ANNUITY INVESTORS LIFE INSURANCE COMPANY®
ANNUITY INVESTORS® VARIABLE ACCOUNT B
THE COMMODORE ADVANTAGE®
Individual and Group Flexible Premium Deferred Annuities
Annual Supplement Dated April 30, 2020 to
The Commodore Advantage Prospectus Dated May 1, 2019
The information in this Supplement updates and otherwise supplements The Commodore Advantage Prospectus dated May 1, 2019 (the "2019 Advantage Prospectus"). Please read this Supplement carefully and retain it for future reference.
The Commodore Advantage Prospectus currently includes the documents listed below.
∙Annual Supplement Dated April 30, 2020, which includes prospectus information that has been revised since May 1, 2019
∙2019 Advantage Prospectus
∙2019 Supplemental Prospectus-Guaranteed Withdrawal Benefit Riders ("2019 GWB Rider Supplement"), which applies only to Contracts issued before June 1, 2009 with a guaranteed withdrawal benefit rider
The financial statements of Annuity Investors Variable Account B for the year ended December 31, 2019, accompany this Annual Supplement.
How to Get Copies of Documents and Financial Statements
You can access the documents and financial statements described above on our website at gaig.com/annuities/pages/variable-compliance-docs.aspx . If you would like a free paper copy of any document or financial statement described above, contact us.
Our Contact Information
Company Name: Annuity Investors Life Insurance Company
Mailing Address: P.O. Box 5423, Cincinnati OH 45201-5423
Service Center: 1.800.789.6771
Website:gaig.com
Form and File Numbers
Our contract form numbers for The Commodore Advantage are A803(NQ98)-3, A803(Q98)-3, G803(98)-3, C803(98)-3, P1809603NW, P1809703NW, P2008803NW, and P2008903NW. Form numbers may vary by state. The SEC file number for The Commodore Advantage is 333-51971.
Terminology
Unless otherwise indicated, terms used in this Supplement have the same meaning as in the 2019 Advantage Prospectus.
Internet Delivery of Shareholder Reports
Beginning on January 1, 2021, as permitted by regulations adopted by the SEC, paper copies of the shareholder reports for the Portfolios available under your Contract will no longer be sent by mail, unless you specifically request paper copies of the reports from us. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from us electronically by contacting the Company at 1- 800-789-6771.
You may elect to receive all future reports in paper free of charge. You can inform us that you wish to continue receiving paper copies of your shareholder reports by contacting the Company at 1-800-789-6771. Your election to receive reports in paper will apply to all Portfolios available under your Contract.
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Table of Contents |
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Page 2 of 19
PORTFOLIOS
The updated information set out below replaces in its entirety the Portfolio information on the COVER PAGE of the 2019 Advantage Prospectus.
The Subaccounts under the Contract invest in the corresponding Portfolios listed below.
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
Invesco Oppenheimer V.I. Capital Appreciation Fund - Series I
Invesco Oppenheimer V.I. Conservative Balanced Fund - Series I
Invesco Oppenheimer V.I. Discovery Mid Cap Growth Fund - Series I
Invesco Oppenheimer V.I. Main Street Fund® - Series I
Invesco V.I. American Value Fund - Series I
Invesco V.I. Comstock Fund - Series I
Invesco V.I. Core Equity Fund - Series I
Invesco V.I. Diversified Dividend Fund - Series I
Invesco V.I. Health Care Fund - Series I
Invesco V.I. High Yield Fund - Series I
Invesco V.I. Small Cap Equity Fund - Series I
ALPS Variable Investment Trust
Morningstar Balanced ETF Asset Allocation Portfolio - Class II
Morningstar Conservative ETF Asset Allocation Portfolio - Class II
Morningstar Growth ETF Asset Allocation Portfolio - Class II
Morningstar Income and Growth ETF Asset Allocation Portfolio - Class II
American Century Variable Portfolios, Inc.
VP Capital Appreciation Fund - Class I
VP Large Company Value Fund - Class I
VP Mid Cap Value Fund - Class I
VP Ultra® Fund - Class I
BNY Mellon Investment Portfolios
MidCap Stock Portfolio - Service Shares
Technology Growth Portfolio - Initial Shares
BNY Mellon Stock Index Fund, Inc.
BNY Mellon Stock Index Fund, Inc. - Initial Shares
BNY Mellon Sustainable U.S. Equity Portfolio, Inc.
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
BNY Mellon Variable Investment Fund
Appreciation Portfolio - Initial Shares
Government Money Market Portfolio
Growth and Income Portfolio - Initial Shares
Opportunistic Small Cap Portfolio - Initial Shares
Calamos® Advisors Trust
Calamos® Growth and Income Portfolio (Closed April 30, 2012)
Davis Variable Account Fund, Inc.
Davis Value Portfolio (Closed April 30, 2015)
Deutsche DWS Investments VIT Funds
DWS Small Cap Index VIP - Class A
Page 3 of 19
Franklin Templeton Variable Insurance Products Trust
Templeton Foreign VIP Fund - Class 2
Janus Aspen Series
Janus Henderson VIT Balanced Portfolio - Institutional Shares
Janus Henderson VIT Enterprise Portfolio - Institutional Shares Janus Henderson VIT Forty Portfolio - Institutional Shares
Janus Henderson VIT Global Research Portfolio - Institutional Shares (Closed November 30, 2004) Janus Henderson VIT Overseas Portfolio - Institutional Shares
Janus Henderson VIT Research Portfolio - Institutional Shares
Morgan Stanley Variable Insurance Fund, Inc.
Core Plus Fixed Income Portfolio - Class I
Discovery Portfolio - Class I
U.S. Real Estate Portfolio - Class I
PIMCO Variable Insurance Trust
PIMCO Real Return Portfolio - Administrative Class
PIMCO Total Return Portfolio - Administrative Class
The Timothy Plan
The Timothy Plan Conservative Growth Portfolio Variable Series (Closed November 30, 2004)
The Timothy Plan Strategic Growth Portfolio Variable Series (Closed November 30, 2004)
Wilshire Variable Insurance Trust
Wilshire Global Allocation Fund
Closed Portfolios
Each investment option listed above as "Closed" is available only to Contract Owners who held Accumulation Units in the Subaccount on the date on which it was closed. A Closed Subaccount will become unavailable to you once you no longer have money in that Closed Subaccount.
Morningstar Portfolios
If your Contract Effective date is before June 1, 2009 and you have activated a guaranteed withdrawal benefit rider, you may only allocate funds to the Morningstar Portfolios.
Portfolio Changes since May 1, 2019
The list of Portfolios reflects name changes and acquisitions that have occurred since May 1, 2019 as described in the 2019 Advantage Prospectus or as otherwise described below. If the name of a Portfolio was changed, it is listed under its new name. If a Portfolio was acquired by another Portfolio, the acquired Portfolio is no longer included in the list.
AIM Variable Insurance Funds (Invesco Variable Insurance Funds): On or about May 24, 2019, each fund of Oppenheimer Variable Account Funds merged into a corresponding, newly formed fund of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) listed below. Non-Service shares were re-designated as Series I shares.
∙Oppenheimer Capital Appreciation Fund/VA merged into Invesco Oppenheimer V.I. Capital Appreciation Fund.
∙Oppenheimer Conservative Balanced Fund/VA merged into Invesco Oppenheimer V.I. Conservative Balanced Fund.
∙Oppenheimer Main Street Fund® /VA merged into Invesco Oppenheimer V.I. Main Street Fund®.
BNY Mellon Investment Portfolios: Effective on or about June 3, 2019, Dreyfus Investment Portfolios was renamed BNY
Mellon Investment Portfolios. There were no changes in the names of the following funds: MidCap Stock Portfolio and Technology Growth Portfolio.
BNY Mellon Stock Index Fund, Inc.: Effective on or about June 3, 2019, Dreyfus Stock Index Fund, Inc. was renamed BNY Mellon Stock Index Fund, Inc.
The BNY Mellon Sustainable U.S. Equity Portfolio, Inc.: Effective on or about June 3, 2019, The Dreyfus Sustainable U.S. Equity Portfolio, Inc. was renamed BNY Mellon Sustainable U.S. Equity Portfolio, Inc.
