boards of Trustees of the Fidelity Variable
Insurance Products Funds. As compensation for such services, the Fidelity Funds
pay FMR a monthly fee in the form of a charge, calculated on a monthly basis by
adding a group fee rate to an individual Portfolio fee rate, and multiplying the
result by the Portfolios' average net assets. The group fee rate is based on the
average net assets of all the mutual fund assets advised by FMR, and cannot rise
above .52%. FMR pays, at its own expense, FMR U.K. and FMR Far East an annual
fee equal to 50% of its management fee rate with respect to the Fidelity VIP II
Contrafund Portfolio's investments that each sub-advisor manages on a
discretionary basis. See the prospectus for the Fidelity Variable Insurance
Products Funds which is attached to this prospectus.
JANUS ASPEN SERIES
The Separate Account currently invests in the Janus Aspen Series Balanced
and Janus Aspen Series Worldwide Growth Portfolios of the Janus Aspen Series.
Currently, the Janus Aspen Series Balanced and Janus Aspen Series Worldwide
Growth Portfolios are the only Eligible Portfolios available through the Janus
Aspen Series for investment by the Separate Account.
Janus Capital Corporation ("JCC") provides investment advisory services to
the Janus Aspen Series Balanced and Janus Aspen Series Worldwide Growth
Portfolios in accordance with the policies, programs and guidelines established
by the Board of Trustees of the Janus Aspen Series. As compensation for such
services, the Janus
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<PAGE> 27
Aspen Series pays JCC a management fee in the form of a daily charge at an
annual rate of .75% for the first $300 million of the average daily net assets
of each Portfolio, .70% of the next $200 million of the average daily net assets
of each Portfolio, and .65% of an amount over $500 million of the average daily
net assets of each Portfolio. JCC has agreed to reduce the advisory fee for each
Portfolio to the extent that such fee exceeds the effective rate of the Janus
retail fund corresponding to such Portfolio. JCC may terminate this fee
reduction at any time upon 90 days' notice to the Board of Trustees of the Janus
Aspen Series. See the prospectus for the Janus Aspen Series which is attached to
this prospectus.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
The Separate Account currently invests in the Morgan Stanley Dean Witter
Emerging Markets Equity Portfolio of the Morgan Stanley Dean Witter Fund.
Currently, the Morgan Stanley Dean Witter Emerging Markets Equity Portfolio is
the only Eligible Portfolio available through the Morgan Stanley Dean Witter
Fund for investment by the Separate Account.
Morgan Stanley Dean Witter Investment Management Inc. ("MSDWI") provides
investment advisory services to the Morgan Stanley Dean Witter Emerging Markets
Equity Portfolio in accordance with the policies, programs and guidelines
established by the Board of Directors of the Morgan Stanley Dean Witter Fund. As
compensation for such services, the Morgan Stanley Dean Witter Fund pays MSDWI a
quarterly management fee in the form of a daily charge at an annual rate of
1.25% for the first $500 million of the average daily net assets of the
Portfolio, 1.20% of the next $500 million of the average daily net assets of the
Portfolio, and 1.15% of the average daily net assets of the Portfolio in excess
of $1 billion. MSDWI has agreed to a reduction in their management fees and to
reimburse the Portfolio if such fees would cause the total annual operating
expenses of the Portfolio to exceed 1.75% of average daily net assets. See the
prospectus for the Morgan Stanley Dean Witter Fund which is attached to this
prospectus.
PORTFOLIOS
The assets of each Portfolio are separate from the others and each such
Portfolio has different investment objectives and policies. As a result, each
Portfolio operates as a separate investment fund and the investment performance
of one Portfolio has no effect on the investment performance of any other
Portfolio.
THE MAINSTAY VP CAPITAL APPRECIATION PORTFOLIO
The MainStay VP Capital Appreciation Portfolio seeks long-term growth of
capital. It seeks to achieve its primary investment objective by maintaining a
flexible approach towards investing in various types of companies as well as
types of securities depending upon the economic environment and the relative
attractiveness of the various securities markets. Generally, the Portfolio will
seek to invest in securities issued by companies with investment characteristics
such as participation in expanding markets, increasing unit sales volume, growth
in revenues and earnings per share superior to that of the average common stocks
comprising indices such as the Standard & Poor's 500 Composite Price Index ("S&P
500") and increasing return on investment. Dividend
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<PAGE> 28
income, if any, is a consideration incidental to the Portfolio's objective of
growth of capital.
THE MAINSTAY VP CASH MANAGEMENT PORTFOLIO
The MainStay VP Cash Management Portfolio seeks as high a level of current
income as is consistent with preservation of capital and maintenance of
liquidity. It invests primarily in short-term U.S. Government Securities,
obligations of banks, commercial paper, short-term corporate obligations and
obligations of U.S. and non-U.S. issuers denominated in U.S. dollars. An
investment in the MainStay VP Cash Management Portfolio is neither insured nor
guaranteed by the U.S. Government, and there can be no assurance that the
Portfolio will be able to maintain a stable net asset value of $1.00 per share.
THE MAINSTAY VP CONVERTIBLE PORTFOLIO
The MainStay VP Convertible Portfolio seeks capital appreciation together
with current income. The Portfolio will invest primarily in convertible
securities consisting of bonds, debentures, corporate notes, preferred stocks or
other securities which are convertible into common stocks. Certain of the
Portfolio's investments have speculative characteristics.
THE MAINSTAY VP GOVERNMENT PORTFOLIO
The MainStay VP Government Portfolio seeks a high level of current income,
consistent with safety of principal. It will invest primarily in U.S. Government
securities which include U.S. Treasury obligations and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities. The U.S.
Government securities purchased for this Portfolio, but not the shares of the
Portfolio themselves, are issued or guaranteed by the U.S. Government or its
agencies or instrumentalities.
THE MAINSTAY VP HIGH YIELD CORPORATE BOND PORTFOLIO
The MainStay VP High Yield Corporate Bond Portfolio seeks maximum current
income through investment in a diversified portfolio of high yield, high risk
debt securities. This Portfolio seeks to achieve its primary objective by
investment in a diversified portfolio of high yield debt securities which are
ordinarily in the lower rating categories of recognized rating agencies that is,
rated Baa to B by Moody's Investors Services, Inc. ("Moody's") or BBB to B by
Standard & Poor's ("S&P"). Securities rated lower than Baa by Moody's or BBB by
S&P, or, if not rated, of equivalent quality, are sometimes referred to as "high
yield" securities or "junk bonds." The potential for high yield is accompanied
by higher risk. Certain of the Portfolio's investments have speculative
characteristics. Capital appreciation is a secondary objective which will be
sought only when consistent with this Portfolio's primary objective.
THE MAINSTAY VP INTERNATIONAL EQUITY PORTFOLIO
The MainStay VP International Equity Portfolio seeks long-term growth of
capital by investing in a portfolio consisting primarily of non-U.S. equity
securities. Current income is a secondary objective. In pursuing its investment
objective, the Portfolio will seek to invest in securities that provide the
potential for strong return but that do not, in MacKay-Shields' judgment,
present undue or imprudent risk. The Portfolio pursues its
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<PAGE> 29
objectives by investing its assets in a diversified portfolio of common stocks,
preferred stocks, warrants and comparable equity securities.
THE MAINSTAY VP TOTAL RETURN PORTFOLIO
The MainStay VP Total Return Portfolio seeks to realize current income
consistent with reasonable opportunity for future growth of capital and income.
The Portfolio maintains a flexible approach by investing in a broad range of
securities, which may be diversified by company, by industry and by type. The
Portfolio may invest in common stocks, convertible securities, warrants and
fixed-income securities, such as bonds, preferred stocks and other debt
obligations, including money market instruments.
THE MAINSTAY VP VALUE PORTFOLIO
The MainStay VP Value Portfolio seeks maximum long-term total return from a
combination of capital growth and income. It seeks to achieve this objective by
following flexible investment policies emphasizing investment in common stocks
which are, in the opinion of MacKay-Shields, undervalued at the time of
purchase. This Portfolio will normally invest in dividend-paying common stocks
that are listed on a national securities exchange or traded in the
over-the-counter market, but may also invest in non-dividend paying stocks in
accordance with MacKay-Shields' judgment.
THE MAINSTAY VP BOND PORTFOLIO
The MainStay VP Bond Portfolio seeks the highest income over the long-term
consistent with preservation of principal. It will invest primarily in
fixed-income debt securities of an investment grade, but may also invest in
lower-rated securities, convertible debt, and preferred and convertible
preferred stock.
THE MAINSTAY VP GROWTH EQUITY PORTFOLIO
The MainStay VP Growth Equity Portfolio seeks long-term growth of capital,
with income as a secondary consideration. It will invest principally in common
stock (and securities convertible into, or with rights to purchase, common
stock) of well-established, well-managed companies which appear to have better
than average growth potential.
THE MAINSTAY VP INDEXED EQUITY PORTFOLIO
The MainStay VP Indexed Equity Portfolio seeks to provide investment
results that correspond to the total return performance (reflecting reinvestment
of dividends) of common stocks in the aggregate, as represented by the S&P 500.
Using a full replication method, the Portfolio invests in all 500 stocks in the
S&P 500 in the same proportion as their representation in the S&P 500. The S&P
500 is an unmanaged index considered representative of the U.S. stock market.
The MainStay VP Indexed Equity Portfolio is neither sponsored by or affiliated
with the S&P 500.
THE ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
The Alger American Small Capitalization Portfolio seeks long-term capital
appreciation. Except during temporary defensive periods, the Portfolio invests
at least 65% of its total assets in equity securities of companies that, at the
time of purchase of the securities, have total market capitalization within the
range of companies included in the
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<PAGE> 30
Russell 2000 Growth Index or the S&P Small Cap 600 Index, updated quarterly.
Both indexes are broad indexes of small capitalization stocks. The Portfolio may
invest up to 35% of its total assets in equity securities of companies that, at
the time of purchase, have total market capitalization outside this combined
range and in excess of that amount (up to 100% of its assets) during temporary
defensive periods.
THE CALVERT SOCIAL BALANCED PORTFOLIO
The Calvert Social Balanced Portfolio seeks to achieve a total return above
the rate of inflation through an actively managed nondiversified portfolio of
common and preferred stocks, bonds and money market instruments that offer
income and capital growth opportunity and that satisfy the social concern
criteria established for this Portfolio.
THE FIDELITY VIP II CONTRAFUND PORTFOLIO
The Fidelity VIP II Contrafund Portfolio seeks long-term capital
appreciation by investing in securities of companies whose value FMR believes is
not fully recognized by the public. The Portfolio normally invests in common
stock and securities convertible into common stock, but has the flexibility to
invest in other types of securities.
THE FIDELITY VIP EQUITY-INCOME PORTFOLIO
The Fidelity VIP Equity-Income Portfolio seeks reasonable income by
investing primarily in income-producing equity securities. In choosing these
securities, the Portfolio will also consider the potential for capital
appreciation. Secondarily, the Portfolio's goal is to achieve a yield that
exceeds the composite yield on the securities comprising the S&P 500 Index.
THE JANUS ASPEN SERIES BALANCED PORTFOLIO
The Janus Aspen Series Balanced Portfolio seeks long-term capital growth,
consistent with preservation of capital and balanced by current income. It is a
diversified Portfolio that, under normal circumstances, pursues its objective by
investing 40 to 60% of its assets in securities selected primarily for their
growth potential and 40 to 60% of its assets in securities selected primarily
for their income potential. The Portfolio normally invests at least 25% of its
assets in fixed-income senior securities, which include debt securities and
preferred stock.
THE JANUS ASPEN SERIES WORLDWIDE GROWTH PORTFOLIO
The Janus Aspen Series Worldwide Growth Portfolio seeks long-term growth of
capital in a manner consistent with the preservation of capital. It invests in a
diversified portfolio of common stocks of foreign and domestic issuers. The
Portfolio has the flexibility to invest on a worldwide basis in companies and
organizations of any size, regardless of country of organization or place of
principal business activity. The Portfolio normally invests in issuers from at
least five different countries, including the United States. The Portfolio may
at times invest in fewer than five countries or even in a single country.
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<PAGE> 31
THE MORGAN STANLEY DEAN WITTER EMERGING MARKETS EQUITY PORTFOLIO
The Morgan Stanley Dean Witter Emerging Markets Equity Portfolio seeks
long-term capital appreciation by investing primarily in common and preferred
stocks, convertible securities, rights and warrants to purchase common stocks,
sponsored and unsponsored ADR's and other equity securities of emerging market
country issuers. Under normal circumstances, at least 65% of the Portfolio's
total assets will be invested in emerging market countries in which the
Portfolio's investment adviser believes the economies are developing strongly
and in which the markets are becoming more sophisticated.
THERE IS NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL ATTAIN THEIR
RESPECTIVE STATED OBJECTIVES.
Additional information concerning the investment objectives and policies of
the Portfolios and the investment advisory services and charges can be found in
the current prospectus for the relevant Fund, each of which is attached to this
prospectus. The Funds' prospectuses should be read carefully before any decision
is made concerning the allocation of net premiums to an Investment Division
corresponding to a particular Portfolio.
The Funds' shares may also be available to certain separate accounts
funding variable annuity policies offered by NYLIAC. This is called "mixed
funding." Except for the MainStay VP Series Fund, shares of all other Funds may
also be available to separate accounts of insurance companies unaffiliated with
NYLIAC. This is called "shared funding." Although we do not anticipate any
inherent difficulties arising from mixed and shared funding, it is theoretically
possible that, due to differences in tax treatment or other considerations, the
interests of owners of various contracts participating in a certain Fund might
at some time be in conflict. The Board of Directors/Trustees of each Fund, each
Fund's investment advisers, and NYLIAC are required to monitor events to
identify any material conflicts that arise from the use of the Funds for mixed
and shared funding. For more information about the risks of mixed and shared
funding please refer to the relevant Fund prospectus.
