AICA
As filed with the Securities and Exchange Registration No. 33-63657
Commission on April 21, 1999
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 5
TO
FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Aetna Insurance Company of America
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Connecticut
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06-1286272
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151 Farmington Avenue, Hartford, Connecticut 06156, (860) 273-4686
Julie E. Rockmore, Counsel
Aetna Insurance Company of America
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
(860) 273-4686
----------------------------------------------------------------
(Name, Address, including Zip Code, and Telephone Number,
including Area Code, of Agent for Service)
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The annuities covered by this registration statement are to be issued from time
to time after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [XX]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. [XX]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _____________________
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ] _____________________
<PAGE>
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _________________
If the delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Regulation S-K
Item 501(b)
<TABLE>
<CAPTION>
Form S-2
- --------
Item No. Information Required in Prospectus Location
- -------- ---------------------------------- --------
<S> <C> <C>
1 Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus............................ Outside Front Cover
2 Inside Front and Outside Back Cover
Pages of Prospectus.................................. Table of Contents (inside front cover)
3 Summary Information, Risk Factors and Ratio of Earnings
to Fixed Charges..................................... Contract Overview
4 Use of Proceeds...................................... Purchase; Investments
5 Determination of Offering Price...................... Not Applicable
6 Dilution............................................. Not Applicable
7 Selling Security Holders............................. Not Applicable
8 Plan of Distribution................................. Other Topics--Contract Distribution
9 Description of Securities to be Registered..... Guaranteed Terms and Guaranteed Interest Rates
10 Interests of Named Experts and Counsel....... Not Applicable
11 Information with Respect to the
Registrant........................................... Not Applicable
12 Incorporation of Certain Information by Reference.... Other Topics--Incorporation of
Certain Documents by Reference
13 Disclosure of Commission Position on
Indemnification for Securities Act Liabilities....... Not Applicable
</TABLE>
<PAGE>
Prospectus - May 3, 1999
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The Contract. The contract described in this prospectus is a group or
individual, single purchase payment, modified, guaranteed, deferred annuity
contract issued by Aetna Insurance Company of America (the Company, we). The
contract is available as a nonqualified deferred annuity. Additionally, the
contract is available as a rollover to a traditional Individual Retirement
Annuity (IRA) under section 408(b) of the Internal Revenue Code of 1986, as
amended (Tax Code) or a rollover to a Roth IRA under Tax Code section 408A. See
"Purchase" in this prospectus for additional information.
The contract is not offered for sale in the State of New York.
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Why Reading this Prospectus is Important. This prospectus contains facts about
the contract that you should know before investing. The information will help
you determine if the contract is right for you. Read this prospectus carefully.
If you do invest in the contract, retain this document for future reference.
Table of Contents . . . page 3
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Contract Design. The contract is designed to:
> Allow you to earn interest and accumulate amounts on a tax deferred basis
> Provide future income payments for life or a specified period of time
> Provide a benefit to a designated beneficiary
How it Works. Upon purchase, you may direct your purchase payment to different
guaranteed terms ranging up to and including twenty years. Each guaranteed term
has its own guaranteed interest rate. When the guaranteed term(s) end, you can
reinvest in another guaranteed term; begin receiving income payments; or
withdraw your full account value.
Withdrawals. You may withdraw all or part of your accumulated funds at any
time. Withdrawals prior to the end of a guaranteed term may be subject to a
market value adjustment and certain fees. Upon a full withdrawal, you could,
therefore, receive less than your purchase payment. See the "Market Value
Adjustment" section, p. 16, and "Fees" section in this prospectus for
additional information.
Additional Disclosure Information. Neither the Securities and Exchange
Commission (SEC) nor any state securities commission has approved or
disapproved of these securities or passed on the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense. We do not
intend for this prospectus to be an offer to sell or a solicitation of an offer
to buy these securities in any state that does not permit their sale, and we
have not authorized anyone to provide you with information different from that
contained in this prospectus.
Our Home Office:
Aetna Insurance Company of America
151 Farmington Avenue
Hartford, Connecticut 06156
(800)-531-4547
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
2
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
Contract Overview ........................................................ 4
Contract Design
Who's Who
Contract Phases: The Accumulation Phase, The Income Phase
Contract Facts
Questions: Contacting the Company (sidebar)
Sending Forms and Written Requests in Good Order (sidebar)
</TABLE>
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<TABLE>
<S> <C>
Guaranteed Terms and Guaranteed Interest Rates ........................... 6
Your Choices at the End of a Guaranteed Term ............................. 8
Purchase ................................................................. 8
Right to Cancel .......................................................... 9
Fees ..................................................................... 10
Withdrawals .............................................................. 13
Systematic Distribution Options .......................................... 14
Market Value Adjustment (MVA) ............................................ 16
Death Benefit ............................................................ 17
Income Phase ............................................................. 18
Investments .............................................................. 21
Taxation ................................................................. 23
Other Topics ............................................................. 28
</TABLE>
Contract Distribution--Contract Modification -- Transfer of Ownership;
Assignment -- Involuntary Terminations -- Year 2000 Readiness--Legal Matters --
Experts --Getting Further Information -- Incorporation of Certain Documents by
Reference
<TABLE>
<S> <C>
Appendix I--Calculating a Market Value Adjustment (MVA) .................. 32
</TABLE>
3
<PAGE>
Questions: Contacting the Company. To answer your questions, contact your
Company representative or write or call our Home Office:
Aetna Insurance
Company of America
151 Farmington Avenue
Hartford, CT 06156-1277
1-800-531-4547
Sending Forms and Written Requests in Good Order.
If you are writing to change your beneficiary, request a withdrawal, or for any
other purpose, contact your Company representative or our Home Office to learn
what information is required in order for the request to be in "good order." We
can only act upon written requests that we receive in good order.
Contract Overview
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The following is intended as a summary. Please read each section of this
prospectus for additional detail.
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Contract Design
The contract described in this prospectus is a group or individual, single
purchase payment, modified, guaranteed, deferred annuity contract issued by
Aetna Insurance Company of America. It is intended to be used as a retirement
savings vehicle that receives beneficial tax treatment and allows you to invest
in fixed interest options in order to help meet long-term financial goals.
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Who's Who
The contract holder (you): The person to whom we issue an individual contract
or a certificate under a group contract.
The Company (we): Aetna Insurance Company of America. We issue the contract.
The contract: Both individual contracts and certificates under a group contract
are referred to in this prospectus as the contract.
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Contract Phases
The Accumulation Phase
> At Investment. Upon purchase, you may direct your purchase payment to
different guaranteed terms ranging up to and including twenty years. Each
guaranteed term has its own guaranteed interest rate. Generally, your
purchase payment will earn interest at the guaranteed interest rate(s) for
the duration of the guaranteed term(s) you select. If you withdraw or
transfer amounts prior to the end of a guaranteed term, those amounts may
be subject to a market value adjustment and certain fees. See "Market
Value Adjustment" and "Fees."
> At Maturity. We will notify you at least 18 days before the guaranteed term
ends. If you do not make any election before the guaranteed term ends, we
will automatically renew the contract for a guaranteed term of the same or
similar duration. If you do not want to automatically renew, contact us
before the guaranteed term ends. Prior to the end of a guaranteed term,
you can elect to reinvest in a different guaranteed term; begin income
phase payments; or withdraw the full amount available at maturity.
The Income Phase
You may start receiving income phase payments any time after the first year of
the contract. Several payment options are available (see "Income Phase"). In
general, you may receive payments for a specified period of time or for life;
receive payments monthly, quarterly, semi-annually or annually; and select an
option that provides a death benefit to beneficiaries.
4
<PAGE>
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Contract Facts
Free Look/Right to Cancel: You may cancel the contract within ten days of
receipt (or as otherwise provided by state law). See "Right to Cancel."
Death Benefit: A beneficiary may receive a benefit in the event of your death
prior to the income phase. Benefits during the income phase depend upon the
payment option selected. See "Death Benefit" and " Income Phase."
Withdrawals: During the accumulation phase, you may withdraw all or part of
your account value. Amounts withdrawn may be subject to a market value
adjustment, early withdrawal charge, maintenance fee, tax withholding and
taxation. See "Market Value Adjustment," "Withdrawals," "Fees" and "Taxation."
Systematic Distribution Options: You may elect to receive regular payments from
your account, while retaining the account in the accumulation phase. See
"Systematic Distribution Options."
Fees: Certain fees may be deducted from your account value. See "Fees."
Taxation: The Tax Code has certain rules that apply to amounts accumulated and
distributed under the contract. Tax penalties may apply if these rules are not
followed. See "Taxation."
Market Value Adjustment (MVA): If you withdraw all or part of your account
value before a guaranteed term is completed, an MVA may apply. The MVA reflects
the change in the value of the investment due to changes in interest rates
since the date of investment, and may be positive or negative. See "Market
Value Adjustment."
5
<PAGE>
Guaranteed Terms and Guaranteed Interest Rates
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The contract offers fixed interest options called guaranteed terms. On the
application or enrollment form, you select the guaranteed term(s) you want to
invest in from among the guaranteed terms we offer at that time. Your purchase
payment earns interest at the guaranteed interest rate applicable to that
guaranteed term.
Guaranteed Terms
Start Date. Guaranteed terms always start on the first business day of the
month.
Length. Guaranteed terms are offered at our discretion for various lengths of
time ranging up to and including twenty years.
Minimum Payments. Your single purchase payment must be at least $10,000. You
may divide your single purchase payment among any of the various guaranteed
terms we offer, but you must invest at least $1,000 in any single guaranteed
term.
Guaranteed Interest Rates
We state the guaranteed interest rates as an effective annual rate of return.
In other words, we credit the interest you earn on your purchase payment at a
rate that provides the guaranteed rate of return over the period of one year,
assuming you make no withdrawals. Guaranteed interest rates will never be less
than the minimum guaranteed interest rate stated in the contract. We reserve
the right to offer, from time to time, guaranteed interest rates to prospective
investors that are higher than those offered to current contract holders with
respect to guaranteed terms of the same duration.
One Guaranteed Term/Multiple Guaranteed Interest Rates. More than one
guaranteed interest rate may be applicable during a guaranteed term greater
than one year. For example, a guaranteed term of five years may apply one
guaranteed interest rate for the first year, a different guaranteed interest
rate for the next two years, and a third guaranteed interest rate for the last
two years.
