Deferred Annuity Procedure Manual

Transcription

1 Deferred Annuity Procedure Manual Updated 1/3/14

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3 GCU Annuities GCU offers fixed, deferred annuities as well as Single Premium Immediate Annuities, and our unique, no time limit Option A Contract. All GCU Deferred Annuities share the benefits of: Principal backed by the GCU asset base. NO sales charges paid by the annuitant. NO annual fees. NO membership fees. 100% of deposits are credited to the annuitant s account. No self-management of funds. Lifetime and retirement income options. Most may be used as qualified plans. Various options available upon maturity. At present, we offer the following annuity contracts 1. Option A 2. One Plus Four 3. Triple Advantage 4. Five Year Advantage 5. Flex 8 6. Option B Annuities (SPIA s) Because we are a Membership Organization, you ll see many benefits (some contractual, and some provided by decree of our Board of Directors). Death Benefit Waiver: many companies DO NOT waive surrender charges if the annuitant passes away while the contract is still in its surrender charge period! GCU offers the DBW on our One Plus Four, Triple, Five, and 8 year annuities! Long Term Care Waiver: By Board Decree on our 5 and 8 year annuities. Annuitant must provide evidence of being in a qualifying LTC facility. Home care is not included in this. Still, a MAJOR selling point! Terminal Illness Waiver: Again, by Board Decree on our 5 and 8 year annuities. Diagnosis by a licensed physician that the annuitant has less than 12 months. Annuitization Waiver: The annuitant may convert to a GCU, Option B, SPIA during the surrender charge period. GCU will waive any applicable surrender charges provided that the SPIA is for a period of 5 years or longer. Page 2

4 Annuitants Due to the way our by-laws are structured with regard to membership, our contracts do not permit co-annuitants on a deferred annuity application. Co-annuitants are possible with our Option B Single Premium Immediate Annuities where a Joint & Survivor settlement option has been elected. Also, the annuitant MUST be a person. Ownership can be assigned to a non-human entity, and we ll cover that under Assignment of Certificate later in this guide. In situations where another company s annuity is set up with co-annuitants, be aware that such an account CANNOT be transferred into GCU. It would require the existing account to be changed to a single annuitant PRIOR to being transferred to GCU. This would also hold true for jointly owned contracts. They must be changed to a single-owner contract prior to being transferred to GCU. Existing contracts need to transfer to GCU on a like to like basis. GCU membership is extended ONLY to the annuitant/insured, and never to any assignee. Membership is individual and does NOT extend to any family member. In the case of a husband and wife, if they both wished to be members, it would require 2 separate contracts with each listed as the annuitant/insured on their respective contract. Issue Ages Some GCU Annuities have age limitations. You ll see those issue ages in the individual product descriptions that follow. In each case, we go by the age at LAST birthday. Therefore, a client who is 80 years, 11 months old, is, for qualification sake, still 80, and thus eligible for the Flex 8. All life insurance is based on the age closest birthday. Hence, someone that turned 80 on February 1 st, is rated as being 81 on August 1 st that year. Maximum Deposits New Applications ( All Maximums are Per Annuitant, per Calendar Year) Option A, One Plus Four, and Triple Advantage (Qualified AND Non-qualified) Effective 1/1/14, the GCU has imposed maximum contributions of $100,000, COMBINED, for deposit (per calendar year) into the Option A, 1+4, and 3 Year contracts. An annuitant who puts $100,000 into any ONE of these 3 contracts would NOT be able to add to, or open another Option A, 1+4, or 3 year contract during that calendar year. Page 3

5 Five Year Advantage and Flex 8 Non Qualified Accounts Effective 1/1/14, the GCU has imposed maximum contributions of $500,000, COMBINED, for deposit (per calendar year) into the Five Year Advantage and Flex 8 contracts. An annuitant who puts $500,000 (Non Qualified) into one of these two contracts would NOT be able to add to, or open another Non Qualified Five Year Advantage or Flex 8 contract during that calendar year. Five Year Advantage and Flex 8 Qualified Accounts (Traditional IRA, Simple, SEP) Effective 1/1/14, the GCU has placed NO restriction on the amount that can be deposited into a qualified Five Year Advantage or Flex 8 Contract. PLEASE NOTE THAT DEPOSIT MAXIMUMS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON THE BUSINESS NEEDS OF THE ORGANIZATION. Qualified Accounts All GCU Deferred Annuities, with the exception of the Option A, may be used for qualified accounts. (Based on age qualifications) We will not, under any circumstance, accept qualified money into an Option A. 401K, 403B Plans, existing Traditional IRA s, etc., will transfer into a GCU Annuity as a Traditional IRA, and will require that the annuitant receive and sign a Traditional IRA Disclosure. Please see TRADITIONAL IRA s. Roth IRA s may be transferred or started new, and will require that the annuitant receive and sign a Roth IRA Disclosure. Please see ROTH IRA s. With the exception of the GCU Option A, all other deferred annuities may also be used for: 1. Simple IRA s 2. SEP IRA s 3. Keoghs These qualified plans do NOT require a disclosure form to be signed by the client as part of the GCU Annuity application process. Page 4

