Deferred Annuity General Overview

Transcription

1 Deferred Annuity General Overview Updated March 16, 2018

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3 INDEX: General annuity overview Page 4 Interest Accumulation on GCU Annuities Page 8 Option A annuity Page 10 One Plus Four annuity Page 12 Triple Advantage PLUS annuity Page 15 Five Year Advantage annuity Page 17 FLEX 8 annuity Page 20 Annuity Application Page 23 Annuity Disclosure Forms Page 27 Assignment of Certificate / Withdrawals on Contracts Page 29 Authorization for Withdrawal from Flexible Annuity Page 32 Coverdell Educational Savings Accounts Page 33 IRA Disclosures Qualified Plans Page 40 Traditional IRA Disclosures & Issues Page 41 Required Minimum Distribution - Traditional IRAs Page 43 Minor Annuitants Page Exchanges Page 45 Election Settlement Option Form Page 46 Requests for Systematic Withdrawals Page 47 Direct Deposit Authorization Page 49 2

4 INDEX (continued): Direct Debit Authorization Page 50 Delivery Receipts & Requests for Duplicate Contracts Page 51 Transferring Qualified Funds, CDs or Investment Accounts Page 52 Replacement of Existing Annuity & Life Contracts Page 54 Suitability Page 55 W-4P (Tax Withholding) Page 56 Death Claims Page 57 Power of Attorney Page 58 DOL Qualified Annuity Disclosure Rule Page 59 3

5 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 PLUS 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. Please be aware that in cases where a benefit is not contractual, but is by Board Decree, those benefits could be discontinued in the future on a go forward basis. However, contract sold at the time that these benefits were still in effect will NEVER lose that benefit, and GCU will honor it for the life of the contract. 4

6 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. (In these cases, the primary annuitant on the Joint and Survivor SPIA is the GCU Member.) 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 singleowner contract prior to being transferred to GCU. Existing contracts need to transfer (1035 Exchange) to GCU on a like to like basis. GCU membership is extended ONLY to the annuitant/insured, and never to any assignee (owner). 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 1/1/18, the GCU has imposed maximum contributions of $200,000, COMBINED, for deposit (per calendar year) into the Option A, 1+4, and 3 Year contracts. An annuitant who puts $200,000 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. Five Year Advantage and Flex 8 Non Qualified Accounts Five Year Advantage: $500,000 Flex 8: $1,000,000 5

7 Five Year Advantage and Flex 8 Qualified Accounts (Traditional IRA, Simple, SEP) Effective 1/1/16, 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. 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. If the annuitant will be 70 ½ by 12/31 of the year that the contract is written, an acceptance OR rejection of the GCU Automated RMD Program must be indicated via the appropriate form. 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. 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. 6

8 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. All GCU Annuity Application Kits, Life Insurance Application Kits, Supplemental Sales and Service forms, and other resources are available at your GCU Agent Portal. 7

9 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. 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,

10 *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, 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 via a Direct Deposit Authorization Form. No systematic withdrawal requests will be processed unless accompanied by the direct deposit information. 9

11 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. 10

12 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 7 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 - ALL AGES f. W Upon the death of the annuitant, Option A s may NOT be continued by the spouse, if living. 11

13 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 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 and W-9.) 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. 12

14 Additional Deposits: Currently, the maximum dollar amount of deposits into a new One Plus Four contract is $200,000 per person, per calendar year. This maximum applies per person regardless of the number of contracts in force. You MAY seek approval from the Home Office for deposits in excess of the current limits. One Plus Four contracts that have continued into the remaining four years are currently permitted to add additional deposits up to $200,000 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. 13

15 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. 9. Clients who continue for the remaining four years: ANY withdrawal made during the 30 day window WILL count against their 10% surrender charge free withdrawal amount for year 2 of the contract. 14

16 Triple Advantage PLUS 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. 15

17 Key Points for the Triple Advantage PLUS 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. 16

18 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%). 1 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. 2 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. 1 This waiver is currently provided by resolution of the GCU Board of Directors, is not contractual, and may be discontinued at any time. 2 This waiver is currently provided by resolution of the GCU Board of Directors, is not contractual, and may be discontinued at any time. 17

19 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. 18

20 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 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. 19

21 FLEX 8 Annuity An 8 Year Deferred Annuity with liquidity features from day one! Issue Ages: 0 80 Minimum Guaranteed Rate: Minimum Initial Deposit: $300 Initial Rate Guarantee Period: One Year 2.75% Additional Deposits are Eligible for Qualified Plans: Yes permitted. 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 2.75%. 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. 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. 20

22 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 2.75% 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. 21

23 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 2.75%! 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. Crediting rate CAN increase in months 13 to 96 based on the new issue rate for the Flex 8 Contract! c. Immediate liquidity features d. Long Term Care Waiver e. Terminal Illness Waiver 6. Maximum Deposits (combined with any existing Five Year Advantage) a. Non Qualified: $1,000,000 b. Qualified Plans: No limit. 7. This is an EXCELLENT income planning tool. Consider that a client can be GUARANTEED a MINIMUM payout rate of 2.75%, with the possibility of an even higher rate, with NO reduction in principal via interest only systematic withdrawals. Compared to an Index Annuity Plan, there are ZERO fees. 22

24 Annuity Application To be used for: Option A One Plus Four Triple Advantage PLUS Five Year Advantage Flex 8 A basic application kit (Other than Option A, Non-Qualified Funds, Not a Transfer or 1035) The Annuity Application The appropriate disclosure form Suitability Form On the Application: Front Page All information needs to be completed. The GCU cannot add or alter information. 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 23

25 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. LEGAL name (do not use nicknames) ii. Relationship to Annuitant iii. Social Security Number iv. 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. 24

26 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 PLUS 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. 25

