Flexible Premium Retirement Annuity

Navy Mutual’s Flexible Premium Retirement Annuity (FPRA) is a non qualified fixed annuity contract which allows you to make flexible, nonscheduled premium deposits. The invested funds will accrue interest on a tax-deferred basis and can be used to complement your future savings goals. Once you are prepared to surrender the contract and receive your accumulation value, you may elect from several payout options. In addition, should you find that you need to receive some of the funds prior to surrendering the contract, you may make partial withdraws from your annuity during the accumulation phase at any time after the first year.

Features of the Flexible Premium Retirement Annuity

Ownership

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 $100.00 must be provided in order to establish a FPRA. Once the FPRA is established, future payments of no less than $25.00 may be made at anytime. No more than $10,000 may be placed into this annuity in any one month, unless the funds are being transferred into the plan through a 1035 Exchange. Systematic payments may be made monthly through military allotment or electronic transfers from a bank account. Payments may be made until 30 days prior to the owner’s or annuitant’s 85th birthday, which ever occurs first.

Annuity 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 which exceed the thresholds of $25,000, $50,000, and $100,000.

Tax-Deferred Accumulation

Under current U.S. tax code, earnings generated within Navy Mutual’s FPRA 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.

Withdrawals

After the FPRA 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. Under current United States 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 in the future will be received as ordinary income. Fund withdrawals received prior to age 59 1/2 may be subject to a 10% federal tax penalty. Please consult your tax professional for details.

Lump Sum Surrenders

The FPRA may be surrendered for the full accumulation value at anytime. Interest distributed prior to age 59 1/2 may be subject to a 10% federal tax penalty. Please contact a tax advisor for more details on annuity taxation.

Amortization (Payments Begin)

Payments from the FPRA can be made in the form of a lump sum cash payment or as a stream of income from any of Navy Mutual’s payout options as described in the section entitled “Annuity Payout Options”. The accumulation value of the contract must be distributed no later than the contract’s effective month nearest the owner’s or annuitant’s 85th birthday, which ever occurs first.

Death Proceeds from Annuity

A named contingent 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 income is distributed from the 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

NMAA’s FPRA may be purchased on the life of and owned by an eligible member, spouse, child, or grandchild. Members and spouses must be under age 85 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 under the age of 65 and either active duty, reserve or retired (subject to recall) from either the Navy, Marine Corps, Coast Guard, US Public Health Service, or NOAA. Only the military member will become a Navy Mutual member after establishing any Navy Mutual benefit plan. Once established, membership is not affected by a subsequent change in service status.

Flexible Premium Retirement Annuity to Complement Your Future Retirement Savings