[Federal Register Volume 70, Number 7 (Tuesday, January 11, 2005)]
[Notices]
[Pages 1914-1925]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-42]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-26719; File No. 812-13110]


IDS Life Insurance Company, et al., Notice of Application

January 5, 2005.
AGENCY: The Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an amended order pursuant to section 
11(a) of the Investment Company Act of 1940, as amended (``Act'') 
approving the terms of an offer of exchange.

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Applicants: IDS Life Insurance Company (``IDS Life''), IDS Life 
Variable Account 10 (``Account 10'') and IDS Life Accounts F, G, H, IZ, 
JZ, KZ, LZ, MZ, N, PZ, QZ, RZ, SZ and TZ (``Old Accounts'' and 
collectively with Account 10, ``Accounts'') (collectively, 
``Applicants'').

Summary of Application: Applicants seek an order to amend an Existing 
Order (described below) (``Amended Order'') pursuant to section 11(a) 
of the Act to approve extending the terms of an existing offer of 
exchange of certain outstanding annuity contracts issued by IDS Life 
and made available through the Old Accounts (``Old Contracts'') for new 
American Express Retirement Advisor Advantage Plus\sm\ Variable Annuity 
contracts issued by IDS Life and made available through Account 10 
(``RAVA Advantage Plus'' and collectively with the Old Contracts, 
``Contracts'').

Filing Date: The Application was filed on July 19, 2004 and amended and 
restated on December 20, 2004.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on January 31, 2005 and should be accompanied by proof of service 
on the applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW., Washington, DC 20549-0609. Applicants, Mary Ellyn Minenko, 
Vice President and Group Counsel, American Express Financial Advisors 
Inc., 50607 AXP Financial Center, Minneapolis, MN 55474.

FOR FURTHER INFORMATION CONTACT: Mark Cowan, Senior Counsel, or Zandra 
Bailes, Branch Chief, Office of Insurance Products, Division of 
Investment Management, at (202) 942-0670.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee from 
the SEC's Public Reference Branch, 450 Fifth Street, NW., Washington, 
DC 20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. IDS Life is a stock life insurance company organized in 1957 
under the laws of the State of Minnesota. It conducts a conventional 
life insurance business. IDS Life is registered with the Commission as 
a broker-dealer under the Securities Exchange Act of 1934, as amended, 
and is a member of the National Association of Securities Dealers. IDS 
Life is a wholly owned subsidiary of American Express Financial 
Corporation (``AEFC''). IDS Life is the issuer and principal 
underwriter of the Contracts funded through the Accounts.
    2. Account 10 is a segregated asset account of IDS Life. Account 10 
funds the variable benefits available under RAVA Advantage Plus. 
Account 10 and its component subaccounts are registered together with 
the Commission as a single unit investment trust under the Act (File 
No. 811-07355).
    3. The Old Accounts are segregated asset accounts of IDS Life. The 
Old Accounts fund the variable benefits available under the IDS Life 
Variable Retirement Annuity (``VRA''), the IDS Life Combination 
Retirement Annuity (``CRA''), the IDS Life Flexible Annuity (``Flex'') 
and the IDS Life Employee Benefit Annuity (``EBA''). The Old Accounts 
are registered together with the Commission as a single unit

[[Page 1915]]

investment trust under the Act (File No. 811-3217).
    4. Applicants assert that in recent years the variable annuity 
marketplace has become increasingly competitive. Many of the purchasers 
of variable annuity contracts in the 1980s and early 1990s are at, or 
close to, the expiration of their contingent deferred sales charge 
(``CDSC'') periods, and the contract values of many contracts are no 
longer subject to a CDSC. Holders of such contracts have become prime 
targets for competitors' variable annuity sales efforts. One feature 
offered to variable annuity purchasers is a ``bonus'' or ``credit'' 
funded from the insurer's general account, generally ranging from 1-4% 
of contract value. IDS Life has experienced the effects of these 
``bonus offers'' through the loss of a portion of its Old Contracts.
    5. IDS Life states that its competitors are permitted to make bonus 
offers to IDS Life's Old Contract owners because offers of exchange to 
contract owners of unaffiliated insurance companies are not prohibited 
by Section 11 of the Act by virtue of a no-action position granted to 
Alexander Hamilton Funds (pub. avail. July 20, 1994) (``Alexander 
Hamilton''). Applicants state that Alexander Hamilton stands for the 
proposition that, except for limited exceptions, exchange offers 
between unaffiliated investment companies are not prohibited under 
section 11. Consistent with section 11(a), therefore, a fund may impose 
a CDSC on shares purchased by investors with proceeds of shares from an 
unaffiliated fund.
    6. Applicants assert that, but for the existence of the affiliated 
nature of the exchange, IDS Life would be able to offer an exchange 
program to its existing Old Contract owners that is similar to its 
competitors' programs. However, unlike its competitors who may make 
bonus offers to Old Contract owners, IDS Life is constrained from 
making a similar offer without first obtaining Commission approval of 
the terms of the exchange.

Existing Exchange Offer

    7. Applicants state that in response to this competitive dilemma, 
IDS Life developed an offer of exchange. On March 12, 2002, the 
Commission issued an order approving the terms of the offer of exchange 
(``Existing Exchange Offer'') that permits eligible contract owners to 
exchange Old Contracts for American Express Retirement Advisor 
Advantage\sm\ Variable Annuity (``RAVA Advantage'') contracts issued by 
IDS Life and made available through Account 10 (``Existing Order''). 
RAVA Advantage is an enhanced contract that offers a lower mortality 
and expense risk (``M&E'') charge than the Old Contracts, credits 
(``Purchase Payment Credits'') on certain payments to the contracts 
(initial payments and subsequent additional payments to the contracts 
are referred to herein individually as a ``Purchase Payment'' and 
collectively as ``Purchase Payments''), more subaccounts investing in 
corresponding funds or portfolios (collectively, ``Investment Funds'') 
and optional enhanced death benefits. IDS Life applies a credit to 
certain exchanges (``Exchange Credit'' and collectively with Purchase 
Payment Credits, ``Credits'') that is in addition to any Purchase 
Payment Credit for which the contract owner would otherwise be eligible 
under the RAVA Advantage contract.
    8. When a contract owner exchanges into a RAVA Advantage contract, 
he or she can allocate the Purchase Payment to any of the Investment 
Funds available under RAVA Advantage. If a contract owner exercises the 
free look option, IDS Life reverses either the RAVA Advantage contract 
value (less any Credits) or the Purchase Payment made to the RAVA 
Advantage contract, depending on applicable law. IDS Life applies this 
amount to restore the Old Contract to the extent possible. IDS Life 
allocates this amount to the selected Old Contract investments in the 
proportions that existed just prior to the exchange. Any adjustments 
made due to investment experience are allocated or deducted according 
to the selected investment percentage allocations under the Old 
Contract just prior to the exchange. Withdrawals made after the free 
look period under RAVA Advantage has expired are governed by the terms 
of the RAVA Advantage contract, including application of the CDSC. To 
the extent a death benefit or surrender payment included any Credit 
amounts applied within twelve months preceding: (i) The date of death 
that results in a lump sum death benefit under RAVA Advantage; or (ii) 
a request for a CDSC waiver due to the owner or annuitant's confinement 
to a nursing home, IDS Life will recapture the Credits.

Extended Exchange Offer

    9. In February 2004, IDS Life began selling RAVA Advantage Plus in 
approved States. RAVA Advantage Plus is an enhanced version of RAVA 
Advantage and is available as a nonqualified annuity for after-tax 
contributions only, or as a qualified annuity under certain retirement 
plans. RAVA Advantage Plus--Band 3 is available to current or retired 
employees of AEFC and their spouses (collectively, ``Employees''); 
current or retired financial advisors who are registered 
representatives of IDS Life and their spouses (collectively, 
``Advisors''); or individuals who, with IDS Life's approval, invest an 
initial Purchase Payment of $1,000,000 or more (collectively, ``Band 3 
Contracts''). RAVA Advantage Plus offers an additional death benefit, 
additional Purchase Payment Credits under Band 3 Contracts, different 
Investment Funds, guarantee period accounts (``GPAs''), an optional 
guaranteed minimum withdrawal benefit (``Withdrawal Benefit''), 
different transfer provisions and additional features such as a special 
dollar-cost averaging program. If an Old Contract owner exchanged into 
a RAVA Advantage Plus contract, he or she could allocate Purchase 
Payments to any of the Investment Funds available under RAVA Advantage 
Plus, including most of the Investment Funds available under the Old 
Contract, as well as Investment Funds that are not available under the 
Old Contract. To the extent a death benefit or surrender payment 
included any Credit amounts applied within twelve months preceding: (i) 
The date of death that results in a lump sum death benefit under RAVA 
Advantage Plus; (ii) a request for a CDSC waiver due to the owner or 
owner's spouse's confinement to a nursing home or hospital or the 
owner's terminal illness; or (iii) the owner's settlement under an 
annuity payout plan, IDS Life will recapture the Credits. If a non-
natural person owns the RAVA Advantage Plus contract, the benefits and 
distributions under the contract are based on the life of the 
annuitant.
    10. Applicants now seek an Amended Order to approve extending the 
terms of the Existing Exchange Offer to permit the exchange of the Old 
Contracts for new RAVA Advantage Plus contracts in those states where 
RAVA Advantage Plus is approved (``Extended Exchange Offer''). The 
terms of the Extended Exchange Offer would be substantially similar to 
those described in the Existing Order. Applicants state that the 
Extended Exchange Offer, like the Existing Exchange Offer, is designed 
to respond to IDS Life's competitive dilemma and to assure that 
persisting contract owners who accept the Extended Exchange Offer 
receive an immediate and enduring economic benefit.