27 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. 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. Agent s Report MUST be completed on each application. In particular, please note number 4: I have verified the Proposed Insured s identity by viewing the individual s photograph on a driver s license, passport, or other official document Under the Know Your Customer requirements of the Anti-Money Laundering Laws, it is IMPERATIVE that you verify the identity of your prospective client. If the answer to item 4 is no, the application will be rejected by GCU. 26

28 One Plus Four. Form: DISC Annuity Disclosure Forms Triple Advantage PLUS. 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 W-9 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: The current new issue crediting rate as declared by the GCU Board of Directors. 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. 27

29 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. 28

30 Assignment of Certificate and Authorization for Changes or Withdrawals on Assigned Contracts 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 29

31 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. 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. 30

32 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 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,

33 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. 32

34 Coverdell Educational Savings Accounts All of the rules, etc, for the Coverdell Plan can be seen at the government s IRS website: 1. Coverdell plans are a great way to save for college and, with proper usage, provide for tax free earnings if the account is used for qualified expenditures. 2. A client MAY have a Coverdell in addition to a 529 plan. 3. The following contracts may be used for a Coverdell ESA: a. Flex 8 b. Five Year Advantage c. Triple Advantage PLUS d. One Plus Four 4. Application Process a. Deferred Annuity App with child named as the annuitant. b. Disclosure form appropriate to the contract chosen. c. IRS Form 5305-EA i. Name of depositor = the person opening the account for the child ii. iii. Designated beneficiary is the child Name of responsible individual 1. MUST be the child s parent or legal guardian. 2. Can t be the grandparent, etc., even if they are the ones opening the account. In that case, the grandparent is the depositor, and the child s parent or guardian is the responsible party. iv. The depositor assigned the custodial account 1. This is the amount they are opening the account with. 2. Minimum for all GCU Contracts is $ Maximum deposit into a Coverdell is $2,000 (income levels permitting) 4. Contributions to a Coverdell ESA are NOT tax deductible. v. Article VI: be sure to check if the Responsible Party may, or may not, change the beneficiary designation. vi. Signatures 1. Depositor: person who opened the account. 2. Custodian: the Responsible party (parent or guardian) 3. Witness: the agent 5. We have prepared a 3 page FAQ and a 1 page summary for the Coverdell. You should give a copy of these to your client. 33

35 Coverdell Educational Savings Accounts FAQ This Disclosure is modified according to IRS Notice and revised according to EGTRRA EDUCATION IRA s Beginning January 1, 2001, taxpayers may deposit up to $2,000 per year into an Education IRA for a child under age 18. Parents, grandparents, other family members, friends, and a child him/herself may contribute to the child s Education IRA, provided that the total contributions for the child during the taxable year do not exceed the $2,000 limit. Amounts deposited in the account grow tax-free until distributed, and the child will not owe tax on any withdrawal from the account if the child s qualified higher education expense at an eligible educational institution for the year equal or exceed the amount of the withdrawal. If the child does not need the money for postsecondary education, the account balance can be rolled over to the Education IRA of certain family members who can use it for their higher education. Amounts withdrawn from an Education IRA that exceeds the child s qualified higher education expenses in a taxable year are generally subject to income tax and to an additional tax of 10 percent. The Hope Scholarship Credit and Lifetime Learning Credit may not be claimed for a student s expenses in a taxable year in which the student takes a tax-free withdrawal from an Educational IRA. Q1: What is an Education IRA? A1: An Education IRA is a trust or custodial account that is created or organized in the United States exclusively for the purpose of paying the qualified higher education expenses of the designated beneficiary of the account. The account must be designated as an Education IRA when it is created in order to be treated as an Education IRA for tax purposes. Q2: For whom may an Education IRA be established? A2: An Education IRA may be established for the benefit of anyone under age 18. Contributions to the Education IRA will not be accepted after the designated beneficiary reaches his/her 18 th birthday, except when the designated beneficiary has a need for a necessary special education, then contributions may be made beyond 18. Q3: Where may an individual open an Education IRA? A3: An individual may open an Education IRA with any bank, or other entity that has been approved to service as a nonbank trustee or custodian of an individual retirement account (IRA), and the bank or entity is offering Education IRA s. Other entities that wish to offer Education IRA s but are not approved to service as IRA trustees or custodians may seek approval by following the same IRS procedures used for approval of other IRA nonbank trustees. See Notice 97-57, I.R.B. (October 27, 1997). Q4: When may a taxpayer start contributing to an education IRA for a child? A4: A taxpayer may start making contributions on January 1, 1998, or anytime thereafter. 34

36 Q5: How much may be contributed to a child s education IRA? A5: Up to $2,000 per year in aggregate contributions may be made for the benefit of any child. The contributions beginning on and after January 1, 2002 may be placed in a single Education IRA or into multiple Education IRA s. Q6: What happens if more than $2,000 is contributed to an Education IRA on behalf of a child in a calendar year? A6: Aggregate contributions for the benefit of a particular child in excess of $2,000 for a calendar year are treated as excess contributions. If the excess contributions (and any earnings attributable to them) are not withdrawn from the child s account (or accounts) before June 1, the excess contributions are subject to a 6 percent excise tax for each year the excess amount remains in the account. Q7: May contributions other than cash be made to a child s Education IRA? A7: No. Education IRA s are permitted to accept contributions made in cash only. Q8: May contributors take a deduction for contributions made to an Education IRA? A8: No. Q9: Are there any restrictions on who can contribute to an Education IRA? A9: Any individual may contribute up to $2,000 to a child s Education IRA if the individual s modified adjusted gross income for the taxable year is no more than $95,000 adjusted ($190,000 adjusted for married taxpayers filing jointly). (See Sec. 1, Q&A6 for a description of modified adjusted gross income.) The $2,000 maximum contribution per child is gradually reduced for individuals with modified adjusted gross income between $95,000 and $110,000 (between $190,000 and $220,000 for married taxpayers filing jointly). For example, an unmarried taxpayer with modified adjusted gross income of $96,500 in a taxable year could make a maximum contribution per child of $1,800 for that year. Taxpayers with modified adjusted gross income above $110,000 ($220,000 for married taxpayers filing jointly) cannot make contributions to anyone s Education IRA. Q10: May a child contribute to his/her own Education IRA? A10: Yes Q11: Does a taxpayer have to be related to the designated beneficiary in order to contribute to the designated beneficiary s Education IRA? A11: No Q12: How many Education IRAs may a child have? A12: There is no limit on the number of Education IRAs that may be established designating a particular child beneficiary. However, in any given taxable year the total aggregate contributions to all the accounts designating a particular child as beneficiary may not exceed $2,