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BNY Mellon Variable Investment Fund: Effective on or about June 3, 2019, Dreyfus Variable Investment Fund was renamed
BNY Mellon Variable Investment Fund. There were no changes in the names of the following portfolios: Appreciation Portfolio, Government Money Market Portfolio, Growth and Income Portfolio, and Opportunistic Small Cap Portfolio.
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
Effective April 30, 2020, Invesco V.I. Mid Cap Growth Fund merged into Invesco Oppenheimer V.I. Discovery Mid Cap Growth Fund.
EXPENSE TABLES
The information below replaces in its entirety the EXPENSE TABLES section of the 2019 Advantage Prospectus.
EXPENSE TABLES
These tables describe the fees and expenses that you will pay when you buy, hold or withdraw amounts from the Contract.
Table A: Contract Owner Transaction Expenses
(Replaces Table A in the 2019 Advantage Prospectus)
The first table describes the fees and expenses that you will pay at the time that you buy the Contract, withdraw amounts from the Contract, surrender the Contract, transfer cash value between investment options, or borrow money under the Contract. Premium taxes may also be deducted.
|
Current |
Maximum |
Maximum Contingent Deferred Sales Charge (as to Purchase Payments only)(1) |
8.00% |
8.00% |
Transfer Fee(2) |
$25 |
$30 |
Annual Automatic Transfer Program Fee |
None |
$30 |
Annual Systematic Withdrawal Fee |
None |
$30 |
Loan Interest Spread(3) |
3.00% |
7.00% |
(1)The contingent deferred sales charge is calculated as a percentage of Purchase Payments withdrawn or surrendered. This charge applies to each Purchase Payment separately. The charge on each Purchase Payment decreases to zero after 7 years. We may waive the contingent deferred sales charge under certain circumstances. See the Charges and Deductions section of this prospectus for more information about the contingent deferred sales charge and the circumstances in which it may be waived.
(2)The transfer fee currently applies to transfers in excess of 12 in any contract year.
(3)Generally, we require collateral in an amount equal to 110% of the outstanding loan balance. The loan interest spread is the difference between the amount of interest we charge you for a loan and the amount of interest we credit to your collateral. Because the maximum interest rate we charge on a loan is 8% and the minimum interest rate we credit to collateral may be as low as 1%, depending on the Contract, the maximum loan interest spread is 7%. However, a plan administrator or an employer retirement plan may require us to charge a higher interest rate on loans. In this case, the maximum loan interest rate spread will be higher than 7%.
If you cancel the Contract during the right to cancel period, we generally will recapture all bonus amounts credited to the Purchase Payments during that period. In addition, we will recapture the amount of any bonus credited to the Purchase Payments made during the first contract year if the Contract is surrendered in full during the first contract year. Additional information about the recapture of bonus amounts is set out in the Purchase Payment Bonus section of this prospectus.
Table B: Annual Expenses
(Replaces Table B in the 2019 Advantage Prospectus)
The next table describes the fees and expenses that you will pay periodically during the time that you own the Contract, not including Portfolio fees and expenses. Separate Account annual expenses are shown as a percentage of the average value of the Owner's interest in the Subaccounts.
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|
|
Standard Contracts with |
|
Standard Contracts |
Administration Charge Waived* |
Annual Contract Maintenance Fee |
$30 |
$30 |
Separate Account Annual Expenses |
|
|
Mortality and Expense Risk Charge |
1.25% |
1.25% |
Administration Charge |
0.15% |
0.00% |
Total Separate Account Annual Expenses |
1.40% |
1.25% |
* When we expect to incur reduced administrative expenses, we may waive the Administration Charge.
If you surrender your Contract, we will apply the contract maintenance fee at that time.
Table C: Total Annual Portfolio Operating Expenses
(Replaces Table C in the 2019 Advantage Prospectus)
The next table shows the minimum and maximum total operating expenses charged by the Portfolios that you may pay periodically during the time that you own the Contract. These expenses are deducted from Portfolio assets and include management fees, distribution and service (12b-1) fees, acquired fund fees and expense, and other expenses. More detail concerning each Portfolio's fees and expenses is contained in the prospectus of that Portfolio.
Minimum Maximum
0.27%1.53%
The minimum expenses are the expenses of the BNY Mellon Stock Index Fund, Inc. The maximum expenses are the expenses of the PIMCO Real Return Portfolio.
The information about Portfolio expenses that we used to prepare this table was provided to us by the Portfolios. We have not independently verified the Portfolio expense information. The minimum and maximum expenses shown in the table are for the year ended December 31, 2019. Actual expenses of a Portfolio in future years may be higher or lower.
The Portfolios in the ALPS Variable Investment Trust (Morningstar Portfolios) and the Wilshire Variable Insurance Trust are structured as "fund of funds" and invest in other investment companies ("Acquired Funds"). As a result, each Morningstar portfolio and Wilshire portfolio will likely incur higher expenses than a fund that invests directly in securities and you will effectively be paying a portion of the management fees and other expenses of the Acquired Funds.
EXAMPLES
The information below replaces in its entirety the EXAMPLES section of the 2019 Advantage Prospectus and the subsection entitled "The Commodore Advantage" of the SUPPLEMENT TO EXAMPLES section of the 2019 GWB Rider Supplement.
EXAMPLES
These examples are intended to help you compare the cost of investing in the Contract with the cost of investing in other variable annuity contracts. These costs include:
∙the Contract Owner transaction expenses (described in Table A above),
∙the annual expenses (described in Table B above), and
∙Portfolio operating expenses (described in Table C above).
Your actual costs may be higher or lower than the costs shown in the examples.
Example 1: Contract with Maximum Fund Operating Expenses (Replaces Example 1 in the 2019 Advantage Prospectus) Assumptions
∙You invest $10,000 in the Contract for the periods indicated, a 4% bonus is credited to your Purchase Payment, and your investment has a 5% return each year.
∙The annual contract maintenance fee ($30), the Separate Account annual expenses (1.40%), and the maximum Portfolio
expenses (1.53%) are incurred.
By comparing the costs shown in the tables below, you can see the impact of contingent deferred sales charges on your costs.
Page 6 of 19
|
1 year |
3 years |
5 years |
10 years |
We assume that you surrender your Contract at the end of the period. We |
|
|
|
|
also assume that the applicable contingent deferred sales charge is |
$1,131 |
$1,759 |
$2,383 |
$4,439 |
incurred. In this case, your costs would be: |
|
|
|
|
We assume that you keep your Contract and leave your money in your |
|
|
|
|
Contract for the entire period or you annuitize your Contract at the end of |
$331 |
$1,059 |
$1,883 |
$4,439 |
the period. The contingent deferred sales charge does not apply in |
|
|
|
|
these situations. In this case, your costs would be: |
|
|
|
|
Example 2: Contract with Minimum Fund Operating Expenses (Replaces Example 2 in the 2019 Advantage Prospectus) Assumptions
∙You invest $10,000 in the Contract for the periods indicated, a 4% bonus is credited to your Purchase Payment, and your investment has a 5% return each year.
∙The annual contract maintenance fee ($30), the Separate Account annual expenses (1.40%), and the minimum Portfolio
expenses (0.27%) are incurred.
By comparing the costs shown in the tables below, you can see the impact of contingent deferred sales charges on your costs.
|
1 year |
3 years |
5 years |
10 years |
We assume that you surrender your Contract at the end of the period. We |
|
|
|
|
also assume that the applicable contingent deferred sales charge is |
$1,003 |
$1,355 |
$1,677 |
$2,839 |
incurred. In this case, your costs would be: |
|
|
|
|
|
|
|
|
|
We assume that you keep your Contract and leave your money in your |
|
|
|
|
Contract for the entire period or you annuitize your Contract at the end of |
$203 |
$655 |
$1,177 |
$2,839 |
the period. The contingent deferred sales charge does not apply in |
|
|
|
|
these situations. In this case, your costs would be: |
|
|
|
|
Example 3: Example for Contract with Optional Benefit Rider and Maximum Fund Operating Expenses
This example applies only if your Contract was issued before June 1, 2009 and you have activated one of the guaranteed withdrawal benefit riders. (Replaces The Commodore Advantage Example in the 2019 GWB Rider Supplement)
Assumptions
∙You invest $10,000 in the Contract for the periods indicated, a 4% bonus is credited to your Purchase Payment, and your investment has a 5% return each year.
