NON-PARTICIPATING
GROUP MODIFIED GUARANTEED ANNUITY CONTRACT
ACCOUNT VALUE SUBJECT TO A MARKET VALUE ADJUSTMENT
This Master Group Modified Guaranteed Annuity Contract ("Contract") is issued
to the group identified on the schedule. Certificates issued under the
Contract are subject to all provisions of the Contract, whether or not
summarized in the Certificate. This Contract alone governs the rights of the
parties. A copy of this Contract will be furnished to the Participant upon
request.
MARKET VALUE ADJUSTMENT
This Contract contains a Market Value Adjustment formula. The formula may
result in an upward or downward adjustment of the Account Value when
withdrawals are made prior to the end of any Guaranteed Period. Generally,
the Market Value Adjustment will not be applied to:
- The Death Benefit, when proper claim is made within 1 year of death
(see page 8);
- Surrenders from a Sub-Account at the end of its Guaranteed Period
(see page 9);
- Interest Withdrawals (see page 9);
- Annuitization on the Annuity Commencement Date (see page 10).
The Market Value Adjustment is described on the Schedule of this Contract.
SEPARATE ACCOUNT
Annuity Premium(s) will be allocated to and accounted for in a non-unitized
separate account. The assets of this separate account cannot be charged with
liabilities arising out of other business of the Company. Account Values are
determined in accordance with the terms of this Contract without regard to
the actual performance of the assets in the separate account.
YOU HAVE THE RIGHT TO RETURN THIS CONTRACT.
YOU MAY CANCEL THIS CONTRACT WITHIN THIRTY DAYS AFTER YOU RECEIVE IT BY
RETURNING IT TO OUR ADMINISTRATIVE OFFICE OR TO OUR AGENT, WITH A WRITTEN
REQUEST FOR CANCELLATION. WE WILL PROMPTLY RETURN THE ACCOUNT VALUE ADJUSTED
BY THE MARKET VALUE ADJUSTMENT.
AMERICAN FOUNDATION LIFE INSURANCE COMPANY
0000 XXX. 000 XXXXX
XXXXXXXXXX, XXXXXXX 00000
000-000-0000
(A STOCK INSURANCE COMPANY)
THIS PAGE INTENTIONALLY LEFT BLANK.
SCHEDULE
AFR-0000001 March 1, 1998
------------------------------------ ---------------------------------
GROUP CONTRACT NUMBER EFFECTIVE DATE
AmSouth Bank, N. A., as Trustee
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CONTRACT HOLDER
Account holders of Broker/Dealers with Distribution Agreements with
American Foundation Life Insurance Company
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CLASS OF ELIGIBLE PARTICIPANTS
JURISDICTION
This Contract is governed by the laws of the state in which the Contract is
delivered.
MARKET VALUE ADJUSTMENT
The Market Value Adjustment is equal to the Market Value Adjustment
percentage indicated below, applied to the amount of each full or partial
surrender requested less any amount available under the "INTEREST WITHDRAWAL"
provision of this Contract at the time of the surrender. The Market Value
Adjustment does not apply to surrenders made from a Sub-Account at the end of
its Guaranteed Period; such surrenders should be requested during the final
30 days of the Guaranteed Period.
MARKET VALUE ADJUSTMENT PERCENTAGE = (C - I + 0.25%) X (N/12), WHERE:
C = the Guaranteed Interest Rate currently in effect for a Guaranteed
Period with a duration equivalent to the time remaining in the
Guaranteed Period from which the surrender is being made. Linear
interpolation will be used to determine C when the time remaining is not
an integral number of whole years. When the time remaining is less than
one year, C will be the current one year rate;
I = the Guaranteed Interest Rate initially established for the
Guaranteed Period from which the surrender is being made;
N = the number of months remaining in the Guaranteed Period from which
the surrender is being made.
Factors used in determining I, such as whether I was established as an
Initial or a Subsequent Guaranteed Interest Rate, will be considered when
determining C.
