S-3: Registration statement under Securities Act of 1933
Published on
AS FILED WITH THE SEC ON FEBRUARY 27, 2003
REGISTRATION NO. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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PRUCO LIFE INSURANCE COMPANY
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(EXACT NAME OF REGISTRANT)
ARIZONA
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(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
22-194455
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(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
C/O PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-7333
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(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
THOMAS C. CASTANO
ASSISTANT SECRETARY
PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-4708
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(NAME, ADDRESS, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES TO:
ADAM SCARAMELLA
VICE PRESIDENT,
CORPORATE COUNSEL
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-4940
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Approximate date of commencement of proposed sale to the public--May 1, 2003
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box ........................[X]
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* Securities are not issued in predetermined units
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said section 8(a)
may determine.
The risk factors associated with these securities are discussed in the
prospectuses included with this registration statement. Prudential Investment
Management Services LLC distributed these securities on a best efforts basis.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
STRATEGIC PARTNERS(SM)
ANNUITY ONE 3
VARIABLE ANNUITY
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PROSPECTUS: MAY 1, 2003
THIS PROSPECTUS DESCRIBES AN INDIVIDUAL VARIABLE ANNUITY CONTRACT OFFERED BY
PRUCO LIFE INSURANCE COMPANY (PRUCO LIFE). PRUCO LIFE IS A WHOLLY-OWNED
SUBSIDIARY OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA.
THE FUNDS
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Strategic Partners Annuity One offers a wide variety of investment choices,
including 32 variable investment options that invest in mutual funds managed by
these leading asset managers:
PRUDENTIAL INVESTMENTS LLC
JENNISON ASSOCIATES LLC
A I M CAPITAL MANAGEMENT, INC.
ALLIANCE CAPITAL MANAGEMENT, L.P.
BANK OF IRELAND ASSET MANAGEMENT (U.S.) LIMITED
CALAMOS ASSET MANAGEMENT, INC.
DAVIS ADVISORS
DEUTSCHE ASSET MANAGEMENT INVESTMENT SERVICES LIMITED
EARNEST PARTNERS LLC
FIDELITY MANAGEMENT & RESEARCH COMPANY
FURMAN SELZ CAPITAL MANAGEMENT LLC
GE ASSET MANAGEMENT, INCORPORATED
INVESCO FUNDS GROUP, INC.
JANUS CAPITAL MANAGEMENT LLC
LORD, ABBETT & CO. LLC
MASSACHUSETTS FINANCIAL SERVICES COMPANY (MFS)
NATIONAL CITY INVESTMENT MANAGEMENT COMPANY
PACIFIC INVESTMENT MANAGEMENT COMPANY LLC (PIMCO)
SALOMON BROTHERS ASSET MANAGEMENT INC.
WELLINGTON MANAGEMENT COMPANY LLP
You may choose between two basic versions of Strategic Partners Annuity One. One
version, the Contract With Credit, provides for a bonus credit that we add to
each purchase payment you make. If you choose this version of Strategic Partners
Annuity One, some charges and expenses may be higher than if you choose the
version without the credit. Those higher charges could exceed the amount of the
credit under some circumstances, particularly if you withdraw purchase payments
within a few years of making those purchase payments.
PLEASE READ THIS PROSPECTUS
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Please read this prospectus before purchasing a Strategic Partners Annuity One
variable annuity contract, and keep it for future reference. Current
prospectuses for the underlying mutual funds accompany this prospectus. These
prospectuses contain important information about the mutual funds. Please read
these prospectuses and keep them for reference as well.
TO LEARN MORE ABOUT STRATEGIC PARTNERS ANNUITY ONE
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To learn more about the Strategic Partners Annuity One variable annuity, you can
request a copy of the Statement of Additional Information (SAI) dated May 1,
2003. The SAI has been filed with the Securities and Exchange Commission (SEC)
and is legally a part of this prospectus. Pruco Life also files other reports
with the SEC. All of these filings can be reviewed and copied at the SEC's
offices, and can also be obtained from the SEC's Public Reference Section, 450
5th Street N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at (800) SEC-0330. The
SEC maintains a Web site (http://www.sec.gov) that contains the Strategic
Partners Annuity One SAI, material incorporated by reference, and other
information regarding registrants that file electronically with the SEC. The
Table of Contents of the SAI is on Page 59 of this prospectus.
FOR A FREE COPY OF THE SAI CALL US AT:
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- - (888) PRU-2888 or write to us at:
- - Prudential Annuity Service Center
P.O. Box 7960
Philadelphia, PA 19101
THE SEC HAS NOT DETERMINED THAT THIS CONTRACT IS A GOOD INVESTMENT, NOR HAS THE
SEC DETERMINED THAT THIS PROSPECTUS IS COMPLETE OR ACCURATE. IT IS A CRIMINAL
OFFENSE TO STATE OTHERWISE. INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT
TO RISK, INCLUDING THE POSSIBLE LOSS OF YOUR MONEY. AN INVESTMENT IN STRATEGIC
PARTNERS ANNUITY ONE IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
1
CONTENTS
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PART I SUMMARY
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STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS
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PART I
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SUMMARY
GLOSSARY
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WE HAVE TRIED TO MAKE THIS PROSPECTUS AS EASY TO READ AND UNDERSTAND AS
POSSIBLE. BY THE NATURE OF THE CONTRACT, HOWEVER, CERTAIN TECHNICAL WORDS OR
TERMS ARE UNAVOIDABLE. WE HAVE IDENTIFIED THE FOLLOWING AS SOME OF THESE WORDS
OR TERMS.
ACCUMULATION PHASE
The period that begins with the contract date (which we define below) and ends
when you start receiving income payments, or earlier if the contract is
terminated through a full withdrawal or payment of a death benefit.
ADJUSTED CONTRACT VALUE
When you begin receiving income payments, the value of your contract minus any
charge we impose for premium taxes.
ADJUSTED PURCHASE PAYMENT
Your invested purchase payment adjusted for any subsequent withdrawals. The
adjusted purchase payment is used only for calculations of the earnings
appreciator benefit.
ANNUITANT
The person whose life determines the amount of income payments that we will pay.
ANNUITY DATE
The date when income payments are scheduled to begin.
BENEFICIARY
The person(s) or entity you have chosen to receive a death benefit.
CONTRACT DATE
The date on which we credit your initial purchase payment. We will credit the
initial purchase payment to your contract within two business days from the day
on which we receive your payment and all necessary paperwork in good order at
the Prudential Annuity Service Center. Contract anniversaries are measured from
the contract date. A contract year starts on the contract date or on a contract
anniversary.
CONTRACT OWNER, OWNER, OR YOU
The person entitled to the ownership rights under the contract.
CONTRACT VALUE
This is the total value of your contract, equal to the sum of the values of your
investment in each investment option you have chosen. Your contract value will
go up or down based on the performance of the investment options you choose.
CONTRACT WITH CREDIT
A version of the annuity contract that provides for a bonus credit with each
purchase payment that you make and has different withdrawal charges and
insurance and administrative costs than the Contract Without Credit.
CONTRACT WITHOUT CREDIT
A version of the annuity contract that does not provide a credit and has
different withdrawal charges and insurance and administrative costs than the
Contract With Credit.
CREDIT
If you choose the Contract With Credit, this is the bonus amount that we
allocate to your account each time you make a purchase payment. The amount of
the credit is a percentage of the purchase payment. Bonus credits generally are
not recaptured once the free look period expires. Our reference in the preceding
sentence to "generally are not recaptured" refers to the fact that we have the
contractual right to deduct, from the death benefit we pay, the amount of any
credit corresponding to a purchase payment made within one year of death.
DEATH BENEFIT
If the sole owner dies, or if jointly owned, the first to die of the owner or
joint owner, the beneficiary you designate will receive, at a minimum, the total
amount invested, reduced by withdrawals or a potentially greater amount related
to market appreciation. The guaranteed minimum death benefit is available for an
additional charge.
DOLLAR COST AVERAGING FIXED RATE OPTION (DCA FIXED RATE OPTION)
An investment option that offers a fixed rate of interest for a selected period
during which periodic transfers are
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PART I
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SUMMARY
automatically made to selected variable investment options or to the one-year
fixed rate option. We guarantee your money will earn at least 3% while it is
allocated to this option. Payments you allocate to the DCA Fixed Rate Option
become part of Pruco Life's general assets until they are transferred.
EARNINGS APPRECIATOR BENEFIT (EAB)
An optional feature available for an additional charge that may provide a
supplemental death benefit based on earnings under the contract.
FIXED INTEREST RATE OPTIONS
Investment options that offer a fixed rate of interest for either a one-year
period (fixed rate option) or a selected period during which periodic transfers
are made to selected variable investment options or to the one-year fixed rate
option (dollar cost averaging fixed rate option).
GMDB PROTECTED VALUE
The guaranteed amount of the guaranteed minimum death benefit, which may equal
the GMDB roll-up value, the GMDB step-up value, or the greater of the two. The
protected value will be subject to certain age restrictions and time durations,
however it will still increase by subsequent invested purchase payments and
reduce by withdrawals.
GMDB ROLL-UP
We may use the GMDB roll-up value to compute the GMDB protected value of the
guaranteed minimum death benefit. The GMDB roll-up is equal to the invested
purchase payments compounded daily at an effective annual interest rate of 5%
(if the sole owner or the older of the owner and joint owner is less than 80
years old on the contract date) or 3% (if the sole owner or the older of the
owner and joint owner is between 80 and 85 years old on the contract date)
starting on the date that each invested purchase payment is made, reduced by
withdrawals.
GMDB STEP-UP
We may use the GMDB step-up value to compute the GMDB protected value of the
guaranteed minimum death benefit.
If the sole owner or the older of the owner and joint owner is less than
age 80 on the contract date, the GMDB step-up before the first contract
anniversary is the initial invested purchase payment increased by subsequent
invested purchase payments and reduced by the effect of withdrawals. The GMDB
step-up on each contract anniversary will be the greater of the previous GMDB
step-up and the contract value as of such contract anniversary. Between contract
anniversaries, the GMDB step-up will be increased by invested purchase payments
and reduced by the effect of withdrawals.
If the sole owner or the older of the owner and joint owner is between age
80 and 85 on the contract date, the GMDB step-up before the third contract
anniversary is the sum of invested purchase payments, reduced by the effect of
withdrawals. On the third contract anniversary the GMDB step-up will be adjusted
to the greater of the then current GMDB step-up or the contract value as of that
contract anniversary.
GMIB PROTECTED VALUE
The GMIB protected value is calculated daily and is equal to the GMIB roll-up,
until the GMIB roll-up either reaches its cap or if we stop applying the annual
interest rate based on the age of the annuitant, number of contract
anniversaries or number of years since last GMIB reset. At such point, the GMIB
protected value will be increased by any subsequent invested purchase payments,
reduced by withdrawals. You may elect to reset your GMIB protected value to
equal your contract value twice over the life of the contract.
GMIB ROLL-UP
We will use GMIB roll-up value to compute the GMIB protected value of the
guaranteed minimum income benefit. The GMIB roll-up is equal to the invested
purchase payments compounded daily at an effective annual interest rate of 5%
starting on the date each invested purchase payment is made, subject to a 200%
cap, and reduced by withdrawals.
GOOD ORDER
An instruction received at the Prudential Annuity Service Center, utilizing such
forms, signatures and dating as we require, which is sufficiently clear that we
do not need to exercise any discretion to follow such instructions.
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GLOSSARY CONTINUED
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PART I
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SUMMARY
GUARANTEED MINIMUM DEATH BENEFIT (GMDB)
An optional feature available for an additional charge, which guarantees that
the death benefit that the beneficiary receives will be no less than a certain
GMDB protected value. Depending upon the terms of your contract, the protected
value for the guaranteed minimum death benefit may equal the GMDB roll-up value,
the GMDB step-up value, or the larger of the two.
GUARANTEED MINIMUM INCOME BENEFIT (GMIB)
An optional feature available for an additional charge that guarantees that the
income payments you receive during the income phase will be no less than a
certain GMIB protected value applied to the guaranteed annuity purchase rates.
GUARANTEE PERIOD
A period of time during which your invested purchase payment in the market value
adjustment option earns interest at the declared rate. We have the right to
offer one or more of several guarantee periods equal to any or all of the
following: 1 year (currently available only as a renewal option), 2 years, 3
years, 4 years, 5 years, 6 years, 7 years, 8 years, 9 years, and 10 years.
IAB AUTOMATIC WITHDRAWAL PAYMENT PROGRAM
A series of payments consisting of a portion of your contract value and income
appreciator benefit paid to you in equal installments over a 10 year period,
which you may choose, if you elect to receive the income appreciator benefit
(IAB) during the accumulation phase.
IAB CREDIT
An amount we add to your contract value that is credited in equal installments
over a 10 year period, which you may choose, if you elect to receive the income
appreciator benefit (IAB) during the accumulation phase.
INCOME APPRECIATOR BENEFIT (IAB)
An optional feature that may be available for an additional charge that may
provide a supplemental income benefit based on earnings under the contract.
INCOME OPTIONS
Options under the contract that define the frequency and duration of income
payments. In your contract, we also refer to these as payout or annuity options.
INCOME PHASE
The period in which you receive income payments under the contract.
INVESTED PURCHASE PAYMENTS
Your purchase payments less any deduction we make for any premium or other tax
charge.
JOINT OWNER
The person named as the joint owner, who shares ownership rights with the owner
as defined in the contract. A joint owner may be the owner's spouse, but need
not be.
MARKET VALUE ADJUSTMENT OPTION
Under both the Contract With Credit and the Contract Without Credit, an
investment option that offers guarantee periods from one to ten years in length,
and pays a fixed rate of interest with respect to each guarantee period. We
impose a market value adjustment on withdrawals or transfers that you make from
this option prior to the end of a guarantee period.
NET PURCHASE PAYMENTS
Your total purchase payments less any withdrawals you have made.
PRUDENTIAL ANNUITY SERVICE CENTER
For general correspondence: P.O. Box 7960, Philadelphia, PA 19101. For express
overnight mail: 2101 Welsh Road, Dresher, PA 19025. The telephone number is
888-PRU-2888. Prudential's Web site is www.prudential.com.
PURCHASE PAYMENTS
The amount of money you pay us to purchase the contract. With some restrictions,
you can make additional purchase payments at any time during the accumulation
phase.
SEPARATE ACCOUNT
We hold your purchase payments allocated to the variable investment options in a
separate account called the Pruco Life Flexible Premium Variable Annuity
Account. The separate account is set apart from all of the general assets of
Pruco Life.
STATEMENT OF ADDITIONAL INFORMATION
A document containing certain additional information about the Strategic
Partners Annuity One variable annuity.
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PART I
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SUMMARY
We have filed the Statement of Additional Information with the Securities and
Exchange Commission and it is legally a part of this prospectus. To learn how to
obtain a copy of the Statement of Additional Information, see the front cover of
this prospectus.
TAX DEFERRAL
This is a way to increase your assets without currently being taxed. Generally,
you do not pay taxes on your contract earnings until you take money out of your
contract. You should be aware that tax favored plans (such as IRAs) already
provide tax deferral regardless of whether they invest in annuity contracts. See
"What Are the Tax Considerations Associated with the Strategic Partners Annuity
One Contract," on page 52.
VARIABLE INVESTMENT OPTION
When you choose a variable investment option, we purchase shares of the mutual
fund which are held as an investment for that option. We hold these shares in
the separate account. The division of the separate account of Pruco Life that
invests in a particular mutual fund is referred to in your contract as a
subaccount.
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PART I
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SUMMARY FOR SECTIONS 1-9
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FOR A MORE COMPLETE DISCUSSION OF THE FOLLOWING TOPICS, SEE THE CORRESPONDING
SECTION IN PART II OF THE PROSPECTUS.
SECTION 1
WHAT IS THE STRATEGIC PARTNERS ANNUITY ONE VARIABLE ANNUITY?
The Strategic Partners Annuity One variable annuity is a contract between you,
the owner, and us, the insurance company, Pruco Life Insurance Company (Pruco
Life, we or us). The contract allows you to invest on a tax-deferred basis in
one or more of 32 variable investment options, two fixed interest rate options,
and the market value adjustment option. The contract is intended for retirement
savings or other long-term investment purposes and provides for a death benefit.
There are two basic versions of the Strategic Partners Annuity One variable
annuity.
Contract With Credit.
- - provides for a bonus credit that we add to each purchase payment that you
make,
- - has higher withdrawal charges and insurance and administrative costs than the
Contract Without Credit,
- - may provide lower interest rates for fixed and market value adjustment
options than the Contract Without Credit
Contract Without Credit.
- - does not provide a credit,
- - has lower withdrawal charges and insurance and administrative costs than the
Contract With Credit.
- - may provide higher interest rates for fixed and market value adjustment
options than the Contract With Credit
The variable investment options available under the contract offer the
opportunity for a favorable return. However, this is NOT guaranteed. It is
possible, due to market changes, that your investments may decrease in value.
The fixed interest rate options offer a guaranteed interest rate. While your
money is allocated to one of these options, your principal amount will not
decrease and we guarantee that your money will earn at least a minimum interest
rate annually. Under the market value adjustment option, while your money
remains in the contract for the full guarantee period, your principal amount is
guaranteed and the interest amount that your money will earn is guaranteed by us
to always be at least 3%.
Payments allocated to the fixed interest rate options become part of Pruco
Life's general assets. Payments allocated to the market value adjustment option
are held as a separate pool of assets, but the income, gains or losses
experienced by these assets are not directly credited or charged against the
contracts. As a result, the strength of our guarantees under these options is
based on the overall financial strength of Pruco Life.
You can invest your money in any or all of the variable investment options,
the fixed interest rate options, and one or more guarantee periods available
under the market value adjustment option. You may make up to 12 free transfers
each contract year among the variable investment options. Certain restrictions
apply to transfers involving the fixed interest rate options.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase.
- - During the accumulation phase, any earnings grow on a tax-deferred basis and
are generally only taxed as income when you make a withdrawal.
- - The income phase starts when you begin receiving regular payments from your
contract.
The amount of money you are able to accumulate in your contract during the
accumulation phase will help determine the amount you will receive during the
income phase. Other factors will affect the amount of your payments, such as
age, gender, and the payout option you select.
The contract offers a choice of income and death benefit options, which may
also be available to you.
There are certain state variations to this contract that are referred to in
this prospectus. Please see the
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PART I
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SUMMARY
SAI and your contract for further information on these and other variations.
If you change your mind about owning Strategic Partners Annuity One, you may
cancel your contract within 10 days after receiving it (or whatever period is
required under applicable state law). We call this the "Free Look" period.
SECTION 2
WHAT INVESTMENT OPTIONS CAN I CHOOSE?
You can invest your money in any or all of the following variable investment
options:
The Prudential Series Fund, Inc.
Jennison Portfolio (domestic equity)
Prudential Equity Portfolio
Prudential Global Portfolio
Prudential Money Market Portfolio
Prudential Stock Index Portfolio
Prudential Value Portfolio (domestic equity)
SP Aggressive Growth Asset Allocation Portfolio
SP AIM Aggressive Growth Portfolio
SP AIM Core Equity Portfolio
SP Alliance Large Cap Growth Portfolio
SP Alliance Technology Portfolio
SP Balanced Asset Allocation Portfolio
SP Conservative Asset Allocation Portfolio
SP Davis Value Portfolio
SP Deutsche International Equity Portfolio
SP Fundamental Value Portfolio
SP Growth Asset Allocation Portfolio
SP INVESCO Small Company Growth Portfolio
SP International Value Portfolio
SP Jennison International Growth Portfolio
SP Large Cap Growth Portfolio
SP Large Cap Value Portfolio
SP MFS Capital Opportunities Portfolio (domestic and foreign equity)
SP Mid Cap Growth Portfolio (formerly SP MFS Mid-Cap Growth Portfolio)
SP Mid Cap Value Portfolio
SP PIMCO High Yield Portfolio
SP PIMCO Total Return Portfolio
SP Prudential U.S. Emerging Growth Portfolio
SP Small/Mid Cap Value Portfolio
SP Small Cap Value Portfolio
SP Strategic Partners Focused Growth Portfolio
Janus Aspen Series
Growth Portfolio -- Service Shares
Depending upon market conditions, you may earn or lose money in any of these
options. The value of your contract will fluctuate depending upon the
performance of the mutual fund portfolios used by the variable investment
options that you choose. Performance information for the variable investment
options appears in the Statement of Additional Information (SAI). Past
performance is not a guarantee of future results.
Two guaranteed fixed interest rate options are also available:
- - The one-year fixed interest rate option offers a base interest rate that is
guaranteed by us for one year, and will always be at least between 1.5% to 3%
per year depending on your state's applicable law. We may also offer a higher
interest rate on each purchase payment allocated to this option for the first
year after the payment.
- - The dollar cost averaging fixed rate option offers an interest rate that is
guaranteed by us for a selected period during which we make periodic
transfers from this option to the variable investment options you select or
to the one-year fixed interest rate option. We guarantee that the interest
rate for the dollar cost averaging fixed rate option will always be at least
3% per year.
You may also invest your money in a market value adjustment option.
You can allocate purchase payments or transfer contract value to one or more
guarantee periods available under the market value adjustment option. Available
guarantee periods will include one or more of the following periods: 1 year
(currently available only as a renewal option), 2 years, 3 years, 4 years, 5
years, 6 years, 7 years, 8 years, 9 years and 10 years in length. Allocations or
transfers must be at least $1,000. This option is not available for contracts
issued in Maryland, Oregon and Washington.
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SUMMARY FOR SECTIONS 1-9 CONTINUED
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PART I
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SUMMARY
SECTION 3
WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE? (ANNUITIZATION)
If you want to receive regular income from your annuity, you can choose one of
several options, including guaranteed payments for the annuitant's lifetime.
Generally, once you begin receiving regular payments, you cannot change your
payment plan.
For an additional fee, you may also choose, if it is available under your
contract, the guaranteed minimum income benefit and the income appreciator
benefit. The guaranteed minimum income benefit guarantees that once the income
period begins, your income payments will be no less than a value calculated by a
certain "GMIB protected value" applied to the GMIB guaranteed annuity purchase
rates. The income appreciator benefit may provide an additional income amount
during the accumulation phase or upon annuitization. See "What Kind Of Payments
Will I Receive During the Income Phase" on page 35.
SECTION 4
WHAT IS THE DEATH BENEFIT?
In general, if the sole owner or first-to-die of the owner or joint owner dies
before the income phase of the contract begins, the person(s) or entity that you
have chosen as your beneficiary will receive, at a minimum, the greater of (i)
the contract value, (ii) either the base death benefit or, for a higher
insurance and administrative cost, a potentially larger guaranteed minimum death
benefit. The base death benefit equals the total invested purchase payments
proportionally reduced by withdrawals. The guaranteed minimum death benefit is
equal to a "GMDB protected value" that depends upon which of the following
guaranteed minimum death benefit options you choose:
- - the highest value of the contract on any contract anniversary, which we call
the "GMDB step-up value;"
- - the total amount you invest increased by a guaranteed rate of return, which
we call the "GMDB roll-up value;" or
- - the greater of the GMDB step-up value or GMDB roll-up value.
If on the date we receive due proof of death, (1) there is only one owner of the
contract and there is only one beneficiary who is the owner's spouse; or (2)
there are an owner and joint owner of the contract, and the owner's spouse is
both the joint owner and the beneficiary under the contract and certain other
conditions are met, then in lieu of paying a death benefit, we will allow the
surviving spouse to continue the contract by exercising the Spousal Continuance
Benefit, which we describe on page 40.
Depending upon the terms of your contract, not all guaranteed death benefit
options may be available. See "What is the Death Benefit" on page 37.
For an additional fee, you may also choose, if it is available under your
contract, the earnings appreciator supplemental death benefit, which provides a
benefit payment upon the death of the sole owner or first to die of the owner or
joint owner during the accumulation period.
SECTION 5
HOW CAN I PURCHASE A STRATEGIC PARTNERS ANNUITY ONE CONTRACT?
Under most circumstances, you can purchase this contract with a minimum initial
purchase payment of $10,000. In most states and subject to some conditions, you
can make additional purchase payments of $500 or more at any time during the
accumulation phase of the contract. Your representative can help you fill out
the proper forms. The Contract With Credit provides for the allocation of a
credit with each purchase payment.
You may purchase this contract only if you are age 85 or younger. Certain age
limits apply to certain features and benefits described herein.
SECTION 6
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS ANNUITY ONE
CONTRACT?
The contract has insurance features and investment features, both of which have
related costs and charges.
- - Each year or upon full surrender we deduct a contract maintenance charge of
$35 if your contract value is less than $75,000 (or 2% of your contract
value, if that amount is less than $35). We do not
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impose the contract maintenance charge if your contract value is $75,000 or
more. We may impose lesser charges in certain states.
- - For insurance and administrative costs, we also deduct a daily charge based
on the average daily value of all assets allocated to the variable investment
options, depending on the death benefit option that you choose. The daily
cost is equivalent to an annual charge, as follows:
-- 1.40% if you do not choose the guaranteed minimum death benefit,
-- 1.65% if you choose the roll-up or step-up guaranteed minimum death
benefit option, and
-- 1.75% if you choose the guaranteed minimum death benefit option of the
greater of the roll-up or step-up.
We impose an additional insurance and administrative cost of 0.10% annually
for the Contract With Credit.
- - We will deduct an additional charge if you choose the earnings appreciator
benefit supplemental death benefit. We deduct this charge from your contract
value on the contract anniversary and upon certain other events. The charge
for this benefit is based on an annual rate of 0.30% of your contract value.
- - We will deduct an additional charge if you choose the guaranteed minimum
income benefit. We deduct this annual charge from your contract value on the
contract anniversary and upon certain other events. The charge for this
benefit is equal to 0.45% of the GMIB protected value.
- - We will deduct an additional charge if you choose the income appreciator
benefit. We deduct this charge from your contract value on the contract
anniversary and upon certain other events. The charge for this benefit is
based on an annual rate of 0.25% of your contract value.
- - A few states and jurisdictions assess a premium tax when you begin receiving
regular income payments from your annuity. In those states, we will assess
the required premium tax charge, which can range up to 3.5% of your contract
value.
- - The mutual funds in which the variable investment options invest also incur
fees and expenses. For the year 2002, these daily charges ranged on an annual
basis from 0.39% to 1.30% of a fund's average daily net assets.
- - If you withdraw money (or you begin the income phase) less than seven
contract anniversaries after making a purchase payment, then you may have to
pay a withdrawal charge on all or part of the withdrawal. This charge ranges
from 1-7% for the Contract Without Credit and 5-8% for the Contract With
Credit (in certain states reduced withdrawal charges may apply for certain
ages. Your contract contains the applicable charges).
For more information, including details about other possible charges under
the contract, see "Summary of Contract Expenses" on page 15 and "What Are The
Expenses Associated With The Strategic Partners Annuity One Contract?" on page
44.
SECTION 7
HOW CAN I ACCESS MY MONEY?
You may withdraw money at any time during the accumulation phase. If you do so,
however, you may be subject to income tax and, if you make a withdrawal prior to
age 59 1/2, an additional tax penalty as well. For the Contract Without Credit,
if you withdraw money less than seven contract anniversaries after making a
purchase payment, we may impose a withdrawal charge ranging from 1 to 7%. For
the version of the Contract With Credit, we may impose a withdrawal charge
ranging from 5-8% (in certain states reduced withdrawal charges may apply for
certain ages. Your contract contains the applicable charges).
Under the market value adjustment option, you will be subject to a market
value adjustment if you make a withdrawal or transfer from the option prior to
the end of a guarantee period.
SECTION 8
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS ANNUITY
ONE CONTRACT?
Your earnings are generally not taxed until you withdraw them. If you take money
out during the accumulation
13
SUMMARY FOR SECTIONS 1-9 CONTINUED
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phase, the tax laws treat the withdrawal as first a withdrawal of earnings,
which are taxed as ordinary income. If you are younger than age 59 1/2 when you
take money out, you may be charged a 10% federal tax penalty on the earnings in
addition to ordinary taxation. A portion of the payments you receive during the
income phase is considered a return of your original investment and therefore
will not be taxable as income. Generally, all amounts withdrawn from an
Individual Retirement Annuity (IRA) contract (excluding Roth IRAs) prior to age
59 1/2 are taxable and subject to the 10% penalty.
SECTION 9
OTHER INFORMATION
This contract is issued by Pruco Life, a subsidiary of the Prudential Insurance
Company of America, and sold by registered representatives of affiliated and
unaffiliated broker/dealers.
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PART I
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SUMMARY
SUMMARY OF CONTRACT EXPENSES
- --------------------------------------------------------------------------------
THE PURPOSE OF THIS SUMMARY IS TO HELP YOU TO UNDERSTAND THE COSTS AND EXPENSES
YOU WILL PAY FOR STRATEGIC PARTNERS ANNUITY ONE. THE FOLLOWING TABLES DESCRIBE
THE MAXIMUM FEES AND EXPENSES THAT YOU WILL PAY WHEN BUYING, OWNING, AND
SURRENDERING THE CONTRACT. THE FIRST TABLE DESCRIBES THE FEES AND EXPENSES THAT
YOU WILL PAY AT THE TIME THAT YOU BUY THE CONTRACT, SURRENDER THE CONTRACT, OR
TRANSFER CASH VALUE BETWEEN INVESTMENT OPTIONS. STATE PREMIUM TAXES MAY ALSO BE
DEDUCTED.
For more detailed information, including additional information about current
and maximum charges, see "What Are The Expenses Associated With The Strategic
Partners Annuity One Contract?" on page 44. For more detailed expense
information about the mutual funds, please refer to the individual fund
prospectuses, which you will find attached at the back of this prospectus.
Historical unit values appear in the appendix to this prospectus.
CONTRACTOWNER TRANSACTION EXPENSES
15
SUMMARY OF CONTRACT EXPENSES CONTINUED
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PART I
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SUMMARY
The next table describes the fees and expenses you will pay periodically during
the time that you own the contract, not including underlying mutual fund fees
and expenses.
1: Each contract year, you may withdraw a specified amount of your contract
value without incurring a withdrawal charge. We will waive the withdrawal fee if
we pay a death benefit or under certain other circumstances. See "Withdrawal
Charge" on page 46. In certain states reduced withdrawal charges may apply for
certain ages under the Contract with Credit. Your contract contains the
applicable charges.
2: Currently we charge $25 for each transfer after the twelfth in a contract
year. We can raise that charge up to a maximum of $30, as shown in the above
table, but have no current intention to do so. We will not charge you for
transfers made in connection with Dollar Cost Averaging and Auto-Rebalancing and
do not count them toward the limit of 12 free transfers per year.
3: As shown in the table above, we have the right to assess a fee of up to $60
annually and at the time of full withdrawal. We currently assess a fee of $35
against contracts valued less than $75,000 (or 2% of contract value, if less).
4: We impose this additional charge of 0.10% on the Contract With Credit,
irrespective of which death benefit option you choose.
5: We impose this charge only if you choose the guaranteed minimum income
benefit. See "Guaranteed Minimum Income Benefit," on page 33. This charge is
equal to 0.45% of the "GMIB protected value, which is calculated daily and
generally is equal to the GMIB roll-up value. Subject to certain age
restrictions, the roll-up value is the total of all invested purchase payments
compounded daily at an effective annual rate of 5.0%, subject to a 200% cap.
Withdrawals reduce both the roll-up value and the cap. The reduction is equal to
the amount of the withdrawal for the first 5% of the roll-up value, calculated
as of the latest contract anniversary (or contract date). The amount of the
withdrawal in excess of 5% of the roll-up value further reduces the roll-up
value and cap proportionally to the additional reduction in contract value after
the first five percent withdrawal occurs. See "Effect of Withdrawals" on page
34. We assess this fee each contract anniversary and when you begin the income
phase of your contract. We also assess this fee if you make a full withdrawal,
but prorate the fee to reflect a partial rather than full year. If you make a
partial withdrawal, we will assess the prorated fee if the remaining contract
value after the withdrawal would be less than the amount of the prorated fee;
otherwise we will not assess the fee at that time. In the future, we may make
other guaranteed minimum income benefit options available. Those other options
may involve different fees.
6: We impose this charge only if you choose the income appreciator benefit. The
charge for this benefit is based on an annual rate of 0.25% of your contract
value. The income appreciator benefit charge is calculated: on each contract
anniversary, on the annuity date, upon the death of the sole owner or first to
die of the owner or joint owner prior to the annuity date, upon a full or
partial withdrawal, and upon a subsequent purchase payment. The fee is based on
the contract value at the time of the calculation, and is prorated based on the
portion of the contract year since the date that the charge was last calculated.
Although it may be calculated more often, it is deducted only: on each contract
anniversary, on the annuity date, upon the death of the sole owner or first to
die of the owner or joint owners prior to the annuity date, upon a full
withdrawal, and upon a partial withdrawal if the contract value remaining after
such partial withdrawal is not enough to cover the then-applicable charge. We
reserve the right to calculate and deduct the fee more frequently than annually,
such as quarterly.
7: We impose this charge only if you choose the earnings appreciator benefit.
The charge for this benefit is based on an annual rate of 0.30% of your contract
value. Although the charge may be calculated more often, it is deducted only: on
each contract anniversary, on the annuity date, upon the death of the sole owner
or first to die of the owner or joint owner prior to the annuity date, upon a
full withdrawal, and upon a partial withdrawal if the contract value remaining
after such partial withdrawal is not enough to cover the then-applicable
earnings appreciator charge. We reserve the right to calculate and deduct the
fee more frequently than annually, such as quarterly.
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PART I
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The next item shows the minimum and maximum total operating expenses charged by
the underlying mutual funds that you may pay periodically during the time that
you own the contract. More detail concerning each underlying mutual fund's fees
and expenses is contained in the prospectus for each underlying mutual fund. The
minimum and maximum total operating expenses depicted below are based on
historical fund expenses for the year ended December 31, 2002. Fund expenses are
not fixed or guaranteed by the Strategic Partners Annuity One contract, and may
vary from year to year.
TOTAL ANNUAL MUTUAL FUND OPERATING EXPENSES (expenses that are deducted from
underlying mutual fund assets, including management fees, distribution and/or
service (12b-1) fees, and other expenses)
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PART I
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SUMMARY
EXPENSE EXAMPLES
- --------------------------------------------------------------------------------
THESE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
CONTRACT WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITY CONTRACTS. THESE
COSTS INCLUDE CONTRACT OWNER TRANSACTION EXPENSES, CONTRACT FEES, SEPARATE
ACCOUNT ANNUAL EXPENSES, AND UNDERLYING MUTUAL FUND FEES AND EXPENSES.
THE EXAMPLES ASSUME THAT YOU INVEST $10,000 IN THE CONTRACT FOR THE TIME PERIODS
INDICATED. THE EXAMPLES ALSO ASSUME THAT YOUR INVESTMENT HAS A 5% RETURN EACH
YEAR AND ASSUMES THE MAXIMUM FEES AND EXPENSES OF ANY OF THE MUTUAL FUNDS.
ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS,
YOUR COSTS WOULD BE AS INDICATED IN THE TABLES THAT FOLLOW.
EXAMPLE 1A: Contract Without Credit: Base Death Benefit, and You Withdraw All
Your Assets
This example assumes that:
- - You invest $10,000 in the Contract Without Credit;
- - You do not choose a Guaranteed Minimum Death Benefit, Earnings Appreciator
Benefit, Guaranteed Minimum Income Benefit, and Income Appreciator Benefit;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - The investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year; and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 1B: Contract Without Credit: Base Death Benefit, and You Do Not Withdraw
Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
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PART I
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SUMMARY
EXAMPLE 2A: Contract Without Credit: Greater of Roll-up or Step-up Guaranteed
Minimum Death Benefit; Guaranteed Minimum Income Benefit; Earnings Appreciator
Benefit; Income Appreciator Benefit; and You Withdraw All Your Assets
This example assumes that:
- - You invest $10,000 in the Contract Without Credit;
- - You choose a Guaranteed Minimum Death Benefit that provides the greater of
the step-up or roll-up death benefit;
- - You choose the Guaranteed Minimum Income Benefit;
- - You choose the Earnings Appreciator Benefit;
- - You choose the Income Appreciator Benefit;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - The investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year; and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 2B: Contract Without Credit: Greater of Roll-up or Step-up Guaranteed
Minimum Death Benefit; Guaranteed Minimum Income Benefit; Earnings Appreciator
Benefit; Income Appreciator Benefit and You Do Not Withdraw Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
EXAMPLE 3A: Contract With Credit: Base Death Benefit, and You Withdraw All Your
Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you invest in the version of the Contract With Credit under which
bonus credits are generally not recapturable after expiration of the free look
period.
EXAMPLE 3B: Contract With Credit: Base Death Benefit, and You Do Not Withdraw
Your Assets
This example makes exactly the same assumptions as Example 1b except that it
assumes that you invest in the version of the Contract With Credit under which
bonus credits are generally not recapturable after expiration of the free look
period.
19
EXPENSE EXAMPLES CONTINUED
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PART I
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SUMMARY
EXAMPLE 4A: Contract With Credit: Greater of Roll-up or Step-up Guaranteed
Minimum Death Benefit; Guaranteed Minimum Income Benefit; Earnings Appreciator
Benefit, Income Appreciator Benefit, and You Withdraw All Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you invest in the version of the Contract With Credit under which
bonus credits are generally not recapturable after expiration of the free look
period.
EXAMPLE 4B: Contract With Credit: Greater of Roll-up or Step-up Guaranteed
Minimum Death Benefit; Guaranteed Minimum Income Benefit; Earnings Appreciator
Benefit, Income Appreciator Benefit, and You Do Not Withdraw Your Assets
This example makes exactly the same assumptions as Example 2b except that it
assumes that you invest in the version of the Contract With Credit under which
bonus credits are generally not recapturable after expiration of the free look
period.
In these expense examples, we set out projected expenses that are based on
versions of the contract that carry the highest and lowest overall charges. We
do not depict projected expenses for every possible combination of contract
charges. The actual expenses under the contract with the insurance features and
underlying funds that you have selected, and the purchase payments that you have
made, may vary from the figures we depict here.
NOTES FOR EXPENSE EXAMPLES:
THESE EXAMPLES DO NOT SHOW PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE HIGHER OR LOWER. THESE
EXAMPLES DO NOT DEPICT EVERY
POSSIBLE COMBINATION OF CHARGES
UNDER THE CONTRACTS.
The values shown in the 10 year
column are the same for Example 1a
and Example 1b, the same for
Example 2a and 2b, the same for
Example 3a and 3b, and the same for
Example 4a and 4b. This is because
if 10 years have elapsed since your
last purchase payment, we would no
longer deduct withdrawal charges
when you make a withdrawal or begin
the income phase of your contract.
Examples 3a, 3b, 4a and 4b reflect
the maximum withdrawal charges, in
certain states reduced withdrawal
charges may apply for certain ages.
The examples use an average
contract maintenance charge, which
we calculated based on our estimate
of the total contract fees we
expect to collect. Based on these
estimates, the contract maintenance
charge is included as an annual
charge of 0.05% of contract value.
Your actual fees will vary based on
the amount of your contract and
your specific allocation among the
investment options.
A table of accumulation unit values
of interests in each variable
investment option appears in the
Appendix.
The examples do not reflect premium
taxes. We may apply a charge for
premium taxes depending on what
state you live in.
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PART II SECTIONS 1-9
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STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS
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PART II
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SECTIONS 1-9
1:
WHAT IS THE STRATEGIC PARTNERS ANNUITY ONE
VARIABLE ANNUITY?
- --------------------------------------------------------------------------------
THE STRATEGIC PARTNERS ANNUITY ONE VARIABLE ANNUITY IS A CONTRACT BETWEEN YOU,
THE OWNER, AND US, PRUCO LIFE INSURANCE COMPANY (PRUCO LIFE, WE OR US).
Under our contract, in exchange for your payment to us, we promise to pay you a
guaranteed income stream that can begin any time on or after the third contract
anniversary. Your annuity is in the accumulation phase until you decide to begin
receiving annuity payments. The date you begin receiving annuity payments is the
annuity date. On the annuity date, your contract switches to the income phase.
This annuity contract benefits from tax deferral. Tax deferral means that you
are not taxed on earnings or appreciation on the assets in your contract until
you withdraw money from your contract. (If you hold the annuity contract in a
tax-favored plan such as an IRA, that plan generally provides tax deferral even
without investing in an annuity contract.)
There are two basic versions of Strategic Partners Annuity One variable
annuity.
Contract With Credit.
- - provides for a bonus credit that we add to each purchase payment that you
make,
- - has higher withdrawal charges and insurance and administrative costs than the
Contract Without Credit,
- - may provide a lower interest rate for fixed and market value adjustment
options than the Contract Without Credit,
Contract Without Credit.
- - does not provide a credit,
- - has lower withdrawal charges and insurance and administrative costs than the
Contract With Credit,
- - may provide a higher interest rate for fixed and market value adjustment
options than the Contract With Credit.
Unless we state otherwise, when we use the word contract, it applies to both
versions.
Because of the higher withdrawal charges, if you choose the Contract With
Credit and you withdraw a purchase payment, depending upon the performance of
the investment options you choose, you may be worse off than if you had chosen
the Contract Without Credit. We do not recommend purchase of either version of
Strategic Partners Annuity One if you anticipate having to withdraw a
significant amount of your purchase payments within a few years of making those
purchase payments.
Strategic Partners Annuity One is a variable annuity contract. This means
that during the accumulation phase, you can allocate your assets among 32
variable investment options, two guaranteed fixed interest rate options and a
market value adjustment option. If you select variable investment options, the
amount of money you are able to accumulate in your contract during the
accumulation phase depends upon the investment performance of the mutual funds
associated with those variable investment options. Because the mutual funds'
portfolios fluctuate in value depending upon market conditions, your contract
value can either increase or decrease. This is important, since the amount of
the annuity payments you receive during the income phase depends upon the value
of your contract at the time you begin receiving payments.
As mentioned above, two guaranteed fixed interest rate options are available:
- - The one-year fixed interest rate option offers a base interest rate that is
guaranteed by us for one year and will always be at least a minimum interest
rate per year between 1.5% to 3% depending on your state's applicable law. We
may also offer a higher interest rate on each purchase payment allocated to
this option for the first year after the payment.
- - The dollar cost averaging fixed rate option offers an interest rate that is
guaranteed by us for a selected period during which periodic transfers are
made to selected variable investment options and/or to the one-year fixed
interest rate option. We guarantee
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PART II
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SECTIONS 1-9
your money will earn at least 3% while it is allocated to this option.
Additionally, you may allocate purchase payments or transfer contract value
to the market value adjustment option. Under this option, we will offer one or
more of the following guarantee periods: 1 year (currently available only as a
renewal option), 2 years, 3 years, 4 years, 5 years, 6 years, 7 years, 8 years,
9 years, and 10 years in length. However, we will not allow purchase payments or
transfers into a guarantee period unless that guarantee period offers 3% annual
interest or greater.
As the owner of the contract, you have all of the decision-making rights
under the contract. You will also be the annuitant unless you designate someone
else. The annuitant is the person whose life is used to determine how much and
how long the annuity payments will continue once the annuity phase begins. On or
after the annuity date, the annuitant may not be changed.
The beneficiary is the person(s) or entity you designate to receive any death
benefit. You may change the beneficiary any time prior to the annuity date by
making a written request to us. Your request becomes effective when we approve
it.
There are certain state variations to this contract that are referred to in
this prospectus. Please see the SAI and your contract for further information on
these and other variations.
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"
If you change your mind about owning Strategic Partners Annuity One, you may
cancel your contract within 10 days after receiving it (or whatever period is
required by applicable state law). You can request a refund by returning the
contract either to the representative who sold it to you, or to the Prudential
Annuity Service Center at the address shown on the first page of this
prospectus. You will receive, depending on applicable state law:
- - Your full purchase payment, less any applicable federal and state income tax
withholding; or
- - The amount your contract is worth as of the day we receive your request, less
any applicable federal and state income tax withholding. This amount may be
more or less than your original payment. If you have purchased the Contract
With Credit, we will deduct any credit we had added to your contract value.
We will not, unless and until we obtain SEC exemptive relief, recoup for our
own assets the full amount of the 6% bonus credit applicable to purchase
payments of $1 million or greater that we had given to you. Rather, we will
recoup an amount equal to the value of the credit as of the business day on
which we receive your request, less any charges attributable to that credit.
We reserve the right to recapture the entire amount of the credit upon
obtaining appropriate approval of the SEC with regard to that bonus credit.
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PART II
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SECTIONS 1-9
2:
WHAT INVESTMENT OPTIONS
CAN I CHOOSE?
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THE CONTRACT GIVES YOU THE CHOICE OF ALLOCATING YOUR PURCHASE PAYMENTS TO ANY
ONE OR MORE OF 32 VARIABLE INVESTMENT OPTIONS, 2 FIXED INTEREST RATE OPTIONS,
AND A MARKET VALUE ADJUSTMENT OPTION.
The 32 variable investment options invest in mutual funds managed by leading
investment advisers. Separate prospectuses for these funds are attached to this
prospectus. You should read a mutual fund's prospectus before you decide to
allocate your assets to the variable investment option using that fund.
VARIABLE INVESTMENT OPTIONS
Listed below are the mutual funds in which the variable investment options
invest. Each variable investment option has a separate investment objective.
The Prudential Series Fund, Inc.
- - Jennison Portfolio (domestic equity)
- - Prudential Equity Portfolio
- - Prudential Global Portfolio
- - Prudential Money Market Portfolio
- - Prudential Stock Index Portfolio
- - Prudential Value Portfolio (domestic equity)
- - SP Aggressive Growth Asset Allocation Portfolio
- - SP AIM Aggressive Growth Portfolio
- - SP AIM Core Equity Portfolio
- - SP Alliance Large Cap Growth Portfolio
- - SP Alliance Technology Portfolio
- - SP Balanced Asset Allocation Portfolio
- - SP Conservative Asset Allocation Portfolio
- - SP Davis Value Portfolio
- - SP Deutsche International Equity Portfolio
- - SP Fundamental Value Portfolio
- - SP Growth Asset Allocation Portfolio
- - SP International Value Portfolio
- - SP INVESCO Small Company Growth Portfolio
- - SP Jennison International Growth Portfolio
- - SP Large Cap Growth Portfolio
- - SP Large Cap Value Portfolio
- - SP MFS Capital Opportunities Portfolio
(domestic and foreign equity)
- - SP Mid Cap Growth Portfolio (formerly SP MFS Mid-Cap Growth Portfolio)
- - SP Mid-Cap Value Portfolio
- - SP PIMCO High Yield Portfolio
- - SP PIMCO Total Return Portfolio
- - SP Prudential U.S. Emerging Growth Portfolio
- - SP Small/Mid Cap Value Portfolio
- - SP Small Cap Value Portfolio
- - SP Strategic Partners Focused Growth Portfolio
The Jennison Portfolio, Prudential Equity Portfolio, Prudential Global
Portfolio, Prudential Money Market Portfolio, Prudential Stock Index Portfolio
and Prudential Value Portfolio, and each "SP" Portfolio of the Prudential Series
Fund, are managed by an indirect wholly-owned subsidiary of Prudential
Financial, Inc. called Prudential Investments LLC (PI). In addition, the
portfolios listed below also have subadvisers, which are listed below and which
have day-to-day responsibility for managing the portfolio, subject to the
oversight of PI using a manager-of-managers approach.
Prudential Money Market Portfolio and Prudential Stock Index Portfolio:
Prudential Investment Management, Inc.
Jennison Portfolio, Prudential Global Portfolio, SP Jennison
International Growth Portfolio, SP Prudential U.S. Emerging Growth
Portfolio and Prudential Value Portfolio: Jennison Associates LLC
Prudential Equity Portfolio: GE Asset Management, Incorporated, Jennison
Associates LLC, and Salomon Brothers Asset Management Inc.
SP Strategic Partners Focused Growth Portfolio: Jennison Associates LLC
and Alliance Capital Management, L.P.
SP AIM Aggressive Growth Portfolio and SP AIM Core Equity Portfolio: A I
M Capital Management, Inc.
SP Alliance Large Cap Growth Portfolio and SP Alliance Technology
Portfolio: Alliance Capital Management L.P.
SP Davis Value Portfolio: Davis Advisors
SP Deutsche International Equity Portfolio: Deutsche Asset Management
Investment Services Limited, a wholly-owned subsidiary of Deutsche Bank
AG
SP Fundamental Value Portfolio: Wellington Management Company, LLP
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PART II
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SECTIONS 1-9
SP INVESCO Small Company Growth Portfolio: INVESCO Funds Group, Inc.
SP International Value Portfolio: Bank of Ireland Asset Management
(U.S.) Limited
SP Large Cap Growth Portfolio: Furman Selz Capital Management LLC
SP Large Cap Value Portfolio and SP Small/Mid Cap Value Portfolio:
Fidelity Management and Research Company
SP MFS Capital Opportunities Portfolio: Massachusetts Financial Services
Company
SP Mid Cap Growth Portfolio (formerly SP MFS Mid-Cap Growth Portfolio):
Calamos Asset Management, Inc.
SP Mid Cap Value Portfolio: Lord, Abbett & Co. LLC
SP PIMCO High Yield Portfolio and SP PIMCO Total Return Portfolio:
Pacific Investment Management Company
SP Small Cap Value Portfolio: EARNEST Partners LLC and National City
Investment Management Company
Janus Aspen Series
- - Growth Portfolio--Service Shares
Janus Capital Management LLC serves as investment adviser to the Growth
Portfolio--Service Shares of Janus Aspen Series.
A fund or portfolio may have a similar name or an investment objective and
investment policies closely resembling those of a mutual fund managed by the
same investment adviser that is sold directly to individual investors. Despite
such similarities, there can be no assurance that the investment performance of
any such fund or portfolio will resemble that of its retail fund counterpart.
An affiliate of each of the funds may compensate Pruco Life based upon an
annual percentage of the average assets held in the fund by Pruco Life under the
contracts. These percentages may vary by fund and/or portfolio, and reflect
administrative and other services we provide.
FIXED INTEREST RATE OPTIONS
We offer two fixed interest rate options:
- - a one-year fixed interest rate option, and
- - a dollar cost averaging fixed rate option ("DCA Fixed Rate Option").
When you select one of these options, your payment will earn interest at the
established rate for the applicable interest rate period. A new interest rate
period is established every time you allocate or transfer money into a fixed
interest rate option. (You may not transfer amounts from other investment
options into the DCA Fixed Rate Option.) You may have money allocated in more
than one interest rate period at the same time. This could result in your money
earning interest at different rates and each interest rate period maturing at a
different time. While these interest rates may change from time to time they
will never be less than a certain minimum. We may offer lower interest rates for
Contracts With Credit than for Contracts Without Credit.
ONE-YEAR FIXED INTEREST RATE OPTION
We set a one-year base guaranteed annual interest rate for the one-year fixed
interest rate option. Additionally, we may provide a higher interest rate on
each purchase payment allocated to this option for the first year after the
payment. This higher interest rate will not apply to amounts transferred from
other investment options within the contract or amounts remaining in this option
for more than one year. For the one-year fixed rate option, the minimum rate is
between 1.5% to 3%, depending on your state's applicable law.
DOLLAR COST AVERAGING FIXED RATE OPTION
You may allocate all or part of any purchase payment to the DCA Fixed Rate
Option. For this option, the interest rate is guaranteed for the applicable
period of time for which transfers are made. The minimum interest rate for this
option is 3%. Under this option, you automatically transfer amounts over a
stated period (currently, six or twelve months) from the DCA Fixed Rate Option
to the variable investment options and/or to the one-year fixed interest rate
option, as you select. We will invest the assets you allocate to the DCA Fixed
Rate Option in our general account until they are transferred. You may not
transfer from other investment options to the DCA Fixed Rate Option.
If you choose to allocate all or part of a purchase payment to the DCA Fixed
Rate Option, the minimum
27
2:
WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
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PART II
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SECTIONS 1-9
amount of the purchase payment you may allocate is $2,000. The first periodic
transfer will occur on the date you allocate your purchase payment to the DCA
Fixed Rate Option. Subsequent transfers will occur on the monthly anniversary of
the first transfer. Currently, you may choose to have the purchase payments
allocated to the DCA Fixed Rate Option transferred to the other options in
either six or twelve monthly installments, and you may not change that number of
monthly installments after you have chosen the DCA Fixed Rate Option. You may
allocate to both the six-month and twelve-month options. (In the future, we may
make available other numbers of transfers and other transfer schedules--for
example, quarterly as well as monthly.) If you choose a six-payment transfer
schedule, each transfer generally will equal 1/6th of the amount you allocated
to the DCA Fixed Rate Option, and if you choose a twelve-payment transfer
schedule, each transfer generally will equal 1/12th of the amount you allocated
to the DCA Fixed Rate Option. In either case, the final transfer amount
generally will also include the credited interest. You may change at any time
the options into which the DCA Fixed Rate Option assets are transferred. You may
make a one time transfer of the remaining value out of your DCA Fixed Rate
Option, if you so choose. Transfers from the DCA Fixed Rate Option do not count
toward the maximum number of free transfers allowed under the contract.
If you make a withdrawal or have a fee assessed from your contract, and all
or part of that withdrawal or fee comes out of the DCA Fixed Rate Option, we
will recalculate the periodic transfer amount to reflect the change. This
recalculation may include some or all of the interest credited to the date of
the next scheduled transfer. If a withdrawal or fee assessment reduces the
monthly transfer amount below $100, we will transfer the remaining balance in
the DCA Fixed Rate Option on the next scheduled transfer date.
By investing amounts on a regular basis instead of investing the total amount
at one time, the DCA Fixed Rate Option may decrease the effect of market
fluctuation on the investment of your purchase payment. Of course, dollar cost
averaging cannot ensure a profit or protect against loss in a declining market.
