Agent Sales Guide. Kansas Cit y Life Insurance Company. For Agent Use Only Not For Use With Clients

Transcription

1 Aget Sales Guide F i x e d a u i t i e s Kasas Cit y Life Isurace Compay For Aget Use Oly Not For Use With Cliets

2 Fixed Auity Aget Guide Idex What Is a Fixed Auity?... 2 Specificatios Chart... 3 Fixed Deferred Auities... 4 Meetig Buyer Needs... 4 Puttig Moey ito the Cotract... 4 Cotract Values... 5 Iterest Creditig... 5 Guarateed Iterest... 5 Cotract Value Bous Feature... 5 Distributios... 5 Free Partial Withdrawals... 6 Systematic Partial Withdrawals... 6 Market Value Adjustmets... 6 TSA Loa Provisio... 6 Lifetime Icome Rider... 6 Nursig Home Waiver... 6 Maturity Date... 7 Sigle Premium Immediate Auity... 7 Split Auity Cocept... 8 Taxatio of Auities... 8 Defiig the Ower, Auitat ad Beeficiary... 9 How to Get Your Busiess o the Books

3 What Is a Fixed Auity? A fixed auity is a cotract betwee a idividual ad a life isurace compay i which the idividual deposits a amout of moey with the compay. While o deposit, the isurace compay promises to pay iterest ad ultimately provide paymets of a fixed amout over a specified period or throughout the lifetime of oe or more persos. Auities are curretly the oly fiacial product that ca guaratee icome paymets that caot be outlived. Most people purchase auities for log-term eeds, meaig they do ot pla to make withdrawals or begi receivig a icome util a future date. All Kasas City Life Isurace Compay auities allow for immediate withdrawals withi specific limits. Fixed auity cotracts guaratee a miimum rate of iterest, but the life isurace compay ca, ad ofte does, credit a higher rate. Auities also have attractive tax beefits that ehace the effect of iterest earigs i the cotract. Advatages of Tax Deferral Iterest eared i a auity is fully tax-deferred util it is withdraw or received as icome from the cotract. This allows the cotract value to grow faster whe compared to a taxable ivestmet, such as a CD. Compare the accumulatio of a sigle $100,000 deposit o a tax-deferred basis with the accumulatio o a aftertax basis (assumig a 28 percet tax bracket). As you ca see, the loger taxes are deferred, the greater the beefits! Tax-Deferred Ivestmet vs. Taxable Ivestmet Iterest Rate 4.00% Deferred Tax After-Tax Accumulatio Accumulatio* Year 5 $115,599 $115,254 Year 10 $134,577 $132,834 Year 15 $157,668 $153,096 Year 20 $185,761 $176,449 These figures are provided for iformatioal purposes oly. Actual rates may be higher or lower. Both colums are after-tax values. The deferred tax accumulatio pays tax oly at the time withdrawals are made. After-tax accumulatio pays tax aually. * A 10% federal tax pealty may be imposed o withdrawals made prior to age 59½. I additio, surreder charges may be assessed to early withdrawals. Advatages of Fixed Auities Fixed auities are a soud ivestmet for your cliets who are less willig to risk market fluctuatios. Fixed auities are a safe ad guarateed way to provide retiremet icome. Most auity cotracts offer lifetime paymets, guarateeig specified paymets to your cliets util death. Fixed auities help cliets by allowig them to ame a beeficiary ad avoid probate. Fixed auities offer great flexibility ad cotrol i distributio of assets to loved oes. For eve greater cotrol ad added flexibility, fixed auities allow owers to ame a trust as the beeficiary. Fixed auities offer safe, guarateed, competitive iterest rates for growth ad/or icome; ad uder curret tax laws, owers pay NO icome taxes o gais util moey is withdraw from the auity. The iterest earigs withi a oqualified fixed deferred auity are ot couted toward icome that subjects Social Security beefits to icome taxatio. If you shelter eough icome i deferred auities ad brig the ower s icome below the curret tax thresholds for a sigle or married taxpayer, he or she may pay o tax (federal or state) o their Social Security icome. 2

