SPDA

Single-Premium Deferred Annuity for Simple, Secure Investing

What is a Single-Premium Deferred Annuity (SPDA)?

• An SPDA is a nonqualified fixed annuity that provides tax-deferred interest accumulation on a lump-sum premium deposit.
• There is a one-percent premium bonus added to your account for an SPDA annuity purchased with a "lock-in" period of seven or more years.
• The interest rate on the contract is guaranteed for a fixed period of time, which you choose, up to 10 years.
• You can make a single-premium contribution of up to $1,000,000.

Features of the Single-Premium Deferred Annuity

Review your Annuity for 15 Days 

The owner of an annuity may terminate his or her contract within 15 days after purchase and receive a full refund of premium that was placed into the annuity.

Single-Premium Amounts

Single-premium payments may range from a  minimum of $10,000 per contract up to a maximum of $1,000,000 per owner.  No additional premiums may be paid into an existing annuity.  Any new premiums will be applied to  a new annuity contract, subject to the minimum $10,000 requirement. Interest rates will be calculated by the lock-in period and the single-premium payment amount.  Larger premium payments will allow higher interest rates to be credited to the contract.  The premium payment thresholds to obtain a higher interest rate are $25,000, $50,000, and $100,000.  Please contact Navy Mutual, at 1-800-628-6011, for current rates.

Annuity Interest Rate Lock-In Periods

Navy Mutual periodically establishes current interest rates for all new Navy Mutual Single-Premium Deferred Annuity contracts, based on your chosen lock-in period.  A lock-in period from among two, five, seven, or 10 years ensures that your interest rate does not change during that period. 

Options after the Interest Rate Lock-In Period

Once the plan reaches the end of the lock-in period, the annuity owner has a number of options from which to choose, as follows:

1. Continue the annuity with a new lock-in period of two, five, seven, or 10 years, at current interest rates.
2. Continue the annuity with market interest rates, which will fluctuate throughout the year.
3. Receive a guaranteed stream of income during a specific number of years, or for your lifetime.
4. Receive the accumulation value as a lump-sum payment.

Premium Bonus when You Lock the Investment Period

Navy Mutual will credit to the single-premium deposit a bonus equal to one percent of the amount of the single premium when an annuity is purchased with a lock-in period of either seven or 10 years.  The bonus immediately enhances the single premium and, consequently, the amount starts accumulating at the applicable interest rate.  

For example, a $100,000 premium will receive an immediate $1,000 bonus that results in a $101,000 initial accumulation value, which will begin accumulating interest from the beginning of the contract.  Lock-in periods of less than seven years will not receive a premium bonus.  If an annuity is surrendered voluntarily, prior to the end of the lock-in period, the bonus and any interest earned on the bonus will be deducted from the surrender value.  (See the discussion about surrenders further in this section.)

Tax-Deferred Accumulation for a Higher Growth Rate

Compliant with the current U.S. Tax Code, your earnings generated within Navy Mutual's SPDA do not create an income tax liability until payments are distributed from the annuity.  Without taxes being paid on the interest gain every year, the annuity will enjoy a greater effective growth rate than comparable taxable investments.

Safety

Navy Mutual guarantees you will receive the initial interest rate from the annuity effective date through your elected lock-in period, unless you make withdrawals or implement an early surrender.

Withdrawals from Your Annuity

After the Navy Mutual Single-Premium Deferred Annuity has been in effect for one year, the owner may make annual withdrawals of up to 10% of the accumulated value.  The 10% withdrawal amount is not cumulative.  Up to four withdrawals may be made each year without charge.  Withdrawals in excess of four will incur a withdrawal fee. According to the current U.S.Tax Code, all withdrawals are considered a withdrawal of interest first, and principal second.  Therefore, an income tax liability will be incurred on any interest distributed.  Any untaxed interest received by the annuitant in the future will be received as ordinary income.  Fund withdrawals received prior to age 59½ may be subject to a 10% federal tax penalty.  Please consult your tax professional for details.

Surrenders

A Navy Mutual SPDA may be surrendered at any time, with no surrender fees, loads, or commissions deducted.  If the surrender of the SPDA occurs prior to the completion of the contract lock-in period, the fair market value of the annuity, less any premium bonus and accumulated interest on the bonus, will be provided to the plan owner. 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 market value adjustment (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 an initial interest rate of seven percent and during the next three years interest rates drop to four percent. v If you surrender your annuity before the end of your "lock-in" period, your MVA would be positive.  Money would be added to your surrender value because interest rates are lower than when you made your contribution.  If interest rates were to rise, your MVA would be negative and money would be deducted from your surrender value.

Ownership

Only an eligible individual, as described in 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.

Death Proceeds

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.  Any accumulated interest will be taxable to the new owner as the income is distributed from the annuity. 

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 during the lock-in period, a market value adjustment (MVA) would be calculated to reflect changes in interest rates.  Specifically, the MVA is calculated based on the difference between the lock-in rate at the time of issue, and the current rate guaranteed for new issues of the same product.  Any premium bonus will be deducted for early surrenders.

The total accumulated value will never be less than the premium received, less any withdrawals you may have made, as applied and accumulated at no less that a one- to three-percent annual effective interest rate, as guaranteed on the date of contract issue.  So, you will never receive less than you contributed!

For example, assume a plan terminates at the end of five years with a lump-sum premium deposit of $100,000, a premium bonus of $1,000, an account balance of $128,904, and a guaranteed rate lock for seven years at five percent.  The following scenarios are possible:

Rising Interest Rate – With the rate guaranteed for new issues of the same seven-year locked product of eight percent, the MVA would equal -$7,007, plus the premium bonus of $1,000, and the amount paid upon termination would be $120,897.

Declining Interest Rate – With the rate guaranteed for new issues of the same seven-year locked product of three percent, the MVA would equal +$5,015, less the premium bonus of $1,000, and the amount paid upon termination would be $132,919.

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 Single-Premium Deferred Annuity.

Tax-Deferred Exchanges

The surrender value of an existing deferred annuity or permanent life insurance plan can be transferred into a Navy Mutual Single-Premium Deferred Annuity without incurring an immediate taxable event!  This transfer is called a 1035 Exchange.  To qualify for a tax-deferred 1035 Exchange, the same person(s) must be covered in the new contract.  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 a Navy Mutual counselor to receive the necessary forms to implement a tax-deferred 1035 Exchange.

Annuity Payout Options

Once you decide to receive income, you may choose from the various SPDA amortization payout options that follow:

Lump Sum

A payment of the entire accumulated cash value may be received as a single payment.

Fixed Period

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 dies 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 annuitants death, payments will cease.

Life Income with a Fixed Period Certain

Payments are guaranteed to continue during the annuitants lifetime.  Additionally, this option contains a feature that ensures the continuation of payments to the owner or beneficiary, as applicable, if the annuitant dies within a predetermined period of time (referred to as a period certain).  A period certain of  five, 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 11^th year, a beneficiary will continue to receive the payments for four years (years 15-11).  If the annuitant 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

The Navy Mutual Single-Premium Deferred Annuity (SPDA) may be purchased on the life of, and owned by, an eligible member, spouse, child, or grandchild.  A plan may be purchased to cover 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 a SPDA 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 on active duty, retired, a reservist, or any honorably discharged veteran residing in Hawaiʻi, Maryland, North Carolina, South Carolina, or Virginia.

If you have any questions about annuities, contact Navy Mutual today.

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