<PAGE>
GROUP VARIABLE ANNUITY PROSPECTUS
MINNESOTA MUTUAL
GROUP VARIABLE ANNUITY PROSPECTUS
The group deferred variable annuity contracts (hereinafter "Contracts"),
which are more fully described in this Prospectus, are designed to provide
benefits under certain retirement programs or plans which qualify for special
federal income tax treatment. The Contracts are specifically designed for
deferred compensation plans of state and local governments and other tax-exempt
organizations as provided in Sections 457 and 403 of the Internal Revenue Code
(hereinafter "Code").
The contract may also be used in other situations where a group annuity
contract is desired but where the benefit structure does not require a contract
which is recognized as an "annuity" for federal income tax purposes.
The owner of a Contract or a Participant under a Contract may elect to have
contract values accumulated on a completely variable basis, on a completely
fixed basis (as part of Minnesota Mutual's General Account and in which the
safety of principal and interest are guaranteed) or on a combination fixed and
variable basis. To the extent that contract values are accumulated on a variable
basis, they will be a part of the Group Variable Annuity Account. The Group
Variable Annuity Account invests its assets in shares of the Portfolios of
Advantus Series Fund, Inc. (the "Series Fund") or in shares of other registered
investment companies or portfolios of such companies (hereinafter "Underlying
Funds"). The Underlying Funds which are available under the Contract include the
Long-Term Corporate Portfolio of Vanguard Fixed Income Securities Fund, Inc.;
the Vanguard/Wellington Fund, Inc.; the Fidelity Contrafund; the Scudder
International Fund, a series of Scudder International Fund, Inc.; and the Janus
Twenty Fund, a series of the Janus Investment Fund. The variable accumulation
value of the Contract and the amount of each variable annuity payment will vary
in accordance with the performance of the Portfolio or Portfolios of the Series
Fund or such other Underlying Funds selected by the Contract Owner or
Participant. The Contract Owner or Participant bears the entire investment risk
for any amounts allocated to the Group Variable Annuity Account. The Contract
and all interests under it are usually subject to the general interests of
creditors of the owner of the Contract (usually the employer).
The amount of annuity payments may also be variable based upon the experience
of the Group Variable Annuity Account or the payments may be fixed. They may
also be a combination of both.
This Prospectus sets forth information that a prospective investor should know
before investing in the Group Variable Annuity Account, and it should be read
and kept for future reference. A Statement of Additional Information, bearing
the same date, which contains further Contract and Group Variable Annuity
Account information, has been filed with the Securities and Exchange Commission
and is incorporated by reference into this Prospectus. A copy of the Statement
of Additional Information may be obtained without charge by calling (612)
665-3500, or by writing the Group Variable Annuity Account at its principal
office at Minnesota Mutual Life Center, 400 Robert Street North, St. Paul,
Minnesota 55101-2098. A Table of Contents for the Statement of Additional
Information appears in this Prospectus on page 31.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
[LOGO]
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
PH 612/665-3500
http://www.minnesotamutual.com
The date of this document and the Statement of Additional Information is: May 1,
1997.
F.47496 Rev. 5-1997
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Definitions................................................. 3
Synopsis.................................................... 4
Expense Table............................................... 6
Condensed Financial Information............................. 9
Financial Statements........................................ 10
Performance Data............................................ 10
General Descriptions........................................ 11
Contract Charges............................................ 15
Sales Charges........................................... 15
Mortality and Expense Risk Charges...................... 15
Contract Administrative Charge.......................... 16
Premium Taxes........................................... 16
Contract Fee............................................ 16
Series Fund and Underlying Fund Expenses.................... 16
Description of the Contracts................................ 17
Voting Rights............................................... 20
Annuity Period.............................................. 21
Death Benefit............................................... 23
Crediting Accumulation Units................................ 24
Withdrawals and Surrender................................... 26
Distribution................................................ 27
Federal Tax Status.......................................... 27
Legal Proceedings........................................... 31
Registration Statement...................................... 31
Statement of Additional Information......................... 31
</TABLE>
2
<PAGE>
DEFINITIONS
As used in this Prospectus, the following terms have the indicated meanings:
ACCUMULATION UNIT: an accounting device used to determine the value of a
Contract before annuity payments begin.
ACCUMULATION VALUE: the sum of the values under a Contract in the General
Account and in the Group Variable Annuity Account. Accumulation values may also
be determined with respect to each Participant's interest in the Contract.
ANNUITY: a series of payments for life; for life with a minimum number of
payments guaranteed; for the joint lifetime of the annuitant and another person
and thereafter during the lifetime of the survivor; or for a period certain.
ANNUITY UNIT: an accounting device used to determine the amount of annuity
payments.
CERTIFICATE: a Participant's evidence of Contract rights and privileges or of
the amount and terms of annuity payments.
CODE: the Internal Revenue Code of 1986, as amended.
CONTRACT OWNER: the owner of the Contract, which could be a state, a local
government or other tax-exempt employer eligible to contract for a
tax-advantaged plan or any other suitable group owner.
CONTRACT YEAR: a period of one year beginning with the Contract date or a
Contract anniversary.
FIXED ANNUITY: an annuity providing for payments of guaranteed amounts
throughout the payment period.
FUND: the mutual fund or separate investment portfolio within a series mutual
fund which has been designated as an eligible investment for the Group Variable
Annuity Account, which shall be in addition to the Advantus Series Fund, Inc.
and its Portfolios.
GENERAL ACCOUNT: all of our assets other than those in the Group Variable
Annuity Account or in other separate accounts established by us.
GROUP VARIABLE ANNUITY ACCOUNT: a separate investment account called the
Minnesota Mutual Group Variable Annuity Account, where the investment experience
of its assets is kept separate from our other assets. This Group Variable
Annuity Account has several sub-accounts.
PARTICIPANT: a person for whom an interest is maintained under a group variable
annuity Contract, prior to the time that annuity payments begin.
PLAN: a tax-qualified plan of state and local governments and other tax-exempt
organizations, or a plan sponsored by any other suitable group owner, under
which benefits are to be provided by the group variable annuity Contracts
described herein.
PURCHASE PAYMENTS: amounts paid to us under a Contract.
SERIES FUND: the Advantus Series Fund, Inc., a mutual fund of the series type
which is an investment alternative for the Group Variable Annuity Account.
UNDERLYING FUND: one of a number of named mutual funds which are investment
alternatives for the Group Variable Annuity Account.
UNDERLYING FUND PORTFOLIO: a securities portfolio of an Underlying Fund where it
is a mutual fund of the series type.
VALUATION DATE: each date on which a Fund Portfolio is valued.
VARIABLE ANNUITY: an annuity providing for payments varying in amount in
accordance with the investment experience of the Group Variable Annuity Account.
WE, US, OUR: The Minnesota Mutual Life Insurance Company.
YOU, YOUR: a Participant under the Contract.
3
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE VARIABLE ANNUITY CONTRACTS
THIS SYNOPSIS CONTAINS A BRIEF SUMMARY OF SOME OF THE IMPORTANT FEATURES OF THE
VARIABLE ANNUITY CONTRACTS DESCRIBED IN THIS PROSPECTUS. YOU MAY FIND IT HELPFUL
TO RE-READ THIS SUMMARY AFTER READING THE PROSPECTUS, WHICH SHOULD BE RETAINED
FOR FUTURE REFERENCE. A GLOSSARY OF SPECIAL TERMS USED IN THIS PROSPECTUS MAY BE
FOUND UNDER THE HEADING "DEFINITIONS" IN THIS PROSPECTUS ON PAGE 3.
WHAT IS AN ANNUITY?
An annuity is a series of payments for life; for life with a minimum number of
payments guaranteed; for the joint lifetime of the annuitant and another person
and thereafter during the lifetime of the survivor; or for a period certain. An
annuity with payments which are guaranteed as to amount during the payment
period is a fixed annuity. An annuity with payments which vary during the
payment or accumulation period in accordance with the investment experience of a
separate account is called a variable annuity.
WHAT ARE THE CONTRACTS OFFERED BY THIS PROSPECTUS?
The Contracts are combination fixed and variable annuity contracts issued by us
which provide for monthly annuity payments. These payments may begin immediately
or at a future date elected by you. Purchase payments received by us under a
Contract are allocated either to our General Account or Group Variable Annuity
Account, as specified by you. Purchase payments and other values allocated to
the General Account will be guaranteed and will accumulate at a rate of interest
guaranteed to be no less than 3%. Purchase payments and other values allocated
to the Group Variable Annuity Account are invested according to your
instructions in one or more Underlying Fund Portfolios and there is no guarantee
of investment return or even against investment loss on such allocations.
This Prospectus describes only the variable aspects of the Contracts, except
where fixed aspects are specifically mentioned. Please look to the language of
the Contracts for a description of the fixed portion of the Contracts. For more
information on the Contracts, see the heading "Description of the Contracts" in
this Prospectus.
WHAT TYPES OF VARIABLE ANNUITY CONTRACTS ARE AVAILABLE?
This Prospectus offers only one type of Contract, a group deferred variable
annuity contract (herein "Contract"), designed primarily to be used in
tax-advantaged plans of state and local governments and other tax-exempt
organizations. These governments or organizations are the owners of the
Contracts. The Contract and all interests under it are subject to the general
interests of creditors of the owner of the Contract (usually the employer).
HOW DOES A PERSON OBTAIN COVERAGE UNDER THE CONTRACT?
After purchasing a Contract, the Contract Owner will submit an application to us
for any employee who desires coverage under the Contract, is eligible to
participate in the underlying retirement program and who completes an
application. Such a person is then covered by the Contract and its terms, herein
a "Participant." A person's employer or the Contract Owner should be consulted
for additional information regarding the plan.
HOW IS THE AMOUNT OF PURCHASE PAYMENTS DETERMINED?
As a general matter, the Contract Owner, normally an employer, will report to us
the amount of purchase payments by or on behalf of each Participant. There are
no minimum amounts or number of purchase payments that are required under the
Contract. For deferred compensation programs, the employer or Contract Owner
will make purchase payments by or on behalf of a Participant pursuant to the
provisions of the underlying deferred compensation plan.
WHAT INVESTMENT OPTIONS ARE AVAILABLE FOR THE GROUP VARIABLE ANNUITY ACCOUNT?
Currently purchase payments may be allocated to one or more of the sub-accounts
of the Group Variable Annuity Account that invest respectively in the following
Series Fund or Underlying Fund Portfolios:
Growth Portfolio of Advantus Series Fund, Inc.,
Bond Portfolio of Advantus Series Fund, Inc.,
Money Market Portfolio of Advantus Series Fund, Inc.,
Asset Allocation Portfolio of Advantus Series Fund, Inc.,
4
<PAGE>
Mortgage Securities Portfolio of Advantus Series Fund, Inc.,
Index 500 Portfolio of Advantus Series Fund, Inc.,
Capital Appreciation Portfolio of Advantus Series Fund, Inc.,
International Stock Portfolio of Advantus Series Fund, Inc.,
Value Stock Portfolio of Advantus Series Fund, Inc.,
Small Company Portfolio of Advantus Series Fund, Inc.,
Maturing Government Bond Portfolios of Advantus Series Fund, Inc. (of which
four are available),
Long-Term Corporate Portfolio of Vanguard Fixed Income Securities Fund,
Inc.,
Vanguard/Wellington Fund, Inc.,
Fidelity Contrafund,
Scudder International Fund, a series of Scudder International Fund, Inc.,
and
Janus Twenty Fund, a series of the Janus Investment Fund
Additional information concerning the investment objectives, policies and
related expenses of the Series Fund Portfolios can be found in the current
prospectus for the Advantus Series Fund, Inc., which is attached to this
Prospectus. Additional information concerning the investment objectives and
policies of these Underlying Funds is contained in the prospectuses for each
such option. Some of these fund alternatives may also be part of a series fund
arrangement where not all of an existing fund's investment options are available
to the Contract.
There is no assurance that any Series Fund Portfolio or Underlying Fund will
meet its objectives.
CAN YOU CHANGE THE PORTFOLIO SELECTED?
Yes, provided that the Contract Owner and the underlying plan permit it. A
Participant may change the allocation of future purchase payments by giving us
written notice or a telephone call notifying us of the change. Before annuity
payments begin, a Participant may transfer all or a part of the accumulation
value from one Portfolio to another or among the Portfolios. After variable
annuity payments begin, transfers of annuity reserves may be made among the
sub-accounts of the Group Variable Annuity Account and from those sub-accounts
to the General Account. However, once fixed annuity payments begin, no annuity
reserves may be transferred out of the General Account.
WHAT CHARGES ARE ASSOCIATED WITH THE CONTRACTS?