37 Q13: May a designated beneficiary take a tax-free withdrawal from an Education IRA to pay qualified higher education expenses if the designated beneficiary is enrolled less than full-time at an eligible educational institution? A13: Yes. Whether the designated beneficiary is enrolled full-time, half-time, or less than halftime, he/she may take a tax-free withdrawal to pay qualified higher education expenses. Q14: What happens when a designated beneficiary withdraws assets from an Education IRA to pay for qualified education? A14: Generally, the withdrawal is tax-free to the designated beneficiary to the extent the amount of the withdrawal does not exceed the designated beneficiary s qualified education expenses. Q15: What are qualified education expenses? A15: Qualified education expenses include (1) qualified elementary and secondary education expenses (as described in (1) below), and (2) qualified higher education expenses as described in (2) below). Qualified education expenses also include any contribution to a qualified tuition program (529 Plan) on behalf of the beneficiary. (1) Qualified elementary and secondary education expenses. Qualified elementary and secondary education expenses are expenses for tuition, fees, academic tutoring, special needs services in the case of a special needs beneficiary, books, supplies, and other equipment incurred in connection with the enrollment or attendance of the beneficiary as an elementary or secondary school student at a public, private, or religious school. ( School means any school that provides elementary or secondary education [kindergarten through grade 12] as determined under state law.) Qualified elementary and secondary education expenses also include expenses for room and board, uniforms, transportation and supplementary items and services (including extended day programs) that are required or provided by a public, private, or religious school in connection with enrollment or attendance. Expenses for the purchase of any computer technology or equipment, or to pay for internet access and related services, are considered qualified education expenses if such technology, equipment, or services are to be used by the beneficiary and the beneficiary s family during any of the years the beneficiary is in school. Such expenses do not include the cost of computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature. (2) Qualified higher education expenses. Qualified higher education expenses are expenses for tuition, fees, special needs services in the case of a special needs student, books, supplies and equipment required for the enrollment or attendance of the beneficiary at an eligible educational institution. Qualified higher education expenses also include reasonable room and board costs if the beneficiary is at least a half-time student at an eligible educational institution. Room and board costs are generally limited to the allowance for room and board included in the cost of attendance as determined by the institution. For students living in housing owned and operated by the eligible educational institution, the actual invoice amount the beneficiary is charged by the eligible educational 36

38 institution for room and board will be includible as qualified education expenses if that amount is greater that the allowance described above. A beneficiary will be considered to be enrolled at least half-time if the beneficiary is enrolled for at least the full-time academic workload for the course of study the beneficiary is pursuing as determined under the standards of the institution where the beneficiary is enrolled. The institution s standard for a full-time workload must equal or exceed the standards established by the Department of Education under the Higher Education Act of Q16: What is an eligible educational institution for purposes of qualified higher education expenses? A16: An eligible educational institution is any college, university, vocational school, or other post secondary educational institution described in section 481 of the Higher Education Act of 1965 and which is eligible to participate in the student aid programs administered by the Department of Education. This category includes virtually all accredited public, nonprofit, and proprietary postsecondary institutions. (The same eligibility requirements for institutions apply for the Hope Scholarship Credit, the Lifetime Learning Credit, and early withdrawals from IRAs for qualified higher education expenses.) The educational institution should be able to tell you if it is an eligible educational institution. Q17: What happens if a designated beneficiary withdraws an amount from an Education IRA but does not have any qualified higher education expenses to pay in the taxable year he/she makes the withdrawal? A17: Generally, if a designated beneficiary withdraws an amount from an Education IRA and does not have any qualified higher education expenses during the taxable year, a portion of the distribution is taxable. The taxable portion is the portion that represents earnings that have accumulated tax-free in the account. The taxable portion of the distribution is also subject to a 10 percent additional tax unless an exception applies. Q18: Is a distribution from an Education IRA taxable if the distribution is contributed to another Education IRA? A18: Any amount distributed from an Education IRA and rolled over to another Education IRA for the benefit of the same designated beneficiary or certain members of the designated beneficiary s family is not taxable. An amount is rolled over if it is paid to another Education IRA on a date within 60 days after the date of the distribution. Members of the designated beneficiary s family include the designated beneficiary s children and their descendants, stepchildren and their descendants, siblings and their children, parents and grandparents, stepparents, and spouses of all the foregoing. The $2,000 annual contribution limit to Education IRAs does not apply to these rollover contributions. For example, an older brother who has $2,000 left in his Education IRA after he graduates from college can roll over the full $2,000 balance to an Education IRA for his younger sister who is still in high school without paying any tax on the transfer. 37

