[Federal Register Volume 60, Number 76 (Thursday, April 20, 1995)]
[Notices]
[Pages 19794-19796]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-9842]



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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21010; File No. 812-9226]


Great-West Life & Annuity Insurance Company, et al.

April 14, 1995.
AGENCY: U.S. Securities and Exchange Commission (``SEC'' or 
``Commission'').

ACTION: Notice of Application for Exemption under the Investment 
Company Act of 1940 (the ``Act'').

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APPLICANTS: Great-West Life & Annuity Insurance Company (the 
``Company''), The Great-West Life Assurance Company (``GWLAC''), and 
Retirement Plan Series Account (the ``Separate Account'').

RELEVANT ACT SECTIONS: Order requested under Section 6(c) for 
exemptions from Sections 26(a)(2)(C) and 27(c)(2) of the Act.

SUMMARY OF APPLICATION: Applicants request exemptions from Sections 
26(a)(2)(C) and 27(c)(2) of the Act to the extent necessary to permit 
the Company to deduct from the Separate Account the mortality and 
expense risk charge imposed under (1) flexible premium deferred 
individual variable annuity contracts (``Contracts'') and (2) any other 
variable annuity contracts offered by the Company and made available 
through the Separate Account or through any other similar separate 
account(s) established by the Company, whether currently existing or 
hereafter created (``Other Separate Accounts''), which are 
substantially similar in all material [[Page 19795]] respects (``Future 
Contracts''). Applicants also request that the relief be extended to 
any other broker-dealer, whether currently existing or hereafter 
created, which may serve in the future as principal underwriter of 
Contracts or Future Contracts.

FILING DATE: The Application was filed on September 13, 1994 and 
amended on February 23, 1995 and March 21, 1995.

HEARING OR NOTIFICATION OF HEARING: An order granting the Application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
Applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on May 9, 1995, and 
should be accompanied by proof of service on Applicants in the form of 
an affidavit or, for lawyers, a certificate of service. Hearing 
requests should state the nature of the writer's interest, the reason 
for the request, and the issues contested. Persons who wish to be 
notified of a hearing may request notification by writing to the SEC's 
Secretary.

ADDRESSES: SEC, Secretary, 450 Fifth Street, NW., Washington, DC 20549. 
Applicants, c/o Jorden Burt & Berenson, 1025 Thomas Jefferson Street, 
NW., suite 400 East, Washington, DC 20007.

FOR FURTHER INFORMATION CONTACT:
Edward P. Macdonald, Staff Attorney, or Wendy Friedlander, Deputy 
Chief, at (202) 942-0670, Office of Insurance Products, Division of 
Investment Management.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
Application. The complete Application may be obtained for a fee from 
the SEC's Public Reference Branch.

Applicants' Representations

    1. The Company is a stock life insurance company initially 
organized under the laws of the State of Kansas. In 1990, the Company 
redomesticated and is now organized under the laws of the State of 
Colorado. The Company, a wholly-owned subsidiary of the GWLAC, is 
qualified to do business in 49 states and the District of Columbia.
    2. GWLAC, a life insurance company organized under the laws of 
Canada, will be the principal underwriter with respect to the 
Contracts. GWLAC is registered with the Commission under the Securities 
Exchange Act of 1934 as a broker-dealer and is a member of the National 
Association of Securities Dealers, Inc.
    3. The Separate Account was established under the laws of the State 
of Colorado on January 25, 1994, as a funding vehicle for the Contracts 
and is registered under the Act as a unit investment trust. The 
Separate Account initially will have twelve investment divisions 
(``Divisions'') available for allocation of contributions by 
contractowners (``Owners''). Each Division invests solely in a 
corresponding portfolio of Maxim Series Fund, Inc., an open-end 
management investment company registered under the Act. The shares of 
each portfolio may also be offered to other Separate Accounts.
    4. Interests under the Contracts are registered under the 
Securities Act of 1933. The Contracts will receive favorable tax 
treatment under Section 408(b) of the Internal Revenue Code (``Code'') 
as individual retirement annuities and will be available for an initial 
contribution of at least $3,500 rolled-over from retirement plans which 
qualify under Section 401(k) of the Code. Additional contributions may 
be made in amounts of at least $250. The Contracts provide that 
contributions can accumulate on a variable basis, a guaranteed basis, 
or on a combination of both. The Contracts also will offer several 
annuity options payable on a variable basis, a fixed basis, or on a 
combination of both.
    5. The Company will not impose a sales charge or a Contract 
maintenance charge in connection with the Contracts.
    6. A $50 charge will be imposed on any Contract surrendered in 
whole during the first 12 months after issue, excluding the ``free 
look'' period. A $25 charge will be imposed on any Contract surrendered 
in part during the first 12 months after issue. These charges reflect 
the actual expenses associated with such surrenders which the company 
expects to incur and would be assessed in reliance on Rule 269-1 under 
the Act.\1\

