<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY -
SEPARATE ACCOUNT THREE
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: 1-800-862-6668 (Contract Owner)
1-800-862-4397 (Account Executive)
- --------------------------------------------------------------------------------
This Prospectus describes the Dean Witter Select Dimensions Plan, a tax deferred
variable annuity issued by Hartford Life and Annuity Insurance Company
("Hartford"). Payments for the Contract will be held in the Fixed Account and/or
a series of Hartford Life and Annuity Insurance Company -- Separate Account
Three (the "Separate Account"). Allocations to and transfers to and from the
Fixed Account are not permitted in certain states.
There are currently thirteen Sub-Accounts available under the Contract. The
underlying investment portfolios ("Portfolios") of the Dean Witter Select
Dimensions Investment Series for the Sub-Accounts are the Money Market
Portfolio, the North American Government Securities Portfolio, the Diversified
Income Portfolio, the Balanced Growth Portfolio, the Utilities Portfolio, the
Dividend Growth Portfolio, the Value-Added Market Portfolio, the Growth
Portfolio, the American Value Portfolio, the Mid-Cap Growth Portfolio, the
Global Equity Portfolio, the Developing Growth Portfolio, and the Emerging
Markets Portfolio.
This Prospectus sets forth the information concerning the Separate Account and
the Fixed Account that investors should know before investing. This Prospectus
should be kept for future reference. Additional information about the Separate
Account and the Fixed Account has been filed with the Securities and Exchange
Commission and is available without charge upon request. To obtain the Statement
of Additional Information send a written request to or call Hartford Life and
Annuity Insurance Company, Attn: Annuity Marketing Services, P.O. Box 5085,
Hartford, CT 06102-5085. The Table of Contents for the Statement of Additional
Information may be found on page 28 of this Prospectus. The Statement of
Additional Information is incorporated by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED
BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THIS PROSPECTUS IS ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE DEAN WITTER
SELECT DIMENSIONS INVESTMENT SERIES ("FUND") AND IS VALID ONLY WHEN ACCOMPANIED
BY A CURRENT PROSPECTUS FOR THE FUND.
Prospectus Dated: May 1, 1997, Revised February 26, 1998
Statement of Additional Information Dated: May 1, 1997
1 - PROSPECTUS
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
<S> <C>
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Glossary of Special Terms 3
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Fee Tables 4
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Summary 7
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Performance Related Information 8
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Introduction 8
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The Contract 9
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Right to Cancel Period 9
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The Separate Account 9
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The Fixed Account 10
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The Company 11
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The Portfolios 11
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Operation of the Contract/Accumulation Period 13
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Premium Payments 12
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Value of Accumulation Units 13
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Value of the Fixed Account 14
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Value of the Contract 14
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Transfers Among Sub-Accounts 14
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Transfers Between the Fixed Account and the Sub-Accounts 14
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Redemption/Surrender of a Contract 14
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Death Benefit 15
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Charges Under the Contract 16
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Contingent Deferred Sales Charges 16
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During the First Seven Contract Years 16
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After the Seventh Contract Year 16
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Mortality and Expense Risk Charge 17
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Administration and Maintenance Fees 18
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Premium Taxes 18
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Waiver of Sales Charge 18
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<CAPTION>
PAGE
<S> <C>
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Annuity Benefits 18
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Annuity Options 19
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The Annuity Unit and Valuation 19
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Determination of Payment Amount 20
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Federal Tax Considerations 20
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General 20
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Taxation of Hartford and the Separate Account 20
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Taxation of Annuities -- General Provisions Affecting Purchasers
Other Than Qualified Retirement Plans 20
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Federal Income Tax Withholding 23
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General Provisions Affecting Qualified Retirement Plans 23
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Annuity Purchases by Nonresident Aliens and Foreign Corporations 23
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General Matters 24
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Assignment 24
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Modification 24
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Delay of Payments 24
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Voting Rights 24
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Distribution of the Contracts 24
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Other Contracts Offered 24
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Custodian of Separate Account Assets 24
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Legal Proceedings 24
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Legal Counsel 25
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Experts 25
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Additional Information 25
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Appendix I 26
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Table of Contents to Statement of Additional Information 28
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</TABLE>
2 - PROSPECTUS
<PAGE>
GLOSSARY OF SPECIAL TERMS
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ACCUMULATION UNIT: An accounting unit of measure used to calculate values before
Annuity payments begin.
ANNUAL WITHDRAWAL AMOUNT: The amount which can be withdrawn in any Contract year
without surrender charges.
ANNUITANT: The person or participant upon whose life the Contract is issued.
ANNUITY: A series of payments for life, or for life with a minimum number of
payments or a determinable sum guaranteed, or for a joint lifetime and
thereafter during the lifetime of the survivor, or for a designated period.
ANNUITY COMMENCEMENT DATE: The date on which Annuity payments are to commence.
Under a group unallocated Contract, the date for each participant is determined
by the Contract Owner in accordance with the terms of the Plan.
ANNUITY UNIT: An accounting unit of measure used to calculate the value of
Annuity payments.
BENEFICIARY: The person(s) who receive Contract Values in the event of the
Annuitant's or Contract Owner's death under certain conditions. Under a group
unallocated Contract, the person named within the Plan documents/enrollment
forms by each Participant entitled to receive benefits as per the terms of the
Contract in case of the death of the Participant.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: Securities and Exchange Commission.
CONTINGENT ANNUITANT: The person so designated by the Contract Owner, who upon
the Annuitant's death, prior to the Annuity Commencement Date, becomes the
Annuitant.
CONTRACT ANNIVERSARY: The anniversary of the Contract Date.
CONTRACT OWNER(S): The owner(s) of the Contract, trustee or other entity,
sometimes herein referred to as "you".
CONTRACT VALUE: The aggregate value of any Sub-Account Accumulation Units held
under the Contract plus the value of the Fixed Account.
CONTRACT YEAR: A period of 12 months commencing with the Contract Date or any
anniversary thereof.
DEATH BENEFIT: The amount payable upon the death of a Contract Owner or
Annuitant (or Participant in the case of a group unallocated Contract) before
annuity payments have started.
FIXED ACCOUNT: Part of the General Account of Hartford to which a Contract Owner
may allocate all or a portion of his Premium Payment or Contract Value.
FIXED ANNUITY: An Annuity providing for guaranteed payments which remain fixed
in amount throughout the payment period and which do not vary with the
investment experience of a separate account.
FUND: Dean Witter Select Dimensions Investment Series.
GENERAL ACCOUNT: The General Account of Hartford which consists of all assets of
the Hartford Life and Annuity Insurance Company other than those allocated to
the separate accounts of the Hartford Life and Annuity Insurance Company.
HARTFORD: Hartford Life and Annuity Insurance Company. On January 1, 1998, ITT
Hartford Life and Annuity Insurance Company's name changed to Hartford Life and
Annuity Insurance Company.
HOME OFFICE OF THE COMPANY: Currently located at 200 Hopmeadow Street, Simsbury,
Connecticut. All correspondence concerning the Contract should be sent to P.O.
Box 5085, Hartford, CT 06102-5085, Attn: Individual Annuity Services.
MAXIMUM ANNIVERSARY VALUE: A value used in determining the death benefit. It is
based on a series of calculations of Contract Values on Contract Anniversaries,
premium payments and partial surrenders, as described on page 15.
NON-QUALIFIED CONTRACT: A Contract which is not classified as a tax-qualified
retirement plan using pre-tax dollars under the Internal Revenue Code.
PARTICIPANT: (For Group Unallocated Contracts Only). Any eligible employee of an
employer/ Contract Owner participating in the Plan.
PLAN: A voluntary Plan of an Employer which qualifies for special tax treatment
under a section of the Internal Revenue Code.
PORTFOLIOS: Currently, the portfolios of Dean Witter Select Dimensions
Investment Series described on page 11 of this Prospectus.
PREMIUM PAYMENT: A payment made to Hartford pursuant to the terms of the
Contract.
QUALIFIED CONTRACT: A Contract which qualifies as a tax-qualified retirement
plan using pre-tax dollars under the Internal Revenue Code, such as an
employer-sponsored Section401(k) plan or an Individual Retirement Annuity (IRA).
PREMIUM TAX: A tax charged by a state or municipality on Premium Payments or
Contract Values.
SEPARATE ACCOUNT: The Hartford separate account entitled "Hartford Life and
Annuity Insurance Company -- Separate Account Three".
SUB-ACCOUNT: Accounts established within the Separate Account with respect to a
Fund.
TERMINATION VALUE: The Contract Value upon termination of the Contract prior to
the Annuity Commencement Date, less any applicable Premium Taxes, the Annual
Maintenance Fee and any applicable contingent deferred sales charges.
UNALLOCATED CONTRACTS: Contracts issued to employers or such other entities as
Contract Owners with no allocation to a specific Participant, as defined herein.
The Plans will be responsible for the individual allocations.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined at the close of the New York Stock
Exchange (currently 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
VARIABLE ANNUITY: An Annuity providing for payments varying in amount in
accordance with the investment experience of the assets of the Separate Account.
3 - PROSPECTUS
<PAGE>
FEE TABLES
CONTRACT OWNER TRANSACTION EXPENSES (All Sub-Accounts)
<TABLE>
<S> <C>
Sales Load Imposed on Purchases (as a percentage of premium payments) None
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Exchange Fee $0
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DEFERRED SALES LOAD (as a percentage of amounts withdrawn)
First Year (1) 6%
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Second Year 6%
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Third Year 5%
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Fourth Year 5%
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Fifth Year 4%
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Sixth Year 3%
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Seventh Year 2%
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Eighth Year 0%
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Annual Contract Fee (2) $30
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ANNUAL EXPENSES-SEPARATE ACCOUNT (as percentage of average account value)
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Mortality and Expense Risk 1.250%
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Administration Fees 0.150%
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Total 1.400%
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</TABLE>
(1) Length of time from premium payment.
(2) The Annual Maintenance Fee is a single $30 charge on a Contract. It is
deducted proportionally from the investment options in use at the time of
the charge. Pursuant to requirements of the 1940 Act, the Annual
Maintenance Fee has been reflected in the Examples by a method intended to
show the "average" impact of the Annual Maintenance Fee on an investment in
the Separate Account. The Annual Maintenance Fee is deducted only when the
accumulated value is less than $50,000. In the Example, the Annual
Maintenance Fee is approximated as a 0.08% annual asset charge based on the
experience of the Contracts.
ANNUAL FUND OPERATING EXPENSES (1) (AS A PERCENTAGE OF NET ASSETS)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
The Money Market Portfolio 0.500% 0.090% 0.590%
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The North American Government Securities Portfolio 0.650% 0.800% 1.450%
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The Diversified Income Portfolio 0.400% 0.310% 0.710%
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The Balanced Growth Portfolio 0.600% 0.150% 0.750%
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The Utilities Portfolio 0.650% 0.150% 0.800%
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The Dividend Growth Portfolio 0.625% 0.045% 0.670%
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The Value-Added Market Portfolio 0.500% 0.140% 0.640%
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The Growth Portfolio 0.800% 0.370% 1.170%
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The American Value Portfolio 0.625% 0.085% 0.710%
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The Mid-Cap Growth Portfolio (2) 0.750% 0.060% 0.810%
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The Global Equity Portfolio 1.000% 0.250% 1.250%
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The Developing Growth Portfolio 0.500% 0.180% 0.680%
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The Emerging Markets Portfolio 1.250% 0.770% 2.020%
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</TABLE>
(1) For the period January 1, 1996 through December 31, 1996, or the attainment
by the respective Portfolio of $50 million of net assets, whichever
occurred first, the Investment Adviser waived the management fee and
reimbursed the operating expenses to the extent they exceeded 0.50% of
daily net assets of the Portfolio.
(2) The Investment Manager has undertaken to assume all expenses of the Mid-Cap
Growth Portfolio and waive the compensation provided for that Portfolio in
its Management Agreement with the Fund until such time as the Portfolio has
$50 million of net assets or until July 31, 1998 whichever occurs first.
4 - PROSPECTUS
<PAGE>
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IF YOU DO NOT
SURRENDER YOUR
CONTRACT, YOU
WOULD PAY THE
FOLLOWING
IF YOU SURRENDER YOUR CONTRACT IF YOU ANNUITIZE YOUR CONTRACT EXPENSES ON A
AT THE END OF THE APPLICABLE AT THE END OF THE APPLICABLE $1,000
TIME PERIOD, YOU WOULD PAY THE TIME PERIOD, YOU WOULD PAY THE INVESTMENT,
FOLLOWING EXPENSES ON A $1,000 FOLLOWING EXPENSES ON A $1,000 ASSUMING A 5%
INVESTMENT, ASSUMING A 5% INVESTMENT, ASSUMING A 5% ANNUAL RETURN
ANNUAL RETURN ON ASSETS: ANNUAL RETURN ON ASSETS: ON ASSETS:
- -------------------------------------------------------------------------------------------------------------------------------
3 5 10 3 5 10 3
SUB-ACCOUNT 1 YEAR YEARS YEARS YEARS 1 YEAR YEARS YEARS YEARS 1 YEAR YEARS
- -------------------------------------------------------------------------------------------------------------------------------
The Money Market Portfolio $81 $115 $151 $239 $20 $64 $110 $238 $21 $65
- -------------------------------------------------------------------------------------------------------------------------------
The North American Government Securities
Portfolio 90 141 195 326 29 90 154 325 30 91
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The Diversified Income Portfolio 82 118 157 251 22 68 116 251 22 68
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The Balanced Growth Portfolio 83 120 159 255 22 69 119 255 23 70
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The Utilities Portfolio 83 121 162 261 23 71 121 260 23 71
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The Dividend Growth Portfolio 82 117 155 247 21 67 114 246 22 67
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The Value-Added Market Portfolio 81 116 153 244 21 66 113 243 21 66
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The Growth Portfolio 87 132 181 298 26 82 140 298 27 82
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The American Value Portfolio 82 118 157 251 22 68 116 251 22 68
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The Mid-Cap Growth Portfolio 83 121 162 262 23 71 122 261 23 71
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The Global Equity Portfolio 88 135 185 306 27 84 144 306 28 85
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The Developing Growth Portfolio 82 117 155 248 21 67 115 248 22 67
- -------------------------------------------------------------------------------------------------------------------------------
The Emerging Markets Portfolio 96 158 223 380 35 108 183 379 36 108
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------
5 10
SUB-ACCOUNT YEARS YEARS
- ---------------------------------------------
The Money Market Portfolio $111 $239
- ---------------------------------------------
The North American Government Securities
Portfolio 155 326
- ---------------------------------------------
The Diversified Income Portfolio 117 251
- ---------------------------------------------
The Balanced Growth Portfolio 119 255
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The Utilities Portfolio 122 261
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The Dividend Growth Portfolio 115 247
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The Value-Added Market Portfolio 113 244
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The Growth Portfolio 141 298
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The American Value Portfolio 117 251
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The Mid-Cap Growth Portfolio 122 262
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The Global Equity Portfolio 145 306
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The Developing Growth Portfolio 115 248
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The Emerging Markets Portfolio 183 380
- ---------------------------------------------
<CAPTION>
</TABLE>
The purpose of this table is to assist the Contract Owner in understanding
various costs and expenses that a Contract Owner will bear directly or
indirectly. The table reflects expenses of the Separate Account and underlying
Funds. Premium taxes may also be applicable.