Example of Interest Crediting at the Guaranteed Interest Rate. The example
below shows how interest is credited during a guaranteed term. The hypothetical
guaranteed interest rate used in this example is illustrative only and is not
intended to predict future guaranteed interest rates to be offered under the
contract. Actual guaranteed interest rates offered may be more or less than
those shown. The example assumes no withdrawals of any amount during the entire
seven-year guaranteed term illustrated. Accordingly, the example does not
reflect any market value adjustment, federal income taxes, possible tax
penalties, or deductions of any early withdrawal charge, premium taxes, or
maintenance fees. See "Withdrawals," "Market Value Adjustment," "Fees" and
"Taxation."
6
<PAGE>
Example:
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<TABLE>
<CAPTION>
<S> <C>
Purchase payment: $20,000
Guaranteed term: 7 years
Guaranteed interest rate: 6.00% per year
The guaranteed interest rate is applied in this example by using the
formula:
1 + the guaranteed interest rate = 1.06
Account Value at End of Interest Earned at End of
Each Contract Year Each Contract Year
- ------------------------ ----------------------------------
Contract year 1 = $21,200.00 Interest at end of contract year
($20,000.00 \x 1.06) 1 = $1,200.00
Contract year 2 = $22,472.00 Interest at end of contract year
($21,200.00 \x 1.06) 2 = $1,272.00
Contract year 3 = $23,820.32 Interest at end of contract year
($22,472.00 \x 1.06) 3 = $1,348.32
Contract year 4 = $25,249.54 Interest at end of contract year
($23,820.32 \x 1.06) 4 = $1,429.22
Contract year 5 = $26,764.51 Interest at end of contract year
($25,249.54 \x 1.06) 5 = $1,514.97
Contract year 6 = $28,370.38 Interest at end of contract year
($26,764.51 \x 1.06) 6 = $1,605.87
End of guaranteed term = $30,072.61 Interest at end of contract year
($28,370.38 \x 1.06) 7 = $1,702.23
Total interest credited in guaranteed term = $10,072.61 ($30,072.61 - $20,000)
</TABLE>
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Determination of Guaranteed Interest Rates. We will periodically determine the
guaranteed interest rates we offer at our sole discretion. We have no specific
formula for determining the rate of interest we will declare as future
guaranteed interest rates. Our determination of guaranteed interest rates is
influenced by, but does not necessarily correspond to, interest rates available
on the types of debt instruments in which we intend to invest the amounts
attributable to the contract. (See "Investments.") The Company's management
will also consider various factors in determining guaranteed interest rates for
a given guaranteed term, including some or all of the following:
> Regulatory and tax requirements
> Sales commissions
> Administrative expenses
> General economic trends
> Competitive factors
The Company's management determines the guaranteed interest rates we will
offer. We cannot predict nor guarantee future levels of guaranteed interest
rates above a contractually guaranteed minimum rate nor guarantee what rates
will be offered in the future.
7
<PAGE>
Your Choices at the End of a Guaranteed Term
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At least 18 calendar days prior to the end of a guaranteed term, we will notify
you that the guaranteed term is about to end. At the end of a guaranteed term,
you can do three things with the amount you have accumulated for that
guaranteed term:
> Reinvest all or part of it in another guaranteed term
> Withdraw all or part of it
> Use all or part of it to start your income phase payments
These choices can also be combined. For example, you can withdraw part of the
amount you have accumulated and reinvest the balance; or reinvest part and use
the balance to start income phase payments. Each of these choices has certain
consequences, which you should consider carefully. See "Withdrawals," "Income
Phase" and "Taxation."
Requesting Your Choice. Once you decide what you want to do with your account
value for that guaranteed term, you must advise us of your decision by
completing an election form. We must receive your completed election form at
least five days prior to the end of the guaranteed term to which it applies.
If we do not receive your properly completed election form in time, or you do
not submit an election form, your account value at the end of the guaranteed
term will be automatically reinvested in the following manner:
> For a guaranteed term equal to the guaranteed term just ended
> If no such guaranteed term is available, for the guaranteed term with the
next shortest duration
> If no such shorter guaranteed term is available, for the next longest
guaranteed term
Your account value will then earn interest at the guaranteed interest rate
applicable to the guaranteed term automatically selected for you. We will mail
a confirmation statement to you the next business day after the completion of
the just-ended guaranteed term advising you of the new guaranteed term and
guaranteed interest rate.
Purchase
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Contract Type. The contract may be purchased as one of the following:
(1) A nonqualified deferred annuity
(2) A rollover to a traditional individual retirement annuity (IRA) under Tax
Code section 408(b) (limitations apply, see "Purchasing a Traditional IRA"
in this section)
(3) A rollover to a Roth IRA under Tax Code section 408A (limitations apply,
see "Purchasing a Roth IRA" in this section)
How to Purchase. To purchase a contract, complete an application or enrollment
form and submit it to the Company along with your purchase payment.
8
<PAGE>
Payment Methods. The following payment methods are allowed:
> One lump sum payment
> Transfer or rollover from a pre-existing plan or account
We reserve the right to reject any payments without advance notice.
Payment Amount. The minimum purchase payment is $10,000. We may limit the
amount of the maximum purchase payment. All purchase payments over $1,000,000
will be allowed only with our consent. You may not make any additional purchase
payments under an existing contract. However, eligible persons may purchase
additional contracts at the then prevailing guaranteed interest rates and
guaranteed terms.
Purchasing a Traditional IRA. To purchase the contract as a traditional IRA,
your purchase payment must be a transfer of amounts held in one of the
following:
> A traditional individual retirement account under Tax Code section 408(a)
> A traditional individual retirement annuity under Tax Code section 408(b)
> A retirement plan qualified under Tax Code section 401 or 403
Purchasing a Roth IRA. A contract may be purchased as a Roth IRA under Tax Code
section 408A, by transferring amounts previously accumulated under another Roth
IRA or from a traditional individual retirement annuity or individual
retirement account, provided certain conditions are met. (See "Taxation.")
Acceptance or Rejection of Applications or Enrollment Forms. We must accept or
reject your application or enrollment form within two business days of receipt.
If the application or enrollment form is incomplete, we may hold it and any
accompanying purchase payment for five days. Payments may be held for longer
periods only with your consent, pending acceptance of the application or
enrollment form. If the application or enrollment form is accepted, a contract
will be issued to you. If the application or enrollment form is rejected, we
will return it and any payments to you, without interest.
What Happens to Your Purchase Payment? If we accept your application or
enrollment form, your purchase payment becomes part of our general assets and
is credited to an account established for you. We will confirm the crediting of
your purchase payment within five business days of receipt of your properly
completed application or enrollment form. You start earning interest on your
purchase payment beginning on the effective date of the contract, which is the
date your purchase payment is credited. During the period of time between the
date your purchase payment is credited and the start of the guaranteed term you
selected, your purchase payment earns interest at the guaranteed interest rate
applicable to the guaranteed term you selected.
Right to Cancel
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You may cancel the contract within ten days of receiving it (or as otherwise
provided by state law) by returning it to our Home Office along with a written
notice of cancellation. We will issue a refund within seven days of our receipt
of the contract and written notice of cancellation. The refund will equal the
amount of your purchase payment.
9
<PAGE>
Fees
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The following fees and other deductions may impact your account value:
> Early Withdrawal Charge (see below)
> Maintenance Fee (see below)
> Premium Taxes (see below)
> Market Value Adjustment (see "Market Value Adjustment")
> Taxation (see "Taxation")
Early Withdrawal Charge
Withdrawals of all or a portion of your account value may be subject to a
charge.
Amount. The amount is a percentage of the purchase payment you withdraw. The
percentage will be determined by the early withdrawal charge schedule below.
Purpose. This is a deferred sales charge. It reimburses some of our sales and
administrative expenses associated with the contract.
Early Withdrawal Charge Schedule:
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Years since purchase payment
credited: 0 1 2 3 4 5 6 7
Fee as a percentage
of payment withdrawn: 7% 7% 6% 6% 5% 4% 2% 0%
</TABLE>
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How We Apply the Schedule. For purposes of applying the early withdrawal
charge, all time periods are measured from the date your purchase payment is
credited, even if you reinvest all or part of your account value in another
guaranteed term. Once the early withdrawal charge declines to 0%, it no longer
applies, regardless of how long you own the contract.
The early withdrawal charge applies only to withdrawals of your purchase
payment. However, for the purposes of this charge, we assume you are
withdrawing all or part of your purchase payment first (not your earnings).
This assumption is not made for tax purposes. (See "Taxation.")
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Example. Assume the first guaranteed term you select is for five years. Further
assume that at the end of this five-year guaranteed term, you decide to
reinvest your account value for another guaranteed term of four years. Assume
you then make a withdrawal (but not a special withdrawal, as described below)
during the second year of the new guaranteed term. Because six years have
passed since your purchase payment was credited, you would pay a 2% early
withdrawal charge, even though you could have withdrawn all or part of your
account value at the end of the first five-year guaranteed term without paying
an early withdrawal charge (see "Waiver of Charge," below). However, if you
make a withdrawal during the third year of the new guaranteed term, or anytime
thereafter, you would pay no early withdrawal charge, because seven years would
have passed since your purchase payment was credited.
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10
<PAGE>
Special Withdrawals. After 12 months from the contract effective date, you may
make one withdrawal equal to 10% or less of your account value during any
calendar year, valued at the time we receive your withdrawal request in
writing, and we will not deduct any early withdrawal charge. This special
withdrawal is subject to the following restrictions:
> It applies only to the first withdrawal each calendar year
> All subsequent withdrawals that calendar year are subject to an early
withdrawal charge, even if you did not withdraw the full 10% with your first
withdrawal
> If your first withdrawal of the calendar year is in excess of 10% of your
account value, the excess amount is subject to an early withdrawal charge
Waiver of Charge. The early withdrawal charge is waived for amounts that are:
> Withdrawn at the end of a guaranteed term, provided that at least five days
prior to the end of that guaranteed term we receive your withdrawal request
in writing. If you reinvest those amounts in another guaranteed term, future
withdrawals will be subject to an early withdrawal charge as described above.
> $2,500 or less, provided that no withdrawal has been made from your account
during the prior 12 months.
> Withdrawn due to your election of a systematic distribution option (see
"Systematic Distribution Options").
> Withdrawn due to an involuntary termination. This may occur if your account
value is less than $2,500 (see "Other Topics--Involuntary Terminations").