We provide certain services to you in connection with the investment of
premiums in the Investment Divisions, which, in turn, invest in the Portfolios.
These services include, among others, providing information about the
Portfolios. We receive a service fee from the investment advisers or other
service providers of some of the Funds in return for providing services of this
type. Currently, we receive service fees at annual rates ranging from .10% to
.21% of the aggregate net asset value of the shares of some of the Eligible
Portfolios held by the Investment Divisions.
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
NYLIAC retains the right, subject to any applicable law, to make additions
to, deletions from, or substitutions for, the Portfolio shares held by any
Investment Division. NYLIAC reserves the right to eliminate the shares of any of
the Portfolios and to substitute shares of another portfolio of a Fund, or of
another registered open-end management investment company. We may do this if the
shares of the Portfolios are no longer available for investment or, if we
believe investment in any Portfolio would become inappropriate in view of the
purposes of the Separate Account. To the extent
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<PAGE> 32
required by law, substitutions of shares attributable to your interest in an
Investment Division will not be made until you have been notified of the change.
Nothing contained herein shall prevent the Separate Account from purchasing
other securities for other series or classes of policies, or from effecting a
conversion between series or classes of policies on the basis of requests made
by policyowners.
NYLIAC may also establish additional Investment Divisions for the Separate
Account. Each additional Investment Division will purchase shares in a new
portfolio of a Fund or in another mutual fund. New Investment Divisions may be
established when, in the sole discretion of NYLIAC, marketing, tax, investment
or other conditions so warrant. Any new Investment Divisions will be made
available to existing policyowners on a basis NYLIAC determines. NYLIAC may also
eliminate one or more Investment Divisions, if, in its sole discretion,
marketing, tax, investment or other conditions warrant.
In the event of any substitution or change, NYLIAC may, by appropriate
endorsement, change the policies to reflect such substitution or change. If
deemed to be in the best interests of persons having voting rights under the
policies, the Separate Account may be operated as a management company under the
Investment Company Act of 1940, may be deregistered under such Act in the event
such registration is no longer required, or may be combined with one or more
other separate accounts.
REINVESTMENT
All dividends and capital gain distributions from Portfolios are
automatically reinvested in shares of the distributing Portfolio at their net
asset value on the payable date.
GENERAL PROVISIONS OF THE POLICY
This section of the prospectus describes the general provisions of the
policy, and is subject to the terms of the policy. You may review a copy of the
policy upon request.
PREMIUMS
You may allocate a portion of each net premium to one or more Investment
Divisions or the Fixed Account. You may currently maintain Cash Value in any
number of the Allocation Alternatives. You select a premium payment schedule in
the application and are not bound by an inflexible premium schedule. Premiums
must be sent to our Principal Office or to the address indicated for payment on
your notice. Two premium concepts are very important under the policy: scheduled
premiums and unscheduled premiums.
SCHEDULED PREMIUMS
The amount of the scheduled premium is shown on the Policy Data Page.
There is no penalty if the scheduled premium is not paid. Payment of the
scheduled premium, however, does not guarantee coverage for any period of time.
Instead, the continuance of the policy depends upon the policy's Cash Surrender
Value. If the Cash Surrender Value becomes insufficient to pay certain monthly
charges and a late period expires without sufficient payment the policy will
terminate. For details see TERMINATION.
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<PAGE> 33
Policies that are maintained at Cash Surrender Values just sufficient to
cover fees and charges or that are otherwise minimally funded are more at risk
for not being able to maintain such Cash Surrender Values. The risk arises
because of market fluctuation and other performance-related risks. When
determining the amount of your scheduled premium payments, you should consider
funding your policy at a level that can maximize the investment opportunities
within your policy and minimize the risks associated with market fluctuations.
UNSCHEDULED PREMIUMS
While the Insured is living, you may make unscheduled premium payments of
at least $50 at any time prior to the policy anniversary on which the Insured is
age 95. However, in no event may the premium be an amount which would jeopardize
the policy's qualification as "life insurance," as defined under Section 7702 of
the Internal Revenue Code. Unscheduled premiums also include the proceeds of an
exchange made in accordance with Section 1035 of the Internal Revenue Code. If
an unscheduled premium would result in an increase in the life insurance benefit
greater than the increase in the Cash Value, we reserve the right to require
proof of insurability before we accept and apply the payment to the policy. We
also reserve the right to limit the number and amount of any unscheduled
premiums. In certain states, unscheduled premiums may be made only once each
Policy Year.
TERMINATION
The policy does not terminate for failure to pay premiums since payments,
other than the initial premium, are not specifically required. Rather, if on a
Monthly Deduction Day, the Cash Surrender Value is less than the monthly
deduction charge for the next policy month, the policy will continue for a late
period of 62 days after that Monthly Deduction Day.
We allow a 62 day late period to pay any premium necessary to cover the
overdue monthly deduction and/or excess policy loan. We will mail a notice to
you at your last known address, and a copy to the last known assignee on our
records, if any, at least 31 days before the end of the late period which states
this amount. During the late period, the policy remains in force. If we do not
receive the required payment before the end of the late period, the policy will
end and there will be no Cash Value or death benefit. If the Insured dies during
the late period, we will pay the death benefit. However, these proceeds will be
reduced by the amount of any Policy Debt and monthly deduction charges for the
full policy month or months that run from the beginning of the late period
through the policy month in which the Insured dies.
MATURITY DATE
For all policies issued prior to May 1, 1995 (except in New Jersey), the
death benefit payable for all ages is based on the life insurance benefit option
in effect and any decreases or increases made in the policy face amount as shown
on the Policy Data Page. For all policies issued in New Jersey and for policies
issued on or after May 1, 1995 in all other states, a policy matures beginning
on the anniversary on which the Insured is age 95 and the face amount of the
policy, as shown on the Policy Data Page, will no longer apply. Instead, the
death benefit under the policy will equal the Cash Surrender Value of the
policy. You will be notified one year prior to maturity that, upon
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<PAGE> 34
reaching attained age 95, you may elect either to receive the Cash Surrender
Value of the policy at such time or to continue to hold the policy. Please
consult your tax adviser regarding the tax implications of these options.
If the policy is held, the policy's Accumulation Value will be transferred
to the Fixed Account and it will be credited with interest at an annual rate of
not less than 4%. No further monthly deductions will be made for cost of
insurance. You may surrender the policy for an amount equal to the Cash
Surrender Value of the policy by presenting to our Principal Office a signed
written request providing the information we request. (In New York, when the
Insured reaches attained age 100, you will automatically receive the Cash
Surrender Value of the policy.) If the policy is still in force upon the death
of the Insured, these proceeds will be paid to the Beneficiary.
Any insurance on an Other Covered Insured, provided by a rider attached to
the policy, which is still in effect will end on the policy anniversary when the
Insured is age 95. However, if an Other Covered Insured is younger than age 70
when the rider ends, that insured can convert the term insurance at that time as
provided in the rider.
DOLLAR COST AVERAGING
Dollar cost averaging is a systematic method of investing which allows you
to purchase units of the Investment Divisions at regular intervals in fixed
dollar amounts so that the cost of your units is averaged over time and over
various market cycles. The main objective of dollar cost averaging is to achieve
an average cost per share that is lower than the average price per unit during
volatile market conditions. Since the same dollar amount is transferred to an
Investment Division with each transfer, more units are purchased in the
Investment Division if the value per unit is low and fewer units are purchased
if the value per unit is high. Therefore, a lower than average cost per unit may
be achieved if prices fluctuate over the long term. Similarly, for each transfer
out of an Investment Division, more units are sold in an Investment Division if
the value per unit is low and fewer units are sold if the value per unit is
high. Dollar cost averaging does not assure a profit or protect against a loss
in declining markets. Because it involves continuous investing regardless of
price levels, you should consider your financial ability to continue to make
purchases during periods of low price levels.
If you decide to use the dollar cost averaging feature, we will ask you to
specify:
-- the dollar amount you want to have transferred (minimum transfer: $100);
-- the Investment Division you want to transfer money from;
-- the Investment Divisions and/or Fixed Account you want to transfer money
to;
-- the date on which you want the transfers to be made, within the limits
indicated below; and
-- how often you would like the transfers made (monthly, quarterly,
semi-annually or annually).
You are not allowed to make dollar cost averaging transfers from the Fixed
Account, but you can make dollar cost averaging transfers into the Fixed
Account.
We will make all dollar cost averaging transfers on the date you specify or
on the next Business Day. You may specify any day of the month, except the 29th,
30th or 31st of a month. We will not process a dollar cost averaging transfer
unless we have
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<PAGE> 35
received a written request at our Principal Office. We must receive this request
at least one week before the date dollar cost averaging transfers are scheduled
to begin.
The minimum Cash Value required to elect this option is $5,000. NYLIAC will
automatically suspend this feature if the Cash Value is less than $4,500 on a
transfer date. Once the Cash Value equals or exceeds this amount, the dollar
cost averaging transfers will automatically resume as scheduled.
You may cancel the dollar cost averaging option at any time by written
request. You may not elect dollar cost averaging if you have chosen the
automatic asset reallocation option. However, you have the option of alternating
between these two options.
The dollar cost averaging option is available to you at no additional cost.
AUTOMATIC ASSET REALLOCATION
This option allows you to maintain the percentage allocated to each
Investment Division at a pre-set level. For example, you might specify that 50%
of the Accumulation Value be allocated to the MainStay VP Growth Equity
Investment Division and 50% of the Accumulation Value be allocated to the
MainStay VP Bond Investment Division. Over time, the fluctuations in each of
these Investment Division's investment results will shift the percentages. If
you elect the automatic asset reallocation option, NYLIAC will automatically
transfer your Accumulation Value back to the percentages you specify. You may
choose to have reallocations made quarterly, semi-annually or annually. We will
process automatic asset reallocations of less than $500. The minimum
Accumulation Value required to elect this option is $5,000. After your initial
election of this option, you must maintain a minimum Accumulation Value of
$4,500 in order to have subsequent reallocations made under this option. There
is no minimum amount which you must allocate among the Investment Divisions
under this option.
You may cancel the automatic asset reallocation option at any time in a
written request to our Principal Office. We will suspend this option
automatically if the Cash Value is less than $4,500. Once the Cash Value equals
or exceeds this amount, the automatic asset reallocations will automatically
resume. The automatic asset reallocation option may not be elected if you have
selected the dollar cost averaging option. However, you have the option of
alternating between these two options.
The automatic asset reallocation option is available to you at no
additional cost.
INTEREST SWEEP
This feature is available at no additional cost.
For policies where we receive the application on or after November 20,
1998, you can direct that the interest earned in the Fixed Account be
periodically transferred into the Investment Division(s) you specify. This
automatic process is called interest sweep. If you choose the interest sweep
feature, we will ask you to specify:
-- the date you want this feature to start;
-- the percentage you want to be transferred to each Investment Division;
and
-- how often (monthly, quarterly, semi-annually or annually) you want us to
make these transfers.
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<PAGE> 36
We will begin to make interest sweep transfers when the amount in the Fixed
Account is at least $5,000. You can specify any date that you want us to make
these automatic transfers, with the exception of the 29th, 30th or 31st of a
month.
You cannot choose the interest sweep feature if you have instructed us to
deduct any part of your policy expenses from the Fixed Account. If you want to
elect the interest sweep feature and you want to allocate your expenses, you
must allocate your expense deduction to the MainStay VP Cash Management
Investment Division.
You can request interest sweep in addition to either the dollar cost
averaging or automatic asset reallocation features. If an interest sweep
transfer is scheduled for the same day as a dollar cost averaging or automatic
asset reallocation transfer, we will process the interest sweep transfer first.
If an interest sweep transfer would cause more than 20% of the amount you
have in the Fixed Account at the beginning of the Policy Year to be transferred
from the Fixed Account, we will not process the transfer and we will suspend the
interest sweep feature. If the amount you have in the Fixed Account is less than
$4,500, we will automatically suspend this feature. Once the amount you have in
the Fixed Account equals or exceeds this amount, the interest sweep feature will
automatically resume as scheduled. You may cancel the interest sweep feature at
any time by written request.
DEATH BENEFIT UNDER THE POLICY
The death benefit is the amount payable to the named Beneficiary when the
Insured dies prior to the Insured's maturity date. Upon receiving due proof of
death, we pay the Beneficiary the death benefit amount determined as of the date
the Insured dies. All or part of the death benefit can be paid in cash or
applied under one or more of our payment options described under ADDITIONAL
PROVISIONS OF THE POLICY--Payment Options at page .
The amount of the death benefit is determined by whether you have chosen
Life Insurance Benefit Option 1 or Life Insurance Benefit Option 2.
Life Insurance Benefit Option 1--Provides a death benefit equal to the
greater of (i) the face amount of the policy (ii) or a percentage of the
Cash Value equal to the minimum necessary for the policy to qualify as life
insurance under Section 7702 of the Internal Revenue Code. (See the
following table for these percentages.)
Life Insurance Benefit Option 2--Provides a death benefit equal to the
greater of (i) the face amount of the policy plus the Cash Value or (ii) a
percentage of the Cash Value equal to the minimum necessary for the policy
to qualify as life insurance under Section 7702 of the Internal Revenue
Code. (See the following table for these percentages.)