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
5 - PROSPECTUS
<PAGE>
ACCUMULATION UNIT VALUES
(For an accumulation unit outstanding throughout the period)
The following information has been examined by Arthur Andersen LLP, independent
public accountants, whose report thereon is included in the Statement of
Additional information, which is incorporated by reference to this Prospectus.
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
MONEY MARKET PORTFOLIO
SUB-ACCOUNT
Accumulation unit value at
beginning of period............. $ 10.521 $ 10.056 $ 10.000(a)
Accumulation unit value at end of
period.......................... $ 10.901 $ 10.521 $ 10.056
Number accumulation units
outstanding at end of period (in
thousands)...................... 7,480 3,864 112
NORTH AMERICAN GOVERNMENT
SECURITIES PORTFOLIO SUB-ACCOUNT
Accumulation unit value at
beginning of period............. $ 10.536 $ 10.041 $ 10.000(a)
Accumulation unit value at end of
period.......................... $ 10.841 $ 10.536 $ 10.041
Number accumulation units
outstanding at end of period (in
thousands)...................... 353 107 2
BALANCED GROWTH PORTFOLIO
SUB-ACCOUNT
Accumulation unit value at
beginning of period............. $ 12.164 $ 10.040 $ 10.000(a)
Accumulation unit value at end of
period.......................... $ 13.618 $ 12.164 $ 10.040
Number accumulation units
outstanding at end of period (in
thousands)...................... 2,663 1,220 69
UTILITIES PORTFOLIO
SUB-ACCOUNT
Accumulation unit value at
beginning of period............. $ 12.685 $ 10.045 $ 10.000(a)
Accumulation unit value at end of
period.......................... $ 13.567 $ 12.685 $ 10.045
Number accumulation units
outstanding at end of period (in
thousands)...................... 2,512 1,356 40
DIVIDEND GROWTH PORTFOLIO
SUB-ACCOUNT
Accumulation unit value at
beginning of period............. $ 13.787 $ 9.975 $ 10.000(a)
Accumulation unit value at end of
period.......................... $ 16.921 $ 13.787 $ 9.975
Number accumulation units
outstanding at end of period (in
thousands)...................... 14,201 5,393 128
VALUE-ADDED MARKET PORTFOLIO
SUB-ACCOUNT
Accumulation unit value at
beginning of period............. $ 12.418 $ 9.904 $ 10.000(a)
Accumulation unit value at end of
period.......................... $ 14.422 $ 12.418 $ 9.904
Number accumulation units
outstanding at end of period (in
thousands)...................... 4,528 1,783 25
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
GROWTH PORTFOLIO
SUB-ACCOUNT
Accumulation unit value at
beginning of period............. $ 11.224 $ 10.047 $ 10.000(a)
Accumulation unit value at end of
period.......................... $ 13.675 $ 11.224 $ 10.047
Number accumulation units
outstanding at end of period (in
thousands)...................... 1,233 316 21
AMERICAN VALUE PORTFOLIO
SUB-ACCOUNT
Accumulation unit value at
beginning of period............. $ 13.770 $ 10.049 $ 10.000(a)
Accumulation unit value at end of
period.......................... $ 15.335 $ 13.770 $ 10.049
Number accumulation units
outstanding at end of period (in
thousands)...................... 7,289 2,606 72
GLOBAL EQUITY PORTFOLIO
SUB-ACCOUNT
Accumulation unit value at
beginning of period............. $ 11.162 $ 9.950 $ 10.000(a)
Accumulation unit value at end of
period.......................... $ 12.265 $ 11.162 $ 9.950
Number accumulation units
outstanding at end of (in
thousands)...................... 4,360 1,424 110
DEVELOPING GROWTH PORTFOLIO
SUB-ACCOUNT
Accumulation unit value at end of
period.......................... $ 15.123 $ 10.138 $ 10.000(a)
Accumulation unit value at end of
period.......................... $ 16.843 $ 15.123 $ 10.138
Number accumulation units
outstanding at end of period (in
thousands)...................... 3,366 1,078 27
EMERGING MARKET PORTFOLIO
SUB-ACCOUNT
Accumulation unit value at
beginning of period............. $ 9.841 $ 10.037 $ 10.000(a)
Accumulation unit value at end of
period.......................... $ 11.420 $ 9.841 $ 10.037
Number accumulation units
outstanding at end of period (in
thousands)...................... 1,394 389 35
DIVERSIFIED INCOME PORTFOLIO
SUB-ACCOUNT
Accumulation unit value at
beginning of period............. $ 10.607 $ 10.056 10.000(a)
Accumulation unit value at end of
period.......................... $ 11.456 $ 10.607 10.056
Number accumulation units
outstanding at end of period (in
thousands)...................... 2,579 775 30
</TABLE>
(a) Inception Date September 14, 1994
6 - PROSPECTUS
<PAGE>
SUMMARY
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WHAT IS THE CONTRACT AND HOW MAY I PURCHASE ONE?
The Contract offered is a tax deferred variable annuity contract ("Contract")
(see "Taxation of Annuities in General," page 19). Generally, the Contract is
purchased by completing an application or an order to purchase a Contract and
submitting it, along with the initial Premium Payments, to Hartford for its
approval. The minimum initial Premium Payment is $1,000 with a minimum
allocation to any Fund of $500. Certain plans may make smaller initial and
subsequent periodic premium payments. Subsequent Premium Payments, if made, must
be a minimum of $500. Generally, a Contract Owner may exercise his right to
cancel the Contract within 10 days of delivery of the Contract by returning the
Contract to Hartford at its Home Office. If the Contract Owner exercises his
right to cancel, Hartford will return either the Contract Value or the original
Premium Payments to the Contract Owner. The duration of the right to cancel
period and Hartford's obligation to either return the Contract Value or the
original Premium will depend on state law (see "Right to Cancel Period").
WHO MAY PURCHASE THE CONTRACT?
Any individual, group or trust may purchase the Contracts, including any trustee
or custodian for a retirement plan which qualifies for special Federal tax
treatment under the Internal Revenue Code ("Qualified Contracts"). These
Contracts are also available for IRA's. (See "Federal Tax Considerations"
commencing on page 19 and Appendix I commencing on page 25.)
WHAT TYPES OF INVESTMENTS ARE AVAILABLE UNDER THE CONTRACT?
The underlying investments for the Contract are shares of the Dean Witter Select
Dimensions Investment Series, an open-end diversified series investment company
with multiple portfolios ("Portfolio") as follows: the Money Market Portfolio,
the North American Government Securities Portfolio, the Diversified Income
Portfolio, the Balanced Growth Portfolio, the Utilities Portfolio, the Dividend
Growth Portfolio, the Value-Added Market Portfolio, the Growth Portfolio, the
American Value Portfolio, the Mid-Cap Growth Portfolio, the Global Equity
Portfolio, the Developing Growth Portfolio, and the Emerging Markets Portfolio
and such other portfolios as shall be offered from time to time, and the Fixed
Account, or a combination of the Portfolios and the Fixed Account. (See "The
Portfolios" commencing on page 11 and "The Fixed Account" commencing on page
10.)
WHAT ARE THE CHARGES UNDER THE CONTRACTS?
SALES EXPENSES There is no deduction for sales expenses from Premium Payments
when made. However, a contingent deferred sales charge may be assessed against
Contract Values when they are surrendered. (See "Contingent Deferred Sales
Charges" commencing on page 15.)
The length of time from receipt of a Premium Payment to the time of surrender
determines the contingent deferred sales charge. For this purpose, Premium
Payments will be deemed to be surrendered in the order in which they are
received and all surrenders will be first from Premium Payments and then from
other Contract Values. The charge is a percentage of the amount withdrawn (not
to exceed the aggregate amount of the Premium Payments made). The charge is as
follows:
<TABLE>
<CAPTION>
LENGTH OF TIME
FROM PREMIUM PAYMENT
CHARGE (NUMBER OF YEARS)
<S> <C>
- -------------------------------------------------------------
6% 1
- -------------------------------------------------------------
6% 2
- -------------------------------------------------------------
5% 3
- -------------------------------------------------------------
5% 4
- -------------------------------------------------------------
4% 5
- -------------------------------------------------------------
3% 6
- -------------------------------------------------------------
2% 7
- -------------------------------------------------------------
0% 8 or more
- -------------------------------------------------------------
</TABLE>
No contingent deferred sales charge will be assessed in the event of death of
the Annuitant or Contract Owner, or upon the exercise of the withdrawal
privilege or if Contract Values are applied to an Annuity option provided for
under the Contract (except that a surrender out of Annuity Option Four will be
subject to a contingent deferred sales charge where applicable). (See
"Contingent Deferred Sales Charges" commencing on page 15.)
FREE WITHDRAWAL PRIVILEGE. Withdrawals of up to 10% per Contract Year of the
Premium Payments made to a Contract, on a noncumulative basis, may be made
without the imposition of the contingent deferred sales charge during the first
seven Contract Years. (See "Contingent Deferred Sales Charges" commencing on
page 15). Certain plans or programs may have different withdrawal privileges.
MORTALITY AND EXPENSE RISKS For assuming the mortality and expense risks under
the Contract, Hartford will impose a 1.25% per annum charge against all Contract
Values held in the Sub-Accounts. (See "Mortality and Expense Risk Charge," page
16).
ANNUAL ADMINISTRATION AND MAINTENANCE FEE The Contract provides for
administration and Contract maintenance charges. For administration, the charge
is .15% per annum against all Contract Values held in the Separate Account. For
Contract maintenance, the charge is $30 annually. (See "Administration and
Maintenance Fees," page 17). Contracts with a Contract Value of $50,000 or more
at time of Contract Anniversary will not be assessed this charge.
7 - PROSPECTUS
<PAGE>
PREMIUM TAXES A deduction will be made for Premium Taxes for Contracts sold in
certain states. (See "Premium Taxes," page 17.)
CHARGES BY THE PORTFOLIOS The Portfolios are subject to certain fees, charges
and expenses. (See the Prospectus for the Fund accompanying this Prospectus.)
CAN I GET MY MONEY IF I NEED IT?
Subject to any applicable charges, the Contract may be surrendered, or portions
of the value of such Contract may be withdrawn, at any time prior to the Annuity
Commencement Date. However, if less than $500 remains in a Contract as a result
of a withdrawal, Hartford may terminate the Contract in its entirety. (See
"Redemption/Surrender of a Contract" commencing on page 14; see also "Federal
Tax Considerations," commencing on page 19, for a discussion of federal tax
consequences, including a 10% penalty tax that may apply upon surrender or
withdrawal.)
DOES THE CONTRACT PAY ANY DEATH BENEFITS?
A Death Benefit is provided in the event of death of the Annuitant or Contract
Owner or Joint Contract Owner before Annuity payments have commenced. (See
"Death Benefit," page 15.)
WHAT ARE THE AVAILABLE ANNUITY OPTIONS UNDER THE CONTRACT?
There are five available Annuity options under the Contract which are described
on page 18. The Annuity Commencement Date may not be deferred beyond the
Annuitant's 90th birthday except in certain states where the Annuity
Commencement Date may not be deferred beyond the Annuitant's 85th birthday. If a
Contract Owner does not elect otherwise, the Contract Value less applicable
premium taxes will be applied on the Annuity Commencement Date under the second
option to provide a life annuity with 120 monthly payments certain.
DOES THE CONTRACT OWNER HAVE ANY VOTING RIGHTS UNDER THE CONTRACT?
Contract Owners will have the right to vote on matters affecting an underlying
Portfolio to the extent that proxies are solicited by such Portfolio. If a
Contract Owner does not vote, Hartford shall vote such interests in the same
proportion as shares of the Portfolio for which instructions have been received
by Hartford. (See "Voting Rights," page 23.)
PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance related information
concerning its Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
Each Portfolio may include total return in advertisements or other sales
material.
When a Sub-Account advertises its total return, it will usually be calculated
for one year, five years, and ten years or some other relevant periods if the
Sub-Account has not been in existence for at least ten years. Total return is
measured by comparing the value of an investment in the Sub-Account at the
beginning of the relevant period to the value of the investment at the end of
the period (assuming the deduction of any contingent deferred sales charge which
would be payable if the investment were redeemed at the end of the period).
The North American Government Securities Portfolio and Diversified Income
Portfolio may advertise yield in addition to total return. The yield will be
computed in the following manner: The net investment income per unit earned
during a recent one month period is divided by the unit value on the last day of
the period. This figure reflects the recurring charges at the Separate Account
level including the Annual Contract Fee.
The Money Market Portfolio Sub-Account may advertise yield and effective yield.
The yield of a Sub-Account is based upon the income earned by the Sub-Account
over a seven-day period and then annualized, i.e. the income earned in the
period is assumed to be earned every seven days over a 52-week period and stated
as a percentage of the investment. Effective yield is calculated similarly but
when annualized, the income earned by the investment is assumed to be reinvested
in Sub-Account units and thus compounded in the course of a 52-week period.
