Final answer:
The correct answer is option d. Variable annuity payouts are adjusted based on annuity units, which can vary in value and therefore influence the payout amounts. Accumulation units are involved in the earlier phase and are converted to annuity units, while the exclusion ratio pertains to the tax aspect rather than payout adjustments.
Step-by-step explanation:
Variable annuity payouts are primarily adjusted based on annuity units. These units are used in the payout, or annuitization, phase of the annuity contract. While the investor owns accumulation units during the accumulation phase of the annuity, these units are converted into annuity units when the annuitization phase begins. The number of annuity units remains fixed throughout the payout period, but their value can change based on the performance of the underlying investment options, thus altering the amount of each payment received by the annuitant.
An exclusion ratio deals with the taxable and non-taxable portions of the annuity payments and is not directly related to how the payout is adjusted. The term LIFO, or last-in, first-out, is an accounting method used to evaluate inventory and is not directly connected to variable annuity payouts.