Flexible Premium Retirement Annuity

Only an eligible individual, as described under the section “Navy Mutual Eligibility”, may be established as the owner. Joint ownership is not allowed. Only one FPRA contract may be purchased per eligible owner. 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).

Premium Payments

A minimum initial deposit of at least $100 is needed to establish a FPRA. Future contributions of $25 or
more may be made at anytime up to a total contribution amount of $1,000,000.

Interest Rate

Interest rates will vary throughout the year as determined by the 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. Interest rates are guaranteed never to drop below 3%.

Tax-Deferred Accumulation

Earnings generated within Navy Mutual’s 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.

Tax Considerations

All interest accumulated within Navy Mutual’s FPRA is tax-deferred. Any payment distribution from a
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 59 ½, a 10% federal tax penalty may be applied. Prior to taking distributions from an annuity, contact a tax advisor for more details on annuity taxation.

Withdrawals

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 in excess of four will incur a withdrawal fee.

Surrenders

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) 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 over a period of time which meets or exceeds the owner’s life expectancy.

MVA example: you purchase an annuity whose current average rate of return is 7% and over 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 since 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.

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.

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 will never be less that the premiums received (less any withdrawal you may have made), as applied, and accumulated at a minimum 3% annual effective interest rate; so, you will never receive less then you contributed!

For Example: Assume a plan terminates at the end of 5 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 3.0%, 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, you are guaranteed that your premiums will earn interest. You cannot lose money with our Flexible Premium Retirement Annuity.

Tax-Deferred Exchanges

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), IRA, 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 forms necessary to perform a 1035 Exchange.

Annuity Payout Options

Once the decision to receive income is made, you may choose from the various FPRA payout options explained below.

Lump Sum

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

Fixed Period

An individual may receive income over a fixed number of years which can range from 1 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 over 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 4 years (15 - 11). If the annuitant’s death occurs after the period certain, no additional payments will be paid.

Joint and 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%, 66 2/3% 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 6 months and age 24. Nonmembers (i.e., service member who does not currently maintain a policy with Navy Mutual) applying for a FPRA must be a service member of one of the five sea services (i.e., Navy, Marine Corps, Coast Guard, U.S. Public Health Service, and National Oceanic and Atmospheric Administration) who is either active duty, retired, a reservist or any honorably discharged veteran residing in Maryland, North Carolina, South Carolina or Virginia.