6 Conversions of a Traditional IRA to a Roth 1. Annuitants should ALWAYS check with their Tax Advisor PRIOR to performing this conversion. 2. Existing Traditional IRA s a. Currently with GCU i. May be converted to a Roth. Conversion requires a new application, Roth Disclosure, and all necessary supporting forms. ii. The Roth account will go into a NEW CONTRACT at the current new issue crediting rate for that particular deferred contract. b. Currently with another company i. You can NOT transfer an existing Traditional IRA account from another company into a GCU Annuity as a Roth. ii. In the case of a client who has an existing Traditional IRA with another company, and wishes to convert the account to a Roth with GCU, their options are: 1. Convert the existing Traditional to a Roth with the current company, and then transfer the Roth to GCU. 2. Transfer the existing Traditional IRA to GCU as a Traditional IRA, and then convert the GCU Traditional IRA contract to a Roth. a. This would require TWO applications being taken i. One for the Traditional IRA transfer. ii. One for the Roth conversion. b. Both applications would require a qualified plan disclosure form. Death Claims First reporting of a death claim may be done by contacting our Member Services team: By Phone: By MemberServices@gcuusa.com Claims form may also be found at: GCU does permit the continuation of an existing annuity (with the exception of Option A s) in cases where the spouse is the beneficiary. Continuation is only available to the surviving spouse. Page 5

7 Power of Attorney All POA s MUST be approved by GCU Counsel PRIOR to a contract being produced, or any contract changes being made. We will submit them to our legal counsel and then advise if they are or are not acceptable. By Mail: Attention Member Services By Fax: , Attn: Member Services By MemberServices@gcuusa.com Interest Accumulation on GCU Deferred Annuities It s often reported that Albert Einstein referred to compound interest as the greatest force on earth quite a powerful expression from someone universally accepted as a genius. Without exploring the depths of that thought, it is still important to understand the manner and method of how GCU applies interest to each member s account in their deferred annuity. All of our interest rates are Annual Percentage Yield (APY) rates, and compound, daily, on the original principle balance and all previous days accumulated interest. For example, if the current rate on an account was 4% and the client invested $100,000, each day we would multiply the account balance by a factor that would result in an account balance of $104,000 at the end of the contract year. What does this mean to your client? Let s look at 2 examples: in the first, how compounding interest affects the account balance of a client in a 5 Year Advantage annuity, and in the second, the impact on total interest when a client chooses to take monthly interest withdrawals from the same account. Page 6

8 EXAMPLE 1: Impact of Compounding Interest. A client deposits $100,000 into a 5 Year Advantage with a crediting rate of 4.80%, assuming the rate stays the same in all 5 years.* The natural inclination is to assume $4,800 per year in interest, for 5 years, or $24,000 total interest at the end of the 5 years, for an account balance of $124,000. However, using GCU s compounding interest method; the same account would look like this: Current Interest Rate: 4.80% Amount Deposited: $100, Year Total 1 $104, $109, $115, $120, $126, As you can see, the effect of compounding interest from year to year results in an actual account balance of over $126,417.. *This is only an example of the effect of compounding interest. Since the 5 Yr only has a two year guarantee, you would NEVER project the rate beyond the minimum guarantee in the remaining 3 years. The same would apply to years 2 8 in the Flex 8. (one yr guarantee). EXAMPLE 2: Impact of Monthly Interest Only Withdrawals. Same client with $100,000 in the 5 Year Advantage (4.80% crediting rate), wants to take monthly withdrawals of interest only. Again, the natural assumption would be to say: $4,800 per year in interest equals $400 per month. However, because of the compounding interest method, the actual monthly results would look like this: Daily Multiplier for 4.80% = Amount on Deposit = $100, Day $100, $ $ $100, $100, $ $1, $100, $ $2, $4, Page 7

9 Given one 28 day month per year, four 30 day months, and seven 31 day months, the total of the 12 monthly interest distributions would be $4, The reason is simple: each month, based on the number of days, the account accumulates interest on the $100,000 principle, the interest is withdrawn, and the account balance goes back to $100,000. You lose the impact of the month to month compounding of interest on the principle and each preceding month s interest accumulation. It is extremely important that clients who wish to take monthly interest only distributions understand this. Clients who wish to take systematic monthly, quarterly, semi-annual, or annual interest or fixed amount distributions MUST complete a Request for Systematic Withdrawal and agree to direct deposit. No systematic withdrawal requests will be processed unless accompanied by the direct deposit information. A further description of each GCU Deferred Annuity contract follows. The descriptions are for all GCU contracts issued on or after 2/1/11. Page 8

10 Option A Annuity Complete Liquidity with a competitive interest rate! Issue Ages: No age restrictions Minimum Guaranteed Rate: 1.0% Minimum Initial Deposit: $5,000 Maximum Initial Deposit: * 1 Initial Rate Guarantee Period: Current calendar month Eligible for Qualified Plans: No Additional Deposits are NOT permitted Must agree to direct deposit of interest for the contract to be issued. Contract term: The GCU Option A account has NO expiration or maturity date. Once opened, it may remain in force year after year provided that the account is not drawn below the $5,000 minimum balance. Your initial interest rate: is guaranteed for the balance of the month in which the contract is issued, and may change on a calendar month to month basis as declared by GCU, but is guaranteed to NEVER be less than declared guaranteed minimum rate. Each month s subsequent interest rate will be the declared new issue crediting rate for the GCU Option A contract. Interest Earnings: While you may elect to have your interest direct deposited on a monthly, quarterly, semi-annual, or annual basis, the account must distribute all accumulated interest at the end of each contract year. Regardless of the distribution frequency, a 1099-I will be issued for any and all interest earned in the calendar year. Because this contract does not provide for tax deferred accumulation, there is NO early distribution penalty for annuitants under age 59 ½. You may also elect via form W4P to have GCU withhold taxes from any interest distribution. Withdrawal provisions: This contract is 100% liquid from day one, and may be completely surrendered at any time WITHOUT a surrender charge! You may also make partial withdrawals at any time. The minimum withdrawal is $50.00; however, any withdrawal that results in a remaining balance of less than $5,000 will require the account to be closed with a distribution of the remaining funds. 1 Contact the GCU Home Office for maximum deposits. Page 9