Yield reflect the recurring charges at the Separate Account level including the
Annual Contract Fee.
Total return at the Separate Account level includes all Contract charges: sales
charges, mortality and expense risk charges, and the Annual Contract Fee, and is
therefore lower than total return at the Fund level, with no comparable charges.
Likewise, yield at the Separate Account level includes all recurring charges
(except sales charges), and is therefore lower than yield at the Portfolio
level, with no comparable charges.
Hartford may provide information on various topics to Contract Owners and
prospective Contract Owners in advertising, sales literature or other materials.
These topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as value investing, dollar cost averaging and
asset allocation), the advantages and disadvantages of investing in
tax-advantaged and taxable instruments, customer profiles and hypothetical
purchase scenarios, financial management and tax and retirement planning, and
other investment alternatives, including comparisons between the Contracts and
the characteristics of and market for such alternatives.
INTRODUCTION
This Prospectus has been designed to provide you with the necessary information
to make a decision on purchasing a tax
8 - PROSPECTUS
<PAGE>
deferred variable annuity contract offered by Hartford and funded by the Fixed
Account and/or a series of the Separate Account. Please read the Glossary of
Special Terms on page 3 prior to reading this Prospectus to familiarize yourself
with the terms being used.
THE CONTRACT
The Dean Witter Select Dimensions Plan is a tax deferred variable annuity
contract ("Contract"). Payments for the Contract will be held in the Fixed
Account and/or a series of the Separate Account. Initially there are no
deductions from your Premium Payments (except for Premium Taxes, if applicable)
so your entire Premium Payment is put to work in the investment Sub-Account(s)
of your choice or the Fixed Account. Each Sub-Account invests in a different
underlying Portfolio with its own distinct investment objectives. You pick the
Sub-Account(s) with the investment objectives that meet your needs. You may
select one or more Sub-Accounts and/or the Fixed Account and determine the
percentage of your Premium Payment that is put into a Sub-Account or the Fixed
Account. You may also transfer assets among the Sub-Accounts and the Fixed
Account so that your investment program meets your specific needs over time.
There are minimum requirements for investing in each Sub-Account and the Fixed
Account which are described later in this Prospectus. In addition, there are
certain other limitations on withdrawals and transfers of amounts in the
Sub-Accounts and the Fixed Account as described in this Prospectus. See "Charges
Under the Contract" for a description of the charges for redeeming a Contract
and other charges made under the Contract.
Generally, the Contract contains the five optional forms of Annuity described
later in this Prospectus. Options 2, 4 and 5 are available with respect to
Qualified Contracts only if the guaranteed payment period is less than the life
expectancy of the Annuitant at the time the option becomes effective. Such life
expectancy shall be computed on the basis of the mortality table prescribed by
the IRS, or if none is prescribed, the mortality table then in use by Hartford.
The Contract Owner may select an Annuity Commencement Date and an Annuity option
which may be on a fixed or variable basis, or a combination thereof. The Annuity
Commencement Date may not be deferred beyond the Annuitant's 90th birthday
except in certain states where the Annuity Commencement Date may not be deferred
beyond the Annuitant's 85th birthday.
The Annuity Commencement Date and/or the Annuity option may be changed from time
to time, but any such change must be made at least 30 days prior to the date on
which payments are scheduled to begin. If you do not elect otherwise, payments
will begin at the Annuitant's age 90 under Option 2 with 120 monthly payments
certain (Option 1 for Contracts issued in Texas).
When an Annuity is effected under a Contract, unless otherwise specified,
Contract Values held in the Sub-Accounts will be applied to provide a Variable
Annuity based on the pro rata amount in the various Sub-Accounts. Fixed Account
Contract Values will be applied to provide a Fixed Annuity. Variable Annuity
payments will vary in accordance with the investment performance of the
Sub-Accounts you have selected. The Contract allows the Contract Owner to change
the Sub-Accounts on which variable payments are based after payments have
commenced once every three (3) months. Any Fixed Annuity allocation may not be
changed.
The Contract offered under this Prospectus may be purchased by any individual
("Non-Qualified Contract") or by an individual, trustee or custodian for a
retirement plan qualified under Sections 401(a) or 403(a) of the Internal
Revenue Code; annuity purchase plans adopted by public school systems and
certain tax-exempt organizations according to Section 403(b) of the Internal
Revenue Code; Individual Retirement Annuities adopted according to Section 408
of the Internal Revenue Code; employee pension plans established for employees
by a state, a political subdivision of a state, or an agency or instrumentality
of either a state or a political subdivision of a state, and certain eligible
deferred compensation plans as defined in Section 457 of the Internal Revenue
Code ("Qualified Contracts").
RIGHT TO CANCEL PERIOD
If you are not satisfied with your purchase you may surrender the Contract by
returning it within ten days (or longer in some states) after you receive it. A
written request for cancellation must accompany the Contract. In such event,
Hartford will, without deduction for any charges normally assessed thereunder,
pay you an amount equal to the Contract Value on the date of receipt of the
request for cancellation. You bear the investment risk during the period prior
to the Company's receipt of request for cancellation. Hartford will refund the
premium paid only for individual retirement annuities (if returned within seven
days of receipt) and in those states where required by law.
THE SEPARATE ACCOUNT
The Separate Account was established on June 13, 1994, in accordance with
authorization by the Board of Directors of Hartford. It is the Separate Account
in which Hartford sets aside and invests the assets attributable to variable
annuity contracts, including the contracts sold under this Prospectus. Although
the Separate Account is an integral part of Hartford, it is registered as a unit
investment trust under the Investment Company Act of 1940. This registration
does not, however, involve supervision by the Commission of the management or
the investment practices or policies of the Separate Account or Hartford. The
Separate Account meets the definition of "separate account" under federal
securities law.
Under Connecticut law, the assets of the Separate Account attributable to the
Contracts offered under this Prospectus are held for the benefit of the owners
of, and the persons entitled to payments under, those Contracts. Income, gains,
and losses, whether or not realized, from assets allocated to the Separate
9 - PROSPECTUS
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Account, are, in accordance with the Contracts, credited to or charged against
the Separate Account. Also, the assets in the Separate Account are not
chargeable with liabilities arising out of any other business Hartford may
conduct. So Contract Values allocated to the Sub-Accounts will not be affected
by the rate of return of Hartford's General Account, nor by the investment
performance of any of Hartford's other separate accounts. However, the
obligations arising under the Contracts are general obligations of Hartford.
Your investment in the Separate Account is allocated to one or more Sub-Accounts
as per your specifications. Each Sub-Account is invested exclusively in the
shares of one underlying Portfolio. Net Premium Payments and proceeds of
transfers between Portfolios are applied to purchase shares in the appropriate
Fund at net asset value determined as of the end of the Valuation Period during
which the payments were received or the transfer made. All distributions from
the Portfolios are reinvested at net asset value. The value of your investment
will therefore vary in accordance with the net income and the market value of
the Portfolios of the underlying Portfolio. During the Variable Annuity payout
period, both your Annuity payments and reserve values will vary in accordance
with these factors.
Hartford does not guarantee the investment results of the Portfolios or any of
the underlying investments. There is no assurance that the value of a Contract
during the years prior to retirement or the aggregate amount of the Variable
Annuity payments will equal the total of Premium Payments made under the
Contract. Since each underlying Portfolio has different investment objectives
and policies, each is subject to different risks. These risks are more fully
described in the accompanying Fund Prospectus.
Hartford reserves the right, subject to compliance with the law, to substitute
the shares of any other registered investment company for the shares of any
Portfolio held by the Separate Account. Substitution may occur only if shares of
the Portfolio(s) become unavailable or if there are changes in applicable law or
interpretations of law. Current law requires notification to you of any such
substitution and approval of the Commission.
The Separate Account may be subject to liabilities arising from a Series of the
Separate Account whose assets are attributable to other variable annuity
contracts or variable life insurance policies offered by the Separate Account
which are not described in this Prospectus.
THE FIXED ACCOUNT
THAT PORTION OF THE CONTRACT RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN
ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT,
AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION. THE FOLLOWING DISCLOSURE ABOUT
THE FIXED ACCOUNT MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF
THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF
DISCLOSURE.
Premium Payments and Contract Values allocated to the Fixed Account become a
part of the general assets of Hartford. Hartford invests the assets of the
General Account in accordance with applicable laws governing investments of
Insurance Company General Accounts.
Currently, Hartford guarantees that it will credit interest at a rate of not
less than 3% per year, compounded annually, to amounts allocated to the Fixed
Account under the Contracts. However, Hartford reserves the right to change the
rate according to state insurance law. Hartford may credit interest at a rate in
excess of 3% per year; however, Hartford is not obligated to credit any interest
in excess of 3% per year. There is no specific formula for the determination of
excess interest credits. Some of the factors that the Company may consider in
determining whether to credit excess interest to amounts allocated to the Fixed
Account and the amount thereof, are general economic trends, rates of return
currently available and anticipated on the Company's investments, regulatory and
tax requirements and competitive factors. ANY INTEREST CREDITED TO AMOUNTS
ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3% PER YEAR WILL BE DETERMINED IN
THE SOLE DISCRETION OF THE COMPANY. THE OWNER ASSUMES THE RISK THAT INTEREST
CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF 3%
FOR ANY GIVEN YEAR.
From time to time, Hartford may credit increased interest rates to Contract
Owners under certain programs established at the discretion of Hartford.
Effective February 25, 1998, Contract Owners may enroll in a special
pre-authorized transfer program known as Hartford's Dollar Cost Averaging Bonus
Program (the "Program"). Under this Program, Contract Owners who enroll may
allocate a minimum of $5,000 of their Premium Payment into the Program (Hartford
may allow a lower minimum Premium Payment for qualified plan transfers or
rollovers, including IRAs) and pre-authorize transfers to any of the Sub-
Accounts under either the 6 Month Transfer Program or 12 Month Transfer Program.
The 6 Month Transfer Program and the 12 Month Transfer Program will generally
have different credited interest rates. Under the 6 Month Transfer Program, the
interest rate can accrue up to 6 months and all Premium Payments and accrued
interest must be transferred to the selected Sub-Accounts in 3 to 6 months.
Under the 12 Month Transfer Program, the interest rate can accrue up to 12
months and all
10 - PROSPECTUS
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Premium Payments and accrued interest must be transferred to the selected
Sub-Accounts in 7 to 12 months. This will be accomplished by monthly transfers
for the period selected and a final transfer of the entire amount remaining in
the Program.
The pre-authorized transfers will begin within 15 days after the initial Program
Premium Payment and complete enrollment instructions are received by Hartford.
If complete Program enrollment instructions are not received by Hartford within
15 days of receipt of the initial Program Premium Payment, the Program will be
voided and the entire balance in the Program will be credited with the
non-Program interest rate then in effect for the Fixed Account.
Any subsequent Premium Payments received by Hartford within the Program period
selected will be allocated to the Sub-Accounts over the remainder of that
Program transfer period, unless otherwise directed by the Contract Owner.
A Contract Owner may only have one dollar cost averaging program in place at one
time, this means one standard dollar cost averaging plan or one Dollar Cost
Averaging Bonus Program.
Contract Owners may elect to terminate the pre-authorized transfers by calling
or writing Hartford of their intent to cancel their enrollment in the Program.
Upon cancellation of enrollment in the Program, Contract Owners will no longer
receive the increased interest rate. Hartford reserves the right to discontinue,
modify or amend the Program or any other interest rate program established by
Hartford. Any change to the Program will not affect Contract Owners currently
enrolled in the Program. This Program may not be available in all states; please
contact Hartford to determine if it is available in your state.
THE COMPANY
Hartford Life and Annuity Insurance Company ("Hartford") is a stock life
insurance company engaged in the business of writing life insurance and
annuities, both individual and group, in all states of the United States and the
District of Columbia, except New York. On January 1, 1998, Hartford's name
changed to Hartford Life and Annuity Insurance Company. Hartford was originally
incorporated under the laws of Wisconsin on January 9, 1956, and was
subsequently redomiciled to Connecticut. Its offices are located in Simsbury,
Connecticut; however, its mailing address is P.O. Box 2999, Hartford, CT
06104-2999. Hartford is a subsidiary of Hartford Fire Insurance Company, one of
the largest multiple lines insurance carriers in the United States. Hartford is
ultimately controlled by The Hartford Financial Services Group, Inc., a Delaware
corporation.
HARTFORD RATINGS
<TABLE>
<CAPTION>
EFFECTIVE
RATING AGENCY DATE OF RATING RATING BASIS OF RATING
- ------------------------------------------------------------------ -------------- ----------- -----------------------------------
<S> <C> <C> <C>
Financial soundness and operating
A.M. Best and Company, Inc........................................ 9/9/97 A+ performance
Standard & Poor's................................................. 7/2/97 AA Claims paying ability
Duff & Phelps Credit Rating Co.................................... 2/24/97 AA+ Claims paying ability
</TABLE>
These ratings apply to Hartford's ability to meet its insurance obligations,
including those described in this Prospectus.
THE PORTFOLIOS
The underlying investment for the Contracts are shares of the Dean Witter Select
Dimensions Investment Series ("Fund"), an open-end diversified series investment
company with multiple portfolios. The underlying Portfolio corresponding to each
Sub-Account and their investment objectives are described below. Hartford
reserves the right, subject to compliance with the law, to offer additional
portfolios with differing investment objectives. The Portfolios may not be
available in all states.
MONEY MARKET PORTFOLIO
Seeks high current income, preservation of capital and liquidity by investing in
the following money market instruments: U.S. Government securities, obligations
of U.S. regulated banks and savings institutions having total assets of more
than $1 billion, or less than $1 billion if such are fully federally insured as
to principal (the interest may not be insured) and high grade corporate debt
obligations maturing in thirteen months or less.
NORTH AMERICAN GOVERNMENT SECURITIES PORTFOLIO
Seeks to earn a high level of current income while maintaining relatively low
volatility of principal, by investing primarily in investment grade fixed-income
securities issued or guaranteed by the U.S., Canadian or Mexican governments.