In the event a current Guaranteed Interest Rate is no longer established by
the Company, a suitable replacement index, subject to all necessary
regulatory approvals, will be used.
A detailed description of the Market Value Adjustment has been filed with the
Superintendent of the New York Insurance Department.
SURRENDER CHARGE
The Surrender Charge percentage for each year of an Initial or Subsequent
Guaranteed Period is indicated in the appropriate table below. The Surrender
Charge is determined by applying the Surrender Charge percentage to the
amount of each full or partial surrender requested adjusted by any applicable
Market Value Adjustment, less any amount available under the "INTEREST
WITHDRAWAL" provision of this Contract at the time of the
surrender. The Surrender Charge does not apply to surrenders made from a
Sub-Account at the end of its Guaranteed Period.
SURRENDER CHARGE FOR INITIAL GUARANTEED PERIODS
GUARANTEED
PERIOD PREMIUM YEAR DURING WHICH SURRENDER IS TAKEN
1 2 3 4 5 6 7 8 9 10
1 1%
2 2% 1%
3 3% 2% 1%
4 4% 3% 2% 1%
5 5% 4% 3% 2% 1%
6 6% 5% 4% 3% 2% 1%
7-10 7% 6% 5% 4% 3% 2% 1% 0% 0% 0%
SURRENDER CHARGE FOR SUBSEQUENT GUARANTEED PERIODS
GUARANTEED
PERIOD PREMIUM YEAR DURING WHICH SURRENDER IS TAKEN
1 2 3 4 5 6 7 8 9 10
1 1%
2 2% 1%
3 3% 2% 1%
4 4% 3% 2% 1%
5 5% 4% 3% 2% 1%
6 5% 5% 4% 3% 2% 1%
7-10 5% 5% 5% 4% 3% 2% 1% 0% 0% 0%
INDEX
Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
General Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Control Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Death Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Interest Credited and Guaranteed Periods. . . . . . . . . . . . . . . . . . 8
Premium Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Surrenders - Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Annuity Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Annuity Tables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
DEFINITIONS
ACCOUNT VALUE - The sum of all Sub-Account Values.
ADMINISTRATIVE OFFICE - 0000 Xxxxxxx 000 Xxxxx, Xxxxxxxxxx, Xxxxxxx 00000.
ANNUITANT - Annuity payments may depend upon the continuation of the life of
a person. That person is called an Annuitant and is named in the Certificate.
Annuity payments will be paid to the Annuitant, unless directed otherwise by
the Participant.
ANNUITY - A series of periodic payments.
ANNUITY COMMENCEMENT DATE - The date on which Annuity payments are
determined. The initial payment must be made within one month of the Annuity
Commencement Date.
ANNUITY PREMIUM - Payments (less premium taxes, if applicable) made and
allocated to the Guaranteed Period(s) offered under this Contract. Each
Annuity Premium and each allocation to a Guaranteed Period must be at least
$10,000. We reserve the right to not accept any Annuity Premium payment.
BENEFICIARY - The person or persons entitled to receive the Death Benefit
under this Contract upon the death of a Participant.
PRIMARY - The Primary Beneficiary is the surviving Participant, if any.
If there is no surviving Participant, the Primary Beneficiary is the
person or persons designated on the application or, if changed by the
Participant, the person or persons so named in our records.
CONTINGENT - The person named to receive the Death Benefit if the
Primary Beneficiary is not living at the time of a Participant's death.
If no Beneficiary designation is in effect or if no Beneficiary is
living at the time of a Participant's death, the estate of the deceased
Participant will be the Beneficiary.
IRREVOCABLE - An irrevocable Beneficiary is one whose consent is needed
to change the Beneficiary designation, and to exercise certain other
rights.
CERTIFICATE - The individual Certificate issued by the Company to the
Participant or Contract Holder for delivery to the Participant. The
Certificate summarizes the provisions of the Contract and evidences that an
Annuity Premium payment has been made by or on behalf of the Participant.
