<PAGE>
SELECT DIMENSIONS ASSETMANAGER
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY -
SEPARATE ACCOUNT THREE
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: 1-800-862-6668 (Contract Owners)
1-800-862-4397 (Account Executive)
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This Prospectus describes an individual and group tax-deferred variable annuity
contract designed for retirement planning purposes (each, a "Contract" and
collectively, the "Contracts").
The Contracts are issued by Hartford Life and Annuity Insurance Company
("Hartford"). Payments for the Contracts will be held in Sub-Accounts of
Hartford Life and Annuity Insurance Company Separate Account Three (the
"Separate Account").
There are currently eighteen Sub-Accounts available under the Contract.
Underlying investment portfolios ("Portfolios") are available through the Morgan
Stanley Dean Witter Select Dimensions Investment Series, the Morgan Stanley
Universal Funds, Inc. and the Van Kampen American Capital Life Investment Trust
(individually, a "Fund", collectively, the "Funds"). The following Portfolios
are available under the Contract: 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 of the Morgan
Stanley Dean Witter Select Dimensions Investment Series, the High Yield
Portfolio, the Mid-Cap Value Portfolio and the Emerging Markets Debt Portfolio
of the Morgan Stanley Universal Funds, Inc. and the Strategic Stock Portfolio
and the Enterprise Portfolio of the Van Kampen American Capital Life Investment
Trust.
This Prospectus sets forth the basic information concerning the Contract and the
Separate Account that a prospective investor should know before purchasing a
Contract. You should keep this Prospectus for future reference. A Statement of
Additional Information providing additional information about the Contract and
the Separate Account has been filed with the Securities and Exchange Commission
and is available without charge upon request. To obtain the Statement of
Additional Information, call (800) 862-6668 or send a written request to
Hartford Life and Annuity Insurance Company, Attn: Individual Annuity Services,
P.O. Box 5085, Hartford, CT 06102-5085. The Table of Contents for the Statement
of Additional Information may be found on page 30 of this Prospectus. The
Statement of Additional Information is incorporated by reference in this
Prospectus.
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.
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.
Prospectus Dated: July 16, 1998
Statement of Additional Information Dated: July 16, 1998
1 - PROSPECTUS
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TABLE OF CONTENTS
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<TABLE>
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PAGE
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<S> <C>
Glossary of Special Terms 3
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Fee Table 5
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Summary 7
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Hartford, The Separate Account and The Portfolios 8
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Hartford Life and Annuity Insurance Company 8
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The Separate Account 8
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The Portfolios 9
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Performance Related Information 12
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Description of the Contracts 13
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Contracts Offered 13
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Purchasing a Contract 13
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Right to Examine the Contract 13
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Crediting and Allocating the Premium Payment 13
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Contract Value -- Before the Annuity Commencement Date 14
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Sub-Account Value Transfers Before and After the Annuity
Commencement Date 14
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Surrenders 15
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Contract Fees and Charges 16
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Death Before the Annuity Commencement Date 17
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Death On or After the Annuity Commencement Date 18
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Distribution Requirements: Prior to the Annuity Commencement Date 18
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Settlement Provisions 19
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Annuity Payment Options 19
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Annuity Proceeds Settlement Option 19
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PAGE
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Annuity Calculation Date and Annuity Commencement Date 20
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Income Payment Dates 20
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Variable Annuity Payments 20
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Additional Contract Information 22
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Assignment 22
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Misstatement of Age or Sex 22
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Contract Modification 22
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Federal Tax Considerations 22
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A. General 22
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B. Taxation of Hartford and the Separate Account 22
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C. Taxation of Annuities -- General Provisions Affecting
Purchasers Other Than Qualified Retirement Plans 23
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D. Federal Income Tax Withholding 25
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E. General Provisions Affecting Tax-Qualified Retirement Plans 25
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F. Annuity Purchases by Nonresident Aliens and Foreign
Corporations 25
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Other Information 26
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Distribution of the Contracts 26
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Legal Matters 26
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Experts 26
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Additional Information 26
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Appendix I -- Information Regarding Tax-qualified Retirement Plans 27
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Table of Contents for Statement of Additional Information 30
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</TABLE>
2 - PROSPECTUS
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GLOSSARY OF SPECIAL TERMS
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ACCUMULATION UNIT: An accounting unit of measure used to calculate the value of
a Sub-Account before Annuity payments begin.
ADMINISTRATIVE OFFICE OF THE COMPANY: Currently located at 200 Hopmeadow Street,
Simsbury, Connecticut 06089. Except for correspondence sent overnight, all
correspondence concerning the Contract should be sent to Hartford Life and
Annuity Insurance Company, Attn: Individual Annuity Services, P.O. Box 5085,
Hartford, CT 06102-5085. Overnight correspondence should be sent to 200
Hopmeadow Street, Simsbury, Connecticut 06089.
ANNUAL MAINTENANCE FEE: An annual $30 charge on a Contract having a Contract
Value of less than $100,000, as determined on the most recent Contract
Anniversary or upon full surrender of the Contract. The charge is deducted
proportionally from the investment options in use at the time of the deduction.
ANNUITANT: The person on whose life the Contract is issued. The Annuitant may
not be changed.
ANNUITY: A contract issued by an insurance company that provides, in exchange
for premium payments, a series of income payments. This Prospectus describes a
deferred Annuity contract in which premium payments accumulate tax-deferred
until a partial or full surrender is taken or until the Annuity Commencement
Date. Annuity payments under the Contract will begin as of the Annuity
Commencement Date in accordance with the Annuity payment option selected.
ANNUITY CALCULATION DATE: The date as of which the first Annuity payment is
calculated. It will be no more than five Valuation Days prior to the Annuity
Commencement Date.
ANNUITY COMMENCEMENT DATE: The date as of which Annuity payments will begin. The
Annuity Commencement Date will not be deferred beyond the Annuitant's age 90 or
the end of Contract Year 10, whichever is later. If the Contract is sold as part
of a Charitable Remainder Trust, the Annuity Commencement Date may be deferred
to the end of the Annuitant's age 100.
ANNUITY UNIT: An accounting unit of measure used to calculate the dollar amount
of Variable Annuity payments.
ANNUITY UNIT FACTOR: The factor applied in computing Annuity Unit values to
neutralize the effect of the Assumed Investment Return.
ASSUMED INVESTMENT RETURN (AIR): The annual rate of return shown on the
specification page of the Contract. This rate is used to determine the degree of
fluctuation in the amount of Variable Annuity payments in response to
fluctuations in the net investment return of selected Sub-Accounts. The AIR
assumes (among other things) that the assets in the Sub-Accounts supporting the
Contract will have a net annual return over the anticipated Annuity payment
period equal to the rate of return selected. If the actual performance in the
net investment return of the selected Sub-Accounts is equal to the AIR, the
payment will be constant. If the actual performance in the net investment return
of the selected Sub-Accounts is greater than the AIR, the Annuity payment will
increase. If the actual performance is less than the AIR, the Annuity payment
amount will be lower.
BENEFICIARY: The person(s) entitled to receive a Death Benefit upon the death of
the Contract Owner or Annuitant, as applicable.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: The U.S. Securities and Exchange Commission.
COMMUTED VALUE: The present value of remaining guaranteed Annuity payments under
the Payment for a Period Certain Annuity payment option.
CONTINGENT ANNUITANT: The person a Contract Owner may designate, who, if the
Annuitant dies prior to the Annuity Commencement Date, becomes the Annuitant.
CONTRACT: For an Annuity issued to an individual, the Contract is the individual
Annuity and any endorsements or riders. For a group Annuity, the Contract is a
certificate evidencing a participating interest in a group Annuity and any
endorsements or riders. Any reference in this Prospectus to a Contract includes
the certificate.
CONTRACT ANNIVERSARY: The anniversary of the Contract Issue Date.
CONTRACT ISSUE DATE: The date as of which an account is established for the
Contract Owner.
CONTRACT OWNER(S): The owner(s) of the Contract (or a certificate in certain
states), trustee or other entity, sometimes herein referred to as "you" or
"your."
CONTRACT VALUE: The aggregate value of the Sub-Accounts on any Valuation Day.
CONTRACT YEAR: A period of 12 months commencing with the Contract Issue Date or
any anniversary thereof.
DEATH BENEFIT: The amount payable upon the death of a Contract Owner(s) or
Annuitant before Annuity payments have commenced and, under Annuity payment
options Payment for a Period Certain and Life Annuity with a Cash Refund, after
annuity payments have commenced.
DUE PROOF OF DEATH: A certified copy of a death certificate, an order of a court
of competent jurisdiction, a statement from a physician who attended the
deceased or any other proof acceptable to Hartford.
FIXED ANNUITY: An Annuity with payments which remain fixed as to dollar amount
throughout the payment period.
FUNDS: Currently, the Morgan Stanley Dean Witter Select Dimensions Investment
Series, the Morgan Stanley Universal
3 - PROSPECTUS
<PAGE>
Funds, Inc. and the Van Kampen American Capital Life Investment Trust.
GENERAL ACCOUNT: The General Account of Hartford which consists of all assets of
Hartford other than those allocated to the separate accounts of Hartford.
HARTFORD: Hartford Life and Annuity Insurance Company.
INCOME PAYMENT DATE: The date each month, quarter, semi-annual period, or year
as of which Hartford computes the Annuity payments.
JOINT ANNUITANT: Upon annuitization, a person, other than the Annuitant, on
whose continuation of life Annuity payments may be made. The contract will have
a Joint Annuitant only if the Annuity payment option selected provides for a
survivor. The Joint Annuitant may not be changed.
MAXIMUM ANNIVERSARY VALUE: Value used in determining the Death Benefit prior to
the Annuity Commencement Date. It is based on a series of calculations on
Contract Anniversaries of Contract Values, Premium Payments and partial
surrenders, as described on page 17 of this Prospectus.
NET ASSET VALUE: The value per share of any Portfolio on any Valuation Day. The
method of computing the Net Asset Value is described in the prospectus for each
Fund.