The following Contract expense information is intended to illustrate the
expenses of the Contract as applied to the Participant interests thereunder. All
expenses are rounded to the nearest dollar. The information contained in the
tables must be considered with the narrative information which immediately
follows them.
5
<PAGE>
EXPENSE TABLE
The tables shown below are to assist a Contract Owner or Participant in
understanding the costs and expenses that a Participant's interest in the
Contract will bear directly or indirectly. For more information on Contract
costs and expenses, see the Prospectus heading "Contract Charges" and the
information immediately following. We reserve the right to increase the
mortality and expense risk charge to 1.25%. We also reserve the right to
increase the administrative charge to .40%. However, no such increases are
anticipated. The table does not reflect deductions for any applicable premium
taxes which may be made from each purchase payment depending upon the applicable
law. Surrender amounts in years shown reflect the Participant's ability to
withdraw an amount equal to ten percent of the accumulation value at the end of
the previous calendar year without the imposition of the deferred sales charge.
PARTICIPANT TRANSACTION EXPENSES
<TABLE>
<S> <C>
Deferred Sales Load (as a percentage of amount
surrendered).............................................. 6.0%
decreasing uniformly
by .0833% for each of
the first 72 months
from the contract
date
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value) Mortality and
Expense Risk Charges........................................ 0.85%
Contract Administrative Charge.............................. 0.15%
------
Total Separate Account Annual Expenses.................. 1.00%
------
------
</TABLE>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(As a percentage of average net assets for the described underlying mutual
funds.)
<TABLE>
<CAPTION>
TOTAL FUND ANNUAL
MANAGEMENT & OTHER EXPENSES (AFTER EXPENSES (AFTER
INVESTMENT ADMINISTRATIVE EXPENSE EXPENSE
MANAGEMENT FEES EXPENSES REIMBURSEMENTS) REIMBURSEMENTS)
--------------- ----------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Advantus Series Fund, Inc.:
Growth Portfolio.............. .50% -- .09% .59%
Bond Portfolio................ .50% -- .06% .56%
Money Market Portfolio........ .50% -- .10% .60%
Asset Allocation Portfolio.... .50% -- .04% .54%
Mortgage Securities
Portfolio................... .50% -- .08% .58%
Index 500 Portfolio........... .40% -- .05% .45%
Capital Appreciation
Portfolio................... .75% -- .10% .85%
International Stock
Portfolio................... .74% -- .32% 1.06%
Small Company Portfolio....... .75% -- .06% .81%
Maturing Government Bond 1998
Portfolio (1)(2)............ .05% -- .15% .20%
Maturing Government Bond 2002
Portfolio (1)(2)............ .05% -- .15% .20%
Maturing Government Bond 2006
Portfolio(2)................ .25% -- .15% .40%
Maturing Government Bond 2010
Portfolio(2)................ .25% -- .15% .40%
Value Stock Portfolio(2)...... .75% -- .08% .83%
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
TOTAL FUND ANNUAL
MANAGEMENT & OTHER EXPENSES (AFTER EXPENSES (AFTER
INVESTMENT ADMINISTRATIVE EXPENSE EXPENSE
MANAGEMENT FEES EXPENSES REIMBURSEMENTS) REIMBURSEMENTS)
--------------- ----------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Vanguard Fixed Income Securities
Fund, Inc.-- Long-Term
Corporate Portfolio............ .04% .24% .03% .31%
Vanguard/Wellington Fund,
Inc............................ .04% .23% .03% .31%
Fidelity Contrafund............. .57% -- .26% .83%
Scudder International Fund...... .82% -- .32% 1.14%
Janus Twenty Fund............... .66% -- .27% .93%
</TABLE>
(1) Investment management fees for the Maturing Government Bond 1998 and 2002
Portfolios are equal on an annual basis to .05% of average daily net assets
until April 30, 1998 at which time the fees will be .25% of average daily
net assets.
(2) Minnesota Mutual voluntarily absorbed certain expenses of the Maturing
Government Bond 1998, Maturing Government Bond 2002, Maturing Government
Bond 2006 and Maturing Government Bond 2010 Portfolios for the year ended
December 31, 1996. If these portfolios had been charged for expenses, the
ratio of expenses to average daily net assets would have been .72%, 1.14%,
1.58% and 2.18%, respectively. It is Minnesota Mutual's present intention to
waive other fund expenses during the current fiscal year which exceed, as a
percentage of average daily net assets, .15%. Minnesota Mutual also reserves
the option to reduce the level of other expenses which it will voluntarily
absorb.
CONTRACT OWNER EXPENSE EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period.
<TABLE>
<CAPTION>
IF YOU SURENDERED YOUR
CONTRACT AT THE END OF THE IF YOU ANNUITIZE AT THE END OF
APPLICABLE TIME PERIOD THE APPLICABLE TIME PERIOD
------------------------------------- -------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advantus Series Fund, Inc.:
Growth Portfolio...................... $63 $80 $ 97 $189 $16 $50 $ 87 $189
Bond Portfolio........................ $63 $79 $ 96 $186 $16 $49 $ 85 $186
Money Market Portfolio................ $63 $80 $ 98 $190 $16 $50 $ 87 $190
Asset Allocation Portfolio............ $62 $79 $ 95 $183 $16 $49 $ 84 $183
Mortgage Securities Portfolio......... $63 $80 $ 97 $188 $16 $50 $ 86 $188
Index 500 Portfolio................... $61 $76 $ 90 $174 $15 $46 $ 79 $174
Capital Appreciation Portfolio........ $65 $88 $111 $217 $19 $58 $100 $217
International Stock Portfolio......... $67 $94 $121 $239 $21 $65 $111 $239
Small Company Portfolio............... $65 $87 $109 $213 $18 $57 $ 98 $213
Maturing Government Bond 1998
Portfolio........................... $59 $68 $ 77 $145 $12 $38 $ 66 $145
Maturing Government Bond 2002
Portfolio........................... $59 $68 $ 77 $145 $12 $38 $ 66 $145
Maturing Government Bond 2006
Portfolio........................... $61 $74 $ 87 $168 $14 $44 $ 77 $168
Maturing Government Bond 2010
Portfolio........................... $61 $74 $ 87 $168 $14 $44 $ 77 $168
Value Stock Portfolio................. $65 $87 $110 $215 $19 $58 $ 99 $215
Vanguard Fixed Income Securities Fund,
Inc.--Long-Term Corporate Portfolio.... $60 $72 $ 83 $158 $13 $42 $ 72 $158
Vanguard/Wellington Fund, Inc........... $60 $72 $ 83 $168 $13 $42 $ 72 $158
Fidelity Contrafund..................... $65 $87 $110 $215 $19 $58 $ 99 $215
Scudder International Fund.............. $68 $96 $125 $247 $22 $67 $115 $247
Janus Twenty Fund....................... $66 $90 $115 $225 $20 $60 $104 $225
</TABLE>
7
<PAGE>
IS THERE A GUARANTEED DEATH BENEFIT?
Yes. The Contract has a guaranteed death benefit if a Participant dies before
annuity payments have started. The death benefit shall be equal to the greater
of: (1) the amount of the Participant's accumulation value payable at death; or
(2) the amount of the total purchase payments paid to us by or on behalf of a
Participant, less all prior Participant Contract withdrawals or transfers. A
transfer for this purpose is the application of an amount from this Contract to
another investment alternative available in the Contract Owner's underlying
plan.
WHAT ANNUITY OPTIONS ARE AVAILABLE?
The Contracts specify several annuity options. Each annuity option may be
elected on either a variable annuity or fixed annuity basis or a combination of
the two. Other annuity options may be available from us on request. The
specified annuity options are a life annuity; a life annuity with a period
certain of either 120 months, 180 months or 240 months; a joint and last
survivor annuity and a period certain annuity.
WHAT IF A CONTRACT PARTICIPANT DIES?
If a Participant dies before payments begin, we will pay the Participant's
guaranteed death benefit of the Contract as a death benefit to the named
beneficiary. If the annuitant dies after annuity payments have begun, we will
pay whatever death benefit may be called for by the terms of the annuity option
selected.
WHAT VOTING RIGHTS DO YOU HAVE?
Participants and annuitants will be able to direct us as to how to vote shares
of the Series Fund and Underlying Funds held for their Certificates.
8
<PAGE>
CONDENSED FINANCIAL INFORMATION
The financial statements of and Minnesota Mutual Group Variable Annuity and The
Minnesota Mutual Life Insurance Company Account may be found in the Statement of
Additional Information.
The table below gives per unit information about each sub-account for the
years ended December 31, 1996 and 1995 and the period from September 2, 1994,
commencement of operations, to December 31, 1994. This information should be
read in conjunction with the financial statements and related notes of Minnesota
Mutual Group Variable Annuity Account included in the Statement of Additional
Information. As of December 31, 1996, no contract owners have elected to
allocate payments to the MIMLIC Bond, MIMLIC Mortgage Securities, MIMLIC Capital
Appreciation, MIMLIC International Stock, MIMLIC Small Company, MIMLIC Maturing
Government Bond 1998, MIMLIC Maturing Government Bond 2002, MIMLIC Maturing
Government Bond 2006, MIMLIC Maturing Government Bond 2010 and MIMLIC Value
Stock sub-accounts. Accordingly, no condensed financial information is presented
for these sub-accounts.
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 2,
YEAR ENDED YEAR ENDED 1994 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
MIMLIC Growth Sub-Account:
Unit value at beginning of period............... $1.000 -- --
Unit value at end of period..................... $1.076 -- --
Number of units outstanding at end of period.... 136,198 -- --
MIMLIC Money Market Sub-Account:
Unit value at beginning of period............... $1.055 $1.011 $1.000
Unit value at end of period..................... $1.097 $1.055 $1.011
Number of units outstanding at end of period.... 1,676,436 812,075 318,636
MIMLIC Asset Allocation Sub-Account:
Unit value at beginning of period............... $1.000 -- --
Unit value at end of period..................... $1.062 -- --
Number of unit outstanding at end of period..... 69,684 -- --
MIMLIC Index 500 Sub-Account:
Unit value at beginning of period............... $1.326 $0.979 $1.000
Unit value at end of period..................... $1.597 $1.326 $0.979
Number of units outstanding at end of period.... 3,811,296 1,252,482 261,150
Vanguard Long-Term Corporate Sub-Account:
Unit value at beginning of period............... $1.234 $0.989 $1.000
Unit value at end of period..................... $1.242 $1.234 $0.989
Number of units outstanding at end of period.... 2,199,884 1,202,743 275,796
Vanguard Wellington Sub-Account
Unit value at beginning of period............... $1.283 $0.977 $1.000
Unit value at end of period..................... $1.475 $1.283 $0.977
Number of units outstanding at end of period.... 9,571,917 4,097,086 1,363,274
Fidelity Contrafund Sub-Account:
Unit value at beginning of period............... $1.322 $0.981 $1.000
Unit value at end of period..................... $1.600 $1.322 $0.981
Number of units outstanding at end of period.... 18,638,007 11,232,337 4,870,232
Scudder International Sub-Account:
Unit value at beginning of period............... $1.039 $0.934 $1.000
Unit value at end of period..................... $1.178 $1.039 $0.934
Number of units outstanding at end of period.... 4,774,006 3,011,428 1,807,445
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 2,
YEAR ENDED YEAR ENDED 1994 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Janus Twenty Sub-Account:
Unit value at beginning of period............... $1.289 $0.959 $1.000
Unit value at end of period..................... $1.628 $1.289 $0.959
Number of units outstanding at end of period.... 2,891,975 990,111 444,821
</TABLE>
- ------------------------------------------------------------------------
FINANCIAL STATEMENTS
The financial statements of Minnesota Mutual Group Variable Annuity Account and
The Minnesota Mutual Life Insurance Company's financial statements are included
in the Statement of Additional Information.
- ------------------------------------------------------------------------
PERFORMANCE DATA
From time to time the Group Variable Annuity Account may publish advertisements
containing performance data relating to its sub-accounts. In the case of the
Money Market sub-account, the Group Variable Annuity Account will publish yield
or effective yield quotations for a seven-day or other specified period. In the
case of the other sub-accounts, performance data will consist of average annual
total return quotations for a one-year period and for the period since the
sub-account became available pursuant to the Group Variable Annuity Account's
registration statement, and may also include cumulative total return quotations
for the period since the sub-account became available pursuant to such
registration statement. The Money Market sub-account may also quote such average
annual and cumulative total return figures. Performance figures used by the
Group Variable Annuity Account are based on historical information of the sub-
accounts for specified periods, and the figures are not intended to suggest that
such performance will continue in the future. Performance figures of the Group
Variable Annuity Account will reflect charges made pursuant to the terms of the
Contracts offered by this Prospectus and charges of the Series Fund or
Underlying Funds. The various performance figures used in Group Variable Annuity
Account advertisements relating to the contracts described in this Prospectus
are summarized below. More detailed information on the computations is set forth
in the Statement of Additional Information.