MARKET VALUE ADJUSTMENT OPTION
Under the market value adjustment option, we have the right to offer one or more
of several guarantee periods. These guarantee periods are 1 year (currently
available only as a renewal option), 2 years, 3 years, 4 years, 5 years, 6
years, 7 years, 8 years, 9 years, or 10 years in length.
This option is not available for contracts issued in Maryland, Oregon and
Washington.
We declare the interest rate for each available guarantee period
periodically, but we guarantee that we will declare no less than 3% interest
with respect to any guarantee period. You will earn interest on your invested
purchase payment at the rate that we have declared for the guarantee period you
have chosen. You must invest at least $1,000.
We may offer lower interest rates for Contracts With Credit than for
Contracts Without Credit.
We express interest rates as annual rates, although we credit interest within
each guarantee period on a daily basis. The daily interest that we credit is
equal to the pro rated portion of the interest that would be earned on an annual
basis. We credit interest from the business day on which your purchase payment
is received in good order at the Prudential Annuity Service Center until the
earliest to occur of any of the following events: (a) full surrender of the
Contract, (b) commencement of annuity payments or settlement, (c) cessation of
the guarantee period, (d) withdrawal or transfer the value in the guarantee
period, or (e) death of the first to die of the owner and joint owner (or
annuitant, for entity-owned contracts) unless the contract is continued under
the spousal continuance provision.
During the 30 day period immediately following the end of a guarantee period,
we allow you to do any of the following, without the imposition of the market
value adjustment:
(a) withdrawal or transfer the value in the guarantee period,
(b) allocate the value in the guarantee period to another guarantee period or
other investment option (provided that the new guarantee period
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ends prior to the annuity date, if earlier). You will receive the interest
rate applicable on the date we receive your instruction, or
(c) apply the value in the guarantee period to the annuity or settlement option
of your choice.
If we do not receive instructions from you concerning the disposition of the
contract value in your maturing guarantee period, we will reinvest the contract
value in the Prudential Money Market Portfolio investment option.
During the 30 day period immediately following the end of the guarantee
period, or until you elect to do either a, b or c delineated immediately above,
you will receive the current interest rate applicable to the guarantee period
having the same duration as the guarantee period that just matured, which is
offered on the day immediately following the end of the matured guarantee
period. However, if at that time we do not offer a guarantee period with the
same duration as that which matured, you will then receive the current interest
rate applicable to the shortest guarantee period then offered.
Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed and
the interest amount that your money will earn is guaranteed by us to always be
at least 3%.
Payments allocated to the fixed interest rate options become part of Pruco
Life's general assets. Payments allocated to the market value adjustment option
are held as a separate pool of assets, but the income, gains or losses
experienced by these assets are not directly credited or charged against the
contracts. As a result, the strength of our guarantees under these options is
based on the overall financial strength of Pruco Life.
MARKET VALUE ADJUSTMENT
When you allocate a purchase payment or transfer contract value to a guarantee
period, we use that money to buy and sell securities and other instruments to
support our obligation to pay interest. Generally, we buy bonds for this
purpose. The duration of the bonds and other instruments that we buy with
respect to a particular guarantee period is influenced significantly by the
length of the guarantee period. Thus, for example, we typically would acquire
longer-duration bonds with respect to the 10 year guarantee period than we do
for the 3 year guarantee period. The value of these bonds is affected by changes
in interest rates, among other factors. The market value adjustment that we
assess against your contract value if you withdraw or transfer prior to the end
of a guarantee period involves our attributing to you a portion of our
investment experience on these bonds and other instruments. For example, if you
make a full withdrawal when interest rates have risen since the time of your
investment, the bonds and other investments in the guarantee period likely would
have decreased in value, meaning that we would impose a "negative" market value
adjustment on you (i.e., one that results in a reduction of the withdrawal
proceeds that you receive). For a partial withdrawal, we would deduct a negative
market value adjustment from your remaining contract value. Conversely, if
interest rates have decreased, the market value adjustment would be positive.
Other things you should know about the market value adjustment include the
following:
- - We determine the market value adjustment according to a mathematical formula,
which is set forth at the end of this prospectus under the heading
"Market-Value Adjustment Formula." In that section of the prospectus, we also
provide hypothetical examples of how the formula works.
- - In addition to imposing a market value adjustment on withdrawals, we also
will impose a market value adjustment on the contract value you apply to an
annuity or settlement option, unless you annuitize after the end of a
guarantee period. The laws of certain states may prohibit us from imposing a
market value adjustment on the annuity date.
YOU SHOULD REALIZE, HOWEVER, THAT APART FROM THE MARKET VALUE ADJUSTMENT, THE
VALUE OF THE BENEFIT IN YOUR GUARANTEE PERIOD UNDER YOUR CONTRACT DOES NOT
DEPEND ON THE INVESTMENT PERFORMANCE OF THE BONDS AND OTHER INSTRUMENTS THAT WE
HOLD WITH RESPECT TO YOUR GUARANTEE PERIOD. APART FROM THE EFFECT OF ANY MARKET
VALUE ADJUSTMENT, WE DO NOT PASS THROUGH TO
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YOU THE GAINS OR LOSSES ON THE BONDS AND OTHER INSTRUMENTS THAT WE HOLD IN
CONNECTION WITH A GUARANTEE PERIOD.
TRANSFERS AMONG OPTIONS
You can transfer money among the variable investment options and the one-year
fixed interest rate option. In addition, you can transfer contract value out of
a market value adjustment guarantee period into another market value adjustment
guarantee period, a variable investment option, or the one-year fixed interest
rate option, although a market value adjustment will apply to any transfer you
make prior to the end of a guarantee period. You may transfer contract value
into the market value adjustment option at any time, provided it is at least
$1,000.
You may make your transfer request by telephone, electronically, or otherwise
in paper form to the Prudential Annuity Service Center. You may make up to two
telephone and electronic transfer requests per month. You must make any
additional transfer requests during that month in writing with an original
signature. We have procedures in place to confirm that instructions received by
telephone or electronically are genuine. We will not be liable for following
telephone or electronic instructions that we reasonably believe to be genuine.
We require any transfer request that you submit by fax to be accompanied by a
confirming telephone call to the Prudential Annuity Service Center. Your
transfer request will take effect at the end of the business day on which we
receive it. Our business day generally closes at 4:00 p.m. Eastern time, and
requests received after that time will take effect at the end of the next
business day.
YOU CAN MAKE TRANSFERS OUT OF A FIXED INTEREST-RATE OPTION, OTHER THAN THE
DCA OPTION, ONLY DURING THE 30-DAY PERIOD FOLLOWING THE END OF THE ONE YEAR
INTEREST RATE PERIOD. TRANSFERS FROM THE DCA OPTION ARE MADE ON A PERIODIC BASIS
FOR THE PERIOD THAT YOU SELECT.
During the contract accumulation phase, you can make up to 12 transfers each
contract year without charge. We currently charge $25 for each transfer after
the twelfth in a contract year, and we have the right to increase this charge up
to $30. (Dollar Cost Averaging and Auto-Rebalancing transfers are always free,
and do not count toward the 12 free transfers per year.)
MARKET TIMING
THE CONTRACT WAS NOT DESIGNED FOR MARKET TIMING OR FOR PERSONS THAT MAKE
PROGRAMMED, LARGE, OR FREQUENT TRANSFERS. BECAUSE MARKET TIMING AND SIMILAR
TRADING PRACTICES GENERALLY ARE DISRUPTIVE TO THE SEPARATE ACCOUNT AND THE
UNDERLYING MUTUAL FUNDS, WE MONITOR CONTRACT TRANSACTIONS IN AN EFFORT TO
IDENTIFY SUCH TRADING PRACTICES. IF WE DETECT THOSE PRACTICES, WE RESERVE THE
RIGHT TO REJECT A PROPOSED TRANSACTION AND TO MODIFY THE CONTRACT'S TRANSFER
PROCEDURES. FOR EXAMPLE, WE MAY DECIDE NOT TO ACCEPT THE TRANSFER REQUESTS OF AN
AGENT ACTING UNDER A POWER OF ATTORNEY ON BEHALF OF MORE THAN ONE
CONTRACTHOLDER.
OTHER AVAILABLE FEATURES
DOLLAR COST AVERAGING
The dollar cost averaging (DCA) feature (which is distinct from the DCA Fixed
Rate Option) allows you to systematically transfer either a fixed dollar amount
or a percentage out of any variable investment option and into one or more other
variable investment options or the one-year fixed rate option. You can have
these automatic transfers occur monthly, quarterly, semiannually or annually. By
investing amounts on a regular basis instead of investing the total amount at
one time, dollar cost averaging may decrease the effect of market fluctuation on
the investment of your purchase payment. Of course, dollar cost averaging cannot
ensure a profit or protect against loss in a declining market.
Each dollar cost averaging transfer must be at least $100. Transfers will be
made automatically on the schedule you choose until the entire amount you chose
to have transferred has been transferred or until you tell us to discontinue the
transfers. If the remaining amount to be transferred drops below $100, the
entire remaining balance will be transferred on the next transfer date. You can
allocate additional amounts to be transferred at any time.
Your transfers will occur on the last calendar day of each transfer period
you have selected, provided that
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the New York Stock Exchange is open on that date. If the New York Stock Exchange
is not open on a particular transfer date, the transfer will take effect on the
next business day.
Any dollar cost averaging transfers you make do not count toward the 12 free
transfers you are allowed each contract year. The dollar cost averaging feature
is available only during the contract accumulation phase.
ASSET ALLOCATION PROGRAM
We recognize the value of having advice when deciding how to allocate your
purchase payments among the investment options. If you choose to participate in
the Asset Allocation Program, your representative will give you a questionnaire
to complete that will help determine a program that is appropriate for you. We
will prepare your asset allocation based on your answers to the questionnaire.
We will not charge you for this service and you are not obligated to participate
or to invest according to program recommendations.
AUTO-REBALANCING
Once you have allocated your money among the variable investment options, the
actual performance of the investment options may cause your allocation to shift.
For example, an investment option that initially holds only a small percentage
of your assets could perform much better than another investment option. Over
time, this option could increase to a larger percentage of your assets than you
desire. You can direct us to automatically rebalance your assets to return to
your original allocation percentages or to subsequent allocation percentages you
select. We will rebalance only the variable investment options that you have
designated. If you also participate in the DCA feature, then the variable
investment option from which you make the DCA transfers will not be rebalanced.
You may choose to have your rebalancing occur monthly, quarterly,
semiannually, or annually. The rebalancing will occur on the last calendar day
of the period you have chosen, provided that the New York Stock Exchange is open
on that date. If the New York Stock Exchange is not open on that date, the
rebalancing will take effect on the next business day.
Any transfers that occur as a result of the Auto-Rebalancing feature do not
count toward the 12 free transfers you are allowed per year. The
auto-rebalancing feature is available only during the contract accumulation
phase. If you choose auto-rebalancing and dollar cost averaging,
auto-rebalancing will take place after the transfers from your DCA account.
VOTING RIGHTS
We are the legal owner of the shares of the mutual funds available as variable
investment options. However, we currently vote the shares of the mutual funds
according to voting instructions we receive from contract owners. When a vote is
required, we will mail you a form that you can complete and return to us to tell
us how you wish us to vote. When we receive those instructions, we will vote all
of the shares we own on your behalf in accordance with those instructions. We
will vote fund shares for which we do not receive instructions, and any other
shares that we own, in the same proportion as shares for which we do receive
instructions from contract owners. We may change the way your voting
instructions are calculated if federal or state law requires or permits it.
SUBSTITUTION
We may substitute one or more of the mutual funds used by the variable
investment options. We would not do this without the approval of the SEC and any
necessary state insurance departments. We would give you specific notice in
advance of any substitution we intended to make. We may also stop allowing
investments in existing funds.
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We can begin making annuity payments any time on or after the third contract
anniversary (or as required by state law if different). Annuity payments must
begin no later than the contract anniversary next following the annuitant's 95th
birthday (unless we agree to another date).
The Strategic Partners Annuity One variable annuity contract offers an
optional guaranteed minimum income benefit, which we describe below. Your
annuity options vary depending upon whether you choose this benefit.
Depending upon the annuity option you choose, you may incur a withdrawal
charge when the income phase begins. Currently, if permitted by state law, we
deduct any applicable withdrawal charge if you choose Option 1 for a period
shorter than five years, Option 3, or certain other annuity options that we may
make available. We do not deduct a withdrawal charge if you choose Option 1 for
a period of five years or longer or Option 2. For information about withdrawal
charges, see "What are the Expenses Associated with the Strategic Partners
Annuity One Contract," page 44.
In addition, any value in a guarantee period of the market value adjustment
option may be subject to a market value adjustment.
PAYMENT PROVISIONS WITHOUT THE GUARANTEED MINIMUM INCOME BENEFIT
We make the income plans described below available at any time before the
annuity date. We call these plans "annuity options" or "settlement options."
During the income phase, all of the annuity options under this contract are
fixed annuity options. This means that you no longer invest in the variable
investment options--that is, in the underlying mutual funds--on or after the
annuity date. If another annuity option is not selected by the annuity date, you
will automatically select the Life Income Annuity Option (Option 2, described
below) unless prohibited by applicable law. GENERALLY, ONCE THE ANNUITY PAYMENTS
BEGIN, THE ANNUITY OPTION CANNOT BE CHANGED AND YOU CANNOT MAKE WITHDRAWALS.
OPTION 1
ANNUITY PAYMENTS FOR A FIXED PERIOD
Under this option, we will make equal payments for the period chosen, up to 25
years (but not to exceed life expectancy). We will make these payments monthly,
quarterly, semiannually, or annually, as you choose, for the fixed period. If
the annuitant dies during the income phase, we will continue payments to the
beneficiary for the remainder of the fixed period or, if the beneficiary so
chooses, we will make a single lump-sum payment. We calculate the amount of the
lump sum payment as the present value of the unpaid future payments based upon
the interest rate used to compute the actual payments. That interest rate will
always be at least 3% a year.
OPTION 2
LIFE INCOME ANNUITY OPTION
Under this option, we will make annuity payments monthly, quarterly,
semiannually, or annually as long as the annuitant is alive. If the annuitant
dies before we have made 10 years' worth of payments, we will pay the
beneficiary the present value of the remaining annuity payments in one lump sum,
unless we were specifically instructed to continue to pay the remaining monthly
annuity payments. We calculate the present value of the remaining annuity
payments using the interest rate used to compute the amount of the original 120
payments. That interest rate will always be at least 3% a year. If an annuity
option is not selected by the annuity date, you will automatically select this
option, unless prohibited by applicable law.
OPTION 3
INTEREST PAYMENT OPTION
Under this option, we will credit interest on the adjusted contract value until
you request payment of all or part of the adjusted contract value. We can make
interest payments on a monthly, quarterly, semiannual, or annual basis or allow
the interest to accrue on your contract assets. Under this option, we will pay
you interest at an effective rate of at least 3% a year. This option is not
available if you hold your contract in an IRA.
Under this option, all gain in the annuity will be taxable as of the annuity
date.
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OTHER ANNUITY OPTIONS
We currently offer a variety of other annuity options. At the time annuity
payments are chosen, we may make available to you any of the fixed annuity
options then offered.
Applicable state law may limit some of these options. Consult the Statement
of Additional Information for details.
TAX CONSIDERATIONS
If your contract is held under a tax-favored plan, as discussed on page 54, you
should consider the minimum distribution requirements mentioned on page 56 when
selecting your annuity option.
For certain contracts held in connection with "qualified" retirement plans
(such as a Section 401(k) plan), please note that if you are married at the time
your payments commence, you may be required by federal law to choose an income
option that provides at least a 50 percent joint and survivor annuity to your
spouse, unless your spouse waives that right. Similarly, if you are married at
the time of your death, federal law may require all or a portion of the death
benefit to be paid to your spouse, even if you designated someone else as your
beneficiary. For more information, consult the terms of your retirement
arrangement.
GUARANTEED MINIMUM INCOME BENEFIT
The guaranteed minimum income benefit (GMIB), is an optional feature that, if
you choose it, guarantees that once the income period begins, your income
payments will be no less than a value based on a certain GMIB protected value
applied to the GMIB guaranteed annuity purchase rates. If you want the
guaranteed minimum income benefit, you must elect it when you make your initial
purchase payment. Once elected, the guaranteed minimum income benefit cannot be
revoked. This feature may not be available in your state.
The GMIB protected value is calculated daily and is equal to the GMIB roll-up
until the GMIB roll-up either reaches its cap or if we stop applying the annual
interest rate based on the age of the annuitant, number of contract
anniversaries, or number of years since last GMIB reset, as described below. At
this point, the GMIB protected value will be increased by any subsequent
invested purchase payments, reduced by the effect of withdrawals. Depending on
applicable state law, the guaranteed minimum income benefit is not available
under all contracts. In addition, the guaranteed minimum income benefit is
subject to certain age restrictions described below.
- - The annuitant must be 75 or younger in order for you to elect guaranteed
minimum income benefit.
- - If you choose the guaranteed minimum income benefit, we will impose an annual
charge equal to 0.45% of the GMIB protected value, described below. (In some
states, we may calculate this fee on a different basis, but it will not be
higher than 0.45% of the GMIB protected value.) See "What are the Expenses
Associated with the Strategic Partners Annuity One Contract?" on page 44.
- - To take advantage of the guaranteed minimum income benefit, you must wait a
certain amount of time before you begin the income phase. The waiting period
is the period extending from the contract date to the 7th contract
anniversary but, if the guaranteed minimum income benefit has been reset (as
described below), the waiting period is the 7 year period beginning with the
date of the most recent reset.
Once the waiting period has elapsed, you will have a thirty-day period each
year, beginning on the contract anniversary, during which you may begin the
income phase with the guaranteed minimum income benefit by submitting the
necessary forms in good order to the Prudential Annuity Service Center.
GMIB ROLL-UP
The GMIB roll-up is equal to the invested purchase payments, increased daily at
an effective annual interest rate of 5% starting on the date each invested
purchase payment is made, until the cap is reached (GMIB roll-up cap). We will
reduce this amount by the effect of withdrawals. The GMIB roll-up cap is equal
to two times each invested purchase payment and is reduced by the effect of
withdrawals.
Even if the GMIB roll-up cap has not been reached, we will nevertheless stop
increasing the GMIB roll-up
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value by the effective annual interest rate on the latest of:
- the contract anniversary coinciding with or next following the
annuitant's 80th birthday,
- the 7th contract anniversary, or
- 7 years from the most recent GMIB reset (as described below).
However, even if we stop increasing the GMIB roll-up value by the effective
annual interest rate, we will still increase the GMIB protected value by
subsequent invested purchase payments, reduced by the effect of withdrawals.
EFFECT OF WITHDRAWALS.
In each contract year, withdrawals will first reduce the GMIB protected value on
a dollar for dollar basis, by the same dollar amount of the withdrawal up to the
first 5% of GMIB protected value calculated on the contract anniversary (or,
during the first contract year, on the contract date). A proportional reduction
will apply to amounts exceeding the 5% of GMIB protected value. We calculate the
proportional reduction by dividing the contract value after the withdrawal by
the contract value immediately following the withdrawal of the first 5% of GMIB
protected value. The resulting percentage is multiplied by the GMIB protected
value minus the amount of the withdrawal that does not exceed 5%.
Here is an example of the impact of a withdrawal on the GMIB protected value:
An owner invests $100,000 initially and then requests a withdrawal of $8,000
in the first contract year. If the contract value had increased to $108,000
prior to the withdrawal, the first $5,000 of the withdrawal would reduce the
GMIB protected value by $5,000 (dollar-for-dollar up to 5% of the GMIB protected
value at issue). The remaining $3,000 of the withdrawal would reduce the GMIB
protected value in the same proportion that the contract value was reduced.
Since the remaining $3,000 withdrawn is 2.91% of the contract value after the
initial $5,000 was withdrawn on a dollar-for-dollar basis, the remaining GMIB
protected value is reduced by 2.91%. If the protected value were $105,000 before
the withdrawal, after the reduction it would be $97,090 ($105,000 minus $5,000
taken dollar for dollar minus a reduction of 2.91% of $100,000 or $2,910).
GMIB RESET FEATURE
You may elect to "reset" your GMIB protected value to equal your current
contract value twice over the life of the contract. You may only exercise this
reset option if the annuitant has not yet reached his or her 76th birthday. If
reset, you must wait a new 7-year period from the most recent reset to exercise
the guaranteed minimum income benefit. Further, we will reset the GMIB roll-up
cap to equal two times the GMIB protected value as of such date. Additionally,
if you reset, we will determine the GMIB payout amount by using the guaranteed
annuity purchase rates (attached to your contract) based on the number of years
since the most recent reset.
PAYOUT AMOUNT
The guaranteed minimum income benefit payout amount is based on the age and sex
of the annuitant (and, if there is one, the co-annuitant as well). After we
first deduct a charge for any applicable premium taxes, the payout amount will
equal the greater of:
1) the GMIB protected value as of the date you exercise the GMIB payout option,
applied to the GMIB guaranteed annuity purchase rates and based on the
annuity payout option as described below.
2) the adjusted contract value--that is, the contract value minus any charge we
impose for premium taxes--as of the date you exercise the GMIB payout option
applied to the current annuity purchase rates then in use.
GMIB ANNUITY PAYOUT OPTIONS
We currently offer two guaranteed minimum income benefit annuity payout options.
Each option involves payment for at least a period certain of ten years.
GMIB OPTION 1
SINGLE LIFE PAYOUT OPTION
We will make monthly payments for as long as the annuitant lives, with payments
for a period certain. We will stop making payments after the later of the death
of the annuitant or the end of the period certain.
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GMIB OPTION 2
JOINT LIFE PAYOUT OPTION
In the case of an annuitant and co-annuitant, we will make monthly payments for
the joint lifetime of the annuitant and co-annuitant, with payments for a period
certain. If the co-annuitant dies first, we will continue to make payments until
the later of the death of the annuitant and the end of the period certain. If
the annuitant dies first, we will continue to make payments until the later of
the death of the co-annuitant and the end of the period certain, but if the
period certain ends first, we will reduce the amount of each payment to 50% of
the original amount.
You have no right to withdraw amounts early under either GMIB payout option.
We may make other payout frequencies available, such as quarterly, semi-annually
or annually.
Because we do not impose a new waiting period for each subsequent purchase
payment, if you choose the guaranteed minimum income benefit, we reserve the
right to limit subsequent purchase payments if we discover that by the timing of
your purchase payments and withdrawals, your protected value is increasing in
ways we did not intend. In determining whether to limit purchase payments, we
will look at purchase payments which are disproportionately larger than your
initial purchase payment and other actions that may artificially increase the
GMIB protected value. Certain state laws may prevent us from limiting your
subsequent purchase payments. You must exercise one of the GMIB payout options
described above no later than 30 days after the contract anniversary following
the annuitant's attainment of age 95.
INCOME APPRECIATOR BENEFIT
The income appreciator benefit (or "IAB") is an optional, supplemental income
benefit that provides an additional income amount during the accumulation period
or upon annuitization. The income appreciator benefit is designed to provide you
with additional funds in order to defray the impact taxes may have on
distributions from your contract. Because individual circumstances vary, you
should consult with a qualified tax adviser to determine whether it would be
appropriate for you to elect the income appreciator benefit.
If you want the income appreciator benefit, you generally must elect it when
you make your initial purchase payment. Once you elect the income appreciator
benefit, you may not later revoke it.
- - The annuitant must be 75 or younger in order for you to elect the income
appreciator benefit
- - If you choose the income appreciator benefit, we will impose an annual charge
equal to 0.25% of your contract value. See "What are the Expenses Associated
with the Strategic Partners Annuity One Contract?" on page 44.
ACTIVATION OF THE INCOME APPRECIATOR BENEFIT
You can activate the income appreciator benefit at any time after it has been in
force for seven years. To activate the income appreciator benefit, you must send
us a written request in good order.
Once activated, you can receive the income appreciator benefit:
-- at annuitization as part of an annuity payment (IAB Option 1);
-- during the accumulation phase through the IAB automatic withdrawal
payment program (IAB Option 2); or
-- during the accumulation phase as an income appreciator benefit credit
to your contract over a 10-year period (IAB Option 3).
More information about IAB Option 1 appears below. For information about IAB
Options 2 and 3, see "How Can I Access My Money?" on page 49.
Income appreciator benefit payments are treated as earnings and may be
subject to tax upon withdrawal. See "What are the Tax Considerations Associated
with the Strategic Partners Annuity One Contract?" on page 52.
CALCULATION OF INCOME APPRECIATOR BENEFIT AMOUNT
We will calculate the income appreciator benefit amount as of the date we
receive your written request in good order (or, for IAB Option 1, on the annuity
date). We do this by multiplying the current earnings in the contract by the
applicable income appreciator benefit
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percentage based on the number of years the income appreciator benefit has been
in force. For purposes of calculating the income appreciator benefit:
- - earnings are calculated as the difference between the contract value and the
sum of all purchase payments;
- - earnings do not include (1) any amount added to the contract value as a
result of the spousal continuance benefit (explained on page 40), or (2) if
we were to permit you to elect the income appreciator benefit after the
contract date, any earnings accrued under the contract prior to that
election;
- - withdrawals reduce earnings first, then purchase payments, on a
dollar-for-dollar basis;
- - the table below shows the income appreciator benefit percentages
corresponding to the number of years the income appreciator benefit has been
in force.
You can activate the income appreciator benefit at annuitization under IAB
Option 1, as described below. You can also activate the income appreciator
benefit during accumulation period under IAB Options 2 and 3. For more
information about IAB Options 2 and 3, see "How Can I Access My Money?" on page
49.
IAB OPTION 1 -- INCOME APPRECIATOR BENEFIT AT ANNUITIZATION
Under this option, if you choose to activate the income appreciator benefit at
annuitization, we will calculate the income appreciator benefit amount on the
annuity date and add it to the contract value for purposes of determining the
adjusted contract value. You may apply the adjusted contract value to any
annuity or settlement option over the lifetime of the annuitant, joint
annuitants, or a period certain of at least 15 years (but not to exceed life
expectancy).
UPON ANNUITIZATION, YOU MAY LOSE ALL OR A PORTION OF THE INCOME APPRECIATOR
BENEFIT IF YOU CHOOSE AN ANNUITY SETTLEMENT OPTION OTHER THAN ANY LIFETIME
PAYOUT OPTION OR PERIOD CERTAIN OPTION FOR AT LEAST 15 YEARS. IN SUCH INSTANCES,
WE WOULD NOT REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR THIS BENEFIT.
EFFECT OF INCOME APPRECIATOR BENEFIT ON GUARANTEED MINIMUM INCOME BENEFIT
If you exercise the guaranteed minimum income benefit feature and an income
appreciator benefit amount remains payable under your contract, the value we use
to calculate the annuity payout amount will be the greater of:
1. the adjusted contract value plus the remaining income appreciator benefit
amount, calculated at current annuitization rates; or
2. the guaranteed minimum income benefit protected value plus the remaining
income appreciator benefit amount, calculated using the guaranteed annuity
purchase rates shown in the contract.
If you exercise the guaranteed minimum income benefit feature and activate the
income appreciator benefit at the same time, you must choose among the
guaranteed minimum income benefit annuity payout options available at the time.
TERMINATING THE INCOME APPRECIATOR BENEFIT
The income appreciator benefit will terminate on the earliest of:
- - the date you make a total withdrawal from the contract;
- - the date a death benefit is payable if the contract is not continued by the
surviving spouse under the spousal continuance benefit;
- - the date the income appreciator benefit amount is reduced to zero (generally
ten years after activation) under IAB Options 2 and 3;
- - the date of annuitization; or
- - the date the contract terminates.
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4:
WHAT IS THE
DEATH BENEFIT?
- --------------------------------------------------------------------------------
THE DEATH BENEFIT FEATURE PROTECTS THE VALUE OF THE CONTRACT FOR THE
BENEFICIARY.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. You name the beneficiary at the time the contract is issued, unless you
change it at a later date. Unless you name an irrevocable beneficiary, during
the accumulation period you can change the beneficiary at any time before the
owner dies. However, if jointly owned, the owner must name the joint owner and
the joint owner must name the owner as the beneficiary.
CALCULATION OF THE DEATH BENEFIT
If the owner or joint owner dies during the accumulation phase, we will, upon
receiving the appropriate proof of death and any other needed documentation
("proof of death"), pay a death benefit to the beneficiary designated by the
deceased owner or joint owner. If there are an owner and joint owner of the
contract, and the owner's spouse is both the joint owner and the beneficiary, at
the death of the first to die, the death benefit will be paid to the surviving
owner or the surviving owner may continue the contract under the Spousal
Continuance Benefit. See "Spousal Continuance Benefit" on page 40. Upon death,
the beneficiary will receive the greater of the following:
1) The current value of your contract (as of the time we receive proof of
death). If you have purchased the Contract With Credit, we will first deduct
any credit corresponding to a purchase payment made within one year of death.
We impose no market value adjustment on contract value held within the market
value adjustment option when a death benefit is paid.
2) Either the base death benefit, which equals the total invested purchase
payments you have made proportionally reduced by any withdrawals, or, if you
have chosen a guaranteed minimum death benefit, the GMDB protected value of
that death benefit.
GUARANTEED MINIMUM DEATH BENEFIT
The guaranteed minimum death benefit (GMDB) provides for the option to receive
an enhanced death benefit upon the death of the sole owner or the first to die
of the owner or joint owner during the accumulation phase. If you elect the GMDB
feature, you must elect a GMDB protected value option. The GMDB protected value
option can be equal to the GMDB roll-up, the GMDB step-up, or the greater of the
GMDB roll-up and the GMDB step-up. The GMDB protected value is calculated daily.
GMDB ROLL-UP
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE 80
ON THE CONTRACT DATE, the GMDB roll-up is equal to the invested purchase
payments, increased daily at an effective annual interest rate of 5% starting on
the date that each invested purchase payment is made. The GMDB roll-up will
increase by subsequent invested purchase payments and reduce by the effect of
withdrawals.
We stop increasing the GMDB roll-up by the effective annual interest rate on
the later of:
- - the contract anniversary coinciding with or next following the sole owner's
or older owner's 80th birthday, or
- - the 5th contract anniversary.
However, the GMDB protected value will still increase by subsequent invested
purchase payments and reduce by the effect of withdrawals.
Withdrawals will first reduce the GMDB protected value on a dollar-for-dollar
basis up to the first 5% of GMDB protected value calculated on the contract
anniversary (on the contract date in the first contract year), then
proportionally by any amounts exceeding the 5%.
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB roll-up is equal to the invested purchase
payments, increased daily at an effective annual interest rate of 3% starting on
the date that each invested purchase payment is made. We will increase the GMDB
roll-up by subsequent invested purchase payments and reduce it by the effect of
withdrawals.
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4:
WHAT IS THE DEATH BENEFIT? CONTINUED
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PART II
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SECTIONS 1-9
We stop increasing the GMDB roll-up by the effective annual interest rate on
the 5th contract anniversary. However we will continue to reduce the GMDB
protected value by the effect of withdrawals.
Withdrawals will first reduce the GMDB protected value on a dollar-for-dollar
basis up to the first 3% of GMDB protected value calculated on the contract
anniversary (on the contract date in the first contract year), then
proportionally by any amounts exceeding the 3%.
GMDB STEP-UP
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE 80
ON THE CONTRACT DATE, the GMDB step-up before the first contract anniversary is
the initial invested purchase payment increased by subsequent invested purchase
payments, and proportionally reduced by the effect of withdrawals. The GMDB
step-up on each contract anniversary will be the greater of the previous GMDB
step-up and the contract value as of such contract anniversary. Between contract
anniversaries, the GMDB step-up will increase by invested purchase payments and
reduce proportionally by withdrawals.
We stop increasing the GMDB step-up by any appreciation in the contract value
on the later of:
- - the contract anniversary coinciding with or next following the sole or older
owner's 80th birthday, or
- - the 5th contract anniversary.
However we still increase the GMDB protected value by subsequent invested
purchase payments and proportionally reduce it by withdrawals.
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB step-up before the third contract
anniversary is the sum of invested purchase payments, reduced by the effect of
withdrawals. On the third contract anniversary, we will adjust the GMDB step-up
to the greater of the then current GMDB step-up or the contract value as of that
contract anniversary. Thereafter we will only increase the GMDB protected value
by subsequent invested purchase payments and proportionally reduce it by
withdrawals.
Special rules apply if the beneficiary is the spouse of the owner, and the
contract does not have a joint owner. In that case, upon the death of the owner,
the spouse will have the choice of the following:
- - If the sole beneficiary under the contract is the owner's spouse, and the
other requirements of the Spousal Continuance Benefit are met (see page 40),
then the contract can continue, and the spouse will become the new owner of
the contract; or
- - The spouse can receive the death benefit. If the spouse does wish to receive
the death benefit, he or she must make that choice within the first 60 days
following our receipt of proof of death. Otherwise, the beneficiary will
receive the death benefit.
If ownership of the contract changes as a result of the owner assigning it to
someone else, we will reset the value of the death benefit to equal the contract
value on the date the change of ownership occurs, and for purposes of computing
the future death benefit, we will treat that contract value as a purchase
payment occurring on that date.
Depending on applicable state law, some death benefit options may not be
available or may be subject to certain restrictions under your contract.
SPECIAL RULES IF JOINT OWNERS
If the contract has an owner and a joint owner and they are spouses at the time
that one dies the Spousal Continuance Benefit may apply. See "Spousal
Continuance Benefit" page 40. If the Contract has an owner and a joint owner and
they are not spouses at the time one dies, we will pay the death benefit and the
contract will end. Joint ownership may not be allowed in your state.
PAYOUT OPTIONS
The beneficiary may, within 60 days of providing proof of death, choose to take
the death benefit under one of several death benefit payout options listed
below.
The death benefit payout options are:
CHOICE 1. Lump sum payment of the death benefit. If the beneficiary does not
choose a payout option within sixty days, the beneficiary will receive this
payout option.
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PART II
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SECTIONS 1-9
CHOICE 2. The payment of the entire death benefit within a period of 5 years
from the date of death of the first to die of the owner or joint owner.
The entire death benefit will include any increases or losses resulting
from the performance of the variable or fixed interest rate options during
this period. During this period the beneficiary may: reallocate the contract
value among the variable or one-year fixed interest rate options; name a
beneficiary to receive any remaining death benefit in the event of the
beneficiary's death; and make withdrawals from the contract value, in which
case, any such withdrawals will not be subject to any withdrawal charges.
However, the beneficiary may not make any purchase payments to the contract.
During this 5 year period, we will continue to deduct from the death
benefit proceeds the charges and costs that were associated with the features
and benefits of the contract. Some of these features and benefits may not be
available to the beneficiary, such as the GMIB, IAB and spousal continuance
benefit.
CHOICE 3. Payment of the death benefit under an annuity or annuity settlement
option over the lifetime of the beneficiary or over a period not extending
beyond the life expectancy of the beneficiary with distribution beginning
within one year of the date of death of the last to survive of the owner or
joint owner.
If the contract has an owner and a joint owner:
- - If the owner and joint owner are spouses at the death of the first to die of
the two, any portion of the death benefit not applied under Choice 3 within
one year of the survivor's date of death must be distributed within five
years of the survivor's date of death.
- - If the owner and joint owner are not spouses at the death of the first to die
of the two, any portion of the death benefit (which is equal to the adjusted
contract value) not applied under Choice 3 within one year of the date of
death of the first to die must be distributed within five years of that date
of death.
The tax consequences to the beneficiary vary among the three death benefit
payout options. See "What are the Tax Considerations Associated with the
Strategic Partners Annuity One Contract?" on page 52.
EARNINGS APPRECIATOR BENEFIT
The earnings appreciator benefit (or "EAB") is an optional, supplemental death
benefit that provides a benefit payment upon the death of the sole owner or
first to die of the owner or joint owner during the accumulation phase. Any
earnings appreciator benefit payment we make will be in addition to any other
death benefit payment we make under the contract. This feature may not be
available in your state.
The earnings appreciator benefit is designed to provide a beneficiary with
additional funds when we pay a death benefit in order to defray the impact taxes
may have on that payment. Because individual circumstances vary, you should
consult with a qualified tax adviser to determine whether it would be
appropriate for you to elect the earnings appreciator benefit.
If you want the earnings appreciator benefit, you generally must elect it at
the time you apply for the contract. If you elect the earnings appreciator
benefit, you may not later revoke it.
Upon our receipt of due proof of death in good order, we will determine an
earnings appreciator benefit by multiplying the earnings appreciator benefit
percentage below by the lesser of: (i) the then-existing amount of earnings
under the contract, or (ii) an amount equal to 3 times the sum of all purchase
payments previously made under the contract.
For purposes of computing earnings and purchase payments under the earnings
appreciator benefit, we calculate earnings as the difference between the
contract value and the sum of all purchase payments. Withdrawals reduce earnings
first, then purchase payments, on a dollar-for-dollar basis.
EAB percentage:
- - 40% if the owner is age 70 or younger on the date the application is signed.
- - 25% if the owner is between ages 71 and 75 on the date the application is
signed.
39
4:
WHAT IS THE DEATH BENEFIT? CONTINUED
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PART II
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SECTIONS 1-9
- - 15% if the owner is between ages 76 and 79 on the date the application is
signed.
If the contract is owned jointly, the age of the older of the owner or joint
owner determines the EAB percentage.
If the surviving spouse is continuing the contract in accordance with the
spousal continuance benefit (See "Spousal Continuance Benefit" below), the
following conditions apply:
- - In calculating the earnings appreciator benefit, we will use the age of the
surviving spouse at the time that the spousal continuance benefit is
activated to determine the applicable EAB percentage.
- - We will not allow the surviving spouse to continue the earnings appreciator
benefit (or bear the charge associated with this benefit) if he or she is age
80 or older on the date that the spousal continuance benefit is activated.
- - If the earnings appreciator benefit is continued, we will calculate any
applicable earnings appreciator benefit payable upon the surviving spouse's
death by treating the contract value (as adjusted under the terms of the
spousal continuance benefit) as the first purchase payment.
TERMINATING THE EARNINGS APPRECIATOR BENEFIT
The earnings appreciator benefit will terminate on the earliest of:
- - the date you make a total withdrawal from the contract,
- - the date a death benefit is payable if the contract is not continued by the
surviving spouse under the spousal continuance benefit,
- - the date the contract terminates, or
- - the date you annuitize the contract.
SPOUSAL CONTINUANCE BENEFIT
This benefit is available if, on the date we receive due proof of the owner's
death, (1) there is only one owner of the contract and there is only one
beneficiary who is the owner's spouse; or (2) there are an owner and joint owner
of the contract, and the joint owner is the owner's spouse and the owner's
beneficiary under the contract. In such cases, the surviving spouse, or
annuitant if other than the surviving spouse, cannot be older than age 95 on
that date, and the surviving spouse will become the new sole owner under the
contract. Assuming the above conditions are present, the surviving spouse can
elect the spousal continuance benefit, but must do so no later than 60 days
after furnishing due proof of the owner's death in good order.
Upon activation of the spousal continuance benefit, the contract value is
adjusted to equal the amount of the death benefit to which the surviving spouse
would have been entitled. This contract value will serve as the basis for
calculating any death benefit payable upon the death of the surviving spouse. We
will allocate any increase in the adjusted contract value among the variable,
fixed interest rate or market value adjustment options in the same proportions
that existed immediately prior to the spousal continuance adjustment.
Under the spousal continuance benefit, we waive any potential withdrawal
charges applicable to purchase payments made prior to activation of the spousal
continuance benefit. However, we will continue to impose withdrawal charges on
purchase payments made after activation of this benefit. In addition, contract
value allocated to the market value adjustment option will remain subject to a
potential market value adjustment.
IF YOU ELECTED THE BASE DEATH BENEFIT, then upon activation of the spousal
continuance benefit, we will adjust the contract value to equal the greater of:
- - the contract value, or
- - the sum of all invested purchase payments (adjusted for withdrawals),
plus the amount of any applicable earnings appreciator benefit.
IF YOU ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GMDB ROLL-UP, we
will adjust the contract value to equal the greater of:
- - the contract value, or
- - the GMDB roll-up,
plus the amount of any applicable earnings appreciator benefit.
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PART II
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SECTIONS 1-9
IF YOU HAVE ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GMDB
STEP-UP, we will adjust the contract value to equal the greater of:
- - the contract value, or
- - the GMDB step-up,
plus the amount of any applicable earnings appreciator benefit.
IF YOU HAVE ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GREATER OF
THE GMDB ROLL-UP AND GMDB STEP-UP, we will adjust the contract value to equal
the greatest of:
- - the contract value,
- - the GMDB roll-up, or
- - the GMDB step-up,
plus the amount of any applicable earnings appreciator benefit.
After we have made the adjustment to contract value set out immediately
above, we will continue to compute the GMDB roll-up and the GMDB step-up under
the surviving spousal owner's contract, and will do so in accordance with the
preceding paragraphs.
If the contract is being continued by the surviving spouse, the attained age
of the surviving spouse will be the basis used in determining the death benefit
payable under the guaranteed minimum death benefit provisions of the contract.
IF YOU ELECTED THE GUARANTEED MINIMUM INCOME BENEFIT, it will be continued
for the surviving spousal owner. All provisions of the guaranteed minimum income
benefit (i.e., waiting period, GMIB roll-up cap, etc.) will remain the same as
on the date of the owner's death. See "Guaranteed Minimum Income Benefit" page
36. If the GMIB reset feature was never exercised, the surviving spousal owner
can exercise the GMIB reset feature twice. If the original owner had previously
exercised the GMIB reset feature once, the surviving spousal owner can exercise
the GMIB reset once. However the surviving spouse (or new annuitant designated
by the surviving spouse) must be under 76 years of age at the time of reset. If
the original owner had previously exercised the GMIB reset feature twice, the
surviving spousal owner may not exercise the GMIB reset at all. If the attained
age of the surviving spouse at activation of the spousal continuance benefit,
when added to the remainder of the GMIB waiting period to be satisfied, would
preclude the surviving spouse from utilizing the guaranteed minimum income
benefit, we will revoke the guaranteed minimum income benefit under the contract
at that time and we will no longer charge for that benefit.
IF YOU ELECTED THE INCOME APPRECIATOR BENEFIT, on the owner's death, the
income appreciator benefit will end unless the contract is continued by the
owner's surviving spouse under the spousal continuance benefit. See "Spousal
Continuance Benefit" page 40. If the contract is continued by the surviving
spouse, we will continue to pay the balance of any income appreciator benefit
payments over the remainder of the 10-year payment period, or until the
surviving spouse attains age 95, whichever occurs first.
If the income appreciator benefit has not been in force for 7 contract years,
the surviving spouse may not activate the benefit until it has been in force for
7 contract years. If the attained age of the surviving spouse at activation of
the spousal continuation benefit, when added to the remainder of the IAB waiting
period to be satisfied, would preclude the surviving spouse from utilizing the
income appreciator benefit, we will revoke the income appreciator benefit under
the contract at that time and we will no longer charge for that benefit. If the
income appreciator benefit has been in force for 7 contract years, but the
benefit has not been activated, the surviving spouse may activate the benefit at
any time after the contract has been continued. If the income appreciator
benefit is activated after the contract is continued by the surviving spouse,
the income appreciator benefit calculation will exclude any amount added to the
contract at the time of spousal continuance resulting from any death benefit
value exceeding the contract value.
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PART II
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5:
HOW CAN I PURCHASE A STRATEGIC PARTNERS
ANNUITY ONE CONTRACT?
- --------------------------------------------------------------------------------
PURCHASE PAYMENTS
The initial purchase payment is the amount of money you first pay us to purchase
the contract. The minimum initial purchase payment is $10,000. In most states,
and subject to some restrictions, you can make additional purchase payments of
$500 or more at any time during the accumulation phase. (You may not make
additional purchase payments if you purchase a contract issued in Massachusetts,
or if you purchase a Contract With Credit issued in Pennsylvania.) You may
purchase this contract only if you are age 85 or younger, certain age limits
apply to certain features and benefits described herein. However, no subsequent
purchase payments may be made after the earliest of the 85th birthday of (i) the
owner, (ii) the joint owner or (iii) the annuitant.
Currently, the maximum aggregate purchase payments you may make is $20
million. We limit the maximum total purchase payments in any contract year other
than the first to $2 million. You must obtain our approval prior to submitting a
purchase payment of $5 million or greater within the first contract year, or
greater than $2 million for subsequent purchase payments. Depending on
applicable state law, lower limits may apply.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your invested purchase payment
among the variable or fixed interest rate investment options or the market value
adjustment option based on the percentages you choose. The percentage of your
allocation to a particular investment option can range in whole percentages from
0% to 100%.
You may change your allocation of future invested purchase payments at any
time. Contact the Prudential Annuity Service Center for details.
If you make an additional purchase payment without allocation instructions,
we will allocate the invested purchase payment in the same proportion as your
most recent purchase payment, unless you directed us in connection with that
purchase payment to make that allocation on a one-time-only basis.
The allocation procedure mentioned above will apply unless that portion
designated for the DCA Fixed Rate Option is less than $2,000. In that case, we
will use your transfer allocation for the DCA Fixed Rate Option as part of your
allocation instructions until you direct us otherwise.
We will credit the initial purchase payment to your contract within two
business days from the day on which we receive your payment at the Prudential
Annuity Service Center. If, however, your first payment is made without enough
information for us to set up your contract, we may need to contact you to obtain
the required information. If we are not able to obtain this information within
five business days, we will within that five business day period either return
your purchase payment or obtain your consent to continue holding it until we
receive the necessary information. We will generally credit each subsequent
purchase payment as of the business day we receive it in good order at the
Prudential Annuity Service Center. Our business day generally closes at 4:00
p.m. Eastern time.
CREDITS
If you purchase the Contract With Credit, we will add a credit amount to your
contract value with each purchase payment you make. The credit amount is
allocated to the variable or fixed interest rate investment options in the same
percentages as the purchase payment.
The bonus credit that we pay with respect to any purchase payment depends on
(i) the age of the older of the owner or joint owner on the date on which the
purchase payment is made and (ii) the amount of the purchase payment.
Specifically,
- - if the elder owner is 80 or younger on the date that the purchase payment is
made, then we will add a bonus credit to the purchase payment equal to 4% if
the purchase payment is less than $250,000; 5% if the purchase payment is
equal to or greater than $250,000 but less than $1 million; or 6% if the
purchase payment is $1 million or greater; and
- - if the elder owner is aged 81-85 on the date that the purchase payment is
made, then we will add a bonus credit equal to 3% of the amount of the
purchase payment.
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Under the Contract With Credit, if we pay a death benefit under the contract,
we have a contractual right to take back any credit we applied within one year
of the date of death. If the owner returns the contract during the free look
period, we will recapture bonus credits. However, we will not, unless and until
we obtain SEC exemptive relief, recoup for our own assets the full amount of the
6% bonus credit applicable to purchase payments of $1 million or greater that we
had given to you. Rather, we will recoup an amount equal to the value of the
credit as of the business day on which we receive your request, less any charges
attributable to that credit. We reserve the right to recapture the entire amount
of the credit upon obtaining appropriate approval of the SEC with regard to that
bonus credit.
CALCULATING CONTRACT VALUE
The value of your contract will go up or down depending on the investment
performance of the variable investment options you choose. To determine the
value of your contract, we use a unit of measure called an accumulation unit. An
accumulation unit works like a share of a mutual fund.
Every day we determine the value of an accumulation unit for each of the
variable investment options. We do this by:
1) adding up the total amount of money allocated to a specific investment
option,
2) subtracting from that amount insurance charges and any other applicable
charges such as for taxes, and
3) dividing this amount by the number of outstanding accumulation units.
When you make a purchase payment, we credit your contract with accumulation
units of the subaccount or subaccounts for the investment options you choose. We
determine the number of accumulation units credited to your contract by dividing
the amount of the purchase payment, plus (if you have purchased the Contract
With Credit) any applicable credit, allocated to an investment option by the
unit price of the accumulation unit for that investment option. We calculate the
unit price for each investment option after the New York Stock Exchange closes
each day and then credit your contract. The value of the accumulation units can
increase, decrease, or remain the same from day to day.
We cannot guarantee that your contract value will increase or that it will
not fall below the amount of your total purchase payments. However, we do
guarantee a minimum interest rate of between 1.5% and 3% a year, depending on
your state's applicable law, on that portion of the contract value allocated to
the one-year fixed interest-rate option. For the DCA Fixed Interest Rate Option,
we guarantee a minimum interest rate of 3% annually.
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PART II
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SECTIONS 1-9
6:
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC
PARTNERS ANNUITY ONE CONTRACT?
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THERE ARE CHARGES AND OTHER EXPENSES ASSOCIATED WITH THE CONTRACT THAT REDUCE
THE RETURN ON YOUR INVESTMENT. WE DESCRIBE THESE CHARGES AND EXPENSES BELOW.
INSURANCE AND ADMINISTRATIVE COST
Each day, we make a deduction for the insurance and administrative cost. This
cost covers our expenses for mortality and expense risk, administration,
marketing and distribution. If you choose a guaranteed minimum death benefit
option, the insurance and administrative cost also includes a charge to cover
our assumption of the associated risk. The mortality risk portion of the cost is
for our assumption of the risk that the annuitant(s) will live longer than
expected based on our life expectancy tables. When this happens, we pay a
greater number of annuity payments. The expense risk portion of the cost is for
our assumption of the risk that the current costs will be insufficient in the
future to cover the cost of administering the contract. The administrative
expense portion of the cost compensates us for the expenses associated with the
administration of the contract. This includes preparing and issuing the
contract; establishing and maintaining contract records; preparation of
confirmations and annual reports; personnel costs; legal and accounting fees;
filing fees; and systems costs. The guaranteed minimum death benefit risk
portion of the cost, if applicable, covers our assumption of the risk that the
protected value of the contract will be larger than the base death benefit if
the contract owner dies during the accumulation phase.
If the insurance and administrative cost is not sufficient to cover our
expenses, then we will bear the loss. We do, however, expect to profit from this
cost. The insurance and administrative cost for your contract cannot be
increased. We may use any profits from this cost to pay for the costs of
distributing the contracts. If you choose the Contract With Credit, we will also
use any profits from this charge to recoup our costs of providing the credit.
We calculate the insurance and administrative cost based on the average daily
value of all assets allocated to the variable investment options. These costs
are not assessed against amounts allocated to the fixed interest rate options.
The amount of the cost depends on the death benefit option that you choose. The
cost is equal to:
- 1.40% on an annual basis if you choose the base death benefit,
- 1.65% on an annual basis if you choose either the roll-up or step-up
guaranteed minimum death benefit option, and
- 1.75% on an annual basis if you choose the guaranteed minimum death
benefit option of the greater of the roll-up or step-up.
We impose an additional insurance and administrative cost of 0.10% annually
(of account value attributable to the variable investment options) for the
Contract with Credit.
EARNINGS APPRECIATOR BENEFIT CHARGE
We will impose an additional charge if you choose the earnings appreciator
benefit. The charge for this benefit is based on an annual rate of 0.30% of your
contract value.
We calculate the charge on each of the following events:
- each contract anniversary,
- on the annuity date,
- upon death of the sole or first to die of the owner or joint owner prior
to the annuity date,
- upon a full or partial withdrawal, and
- upon a subsequent purchase payment.
The fee is based on the contract value at time of calculation and is
pro-rated based on the portion of the contract year since the date that the
earnings appreciator benefit charge was last calculated.
Although the earnings appreciator benefit charge may be calculated more
often, it is deducted only:
- on each contract anniversary,
- on the annuity date,
- upon death of the sole owner or first to die of the owner or joint owner
prior to the annuity date,
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- upon a full withdrawal, and
- upon a partial withdrawal if the contract value remaining after the
partial withdrawal is not enough to cover the then applicable earnings
appreciator benefit charge.
We withdraw this charge from each investment option (including each guarantee
period) in the same proportion that the amount allocated to the investment
option bears to the total contract value. Upon a full withdrawal or if the
contract value remaining after a partial withdrawal is not enough to cover the
then-applicable earnings appreciator benefit charge, we will deduct the charge
from the amount we pay you. We will deem the payment of the earnings appreciator
benefit charge as made from earnings for purposes of calculating other charges.
GUARANTEED MINIMUM INCOME BENEFIT CHARGE
We will impose an additional charge if you choose the guaranteed minimum income
benefit. This is an annual charge equal to 0.45% of the GMIB protected value of
your contract, which we deduct from your contract value on each of the following
events:
- - each contract anniversary,
- - when you begin the income phase of the contract,
- - upon a full withdrawal, and
- - upon a partial withdrawal if the remaining contract value would not be enough
to cover the then applicable guaranteed minimum income benefit charge.
If we impose this fee other than on a contract anniversary, then we will
pro-rate it based on the portion of the contract year for which the guaranteed
minimum income benefit was in effect. We withdraw the fee from each investment
option in the same proportion that your contract value is allocated to that
investment option. Upon a full withdrawal or if the contract value remaining
after a partial withdrawal is not enough to cover the applicable guaranteed
minimum income benefit charge, we will deduct the charge from the amount we pay
you.
In some states, we may calculate the charge for the guaranteed minimum income
benefit in a different manner, but that charge will not exceed 0.45% of the GMIB
protected value.
We will not impose the guaranteed minimum income benefit charge after the
income phase begins, after you revoke the guaranteed minimum income benefit, or
after you choose your GMIB payout option.
INCOME APPRECIATOR BENEFIT CHARGE
We will impose an additional charge if you choose the income appreciator
benefit. This is an annual charge equal to 0.25% of your contract value. The
income appreciator benefit charge is calculated:
- on each contract anniversary,
- on the annuity date,
- upon the death of the sole owner or first to die of the owner or joint
owner prior to the annuity date,
- upon a full or partial withdrawal, and
- upon a subsequent purchase payment.