NET INVESTMENT FACTOR: The Net Investment Factor for each of the Sub-Accounts,
equal to the Net Asset Value of the corresponding Fund at the end of the
Valuation Period (plus the per share amount of any dividends or capital gains
distributed by that Fund if the ex-dividend date occurs in the Valuation Period
then ended) divided by the Net Asset Value of the corresponding Fund at the
beginning of the Valuation Period.
NON-QUALIFIED CONTRACT: A Contract which is not classified as a tax-qualified
retirement plan funded with pre-tax dollars under the Code.
PAYEE: The person or party designated by the Contract Owner to receive Annuity
payments.
PLAN: A voluntary plan of an employer which qualifies for special tax treatment
under a section of the Code.
PORTFOLIOS: Currently, the portfolios of Morgan Stanley Dean Witter Select
Dimensions Investment Series, the Morgan Stanley Universal Funds, Inc. and Van
Kampen American Capital Life Investment Trust described on page 9 of this
Prospectus.
PREMIUM PAYMENT: A payment made to Hartford pursuant to the terms of the
Contract.
PREMIUM TAX: The amount of tax, if any, charged by a federal, state or other
governmental entity on Premium Payments or Contract Value.
QUALIFIED CONTRACT: A Contract which qualifies as a tax-qualified retirement
plan using pre-tax dollars under the Code, such as an employer-sponsored 401(k)
or an Individual Retirement Annuity (IRA).
SEPARATE ACCOUNT: An account that Hartford established to separate the assets
funding the variable benefits for the class of contracts to which the Contract
belongs from the other assets of Hartford. The Hartford separate account is
entitled "Hartford Life and Annuity Insurance Company -- Separate Account
Three."
SUB-ACCOUNT: A subdivision established within the Separate Account used to
allocate the Contract Owner's Contract Value to the corresponding Fund.
SUB-ACCOUNT VALUE: On or before the Annuity Calculation Date, the amount is
determined on any day by multiplying the number of Accumulation Units
attributable to the Contract in that Sub-Account by the Accumulation Unit value
for that Sub-Account.
SURRENDER VALUE: Prior to the Annuity Commencement Date, the Surrender Value is
the Contract Value, less any applicable Premium Taxes, and/or the Annual
Maintenance Fee. After the Annuity Commencement Date, the Surrender Value under
the Payment for a Period Certain Annuity payment option is equal to the Commuted
Value.
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 (generally 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.
4 - PROSPECTUS
<PAGE>
FEE TABLE
SUMMARY
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CONTRACT OWNER TRANSACTION EXPENSES (ALL SUB-ACCOUNTS)
<TABLE>
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PRIOR TO AFTER
ANNUITIZATION ANNUITIZATION
<S> <C> <C>
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Sales Load Imposed on Purchases (as a percentage of premium payments) None None
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Exchange Fee $0 $0
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DEFERRED SALES LOAD (as a percentage of amounts withdrawn) None None
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Annual Maintenance Fee (1) $30 $30
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ANNUAL EXPENSES -- SEPARATE ACCOUNT (as percentage of average account value)
Mortality and Expense Risk 1.50% 1.25%
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Administration Fees 0.15% 0.15%
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Other Account Fees 0% 0%
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Total 1.65% 1.40%
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</TABLE>
(1) The Annual Maintenance Fee is an annual $30 charge on a Contract having a
Contract Value of less than $100,000, as determined on the most recent
Contract Anniversary or upon full surrender of the Contract. The charge is
deducted proportionally from the investment options in use at the time of
the deductions.
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING EXPENSES
MANAGEMENT EXPENSES (AFTER ANY FEE
FEES (AFTER ANY WAIVERS AND
(AFTER ANY EXPENSE EXPENSE
FEE WAIVERS) REIMBURSEMENT) REIMBURSEMENT)(1)
<S> <C> <C> <C>
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MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES:
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Money Market Portfolio 0.500% 0.050% 0.550%
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North American Government Securities Portfolio 0.650% 0.610% 1.260%
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Diversified Income Portfolio 0.400% 0.150% 0.550%
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Balanced Growth Portfolio 0.620% 0.110% 0.730%
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Utilities Portfolio 0.650% 0.110% 0.760%
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Dividend Growth Portfolio 0.625% 0.025% 0.650%
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Value-Added Market Portfolio 0.500% 0.080% 0.580%
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Growth Portfolio 0.810% 0.160% 0.970%
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American Value Portfolio 0.625% 0.055% 0.680%
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Mid-Cap Growth Portfolio (1) 0.750% 0.370% 1.120%
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Global Equity Portfolio 1.000% 0.130% 1.130%
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Developing Growth Portfolio 0.500% 0.100% 0.600%
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Emerging Markets Portfolio 1.250% 0.460% 1.710%
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MORGAN STANLEY UNIVERSAL FUNDS, INC.:
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High Yield Portfolio (2) 0.000% 0.800% 0.800%
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Mid-Cap Value Portfolio (2) 0.000% 1.050% 1.050%
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Emerging Markets Debt Portfolio (2) 0.090% 1.210% 1.300%
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VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST:
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Strategic Stock Portfolio (3) 0.000% 0.650% 0.650%
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Enterprise Portfolio (3) 0.430% 0.170% 0.600%
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</TABLE>
(1) 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 Portfolio until such time as the Portfolio
has $50 million of net assets or until July 31, 1998, whichever occurs
first.
(2) With respect to the High Yield, Mid-Cap Value and Emerging Markets Debt
Portfolios, the investment advisers have voluntarily agreed to waive their
investment advisory fees and to reimburse the Portfolios if such fees would
cause their respective "Total Fund Operating Expenses" to exceed those set
5 - PROSPECTUS
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forth in the table above. Absent such reductions, it is estimated that
"Management Fees," "Other Expenses" and "Total Fund Operating Expenses" for
the Portfolios would have been as follows:
<TABLE>
<CAPTION>
TOTAL FUND
PORTFOLIO MANAGEMENT FEE OTHER EXPENSES OPERATING EXPENSES
<S> <C> <C> <C>
High Yield 0.50% 1.18% 1.68%
Mid-Cap Value 0.75% 1.38% 2.13%
Emerging Markets Debt 0.80% 1.26% 2.06%
</TABLE>
(3) With respect to the Strategic Stock Portfolio and the Enterprise Portfolio,
the investment adviser, Van Kampen American Capital Asset Management, Inc.,
has voluntarily agreed to waive its investment advisory fees and to
reimburse the Portfolios if such fees would cause their respective "Total
Fund Operating Expenses" to exceed those set forth in the table above.
Absent such reductions, it is estimated that "Management Fees," "Other
Expenses" and "Total Fund Operating Expenses" for the Portfolios would have
been as follows:
<TABLE>
<CAPTION>
TOTAL FUND
PORTFOLIO MANAGEMENT FEE OTHER EXPENSES OPERATING EXPENSES
<S> <C> <C> <C>
Strategic Stock 0.50% 2.09% 2.59%
Enterprise 0.50% 0.17% 0.67%
</TABLE>
The purpose of these tables is to assist the Contract Owner in understanding the
various costs and expenses that a Contract Owner will bear directly or
indirectly. The table reflects expenses of the Separate Account and the current
management fees, other expenses and total expenses for each Fund. Premium Taxes,
ranging from 0% to 4%, may also be applicable. For a more complete description
of the various costs and expenses, see "Contract Fees and Charges," page 16 and
the prospectus for the Funds which accompanies this Prospectus.
EXAMPLE
<TABLE>
<CAPTION>
IF YOU SURRENDER YOUR CONTRACT IF YOU ANNUITIZE YOUR CONTRACT
AT THE END OF THE APPLICABLE AT THE END OF THE APPLICABLE
TIME PERIOD, YOU WOULD PAY THE TIME PERIOD, YOU WOULD PAY THE
FOLLOWING EXPENSES ON A $1,000 FOLLOWING EXPENSES ON A $1,000
INVESTMENT, ASSUMING A 5% INVESTMENT, ASSUMING A 5%
ANNUAL RETURN ON ASSETS: ANNUAL RETURN ON ASSETS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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<CAPTION>
SUB-ACCOUNT 1 YR. 3 YRS. 5 YRS. 10 YRS. 1 YR. 3 YRS. 5 YRS. 10 YRS.
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Portfolio $23 $71 $122 $262 $20 $63 $109 $235
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North American Government Securities
Portfolio 30 93 158 333 27 85 145 308
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Diversified Income Portfolio 23 71 122 262 20 63 109 235
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Balanced Growth Portfolio 25 77 131 280 22 69 118 254
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Utilities Portfolio 25 78 133 283 22 69 119 257
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Dividend Growth Portfolio 24 74 127 272 21 66 114 245
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Value-Added Market Portfolio 23 72 124 265 20 64 110 238
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Growth Portfolio 27 84 144 304 24 76 130 278
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American Value Portfolio 24 75 129 275 21 67 115 248
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Mid-Cap Growth Portfolio 29 89 151 319 26 81 138 294
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Global Equity Portfolio 29 89 152 320 26 81 138 295
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Developing Growth Portfolio 24 73 125 267 21 65 111 240
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Emerging Markets Portfolio 35 107 181 375 32 99 168 351
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High Yield Portfolio 26 79 135 287 23 71 122 261
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Mid-Cap Value Portfolio 28 87 148 312 25 78 134 287
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Emerging Markets Debt Portfolio 31 94 160 337 28 86 147 311
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Strategic Stock Portfolio 24 74 127 272 21 66 114 245
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Enterprise Portfolio 24 73 125 267 21 65 111 240
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</TABLE>
Pursuant to requirements of the Investment Company Act of 1940, as amended
("1940 Act"), the Annual Maintenance Fee has been reflected in the EXAMPLE by a
method intended to show the average impact of the fee on an investment in the
Separate Account. The Annual Maintenance Fee is deducted only when the Contract
Value is less than $100,000. In the EXAMPLE, the Annual Maintenance Fee is
approximated as a % annual asset charge based on the experience of the
Contracts.
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
6 - PROSPECTUS
<PAGE>
SUMMARY
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WHAT IS THE CONTRACT?
The Contract is an individual and group tax-deferred variable annuity contract
designed for retirement planning purposes. This Prospectus is designed to
provide prospective Contract Owners with information necessary to decide whether
or not to purchase a Contract. This summary provides a concise description of
the more significant aspects of the Contract. Further detail is provided in this
Prospectus, the related Statement of Additional Information, the Contract, and
the prospectus for the Funds. For further information, contact Hartford at the
Administrative Office of the Company or your registered representative.