11 Option A Annuity continued Key Points for the Option A 1. The Option A is an interest only settlement option. 2. The crediting rate can vary from month to month on the same account, but cannot go below the guaranteed minimum. 3. It may NOT be used for qualified accounts of ANY type. 4. A direct deposit form MUST accompany the application regardless of the mode of distribution for the interest accumulated in the account. There will be no exceptions to this. 5. Once a distribution mode (Monthly, Quarterly, Semi, or Annually) has been selected on the Election of Settlement Option Form, that mode may NOT be changed until the end of the contract year. 6. All interest MUST be distributed from the account at the end of every contract year. 7. A 1099-I will be issued to the client for any year in which any interest is distributed. 8. All interest distributions will go off of the contract s effective date. a. For example, a client whose contract is effective on April 14 th, would have their interest direct deposited within 5 calendar days of the 14 th of the month: i. Monthly: 5/14, 6/14, 7/14, etc. ii. Quarterly: 7/14, 10/14, 1/14, 4/14. iii. Semi-Annual: 10/14, 4/14. iv. Annually: 4/14 b. The reason we say within 5 calendar days is that our system will compute their interest accumulation the evening of their modal monthiversary date. The next business day, it will be sent to our bank for direct deposit transmission. If the monthiversary date was a Friday and Monday was a holiday, the bank would not receive the information until Tuesday and it could be Wednesday before the direct deposit is facilitated. It is essential that your client understand this process. 9. On the W4P, it is important that the client indicate what withholding, if any, that they want taken from each distribution. If the client does not check the block indicating that they do NOT want withholding, we WILL withhold from each distribution. 10. Because there is no tax deferred growth permitted in the Option A contract, there are also NO early distribution penalties assessed for clients under age 59 ½. 11. The Option A Annuity Kit: a. Deferred Annuity Application b. Election of Settlement Option c. W4P d. Direct Deposit Authorization e. Suitability form (ages 65 and over) 12. Upon the death of the annuitant, Option A s may NOT be continued by the spouse, if living. Page 10

12 One Plus Four Annuity A Five Year Window Annuity, that gives you the option of surrendering the contract at the end of the first year, converting it to a new One Plus Four, or continuing in the same contract for the remaining four years. Issue Ages: No age restrictions! Minimum Guaranteed Rate: 1.0% Minimum Initial Deposit: $300 Initial Rate Guarantee Period: One Year Additional Deposits are permitted. Eligible for Qualified Plans: Yes Withdrawal provisions: This contract does not allow for any surrender charge free withdrawals during the first year. Surrender charges in the first year are 9%, and are reduced by 2% in each subsequent year of the five year contract. (9% - 7% - 5% - 3% - 1%). Should you continue into the remaining 4 years of the contract, surrender charge free withdrawals of 10% are permitted in each remaining year based on the contract s value at the preceding anniversary date. Please note: Any interest or gain in the withdrawal will be subject to taxes and, if withdrawn prior to age 59 ½, may also be subject to a 10% early distribution penalty imposed by the IRS. By IRS mandate, interest is always distributed first. Your initial interest rate is guaranteed for the first year. Upon the first contract anniversary, and for 30 days thereafter, you have the option of: 1. Continuing the contract for the remaining four years. The rate for each subsequent year will be based on the Five Year Advantage New Issue Crediting Rate at EACH anniversary of your contract, and guaranteed at that level for the contract year. During the 30 day window, you may withdraw any portion of your proceeds without a surrender charge. (Must be done via a Request for Annuity Partial Withdrawal Form. 2. Surrendering the contract during the 30 day window, and converting to a new One Plus Four. The initial crediting rate for the new contract will be the current crediting rate in the month of the conversion. The entire proceeds of the existing contract may be converted into the new contract without creating a taxable event. 3. Surrendering the contract completely without incurring a surrender charge. (Again, this will create a taxable event and potential penalties.) The contract may also be transferred or 1035 d. 4. Converting to any other annuity offered at that time by GCU, based on age qualifications. Initial deposit limits do not apply to existing funds being converted, only to new monies being added to the account. Page 11

13 Additional Deposits: Currently, the maximum dollar amount of deposits into a new One Plus Four contract is $100,000 per person, per calendar year. This maximum applies per person regardless of the number of contracts in force. One Plus Four contracts that have continued into the remaining four years are currently permitted to add additional deposits up to $100,000 per calendar year. Conversions of an existing One Plus Four to a new One Plus Four (during the 30 day window beginning on the first contract anniversary) will be able to convert the entire amount of the old contract into the new one. Additional deposits are subject to current first year maximums. Maturity Date: Upon the maturity date of the contract, you may: 1. Convert to any GCU Annuity being offered at that time, subject to age availability. Initial rate for the new contract will be based on the current crediting rate for that new contract in the month of the conversion. 2. Withdraw any or all of the available funds without a surrender charge. Any interest or gain in the withdrawal will be subject to taxes and, if withdrawn prior to age 59 ½, may also be subject to a 10% early distribution penalty imposed by the IRS. 3. Continue the contract indefinitely, with complete liquidity of the available funds (no surrender charges). The credited interest rate, beginning the first day of the 6 th contract year will be the credited liquid money rate as declared by GCU, and can change on a month to month basis. Subsequent contract years will follow the same crediting rate process. Crediting rates for all years following the maturity of the contract will be no less than the guaranteed minimum in the contract. Death Benefit Waiver: No surrender charges will be imposed on the death benefits paid under this annuity contract. Page 12

