[Federal Register Volume 60, Number 76 (Thursday, April 20, 1995)]
[Notices]
[Pages 19794-19796]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-9842]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21010; File No. 812-9226]
Great-West Life & Annuity Insurance Company, et al.
April 14, 1995.
AGENCY: U.S. Securities and Exchange Commission (``SEC'' or
``Commission'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANTS: Great-West Life & Annuity Insurance Company (the
``Company''), The Great-West Life Assurance Company (``GWLAC''), and
Retirement Plan Series Account (the ``Separate Account'').
RELEVANT ACT SECTIONS: Order requested under Section 6(c) for
exemptions from Sections 26(a)(2)(C) and 27(c)(2) of the Act.
SUMMARY OF APPLICATION: Applicants request exemptions from Sections
26(a)(2)(C) and 27(c)(2) of the Act to the extent necessary to permit
the Company to deduct from the Separate Account the mortality and
expense risk charge imposed under (1) flexible premium deferred
individual variable annuity contracts (``Contracts'') and (2) any other
variable annuity contracts offered by the Company and made available
through the Separate Account or through any other similar separate
account(s) established by the Company, whether currently existing or
hereafter created (``Other Separate Accounts''), which are
substantially similar in all material [[Page 19795]] respects (``Future
Contracts''). Applicants also request that the relief be extended to
any other broker-dealer, whether currently existing or hereafter
created, which may serve in the future as principal underwriter of
Contracts or Future Contracts.
FILING DATE: The Application was filed on September 13, 1994 and
amended on February 23, 1995 and March 21, 1995.
HEARING OR NOTIFICATION OF HEARING: An order granting the Application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
Applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on May 9, 1995, and
should be accompanied by proof of service on Applicants in the form of
an affidavit or, for lawyers, a certificate of service. Hearing
requests should state the nature of the writer's interest, the reason
for the request, and the issues contested. Persons who wish to be
notified of a hearing may request notification by writing to the SEC's
Secretary.
ADDRESSES: SEC, Secretary, 450 Fifth Street, NW., Washington, DC 20549.
Applicants, c/o Jorden Burt & Berenson, 1025 Thomas Jefferson Street,
NW., suite 400 East, Washington, DC 20007.
FOR FURTHER INFORMATION CONTACT:
Edward P. Macdonald, Staff Attorney, or Wendy Friedlander, Deputy
Chief, at (202) 942-0670, Office of Insurance Products, Division of
Investment Management.
SUPPLEMENTARY INFORMATION: The following is a summary of the
Application. The complete Application may be obtained for a fee from
the SEC's Public Reference Branch.
Applicants' Representations
1. The Company is a stock life insurance company initially
organized under the laws of the State of Kansas. In 1990, the Company
redomesticated and is now organized under the laws of the State of
Colorado. The Company, a wholly-owned subsidiary of the GWLAC, is
qualified to do business in 49 states and the District of Columbia.
2. GWLAC, a life insurance company organized under the laws of
Canada, will be the principal underwriter with respect to the
Contracts. GWLAC is registered with the Commission under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc.
3. The Separate Account was established under the laws of the State
of Colorado on January 25, 1994, as a funding vehicle for the Contracts
and is registered under the Act as a unit investment trust. The
Separate Account initially will have twelve investment divisions
(``Divisions'') available for allocation of contributions by
contractowners (``Owners''). Each Division invests solely in a
corresponding portfolio of Maxim Series Fund, Inc., an open-end
management investment company registered under the Act. The shares of
each portfolio may also be offered to other Separate Accounts.
4. Interests under the Contracts are registered under the
Securities Act of 1933. The Contracts will receive favorable tax
treatment under Section 408(b) of the Internal Revenue Code (``Code'')
as individual retirement annuities and will be available for an initial
contribution of at least $3,500 rolled-over from retirement plans which
qualify under Section 401(k) of the Code. Additional contributions may
be made in amounts of at least $250. The Contracts provide that
contributions can accumulate on a variable basis, a guaranteed basis,
or on a combination of both. The Contracts also will offer several
annuity options payable on a variable basis, a fixed basis, or on a
combination of both.
5. The Company will not impose a sales charge or a Contract
maintenance charge in connection with the Contracts.
6. A $50 charge will be imposed on any Contract surrendered in
whole during the first 12 months after issue, excluding the ``free
look'' period. A $25 charge will be imposed on any Contract surrendered
in part during the first 12 months after issue. These charges reflect
the actual expenses associated with such surrenders which the company
expects to incur and would be assessed in reliance on Rule 269-1 under
the Act.\1\
\1\The Applicants represent that they will amend the application
during the notice period to include this representation.
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7. At any time prior to the annuity commencement date, Owners may
make unlimited transfers between Divisions. The Company does not charge
any fee for these transfers.
8. The Company may make a deduction for premium taxes imposed by
states or other governmental entities, either (i) when a surrender or
cancellation occurs, or (ii) at the annuity commencement date.
Currently, these taxes range up to 2.5%.
9. The Company will impose a mortality and expense risk charge of
up to .75% as compensation for bearing certain mortality and expense
risks assumed under the Contracts. Contracts having a balance of: (1)
$0 to $9,999.99 will be subject to a mortality and expense risk charge
equal to .75%; (2) $10,000 to $24,999.99 will be subject to a mortality
and expense risk charge equal to .50%; and (3) $25,000 to $49,999.99
will be subject to a mortality and expense risk charge equal to .25%.