DIVERSIFIED INCOME PORTFOLIO
Seeks, as a primary objective, to earn a high level of current income and, as a
secondary objective, to maximize total return, but only to the extent consistent
with its primary objective, by equally allocating its assets among three
separate groupings of fixed-income securities. Up to one-third of the securities
in which the Diversified Income Portfolio may invest will include securities
rated Baa/BBB or lower. See the Special Considerations for Investments for High
Yield Securities disclosed in the Fund prospectus.
11 - PROSPECTUS
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BALANCED GROWTH PORTFOLIO
Seeks to provide capital growth with reasonable current income by investing,
under normal market conditions, at least 60% of its total assets in a
diversified portfolio of common stocks of companies which have a record of
paying dividends and, in the opinion of the Investment Manager, have the
potential for increasing dividends and in securities convertible into common
stock, and at least 25% of its total assets in investment grade fixed-income
(fixed rate and adjustable-rate) securities such as corporate notes and bonds
and obligations issued or guaranteed by the U.S. government, its agencies and
its instrumentalities.
UTILITIES PORTFOLIO
Seeks to provide current income and long-term growth of income and capital by
investing in equity and fixed-income securities of companies in the public
utilities industry.
DIVIDEND GROWTH PORTFOLIO
Seeks to provide reasonable current income and long-term growth of income and
capital by investing primarily in common stock of companies with a record of
paying dividends and the potential for increasing dividends.
VALUE-ADDED MARKET PORTFOLIO
Seeks to achieve a high level of total return on its assets through a
combination of capital appreciation and current income, by investing, on an
equally-weighted basis, in a diversified portfolio of common stocks of the
companies which are represented in the Standard & Poor's 500 Composite Stock
Price Index.
GROWTH PORTFOLIO
Seeks long-term growth of capital by investing primarily in common stocks and
securities convertible into common stocks issued by domestic and foreign
companies.
AMERICAN VALUE PORTFOLIO
Seeks long-term capital growth consistent with an effort to reduce volatility,
by investing principally in common stock of companies in industries which, at
the time of the investment, are believed to be attractively valued given their
above average relative earnings growth potential at that time.
MID-CAP GROWTH PORTFOLIO
Seeks long-term capital growth by investing primarily in equity securities of
"mid-cap" companies (that is, companies whose equity market capitalization falls
within the range of $250 million to $5 billion).
GLOBAL EQUITY PORTFOLIO
Seeks a high level of total return on its assets primarily through long-term
capital growth and, to a lesser extent, from income, through investments in all
types of common stocks and equivalents (such as convertible securities and
warrants), preferred stocks and bonds and other debt obligations of domestic and
foreign companies, governments and international organizations.
DEVELOPING GROWTH PORTFOLIO
Seeks long-term capital growth by investing primarily in common stocks of
smaller and medium-sized companies that, in the opinion of the Investment
Manager, have the potential for growing more rapidly than the economy and which
may benefit from new products or services, technological developments or changes
in management.
EMERGING MARKETS PORTFOLIO
Seeks long-term capital appreciation by investing primarily in equity securities
of companies in emerging market countries. The Emerging Markets Portfolio may
invest up to 35% of its total assets in high risk fixed-income securities that
are rated below investment grade or are unrated (commonly referred to as "junk
bonds"). See the special considerations for investments in high yield securities
disclosed in the Fund prospectus.
The Portfolios are managed in styles similar to other investment companies whose
shares are generally offered to the public and which are managed by Dean Witter
InterCapital, Inc., the Investment Manager, or by TCW Funds Management, Inc.,
the Sub-Adviser to certain of the Portfolios. In addition, Morgan Stanley Asset
Management, Inc. ("MSAM") is the Sub-Adviser to the Growth Portfolio. The
Portfolios of these other investment companies may, however, employ different
investment practices and may invest in securities different from those in which
their counterpart Portfolios invest and, consequently, will not have identical
portfolios or experience identical investment results.
The Portfolios are available only to serve as the underlying investment for
variable annuity and variable life contracts. A full description of the
Portfolios, including their investment objectives, policies and restrictions,
risks, charges and expenses and other aspects of their operation, is contained
in the accompanying Fund Prospectus which should be read in conjunction with
this Prospectus before investing, and in the Fund Statement of Additional
Information which may be ordered without charge from Dean Witter Select
Dimensions Investment Series.
It is conceivable that in the future it may be disadvantageous for variable
annuity separate accounts and variable life insurance separate accounts to
invest in the Portfolios simultaneously. Although Hartford and the Fund do not
currently foresee any such disadvantages either to variable annuity contract
owners or to variable life insurance policyowners, the Fund's Board of Trustees
would monitor events in order to identify any material conflicts between such
Contract Owners and policyowners and to determine what action, if any, should be
taken in response thereto. If the Board of Trustees of the Fund were to conclude
that separate
12 - PROSPECTUS
<PAGE>
Portfolios should be established for variable life and variable annuity separate
accounts, the variable annuity Contract holders would not bear any expenses
attendant upon establishment of such separate funds.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"), a
Delaware Corporation, whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment Manager. The Investment Manager, which was
incorporated in July, 1992, is a wholly-owned subsidiary of Morgan Stanley, Dean
Witter, Discover & Co.
The Fund has retained the Investment Manager to provide administrative services,
manage its business affairs and manage the investment of the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. InterCapital has retained its wholly-owned subsidiary, Dean Witter
Services Company Inc., to perform the aforementioned administrative services for
the Fund. For its services, the Portfolios pay the Investment Manager a monthly
fee. See the accompanying Fund Prospectus for a more complete description of the
Investment Manager and the respective fees of the Portfolios.
With regard to the North American Government Securities Portfolio and the
Emerging Markets Portfolio, under a Sub-Advisory Agreement between TCW Funds
Management, Inc. ("TCW") and the Investment Manager, TCW provides these
Portfolios with investment advice and portfolio management, in each case subject
to the overall supervision of the Investment Manager. TCW's address is 865 South
Figueroa Street, Suite 1800, Los Angeles, California 90017.
With respect to the Growth Portfolio, under a Sub-Advisory Agreement between the
Investment Manager and MSAM, MSAM provides the Growth Portfolio with investment
advice and portfolio management, subject to the overall supervision of the
Investment Manager. MSAM is an affiliate of the Investment Manger. MSAM's
address is 1221 Avenue of the Americas, New York, New York 10020.
The Fund's Board of Trustees reviews the various services provided by or under
the direction of the Investment Manager (or by the Sub-Adviser) to ensure that
the Fund's general investment policies and programs are being properly carried
out and that administrative services are being provided to the Fund in a
satisfactory manner.
OPERATION OF THE CONTRACT/ ACCUMULATION PERIOD
PREMIUM PAYMENTS
The balance of each initial Premium Payment remaining after the deduction of any
applicable Premium Tax is credited to your Contract within two business days of
receipt of a properly completed application or an order to purchase a Contract
and the initial Premium Payment by Hartford at its Home Office, P.O. Box 5085,
Hartford, CT 06102-5085. It will be credited to the Sub-Account(s) and/or the
Fixed Account in accordance with your election. If the application or other
information is incomplete when received, the balance of each initial Premium
Payment, after deduction of any applicable Premium Tax, will be credited to the
Sub-Account(s) or the Fixed Account within five business days of receipt or the
entire Premium Payment will be immediately returned unless you have been
informed of the delay and request that the Premium Payment not be returned.
Subsequent Premium Payments are priced on the Valuation Day received by Hartford
in its Home Office or other designated administrative office.
The number of Accumulation Units in each Sub-Account to be credited to a
Contract will be determined by dividing the portion of the Premium Payment being
credited to each Sub-Account by the value of an Accumulation Unit in that
Sub-Account on that date.
The minimum initial Premium Payment is $1,000. Subsequent Premium Payments, if
made, must be a minimum of $500. Certain plans may make smaller initial and
subsequent periodic payments. Each Premium Payment may be split among the
various Sub-Accounts and the Fixed Account subject to minimum amounts then in
effect.
Hartford Securities Distribution Company, Inc. ("HSD") serves as principal
underwriter for the securities issued with respect to the Separate Account. HSD
is a wholly-owned subsidiary of Hartford Life Insurance Company. HSD is
registered with the Commission under the Securities Exchange Act of 1934 as a
Broker-Dealer and is a member of the National Association of Securities Dealers,
Inc. The principal business address of HSD is the same as Hartford.
VALUE OF ACCUMULATION UNITS
The Accumulation Unit value for each Sub-Account will vary to reflect the
investment experience of the applicable Portfolio and will be determined on each
Valuation Day by multiplying the Accumulation Unit value of the particular
Sub-Account on the preceding Valuation Day by a "Net Investment Factor" for that
Sub-Account for the Valuation Period then ended. The "Net Investment Factor" for
each of the Sub-Accounts is equal to the net asset value per share of the
corresponding Portfolio at the end of the Valuation Period (plus the per share
amount of any dividends or capital gains distributed by that Portfolio if the
ex-dividend date occurs in the Valuation Period then ended) divided by the net
asset value per share of the corresponding Portfolio at the beginning of the
Valuation Period. You should refer to the Fund Prospectus which accompanies this
Prospectus for a description of how the assets of each Portfolio are valued
since each determination has a direct bearing on the Accumulation Unit value of
the Sub-Account and therefore the value of a Contract. The Accumulation Unit
value is affected by the performance of the underlying Portfolio(s), expenses
and deduction of the charges described in this Prospectus.
13 - PROSPECTUS
<PAGE>
The shares of the Portfolio are valued at net asset value on each Valuation Day.
A description of the valuation methods used in valuing Portfolio shares may be
found in the accompanying Prospectus of the Fund.
VALUE OF THE FIXED ACCOUNT
Hartford will determine the value of the Fixed Account by crediting interest to
amounts allocated to the Fixed Account. The minimum Fixed Account interest rate
is 3%, compounded annually. Hartford may credit a lower minimum interest rate
according to state law. Hartford also may credit interest at rates greater than
the minimum Fixed Account interest rate.
VALUE OF THE CONTRACT
The value of the Sub-Account investments under your Contract at any time prior
to the commencement of Annuity payments can be determined by multiplying the
total number of Accumulation Units credited to your Contract in each Sub-Account
by the then current Accumulation Unit values for the applicable Sub-Account. The
value of the Fixed Account under your Contract will be the amount allocated to
the Fixed Account plus interest credited. You will be advised at least
semi-annually of the number of Accumulation Units credited to each Sub-Account,
the current Accumulation Unit values, the Fixed Account Value, and the total
value of your Contract.
TRANSFERS AMONG SUB-ACCOUNTS
You may transfer the values of your Sub-Account allocations from one or more
Sub-Accounts to another free of charge. However, Hartford reserves the right to
limit the number of transfers to twelve (12) per Contract Year, with no two (2)
transfers occurring on consecutive Valuation Days. Transfers by telephone may be
made by a Contract Owner or by the attorney-in-fact pursuant to a power of
attorney by calling (800) 862-6668 or by the agent of record by calling (800)
862-4397. Telephone transfers may not be permitted by some states for their
residents who purchase variable annuities.
The policy of Hartford and its agents and affiliates is that they will not be
responsible for losses resulting from acting upon telephone requests reasonably
believed to be genuine. Hartford will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine; otherwise, Hartford may
be liable for any losses due to unauthorized or fraudulent instructions. The
procedures Hartford follows for transactions initiated by telephone include
requirements that callers provide certain information for identification
purposes. All transfer instructions by telephone are tape recorded.
Hartford may permit the Contract Owner to preauthorize transfers between the
Sub-Accounts and the Fixed Account under certain circumstances. Transfers
between the Sub-Accounts may be made both before and after Annuity payments
commence (limited to once a quarter) provided that the minimum allocation to any
Sub-Account may not be less than $500. No minimum balance is presently required
in any Sub-Account.
The right to reallocate Contract Values between the Sub-Accounts is subject to
modification if Hartford determines, in its sole discretion, that the exercise
of that right by one or more Contract Owners is, or would be, to the
disadvantage of other Contract Owners. Any modification could be applied to
transfers to or from some or all of the Sub-Accounts and could include, but not
be limited to, the requirement of a minimum time period between each transfer,
not accepting transfer requests of an agent acting under a power of attorney on
behalf of more than one Contract Owner, or limiting the dollar amount that may
be transferred between the Sub-Accounts and the Fixed Account by a Contract
Owner at any one time. Such restrictions may be applied in any manner reasonably
designed to prevent any use of the transfer right which is considered by
Hartford to be to the disadvantage of other Contract Owners.
TRANSFERS BETWEEN THE FIXED ACCOUNT AND THE SUB-ACCOUNTS
Subject to the restrictions set forth above, transfers from the Fixed Account
into a Sub-Account may be made at any time during the Contract Year. The maximum
amount which may be transferred from the Fixed Account during any Contract Year
is the greater of 30% of the Fixed Account balance as of the last Contract
Anniversary or the greatest amount of any prior transfer from the Fixed Account.
If Hartford permits preauthorized transfers from the Fixed Account to the
Sub-Accounts, this restriction is inapplicable. However, if any interest rate is
renewed at a rate at least one percentage point less than the previous rate, the
Contract Owner may elect to transfer up to 100% of the Portfolios receiving the
reduced rate within sixty days of notification of the interest rate decrease.
Generally, transfers may not be made from any Sub-Account into the Fixed Account
for the six-month period following any transfer from the Fixed Account into one
or more of the Sub-Accounts. Hartford reserves the right to modify the
limitations on transfers from the Fixed Account and to defer transfers from the
Fixed Account for up to six months from the date of request.
REDEMPTION/SURRENDER OF A CONTRACT
At any time prior to the Annuity Commencement Date, you have the right, subject
to any IRS provisions applicable thereto, to surrender the value of the Contract
in whole or in part. Surrenders are not permitted after Annuity payments
commence except that a full surrender is allowed when payments for a designated
period (Option 4 and 5) are selected as the Annuity option.
