LIFE SERIES FUND - First Investors

exception, changes (other than by reasonof death or disability) to Your systematicpayments before You reach age 591/2orwithin five years (after You reach that age)after beginning Your systematic paymentswill result in the retroactive imposition ofthe 10% tax penalty with interest. Otherexceptions may apply under certaincircumstances. Special rules may alsoapply to the exceptions noted above.If the Contract was purchased as aninvestment for profit, subject to certainrules, You may deduct any loss uponsurrender of the Contract as an ordinaryloss. For purposes of surrenders, theInternal Revenue Code treats all Contractsthat We issue to You in the same calendaryear as a single Contract.Death BenefitsUnlike the death benefit on a lifeinsurance policy, the death benefit paid onan annuity contract does not pass to theBeneficiary free of income taxes.Generally, a death benefit is included inthe recipient’s income as follows:• if distributed in a lump sum, it istaxed in the same manner as a surrenderof the Contract;• if distributed under an annuity payoutoption, it is taxed in the same manner asannuity payments.The death benefit paid to a Beneficiary ona Contract is ordinary income to theBeneficiary to the extent it exceeds theContractowner’s Investment in theContract. The Beneficiary must pay taxeson this amount at the Beneficiary’s taxrate. Moreover, the amount of the deathbenefit may also be taxed in theContractowner’s estate unless theBeneficiary is the spouse. If theBeneficiary is not the spouse, theBeneficiary may be eligible for a specialincome tax deduction for a portion of theestate tax attributable to the death benefit.Transfers, Assignments and ContractExchangesTransferring or assigning ownership of aContract, changing the Maturity Date orexchanging a Contract (unless theexchange qualifies as a tax-free exchangeunder Section 1035 of the InternalRevenue Code) may result in certain taxconsequences, such as income and gifttaxes, not explained in this prospectus.Please consult Your tax adviser regardingthese consequences.Tax Withholding and ReportingThe Internal Revenue Code generallyrequires Us to withhold income tax fromany Contract distribution, including apartial surrender or total surrender or anannuity payment. The amount ofwithholding depends, in part, on whetherthe payment is “periodic” or “nonperiodic.”For periodic payments (e.g., annuitypayments), We withhold from the taxableportion of each payment as if it were apayment of wages, based on a payrollwithholding schedule that assumes amarried recipient claiming threewithholding exemptions. If You want Us towithhold on a different basis, You must filean appropriate withholding certificate withUs. For non-periodic payments (e.g.,distributions such as partial surrenders),We generally withhold 10% of the taxableportion of each payment.You may elect not to have the withholdingrules apply. For periodic payments, Yourelection is effective for the calendar yearfor which You file it with Us and for eachsubsequent year until You amend orrevoke it. For non-periodic payments, anelection is effective when You file it withUs, but only for the payment to which it isapplicable. We have to notify Yourrecipients of Your right to elect not to havetaxes withheld. The Internal RevenueCode generally requires Us to report allpayments to the IRS.25