Comparison of RAVA Advantage and RAVA Advantage Plus

    11. The primary differences between RAVA Advantage and RAVA 
Advantage Plus are as follows:

[[Page 1916]]

a. Purchase Payments
    Both RAVA Advantage and RAVA Advantage Plus may be issued as a non-
qualified annuity for after-tax contributions only, or as a qualified 
annuity under the following retirement plans: (i) Individual Retirement 
Annuities, including Roth IRAs (collectively, ``IRAs''); (ii) SIMPLE 
IRAs; (iii) Simplified Employee Pension (``SEP'') plans; (iv) plans 
under Section 401(k) of the Internal Revenue Code of 1986, as amended 
(``Code'') (``section 401(k) Plans''); (v) custodial and trusteed plans 
under section 401(a) of the Code (``section 401(a) Plans''); or (vi) 
Tax-Sheltered Annuities under section 403(b) of the Code (``TSAs''). 
Under RAVA Advantage, the owner may allocate Purchase Payments to 
subaccounts or the fixed account in even 1% increments. Under RAVA 
Advantage Plus, if the owner has not selected the Withdrawal Benefit, 
the owner may allocate Purchase Payments to the subaccounts, GPAs (in 
approved States), the fixed account and/or the special dollar cost 
averaging account (when available) in even 1% increments. If the owner 
has selected the Withdrawal Benefit, the owner must allocate Purchase 
Payments in accordance with an available asset allocation program. IDS 
Life reserves the right to not accept Purchase Payments allocated to 
the fixed account for twelve months following either a partial 
surrender from the fixed account or a lump sum transfer from the fixed 
account to a subaccount.
b. Investment Funds and Other Investment Options
    Owners of RAVA Advantage contracts currently may allocate their 
Purchase Payments among 53 Investment Funds from 17 fund families. 
Owners of RAVA Advantage Plus contracts currently may allocate their 
Purchase Payments among 56 Investment Funds from 17 fund families. RAVA 
Advantage also offers a fixed account investment option with a 
guaranteed minimum interest rate of 3% on an annual basis. RAVA 
Advantage Plus offers a fixed account investment option with a 
guaranteed minimum interest rate ranging from 1.5% to 3% on an annual 
basis depending on the State in which the contract is issued. In 
addition, RAVA Advantage Plus offers GPAs (in approved States). The 
owner may allocate Purchase Payments and Purchase Payment Credits to 
one or more of the GPAs with guarantee periods that IDS Life declares. 
Each GPA pays an interest rate that IDS Life declares when the owner 
makes an allocation to the account.
c. Optional Withdrawal Benefit
    RAVA Advantage Plus contains a new optional living benefit that 
currently is not available under RAVA Advantage. The Withdrawal Benefit 
is available (in approved States) if the owner is age 75 or younger at 
contract issue. The Withdrawal Benefit gives the owner the right to 
take limited partial withdrawals in each contract year that ultimately 
equal Purchase Payments plus Purchase Payment Credits, as adjusted for 
certain excess withdrawals. The Guaranteed Benefit Payment is the 
amount that the owner is entitled to take through partial withdrawals 
each contract year. An annual Elective Step up option is available that 
allows the owner to step up the Guaranteed Benefit Amount to 100% of 
the contract anniversary value, subject to certain rules. The 
Withdrawal Benefit requires that the owner participate in an available 
asset allocation program. The current cost of the Withdrawal Benefit is 
0.60%. IDS Life reserves the right to increase this cost up to a 
maximum of 2.50% for new RAVA Advantage Plus contract owners. However, 
any change to the cost will only apply to an existing RAVA Advantage 
Plus contract owner if: (i) He or she changes asset allocation models 
and the current cost for new owners is higher than the cost currently 
paid by the existing owner; or (ii) the existing RAVA Advantage Plus 
contract owner chooses the annual Elective Step up and the current cost 
for new owners is higher than the cost currently paid by the existing 
owner. IDS Life also reserves the right to charge a fee that varies by 
the asset allocation model selected.
d. Transfers
    Under RAVA Advantage the owner may transfer contract values between 
the subaccounts, or from the subaccounts to the fixed account. However, 
certain restrictions apply with respect to the timing of transfers from 
the fixed account. Under RAVA Advantage Plus, if required to 
participate in the asset allocation program in connection with the 
Withdrawal Benefit, the owners may not make transfers except among the 
various asset allocation models then available. Otherwise, the owner 
may transfer contract values between the subaccounts. The owner also 
may transfer contract values from the subaccounts to the GPAs and the 
fixed account. However, certain restrictions apply with respect to the 
timing of transfers from the fixed account. The owner may transfer 
contract values from any GPA to the subaccounts, fixed account or 
another GPA any time after 60 days of transfer or Purchase Payment 
allocation into that GPA. Transfers made more than 30 days before the 
end of the guarantee period will receive a market value adjustment, 
which may result in a gain or loss of contract value.
e. Purchase Payment Credits
    Under RAVA Advantage, the Purchase Payment Credits are: 1% of each 
Purchase Payment received if the owner selected the ten-year CDSC 
schedule and the initial Purchase Payment is under $100,000 or if the 
owner selected the seven-year CDSC schedule and the initial Purchase 
Payment is at least $100,000; and 2% of each Purchase Payment received 
if the owner selected the ten-year CDSC schedule and the initial 
Purchase Payment is at least $100,000.
    Under RAVA Advantage Plus, the Purchase Payment Credits are: 1% of 
each Purchase Payment received if the owner selected the ten-year CDSC 
schedule and the initial Purchase Payment is under $100,000 or if the 
owner selected the seven-year CDSC schedule and the initial Purchase 
Payment is at least $100,000 but less than $1,000,000; and 2% of each 
Purchase Payment received if the owner selected the ten-year CDSC 
schedule and the initial Purchase Payment is at least $100,000 but less 
than $1,000,000. For Band 3 Contracts, the Purchase Payment Credits 
are: 2% of each Purchase Payment received if the owner selected the 
seven-year CDSC schedule; and 3% of each Purchase Payment received if 
the owner selected the ten-year CDSC schedule.
f. Recapture of Purchase Payment Credits
    Under RAVA Advantage, IDS Life currently recaptures Purchase 
Payment Credits if the owner returns the RAVA Advantage contract during 
the free look period. IDS Life also may recapture Purchase Payment 
Credits if they were applied within twelve months preceding: the date 
of death that results in a lump sum death benefit; or a request for a 
surrender due to the owner or annuitant's confinement to a nursing 
home. See, IDS Life Insurance Company, et al., Investment Company Act 
Release Nos. 24220 (December 23, 1999) (Notice) and 24257 (January 19, 
2000) (Order).
    Under RAVA Advantage Plus, IDS Life currently recaptures Purchase 
Payment Credits if the owner returns the RAVA Advantage Plus contract 
during the free look period. IDS Life also may recapture Purchase 
Payment Credits if they were applied within twelve months