WHO MAY PURCHASE A CONTRACT?
The Contracts are available for purchase by individuals and groups on both a
non-qualified and qualified basis. The maximum issue age for the Contract is 85
years old. (See "Description of the Contracts," page 13.) A prospective Contract
Owner may purchase a Contract by completing and submitting an application or an
order request along with the initial Premium Payment to Hartford for its
approval. Generally, the minimum initial Premium Payment is $20,000. Thereafter,
the minimum Premium Payment is $500. Certain plans may be allowed to make
smaller periodic payments. There is no deduction for sales expenses from Premium
Payments when made. A deduction will be made for state Premium Taxes for
Contracts sold in certain states. (See "Contract Fees and Charges," page 16.)
Subject to certain minimum allocation requirements that may be in effect from
time to time, the initial Premium Payment, less any applicable Premium Taxes, is
allocated to each Sub-Account as specified on the application or order request.
All percentage allocations must be in whole numbers (e.g., 1%).
IS THERE A RIGHT TO EXAMINE THE CONTRACT?
Contract Owners may cancel the Contract during the cancellation period and
receive a refund equal to the Contract Value plus any applicable Premium Taxes.
The cancellation period is a ten-day period of time beginning when the Contract
is received by a Contract Owner. Some states require a longer cancellation
period or return of the Premium Payment. (See "Right to Examine the Contract,"
page 13.)
WHAT ARE THE INVESTMENT
OPTIONS AVAILABLE UNDER THE
CONTRACT?
The underlying investments for the Contract are shares of the Portfolios of the
Morgan Stanley Dean Witter Select Dimensions Investment Series, the Morgan
Stanley Universal Funds, Inc. and Van Kampen American Capital Life Investment
Trust, open-end management investment companies 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 of the Morgan Stanley Dean Witter Select Dimensions Investment
Series, the High Yield Portfolio, the Mid-Cap Value Portfolio and the Emerging
Markets Debt Portfolio of the Morgan Stanley Universal Funds, Inc. and the
Strategic Stock Portfolio and the Enterprise Portfolio of the Van Kampen
American Capital Life Investment Trust and such other Portfolios as shall be
offered from time to time. (See "The Portfolios," page 9.) With certain
limitations, Contract Owners may allocate their Premium Payments and Contract
Values to one or a combination of Sub-Accounts which invest in these investment
options, and may transfer among the corresponding Sub-Accounts. (See
"Sub-Account Value Transfers Before and After the Annuity Commencement Date,"
page 14.)
CAN I GET MY MONEY IF I NEED IT?
The Contracts may be surrendered, or portions of the value of the Contracts may
be surrendered, at any time prior to the Annuity Commencement Date without
charge. (See "Surrenders," page 15). The Contract may also be surrendered after
the Annuity Commencement Date under the Payment for a Period Certain Annuity
payment option. Surrenders may have adverse federal income tax consequences
including the possibility of being subject to a penalty tax. (See "Federal Tax
Considerations," page 22.)
DOES THE CONTRACT PAY ANY DEATH BENEFITS?
The Contract provides for a minimum Death Benefit in the event of the death of
the Annuitant or Contract Owner before the Annuity Commencement Date and, under
some Annuity payment options, after the Annuity Commencement Date. (See Death
Before the Annuity Commencement Date" and "Death On or After the Annuity
Commencement Date," pages 17 and 18.)
WHAT ARE THE CONTRACT FEES AND CHARGES?
The following fees and charges are assessed under the Contracts:
ANNUAL MAINTENANCE FEE. An Annual Maintenance Fee in the amount of $30 is
deducted from Contract Values each Contract Year (not applicable to Contracts
with Contract Values of $100,000 or more, as determined on the most recent
Contract Anniversary). (See "Contract Fees and Charges," page 16.)
7 - PROSPECTUS
<PAGE>
ADMINISTRATION CHARGE. The Contract provides an administration of .15% per annum
against all Contract Values held in the Separate Account. (See "Administration
Charge," page 16.)
MORTALITY AND EXPENSE RISK CHARGE. Prior to annuitization, Hartford applies a
1.50% per annum mortality and expense risk charge against all Contract Values
held in the Separate Account. After annuitization, the mortality and expense
risk charge will decrease to 1.25% per annum of the Contract Values held in the
Separate Account. (See "Contract Fees and Charges," page 16.)
PREMIUM TAX CHARGE. On any Contract subject to a Premium Tax, Hartford may
deduct the tax on a pro-rata basis from the Sub-Accounts at the time Hartford
pays the tax to the applicable government authorities, at the time the Contract
is surrendered, at the time Death Benefits are paid or on the Annuity
Commencement Date. (See "Contract Fees and Charges," page 16.)
EXPENSES OF THE PORTFOLIOS. The investment experience of each Sub-Account
reflects the investment experience of the Portfolio whose shares it holds. The
investment experience of each Portfolio, in turn, reflects its fees and other
operating expenses. (See "Annual Fund Operating Expenses," page 5 of this
Prospectus and the prospectus for the Funds attached hereto.)
WHAT ARE THE ANNUITY PAYMENT OPTIONS?
The following Annuity payment options are available under the Contract on either
a fixed or variable basis: Life Annuity; Life Annuity with a Cash Refund; Life
Annuity with Payments For a Period Certain; Joint and Last Survivor Life
Annuity; Joint and Last Survivor Life Annuity with Payments for a Period
Certain; and Payment for a Period Certain. In the absence of an Annuity payment
option election, and depending on state law, the Contract Value (less applicable
Premium Taxes) will be applied on the Annuity Commencement Date to provide a
Fixed Annuity with payments guaranteed for 10 years. (See "Settlement
Provisions," page 18.)
In addition, the Annuity Proceeds Settlement Option is offered to a Beneficiary
who opt to leave the Death Benefit invested in the Sub-Accounts.
HARTFORD, THE SEPARATE ACCOUNT AND THE PORTFOLIOS
--------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company 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. Hartford's name changed from ITT Hartford Life and Annuity
Insurance Company to Hartford Life and Annuity Insurance Company on January 1,
1998. 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 DATE OF
AGENCY RATING RATING BASIS OF RATING
- ------------------- --------- ----------- --------------------------
<S> <C> <C> <C>
A.M. Best and A+ Financial soundness and
Company, Inc....... 9/9/97 operating performance
Standard & Poor's.. 1/23/98 AA Insurer financial strength
Duff & Phelps...... 1/23/98 AA+ Claims paying ability
</TABLE>
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 1940 Act. 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
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. Premium Payments, less any applicable
Premium Taxes, 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
8 - PROSPECTUS
<PAGE>
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 Funds Prospectuses.
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 already purchased or to be purchased in the future by the Separate
Account provided that the substitution has been approved by the Commission.
Current law requires notification to you of any such substitution. Hartford
reserves the right to add new Portfolios or close Portfolios.
The Separate Account may be subject to liabilities arising from the Separate
Account assets which are attributable to other variable annuity contracts
offered by the Separate Account which are not described in this Prospectus.
THE PORTFOLIOS
The underlying investment for the Contracts are shares of the Morgan Stanley
Dean Witter Select Dimensions Investment Series, the Morgan Stanley Universal
Funds, Inc. and Van Kampen American Capital Life Investment Trust, all open-end
management investment companies. The underlying Portfolios 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.
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES:
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 Funds prospectuses.
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 20% 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.
9 - PROSPECTUS
<PAGE>
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.
MORGAN STANLEY UNIVERSAL FUNDS, INC.:
HIGH YIELD PORTFOLIO
Seeks above-average total return over a market cycle of three to five years by
investing primarily in a diversified portfolio of high yield securities,
including corporate bonds and other fixed income securities and derivatives.
High yield securities are rated below investment grade and are commonly referred
to as "junk bonds". The Portfolio's average weighted maturity will ordinarily
exceed five years and will usually be between five and fifteen years. See the
special considerations for investments in high yield securities disclosed in the
Fund prospectus.
MID-CAP VALUE PORTFOLIO
Seeks above-average total return over a market cycle of three to five years by
investing in common stocks and other equity securities of issuers with equity
capitalizations in the range of the companies represented in the S&P MidCap 400
Index.
EMERGING MARKETS DEBT PORTFOLIO
Seeks high total return by investing primarily in fixed income securities of
government and government related issues located in emerging market countries
which securities provide a high level of current income while at the same time
holding the potential for capital appreciation if the perceived creditworthiness
of the issuer improves due to the improving economic, financial, political,
social or other conditions in the country in which the issuer is located.
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST:
STRATEGIC STOCK PORTFOLIO
Seeks to provide investors with an above average total return through a
combination of potential capital appreciation and dividend income, consistent
with the preservation of invested capital by investing primarily in a portfolio
of dividend paying equity securities included in the Dow Jones Industrial
Average or in the Morgan Stanley Capital International USA Index.
ENTERPRISE PORTFOLIO
Seeks capital appreciation through investments in securities believed by the
investment adviser to have above average potential for capital appreciation.
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 Funds prospectuses which should be read in conjunction with
this Prospectus before investing, and in the Funds' Statement of Additional
Information which may be ordered without charge from the Funds.
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 Funds do not
currently foresee any such disadvantages either to variable annuity contract
owners or to variable life insurance policyowners, the Funds' Boards 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 a Fund were to conclude
that separate Portfolios should be established for variable life and
10 - PROSPECTUS
<PAGE>
variable annuity separate accounts, the variable annuity Contract holders would
not bear any expenses attendant upon establishment of such separate funds.
THE INVESTMENT ADVISERS
Morgan Stanley Dean Witter Advisors Inc., a Delaware Corporation, whose address
is Two World Trade Center, New York, New York 10048, is the Investment Manager
for 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 of the Morgan Stanley Dean Witter Select
Dimensions Investment Series (the "Dean Witter Portfolios"). Morgan Stanley Dean
Witter Advisors Inc. was incorporated in July, 1992 and is a wholly-owned
subsidiary of Morgan Stanley Dean Witter & Co. ("MSDW").