MONEY MARKET SUB-ACCOUNT YIELD. Yield quotations for the Money Market
sub-account are based on the income generated by an investment in the
sub-account over a specified period, usually seven days. The figures are
"annualized," that is, the amount of income generated by the investment during
the period is assumed to be generated over a 52-week period and is shown as a
percentage of the investment. Effective yield quotations are calculated
similarly, but when annualized the income earned by an investment in the sub-
account is assumed to be reinvested. Effective yield quotations will be slightly
higher than yield quotations because of the compounding effect of this assumed
reinvestment. Yield and effective yield figures quoted by the sub-account will
not reflect the deduction of any applicable deferred sales charges.
TOTAL RETURN FIGURES. Cumulative total return figures may also be quoted for
all sub-accounts. Cumulative total return is based on a hypothetical $1,000
investment in the sub-account at the beginning of the advertised period, and is
equal to the percentage change between the $1,000 net asset value of that
investment at the beginning of the period and the net asset value of that
investment at the end of the period. Cumulative total return figures quoted by
the sub-account will not reflect the deduction of any applicable deferred sales
charges.
All cumulative total return figures published for sub-accounts will be
accompanied by average annual total return figures for a one-year period,
three-year period and for the period since the sub-account became available
pursuant to the Group Variable Annuity Account's registration statement. Average
annual total return figures will show for the specified period the average
annual rate of return required for an initial investment of $1,000 to equal the
surrender value of that investment at the end of the period. The surrender value
will reflect the deduction of the deferred sales charge applicable to the
contract and to the length of the period advertised. Such average annual total
return figures may also be accompanied by average annual total return figures,
for the same or other periods, which do not reflect the deduction of any
applicable deferred sales charges.
10
<PAGE>
GENERAL DESCRIPTIONS
A. THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
The Minnesota Mutual Life Insurance Company is a mutual life insurance company
organized in 1880 under the laws of Minnesota. Its home office is at 400 Robert
Street North, St. Paul, Minnesota 55101-2098 (612-665-3500). It is licensed to
do a life insurance business in all states of the United States (except New
York, where it is an authorized reinsurer), the District of Columbia, Canada,
Puerto Rico, and Guam.
B. MINNESOTA MUTUAL GROUP VARIABLE ANNUITY ACCOUNT
On June 14, 1993, the Board of Trustees of Minnesota Mutual established the
Minnesota Mutual Group Variable Annuity Account (the "Group Variable Annuity
Account") in accordance with Minnesota Insurance Law. The Group Variable Annuity
Account is registered as a unit investment trust under the Investment Company
Act of 1940, as amended (the "1940 Act") and meets the definition of a "separate
account" under the federal securities laws.
The Minnesota law under which the Group Variable Annuity Account was
established provides that the assets of the Group Variable Annuity Account shall
not be chargeable with liabilities arising out of any other business which
Minnesota Mutual may conduct, but shall be held and applied exclusively for the
benefit of the holders of those variable annuity Contracts for which the
separate account was established. The investment performance of the Group
Variable Annuity Account is entirely independent of both the investment
performance of our General Account and of any other separate accounts which we
may have established or may later establish. All obligations under the Contracts
are general corporate obligations of Minnesota Mutual.
The Group Variable Annuity Account currently has sub-accounts to which
Contract Owners and Participants may allocate purchase payments. Each
sub-account invests in shares of a corresponding Portfolio of the Fund or an
underlying Fund. Additional sub-accounts may be added at our discretion.
C. ADVANTUS SERIES FUND, INC.
The Group Variable Annuity Account may invest in Advantus Series Fund, Inc. (the
"Series Fund"), a mutual fund of the series type. Prior to May 1, 1997, the name
of the Series Fund was "MIMLIC Series Fund, Inc." On January 14, 1997, the
Series Fund's Board of Directors approved an amendment of the Series Fund's
Articles of Incorporation for the purpose of changing the name of the Series
Fund to "Advantus Series Fund, Inc." effective May 1, 1997. The purpose of the
name change is to provide the Series Fund with a more distinctive name which may
provide greater visibility and name recognition, which reflects the name of its
adviser and which may provide additional marketing opportunities for variable
contracts investing in shares of the Series Fund. The change in the Series
Fund's name will not result in any change in investment objectives, policies or
practices for the Series Fund or any of its portfolios. The Series Fund is
registered with the Securities and Exchange Commission as a diversified,
open-end management investment company, but such registration does not signify
that the Commission supervises the management, or the investment practices or
policies, of the Series Fund. The Series Fund issues its shares, continually and
without sales charge, only to our separate accounts, which currently include the
Variable Annuity Account, the Group Variable Annuity Account, Variable Fund D,
the Variable Life Account, and the Variable Universal Life Account. The Series
Fund may be made available to other separate accounts as new products are
developed, and may be used as the underlying investment medium for separate
accounts of the Northstar Life Insurance Company, a wholly-owned subsidiary of
ours domiciled in the State of New York. Shares are sold and redeemed at net
asset value. In the case of a newly issued Contract or interest under it,
purchases of shares of the Portfolios of the Series Fund in connection with the
first purchase payment will be based on the values next determined after
issuance of the Contract by us. Redemptions of shares of the Portfolios of the
Series Fund are made at the net asset value next determined from the day we
receive a request for transfer, partial withdrawal or surrender at our home
office. In the case of outstanding Contracts, purchases of shares of the
Portfolio of the Series Fund for the Group Variable Annuity Account are made at
the net asset value of such shares next determined after receipt by us of
Contract purchase payments.
The Series Fund's investment adviser is Advantus Capital Management, Inc.
("Advantus Capital"). Advantus Capital is a wholly-owned subsidiary of MIMLIC
Asset Management Company ("MIMLIC Management") which, prior to May 1, 1997,
served as investment adviser to the Series Fund. MIMLIC Management is a
wholly-owned subsidiary of
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Minnesota Mutual. The same portfolio managers and other personnel who previously
provided investment advisory services to the Series Fund through MIMLIC
Management continue to provide the same services through Advantus Capital.
Advantus Capital acts as an investment adviser to the Series Fund pursuant to an
advisory agreement.
It is conceivable that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the Series Fund simultaneously. Although Minnesota Mutual does not
currently foresee any such disadvantages either to variable life insurance
policy owners or to variable annuity contract owners, the Series Fund's Board of
Directors intends to monitor events in order to identify any material conflicts
between such policy owners and contract owners and to determine what action, if
any, should be taken in response thereto. Such action could include the sale of
Series Fund shares by one or more of the separate accounts, which could have
adverse consequences. Material conflicts could result from, for example, (1)
changes in state insurance law, (2) changes in federal income tax laws, (3)
changes in the investment management of any of the Portfolios of the Series
Fund, or (4) differences in voting instructions between those given by policy
owners and those given by contract owners.
The investment objectives and certain policies of the Portfolios of the Series
Fund available in the Contract are as follows:
The Growth Portfolio seeks the long-term accumulation of capital. Current
income, while a factor in portfolio selection, is a secondary objective. The
Growth Portfolio will invest primarily in common stocks and other equity
securities. Common stocks are more volatile than debt securities and involve
greater investment risk.
The Bond Portfolio seeks as high a level of long-term total rate of return
as is consistent with prudent investment risk. A secondary objective is to
seek preservation of capital. The Bond Portfolio will invest primarily in
long-term, fixed-income, high-quality debt instruments. The value of debt
securities will tend to rise and fall inversely with the rise and fall of
interest rates.
The Money Market Portfolio seeks maximum current income to the extent
consistent with liquidity and the stability of capital. The Money Market
Portfolio will invest in money market instruments and other debt securities
with maturities not exceeding one year. The return produced by these
securities will reflect fluctuation in short-term interest rates.
The Asset Allocation Portfolio seeks as high a level of long-term total rate
of return as is consistent with prudent investment risk. The Asset
Allocation Portfolio will invest in common stocks and other equity
securities, bonds and money market instruments. The Asset Allocation
Portfolio involves the risks inherent in stocks and debt securities of
varying maturities and the risk that the Portfolio may invest too much or
too little of its assets in each type of security at any particular time.
The Mortgage Securities Portfolio seeks a high level of current income
consistent with prudent investment risk. In pursuit of this objective the
Mortgage Securities Portfolio will follow a policy of investment primarily
in mortgage-related securities. Prices of mortgage-related securities will
tend to rise and fall inversely with the rise and fall of the general level
of interest rates.
The Index 500 Portfolio seeks investment results that correspond generally
to the price and yield performance of the common stocks included in the
Standard & Poor's Corporation 500 Composite Stock Price Index (the "Index").
It is designed to provide an economical and convenient means of maintaining
a broad position in the equity market as part of an overall investment
strategy. All common stocks, including those in the Index, involve greater
investment risk than debt securities. The fact that a stock has been
included in the Index affords no assurance against declines in the price or
yield performance of that stock.
The Capital Appreciation Portfolio seeks growth of capital. Investments will
be made based upon their potential for capital appreciation. Therefore,
current income will be incidental to the objective of capital growth.
Because of the market risks inherent in any equity investment, the selection
of securities on the basis of their appreciation possibilities cannot ensure
against possible loss in value.
The International Stock Portfolio seeks long-term capital growth. In pursuit
of this objective the International Stock Portfolio
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will follow a policy of investing in stocks issued by companies, large and
small, and debt obligations of companies and governments outside the United
States. Current income will be incidental to the objective of capital
growth. The Portfolio is designed for persons seeking international
diversification. Investors should consider carefully the substantial risks
involved in investing in securities issued by companies and governments of
foreign nations, which are in addition to the usual risks inherent in
domestic investments.
The Small Company Portfolio seeks long-term accumulation of capital. In
pursuit of this objective, the Small Company Portfolio will follow a policy
of investing primarily in common or preferred stocks issued by small
companies, defined in terms of either market capitalization or gross
revenues. Investments in small companies usually involve greater investment
risks than fixed income securities or corporate equity securities generally.
Small companies will typically have a market capitalization of less than
$1.5 billion or annual gross revenues of less than $1.5 billion.
The Value Stock Portfolio seeks the long-term accumulation of capital. In
pursuit of this objective, the Value Stock Portfolio will follow a policy of
investing primarily in the equity securities of companies which, in the
opinion of the adviser, have market values which appear low relative to
their underlying value or future earnings and growth potential. As it is
anticipated that the Portfolio will consist in large part of dividend-paying
common stocks, the production of income will be a secondary objective of the
Portfolio.
The Maturing Government Bond Portfolios seek to provide as high an
investment return as is consistent with prudent investment risk for a
specified period of time ending on a specified liquidation date. In pursuit
of this objective each of the four Maturing Government Bond Portfolios seek
to return a reasonably assured targeted dollar amount, predictable at the
time of investment, on a specific target date in the future through
investment in a portfolio composed primarily of zero coupon securities.
These are securities that pay no cash income and are sold at a discount from
their par value at maturity. The current target dates for the maturities of
these Portfolios are 1998, 2002, 2006 and 2010, respectively. On maturity
the Portfolio will be converted to cash and reinvested at the direction of
the Contract Owner. In the absence of instructions, liquidation proceeds
will be allocated to the Money Market Portfolio.
A prospectus for the Series Fund is attached to this Prospectus and
prospectuses for the other Underlying Funds are distributed with this Prospectus
or are available upon request. A person should carefully read this Prospectus
and the prospectus for any Underlying Fund Portfolio to which payments are to be
allocated before investing in the Contracts.
D. UNDERLYING FUNDS
In addition to the investment made by the Group Variable Annuity Account in
shares of the Series Fund, the Contracts also provide for sub-accounts of the
Group Variable Annuity Account which invest in shares of other registered
investment companies. These Underlying Fund options may not be available in all
Contracts issued by us and Participants should consult with their employer and
plan sponsor to determine the availability of these options under the Contract
available to them. As of the date of this Prospectus, sub-accounts have been
established which allow for investment in shares of the following:
Long-Term Corporate Portfolio of Vanguard Fixed Income Securities Fund,
Inc., (a corporate and government bond fund); Vanguard/Wellington Fund,
Inc., a balanced equity fund; Fidelity Contrafund, a growth equity fund;
Scudder International Fund, an international stock fund; and Janus Twenty
Fund, a growth equity fund.
The Vanguard Fixed Income Securities Fund, Inc. employs the Wellington
Management Company as the investment adviser for the Long-Term Corporate
Portfolio. The Vanguard/Wellington Fund, Inc., employs as its adviser the
Wellington Management Company. The Fidelity Contrafund has as its adviser
Fidelity Management & Research Company ("FMR"), a subsidiary of FMR
Corporation. The Scudder International Fund has as its adviser Scudder,
Stevens & Clark, Inc. The Janus Twenty Fund has as its adviser Janus Capital
Corporation.