FULL SURRENDERS. At any time prior to the Annuity Commencement Date (and after
the Annuity Commencement Date with respect to values applied to Option 4), the
Contract Owner has the right to terminate the Contract. In such event, the
Termination Value of the Contract may be taken in the form of a lump sum cash
settlement. The Termination Value of the Contract is equal to the Contract Value
less any applicable Premium Taxes, the Contract
14 - PROSPECTUS
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Maintenance Fee, if applicable, and any applicable contingent deferred sales
charges. The Termination Value may be more or less than the amount of the
Premium Payments made to a Contract.
PARTIAL SURRENDERS. The Contract Owner may make a partial surrender of Contract
Values at any time prior to the Annuity Commencement Date so long as the amount
surrendered is at least equal to the minimum amount rules then in effect.
Currently, there is no minimum amount rule in effect. However, Hartford may
institute minimum amount rules at some future time. Additionally, if the
remaining Contract Value following a surrender is less than $500 (and, for Texas
contracts, there were no Premium Payments made during the preceding two contract
years), Hartford may terminate the Contract and pay the Termination Value.
Certain plans or programs may have different withdrawal privileges. Hartford may
permit the Contract Owner to preauthorize partial surrenders subject to certain
limitations then in effect.
THERE ARE CERTAIN RESTRICTIONS ON SECTION 403(B) TAX SHELTERED ANNUITIES. AS OF
DECEMBER 31, 1988, ALL SECTION 403(B) ANNUITIES HAVE LIMITS ON FULL AND PARTIAL
SURRENDERS. CONTRIBUTIONS TO THE CONTRACT MADE AFTER DECEMBER 31, 1988 AND ANY
INCREASES IN CASH VALUE AFTER DECEMBER 31, 1988 MAY NOT BE DISTRIBUTED UNLESS
THE CONTRACT OWNER/EMPLOYEE HAS A) ATTAINED AGE 59 1/2, B) TERMINATED
EMPLOYMENT, C) DIED, D) BECOME DISABLED OR E) EXPERIENCED FINANCIAL HARDSHIP.
DISTRIBUTIONS DUE TO FINANCIAL HARDSHIP OR SEPARATION FROM SERVICE MAY STILL BE
SUBJECT TO A PENALTY TAX OF 10%.
HARTFORD WILL NOT ASSUME ANY RESPONSIBILITY IN DETERMINING WHETHER A WITHDRAWAL
IS PERMISSIBLE, WITH OR WITHOUT TAX PENALTY, IN ANY PARTICULAR SITUATION; OR IN
MONITORING WITHDRAWAL REQUESTS REGARDING PRE OR POST JANUARY 1, 1989 ACCOUNT
VALUES.
ANY SUCH FULL OR PARTIAL SURRENDER DESCRIBED ABOVE MAY RESULT IN ADVERSE TAX
CONSEQUENCES TO THE CONTRACT OWNER. THE CONTRACT OWNER, THEREFORE, SHOULD
CONSULT WITH HIS TAX ADVISER BEFORE UNDERTAKING ANY SUCH SURRENDER. (SEE
"FEDERAL TAX CONSIDERATIONS" COMMENCING ON PAGE 19.)
Payment on any request for a full or partial surrender from the Sub-Accounts
and/or the Fixed Account will be made as soon as possible and in any event no
later than seven days after the written request is received by Hartford at its
Home Office, Attn: Individual Annuity Services, P.O. Box 5085, Hartford, CT
06102-5085. Hartford may defer payment of any amounts from the Fixed Account for
up to six months from the date of the request for surrender. If Hartford defers
payment for more than 30 days, Hartford will pay interest of at least 3% per
annum on the amount deferred. In requesting a partial withdrawal you should
specify the Fixed Account and/or the Sub-Account(s) from which the partial
withdrawal is to be taken. Otherwise, such withdrawal and any applicable
contingent deferred sales charges will be effected on a pro rata basis according
to the value in the Fixed Account and each Sub-Account under a Contract. Within
this context, the contingent deferred sales charges are taken from the Premium
Payments in the order in which they were received: from the earliest Premium
Payments to the latest Premium Payments. (See "Contingent Deferred Sales
Charges," page 15.)
DEATH BENEFIT
The Contracts provide that in the event the Annuitant dies before the Annuity
Commencement Date, the Contingent Annuitant will become the Annuitant. If the
Annuitant dies before the Annuity Commencement Date and either (a) there is no
designated Contingent Annuitant, (b) the Contingent Annuitant predeceases the
Annuitant, or (c) if any Contract Owner dies before the Annuity Commencement
Date, the Beneficiary as determined under the Contract Control Provisions will
receive the Death Benefit as determined on the date of receipt of due proof of
death by Hartford in its Home Office. With regard to Joint Contract Owners,
after the death of a joint Contract Owner prior to the Annuity Commencement
Date, the Beneficiary will be the surviving Contract Owner notwithstanding that
the beneficiary designation may be different.
GUARANTEED DEATH BENEFIT If the Annuitant dies before the Annuity Commencement
Date and there is no designated Contingent Annuitant surviving, or if the
Contract Owner dies before the Annuity Commencement Date, the Beneficiary will
receive the greatest of (a) the Contract Value determined as of the day written
proof of death of such person is received by Hartford, or (b) 100% of the total
Premium Payments made to such Contract, reduced by the dollar amount of any
partial surrenders since the issue date, or (c) the Maximum Anniversary Value
immediately preceding the date of death. The Maximum Anniversary Value is equal
to the greatest Anniversary Value attained from the following:
As of the date of receipt of due proof of death, Hartford will calculate an
Anniversary Value for each Contract Anniversary prior to the deceased's attained
age 81. The Anniversary Value is equal to the Contract Value on a Contract
Anniversary, increased by the dollar amount of any premium payments made since
that anniversary and reduced by the dollar amount of any partial surrenders
since that anniversary.
PAYMENT OF DEATH BENEFIT Death Benefit proceeds will remain invested in the
Separate Account in accordance with the allocation instructions given by the
Contract Owner until the proceeds are paid or Hartford receives new instructions
from the Beneficiary. The Death Benefit may be taken in one sum, payable within
7 days after the date Due Proof of Death is received, or under any of the
15 - PROSPECTUS
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settlement options then being offered by the Company provided, however, that:
(a) in the event of the death of any Contract Owner prior to the Annuity
Commencement Date, the entire interest in the Contract will be distributed
within 5 years after the death of the Contract Owner and (b) in the event of the
death of any Contract Owner or Annuitant which occurs on or after the Annuity
Commencement Date, any remaining interest in the Contract will be paid at least
as rapidly as under the method of distribution in effect at the time of death,
or, if the benefit is payable over a period not extending beyond the life
expectancy of the Beneficiary or over the life of the Beneficiary, such
distribution must commence within one year of the date of death. The proceeds
due on the death may be applied to provide variable payments, fixed payments, or
a combination of variable and fixed payments. However, in the event of the
Contract Owner's death where the sole Beneficiary is the spouse of the Contract
Owner and the Annuitant or Contingent Annuitant is living, such spouse may
elect, in lieu of receiving the death benefit, to be treated as the Contract
Owner. The Contract Value and the Maximum Anniversary Value of the Contract will
be unaffected by treating the spouse as the Contract Owner.
If the Contract is owned by a corporation or other non-individual, the Death
Benefit payable upon the death of the Annuitant prior to the Annuity
Commencement Date will be payable only as one sum or under the same settlement
options and in the same manner as if an individual Contract Owner died on the
date of the Annuitant's death.
There may be postponement in the payment of Death Benefits whenever (a) the New
York Stock Exchange is closed, except for holidays or weekends, or trading on
the New York Stock Exchange is restricted as determined by the Securities and
Exchange Commission; (b) the Securities and Exchange Commission permits
postponement and so orders; or (c) the Securities and Exchange Commission
determines that an emergency exists making valuation of the amounts or disposal
of securities not reasonably practicable.
GROUP UNALLOCATED CONTRACTS For Group Unallocated Contracts, Hartford requires
that detailed accounting of cumulative purchase payments, cumulative gross
surrenders, and current Contract Value attached to each Plan Participant be
submitted on an annual basis by the Contract Owner. Failure to submit accurate
data satisfactory to Hartford will give Hartford the right to terminate this
extension of benefits.
CHARGES UNDER THE CONTRACT
CONTINGENT DEFERRED
SALES CHARGES
There is no deduction for sales expenses from Premium Payments when made.
However, a contingent deferred sales charge may be assessed against Contract
Values when they are surrendered. The length of time from receipt of a Premium
Payment to the time of surrender determines the contingent deferred sales
charge. Premium Payments will be deemed to be surrendered in the order in which
they were received.
A Contract Owner who chooses to surrender a Contract in full who has not yet
withdrawn the Annual Withdrawal Amount during the current Contract Year (as
described below under the sub-heading, "After the Seventh Contract Year") may,
depending upon the amount of investment gain experienced under the Contract,
reduce the amount of any contingent deferred sales charge paid by first
withdrawal the Annual Withdrawal Amount and then requesting a full surrender of
the Contract. Currently, regardless of whether a Contract Owner first requests a
partial withdrawal of the Annual Withdrawal Amount, upon receiving a request for
a full surrender of a Contract, Hartford assesses any applicable contingent
deferred sales charge against the surrender proceeds representing the lesser of:
(1) aggregate Premium Payments under the Contract not previously withdrawn; and
(2) the Contract Value, less the Annual Withdrawal Amount available at the time
of the full surrender, less the Annual Maintenance Fee.
DURING THE FIRST SEVEN
CONTRACT YEARS
During the first seven Contract Years, all surrenders will be first from Premium
Payments and then from other Contract Values. If an amount equal to all Premium
Payments has been surrendered, a contingent deferred sales charge will not be
assessed against the surrender of the remaining Contract Value.
AFTER THE SEVENTH
CONTRACT YEAR
After the seventh Contract Year, all surrenders will first be from earnings and
then from Premium Payments. A contingent deferred sales charge will not be
assessed against the surrender of earnings. If an amount equal to all earnings
has been surrendered, a contingent deferred sales charge will not be assessed
against Premium Payments received more than seven years prior to surrender, but
will be assessed against Premium Payments received less than seven years prior
to surrender.
The charge is a percentage of the amount withdrawn (not to exceed the aggregate
amount of the Premium Payments made) and equals:
<TABLE>
<CAPTION>
LENGTH OF TIME
FROM PREMIUM PAYMENT
CHARGE (NUMBER OF YEARS)
<S> <C>
- ---------------------------------------------------------------
6% 1
- ---------------------------------------------------------------
6% 2
- ---------------------------------------------------------------
5% 3
- ---------------------------------------------------------------
5% 4
- ---------------------------------------------------------------
4% 5
- ---------------------------------------------------------------
3% 6
- ---------------------------------------------------------------
2% 7
- ---------------------------------------------------------------
0% 8 or more
- ---------------------------------------------------------------
</TABLE>
The contingent deferred sales charges are used to cover expenses relating to the
sale and distribution of the Contracts, including commissions paid to any
distribution organization and its sales personnel, the cost of preparing sales
literature and other promotional activities. To the extent that these charges do
not cover such
16 - PROSPECTUS
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distribution expenses, the expenses will be borne by Hartford from its general
assets, including surplus. The surplus might include profits resulting from
unused mortality and expense risk charges.
During the first seven Contract Years, on a non-cumulative basis, a Contract
Owner may make a partial surrender of Contract Values of up to 10% of the
aggregate Premium Payments made to the contract (as determined on the date of
the requested withdrawal) without the application of the contingent deferred
sales charge. After the seventh Contract year, the Contract Owner may make a
partial surrender of 10% of premium payments made during the seven years prior
to the surrender and 100% of the Contract Value less the Premium Payments made
during the seven years prior to the surrender. The amount which can be withdrawn
in any Contract Year prior to incurring surrender charges is the "Annual
Withdrawal Amount." An Extended Withdrawal Privilege rider allows an Annuitant
who attains age 70 1/2 under a Qualified Plan to withdraw an amount in excess of
the Annual Withdrawal Amount to comply with IRS minimum distribution rules.
The contingent deferred sales charges which cover expenses relating to the sale
and distribution of the Contracts may be reduced for certain sales of the
Contracts under circumstances which may result in savings of such sales and
distribution expenses. Therefore, the contingent deferred sales charges may be
reduced if the Contracts are sold to certain employee and professional groups.
In addition, there may be other circumstances of which Hartford is not presently
aware which could result in reduced sales or distribution expenses. Reductions
in these charges will not be unfairly discriminatory against any Contract Owner.
Hartford may offer certain employer sponsored savings plans, in its discretion
reduced fees and charges including, but not limited to, the contingent deferred
sales charges, the mortality and expense risk charge and the maintenance fee for
certain sales under circumstances which may result in savings of certain costs
and expenses. Reductions in these fees and charges will not be unfairly
discriminatory against any Contract Owner.
MORTALITY AND EXPENSE
RISK CHARGE
Although Variable Annuity payments made under the Contracts will vary in
accordance with the investment performance of the underlying Portfolio shares
held in the Sub-Account(s), the payments will not be affected by (a) Hartford's
actual mortality experience among Annuitants before or after the Annuity
Commencement Date or (b) Hartford's actual expenses, if greater than the
deductions provided for in the Contracts because of the expense and mortality
undertakings by Hartford.
For assuming these risks under the Contracts, Hartford will make a daily charge
at the rate of 1.25% per annum against all Contract Values held in the
Sub-Accounts during the life of the Contract, including the payout period,
(estimated at .90% for mortality and .35% for expense).
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The mortality undertaking provided by Hartford under the Contracts, assuming the
selection of one of the forms of life Annuities, is to make monthly Annuity
payments (determined in accordance with the 1983(a) Individual Annuity Mortality
Table and other provisions contained in the Contract) to Annuitants regardless
of how long an Annuitant may live, and regardless of how long all Annuitants as
a group may live. Hartford also assumes the liability for payment of a minimum
Death Benefit under the Contract.