14 Key Points for the One Plus Four 1. There are NO surrender charge free withdrawals permitted during the first contract year. 2. The One Plus Four may be used for qualified plans. 3. Should the client continue the contract into the remaining four years, once the 30 day window has expired, they could add up to a total of $100,000 in that calendar year, and each calendar year thereafter, provided they open no other GCU Option A, One Plus Four, or Triple Advantage. 4. If a client chooses to surrender the contract during the 30 day window, they are NOT able to return the check and re-open the account. 5. Should the annuitant/owner decide to continue their One Plus Four into the remaining four years, NO NEW CONTRACT is issued. The One Plus Four IS a five year contract that provides for surrender charge free surrender during the 30 day window. Clients who continue into the remaining four years will NOT receive any additional correspondence from us. 6. It is VERY IMPORTANT that the client understands that the rates for years 2,3,4 and 5 (should they continue the contract beyond the 30 day window) cannot be determined at the time the contract is written! The only thing that is certain is that the initial rate is guaranteed for the first 12 months of the contract. After that, and on a year by year basis, each subsequent year s interest rate will be based off of the new issue crediting rate for our Five Year Advantage in the month of their anniversary, and can change from year to year, subject to the contract minimum. 7. If the client is going to move the money during the 30 day window into another annuity, we need to receive the 1035 paperwork from the new company BEFORE the end of the 30 days. If a client has us write them a check (and it s a non-qualified account), it WILL create a taxable event! 8. One Plus Four accounts that have been assigned to an owner different than the annuitant, must also be assigned to the new owner if converting to a new contract. Page 13

15 Triple Advantage Annuity A 36 month Annuity, with the initial interest rate guaranteed for all 36 months! Issue Ages: 0 95 Minimum Guaranteed Rate: 1.0% Minimum Initial Deposit: $300 Initial Rate Guarantee Period: Three Years Additional Deposits are permitted. Eligible for Qualified Plans: Yes Withdrawal provisions: This contract does not allow for any surrender charge free withdrawals during the first year. Surrender charges in the first year are 5%, and are reduced by 2% in each subsequent year of the three year contract. (5% - 3% - 1%). Surrender charge free withdrawals of 10% are permitted in the second and third year, based on the contract s value on the last day of the previous contract year. Please note: Any interest or gain in the withdrawal will be subject to taxes and, if withdrawn prior to age 59 ½, may also be subject to a 10% early distribution penalty imposed by the IRS. By IRS mandate, interest is always distributed first. Death Benefit Waiver: No surrender charges will be imposed on the death benefits paid under this annuity contract. Maturity Date: Upon the maturity date of the contract, you may: 1. Convert to any GCU Annuity being offered at that time, subject to age availability. Initial rate for the new contract will be based on the current crediting rate for that new contract in the month of the conversion. 2. Withdraw any or all of the available funds without a surrender charge. Any interest or gain in the withdrawal will be subject to taxes and, if withdrawn prior to age 59 ½, may also be subject to a 10% early distribution penalty imposed by the IRS. 3. Continue the contract indefinitely, with complete liquidity of the available funds (no surrender charges). The credited interest rate, beginning the first day of the 4 th contract year will be the credited liquid money rate as declared by GCU, and can change on a month to month basis. Subsequent contract years will follow the same crediting rate process. Crediting rates for all years following the maturity of the contract will be no less than the guaranteed minimum in the contract. Contact the GCU Home Office for maximum deposits. Additional deposits subject to certain maximums. Page 14

16 Key Points for the Triple Advantage 1. There are NO surrender charge free withdrawals permitted during the first contract year. 2. The initial interest rate is guaranteed for all 36 months. 3. Additional deposits (subject to maximums) are permitted throughout the 36 months, and will receive the same rate without extending the surrender charge period. 4. The Triple Advantage may be used for qualified plans. 5. With the 10% surrender charge free withdrawal provisions in years 2 and 3, the client could take their first year interest at the beginning of the second year, and their second year interest at the beginning of the third year. Page 15