∙You activate the Guaranteed Lifetime Withdrawal Benefit with Spousal Continuation when you purchase your Contract and the maximum rider charge of 1.20% is incurred. The rider interest credit is 5%.
∙The annual contract maintenance fee of $30 and Separate Account annual expenses of 1.40% are incurred.
∙The maximum Portfolio expenses (0.89%) are incurred.
|
1 year |
3 years |
5 years |
10 years |
This example assumes that you surrender your Contract at the end of the |
|
|
|
|
indicated period and the applicable contingent deferred sales charge is |
$1,186 |
$1,944 |
$2,725 |
$5,297 |
incurred. If you surrender your Contract at the end of the period, your |
|
|
|
|
costs would be: |
|
|
|
|
This example assumes that you annuitize your Contract at the end of the |
|
|
|
|
indicated period or you keep your Contract and leave your money in your |
$386 |
$1,244 |
$2,225 |
$5,297 |
Contract for the entire period. If you annuitize your Contract at the end of |
|
|
|
|
the period or you keep your Contract for the entire period, your costs |
|
|
|
|
would be: |
|
|
|
|
FINANCIAL INFORMATION
The paragraph below replaces in its entirety the FINANCIAL INFORMATION section of the 2019 Advantage Prospectus.
Page 7 of 19
The financial statements of Annuity Investors Variable Account B for the year ended December 31, 2019, accompany this Supplement and are available at gaig.com/annuities/pages/variable-compliance-docs.aspx .
The financial statements of Annuity Investors Life Insurance Company for the years ended December 31, 2019, 2018 and 2017 are available at gaig.com/annuities/pages/variable-compliance-docs.aspx . If you would like a free paper copy of these financial statements, contact us.
OVERVIEW
The text below replaces in its entirety the subsection entitled "What Are the Risks Related to the Contract?" of the OVERVIEW section of the 2019 Advantage Prospectus.
What Are the Risks Related to the Contract?
∙The variable investment options to which you allocate Purchase Payments may lose value, which would cause your Account Value to decrease.
o The outbreak of the novel coronavirus known as COVID-19 was declared a pandemic by the World Health Organization in March 2020. As of the date of this prospectus, the COVID-19 pandemic has led to significant volatility and negative returns in the financial markets. These market conditions have impacted the performance of the variable investment options available under the Contract. If these market conditions continue, and depending on your individual circumstances (e.g., your selected variable investment options and the timing of any Purchase Payments, transfers, or withdrawals), you may experience (perhaps significant) negative returns under the Contract. The duration of the COVID-19 pandemic, and the future impact that the pandemic may have on the financial markets and global economy, cannot be foreseen, however. You should consult with a Financial Professional about how the COVID-19 pandemic and the recent market conditions may impact your future investment decisions related to the Contract, such as making Purchase Payments, transfers, or withdrawals, based on your individual circumstances.
∙We may not be able to pay claims related to the annuity or death benefits.
oThe economic impacts of the COVID-19 pandemic may negatively affect our financial condition and results of operations. The extent to which the COVID-19 pandemic impacts financial markets, the global economy, and our financial strength and claims-paying ability will depend on future developments that cannot be predicted with certainty. We continue to be subject to significant state solvency regulations that require us to reserve amounts to pay our contractual guarantees.
∙A contingent deferred sales charge may apply if you withdraw money from your Contract or surrender your Contract.
∙A penalty tax may be imposed at the time of a withdrawal or a surrender depending on your age and other circumstances.
PORTFOLIOS, SHARE CLASSES, ADVISORS AND INVESTMENT CATEGORIES
The text below replaces in its entirety the PORTFOLIOS, SHARES CLASSES, ADVISORS AND PORTFOLIO INVESTMENT CATEGORIES section of the 2019 Advantage Prospectus.
Portfolios, Share Classes, Advisors and Portfolio Investment Categories
PORTFOLIO |
SHARE CLASS |
ADVISOR |
INVESTMENT CATEGORY |
|
|
|
|
AIM Variable Insurance Funds (Invesco Variable Insurance Funds) |
| ||
|
|
|
|
Invesco Oppenheimer V.I. Capital |
Series I |
Invesco Advisers, Inc. |
US Equity Large Cap Growth: |
Appreciation Fund |
|
|
Large Growth |
Invesco Oppenheimer V.I. |
Series I |
Invesco Advisers, Inc. |
Cautious Allocation: Large |
Conservative Balanced Fund |
|
|
Blend |
Invesco Oppenheimer V.I. |
Series I |
Invesco Advisers, Inc. |
US Equity Mid Cap: Mid |
Discovery Mid Cap Growth Fund |
|
|
Growth |
Invesco Oppenheimer V.I. Main |
Series I |
Invesco Advisers, Inc. |
US Equity Large Cap Blend: |
Street Fund® |
|
|
Large Blend |
Invesco V.I. American Value Fund |
Series I |
Invesco Advisers, Inc. |
US Equity Mid Cap: Mid Value |
|
|
|
|
Invesco V.I. Comstock Fund |
Series I |
Invesco Advisers, Inc. |
US Equity Large Cap Value: |
|
|
|
Large Value |
Invesco V.I. Core Equity Fund |
Series I |
Invesco Advisers, Inc. |
US Equity Large Cap Blend: |
|
|
|
Large Blend |
|
|
Page 8 of 19 |
|
PORTFOLIO |
SHARE CLASS |
ADVISOR |
INVESTMENT CATEGORY |
|
|
|
|
Invesco V.I. Diversified Dividend |
Series I |
Invesco Advisers, Inc. |
US Equity Large Cap Value: |
Fund |
|
|
Large Value |
Invesco V.I. Health Care Fund |
Series I |
Invesco Advisers, Inc. |
Healthcare Sector Equity: |
|
|
|
Large Growth |
Invesco V.I. High Yield Fund |
Series I |
Invesco Advisers, Inc. |
US Fixed Income |
|
|
|
|
Invesco V.I. Small Cap Equity Fund |
Series I |
Invesco Advisers, Inc. |
US Equity Small Cap: Small |
|
|
|
Growth |
ALPS Variable Investment Trust |
|
|
|
|
|
|
|
Morningstar Balanced ETF Asset |
Class II |
ALPS Advisers, Inc. Sub- |
Moderate Allocation: Large |
Allocation Portfolio |
|
Advisor: Morningstar Investment |
Blend |
|
|
Management LLC |
|
Morningstar Conservative ETF |
Class II |
ALPS Advisers, Inc. Sub- |
Cautious Allocation: Large |
Asset Allocation Portfolio |
|
Advisor: Morningstar Investment |
Value |
|
|
Management LLC |
|
Morningstar Growth ETF Asset |
Class II |
ALPS Advisers, Inc. Sub- |
Aggressive Allocation: Large |
Allocation Portfolio |
|
Advisor: Morningstar Investment |
Blend |
|
|
Management LLC |
|
Morningstar Income and Growth |
Class II |
ALPS Advisers, Inc. Sub- |
Cautious Allocation: Large |
ETF Asset Allocation Portfolio |
|
Advisor: Morningstar Investment |
Blend |
|
|
Management LLC |
|
American Century Variable Portfolios, Inc. |
|
| |
|
|
|
|
VP Capital Appreciation Fund |
Class I |
American Century Investment |
US Equity Mid Cap: Mid |
|
|
Management, Inc. |
Growth |
VP Large Company Value Fund |
Class I |
American Century Investment |
US Equity Large Cap Value: |
|
|
Management, Inc. |
Large Value |
VP Mid Cap Value Fund |
Class I |
American Century Investment |
US Equity Mid Cap: Mid Value |
|
|
Management, Inc. |
|
VP Ultra® Fund |
Class I |
American Century Investment |
US Equity Large Cap Growth: |
|
|
Management, Inc. |
Large Growth |
BNY Mellon Investment Portfolios |
|
|
|
|
|
|
|
MidCap Stock Portfolio |
Service Shares |
BNY Mellon Investment Adviser, Inc. |
US Equity Mid Cap: Mid Blend |