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<PAGE> 37
<TABLE>
<CAPTION>
INSURED'S AGE INSURED'S AGE
ON POLICY IRC SECTION 7702 ON POLICY IRC SECTION 7702
ANNIVERSARY LIFE INSURANCE % ANNIVERSARY LIFE INSURANCE %
- ------------- ---------------- ------------- ----------------
<S> <C> <C> <C>
0-40 250 61 128
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75-90 105
55 150 91 104
56 146 92 103
57 142 93 102
58 138 94 101
59 134 95 & Over 100
60 130
</TABLE>
The value of any additional benefits provided by rider on the primary
Insured's life is added to the amount of the death benefit. We pay interest on
the death benefit from the date of death to the date the death benefit is paid
or a payment option becomes effective. The interest rate equals the rate
determined under the Interest Payment Option as described in ADDITIONAL
PROVISIONS OF THE POLICY--Payment Options. We subtract any outstanding Policy
Debt, and any unpaid monthly deductions if the death occurs during the 62-day
late period and then credit the interest. Under both life insurance benefit
options, negative investment experience in the Investment Divisions will never
result in a death benefit that will be less than the face amount, so long as the
policy remains in force.
EXAMPLE 1:
The following example shows how the death benefit varies as a result of
investment performance on a policy with Life Insurance Benefit Option 1 assuming
age at death is 45:
<TABLE>
<CAPTION>
POLICY A POLICY B
-------- --------
<S> <C> <C>
(1) Face amount....................................... $100,000 $100,000
(2) Cash Value on date of death (and no loans)........ $ 50,000 $ 40,000
(3) Internal Revenue Code ("IRC") Section 7702 Life
Insurance Percentage on date of death............. 215% 215%
(4) Cash Value multiplied by the IRC Percentage....... $107,500 $ 86,000
(5) Death benefit = greater of (1) and (4)............ $107,500 $100,000
</TABLE>
32
<PAGE> 38
EXAMPLE 2:*
The following example shows how the death benefit varies as a result of
investment performance on a policy assuming age at death is 97 (past maturity
date):
<TABLE>
<CAPTION>
POLICY A POLICY B POLICY C
-------- -------- --------
<S> <C> <C> <C>
(1) Face amount as shown on the Policy Data
Page................................... $100,000 $100,000 $200,000
(2) Cash Surrender Value on date of
death.................................... $ 50,000 $110,000 $110,000
(3) Death benefit after maturity = Cash
Surrender Value........................ $ 50,000 $110,000 $110,000
</TABLE>
- ---------------
* For all policies issued in New Jersey and for policies issued on or after May
1, 1995 in all other states.
FACE AMOUNT CHANGES
Certain states may impose limitations on increasing or decreasing the face
amount of your policy. Refer to your policy for details. You can apply in
writing to have the face amount increased or decreased.
The amount of an increase in face amount must be for at least $5,000 and is
subject to our maximum retention limits. Evidence of insurability satisfactory
to us is required for an increase. We reserve the right to limit increases, and
the number of increases may be limited by state law. Generally, the Insured may
not be older than age 90 as of the date of any increase in face amount. Any
increase will take effect on the next Monthly Deduction Day on or after we
approve the application for increase. An increase in face amount may affect the
net amount at risk, which may increase the cost of insurance charge. Face amount
increases incur new 15 year surrender charge periods on the amount of the
increase.
Decreases in coverage are allowed. The face amount will be reduced by
canceling insurance segments on a last purchased, first canceled basis and the
appropriate surrender charge will be deducted from the Cash Value. (For a
discussion of the charges associated with a decrease, see SURRENDER CHARGES at
page .) Consult your tax adviser regarding the tax consequences of decreasing
your coverage. A decrease in face amount is effective on the next Monthly
Deduction Day following the receipt of a written request. The face amount may
not be decreased to less than $50,000. We reserve the right to terminate the
option of decreasing the face amount, and the number of decreases may be limited
by state law.
LIFE INSURANCE BENEFIT OPTION CHANGES
You can change the life insurance benefit option of the policy. Any change
of option will take effect on the Monthly Deduction Day on or after the date we
receive your signed request at our Principal Office or such other location that
we indicate to you in writing. If you change from Option 1 to Option 2, the face
amount of the policy will be decreased by the Cash Value. In that case, a
surrender charge will be assessed if a surrender charge is then currently
applicable. If you change from Option 2 to Option 1, the face amount of the
policy will be increased by the Cash Value. A new schedule of surrender charges
will apply to the increase except for policies where we receive the application
on or after November 20, 1998.
33
<PAGE> 39
CASH VALUE AND CASH SURRENDER VALUE
CASH VALUE
The Cash Value of the policy is the sum of the Accumulation Value and the
value in the Fixed Account. Initially, the Cash Value equals the net amount of
the first premium paid under the policy. This amount is allocated among the
Fixed Account and the Investment Divisions according to the allocation
percentages requested in the application, or as subsequently changed by you.
TRANSFERS
All or part of the Cash Value may be transferred among Investment Divisions
or from an Investment Division to the Fixed Account. We reserve the right to
limit the number of transfers to the Fixed Account after the first two Policy
Years. (In New Jersey and New York, no more than twelve transfers per Policy
Year may be made from the Investment Divisions to the Fixed Account after the
first two Policy Years.) The minimum amount that may be transferred from one
Investment Division to another Investment Division, or to the Fixed Account, is
the lesser of (i) $500 or (ii) the total value of the Accumulation Units in the
Investment Division from which the transfer is being made. If, after an ordered
transfer, the value of the remaining Accumulation Units in an Investment
Division or the value in the Fixed Account would be less than $500, the entire
value will be transferred. There is no charge for the first twelve transfers in
any one Policy Year. We reserve the right to charge $30 for each transfer in
excess of twelve per year. Any transfer made in connection with the dollar cost
averaging and automatic asset reallocation options will not count as a transfer
toward the twelve-transfer limit. However, transfers made in connection with the
Interest Sweep option will count toward the twelve-transfer limit.
Transfers may also be made from the Fixed Account to the Investment
Divisions in certain situations. (See THE FIXED ACCOUNT at page ___ .)
Transfer requests must be in writing and sent to our Principal Office on a
form we approve or by telephone in accordance with established procedures.
Transfers from Investment Divisions will be made based on the Accumulation Unit
values at the end of the Business Day on which NYLIAC receives the transfer
request. (See ADDITIONAL PROVISIONS OF THE POLICY--When We Pay Proceeds at page
_____ .)
INVESTMENT RETURN
The investment return of a policy is based on:
-- The Accumulation Units held in each Investment Division,
-- The investment experience of each Investment Division as measured by its
actual net rate of return, and
-- The interest rate credited on Cash Values held in the Fixed Account.
The investment experience of an Investment Division reflects increases or
decreases in the net asset value of the shares of the underlying Fund, any
dividend or capital gains distributions declared by the Fund, and any charges
against the assets of the Investment Division. This investment experience is
determined each Business Day on which the net asset value of the underlying Fund
is determined. The actual net rate
34
<PAGE> 40
of return for an Investment Division measures the investment experience from the
end of one Business Day to the end of the next Business Day.
CASH SURRENDER VALUE
The policy may be surrendered for its Cash Surrender Value at any time
before the Insured dies. Unless a later effective date is selected, the
surrender is effective on the date we receive the policy and a written request
in proper form at our Principal Office. The policy and written request for
surrender are deemed received on the date on which they are received by mail at
NYLIAC's Principal Office or such other location that we indicate to you in
writing. If, however, the date on which they are received is not a Business Day,
or if they are received other than through the mail after the closing of the New
York Stock Exchange, they are deemed received on the next Business Day.
Because the Cash Value of the policy fluctuates with the performance of the
Investment Divisions and the interest rate credited to the Fixed Account, and
because certain surrenders or partial withdrawals are subject to a surrender
charge, and because of charges made against the policy, the total amount paid
upon surrender of the policy (taking into account any prior withdrawals) may be
more or less than the total premiums.
PARTIAL WITHDRAWALS
The owner of a policy may make a partial withdrawal of the policy's Cash
Surrender Value at any time while the Insured is living, in writing or by
calling a service representative at (800) 598-2019. The minimum partial
withdrawal is $500 unless we agree otherwise. We will apply uniform rules in
agreeing to partial withdrawals under $500. The amount available for a partial
withdrawal is the policy's Cash Surrender Value at the end of the Business Day
during which we receive the request for the partial withdrawal at our Principal
Office. The partial withdrawal will be made on a pro-rata basis from the Fixed
Account and/or Investment Divisions, unless you indicate otherwise. If the
portion of your request for a partial withdrawal from the Fixed Account or
Investment Division is greater than the amount in the Fixed Account and/or
Investment Division, we will reduce the partial withdrawal by that amount and
pay you the entire value of that Fixed Account and/or Investment Division, less
any surrender charge which may apply. Partial withdrawals will cause a reduction
in the policy's face amount when Life Insurance Benefit Option 1 is in effect.
We reserve the right to limit the amount and frequency of partial withdrawals,
and state law limitations may also apply. Partial withdrawals and surrenders may
be subject to surrender charges. For details see CHARGES UNDER THE POLICY at
page _____ .
We may charge a fee, not to exceed the lesser of $25 or 2% of the amount
withdrawn, for processing a partial withdrawal. This fee will be deducted from
the remaining balance of the Fixed Account and/or Investment Divisions based on
the withdrawal allocation, or if the fee amount exceeds the remaining balance,
it will be deducted from the Fixed Account and/or Investment Divisions on a pro
rata basis. When you make a partial withdrawal, the death benefit, the Cash
Value, and the Cash Surrender Value will be reduced by the amount of the
withdrawal proceeds you receive as of the date you receive the payment and any
applicable surrender charge.
35
<PAGE> 41
POLICY LOAN PRIVILEGE
Using the policy as sole security, you can borrow any amount up to the loan
value of the policy. The loan value on any given date is equal to (i) 90% of the
Cash Value, less applicable surrender charges and less any deferred contract
charges, less (ii) any Policy Debt. Certain of the provisions discussed below,
applicable to policy loans, differ considerably in the state of New Jersey. New
Jersey policyowners should review their policy for further details.
SOURCE OF LOAN
When a loan is requested, an amount necessary to increase the value in the
Fixed Account to 108% of the new loan amount, less the excess of the value in
the Fixed Account over any outstanding policy loan, is transferred from the
Separate Account to the Fixed Account. This transfer will be made on a pro-rata
basis from the various Investment Divisions. While a policy loan is outstanding,
no partial withdrawals or transfers which would reduce the value in the Fixed
Account below 108% of the outstanding loan are permitted. However, monthly
deductions, such as the cost of insurance charge, may reduce the Fixed Account
below the 108% threshold.
LOAN INTEREST
The effective annual loan interest rate is 8%, which is payable in arrears.
We reserve the right to set a lower rate which we will determine at least once
every twelve months, but not more frequently than once in any three month
period. Loan interest for the Policy Year in which a loan is taken will be due
on the next policy anniversary. Loan interest accrues each day and is payable on
the earliest of the policy anniversary, on the date of death, surrender, or
lapse, or on the date of a loan increase or loan repayment. Loan interest not
paid in cash as of the policy anniversary, or prior to the expiration of the
late period, will be charged as a new loan. An amount may need to be transferred
to the Fixed Account to cover this increased loan amount.
If we have set a loan interest rate lower than 8% per year, any subsequent
increase in the interest rate will be subject to the following conditions:
(1) The effective date of any increase in the interest rate will not
be earlier than one year after the effective date of the
establishment of the previous rate.
(2) The amount by which the interest rate may be increased will not
exceed one percent per year, but the rate of interest will in no
event ever exceed 8%.
(3) We will give notice of the interest rate in effect when a loan is
made and when sending notice of loan interest due.
(4) If a loan is outstanding 40 days or more before the effective date
of an increase in the interest rate, we will notify you of that
increase at least 30 days prior to the effective date of the
increase.
(5) We will give notice of any increase in the interest rate when a
loan is made during the 40 days before the effective date of the
increase.
36
<PAGE> 42
REPAYMENT
All or part of an unpaid loan can be repaid before the Insured's death or
before the policy is surrendered. Loan repayments are allocated to the
Investment Divisions and/or the Fixed Account in accordance with premium
allocations in effect at the time of the loan repayment, unless you indicate
otherwise. If a loan is outstanding when the life insurance or surrender
proceeds become payable, we will deduct the amount of any Policy Debt from these
proceeds. In addition, if any Policy Debt exceeds the policy's Cash Surrender
Value, we will mail a notice to you at your last known address and a copy to the
last known assignee on our records. All insurance will end 31 days after the
date on which we mail that notice to you if the excess amount is not paid within
that 31 days.
INTEREST ON LOANED VALUE
The amount of any loan is held in the Fixed Account and earns interest at a
rate we determine. Such rate will never be less than 2% less than the effective
annual loan interest rate and in no event less than 4%.
Currently, the amount in the Fixed Account which is collateral for an
outstanding loan is credited with interest at a rate that is 1% less than the
effective annual loan interest rate during the first 10 Policy Years and 0.5%
less than the effective rate in subsequent Policy Years. These rates are not
guaranteed and can change at any time.
That portion of the policy's Cash Value held in the Fixed Account is not
affected by the Separate Account's investment performance. The Cash Value is
affected because the portion of the Cash Value equal to the policy loan is
credited with an interest rate declared by us rather than a rate of return
reflecting the investment performance of the Separate Account. Any interest
credited on the loan amount in the Fixed Account remains in the Fixed Account
unless you transfer amounts no longer needed as security to the Separate
Account.