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The investment objectives and certain policies of the Underlying Funds
available under the Contract are as follows:
The Vanguard Long-Term Corporate Portfolio, part of the Vanguard Fixed
Income Securities Fund, Inc., seeks to provide investors with a high level
of income consistent with the maintenance of principal and liquidity. This
Portfolio invests in a diversified portfolio of investment grade corporate
and government bonds. This Portfolio is exposed to substantial interest rate
risk because of the length of its average maturity and it may exhibit high
to very high price fluctuations due to changing interest rates. The
possibility that corporate bonds held by the Portfolio will be repaid prior
to maturity is an additional risk associated with this Portfolio.
The Vanguard/Wellington Fund, Inc. seeks to provide conservation of
principal, a reasonable income return, and profits without undue risk. This
Fund invests in a diversified portfolio of common stocks and bonds, with
common stocks expected to represent 60% to 70% of the Fund's total assets.
Fidelity Contrafund seeks long-term growth by investing in stocks. This Fund
invests in companies that are currently "out of favor" with the public but
show potential for capital appreciation. The Fund invests in both well-known
and lesser-known companies believed to be undervalued due to overly
pessimistic appraisals by the market. The Fund invests primarily in common
stock and convertible securities, with a bias toward medium- and smaller-
capitalization companies.
The Scudder International Fund, a series of Scudder International Fund,
Inc., seeks long-term growth of capital primarily through a diversified
portfolio of marketable foreign equity securities. It generally invests in
equity securities of established companies that are listed on foreign
exchanges which the Adviser believes have favorable characteristics, but may
also invest up to 20% of its total assets in debt securities of foreign
governments, supranational organizations and private issuers. The Fund seeks
to diversify investments among several countries and to have represented in
the portfolio, in substantial proportions, business activities in not less
than three different countries. The Fund does not intend to concentrate
investments in any particular industry. Foreign investing involves exposure
to special risks, including economic or political instability and currency
fluctuation.
The Janus Twenty Fund, a series of the Janus Investment Fund, seeks
long-term growth of capital. This nondiversified Fund seeks to invest in
companies that the portfolio manager believes offer rapid growth potential.
Under normal circumstances, this Fund will concentrate its investments in a
core position of 20 to 30 common stocks. The risk of loss may be greater
than would exist with a more diversified account.
Some of these shares are available not only to insurance company separate
accounts, but may also be available to the public generally, which may have a
bearing on the question of whether the Contracts may be considered annuity
contracts for tax purposes. For more information, please see the heading
"Federal Tax Status" in this Prospectus on page 27. Persons considering
sub-account investments in these Funds should obtain a current prospectus for
those Funds from the Funds or the Contract Owners before investing in those
sub-accounts.
E. ADDITIONS, DELETIONS OR SUBSTITUTIONS
We retain the right, subject to any applicable law, to make substitutions with
respect to the investments of the sub-accounts of the Group Variable Annuity
Account. If investment in a fund should no longer be possible or if we determine
it becomes inappropriate for Contracts of this class, we may substitute another
fund for a sub-account. Substitution may be with respect to existing
accumulation values, future purchase payments and future annuity payments.
Investment in all Series Fund or Underlying Fund options may not be available,
and may be restricted by the Contract Owner. For example, the Contract held by
the Chuch of the Nazarene Tax- Sheltered Annuity Plan makes available the
Underlying Fund options and the Money Market, Growth, Asset Allocation, and
Index 500 Portfolios of the Series Fund. The Contract held by the Minnesota
State Deferred Compensation Plan makes available the Underlying Fund options and
the Money Market and Index 500 Portfolios of the Series Fund. The Minnesota
State Colleges and University 403(b) Program
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makes available all of the portfolios of the Series Fund.
We may also establish additional sub-accounts in the Group Variable Annuity
Account and we reserve the right to add, combine or remove any sub-accounts of
the Group Variable Annuity Account. Each additional sub-account will purchase
shares in a new portfolio or mutual fund. Such sub-accounts may be established
when, in our sole discretion, marketing, tax, investment or other conditions
warrant such action. Similar considerations will be used by us should there be a
determination to eliminate one or more of the sub-accounts of the Group Variable
Annuity Account. The basis of offering additional investment options to existing
Contract Owners is subject to our discretion.
We also reserve the right, when permitted by law, to de-register the Group
Variable Annuity Account under the Investment Company Act of 1940, to restrict
or eliminate any voting rights of the Contract Owners, and to combine the Group
Variable Annuity Account with one or more of our other separate accounts.
- ------------------------------------------------------------------------
CONTRACT CHARGES
A. SALES CHARGES
No sales charge is deducted from the purchase payments for these Contracts.
However, when a Participant's accumulation value is reduced by a withdrawal or
surrender, a deferred sales charge may be deducted for expenses relating to the
sale of the Contracts.
The deferred sales charge is deducted from the Participant's remaining
accumulation value except in the case of a surrender, where it reduces the
amount distributed. We will deduct the deferred sales charge proportionally from
the Participant's fixed and variable accumulation value.
The amount of the deferred sales charge, expressed as a percentage of the
Participant's accumulation value withdrawn, is shown in the following table.
Percentages are shown as of the Participant's date of initial Contract
participation and the end of each of the first six years of participation. The
percentages decrease uniformly each month for 72 months from the initial date.
In no event will the sum of the deferred sales charges exceed 9% of the purchase
payments made by or on behalf of that Participant under a Contract.
<TABLE>
<CAPTION>
END OF DEFERRED
PARTICIPATION YEAR SALES CHARGE
- -------------------- -----------------
<S> <C>
Participation Date 6%
1 5%
2 4%
3 3%
4 2%
5 1%
6 0%
</TABLE>
These sales charges may be waived in certain circumstances where sales expenses
are not paid at the time of sale to registered representatives and
broker-dealers responsible for the sales of the Contracts on the basis of
purchase payments made under the Contract and where the Contract is sold in
anticipation of reduced expenses.
B. MORTALITY AND EXPENSE RISK CHARGES
We assume the mortality risk under the Contracts by our obligation to continue
to make monthly annuity payments, determined in accordance with the annuity rate
tables and other provisions contained in the Contract, to each annuitant
regardless of how long that annuitant lives or all annuitants as a group live.
This assures an annuitant that neither the annuitant's own longevity nor an
improvement in life expectancy generally will have an adverse effect on the
monthly annuity payments received under the Contract. In addition, we assume
mortality risk in the formulation of death benefit provided by the Contract. See
the heading "Death Benefit" herein.
We assume an expense risk by assuming the risk that deductions provided for in
the Contracts for the sales and administrative expenses will be adequate to
cover the expenses incurred.
For assuming these risks, we currently make a deduction from the Group
Variable Annuity Account at the annual rate of .40% for the mortality risk and
.45% for the expense risk. We reserve the right to increase the charge for the
assumption of mortality risks to not more than .60% and the expense risks to not
more than .65%. If this charge is increased to this maximum amount, then the
total of the mortality risk charge and expense risk charge would be 1.25% on an
annual basis.
If these deductions prove to be insufficient to cover the actual cost of the
expense and mortality risks assumed by us, then we will absorb the resulting
losses and make sufficient transfers to the Group Variable Annuity Account from
our general account, where appropriate. Conversely, if these deductions prove to
be
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more than sufficient after the establishment of any contingency reserves deemed
prudent or required by law, any excess will be profit (or "surplus") to us. Some
or all of such profit may be used to cover any distribution costs not recovered
through the deferred sales charge.
C. CONTRACT ADMINISTRATIVE CHARGE
We perform all administrative services relative to the Contract. These services
may include the review of the applications for compliance with our issue
criteria, the preparation and issue of contracts and certificates, the receipt
of purchase payments, forwarding them to the Series Fund or other fund managers
for investment, the preparation and mailing of periodic reports and the
performance of other services.
As consideration for providing these services we currently make a deduction
from the Group Variable Annuity Account at the annual rate of .15% for contract
administration. We reserve the right to increase this administrative charge to
not more than .40%. The administrative charge is designed to cover the
administrative expenses incurred by us under the Contract.
D. PREMIUM TAXES
Deduction for any applicable state premium taxes may be made from each purchase
payment or at the commencement of annuity payments. There are currently no
premium taxes which are applicable to the Contracts, but we reserve the right to
make such a deduction should they become applicable to this Contract in the
future.
E. CONTRACT FEE
For Participants who elect a fixed annuity, there is a charge of $200 which is
taken as a contract fee whenever fixed annuity payments are elected and
purchased at rates guaranteed by the Contract. This fee will also be deducted
when amounts are transferred for additional fixed annuity income once fixed
annuity payments have begun.
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SERIES FUND AND UNDERLYING FUND EXPENSES
Advantus Capital, one of our subsidiaries, acts as the investment adviser to the
Series Fund and deducts from the net asset value of each Portfolio of the Series
Fund a fee for its services which are provided under an investment advisory
agreement. The investment advisory agreements provide that the fee shall be
computed at the annual rate which may not exceed .4% of the Index 500 Portfolio,
.75% of the Capital Appreciation, Value Stock and Small Company Portfolios, 1%
for the International Stock Portfolio and .5% of each of the remaining
Portfolio's average daily net assets other than the Maturing Government Bond
Portfolios. The Maturing Government Bond Portfolios pay an advisory fee equal to
an annual rate of .25% of average daily net assets, however, the Portfolio which
matures in 1998 will pay a rate of .05% from its inception to April 20, 1998,
and .25% thereafter and the Portfolio which matures in 2002 will pay a rate of
.05% from its inception to April 30, 1998, and .25% thereafter of average daily
net assets.
The Underlying Funds available to the sub-accounts of the Group Variable
Annuity Account will also have advisory fees and expenses associated with the
management of the assets in those alternatives according to the agreement that
each has with its investment adviser. The adviser for each and a brief summary
of the advisory arrangement for each is as follows:
The Vanguard Fixed Income Securities Fund, Inc. employs the Wellington
Management Company as the investment adviser for the Long-Term Corporate
Portfolio. It pays the adviser a fee at the end of each fiscal quarter,
calculated by applying a rate, based on the following percentages, to the
Fund's average month-end assets for the quarter: for the first $2.5 billion,
at a rate of .125%; for the next $2.5 billion, at a rate of .100%; for the
next $2.5 billion, at a rate of .075% and over $7.5 billion, at a rate of
.050%. The advisory fee is apportioned among the three Portfolios of the
Fund according to a formula and pursuant to that allocation formula, the fee
to the Long-Term Corporate Portfolio is reduced by 50% from that applicable
to the Fund.
The Vanguard/Wellington Fund, Inc. employs as its adviser the Wellington
Management Company. It pays the adviser a fee at the end of each fiscal
quarter, calculated by applying a rate, based on the following percentages,
to the Fund's average month-end assets for the quarter: For the first $500
million, at a rate of .125%; for the next $500 million, at a rate of .100%;
for the next $1 billion, at a rate of .075%; for the next $1 billion, at a
rate of .050%; over $3 billion, at a rate of .040%.
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The Fidelity Contrafund has as its adviser Fidelity Management & Research
Company ("FMR"), a subsidiary of FMR Corp. The management fee paid to FMR is
determined by taking a basic fee and then applying a performance adjustment
which, in turn, depends on how well the Fund has performed relative to the
S&P 500. The basic fee is calculated by adding an aggregated fund fee rate
to an individual fund fee rate and multiplying that amount by the Fund's
average net assets. The aggregated fund fee rate cannot rise above .52% and
it drops as total assets under management increases. As of December, 1995,
the basic fee rate was .61%. After applying the performance adjustment, the
total management fee for fiscal 1995 was .72%. The maximum annualized
performance adjustment rate is plus or minus .20%.
The Scudder International Fund has as its adviser Scudder, Stevens & Clark,
Inc. For the fiscal year ended March 31, 1995, the adviser received an
investment management fee of 0.83% of the Fund's average daily nets assets
on an annual basis. The fee is graduated so that increases in the Fund's net
assets may result in a lower fee and decreases in the Fund's net assets may
result in a higher fee.
The Janus Twenty Fund has as its adviser Janus Capital Corporation. The
advisory fee paid to the adviser for the fiscal period ended on October 31,
1995 amounted to .67%. It pays the adviser a fee at the end of each fiscal
quarter, calculated by applying a rate, based on the following percentages,
to the Fund's average month-end assets for the quarter: 1.00% of the first
$30 million, .75% of next $270 million, .70% of next $200 million and .65%
of over $500 million.
