The North American Secure Horizon℠ Fixed Index Annuity (FIA) represents a sophisticated retirement planning solution designed to provide principal protection while offering growth potential through market-linked interest crediting strategies. Issued by North American Company for Life and Health Insurance®, this single premium deferred annuity offers multiple product variations to meet diverse investor needs.
Product Overview and Variations
Core Product: North American Secure Horizon℠
The base Secure Horizon FIA serves as the foundation product, offering:
- Single premium requirements: $25,000 minimum (qualified and non-qualified)
- Issue ages: 0-79 years
- Surrender charge period: 10 years
- Multiple crediting strategies: Fixed rate, annual point-to-point, two-year point-to-point, and Performance Strategy Ladder
Enhanced Version: Secure Horizon℠ Accelerator
The Accelerator version builds upon the base product with significant premium bonus features:
- Premium bonus: Up to 17% (13% base + 4% special promotional bonus)
- State variations:
- 17% bonus states: AL, AR, AZ, CO, DC, FL, GA, IA, IL, KS, KY, ME, MI, MS, NC, ND, NE, NM, RI, SD, TN, VT, WV, WI
- 16% bonus states: AK, CA, CT, DE, HI, ID, IN, LA, MA, MD, MN, MO, MT, NH, NJ, NV, OH, OK, OR, PA, SC, TX, UT, VA, WA, WY
Product Features and Specifications
Surrender Charge Structure
The product features a 10-year surrender charge period with schedules that vary by state regulations. The standard schedule begins at 10% in the first year and declines annually, reaching 0% after the 10-year period. Some states offer more favorable schedules with lower initial charges and faster declining rates.
Penalty-Free Withdrawals
Beginning in the second contract year, policyholders may take annual penalty-free withdrawals of up to 7% of the beginning-of-year accumulation value without:
- Surrender charges
- Market value adjustment
- Premium bonus recapture (on penalty-free amounts)
Available Indices
The product offers access to five sophisticated indices:
1. Loomis Sayles Managed Futures 2 Index
Alternative strategy exposure for diversification
2. NYSE GEARS Index
Volatility-controlled equity exposure
3. Research Affiliates® Global Multi-Asset Index
Broad diversification across asset classes
4. S&P 500® Low Volatility Daily Risk Control 5% Index ER
Reduced volatility equity participation
5. S&P PRISM® Index
Enhanced equity exposure with risk management
Interest Crediting Strategies
Fixed Account
Provides guaranteed interest crediting with rates declared annually, offering stability and predictability for conservative portions of the allocation.
Point-to-Point Methods
- Annual Point-to-Point: Measures index performance over one-year terms
- Two-Year Point-to-Point: Extends the measurement period to two years, typically offering higher participation rates
Performance Strategy Ladder – The Innovation
The Performance Strategy Ladder represents the product’s most sophisticated crediting method, featuring:
Structure
- Five separate strategies with varying term lengths (1, 2, 3, 4, and 5 years)
- Equal initial allocation: 20% to each strategy term
- Automatic rebalancing: Strategies mature and transfer to new terms over the 10-year ladder period
Participation Rate Advantages
The ladder structure enables significantly higher participation rates:
- 1-year terms: Up to 160% participation
- 2-year terms: Up to 310% participation
- 3-year terms: Up to 400% participation
- 4-year terms: Up to 450% participation
- 5-year terms: Up to 500% participation
Strategy Charge Enhancement
For clients seeking even higher participation rates, a 0.95% annual strategy charge can be applied to further enhance crediting potential, with participation rates reaching:
- 5-year terms with charge: Up to 375% participation on certain indices
Partial Roth Conversion Capabilities
Overview
A unique feature available for contracts issued February 1, 2024, or later, partial Roth conversions allow clients to gradually convert portions of their traditional IRA annuity to Roth status.