|
|
|
|
Technology Growth Portfolio |
Initial Shares |
BNY Mellon Investment Adviser, Inc. |
Technology Sector Equity: |
|
|
|
Large Growth |
BNY Mellon Stock Index Fund, Inc. |
|
|
|
|
|
|
|
BNY Mellon Stock Index Fund, Inc. |
Initial Shares |
BNY Mellon Investment Adviser, Inc. |
US Equity Large Cap Blend: |
|
|
Index Manager: Mellon Investments |
Large Blend |
|
|
Corporation (an affiliate of BNY |
|
|
|
Mellon Investment Adviser, Inc.) |
|
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. |
|
| |
|
|
|
|
BNY Mellon Sustainable U.S. |
Initial Shares |
BNY Mellon Investment Adviser, Inc. |
US Equity Large Cap Blend: |
Equity Portfolio, Inc. |
|
Sub-Advisor: Newton Investment |
Large Blend |
|
|
Management Limited |
|
BNY Mellon Variable Investment Fund |
|
| |
|
|
|
|
Appreciation Portfolio |
Initial Shares |
Adviser: BNY Mellon Investment |
US Equity Large Cap Blend: |
|
|
Adviser, Inc. |
Large Growth |
|
|
Sub-Adviser: Fayez Sarofim & Co. |
|
Government Money Market |
|
Dreyfus Cash Investment |
US Money Market |
Portfolio |
|
Strategies, a division of BNY Mellon |
|
|
|
Investment Adviser, Inc. |
|
Growth and Income Portfolio |
Initial Shares |
BNY Mellon Investment Adviser, Inc. |
US Equity Large Cap Growth: |
|
|
|
Large Growth |
Opportunistic Small Cap Portfolio |
Initial Shares |
BNY Mellon Investment Adviser, Inc. |
US Equity Small Cap: Small |
|
|
|
Blend |
|
|
Page 9 of 19 |
|
PORTFOLIO |
SHARE CLASS |
|
ADVISOR |
INVESTMENT CATEGORY |
|
|
|
|
|
Deutsche DWS Investments VIT Funds |
|
| ||
|
|
|
| |
DWS Small Cap Index VIP |
Class A |
|
DWS Investment Management |
US Equity Small Cap: Small |
|
|
|
Americas, Inc. |
Blend |
Franklin Templeton Variable Insurance Products Trust |
|
| ||
|
|
|
| |
Templeton Foreign VIP Fund |
Class 2 |
|
Templeton Investment Counsel, LLC |
Global Equity Large Cap: |
|
|
|
|
Large Value |
Janus Aspen Series |
|
|
|
|
|
|
|
| |
Janus Henderson VIT Balanced |
Institutional |
|
Janus Capital Management LLC |
Moderate Allocation: Large |
Portfolio |
Shares |
|
|
Blend |
Janus Henderson VIT Enterprise |
Institutional |
|
Janus Capital Management LLC |
US Equity Mid Cap: Mid |
Portfolio |
Shares |
|
|
Growth |
Janus Henderson VIT Forty |
Institutional |
|
Janus Capital Management LLC |
US Equity Large Cap Growth: |
Portfolio |
Shares |
|
|
Large Growth |
Janus Henderson VIT Overseas |
Institutional |
|
Janus Capital Management LLC |
Global Equity Large Cap: |
Portfolio |
Shares |
|
|
Large Blend |
Janus Henderson VIT Research |
Institutional |
|
Janus Capital Management LLC |
US Equity Large Cap Growth: |
Portfolio |
Shares |
|
|
Large Growth |
Morgan Stanley Variable Insurance Fund, Inc. |
|
| ||
|
|
|
| |
Core Plus Fixed Income Portfolio |
Class I |
|
Morgan Stanley Investment |
US Fixed Income |
|
|
|
Management, Inc. |
|
Discovery Portfolio |
Class I |
|
Morgan Stanley Investment |
US Equity Mid Cap: Mid |
|
|
|
Management, Inc. |
Growth |
U.S. Real Estate Portfolio |
Class I |
|
Morgan Stanley Investment |
Real Estate Sector Equity: Mid |
|
|
|
Management, Inc. |
Value |
PIMCO Variable Insurance Trust |
|
|
|
|
|
|
|
| |
PIMCO Real Return Portfolio |
Administrative |
|
Pacific Investment Management |
US Fixed Income |
|
Class |
|
Company LLC |
|
PIMCO Total Return Portfolio |
Administrative |
|
Pacific Investment Management |
US Fixed Income |
|
Class |
|
Company LLC |
|
Wilshire Variable Insurance Trust |
|
|
|
|
|
|
|
|
|
Wilshire Global Allocation Fund |
|
|
Wilshire Associates Incorporated |
Moderate Allocation: Large |
|
|
|
|
Blend |
The investment category for a Portfolio that is listed in the table above was assigned by an unaffiliated provider of independent investment research and is based on portfolio statistics and compositions over the past three years.
Each Morningstar Portfolio and the Wilshire Portfolio listed in the table above is structured as a "fund of funds". A "fund of funds" attempts to achieve its investment objective by investing in other investment companies (each, an "Acquired Fund"), which in turn invests directly in securities. Each Morningstar Portfolio and the Wilshire Portfolio indirectly incurs a proportionate share of the expenses of each Acquired Fund in which it invests. As a result of this fund of funds structure, the Morningstar Portfolios and the Wilshire Portfolio will likely incur higher expenses than funds that invest directly in securities.
PURCHASE PAYMENTS AND ALLOCATIONS TO INVESTMENT OPTIONS
The text below is added to the subsection entitled "Purchase Payments" of the PURCHASE PAYMENTS AND ALLOCATIONS TO INVESTMENT OPTIONS section of the 2019 Advantage Prospectus.
Unforeseen Processing Delays. We are exposed to risks related to natural and man-made disasters and catastrophes, such as (but not limited to) storms, fires, floods, earthquakes, public health crises, malicious acts, and terrorist acts, any of which could adversely affect our ability to conduct business. A natural or man-made disaster or catastrophe, including a pandemic (such as COVID-19), could affect the ability or willingness of our employees or the employees of our service providers to perform their job responsibilities. While many of our employees and the employees of our service providers are able to work remotely, those remote work arrangements may result in our business operations being less efficient than under normal circumstances and could lead to delays in our processing of contract-related transactions, including orders from contract owners. Catastrophic events may negatively affect the computer and other systems on which we rely, impact our ability to calculate Accumulation Unit Values, or
Page 10 of 19
have other possible negative impacts. There can be no assurance that our service providers will be able to successfully avoid negative impacts associated with natural and man-made disasters and catastrophes.
DEFINITIONS
The text below replaces in its entirety the definition of "Accumulation Period" in the DEFINITIONS section of the 2019 Advantage Prospectus.
Accumulation Period. The period during which Purchase Payments and accumulated earnings are invested according to the investment options elected. The Accumulation Period ends when a Contract is annuitized or surrendered in full, or on the Death Benefit Commencement Date.
The text below is added to the DEFINITIONS section of the 2019 Advantage Prospectus.
Death Benefit Commencement Date. The first day of the first payment interval for a Death Benefit that is paid as periodic payments or the date of payment for a Death Benefit that is paid as a lump sum. The Beneficiary designates the Death Benefit Commencement Date when filing a claim by Written Request. It can be no earlier than the date that we have received at our administrative office both Due proof of the death of the Owner and a claim in Good Order with instructions as to the form of the Death Benefit.
DEATH BENEFIT
The text below replaces in its entirety the DEATH BENEFIT section of the 2019 Advantage Prospectus.
A death benefit will be paid under a Contract if the Owner dies during the Accumulation Period. If a surviving spouse (or civil union partner/domestic partner in applicable states) becomes a Successor Owner of the Contract, the death benefit will be paid on the death of the Successor Owner if he or she dies during the Accumulation Period.