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DESCRIPTION OF THE CONTRACTS
The following material is intended to provide a general description of the terms
of the Contracts. In the event that there are questions concerning the Contracts
which are not discussed or should you desire additional information, then
inquires may be addressed to us at: Minnesota Mutual Life Center, 400 Robert
Street North, St. Paul, Minnesota 55101-2098. Our phone number is: (612)
665-3500.
1. TYPE OF CONTRACT OFFERED
GROUP DEFERRED VARIABLE ANNUITY CONTRACT
The Contract is a group deferred variable annuity contract which is offered to
employers and plan sponsors which are eligible to purchase group contracts which
are to be used in connection with tax-advantaged plans of state and local
governments and other tax-exempt organizations. The type of plans for which the
Contract is suitable are described in Sections 457 and 403 of the Internal
Revenue Code. The Contract provides rights and options to individuals who
participate under such plans; the Contracts may not be purchased directly by
individuals. The contract may also be used in other situations where a group
annuity contract is desired but where the benefit structure does not require a
contract which is recognized as an "annuity" for federal income tax purposes.
2. ISSUANCE OF CONTRACTS
The Contracts are issued by us to sponsors of eligible plans upon their
application. In a typical plan, the sponsor or eligible governmental unit is the
owner of the Contract and will designate individuals eligible to participate in
the Contract as a Participant. The Contract and all interests under it are
usually subject to the general interests of creditors of the owner of the
Contract (usually the employer).
3. MODIFICATION OF CONTRACTS
The Contract may be modified at any time by written agreement between us and the
owner of the Contract. However, no such modification will adversely affect the
rights of a Participant under the Contract unless the modification is made to
comply with a law or government regulation.
4. ANNUITY PAYMENTS
Variable annuity payments are determined on the basis of: (a) the mortality
table specified in the Contract, which reflects the age of the annuitant; (b)
the type of annuity payment option selected; and (c) the investment performance
of the Group Variable Annuity Account and its sub-accounts. The amount of the
variable annuity payments will not be affected by adverse mortality experience
or by an increase in an expense in excess of the expense deduction provided for
in the Contract. The annuitant electing to receive all or a part of
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<PAGE>
his or her payments as a variable annuity will receive the value of a fixed
number of annuity units each month. The value of such units and thus the amounts
of the monthly annuity payments will, however, reflect investment gains and
losses and investment income of the Group Variable Annuity Account, and thus the
annuity payments will vary with the investment experience of the assets of the
applicable Group Variable Annuity Account.
5. ASSIGNMENT
A Participant's accumulation value may not be assigned, sold, transferred,
discounted or pledged as collateral for a loan or as security for the
performance of an obligation or for any other purpose, and to the maximum extent
permitted by law, that value and benefits payable under the Contract shall be
exempt from the claims of creditors. The assets of the plan are, however,
subject to the claims of the general creditors of the Contract Owner (usually
the employer).
6. LIMITATIONS ON PURCHASE PAYMENTS
The amount of purchase payments to be paid by the Contract Owner by or on behalf
of a Participant shall be determined by the Contract Owner in accordance with
the provisions of the underlying plan. All purchase payments are payable at our
Home Office which is located at: 400 Robert Street North, St. Paul, Minnesota
55101-2098.
7. SUSPENSION AND TERMINATION OF PURCHASE PAYMENTS
A Contract Owner may suspend making purchase payments by giving 60 days' written
notice to us. The suspension may be with respect to all Participants or only as
to such class or classes of Participants as may be specified by the Contract
Owner. Purchase payments may be resumed as to those suspended Participants by
written notice to us.
Under some contracts, the Contract Owner may at any time terminate the
Contract should we fail to perform under the Contract and not cure any found
deficiency or should our activities be classified as misfeasance, malfeasance or
fraud. Some Contracts may also be terminated should we have a material change in
our financial condition as measured by the standard insurance company rating
agencies.
We may terminate the Contract at any date by written notice to the Contract
Owner in the event that the Contract is no longer part of a qualified Section
457 or Section 403 plan or if we determine that a Contract amendment is
necessary and the Contract Owner does not assent to such an amendment.
After termination of the Contract, we will accept no further purchase
payments. Termination will have no effect on Participants as to whom annuity
payments have begun. As to Participants with a current accumulation value, those
values will continue to be maintained under the Contract until: (a) withdrawn to
provide plan benefits, (b) applied to provide annuity payments or (c)
transferred to the Contract Owner. So long as Participant Accumulation Values
are maintained under the Contract, the withdrawal and transfer provisions
continue to apply to those values on the same basis as prior to Contract
termination.
If amounts are to be transferred to the Contract Owner on termination of the
Contract, those accumulation values attributable to the Group Variable Annuity
Account, decreased by any applicable deferred sales charge, will be transferred
within seven days after the Contract termination. However, Minnesota Mutual
reserves the right to defer payment for any period during which the New York
Stock Exchange is closed for trading or when the Securities and Exchange
Commission has determined that a state of emergency exists which may make such
determination and payment impractical.
General Account values payable to the Contract Owner on termination are
subject to current valuation procedures and payment of the General Account
accumulation value or market value to the Contract Owner, decreased by any
applicable deferred sales charge, as may be either in a lump sum or in
installments over a five year period as the Contract Owner may elect. However,
in any event we guarantee that on the termination of the Contract, Participant
General Account market values will not be less than the sum of all allocations
made to the General Account by or on behalf of each Participant, accumulated at
3% per annum, less any Participant withdrawal, any applicable deferred sales
charge and less any transfers of General Account accumulation values to the
Group Variable Annuity Account.
8. CONTRACT SETTLEMENT
Whenever any payment of an amount under the Contract attributable to the Group
Variable Annuity Account is to be made in a single sum, payment will be made
within seven days after the date such payment is called for by the terms
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of the Contract, except as payment may be subject for postponement for:
(a) any period during which the New York Stock Exchange is closed other than
customary weekend and holiday closings, or during which trading on the
New York Stock Exchange is restricted, as determined by the Securities
and Exchange Commission;
(b) any period during which an emergency exists as determined by the
Commission as a result of which it is not reasonably practical to
dispose of securities in the Group Variable Annuity Account or to fairly
determine the value of the assets of the Group Variable Annuity Account;
or
(c) such other periods as the Commission may by order permit for the
protection of the Contract Owners.
9. PARTICIPATION IN DIVISIBLE SURPLUS
The Contract is a participating Contract. The portion, if any, of our divisible
surplus accruing on this Contract shall be determined annually by us and shall
be credited to the Contract on such a basis as we may determine. We do not
anticipate any divisible surplus and do not anticipate making dividend payments
to Contract Owners under the Contract.
10. CONTRACT LOANS
A Participant under a Contract which satisfies the requirements of Code Section
403 as a tax-sheltered annuity (a "TSA Contract") and under a plan which
provides for loans may take a loan from us with the Contract as security for the
loan, to the extent that such loans are permitted by applicable state law. The
maximum loan available is the lesser of (a) or (b), where (a) is $50,000 and (b)
is the greater of (i) one-half of the Participant's Accumulation Value less any
applicable deferred sales charge or (ii) the Participant's Accumulation Value up
to the amount of $10,000, less the amount of interest that would be charged
during the first quarter that the loan would be outstanding and less any
applicable deferred sales charge. Such a loan taken from, or secured by, a TSA
Contract may have federal income tax consequences. See "Federal Tax Status" on
page 27. The maximum loan amount is determined as of the date we receive a
Participant's request for a loan. This minimum loan amount is $1,000.
Upon receiving a written request for a loan, we will send the Participant a
loan application and agreement for his or her signature. We will charge interest
in arrears. Restrictions other than the maximum loan amount which apply to loans
are:
(a) Only one loan may be outstanding at any time;
(b) A period of at least three months is required between the repayment of a
loan and the application for a new loan;
(c) If there is an outstanding loan on the Contract, then any withdrawals
will be limited to the Accumulation Value, less the outstanding loan
principal, less any interest due, and less any applicable deferred sales
charge;
(d) A loan is not available if annuity payments have begun; and
(e) The TSA loan account portion of a Participant's interest in the Contract
may not be transferred to the Group Variable Annuity Account when a loan
is outstanding, provided, however, that a single transfer from the TSA
loan account will be allowed each calendar year in an amount no more
than the TSA loan account value less the outstanding loan principal,
less the outstanding interest, and less any applicable deferred sales
charge.
The loan amount requested, plus the first quarter's interest, plus any
applicable deferred sales charge, will be transferred from the portion of the
Participant's Accumulation Value allocated to the Group Variable Annuity Account
to the General Account on the date the loan application is approved. Unless the
Participant directs us otherwise, amounts will be transferred from sub-accounts
of the Group Variable Annuity Account in the same proportion that the
Participant's allocations to each sub-account bears to his or her total
allocations to the Group Variable Annuity Account prior to the loan.
LOAN INTEREST AND TSA LOAN ACCOUNT INTEREST
The interest rate charged on a loan is variable and will be set on the first
day of each calendar quarter. It will apply to the outstanding loan principal in
that calendar quarter. The loan interest rate will not exceed the greater of the
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"published monthly average" for the calendar month ending two months before the
beginning of the calendar quarter or the "interest rate in effect on the
Contract" plus 1%. The "published monthly average" means the Moody's Composite
Average of Yields on Bonds as published by the Moody's Investors Service. The
"interest rate in effect on the Contract" is the interest rate credited on
portions of Accumulation Value allocated to the General Account, including
amounts held in the TSA loan account.
The interest rate credited to allocations of Accumulation Value to the General
Account will also be credited to the TSA loan account, which will have the
effect of reducing the effective interest rate to be paid on the loan to the
difference between the interest rate paid on the loan and that credited on the
TSA loan account. A loan will have a permanent effect on the Participant's
Accumulation Value. The effect could be either positive or negative, depending
upon whether the investment results of the sub-accounts are greater or lesser
than the interest rate credited on the TSA loan account.
LOAN REPAYMENT
Repayment must be made in substantially equal payments over a period of five
years or less. Early repayment may be made without penalty at any time. When the
loan is repaid, then the TSA loan account terminates, and the amounts remain in
the General Account. A Participant may reallocate these amounts among the
General Account and the sub-accounts of the Separate Account by exercising his
or her Contract's transfer rights.
If a Participant withdraws all of his or her Accumulation Value while a loan
is outstanding, then the loan is due at the time of the withdrawal. If the loan
is not repaid prior to the complete withdrawal, the payment on withdrawal will
be the Participant's Accumulation Value, less the outstanding loan principal,
less any interest due, and less any applicable deferred sales charges. In
addition, depending upon the Participant's circumstances, such a withdrawal may
result in income taxation, tax penalties and disqualification of the
Participant's interest in the Contract as a tax-sheltered annuity.
Failure to meet the requirements of the loan agreement will result in its
termination. Loan amounts will then be treated as distributions under the
contract. Treatment of a loan as a distribution will result in taxable income
under applicable tax rules. In addition, depending upon the Participant's
circumstances, it may result in income taxation, tax penalties, and
disqualification of the Participant's interest in the contract as a
tax-sheltered annuity. If there is a distribution, the Participant's
Accumulation Value will be reduced by the amount of the outstanding loan
principal, reduced by any interest due, and reduced by any applicable deferred
sales charge on that amount.
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VOTING RIGHTS
We will vote in our discretion shares of Underlying Funds other than Portfolios
of the Series Fund held in the Group Variable Annuity Account. We also will vote
the Series Fund Portfolio shares held in the Group Variable Annuity Account, but
will do so in accordance with instructions received from Participants with
values allocated to sub-accounts investing in shares of those Series Fund
Portfolios. We will vote all shares of a Series Fund Portfolio held by the Group
Variable Annuity Account for which no voting instructions are received from
Participants in the same proportion as shares held by the Group Variable Annuity
Account for which such instructions have been received. If, however, the 1940
Act or any regulation thereunder should change so that we may be allowed to vote
such shares in our own right, then we may elect to do so.
Voting instructions for votes of Series Fund Portfolio shares are to be
provided during the accumulation period by Participants with values allocated to
sub-accounts investing in those Portfolios and during the annuity period by
annuitants with annuity reserves allocated to those sub-accounts. In each case,
the value of the amounts so allocated on behalf of a Participant or annuitant
will be divided by net asset value per share of the applicable Series Fund
Portfolio shares to determine the number of shares for which voting instructions
may be provided by the Participant or annuitant. In either case, instructions
for voting fractional shares will be recognized. We shall notify each
Participant or annuitant of a Series Fund shareholders' meeting if the shares
held for the Participant may be voted at such meeting. We shall notify
Participants or annuitants who are entitled to provide such voting instructions
and will provide them with proxy materials and forms necessary for providing
voting instructions.