17 Five Year Advantage Annuity A 60 month Annuity with excellent liquidity features from day one! Issue Ages: 0 88 Minimum Guaranteed Rate: 2.0% Minimum Initial Deposit: $300 Initial Rate Guarantee Period: Two Years Additional Deposits are permitted. Eligible for Qualified Plans: Yes Withdrawal provisions: The GCU currently allows for surrender charge free withdrawals in EACH contract year! Year One = 10% of the initial deposit. Years Two thru Five = 20% in each year based on the account value at the end of the previous contract year. Withdrawals exceeding the permitted amounts will be subject to a surrender charge. Surrender charges in the first year are 9%, and are reduced by 2% in each subsequent year of the five year contract. (9% - 7% - 5% - 3% - 1%). 2 Please note: Any interest or gain in the withdrawal will be subject to taxes and, if withdrawn prior to age 59 ½, may also be subject to a 10% early distribution penalty imposed by the IRS. By IRS mandate, interest is always distributed first. Long Term Care Waiver: No surrender charges will be imposed on withdrawals or surrender of this contract upon receipt of acceptable proof that the annuitant has become confined to a Long Term Care Facility. 3 Terminal Illness Waiver: No surrender charges will be imposed on withdrawals or surrender of this contract should the annuitant become terminally ill as certified by an attending physician. 4 Death Benefit Waiver: As with all GCU Deferred Annuity Contracts, no surrender charges will be imposed on the death benefits paid under this contract. Maturity Date: Upon the maturity date of the contract, you may: 1. Convert to any GCU Annuity being offered at that time, subject to age availability. Initial rate for the new contract will be based on the current crediting rate for that new contract in the month of the conversion. 2. Withdraw any or all of the available funds without a surrender charge. Any interest or gain in the withdrawal will be subject to taxes and, if withdrawn prior to age 59 ½, may also be subject to a 10% early distribution penalty imposed by the IRS. 2 This waiver is currently provided by resolution of the GCU Board of Directors, is not contractual, and may be discontinued at any time. 3 This waiver is currently provided by resolution of the GCU Board of Directors, is not contractual, and may be discontinued at any time. Page 16

18 3. Continue the contract indefinitely, with complete liquidity of the available funds (no surrender charges). The credited interest rate, beginning the first day of the 6 th contract year will be at least 3% with any excess to be declared by the Board of Directors, and is subject to change on a month to month basis as the contract continues. Subsequent contract years will follow the same crediting rate process. Crediting rates for all years following the maturity of the contract will be no less than the guaranteed minimum in the contract. Page 17

19 Key Points for the Five Year Advantage 1. May be used for qualified plans. 2. Allows for monthly interest distributions beginning in the FIRST year! (Must complete a Request For Systematic Withdrawal Form, including direct deposit information. Any and all withdrawals will count toward the total of surrender charge free withdrawals permitted in any contract year. Principal AND Interest count toward the total withdrawals. 3. Clients, who wish to have systematic interest or stated amount withdrawals every month, MUST complete a direct deposit form. We will NOT issue checks for regular, monthly withdrawals. 4. Benefits: a. Consistent interest rate b. Immediate liquidity features c. Long Term Care Waiver d. Terminal Illness Waiver 5. Maximum Deposits (combined with any existing Flex 8) a. Non Qualified: $500,000 b. Qualified Plans: No limit. 6. Although past performance is no guarantee of future action, GCU has always paid the initial crediting rate in all 5 years of the contract. From a technical standpoint, however, the initial crediting rate is only guaranteed for the first 2 contract years. The contract minimum guarantee applies to the remaining three years, and possibly more should the client elect to keep the contract at GCU after the maturity date. Page 18

20 FLEX 8 Annuity An 8 Year Deferred Annuity with liquidity features from day one! Issue Ages: 0 80 Minimum Guaranteed Rate: 3.0% Minimum Initial Deposit: $300 Initial Rate Guarantee Period: One Year Additional Deposits are permitted. Eligible for Qualified Plans: Yes Your initial interest rate is guaranteed for the first contract year. For subsequent contract years, your interest rate, on a month to month basis, will be based on the New Issue Crediting Rate for the GCU Flex 8 contract, but is guaranteed to NEVER be less than 3%. Therefore, this contract has the ability to respond, on a monthly basis, to an increasing interest rate environment, while consistently giving you the highest crediting rate on any GCU annuity contract! Withdrawal provisions: The GCU allows for surrender charge free withdrawals in EACH contract year! Year One = 10% of the initial deposit. Years Two thru Eight = 10% in each year based on the account value at the end of the previous contract year. Withdrawals exceeding the permitted amounts will be subject to a surrender charge. Surrender charges in the first year are 9%, and are reduced by 1% in each subsequent year of the eight year contract. (9% - 8% - 7% - 6% - 5% - 4% - 3% - 2%). Please note: Any interest or gain in the withdrawal will be subject to taxes and, if withdrawn prior to age 59 ½, may also be subject to a 10% early distribution penalty imposed by the IRS. Long Term Care Waiver: No surrender charges will be imposed on withdrawals or surrender of this contract upon receipt of acceptable proof that the annuitant has become confined to a Long Term Care Facility. Terminal Illness Waiver: No surrender charges will be imposed on withdrawals or surrender of this contract should the annuitant become terminally ill as certified by an attending physician. Death Benefit Waiver: As with all GCU Deferred Annuity Contracts, no surrender charges will be imposed on the death benefits paid under this contract. Page 19

21 Maturity Date: Upon the maturity date of the contract, you may: 1. Convert to any GCU Annuity being offered at that time, subject to age availability. Initial rate for the new contract will be based on the current crediting rate for that new contract in the month of the conversion. 2. Withdraw any or all of the available funds without a surrender charge. Any interest or gain in the withdrawal will be subject to taxes and, if withdrawn prior to age 59 ½, may also be subject to a 10% early distribution penalty imposed by the IRS. 3. Continue the contract indefinitely, with complete liquidity of the available funds (no surrender charges). The credited interest rate, beginning the first day of the 9 th contract year will be at least 3% with any excess to be declared by the Board of Directors, and is subject to change on a month to month basis as the contract continues. Subsequent contract years will follow the same crediting rate process. Crediting rates for all years following the maturity of the contract will be no less than the guaranteed minimum in the contract. Page 20