39 Q19: What happens to the assets remaining in an Education IRA after the designated beneficiary finishes his/her education? A19: There are two options. The amount remaining in the account may be withdrawn for the designated beneficiary. The designated beneficiary will be subject to both income tax and the additional 10 percent tax on the portion of the amount withdrawn that represents earnings if the designated beneficiary does not have any qualified higher education expenses in the same taxable year he/she makes the withdrawal. Alternatively, if the amount in the designated beneficiary s Education IRA is withdrawn and rolled over (as described in Q&A 18 of this section) to another Education IRA for the benefit of a member of the designated beneficiary s family, the amount rolled over will not be taxable. Q20: Rather than rolling over money from one Education IRA to another, may the designated beneficiary of the account be changed from one child to another without triggering a tax? A20: Yes, provided: (1) the terms of the particular trust or custodial account permit a change in designated beneficiaries (each trustee or custodian will control whether options like this one are available in the accounts they offer), and (2) the new designated beneficiary is a member of the previous designated beneficiary s family. (See Q&A 18 in this section). Q21: May a beneficiary or his or her parents claim the Hope Scholarship Credit or Lifetime Learning Credit for the beneficiary s expenses in a taxable year in which the beneficiary received money from an education savings account on a tax-free basis? A21: Yes. For more information about the Hope Scholarship Credit and the Lifetime Learning Credit, see IRS Publication 970, Tax Benefits for Education. Q22: May contributions be made to both a qualified state tuition program and an Education IRA on behalf of the same designated beneficiary in the same taxable year? A22: Yes. Contributions can be made to a qualified tuition program (QTP) and ESA in the same year for the same beneficiary. 38

40 Coverdell Educational Savings Accounts Summary MAXIMUM NON-DEDUCTIBLE CONTRIBUTION $2,000 per year per child of all contributions combined. Contributions are NOT tax deductible. ADJUSTED GROSS INCOME PHASE OUT RANGE Single = $95,000 to $110,000 Married Filing Jointly = $190,000 to $220,000 QUALIFIED EDUCATIONAL INSTITUTION Includes qualified elementary and secondary schools, private, public, and religious schools as well as special-needs education. QUALIFIED EXPENSES Includes tuition, room and board, fees, books, supplies, computer and related technology equipment required for the designated beneficiary. AGE CONSIDERATION Contributions may be made for the designated beneficiary until they turn 18 years of age. Distributions and rollovers are permitted prior to age 30. Accounts may be contributed to after age 18 and continue after age 30 for special need education only. TIME FOR MAKING CONTRIBUTIONS Before April 15 th following the tax year. TIME FOR MAKING CORRECTIVE WITHDRAWALS Excess contributions are subject to a 6% penalty; excess withdrawal is subject to a 10% penalty. The penalties will NOT be imposed if corrected before June 1 after the tax year in which the excess was made. WHAT IF THE DESIGNATED BENEFICIARY DOESN T ATTEND COLLEGE? The authorized person (responsible party) can change the designated beneficiary to another eligible family member. He/she can also withdraw the fund and pay the 10% penalty, in addition to income tax, on the earnings portion of the withdrawal. TAX REPORTING Similar to an IRA, the annual contribution is reported to the IRS by using form 5498-ESA and annual statements to the authorized person. The custodian is to report any withdrawal with form 1099-Q. The beneficiary is responsible for any income tax to the IRS as part of their income tax return. We strongly encourage you to check with your CPA or attorney for more detailed explanations, if needed. 39

41 IRA Disclosures Qualified Plans Only the One Plus Four, Triple Advantage, Five Year Advantage, and Flex 8 may be used for qualified plans. Option A s are NOT permitted to be used for qualified plans. 1. The following qualified plans require an additional disclosure to be signed by the applicant and returned as part of the application kit: a. Coverdell Educational Savings Plans: IRS Form 5305-EA b. Roth IRA: The Roth IRA Disclosure Form i. Client keeps all of the disclosure pages ii. Signature page is to be returned with the application kit. c. Traditional IRA: The Traditional IRA Disclosure Form i. Client keeps all of the disclosure pages ii. Signature page is to be returned with the application kit. iii. Be sure to review upcoming section on Traditional IRA Disclosures. 2. The following qualified plans do not require an additional disclosure form relative to the type of plan: All require DOL form a. Simple IRA b. SEP IRA (IRS Form 5305-SEP should be filed with their tax accountant) c. Keogh d. TSA 3. For Traditional IRA Accounts a. If the annuitant will need to take an RMD for the tax year in which the account is transferred to GCU, every attempt should be made to get an account statement for the original account showing their account balance at the beginning of that tax year. 4. ANNUITANTS WHO WILL BE 70 ½ (or older) BY 12/31 OF THAT YEAR: a. Qualified contracts coming to GCU during the course of the year should have the RMD taken PRIOR to transferring to GCU. b. If the RMD is not taken, the annuitant will need to be sure to provide a statement showing the account balance as of 1/1 of that tax year. c. Clients have the option of participating in the GCU automated RMD program. Under this program: i. GCU will DIRECT DEPOSIT their RMD around the middle of November. NO OTHER dates may be elected for this automated process. ii. Any withdrawals made during the year and prior to the automated withdrawal will be calculated against that year s RMD total withdrawal that would be required. d. Clients who DO NOT wish to participate in the automated RMD program MUST complete a RMD waiver form indicating that they have been advised of the program and have chosen not to participate. The burden of taking the RMD will fall upon the agent and the client. 40