[[Page 1917]]

preceding: the date of death that results in a lump sum death benefit; 
a request for a surrender due to the owner or owner's spouse's 
confinement to a nursing home or hospital or the owner's terminal 
illness; or settlement under an annuity payout plan. See, IDS Life 
Insurance Company, et al., Investment Company Act Release Nos. 26338 
(January 22, 2004) (Notice) and 26354 (February 20, 2004) (Order).
g. Surrender Options
    Under RAVA Advantage, the owner can access contract values at any 
time through partial or full surrender and the owner has a Free 
Withdrawal Amount equal to earnings or up to 10% of the prior 
anniversary contract value per contract year (if not already included 
in earnings).
    Under RAVA Advantage Plus, the owner can access contract values at 
any time through partial or full surrender. If the owner has not 
selected the Withdrawal Benefit, the owner has a Total Free Amount 
equal to earnings or up to 10% of the prior anniversary contract value 
per contract year (if not already included in earnings). If the owner 
selected the Withdrawal Benefit, the owner may withdraw up to the 
Guaranteed Benefit Payment each contract year. Amounts withdrawn in 
excess of Guaranteed Benefit Payment may reduce future amounts 
available under the Withdrawal Benefit.
h. All Standard and Optional Death Benefits
    Under RAVA Advantage, payment to the beneficiary occurs upon the 
earlier of the owner or annuitant's death, and benefits are based on 
the age of both the owner and annuitant. Under RAVA Advantage Plus, 
payment to the beneficiary occurs upon the owner's death, and benefits 
are based on the age of the owner.
i. Standard Death Benefit
    Under RAVA Advantage, if the owner and annuitant are age 80 or 
younger on date of death, the death benefit is the greatest of: The 
contract value; the contract value as of most recent sixth contract 
anniversary plus subsequent Purchase Payments less adjusted partial 
surrenders; or Purchase Payments less adjusted partial surrenders. If 
either the owner or annuitant is age 81 or older on the date of death, 
the death benefit is the greatest of: The contract value; or Purchase 
Payments less adjusted partial surrenders. The benefit provided under 
the optional Return of Purchase Payments Death Benefit (``ROPP Death 
Benefit'') described below is included in the RAVA Advantage standard 
death benefit at no extra cost.
    Under RAVA Advantage Plus, if the owner is age 75 or younger at 
contract issue, the death benefit is the greater of: the contract 
value, less any Purchase Payment Credits subject to recapture and less 
a pro rata portion of any rider fees; or Purchase Payments less 
adjusted partial surrenders. If the owner is age 76 or older at 
contract issue, the death benefit is: The contract value, less any 
Purchase Payment Credits subject to recapture and less a pro rata 
portion of any rider fees.
j. Optional Return of Purchase Payment (``ROPP'') Death Benefit
    Under RAVA Advantage Plus, the ROPP Death Benefit is available (in 
approved states) if the owner is age 76 or older at contract issue. The 
benefit provided by the ROPP Death Benefit is included in the standard 
death benefit if the owner is age 75 or younger at contract issue at no 
additional cost. The ROPP Death Benefit states that, upon the owner's 
death before annuity payouts begin and while the contract is in force, 
IDS Life will pay the designated beneficiary the greater of: The 
contract value, less Purchase Payment Credits subject to recapture and 
less a pro rata portion of any rider fees; or Purchase Payments minus 
adjusted partial surrenders. The current cost of the ROPP Death Benefit 
is 0.20%. IDS Life reserves the right to increase the cost after the 
tenth rider anniversary to a maximum of 0.30% and to discontinue 
offering the ROPP Death Benefit for new RAVA Advantage Plus contracts.
k. Optional Maximum Anniversary Value (``MAV'') Death Benefit
    The optional MAV Death Benefit is available under both RAVA 
Advantage and RAVA Advantage Plus. Under RAVA Advantage, the MAV Death 
Benefit is available (in approved States) if both the owner and 
annuitant are age 75 or younger at contract issue. The MAV Death 
Benefit states that, upon the earlier of the owner or annuitant's death 
before annuity payouts begin and while the contract is in force, IDS 
Life will pay the designated beneficiary the Maximum Anniversary Value 
(``MAV'').
    Under RAVA Advantage Plus, the MAV Death Benefit is available (in 
approved States) if the owner is age 75 or younger at contract issue. 
The MAV Death Benefit states that, upon the owner's death before 
annuity payouts begin and while the contract is in force, IDS Life will 
pay the designated beneficiary the greatest of: The contract value, 
less Purchase Payment Credits subject to recapture and less a pro rata 
portion of any rider fees; Purchase Payments minus adjusted partial 
surrenders; or the MAV as calculated on the most recent contract 
anniversary plus subsequent Purchase Payments made and minus 
adjustments for partial surrenders since that contract anniversary. The 
current cost of the MAV Death Benefit under RAVA Advantage Plus is 
0.25%. IDS Life reserves the right to increase this cost after the 
tenth rider anniversary to a maximum of 0.35% and to discontinue 
offering the MAV Death Benefit for new RAVA Advantage Plus contracts. A 
fee discount of 0.10% applies if the owner purchases the MAV Death 
Benefit with either the EEB or EEP (described below).
l. Optional Maximum Five-Year Anniversary Value (``5-Year MAV'') Death 
Benefit
    RAVA Advantage Plus contains a new optional death benefit that 
currently is not available under RAVA Advantage. The 5-Year MAV Death 
Benefit is available (in approved states) if the owner is age 75 or 
younger at contract issue. The 5-Year MAV Death Benefit states that, 
upon the owner's death before annuity payouts begin and while the 
contract is in force, IDS Life will pay the designated beneficiary the 
greatest of: The contract value, less Purchase Payment Credits subject 
to recapture and less a pro rata portion of any rider fees; Purchase 
Payments minus adjusted partial surrenders; or the MAV as calculated on 
the most recent fifth contract anniversary plus subsequent Purchase 
Payments made and minus adjustments for partial surrenders since that 
contract anniversary. The current cost of the 5-Year MAV Death Benefit 
is 0.10%. IDS Life reserves the right to increase this cost after the 
tenth rider anniversary to a maximum of 0.20% and to discontinue 
offering the 5-Year MAV Death Benefit for new RAVA Advantage Plus 
contracts. A fee discount of 0.05% applies if the owner purchases the 
5-Year MAV Death Benefit with either the EEB or EEP (described below).
m. Optional Enhanced Earnings Death Benefit (``EEB'')
    The optional EEB is available under both RAVA Advantage and RAVA 
Advantage Plus. Under RAVA Advantage, the EEB is available (in approved 
States) if both the owner and annuitant are age 75 or younger at the 
rider effective date. The EEB states that, upon the earlier of the 
owner or annuitant's death after the first contract anniversary but 
before annuity payouts begin and while the contract is in force, IDS 
Life will pay the designated

[[Page 1918]]

beneficiary the standard death benefit or the MAV Death Benefit, if 
applicable, plus: 40% of earnings at death if the owner and the 
annuitant were under age 70 on the rider effective date, up to a 
maximum of 100% of Purchase Payments not previously surrendered that 
are one or more years old; or 15% of earnings at death if the owner or 
the annuitant were age 70 to 75 on the rider effective date, up to a 
maximum of 37.5% of Purchase Payments not previously surrendered that 
are one or more years old. The cost of the EEB under RAVA Advantage is 
0.30%.
    Under RAVA Advantage Plus, the EEB is available (in approved 
States) if the owner is age 75 or younger at the rider effective date. 
The EEB states that, upon the owner's death after the first contract 
anniversary but before annuity payouts begin and while the contract is 
in force, IDS Life will pay the designated beneficiary the standard 
death benefit or the MAV Death Benefit or 5-Year MAV Death Benefit, if 
applicable, plus: 40% of earnings at death if the owner was under age 
70 on the rider effective date, up to a maximum of 100% of Purchase 
Payments not previously surrendered that are one or more years old; or 
15% of earnings at death if the owner was age 70 to 75 on the rider 
effective date, up to a maximum of 37.5% of Purchase Payments not 
previously surrendered that are one or more years old. The current cost 
of the EEB under RAVA Advantage Plus is 0.30%. IDS Life reserves the 
right to increase this cost after the tenth rider anniversary to a 
maximum of 0.40% and to discontinue offering the EEB for new RAVA 
Advantage Plus contracts. A fee discount of 0.10% applies if the owner 
purchases the MAV Death Benefit with the EEB and a fee discount of 
0.05% applies if the owner purchases the 5-Year MAV Death Benefit with 
the EEB.
n. Optional Enhanced Earnings Plus Death Benefit (``EEP'')
    The optional EEP is available under both RAVA Advantage and RAVA 
Advantage Plus. Under RAVA Advantage, this benefit is available (in 
approved states) if both the owner and annuitant are age 75 or younger 
at contract issue, and the contract is purchased through an exchange. 
The EEP states that, upon the earlier of the owner or annuitant's 
death, after the first contract anniversary but before annuity payouts 
begin and while the contract is in force, IDS Life will pay the 
designated beneficiary: EEP Part I benefits, which equal the benefits 
payable under the EEB described above; plus EEP Part II benefits, which 
equal a percentage of exchanged Purchase Payments identified at issue 
and not previously surrendered as follows:

------------------------------------------------------------------------
                                         Percentage if    Percentage if
                                           owner and         owner or
                                         annuitant are    annuitant  are
          Contract year date           under age 70  on   70-75  on the
                                           the rider          rider
                                        effective date    effective date
------------------------------------------------------------------------
One and Two..........................                 0            0
Three and Four.......................                10            3.75
Five or more.........................                20            7.5
------------------------------------------------------------------------

