Broker Guide to the Secured Rate Annuity From Standard Insurance Company Standard Insurance Company A subsidiary of StanCorp Financial Group, Inc. Individual Annuities 1100 SW Sixth Avenue Portland OR 97204 (800) 378-4578 www.standard.com/annuities 10089 (10/03) FOR PRODUCER USE ONLY
Broker Guide to the Secured Rate Annuity Overview...1 Selling Points...2 At A Glance...9 For More Information...13
Overview What is the Secured Rate Annuity? The Secured Rate Annuity (SRA) is single premium deferred annuity offering multiple interest rate guarantee periods and flexible withdrawal option. Some SRA options even provide bonus rewards for your clients long-term savings commitment. Your clients may choose a one-year, three-year, five-year or six-year interest rate guarantee period and secure the current rate for the length of the guarantee period. At the end of the guarantee period, your clients benefit from competitive renewal rates based on the current interest rate environment and current market conditions. In addition, your customers will be spared the hassles of a 30- or 60-day window at the end of the guarantee period, during which time policyowners are generally required to make a decision prior to the start of new rate guarantee and surrender periods. The Secured Rate Annuity offers a variety of ways for your clients to access funds before the end of the surrender-charge period without paying a surrender charge. Easy withdrawal methods include an annual 10% free out withdrawal option (beginning during the second contract year), payments of earned interest (available immediately), 72(t) and 72(q) Substantially Equal Periodic Payments for early retirement income without IRS penalties, Required Minimum Distributions from qualified plans, and nursing home and terminal condition waivers. Details of these flexible withdrawal features follow. Page 1
For More Information Selling Points For additional information about the SRA, please contact one of our customer service specialists at (800) 247-6888 or Annuity Sales Support at (800) 378-4578, ext. 6605. Competitive Interest Rate Guarantees The Secured Rate Annuity offers strong growth potential through competitive market interest rates. The Standard has a long-standing history of excellent fixed annuity performance and competitive renewal rates. Order SRA supplies at www.standard.com/annuities or by calling (800) 247-6888. Whether your clients choose the SRA s one-year, three-year, five-year or six-year guarantee option, the initial interest rate is guaranteed to remain level during the initial rate period. After the guaranteed rate period, your clients will then enjoy competitive renewal rates based on current market conditions. Close-up: One-Year Guarantee Period The one-year option guarantees the current interest rate for one contract year. It also includes an interest rate bonus of 1.00% for the first contract year. After the first year, your clients will receive renewal interest rates based on current market conditions, and the interest rate is guaranteed to never go below the contractual annual minimum guaranteed rate. Additionally, at the end of the seventh year, the annuity will be credited with additional interest equal to 1.00% of the initial premium; and at the end of the eighth and subsequent years the annuity will be credited with additional interest equal to 0.25% of the initial premium, less any previous withdrawals or loans. 8968 SRA Spreadsheet 9254 SRA Fact Sheet and Disclosure Statement 9253 SRA Brochure Page 13 Page 2
Close-up: Three-Year Guarantee Period The three-year option guarantees the current interest rate for three contract years. It is a level-rate guarantee and does not include a first-year rate bonus. After the third year, your clients will receive renewal interest rates based on current market conditions, and the interest rate is guaranteed to never go below the contractual minimum guaranteed rate. Additionally, after the fourth year, if your client chooses an income option with The Standard, the payments received will be based on an additional 2.00% added to the annuity s current value upon annuitization. Your client must choose either a Lifetime Income option or a Period Certain option of five years or longer to receive this benefit. Close-up: Five-Year Guarantee Period The five-year option guarantees the current interest rate for five contract years. It is a level-rate guarantee and does not include a first-year rate bonus. After the fifth year, your clients will receive renewal interest rates based on current market conditions, and the interest rate is guaranteed to never go below the contractual minimum guaranteed rate. Close-up: Six-Year Guarantee Period The six-year option guarantees the current interest rate for six contract years. It is a level-rate guarantee and does not include a first-year rate bonus. After the sixth year, your clients will receive renewal interest rates based on current market conditions, and the interest rate is guaranteed to never go below the contractual minimum guaranteed rate. 10% Annual Withdrawals After the first year, your client may withdraw up to 10% of the annuity s value each year without a surrender charge. Withdrawals may be subject to a 10% IRS penalty. Required Minimum Distributions Required Minimum Distributions attributable to the account value of the SRA will be distributed without the assessment of a surrender fee. The