Nursing Home Waiver. If approved in your state, you may withdraw all or a
portion of your account value without an early withdrawal charge if all of the
following conditions are met:
> More than one account year has elapsed since the date your purchase payment
was credited
> The annuitant, designated under the contract, has spent at least 45
consecutive days in a licensed nursing facility
> The withdrawal is requested within three years of the designated annuitant's
admission to a licensed nursing facility (in Oregon there is no three year
limitation and in New Hampshire non-licensed facilities are included)
We will not waive the early withdrawal charge if the annuitant was in a
licensed nursing care facility at the time you purchased the contract. The
nursing home waiver may not be available in all states.
Market Value Adjustment and Taxation. Except for withdrawals at the end of a
guaranteed term as noted above, and withdrawals under a systematic distribution
option, a market value adjustment is applicable to any amounts you withdraw,
and you may also be required to pay taxes and tax penalties. See "Market Value
Adjustment" and "Taxation."
continued -->
11
<PAGE>
(Fees, continued)
Annual Maintenance Fee
Currently we do not charge a maintenance fee. However, prior to the time you
enter the income phase, an annual maintenance fee may be deducted from your
account value on each anniversary of the contract's effective date and if you
make a full withdrawal from the contract. The terms and conditions under which
the maintenance fee may be deducted are stated in the contract. A maintenance
fee would be used to reimburse us for our administrative expenses relating to
establishing and maintaining the contract.
Premium Taxes
Maximum Amount. Some states and municipalities charge a premium tax on
annuities. These taxes currently range from 0% to 4%, depending upon the
jurisdiction.
When/How. We reserve the right to deduct premium taxes from your account value
or from your payment to the account at any time, but not before there is a tax
liability under state law. Our current practice is to deduct the premium taxes
at the time of a complete withdrawal or the commencement of income payments.
If, at your death, your beneficiary elects to receive a lump sum distribution,
a charge will be deducted for any premium taxes paid on your behalf for which
we have not been reimbursed. If we deduct premium taxes from your purchase
payment, the amount invested in a guaranteed term will be equal to the amount
of your purchase payment reduced by any applicable premium tax.
12
<PAGE>
Withdrawals
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You may withdraw all or part of your account value at any time during the
accumulation phase. Amounts are withdrawn on a pro rata basis from each of the
guaranteed terms under the contract. You may request that we inform you in
advance of the amount payable upon a withdrawal.
Steps for Making a Withdrawal.
> Select the withdrawal amount
1) Full withdrawal: You will receive, reduced by any required withholding tax,
your account value, plus or minus any applicable market value adjustment,
and minus any applicable early withdrawal charge and annual maintenance
fee.
2) Partial Withdrawal (Percentage or Specified Dollar Amount): You will
receive, reduced by any required withholding tax, the amount you specify,
subject to the value available in your account. However, the amount
actually withdrawn from your account will be adjusted for any applicable
early withdrawal charge and any positive or negative market value
adjustment, and accordingly, may be more or less than the amount requested.
> Properly complete a disbursement form and submit it to our Home Office
Delivery of Payment. Payment of withdrawal requests will be made in accordance
with the SEC's requirements. Normally, payment will be sent not later than
seven days following our receipt of the disbursement form in good order.
However, under certain emergency situations, we may defer payment of any
withdrawal for a period not exceeding six months from the date we receive your
withdrawal request.
Taxes, Fees and Deductions. Amounts withdrawn may be subject to one or more of
the following:
> Early Withdrawal Charge: Withdrawals of all or a portion of your account may
be subject to an early withdrawal charge. This is a deferred sales charge
that reimburses us for some of the sales and administrative expenses
associated with the contract. See "Fees--Early Withdrawal Charge."
> Annual Maintenance Fee: If you make a full withdrawal from the contract, we
may deduct any applicable annual maintenance fee. See "Fees--Annual
Maintenance Fee."
> Market Value Adjustment (MVA): The MVA reflects changes in interest rates
since the deposit period. The MVA may be positive or negative. If you make a
withdrawal before the end of a guaranteed term, we will calculate an MVA and
the amount withdrawn will be adjusted for any applicable positive or negative
MVA. See "Market Value Adjustment."
> Tax Penalty: If you make a withdrawal before you attain age 59-1/2, the
amount withdrawn may be subject to a 10% penalty tax. See "Taxation."
> Tax Withholding: Amounts withdrawn may be subject to withholding for federal
income taxes. See "Taxation."
All applicable fees and deductions are deducted from the amount of your
withdrawal in accordance with the terms of the contract. Any market value
adjustment applicable to your withdrawal, taxes, fees and deductions may either
increase or decrease the amount paid to you. To determine which may apply,
refer to the appropriate sections of this prospectus, contact your Company
representative or call our Home Office at the number listed in "Contract
Overview."
13
<PAGE>
Systematic Distribution Options
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Features of a Systematic Distribution Option (SDO)
An SDO allows you to receive regular payments from the contract without moving
into the income phase. By remaining in the accumulation phase, certain rights
and flexibility not available during the income phase are retained.
The following SDOs may be available:
> SWO--Systematic Withdrawal Option. SWO is a series of automatic partial
withdrawals from your account based on a payment method you select. It is
designed for those who want a periodic income while retaining investment
flexibility for amounts accumulated under the contract.
SWO allows you to withdraw either a specified amount or a specified
percentage of the contract's value, or to withdraw amounts over a specified
time period that you determine, within certain limits described in the
contract. SWO payments can be made on a monthly or quarterly basis, and the
amount of each payment is determined by dividing the designated annual
amount by the number of payments due each calendar year. SWO payments are
withdrawn pro rata from each of the guaranteed terms under the contract.
Under a contract purchased as a traditional IRA, if the SWO payment for any
year is less than the minimum required distribution under the Tax Code, the
SWO payment will be increased to an amount equal to the minimum
distribution amount.
If you participate in SWO, you may not utilize a special withdrawal to make
additional withdrawals from the contract. (See "Withdrawals -- Special
Withdrawals.")
> ECO--Estate Conservation Option. ECO offers the same investment flexibility
as SWO, but is designed for those who want to receive only the minimum
distribution the Tax Code requires each year.
Under ECO, we calculate the minimum distribution amount required by law,
and pay you that amount once a year. ECO is not available under
nonqualified contracts or under Roth IRA contracts. ECO payments are
withdrawn pro rata from each of the guaranteed terms under the contract. We
will, upon request, inform you in advance of the amount payable under ECO.
If you participate in ECO, you may not utilize a special withdrawal to make
additional withdrawals from the contract. (See "Withdrawals -- Special
Withdrawals.")
> Other Systematic Distribution Options. We may add additional SDOs from time
to time. You may obtain additional information relating to any of the SDOs
from your Company representative or from our Home Office.
Availability. If allowed by applicable law, we reserve the right to discontinue
the availability of one or all of the SDOs for new elections at any time and to
change the terms of future elections.
Eligibility. To exercise one of these options you must meet certain age
criteria and your account value must meet certain minimum requirements. To
14
<PAGE>
determine if you meet the age and account value criteria and to assess terms
and conditions that may apply, contact your Company representative or our Home
Office.
Termination. You may revoke an SDO at any time by submitting a written request
to our Home Office. However, once cancelled, you or your spousal beneficiary
may not elect SWO again. In addition, once cancelled, ECO may not be elected
again until 36 months have elapsed.
Deductions and Taxation. When you elect an SDO, your account value remains in
the accumulation phase and subject to the applicable charges and deductions
described in "Fees." However, we will not apply an early withdrawal charge or
market value adjustment to any part of your account value paid under SWO or
ECO. Taking a withdrawal through an SDO may have tax consequences. If you are
concerned about tax implications consult a tax advisor before one of these
options is elected. (See "Taxation.")
15
<PAGE>
Market Value Adjustment (MVA)
- --------------------------------------------------------------------------------
What is an MVA? In certain situations described below, including when you make
a withdrawal before the end of a guaranteed term, we will calculate a market
value adjustment and either add or deduct that value from the amount withdrawn.
The calculation we use to determine the MVA reflects the change in the value of
your investment due to changes in interest rates since the start of the
guaranteed term under the contract. When these interest rates increase, the
value of the investment decreases, and the MVA amount may be negative and cause
a deduction from your withdrawal amount. Conversely, when these interest rates
decrease, the value of the investment increases, and the MVA amount may be
positive and cause an increase in your withdrawal amount.
Calculation of the MVA. For a further explanation of how the MVA is calculated,
see Appendix I.
Purpose of the MVA. If you make an early withdrawal from the contract, we may
need to liquidate certain assets or use existing cash flow that would otherwise
be available to invest at current interest rates. The assets we may liquidate
to provide your withdrawal amount may be sold at a profit or a loss, depending
upon market conditions. To lessen this impact, certain withdrawals are subject
to an MVA.
When Does an MVA Apply? An MVA may apply when:
> You request a withdrawal before the end of a guaranteed term. In this case
the withdrawal amount may be increased or decreased by the application of the
MVA.
> You initiate income phase payments before the end of your guaranteed term. In
this case an MVA may be applied to any amounts used to start income phase
payments. While either a positive or negative MVA may apply to amounts used
to start a nonlifetime payment option, only a positive MVA will apply to
amounts used to start a lifetime payment option. See "Income Phase."
> We terminate the contract because your account value is less than $2,500.
> You cancel the contract.
> A death benefit is paid upon the death of the annuitant, more than six months
after the death (see "Death Benefit").
When Does an MVA Not Apply? An MVA will not be applied to:
> Withdrawals under the Systematic Withdrawal Option or Estate Conservation
Option as described in "Systematic Distribution Options."
> A death benefit payable upon death of an annuitant, if paid within six months
of the annuitant's death (see "Death Benefit").
> Amounts withdrawn at the end of a guaranteed term, provided that at least
five days prior to the end of that guaranteed term we receive your withdrawal
request in writing. The MVA, however, remains applicable to any amount you
reinvest for another guaranteed term.
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<PAGE>
This section provides information about the death benefit during the
accumulation phase. For death benefit information applicable to the income
phase, see "Income Phase."
Annuitant: The person(s) on whose life expectancy we calculate the income phase
payments.
Death Benefit
- --------------------------------------------------------------------------------
During the Accumulation Phase
Who Receives the Benefit? If you or the annuitant die during the accumulation
phase, a death benefit will be paid to your beneficiary in accordance with the
terms of the contract subject to the following:
> If there are joint contract holders, upon the death of one, the surviving
joint contract holder will be deemed the designated beneficiary, and any
other beneficiary on record will be treated as the beneficiary at the death
of the surviving joint contract holder
> If you are not a natural person, the death benefit will be payable at the
death of the annuitant designated under the contract or upon any change of
the annuitant
> If you die and no beneficiary exists, the death benefit will be paid in a
lump sum to your estate
Designating a Beneficiary(ies). You may designate a beneficiary on your
application or enrollment form, or by providing a written request in good order
to our Home Office.
