<PAGE> 1
PROSPECTUS DATED JUNE 26, 2000
FOR
MAINSTAY PREMIUM PLUS VARIABLE ANNUITY
FROM
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A DELAWARE CORPORATION)
51 MADISON AVENUE, NEW YORK, NEW YORK 10010
INVESTING IN
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
This Prospectus describes the individual flexible premium MainStay Premium
Plus Variable Annuity policies issued by New York Life Insurance and Annuity
Corporation ("NYLIAC"). We designed these policies to assist individuals with
their long-term retirement planning needs. You can use these policies with
retirement plans that do or do not qualify for special federal income tax
treatment. The policies offer flexible premium payments, access to your money
through partial withdrawals (some withdrawals may be subject to a surrender
charge and/or tax penalty), a choice of when income payments commence, and a
guaranteed death benefit if the owner or annuitant dies before income payments
have commenced.
NYLIAC will apply a credit to your premium payments. (See "Credit" at page
22.) Fees and charges for a policy with a credit may be higher than those for
other policies, and over time, the amount of the credit may be more than offset
by those higher charges.
Your premium payments accumulate on a tax-deferred basis. This means your
earnings are not taxed until you take the money out of your policy which can be
done in several ways. You can split your premium payments among a guaranteed
interest option, a general account option specifically for the dollar cost
averaging program and the twenty-six variable investment divisions listed below.
<TABLE>
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- MainStay VP Capital Appreciation
- MainStay VP Cash Management
- MainStay VP Convertible
- MainStay VP Government
- MainStay VP High Yield Corporate Bond
- MainStay VP International Equity
- MainStay VP Total Return
- MainStay VP Value
- MainStay VP Bond
- MainStay VP Growth Equity
- MainStay VP Indexed Equity
- American Century Income & Growth
- Dreyfus Large Company Value
- Eagle Asset Management Growth Equity
- Lord Abbett Developing Growth
- Alger American Small Capitalization
- Calvert Social Balanced
- Fidelity VIP II Contrafund(R)
- Fidelity VIP Equity-Income
- Janus Aspen Series Balanced
- Janus Aspen Series Worldwide Growth
- MFS(R) Growth With Income Series
- MFS(R) Research Series
- Morgan Stanley UIF Emerging Markets Equity
- T. Rowe Price Equity Income
- Van Eck Worldwide Hard Assets
</TABLE>
You may allocate initial premiums, and thereafter may maintain the
Accumulation Value in up to 18 Allocation Alternatives and the DCA Advantage
Plan Account inclusively.
We do not guarantee the investment performance of these variable investment
divisions. Depending on current market conditions, you can make or lose money in
any of the investment divisions.
You should read this Prospectus carefully before investing and keep it for
future reference. This Prospectus is not valid unless attached to current
prospectuses for the MainStay VP Series Fund, Inc., the Alger American Fund, the
Calvert Variable Series, Inc., the Fidelity Variable Insurance Products Fund II
(VIP II), the Fidelity Variable Insurance Products Fund (VIP), the Janus Aspen
Series, the MFS(R) Variable Insurance Trust(sm), the Universal Institutional
Funds, Inc., the T. Rowe Price Equity Series, Inc. and the Van Eck Worldwide
Insurance Trust (the "Funds", each individually a "Fund").
To learn more about the policy, you can obtain a copy of the Statement of
Additional Information ("SAI") dated June 26, 2000. The SAI has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated by reference
into this Prospectus. The table of contents for the SAI appears at the end of
this Prospectus. For a free copy of the SAI, call us at (800) 762-6212 or write
to us at the address above.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE POLICIES INVOLVE RISKS, INCLUDING POTENTIAL LOSS OF PRINCIPAL INVESTED.
THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
DEFINITIONS............................ 3
FEE TABLE.............................. 5
QUESTIONS AND ANSWERS ABOUT MAINSTAY
PREMIUM PLUS VARIABLE ANNUITY........ 10
FINANCIAL STATEMENTS................... 16
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION AND THE SEPARATE
ACCOUNT.............................. 17
New York Life Insurance and Annuity
Corporation....................... 17
The Separate Account................. 17
The Portfolios....................... 17
Additions, Deletions or Substitutions
of Investments.................... 18
Reinvestment......................... 19
THE POLICIES........................... 19
Selecting the Variable Annuity That's
Right for You..................... 19
Qualified and Non-Qualified
Policies.......................... 20
Policy Application and Premium
Payments.......................... 20
Payments Returned for Insufficient
Funds............................. 21
Credit............................... 22
Your Right to Cancel ("Free Look")... 22
Issue Ages........................... 23
Transfers............................ 23
Procedures for Telephone
Transactions...................... 23
Dollar Cost Averaging (DCA)
Programs.......................... 23
(a) Traditional Dollar Cost
Averaging.................... 24
(b) The DCA Advantage Plan........ 24
Automatic Asset Reallocation......... 25
Interest Sweep....................... 25
Accumulation Period.................. 26
(a) Crediting of Premium
Payments..................... 26
(b) Valuation of Accumulation
Units........................ 26
Third Party Investment Advisory
Arrangements...................... 26
Policy Owner Inquiries............... 26
CHARGES AND DEDUCTIONS................. 27
Surrender Charges.................... 27
Amount of Surrender Charge........... 27
Exceptions to Surrender Charges...... 27
Other Charges........................ 28
(a) Separate Account Charge....... 28
(b) Policy Service Charge......... 28
(c) Investment Protection Plan
Rider Charge................. 28
</TABLE>
<TABLE>
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(d) Rider Risk Charge
Adjustment...................... 28
(e) Fund Charges................. 29
Group and Sponsored Arrangements..... 29
Taxes................................ 29
DISTRIBUTIONS UNDER THE POLICY......... 29
Surrenders and Withdrawals........... 29
(a) Surrenders.................... 30
(b) Partial Withdrawals........... 30
(c) Periodic Partial
Withdrawals.................. 30
(d) Hardship Withdrawals.......... 30
Required Minimum Distribution
Option........................... 30
Our Right to Cancel.................. 31
Annuity Commencement Date............ 31
Death Before Annuity Commencement.... 31
Income Payments...................... 32
(a) Election of Income Payment
Options...................... 32
(b) Other Methods of Payment...... 33
(c) Proof of Survivorship......... 33
Delay of Payments.................... 33
Designation of Beneficiary........... 33
Restrictions Under Internal Revenue
Code Section 403(b)(11)........... 33
Loans................................ 33
Riders............................... 34
(a) Living Needs Benefit Rider.... 34
(b) Unemployment Benefit Rider... 34
(c) Investment Protection Plan
Rider........................ 35
THE FIXED ACCOUNT...................... 36
(a) Interest Crediting............ 36
(b) Transfers to Investment
Divisions.................... 36
THE DCA ADVANTAGE PLAN ACCOUNT......... 37
FEDERAL TAX MATTERS.................... 37
Introduction......................... 37
Taxation of Annuities in General..... 37
Qualified Plans...................... 38
(a) Section 403(a) Plans.......... 39
(b) Section 403(b) Plans.......... 39
(c) Individual Retirement
Annuities.................... 39
(d) Roth Individual Retirement
Annuities.................... 39
(e) Deferred Compensation Plans... 39
DISTRIBUTOR OF THE POLICIES............ 39
VOTING RIGHTS.......................... 39
TABLE OF CONTENTS FOR THE STATEMENT OF
ADDITIONAL INFORMATION............... 41
</TABLE>
THIS PROSPECTUS IS NOT CONSIDERED AN OFFERING IN ANY STATE WHERE THE SALE
OF THIS POLICY CANNOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATIONS REGARDING THE OFFERING OTHER THAN AS DESCRIBED IN THIS
PROSPECTUS OR IN ANY ATTACHED SUPPLEMENT TO THIS PROSPECTUS OR IN ANY
SUPPLEMENTAL SALES MATERIAL WE AUTHORIZE.
2
<PAGE> 3
DEFINITIONS
ACCUMULATION UNIT--An accounting unit we use to calculate the Variable
Accumulation Value prior to the Annuity Commencement Date. Each Investment
Division of the Separate Account has a distinct variable Accumulation Unit
value.
ACCUMULATION VALUE--The sum of the Variable Accumulation Value, the Fixed
Accumulation Value, and the DCA Accumulation Value of a policy.
ALLOCATION ALTERNATIVES--The Investment Divisions of the Separate Account and
the Fixed Account.
ANNUITANT--The person whose life determines the Income Payments, and upon whose
death prior to the Annuity Commencement Date, benefits under the policy may be
paid.
ANNUITY COMMENCEMENT DATE--The date on which we are to make the first Income
Payment under the policy.
BENEFICIARY--The person or entity having the right to receive the death benefit
set forth in the policy and who is the "designated beneficiary" for purposes of
Section 72 of the Internal Revenue Code in the event of the Annuitant's or the
policy owner's death.
BUSINESS DAY--Generally, any day on which the New York Stock Exchange ("NYSE")
is open for trading. Our Business Day ends at 4:00 p.m. Eastern Time or the
close of regular trading of the NYSE, if earlier.
CREDIT--An amount we will apply to your Accumulation Value at the time of your
premium payments. The Credit is calculated as a percentage of each premium
payment and will never be less than 2 percent (the "Credit Rate"). The Credit
Rate applicable to a premium payment varies, depending on the total amount of
premium payments received under the policy. The Credit Rate schedule as of the
date of this prospectus is set forth on Page 22. With notice to you, in our sole
discretion, we may change both the Credit Rates and the total premium payment
brackets applicable to future premium payments under this policy.
DOLLAR COST AVERAGING ("DCA") ADVANTAGE PLAN ACCOUNT--The 6-month DCA account
used specifically for the DCA Advantage Plan.
DOLLAR COST AVERAGING ("DCA") ADVANTAGE PLAN--A feature which permits automatic
dollar cost averaging using the DCA Advantage Plan Account.
DOLLAR COST AVERAGING ("DCA") ACCUMULATION VALUE--The sum of premium payments
and any Credits allocated to the DCA Advantage Plan Account, plus interest
credited on those premium payments and any Credits, less any transfers and
partial withdrawals from the DCA Advantage Plan, and less any surrender charges
and any policy service charges that may already have been assessed from the DCA
Advantage Plan. The DCA Accumulation Value is supported by assets in NYLIAC's
general account. These assets are subject to the claims of our general
creditors.
ELIGIBLE PORTFOLIOS ("PORTFOLIOS")--The mutual fund portfolios of the Funds that
are available for investment through the Investment Divisions of the Separate
Account.
FIXED ACCOUNT--An account that is credited with a fixed interest rate which
NYLIAC declares and is not part of the Separate Account. The Accumulation Value
of the Fixed Account is supported by assets in NYLIAC's general account, which
are subject to the claims of our general creditors.
FIXED ACCUMULATION VALUE--The sum of premium payments and any Credits and
transfers allocated to the Fixed Account, plus interest credited on those
premium payments and any Credits and transfers, less any transfers and partial
withdrawals from the Fixed Account, and less any surrender charges and policy
service charges that may have already been assessed from the Fixed Account.
INCOME PAYMENTS--Periodic payments NYLIAC makes after the Annuity Commencement
Date.
INVESTMENT DIVISION--The variable investment options available with the policy.
Each Investment Division invests exclusively in shares of a specified Eligible
Portfolio.
NON-QUALIFIED POLICIES--Policies that are not available for use in connection
with employee retirement plans that qualify for special federal income tax
treatment.
PAYMENT YEAR(S)--With respect to any premium payment, the year(s) beginning on
the date such premium payment is made to the policy.
3
<PAGE> 4
POLICY ANNIVERSARY--An anniversary of the Policy Date shown on the Policy Data
Page.
POLICY DATA PAGE--Page 2 of the policy which contains the policy specifications.
POLICY DATE--The date from which we measure Policy Years, quarters, months and
Policy Anniversaries. It is shown on the Policy Data Page.
POLICY YEAR--A year starting on the Policy Date. Subsequent Policy Years begin
on each Policy Anniversary, unless otherwise indicated.
QUALIFIED POLICIES--Policies issued under employee retirement plans that qualify
for special federal income tax treatment.
SEPARATE ACCOUNT--NYLIAC Variable Annuity Separate Account-III, a segregated
asset account we established to receive and invest premium payments paid under
the policies. The Separate Account's Investment Divisions, in turn, purchase
shares of Eligible Portfolios.
VARIABLE ACCUMULATION VALUE--The sum of the products of the current Accumulation
Unit value(s) for each of the Investment Divisions multiplied by the number of
Accumulation Units held in the respective Investment Division.
4
<PAGE> 5
FEE TABLE
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD MAINSTAY VP
CAPITAL CASH MAINSTAY VP MAINSTAY VP CORPORATE INTERNATIONAL
APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT BOND EQUITY
------------ ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
OWNER TRANSACTION
EXPENSES
Surrender
Charge(as a % of
amount
withdrawn)...... 8% during Payment Years 1-4; 7% during Payment Year 5; 6% during Payment Year 6; 5%
during Payment Year 7; 4% during Payment Year 8; and 0% thereafter.
Transfer Fee...... There is no transfer fee on the first 12 transfers in any Policy Year. However,
NYLIAC reserves the right to charge up to $30 for each transfer in excess of 12
transfers per Policy Year.
Annual Policy
Service
Charge.......... $30 per policy for policies with less than $100,000 of Accumulation Value.
Investment
Protection Plan
Rider Charge
(optional)...... Maximum annual charge of 1% of the amount that is guaranteed.
Rider Risk Charge
Adjustment
(optional)...... Maximum charge of 2% of the amount that is guaranteed for cancellation of the
SEPARATE ACCOUNT Investment Protection Plan.
ANNUAL EXPENSES
(as a % of average
account value)
(including
mortality and
expense risk and
administrative
fees)........... 1.60% 1.60% 1.60% 1.60% 1.60% 1.60%
FUND ANNUAL EXPENSES
AFTER
REIMBURSEMENT
(as a % of average
net assets for
the fiscal year
ended
December 31,
1999)(a)
Advisory Fees..... 0.36% 0.25% 0.36% 0.30% 0.30% 0.60%
Administration
Fees............ 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%
Other Expenses.... 0.06% 0.06% 0.15% 0.09% 0.07% 0.27%
Total Fund Annual
Expenses........ 0.62% 0.51% 0.71% 0.59% 0.57% 1.07%
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP MAINSTAY VP MAINSTAY VP CENTURY LARGE
TOTAL MAINSTAY VP MAINSTAY VP GROWTH INDEXED INCOME & COMPANY
RETURN VALUE BOND EQUITY EQUITY GROWTH VALUE
----------- ----------- ----------- ----------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
OWNER TRANSACTION
EXPENSES
Surrender Charge
(as a % of
amount
withdrawn)...... 8% during Payment Years 1-4; 7% during Payment Year 5; 6% during Payment Year 6; 5% during
Payment Year 7; 4% during Payment Year 8; and 0% thereafter.
Transfer Fee...... There is no transfer fee on the first 12 transfers in any Policy Year. However, NYLIAC
reserves the right to charge up to $30 for each transfer in excess of 12 transfers per
Policy Year.
Annual Policy
Service
Charge.......... $30 per policy for policies with less than $100,000 of Accumulation Value.
Investment
Protection Plan
Rider Charge
(optional)...... Maximum annual charge of 1% of the amount that is guaranteed.
Rider Risk Charge
Adjustment
(optional)...... Maximum charge of 2% of the amount that is guaranteed for cancellation of the Investment
SEPARATE ACCOUNT Protection Plan.
ANNUAL EXPENSES
(as a % of average
account value)
(including
mortality and
expense risk and
administrative
fees)........... 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60%
FUND ANNUAL EXPENSES
AFTER
REIMBURSEMENT
(as a % of average
net assets for
the fiscal year
ended December
31, 1999)(a)
Advisory Fees..... 0.32% 0.36% 0.25% 0.25% 0.10% 0.50% 0.60%
Administration
Fees............ 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%
Other Expenses.... 0.06% 0.07% 0.05% 0.04% 0.06% 0.15%(b) 0.15%(b)
Total Fund Annual
Expenses........ 0.58% 0.63% 0.50% 0.49% 0.36% 0.85% 0.95%
</TABLE>
5
<PAGE> 6
FEE TABLE--(CONTINUED)
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<TABLE>
<CAPTION>
EAGLE
ASSET ALGER JANUS
MANAGEMENT LORD ABBETT AMERICAN CALVERT FIDELITY FIDELITY VIP ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II EQUITY- SERIES
EQUITY GROWTH CAPITALIZATION BALANCED CONTRAFUND(R) INCOME BALANCED
---------- ----------- -------------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
OWNER TRANSACTION
EXPENSES
Surrender Charge
(as a % of
amount
withdrawn)...... 8% during Payment Years 1-4; 7% during Payment Year 5; 6% during Payment Year 6; 5% during Payment
Year 7; 4% during Payment Year 4; and 0% thereafter.
Transfer Fee...... There is no transfer fee on the first 12 transfers in any Policy Year. However, NYLIAC reserves the
right to charge up to $30 for each transfer in excess of 12 transfers per Policy Year.
Annual Policy
Service
Charge.......... $30 per policy for policies with less than $100,000 of Accumulation Value.
Investment
Protection Plan
Rider Charge
(optional)...... Maximum annual charge of 1% of the amount that is guaranteed.
Rider Risk Charge
Adjustment
(optional)...... Maximum charge of 2% of the amount that is guaranteed for cancellation of the Investment Protection
SEPARATE ACCOUNT Plan.
ANNUAL EXPENSES
(as a % of average
account value)
(including
mortality and
expense risk and
administrative
fees)........... 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60%
FUND ANNUAL EXPENSES
AFTER
REIMBURSEMENT
(as a % of average
net assets for
the fiscal year
ended
December 31,
1999)(a)
Advisory Fees..... 0.50% 0.60% 0.85% 0.70%(c) 0.58% 0.48% 0.65%
Administration
Fees............ 0.20% 0.20% -- -- -- -- --
Other Expenses.... 0.15%(b) 0.15%(b) 0.05% 0.19%(c) 0.09% 0.09% 0.02%
Total Fund Annual
Expenses........ 0.85% 0.95% 0.90% 0.89%(c) 0.67%(d) 0.57%(d) 0.67%(e)
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
MORGAN
STANLEY
JANUS ASPEN MFS(R) UIF
SERIES GROWTH MFS(R) EMERGING T. ROWE PRICE VAN ECK
WORLDWIDE WITH INCOME RESEARCH MARKETS EQUITY WORLDWIDE
GROWTH SERIES SERIES EQUITY INCOME HARD ASSETS
----------- ----------- -------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
OWNER TRANSACTION
EXPENSES
Surrender Charge
(as a % of
amount
withdrawn)...... 8% during Payment Years 1-4; 7% during Payment Year 5; 6% during Payment Year 6; 5%
during Payment Year 7; 4% during Payment Year 8; and 0% thereafter.
Transfer Fee...... There is no transfer fee on the first 12 transfers in any Policy Year. However,
NYLIAC reserves the right to charge up to $30 for each transfer in excess of 12
transfers per Policy Year.
Annual Policy
Service
Charge.......... $30 per policy for policies with less than $100,000 of Accumulation Value.
Investment .
Protection Plan
Rider Charge
(optional)...... Maximum annual charge of 1% of the amount that is guaranteed
Rider Risk Charge
Adjustment
(optional)...... Maximum charge of 2% of the amount that is guaranteed for cancellation of the
SEPARATE ACCOUNT Investment Protection Plan.
ANNUAL EXPENSES
(as a % of average
account value)
(including
mortality and
expense risk and
administrative
fees)........... 1.60% 1.60% 1.60% 1.60% 1.60% 1.60%
FUND ANNUAL EXPENSES
AFTER
REIMBURSEMENT
(as a % of average
net assets for
the fiscal year
ended December
31, 1999)(a)
Advisory Fees..... 0.65% 0.75% 0.75% 0.42% 0.85%(g) 1.00%
Administration
Fees............ -- -- -- 0.25% -- --
Other Expenses.... 0.05% 0.13% 0.11% 1.12% -- 0.26%
Total Fund Annual
Expenses........ 0.70%(e) 0.88% 0.86% 1.79%(f) 0.85% 1.26%
</TABLE>
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<TABLE>
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(a) The Fund or its agents provided the fees and charges which
are based on 1999 expenses and may reflect estimated
charges. We have not verified the accuracy of the
information provided by the agents.
(b) "Other Expenses" and "Total Fund Annual Expenses" for the
American Century Income & Growth, Dreyfus Large Company
Value, Eagle Asset Management Growth Equity and Lord Abbett
Developing Growth Portfolios reflect an expense
reimbursement agreement that ended December 31, 1999
limiting "Other Expenses" to 0.15% annually. In the absence
of the expense reimbursement arrangement, the "Total Fund
Annual Expenses" would have been 0.92%, 1.00%, 0.87% and
1.04% for the American Century Income & Growth, Dreyfus
Large Company Value, Eagle Asset Management Growth Equity
and Lord Abbett Developing Growth Portfolios, respectively.
(c) "Other Expenses" reflect an indirect fee. The Portfolio has
an offset arrangement with the custodian bank whereby the
custodian's and transfer agent's fees may be paid indirectly
by credits earned on the Portfolio's uninvested cash
balances. These credits are used to reduce the Portfolio's
expenses. Net fund operating expenses after reductions for
such expense offset arrangement would be 0.86% for Social
Balanced Portfolio. Total expenses have been restated to
reflect expenses expected to be incurred in 2000.
(d) Through arrangements with certain funds or FMR on behalf of
certain funds' custodian, credits realized as a result of
uninvested cash balances were used to reduce a portion of
each applicable fund's expenses. With these reductions,
total operating expenses presented in the table would have
been 0.65% for the Fidelity VIP II Contrafund(R) Portfolio
and 0.56% for the Fidelity VIP Equity-Income Portfolio.
(e) Expenses are based upon expenses for the fiscal year ended
December 31, 1999, restated to reflect a reduction in the
management fee for Worldwide Growth and Balanced portfolios.
Expenses are subject to voluntary waivers by Janus Capital.
Waivers, if applicable, are first applied against the
management fee and then against other expenses, and will
continue until at least the next annual renewal of the
advisory agreement. All expenses are shown without the
effect of any expense offset arrangements.
(f) Morgan Stanley Asset Management has voluntarily agreed to
waive its "Advisory Fees" and/or reimburse the Portfolio, if
necessary, to the extent that the "Total Fund Annual
Expenses" of the Portfolio exceeds 1.75% of average daily
net assets. For purposes of determining the amount of the
voluntary advisory fee waiver and/or reimbursement, if any,
the portfolio's annual operating expenses include certain
investment related expenses such as foreign country tax
expense and interest expense on amounts borrowed which were
0.04% of the average daily net assets for 1999. The fee
waivers and reimbursements described above may be terminated
by Morgan Stanley Asset Management at any time without
notice. Absent such reductions, "Advisory Fees,"
"Administration Fees" and "Total Fund Annual Expenses" would
have been 1.25%, 0.25% and 2.62% respectively.
(g) The "Advisory Fees" include the ordinary operating expenses
of the Fund.
</TABLE>
7
<PAGE> 8
EXAMPLES(1)
The table below will help you understand the various costs and expenses
that you will bear directly and indirectly. The table reflects charges and
expenses of the Separate Account and the Funds. However, the table does not
reflect the charges for the optional Investment Protection Plan Rider, which
would add a maximum of $10.30 per year for each year that the rider is in
effect. If you cancel the rider at any time prior to surrendering the policy, a
one-time charge of up to $20.60 would apply.
Charges and expenses may be higher or lower in future years. For more
information, see "Charges and Deductions" at page 27 and the Fund prospectuses
which accompany this Prospectus. NYLIAC may, where premium taxes are imposed by
state law, deduct premium taxes on surrender of the policy or on the Annuity
Commencement Date.
You would pay the following expenses on a hypothetical $1,000 investment in
each of the Investment Divisions listed, assuming a 5% annual return on assets:
1. If you surrender your policy at the end of the stated time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
MainStay VP Capital Appreciation....................... $ 97.44 $150.34 $195.82 $265.37
MainStay VP Cash Management............................ $ 96.39 $147.20 $190.54 $253.96
MainStay VP Convertible................................ $ 98.29 $152.89 $200.11 $274.58
MainStay VP Government................................. $ 97.15 $149.49 $194.39 $262.26
MainStay VP High Yield Corporate Bond.................. $ 96.95 $148.90 $193.41 $260.18
MainStay VP International Equity....................... $101.71 $163.10 $217.16 $310.71
MainStay VP Total Return............................... $ 97.06 $149.20 $193.91 $261.23
MainStay VP Value...................................... $ 97.53 $150.62 $196.30 $266.39
MainStay VP Bond....................................... $ 96.30 $146.91 $190.05 $252.91
MainStay VP Growth Equity.............................. $ 96.19 $146.62 $189.58 $251.87
MainStay VP Indexed Equity............................. $ 94.96 $142.91 $183.31 $238.23
American Century Income & Growth....................... $ 99.62 $156.87 $206.77 $288.78
Dreyfus Large Company Value............................ $100.57 $159.70 $211.51 $298.82
Eagle Asset Management Growth Equity................... $ 99.62 $156.87 $206.77 $288.78
Lord Abbett Developing Growth.......................... $100.57 $159.70 $211.51 $298.82
Alger American Small Capitalization.................... $100.10 $158.29 $209.14 $293.81
Calvert Social Balanced................................ $100.00 $158.00 $208.67 $292.80
Fidelity VIP Contrafund(R)............................. $ 97.91 $151.76 $198.21 $270.50
Fidelity VIP Equity-Income............................. $ 96.95 $148.90 $193.41 $260.18
Janus Aspen Series Balanced............................ $ 97.91 $151.76 $198.21 $270.50
Janus Aspen Series Worldwide Growth.................... $ 98.20 $152.61 $199.65 $273.57
MFS(R) Growth With Income Series....................... $ 99.90 $157.72 $208.20 $291.80
MFS(R) Research Series................................. $ 99.72 $157.15 $207.26 $289.80
Morgan Stanley UIF Emerging Markets Equity............. $108.55 $183.25 $250.47 $379.17
T. Rowe Price Equity Income............................ $ 99.62 $156.87 $206.77 $288.78
Van Eck Worldwide Hard Assets.......................... $103.52 $168.44 $226.04 $329.26
</TABLE>
2. If you annuitize your policy at the end of the stated time period:
<TABLE>
<S> <C> <C> <C> <C>
MainStay VP Capital Appreciation....................... $ 97.44 $ 72.47 $124.03 $265.37
MainStay VP Cash Management............................ $ 96.39 $ 69.07 $118.38 $253.96
MainStay VP Convertible................................ $ 98.29 $ 75.23 $128.64 $274.58
MainStay VP Government................................. $ 97.15 $ 71.54 $122.49 $262.26
MainStay VP High Yield Corporate Bond.................. $ 96.95 $ 70.92 $121.44 $260.18
MainStay VP International Equity....................... $101.71 $ 86.27 $146.97 $310.71
</TABLE>
------------
(1) For purposes of calculating these examples, we have expressed the annual
policy service charge as an annual percentage of assets based on an
estimated average size of policies having an Accumulation Value of less than
$100,000. This calculation method reasonably reflects the annual policy
service charge applicable to policies having an Accumulation Value of less
than $100,000. The annual policy service charge does not apply to policies
having an Accumulation Value of $100,000 or greater. The expenses shown,
therefore, would be slightly lower if your policy's Accumulation Value is
$100,000 or greater. The expenses shown also assume any waiver or
reimbursement arrangements were in effect for the periods shown.