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During the accumulation period of each Certificate, the Participant holds the
voting interest in each Certificate. The number of votes will be determined by
dividing the accumulation value of the Contract as to the accumulation value of
each Participant attributable to each sub-account by the net asset value per
share of the underlying Series Fund shares held by that sub-account.
During the annuity period of each Certificate, the annuitant holds the voting
interest in each Certificate. The number of votes will be determined by dividing
the reserve for each annuitant allocated to each sub-account by the net asset
value per share of the underlying Series Fund shares held by that sub-account.
After an annuity begins, the votes attributable to any particular annuitant will
decrease as the reserves decrease. In determining any voting interest,
fractional shares will be recognized.
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ANNUITY PERIOD
1. ELECTING THE RETIREMENT DATE AND FORM OF ANNUITY
The Contracts provide for four annuity payment options, any one of which may be
elected if permitted by law. Each annuity payment option may be elected on
either a variable annuity or a fixed annuity basis, or a combination thereof.
Other annuity payment options may be available as agreed to between a
Participant and us and upon request to us.
If an election has not been made otherwise, and the plan does not specify to
the contrary, the Participant's retirement date shall be April 1 of the calendar
year next following the calendar year in which the Participant attains age
70 1/2. The annuity payment option shall be Option 2A, a life annuity with a
period certain of 120 months. Unless notified in writing by the Contract Owner
or Participant at least 30 days prior to the Annuity Commencement Date, a fixed
annuity will be provided by any General Account accumulation value and a
variable annuity will be provided by any Group Variable Annuity Account
accumulation value. The minimum first monthly annuity payment on either a
variable or fixed dollar basis is $20 imposed separately for the portion of the
annuity payments payable as a fixed annuity and the portion payable as a
variable annuity under each of the sub-accounts of the Group Variable Annuity
Account. If such first monthly payment would be less than $20, we may fulfill
our obligation by paying in a single sum the value of a Participant's interest
in the Contract which would otherwise have been applied to provide annuity
payments.
Once annuity payments have commenced, the annuitant cannot surrender his or
her annuity benefit and receive a single sum settlement in lieu thereof. In the
event that a beneficiary elects to receive the commuted value of the remaining
guaranteed payments in a lump sum, that value will be based on the then current
dollar amount of one payment and the same interest rate which served as a basis
for the annuity.
The mortality and expense risks charges continue to be deducted throughout the
annuity period, even under each of the available variable annuity payment
options, including Option 4, under which there is no mortality risk to Minnesota
Mutual.
2. ANNUITY PAYMENT OPTIONS
OPTION 1--LIFE ANNUITY
This is an annuity payable monthly during the lifetime of the annuitant and
terminating with the last monthly payment preceding the death of the annuitant.
This option usually offers the largest monthly payments (of those options
involving life contingencies) since there is no guarantee of a minimum number of
payments or provision for a death benefit for beneficiaries. It would be
possible under this option for the annuitant to receive only one annuity payment
if he or she died prior to the due date of the second annuity payment, two if he
or she died before the due date of the third annuity payment, etc.
OPTION 2--LIFE ANNUITY WITH A PERIOD CERTAIN OF 120 MONTHS (OPTION 2A), 180
MONTHS (OPTION 2B), OR 240 MONTHS
(OPTION 2C)
This is an annuity payable monthly during the lifetime of the annuitant, with
the guarantee that if the annuitant dies before payments have been made for the
period certain elected, payments will continue to the beneficiary during the
remainder of the period certain; or if the beneficiary so elects at any time
during the remainder of the period certain, the present value of the remaining
guaranteed number of payments, based on the then current dollar amount of one
such payment shall be paid in a single sum to the beneficiary.
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OPTION 3--JOINT AND LAST SURVIVOR ANNUITY
This is an annuity payable monthly during the joint lifetime of the annuitant
and a designated joint annuitant and continuing thereafter during the remaining
lifetime of the survivor. Under this option there is no guarantee of a minimum
number of payments or provision for a death benefit for beneficiaries.
OPTION 4--PERIOD CERTAIN ANNUITY
This is an annuity payable monthly for a period certain of from 5 to 20 years,
as elected. If the annuitant dies before payments have been made for the period
certain elected, payments will continue to the beneficiary during the remainder
of such period certain.
By written notice to us from the Contract Owner or a Participant at least 30
days prior to a Participant's Annuity Commencement Date, a lump sum settlement
of a Participant's accumulation value may be elected in lieu of the application
of that amount to an Annuity Payment Option. After the payment of such a lump
sum settlement to the Participant, the Participant shall have no further rights
under the Contract.
3. VALUE OF THE ANNUITY UNIT
The value of an annuity unit is determined monthly as of the first day of each
month. The value of the annuity unit on the first day of each month is
determined by multiplying the value on the first day of the preceding month by
the product of (a) .996338, and (b) the ratio of the value of the accumulation
unit for the valuation date next following the fourteenth day of the preceding
month to the value of the accumulation unit for the valuation date next
following the fourteenth day of the second preceding month. (The factor of
.996338 is used to neutralize the assumed net investment rate, discussed in
Section 4 below, of 4.5% per annum built into the first payment calculation and
which is not applicable because the actual net investment rate is credited
instead.) The value of an annuity unit as of any date other than the first day
of a month is equal to its value as of the first day of the next succeeding
month.
4. DETERMINATION OF AMOUNT OF FIRST MONTHLY ANNUITY PAYMENT
Under the Contract described in this Prospectus, the first monthly annuity
payment is determined by applying the value of the Participant's individual
accumulation value at retirement. State premium taxes, if applicable and not
previously deducted from purchase payments, may be deducted from the
Participant's accumulation value before the first payment is determined. These
taxes currently range from 0 to 3.5%, depending upon the state of issue and type
of plan involved.
The amount of the first monthly payment depends on the annuity payment option
elected, the form of annuity, and the adjusted age of the annuitant. A table
used to determine the adjusted age of the annuitant and joint annuitant is
contained in the Contract. For both fixed and variable annuity payments, the
adjusted age of the annuitant and joint annuitant, if any, is used to determine
the first payment.
For a fixed annuity, the Contract contains tables indicating the dollar amount
of the monthly payment under each annuity payment option for each $1,000 of
value applied. The tables are determined from the Progressive Annuity Table with
interest at the rate of 3% per annum, assuming births in the year 1900 and an
age setback of six years. A $200 fee may be deducted from the Participant's
General Account accumulation value before applying the rates found in the
tables.
The dollar amount of the first monthly variable annuity payment is determined
by applying the available value (after deduction of any applicable premium taxes
not previously deducted) to a rate which is based on the Progressive Annuity
Table with interest at the rate of 4.5% per annum, assuming births in the year
1900 and with an age setback of six years. A number of units is then determined
by dividing this dollar amount by the then current annuity unit value.
Thereafter, the number of annuity units remains unchanged during the period of
annuity payments. This determination is made separately for each sub-account of
the separate account. The number of annuity units is based upon the available
value in each sub-account as of the date annuity payments are to begin. The
dollar amount determined for each sub-account will then be aggregated for
purposes of making payment.
The 4.5% interest rate assumed in the annuity rate would produce level annuity
payments if the net investment rate remained constant at 4.5% per year.
Subsequent payments will be less than, equal to, or greater than the first
payment depending upon whether the actual net investment rate is less than,
equal to, or greater than 4.5%. A higher interest rate would mean a higher
initial payment, but a more slowly rising (or more rapidly falling) series of
subsequent payments. A lower assumption would have the opposite effect.
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If, when annuity payments are elected, we are using annuity rates for
Contracts of this class which result in larger annuity payments, we will use
those rates instead of those guaranteed in the Contract.
5. AMOUNT OF SECOND AND SUBSEQUENT MONTHLY VARIABLE ANNUITY PAYMENTS
The dollar amount of the second and later variable annuity payments is equal to
the number of annuity units determined for each applicable sub-account of the
Group Variable Annuity Account multiplied by the annuity unit value for that
sub-account as of the due date of the payment. This amount may increase or
decrease from month to month.
The dollar amounts for variable annuity payments determined for each
applicable sub-account of the Group Variable Annuity Account will be aggregated
for purposes of making the monthly variable annuity payment to the Participant.
6. TRANSFER OF ANNUITY RESERVES
Amounts held as annuity reserves may be transferred among the variable annuity
sub-accounts during the annuity period. Annuity reserves may also be transferred
from a variable annuity to a fixed annuity during this time. The change must be
made by a written request. The annuitant and joint annuitant, if any, must make
such an election.
There are restrictions to such a transfer. The transfer of an annuity reserve
amount from any sub-account must be at least equal to $5,000 or the entire
amount of the reserve remaining in that sub-account. In addition, annuity
payments must have been in effect for a period of 12 months before a change may
be made. Such transfers can be made only once every 12 months. The written
request for an annuity transfer must be received by us more than 30 days in
advance of the due date of the annuity payment subject to the transfer. Upon
request, we will make available to you annuity reserve amount sub-account
information.
A transfer will be made on the basis of annuity unit values. The number of
annuity units from the sub-account being transferred will be converted to a
number of annuity units in the new sub-account. The annuity payment option will
remain the same and cannot be changed. After this conversion, a number of
annuity units in the new sub-account will be payable under the elected option.
The first payment after conversion will be of the same amount as it would have
been without the transfer. The number of annuity units will be set at that
number of units which are needed to pay that same amount on the transfer date.
When we receive a request for the transfer of variable annuity reserves, it
will be effective for future annuity payments. The transfer will be effective
and funds actually transferred in the middle of the month prior to the next
annuity payment affected by your request. We will use the same valuation
procedures to determine your variable annuity payment that we used initially.
Amounts held as reserves to pay a variable annuity may also be transferred to
a fixed annuity during the annuity period. However, the restrictions which apply
to annuity sub-account transfers will apply as well. The amount transferred will
then be applied to provide a fixed annuity amount. This amount will be based
upon the adjusted age of the annuitant and any joint annuitant at the time of
the transfer. The annuity payment option will remain the same. Amounts paid as a
fixed annuity may not be transferred to a variable annuity.
When we receive a request to make such a transfer to a fixed annuity, it will
be effective for future annuity payments. The transfer will be effective and
funds actually transferred in the middle of the month prior to the next annuity
payment. We will use the same fixed annuity pricing method at the time of
transfer that we used to determine an initial fixed annuity payment.
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DEATH BENEFIT
Death benefits, if any, payable under Contracts shall be in such amount as is
determined by the provisions of the applicable qualified trust or plan. The
Contracts provide that in the event of the death of the Participant prior to the
commencement of annuity payments, the death proceeds payable to the named
beneficiary will be the greater of: a) the Participant's accumulation value
determined as of the valuation date coincident with or next following the date
due proof of death is received by us, or b) the total of the purchase payments
made by or on behalf of a Participant received by us less any prior Participant
withdrawals or transfers to another investment alternative available in the
Contract Owner's underlying plan. Death proceeds will be paid in a single sum to
the beneficiary designated by the Participant, unless an annuity option is
elected by the beneficiary. Payment will be made within seven
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days after we receive due proof of death of the Participant. Except as noted
below, a Participant's entire interest in the Contract must be distributed
within five years of the Participant's death. If the annuitant dies after
annuity payments have begun, Minnesota Mutual will pay to the beneficiary any
death benefit provided by the annuity option selected. The person selected by
the Participant as the beneficiary of any remaining interest after the death of
the annuitant under the annuity option may be a person different from that
person designated as the beneficiary of the Participant's interest in the
Contract prior to the annuity commencement date.
The beneficiary will be the person or persons named in the Contract
application unless the Participant, or annuitant if annuity payments have
commenced, subsequently changes the beneficiary. In that event, we will pay the
amount payable at death to the beneficiary named in the last change of
beneficiary request. The Participant's or annuitant's written request to change
the beneficiary will not be effective until it is recorded in Minnesota Mutual's
home office records. After it has been recorded, it will take effect as of the
date the Participant or annuitant signed the request. However, if the
Participant or annuitant dies before the request has been recorded, the request
will not be effective as to those death proceeds we have paid before the request
was recorded in our home office records.
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CREDITING ACCUMULATION UNITS
During the accumulation period--the period before the commencement of annuity
payments--the purchase payment (on receipt of a completed application or
subsequently) is credited to a Participant's accumulation value on the valuation
date coincident with or next following the date such purchase payment is
received. If the initial purchase payment is accompanied by an incomplete
application, the purchase payment will not be credited until the valuation date
coincident with or next following the date a completed application is received.
We will offer to return the initial purchase payment accompanying an incomplete
application if it appears that the application cannot be completed within five
business days. Purchase payments will be credited to the Contract in the form of
accumulation units. The number of accumulation units credited with respect to
each purchase payment is determined by dividing the portion of the purchase
payment allocated to each sub-account by the then current accumulation unit
value for that sub-account. The total of these separate account accumulation
values in the sub-accounts will be the separate account accumulation value.