The fee is based on the contract value at the time of the calculation, and is
prorated based on the portion of the contract year since the date that the
income appreciator benefit charge was last calculated.
Although the income appreciator benefit charge may be calculated more often,
it is deducted only:
- on each contract anniversary,
- on the annuity date,
- upon the death of the sole owner or first to die of the owner or joint
owners prior to the annuity date,
- upon a full withdrawal, and
- upon a partial withdrawal if the contract value remaining after such
partial withdrawal is not enough to cover the then-applicable income
appreciator benefit charge.
We reserve the right to calculate and deduct the fee more frequently than
annually, such as quarterly.
The income appreciator benefit charge is deducted from each investment option
in the same proportion that the amount allocated to the investment option bears
to the total contract value. Upon a full
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withdrawal, or if the contract value remaining after a partial withdrawal is not
enough to cover the then-applicable income appreciator benefit charge, the
charge is deducted from the amount paid. The payment of the income appreciator
benefit charge will be deemed to be made from earnings for purposes of
calculating other charges.
We no longer assess this charge upon election of IAB Option 1, the completion
of IAB Option 2 or 3, and upon annuitization.
CONTRACT MAINTENANCE CHARGE
We do not deduct a contract maintenance charge for administrative expenses while
your contract value is $75,000 or more. If your contract value is less than
$75,000 on a contract anniversary during the accumulation phase or when you make
a full withdrawal, we will deduct $35 (or a lower amount equal to 2% of your
contract value) for administrative expenses. (This fee may differ in certain
states.) We may increase this charge up to a maximum of $60 per year. Also, we
may raise the level of the contract value at which we waive this fee. We will
deduct this charge proportionately from each of your contract's investment
options.
WITHDRAWAL CHARGE
A withdrawal charge may apply if you make a full or partial withdrawal during
the withdrawal charge period for a purchase payment. The withdrawal charge may
also apply if you begin the income phase during the withdrawal charge period,
depending upon the annuity option you choose. The amount and duration of the
withdrawal charge depends on whether you choose the Contract With Credit or the
Contract Without Credit. The withdrawal charge varies with the number of
contract anniversaries that have elapsed since each purchase payment was made.
Specifically, we maintain an "age" for each purchase payment you have made by
keeping track of how many contract anniversaries have passed since the purchase
payment was made. The withdrawal charge is the percentage, shown below, of the
amount withdrawn.
In certain states reduced withdrawal charges may apply for certain ages under
the Contract with Credit. Your contract contains the applicable charges.
If a withdrawal is effective on the day before a contract anniversary, the
withdrawal charge percentage as of the following contract anniversary will
apply. If you request a withdrawal, we will deduct an amount from the contract
value that is sufficient to pay the withdrawal charge and provide you with the
amount requested.
If you request a full withdrawal, we will provide you with the full amount of
the contract value after making these deductions.
Each contract year, you may withdraw a specified amount of your contract
value without incurring a withdrawal charge. We make this "charge-free amount"
available to you subject to approval of this feature in your state. We determine
the charge-free amount available to you in a given contract year on the contract
anniversary that begins that year. In calculating the charge-free amount, we
divide purchase payments into two categories -- payments that are subject to a
withdrawal charge and those that are not. We determine the charge-free amount
based only on purchase payments that are subject to a withdrawal charge. The
charge-free amount in a given contract year is equal to 10% of the sum of all
the purchase payments subject to the withdrawal charge that you have made as of
the applicable contract anniversary. During the first contract year, the
charge-free amount is equal to 10% of the initial purchase payment.
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When you make a withdrawal, we will first deduct the amount of the withdrawal
from purchase payments no longer subject to a withdrawal charge, and then from
the available charge-free amount, and will consider purchase payments to be paid
out on a first-in, first-out basis. Withdrawals in excess of the charge-free
amount will come first from purchase payments, also on a first-in, first-out
basis, and will be subject to withdrawal charges, if applicable, even if
earnings are available on the date of the withdrawal. Once you have withdrawn
all purchase payments, additional withdrawals will come from any earnings. We do
not impose withdrawal charges on earnings.
However, if a withdrawal or transfer is taken from a market value adjustment
guarantee period prior to the expiration of the rate guarantee period we will
make a market value adjustment.
If you choose the Contract With Credit and make a withdrawal that is subject
to a withdrawal charge, we may use part of that withdrawal charge to recoup our
costs of providing the credit.
Withdrawal charges will never be greater than permitted by applicable law.
If you surrender your contract, and later change your mind, we may allow you
to reinstate your contract during a limited period of time after the surrender.
For purposes of computing any withdrawal charge on a withdrawal you make after
the reinstatement, we will view the contract as having remained in effect
continuously. The minimal sales costs associated with reinstatements allow us to
offer this administrative option. Reinstatement will not reverse the tax
consequences or tax reporting associated with the surrender. See "What are the
Tax Considerations Associated with the Strategic Partners Annuity One Contract?"
page 52.
WAIVER OF WITHDRAWAL CHARGES
CRITICAL CARE ACCESS
Except as restricted by applicable state law, we will waive all withdrawal
charges and any market value adjustment upon receipt of proof that the owner or
a joint owner is terminally ill, or has been confined to an eligible nursing
home or eligible hospital continuously for at least three months after the
contract date. We will also waive the contract maintenance charge if you
surrender your contract in accordance with the above noted conditions. This
waiver is not available if the owner has assigned ownership of the contract to
someone else.
MINIMUM DISTRIBUTION REQUIREMENTS
If a withdrawal is taken from a tax qualified contract in order to satisfy an
IRS mandatory distribution requirement only with respect to that contract's
account balance, we will waive withdrawal charges. See "What are the Tax
Considerations Associated with the Strategic Partners Annuity One Contract?" on
page 52.
TAXES ATTRIBUTABLE TO PREMIUM
There are federal, state and local premium based taxes applicable to your
purchase payment. We are responsible for the payment of these taxes and may make
a deduction from the value of the contract to pay some or all of these taxes.
Some of these taxes are due when the contract is issued, others are due when the
annuity payments begin. It is our current practice not to deduct a charge for
state premium taxes until annuity payments begin. In the states that impose a
premium tax, the current rates range up to 3.5%. It is also our current practice
not to deduct a charge for the federal deferred acquisition costs paid by us
that are based on premium received. However, we reserve the right to charge the
contract owner in the future for any such deferred acquisition costs and any
federal, state or local income, excise, business or any other type of tax
measured by the amount of premium received by us.
TRANSFER FEE
You can make 12 free transfers every contract year. We measure a contract year
from the date we issue your contract, which is the contract date. If you make
more than 12 transfers in a contract year (excluding Dollar Cost Averaging and
Auto-Rebalancing), we will deduct a transfer fee of $25 for each additional
transfer. In the future we could raise that charge up to $30 per additional
transfer, although we have no current plans to do so. We will deduct the
transfer fee pro-rata from the investment options from which the transfer is
made.
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In certain states, we may limit the transfer fee to a lower amount to comply
with applicable state law. Consult the Statement of Additional Information for
details.
COMPANY TAXES
We will pay the taxes on the earnings of the separate account. We do not
currently charge you for these taxes. We will periodically review the issue of
charging for these taxes and may impose a charge in the future.
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7:
HOW CAN I
ACCESS MY MONEY?
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YOU CAN ACCESS YOUR MONEY BY:
- - MAKING A WITHDRAWAL (EITHER PARTIAL OR FULL); OR
- - CHOOSING TO RECEIVE ANNUITY PAYMENTS DURING THE INCOME PHASE.
WITHDRAWALS DURING THE ACCUMULATION PHASE
Following the free look period, when you make a full withdrawal, you will
receive the value of your contract minus any applicable charges and fees. We
will calculate the value of your contract and charges, if any, as of the date we
receive your request in good order at the Prudential Annuity Service Center.
Unless you tell us otherwise, we will take any partial withdrawal
proportionately from all of the investment options in which you have invested.
For a partial withdrawal, we will deduct any applicable charges and fees
proportionately from the investment options in your contract. The minimum amount
you may withdraw is $250. If, after a withdrawal, your contract value is less
than $2,000, we have the right to end your contract.
With respect to the variable investment options we will generally pay the
withdrawal amount, less any required tax withholding, within seven days after we
receive a withdrawal request in good order.
With respect to the market value adjustment option, you may specify the
guarantee period from which you would like to make a withdrawal. If you indicate
that the withdrawal is to originate from the market value adjustment option, but
you do not specify which guarantee period is to be involved, then we will take
the withdrawal from the guarantee period that has the least time remaining until
its maturity date. If you indicate that you wish to make a withdrawal, but do
not specify the investment options to be involved, then we will take the
withdrawal from your contract value on a pro rata basis from each investment
option that you have. In that situation, we will aggregate the contract value in
each of the guarantee periods that you have within the market value adjustment
option for purposes of making that pro rata calculation. The portion of the
withdrawal associated with the market value adjustment option then will be taken
from the guarantee periods with the least amount of time remaining until the
maturity date, irrespective of the original length of the guarantee period. You
should be aware that a withdrawal may avoid a withdrawal charge based on the
charge-free amount that we allow, yet still be subject to a market value
adjustment.
INCOME TAXES, TAX PENALTIES, AND CERTAIN RESTRICTIONS MAY APPLY TO ANY
WITHDRAWAL YOU MAKE. FOR A MORE COMPLETE EXPLANATION, SEE SECTION 8 OF THIS
PROSPECTUS.
AUTOMATED WITHDRAWALS
We offer an automated withdrawal feature. This feature enables you to receive
periodic withdrawals in monthly, quarterly, semiannual, or annual intervals. We
will process your withdrawals at the end of the business day at the intervals
you specify. We will continue at these intervals until you tell us otherwise.
You can make withdrawals from any designated investment option or proportionally
from all investment options (other than a guarantee period within the market
value adjustment option). The minimum automated withdrawal amount you can make
is $100.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO AUTOMATED
WITHDRAWALS. FOR A MORE COMPLETE EXPLANATION, SEE SECTION 8 OF THIS PROSPECTUS.
INCOME APPRECIATOR BENEFIT OPTIONS DURING THE ACCUMULATION PHASE
The income appreciator benefit (or "IAB") is discussed on page 35. As mentioned
there, you may choose IAB Option 1 at annuitization, but you may instead choose
IAB Options 2 or 3 during the accumulation phase of your contract. Income
appreciator benefit payments under IAB Options 2 and 3 will begin on the same
day of the month as the contract date, beginning with the next month following
our receipt of your request in good order. Under IAB Options 2 and 3, you can
choose to have the income appreciator benefit amounts paid or credited monthly,
quarterly, semi-annually, or annually.
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IAB OPTIONS 2 AND 3 INVOLVE A TEN-YEAR PAYMENT PERIOD. IF THE 10-YEAR PAYMENT
PERIOD WOULD END AFTER THE ANNUITY DATE AND YOU CHOOSE AN ANNUITY SETTLEMENT
OPTION OTHER THAN ANY LIFETIME PAYOUT OPTION OR PERIOD CERTAIN OPTION OF AT
LEAST 15 YEARS OR YOU MAKE A FULL WITHDRAWAL, YOU MAY LOSE ALL OR ANY REMAINING
PORTION OF THE INCOME APPRECIATOR BENEFIT. IN SUCH INSTANCES, WE WOULD NOT
REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR THIS BENEFIT.
IAB OPTION 2 -- INCOME APPRECIATOR BENEFIT AUTOMATIC WITHDRAWAL PAYMENT PROGRAM
Under this option, you elect to receive the income appreciator benefit during
the accumulation phase. When you activate the benefit, a 10-year income
appreciator benefit automatic withdrawal payment program begins. We will pay you
the income appreciator benefit amount in equal installments over a 10 year
payment period. You may combine this income appreciator benefit amount with an
automated withdrawal amount from your contract value, in which case each
combined payment must be at least $100.
The maximum automated withdrawal payment amount that you may receive from
your contract value under this income appreciator benefit program in any
contract year during the 10-year period may not exceed 10% of the contract value
as of the date you activate the income appreciator benefit.
Once we calculate the income appreciator benefit, the amount will not be
affected by changes in contract value due to the investment performance of any
allocation option. Withdrawal charges may apply to automatic withdrawal payment
amounts, but not income appreciator benefit amounts, of the income appreciator
benefit program payments.
After the ten-year payment period has ended, if the remaining contract value
is $2,000 or more, the contract will continue. If the remaining contract value
is less than $2,000 after the end of the 10-year payment period, we will pay you
the remaining contract value and the contract will terminate. If the contract
value falls below the minimum amount required to keep the contract in force due
solely to investment results before the end of the 10-year payment period, we
will continue to pay the income appreciator benefit amount for the remainder of
the 10-year payment period.
DISCONTINUING THE INCOME APPRECIATOR BENEFIT AUTOMATIC WITHDRAWAL PAYMENT
PROGRAM UNDER IAB OPTION 2
You may discontinue the income appreciator benefit payment program under IAB
Option 2 and activate IAB Option 3 at any time after payments have begun and
before the last payment is made. We will add the remaining income appreciator
benefit amount to the contract value at the same frequency as your initial
election until the end of the 10-year payment period. We will treat any income
appreciator benefit amount added to the contract value as additional earnings.
Unless you direct us otherwise, we will allocate these additions to the variable
or fixed interest rate options in the same proportions as your most recent
purchase payment allocation percentages.
You may discontinue the income appreciator benefit payment program under IAB
Option 2 before the last payment is made and elect an annuity or settlement
option. We will add the balance of the income appreciator benefit amount for the
10-year payment period to the contract value in a lump sum before determining
the adjusted contract value. The adjusted contract value may be applied to any
annuity or settlement option that is paid over the lifetime of the annuitant,
joint annuitants, or a period certain of at least 15 years (but not to exceed
life expectancy).
IAB OPTION 3 -- INCOME APPRECIATOR BENEFIT CREDIT TO CONTRACT VALUE
Under this option, you can activate the income appreciator benefit and receive
the benefit as credits to your contract value over a 10-year payment period. We
will allocate these income appreciator benefit credits to the variable
investment options, the fixed interest rate option, or the market value
adjustment option in the same manner as your current allocation, unless you
direct us otherwise. We will calculate the income appreciator benefit amount on
the date we receive your written request in good order. Once we have calculated
the income appreciator benefit, the income appreciator
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benefit credit will not be affected by changes in contract value due to the
investment performance of any allocation option.
Before we add the last income appreciator benefit credit to your contract
value, you may switch to IAB Option 2 and receive the remainder of the income
appreciator benefit as payments to you (instead of credits to the contract
value) under the income appreciator benefit program for the remainder of the
10-year payment period.
You can also request that any remaining payments in the 10-year payment
period be applied to an annuity or settlement option that is paid over the
lifetime of the annuitants, joint annuitants, or a period certain of at least 15
years (but not to exceed life expectancy).
EXCESS WITHDRAWALS
During the 10 year period under IAB options 2 or 3, an "excess withdrawal"
occurs when any amount is withdrawn from your contract value in a contract year
that exceeds the sum of (1) 10% of the contract value as of the date the income
appreciator benefit was activated plus (2) earnings since the income appreciator
benefit was activated that have not been previously withdrawn.
We will deduct the excess withdrawal on a proportional basis from the
remaining income appreciator benefit amount. We will then calculate and apply a
new reduced income appreciator benefit amount.
Withdrawals you make in a contract year that do not exceed the sum of (1) 10%
of the contract value as of the date the income appreciator benefit was
activated plus (2) earnings since the income appreciator benefit was activated
that have not been previously withdrawn do not reduce the remaining income
appreciator benefit amount.
EFFECT OF TOTAL WITHDRAWAL ON INCOME APPRECIATOR BENEFIT
We will not make income appreciator benefit payments after the date you make a
total withdrawal of the contract surrender value.
SUSPENSION OF PAYMENTS OR TRANSFERS
The Securities and Exchange Commission (SEC) may require us to suspend or
postpone payments made in connection with withdrawals or transfers for any
period when:
- - The New York Stock Exchange is closed (other than customary weekend and
holiday closings);
- - Trading on the New York Stock Exchange is restricted;
- - An emergency exists, as determined by the SEC, during which sales and
redemptions of shares of the mutual funds are not feasible or we cannot
reasonably value the accumulation units; or
- - The Securities and Exchange Commission, by order, permits suspension or
postponement of payments for the protection of owners.
We expect to pay the amount of any withdrawal or transfer made from the fixed
interest rate options promptly upon request.
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8:
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC
PARTNERS ANNUITY ONE CONTRACT?
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The tax considerations associated with the Strategic Partners Annuity One
contract vary depending on whether the contract is (i) owned by an individual
and not associated with a tax-favored retirement plan, or (ii) held under a
tax-favored retirement plan. We discuss the tax considerations for these
categories of contracts below. The discussion is general in nature and describes
only federal income tax law (not state or other tax laws). It is based on
current law and interpretations, which may change. It is not intended as tax
advice. You should consult with a qualified tax adviser for complete information
and advice.
CONTRACTS OWNED BY INDIVIDUALS (NOT ASSOCIATED WITH TAX-FAVORED RETIREMENT
PLANS)
TAXES PAYABLE BY YOU
We believe the contract is an annuity contract for tax purposes. Accordingly, as
a general rule, you should not pay any tax until you receive money under the
contract.
Generally, annuity contracts issued by the same company (and affiliates) to
you during the same calendar year must be treated as one annuity contract for
purposes of determining the amount subject to tax under the rules described
below.
Subject to approval by your state, we offer supplemental benefits such as the
earnings appreciator benefit and the income appreciator benefit. Although we
believe these benefits are investment protection features that should have no
adverse tax consequences, it is possible that the Internal Revenue Service would
assert that some or all of the charges for the features should be treated for
federal income tax purposes as a partial withdrawal from the contract. It is
also possible that the Internal Revenue Service would assert that some or all of
the charges for the guaranteed minimum death benefit and guaranteed minimum
income benefit should be treated for federal income tax purposes as a partial
withdrawal from the contract. If this were the case, the charge for these
benefits could be deemed a withdrawal and treated as taxable to the extent there
are earnings in the contract. Additionally, for owners under age 59 1/2, the
taxable income attributable to the charge for the benefit could be subject to a
tax penalty.
If the Internal Revenue Service determines that the deductions for one or
more benefits under the contract -- including, without limitation, the
guaranteed minimum death benefit and the guaranteed minimum income benefit, and
any supplemental benefit added by endorsement -- are taxable withdrawals, then
the sole or surviving owner may cancel the affected benefit(s) within 90 days of
notice from us.
TAXES ON WITHDRAWALS AND SURRENDER
If you make a withdrawal from your contract or surrender it before annuity
payments begin, the amount you receive will be taxed as ordinary income, rather
than as return of purchase payments, until all gain has been withdrawn. You will
generally be taxed on any withdrawals from the contract while you are alive even
if the withdrawal is paid to someone else.
If you assign or pledge all or part of your contract as collateral for a
loan, the part assigned will be treated as a withdrawal. Also, if you elect the
interest payment option, that election will be treated, for tax purposes, as
surrendering your contract.
If you transfer your contract for less than full consideration, such as by
gift, you will trigger tax on the gain in the contract. This rule does not apply
if you transfer the contract to your spouse or under most circumstances if you
transfer the contract incident to divorce.
It is our position that the guaranteed minimum death benefit, the guaranteed
minimum income benefit, and other contract benefits are an integral part of the
annuity contract and accordingly that the charges made against the annuity
contract's cash value for the benefit should not be treated as distributions
subject to income tax. It is possible, however, that the Internal Revenue
Service could take the position that such charges should be treated as
distributions.
TAXES ON ANNUITY PAYMENTS
A portion of each annuity payment you receive will be treated as a partial
return of your purchase payments and will not be taxed. The remaining portion
will be taxed as ordinary income. Generally, the nontaxable portion is
determined by multiplying the annuity payment you receive by a fraction, the
numerator of which is your
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purchase payments (less any amounts previously received tax-free) and the
denominator of which is the total expected payments under the contract.
After the full amount of your purchase payments have been recovered tax-free,
the full amount of the annuity payments will be taxable. If annuity payments
stop due to the death of the annuitant before the full amount of your purchase
payments have been recovered, a tax deduction may be allowed for the unrecovered
amount.
TAX PENALTY ON WITHDRAWALS AND ANNUITY PAYMENTS
Any taxable amount you receive under your contract may be subject to a 10% tax
penalty. Amounts are not subject to this tax penalty if:
- - the amount is paid on or after you reach age 59 1/2 or die;
- - the amount received is attributable to your becoming disabled;
- - the amount paid or received is in the form of level annuity payments not less
frequently than annually under a lifetime annuity;
TAXES PAYABLE BY BENEFICIARIES
All of the death benefit options are subject to income tax to the extent the
distribution exceeds the adjusted basis in the contract and the full value of
the death benefit is included in the owner's estate. Generally, the same tax
rules described above would also apply to amounts received by your beneficiary.
Choosing an annuity payment option instead of a lump sum death benefit may defer
taxes. Certain minimum distribution requirements apply upon your death, as
discussed further below. Tax consequences to the beneficiary vary among the
death benefit payment options.
- - Choice 1: the beneficiary is taxed on earnings in the contract.
- - Choice 2: the beneficiary is taxed as amounts are withdrawn (In this case
earnings are treated as being distributed first).
- - Choice 3: the beneficiary is taxed on each payment (part will be treated as
earnings and part as return of premiums).
REPORTING AND WITHHOLDING ON DISTRIBUTIONS
Taxable amounts distributed from your annuity contracts are subject to federal
and state income tax reporting and withholding. In general, we will withhold
federal income tax from the taxable portion of such distribution based on the
type of distribution. In the case of an annuity or similar periodic payment, we
will withhold as if you are a married individual with 3 exemptions unless you
designate a different withholding status. In the case of all other
distributions, we will withhold at a 10% rate. You may generally elect not to
have tax withheld from your payments. An election out of withholding must be
made on forms that we provide.
State income tax withholding rules vary and we will withhold based on the
rules of your State of residence. Special tax rules apply to withholding for
nonresident aliens, and we generally withhold income tax for nonresident aliens
at a 30% rate. A different withholding rate may be applicable to a nonresident
alien based on the terms of an existing income tax treaty between the United
States and the nonresident alien's country. Please refer to the CONTRACTS HELD
BY TAX FAVORED PLANS section for withholding rules for tax favored plans (for
example, an IRA).
Regardless of the amount withheld by us, you are liable for payment of
federal and state income tax on the taxable portion of annuity distributions.
You should consult with your tax advisor regarding the payment of the correct
amount of these income taxes and potential liability if you fail to pay such
taxes.
ANNUITY QUALIFICATION
Diversification And Investor Control In order to qualify for the tax rules
applicable to annuity contracts described above, the contract must be an annuity
contract for tax purposes. This means that the assets underlying the annuity
contract must be diversified, according to certain rules. It also means that we,
and not you as the contract-owner, must have sufficient control over the
underlying assets to be treated as the owner of the underlying assets for tax
purposes. We believe these rules, which are further discussed in the Statement
of Additional Information, will be met.
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Required Distributions Upon Your Death Upon your death (or the death of a
joint owner, if earlier), certain distributions must be made under the contract.
The required distributions depend on whether you die before you start taking
annuity payments under the contract or after you start taking annuity payments
under the contract.
If you die on or after the annuity date, the remaining portion of the
interest in the contract must be distributed at least as rapidly as under the
method of distribution being used as of the date of death.
If you die before the annuity date, the entire interest in the contract must
be distributed within 5 years after the date of death. However, if an annuity
payment option is selected by your designated beneficiary and if annuity
payments begin within 1 year of your death, the value of the contract may be
distributed over the beneficiary's life or a period not exceeding the
beneficiary's life expectancy. Your designated beneficiary is the person to whom
benefit rights under the contract pass by reason of death, and must be a natural
person in order to elect an annuity payment option based on life expectancy or a
period exceeding five years.
If any portion of the contract is payable to (or for the benefit of) your
surviving spouse, that portion of the contract may be continued with your spouse
as the owner.
Changes In The Contract We reserve the right to make any changes we deem
necessary to assure that the contract qualifies as an annuity contract for tax
purposes. Any such changes will apply to all contract owners and you will be
given notice to the extent feasible under the circumstances.
ADDITIONAL INFORMATION
You should refer to the Statement of Additional Information if:
- - The contract is held by a corporation or other entity instead of by an
individual or as agent for an individual.
- - Your contract was issued in exchange for a contract containing purchase
payments made before August 14, 1982.
- - You transfer your contract to, or designate, a beneficiary who is either
37 1/2 years younger than you or a grandchild.
CONTRACTS HELD BY TAX FAVORED PLANS
The following discussion covers annuity contracts held under tax-favored
retirement plans. Currently, the contract may be purchased for use in connection
with individual retirement accounts and annuities (IRAs) which are subject to
Sections 408(a), 408(b) and 408A of the Internal Revenue Code of 1986, as
amended (Code). This description assumes that you have satisfied the
requirements for eligibility for these products.
YOU SHOULD BE AWARE THAT TAX FAVORED PLANS SUCH AS IRAS GENERALLY PROVIDE TAX
DEFERRAL REGARDLESS WHETHER THEY INVEST IN ANNUITY CONTRACTS. THIS MEANS THAT
WHEN A TAX FAVORED PLAN INVESTS IN AN ANNUITY CONTRACT, IT GENERALLY DOES NOT
RESULT IN ANY ADDITIONAL TAX DEFERRAL BENEFITS.
TYPES OF TAX FAVORED PLANS
IRAs If you buy a contract for use as an IRA, we will provide you a copy of
the prospectus and contract. The "IRA Disclosure Statement" on page 63 contains
information about eligibility, contribution limits, tax particulars, and other
IRA information. In addition to this information (some of which is summarized
below), the IRS requires that you have a "free look" after making an initial
contribution to the contract. During this time, you can cancel the contract by
notifying us in writing, and we will refund all of the purchase payments under
the contract (or, if provided by applicable state law, the amount credited under
the contract, calculated as of the date that we receive this cancellation
notice, if greater), less any applicable federal and state income tax
withholding.
Contributions Limits/Rollovers: Because of the way the contract is designed,
you may only purchase a contract for an IRA in connection with a "rollover" of
amounts from a qualified retirement plan or transfer from another IRA. You must
make a minimum initial payment of $10,000 to purchase a contract. This minimum
is greater than the maximum amount of any annual contribution allowed by law you
may make to an IRA. For 2002 to 2004 the limit is $3,000; increasing in
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PART II
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SECTIONS 1-9
2005 to 2007, to $4,000; and for 2008, $5,000. After 2008 the contribution
amount will be indexed for inflation. The tax law also provides for a catch-up
provision for individuals who are age 50 and above. These taxpayers will be
permitted to contribute an additional $500 in years 2002 to 2005 and an
additional $1,000 in 2006 and years thereafter). The "rollover" rules under the
Code are fairly technical; however, an individual (or his or her surviving
spouse) may generally "roll over" certain distributions from tax favored
retirement plans (either directly or within 60 days from the date of these
distributions) if he or she meets the requirements for distribution. Once you
buy the contract, you can make regular IRA contributions under the contract (to
the extent permitted by law). However, if you make such regular IRA
contributions, you should note that you will not be able to treat the contract
as a "conduit IRA," which means that you will not retain possible favorable tax
treatment if you subsequently "roll over" the contract funds originally derived
from a qualified retirement plan or TDA into another Section 401(a) plan or TDA.
Required Provisions: Contracts that are IRAs (or endorsements that are part
of the contract) must contain certain provisions:
- - You, as owner of the contract, must be the "annuitant" under the contract
(except in certain cases involving the division of property under a decree of
divorce);
- - Your rights as owner are non-forfeitable;
- - You cannot sell, assign or pledge the contract, other than to Pruco Life;
- - The annual premium you pay cannot be greater than the maximum amount allowed
by law, including catch-up contributions if applicable (which does not
include any rollover amounts);
- - The date on which annuity payments must begin cannot be later than the April
1st of the calendar year after the calendar year you turn age 70 1/2; and
- - Death and annuity payments must meet "minimum distribution requirements"
(described below).
Usually, the full amount of any distribution from an IRA (including a
distribution from this contract) which is not a rollover is taxable. As taxable
income, these distributions are subject to the general tax withholding rules
described earlier. In addition to this normal tax liability, you may also be
liable for the following, depending on your actions:
- - A 10% "early distribution penalty" (described below);
- - Liability for "prohibited transactions" if you, for example, borrow against
the value of an IRA; or
- - Failure to take a minimum distribution (also generally described below).
ROTH IRAs Like standard IRAs, income within a Roth IRA accumulates tax-free,
and contributions are subject to specific limits. Roth IRAs have, however, the
following differences:
- - Contributions to a Roth IRA cannot be deducted from your gross income;
- - "Qualified distributions" (generally, held for 5 tax years and payable on
account of death, disability, attainment of age 59 1/2, or first
time-homebuyer) from Roth IRAs are excludable from your gross income; and
- - If eligible, you may make contributions to a Roth IRA after attaining age
70 1/2, and distributions are not required to begin upon attaining such age
or at any time thereafter.
Because the contract's minimum initial payment of $10,000 is greater than the
maximum annual contribution permitted to be made to a Roth IRA, you may purchase
a contract as a Roth IRA only in connection with a "rollover" or "conversion" of
the proceeds of another traditional IRA, conduit IRA, SEP, SIMPLE-IRA, or Roth
IRA. The Code permits persons who meet certain income limitations (generally,
adjusted gross income under $100,000), and who receive certain qualifying
distributions from such non-Roth IRAs, to directly rollover or make, within 60
days, a "rollover" of all or any part of the amount of such distribution to a
Roth IRA which they establish. This conversion triggers current taxation (but is
not subject to a 10% early distribution penalty). Once the contract has been
purchased, regular Roth IRA contributions will be accepted to the extent
permitted by law.
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TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC
PARTNERS ANNUITY ONE CONTRACT CONTINUED
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PART II
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SECTIONS 1-9
MINIMUM DISTRIBUTION REQUIREMENTS AND PAYMENT OPTION
If you hold the contract under an IRA (or other tax-favored plan), IRS minimum
distribution requirements must be satisfied. This means that payments must start
by April 1 of the year after the year you reach age 70 1/2 and must be made for
each year thereafter. The amount of the payment must at least equal the minimum
required under the IRS rules. Several choices are available for calculating the
minimum amount, including a new method permitted under IRS regulations released
in April 2002. More information on the mechanics of this calculation is
available on request. Please contact us a reasonable time before the IRS
deadline so that a timely distribution is made. Please note that there is a 50%
IRS penalty tax on the amount of any minimum distribution not made in a timely
manner.
You can use the Minimum Distribution option to satisfy the IRS minimum
distribution requirements for this contract without either beginning annuity
payments or surrendering the contract. We will send you a check for this minimum
distribution amount, less any other partial withdrawals that you made during the
year.
PENALTY FOR EARLY WITHDRAWALS
You may owe a 10% tax penalty on the taxable part of distributions received from
an IRA, SEP, SIMPLE-IRA (which may increase to 25%), Roth IRA, TDA or qualified
retirement plan before you attain age 59 1/2. There are only limited exceptions
to this tax, and you should consult your tax adviser for further details.
WITHHOLDING
Unless a distribution is an eligible rollover distribution that is "directly"
rolled over into another qualified plan, IRA (including the IRA variations
described above), SEP, 457 government plan or TDA, we will withhold at the rate
of 20%. This 20% withholding does not apply to distributions from IRAs and Roth
IRAs. For all other distributions, unless you elect otherwise, we will withhold
federal income tax from the taxable portion of such distribution at an
appropriate percentage. The rate of withholding on annuity payments where no
mandatory withholding is required is determined on the basis of the withholding
certificate that you file with us. If you do not file a certificate, we will
automatically withhold federal taxes on the following basis:
- - For any annuity payments not subject to mandatory withholding, you will have
taxes withheld by us as if you are a married individual, with 3 exemptions;
and
- - For all other distributions, we will withhold at a 10% rate.
We will provide you with forms and instructions concerning the right to elect
that no amount be withheld from payments in the ordinary course. However, you
should know that, in any event, you are liable for payment of federal income
taxes on the taxable portion of the distributions, and you should consult with
your tax advisor to find out more information on your potential liability if you
fail to pay such taxes.
ERISA DISCLOSURE/REQUIREMENTS
ERISA (the "Employee Retirement Income Security Act of 1974") and the Code
prevents a fiduciary and other "parties in interest" with respect to a plan
(and, for these purposes, an IRA would also constitute a "plan") from receiving
any benefit from any party dealing with the plan, as a result of the sale of the
contract. Administrative exemptions under ERISA generally permit the sale of
insurance/annuity products to plans, provided that certain information is
disclosed to the person purchasing the contract. This information has to do
primarily with the fees, charges, discounts and other costs related to the
contract, as well as any commissions paid to any agent selling the contract.
Information about any applicable fees, charges, discounts, penalties or
adjustments may be found under "What are the Expenses Associated with the
Strategic Partners Annuity One Contract" starting on page 44.
Information about sales representatives and commissions may be found under
"Other Information" and "Sale and Distribution of the Contract" on page 58.
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STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SECTIONS 1-9
In addition, other relevant information required by the exemptions is
contained in the contract and accompanying documentation. Please consult your
tax advisor if you have any additional questions.
SPOUSAL CONSENT RULES FOR RETIREMENT PLANS -- QUALIFIED CONTRACTS
If you are married at the time your payments commence, you may be required by
federal law to choose an income option that provides survivor annuity income to
your spouse, unless your spouse waives that right. Similarly, if you are married
at the time of your death, federal law may require all or a portion of the death
benefit to be paid to your spouse, even if you designated someone else as your
beneficiary. A brief explanation of the applicable rules follows. For more
information, consult the terms of your retirement arrangement.
Defined Benefit Plans, Money Purchase Pension Plans, and ERISA 403(b)
Annuities. If you are married at the time your payments commence, federal law
requires that benefits be paid to you in the form of a "qualified joint and
survivor annuity" ("QJSA"), unless you and your spouse waive that right, in
writing. Generally, this means that you will receive a reduced payment during
your life and, upon your death, your spouse will receive at least one-half of
what you were receiving for life. You may elect to receive another income option
if your spouse consents to the election and waives his or her right to receive
the QJSA. If your spouse consents to the alternative form of payment, your
spouse may not receive any benefits from the plan upon your death. Federal law
also requires that the plan pay a death benefit to your spouse if you are
married and die before you begin receiving your benefit. This benefit must be
available in the form of an annuity for your spouse's lifetime and is called a
"qualified pre-retirement survivor annuity" ("QPSA"). If the plan pays death
benefits to other beneficiaries, you may elect to have a beneficiary other than
your spouse receive the death benefit, but only if your spouse consents to the
election and waives his or her right to receive the QPSA. If your spouse
consents to the alternate beneficiary, your spouse will receive no benefits from
the plan upon your death. Any QPSA waiver prior to your attaining age 35 will
become null and void on the first day of the calendar year in which you attain
age 35, if still employed.
Defined Contribution Plans (including 401(k) Plans). Spousal consent to a
distribution is generally not required. Upon your death, your spouse will
receive the entire death benefit, even if you designated someone else as your
beneficiary, unless your spouse consents in writing to waive this right. Also,
if you are married and elect an annuity as a periodic income option, federal law
requires that you receive a QJSA (as described above), unless you and your
spouse consent to waive this right.
IRAs, non-ERISA 403(b) Annuities, and 457 Plans. Spousal consent to a
distribution is not required. Upon your death, any death benefit will be paid to
your designated beneficiary.
ADDITIONAL INFORMATION
For additional information about federal tax law requirements applicable to tax
favored plans, see the "IRA Disclosure Statement" on page 63.
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STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SECTIONS 1-9
9:
OTHER
INFORMATION
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PRUCO LIFE INSURANCE COMPANY
Pruco Life Insurance Company (Pruco Life) is a stock life insurance company
organized in 1971 under the laws of the State of Arizona. It is licensed to sell
life insurance and annuities in the District of Columbia, Guam and in all states
except New York. Pruco Life is a wholly-owned subsidiary of The Prudential
Insurance Company of America (Prudential), a New Jersey stock life insurance
company that has been doing business since 1875. Prudential is an indirect
wholly-owned subsidiary of Prudential Financial, Inc. (Prudential Financial), a
New Jersey insurance holding company. As Pruco Life's ultimate parent,
Prudential Financial exercises significant influence over the operations and
capital structure of Pruco Life and Prudential. However, neither Prudential
Financial, Prudential, nor any other related company has any legal
responsibility to pay amounts that Pruco Life may owe under the contract.
Pruco Life publishes annual and quarterly reports that are filed with the
SEC. These reports contain financial information about Pruco Life that is
annually audited by independent accountants. Pruco's Life annual report for the
year ended December 31, 2002, together with subsequent periodic reports that
Pruco Life files with the SEC, are incorporated by reference into this
prospectus. You can obtain copies, at no cost, of any and all of this
information, including the Pruco Life annual report that is not ordinarily
mailed to contractholders, the more current reports and any subsequently filed
documents at no cost by contacting us at the address or telephone number listed
on the cover. You may read and copy any filings made by Pruco Life with the SEC
at the SEC's Public Reference Room at 450 Fifth Street, Washington, D.C. 20549.
You can obtain information on the operation of the Public Reference Room by
calling 1-800-SEC-0330. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC at http://www.sec.gov.
THE SEPARATE ACCOUNT
We have established a separate account, the Pruco Life Flexible Premium Variable
Annuity Account (the "separate account"), to hold the assets that are associated
with the contracts. The separate account was established under Arizona law on
June 16, 1995, and is registered with the U.S. Securities and Exchange
Commission under the Investment Company Act of 1940 as a unit investment trust,
which is a type of investment company. The assets of the separate account are
held in the name of Pruco Life and legally belong to us. These assets are kept
separate from all of our other assets and may not be charged with liabilities
arising out of any other business we may conduct. More detailed information
about Pruco Life, including its audited financial statements, appears in the
Statement of Additional Information.
RISK FACTORS
There are various risks associated with the purchase of the market value
adjustment option annuity that we summarize below.
ISSUER RISK. Your market value adjustment option is issued by Pruco Life, and
thus is backed by the financial strength of that company. If Pruco Life were to
experience significant financial adversity, it is possible that Pruco Life's
ability to pay interest and principal under the market value adjustment option
could be impaired.
RISKS RELATED TO CHANGING INTEREST RATES. You do not participate directly in
the investment experience of the bonds and other instruments that Pruco Life
holds to support the market value adjustment option. Nonetheless, the market
value adjustment formula (which is detailed in the appendix to this prospectus)
reflects the effect that prevailing interest rates have on those bonds and other
instruments. If you need to withdraw your money during a period in which
prevailing interest rates have risen above their level when you made your
purchase, you will experience a "negative" market value adjustment. When we
impose this market value adjustment, it could result in the loss of both the
interest you have earned and a portion of your purchase payments. Thus, before
you commit to a particular guarantee period, you should consider carefully
whether you have the ability to remain in the
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PART II
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SECTIONS 1-9
contract throughout the guarantee period. In addition, we cannot, of course,
assure you that the market value adjustment option will perform better than
another investment that you might have made.
RISKS RELATED TO THE WITHDRAWAL CHARGE. We impose withdrawal charges under
the variable annuities that offer the market value adjustment option as a
companion option. If you anticipate needing to withdraw your money prior to the
end of a guarantee period, you should be prepared to pay the withdrawal charge
that we will impose.
SALE AND DISTRIBUTION OF THE CONTRACT
Prudential Investment Management Services LLC ("PIMS"), 100 Mulberry Street,
Newark, New Jersey 07102-4077, acts as the distributor of the contracts under a
"best efforts" underwriting agreement with Pruco Life under which PIMS is
reimbursed for its costs and expenses. PIMS is an indirect wholly-owned
subsidiary of Prudential Financial, Inc. and is a limited liability corporation
organized under Delaware law in 1996. It is a registered broker-dealer under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc.
We pay the broker-dealer whose registered representatives sell the contract
either:
- - a commission of up to 8% of your purchase payments; or
- - a combination of a commission on purchase payments and a "trail"
commission -- which is a commission determined as a percentage of your
contract value that is paid periodically over the life of your contract.
The commission amount quoted above is the maximum amount which is paid. In most
circumstances, the registered representative who sold the contract will receive
significantly less. We will generally pay less compensation with respect to
contracts issued to customers over 80 years old.
From time to time, Prudential or its affiliates may offer and pay non-cash
compensation to registered representatives who sell the contract. For example,
Prudential or an affiliate may pay for a training and education meeting that is
attended by registered representatives of both Prudential-affiliated broker-
dealers and independent broker-dealers. Prudential and its affiliates retain
discretion as to which broker-dealers to offer non-cash (and cash) compensation
arrangements, and will comply with NASD rules and other pertinent laws in making
such offers and payments. Our payment of cash or non-cash compensation in
connection with sales of the contract does not result directly in any additional
charge to you.
ASSIGNMENT
You can assign the contract at any time during your lifetime. If you do so, we
will reset the death benefit to equal the contract value on the date the
assignment occurs. For details, see "What is the Death Benefit," on page 37. We
will not be bound by the assignment until we receive written notice. We will not
be liable for any payment or other action we take in accordance with the
contract if that action occurs before we receive notice of the assignment. An
assignment, like any other change in ownership, may trigger a taxable event.
If the contract is issued under a qualified plan, there may be limitations on
your ability to assign the contract. For further information please speak to
your representative.
FINANCIAL STATEMENTS
The financial statements of the separate account associated with Strategic
Partners Annuity One are included in the Statement of Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
Contents:
- - Company
- - Experts
- - Litigation
- - Principal Underwriter
- - Determination of Accumulation Unit Values
- - Performance Information
- - Comparative Performance Information and Advertising
- - Federal Tax Status
- - State Specific Variations
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OTHER INFORMATION CONTINUED
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PART II
STRATEGIC PARTNERS ANNUITY ONE PROSPECTUS SECTIONS 1-9
- - Directors and Officers
- - Financial Statements
HOUSEHOLDING
To reduce costs, we now send only a single copy of prospectuses and shareholder
reports to each consenting household, in lieu of sending a copy to each
contractholder that resides in the household. If you are a member of such a
household, you should be aware that you can revoke your consent to householding
at any time, and begin to receive your own copy of prospectuses and shareholder
reports, by calling 1-877-778-5008.
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MARKET-VALUE
ADJUSTMENT FORMULA
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MARKET-VALUE ADJUSTMENT FORMULA
GENERAL FORMULA
The formula under which Pruco Life calculates the market value adjustment
applicable to a full or partial surrender, annuitization, or settlement under
the market value adjustment option is set forth below. The market value
adjustment is expressed as a multiplier factor. That is, the Contract Value
after the market value adjustment ("MVA"), but before any surrender charge, is
as follows: Contract Value (after MVA) = Contract Value (before MVA) X (1 +
MVA). The MVA itself is calculated as follows:
1 + I
MVA = [(-------------) to the N/12 power] -1
1 + J + .0025
PENNSYLVANIA FORMULA
We use the same MVA formula with respect to contracts issued in Pennsylvania as
the general formula, except that "J" in the formula above uses an interpolated
rate as the current credited interest rate. Specifically, "J" is the
interpolated current credited interest rate offered on new money at the time of
withdrawal, annuitization, or settlement. The interpolated value is calculated
using the following formula:
m/365 X (n + 1) year rate + (365 - m)/365 X n year rate,
where "n" equals the number of whole years remaining in the Contract's current
guarantee period, and "m" equals the number of days remaining in year "n" of the
current guarantee period.
INDIANA FORMULA
We use the following MVA formula for contracts issued in Indiana:
1 + I
MVA = [(-----------) to the N/12 power] -1
1 + J
The variables I, J and N retain the same definitions as the general formula.
MARKET VALUE ADJUSTMENT EXAMPLE
(ALL STATES EXCEPT INDIANA AND PENNSYLVANIA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.05 + 0.0025)]to the (38/12)
power -1 = 0.02274
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.02274 = $253.03
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $253.03 = $11,380.14
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MARKET-VALUE ADJUSTMENT FORMULA CONTINUED
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PART II
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The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.07 + 0.0025)] to the (38/12)
power -1 = -0.03644
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.03644) = -$405.47
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$405.47) = $10,721.64
MARKET VALUE ADJUSTMENT EXAMPLE
(PENNSYLVANIA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 3 years (the number of whole years remaining) is 4%, and for a
guarantee period of 4 years (the number of whole years remaining plus 1) is
5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.0417 + 0.0025)] to the
(38/12) power -1 = 0.04902
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.04902 = $545.45
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $545.45 = $11,672.56
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 3 years (the number of whole years remaining) is 7%, and for a
guarantee period of 4 years (the number of whole years remaining plus 1) is
8%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.0717 + 0.0025)] to the
(38/12) power -1 = -0.04098
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.04098) = -$455.99
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3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$455.99) = $10,671.12
MARKET VALUE ADJUSTMENT EXAMPLE
(INDIANA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.05)] to the (38/12) power -1 =
0.03047
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 x 0.03047 = $339.04
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $339.04 = $11,466.15
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.07)] to the (38/12) power -1
= -0.02930
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.02930) = -$326.02
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$326.02) = $10,801.09
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IRA DISCLOSURE STATEMENT
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This statement is designed to help you understand the requirements of federal
tax law which apply to your individual retirement annuity (IRA), your Roth IRA,
your simplified employee pension IRA (SEP) for employer contributions, your
Savings Incentive Match Plan for Employees (SIMPLE) IRA, or to one you purchase
for your spouse. You can obtain more information regarding your IRA either from
your sales representative or from any district office of the Internal Revenue
Service. Those are federal tax law rules; state tax laws may vary.
FREE LOOK PERIOD
The annuity contract offered by this prospectus gives you the opportunity to
return the contract for a full refund (less any applicable federal and state
income tax withholding) within 10 days (or whatever period is required by
applicable state law) after it is delivered. This is a more liberal provision
than is required in connection with IRAs. To exercise this "free-look"
provision, return the contract to the representative who sold it you or to the
Prudential Annuity Service Center at the address shown on the first page of this
prospectus.
ELIGIBILITY REQUIREMENTS
IRAs are intended for all persons with earned compensation whether or not they
are covered under other retirement programs. Additionally, if you have a
non-working spouse (and you file a joint tax return), you may establish an IRA
on behalf of your non-working spouse. A working spouse may establish his or her
own IRA. A divorced spouse receiving taxable alimony (and no other income) may
also establish an IRA.
CONTRIBUTIONS AND DEDUCTIONS
Contributions to your IRA will be deductible if you are not an "active
participant" in an employer maintained qualified retirement plan or you have
"Adjusted Gross Income" (as defined under Federal tax laws) which does not
exceed the "applicable dollar limit." IRA (or SEP) contributions must be made by
no later than the due date for filing your income tax return for that year,
excluding extensions (generally by April 15th). For a single taxpayer, the
applicable dollar limitation is $40,000 in 2003, with the amount of IRA
contribution which may be deducted reduced proportionately for Adjusted Gross
Income between $40,000 -- $50,000. For married couples filing jointly, the
applicable dollar limitation is $60,000, with the amount of IRA contribution
which may be deducted reduced proportionately between $60,000-$70,000. There is
no deduction allowed for IRA contributions when Adjusted Gross Income reaches
$50,000 for individuals and $70,000 for married couples filing jointly. Income
limits are scheduled to increase until 2006 for single taxpayers and 2007 for
married taxpayers.
Contributions made by your employer to your SEP are excludable from your
gross income for tax purposes in the calendar year for which the amount is
contributed. Certain employees who participate in a SEP will be entitled to
elect to have their employer make contributions to their SEP on their behalf or
to receive the contributions in cash. If the employee elects to have
contributions made on the employee's behalf to the SEP, those funds are not
treated as current taxable income to the employee. Elective deferrals under a
SEP are limited to $12,000 in 2003, with a permitted catch-up contribution of
$2,000 for individuals age 50 and above. Contribution limits and catch-up
contribution limits are scheduled to increase through 2006 and are indexed for
inflation thereafter. Salary-reduction SEPs (also called "SARSEPs") are
available only if at least 50% of the employees elect to have amounts
contributed to the SARSEP and if the employer has 25 or fewer employees at all
times during the preceding year. New SARSEPs may not be established after 1996.
The IRA maximum annual contribution is limited to the lesser of: (1) the
maximum amount allowed by law, including catch-up contributions if applicable,
or (2) 100% of your earned compensation. Contributions in excess of these limits
may be subject to penalty. See below.
Under a SEP agreement, the maximum annual contribution which your employer
may make on your behalf to a SEP contract that is excludable from your income is
the lesser of 25% of your salary or $40,000. An employee who is a participant in
a SEP agreement
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may make after-tax contributions to the SEP contract, subject to the
contribution limits applicable to IRAs in general. Those employee contributions
will be deductible subject to the deductibility rules described above.
The maximum tax deductible annual contribution that a divorced spouse with no
other income may make to an IRA is the lesser of (1) the maximum amount allowed
by law, including catch-up contributions if applicable or (2) 100% of taxable
alimony.
If you or your employer should contribute more than the maximum contribution
amount to your IRA or SEP, the excess amount will be considered an "excess
contribution." You are permitted to withdraw an excess contribution from your
IRA or SEP before your tax filing date without adverse tax consequences. If,
however, you fail to withdraw any such excess contribution before your tax
filing date, a 6% excise tax will be imposed on the excess for the tax year of
contribution.
Once the 6% excise tax has been imposed, an additional 6% penalty for the
following tax year can be avoided if the excess is (1) withdrawn before the end
of the following year, or (2) treated as a current contribution for the
following year. (See Premature Distributions below for penalties imposed on
withdrawal when the contribution exceeds the maximum amount allowed by law,
including catch-up contributions if applicable.)
IRA FOR NON-WORKING SPOUSE
If you establish an IRA for yourself, you may also be eligible to establish an
IRA for your "non-working" spouse. In order to be eligible to establish such a
spousal IRA, you must file a joint tax return with your spouse and, if your
non-working spouse has compensation, his/her compensation must be less than your
compensation for the year. Contributions of up to the maximum amount allowed by
law, including catch-up contributions if applicable, may be made to your IRA and
the spousal IRA if the combined compensation of you and your spouse is at least
equal to the amount contributed. If requirements for deductibility (including
income levels) are met, you will be able to deduct an amount equal to the least
of (i) the amount contributed to the IRAs; (ii) twice the maximum amount allowed
by law, including catch-up contributions if applicable; or (iii) 100% of your
combined gross income.
Contributions in excess of the contribution limits may be subject to penalty.
See page 63 under "Contributions and Deductions." If you contribute more than
the allowable amount, the excess portion will be considered an excess
contribution. The rules for correcting it are the same as discussed above for
regular IRAs.
Other than the items mentioned in this section, all of the requirements
generally applicable to IRAs are also applicable to IRAs established for
non-working spouses.
ROLLOVER CONTRIBUTION
Once every year, you are permitted to withdraw any portion of the value of your
IRA or SEP and reinvest it in another IRA or bond. Withdrawals may also be made
from other IRAs and contributed to this contract. This transfer of funds from
one IRA to another is called a "rollover" IRA. To qualify as a rollover
contribution, the entire portion of the withdrawal must be reinvested in another
IRA within 60 days after the date it is received. You will not be allowed a
tax-deduction for the amount of any rollover contribution.
A similar type of rollover to an IRA can be made with the proceeds of a
qualified distribution from a qualified retirement plan or tax-sheltered
annuity. Properly made, such a distribution will not be taxable until you
receive payments from the IRA created with it. You may later roll over such a
contribution to another qualified retirement plan. (You may roll less than all
of a qualified distribution into an IRA, but any part of it not rolled over will
be currently includable in your income without any capital gains treatment.)
Funds can also be rolled over from an IRA or SEP to another IRA or SEP or to
another qualified retirement plan or 457 government plan.
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IRA DISCLOSURE STATEMENT CONTINUED
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DISTRIBUTIONS
(a) PREMATURE DISTRIBUTIONS
At no time can your interest in your IRA or SEP be forfeited. To insure that
your contributions will be used for retirement, the federal tax law does not
permit you to use your IRA or SEP as security for a loan. Furthermore, as a
general rule, you may not sell or assign your interest in your IRA or SEP to
anyone. Use of an IRA (or SEP) as security or assignment of it to another will
invalidate the entire annuity. It then will be includable in your income in the
year it is invalidated and will be subject to a 10% tax penalty if you are not
at least age 59 1/2 or totally disabled. (You may, however, assign your IRA or
SEP without penalty to your former spouse in accordance with the terms of a
divorce decree.)
You may surrender any portion of the value of your IRA (or SEP). In the case
of a partial surrender which does not qualify as a rollover, the amount
withdrawn will be includable in your income and subject to the 10% penalty if
you are not at least age 59 1/2 or totally disabled unless you comply with
special rules requiring distributions to be made at least annually over your
life expectancy.
The 10% tax penalty does not apply to the withdrawal of an excess
contribution as long as the excess is withdrawn before the due date of your tax
return. Withdrawals of excess contributions after the due date of your tax
return will generally be subject to the 10% penalty unless the excess
contribution results from erroneous information from a plan trustee making an
excess rollover contribution or unless you are over age 59 1/2 or are disabled.
(b) DISTRIBUTION AFTER AGE 59 1/2
Once you have attained age 59 1/2 (or have become totally disabled), you may
elect to receive a distribution of your IRA (or SEP) regardless of when you
actually retire. In addition, you must commence distributions from your IRA by
April 1 following the year you attain age 70 1/2. You may elect to receive the
distribution under any one of the periodic payment options available under the
contract. The distributions from your IRA under any one of the periodic payment
options or in one sum will be treated as ordinary income as you receive them to
the degree that you have made deductible contributions. If you have made both
deductible and nondeductible contributions, the portion of the distribution
attributable to the nondeductible contribution will be tax-free.