Standard guarantees its calculation of RMDs and will pay any fines or penalties associated with an incorrect amount calculated by The Standard. However, The Standard will not be responsible for incorrect calculations due to incorrect information provided by the policyowner. This guarantee is limited to calculations made on accounts administered by The Standard. Nursing Home Benefit After the first contract year, if your client becomes a nursing home resident for thirty or more consecutive days, The Standard will waive all surrender charges on all withdrawals, transfers and surrenders. Written documentation is required. Terminal Condition Benefit If your client is diagnosed with a terminal condition, The Standard will waive all surrender charges on all withdrawals, transfers and surrenders. Written documentation is required. Annual Contract Fees There are no annual contract fees. Page 3 Page 12
Surrender Charges SRA 1 Surrender Schedule Policy Year 1 2 3 4 5 6 Surrender Charge 7% 7% 7% 6% 5% 3% SRA 3 Surrender Schedule Policy Year 1 2 3 Surrender Charge 9% 8% 7% SRA 5 Surrender Schedule Policy Year 1 2 3 4 5 Surrender Charge 9% 8% 7% 6% 5% SRA 6 Surrender Schedule Policy Year 1 2 3 4 5 6 Surrender Charge 9% 8% 7% 6% 5% 4% Bailout Rate Provisions (SRA 1 Only) If the interest rate credited to the policy falls below the stated bailout rate for the policy year, all withdrawals, transfers and surrenders will be free of surrender charges. The bailout interest rate for policy years one through five equals the first year guaranteed interest rate minus 1.00%. The bailout interest rate for policy year six equals the first year guaranteed interest rate minus 2.00%. Interest Payments Regular payments of earned interest are available beginning in contract year one. Your clients may choose to receive monthly, quarterly, semi-annual or annual interest payments. Payments cannot be less than $100. Competitive Compensation Broker level first-year commission for: SRA 1 = 3.75% for ages 80 and under; SRA 3 = 2.00% for ages 80 and under; SRA 5 = 3.00% for ages 80 and under; SRA 6 = 3.00% for premium under $250,000, ages 80 and under = 2.00% for premium over $250,000, ages 80 and under Short Surrender Periods Because the Secured Rate Annuity is specifically designed to perform best over the long term. If a client needs to access funds during the surrender period (in excess of any free withdrawal provisions), a surrender charge is assessed according to the tables below. There are no surrender charges on withdrawals, transfers or surrenders after the sixth contract year for the SRA 1. The SRA 3 has no surrender charges after the third contract year. SRA 1 Surrender Schedule Policy Year 1 2 3 4 5 6 Surrender Charge 7% 7% 7% 6% 5% 3% SRA 3 Surrender Schedule Policy Year 1 2 3 Surrender Charge 9% 8% 7% SRA 5 Surrender Schedule Policy Year 1 2 3 4 5 Surrender Charge 9% 8% 7% 6% 5% SRA 6 Surrender Schedule Policy Year 1 2 3 4 5 6 Surrender Charge 9% 8% 7% 6% 5% 4% Page 11 Page 4
Premium is Guaranteed Principal is 100% guaranteed. Regardless of economic fluctuations at home or abroad, we guarantee that your client or the beneficiary will never receive less than total premium payments, less any withdrawals or loans taken. This is a guarantee that many other investments cannot provide. No Market Value Adjustment (MVA) Industry studies continue to confirm that fixed annuity buyers are generally risk averse and prefer not to expose all of their retirement savings to the volatility of the equities markets. The Secured Rate Annuity uses no Market Value Adjustment, unlike many multi-year guarantee annuities. MVAs generally adjust an account s value to increase or lessen the amount payable each time a withdrawal or surrender occurs during the surrender-charge period. Because the SRA does not use an MVA, accessing funds becomes a transparent and consumer-friendly process that is easy for the policyowner to understand and easy for you to market. Innovative Bailout Guarantee (SRA 1 Only) The SRA 1 provides an innovative bailout guarantee. If future market conditions dictate that The Standard cannot perform within the interest-rate parameters defined when the contract was established, your client can make withdrawals or transfers even surrender the policy without a surrender fee. No questions asked. The examples below show how the SRA 1 bailout provisions work for your clients: The bailout interest rate for policy years one through five on the SRA 1 equals the first year guaranteed interest rate minus 1.00%. The bailout interest rate for policy year six equals the first year guaranteed interest rate minus 2.00%. Additional Premiums Once an SRA is established, your client may pay additional premiums during the first 90 contract days. Any additional premiums received will be credited with the current interest rate in effect at the time of the payment, unless the additional premium results from a transfer, rollover or exchange request that is subject to the 60-day interest-rate lock. Issue Ages The maximum annuitant issue age for the Secured Rate Annuity is 85. Commissions SRA 1 Broker level first-year commissions are 3.75% for issue ages 80 and under and 1.85% for issue ages 81 through 85. SRA 3 Broker level first-year commissions are 2.00% for issue ages 80 and under and 1.00% for issue ages 81-85. SRA 5 Broker level first-year commissions are 3.00% for issue ages 80 and under and 1.50% for issue ages 81 through 85. SRA 6 Broker level first-year commissions are 3.00% for issue ages 80 and under and 1.50% for issue ages 81 through 85. With premium of $250,000 or more, broker level first-year commissions are 2.00% for ages 80 and under and 1.00% for issue ages 81 through 85. Commission Chargeback 100% of commission will be recaptured on SRAs surrendered during the first six contract months. Fifty percent of commission will be recaptured on SRAs surrendered between the sixth and twelfth contract months. There is no chargeback on death of the annuitant. Page 5 Page 10
