Flexible Premium Retirement Annuity
What is a flexible premium retirement annuity (FPRA)?
- An FPRA is an annuity product designed for maximum accumulation of investment dollars with minimum exposure to risk.
- The FPRA is a nonqualified flexible premium retirement-focused annuity that provides tax-deferred interest accumulation along with the ability to make future contributions of any amount at any time.
- Your average rate of return will vary throughout the year, in accordance with interest rates.
- You can contribute up to a total of $1,000,000.
|Minimum Initial Contribution
|Maximum Monthly Contribution
||None, Subject to Maximum Cumulative Contribution
|Maximum Cumulative Contribution
|Market Value Adjustment
||Yes, for 7 Years
|Interest Guaranteed on Contributions
||Yes, for 1 Year
|Minimum Interest Guaranteed
||1-3% Annual Effective Rate
Features of the Flexible Premium Retirement Annuity
Any eligible individual, as described under the section “Navy Mutual Eligibility,” may be established as the owner. Joint ownership is not allowed. Please be aware that minor children who are established as contract owners do not have legal capacity to make any changes to a contract until they become of legal age (as determined by your state).
A minimum initial deposit of at least $100 is needed to establish an FPRA. Future contributions of $25 or more may be made at any time, up to a total contribution amount of $1,000,000.
Interest rates will vary throughout the year as determined by Navy Mutual Aid Association in response to changes in the market. Each premium payment will earn Navy Mutual’s new money rate for the first 12 months, after which time the payment will earn Navy Mutual’s portfolio rate. Higher interest rates will be applied to accumulation values that exceed the thresholds of $25,000, $50,000, and $100,000. The minimum guaranteed interest credited to the contract will be 1 to 3%. Once the contract is issued, this rate is fixed and will not change.
Earnings generated within a Navy Mutual FPRA do not create an income tax liability until payments are actually distributed from the annuity. This allows the annuity to enjoy a greater effective growth rate than comparable taxable investments.
All interest accumulated within Navy Mutual’s FPRA is tax-deferred. Any payment distribution from an FPRA through a withdrawal or surrender is taxable as income, up to the extent that the accumulation value of the contract exceeds the investment. If a taxable distribution occurs prior to age 59½, a 10% federal tax penalty may be applied. Prior to taking distributions from an annuity, contact a tax advisor for more details about annuity taxation.
Annual withdrawals of up to 10% of the accumulated value are available after the first year. Up to four withdrawals may be made each year without charge. Withdrawals numbering in excess of four will incur a withdrawal fee.
An FPRA from Navy Mutual may be surrendered at anytime, with no surrender fees, loads, or commissions deducted. If the FPRA is surrendered during the first seven years, Navy Mutual will apply a market value adjustment (MVA - See next section.), based on the difference between the average rate of return for the plan and the current rate guaranteed on new contributions. Thus, the fair market value of the annuity is determined by market interest rates at the time of surrender and may result in either a higher or lower accumulation value than what was projected. No MVA will occur if the contract is surrendered due to the owner’s need for nursing home care, terminal illness, death, or when the owner elects to receive an immediate annuity paid out during a period of time that meets or exceeds the owner’s life expectancy.
MVA Example: You purchase an annuity with a current average rate of return at 7% and for the next three years interest rates drop to 4%. If you surrender your annuity before the end of seven years, your MVA would be positive. Money would be added to your surrender value because interest rates are lower than your average rate of return. If interest rates were to rise, your MVA would be negative and money would be deducted from your surrender value.
A named successor owner or beneficiary will receive the accumulation value of the annuity at the time of death without the delay and cost of probate.
What is a market value adjustment (MVA) on an annuity?
Market value adjusted annuities are fixed annuities that allow you the flexibility to leave your money in place after the initial term of your annuity is completed, or withdraw it with no surrender charge. If you want to withdraw your money earlier, before the initial term has passed, you can. If you surrender the annuity before the end of the seventh contract year, we will adjust the surrender value to reflect changes in interest rates. You may be credited a higher or lower rate than with the original contract, depending on market conditions.