Only one Certificate will be issued to each Participant regardless of the
number of Annuity Premiums the Participant makes.
CERTIFICATE DATE - The date on which the Certificate takes effect.
Certificate Years are measured from the Certificate Date.
COMPANY - American Foundation Life Insurance Company. The Company is also
referred to as "we", "us", or "our".
DEATH BENEFIT - The amount payable to a Beneficiary upon the death of a
Participant prior to the Annuity Commencement Date. Only one Death Benefit
is payable under each Certificate even though a Certificate may, in some
circumstances, continue beyond its Participant's death.
GUARANTEED INTEREST RATE - The effective rate of interest, calculated after
daily compounding has been taken into account, which is established by the
Company for a Guaranteed Period. Guaranteed Interest Rates are designated as
either "Initial" or "Subsequent".
GUARANTEED PERIOD - The period for which a Guaranteed Interest Rate will be
credited to a
Sub-Account. Guaranteed Periods are designated as either "Initial" or
"Subsequent".
MARKET VALUE ADJUSTMENT - An adjustment made to a Sub-Account Value when a
partial or full surrender is made prior to the end of any Guaranteed Period.
NET ACCOUNT VALUE - The sum of all Net Sub-Account Values.
NET SUB-ACCOUNT VALUE - The Sub-Account Value after application of the Market
Value Adjustment and less deductions for any Surrender Charges and applicable
premium taxes.
NET SURRENDER AMOUNT - The Surrender Amount after application of the Market
Value Adjustment and less deductions for any Surrender Charges and applicable
premium taxes.
PARTICIPANT - The owner(s) of a Certificate issued under this Contract.
Individuals, as well as non-natural persons such as corporations or trusts,
may be Participants.
SUB-ACCOUNT - Annuity Premium is allocated to one or more Sub-Accounts. A
Sub-Account is characterized by its Guaranteed Period and its corresponding
Guaranteed Interest Rate.
SUB-ACCOUNT PREMIUM - Annuity Premium allocated and credited to a Sub-Account
("Initial"), or any amount transferred and credited to a Sub-Account at the
end of a Guaranteed Period ("Subsequent"). Premium Years are measured from
the date the Sub-Account Premium is credited.
SUB-ACCOUNT VALUE - The Sub-Account Premium, increased by all interest
credited and decreased by previous full or partial surrenders (including
applicable Surrender Charges, Market Value Adjustments and premium taxes) and
previous interest withdrawals. The Sub-Account Value of each Sub-Account
under a Certificate must be at least $10,000 at all times.
SURRENDER AMOUNT - The portion of the Sub-Account Value removed to satisfy a
written request for a full or partial surrender.
SURRENDER CHARGE - A charge imposed when a partial or full surrender is made
prior to the end of a Guaranteed Period.
SURRENDER DATE - The date on which a full or partial surrender is processed.
WRITING - A written form satisfactory to the Company received at the
Administrative Office.
GENERAL PROVISIONS
ENTIRE CONTRACT
This Contract, the copy of the Participant's application and any riders,
endorsements or amendments we provide constitute the entire agreement between
the parties. All statements in the application are considered representations
and not warranties.
NON-PARTICIPATING
This Contract does not share in our surplus or profits and does not pay
dividends.
MODIFICATION OF CONTRACT
No change or waiver of the terms of this Contract is valid unless made by us
in writing, and signed by our President, Vice President, or Secretary. We
reserve the right to modify this Contract to conform to any applicable laws,
regulations or rulings issued by a governmental agency. Certificates issued
under this Contract will be similarly endorsed. We will send each
Participant a copy of the endorsement containing the modifications.