A withdrawal from the Contract may result in a reduction of the Death Benefit that is greater than the amount of the withdrawal.
Death Benefit Amount
The determination of the Death Benefit Amount depends on the form of Contract in effect in the state where the Contract was issued. For example, in 2003, the Company sought approval from the various states for an endorsement with revised provisions concerning the determination of the Death Benefit Amount (the "2003 Death Benefit Endorsement"). Please contact the Company if you have questions as to how to determine the Death Benefit Amount under your Contract.
Death Benefit Amount (Version 1)
This Version 1 of the Death Benefit Amount applies to:
∙all Group and Individual Contracts issued in any state after May 1, 2006; and
∙all Group and Individual Contracts issued prior to May 1, 2006 but after the 2003 Death Benefit Endorsement was approved in the state where the Contract was issued.
The Death Benefit Amount will be based on the greater of:
1)the Account Value on the Death Benefit Valuation Date; or
2)the Minimum Death Benefit.
The Death Benefit Amount will be reduced by any applicable premium tax or other tax not previously deducted. It will also be reduced by any outstanding loans.
The Death Benefit Amount will be allocated among the Subaccounts and Fixed Account options as of the Death Benefit Valuation Date. This allocation will be made in the same proportion as the value of each option bears to the Owner's total Account Value immediately before the Death Benefit Valuation Date.
Unless transferred by the Beneficiary, the portion of the Death Benefit Amount allocated to the Subaccounts will remain in those Subaccounts until the Death Benefit Commencement Date.
The Death Benefit Amount under this Contract will be finally determined using the Account Value on the Death Benefit Commencement Date. If the Death Benefit Commencement Date is later than the Death Benefit Valuation Date, the Death Benefit amount may be lower than the amount calculated on the Death Benefit Valuation Date.
Page 11 of 19
Minimum Death Benefit. The Minimum Death Benefit is equal to the total Purchase Payments, including the bonus(es) thereon, reduced proportionally for withdrawals. This reduction will include any charges or adjustments applicable to such withdrawals and will be made on the date of the withdrawal. This means that the Minimum Death Benefit will be reduced on that date in the same percentage as the percentage reduction in the Account Value.
Example of Determination of Death Benefit Amount (Version 1). This example is intended to help you understand how a withdrawal impacts the Death Benefit amount.
Assuming your total Purchase Payments equal $100,000, your Account Value is $90,000, you withdraw $10,000 from the Contract, and you are left with an Account Value of $80,000, and the Death Benefit Commencement Date is not after the Death Benefit Valuation Date.
Step One: Calculate the proportional reduction.
1 – |
$80,000 |
Account Value immediately after withdrawal |
|
|
= 11.1111% |
Percentage | |||||
$90,000 |
Account Value immediately before withdrawal |
Reduction | |||||||||
|
| ||||||||||
$100,000 |
Purchase |
x 11.1111% |
Percentage |
= $11,111 |
Proportional |
| |||||
Payments |
Reduction |
Reduction |
| ||||||||
|
|
|
|
|
| ||||||
|
|
|
|
|
| ||||||
Step Two: Calculate the reduced Purchase Payment amount. |
|
|
|
| |||||||
Purchase Payments |
|
|
|
|
$100,000 |
|
|
| |||
Less proportional reduction for withdrawals |
|
|
– 11,111 |
|
| ||||||
Purchase Payments reduced for withdrawals |
|
|
$88,889 |
|
|
| |||||
Step Three: Determine the Death Benefit amount.
Immediately after the withdrawal, the reduced Purchase Payments of $88,889 is greater than the Account Value of $80,000, so the Death Benefit amount would be $88,889.
Death Benefit Amount (Version 2)
This Version 2 of the Death Benefit Amount applies to all Group and Individual Contracts issued in any state before the 2003 Death Benefit Endorsement was approved in the state where the Contract was issued.
The death benefit will be based on the larger of the following two amounts:
1)The Account Value on the Death Benefit Valuation Date; or
2)The total Purchase Payment(s), including the bonus(es) thereon, less any partial withdrawals and any CDSC that applied to those amounts.
Any applicable premium tax or other taxes not previously deducted, and any outstanding loans, will be deducted from the death benefit amount described above.
The Death Benefit Amount will be allocated among the Subaccounts and Fixed Account options as of the Death Benefit Valuation Date. This allocation will be made in the same proportion as the value of each option bears to the Owner's total Account Value immediately before the Death Benefit Valuation Date.
Unless transferred by the Beneficiary, the portion of the Death Benefit Amount allocated to the Subaccounts will remain in those Subaccounts until the Death Benefit Commencement Date.
The Death Benefit Amount under this Contract will be finally determined using the Account Value on the Death Benefit Commencement Date. If the Death Benefit Commencement Date is later than the Death Benefit Valuation Date, the Death Benefit amount may be lower than the amount calculated on the Death Benefit Valuation Date.
Example of Determination of Death Benefit Amount (Version 2). This example is intended to help you understand how a withdrawal impacts the Death Benefit amount.
Assuming your total Purchase Payments equal $100,000, your Account Value is $90,000, you withdraw $10,000 from the Contract, and you are left with an Account Value of $80,000, and the Death Benefit Commencement Date is not after the Death Benefit Valuation Date.
Page 12 of 19
Step One: Calculate the reduced Purchase Payment amount. |
|
|
Purchase Payments |
$100,000 | |
Less reduction for withdrawals |
|
-10,000 |
Purchase Payments reduced for withdrawals |
$ |
90,000 |
Step Two: Determine the Death Benefit amount.
Immediately after the withdrawal, the reduced Purchase Payment of $90,000 is greater than the Account Value of $80,000, so the Death Benefit amount would be $90,000.
Form of Death Benefit Payment
For all Contracts, an Owner may elect the form of payment of the death benefit at any time before his or her death. The form of payment may be a lump sum, or any available form of settlement option. The standard forms of settlement options are described in the Settlement Options section of this prospectus. There is no additional charge associated with the form of Death Benefit election.
If the Owner does not make an election as to the form of death benefit, the Beneficiary may make an election within one year after the Owner's death. If no election as to the form of settlement option is made, the Company will apply the death benefit to a fixed dollar benefit with monthly payments for a fixed period of four years.
The first day of the Benefit Payment Period in which a death benefit is paid may not be more than one year after the Owner's death. The day a death benefit is paid in a lump sum may not be more than five years after the Owner's date of death.
PAYMENT OF BENEFITS
The text below replaces in its entirety the first paragraph of the PAYMENT OF BENEFITS section of the 2019 Advantage Prospectus.
When a Contract is annuitized, or when a death benefit is applied to a settlement option, the Company promises to pay a stream of benefit payments for the duration of the settlement option selected. Upon annuitization, the Account Value is no longer available to the Owner. Benefit payments may be calculated and paid: (1) as a fixed dollar benefit; (2) as a variable dollar benefit; or (3) as a combination of both. Only the amount of fixed dollar benefit payments is guaranteed by the Company. The Owner (or Payee) bears the risk that any variable dollar benefit payment may be less than the initial variable dollar benefit payment, or that it may decline to zero, if Benefit Unit Values for that payment decrease sufficiently. Transfers between a variable dollar benefit and a fixed dollar benefit are not permitted, but transfers of Benefit Units among Subaccounts are permitted once each 12 months after a variable dollar benefit has been paid for at least 12 months. The formulas for transferring Benefit Units among Subaccounts during the Benefit Payment Period are set forth in the Statement of Additional Information.
THE CONTRACTS
The text below replaces in its entirety the subsection entitled "Successor Owner" of the "Persons with Rights under a Contract" subsection of the THE CONTRACTS section of the 2019 Advantage Prospectus.
Successor Owner. The surviving spouse (or civil union partner/domestic partner spouse in applicable states) of a deceased Owner may become a Successor Owner if the surviving spouse (or civil union partner/domestic partner spouse in applicable states) was either the joint Owner or sole surviving Beneficiary under the Contract. In order for a spouse (or civil union partner/domestic partner spouse in applicable states) to become a Successor Owner, the Owner must make an election prior to the Owner's death, or the surviving spouse (or civil union partner/domestic partner spouse in applicable states) must make an election within one year of the Owner's death.