Calculation of the Benefit. The death benefit is calculated as of the date
proof of death and the beneficiary's right to receive the death benefit are
received in good order at our Home Office. The amount of the death benefit is
determined as follows:
> If the death benefit is paid within six months of the death of the annuitant,
the amount equals your account value
> If the death benefit is paid more than six months after the date of death of
the annuitant, or if paid upon your death and you are not the annuitant, it
equals your account value as adjusted by any applicable market value
adjustment
> If you are not the annuitant, the death benefit payable may be subject to an
early withdrawal charge
Benefit Payment Options. If you are the annuitant and you die before income
phase payments begin, or if you are not a natural person and the annuitant dies
before income phase payments begin, any beneficiary under the contract who is
an individual has several options for receiving payment of the death benefit.
The death benefit may be paid:
> In one lump sum payment
> In accordance with any of the available income phase payment options (see
"Income Phase--Payment Options")
> In certain circumstances, your beneficiary, spousal beneficiary or joint
contract holder may have the option to continue the contract rather than
receive the death benefit
Taxation. The Tax Code requires distribution of death benefit proceeds within a
certain period of time. Failure to begin receiving death benefit payments
within those time periods can result in tax penalties. Regardless of the method
of payment, death benefit proceeds will generally be taxed to the beneficiary
in the same manner as if you had received those payments. See "Taxation" for
additional information.
Change of Beneficiary. You may change the beneficiary previously designated at
any time by submitting notice in writing to our Home Office. The change will
not be effective until we receive and record it.
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<PAGE>
We may have used the following terms in prior prospectuses:
Annuity Phase--Income Phase
Annuity Option--Payment Option
Annuity Payment--Income Phase Payment
Annuitization--Initiating Income Phase Payments
Income Phase
- --------------------------------------------------------------------------------
During the income phase you receive payments from your accumulated account
value. You may apply all or a portion of your account value to provide these
payments. Income phase payments are made to you or you can request the payments
be deposited directly to your bank account. After your death, we will send your
designated beneficiary any income phase payments still due. You may be required
to pay taxes on all or a portion of the income phase payments you receive. (See
"Taxation.")
Partial Entry into the Income Phase. You may elect a payment option for a
portion of your account value, while leaving the remaining portion in a
guaranteed term(s). Whether the Tax Code considers such payments taxable as
annuity payments or as withdrawals is currently unclear; therefore, you should
consult with a qualified tax advisor before electing this option.
Initiating Payments. At least 30 days prior to the date you want to start
receiving payments, you must notify us in writing of the following:
> Start date
> Payment option (see the payment options table in this section)
> Payment frequency (i.e., monthly, quarterly, semi-annually or annually)
The account will continue in the accumulation phase until you properly initiate
income phase payments. You may change your payment option election up to 30
days before income phase payments begin. Once you elect for income phase
payments to begin, you may not elect a different payment option or elect to
receive a lump sum payment.
What Affects Payment Amounts? Some of the factors that may affect payment
amounts include your age, your gender, your account value, the payment option
selected and number of guaranteed payments (if any) selected.
Minimum Payment Amounts. The payment option you select must result in one or
both of the following:
> A first payment of at least $50
> Total yearly payments of at least $250
If your account value is too low to meet these minimum payment amounts, you
must elect a lump sum payment. We reserve the right to increase the minimum
payment amount based upon increases in the Consumer Price Index--Urban.
Payment Start Date. Income phase payments may start any time after the first
year of the contract, and will start the later of the annuitant's 85th birthday
or the tenth anniversary of your purchase payment, unless you elect otherwise.
Regardless of your income phase payment start date, your income phase payments
will not begin until you have selected an income phase payment option. Failure
to select a payment option by your payment start date, or postponement of the
start date past the later of the annuitant's 85th birthday or the tenth
anniversary of your purchase payment, may have adverse tax consequences. You
should consult with a qualified tax advisor if you are considering either of
these courses of action.
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<PAGE>
Payment Length. If you choose a lifetime payment option with guaranteed
payments, when the payments begin, the age of the annuitant plus the number of
years for which payments are guaranteed must not exceed 95. Additionally,
federal income tax requirements currently applicable to traditional IRAs
provide that the period of years guaranteed may not be greater than the joint
life expectancies of the payee and his or her designated beneficiary.
Charges Deducted. No early withdrawal charge will be applied to amounts used to
start income phase payments, although a market value adjustment may be
applicable.
Market Value Adjustment. If your income phase payments start before the end of
your guaranteed term, a market value adjustment will be applied to any amounts
used to start income phase payments. If you select a lifetime payment option,
only a positive market value adjustment will be applied. (See "Market Value
Adjustment.")
Death Benefit During the Income Phase. Upon the death of either the annuitant
or the surviving joint annuitant, the amount payable, if any, to your
beneficiary depends on the payment option currently in force. Any amounts
payable must be paid at least as rapidly as under the method of distribution in
effect at the annuitant's death. If you die and you are not the annuitant, any
remaining payments will continue to be made to your beneficiary at least as
rapidly as under the method of distribution in effect at your death.
Taxation. To avoid certain tax penalties, you or your beneficiary must meet the
distribution rules imposed by the Tax Code. See "Taxation."
continued -->
19
<PAGE>
(Income Phase, continued)
Payment Options
The following table lists the payment options and accompanying death benefits
that may be available during the income phase. We may offer additional payment
options under the contract from time to time.
Terms Used in the Tables:
Annuitant: The person(s) on whose life expectancy the income phase payments are
calculated.
Beneficiary: The person designated to receive the death benefit payable under
the contract.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Lifetime Payment Options
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Length of Payments: For as long as the annuitant lives. It is possible only one payment will be
made should the annuitant die prior to the second payment's due date.
Life Income
Death Benefit--None: All payments end upon the annuitant's death.
- ----------------------------------------------------------------------------------------------------------------------
Length of Payments: For as long as the annuitant lives, with payments guaranteed for your choice
of 5, 10, 15, or 20 years, or other periods specified in the contract.
Life Income--
Guaranteed
Payments Death Benefit: If the annuitant dies before we have made all the guaranteed payments, payments
will continue to the beneficiary.
- ----------------------------------------------------------------------------------------------------------------------
Length of Payments: For as long as either annuitant lives. It is possible only one payment will be
made should both the annuitant and joint annuitant die before the second payment's due date.
Continuing Payments: When you select this option you will also choose either:
(a) 100%, 662/3%, or 50% of the payment to continue to the surviving annuitant after the first
Life Income--
Two Lives death; or
(b) 100% of the payment to continue to the first annuitant on the second annuitant's death, and
50% of the payment to continue to the second annuitant on the first annuitant's death.
Death Benefit--None: Payments cease upon the death of both annuitants.
- ----------------------------------------------------------------------------------------------------------------------
Length of Payments: For as long as either annuitant lives, with payments guaranteed for a
minimum of 120 months, or other periods specified in the contract.
Life Income--
Two Lives-- Continuing Payments: 100% of the payment will continue to the surviving annuitant after the first
Guaranteed death.
Payments
Death Benefit: If both annuitants die before the guaranteed payments have all been paid,
payments will continue to the beneficiary.
----------------------------------------------------------------------------------------------------------------------
Nonlifetime Payment Option
- ----------------------------------------------------------------------------------------------------------------------
Length of Payments: Payments will continue for your choice of 10 through 30 years (or other
periods specified in the contract).
Nonlifetime--
Guaranteed
Payments Death Benefit: If the annuitant dies before we make all the guaranteed payments, payment will
continue to the beneficiary.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
Investments
- --------------------------------------------------------------------------------
Separate Account. Payments received under the contract and allocated to
guaranteed terms will be deposited to, and accounted for in a nonunitized
separate account that we established under Connecticut law. A nonunitized
separate account is a separate account in which you do not participate in the
performance of the assets through unit values or any other interest.
Persons allocating amounts to the nonunitized separate account do not receive a
unit value of ownership of assets accounted for in the separate account. The
assets accrue solely to our benefit and we bear the entire risk of investment
gain or loss. All of our obligations due to allocations to the nonunitized
separate account are contractual guarantees we have made and are accounted for
in the separate account. All of our general assets are available to meet the
guarantees under the contracts. However, to the extent provided for in the
applicable contracts, assets of the nonunitized separate account are not
chargeable with liabilities arising out of any other business we conduct.
Income, gains or losses of the separate account are credited to or charged
against the assets of the separate account without regard to other income,
gains or losses of the Company. We have amended a majority of the contracts
covered by this prospectus to provide that the assets of the nonunitized
separate account, to the extent of contract liabilities, are "insulated" from
other Company liabilities as described above. We are in the process of amending
any remaining contracts covered by this prospectus to provide the same.
Setting Guaranteed Interest Rates. We do not have any specific formula for
setting guaranteed interest rates for the guaranteed terms. We expect the
guaranteed interest rates to be influenced by, but not necessarily correspond
to, yields on fixed income securities we acquire with amounts allocated to the
guaranteed terms when the guaranteed interest rates are set.
Types of Investments. Our assets will be invested in accordance with the
requirements established by applicable state laws regarding the nature and
quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of
investment. In general, these laws permit investments, within specified limits
and subject to certain qualifications, in federal, state, and municipal
obligations, corporate bonds, preferred and common stocks, real estate
mortgages, and certain other investments.
We intend to invest in assets which, in the aggregate, have characteristics,
especially cash flow patterns, reasonably related to the characteristics of the
liabilities. Various immunization techniques will be used to achieve the
objective of close aggregate matching of assets and liabilities. We will
primarily invest in investment-grade fixed income securities including:
> Securities issued by the United States Government or its agencies or
instrumentalities, which issues may or may not be guaranteed by the United
States Government.
> Debt securities that are rated, at the time of purchase, within the four
highest grades assigned by Moody's Investors Services, Inc. (Aaa, Aa, A or
Baa) or Standard & Poor's Corporation (AAA, AA, A or BBB) or any other
nationally recognized rating organizations.
continued -->
21
<PAGE>
(Investments, continued)
> Other debt instruments including, but not limited to:
o Issues of banks, bank holding companies or corporations
o Issues guaranteed by banks or bank holding companies
These obligations, although not rated by Moody's, Standard & Poor's, or other
nationally recognized rating organizations, are deemed by the Company's
management to have an investment quality comparable to securities which may
be purchased as stated above.