8
<PAGE> 9
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
MainStay VP Total Return............................... $ 97.06 $ 71.23 $121.98 $261.23
MainStay VP Value...................................... $ 97.53 $ 72.77 $124.54 $266.39
MainStay VP Bond....................................... $ 96.30 $ 68.76 $117.83 $252.91
MainStay VP Growth Equity.............................. $ 96.19 $ 68.45 $117.32 $251.87
MainStay VP Indexed Equity............................. $ 94.96 $ 64.44 $110.58 $238.23
American Century Income & Growth....................... $ 99.62 $ 79.53 $135.79 $288.78
Dreyfus Large Company Value............................ $100.57 $ 82.60 $140.89 $298.82
Eagle Asset Management Growth Equity................... $ 99.62 $ 79.53 $135.79 $288.78
Lord Abbett Developing Growth.......................... $100.57 $ 82.60 $140.89 $298.82
Alger American Small Capitalization.................... $100.10 $ 81.07 $138.35 $293.81
Calvert Social Balanced................................ $100.00 $ 80.76 $137.84 $292.80
Fidelity VIP Contrafund(R)............................. $ 97.91 $ 74.00 $126.60 $270.50
Fidelity VIP Equity-Income............................. $ 96.95 $ 70.92 $121.44 $260.18
Janus Aspen Series Balanced............................ $ 97.91 $ 74.00 $126.60 $270.50
Janus Aspen Series Worldwide Growth.................... $ 98.20 $ 74.93 $128.14 $273.57
MFS(R) Growth With Income Series....................... $ 99.90 $ 80.45 $137.33 $291.80
MFS(R) Research Series................................. $ 99.72 $ 79.64 $136.32 $289.80
Morgan Stanley UIF Emerging Markets Equity............. $108.55 $108.08 $182.77 $379.17
T. Rowe Price Equity Income............................ $ 99.62 $ 79.53 $135.79 $288.78
Van Eck Worldwide Hard Assets.......................... $103.52 $ 92.05 $156.51 $329.26
</TABLE>
3. If you do not surrender your policy:
<TABLE>
<S> <C> <C> <C> <C>
MainStay VP Capital Appreciation....................... $ 23.53 $ 72.47 $124.03 $265.37
MainStay VP Cash Management............................ $ 22.40 $ 69.07 $118.36 $253.96
MainStay VP Convertible................................ $ 24.45 $ 75.23 $128.64 $274.68
MainStay VP Government................................. $ 23.22 $ 71.54 $122.49 $262.26
MainStay VP High Yield Corporate Bond.................. $ 23.01 $ 70.92 $121.44 $260.18
MainStay VP International Equity....................... $ 28.14 $ 66.27 $146.97 $310.71
MainStay VP Total Return............................... $ 23.12 $ 71.23 $121.98 $261.23
MainStay VP Value...................................... $ 23.63 $ 72.77 $124.54 $266.39
MainStay VP Bond....................................... $ 22.30 $ 68.76 $117.83 $252.91
MainStay VP Growth Equity.............................. $ 22.19 $ 68.45 $117.32 $251.87
MainStay VP Indexed Equity............................. $ 20.86 $ 64.44 $110.58 $238.23
American Century Income & Growth....................... $ 25.88 $ 79.53 $135.79 $288.78
Dreyfus Large Company Value............................ $ 26.91 $ 82.60 $140.89 $298.82
Eagle Asset Management Growth Equity................... $ 25.88 $ 79.53 $135.79 $288.78
Lord Abbett Developing Growth.......................... $ 26.91 $ 82.60 $140.89 $298.82
Alger American Small Capitalization.................... $ 26.40 $ 81.07 $138.35 $293.81
Calvert Social Balanced................................ $ 26.29 $ 80.76 $137.84 $292.80
Fidelity VIP Contrafund(R)............................. $ 24.04 $ 74.00 $126.60 $270.50
Fidelity VIP Equity-Income............................. $ 23.01 $ 70.92 $121.44 $260.18
Janus Aspen Series Balanced............................ $ 24.04 $ 74.00 $126.60 $270.50
Janus Aspen Series Worldwide Growth.................... $ 24.35 $ 74.93 $128.14 $273.57
MFS(R) Growth With Income Series....................... $ 26.19 $ 80.45 $137.33 $291.80
MFS(R) Research Series................................. $ 25.99 $ 79.84 $136.32 $289.80
Morgan Stanley UIF Emerging Markets Equity............. $ 35.51 $108.08 $182.77 $379.17
T. Rowe Price Equity Income............................ $ 25.88 $ 79.53 $135.79 $288.78
Van Eck Worldwide Hard Assets.......................... $ 30.09 $ 92.05 $156.51 $329.26
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
PERFORMANCE OR EXPENSES. THE ACTUAL EXPENSES PAID OR PERFORMANCE ACHIEVED MAY BE
GREATER OR LESS THAN THOSE SHOWN.
9
<PAGE> 10
QUESTIONS AND ANSWERS ABOUT MAINSTAY PREMIUM PLUS VARIABLE ANNUITY
NOTE: THE FOLLOWING SECTION CONTAINS BRIEF QUESTIONS AND ANSWERS ABOUT
MAINSTAY PREMIUM PLUS VARIABLE ANNUITY. YOU SHOULD REFER TO THE BODY OF THIS
PROSPECTUS FOR MORE DETAILED INFORMATION.
1. WHAT IS MAINSTAY PREMIUM PLUS VARIABLE ANNUITY?
MainStay Premium Plus Variable Annuity is a Flexible Premium Deferred
Variable Retirement Annuity policy issued by NYLIAC. We will apply a Credit to
premiums paid in a percentage amount according to the Credit Rate schedule then
in effect. The Credit Rate schedule may be changed. (See "Credit" at page 22.)
You may allocate premium payments to one or more of the Investment Divisions of
the Separate Account, the DCA Advantage Plan Account, or to the Fixed Account.
The Accumulation Value will fluctuate according to the performance of the
Investment Divisions selected, the daily deduction of the Separate Account
charges, and the interest credited on amounts in the Fixed Account and the DCA
Advantage Plan Account.
2. WHAT IS THE CREDIT?
The Credit is a percentage of each premium payment that is added to your
Accumulation Value at the time of each premium payment. Credits are applied to
the same Allocation Alternatives and/or the DCA Advantage Plan Account in the
same percentages as your premium payments. The Credit Rate applicable to a
premium payment varies, depending on the total amount of premiums received under
the policy. We will deduct the amount of the Credit from the amount returned to
you if you cancel your policy. (See "Your Right to Cancel ("Free Look") at page
22.) We will also deduct from the death benefit proceeds any Credit applied
within the 12 months preceding the death of the owner or annuitant. (See
"Credit" at page 22.)
3. WHERE CAN I ALLOCATE MY PREMIUM PAYMENT?
(a) You can allocate your premium payments to one or more of the following
Allocation Alternatives:
(i) SEPARATE ACCOUNT
The Separate Account currently consists of twenty-six Investment
Divisions. They are listed on the first page of this Prospectus. When
you allocate a premium payment to one of the Investment Divisions, the
Separate Account will invest your premium payment exclusively in shares
of the corresponding Eligible Portfolio of the relevant Fund.
(ii) FIXED ACCOUNT
Each premium payment, or the portion of any premium payment, you
allocate to the Fixed Account will reflect a guaranteed interest rate.
(See "The Fixed Account" at page 36.)
(b) You can also allocate your premium payments to the DCA Advantage Plan.
The DCA Advantage Plan consists of a 6-month DCA Advantage Plan Account. NYLIAC
will credit interest to amounts held in the DCA Advantage Plan Account at rates
we have set in advance. The DCA Advantage Plan allows you to set up automatic
dollar cost averaging from the DCA Advantage Plan Account into the Investment
Divisions and/or the Fixed Account. (See "The DCA Advantage Plan" at page 24.)
4. CAN I MAKE TRANSFERS AMONG THE INVESTMENT DIVISIONS AND THE FIXED ACCOUNT?
You can transfer all or part of the Accumulation Value of your policy
between the Investment Divisions or from the Investment Divisions to the Fixed
Account at least 30 days before the Annuity Commencement Date. Generally, you
can transfer a minimum amount of $500, unless we agree otherwise. You can make
unlimited transfers each Policy Year. We currently do not charge for transfers.
However, we reserve the right to charge up to $30 for each transfer after the
first twelve in a given Policy Year. (See "Transfers" at page 36.)
You can make transfers from the Fixed Account and the DCA Advantage Plan
Account, although certain restrictions may apply. (See "The Fixed Account" at
page 36 and "The DCA Advantage Plan Account" at page 37). In addition, you can
request transfers through the traditional Dollar Cost Averaging, Automatic Asset
Reallocation, or Interest Sweep options described at pages 24 and 25 of this
Prospectus.
5. WHAT CHARGES ARE ASSESSED AGAINST THE POLICY?
Before the date we start making Income Payments to you, we will deduct a
policy service charge of $30 on each Policy Anniversary or upon surrender of the
policy if on that date the Accumulation Value is below $100,000. In addition, we
deduct a daily charge for certain mortality and expense risks NYLIAC assumes and
for
10
<PAGE> 11
policy administration expenses. This charge, on an annual basis is 1.6% of the
average net asset value of the Separate Account. (See "Separate Account Charges"
at page 28.)
We impose a surrender charge on certain partial withdrawals and surrenders
of the policies. This charge is assessed as a percentage of the amount withdrawn
or surrendered during the first eight Payment Years following each premium
payment. We keep track of each premium payment and assess a charge based on the
length of time a premium payment is in your policy before it is withdrawn. The
percentage declines after the first four Payment Years as follows:
<TABLE>
<CAPTION>
SURRENDER
PAYMENT YEAR CHARGE
------------ ---------
<S> <C>
1........................................................... 8%
2........................................................... 8%
3........................................................... 8%
4........................................................... 8%
5........................................................... 7%
6........................................................... 6%
7........................................................... 5%
8........................................................... 4%
9+.......................................................... 0%
</TABLE>
For purposes of calculating the surrender charge, we treat withdrawals as
coming from the oldest premium payment first (on a first-in, first-out basis).
Surrender charges will not be assessed under certain circumstances. For
example, in any one Policy Year, you may withdraw free of a surrender charge the
greater of (a) 10% of the Accumulation Value at the time of withdrawal or (b)
the Accumulation Value of the policy less the accumulated premium payments. (See
"Surrender Charges" and "Exceptions to Surrender Charges" at page 27.)
If you selected the Investment Protection Plan (in states where available),
we will deduct a charge on each policy quarter, based on the amount that is
guaranteed. (See "Other Charges--Investment Protection Plan Rider Charge" at
page 28). The maximum annual charge for this feature is 1% of the amount that is
guaranteed. We may deduct a charge from your Accumulation Value if you cancel
the Investment Protection Plan. We call this charge a Rider Risk Charge
Adjustment. (See "Other Charges--Rider Risk Charge Adjustment" at page 28). The
maximum Rider Risk Charge Adjustment is 2% of the amount that is guaranteed. We
set both of these charges at our sole discretion, subject to the stated
maximums. You should consult with your registered representative to determine
the percentages we are currently charging before you select the Investment
Protection Plan. We will not increase either of these charges after the date the
rider becomes effective for the Investment Protection Plan.
Finally, the value of the shares of each Fund reflects advisory fees,
administration fees and other expenses deducted from the assets of each Fund.
(See the Fund prospectuses which are attached to this Prospectus.)
6. WHAT ARE THE MINIMUM INITIAL AND MAXIMUM ADDITIONAL PREMIUM PAYMENTS?
Unless we permit otherwise, the minimum initial premium payment is $2,000
for Qualified Policies and $5,000 for Non-Qualified Policies. You can make
additional premium payments of at least $2,000 for Qualified Policies and $5,000
for Non-Qualified Policies or such lower amount as we may permit at any time.
You have a choice of sending premium payments directly to NYLIAC or through
pre-authorized monthly deductions from banks, credit unions or similar accounts.
We may agree to other methods of payment. The maximum aggregate amount of
premium payments we accept is $1,000,000 without prior approval. For Qualified
Policies, you may not make premium payments in excess of the amount permitted by
law for the plan.
7. HOW ARE PREMIUM PAYMENTS ALLOCATED?
We will allocate the initial premium payment to the Investment Divisions,
Fixed Account and/or the DCA Advantage Plan Account you have selected within two
Business Days after receipt, subject to our receipt of all information necessary
to issue a policy. Subsequent premium payments will be allocated at the close of
the Business Day on which they are received. We will apply the Credit on your
premium payment to the Allocation Alternatives and the DCA Advantage Plan
Account at the same time that we allocate your premium payment.
11
<PAGE> 12
You may allocate the initial premium payment to, and thereafter may
maintain the Accumulation Value in, a maximum of 18 Allocation Alternatives and
the DCA Advantage Plan Account inclusively. (See "Automatic Asset Reallocation"
at page 25.) Moreover, you may raise or lower the percentages (which must be in
whole numbers) of the premium payment you place in each Allocation Alternative
at the time you make a premium payment. The minimum amount which you may place
in any one Allocation Alternative is $100, or such lower amount as we may
permit. The minimum amount which you may place in the DCA Advantage Plan Account
is $5,000. We reserve the right to limit the amount of a premium payment that
may be placed in any one Allocation Alternative and/or the DCA Advantage Plan
Account and the number of Allocation Alternatives and the DCA Advantage Plan
Account inclusively to which you allocate your Accumulation Value.
8. WHAT HAPPENS IF PREMIUM PAYMENTS ARE NOT MADE?
If we do not receive any premium payments for a period of two years, and
both the Accumulation Value of your policy and your total premium payments less
any withdrawals and surrender charges are less than $2,000, we reserve the right
to terminate your policy. We will notify you of our intention to exercise this
right and give you 90 days to make a premium payment. If we terminate your
policy, we will pay you the Accumulation Value of your policy in one lump sum.
9. CAN I WITHDRAW MONEY FROM THE POLICY BEFORE THE ANNUITY COMMENCEMENT DATE?
You may make withdrawals from your policy before the Annuity Commencement
Date and while the Annuitant is alive. Your withdrawal request must be in a form
that is acceptable to us. Under most circumstances, you may make a minimum
partial withdrawal of $500. Withdrawals may be subject to a surrender charge. In
addition, you may have to pay income tax and a 10% penalty tax may apply if you
are under age 59 1/2. (See "Distributions Under the Policy" at page 29 and
"Federal Tax Matters" at page 37.)
10. HOW WILL NYLIAC MAKE INCOME PAYMENTS ON THE ANNUITY COMMENCEMENT DATE?
We will make Income Payments on a fixed basis. We do not currently offer a
variable income payment option. We will make payments over the life of the
Annuitant with a guarantee of 10 years of payments, even if the Annuitant dies
sooner ("Life Income Payment Option"). Income Payments will always be the same
specified amount. (See "Income Payments" at page 32.) We may offer other
options, at our discretion, where permitted by state law.
11. WHAT HAPPENS IF I DIE OR THE ANNUITANT DIES BEFORE THE ANNUITY COMMENCEMENT
DATE?
If you or the Annuitant dies before the Annuity Commencement Date, we will
pay the Beneficiary under the policy an amount equal to the greatest of:
(a) the Accumulation Value, less any outstanding loan balance, less
Credit amounts applied within the 12 months immediately preceding
death,
(b) the sum of all premium payments made, less any outstanding loan
balance, partial withdrawals, and surrender charges on those partial
withdrawals, or
(c) the "reset value" (as described on page 31 of this Prospectus) plus
any additional premium payments made since the most recent "Reset
Anniversary," less any outstanding loan balance, proportional
withdrawals made since the most recent Reset Anniversary and any
surrender charges applicable to such "proportional withdrawals."
If the Beneficiary is the spouse of the Annuitant or the owner, see
Question 12. (Also see "Death Before Annuity Commencement" at page 31 and
"Federal Tax Matters" at page 37.)
12. WHAT HAPPENS IF MY SPOUSE IS THE BENEFICIARY?
If you are the owner and Annuitant and you die before the Annuity
Commencement Date, your spouse may continue the policy as the new owner and
Annuitant if he/she is also the sole Beneficiary (for Non-Qualified, IRA, Roth
IRA, TSA or SEP policies only). If your spouse chooses to continue the policy,
we will not pay the death benefit proceeds as a consequence of your death, or
the Annuitant's death.
13. CAN I RETURN THE POLICY AFTER IT IS DELIVERED?
You can cancel the policy by returning it to us, or to the registered
representative through whom you purchased it, within 10 days of delivery of the
policy or such longer period as required under state law. In states where
approved, you will receive the policy's Accumulation Value on the Business Day
we receive the policy less
12
<PAGE> 13
the Credit applied, but without any deduction for premium taxes or a surrender
charge. This amount may be more or less than your premium payments. Otherwise,
you will receive from us the greater of (i) the initial premium payment less any
prior partial withdrawals or (ii) the Accumulation Value on the Business Day we
receive the policy less the Credit applied, but without any deduction for
premium taxes or a surrender charge. We will set forth the provision in your
policy.
14. WHAT ABOUT VOTING RIGHTS?
You can instruct NYLIAC how to vote shares of the Funds in which you have a
voting interest through the Separate Account. (See "Voting Rights" at page 39.)
15. HOW WILL NYLIAC CALCULATE INVESTMENT PERFORMANCE OF THE SEPARATE ACCOUNT?
YIELDS. The yield of the MainStay VP Cash Management Investment Division
refers to the annualized income generated by an investment in that Investment
Division over a specified seven-day period. In calculating the yield, we assume
that the income generated for that seven-day period is generated each seven-day
period over a 52-week period. The current yield is shown as a percentage of the
investment. The effective yield is calculated similarly but, when annualized,
the income earned in the Cash Management Investment Division is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment.
The yield of the MainStay VP Government, MainStay VP High Yield Corporate
Bond or MainStay VP Bond Investment Divisions refers to the annualized income
generated in that Investment Division over a specified thirty-day period. In
calculating the yield, we assume that the income generated by the investment
during that thirty-day period is generated each thirty-day period over a
12-month period. The current yield will be shown as a percentage of the
investment.
The yield calculations do not reflect the effect of any surrender charge
that may be applicable to a particular policy. To the extent that the surrender
charge is applicable to a particular policy, the yield of that policy will be
reduced. Past performance is no indication of future performance. For additional
information regarding the yields described above, please refer to the Statement
of Additional Information.
TOTAL RETURN CALCULATIONS. The following tables present performance data
for each of the Portfolios for periods ending December 31, 1999. The average
annual total return (if surrendered) data reflect all Separate Account and Fund
annual expenses shown in the Fee Table on pages 5 through 7. The average annual
total return (if surrendered) figures assume that the policy is surrendered at
the end of the periods shown. The annual policy service charge, which is charged
to policies with an Accumulation Value of less than $100,000, is not reflected.
This fee, if applicable, would reduce the rates of return. The average annual
total return (no surrenders) does not reflect the deduction of any surrender
charges. All rates of return include the reinvestment of investment income,
including interest and dividends, but do not include any Credits applied.
The Portfolios existed prior to the date that they were added to an
Investment Division of the Separate Account. For periods prior to an Investment
Division's inception date, the performance of the Investment Division was
derived from the performance of the corresponding Portfolios, as modified to
reflect the Separate Account and Fund annual expenses as if the policy had been
available during the periods shown, which it was not. Performance Since
Investment Division Inception is not shown because, as of the date of this
prospectus, sales of the policy have not begun and no amounts have been
allocated to the Investment Divisions. The results shown are not an estimate or
guarantee of future investment performance for the Investment Divisions.
13
<PAGE> 14
AVERAGE ANNUAL TOTAL RETURN
(FOR PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD
CAPITAL CASH MAINSTAY VP MAINSTAY VP CORPORATE
INVESTMENT DIVISIONS: APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT BOND
--------------------- ------------ ----------- ----------- ----------- -----------
PORTFOLIO INCEPTION DATE: 1/29/93 1/29/93 10/1/96 1/29/93 5/1/95
-------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN (IF SURRENDERED)
1 Year..................................... 15.48% -4.20% 31.79% -10.22% 3.10%
3 Year..................................... 25.16% 0.91% 15.81% 1.27% 5.34%
5 Year..................................... 25.53% 2.28% 4.11%
10 Year....................................
Since Portfolio Inception.................. 19.89% 2.38% 15.77% 3.27% 9.03%
Since Investment Division Inception*.......
AVERAGE ANNUAL TOTAL RETURN (NO SURRENDERS)
1 Year..................................... 23.48% 3.23% 39.79% -3.25% 11.10%
3 Year..................................... 26.84% 3.46% 17.77% 3.80% 7.69%
5 Year..................................... 26.09% 3.53% 5.28%
10 Year....................................
Since Portfolio Inception.................. 20.14% 3.00% 17.51% 3.86% 10.10%
Since Investment Division Inception*.......
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET
MANAGEMENT LORD ABBETT CALVERT ALGER AMERICAN
GROWTH DEVELOPING SOCIAL SMALL FIDELITY VIP II
INVESTMENT DIVISIONS: EQUITY GROWTH BALANCED CAPITALIZATION CONTRAFUND(R)
--------------------- ------ ----------- -------- -------------- ---------------
PORTFOLIO INCEPTION DATE: 5/1/98 5/1/98 9/2/86 9/20/88 1/3/95
-------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN (IF SURRENDERED)
1 Year..................................... 54.95% 22.15% 2.54% 33.21% 14.34%
3 Year..................................... 12.26% 18.89% 22.37%
5 Year..................................... 15.39% 20.04%
10 Year.................................... 10.28% 16.34%
Since Portfolio Inception.................. 43.10% 6.22% 9.89% 18.93% 25.16%
Since Investment Division Inception*.......
AVERAGE ANNUAL TOTAL RETURN (NO SURRENDERS)
1 Year..................................... 62.95% 30.15% 10.50% 41.21% 22.34%
3 Year..................................... 14.33% 20.75% 24.13%
5 Year..................................... 16.17% 20.71%
10 Year.................................... 10.28% 16.34%
Since Portfolio Inception.................. 46.83% 10.75% 9.89% 18.93% 25.73%
Since Investment Division Inception*.......
</TABLE>
---------------
* As of the date of this prospectus, sales of the policies have not yet
commenced. Therefore, there is no performance data since Investment Division
inception.
14
<PAGE> 15
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP CENTURY LARGE
INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH INDEXED INCOME & COMPANY
EQUITY RETURN VALUE BOND EQUITY EQUITY GROWTH VALUE
------------- ----------- ----------- ----------- ----------- ----------- -------- -------
5/1/95 1/29/93 5/1/95 1/23/84 1/23/84 1/29/93 5/1/98 5/1/98
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
18.08% 7.21% -0.59% -10.03% 19.96% 10.84% 7.78% -2.49%
14.51% 16.75% 4.55% 1.44% 24.05% 23.53%
17.70% 4.46% 24.80% 25.55%
5.90% 16.14%
12.73% 13.77% 11.20% 7.52% 13.78% 18.98% 10.16% -0.47%
26.08% 15.21% 7.13% -3.05% 27.96% 18.84% 15.78% 5.08%
16.51% 18.68% 6.93% 3.97% 25.76% 25.25%
18.42% 5.61% 25.38% 26.11%
5.90% 16.41%
13.68% 14.10% 12.20% 7.52% 13.78% 19.24% 14.59% 4.08%
</TABLE>
<TABLE>
<CAPTION>
MORGAN
STANLEY
JANUS ASPEN MFS(R) UIF T. ROWE
FIDELITY VIP JANUS ASPEN SERIES GROWTH MFS(R) EMERGING PRICE VAN ECK
EQUITY- SERIES WORLDWIDE WITH INCOME RESEARCH MARKETS EQUITY WORLDWIDE
INCOME BALANCED GROWTH SERIES SERIES EQUITY INCOME HARD ASSETS
------------ ----------- ----------- ----------- -------- -------- ------- -----------
10/9/86 9/13/93 9/13/93 10/9/95 7/26/95 10/1/96 3/31/94 9/1/89
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-2.85% 16.80% 53.92% -2.52% 14.13% 84.67% -5.24% 11.13%
11.07% 23.91% 33.71% 15.37% 17.84% 10.24% 9.15% -10.07%
15.98% 22.10% 31.03% 15.80% -1.40%
12.68% 1.42%
11.85% 18.39% 27.44% 18.25% 19.46% 8.54% 14.85% 2.15%
4.69% 24.80% 61.92% 5.05% 22.13% 92.67% 2.12% 19.13%
13.20% 25.62% 33.18% 17.34% 19.73% 12.39% 11.35% -7.80%
16.74% 22.72% 31.50% 16.57% -0.11%
12.68% 1.42%
11.85% 18.71% 27.65% 19.20% 20.30% 10.54% 15.38% 2.15%
</TABLE>
For additional information regarding the total return calculations
described above, you should refer to the Statement of Additional Information.
15
<PAGE> 16
16. ARE POLICY LOANS AVAILABLE?
If you have purchased your policy in connection with a tax-sheltered
annuity "TSA" (Section 403(b)) plan, you may be able to borrow some of your
Accumulation Value subject to certain conditions. (See "Loans" at page 33.)
17. HOW DO I CONTACT MAINSTAY ANNUITIES OR NYLIAC?
<TABLE>
<S> <C> <C>
REGULAR MAIL MainStay Annuities
P.O. Box 13886
Newark, NJ 07188-0886
EXPRESS MAIL MainStay Annuities (Box 13886)
300 Harmon Meadow Boulevard
3rd Floor
Secaucus, NJ 07094
CUSTOMER SERVICE (800) 762-6212
AND UNIT VALUES
</TABLE>
FINANCIAL STATEMENTS
The audited financial statements of NYLIAC (including the auditor's report)
for the fiscal years ended December 31, 1999, 1998 and 1997 are included in the
Statement of Additional Information. As of the date of this prospectus, the sale
of MainStay Premium Plus policies had not begun. Therefore, no financial
statements for the Separate Account are presented.
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<PAGE> 17
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
AND THE SEPARATE ACCOUNT
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
New York Life Insurance and Annuity Corporation ("NYLIAC") is a stock life
insurance company incorporated in Delaware in 1980. NYLIAC is licensed to sell
life, accident and health insurance and annuities in the District of Columbia
and all states. In addition to the policies we describe in this Prospectus,
NYLIAC offers other life insurance policies and annuities.
NYLIAC is a wholly-owned subsidiary of New York Life Insurance Company
("New York Life"), a mutual life insurance company doing business in New York
since 1845. NYLIAC held assets of $29.669 billion at the end of 1999. New York
Life has invested in NYLIAC, and will occasionally make additional contributions
to NYLIAC in order to maintain capital and surplus in accordance with state
requirements.
THE SEPARATE ACCOUNT
The Separate Account was established on November 30, 1994, pursuant to
resolutions of the NYLIAC Board of Directors. The Separate Account is registered
as a unit investment trust with the Securities and Exchange Commission under the
Investment Company Act of 1940. This registration does not signify that the
Securities and Exchange Commission supervises the management, or the investment
practices or policies, of the Separate Account.
Although the assets of the Separate Account belong to NYLIAC, these assets
are held separately from our other assets. The Separate Account's assets are not
chargeable with liabilities incurred in any of NYLIAC's other business
operations (except to the extent that assets in the Separate Account exceed the
reserves and other liabilities of that Separate Account). The income, capital
gains and capital losses incurred on the assets of the Separate Account are
credited to or charged against the assets of the Separate Account, without
regard to the income, capital gains or capital losses arising out of any other
business NYLIAC may conduct. Therefore, the investment performance of the
Separate Account is entirely independent of the investment performance of the
Fixed Account, the DCA Advantage Plan Account and any other separate account of
NYLIAC.
The Separate Account currently has 26 Investment Divisions. Premium
payments allocated to the Investment Divisions are invested solely in the
corresponding Eligible Portfolios of the relevant Fund.
THE PORTFOLIOS
The assets of each Eligible Portfolio are separate from the others and each
such Portfolio has different investment objectives and policies. As a result,
each Eligible Portfolio operates as a separate investment fund and the
investment performance of one Portfolio has no effect on the investment
performance of any other Portfolio. Portfolios described in this prospectus are
different from portfolios available directly to the general public. Investment
results may differ.
WE OFFER NO ASSURANCE THAT ANY OF THE ELIGIBLE PORTFOLIOS WILL ATTAIN THEIR
RESPECTIVE STATED OBJECTIVES.
The Funds also make their shares available to certain other separate
accounts funding variable life insurance policies offered by NYLIAC. This is
called "mixed funding." Except for the MainStay VP Series Fund, all other Funds
also make their shares available to separate accounts of insurance companies
unaffiliated with NYLIAC. This is called "shared funding." Although we do not
anticipate any inherent difficulties arising from mixed and shared funding, it
is theoretically possible that, due to differences in tax treatment or other
considerations, the interests of owners of various contracts participating in a
certain Fund might at some time be in conflict. The Board of Directors/Trustees
of each Fund, each Fund's investment advisers, and NYLIAC are required to
monitor events to identify any material conflicts that arise from the use of the
Funds for mixed and shared funding. For more information about the risks of
mixed and shared funding, please refer to the relevant Fund prospectus.