Prior to May 1, 2004, the Successor Owner provisions of the Contract were available only by endorsement and may not have been available in all states.
As required by federal tax law, the Contract contains rules about the rate at which a death benefit must be paid to a beneficiary who is not your spouse. If the successor owner is not your spouse as defined by federal tax law, then after your death the contract values must be distributed in a manner that complies with these rules. For this purpose, a civil union partner/domestic partner is not considered a spouse.
Page 13 of 19
Civil Union Partners, and Domestic Partners. Federal tax law does not recognize a civil union or domestic partnership as a marriage. Although a civil union partner/domestic partner may become a successor owner in applicable states, the favorable tax treatment provided by deferral tax law to a surviving spouse in NOT available to a surviving civil union partner/domestic partner. For information about federal tax laws, please consult a tax advisor.
Step Up in Account Value for Successor Owner. If the surviving spouse (or civil union partner/domestic partner in applicable states) of a deceased Owner becomes a Successor Owner of the Contract, the Account Value may be increased. There is no additional charge associated with this feature. Any such increase will be equal to the amount, if any, that the Account Value would have been increased on the Death Benefit Valuation Date if your spouse (or civil union partner/domestic partner) had elected to take the Death Benefit. An increase will only apply if the Death Benefit would have been based on a return of premium value, a historic value, or any other Death Benefit calculation value that is greater than the Account Value.
For this purpose, the Death Benefit Valuation Date is the earlier of: (1) the date that we have received at our administrative office both Due Proof of Death and a Written Request to become successor owner of the Contract; or (2) the first anniversary of death. Any such increase shall be effective on the Death Benefit Valuation Date, and shall be allocated proportionally among the Subaccounts and the Fixed Account options based on the value of each such option as of the end of the Valuation Period immediately before that date.
For purposes of determining the date that would have been the Death Benefit Valuation Date, the election to become Successor Owner will be deemed to be instructions as to the form of death benefit. The election to become Successor Owner must be made within one year of the date of the Owner's death.
ABANDONED PROPERTY AND ESCHEATMENT
The text below replaces in its entirety the ABANDONED PROPERTY AND ESCHEATMENT section of the 2019 Advantage Prospectus.
Every state has unclaimed property laws. These laws generally declare annuity contracts to be abandoned after a period of inactivity of three to five years (1) from the first day of the period during which annuity benefit payments are to be paid; or
(2)from the date of death for which a death benefit is due and payable. For example, if the payment of a death benefit has been triggered, but the Beneficiary does not come forward to claim the death benefit in a timely manner, the unclaimed property laws will apply.
If a death benefit, annuity benefit payments, or other Contract proceeds are unclaimed, we will pay them to the abandoned property division or unclaimed property office of the applicable state. (Escheatment is the formal, legal name for this process.) For example, on an unclaimed death benefit, depending on the circumstances, the proceeds are paid (1) to the state where the Beneficiary last resided, as shown on our books and records; (2) to the state where the Owner last resided, as shown on our books and records; or (3) to Ohio, which is our state of domicile. The state will hold the proceeds without interest until a valid claim is made by the person entitled to the proceeds.
If the Contract owner dies and we are unable to locate the beneficiary, or if the Contract requires annuity benefit payments to start and we cannot locate the owner, the Account Value of the Contract will remain in the Subaccount and Fixed Account options until the death benefits or Contract proceeds are claimed or escheated. If escheated, the death benefit amount or Contract proceeds will be finally determined using the Account Value at the end of the Valuation Period that is no more than seven days before date that we make the escheat payment to the state.
To prevent escheatment of the death benefit, annuity benefit payments or other proceeds from your annuity, it is important:
∙to update your contact information, such as your address, phone number and email address, if and as it changes; and
∙to update your Beneficiary and other designations, including complete names, complete addresses, phone numbers, and
social security numbers, if and as they change.
Please contact us at P.O. Box 5423, Cincinnati, OH 45201-5423, or call us at 1-800-789-6771, to make such changes.
State unclaimed property laws do not apply to annuity contracts that are held under an employer retirement plan that is subject to the Employee Retirement Income Security Act of 1974 (ERISA).
Page 14 of 19
FEDERAL TAX MATTERS
The text below replaces in its entirety the FEDERAL TAX MATTERS section of the 2019 Advantage Prospectus.
This section provides a general description of federal income tax considerations relating to the Contracts. The purchase, holding, and transfer of a Contract may have federal estate and gift tax consequences in addition to income tax consequences. Estate and gift taxation is not discussed in this prospectus or in the Statement of Additional Information. State taxation will vary, depending on the state in which you reside, and is not discussed in this prospectus or in the Statement of Additional Information.
The tax information provided in this prospectus is not intended or written to be used as legal or tax advice. It is written solely to provide general information related to the purchase and holding of the Contracts. You should seek advice on legal or tax questions based on your particular circumstances from an attorney or tax advisor who is not affiliated with the Company.
Tax Deferral on Annuities
Internal Revenue Code ("IRC") Section 72 governs the taxation of annuities in general. The income earned on a Contract is generally not included in the Owner's taxable income until it is withdrawn from the Contract. In other words, a Contract is a tax- deferred investment. In order to qualify for this tax-deferred treatment, the Contracts must meet certain requirements related to investor control and diversification discussed in the Statement of Additional Information. Tax deferral is not available for a Contract when an Owner is a trust, corporation, LLC, partnership, or other entity unless the Contract is part of a tax-qualified retirement plan or the Owner is a mere agent for a natural person. For a nonqualified deferred compensation plan, this rule means that the employer as Owner of the Contract will generally be taxed currently on any increase in the Surrender Value, although the plan itself may provide a tax deferral to the participating employee.
Tax-Qualified Retirement Plans
Annuities may also qualify for tax-deferred treatment, or serve as a funding vehicle, under tax-qualified retirement plans that are governed by other IRC provisions. These provisions include IRC Section 401 (pension, profit sharing, and 401(k) plans), IRC Section 403(b) (tax-sheltered annuities), IRC Sections 408 and 408A (individual retirement annuities), and IRC Section 457(b) (governmental deferred compensation plans). Tax-deferral is generally also available under these tax-qualified retirement plans through the use of a trust or custodial account without the use of an annuity.
The tax law rules governing tax-qualified retirement plans and the treatment of amounts held and distributed under such plans are complex. If the Contract is to be used in connection with a tax-qualified retirement plan, including an individual retirement annuity ("IRA") under a Simplified Employee Pension (SEP) Plan, you should seek competent legal and tax advice regarding the suitability of the Contract for your particular situation. Following is a brief description of the types of tax-qualified retirement plans for which the Contracts are available.
Contributions to a tax-qualified Contract are typically made with pre-tax dollars, while contributions to other Contracts are typically made with after-tax dollars, though there are exceptions in either case. Tax-qualified Contracts may also be subject to restrictions on withdrawals that do not apply to other Contracts. These restrictions may be imposed to meet the requirements of the IRC or of an employer plan.
Individual Retirement Annuities. IRC Sections 219 and 408 permit certain individuals or their employers to contribute to an individual retirement arrangement known as an "Individual Retirement Annuity" or "IRA". Under applicable limitations, an individual may claim a tax deduction for certain contributions to an IRA. Contributions made to an IRA for an employee under a Simplified Employee Pension (SEP) Plan or Savings Incentive Match Plan for Employees (SIMPLE) established by an employer are not includable in the gross income of the employee until distributed from the IRA. Distributions from an IRA are taxable to the extent that they represent contributions for which a tax deduction was claimed, contributions made under a SEP plan or SIMPLE, or income earned within the IRA.
Roth IRAs. IRC Section 408A permits certain individuals to contribute to a Roth IRA. Contributions to a Roth IRA are not tax deductible. Tax-free distributions of contributions may be made at any time. Distributions of earnings are tax-free following the five-year period beginning with the first year for which a Roth IRA contribution was made if the Owner has attained age 59½, become disabled, or died, or for qualified first-time homebuyer expenses.