22 Key Points for the Flex 8 1. May be used for qualified plans. 2. For those clients who play the one year game, believing that interest rates will increase at some point in the near future, the Flex 8 gives them a substantially better crediting rate in the first year over a One Plus Four, AND, beginning in the 13 th contract month, will adjust to the prevailing Flex 8 new issue crediting rate on a month to month basis. a. If new issue crediting rates DO increase, the client s account will reflect that on a monthly basis (beginning in the second year), and, even in a decreasing market, the rate can NEVER go below 3%! b. Should crediting rates decrease, likely, ALL contracts will see a decrease, but the Flex 8 can NOT go below its stated minimum guaranteed crediting rate. c. The Flex 8 will ALWAYS have our highest new issue crediting rate vs our other contracts. 3. Allows for monthly interest distributions beginning in the FIRST year! Any and all withdrawals will count toward the total of surrender charge free withdrawals permitted in any contract year. Principal AND Interest count toward the total withdrawals. 4. Clients, who wish to have systematic interest or stated amount withdrawals every month, MUST complete a Request for Systematic Withdrawal Form, including direct deposit information. We will NOT issue checks for systematic withdrawals. 5. Benefits: a. Consistent interest rate b. Immediate liquidity features c. Long Term Care Waiver d. Terminal Illness Waiver 6. Maximum Deposits (combined with any existing Five Year Advantage) a. Non Qualified: $500,000 b. Qualified Plans: No limit. Page 21

23 Annuity Application (Form DefAnu-2010) To be used for: Option A One Plus Four Triple Advantage Five Year Advantage Flex 8 All of these contracts require, at a minimum, the application and the disclosure form that is appropriate to each contract. At a minimum would be a non-qualified annuity for an annuitant between 18 and 64 years old. The need for other forms would be dictated by a variety of factors: age, qualified plan, transfer of funds, 1035 s, etc. On the Application: Front Page Is the Proposed Annuitant a member of the GCU? We do NOT have a separate application for membership, nor are there any annual membership fees. If your client is NOT currently a GCU member, just check No. We will assign them to their appropriate lodge when we receive the application. 1. Full Name of Proposed Annuitant a. Must be a person i. GCU, due to our membership bylaws, does NOT allow for Co-Annuitants on deferred annuities or the Option A. If you are dealing with a client who has an existing annuity with another company, and it is set up with joint annuitants or joint owners, you can NOT 1035 it into a GCU annuity without first making the prior contract an individually held contract s, transfers, etc., must be done on a Like to Like basis. ii. Keep in mind that you CAN NOT have Co-owners. Again, a contract owned by a couple must change the existing contract to a single person ownership prior to 1035 or transfer. SEE ASSIGNMENT OF CERTIFICATE. iii. Unless the contract is assigned, the annuitant is the owner of the contract. SEE ASSIGNMENT OF CERTIFICATE Page 22

24 iv. You CAN use our products for Associations, Companies, Churches, etc. SEE ASSIGNMENT OF CERTIFICATE b. If the Proposed Annuitant is under 18 years old: i. Non-qualified plan: SEE MINOR ANNUITANTS ii. Coverdell Educational IRA: SEE COVERDELL c. If the Proposed Annuitant is 65 or older: SEE SUITABILITY FORM. 2. Address, etc. a. The client s legally registered domicile. b. address is VERY IMPORTANT! i. IMPORTANT! We do NOT sell client addresses. They are protected under the GCU Privacy Policy. ii. We will send the client info on how to register online at our website so that they can see ALL of their accounts, balances, etc. iii. They can also access certain other web features regarding their contracts. iv. Can sign up for E-Statements and get an electronic statement on all of their accounts EACH quarter. v. Clients NOT registered online, or those who are registered, but haven t requested E-Statements, will get paper statements at the end of the second quarter and at the end of the year. 3. D.O.B./Age/Sex/SSN 4. Beneficiaries a. Primary beneficiaries: GCU will NOT produce any application unless the following information is included for EACH primary beneficiary named: i. Name ii. Relationship to Annuitant iii. Social Security Number iv. Date of Birth v. Share of proceeds. b. Beneficiaries under the age of 18 may not receive the proceeds of a contract until they become of age. If it occurs, GCU will hold the funds in our St. Nicholas Trust, until they turn 18. c. IMPORTANT: If a Trust is named as a beneficiary, a copy of the trust MUST accompany the application. Page 23

25 5. Replacement Questions a. If yes, all appropriate replacement forms MUST be completed. b. When applicable c. Partial 1035 s, etc. Be aware of the potential tax ramifications involved in a partial 1035 should the annuitant wish to begin taking withdrawals. 6. Type of Deferred Annuity a. Plan i. Option A ii. One Plus Four iii. Triple Advantage iv. Five Year Advantage v. Flex 8 b. Billing Options i. Reminders for additional deposits. ii. At the end of the line, you can write in an amount they would LIKE to contribute each reminder, or: iii. If you don t enter an amount, we will take their initial deposit and divide it by the modal frequency to generate the amount on the reminder. iv. GCU does NOT send Monthly reminders. Clients who wish to contribute monthly to their annuity should fill out a Direct Debit Authorization. SEE DIRECT DEBIT AUTHORIZATION. v. If the client does not wish to have ANY reminders sent, be sure to check Do Not Bill. c. Amount Paid with application. Write in one of the following: i. Amount of check(s) being sent with the application. ii. 1035, if the funds are being sent from another non-qualified annuity. iii. Transfer, if the funds are being sent from a qualified account. d. Benefits to commence on i. The date the client would want the contract to annuitize. ii. If they do not wish to declare that date, just leave it blank. The contract would then have the benefits to commence at the maturity date of the contract. iii. You can always write in a date that is far out into the future. 1. They can still request an earlier maturity date later, in writing. Page 24