We provide certain services to you in connection with the investment of
premium payments in the Investment Divisions, which, in turn, invest in the
Eligible Portfolios. These services include, among others, providing information
about the Eligible Portfolios. We receive a service fee from the investment
advisers or other service providers of some of the Funds in return for providing
services of this type. Currently, we receive service fees at annual rates
ranging from .10% to .21% of the aggregate net asset value of the shares of some
of the Eligible Portfolios held by the Investment Divisions.
17
<PAGE> 18
The Eligible Portfolios of the relevant Funds, along with their investment
advisers, are listed in the following table:
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND INVESTMENT ADVISERS ELIGIBLE PORTFOLIOS
- -
<S> <C> <C>
MainStay VP Series Fund, Inc. MacKay Shields LLC MainStay VP Capital Appreciation; MainStay VP
Cash Management; MainStay VP Convertible;
MainStay VP Government; MainStay VP High Yield
Corporate Bond; MainStay VP International Equity;
MainStay VP Total Return; MainStay VP Value
MainStay VP Series Fund, Inc. Monitor Capital Advisors LLC MainStay VP Indexed Equity
MainStay VP Series Fund, Inc. Madison Square Advisors LLC MainStay VP Bond;
MainStay VP Growth Equity
MainStay VP Series Fund, Inc. New York Life Insurance Company MainStay VP American Century Income & Growth;
MainStay VP Dreyfus Large Company Value;
MainStay VP Eagle Asset Management Growth
Equity;
MainStay VP Lord Abbett Developing Growth
The Alger American Fund Fred Alger Management, Inc. Alger American Small Capitalization
Calvert Variable Series, Inc. Calvert Asset Management Company Calvert Social Balanced
Fidelity Variable Insurance Fidelity Management and Research Fidelity VIP II Contrafund(R)
Products Fund II Company
Fidelity Variable Insurance Fidelity Management and Research Fidelity VIP Equity-Income
Products Fund Company
Janus Aspen Series Janus Capital Corporation Janus Aspen Series Balanced;
Janus Aspen Series Worldwide Growth
MFS(R) Variable Insurance MFS(R) Investment Management MFS(R) Growth With Income Series;
Trust(SM) MFS(R) Research Series
The Universal Institutional Funds, Morgan Stanley Asset Management Morgan Stanley UIF Emerging Markets Equity
Inc.
T. Rowe Price Equity Series, Inc. T. Rowe Price Associates, Inc. T. Rowe Price Equity Income
Van Eck Worldwide Insurance Trust Van Eck Associates Corporation Van Eck Worldwide Hard Assets
</TABLE>
Please refer to the attached prospectuses of the respective Funds for a complete
description of the Funds, the investment advisers and the Portfolios. The Funds'
prospectuses should be read carefully before any decision is made concerning the
allocation of premium payments to an Investment Division corresponding to a
particular Eligible Portfolio.
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
NYLIAC retains the right, subject to any applicable law, to make additions
to, deletions from, or substitutions for, the Eligible Portfolio shares held by
any Investment Division. NYLIAC reserves the right to eliminate the shares of
any of the Eligible Portfolios and to substitute shares of another portfolio of
a Fund, or of another registered open-end management investment company. We may
do this if the shares of the Eligible Portfolios are no longer available for
investment or if we believe investment in any Eligible Portfolio would become
inappropriate in view of the purposes of the Separate Account. To the extent
required by law, we will not make substitutions of shares attributable to your
interest in an Investment Division until you have been notified of the change.
This does not prevent the Separate Account from purchasing other securities for
other series or classes of policies, or from processing a conversion between
series or classes of policies on the basis of requests made by policy owners.
We may establish new Investment Divisions when we determine, in our sole
discretion, that marketing, tax, investment or other conditions so warrant. We
will make any new Investment Divisions available to existing
18
<PAGE> 19
policy owners on a basis we determine. We may also eliminate one or more
Investment Divisions, if we determine, in our sole discretion, that marketing,
tax, investment or other conditions warrant.
In the event of any substitution or change, NYLIAC may, by appropriate
endorsement, change the policies to reflect such substitution or change. We also
reserve the right to: (a) operate the Separate Account as a management company
under the Investment Company Act of 1940, (b) deregister it under such Act in
the event such registration is no longer required, (c) combine it with one or
more other separate accounts, and (d) restrict or eliminate the voting rights of
persons having voting rights as to the Separate Account as permitted by law.
REINVESTMENT
We automatically reinvest all dividends and capital gain distributions from
Eligible Portfolios in shares of the distributing Portfolio at their net asset
value on the payable date.
THE POLICIES
This is a flexible premium policy which means additional premium payments
can be made. It is issued on the lives of individual Annuitants.
SELECTING THE VARIABLE ANNUITY THAT'S RIGHT FOR YOU
In addition to the policy described in this prospectus, we offer other
variable annuities, with different features, fees and charges. Your registered
representative can help you decide which is best for you based on your
individual circumstances, time horizon and liquidity preferences.
The MainStay Plus Variable Annuity is designed generally for purchasers
with an intermediate time horizon. It has the lowest total separate account fees
and charges of the three MainStay variable annuities.
The MainStay Access Variable Annuity is designed generally for purchasers
with a shorter time horizon who prefer an annuity with no surrender charges.
Although there is no surrender charge under a MainStay Access Variable Annuity,
other charges are somewhat higher than those in the MainStay Plus Variable
Annuity.
The MainStay Premium Plus Variable Annuity is designed generally for
purchasers who prefer an annuity with a credit. Fees and charges for the
MainStay Premium Plus Variable Annuity are somewhat higher than those in the
MainStay Plus Variable Annuity, and over time, the amount of the Credit may be
more than offset by those higher charges. Furthermore, there may be
circumstances in which the purchase of a MainStay Premium Plus Variable Annuity
is less advantageous than the purchase of another MainStay Variable Annuity
which might have lower fees but no credit. This may be the case, for example, if
you intend to make fewer and/or smaller premium payments into the policy, or if
you anticipate retaining the policy for a significant time beyond the surrender
charge period.
The chart below outlines some of the different features for each MainStay
variable annuity we offer. The MainStay Premium Plus Variable Annuity is offered
by this prospectus. The other variable annuities described below are offered by
separate prospectuses. Your registered representative can provide you with the
prospectuses, which contain more complete information, for the other variable
annuities described below. Please read the prospectuses carefully before
investing.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<CAPTION>
MAINSTAY PREMIUM PLUS MAINSTAY PLUS MAINSTAY ACCESS
VARIABLE ANNUITY VARIABLE ANNUITY VARIABLE ANNUITY
----------------------------- ----------------------------- ----------------------
<S> <C> <C> <C>
DCA Advantage Plan Yes (6 month account) Yes (6, 12, 18 month accounts No
are available)
Surrender Charge Period 8 years (8%, 8%, 8%, 8%, 7%, 6 years (7%, 7%, 7%, 6%, 5%, N/A
6%, 5%, 4%) (Based on each 4%) (Based on each premium
premium payment date) payment date)
Death Benefit Guarantee Annual Reset to age 80 Annual Reset to age 85* Annual Reset to age 80
Total Separate Account 1.60% 1.40% 1.55%
Charges (mortality and
expense risk charge and
administration fee)
Annual Policy Fee $30 $30 $40
Minimum Cash Value Required $100,000 $20,000 $50,000
to Waive Policy Fee
</TABLE>
All policies and features may not be available in all states.
* Every 3 years in some states.
19
<PAGE> 20
The policies are variable. This means that the Accumulation Value will
fluctuate based on the investment experience of the Investment Divisions you
select, the interest credited on the Fixed Accumulation Value and, in states
where approved, the DCA Accumulation Value. NYLIAC does not guarantee the
investment performance of the Separate Account or of the Funds. You bear the
entire investment risk with respect to amounts allocated to the Investment
Divisions of the Separate Account. We offer no assurance that the investment
objectives of the Investment Divisions will be achieved. Accordingly, amounts
allocated to the Investment Divisions of the Separate Account are subject to the
risks inherent in the securities markets and, specifically, to price
fluctuations in the Funds' investments.
As the owner of the policy, you have the right to (a) change the
Beneficiary, (b) name a new owner (on Non-Qualified Policies only), (c) receive
Income Payments, and (d) name a payee to receive Income Payments. You cannot
lose these rights. However, all rights of ownership cease upon your death.
QUALIFIED AND NON-QUALIFIED POLICIES
We designed the policies primarily for the accumulation of retirement
savings, and to provide income at a future date. We issue both Qualified and
Non-Qualified Policies. Both types of policies offer tax-deferred accumulation.
You may purchase a Non-Qualified Policy with after-tax dollars to provide for
retirement income other than through a tax-qualified plan. You may purchase a
Qualified Policy with pre-tax dollars for use with any one of the tax-qualified
plans listed below.
(1) Section 403(b) Tax Sheltered Annuities purchased by employees of
certain tax-exempt organizations and certain state-supported
educational institutions;
(2) Section 408 or 408A Individual Retirement Annuities ("IRAs"), including
Roth IRAs;
(3) Section 457 Deferred Compensation Plans; and
(4) Section 403(a) annuities.
Please see "Federal Tax Matters" at page 37 for a detailed description of
these plans.
If you are considering a Qualified Policy, you should be aware that this
annuity will fund a retirement plan that already provides tax deferral under the
Internal Revenue Code. In such situations, the tax deferral of the annuity does
not provide additional benefits. In addition, you should be aware that there are
fees and charges in an annuity that may not be included in other types of
investments which may be more or less costly. However, the fees and charges
under the policies are designed to provide for certain payment guarantees and
features that may not be available in these other types of investments. They
include:
(1) a Fixed Account option, which features a guaranteed fixed interest
rate;
(2) a death benefit that is payable should you die while the policy is in
force, which is reset every year and is guaranteed to be at least the
amount of your premium payments, less any outstanding loan balance,
partial withdrawals, surrender charges, and Credits applied within the
12 months immediately preceding death;
(3) the option for your Beneficiary to receive a guaranteed amount of
monthly income for his or her lifetime should you die prior to the
Annuity Commencement Date;
(4) the option to receive a guaranteed amount of monthly income for life
after the first Policy Year; and
(5) two riders (an Unemployment Benefit Rider and a Livings Need Benefit
Rider), which allow you to withdraw money from your policy without the
imposition of surrender charges, subject to the terms of each rider.
These features are explained in detail in this Prospectus. You should consult
with your tax or legal advisor to determine if the policy is suitable for your
tax qualified plan.
POLICY APPLICATION AND PREMIUM PAYMENTS
You can purchase a policy by completing an application with a registered
representative. The application will be sent along with your initial premium
payment to NYLIAC. In addition, in states where permitted, you can also instruct
a broker-dealer with whom NYLIAC has entered into an agreement to forward the
initial premium payment along with a Policy Request to us. If the application or
Policy Request supplied by a broker-dealer is complete and accurate, we will
credit the initial premium payment within two Business Days after receipt. If we
cannot credit the initial premium payment within five Business Days after we
receive it because the application or Policy Request is incomplete or
inaccurate, we will contact you or the broker-dealer providing the application
or Policy Request and explain the reason for the delay. Unless you consent to
NYLIAC's retaining the initial premium payment and crediting it as soon as the
necessary requirements are fulfilled, we will offer to refund the initial
premium payment immediately. Acceptance of applications is subject to NYLIAC's
rules. We reserve the
20
<PAGE> 21
right to reject any application or initial premium payment. YOU ARE ENCOURAGED
TO SEND SUBSEQUENT PREMIUM PAYMENTS DIRECTLY AS INDICATED ON PAGE 16.
If we issue your policy based on a Policy Request, we will require you to
provide to us either a signed acknowledgement of the information contained in
the Policy Request in a form acceptable to us, or, where required by applicable
state law or regulation, a signed application form. From the time we issue the
policy until we receive the signed acknowledgement or application, the
Beneficiary under the policy will be the policy owner (or the estate). Also
policy transactions may not be made unless the Beneficiary designation or
transaction request is signature guaranteed. Upon receipt of the signed
acknowledgement or application form, the Beneficiary will be specified under the
policy and we will process transactions requested with respect to the policy
without requiring a signature guarantee.
We will allocate initial premium payments directly to the Investment
Divisions, the Fixed Account or the DCA Advantage Plan Account in accordance
with your initial allocation instructions. We will allocate subsequent premium
payments in accordance with your most recent instructions on file with us.
You may allocate the initial premium payments in up to 18 Allocation
Alternatives and the DCA Advantage Plan Account inclusively. Thereafter, you may
maintain the Accumulation Value in up to 18 Investment Divisions and the DCA
Advantage Plan Account inclusively plus the Fixed Account at any one time. We
will credit subsequent premium payments to the policy at the close of the
Business Day on which they are received at MainStay Annuities--Client Services.
Moreover, you may increase or decrease the percentages of the premium payments
(which must be in whole number percentages) allocated to each Allocation
Alternative at the time a premium payment is made. However, any change to the
policy's allocations may not result in the Accumulation Value being allocated to
more than 18 Investment Divisions and the DCA Advantage Plan Account inclusively
plus the Fixed Account.
Unless we permit otherwise, the minimum initial premium payment is $2,000
for Qualified Policies and $5,000 for Non-Qualified Policies. You may make
additional premium payments in the same respective amounts or such lower amount
as we may permit at any time or by any method NYLIAC makes available. The
currently available methods of payment are direct payments to NYLIAC,
pre-authorized monthly deductions from your bank, a credit union or similar
accounts and any other method agreed to by us. You may make additional premium
payments at any time before the Annuity Commencement Date and while you and the
Annuitant are living. The maximum aggregate amount of premium payments we accept
is $1,000,000 without prior approval. NYLIAC reserves the right to limit the
dollar amount of any premium payment.
For Qualified Policies, you may not make premium payments in any Policy
Year that exceed the amount permitted by the plan or by law.
PAYMENTS RETURNED FOR INSUFFICIENT FUNDS
If your premium payment is returned for insufficient funds, we reserve the
right to reverse the investment options chosen and charge you a $20.00 fee for
each returned payment. In addition, the Fund may also redeem shares to cover any
losses it incurs as result of a returned payment. If a payment is returned for
insufficient funds for two consecutive periods, the privileges to pay by check
or electronically will be suspended until you notify us to reinstate it, and we
agree.
21
<PAGE> 22
CREDIT
We will apply a Credit to your Accumulation Value at the time of each
premium payment. The Credit is calculated as a percentage of each premium
payment. The percentage will depend on the Credit Rate schedule then in effect,
and will never be less than 2 percent. The Credit Rate applicable to a premium
payment varies, depending on the total amount of premium payments received under
the policy ("Total Accumulated Premiums"). Withdrawals will not reduce Total
Accumulated Premiums. In addition, if we receive more than one premium payment
within 180 days of the Policy Date, we will adjust the Credits applied to such
payments using the Credit Rate applicable to the later payment(s) made during
that period. We will apply any additional Credit amounts resulting from such
adjustments as of the date we receive the later premium payment. As of the date
of this prospectus, the Credit Rate schedule is as follows:
<TABLE>
<CAPTION>
CREDIT RATE SCHEDULE
---------------------------------------------------
CREDIT RATE
(AS A % OF EACH
TOTAL ACCUMULATED PREMIUMS PREMIUM PAYMENT)
-------------------------------- ----------------
<S> <C> <C>
but less
at least than
---------- ----------
minimum $ 50,000 3.00%
$ 50,000 $ 100,000 3.25%
$ 100,000 $ 500,000 4.50%
$ 500,000 $1,000,000 4.50%
$1,000,000* $2,500,000 4.50%
$2,500,000 $5,000,000 5.00%
$5,000,000 unlimited 5.00%
</TABLE>
---------------
* Total Accumulated Premiums in excess of $1,000,000 are subject to prior
approval. (See "Policy Application and Premium Payments" on page 21.)
With notice to you, in our sole discretion, we may change both the Credit
Rates and the Total Accumulated Premiums brackets applicable to future premium
payments under your policy. Subsequent premium payments will receive the Credit
Rate then in effect for the applicable bracket. In setting the Credit Rates and
associated brackets, NYLIAC will consider fixed and variable expenses incurred
in policy issue, servicing and maintenance, the average length of time that
policies issued remain in force along with the mortality experience of those
policies, and NYLIAC's competitive position in the market place.
We will deduct the amount of the Credit from the amount returned to you if
you cancel your policy. (See "Your Right to Cancel ("Free Look")" below.) Also,
we will deduct from the death benefit proceeds any Credit applied within the 12
months immediately preceding the death of the owner or annuitant. (See "Death
Before Annuity Commencement" at page 31.)
Credits are allocated to the same Allocation Alternatives based on the same
percentages used to allocate your premium payments. We do not consider Credits
to be premium payments for purposes of any discussion in this prospectus.
Credits are also not considered to be your investment in the policy for tax
purposes.
Fees and charges for a policy with a Credit may be higher than those for
other policies. For example, we use a portion of the surrender charge and
Separate Account Charge to help recover the cost of providing the Credit under
the policy. (See "Charges and Deductions" at page 28.) Over time, the amount of
the Credit may be more than offset by those higher charges. There may be
circumstances in which the purchase of a MainStay Premium Plus Variable Annuity
is less advantageous than the purchase of another MainStay variable annuity
which might have lower fees but no credit. This may be the case, for example, if
you intend to make fewer and/or smaller premium payments into the policy, or if
you anticipate retaining the policy for a significant time beyond the surrender
charge period. Under certain circumstances (such as a period of poor market
performance), the fees and charges associated with the Credit may exceed the sum
of the Credit and any related earnings. You should consider this possibility
before purchasing the policy.
YOUR RIGHT TO CANCEL ("FREE LOOK")
You may cancel the policy by returning it to us, or to the registered
representative through whom you purchased it, within 10 days of delivery of the
policy or such longer period as required under state law. In states where
approved, you will receive the policy's Accumulation Value on the Business Day
we receive the policy, less the Credit, but without any deduction for premium
taxes or a surrender charge. This amount may be more or less than your premium
payments. Otherwise, you will receive from us the greater of (i) the initial
premium payment less any prior partial withdrawals or (ii) the Accumulation
Value on the Business Day we receive the
22
<PAGE> 23
policy, less the Credit, but without any deduction for premium taxes or a
surrender charge. We will set forth the provision in your policy.
ISSUE AGES
We can issue Non-Qualified Policies if both you and the Annuitant are not
older than age 80. We will accept additional premium payments until either you
or the Annuitant reaches the age of 80, unless we agree otherwise. For IRA, Roth
IRA, TSA and SEP plans, you must also be the Annuitant. We can issue Qualified
Policies if the Owner/Annuitant is between the ages of 18 and 80. We will accept
additional premium payments until the Owner/Annuitant reaches the age of 80,
unless otherwise limited by the terms of a particular plan or unless we agree
otherwise.
TRANSFERS
You may transfer amounts between Investment Divisions of the Separate
Account or to the Fixed Account at least 30 days before the Annuity Commencement
Date. You may not make transfers into the DCA Advantage Plan Account. Transfers
made from the DCA Advantage Plan Account to the Investment Divisions are subject
to different limitations (See "The DCA Advantage Plan" at page 24.) Except in
connection with transfers made pursuant to traditional Dollar Cost Averaging,
Automatic Asset Reallocation, Interest Sweep, and the DCA Advantage Plan, the
minimum amount that you may transfer from one Investment Division to other
Investment Divisions or to the Fixed Account, is $500. Except for the
traditional Dollar Cost Averaging, Automatic Asset Reallocation and Interest
Sweep options, and the DCA Advantage Plan, if the value of the remaining
Accumulation Units in an Investment Division or Fixed Account would be less than
$500 after you make a transfer, we will transfer the entire value unless NYLIAC
in its discretion determines otherwise. The amount(s) transferred to other
Investment Divisions must be a minimum of $25 for each Investment Division.
There is no charge for the first twelve transfers in any one Policy Year.
NYLIAC reserves the right to charge up to $30 for each transfer in excess of
twelve, subject to any applicable state insurance law requirements. Any transfer
made in connection with traditional Dollar Cost Averaging, Automatic Asset
Reallocation, Interest Sweep and the DCA Advantage Plan will not count as a
transfer toward the twelve transfer limit. You may make transfers from the Fixed
Account to the Investment Divisions in connection with the Interest Sweep option
and in certain other situations. (See "The Fixed Account" at page 36.)
Your transfer requests must be in writing on a form approved by NYLIAC or
by telephone in accordance with established procedures. (See "Procedures for
Telephone Transactions" below.) We will make transfers from Investment Divisions
based on the Accumulation Unit values at the end of the Business Day on which we
receive the transfer request. (See "Delay of Payments" at page 33.)
PROCEDURES FOR TELEPHONE TRANSACTIONS
You may authorize us to accept telephone instructions from you or other
persons you designate for the following types of transactions: premium
allocations, transfers among Allocation Alternatives and/or the DCA Advantage
Plan, partial withdrawals, periodic partial withdrawals, traditional Dollar Cost
Averaging, Automatic Asset Reallocation, Interest Sweep, or to reset or cancel
the Investment Protection Plan. You can elect this feature by completing and
signing a Telephone Authorization form. Telephone Authorization may be elected,
changed or canceled at any time. You, or other persons you designate, may effect
telephone transactions by speaking with a service representative at (800)
762-6212. Furthermore, we will confirm all telephone transactions in writing.
NYLIAC is not liable for any loss, cost or expense for action on telephone
instructions which are believed to be genuine in accordance with these
procedures. We must receive telephone transfer requests no later than 4:00 p.m.
Eastern Time in order to assure same day processing. We will process requests
received after 4:00 p.m. Eastern Time on the next Business Day.
DOLLAR COST AVERAGING PROGRAMS
The main objective of dollar cost averaging is to achieve an average cost
per share that is lower than the average price per share during volatile market
conditions. Since you transfer the same dollar amount to an Investment Division
with each transfer, you purchase more units in an Investment Division if the
value per unit is low and fewer units if the value per unit is high. Therefore,
you achieve a lower than average cost per unit if prices fluctuate over the long
term. Similarly, for each transfer out of an Investment Division, you sell more
units in an Investment Division if the value per unit is low and fewer units if
the value per unit is high. Dollar cost averaging does not assure a profit or
protect against a loss in declining markets. Because it involves continuous
investing regardless of price levels, you should consider your financial ability
to continue to make purchases during periods of low price levels. NYLIAC will
also offer the DCA Advantage Plan under which you may utilize a
23
<PAGE> 24
6-month DCA Account. (See "The DCA Advantage Plan" below.) We do not count
transfers under dollar cost averaging as part of your 12 free transfers each
Policy Year. There is no charge imposed for either Dollar Cost Averaging
Program.
We have set forth below an example of how dollar cost averaging works. In
the example, we have assumed that you want to move $100 from the Cash Management
Investment Division to the MainStay VP Growth Equity Investment Division each
month. Assuming the Accumulation Unit values below, you would purchase the
following number of Accumulation Units:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<CAPTION>
AMOUNT ACCUMULATION ACCUMULATION UNITS
TRANSFERRED MUNIT VALUE PURCHASED
<S> <C> <C> <C>
1 $100 $10.00 10.00
2 $100 $ 8.00 12.50
3 $100 $12.50 8.00
4 $100 $ 7.50 13.33
Total $400 $38.00 43.83
</TABLE>
The average unit price is calculated as follows:
<TABLE>
<S> <C> <C> <C> <C>
Total share price $38.00
----------------------- = ------ = $9.50
Number of months 4
</TABLE>
The average unit cost is calculated as follows:
<TABLE>
<S> <C> <C> <C> <C>
Total amount transferred $400.00
---------------------------- = ------- = $9.13
Total units purchased 43.83
</TABLE>
In this example, you would have paid an average cost of $9.13 per unit
while the average price per unit is $9.50.
(a) Traditional Dollar Cost Averaging
This option permits systematic investing to be made in equal installments
over various market cycles to help reduce risk. You may specify, prior to the
Annuity Commencement Date, a specific dollar amount to be transferred from any
Investment Divisions to any combination of Investment Divisions and/or the Fixed
Account. You will specify the Investment Divisions to transfer money from, the
Investment Divisions and/or Fixed Account to transfer money to, the amounts to
be transferred, the date on which transfers will be made, subject to our rules,
and the frequency of the transfers (either monthly, quarterly, semi-annually or
annually). You may not make transfers from the Fixed Account, but you may make
transfers into the Fixed Account. Each transfer from an Investment Division must
be at least $100. You must have a minimum Accumulation Value of $5,000 to elect
this option. NYLIAC may reduce the minimum transfer amount and minimum
Accumulation Value at its discretion.
NYLIAC will make all dollar cost averaging transfers on the day of each
calendar month that you specify or on the next Business Day (if the day you have
specified is not a Business Day or does not exist in that month). You may
specify any day of the month. In order to process a transfer under our
traditional Dollar Cost Averaging option, NYLIAC must have received a request in
writing or by telephone (see "Procedures for Telephone Transactions" at page 23)
no later than one week prior to the date the transfers are to begin.
You may cancel the traditional Dollar Cost Averaging option at any time in
a written request or by telephone (see "Procedures for Telephone Transactions"
at page 23). NYLIAC may also cancel this option if the Accumulation Value is
less than $5,000, or such lower amount as we may determine. You may not elect
the traditional Dollar Cost Averaging option if you have selected the Automatic
Asset Reallocation option.
(b) The DCA Advantage Plan
This feature permits you to set up automatic dollar cost averaging using
the 6-month DCA Advantage Plan Account when an initial premium payment or a
subsequent premium payment is made. You can request the DCA Advantage Plan in
addition to the traditional Dollar Cost Averaging, Automatic Asset Reallocation,
or Interest Sweep options.
You must allocate a minimum of $5,000 to the DCA Advantage Plan Account.
You must specify the Investment Divisions into which transfers from the DCA
Advantage Plan Account are to be made. However, you may not select the DCA
Advantage Plan Account if its duration would extend beyond the Annuity
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<PAGE> 25
Commencement Date. Amounts in the DCA Advantage Plan Account will be transferred
to the Investment Divisions in 6 monthly transfers. Dollar cost averaging will
begin one month from the date NYLIAC receives the premium payment and transfers
will be made on the same day or on the next Business Day (if the day is not a
Business Day or does not exist in that month) each subsequent month for the
duration of the DCA Advantage Plan Account. The amount of each transfer will be
calculated at the time of the transfer based on the number of remaining monthly
transfers and the remaining value in the DCA Advantage Plan Account. For
example, the amount of the first monthly transfer out of the DCA Advantage Plan
Account will equal 1/6 of the value of the DCA Advantage Plan Account on the
date of the transfer. The amount of each of the five remaining transfers will
equal 1/5, 1/4, 1/3, 1/2 and the balance, respectively, of the value of the DCA
Advantage Plan Account on the date of each transfer.
You may not have more than one DCA Advantage Plan Account open at the same
time. Accordingly, any subsequent premium payment we receive for a DCA Advantage
Plan Account that is already open will be allocated to that same DCA Advantage
Plan Account. The entire value of the DCA Advantage Plan Account will be
completely transferred to the Investment Divisions within the duration
specified. For example, if you allocate an initial premium payment to the
6-month DCA Advantage Plan Account under which the 6-month term will end on
December 31, 2000 and you make a subsequent premium payment to the 6-month DCA
Advantage Plan Account before December 31, 2000, we will allocate the subsequent
premium payment to the same 6-month DCA Advantage Plan Account already opened
and transfer the entire value of the 6-month DCA Advantage Plan Account to the
Investment Divisions by December 31, 2000 even though a portion of the money was
not in that DCA Advantage Plan Account for the entire 6-month period.
You can make partial withdrawals and transfers (in addition to the
automatic transfers described above) from the DCA Advantage Plan Account. We
will make partial withdrawals and transfers first from the DCA Accumulation
Value attributed to the initial premium payment and then from the DCA
Accumulation Value attributed to subsequent allocations in the order received.
You cannot make transfers into the DCA Advantage Plan Account from any
Allocation Alternative.
AUTOMATIC ASSET REALLOCATION
This option allows you to maintain the percentage allocated to each
Investment Division at a pre-set level. For example, you might specify that 50%
of the Variable Accumulation Value of your policy be allocated to the MainStay
VP Convertible Investment Division and 50% of the Variable Accumulation Value be
allocated to the MainStay VP International Equity Investment Division. Over
time, the fluctuations in each of these Investment Division's investment results
will shift the percentages. If you elect this Automatic Asset Reallocation
option, NYLIAC will automatically transfer your Variable Accumulation Value back
to the percentages you specify. You may choose to have reallocations made
quarterly, semi-annually or annually. The minimum Variable Accumulation Value
required to elect this option is $5,000. There is no minimum amount which you
must allocate among the Investment Divisions under this option. There is no
charge imposed for Automatic Dollar Cost Averaging.