The mortality undertakings are based on Hartford's determination of expected
mortality rates among all Annuitants. If actual experience among Annuitants
during the Annuity payment period deviates from Hartford's actuarial
determination of expected mortality rates among Annuitants because, as a group,
their longevity is longer than anticipated, Hartford must provide amounts from
its general Portfolios to fulfill its Contract obligations. Hartford will bear
the loss in such a situation. Also, in the event of the death of an Annuitant or
Contract Owner before the commencement of Annuity payments, whichever is
earlier, Hartford can, in periods of declining value, experience a loss
resulting from the assumption of the mortality risk relative to the minimum
Death Benefit.
In providing an expense undertaking, Hartford assumes the risk that the
contingent deferred sales charges and the Administration and Maintenance Fees
for maintaining the Contracts prior to the Annuity Commencement Date may be
insufficient to cover the actual cost of providing such items.
ADMINISTRATION AND MAINTENANCE FEES
Hartford will deduct certain fees from Contract Values to reimburse it for
expenses relating to the administration and maintenance of the Contract and the
Fixed Account. For Contract maintenance, Hartford will deduct an annual fee of
$30 on each Contract Anniversary on or before the Annuity Commencement Date. The
deduction will be made pro rata according to the value in each Sub-Account and
the Fixed Account under a Contract. If during a Contract Year the Contract is
surrendered for its full value, Hartford will deduct the Contract Maintenance
Fee at the time of such surrender. For administration, Hartford makes a daily
charge at the rate of .15% per annum against all Contract Values held in the
Separate Account during both the accumulation and annuity phases of the
Contract. There is not necessarily a relationship between the amount of
administrative charge imposed on a given Contract and the amount of expenses
that may be attributable to that Contract; expenses may be more or less than the
charge.
The types of expenses incurred by the Separate Account include, but are not
limited to, expenses of issuing the Contract and expenses for confirmations,
Contract quarterly statements, processing of transfers and surrenders,
responding to Contract Owner inquiries, reconciling and depositing cash
receipts, calculation and monitoring daily Sub-Account unit values, Separate
Account reporting, including semiannual and annual reports and mailing and
tabulation of shareholder proxy solicitations.
You should refer to the Fund Prospectus for a description of deductions and
expenses paid out of the assets of the Portfolios.
PREMIUM TAXES
A deduction is also made for Premium Tax, if applicable, imposed by a state or
other governmental entity. Certain states impose a Premium Tax, currently
ranging up to 3.5%. Some states assess the tax at the time purchase payments are
made; others assess the tax at the time of annuitization. Hartford will pay
Premium Taxes at the time imposed under applicable law. At its sole discretion,
Hartford may deduct Premium Taxes at the time Hartford pays such taxes to the
applicable taxing authorities, at the time the Contract is surrendered, or at
the time the Contract annuitizes.
WAIVER OF SALES CHARGE
Hartford will waive any contingent deferred sales charges applicable to a
partial or full surrender of the Contract Value if the Annuitant is confined, at
the recommendation of a physician, for medically necessary reasons, for at least
180 calendar days to: a hospital recognized as a general hospital by the proper
authority of the state in which it is located; or a hospital recognized as a
general hospital by the Joint Commission on the Accreditation of Hospitals; or a
facility certified as a hospital or long-term care facility; or a nursing home
licensed by the state in which it is located and offers the services of a
registered nurse 24 hours a day.
The Annuitant can not be confined at the time the Contract was purchased in
order to receive the waiver and the Contract Owner(s) must have been the
Contract Owner(s) continuously since the Contract issue date; must provide
written proof of confinement satisfactory to Hartford; and must request the
partial or full surrender of the Contract Value within 91 calendar days of the
last day of confinement.
This contingent deferred charge waiver may not be available in all states.
Please contact your registered representative or Hartford to determine state
availability.
ANNUITY BENEFITS
You select an Annuity Commencement Date and an Annuity option which may be on a
fixed or variable basis, or a combination thereof. The Annuity Commencement Date
will not be deferred beyond the Annuitant's 90th birthday (85th birthday in some
states, 100th birthday if sold as a Charitable Remainder Trust, where approved).
The Annuity Commencement Date and/ or the Annuity option may be changed from
time to time, but any change must be at least 30 days prior to the date on which
Annuity payments are scheduled to begin. The contract allows
18 - PROSPECTUS
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the Contract Owner to change the Sub-Accounts on which variable payments are
based after payments have commenced once every three (3) months. Any Fixed
Annuity allocation may not be changed.
ANNUITY OPTIONS
The Contract contains the five optional Annuity forms described below. Options
2, 4 and 5 are available to Qualified Contracts only if the guaranteed payment
period is less than the life expectancy of the Annuitant at the time the option
becomes effective. Such life expectancy shall be computed on the basis of the
mortality table prescribed by the IRS, or if none is prescribed, the mortality
table then in use by the Hartford. With respect to Non-Qualified Contracts, if
you do not elect otherwise, payments in most states will automatically begin at
the Annuitant's age 90 (with the exception of states that do not allow deferral
past age 85) under Option 2 with 120 monthly payments certain. For Qualified
Contracts and contracts issued in Texas, if you do not elect otherwise, payments
will begin automatically at the Annuitant's age 90 under Option 1 to provide a
life Annuity.
Under any of the Annuity options excluding Options 4 and 5, no surrenders are
permitted after Annuity payments commence. Only full surrenders are allowed out
of Option 4 and any such surrender will be subject to contingent deferred sales
charges, if applicable. Full or partial withdrawals may be made from Option 5 at
any time and contingent deferred sales charges will not be applied.
OPTION 1: LIFE ANNUITY
A life Annuity is an Annuity payable during the lifetime of the Annuitant and
terminating with the last payment preceding the death of the Annuitant. This
option offers the largest payment amount of any of the life Annuity options
since there is no guarantee of a minimum number of payments nor a provision for
a death benefit payable to a Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity payment,
two if he died before the date of the third Annuity payment, etc.
OPTION 2: LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that payments will be made for a minimum of 120,
180 or 240 months, as elected. If, at the death of the Annuitant, payments have
been made for less than the minimum elected number of months, then the present
value as of the date of the Annuitant's death, of any remaining guaranteed
payments will be paid in one sum to the Beneficiary or Beneficiaries designated
unless other provisions have been made and approved by the company.
OPTION 3: JOINT AND LAST SURVIVOR ANNUITY
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
Based on the options currently offered by Hartford, the Annuitant may elect that
the payment to the survivor be less than the payment made during the joint
lifetime of the Annuitant and a designated second person.
It would be possible under this option for an Annuitant and designated second
person to receive only one payment in the event of the common or simultaneous
death of the parties prior to the due date for the second payment and so on.
OPTION 4: PAYMENTS FOR A DESIGNATED PERIOD
An amount payable monthly for the number of years selected which may be from 5
to 30 years. Under this option, you may, at any time, surrender the contract and
receive, within seven days, the Termination Value of the Contract as determined
by Hartford.
In the event of the Annuitant's death prior to the end of the designated period,
the present value as of the date of the Annuitant's death, of any remaining
guaranteed payments will be paid in one sum to the Beneficiary or Beneficiaries
designated unless other provisions have been made and approved by the Company.
Option 4 is an option that does not involve life contingencies and thus no
mortality guarantee. Charges made for the mortality undertaking under the
contracts thus provide no real benefit to a Contract Owner.
OPTION 5: DEATH BENEFIT REMAINING WITH HARTFORD
Proceeds from the Death Benefit may be left with Hartford for a period not to
exceed five years from the date of the Contract Owner's death prior to the
Annuity Commencement Date. These proceeds will remain in the Sub-Account(s) to
which they were allocated at the time of death unless the Beneficiary elects to
reallocate them. Full or partial withdrawals may be made at any time. In the
event of withdrawals, the remaining value will equal the Contract Value of the
proceeds left with Hartford, minus any withdrawals.
Hartford may offer other annuity options from time to time.
THE ANNUITY UNIT AND VALUATION
The value of the Annuity Unit for each Sub-Account in the Separate Account for
any day is determined by multiplying the value for the preceding day by the
product of (1) the net investment factor (See "Valuation of Accumulation Units,"
commencing on page 13) for the day for which the Annuity Unit value is being
calculated and (2) a factor to neutralize the assumed investment rate of 5.00%
per annum discussed below.
19 - PROSPECTUS
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DETERMINATION OF PAYMENT AMOUNT
When Annuity payments are to commence, the value of the Contract is determined
as the sum of the value of the Fixed Account no earlier than the close of
business on the fifth Valuation Day preceding the date the first Annuity payment
is due plus the product of the value of the Accumulation Unit of each
Sub-Account on that same day, and the number of Accumulation Units credited to
each Sub-Account as of the date the Annuity is to commence.
The Contract contains tables indicating the minimum dollar amount of the first
monthly payment under the optional forms of Annuity for each $1,000 of value of
a Sub-Account under a Contract. The first monthly payment varies according to
the form and type of Annuity selected. The Contract contains Annuity tables
derived from the 1983(a) Individual Annuity Mortality Table with ages set back
one year and with an assumed investment rate ("A.I.R.") of 3% per annum for the
Fixed Annuity and 5% per annum for the Variable Annuity.
The total first monthly Variable Annuity payment is determined by multiplying
the value (expressed in thousands of dollars) of a Sub-Account (less any
applicable Premium Taxes) by the amount of the first monthly payment per $1,000
of value obtained from the tables in the Contracts.
Fixed Annuity payments are determined at annuitization by multiplying the values
allocated to the Fixed Account (less applicable Premium Taxes) by a rate to be
determined by Hartford which is no less than the rate specified in the Annuity
tables in the Contract. The Annuity payment will remain level for the duration
of the Annuity.
The amount of the first monthly Variable Annuity payment, determined as
described above, is divided by the value of an Annuity Unit for the appropriate
Sub-Account no earlier than the close of business on the fifth Valuation Day
preceding the day on which the payment is due in order to determine the number
of Annuity Units represented by the first payment. This number of Annuity Units
remains fixed during the Annuity payment period, and in each subsequent month
the dollar amount of the Variable Annuity payment is determined by multiplying
this fixed number of Annuity Units by the then current Annuity Unit value.
THE A.I.R. ASSUMED IN THE MORTALITY TABLES WOULD PRODUCE LEVEL VARIABLE ANNUITY
PAYMENTS IF THE INVESTMENT RATE REMAINED CONSTANT. IN FACT, PAYMENTS WILL VARY
UP OR DOWN AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE A.I.R.
The Annuity Unit value used in calculating the amount of the Variable Annuity
payments will be based on an Annuity Unit value determined as of the close of
business on a day no earlier than the fifth Valuation Day preceding the date of
the Annuity payment.
FEDERAL TAX CONSIDERATIONS
--------------------------------------------------------------------
WHAT ARE SOME OF THE FEDERAL TAX CONSEQUENCES WHICH AFFECT THESE CONTRACTS?
A. GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING TO
THE ACTUAL STATUS OF THE CONTRACT OWNER INVOLVED AND THE TYPE OF PLAN UNDER
WHICH THE CONTRACT IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A PERSON,
TRUSTEE, OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A CONTRACT DESCRIBED
HEREIN.
It should be understood that any detailed description of the federal income tax
consequences regarding the purchase of these Contracts cannot be made in this
Prospectus and that special tax rules may be applicable with respect to certain
purchase situations not discussed herein. In addition, no attempt is made here
to consider any applicable state or other tax laws. For detailed information, a
qualified tax adviser should always be consulted. The discussion here and in
Appendix I commencing on page 25 is based on Hartford's understanding of
existing federal income tax laws as they are currently interpreted.
B. TAXATION OF HARTFORD AND
THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under subchapter M of Chapter 1 of the Code.
Investment income and any realized capital gains on the assets of the Separate
Account are reinvested and are taken into account in determining the value of
the Accumulation and Annuity Units (See "Value of Accumulation Units" commencing
on page 13). As a result, such investment income and realized capital gains are
automatically applied to increase reserves under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
C. TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING PURCHASERS OTHER THAN
QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
20 - PROSPECTUS
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1. NON-NATURAL PERSONS, CORPORATIONS, ETC. Section 72 contains provisions for
Contract Owners which are non-natural persons. Non-natural persons include
corporations, trusts, and partnerships. The annual net increase in the value of
the Contract is currently includable in the gross income of a non-natural person
unless the non-natural person holds the Contract as an agent for a natural
person. There is an exception from current inclusion for certain annuities held
by structured settlement companies, certain annuities held by an employer with
respect to a terminated qualified retirement plan, and certain immediate
annuities. A non-natural person which is a tax- exempt entity for federal tax
purposes will not be subject to income tax as a result of this provision.
If the Contract Owner is not an individual, the primary Annuitant shall be
treated as the Contract Owner for purposes of making distributions which are
required to be made upon the death of the Contract Owner. If there is a change
in the primary Annuitant, such change shall be treated as the death of the
Contract Owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS). A Contract Owner is not taxed on
increases in the value of the Contract until an amount is received or deemed
received, e.g., in the form of a lump sum payment (full or partial value of a
Contract) or as Annuity payments under the settlement option elected.
The provisions of Section 72 of the Code concerning distributions are summarized
briefly below. Also summarized are special rules affecting distributions from
Contracts obtained in a tax-free exchange for other annuity contracts or life
insurance contracts which were purchased prior to August 14, 1982.
A. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
I. Total premium payments less amounts received which were not includable in
gross income equal the "investment in the contract" under Section 72 of the
Code.
II. To the extent that the value of the Contract (ignoring any surrender charges
except on a full surrender) exceeds the "investment in the contract," such
excess constitutes the "income on the contract."
III. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a partial surrender) is deemed to come first from any such
"income on the contract" and then from "investment in the contract," and for
these purposes such "income on the contract" shall be computed by reference to
any aggregation rule in subparagraph 2.c., below. As a result, any such amount
received or deemed received (1) shall be includable in gross income to the
extent that such amount does not exceed any such "income on the contract," and
(2) shall not be includable in gross income to the extent that such amount does
exceed any such "income on the contract." If at the time that any amount is
received or deemed received there is no "income on the contract" (e.g., because
the gross value of the Contract does not exceed the "investment in the contract"
and no aggregation rule applies), then such amount received or deemed received
will not be includable in gross income, and will simply reduce the "investment
in the contract."
