Guaranteed Lifetime Withdrawal Benefit (GLWB) rider
Representative Guide Guaranteed Lifetime Withdrawal Benefit Rider on Variable Annuities Ameritas Life Insurance Corp.
AN 1094 5/12
For Representative or Broker/Dealer use only. Not for use with clients.
INTRODUCTION
A variable annuity can be an integral part of your clients’ long-term retirement planning strategy, providing direction to help them overcome unnecessary risks and important optional benefits to help protect their financial future. Variable annuities provide a tax-deferral benefit that can work well with your clients’ goals of investing for long-term retirement. Variable annuities offer professionally managed investment options, guaranteed death benefits and payment options to meet your clients’ needs, but they should always read the prospectus before investing in variable annuities to make sure they understand the risks and charges involved.
Retirement protection for your clients. The optional Guaranteed Lifetime Withdrawal Benefit (GLWB) rider is a variable annuity lifetime withdrawal benefit rider designed to help your clients protect their potential retirement income benefit from market downturns and eliminate the risk of outliving retirement income. For an additional charge, the optional GLWB rider provides a withdrawal benefit that guarantees a series of annualized withdrawals without annuitization, regardless of the policy value, until the death of the last surviving Covered Person. (Note that annuitization does not incur additional charges.) Your clients can keep their retirement assets invested and take advantage of potential market upside while getting downside market protection.
PRODUCT HIGHLIGHTS
When your clients purchase a variable annuity with the GLWB rider, they choose when to activate and begin paying for the rider at any time after age 50. They have the option to focus on tax-deferred accumulation, guaranteed accumulation for retirement income or immediate guaranteed lifetime withdrawals. They control when and how to use the GLWB rider to fit their retirement strategy.
Issue Ages
0 – 85
Activation Age for GLWB Rider
50+
Current Rider Charges The following rider charges will be deducted from the Policy Value: Single Life Joint Spousal1
Annual/Maximum Monthly 0.9500% 0.0791% 1.1000% 0.0916%
• Rider charge is deducted each month during the Accumulation and Withdrawal Phases. • Rider charge is not deducted during the Inactive and Guaranteed Phases. • Rider charge is “locked-in” once a policy enters the Withdrawal Phase and cannot be increased.
Availability
The GLWB rider is available on Overture Medley® from Ameritas Life Insurance Corp. Policy and rider may vary and may not be available in all states. The GLWB rider is not available on previously-issued business. Asset allocation models may not be available with all riders.
1 Available for Non-Qualified policies and IRA (Traditional, Roth, SEP, SIMPLE) policies only.
For Representative or Broker/Dealer use only. Not for use with clients.
How the GLWB Rider Works
The GLWB rider has four distinct phases. It is important to discuss each of these phases with your clients. Clients can remain in the Inactive Phase and not pay for the rider until it is needed. Activation of the rider is not required, but the rider must be activated to receive any protection or benefits. Based on their individual needs, your clients can choose when to activate the rider at any time after youngest Covered Person attains age 50, and enter into the Accumulation Phase or immediately start the Withdrawal Phase.
When the GLWB rider is activated, clients must select either the single life or the joint spousal option. They will also need to choose an asset allocation model in which the policy value will be invested: Balanced, Moderate, or Conservative models are currently available on rider activation.
INACTIVE PHASE
The following apply during the Inactive Phase: • No charges for the rider will be deducted from the policy value. • No restrictions are imposed on withdrawals other than those provided by the base policy. • No restrictions are imposed on asset allocations other than those provided by the base policy. • No determinations are made of Premium Accumulation Value, Maximum Anniversary Policy Value, or Benefit Base as they apply to the benefits and provisions of this rider.
The end of the Inactive Phase coincides with the Rider Activation Date.