FREE LOOK PROVISION
The policy contains a provision that permits cancellation by returning it
to us, or to the registered representative through whom it was purchased, during
the free look period. The free look period begins on the date you receive the
policy and ends 20 days later (or the amount of time required by state law but
not less than 10 days). You may cancel increases in the face amount under the
same time limitations. Premiums will be allocated to the MainStay VP Cash
Management Division until the end of the free look period. (In the District of
Columbia, when the policy is issued, the premium is allocated entirely to the
MainStay VP Cash Management Investment Division. On the later of 20 days after
the policy is delivered or 45 days after the application is executed, the net
premium is allocated according to the policyowner's instructions.) Unless
otherwise required by state law, upon cancellation, you will receive from us the
greater of the policy's Cash Value as of the date the policy is returned or the
premiums paid, less loans and partial withdrawals. The policy will be void as of
the Issue Date. For canceled increases in the face amount, the refund equals the
amount of premiums that are in excess of scheduled premiums which are allocated
to the increase in accordance with the surrender charge provision, less any
portion of such amount previously paid to you.
37
<PAGE> 43
EXCHANGE PRIVILEGE
At any time within 24 months of the Issue Date or after an increase in the
face amount of the policy, you may request that the entire Accumulation Value of
the policy be transferred to the Fixed Account to acquire fixed benefit life
insurance protection on the life of the Insured. However, you may request such a
transfer within 24 months after an increase in the face amount of the policy
solely with respect to the lesser of that portion of the post-increase premiums
attributable to the increase in the face amount of the policy or the
Accumulation Value under the policy. The exchange will become effective when we
receive proper written request.
At any time within 24 months of the Issue Date, you may exchange the policy
for a policy on a permanent plan of life insurance which we offer for this
purpose. We will not require evidence of insurability. The date of exchange will
be the later of (a) the date you send us the policy along with a proper written
request; or (b) the date we receive the policy at our Principal Office, or such
other location that we indicate to you in writing, and the necessary payment for
the exchange. Upon an exchange of a policy, all riders and benefits will end
unless we agree otherwise or unless required under state law. The exchanged
policy will have the same Issue Date, issue age and risk classification as the
original policy. In order to exchange the policy, we will require: (a) that the
policy be in effect on the date of exchange; (b) repayment of any Policy Debt;
and (c) an adjustment, if any, for premiums and Cash Values of the policy and
any new policy.
SPECIAL NEW YORK REQUIREMENTS. In the event of a material change in the
investment policy of a Portfolio, you may convert your policy to a new flexible
premium life insurance policy for an amount of insurance not to exceed the
amount of the death benefit under your original policy on the date of
conversion. The new policy will be based on the same issue age, gender and class
of risk as your original policy but will not offer variable investment options
such as the Investment Divisions. We will not require that you provide evidence
of insurability in order to effect this conversion. You will have 60 days after
the later of (1) effective date of the change in the investment policy of the
Portfolio and (2) the date you receive notification of such change. All riders
attached to your original policy will end on the date of any such conversion.
YOUR VOTING RIGHTS
The Funds are not required to and typically do not hold annual stockholder
meetings. Special stockholder meetings will be called when necessary.
To the extent required by law, whenever a special stockholder meeting is
held, NYLIAC will vote the Portfolio shares held in the Separate Account in
accordance with instructions received from policyowners having voting interests
in the corresponding Investment Divisions. If, however, applicable laws or
regulations change, and as a result, we determine that we are allowed to vote
the Portfolio shares in our own right, we may elect to do so.
The number of votes which are available to a policyowner will be calculated
separately for each Investment Division and will be determined by applying the
policyowner's percentage interest in a particular Investment Division to the
total number of votes attributable to the Investment Division.
38
<PAGE> 44
The number of votes of the Portfolio which are available will be determined
as of the date established by that Portfolio for determining shareholders
eligible to vote at the meeting of the relevant Fund. Voting instructions will
be solicited by written communication prior to such meeting in accordance with
procedures established by the relevant Fund.
Fund shares as to which no timely instructions are received will be voted
in proportion to the voting instructions which are received with respect to all
policies participating in that Investment Division. Voting instructions to
abstain on any item to be voted upon will be applied on a pro rata basis to
reduce the votes eligible to be cast. Each person having a voting interest in an
Investment Division will receive proxy material, reports and other materials
relating to the appropriate Portfolio.
OUR RIGHTS
We reserve the right to take certain actions in connection with our
operations and the operations of the Separate Account. These actions will be
taken in accordance with applicable laws (including obtaining any required
approval of the SEC and any other required regulatory approvals). If necessary,
we will seek your approval.
Specifically, we reserve the right to:
-- add or remove any Investment Division;
-- create new separate accounts;
-- combine the Separate Account with one or more other separate accounts;
-- operate the Separate Account as a management investment company or in
any other form permitted by law;
-- deregister the Separate Account;
-- manage the Separate Account under the direction of a committee or
discharge such committee at any time;
-- transfer the assets of the Separate Account to one or more other
separate accounts; and
-- restrict or eliminate any of the voting rights of policyowners or other
persons who have voting rights as to the Separate Account.
NYLIAC also reserves the right to change the names of the Separate Account.
We have reserved all rights to the name of New York Life Insurance Company
or any part of it. We may allow the Separate Account and other entities to use
our name or part of it, but we may also withdraw this right.
39
<PAGE> 45
DIRECTORS AND PRINCIPAL OFFICERS OF NYLIAC
<TABLE>
<S> <C>
DIRECTORS: POSITIONS DURING LAST FIVE YEARS:
Seymour Sternberg......................... Chairman of the Board, Chief Executive Officer and
President of New York Life from April 1997 to date;
President and Chief Operating Officer of New York
Life from October 1995 to April 1997; Vice Chairman
and President Elect from February 1995 to October
1995; Executive Vice President prior thereto.
President of NYLIAC from November 1995 to May 1997.
Richard M. Kernan, Jr..................... Executive Vice President and Chief Investment Officer
of New York Life from March 1991 to date.
Robert D. Rock............................ Senior Vice President in charge of the Individual
Annuity Department of New York Life from March 1992
to date; Vice President prior thereto. Senior Vice
President of NYLIAC from April 1992 to date.
Frederick J. Sievert...................... Vice Chairman of New York Life from January 1997 to
date; Executive Vice President from February 1995 to
January 1997; Senior Vice President and Chief
Financial Officer--Individual Operations prior
thereto. President of NYLIAC from May 1997 to date;
Executive Vice President from November 1995 to May
1997; Senior Vice President prior thereto.
George J. Trapp........................... Executive Vice President of New York Life from June
1995 to date and Corporate Secretary of New York Life
from November 1995 to date; Senior Vice President of
New York Life from 1991 until June 1995. Member of
the Executive Management Committee of New York Life
since 1994.
Phillip J. Hildebrand..................... Senior Vice President in Charge of the Agency
Department of New York Life from 1996 to date.
Managing Partner of Dallas General Office of New York
Life from 1994 to 1996.
Frank M. Boccio........................... Senior Vice President in charge of Individual Policy
Services Department of New York Life since July 1995;
Vice President of New York Life from 1994 to July
1995.
</TABLE>
40
<PAGE> 46
<TABLE>
<S> <C>
Michael G. Gallo.......................... Senior Vice President in charge of the Individual
Life Department of New York Life from July 1995 to
date; Senior Vice President--Northeastern Agencies
from February 1994 to July 1995; Vice President prior
thereto. Senior Vice President of NYLIAC from August
1995 to date.
Solomon Goldfinger........................ Senior Vice President and Chief Financial Officer in
charge of the Financial Management Department of New
York Life from July 1995 to date; Senior Vice
President in charge of the Individual Life Department
prior thereto. Senior Vice President of NYLIAC from
April 1992 to date.
Howard I. Atkins.......................... Executive Vice President and Chief Financial Officer
of New York Life and NYLIAC from April 1996 to date;
Chief Financial Officer of MidAtlantic Corporation
prior thereto.
OFFICERS:
Jay S. Calhoun, III....................... Senior Vice President and Treasurer of New York Life
from March 1997 to date; Vice President and Treasurer
from November 1992 to March 1997; Corporate Vice
President prior thereto. Senior Vice President and
Treasurer of NYLIAC from May 1997 to date; Vice
President and Treasurer of NYLIAC from January 1993
to May 1997.
Jean E. Hoysradt.......................... Senior Vice President in charge of the Investment
Department of New York Life from March 1992 to date;
Senior Vice President of NYLIAC from April 1992 to
date.
Maryann L. Ingenito....................... Vice President of New York Life from April 1990 to
date. Vice President and Controller (Principal
Accounting Officer) of NYLIAC from December 1994 to
date; Vice President and Assistant Controller prior
thereto.
Frank J. Ollari........................... Senior Vice President in charge of the Mortgage
Finance Department of New York Life from October 1989
to date. Senior Vice President of NYLIAC from April
1992 to date.
</TABLE>
41
<PAGE> 47
<TABLE>
<S> <C>
Joel M. Steinberg......................... Vice President and Actuary of New York Life from
March 1998 to date; Corporate Vice President and
Actuary from March 1996 to March 1998. Actuary prior
to March 1996.
Stephen N. Steinig........................ Senior Vice President and Chief Actuary of New York
Life from February 1994 to date; Chief Actuary and
Controller prior thereto. Senior Vice President and
Chief Actuary of NYLIAC from May 1991 to date.
</TABLE>
YEAR 2000 READINESS
The computer systems we use to process all policy transactions and
valuations need to be modified to accommodate the changeover to Year 2000. These
modifications are necessary for us to be able to continue to administer the
policies in Year 2000 and later. As is the case with most systems projects,
risks and uncertainties exist, and a project could be delayed. We are, however,
working to make these systems modifications, and we expect that the necessary
changes will be completed on time and in a way that will result in no disruption
to our policy servicing operations.
THE FIXED ACCOUNT
The Fixed Account is supported by the assets in NYLIAC's general account,
which includes all of NYLIAC's assets except those assets specifically allocated
to the Separate Account. NYLIAC has sole discretion to invest the assets of the
Fixed Account subject to applicable law. The Fixed Account is not registered
under the federal securities laws and is not generally subject to their
provisions. NYLIAC has been advised that the staff of the SEC has not reviewed
the disclosures in this prospectus relating to the Fixed Account. These
disclosures regarding the Fixed Account may be subject to certain applicable
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
INTEREST CREDITING
NYLIAC guarantees that it will credit interest at an annual rate of at
least 4% to values in or transferred to the Fixed Account under the policies.
NYLIAC may, at its sole discretion, credit a higher rate of interest to the
Fixed Account, or to amounts allocated or transferred to the Fixed Account. The
interest rate will be set by NYLIAC and can change daily. The interest rate may
differ for loaned and non-loaned amounts in the Fixed Account.
TRANSFERS TO INVESTMENT DIVISIONS AND TO THE FIXED ACCOUNT
Amounts may be transferred from the Fixed Account to the Investment
Divisions, subject to the following conditions.
1. Maximum Transfer. The maximum amount you are allowed to transfer from
the Fixed Account to the Investment Divisions during any Policy Year is
20% of the value in the Fixed Account at the beginning of the Policy
Year.
42
<PAGE> 48
2. Minimum Transfer. The minimum amount that you may transfer from the
Fixed Account to the Investment Divisions is the lesser of (i) $500 or
(ii) the value in the Fixed Account. In most states, we will consider
transfers of amounts less than this minimum.
3. Minimum Remaining Value. If, after a contemplated transfer, the
remaining values in the Fixed Account would be less than $500, we have
the right to include that amount in the transfer.
We reserve the right to limit transfers from the Investment Divisions to
the Fixed Account after the first two Policy Years. In New Jersey and New York
after the first two Policy Years, you may not make more than 12 transfers to the
Fixed Account in any one Policy Year. You should review your policy for further
details.
Transfer requests must be in writing on a form approved by NYLIAC or by
telephone in accordance with established procedures.
See the policy for details and a description of the Fixed Account.
PROCEDURES FOR TELEPHONE TRANSFERS
You may effect telephone transfers in two ways. You may directly contact a
service representative at (800)598-2019. You may also request access to an
electronic service known as a Voice Response Unit (VRU). The VRU will permit the
unassisted transfer of monies among the Investment Divisions and/or the Fixed
Account and change of allocation of future payments. If you intend to conduct
telephone transfers through the VRU, you will be asked to complete a Telephone
Authorization Form.
We will undertake reasonable procedures to confirm that instructions
communicated by telephone are genuine. Before a service representative accepts
any requests, callers will be asked for their social security number and
address. All calls will also be recorded. A Personal Identification Number (PIN)
will be assigned to all policyowners who request VRU access. The PIN is selected
by and known only to the policyowner. Proper entry of the PIN is required before
any transactions will be allowed through the VRU. Furthermore, we will confirm
all transactions performed over the VRU and all transactions effected with a
service representative, in writing. NYLIAC is not liable for any loss, cost or
expense for action on telephone instructions which are believed to be genuine in
accordance with these procedures. Telephone transfer requests must be received
no later than 4:00 p.m. Eastern Time to assure same-day processing. Requests
received after 4:00 p.m. will be processed at the end of the next Business Day.
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is general in nature. It is not an exhaustive
discussion of all tax questions that might arise under the policy, and is not
intended as tax advice. No attempt is made to consider any applicable state or
other tax laws and no representation is made as to the likelihood of
continuation of current federal income tax laws and Treasury regulations or of
current interpretations of the Internal Revenue Service. Future legislation,
regulations or interpretations could adversely affect the tax treatment of life
insurance policies. Lastly, there are many areas of the tax law where minimal
guidance exists in the form of Treasury regulations or revenue rulings.