Morgan Stanley Dean Witter Advisors Inc. provides administrative services,
manages the Dean Witter Portfolios' business affairs and manages the investment
of the Dean Witter Portfolios' assets, including the placing of orders for the
purchase and sales of portfolio securities. Morgan Stanley Dean Witter Advisors
Inc. has retained Morgan Stanley Dean Witter Services Company Inc., its
wholly-owned subsidiary, to perform the aforementioned administrative services
for the Dean Witter Portfolios. For its services, the Dean Witter Portfolios pay
Morgan Stanley Dean Witter Advisors Inc. a monthly fee. See the accompanying
Fund prospectus for a more complete description of Morgan Stanley Dean Witter
Advisors Inc. and the respective fees of the Dean Witter Portfolios.
With regard to the North American Government Securities Portfolio and the
Emerging Markets Portfolio, TCW Funds Management ("TCW"), under a sub-advisory
agreement with Morgan Stanley Dean Witter Advisors Inc., provides these
Portfolios with investment advice and portfolio management, in each case subject
to the overall supervision of the Morgan Stanley Dean Witter Advisors Inc. TCW's
address is 865 South Figueroa Street, Suite 1800, Los Angeles, California 90017.
With regard to the Growth Portfolio, Morgan Stanley Asset Management Inc.
("MSAM"), under a sub-advisory agreement with Morgan Stanley Dean Witter
Advisors Inc., provides the Growth Portfolio with investment advice and
portfolio management, subject to the overall supervision of Morgan Stanley Dean
Witter Advisors Inc. MSAM, like Morgan Stanley Dean Witter Advisors Inc., is a
wholly-owned subsidiary of MSDW. MSAM's address is 1221 Avenue of the Americas,
New York, New York 10020.
In addition to acting as the sub-advisor for the Growth Portfolio, MSAM,
pursuant to an Investment Advisory Agreement with the Morgan Stanley Universal
Funds, Inc., is the investment advisor for the Emerging Markets Debt Portfolio.
As the investment advisor, MSAM, provides investment advice and portfolio
management services for the Emerging Markets Debt Portfolio, subject to the
supervision of the Morgan Stanley Universal Fund's Board of Directors.
The investment advisor for the High Yield Portfolio and the Mid-Cap Value
Portfolio is Miller, Anderson & Sherrerd, LLP ("MAS"). MAS is a Pennsylvania
limited liability partnership founded in 1969 with its principal offices at One
Tower Bridge, West Conshohocken, Pennsylvania 19428. MAS provides investment
advisory services to employee benefit plans, endowment funds, foundations and
other institutional investors and has served as an investment advisor to several
open-end investment companies. MAS is a indirect wholly owned subsidiary of
MSDW.
The investment advisor with respect to the Strategic Stock Portfolio and the
Enterprise Portfolio is Van Kampen American Capital Asset Management, Inc., a
wholly-owned subsidiary of Van Kampen American Capital, Inc. Van Kampen American
Capital, Inc. is an indirect wholly-owned subsidiary of MSDW. Van Kampen
American Capital, Inc. is a diversified asset management company with more than
two million retail investor accounts, extensive capabilities for managing
institutional portfolios, and more than $60 billion under management or
supervision. Van Kampen American Capital Inc.'s more than 50 open-end and 38
closed end funds and more than 2,500 unit investment trusts are professionally
distributed by leading financial advisers nationwide.
VOTING RIGHTS. Hartford is the legal owner of all shares of the Funds 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 all Fund 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 Fund shareholders' meeting if the shares held
for your account may be voted at such meetings. Hartford will send proxy
materials and a form of instruction by means of which you can instruct Hartford
with respect to the voting of the Fund shares held for your account.
In connection with the voting of Fund shares held by it, Hartford will arrange
for the handling and tallying of proxies received from Contract Owners. Hartford
as such, shall have no right, except as described below, to vote any Fund shares
held by it under the Contract which may be registered in its name or the names
of its nominees. Hartford will, however, vote the Fund
11 - PROSPECTUS
<PAGE>
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 Fund
shares held for such Contract Owner's account. Hartford will vote shares for
which no instructions have been given and shares which are not attributable to
Contract Owners (i.e. shares owned by Hartford) in the same proportion as it
votes shares of that Fund for which it has received instructions. During the
Annuity period under a Contract, the number of votes will decrease as the assets
held to fund Annuity benefits decrease.
The Funds are available only to serve as the underlying investment vehicles for
variable annuity and variable life insurance contracts, including the Contracts
described in this Prospectus, issued by Hartford. 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 Funds simultaneously.
Although Hartford and the Funds do not currently foresee any such disadvantages
either to variable annuity contract owners or to variable life insurance policy
owners, the Funds' Board of Directors intends to monitor events in order to
identify any material conflicts between such contract owners and policy owners
and to determine what action, if any, should be taken in response thereto. If
the Board of Directors of the Funds were to conclude that separate funds should
be established for variable life and variable annuity separate accounts, the
variable annuity contract owners would not bear any expense related to the
establishment of such separate funds.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF INVESTMENTS. Hartford retains the
right, subject to any applicable law, to make certain changes to the investment
options offered under the Contract. Hartford reserves the right to eliminate the
shares of any of the Funds and to substitute shares of another registered
investment company for the shares of any Fund already purchased or to be
purchased in the future by the Separate Account, if the shares of the Funds are
no longer available for investment, or, if in Hartford's judgment, investment in
any Fund would be inappropriate in view of the purposes of the Separate Account.
To the extent required by the 1940 Act, substitutions of shares attributable to
a Contract Owner's interest in a Fund will not be made until Commission approval
has been obtained and the Contract Owner has been notified of the change.
New Funds may be established at the discretion of Hartford. Any new Fund will be
made available to existing Contract Owners on a basis to be determined by
Hartford. Hartford may also close one or more Funds to additional Premium
Payments or transfers from existing Sub-Accounts.
In the event of any substitution or change, Hartford may, by appropriate
endorsement, make such changes in the Contract as may be necessary or
appropriate to reflect such substitution or change. Furthermore, if deemed to be
in the best interest of persons having voting rights in the Contracts, the
Separate Account may be operated as a management company under the 1940 Act or
any other form permitted by law, may be de-registered under the 1940 Act in the
event such registration is no longer required, or may be combined with one or
more other separate accounts.
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.
All of the Sub-Accounts may include total return in advertisements or other
sales material.
When a Sub-Account advertises its standardized total return, it will be
calculated to a date not earlier than the effective date of the Separate
Account. This figure will be calculated for one year, five years, and ten years
or some other relevant period if the Separate Account has not been in existence
for one, five or 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.
In addition to the standardized total return, the Sub-Account may advertise
non-standardized total returns. This figure will usually be calculated for one
year, five years, and ten years or some other relevant period, if the Separate
Account has not been in existence for one, five or ten years. This
non-standardized total return is measured in the same manner as the standardized
total return described above, except that the Annual Maintenance Fee is not
deducted. Therefore, this non-standardized total return for a Sub-Account is
higher than standardized total return for a Sub-Account.
The Separate Account may also advertise non-standard total returns which
pre-date the inception date of the Separate Account. These non-standardized
total returns are calculated by assuming that the Sub-Accounts have been in
existence for the same periods as the underlying Funds by taking deductions for
charges equal to those currently assessed against the Sub-Accounts. These
non-standardized returns must be accompanied by standardized total returns.
The North American Government Securities Portfolio, Balanced Growth Portfolio,
High Yield 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
12 - PROSPECTUS
<PAGE>
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
Maintenance 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 reflects the recurring charges at the Separate Account level including the
Annual Maintenance Fee.
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.
DESCRIPTION OF THE CONTRACTS
--------------------------------------------------------------------
CONTRACTS OFFERED
The Contracts are individual or group tax-deferred Variable Annuity Contracts
designed for retirement planning purposes and may be purchased by any
individual, group or trust, including any 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 Code; Individual Retirement
Annuities adopted according to Section 408 of the 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 Code ("Qualified Contracts").
PURCHASING A CONTRACT
A prospective Contract Owner may purchase a Contract by completing and
submitting an application or an order request along with an initial Premium
Payment to the Administrative Office of the Company. The maximum age for
Annuitants on the Contract Issue Date is 85. Generally, the minimum Premium
Payment is $20,000. Thereafter, the minimum Premium Payment is $500. Certain
plans may be allowed to make smaller periodic payments. Unless Hartford gives
its prior approval, it will not accept a Premium Payment in excess of
$1,000,000. Each Premium Payment may be split among the various Sub-Accounts
subject to minimum amounts then in effect. Hartford will send Contract Owners a
confirmation notice upon receipt and acceptance of the Contract Owner's Premium
Payment.
RIGHT TO EXAMINE THE CONTRACT
If you are not satisfied with your purchase, you may cancel the Contract by
returning it within 10 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 plus any applicable Premium Tax on
the date of receipt of the request for cancellation. You bear the investment
risk during the period prior to Hartford'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.
CREDITING AND ALLOCATING THE PREMIUM PAYMENT
The initial Premium Payment, less any applicable Premium Tax, will be credited
to your Contract within 2 business days of receipt of the initial Premium
Payment and a properly completed application or an order to purchase a Contract
by Hartford at the Administrative Office of the Company. It will be credited to
the Sub-Account(s) in accordance with your election. If the application, order
request, or other required information is incomplete when received, Hartford
reserves the right to retain the Premium Payment for up to five business days
while it attempts to complete the information. If the information cannot be made
complete within 5 business days, the applicant will be informed of the reasons
for the delay and the Premium Payment will be returned unless the applicant
specifically consents to Hartford retaining the Premium Payment until the
information is made complete. The Premium Payment will then be allocated within
two business days after receipt of the complete information.
Subsequent Premium Payments received by Hartford in the Administrative Office of
the Company, or other designated administrative offices are priced on the
Valuation Day prior to the close of the New York Stock Exchange (generally 4:00
p.m. E.T.). Unless otherwise specified, Hartford will allocate any subsequent
Premium Payment to Sub-Accounts in accordance with the most recent premium
allocation instructions received by Hartford.