You can cancel the Automatic Asset Reallocation option at any time in a
written request or by telephone (see "Procedures for Telephone Transactions" at
page 23). NYLIAC may also cancel this option if the Accumulation Value is less
than $5,000, or such a lower amount as we may determine. You may not elect the
Automatic Asset Reallocation option if you have selected the traditional Dollar
Cost Averaging option.
INTEREST SWEEP
You can request, prior to the Annuity Commencement Date, that the interest
earned on monies allocated to the Fixed Account be transferred from the Fixed
Account to any combination of Investment Divisions. You will specify the
Investment Divisions, the frequency of the transfers (either monthly, quarterly,
semi-annually or annually), and the day of each calendar month to make the
transfers. The minimum Fixed Accumulation Value required to elect this option is
$5,000, but this amount may be reduced at our discretion. NYLIAC will make all
Interest Sweep transfers on the day of each calendar month you have specified or
on the next Business Day (if the day you have specified is not a Business Day or
does not exist in that month). There is no charge imposed for the Interest Sweep
option.
You may request the Interest Sweep option in addition to either traditional
Dollar Cost Averaging, Automatic Asset Reallocation or the DCA Advantage Plan.
If an Interest Sweep transfer is scheduled for the same day as a transfer
related to the traditional Dollar Cost Averaging option, the Automatic Asset
Reallocation option or the DCA Advantage Plan, we will process the Interest
Sweep transfer first.
25
<PAGE> 26
transfer related to the traditional Dollar Cost Averaging option, the Automatic
Asset Reallocation option or the DCA Advantage Plan, we will process the
Interest Sweep transfer first.
YOU MAY NOT TRANSFER MORE THAN 20% of the Fixed Accumulation Value at the
beginning of the Policy Year from the Fixed Account to the Investment Divisions
during a Policy Year. (See "The Fixed Account--Transfers to Investment
Divisions" at page 36.) If an Interest Sweep option transfer would cause more
than 20% of the Fixed Accumulation Value at the beginning of the Policy Year to
be transferred from the Fixed Account, we will not process the transfer and the
Interest Sweep option will be automatically suspended.
You can cancel the Interest Sweep option at any time in a written request
or by telephone (see "Procedures for Telephone Transactions" at page 22). We may
also cancel this option if the Fixed Accumulation Value is less than $5,000, or
such a lower amount as we may determine.
ACCUMULATION PERIOD
(a) Crediting of Premium Payments
You can allocate a portion of each premium payment to one or more
Investment Divisions or the Fixed Account. The minimum amount that you may
allocate to any one Investment Division or the Fixed Account is $100 (or such
lower amount as we may permit). You may also allocate all or a portion of each
premium payment to the DCA Advantage Plan Account. The minimum amount that you
may allocate to the DCA Account is $5,000. (See "The DCA Advantage Plan" at page
24.) We will allocate the initial premium payment to the Allocation Alternatives
and/or the DCA Advantage Plan Account you have specified within two Business
Days after receipt. We will allocate additional premium payments to the
Allocation Alternatives and/or the DCA Advantage Plan Account at the close of
the Business Day on which they are received at MainStay Annuities -- Client
Services. We will apply Credits to the same Allocation Alternatives and/or the
DCA Advantage Plan Account based on the same percentages used to allocate your
premium payments.
We will credit that portion of each premium payment (and any Credit
thereon) you allocate to an Investment Division in the form of Accumulation
Units. We determine the number of Accumulation Units we credit to a policy by
dividing the amount allocated to each Investment Division by the Accumulation
Unit value for that Investment Division on the day we are making this
calculation. The value of an Accumulation Unit will vary depending on the
investment experience of the Portfolio in which the Investment Division invests.
The number of Accumulation Units we credit to a policy will not, however, change
as a result of any fluctuations in the value of an Accumulation Unit. (See "The
Fixed Account" at page 36 for a description of interest crediting.)
(b) Valuation of Accumulation Units
The value of Accumulation Units in each Investment Division will change
daily to reflect the investment experience of the corresponding Portfolio as
well as the daily deduction of the Separate Account charges. The Statement of
Additional Information contains a detailed description of how we value the
Accumulation Units.
THIRD PARTY INVESTMENT ADVISORY ARRANGEMENTS
In some cases, the policy may be sold to policy owners who independently
utilize the services of a third party advisor offering asset allocation and/or
market timing services. NYLIAC may honor transfer and withdrawal instructions
from such asset allocation and market timing services if it has received
authorization to do so from the policy owner participating in the service. We do
not endorse, approve or recommend such services in any way and you should be
aware that fees paid for such services are separate from and in addition to fees
paid under the policy.
Because the amounts associated with some of these transactions may be
unusually large, the investment advisers may have difficulty processing the
transactions. In addition, execution of such transactions may possibly adversely
affect the Variable Accumulation Values of policy owners who are not utilizing
asset allocation or market timing services. Accordingly, NYLIAC reserves the
right to not accept transfer instructions which are submitted by any person,
asset allocation and/or market timing services on behalf of policy owners. We
will exercise this right only in accordance with uniform procedures that we may
establish from time to time and that will not unfairly discriminate against
similarly situated policy owners.
POLICY OWNER INQUIRIES
Your inquiries should be addressed to MainStay Annuities. (See page 16).
26
<PAGE> 27
CHARGES AND DEDUCTIONS
SURRENDER CHARGES
Since no deduction for a sales charge is made from premium payments, we
impose a surrender charge on certain partial withdrawals and surrenders of the
policies. The surrender charge covers certain expenses relating to the sale of
the policies, including commissions to registered representatives and other
promotional expenses. We measure the surrender charge as a percentage of the
amount withdrawn or surrendered. The surrender charge may apply to amounts
applied under certain Income Payment options.
If you surrender your policy, we deduct the surrender charge from the
amount paid to you. In the case of a partial withdrawal, you can direct NYLIAC
to take surrender charges either from the remaining value of the Allocation
Alternatives and/or the DCA Advantage Plan Account from which the partial
withdrawals are made, or from the amount paid to you. If the remaining value in
an Allocation Alternative and/or the DCA Advantage Plan Account is less than the
necessary surrender charge, we will deduct the remainder of the charge from the
amount withdrawn from that Allocation Alternative and/or the DCA Advantage Plan
Account.
The maximum surrender charge will be 8% of the amount withdrawn. The
percentage of the surrender charge varies, depending upon the length of time a
premium payment is in your policy before it is withdrawn. For purposes of
calculating the applicable surrender charge, we deem premium payments to be
withdrawn on a first-in, first-out basis. Unless required otherwise by state
law, the surrender charge for amounts withdrawn or surrendered during the first
four Payment Years following the premium payment to which such withdrawal or
surrender is attributable is 8% of the amount withdrawn or surrendered. This
charge then declines by 1% per year for each additional Payment Year, until the
eighth Payment Year, after which no charge is made, as shown in the following
chart:
AMOUNT OF SURRENDER CHARGE
<TABLE>
<CAPTION>
SURRENDER CHARGE
----------------
<S> <C>
1........................................................... 8%
2........................................................... 8%
3........................................................... 8%
4........................................................... 8%
5........................................................... 7%
6........................................................... 6%
7........................................................... 5%
8........................................................... 4%
9+.......................................................... 0%
</TABLE>
EXCEPTIONS TO SURRENDER CHARGES
We will not assess a surrender charge:
(a) on amounts you withdraw in any Policy Year which are less than or
equal to the greater of (i) 10% of the Accumulation Value at the
time of surrender or withdrawal or (ii) the Accumulation Value
less accumulated premium payments.
(b) if NYLIAC cancels the policy;
(c) when we pay proceeds upon the death of the policy owner or the
Annuitant;
(d) when you select an Income Payment option in any Policy Year after
the first Policy Year;
(e) when a required minimum distribution is made under a Qualified
Policy (this amount will, however, count against the first
exception described above); and
(f) on withdrawals you make under the Living Needs Benefit Rider or
Unemployment Benefit Rider.
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<PAGE> 28
OTHER CHARGES
(a) Separate Account Charge
Prior to the Annuity Commencement Date, we deduct a daily charge from the
assets of the Separate Account to compensate us for certain mortality and
expense risks we assume under the policies and for providing policy
administration services. On an annual basis, the charge equals 1.60% of the
average daily net asset value of the Separate Account. We guarantee that this
charge will not increase. If the charge is insufficient to cover actual costs
and assumed risks, the loss will fall on NYLIAC. If the charge is more than
sufficient, we will add any excess to our general funds. We may use these funds
for any corporate purpose, including expenses relating to the sale of the
policies, to the extent that surrender charges do not adequately cover sales
expenses.
The mortality risk assumed is the risk that Annuitants as a group will live
for a longer time than our actuarial tables predict. As a result, we would be
paying more Income Payments than we planned. We also assume a risk that the
mortality assumptions reflected in our guaranteed annuity payment tables, shown
in each policy, will differ from actual mortality experience. Lastly, we assume
a mortality risk that, at the time of death, the guaranteed minimum death
benefit will exceed the policy's Accumulation Value. The expense risk assumed is
the risk that the cost of issuing and administering the policies will exceed the
amount we charge for these services. We expect to make a profit from this
charge, which we may use for any purpose, including expenses associated with the
Credit.
(b) Policy Service Charge
We deduct an annual policy service charge of $30 each Policy Year on the
Policy Anniversary or upon surrender of the policy if on the Policy Anniversary
or date of surrender the Accumulation Value is less than $100,000. We deduct the
annual policy service charge from each Allocation Alternative and the DCA
Advantage Plan Account, if applicable, in proportion to its percentage of the
Accumulation Value on the Policy Anniversary or date of surrender. This charge
is designed to cover the costs for providing services under the policy such as
collecting, processing and confirming premium payments and establishing and
maintaining the available methods of payment.
(c) Investment Protection Plan Rider Charge (optional)
If you selected the Investment Protection Plan (in states where available),
we will deduct a charge on the first Business Day on each policy quarter that
the rider is in effect based on the amount that is guaranteed. We will deduct
this charge beginning with the first policy quarter after the effective date of
the rider. (See "Riders--Investment Protection Plan Rider" at page 35). We will
deduct the charge from each Allocation Alternative and the DCA Advantage Plan
Account in proportion to its percentage of the Accumulation Value on the first
Business Day of the applicable policy quarter.
The maximum annual charge is 1% of the amount that is guaranteed. We may
set a lower charge at our sole discretion. You should check with your registered
representative to determine the percentage we are currently charging before you
select this feature.
If you reset the amount that is guaranteed, a new charge for the rider will
apply. This charge may be more or less than the charge currently in effect on
your policy, but will never exceed the stated maximum. The charge in effect on
the effective date of the rider or on the effective date of any reset will not
change after the date the rider becomes effective. We will continue to deduct
the current charge until the first policy quarter following the effective date
of the reset.
(d) Rider Risk Charge Adjustment (optional)
If you cancel the Investment Protection Plan, we will deduct a Rider Risk
Charge Adjustment from your Accumulation Value. The cancellation will be
effective on the date we receive your request. (See "Riders--Investment
Protection Plan Rider" at page 35). We will deduct the Rider Risk Charge
Adjustment from each Allocation Alternative and each DCA Advantage Plan Account
in proportion to its percentage of the Accumulation Value on that day. We will
not deduct this charge if you surrender your policy. However, surrender charges
may apply.
We will not change the adjustment for a particular policy once it is set on
the date the rider takes effect. The maximum Rider Risk Charge Adjustment is 2%
of the amount that is guaranteed. We may set a lower charge at our sole
discretion. You should check with your registered representative to determine
the percentage we are currently charging before you select this feature.
28
<PAGE> 29
If you reset the amount that is guaranteed, a new Rider Risk Charge
Adjustment may apply. This charge may be more or less than the charge currently
in effect on your policy, but will never exceed the stated maximum. The
adjustment charge in effect on the effective date of the rider or on the
effective date of any reset will not increase after the rider is issued.
(e) Fund Charges
The value of the assets of the Separate Account will indirectly reflect the
Funds' total fees and expenses. The Funds' total fees and expenses are not part
of the policy. They may vary in amount from year to year. These fees and
expenses are described in detail in the relevant Fund's prospectus.
GROUP AND SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce the surrender
charge and the policy service charge or change the minimum initial and
additional premium payment requirements. Group arrangements include those in
which a trustee or an employer, for example, purchases policies covering a group
of individuals on a group basis. Sponsored arrangements include those in which
an employer allows us to sell policies to its employees or retirees on an
individual basis.
Our costs for sales, administration, and mortality generally vary with the
size and stability of the group among other factors. We take all these factors
into account when reducing charges. To qualify for reduced charges, a group or
sponsored arrangement must meet certain requirements, including our requirements
for size and number of years in existence. Group or sponsored arrangements that
have been set up solely to buy policies or that have been in existence less than
six months will not qualify for reduced charges.
We will make any reductions according to our rules in effect when a request
for a policy is approved. We may change these rules from time to time. Any
variation in the surrender charge or policy service charge will reflect
differences in costs or services and will not be unfairly discriminatory.
TAXES
NYLIAC may, where premium taxes are imposed by state law, deduct such taxes
from your policy either (i) when a surrender or cancellation occurs, or (ii) at
the Annuity Commencement Date. Applicable premium tax rates depend upon such
factors as your current state of residency, and the insurance laws and NYLIAC's
status in states where premium taxes are incurred. Current premium tax rates
range from 0% to 3.5%. Applicable premium tax rates are subject to change by
legislation, administrative interpretations or judicial acts.
Under present laws, NYLIAC will also incur state and local taxes (in
addition to the premium taxes described above) in several states. At present,
these taxes are not significant. If they increase, however, NYLIAC may make
charges for such taxes.
NYLIAC does not expect to incur any federal income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the policies. (See "Federal Tax Matters" at page 37.) Based upon
these expectations, no charge is being made currently for corporate federal
income taxes which may be attributable to the Separate Account. Such a charge
may be made in future years for any federal income taxes NYLIAC incurs.
DISTRIBUTIONS UNDER THE POLICY
SURRENDERS AND WITHDRAWALS
You can make partial withdrawals, periodic partial withdrawals, hardship
withdrawals or surrender the policy to receive part or all of the Accumulation
Value at any time before the Annuity Commencement Date and while the Annuitant
is living, by sending a written request to MainStay Annuities. In addition, you
may request partial withdrawals and periodic partial withdrawals by telephone.
(See "Procedures for Telephone Transactions" at page 23.) The amount available
for withdrawal is the Accumulation Value at the end of the Business Day during
which we receive the written or telephonic surrender or withdrawal request, less
any outstanding loan balance, surrender charges, premium taxes which we may
deduct, and policy service charge, if applicable. If you have not provided us
with a written election not to withhold federal income taxes at the time you
make a withdrawal or surrender request, NYLIAC must by law withhold such taxes
from the taxable portion of any surrender or withdrawal. We will remit that
amount to the federal government. In addition, some states have enacted
legislation requiring withholding. We will pay all surrenders or withdrawals
within seven days of receipt of all
29
<PAGE> 30
documents (including documents necessary to comply with federal and state tax
law), subject to postponement in certain circumstances. (See "Delay of Payments"
at page 33.)
Since you assume the investment risk with respect to amounts allocated to
the Separate Account and because certain surrenders or withdrawals are subject
to a surrender charge and premium tax deduction, the total amount paid upon
surrender of the policy (taking into account any prior withdrawals) may be more
or less than the total premium payments made.
Surrenders and withdrawals may be taxable transactions, and the Internal
Revenue Code provides that a 10% penalty tax may be imposed on certain early
surrenders or withdrawals. (See "Federal Tax Matters--Taxation of Annuities in
General" at page 37.)
(a) Surrenders
We may deduct a surrender charge and any state premium tax, if applicable,
less any outstanding loan balance, and less the annual policy service charge, if
applicable, from the amount paid. We will pay the proceeds in a lump sum to you
unless you elect a different Income Payment method. (See "Income Payments" at
page 32.) Surrenders may be taxable transactions and the 10% penalty tax
provisions may be applicable. (See "Federal Tax Matters--Taxation of Annuities
in General" at page 37.)
(b) Partial Withdrawals
The minimum amount that can be withdrawn is $500, unless we agree
otherwise. We will withdraw the amount from the Allocation Alternatives and/or
the DCA Advantage Plan Account in accordance with your request. If you do not
specify how to allocate a partial withdrawal among the Allocation Alternatives
and/or the DCA Advantage Plan Account, we will allocate the partial withdrawal
on a pro-rata basis. Partial withdrawals may be taxable transactions and the 10%
penalty tax provisions may be applicable. (See "Federal Tax Matters--Taxation of
Annuities in General" at page 37.)
If the requested partial withdrawal is greater than the value in any of the
Allocation Alternatives and/or the DCA Advantage Plan Account from which the
partial withdrawal is being made, we will pay the entire value of that
Allocation Alternative and/or the DCA Advantage Plan Account, less any surrender
charge that may apply, to you. We will not process partial withdrawal requests
if honoring such requests would result in an Accumulation Value of less than
$2,000.
(c) Periodic Partial Withdrawals
You may elect to receive regularly scheduled partial withdrawals from the
policy. These periodic partial withdrawals may be paid on a monthly, quarterly,
semi-annual, or annual basis. You will elect the frequency of the withdrawals
and the day of the month for the withdrawals to be made. We will make all
withdrawals on the day of each calendar month you specify, or on the next
Business Day (if the day you have specified is not a Business Day or does not
exist in that month). You must specify the Investment Divisions and/or the Fixed
Account from which the periodic partial withdrawals will be made. The minimum
amount under this feature is $100, or such lower amount as we may permit.
Periodic partial withdrawals may be taxable transactions and the 10% penalty tax
provisions may be applicable. (See "Federal Tax Matters--Taxation of Annuities
in General" at page 37.) If you do not specify otherwise, we will withdraw money
on a pro-rata basis from each Investment Division and/or the Fixed Account. You
may make periodic partial withdrawals from the DCA Advantage Plan Account.
You can elect to receive "Interest Only" periodic partial withdrawals for
the interest earned on monies allocated to the Fixed Account. If this option is
chosen, the $100 minimum for periodic partial withdrawals will be waived.
However, you must have at least $5,000 in the Fixed Account at the time of each
periodic partial withdrawal, unless we agree otherwise.
(d) Hardship Withdrawals
Under certain Qualified Policies, the Plan Administrator may allow, in its
sole discretion, certain withdrawals it determines to be "Hardship Withdrawals."
The surrender charge and 10% penalty tax, if applicable, and provisions
applicable to partial withdrawals apply to Hardship Withdrawals.
REQUIRED MINIMUM DISTRIBUTION
For IRAs and IRA SEPs, the policy owner is generally not required to elect
the required minimum distribution option until April 1st of the year following
the calendar year he or she attains age 70 1/2. For TSAs, the policy owner is
generally not required to elect the required minimum distribution option until
April 1st of the year
30
<PAGE> 31
following the calendar year he or she attains age 70 1/2 or until April 1st of
the year following the calendar year he or she retires, whichever occurs later.
OUR RIGHT TO CANCEL
If we do not receive any premium payments for a period of two years, and
both the Accumulation Value of your policy and your total premium payments less
any withdrawals and surrender charges are less than $2,000, we reserve the right
to terminate your policy subject to any applicable state insurance law or
regulation. We will notify you of our intention to exercise this right and give
you 90 days to make a premium payment. If we terminate your policy, we will pay
you the Accumulation Value of your policy in one lump sum.
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is the date specified on the Policy Data
Page. The Annuity Commencement Date is the day that Income Payments are
scheduled to commence unless the policy has been surrendered or an amount has
been paid as proceeds to the designated Beneficiary prior to that date. The
earliest possible annuity commencement date is the first Policy Anniversary. You
may change the Annuity Commencement Date to an earlier date by providing written
notice to NYLIAC. The latest possible annuity commencement date is the
annuitant's 90(th) birthday. You may defer the Annuity Commencement Date to a
later date if we agree to it, provided that we receive a written notice of the
request at least one month before the last selected Annuity Commencement Date.
The Annuity Commencement Date and Income Payment method for Qualified Policies
may also be controlled by endorsements, the plan, or applicable law.
DEATH BEFORE ANNUITY COMMENCEMENT
If you or the Annuitant dies prior to the Annuity Commencement Date, we
will pay an amount as proceeds to the designated Beneficiary, as of the date we
receive proof of death and all requirements necessary to make the payment. That
amount will be the greatest of:
(a) the Accumulation Value, less any outstanding loan balance, less Credits
applied within the 12 months immediately preceding death;
(b) the sum of all premium payments made, less any outstanding loan
balance, partial withdrawals, and surrender charges on those partial
withdrawals; or
(c) the "reset value" plus any additional premium payments made since the
most recent "Reset Anniversary," less any outstanding loan balance,
"proportional withdrawals" made since the most recent Reset Anniversary
and any surrender charges applicable to such "proportional
withdrawals."
We recalculate the reset value, with respect to any policy, every year from
the Policy Date ("Reset Anniversary") until you or the Annuitant reaches age 80.
On the first Policy Anniversary, we calculate the reset value by comparing (a)
the Accumulation Value; and (b) the total of the premium payments made to the
policy, less any partial withdrawals, and surrender charges on those partial
withdrawals. The reset value calculated on the second and subsequent Reset
Anniversaries is based on a comparison between (a) the Accumulation Value on the
current Reset Anniversary; and (b) the reset value on the prior Reset
Anniversary, plus any premium payments since the prior Reset Anniversary, less
any proportional withdrawals, and surrender charges on those proportional
withdrawals. The greater of the compared values will be the new reset value.
Please consult with your registered representative regarding the reset value
that is available under your particular policy.
A proportional withdrawal is an amount equal to the amount withdrawn from
the policy divided by the policy's Accumulation Value immediately preceding the
withdrawal, multiplied by the reset value immediately preceding the withdrawal.
We have set forth below an example of how we calculate the death benefit.
In this example, we have assumed the following:
(1) you purchase a policy with a $200,000 premium payment;
(2) a Credit of $9,000 is applied to your policy;
(3) $20,000 withdrawal is made prior to the policy's first Policy
Anniversary;
(4) the Accumulation Value is $220,000 on the first Policy Anniversary
(Reset Anniversary); and
(5) you die in the second Policy Year and the Accumulation Value of the
policy has decreased to $175,000.
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<PAGE> 32
The death benefit is the greatest of:
<TABLE>
<S> <C> <C>
(a) Accumulation Value = $175,000
(b) Premium payments less any partial = $180,000 ($200,000 - $20,000)
withdrawals; or
(c) Reset value (Accumulation Value on first = $220,000
Policy Anniversary)
</TABLE>
In this example, your Beneficiary(ies) would receive $220,000.
The formula guarantees that the amount we pay will at least equal the sum
of all premium payments (less any outstanding loan balance, partial withdrawals,
and surrender charges on such partial withdrawals), independent of the
investment experience of the Separate Account. The Beneficiary may receive the
amount payable in a lump sum or under any life income payment option which is
then available. If more than one Beneficiary is named, each Beneficiary will be
paid a pro rata portion from each Allocation Alternative and the DCA Advantage
Plan Account in which the policy is invested as of the date we receive proof of
death and all requirements necessary to make the payment to that Beneficiary. We
will keep the remaining balance in the policy to pay the other Beneficiaries.
Due to market fluctuations, the remaining Accumulation Value may increase or
decrease and we may pay subsequent Beneficiaries a different amount.
We will make payments in a lump sum to the Beneficiary unless you have
elected or the Beneficiary elects otherwise in a signed written notice which
gives us the information that we need. If such an election is properly made, we
will apply all or part of these proceeds:
(i) under the Life Income Payment Option to provide an immediate
annuity for the Beneficiary who will be the policy owner and
Annuitant; or
(ii) under another Income Payment option we may offer at the time.
Payments under the annuity or under any other method of payment
we make available must be for the life of the Beneficiary, or for
a number of years that is not more than the life expectancy of
the Beneficiary at the time of the policy owner's death (as
determined for federal tax purposes), and must begin within one
year after the policy owner's death. (See "Income Payments"
below.)
If your spouse is the Beneficiary, we can pay the proceeds to the surviving
spouse if you die before the Annuity Commencement Date or the policy can
continue with the surviving spouse as (a) the new policy owner and, (b) if you
were the Annuitant, as the Annuitant. If a policy is jointly owned, ownership
rights and privileges under the policy must be exercised jointly and benefits
under the policy will be paid upon the death of any joint owner. (See "Federal
Tax Matters--Taxation of Annuities in General" at page 37.)
If the Annuitant and, where applicable under another Income Payment option,
the Joint Annuitant, if any, die after the Annuity Commencement Date, NYLIAC
will pay the sum required by the Income Payment option in effect.
We will make any distribution or application of policy proceeds within 7
days after NYLIAC receives all documents (including documents necessary to
comply with federal and state tax law) in connection with the event or election
that causes the distribution to take place, subject to postponement in certain
circumstances. (See "Delay of Payments" at page 33.)
INCOME PAYMENTS
(a) Election of Income Payment Options
We will make Income Payments under the Life Income Payment Option or under
such other option we may offer at that time where permitted by state laws. (See
"Annuity Payments" in the Statement of Additional Information.) We will require
that a lump sum payment be made if the Accumulation Value is less than $2,000.
At any time before the Annuity Commencement Date, you may change the Income
Payment option or request any other method of payment we agree to. If the Life
Income Payment Option is chosen, we may require proof of birth date before
Income Payments begin. For Income Payment options involving life income, the
actual age of the Annuitant will affect the amount of each payment. Since
payments based on older Annuitants are expected to be fewer in number, the
amount of each annuity payment should be greater. We will make payments under
the Life Income Payment Option in the same specified amount and over the life of
the Annuitant with a guarantee of 10 years of payments, even if the Annuitant
dies sooner. NYLIAC does not currently offer variable Income Payment options.
Under Income Payment options involving life income, the payee may not
receive Income Payments equal to the total premium payments if the Annuitant
dies before the actuarially predicted date of death. We base Income
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Payment Options involving life income on annuity tables that vary on the basis
of sex, unless the policy was issued under an employer sponsored plan or in a
state which requires unisex rates.
(b) Other Methods of Payment
If NYLIAC agrees, you (or the Beneficiary upon the death of you or the
Annuitant prior to the Annuity Commencement Date) may choose to have Income
Payments made under some other method of payment or in a lump sum.
(c) Proof of Survivorship
We may require satisfactory proof of survival from time to time before we
pay any Income Payments or other benefits. We will request the proof at least 30
days prior to the next scheduled payment date.
DELAY OF PAYMENTS
We will pay any amounts due from the Separate Account under the policy
within seven days of the date NYLIAC receives all documents (including documents
necessary to comply with federal and state tax law) in connection with a request
unless:
1. The New York Stock Exchange ("NYSE") is closed for other than usual
weekends or holidays, or trading on the NYSE is otherwise
restricted;
2. An emergency exists as defined by the Securities and Exchange
Commission ("SEC");
3. The SEC permits a delay for the protection of security holders; or
4. The check used to pay the premium has not cleared through the
banking system. This may take up to 15 days.
For the same reasons, we will delay transfers from the Separate Account to
the Fixed Account.
We may also delay payments of any amount due from the Fixed Account and/or
the DCA Program. When permitted by law, we may defer payment of any partial
withdrawal or full surrender request for up to six months from the date of
surrender from the Fixed Account and/or the DCA Program. We will pay interest of
at least 3.5% per year on any partial withdrawal or full surrender request
deferred for 30 days or more.
DESIGNATION OF BENEFICIARY
You may name, in a written form acceptable to us, one or more
Beneficiaries. Thereafter, before the Annuity Commencement Date and while the
Annuitant is living, you may change the Beneficiary by written notice in a form
acceptable to NYLIAC. If before the Annuity Commencement Date, the Annuitant
dies before you and no Beneficiary for the proceeds or for a stated share of the
proceeds survives, the right to the proceeds or shares of the proceeds passes to
you. If you are the Annuitant, the proceeds pass to your estate. However, if the
policy owner who is not the Annuitant dies before the Annuity Commencement Date,
and no Beneficiary for the proceeds or for a stated share of the proceeds
survives, the right to the proceeds or shares of the proceeds passes to the
policy owner's estate.
For policies issued through a Policy Request, the Beneficiary will be the
policy owner or his/her estate until the Beneficiary is designated as described
under "Policy Application and Premium Payments" at page 21.