No mortality and expense risk charge will be imposed for an account
balance of $50,000 or greater. The levels of these charges are
guaranteed and will not be increased. Of the amounts charged for
mortality and expense risk, where the total charge is: (1) .75%: 0.60%
is a mortality risk charge and 0.15% is an expense risk charge; (2)
.50%: 0.40% is a mortality risk charge and 0.10% is an expense risk
charge; and (3) .25%: 0.20% is a mortality risk charge and 0.05% is an
expense risk charge.
10. These annual charges will be assessed daily and will be based
on the assets of the Separate Account. The level of the mortality and
expense risk charge applicable to the Contract during the first
calendar year will be based upon the initial account balance of the
Contract. The initial account balance used to determine the appropriate
mortality and expense risk charge level will include both fixed and
variable money; however, the charge will only apply to the variable
portion.
11. The level of mortality and expense risk charge applicable in
subsequent calendar years will be based upon the account balance of the
Contract as of December 31 of the previous calendar year.
12. The mortality risk to be borne by the Company under the
Contracts arises from its obligations to make annuity payments, in the
case where the life annuity is selected, regardless of how long an
annuitant may live. The mortality risk under the Contracts, where a
life annuity with a life contingency is selected, is the risk that
annuitants will live longer than the Company's actuarial projections
indicate resulting in higher than expected annuity payments.
13. The expense risk to be borne by the Company under the Contracts
is the risk that the actual administrative expenses incurred in
connection with the Contracts may exceed the anticipated administrative
expenses.
Applicants' Legal Analysis
1. Section 6(c) of the Act authorizes the Commission to grant an
exemption from any provision, rule or regulation of the Act to the
extent that it is necessary or appropriate in the public interest and
consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of [[Page 19796]] the Act.
Sections 26(a)(2)(C) and 27(c)(2) of the Act, in relevant part,
prohibit a registered unit investment trust, its depositor or principal
underwriter, from selling periodic payment plan certificates unless the
proceeds of all payments, other than sales loads, are deposited with a
qualified bank and held under arrangements which prohibit any payment
to the depositor or principal underwriter except a reasonable fee, as
the Commission may prescribe, for performing bookkeeping and other
administrative duties normally performed by the bank itself.
2. Applicants request exemptions from Sections 26(a)(2)(C) and
27(c)(2) of the Act to the extent necessary to permit the deduction of
a charge up to .75% from (i) the assets of the Separate Account with
respect to the Contracts and Future Contracts and (ii) from the assets
of Other Separate Accounts in connection with Future Contracts, to
compensate the Company for the assumption of mortality and expense
risks. In addition, Applicants also request that the exemptive relief
requested extend to any other broker-dealer, whether currently existing
or hereinafter created, which may serve in the future as principal
underwriter of Contracts or Future Contracts. Applicants assert that
the requested exemptions are necessary and appropriate in the public
interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the Act.
3. With respect to the level of the mortality and expense risk
charge, Applicants hereby represent that they have reviewed publicly
available information regarding the aggregate level of mortality and
expense risk charges under variable annuity contracts comparable to the
Contracts currently being offered in the insurance industry, taking
into consideration such factors as current charge levels, the manner in
which charges are imposed, the presence of charge level or annuity rate
guarantees and the markets in which the Contracts will be offered.
Based upon the foregoing, Applicants further represent that the
mortality and expense risk charge contemplated under the Contracts are
within the range of industry practice for comparable contracts.
Applicants will maintain at their principal office and will make
available to the Commission upon request a memorandum setting forth in
detail the products analyzed in the course of, and the methodology and
results of, the comparative survey.
4. Similarly, prior to issuing any Future Contracts, Applicants
will represent that the mortality and expense charges under any Future
Contracts will be within the range of industry practice for comparable
contracts. Applicants will maintain at their principal office and will
make available to the Commission upon request a memorandum setting
forth in detail the products analyzed in the course of, and the
methodology and results of, the comparative survey.
5. Applicants acknowledge that, if a profit is realized from the
mortality and expense risk charge, all or a portion of such profit may
be available for any lawful purpose including shortfalls in the costs
of distributing the Contracts. The Company represents that there is a
reasonable likelihood that the proposed distribution financing
arrangements will benefit the Separate Account and Owners. The Company
represents that the basis for that conclusion is set forth in a
memorandum which will be maintained at its home office and will be
available to the Commission upon request.
6. Applicants further represent that the Separate Account, and any
Other Separate Accounts, will only invest in underlying funds which
have undertaken to have a board of directors/trustees, a majority of
whom are not interested persons of any such fund, formulate and approve
any plan under Rule 12b-1 under the Act to finance distribution
expenses.
7. Applicants assert that extending relief to Future Contracts,
Other Separate Accounts, and any other broker-dealer, whether currently
existing or hereinafter created, which may serve in the future as
principal underwriter of Contracts or Future Contracts is appropriate
in the public interest because it would promote competitiveness in the
variable annuity market by eliminating the need for the Company to file
redundant exemptive applications, thereby reducing administrative
expenses and maximizing the efficient use of its resources. The delay
and expense involved in having to repeatedly seek exemptive relief
would impair the Company's ability to effectively take advantage of
business opportunities as they arise. If the Company were repeatedly
required to seek exemptive relief with respect to the same issues
addressed in the Application, investors would not receive any
additional benefit or protection. Therefore, Applicants believe that
the requested exemptions are appropriate in the public interest and
consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of the Act.
Conclusion
For the reasons set forth above, Applicants represent that the
exemptions requested are necessary and appropriate in the public
interest and consistent with the protection of investors and purposes
fairly intended by the policy and provisions of the Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-9842 Filed 4-19-95; 8:45 am]
BILLING CODE 8010-01-M