43
<PAGE> 49
While we reserve the right to make changes in the policy to assure that it
continues to qualify as life insurance for tax purposes, we cannot make any
guarantee regarding the future tax treatment of any policy. For complete
information on the tax treatment of the policies, the tax treatment under the
laws of your state, or the impact of proposed or future changes in tax
legislation, regulations or interpretations, you should consult with a tax
advisor.
The ultimate effect of federal income taxes on values under the policy and
on the economic benefit to the policyowner or Beneficiary depends upon NYLIAC's
tax status, upon the terms of the policy and upon the tax status of the
individual concerned.
TAX STATUS OF NYLIAC AND THE SEPARATE ACCOUNT
NYLIAC is taxed as a life insurance company under Subchapter L of the
Internal Revenue Code of 1986. The Separate Account is not a separate taxable
entity from NYLIAC and its operation is taken into account by NYLIAC in
determining its income tax liability. All investment income and realized net
capital gains on the assets of the Separate Account are reinvested and taken
into account in determining Cash Values and are automatically applied to
increase the book reserves associated with the policies. Under existing federal
income tax law, neither the investment income nor any net capital gains of the
Separate Account are taxed to NYLIAC to the extent those items are applied to
increase reserves associated with the policies.
CHARGES FOR TAXES
We impose a federal tax charge equal to 1.25% of premiums received under
the policy to compensate NYLIAC for the federal income tax liability it incurs
under Section 848 of the Internal Revenue Code by reason of its receipt of
premiums under the policy. We may increase the federal tax charge if the federal
government increases this charge. We believe that this charge is reasonable in
relation to the increased tax burden NYLIAC incurs as a result of Internal
Revenue Code Section 848. No other charge is currently made to the Separate
Account for federal income taxes of NYLIAC that may be attributable to the
Separate Account. Periodically, we review the appropriateness of charges to the
Separate Account for NYLIAC's federal income taxes, and in the future, a charge
may be made for federal income taxes incurred by NYLIAC that are attributable to
the Separate Account. In addition, depending on the method of calculating
interest credited to policy values allocated to the Fixed Account (see preceding
section), a charge may also be imposed for the policy's share of NYLIAC's
federal income taxes attributable to the Fixed Account.
Under current laws, NYLIAC may incur state or local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant.
If there is a material change in applicable state or local tax laws, NYLIAC
reserves the right to charge the Separate Account for the portion of such taxes,
if any, attributable to the Separate Account.
DIVERSIFICATION STANDARDS AND CONTROL ISSUES
In addition to other requirements imposed by the Internal Revenue Code, a
policy will qualify as life insurance only if the diversification requirements
of Internal Revenue Code Section 817(h) are satisfied by the Separate Account.
To assure that each policy continues to qualify as life insurance for federal
income tax purposes, we intend to
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comply with Section 817(h) and its regulations. To satisfy these diversification
standards, the regulations generally require that on the last day of each
quarter of a calendar year no more than 55% of the value of a Separate Account's
assets can be represented by any one investment, no more than 70% can be
represented by any two investments, no more than 80% can be represented by any
three investments, and no more than 90% can be represented by any four
investments. For purposes of these rules, all securities of the same issuer
generally are treated as a single investment, but each U.S. Government agency or
instrumentality is treated as separate issuer. In addition a "look-through" rule
applies to treat a pro-rata portion of each asset of each Portfolio as an asset
of the Separate Account holding an interest in such Portfolio.
With respect to variable life insurance contracts, the general
diversification requirements of Section 817(h) are modified to the extent that
any of the assets of the Separate Account are direct obligations of the United
States Treasury. Even if the Separate Account invests only in United States
Treasury securities, it will be treated as adequately diversified under Section
817(h). In addition, for purposes of determining whether its holdings of assets
other than United States Treasury securities are adequately diversified, the
generally applicable percentage limitations are increased based on the value of
the Separate Account's investment in United States Treasury securities.
Notwithstanding this modification of the general diversification requirements,
however, the investments of the Separate Account will be structured to comply
with the general diversification standards because they serve as an investment
vehicle for certain variable annuity contracts which must comply with the
general standards.
In connection with its issuance of temporary regulations under Internal
Revenue Code Section 817(h) in 1986, the Treasury Department announced that such
temporary regulations did not provide guidance concerning the extent to which
policyowners could be permitted to direct their investments to particular
divisions of a separate account and that guidance on this issue would be
forthcoming. Regulations addressing this issue have not yet been issued or
proposed, and it is not clear, at this time, whether such regulations will ever
be issued or what such regulations might provide. If such regulations were to be
issued in the future, it is possible that the policy might need to be modified
to comply with such regulations. For these reasons, we reserve the right to
modify the policy, as necessary, to prevent the policyowner from being
considered the owner of the assets of the Separate Account.
LIFE INSURANCE STATUS OF POLICY
NYLIAC believes that the policy meets the statutory definition of life
insurance under Internal Revenue Code Section 7702 and that the policyowner and
Beneficiary of any policy will receive the same federal income tax treatment as
that accorded to owners and beneficiaries of fixed benefit life insurance
policies. Specifically, the death benefit under the policy will be excludable
from the gross income of the Beneficiary subject to the terms and conditions of
Section 101(a)(1) of the Internal Revenue Code. Pursuant to Section 101(g),
amounts received after December 31, 1996, by the policyowner may also be
excludable from the policyowner's gross income when the Insured has a terminal
illness. (Death benefits under a "modified endowment contract" as discussed
below are treated in the same manner as death benefits under life insurance
contracts that are not so classified.)
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<PAGE> 51
In addition, unless the policy is a "modified endowment contract," in which
case the receipt of any loan under the policy may result in recognition of
income to the policyowner, the policyowner will not be deemed to be in
constructive receipt of the Cash Values, including increments thereon, under the
policy until proceeds of the policy are received upon a surrender of the policy
or a partial withdrawal.
MODIFIED ENDOWMENT CONTRACT STATUS
A policy will be a modified endowment contract if it satisfies the
definition of life insurance set out in the Internal Revenue Code, but it either
fails the additional "7-pay test" set forth in Internal Revenue Code Section
7702A or was received in exchange for a modified endowment contract. A policy
will fail the 7-pay test if the accumulated amount paid under the contract at
any time during the first seven contract years exceeds the total premiums that
would have been payable under a policy providing for guaranteed benefits upon
the payment of seven level annual premiums. A policy received in exchange for a
modified endowment contract will be taxed as a modified endowment contract even
if it would otherwise satisfy the 7-pay test.
While the 7-pay test is generally applied as of the time the policy is
issued, certain changes in the contractual terms of a policy will require a
policy to be retested to determine whether the change has caused the policy to
become a modified endowment contract. For example, a reduction in death benefits
during the first seven contract years will cause the policy to be retested as if
it had originally been issued with the reduced death benefit.
In addition, if a "material change" occurs at any time while the policy is
in force, a new 7-pay test period will start and the policy will need to be
retested to determine whether it continues to meet the 7-pay test. The term
"material change" generally includes increases in death benefits, but does not
include an increase in death benefits which is attributable to the payment of
premiums necessary to fund the lowest level of death benefits payable during the
first seven contract years, or which is attributable to the crediting of
interest with respect to such premiums.
Because the policy provides for flexible premiums, we have instituted
procedures to monitor whether, under our current interpretation of the law,
increases in death benefits or additional premiums cause either the start of a
new seven-year test period or the taxation of distributions and loans. All
additional premiums will be considered in these determinations.
If a policy fails the 7-pay test, all distributions (including loans)
occurring in the year of failure and thereafter will be subject to the rules for
modified endowment contracts. A recapture provision also applies to loans and
distributions that are received in anticipation of failing the 7-pay test. Any
distribution or loan made within two years prior to the date that a policy fails
the 7-pay test is considered to have been made in anticipation of the failure.
POLICY SURRENDERS AND PARTIAL WITHDRAWALS
Upon a full surrender of a policy for its Cash Surrender Value you will
recognize ordinary income for federal tax purposes to the extent that the Cash
Value, less surrender charges and any deferred contract charges, exceeds the
investment in the contract (the total of all premiums paid but not previously
recovered plus any other
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<PAGE> 52
consideration paid for the policy). The tax consequences of a partial withdrawal
from a policy will depend upon whether the partial withdrawal results in a
reduction of future benefits under the policy and whether the policy is a
modified endowment contract.
If the policy is not a modified endowment contract, the general rule is
that a partial withdrawal from a policy is taxable only to the extent that it
exceeds the total investment in the contract. An exception to this general rule
applies, however, if a reduction of benefits occurs during the first 15 years
after a policy is issued and there is a cash distribution associated with that
reduction. In such a case, Internal Revenue Code Section 7702(f)(7) overrides
the general rule and prescribes a formula under which the policyowner may be
taxed on all or a part of the amount distributed. After 15 years, the rule of
Internal Revenue Code Section 7702(f)(7) no longer applies so that cash
distributions from a policy that is not a modified endowment contract will not
be subject to federal income tax, except to the extent they exceed the total
investment in the contract. We suggest that you consult with a tax advisor in
advance of a proposed decrease in face amount or a partial withdrawal. In
addition, any amounts distributed under a "modified endowment contract"
(including proceeds of any loan) are taxable to the extent of any accumulated
income in the policy. In general, the amount which may be subject to tax is the
excess of the Cash Value (both loaned and unloaned) over the previously
unrecovered premiums paid.
Under certain circumstances, a distribution under a modified endowment
contract (including a loan) may be taxable even though it exceeds the amount of
accumulated income in the policy. This can occur because for purposes of
determining the amount of income received upon a distribution (or loan) from a
modified endowment contract, the Internal Revenue Code requires the aggregation
of all modified endowment contracts issued to the same policyowner by an insurer
and its affiliates within the same calendar year. Therefore, loans and
distributions from any one such policy are taxable to the extent of the income
accumulated in all the modified endowment contracts required to be so
aggregated.
If any amount is taxable as a distribution of income under a modified
endowment contract (as a result of a policy surrender, a partial withdrawal or a
loan), it may also be subject to a 10% penalty tax under Internal Revenue Code
Section 72(v). Limited exceptions from the additional penalty tax are available
for certain distributions to individual policyowners. The penalty tax will not
apply to distributions: (i) that are made on or after the date the taxpayer
attains age 59 1/2; or (ii) that are attributable to the taxpayer's becoming
disabled; or (iii) that are part of a series of substantially equal periodic
payments (made not less frequently than annually) made for the life or life
expectancy of the taxpayer.
POLICY LOANS AND INTEREST DEDUCTIONS
We also believe that under current law any loan received under the policy
will be treated as Policy Debt and that, unless the policy is a modified
endowment contract, no part of any loan under a policy will constitute income to
the policyowner. If the policy is a modified endowment contract (see discussion
above) loans will be fully taxable to the extent of the income in the policy
(and in any other contracts with which it must be aggregated) and could be
subject to the additional 10% tax.
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Internal Revenue Code Section 264 provides that interest paid or accrued on
a loan in connection with a policy is generally nondeductible. Certain
exceptions apply, however, with respect to policies covering key employees. In
addition, in the case of policies not held by individuals, special rules may
limit the deductibility of interest on loans that are not made in connection
with a policy. We suggest consultation with a tax advisor for further guidance.
CORPORATE ALTERNATIVE MINIMUM TAX
Ownership of a policy by a corporation may affect the policyowner's
exposure to the corporate alternative minimum tax. In determining whether it is
subject to alternative minimum tax a corporate policyowner must make two
computations. First, the corporation must take into account a portion of the
current year's increase in the "inside build up" or income on the contract in
its corporate-owned policies. Second, the corporation must take into account a
portion of the amount by which the death benefits received under any policy
exceed the sum of (i) the premiums paid on that policy in the year of death, and
(ii) the corporation's basis in the policy (as measured for alternative minimum
tax purposes) as of the end of the corporation's tax year immediately preceding
the year of death.
EXCHANGES OR ASSIGNMENTS OF POLICIES
A change of the policyowner or the Insured or an exchange or assignment of
a policy may have significant tax consequences depending on the circumstances.
For example, an assignment or exchange of a policy may result in taxable income
to the transferring policyowner. Further, Internal Revenue Code Section 101(a)
provides, subject to certain exceptions, that where a policy has been
transferred for value, only the portion of the death benefit which is equal to
the total consideration paid for the policy may be excluded from gross income.
For complete information with respect to policy assignments and exchanges, you
should consult with a qualified tax advisor.
STEP PROGRAM
The Severance Trust Executive Program ("STEP") is an employee welfare
benefit plan that provides severance benefits and life insurance coverage
through a ten-or-more employer trust as described in Section 419A(f)(6) of the
Internal Revenue Code. The tax consequences of participating in a STEP trust are
uncertain under current law. There is a reasonable possibility that
contributions to the STEP trust may not be deductible for income tax purposes.
Moreover, there is at least some risk that an employee or owner may be viewed by
the Internal Revenue Service as receiving gross income in the year contributions
are made to the STEP trust. Prospective participants should have their own
qualified advisors review the legal and actuarial opinions applicable to the
STEP Program.
OTHER TAX ISSUES
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of policy proceeds depend on the
circumstances of each policyowner or Beneficiary.
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<PAGE> 54
QUALIFIED PLANS
In the future, we may make the policy available to certain tax-qualified
employee benefit plans. The rules governing such use are complex, and a
purchaser should not use the policy in conjunction with any such qualified plan
until he or she has consulted a competent tax advisor. The policy may not be
acquired by an Individual Retirement Account (IRA).