RESTRICTIONS UNDER INTERNAL REVENUE CODE SECTION 403(B)(11)
Distributions attributable to salary reduction contributions made in years
beginning after December 31, 1988 (including the earnings on these
contributions), as well as to earnings in such years on salary reduction
accumulations held as of the end of the last year beginning before January 1,
1989, may not begin before the employee attains age 59 1/2, separates from
service, dies or becomes disabled. The plan may also provide for distribution in
the case of hardship. However, hardship distributions are limited to amounts
contributed by salary reduction. The earnings on such amounts may not be
withdrawn. Even though a distribution may be permitted under these rules (e.g.
for hardship or after separation from service), it may still be subject to a 10%
additional income tax as a premature distribution. To the extent that these
limitations on distributions conflict with the redeemability provisions of the
Investment Company Act of 1940, NYLIAC relies upon a November 28, 1988 no-
action letter for exemptive relief.
Under the terms of your plan, you may have the option to invest in other
403(b) funding vehicles, including 403(b)(7) custodial accounts. You should
consult your plan document to make this determination.
LOANS
Loans are available only if you have purchased your policy in connection
with a 403(b) plan and may not be available in all states for plans subject to
the Employment Retirement Income Security Act of 1974 ("ERISA").
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Under your 403(b) policy, you may borrow against your policy's Accumulation
Value after the first Policy Year and prior to the Annuity Commencement Date.
Unless we agree otherwise, only one loan may be outstanding at a time. A minimum
Accumulation Value of $5,000 must remain in the policy. The minimum loan amount
is $500. The maximum loan that you may take is the lesser of: (a) 50% of the
policy's Accumulation Value on the date of the loan or (b) $50,000. We withdraw
a loan processing fee of $25 from the Accumulation Value on a pro rata basis,
unless prohibited by applicable state law or regulation. If on the date of the
loan you do not have a Fixed Accumulation Value equal to at least 125% (110% in
New York) of the loan amount, we will transfer sufficient Accumulation Value
from the Investment Divisions and/or DCA Advantage Plan Account on a pro rata
basis so that the Fixed Accumulation Value equals 125% (110% in New York) of the
loan amount. While a loan is outstanding, you may not make partial withdrawals
or transfers which would reduce the Fixed Accumulation Value to an amount less
than 125% (110% in New York) of the outstanding loan balance.
For plans not subject to ERISA, the interest rate paid by the policy owner
of the loan will equal 5%. We will credit the assets being held in the Fixed
Account to secure the loan with the minimum guaranteed interest rate of 3%. For
plans subject to ERISA, we will apply the interest charged on the loan at the
then current prime rate plus 1%. We will credit the money being held in the
Fixed Account to secure the loan with a rate of interest that is the prime rate
less 1%, but it will always be at least equal to the minimum guaranteed interest
rate of 3%. For all plans, we will assess interest in arrears as part of the
periodic loan repayments.
You must repay the loan on a periodic basis at a frequency not less
frequently than quarterly and over a period no greater than five years from the
date it is taken. If a loan repayment is in default we will withdraw the amount
in default from the Fixed Accumulation Value to the extent permitted by federal
income tax rules. We will take such a repayment on a first-in, first-out (FIFO)
basis from amounts allocated to the Fixed Account.
We permit loans to acquire a principal residence under the same terms
described above, except that:
(a) the minimum loan amount is $5,000; and
(b) repayment of the loan amount may be extended to a maximum of
twenty-five years.
We deduct any outstanding loan balance including any accrued interest from
the Fixed Accumulation Value prior to payment of a surrender or the commencement
of the annuity benefits. On death of the policy owner or Annuitant, we deduct
any outstanding loan balance from the Fixed Accumulation Value as a partial
withdrawal as of the date we receive the notice of death.
Loans are subject to the terms of the policy, your 403(b) plan and the
Internal Revenue Code, which may impose restrictions upon them. We reserve the
right to suspend, modify, or terminate the availability of loans under this
policy at any time. However, any action taken by us will not affect already
outstanding loans.
RIDERS
At no additional charge, we include two riders under the policy: an
Unemployment Benefit Rider, for Non-Qualified, IRA and Roth IRA policies, and a
Living Needs Benefit Rider, for all types of policies. The first two riders
described below provide for an increase in the amount that can be withdrawn from
your policy which will not be subject to a surrender charge upon the happening
of certain qualifying events. The Investment Protection Plan rider is available
at an additional cost. The riders are only available in those states where they
have been approved. Please consult with your registered representative regarding
the availability of these riders in your state.
(a) Living Needs Benefit Rider
If the Annuitant enters a nursing home, becomes terminally ill or disabled,
you may be eligible to receive all or a portion of the Accumulation Value
without paying a surrender charge. The policy must have been inforce for at
least one year and have a minimum Accumulation Value of $5,000. You must also
provide us with proof that the Annuitant has spent 60 or more consecutive days
in a nursing home. Withdrawals will be taxable to the extent of gain and, prior
to age 59 1/2, may be subject to a 10% IRS penalty. This rider is in effect in
all states where approved.
(b) Unemployment Benefit Rider
For all Non-Qualified, IRA and Roth IRA policies, if you become unemployed,
you may be eligible to increase the amount that can be withdrawn from your
policy up to 50% without paying surrender charges. This rider can only be used
once. The policy must have been inforce for at least one year and have a minimum
Accumulation
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Value of $5,000. You also must have been unemployed for at least 60 consecutive
days. Withdrawals may be taxable transactions and, prior to age 59 1/2, may be
subject to a 10% IRS penalty. This rider is in effect in all states where
approved.
(c) Investment Protection Plan Rider (optional)
THE INVESTMENT PROTECTION PLAN RIDER IS AVAILABLE ONLY IN STATES WHERE
APPROVED. If you select this rider, you will be able to surrender the policy and
receive the greater of the policy Accumulation Value or the amount that is
guaranteed under the rider. While this rider is in effect, we will deduct a
charge from your Accumulation Value on each policy quarter. (See "Other
Charges--Investment Protection Plan Rider Charge" at page 28). When you make a
partial withdrawal, we will reduce the amount that is guaranteed under the rider
by the amount of the proportional withdrawal. The proportional withdrawal is
equal to the amount withdrawn from the policy (including any amount withdrawn
for the surrender charge) divided by the Accumulation Value immediately
preceding the withdrawal, multiplied by the amount that is guaranteed
immediately preceding the withdrawal.
The amount that is guaranteed under the rider will depend on when you
select or reset it:
(i) At the time of application: The amount that is guaranteed will
equal the initial premium payment and Credit thereon plus any
additional premium payments and Credits thereon we receive in the
first Policy Year, less all proportional withdrawals. Premium
payments made after the first Policy Year will not be included in
the amount that is guaranteed. The rider will take effect on the
Policy Date.
(ii) While the policy is in force: The amount that is guaranteed will
equal the Accumulation Value on the date the rider takes effect,
less all proportional withdrawals. The rider will take effect on
the next Policy Anniversary following the date we receive your
application for the rider.
(iii) Resetting the guaranteed amount: You may request to reset the
amount that is guaranteed at any time while the rider is in
effect. The new rider will take effect on the Policy Anniversary
immediately following the date we receive your request to reset.
The amount that is guaranteed will equal the Accumulation Value
on the next Policy Anniversary, less all proportional
withdrawals. We will also reset a new charge for the rider and
the Rider Risk Charge Adjustment on that Policy Anniversary.
(See "Other Charges--Investment Protection Plan Rider Charge"
and "Other Charges--Rider Risk Charge Adjustment" at page 28).
You will be eligible to receive the benefit under this rider beginning on
the tenth Policy Anniversary after the later of (1) the effective date of the
rider or (2) the effective date of any reset. You may also exercise this benefit
on any Policy Anniversary subsequent to the tenth. To exercise this benefit, you
must send us a written request to surrender the policy no later than ten
Business Days after the applicable Policy Anniversary. Amounts paid to you under
the terms of this rider may be taxable and you may be subject to a 10% tax
penalty if paid before you reach age 59 1/2.
You may cancel this rider within 30 days after delivery of the rider or, if
you selected this feature at the time of application, within 30 days after
delivery of the policy. You must return the rider to us or to the registered
representative through whom it was purchased, with a written request for
cancellation. Upon receipt of this request, we will promptly cancel the rider
and refund any Investment Protection Plan Rider charge which may have been
deducted. After this 30-day period, you still have the right to discontinue the
rider. However, we will deduct a Rider Risk Charge Adjustment from your
Accumulation Value and we will not refund any Investment Protection Plan Rider
charge which may have been deducted. (See "Other Charges--Rider Risk Charge
Adjustment" at page 28). The cancellation will be effective on the date we
receive your request.
This rider is available on all Non-Qualified and Roth IRA policies so long
as the first date that you can exercise and receive benefits under the rider is
before the Annuity Commencement Date. The rider is also available on IRA and
SEP-IRA policies if the policy owner is younger than age 66 on the date the
rider takes effect.
Because this rider generally provides protection against decreases in the
policy's Accumulation Value due to negative investment performance, this rider
may not be a benefit to you if all or most of your Accumulation Value is
allocated to the Fixed Account. You should select this rider only if you have or
intend to have most or all of your Accumulation Value allocated to the
Investment Divisions.
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This rider will provide no benefit if you surrender the policy before the
Policy Anniversary on which you are eligible to exercise the rider. Therefore,
you should select this rider only if you intend to keep the policy for at least
ten years.
We have set forth below an example of how the benefit of this rider may be
realized and how partial withdrawals will impact the guaranteed amount. In this
example, we have assumed the following:
(1) the rider is selected at the time of application;
(2) an initial premium payment of $100,000 is made;
(3) a Credit of $4,500 is applied to your policy;
(4) no additional premium payments are made;
(5) a withdrawal of $20,000 is made in the eighth Policy Year;
(6) the Accumulation Value immediately preceding the withdrawal has
decreased to $80,000; and
(7) the Accumulation Value on the tenth Policy Year has decreased to
$50,000.
The guaranteed amount at time of application was $104,500. When the partial
withdrawal was made in the eighth Policy Year, we reduced the guaranteed amount
by the amount of the proportional withdrawal. We calculated the amount of the
proportional withdrawal by taking the requested withdrawal amount, dividing it
by the Accumulation Value immediately preceding the withdrawal, and then
multiplying that number by the guaranteed amount immediately preceding the
withdrawal.
Proportional withdrawal = ($20,000/$80,000) x $104,500 = $26,125
To determine the new guaranteed amount after the withdrawal, we subtracted
the amount of the proportional withdrawal from the initial guaranteed amount:
($104,500 - $26,125) = $78,375. If this policy is surrendered in the tenth
Policy Year, the policy owner receives $78,375 even though the Accumulation
Value has decreased to $50,000.
THE FIXED ACCOUNT
The Fixed Account is supported by the assets in NYLIAC's general account,
which includes all of NYLIAC's assets except those assets specifically allocated
to NYLIAC's separate accounts. NYLIAC has sole discretion to invest the assets
of the Fixed Account subject to applicable law. The Fixed Account is not
registered under the federal securities laws and is generally not subject to
their provisions. Furthermore, the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this Prospectus relating to the
Fixed Account. These disclosures regarding the Fixed Account may be subject to
certain applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
(a) Interest Crediting
NYLIAC guarantees that it will credit interest at an annual effective rate
of at least 3% to amounts allocated or transferred to the Fixed Account under
the policies. We credit interest on a daily basis. NYLIAC may, at its sole
discretion, credit a higher rate or rates of interest to amounts allocated or
transferred to the Fixed Account. Interest rates will be set on the anniversary
of each premium payment or transfer. All premium payments, any Credit thereon,
and additional amounts (including transfers from other Investment Divisions)
allocated to the Fixed Account, plus prior interest earned on such amounts, will
receive their applicable interest rate for one-year periods from the anniversary
on which the allocation or transfer was made.
(b) Transfers to Investment Divisions
You may transfer amounts from the Fixed Account to the Investment Divisions
up to 30 days prior to the Annuity Commencement Date, subject to the following
conditions.
1. The maximum amount you are allowed to transfer from the Fixed
Account to the Investment Divisions during any Policy Year is 20% of the
Fixed Accumulation Value at the beginning of the Policy Year.
2. The minimum amount that you may transfer from the Fixed Account to
the Investment Divisions is the lesser of (i) $500 or (ii) the Fixed
Accumulation Value, unless we agree otherwise. Additionally, the remaining
value in the Fixed Account must be at least $500. If, after a contemplated
transfer, the remaining values in the Fixed Account would be less than
$500, that amount must be included in the transfer, unless
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NYLIAC in its discretion permits otherwise. We determine amounts
transferred from the Fixed Account on a first-in, first-out ("FIFO") basis,
for purposes of determining the rate at which we credit interest on monies
remaining in the Fixed Account.
Except as part of an existing request relating to the traditional Dollar
Cost Averaging option, the Interest Sweep option or the DCA Advantage Plan
(where available), you may not transfer money into the Fixed Account if you made
a transfer out of the Fixed Account during the previous six-month period.
You must make transfer requests in writing on a form approved by NYLIAC or
by telephone in accordance with established procedures. (See "Procedures for
Telephone Transactions" at page 23.)
We will deduct partial withdrawals and apply any surrender charges to the
Fixed Account on a FIFO basis (i.e., from any value in the Fixed Account
attributable to premium payments or transfers from Investment Divisions in the
same order in which you allocated such payments or transfers to the Fixed
Account during the life of the policy).
THE DCA ADVANTAGE PLAN ACCOUNT
Like the Fixed Account, the DCA Advantage Plan Account is also supported by
the assets in NYLIAC's general account. The DCA Advantage Plan Account is not
registered under the federal securities laws. The information contained in the
first paragraph under "The Fixed Account" on page 36, equally applies to the DCA
Advantage Plan Account.
NYLIAC will set interest rates in advance for each date on which we may
receive a premium payment to the DCA Advantage Plan Account. We will never
declare less than a 3% annual effective rate. Premium payments into the DCA
Advantage Plan Account and any Credit thereon will receive the applicable
interest rate in effect on the Business Day we receive the premium payment.
Interest rates for subsequent premium payments made into the DCA Advantage Plan
Account may be different from the rate applied to prior premium payments made
into the DCA Advantage Plan Account.
The annual effective rate that we declare is credited only to amounts
remaining in the DCA Advantage Plan Account. We credit the interest on a daily
basis. Because money is periodically transferred out of the DCA Advantage Plan
Account, amounts in the DCA Advantage Plan Account will not achieve the declared
annual effective rate.
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. The
Qualified Policies are designed for use by individuals in retirement plans which
are intended to qualify as plans qualified for special income tax treatment
under Sections 219, 403, 408, 408A or 457 of the Code. The ultimate effect of
federal income taxes on the Accumulation Value, on Income Payments and on the
economic benefit to you, the Annuitant or the Beneficiary depends on the type of
retirement plan for which the Qualified Policy is purchased, on the tax and
employment status of the individual concerned and on NYLIAC's tax status. The
following discussion assumes that Qualified Policies are used in retirement
plans that qualify for the special federal income tax treatment described above.
This discussion is not intended to address the tax consequences resulting from
all of the situations in which a person may be entitled to or may receive a
distribution under a policy. Any person concerned about these tax implications
should consult a competent tax adviser before making a premium payment. This
discussion is based upon NYLIAC's understanding of the present federal income
tax laws as they are currently interpreted by the Internal Revenue Service. We
cannot predict the likelihood of continuation of the present federal income tax
laws or of the current interpretations by the Internal Revenue Service, which
may change from time to time without notice. Any such change could have
retroactive effects regardless of the date of enactment. Moreover, this
discussion does not take into consideration any applicable state or other tax
laws except with respect to the imposition of any state premium taxes. We
suggest you consult with your tax adviser.
TAXATION OF ANNUITIES IN GENERAL
The following discussion assumes that the policies will qualify as annuity
contracts for federal income tax purposes. The Statement of Additional
Information discusses such qualifications.
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Section 72 of the Code governs taxation of annuities in general. NYLIAC
believes that an annuity policy owner generally is not taxed on increases in the
value of a policy until distribution occurs either in the form of a lump sum
received by withdrawing all or part of the Accumulation Value (i.e., surrenders
or partial withdrawals) or as Income Payments under the Income Payment option
elected. The exception to this rule is that generally, a policy owner of any
deferred annuity policy who is not a natural person must include in income any
increase in the excess of the policy owner's Accumulation Value over the policy
owner's investment in the contract during the taxable year. However, there are
some exceptions to this exception. You may wish to discuss these with your tax
counsel. The taxable portion of a distribution (in the form of an annuity or
lump sum payment) is generally taxed as ordinary income. For this purpose, the
assignment, pledge, or agreement to assign or pledge any portion of the
Accumulation Value generally will be treated as a distribution.
In the case of a withdrawal or surrender distributed to a participant or
Beneficiary under a Qualified Policy (other than a Qualified Policy used in a
retirement plan that qualifies for special federal income tax treatment under
Section 457 of the Code as to which there are special rules), a ratable portion
of the amount received is taxable, generally based on the ratio of the
investment in the contract to the total policy value. The "investment in the
contract" generally equals the portion, if any, of any premium payments paid by
or on behalf of an individual under a policy which is not excluded from the
individual's gross income. For policies issued in connection with qualified
plans, the "investment in the contract" can be zero. The law requires the use of
special simplified methods to determine the taxable amount of payments that are
based in whole or in part on the Annuitant's life and that are paid from
qualified retirement plans under Section 401(a) and from qualified annuities and
Tax Sheltered Annuities under Sections 403(a) and 403(b).
Generally, in the case of a withdrawal under a Non-Qualified Policy before
the Annuity Commencement Date, amounts received are first treated as taxable
income to the extent that the Accumulation Value immediately before the
withdrawal exceeds the "investment in the contract" at that time. Any additional
amount withdrawn is not taxable.
Although the tax consequences may vary depending on the Income Payment
option elected under the policy, in general, only the portion of the Income
Payment that represents the amount by which the Accumulation Value exceeds the
"investment in the contract" will be taxed. After the investment in the policy
is recovered, the full amount of any additional Income Payments is taxable. For
fixed Income Payments, in general, there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the Income Payments for the term of the
payments. However, the remainder of each Income Payment is taxable until the
recovery of the investment in the contract, and thereafter the full amount of
each annuity payment is taxable. If death occurs before full recovery of the
investment in the contract, the unrecovered amount may be deducted on the
annuitant's final tax return.
In the case of a distribution, a penalty tax equal to 10% of the amount
treated as taxable income may be imposed. The penalty tax is not imposed in
certain circumstances, including, generally, distributions: (1) made on or after
the date on which the taxpayer is actual age 59 1/2, (2) made as a result of the
policy owner's or Annuitant's death or disability, or (3) received in
substantially equal installments paid at least annually as a life annuity. Other
tax penalties may apply to certain distributions pursuant to a Qualified Policy.
All non-qualified, deferred annuity contracts issued by NYLIAC (or its
affiliates) to the same policy owner during any calendar year are to be treated
as one annuity contract for purposes of determining the amount includable in an
individual's gross income. In addition, there may be other situations in which
the Treasury Department may conclude (under its authority to issue regulations)
that it would be appropriate to aggregate two or more annuity contracts
purchased by the same policy owner. Accordingly, a policy owner should consult a
competent tax adviser before purchasing more than one policy or other annuity
contract.
A transfer of ownership of a policy, or designation of an Annuitant or
other Beneficiary who is not also the policy owner, may result in certain income
or gift tax consequences to the policy owner. A policy owner contemplating any
transfer or assignment of a policy should contact a competent tax adviser with
respect to the potential tax effects of such a transaction.
QUALIFIED PLANS
The Qualified Policy is designed for use with several types of qualified
plans. The tax rules applicable to participants and beneficiaries in such
qualified plans vary according to the type of plan and the terms and conditions
of the plan itself. Special favorable tax treatment may be available for certain
types of contributions and distributions (including special rules for certain
lump sum distributions to individuals who attained the age of 50 by January 1,
1986). Adverse tax consequences may result from contributions in excess of
specified limits,
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distributions prior to age 59 1/2 (subject to certain exceptions), distributions
that do not conform to specified minimum distribution rules and in certain other
circumstances. Therefore, this discussion only provides general information
about use of the policies with the various types of qualified plans. Policy
owners and participants under qualified plans as well as Annuitants and
Beneficiaries are cautioned that the rights of any person to any benefits under
qualified plans may be subject to the terms and conditions of the plans
themselves, regardless of the terms and conditions of the policy issued in
connection with the plan. Purchasers of policies for use with any qualified plan
should seek competent legal and tax advice regarding the suitability of the
policy.
(a) Section 403(a) Plans. Under Section 403(a) of the Code, payments
made by employers to purchase annuity contracts, which meet certain
requirements, for their employees are excludible from the gross income of
the employee. Any amounts distributed to the employees under such annuity
contracts are taxable to them in the years in which distributions are made.
(b) Section 403(b) Plans. Under Section 403(b) of the Code, payments
made by public school systems and certain tax exempt organizations to
purchase annuity policies for their employees are excludable from the gross
income of the employee, subject to certain limitations. However, such
payments may be subject to FICA (Social Security) taxes.
(c) Individual Retirement Annuities. Sections 219 and 408 of the Code
permit individuals or their employers to contribute to an individual
retirement program known as an "Individual Retirement Annuity" or "IRA",
including an employer-sponsored Simplified Employee Pension or "SEP".
Individual Retirement Annuities are subject to limitations on the amount
which may be contributed and deducted and the time when distributions may
commence. In addition, distributions from certain other types of qualified
plans may be placed into Individual Retirement Annuities on a tax-deferred
basis.
(d) Roth Individual Retirement Annuities. Section 408A of the Code
permits individuals with incomes below a certain level to contribute to an
individual retirement program known as a "Roth Individual Retirement
Annuity" or "Roth IRA." Roth IRAs are subject to limitations on the amount
that may be contributed. Contributions to Roth IRAs are not deductible, but
distributions from Roth IRAs that meet certain requirements are not
included in gross income. Certain individuals are eligible to convert their
existing non-Roth IRAs into Roth IRAs. They will be subject to income tax
at the time of conversion.
(e) Deferred Compensation Plans. Section 457 of the Code, while not
actually providing for a qualified plan as that term is normally used,
provides for certain deferred compensation plans with respect to service
for state governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities and tax exempt
organizations which enjoy special treatment. The policies can be used with
such plans. Under such plans, a participant may specify the form of
investment in which his or her participation will be made. Such investments
are generally owned by, and are subject to, the claims of the general
creditors of the sponsoring employer, except that Section 457 plans of
state and local government must be held and used for the exclusive benefit
of participants and beneficiaries in a trust or annuity contract.
DISTRIBUTOR OF THE POLICIES
NYLIFE Distributors Inc. ("NYLIFE Distributors"), 51 Madison Avenue, New
York, New York 10010, is the principal underwriter and the distributor of the
policies. It is an indirect wholly-owned subsidiary of New York Life. The
maximum commission paid to broker-dealers who have entered into dealer
agreements with NYLIFE Distributors is not expected to exceed 7%. A portion of
this amount is paid as commissions to registered representatives.
VOTING RIGHTS
The Funds are not required to and typically do not hold routine annual
stockholder meetings. Special stockholder meetings will be called when
necessary. To the extent required by law, NYLIAC will vote the Eligible
Portfolio shares held in the Investment Divisions at special shareholder
meetings of the Funds in accordance with instructions we receive from persons
having voting interests in the corresponding Investment Division. If, however,
the federal securities laws are amended, or if NYLIAC's present interpretation
should change, and as a result, NYLIAC determines that it is allowed to vote the
Eligible Portfolio shares in its own right, we may elect to do so.
Prior to the Annuity Commencement Date, you hold a voting interest in each
Investment Division to which you have money allocated. We will determine the
number of votes which are available to you by dividing the
39
<PAGE> 40
Accumulation Value attributable to an Investment Division by the net asset value
per share of the applicable Eligible Portfolios. We will calculate the number of
votes which are available to you separately for each Investment Division. We
will determine that number by applying your percentage interest, if any, in a
particular Investment Division to the total number of votes attributable to the
Investment Division.
We will determine the number of votes of the Eligible Portfolio which are
available as of the date established by the Portfolio of the relevant Fund.
Voting instructions will be solicited by written communication prior to such
meeting in accordance with procedures established by the relevant Fund.
If we do not receive timely instructions, we will vote those shares in
proportion to the voting instructions which are received with respect to all
policies participating in that Investment Division. We will apply voting
instructions to abstain on any item to be voted upon on a pro rata basis to
reduce the votes eligible to be cast. Each person having a voting interest in an
Investment Division will receive proxy material, reports and other materials
relating to the appropriate Eligible Portfolio.
40
<PAGE> 41
TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
The SAI contains more details concerning the subjects discussed in this
Prospectus. The following is the Table of Contents for that SAI:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POLICIES................................................ 2
INVESTMENT PERFORMANCE CALCULATIONS......................... 2
ANNUITY PAYMENTS............................................ 4
GENERAL MATTERS............................................. 4
FEDERAL TAX MATTERS......................................... 5
DISTRIBUTOR OF THE POLICIES................................. 6
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS...................... 6
STATE REGULATION............................................ 6
RECORDS AND REPORTS......................................... 6
LEGAL PROCEEDINGS........................................... 6
EXPERTS..................................................... 7
OTHER INFORMATION........................................... 7
FINANCIAL STATEMENTS........................................ F-1
</TABLE>
How to obtain a MainStay Premium Plus Variable Annuity Statement of Additional
Information.
Call (800) 762-6212 or send this request form to:
MainStay Annuities
51 Madison Avenue
Room 3300
New York, NY 10010
--------------------------------------------------------------------------------
Please send me a MainStay Premium Plus Variable Annuity Statement of Additional
Information
dated June 26, 2000
--------------------------------------------------------------------------------
Name
--------------------------------------------------------------------------------
Address
--------------------------------------------------------------------------------
City State Zip
41
<PAGE> 42
LOGO
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
INDIVIDUAL RETIREMENT ANNUITY
DISCLOSURE STATEMENT
The following information is being provided to you, the policyowner, in
accordance with the requirements of the Internal Revenue Service. This
Disclosure Statement is not part of the Prospectus. It includes non-technical
explanation of some of the changes made by the Taxpayer Relief Act of 1997
applicable to Individual Retirement Accounts or Annuities (IRAs). You should
consult your tax adviser about the specifics of these rules, and remember that
the terms of your actual contract and any endorsements will control your rights
and obligations.
1. REVOCATION OF YOUR IRA
If you have not received this Disclosure Statement at least seven calendar
days before the establishment of your Individual Retirement Annuity, you have
the right to revoke your Individual Retirement Annuity during the seven calendar
day period following the establishment of it. In order to revoke your Individual
Retirement Annuity, you must notify us in writing and you must mail or deliver
your revocation to NYLIAC. If your revocation is mailed, the date of the
postmark (or the date of certification or registration if sent by certified or
registered mail) will be considered your revocation date. If you revoke your
Individual Retirement Annuity during the seven day period, the entire amount of
your account, without any adjustments (for items such as administrative
expenses, fees, or fluctuation in market value) will be returned to you.
2. CONTRIBUTIONS
(a) Regular IRA. The policyowner may make periodic contributions to a
regular IRA in any amount up to the combined tax deductible and non-tax
deductible contribution limit described in Section 3 of this Disclosure
Statement. All such contributions shall be in cash and shall be invested in
accordance with this Disclosure Statement. This IRA cannot be issued as a SIMPLE
IRA.
(b) Spousal IRA. If the policyowner and the spouse file a joint federal
income tax return for the taxable year and if the spouse's compensation, if any,
includable in gross income for the year is less than the compensation includable
in the gross income of the policyowner for the year, the policyowner and the
spouse may each establish his or her own individual IRA and may make periodic
contributions to their own IRA in accordance with the rules and limits for tax
deductible and non-tax deductible contributions contained in Sections 219(c) and
408(o) of the Internal Revenue Code. Such contributions shall be in cash and
shall be invested in accordance with this Disclosure Statement.
(c) Rollover IRA. A rollover contribution by the policyowner shall be a
nonperiodic deposit in cash to be invested in accordance with this Disclosure
Statement, with respect to which contribution the policyowner warrants that (1)
the entire amount rolled over is attributable to a distribution from an
employee's trust, an employee's annuity, an annuity contract or another
individual retirement account or annuity, which meets the requirements of
Internal Revenue Code section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3); (2)
within one (1) year of receiving such distribution, the policyowner did not
receive another distribution which constituted a "rollover" referred to in
Internal Revenue Code Section 408(d)(3)(B); and (3) the contribution as made
satisfies all the requirements for rollover contributions as set forth under the
Internal Revenue Code. A rollover contribution attributable to contributions
made by an employer to an individual's SIMPLE IRA cannot be made prior to the
expiration of the 2-year period beginning on the date the individual first
participated in that employer's SIMPLE plan.