(c) INADEQUATE DISTRIBUTIONS--50% TAX
Your IRA or SEP is intended to provide retirement benefits over your lifetime.
Thus, federal tax law requires that you either (1) receive a lump-sum
distribution of your IRA by April 1 of the year following the year in which you
attain age 70 1/2 or (2) start to receive periodic payments by that date. If you
elect to receive periodic payments, those payments must be sufficient to pay out
the entire value of your IRA during your life expectancy (or over the joint life
expectancies of you and your spouse/beneficiary). The calculation method is
revised under the IRS regulations issued in April 2002 for distributions
beginning in 2003 and were optional for distributions in 2002. If the payments
are not sufficient to meet these requirements, an excise tax of 50% will be
imposed on the amount of any underpayment.
(d) DEATH BENEFITS
If you (or your surviving spouse) die before receiving the entire value of your
IRA (or SEP), the remaining interest must be distributed to your beneficiary (or
your surviving spouse's beneficiary) in one lump-sum by December 31st of the
fifth year after your (or your surviving spouse's) death, or applied to purchase
an immediate annuity for the beneficiary. This annuity must be payable over the
life expectancy of the beneficiary beginning by December 31st of the year
following the year after your or your spouse's death. If your spouse is the
designated beneficiary, he or she is treated as the owner of the IRA. If minimum
required distributions have begun, and no designated beneficiary is identified
by December 31st of the year following the year of death, the entire amount must
be distributed based on the life expectancy of the owner using the owner's age
prior to death. A distribution of the balance
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of your IRA upon your death will not be considered a gift for federal tax
purposes, but will be included in your gross estate for purposes of federal
estate taxes.
ROTH IRAS
Section 408A of the Code permits eligible individuals to contribute to a type of
IRA known as a "Roth IRA." Contributions may be made to a Roth IRA by taxpayers
with adjusted gross incomes of less than $160,000 for married individuals filing
jointly and less than $110,000 for single individuals. Married individuals
filing separately are not eligible to contribute to a Roth IRA. The maximum
amount of contributions allowable for any taxable year to all IRAs maintained by
an individual is generally the lesser of the maximum amount allowed by law and
100% of compensation for that year (the maximum amount allowed by law is phased
out for incomes between $150,000 and $160,000 for married and between $95,000
and $110,000 for singles). The contribution limit is reduced by the amount of
any contributions made to a traditional IRA. Contributions to a Roth IRA are not
deductible.
For taxpayers with adjusted gross income of $100,000 or less, all or part of
amounts in a traditional IRA may be converted, transferred or rolled over to a
Roth IRA. Some or all of the IRA value will typically be includable in the
taxpayer's gross income. Provided a rollover contribution meets the requirements
of IRAs under Section 408(d)(3) of the Code, a rollover may be made from a Roth
IRA to another Roth IRA.
UNDER SOME CIRCUMSTANCES, IT MAY NOT BE ADVISABLE TO ROLL OVER, TRANSFER OR
CONVERT ALL OR PART OF A TRADITIONAL IRA TO A ROTH IRA. PERSONS CONSIDERING A
ROLLOVER, TRANSFER OR CONVERSION SHOULD CONSULT THEIR OWN TAX ADVISOR.
"Qualified distributions" from a Roth IRA are excludable from gross income. A
"qualified distribution" is a distribution that satisfies two requirements: (1)
the distribution must be made (a) after the owner of the IRA attains age 59 1/2;
(b) after the owner's death; (c) due to the owner's disability; or (d) for a
qualified first time homebuyer distribution within the meaning of Section
72(t)(2)(F) of the Code; and (2) the distribution must be made in the year that
is at least five tax years after the first year for which a contribution was
made to any Roth IRA established for the owner or five years after a rollover,
transfer, or conversion was made from a traditional IRA to a Roth IRA.
Distributions from a Roth IRA that are not qualified distributions will be
treated as made first from contributions and then from earnings, and taxed
generally in the same manner as distributions from a traditional IRA.
Distributions from a Roth IRA need not commence at age 70 1/2. However, if
the owner dies before the entire interest in a Roth IRA is distributed, any
remaining interest in the contract must be distributed under the same rules
applied to traditional IRAs where death occurs before the required beginning
date.
REPORTING TO THE IRS
Beginning with Forms 5498 issued in January 2004, we will indicate to you and to
the IRS that your account is subject to minimum required distributions if you
were at least 70 1/2 at the end of the prior year.
Whenever you are liable for one of the penalty taxes discussed above (6% for
excess contributions, 10% for premature distributions or 50% for underpayments),
you must file Form 5329 with the Internal Revenue Service. The form is to be
attached to your federal income tax return for the tax year in which the penalty
applies. Normal contributions and distributions must be shown on your income tax
return for the year to which they relate.
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APPENDIX
ACCUMULATION UNIT VALUES
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As we have indicated throughout this prospectus, the Strategic Partners Annuity
One Variable Annuity is a contract that allows you to select or decline any of
several features that carries with it a specific asset-based charge. We maintain
a unique unit value corresponding to each combination of such Contract features.
Here we depict the historical unit values corresponding to the contract features
bearing the highest and lowest combinations of asset-based charges during the
periods September 22, 2000 to December 31, 2000, January 1, 2001 to December 31,
2001 and January 1, 2002 to December 31, 2002. From September 22, 2000 to
February 3, 2002, the highest combination of asset-based charges amounted to
1.70%. From February 4, 2002 to December 31, 2002 the highest combination of
asset-based charges amounted to 1.80%. The lowest combination of asset-based
charges for all of these periods amounted to 1.40%. Under the version of the
contracts described in this prospectus, the highest combinations of asset-based
charges now amounts to 1.85%, while the lowest combination of asset-based
charges remains at 1.40%. In the Statement of Additional Information, we set out
historical unit values corresponding to the other combinations of asset-based
charges available during those prior periods. You can obtain a copy of the
Statement of Additional Information without charge, by calling (888) PRU-2888 or
by writing to us at Prudential Annuity Service Center, P.O. Box 7960,
Philadelphia, PA 19101.
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ACCUMULATION UNIT VALUES
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69
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70
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* BASE DEATH BENEFIT
** COMMENCEMENT OF BUSINESS
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ACCUMULATION UNIT VALUES
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72
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73
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* GMDB GREATER OF ROLLUP AND STEP-UP AND CONTRACT WITH CREDIT.
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PART III PROSPECTUSES
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VARIABLE INVESTMENT OPTIONS
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STRATEGIC PARTNERS(SM)
PLUS 3
VARIABLE ANNUITY
- --------------------------------------------------------------------------------
PROSPECTUS: MAY 1, 2003
THIS PROSPECTUS DESCRIBES AN INDIVIDUAL VARIABLE ANNUITY CONTRACT OFFERED BY
PRUCO LIFE INSURANCE COMPANY (PRUCO LIFE). PRUCO LIFE IS A WHOLLY-OWNED
SUBSIDIARY OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA.
THE FUNDS
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Strategic Partners Plus offers a wide variety of investment choices, including
40 variable investment options that invest in mutual funds managed by these
leading asset managers:
PRUDENTIAL INVESTMENTS LLC
JENNISON ASSOCIATES LLC
A I M CAPITAL MANAGEMENT, INC.
ALLIANCE CAPITAL MANAGEMENT, L.P.
BANK OF IRELAND ASSET MANAGEMENT (U.S.) LIMITED
CALAMOS ASSET MANAGEMENT, INC.
DAVIS ADVISORS
DEUTSCHE ASSET MANAGEMENT INVESTMENT SERVICES LIMITED
EARNEST PARTNERS LLC
EVERGREEN INVESTMENT MANAGEMENT COMPANY
FIDELITY MANAGEMENT & RESEARCH COMPANY
FURMAN SELZ CAPITAL MANAGEMENT LLC
GE ASSET MANAGEMENT, INCORPORATED
INVESCO FUNDS GROUP, INC.
JANUS CAPITAL MANAGEMENT LLC
LORD, ABBETT & CO. LLC
MASSACHUSETTS FINANCIAL SERVICES COMPANY (MFS)
NATIONAL CITY INVESTMENT MANAGEMENT COMPANY
PACIFIC INVESTMENT MANAGEMENT COMPANY LLC (PIMCO)
SALOMON BROTHERS ASSET MANAGEMENT INC.
WELLINGTON MANAGEMENT COMPANY LLP
You may choose between two basic versions of Strategic Partners Plus. One
version, the Contract With Credit, provides for a bonus credit that we add to
each purchase payment you make. If you choose this version of Strategic Partners
Plus, some charges and expenses may be higher than if you choose the version
without the credit. Those higher charges could exceed the amount of the credit
under some circumstances,
particularly if you withdraw purchase payments within a few years of making
those purchase payments.
PLEASE READ THIS PROSPECTUS
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Please read this prospectus before purchasing a Strategic Partners Plus variable
annuity contract, and keep it for future reference. Current prospectuses for the
underlying mutual funds accompany this prospectus. These prospectuses contain
important information about the mutual funds. Please read these prospectuses and
keep them for reference as well.
TO LEARN MORE ABOUT STRATEGIC PARTNERS PLUS
- ------------------------------------------------------------
To learn more about the Strategic Partners Plus variable annuity, you can
request a copy of the Statement of Additional Information (SAI) dated May 1,
2003. The SAI has been filed with the Securities and Exchange Commission (SEC)
and is legally a part of this prospectus. Pruco Life also files other reports
with the SEC. All of these filings can be reviewed and copied at the SEC's
offices, and can also be obtained from the SEC's Public Reference Section, 450
5th Street N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at (800) SEC-0330. The
SEC maintains a Web site (http://www.sec.gov) that contains the Strategic
Partners Plus SAI, material incorporated by reference, and other information
regarding registrants that file electronically with the SEC. The Table of
Contents of the SAI is on Page 60 of this prospectus.
FOR A FREE COPY OF THE SAI CALL US AT:
- ------------------------------------------------------------
- - (888) PRU-2888 or write to us at:
- - Prudential Annuity Service Center
P.O. Box 7960
Philadelphia, PA 19101
THE SEC HAS NOT DETERMINED THAT THIS CONTRACT IS A GOOD INVESTMENT, NOR HAS THE
SEC DETERMINED THAT THIS PROSPECTUS IS COMPLETE OR ACCURATE. IT IS A CRIMINAL
OFFENSE TO STATE OTHERWISE. INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT
TO RISK, INCLUDING THE POSSIBLE LOSS OF YOUR MONEY. AN INVESTMENT IN STRATEGIC
PARTNERS PLUS IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
1
CONTENTS
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2
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3
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4
PART I SUMMARY
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STRATEGIC PARTNERS PLUS PROSPECTUS
5
PART I
STRATEGIC PARTNERS PLUS PROSPECTUS SUMMARY
GLOSSARY
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WE HAVE TRIED TO MAKE THIS PROSPECTUS AS EASY TO READ AND UNDERSTAND AS
POSSIBLE. BY THE NATURE OF THE CONTRACT, HOWEVER, CERTAIN TECHNICAL WORDS OR
TERMS ARE UNAVOIDABLE. WE HAVE IDENTIFIED THE FOLLOWING AS SOME OF THESE WORDS
OR TERMS.
ACCUMULATION PHASE
The period that begins with the contract date (which we define below) and ends
when you start receiving income payments, or earlier if the contract is
terminated through a full withdrawal or payment of a death benefit.
ADJUSTED CONTRACT VALUE
When you begin receiving income payments, the value of your contract minus any
charge we impose for premium taxes.
ADJUSTED PURCHASE PAYMENT
Your invested purchase payment adjusted for any subsequent withdrawals. The
adjusted purchase payment is used only for calculations of the earnings
appreciator benefit.
ANNUITANT
The person whose life determines the amount of income payments that we will pay.
ANNUITY DATE
The date when income payments are scheduled to begin.
BENEFICIARY
The person(s) or entity you have chosen to receive a death benefit.
CONTRACT DATE
The date on which we credit your initial purchase payment. We will credit the
initial purchase payment to your contract within two business days from the day
on which we receive your payment and all necessary paperwork in good order at
the Prudential Annuity Service Center. Contract anniversaries are measured from
the contract date. A contract year starts on the contract date or on a contract
anniversary.
CONTRACT OWNER, OWNER, OR YOU
The person entitled to the ownership rights under the contract.
CONTRACT VALUE
This is the total value of your contract, equal to the sum of the values of your
investment in each investment option you have chosen. Your contract value will
go up or down based on the performance of the investment options you choose.
CONTRACT WITH CREDIT
A version of the annuity contract that provides for a bonus credit with each
purchase payment that you make and has different withdrawal charges and
insurance and administrative costs than the Contract Without Credit.
CONTRACT WITHOUT CREDIT
A version of the annuity contract that does not provide a credit and has
different withdrawal charges and insurance and administrative costs than the
Contract With Credit.
CREDIT
If you choose the Contract With Credit, this is the bonus amount that we
allocate to your account each time you make a purchase payment. The amount of
the credit is a percentage of the purchase payment. Bonus credits generally are
not recaptured once the free look period expires. Our reference in the preceding
sentence to "generally are not recaptured" refers to the fact that we have the
contractual right to deduct, from the death benefit we pay, the amount of any
credit corresponding to a purchase payment made within one year of death.
DEATH BENEFIT
If the sole owner dies, or if jointly owned, the first to die of the owner or
joint owner, the beneficiary you designate will receive, at a minimum, the total
amount invested, reduced by withdrawals or a potentially greater amount related
to market appreciation. The guaranteed minimum death benefit is available for an
additional charge.
DOLLAR COST AVERAGING FIXED RATE OPTION (DCA FIXED RATE OPTION)
An investment option that offers a fixed rate of interest for a selected period
during which periodic transfers are
6
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PART I
STRATEGIC PARTNERS PLUS PROSPECTUS SUMMARY
automatically made to selected variable investment options or to the one-year
fixed rate option. We guarantee your money will earn at least 3% while it is
allocated to this option. Payments you allocate to the DCA Fixed Rate Option
become part of Pruco Life's general assets until they are transferred.
EARNINGS APPRECIATOR BENEFIT (EAB)
An optional feature available for an additional charge that may provide a
supplemental death benefit based on earnings under the contract.
FIXED INTEREST RATE OPTIONS
Investment options that offer a fixed rate of interest for either a one-year
period (fixed rate option) or a selected period during which periodic transfers
are made to selected variable investment options or to the one-year fixed rate
option (dollar cost averaging fixed rate option).
GMDB PROTECTED VALUE
The guaranteed amount of the guaranteed minimum death benefit, which may equal
the GMDB roll-up value, the GMDB step-up value, or the greater of the two. The
protected value will be subject to certain age restrictions and time durations,
however it will still increase by subsequent invested purchase payments and
reduce by withdrawals.
GMDB ROLL-UP
We may use the GMDB roll-up value to compute the GMDB protected value of the
guaranteed minimum death benefit. The GMDB roll-up is equal to the invested
purchase payments compounded daily at an effective annual interest rate of 5%
(if the sole owner or the older of the owner and joint owner is less than 80
years old on the contract date) or 3% (if the sole owner or the older of the
owner and joint owner is between 80 and 85 years old on the contract date)
starting on the date that each invested purchase payment is made, reduced by
withdrawals.
GMDB STEP-UP
We may use the GMDB step-up value to compute the GMDB protected value of the
guaranteed minimum death benefit.
If the sole owner or the older of the owner and joint owner is less than
age 80 on the contract date, the GMDB step-up before the first contract
anniversary is the initial invested purchase payment increased by subsequent
invested purchase payments and reduced by the effect of withdrawals. The GMDB
step-up on each contract anniversary will be the greater of the previous GMDB
step-up and the contract value as of such contract anniversary. Between contract
anniversaries, the GMDB step-up will be increased by invested purchase payments
and reduced by the effect of withdrawals.
If the sole owner or the older of the owner and joint owner is between age
80 and 85 on the contract date, the GMDB step-up before the third contract
anniversary is the sum of invested purchase payments, reduced by the effect of
withdrawals. On the third contract anniversary the GMDB step-up will be adjusted
to the greater of the then current GMDB step-up or the contract value as of that
contract anniversary.
GMIB PROTECTED VALUE
The GMIB protected value is calculated daily and is equal to the GMIB roll-up,
until the GMIB roll-up either reaches its cap or if we stop applying the annual
interest rate based on the age of the annuitant, number of contract
anniversaries or number of years since last GMIB reset. At such point, the GMIB
protected value will be increased by any subsequent invested purchase payments,
reduced by withdrawals. You may elect to reset your GMIB protected value to
equal your contract value twice over the life of the contract.
GMIB ROLL-UP
We will use GMIB roll-up value to compute the GMIB protected value of the
guaranteed minimum income benefit. The GMIB roll-up is equal to the invested
purchase payments compounded daily at an effective annual interest rate of 5%
starting on the date each invested purchase payment is made, subject to a 200%
cap, and reduced by withdrawals.
GOOD ORDER
An instruction received at the Prudential Annuity Service Center, utilizing such
forms, signatures and dating as we require, which is sufficiently clear that we
do not need to exercise any discretion to follow such instructions.
7
GLOSSARY CONTINUED
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STRATEGIC PARTNERS PLUS PROSPECTUS SUMMARY
GUARANTEED MINIMUM DEATH BENEFIT (GMDB)
An optional feature available for an additional charge, which guarantees that
the death benefit that the beneficiary receives will be no less than a certain
GMDB protected value. Depending upon the terms of your contract, the protected
value for the guaranteed minimum death benefit may equal the GMDB roll-up value,
the GMDB step-up value, or the larger of the two.
GUARANTEED MINIMUM INCOME BENEFIT (GMIB)
An optional feature available for an additional charge that guarantees that the
income payments you receive during the income phase will be no less than a
certain GMIB protected value applied to the guaranteed annuity purchase rates.
GUARANTEE PERIOD
A period of time during which your invested purchase payment in the market value
adjustment option earns interest at the declared rate. We have the right to
offer one or more of seven guarantee periods equal to any or all of the
following: 1 year (currently available only as a renewal option), 2 years, 3
years, 4 years, 5 years, 6 years, 7 years, 8 years, 9 years, and 10 years.
IAB AUTOMATIC WITHDRAWAL PAYMENT PROGRAM
A series of payments consisting of a portion of your contract value and income
appreciator benefit paid to you in equal installments over a 10 year period,
which you may choose, if you elect to receive the income appreciator benefit
(IAB) during the accumulation phase.
IAB CREDIT
An amount we add to your contract value that is credited in equal installments
over a 10 year period, which you may choose, if you elect to receive the income
appreciator benefit (IAB) during the accumulation phase.
INCOME APPRECIATOR BENEFIT (IAB)
An optional feature that may be available for an additional charge that may
provide a supplemental income benefit based on earnings under the contract.
INCOME OPTIONS
Options under the contract that define the frequency and duration of income
payments. In your contract, we also refer to these as payout or annuity options.
INCOME PHASE
The period in which you receive income payments under the contract.
INVESTED PURCHASE PAYMENTS
Your purchase payments less any deduction we make for any premium or other tax
charge.
JOINT OWNER
The person named as the joint owner, who shares ownership rights with the owner
as defined in the contract. A joint owner may be the owner's spouse, but need
not be.
MARKET VALUE ADJUSTMENT OPTION
Under both the Contract With Credit and the Contract Without Credit, an
investment option that offers guarantee periods from one to ten years in length,
and pays a fixed rate of interest with respect to each guarantee period. We
impose a market value adjustment on withdrawals or transfers that you make from
this option prior to the end of a guarantee period.
NET PURCHASE PAYMENTS
Your total purchase payments less any withdrawals you have made.
PRUDENTIAL ANNUITY SERVICE CENTER
For general correspondence: P.O. Box 7960, Philadelphia, PA 19101. For express
overnight mail: 2101 Welsh Road, Dresher, PA 19025. The telephone number is
888-PRU-2888. Prudential's Web site is www.prudential.com.
PURCHASE PAYMENTS
The amount of money you pay us to purchase the contract. With some restrictions,
you can make additional purchase payments at any time during the accumulation
phase.
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STRATEGIC PARTNERS PLUS PROSPECTUS SUMMARY
SEPARATE ACCOUNT
We hold your purchase payments allocated to the variable investment options in a
separate account called the Pruco Life Flexible Premium Variable Annuity
Account. The separate account is set apart from all of the general assets of
Pruco Life.
STATEMENT OF ADDITIONAL INFORMATION
A document containing certain additional information about the Strategic
Partners Plus variable annuity. We have filed the Statement of Additional
Information with the Securities and Exchange Commission and it is legally a part
of this prospectus. To learn how to obtain a copy of the Statement of Additional
Information, see the front cover of this prospectus.
TAX DEFERRAL
This is a way to increase your assets without currently being taxed. Generally,
you do not pay taxes on your contract earnings until you take money out of your
contract. You should be aware that tax favored plans (such as IRAs) already
provide tax deferral regardless of whether they invest in annuity contracts. See
"What Are the Tax Considerations Associated with the Strategic Partners Plus
Contract," on page 45.
VARIABLE INVESTMENT OPTION
When you choose a variable investment option, we purchase shares of the mutual
fund which are held as an investment for that option. We hold these shares in
the separate account. The division of the separate account of Pruco Life that
invests in a particular mutual fund is referred to in your contract as a
subaccount.
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SUMMARY FOR SECTIONS 1-9
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FOR A MORE COMPLETE DISCUSSION OF THE FOLLOWING TOPICS, SEE THE CORRESPONDING
SECTION IN PART II OF THE PROSPECTUS.
SECTION 1
WHAT IS THE STRATEGIC PARTNERS PLUS VARIABLE ANNUITY?
The Strategic Partners Plus variable annuity is a contract between you, the
owner, and us, the insurance company, Pruco Life Insurance Company (Pruco Life,
we or us). The contract allows you to invest on a tax-deferred basis in one or
more of 40 variable investment options, two fixed interest rate options, and the
market value adjustment option. The contract is intended for retirement savings
or other long-term investment purposes and provides for a death benefit.
There are two basic versions of the Strategic Partners Plus variable annuity.
Contract With Credit.
- - provides for a bonus credit that we add to each purchase payment that you
make,
- - has higher withdrawal charges and insurance and administrative costs than the
Contract Without Credit,
- - may provide lower interest rates for fixed and market value adjustment
options than the Contract Without Credit.
Contract Without Credit.
- - does not provide a credit,
- - has lower withdrawal charges and insurance and administrative costs than the
Contract With Credit.
- - may provide higher interest rates for fixed and market value adjustment
options than the Contract With Credit.
The variable investment options available under the contract offer the
opportunity for a favorable return. However, this is NOT guaranteed. It is
possible, due to market changes, that your investments may decrease in value.
The fixed interest rate options offer a guaranteed interest rate. While your
money is allocated to one of these options, your principal amount will not
decrease and we guarantee that your money will earn at least a minimum interest
rate annually. Under the market value adjustment option, while your money
remains in the contract for the full guarantee period, your principal amount is
guaranteed and the interest amount that your money will earn is guaranteed by us
to always be at least 3%.
Payments allocated to the fixed interest rate options become part of Pruco
Life's general assets. Payments allocated to the market value adjustment option
are held as a separate pool of assets, but the income, gains or losses
experienced by these assets are not directly credited or charged against the
contracts. As a result, the strength of our guarantees under these options is
based on the overall financial strength of Pruco Life.
You can invest your money in any or all of the variable investment options,
the fixed interest rate options and one or more guarantee periods available
under the market value adjustment option. You may make up to 12 free transfers
each contract year among the variable investment options. Certain restrictions
apply to transfers involving the fixed interest rate options.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase.
- - During the accumulation phase, any earnings grow on a tax-deferred basis and
are generally only taxed as income when you make a withdrawal.
- - The income phase starts when you begin receiving regular payments from your
contract.
The amount of money you are able to accumulate in your contract during the
accumulation phase will help determine the amount you will receive during the
income phase. Other factors will affect the amount of your payments, such as
age, gender, and the payout option you select.
The contract offers a choice of income and death benefit options, which may
also be available to you.
There are certain state variations to this contract that are referred to in
this prospectus. Please see the SAI and your contract for further information on
these and other variations.
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STRATEGIC PARTNERS PLUS PROSPECTUS SUMMARY
If you change your mind about owning Strategic Partners Plus, you may cancel
your contract within 10 days after receiving it (or whatever period is required
under applicable state law). We call this the "Free Look" period.
SECTION 2
WHAT INVESTMENT OPTIONS CAN I CHOOSE?
You can invest your money in any or all of the following variable investment
options:
The Prudential Series Fund, Inc.
Jennison Portfolio (domestic equity)
Prudential Equity Portfolio
Prudential Global Portfolio
Prudential Money Market Portfolio
Prudential Stock Index Portfolio
Prudential Value Portfolio (domestic equity)
SP Aggressive Growth Asset Allocation Portfolio
SP AIM Aggressive Growth Portfolio
SP AIM Core Equity Portfolio
SP Alliance Large Cap Growth Portfolio
SP Alliance Technology Portfolio
SP Balanced Asset Allocation Portfolio
SP Conservative Asset Allocation Portfolio
SP Davis Value Portfolio
SP Deutsche International Equity Portfolio
SP Fundamental Value Portfolio
SP Growth Asset Allocation Portfolio
SP INVESCO Small Company Growth Portfolio
SP International Value Portfolio
SP Jennison International Growth Portfolio
SP Large Cap Growth Portfolio
SP Large Cap Value Portfolio
SP MFS Capital Opportunities Portfolio (domestic and foreign equity)
SP Mid Cap Growth Portfolio
(formerly SP MFS Mid-Cap Growth Portfolio)
SP Mid Cap Value Portfolio
SP PIMCO High Yield Portfolio
SP PIMCO Total Return Portfolio
SP Prudential U.S. Emerging Growth Portfolio
SP Small/Mid Cap Value Portfolio
SP Small Cap Value Portfolio
SP Strategic Partners Focused Growth Portfolio
Evergreen Variable Annuity Trust
Evergreen VA Blue Chip Fund
Evergreen VA Capital Growth Fund
Evergreen VA Foundation Fund
(domestic balance/equity and fixed income)
Evergreen VA Global Leaders
(international and global growth/equity)
Evergreen VA Growth Fund
Evergreen VA Masters Fund
(domestic growth/all cap/equity)
Evergreen VA Omega Fund
(domestic growth/all cap/equity)
Evergreen VA Small Cap Value Fund
Janus Aspen Series
Growth Portfolio -- Service Shares
Depending upon market conditions, you may earn or lose money in any of these
options. The value of your contract will fluctuate depending upon the
performance of the mutual fund portfolios used by the variable investment
options that you choose. Performance information for the variable investment
options appears in the Statement of Additional Information (SAI). Past
performance is not a guarantee of future results.
Two guaranteed fixed interest rate options are also available:
- - The one-year fixed interest rate option offers a base interest rate that is
guaranteed by us for one year, and will always be at least between 1.5% to 3%
per year depending on your state's applicable law. We may also offer a higher
interest rate on each purchase payment allocated to this option for the first
year after the payment.
- - The dollar cost averaging fixed rate option offers an interest rate that is
guaranteed by us for a selected period during which we make periodic
transfers from this option to the variable investment options you select or
to the one-year fixed interest rate option. We guarantee that the interest
rate for the dollar cost averaging fixed rate option will always be at least
3% per year.
You may also invest your money in a market value adjustment option.
You can allocate purchase payments or transfer contract value to one or more
guarantee periods
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SUMMARY FOR SECTIONS 1-9 CONTINUED
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STRATEGIC PARTNERS PLUS PROSPECTUS SUMMARY
available under the market value adjustment option. Available guarantee periods
will include one or more of the following: of 1 year (currently available only
as a renewal option), 2 years, 3 years, 4 years, 5 years, 6 years, 7 years, 8
years, 9 years and 10 years in length. Allocations or transfers must be at least
$1,000. This option is not available for contracts issued in Maryland, Oregon
and Washington.
SECTION 3
WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE? (ANNUITIZATION)
If you want to receive regular income from your annuity, you can choose one of
several options, including guaranteed payments for the annuitant's lifetime.
Generally, once you begin receiving regular payments, you cannot change your
payment plan.
For an additional fee, you may also choose, if it is available under your
contract, the guaranteed minimum income benefit and the income appreciator
benefit. The guaranteed minimum income benefit guarantees that once the income
period begins, your income payments will be no less than a value calculated by a
certain "GMIB protected value" applied to the GMIB guaranteed annuity purchase
rates. The income appreciator benefit may provide an additional income amount
during the accumulation phase or upon annuitization. See "What Kind Of Payments
Will I Receive During the Income Phase" on page 33.
SECTION 4
WHAT IS THE DEATH BENEFIT?
In general, if the sole owner or first-to-die of the owner or joint owner dies
before the income phase of the contract begins, the person(s) or entity that you
have chosen as your beneficiary will receive, at a minimum, the greater of (i)
the contract value, (ii) either the base death benefit or, for a higher
insurance and administrative cost, a potentially larger guaranteed minimum death
benefit. The base death benefit equals the total invested purchase payments
proportionally reduced by withdrawals. The guaranteed minimum death benefit is
equal to a "GMDB protected value" that depends upon which of the following
guaranteed minimum death benefit options you choose:
- - the highest value of the contract on any contract anniversary, which we call
the "GMDB step-up value;"
- - the total amount you invest increased by a guaranteed rate of return, which
we call the "GMDB roll-up value;" or
- - the greater of the GMDB step-up value or GMDB roll-up value.
If on the date we receive due proof of death, (1) there is only one owner of the
contract and there is only one beneficiary who is the owner's spouse; or (2)
there are an owner and joint owner of the contract, and the owner's spouse is
both the joint owner and the beneficiary under the contract and certain other
conditions are met, then in lieu of paying a death benefit, we will allow the
surviving spouse to continue the contract by exercising the Spousal Continuance
Benefit, which we describe on page 40.
Depending upon the terms of your contract, not all guaranteed death benefit
options may be available. See "What is the Death Benefit" on page 37.
For an additional fee, you may also choose, if it is available under your
contract, the earnings appreciator supplemental death benefit, which provides a
benefit payment upon the death of the sole owner or first to die of the owner or
joint owner during the accumulation period.
SECTION 5
HOW CAN I PURCHASE A STRATEGIC PARTNERS PLUS CONTRACT?
Under most circumstances, you can purchase this contract with a minimum initial
purchase payment of $10,000. In most states and subject to some conditions, you
can make additional purchase payments of $500 or more at any time during the
accumulation phase of the contract. Your representative can help you fill out
the proper forms. The Contract With Credit provides for the allocation of a
credit with each purchase payment.
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You may purchase this contract only if you are age 85 or younger. Certain age
limits apply to certain features and benefits described herein.
SECTION 6
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS PLUS CONTRACT?
The contract has insurance features and investment features, both of which have
related costs and charges.
- - Each year or upon full surrender we deduct a contract maintenance charge of
$35 if your contract value is less than $75,000 (or 2% of your contract
value, if that amount is less than $35). We do not impose the contract
maintenance charge if your contract value is $75,000 or more. We may impose
lesser charges in certain states.
- - For insurance and administrative costs, we also deduct a daily charge based
on the average daily value of all assets allocated to the variable investment
options, depending on the death benefit option that you choose. The daily
cost is equivalent to an annual charge, as follows:
-- 1.40% if you do not choose the guaranteed minimum death benefit,
-- 1.65% if you choose the roll-up or step-up guaranteed minimum death
benefit option, and
-- 1.75% if you choose the guaranteed minimum death benefit option of the
greater of the roll-up or step-up.
We impose an additional insurance and administrative cost of 0.10% annually
for the Contract With Credit.
- - We will deduct an additional charge if you choose the earnings appreciator
benefit supplemental death benefit. We deduct this charge from your contract
value on the contract anniversary and upon certain other events. The charge
for this benefit is based on an annual rate of 0.30% of your contract value.
- - We will deduct an additional charge if you choose the guaranteed minimum
income benefit. We deduct this annual charge from your contract value on the
contract anniversary and upon certain other events. The charge for this
benefit is equal to 0.45% of the GMIB protected value.
- - We will deduct an additional charge if you choose the income appreciator
benefit. We deduct this charge from your contract value on the contract
anniversary and upon certain other events. The charge for this benefit is
based on an annual rate of 0.25% of your contract value.
- - A few states and jurisdictions assess a premium tax when you begin receiving
regular income payments from your annuity. In those states, we will assess
the required premium tax charge, which can range up to 3.5% of your contract
value.
- - The mutual funds in which the variable investment options invest also incur
fees and expenses. For the year 2002, these daily charges ranged on an annual
basis from 0.39% to 1.30% of a fund's average daily net assets.
- - If you withdraw money (or you begin the income phase) less than seven
contract anniversaries after making a purchase payment, then you may have to
pay a withdrawal charge on all or part of the withdrawal. This charge ranges
from 1-7% for the Contract Without Credit and 5-8% for the Contract With
Credit (In certain states reduced withdrawal charges may apply for certain
ages. Your contract contains the applicable charges).
For more information, including details about other possible charges under
the contract, see "Summary of Contract Expenses" on page 15 and "What Are The
Expenses Associated With The Strategic Partners Plus Contract?" on page 45.
SECTION 7
HOW CAN I ACCESS MY MONEY?
You may withdraw money at any time during the accumulation phase. If you do so,
however, you may be subject to income tax and, if you make a withdrawal prior to
age 59 1/2, an additional tax penalty as well. For the Contract Without Credit,
if you withdraw money less than seven contract anniversaries after making a
purchase payment, we may impose a withdrawal
13
SUMMARY FOR SECTIONS 1-9 CONTINUED
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PART I
STRATEGIC PARTNERS PLUS PROSPECTUS SUMMARY
charge ranging from 1 to 7%. For the version of the Contract With Credit, we may
impose a withdrawal charge ranging from 5-8% (In certain states reduced
withdrawal charges may apply for certain ages. Your contract contains the
applicable charges). Under the market value adjustment option, you will be
subject to a market value adjustment if you make a withdrawal or transfer from
the option prior to the end of a guarantee period.
SECTION 8
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS PLUS
CONTRACT?
Your earnings are generally not taxed until you withdraw them. If you take money
out during the accumulation phase, the tax laws treat the withdrawal as first a
withdrawal of earnings, which are taxed as ordinary income. If you are younger
than age 59 1/2 when you take money out, you may be charged a 10% federal tax
penalty on the earnings in addition to ordinary taxation. A portion of the
payments you receive during the income phase is considered a return of your
original investment and therefore will not be taxable as income. Generally, all
amounts withdrawn from an Individual Retirement Annuity (IRA) contract
(excluding Roth IRAs) prior to age 59 1/2 are taxable and subject to the 10%
penalty.
SECTION 9
OTHER INFORMATION
This contract is issued by Pruco Life, a subsidiary of the Prudential Insurance
Company of America, and sold by registered representatives of affiliated and
unaffiliated broker/dealers.
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STRATEGIC PARTNERS PLUS PROSPECTUS SUMMARY
SUMMARY OF CONTRACT EXPENSES
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THE PURPOSE OF THIS SUMMARY IS TO HELP YOU TO UNDERSTAND THE COSTS AND EXPENSES
YOU WILL PAY FOR STRATEGIC PARTNERS PLUS. THE FOLLOWING TABLES DESCRIBE THE
MAXIMUM FEES AND EXPENSES THAT YOU WILL PAY WHEN BUYING, OWNING, AND
SURRENDERING THE CONTRACT. THE FIRST TABLE DESCRIBES THE FEES AND EXPENSES THAT
YOU WILL PAY AT THE TIME THAT YOU BUY THE CONTRACT, SURRENDER THE CONTRACT, OR
TRANSFER CASH VALUE BETWEEN INVESTMENT OPTIONS. STATE PREMIUM TAXES MAY ALSO BE
DEDUCTED.
For more detailed information, including additional information about current
and maximum charges, see "What Are The Expenses Associated With The Strategic
Partners Plus Contract?" on page 45. For more detailed expense information about
the mutual funds, please refer to the individual fund prospectuses, which you
will find attached at the back of this prospectus. Historical unit values appear
in the appendix to this prospectus.
CONTRACTOWNER TRANSACTION EXPENSES
1: Each contract year, you may withdraw a specified amount of your contract
value without incurring a withdrawal charge. We will waive the withdrawal fee if
we pay a death benefit or under certain other circumstances. See "Withdrawal
Charge" on page 47. In certain states reduced withdrawal charges may apply for
certain ages under the Contract with Credit. Your contract contains the
applicable charges.
2: Currently we charge $25 for each transfer after the twelfth in a contract
year. We can raise that charge up to a maximum of $30, as shown in the above
table, but have no current intention to do so. We will not charge you for
transfers made in connection with Dollar Cost Averaging and Auto-Rebalancing and
do not count them toward the limit of 12 free transfers per year.
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SUMMARY OF CONTRACT EXPENSES CONTINUED
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PART I
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The next table describes the fees and expenses you will pay
periodically during the time that you own the contract, not
including underlying mutual fund fees and expenses.
3: As shown in the table above, we have the right to assess a fee of up to $60
annually and at the time of full withdrawal. We currently assess a fee of $35
against contracts valued less than $75,000 (or 2% of contract value, if less).
4: We impose this additional charge of 0.10% on the Contract With Credit,
irrespective of which death benefit option you choose.
5: We impose this charge only if you choose the guaranteed minimum income
benefit. See "Guaranteed Minimum Income Benefit," on page 34. This charge is
equal to 0.45% of the "GMIB protected value, which is calculated daily and
generally is equal to the GMIB roll-up value. Subject to certain age
restrictions, the roll-up value is the total of all invested purchase payments
compounded daily at an effective annual rate of 5.0%, subject to a 200% cap.
Withdrawals reduce both the roll-up value and the cap. The reduction is equal to
the amount of the withdrawal for the first 5% of the roll-up value, calculated
as of the latest contract anniversary (or contract date). The amount of the
withdrawal in excess of 5% of the roll-up value further reduces the roll-up
value and cap proportionally to the additional reduction in contract value after
the first five percent withdrawal occurs. See "Effect of Withdrawals" on page
35. We assess this fee each contract anniversary and when you begin the income
phase of your contract. We also assess this fee if you make a full withdrawal,
but prorate the fee to reflect a partial rather than full year. If you make a
partial withdrawal, we will assess the prorated fee if the remaining contract
value after the withdrawal would be less than the amount of the prorated fee;
otherwise we will not assess the fee at that time. In the future, we may make
other guaranteed minimum income benefit options available. Those other options
may involve different fees.
6: We impose this charge only if you choose the income appreciator benefit. The
charge for this benefit is based on an annual rate of 0.25% of your contract
value. The income appreciator benefit charge is calculated: on each contract
anniversary, on the annuity date, upon the death of the sole owner or first to
die of the owner or joint owner prior to the annuity date, upon a full or
partial withdrawal, and upon a subsequent purchase payment. The fee is based on
the contract value at the time of the calculation, and is prorated based on the
portion of the contract year since the date that the charge was last calculated.
Although it may be calculated more often, it is deducted only: on each contract
anniversary, on the annuity date, upon the death of the sole owner or first to
die of the owner or joint owners prior to the annuity date, upon a full
withdrawal, and upon a partial withdrawal if the contract value remaining after
such partial withdrawal is not enough to cover the then-applicable charge. We
reserve the right to calculate and deduct the fee more frequently than annually,
such as quarterly.
7: We impose this charge only if you choose the earnings appreciator benefit.
The charge for this benefit is based on an annual rate of 0.30% of your contract
value. Although the charge may be calculated more often, it is deducted only: on
each contract anniversary, on the annuity date, upon the death of the sole owner
or first to die of the owner or joint owner prior to the annuity date, upon a
full withdrawal, and upon a partial withdrawal if the contract value remaining
after such partial withdrawal is not enough to cover the then-applicable
earnings appreciator charge. We reserve the right to calculate and deduct the
fee more frequently than annually, such as quarterly.
16
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PART I
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The next item shows the minimum and maximum total operating expenses charged by
the underlying mutual funds that you may pay periodically during the time that
you own the contract. More detail concerning each underlying mutual fund's fees
and expenses is contained in the prospectus for each underlying mutual fund. The
minimum and maximum total operating expenses depicted below are based on
historical fund expenses for the year ended December 31, 2002. Fund expenses are
not fixed or guaranteed by the Strategic Partners Plus contract, and may vary
from year to year.
TOTAL ANNUAL MUTUAL FUND OPERATING EXPENSES (expenses that are deducted from
underlying mutual fund assets, including management fees, distribution and/or
service (12b-1) fees, and other expenses)
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PART I
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EXPENSE EXAMPLES
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THESE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
CONTRACT WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITY CONTRACTS. THESE
COSTS INCLUDE CONTRACT OWNER TRANSACTION EXPENSES, CONTRACT FEES, SEPARATE
ACCOUNT ANNUAL EXPENSES, AND UNDERLYING MUTUAL FUND FEES AND EXPENSES.
THE EXAMPLES ASSUME THAT YOU INVEST $10,000 IN THE CONTRACT FOR THE TIME PERIODS
INDICATED. THE EXAMPLES ALSO ASSUME THAT YOUR INVESTMENT HAS A 5% RETURN EACH
YEAR AND ASSUMES THE MAXIMUM FEES AND EXPENSES OF ANY OF THE MUTUAL FUNDS.
ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS,
YOUR COSTS WOULD BE AS INDICATED IN THE TABLES THAT FOLLOW.
EXAMPLE 1A: Contract Without Credit: Base Death Benefit, and You Withdraw All
Your Assets
This example assumes that:
- - You invest $10,000 in the Contract Without Credit;
- - You do not choose a Guaranteed Minimum Death Benefit, Earnings Appreciator
Benefit, Guaranteed Minimum Income Benefit, and Income Appreciator Benefit;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - The investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year; and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 1B: Contract Without Credit: Base Death Benefit, and You Do Not Withdraw
Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
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EXAMPLE 2A: Contract Without Credit: Greater of Roll-up or Step-up Guaranteed
Minimum Death Benefit; Guaranteed Minimum Income Benefit; Earnings Appreciator
Benefit; Income Appreciator Benefit; and You Withdraw All Your Assets
This example assumes that:
- - You invest $10,000 in the Contract Without Credit;
- - You choose a Guaranteed Minimum Death Benefit that provides the greater of
the step-up or roll-up death benefit;
- - You choose the Guaranteed Minimum Income Benefit;
- - You choose the Earnings Appreciator Benefit;
- - You choose the Income Appreciator Benefit;
- - You allocate all of your assets to only one of the variable investment
options having the maximum total operating expenses;
- - The investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year; and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 2B: Contract Without Credit: Greater of Roll-up or Step-up Guaranteed
Minimum Death Benefit; Guaranteed Minimum Income Benefit; Earnings Appreciator
Benefit; Income Appreciator Benefit and You Do Not Withdraw Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
EXAMPLE 3A: Contract With Credit: Base Death Benefit, and You Withdraw All Your
Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you invest in the version of the Contract With Credit under which
bonus credits are generally not recapturable after expiration of the free look
period.
EXAMPLE 3B: Contract With Credit: Base Death Benefit, and You Do Not Withdraw
Your Assets
This example makes exactly the same assumptions as Example 1b except that it
assumes that you invest in the version of the Contract With Credit under which
bonus credits are generally not recapturable after expiration of the free look
period.
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EXPENSE EXAMPLES CONTINUED
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EXAMPLE 4A: Contract With Credit: Greater of Roll-up or Step-up Guaranteed
Minimum Death Benefit; Guaranteed Minimum Income Benefit; Earnings Appreciator
Benefit, Income Appreciator Benefit, and You Withdraw All Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you invest in the version of the Contract With Credit under which
bonus credits are generally not recapturable after expiration of the free look
period.
EXAMPLE 4B: Contract With Credit: Greater of Roll-up or Step-up Guaranteed
Minimum Death Benefit; Guaranteed Minimum Income Benefit; Earnings Appreciator
Benefit, Income Appreciator Benefit, and You Do Not Withdraw Your Assets
This example makes exactly the same assumptions as Example 2b except that it
assumes that you invest in the version of the Contract With Credit under which
bonus credits are generally not recapturable after expiration of the free look
period.
In these expense examples, we set out projected expenses that are based on
versions of the contract that carry the highest and lowest overall charges. We
do not depict projected expenses for every possible combination of contract
charges. The actual expenses under the contract with the insurance features and
underlying funds that you have selected, and the purchase payments that you have
made, may vary from the figures we depict here.
NOTES FOR EXPENSE EXAMPLES:
THESE EXAMPLES DO NOT SHOW PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE HIGHER OR LOWER. THESE
EXAMPLES DO NOT DEPICT EVERY
POSSIBLE COMBINATION OF CHARGES
UNDER THE CONTRACTS.
The values shown in the 10 year
column are the same for Example 1a
and Example 1b, the same for
Example 2a and 2b, the same for
Example 3a and 3b, and the same for
Example 4a and 4b. This is because
if 10 years have elapsed since your
last purchase payment, we would no
longer deduct withdrawal charges
when you make a withdrawal or begin
the income phase of your contract.
Examples 3a, 3b, 4a and 4b reflect
the maximum withdrawal charges, in
certain states reduced withdrawal
charges may apply for certain ages.
The examples use an average
contract maintenance charge, which
we calculated based on our estimate
of the total contract fees we
expect to collect. Based on these
estimates, the contract maintenance
charge is included as an annual
charge of 0.05% of contract value.
Your actual fees will vary based on
the amount of your contract and
your specific allocation among the
investment options.
A table of accumulation unit values
of interests in each variable
investment option appears in the
Appendix.
The examples do not reflect premium
taxes. We may apply a charge for
premium taxes depending on what
state you live in.
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PART I
STRATEGIC PARTNERS PLUS PROSPECTUS SUMMARY
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PART II SECTIONS 1-9
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STRATEGIC PARTNERS PLUS PROSPECTUS
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STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
1:
WHAT IS THE STRATEGIC PARTNERS PLUS
VARIABLE ANNUITY?
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THE STRATEGIC PARTNERS PLUS VARIABLE ANNUITY IS A CONTRACT BETWEEN YOU, THE
OWNER, AND US, PRUCO LIFE INSURANCE COMPANY (PRUCO LIFE, WE OR US).
Under our contract, in exchange for your payment to us, we promise to pay you a
guaranteed income stream that can begin any time on or after the third contract
anniversary. Your annuity is in the accumulation phase until you decide to begin
receiving annuity payments. The date you begin receiving annuity payments is the
annuity date. On the annuity date, your contract switches to the income phase.
This annuity contract benefits from tax deferral. Tax deferral means that you
are not taxed on earnings or appreciation on the assets in your contract until
you withdraw money from your contract. (If you hold the annuity contract in a
tax-favored plan such as an IRA, that plan generally provides tax deferral even
without investing in an annuity contract.)
There are two basic versions of Strategic Partners Plus variable annuity.
Contract With Credit.
- - provides for a bonus credit that we add to each purchase payment that you
make,
- - has higher withdrawal charges and insurance and administrative costs than the
Contract Without Credit,
- - may provide a lower interest rate for fixed and market value adjustment
options than the Contract With Credit.
Contract Without Credit.
- - does not provide a credit,
- - has lower withdrawal charges and insurance and administrative costs than the
Contract With Credit,
- - may provide a higher interest rate for fixed and market value adjustment
options than the Contract With Credit.
Unless we state otherwise, when we use the word contract, it applies to both
versions.
Because of the higher withdrawal charges, if you choose the Contract With
Credit and you withdraw a purchase payment, depending upon the performance of
the investment options you choose, you may be worse off than if you had chosen
the Contract Without Credit. We do not recommend purchase of either version of
Strategic Partners Plus if you anticipate having to withdraw a significant
amount of your purchase payments within a few years of making those purchase
payments.
Strategic Partners Plus is a variable annuity contract. This means that
during the accumulation phase, you can allocate your assets among 40 variable
investment options, two guaranteed fixed interest rate options and a market
value adjustment option. If you select variable investment options, the amount
of money you are able to accumulate in your contract during the accumulation
phase depends upon the investment performance of the mutual funds associated
with those variable investment options. Because the mutual funds' portfolios
fluctuate in value depending upon market conditions, your contract value can
either increase or decrease. This is important, since the amount of the annuity
payments you receive during the income phase depends upon the value of your
contract at the time you begin receiving payments.
As mentioned above, two guaranteed fixed interest rate options are available:
- - The one-year fixed interest rate option offers a base interest rate that is
guaranteed by us for one year and will always be at least a minimum interest
rate per year between 1.5% to 3% depending on your state's applicable law. We
may also offer a higher interest rate on each purchase payment allocated to
this option for the first year after the payment.
- - The dollar cost averaging fixed rate option offers an interest rate that is
guaranteed by us for a selected period during which periodic transfers are
made to selected variable investment options and/or to the one-year fixed
interest rate option. We guarantee your money will earn at least 3% while it
is allocated to this option.
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PART II
STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
Additionally, you may allocate purchase payments or transfer contract value
to the market value adjustment option. Under this option, we will offer one or
more of the following guarantee periods: 1 year (currently available only as a
renewal option), 2 years, 3 years, 4 years, 5 years, 6 years, 7 years, 8 years,
9 years, and 10 years in length. However, we will not allow purchase payments or
transfers into a guarantee period unless that guarantee period offers 3% annual
interest or greater.
As the owner of the contract, you have all of the decision-making rights
under the contract. You will also be the annuitant unless you designate someone
else. The annuitant is the person whose life is used to determine how much and
how long the annuity payments will continue once the annuity phase begins. On or
after the annuity date, the annuitant may not be changed.
The beneficiary is the person(s) or entity you designate to receive any death
benefit. You may change the beneficiary any time prior to the annuity date by
making a written request to us. Your request becomes effective when we approve
it.
There are certain state variations to this contract that are referred to in
this prospectus. Please see the SAI and your contract for further information on
these and other variations.
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"
If you change your mind about owning Strategic Partners Plus, you may cancel
your contract within 10 days after receiving it (or whatever period is required
by applicable state law). You can request a refund by returning the contract
either to the representative who sold it to you, or to the Prudential Annuity
Service Center at the address shown on the first page of this prospectus. You
will receive, depending on applicable state law:
- - Your full purchase payment, less any applicable federal and state income tax
withholding; or
- - The amount your contract is worth as of the day we receive your request, less
any applicable federal and state income tax withholding. This amount may be
more or less than your original payment. If you have purchased the Contract
With Credit, we will deduct any credit we had added to your contract value.
We will not, unless and until we obtain SEC exemptive relief, recoup for our
own assets the full amount of the 6% bonus credit applicable to purchase
payments of $1 million or greater that we had given to you. Rather, we will
recoup an amount equal to the value of the credit as of the business day on
which we receive your request, less any charges attributable to that credit.
We reserve the right to recapture the entire amount of the credit upon
obtaining appropriate approval of the SEC with regard to that bonus credit.
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PART II
STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
2:
WHAT INVESTMENT OPTIONS
CAN I CHOOSE?
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THE CONTRACT GIVES YOU THE CHOICE OF ALLOCATING YOUR PURCHASE PAYMENTS TO ANY
ONE OR MORE OF 40 VARIABLE INVESTMENT OPTIONS, 2 FIXED INTEREST RATE OPTIONS,
AND A MARKET VALUE ADJUSTMENT OPTION.
The 40 variable investment options invest in mutual funds managed by leading
investment advisers. Separate prospectuses for these funds are attached to this
prospectus. You should read a mutual fund's prospectus before you decide to
allocate your assets to the variable investment option using that fund.
VARIABLE INVESTMENT OPTIONS
Listed below are the mutual funds in which the variable investment options
invest. Each variable investment option has a separate investment objective.
The Prudential Series Fund, Inc.
- - Jennison Portfolio (domestic equity)
- - Prudential Equity Portfolio
- - Prudential Global Portfolio
- - Prudential Money Market Portfolio
- - Prudential Stock Index Portfolio
- - Prudential Value Portfolio (domestic equity)
- - SP Aggressive Growth Asset Allocation Portfolio
- - SP AIM Aggressive Growth Portfolio
- - SP AIM Core Equity Portfolio
- - SP Alliance Large Cap Growth Portfolio
- - SP Alliance Technology Portfolio
- - SP Balanced Asset Allocation Portfolio
- - SP Conservative Asset Allocation Portfolio
- - SP Davis Value Portfolio
- - SP Deutsche International Equity Portfolio
- - SP Fundamental Value Portfolio
- - SP Growth Asset Allocation Portfolio
- - SP International Value Portfolio
- - SP INVESCO Small Company Growth Portfolio
- - SP Jennison International Growth Portfolio
- - SP Large Cap Growth Portfolio
- - SP Large Cap Value Portfolio
- - SP MFS Capital Opportunities Portfolio
(domestic and foreign equity)
- - SP Mid Cap Growth Portfolio (formerly SP MFS Mid-Cap Growth)
- - SP Mid Cap Value Portfolio
- - SP PIMCO High Yield Portfolio
- - SP PIMCO Total Return Portfolio
- - SP Prudential U.S. Emerging Growth Portfolio
- - SP Small/Mid Cap Value Portfolio
- - SP Small Cap Value Portfolio
- - SP Strategic Partners Focused Growth Portfolio
The Jennison Portfolio, Prudential Equity Portfolio, Prudential Global
Portfolio, Prudential Money Market Portfolio, Prudential Stock Index Portfolio
and Prudential Value Portfolio, and each "SP" Portfolio of the Prudential Series
Fund, are managed by an indirect wholly-owned subsidiary of Prudential
Financial, Inc. called Prudential Investments LLC (PI). In addition, the
portfolios listed below also have subadvisers, which are listed below and which
have day-to-day responsibility for managing the portfolio, subject to the
oversight of PI using a manager-of-managers approach.