WITHHOLDING
Under Section 3405 of the Internal Revenue Code, withholding is generally
required with respect to certain taxable distributions under insurance
contracts. In the case of periodic payments (payments made as an annuity or on a
similar basis), the withholding is at graduated rates (as though the payments
were employee wages). With respect to non-periodic distributions, the
withholding is at a flat rate of 10%. A policyowner can elect to have either
non-periodic or periodic payments made without withholding except where the
policyowner's tax identification number has not been furnished to NYLIAC or the
Internal Revenue Service has notified us that the tax identification number
furnished by the policyowner is incorrect.
Different withholding rules apply to payments made to U.S. citizens living
outside the United States and to non-U.S. citizens living outside of the United
States. U.S. citizens who live outside of the United States generally are not
permitted to elect not to have federal income taxes withheld from payments.
Payments to non-U.S. citizens who are not residents of the United States
generally are subject to 30% withholding, unless an income tax treaty between
their country of residence and the United States provides for either a lower
rate of withholding or an exemption from withholding.
ADDITIONAL PROVISIONS OF THE POLICY
REINSTATEMENT OPTION
For a period of five (5) years after termination, you can request that we
reinstate the policy during the Insured's lifetime. We will not reinstate the
policy if it has been returned for its Cash Surrender Value. Note that a
termination and later reinstatement may cause the policy to become a modified
endowment contract.
Before we will reinstate the policy, we must receive the following:
-- A payment in an amount which is sufficient to keep the policy in force
for at least 3 months. If the policy lapses before and is reinstated
after the first policy anniversary, we must also receive an amount equal
to 150% of any deferred contract charge not previously deducted. This
payment will be in lieu of the payment of all premiums in arrears;
-- Any unpaid loan must also be repaid, together with loan interest at 6%
compounded once each year from the end of the late period to the date of
reinstatement. If a policy loan interest rate of less than 6% is in
effect when the policy is reinstated, the interest rate for any unpaid
loan at the time of reinstatement will be the same as the policy loan
interest rate; and
-- Evidence of insurability satisfactory to us if the reinstatement is
requested more than 30 days after termination.
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If we do reinstate the policy, the face amount for the reinstated policy
will be the same as it would have been if the policy had not terminated. The
effective date of reinstatement will be the Monthly Deduction Day on or
following the date we approve the request for reinstatement.
ADDITIONAL BENEFITS YOU CAN GET BY RIDER
The policy can include additional benefits that we approve based on our
standards and limits for issuing insurance and classifying risks. None of these
benefits depends on the investment performance of the Separate Account or the
Fixed Account. An additional benefit is provided by a rider and is subject to
the terms of both the policy and the rider. The following riders are available.
Guaranteed Minimum Death Benefit ("GMDB") Rider
This rider is subject to state regulatory approvals and may not be
available in all states. Please contact your registered representative to
determine if this rider is available in your state. In addition, the rider title
and requirements for this rider may vary by state. Please contact your
registered representative or refer to your rider for additional information.
This rider guarantees that the policy will not lapse even if the Cash
Surrender Value is not enough to cover the policy's current monthly deduction
charges. Generally, this rider is available with expiry dates of the Insured's
age 70, 80 and, except for policies issued with a substandard underwriting
class, 95. At issue, you can choose any one of the expiry dates, but the
coverage period for the rider must be at least 10 years.
In exchange for the guarantee provided by this rider, you are required to
pay a certain amount of premiums into the policy. The monthly GMDB premium is
calculated for the policy and is shown on the Policy Data Page. However,
premiums do not have to be paid on a monthly basis. On each Monthly Deduction
Day, a GMDB premium test is performed. The GMDB premium test is satisfied if the
total of all premiums paid to date under the policy, less any partial
withdrawals made, are at least equal to the sum of all monthly GMDB premiums
from the date this rider is issued up to that Monthly Deduction Day.
If on a Monthly Deduction Day, the policy does not satisfy the GMDB premium
test by more than the amount of one monthly GMDB premium, you will be notified
by letter that the rider will end unless you pay the amount necessary to pass
the test by the next Monthly Deduction Day. However, we will reinstate the rider
if the required payment is received before the next Monthly Deduction Day
following the date the rider ended.
The monthly GMDB premium can change if certain changes are made to the
policy.
In addition to the premium requirement described above, policyowners must
pay a charge for the rider. The charge is $0.01 per $1000 of the sum of the
policy's base face amount plus any face amount provided by an Other Covered
Insured rider. This charge will be deducted from the policy's Cash Value on each
Monthly Deduction Day.
This rider will end if you take a policy loan during the first two Policy
Years. After the first two Policy Years, loans are permitted but are restricted.
In general, the Cash Surrender Value minus the requested loan must exceed the
total of the monthly GMDB premiums, accumulated at an annual effective interest
rate of 6%, as of that date. If you request a loan which would cause the GMDB
rider to end, we will delay processing the
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request until we receive your signed authorization to terminate the rider. Once
terminated under these circumstances, the rider cannot be reinstated.
This rider will also end if the rider reaches its expiry date or if the
policy ends or is surrendered.
The GMDB rider also covers the monthly deduction charges due for any other
policy riders. However, if monthly deduction charges are being waived under
another policy rider, the GMDB rider is placed in an inactive status and no
benefit under the GMDB rider is in effect. While the rider is in an inactive
status, no charge for the rider is payable, and no GMDB premium testing will be
performed. However, once monthly deductions for the policy are no longer being
waived, the GMDB rider will automatically be restored. Beginning in the next
Monthly Deduction Day, the charge for this rider will be deducted and the GMDB
premium test must again be satisfied.
Children's Insurance Rider
This rider provides level term insurance coverage on the lives of children
of the Insured until the earlier of the policy anniversary on which the child is
age 25 or the policy anniversary on which the Insured is or would have been age
65. At that time, you may convert the rider coverage to a current-dated
permanent life insurance policy.
Term Insurance On Other Covered Insured Rider (also referred to as
Supplemental Insurance Benefit Rider)
This rider provides level term insurance coverage on one or more insureds
and is convertible up until the policy anniversary on which that insured is age
71 or on the death of the primary Insured, if earlier. This rider is currently
not available on the primary Insured.
Monthly Deduction Waiver Rider
This rider provides for the waiver of monthly deduction charges in the
event of total disability of the primary Insured.
Accidental Death Benefit Rider
This rider provides for an additional death benefit in the event the
Insured's death was caused by accidental bodily injury occurring within one year
of the Insured's death. No benefit is payable under this rider if the Insured
dies before his or her first birthday or after the policy anniversary when the
Insured is age 70.
Guaranteed Insurability Rider
This rider allows you to increase the face amount of the policy or purchase
a new policy on the Insured for a specified option amount on specified dates,
without evidence of insurability.
Spouse Paid-Up Insurance Purchase Option Rider (not available in New York)
This rider allows the Insured's spouse or the spouse of an Other Covered
Insured to purchase a paid-up insurance policy on his or her life on the
Insured's or the Other Covered Insured's death. The amount that may be purchased
cannot exceed the death
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benefit on the policy, provided the spouse is the Beneficiary under the policy
or the applicable Term Insurance On Other Covered Insured Rider.
Accelerated Benefits Rider
Generally, this rider allows you to receive 25% or more of the death
benefit up to $250,000, less an interest adjustment, when the Insured has a life
expectancy of twelve months or less. Amounts received under this rider after
December 31, 1996 will generally be excludable from your gross income under
Section 101(g) of the Internal Revenue Code. The exclusion from gross income
will not apply, however, if the policyowner is not the Insured and the
policyowner has an insurable interest in the life of the Insured either because
the Insured is a director, officer or employee of the policyowner or because the
Insured has a financial interest in a business of the policyowner.
When less than 100% of the death benefit is accelerated, the policy stays
in force, with the face amount and other policy values reduced proportionately.
PAYMENT OPTIONS
Death benefits will be paid in one sum, or if elected, all or part of the
death benefit can be placed under one or more of the options described in this
section. If we agree, the death benefit may be placed under some other method of
payment instead. Any death benefits paid in one sum will bear interest
compounded each year from the Insured's death to the date of payment. We set the
interest rate each year. This rate will be at least 3% per year, and will not be
less than required by law.
While the Insured is living, you can elect or change an option. You can
also elect or change one or more Beneficiaries who will be the payee or payees
under that option. After the Insured dies, any person who is to receive proceeds
in one sum (other than an assignee) can elect an option and name payees. The
person who elects an option can also name one or more successor payees to
receive any amount remaining at the death of the payee. Naming these payees
cancels any prior choice of successor payees. A payee who did not elect the
option does not have the right to advance or assign payments, take the payments
in one sum, or make any other change. However, the payees may be given the right
to do one or more of these things if the person who elects the option tells us
in writing and we agree.
If we agree, a payee who elects Option 1A, 1B, or 2 may later elect to have
any amount we still have, or the present value of any elected payments, placed
under some other option described in this section. When any payment under an
option would be less than $100, we may pay any unpaid amount or present value in
one sum.
PAYEES
Only individuals who are to receive payments in their own behalf may be
named as payees or successor payees, unless we agree otherwise. We may require
proof of the age or the survival of a payee.
It may happen that when the last surviving payee dies, we still have an
unpaid amount, or there are some payments which remain to be made. If so, we
will pay the unpaid amount with interest to the date of payment, or pay the
present value of the remaining payments, to that payee's estate in one sum. The
present value of the
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remaining payments is based on the interest rate used to compute them, and is
always less than their sum.
PROCEEDS AT INTEREST OPTIONS (OPTIONS 1A AND 1B)
The policy proceeds may be left with us at interest. We will set the
interest rate each year. This rate will be at least 3% per year.
For the Interest Accumulation Option (Option 1A), we credit interest each
year on the amount we still have. This amount can be withdrawn at any time in
sums of $100 or more. We pay interest to the date of withdrawal on sums
withdrawn.
For the Interest Payment Option (Option 1B), we pay interest once each
month, every 3 months, every 6 months, or once each year, as chosen, based on
the amount we still have.
LIFE INCOME OPTION (OPTION 2) (NOT AVAILABLE IN MASSACHUSETTS AND MONTANA)
We make equal payments each month during the lifetime of the payee or
payees. We determine the amount of the monthly payment by applying the death
benefit to purchase a corresponding single premium life annuity policy which is
being issued when the first payment is due. Payments are based on the
appropriately adjusted annuity premium rate in effect at that time, but will not
be less than the corresponding minimum amount shown in the appropriate Option 2
table of your policy. These minimum amounts are based on the 1983 Table "a" with
Projection Scale G and with interest compounded each year at 3%.
When asked, we will state in writing what the minimum amount of each
monthly payment would be under these options. It is based on the gender and
adjusted age of the payee(s). To find the adjusted age in the year the first
payment is due, we increase or decrease the payee's age at that time, as
follows:
<TABLE>
<CAPTION>
1995 AND 2036 AND
EARLIER 1996-2005 2006-2015 2016-2025 2026-2035 LATER
- -------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
+2 +1 0 -1 -2 -3
</TABLE>
For Option 2, we make a payment each month while the payee is living.
Payments do not change, and are guaranteed for 10 years, even if both payees die
sooner.
BENEFICIARY
A Beneficiary is any person(s) and/or entity(ies) you name to receive the
death benefit after the Insured dies. You name the Beneficiary when you apply
for the policy. There may be different classes of beneficiaries, such as primary
and secondary. These classes set the order of payment. There may be more than
one Beneficiary in a class.
The Beneficiary may be changed during the Insured's lifetime by writing to
our Principal Office or such other location that we indicate to you in writing.
Generally, the change will take effect as of the date the request is signed. If
no Beneficiary is living when the Insured dies, unless provided otherwise, the
Death Benefit is paid to the policyowner or, if deceased, the policyowner's
estate.
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ASSIGNMENT
While the Insured is living, the policy may be assigned as collateral for a
loan or other obligation. For an assignment to be binding on us, we must receive
a signed copy of it at our Principal Office or such other location that we
indicate to you in writing. We are not responsible for the validity of any
assignment.
LIMITS ON OUR RIGHTS TO CHALLENGE THE POLICY
Except for any increases in face amount, other than one due solely to a
change in the life insurance benefit option, we must bring any legal action to
contest the validity of a policy within two years from its Issue Date (unless a
state has different requirements). After that we cannot contest its validity,
except for failure to pay premiums unless the Insured died within that two year
period. For any increase in the face amount, other than one due solely to a
change in the life insurance benefit option, we must bring legal action to
contest that increase within two years from the effective date of the increase.
MISSTATEMENT OF AGE OR SEX
If the Insured's age or sex is misstated in the policy application, the
Cash Value (except in Pennsylvania), Cash Surrender Value and the death benefit
will be adjusted to reflect the correct age and sex. The death benefit will be
adjusted based on what the policy would provide according to the most recent
mortality charge for the correct date of birth or correct sex.
SUICIDE
If the Insured commits suicide within two years (or less where required by
law) from the Issue Date (or with respect to an increase in face amount, the
effective date of the increase), and while the policy is in force, we pay a
limited death benefit in one sum to the Beneficiary. The limited death benefit
is the amount of premiums, less any Policy Debt, or amounts withdrawn. For any
increases in the face amount, the limited death benefit will be the monthly
deductions made for that increase. If the limited death benefit for the entire
policy is payable, there will be no additional payment for the increase.
WHEN WE PAY PROCEEDS
If the policy has not terminated, payment of the Cash Surrender Value, loan
proceeds, partial withdrawals or the death benefit are made within 7 days after
we receive all requirements at our Principal Office or such other location that
we indicate to you in writing. But we can delay payment of the Cash Surrender
Value or any partial withdrawal from the Separate Account, loan proceeds
attributable to the Separate Account, or the death benefit during any period
that:
-- It is not reasonably practicable to determine the amount because the
NYSE is closed (other than customary weekend and holiday closings),
trading is restricted by the SEC, or the SEC declares that an emergency
exists; or
-- The SEC, by order, permits us to delay payment in order to protect our
policyowners.