Strict limitations apply to rollovers, and you should seek competent tax
advice in order to comply with all the rules governing rollovers.
(d) Transfers. The policyowner may make an initial or subsequent
contribution hereunder by directing a Custodian or Trustee of an existing
individual retirement account or individual retirement annuity to transfer an
amount in cash to the Individual Retirement Annuity.
(e) Time to Make Contributions. You may make contributions to your IRA at
any time for a taxable year beginning on the first day of that year and ending
on the date that your income tax return for that year is due (without regard to
any extensions).
IRA-1
<PAGE> 43
(f) Simplified Employee Pension. If an IRA is established that meets the
requirements of a Simplified Employee Pension Plan, your employer may contribute
an amount not to exceed the lesser of 15% of your includable compensation
($160,000 for 1999, adjusted for inflation thereafter) or $30,000. The amount of
such contribution is not includable in your income as wages (for federal income
tax purposes). Within that overall limit you may elect to defer up to $10,000 in
1999 (as adjusted for inflation in accordance with the Internal Revenue Code) of
your includable compensation if your employer's SEP plan permits salary
reduction contributions and was established on or before December 31, 1996. The
amount of such elective deferral is excludable from your income as wages (for
federal income tax purposes). For further details, see your employer.
(g) Responsibility of the Policyowner. If the policyowner contemplates
future periodic contributions, rollovers, or transfers to the IRA, such
contributions, rollovers or transfers must be made in accordance with the
appropriate sections of the Code. It is the policyowner's full and sole
responsibility to determine the tax deductibility of all contributions, and to
make such contributions in accordance with the Code. Neither the Custodian nor
New York Life Insurance and Annuity Corporation are permitted to provide tax
advice, and will assume no liability for the tax consequences of any
contribution to the IRA.
3. DEDUCTIBILITY OF CONTRIBUTIONS
(a) Eligibility. Under the Internal Revenue Code, if neither you nor your
spouse is an active participant (see (b) below), you and your spouse may
contribute up to $4,000 together (but no more than $2,000 to each individual
account) if your combined compensation is at least equal to that amount and take
a deduction for the entire amount contributed. If you are an active participant,
but have an adjusted gross income (AGI) below a certain level (see (c) below),
you may make a deductible contribution. If you are an active participant and you
have AGI above that level (see (c) below), the amount of the deductible
contribution you may make is phased down and eventually eliminated. If you are
not an active participant, but your spouse is an active participant, you may
make a $2,000 deductible contribution provided that if your combined AGI is
above the specified level (see (c) below), the amount of the deductible
contribution you may make to an IRA is phased down and eventually eliminated.
(b) Active Participant. You are an "active participant" for a year if you
are covered by a retirement plan. You are covered by a "retirement plan" for a
year if your employer or union has a retirement plan under which money is added
to your annuity or you are eligible to earn retirement credits. For example, if
you are covered under a profit-sharing plan, a 403(b) annuity, certain
government plans, a salary reduction arrangement (such as a Tax Sheltered
Annuity 403(b) arrangement or a 401(k) plan), a Simplified Employee Pension Plan
(SEP), a SIMPLE retirement account or a plan which promises you a retirement
benefit which is based upon the number of years of service you have with the
employer, you are likely to be an active participant. Your Form W-2 for the year
should indicate your participation status.
(c) Adjusted Gross Income (AGI). If you or your spouse is an active
participant, you must look at your Adjusted Gross Income for the year (if you
and your spouse file a joint tax return, you use your combined AGI) to determine
whether you can make a deductible IRA contribution. Your tax return will show
you how to calculate your AGI for this purpose. If you are at or below a certain
AGI level, called the threshold level, you are treated as if you were not an
active participant and can make a deductible contribution under the same rules
as a person who is not an active participant.
If you are single, your threshold AGI level is $32,000 (for 2000). The
threshold level if you are married and file a joint tax return is $52,000 (for
2000), and if you are married, but file a separate tax return, the threshold
level is $0. However, if only your spouse is an active participant and you file
a joint tax return, the threshold level is $150,000 phased out at $160,000
(beginning in 1998).
IRA-2
<PAGE> 44
The $32,000 and $52,000 threshold levels are to increase in future years as
shown below:
<TABLE>
<CAPTION>
JOINT RETURNS
-------------
FOR TAXABLE YEARS BEGINNING IN: THE THRESHOLD LEVEL IS:
------------------------------- -----------------------
<S> <C>
2000 $52,000
2001 $53,000
2002 $54,000
2003 $60,000
2004 $65,000
2005 $70,000
2006 $75,000
2007 and thereafter $80,000
</TABLE>
<TABLE>
<CAPTION>
SINGLE TAXPAYERS
----------------
FOR TAXABLE YEARS BEGINNING IN: THE THRESHOLD LEVEL IS:
------------------------------- -----------------------
<S> <C>
2000 $32,000
2001 $33,000
2002 $34,000
2003 $40,000
2004 $45,000
2005 and thereafter $50,000
</TABLE>
If your AGI is less than $10,000 above your threshold level, you will still
be able to make a deductible contribution, but it will be limited in amount. The
amount by which your AGI exceeds your threshold level (AGI-threshold level) is
called your Excess AGI. The Maximum Allowable Deduction is $2,000 (and an
additional $2,000 for a Spousal IRA). You can calculate your Deduction Limit as
follows:
10,000 - Excess AGI X Maximum Allowable Deduction = Deduction Limit
10,000
You must round up the result to the next highest $10 level (the next
highest number which ends in zero). For example, if the result is $1,525, you
must round it up to $1,530. If the final result is below $200 but above zero,
your Deduction Limit is $200. Your Deduction Limit cannot, in any event, exceed
100% of your compensation.
(d) Restrictions. No deduction is allowed for (a) contributions other than
in cash; (b) contributions (other than those by an employer to a Simplified
Employee Pension Plan) made during your calendar year in which you attain age
70 1/2 or thereafter; or (c) for any amount you contribute which was a
distribution from another retirement plan ("rollover" contribution). However,
the limitations in paragraphs (a) and (b) do not apply to rollover
contributions.
(e) Compensation. For purposes of determining allowable contributions, the
term "Compensation" includes all earned income, including net earnings from self
employment and alimony or separate maintenance payments received and includable
in your gross income, but does not include deferred compensation or any amount
received as a pension or annuity.
4. NONDEDUCTIBLE CONTRIBUTIONS TO IRAS
Even if you are above the threshold level and, thus, may not make a
deductible contribution of $2,000 (and an additional $2,000 for a Spousal IRA),
you may still contribute up to the lesser of 100% of compensation or $2,000 to
an IRA (and an additional $2,000 for a Spousal IRA). The amount of your
contribution which is not deductible will be a nondeductible contribution to the
IRA. You may also choose to make a contribution nondeductible even if you could
have deducted part or all of the contribution. Interest or other earnings on
your IRA contribution, whether from deductible or nondeductible contributions,
will not be taxed until taken out of your IRA and distributed to you.
If you make a nondeductible contribution to an IRA you must report the
amount of the nondeductible contribution to the IRS as a part of your tax return
for the year.
If you make a nondeductible contribution to an IRA you must report the
amount of the nondeductible contribution to the IRS as a part of your tax return
for the year.
IRA-3
<PAGE> 45
5. DISTRIBUTIONS
(a) Required Distributions. Distribution of your IRA must be made or begin
no later than April 1 of the calendar year following the calendar year in which
you attain age 70 1/2. A distribution may be made at once in a lump sum, or it
may be made in installments. Installment payments must be made over a period not
exceeding your life expectancy (as determined annually), or the joint life and
last survivor expectancy of you and the beneficiary you designate (as
redetermined annually, if that beneficiary is your spouse).
If you die before the entire interest is distributed to you, but after
distribution to you has begun, your entire annuity must be distributed to your
beneficiary at least as rapidly as your annuity was being distributed prior to
your death. If you die before you begin to receive distributions from your
annuity and if you have a designated beneficiary, distribution to your
beneficiary must be made over a period not exceeding the greater of the
beneficiary's life expectancy or five years after your death; if you have no
designated beneficiary, distribution must be completed within five years of your
death. Distributions upon your death must begin within one year following your
death or, if your beneficiary is your spouse, no later than the date on which
you would have attained age 70 1/2 (if later). If following your death before
distributions have begun, your spouse also dies, immediate distribution must
begin to be made to your spouse's beneficiary, if any, over a period no longer
than that person's life expectancy, or if your spouse has not designated a
beneficiary, full payment must be made to your spouse's estate within five
years.
(b) IRA Distributions. Because nondeductible IRA contributions are made
using income which has already been taxed (that is, they are not deductible
contributions), the portion of the IRA distributions consisting of nondeductible
contributions will not be taxed again when received by you. If you make any
nondeductible IRA contributions, each distribution from your IRAs will consist
of a nontaxable portion (return of nondeductible contributions) and a taxable
portion (return of deductible contributions, if any, and account earnings).
Thus, you may not take a distribution which is entirely tax-free. The
following formula is used to determine the nontaxable portion of your
distributions for a taxable year.
<TABLE>
<S> <C> <C> <C> <C>
Remaining Nondeductible contributions
--------------------------------------------- Total distributions Nontaxable distributions
Year-end total IRA balances X (for the year) = (for the year)
</TABLE>
To figure the year-end total IRA balance, you must treat all of your IRAs
as a single IRA (other than Roth IRAs). This includes all regular IRAs, as well
as Simplified Employee Pension (SEP) IRAs, SIMPLE IRAs, and Rollover IRAs. You
also add back the distributions taken during the year.
Even if you withdrew all of the money in your IRA in a lump sum, you will
not be entitled to use any form of income averaging to reduce the federal income
tax on your distribution. Also, no portion of your distribution is taxable as a
capital gain.
(c) Withholding. Unless you elect not to have withholding apply, a 10%
federal income tax will be withheld from your IRA distributions. If payments are
delivered to foreign countries, however, tax will, generally, be withheld at a
10% rate unless you certify to the Custodian that you are not a U.S. citizen
residing abroad or a "tax avoidance expatriate" as defined in the Internal
Revenue Code (Section 877).
6. PENALTIES
(a) Excess Contributions. If at the end of any taxable year your IRA
contributions (other than rollovers or transfers) exceed the maximum allowable
(deductible and nondeductible) amount for that year, this excess contribution
amount will be subject to a nondeductible 6% excise (penalty) tax. However, if
you withdraw the excess contribution, plus any earnings on it, before the due
date for filing your federal income tax return for the year (including
extensions), the excess contribution will not be subject to the 6% penalty tax.
The amount of the excess contribution withdrawn will not be considered a
premature distribution, but the earnings withdrawn will be taxable income to you
and may be subject to an additional 10% tax on premature distributions.
Alternatively, excess contributions for one year may be carried forward as IRA
contributions in the next year to the extent that the excess, when aggregated
with your IRA contribution (if any) for the subsequent year, does not exceed the
maximum allowable (deductible and nondeductible) amount for that year. The 6%
excise tax will be imposed on excess contributions in each year they are neither
returned nor applied as contributions.
(b) Early Distributions. Since the purpose of an IRA is to accumulate
funds for retirement, your receipt or use of any portion of your IRA before you
attain age 59 1/2 constitutes an early distribution unless the distribution
occurs in the event of your death or disability or is part of a series of
substantially equal periodic payments made over your life expectancy (as
determined from tables in the income tax regulations) or the joint life
IRA-4
<PAGE> 46
expectancies of you and your beneficiary or is used to pay certain medical
expenses or is used for certain qualified first-time homebuyer expenses or
certain qualified higher education expenses. The amount of an early distribution
(excluding the nondeductible contribution included therein) is includable in
your gross income and is subject to a 10% penalty tax on the amount of the early
distribution unless you transfer it to another IRA as a qualifying rollover
contribution. If you transfer, rollover or convert a regular IRA into a Roth
IRA, the 10% penalty tax will not apply, but the distribution is taxable income.
(If you converted a regular IRA into a Roth IRA in 1998, the additional tax
liability will be spread over four years (1998, 1999, 2000, and 2001), unless
you elected to pay the entire amount when you filed your 1998 federal income tax
return.
(c) Minimum Distributions. If the minimum distribution rules described in
5a apply to a recipient of distributions and if the amount distributed during a
calendar year is less than the minimum amount required to be distributed, the
recipient will be subject to a penalty tax equal to 50% of the difference
between the amount required to be distributed and the amount actually
distributed.
(d) Excess Distributions. The 15% excise tax on excess distributions has
been repealed for excess distributions received after December 31, 1996. The 15%
excise tax on excess retirement accumulations has been repealed for estates of
decedents dying after December 31, 1996.
(e) Prohibited Transactions. If the policyowner or the beneficiary engage
in any prohibited transaction (such as any sale, exchange or leasing of any
property between the policyowner and the annuity, or any interference with the
independent status of the annuity), the annuity will lose its tax exemption and
be treated as having been distributed to the policyowner. The value of the
entire annuity (excluding the non-deductible contribution included therein) will
be includable in your gross income; if at the time of the prohibited transaction
the policyowner is under age 59 1/2, the policyowner will also be subject to the
10% penalty tax on early distributions.
(f) Overstatement of Non-deductible Contributions. If you overstate your
non-deductible IRA contributions on your federal income tax return (without
reasonable cause) you may be subject to a $100 penalty and a $50 penalty for
failure to file any form required by the IRS to report non-deductible
contributions (in addition to any generally applicable tax, interest, and
penalties to which you may be liable if you understate income upon receiving a
distribution from your account. See paragraph 5(b) of this Disclosure Statement
and IRS Form 8606.)
7. FEDERAL ESTATE AND GIFT TAXES
Any amount distributed from your IRA upon your death may be subject to
federal estate and gift taxes.
8. OTHER INFORMATION
(a) Tax Reporting. You need not file Treasury Form 5329 with the Internal
Revenue Service unless during the taxable year there is an excess contribution
to, premature distribution from, or insufficient distribution from your IRA. You
must report contributions to, and distributions from your IRA (including the
year end aggregate account balance of all IRAs) on your federal income tax
return for the year. You must designate on the return how much of your annual
contribution is deductible and how much is nondeductible.
(b) IRS Approval. This Individual Retirement Annuity has been approved as
to form by the Internal Revenue Service. Such approval is a determination only
as to the form of the annuity and does not represent a determination of the
merits of such annuity.
(c) Custodian. The Trustee or Custodian of an IRA must be either a bank or
such other person who has been approved by the Secretary of the Treasury.
(d) Vesting. Your interest in your IRA must be nonforfeitable at all
times.
(e) State Tax Law. You should consult your tax adviser about any state tax
consequences of your IRA; you should be aware that some of these laws may differ
from Federal tax law governing IRAs.
IRA-5
<PAGE> 47
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 48
LOGO
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
ROTH INDIVIDUAL RETIREMENT ANNUITY
DISCLOSURE STATEMENT
The following information is being provided to you, the policyowner, in
accordance with the requirements of the Internal Revenue Service. This
disclosure includes non-technical explanation of some of the requirements
applicable to Roth Individual Retirement Annuities (Roth IRAs). The information
provided applies to contributions made and distributions received on and after
January 1, 1998.
1. REVOCATION OF YOUR ROTH IRA
You may revoke your Roth IRA at anytime within seven days after it is
established by mailing or delivering a written notice of revocation to New York
Life Insurance and Annuity Corporation, 51 Madison Avenue, Room 3300, New York,
NY 10010. Any notice of revocation will be deemed mailed on the date of postmark
(or if sent be certified or registered mail, the date of certification or
registration) if it is deposited in the U.S. Postal Service in an envelope, or
other appropriate wrapper, first-class postage prepaid, properly addressed. Upon
revocation, you will be entitled to a full refund of your entire Roth IRA
without any adjustments (for items such as administrative expenses, fees, or
fluctuation in market value).
2. CONTRIBUTIONS
(a) Regular Roth IRA. The policyowner may make periodic contributions to a
Roth IRA in any amount up to the contribution limit described in Section 3
(Deductibility of Contributions). All contributions to your Roth IRA must be
made in cash. Contributions for a taxable year must be made no later than April
15 of the following year.
(b) Rollover Roth IRA. A rollover contribution by the policyowner shall be
a nonperiodic deposit in cash, with respect to which contribution the
policyowner warrants that 1) the entire amount rolled over is attributable to a
distribution from a regular Individual Retirement Annuity (a "regular IRA") or
another Roth IRA which meets the requirements of Code Section 408(d)(3); 2)
within one (1) year of receiving such distribution, the policyowner did not
receive another distribution which constituted a "rollover" of a Roth IRA to
another Roth IRA; and 3) the contribution as made satisfies all the requirements
for Roth IRA rollover contributions as set forth under the Internal Revenue Code
"Code".
Strict limitations apply to rollovers, and you should seek competent tax
advice in order to comply with all the rules governing rollovers.
(c) Transfers and Conversions. The policyowner may make an initial or
subsequent contribution hereunder, provided that your Modified Adjusted Gross
Income (MAGI) does not exceed $100,000 during the year of such transfer and you
do not file your income tax return as married filing separately, by directing a
Trustee of an existing regular IRA to directly transfer an amount in cash from
or, if permitted by the Trustee, to convert, such regular IRA into this Roth
IRA. The policyowner may also direct a Trustee of an existing Roth IRA to
directly transfer an amount in cash from an existing Roth IRA to the Trustee of
this Roth IRA without regard to such income or return filing limitations.
(d) Tax Consequences of Rollovers and Transfers. A rollover, transfer, or
conversion of a regular IRA to a Roth IRA is permitted if your MAGI does not
exceed $100,000 and you do not file your income tax return as married filing
separately. Such a rollover, transfer, or conversion will be treated as a
taxable distribution of the regular IRA, but the 10% excise tax on early
distributions will not apply. For such rollovers, transfers, and conversions of
regular IRAs into Roth IRAs during 1998, a special rule applies and any amount
required to be so included in taxable income will be included ratably over 1998,
1999, 2000, and 2001.
(e) Responsibility of the policyowner. If the policyowner contemplates
future periodic contributions, rollovers, or transfers to the Roth IRA, such
contributions, rollovers, or transfers must be made in accordance with the
appropriate sections of the Code. It is the policyowner's full and sole
responsibility to determine the tax deductibility of all contributions, and to
make such contributions in accordance with the Code. New York Life Insurance and
Annuity Corporation (NYLIAC) and its employees are not permitted to provide tax
advice, and assume no liability for the tax consequences of any contribution to,
or distribution from, the Roth IRA.
ROTH IRA-1
<PAGE> 49
3. DEDUCTIBILITY OF CONTRIBUTIONS
(a) Eligibility. Under the law, you may make a contribution of up to the
lesser of $2,000 or 100% of compensation, reduced by the amount of contributions
you make to any other regular IRA (except Education IRAs) or Roth IRA for the
taxable year, provided that if your MAGI is above the specified level, the
amount of the contribution you may make to a Roth IRA is phased down and
eventually eliminated. Contributions to a Roth IRA are not deductible for income
tax purposes.
(b) Modified Adjusted Gross Income (MAGI). You must look at your Modified
Adjusted Gross Income for the year (if you and your spouse file a joint tax
return, use your combined MAGI) to determine whether you can make a Roth IRA
contribution. Your tax return will show you how to calculate your MAGI for this
purpose, except that you should disregard any income resulting from a taxable
rollover, transfer, or conversion of a regular IRA to a Roth IRA. Only if you
are at or below a certain MAGI level, called the Threshold Level, can you make a
contribution to a Roth IRA.
If you are single, your MAGI Threshold Level is $95,000. The Threshold
Level if you are married and file a joint tax return is $150,000, and if you are
married but file a separate tax return, the Threshold Level is $0.
If your MAGI is less than $15,000 ($10,000 in the case of a joint return)
above your Threshold Level, you will still be able to make a Roth IRA
contribution, but it will be limited in amount. The amount by which your MAGI
exceeds your Threshold Level (MAGI minus the Threshold Level) is called your
Excess MAGI. The maximum allowable contribution is $2,000. You can calculate
your contribution limit as follows:
<TABLE>
<C> <C> <S> <C> <C>
$15,000 ($10,000 in the case) - Excess
(of a joint return) MAGI Maximum
----------------------------------------------- X Allowable = Contribution Limit
$15,000 ($10,000 in the case) Contribution
(of a joint return)
</TABLE>
You must round up the result to the next highest $10 level (the next
highest number which ends in zero). For example, if the result is $1,525, you
must round it up to $1,530. If the final result is below $200 but above zero,
your contribution limit is $200. Your contribution limit cannot, in any event,
exceed 100% of your compensation.
The maximum contribution you and your spouse may make to all your IRAs in
the aggregate, including Roth IRAs, is the lesser of 100% of your combined
compensation or $4,000 annually ($2,000 individually).
(c) Deductions. No deduction is allowed for Roth IRA contributions.
(d) Compensation. For purposes of determining allowable contributions, the
term "Compensation" includes all earned income, including net earnings from self
employment and alimony or separate maintenance payments received and includible
in your gross income, but does not include deferred compensation or any amount
received as a pension or annuity.
4. DISTRIBUTIONS
(a) Required Distributions After Death. If you die before the entire
interest is distributed to you, but after distribution to you from your Roth IRA
has begun, your entire annuity must be distributed to your beneficiary at least
as rapidly as your annuity was being distributed prior to your death. If you die
before you begin to receive distributions from your annuity and if you have a
designated beneficiary, distribution to your beneficiary must be made over a
period not exceeding the greater of the beneficiary's life expectancy or five
years after your death; if you have no designated beneficiary, distribution must
be completed within five years of your death. Distributions upon your death must
begin within one year following your death or, if your beneficiary is your
spouse, no later than the date on which you would have attained age 70 1/2 (if
later). If following your death before distributions have begun, your spouse
also dies, immediate distribution must begin to be made to your spouse's
beneficiary, if any, over a period no longer than that person's life expectancy,
or if your spouse has not designated a beneficiary, full payment must be made to
your spouse's estate within five years.
(b) Roth IRA Distributions
(i) Qualifying nontaxable distributions.
ROTH IRA-2
<PAGE> 50
A distribution from your Roth IRA will not be includible in your gross
income if it is:
(a) made on or after the date you attain age 59 1/2
(b) made after you die or become disabled, or
(c) made as a qualified first time homebuyer distribution
and is made after the five taxable year period beginning with the first
taxable year in which you or your spouse made a contribution to a Roth IRA,
or, in the case of a rollover from a regular IRA to a Roth IRA, after the
five taxable year period beginning with the taxable year of the rollover.
Distributions meeting these requirements are known as "qualifying
distributions".
(ii) Other distributions partly taxable.
If a distribution from your Roth IRA does not meet the requirements of
a qualifying distribution as described in (i), then the distribution will
be treated first as a return of nontaxable Roth IRA contributions, and
second, after all such contributions have been returned, as distributions
of taxable earnings, which in addition to income tax may be subject to the
10% penalty tax on early distributions, as discussed below.
In addition, you will not be entitled to use any form of income
averaging to reduce the federal income tax on the taxable portion of your
distribution. Also, no portion of your distribution is taxable as a capital
gain.
(c) Withholding. Unless you elect not to have withholding apply, federal
income tax will be withheld from any taxable portion of your Roth IRA
distributions. If payments are delivered to foreign countries, however, tax
will, generally, be withheld at a 10% rate unless you certify to the Trustee
that you are not a U.S. citizen residing abroad or a "tax avoidance expatriate"
as defined in the Internal Revenue Code Section 877.
5. PENALTIES
(a) Excess Contributions. If at the end of any taxable year your Roth IRA
contributions (other than rollovers or transfers) exceed the maximum allowable
annuity for that year, this excess contribution amount will be subject to a
nondeductible 6% excise (penalty) tax. However, if you withdraw the excess
contribution, plus any earnings on it, before the due date for filing your
federal income tax return for the year (including extensions), the excess
contribution will not be subject to the 6% penalty tax. The amount of the excess
contribution withdrawn will not be considered a premature distribution, but the
earnings withdrawn will be taxable income to you. Alternatively, excess
contributions for one year may be carried forward as Roth IRA contributions in
the next year to the extent that the excess, when aggregated with your Roth IRA
contributions (if any) for the subsequent year, does not exceed the maximum
allowable amount for that year. The 6% excise tax will be imposed on excess
contributions in each year they are neither returned nor applied as
contributions.
(b) Early Distributions. Since the purpose of a Roth IRA is to accumulate
funds for retirement, your receipt or use of any portion of your Roth IRA
account (for example, as collateral for a loan) which is not a qualifying
distribution before you attain age 59 1/2, to the extent it is taxable to you as
described above, constitutes an early distribution unless the distribution is a
result of death or disability, or is part of a series of substantially equal
periodic payments made over your life expectancy (as determined from tables in
the income tax regulations) or the joint life expectancies of you and your
beneficiary, is used to pay certain medical expenses, or is used for certain
qualified first-time homebuyer expenses, or certain qualified higher education
expenses. The amount of an early distribution which is not a qualifying
distribution and is not a return of previous Roth IRA contributions is
includible in your gross income and is subject to a 10% penalty tax on the
amount of the early distribution unless you transfer it to another Roth IRA as a
qualifying rollover contribution.
(c) Minimum Distributions. If the minimum distribution rules described in
4(a) apply to a recipient of distributions and if the amount distributed during
a calendar year is less than the minimum amount required to be distributed, the
recipient will be subject to a penalty tax equal to 50% of the difference
between the amount required to be distributed and the amount actually
distributed.
(d) Prohibited Transactions. If you or your beneficiary engage in any
prohibited transaction (such as any sale, exchange or leasing of any property
between you and the annuity, or any interference with the independent status of
the annuity), the annuity will lose its tax exemption and be treated as having
been distributed to you. The value of the entire annuity (excluding the
nondeductible contributions included therein) will be includible in
ROTH IRA-3
<PAGE> 51
your gross income; if at the time of the prohibited transaction you are under
age 59 1/2 you will also be subject to the 10% penalty tax on early
distributions.
6. FEDERAL ESTATE GIFT TAXES
Any amount distributed from your Roth IRA upon your death may be subject to
federal estate and gift taxes.
7. OTHER INFORMATION
(a) Tax Reporting. You need not file Treasury Form 5329 with the Internal
Revenue Service unless during the taxable year there is an excess contribution
to, or premature distribution from, your Roth IRA. You must report distributions
from your Roth IRA on your federal income tax return for the year.
(b) IRS Approval. This Roth IRA plan has not been approved as to form by
the Internal Revenue Service. Approval by the IRS of the Roth IRA plan is a
determination only as to the form of the annuity and does not represent a
determination of the merits of such annuity.
(c) Vesting. Your interest in your Roth IRA must be nonforfeitable at all
times.
ROTH IRA-4
<PAGE> 52
STATEMENT OF ADDITIONAL INFORMATION
JUNE 26, 2000
FOR
MAINSTAY PREMIUM PLUS VARIABLE ANNUITY
FROM
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
INVESTING IN
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
This Statement of Additional Information ("SAI") is not a prospectus. This
SAI contains information that expands upon subjects discussed in the current
MainStay Premium Plus Variable Annuity Prospectus. You should read the SAI in
conjunction with the current MainStay Premium Plus Variable Annuity Prospectus
dated June 26, 2000. You may obtain a copy of the Prospectus by calling MainStay
Annuities at (800) 762-6212 or writing to MainStay Annuities, 51 Madison Avenue,
Room 3300, New York, New York 10010. Terms used but not defined in this SAI have
the same meaning as in the current MainStay Premium Plus Variable Annuity
Prospectus.
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POLICIES (20)........................................... 2
Valuation of Accumulation Units (25)................... 2
INVESTMENT PERFORMANCE CALCULATIONS......................... 2
MainStay VP Cash Management Investment Division........ 2
MainStay VP Government, MainStay VP High Yield
Corporate Bond and MainStay VP Bond Investment
Division Yields...................................... 3
Average Annual Total Return............................ 3
ANNUITY PAYMENTS............................................ 4
GENERAL MATTERS............................................. 4
FEDERAL TAX MATTERS (36).................................... 5
Taxation of New York Life Insurance and Annuity
Corporation.......................................... 5
Tax Status of the Policies............................. 5
DISTRIBUTOR OF THE POLICIES (38)............................ 6
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS...................... 6
STATE REGULATION............................................ 6
RECORDS AND REPORTS......................................... 6
LEGAL PROCEEDINGS........................................... 6
EXPERTS..................................................... 7
OTHER INFORMATION........................................... 7
FINANCIAL STATEMENTS........................................ F-1
</TABLE>
------------
* (Numbers in parentheses refer to page numbers of corresponding sections of the
current MainStay Premium Plus Variable Annuity Prospectus.)
