Unlike a "fixed" annuity, which pays a fixed monthly amount year after year regardless of economic conditions, a variable annuity "varies" year after year based on changing market conditions. Consequently, you have the potential for retirement income that is likely to keep pace with, if not exceed, the rate of inflation.

The portion of your Retirement Plan account that you choose to convert to an annuity is added to a financial "pool" from which all annuities are paid. Mortality tables tell us that a certain number of people in the pool will die each year. It is not known, of course, which persons will live through each year, but actuaries do know approximately how many will live. MMBB can therefore rely on the "law of averages" to provide lifetime income for each person in the pool. The pool is analyzed annually for sufficiency.

Half of the persons who reach retirement age will die before they reach their life expectancy. The other half will live beyond their life expectancy. If you live exactly to your life expectancy, you will have received in monthly payments the total value of your Retirement Plan account that you elected to convert to an annuity, plus the investment results experienced during the period you received annuity payments. Those who live beyond life expectancy continue to receive a lifetime annuity from the funds in the pool.

When you convert your account to an annuity, you are credited with a set number of annuity units which remain constant throughout your retirement. The number of units credited to you depends primarily on the dollar amount you convert to your annuity. Other factors include:

• the form of annuity payment you select; and
  
• your life expectancy and that of your joint annuitant (if any) at the time you retire.

Once determined, the number of annuity units does not change throughout your retirement unless you select a joint annuity. When one member of the couple dies, the number of annuity units may decrease, depending on the option chosen. The number of annuity units credited to you, times the annual annuity payout value, determines the amount you receive for the year.

Each year, the annuity unit's payout value is recalculated. The payout value is the average of the actual annuity unit values for the six months ending September 30, the actual annuity unit value on September 30, adjusted for mortality, or 95% of the prior year payout value, whichever is higher.

Annual changes in the annuity payout values are effective January 1. Your annuity payments remain the same for the year, unless you or your joint annuitant dies during the year.

The plan includes two special features designed to enhance your annuity benefit: an advanced earnings assumption and a 5% limit in the drop of the annuity payout value in any one year. Following is a description of each of these features:

• Advance Earnings Assumption
  To moderate the annual changes in your monthly payment, your annuity check will include not only a return of principal but also a 4% earnings assumption, regardless of the rate actually being earned at the time your payments are made.
  
  MMBB assumes the funds in the annuity pool will earn 4% a year during your retirement years. The number of annuity units credited to you includes the portion of your Retirement Plan account that you converted to an annuity plus the 4% advance earnings assumption. Any investment experience in excess of the 4% assumption in a given year in retirement will result in an increase in your annuity payments for the following year. On the other hand, if the investment experience of the annuity pool is less than 4%, the following year's annuity payments will be less than the current year's level.
  
• Five Percent Limit On Annuity Payout Reductions
  Recognizing that a substantial drop in earnings for any one year could create a financial hardship for many retired members, the decline in the annuity payout value is limited to 5% in any one year, regardless of investment results.
  

Your annuity payments can take any of the following forms:

• Single-Life Annuity
  You receive monthly annuity payments for life. Payments stop at your death.
  
  
• 100%/100% Joint and Survivor Annuity
  When either you or your joint annuitant dies, the survivor's annuity will be based on the same number of annuity units for life.
  
  
• 80%/80% Joint and Survivor Annuity
  When either you or your joint annuitant dies, the survivor's annuity will be based on the same number of annuity units for life.
  
  
• 100%/60% Joint and Survivor Annuity
  If your spouse dies first, your annuity continues at 100% for the rest of your life. If you die first, your spouse receives 60% of your monthly annuity for life.
  

In general, the larger the percent to the survivor, the smaller the initial dollar payment. The 100% choice, for example, leaves the largest payments to your spouse. But of the three choices, it makes the smallest initial payment to you, the member. The value of the benefit under all three options is equal. It's just that if an option promises a larger payment later on, it needs to pay a smaller one initially.

If you die or your spouse dies within six years of retirement, joint annuities will be recomputed on a single-life basis, subtracting payments already made. The single-life annuity will then be compared with the joint-life annuity and the larger amount will be paid to the survivor.

Your annuity payment will include a 10-year guarantee feature. The guarantee provides payment of the first ten years of annuity payments. If you and your joint annuitant die before receiving at least ten years of payment, your beneficiary or your estate will receive the remaining value for the 10-year period. If you and/or your spouse live beyond the 120-month period, annuity payments continue for as long as either of you lives. This guarantee applies even if you elect a single-life annuity payment option. The waiver of this feature would add less than 1% to the amount of the joint-life and survivorship payment and a little more than that on the single-life payment. The increase depends on your age, the age of your spouse and other factors.