13 - PROSPECTUS
<PAGE>
CONTRACT VALUE -- BEFORE THE ANNUITY COMMENCEMENT DATE
SUB-ACCOUNT VALUE. The Contract Value is the sum of all Sub-Account Values and
therefore reflects the investment performance of the Sub-Accounts to which it is
allocated. The Sub-Account Value for any Sub-Account as of the Contract Issue
Date is equal to the amount of the Premium Payment allocated to that
Sub-Account. The Sub-Account Value for a Contract is determined on any given day
by the multiplying the number of Accumulation Units attributable to the Contract
in that Sub-Account by the Accumulation Unit value for that Sub-Account.
Therefore, on any Valuation Day the Contract Owner's Sub-Account Value reflects
any variation of the interest income, dividends, net capital gains or losses,
realized or unrealized, and any amounts transferred into or out of that
Sub-Account.
ACCUMULATION UNITS. The portions of the Premium Payments allocated to a
Sub-Account or amounts of Contract Value transferred to a Sub-Account are
converted into Accumulation Units. For any Contract, the number of Accumulation
Units credited to a Sub-Account is determined by dividing the dollar amount
directed to the Sub-Account by the value of the Accumulation Unit for that
Sub-Account for the Valuation Day as of which the portion of the Premium Payment
or transferred Contract Value is invested in the Sub-Account. Transferred
Contract Value is invested in a Sub-Account as of the end of the Valuation
Period during which the transfer request was received. Therefore, a Premium
Payment or portion of a Premium Payment allocated to or amounts transferred to a
Sub-Account under a Contract increase the number of Accumulation Units of that
Sub-Account credited to the Contract.
Surrenders, transfers out of a Sub-Account, the death of any Contract Owner or
the Annuitant before the Annuity Commencement Date, and the application of
Contract Value less Premium Tax to an Annuity payment option on the Annuity
Calculation Date all result in a decrease in the number of Accumulation Units of
one or more Sub-Accounts. Accumulation Units are valued as of the end of the
Valuation Period.
The Accumulation Unit value for each Sub-Account was arbitrarily set initially
at $1 when the Sub-Account began operations. Thereafter, the Accumulation Unit
value for each Sub-Account will equal (a) the Accumulation Unit value at the end
of the preceding Valuation Day multiplied by (b) the Net Investment Factor for
the Valuation Day for which the Accumulation Unit value is being calculated.
(See "Net Investment Factor," below.)
The Sub-Account Value as of each Valuation Day is then determined by
multiplying: (a) the number of Accumulation Units in the Sub-Account by (b) the
Accumulation Unit value for that Sub-Account as of that Valuation Day.
You will be advised, at least semiannually, of the number of Accumulation Units
credited to each Sub-Account, the current Accumulation Unit values, and the
total value of your Contract.
THE NET INVESTMENT FACTOR (BEFORE AND AFTER THE ANNUITY COMMENCEMENT DATE) The
Net Investment Factor is an index applied to measure the investment performance
of a Sub-Account from one Valuation Period to the next. For each Sub-Account,
the Net Investment Factor reflects the investment performance of the Fund in
which that Sub-Account invests and the charges assessed against that Sub-Account
for a Valuation Period. The Net Investment Factor is calculated by dividing (a)
by (b) and subtracting (c) from the result, where:
(a) is the Net Asset Value of the Fund held in that Sub-Account, determined at
the end of the current Valuation Period (plus the per share amount of any
dividends or capital gains distributions made by that Fund);
(b) is the Net Asset Value of the Fund held in the Sub-Account, determined at
the beginning of the Valuation Period;
(c) is a daily factor representing the mortality and expense risk charge and any
applicable administration charge deducted from the Sub-Account, adjusted for
the number of days in the Valuation Period.
SUB-ACCOUNT VALUE TRANSFERS BEFORE AND AFTER THE ANNUITY COMMENCEMENT DATE
You may transfer the your Sub-Account Values from one or more Sub-Accounts to
another Sub-Account free of charge. However, Hartford reserves the right to
limit the number of transfers to 12 per Contract Year, with no 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 Hartford at (800) 862-6668 or by the agent of record by calling (800)
862-7155. Telephone transfers may not be permitted by some states.
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. 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 among
Sub-Accounts and between Sub-Accounts under certain circumstances. Transfers
between the Sub-Accounts may be made both before and after the Annuity
Commencement Date. Generally, the minimum allocation to any Sub-Account may not
be less than $500. All percentage (%) allocations must be in whole numbers
(e.g., 1%). No minimum balance is presently required in any Sub-Account.
It is the responsibility of the Contract Owner to verify the accuracy of all
confirmations of transfers and to promptly advise
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Hartford of any inaccuracies within 30 days of receipt of the confirmation.
Subject to the exceptions set forth in the following paragraph, the right to
reallocate Contract Values is subject to modification if Hartford determines, in
its sole opinion, 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 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.
Currently, and with respect to Contracts issued in all states, the only
restriction in effect is that Hartford will not accept instructions from agents
acting under a power of attorney of multiple Contract Owners whose accounts
aggregate more than $2 million, unless the agent has entered into a third party
transfer services agreement with Hartford.
SURRENDERS
FULL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE. At any time prior to the
Annuity Commencement Date, the Contract Owner has the right to fully surrender
the Contract. In such event, the Surrender Value of the Contract may be taken in
the form of a lump sum cash settlement. With the exception of Annuity payment
options 6, no surrenders are permitted after the Annuity Commencement Date.
The Surrender Value of the Contract is equal to the Contract Value less any
Premium Taxes, and the Annual Maintenance Fee, if applicable. The Surrender
Value may be more or less than the amount of the Premium Payments made to a
Contract.
PARTIAL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE. 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
Hartford's minimum amount rules then in effect. Additionally, if the remaining
Contract Value following a surrender is less than $500, Hartford may terminate
the Contract and pay the Surrender Value. For Contracts issued in Texas, the
Contract will not be terminated when the remaining Contract Value after a
surrender is less than $500 unless there were no Premium Payments made during
the previous 2 Contract Years.
When requesting a partial surrender, you should specify the Sub-Account(s) from
which the partial surrender will be taken. Otherwise, the surrender will be
effected on a pro rata basis according to the value in each Sub-Account.
Hartford may permit the Contract Owner to preauthorize partial surrenders
subject to certain limitations then in effect.
SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE. A Contract Owner may fully
surrender the Contract on or after the Annuity Commencement Date if the Payment
For a Period Certain Annuity payment option is in effect. Under the Payments For
a Period Certain option, Hartford pays the Contract Owner the Commuted Value
upon surrender. This surrender charge is computed as of the date Hartford
receives the written request for surrender at the Administrative Office of the
Company. No partial surrenders are permitted after the Annuity Commencement
Date.
A Contract Owner may request in writing a partial and full surrender of the
Contract. Partial surrenders may be requested by telephone provided certain
requirements are met. (See "Telephone Surrender Privileges," below.)
CONTRACT OWNERS SHOULD CONSULT THEIR TAX ADVISER REGARDING THE TAX CONSEQUENCES
OF A SURRENDER. A surrender made before age 59 1/2 may result in adverse tax
consequences, including the imposition of a penalty tax of 10% of the taxable
portion of the Surrender Value. (See "Federal Tax Considerations," page 22.)
TELEPHONE SURRENDER PRIVILEGES. Hartford permits partial surrenders by telephone
subject to dollar amount limitations in effect at the time a Contract Owner
requests the surrender. To request partial surrenders by telephone, a Contract
Owner must have completed and returned to Hartford a Telephone Redemption
Program Enrollment Form authorizing telephone surrenders. If there are joint
Contract Owners, both must authorize Hartford to accept telephone instructions
and agree that Hartford may accept telephone instructions for partial surrenders
from either Contract Owner. Partial surrender requests will not be honored until
Hartford receives all required documents in proper form.
Telephone authorization will remain valid until (a) Hartford receives written
notice of revocation by a Contract Owner, or, in the case of joint Contract
Owners, written notice from either Contract Owner; (b) Hartford discontinues the
privilege; or (c) Hartford has reason to believe that a Contract Owner has
entered into a market timing agreement with an investment adviser and/or
broker/dealer.
Hartford may record any telephone calls to verify data concerning transactions
and may adopt other procedures to confirm that telephone instructions are
genuine. Hartford will not be liable for losses or expenses arising out of
telephone instructions reasonably believed to be genuine.
In order to obtain that day's unit values on surrender, Hartford must receive
telephone surrender instructions prior to the close of trading on the New York
Stock Exchange (generally 4:00 p.m. Eastern Time).
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Hartford may modify, suspend, or terminate telephone transaction privileges at
any time.
PAYMENT OF SURRENDER AMOUNTS. Payment of any request for a full or partial
surrender from the Sub-Accounts will be made as soon as possible and in any
event no later than seven days after the request is received by Hartford at the
Administrative Office of the Company.
There may be postponement in the payment of Surrender Amounts whenever (a) the
New York Stock Exchange is closed; (b) trading on the New York Stock Exchange is
restricted as determined by the Commission; (c) the Commission permits
postponement and so orders; or (d) the Commission determines that an emergency
exists making valuation of the amounts or disposal of securities not reasonably
practicable.
CERTAIN QUALIFIED CONTRACT SURRENDERS -- 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) SEPARATED FROM SERVICE, C) DIED, D) BECOME DISABLED
OR E) EXPERIENCED FINANCIAL HARDSHIP (CASH VALUE INCREASES MAY NOT BE
DISTRIBUTED FOR HARDSHIPS PRIOR TO AGE 59 1/2).
DISTRIBUTIONS PRIOR TO AGE 59 1/2 DUE TO FINANCIAL HARDSHIP OR SEPARATION FROM
SERVICE MAY STILL BE SUBJECT TO A PENALTY TAX OF 10%.
HARTFORD WILL NOT ASSUME ANY RESPONSIBILITY FOR 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 CONTRACT
VALUES.
ANY FULL OR PARTIAL SURRENDER DESCRIBED ABOVE MAY AFFECT THE CONTINUING
TAX-QUALIFIED STATUS OF SOME CONTRACTS OR PLANS AND MAY RESULT IN ADVERSE TAX
CONSEQUENCES TO THE CONTRACT OWNER. THE CONTRACT OWNER, THEREFORE, SHOULD
CONSULT WITH HIS OR HER TAX ADVISER BEFORE UNDERTAKING ANY SUCH SURRENDER. (SEE
"FEDERAL TAX CONSIDERATIONS," PAGE 22.)