4 Fixed Auity Specificatios The followig is ot iteded to be a complete descriptio of Kasas City Life s fixed auity products. Please refer to other iformatio i this Aget Guide or to the Product Guide o the Kasas City Life Illustratio System for details. Complete Name Issue Ages Markets Miimum Deposit Requiremets Maximum Deposit Deposit Modes Available Guarateed Iterest Rate Accumulated Value Bous Death Beefit Load-Free Withdrawals Systematic Withdrawals Loas Nursig Home Waiver SecurityTrack SM GrowthTrack SM SelecTrack 5 SM SelecTrack 7 SM SelecTrack 10 SM Auitat: 0-80 Ower: 0-90 Auitat & Ower: 0-85 $5,000 sigle $50 mothly/$600 aual Sigle, Aual, SA, Qtrly, Mothly (PAC or CB) Betwee 1% ad 3%. Betwee 1% ad 3%. See Page 5 for iformatio See Page 5 for iformatio o the o the redetermiable redetermiable guarateed iterest rate. guarateed iterest rate. 0.25% credited o each 1.00% of cotract value cotract aiversary if cotract value is $50,000 or aiversary. credited o first cotract more. Not guarateed. Auitat: Cotract value Auitat & Ower: Ower, if other tha Cotract value Auitat: Cash surreder value Aual, SA, Qtrly or Mothly. Miimum $100. Replaces load-free withdrawal. Surreder charge assessed whe cumulative withdrawal exceeds 10% of cotract value at begiig of cotract year. Auitat: 0-85 Ower: 0-90 Qualified & Noqualified $250,000 without prior approval Auitat: 0-80 Ower: 0-90 $10,000 Sigle Auitat: 0-80 Ower: 0-90 Iitial rate is guarateed for 5, 7 or 10 years. After that, the guaratee is betwee 1% ad 3%. See Page 5. N/A Auitat: Cotract value Ower, if other tha Auitat: Cash surreder value before MVA Up to 10% of the cotract value at the begiig of cotract year may be withdraw oce per cotract year. Aual, SA, Qtrly or Mothly. Miimum $100. Replaces load-free withdrawal. Surreder charge ad MVA assessed whe cumulative withdrawal exceeds 10% of cotract value at begiig of cotract year. 403(b) ad 501(c) market. N/A Ower cofied to licesed ursig home for at least 90 days. Cotract value trasferred to immediate auity with at least 3-year payout. Aual Admiistrative Charge $30 deducted from cotract value at ed of cotract year. Waived if cotract value is $10,000 or more or if $600 or more premium paid durig cotract year. N/A Year Charge Year Charge Year Charge Year Charge Year Charge Year Charge Year Charge Year Charge Year Charge Surreder Charge (Based o Cotract Year) 1-2 8% 6 4% 3 7% 7 2% 4 6% 8+ 0% 5 5% 1 10% 7 4% 2 9% 8 3% 3 8% 9 2% 4 7% 10 1% 5 6% 11+ 0% 6 5% 1 10% 2 9% 3 8% 4 7% 5 6% 6+ 0% 1 10% 5 6% 2 9% 6 5% 3 8% 7 4% 4 7% 8+ 0% 1 10% 7 4% 2 9% 8 3% 3 8% 9 2% 4 7% 10 1% 5 6% 11+ 0% 6 5% Market Value Adjustmet (MVA) N/A Applies to surreders i excess of the load-free amout ad auitizatio. 3

5 Kasas City Life s Fixed Auities Kasas City Life s fixed auity portfolio icludes a variety of products, all of which are desiged to meet the fiacial eeds of your cliets*: Fixed Deferred Auities SecurityTrack SM GrowthTrack SM SelecTrack SM 5, 7 ad 10 Sigle Premium Immediate Auity (SPIA) *Creditig rates are updated mothly i the Ifo of Iterest sectio o Click o Product Iformatio i the Sales & Marketig Ceter. Kasas City Life s Fixed Deferred Auities offer cliets: Safety of pricipal. Competitive rates. Tax-deferred accumulatio. No up-frot costs all moey deposited ito a fixed auity cotract ears iterest immediately. Easy access to fuds, if eeded. A surreder pealty may apply to withdrawals i excess of 10 percet of the cotract value. Guarateed death beefits. Cotrol of icome ad taxes your cliets ca determie whe to withdraw their moey, exercisig cotrol over paymets o taxable gais. Social Security icome tax advatage. Icome the cliets caot outlive. Cliet Sales Materials The followig fixed auity brochures are available for use with your cliets. These brochures may be ordered through the Olie Sales Materials Catalog o by ig the Supply Departmet at supply@kclife.com, or by callig ext i the Home Office. Brochure Form Number SecurityTrack 6468 SecurityTrack i Orego 6468A GrowthTrack 6545 GrowthTrack i Orego 6545A SelecTrack 1469 SPIA 6705 Brochures are also available i PDF format i the Sales Materials sectio of the Sales & Marketig Ceter o You ca prit them o your color priter. You ca them to cliets. You ca post them o your Home Officeapproved website. Product Approval Iformatio o The most curret product approvals ca be foud o the Kasas City Life Illustratio system website with just a few clicks of your mouse. 1. Go to 2. Click o discover. 3. Click o state product availability. 4. Click o the desired state you wat ad a list of all approved products ad riders will be displayed. If you have questios or eed assistace, please cotact the illustratio system developmet team by at illustratiohelp@kclife.com or by phoe at , ext Fixed Deferred Auities While each of Kasas City Life s fixed deferred auities has distictive traits, these auities share may commo cotract provisios. For a quick look at what each oe offers, refer to the specificatios chart i this maual o Page 3. For more detailed iformatio, refer to the Auity sectio of the Product Guide o the Kasas City Life Illustratio System. Meetig Buyer Needs Determiig which Kasas City Life fixed deferred auity best suits your cliets eeds depeds o several factors: How log does the cliet wat the curret iterest rate guaratee? How soo does the cliet pla to use the moey? How much is the iitial deposit? Will this be a oe-time, lump-sum premium? Or will the cliet make ogoig deposits? Puttig Moey ito the Cotract Kasas City Life s fixed deferred auities offer a wide rage of flexibility i determiig the amout ad frequecy of premium paymets. The SelecTrack 5, 7 ad 10 are sigle premium plas. The GrowthTrack ad SecurityTrack are flexible premium plas that provide the followig paymet optios. Sigle premium paymet. Regular, periodic paymets. Lump-sum premium followed by periodic paymets. Uscheduled paymets. 4