<PAGE> 53
THE POLICIES
The following provides additional information about the policies and
supplements the description in the Prospectus.
VALUATION OF ACCUMULATION UNITS
Accumulation Units are valued separately for each Investment Division of
the Separate Account. The method used for valuing Accumulation Units in each
Investment Division is the same. We arbitrarily set the value of each
Accumulation Unit as of the date operations began for the Investment Division.
Thereafter, the value of an Accumulation Unit of an Investment Division for any
Business Day equals the value of an Accumulation Unit in that Investment
Division as of the immediately preceding Business Day multiplied by the "Net
Investment Factor" for that Investment Division for the current Business Day.
We determine the Net Investment Factor for each Investment Division for any
period from the close of the preceding Business Day to the close of the current
Business Day (the "Valuation Period") by the following formula:
(a/b) - c
Where: a = the result of:
(1) the net asset value per share of the Eligible Portfolio shares
held in the Investment Division determined at the end of the current
Valuation Period, plus
(2) the per share amount of any dividend or capital gain distribution
made by the Eligible Portfolio for shares held in the Investment
Division if the "ex-dividend" date occurs during the current Valuation
Period;
b = the net asset value per share of the Eligible Portfolio shares held
in the Investment Division determined as of the end of the
immediately preceding Valuation Period; and
c = a factor representing the charges deducted from the applicable
Investment Division on a daily basis. Such factor is equal, on an
annual basis, to 1.60% of the daily net asset value of the Separate
Account. (See "Other Charges" at page 27 of the Prospectus.)
The Net Investment Factor may be greater or less than one. Therefore, the
value of an Accumulation Unit in an Investment Division may increase or decrease
from Valuation Period to Valuation Period.
INVESTMENT PERFORMANCE CALCULATIONS
MAINSTAY VP CASH MANAGEMENT INVESTMENT DIVISION
NYLIAC calculates the MainStay VP Cash Management Investment Division's
current annualized yield for a seven-day period in a manner which does not take
into consideration any realized or unrealized gains or losses on shares of the
MainStay VP Cash Management Portfolio or on its portfolio securities. This
current annualized yield is computed by determining the net change (exclusive of
realized gains and losses on the sale of securities and unrealized appreciation
and depreciation) in the value of a hypothetical account having a balance of one
unit of the MainStay VP Cash Management Investment Division at the beginning of
such seven-day period, dividing such net change in account value by the value of
the account at the beginning of the period to determine the base period return
and annualizing this quotient on a 365-day basis. The net change in account
value reflects the deductions for the administration fee and the mortality and
expense risk charge, and income and expenses accrued during the period. Because
of these deductions, the yield for the MainStay VP Cash Management Division will
be lower than the yield for the MainStay VP Cash Management Portfolio.
NYLIAC also calculates the effective yield of the MainStay VP Cash
Management Investment Division for the same seven-day period on a compounded
basis. The effective yield is calculated by compounding the unannualized base
period return by adding one to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting one from the result.
The yield on amounts held in the MainStay VP Cash Management Investment
Division normally will fluctuate on a daily basis. Therefore, the disclosed
yield for any given past period is not an indication or representation of future
yields or rates of return. The MainStay VP Cash Management Investment Division's
actual yield is affected by changes in interest rates on money market
securities, average portfolio maturity of the MainStay VP Cash
2
<PAGE> 54
Management Portfolio, the types and quality of portfolio securities held by the
MainStay VP Cash Management Portfolio, and its operating expenses.
MAINSTAY VP GOVERNMENT, MAINSTAY VP HIGH YIELD CORPORATE BOND AND MAINSTAY
VP BOND INVESTMENT DIVISION YIELDS
The current annualized yield of the MainStay VP Government, MainStay VP
High Yield Corporate Bond and MainStay VP Bond Investment Divisions refers to
the income generated by these Investment Divisions over a specified 30-day
period. Because the yield is annualized, the yield generated by an Investment
Division during the 30-day period is assumed to be generated each 30-day period.
We compute the yield by dividing the net investment income per accumulation unit
earned during the period by the price per unit on the last day of the period,
according to the following formula:
---- YIELD = 2[(a-b+1)(6)-1]
cd
Where: a = net investment income earned during the period by the Portfolio
attributable to shares owned by the MainStay VP Government, MainStay
VP High Yield Corporate Bond or MainStay VP Bond Investment Division.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of accumulation units outstanding during
the period.
d = the maximum offering price per accumulation unit on the last day of
the period.
Accrued expenses will include all recurring fees that are charged to all
policy owner accounts. The yield calculations do not reflect the effect of any
surrender charges that may be applicable to a particular policy. Surrender
charges range from 7% to 0% of the premium payments withdrawn depending on the
elapsed time since the relevant premium payment was made.
Because of the charges and deductions imposed by the Separate Account the
yield for the Investment Divisions will be lower than the yield for the
corresponding Portfolio of the Fund. The yield on amounts held in the Investment
Divisions normally will fluctuate over time. Therefore, the disclosed yield for
any given past period is not an indication or representation of future yields or
rates of return. The MainStay VP Government, MainStay VP High Yield Corporate
Bond or MainStay VP Bond Investment Division's actual yield will be affected by
the types and quality of portfolio securities held by the MainStay VP
Government, MainStay VP High Yield Corporate Bond and MainStay VP Bond
Portfolios of the Fund and their operating expenses.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return quotations for
the Investment Divisions are computed by finding the average annual compounded
rates of return over the periods shown that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(1+T)(n) = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one, five, or ten-year period or the inception date,
at the end of the one, five or ten-year period (or fractional portion
thereof).
All total return figures are prepared under methods the SEC requires when
advertising performance information. For periods beginning on or after the dates
when the Investment Divisions started operations, the average annual total
return (if surrendered) figures may be referred to as "standardized"
performance. For periods before the dates when the Investment Divisions started
operations, the figures are considered "non-standardized". The average annual
total return (no surrender) figures are all considered "non-standardized".
Performance data for the Investment Divisions may be compared, in
advertisements, sales literature and reports to shareholders, to: (i) the
investment returns on various mutual funds, stocks, bonds, certificates of
deposit, tax free bonds, or common stock and bond indexes; and (ii) other groups
of variable annuity separate accounts or other investment products tracked by
Lipper Analytical Services, a widely used independent research firm which ranks
mutual funds and other investment companies by overall performance, investment
3
<PAGE> 55
objectives, and assets, or tracked by other services, companies, publications,
or persons who rank such investment companies on overall performance or other
criteria.
Reports and promotional literature may also contain the ratings New York
Life and NYLIAC have received from independent rating agencies. New York Life
and NYLIAC are among only a few companies that have consistently received among
the highest possible ratings from the four major independent rating companies:
A.M. Best and Moody's (for financial stability and strength) and Standard and
Poor's and Duff & Phelps (for claims paying ability). However, neither New York
Life nor NYLIAC guarantees the investment performance of the Investment
Divisions.
ANNUITY PAYMENTS
We will make equal annuity payments each month under the Life Income
Payment Option during the lifetime of the Annuitant. Once payments begin, they
do not change and are guaranteed for 10 years even if the Annuitant dies sooner.
If the Annuitant dies before all guaranteed payments have been made, the rest
will be made to the Beneficiary. We may require that the payee submit proof of
the Annuitant's survivorship as a condition for future payments beyond the
10-year guaranteed payment period.
On the Annuity Commencement Date, we will determine the Accumulation Value
of your policy and use that value to calculate the amount of each annuity
payment. We determine each annuity payment by applying the Accumulation Value,
less any premium taxes, to the annuity factors specified in the annuity table
set forth in the policy. Those factors are based on a set amount per $1,000 of
proceeds applied. The appropriate rate must be determined by the sex (except
where, as in the case of certain Qualified Policies and other employer-sponsored
retirement plans, such classification is not permitted), date of application and
age of the Annuitant. The dollars applied are then divided by 1,000 and the
result multiplied by the appropriate annuity factor from the table to compute
the amount of the each monthly annuity payment.
GENERAL MATTERS
NON-PARTICIPATING. The policies are non-participating. Dividends are not
paid.
MISSTATEMENT OF AGE OR SEX. If the Annuitant's stated age and/or sex in
the policy are incorrect, NYLIAC 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. (See "Income Payments--Election of Income Payment Options" at page 32 of
the Prospectus.) If we made payments based on incorrect age or sex, we will
increase or reduce a later payment or payments to adjust for the error. Any
adjustment will include interest, at 3.5% per year, from the date of the wrong
payment to the date the adjustment is made.
ASSIGNMENTS. If permitted by the plan or by law for the plan indicated in
the application for the policy, you may assign a Non-Qualified Policy or any
interest in it prior to the Annuity Commencement Date and during the Annuitant's
lifetime. NYLIAC will not be deemed to know of an assignment unless it receives
a copy of a duly executed instrument evidencing such assignment. Further, NYLIAC
assumes no responsibility for the validity of any assignment. (See "Federal Tax
Matters--Taxation of Annuities in General" at page 37 of the Prospectus.)
MODIFICATION. NYLIAC may not modify the policy without your consent except
to make the policy meet the requirements of the Investment Company Act of 1940,
or to make the policy comply with any changes in the Internal Revenue Code or as
required by the Code in order to continue treatment of the policy as an annuity,
or by any other applicable law.
INCONTESTABILITY. We rely on statements made in the application or a
Policy Request. They are representations, not warranties. We will not contest
the policy after it has been in force during the lifetime of the Annuitant for
two years from the Policy Date.
4
<PAGE> 56
FEDERAL TAX MATTERS
TAXATION OF NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
NYLIAC is taxed as a life insurance company. Because the Separate Account
is not an entity separate from NYLIAC, and its operations form a part of NYLIAC,
it will not be taxed separately as a "regulated investment company" under
Subchapter M of the Code. Investment income and realized net capital gains on
the assets of the Separate Account are reinvested and are taken into account in
determining the Accumulation Value. As a result, such investment income and
realized net capital gains are automatically retained as part of the reserves
under the policy. Under existing federal income tax law, NYLIAC believes that
Separate Account investment income and realized net capital gains should not be
taxed to the extent that such income and gains are retained as part of the
reserves under the policy.
TAX STATUS OF THE POLICIES
Section 817(h) of the Code requires that the investments of the Separate
Account must be "adequately diversified" in accordance with Treasury regulations
in order for the policies to qualify as annuity contracts under Section 72 of
the Code. The Separate Account intends to comply with the diversification
requirements prescribed by the Treasury under Treasury Regulation Section
1.817-5.
To comply with regulations under Section 817(h) of the Code, the Separate
Account is required to diversify its investments, so that on the last day of
each quarter of a calendar year, no more than 55% of the value of its assets 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 investments. For this purpose,
securities of a single issuer are treated as one investment and each U.S.
Government agency or instrumentality is treated as a separate issuer. Any
security issued, guaranteed, or insured (to the extent so guaranteed or insured)
by the U.S. Government or an agency or instrumentality of the U.S. Government is
treated as a security issued by the U.S. Government or its agency or
instrumentality, whichever is applicable.
Although the Treasury Department has issued regulations on the
diversification requirements, such regulations do not provide guidance
concerning the extent to which policy owners may direct their investments to
particular subaccounts of a separate account, or the permitted number of such
subaccounts. It is unclear whether additional guidance in this regard will be
issued in the future. It is possible that if such guidance is issued, the policy
may need to be modified to comply with such additional guidance. For these
reasons, NYLIAC reserves the right to modify the policy as necessary to attempt
to prevent the policy owner from being considered the owner of the assets of the
Separate Account or otherwise to qualify the policy for favorable tax treatment.
The Code also requires that non-qualified annuity contracts contain
specific provisions for distribution of the policy proceeds upon the death of
any policy owner. In order to be treated as an annuity contract for federal
income tax purposes, the Code requires that such policies provide that (a) if
any policy owner dies on or after the Annuity Commencement Date and before the
entire interest in the policy has been distributed, the remaining portion must
be distributed at least as rapidly as under the method in effect on the policy
owner's death; and (b) if any policy owner dies before the Annuity Commencement
Date, the entire interest in the policy must generally be distributed within 5
years after the policy owner's date of death. These requirements will be
considered satisfied if the entire interest of the policy is used to purchase an
immediate annuity under which payments will begin within one year of the policy
owner's death and will be made for the life of the Beneficiary or for a period
not extending beyond the life expectancy of the Beneficiary. If the Beneficiary
is the policy owner's surviving spouse, the Policy may be continued with the
surviving spouse as the new policy owner. If the policy owner is not a natural
person, these "death of Owner" rules apply when the primary Annuitant is
changed. Non-Qualified Policies contain provisions intended to comply with these
requirements of the Code. No regulations interpreting these requirements of the
Code have yet been issued and thus no assurance can be given that the provisions
contained in these policies satisfy all such Code requirements. The provisions
contained in these policies will be reviewed and modified if necessary to assure
that they comply with the Code requirements when clarified by regulation or
otherwise.
Withholding of federal income taxes on the taxable portion of all
distributions may be required unless the recipient elects not to have any such
amounts withheld and properly notifies NYLIAC of that election. Different rules
may apply to United States citizens or expatriates living abroad. In addition,
some states have enacted legislation requiring withholding.
5
<PAGE> 57
Even if a recipient elects no withholding, special rules may require NYLIAC
to disregard the recipient's election if the recipient fails to supply NYLIAC
with a "TIN" or taxpayer identification number (social security number for
individuals) or if the Internal Revenue Service notifies NYLIAC that the TIN
provided by the recipient is incorrect.
DISTRIBUTOR OF THE POLICIES
NYLIFE Distributors Inc. ("NYLIFE Distributors") is the distributor of the
policies. NYLIFE Distributors is registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 as a broker-dealer and is a
member of the National Association of Securities Dealers, Inc. NYLIFE
Distributors is an indirect wholly-owned subsidiary of New York Life. The
maximum commission paid to broker-dealers who have entered into dealer
agreements with NYLIFE Distributors is not expected to exceed 7%. A portion of
this amount is paid as commissions to registered representatives.
As these policies are being offered for the first time, no underwriting
commissions have been paid.
The policies are sold and premium payments are accepted on a continuous
basis.
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
NYLIAC holds title to assets of the Separate Account. The assets are kept
physically segregated and held separate and apart from NYLIAC's general
corporate assets. Records are maintained of all purchases and redemptions of
Eligible Portfolio shares held by each of the Investment Divisions.
STATE REGULATION
NYLIAC is a stock life insurance company organized under the laws of
Delaware, and is subject to regulation by the Delaware State Insurance
Department. We file an annual statement with the Delaware Commissioner of
Insurance on or before March 1 of each year covering the operations and
reporting on the financial condition of NYLIAC as of December 31 of the
preceding calendar year. Periodically, the Delaware Commissioner of Insurance
examines the financial condition of NYLIAC, including the liabilities and
reserves of the Separate Account.
In addition, NYLIAC is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain policy
rights and provisions depends on state approval and/or filing and review
processes. Where required by state law or regulation, the policies will be
modified accordingly.
RECORDS AND REPORTS
NYLIAC maintains all records and accounts relating to the Separate Account.
As presently required by the federal securities laws, NYLIAC will mail to you at
your last known address of record, at least semi-annually after the first Policy
Year, reports containing information required under the federal securities laws
or by any other applicable law or regulation.
LEGAL PROCEEDINGS
NYLIAC is a defendant in individual and/or alleged class action suits
arising from its agency sales force, insurance (including variable contracts
registered under the federal securities law), investment, retail securities
and/or other operations, including actions involving retail sales practices.
Most of these actions also seek substantial or unspecified compensatory and
punitive damages. NYLIAC is also from time to time involved in various
governmental, administrative, and investigative proceedings and inquiries.
Given the uncertain nature of litigation and regulatory inquiries, the
outcome of which cannot be predicted, NYLIAC nevertheless believes that, after
provisions made in the financial statements, the ultimate liability that could
result from litigation and proceedings would not have a material adverse effect
on NYLIAC's financial position; however, it is possible that settlements or
adverse determinations in one or more actions or other proceedings in the future
could have a material adverse effect on NYLIAC's operating results for a given
year.
6
<PAGE> 58
EXPERTS
The financial statements of NYLIAC as of December 31, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999 included in this
Statement of Additional Information have been so included in reliance on the
report (which includes an explanatory paragraph relating to a change in its
method of accounting for the cost of computer software developed or obtained for
internal use as described in Note 2 to the financial statements) of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
OTHER INFORMATION
NYLIAC filed a registration statement with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
policies discussed in the Prospectus and this Statement of Additional
Information. We have not included all of the information set forth in the
registration statement, amendments and exhibits to the registration statement in
the Prospectus and this Statement of Additional Information. We intend the
statements contained in the Prospectus and this Statement of Additional
Information concerning the content of the policies and other legal instruments
to be summaries. For a complete statement of the terms of these documents, you
should refer to the instruments filed with the Securities and Exchange
Commission. The omitted information may be obtained at the principal offices of
the Securities and Exchange Commission in Washington, D.C., upon payment of
prescribed fees, or through the Commission's website at www.sec.gov.
7
<PAGE> 59
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 60
FINANCIAL STATEMENTS
F-1
<PAGE> 61
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Fixed maturities
Available for sale, at fair value $13,289 $13,081
Held to maturity, at amortized cost 681 725
Equity securities 89 100
Mortgage loans 1,850 1,622
Real estate 72 116
Policy loans 512 491
Other long-term investments 21 26
------- -------
Total investments 16,514 16,161
Cash and cash equivalents 1,087 948
Deferred policy acquisition costs 1,507 859
Deferred taxes 53 --
Other assets 316 282
Separate account assets 10,192 6,852
------- -------
Total assets $29,669 $25,102
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Policyholders' account balances $16,065 $14,743
Future policy benefits 356 315
Policy claims 69 60
Deferred taxes -- 101
Other liabilities 1,113 943
Separate account liabilities 10,134 6,792
------- -------
Total liabilities 27,737 22,954
------- -------
STOCKHOLDER'S EQUITY
Capital stock -- par value $10,000
(20,000 shares authorized, 2,500 issued and outstanding) 25 25
Additional paid in capital 480 480
Accumulated other comprehensive income (loss) (191) 201
Retained earnings 1,618 1,442
------- -------
Total stockholder's equity 1,932 2,148
------- -------
Total liabilities and stockholder's equity $29,669 $25,102
======= =======
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 62
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1999 1998 1997
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Universal life and annuity fees $ 442 $ 364 $ 314
Net investment income 1,179 1,108 1,084
Investment gains, net 12 63 108
Other income 97 51 35
------ ------ ------
Total revenues 1,730 1,586 1,541
------ ------ ------
EXPENSES
Interest credited to policyholders' account balances 858 784 748
Policyholder benefits 182 175 141
Operating expenses 405 405 352
------ ------ ------
Total expenses 1,445 1,364 1,241
------ ------ ------
Income before Federal income taxes 285 222 300
Federal income taxes:
Current 52 97 114
Deferred 57 (17) (1)
------ ------ ------
Total Federal income taxes 109 80 113
------ ------ ------
NET INCOME $ 176 $ 142 $ 187
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 63
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF COMPREHENSIVE INCOME/(LOSS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1999 1998 1997
------ ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
NET INCOME $ 176 $142 $187
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
period (393) 79 --
Unrealized holding gains (losses) arising during
period, including reclassification adjustments -- -- 89
Less: reclassification adjustment for gains (losses)
included in net income (1) 35 --
----- ---- ----
OTHER COMPREHENSIVE INCOME (LOSS) (392) 44 89
----- ---- ----
COMPREHENSIVE INCOME (LOSS) $(216) $186 $276
===== ==== ====
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 64
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
CAPITAL PAID IN COMPREHENSIVE RETAINED STOCKHOLDERS'
STOCK CAPITAL INCOME (LOSS) EARNINGS EQUITY
------- ---------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $25 $480 $ 68 $1,113 $1,686
Net income for 1997 -- -- -- 187 187
Net change in unrealized gains and losses of
available for sale securities -- -- 89 -- 89
--- ---- ----- ------ ------
BALANCE AT DECEMBER 31, 1997 25 480 157 1,300 1,962
Net income for 1998 -- -- -- 142 142
Net change in unrealized gains and losses of
available for sale securities -- -- 44 -- 44
--- ---- ----- ------ ------
BALANCE AT DECEMBER 31, 1998 25 480 201 1,442 2,148
Net income for 1999 -- -- -- 176 176
Net change in unrealized gains and losses of
available for sale securities -- -- (392) -- (392)
--- ---- ----- ------ ------
BALANCE AT DECEMBER 31, 1999 $25 $480 $(191) $1,618 $1,932
=== ==== ===== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 65
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
------- ------- --------
(IN MILLIONS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 176 $ 142 $ 187
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization (3) 2 (43)
Net capitalization of deferred policy acquisition costs (298) (192) (85)
Universal life and annuity fees (215) (198) (202)
Interest credited to policyholders' account balances 858 784 748
Net realized investment losses (13) (56) (126)
Deferred income taxes 57 (17) (1)
(Increase) decrease in:
Net separate account assets 1 (42) 30
Other assets and other liabilities (90) (98) 124
Increase (decrease) in:
Policy claims 9 4 (2)
Future policy benefits 41 39 25
------- ------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 523 368 655
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from:
Sale of available for sale fixed maturities 3,981 5,325 13,378
Maturity of available for sale fixed maturities 1,505 1,610 1,137
Sale of held to maturity fixed maturities -- -- 3
Maturity of held to maturity fixed maturities 121 102 112
Sale of equity securities 170 77 140
Repayment of mortgage loans 227 238 220
Sale of real estate and other invested assets 62 47 40
Cost of:
Available for sale fixed maturities acquired (6,679) (7,670) (14,391)
Held to maturity fixed maturities acquired (75) (49) (281)
Equity securities acquired (152) (83) (163)
Mortgage loans acquired (451) (558) (413)
Real estate and other invested assets acquired (13) (20) (29)
Policy loans (net) (21) (10) (17)
Increase (decrease) in loaned securities (222) 425 --
Securities sold under agreements to repurchase (net) 480 (45) 134
------- ------- --------
NET CASH USED IN INVESTING ACTIVITIES (1,067) (611) (130)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 2,195 1,501 1,191
Withdrawals (1,335) (1,151) (1,235)
Net transfers from (to) the separate accounts (181) 67 58
------- ------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 679 417 14
------- ------- --------
Effect of exchange rate changes on cash and cash equivalents 4 1 (2)
------- ------- --------
Net increase in cash and cash equivalents 139 175 537
------- ------- --------
Cash and cash equivalents, beginning of year 948 773 236
------- ------- --------
Cash and cash equivalents, end of year $ 1,087 $ 948 $ 773
======= ======= ========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 66
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
NOTE 1 -- NATURE OF OPERATIONS
New York Life Insurance and Annuity Corporation ("NYLIAC") is a direct,
wholly owned subsidiary of New York Life Insurance Company ("New York Life")
domiciled in the State of Delaware. NYLIAC offers a wide variety of interest
sensitive insurance and annuity products to a large cross section of the
insurance market. NYLIAC markets its products in all 50 of the United States,
the District of Columbia and Taiwan, primarily through its agency force. In
addition, NYLIAC markets Corporate Owned Life Insurance through independent
brokers and brokerage general agents.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of financial
statements of life insurance enterprises requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements. Actual results may differ from estimates.
Certain reclassifications have been made to the 1998 and 1997 financial
statements to conform to the current presentation.
INVESTMENTS
Fixed maturity investments, which NYLIAC has both the ability and the
intent to hold to maturity, are stated at amortized cost. Investments identified
as available for sale are reported at fair value. Unrealized gains and losses on
available for sale securities are reported in stockholder's equity, net of
deferred taxes and related adjustments. The cost basis of fixed maturity and
equity securities are adjusted for impairments in value deemed to be other than
temporary, with the associated realized loss reported in net income. Equity
securities are carried at fair value with related unrealized gains and losses
reflected in comprehensive income, net of deferred taxes and related
adjustments. Mortgage loans are carried at unpaid principal balances, net of
impairment reserves, and are generally secured. Investment real estate, which
NYLIAC has the intent to hold for the production of income, is carried at
depreciated cost net of write-downs for other than temporary declines in fair
value. Properties held for sale are carried at the lower of cost or fair value
less estimated selling costs. Policy loans are stated at the aggregate balance
due, which approximates fair value since loans on policies have no defined
maturity date and reduce amounts payable at death or surrender. Cash equivalents
include investments that have maturities of 90 days or less at date of purchase
and are carried at amortized cost, which approximates fair value. Short-term
investments that have maturities of between 91-365 days at date of purchase are
included in fixed maturities on the balance sheet and are carried at amortized
cost, which approximates fair value.
Mortgage backed bonds are carried at amortized cost using the interest
method considering anticipated prepayments at the date of purchase. Significant
changes in future anticipated cash flows from the original purchase assumptions
are accounted for using the retrospective adjustment method.
Derivative financial instruments hedging exposure to interest rate
fluctuation on available for sale securities are accounted for at fair market
value. Unrealized gains and losses are reported in comprehensive income, net of
deferred taxes and related adjustments. Amounts payable or receivable under
interest rate and commodity swap agreements and interest rate floor agreements
are recognized as investment income or expense when earned. Premiums paid for
interest rate floor agreements are amortized into interest expense over the life
of the agreement. Realized gains and losses are recognized in net income upon
termination or maturity of the contracts.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new and maintaining renewal business and certain
costs of issuing policies that vary with and are primarily related to the
production of new and renewal business have been deferred and
F-7
<PAGE> 67
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
DEFERRED POLICY ACQUISITION COSTS -- (CONTINUED)
recorded as an asset in the balance sheet. These consist primarily of
commissions, certain expenses of underwriting and issuing contracts, and certain
agency expenses. Acquisition costs for universal life and annuity contracts are
amortized in proportion to estimated gross profits over the effective life of
the contracts, which is assumed to be 25 years for universal life contracts and
15 years for annuities. Changes in assumptions are reflected in the current
year's amortization.
The carrying amount of the deferred policy acquisition cost asset is
adjusted at each balance sheet date as if the unrealized gains or losses on
investments associated with these insurance contracts had been realized and
included in the gross profits used to determine current period amortization. The
increase or decrease in the deferred policy acquisition cost asset due to
unrealized gains or losses is recorded in comprehensive income.
RECOGNITION OF INCOME AND RELATED EXPENSES
Amounts received under universal life and annuity contracts are reported as
deposits to policyholders' account balances. Revenues from these contracts
consist of amounts assessed during the period for mortality and expense risk,
policy administration and surrender charges. Amounts previously assessed to
compensate the insurer for services to be performed over future periods are
deferred and recognized into income in the period benefited using the same
assumptions and factors used to amortize capitalized acquisition costs. Policy
benefits and claims that are charged to expenses include benefit claims incurred
in the period in excess of related policyholders' account balances.
POLICYHOLDERS' ACCOUNT BALANCES
Policyholders' account balances on universal life and annuity contracts are
equal to cumulative deposits plus credited interest less withdrawals and
charges. This liability also includes a liability for amounts that have been
assessed to compensate the insurer for services to be performed over future
periods.
FEDERAL INCOME TAXES
NYLIAC is a member of a group which files a consolidated Federal income tax
return with New York Life. The consolidated income tax provision or benefit is
allocated among the members of the group in accordance with a tax allocation
agreement. The tax allocation agreement provides that NYLIAC is allocated its
share of the consolidated tax provision or benefit determined generally on a
separate company basis. Current Federal income taxes are charged or credited to
operations based upon amounts estimated to be payable or recoverable as a result
of taxable operations for the current year and any adjustments to such estimates
from prior years. Deferred income tax assets and liabilities are recognized for
the future tax consequence of temporary differences between financial statement
carrying amounts and income tax bases of assets and liabilities.
Current Federal income taxes include a provision for NYLIAC's share of the
equity base tax applicable to mutual life insurance companies and their
insurance subsidiaries. The amount recorded is based on NYLIAC's estimate of the
differential earnings rate ("DER") (the actual rate will be announced at a later
date by the Internal Revenue Service ("IRS")) used to compute the equity base
tax.