    The cost of the EEP under RAVA Advantage is 0.40%.
    Under RAVA Advantage Plus, the EEP is available (in approved 
States) if the owner is age 75 or younger at contract issue. The EEP 
states that, upon the owner's death after the first contract 
anniversary but before annuity payouts begin and while the contract is 
in force, IDS Life will pay the designated beneficiary: EEP Part I 
benefits, which equal the benefits payable under the EEB described 
above; plus EEP Part II benefits, which equal a percentage of exchanged 
Purchase Payments identified at issue and not previously surrendered as 
follows:

------------------------------------------------------------------------
                                         Percentage if    Percentage if
                                        owner is  under   owner is  age
            Contract year               age 70  on the    70-75  on the
                                       rider  effective       rider
                                             date         effective date
------------------------------------------------------------------------
One and Two..........................                 0            0
Three and Four.......................                10            3.75
Five or more.........................                20            7.5
------------------------------------------------------------------------

    The current cost of the EEP under RAVA Advantage Plus is 0.40%. IDS 
Life reserves the right to increase this cost after the tenth rider 
anniversary to a maximum of 0.50% and to discontinue offering the EEP 
for new RAVA Advantage Plus contracts. A fee discount of 0.10% applies 
if the owner purchases the MAV Death Benefit with the EEP and a fee 
discount of 0.05% applies if the owner purchases the 5-Year MAV Death 
Benefit with the EEP.
o. Annuity Payout Options
    There are five annuity payout options under both RAVA Advantage and 
RAVA Advantage Plus: (A) Life annuity--no refund; (B) life annuity with 
five, ten or 15 years certain; (C) life annuity--installment refund; 
(D) joint and last survivor life annuity--no refund; and (E) payouts 
for a specified period. These five annuity payouts are available on a 
fixed or variable basis, or a combination of both. A sixth annuity 
payout option, the Remaining Benefit Amount Payout Option, is available 
only under the Withdrawal Benefit under RAVA Advantage Plus. This sixth 
annuity payout is available on a fixed basis only. IDS may also agree 
to other payout arrangements.
p. Asset Rebalancing
    Under both RAVA Advantage and RAVA Advantage Plus, if the owner has 
not selected the Withdrawal Benefit, the owner can elect to have the 
variable subaccount portion of the contract value automatically 
rebalanced on either a quarterly, semi-annual or annual basis, based on 
the allocations chosen by the

[[Page 1919]]

contract owner. Under RAVA Advantage Plus, if the owner has selected 
the Withdrawal Benefit and therefore is required to participate in an 
asset allocation program, IDS rebalances contract values quarterly. 
There is no additional cost for asset rebalancing.
q. Other Features
    Both RAVA Advantage and RAVA Advantage Plus provide for dollar-cost 
averaging. In addition, RAVA Advantage Plus provides for a special 
dollar-cost averaging program (which may not be available at all 
times). IDS Life reserves the right to add new contract features to 
RAVA Advantage and/or RAVA Advantage Plus.
r. CDSC Schedules
    Under both RAVA Advantage and RAVA Advantage Plus, IDS Life 
assesses a CDSC against partial or full surrenders in excess of the 
Free Withdrawal Amount/ Total Free Amount. IDS Life applies a CDSC on 
each Purchase Payment. The length of time from receipt of a Purchase 
Payment to the time of surrender determines the percentage of CDSC. 
Under the seven-year CDSC period, the CDSC ranges from 7% in year 1 to 
0% in year 8 and after. Under the ten-year CDSC period, the CDSC ranges 
from 8% in year 1 to 0% in year 11 and after. IDS Life does not assess 
a CDSC on contract earnings, Free Withdrawal Amounts/ Total Free 
Amounts, required minimum distributions (provided the amount is no 
greater than the required minimum distribution amount calculated under 
the specific contract, currently in force), amounts refunded during the 
free look period, death benefits, or if payments are made under any 
annuity payout option (unless payouts made under annuity payout option 
E are later surrendered). Additionally, the RAVA Advantage contract 
provides for a waiver of the CDSC if the owner or annuitant is confined 
to a nursing home, and has been for the prior 90 days, and confinement 
began after the contract date. RAVA Advantage Plus provides for a 
waiver of the CDSC if the owner or the owner's spouse is confined to a 
nursing home or hospital, and has been for the prior 60 days, and 
confinement began after the contract date. RAVA Advantage Plus also 
provides for a waiver of the CDSC if the owner is diagnosed in the 
second or later contract years as disabled with a medical condition 
that with reasonable medical certainty will result in death within 12 
months or less from the date of a licensed physician's statement.
s. M&E Charge
    During the life of the RAVA Advantage contract, IDS life deducts an 
M&E charge at an annual rate of 0.95% of the average daily subaccount 
value for nonqualified annuity contracts and 0.75% of the average daily 
subaccount value for qualified annuity contracts. During the life of 
the RAVA Advantage Plus contract, IDS life deducts an M&E charge at an 
annual rate of 0.95% of the average daily subaccount value for 
nonqualified annuity contracts, 0.75% of the average daily subaccount 
value for qualified annuity contracts and 0.55% of the average daily 
subaccount value for Band 3 Contracts.
t. Contract Administrative Charge
    Under both RAVA Advantage and RAVA Advantage Plus, IDS Life deducts 
an annual charge of $30 for administrative expenses from the contract 
value of each contract. For RAVA Advantage Plus, IDS Life reserves the 
right to increase this annual contract administrative charge after the 
first contract anniversary to a maximum of $50. Under RAVA Advantage 
and RAVA Advantage Plus, IDS Life waives the contract administrative 
charge when the contract value, or total Purchase Payments less any 
Purchase Payments surrendered, is $50,000 or more on the current 
contract anniversary.
u. Premium Tax
    Under both RAVA Advantage and RAVA Advantage Plus, IDS life deducts 
premium taxes of up to 3.5%, if applicable. These taxes depend upon the 
contract owner's state of residence or the State in which the contract 
was sold. Currently IDS Life deducts any applicable premium tax when 
annuity payouts begin. However, IDS Life reserves the right to deduct 
this tax at other times such as when a contract is surrendered.
v. Operating Expenses of the Investment Funds
    Under both RAVA Advantage and RAVA Advantage Plus, assets invested 
in the Investment Funds are charged with the annual operating expenses 
of those Investment Funds.

The Old Contracts

    12. VRA and CRA are registered together under the 1933 Act (File 
No. 2-73114). IDS Life no longer offers VRA contracts. IDS Life offers 
CRA contracts only for limited purposes. VRA and CRA both were issued 
as nonqualified annuities for after-tax contributions only, or as 
qualified annuities under the following retirement plans: (i) IRAs; 
(ii) SEP plans; (iii) Section 401(k) Plans; (iv) Section 401(a) Plans; 
(v) TSAs, or (vi) plans under Section 457 of the Code (``Section 457 
Plans''). VRA was purchased with a single Purchase Payment between 
$5,000 and $500,000. No additional Purchase Payments are allowed under 
VRA. CRA may be purchased with a minimum initial Purchase Payment of 
$600, or in minimum installments of $50 per month or $23.08 biweekly 
under a scheduled payment plan. An owner may make additional Purchase 
Payments to CRA, which require a $50 minimum (unless Purchase Payments 
are made by installments under a scheduled payment plan), subsequent to 
the initial Purchase Payment. Maximum limitations on Purchase Payments 
are imposed for the first year and subsequent years, depending on 
whether the annuity is nonqualified or qualified. Participants in the 
CRA Select University of Wisconsin TSA Plan (``CRA Select'') bought CRA 
with installment payments of $200 to $25,000 annually.
    13. Owners of VRA and CRA contracts currently may allocate their 
Purchase Payments among 14 Old Accounts that invest in 14 corresponding 
Investment Funds (most of which currently are available under RAVA 
Advantage Plus). CRA also offers a fixed account investment option with 
a guaranteed minimum interest rate of 3.5% to 4% on an annual basis 
depending on when the CRA contract was issued. VRA does not have a 
fixed account investment option.
    14. Owners of VRA and CRA contracts may transfer contract values 
among the Old Accounts without charge. Transfers to and from CRA's 
fixed account are permitted, subject to certain restrictions described 
in the prospectus for the CRA contracts.
    15. The owner of a VRA or CRA contract can access contract values 
at any time before annuity payouts begin by means of partial surrenders 
or a full surrender. In addition, VRA permits the owner a Free 
Withdrawal Amount of up to 10% of the initial Purchase Payment amount 
each year after the first without incurring a CDSC. CRA Select permits 
an annual Free Withdrawal Amount of 10% of the contract value at the 
beginning of each contract year. There are no other Free Withdrawal 
Amounts under CRA.
    16. The death benefit under VRA and CRA is available at no extra 
cost. The death benefit provision under both VRA and CRA states that, 
upon the earlier of the owner or annuitant's death before annuity 
payouts begin and while the contract is in force, IDS Life will pay the 
following death benefits to the designated beneficiary: (i) If death