6 Kasas City Life requires prior approval for auity premium paymet amouts i excess of $250,000. Please cotact Matt Dolliver, Associate Actuary, at , ext. 8532, for more iformatio. Cotract Value The cotract value is equal to the premiums paid plus iterest eared, mius partial withdrawals ad aual admiistrative charges, if ay. The cash surreder value is the amout available to the cotract ower i cash upo a full surreder of the cotract. The cash surreder value is the cotract value mius ay applicable surreder charge ad ay loa ad loa iterest. Kasas City Life does ot deduct a sales charge for auity premium paymets. However, Kasas City Life will deduct a charge for early surreder, partial surreders*, or electio of a o-life auity paymet optio. Surreder charges are admiistered to cover expeses icurred i the distributio of cotracts. * All Kasas City Life deferred auities allow oe partial withdrawal, for up to 10 percet of the cotract value, oce each cotract year without icurrig a surreder charge. Iterest Creditig Iterest rates credited to fixed deferred auities are determied by Kasas City Life, subject to the miimum guarateed rates of each pla. Rates may vary by pla ad the date the premium is received. Curret rates for the SecurityTrack ad GrowthTrack plas are guarateed through the ed of the caledar year. SelecTrack rates are guarateed for the term chose 5, 7 or 10 years. For a complete descriptio of credited rates ad guaratee periods, please see Ifo of Iterest i the Product Iformatio sectio of the Sales & Marketig Ceter at Rates are updated mothly. Guarateed Iterest The guarateed iterest rate for the SecurityTrack, GrowthTrack ad SelecTrack is iitially determied whe the cotract is issued. The iitial guarateed iterest rate applies to the cotract util the ed of the surreder charge period (7 years for SecurityTrack, 10 years for GrowthTrack ad 5, 7 or 10 years for SelecTrack). For the SelecTrack, the iitial credited rate is guarateed through the surreder charge period of 5, 7 or 10 years. The iitial guarateed iterest rate is subject to chage each moth for ew applicatios received. After the surreder charge period of the cotract has elapsed, the guarateed iterest rate will be determied aually for each subsequet policy year based o the 5 Federal Reserve s 5-year Costat Maturity Treasury mothly average rate for the November of the previous caledar year. The formula for the guarateed rate equals the 5-year Costat Maturity rate reduced by 1.25 percet rouded to the earest.05 percet. This calculatio is subject to beig at least 1.0 percet but ot more tha 3.0 percet. Cliets are otified each year whe the ew guarateed rate is determied. Cotract Value Bous Features SecurityTrack may pay a bous equal to 0.25 percet of the cotract value (icludig iterest earigs) o every cotract aiversary o which the cotract value is $50,000 or more. This bous is ot guarateed ad may be discotiued at the discretio of the Compay. GrowthTrack pays a bous equal to 1 percet of the cotract value (icludig iterest earigs) o the first cotract aiversary. This bous is guarateed by a edorsemet to the cotract at the time of issue. Kasas City Life may choose to discotiue this cotract edorsemet for future policies at the Compay s discretio. There are o cotract value bouses available o the SelecTrack plas. Distributios Oe of the major advatages of oqualified fixed deferred auities is the choice of distributio optios without eterig the auity payout phase. Lump Sum Whe the ower surreders the cotract ad receives the cash surreder value. The cash surreder value received i excess of the premiums paid will be cosidered taxable iterest i the year received. Withdrawal The ower requests a amout less tha the cash surreder value o a oetime or periodic basis ad the auity stays i force. Withdrawals durig the accumulatio phase are treated as withdrawals of iterest earigs first ad are taxed as icome i the year withdraw. To the extet that a withdrawal exceeds earigs, that portio of the withdrawal is cosidered a taxfree retur of pricipal. Free Partial Withdrawals Begiig i the first cotract year, all Kasas City Life deferred auities offer the cotract ower oe partial surreder per cotract year with o surreder charges. This partial withdrawal may be for up to 10 percet of the begiig-of-cotract-year cotract value. If the full 10 percet is ot take, the remaiig amout does ot carry forward to the ext cotract year. If the cotract is set up for systematic partial withdrawals, this optio is ot available.