> Commercial paper, cash or cash equivalents, and other short-term investments
having a maturity of less than one year which are considered by the Company's
management to have investment quality comparable to securities which may be
purchased as stated above.
> In addition, we may invest in futures and options. We purchase financial
futures and related options and options on securities solely for
nonspeculative hedging purposes. In the event securities prices are
anticipated to decline, we may sell a futures contract or purchase a put
option on futures or securities to protect the value of securities it holds.
Similarly, if securities prices are expected to rise, we may purchase a
futures contract or a call option against anticipated positive cash flow or
we may purchase options on securities.
While this section generally describes our investment strategy, we are not
obligated to invest the assets attributable to the contract according to any
particular strategy, except as may be required by Connecticut and other state
insurance laws. Additionally, the guaranteed interest rates we establish need
not relate to the investment performance we experience.
22
<PAGE>
In This Section
> Introduction
> The Contract
> Taxation of Withdrawals and Other Distributions
> 10% Penalty Tax
> Withholding for Federal Income Tax Liability
> Minimum Distribution Requirements
> More Rules Specific to IRAs
> More Rules Specific to Nonqualified Contracts
> Taxation of the Company
When consulting a tax advisor, be certain he or she has expertise in the Tax
Code sections applicable to your tax concerns.
Taxation
- --------------------------------------------------------------------------------
Introduction
This section discusses our understanding of current federal income tax laws
affecting the contract. You should keep the following in mind when reading it:
> Your tax position (or the tax position of the beneficiary, as applicable)
determines federal taxation of amounts held or paid out under the contract.
> Tax laws change. It is possible a future change could affect contracts issued
in the past.
> This section addresses federal income tax rules and does not discuss federal
estate and gift tax implications, state and local taxes or any other tax
provisions.
> We do not make any guarantee about the tax treatment of the contract or
transactions involving the contract.
- --------------------------------------------------------------------------------
We do not intend this information to be tax advice. For advice about the effect
of federal income taxes or any other taxes on amounts held or paid out under the
contract, consult a tax advisor.
- --------------------------------------------------------------------------------
The Contract
The contract is designed for use on a non-tax-qualified basis as a nonqualified
contract, or with certain retirement arrangements that qualify under Tax Code
sections 408(b) or 408A.
The tax rules vary according to whether the contract is a nonqualified contract
or used with a retirement arrangement. If used with a retirement arrangement,
you need to know the Tax Code section under which your arrangement qualifies.
Contact your Company representative or our Home Office to learn which Tax Code
section applies to your arrangement.
Contract holders are responsible for determining that contributions,
distributions and other transactions satisfy applicable laws. Legal counsel and
a tax advisor should be consulted regarding the suitability of the contract.
Taxation of Withdrawals and Other Distributions
Certain tax rules apply to distributions from the contract. A distribution is
any amount taken from the contract including withdrawals, income payments,
rollovers, exchanges and death benefit proceeds. We report the taxable portion
of all distributions to the IRS.
Nonqualified Contracts. A full withdrawal of a nonqualified contract is taxable
to the extent the amount received exceeds the investment in the contract. A
partial withdrawal is taxable to the extent the account value immediately
before the withdrawal exceeds the investment in the contract. In other words, a
partial withdrawal is treated first as a withdrawal of taxable earnings.
For income phase payments, a portion of each payment that represents the
investment in the contract is not taxable. An exclusion ratio is calculated to
determine the nontaxable portion.
For fixed income phase payments, in general, there is no tax on the portion of
each payment which represents the same ratio that the investment in the
continued -->
23
<PAGE>
(Taxation, continued)
contract bears to the total dollar amount of the expected payments as defined
in Tax Code section 72(d). The entire income phase payment will be taxable once
the recipient has recovered the investment in the contract.
All deferred nonqualified annuity contracts that are issued by the Company (or
its affiliates) to the same contract holder during any calendar year are
treated as one annuity contract for purposes of determining the amount
includible in gross income under Tax Code section 72(e). In addition, the
Treasury Department has specific authority to issue regulations that prevent
the avoidance of Tax Code section 72(e) through the serial purchase of annuity
contracts or otherwise.
408(b) IRA. All distributions from a 408(b) traditional individual retirement
annuity (IRA) are taxed as received unless one of the following applies:
> The distribution is rolled over to another traditional IRA or, if the IRA
contains only amounts previously rolled over from a 401(a), 401(k), or 403(b)
plan, to another plan of the same type.
> You made after-tax contributions to the plan. In this case, the distribution
will be taxed according to rules detailed in the Tax Code.
408A Roth IRA. A qualified distribution from a Roth IRA is not taxed when it is
received. A qualified distribution is a distribution that meets both of the
following requirements:
> Made after the five-taxable year period beginning with the first taxable year
for which a contribution was made
> Made after you attain age 59 1/2, die, become permanently and totally
disabled, or for a qualified first-time home purchase
If a distribution is not qualified, the accumulated earnings are taxable. A
partial distribution will first be treated as a return of contributions, which
is not taxable.
Taxation of Death Benefit Proceeds. In general, payments received by your
beneficiaries after your death are taxed in the same manner as if you had
received those payments.
10% Penalty Tax
Under certain circumstances, the Tax Code may impose a 10% penalty tax on the
taxable portion of any distribution from a nonqualified contract or from a
contract used with a 408A Roth IRA or 408(b) traditional IRA.
Nonqualified Contract. The 10% penalty tax applies to the taxable portion of a
distribution from a nonqualified annuity unless one or more of the following
have occurred:
> The taxpayer has attained age 59-1/2
> The taxpayer has become totally and permanently disabled
> The contract holder has died
> The distribution is made in substantially equal periodic payments (at least
annually) over the life or life expectancy of the taxpayer or the joint lives
or joint life expectancies of the taxpayer and beneficiary
> The distribution is allocable to investment in the contract before August 14,
1982
24
<PAGE>
408(b) Traditional IRA and 408A Roth IRA. The 10% penalty tax applies to the
taxable portion of a distribution from a 408(b) or 408A IRA, unless one or more
of the following have occurred:
> You have attained age 59-1/2
> You have become totally and permanently disabled
> You have died
> The distribution is rolled over in accordance with the Tax Code
> The distribution is made in substantially equal periodic payments (at least
annually) over your life or life expectancy or the joint lives or joint life
expectancies of you and your beneficiary
> The distribution is equal to unreimbursed medical expenses that qualify for
deduction as specified in the Tax Code
> The distribution is used to pay for health insurance premiums for certain
unemployed individuals
> The amount is withdrawn for a first-time home purchase
> The amount withdrawn is for higher education expenses
These exceptions also apply to a distribution from a Roth IRA that is not a
qualified distribution or a rollover to a Roth IRA that is not a qualified
rollover contribution.
Withholding for Federal Income Tax Liability
Any distributions under the contract are generally subject to withholding.
Federal income tax liability rates vary according to the type of distribution
and the recipient's tax status:
> Nonqualified Contract. Generally, you or a beneficiary may elect not to have
tax withheld from distributions
> 408(b) and 408A IRAs. Generally, you or a beneficiary may elect not to have
tax withheld from distributions
> Non-resident Aliens. If you or your beneficiary are a non-resident alien,
then any withholding is governed by Tax Code section 1441 based on the
individual's citizenship, the country of domicile and treaty status
Minimum Distribution Requirements
If your contract is a 408(b) traditional IRA, to avoid certain tax penalties,
you and any beneficiary must meet the minimum distribution requirements imposed
by the Tax Code. The requirements do not apply to nonqualified contracts or
Roth IRA contracts, except with regard to death benefits. These rules may
dictate one or more of the following:
> Start date for distributions
> The time period in which all amounts in your account(s) must be distributed
> Distribution amounts
Start Date. If your contract is a 408(b) IRA, generally you must begin
receiving distributions by April 1 of the calendar year following the calendar
year in which you attain age 70-1/2.
Time Period. We must pay out distributions from 408(b) IRA contracts over one
of the following time periods:
continued -->
25
<PAGE>
(Taxation, continued)
> Over your life or the joint lives of you and your beneficiary
> Over a period not greater than your life expectancy or the joint life
expectancies of you and your beneficiary
50% Excise Tax. If you fail to receive the minimum required distribution for
any tax year from a 408(b) IRA, a 50% excise tax is imposed on the required
amount that was not distributed.
Minimum Distribution of Death Benefit Proceeds (Except Nonqualified
Contracts). The following applies to 408(b) and 408A IRAs. Different
distribution requirements apply if your death occurs:
> After you begin receiving minimum distributions under the contract
> Before you begin receiving such distributions
If your death occurs after you begin receiving minimum distributions under the
contract, distributions must be made at least as rapidly as under the method in
effect at the time of your death. Tax Code section 401(a)(9) provides specific
rules for calculating the minimum required distributions at your death. The
rules differ, dependent upon both of the following:
> Whether your minimum required distribution was calculated each year based on
your single life expectancy or the joint life expectancies of you and your
beneficiary
> Whether life expectancy was recalculated
The rules are complex and any beneficiary should consult with a tax advisor
before electing the method of calculation to satisfy the minimum distribution
requirements.
If your death occurs before you begin receiving minimum distributions under the
contract, your entire balance must be distributed by December 31 of the
calendar year containing the fifth anniversary of the date of your death. For
example, if you die on September 1, 1999, your entire balance must be
distributed to the beneficiary by December 31, 2004. However, if the
distribution begins by December 31 of the calendar year following the calendar
year of your death, then payments may be made in either of the following
time-frames:
> Over the life of the beneficiary
> Over a period not extending beyond the life expectancy of the beneficiary
Start Dates for Spousal Beneficiaries. If the beneficiary is your spouse, the
distribution must begin on or before the later of the following:
> December 31 of the calendar year following the calendar year of your death
> December 31 of the calendar year in which you would have attained age 70-1/2
Special Rule for IRA Spousal Beneficiaries. In lieu of taking a distribution
under these rules, a spousal beneficiary may elect to treat the account as his
or her own IRA and defer taking a distribution until his or her age 70-1/2. The
surviving spouse is deemed to have made such an election if the surviving
spouse makes a rollover to or from the account or fails to take a distribution
within the required time period.
26
<PAGE>
Minimum Distribution of Death Benefit Proceeds (Nonqualified Contracts)
Death of Contract Holder. The following requirements apply to nonqualified
contracts at the death of the contract holder. Different distribution
requirements apply if you are the contract holder and your death occurs:
> After you begin receiving income phase payments under the contract
> Before you begin receiving such distributions
If your death occurs after you begin receiving income phase payments,
distribution must be made at least as rapidly as under the method in effect at
the time of your death.