At A Glance Interest Rate Guarantee SRA 1 Initial interest rate is guaranteed for one policy year and includes 1.00% in additional interest during the first contract year that is not included in subsequent years renewal rates. SRA 3 Initial interest rate is guaranteed for three policy years. SRA 5 Initial interest rate is guaranteed for five policy years. SRA 6 Initial interest rate is guaranteed for six policy years. 60-Day Interest Rate Lock The SRA has a 60-day interest rate lock that holds the rate from the time the application is received for 60 days on any rollover, transfer or exchange. If the funds are received within the 60-day window, the client will receive either the held interest rate or the current interest rate, whichever is greater. Minimum Initial Premium $15,000 is the minimum initial premium necessary to establish the policy. Maximum Initial Premium SRA 1 Example: 5.25% guaranteed for year one and including 1.00% first-year bonus SRA 1 Surrender Schedule Policy Year 2 3 4 5 6 Bailout Rate 4.25% 4.25% 4.25% 4.25% 3.25% In the example above, if the interest rate credited in contract years two through six is lower than the corresponding bailout rate for that year, then your client may make withdrawals, transfers or surrender the contract without surrender charges. Please note that the SRA 3, SRA 5 and SRA 6 do not provide a bailout interest rate provision because the initial interest rate is guaranteed for the length of the surrender charge schedule. Rewards for Your Client s Long-Term Savings Commitment Only the SRA 3 features an annuitization bonus that rewards your client s election of a Standard Insurance Company income option. After the fourth year, if your client chooses an income option with The Standard, the payments received will be based on an additional 2.00% added to the annuity s current value upon annuitization. Your client must choose either a Lifetime Income option or a Period Certain option of five years or longer to receive this benefit. $1,000,000 is the maximum initial premium allowed for establishing an SRA. However, higher amounts may be permitted with the prior approval of The Standard s home office. Page 9 Page 6
Close-up: SRA 3 Annuitization Bonus The example below shows how the annuitization bonus benefits your customers, using the following assumptions: (1) $100,000 premium guaranteed at 4.00% for three years, (2) 4.00% assumed for year four (for illustration purposes only), (3) five-year Period Certain income option elected at the end of the fourth contract year, and (4) contractual minimum guaranteed rate of 1.50%. End of Account Cumulative Annual Year Value Return Yield 1 $104,000 4.00% 4.00% 2 $108,160 8.16% 4.00% 3 $112,486 12.49% 4.00% 4 $116,986 16.99% 4.00% Five-Year Period Certain without 2.00% bonus Value $116,986 Annual Payment $24,099.09 Five-Year Period Certain with 2.00% bonus Value $119,326 Annual Payment $24,581.07 Only the SRA 1 features an innovative persistency bonus that rewards your client s commitment to a long-term retirement savings strategy. At the end of the seventh contract year, your client will receive a persistency bonus credited to the contract as interest equal to 1.00% of the premium, minus any prior withdrawals. Then, at every policy anniversary afterward, your client will be rewarded with a bonus equal to 0.25% of the premium, minus any prior withdrawals. Close-up: SRA 1 Persistency Bonus The example below shows how the persistency bonus benefits your customers, using the following assumptions: (1) $100,000 premium guaranteed at 5.25% for one year, (2) 4.25% assumed for subsequent sixth and seventh years (for illustration purposes only). End of Account Cumulative Annual Year Value Return Yield 1 $105,250 5.25% 5.25% 2 $109,723 9.72% 4.25% 3 $114,386 14.39% 4.25% 4 $119,248 19.25% 4.25% 5 $124,316 24.32% 4.25% 6 $129,599 29.60% 4.25% Before: 7 $135,107 35.11% 4.25% + $1,000 + 1.00% Persistency With Bonus: 7 $136,107 36.11% 5.02% The SRA 1 persistency bonus is our way of thanking your clients (and you) for committing to a long-term savings program with The Standard. At the end of the seventh contract year and each subsequent year the SRA 1 rewards your clients for maintaining a financial plan that you helped them establish. Substantially Equal Periodic Payments 72(t) and 72(q) The Secured Rate Annuity allows your client to select the Substantially Equal Periodic Payments (SEPP) option, which allows early retirement income without early retirement penalties. SEPP is an ideal option for clients who want to retire before the age of 59½ without incurring the 10% early withdrawal penalty linked to such plans such as Traditional IRAs, pension or profit sharing plans, or 403(b) Tax-Sheltered Annuities. The SRA s SEPP allows for penalty-free withdrawals from many annuities too! Page 7 Page 8