7 Systematic Partial Withdrawals Begiig i the first cotract year, the cotract ower may elect to receive iterest or systematic partial withdrawal paymets. Each paymet must be a miimum of $100 ad ca be received aually, semi-aually, quarterly or mothly. Chages to this electio may be made oly oce per cotract year o the cotract aiversary. If the total paymets for the cotract year exceed 10 percet of the begiig-of-cotract-year cotract value, the ay applicable surreder charge will apply to the excess paymets. The cotract ower is ot etitled to ay other free partial withdrawals durig a cotract year i which he or she has elected to receive iterest or systematic partial withdrawal paymets, eve if those paymets do ot exceed 10 percet of the cotract value. Market Value Adjustmet Withdrawals made from SelecTrack plas i excess of the free withdrawal amout will be subject to a Market Value Adjustmet (MVA). This ca be either a positive or egative adjustmet, based o the movemet of treasury rates from the time the cotract was issued to the time of withdrawal or surreder. The MVA protects Kasas City Life whe iterest rates are high ad provides a beefit to the cotract ower whe rates are low. By usig the MVA, Kasas City Life ca provide your customers with higher iterest rates. Please refer to the Product Guide o the Kasas City Life Illustratio System for full details o how the MVA is calculated. The MVA will be applied to full surreders, partial withdrawals that exceed the free amout ad auitizatio. The MVA is ot applied o death beefits, ursig home beefits or free partial surreders. The MVA is ot applicable to cotracts issued i Delaware, Iowa, Idiaa, Marylad, Miesota, Missouri, Motaa, New Jersey, North Carolia, Orego, Pesylvaia, Utah ad West Virgiia. TSA Loa Provisio Loas are available o all SecurityTrack ad GrowthTrack plas i the tax-sheltered auity (TSA) market [403(b)/501(c)(3)]. Loas are available after the completio of the first cotract year, ad oly oe loa for every 12-moth period is allowed. The miimum loa amout is $2,500. The maximum loa amout is the lesser of 50 percet of the cash surreder value or the maximum allowed by the TEFRA guidelies as a o-taxable distributio. Cotact the Customer Services Departmet at , ext. 8060, for a loa quote. Eight percet aual iterest will be charged o the loa balace. The cash surreder value securig the loa will ear the guarateed iterest rate provided by the cotract. All loas must be repaid withi five years with regularly scheduled mothly paymets. Failure to make the scheduled mothly paymet will result i default o the loa ad the etire origial loa amout could become taxable. Loas may be paid off early without pealty. Lifetime Icome Rider The Lifetime Icome Rider (LIR) is a optioal beefit that you may add to your cliet s Kasas City Life deferred auity cotract. The LIR provides a way to geerate lifetime icome but also maitai cotrol of the deferred auity fuds through the provisios of the deferred auity cotract. The key LIR features are: The growth of the Guarateed Withdrawal Balace (GWB) i years whe o withdrawal is take from the cotract. Provide lifetime icome while maitaiig cotrol of the deferred auity cotract, ad Have lifetime icome icreased if the cliet is cofied to a eligible ursig home.* If o withdrawal is take durig the year, the GWB will grow by 7.2 percet i cotract years 1-10 ad by 4.0 percet i years The growth of the GWB helps icrease the Lifetime Icome Amout (LIA) that is available whe your cliet wats to start receivig icome. The LIA is determied by the amout of the GWB whe your cliet wats to start icome, the age whe the icome starts ad whether or ot the icome is o a sigle-life or joit-life basis. I additio, the LIA will icrease by 50 percet if the ower is cofied to a eligible ursig home ad meets the coditios specified i the cotract*. Curretly, the aual charge of this optioal rider is 0.40 percet of the GWB per year. *The Nursig Home Cofiemet Ehacemet is ot available i Califoria, Coecticut, Florida ad Marylad. Nursig Home Waiver (NHW)* If Kasas City Life receives satisfactory proof that the ower is admitted to a licesed ursig home, the cotract value may be paid out equally over at least a three-year period with o surreder charges assessed or market value adjustmet. The ower must be cofied for at least 90 days. Kasas City Life will trasfer the cotract value, less ay idebtedess, to a specified period payout cotract. *NHW is ot available i Califoria, Massachusetts or Pesylvaia for SelecTrack ad Califoria or Pesylvaia for GrowthTrack ad SecurityTrack. 6