Tax-Sheltered Annuities. IRC Section 403(b) permits public schools and charitable, religious, educational, and scientific organizations described in IRC Section 501(c)(3) to establish "tax-sheltered annuity" or "TSA" plans for their employees. TSA contributions and Contract earnings are generally not included in the gross income of the employee until distributed from the TSA. Amounts attributable to contributions made under a salary reduction agreement cannot be distributed until the employee attains age 59½, severs employment, becomes disabled, incurs a hardship, is eligible for a qualified reservist distribution, or dies. The IRC and the plan may impose additional restrictions on distributions.
Page 15 of 19
Pension, Profit–Sharing, and 401(k) Plans. IRC Section 401 permits employers to establish various types of retirement plans for employees and permits self-employed individuals to establish such plans for themselves and their employees. These plans may use annuity contracts to fund plan benefits. Generally, contributions are deductible to the employer in the year made, and contributions and earnings are generally not included in the gross income of the employee until distributed from the plan. The IRC and the plan may impose restrictions on distributions. Purchasers of a Contract for use with such plans should seek competent advice regarding the suitability of the Contract under the particular plan.
Governmental Eligible Deferred Compensation Plans. State and local government employers may purchase annuity contracts to fund eligible deferred compensation plans for their employees, as described in IRC Section 457(b). Contributions and earnings are generally not included in the gross income of the employee until the employee receives distributions from the plan. Amounts cannot be distributed until the employee attains age 70½, severs employment, becomes disabled, incurs an unforeseeable emergency, or dies. The plan may impose additional restrictions on distributions.
Roth TSAs, Roth 401(k)s, and Roth 457(b)s. IRC Section 402A permits TSA plans, 401(k) plans, and governmental 457(b) plans to allow participating employees to designate some part or all of their future elective contributions as Roth contributions. Roth contributions to a TSA plan, 401(k) plan, or governmental 457(b) plan are included in the employee's taxable income as earned. Amounts attributable to Roth TSA, Roth 401(k), or Roth 457(b) contributions must be held in a separate account from amounts attributable to traditional pre-tax TSA, 401(k), or 457(b) contributions. Distributions from a Roth TSA, Roth 401(k), or Roth 457(b) account are considered to come proportionally from contributions and earnings. Distributions attributable to Roth account contributions are tax-free. Distributions attributable to Roth account earnings are tax-free following the five-year period beginning with the first year for which Roth contributions are made to the plan if the employee has attained age 59½, become disabled, or died. A Roth TSA, Roth 401(k), or Roth 457(b) account is subject to the same distribution restrictions that apply to amounts attributable to traditional pre-tax TSA, 401(k), or 457(b) contributions made under a salary reduction agreement. The plan may impose additional restrictions on distributions.
Nonqualified Deferred Compensation Plans
Employers may invest in annuity contracts in connection with unfunded deferred compensation plans for their employees. Such plans may include eligible deferred compensation plans of non-governmental tax-exempt employers, as described in IRC Section 457(b); deferred compensation plans of both governmental and nongovernmental tax-exempt employers that are taxed under IRC Section 457(f) and subject to Section 409A; and nonqualified deferred compensation plans of for-profit employers subject to Section 409A. In most cases, these plans are designed so that amounts credited under the plan will not be includable in the employees' gross income until paid under the plan. In these situations, the Contracts are not plan assets and are subject to the claims of the employer's general creditors. Whether or not made from the Contract, plan benefit payments are subject to restrictions imposed by the IRC and the plan.
Summary of Income Tax Rules
The following chart summarizes the basic income tax rules governing tax-qualified retirement plans, nonqualified deferred compensation plans, and other non-tax-qualified Contracts.
|
Tax-Qualified Contracts and Plans |
|
Nonqualified |
Other Non-Tax-Qualified |
|
|
Deferred Compensation Plans |
Contracts | |
|
|
| ||
Plan Types |
IRC §408 (IRA, SEP, SIMPLE IRA) |
|
IRC §409A |
IRC §72 only |
|
IRC §408A (Roth IRA) |
|
Nongovernmental IRC §457(b) |
|
|
IRC §403(b) (Tax Sheltered Annuity) |
|
IRC §457(f) |
|
|
IRC §401 (Pension, Profit–Sharing, |
|
|
|
|
401(k)) |
|
|
|
|
Governmental IRC §457(b) |
|
|
|
|
IRC §402A (Roth TSA, Roth 401(k), or |
|
|
|
|
Roth 457(b)) |
|
|
|
Who May |
Eligible employee, employer, or employer |
Employer on behalf of eligible employee. |
Anyone. Non-natural person will | |
Purchase a |
plan. |
Employer generally loses tax-deferred |
generally lose tax-deferred status. | |
Contract |
|
status of Contract itself. |
| |
Contribution |
Contributions are limited by the IRC and/or plan requirements |
None | ||
Limits |
|
|
|
|
Distribution |
Distributions from Contract and/or plan may be restricted to meet IRC and/or plan |
None. | ||
Restrictions |
requirements. |
|
|
|
Page 16 of 19
|
Tax-Qualified Contracts and Plans |
Nonqualified |
Other Non-Tax-Qualified |
|
Deferred Compensation Plans |
Contracts | |
|
| ||
Taxation of |
Generally, 100% of distributions must be included in taxable income. However, the |
Generally, distributions must be | |
Withdrawals, |
portion that represents any after-tax investment is not taxable. Distributions from Roth |
included in taxable income until | |
Surrenders, |
IRA are deemed to come first from after-tax contributions. Distributions from other |
all accumulated earnings are paid | |
and Lump Sum |
plans are generally deemed to come from taxable income and after-tax investment (if |
out. Thereafter, distributions are | |
Death Benefit |
any) on a pro-rata basis. Distributions from §408A Roth IRA or §402A Roth TSA, Roth |
tax-free return of the original | |
|
401(k), or Roth 457(b) are completely tax free if certain requirements are met. |
investment. | |
|
For tax purposes, all IRAs and SEP IRAs of an owner are treated as a single IRA, and |
However, distributions are tax- | |
|
all Roth IRAs of an owner are treated as a single Roth IRA. |
free until any investment made | |
|
|
|
before August 14, 1982 is |
|
|
|
returned. |
|
|
|
For tax purposes, all non-tax- |
|
|
|
qualified annuity contracts issued |
|
|
|
to the same owner by the same |
|
|
|
insurer in the same calendar year |
|
|
|
are treated as one contract. |
Taxation of |
For fixed dollar benefit payments, a percentage of each payment is tax free equal to the ratio of after-tax investment (if any) | ||
Annuitization |
to the total expected payments, and the balance is included in taxable income. For variable dollar benefit payments, a | ||
Payments |
specific dollar amount of each payment is tax free, as predetermined by a pro rata formula, rather than a percentage of | ||
(annuity benefit |
each payment. In either case, once the after-tax investment has been recovered, the full amount of each benefit payment | ||
or death |
is included in taxable income. Distributions from a Roth IRA, Roth TSA, Roth 401(k), or Roth 457(b) are completely tax | ||
benefit) |
free if certain requirements are met. |
|
|
Possible |
Taxable portion of payments made before |
None. |
Taxable portion of payments |
Penalty Taxes |
age 59½ may be subject to 10% penalty |
|
made before age 59½ may be |
for |
tax (or 25% for a SIMPLE IRA during the |
|
subject to a 10% penalty tax. |
Distributions |
first two years of participation). Penalty |
|
Penalty taxes do not apply to |
Before Age |
taxes do not apply to payments after the |
|
payments after the Owner's |
59½ |
participant's death, or to §457 plans. |
|
death. Other exceptions may |
|
Other exceptions may apply. |
|
apply. |
Assignment/ |
Assignment and transfer of Ownership generally not permitted. |
Generally, deferred earnings | |
Transfer of |
|
|
taxable to transferor upon transfer |
Contract |
|
|
or assignment. Gift tax |
|
|
|
consequences are not discussed |
|
|
|
herein. |
Federal Income |
Eligible rollover distributions from §401, |
Generally subject to wage withholding. |
Generally, Payee may elect to |
Tax |
§403(b), and governmental §457(b) plans |
|
have taxes withheld or not. |
Withholding |
are subject to 20% mandatory withholding |
|
|
|
on taxable portion unless direct rollover. |
|
|
|
For other payments, Payee may generally |
|
|
|
elect to have taxes withheld or not. |
|
|
Rollovers, Transfers, and Exchanges
Amounts from a tax-qualified Contract may be rolled over, transferred, or exchanged into another tax-qualified account or retirement plan as permitted by the IRC and plan(s). Amounts may be rolled over, transferred, or exchanged into a tax-qualified Contract from another tax-qualified account or retirement plan as permitted by the IRC and plan(s). In most cases, such a rollover, transfer, or exchange is not taxable, unless the rollover of pre-tax amounts is made into a Roth IRA, a Roth TSA, Roth 401(k), or Roth 457(b). Rollovers, transfers, and exchanges are not subject to normal contribution limits. The IRC or plan may require that rollovers be held in a separate Contract from other plan funds.