Process and Structure
- Minimum conversion: $5,000 per conversion
- Contract structure: North American creates a “mirror” converted contract
- Feature replication: All original contract features carry over to the converted contract
- Ongoing flexibility: Multiple conversions can be processed over time
Tax Implications
- Immediate taxation: Converted amounts are taxable in the year of conversion
- Future benefits: All future distributions from the Roth contract are tax-free (subject to standard Roth IRA rules)
- Withholding options: Available up to penalty-free amounts
Strategic Benefits
No RMDs
Roth contracts don’t require distributions during the owner’s lifetime
Estate Planning
Tax-free asset transfer to beneficiaries
Tax Diversification
Provides flexibility in managing retirement income taxation
Client Illustration Analysis
Case Study: James Owen (Age 55)
The provided illustration demonstrates a $250,000 premium allocation using the Performance Strategy Ladder with the S&P PRISM Index in Alabama, which qualifies for the full 17% premium bonus:
Premium Enhancement
- Initial Premium: $250,000
- Premium Bonus: 17% ($42,500)
- Initial Accumulation Value: $292,500
Performance Strategy Ladder Participation Rates
- 1-year terms: 95% participation
- 2-year terms: 125% participation
- 3-year terms: 140% participation
- 4-year terms: 150% participation
- 5-year terms: 185% participation
Performance Projections (10-Year Period)
- Most Recent Period (2014-2024): 7.49% annual effective rate, ending value $419,199
- Highest Growth Period (2011-2021): 10.25% annual effective rate, ending value $540,072
- Lowest Growth Period (2014-2024): 7.49% annual effective rate, ending value $419,199
Key Observations
- Consistent Performance: Even in the most recent market period, the illustration shows solid growth with a 7.49% annual effective rate
- Principal Protection: All scenarios maintain the guaranteed minimum of $250,000 original premium
- Bonus Enhancement: The 17% premium bonus provides immediate value enhancement, starting the accumulation at $292,500
- Compound Growth: The Performance Strategy Ladder’s structure captures and compounds gains over multiple time horizons with increasing participation rates for longer terms
Accumulation Value True-Up Feature
The contract includes an innovative Accumulation Value True-Up benefit that:
- Activates: At the end of the surrender charge period
- Calculates: Total interest credits minus total strategy charges across all accounts
- Applies: One-time adjustment if total interest exceeds total charges
- Distributes: Proportionally across all accounts based on accumulation values
Allocation Management Through Annexus
Professional Oversight
The Secure Horizon FIA benefits from Annexus’s allocation management expertise, providing:
- Strategic guidance: Professional assessment of index allocation strategies
- Market insight: Ongoing evaluation of index performance characteristics
- Rebalancing recommendations: Periodic review and adjustment suggestions
Index Selection Rationale
Each available index serves specific portfolio functions:
Managed Futures
Alternative strategy exposure for diversification
GEARS Index
Volatility-controlled equity exposure
Multi-Asset
Broad diversification across asset classes
Low Volatility
Reduced volatility equity participation
PRISM
Enhanced equity exposure with risk management
Market Value Adjustment (MVA)
Purpose and Application
The MVA helps protect the insurance company’s reserves while providing potential upside to policyholders:
- Interest rate environment: Applied based on prevailing rate changes since issue
- Withdrawal timing: Only affects surrenders during the surrender charge period
- Protection mechanism: Cannot reduce surrender value below guaranteed minimums
Impact Scenarios
- Rising rates: May reduce withdrawal amounts through negative adjustment
- Declining rates: May increase withdrawal amounts through positive adjustment
- All scenarios: Minimum guaranteed surrender value always maintained
Competitive Advantages
Unique Value Propositions
1. Performance Strategy Ladder
Industry-leading crediting methodology
2. Partial Roth Conversions
Innovative tax planning flexibility
3. Premium Bonus
Immediate account value enhancement
4. Index Variety
Sophisticated index options for diverse strategies
5. Accumulation Value True-Up
Additional protection for strategy charge impact
Target Market Applications
- Pre-retirees: Seeking growth with protection in final accumulation years
- Conservative investors: Wanting market participation without principal risk
- Tax planners: Utilizing Roth conversion strategies for estate planning
- Sophisticated investors: Appreciating advanced crediting methodologies
Important Considerations
Suitability Factors
- Long-term commitment: 10-year surrender charge period requires appropriate time horizon
- Liquidity needs: 7% annual penalty-free withdrawals may not suit high liquidity needs
- Risk tolerance: While principal-protected, returns are not guaranteed
- Tax situation: Partial Roth conversion benefits depend on individual tax circumstances
Regulatory and Compliance
- State variations: Product features and charges vary by state
- FINRA oversight: Sales require appropriate suitability determination
- Tax implications: Professional tax advice recommended for Roth conversions
Frequently Asked Questions
1. How does the Performance Strategy Ladder work, and why are the participation rates different for each term length?
The Performance Strategy Ladder is North American’s innovative crediting method that automatically allocates your premium equally across five different term lengths (1, 2, 3, 4, and 5 years), with 20% going to each strategy initially. The participation rates increase with longer terms because insurance companies can offer higher rates when they have more time to manage the underlying investments. For example, in the S&P PRISM Index:
- 1-year terms: 95% participation
- 2-year terms: 125% participation
- 3-year terms: 140% participation
- 4-year terms: 150% participation
- 5-year terms: 185% participation
As each strategy matures, it automatically transfers to a new 5-year term, creating a continuous ladder effect that aims to capture higher participation rates while providing annual crediting opportunities.