IV. The receipt of any amount as a loan under the Contract or the assignment or
pledge of any portion of the value of the Contract shall be treated as an amount
received for purposes of this subparagraph a. and the next subparagraph b.
V. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not apply,
however, to certain transfers of property between spouses or incident to
divorce.
B. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
I. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the Annuity
Commencement Date, any additional payments (including surrenders) will be
entirely includable in gross income.
II. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from gross
income by the exclusion ratio does not exceed the investment in the contract as
of the Annuity Commencement Date, then the remaining portion of unrecovered
investment shall be allowed as a deduction for the last taxable year of the
Annuitant.
III. Generally, nonperiodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and shall be
fully includable in gross income. However, upon a full surrender after such
date, only the excess of the amount received (after any surrender charge) over
the remaining "investment in the contract" shall be includable in gross income
(except to the extent that the aggregation rule referred to in the next
subparagraph c. may apply).
C. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or affiliated
insurer) to the same Contract Owner within the same calendar year (other than
certain contracts held in connection with a tax-qualified retirement
arrangement) will be treated as one annuity Contract for the purpose of
determining the taxation of distributions prior to the Annuity Commencement
Date. An annuity contract received in a tax-free exchange for another annuity
contract or life insurance contract may be treated as a new Contract for this
purpose. Hartford believes that for any annuity subject to such aggregation, the
values under the Contracts and the investment in the contracts will be added
together
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to determine the taxation under subparagraph 2.a., above, of amounts received or
deemed received prior to the Annuity Commencement Date. Withdrawals will first
be treated as withdrawals of income until all of the income from all such
Contracts is withdrawn. As of the date of this Prospectus, there are no
regulations interpreting this provision.
D. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY PAYMENTS.
I. If any amount is received or deemed received on the Contract (before or after
the Annuity Commencement Date), the Code applies a penalty tax equal to 10% of
the portion of the amount includable in gross income, unless an exception
applies.
II. The 10% penalty tax will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient has attained the age of
59 1/2.
2. Distributions made on or after the death of the holder or where the holder is
not an individual, the death of the primary annuitant.
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of substantially equal
periodic payments for the life (or life expectancy) of the recipient (or the
joint lives or life expectancies of the recipient and the recipient's
Beneficiary).
5. Distributions of amounts which are allocable to the "investment in the
contract" prior to August 14, 1982 (see next subparagraph e.).
E. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED
THROUGH A TAX-FREE EXCHANGE OF OTHER ANNUITY
OR LIFE INSURANCE CONTRACTS PURCHASED PRIOR TO
AUGUST 14, 1982.
If the Contract was obtained by a tax-free exchange of a life insurance or
annuity Contract purchased prior to August 14, 1982, then any amount received or
deemed received prior to the Annuity Commencement Date shall be deemed to come
(1) first from the amount of the "investment in the contract" prior to August
14, 1982 ("pre-8/14/82 investment") carried over from the prior Contract, (2)
then from the portion of the "income on the contract" (carried over to, as well
as accumulating in, the successor Contract) that is attributable to such
pre-8/14/82 investment, (3) then from the remaining "income on the contract,"
and (4) last from the remaining "investment in the contract." As a result, to
the extent that such amount received or deemed received does not exceed such
pre-8/14/82 investment, such amount is not includable in gross income., In
addition, to the extent that such amount received or deemed received does not
exceed the sum of (a) such pre- 8/14/82 investment and (b) the "income on the
contract" attributable thereto, such amount is not subject to the 10% penalty
tax. In all other respects, amounts received or deemed received from such post-
exchange Contracts are generally subject to the rules described in this
subparagraph 3.
F. REQUIRED DISTRIBUTIONS
I. DEATH OF CONTRACT OWNER OR PRIMARY ANNUITANT
Subject to the alternative election or spouse beneficiary provisions in ii. or
iii., below:
1. If any Contract Owner dies on or after the Annuity Commencement Date and
before the entire interest in the Contract has been distributed, the remaining
portion of such interest shall be distributed at least as rapidly as under the
method of distribution being used as of the date of such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the entire
interest in the Contract will be distributed within five years after such death;
and
3. If the Contract Owner is not an individual, then for purposes of 1. or 2.,
above, the primary annuitant under the Contract shall be treated as the Contract
Owner, and any change in the primary annuitant shall be treated as the death of
the Contract Owner. The primary annuitant is the individual, the events in the
life of whom are of primary importance in affecting the timing or amount of the
payout under the Contract.
II. ALTERNATIVE ELECTION TO SATISFY DISTRIBUTION REQUIREMENTS
If any portion of the interest of a Contract Owner described in i., above, is
payable to or for the benefit of a designated beneficiary, such beneficiary may
elect to have the portion distributed over a period that does not extend beyond
the life or life expectancy of the beneficiary. The election and payments must
begin within a year of the death.
III. SPOUSE BENEFICIARY
If any portion of the interest of a Contract Owner is payable to or for the
benefit of his or her spouse, and the Annuitant or Contingent Annuitant is
living, such spouse shall be treated as the Contract Owner of such portion for
purposes of section i., above.
3. DIVERSIFICATION REQUIREMENTS. Section 817 of the Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period during which the investments made by the separate account or underlying
fund are not adequately diversified in accordance with regulations prescribed by
the Treasury Department. If a Contract is not treated as an annuity contract,
the Contract Owner will be subject to income tax on the annual increases in cash
value.
The Treasury Department has issued diversification regulations which generally
require, among other things, that no more than 55% of the value of the total
assets of the segregated asset account underlying a variable contract is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four
22 - PROSPECTUS
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investments. In determining whether the diversification standards are met, all
securities of the same issuer, all interests in the same real property project,
and all interests in the same commodity are each treated as a single investment.
In addition, in the case of government securities, each government agency or
instrumentality shall be treated as a separate issuer.
A separate account must be in compliance with the diversification standards on
the last day of each calendar quarter or within 30 days after the quarter ends.
If an insurance company inadvertently fails to meet the diversification
requirements, the company may comply within a reasonable period and avoid the
taxation of contract income on an ongoing basis. However, either the company or
the Contract Owner must agree to pay the tax due for the period during which the
diversification requirements were not met.
Hartford monitors the diversification of investments in the separate accounts
and tests for diversification as required by the Code. Hartford intends to
administer all contracts subject to the diversification requirements in a manner
that will maintain adequate diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT. In order for a variable
annuity contract to qualify for tax deferral, assets in the segregated asset
accounts supporting the variable contract must be considered to be owned by the
insurance company and not by the variable contract owner. The Internal Revenue
Service ("IRS") has issued several rulings which discuss investor control. The
IRS has ruled that incidents of ownership by the contract owner, such as the
ability to select and control investments in a separate account, will cause the
contract owner to be treated as the owner of the assets for tax purposes.
Further, in the explanation to the temporary Section 817 diversification
regulations, the Treasury Department noted that the temporary regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." The explanation further indicates that "the temporary regulations
provide that in appropriate cases a segregated asset account may include
multiple sub-accounts, but do not specify the extent to which policyholders may
direct their investments to particular sub-accounts without being treated as the
owners of the underlying assets. Guidance on this and other issues will be
provided in regulations or revenue rulings under Section 817(d), relating to the
definition of variable contract." The final regulations issued under Section 817
do not provide guidance regarding investor control, and as of the date of this
Prospectus, no other such guidance has been issued. Further, Hartford does not
know if or in what form such guidance will be issued. In addition, although
regulations are generally issued with prospective effect, it is possible that
regulations may be issued with retroactive effect. Due to the lack of specific
guidance regarding the issue of investor control, there is necessarily some
uncertainty regarding whether a Contract Owner could be considered the owner of
the assets for tax purposes. Hartford reserves the right to modify the
contracts, as necessary, to prevent Contract Owners from being considered the
owners of the assets in the separate accounts.
D. FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will be
subject to federal income tax withholding, pursuant to Section 3405 of the Code.
The application of this provision is summarized below:
1. NON-PERIODIC DISTRIBUTIONS.
The portion of a non-periodic distribution which constitutes taxable income will
be subject to federal income tax withholding unless the recipient elects not to
have taxes withheld. If an election not to have taxes withheld is not provided,
10% of the taxable distribution will be withheld as federal income tax. Election
forms will be provided at the time distributions are requested. If the necessary
election forms are not submitted to Hartford, Hartford will automatically
withhold 10% of the taxable distribution.
2. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN ONE
YEAR).
The portion of a periodic distribution which constitutes taxable income will be
subject to federal income tax withholding as if the recipient were married
claiming three exemptions. A recipient may elect not to have income taxes
withheld or have income taxes withheld at a different rate by providing a
completed election form. Election forms will be provided at the time
distributions are requested.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I, commencing on page 25, for information
relative to the types of plans for which it may be used and the general
explanation of the tax features of such plans.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal income
tax consequences to annuity purchasers that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
U.S. federal income tax and withholding on annuity distributions at a 30% rate,
unless a lower treaty rate applies. In addition, purchasers may be subject to
state premium tax, other state and/or municipal taxes, and taxes that may be
imposed by the purchaser's country of citizenship or residence. Prospective
purchasers are advised to consult with a qualified tax advisor regarding U.S.,
state, and foreign taxation with respect to an annuity purchase.
23 - PROSPECTUS
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GENERAL MATTERS
ASSIGNMENT
Ownership of a Contract described herein is generally assignable. However, if
the Contracts are issued pursuant to some form of Qualified Plan, it is possible
that the ownership of the Contracts may not be transferred or assigned depending
on the type of qualified retirement plan involved. An assignment of a Non-
Qualified Contract may subject the assignment proceeds to income taxes and
certain penalty taxes. (See "Taxation of Annuities in General -- Non-Tax
Qualified Purchasers," page 19.)
MODIFICATION
Hartford reserves the right to modify the Contract, but only if such
modification: (i) is necessary to make the Contract or the Separate Account
comply with any law or regulation issued by a governmental agency to which
Hartford is subject; or (ii) is necessary to assure continued qualification of
the Contract under the Code or other federal or state laws relating to
retirement annuities or annuity Contracts; or (iii) is necessary to reflect a
change in the operation of the Separate Account or the Sub-Account(s) or (iv)
provides additional Separate Account options or (v) withdraws Separate Account
options. In the event of any such modification Hartford will provide notice to
the Contract Owner or to the payee(s) during the Annuity period. Hartford may
also make appropriate endorsement in the Contract to reflect such modification.
DELAY OF PAYMENTS
There may be postponement of a surrender payment or death benefit whenever (a)
the New York Stock Exchange is closed, except for holidays or weekends, or
trading on the New York Stock Exchange is restricted as determined by the
Commission; (b) the Commission permits postponement and so orders; or (c) the
Commission determines that an emergency exists making valuation or disposal of
securities not reasonably practicable.
VOTING RIGHTS
Hartford is the legal owner of all Fund shares held in the Separate Account. As
the owner, Hartford has the right to vote at the Funds' shareholder meetings.
However, to the extent required by federal securities laws or regulations,
Hartford will:
1. Vote all Fund shares attributable to a Contract according to instructions
received from the Contract Owner, and
2. Vote shares attributable to a Contract for which no voting instructions are
received in the same proportion as shares for which instructions are received.
If any federal securities laws or regulations, or their present interpretation
change to permit Hartford to vote Fund shares in its own right, Hartford may
elect to do so.
Hartford will notify you of any Portfolio shareholders' meeting if the shares
held for your account may be voted at such meetings. Hartford will also send
proxy materials and a form of instruction by means of which you can instruct
Hartford with respect to the voting of the Portfolio shares held for your
account.
In connection with the voting of Portfolio shares held by it, Hartford will
arrange for the handling and tallying of voting instructions received from
Contract Owners. Hartford as such, shall have no right, except as hereinafter
provided, to vote any Fund shares held by it hereunder which may be registered
in its name or the names of its nominees. Hartford will, however, vote the
Portfolio shares held by it in accordance with the instructions received from
the Contract Owners for whose accounts the Fund shares are held. If a Contract
Owner desires to attend any meeting at which shares held for the Contract
Owner's benefit may be voted, the Contract Owner may request Hartford to furnish
a proxy or otherwise arrange for the exercise of voting rights with respect to
the Portfolio shares held for such Contract Owner's account. In the event that
the Contract Owner gives no instructions or leaves the manner of voting
discretionary, Hartford will vote such shares of the appropriate Portfolio in
the same proportion as shares of that Portfolio for which instructions have been
received. During the Annuity period under a Contract the number of votes will
decrease as the assets held to Portfolio Annuity benefits decrease.
DISTRIBUTION OF THE CONTRACTS
The securities will be sold by insurance and variable annuity agents of Hartford
who are registered representatives of Dean Witter Reynold Inc. ("Dean Witter").
Dean Witter is registered with the Commission under the Securities Exchange Act
of 1934 as a Broker-Dealer and is a member of the National Association of
Securities Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 7% of Premium
Payments.
From time to time, Hartford may pay or permit other promotional incentives, in
cash or credit or other compensation.
OTHER CONTRACTS OFFERED
In addition to the Contracts described in this Prospectus, it is contemplated
that other forms of group or individual Variable Annuities may be sold providing
benefits which vary in accordance with the investment experience of the Separate
Account.
CUSTODIAN OF SEPARATE
ACCOUNT ASSETS
The assets of the Separate Account are held by Hartford under a safekeeping
arrangement.
LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the Separate Account is
a party.
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LEGAL COUNSEL
Counsel with respect to federal laws and regulations applicable to the issue and
sale of the Contracts and with respect to Connecticut law is Lynda Godkin,
General Counsel, Hartford Life Insurance Companies, P.O. Box 2999, Hartford,
Connecticut 06104-2999.
EXPERTS
The audited financial statements included in this prospectus and elsewhere in
the registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports. Reference is made to said report on the statutory-basis financial
statements of ITT Hartford Life and Annuity Insurance Company which states the
statutory-basis financial statements are presented in accordance with statutory
accounting practices prescribed or permitted by the National Association of
Insurance Commissioners and the State of Connecticut Insurance Department, not
presented in accordance with generally accepted accounting principles. Reference
is made to said report on the statutory-basis financial statements of ITT
Hartford Life and Annuity Insurance Company (the Depositor), which includes an
explanatory paragraph with respect to the change in valuation method in
determining aggregate reserves for future benefits in 1994, as discussed in Note
1 of Notes to Statutory Financial Statements. The principal business address of
Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut 06103.