Interests in the sub-accounts will be valued separately.
The number of accumulation units so determined shall not be changed by any
subsequent change in the value of an accumulation unit, but the value of an
accumulation unit will vary from valuation date to valuation date to reflect the
investment experience of the Portfolios of the Series Fund and those other
Underlying Funds which may be held by the sub-accounts of the Group Variable
Annuity Account.
Minnesota Mutual will determine the value of accumulation units on each day on
which the Portfolios of the Series Fund and such other Underlying Funds are
valued. The net asset value of the Series Fund and Underlying Fund shares are
computed once daily, as of the primary closing time for business on the New York
Stock Exchange (as of the date hereof the primary close of trading is 3:00 p.m.
(Central Time), but this time may be changed) on each day, Monday through
Friday, except (i) days on which changes in the value of such Fund's securities
will not materially affect the current net asset value of such Fund's shares,
(ii) days during which no such Series Fund's shares or Underlying Fund's shares
are tendered for redemption and no order to purchase or sell such Fund's shares
is received by such Fund and (iii) customary national business holidays on which
the New York Stock Exchange is closed for trading (as of the date hereof, New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day).
Accordingly, the value of accumulation units will be determined daily, and
such determinations will be applicable to all purchase payments received by
Minnesota Mutual at its home office on that day prior to the close of business
of the Exchange. The value of accumulation units applicable to purchase payments
received subsequent to the close of business of the Exchange on that day will be
the value determined as of the close of business on the next day the Exchange is
open for trading.
In addition to providing for the allocation of purchase payments to the
sub-accounts of the separate account, the Contracts also provide
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for allocation of purchase payments to Minnesota Mutual's General Account for
accumulation at a guaranteed interest rate.
TRANSFER OF VALUES
Upon a Participant's written or telephone request, values under the Contract may
be transferred between the General Account and the Group Variable Annuity
Account or among the sub-accounts of the Group Variable Annuity Account. We will
make the transfer on the basis of accumulation unit values on the valuation date
coincident with or next following the day we receive the request at our home
office. No deferred sales charge will be imposed on such transfers. Transfers
between the sub-accounts of the Group Variable Annuity Account are unlimited as
to amount and frequency.
The Contracts permit us to limit the frequency and amount of transfers from
the General Account to the sub-accounts of the Group Variable Annuity Account.
The Contracts provide that such transfers from a Participant's Accumulation
Value in our General Account will be on a first-in, first-out (FIFO) basis and
they provide that Participants may transfer the greater of $1,000 or 10% of
their General Account accumulation value annually or in 12 monthly installments.
Currently, we limit such transfers during any calendar year to the greater of
$1,000 or an amount which is no more than 20% of the General Account
accumulation value at the time of the transfer.
Transfer arrangements may be established to begin on the 10th or 20th of any
month and if a transfer cannot be completed it will be made on the next
available transfer date.
Also, in addition to requests for transfer which are by written request, a
Participant or persons authorized by Participants may effect transfers, or a
change in the allocation of future premiums, by means of a telephone call.
Transfers and requests made pursuant to such a call are subject to the same
conditions and procedures as are outlined above for written transfer requests.
During periods of marked economic or market changes, Participants may experience
difficulty in implementing a telephone transfer due to a heavy volume of
telephone calls. In such a circumstance, Participants should consider submitting
a written transfer request while continuing to attempt a telephone transfer. We
reserve the right to restrict the frequency of--or otherwise modify, condition,
terminate or impose charges upon--telephone transfer privileges. For more
information on telephone transfers, contact Minnesota Mutual.
We will employ reasonable procedures to satisfy ourselves that instructions
received from Participants are genuine and, to the extent that we do not, we may
be liable for any losses due to unauthorized or fraudulent instructions. We
require Participants to identify themselves in those telephone conversations
through such information as we may deem to be reasonable. We record telephone
transfer and change of allocation instruction conversations and we provide
Participants with a written confirmation of the telephone transfer.
The interests of Contract Owners and Participants arising from the allocation
of purchase payments or the transfer of contract values to the General Account
of Minnesota Mutual, and thereby to its general assets, are not registered under
the Securities Act of 1933, and Minnesota Mutual is not registered as an
investment company under the Investment Company Act of 1940. Accordingly, such
interests and Minnesota Mutual are not subject to the provisions of those acts
that would apply if registration under such acts were required.
PORTABILITY
In addition to provisions which allow a transfer of Participant accumulation
values under the Contract between the General Account of Minnesota Mutual and
the Group Variable Annuity Account and transfers among the sub-accounts of the
Group Variable Annuity Account, withdrawals are also allowed from the
Participant accumulation values of the Contract to transfer amounts to other
investment alternatives offered by the Contract Owner in its underlying plan.
Withdrawals for this purpose other than those relating to the timing of
payments, are subject to the same limitations and restrictions as described in
the heading "Transfer of Values" immediately above and the same dollar
limitations on such transfers similarly apply.
VALUE OF THE CONTRACT
The value of the Contract at any time prior to the commencement of annuity
payments can be determined by multiplying the total number of accumulation units
credited to the Contract by the current value of an accumulation unit in each
sub-account of the Group Variable Annuity Account and adding to this amount the
sum of General Account values. There is no assurance that such value will equal
or exceed the purchase payments made, except with respect to amounts allocated
to the General Account.
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The Contract Owner and, where applicable, each Participant will be advised
periodically of the number of accumulation units credited to the Contract or to
the Participant's individual account, the current value of each accumulation
unit, and the total value of the Contract or the individual account.
ACCUMULATION UNIT VALUE
The value of an accumulation unit in each sub-account of the Group Variable
Annuity Account was set at $1.000000 on the first valuation date of the Group
Variable Annuity Account. The value of an accumulation unit on any subsequent
valuation date is determined by multiplying the value of an accumulation unit on
the immediately preceding valuation date by the net investment factor (described
below) for the valuation period just ended. The value of an accumulation unit as
of any date other than a valuation date is equal to its value on the next
succeeding valuation date.
NET INVESTMENT FACTOR
The net investment factor is an index used to measure the investment performance
of a sub-account from one valuation period to the next. For any sub-account, the
net investment factor for a valuation period is the gross investment rate for
such sub-account for the valuation period, less a deduction for the mortality
risk, expense risk and administrative charge at the current rate of 1.00% per
annum.
The gross investment rate is equal to: (1) the net asset value per share of a
Series Fund or Underlying Fund share held in a sub-account of the Group Variable
Annuity Account determined at the end of the current valuation period; plus (2)
the per share amount of any dividend or capital gain distribution by that Series
Fund or Underlying Fund if the "ex-dividend" date occurs during the current
valuation period; divided by (3) the net asset value per share of that Series
Fund or Underlying Fund share determined at the end of the preceding valuation
period. The gross investment rate may be positive or negative.
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WITHDRAWALS AND SURRENDER
Under certain circumstances a Participant may have the right to surrender his or
her interest in the Contract in whole or in part, subject to possible adverse
tax consequences. (See discussion under heading "Federal Tax Status" on pages
27-31.)
Withdrawals may be made only for the purpose of providing plan benefits,
making transfers to the Contract Owner, making transfers to plan investment
alternatives available in the Contract Owner's underlying plan other than those
provided for in this Contract, or allowing other withdrawals as allowed in the
plan and mutually agreed upon by Minnesota Mutual and the Contract Owner. The
amount available for withdrawal shall be the Participant accumulation value less
any applicable deferred sales charge. If withdrawals during the first calendar
year of participation are equal to or less than 10% of the total purchase
payments made on behalf of the Participant, the charge will not apply. In
subsequent calendar years there will be no charge for withdrawals equal to or
less than 10% of the prior calendar year Participant accumulation value. If a
Participant's withdrawals in any calendar year exceed this amount, the deferred
sales charge will apply to the excess.
Withdrawal amounts shall be deducted from the Participant's General Account
accumulation value on a first in, first out (FIFO) basis. Unless otherwise
instructed by the Participant or the Contract Owner, withdrawal amounts will be
made from a Participant's interest in the General Account and each sub-account
of the Group Variable Annuity Account in the same proportion that the value of
that Participant's interest in the General Account and any sub-account bears to
that Participant's total accumulation value.
Withdrawals are made upon written request from the Participant or Contract
Owner to Minnesota Mutual. The withdrawal date will be the valuation date
coincident with or next following the receipt of the request by Minnesota Mutual
at its home office.
We will waive the applicable dollar amount limitation on withdrawals where a
systematic withdrawal program is in place and such a smaller amount satisfies
the minimum distribution requirements of the Code.
Once annuity payments have commenced for a Participant, the Participant cannot
surrender his or her annuity benefit and receive a single sum settlement in lieu
thereof. For a discussion of commutation rights of payees and beneficiaries
subsequent to the annuity commencement date, see heading "Annuity Payment
Options" on page 21.
Contract Owners or plan administrators of the Contract Owner's underlying plan
may also submit signed written withdrawal or surrender
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requests to us by facsimile (FAX) transmission. Our FAX number is (612)
665-7942. Transfer instructions or changes as to future allocations of purchase
payments may be communicated to us by the same means.
The surrender of a Certificate or a partial withdrawal thereunder may result
in a credit against Minnesota Mutual's premium tax liability. In such event,
Minnesota Mutual will pay in addition to the cash value paid in connection with
the surrender or withdrawal, the lesser of (1) the amount by which Minnesota
Mutual's premium tax liability is reduced, or (2) the amount previously deducted
from purchase payments for premium taxes. No representation can be made that
upon any such surrender or withdrawal any such payment will be made, since
applicable tax laws at the time of surrender or withdrawal would be
determinative.
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DISTRIBUTION
The Contracts will be sold by Minnesota Mutual life insurance agents who are
also registered representatives of MIMLIC Sales Corporation or other
broker-dealers who have entered into selling agreements with MIMLIC Sales
Corporation. MIMLIC Sales Corporation ("MIMLIC Sales") acts as the principal
underwriter of the Contracts. MIMLIC Sales is a wholly-owned subsidiary of
MIMLIC Asset Management Company, a wholly-owned subsidiary of Minnesota Mutual.
MIMLIC Sales is registered as a broker-dealer under the Securities Exchange Act
of 1934 and is a member of the National Association of Securities Dealers, Inc.
Commissions to dealers, paid in connection with the sale of the Contracts, may
not exceed an amount which is equal to 6% of the purchase payments received for
the Contracts. Commissions on group cases may vary.
In addition, MIMLIC Sales or Minnesota Mutual will provide credits which allow
registered representatives (Agents) who are responsible for sales of the
Contracts to attend conventions and other meetings sponsored by Minnesota Mutual
or its affiliates for the purpose of promoting the sale of insurance and/or
investment products offered by Minnesota Mutual and its affiliates. Such credits
may cover the registered representatives' transportation, hotel accommodations,
meals, registration fees and the like. Minnesota Mutual may also pay registered
representatives additional amounts based upon their production and the
persistency of life insurance and annuity business placed with Minnesota Mutual.
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FEDERAL TAX STATUS
INTRODUCTION
The discussion contained herein is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax adviser. No attempt
is made to consider any applicable state or other tax laws. In addition, this
discussion is based on our understanding of federal income tax laws as they are
currently interpreted. No representation is made regarding the likelihood of
continuation of current income tax laws or the current interpretations of the
Internal Revenue Service.
Minnesota Mutual is taxed as a "life insurance company" under the Internal
Revenue Code. The operations of the Group Variable Annuity Account form a part
of, and are taxed with, our other business activities. Currently, no federal
income tax is payable by us on income dividends received by the Group Variable
Annuity Account or on capital gains arising from its investment activities. The
Group Variable Annuity Account is not taxed as a "regulated investment company"
under the Internal Revenue Code (the "Code") and it does not anticipate any
change in that tax status.
TAXATION OF ANNUITY CONTRACTS IN GENERAL
Section 72 of the Code governs taxation of nonqualified annuities in general and
some aspects of tax qualified programs. No taxes are imposed on increases in the
value of a contract until distribution occurs, either in the form of a payment
in a single sum or as annuity payments under the annuity option elected.
As a general rule, deferred annuity contracts held by a corporation, trust or
other similar entity, as opposed to a natural person, are not treated as annuity
contracts for federal tax purposes. The investment income on such contracts is
taxed as ordinary income that is received or accrued by the owner of the
contract during the taxable year.
For payments made in the event of a full surrender of an annuity, the taxable
portion is generally the amount in excess of the cost basis (i.e., purchase
payments) of the contract. Amounts withdrawn from the variable annuity contracts
not part of a qualified program are treated first as taxable income to the
extent of the excess of the contract value over the
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purchase payments made under the contract. Such taxable portion is taxed at
ordinary income tax rates.