If your death occurs before you begin receiving income phase payments, your
entire balance must be distributed within five years after the date of your
death. For example, if you die on September 1, 1999, your entire balance must
be distributed by August 31, 2004. However, if the distribution begins within
one year of your death, then payments may be made in one of the following
time-frames:
> Over the life of the beneficiary
> Over a period not extending beyond the life expectancy of the beneficiary
Spousal Beneficiaries. If the beneficiary is your spouse, the account may be
continued with the surviving spouse as the new contract holder.
Death of Annuitant. If the contract holder is a non-natural person and the
annuitant dies, the same rules apply as outlined above for death of the
contract holder. If the contract holder is a natural person but not the
annuitant and the annuitant dies, the beneficiary must elect an income phase
payment option within 60 days of the date of death, or any gain under the
contract will be includible in the beneficiary's income in the year the
annuitant dies.
More Rules Specific to IRAs
Tax Code section 408(b) permits eligible individuals to contribute to an IRA on
a pre-tax (deductible) basis. Employers may establish Simplified Employee
Pension (SEP) plans and contribute to a traditional IRA owned by the employee.
Tax Code section 408A permits eligible individuals to contribute to a Roth IRA
on an after-tax (nondeductible) basis.
Assignment or Transfer of Contracts. Adverse tax consequences may result if you
assign or transfer your interest in the contract to persons other than your
spouse incident to a divorce.
Eligibility. Eligibility to contribute to a traditional 408(b) IRA on a pre-tax
basis or to establish a Roth IRA or to rollover or transfer from a traditional
408(b) IRA to a Roth IRA depends on your adjusted gross income.
Rollovers and Transfers. Rollovers and direct transfers are permitted from a
401, 403(a) or a 403(b) arrangement to a traditional 408(b) IRA. Distributions
from these arrangements are not permitted to be transferred or rolled over to a
Roth IRA. A Roth IRA can accept transfers/rollovers only from a traditional
408(b) IRA, subject to ordinary income tax, or from another Roth IRA.
More Rules Specific to Nonqualified Contracts
In General. Tax Code section 72 governs taxation of annuities in general.
continued -->
27
<PAGE>
(Taxation, continued)
A contract holder under a nonqualified contract who is a natural person
generally is not taxed on increases in the account value until distribution
occurs by withdrawing all or part of such account value. The taxable portion of
a distribution is taxable as ordinary income.
Non-Natural Contract Holders of a Nonqualified Contract. If the contract holder
is not a natural person, a nonqualified contract generally is not treated as an
annuity for income tax purposes and the income on the contract for the taxable
year is currently taxable as ordinary income. Income on the contract is any
increase over the year in the full withdrawal value, adjusted for purchase
payments made during the year, amounts previously distributed and amounts
previously included in income. There are some exceptions to the rule and a
non-natural person should consult with its tax advisor prior to purchasing this
contract. A non-natural person exempt from federal income taxes should consult
with its tax advisor regarding treatment of income on the contract for purposes
of the unrelated business income tax. When the contract holder is not a natural
person, a change in annuitant is treated as the death of the contract holder.
Transfers, Assignments or Exchanges of a Nonqualified Contract. A transfer of
ownership of a nonqualified contract, the designation of an annuitant, payee or
other beneficiary who is not also the contract holder, the selection of certain
annuity dates, or the exchange of a contract may result in certain tax
consequences. The assignment, pledge, or agreement to assign or pledge any
portion of the account value generally will be treated as a distribution.
Anyone contemplating any such designation, transfer, assignment, selection, or
exchange should contact a tax advisor regarding the potential tax effects of
such a transaction.
Taxation of the Company
We are taxed as a life insurance company under the Tax Code. We own all assets
supporting the obligations of the contracts. Any income earned on these assets
is considered income to the Company.
Other Topics
- --------------------------------------------------------------------------------
Contract Distribution
Aetna Life Insurance and Annuity Company (ALIAC), an affiliate of the Company,
will serve as the principal underwriter for the securities sold by this
prospectus. ALIAC is registered as a broker-dealer with the SEC and is a member
of the National Association of Securities Dealers, Inc. (NASD). As principal
underwriter, ALIAC will enter into arrangements with one or more registered
broker-dealers, including at least one of its affiliates, to offer and sell the
contracts described in this prospectus. We call these entities "distributors."
ALIAC and one or more of its affiliates may also sell the contracts directly.
All individuals offering and selling the contracts must be registered
representatives of a broker-dealer and must be licensed as insurance agents to
sell annuity contracts.
Commission Payments. ALIAC may pay commissions to persons who offer and sell
the contracts. The maximum percentage amount paid with respect to a
28
<PAGE>
given purchase payment is 6% of the payment to an account. ALIAC may also pay
asset-based service fees. Asset-based service fees will not exceed 11/4% of the
assets held under a contract. Some sales personnel may receive various types of
non-cash compensation as special sales incentives, including trips and
educational and/or business seminars. However, any such compensation will be
paid in accordance with NASD rules. In addition, ALIAC may provide additional
compensation to the Company's supervisory and other management personnel if the
overall investments in funds advised by the Company or its affiliates increases
over time. ALIAC may reimburse the distributor for certain expenses. The name
of the distributor and the registered representative responsible for your
account are stated in your application. ALIAC pays any commissions and sales
related expenses and these are not deducted from payments to your account.
ALIAC may also contract with independent third party broker-dealers who will
act as wholesalers by assisting ALIAC in finding broker-dealers interested in
acting as distributors of the contracts. These wholesalers may also provide
training, marketing and other sales related functions for ALIAC and for the
distributors and may provide certain administrative services to ALIAC in
connection with the contracts. ALIAC may pay such wholesalers compensation
based on purchase payments for the contracts purchased through distributors
selected by the wholesaler. ALIAC may also designate third parties to provide
services in connection with the contracts, such as reviewing applications for
completeness and compliance with insurance requirements and providing the
distributors with approved marketing material, prospectuses or other supplies.
These parties will also receive payments based on purchase payments for their
services, to the extent applicable securities laws and NASD rules allow such
payments. ALIAC will pay all costs and expenses related to these services.
Contract Modification
Only an authorized officer of the Company may change the terms of the contract.
We may change the contract as required by federal or state law. In addition, we
may, upon 30 days' written notice to the contract holder, make other changes to
group contracts that would apply only to individuals who become participants
under that contract after the effective date of such changes. If the group
contract holder does not agree to a change, we reserve the right to refuse to
establish new accounts under the contract. Certain changes will require the
approval of appropriate state or federal regulatory authorities.
Transfer of Ownership; Assignment
Your rights under a nonqualified contract may be assigned or transferred. An
assignment of a contract will only be binding on us if it is made in writing
and sent to and accepted by us at our Home Office. We will use reasonable
procedures to confirm the assignment is authentic, including verification of
signature. If we fail to follow our own procedures, we will be liable for any
losses to you directly resulting from the failure. Otherwise, we are not
responsible for the validity of any assignment. The rights of the contract
holder and the interest of the annuitant and any beneficiary will be subject to
the rights of any assignee we have on our records. We reserve the right not to
accept any assignment or transfer to a non-natural person. In some cases, an
assignment may have adverse tax consequences. You should consult a tax advisor.
29
<PAGE>
Involuntary Terminations
We reserve the right to terminate any account with a value of $2,500 or less
immediately following a partial withdrawal. However, an IRA may only be closed
out when payments to the contract have not been received for a 24-month period
and the paid-up annuity benefit at maturity would be less than $20 per month.
If such right is exercised, you will be given 90 days' advance written notice.
No early withdrawal charge will be deducted for involuntary terminations. We do
not intend to exercise this right in cases where the account value is reduced
to $2,500 or less solely due to investment performance.
Year 2000 Readiness
The Company is dependent on computer systems and applications to conduct its
business. The Company shares the same systems as Aetna Life Insurance and
Annuity Company (ALIAC) and Aetna management has decided not to allocate Year
2000 costs to the Company. ALIAC has developed and is currently executing a
comprehensive risk-based plan designed to make its mission-critical information
technology (IT) systems and embedded systems Year 2000 ready. The plan for IT
systems covers five stages including (i) assessment, (ii) remediation, (iii)
testing, (iv) implementation and (v) Year 2000 approval. At year end 1997,
ALIAC had substantially completed the assessment stage. The remediation of
mission-critical IT systems was completed by year end 1998. ALIAC expects to
incur internal staffing costs, as well as consulting and other expenses related
to infrastructure and facilities enhancements necessary to prepare its systems
for the Year 2000. ALIAC's total Year 2000 costs for these systems were $21
million (after tax) in 1998 and are currently estimated to be $16 million
(after tax) in 1999 and are expected to be funded through operating cash flows.
The Company deals with affiliated and unaffiliated third parties in connection
with the investments made by the Company with the amounts allocated to the
Multi-Rate Annuity. Aetna Inc. and the Company have initiated communication
with their critical external relationships to determine the extent to which the
Aetna organization may be vulnerable to such parties' failure to resolve their
own Year 2000 issues. The Aetna organization, including the Company, have
assessed and are prioritizing responses in an attempt to mitigate risks with
respect to the failure of these parties to be Year 2000 ready. The failure of
third parties to complete adequate preparations in a timely manner could have
an adverse effect on the operation of the Multi-Rate Annuity, or the
establishment of future guaranteed interest rates.
Legal Matters
Counsel of the Company has passed upon the validity of the interests under the
contracts offered through this prospectus.
Experts
We have incorporated by reference into Post Effective Amendment No. 5 to the
Registration Statement of which this prospectus is a part and/or into this
prospectus:
> The balance sheets of the Company as of December 31, 1998 and 1997 and the
related statements of income, changes in shareholder's equity and cash flows
and the related schedule for each of the years in the three-year period ended
December 31, 1998.
> The reports of KPMG LLP
30
<PAGE>
These statements are included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998. We have relied upon the reports of KPMG LLP,
independent certified public accountants, and upon their authority as experts
in accounting and auditing.
Getting Further Information
This prospectus does not contain all of the information contained in the
registration statement of which this prospectus is a part. Portions of the
registration statement have been omitted from this prospectus as allowed by the
Securities and Exchange Commission (SEC). You may obtain the omitted
information from the offices of the SEC, as described below.