CONTRACT FEES AND CHARGES
ANNUAL MAINTENANCE FEE. Each year, on each Contract Anniversary on or before the
Annuity Commencement Date, Hartford will deduct an Annual Maintenance Fee, if
applicable, from Contract Values to reimburse it for expenses relating to the
maintenance of the Contract and the Sub-Account(s) thereunder. The Annual
Maintenance Fee is $30 per Contract Year for Contracts with less than $100,000
Contract Value on the Contract Anniversary. If, during a Contract Year, the
Contract is surrendered for its full value, Hartford will deduct the Annual
Maintenance Fee, if applicable, at the time of such surrender. The fee is a flat
fee which will be due in the full amount regardless of the time of the Contract
Year that Contract Values are surrendered. The deduction will be made pro rata
according to the value in each Sub-Account under a Contract.
The types of expenses covered by the Annual Maintenance Fee 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.
Annual Maintenance Fees are waived for Contracts with Contract Value equal to or
greater than $100,000. Hartford reserves the right to waive the Annual
Maintenance Fee under certain conditions.
ADMINISTRATION CHARGE. 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.
MORTALITY AND EXPENSE RISK CHARGE. Although Variable Annuity payments made under
the Contracts will vary in accordance with the investment performance of the
underlying Fund shares held in the Sub-Account(s), the payments will not be
affected by (a) Hartford's actual mortality experience 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.
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Prior to the Annuity Commencement Date, Hartford will, for assuming these risks
under the Contracts, make a daily charge at the rate of 1.50% per annum against
all Contract Values (estimated at 0.95% for mortality and 0.55% for expense).
After the Annuity Commencement Date, Hartford will make a daily charge of 1.25%
per annum (estimated at .90% for mortality and .35% for expense) against all
Sub-Account Values.
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 1983a Individual Annuity Mortality
Table projected to the year 2000 using Projection Scale G 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 funds 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 Annuity Commencement Date, whichever is earlier,
Hartford can, in periods of declining value, experience a loss resulting from
the assumption of the mortality risk relative to the guaranteed Death Benefit.
In providing an expense undertaking, Hartford assumes the risk that the Annual
Maintenance Fee and Administrative Charge for maintaining the Contracts prior to
the Annuity Commencement Date may be insufficient to cover the actual cost of
providing such items.
PREMIUM TAXES. A deduction is also made for Premium Tax, if applicable, imposed
by a federal, state or other governmental entity. Certain states impose a
Premium Tax, currently ranging up to 4%. Some states assess the tax at the time
Premium 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 government authorities, at the time the Contract is
surrendered, at the time the Death Benefit is paid, or on the Annuity
Commencement Date.
EXCEPTIONS. Hartford may offer, in its discretion, reduced fees and charges
including, but not limited to, the mortality and expense risk charge and the
Annual Maintenance Fee for certain sales (including employer sponsored savings
plans) 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.
DEATH BEFORE THE ANNUITY COMMENCEMENT DATE
If the Contract Owner or the Annuitant dies before the Annuity Commencement
Date, Hartford will pay a Death Benefit.
If the deceased had not attained age 81, the Death Benefit is the greatest of:
(a) the Contract Value, or
(b) 100% of the total Premium Payments made to such Contract, reduced by any
prior surrenders, or
(c) the Maximum Anniversary Value immediately preceding the date of death.
The Maximum Anniversary Value is equal to the greatest Contract Anniversary
value attained from the following: Hartford will calculate a Contract
Anniversary value for each Contract Anniversary prior to the deceased's attained
age 81. The Contract 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.
If the deceased had attained age 81, then the Death Benefit is the greatest of:
(a) the Contract Value, or
(b) 100% of the total Premium Payments made to such Contract, reduced by any
prior surrenders, or
(c) the Maximum Anniversary Value at the deceased's attained age 80, reduced by
any prior surrenders and increased by premiums paid.
If the Contract Owner or Annuitant dies before the Annuity Commencement Date and
a Death Benefit is payable to the Beneficiary, the Death Benefit will be
calculated as of the date Hartford receives written notification of Due Proof of
Death. Any Annuity payments made or after the date of death, but before receipt
of written notification of Due Proof of Death will be recovered by Hartford from
the Payee.
The calculated Death Benefit will remain invested in accordance with the last
allocation instructions given by the Contract Owner until new complete
settlement instructions are received from the beneficiary(s). During the time
period between Hartford's receipt of written notification of Due Proof of Death
and Hartford's receipt of complete settlement instructions, the calculated Death
Benefit will be subject to market fluctuations.
IF THE CONTRACT OWNER DIES before the Annuity Commencement Date, any surviving
joint Contract Owner becomes the Beneficiary. If there is no surviving joint
Contract Owner, the designated Beneficiary will be the Beneficiary. If the
Contract Owner's spouse is the sole Beneficiary and the Annuitant is living, the
spouse may elect, in lieu of receiving the Contract Value, to be treated as the
Contract Owner. If no Beneficiary
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designation is in effect or if the Beneficiary has predeceased the Contract
Owner, the Contract Owner's estate will be the Beneficiary.
IF THE ANNUITANT DIES before the Annuity Commencement Date, the Contingent
Annuitant will become the Annuitant. If either (a) there is no Contingent
Annuitant, (b) the Contingent Annuitant predeceases the Annuitant, or (c) if any
sole Contract Owner dies before the Annuity Commencement Date, the Beneficiary,
as determined under the Contract control provisions, will receive the Death
Benefit. However, if the Annuitant dies prior to the Annuity Commencement Date
and the Contract Owner is living, the Contract Owner shall be the Beneficiary.
In that case, the rights of any designated Beneficiary shall be void.
DEATH ON OR AFTER THE ANNUITY COMMENCEMENT DATE
If the Annuitant dies on or after the Annuity Commencement Date, Hartford will
pay the Death Benefit under the following Annuity payment options: Life Annuity
with Cash Refund and Life Annuity with Payment for a Period Certain.
PAYMENT FOR A PERIOD CERTAIN. The Death Benefit on or after the Annuity
Commencement Date, under the Payment for a Period Certain Annuity payment option
is as follows:
IF THE ANNUITANT DIES on or after the Annuity Commencement Date, the Beneficiary
will have the option of having payments continue to the Beneficiary for the
remainder of the period or taking the Death Benefit in one sum. If the
Beneficiary opts to take the Death Benefit in one sum, the Death Benefit will
equal the Commuted Value.
IF A CONTRACT OWNER WHO IS NOT THE ANNUITANT DIES on or after the Annuity
Commencement Date, any surviving joint Contract Owner becomes the sole Contract
Owner. If there is no surviving Contract Owner, the Payee becomes the new
Contract Owner. If any Contract Owner dies, the remaining Annuity payments will
be distributed at least as rapidly as under the method of distribution being
used as of the date of such death.
LIFE ANNUITY WITH CASH REFUND. The Death Benefit on or after the Annuity
Commencement Date, under the Life Annuity with Cash Refund Annuity payment
option equals the Contract Value less Premium Tax used to purchase Annuity Units
on the Annuity Calculation Date minus the sum of all Annuity payments made.
DISTRIBUTION REQUIREMENTS: PRIOR TO THE ANNUITY COMMENCEMENT DATE
The Death Benefit will be distributed based on the Contract Owner's or
Annuitant's date of death and the Beneficiary's election:
(a) in a single lump sum, within 5 years from the death
(b) under an Annuity payment option provided that:
(1) Annuity payments begin within one year of the date of death, and
(2) Annuity payments are made in substantially equal installments over the
life of the Beneficiary, or
(3) Annuity payments are made in substantially equal installments over a
period not greater than the life expectancy of the Beneficiary;
(c) if the sole Beneficiary is the spouse of the deceased Contract Owner, he or
she may by written notice within one year of the Contract Owner's death,
elect to continue the Contract as the new Contract Owner. If the spouse so
elects, all of his or her rights as Beneficiary cease and if the deceased
Contract Owner was also the sole Annuitant and appointed no Contingent
Annuitant, he or she will become the Annuitant (For qualified plans, see
"Appendix I," page 27); or
(d) if the Contract Owner is not an individual, then the "primary Annuitant"
shall be treated as the Contract Owner under (a) and (b) above. For this
purpose, the "primary Annuitant" means 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.
The Death Benefit will only be paid after Hartford has received Due Proof of
Death.
There may be postponement in the payment of Death Benefits whenever (a) the New
York Stock Exchange is closed, including for holidays and 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 of the amounts or disposal
of securities not reasonably practicable.
SETTLEMENT PROVISIONS
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You select an Annuity Commencement Date and an Annuity payment option which may
be on a fixed or variable basis, or a combination thereof. The Annuity
Commencement Date will not be deferred beyond the end of Annuitant's age 90 or
the end of Contract Year 10, whichever is later. (If the Contract is sold as
part of a Charitable Remainder Trust, the Annuity Commencement Date may be
deferred to the end of the Annuitant's age 100.) The Annuity Commencement Date
and/or the Annuity payment 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 contains the 6 Annuity payment options described below and Option
7, the Annuity Proceeds Settlement Option.
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Annuity payment options 3, 5, 6 and the Annuity Proceeds Settlement Option are
each 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 Hartford. With respect to Non-Qualified Contracts, if you do not elect
otherwise, Fixed Annuity payments will automatically begin on the Annuity
Commencement Date under Annuity payment option 3 with Annuity payments
guaranteed for 10 years. For Qualified Contracts and Contracts issued in Texas,
if you do not elect otherwise, Fixed Annuity payments will begin automatically
on the Annuity Commencement Date, under option 1 to provide a life Annuity.
With the exception of Annuity payment option 6, no surrenders are permitted
after Annuity payments commence.
ANNUITY PAYMENT OPTIONS
OPTION 1: LIFE ANNUITY.
Hartford makes Annuity payments for as long as the Annuitant lives. Under this
option, a Payee would receive only one Annuity payment if the Annuitant dies
after the first such payment, two Annuity payments if the Annuitant dies after
the second payment, etc.