The total accumulated value of the annuity will never be less than the premiums received (less any withdrawal you may have made), as applied, and accumulated at a minimum 1 to 3% annual effective interest rate, which is guaranteed on the date of contract issue. You will never receive less than you contributed!
For Example: Assume a plan terminates at the end of five years with cumulative contributions of $100,000, an account balance of $127,628, and an average rate of return of 5.0%.
Rising Interest Rate – With the rate guaranteed on new contributions of 8.0%, the MVA would equal -$7,658 and the amount paid upon termination would be $119,970.
Declining Interest Rate – With the rate guaranteed on new contributions of 3%, the MVA would equal +$5,105 and the amount paid upon termination would be $132,733.
Not only are you guaranteed to get your premiums back, but you also are guaranteed that your premiums will earn interest. You cannot lose money with the Navy Mutual Flexible Premium Retirement Annuity.
The surrender value of an existing deferred annuity or permanent life insurance plan can be transferred into a Navy Mutual annuity without incurring an immediate taxable event! This transfer is called a “1035 Exchange.” To qualify for a tax-deferred 1035 Exchange, the contract must be payable to the same person or person(s). Please be aware that retirement accounts, such as a 401(k) plans, IRAs, etc., will not qualify for a 1035 Exchange to any of Navy Mutual’s annuity products. To ensure that your transfer will qualify, please contact your tax advisor. Please contact your Navy Mutual counselor to receive the necessary forms to perform a 1035 Exchange.
Annuity Payout Options
Once you decide to receive income, you may choose from among the following FPRA payout options:
You may receive a payment of the entire accumulated cash value as a single payment.
An individual may receive income during a fixed number of years, which can range from one to 30 years. All payments will cease after the elected period is complete. If the annuitant should die during the fixed period, a designated beneficiary will receive the remainder of the payments.
Life Income with No Death Benefit
This option allows an individual to receive the highest monthly income during the course of a lifetime. Payments are guaranteed to continue for the life of the annuitant. Upon the annuitant’s death, payments will cease.
Life Income with a Fixed Period Certain
Payments are guaranteed to continue during the annuitant’s lifetime. In addition, this option contains a feature that ensures the continuation of payments to the owner or beneficiary (as applicable) if the annuitant should die within a predetermined period of time, referred to as a period certain. A period certain of 5, 10, 15, or 20 years may be elected. Should the annuitant die during the period certain, payments will continue to a designated beneficiary for the remainder of the period certain. For example, if a 15-year period certain is elected and the annuitant dies in the 11th year, a beneficiary will continue to receive payments for four years (15-11). If the annuitant’s death occurs after the period certain, no additional payments will be paid.
Joint & Survivor Income
Payments are made until the death of the surviving annuitant. Upon the death of one annuitant, the surviving annuitant will continue to receive a previously elected percentage of the original annuity payment. The survivor may receive 100%, 66⅔%, or 50% of the annuity payment. Payments cease upon the death of the second annuitant.
Navy Mutual Eligibility for Flexible Premium Retirement Annuities
Navy Mutual's Flexible Premium Retirement Annuity (FPRA) may be purchased on the life of, and owned by, an eligible member, spouse, child or grandchild. A plan may be purchased on a member or spouse at any age, while children and grandchildren must be between the ages of six months and age 24. Nonmembers (i.e., service members who do not currently maintain a policy with Navy Mutual) applying for an FPRA must be a service member of one of the five sea services (United States Navy, U.S. Marine Corps, United States Coast Guard, U.S. Public Health Service Commissioned Corps, and the National Oceanic and Atmospheric Administration) who is either active duty, retired, a reservist, or any honorably discharged veteran residing in Hawaiʹi, Maryland, North Carolina, South Carolina, or Virginia.
If you have any questions about annuities, contact Navy Mutual today.
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