ACCUMULATION PHASE
Once the youngest Covered Person is at least age 50, the owner may elect to enter the Accumulation Phase. The Accumulation Phase is optional, the owner may elect to skip this phase and move directly to the Withdrawal Phase provided the youngest Covered Person is age 50+. The Accumulation Phase provides a 10-year period in which the Premium Accumulation Value will be credited a guaranteed 5% annual compounded rate of return (The rate of interest is 0% in policy years in which a withdrawal is taken). The initial Premium Accumulation Value is determined as follows: • If the Rider Activation Date is the same as the policy date, it is equal to the initial premium. • If the Rider Activation Date is after the policy date, it is equal to the policy value as of the Rider Activation Date.
During the same 10-year period used for purposes of the Premium Accumulation Value, the policy values on each anniversary are tracked to determine the Maximum Anniversary Policy Value.
For Representative or Broker/Dealer use only. Not for use with clients.
Reset feature
On each policy anniversary during the Accumulation Phase, the Premium Accumulation Value will be reset to the Policy value, if the Policy value is greater than the Premium Accumulation Value. At the time of each reset: A new 10-year period begins for: 1. Premium Accumulation Value; and 2. Comparison of anniversary Policy values to determine the Maximum Anniversary Policy Value.
Withdrawals
Any withdrawal, including a Required Minimum Distribution (RMD) withdrawal, will reduce the Premium Accumulation Value and the Maximum Anniversary Policy Value in the same proportion that the withdrawal amount has to the Policy value prior to the withdrawal. Taking a withdrawal according to this provision will reduce the annual rate of interest applicable to the Premium Accumulation Value to 0% for the Rider Year in which the withdrawal is taken. Each situation is different. However, if RMD withdrawals are anticipated, it may be in your client’s best interest to move to the Withdrawal Phase.
How to activate the GLWB rider
On the policy anniversary after the youngest Covered Person’s age 50, we will send a letter to remind the owner that they can activate the GLWB rider at any time. The service form needed to activate the rider will be included. If your clients choose activate they willyourbeclient instructed provide us This chart showsto that if the S&Pthe 500rider, Index increases, will realizeto 55% of that gain. the S&P 500information: Index goes down, your client will experience no loss. with theIf following 1. Whether they want to begin either the Accumulation or the Withdrawal Phase of the rider. 2. Their selection of either the single life or joint spousal option2 for the rider (irrevocable). 3. Their selection of the asset allocation model in which they would like to invest their policy value.
Your clients maintain flexible access to policy values during the Accumulation Phase with some restrictions. One withdrawal per Rider Year is permitted during the Accumulation Phase without initiating the Withdrawal Phase. Your clients must indicate that this is a single withdrawal request at the time the withdrawal is requested. A second request for a withdrawal in a Rider Year will automatically transition the rider to the Withdrawal Phase as described below. We will notify you before this occurs.
2 Available for Non-Qualified policies and IRA (Traditional, Roth, SEP, SIMPLE) policies only.
WITHDRAWAL PHASE
We guarantee that your clients can withdraw up to the Lifetime Withdrawal Benefit Amount (LWBA) each year during the Withdrawal Phase, regardless of policy value, until the death of the last Covered Person. Your clients may choose to begin withdrawal payments no sooner than 30 days after the policy issue date (again, provided they are age 50+), and no later than 60 days after the date we receive the properly completed service form in our office.
For Representative or Broker/Dealer use only. Not for use with clients.
Lifetime Withdrawal Benefit Amount (LWBA)
The LWBA is the annualized maximum amount that can be withdrawn without reducing future benefits. Total withdrawals in a Rider Year that do not exceed the LWBA will not be subject to withdrawal charges as provided by the base policy and any other rider issued with the base policy.
The LWBA is determined by applying the lifetime distribution factor to the Benefit Base.
The lifetime distribution factor corresponds to the Youngest Age at the beginning of the Withdrawal Phase. The lifetime distribution factor is established from the following schedule. It never changes once it is established. • 4.0% - ages 50 through 54 • 4.5% - ages 55 through 59 • 5.0% - ages 60 through 64 • 5.5% - ages 65 through 69 • 6.0% - ages 70 through 74 • 6.5% - ages 75 through 79 • 7.0% - age 80 and older
Your client has the choice of receiving withdrawals on an annual, semi-annual, quarterly, or monthly basis. If periodic withdrawals become less than $100, we will change the frequency of withdrawals to an interval that will result in a payment of at least $100.