Prudential Money Market Portfolio and Prudential Stock Index Portfolio:
Prudential Investment Management, Inc.
Jennison Portfolio, Prudential Global Portfolio, SP Jennison
International Growth Portfolio, SP Prudential U.S. Emerging Growth
Portfolio and Prudential Value Portfolio: Jennison Associates LLC
Prudential Equity Portfolio: GE Asset Management, Incorporated, Jennison
Associates LLC, and Salomon Brothers Asset Management Inc.
SP Strategic Partners Focused Growth Portfolio: Jennison Associates LLC
and Alliance Capital Management, L.P.
SP AIM Aggressive Growth Portfolio and SP AIM Core Equity Portfolio: A I
M Capital Management, Inc.
SP Alliance Large Cap Growth Portfolio and SP Alliance Technology
Portfolio: Alliance Capital Management L.P.
SP Davis Value Portfolio: Davis Advisors
SP Deutsche International Equity Portfolio: Deutsche Asset Management
Investment Services Limited, a wholly-owned subsidiary of Deutsche Bank
AG
SP Fundamental Value Portfolio: Wellington Management Company, LLP
SP INVESCO Small Company Growth Portfolio: INVESCO Funds Group, Inc.
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PART II
STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
SP International Value Portfolio: Bank of Ireland Asset Management
(U.S.) Limited
SP Large Cap Growth Portfolio: Furman Selz Capital Management LLC
SP Large Cap Value Portfolio and SP Small/Mid Cap Value Portfolio:
Fidelity Management and Research Company
SP MFS Capital Opportunities Portfolio: Massachusetts Financial Services
Company
SP Mid Cap Growth Portfolio (formerly SP MFS Mid-Cap Growth Portfolio):
Calamos Asset Management, Inc.
SP Mid Cap Value Portfolio: Lord, Abbett & Co. LLC
SP PIMCO High Yield Portfolio and SP PIMCO Total Return Portfolio:
Pacific Investment Management Company
SP Small Cap Value Portfolio: EARNEST Partners LLC and National City
Investment Management Company
Evergreen Variable Annuity Trust
- - Evergreen VA Blue Chip Fund
- - Evergreen VA Capital Growth Fund
- - Evergreen VA Foundation Fund (domestic balanced/ equity and fixed income)
- - Evergreen VA Global Leaders Fund (international & global growth/equity)
- - Evergreen VA Growth Fund
- - Evergreen VA Masters Fund (domestic growth/all cap/equity)
- - Evergreen VA Omega Fund (domestic growth/all cap/equity)
- - Evergreen VA Small Cap Value Fund
Evergreen Investment Management Company, LLC serves as investment adviser to the
above-listed Evergreen Variable Annuity Trust Funds.
Janus Aspen Series
- - Growth Portfolio--Service Shares
Janus Capital Management LLC serves as investment adviser to the Growth
Portfolio--Service Shares of Janus Aspen Series.
A fund or portfolio may have a similar name or an investment objective and
investment policies closely resembling those of a mutual fund managed by the
same investment adviser that is sold directly to individual investors. Despite
such similarities, there can be no assurance that the investment performance of
any such fund or portfolio will resemble that of its retail fund counterpart.
An affiliate of each of the funds may compensate Pruco Life based upon an
annual percentage of the average assets held in the fund by Pruco Life under the
contracts. These percentages may vary by fund and/or portfolio, and reflect
administrative and other services we provide.
FIXED INTEREST RATE OPTIONS
We offer two fixed interest rate options:
- - a one-year fixed interest rate option, and
- - a dollar cost averaging fixed rate option ("DCA Fixed Rate Option").
When you select one of these options, your payment will earn interest at the
established rate for the applicable interest rate period. A new interest rate
period is established every time you allocate or transfer money into a fixed
interest rate option. (You may not transfer amounts from other investment
options into the DCA Fixed Rate Option.) You may have money allocated in more
than one interest rate period at the same time. This could result in your money
earning interest at different rates and each interest rate period maturing at a
different time. While these interest rates may change from time to time they
will never be less than a certain minimum. We may offer lower interest rates for
Contracts With Credit than for Contracts Without Credit.
ONE-YEAR FIXED INTEREST RATE OPTION
We set a one-year base guaranteed annual interest rate for the one-year fixed
interest rate option. Additionally, we may provide a higher interest rate on
each purchase payment allocated to this option for the first year after the
payment. This higher interest rate will not apply to amounts transferred from
other investment options within the contract or amounts remaining in this option
for more than one year. For the one-year fixed rate option, the minimum rate is
between 1.5% to 3%, depending on your state's applicable law.
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WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
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PART II
STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
DOLLAR COST AVERAGING FIXED RATE OPTION
You may allocate all or part of any purchase payment to the DCA Fixed Rate
Option. For this option, the interest rate is guaranteed for the applicable
period of time for which transfers are made. The minimum interest rate for this
option is 3%. Under this option, you automatically transfer amounts over a
stated period (currently, six or twelve months) from the DCA Fixed Rate Option
to the variable investment options and/or to the one-year fixed interest rate
option, as you select. We will invest the assets you allocate to the DCA Fixed
Rate Option in our general account until they are transferred. You may not
transfer from other investment options to the DCA Fixed Rate Option.
If you choose to allocate all or part of a purchase payment to the DCA Fixed
Rate Option, the minimum amount of the purchase payment you may allocate is
$2,000. The first periodic transfer will occur on the date you allocate your
purchase payment to the DCA Fixed Rate Option. Subsequent transfers will occur
on the monthly anniversary of the first transfer. Currently, you may choose to
have the purchase payments allocated to the DCA Fixed Rate Option transferred to
the other options in either six or twelve monthly installments, and you may not
change that number of monthly installments after you have chosen the DCA Fixed
Rate Option. You may allocate to both the six-month and twelve-month options.
(In the future, we may make available other numbers of transfers and other
transfer schedules--for example, quarterly as well as monthly.) If you choose a
six-payment transfer schedule, each transfer generally will equal 1/6th of the
amount you allocated to the DCA Fixed Rate Option, and if you choose a
twelve-payment transfer schedule, each transfer generally will equal 1/12th of
the amount you allocated to the DCA Fixed Rate Option. In either case, the final
transfer amount generally will also include the credited interest. You may
change at any time the options into which the DCA Fixed Rate Option assets are
transferred. You may make a one time transfer of the remaining value out of your
DCA Fixed Rate Option, if you so choose. Transfers from the DCA Fixed Rate
Option do not count toward the maximum number of free transfers allowed under
the contract.
If you make a withdrawal or have a fee assessed from your contract, and all
or part of that withdrawal or fee comes out of the DCA Fixed Rate Option, we
will recalculate the periodic transfer amount to reflect the change. This
recalculation may include some or all of the interest credited to the date of
the next scheduled transfer. If a withdrawal or fee assessment reduces the
monthly transfer amount below $100, we will transfer the remaining balance in
the DCA Fixed Rate Option on the next scheduled transfer date.
By investing amounts on a regular basis instead of investing the total amount
at one time, the DCA Fixed Rate Option may decrease the effect of market
fluctuation on the investment of your purchase payment. Of course, dollar cost
averaging cannot ensure a profit or protect against loss in a declining market.
MARKET VALUE ADJUSTMENT OPTION
Under the market value adjustment option, we have the right to offer one or more
of several guarantee periods. These guarantee periods are 1 year (currently
available only as a renewal option), 2 years, 3 years, 4 years, 5 years, 6
years, 7 years, 8 years, 9 years, or 10 years in length.
This option is not available for contracts issued in Maryland, Oregon and
Washington.
We declare the interest rate for each available guarantee period
periodically, but we guarantee that we will declare no less than 3% interest
with respect to any guarantee period. You will earn interest on your invested
purchase payment at the rate that we have declared for the guarantee period you
have chosen. You must invest at least $1,000.
We may offer lower interest rates for Contracts With Credit than for
Contracts Without Credit.
We express interest rates as annual rates, although we credit interest within
each guarantee period on a daily basis. The daily interest that we credit is
equal to the pro rated portion of the interest that would be earned on an annual
basis. We credit interest from the business day on which your purchase payment
is received in good order at the Prudential Annuity Service Center until the
earliest to occur of any of the following events: (a) full surrender of the
Contract, (b) commencement of annuity payments or
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PART II
STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
settlement, (c) cessation of the guarantee period, (d) withdrawal or transfer
the value of the guarantee period, or (e) death of the first to die of the owner
and joint owner (or annuitant, for entity-owned contracts) unless the contract
is continued under the spousal convenience provision.
During the 30 day period immediately following the end of a guarantee period,
we allow you to do any of the following, without the imposition of the market
value adjustment:
(a) withdrawal or transfer the value of the guarantee period,
(b) allocate the value in the guarantee period to another guarantee period or
other investment option (provided that the new guarantee period ends prior
to the annuity date, if earlier). You will receive the interest rate
applicable on the date we receive your instruction, or
(c) apply the value in the guarantee period to the annuity or settlement option
of your choice.
If we do not receive instructions from you concerning the disposition of the
contract value in your maturing guarantee period, we will reinvest the contract
value in the Prudential Money Market Portfolio investment option.
During the 30 day period immediately following the end of the guarantee
period, or until you elect to do either a, b or c delineated immediately above,
you will receive the current interest rate applicable to the guarantee period
having the same duration as the guarantee period that just matured, which is
offered on the day immediately following the end of the matured guarantee
period. However, if at that time we do not offer a guarantee period with the
same duration as that which matured, you will then receive the current interest
rate applicable to the shortest guarantee period then offered.
Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed and
the interest amount that your money will earn is guaranteed by us to always be
at least 3%.
Payments allocated to the fixed interest rate options become part of Pruco
Life's general assets. Payments allocated to the market value adjustment option
are held as a separate pool of assets, but the income, gains or losses
experienced by these assets are not directly credited or charged against the
contracts. As a result, the strength of our guarantees under these options are
based on the overall financial strength of Pruco Life.
MARKET VALUE ADJUSTMENT
When you allocate a purchase payment or transfer contract value to a guarantee
period, we use that money to buy and sell securities and other instruments to
support our obligation to pay interest. Generally, we buy bonds for this
purpose. The duration of the bonds and other instruments that we buy with
respect to a particular guarantee period is influenced significantly by the
length of the guarantee period. Thus, for example, we typically would acquire
longer-duration bonds with respect to the 10 year guarantee period than we do
for the 3 year guarantee period. The value of these bonds is affected by changes
in interest rates, among other factors. The market value adjustment that we
assess against your contract value if you withdraw or transfer prior to the end
of a guarantee period involves our attributing to you a portion of our
investment experience on these bonds and other instruments. For example, if you
make a full withdrawal when interest rates have risen since the time of your
investment, the bonds and other investments in the guarantee period likely would
have decreased in value, meaning that we would impose a "negative" market value
adjustment on you (i.e., one that results in a reduction of the withdrawal
proceeds that you receive). For a partial withdrawal, we would deduct a negative
market value adjustment from your remaining contract value. Conversely, if
interest rates have decreased, the market value adjustment would be positive.
Other things you should know about the market value adjustment include the
following:
- - We determine the market value adjustment according to a mathematical formula,
which is set forth at the end of this prospectus under the heading
"Market-Value Adjustment Formula." In that section of the prospectus, we also
provide hypothetical examples of how the formula works.
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PART II
STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
- - In addition to imposing a market value adjustment on withdrawals, we also
will impose a market value adjustment on the contract value you apply to an
annuity or settlement option, unless you annuitize after the end of a
guarantee period. The laws of certain states may prohibit us from imposing a
market value adjustment on the annuity date.
YOU SHOULD REALIZE, HOWEVER, THAT APART FROM THE MARKET VALUE ADJUSTMENT, THE
VALUE OF THE BENEFITS UNDER YOUR CONTRACT DOES NOT DEPEND ON THE INVESTMENT
PERFORMANCE OF THE BONDS AND OTHER INSTRUMENTS THAT WE HOLD WITH RESPECT TO YOUR
GUARANTEE PERIOD. APART FROM THE EFFECT OF ANY MARKET VALUE ADJUSTMENT, WE DO
NOT PASS THROUGH TO YOU THE GAINS OR LOSSES ON THE BONDS AND OTHER INSTRUMENTS
THAT WE HOLD IN CONNECTION WITH A GUARANTEE PERIOD.
TRANSFERS AMONG OPTIONS
You can transfer money among the variable investment options and the one-year
fixed interest rate option. In addition, you can transfer contract value out of
a market value adjustment guarantee period into another market value adjustment
guarantee period, a variable investment option, or the one-year fixed interest
rate option, although a market value adjustment will apply to any transfer you
make prior to the end of a guarantee period. You may transfer contract value
into the market value adjustment option at any time, provided it is at least
$1,000.
You may make your transfer request by telephone, electronically, or otherwise
in paper form to the Prudential Annuity Service Center. You may make up to two
telephone and electronic transfer requests per month. You must make any
additional transfer requests during that month in writing with an original
signature. We have procedures in place to confirm that instructions received by
telephone or electronically are genuine. We will not be liable for following
telephone or electronic instructions that we reasonably believe to be genuine.
We require any transfer request that you submit by fax to be accompanied by a
confirming telephone call to the Prudential Annuity Service Center. Your
transfer request will take effect at the end of the business day on which we
receive it. Our business day generally closes at 4:00 p.m. Eastern time, and
requests received after that time will take effect at the end of the next
business day.
YOU CAN MAKE TRANSFERS OUT OF A FIXED INTEREST-RATE OPTION, OTHER THAN THE
DCA OPTION, ONLY DURING THE 30-DAY PERIOD FOLLOWING THE END OF THE ONE YEAR
INTEREST RATE PERIOD. TRANSFERS FROM THE DCA OPTION ARE MADE ON A PERIODIC BASIS
FOR THE PERIOD THAT YOU SELECT.
During the contract accumulation phase, you can make up to 12 transfers each
contract year without charge. We currently charge $25 for each transfer after
the twelfth in a contract year, and we have the right to increase this charge up
to $30. (Dollar Cost Averaging and Auto-Rebalancing transfers are always free,
and do not count toward the 12 free transfers per year.)
MARKET TIMING
THE CONTRACT WAS NOT DESIGNED FOR MARKET TIMING OR FOR PERSONS THAT MAKE
PROGRAMMED, LARGE, OR FREQUENT TRANSFERS. BECAUSE MARKET TIMING AND SIMILAR
TRADING PRACTICES GENERALLY ARE DISRUPTIVE TO THE SEPARATE ACCOUNT AND THE
UNDERLYING MUTUAL FUNDS, WE MONITOR CONTRACT TRANSACTIONS IN AN EFFORT TO
IDENTIFY SUCH TRADING PRACTICES. IF WE DETECT THOSE PRACTICES, WE RESERVE THE
RIGHT TO REJECT A PROPOSED TRANSACTION AND TO MODIFY THE CONTRACT'S TRANSFER
PROCEDURES. FOR EXAMPLE, WE MAY DECIDE NOT TO ACCEPT THE TRANSFER REQUESTS OF AN
AGENT ACTING UNDER A POWER OF ATTORNEY ON BEHALF OF MORE THAN ONE
CONTRACTHOLDER.
OTHER AVAILABLE FEATURES
DOLLAR COST AVERAGING
The dollar cost averaging (DCA) feature (which is distinct from the DCA Fixed
Rate Option) allows you to systematically transfer either a fixed dollar amount
or a percentage out of any variable investment option and into one or more other
variable investment options or the one-year fixed rate option. You can have
these automatic transfers occur monthly, quarterly, semiannually or annually. By
investing amounts on a regular basis instead of investing the total amount at
one time, dollar cost averaging may decrease the effect of market fluctuation on
the investment of your purchase payment. Of course, dollar cost averaging cannot
ensure a profit or protect against loss in a declining market.
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Each dollar cost averaging transfer must be at least $100. Transfers will be
made automatically on the schedule you choose until the entire amount you chose
to have transferred has been transferred or until you tell us to discontinue the
transfers. If the remaining amount to be transferred drops below $100, the
entire remaining balance will be transferred on the next transfer date. You can
allocate additional amounts to be transferred at any time.
Your transfers will occur on the last calendar day of each transfer period
you have selected, provided that the New York Stock Exchange is open on that
date. If the New York Stock Exchange is not open on a particular transfer date,
the transfer will take effect on the next business day.
Any dollar cost averaging transfers you make do not count toward the 12 free
transfers you are allowed each contract year. The dollar cost averaging feature
is available only during the contract accumulation phase.
ASSET ALLOCATION PROGRAM
We recognize the value of having advice when deciding how to allocate your
purchase payments among the investment options. If you choose to participate in
the Asset Allocation Program, your representative will give you a questionnaire
to complete that will help determine a program that is appropriate for you. We
will prepare your asset allocation based on your answers to the questionnaire.
We will not charge you for this service and you are not obligated to participate
or to invest according to program recommendations.
AUTO-REBALANCING
Once you have allocated your money among the variable investment options, the
actual performance of the investment options may cause your allocation to shift.
For example, an investment option that initially holds only a small percentage
of your assets could perform much better than another investment option. Over
time, this option could increase to a larger percentage of your assets than you
desire. You can direct us to automatically rebalance your assets to return to
your original allocation percentages or to subsequent allocation percentages you
select. We will rebalance only the variable investment options that you have
designated. If you also participate in the DCA feature, then the variable
investment option from which you make the DCA transfers will not be rebalanced.
You may choose to have your rebalancing occur monthly, quarterly,
semiannually, or annually. The rebalancing will occur on the last calendar day
of the period you have chosen, provided that the New York Stock Exchange is open
on that date. If the New York Stock Exchange is not open on that date, the
rebalancing will take effect on the next business day.
Any transfers that occur as a result of the Auto-Rebalancing feature do not
count toward the 12 free transfers you are allowed per year. The
auto-rebalancing feature is available only during the contract accumulation
phase. If you choose auto-rebalancing and dollar cost averaging,
auto-rebalancing will take place after the transfers from your DCA account.
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PART II
STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
VOTING RIGHTS
We are the legal owner of the shares of the mutual funds available as variable
investment options. However, we currently vote the shares of the mutual funds
according to voting instructions we receive from contract owners. When a vote is
required, we will mail you a form that you can complete and return to us to tell
us how you wish us to vote. When we receive those instructions, we will vote all
of the shares we own on your behalf in accordance with those instructions. We
will vote fund shares for which we do not receive instructions, and any other
shares that we own, in the same proportion as shares for which we do receive
instructions from contract owners. We may change the way your voting
instructions are calculated if federal or state law requires or permits it.
SUBSTITUTION
We may substitute one or more of the mutual funds used by the variable
investment options. We would not do this without the approval of the SEC and any
necessary state insurance departments. We would give you specific notice in
advance of any substitution we intended to make. We may also stop allowing
investments in existing funds.
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3:
WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE
INCOME PHASE? (ANNUITIZATION)
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We can begin making annuity payments any time on or after the third contract
anniversary (or as required by state law if different). Annuity payments must
begin no later than the contract anniversary next following the annuitant's 95th
birthday (unless we agree to another date).
The Strategic Partners Plus variable annuity contract offers an optional
guaranteed minimum income benefit, which we describe below. Your annuity options
vary depending upon whether you choose this benefit.
Depending upon the annuity option you choose, you may incur a withdrawal
charge when the income phase begins. Currently, if permitted by state law, we
deduct any applicable withdrawal charge if you choose Option 1 for a period
shorter than five years, Option 3, or certain other annuity options that we may
make available. We do not deduct a withdrawal charge if you choose Option 1 for
a period of five years or longer or Option 2. For information about withdrawal
charges, see "What are the Expenses Associated with the Strategic Partners Plus
Contract," page 45.
In addition, any value in the guarantee period of the market value adjustment
option may be subject to a market value adjustment.
PAYMENT PROVISIONS WITHOUT THE GUARANTEED MINIMUM INCOME BENEFIT
We make the income plans described below available at any time before the
annuity date. We call these plans "annuity options" or "settlement options."
During the income phase, all of the annuity options under this contract are
fixed annuity options. This means that you no longer invest in the variable
investment options--that is, in the underlying mutual funds--on or after the
annuity date. If another annuity option is not selected by the annuity date, you
will automatically select the Life Income Annuity Option (Option 2, described
below) unless prohibited by applicable law. GENERALLY, ONCE THE ANNUITY PAYMENTS
BEGIN, THE ANNUITY OPTION CANNOT BE CHANGED AND YOU CANNOT MAKE WITHDRAWALS.
OPTION 1
ANNUITY PAYMENTS FOR A FIXED PERIOD
Under this option, we will make equal payments for the period chosen, up to 25
years (but not to exceed life expectancy). We will make these payments monthly,
quarterly, semiannually, or annually, as you choose, for the fixed period. If
the annuitant dies during the income phase, we will continue payments to the
beneficiary for the remainder of the fixed period or, if the beneficiary so
chooses, we will make a single lump-sum payment. We calculate the amount of the
lump sum payment as the present value of the unpaid future payments based upon
the interest rate used to compute the actual payments. That interest rate will
always be at least 3% a year.
OPTION 2
LIFE INCOME ANNUITY OPTION
Under this option, we will make annuity payments monthly, quarterly,
semiannually, or annually as long as the annuitant is alive. If the annuitant
dies before we have made 10 years' worth of payments, we will pay the
beneficiary the present value of the remaining annuity payments in one lump sum,
unless we were specifically instructed to continue to pay the remaining monthly
annuity payments. We calculate the present value of the remaining annuity
payments using the interest rate used to compute the amount of the original 120
payments. That interest rate will always be at least 3% a year. If an annuity
option is not selected by the annuity date, you will automatically select this
option, unless prohibited by applicable law.
OPTION 3
INTEREST PAYMENT OPTION
Under this option, we will credit interest on the adjusted contract value until
you request payment of all or part of the adjusted contract value. We can make
interest payments on a monthly, quarterly, semiannual, or annual basis or allow
the interest to accrue on your contract assets. Under this option, we will pay
you interest at an effective rate of at least 3% a year. This option is not
available if you hold your contract in an IRA.
Under this option, all gain in the annuity will be taxable as of the annuity
date.
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OTHER ANNUITY OPTIONS
We currently offer a variety of other annuity options. At the time annuity
payments are chosen, we may make available to you any of the fixed annuity
options then offered.
Applicable state law may limit some of these options. Consult the Statement
of Additional Information for details.
TAX CONSIDERATIONS
If your contract is held under a tax-favored plan, as discussed on page 55, you
should consider the minimum distribution requirements mentioned on page 57 when
selecting your annuity option.
For certain contracts held in connection with "qualified" retirement plans
(such as a Section 401(k) plan), please note that if you are married at the time
your payments commence, you may be required by federal law to choose an income
option that provides at least a 50 percent joint and survivor annuity to your
spouse, unless your spouse waives that right. Similarly, if you are married at
the time of your death, federal law may require all or a portion of the death
benefit to be paid to your spouse, even if you designated someone else as your
beneficiary. For more information, consult the terms of your retirement
arrangement.
GUARANTEED MINIMUM INCOME BENEFIT
The guaranteed minimum income benefit (GMIB), is an optional feature that, if
you choose it, guarantees that once the income period begins, your income
payments will be no less than a value based on a certain GMIB protected value
applied to the GMIB guaranteed annuity purchase rates. If you want the
guaranteed minimum income benefit, you must elect it when you make your initial
purchase payment. Once elected, the guaranteed minimum income benefit cannot be
revoked. This feature may not be available in your state.
The GMIB protected value is calculated daily and is equal to the GMIB roll-up
until the GMIB roll-up either reaches its cap or if we stop applying the annual
interest rate based on the age of the annuitant, number of contract
anniversaries, or number of years since last GMIB reset, as described below. At
this point, the GMIB protected value will be increased by any subsequent
invested purchase payments, reduced by the effect of withdrawals. Depending on
applicable state law, the guaranteed minimum income benefit is not available
under all contracts. In addition, the guaranteed minimum income benefit is
subject to certain age restrictions described below.
- - The annuitant must be 75 or younger in order for you to elect guaranteed
minimum income benefit.
- - If you choose the guaranteed minimum income benefit, we will impose an annual
charge equal to 0.45% of the GMIB protected value, described below. (In some
states, we may calculate this fee on a different basis, but it will not be
higher than 0.45% of the GMIB protected value.) See "What are the Expenses
Associated with the Strategic Partners Plus Contract?" on page 45.
- - To take advantage of the guaranteed minimum income benefit, you must wait a
certain amount of time before you begin the income phase. The waiting period
is the period extending from the contract date to the 7th contract
anniversary but, if the guaranteed minimum income benefit has been reset (as
described below), the waiting period is the 7 year period beginning with the
date of the most recent reset.
Once the waiting period has elapsed, you will have a thirty-day period each
year, beginning on the contract anniversary, during which you may begin the
income phase with the guaranteed minimum income benefit by submitting the
necessary forms in good order to the Prudential Annuity Service Center.
GMIB ROLL-UP
The GMIB roll-up is equal to the invested purchase payments, increased daily at
an effective annual interest rate of 5% starting on the date each invested
purchase payment is made, until the cap is reached (GMIB roll-up cap). We will
reduce this amount by the effect of withdrawals. The GMIB roll-up cap is equal
to two times each invested purchase payment and is reduced by the effect of
withdrawals.
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Even if the GMIB roll-up cap has not been reached, we will nevertheless stop
increasing the GMIB roll-up value by the effective annual interest rate on the
latest of:
- the contract anniversary coinciding with or next following the
annuitant's 80th birthday,
- the 7th contract anniversary, or
- 7 years from the most recent GMIB reset (as described below).
However, even if we stop increasing the GMIB roll-up value by the effective
annual interest rate, we will still increase the GMIB protected value by
subsequent invested purchase payments, reduced by the effect of withdrawals.
EFFECT OF WITHDRAWALS.
In each contract year, withdrawals will first reduce the GMIB protected value on
a dollar for dollar basis, by the same dollar amount of the withdrawal up to the
first 5% of GMIB protected value calculated on the contract anniversary (or,
during the first contract year, on the contract date). A proportional reduction
will apply to amounts exceeding the 5% of GMIB protected value. We calculate the
proportional reduction by dividing the contract value after the withdrawal by
the contract value immediately following the withdrawal of the first 5% of GMIB
protected value. The resulting percentage is multiplied by the GMIB protected
value minus the amount of the withdrawal that does not exceed 5%.
Here is an example of the impact of a withdrawal on the GMIB protected value:
An owner invests $100,000 initially and then requests a withdrawal of $8,000
in the first contract year. If the contract value had increased to $108,000
prior to the withdrawal, the first $5,000 of the withdrawal would reduce the
GMIB protected value by $5,000 (dollar-for-dollar up to 5% of the GMIB protected
value at issue). The remaining $3,000 of the withdrawal would reduce the GMIB
protected value in the same proportion that the contract value was reduced.
Since the remaining $3,000 withdrawn is 2.91% of the contract value after the
initial $5,000 was withdrawn on a dollar-for-dollar basis, the remaining GMIB
protected value is reduced by 2.91%. If the protected value were $105,000 before
the withdrawal, after the reduction it would be $97,090 ($105,000 minus $5,000
taken dollar for dollar minus a reduction of 2.91% of $100,000 or $2,910).
GMIB RESET FEATURE
You may elect to "reset" your GMIB protected value to equal your current
contract value twice over the life of the contract. You may only exercise this
reset option if the annuitant has not yet reached his or her 76th birthday. If
reset, you must wait a new 7-year period from the most recent reset to exercise
the guaranteed minimum income benefit. Further, we will reset the GMIB roll-up
cap to equal two times the GMIB protected value as of such date. Additionally,
if you reset, we will determine the GMIB payout amount by using the guaranteed
annuity purchase rates (attached to your contract) based on the number of years
since the most recent reset.
PAYOUT AMOUNT
The guaranteed minimum income benefit payout amount is based on the age and sex
of the annuitant (and, if there is one, the co-annuitant as well). After we
first deduct a charge for any applicable premium taxes, the payout amount will
equal the greater of:
1) the GMIB protected value as of the date you exercise the GMIB payout option,
applied to the GMIB guaranteed annuity purchase rates and based on the
annuity payout option as described below.
2) the adjusted contract value--that is, the contract value minus any charge we
impose for premium taxes--as of the date you exercise the GMIB payout option
applied to the current annuity purchase rates then in use.
GMIB ANNUITY PAYOUT OPTIONS
We currently offer two guaranteed minimum income benefit annuity payout options.
Each option involves payment for at least a period certain of ten years.
GMIB OPTION 1
SINGLE LIFE PAYOUT OPTION
We will make monthly payments for as long as the annuitant lives, with payments
for a period certain. We
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PART II
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will stop making payments after the later of the death of the annuitant or the
end of the period certain.
GMIB OPTION 2
JOINT LIFE PAYOUT OPTION
In the case of an annuitant and co-annuitant, we will make monthly payments for
the joint lifetime of the annuitant and co-annuitant, with payments for a period
certain. If the co-annuitant dies first, we will continue to make payments until
the later of the death of the annuitant and the end of the period certain. If
the annuitant dies first, we will continue to make payments until the later of
the death of the co-annuitant and the end of the period certain, but if the
period certain ends first, we will reduce the amount of each payment to 50% of
the original amount.
You have no right to withdraw amounts early under either GMIB payout option.
We may make other payout frequencies available, such as quarterly, semi-annually
or annually.
Because we do not impose a new waiting period for each subsequent purchase
payment, if you choose the guaranteed minimum income benefit, we reserve the
right to limit subsequent purchase payments if we discover that by the timing of
your purchase payments and withdrawals, your protected value is increasing in
ways we did not intend. In determining whether to limit purchase payments, we
will look at purchase payments which are disproportionately larger than your
initial purchase payment and other actions that may artificially increase the
GMIB protected value. Certain state laws may prevent us from limiting your
subsequent purchase payments. You must exercise one of the GMIB payout options
described above no later than 30 days after the contract anniversary following
the annuitant's attainment of age 95.
INCOME APPRECIATOR BENEFIT
The income appreciator benefit (or "IAB") is an optional, supplemental income
benefit that provides an additional income amount during the accumulation period
or upon annuitization. The income appreciator benefit is designed to provide you
with additional funds in order to defray the impact taxes may have on
distributions from your contract. Because individual circumstances vary, you
should consult with a qualified tax adviser to determine whether it would be
appropriate for you to elect the income appreciator benefit.
If you want the income appreciator benefit, you generally must elect it when
you make your initial purchase payment. Once you elect the income appreciator
benefit, you may not later revoke it.
- - The annuitant must be 75 or younger in order for you to elect the income
appreciator benefit
- - If you choose the income appreciator benefit, we will impose an annual charge
equal to 0.25% of your contract value. See "What are the Expenses Associated
with the Strategic Partners Plus Contract?" on page 45.
ACTIVATION OF THE INCOME APPRECIATOR BENEFIT
You can activate the income appreciator benefit at any time after it has been in
force for seven years. To activate the income appreciator benefit, you must send
us a written request in good order.
Once activated, you can receive the income appreciator benefit:
-- at annuitization as part of an annuity payment (IAB Option 1);
-- during the accumulation phase through the IAB automatic withdrawal
payment program (IAB Option 2); or
-- during the accumulation phase as an income appreciator benefit credit
to your contract over a 10-year period (IAB Option 3).
More information about IAB Option 1 appears below. For information about IAB
Options 2 and 3, see "How Can I Access My Money?" on page 50.
Income appreciator benefit payments are treated as earnings and may be
subject to tax upon withdrawal. See "What are the Tax Considerations Associated
with the Strategic Partners Plus Contract?" on page 53.
CALCULATION OF INCOME APPRECIATOR BENEFIT AMOUNT
We will calculate the income appreciator benefit amount as of the date we
receive your written request in good order (or, for IAB Option 1, on the annuity
date). We do this by multiplying the current earnings in the
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PART II
STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
contract by the applicable income appreciator benefit percentage based on the
number of years the income appreciator benefit has been in force. For purposes
of calculating the income appreciator benefit:
- - earnings are calculated as the difference between the contract value and the
sum of all purchase payments;
- - earnings do not include (1) any amount added to the contract value as a
result of the spousal continuance benefit (explained on page 41), or (2) if
we were to permit you to elect the income appreciator benefit after the
contract date, any earnings accrued under the contract prior to that
election;
- - withdrawals reduce earnings first, then purchase payments, on a
dollar-for-dollar basis;
- - the table below shows the income appreciator benefit percentages
corresponding to the number of years the income appreciator benefit has been
in force.
You can activate the income appreciator benefit at annuitization under IAB
Option 1, as described below. You can also activate the income appreciator
benefit during accumulation period under IAB Options 2 and 3. For more
information about IAB Options 2 and 3, see "How Can I Access My Money?" on page
50.
IAB OPTION 1 -- INCOME APPRECIATOR BENEFIT AT ANNUITIZATION
Under this option, if you choose to activate the income appreciator benefit at
annuitization, we will calculate the income appreciator benefit amount on the
annuity date and add it to the contract value for purposes of determining the
adjusted contract value. You may apply the adjusted contract value to any
annuity or settlement option over the lifetime of the annuitant, joint
annuitants, or a period certain of at least 15 years (but not to exceed life
expectancy).
UPON ANNUITIZATION, YOU MAY LOSE ALL OR A PORTION OF THE INCOME APPRECIATOR
BENEFIT IF YOU CHOOSE AN ANNUITY SETTLEMENT OPTION OTHER THAN ANY LIFETIME
PAYOUT OPTION OR PERIOD CERTAIN OPTION FOR AT LEAST 15 YEARS. IN SUCH INSTANCES,
WE WOULD NOT REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR THIS BENEFIT.
EFFECT OF INCOME APPRECIATOR BENEFIT ON GUARANTEED MINIMUM INCOME BENEFIT
If you exercise the guaranteed minimum income benefit feature and an income
appreciator benefit amount remains payable under your contract, the value we use
to calculate the annuity payout amount will be the greater of:
1. the adjusted contract value plus the remaining income appreciator benefit
amount, calculated at current annuitization rates; or
2. the guaranteed minimum income benefit protected value plus the remaining
income appreciator benefit amount, calculated using the guaranteed annuity
purchase rates shown in the contract.
If you exercise the guaranteed minimum income benefit feature and activate the
income appreciator benefit at the same time, you must choose among the
guaranteed minimum income benefit annuity payout options available at the time.
TERMINATING THE INCOME APPRECIATOR BENEFIT
The income appreciator benefit will terminate on the earliest of:
- - the date you make a total withdrawal from the contract;
- - the date a death benefit is payable if the contract is not continued by the
surviving spouse under the spousal continuance benefit;
- - the date the income appreciator benefit amount is reduced to zero (generally
ten years after activation) under IAB Options 2 and 3;
- - the date of annuitization; or
- - the date the contract terminates.
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4:
WHAT IS THE
DEATH BENEFIT?
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THE DEATH BENEFIT FEATURE PROTECTS THE VALUE OF THE CONTRACT FOR THE
BENEFICIARY.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. You name the beneficiary at the time the contract is issued, unless you
change it at a later date. Unless you name an irrevocable beneficiary, during
the accumulation period you can change the beneficiary at any time before the
owner dies. However, if jointly owned, the owner must name the joint owner and
the joint owner must name the owner as the beneficiary.
CALCULATION OF THE DEATH BENEFIT
If the owner or joint owner dies during the accumulation phase, we will, upon
receiving the appropriate proof of death and any other needed documentation
("proof of death"), pay a death benefit to the beneficiary designated by the
deceased owner or joint owner. If there are an owner and joint owner of the
contract, and the owner's spouse is both the joint owner and the beneficiary, at
the death of the first to die, the death benefit will be paid to the surviving
owner or the surviving owner may continue the contract under the Spousal
Continuance Benefit. See "Spousal Continuance Benefit" on page 41. Upon death,
the beneficiary will receive the greater of the following:
1) The current value of your contract (as of the time we receive proof of
death). If you have purchased the Contract With Credit, we will first deduct
any credit corresponding to a purchase payment made within one year of death.
We impose no market value adjustment on contract value held within the market
value adjustment option when a death benefit is paid.
2) Either the base death benefit, which equals the total invested purchase
payments you have made proportionally reduced by any withdrawals, or, if you
have chosen a guaranteed minimum death benefit, the GMDB protected value of
that death benefit.
GUARANTEED MINIMUM DEATH BENEFIT
The guaranteed minimum death benefit (GMDB) provides for the option to receive
an enhanced death benefit upon the death of the sole owner or the first to die
of the owner or joint owner during the accumulation phase. If you elect the GMDB
feature, you must elect a GMDB protected value option. The GMDB protected value
option can be equal to the GMDB roll-up, the GMDB step-up, or the greater of the
GMDB roll-up and the GMDB step-up. The GMDB protected value is calculated daily.
GMDB ROLL-UP
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE 80
ON THE CONTRACT DATE, the GMDB roll-up is equal to the invested purchase
payments, increased daily at an effective annual interest rate of 5% starting on
the date that each invested purchase payment is made. The GMDB roll-up will
increase by subsequent invested purchase payments and reduce by the effect of
withdrawals.
We stop increasing the GMDB roll-up by the effective annual interest rate on
the later of:
- - the contract anniversary coinciding with or next following the sole owner's
or older owner's 80th birthday, or
- - the 5th contract anniversary.
However, the GMDB protected value will still increase by subsequent invested
purchase payments and reduce by the effect of withdrawals.
Withdrawals will first reduce the GMDB protected value on a dollar-for-dollar
basis up to the first 5% of GMDB protected value calculated on the contract
anniversary (on the contract date in the first contract year), then
proportionally by any amounts exceeding the 5%.
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB roll-up is equal to the invested purchase
payments, increased daily at an effective annual interest rate of 3% starting on
the date that each invested purchase payment is made. We will increase the GMDB
roll-up by subsequent invested purchase payments and reduce it by the effect of
withdrawals.
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We stop increasing the GMDB roll-up by the effective annual interest rate on
the 5th contract anniversary. However we will continue to reduce the GMDB
protected value by the effect of withdrawals.
Withdrawals will first reduce the GMDB protected value on a dollar-for-dollar
basis up to the first 3% of GMDB protected value calculated on the contract
anniversary (on the contract date in the first contract year), then
proportionally by any amounts exceeding the 3%.
GMDB STEP-UP
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE 80
ON THE CONTRACT DATE, the GMDB step-up before the first contract anniversary is
the initial invested purchase payment increased by subsequent invested purchase
payments, and proportionally reduced by the effect of withdrawals. The GMDB
step-up on each contract anniversary will be the greater of the previous GMDB
step-up and the contract value as of such contract anniversary. Between contract
anniversaries, the GMDB step-up will increase by invested purchase payments and
reduce proportionally by withdrawals.
We stop increasing the GMDB step-up by any appreciation in the contract value
on the later of:
- - the contract anniversary coinciding with or next following the sole or older
owner's 80th birthday, or
- - the 5th contract anniversary.
However we still increase the GMDB protected value by subsequent invested
purchase payments and proportionally reduce it by withdrawals.
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB step-up before the third contract
anniversary is the sum of invested purchase payments, reduced by the effect of
withdrawals. On the third contract anniversary, we will adjust the GMDB step-up
to the greater of the then current GMDB step-up or the contract value as of that
contract anniversary. Thereafter we will only increase the GMDB protected value
by subsequent invested purchase payments and proportionally reduce it by
withdrawals.
Special rules apply if the beneficiary is the spouse of the owner, and the
contract does not have a joint owner. In that case, upon the death of the owner,
the spouse will have the choice of the following:
- - If the sole beneficiary under the contract is the owner's spouse, and the
other requirements of the Spousal Continuance Benefit are met (see page 41),
then the contract can continue, and the spouse will become the new owner of
the contract; or
- - The spouse can receive the death benefit. If the spouse does wish to receive
the death benefit, he or she must make that choice within the first 60 days
following our receipt of proof of death. Otherwise, the beneficiary will
receive the death benefit.
If ownership of the contract changes as a result of the owner assigning it to
someone else, we will reset the value of the death benefit to equal the contract
value on the date the change of ownership occurs, and for purposes of computing
the future death benefit, we will treat that contract value as a purchase
payment occurring on that date.
Depending on applicable state law, some death benefit options may not be
available or may be subject to certain restrictions under your contract.
SPECIAL RULES IF JOINT OWNERS
If the contract has an owner and a joint owner and they are spouses at the time
that one dies the Spousal Continuance Benefit may apply. See "Spousal
Continuance Benefit" page 40. If the Contract has an owner and a joint owner and
they are not spouses at the time one dies, we will pay the death benefit and the
contract will end. Joint ownership may not be allowed in your state.
PAYOUT OPTIONS
The beneficiary may, within 60 days of providing proof of death, choose to take
the death benefit under one of several death benefit payout options listed
below.
The death benefit payout options are:
CHOICE 1. Lump sum payment of the death benefit. If the beneficiary does not
choose a payout option within sixty days, the beneficiary will receive this
payout option.
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CHOICE 2. The payment of the entire death benefit within a period of 5 years
from the date of death of the first to die of the owner or joint owner.
The entire death benefit will include any increases or losses resulting
from the performance of the variable or fixed interest rate options during
this period. During this period the beneficiary may: reallocate the contract
value among the variable or one-year fixed interest rate options; name a
beneficiary to receive any remaining death benefit in the event of the
beneficiary's death; and make withdrawals from the contract value, in which
case, any such withdrawals will not be subject to any withdrawal charges.
However, the beneficiary may not make any purchase payments to the contract.
During this 5 year period, we will continue to deduct from the death
benefit proceeds the charges and costs that were associated with the features
and benefits of the contract. Some of these features and benefits may not be
available to the beneficiary, such as the GMIB, IAB and spousal continuance
benefit.
CHOICE 3. Payment of the death benefit under an annuity or annuity settlement
option over the lifetime of the beneficiary or over a period not extending
beyond the life expectancy of the beneficiary with distribution beginning
within one year of the date of death of the last to survive of the owner or
joint owner.
If the contract has an owner and a joint owner:
- - If the owner and joint owner are spouses at the death of the first to die of
the two, any portion of the death benefit not applied under Choice 3 within
one year of the survivor's date of death must be distributed within five
years of the survivor's date of death.
- - If the owner and joint owner are not spouses at the death of the first to die
of the two, any portion of the death benefit (which is equal to the adjusted
contract value) not applied under Choice 3 within one year of the date of
death of the first to die must be distributed within five years of that date
of death.
The tax consequences to the beneficiary vary among the three death benefit
payout options. See "What are the Tax Considerations Associated with the
Strategic Partners Plus Contract?" on page 53.
EARNINGS APPRECIATOR BENEFIT
The earnings appreciator benefit (or "EAB") is an optional, supplemental death
benefit that provides a benefit payment upon the death of the sole owner or
first to die of the owner or joint owner during the accumulation phase. Any
earnings appreciator benefit payment we make will be in addition to any other
death benefit payment we make under the contract. This feature may not be
available in your state.
The earnings appreciator benefit is designed to provide a beneficiary with
additional funds when we pay a death benefit in order to defray the impact taxes
may have on that payment. Because individual circumstances vary, you should
consult with a qualified tax adviser to determine whether it would be
appropriate for you to elect the earnings appreciator benefit.
If you want the earnings appreciator benefit, you generally must elect it at
the time you apply for the contract. If you elect the earnings appreciator
benefit, you may not later revoke it.
Upon our receipt of due proof of death in good order, we will determine an
earnings appreciator benefit by multiplying the earnings appreciator benefit
percentage below by the lesser of: (i) the then-existing amount of earnings
under the contract, or (ii) an amount equal to 3 times the sum of all purchase
payments previously made under the contract.
For purposes of computing earnings and purchase payments under the earnings
appreciator benefit, we calculate earnings as the difference between the
contract value and the sum of all purchase payments. Withdrawals reduce earnings
first, then purchase payments, on a dollar-for-dollar basis.
EAB percentage:
- - 40% if the owner is age 70 or younger on the date the application is signed.
- - 25% if the owner is between ages 71 and 75 on the date the application is
signed.
40
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PART II
STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
- - 15% if the owner is between ages 76 and 79 on the date the application is
signed.
If the contract is owned jointly, the age of the older of the owner or joint
owner determines the EAB percentage.
If the surviving spouse is continuing the contract in accordance with the
spousal continuance benefit (See "Spousal Continuance Benefit" below), the
following conditions apply:
- - In calculating the earnings appreciator benefit, we will use the age of the
surviving spouse at the time that the spousal continuance benefit is
activated to determine the applicable EAB percentage.
- - We will not allow the surviving spouse to continue the earnings appreciator
benefit (or bear the charge associated with this benefit) if he or she is age
80 or older on the date that the spousal continuance benefit is activated.
- - If the earnings appreciator benefit is continued, we will calculate any
applicable earnings appreciator benefit payable upon the surviving spouse's
death by treating the contract value (as adjusted under the terms of the
spousal continuance benefit) as the first purchase payment.
TERMINATING THE EARNINGS APPRECIATOR BENEFIT
The earnings appreciator benefit will terminate on the earliest of:
- - the date you make a total withdrawal from the contract,
- - the date a death benefit is payable if the contract is not continued by the
surviving spouse under the spousal continuance benefit,
- - the date the contract terminates, or
- - the date you annuitize the contract.
SPOUSAL CONTINUANCE BENEFIT
This benefit is available if, on the date we receive due proof of the owner's
death, (1) there is only one owner of the contract and there is only one
beneficiary who is the owner's spouse; or (2) there are an owner and joint owner
of the contract, and the joint owner is the owner's spouse and the owner's
beneficiary under the contract. In such cases, the surviving spouse, or
annuitant if other than the surviving spouse, cannot be older than age 95 on
that date, and the surviving spouse will become the new sole owner under the
contract. Assuming the above conditions are present, the surviving spouse can
elect the spousal continuance benefit, but must do so no later than 60 days
after furnishing due proof of the owner's death in good order.
Upon activation of the spousal continuance benefit, the contract value is
adjusted to equal the amount of the death benefit to which the surviving spouse
would have been entitled. This contract value will serve as the basis for
calculating any death benefit payable upon the death of the surviving spouse. We
will allocate any increase in the adjusted contract value among the variable or
fixed interest rate options in the same proportions that existed immediately
prior to the spousal continuance adjustment.
Under the spousal continuance benefit, we waive any potential withdrawal
charges applicable to purchase payments made prior to activation of the spousal
continuance benefit. However, we will continue to impose withdrawal charges on
purchase payments made after activation of this benefit. In addition, contract
value allocated to the market value adjustment option will remain subject to a
potential market value adjustment.
IF YOU ELECTED THE BASE DEATH BENEFIT, then upon activation of the spousal
continuance benefit, we will adjust the contract value to equal the greater of:
- - the contract value, or
- - the sum of all invested purchase payments (adjusted for withdrawals),
plus the amount of any applicable earnings appreciator benefit.
IF YOU ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GMDB ROLL-UP, we
will adjust the contract value to equal the greater of:
- - the contract value, or
- - the GMDB roll-up,
plus the amount of any applicable earnings appreciator benefit.
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PART II
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IF YOU HAVE ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GMDB
STEP-UP, we will adjust the contract value to equal the greater of:
- - the contract value, or
- - the GMDB step-up,
plus the amount of any applicable earnings appreciator benefit.
IF YOU HAVE ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GREATER OF
THE GMDB ROLL-UP AND GMDB STEP-UP, we will adjust the contract value to equal
the greatest of:
- - the contract value,
- - the GMDB roll-up, or
- - the GMDB step-up,
plus the amount of any applicable earnings appreciator benefit.
After we have made the adjustment to contract value set out immediately
above, we will continue to compute the GMDB roll-up and the GMDB step-up under
the surviving spousal owner's contract, and will do so in accordance with the
preceding paragraphs.
If the contract is being continued by the surviving spouse, the attained age
of the surviving spouse will be the basis used in determining the death benefit
payable under the guaranteed minimum death benefit provisions of the contract.
IF YOU ELECTED THE GUARANTEED MINIMUM INCOME BENEFIT, it will be continued
for the surviving spousal owner. All provisions of the guaranteed minimum income
benefit (i.e., waiting period, GMIB roll-up cap, etc.) will remain the same as
on the date of the owner's death. See "Guaranteed Minimum Income Benefit" page
32. If the GMIB reset feature was never exercised, the surviving spousal owner
can exercise the GMIB reset feature twice. If the original owner had previously
exercised the GMIB reset feature once, the surviving spousal owner can exercise
the GMIB reset once. However the surviving spouse (or new annuitant designated
by the surviving spouse) must be under 76 years of age at the time of reset. If
the original owner had previously exercised the GMIB reset feature twice, the
surviving spousal owner may not exercise the GMIB reset at all. If the attained
age of the surviving spouse at activation of the spousal continuance benefit,
when added to the remainder of the GMIB waiting period to be satisfied, would
preclude the surviving spouse from utilizing the guaranteed minimum income
benefit, we will revoke the guaranteed minimum income benefit under the contract
at that time and we will no longer charge for that benefit.
IF YOU ELECTED THE INCOME APPRECIATOR BENEFIT, on the owner's death, the
income appreciator benefit will end unless the contract is continued by the
owner's surviving spouse under the spousal continuance benefit. See "Spousal
Continuance Benefit" page 41. If the contract is continued by the surviving
spouse, we will continue to pay the balance of any income appreciator benefit
payments over the remainder of the 10-year payment period, or until the
surviving spouse attains age 95, whichever occurs first.
If the income appreciator benefit has not been in force for 7 contract years,
the surviving spouse may not activate the benefit until it has been in force for
7 contract years. If the attained age of the surviving spouse at activation of
the spousal continuation benefit, when added to the remainder of the IAB waiting
period to be satisfied, would preclude the surviving spouse from utilizing the
income appreciator benefit, we will revoke the income appreciator benefit under
the contract at that time and we will no longer charge for that benefit. If the
income appreciator benefit has been in force for 7 contract years, but the
benefit has not been activated, the surviving spouse may activate the benefit at
any time after the contract has been continued. If the income appreciator
benefit is activated after the contract is continued by the surviving spouse,
the income appreciator benefit calculation will exclude any amount added to the
contract at the time of spousal continuance resulting from any death benefit
value exceeding the contract value.
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5:
HOW CAN I PURCHASE A STRATEGIC PARTNERS
PLUS CONTRACT?
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PURCHASE PAYMENTS
The initial purchase payment is the amount of money you first pay us to purchase
the contract. The minimum initial purchase payment is $10,000. In most states,
and subject to some restrictions, you can make additional purchase payments of
$500 or more at any time during the accumulation phase. You may not make
additional purchase payments if you purchase a contract issued in Massachusetts,
or if you purchase a Contract With Credit in Pennsylvania. You may purchase this
contract only if you are age 85 or younger, certain age limits apply to certain
features and benefits described herein. However, no subsequent purchase payments
may be made after the earliest of the 85th birthday of (i) the owner, (ii) the
joint owner or (iii) the annuitant.
Currently, the maximum aggregate purchase payments you may make is $20
million. We limit the maximum total purchase payments in any contract year other
than the first to $2 million. You must obtain our approval prior to submitting a
purchase payment of $5 million or greater within the first contract year, or
greater than $2 million for subsequent purchase payments. Depending on
applicable state law, lower limits may apply.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your invested purchase payment
among the variable or fixed interest rate investment options or the market value
adjustment option based on the percentages you choose. The percentage of your
allocation to a particular investment option can range in whole percentages from
0% to 100%.
You may change your allocation of future invested purchase payments at any
time. Contact the Prudential Annuity Service Center for details.
If you make an additional purchase payment without allocation instructions,
we will allocate the invested purchase payment in the same proportion as your
most recent purchase payment, unless you directed us in connection with that
purchase payment to make that allocation on a one-time-only basis.
The allocation procedure mentioned above will apply unless that portion
designated for the DCA Fixed Rate Option is less than $2,000. In that case, we
will use your transfer allocation for the DCA Fixed Rate Option as part of your
allocation instructions until you direct us otherwise.
We will credit the initial purchase payment to your contract within two
business days from the day on which we receive your payment at the Prudential
Annuity Service Center. If, however, your first payment is made without enough
information for us to set up your contract, we may need to contact you to obtain
the required information. If we are not able to obtain this information within
five business days, we will within that five business day period either return
your purchase payment or obtain your consent to continue holding it until we
receive the necessary information. We will generally credit each subsequent
purchase payment as of the business day we receive it in good order at the
Prudential Annuity Service Center. Our business day generally closes at 4:00
p.m. Eastern time.
CREDITS
If you purchase the Contract With Credit, we will add a credit amount to your
contract value with each purchase payment you make. The credit amount is
allocated to the variable or fixed interest rate investment options in the same
percentages as the purchase payment.
The bonus credit that we pay with respect to any purchase payment depends on
(i) the age of the older of the owner or joint owner on the date on which the
purchase payment is made and (ii) the amount of the purchase payment.
Specifically,
- - if the elder owner is 80 or younger on the date that the purchase payment is
made, then we will add a bonus credit to the purchase payment equal to 4% if
the purchase payment is less than $250,000; 5% if the purchase payment is
equal to or greater than $250,000 but less than $1 million; or 6% if the
purchase payment is $1 million or greater; and
- - if the elder owner is aged 81-85 on the date that the purchase payment is
made, then we will add a bonus credit equal to 3% of the amount of the
purchase payment.
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PART II
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Under the Contract With Credit, if we pay a death benefit under the contract,
we have a contractual right to take back any credit we applied within one year
of the date of death. If the owner returns the contract during the free look
period, we will recapture bonus credits. However, we will not, unless and until
we obtain SEC exemptive relief, recoup for our own assets the full amount of the
6% bonus credit applicable to purchase payments of $1 million or greater that we
had given to you. Rather, we will recoup an amount equal to the value of the
credit as of the business day on which we receive your request, less any charges
attributable to that credit. We reserve the right to recapture the entire amount
of the credit upon obtaining appropriate approval of the SEC with regard to that
bonus credit.