In the case of a withdrawal under an annuity that is part of a qualified
program, a portion of the amount received is taxable based on the ratio of the
"investment in the contract" to the individual's balance in the retirement plan,
generally the value of the annuity. The "investment in the contract" generally
equals the portion of any deposits made by or on behalf of an individual under
an annuity which was not excluded from the gross income of the individual. For
annuities issued in connection with qualified plans, the "investment in the
contract" can be zero.
For annuity payments, the taxable portion is generally determined by a formula
that establishes the ratio that the cost basis of the contract bears to the
expected return under the contract. Such taxable part is taxed at ordinary
income rates.
If a taxable distribution is made under the variable annuity contracts, a
penalty tax of 10% of the amount of the taxable distribution may apply. This
additional tax does not apply where the taxpayer is 59 1/2 or older, where
payment is made on account of the taxpayer's disability, or where payment is
made by reason of death of the owner, and in certain other circumstances.
The Code also provides an exception to the penalty tax for distributions, in
periodic payments, of substantially equal installments, be made for the life (or
life expectancy) of the taxpayer or the joint lives (or joint life expectancies)
of the taxpayer and beneficiary.
For some types of qualified plans, other tax penalties may apply to certain
distributions.
A transfer of ownership of a contract, the designation of an annuitant or
other payee who is not also the Contract Owner, or the assignment of the
contract may result in certain income or gift tax consequences to the Contract
Owner that are beyond the scope of this discussion. A Contract Owner who is
contemplating any such transfer, designation or assignment should consult a
competent tax adviser with respect to the potential tax effects of that
transaction.
For purposes of determining a Contract Owner's gross income, the Code provides
that all nonqualified deferred annuity contracts issued by the same company (or
its affiliates) to the same Contract Owner during any calendar year shall be
treated as one annuity contract. Additional rules may be promulgated under this
provision to prevent avoidance of its effect through serial contracts or
otherwise. For further information on these rules, see your tax adviser.
DIVERSIFICATION REQUIREMENTS
Section 817(h) of the Code authorizes the Treasury to set standards, by
regulation or otherwise for the investments of the Group Variable Annuity
Account to be "adequately diversified" in order for the Contract to be treated
as an annuity contract for Federal tax purposes. Group Variable Annuity Account,
through the Series Fund, intends to comply with the diversification requirements
prescribed in Regulations Section 1.817-5, which affect how the Series Fund's
assets may be invested. Although the investment adviser is an affiliate of
Minnesota Mutual, Minnesota Mutual does not have control over the Series Fund or
its investments. Nonetheless, Minnesota Mutual believes that each Portfolio of
the Series Fund in which the Group Variable Annuity Account owns shares will be
operated in compliance with the requirements prescribed by the Treasury.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includable in the variable
annuity Contract Owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
Department has also announced, in connection with the issuance of regulations
concerning investment diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor (i.e., the
contract owner), rather than the insurance company, to be treated as the owner
of the assets in the account." This announcement also states that guidance would
be issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts without being treated as
owners of the underlying assets." As of the date of this Prospectus, no such
guidance has been issued.
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The ownership rights of a Participant under the Contract are similar to, but
different in certain respects from, those described by the IRS in rulings in
which it was determined that contract owners were not owners of separate account
assets. For example, a Participant has the choice of one or more sub-accounts in
which to allocate net purchase payments and contract values, and may be able to
transfer among sub-accounts more frequently than in such rulings. These
differences could result in a Contract Owner and thus the Participant as being
treated as the owner of the assets of the Group Variable Annuity Account. In
addition, Minnesota Mutual does not know what standards will be set forth, if
any, in the regulations or rulings which the Treasury Department has stated it
expects to issue. Minnesota Mutual therefore reserves the right to modify the
Contract as necessary to attempt to prevent a Contract Owner or Participant from
being considered the owner of a pro rata share of the assets of the Group
Variable Annuity Account.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a Contract because of the death of the owner.
Generally, such amounts are includable in the income of the recipient as
follows: (1) if distributed in a lump sum, they are taxed in the same manner as
a full surrender of the Contract, as described above, or (2) if distributed
under an annuity option, they are taxed in the same manner as annuity payments,
as described above.
TAX QUALIFIED PROGRAMS
The annuity is designed for use with several types of retirement plans that
qualify for special tax treatment. The tax rules applicable to Participants and
beneficiaries in retirement plans vary according to the type of plan and the
terms and conditions of the plan. Special favorable tax treatment may be
available for certain types of contributions and distributions. Adverse tax
consequences may result from contributions in excess of specified limits;
distributions prior to age 59 1/2 (subject to certain exceptions); distributions
that do not conform to specified minimum distribution rules; aggregate
distributions in excess of a specified annual amount; and in other specified
circumstances.
We make no attempt to provide more than general information about use of
annuities with the various types of retirement plans. Owners and participants
under retirement plans as well as annuitants and beneficiaries are cautioned
that the rights of any person to any benefits under annuities purchased in
connection with these plans may be subject to the terms and conditions of the
plans themselves, regardless of the terms and conditions of the annuity issued
in connection with such a plan. Some retirement plans are subject to transfer
restrictions, distribution and other requirements that are not incorporated into
the annuity or other annuity administration procedures. Owners, participants and
beneficiaries are responsible for determining that contributions, distributions
and other transactions with respect to the annuities comply with applicable law.
Purchasers of annuities for use with any retirement plan should consult their
legal counsel and tax adviser regarding the suitability of the contract. The
contract may also be used in other situations where a group annuity contract is
desired for funding but where the benefit structure does not require a contract
which is recognized as an "annuity" for federal income tax purposes. As with
deferred compensation plans, the availability of public funds within the
contract may present additional considerations as to whether that contract is
qualified as an annuity contract for tax purposes.
CORPORATE PENSION AND PROFIT-SHARING PLANS AND H.R. 10 PLANS
Code Section 401(a) permits employers to establish various types of retirement
plans for employees, and permits self-employed individuals to establish
retirement plans for themselves and their employees. These retirement plans may
permit the purchase of the contracts to accumulate retirement savings under the
plans. Adverse tax or other legal consequences to the plan, to the participant
or to both may result if this annuity is assigned or transferred to any
individual as a means to provide benefit payments, unless the plan complies with
all legal requirements applicable to such benefits prior to transfer of the
annuity.
DEFERRED COMPENSATION PLANS
Code Section 457 provides for certain deferred compensation plans. These plans
may be offered with respect to service for state governments, local governments,
political subdivisions, agencies, instrumentalities and certain affiliates of
such entities, and tax-exempt organizations. The plans may permit participants
to specify the form of investment for their deferred compensation account.
With respect to non-governmental Section 457 plans, all investments are owned
by the
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sponsoring employer and are subject to the claims of the general creditors of
the employer and, depending on the terms of the particular plan, the employer
may be entitled to draw on deferred amounts for purposes unrelated to its
Section 457 plan obligations. In general, all amounts received under a Section
457 plan are taxable and are subject to federal income tax withholding as wages.
Any amount deferred under an eligible deferred compensation plan, and any
income attributable to the amounts so deferred, are currently excluded from the
Participant's income. Generally, the maximum amount of compensation that may be
deferred is the lesser of $7,500 or 33 1/3% of includable compensation (taxable
earnings). Different rules may apply for Participants covered by private
deferred compensation plans under this section and those Participants should
consult a competent tax adviser concerning the operation of such a plan. A
Participant who participates in a deferred compensation plan sponsored by an
employer and who also participates in a Section 403(b) retirement program,
Section 401(k) plan or a Simplified Employee Pension (SEP) amounts excludable
from gross income pursuant to that program, plan or pension reduce the amount of
compensation which may be deferred under a Section 457 deferred compensation
plan.
The diversification requirements of Section 817(h) of the Code, previously
described in this section, may present additional considerations for purchasers
or Participants of the Contracts. Code Section 817(h) applies to a variable
annuity contract other than a pension plan contract. Section 818 of the Code
defines pension plan contracts as contracts issued under a Section 401(a) plan,
Section 401(k) plan, Section 403(b) program, or a Section 457 retirement program
as maintained by the United States government, the government of any state or
political subdivision thereof, or by any agency or instrumentality of the
foregoing.
Notwithstanding this exemption, an existing Revenue Ruling, Revenue Ruling
81-225, may provide a legal theory that suggests that contracts which utilize a
public fund, that is to say a fund available not only to separate accounts of
insurance companies but to members of the public generally, may present
additional considerations as to whether that contract is qualified as an annuity
contract for tax purposes because of the existence of the availability of the
public funds in that contract. We believe that if the Service were to make such
a determination providing that result, that the existence of a Section 457
deferred compensation plan would, nevertheless, protect Participants in that
plan from current income taxation.
Additionally, should a contract make a public fund available to its
Participants, it is believed that additional contracts funded by the separate
account could participate in the separate account and, so long as they omitted
the use of non-public funds, that they could continue to obtain tax treatment as
an annuity under existing regulations and revenue rulings.
PUBLIC SCHOOL SYSTEMS AND CERTAIN TAX EXEMPT ORGANIZATIONS
Under Code Section 403(b), payments made by public school systems and certain
tax exempt organizations to purchase annuity contracts for their employees are
excludable from the gross income of the employee, subject to certain
limitations. However, these payments may be subject to FICA (Social Security)
taxes.
Code Section 403(b)(11) restricts the distribution under Code Section 403(b)
annuity contracts of: (1) elective contributions made in years beginning after
December 31, 1988; (2) earnings on those contributions; and (3) earnings in such
years on amounts held as of the last year beginning before January 1, 1989.
Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
WITHHOLDING
In general, distributions from annuities are subject to federal income tax
withholding unless the recipient elects not to have tax withheld. Different
rules may apply to payments delivered outside the United States. Some states
have enacted similar rules.
Recent changes to the Code allow the rollover of most distributions from
tax-qualified plans and Section 403(b) annuities directly to other tax-qualified
plans that will accept such distributions and to individual retirement accounts
and individual retirement annuities. Distributions which may not be rolled over
are those which are: (1) one of a series of substantially equal annual (or more
frequent) payments made (a) over the life or life expectancy of the employee,
(b) the joint lives or joint expectancies of the employee and the
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employee's designated beneficiary, or (c) for a specified period of ten years or
more; (2) a required minimum distribution; or (3) the non-taxable portion of a
distribution.
Any distribution eligible for rollover, which may include payment to an
employee, an employee's surviving spouse or an ex-spouse who is an alternate
payee, will be subject to federal tax withholding at a 20% rate unless the
distribution is made as a direct rollover to a tax-qualified plan or to an
individual retirement account or annuity. It may be noted that amounts received
by individuals which are eligible for rollover may still be placed in another
tax-qualified plan or individual retirement account or individual retirement
annuity if the transaction is completed within 60 days after the distribution
has been received. Such a taxpayer must replace withheld amounts with other
funds to avoid taxation on the amount previously withheld.
LOANS
Generally, interest paid on any loan under an annuity Contract which is owned by
an individual is not deductible. A Participant should consult a competent tax
adviser before deducting any loan interest.
SEE YOUR OWN TAX ADVISER
It should be understood that the foregoing description of the federal income tax
consequences under these Contracts is not exhaustive and that special rules are
provided with respect to situations not discussed herein. It should also be
understood that should a plan lose its qualified status, employees will lose
some of the tax benefits described. Statutory changes in the Internal Revenue
Code with varying effective dates, and regulations adopted thereunder may also
alter the tax consequences of specific factual situations. Due to the complexity
of the applicable laws, tax advice may be needed by a person contemplating
becoming a Participant under the Contract or exercising elections under such a
Contract. For further information a qualified tax adviser should be consulted.
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LEGAL PROCEEDINGS
There are no pending legal proceedings in which the Group Variable Annuity
Account is a party. There are no material pending legal proceedings, other than
ordinary routine litigation incidental to their business, in which Minnesota
Mutual, Advantus Capital or MIMLIC Sales is a party.
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REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Contracts offered hereby. This Prospectus does not contain all the information
set forth in the Registration Statement and amendments thereto and exhibits
filed as a part thereof, to all of which reference is hereby made for further
information concerning the Group Variable Annuity Account and the Contracts.
Statements contained in this Prospectus as to the content of Contracts and other
legal instruments are summaries. For a complete statement of the terms thereof
reference is made to such instruments as filed.
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STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information, which contains additional Contract and
Group Variable Annuity Account information, including financial statements, is
available from the offices of the Group Variable Annuity Account at your
request. The Table of Contents for that Statement of Additional Information is
as follows:
Group Variable Annuity Account
Trustees and Principal Management Officers of Minnesota Mutual
Distribution of Contracts
Annuity Payments
Auditors
Financial Statements
Appendix A--Calculation of Unit Values
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