42 Traditional IRA Disclosure and Issues The signature page indicating receipt of the Traditional IRA Disclosure also contains several questions that need to be answered by the proposed annuitant. These questions are very important if the annuitant will need to take an RMD during the year in which the account comes to GCU. Annuitants MAY sign up for the GCU RMD program so that they can be sure to receive their RMD s each year. It is the ANNUITANT S responsibility to be sure they take the necessary RMD s from their account or accounts each year. Failure to properly take an RMD will have sizeable penalties imposed by the IRS upon the annuitant. Will the Annuitant be 70 ½ by the end of this particular contract year? What we are looking for here are those individuals who would be facing their first year where and RMD (Required Minimum Distribution) would need to take place, due to the fact that by 12/31 of that tax year, they would be at least 70 ½ years old. If the annuitant will be 70 ½ but not yet 71 on 12/31 of the tax year, they will have until April 1 st of the following year to take their first RMD. However, if they do this, they will still have a second RMD taken during that year. For example, the annuitant is 70 ½ on December 31, They wait until 2012 to take their first RMD for the 2011 tax year. They will still need to take their 2012 RMD BEFORE 12/31/12> Has the Annuitant taken any distributions from their IRA account this year? Whether it s the first year that the annuitant would be required to take their RMD, or if they ve already been taking RMD s in previous years, have they made any withdrawals during this tax year that would apply toward their RMD? It s important to know this so that, in case they have NOT taken any distributions, we can STRONGLY suggest that they sign up for our RMD program. Even if they ve taken some withdrawals, is it enough to cover their RMD? Does the Annuitant have any additional Traditional IRA s with other companies? The Annuitant s RMD will be determined by the TOTAL value of all of their accounts on January 1 st of each tax year. Some annuitants elect to take their TOTAL RMD from a particular account. In those cases, they would NOT want to register for GCU s RMD program. However, if/when that other account is depleted; they would need to notify us if they wished to begin receiving their RMD s from their GCU Account. 41

43 The following is EXTREMELY IMPORTANT for annuitants with multiple Traditional IRA s: 1. Annuitants in a GCU One Plus Four or Triple Advantage: a. We will permit the RMD from their account even during the first contract year without incurring a surrender charge (normally, surrender charges would apply to ANY withdrawal in these contracts first year). b. However, only the RMD relative to their account balance in their GCU account will be permitted to be withdrawn without surrender charge. The annuitant may NOT withdraw ALL of their RMD based on the total of all of their accounts. c. In subsequent contract years, where limited surrender charge free withdrawals are permitted, the RMD WILL count toward the permitted surrender charge free withdrawal percentage. The balance of the remaining surrender charge free permitted withdrawals COULD be used to satisfy other RMD s. 2. Annuitants in a GCU Five Year Advantage or Flex 8: a. Surrender charge free withdrawals are permitted in every year of these contracts. b. Again, though, the RMD will count toward the total surrender charge free permitted amount. If the Annuitant has additional Traditional IRA accounts with other companies, are they taking their RMD s from those accounts? Since it is the annuitant s responsibility, once they turn 70 ½, to take their RMD s each year, we want to be sure that they are making the proper arrangements. For those annuitants whose ONLY Traditional IRA is with GCU, or for annuitants with multiple Traditional IRA accounts that wish to have GCU process the RMD for their GCU account each year, we strongly encourage them to sign up for our RMD program. Some annuitants take monthly incomes from their accounts and need to be sure that the total taken within the tax year satisfies their RMD. Clients who decline to participate in the automated RMD program must complete a separate form indicating that they are electing to NOT participate. 42

44 Required Minimum Distribution Program For Traditional IRAs Any annuitant who holds a GCU Traditional IRA account may sign up for our RMD program beginning in the tax year in which they turn 70 ½, whether it s an existing account or one opened during that tax year. For these annuitants, they should complete the Required Minimum Distribution form. 1. If it s an existing GCU annuity, write in the certificate number on the form. 2. For new accounts being written where the RMD will be required that year, leave the annuity certificate number blank, and we will see that it s applied to the new account, once created. 3. Have the annuitant sign and date the form. a. Please take a moment to LEGIBLY print the annuitant s name under the signature line. 4. The Annuitant MUST elect whether or not they wish for GCU to withhold taxes from their RMD. a. The annuitant may change their withholding choice provided that GCU receives a new, complete RMD form by 10/31 of the tax year. Annuitants on the GCU RMD program will have their RMD processed and sent to them on or about the middle of November. There is NO exception to this, and the client may not participate in our RMD program and request a different distribution date. Annuitants on our RMD program MUST agree to direct deposit in order to be on the program. Annuitants wishing to have either a different date of distribution or who will not agree to direct deposit will be required to complete a request for partial withdrawal form and W-9. That form MUST be received at GCU by 12/1 of the year to insure processing by 12/31. Annuitants who decline to participate in the automated RMD program must complete the appropriate RMD waiver form indicating they are declining participation. The burden of taking their RMD will then fall to them and the agent. 43

45 Minor Annuitants When the annuitant is under the age of 18, (except if the annuity is being set up as a Coverdell ESA) a Disclosure Form for Annuities for Minors form must be completed. There are several key points to keep in mind: 1. Minors who are older than 15 ½ CAN make their own application for annuity and be the annuitant. a. NO contract changes are permitted until they reach age 18. b. They still would need to complete the Disclosure for Minors form. 2. Any Adult applicant can apply for the minor s annuity. a. The minor is named as the annuitant. b. They (the minor) MUST have a Social Security Number 3. Whoever is the applicant, they will complete the information on the disclosure form. In the case of an annuitant over 15 ½ but under age 18, if they are the applicant, they would also complete this form with their information. 4. Adult applicants need to know that the minor annuitant is the OWNER of the contract. Once the minor turns 18, they may do with the account as they wish and the adult applicant has no control over the account. 5. As a minor (and the contract owner), they cannot exercise any rights or make changes to the contract until they reach their majority age of 18. These rights and changes include, but are not limited to, the following: a. Surrenders b. Withdrawals c. Change of ownership d. Change of beneficiary 6. An ANNUITY SUITABILITY FORM must be completed for all minor annuitants, even with a Coverdell ESA. 7. Unless authorized by the proper authority (the Courts, etc.), these rights may not be exercised on behalf of the minor annuitant by a parent or legal guardian. 44