8 Maturity Date All Kasas City Life fixed deferred auities are issued with a specific maturity date, which is stated o the cotract. However, that date ca be exteded idefiitely, as log as doig so is ot i violatio of ay tax laws. The maturity date for GrowthTrack, SecurityTrack ad SelecTrack is the later of: The cotract aiversary followig the auitat s 85th birthday; or The 10th cotract aiversary. Sigle Premium Immediate Auity Oe of the largest fiacial risks facig your cliets today is outlivig their assets. Lifetime auities from Kasas City Life ca help you remove that risk from your cliets fiacial plas. Auities are still the oly fiacial vehicle that ca guaratee a icome for life, ad Kasas City Life s payout factors have historically bee amog the highest i the isurace idustry. Not oly ca the Sigle Premium Immediate Auity (SPIA) guaratee lifetime icome, there are additioal optios that guaratee a miimum retur of the iitial ivestmet or guarateed paymets for a stated period of time regardless of whe the auitat or ower dies. The flexibility offered by Kasas City Life allows you to tailor the SPIA to meet your cliets specific eeds: Use the SPIA to help your cliets pay for expeses that will be relatively short term i duratio, such as a child s college expeses, child support or alimoy. Will your cliet retire before he or she is eligible to receive Social Security ad/or other retiremet beefits? Use the SPIA to help bridge the gap i icome util those beefits start. Use the SPIA to fud a log-term care or a life isurace cotract. Kasas City Life requires prior approval for cotracts i excess of $250,000. Cotact Matt Dolliver, at , ext. 8532, for more iformatio. Cliets eeds are almost iumerable; so are the optios Kasas City Life offers. The SPIA is available for both qualified ad oqualified moies. The icome periods are available from three to 30 years (or for as log as a perso lives uder a life icome) payable mothly, quarterly, semiaually or aually. The icome ca be for: A specified time period. A specified amout. Your cliet s lifetime with or without miimum time-period guaratees. Your cliet s ad his or her spouse s lifetimes with survivor beefits with or without miimum time-period guaratees. The chart below summarizes the may optios available. Kasas City Life s Icome Optios Icome for a Fixed Period Icome for a Specified Amout Icome for a Specified Period Qualified ad Noqualified Explaatio of Auity Payout Optios Idividual Life Life Oly Period Certai ad Life Istallmet Refud Qualified ad Noqualified Lifetime Icome Joit Life Life Oly Period Certai ad Life 100%, 75%, 66% or 50% to Survivor Qualified ad Noqualified Life Oly Paymets will be made to the desigated recipiet durig the lifetime of the auitat. There is o guarateed period ad o guarateed total paymet amout. Certai ad Life Paymets will be made for a specified umber of years (miimum of three years ad a maximum of 30 years), ad will cotiue to be paid as log as the auitat lives. Istallmet Refud Paymets will be made util the total paymets equal the amout of the sigle premium ivested, ad will cotiue for the rest of the auitat s life. Specified period Paymets will be made for the umber of years chose by the ower. (The ower may choose a desired icome amout, which will determie the legth of the cotract, based o the sigle premium amout ivested.) Joit ad Survivor Life Paymets are made durig the lifetime of two persos. Paymets cotiue util the death of both recipiets. Joit ad Survivor Certai ad Life Paymets will be made for a specified umber of years (miimum of three years ad a maximum of 30 years), ad will cotiue util the death of both recipiets. 7