[[Page 1920]]

occurs before the annuitant's 75th birthday, the beneficiary receives 
the greater of the contract value; or Purchase Payments, minus any 
surrenders, or (ii) if death occurs on or after the annuitant's 75th 
birthday, the beneficiary receives the contract value.
    17. The VRA and CRA contracts contain the same annuity payout 
options A through E as RAVA Advantage Plus. Annuity payouts are 
available on a fixed or variable basis, or a combination of both.
    18. Under VRA, IDS Life assesses a CDSC against partial or full 
surrenders in excess of the Free Withdrawal Amount. The CDSC applies to 
surrenders in the first seven contract years as a percentage of the 
amount surrendered. The CDSC ranges from 7% in the first contract year 
to 0% after 7 contract years. Under CRA, IDS Life assesses a CDSC 
against partial or full surrenders (in excess of the Free Withdrawal 
Amount for CRA Select). The CDSC is a percentage of the amount 
surrendered. Three separate CDSC periods apply to the three different 
versions of CRA. For the original CRA, which is no longer sold, the 
CDSC applies to surrenders in the first eleven contract years and 
ranges from 7% in the first contract year to 0% after 11 contract 
years. For CRA Select, which funded the University of Wisconsin TSA 
Plan but is no longer sold, the CDSC applies to surrenders in the first 
eight contract years and ranges from 7% in the first contract year to 
0% after 8 contract years. For the CRA version that currently is sold 
for conversions from American Express Retirement Services or other IDS 
Life retirement annuities under which conversion is available, the CDSC 
applies to surrenders in the first seven contract years and ranges from 
6% in the first contract year to 0% after 7 contract years. IDS Life 
does not assess a CDSC on Free Withdrawal Amounts under any VRA or CRA 
Select contract, required minimum distributions (provided the amount is 
no greater than the required minimum distribution amount calculated 
under the specific contract, currently in force), amounts refunded 
during the free look period, death benefits, or if payments are made 
under any annuity payout option (unless payouts made under annuity 
payout option E are later surrendered).
    19. During the life of each VRA and CRA contract, IDS Life deducts 
an M&E charge at an annual rate of 1% of the average daily variable 
account value.
    20. IDS Life deducts a charge for administrative expenses annually 
from the contract value of each VRA and CRA contract. The annual 
contract administrative charge is $20 per contract year for VRA and $30 
per contract year for CRA.
    21. IDS Life deducts premium taxes of up to 3.5%, if applicable, 
and under the same terms as RAVA Advantage Plus.
    22. Assets invested in the Investment Funds are charged with the 
annual operating expenses of those Investment Funds.
    23. Flex is registered under the 1933 Act (File No. 33-4173). IDS 
Life no longer offers Flex contracts. Flex was issued as a nonqualified 
annuity for after-tax contributions only, or as a qualified annuity 
under the following retirement plans: (i) IRAs; (ii) SEP plans; (iii) 
Section 401(k) Plans; (iv) Section 401(a) Plans; (v) TSAs; or (vi) 
Section 457 Plans. Flex was purchased with a minimum initial Purchase 
Payment of $1,000 for qualified annuities or $2,000 for nonqualified 
annuities, or in minimum installments of $50 per month or $23.08 
biweekly under a scheduled payment plan. An owner may make additional 
Purchase Payments, which require a $50 minimum (unless Purchase 
Payments are made by installments under a scheduled payment plan), 
subsequent to the initial Purchase Payment. Maximum limitations on 
Purchase Payments are imposed for the first year, depending on the age 
of the owner or annuitant, and for each subsequent year.
    24. Owners of Flex contracts currently may allocate their Purchase 
Payments among the 14 Old Accounts that invest in 14 corresponding 
Investment Funds (most of which currently are available under RAVA 
Advantage Plus). Flex also offers a fixed account investment option 
with guaranteed minimum interest rates ranging from 3% to 4% on an 
annual basis, depending on when the Flex contract was issued.
    25. Owners of Flex contracts may transfer contract values among the 
Old Accounts without charge. Transfers to and from the fixed account 
are permitted, subject to certain restrictions described in the 
prospectus for the Flex contracts.
    26. The owner of a Flex contract can access contract values at any 
time before annuity payouts begin by means of partial surrenders or a 
full surrender. In addition, Flex permits the owner a Free Withdrawal 
Amount of contract earnings without incurring a CDSC.
    27. The death benefit under Flex is available at no extra cost. The 
death benefit provision states that, upon the earlier of the owner or 
annuitant's death before annuity payouts begin and while the contract 
is in force, IDS Life will pay the following death benefits to the 
designated beneficiary: (i) If death occurs before the annuitant's 75th 
birthday, the beneficiary receives the greatest of the contract value; 
the contract value as of the most recent sixth contract anniversary, 
minus any surrenders since that anniversary; or Purchase Payments, 
minus any surrenders; or (ii) if death occurs on or after the 
annuitant's 75th birthday, the beneficiary receives the greater of the 
contract value; or the contract value as of the most recent sixth 
contract anniversary, minus any surrenders since that anniversary.
    28. Flex contains the same annuity payout options A through E as 
RAVA Advantage Plus. Annuity payouts are available on a fixed or 
variable basis, or a combination of both.
    29. Under Flex, IDS Life assesses a CDSC against partial or full 
surrenders in excess of the Free Withdrawal Amount. IDS Life applies a 
CDSC of 7% on each Purchase Payment if the contract owner requests a 
surrender within six years of making that Purchase Payment. The Flex 
contract provides for a waiver of the CDSC for amounts surrendered 
after the later of the annuitant's attaining age 65 or the tenth 
contract anniversary. Additionally, IDS Life does not assess a CDSC on 
contract earnings, required minimum distributions (provided the amount 
is no greater than the required minimum distribution amount calculated 
under the specific contract, currently in force), death benefits, or if 
payments are made under any annuity payout option (unless payouts made 
under annuity payout option E are later surrendered).
    30. During the life of the Flex contract, IDS Life deducts an M&E 
charge at an annual rate of 1% of the average daily variable account 
value.
    31. IDS Life deducts a charge of $6 for administrative expenses at 
the end of each contract quarter from the contract value of the Flex 
contract (which equals an annual charge of $24 per contract year).
    32. IDS Life deducts premium taxes of up to 3.5%, if applicable, 
and under the same terms as RAVA Advantage Plus.
    33. Assets invested in the Investment Funds are charged with the 
annual operating expenses of those Investment Funds.
    34. EBA is registered under the 1933 Act (File No. 33-52518). IDS 
Life no longer offers EBA contracts. EBA was issued only as a group 
TSA. EBA was purchased with a minimum initial Purchase Payment of 
$1,000 or in minimum installments of $25 per month or $300 annually 
under a scheduled payment plan. An owner may make additional Purchase 
Payments, which require a $50 minimum (unless

[[Page 1921]]

Purchase Payments are made by installments under a scheduled payment 
plan), subsequent to the initial Purchase Payment. Maximum limitations 
on Purchase Payments are imposed for the first year, depending on the 
age of the contract owner, and for each subsequent year.
    35. Owners of EBA contracts currently may allocate their Purchase 
Payments among the 14 Old Accounts that invest in 14 corresponding 
Investment Funds (most of which currently are available under RAVA 
Advantage Plus). EBA also offers a fixed account investment option with 
a guaranteed minimum interest rate of 4% on an annual basis.
    36. Owners of EBA contracts may transfer contract values among the 
Old Accounts without charge. Transfers to and from the fixed account 
are permitted, subject to certain restrictions described in the 
prospectus for the EBA contracts.
    37. Subject to certain restrictions imposed by the Code, the owner 
of an EBA contract can access certificate values at any time before 
annuity payouts begin by means of partial surrenders or a full 
surrender.
    38. The death benefit under EBA is available at no extra cost. The 
death benefit provision states that, upon the owner/annuitant's death 
before annuity payouts begin and while the contract is in force, IDS 
Life will pay the following death benefits to the designated 
beneficiary: (i) If death occurs before the annuitant's 75th birthday, 
the beneficiary receives the greater of the certificate value; or 
Purchase Payments, minus any surrenders; or (ii) if death occurs on or 
after the annuitant's 75th birthday, the beneficiary receives the 
certificate value.
    39. EBA contains the same annuity payout options A through E as 
RAVA Advantage Plus. Annuity payouts are available on a fixed or 
variable basis, or a combination of both.
    40. Under EBA, IDS Life assesses a CDSC against partial or full 
surrenders in the first eleven certificate years as a percentage of the 
amount surrendered. The CDSC ranges from 8% in the first certificate 
year to 0% after 11 certificate years. The EBA contract provides for a 
waiver of the CDSC for amounts surrendered due to the owner's 
retirement under the TSA plan on or after age 55. Additionally, IDS 
Life does not assess a CDSC on required minimum distributions (provided 
the amount is no greater than the required minimum distribution amount 
calculated under the specific contract, currently in force), amounts 
refunded during the free look period, death benefits, or if payments 
are made under any annuity payout option (unless payouts made under 
annuity payout option E are later surrendered).
    41. During the life of the EBA contract, IDS Life deducts an M&E 
charge at an annual rate of 1% of the average daily variable account 
value.
    42. IDS Life deducts a $30 charge for administrative expenses at 
the end of each certificate year from the certificate value of the EBA 
contract.
    43. IDS Life deducts premium taxes of up to 3.5%, if applicable, 
and under the same terms as RAVA Advantage Plus.
    44. Assets invested in the Investment Funds are charged with the 
annual operating expenses of those Investment Funds.
    45. Applicants represent that the features and benefits of RAVA 
Advantage Plus will be no less favorable than those under the Old 
Contracts, with some exceptions for differences in the guaranteed 
minimum interest rate under the fixed account investment option, lower 
annuity settlement rates, some additional transfer restrictions and 
lower initial death benefits. Applicants also represent that, with some 
exceptions for the CDSC, the charge for administrative expenses and 
optional charges for optional death benefits, the fees and charges of 
the RAVA Advantage Plus contract will be no higher than those of the 
Old Contracts.