CALCULATING CONTRACT VALUE
The value of your contract will go up or down depending on the investment
performance of the variable investment options you choose. To determine the
value of your contract, we use a unit of measure called an accumulation unit. An
accumulation unit works like a share of a mutual fund.
Every day we determine the value of an accumulation unit for each of the
variable investment options. We do this by:
1) adding up the total amount of money allocated to a specific investment
option,
2) subtracting from that amount insurance charges and any other applicable
charges such as for taxes, and
3) dividing this amount by the number of outstanding accumulation units.
When you make a purchase payment, we credit your contract with accumulation
units of the subaccount or subaccounts for the investment options you choose. We
determine the number of accumulation units credited to your contract by dividing
the amount of the purchase payment, plus (if you have purchased the Contract
With Credit) any applicable credit, allocated to an investment option by the
unit price of the accumulation unit for that investment option. We calculate the
unit price for each investment option after the New York Stock Exchange closes
each day and then credit your contract. The value of the accumulation units can
increase, decrease, or remain the same from day to day.
We cannot guarantee that your contract value will increase or that it will
not fall below the amount of your total purchase payments. However, we do
guarantee a minimum interest rate of between 1.5% and 3% a year, depending on
your state's applicable law, on that portion of the contract value allocated to
the one-year fixed interest-rate option. For the DCA Fixed Interest Rate Option,
we guarantee a minimum interest rate of 3% annually.
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6:
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC
PARTNERS PLUS CONTRACT?
- --------------------------------------------------------------------------------
THERE ARE CHARGES AND OTHER EXPENSES ASSOCIATED WITH THE CONTRACT THAT REDUCE
THE RETURN ON YOUR INVESTMENT. WE DESCRIBE THESE CHARGES AND EXPENSES BELOW.
INSURANCE AND ADMINISTRATIVE COST
Each day, we make a deduction for the insurance and administrative cost. This
cost covers our expenses for mortality and expense risk, administration,
marketing and distribution. If you choose a guaranteed minimum death benefit
option, the insurance and administrative cost also includes a charge to cover
our assumption of the associated risk. The mortality risk portion of the cost is
for our assumption of the risk that the annuitant(s) will live longer than
expected based on our life expectancy tables. When this happens, we pay a
greater number of annuity payments. The expense risk portion of the cost is for
our assumption of the risk that the current costs will be insufficient in the
future to cover the cost of administering the contract. The administrative
expense portion of the cost compensates us for the expenses associated with the
administration of the contract. This includes preparing and issuing the
contract; establishing and maintaining contract records; preparation of
confirmations and annual reports; personnel costs; legal and accounting fees;
filing fees; and systems costs. The guaranteed minimum death benefit risk
portion of the cost, if applicable, covers our assumption of the risk that the
protected value of the contract will be larger than the base death benefit if
the contract owner dies during the accumulation phase.
If the insurance and administrative cost is not sufficient to cover our
expenses, then we will bear the loss. We do, however, expect to profit from this
cost. The insurance and administrative cost for your contract cannot be
increased. We may use any profits from this cost to pay for the costs of
distributing the contracts. If you choose the Contract With Credit, we will also
use any profits from this charge to recoup our costs of providing the credit.
We calculate the insurance and administrative cost based on the average daily
value of all assets allocated to the variable investment options. These costs
are not assessed against amounts allocated to the fixed interest rate options.
The amount of the cost depends on the death benefit option that you choose. The
cost is equal to:
- 1.40% on an annual basis if you choose the base death benefit,
- 1.65% on an annual basis if you choose either the roll-up or step-up
guaranteed minimum death benefit option, and
- 1.75% on an annual basis if you choose the guaranteed minimum death
benefit option of the greater of the roll-up or step-up.
We impose an additional insurance and administrative cost of 0.10% annually
(of account value attributable to the variable investment options) for the
Contract with Credit.
EARNINGS APPRECIATOR BENEFIT CHARGE
We will impose an additional charge if you choose the earnings appreciator
benefit. The charge for this benefit is based on an annual rate of 0.30% of your
contract value.
We calculate the charge on each of the following events:
- each contract anniversary,
- on the annuity date,
- upon death of the sole or first to die of the owner or joint owner prior
to the annuity date,
- upon a full or partial withdrawal, and
- upon a subsequent purchase payment.
The fee is based on the contract value at time of calculation and is
pro-rated based on the portion of the contract year since the date that the
earnings appreciator benefit charge was last calculated.
Although the earnings appreciator benefit charge may be calculated more
often, it is deducted only:
- on each contract anniversary,
- on the annuity date,
- upon death of the sole owner or first to die of the owner or joint owner
prior to the annuity date,
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PART II
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- upon a full withdrawal, and
- upon a partial withdrawal if the contract value remaining after the
partial withdrawal is not enough to cover the then applicable earnings
appreciator benefit charge.
We withdraw this charge from each investment option in the same proportion
that the amount allocated to the investment option bears to the total contract
value. Upon a full withdrawal or if the contract value remaining after a partial
withdrawal is not enough to cover the then-applicable earnings appreciator
benefit charge, we will deduct the charge from the amount we pay you. We will
deem the payment of the earnings appreciator benefit charge as made from
earnings for purposes of calculating other charges.
GUARANTEED MINIMUM INCOME BENEFIT CHARGE
We will impose an additional charge if you choose the guaranteed minimum income
benefit. This is an annual charge equal to 0.45% of the GMIB protected value of
your contract, which we deduct from your contract value on each of the following
events:
- - each contract anniversary,
- - when you begin the income phase of the contract,
- - upon a full withdrawal, and
- - upon a partial withdrawal if the remaining contract value would not be enough
to cover the then applicable guaranteed minimum income benefit charge.
If we impose this fee other than on a contract anniversary, then we will
pro-rate it based on the portion of the contract year for which the guaranteed
minimum income benefit was in effect. We withdraw the fee from each investment
option in the same proportion that your contract value is allocated to that
investment option. Upon a full withdrawal or if the contract value remaining
after a partial withdrawal is not enough to cover the applicable guaranteed
minimum income benefit charge, we will deduct the charge from the amount we pay
you.
In some states, we may calculate the charge for the guaranteed minimum income
benefit in a different manner, but that charge will not exceed 0.45% of the GMIB
protected value.
We will not impose the guaranteed minimum income benefit charge after the
income phase begins, after you revoke the guaranteed minimum income benefit, or
after you choose your GMIB payout option.
INCOME APPRECIATOR BENEFIT CHARGE
We will impose an additional charge if you choose the income appreciator
benefit. This is an annual charge equal to 0.25% of your contract value. The
income appreciator benefit charge is calculated:
- on each contract anniversary,
- on the annuity date,
- upon the death of the sole owner or first to die of the owner or joint
owner prior to the annuity date,
- upon a full or partial withdrawal, and
- upon a subsequent purchase payment.
The fee is based on the contract value at the time of the calculation, and is
prorated based on the portion of the contract year since the date that the
income appreciator benefit charge was last calculated.
Although the income appreciator benefit charge may be calculated more often,
it is deducted only:
- on each contract anniversary,
- on the annuity date,
- upon the death of the sole owner or first to die of the owner or joint
owners prior to the annuity date,
- upon a full withdrawal, and
- upon a partial withdrawal if the contract value remaining after such
partial withdrawal is not enough to cover the then-applicable income
appreciator benefit charge.
We reserve the right to calculate and deduct the fee more frequently than
annually, such as quarterly.
The income appreciator benefit charge is deducted from each investment option
in the same proportion that the amount allocated to the investment option bears
to the total contract value. Upon a full
46
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PART II
STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
withdrawal, or if the contract value remaining after a partial withdrawal is not
enough to cover the then-applicable income appreciator benefit charge, the
charge is deducted from the amount paid. The payment of the income appreciator
benefit charge will be deemed to be made from earnings for purposes of
calculating other charges.
We no longer assess this charge upon election of IAB Option 1, the completion
of IAB Option 2 or 3, and upon annuitization.
CONTRACT MAINTENANCE CHARGE
We do not deduct a contract maintenance charge for administrative expenses while
your contract value is $75,000 or more. If your contract value is less than
$75,000 on a contract anniversary during the accumulation phase or when you make
a full withdrawal, we will deduct $35 (or a lower amount equal to 2% of your
contract value) for administrative expenses. (This fee may differ in certain
states.) We may increase this charge up to a maximum of $60 per year. Also, we
may raise the level of the contract value at which we waive this fee. We will
deduct this charge proportionately from each of your contract's investment
options.
WITHDRAWAL CHARGE
A withdrawal charge may apply if you make a full or partial withdrawal during
the withdrawal charge period for a purchase payment. The withdrawal charge may
also apply if you begin the income phase during the withdrawal charge period,
depending upon the annuity option you choose. The amount and duration of the
withdrawal charge depends on whether you choose the Contract With Credit or the
Contract Without Credit. The withdrawal charge varies with the number of
contract anniversaries that have elapsed since each purchase payment was made.
Specifically, we maintain an "age" for each purchase payment you have made by
keeping track of how many contract anniversaries have passed since the purchase
payment was made. The withdrawal charge is the percentage, shown below, of the
amount withdrawn.
In certain states reduced withdrawal charges may apply for certain ages under
the Contract with Credit. Your contract contains the applicable charges.
If a withdrawal is effective on the day before a contract anniversary, the
withdrawal charge percentage as of the following contract anniversary will
apply. If you request a withdrawal, we will deduct an amount from the contract
value that is sufficient to pay the withdrawal charge and provide you with the
amount requested.
If you request a full withdrawal, we will provide you with the full amount of
the contract value after making these deductions.
Each contract year, you may withdraw a specified amount of your contract
value without incurring a withdrawal charge. We make this "charge-free amount"
available to you subject to approval of this feature in your state. We determine
the charge-free amount available to you in a given contract year on the contract
anniversary that begins that year. In calculating the charge-free amount, we
divide purchase payments into two categories -- payments that are subject to a
withdrawal charge and those that are not. We determine the charge-free amount
based only on purchase payments that are subject to a withdrawal charge. The
charge-free amount in a given contract year is equal to 10% of the sum of all
the purchase payments subject to the withdrawal charge that you have made as of
the applicable contract anniversary. During the first contract year, the
charge-free amount is equal to 10% of the initial purchase payment.
47
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PART II
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When you make a withdrawal, we will first deduct the amount of the withdrawal
from purchase payments no longer subject to a withdrawal charge, and then from
the available charge-free amount, and will consider purchase payments to be paid
out on a first-in, first-out basis. Withdrawals in excess of the charge-free
amount will come first from purchase payments, also on a first-in, first-out
basis, and will be subject to withdrawal charges, if applicable, even if
earnings are available on the date of the withdrawal. Once you have withdrawn
all purchase payments, additional withdrawals will come from any earnings. We do
not impose withdrawal charges on earnings.
However, if a withdrawal or transfer is taken from a market value adjustment
guarantee period prior to the expiration of the rate guarantee period we will
make a market value adjustment.
If you choose the Contract With Credit and make a withdrawal that is subject
to a withdrawal charge, we may use part of that withdrawal charge to recoup our
costs of providing the credit.
Withdrawal charges will never be greater than permitted by applicable law.
If you surrender your contract, and later change your mind, we may allow you
to reinstate your contract during a limited period of time after the surrender.
For purposes of computing any withdrawal charge on a withdrawal you make after
the reinstatement, we will view the contract as having remained in effect
continuously. The minimal sales costs associated with reinstatements allow us to
offer this administrative option. Reinstatement will not reverse the tax
consequences or tax reporting associated with the surrender. See "What are the
Tax Considerations Associated with the Strategic Partners Plus Contract?" page
53.
WAIVER OF WITHDRAWAL CHARGES
CRITICAL CARE ACCESS
Except as restricted by applicable state law, we will waive all withdrawal
charges and any market value adjustment upon receipt of proof that the owner or
a joint owner is terminally ill, or has been confined to an eligible nursing
home or eligible hospital continuously for at least three months after the
contract date. We will also waive the contract maintenance charge if you
surrender your contract in accordance with the above noted conditions. This
waiver is not available if the owner has assigned ownership of the contract to
someone else.
MINIMUM DISTRIBUTION REQUIREMENTS
If a withdrawal is taken from a tax qualified contract in order to satisfy an
IRS mandatory distribution requirement only with respect to that contract's
account balance, we will waive withdrawal charges. See "What are the Tax
Considerations Associated with the Strategic Partners Plus Contract?" on page
53.
TAXES ATTRIBUTABLE TO PREMIUM
There are federal, state and local premium based taxes applicable to your
purchase payment. We are responsible for the payment of these taxes and may make
a deduction from the value of the contract to pay some or all of these taxes.
Some of these taxes are due when the contract is issued, others are due when the
annuity payments begin. It is our current practice not to deduct a charge for
state premium taxes until annuity payments begin. In the states that impose a
premium tax, the current rates range up to 3.5%. It is also our current practice
not to deduct a charge for the federal deferred acquisition costs paid by us
that are based on premium received. However, we reserve the right to charge the
contract owner in the future for any such deferred acquisition costs and any
federal, state or local income, excise, business or any other type of tax
measured by the amount of premium received by us.
TRANSFER FEE
You can make 12 free transfers every contract year. We measure a contract year
from the date we issue your contract, which is the contract date. If you make
more than 12 transfers in a contract year (excluding Dollar Cost Averaging and
Auto-Rebalancing), we will deduct a transfer fee of $25 for each additional
transfer. In the future we could raise that charge up to $30 per additional
transfer, although we have no current plans to do so. We will deduct the
transfer fee pro-rata from the investment options from which the transfer is
made.
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PART II
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In certain states, we may limit the transfer fee to a lower amount to comply
with applicable state law. Consult the Statement of Additional Information for
details.
COMPANY TAXES
We will pay the taxes on the earnings of the separate account. We do not
currently charge you for these taxes. We will periodically review the issue of
charging for these taxes and may impose a charge in the future.
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PART II
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7:
HOW CAN I
ACCESS MY MONEY?
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YOU CAN ACCESS YOUR MONEY BY:
- - MAKING A WITHDRAWAL (EITHER PARTIAL OR FULL); OR
- - CHOOSING TO RECEIVE ANNUITY PAYMENTS DURING THE INCOME PHASE.
WITHDRAWALS DURING THE ACCUMULATION PHASE
Following the free look period, when you make a full withdrawal, you will
receive the value of your contract minus any applicable charges and fees. We
will calculate the value of your contract and charges, if any, as of the date we
receive your request in good order at the Prudential Annuity Service Center.
Unless you tell us otherwise, we will take any partial withdrawal
proportionately from all of the investment options in which you have invested.
For a partial withdrawal, we will deduct any applicable charges and fees
proportionately from the investment options in your contract. The minimum amount
you may withdraw is $250. If, after a withdrawal, your contract value is less
than $2,000, we have the right to end your contract.
With respect to the variable investment options we will generally pay the
withdrawal amount, less any required tax withholding, within seven days after we
receive a withdrawal request in good order.
With respect to the market value adjustment option, you may specify the
guarantee period from which you would like to make a withdrawal. If you indicate
that the withdrawal is to originate from the market value adjustment option, but
you do not specify which guarantee period is to be involved, then we will take
the withdrawal from the guarantee period that has the least time remaining until
its maturity date. If you indicate that you wish to make a withdrawal, but do
not specify the investment options to be involved, then we will take the
withdrawal from your contract value on a pro rata basis from each investment
option that you have. In that situation, we will aggregate the contract value in
each of the guarantee periods that you have within the market value adjustment
option for purposes of making that pro rata calculation. The portion of the
withdrawal associated with the market value adjustment option then will be taken
from the guarantee periods with the least amount of time remaining until the
maturity date, irrespective of the original length of the guarantee period. You
should be aware that a withdrawal may avoid a withdrawal charge based on the
charge-free amount that we allow, yet still be subject to a market value
adjustment.
INCOME TAXES, TAX PENALTIES, AND CERTAIN RESTRICTIONS MAY APPLY TO ANY
WITHDRAWAL YOU MAKE. FOR A MORE COMPLETE EXPLANATION, SEE SECTION 8 OF THIS
PROSPECTUS.
AUTOMATED WITHDRAWALS
We offer an automated withdrawal feature. This feature enables you to receive
periodic withdrawals in monthly, quarterly, semiannual, or annual intervals. We
will process your withdrawals at the end of the business day at the intervals
you specify. We will continue at these intervals until you tell us otherwise.
You can make withdrawals from any designated investment option or proportionally
from all investment options, other than a guarantee period within the market
value adjustment option. The minimum automated withdrawal amount you can make is
$100.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO AUTOMATED
WITHDRAWALS. FOR A MORE COMPLETE EXPLANATION, SEE SECTION 8 OF THIS PROSPECTUS.
INCOME APPRECIATOR BENEFIT OPTIONS DURING THE ACCUMULATION PHASE
The income appreciator benefit (or "IAB") is discussed on page 36. As mentioned
there, you may choose IAB Option 1 at annuitization, but you may instead choose
IAB Options 2 or 3 during the accumulation phase of your contract. Income
appreciator benefit payments under IAB Options 2 and 3 will begin on the same
day of the month as the contract date, beginning with the next month following
our receipt of your request in good order. Under IAB Options 2 and 3, you can
choose to have the income appreciator benefit amounts paid or credited monthly,
quarterly, semi-annually, or annually.
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PART II
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IAB OPTIONS 2 AND 3 INVOLVE A TEN-YEAR PAYMENT PERIOD. IF THE 10-YEAR PAYMENT
PERIOD WOULD END AFTER THE ANNUITY DATE AND YOU CHOOSE AN ANNUITY SETTLEMENT
OPTION OTHER THAN ANY LIFETIME PAYOUT OPTION OR PERIOD CERTAIN OPTION OF AT
LEAST 15 YEARS OR YOU MAKE A FULL WITHDRAWAL, YOU MAY LOSE ALL OR ANY REMAINING
PORTION OF THE INCOME APPRECIATOR BENEFIT. IN SUCH INSTANCES, WE WOULD NOT
REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR THIS BENEFIT.
IAB OPTION 2 -- INCOME APPRECIATOR BENEFIT AUTOMATIC WITHDRAWAL PAYMENT PROGRAM
Under this option, you elect to receive the income appreciator benefit during
the accumulation phase. When you activate the benefit, a 10-year income
appreciator benefit automatic withdrawal payment program begins. We will pay you
the income appreciator benefit amount in equal installments over a 10 year
payment period. You may combine this income appreciator benefit amount with an
automated withdrawal amount from your contract value, in which case each
combined payment must be at least $100.
The maximum automated withdrawal payment amount that you may receive from
your contract value under this income appreciator benefit program in any
contract year during the 10-year period may not exceed 10% of the contract value
as of the date you activate the income appreciator benefit.
Once we calculate the income appreciator benefit, the amount will not be
affected by changes in contract value due to the investment performance of any
allocation option. Withdrawal charges may apply to automatic withdrawal payment
amounts, but not income appreciator benefit amounts, of the income appreciator
benefit program payments.
After the ten-year payment period has ended, if the remaining contract value
is $2,000 or more, the contract will continue. If the remaining contract value
is less than $2,000 after the end of the 10-year payment period, we will pay you
the remaining contract value and the contract will terminate. If the contract
value falls below the minimum amount required to keep the contract in force due
solely to investment results before the end of the 10-year payment period, we
will continue to pay the income appreciator benefit amount for the remainder of
the 10-year payment period.
DISCONTINUING THE INCOME APPRECIATOR BENEFIT AUTOMATIC WITHDRAWAL PAYMENT
PROGRAM UNDER IAB OPTION 2
You may discontinue the income appreciator benefit payment program under IAB
Option 2 and activate IAB Option 3 at any time after payments have begun and
before the last payment is made. We will add the remaining income appreciator
benefit amount to the contract value at the same frequency as your initial
election until the end of the 10-year payment period. We will treat any income
appreciator benefit amount added to the contract value as additional earnings.
Unless you direct us otherwise, we will allocate these additions to the variable
or fixed interest rate options in the same proportions as your most recent
purchase payment allocation percentages.
You may discontinue the income appreciator benefit payment program under IAB
Option 2 before the last payment is made and elect an annuity or settlement
option. We will add the balance of the income appreciator benefit amount for the
10-year payment period to the contract value in a lump sum before determining
the adjusted contract value. The adjusted contract value may be applied to any
annuity or settlement option that is paid over the lifetime of the annuitant,
joint annuitants, or a period certain of at least 15 years (but not to exceed
life expectancy).
IAB OPTION 3 -- INCOME APPRECIATOR BENEFIT CREDIT TO CONTRACT VALUE
Under this option, you can activate the income appreciator benefit and receive
the benefit as credits to your contract value over a 10-year payment period. We
will allocate these income appreciator benefit credits to the variable
investment options, the fixed interest rate options, or the market value
adjustment option in the same manner as your current allocation, unless you
direct us otherwise. We will calculate the income appreciator benefit amount on
the date we receive your written request in good order. Once we have calculated
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the income appreciator benefit, the income appreciator benefit credit will not
be affected by changes in contract value due to the investment performance of
any allocation option.
Before we add the last income appreciator benefit credit to your contract
value, you may switch to IAB Option 2 and receive the remainder of the income
appreciator benefit as payments to you (instead of credits to the contract
value) under the income appreciator benefit program for the remainder of the
10-year payment period.
You can also request that any remaining payments in the 10-year payment
period be applied to an annuity or settlement option that is paid over the
lifetime of the annuitants, joint annuitants, or a period certain of at least 15
years (but not to exceed life expectancy).
EXCESS WITHDRAWALS
During the 10 year period under IAB options 2 or 3, an "excess withdrawal"
occurs when any amount is withdrawn from your contract value in a contract year
that exceeds the sum of (1) 10% of the contract value as of the date the income
appreciator benefit was activated plus (2) earnings since the income appreciator
benefit was activated that have not been previously withdrawn.
We will deduct the excess withdrawal on a proportional basis from the
remaining income appreciator benefit amount. We will then calculate and apply a
new reduced income appreciator benefit amount.
Withdrawals you make in a contract year that do not exceed the sum of (1) 10%
of the contract value as of the date the income appreciator benefit was
activated plus (2) earnings since the income appreciator benefit was activated
that have not been previously withdrawn do not reduce the remaining income
appreciator benefit amount.
EFFECT OF TOTAL WITHDRAWAL ON INCOME APPRECIATOR BENEFIT
We will not make income appreciator benefit payments after the date you make a
total withdrawal of the contract surrender value.
SUSPENSION OF PAYMENTS OR TRANSFERS
The Securities and Exchange Commission (SEC) may require us to suspend or
postpone payments made in connection with withdrawals or transfers for any
period when:
- - The New York Stock Exchange is closed (other than customary weekend and
holiday closings);
- - Trading on the New York Stock Exchange is restricted;
- - An emergency exists, as determined by the SEC, during which sales and
redemptions of shares of the mutual funds are not feasible or we cannot
reasonably value the accumulation units; or
- - The Securities and Exchange Commission, by order, permits suspension or
postponement of payments for the protection of owners.
We expect to pay the amount of any withdrawal or transfer made from the fixed
interest rate options promptly upon request.
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8:
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC
PARTNERS PLUS CONTRACT?
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The tax considerations associated with the Strategic Partners Plus contract vary
depending on whether the contract is (i) owned by an individual and not
associated with a tax-favored retirement plan, or (ii) held under a tax-favored
retirement plan. We discuss the tax considerations for these categories of
contracts below. The discussion is general in nature and describes only federal
income tax law (not state or other tax laws). It is based on current law and
interpretations, which may change. It is not intended as tax advice. You should
consult with a qualified tax adviser for complete information and advice.
CONTRACTS OWNED BY INDIVIDUALS (NOT ASSOCIATED WITH TAX-FAVORED RETIREMENT
PLANS)
TAXES PAYABLE BY YOU
We believe the contract is an annuity contract for tax purposes. Accordingly, as
a general rule, you should not pay any tax until you receive money under the
contract.
Generally, annuity contracts issued by the same company (and affiliates) to
you during the same calendar year must be treated as one annuity contract for
purposes of determining the amount subject to tax under the rules described
below.
Subject to approval by your state, we offer supplemental benefits such as the
earnings appreciator benefit and the income appreciator benefit. Although we
believe these benefits are investment protection features that should have no
adverse tax consequences, it is possible that the Internal Revenue Service would
assert that some or all of the charges for the features should be treated for
federal income tax purposes as a partial withdrawal from the contract. It is
also possible that the Internal Revenue Service would assert that some or all of
the charges for the guaranteed minimum death benefit and guaranteed minimum
income benefit should be treated for federal income tax purposes as a partial
withdrawal from the contract. If this were the case, the charge for these
benefits could be deemed a withdrawal and treated as taxable to the extent there
are earnings in the contract. Additionally, for owners under age 59 1/2, the
taxable income attributable to the charge for the benefit could be subject to a
tax penalty.
If the Internal Revenue Service determines that the deductions for one or
more benefits under the contract -- including, without limitation, the
guaranteed minimum death benefit and the guaranteed minimum income benefit, and
any supplemental benefit added by endorsement -- are taxable withdrawals, then
the sole or surviving owner may cancel the affected benefit(s) within 90 days of
notice from us.
TAXES ON WITHDRAWALS AND SURRENDER
If you make a withdrawal from your contract or surrender it before annuity
payments begin, the amount you receive will be taxed as ordinary income, rather
than as return of purchase payments, until all gain has been withdrawn. You will
generally be taxed on any withdrawals from the contract while you are alive even
if the withdrawal is paid to someone else.
If you assign or pledge all or part of your contract as collateral for a
loan, the part assigned will be treated as a withdrawal. Also, if you elect the
interest payment option, that election will be treated, for tax purposes, as
surrendering your contract.
If you transfer your contract for less than full consideration, such as by
gift, you will trigger tax on the gain in the contract. This rule does not apply
if you transfer the contract to your spouse or under most circumstances if you
transfer the contract incident to divorce.
It is our position that the guaranteed minimum death benefit, the guaranteed
minimum income benefit, and other contract benefits are an integral part of the
annuity contract and accordingly that the charges made against the annuity
contract's cash value for the benefit should not be treated as distributions
subject to income tax. It is possible, however, that the Internal Revenue
Service could take the position that such charges should be treated as
distributions.
TAXES ON ANNUITY PAYMENTS
A portion of each annuity payment you receive will be treated as a partial
return of your purchase payments and will not be taxed. The remaining portion
will be taxed as ordinary income. Generally, the nontaxable portion is
determined by multiplying the annuity payment you receive by a fraction, the
numerator of which is your
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PART II
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purchase payments (less any amounts previously received tax-free) and the
denominator of which is the total expected payments under the contract.
After the full amount of your purchase payments have been recovered tax-free,
the full amount of the annuity payments will be taxable. If annuity payments
stop due to the death of the annuitant before the full amount of your purchase
payments have been recovered, a tax deduction may be allowed for the unrecovered
amount.
TAX PENALTY ON WITHDRAWALS AND ANNUITY PAYMENTS
Any taxable amount you receive under your contract may be subject to a 10% tax
penalty. Amounts are not subject to this tax penalty if:
- - the amount is paid on or after you reach age 59 1/2 or die;
- - the amount received is attributable to your becoming disabled;
- - the amount paid or received is in the form of level annuity payments not less
frequently than annually under a lifetime annuity;
TAXES PAYABLE BY BENEFICIARIES
All of the death benefit options are subject to income tax to the extent the
distribution exceeds the adjusted basis in the contract and the full value of
the death benefit is included in the owner's estate. Generally, the same tax
rules described above would also apply to amounts received by your beneficiary.
Choosing an annuity payment option instead of a lump sum death benefit may defer
taxes. Certain minimum distribution requirements apply upon your death, as
discussed further below. Tax consequences to the beneficiary vary among the
death benefit payment options.
- - Choice 1: the beneficiary is taxed on earnings in the contract.
- - Choice 2: the beneficiary is taxed as amounts are withdrawn (In this case
earnings are treated as being distributed first).
- - Choice 3: the beneficiary is taxed on each payment (part will be treated as
earnings and part as return of premiums).
REPORTING AND WITHHOLDING ON DISTRIBUTIONS
Taxable amounts distributed from your annuity contracts are subject to federal
and state income tax reporting and withholding. In general, we will withhold
federal income tax from the taxable portion of such distribution based on the
type of distribution. In the case of an annuity or similar periodic payment, we
will withhold as if you are a married individual with 3 exemptions unless you
designate a different withholding status. In the case of all other
distributions, we will withhold at a 10% rate. You may generally elect not to
have tax withheld from your payments. An election out of withholding must be
made on forms that we provide.
State income tax withholding rules vary and we will withhold based on the
rules of your State of residence. Special tax rules apply to withholding for
nonresident aliens, and we generally withhold income tax for nonresident aliens
at a 30% rate. A different withholding rate may be applicable to a nonresident
alien based on the terms of an existing income tax treaty between the United
States and the nonresident alien's country. Please refer to the CONTRACTS HELD
BY TAX FAVORED PLANS section for withholding rules for tax favored plans (for
example, an IRA).
Regardless of the amount withheld by us, you are liable for payment of
federal and state income tax on the taxable portion of annuity distributions.
You should consult with your tax advisor regarding the payment of the correct
amount of these income taxes and potential liability if you fail to pay such
taxes.
ANNUITY QUALIFICATION
Diversification And Investor Control In order to qualify for the tax rules
applicable to annuity contracts described above, the contract must be an annuity
contract for tax purposes. This means that the assets underlying the annuity
contract must be diversified, according to certain rules. It also means that we,
and not you as the contract-owner, must have sufficient control over the
underlying assets to be treated as the owner of the underlying assets for tax
purposes. We believe these rules, which are further discussed in the Statement
of Additional Information, will be met.
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PART II
STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
Required Distributions Upon Your Death Upon your death (or the death of a
joint owner, if earlier), certain distributions must be made under the contract.
The required distributions depend on whether you die before you start taking
annuity payments under the contract or after you start taking annuity payments
under the contract.
If you die on or after the annuity date, the remaining portion of the
interest in the contract must be distributed at least as rapidly as under the
method of distribution being used as of the date of death.
If you die before the annuity date, the entire interest in the contract must
be distributed within 5 years after the date of death. However, if an annuity
payment option is selected by your designated beneficiary and if annuity
payments begin within 1 year of your death, the value of the contract may be
distributed over the beneficiary's life or a period not exceeding the
beneficiary's life expectancy. Your designated beneficiary is the person to whom
benefit rights under the contract pass by reason of death, and must be a natural
person in order to elect an annuity payment option based on life expectancy or a
period exceeding five years.
If any portion of the contract is payable to (or for the benefit of) your
surviving spouse, that portion of the contract may be continued with your spouse
as the owner.
Changes In The Contract We reserve the right to make any changes we deem
necessary to assure that the contract qualifies as an annuity contract for tax
purposes. Any such changes will apply to all contract owners and you will be
given notice to the extent feasible under the circumstances.
ADDITIONAL INFORMATION
You should refer to the Statement of Additional Information if:
- - The contract is held by a corporation or other entity instead of by an
individual or as agent for an individual.
- - Your contract was issued in exchange for a contract containing purchase
payments made before August 14, 1982.
- - You transfer your contract to, or designate, a beneficiary who is either
37 1/2 years younger than you or a grandchild.
CONTRACTS HELD BY TAX FAVORED PLANS
The following discussion covers annuity contracts held under tax-favored
retirement plans. Currently, the contract may be purchased for use in connection
with individual retirement accounts and annuities (IRAs) which are subject to
Sections 408(a), 408(b) and 408A of the Internal Revenue Code of 1986, as
amended (Code). This description assumes that you have satisfied the
requirements for eligibility for these products.
YOU SHOULD BE AWARE THAT TAX FAVORED PLANS SUCH AS IRAS GENERALLY PROVIDE TAX
DEFERRAL REGARDLESS WHETHER THEY INVEST IN ANNUITY CONTRACTS. THIS MEANS THAT
WHEN A TAX FAVORED PLAN INVESTS IN AN ANNUITY CONTRACT, IT GENERALLY DOES NOT
RESULT IN ANY ADDITIONAL TAX DEFERRAL BENEFITS.
TYPES OF TAX FAVORED PLANS
IRAs If you buy a contract for use as an IRA, we will provide you a copy of
the prospectus and contract. The "IRA Disclosure Statement" on page 64 contains
information about eligibility, contribution limits, tax particulars, and other
IRA information. In addition to this information (some of which is summarized
below), the IRS requires that you have a "free look" after making an initial
contribution to the contract. During this time, you can cancel the contract by
notifying us in writing, and we will refund all of the purchase payments under
the contract (or, if provided by applicable state law, the amount credited under
the contract, calculated as of the date that we receive this cancellation
notice, if greater), less any applicable federal and state income tax
withholding.
Contributions Limits/Rollovers: Because of the way the contract is designed,
you may only purchase a contract for an IRA in connection with a "rollover" of
amounts from a qualified retirement plan or transfer from another IRA. You must
make a minimum initial payment of $10,000 to purchase a contract. This minimum
is greater than the maximum amount of any annual contribution allowed by law you
may make to an IRA. For 2002 to 2004 the limit is $3,000; increasing in
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PART II
STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
2005 to 2007, to $4,000; and for 2008, $5,000. After 2008 the contribution
amount will be indexed for inflation. The tax law also provides for a catch-up
provision for individuals who are age 50 and above. These taxpayers will be
permitted to contribute an additional $500 in years 2002 to 2005 and an
additional $1,000 in 2006 and years thereafter). The "rollover" rules under the
Code are fairly technical; however, an individual (or his or her surviving
spouse) may generally "roll over" certain distributions from tax favored
retirement plans (either directly or within 60 days from the date of these
distributions) if he or she meets the requirements for distribution. Once you
buy the contract, you can make regular IRA contributions under the contract (to
the extent permitted by law). However, if you make such regular IRA
contributions, you should note that you will not be able to treat the contract
as a "conduit IRA," which means that you will not retain possible favorable tax
treatment if you subsequently "roll over" the contract funds originally derived
from a qualified retirement plan or TDA into another Section 401(a) plan or TDA.
Required Provisions: Contracts that are IRAs (or endorsements that are part
of the contract) must contain certain provisions:
- - You, as owner of the contract, must be the "annuitant" under the contract
(except in certain cases involving the division of property under a decree of
divorce);
- - Your rights as owner are non-forfeitable;
- - You cannot sell, assign or pledge the contract, other than to Pruco Life;
- - The annual premium you pay cannot be greater than the maximum amount allowed
by law, including catch-up contributions if applicable (which does not
include any rollover amounts);
- - The date on which annuity payments must begin cannot be later than the April
1st of the calendar year after the calendar year you turn age 70 1/2; and
- - Death and annuity payments must meet "minimum distribution requirements"
(described below).
Usually, the full amount of any distribution from an IRA (including a
distribution from this contract) which is not a rollover is taxable. As taxable
income, these distributions are subject to the general tax withholding rules
described earlier. In addition to this normal tax liability, you may also be
liable for the following, depending on your actions:
- - A 10% "early distribution penalty" (described below);
- - Liability for "prohibited transactions" if you, for example, borrow against
the value of an IRA; or
- - Failure to take a minimum distribution (also generally described below).
ROTH IRAs Like standard IRAs, income within a Roth IRA accumulates tax-free,
and contributions are subject to specific limits. Roth IRAs have, however, the
following differences:
- - Contributions to a Roth IRA cannot be deducted from your gross income;
- - "Qualified distributions" (generally, held for 5 tax years and payable on
account of death, disability, attainment of age 59 1/2, or first
time-homebuyer) from Roth IRAs are excludable from your gross income; and
- - If eligible, you may make contributions to a Roth IRA after attaining age
70 1/2, and distributions are not required to begin upon attaining such age
or at any time thereafter.
Because the contract's minimum initial payment of $10,000 is greater than the
maximum annual contribution permitted to be made to a Roth IRA, you may purchase
a contract as a Roth IRA only in connection with a "rollover" or "conversion" of
the proceeds of another traditional IRA, conduit IRA, SEP, SIMPLE-IRA, or Roth
IRA. The Code permits persons who meet certain income limitations (generally,
adjusted gross income under $100,000), and who receive certain qualifying
distributions from such non-Roth IRAs, to directly rollover or make, within 60
days, a "rollover" of all or any part of the amount of such distribution to a
Roth IRA which they establish. This conversion triggers current taxation (but is
not subject to a 10% early distribution penalty). Once the contract has been
purchased, regular Roth IRA contributions will be accepted to the extent
permitted by law.
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PART II
STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
MINIMUM DISTRIBUTION REQUIREMENTS AND PAYMENT OPTION
If you hold the contract under an IRA (or other tax-favored plan), IRS minimum
distribution requirements must be satisfied. This means that payments must start
by April 1 of the year after the year you reach age 70 1/2 and must be made for
each year thereafter. The amount of the payment must at least equal the minimum
required under the IRS rules. Several choices are available for calculating the
minimum amount, including a new method permitted under IRS regulations released
in April 2002. More information on the mechanics of this calculation is
available on request. Please contact us a reasonable time before the IRS
deadline so that a timely distribution is made. Please note that there is a 50%
IRS penalty tax on the amount of any minimum distribution not made in a timely
manner.
You can use the Minimum Distribution option to satisfy the IRS minimum
distribution requirements for this contract without either beginning annuity
payments or surrendering the contract. We will send you a check for this minimum
distribution amount, less any other partial withdrawals that you made during the
year.
PENALTY FOR EARLY WITHDRAWALS
You may owe a 10% tax penalty on the taxable part of distributions received from
an IRA, SEP, SIMPLE-IRA (which may increase to 25%), Roth IRA, TDA or qualified
retirement plan before you attain age 59 1/2. There are only limited exceptions
to this tax, and you should consult your tax adviser for further details.
WITHHOLDING
Unless a distribution is an eligible rollover distribution that is "directly"
rolled over into another qualified plan, IRA (including the IRA variations
described above), SEP, 457 government plan or TDA, we will withhold at the rate
of 20%. This 20% withholding does not apply to distributions from IRAs and Roth
IRAs. For all other distributions, unless you elect otherwise, we will withhold
federal income tax from the taxable portion of such distribution at an
appropriate percentage. The rate of withholding on annuity payments where no
mandatory withholding is required is determined on the basis of the withholding
certificate that you file with us. If you do not file a certificate, we will
automatically withhold federal taxes on the following basis:
- - For any annuity payments not subject to mandatory withholding, you will have
taxes withheld by us as if you are a married individual, with 3 exemptions;
and
- - For all other distributions, we will withhold at a 10% rate.
We will provide you with forms and instructions concerning the right to elect
that no amount be withheld from payments in the ordinary course. However, you
should know that, in any event, you are liable for payment of federal income
taxes on the taxable portion of the distributions, and you should consult with
your tax advisor to find out more information on your potential liability if you
fail to pay such taxes.
ERISA DISCLOSURE/REQUIREMENTS
ERISA (the "Employee Retirement Income Security Act of 1974") and the Code
prevents a fiduciary and other "parties in interest" with respect to a plan
(and, for these purposes, an IRA would also constitute a "plan") from receiving
any benefit from any party dealing with the plan, as a result of the sale of the
contract. Administrative exemptions under ERISA generally permit the sale of
insurance/annuity products to plans, provided that certain information is
disclosed to the person purchasing the contract. This information has to do
primarily with the fees, charges, discounts and other costs related to the
contract, as well as any commissions paid to any agent selling the contract.
Information about any applicable fees, charges, discounts, penalties or
adjustments may be found under "What are the Expenses Associated with the
Strategic Partners Plus Contract" starting on page 45.
Information about sales representatives and commissions may be found under
"Other Information" and "Sale and Distribution of the Contract" on page 59.
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In addition, other relevant information required by the exemptions is
contained in the contract and accompanying documentation. Please consult your
tax advisor if you have any additional questions.
SPOUSAL CONSENT RULES FOR RETIREMENT PLANS -- QUALIFIED CONTRACTS
If you are married at the time your payments commence, you may be required by
federal law to choose an income option that provides survivor annuity income to
your spouse, unless your spouse waives that right. Similarly, if you are married
at the time of your death, federal law may require all or a portion of the death
benefit to be paid to your spouse, even if you designated someone else as your
beneficiary. A brief explanation of the applicable rules follows. For more
information, consult the terms of your retirement arrangement.
Defined Benefit Plans, Money Purchase Pension Plans, and ERISA 403(b)
Annuities. If you are married at the time your payments commence, federal law
requires that benefits be paid to you in the form of a "qualified joint and
survivor annuity" ("QJSA"), unless you and your spouse waive that right, in
writing. Generally, this means that you will receive a reduced payment during
your life and, upon your death, your spouse will receive at least one-half of
what you were receiving for life. You may elect to receive another income option
if your spouse consents to the election and waives his or her right to receive
the QJSA. If your spouse consents to the alternative form of payment, your
spouse may not receive any benefits from the plan upon your death. Federal law
also requires that the plan pay a death benefit to your spouse if you are
married and die before you begin receiving your benefit. This benefit must be
available in the form of an annuity for your spouse's lifetime and is called a
"qualified pre-retirement survivor annuity" ("QPSA"). If the plan pays death
benefits to other beneficiaries, you may elect to have a beneficiary other than
your spouse receive the death benefit, but only if your spouse consents to the
election and waives his or her right to receive the QPSA. If your spouse
consents to the alternate beneficiary, your spouse will receive no benefits from
the plan upon your death. Any QPSA waiver prior to your attaining age 35 will
become null and void on the first day of the calendar year in which you attain
age 35, if still employed.
Defined Contribution Plans (including 401(k) Plans). Spousal consent to a
distribution is generally not required. Upon your death, your spouse will
receive the entire death benefit, even if you designated someone else as your
beneficiary, unless your spouse consents in writing to waive this right. Also,
if you are married and elect an annuity as a periodic income option, federal law
requires that you receive a QJSA (as described above), unless you and your
spouse consent to waive this right.
IRAs, non-ERISA 403(b) Annuities, and 457 Plans. Spousal consent to a
distribution is not required. Upon your death, any death benefit will be paid to
your designated beneficiary.
ADDITIONAL INFORMATION
For additional information about federal tax law requirements applicable to tax
favored plans, see the "IRA Disclosure Statement" on page 64.
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9:
OTHER
INFORMATION
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PRUCO LIFE INSURANCE COMPANY
Pruco Life Insurance Company (Pruco Life) is a stock life insurance company
organized in 1971 under the laws of the State of Arizona. It is licensed to sell
life insurance and annuities in the District of Columbia, Guam and in all states
except New York. Pruco Life is a wholly-owned subsidiary of The Prudential
Insurance Company of America (Prudential), a New Jersey stock life insurance
company that has been doing business since 1875. Prudential is an indirect
wholly-owned subsidiary of Prudential Financial, Inc. (Prudential Financial), a
New Jersey insurance holding company. As Pruco Life's ultimate parent,
Prudential Financial exercises significant influence over the operations and
capital structure of Pruco Life and Prudential. However, neither Prudential
Financial, Prudential, nor any other related company has any legal
responsibility to pay amounts that Pruco Life may owe under the contract.
Pruco Life publishes annual and quarterly reports that are filed with the
SEC. These reports contain financial information about Pruco Life that is
annually audited by independent accountants. Pruco's Life annual report for the
year ended December 31, 2002, together with subsequent periodic reports that
Pruco Life files with the SEC, are incorporated by reference into this
prospectus. You can obtain copies, at no cost, of any and all of this
information, including the Pruco Life annual report that is not ordinarily
mailed to contractholders, the more current reports and any subsequently filed
documents at no cost by contacting us at the address or telephone number listed
on the cover. You may read and copy any filings made by Pruco Life with the SEC
at the SEC's Public Reference Room at 450 Fifth Street, Washington, D.C. 20549.
You can obtain information on the operation of the Public Reference Room by
calling 1-800-SEC-0330. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC at http://www.sec.gov.
THE SEPARATE ACCOUNT
We have established a separate account, the Pruco Life Flexible Premium Variable
Annuity Account (the "separate account"), to hold the assets that are associated
with the contracts. The separate account was established under Arizona law on
June 16, 1995, and is registered with the U.S. Securities and Exchange
Commission under the Investment Company Act of 1940 as a unit investment trust,
which is a type of investment company. The assets of the separate account are
held in the name of Pruco Life and legally belong to us. These assets are kept
separate from all of our other assets and may not be charged with liabilities
arising out of any other business we may conduct. More detailed information
about Pruco Life, including its audited financial statements, appears in the
Statement of Additional Information.
RISK FACTORS
There are various risks associated with the purchase of the market value
adjustment option that we summarize below.
ISSUER RISK. Your market value adjustment option is issued by Pruco Life, and
thus is backed by the financial strength of that company. If Pruco Life were to
experience significant financial adversity, it is possible that Pruco Life's
ability to pay interest and principal under the market value adjustment option
could be impaired.
RISKS RELATED TO CHANGING INTEREST RATES. You do not participate directly in
the investment experience of the bonds and other instruments that Pruco Life
holds to support the market value adjustment option. Nonetheless, the market
value adjustment formula (which is detailed in the appendix to this prospectus)
reflects the effect that prevailing interest rates have on those bonds and other
instruments. If you need to withdraw your money during a period in which
prevailing interest rates have risen above their level when you made your
purchase, you will experience a "negative" market value adjustment. When we
impose this market value adjustment, it could result in the loss of both the
interest you have earned and a portion of your purchase payments. Thus, before
you commit to a particular guarantee period, you should consider carefully
whether you have the ability to remain in the
59
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OTHER INFORMATION CONTINUED
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PART II
STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
contract throughout the guarantee period. In addition, we cannot, of course,
assure you that the market value adjustment option will perform better than
another investment that you might have made.
RISKS RELATED TO THE WITHDRAWAL CHARGE. We impose withdrawal charges under
the variable annuities that offer the market value adjustment option as a
companion option. If you anticipate needing to withdraw your money prior to the
end of a guarantee period, you should be prepared to pay the withdrawal charge
that we will impose.
SALE AND DISTRIBUTION OF THE CONTRACT
Prudential Investment Management Services LLC ("PIMS"), 100 Mulberry Street,
Newark, New Jersey 07102-4077, acts as the distributor of the contracts under a
"best efforts" underwriting agreement with Pruco Life under which PIMS is
reimbursed for its costs and expenses. PIMS is an indirect wholly-owned
subsidiary of Prudential Financial, Inc. and is a limited liability corporation
organized under Delaware law in 1996. It is a registered broker-dealer under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc.
We pay the broker-dealer whose registered representatives sell the contract
either:
- - a commission of up to 8% of your purchase payments; or
- - a combination of a commission on purchase payments and a "trail"
commission -- which is a commission determined as a percentage of your
contract value that is paid periodically over the life of your contract.
The commission amount quoted above is the maximum amount which is paid. In most
circumstances, the registered representative who sold the contract will receive
significantly less. We will generally pay less compensation with respect to
contracts issued to customers over 80 years old.
From time to time, Prudential or its affiliates may offer and pay non-cash
compensation to registered representatives who sell the contract. For example,
Prudential or an affiliate may pay for a training and education meeting that is
attended by registered representatives of both Prudential-affiliated broker-
dealers and independent broker-dealers. Prudential and its affiliates retain
discretion as to which broker-dealers to offer non-cash (and cash) compensation
arrangements, and will comply with NASD rules and other pertinent laws in making
such offers and payments. Our payment of cash or non-cash compensation in
connection with sales of the contract does not result directly in any additional
charge to you.
ASSIGNMENT
You can assign the contract at any time during your lifetime. If you do so, we
will reset the death benefit to equal the contract value on the date the
assignment occurs. For details, see "What is the Death Benefit," on page 38. We
will not be bound by the assignment until we receive written notice. We will not
be liable for any payment or other action we take in accordance with the
contract if that action occurs before we receive notice of the assignment. An
assignment, like any other change in ownership, may trigger a taxable event.
If the contract is issued under a qualified plan, there may be limitations on
your ability to assign the contract. For further information please speak to
your representative.
FINANCIAL STATEMENTS
The financial statements of the separate account associated with Strategic
Partners Plus are included in the Statement of Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
Contents:
- - Company
- - Experts
- - Litigation
- - Principal Underwriter
- - Determination of Accumulation Unit Values
- - Performance Information
- - Comparative Performance Information and Advertising
- - Federal Tax Status
- - State Specific Variations
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- - Directors and Officers
- - Financial Statements
HOUSEHOLDING
To reduce costs, we now send only a single copy of prospectuses and shareholder
reports to each consenting household, in lieu of sending a copy to each
contractholder that resides in the household. If you are a member of such a
household, you should be aware that you can revoke your consent to householding
at any time, and begin to receive your own copy of prospectuses and shareholder
reports, by calling 1-877-778-5008.
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MARKET-VALUE
ADJUSTMENT FORMULA
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MARKET-VALUE ADJUSTMENT FORMULA
GENERAL FORMULA
The formula under which Pruco Life calculates the market value adjustment
applicable to a full or partial surrender, annuitization, or settlement under
the market value adjustment option is set forth below. The market value
adjustment is expressed as a multiplier factor. That is, the Contract Value
after the market value adjustment ("MVA"), but before any surrender charge, is
as follows: Contract Value (after MVA) = Contract Value (before MVA) X (1 +
MVA). The MVA itself is calculated as follows:
1 + I
MVA = [(-----------)to the N/12 power] -1
1 + J + .0025
PENNSYLVANIA FORMULA
We use the same MVA formula with respect to contracts issued in Pennsylvania as
the general formula, except that "J" in the formula above uses an interpolated
rate as the current credited interest rate. Specifically, "J" is the
interpolated current credited interest rate offered on new money at the time of
withdrawal, annuitization, or settlement. The interpolated value is calculated
using the following formula:
m/365 X (n + 1) year rate + (365 - m)/365 X n year rate,
where "n" equals the number of whole years remaining in the Contract's current
guarantee period, and "m" equals the number of days remaining in year "n" of the
current guarantee period.
INDIANA FORMULA
We use the following MVA formula for contracts issued in Indiana:
1 + I
MVA = [(-----------)to the N/12 power] -1
1 + J
The variables I, J and N retain the same definitions as the general formula.
MARKET VALUE ADJUSTMENT EXAMPLE
(ALL STATES EXCEPT INDIANA AND PENNSYLVANIA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.05 + 0.0025)]to the (38/12)
power -1 = 0.02274
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.02274 = $253.03
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $253.03 = $11,380.14
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The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.07 + 0.0025)] to the(38/12)
power -1 = -0.03644
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.03644) = -$405.47
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$405.47) = $10,721.64
MARKET VALUE ADJUSTMENT EXAMPLE
(PENNSYLVANIA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 3 years (the number of whole years remaining) is 4%, and for a
guarantee period of 4 years (the number of whole years remaining plus 1) is
5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.0417 + 0.0025)] to the
(38/12) power-1 = 0.04902
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.04902 = $545.45
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $545.45 = $11,672.56
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 3 years (the number of whole years remaining) is 7%, and for a
guarantee period of 4 years (the number of whole years remaining plus 1) is
8%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.0717 + 0.0025)] to the
(38/12) power-1 = -0.04098
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.04098) = -$455.99
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MARKET-VALUE ADJUSTMENT FORMULA CONTINUED
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PART II
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3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$455.99) = $10,671.12
MARKET VALUE ADJUSTMENT EXAMPLE
(INDIANA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
POSITIVE MARKET VALUE ADJUSTMENT
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.05)] to the (38/12) power-1 =
0.03047
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 x 0.03047 = $339.04
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $339.04 = $11,466.15
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.07)]to the (38/12) power -1
= -0.02930
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.02930) = -$326.02
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$326.02) = $10,801.09
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.07)] to the (38/12) power-1 =
-0.02930
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 x (-0.02930) = -$326.02
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$326.02) = $10,801.09
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IRA DISCLOSURE STATEMENT
- --------------------------------------------------------------------------------
This statement is designed to help you understand the requirements of federal
tax law which apply to your individual retirement annuity (IRA), your Roth IRA,
your simplified employee pension IRA (SEP) for employer contributions, your
Savings Incentive Match Plan for Employees (SIMPLE) IRA, or to one you purchase
for your spouse. You can obtain more information regarding your IRA either from
your sales representative or from any district office of the Internal Revenue
Service. Those are federal tax law rules; state tax laws may vary.
FREE LOOK PERIOD
The annuity contract offered by this prospectus gives you the opportunity to
return the contract for a full refund (less any applicable federal and state
income tax withholding) within 10 days (or whatever period is required by
applicable state law) after it is delivered. This is a more liberal provision
than is required in connection with IRAs. To exercise this "free-look"
provision, return the contract to the representative who sold it you or to the
Prudential Annuity Service Center at the address shown on the first page of this
prospectus.
ELIGIBILITY REQUIREMENTS
IRAs are intended for all persons with earned compensation whether or not they
are covered under other retirement programs. Additionally, if you have a
non-working spouse (and you file a joint tax return), you may establish an IRA
on behalf of your non-working spouse. A working spouse may establish his or her
own IRA. A divorced spouse receiving taxable alimony (and no other income) may
also establish an IRA.