9 Split Auity Cocept For each deposit made, two cotracts are issued a deferred auity ad a SPIA for a specified period payout. The basic idea of the split auity cocept is that while receivig the icome from the SPIA, the deferred auity grows to the amout of the origial deposit by the time the paymets from the SPIA cease. This, of course, assumes iterest-creditig rates are sufficiet to allow it to do so. This cocept is oly available i the oqualified market. Taxatio of Auities Sigle Premium Immediate Auity Each scheduled paymet from a oqualified SPIA icludes a taxable portio ad a o-taxable retur of ivestmet. To calculate the taxable portio, the exclusio allowace must be determied. This exclusio allowace ratably returs the ivestmet i the cotract throughout the life of the paymet stream. To determie the exclusio allowace for the specified period or the specified amout optios, divide the ivestmet (cost basis) by the total amout to be received from the cotract. This is the portio of each paymet that will ot be taxable (excluded from icome); the balace will be reported as icome to the ower. To determie the exclusio allowace for ay oqualified auity based o life expectacy, cotact Support Admiistratio at , ext. 8691, i the Home Office. All distributios from a qualified auity will be cosidered fully taxable i the year paymets are received. IRS Pealties for Withdrawals Prior to Age 59½ Noqualified auity exceptios to the premature distributio pealty: Made o or after the ower s attaimet of age 59½. Ay distributio attributable to the ower s death or disability. A series of substatially equal periodic paymets, ot less frequetly tha aually, made for the life or joit life expectacy of the cotract ower ad his or her beeficiary. Paymets may ot be modified for the greater of five years or age 59½. Attributable to pre-tefra cost basis. (Ivestmet i the cotract prior to Aug. 14, 1982.) Uder a immediate auity as defied i IRC Sec. 72(u)(4). Purchased with a sigle premium or auity cosideratio, with a auity start date withi oe year from the date of purchase, providig substatially equal paymets ot less frequetly tha aually durig the auity period. IRA exceptios to the premature distributio pealty: Attaimet of age 59½. Attributable to the ower s death or disability. Made for medical care to the extet allowable as a medical expese deductio. Oly amouts i excess of 7.5 percet of the idividual s AGI escape the pealty. For paymet of health isurace premiums if the cotract ower has bee receivig uemploymet compesatio for at least 12 weeks. Used to pay higher educatio expeses for the cotract ower, cotract ower s spouse, childre or gradchildre. Qualify as first time home buyer distributio with a lifetime limit of $10,000. A series of substatially equal periodic paymets, made at least aually, for the life expectacy or joit life expectacy of the cotract ower ad his or her beeficiary. Paymets may ot be modified for the greater of five years or age 59½. (A oe-time electio is allowed to chage the calculatio method to the RMD method.) TSA exceptios to the premature distributio pealty: Attaimet of age 59½. Attributable to the cotract ower s death or disability. Made for medical care to the extet allowable as a medical expese deductio. Oly amouts i excess of 7.5 percet of the idividual s AGI escape the pealty. A series of substatially equal periodic paymets, made at least aually, for the life expectacy or joit life expectacy of the cotract ower ad his or her beeficiary. Properly made to a alterate payee uder a qualified domestic relatios order (QDRO). 8

10 Taxatio of oqualified deferred auities (assumig all basis is post-tefra basis): Noqualified deferred auities are taxable to the extet of the gai i the cotract at the time of distributio or taxable evet. The taxable portio o a partial withdrawal is the lesser of the cotract gai or the actual withdrawal. Example 1 Bob Smith, age 49, has a oqualified deferred auity with a cotract value of $52, ad a surreder value of $50, His cost basis i the cotract is $35, Mr. Smith requests a partial withdrawal of $26, $52, Cotract Value -35, Less Cost Basis $17, Total Gai* Whe calculatig the taxable gai o a partial withdrawal, the gai is the differece betwee the cotract value (without regard to ay surreder charges) ad the cost basis. Because the cotract gai, $17,300.50, is less tha the requested withdrawal amout, the full gai is taxable ad the balace of the withdrawal is ot taxed. As it is, had Mr. Smith requested a withdrawal of $15,000.00, the full $15, would have bee taxable because the withdrawal amout is less tha the cotract gai. $26, Requested withdrawal amout 17, Less Gai 8, Total portio ot subject to taxatio However, the gai is calculated differetly o a full surreder. The gai o a full surreder is the differece betwee the surreder value ad the cost basis. Assume the same facts i Example 1, except Mr. Smith ow requests a full surreder. $50, Surreder Value -35, Less Cost Basis $15, Total Gai o Surreder* * The taxable portio would also be subject to the IRS 10 percet premature distributio pealty because Mr. Smith is ot yet 59½. If a cotract cotais both pre-tefra (cotributios prior to Aug. 14, 1982) ad post-tefra cost basis (cotributios after Aug. 13, 1982), the gai o partial withdrawals is taxed accordig to the first-i, first-out rules up to the amout of the pre-tefra basis. Example 2 Bob Smith, age 49, has a auity with both cotract ad surreder values of $259, The cotract cotais pre-tefra basis of $22, ad post-tefra basis of $49, Mr. Smith requests a partial withdrawal of $25, The taxable portio o this withdrawal will be $3, because the pre-tefra basis will be recovered first i ay withdrawals. $25, Requested withdrawal amout -22, Less pre-tefra basis $ 3, Portio subject to taxatio $22, Pre-TEFRA basis $49, Post-TEFRA basis $82, Pre-TEFRA earigs $105, Post-TEFRA earigs Although Mr. Smith is oly 49, i Example 2 the gai would ot be subject to the IRS 10 percet premature distributio pealty because the icome is allocable to the pre-tefra ivestmet. Cotract proceeds that cotai a mixture of pre- ad post-tefra basis are taxed as follows: first, pre-tefra basis is retured, the pre-tefra earigs, followed by post-tefra earigs, ad fially post-tefra basis. Distributios from qualified deferred auity cotracts are always reported as 100 percet taxable. If the cotract cotais after-tax cotributios, the taxpayer will be required to file the correct forms with his or her IRS Form 1040 providig proof of such. These distributios will also be subject to the premature distributio pealty uless oe of the exceptios applies. Defiig the Ower, Auitat ad Beeficiary There are three people ivolved i the purchase of a auity: the ower, the auitat ad the beeficiary. The ower is the perso who origially puts the moey ito the auity cotract ad cotrols it. The ower has the right to make chages to the cotract, as he or she ows the ivestmet i the auity, which is (for estate plaig purposes) also icluded i his or her gross estate. The ower ca be more tha oe perso; if so, the ower does ot have to be related to the auitat. A trust, a so or daughter, or eve a fried ca be the ower of a auity cotract. The auitat is the perso who will receive a icome from the cotract. If the cotract also has a ower, the auitat s life expectacy is used to calculate icome payouts. The auitat CAN BE someoe other tha the ower. The auitat ca also be more tha oe perso, but oly if the cotract is auitized or issued as a SPIA with a joit ad survivor optio. Cotiget Ower Prior to Ja. 18, 1985, auity owers were allowed to ame a cotiget ower. This cotiget ower 9