Terms of the Extended Exchange Offer

    46. Applicants propose to offer eligible owners of Old Contracts 
the opportunity to exchange their Old Contracts for RAVA Advantage Plus 
by means of the Extended Exchange Offer. Partial exchanges will not be 
permitted.
    47. To be eligible for the Extended Exchange Offer, an Old Contract 
owner must meet all of the following criteria: (i) Have completed ten 
or more contract or certificate years under the Old Contract; (ii) have 
not made Purchase Payments greater than $4,000 in any tax year under 
the Old Contract in the 36 months prior to accepting the Extended 
Exchange Offer (except for installment payments made under a scheduled 
payment plan); and (iii) have a remaining CDSC of 2% or less of the 
contract or certificate value of the Old Contract. IDS Life reserves 
the right to expand the Extended Exchange Offer to owners of contracts 
who have completed less than ten contract or certificate years under 
the Old Contract or who have made Purchase Payments greater than $4,000 
in any tax year under the Old Contract in the 36 months prior to 
accepting the Extended Exchange Offer. IDS Life also reserves the right 
to require a minimum contract or certificate value (``Exchange Value'') 
plus any additional transfers or rollovers for qualified annuities or 
any additional Purchase Payments or exchanges for nonqualified 
annuities (individually and collectively, the ``Additional Amounts'') 
for eligibility for the Extended Exchange Offer and to change those 
minimum amounts from time to time.
    48. If an owner accepts the Extended Exchange Offer, IDS Life will 
allocate to the owner's account either a Purchase Payment Credit or an 
Exchange Credit. Under RAVA Advantage Plus, each time IDS Life receives 
a Purchase Payment from an owner, it allocates to the owner's account a 
Purchase Payment Credit equal to 1% of each Purchase Payment received: 
(i) If the owner selected the ten-year CDSC schedule and the initial 
Purchase Payment is under $100,000; or (ii) if the owner selected the 
seven-year CDSC schedule and the initial Purchase Payment is at least 
$100,000 but less than $1,000,000. Each time IDS Life receives a 
Purchase Payment from the owner, it allocates to the owner's account a 
Purchase Payment Credit equal to 2% of each Purchase Payment received 
if the owner selected the ten-year CDSC schedule and the initial 
Purchase Payment is at least $100,000 but less than $1,000,000. Under 
the Band 3 Contracts, each time IDS Life receives a Purchase Payment 
from the owner, it allocates to the owner's account a Purchase Payment 
Credit equal to 2% of each Purchase Payment received if the owner 
selected the seven-year CDSC schedule and 3% of each Purchase Payment 
received if the owner selected the ten-year CDSC schedule. To increase 
the likelihood of remaining eligible to receive the applicable Purchase 
Payment Credit based on the initial Purchase Payment amount, the Old 
Contract owner could transfer that contract or certificate value 
allocated to the Old Accounts to the Old Account investing in the AXP 
[supreg] VP Cash Management Fund while the exchange is pending to help 
reduce the risk of market volatility.
    49. Under the terms of the RAVA Advantage Plus contract, if the 
initial Purchase Payment is less than $100,000, IDS Life will not 
allocate a 1% Purchase Payment Credit based on the initial Purchase 
Payment amount. However, in those cases where the initial Purchase 
Payment is less than $100,000, IDS Life will provide, from its general 
account assets, a 1% Exchange Credit based on the Exchange Value of the 
Old Contract applied to RAVA Advantage Plus on the day the exchange is 
effected (``Exchange Date''). This 1% Exchange Credit will not apply to 
subsequent Purchase Payments to RAVA Advantage Plus.

[[Page 1922]]

However, even when the initial Purchase Payment is less than $100,000, 
IDS Life will allocate a Purchase Payment Credit of 1% of the initial 
Purchase Payment and 1% of each subsequent Purchase Payment received if 
the owner selects the ten-year CDSC period.
    50. Upon the owner's acceptance of the Extended Exchange Offer, IDS 
Life will issue a RAVA Advantage Plus contract with all applicable 
Credits. No CDSC will be deducted upon the surrender of an Old Contract 
in connection with the exchange. The Exchange Value of each Old 
Contract, together with any applicable Additional Amounts and Credits, 
will be applied to the new RAVA Advantage Plus contract as of the 
Exchange Date. The Exchange Date will be the contract date of the new 
RAVA Advantage Plus contract for purposes of determining contract years 
and anniversaries after the Exchange Date.
    51. If the owner of the new RAVA Advantage Plus contract exercises 
the free look option, IDS Life will recapture any Credits. IDS Life 
will reverse either the RAVA Advantage Plus contract value (less any 
Credits and reflecting any applicable market value adjustment) or the 
Purchase Payment made to the RAVA Advantage Plus contract, depending on 
applicable law. IDS Life will apply this amount to restore the Old 
Contract to the extent possible. IDS Life will allocate this amount to 
the selected Old Contract investments in the proportions that existed 
just prior to the exchange. Any adjustments made due to investment 
experience and/or market value adjustment will be allocated or deducted 
according to the selected investment percentage allocations under the 
Old Contract just prior to the exchange. Withdrawals made after the 
free look period under RAVA Advantage Plus has expired will be governed 
by the terms of the RAVA Advantage Plus contract, including the 
application of the CDSC. To the extent a death benefit or surrender 
payment includes any Credit amounts applied within twelve months 
preceding: (i) The date of death that results in a lump sum death 
benefit under RAVA Advantage Plus; (ii) a request for a CDSC waiver due 
to the owner or owner's spouse's confinement to a nursing home or 
hospital or the owner's terminal illness; or (iii) the owner's 
settlement under an annuity payout plan, IDS Life will recapture the 
Credits.
    52. IDS Life will notify all owners of the Old Contracts of the 
Extended Exchange Offer through normal client communications such as 
updated prospectuses or prospectus supplements (``Program 
Announcement''). This Program Announcement will: (i) Describe the terms 
and conditions of the Extended Exchange Offer; (ii) suggest to owners 
who may qualify that they contact their registered representatives to 
learn more about the Extended Exchange Offer and to discuss their 
individual situations (including tax, financial planning and contract 
considerations); and (iii) notify owners that IDS Life reserves the 
right to cancel the Extended Exchange Offer at any time. In addition, 
IDS Life may send the information in the Program Announcement to some 
or all Old Contract owners via additional communications that also may 
include that owner's specific contract information (such as Exchange 
Value and applicable CDSC).
    53. IDS Life, either directly or through its registered 
representatives, will provide eligible Old Contract owners who are 
interested in learning more about the Extended Exchange Offer with an 
Offering Communication that includes information outlined in the 
Program Announcement and additional information describing the Extended 
Exchange Offer. The Offering Communication will state, in clear and 
plain English, that the Extended Exchange Offer is not designed for a 
contract owner who: (i) Intends to hold the RAVA Advantage Plus 
contract as a short-term investment vehicle; or (ii) anticipates 
surrendering all or part (i.e. more than the Total Free Amount on an 
annual basis) of his or her RAVA Advantage Plus contract before five to 
seven years (if the Old Contract owner would select the seven-year CDSC 
period under RAVA Advantage Plus) or eight to ten years (if the Old 
Contract owner would select the ten-year CDSC period under RAVA 
Advantage Plus). IDS Life will encourage Old Contract owners to 
carefully evaluate their personal financial planning situation when 
deciding whether to accept or reject the Extended Exchange Offer.
    54. In addition, the Offering Communication will explain how the 
owner of an Old Contract contemplating an exchange may avoid the 
applicable CDSC on the RAVA Advantage Plus contract by not surrendering 
more than the annual Total Free Amount and by holding any subsequent 
Purchase Payments until expiration of the CDSC period. In this regard, 
IDS Life will state, in clear and plain English, that if the owner 
surrenders the RAVA Advantage Plus contract during the initial CDSC 
period: (i) The lower M&E charges and any applicable Credits may be 
more than offset by the CDSC; and (ii) an Old Contract owner may be 
worse off than if he or she had rejected the Extended Exchange Offer.
    55. Furthermore, IDS Life will state, in clear and plain English, 
that guaranteed annuity settlement rates generally are lower under RAVA 
Advantage Plus. Therefore, if the Old Contract owner contemplates 
annuitizing the RAVA Advantage Plus contract during the first few 
years, the lower settlement factors may more than offset the lower M&E 
charges and any applicable Credits.
    56. IDS Life will explain that if an owner accepts the Extended 
Exchange Offer, IDS Life will allocate to the owner's account either a 
Purchase Payment Credit or an Exchange Credit. If the initial Purchase 
Payment is at least $100,000, IDS Life will allocate to the owner's 
account a Purchase Payment Credit on the initial Purchase Payment and 
on each subsequent Purchase Payment received. To increase the 
likelihood of remaining eligible to receive the applicable Purchase 
Payment Credit based on the initial Purchase Payment amount, the Old 
Contract owner could transfer that contract or certificate value 
allocated to the Old Accounts to the Old Account investing in the 
AXP[supreg] VP Cash Management Fund while the exchange is pending to 
help reduce the risk of market volatility. If the initial Purchase 
Payment to RAVA Advantage Plus is less than $100,000, IDS Life will 
provide a 1% Exchange Credit based on the Exchange Value of the Old 
Contract applied to RAVA Advantage Plus on the Exchange Date. The 1% 
Exchange Credit will not apply to subsequent Purchase Payments. 
However, even when the initial Purchase Payment is less than $100,000, 
IDS Life will allocate a Purchase Payment Credit of 1% of the initial 
Purchase Payment and 1% of each subsequent Purchase Payment received if 
the owner selects the ten-year CDSC period.
    57. In addition, IDS Life will prominently disclose that the 
guaranteed minimum interest rate on RAVA Advantage Plus' fixed account 
investment option may be less than the guaranteed minimum interest rate 
on the Old Contract's fixed account investment option. IDS Life also 
will disclose that the current death benefit on the Old Contract may be 
greater than the initial death benefit on RAVA Advantage Plus. When 
applicable, IDS Life also will explain that an owner of an Old Contract 
may lose some tax benefits. The Offering Communication will state that 
certain Investment Funds available under the Old Contracts are not 
available under RAVA Advantage Plus and that transfers to and from the