26 e. Qualified Annuity Plan i. Where applicable, check the appropriate box. ii. Traditional IRA s require a signed Traditional IRA disclosure form. SEE TRADITIONAL IRA DISCLOSURE. iii. Roth IRA s also require a special disclosure form to be signed by the annuitant. SEE ROTH IRA DISCLOSURE. iv. Coverdell Educational Plans require IRS form 5305-EA. SEE COVERDELL. 7. Special Requests a. ONLY to be used for situations such as i. Mail contract directly to client ii. Do not make effective until b. PLEASE: Do NOT write in: i. Send monthly interest, etc. ii. Those requests require a SEPARATE form to be completed. On the Application: Back/Second Page Dated at: The city and state where you are completing the application. Agent Signature Agent to LEGIBLY print their name License number: At this time, only required for Florida agents GCU Agent number: You will be assigned an agent number to be used on all of your GCU applications and correspondence upon submission of your first contract application. It is essential that you write this number on all applications and correspondence. We can provide your number to you if you ve forgotten it. Please Agent Services if you need us to send you your GCU agent number. AgentServices@gcuusa.com. Proposed Annuitant s Signature/Parent or Guardian if Proposed Annuitant is under age 16: The application MUST be signed by the appropriate person or it will be returned to you for signature. The contract cannot be initiated or any interest credited for the client until all necessary forms and signatures are complete and received by the GCU Home Office. Page 25

27 One Plus Four. Form: DISC Annuity Disclosure Forms Triple Advantage. Form: DISC-TripAdv.2011 Five Year Advantage. Form: DISC-5YrAdv.2011 Flex 8. Form: DISC-8YrAdv.2011 Option A: NO DISCLOSURE FORM REQUIRED. However, the Option A application must include: Election of Settlement Option Form W4P The Contract-appropriate disclosure form MUST accompany your client s deferred annuity application. We cannot process an application that does not have the Annuity Disclosure form that corresponds to the type of annuity that you wrote in on line 6 of the application Type of Deferred Annuity: Plan:. For Option A contracts, the basic application kit is the Deferred Annuity Application (Form DefAnu-2010), the Election of Settlement Option Form (SEE ELECTION OF SETTLEMENT OPTION), a completed W4P (SEE W4P), and a completed direct deposit form. The importance of thoroughly reviewing the appropriate disclosure form with your client can NOT be overstated! INTEREST RATE: Directors. The current new issue crediting rate as declared by the GCU Board of 1. The rates for any particular month will be sent to your . It is our goal to have them to you at least one week before the month begins. 2. Current new issue crediting rates can also be seen at our website: 3. For transfers and 1035 s: a. If no cash is accompanying the application, we will hold the interest rate for 30 days from the day we receive the application. This is important should the new issue crediting rate decrease. Page 26

28 SURRENDER CHARGES b. If you write in an interest rate and the transfer/1035 takes longer than 30 days to get to us, should the interest rate change, you d need to have your client complete a new disclosure form with the proper interest rate written in. If you believe the transfer/1035 will take longer than 30 days, you have the option of NOT writing in the interest rate. c. One acceptable option is to include a check with the application along with the transfer/1035 form. Note that in some cases involving qualified accounts, this may NOT be possible. It is imperative that you cover with your client the surrender charges that exist for the type of contract they are purchasing. This is a critical component of determining the suitability of the investment for your client. Other than the specific features of each product that allow for surrender charge free distributions, GCU will not waive any surrender charges that are in effect for any contract. FEATURES 1. All GCU deferred annuity contracts contain the Death Benefit Waiver. 2. Penalty free withdrawals are also provided for in each contract, but they vary as to when and as to the percent permitted. In all cases, the percentage permitted in any particular contract year is based on the account balance on the last day of the preceding contract year. The percentage permitted times that balance gives you a TOTAL dollar figure that may be withdrawn, without surrender charge in that particular contract year. It includes principal AND interest. SIGNATURES 1. The annuitant or applicant. 2. Agents MUST sign the disclosure COPIES 1. You may wish to make two copies of the form so that you can leave one with the client. 2. Please be aware that when we produce a contract and mail it to you for delivery, a copy of the application and the disclosure form IS included with the contract. Page 27

29 Assignment of Certificate As previously mentioned, GCU deferred annuities MUST be written with a person as the annuitant on the application. In most cases, the annuitant is the actual OWNER of the contract. However, there are cases where the annuitant and the owner are different, for a variety of reasons. In all cases, the annuitant becomes the Assignor of the contract on the Assignment of Certificate (AOC) form. The person or entity that the contract is being assigned to (the new owner) becomes the Assignee. GCU contracts only permit: 1. An individual person as owner. (A couple may NOT own a contract with GCU) 2. An entity as owner, such as: a. Company b. Non-profit c. Church d. Association e. Etc. 3. NOTE that GCU contracts do not permit co-owners such as a husband and wife. In these cases, your options would be: a. Name one of the spouses as the annuitant on the application. b. That annuitant (without any assignment) is the owner of the contract, and the other spouse could be named a primary beneficiary; irrevocable if necessary. c. The other spouse COULD be assigned ownership of the contract, and could also be the beneficiary of the contract should the annuitant pass away. (Please be aware that in all cases, the contract follows the life of the annuitant. As such, once the annuitant passes away, the proceeds of the contract are paid to the beneficiary or beneficiaries REGARDLESS of who owns the contract. Should the OWNER of the contract pass away, the contract would become part of THEIR estate.) In situations where the husband and wife are co-owners of an existing annuity with another company, they must convert that existing contract to a single owner BEFORE the account could be 1035 d or Transferred to GCU, the same as if there were co-annuitants on the existing annuity. The existing contract would have to be converted to a single annuitant contract. Page 28