46 1035 Exchanges 1. Only to be used for: a. Moving funds from another insurance company s NON-QUALIFIED annuity to GCU. b. Life Insurance policy to life insurance policy c. Life Insurance policy to a non-qualified annuity. 2. Unlike qualified (IRA s) plans, a client cannot liquidate an existing non-qualified annuity, receive the funds, and then put them into another annuity within 60 days to avoid taxation! The ONLY way to avoid a taxable event is to 1035 the money from one nonqualified annuity to another non-qualified annuity. 3. Do NOT use this form for qualified transfers or moving funds from a CD, etc. 4. Can be used for Life Insurance AND Annuities a. Annuity to annuity is permitted. b. Life Insurance to Life Insurance is permitted. c. Life to Annuity IS permitted. d. Annuity to Life Insurance is NOT permitted. 5. Be aware that on Partial 1035 s, the client may NOT receive any distributions from EITHER account for a period of 12 months from the withdrawal date from the first contract that distributed the partial Doing so will create a taxable event on ALL of the gain in BOTH contracts, and if the client is under 59 ½, the 10% early distribution penalty could also apply! 6. Also, please remember that the accounts must go like to like. An existing contract with another company that has co-annuitants CANNOT 1035 into a GCU annuity. The client would have to change the existing contract to a single annuitant contract. Similarly, if the existing contract has an owner that differs from the annuitant, the GCU contract would also have to have that owner. 7. Since replacement of an existing contract is involved, be sure that you have completed the appropriate replacement forms for your State. 8. Complete the 1035 transfer form and return it to us along with the client s application, and any other necessary paperwork to complete the basic sale. a. Once received, we will process the 1035 and send it along to the existing company via certified mail/return receipt requested. b. It is the AGENTS responsibility to follow up with the existing company if necessary, and in some cases, direct the client to contact them. Many companies will not even confirm to US that they have received the paperwork, let alone give us information on the status of the transfer. 9. We will notify the agent via when the funds have been received. 45

47 Election of Settlement Option Form This form is required for: 1. Option A Accounts 2. Opening a Single Premium Immediate Annuity 3. Annuitizing an existing GCU deferred annuity Write in the insured/annuitant s name. The payee for the payments provided by the option elected shall be: 1. Annuitant and owner are the same: write in the annuitant s name. 2. If the ownership has been assigned (See Assignment of Certificate), you ll write in the new owner s name. 3. If it s a husband/wife that own the contract, you ll write in both names and elect either and or or. a. Should a check ever need to be issued, and means both would have to endorse the check. Or, allows for one signature. OPTION A: 1. You will complete section 1, Interest Income. a. Amount to be applied = their deposit. (See Option A minimum and maximum deposits). b. Next you will select the frequency of their interest distributions. Once they elect a distribution mode, it may not be changed until the next contract year. c. Rate of interest: Our current new issue rates for Option A accounts. d. Beneficiaries: DO NOT write same as on Application. You MUST complete the beneficiary section. e. Client signs, and includes SSN, DOB, Phone, and date. For Single Premium Immediate Annuities (SPIA): 1. Which section (II. Or III.) will depend on the type of settlement that your client is looking for: a. Period Certain b. Amount Certain c. Life Income 2. Your GCU Member Service Team will be able to get these figures for you based on your client s gender and D.O.B., and we can help you complete the form. 46

48 Requests for Systematic Withdrawals Clients may elect to take regular, systematic, distributions from their annuities on an interest only or stated amount basis. They may choose to do these on a monthly, quarterly, semi-annual, or annual basis. Direct Deposit is mandatory for all systematic withdrawal requests. Once a distribution has been made, the client may NOT change the mode of distribution until the next contract year. Distributions prior to age 59 ½ will likely incur a 10% early distribution penalty from the IRS. (Except for the Option A) Systematic withdrawals of interest only or stated amount are only available with: 1. Option A s: a. Interest only! b. Can NOT do stated amounts. c. Withdrawals of principal must be done separately as a full or partial surrender via a Certificate Service Form. d. As the Option A cannot defer interest from year to year, there is NO early distribution penalty for an annuitant who is under age 59 ½. They will receive a 1099-INT for their interest distributions. 2. One Plus Fours a. Only available for those contracts that continued into the last 4 years of the contract. (10% per year) b. First year distributions would be subject to a 9% surrender charge, including interest only! 3. Triple Advantage PLUS a. For contracts written as Single Premium contracts, NO withdrawals are permitted until after the contract is out of surrender. This would mostly apply to Triple Advantage contracts written PRIOR to 2/1/11. b. For contracts written as Flexible Premium accounts (written after 2/1/11, in most cases, but may vary by when it was introduced by State) i. Are in their second or third contract year. (10% per year) ii. First year distributions would be subject to a 5% surrender charge, including interest only distributions. 4. Five Year Advantage a. Systematic withdrawals are permitted in each year, subject to surrender charge free maximum percentages, and could begin one month after the effective date of the contract. b. First year withdrawals are permitted up to 10% of the initial deposit without incurring a surrender charge. Again, this limit applies to the TOTAL of principle and interest withdrawals. It is NOT 10% of principle with the interest being separate. 47

49 c. Years two thru five have a 20% surrender charge free withdrawal provision. This percentage is based on the contract s value on the last day of the previous contract year. d. Amounts withdrawn (combined principle and interest) over the permitted percentages are subject to surrender charges of 9%, 7%, 5%, 3%, and 1% in years 1 thru 5, respectively. 5. Flex 8 a. Systematic withdrawals are permitted in each year. b. Year One = 10% of the deposit amount. Additional deposits made during the first year will NOT increase the allowable, surrender charge free amount that could be withdrawn. c. Years Two thru Eight = 10% surrender charge free withdrawal privileges based on the contract s value on the last day of the previous contract year. Please keep in mind that interest AND principle combined are considered toward the total amount that is available, surrender charge free, in any given contract year. Clients who elect a stated amount systematic distribution need to be sure that in subsequent contract years, as the principle balance diminishes at the end of each contract year, their stated amount withdrawals in any given contract year DO NOT exceed the surrender charge free withdrawal permitted amount. TAX WITHHOLDING: On the Request for Systematic Withdrawals form, the client may elect to not have any withholding from any distribution. They may also elect to have either a stated amount of withholding taken from each withdrawal, or a stated percentage. Distributions of interest or gain will always create a taxable event, and if the annuitant is under age 59 ½, (other than an IRA distribution under a 72T program) will be subject to a 10% early distribution penalty imposed by the IRS. 48