CONTRIBUTIONS AND DEDUCTIONS
Contributions to your IRA will be deductible if you are not an "active
participant" in an employer maintained qualified retirement plan or you have
"Adjusted Gross Income" (as defined under Federal tax laws) which does not
exceed the "applicable dollar limit." IRA (or SEP) contributions must be made by
no later than the due date for filing your income tax return for that year,
excluding extensions (generally by April 15th). For a single taxpayer, the
applicable dollar limitation is $40,000 in 2003, with the amount of IRA
contribution which may be deducted reduced proportionately for Adjusted Gross
Income between $40,000-$50,000. For married couples filing jointly, the
applicable dollar limitation is $60,000, with the amount of IRA contribution
which may be deducted reduced proportionately between $60,000-$70,000. There is
no deduction allowed for IRA contributions when Adjusted Gross Income reaches
$50,000 for individuals and $70,000 for married couples filing jointly. Income
limits are scheduled to increase until 2006 for single taxpayers and 2007 for
married taxpayers.
Contributions made by your employer to your SEP are excludable from your
gross income for tax purposes in the calendar year for which the amount is
contributed. Certain employees who participate in a SEP will be entitled to
elect to have their employer make contributions to their SEP on their behalf or
to receive the contributions in cash. If the employee elects to have
contributions made on the employee's behalf to the SEP, those funds are not
treated as current taxable income to the employee. Elective deferrals under a
SEP are limited to $12,000 in 2003, with a permitted catch-up contribution of
$2,000 for individuals age 50 and above. Contribution limits and catch-up
contribution limits are scheduled to increase through 2006 and are indexed for
inflation thereafter. Salary-reduction SEPs (also called "SARSEPs") are
available only if at least 50% of the employees elect to have amounts
contributed to the SARSEP and if the employer has 25 or fewer employees at all
times during the preceding year. New SARSEPs may not be established after 1996.
The IRA maximum annual contribution is limited to the lesser of: (1) the
maximum amount allowed by law, including catch-up contributions if applicable,
or (2) 100% of your earned compensation. Contributions in excess of these limits
may be subject to penalty. See below.
Under a SEP agreement, the maximum annual contribution which your employer
may make on your behalf to a SEP contract that is excludable from your income is
the lesser of 25% of your salary or $40,000. An employee who is a participant in
a SEP agreement
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IRA DISCLOSURE STATEMENT CONTINUED
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PART II
STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
may make after-tax contributions to the SEP contract, subject to the
contribution limits applicable to IRAs in general. Those employee contributions
will be deductible subject to the deductibility rules described above.
The maximum tax deductible annual contribution that a divorced spouse with no
other income may make to an IRA is the lesser of (1) the maximum amount allowed
by law, including catch-up contributions if applicable or (2) 100% of taxable
alimony.
If you or your employer should contribute more than the maximum contribution
amount to your IRA or SEP, the excess amount will be considered an "excess
contribution." You are permitted to withdraw an excess contribution from your
IRA or SEP before your tax filing date without adverse tax consequences. If,
however, you fail to withdraw any such excess contribution before your tax
filing date, a 6% excise tax will be imposed on the excess for the tax year of
contribution.
Once the 6% excise tax has been imposed, an additional 6% penalty for the
following tax year can be avoided if the excess is (1) withdrawn before the end
of the following year, or (2) treated as a current contribution for the
following year. (See Premature Distributions below for penalties imposed on
withdrawal when the contribution exceeds the maximum amount allowed by law,
including catch-up contributions if applicable.)
IRA FOR NON-WORKING SPOUSE
If you establish an IRA for yourself, you may also be eligible to establish an
IRA for your "non-working" spouse. In order to be eligible to establish such a
spousal IRA, you must file a joint tax return with your spouse and, if your
non-working spouse has compensation, his/her compensation must be less than your
compensation for the year. Contributions of up to the maximum amount allowed by
law, including catch-up contributions if applicable, may be made to your IRA and
the spousal IRA if the combined compensation of you and your spouse is at least
equal to the amount contributed. If requirements for deductibility (including
income levels) are met, you will be able to deduct an amount equal to the least
of (i) the amount contributed to the IRAs; (ii) twice the maximum amount allowed
by law, including catch-up contributions if applicable; or (iii) 100% of your
combined gross income.
Contributions in excess of the contribution limits may be subject to penalty.
See page 64 under "Contributions and Deductions." If you contribute more than
the allowable amount, the excess portion will be considered an excess
contribution. The rules for correcting it are the same as discussed above for
regular IRAs.
Other than the items mentioned in this section, all of the requirements
generally applicable to IRAs are also applicable to IRAs established for
non-working spouses.
ROLLOVER CONTRIBUTION
Once every year, you are permitted to withdraw any portion of the value of your
IRA or SEP and reinvest it in another IRA or bond. Withdrawals may also be made
from other IRAs and contributed to this contract. This transfer of funds from
one IRA to another is called a "rollover" IRA. To qualify as a rollover
contribution, the entire portion of the withdrawal must be reinvested in another
IRA within 60 days after the date it is received. You will not be allowed a
tax-deduction for the amount of any rollover contribution.
A similar type of rollover to an IRA can be made with the proceeds of a
qualified distribution from a qualified retirement plan or tax-sheltered
annuity. Properly made, such a distribution will not be taxable until you
receive payments from the IRA created with it. You may later roll over such a
contribution to another qualified retirement plan. (You may roll less than all
of a qualified distribution into an IRA, but any part of it not rolled over will
be currently includable in your income without any capital gains treatment.)
Funds can also be rolled over from an IRA or SEP to another IRA or SEP or to
another qualified retirement plan or 457 government plan.
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DISTRIBUTIONS
(a) PREMATURE DISTRIBUTIONS
At no time can your interest in your IRA or SEP be forfeited. To insure that
your contributions will be used for retirement, the federal tax law does not
permit you to use your IRA or SEP as security for a loan. Furthermore, as a
general rule, you may not sell or assign your interest in your IRA or SEP to
anyone. Use of an IRA (or SEP) as security or assignment of it to another will
invalidate the entire annuity. It then will be includable in your income in the
year it is invalidated and will be subject to a 10% tax penalty if you are not
at least age 59 1/2 or totally disabled. (You may, however, assign your IRA or
SEP without penalty to your former spouse in accordance with the terms of a
divorce decree.)
You may surrender any portion of the value of your IRA (or SEP). In the case
of a partial surrender which does not qualify as a rollover, the amount
withdrawn will be includable in your income and subject to the 10% penalty if
you are not at least age 59 1/2 or totally disabled unless you comply with
special rules requiring distributions to be made at least annually over your
life expectancy.
The 10% tax penalty does not apply to the withdrawal of an excess
contribution as long as the excess is withdrawn before the due date of your tax
return. Withdrawals of excess contributions after the due date of your tax
return will generally be subject to the 10% penalty unless the excess
contribution results from erroneous information from a plan trustee making an
excess rollover contribution or unless you are over age 59 1/2 or are disabled.
(b) DISTRIBUTION AFTER AGE 59 1/2
Once you have attained age 59 1/2 (or have become totally disabled), you may
elect to receive a distribution of your IRA (or SEP) regardless of when you
actually retire. In addition, you must commence distributions from your IRA by
April 1 following the year you attain age 70 1/2. You may elect to receive the
distribution under any one of the periodic payment options available under the
contract. The distributions from your IRA under any one of the periodic payment
options or in one sum will be treated as ordinary income as you receive them to
the degree that you have made deductible contributions. If you have made both
deductible and nondeductible contributions, the portion of the distribution
attributable to the nondeductible contribution will be tax-free.
(c) INADEQUATE DISTRIBUTIONS--50% TAX
Your IRA or SEP is intended to provide retirement benefits over your lifetime.
Thus, federal tax law requires that you either (1) receive a lump-sum
distribution of your IRA by April 1 of the year following the year in which you
attain age 70 1/2 or (2) start to receive periodic payments by that date. If you
elect to receive periodic payments, those payments must be sufficient to pay out
the entire value of your IRA during your life expectancy (or over the joint life
expectancies of you and your spouse/beneficiary). The calculation method is
revised under the IRS regulations issued in April 2002 for distributions
beginning in 2003 and were optional for distributions in 2002. If the payments
are not sufficient to meet these requirements, an excise tax of 50% will be
imposed on the amount of any underpayment.
(d) DEATH BENEFITS
If you (or your surviving spouse) die before receiving the entire value of your
IRA (or SEP), the remaining interest must be distributed to your beneficiary (or
your surviving spouse's beneficiary) in one lump-sum by December 31st of the
fifth year after your (or your surviving spouse's) death, or applied to purchase
an immediate annuity for the beneficiary. This annuity must be payable over the
life expectancy of the beneficiary beginning by December 31st of the year
following the year after your or your spouse's death. If your spouse is the
designated beneficiary, he or she is treated as the owner of the IRA. If minimum
required distributions have begun, and no designated beneficiary is identified
by December 31st of the year following the year of death, the entire amount must
be distributed based on the life expectancy of the owner using the owner's age
prior to death. A distribution of the balance
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of your IRA upon your death will not be considered a gift for federal tax
purposes, but will be included in your gross estate for purposes of federal
estate taxes.
ROTH IRAS
Section 408A of the Code permits eligible individuals to contribute to a type of
IRA known as a "Roth IRA." Contributions may be made to a Roth IRA by taxpayers
with adjusted gross incomes of less than $160,000 for married individuals filing
jointly and less than $110,000 for single individuals. Married individuals
filing separately are not eligible to contribute to a Roth IRA. The maximum
amount of contributions allowable for any taxable year to all IRAs maintained by
an individual is generally the lesser of the maximum amount allowed by law and
100% of compensation for that year (the maximum amount allowed by law is phased
out for incomes between $150,000 and $160,000 for married and between $95,000
and $110,000 for singles). The contribution limit is reduced by the amount of
any contributions made to a traditional IRA. Contributions to a Roth IRA are not
deductible.
For taxpayers with adjusted gross income of $100,000 or less, all or part of
amounts in a traditional IRA may be converted, transferred or rolled over to a
Roth IRA. Some or all of the IRA value will typically be includable in the
taxpayer's gross income. Provided a rollover contribution meets the requirements
of IRAs under Section 408(d)(3) of the Code, a rollover may be made from a Roth
IRA to another Roth IRA.
UNDER SOME CIRCUMSTANCES, IT MAY NOT BE ADVISABLE TO ROLL OVER, TRANSFER OR
CONVERT ALL OR PART OF A TRADITIONAL IRA TO A ROTH IRA. PERSONS CONSIDERING A
ROLLOVER, TRANSFER OR CONVERSION SHOULD CONSULT THEIR OWN TAX ADVISOR.
"Qualified distributions" from a Roth IRA are excludable from gross income. A
"qualified distribution" is a distribution that satisfies two requirements: (1)
the distribution must be made (a) after the owner of the IRA attains age 59 1/2;
(b) after the owner's death; (c) due to the owner's disability; or (d) for a
qualified first time homebuyer distribution within the meaning of Section
72(t)(2)(F) of the Code; and (2) the distribution must be made in the year that
is at least five tax years after the first year for which a contribution was
made to any Roth IRA established for the owner or five years after a rollover,
transfer, or conversion was made from a traditional IRA to a Roth IRA.
Distributions from a Roth IRA that are not qualified distributions will be
treated as made first from contributions and then from earnings, and taxed
generally in the same manner as distributions from a traditional IRA.
Distributions from a Roth IRA need not commence at age 70 1/2. However, if
the owner dies before the entire interest in a Roth IRA is distributed, any
remaining interest in the contract must be distributed under the same rules
applied to traditional IRAs where death occurs before the required beginning
date.
REPORTING TO THE IRS
Beginning with Forms 5498 issued in January 2004, we will indicate to you and to
the IRS that your account is subject to minimum required distributions if you
were at least 70 1/2 at the end of the prior year.
Whenever you are liable for one of the penalty taxes discussed above (6% for
excess contributions, 10% for premature distributions or 50% for underpayments),
you must file Form 5329 with the Internal Revenue Service. The form is to be
attached to your federal income tax return for the tax year in which the penalty
applies. Normal contributions and distributions must be shown on your income tax
return for the year to which they relate.
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PART II
STRATEGIC PARTNERS PLUS PROSPECTUS SECTIONS 1-9
APPENDIX
ACCUMULATION UNIT VALUES
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As we have indicated throughout this prospectus, the Strategic Partners Plus
Variable Annuity is a contract that allows you to select or decline any of
several features that carries with it a specific asset-based charge. We maintain
a unique unit value corresponding to each combination of such Contract features.
Here we depict the historical unit values corresponding to the contract features
bearing the highest and lowest combinations of asset-based charges during the
periods September 22, 2000 to December 31, 2000, January 1, 2001 to December 31,
2001 and January 1, 2002 to December 31, 2002. From September 22, 2000 to
February 3, 2002, the highest combination of asset-based charges amounted to
1.70%. From February 4, 2002 to December 31, 2002 the highest combination of
asset-based charges amounted to 1.80%. The lowest combination of asset-based
charges for all these periods amounted to 1.40%. Under the version of the
contracts described in this prospectus, the highest combinations of asset-based
charges now amounts to 1.85%, while the lowest combination of asset-based
charges remains at 1.40%. In the Statement of Additional Information, we set out
historical unit values corresponding to the other combinations of asset-based
charges available during those prior periods. You can obtain a copy of the
Statement of Additional Information without charge, by calling (888) PRU-2888 or
by writing to us at Prudential Annuity Service Center, P.O. Box 7960,
Philadelphia, PA 19101.
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PART III PROSPECTUSES
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VARIABLE INVESTMENT OPTIONS
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STRATEGIC PARTNERS(SM)
FLEXELITE
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VARIABLE ANNUITY
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PROSPECTUS: MAY 1, 2003
THIS PROSPECTUS DESCRIBES AN INDIVIDUAL VARIABLE ANNUITY CONTRACT OFFERED BY
PRUCO LIFE INSURANCE COMPANY (PRUCO LIFE). PRUCO LIFE IS A WHOLLY OWNED
SUBSIDIARY OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA.
THE FUNDS
- ------------------------------------------------------------
Strategic Partners FlexElite offers a wide variety of investment choices,
including 32 variable investment options that invest in mutual funds managed by
these leading asset managers.
PRUDENTIAL INVESTMENTS LLC
JENNISON ASSOCIATES LLC
A I M CAPITAL MANAGEMENT, INC.
ALLIANCE CAPITAL MANAGEMENT, LP
BANK OF IRELAND ASSET MANAGEMENT (U.S.) LIMITED
CALAMOS ASSET MANAGEMENT, INC.
DAVIS ADVISORS
DEUTSCHE ASSET MANAGEMENT INVESTMENT SERVICES
EARNEST PARTNERS
FIDELITY MANAGEMENT & RESEARCH COMPANY
FURMAN SELZ CAPITAL MANAGEMENT
GE ASSET MANAGEMENT, INCORPORATED
INVESCO FUNDS GROUP, INC.
JANUS CAPITAL MANAGEMENT LLC
LORD, ABBETT & CO. LLC
MASSACHUSETTS FINANCIAL SERVICES COMPANY (MFS)
NATIONAL CITY INVESTMENT MANAGEMENT
PACIFIC INVESTMENT MANAGEMENT COMPANY LLC (PIMCO)
SALOMON BROTHERS ASSET MANAGEMENT INC.
VICTORY CAPITAL MANAGEMENT INC.
WELLINGTON MANAGEMENT COMPANY, LLP
PLEASE READ THIS PROSPECTUS
- ------------------------------------------------------------
Please read this prospectus before purchasing a Strategic Partners FlexElite
variable annuity contract and keep it for future reference. Current prospectuses
for each of the underlying mutual funds accompany this prospectus. These
prospectuses contain important information about the mutual funds. Please read
these prospectuses and keep them for reference.
TO LEARN MORE ABOUT STRATEGIC PARTNERS FLEXELITE
- ------------------------------------------------------------
To learn more about the Strategic Partners FlexElite variable annuity, you can
request a copy of the Statement of Additional Information (SAI) dated May 1,
2003. The SAI has been filed with the Securities and Exchange Commission (SEC)
and is legally a part of this prospectus. Pruco Life also files other reports
with the SEC. All of these filings can be reviewed and copied at the SEC's
offices, and can be obtained from the SEC's Public Reference Section, 450 5th
Street N.W., Washington, D.C. 20549. You may obtain information on the operation
of the Public Reference Room by calling the SEC at (800) SEC-0330. The SEC also
maintains a Web site (http://www.sec.gov) that contains the Strategic Partners
FlexElite SAI, material incorporated by reference, and other information
regarding registrants that file electronically with the SEC. The Table of
Contents of the SAI is on Page 59 of this prospectus.
FOR A FREE COPY OF THE SAI CALL US AT:
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(888) PRU-2888
or write to us at:
Prudential Annuity Service Center
P.O. Box 7960
Philadelphia, PA 19101
YOU MAY ELECT BEFORE YOUR 3RD AND 6TH CONTRACT ANNIVERSARIES TO HAVE A CREDIT
ADDED TO YOUR CONTRACT VALUE. IF YOU MAKE A CREDIT ELECTION, YOUR CHARGES MAY BE
HIGHER THAN IF YOU HAD NOT MADE THE ELECTION AND THEY COULD EXCEED YOUR CREDIT
AMOUNT IF YOU MAKE A WITHDRAWAL WITHIN 3 YEARS OF YOUR ELECTION.
THE SEC HAS NOT DETERMINED THAT THIS CONTRACT IS A GOOD INVESTMENT, NOR HAS THE
SEC DETERMINED THAT THIS PROSPECTUS IS COMPLETE OR ACCURATE. IT IS A CRIMINAL
OFFENSE TO STATE OTHERWISE. INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT
TO RISK, INCLUDING THE POSSIBLE LOSS OF YOUR MONEY. AN INVESTMENT IN STRATEGIC
PARTNERS FLEXELITE IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
CONTENTS
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4
PART I SUMMARY
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STRATEGIC PARTNERS FLEXELITE PROSPECTUS
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5
PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
GLOSSARY
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WE HAVE TRIED TO MAKE THIS PROSPECTUS AS EASY TO READ AND UNDERSTAND AS
POSSIBLE. BY THE NATURE OF THE CONTRACT, HOWEVER, CERTAIN TECHNICAL WORDS OR
TERMS ARE UNAVOIDABLE. WE HAVE IDENTIFIED THE FOLLOWING AS SOME OF THESE WORDS
OR TERMS.
ACCUMULATION PHASE
The period that begins with the contract date (see definition below) and ends
when you start receiving income payments, or earlier if the contract is
terminated through a full withdrawal or payment of a death benefit.
ADJUSTED CONTRACT VALUE
When you begin receiving income payments, the value of your contract adjusted
for any market value adjustment minus any charge we impose for premium taxes,
withdrawal charge and credit election withdrawal charge.
ANNUITANT
The person whose life determines the amount of income payments that will be
paid. If the annuitant dies before the annuity date, the co-annuitant (if any)
becomes the annuitant if the contract's requirements for changing the annuity
date are met. If, upon the death of the annuitant, there is no surviving
co-annuitant, and the owner is not the annuitant, then the owner becomes the
annuitant.
ANNUITY DATE
The date when income payments are scheduled to begin.
BENEFICIARY
The person(s) or entity you have chosen to receive a death benefit.
CO-ANNUITANT
The person shown on the contract data pages who becomes the annuitant upon the
death of the annuitant. No co-annuitant may be designated if the owner is a non-
natural person.
CONTRACT DATE
The date we receive your initial purchase payment. We will credit the initial
purchase payment to your contract within
two business days from the day on which we receive all necessary paperwork in
good order at the Prudential Annuity Service Center. Contract anniversaries are
measured from the contract date. A contract year starts on the contract date or
on a contract anniversary.
CONTRACT OWNER, OWNER OR YOU
The person entitled to the ownership rights under the contract.
CONTRACT VALUE
This is the total value of your contract, equal to the sum of the values of your
investment in each investment option you have chosen. Your contract value will
go up or down based on the performance of the investment options you choose.
CREDIT
The amount we add to your contract value if you make a credit election.
CREDIT ELECTION
Your election to have a credit added to your contract value. At least 30
calendar days prior to your 3rd and 6th contract anniversaries, we will notify
you of your option to make a credit election. We will give you notice only if
the credit election is available under your contract and you have not previously
declined to receive a credit. We must receive the credit election in good order
no later than the applicable contract anniversary.
DEATH BENEFIT
If the owner dies, the beneficiary you designate will receive, at a minimum, the
total amount invested, reduced by withdrawals or a potentially greater amount
related to market appreciation. A guaranteed minimum death benefit is available
for an additional charge.
6
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
DOLLAR COST AVERAGING FIXED RATE OPTION (DCA FIXED RATE OPTION)
An investment option that offers a fixed rate of interest for a selected period
during which periodic transfers are automatically made to selected variable
investment options or to the one-year fixed rate option. We guarantee your money
will earn at least 3% while it is allocated to this option. Payments you
allocate to the DCA Fixed Rate Option become part of Pruco Life's general assets
until they are transferred.
EARNINGS APPRECIATOR
An optional feature available for an additional charge that may provide a
supplemental death benefit based on earnings under the contract.
FIXED INTEREST RATE OPTIONS
These are investment options that offer a fixed rate of interest for either a
one-year period (fixed rate option) or a selected period during which periodic
transfers are made to selected variable investment options (DCA fixed rate
option).
GMDB PROTECTED VALUE
The guaranteed amount of the guaranteed minimum death benefit, which may equal
the GMDB roll-up value, the GMDB step-up value, or the greater of the two. The
protected value will be subject to certain age restrictions and time durations,
however it will still increase by subsequent invested purchase payments and
reduce by withdrawals.
GMDB ROLL-UP
We may use the GMDB roll-up value to compute the GMDB protected value of the
guaranteed minimum death benefit. The GMDB roll-up is equal to the invested
purchase payments compounded daily at an effective annual interest rate of 5%
(if the sole owner or the older of the owner and joint owner is less than 80
years old on the contract date) or for contracts sold the later of May 1, 2003
or upon state approval 3% (if the sole owner or the older of the owner and joint
owner is between 80 and 85 years old on the contract date) starting on the date
that each invested purchase payment is made, reduced by withdrawals.
GMDB STEP-UP
We may use the GMDB step-up value to compute the GMDB protected value of the
guaranteed minimum death benefit.
If the sole owner or the older of the owner and joint owner is less than
age 80 on the contract date, the GMDB step-up before the first contract
anniversary is the initial invested purchase payment increased by subsequent
invested purchase payments and reduced by the effect of withdrawals. The GMDB
step-up on each contract anniversary will be the greater of the previous GMDB
step-up and the contract value as of such contract anniversary. Between contract
anniversaries, the GMDB step-up will be increased by invested purchase payments
and reduced by the effect of withdrawals.
For contracts sold the later of May 1, 2003 or upon state approval, if the
sole owner or the older of the owner and joint owner is between age 80 and 85 on
the contract date, the GMDB step-up before the third contract anniversary is the
sum of invested purchase payments, reduced by the effect of withdrawals. On the
third contract anniversary the GMDB step-up will be adjusted to the greater of
the then current GMDB step-up or the contract value as of that contract
anniversary.
GMIB PROTECTED VALUE
The GMIB protected value is calculated daily and is equal to the GMIB roll-up,
until the GMIB roll-up either reaches its cap or if we stop applying the annual
interest rate based on the age of the annuitant, number of contract
anniversaries or number of years since last GMIB reset. At such point, the GMIB
protected value will be increased by any subsequent invested purchase payments,
and reduced by withdrawals. You may elect to reset your GMIB protected value to
equal your contract value twice over the life of the contract.
GMIB ROLL-UP
We will use the GMIB roll-up value to compute the GMIB protected value of the
guaranteed minimum income benefit. The GMIB roll-up is equal to the invested
purchase payments compounded daily at an effective annual interest rate of 5%
starting on the date each invested purchase payment is made, subject to a 200%
cap, and reduced by withdrawals.
GOOD ORDER
An instruction received at the Prudential Annuity Service Center, utilizing such
forms, signatures and dating as we require, which is sufficiently clear that we
do not need to exercise any discretion to follow such instructions.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
GLOSSARY CONTINUED
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GUARANTEED MINIMUM DEATH BENEFIT (GMDB)
An optional feature available for an additional charge, which guarantees that
the death benefit that the beneficiary receives will be no less than a certain
GMDB "protected value". Depending upon the terms of your contract, the protected
value for the guaranteed minimum death benefit may equal the GMDB "roll-up
value," the GMDB "step-up value," or the larger of the two. We define these
terms above.
GUARANTEED MINIMUM INCOME BENEFIT (GMIB)
An optional feature available for an additional charge that guarantees that the
income payments you receive during the income phase will be no less than a
certain GMIB protected value applied to the guaranteed annuity purchase rates.
GUARANTEE PERIOD
A period of time during which your invested purchase payment in the market value
adjustment option earns interest at the declared rate. We have the right to
offer one or more guarantee periods.
IAB AUTOMATIC WITHDRAWAL PAYMENT PROGRAM
A series of payments consisting of a portion of your contract value and income
appreciator benefit paid to you in equal installments over a 10 year period,
which you may choose, if you elect to receive the income appreciator benefit
(IAB) during the accumulation phase.
IAB CREDIT
An amount we add to your contract value that is credited in equal installments
over a 10 year period, which you may choose, if you elect to receive the income
appreciator benefit (IAB) during the accumulation phase.
INCOME APPRECIATOR BENEFIT (IAB)
An optional feature that may be available for an additional charge that may
provide a supplemental income benefit based on earnings under the contract.
INCOME OPTIONS
Options under the contract that define the frequency and duration of income
payments. In your contract, we also refer to these as payout or annuity options.
INCOME PHASE
The period in which you receive income payments under the contract.
INVESTED PURCHASE PAYMENTS
Your purchase payments (which we define below) less any deduction we make for
any premium or other tax charge.
JOINT OWNER
The person named as the joint owner, who shares ownership rights with the owner
as defined in the contract. The joint owner may be the owner's spouse, but need
not be.
MARKET VALUE ADJUSTMENT OPTION
An investment option for contracts sold the later of May 1, 2003 or upon state
approval. The investment option offers guarantee periods from one to ten years
in length, and pays a fixed rate of interest with respect to each guarantee
period, we impose a market value adjustment on withdrawals that you make prior
to the end of a guarantee period.
NET PURCHASE PAYMENTS
Your total purchase payments less any withdrawals you have made.
PRUDENTIAL ANNUITY SERVICE CENTER
For general correspondence: P.O. Box 7960, Philadelphia, PA, 19101. For express
overnight mail: 2101 Welsh Road, Dresher, PA 19025. The phone number is (888)
PRU-2888. Prudential's Web site is www.prudential.com.
PURCHASE PAYMENTS
The amount of money you pay us to purchase the contract. Generally, with some
restrictions, you can make additional purchase payments at any time during the
accumulation phase.
SEPARATE ACCOUNT
Purchase payments allocated to the variable investment options are held by us in
a separate account called the Pruco Life Flexible Premium Variable Annuity
Account. The separate account is set apart from all of the general assets of
Pruco Life.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
STATEMENT OF ADDITIONAL INFORMATION
A document containing certain additional information about the Strategic
Partners FlexElite variable annuity. We have filed the Statement of Additional
Information with the Securities and Exchange Commission and it is legally a part
of this prospectus. To learn how to obtain a copy of the Statement of Additional
Information, see the front cover of this prospectus.
TAX DEFERRAL
This is a way to increase your assets without currently being taxed. Generally,
you do not pay taxes on your contract earnings until you take money out of your
contract. You should be aware that tax favored plans (such as IRAs) already
provide tax deferral regardless of whether they invest in annuity contracts. See
"What Are the Tax Considerations Associated with the Strategic Partners
FlexElite Contract," on page 51.
VARIABLE INVESTMENT OPTION
When you choose a variable investment option, we purchase shares of the mutual
fund which are held as an investment for that option. We hold these shares in
the separate account. The division of the separate account of Pruco Life that
invests in a particular mutual fund is referred to in your contract as a
subaccount.
9
PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SUMMARY FOR SECTIONS 1-9
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FOR A MORE COMPLETE DISCUSSION OF THE FOLLOWING TOPICS, SEE THE CORRESPONDING
SECTION IN PART II OF THE PROSPECTUS.
SECTION 1
WHAT IS THE STRATEGIC PARTNERS FLEXELITE VARIABLE ANNUITY?
The Strategic Partners FlexElite Variable Annuity is a contract between you, the
owner, and us, the insurance company, Pruco Life Insurance Company (Pruco Life
Insurance Company will hereafter be referred to as Pruco Life, We or Us). The
contract allows you to invest on a tax-deferred basis in one or more of 32
variable investment options. The contract is intended for retirement savings or
other long-term investment purposes and provides for a death benefit. Certain
charges and features of the contract, such as the Guaranteed Minimum Income
Benefit and the Income Appreciator Benefit, apply only to contracts sold the
later of May 1, 2003 or upon state approval. The Guaranteed Minimum Income
Benefit and Income Appreciator Benefit features are available in other Pruco
Life variable annuities that have lower charges.
The variable investment options are designed to offer the opportunity for a
favorable return. However, this is NOT guaranteed. It is possible, due to market
changes, that your investments may decrease in value.
You can invest your money in any or all of the variable investment options, the
fixed interest rate options, and the market value adjustment option. You are
allowed 12 free transfers each contract year among the variable investment
options, without a charge.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase.
- - During the accumulation phase, any earnings grow on a tax-deferred basis and
are generally only taxed as income when you make a withdrawal.
- - The income phase starts when you begin receiving regular payments from your
contract. The amount of money you are able to accumulate in your contract
during the accumulation phase will help determine the amount of payments you
will receive during the income phase. Other factors will affect the amount of
your payments such as age, gender and the payout option you selected.
If you change your mind about owning Strategic Partners FlexElite, you may
cancel your contract within 10 days after receiving it (or whatever time period
is required under applicable law). This time period is referred to as the Free
Look period.
SECTION 2
WHAT INVESTMENT OPTIONS CAN I CHOOSE?
You generally can invest your money in any of the variable investment options
that use the mutual funds described in the fund prospectuses provided with this
prospectus:
The Prudential Series Fund, Inc.
Jennison Portfolio (domestic equity)
Prudential Equity Portfolio
Prudential Global Portfolio
Prudential Money Market Portfolio
Prudential Stock Index Portfolio
Prudential Value Portfolio (domestic equity)
SP Aggressive Growth Asset Allocation Portfolio
SP AIM Aggressive Growth Portfolio
SP AIM Core Equity Portfolio
SP Alliance Large Cap Growth Portfolio
SP Alliance Technology Portfolio
SP Balanced Asset Allocation Portfolio
SP Conservative Asset Allocation Portfolio
SP Davis Value Portfolio
SP Deutsche International Equity Portfolio
SP Fundamental Value Portfolio
SP Growth Asset Allocation Portfolio
SP International Value Portfolio
SP INVESCO Small Company Growth Portfolio
SP Jennison International Growth Portfolio
SP Large Cap Growth Portfolio
SP Large Cap Value Portfolio
SP MFS Capital Opportunities Portfolio (domestic and foreign equity)
SP Mid-Cap Growth Portfolio (formerly MFS Mid-Cap Growth Portfolio)
SP Mid-Cap Value Portfolio
SP PIMCO High Yield Portfolio
SP PIMCO Total Return Portfolio
SP Prudential U.S. Emerging Growth Portfolio
SP Small-Cap Value Portfolio
SP Small/Mid Cap Value Portfolio
SP Strategic Partners Focused Growth Portfolio
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10
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
Janus Aspen Series
Growth Portfolio -- Service Shares
You may also invest your money in a fixed interest rate option or in a market
value adjustment option.
Depending upon market conditions, you may earn or lose money in any of these
options. The value of your contract will fluctuate depending upon the investment
performance of the mutual funds used by the variable investment options that you
choose. Performance information for the variable investment options is provided
in the Statement of Additional Information (SAI). Past performance is not a
guarantee of future results.
SECTION 3
WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE? (ANNUITIZATION)
If you want to receive regular income from your annuity, you can choose one of
several options, including guaranteed payments for the annuitant's lifetime.
Generally, once you begin receiving regular payments, you cannot change your
payment plan.
For an additional fee, you may also choose, if it is available under your
contract, the guaranteed minimum income benefit and the income appreciator
benefit. The guaranteed minimum income benefit guarantees that once the income
period begins, your income payments will be no less than a certain "GMIB
protected value" applied to the guaranteed annuity purchase rates. The income
appreciator benefit provides an additional income amount during the accumulation
phase or upon annuitization. See "What Kind Of Payments Will I Receive During
the Income Phase" on page 30.
SECTION 4
WHAT IS THE DEATH BENEFIT?
For contracts sold the later of May 1, 2003 or upon state approval, if the sole
owner or first to die of the owner and joint owner dies before the income phase
of the contract begins, the person(s) or entity that you have chosen as your
beneficiary will receive at a minimum, the greater of (i) the contract value,
(ii) either the base death benefit or, for a higher insurance charge, a
potentially larger Guaranteed Minimum Death Benefit (GMDB). The base death
benefit equals the total invested purchase payments proportionately reduced by
withdrawals. The GMDB is equal to a "protected value" that depends upon which of
the following GMDB options you choose:
- - The highest value of the contract on any contract anniversary, which we call
the "GMDB step-up value";
- - The total amount you invest increased by a guaranteed rate of return, which
we call the "GMDB roll-up value"; or
- - The greater of the GMDB step-up value or GMDB roll-up value.
FOR ALL OTHER CONTRACTS, THE DEATH BENEFIT DESCRIBED ABOVE WILL BE PAID UPON
THE DEATH OF THE SOLE OWNER OR IF SPOUSAL JOINT OWNERS, THE LAST SURVIVING
OWNER.
If on the date we receive due proof of death, (1) there is only one owner of
the contract and there is only one beneficiary who is the owner's spouse; or (2)
for contracts sold the later of May 1, 2003 or upon state approval, there are an
owner and joint owner of the contract, and the owner's spouse is both the joint
owner and the beneficiary under the contract and certain other conditions are
met, then in lieu of paying a death benefit, we will allow the surviving spouse
to continue the contract by exercising the Spousal Continuance Benefit, which we
describe on page 40.
Depending upon the terms of your contract, not all guaranteed death benefit
options may be available. See "What is the Death Benefit" on page 36.
For an additional fee, you may also choose, if it is available under your
contract, the earnings appreciator supplemental death benefit, which provides a
benefit payment upon the death of the sole owner or first to die of the owner or
joint owner during the accumulation period.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SUMMARY FOR SECTIONS 1-9 CONTINUED
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SECTION 5
HOW CAN I PURCHASE A STRATEGIC PARTNERS FLEXELITE CONTRACT?
You can purchase this contract, under most circumstances, with a minimum initial
purchase payment of $10,000. Generally, you can add $500 ($100 if made through
electronic funds transfer) or more at any time during the accumulation phase of
the contract. Your representative can help you fill out the proper forms. You
may purchase this contract only if you are age 85 or younger, and certain age
limits apply to certain features and benefits described herein.
SECTION 6
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS FLEXELITE CONTRACT?
The contract has insurance features and investment features, and there are costs
related to each.
- - Each year we deduct a contract maintenance charge if your contract value is
less than $100,000. This charge is equal to the lesser of $50 or 2% of your
contract value.
- - For insurance and administrative costs, we also deduct a daily charge based
on the average daily value of all assets allocated to the variable investment
options, depending on the death benefit option that you choose. If you do not
choose a GMDB option, the daily charge is equivalent to an annual charge of
1.65%. If you choose a GMDB option, the annual charge depends upon the option
you choose and will be:
- 1.90% if you choose either the GMDB roll-up or the GMDB step-up options,
or
- 2.00% if you choose the greater of GMDB roll-up and GMDB step-up option.
The 1.65%, 1.90%, and 2.00% charges referenced immediately above apply to
any Strategic Partners FlexElite contract sold the later of May 1, 2003 or
upon state approval. Otherwise, those charges are 1.60%, 1.80%, and 1.90%,
respectively.
- - We will deduct an additional charge if you choose the Earnings Appreciator
supplemental death benefit. We deduct this charge from your contract value on
the contract anniversary and upon certain other events. The charge for this
benefit is based on an annual rate of 0.30% of your contract value.
- - We will deduct an additional charge if you choose the guaranteed minimum
income benefit, if available in your contract. We deduct this annual charge
from your contract value on the contract anniversary and upon certain other
events. The charge for this benefit is equal to 0.45% of the GMIB protected
value.
- - We will deduct an additional charge if you choose the income appreciator
benefit, if available in your contract. We deduct this charge from your
contract value on the contract anniversary and upon certain other events. The
charge for this benefit is based on an annual rate of 0.25% of your contract
value.
- - There are a few states/jurisdictions that assess a premium tax when you begin
receiving regular income payments from your annuity. In those states, we will
assess the required premium tax charge, which can range up to 3.5% of your
contract value.
- - There are also charges made by the mutual funds which are invested in by the
variable investment options. These charges currently range from 0. % to
1. % per year of a fund's average daily assets.
- - If you withdraw money within three years of the contract date or a credit
election you may have to pay a withdrawal charge of 7% on all or part of the
withdrawal.
SECTION 7
HOW CAN I ACCESS MY MONEY?
You may take money out at any time during the accumulation phase. You may,
however, be subject to income tax and, if you make a withdrawal prior to age
59 1/2, an additional tax penalty as well. If you withdraw money within three
years of the contract date or a credit election, we may impose a withdrawal
charge.
Under the market value adjustment option, you will be subject to a market value
adjustment if you make a withdrawal prior to the end of a guarantee period.
SECTION 8
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS FLEXELITE
CONTRACT?
Your earnings are generally not taxed until withdrawn. If you take money out
during the accumulation phase, the tax laws treat the withdrawals as first a
withdrawal of
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12
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
earnings, which are taxed as ordinary income. If you are younger than age 59 1/2
when you take money out, you may be charged a 10% federal tax penalty on the
earnings in addition to ordinary taxation. A portion of the payments you receive
during the income phase is considered a partial return of your original
investment. As a result, that portion of each payment is not taxable as income.
Generally, all amounts withdrawn from an Individual Retirement Annuity (IRA)
contract (excluding Roth IRAs) are taxable and subject to the 10% penalty if
withdrawn prior to age 59 1/2.
SECTION 9
OTHER INFORMATION
This contract is issued by Pruco Life, a subsidiary of The Prudential Insurance
Company of America, and sold by registered representatives of affiliated and
unaffiliated broker-dealers.
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13
PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SUMMARY OF CONTRACT EXPENSES
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THE PURPOSE OF THIS SUMMARY IS TO HELP YOU TO UNDERSTAND THE COSTS YOU WILL PAY
FOR STRATEGIC PARTNERS FLEXELITE. THE FOLLOWING TABLES DESCRIBE THE FEES AND
EXPENSES THAT YOU WILL PAY WHEN BUYING, OWNING, AND SURRENDERING THE CONTRACT.
THE FIRST TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME
THAT YOU BUY THE CONTRACT, SURRENDER THE CONTRACT, OR TRANSFER CASH VALUE
BETWEEN INVESTMENT OPTIONS. STATE PREMIUM TAXES MAY ALSO BE DEDUCTED.
For more detailed information, including additional information about current
and maximum charges, see "What Are The Expenses Associated With The Strategic
Partners FlexElite Contract?" on page 44. For more detailed expense information
about the mutual funds, please refer to the individual fund prospectuses which
you will find at the back of this prospectus.
CONTRACTOWNER TRANSACTION EXPENSES
1: Each contract year, you may withdraw a specified amount of your contract
value without incurring a withdrawal charge. We will waive the withdrawal charge
if we pay a death benefit or under certain other circumstances. See "Withdrawal
Charge" on page 44.
2: We impose these withdrawal charges only if you elect to have the credit added
to your contract value prior to your 3rd and 6th contract anniversaries. These
charges may be lower in certain states.
3: Currently, we charge $10 for each transfer after the twelfth in a contract
year. As shown in the table, we can increase that charge up to a maximum of $30,
but we have no current intention to do so. You will not be charged for transfers
made in connection with Dollar Cost Averaging and Auto-Rebalancing.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
The next table describes the fees and expenses that you will pay periodically
during the time that you own the contract, not including underlying mutual fund
fees and expenses.
4: Currently, we waive this fee if your contract value is greater than or equal
to $100,000. If your contract value is less than $100,000, we currently charge
the lesser of $50 or 2% of your contract value. This is a single fee that we
assess (a) annually or (b) upon a full withdrawal made on a date other than a
contract anniversary. As shown in the table, we can increase this fee in the
future up to a maximum of $60, but we have no current intention to do so.
5: The 1.65%, 1.90%, and 2.00% charges listed here apply to any Strategic
Partners FlexElite contract sold the later of May 1, 2003 or upon state
approval. Otherwise, these charges are 1.60%, 1.80%, and 1.90%, respectively.
For these contracts, we reserve the right to impose an additional insurance
charge of 0.10% annually of average account value in either of the following
scenarios: (i) for contracts issued to those aged 76 or older, under which the
guaranteed minimum death benefit has been selected and (ii) for contracts issued
to those aged 66 or older, under which the Earnings Appreciator Benefit has been
selected.
6: We impose this charge only if you choose the Earnings Appreciator
supplemental death benefit. We deduct this charge annually. We also deduct this
charge if you make a full withdrawal or enter the income phase of your contract,
or if a death benefit is payable, but prorate the fee to reflect a partial
rather than full year. If you make a partial withdrawal, we will deduct the
prorated fee if the remaining contract value after the withdrawal would be less
than the amount of the prorated fee; otherwise we will not deduct the fee at
that time. The fee is also calculated when you make any purchase payment or
withdrawal but we do not deduct it until the next deduction date.
7: We impose this charge only if you choose the guaranteed minimum income
benefit. See "Guaranteed Minimum Income Benefit," on page 31. This charge is
equal to 0.45% of the "GMIB protected value, which is calculated daily and
generally is equal to the GMIB roll-up value. Subject to certain age
restrictions, the roll-up value is the total of all invested purchase payments
compounded daily at an effective annual rate of 5.0%, subject to a 200% cap.
Both the roll-up value and the cap are reduced dollar-for-dollar for the first
5% of the value, annually, and proportionally thereafter by withdrawals. We
assess this fee annually. We also assess this fee if you make a full withdrawal,
but prorate the fee to reflect a partial rather than full year. If you make a
partial withdrawal, we will assess the prorated fee if the remaining contract
value after the withdrawal would be less than the amount of the prorated fee;
otherwise we will not assess the fee at that time. We also deduct this charge
upon annuitization. In the future, we may make other guaranteed minimum income
benefit options available. Those other options may involve different fees.
8: We impose this charge only if you choose the income appreciator benefit. The
charge for this benefit is based on an annual rate of 0.25% of your contract
value. The income appreciator benefit charge is calculated: on each contract
anniversary, on the annuity date, upon the death of the sole owner or first to
die of the owner or joint owner prior to the annuity date, upon a full or
partial withdrawal, and upon a subsequent purchase payment. The fee is based on
the contract value at the time of the calculation, and is prorated based on the
portion of the contract year since the date that the charge was last calculated.
Although it may be calculated more often, it is deducted only: on each contract
anniversary, on the annuity date, upon the death of the sole owner or first to
die of the owner or joint owners prior to the annuity date, upon a full
withdrawal, and upon a partial withdrawal if the contract value remaining after
such partial withdrawal is not enough to cover the then-applicable charge. We
reserve the right to calculate and deduct the fee more frequently than annually,
such as quarterly.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SUMMARY OF CONTRACT EXPENSES CONTINUED
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The next item shows the minimum and maximum total operating expenses charged by
the underlying mutual funds that you may pay periodically during the time that
you own the contract. More detail concerning each underlying mutual fund's fees
and expenses is contained in the prospectus for each underlying mutual fund. The
minimum and maximum total operating expenses depicted below are based on
historical fund expenses for the year ended December 31, 2002. Fund expenses are
not fixed or guaranteed by the Strategic Partners FlexElite contract, and may
vary from year to year.
TOTAL ANNUAL MUTUAL FUND OPERATING EXPENSES (expenses that are deducted from
underlying mutual fund assets, including management fees, distribution and/or
service (12b-1) fees, and other expenses)
* Actual expenses for the mutual funds are lower due to expense reimbursements.
The minimum and maximum expenses, with expense reimbursements, are % and
%, respectively.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
EXPENSE EXAMPLES
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THESE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
CONTRACT WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITY CONTRACTS. THESE
COSTS INCLUDE CONTRACT OWNER TRANSACTION EXPENSES, CONTRACT FEES, SEPARATE
ACCOUNT ANNUAL EXPENSES, AND UNDERLYING MUTUAL FUND FEES AND EXPENSES.
THE EXAMPLES ASSUME THAT YOU INVEST $10,000 IN THE CONTRACT FOR THE TIME PERIODS
INDICATED. THE EXAMPLES ALSO ASSUME THAT YOUR INVESTMENT HAS A 5% RETURN EACH
YEAR AND ASSUME THE MAXIMUM FEES AND EXPENSES OF ANY OF THE MUTUAL FUNDS.
ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS,
YOUR COSTS WOULD BE AS INDICATED IN THE TABLES THAT FOLLOW.
EXAMPLE 1A: Base Death Benefit and You Withdraw All Your Assets
This example assumes that:
- - You invest $10,000 in the Strategic Partners FlexElite Contract;
- - You do not choose a Guaranteed Minimum Death Benefit;
- - You allocate all your assets to the variable investment option having the
maximum total operating expenses;
- - Your investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year;
- - You do not make a credit election; and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 1B: Base Death Benefit and You Do Not Withdraw All Your Assets
This example makes the same assumptions as Example 1a except that it assumes
that you do not withdraw any of your assets at the end of the indicated period.
NOTES FOR EXPENSE EXAMPLES:
These examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. The expense
examples are based on the insurance and administrative expenses applicable to
contracts sold the later of May 1, 2003 or upon state approval.
The values shown in the 5 year and 10 year columns are the same for Example 1a
and Example 1b and the same in the 10 year column for Example 2a and 2b. This is
because if you decline the credit and 3 or more years have elapsed since your
contract date, we would no longer deduct withdrawal charges when you make a
withdrawal or begin the income phase of your contract. Similarly, if 3 or more
years have elapsed since your last credit election before your 6th contract
anniversary, no withdrawal charges apply.
If your contract value is less than $100,000, on your contract anniversary (and
upon a full withdrawal), we deduct the lesser of $50.00 or 2% of the contract
value. The examples use an average annual contract fee, which we calculated
based on our estimate of the total contract fees we expect to collect in 2003.
Based on these estimates, the annual contract fee is included as an annual
charge of 0.05% of contract value. Your actual fees will vary based on the
amount of your contract and your specific allocation(s).
Premium taxes are not reflected in the examples. A charge for premium taxes may
apply depending on the state where you live.
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17
EXPENSE EXAMPLES CONTINUED
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
EXAMPLE 2A: Greater of Roll-up and Step-up Guaranteed Minimum Death Benefit;
Guaranteed Minimum Income Benefit; Earnings Appreciator Benefit, Income
Appreciator Benefit, and You Withdraw All Your Assets
This example assumes that:
- - You invest $10,000 in the Strategic Partners FlexElite Contract;
- - You choose the Greater of Roll-Up and Step-Up Guaranteed Minimum Death
Benefit;
- - You choose the Guaranteed Minimum Income Benefit;
- - You elect the Earnings Appreciation Benefit;
- - You elect the Income Appreciation Benefit;
- - You make credit elections prior to your 3(rd) and 6(th) contract
anniversaries;
- - You allocate all your assets to the variable investment option having the
maximum total operating expenses;
- - Your investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year; and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 2B: Greater of Roll-up and Step-up Guaranteed Minimum Death Benefit;
Guaranteed Minimum Income Benefit; Earnings Appreciator Benefit, Income
Appreciator Benefit, and You Do Not Withdraw Your Assets
This example makes the same assumptions as Example 2a except that it assumes
that you do not withdraw any of your assets at the end of the indicated period.
This example makes exactly the same assumptions as Example 1b except that it
assumes that you make credit elections prior to your 3rd and 6th contract
anniversaries and choose the indicated insurance features. Your actual costs may
be higher or lower, but examples of what your costs would be based on these
assumptions appear on the following pages.
In these expense examples, we set out projected expenses that are based on
versions of the contract that carry the highest and lowest overall charges. We
do not depict projected expenses for every possible combination of contract
charges. The actual expenses under the contract with the insurance features and
underlying funds that you have selected, and the purchase payments that you have
made, may vary from the figures we depict here.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
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20
PART II SECTIONS 1-9
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STRATEGIC PARTNERS FLEXELITE PROSPECTUS
21
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
1:
WHAT IS THE STRATEGIC PARTNERS FLEXELITE
VARIABLE ANNUITY?
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THE STRATEGIC PARTNERS FLEXELITE VARIABLE ANNUITY IS A CONTRACT BETWEEN YOU, THE
OWNER, AND US, THE INSURANCE COMPANY, PRUCO LIFE INSURANCE COMPANY (PRUCO LIFE,
WE OR US).
Under our contract or agreement, in exchange for your payment to us, we promise
to pay you a guaranteed income stream that can begin any time after the second
contract anniversary. Your annuity is in the accumulation phase until you decide
to begin receiving annuity payments. The date you begin receiving annuity
payments is the annuity date. On the annuity date, your contract switches to the
income phase.
This annuity contract benefits from tax deferral. Tax deferral means that you
are not taxed on earnings or appreciation on the assets in your contract until
you withdraw money from your contract. (If you hold the annuity contract in a
tax-favored plan such as an IRA, that plan generally provides tax deferral even
without investing in an annuity contract.)
Strategic Partners FlexElite is a variable annuity contract. During the
accumulation phase, you can allocate your assets among 32 variable investment
options, two guaranteed fixed interest rate options, and the market value
adjustment option. If you select variable investment options, the amount of
money you are able to accumulate in your contract during the accumulation phase
depends upon the investment performance of the mutual fund associated with that
variable investment option.
Because the mutual funds' portfolios fluctuate in value depending upon market
conditions, your contract value can either increase or decrease. This is
important, since the amount of the annuity payments you receive during the
income phase depends upon the value of your contract at the time you begin
receiving payments.
As the owner of the contract, you have all of the decision-making rights
under the contract. You will also be the annuitant unless you designate someone
else. The annuitant is the person whose life is used to determine how much and
how long these payments will continue once the income phase begins. On or after
the annuity date, the annuitant may not be changed.
The beneficiary is the person(s) or entity you designate to receive any death
benefit if the owner(s) dies during the accumulation phase. You may change the
beneficiary any time prior to the annuity date by making a written request to
us. Your request becomes effective when we approve it.
There are certain state variations to this contract that are referred to in
this prospectus. Please see the SAI and your contract for further information on
these and other variations.
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"
If you change your mind about owning Strategic Partners FlexElite, you may
cancel your contract within 10 days after receiving it (or whatever period is
required by applicable law). You can request a refund by returning the contract
either to the representative who sold it to you, or to the Prudential Annuity
Service Center at the address shown on the first page of this prospectus. You
will receive, depending on applicable law:
- - Your full purchase payment; or
- - The amount your contract is worth as of the day we receive your request. This
amount may be more or less than your original payment, less any applicable
federal and state income tax withholding. We impose neither a withdrawal
charge nor any market value adjustment if you cancel your contract under this
provision.
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22
2:
WHAT INVESTMENT OPTIONS
CAN I CHOOSE?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
THE CONTRACT GIVES YOU THE CHOICE OF ALLOCATING YOUR PURCHASE PAYMENTS TO ANY
ONE OR MORE OF 32 VARIABLE INVESTMENT OPTIONS.
The 32 variable investment options invest in mutual funds managed by leading
investment advisors. You should read the mutual fund prospectus before you
decide to allocate your assets to the variable investment option using that
fund.
VARIABLE INVESTMENT OPTIONS
Listed below are the mutual funds in which the variable investment options
invest. Each variable investment option has a different investment objective.
THE PRUDENTIAL SERIES FUND, INC.
- - Jennison Portfolio (domestic equity)
- - Prudential Equity Portfolio
- - Prudential Global Portfolio
- - Prudential Money Market Portfolio
- - Prudential Stock Index Portfolio
- - Prudential Value Portfolio (domestic equity)
- - SP Aggressive Growth Asset Allocation Portfolio
- - SP AIM Aggressive Growth Portfolio
- - SP AIM Core Equity Portfolio
- - SP Alliance Large Cap Growth Portfolio
- - SP Alliance Technology Portfolio
- - SP Balanced Asset Allocation Portfolio
- - SP Conservative Asset Allocation Portfolio
- - SP Davis Value Portfolio
- - SP Deutsche International Equity Portfolio
- - SP Fundamental Value Portfolio
- - SP Growth Asset Allocation Portfolio
- - SP International Value Portfolio
- - SP INVESCO Small Company Growth Portfolio
- - SP Jennison International Growth Portfolio
- - SP Large Cap Growth Portfolio
- - SP Large Cap Value Portfolio
- - SP MFS Capital Opportunities Portfolio (domestic and foreign equity)
- - SP Mid Cap Growth Portfolio
- - SP Mid Cap Value Portfolio
- - SP PIMCO High Yield Portfolio
- - SP PIMCO Total Return Portfolio
- - SP Prudential U.S. Emerging Growth Portfolio
- - SP Small-Cap Value Portfolio
- - SP Small/Mid Cap Value Portfolio
- - SP Strategic Partners Focused Growth Portfolio
The Jennison Portfolio, Prudential Equity Portfolio, Prudential Global
Portfolio, Prudential Money Market Portfolio, Prudential Stock Index Portfolio,
Prudential Value Portfolio, and each "SP" Portfolio of The Prudential Series
Fund, Inc., are managed by an indirect wholly-owned subsidiary of Prudential
Financial, Inc. called Prudential Investments LLC (PI). In addition, the
portfolios listed below also have subadvisers, which are listed below and which
have day-to-day responsibility for managing the portfolio, subject to the
oversight of PI using a manager-of-managers approach.
Prudential Money Market Portfolio and Prudential Stock Index Portfolio:
Prudential Investment Management, Inc.