We may delay paying any surrender value or loan proceeds on the Fixed
Account for up to 6 months from the date the request is received at our
Principal Office. We can delay payment of the entire death benefit if payment is
contested. We investigate all
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death claims arising within the two-year contestable period. Upon receiving the
information from a completed investigation, we generally make a determination
within five days as to whether the claim should be authorized for payment.
Payments are made promptly after authorization. If payment of a Cash Surrender
Value or partial withdrawal value is delayed for 30 days or more, we add
interest at an annual rate of 3%. We add interest to a death benefit from the
date of death to the date of payment at the same rate as is paid under the
Interest Payment Option.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account and the Fixed
Account are maintained by New York Life or NYLIAC. Each year we will mail you a
report showing the Cash Value, Cash Surrender Value and any Policy Debt as of
the latest policy anniversary. This report contains any additional information
required by any applicable law or regulation. We will also mail you a report
each quarter showing you the same information as of the end of the previous
quarter.
Reports and promotional literature may contain the ratings New York Life
and NYLIAC have received from independent rating agencies. Both companies are
among only a few companies that have consistently received among the highest
possible ratings from the four major independent rating companies: A.M. Best and
Moody's Investor's Services Inc. (for financial strength and stability) and
Standard and Poor's and Duff & Phelps (for claims paying ability). However,
neither New York Life nor NYLIAC guarantees the investment performance of the
Investment Divisions.
SALES AND OTHER AGREEMENTS
NYLIFE Distributors Inc., ("NYLIFE Distributors") 51 Madison Avenue, New
York, New York 10010, is the principal underwriter and the distributor of the
policies. NYLIFE Distributors is an indirect wholly-owned subsidiary of New York
Life.
The commissions paid to registered representatives of broker-dealers who
have entered into dealer agreements with NYLIFE Distributors during a policy's
first year will not exceed 50% of the premiums paid up to a policy's target
premium (6.5% in the second and subsequent Policy Years) plus 3.5% of premiums
paid in excess of such amount. Commissions in excess of the percentage payable
on renewal premiums are available for premiums paid in connection with most
increases in a policy's face amount.
Registered representatives who meet certain productivity standards and/or
participate in certain programs may receive additional compensation. From time
to time, NYLIFE Distributors may enter into a special arrangement with a
broker-dealer, which provides for the payment of higher commissions to such
broker-dealer in connection with sales of the policies. Purchasers of policies
will be informed prior to purchase of any applicable special arrangement.
LEGAL PROCEEDINGS
In 1995, NYLIAC and New York Life settled a nationwide class action brought
in New York State court related to the sale of whole life and universal life
insurance policies from 1982 through 1994. In entering into the settlement,
NYLIAC specifically
55
<PAGE> 61
denied any wrongdoing. The settlement was approved by the judge and has been
upheld on appeal.
There are also actions in various jurisdictions by individual policyowners
who either did or did not exclude themselves from the settlement of the
nationwide class action and a purported class action claiming to include
numerous policyholders in one jurisdiction who did not exclude themselves from
the nationwide class action. The certification by a non-New York State court of
a purported class action claiming to include numerous policyholders in that
state who excluded themselves from the settlement of the nationwide class action
was recently reversed by an intermediate appellate court; plaintiffs filed a
motion for rehearing in the intermediate appellate court and the motion was
denied. Plaintiffs may file a petition with the highest court within the
statutory time allowed to do so. Most of these actions seek substantial or
unspecified compensatory and punitive damages.
NYLIAC is also a defendant in other individual suits arising from its
insurance (including variable contracts registered under the federal securities
law), investment and/or other operations, including actions involving retail
sales practices. Most of these actions also seek substantial or unspecified
compensatory and punitive damages. NYLIAC is also from time to time involved as
a party in various governmental, administrative, and investigative proceedings
and inquiries.
Given the uncertain nature of litigation and regulatory inquiries, the
outcome of the above cannot be predicted. NYLIAC nevertheless believes that,
after provisions made in the financial statements, the ultimate liability that
could result from such litigation and proceedings would not have a material
adverse effect on NYLIAC's financial position; however, it is possible that
settlements or adverse determinations in one or more actions or other
proceedings in the future could have a material adverse effect on NYLIAC's
operating results for a given year.
INDEPENDENT ACCOUNTANTS
The financial statements of NYLIAC and the Separate Account have been
included in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
EXPERTS
Actuarial matters in this prospectus have been examined by Joel M.
Steinberg, Vice President and Actuary. An opinion on actuarial matters is filed
with the SEC as an exhibit to the registration statements.
FINANCIAL STATEMENTS
The audited financial statements of NYLIAC (including the auditor's report)
for the fiscal years ended December 31, 1998, 1997 and 1996, and of the Separate
Account (including the auditor's report) for the years ended December 31, 1998
and 1997 are included in this prospectus. The financial statements of NYLIAC
should be considered only as bearing upon the ability of NYLIAC to meet its
obligations under the policy.
56
<PAGE> 62
FINANCIAL STATEMENTS
[TO BE FILED BY AMENDMENT]
<PAGE> 63
APPENDIX A
ILLUSTRATIONS
The following tables demonstrate the way your policy works. The tables are
based on the age, initial death benefit and premium as follows:
The tables are for a policy issued to a male, preferred, age 35 with a
scheduled annual premium of $3,000 and an initial death benefit of $250,000.
The tables show how the Cash Value, Cash Surrender Value and death benefit
would vary over an extended period of time assuming hypothetical gross rates of
return equivalent to a constant annual rate of 0%, 6% or 12%. The tables will
assist in the comparison of the death benefit, Cash Value and Cash Surrender
Value of the policy with other variable life insurance plans.
The death benefit, Cash Value and Cash Surrender Value for a policy would
be different from the amounts shown if the actual gross rates of return averaged
0%, 6% or 12%, but varied above and below those averages for the period. They
would also be different depending on the allocation of the Cash Value among the
Investment Divisions and the Fixed Account, if the actual gross rate of return
for all Investment Divisions averaged 0%, 6% or 12%, but varied above or below
that average for individual Investment Divisions. They would also differ if any
policy loans or partial withdrawals were made during the period of time
illustrated.
The first table reflects all charges under the policy. It assumes that the
cost of insurance charges are based on our current cost of insurance rates and
reflects the deduction of all charges from scheduled premium and the Cash Value
at the current levels. It also reflects a daily mortality and expense risk
charge assessed against the Separate Account equivalent to an annual charge of
0.60% (on a current basis) of the assets in the Separate Account and a daily
asset based administrative charge assessed against the Separate Account
equivalent to an annual charge of 0.10% on the assets in each Investment
Division.
The second table reflects all charges under the policy. It assumes that the
cost of insurance charges are based on our guaranteed maximum cost of insurance
rates and reflects the deduction of all charges from scheduled premiums and the
Cash Value at their guaranteed maximum levels. It also reflects a daily
mortality and expense risk charge assessed against the Separate Account
equivalent to an annual charge of 0.90% (on a guaranteed basis) of the assets in
the Separate Account and a daily asset based administrative charge assessed
against the Separate Account equivalent to an annual charge of 0.10% on the
assets in each Investment Division attributable to the policies.
The tables also reflect total assumed investment advisory fees together
with the expenses incurred by the Funds of % of the average daily net assets
of the Funds. The total is based upon (a) % of average daily net assets, which
is an average of the management fees of each Portfolio; (b) % of average daily
net assets of the Funds which is an average of actual administrative fees for
each Portfolio; and (c) % of average daily net assets of the Funds which is an
average of the other expenses after expense reimbursement for each Portfolio.
An expense reimbursement agreement which limited "Other Expenses" to 0.17%
annually was in effect until December 31, 1996 for the MainStay VP Capital
Appreciation, MainStay VP Cash Management, MainStay VP Government, MainStay VP
Total Return, MainStay VP Bond, MainStay VP Growth Equity and MainStay VP
Indexed Equity Portfolios. "Other Expenses" and "Total Fund Annual Expenses"
have been restated to reflect the absence of the limitation in
A-1
<PAGE> 64
1996. "Other Expenses" and "Total Fund Annual Expenses" for the MainStay VP
Convertible, MainStay VP High Yield Corporate Bond, MainStay VP International
Equity and MainStay VP Value Portfolios reflect an expense reimbursement
agreement effective through December 31, 1997 limiting "Other Expenses" to 0.17%
annually. "Other Expenses" and "Total Fund Annual Expenses" for the MainStay VP
Convertible and MainStay VP International Equity Portfolios reflect an expense
reimbursement agreement effective through December 31, 1998 limiting "Other
Expenses" to 0.17% annually. In the absence of the expense reimbursement
arrangement, the "Total Fund Annual Expenses" for the year ended December 31,
1996 would have been 1.46%, 0.71%, 1.51% and 0.79% for the MainStay VP
Convertible, MainStay VP High Yield Corporate Bond, MainStay VP International
Equity and MainStay VP Value Portfolios, respectively, and for the year ended
December 31, 1997, % and % for the MainStay VP Convertible and MainStay VP
International Equity Portfolios, respectively. Numbers for the MainStay VP
Convertible Portfolio have been annualized based on the period October 1, 1996
(the date of inception) to December 31, 1996.
For the Calvert Social Balanced Portfolio, "Other Expenses" are based on
expenses for fiscal year 1996, and have been restated to reflect an increase in
transfer agency expenses of 0.03% incurred in 1997. The "Advisory Fee" includes
a performance adjustment which could cause the fee to be as high as % or as
low as %, depending on performance. "Other Expenses" reflect an indirect fee
of %. "Total Fund Annual Expenses" after reductions for fees paid indirectly
would have been %.
A portion of the brokerage commissions that the Fidelity VIP II Contrafund
and Fidelity VIP Equity Income Portfolios pay was used to reduce the Portfolios'
annual expenses. In addition, these Portfolios have entered into arrangements
with their custodian and transfer agent whereby interest earned on uninvested
cash balances was used to reduce custodian and transfer agent expenses.
Including these reductions, the "Total Fund Annual Expenses" would have been %
for the Fidelity VIP II Contrafund Portfolio and % for the Fidelity VIP
Equity-Income Portfolio.
A reduced "Advisory Fee" schedule for the Janus Aspen Series Balanced
Portfolio and Janus Aspen Series Worldwide Growth Portfolio was put into effect
on July 1, 1997. The "Advisory Fee" reflects the new rate applied to net assets
as of December 31, 1997. "Other Expenses" are based on gross expenses of the
fund shares before expense offset arrangements for the fiscal year ended
December 31, 1998. Janus Capital Corporation ("JCC") has agreed to reduce the
advisory fee for both Janus Portfolios to the extent that such fee exceeds the
effective rate of the Janus retail fund corresponding to such Portfolio. JCC may
terminate this fee reduction at any time upon 90 days' notice to the Board of
Trustees of the Janus Aspen Series. Other waivers, if applicable, are first
applied against the "Advisory Fee" and then against "Other Expenses". Absent
such waivers or reductions, "Advisory Fees," "Other Expenses" and "Total Fund
Annual Expenses" for the fiscal year ended December 31, 1998 would have been:
%, % and %, respectively, for the Janus Aspen Series Balanced Portfolio
and %, % and %, respectively, for the Janus Aspen Series Worldwide Growth
Portfolio.
Morgan Stanley Asset Management Inc. has agreed to a reduction in its
"Advisory Fees" and to reimburse the Morgan Stanley Emerging Markets Equity
Portfolio for "Other Expenses" if such fees would cause the "Total Fund Annual
Expenses" to exceed 1.75% of average daily net assets. This fee reduction
agreement may be terminated by Morgan Stanley Dean Witter Investment Management
Inc. at any time without notice. Absent such reductions, it is estimated that
"Advisory Fees", "Other Expenses" and "Total Fund Annual Expenses" for the
current fiscal year would be %, % and %, respectively.
A-2
<PAGE> 65
Taking into account the assumed charges for mortality and expense risks and
administrative fees in the Separate Account and the average investment advisory
fees and expenses of the Funds, the gross rates of return of 0%, 6% and 12%
would correspond to actual net investment returns of , % and %,
respectively, based on the current charge for mortality and expense risks, and
%, % and %, respectively, based on the guaranteed maximum charge for
mortality and expense risks.
The actual investment advisory fees and expenses may be more or less than
the amounts illustrated and will depend on the allocations made by the
Policyowner.
The second column of the tables show the amount which would accumulate if
an amount equal to the initial premium were invested and earned interest, after
taxes, at 5% per year, compounded annually.
We will furnish upon request a comparable illustration using the age, sex
and underwriting classification of an Insured for any initial death benefit and
premium requested. In addition to an illustration assuming policy charges at
their maximum, we will furnish an illustration assuming current policy charges
and current cost of insurance rates.
A-3
<PAGE> 66
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE: 35, PREFERRED
SCHEDULED ANNUAL PREMIUM: $3,000
INITIAL FACE AMOUNT: $250,000
LIFE INSURANCE BENEFIT OPTION 1
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
END OF YEAR
END OF YEAR DEATH BENEFIT(2) END OF YEAR CASH VALUE(2) CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
TOTAL PREMIUMS PAID ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
VALUE(2) PLUS INTEREST AT 5% ------------------------------ ----------------------------- -----------------------------
POLICY YEAR AS OF END OF YEAR(1) 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ----------- -------------------- -------- -------- -------- ------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,150
2 6,458
3 9,931
4 13,578
5 17,407
6 21,427
7 25,648
8 30,080
9 34,734
10 39,621
15 67,974
20 104,160
30 209,287
</TABLE>
- ------------
(1) All Premiums are illustrated as if made at the beginning of the Policy Year.