ERROR IN AGE OR SEX
Payments under a Certificate may depend upon a person's age and sex. If the
date of birth or sex provided us is not correct, the benefits under the
Certificate will be adjusted to the amount which would have been payable at
the correct age and sex. When the use of unisex mortality rates is required,
we will not determine or adjust the benefits based upon an error in sex. If
we made any underpayments because of the error, the amount of any
underpayment shall be immediately paid in one sum. Any overpayments made
shall be deducted from the current or succeeding payments due under the
Contract. Overpayments and underpayments shall bear interest at an annual
effective rate of 3%.
Proof of the Annuitant's age and sex will be required before the first
payment will be made under an Annuity option involving lifetime payments.
ASSIGNMENT
Upon notice to us, the Participant may assign his or her rights. The
assignment must be in Writing and we assume no responsibility for the
validity of any assignment. A claim against a Certificate under assignment
is subject to proof of claimant's interest and the extent of the assignment.
SETTLEMENT
The Participant may elect to apply settlement proceeds, including any full or
partial surrender proceeds or the Death Benefit, to any payout option offered
by us for such payments at the time the election is made. The settlement
option selected must comply with the requirements of the Internal Revenue
Code. Any payment we make under this Contract is payable at our
Administrative Office.
RECEIPT OF PAYMENT
If a person receiving payments under this contract is incapable of giving us
a valid receipt we may make such payment to whomever has legally assumed his
or her care and principal support. Any such payment shall fully discharge us
to the extent of that payment. We may require proof that the Annuitant is
living to continue Annuity Payments.
PROTECTION OF PROCEEDS
To the extent permitted by law, no benefits payable under this Contract will
be subject to the claims of creditors of any payee.
ANNUAL REPORTS
At the end of each Certificate Year we will send the Participant a report
showing the current Account Value, Sub-Account Values and all other
information required by law.
CONTROL PROVISIONS
ANNUITY COMMENCEMENT DATE CHANGE
The Participant may change the Annuity Commencement Date by notice to us in
Writing. We must receive the request at least 30 days before the proposed
Annuity Commencement Date. The Annuity Commencement Date selected cannot be
earlier than the end of any existing Guaranteed Period nor later than the
Annuitant's 90th Birthday.
ANNUITANT CHANGE
The Participant may change the Annuitant prior to the Annuity Commencement
Date. The request must be in Writing. Once it is received and acknowledged
at our Administrative Office. The change will relate back to and take effect
on the date the request was signed. The new Annuitant's 90th birthday may
not be before the end of any existing Guaranteed Period. If any Participant
is not an individual, the Annuitant may not be changed.
BENEFICIARY CHANGE
The Participant may change the Beneficiary at any time. We must receive the
request in Writing. If any Beneficiary has been designated irrevocably we
will also need the Irrevocable Beneficiary's written consent to make the
change. The change will relate back to and take effect on the date the
request was signed but we will not be liable for any payment we make before
such request has been received and acknowledged at our Administrative Office.
CONTROL
The Participant may assign the Certificate, surrender the Certificate, amend
or modify the Certificate with our written consent, and exercise, receive and
enjoy every other right and benefit contained in the Certificate. The use of
the rights may be subject to the consent of any assignee or Irrevocable
Beneficiary. Except with respect to termination, Joint Participants may
provide that each Participant alone may exercise all rights, options and
privileges.
DEATH OF THE ANNUITANT OR PARTICIPANT
If the Annuitant is not a Participant and dies prior to the Annuity
Commencement Date, the Participant first named on the application will become
the new Annuitant unless the Participant designates otherwise. If any
Participant is not an individual, the death of the Annuitant will be treated
as the death of a Participant.
If any Participant dies while this Certificate is in force prior to the
Annuity Commencement
Date, a Death Benefit will be payable to the Beneficiary.
DEATH BENEFIT
The Death Benefit will be determined as of the date due proof of death is
received by the Company. If a claim for the Death Benefit is received at our
Administrative Office within 1 year of the date of death the Death Benefit
will equal the greater of: (1) the Account Value, less applicable premium
taxes; or (2) the Net Account Value. If a claim is received past 1 year
after the date of death the Death Benefit will equal the Net Account Value.