We are required by the Securities Exchange Act of 1934 to file periodic reports
and other information with the SEC. You may inspect or copy information
concerning the Company at the Public Reference Room of the SEC at:
Securities and Exchange Commission
450 Fifth Street NW
Washington, DC 20549
You may also obtain copies of these materials at prescribed rates from the
Public Reference Room of the above office. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
You may also find more information about the Company at http://www.aetna.com.
A copy of the Company's annual report on Form 10-K for the year ended December
31, 1998 accompanies this prospectus. We refer to form 10-K for a description
of the Company and its business, including financial statements. We intend to
send contract holders annual account statements and other such legally required
reports. We do not anticipate such reports will include periodic financial
statements or information concerning the Company.
You can find this prospectus and other information the Company must file with
the SEC on the SEC'S web site at http://www.sec.gov.
Incorporation of Certain Documents by Reference
We have incorporated by reference the Company's latest Annual Report on Form
10-K, as filed with the SEC and in accordance with the Securities and Exchange
Act of 1934. The Annual Report must accompany this prospectus. Form 10-K
contains additional information about the Company including certified financial
statements for the latest fiscal year. We have not filed any other reports
pursuant to Sections 13(a) or 15(d) of the Securities and Exchange Act since
the end of the fiscal year covered by that Form 10-K.
The registration statement for this prospectus incorporates some documents by
reference. We will provide a free copy of any such documents upon the request
of anyone who has received this prospectus. We will not include exhibits to
those documents unless they are specifically incorporated by reference into the
document. Direct requests to:
Aetna Insurance Company of America
151 Farmington Avenue
Hartford, CT 06156
800-531-4547
31
<PAGE>
Appendix I
Calculating a Market Value Adjustment (MVA)
- --------------------------------------------------------------------------------
Market Value Adjustment Formula
The mathematical formula used to determine the MVA is:
x
---
{ (1 + i) } 365
{ ------- }
{ (1 + j) }
Where:
> i is the deposit period yield
> j is the current yield
> x is the number of days remaining (computed from Wednesday of the week of
withdrawal) in the guaranteed term
We make an adjustment in the formula of the MVA to reflect the period of time
remaining in the guaranteed term from the Wednesday of the week of a
withdrawal.
Explanation of the Market Value Adjustment Formula
The MVA essentially involves a comparison of two yields: the yield available at
the start of the current guaranteed term of the contract (the deposit period
yield) and the yield currently available (the current yield).
The MVA depends on the relationship between the following:
> The deposit period yield of U.S. Treasury Notes that mature in the last
quarter of the guaranteed term
> The current yield of these U.S. Treasury Notes at the time of withdrawal
If the current yield is the lesser of the two, the MVA will decrease the amount
withdrawn from the contract to satisfy the withdrawal request; if the current
yield is the higher of the two, the MVA will increase the amount withdrawn from
the contract to satisfy the withdrawal request. As a result of the MVA imposed,
the amount withdrawn from the contract prior to the maturity date may be less
than the amount paid into the contract.
To determine the deposit period yield and the current yield, certain
information must be obtained about the prices of outstanding U.S. Treasury
Notes. This information may be found each business day in publications such as
the Wall Street Journal, which publishes the yield-to-maturity percentages for
all Treasury Notes as of the preceding business day. These percentages are used
in determining the deposit period yield and the current yield for the MVA
calculation.
Deposit Period Yield
Determining the deposit period yield in the MVA calculation involves
consideration of interest rates prevailing at the start of the guaranteed term
from which the withdrawal will be made, as follows:
> We identify the Treasury Notes that mature in the last three months of the
guaranteed term
> We determine the yield-to-maturity percentages of these Treasury Notes for
the last business day of each week in the deposit period
The resulting percentages are then averaged to determine the deposit period
yield. The deposit period is the period of time during which the purchase
payment or any reinvestment may be made to available guaranteed terms. A
deposit period may be a month, a calendar quarter, or any other period of time
we specify.
32
<PAGE>
Current Yield
To determine the current yield, we use the same Treasury Notes identified for
the deposit period yield --Treasury Notes that mature in the last three months
of the guaranteed term. However, the yield-to-maturity percentages used are
those for the last business day of the week preceding the withdrawal. We
average these percentages to determine the current yield.
Examples of MVA Calculations
The following are examples of MVA calculations using several hypothetical
deposit period yields and current yields. These examples do not include the
effect of any early withdrawal charge that may be assessed under the contract
upon withdrawal.
Example I.
Assumptions:
i, the deposit period yield, is 8%
j, the current yield, is 10%
x, the number of days remaining (computed from Wednesday of the week of
withdrawal) in the guaranteed term, is 927.
x
---
{ (1 + i) } 365
{ ------- }
MVA = { (1 + j) }
927
---
{ (1.08) } 365
{ ------ }
= { (1.10) }
= .9545
In this example the deposit period yield of 8% is less than the current yield
of 10%, therefore, the MVA is less than 1. The amount withdrawn from the
guaranteed term is multiplied by this MVA.
If a withdrawal or transfer of a specific dollar amount is requested, the
amount withdrawn from a guaranteed term will be increased to compensate for the
negative MVA amount. For example, a withdrawal request to receive a check for
$2,000 would result in a $2,095.34 withdrawal from the guaranteed term.
Assumptions:
i, the deposit period yield, is 5%
j, the current yield, is 6%
x, the number of days remaining (computed from Wednesday of the week of
withdrawal) in the guaranteed term, is 927.
x
---
{ (1 + i) } 365
{ ------- }
MVA = { (1 + j) }
927
---
{ (1.05) } 365
{ ------ }
= { (1.06) }
= .9762
In this example the deposit period yield of 5% is less than the current yield
of 6%, therefore, the MVA is less than 1. The amount withdrawn from the
guaranteed term is multiplied by this MVA.
If a withdrawal or transfer of a specific dollar amount is requested, the
amount withdrawn from a guaranteed term will be increased to compensate for the
negative MVA amount. For example, a withdrawal request to receive a check for
$2,000 would result in a $2,048.76 withdrawal from the guaranteed term.
continued -->
33
<PAGE>
(Appendix I, continued)
Example II.
Assumptions:
i, the deposit period yield, is 10%
j, the current yield, is 8%
x, the number of days remaining (computed from Wednesday of the week of
withdrawal) in the guaranteed term, is 927.
x
---
{ (1 + i) } 365
{ ------- }
MVA = { (1 + j) }
927
---
{ (1.10) } 365
{ ------ }
= { (1.08) }
= 1.0477
In this example the deposit period yield of 10% is greater than the current
yield of 8%, therefore, the MVA is greater than 1. The amount withdrawn from
the guaranteed term is multiplied by this MVA.
If a withdrawal or transfer of a specific dollar amount is requested, the
amount withdrawn from a guaranteed term will be increased to compensate for the
negative MVA amount. For example, a withdrawal request to receive a check for
$2,000 would result in a $1,908.94 withdrawal from the guaranteed term.
Assumptions:
i, the deposit period yield, is 5%
j, the current yield, is 4%
x, the number of days remaining (computed from Wednesday of the week of
withdrawal) in the guaranteed term, is 927.
x
---
{ (1 + i) } 365
{ ------- }
MVA = { (1 + j) }
927
---
{ (1.05) } 365
{ ------ }
= { (1.04) }
= 1.0246
In this example the deposit period yield of 5% is greater than the current
yield of 4%, therefore, the MVA is greater than 1. The amount withdrawn from
the guaranteed term is multiplied by this MVA.
If a withdrawal or transfer of a specific dollar amount is requested, the
amount withdrawn from a guaranteed term will be increased to compensate for the
negative MVA amount. For example, a withdrawal request to receive a check for
$2,000 would result in a $1,951.98 withdrawal from the guaranteed term.
34
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
- ---------------------------------------------------------
Not Applicable
Item 15. Indemnification of Directors and Officers
- -------------------------------------------------------
Section 21 of Public Act No. 97-246 of the Connecticut General Assembly (the
"Act") provides that a corporation may provide indemnification of or advance
expenses to a director, officer, employee or agent only as permitted by Sections
33-770 to 33-778, inclusive, of the Connecticut General Statutes, as amended by
Sections 12 to 20, inclusive, of this Act. Reference is hereby made to Section
33-771(e) of the Connecticut General Statutes ("CGS") regarding indemnification
of directors and Section 33-776(d) of CGS regarding indemnification of officers,
employees and agents of Connecticut corporations. These statutes provide in
general that Connecticut corporations incorporated prior to January 1, 1997
shall, except to the extent that their certificate of incorporation expressly
provides otherwise, indemnify their directors, officers, employees and agents
against "liability" (defined as the obligation to pay a judgment, settlement,
penalty, fine, including an excise tax assessed with respect to an employee
benefit plan, or reasonable expenses incurred with respect to a proceeding) when
(1) a determination is made pursuant to Section 33-775 that the party seeking
indemnification has met the standard of conduct set forth in Section 33-771 or
(2) a court has determined that indemnification is appropriate pursuant to
Section 33-774. Under Section 33-775, the determination of and the authorization
for indemnification are made (a) by the disinterested directors, as defined in
Section 33-770(3); (b) by special counsel; (c) by the shareholders; or (d) in
the case of indemnification of an officer, agent or employee of the corporation,
by the general counsel of the corporation or such other officer(s) as the board
of directors may specify. Also, Section 33-772 provides that a corporation shall
indemnify an individual who was wholly successful on the merits or otherwise
against reasonable expenses incurred by him in connection with a proceeding to
which he was a party because he was a director of the corporation. In the case
of a proceeding by or in the right of the corporation or with respect to conduct
for which the director, officer, agent or employee was adjudged liable on the
basis that he received a financial benefit to which he was not entitled,
indemnification is limited to reasonable expenses incurred in connection with
the proceeding against the corporation to which the individual was named a
party.
The statute does specifically authorize a corporation to procure indemnification
insurance on behalf of an individual who was a director, officer, employer or
agent of the corporation. Consistent with the statute, Aetna Inc. has procured
insurance from Lloyd's of London and several major United States excess insurers
for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor.
<PAGE>
Item 16. Exhibits
- ----------------------
Exhibit No.
(1) Principal Underwriting Agreement between Aetna Insurance Company
of America and Aetna Life Insurance and Annuity Company(1)
(1)(b) First Amendment to Principal Underwriting Agreement between Aetna
Insurance Company of America and Aetna Life Insurance and Annuity
Company(1)
(4) Instruments Defining the Rights of Security Holders
(a) Group Annuity Contract (Form No. G2-MGA-95)(2)
(b) Individual Annuity Contract (Form No. I2-MGA-95)(3)
(c) Certificate (G2CC-MGA-95) to Group Annuity Contract Form No.
