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Plan Types Special Pay Plan The VALIC Special Pay Plan benefits both your organization and your employees by taking advantage of powerful tax legislation enacted especially for employees of tax-exempt organizations. From your perspective as a plan sponsor, the Special Pay Plan will help you reduce payroll taxes on your contributions to the plan. Another attractive feature of the plan is that you may pre-fund special pay obligations over your employees' careers. In this way, if you choose to do so, you may build a reserve to help offset the eventual payout to employees at retirement or termination of employment. Employees may invest unused sick, annual-leave, vacation pay or other forms of special pay. The plan helps your employees defer taxes on contributions to the plan, and permanently saves any Social Security and Medicare taxes on contributions to the plan. Plan features Product features and advantages Portfolio Director Fixed & Variable Annuity investment options Plan features Employers and employees each permanently save the 6.2% of Social Security taxes on Special Pay Plan contributions. Employers and employees each permanently save the 1.45% of Medicare taxes on Special Pay Plan contributions. Employees with accumulated sick, annual-leave and vacation pay, as well as other eligible forms of "Special Pay" are required to participate in this plan. Maximum employer contribution for 401(a) and 403(b) plans is 100% of adjusted compensation up to $45,000 in 2007, and maximum contribution for 457(b) plans is 100% of includible compensation up to $15,500 in 2007. New guidelines published by the IRS require 401(a) plans to have continued and substantial ongoing deposits. Employees are immediately 100% vested in all contributions to the plan. Employees may manage their own investment plan and portfolio. No federal tax penalty applies to withdrawals from 401(a) or 403(b) plans by employees age 55 or older upon termination of employment. No federal tax penalty applies to 457(b) plan withdrawals at any age at termination of employment. In many cases, participants in the Special Pay Plan may also contribute as much as the law allows to their employer's other tax-qualified plans. Income taxes on contributions are deferred until withdrawal or annuity payout begins, usually at retirement.1 VALIC's Portfolio Director Fixed and Variable Annuity is the investment vehicle. Portfolio Director requires a minimum $50,000 annual plan contribution. Contributions may be made to a 403(b) plan for up to five years following an employee's separation from service. Participant account balances are updated daily, and accounts may be accessed on the Web or by an automated, toll-free telephone system. Account statements are provided to the employer and each active employee. [ BACK TO TOP ] Product features and advantages Portfolio Director Special Pay program features and advantages include: Pre-tax contributions1 Tax-deferred growth1 Broad array of variable investment options Fixed option with competitive interest rate No account maintenance fees2 Employer and employee statements No charge for transfers among investment options No surrender charges2 Multiple retirement income options Default for initial deposits is the Short Term Fixed Account [ BACK TO TOP ] Portfolio Director Fixed & Variable Annuity investment options View Portfolio Director investment options. [PDF] View fees and expenses. [PDF] 1 Annuities are long-term investments. Income taxes are payable upon withdrawal. Federal restrictions and tax penalties may apply to early withdrawals. 2 Other fees may apply and are described in the current underlying fund prospectus. The asset management fee is not charged against the Portfolio Director fixed account. To obtain either a contract or underlying fund prospectus, visit www.aigvalic.com or call 1-800-428-2542 (press 1, then 3). The prospectus contains the investment objectives, risks, charges, expenses and other information about the investment company that you should consider carefully before investing. Please read the prospectus carefully before investing or sending money. Applicable to policy forms UIT-194, UITG-194 and UITG-194P. #40015