The Benefit Base is established at the beginning of the Withdrawal Phase. It is used to determine the LWBA. It is not used to determine other benefits or features of the policy or the rider.
Benefit Base
The initial Benefit Base equals the greatest of the following, determined at the beginning of the Withdrawal Phase: • Policy Value • Premium Accumulation Value • Maximum Anniversary Policy Value
The Benefit Base will be adjusted downward due to an Excess Withdrawal and upward due to step-up or additional premium payments. Any time that the Benefit Base is adjusted, the LWBA is re-determined by applying the established lifetime distribution factor to the adjusted Benefit Base.
Impact of withdrawals on Benefit Base
Total withdrawals in a Rider Year up to the LWBA will not reduce the Benefit Base and will not impact the LWBA. Withdrawals in excess of the LWBA taken during the Withdrawal Phase may impact the Benefit Base.
Any withdrawal amount that causes total withdrawals in a Rider Year to exceed the greater of the LWBA or the RMD will be treated as an Excess Withdrawal.
For Representative or Broker/Dealer use only. Not for use with clients.
Excess Withdrawals will proportionally reduce the Benefit Base. A reduction in the Benefit Base will reduce the LWBA. If your client is required to take a RMD from the policy and the RMD exceeds the LWBA, the portion of the RMD that is greater than the LWBA will not be treated as an Excess Withdrawal and will not be assessed a surrender charge.
If an Excess Withdrawal reduces the LWBA to an amount less than $100, we will pay the Remaining Balance in a lump sum. The rider and its benefits will be terminated.
Impact of LWBA on policy values
LWBA will reduce your clients’ policy value, but will not reduce their Benefit Base. If your clients’ policy value reaches zero, they will enter the Guaranteed Phase, and will continue to receive their LWBA.
Step-up of Benefit Base
On each policy anniversary during the Withdrawal Phase, we will compare the policy value to the Benefit Base. If the policy value is greater than the Benefit Base on any anniversary, we will increase the Benefit Base to equal the policy value and recalculate the LWBA, which will increase the LWBA. Policy value can increase via new premium deposits or market growth.
Additional Premiums
Additional premium payments made during the Withdrawal Phase will: • increase the policy value according to the provisions of the policy; • increase the Benefit Base; and • increase the LWBA. Premium payments made during the Withdrawal Phase may not exceed $100,000 during a policy year without our prior approval. Premium payments will not be accepted if the policy value is zero and the policy is in the Guaranteed Phase.
Design tip: Should you deposit new premium into an existing contract or start a new policy? If your client is older and eligible for a higher lifetime distribution factor, a new policy may have a higher rider charge. The existing policy, once in the Withdrawal Phase, cannot have an increase in GLWB rider cost. These factors should be considered in the decision.
How to activate the Withdrawal Phase
Your clients simply need to complete a systematic withdrawal form or take two withdrawals in one year in order to activate the Withdrawal Phase provided they are already in the Accumulation Phase. If they wish to activate the Withdrawal Phase immediately from the Inactive Phase, they need to provide us with the following information first: 1. Their selection of either the single life or joint spousal option for the rider (irrevocable)3. 2. Their selection of the asset allocation model in which they would like to invest their policy value.
3 Available for Non-Qualified policies and IRA (Traditional, Roth, SEP, SIMPLE) policies only.
For Representative or Broker/Dealer use only. Not for use with clients.