(2) Assumes no policy loan or partial withdrawal has been made.
THE ILLUSTRATION IS HYPOTHETICAL AND MAY NOT BE USED TO PROJECT OR PREDICT
INVESTMENT RESULTS. THE INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY
AND ARE BASED ON A HYPOTHETICAL LEVEL ANNUAL RATE OF RETURN. EVEN IF YOUR
AVERAGE RATE OF RETURN IS THE SAME AS THE HYPOTHETICAL RATE, YOUR ACTUAL RESULTS
WILL DIFFER DUE TO ANNUAL FLUCTUATIONS ABOVE OR BELOW THE HYPOTHETICAL AVERAGE
RATE OF RETURN.
A-4
<PAGE> 67
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE: 35, PREFERRED
SCHEDULED ANNUAL PREMIUM: $3,000
INITIAL FACE AMOUNT: $250,000
LIFE INSURANCE BENEFIT OPTION 1
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
END OF YEAR
END OF YEAR DEATH BENEFIT(2) END OF YEAR CASH VALUE(2) CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
TOTAL PREMIUMS PAID ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
VALUE(2) PLUS INTEREST AT 5% ------------------------------ ---------------------------- ----------------------------
POLICY YEAR AS OF END OF YEAR(1) 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ----------- -------------------- -------- -------- -------- ------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,150
2 6,458
3 9,931
4 13,578
5 17,407
6 21,427
7 25,648
8 30,080
9 34,734
10 39,621
15 67,974
20 104,160
30 209,287
</TABLE>
- ------------
(1) All premiums are illustrated as if made at the beginning of the Policy Year.
(2) Assumes no policy loan or partial withdrawal has been made.
THE ILLUSTRATION IS HYPOTHETICAL AND MAY NOT BE USED TO PROJECT OR PREDICT
INVESTMENT RESULTS. THE INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY
AND ARE BASED ON A HYPOTHETICAL LEVEL ANNUAL RATE OF RETURN. EVEN IF YOUR
AVERAGE RATE OF RETURN IS THE SAME AS THE HYPOTHETICAL RATE, YOUR ACTUAL RESULTS
WILL DIFFER DUE TO ANNUAL FLUCTUATIONS ABOVE OR BELOW THE HYPOTHETICAL AVERAGE
RATE OF RETURN.
A-5
<PAGE> 68
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934 , the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Reference is made to Article VIII of the Depositor's By-Laws.
New York Life maintains Directors and Officers Liability/Company
Reimbursement ("D&O") insurance which covers directors, officers and trustees of
New York Life, its subsidiaries, and its subsidiaries and certain affiliates
including the Depositor while acting in their capacity as such. The total annual
aggregate of D&O coverage is $150 million applicable to all insureds under the
D&O policies. There is no assurance that such coverage will be maintained by New
York Life or for the Depositor in the future as, in the past, there have been
large variances in the availability of D&O insurance for financial institutions.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Depositor pursuant to the foregoing provisions, or otherwise, the Depositor
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Depositor of expenses incurred
or paid by a director, officer or controlling person of the Depositor 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 Depositor will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, 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.
REPRESENTATION AS TO THE REASONABLENESS OF AGGREGATE FEES AND CHARGES
New York Life Insurance and Annuity Corporation ("NYLIAC"), the
sponsoring insurance company of the NYLIAC Variable Universal Life Separate
Account-I, hereby represents that the fees and charges deducted under the
Flexible Premium Variable Universal Life Insurance Policies are reasonable in
relation to the services rendered, the expenses expected to be incurred and the
risks assumed by NYLIAC.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The prospectus consisting of 62 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
II-1
<PAGE> 69
The representation as to the reasonableness of aggregate fees and charges.
The signatures.
Written consents of the following persons (to be filed by amendment):
(a) Jonathan E. Gaines, Esq.
(b) Joel M. Steinberg, Vice President and Actuary
(c) PricewaterhouseCoopers LLP
The following exhibits:
1. The following exhibits correspond to those required by paragraph A of the
instructions as to exhibits in Form N-8B- 2:
(1) Resolution of the Board of Directors of NYLIAC establishing
the Separate Account - Previously filed as Exhibit (1) to
Registrant's initial Registration Statement on Form S-6,
re-filed in accordance with Regulation S-T, 17 CFR 232.102(e)
as Exhibit (1) to Registrant's Post-Effective Amendment No. 4
on Form S-6, and incorporated herein by reference.
(2) Not applicable.
(3)(a)(1) Distribution Agreement between NYLIFE Securities Inc. and
NYLIAC - Previously filed as Exhibit (3)(a) to Post-Effective
Amendment No. 1 to the registration statement on Form S-6 for
NYLIAC MFA Separate Account-I (File No. 2-86084), re-filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit
(3)(a)(1) to Registrant's Post-Effective Amendment No. 4 on
Form S-6, and incorporated herein by reference.
(3)(a)(2) Distribution Agreement between NYLIFE Distributors Inc. and
NYLIAC - Previously filed as Exhibit (3)(a)(2) to Registrant's
Post-Effective Amendment No. 3 on Form S-6, and incorporated
herein by reference.
(3)(b) Not applicable.
(3)(c) Not applicable.
(4) Not applicable.
(5) Form of Policy - Previously filed as Exhibit (5) to
Registrant's initial Registration Statement, re-filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit
(5) to Registrant's Post-Effective Amendment No. 4 on Form
S-6, and incorporated herein by reference. Rider to the Policy
- Previously filed as Exhibit (5) to Registrant's Post-
Effective Amendment No. 5 on Form S-6 and incorporated herein
by reference.
(6)(a) Certificate of Incorporation of NYLIAC - previously filed as
Exhibit (6)(a) to the registration statement on Form S-6 for
NYLIAC MFA Separate Account-I (File No. 2-86083), re-filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit
(6)(a) to the initial registration statement on Form S-6 for
NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617), and incorporated herein by
reference.
II-2
<PAGE> 70
(6)(b)(1) By-Laws of NYLIAC - Previously filed as Exhibit (6)(b) to the
registration statement on Form S-6 for NYLIAC MFA Separate
Account-I (File No. 2-86083), re-filed in accordance with
Regulation S-T, 17 CFR 232.102(e) as Exhibit (6)(b) to the
initial registration statement on Form S-6 for NYLIAC
Corporate Sponsored Variable Universal Life Separate Account-I
(File No. 333-07617), and incorporated herein by reference.
(6)(b)(2) Amendments to By-Laws of NYLIAC - Previously filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as
Exhibit (6)(b) to Pre-Effective Amendment No. 1 to the
registration statement on Form S-6 for NYLIAC Variable
Universal Life Separate Account-I (File No. 333-39157), and
incorporated herein by reference.
(7) Not applicable.
(8) Not applicable.
(9)(a) Stock Sale Agreement between NYLIAC and MainStay VP Series
Fund, Inc. (formerly New York Life MFA Series Fund, Inc.) -
Previously filed as Exhibit (9) to Registrant's Pre-Effective
Amendment No. 1 on Form S-6, re-filed as Exhibit (9)(a) to
Pre-Effective Amendment No. 1 to the registration statement on
Form S-6 for NYLIAC Corporate Sponsored Variable Universal
Life Separate Account-I (File No. 333-07617), and incorporated
herein by reference.
(9)(b) Powers of Attorney for the Directors and Officers of NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(c) to Pre-Effective Amendment No. 2
to the registration statement on Form S-6 for NYLIAC Corporate
Sponsored Variable Universal Life Separate Account-I (File No.
333-07617) for the following, and incorporated herein by
reference:
Jay S. Calhoun, Vice President, Treasurer and Director
(Principal Financial Officer)
Richard M. Kernan, Jr., Director
Robert D. Rock, Senior Vice President and Director
Frederick J. Sievert, President and Director
(Principal Executive Officer)
Stephen N. Steinig, Senior Vice President, Chief
Actuary and Director
Seymour Sternberg, Director
(9)(c) Power of Attorney for Maryann L. Ingenito, Vice President and
Controller (Principal Accounting Officer) - Previously filed
in accordance with Regulation S-T, 17 CFR 232.102(e) as
Exhibit (9)(d) to Pre-Effective Amendment No. 1 to the
registration statement on Form S-6 for NYLIAC Corporate
Sponsored Variable Universal Life Separate Account-I (File No.
333-07617), and incorporated herein by reference.
(9)(d) Power of Attorney for Howard I. Atkins, Executive Vice
President (Principal Financial Officer) - Previously filed as
Exhibit 8(d) to Registrant's Pre-Effective Amendment No. 1 on
Form S-6 (File No. 333-39157), and incorporated herein by
reference.
(9)(e) Memorandum describing NYLIAC's issuance, transfer and
redemption procedures for the Policies - Previously filed as
Exhibit (11) to Registrant's Pre-Effective Amendment No. 1 on
Form S-6, refiled in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(d) to Registrant's Post-Effective
Amendment No. 4 on Form S-6, and incorporated herein by
reference.
(9)(f) Participation Agreement among Acacia Capital Corporation,
Calvert Asset Management Company, Inc. and NYLIAC, as amended
- Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(b)(1) to Pre-Effective Amendment No.
1 to the registration statement on Form S-6 for NYLIAC
Corporate Sponsored Variable Universal Life Separate Account-I
(File No. 333-07617), and incorporated herein by reference.
II-3
<PAGE> 71
(9)(g) Participation Agreement among The Alger American Fund, Fred
Alger and Company, Incorporated and NYLIAC - Previously filed
in accordance with Regulation S-T, 17 CFR 232.102(e) as
Exhibit (9)(b)(2) to Pre-Effective Amendment No. 1 to the
registration statement on Form S-6 for NYLIAC Corporate
Sponsored Variable Universal Life Separate Account-I (File No.
333-07617), and incorporated herein by reference.
(9)(h) Participation Agreement between Janus Aspen Series and NYLIAC
- Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(b)(3) to Pre-Effective Amendment No.
1 to the registration statement on Form S-6 for NYLIAC
Corporate Sponsored Variable Universal Life Separate Account-I
(File No. 333-07617), and incorporated herein by reference.
(9)(i) Participation Agreement among Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management Inc. and NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(b)(4) to Pre-Effective Amendment No.
1 to the registration statement on Form S-6 for NYLIAC
Corporate Sponsored Variable Universal Life Separate Account-I
(File No. 333-07617), and incorporated herein by reference.
(9)(j) Participation Agreement among Variable Insurance Products
Fund, Fidelity Distributors Corporation and NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(b)(5) to Pre-Effective Amendment No.
1 to the registration statement on Form S-6 for NYLIAC
Corporate Sponsored Variable Universal Life Separate Account-I
(File No. 333-07617), and incorporated herein by reference.
(9)(k) Participation Agreement among Variable Insurance Products Fund
II, Fidelity Distributors Corporation and NYLIAC - Previously
filed in accordance with Regulation S-T, 17 CFR 232.102(e) as
Exhibit (9)(b)(6) to Pre-Effective Amendment No. 1 to the
registration statement on Form S-6 for NYLIAC Corporate
Sponsored Variable Universal Life Separate Account-I (File No.
333-07617), and incorporated herein by reference.
(9)(l) Power of Attorney for Certain Directors of NYLIAC -
Previously filed as Exhibit 10(e) to Post-Effective Amendment
No. 6 to the registration statement on Form N-4 for NYLIAC
Variable Annuity Separate Account - III (File No. 33-87382),
and incorporated herein by reference for the following:
George J. Trapp, Director
Frank M. Boccio, Director
Phillip J. Hildebrand, Director
Michael G. Gallo, Director
Solomon Goldfinger, Director
Howard I. Atkins, Director
(10) Form of Application - Previously filed as Exhibit (10) to
Registrant's initial Registration Statement on Form S-6,
re-filed in accordance with Regulation S-T, 17 CFR 232.102(e)
as Exhibit (10) to Registrant's Post-Effective Amendment No. 4
on Form S-6, and incorporated herein by reference.
2. Opinion and Consent of Jonathan E. Gaines, Esq. - To be filed
by amendment.
3. Not applicable.
4. Not applicable.
5. Not applicable.
6. Opinion and Consent of Jane L. Hamrick, Vice President and
Actuary - To be filed by amendment.
7. Consent of PricewaterhouseCoopers LLP - To be filed
by amendment.
II-4
<PAGE> 72
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
NYLIAC Variable Universal Life Separate Account-I, certifies that it has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned thereunto duly authorized, in the City and State of New York
on the 26th day of February, 1999.
NYLIAC VARIABLE UNIVERSAL LIFE
SEPARATE ACCOUNT-I
(Registrant)
By /s/ MELVIN J. FEINBERG
-------------------------------------
Melvin J. Feinberg
Vice President and Actuary
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
(Depositor)
By /s/ MELVIN J. FEINBERG
-------------------------------------
Melvin J. Feinberg
Vice President and Actuary
As required by the Securities Act of 1933, this Amendment to the Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
Howard I. Atkins* Executive Vice President and Director
(Principal Financial Officer)
Frank M. Boccio* Director
Michael G. Gallo* Director
Solomon Goldfinger* Director
Phillip J. Hildebrand* Director
Maryann L. Ingenito* Vice President and Controller (Principal
Accounting Officer)
Richard M. Kernan, Jr.* Director
Robert D. Rock* Senior Vice President and Director
Frederick J. Sievert* President and Director (Principal Executive
Officer)
Seymour Sternberg* Director
George J. Trapp* Director
*By /s/ MELVIN J. FEINBERG
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Melvin J. Feinberg
Attorney-in-Fact
February 26, 1999
II-5