Amounts from a non-tax-qualified Contract may be transferred to another non-tax-qualified annuity or to a qualified long-term care policy as a tax-free exchange under IRC Section 1035. Amounts from another non-tax-qualified annuity or from a life insurance or endowment policy may be transferred to a non-tax-qualified Contract as a tax-free exchange under IRC Section 1035.
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Required Distributions
The Contracts are subject to the required distribution rules of federal tax law. These rules vary based on the tax qualification of the Contract or the plan under which it is issued. All required minimum distributions due in 2020 from an IRA, a 403(b) Tax- Sheltered Annuity Plan, a 401 defined contribution plan, or a 457(b) Governmental Deferred Compensation Plan have been waived.
During the life of the Owner or plan participant:
∙For a tax-qualified Contract other than a Roth IRA, required minimum distributions must generally start by April 1 following the year that the IRA owner or plan participant reaches age 72 (or age 70 1/2 if born before July 1, 1950). However, a participant in a TSA, a pension, profit-Sharing, or 401(k) plan, or a governmental 457(b) plan may delay the start of required minimum distributions from the plan until April 1 following the year that the plan participant retires from the employer as long as he or she is not a 5% owner of the employer.
∙For a Roth IRA, there are no required distributions during the owner's life.
∙For a nonqualified deferred compensation plan, required distributions are determined by the terms of the plan and the deferral elections of the plan participant.
∙For a Contract that is not tax-qualified, there are no required distributions during the Owner's life.
After the death of the Owner or plan participant:
∙For a tax-qualified Contract, required minimum distributions vary depending on the type of beneficiary. Some beneficiaries may take payments over life or life expectancy, and others must receive all benefits within five or ten years after death.
∙For a nonqualified deferred compensation plan, required distributions are determined by the terms of the plan and the deferral elections of the plan participant.
∙For a Contract that is not tax-qualified, if payments have begun under a settlement option, then after death any remaining payments must be made at least as rapidly as those made or required before death. Otherwise, the death benefit must be paid out in full within five years of death or must be paid out in substantially equal payments over the life or life expectancy of the designated beneficiary.
∙For a traditional IRA, a Roth IRA, or a Contract that is not tax-qualified, a beneficiary who is a surviving spouse as defined by federal tax law may elect out of these requirements and apply the required distribution rules as if the Contract were his or her own.
Life expectancies for required distributions are calculated based on standard life expectancy tables adopted under federal tax law.
APPENDIX A: CONDENSED FINANCIAL INFORMATION
The text below replaces in its entirety APPENDIX A: CONDENSED FINANCIAL INFORMATION of the 2019 Advantage Prospectus.
Accumulation Unit information (number of Accumulation Units outstanding and Accumulation Unit Values) for each Subaccount at December 31, 2019 is included in the financial statements of Annuity Investors Variable Account B. The beginning Accumulation Unit Value for the BNY Mellon Variable Investment Fund Government Money Market Portfolio (formerly the Dreyfus VIF Government Money Market Portfolio) Subaccount was 1.000000 as of its inception date. The beginning Accumulation Unit Value for each other Subaccount was 10.000000 as of its inception date.
APPENDIX C: CLOSED SUBACCOUNTS
The text below replaces in its entirety APPENDIX C: CLOSED SUBACCOUNTS of the 2019 Advantage Prospectus.
This Appendix provides information you should know before making any decision to allocate Purchase Payments or transfer amounts to the Subaccounts (individually, the "Closed Subaccount" and collectively, the "Closed Subaccounts") investing in the Portfolios listed below ("Closed Portfolios"). Each Closed Subaccount is an additional investment option available only to
Contract Owners who held Accumulation Units in the Subaccount on the cutoff date set out below. Each Closed Subaccount will become unavailable to you once you no longer have money in that Closed Subaccount.
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PORTFOLIO |
SHARE |
ADVISOR |
INVESTMENT |
CUTOFF DATE | |
CLASS |
CATEGORY | ||||
|
|
| |||
Calamos® Advisors Trust |
N/A |
Calamos Advisors LLC |
Aggressive Allocation: |
April 30, 2012 | |
Calamos® Growth and Income Portfolio |
|
|
Large Blend |
| |
Davis Variable Account Fund, Inc. |
N/A |
Davis Selected Advisers L.P. |
US Equity Large Cap |
April 30, 2015 | |
Davis Value Portfolio |
|
Sub-Advisor: Davis Selected Advisers-NY, Inc. |
Blend: Large Blend |
| |
|
|
(an affiliate of Davis Selected Advisors, L.P.) |
|
| |
Janus Aspen Series |
Institutio |
Janus Capital Management LLC |
Global Equity Large |
November 30, 2004 | |
Janus Henderson VIT Global Research |
nal |
|
Cap: Large Growth |
| |
Portfolio |
|
|
|
| |
The Timothy Plan |
N/A |
Timothy Partners, Ltd. |
Cautious Allocation: |
November 30, 2004 | |
Timothy Plan Conservative Growth |
|
|
Mid Blend |
| |
Variable Series |
|
|
|
| |
The Timothy Plan |
N/A |
Timothy Partners, Ltd. |
Moderate Allocation: |
November 30, 2004 | |
Timothy Plan Strategic Growth Variable |
|
|
Mid Blend |
| |
Series |
|
|
|
|
Expenses and Examples with Closed Portfolios
The information in this section supplements the Expense Tables section in the Prospectus, which does not reflect the operating expenses of the Closed Portfolios.
Table C: Total Annual Portfolio Operating Expenses. When the Closed Portfolios are included, the maximum total operating expenses increase as shown below and the maximum expenses are the expenses of the Timothy Plan Strategic Growth Variable Series.
|
Minimum |
Maximum |
Without Closed Portfolios |
0.27% |
1.53% |
With Closed Portfolios |
0.27% |
1.82% |
Example. Below is an example that reflects this increase in the maximum Portfolio expenses.
Example C-1: Contract with Maximum Fund Operating Expenses (Timothy Plan Strategic Growth Variable Series)
Assumptions
∙You invest $10,000 in the Contract for the periods indicated, a 4% bonus is credited to your Purchase Payment, and your investment has a 5% return each year.
∙The annual contract maintenance fee ($30), the maximum Separate Account annual expenses (1.40%), and the maximum Portfolio expenses (1.82%) are incurred.
|
1 year |
3 years |
5 years |
10 years |
We assume that you surrender your Contract at the end of |
$1,160 |
$1,849 |
$2,539 |
$4,777 |
the period. We also assume that the applicable contingent | ||||
deferred sales charge is incurred. In this case, your costs |
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|
|
|
would be: |
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|
|
|
|
|
|
|
|
We assume that you keep your Contract and leave your |
$360 |
$1,149 |
$2,039 |
$4,777 |
money in your Contract for the entire period or you | ||||
annuitize your Contract at the end of the period. The |
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|
|
|
contingent deferred sales charge does not apply in these |
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|
|
|
situations. In this case, your costs would be: |
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|
|
Condensed Financial Information for Closed Subaccounts
Accumulation Unit information (number of Accumulation Units outstanding and Accumulation Unit Values) for each Closed Subaccount at December 31, 2019 is included in the financial statements of Annuity Investors Variable Account B. The beginning Accumulation Unit Value for each Closed Subaccount was 10.000000 as of its inception date.
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