GUARANTEED PHASE
DEATH BENEFIT
If a withdrawal (including a RMD) reduces the policy value to zero and at least one Covered Person is still living, the following will apply: • the monthly rider charge will no longer be deducted; • the LWBA will be provided until the death of the last surviving Covered Person through a series of withdrawals; • no additional premiums will be accepted; • no additional step-ups will occur; • no excess withdrawals will be allowed; • any Remaining Balance will not be available for payment in a lump sum and may not provide payments under an annuity option; and • the policy and any other riders will cease to provide any death benefits. Upon the death of the last Covered Person, the beneficiary will elect to receive either the Death Benefit as provided by the policy and any other applicable riders, or the distribution of the Remaining Balance. If the Remaining Balance option is chosen, it will be distributed to the Beneficiary through the payment of the LWBA until the Remaining Balance is zero.
Spousal continuation Continuation of the rider by the Surviving Spouse will not apply to a policy that is issued as a qualified plan as established by IRS Code 401, 457, and policies previously issued as a qualified plan as established by IRS Code 403(b).
Spousal continuation of the policy may apply to any non-qualified policy or those issued as IRAs (Traditional, SEP, SIMPLE and Roth). 1. If the Covered Person dies while the base policy is in effect, and if the Surviving Spouse of the deceased Covered Person is the primary beneficiary, he or she may elect to continue the base policy in accordance with its terms. 2. If the rider is in its Accumulation Phase at the Covered Person’s death, the surviving spouse may elect to add the rider for his or her life and the following conditions will be followed: a. If the Surviving Spouse is not yet 50, the rider will become inactive (a new inactive rider will be added to the contract and the active rider will be terminated.) b. If the Surviving Spouse has reached age 50, the rider may be added for the Spouse in the Accumulation Phase. A new active rider will be added to the policy and the active rider for the deceased Covered Person will be terminated. The Premium Accumulation Value and Maximum Anniversary Policy Value will be set equal to the policy value. The charge for the rider will equal the charge in effect for new issues. 3. If the rider is in its Withdrawal Phase at the Covered Person’s death, the Surviving Spouse may continue withdrawals of the LWBA until the Remaining Balance is reduced to zero. No step-up of the Benefit Base is available after the Covered Person’s death.
For Representative or Broker/Dealer use only. Not for use with clients.
TERMINATION OF RIDER
Unless the rider is continued by the Surviving Spouse for the Single Life Option, the rider will terminate without value on the earliest of the following: • death of the last surviving Covered Person; • change of owner; • annuity payments commence under an annuity income option; • an Excess Withdrawal is taken such that the LWBA is less than $100; • investment restriction is violated; • a loan is taken from the policy during the Accumulation Phase or the Withdrawal Phase -- applicable only to previously issued policies under 403(b); or • owner provides us with written notice to terminate either the rider or policy (once a client elects to terminate the GLWB rider, it cannot be reinstated).
UNDERSTANDING THE TERMS
If annuity payments commence at the maximum annuity date, the owner may select one of the following options: • apply the policy value under an annuity income option described in the policy; or • receive periodic annualized payments equal to the LWBA through a life contingent annuity. To help you understand the GLWB rider so you can better explain it to your clients, here’s an overview of key terms that are used in the rider.
Benefit phases The four phases are defined as follows: • Inactive Phase. The period of time when this rider is inactive. The owner chooses when to end the Inactive Phase, but it cannot end before the Youngest Age 50. There is no charge for the rider in this phase. • Accumulation Phase. The period of time between the Rider Activation Date and the first date of the Withdrawal Phase. • Withdrawal Phase. The period of time beginning with the occurrence of the first withdrawal as outlined in the Withdrawal Phase section of the rider. • Guaranteed Phase. The period of time during which Lifetime Withdrawal Benefit Amount payments continue to be made, although the policy value has been reduced to zero.
Benefit Base
The amount used in conjunction with the lifetime distribution factor to determine the Lifetime Withdrawal Benefit Amount.
Covered Person(s) This term means: • The owner(s) of the policy; or • The annuitant(s) if the owner of the policy is a non-natural person, such as a trust; or • The joint spouses at the time the joint spousal option of the rider is selected. Once the rider is activated, no changes to the Covered Persons will be permitted.
For Representative or Broker/Dealer use only. Not for use with clients.