[[Page 1923]]

fixed account are more restricted under RAVA Advantage Plus than under 
the Old Contract. Finally, the Offering Communication will state that 
IDS Life may terminate the Extended Exchange Offer at any time. The 
Offering Communication also will include a prospectus for the new RAVA 
Advantage Plus contract.
    58. To accept the Extended Exchange Offer, the owner of an Old 
Contract must complete an internal exchange form and application for 
the RAVA Advantage Plus contract. Applicants state that those Old 
Contract owners who accept the Extended Exchange Offer will incur no 
current taxes and that the exchanges will constitute tax-free 
transfers, rollovers or exchanges pursuant to Section 1035 of the Code.
    59. Applicants submit that the Extended Exchange Offer is meant to 
encourage existing Old Contract owners to remain with IDS Life rather 
than surrender their contracts in exchange for a competitor's product. 
If the CDSC under RAVA Advantage Plus did not apply to the Exchange 
Value, Applicants assert that IDS Life would have no assurance that an 
Old Contract owner who accepted the Extended Exchange Offer would 
persist long enough for any applicable Credits, payments to registered 
representatives and other relevant expenses to be recouped through 
standard fees from the ongoing operation of the RAVA Advantage Plus 
contract.
    60. Applicants state that the commissions that IDS Life will pay 
its registered representatives for soliciting exchanges under the 
Extended Exchange Offer are less than the normal commissions paid for 
soliciting sales of RAVA Advantage Plus contracts. Applicants assert 
that compensating IDS Life's registered representatives for these 
exchanges is necessary in order to provide sufficient incentive for 
them to compete with competitors' registered representatives.
    61. IDS Life reserves the right to terminate the Extended Exchange 
Offer at any time. If IDS Life terminates the Extended Exchange Offer, 
it will send a notice to currently eligible Old Contract owners 
(``Termination Notice''). The Termination Notice will state that Old 
Contract owners who wish to participate in the Extended Exchange Offer 
must do so within two months from the date of the Termination Notice. 
The Termination Notice will contain all of the caveats described 
herein.

Applicants' Conditions

    Applicants agree to the following conditions:
    1. The Offering Communication and Termination Notice will contain 
concise, plain English statements that: (i) The Extended Exchange Offer 
is suitable only for an Old Contract owner who expects to hold RAVA 
Advantage Plus as a long-term investment; (ii) if the RAVA Advantage 
Plus contract is partially or completely surrendered during the initial 
CDSC period or annuitized during the first few years, the lower M&E 
charges and any applicable Credits may be more than offset by the CDSC 
or lower annuity settlement rates and an Old Contract owner may be 
worse off than if he or she had rejected the Extended Exchange Offer; 
(iii) IDS Life will allocate an Exchange Credit equal to 1% of the 
Exchange Value of the Old Contract when the initial Purchase Payment to 
the RAVA Advantage Plus contract is less than $100,000 (this Exchange 
Credit will not apply to subsequent Purchase Payments received); (iv) 
the guaranteed interest rate on RAVA Advantage Plus' fixed account 
option may be less than the guaranteed interest rate on the Old 
Contract's fixed account option; (v) the current death benefit on the 
Old Contract may be greater than the initial death benefit on RAVA 
Advantage Plus; (vi) certain Investment Funds available under the Old 
Contract are not available under RAVA Advantage Plus; (vii) transfers 
to and from the fixed account are more restricted under RAVA Advantage 
Plus than under the Old Contract; (viii) an Old Contract owner may lose 
some tax benefits (when applicable); and (ix) IDS Life reserves the 
right to terminate the Extended Exchange Offer.
    2. The Offering Communication will disclose in concise, plain 
English each aspect of the RAVA Advantage Plus contract that could be 
less favorable than the Old Contracts.
    3. IDS Life, either directly or through its registered 
representatives, will send an Offering Communication to eligible Old 
Contract owners who are interested in learning more about the Extended 
Exchange Offer. An Old Contract owner choosing to exchange will then 
complete and sign an internal exchange form and RAVA Advantage Plus 
application and return it to IDS Life. This internal exchange form will 
prominently restate in concise, plain English the caveats described 
above in Condition (1). If the internal exchange form is more than two 
pages long, IDS Life will use a separate document to obtain contract 
owner acknowledgment of the caveats described in Condition (1).
    4. IDS Life will maintain the following separately identifiable 
records in an easily accessible place for the time periods specified 
below in this Condition (4) for review by the Commission upon request: 
(i) Records showing the level of exchange activity and how it relates 
to the total number of Old Contract owners eligible to exchange 
(quarterly as a percentage of the number eligible); (ii) copies of any 
form of Program Announcements, Offering Communications, Termination 
Notices and other written materials or scripts for presentations by 
registered representatives regarding the Extended Exchange Offer that 
IDS Life either prepares or approves, including the dates that such 
materials were used; (iii) records containing information about each 
exchange transaction that occurs, including the name of the contract 
owner, Old Contract and RAVA Advantage Plus contract numbers; the 
amount of CDSC waived on surrender of the Old Contract; Purchase 
Payment Credits and Exchange Credits paid; the name and CRD number of 
the registered representative soliciting the exchange, firm 
affiliation, branch office address, telephone number and the name of 
the registered representative's broker-dealer; commission paid; the 
internal exchange form (and separate document, if any, used to obtain 
the Old Contract owner's acknowledgment of the caveats required in 
Condition (1)) showing the name, date of birth, address and telephone 
number of the contract owner and the date the internal exchange form 
(or separate document) was signed; amount of contract or certificate 
value exchanged; and persistency information relating to the RAVA 
Advantage Plus contract, including the date of any subsequent surrender 
and the amount of CDSC paid on the surrender; and (iv) logs showing a 
record of any contract owner complaint about the exchange, state 
insurance department inquiries about the exchange, or litigation, 
arbitration, or other proceeding regarding any exchange. The logs will 
include the date of the complaint or commencement of the proceeding, 
name and address of the person making the complaint or commencing the 
proceeding, nature of the complaint or proceeding, and the persons 
named or involved in the complaint or proceeding. Applicants will 
retain records specified in (i) and (iv) for a period of six years 
after the date the records are created, records specified in (ii) for a 
period of six years after the date of last use, and records specified 
in (iii) for a period of two years after the date that the initial CDSC 
period of the RAVA Advantage Plus contract ends.