11 would take cotrol of the proceeds from the auity upo the death of the origial ower. However, a ew law eacted i 1985 chaged this process. Cotiget owers are o loger acceptable o Kasas City Life auities. For example, prior to 1985, a husbad ad wife could purchase a auity. The husbad might have bee the ower ad the auitat, with the wife actig as the cotiget ower, ad the couple s two childre are listed as the beeficiaries. If the husbad had died, the wife would have cotrolled the proceeds, because she was the cotiget ower. O all cotracts writte after 1985, the childre ow receive the proceeds because they are the beeficiaries. It is importat that cliets kow who they wat the proceeds give to a spouse or childre, etc. That perso (or persos) should to be listed as the beeficiary o the auity cotract. How to Get Your Busiess o the Books Fixed Deferred Auities For the applicat GrowthTrack: Auity Disclosure Statemet Flexible Premium Deferred Auity Form M597 SecurityTrack: Auity Disclosure Statemet Flexible Premium Deferred Auity Form M598 SelecTrack: Auity Disclosure Statemet Sigle Premium Deferred Auity Form M681 or M460** For submissio to New Busiess Applicatio for Auity Form A161* Supplemetal Iformatio for Life Isurace ad Auities (Replacemet) Form M444** Fixed Auity Suitability Worksheet Form M653** Auity Needs Aalysis - Fact Fidig Worksheet For Deferred ad Immediate Fixed Auities Form M582** Appropriate 1035 Exchage ad Trasfer of Fuds form (origials required for submissio): 1035 Exchage Assigmet (Form 1035C) Trasfer form for qualified plas ad IRAs to a IRA (Form 6708) Trasfer Form for traditioal IRA to a Roth IRA (Form 6710) Immediate Auities For the applicat Auity Disclosure Statemet Sigle Premium Immediate Auity Form M680 For submissio to Customer Services Applicatio for Auity Form A161* Supplemetal Iformatio for Life Isurace ad Auities (Replacemet) Form M444** Supplemetal Cotract Form 277 Immediate Auity Suitability Worksheet Form M654** Auity Needs Aalysis - Fact Fidig Worksheet For Deferred ad Immediate Fixed Auities Form M582** Appropriate 1035 Exchage ad Trasfer of Fuds form (if applicable). Origials required for submissio: 1035 Exchage Assigmet (Form 1035C) Trasfer form for qualified plas ad IRAs to a IRA (Form 6708) Trasfer Form for traditioal IRA to a Roth IRA (Form 6710) Split Auities For the applicat GrowthTrack: Auity Disclosure Statemet Flexible Premium Deferred Auity Form M597 (if applicable) SecurityTrack: Auity Disclosure Statemet Flexible Premium Deferred Auity Form M598 (if applicable) SelecTrack: Auity Disclosure Statemet Sigle Premium Deferred Auity Form M681 or M460** Auity Disclosure Statemet Sigle Premium Immediate Auity Form M680 For submissio to Customer Services Applicatio for Auity (oe copy for fixed auity ad oe copy for immediate auity) Form A161* Supplemetal Iformatio for Life Isurace ad Auities (Replacemet) Form M444** Supplemetal Cotract Form 277 Immediate Auity Suitability Worksheet Form M654** Fixed Auity Suitability Worksheet Form M653** Auity Needs Aalysis - Fact Fidig Worksheet For Deferred ad Immediate Fixed Auities Form M582** Appropriate 1035 Exchage ad Trasfer of Fuds form (if applicable). Origials required for submissio: 1035 Exchage Assigmet (Form 1035C) Trasfer form for qualified plas ad IRAs to a IRA (Form 6708) Trasfer Form for traditioal IRA to a Roth IRA (Form 6710) Siged copy of split auity proposal *For state-specific forms requiremets, please use the forms tool o the Kasas City Life Illustratio System, **Submit where required by state. For state-specific forms requiremets, please use the forms tool o the Kasas City Life Illustratio System, Tips for completig the forms Auitat Prit full ame (iclude ay former ames). Never use iitials whe the perso has a give ame. Record give ame of married wome (i.e. Mary J. Joes ot Mrs. Joh H. Joes ). Eter sex, date of birth, state of birth, Social Security Number (SSN) ad other applicable iformatio. Ower 10 It is importat that all owership iformatio be accurate ad complete. The ower has legal cotrol of the cotract, ad Kasas City Life must directly cosult with the ower o all cotract trasactios. The curret cotract forms state that the auitat is the ower uless otherwise show i the applicatio. Idicate i this sectio if the cotract is to be