2. What is the premium bonus, and are there any conditions or recapture provisions?
The Secure Horizon℠ Accelerator offers up to a 17% premium bonus (13% base + 4% promotional) that is immediately added to your accumulation value. In our example, a $250,000 premium receives a $42,500 bonus, starting your account at $292,500.
Key conditions:
- The bonus varies by state (17% in AL, AR, AZ, CO, DC, FL, GA, IA, IL, KS, KY, ME, MI, MS, NC, ND, NE, NM, RI, SD, TN, VT, WV, WI; 16% in other states)
- Recapture applies if you take withdrawals above the penalty-free amount (7% annually) during the 10-year surrender charge period
- No recapture on death benefits, penalty-free withdrawals, or nursing home waivers
- The recapture percentage decreases annually (100% in year 1, declining to 0% in year 10)
3. Can I access my money before the 10-year surrender period ends, and what are the costs?
Yes, you have several access options:
Penalty-Free Withdrawals:
- Starting in year 2, you can withdraw up to 7% of your beginning-of-year accumulation value annually
- No surrender charges, market value adjustments, or premium bonus recapture on these amounts
Excess Withdrawals:
- Withdrawals above the 7% penalty-free amount are subject to:
- Surrender charges (starting at 10% in year 1, declining to 4% in year 10)
- Market value adjustment (if interest rates have changed unfavorably)
- Premium bonus recapture on the excess amount
- Required Minimum Distributions (RMDs) from qualified accounts are exempt from surrender charges
4. How does the partial Roth conversion feature work, and what are the tax implications?
Available for contracts issued February 1, 2024, or later, this feature allows you to gradually convert portions of your traditional IRA annuity to Roth status:
Process:
- Minimum $5,000 per conversion
- North American creates a “mirror” Roth contract with identical features
- Multiple conversions allowed over time
- All original contract benefits carry over
Tax Implications:
- Converted amounts are taxable income in the conversion year
- Future distributions from the Roth contract are tax-free (following standard Roth IRA rules)
- Roth contracts have no Required Minimum Distributions during your lifetime
- Provides estate planning benefits with tax-free transfers to beneficiaries
Important: Consult with a tax professional to determine if this strategy fits your specific situation.
5. What is the Accumulation Value True-Up feature, and how does it protect me from strategy charges?
The Accumulation Value True-Up is a unique benefit that provides additional protection at the end of your 10-year surrender charge period. Here’s how it works:
Calculation:
- At year 10, North American calculates total interest credits earned across all accounts
- Compares this to total strategy charges assessed over the contract period
- If total interest credits exceed total strategy charges, you receive a one-time credit
Distribution:
- The True-Up amount is distributed proportionally across all accounts based on their accumulation values
- This ensures you benefit from the overall performance of your strategies
- Does not apply if you’ve taken surrenders exceeding penalty-free amounts during the surrender period
Example: If your strategies generated $50,000 in total interest but you paid $30,000 in strategy charges, you might receive an additional $20,000 credit (the excess interest over charges) distributed across your accounts.
This feature provides an extra layer of protection and ensures that strong-performing strategies can help offset any underperforming ones within your overall allocation.
Conclusion
The North American Secure Horizon FIA, particularly in its Accelerator version, represents a sophisticated evolution in fixed index annuity design. The combination of substantial premium bonuses, innovative Performance Strategy Ladder crediting, and partial Roth conversion capabilities creates a comprehensive retirement planning tool.
The product’s strength lies in its ability to provide:
- Principal protection through insurance guarantees
- Growth potential via multiple crediting strategies
- Tax flexibility through partial Roth conversions
- Professional management through Annexus oversight
For appropriate clients with long-term retirement savings objectives, the Secure Horizon FIA offers a compelling blend of safety, growth potential, and tax planning flexibility that addresses many of the key challenges facing today’s retirement savers.
This analysis is based on product materials current as of August 2025. Product features, rates, and availability may vary by state and are subject to change. Clients should consult with qualified financial and tax professionals before making investment decisions.
