Your annuity's bailout feature
Recently, you may have received a letter regarding your annuity's bailout feature. This page is designed to address additional questions you may have.
Why did I receive this letter?
To help prepare for your financial future, you purchased an annuity from Great American Life Insurance Company. This annuity has a bailout feature. Here is how this feature works:
- Your annuity contract includes a cap for each of its indexed strategies. A cap is the maximum interest rate we will pay for that indexed strategy.
- Each indexed strategy has a term. At the end of each term, we reset caps and you have the opportunity to change how you allocate money in your annuity.
- Each indexed strategy also includes a bailout cap. At the end of a term, if an indexed strategy's cap for the next term drops below the bailout cap for the current term, the annuity's bailout feature is triggered. At that time, you may withdraw the amount in that strategy. If you do that, we agree to waive early withdrawal charges on the money you withdraw.
Your annuity may have an indexed strategy with a term that is about to expire. Due to the current interest rate environment, indexed strategy caps for the next term will be set below your current bailout caps. This will trigger the annuity's bailout feature.
What is the difference between an "indexed strategy cap" and a "bailout cap"?
We use the indexed strategy cap when we determine the interest rate at the end of the term. We use the bailout cap to determine if the bailout feature will apply at the end of the term.
This chart shows the difference between an indexed strategy cap and a bailout cap, and how your annuity's bailout feature is triggered:
In this example:
- The bailout cap at contract issue is 5.5%. This is the cap we must honor without triggering the bailout feature.
- The indexed strategy caps for the first five terms are above or at the bailout cap. We review the indexed strategy cap as each term renews and tell you the indexed strategy cap for the next term when we send you a renewal letter for your annuity.
- Because the indexed strategy cap for Term 6 is below the bailout cap for Term 5, the bailout feature is triggered. The new bailout cap will be 5%.
The amount listed on the letter as the amount available for the bailout is less than the amount in my annuity. Why?
There may be a couple of reasons for this:
- You may also have money in the annuity's declared rate strategy. This money is not available for a free withdrawal under the annuity's bailout feature.
- You may have money in an indexed strategy that has a different term. For example, you may have purchased your contract with multiple payments that were moved into the indexed strategies on different dates. If your annuity's bailout feature will apply to money with a different term, you will receive another letter regarding its withdrawal before the end of that term.
Now that I have this letter about my annuity's bailout, what action can I take?
- You are not required to take any action. You may choose to do nothing.
- You may choose to withdraw all or part of the amount shown on your letter. If you want to take this action, complete and return the bailout request form enclosed with the letter. We must receive this form and any other required paperwork, as outlined on the form, by the date stated on your letter in order to honor your request.
Is there anything I should consider if I withdraw money?
- If you choose to withdraw money, please carefully review the bailout request form.
- Be aware that this withdrawal may have an effect on both your taxes and the benefits of your annuity, such as your free withdrawal allowance and/or an income rider or death benefit rider you may have purchased with your annuity.
- If your annuity is part of a qualified employer plan, you will need to contact your plan administrator about additional steps to complete the withdrawal. If plan restrictions may not allow a payment directly to you, a transfer to another account under the plan may be permitted.
- You may also want to consult your tax advisor prior to taking a withdrawal.
How could this withdrawal affect my annuity's allocations?
As previously mentioned, you have the option to change your strategy allocations at the end of each term. If you withdraw money under the bailout provision, you will want to review how this withdrawal affects those allocations.
- If you’ve not changed your strategy allocation since you purchased your annuity, a bailout withdrawal will not affect the funds remaining in your annuity currently allocated to other strategies.
- If you’ve previously changed your strategy allocations, then the funds remaining in your annuity after a bailout withdrawal will be reallocated based on your most recent strategy allocation election. You may wish to make a new strategy allocation election to prevent funds from being reallocated back into a strategy from which you are taking a bailout withdrawal.
Here’s an example of what happens if you’ve previously changed your strategy allocation:
Term 2: You change your strategy allocation to:
|Annual Point-to-Point Indexed Strategy||25%|
|Monthly Averaging with Cap Indexed Strategy||25%|
Term 6: You had $20,000 in your annuity, allocated as follows:
|Annual Point-to-Point Indexed Strategy||$5,000 (eligible for a bailout withdrawal)|
|Monthly Averaging with Cap Indexed Strategy||$5,000|
You withdraw the $5,000 eligible for a bailout withdrawal and have $15,000 remaining in your annuity. As mentioned, if you do not submit a new strategy allocation, your money will be reallocated back to the Annual Point-to-Point Indexed Strategy. Your new allocation will be:
|Declared Strategy||$7,500 (50% of $15,000)|
|Annual Point-to-Point Indexed Strategy||$3,750 (25% of $15,000)|
|Monthly Averaging with Cap Indexed Strategy||$3,750 (25% of $15,000)|
In this example, if you do not want money reallocated back to the annual point-to-point strategy, you should change your allocation to 0% for that strategy.
I recently received a letter from Great American Life regarding the renewal of my indexed strategies. Why did I also receive this bailout letter? Are there different actions I need to take?
There are different actions between your annuity's renewal and bailout.
- As outlined in the renewal letter, your annuity has a term that is about to expire. This means you can choose to change how you allocate money in your annuity by returning the strategy selection form enclosed with your renewal letter.
- As outlined in the bailout letter, the bailout feature will apply to the term that is about to expire for the indexed strategies identified in that letter. This means you can withdraw money from those strategies without an early withdrawal charge by returning the bailout request form enclosed with your bailout letter.
- If you return the strategy selection form enclosed in your renewal letter, money not withdrawn under the bailout feature will be allocated according to your strategy selection instructions.
Is there a place online where I can find more information about my annuity?
Yes. You may log in to view your account on our contract owner website. If this is your first visit to the site, select "Create an Account" on the left side of the login screen. Follow the instructions on screen to create your online account.
I still have more questions. Who can I contact for answers to them?
You may contact the financial professional who you worked to purchase your annuity. You may also contact our Client Relations department via phone at 800-854-3649 or online using our secure contact form. If you contact us online, please allow 24-48 hours for a response.
Thank you for your continued relationship with Great American Life. We appreciate your trust!
This information is not intended or written to be used as legal or tax advice. It was written solely to support the sale and maintenance of annuity products. As a taxpayer, you cannot use it for the purpose of avoiding penalties that may be imposed under the tax laws. You should seek advice on legal or tax questions based on your particular circumstances from an independent attorney or tax advisor.