50 Direct Deposit Authorization A safer, more convenient way of getting your client s regular distributions to them! GCU mandates that ALL Option A accounts agree to direct deposit of their interest regardless of whether they are requesting monthly, quarterly, semi, or annual distributions. On all other annuities (where withdrawals are permitted) clients may elect to have systematic withdrawals on an Interest Only or Stated Amount basis. In all of these cases, whether the client wants monthly, quarterly, semi, or annual systematic distributions, they MUST complete a direct deposit authorization, with voided check along with the Request for Systematic Withdrawals form. Checks will NOT be issued for systematic withdrawals or Option A interest distributions. There will be no exceptions made. 49

51 Direct Debit Authorization Annuities Clients may elect to make systematic deposits into their annuity (except Option A accounts) on a monthly, quarterly, semi-annual, or annual basis via a direct debit to either their checking or savings account. They may even choose the day of the month (1 st thru 28 th ) that they want the debit to their account drawn. The only days of the month that they CANNOT choose are the 29 th, 30 th, or 31 st of the month. 1. The minimum debit in any mode is $ If they choose monthly, the first debit will occur on the day of the month they choose in the month following the effective date of their contract. 3. Quarterly mode will mean that their debit will be drawn in the 3 rd month following the effective date of the contract, i.e., February effective date would result in their first quarterly debit being drawn in May, then August, November, and February. 4. Semi Annual mode would be the 6 th month following the effective date of the contract. 5. Annual would be the month of their effective date the following year. Your client may still make other deposits into their accounts over and above their systematic debits (subject to annual maximums on some accounts) by sending a check to us made payable to GCU and referencing the account number for the deposit to be added to in the memo line of their check. Life Insurance Once a client has made the initial modal deposit on their life insurance policy, they may make future payments via direct debit, also. GCU does not permit COD life policies. The first modal payment MUST be received (via check) PRIOR to the contract being mailed to you. 1. Clients who select the monthly mode of premium payment MUST go on direct debit for future monthly payments. 2. All other modes are available for direct debit and would fall under the same guidelines as Annuity deposits done via direct debit. 50

52 Delivery Receipts and Requests for Duplicate Contracts All GCU Life and Annuity contracts are mailed to the agent, unless the agent requests that the contract be mailed to the client. 1. Contracts mailed to the client will not include a delivery receipt, and the 30 Day Free Look provision will begin upon their receipt of the contract. 2. Contracts mailed to the agent WILL include a delivery receipt. a. It is the agent s responsibility to deliver the contract to the client within 2 weeks of receipt. If circumstances exist (client on vacation, etc) that would prevent the delivery from occurring in this time frame, the agent should notify us, in writing. b. Upon delivery, the client should sign and date the delivery receipt. c. The Agent will also sign and date the form. d. The delivery receipt is a 2 part form, and one complete, signed and dated by both parties copy should be left with the client. e. The agent will then return their copy of the form to us: i. Mail: To GCU. Attention: Delivery Receipts ii. Fax: , Attention: Delivery Receipts iii. Scan/ to: newbusiness@gcuusa.com iv. If Delivery Receipt is not received after 45 days a $25.00 fee will be assessed If an agent does NOT receive the contract within 3 weeks following the submission of the application or receipt of transferred funds, they may us (NewBusiness@gcuusa.com), indicating that the contract was not received, and a duplicate will be mailed to the agent. However, please keep in mind that an agent may ONLY request a policy reprint for a contract that may have been lost or misplaced in the delivery process. After 30 days from the date of the mailing of the contract, all requests for duplicate contracts must come from the client, via the appropriate form. The completed Request for Duplicate Contract form may be mailed or faxed to the attention of our Member Service Department, or scanned/ ed to: MemberServices@gcuusa.com. 51

53 Transferring Qualified Funds, CD s or Investment Accounts The GCU Transfer Form should be used when transferring QUALIFIED funds from an existing custodian to GCU, or for transferring non-qualified funds from a CD or Investment Account. You can NOT use a 1035 Exchange form for qualified funds! Qualified Accounts: Unless the current custodian of the funds requires their own form to be used (something the agent and client should find out), GCU provides a Transfer Form that can be used to directly transfer a qualified account from an insurance company, or qualified/nonqualified funds from a Bank, Brokerage Account, Annuity, etc. a. A direct rollover of qualified funds is the safest method for your client. b. The IRS only allows an individual to perform ONE indirect (check made out to the client) rollover per tax year. It is very important that clients understand this, as performing more than one indirect rollover per year can have SERIOUS tax consequences for the client. c. Direct rollovers from an existing custodian will come to us marked: Pay to the order of GCU, FBO (for the benefit of). (the client s name) d. Complete the GCU Transfer Form. e. YOU WILL WANT TO CHECK WITH THE CURRENT CUSTODIAN OF THE ACCOUNT TO SEE IF THEY WILL REQUIRE A MEDALLION SIGNATURE GUARANTEE BEFORE THEY WILL TRANSFER THE FUNDS. f. Return the completed and signed form to us along with the application. On the Transfer Form: 1. Complete the client information. 2. Complete info for current custodian a. Check with the current custodian for the proper address that the form should be mailed to. b. If you can, attach a copy of the client s most recent statement for the account. 3. Type of Plan: What type of qualified plan is the current account? a. Check the appropriate block for IRA, SEP, TSA, Keogh b. For 401k s, 403B s, etc., check the Other block and write in the type of account that the funds are CURRENTLY in. 4. Type of Investment: What is the current funding vehicle for the qualified funds? 5. Authorization for Transfer: write in the current account number for the funds. 6. Check one. 52