[[Page 1924]]

Applicants' Legal Analysis

    1. Section 11(a) of the Act makes it unlawful for any registered 
open-end company, or any principal underwriter for such a company, to 
make or cause to be made an offer to the holder of a security of such 
company, or of any other open-end investment company, to exchange his 
or her security for a security in the same or another such company on 
any basis other than the relative net asset values of the respective 
securities, unless the terms of the offer have first been submitted to 
and approved by the Commission or are in accordance with Commission 
rules adopted under section 11.
    2. Section 11(c) of the Act, in pertinent part, requires, in 
effect, that any offer of exchange of the securities of a registered 
unit investment trust for the securities of any other investment 
company be approved by the Commission or satisfy applicable rules 
adopted under Section 11, regardless of the basis of the exchange.
    3. The purpose of section 11 of the Act is to prevent 
``switching,'' the practice of inducing security holders of one 
investment company to exchange their securities for those of a 
different investment company solely for the purpose of exacting 
additional selling charges. That type of practice was found by Congress 
to be widespread in the 1930s prior to the adoption of the Act.
    4. Section 11(c) of the Act requires Commission approval (by order 
or by rule) of any exchange, regardless of its basis, involving 
securities issued by a unit investment trust, because investors in unit 
investment trusts were found by Congress to be particularly vulnerable 
to switching operations.
    5. Applicants assert that the potential for harm to investors 
perceived in switching was its use to extract additional sales charges 
from those investors. Applicants further assert that the terms of the 
proposed Extended Exchange Offer do not present the abuses against 
which section 11 was intended to protect. The Extended Exchange Offer 
is designed to allow IDS Life to compete on a level playing field with 
its competitors who are making bonus offers to its current Old Contract 
owners. No additional sales load or other fee will be imposed at the 
time of exercise of the Extended Exchange Offer.
    6. Rule 11a-2, by its express terms, provides Commission approval 
of certain types of offers of exchange of one variable annuity contract 
for another. Applicants assert that other than the relative net asset 
value requirement (which is not satisfied because exchanging Old 
Contract owners will be given Purchase Payment Credits and/or Exchange 
Credits), the only part of Rule 11a-2 that would not be satisfied by 
the proposed Extended Exchange Offer is the requirement that payments 
under the Old Contract be treated as if they had been made under the 
new RAVA Advantage Plus contract on the dates actually made. This 
provision of Rule 11a-2 is often referred to as a ``tacking'' 
requirement because it has the effect of ``tacking together'' the CDSC 
expiration periods of the exchanged and acquired contracts.
    7. Applicants assert that the absence of tacking does not mean that 
an exchange offer cannot be attractive and beneficial to investors. 
Applicants state that the proposed Extended Exchange Offer would assure 
an immediate and enduring economic benefit to investors for the 
following reasons: (i) RAVA Advantage Plus has a lower M&E charge than 
the Old Contracts. During the life of the Old Contracts, IDS Life 
deducts an M&E charge at an annual rate of 1% of the average daily 
variable account value. During the life of a RAVA Advantage Plus 
contract, IDS Life deducts an M&E charge at an annual rate of 0.95% of 
the average daily subaccount value for nonqualified annuities, 0.75% of 
the average daily subaccount value for qualified annuities and 0.55% of 
the average daily subaccount value for Band 3 Contracts; (ii) RAVA 
Advantage Plus contract owners receive applicable Purchase Payment 
Credits and/or Exchange Credits. Each time IDS Life receives a Purchase 
Payment from an owner, it allocates to the owner's RAVA Advantage Plus 
account a Purchase Payment Credit equal to: (a) 1% of each Purchase 
Payment received if the owner selected the ten-year CDSC period, or if 
the owner selected the seven-year CDSC period and the initial Purchase 
Payment is at least $100,000 but less than $1,000,000; (b) 2% of each 
Purchase Payment received if the owner selected the ten-year CDSC 
period and the initial Purchase Payment is at least $100,000 but less 
than $1,000,000; or (c) for Band 3 Contracts, 2% of each Purchase 
Payment received if the owner selected the seven-year CDSC period and 
3% of each Purchase Payment received if the owner selected the ten-year 
CDSC period. If the initial Purchase Payment to RAVA Advantage Plus is 
less than $100,000, IDS Life will provide a 1% Exchange Credit based on 
the Exchange Value of the Old Contract applied to RAVA Advantage Plus 
on the Exchange Date (but the 1% Exchange Credit will not apply to 
subsequent Purchase Payments); (iii) RAVA Advantage Plus has more 
Investment Funds. RAVA Advantage Plus offers 56 Investment Funds in 
contrast to the 14 Investment Funds under the Old Contracts. One small 
cap Investment Fund available under the Old Contracts currently is not 
available under RAVA Advantage Plus. However, RAVA Advantage Plus 
currently includes six small cap Investment Funds to which a contract 
owner can allocate Purchase Payments. Therefore, RAVA Advantage Plus 
contract owners can allocate Purchase Payments not only to most of the 
Investment Funds under the Old Contracts, but also to many additional 
Investment Funds. This gives RAVA Advantage Plus contract owners the 
opportunity for greater diversification and asset allocation; (iv) RAVA 
Advantage Plus offers an optional living benefit. RAVA Advantage Plus 
contract owners may select the Withdrawal Benefit for an additional 
cost. The Withdrawal Benefit gives the owner the right to take limited 
partial withdrawals in each contract year that ultimately equal 
Purchase Payments plus Credits, as adjusted for certain excess 
withdrawals; and (v) RAVA Advantage Plus has optional enhanced death 
benefits. RAVA Advantage Plus contract owners may elect optional death 
benefits for an additional cost that provide substantive value to 
beneficiaries. A contract owner who expects to hold RAVA Advantage Plus 
as a long-term investment will receive the economic benefits of the 
Extended Exchange Offer. No sales charge will ever be paid on the 
amounts exchanged unless the RAVA Advantage Plus contract is 
surrendered before expiration of the CDSC period the owner has 
selected.
    8. Applicants assert that tacking should be viewed as a useful way 
to avoid the need to scrutinize the terms of an offer of exchange to 
make sure that there is no abuse. Tacking is not a requirement of 
section 11. Rather, it is a creation of a rule designed to approve the 
terms of offers of exchange ``sight unseen.'' Tacking focuses on the 
closest thing to multiple deduction of sales loads that is possible in 
a CDSC context--multiple exposure to sales loads upon surrender or 
redemption. If tacking and other safeguards of Rule 11a-2 are present, 
there is no need for the Commission or its staff to evaluate the terms 
of the offer. The absence of tacking in this fully scrutinized section 
11 application will have no impact on offers made pursuant to the rule 
on a ``sight unseen'' basis.
    9. Applicants assert that the terms of IDS Life's Extended Exchange 
Offer are

[[Page 1925]]

better than those of its competitors. Unlike the Extended Exchange 
Offer proposed by IDS Life, when Old Contract owners exchange into 
competitors' contracts, they must pay any remaining CDSC on the Old 
Contracts at the time of the exchange. No tacking is required when IDS 
Life's competitors offer their variable annuity contracts to owners of 
Old Contracts or when IDS Life makes such an offer to competitors' 
contract owners. The Commission has previously approved similar 
exchange offers to permit the owners of older contracts to exchange 
them for contracts offering an immediate and enduring economic benefit 
even where tacking did not occur.
    10. To the extent there are differences between the Old Contracts 
and the RAVA Advantage Plus contract, those differences relate to 
enhanced contractual features and charges that are fully described in 
the prospectus for the RAVA Advantage Plus contract. Furthermore, the 
Offering Communication (and any Termination Notice) will contain 
concise, plain English disclosure of each aspect of the RAVA Advantage 
Plus contract that could be less favorable than the Old Contracts.

Conclusion

    Applicants submit, for the reasons stated herein, that the Extended 
Exchange Offer is consistent with the protections provided by section 
11 of the Act, and that approving the terms of the Extended Exchange 
Offer is necessary or appropriate in the public interest and consistent 
with the protection of investors and the purposes fairly intended by 
the policies and provisions of the Act. Applicants submit that the 
requested Amended Order approving the terms of the proposed Extended 
Exchange Offer therefore should be granted.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.

Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-42 Filed 1-10-05; 8:45 am]
BILLING CODE 8010-01-P