Only one Death Benefit is payable under each Certificate.
The Death Benefit may be taken in one sum immediately and the Certificate
will terminate. If the Death Benefit is not taken immediately as a lump sum,
then the entire interest in the Certificate must be distributed under one of
the following options:
(1) the entire interest must be distributed over the life of the
Beneficiary, or over a period not extending beyond the life
expectancy of the Beneficiary, with distribution beginning within
one year of the Participant's death; or,
(2) the entire interest must be distributed within 5 years of the
Participant's death.
If the Beneficiary is the deceased Participant's spouse, the surviving spouse
may elect, in lieu of receiving the Death Benefit, to continue the
Certificate and become the new Participant. The surviving spouse may select
a new Beneficiary. Upon this spouse's death, the Death Benefit will become
payable and must then be distributed to the new Beneficiary in one sum
immediately or according to either paragraph (1) or (2), above.
If there is more than one Beneficiary, the foregoing provisions will apply to
each Beneficiary individually.
The Certificate shall be interpreted to comply with the requirements of
Section 72(s) of the Internal Revenue Code. We reserve the right to endorse
this Contract and the Certificate, as necessary, to conform with the
requirements of the Code. We will send each Participant a copy of the
endorsement containing the modifications.
INTEREST CREDITED AND GUARANTEED PERIODS
Initial Sub-Account Premium will earn interest at the Initial Guaranteed
Interest Rate. You may select from any Guaranteed Period we are offering
under this Contract at the time the Annuity Premium is made, provided no
Guaranteed Period extends beyond the Annuity Commencement Date.
You may not transfer a Sub-Account Value to any other Sub-Account before the
end of the existing Sub-Account's Guaranteed Period. During the 30-day
period immediately prior to the end of a Sub-Account's Guaranteed Period, you
may request a surrender of part or all of the
maturing Sub-Account Value. Your request will be processed at the end of the
Guaranteed Period and we will not apply a surrender charge or Market Value
Adjustment to the amount surrendered. At least 15 days, but no more than 45
days before 30-day period prior to the end of the each Guaranteed Period, we
will send a written notice advising you of the maturity date and maturity
value of the Sub-Account, and any other information required by law. At the
end of any Guaranteed Period a Subsequent Guaranteed Period will begin.
Unless you instruct us otherwise in Writing, the Sub-Account Value at
maturity will become the Sub-Account Premium for a Subsequent Guaranteed
Period with the same duration as the previous Guaranteed Period, if it does
not extend beyond the Annuity Commencement Date. Otherwise, the Subsequent
Guaranteed Period will be the longest Guaranteed Period then offered which
does not extend beyond that date. The Company will always offer a 1-year
Subsequent Guaranteed Period in addition to other Guaranteed Periods then
available.
Subsequent Sub-Account Premium will earn interest at the Subsequent
Guaranteed Interest Rate. The Subsequent Guaranteed Interest Rate will be
determined at the beginning of the Subsequent Guaranteed Period and may not
be equal to the Initial Guaranteed Interest Rate then offered for an Initial
Guaranteed Period of the same duration.
Initial and Subsequent Guaranteed Interest Rates will not be less than an
annual effective interest rate of 3%.
PREMIUM TAXES
Premium taxes will be deducted if applicable. Premium taxes may be deducted
from the Annuity Premium when received, from a full or partial surrender,
from the Death Benefit, or from the amount applied to an Annuity, in
accordance with applicable law.
SURRENDERS - TERMINATION
Full surrenders may be made at any time. Partial surrenders may only be made
if each Sub-Account Value after the partial surrender is at least $10,000.
You must specify the Sub-Accounts from which the partial surrender is to be
made, but if a surrender is requested from a Sub-Account which has the same
Guaranteed Period as any other Sub-Account, the partial surrender must come
from the Sub-Account with the shortest time remaining.