54 a. Your client can choose to liquidate all or part of the existing account. b. If the account is in a CD or another annuity product, they can select the second option to surrender the entire account. 7. Client signs and dates the form. The form is now ready to be sent to us along with the application. 1. Once received, and assuming all forms are complete and in good order, we will send the transfer form to the current custodian of the funds via certified mail, return receipt requested. 2. The responsibility to follow up with the current custodian is the agent/client s. 3. If we have not heard back from the current custodian in a reasonable time frame, the agent will be notified by or phone. 4. Once the funds are sent to us by the current custodian, and all paperwork is in order, and the contract will be ready to go to production. 53

55 Replacement of Existing Annuity and Life Contracts Any time you are replacing an existing Life Insurance or Annuity contract with a new contract, you must complete the appropriate Replacement Forms. This also includes any activity where an existing contract may not be getting surrendered, but is being used to finance a new contract. At this time, GCU does NOT require Replacement Forms on any internal 1035 of a GCU contract moving to another GCU contract. However, given the current regulatory environment, we see this potentially changing at some point down the road. It is extremely important from a regulatory standpoint that an agent have a thorough understanding of whether or not replacement of an existing contract is happening. This would include, but not be limited to, understanding: 1. If the client is considering discontinuing making premium payments, surrendering, forfeiting, assigning to the insurer, or otherwise terminating an existing policy or contract. 2. If the client is considering using funds from an existing policy(s) or contract(s) to pay premiums due on the new policy or contract. 54

56 Suitability This form must be sent along with every annuity application. Any annuity application that does not include the Suitability Form will NOT be produced, which means your client s funds will NOT be earning any credited interest rate. 1. Complete the information in the top block for the annuitant and their spouse (if married). 2. The client will then choose whether or not they agree to answer the remainder of the questions on the form. 3. If the client chooses to NOT complete the balance of the form, you must indicate that rejection, and still have the client, and their spouse (where applicable) sign the form. Suitability is becoming a MAJOR issue and concern among the State Insurance Departments and the NAIC. We anticipate changes in the requirements for suitability expanding in the future, and agents who DO NOT do a thorough job of being sure the investment is suitable for the client are opening themselves up to potential Errors and Omissions claims against them. With regard to GCU Annuities, one of the major factors of suitability is ACCESS to needed funds. While the interest rate on a Flex8 may be very appealing to a potential client, it is the agent s responsibility to probe to be sure that the client has other monies available to them, and that the client foresees NO NEED to liquidate the account prior to the end of the 8 year surrender charge period. Every GCU Annuity has limited, built in liquidity features at some point in the contract. It s just important that the client does not foresee a need for funds during the surrender charge period that would be in excess of whatever surrender charge free withdrawals that are permitted. 55

57 W-4P Tax Withholding Department of the Treasury, Internal Revenue Service Form W-4P A W-4P must be completed: 1. With ALL applications for the GCU Option A Annuity 2. With ALL applications for the GCU Option B SPIA s 3. When annuitizing an existing GCU Annuity (along with an Election of Settlement Option Form) 4. When filing a death claim on an Annuity contract Complete the bottom portion of the W-4P. The client MUST indicate if they do not wish to have any federal income tax withheld from the distribution(s). 1. Check Item 1 at the bottom of the form. 2. If they choose no withholding, you won t need to complete items 2 and 3. If the client wishes to have withholding from each distribution, they ll need to complete items 2 and 3. If the client does NOT fill in either item 1, 2, or 3, we WILL withhold from their distributions, and another W-4P would need to be completed and sent to us to correct. Once we have taken withholding and sent it on to the IRS, the money is NOT refundable to the client. 56

58 Death Claims First reporting of a death claim may be done by contacting our Member Service Team: By Phone: By MemberServices@gcuusa.com Claims form may also be found at your Agent Portal, in the Forms Section. GCU does permit the continuation of an existing annuity (with the exception of Option A s) in cases where the spouse is the only PRIMARY beneficiary. Continuation is only available to the surviving spouse. 57

59 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 It is important to understand that any POA should be checked, in advance, for: Is it expired? Does it SPECIFICALLY empower authority to act in financial and insurance matters? 58

60 COMPLIANCE/PRODUCT: Annuity June 12, 2017 Department of Labor - Disclosure PTE for Qualified Annuities Effective June 19, 2017 The Department of Labor (DOL) Fiduciary Rule goes into effect June 9, The DOL Fiduciary Rule requires that all financial professionals giving advice related to qualified funds will be subject to fiduciary requirements. Investment advice must be provided in the best interest of the client and fiduciaries must comply with an applicable Prohibited Transaction Exemption to receive compensation relating to advice recommendations. With this in mind, GCU will require the following: The completion of the PTE disclosure for all qualified annuities including Traditional IRA, Roth IRA, Coverdell ESA, Simple IRA, SEP IRA and TSA. The PTE Disclosure must be reviewed with the client prior to taking an annuity application. A signed copy of the disclosure is required to be given to the client and sent to GCU with the annuity application. For your protection, it is recommended that the agent also retain a signed copy of the disclosure. The disclosure can be found on the Agent Portal in the Sales and Service Forms section. Any qualified annuity application received without a signed PTE will be considered not in good order. The application will be voided and the disclosure will need to be signed by the client prior to taking the application again BULLETIN #37 Agent Version