ADDITIONAL INFORMATION
Inquiries will be answered by calling your representative or by writing:
Hartford Life and Annuity Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Telephone: (800) 862-6668
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APPENDIX I
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INFORMATION REGARDING TAX-QUALIFIED PLANS
THE TAX RULES APPLICABLE TO TAX QUALIFIED CONTRACT OWNERS, INCLUDING
RESTRICTIONS ON CONTRIBUTIONS AND DISTRIBUTIONS, TAXATION OF DISTRIBUTIONS, AND
TAX PENALTIES, VARY ACCORDING TO THE TYPE OF PLAN AS WELL AS THE TERMS AND
CONDITIONS OF THE PLAN ITSELF. VARIOUS TAX PENALTIES MAY APPLY TO CONTRIBUTIONS
IN EXCESS OF SPECIFIED LIMITS, TO DISTRIBUTIONS IN EXCESS OF SPECIFIED LIMITS,
DISTRIBUTIONS WHICH DO NOT SATISFY CERTAIN REQUIREMENTS AND CERTAIN OTHER
TRANSACTIONS WITH RESPECT TO QUALIFIED PLANS. ACCORDINGLY, THIS SUMMARY PROVIDES
ONLY GENERAL INFORMATION ABOUT THE TAX RULES ASSOCIATED WITH USE OF THE CONTRACT
BY A QUALIFIED PLAN. CONTRACT OWNERS, PLAN PARTICIPANTS, AND BENEFICIARIES ARE
CAUTIONED THAT THE RIGHTS AND BENEFITS OF ANY PERSON TO BENEFITS ARE CONTROLLED
BY THE TERMS AND CONDITIONS OF THE PLAN REGARDLESS OF THE TERMS AND CONDITIONS
OF THE CONTRACT. SOME QUALIFIED PLANS ARE SUBJECT TO DISTRIBUTION AND OTHER
REQUIREMENTS WHICH ARE NOT INCORPORATED INTO HARTFORD'S ADMINISTRATIVE
PROCEDURES. OWNERS, PARTICIPANTS AND BENEFICIARIES ARE RESPONSIBLE FOR
DETERMINING THAT CONTRIBUTIONS, DISTRIBUTIONS AND OTHER TRANSACTIONS COMPLY WITH
APPLICABLE LAW. BECAUSE OF THE COMPLEXITY OF THESE RULES, OWNERS, PARTICIPANTS
AND BENEFICIARIES ARE ENCOURAGED TO CONSULT THEIR OWN TAX ADVISERS AS TO
SPECIFIC TAX CONSEQUENCES.
A. QUALIFIED PENSION PLANS
Provisions of the Code permit eligible employers to establish pension or profit
sharing plans (described in Section 401(a) and 401(k), if applicable, and exempt
from taxation under Section 501(a) of the Code), and Simplified Employee Pension
Plans (described in Section 408(k)). Such plans are subject to limitations on
the amount that may be contributed, the persons who may be eligible and the time
when distributions must commence. Corporate employers intending to use these
contracts in connection with such plans should seek competent advice.
B. TAX SHELTERED ANNUITIES UNDER SECTION 403(B)
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations specified
in Section 501(c)(3) of the Code to purchase annuity contracts, and, subject to
certain limitations, exclude such contributions from gross income. Generally,
such contributions may not exceed the lesser of $9,500 or 20% of the employees
"includable compensation" for his most recent full year of employment, subject
to other adjustments. Special provisions may allow some employees to elect a
different overall limitation.
Tax-sheltered annuity programs under Section 403(b) are subject to a PROHIBITION
AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO CONTRIBUTIONS MADE
PURSUANT TO A SALARY REDUCTION AGREEMENT unless such distribution is made:
(1) after the participating employee attains age 59 1/2;
(2) upon separation from service;
(3) upon death or disability; or
(4) in the case of hardship.
The above restrictions apply to distributions of employee contributions made
after December 31, 1988, earnings on those contributions, and earnings on
amounts attributable to employee contributions held as of December 31, 1988.
They do not apply to distributions of any employer or other after-tax
contributions, employee contributions made on or before December 31, 1988, and
earnings credited to employee contributions before December 31, 1988.
C. DEFERRED COMPENSATION PLANS UNDER SECTION 457
Employees and independent contractors performing services for such employers may
contribute on a before tax basis to the Deferred Compensation Plan of their
employer in accordance with the employer's plan and Section 457 of the Code.
Section 457 places limitations on contributions to Deferred Compensation Plans
maintained by a State ("State" means a State, a political sub-division of a
State, and an agency or instrumentality of a State or political sub-division of
a State) or other tax-exempt organization. Generally, the limitation is 33 1/3%
of includable compensation (typically 25% of gross compensation) or $7,500
(indexed), whichever is less. The plan may also provide for additional
"catch-up" deferrals during the three taxable years ending before a Participant
attains normal retirement age.
An employee electing to participate in a Deferred Compensation Plan should
understand that his or her rights and benefits are governed strictly by the
terms of the plan and that the employer is the legal owner of any contract
issued with respect to the plan. The employer, as owner of the contract(s),
retains all voting and redemption rights which may accrue to the contract(s)
issued with respect to the plan. The participating employee should look to the
terms of his or her plan for any charges in regard to participating therein
other than those disclosed in this Prospectus. Participants should also be aware
that effective August 20, 1996, the Small Business Job Protection Act of 1996
requires that all assets and income of an eligible Deferred Compensation Plan
established by a governmental employer which is a State, a political subdivision
of a State, or any agency or instrumentality
26 - PROSPECTUS
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of a State or political subdivision of a State, must be held in trust (or under
certain specified annuity contracts or custodial accounts) for the exclusive
benefit of Participants and their Beneficiaries. Special transition rules apply
to such governmental Deferred Compensation Plans already in existence on August
20, 1996, and provide that such plans need not establish a trust before January
1, 1999. However, this requirement does not apply to amounts under a Deferred
Compensation Plan of a tax-exempt (non-governmental) organization and such
amounts will be subject to the claims of such tax-exempt employer's general
creditors.
In general, distributions from a Section 457 Deferred Compensation Plan are
prohibited unless made after the participating employee attains the age
specified in the plan, separates from service, dies, or suffers an unforeseeable
financial emergency. Present federal tax law does not allow tax-free transfers
or rollovers for amounts accumulated in a Section 457 plan except for transfers
to other Section 457 plans in limited cases.
D. INDIVIDUAL RETIREMENT ANNUITIES UNDER SECTION 408
Section 408 of the Code permits eligible individuals to establish individual
retirement programs through the purchase of Individual Retirement Annuities
("IRAs"). IRAs are subject to limitations on the amount that may be contributed,
the contributions that may be deducted from taxable income, the persons who may
be eligible and the time when distributions may commence. Also, distributions
from certain qualified plans may be "rolled-over" on a tax-deferred basis into
an IRA.
Special rollover rules apply to SIMPLE IRAs. Amounts can be rolled over from one
SIMPLE IRA to another SIMPLE IRA. However, amounts can be rolled over from a
SIMPLE IRA to a regular IRA only after two years have expired since the
participant first commenced participation in the SIMPLE IRA. Amounts cannot be
rolled over to a SIMPLE IRA from a qualified plan or a regular IRA.
Effective after December 31, 1997, the Contract can be offered as ROTH IRAs
under Section 408A of the Code. Contributions to a ROTH IRA are not deductible.
Subject to special limitations, a distribution from a regular IRA may be rolled
over to a ROTH IRA. However, a rollover to a ROTH IRA is not excludable from
gross income. If certain specified conditions are met, qualified distributions
from a ROTH IRA are tax-free.
E. TAX PENALTIES
Distributions from retirement plans are generally taxed under Section 72 of the
Code. Under these rules, a portion of each distribution may be excludable from
income. The excludable amount is the portion of the distribution which bears the
same ratio as the after- tax contributions bear to the expected return.
1. PREMATURE DISTRIBUTION
Distributions from a qualified plan before the Participant attains age 59 1/2
are generally subject to an additional tax equal to 10% of the taxable portion
of the distribution. The 10% penalty does not apply to distributions made after
the employee's death, on account of disability, for eligible medical expenses
and distributions in the form of a life annuity and, except in the case of an
IRA, certain distributions after separation from service at or after age 55. A
life annuity is defined as a scheduled series of substantially equal periodic
payments for the life or life expectancy of the Participant (or the joint lives
or life expectancies of the Participant and Beneficiary).
In addition, effective for distributions made from an IRA after December 31,
1997, there is no such penalty tax on distributions that do not exceed the
amount of certain qualifying higher education expenses, as defined by Section
72(t)(7) of the Code, or which are qualified first-time home-buyer distributions
meeting the requirements of Section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware that the 10%
penalty tax described above is increased to 25% with respect to non-exempt
premature distributions made from your SIMPLE IRA during the first two years
following the date you first commenced participation in any SIMPLE IRA plan of
your employer.
2. MINIMUM DISTRIBUTION TAX
If the amount distributed is less than the minimum required distribution for the
year, the Participant is subject to a 50% tax on the amount that was not
properly distributed.
An individual's interest in a retirement plan must generally be distributed, or
begin to be distributed, not later than April 1 of the calendar year following
the later of (i) the calendar year in which the individual attains age 70 1/2 or
(ii) the calendar year in which the individual retires from service with the
employer sponsoring the plan ("required beginning date"). However, the required
beginning date for an individual who is a five (5) percent owner (as defined in
the Code), or who is the owner of an IRA, is April 1 of the calendar year
following the calendar year in which the individual attains age 70 1/2. The
entire interest of the Participant must be distributed beginning no later than
this required beginning date over a period which may not extend beyond a maximum
of the life expectancy of the Participant and a designated Beneficiary. Each
annual distribution must equal or exceed a "minimum distribution amount" which
is determined by dividing the account balance by the applicable life expectancy.
This account balance is generally based upon the account value as of the close
of business on the last day of the previous calendar year. In addition, minimum
distribution incidental benefit rules may require a larger annual distribution.
If an individual dies before reaching his or her required beginning date, the
individual's entire interest must generally be distributed within five years of
the individual's death. However, this rule will be deemed satisfied, if
distributions begin before
27 - PROSPECTUS
<PAGE>
the close of the calendar year following the individual's death to a designated
Beneficiary (or over a period not extending beyond the life expectancy of the
beneficiary). If the Beneficiary is the individual's surviving spouse,
distributions may be delayed un-
til the individual would have attained age 70 1/2.
If an individual dies after reaching his or her required beginning date or after
distributions have commenced, the individual's interest must generally be
distributed at least as rapidly as under the method of distribution in effect at
the time of the individual's death.
3. EXCESS DISTRIBUTION TAX
If the aggregate distributions from all IRAs and certain other qualified plans
in a calendar year exceed the greater of (i) $150,000, or (ii) $112,500 as
indexed for inflation, a penalty tax of 15% is generally imposed on the excess
portion of the distribution.
4. WITHHOLDING
Periodic distributions from a qualified plan lasting for a period of ten or more
years are generally subject to voluntary income tax withholding. The recipient
of periodic distributions may generally elect not to have withholding apply or
to have income taxes withheld at a different rate by providing a completed
election form. Otherwise, theamount withheld on such distributions is determined
at the rate applicable to wages as if the recipient were married claiming three
exemptions.
Nonperiodic distributions from an IRA are subject to income tax withholding at a
flat 10% rate. The recipient may elect not to have withholding apply.
Nonperiodic distributions from other qualified plans are generally subject to
mandatory income tax withholding at the flat rate of 20% unless such
distributions are:
(1) the non-taxable portion of the distribution;
(2) required minimum distributions;
(3) eligible rollover distributions.
Eligible rollover distributions are direct payments to an IRA or to another
qualified employer plan.
In general, distributions from plans described in Section 457 of the Code are
subject to regular wage withholding rules.
28 - PROSPECTUS
<PAGE>
TABLE OF CONTENTS TO
STATEMENT OF ADDITIONAL
INFORMATION
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
- ---------------------------------------------------------------
Introduction
- ---------------------------------------------------------------
Description of Hartford Life and Annuity
Insurance Company
- ---------------------------------------------------------------
Safekeeping of Assets
- ---------------------------------------------------------------
Independent Public Accountants
- ---------------------------------------------------------------
Distribution of Contracts
- ---------------------------------------------------------------
Calculation of Yield and Return
- ---------------------------------------------------------------
Performance Comparisons
- ---------------------------------------------------------------
Financial Statements
- ---------------------------------------------------------------
</TABLE>
28 - PROSPECTUS
<PAGE>
This form must be completed for all tax sheltered annuities.
SECTION 403(B)(11) ACKNOWLEDGMENT FORM
- ---------------------------------------------------------------
The Hartford Variable Annuity Contract which you have recently purchased is
subject to certain restrictions imposed by the Tax Reform Act of 1986.
Contributions to the Contract after December 31, 1989 and any increases in cash
value after December 31, 1988 may not be distributed to you unless you have:
a. attained age 59 1/2
b. terminated employment
c. died, or
d. become disabled.
Distributions of post December 31, 1988 contributions may also be made if you
have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made because of financial
hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than the Hartford Variable Annuity. Please refer to your
Plan.
Please complete the following and return to:
Hartford Life and Annuity Insurance Company
Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Name of Contract Owner/Participant ______________________
Address _________________________________________________
City or Plan/School District ____________________________
Date: ___________________________________________________
- --------------------------------------------------------------------------------
To Obtain a Statement of Additional Information, please complete the form below
and mail to:
Hartford Life and Annuity Insurance Company
Attn: Individual Annuity Services
PO Box 5085
Hartford, CT 06102-5085
Please send a Statement of Additional Information for Separate Account Three to
me at the following address:
- -------------------------------------------------------
Name
- -------------------------------------------------------
Address
- -------------------------------------------------------
City/State Zip Code