The Surrender Charge and Market Value Adjustment will not apply to full or
partial surrenders made from a Sub-Account at the end of its Guaranteed
Period.
The Net Surrender Amount will be calculated by the Company on the Surrender
Date using the following formula:
(A - M - S - P), WHERE:
A = the Surrender Amount
M = the amount of the Market Value Adjustment;
S = the amount of the Surrender Charge;
P = the amount of unpaid premium taxes, if any.
The Company may defer payment of any partial or full surrender for the period
permitted by law. In no event will the deferral exceed 6 months from the
Surrender Date.
INTEREST WITHDRAWALS
After the first Premium Year of any Sub-Account, you may request a withdrawal
of all, or a portion of the interest credited to that Sub-Account during the
prior Premium Year. Your request must be in Writing and you may only make
one such request per Premium Year. No Surrender Charge or Market Value
Adjustment will be imposed on these interest withdrawals.
ANNUITY OPTIONS
ANNUITY BENEFIT
We will send a written notice advising you of the Annuity Commencement Date
at least 15 days, but no more than 45 days before the 30-day period prior to
the Annuity Commencement Date. If the Annuitant is alive on the Annuity
Commencement Date the Account Value, less applicable premium taxes, will be
applied to the Annuity option you have selected. In the absence of a
selection, however, this amount will be applied under OPTION 3 - Life
Income with Payments for a 10 Year Certain Period.
If an Annuitant or Participant dies on or after the Annuity Commencement Date
any remaining payments will be distributed at least as rapidly as under the
method of distribution being used on the date of death.
An Annuity may not be surrendered after the commencement of Annuity payments.
OPTION 1 - PAYMENT FOR A CERTAIN PERIOD. Guaranteed payments will be made
for any Certain Period from 5 to 30 years.
OPTION 2 - PAYMENTS FOR LIFE. Payments are based upon the life of the
Annuitant and stop upon the Annuitant's death.
OPTION 3 - LIFE INCOME WITH PAYMENTS FOR A CERTAIN PERIOD. Payments are
based on the life of the Annuitant. Payments will continue for the lifetime
of that person with payments guaranteed for the selected Certain Period of 10
years. Payments stop upon the death of the Annuitant or at the end of the
Certain Period, whichever is later.
MINIMUM AMOUNTS - If monthly payments are less than $100 we may make payments
quarterly, semi-annually, or annually.
ANNUITY TABLES
OPTION 1 TABLE OPTIONS 2 AND 3 TABLE
Payments for a Payments for Life, and Life Income with
Certain Period Payments for a Certain Period
LIFE WITH 10 YEARS
LIFE ONLY PERIOD CERTAIN YEARS
MONTHLY AGE OF -------------- --------------------
YEARS PAYMENT ANNUITANT MALE FEMALE MALE FEMALE
----- ------- --------- ---- ------ ---- ------
5 17.91 60 4.77 4.25 4.68 4.21
10 9.61 65 5.46 4.78 5.28 4.70
15 6.87 70 6.44 5.53 6.03 5.36
20 5.51 75 7.79 6.63 6.90 6.21
25 4.71 80 9.70 8.26 7.81 7.22
30 4.18 85 & 12.38 10.70 8.60 8.20
over
These tables illustrate the minimum monthly payment rates for each $1,000
applied. The basis for these calculations is the 1983 Individual Annuitant
Mortality Table A projected 14 years with interest at 3% per annum. Minimum
monthly payment rates for ages and Certain Periods not shown will be
calculated on the same basis and may be obtained from us. To determine
future minimum monthly rates according to these tables, one year will be
deducted from the attained age of the Annuitant for every three completed
years beyond the year 1997. Annuity benefits under this Contract will not be
less than those provided by the application of an equivalent amount to the
purchase of a single premium immediate annuity contract offered by American
Foundation on the Annuity Commencement Date.
GROUP MODIFIED GUARANTEED ANNUITY CONTRACT
NON-PARTICIPATING