30 ON THE AOC FORM: This Agreement made this day of, 20, by and between (The name of the annuitant exactly as it appears on the annuity application), City of, County of, hereinafter referred to as ASSIGNOR, and (The name of the person or entity that will be the owner of the contract) City of, County of, State of, hereinafter referred to as ASSIGNEE. CONDO/HOMEOWNER ASSOCIATIONS, VOLUNTEER FIRE DEPARTMENTS, NON-PROFIT ORGANIZATIONS, COMPANIES, TRUSTS, ETC It IS possible to use GCU Annuities for these types of entities. In each case, an individual person MUST be named as the annuitant on the annuity application. That annuitant then becomes the ASSIGNOR of the contract, transferring ownership to the appropriate entity, which becomes the ASSIGNEE of the contract ownership. Often, the entity which is being assigned the ownership of the contract will also be the beneficiary of the contract. In the case of ownership being assigned to a Trust, a copy of the Trust must accompany the application. Please be aware that when ownership is assigned to a non-human, third party, (except for certain types of trusts), the benefit of tax deferred interest growth is NOT available, and the entity will receive a 1099-I each year for the interest earned in that tax year. For a Non-profit organization, this isn t going to be an issue, but they should be aware that they will be receiving the 1099-I form from us. If you have a One Plus Four that has been assigned, and, during the 30 day window, you are converting to a new One Plus Four, you MUST include a NEW Assignment of Certificate Form assigning the ownership in the same manner. ON THE AOC FORM: Again, the annuitant/assignor signs and enters their SSN and DOB. For the ASSIGNEE signature, the authorized representative of the entity signs, normally entering the EIN of the organization or Trust. It IS possible the same person signs in both places! Take the example of a business owner who wants to use a GCU Annuity for their corporate funds so as to get a better rate of return on their company s money versus a Bank CD or Savings Account. The business owner would be the annuitant on the application, and would sign away their ownership of the contract to their Page 29

31 business, entering their SSN and DOB on the form. They would then sign as ASSIGNEE, accepting the ownership of the contract on behalf of their company, this time entering the company s EIN number. DOB would be left blank. In some cases, particularly a Condo Association, their Board Resolutions require that more than one person sign in order to facilitate a contract change or withdrawal. The President or Treasurer of the Condo s Board of Officers could be the annuitant/assignor and also sign as ASSIGNEE accepting the transfer of ownership. However, if more than one signature is required for future changes or withdrawals, the entity should complete an AUTHORIZATION FOR WITHDRAWAL FROM FLEXIBLE ANNUITY form, listing the names and titles of the individuals authorized to make changes or withdrawals, including each person s signature. IMPORTANT! Upon the death of the annuitant, the contract ceases, the benefits are paid to the beneficiary(s) listed on the contract, and the Assignment of Certificate is no longer valid. REGARDLESS of who OWNS a contract, upon the death of the annuitant, the proceeds will be paid out to the beneficiary(s). If the organization wishes to keep the funds with GCU, a NEW APPLICATION, DISCLOSURE, AND ASSIGNMENT OF CERTIFICATE MUST BE OBTAINED, along with any other necessary forms, ie, suitability or authorization for withdrawals. ALSO: Should the assignee pass away while the annuitant is still alive and the contract in force, the ownership of the contract becomes a part of the estate of the assignee and NOT THE ANNUITANT. It does not automatically revert to the annuitant. Please be aware that existing contracts that are assigned to a new owner MAY CREATE A TAXABLE EVENT! This applies to contracts that were written on or after April 22, Page 30

32 Authorization for Withdrawal from Flexible Annuity This form is normally used in conjunction with an ASSIGNMENT OF CERTIFICATE form. In the case of a Condo Association, Non-profit group, etc., the annuitant/assignor has executed the Assignment of Certificate and named the new owner of the contract. An authorized representative of the new owner signs the Assignment of Certificate indicating their organization s acceptance of the ownership transfer. In many cases, however, for changes to be made to the contract, or for withdrawals to be authorized, the organization will require a number of authorized individuals to sign off on the request. This is when you would use the Authorization for Withdrawal form. 1. At the time of initial application, you will not have an Annuity Number to enter, so leave that blank. 2. Write in the name of the ANNUITANT exactly as it appears on the application. 3. Write in the name of the OWNER/ASSIGNEE exactly as it is shown on the Assignment of Certificate. 4. Have the authorized persons print and sign their name/title. If there are more than 3 authorized signatures, please attach a separate form and mark them 1 of 2, and 2 of 2, etc. Also, if more than one signature is required to enact a change or withdrawal, you ll need to indicate on the form that X number of signatures are required. 5. Should the names change (for example, a Board member resigns or retires) we will need an update on whose signature is no longer viable and the name, signature, title of their replacement. 6. Upon the death of the annuitant, proceeds will be paid according to the beneficiary designations on the contract. Should the entity wish to continue having their funds with GCU, all new paperwork, including a new Authorization for Withdrawal form must be obtained. Page 31