G-MGA-95(4)
(d) Endorsement (E2-MGAIRA-95-2) to Group Annuity Contract Form No.
G2-MGA-95 and Certificate No. G2CC-MGA-95(4)
(e) Endorsement (E2-MGAROTH-97) to Group Annuity Contract Form No.
G2-MGA-95 and Certificate No. G2CC-MGA-95(4)
(5) Opinion re Legality
(10) Material contracts are listed under exhibit 10 in the Company's
Form 10-K for the fiscal year ended December 31, 1998 (File No.
33-81010), as filed with the Commission on March 26, 1999. Each of
the exhibits so listed is incorporated by reference as indicated
in the Form 10-K
(23)(a) Consent of Independent Auditors
(b) Consent of Legal Counsel (included in Exhibit (5) above) (24)(a)
(24)(a) Powers of Attorney
(b) Certificate of Resolution Authorizing Signature by Power of
Attorney(5)
(27) Financial Data Schedule
Exhibits other than these listed are omitted because they are not required or
are not applicable.
1. Incorporated by reference to Registration Statement on Form S-1 (File No.
333-22723), as filed on March 4, 1997.
2. Incorporated by reference to Registration Statement on Form S-2 (File No.
33-63657), as filed on October 25, 1995.
3. Incorporated by reference to Pre-Effective Amendment No. 3 to Registration
Statement on Form S-2 (File No. 33-63657), as filed on January 17, 1996.
4. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form S-2 (File No. 33-63657), as filed on November 24, 1997.
5. Incorporated by reference to Registration Statement on Form N-4 (File No.
33-59749), as filed on June 1, 1995.
<PAGE>
Item 17. Undertakings
- --------------------------
The undersigned registrant hereby undertakes as follows, pursuant to Item
512 of Regulation S-K:
(a) Rule 415 offerings:
(1) To file, during any period in which offers or sales of the
registered securities are being made, a post-effective amendment
to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material changes to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(h) Request for Acceleration of Effective Date:
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
<PAGE>
Item 18. Financial Statements and Schedules
- ------------------------------------------------
Not Applicable
<PAGE>
33-63657
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Post-Effective
Amendment No. 5 to the Registration Statement on Form S-2 (File No. 33-63657) to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Hartford, State of Connecticut, on this 21 day of April, 1999.
AETNA INSURANCE COMPANY OF AMERICA
(REGISTRANT)
By: Thomas J. McInerney*
--------------------------------
Thomas J. McInerney
President
Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 5 to Registration Statement on Form S-2 has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Thomas J. McInerney* Director and President )
- ------------------------------------- (principal executive officer) )
Thomas J. McInerney )
)
Deborah Koltenuk* Vice President, Treasurer and Corporate Controller ) April
- ------------------------------------- (principal accounting and financial officer )
Deborah Koltenuk ) 21, 1999
)
Catherine H. Smith* Director )
- ------------------------------------- )
Catherine H. Smith )
)
Shaun P. Mathews* Director )
- ------------------------------------- )
Shaun P. Mathews )
)
Steven A. Haxton* Director )
- ------------------------------------- )
Steven A. Haxton )
)
David W. O'Leary* Director )
- ------------------------------------- )
David W. O'Leary )
</TABLE>
By: /s/ J. Neil McMurdie
---------------------------------------
/s/ J. Neil McMurdie
*Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C> <C>
16(5) Opinion re Legality
-------------
16(23)(a) Consent of Independent Auditors
-------------
16(23)(b) Opinion and Consent of Legal Counsel (included in
Exhibit 16(5) above)
16(24)(a) Powers of Attorney
-------------
16(27) Financial Data Schedule -------------
</TABLE>
[Aetna letterhead]
[Aetna logo]
AICA
Aetna Inc.
151 Farmington Avenue
Hartford, CT 06156-3124
Julie E. Rockmore
Counsel
Law Division, RE4A
April 21, 1999 Investments & Financial Services
(860) 273-4686
Fax: (860) 273-8340
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Aetna Life Insurance and Annuity Company
Post-Effective Amendment No. 5 to Registration Statement on Form S-2
Prospectus Title: Aetna Multi-Rate Annuity
File No. 33-63657
Dear Sir or Madam:
As Counsel of Aetna Life Insurance and Annuity Company (the "Company"), I have
represented the Company in connection with the Aetna Multi-Rate Annuity (the
"Annuity") available under certain variable annuity contracts and the S-2
Registration Statement relating to such Annuity.
In connection with this opinion, I or those for whom I have supervisory
responsibility, have reviewed Post-Effective Amendment No. 5 to the Registration
Statement on Form S-2 relating to such Annuity, including the prospectus, and
relevant proceedings of the Board of Directors.
Based upon this review, and assuming the securities represented by the Company
are issued in accordance with the provisions of the prospectus, I am of the
opinion that the securities, when sold, will have been legally issued, and will
constitute a legal and binding obligation of the Company.
I further consent to the use of this opinion as an exhibit to Post-Effective
Amendment No. 5 to the Registration Statement.
Sincerely,
/s/ Julie E. Rockmore
- ---------------------
Julie E. Rockmore
Counsel
Aetna Life Insurance and Annuity Company
Consent of Independent Auditors
The Shareholder and Board of Directors of
Aetna Insurance Company of America:
We consent to the incorporation by reference in the registration statement No.
33-63657 on Post Effective Amendment No. 5 on Form S-2 of Aetna Insurance
Company of America (the "Company") of our reports dated March 24, 1999 relating
to the balance sheets of the Company as of December 31, 1998 and 1997, and the
related statements of income, changes in shareholder's equity, and cash flows
and the related schedule for each of the years in the three-year period ended
December 31, 1998, which reports appear in the December 31, 1998 annual report
on Form 10-K of the Company and to the reference to our firm under the heading
"Experts" in the prospectus. Our reports refer to a change in method for
accounting for guaranty-fund and other insurance related assessments in 1997.
/s/ KPMG LLP
Hartford, Connecticut
April 21, 1999
EX-16(24)(a)
POWER OF ATTORNEY
I, the undersigned Director and President of Aetna Insurance Company of America,
hereby constitute and appoint Julie E. Rockmore, Kirk P. Wickman and J. Neil
McMurdie and each of them individually, my true and lawful attorneys, with full
power to them and each of them to sign for me, and in my name and in the
capacities indicated below, any and all amendments, to the Registration
Statements listed below filed with the Securities and Exchange Commission under
the Securities Act of 1933 and the Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
33-59749
33-62481
33-63611
33-63657
33-80750
333-22723
333-49581
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 16th day of April, 1999, my signature as
it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
/s/ Thomas J. McInerney
- -------------------------
Thomas J. McInerney
Director and President
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Insurance Company of America, hereby
constitute and appoint Julie E. Rockmore, Kirk P. Wickman and J. Neil McMurdie
and each of them individually, my true and lawful attorneys, with full power to
them and each of them to sign for me, and in my name and in the capacity
indicated below, any and all amendments, to the Registration Statements listed
below filed with the Securities and Exchange Commission under the Securities Act
of 1933 and the Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
33-59749
33-62481
33-63611
33-63657
33-80750
333-22723
333-49581
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 16th day of April, 1999, my signature as
it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
/s/ Catherine H. Smith
- -----------------------
Catherine H. Smith
Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Insurance Company of America, hereby
constitute and appoint Julie E. Rockmore, Kirk P. Wickman and J. Neil McMurdie
and each of them individually, my true and lawful attorneys, with full power to
them and each of them to sign for me, and in my name and in the capacity
indicated below, any and all amendments, to the Registration Statements listed
below filed with the Securities and Exchange Commission under the Securities Act
of 1933 and the Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
33-59749
33-62481
33-63611
33-63657
33-80750
333-22723
333-49581
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 16th day of April, 1999, my signature as
it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
/s/ Shaun P. Mathews
- ----------------------
Shaun P. Mathews
Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Vice President and Treasurer, Corporate Controller of Aetna
Insurance Company of America, hereby constitute and appoint Julie E. Rockmore,
Kirk P. Wickman and J. Neil McMurdie and each of them individually, my true and
lawful attorneys, with full power to them and each of them to sign for me, and
in my name and in the capacities indicated below, any and all amendments, to the
Registration Statements listed below filed with the Securities and Exchange
Commission under the Securities Act of 1933 and the Investment Company Act of
1940:
Registration Statements filed under the Securities Act of 1933:
33-59749
33-62481
33-63611
33-63657
33-80750
333-22723
333-49581
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 16th day of April, 1999, my signature as
it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
/s/ Deborah Koltenuk
- -----------------------------
Deborah Koltenuk
Vice President and Treasurer,
Corporate Controller
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Insurance Company of America, hereby
constitute and appoint Julie E. Rockmore, Kirk P. Wickman and J. Neil McMurdie
and each of them individually, my true and lawful attorneys, with full power to
them and each of them to sign for me, and in my name and in the capacities
indicated below, any and all amendments, to the Registration Statements listed
below filed with the Securities and Exchange Commission under the Securities Act
of 1933 and the Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
33-59749
33-62481
33-63611
33-63657
33-80750
333-22723
333-49581
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 16th day of April, 1999, my signature as
it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
/s/ David W. O'Leary
- -----------------------
David W. O'Leary
Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Insurance Company of America, hereby
constitute and appoint Julie E. Rockmore, Kirk P. Wickman and J. Neil McMurdie
and each of them individually, my true and lawful attorneys, with full power to
them and each of them to sign for me, and in my name and in the capacities
indicated below, any and all amendments, to the Registration Statements listed
below filed with the Securities and Exchange Commission under the Securities Act
of 1933 and the Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
33-59749
33-62481
33-63611
33-63657
33-80750
333-22723
333-49581
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 16th day of April, 1999, my signature as
it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
/s/ Steven A. Haxton
- ----------------------
Steven A. Haxton
Director
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1998 FOR THE AETNA INSURANCE COMPANY OF AMERICA AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000925988
<NAME> Aetna Insurance Company of America
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 142
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 3
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 145
<CASH> 17
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 60
<TOTAL-ASSETS> 1,246
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 153
<NOTES-PAYABLE> 0
0
0
<COMMON> 3
<OTHER-SE> 68
<TOTAL-LIABILITY-AND-EQUITY> 1,246
0
<INVESTMENT-INCOME> 10
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 1
<BENEFITS> 9
<UNDERWRITING-AMORTIZATION> 4
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 3
<INCOME-TAX> 0
<INCOME-CONTINUING> 3
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