OPTION 2: LIFE ANNUITY WITH A CASH REFUND.
Hartford makes Variable Annuity payments as long as the Annuitant lives. If the
Annuitant dies and the sum of all Annuity payments made are less than the
Contract Value less Premium Tax on the Annuity Calculation Date, the Beneficiary
is entitled to a Death Benefit. The Death Benefit equals the Contract Value less
Premium Tax on the Annuity Calculation Date minus the sum of all Annuity
payments made. This option is only available when for Variable Annuity payment
using the 5% A.I.R.
OPTION 3: LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN.
Hartford makes Annuity payments for as long as the Annuitant lives. At the time
this option is selected, the Contract Owner must select a specific number of
years (a minimum of 5 years and maximum of 100 minus the Annuitant's age). If
the Annuitant dies before the specified number of years has passed, the
Beneficiary will have the option of either having the payments continue to the
Beneficiary for the remainder of the period or receiving the present value of
the remaining payments in one sum. Some restrictions apply to Qualified
Contracts with regards to the specified number of years for which payments are
guaranteed. (See first paragraph under "Settlement Provisions," page 18.)
OPTION 4: JOINT AND LAST SURVIVOR LIFE ANNUITY.
Hartford makes Annuity payments while the Annuitant and Joint Annuitant are
living. After the death of either Annuitant, payments continue for as long as
the other Annuitant lives. Under this option, a Payee would receive only one
Annuity payment if the Annuitant and Joint Annuitant die after the first such
payment, etc. At the time of purchase the Contract Owner must elect to have
Annuity payments after the death of the first Annuitant made in amounts equal to
100%, 66.67% or 50% of the amount that would otherwise be paid.
OPTION 5: JOINT AND LAST SURVIVOR LIFE ANNUITY WITH
PAYMENTS FOR A PERIOD CERTAIN.
Hartford makes Annuity payments to the Payee while the Annuitant and Joint
Annuitant are living. After the death of either Annuitant, Annuity payments
continue to the Payee for as long as the Joint Annuitant lives. At the time of
purchase, the Contract Owner must elect to have Annuity payments after the death
of the first Annuitant made in amounts equal to 100%, 66.67% or 50% of the
amount that would otherwise be paid. At the time this Option is selected, the
Contract Owner must select a specific number of years (a minimum of five years
and maximum of 100 minus the younger Annuitant's age). If the Annuitant and
Joint Annuitant die before the specified number of years has passed, the
Beneficiary will have the option of either having the payments continue to the
Beneficiary for the remainder of the period or receiving the present value of
the remaining payments in one sum. Some restrictions apply to Qualified
Contracts with regards to the specified number of years for which payments are
guaranteed. (See first paragraph under "Settlement Options," page 18.)
OPTION 6: PAYMENTS FOR A PERIOD CERTAIN.
Hartford makes Annuity payments for the number of years (a minimum of 5 years
and maximum of 100 minus the Annuitants age) selected by the Contract Owner. If
the Annuitant dies before the specified number of years have passed, Annuity
payments to the Beneficiary will continue until the specified number of years
have elapsed. After the death of the Annuitant, the Beneficiary will have the
option of either having the payments continue to the Beneficiary for the
remainder of the period or receiving the present value of the remaining payments
in one sum. Some restrictions apply to Qualified Contracts with regards to the
specified number of years for which payments are guaranteed. (See first
paragraph under "Settlement Provisions," page 18.)
ANNUITY PROCEEDS SETTLEMENT OPTION
OPTION 7: ANNUITY PROCEEDS SETTLEMENT OPTION.
Proceeds from the Death Benefit may be left with Hartford for a period not to
exceed 5 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 surrenders may be made at any
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time. In the event of surrenders, the remaining value will equal the Contract
Value of the proceeds left with Hartford, minus any surrenders. This option may
not be available under certain Contracts issued in connection with Qualified
Plans.
Hartford may offer other Annuity payment options from time to time.
VARIABLE AND FIXED ANNUITY PAYMENTS. When an Annuity is effected under a
Contract, unless otherwise specified, Contract Values (less applicable Premium
Taxes) held in the Sub-Accounts will be applied to provide a Variable Annuity
based on the pro rata amount in the various Sub-Accounts. YOU SHOULD CONSIDER
THE QUESTION OF ALLOCATION OF CONTRACT VALUES (LESS APPLICABLE PREMIUM TAXES)
AMONG SUB-ACCOUNTS OF THE SEPARATE ACCOUNT AND THE GENERAL ACCOUNT OF HARTFORD
TO MAKE CERTAIN THAT ANNUITY PAYMENTS ARE BASED ON THE INVESTMENT ALTERNATIVE
BEST SUITED TO YOUR NEEDS FOR RETIREMENT.
The minimum Annuity payment is $50. No election may be made which results in a
first payment of less than $50. If at any time Annuity payments are or become
less than $50, Hartford has the right to change the frequency of payment to
intervals that will result in payments of at least $50.
When Annuity payments are to commence, the value of the Contract is determined
as the sum of 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.
All Annuity payments under any option will occur the same day of the month as
the Annuity Commencement Date, based on the payment frequency selected by the
Contract Owner. Available payment frequencies include monthly, quarterly,
semi-annual and annual. The payment frequency may not be changed after payout
has begun.
ANNUITY CALCULATION DATE AND
ANNUITY COMMENCEMENT DATE
The Contract Owner selects the Annuity Commencement Date in the application or
order request. The Annuity Calculation Date will be no more than five Valuation
Days before the Annuity Commencement Date. The Contract Value less any
applicable Premium Tax is applied to purchase Annuity Units of the Sub-Accounts
selected by the Contract Owner as of the Annuity Calculation Date. The first
Annuity payment is computed using the value of such Annuity Units as of the
Annuity Calculation Date.
INCOME PAYMENT DATES
All Annuity payments after the first Annuity payment are computed and payable as
of the Income Payment Dates. These dates are the same day of the month as the
Annuity Commencement Date based on the Annuity payment frequency selected by the
Contract Owner and shown on the specification page of the Contract. Available
Annuity payment frequencies includes monthly, quarterly, semi-annual and annual.
The Annuity payment frequency may not be changed once selected by the Contract
Owner.
In the event that the Contract Owner does not select a payment frequency,
Annuity payments will be made monthly.
VARIABLE ANNUITY PAYMENTS
THE FIRST VARIABLE ANNUITY PAYMENT. Variable Annuity payments are periodic
payments from Hartford to the designated Payee, the amount of which varies from
one Income Payment Date to the next as a function of the net investment
performance of the Sub-Accounts selected by the Contract Owner to support such
Annuity payments. The dollar amount of the first Variable Annuity payment
depends on the Annuity payment option chosen, the age of the Annuitant, the
gender of the Annuitant (if applicable), the amount of Contract Value applied to
purchase the Annuity payments, and the applicable annuity purchase rates based
on the 1983a Individual Annuity Mortality table using projection scale G
projected to the year 2000 and an AIR of not less than 3.0%.
The dollar amount of the first Variable Annuity payment attributable to each
Sub-Account is determined by dividing the dollar amount of the Contract Value
less applicable Premium Tax applied to that Sub-Account on the Annuity
Calculation Date by $1,000 and multiplying the result by the payment factor in
the Contract for the selected Annuity payment option. The dollar value of the
first Variable Annuity payment is the sum of the first Variable Annuity payments
attributable to each Sub-Account.
ANNUITY UNITS. The number of Annuity Units attributable to a Sub-Account is
derived by dividing the first Variable Annuity payment attributable to that
Sub-Account by the Annuity Unit value for that Sub-Account for the Valuation
Period ending on the Annuity Calculation Date or during which the Annuity
Calculation Date falls if the Valuation Period does not end on such date. The
number of Annuity Units attributable to each Sub-Account under a Contract
remains fixed unless there is a transfer of Annuity Units between Sub-Accounts.
SUBSEQUENT VARIABLE ANNUITY PAYMENTS. The dollar amount of each subsequent
Variable Annuity payment attributable to each Sub-Account is calculated on the
Income Payment Date. It is determined by multiplying (a) by (b) and adding (c),
where:
(a) is the number of Annuity Units of each Sub-Account credited under the
Contract;
(b) is the Annuity Unit value (described below) for that Sub-Account; and
(c) is the results of each Sub-Account calculation.
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The total subsequent Variable Annuity payments equal the sum of the amounts
attributable to each Sub-Account.
Notwithstanding the foregoing, when an Income Payment Date would fall on a day
that is not a Valuation Day, the Income Payment is computed as of the next
Valuation Day. If the date of the month elected does not occur in a given month,
i.e., the 29th, 30th, or 31st of a month, the payments will be computed as of
the last Valuation Day of the month.
The Annuity Unit value of each Sub-Account for any Valuation Period is equal to
(a) multiplied by (b) multiplied by (c) where:
(a) is the Net Investment Factor for the Valuation Period for which the Annuity
Unit value is being calculated;
(b) is the Annuity Unit value for the preceding Valuation Period; and
(c) is the Annuity Unit Factor
The Annuity Unit Factor neutralizes the AIR percentage (3%, 5%, or 6%). The
daily Annuity Unit Factor corresponding to the AIR percentages of 3%, 5%, and 6%
are 0.999919, 0.999866, and 0.999840, respectively.
THE ASSUMED INVESTMENT RETURN (AIR). The Annuity Unit value will increase or
decrease from one Income Payment Date to the next in direct proportion to the
net investment return of the Sub-Account or Sub-Accounts supporting the Variable
Annuity payments, less an adjustment to neutralize the selected AIR. Dividing
what would otherwise be the Annuity Unit value by the AIR factor is necessary in
order to adjust the change in the Annuity Unit value (resulting from the Net
Investment Factor) so that the Annuity Unit value only changes to the extent
that the Net Investment Factor represents a rate of return greater than or less
than the AIR selected by the Contract Owner. Without this adjustment, the Net
Investment Factor would decrease the Annuity Unit value to the extent that such
value represented an annualized rate of return of less than 0.0% and increase
the Annuity Unit value to the extent that such value represented an annualized
rate of return of greater than 0.0%.