12 collaterally assiged, ad eter the ame ad relatioship of the assigee. A siged ad otarized collateral assigmet form must also be submitted; use either the America Bakers form or Home Office Collateral Assigmet Form No. 269A. Owership of a cotract by a mior ca cause problems i exercisig cotract rights ad privileges. It is recommeded that, o cotracts issued o a mior, a adult be amed as ower. If the cotract is to be trasferred to the mior upo the mior s 21st birthday, the ower must request that this actio take place. A trasfer of owership such as this must be idicated i the Special Requests sectio of the applicatio uder the Uiform Trasfer to Miors Act (UTMA) or Uiform Gift to Miors Act (UGMA). If ot listed as such, the chage of owership will be treated as a taxable distributio to the origial ower. Note: The age of majority is 18 i some states. The Social Security Number (SSN) or Taxpayer Idetificatio Number (TIN) of the ower must be provided. If the ower is a guardia or custodia for a mior, ward or icompetet perso, furish the SSN of the mior, ward or icompetet perso. If the ower is a idividual or proprietorship, furish the SSN of the idividual; if a corporatio, proprietorship, partership, irrevocable trust or other orgaizatio, furish the TIN of the corporatio, proprietorship, partership or other orgaizatio. If the ower is a revocable trust, check the trustee box ad furish the date of the trust, the complete ame of the trust, ad the ame ad TIN of the grator i the Special Requests sectio of the applicatio. For oqualified auities oly: If the ower is ot the auitat, the beeficiary for the ower is automatically the auitat uless otherwise oted o the applicatio. If the beeficiary for the ower is ot the auitat, the ame ad relatioship of the ower s beeficiary must be give. Beeficiary Please list at least oe beeficiary o the applicatio form. The beeficiary is the perso amed to receive the proceeds (cash value of the cotract) at the death of the auitat or ower before the maturity date. Pla Eter the correct pla ame, idicate whether the premium will be flexible or sigle, ad eter the aual premium payable. Check the box ext to the type of auity beig requested. Aswer the rollover questio ad idicate the amout of moey trasferred, if applicable. Replacemet 11 Licesig The replacemet questios must always be aswered Yes or No. If aswered Yes, the appropriate replacemet forms must accompay the applicatio to the Home Office. The State Compliace Departmet provides curret iformatio o requiremets of the replacemet regulatios to geeral agets ad agets. Replacemet forms may be obtaied from the Supply Departmet. Before sellig ay Kasas City Life product, agets must: Esure you are appoited by Kasas City Life ad licesed by the appropriate authority i the state/jurisdictio i which you are/will be writig applicatios ad where the cliet resides. Esure the product is approved for sale i the state/jurisdictio i which you are/will be writig applicatios, as well as the state/ jurisdictio i which the auitat resides. Commissios Commissios vary based o your aget cotract for the pla sold. Please refer to your aget cotract or talk with your geeral aget regardig details o commissios payable o Kasas City Life s fixed auities. Cotactig the Home Office Correspodece directed to the Home Office should be set to oe of the followig addresses: New Busiess Departmet Kasas City Life Isurace Compay P. O. Box Kasas City, MO Fax: ewbusiess@kclife.com Customer Services Kasas City Life Isurace Compay P.O. Box Kasas City, MO Fax: customerservice@kclife.com Licesig Departmet Kasas City Life Isurace Compay P.O. Box Kasas City, MO Fax: To cotact the Home Office by telephoe, please call Our ormal hours of operatio are Moday through Friday, 8 a.m. to 4:15 p.m., Cetral Time.

13 Notes

14 3520 Broadway Kasas City, MO (816) Note: The coverage described i this guide is for the fixed auity portfolio of Kasas City Life Isurace Compay (Home Office: Kasas City, Mo). Cotract forms J134, J179, J180 ad J181; Lifetime Icome Rider form umber R222; form umbers may differ by state. Coverage may ot be available i all states m