REINSURANCE
NYLIAC enters into reinsurance agreements in the normal course of its
insurance business to reduce overall risk. NYLIAC remains liable for reinsurance
ceded if the reinsurer fails to meet its obligation on the business it has
assumed. NYLIAC evaluates the financial condition of its reinsurers to minimize
its exposure to significant losses from reinsurer insolvencies.
SEPARATE ACCOUNTS
NYLIAC has established separate accounts with varying investment objectives
which are segregated from NYLIAC's general account and are maintained for the
benefit of separate account policyholders' and NYLIAC. Separate account assets
are stated at market value. The liability for separate accounts represents
F-8
<PAGE> 68
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
SEPARATE ACCOUNTS -- (CONTINUED)
policyholders' interests in the separate account assets. For its registered
separate accounts, these liabilities include accumulated net investment income
and realized and unrealized gains and losses on those assets, and generally
reflect market value. For its guaranteed, non-registered separate account, the
liability includes interest credited to the policies.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of various assets and liabilities are included throughout the
notes to financial statements. Specifically, fair value disclosure of fixed
maturities, short-term investments, cash equivalents, equity securities and
mortgage loans is reported in Note 2 -- Significant Accounting Policies and Note
3 -- Investments. Fair values for policyholders' account balances are reported
in Note 5 -- Insurance Liabilities. Fair values for derivative financial
instruments are included in Note 10 -- Derivative Financial Instruments and Risk
Management. Fair values for repurchase agreements are included in Note
11 -- Commitments and Contingencies.
BUSINESS RISKS AND UNCERTAINTIES
The development of policy reserves and deferred policy acquisition costs
for NYLIAC's products requires management to make estimates and assumptions
regarding mortality, morbidity, lapse, expense and investment experience. Such
estimates are primarily based on historical experience and future expectations
of mortality, morbidity, expense, persistency and investment assumptions. Actual
results could differ from those estimates. Management monitors actual
experience, and where circumstances warrant, revises its assumptions and the
related estimates for policy reserves and deferred policy acquisition costs.
NYLIAC regularly invests in mortgage loans, mortgage-backed securities and
other securities subject to prepayment and/or call risk. Significant changes in
prevailing interest rates and/or geographic conditions may adversely affect the
timing and amount of cash flows on such securities, as well as their related
values. In addition, the amortization of market premium and accretion of market
discount for mortgage-backed and asset-backed securities is based on historical
experience and estimates of future payment experience on the underlying assets.
Actual prepayment speeds will differ from original estimates and may result in
material adjustments to asset values and amortization or accretion recorded in
future periods.
As a subsidiary of a mutual life insurance company, NYLIAC is subject to a
tax on its equity base. The rates applied to NYLIAC's equity base are determined
annually by the IRS after comparison of mutual life insurance company earnings
for the year to the average earnings of the 50 largest stock life insurance
companies for the prior three years. Due to the timing of earnings information,
estimates of the current year's tax rate must be made by management. The
ultimate amounts of equity base tax incurred may vary considerably from the
original estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
During 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use", which requires
capitalization of external and certain internal costs incurred to obtain or
develop internal-use computer software during the application development stage.
NYLIAC applied the provisions of SOP 98-1 prospectively effective January
1, 1999. The adoption of SOP 98-1 resulted in net capitalization of $37 million
at December 31, 1999, which is included in other assets in the accompanying
Balance Sheet. Capitalized internal-use software is amortized on a straight-line
basis over the estimated useful life of the software, not to exceed five years.
During 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement establishes new GAAP
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, and for hedging activities.
In 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities -- Deferral of the Effective Date of FASB Statement No.
133", which postpones the implementation until the 2001 financial statements.
NYLIAC is currently evaluating what impact, if any, this Statement will have on
its financial results.
F-9
<PAGE> 69
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
RECENT ACCOUNTING PRONOUNCEMENTS -- (CONTINUED)
This Statement requires that derivatives be reported in the balance sheet
at their fair value, regardless of any hedging relationship that may exist.
Accounting for the gains or losses resulting from changes in the values of those
derivatives would depend on the use of the derivative and whether it qualifies
for hedge accounting. Changes in fair value of derivatives that are not
designated as hedges or that do not meet the hedge accounting criteria will be
reported in earnings.
NOTE 3 -- INVESTMENTS
FIXED MATURITIES
For publicly traded fixed maturities, estimated fair value is determined
using quoted market prices. For fixed maturities without a readily ascertainable
market value, NYLIAC has determined an estimated fair value using either a
discounted cash flow approach, including provisions for credit risk generally
based upon the assumption such securities will be held to maturity, broker
dealer quotations, or a proprietary matrix pricing model.
At December 31, 1999 and 1998, the maturity distribution of fixed
maturities was as follows (in millions):
<TABLE>
<CAPTION>
1999 1998
----------------------- -----------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
AVAILABLE FOR SALE COST FAIR VALUE COST FAIR VALUE
------------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Due in one year or less $ 514 $ 514 $ 518 $ 521
Due after one year through five years 3,196 3,153 3,473 3,533
Due after five years through ten years 2,167 2,099 1,804 1,885
Due after ten years 3,138 2,938 3,028 3,235
Mortgage and asset-backed securities:
Government or government agency 3,114 2,996 2,080 2,121
Other 1,631 1,589 1,740 1,786
------- ------- ------- -------
Total Available for Sale $13,760 $13,289 $12,643 $13,081
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
HELD TO MATURITY
----------------
<S> <C> <C> <C> <C>
Due in one year or less $ 17 $ 17 $ 27 $ 28
Due after one year through five years 272 360 225 291
Due after five years through ten years 165 159 219 228
Due after ten years 206 194 193 207
Asset-backed securities 21 21 61 62
------- ------- ------- -------
Total Held to Maturity $ 681 $ 751 $ 725 $ 816
======= ======= ======= =======
</TABLE>
F-10
<PAGE> 70
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
FIXED MATURITIES -- (CONTINUED)
At December 31, 1999 and 1998, the distribution of gross unrealized gains
and losses on investments in fixed maturities was as follows (in millions):
<TABLE>
<CAPTION>
1999
---------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
AVAILABLE FOR SALE COST GAINS LOSSES FAIR VALUE
------------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
Corporations and agencies $ 635 $ 7 $ 16 $ 626
U.S. agencies, state and municipal 3,046 7 129 2,924
Foreign Governments 20 -- -- 20
Corporate 8,428 61 359 8,130
Other 1,631 4 46 1,589
------- ---- ---- -------
Total Available for Sale $13,760 $ 79 $550 $13,289
======= ==== ==== =======
HELD TO MATURITY
Corporate $ 661 $ 91 $ 22 $ 730
Other 20 1 -- 21
------- ---- ---- -------
Total Held to Maturity $ 681 $ 92 $ 22 $ 751
======= ==== ==== =======
</TABLE>
<TABLE>
<CAPTION>
1998
---------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
AVAILABLE FOR SALE COST GAINS LOSSES FAIR VALUE
------------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
Corporations and agencies $ 1,006 $ 45 $ 1 $ 1,050
U.S. agencies, state and municipal 1,927 39 4 1,962
Foreign Governments 234 22 -- 256
Corporate 7,736 338 47 8,027
Other 1,740 48 2 1,786
------- ---- ---- -------
Total Available for Sale $12,643 $492 $ 54 $13,081
======= ==== ==== =======
HELD TO MATURITY
Corporate $ 664 $ 91 $ 1 $ 754
Other 61 1 -- 62
------- ---- ---- -------
Total Held to Maturity $ 725 $ 92 $ 1 $ 816
======= ==== ==== =======
</TABLE>
EQUITY SECURITIES
Estimated fair value of equity securities has been determined using quoted
market prices for publicly traded securities and a matrix pricing model for
private placement securities. At December 31, 1999 and 1998, the distribution of
gross unrealized gains and losses on equity securities is as follows (in
millions):
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1999 $80 $13 $4 $ 89
1998 $76 $27 $3 $100
</TABLE>
MORTGAGE LOANS
NYLIAC's mortgage loans are diversified by property type, location and
borrower, and are generally collateralized by the related property.
The fair market value of the mortgage loan portfolio at December 31, 1999
and 1998 is estimated to be $1,858 million and $1,728 million, respectively.
Market values are determined by discounting the projected cash flows for each
loan to determine the current net present value. The discount rate used
approximates the current rate for new mortgages with comparable characteristics
and similar remaining maturities.
F-11
<PAGE> 71
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
MORTGAGE LOANS -- (CONTINUED)
At December 31, 1999 and 1998, contractual commitments to extend credit
under commercial and residential mortgage loan agreements amounted to
approximately $37 million and $76 million, respectively, at a fixed market rate
of interest. These commitments are diversified by property type and geographic
region.
The general reserve provision for losses on mortgage loans was $4 million
and $1 million at December 31, 1999 and 1998, respectively. There were no
specific provisions for losses as of December 31, 1999 and 1998. The activity in
the general reserves as of December 31, 1999 and 1998 is summarized below (in
millions):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Beginning Balance $ 1 $14
Additions/(reductions) charged/(credited) to operations 3 (5)
Recoveries of amounts previously written-down -- (8)
--- ---
Ending Balance $ 4 $ 1
=== ===
</TABLE>
NYLIAC accrues interest income on impaired loans to the extent it is deemed
collectible and the loan continues to perform under its original or restructured
contractual terms. Interest income on problem loans is generally recognized on a
cash basis. Cash payments on loans in the process of foreclosure are generally
treated as a return of principal.
At December 31, 1999 and 1998, the distribution of the mortgage loan
portfolio by property type and geographic region was as follows (in millions):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Property Type:
Office building $ 795 $ 753
Retail 385 330
Apartments 185 187
Residential 302 247
Other 183 105
------ ------
Total $1,850 $1,622
====== ======
Geographic Region:
Central $ 438 $ 359
Pacific 255 211
Middle Atlantic 444 451
South Atlantic 534 418
New England 121 121
Other 58 62
------ ------
Total $1,850 $1,622
====== ======
</TABLE>
REAL ESTATE
At December 31, 1999 and 1998, NYLIAC's real estate portfolio consisted of
the following (in millions):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Investment $63 $105
Acquired through foreclosures 9 11
--- ----
Total real estate $72 $116
=== ====
</TABLE>
Accumulated depreciation on real estate at December 31, 1999 and 1998, was
$11 million and $12 million, respectively. Depreciation expense totaled $3
million in 1999, 1998 and 1997.
F-12
<PAGE> 72
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 4 -- INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES
The components of net investment income for the years ended December 31,
1999, 1998 and 1997, were as follows (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Fixed Maturities $1,013 $ 972 $ 961
Equity Securities 10 7 6
Mortgage Loans 134 116 96
Real Estate 15 15 18
Policy Loans 41 40 39
Derivative Instruments 1 1 1
Other 16 1 18
------ ------ ------
Gross investment income 1,230 1,152 1,139
Investment expenses (51) (44) (55)
------ ------ ------
Net investment income $1,179 $1,108 $1,084
====== ====== ======
</TABLE>
During 1999 a fixed maturity investment that had been classified as held to
maturity was transferred to available for sale and subsequently sold due to
credit deterioration. The investment had an amortized cost of $10,052,000, and
the sale resulted in a realized gain of $82,000. In addition, in 1997 a fixed
maturity investment that had been classified as held to maturity was sold due to
credit deterioration. The investment had an amortized cost of $2,791,000, and
the sale resulted in a realized gain of $14,000.
For the years ended December 31, 1999, 1998 and 1997, realized investment
gains (losses) computed under the specific identification method are as follows
(in millions):
<TABLE>
<CAPTION>
1999 1998 1997
------------------------- ------------------------- -------------------------
GAINS LOSSES GAINS LOSSES GAINS LOSSES
----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Maturities $ 64 $(87) $ 87 $(29) $172 $ (83)
Equity Securities 34 (8) 7 (7) 9 (4)
Mortgage Loans 4 -- 16 (8) 12 (8)
Real Estate 5 (2) 6 (2) 3 (2)
Derivative Instruments -- -- -- -- 80 (71)
Other 2 -- 3 (10) 1 (1)
---- ---- ---- ---- ---- -----
Subtotal $109 $(97) $119 $(56) $277 $(169)
---- ---- ---- ---- ---- -----
Investment gains, net $12 $63 $108
=== === ====
</TABLE>
NET UNREALIZED INVESTMENT GAINS
Net unrealized investment gains on fixed maturities available for sale are
included in the Balance Sheet as a component of "Accumulated other comprehensive
income". Changes in these amounts include reclassification adjustments to avoid
double counting in "Comprehensive income" items that are part of "Net income"
for
F-13
<PAGE> 73
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NET UNREALIZED INVESTMENT GAINS -- (CONTINUED)
a period that also had been part of "Other comprehensive income" in earlier
periods. The amounts for the years ended December 31, are as follows (in
millions):
<TABLE>
<CAPTION>
1999 1998 1997
----- ---- ----
<S> <C> <C> <C>
Net unrealized investments gains, beginning of the year $ 201 $157 $ 68
Changes in net unrealized investment gains attributable to:
Investments:
Net unrealized investment gains (losses) arising
during the period (612) 24 --
Reclassification adjustments for gains (losses)
included
in net income (1) 35 --
Net unrealized investment gains (losses) arising
during the period, including reclassification
adjustments -- -- 142
----- ---- ----
Change in net unrealized investment gains (losses),
net of adjustments (613) 59 142
Impact of net unrealized investment gains (losses) on:
Policyholders' account balance (7) (1) 3
Deferred policy acquisition costs 228 (14) (56)
----- ---- ----
Change in net unrealized investment gains (losses) (392) 44 89
----- ---- ----
Net unrealized investment gains (losses), end of year $(191) $201 $157
===== ==== ====
</TABLE>
Net unrealized gains (losses) on investments arising during the periods
reported in the above table are net of income tax expense (benefit) of $(330)
million, $31 million and $76 million for the years ended December 31, 1999, 1998
and 1997, respectively.
Reclassification adjustments reported in the above table for the years
ended December 31, 1999, 1998 and 1997 are net of income tax expense of $0
million, $19 million and $0 million, respectively.
Policyholders' account balance reported in the above table are net of
income tax expense (benefit) of $(3) million, $0 million and $1 million for the
years ended December 31, 1999, 1998 and 1997, respectively.
Deferred policy acquisition costs in the above table for the years ended
December 31, 1999, 1998 and 1997 are net of income tax expense (benefit) of $122
million, $(8) million and $(31) million, respectively.
NOTE 5 -- INSURANCE LIABILITIES
NYLIAC's annuity contracts are primarily deferred annuities. The carrying
value, which approximates fair value, of NYLIAC's liabilities for deferred
annuities at December 31, 1999 and 1998, was $7,279 million and $6,905 million,
respectively.
NOTE 6 -- SEPARATE ACCOUNTS
NYLIAC maintains eight non-guaranteed, registered separate accounts for its
variable deferred annuity and variable life products. NYLIAC maintains
investments in the registered separate accounts of $71 million and $54 million
at December 31, 1999 and 1998, respectively. The assets of the separate
accounts, which are carried at market value, represent investments in shares of
the New York Life sponsored MainStay VP Series Fund and other non-proprietary
funds.
NYLIAC maintains one guaranteed separate account for universal life
insurance policies. This account provides a minimum guaranteed interest rate
with a market value adjustment imposed upon certain surrenders. The assets of
this separate account are carried at market value.
F-14
<PAGE> 74
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 7 -- DEFERRED POLICY ACQUISITION COSTS
An analysis of deferred policy acquisition costs (DAC) for the years ended
December 31, 1999, 1998 and 1997 is as follows (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ -----
<S> <C> <C> <C>
Balance at beginning of year before adjustment
for unrealized gains (losses) on investments $1,028 $ 836 $ 751
Current year additions 372 286 200
Amortized during year (74) (94) (115)
------ ------ -----
Balance at end of year before adjustment for
unrealized gains (losses) on investments 1,326 1,028 836
Adjustment for unrealized gains (losses) on investments 181 (169) (148)
------ ------ -----
Balance at end of year $1,507 $ 859 $ 688
====== ====== =====
</TABLE>
NOTE 8 -- FEDERAL INCOME TAXES
The components of the net deferred tax liability as of December 31, 1999
and 1998 are as follows (in millions):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Future policyholder benefits $258 $196
Employee and agents benefits 52 53
Investments 131 --
---- ----
Gross deferred tax assets 441 249
==== ====
Deferred tax liabilities
Deferred policy acquisition costs 374 168
Investments -- 174
Other 14 8
---- ----
Gross deferred tax liabilities 388 350
---- ----
Net deferred tax (asset) liability $(53) $101
==== ====
</TABLE>
The gross deferred tax asset relates to temporary differences that are
expected to reverse as net ordinary deductions. Management believes that
NYLIAC's taxable income in future years will be sufficient to realize the
deferred tax benefits and therefore, no valuation allowance has been recorded.
Set forth below is a reconciliation of the Federal income tax rate to the
effective tax rate for 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Equity base tax 5.9 1.7 3.3
Tax exempt income (1.1) (.5) (.5)
Other (1.5) (.2) (.1)
---- ---- ----
Effective tax rate 38.3% 36.0% 37.7%
==== ==== ====
</TABLE>
NYLIAC's Federal income tax returns are routinely examined by the IRS and
provisions are made in the financial statements in anticipation of the results
of these audits. The IRS has completed audits through 1995. There were no
material effects on NYLIAC's results of operations as a result of these audits.
NYLIAC believes that its recorded income tax liabilities are adequate for all
open years.
F-15
<PAGE> 75
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 9 -- REINSURANCE
NYLIAC has entered into cession reinsurance agreements on a coinsurance
basis with non-affiliated companies and on a yearly renewable term basis with
affiliated and non-affiliated companies.
NYLIAC has ceded yearly renewable term reinsurance with affiliated
companies. Under this agreement, included in the accompanying consolidated
statement of income are $1.5 million, $.9 million and $.4 million of ceded
premiums at December 31, 1999, 1998 and 1997, respectively.
On April 1, 1997, NYLIAC, under the terms of an assumption reinsurance
agreement, acquired certain bank owned life insurance policies that had been
issued by Confederation Life Insurance Company. In conjunction with this
transaction, NYLIAC recorded a liability for policyholder account balances of
$277 million, and received cash of $245 million and a note receivable of $11
million. The difference of $21 million between the liability recorded and the
assets received has been recorded as DAC, which is being amortized over the
remaining life of the policies, assumed to be 25 years.
NOTE 10 -- DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
NYLIAC uses derivative financial instruments to manage interest rate,
commodity and market risk. These derivative financial instruments include
interest rate floors and interest rate and commodity swaps. NYLIAC has not
engaged in derivative financial instrument transactions for speculative
purposes.
Notional or contractual amounts of derivative financial instruments provide
only a measure of involvement in these types of transactions and do not
represent the amounts exchanged between the parties engaged in the transaction.
The amounts exchanged are determined by reference to the notional amounts and
other terms of the derivative financial instruments which relate to interest
rates or other financial indices.
NYLIAC is exposed to credit-related losses in the event that a counterparty
fails to perform its obligations under contractual terms. The credit exposure of
derivative financial instruments is represented by the sum of fair values of
contracts with each counterparty, if the net value is positive, at the reporting
date.
NYLIAC deals with highly rated counterparties and does not expect the
counterparties to fail to meet their obligations. NYLIAC has controls in place
to monitor credit exposures by limiting transactions with specific
counterparties within specified dollar limits and assessing the future
creditworthiness of counterparties. NYLIAC uses master netting agreements and
adjusts transaction levels, when appropriate, to minimize risk.
INTEREST RATE RISK MANAGEMENT
NYLIAC enters into various types of interest rate contracts primarily to
minimize exposure of specific assets held by NYLIAC to fluctuations in interest
rates.
The following table summarizes the notional amounts and credit exposures of
interest rate related derivative transactions (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
NOTIONAL CREDIT NOTIONAL CREDIT
AMOUNT EXPOSURE AMOUNT EXPOSURE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest Rate Swaps $225,000 $-- $125,000 $9,125
Interest Rate Floors $150,000 $92 $150,000 $ 748
</TABLE>
Interest rate swaps are agreements with other parties to exchange, at
specified intervals, the difference between fixed-rate and floating-rate
interest amounts calculated by reference to an agreed upon notional amount. Swap
contracts outstanding at December 31, 1999 are between four years, seven months
and nineteen years in maturity. At December 31, 1998 such contracts were between
six years, eight months and nineteen years, four months in maturity. NYLIAC does
not act as an intermediary or broker in interest rate swaps.
F-16
<PAGE> 76
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
INTEREST RATE RISK MANAGEMENT -- (CONTINUED)
The following table shows the type of swaps used by NYLIAC and the weighted
average interest rates. Average variable rates are based on the rates which
determine the last payment received or paid on each contract; those rates may
change significantly, affecting future cash flows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Receive -- fixed swaps -- Notional amount (in thousands) $225,000 $125,000
Average receive rate 6.50% 6.64%
Average pay rate 5.17% 5.65%
</TABLE>
During the term of the swap, net settlement amounts are recorded as
investment income or expense when earned. Fair values of interest rate swaps
were ($8,420,000) and $9,125,000 at December 31, 1999 and 1998, respectively,
based on broker/dealer quotations.
Interest rate floor agreements entitle NYLIAC to receive amounts from
counterparties based upon the difference between a strike price and current
interest rates. Such agreements serve as hedges against declining interest rates
on a portfolio of assets. Amounts received during the term of interest rate
floor agreements are recorded as investment income.
At December 31, 1999 and 1998, unamortized premiums on interest rate floors
amounted to $315,000 and $372,000, respectively. Fair values of such agreements
were $92,000 and $748,000 at December 31, 1999 and 1998, respectively, based on
broker/dealer quotations.
COMMODITY RISK MANAGEMENT
NYLIAC has a bond investment with interest payments linked to the price of
crude oil. NYLIAC has entered into a commodity swap with a total notional amount
of $7,500,000 as a hedge against this commodity risk. The credit exposure of the
swap was $0 and $136,000 at December 31, 1999 and 1998, respectively.
NOTE 11 -- COMMITMENTS AND CONTINGENCIES
LITIGATION
NYLIAC is a defendant in individual suits arising from its agency sales
force, insurance (including variable contracts registered under the federal
securities law), investment, retail securities and/or other operations,
including actions involving retail sales practices. Most of these actions seek
substantial or unspecified compensatory and punitive damages. NYLIAC is also
from time to time involved as a party in various governmental, administrative,
and investigative proceedings and inquiries.
Notwithstanding the uncertain nature of litigation and regulatory
inquiries, the outcome of which cannot be predicted, NYLIAC nevertheless
believes that, after provisions made in the financial statements, the ultimate
liability that could result from litigation and proceedings would not have a
material adverse effect on NYLIAC's financial position; however, it is possible
that settlements or adverse determinations in one or more actions or other
proceedings in the future could have a material adverse effect on NYLIAC's
operating results for a given year.
LOANED SECURITIES AND REPURCHASE AGREEMENTS
NYLIAC participates in a securities lending program for the purpose of
enhancing income on securities held. At December 31, 1999 and 1998, $246 million
and $571 million, respectively, of NYLIAC's fixed maturities and equity
securities were on loan to others, but were fully collateralized in an account
held in trust for NYLIAC. Such assets reflect the extent of NYLIAC's involvement
in securities lending, not NYLIAC's risk of loss.
NYLIAC enters into agreements to sell and repurchase securities for the
purpose of enhancing income on securities held. Under these agreements, NYLIAC
obtains the use of funds from a broker for approximately one month. The
liability reported in the accompanying Balance Sheet (included in other
liabilities) at December 31, 1999 of $620 million ($139 million at December 31,
1998) approximates fair value. The
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<PAGE> 77
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
LOANED SECURITIES AND REPURCHASE AGREEMENTS -- (CONTINUED)
investments acquired with the funds received from the securities sold are
primarily included in cash and cash equivalents in the accompanying Balance
Sheet.
NOTE 12 -- RELATED PARTY TRANSACTIONS
New York Life provides NYLIAC with services and facilities for the sale of
insurance and other activities related to the business of insurance. New York
Life charges NYLIAC for the identified costs associated with these services and
facilities under the terms of a Service Agreement between New York Life and
NYLIAC. Such costs, amounting to $393 million for the year ended December 31,
1999 ($335 million for 1998 and $239 million for 1997) are reflected in
operating expenses and net investment income in the accompanying Statement of
Income.
In addition, NYLIAC is allocated post-retirement and post-employment
benefits other than pensions, which are held by New York Life. NYLIAC was
allocated $12 million for its share of the net periodic post-retirement benefits
expense in 1999 ($8 million and $9 million in 1998 and 1997, respectively) and
$3 million for the post-employment benefits expense in 1999 ($2 million in 1998
and 1997) under the provisions of the Service Agreement. The expenses are
reflected in operating expenses and net investment income in the accompanying
Statement of Income.
In addition, in 1999 New York Life concluded a comprehensive expense
reduction program expected to streamline processes and improve profitability. As
a result of job eliminations and early retirement benefits as defined in
management's termination plan, NYLIAC was allocated $16 million for its share of
these restructuring costs in 1999, which are reflected in operating expenses and
net investment income in the accompanying Statement of Income.
At December 31, 1999 and 1998, NYLIAC has a net liability of $80 million
and $63 million, respectively for the above described services which are
included in other liabilities in the accompanying Balance Sheet.
In 1999 NYLIAC sold a $197 million Corporate Sponsored Variable Universal
Life (CSVUL) policy and a $82 million Corporate Sponsored Universal Life (CSUL)
policy to a Voluntary Employee Benefit Association (VEBA) trust. This trust was
established to fund New York Life's retired employees medical and dental
benefits. In addition, in 1999 and 1998, NYLIAC sold a Corporate Owned Life
(COLI) policy to New York Life for $180 million and $250 million in premiums,
respectively. These policies were sold on the same basis as policies sold to
unrelated customers.
NOTE 13 -- SUPPLEMENTAL CASH FLOW INFORMATION
Federal income taxes paid were $48 million, $67 million, and $126 million
during 1999, 1998 and 1997, respectively.
Total interest paid was $30 million, $27 million and $35 million during
1999, 1998 and 1997, respectively.
NOTE 14 -- STATUTORY FINANCIAL INFORMATION
Accounting practices used to prepare statutory financial statements for
regulatory filings of life insurance companies differ in certain instances from
GAAP. The Delaware Insurance Department recognizes only statutory accounting
practices for determining and reporting the financial condition and results of
operations of an insurance company, and for determining its solvency under the
Delaware Insurance Law. No consideration is given by the Department to financial
statements prepared in accordance with generally accepted accounting principles
in making such determinations.
In 1998, the NAIC adopted the Codification of Statutory Accounting
Principles guidance, which will replace the current Accounting Practices and
Procedures manual as the NAIC's primary guidance on statutory accounting. The
Delaware Insurance Department has adopted the Codification guidance, effective
January 1, 2001. NYLIAC has not estimated the potential effect of the
Codification guidance on its financial statements.
At December 31, 1999 and 1998, statutory stockholder's equity was $1,130
million and $1,095 million, respectively.
F-18
<PAGE> 78
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 14 -- STATUTORY FINANCIAL INFORMATION -- (CONTINUED)
NYLIAC is restricted as to the amounts it may pay as dividends to New York
Life. Under Delaware Insurance Law, dividends on capital stock can be
distributed only out of earned surplus. Furthermore, without prior approval of
the Delaware Insurance Commissioner, dividends can not be declared or
distributed which exceed the greater of ten percent of the Company's surplus or
one hundred percent of net gain from operations.
No dividends were paid or declared for the years ended December 31, 1999,
1998 and 1997.
As of December 31, 1999, the amount of available and accumulated funds
derived from earned surplus from which NYLIAC can pay dividends is $625 million.
The maximum amount of dividend which may be paid in 2000 without prior approval
is $113 million.
F-19
<PAGE> 79
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
New York Life Insurance and Annuity Corporation
In our opinion, the accompanying balance sheet and the related statements of
income, of comprehensive income, of stockholder's equity and of cash flows
present fairly, in all material respects, the financial position of New York
Life Insurance and Annuity Corporation at December 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 2 to the financial statements, the Company changed its
method of accounting in 1999 for the cost of computer software developed or
obtained for internal use.
PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas
New York, New York 10036
March 1, 2000
F-20