    \1\The Applicants represent that they will amend the application 
during the notice period to include this representation.
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    7. At any time prior to the annuity commencement date, Owners may 
make unlimited transfers between Divisions. The Company does not charge 
any fee for these transfers.
    8. The Company may make a deduction for premium taxes imposed by 
states or other governmental entities, either (i) when a surrender or 
cancellation occurs, or (ii) at the annuity commencement date. 
Currently, these taxes range up to 2.5%.
    9. The Company will impose a mortality and expense risk charge of 
up to .75% as compensation for bearing certain mortality and expense 
risks assumed under the Contracts. Contracts having a balance of: (1) 
$0 to $9,999.99 will be subject to a mortality and expense risk charge 
equal to .75%; (2) $10,000 to $24,999.99 will be subject to a mortality 
and expense risk charge equal to .50%; and (3) $25,000 to $49,999.99 
will be subject to a mortality and expense risk charge equal to .25%. 
No mortality and expense risk charge will be imposed for an account 
balance of $50,000 or greater. The levels of these charges are 
guaranteed and will not be increased. Of the amounts charged for 
mortality and expense risk, where the total charge is: (1) .75%: 0.60% 
is a mortality risk charge and 0.15% is an expense risk charge; (2) 
.50%: 0.40% is a mortality risk charge and 0.10% is an expense risk 
charge; and (3) .25%: 0.20% is a mortality risk charge and 0.05% is an 
expense risk charge.
    10. These annual charges will be assessed daily and will be based 
on the assets of the Separate Account. The level of the mortality and 
expense risk charge applicable to the Contract during the first 
calendar year will be based upon the initial account balance of the 
Contract. The initial account balance used to determine the appropriate 
mortality and expense risk charge level will include both fixed and 
variable money; however, the charge will only apply to the variable 
portion.
    11. The level of mortality and expense risk charge applicable in 
subsequent calendar years will be based upon the account balance of the 
Contract as of December 31 of the previous calendar year.
    12. The mortality risk to be borne by the Company under the 
Contracts arises from its obligations to make annuity payments, in the 
case where the life annuity is selected, regardless of how long an 
annuitant may live. The mortality risk under the Contracts, where a 
life annuity with a life contingency is selected, is the risk that 
annuitants will live longer than the Company's actuarial projections 
indicate resulting in higher than expected annuity payments.
    13. The expense risk to be borne by the Company under the Contracts 
is the risk that the actual administrative expenses incurred in 
connection with the Contracts may exceed the anticipated administrative 
expenses.