Excess Withdrawal
The portion of any withdrawal taken during the Withdrawal Phase that makes the total of all withdrawals (except RMDs) in a Rider Year exceed the current Lifetime Withdrawal Benefit Amount at the time of withdrawal.
Lifetime Withdrawal Benefit Amount (LWBA)
The maximum amount that can be withdrawn under the rider during a Rider Year without reducing the Benefit Base.
Maximum Anniversary Policy Value
During the Accumulation Phase, the highest policy value on any policy anniversary during the 10-year period after the later of the Rider Activation Date or the most recent reset date. This value is one of three values used to determine the Benefit Base at the beginning of the Withdrawal Phase.
Monthly Anniversary
Premium Accumulation Value
The same date in a succeeding month as the policy date. The premiums paid and annual compound rate of interest credited on the premiums during a period of time in the Accumulation Phase. The period of time is a 10-year period beginning with the later of the Rider Activation Date or the most recent reset date. The rate of interest is: • 5% for the Rider Year in which no withdrawal is taken; and • 0% for the Rider Year in which a withdrawal is taken. The initial Premium Accumulation Vaue is: • The initial premium if the Rider Activation Date is the same as the policy date. • The policy value as of the Rider Activation Date if the Rider Activation Date is after the policy date.
Remaining Balance
The most recently determined Benefit Base minus the sum of all withdrawals made since the later of the beginning of the Withdrawal Phase or the most recent step-up of the Benefit Base. The Remaining Balance will never be less than zero.
Rider Activation Date
The end of the Inactive Phase and the beginning of the Accumulation Phase or the Withdrawal Phase. It must coincide with a Monthly Anniversary and cannot occur before the Youngest Age 50.
Rider Year
For the first Rider Year, the period of time from the Rider Activation Date to the next policy anniversary. Subsequent Rider Years will coincide with policy years.
RMD
The required minimum distribution amount as defined by Internal Revenue Code Section 401(a)(9) and related Code provisions. It is based on the previous year-end policy value of the policy to which the rider is attached, including the present value of additional benefits provided under the policy and any other riders attached to the policy to the extent required to be taken into account under IRS guidance.
The attained age of the youngest Covered Person.
Youngest Age
For Representative or Broker/Dealer use only. Not for use with clients.
More Information
GLWB Client Brochures are available for Overture Medley®. These brochures include graphs to help your clients understand this complex rider. Call your Ameritas Sales Development Team at 800-319-6903 with any questions about the rider.
Guarantees are based upon the claims-paying ability of the issuing company and do not apply to the investment performance or account value of the underlying variable portfolios. Withdrawals are subject to taxation and may result in federal tax penalties if taken before age 59½.
The GLWB rider is not available on previously issued business. This material does not apply to policies issued in New York. Asset allocation models may not be available with all riders. For detailed information about policy and optional feature costs, limitations and restrictions, please refer to the policy and prospectus.
Overture Medley® (Form 4888), Ameritas No-Load Variable Annuity (Form 6150), and optional rider, Guaranteed Lifetime Withdrawal Benefit (Form GLWB 4901), are issued by Ameritas Life Insurance Corp. (Ameritas Life) and underwritten by affiliate Ameritas Investment Corp. Variable annuities are suitable for long-term investing and are subject to investment risk, including loss of principal. Before investing, carefully consider the investment objectives, risks, charges, expenses, and other important information about the policy issuer and underlying investment options. This information can be found in the policy and investment option prospectuses. Prospectuses for Overture Medley® are available online at ameritas.com or by calling 800-745-1112. Read the prospectuses carefully before investing.
This information is provided by Ameritas Life Insurance Corp., a UNIFI® company. For more information about UNIFI® Companies visit UNIFIcompanies.com. 5900 O Street Lincoln, NE 68510 Ameritas.com
UNIFI® is a registered service mark of UNIFI Mutual Holding Company. ©2012 UNIFI Mutual Holding Company
For Representative or Broker/Dealer use only. Not for use with clients.