Subject to state approval, the Contract permits Contract Owners to select one of
three AIRs: 3%, 5% or 6%. A higher AIR will result in a higher initial payment,
a more slowly rising series of subsequent payments when actual investment
performance (minus any deductions and expenses) exceeds the AIR, and a more
rapid drop in subsequent payments when actual investment performance (minus any
deductions and expenses) is less than the AIR. The following examples may help
clarify the impact of selecting one AIR over another:
1. If a Contract Owner selects a 3% AIR and if the net investment return of the
Sub-Account for an Annuity payment period is equal to the pro-rated portion
of the 3% AIR, the Variable Annuity payment attributable to that Sub-Account
for that period will equal the Annuity payment for the prior period. To the
extent that such net investment return exceeds an annualized rate of return
of 3% for a payment period, the Annuity payment for that period will be
greater than the Annuity payment for the prior period and to the extent that
such return for a period falls short of an annualized rate of 3%, the
Annuity payment for that period will be less than the Annuity payment for
the prior period.
2. If a Contract Owner selects a 5% AIR and if the net investment return of the
Sub-Account for an Annuity payment period is equal to the pro-rated portion
of the 5% AIR, the Variable Annuity payment attributable to that Sub-Account
for that period will equal the Annuity payment for the prior period. To the
extent that such net investment return exceeds an annualized rate of return
of 5% for a payment period, the Annuity payment for that period will be
greater than the Annuity payment for the prior period and to the extent that
such return for a period falls short of an annualized rate of 5%, the
Annuity payment for that period will be less than the Annuity payment for
the prior period.
3. If a Contract Owner selects a 6% AIR and if the net investment return of the
Sub-Account for an Annuity payment period is equal to the pro-rated portion
of the 6% AIR, the Variable Annuity payment attributable to that Sub-Account
for that period will equal the Annuity payment for the prior period. To the
extent that such net investment return exceeds an annualized rate of return
of 6% for a payment period, the Annuity payment for that period will be
greater than the Annuity Payment for the prior period and to the extent that
such return for a period falls short of an annualized rate of 6%, the
Annuity payment for that period will be less than the Annuity payment for
the prior period.
LEVEL VARIABLE ANNUITY PAYMENTS WOULD BE PRODUCED IF THE INVESTMENT RATE RETURNS
REMAINED CONSTANT AND EQUAL TO THE A.I.R. IN FACT, PAYMENTS WILL VARY UP OR DOWN
AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE A.I.R.
EXCHANGE ("TRANSFER") OF ANNUITY UNITS. After the Annuity Calculation Date, the
Contract Owner may exchange (i.e.,"transfer") the dollar value of a designated
number of Annuity Units of a particular Sub-Account for an equivalent dollar
amount of Annuity Units of another Sub-Account. On the date of the transfer, the
dollar amount of a Variable Annuity payment generated from the Annuity Units of
either Sub-Account would be the same. Transfers are executed as of the day
Hartford receives a written request for a transfer. For guidelines refer to
"Sub-Account Value Transfers Before and After the Annuity Commencement Date,"
page 14.
FIXED ANNUITY. Fixed Annuity payments are determined at annuitization by
multiplying the Contract Value (less applicable Premium Taxes) by a rate to be
determined by Hartford which is
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no less than the rate specified in the Fixed Annuity option tables in the
Contract. The Annuity payment will remain level for the duration of the Annuity.
Any Fixed Annuity allocation may not be changed.
ADDITIONAL CONTRACT INFORMATION
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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 be deemed a distribution which subjects the assignment
proceeds to income taxes and certain penalty taxes.
MISSTATEMENT OF AGE OR SEX
If the Annuitant's stated age and/or sex in the Contract are incorrect, Hartford
will change the benefits payable to those which the Premium Payments would have
purchased for the correct age and sex. Sex is not a factor when Annuity Benefits
are based on unisex annuity payment rate tables. If Annuity payments were made
based on incorrect age or sex, we will increase or reduce a later Annuity
payment or payments to adjust for the error. Any adjustment will include
interest, at a rate of 4% per year, from the date of wrong payment to the date
the adjustment is made.
CONTRACT MODIFICATION
Hartford reserves the right to modify the Contract, but only if such
modification: (a) 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 (b) 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 (c) is necessary to reflect a
change in the operation of the Separate Account or the Sub-Account(s) or (d)
provides additional Separate Account options or (e) 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 to the Contract to reflect such modification.
FEDERAL TAX CONSIDERATIONS
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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 27, 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 "Contract Value -- Before the Annuity
Commencement Date" 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.
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
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<PAGE>
inclusion for certain annuities held in tax-qualified retirement arrangements,
certain annuities held by structured settlement companies, certain annuities
held by an employer with respect to a terminated tax-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 as a result of
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 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.
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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 premature distribution
penalty tax equal to ten percent 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 Contract Owner 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 Contract Owner'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 Contract Owner (or
the joint lives or life expectancies of the Contract Owner and the Contract
Owner'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 5 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 1. 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 1. 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
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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 for tax purposes. The
Internal Revenue Service (IRS) has issued several rulings which discuss investor
control. The IRS has ruled that certain incidents of ownership by the contract
owner, such as the ability to select and control investments in a separate
account, could 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
did 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 unless the recipient elects otherwise. A
recipient may elect not to have income taxes withheld or to 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
TAX-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 27 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 adviser regarding U.S.,
state, and foreign taxation with respect to an annuity purchase.
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OTHER INFORMATION
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DISTRIBUTION OF THE CONTRACTS
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. The principal business address of HSD
is the same as that of Hartford.
The securities will be sold by salespersons of HSD who represent Hartford as
insurance and by variable annuity agents who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.
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.
Commissions will be paid by Hartford and will not be more than 1% of Premium
Payments. Trail commissions of 1% annually will be paid on a quarterly basis
beginning after the first Contract Year. From time to time, Hartford may pay or
permit other promotional incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on premium payments made by
policyholders or contract owners. This compensation is usually paid from the
sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or surrender variable insurance products.
The securities may also be sold directly to employees of Hartford and Hartford
Fire Insurance Company, an affiliate of Hartford, without compensation to HSD
salespersons. The securities will be credited with an additional 5% of the
employee's Premium Payment by Hartford. This additional percentage of Premium
Payment in no way affects present or future charges, rights, benefits or current
Contract Values of other Contract Owners.
LEGAL MATTERS
There are no material legal proceedings to which the Separate Account is a
party.
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, P.O. Box 2999, Hartford, Connecticut 06104-2999.
EXPERTS
The audited financial statements included in this 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 the report on the statutory-basis financial statements of
Hartford Life and Annuity Insurance Company (formerly ITT Hartford Life and
Annuity Insurance Company) which states the statutory-basis financials 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, and are not presented in accordance with
generally accepted accounting principles. 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, Connecticut 06102-5085.
Telephone: (800) 521-0538 (Contract Owners)
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APPENDIX I
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INFORMATION REGARDING TAX-QUALIFIED RETIREMENT 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,
TO DISTRIBUTIONS WHICH DO NOT SATISFY CERTAIN REQUIREMENTS AND TO 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 ADVISORS AS TO
SPECIFIC TAX CONSEQUENCES.
A. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS
Provisions of the Code permit eligible employers to establish tax-qualified
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. Employers
intending to use these contracts in connection with such plans should seek
competent tax and other legal 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 $10,000 (indexed) 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 (and, in the case of hardship, any income
attributable to such contributions may not be distributed).
Generally, the above restrictions do not apply to distributions attributable to
cash values or other amounts held under a section 403(b) contract as of December
31, 1988.
C. DEFERRED COMPENSATION PLANS
UNDER SECTION 457
Employees and independent contractors performing services for eligible employers
may have contributions made 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 Eligible 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. Such a 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 an Eligible 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 of a State or political subdivision
of a State, must be held in trust (or under certain specified annuity
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contracts or custodial accounts) for the exclusive benefit of participants and
their beneficiaries. Special transition rules apply to such governmental
Eligible 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 of a trust does not apply to amounts under an Eligible
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 an Eligible Deferred Compensation Plan are
prohibited under Section 457 unless made after the participating employee
attains age 70 1/2, 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.
IRAs generally may not invest in life insurance contracts. However, an annuity
that is used as an IRA may provide a death benefit that equals the greater of
the premiums paid and the annuity's cash value. The Contract offers an enhanced
Death Benefit that may exceed the greater of the Contract Value and total
Premium Payments less prior surrenders. For Contracts issued in most states,
Hartford has obtained approval from the Internal Revenue Service to use the
Contract as 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. Hartford is
a non-designated financial institution.
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 an IRA or a qualified plan before an 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 after age 55. For
these purposes, a life annuity means 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 tax-qualified 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
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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 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 until 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. WITHHOLDING
In general, distributions from IRAs and plans described in Section 457 of the
Code are subject to regular wage withholding rules.
Periodic distributions from other tax-qualified retirement plans that are made
for a specified period of 10 or more years or for the life or life expectancy of
the participant or the joint lives or life expectancies of the participant and
beneficiary are generally subject to federal income tax withholding as if the
recipient were married claiming three exemptions. 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.
Other distributions from such other tax-qualified plans are generally subject to
mandatory income tax withholding at the flat rate of 20% unless such
distributions are:
(a) the non-taxable portion of the distribution;
(b) required minimum distributions; or
(c) direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code section 401(a)(31).
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TABLE OF CONTENTS TO
STATEMENT OF ADDITIONAL
INFORMATION
<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C>
Description of Hartford Life and Annuity
Insurance Company
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Safekeeping of Assets
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Independent Public Accountants
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Distribution of Contracts
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Calculation of Yield and Return
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Performance Comparisons
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Financial Statements
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</TABLE>
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This form must be completed for all tax sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
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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, 1988 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. separated from service,
c. died, or
d. become disabled.
Distributions of post December 31, 1988 contributions, excluding any income
thereon, may also be made if you have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made prior to age 59 1/2
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: ___________________________________________________
Contract No: ____________________________________________
Signature: ______________________________________________
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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
P.O. Box 5085
Hartford, CT 06102-5085
Please send a Statement of Additional Information for the Select Dimensions
AssetManager to me at the following address:
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Name
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Address
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City/State Zip Code