Applicants' Legal Analysis

    1. Section 6(c) of the Act authorizes the Commission to grant an 
exemption from any provision, rule or regulation of the Act to the 
extent that it is necessary or appropriate in the public interest and 
consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of [[Page 19796]] the Act. 
Sections 26(a)(2)(C) and 27(c)(2) of the Act, in relevant part, 
prohibit a registered unit investment trust, its depositor or principal 
underwriter, from selling periodic payment plan certificates unless the 
proceeds of all payments, other than sales loads, are deposited with a 
qualified bank and held under arrangements which prohibit any payment 
to the depositor or principal underwriter except a reasonable fee, as 
the Commission may prescribe, for performing bookkeeping and other 
administrative duties normally performed by the bank itself.
    2. Applicants request exemptions from Sections 26(a)(2)(C) and 
27(c)(2) of the Act to the extent necessary to permit the deduction of 
a charge up to .75% from (i) the assets of the Separate Account with 
respect to the Contracts and Future Contracts and (ii) from the assets 
of Other Separate Accounts in connection with Future Contracts, to 
compensate the Company for the assumption of mortality and expense 
risks. In addition, Applicants also request that the exemptive relief 
requested extend to any other broker-dealer, whether currently existing 
or hereinafter created, which may serve in the future as principal 
underwriter of Contracts or Future Contracts. Applicants assert that 
the requested exemptions are necessary and appropriate in the public 
interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the Act.
    3. With respect to the level of the mortality and expense risk 
charge, Applicants hereby represent that they have reviewed publicly 
available information regarding the aggregate level of mortality and 
expense risk charges under variable annuity contracts comparable to the 
Contracts currently being offered in the insurance industry, taking 
into consideration such factors as current charge levels, the manner in 
which charges are imposed, the presence of charge level or annuity rate 
guarantees and the markets in which the Contracts will be offered. 
Based upon the foregoing, Applicants further represent that the 
mortality and expense risk charge contemplated under the Contracts are 
within the range of industry practice for comparable contracts. 
Applicants will maintain at their principal office and will make 
available to the Commission upon request a memorandum setting forth in 
detail the products analyzed in the course of, and the methodology and 
results of, the comparative survey.
    4. Similarly, prior to issuing any Future Contracts, Applicants 
will represent that the mortality and expense charges under any Future 
Contracts will be within the range of industry practice for comparable 
contracts. Applicants will maintain at their principal office and will 
make available to the Commission upon request a memorandum setting 
forth in detail the products analyzed in the course of, and the 
methodology and results of, the comparative survey.
    5. Applicants acknowledge that, if a profit is realized from the 
mortality and expense risk charge, all or a portion of such profit may 
be available for any lawful purpose including shortfalls in the costs 
of distributing the Contracts. The Company represents that there is a 
reasonable likelihood that the proposed distribution financing 
arrangements will benefit the Separate Account and Owners. The Company 
represents that the basis for that conclusion is set forth in a 
memorandum which will be maintained at its home office and will be 
available to the Commission upon request.
    6. Applicants further represent that the Separate Account, and any 
Other Separate Accounts, will only invest in underlying funds which 
have undertaken to have a board of directors/trustees, a majority of 
whom are not interested persons of any such fund, formulate and approve 
any plan under Rule 12b-1 under the Act to finance distribution 
expenses.
    7. Applicants assert that extending relief to Future Contracts, 
Other Separate Accounts, and any other broker-dealer, whether currently 
existing or hereinafter created, which may serve in the future as 
principal underwriter of Contracts or Future Contracts is appropriate 
in the public interest because it would promote competitiveness in the 
variable annuity market by eliminating the need for the Company to file 
redundant exemptive applications, thereby reducing administrative 
expenses and maximizing the efficient use of its resources. The delay 
and expense involved in having to repeatedly seek exemptive relief 
would impair the Company's ability to effectively take advantage of 
business opportunities as they arise. If the Company were repeatedly 
required to seek exemptive relief with respect to the same issues 
addressed in the Application, investors would not receive any 
additional benefit or protection. Therefore, Applicants believe that 
the requested exemptions are appropriate in the public interest and 
consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of the Act.

Conclusion

    For the reasons set forth above, Applicants represent that the 
exemptions requested are necessary and appropriate in the public 
interest and consistent with the protection of investors and purposes 
fairly intended by the policy and provisions of the Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-9842 Filed 4-19-95; 8:45 am]
BILLING CODE 8010-01-M