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JOHN HANCOCK VARIABLE ANNUITY ACCOUNT I
SUPPLEMENT DATED SEPTEMBER 1, 1996
TO PROSPECTUS DATED MAY 1, 1996
CONTRACT LOANS (SECTION 403(B) QUALIFIED CONTRACTS ONLY)
During the Accumulation Period, an Owner may request a loan from the
Accumulated Value of the Contract. If the loan meets the amount and repayment
requirements described below, it will not be reported to the Internal Revenue
Service as a taxable distribution. Forms provided by JHVLICO must be used to
apply for a Contract loan. An Owner can obtain these forms by calling 800-REAL
LIFE (800-732-5543) or writing to Life and Annuity Services, P.O. Box 111,
Boston, MA 02117. At the time the loan is issued, JHVLICO will provide the
Owner with a detailed loan agreement containing provisions to which the loan
will be subject.
Any loan will be secured by a security interest in the Contract. The loan
amount must be at least $2,500 and may not, at the date of the loan (defined
below), exceed the lesser of: (a) 50% of the Accumulated Value of the
Contract; (b) $50,000; or (c) the sum of 100% of the Accumulated Value of the
Subaccounts and 20% of the Fixed Account Value. That portion of the loan
amount up to 20% of the Accumulated Value of the Contract on the date of the
loan will be deducted from each Subaccount and the Fixed Account in the same
proportion as the Accumulated Value of the Contract is allocated among the
Subaccounts and the Fixed Account on the date of the loan. Any loan amount in
excess of 20% of the Accumulated Value of the Contract will be deducted from
each Subaccount in the same proportion as the Accumulated Value of such
Subaccount bears to the total Accumulated Value of all the Subaccounts on the
date of the loan.
The total loan amount will be transferred to the Loan Collateral Account on
the date of the loan. The Loan Collateral Account is held in JHVLICO's general
investment account and will accrue interest at an effective rate that is 1%
less than the Loan Interest Rate described below. The interest accrued on the
Loan Collateral Account will be transferred back to the Subaccounts and the
Fixed Account on each Contract anniversary and will be allocated to each
Subaccount and the Fixed Account in the same proportion as the Accumulated
Value of the Contract is then allocated among the Subaccounts and the Fixed
Account.
The date of the loan will be the Valuation Date on which JHVLICO receives at
its Home Office all necessary documentation assigning the Contract as the
security for the loan. If such receipt occurs on a date other than a Valuation
Date, the date of the loan will be the Valuation Date next following the date
on which such receipt occurs.
The Loan Interest Rate for this Contract will be determined annually by
JHVLICO. Such determination will be made in the calendar month immediately
preceding the calendar month in which the Contract anniversary occurs. The
Loan Interest Rate will apply to any loan made during the Contract year
following the date of determination. Except as otherwise required by
applicable state law, the rate set will not exceed the greater of (a) Moody's
Corporate Bond Yield Average--Monthly Average Corporates, (as published by
Moody's Investors Service) or any successor thereto, for the calendar month
which is two months before the month in which the date of determination occurs
or (b) 5%. If Moody's Corporate Bond Yield Average--Monthly Average Corporates
is no longer published, JHVLICO reserves the right to select a substitute that
it deems appropriate, subject to applicable law, regulation, or other state
requirement. When a new rate is determined: (a) JHVLICO may increase the
previous rate if the increase would be at least 1/2%; and (b) JHVLICO must
reduce the previous rate if the decrease would be at least 1/2%. JHVLICO will
notify the Owner of the applicable Loan Interest Rate at the time a loan is
made. The Loan Interest Rate for any given loan will be fixed for the entire
loan period. Accrued interest on a loan will be added to the loan daily and
will bear interest from that date at the Loan Interest Rate.
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Repayment of principal and interest will be amortized in level installments
payable no less frequently than quarterly over a period of no more than five
years, except as provided by law. The repayment due dates and installment
amounts will be provided in a repayment schedule sent to the Owner prior to
the first installment due date. The principal portion of each loan repayment
will be transferred back to the Subaccounts and the Fixed Account at the time
of each loan repayment, and will be allocated to each Subaccount and the Fixed
Account in the same proportion as the Accumulated Value of the Contract is
then allocated among the Subaccounts and the Fixed Account.
Prepayment of the entire loan will be permitted. In addition, loan
repayments in excess of regularly scheduled repayments that do not repay the
entire Loan Balance (outstanding loan amount plus loan interest accrued to
date) will be applied to reduce the length of the loan. Such excess loan
repayments do not replace the regularly scheduled loan payments.
If any scheduled loan repayment is not made within 90 calendar days after
the repayment due date, the Loan Balance or such other amount as required by
applicable law shall then be considered in default. To the extent that the
Accumulated Value contains (i) salary reduction contributions made on or
before December 31, 1988 and (ii) earnings credited on such contributions on
or before such date (together referred to as "pre-1988 contributions") at the
time of default, a foreclosure shall be made on such "pre-1988 contributions"
with regard to the default. That is, an amount equal to the amount in default
with respect to such "pre-1988 contributions" (including withdrawal charges
and any accrued and unpaid interest to the date of the default) will be
withdrawn from the Accumulated Value of the Contract to repay the amount in
default. To the extent that the amount in default exceeds the amount of "pre-
1988 contributions," no actual foreclosure on the loan security shall be made
until the earliest of the Owner attaining age 59 1/2, separating from service,
dying or becoming disabled (as defined in IRC section 72(m)(7)) and prior to
the occurrence of such an event, the excess shall be considered a deemed
distribution reportable to the Owner.
If the Contract is surrendered while there is an outstanding Loan Balance or
if the Annuitant dies while there is an outstanding Loan Balance, an amount,
positive or negative, will be determined by subtracting the outstanding Loan
Balance from the Loan Collateral Account on the date of surrender or death. If
such amount is positive, it will be added to the Surrender Value or to the
Death Benefit, as applicable. If such amount is negative, it will be
subtracted from the Surrender Value or the Death Benefit, as applicable. If at
any time the Loan Balance exceeds the sum of the Surrender Value and the Loan
Collateral Account, the loan will be subject to the excessive loan balance
provisions set forth in the loan agreement.
Contract loans are subject to conditions and requirements under the Internal
Revenue Code and, where applicable, ERISA, as well as the terms of any
retirement plan in connection with which the Contract has been acquired. For
example, if loan payments are not made when due, or if JHVLICO otherwise finds
it necessary to exercise its rights to use all or part of the value under a
Contract to repay a Contract loan, serious adverse tax consequences may
result. The tax and ERISA rules relating to Contract loans are complex and in
many cases unclear. For these reasons, and because the rules vary depending on
the individual circumstances of each Contract, JHVLICO cautions that employers
and Owners should take particular care to consult with qualified advisers
before taking action with respect to Contract loans.
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