Jennison Portfolio, Prudential Global Portfolio, Prudential Value
Portfolio, SP Jennison International Growth Portfolio, and SP Prudential
U.S. Emerging Growth Portfolio: Jennison Associates LLC
Prudential Equity Portfolio: Jennison Associates LLC, GE Asset
Management, Incorporated, and Salomon Brothers Asset Management Inc.
SP Strategic Partners Focused Growth Portfolio: Jennison Associates LLC
and Alliance Capital Management, L.P.
SP AIM Aggressive Growth Portfolio and SP AIM Core Equity Portfolio: A I
M Capital Management, Inc.
SP Alliance Large Cap Growth Portfolio and SP Alliance Technology
Portfolio: Alliance Capital Management, L.P.
SP Davis Value Portfolio: Davis Advisors
SP Deutsche International Equity Portfolio: Deutsche Asset Management
Investment Services Limited, a wholly-owned subsidiary of Deutsche Bank
AG
SP Fundamental Value Portfolio: Wellington Management Company, LLP
SP INVESCO Small Company Growth Portfolio: INVESCO Funds Group, Inc.
SP International Value Portfolio: Bank of Ireland Asset Management
(U.S.) Limited
SP Large Cap Growth Portfolio: Furman Selz Capital Management
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23
2:
WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
SP Large Cap Value Portfolio and SP Small/Mid Cap Value Portfolio:
Fidelity Management and Research Company
SP MFS Capital Opportunities Portfolio: Massachusetts Financial Services
Company
SP Mid Cap Growth Portfolio (formerly SP MFS Mid-Cap Growth Portfolio):
Calamos Asset Management, Inc.
SP Mid Cap Value Portfolio: Lord, Abbett & Co. LLC
SP Small-Cap Value Portfolio: EARNEST Partners and National City
Investment Management each will manage approximately 50% of the
Portfolio's assets.
SP PIMCO High Yield Portfolio and SP PIMCO Total Return Portfolio:
Pacific Investment Management Company LLC
Janus Aspen Series
- - Growth Portfolio--Service Shares
Janus Capital Management LLC serves as investment adviser to the Growth
Portfolio--Service Shares of Janus Aspen Series.
A fund or portfolio may have a similar name or an investment objective and
investment policies closely resembling those of a mutual fund managed by the
same investment adviser that is sold directly to individual investors. Despite
such similarities, there can be no assurance that the investment performance of
any such fund or portfolio will resemble that of its retail fund counterpart.
An affiliate of each of the funds may compensate Pruco Life based upon an annual
percentage of the average assets held in the fund by Pruco Life under the
contracts. These percentages may vary by fund and/or portfolio, and reflect
administrative and other services we provide.
FIXED INTEREST RATE OPTIONS
We offer two fixed interest rate options:
- - a one-year fixed rate option, and
- - a dollar cost averaging fixed rate option ("DCA Fixed Rate Option").
We set a one year guaranteed annual interest rate for the one-year fixed rate
option. For the DCA Fixed Rate Option, the interest rate is guaranteed for the
applicable period of time for which transfers are made.
When you select one of these options, your payment will earn interest at the
established rate for the applicable interest rate period. A new interest rate
period is established every time you allocate or transfer money into a fixed
interest rate option. (You may not transfer amounts from other investment
options into the DCA Fixed Rate Option.) You may have money allocated in more
than one interest rate period at the same time. This could result in your money
earning interest at different rates and each interest rate period maturing at a
different time. For the one-year fixed rate option, the minimum guaranteed
interest rate is between 1.5% and 3%, depending on your state's applicable law.
The minimum interest rate for the DCA Fixed Rate Option will never be less than
3%. In addition to a base interest rate that we pay under the fixed rate option,
we also pay additional interest with respect to certain invested purchase
payments (other than transfers). The additional interest is only credited on new
payments for the one-year guarantee period. It is not credited upon renewal or
transfer into the fixed rate option.
You may allocate all or part of any purchase payment to the DCA Fixed Rate
Option. Under this option, you automatically transfer amounts over a stated
period (currently, six or twelve months) from the DCA Fixed Rate Option to the
variable investment options and/or to the one-year fixed interest rate option,
as you select. We will invest the assets you allocate to the DCA Fixed Rate
Option in our general account until they are transferred.
If you choose to allocate all or part of your initial purchase payment to the
DCA Fixed Rate Option, the minimum amount of the purchase payment you may
allocate is $2,000. Purchase payments of less than $2,000 may not be allocated
to the DCA Fixed Rate Option. For contracts sold prior to May 1, 2003, or state
approval of the contracts, the minimum amount of the purchase payments you may
allocate is $5,000. The first periodic transfer will occur on the date you
allocate your purchase payment to the DCA Fixed Rate Option.
Subsequent transfers will occur on the monthly anniversary of the first
transfer. Currently, you may choose to have the purchase payments allocated to
the DCA Fixed Rate Option transferred to the selected variable investment
options or to the one-year fixed interest rate option, in either six or twelve
monthly
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24
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
installments, and you may not change that number of monthly installments after
you have chosen the DCA Fixed Rate Option. You may allocate to both the six-
month and twelve-month options, but the minimum amount of a purchase payment
that may be allocated to one or the other is $2,000. (In the future, we may make
available other numbers of transfers and other transfer schedules--for example,
quarterly as well as monthly.) If you choose a six-payment transfer schedule,
each transfer generally will equal 1/6th of the amount you allocated to the DCA
Fixed Rate Option, and if you choose a twelve-payment transfer schedule, each
transfer generally will equal 1/12th of the amount you allocated to the DCA
Fixed Rate Option. In either case, the final transfer amount generally will also
include the credited interest. You may change at any time the investment options
into which the DCA Fixed Rate Option assets are transferred. Transfers from the
DCA Fixed Rate Option do not count toward the maximum number of free transfers
allowed under the contract.
If you make a withdrawal or have a fee assessed from your contract, and all
or part of that withdrawal or fee comes out of the DCA Fixed Rate Option, we
will recalculate the periodic transfer amount to reflect the change. This
recalculation may include some or all of the interest credited to the date of
the next scheduled transfer. If a withdrawal or fee assessment reduces the
monthly transfer amount below $100, we will transfer the remaining balance in
the DCA Fixed Rate Option on the next scheduled transfer date.
By investing amounts on a regular basis instead of investing the total amount
at one time, the DCA Fixed Rate Option may decrease the effect of market
fluctuation on the investment of your purchase payment. Of course, dollar cost
averaging cannot ensure a profit or protect against loss in a declining market.
MARKET VALUE ADJUSTMENT OPTION
THE MARKET VALUE ADJUSTMENT OPTION IS AVAILABLE TO STRATEGIC PARTNERS FLEXELITE
CONTRACTS SOLD THE LATER OF MAY 1, 2003 OR UPON STATE APPROVAL.
Under the market value adjustment option, we have the right to offer one or
more of several guarantee periods. These guarantee periods are 1 year (currently
available only as a renewal option), 2 years, 3 years, 4 years, 5 years, 6
years, 7 years, 8 years, 9 years, or 10 years in length.
IF THE SURRENDER CHARGE ENDS PRIOR TO MATURITY OF A GUARANTEE PERIOD, AMOUNTS
WITHDRAWN FROM A GUARANTEE PERIOD, OTHER THAN DURING THE 30-DAY PERIOD, WILL BE
SUBJECT TO A MARKET VALUE ADJUSTMENT.
We declare the interest rate for each available guarantee period
periodically, but we guarantee that we will declare no less than 3% interest
with respect to any guarantee period. You will earn interest on your invested
purchase payment at the rate that we have declared for the guarantee period you
have chosen. You must invest at least $1,000.
We express interest rates as annual rates, although we credit interest within
each guarantee period on a daily basis. The daily interest that we credit is
equal to the pro rated portion of the interest that would be earned on an annual
basis. We credit interest from the business day on which your purchase payment
is received in good order at the Prudential Annuity Service Center until the
earliest to occur of any of the following events: (a) full surrender of the
Contract, (b) commencement of annuity payments or settlement, (c) cessation of
the guarantee period, (d) transfer of value in the guarantee period, or (e)
death of the first to die of the owner and joint owner (or annuitant, for
entity-owned contracts), for contracts sold the later of May 1, 2003 or upon
state approval (second to die for contracts purchased before such date), unless
the contract is continued under the spousal continuance option.
During the 30-day period immediately following the end of a guarantee period,
we allow you to do any of the following, without the imposition of the market
value adjustment:
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25
2:
WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
(a) withdraw the value in the guarantee period,
(b) allocate the value to another guarantee period or other investment option
(provided that the new guarantee period ends prior to the contract
anniversary next following the annuitant's 95th birthday or maximum
annuitization date, if earlier.) You will receive the interest rate
applicable on the date we receive your instruction, or
(c) apply the value in the guarantee period to the annuity or settlement option
of your choice.
If we do not receive instructions from you concerning the disposition of the
contract value in your maturing guarantee period, we will reinvest the contract
value in the Prudential Money Market Portfolio investment option.
During the 30-day period immediately following the end of the guarantee
period, or until you elect to do either a, b or c delineated immediately above,
you will receive the current interest rate applicable to the guarantee period
having the same duration as the guarantee period that just matured, which is
offered on the day immediately following the end of the matured guarantee
period. However, if at that time we do not offer a guarantee period with the
same duration as that which matured, you will then receive the current interest
rate applicable to the shortest guarantee period then offered.
Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed and
the interest amount that your money will earn is guaranteed by us to always be
at least 3%.
Payments allocated to the fixed interest rate options become part of Pruco
Life's general assets. Payments allocated to the market value adjustment option
are held as a separate pool of assets, but the income, gains or losses
experienced by these assets are not directly credited or charged against the
contracts. As a result, the strength of our guarantees under these options is
based on the overall financial strength of Pruco Life.
MARKET VALUE ADJUSTMENT
When you allocate a purchase payment or transfer contract value to a guarantee
period, we use that money to buy and sell securities and other instruments to
support our obligation to pay interest. Generally we buy bonds for this purpose.
The duration of the bonds and other instruments that we buy with respect to a
particular guarantee period is influenced significantly by the length of the
guarantee period. Thus, for example, we typically would acquire longer-duration
bonds with respect to the 10 year guarantee period than we do for the 3 year
guarantee period. The value of these bonds is affected by changes in interest
rates, among other factors. The market value adjustment that we assess against
your contract value if you withdraw prior to the end of a guarantee period
involves our attributing to you a portion of our investment experience on these
bonds and other instruments. For example, if you make a full withdrawal when
interest rates have risen since the time of your investment, the bonds and other
investments in the guarantee period likely would have decreased in value,
meaning that we would impose a "negative" market value adjustment on you (i.e.,
one that results in a reduction of the withdrawal proceeds that you receive.)
For a partial withdrawal, we would deduct a negative market value adjustment
from your remaining contract value. Conversely, if interest rates have
decreased, the market value adjustment would be positive.
Other things you should know about the market value adjustment include the
following:
- - We determine the market value adjustment according to a mathematical formula,
which is set forth at the end of this prospectus under the heading
"Market-Value Adjustment Formula." In that section of the prospectus, we also
provide hypothetical examples of how the formula works.
- - A negative market value adjustment could cause you to lose not only the
interest you have earned but also a portion of your principal.
- - In addition to imposing a market value adjustment on withdrawals, we also
will impose a market value adjustment on the contract value you apply to an
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
annuity or settlement option, unless you annuitize after the end of a
guarantee period. The laws of certain states may prohibit us from imposing a
market value adjustment on the annuity date.
IF THE SURRENDER CHARGE ENDS PRIOR TO MATURITY OF A GUARANTEE PERIOD, AMOUNTS
WITHDRAWN FROM A GUARANTEE PERIOD, OTHER THAN DURING THE 30-DAY PERIOD, WILL BE
SUBJECT TO A MARKET VALUE ADJUSTMENT.
YOU SHOULD REALIZE, HOWEVER, THAT APART FROM THE MARKET VALUE ADJUSTMENT, THE
VALUE OF THE BENEFITS IN YOUR GUARANTEE PERIOD DOES NOT DEPEND ON THE INVESTMENT
PERFORMANCE OF THE BONDS AND OTHER INSTRUMENTS THAT WE HOLD WITH RESPECT TO YOUR
GUARANTEE PERIOD. APART FROM THE EFFECT OF ANY MARKET VALUE ADJUSTMENT, WE DO
NOT PASS THROUGH TO YOU THE GAINS OR LOSSES ON THE BONDS AND OTHER INSTRUMENTS
THAT WE HOLD IN CONNECTION WITH A GUARANTEE PERIOD.
TRANSFERS AMONG OPTIONS
Subject to certain restrictions, you can transfer money among the variable
investment options and the one-year fixed interest rate option. In addition, you
can transfer contract value out of a market value adjustment guarantee period
into another market value adjustment guarantee period under the market value
adjustment option, into a variable investment option, or into the one-year fixed
interest rate option, although a market value adjustment will apply to any
transfer you make at a time other than the 30 day period immediately following
the end of a guarantee period. You may transfer contract value into the market
value adjustment option at any time, provided it is at least $1,000.
Your transfer request may be made by telephone, electronically, or otherwise in
paper form to the Prudential Annuity Service Center. Only two transfers per
month may be made by telephone or electronically. After that, all transfer
requests must be in writing with an original signature. We have procedures in
place to confirm that instructions received by telephone or electronically are
genuine. We will not be liable for following telephone or electronic
instructions that we reasonably believe to be genuine. We require any transfer
request that you submit by fax to be accompanied by a confirming telephone call
to the Prudential Annuity Service Center. Your transfer request will take effect
at the end of the business day on which it was received. Our business day
usually closes at 4:00 p.m. Eastern time. With regard to the market value
adjustment option, you can specify the guarantee period from which you wish to
transfer. If you indicate that the transfer is to originate from the market
value adjustment option, but you do not specify the guarantee period from which
funds are to be taken, then we will transfer funds from the guarantee period
that has the least time remaining until its maturity date.
YOU CAN MAKE TRANSFERS OUT OF A FIXED INTEREST RATE OPTION, OTHER THAN THE
DCA FIXED RATE OPTION, ONLY DURING THE 30-DAY PERIOD FOLLOWING THE END OF THE
ONE YEAR INTEREST RATE PERIOD. TRANSFERS FROM THE DCA FIXED RATE OPTION ARE MADE
ON A PERIODIC BASIS FOR THE PERIOD THAT YOU SELECT. TRANSFERS FROM THE DCA FIXED
RATE OPTION CANNOT BE MADE INTO THE MARKET VALUE ADJUSTMENT OPTION BUT CAN BE
MADE INTO THE FIXED RATE OPTION, AT OUR DISCRETION. WE CURRENTLY ALLOW TRANSFERS
INTO THE FIXED RATE OPTION.
During the contract accumulation phase, you can make 12 transfers each
contract year, among the investment options, without charge. If you make more
than 12 transfers in one contract year, you may be charged up to $30 for each
additional transfer. Currently we charge only $10 for additional transfers.
(Dollar Cost Averaging and Auto-Rebalancing transfers are always free, and do
not count toward the 12 free transfers per year. Nor do transfers made during
the 30 day period immediately following the end of a guarantee period count
against the 12 free transfers.) If a transfer that you request out of the market
value adjustment option will be subject to a transfer charge, then:
- We will deduct the transfer charge proportionally from the contract value
in each guarantee period, where you have directed us to transfer funds
from several guarantee periods; and
- If you have directed us to transfer the full contract value out of a
guarantee period, then we will first deduct the transfer charge and
thereafter transfer the remaining amount; and
- In any event, we will deduct the applicable transfer charge prior to
effecting the transfer.
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WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
MARKET TIMING
THE CONTRACT WAS NOT DESIGNED FOR MARKET TIMING OR FOR PERSONS THAT MAKE
PROGRAMMED, LARGE, OR FREQUENT TRANSFERS. BECAUSE MARKET TIMING AND SIMILAR
TRADING PRACTICES GENERALLY ARE DISRUPTIVE TO THE SEPARATE ACCOUNT AND THE
UNDERLYING MUTUAL FUNDS, WE MONITOR CONTRACT TRANSACTIONS IN AN EFFORT TO
IDENTIFY SUCH TRADING PRACTICES. IF WE DETECT THOSE PRACTICES, WE RESERVE THE
RIGHT TO REJECT A PROPOSED TRANSACTION AND TO MODIFY THE CONTRACT'S TRANSFER
PROCEDURES. FOR EXAMPLE, WE MAY DECIDE NOT TO ACCEPT THE TRANSFER REQUEST OF AN
AGENT ACTING UNDER A POWER OF ATTORNEY ON BEHALF OF MORE THAN ONE
CONTRACTHOLDER.
DOLLAR COST AVERAGING
The dollar cost averaging (DCA) feature allows you to systematically transfer
either a fixed dollar amount or a percentage out of any variable investment
option into any other variable investment option(s). Under this feature, you
cannot make transfers into the market value adjustment option and transfers into
a fixed rate option are at our discretion. Currently, we will allow you to
transfer into the one-year fixed interest rate option. You can transfer money to
more than one variable investment option. The investment option used for the
transfers is designated as the DCA account. You can have these automatic
transfers made from the DCA account monthly, quarterly, semiannually or
annually. By allocating amounts on a regular schedule instead of allocating the
total amount at one particular time, you may be less susceptible to the impact
of market fluctuations. Of course, there is no guarantee that dollar cost
averaging will ensure a profit or protect against a loss in declining markets.
Each transfer from your DCA account must be at least $100. Transfers will be
made automatically on the schedule you elect until the entire amount in your DCA
account has been transferred or until you tell us to discontinue the transfers.
If your DCA account balance drops below $100, the entire remaining balance of
the account will be transferred on the next transfer date. You can allocate
subsequent purchase payments to re-open the DCA account at any time.
Your transfers will be made on the last calendar day of each transfer period
you have selected, provided that the New York Stock Exchange is open on that
date. If the New York Stock Exchange is not open on a particular transfer date,
the transfer will take effect on the next business day.
Any transfers you make because of Dollar Cost Averaging are not counted
toward the 12 free transfers you are allowed each contract year. The DCA feature
is available only during the contract accumulation phase, and is offered without
charge.
ASSET ALLOCATION PROGRAM
We recognize the value of having advice when deciding on the allocation of your
money. If you choose to participate in the Asset Allocation Program, your
representative will give you a questionnaire to complete that will help
determine a program that is appropriate for you. Your asset allocation will be
prepared based on your answers to the questionnaire. You will not be charged for
this service, and you are not obligated to participate or to invest according to
program recommendations.
AUTO-REBALANCING
Once your money has been allocated among the variable investment options, the
actual performance of the investment options may cause your allocation to shift.
For example, an investment option that initially holds only a small percentage
of your assets could perform much better than another investment option. Over
time, this option could increase to a larger percentage of your assets than you
desire. You can direct us to automatically rebalance your assets to return to
your original allocation percentage or to a subsequent allocation percentage you
select. We will rebalance only the variable investment options that you have
designated. The DCA account cannot participate in this feature.
Your rebalancing will be done monthly, quarterly, semiannually or annually
based on your choice. The rebalancing will be done on the last calendar day of
the period you have chosen, provided that the New York Stock Exchange is open on
that date. If the New York Stock Exchange is not open on that date, the
rebalancing will take effect on the next business day.
Any transfers you make because of Auto-Rebalancing are not counted toward the
12 free transfers you are allowed per year. This feature is available only
during
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
the contract accumulation phase, and is offered without charge. If you choose
auto-rebalancing and dollar cost averaging, auto-rebalancing will take place
after the transfers from your DCA account.
VOTING RIGHTS
We are the legal owner of the shares of the mutual funds available as variable
investment options. However, we vote the shares of the mutual funds according to
voting instructions we receive from contractowners. We will mail you a proxy
which is a form you need to complete and return to us to tell us how you wish us
to vote. When we receive those instructions, we will vote all of the shares we
own on your behalf in accordance with those instructions. Fund shares for which
we do not receive instructions or which we own in our own right, are voted in
the same proportion as shares for which instructions are received from
contractowners. We may change the way your voting instructions are calculated if
it is required by federal or state regulation.
SUBSTITUTION
We may substitute one or more of the mutual funds used by the variable
investment options. We may also cease to allow investments in existing funds. We
would do this only if events such as investment policy changes or tax law
changes make the mutual fund unsuitable. We would not do this without the
approval of the Securities and Exchange Commission (SEC) and any necessary state
insurance departments approvals. You will be given specific notice in advance of
any substitution we intend to make.
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WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE
INCOME PHASE? (ANNUITIZATION)
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
PAYMENT PROVISIONS
We can begin making annuity payments any time after the second contract
anniversary (or as required by state law if different). Annuity payments must
begin no later than the contract anniversary coinciding with or next following
the annuitant's 95th birthday (unless we agree to another date).
We make the income plans described below available at any time before the
annuity date. These plans are called annuity options or settlement options.
During the income phase, all of the annuity options under this contract are
fixed annuity options. This means that your participation in the variable
investment options ends on the annuity date. If an annuity option is not
selected by the annuity date, the Life Income Annuity Option (Option 2,
described below) will automatically be selected unless prohibited by applicable
law. GENERALLY, ONCE THE ANNUITY PAYMENTS BEGIN, THE ANNUITY OPTION CANNOT BE
CHANGED AND YOU CANNOT MAKE WITHDRAWALS.
The Strategic Partners FlexElite variable annuity contract offers an
optional guaranteed minimum income benefit, which we describe below. Your
annuity options vary depending upon whether you choose this benefit.
Depending upon the annuity option you choose, you may incur a withdrawal
charge when the income phase begins. Currently, if permitted by state law, we
deduct any applicable withdrawal charge if you choose Option 1 for a period
shorter than five years, Option 3, or certain other annuity options that we may
make available. We do not deduct a withdrawal charge if you choose Option 1 for
a period of five years or longer or Option 2. For information about withdrawal
charges, see "What are the Expenses Associated with the Strategic Partners
FlexElite Contract," page 44.
In addition, any value in a guarantee period of the market value adjustment
option may be subject to a market value adjustment upon annuitization.
PAYMENT PROVISIONS WITHOUT THE GUARANTEED MINIMUM INCOME BENEFIT
OPTION 1
ANNUITY PAYMENTS FOR A FIXED PERIOD
Under this option, we will make equal payments for the period chosen, up to 25
years (but not to exceed life expectancy). The annuity payments may be made
monthly, quarterly, semiannually, or annually, as you choose, for the fixed
period. If the annuitant dies during the income phase, payments will continue to
the beneficiary for the remainder of the fixed period. A lump sum payment will
be made to the beneficiary if the beneficiary so chooses. The amount of the lump
sum payment is determined by calculating the present value of the unpaid future
payments. This is done by using the interest rate used to compute the actual
payments. The interest rate used will always be at least 3% a year.
OPTION 2
LIFE INCOME ANNUITY OPTION
Under this option, we will make annuity payments monthly, quarterly,
semiannually, or annually as long as the annuitant is alive. If the annuitant
dies before we have made 10 years worth of payments, we will pay the beneficiary
the present value of the remaining annuity payments in one lump sum unless we
were specifically instructed that the remaining annuity payments continue to be
paid to the beneficiary. The present value of the remaining annuity payments is
calculated by using the interest rate used to compute the amount of the original
120 payments. The interest rate used will always be at least 3% a year.
If an annuity option is not selected by the annuity date, this is the
option we will automatically select for you, unless prohibited by applicable
law. If the life income annuity option is prohibited by applicable law, then we
will pay you a lump sum in lieu of this option.
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
OPTION 3
INTEREST PAYMENT OPTION
Under this option, we will credit interest on the adjusted contract value until
you request payment of all or part of the adjusted contract value. We can make
interest payments on a monthly, quarterly, semiannual, or annual basis or allow
the interest to accrue on your contract assets. Under this option, we will pay
you interest at an effective rate of at least 3% a year. This option is not
available if your contract is held in an IRA. Under this option, all gain in the
annuity will be taxable as of the annuity date. Under this option, you can
withdraw part or all of the contract value that we are holding at any time.
OTHER ANNUITY OPTIONS
We currently offer a variety of other annuity options not described above. At
the time annuity payments are chosen, we may make available to you any of the
fixed annuity options that are offered at your annuity date.
TAX CONSIDERATIONS
If your contract is held under a tax-favored plan, as discussed on page 53, you
should consider the minimum distribution requirements mentioned on page 56, when
selecting your Annuity Option.
If contracts are held in connection with "qualified" retirement plans (such
as a Section 401(k) plan), please note that if you are married at the time your
payments commence, you may be required by federal law to choose an income option
that provides at least a 50 percent joint and survivor annuity to your spouse,
unless your spouse waives that right. Similarly, if you are married at the time
of your death, federal law may require all or a portion of the death benefit to
be paid to your spouse, even if you designated someone else as your beneficiary.
For more information, consult the terms of your retirement arrangement.
GUARANTEED MINIMUM INCOME BENEFIT
THE GUARANTEED MINIMUM INCOME BENEFIT (GMIB), IS AN OPTIONAL FEATURE THAT IS
AVAILABLE TO STRATEGIC PARTNERS FLEXELITE CONTRACTS SOLD THE LATER OF MAY 1,
2003 OR UPON STATE APPROVAL. If you choose the GMIB, it guarantees that once the
income period begins, your income payments will be no less than a certain GMIB
protected value applied to the guaranteed annuity purchase rates. If you elect,
the guaranteed minimum income benefit, it cannot be revoked. This feature may
not be available in your state.
The GMIB protected value is calculated daily and is equal to the GMIB roll-up
until the GMIB roll-up either reaches its cap or if we stop applying the annual
interest rate based on the age of the annuitant, number of contract
anniversaries, or number of years since last GMIB reset, as described below. At
this point, the GMIB protected value will be increased by any subsequent
invested purchase payments, reduced by the effect of withdrawals. Depending on
applicable state law, the guaranteed minimum income benefit is not available
under all contracts. In addition, the guaranteed minimum income benefit is
subject to certain age restrictions described below.
- - The annuitant must be 75 or younger in order for you to elect guaranteed
minimum income benefit.
- - If you choose the guaranteed minimum income benefit, we will impose an annual
charge equal to 0.45% of the GMIB protected value, described below. (In some
states, we may calculate this fee on a different basis, but it will not be
higher than 0.45% of the GMIB protected value.) See "What are the Expenses
Associated with the Strategic Partners FlexElite Contract?" on page 44.
- - TO TAKE ADVANTAGE OF THE GUARANTEED MINIMUM INCOME BENEFIT, YOU MUST WAIT A
CERTAIN AMOUNT OF TIME BEFORE YOU BEGIN THE INCOME PHASE. THE WAITING PERIOD
IS THE PERIOD EXTENDING FROM THE CONTRACT DATE TO THE 7TH CONTRACT
ANNIVERSARY BUT, IF THE GUARANTEED MINIMUM INCOME BENEFIT HAS BEEN RESET (AS
DESCRIBED BELOW), THE WAITING PERIOD IS THE 7-YEAR PERIOD BEGINNING WITH THE
DATE OF THE MOST RECENT RESET.
Once the waiting period has elapsed, you will have a 30-day period each year,
beginning on the contract anniversary, during which you may begin the income
phase with the guaranteed minimum income benefit by submitting the necessary
forms in good order to the Prudential Annuity Service Center.
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CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
GMIB ROLL-UP
The GMIB roll-up is equal to the invested purchase payments, increased daily at
an effective annual interest rate of 5% starting on the date each invested
purchase payment is made, until the cap is reached (GMIB roll-up cap). We will
reduce this amount by the effect of withdrawals. The GMIB roll-up cap is equal
to two times each invested purchase payment and is reduced by the effect of
withdrawals.
Even if the GMIB roll-up cap has not been reached, we will nevertheless stop
increasing the GMIB roll-up value by the effective annual interest rate on the
latest of:
- the contract anniversary coinciding with or next following the
annuitant's 80th birthday,
- the 7th contract anniversary, or
- 7 years from the most recent GMIB reset (as described below).
However, even if we stop increasing the GMIB roll-up value by the effective
annual interest rate, we will still increase the GMIB protected value by
subsequent invested purchase payments, reduced by the effect of withdrawals.
EFFECT OF WITHDRAWALS
In each contract year, withdrawals will first reduce the GMIB protected value on
a dollar-for-dollar basis, by the same dollar amount of the withdrawal up to the
first 5% of GMIB protected value calculated on the contract anniversary (or,
during the first contract year, on the contract date). A proportional reduction
will apply to amounts exceeding the 5% of GMIB protected value. We calculate the
proportional reduction by dividing the contract value after the withdrawal by
the contract value immediately following the withdrawal of the first 5% of GMIB
protected value. The resulting percentage is multiplied by the GMIB protected
value minus the amount of the withdrawal that does not exceed 5%.
Here is an example of the impact of a withdrawal on the GMIB protected value:
An owner invests $100,000 initially and then requests a withdrawal of $8,000
in the first contract year. If the contract value had increased to $108,000
prior to the withdrawal, the first $5,000 of the withdrawal would reduce the
GMIB protected value by $5,000 (dollar-for-dollar up to 5% of the GMIB protected
value at issue). The remaining $3,000 of the withdrawal would reduce the GMIB
protected value in the same proportion that the contract value was reduced.
Since the remaining $3,000 withdrawn is 2.91% of the contract value after the
initial $5,000 was withdrawn on a dollar-for-dollar basis, the remaining GMIB
protected value is reduced by 2.91%. If the protected value were $105,000 before
the withdrawal, after the reduction it would be $97,090 ($105,000 minus $5,000
taken dollar-for-dollar minus a reduction of 2.91% of $100,000 or $2,910).
GMIB RESET FEATURE
You may elect to "reset" your GMIB protected value to equal your current
contract value twice over the life of the contract. You may only exercise this
reset option if the annuitant has not yet reached his or her 76th birthday. If
reset, you must wait a new 7-year period from the most recent reset to exercise
the guaranteed minimum income benefit. Further, we will reset the GMIB roll-up
cap to equal two times the GMIB protected value as of such date. Additionally,
if you reset, we will determine the GMIB payout amount by using the guaranteed
annuity purchase rates (attached to your contract) based on the number of years
since the most recent reset.
PAYOUT AMOUNT
The guaranteed minimum income benefit payout amount is based on the age and sex
of the annuitant (and, if there is one, the co-annuitant as well). After we
first deduct a charge for any applicable premium taxes, the payout amount will
equal the greater of:
1) the GMIB protected value as of the date you exercise the GMIB payout option,
applied to the guaranteed annuity purchase rates and based on the annuity
payout option as described below.
2) the adjusted contract value--that is, the contract value minus any charge we
impose for premium taxes--as of the date you exercise the GMIB payout
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
option applied to the current annuity purchase rates then in use.
GMIB ANNUITY PAYOUT OPTIONS
We currently offer two guaranteed minimum income benefit annuity payout options.
Each option involves lifetime payments with a period certain of ten years.
GMIB OPTION 1
SINGLE LIFE PAYOUT OPTION
We will make monthly payments for as long as the annuitant lives, with payments
for a period certain. We will stop making payments after the later of the death
of the annuitant or the end of the period certain.
GMIB OPTION 2
JOINT LIFE PAYOUT OPTION
In the case of an annuitant and co-annuitant, we will make monthly payments for
the joint lifetime of the annuitant and co-annuitant, with payments for a period
certain. If the co-annuitant dies first, we will continue to make payments until
the later of the death of the annuitant and the end of the period certain. If
the annuitant dies first, we will continue to make payments until the later of
the death of the co-annuitant and the end of the period certain, but if the
period certain ends first, we will reduce the amount of each payment to 50% of
the original amount.
You have no right to withdraw amounts early under either GMIB payout option.
We may make other payout frequencies available, such as quarterly, semi-annually
or annually.
Because we do not impose a new waiting period for each subsequent purchase
payment, if you choose the guaranteed minimum income benefit, we reserve the
right to limit subsequent purchase payments if we discover that by the timing of
your purchase payments and withdrawals, your protected value is increasing in
ways we did not intend. In determining whether to limit purchase payments, we
will look at purchase payments which are disproportionately larger than your
initial purchase payment and other actions that may artificially increase the
GMIB protected value. Certain state laws may prevent us from limiting your
subsequent purchase payments. You must exercise one of the GMIB payout options
described above no later than 30 days after the contract anniversary following
the annuitant's attainment of age 95.
INCOME APPRECIATOR BENEFIT
THE INCOME APPRECIATOR BENEFIT (OR "IAB") IS AVAILABLE TO STRATEGIC PARTNERS
FLEXELITE CONTRACTS SOLD THE LATER OF MAY 1, 2003 OR UPON STATE APPROVAL. The
IAB is an optional, supplemental income benefit that provides an additional
income amount during the accumulation period or upon annuitization. The income
appreciator benefit is designed to provide you with additional funds in order to
defray the impact taxes may have on distributions from your contract. Because
individual circumstances vary, you should consult with a qualified tax adviser
to determine whether it would be appropriate for you to elect the income
appreciator benefit.
If you want the income appreciator benefit, you generally must elect it when
you make your initial purchase payment. Once you elect the income appreciator
benefit, you may not later revoke it.
- - The annuitant must be 75 or younger in order for you to elect the income
appreciator benefit
- - If you choose the income appreciator benefit, we will impose an annual charge
equal to 0.25% of your contract value. See "What are the Expenses Associated
with the Strategic Partners FlexElite Contract?" on page 44.
ACTIVATION OF THE INCOME APPRECIATOR BENEFIT
YOU CAN ACTIVATE THE INCOME APPRECIATOR BENEFIT AT ANY TIME AFTER IT HAS BEEN IN
FORCE FOR SEVEN YEARS. To activate the income appreciator benefit, you must send
us a written request in good order.
Once activated, you can receive the income appreciator benefit:
-- at annuitization as part of an annuity payment (IAB Option 1);
-- during the accumulation phase through the IAB automatic withdrawal
payment program (IAB Option 2); or
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
-- during the accumulation phase as an income appreciator benefit credit
to your contract over a 10-year period (IAB Option 3).
More information about IAB Option 1 appears below. For information about IAB
Options 2 and 3, see "How Can I Access My Money?" on page 48.
Income appreciator benefit payments are treated as earnings and may be
subject to tax upon withdrawal. See "What are the Tax Considerations Associated
with the Strategic Partners FlexElite Contract?" on page 51.
CALCULATION OF INCOME APPRECIATOR BENEFIT AMOUNT
We will calculate the income appreciator benefit amount as of the date we
receive your written request in good order (or, for IAB Option 1, on the annuity
date). We do this by multiplying the current earnings in the contract by the
applicable income appreciator benefit percentage based on the number of years
the income appreciator benefit has been in force. For purposes of calculating
the income appreciator benefit:
- - earnings are calculated as the difference between the contract value and the
sum of all purchase payments;
- - earnings do not include (1) any amount added to the contract value as a
result of the spousal continuance benefit (explained on page 40), or (2) if
we were to permit you to elect the income appreciator benefit after the
contract date, any earnings accrued under the contract prior to that
election;
- - withdrawals reduce earnings first, then purchase payments, on a
dollar-for-dollar basis;
- - the table below shows the income appreciator benefit percentages
corresponding to the number of years the income appreciator benefit has been
in force.
You can activate the income appreciator benefit at annuitization under IAB
Option 1, as described below. You can also activate the income appreciator
benefit during accumulation period under IAB Options 2 and 3. For more
information about IAB Options 2 and 3, see "How Can I Access My Money?" on page
48.
IAB OPTION 1 -- INCOME APPRECIATOR BENEFIT AT ANNUITIZATION
Under this option, if you choose to activate the income appreciator benefit at
annuitization, we will calculate the income appreciator benefit amount on the
annuity date and add it to the contract value for purposes of determining the
adjusted contract value. You may apply the adjusted contract value to any
annuity or settlement option over the lifetime of the annuitant, joint
annuitants, or a period certain of at least 15 years (but not to exceed life
expectancy).
UPON ANNUITIZATION, YOU MAY LOSE ALL OR A PORTION OF THE INCOME APPRECIATOR
BENEFIT IF YOU CHOOSE AN ANNUITY SETTLEMENT OPTION OTHER THAN ANY LIFETIME
PAYOUT OPTION OR PERIOD CERTAIN OPTION FOR AT LEAST 15 YEARS. IN SUCH INSTANCES,
WE WOULD NOT REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR THIS BENEFIT.
EFFECT OF INCOME APPRECIATOR BENEFIT ON GUARANTEED MINIMUM INCOME BENEFIT
If you exercise the guaranteed minimum income benefit feature and an income
appreciator benefit amount remains payable under your contract, the value we use
to calculate the annuity payout amount will be the greater of:
1. the adjusted contract value plus the remaining income appreciator benefit
amount, calculated at current annuitization rates; or
2. the guaranteed minimum income benefit protected value plus the remaining
income appreciator benefit amount, calculated using the guaranteed annuity
purchase rates shown in the contract.
If you exercise the guaranteed minimum income benefit feature and activate the
income appreciator benefit at the same time, you must choose among the
guaranteed minimum income benefit annuity payout options available at the time.
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
TERMINATING THE INCOME APPRECIATOR BENEFIT
The income appreciator benefit will terminate on the earliest of:
- - the date you make a total withdrawal from the contract;
- - the date a death benefit is payable if the contract is not continued by the
surviving spouse under the spousal continuance benefit;
- - the date the income appreciator benefit amount is reduced to zero (generally
ten years after activation) under IAB Options 2 and 3;
- - the date of annuitization; or
- - the date the contract terminates.
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35
4:
WHAT IS THE
DEATH BENEFIT?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
THE DEATH BENEFIT FEATURE PROTECTS THE VALUE OF THE CONTRACT FOR THE
BENEFICIARY.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued, unless you
change it at a later date. Unless an irrevocable beneficiary has been named,
during the accumulation period you can change the beneficiary at any time before
the owner or last survivor, if there are spousal joint owners, dies.
CALCULATION OF THE DEATH BENEFIT
FOR CONTRACTS SOLD THE LATER OF MAY 1, 2003 OR UPON STATE APPROVAL, if the owner
or joint owner dies during the accumulation phase, we will, upon receiving
appropriate proof of death and any other needed documentation ("proof of
death"), pay a death benefit to the beneficiary designated by the owner or joint
owner. If there is a sole owner and there is only one beneficiary who is the
owner's spouse, then the surviving spouse may continue the contract under the
Spousal Continuance Benefit. If there are an owner and joint owner of the
contract, and the owner's spouse is both the joint owner and the beneficiary, at
the death of the first to die, the death benefit will be paid to the surviving
owner, or the surviving owner may continue the contract under the Spousal
Continuance Benefit.
FOR ALL OTHER CONTRACTS, if the sole owner dies during the accumulation
phase, we will, upon receiving appropriate proof of death, pay a death benefit
to the beneficiary designated by the owner. If there is a sole owner and there
is only one beneficiary who is the owner's spouse, then the surviving spouse may
continue the contract under the Spousal Continuance Benefit. If the owner and
joint owner are spouses we will pay this death benefit upon the death of the
last surviving spouse who continues the contract as the sole owner. If the
Contract has an owner and a joint owner and they are not spouses at the time one
dies, we will pay the adjustment contract value and the contract will end. Joint
ownership may not be allowed in your state.
We require proof of death to be submitted promptly. The beneficiary will
receive the greater of the following:
1) The current value of your contract (as of the time we receive appropriate
proof of death). We impose no market value adjustment on contract value held
within the market value adjustment option when a death benefit is paid.
2) Either the base death benefit, which equals the total invested purchase
payments you have made proportionally reduced by any withdrawals, or, if you
have chosen a guaranteed minimum death benefit, the "protected value" of that
death benefit.
FOR CONTRACTS SOLD THE LATER OF MAY 1, 2003 OR UPON STATE APPROVAL, you may
elect the base death benefit and the guaranteed minimum death benefit (GMDB) if
you are age 85 or younger.
FOR ALL OTHER CONTRACTS, you may elect the base death benefit if you are 85
or younger and you may elect a Guaranteed Minimum Death Benefit (GMDB) if you
are 79 or younger.
GUARANTEED MINIMUM DEATH BENEFIT
If you elect the GMDB feature, you must elect a GMDB protected value option.
The GMDB protected value option can be equal to the GMDB roll-up, the GMDB
step-up, or the greater of the GMDB roll-up and the GMDB step-up. The GMDB
protected value is calculated daily.
GMDB ROLL-UP
CONTRACTS SOLD THE LATER OF MAY 1, 2003 OR UPON STATE APPROVAL.
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE
80 ON THE CONTRACT DATE, the GMDB roll-up is equal to the invested purchase
payments, increased daily at an effective annual interest rate of 5% starting on
the date that each invested purchase payment is made. The GMDB roll-up will
increase by subsequent invested purchase payments and reduce by the effect of
withdrawals.
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
We stop increasing the GMDB roll-up by the effective annual interest rate on
the later of:
- - the contract anniversary coinciding with or next following the sole owner's
or older owner's 80th birthday, or
- - the 5th contract anniversary.
However, the GMDB protected value will still increase by subsequent invested
purchase payments and reduce by the effect of withdrawals.
Withdrawals will first reduce the GMDB protected value on a dollar-for-dollar
basis up to the first 5% of GMDB protected value calculated on the contract
anniversary (on the contract date in the first contract year), then
proportionally by any amounts exceeding the 5%.
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB roll-up is equal to the invested purchase
payments, increased daily at an effective annual interest rate of 3% starting on
the date that each invested purchase payment is made. We will increase the GMDB
roll-up by subsequent invested purchase payments and reduce it by the effect of
withdrawals.
We stop increasing the GMDB roll-up by the effective annual interest rate on
the 5th contract anniversary. However we will continue to reduce the GMDB
protected value by the effect of withdrawals.
Withdrawals will first reduce the GMDB protected value on a dollar-for-dollar
basis up to the first 3% of GMDB protected value calculated on the contract
anniversary (on the contract date in the first contract year), then
proportionally by any amounts exceeding the 3%.
ALL OTHER CONTRACTS
The roll-up value equals the total of all invested purchase payments
compounded daily at an effective annual rate of 5.0%, subject to a cap of 200%
of all invested purchase payments. Both the roll-up value and the cap are
reduced proportionally by withdrawals.
We stop increasing the GMDB roll-up by the effective annual interest rate on
the contract anniversary coinciding with or next following the sole owner's or
older owner's 80th birthday.
However, the GMDB protected value will still increase by subsequent invested
purchase payments and reduce by the effect of withdrawals.
GMDB STEP-UP
CONTRACTS SOLD THE LATER OF MAY 1, 2003 OR UPON STATE APPROVAL.
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE
80 ON THE CONTRACT DATE, the GMDB step-up before the first contract anniversary
is the initial invested purchase payment increased by subsequent invested
purchase payments, and proportionally reduced by the effect of withdrawals. The
GMDB step-up on each contract anniversary will be the greater of the previous
GMDB step-up and the contract value as of such contract anniversary. Between
contract anniversaries, the GMDB step-up will increase by invested purchase
payments and reduce proportionally by withdrawals.
We stop increasing the GMDB step-up by any appreciation in the contract value
on the later of:
- - the contract anniversary coinciding with or next following the sole or older
owner's 80th birthday, or
- - the 5th contract anniversary.
However we still increase the GMDB protected value by subsequent invested
purchase payments and proportionally reduce it by withdrawals.
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB step-up before the third contract
anniversary is the sum of invested purchase payments, reduced by the effect of
withdrawals. On the third contract anniversary, we will adjust the GMDB step-up
to the greater of the then current GMDB step-up or the contract value as of that
contract anniversary. Thereafter we will only increase the GMDB protected value
by subsequent invested purchase payments and proportionally reduce it by
withdrawals.
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4:
WHAT IS THE DEATH BENEFIT? CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
ALL OTHER CONTRACTS
The GMDB step-up before the first contract anniversary is the initial invested
purchase payment increased by subsequent invested purchase payments and reduced
by the effect of withdrawals.
The step-up value equals the highest value of the contract on any contract
anniversary date--that is, on each contract anniversary, the new step-up value
becomes the higher of the previous step-up value and the current contract value.
Between anniversary dates, the step-up value is only increased by additional
invested purchase payments and reduced proportionally by withdrawals.
We stop increasing the GMDB step-up by any appreciation in the contract value
on the contract anniversary coinciding with or next following the sole or older
owner's 80th birthday.
However we still increase the GMDB protected value by subsequent invested
purchase payments and proportionally reduce it by withdrawals.
Greater of Step-up and Roll-up Guaranteed Minimum Death Benefit--Under this
option, the protected value is equal to the greater of the step-up value and the
roll-up value.
If you have chosen the base death benefit and death occurs after age 80, the
beneficiary will receive the base death benefit described above. If you have
chosen the guaranteed minimum death benefit option and death occurs on or after
age 80, the beneficiary will receive the greater of: 1) the current contract
value as of the date that due proof of death is received, and 2) the protected
value of that death benefit as of age 80, increased by subsequent invested
purchase payments reduced proportionally by any subsequent withdrawals. For this
purpose, an owner is deemed to reach age 80 on the contract anniversary on or
following the owner's actual 80th birthday (or if there is a joint owner, the
contract anniversary on or following the older owner's actual 80th birthday).
Here is an example of a proportional reduction:
If an owner withdrew 25% of a contract valued at $100,000 and if the
protected value was $80,000, the new protected value following the withdrawal
would be $60,000 or 75% of what it had been prior to the withdrawal.
PAYOUT OPTIONS
The beneficiary may, within 60 days of providing proof of death, choose to take
the death benefit under one of several death benefit payout options listed
below.
The death benefit payout options are:
CHOICE 1. Lump sum payment of the death benefit. If the beneficiary does not
choose a payout option within sixty days, the beneficiary will receive this
payout option.
CHOICE 2. The payment of the entire death benefit within a period of 5 years
from the date of death of the first to die of the owner or joint owner.
The entire death benefit will include any increases or losses resulting
from the performance of the variable or fixed interest rate options during
this period. During this period the beneficiary may: reallocate the contract
value among the variable, one-year fixed interest rate, or the market value
adjustment options; name a beneficiary to receive any remaining death benefit
in the event of the beneficiary's death; and make withdrawals from the
contract value, in which case, any such withdrawals will not be subject to
any withdrawal charges. However, the beneficiary may not make any purchase
payments to the contract.
During this 5 year period, we will continue to deduct from the death
benefit proceeds the charges and costs that were associated with the features
and benefits of the contract. Some of these features and benefits may not be
available to the beneficiary, such as the GMIB, IAB and spousal continuance
benefit.
CHOICE 3. Payment of the death benefit under an annuity or annuity settlement
option over the lifetime of the beneficiary or over a period not extending
beyond the life expectancy of the beneficiary with distribution beginning
within one year of the date of death of the last to survive of the owner or
joint owner.
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
If the owner and joint owner are not spouses at the death of the first to die
of the two, any portion of the death benefit (which is equal to the adjusted
contract value) not applied under Choice 3 within one year of the date of death
of the first to die must be distributed within five years of that date of death.
The tax consequences to the beneficiary vary among the three death benefit
payout options. See "What are the Tax Considerations Associated with the
Strategic Partners FlexElite Contract?" on page 51.
EARNINGS APPRECIATOR BENEFIT
The earnings appreciator benefit (or "EAB") is an optional, supplemental death
benefit that provides a benefit payment upon the death of the sole owner or
first to die of the owner or joint owner during the accumulation phase. Any
earnings appreciator benefit payment we make will be in addition to any other
death benefit payment we make under the contract. This feature may not be
available in your state.
The earnings appreciator benefit is designed to provide a beneficiary with
additional funds when we pay a death benefit in order to defray the impact taxes
may have on that payment. Because individual circumstances vary, you should
consult with a qualified tax adviser to determine whether it would be
appropriate for you to elect the earnings appreciator benefit.
If you want the earnings appreciator benefit, you generally must elect it at
the time you apply for the contract. If you elect the earnings appreciator
benefit, you may not later revoke it.
Upon our receipt of due proof of death in good order, we will determine an
earnings appreciator benefit by multiplying the earnings appreciator benefit
percentage below by the lesser of: (i) the then-existing amount of earnings
under the contract, or (ii) an amount equal to 3 times the sum of all purchase
payments previously made under the contract.
For purposes of computing earnings and purchase payments under the earnings
appreciator benefit, we calculate earnings as the difference between the
contract value and the sum of all purchase payments. Withdrawals reduce earnings
first, then purchase payments, on a dollar-for-dollar basis.
EAB percentage:
- - 40% if the owner is age 70 or younger on the date the application is signed.
- - 25% if the owner is between ages 71 and 75 on the date the application is
signed.
- - FOR CONTRACTS SOLD THE LATER OF MAY 1, 2003 OR UPON STATE APPROVAL, 15% if
the owner is between ages 76 and 79 on the date the application is signed.
If the contract is owned jointly, the age of the older of the owner or joint
owner determines the EAB percentage.
If the surviving spouse is continuing the contract in accordance with the
spousal continuance benefit (See "Spousal Continuance Benefit" below), the
following conditions apply:
- - In calculating the earnings appreciator benefit, we will use the age of the
surviving spouse at the time that the spousal continuance benefit is
activated to determine the applicable EAB percentage.
- - We will not allow the surviving spouse to continue the earnings appreciator
benefit (or bear the charge associated with this benefit) if he or she is age
76 or older on the date that the spousal continuance benefit is activated.
For contracts sold the later of May 1, 2003 or upon state approval, we will
not allow the surviving spouse to continue the earnings appreciation benefit.
- - If the earnings appreciator benefit is continued, we will calculate any
applicable earnings appreciator benefit payable upon the surviving spouse's
death by treating the contract value (as adjusted under the terms of the
spousal continuance benefit) as the first purchase payment.
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39
4:
WHAT IS THE DEATH BENEFIT? CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
TERMINATING THE EARNINGS APPRECIATOR BENEFIT
The earnings appreciator benefit will terminate on the earliest of:
- - the date you make a total withdrawal from the contract,
- - the date a death benefit is payable if the contract is not continued by the
surviving spouse under the spousal continuance benefit,
- - the date the contract terminates, or
- - the date you annuitize the contract.
SPOUSAL CONTINUANCE BENEFIT
This benefit is available if, on the date we receive due proof of the owner's
death, (1) there is only one owner of the contract and there is only one
beneficiary who is the owner's spouse; or (2) for contracts sold the later of
May 1, 2003 or upon state approval, there are an owner and joint owner of the
contract, and the joint owner is the owner's spouse and the owner's beneficiary
under the contract. In such cases, the surviving spouse, or annuitant if other
than the surviving spouse, cannot be older than age 95 on that date, and the
surviving spouse will become the new sole owner under the contract. Assuming the
above conditions are present, the surviving spouse can elect the spousal
continuance benefit, but must do so no later than 60 days after furnishing due
proof of the owner's death in good order.
Upon activation of the spousal continuance benefit, the contract value is
adjusted to equal the amount of the death benefit to which the surviving spouse
would have been entitled. This contract value will serve as the basis for
calculating any death benefit payable upon the death of the surviving spouse. We
will allocate any increase in the adjusted contract value among the variable,
fixed interest rate and market value adjustment options in the same proportions
that existed immediately prior to the spousal continuance adjustment. We will
waive the $1,000 minimum requirement for the market value adjustment option.
Under the spousal continuance benefit, we waive any potential withdrawal
charges applicable to purchase payments made prior to activation of the spousal
continuance benefit. However, we will continue to impose withdrawal charges on
purchase payments made after activation of this benefit. In addition, contract
value allocated to the market value adjustment option will remain subject to a
potential market value adjustment.
IF YOU ELECTED THE BASE DEATH BENEFIT, then upon activation of the spousal
continuance benefit, we will adjust the contract value to equal the greater of:
- - the contract value, or
- - the sum of all invested purchase payments (adjusted for withdrawals),
plus the amount of any applicable earnings appreciator benefit.
IF YOU ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GMDB ROLL-UP, we
will adjust the contract value to equal the greater of:
- - the contract value, or
- - the GMDB roll-up,
plus the amount of any applicable earnings appreciator benefit.
IF YOU HAVE ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GMDB
STEP-UP, we will adjust the contract value to equal the greater of:
- - the contract value, or
- - the GMDB step-up,
plus the amount of any applicable earnings appreciator benefit.
IF YOU HAVE ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GREATER OF
THE GMDB ROLL-UP AND GMDB STEP-UP, we will adjust the contract value to equal
the greatest of:
- - the contract value,
- - the GMDB roll-up, or
- - the GMDB step-up,
plus the amount of any applicable earnings appreciator benefit.
After we have made the adjustment to contract value set out immediately
above, we will continue to compute the GMDB roll-up and the GMDB step-up under
the surviving spousal owner's contract, and will do so in accordance with the
preceding paragraphs.
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40
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
If the contract is being continued by the surviving spouse, the attained age
of the surviving spouse will be the basis used in determining the death benefit
payable under the guaranteed minimum death benefit provisions of the contract.
FOR CONTRACTS SOLD THE LATER OF MAY 1, 2003 OR UPON STATE APPROVAL, IF YOU
ELECTED THE GUARANTEED MINIMUM INCOME BENEFIT, it will be continued for the
surviving spousal owner. All provisions of the guaranteed minimum income benefit
(i.e., waiting period, GMIB roll-up cap, etc.) will remain the same as on the
date of the owner's death. See "Guaranteed Minimum Income Benefit" page 31. If
the GMIB reset feature was never exercised, the surviving spousal owner can
exercise the GMIB reset feature twice. If the original owner had previously
exercised the GMIB reset feature once, the surviving spousal owner can exercise
the GMIB reset once. However the surviving spouse (or new annuitant designated
by the surviving spouse) must be under 76 years of age at the time of reset. If
the original owner had previously exercised the GMIB reset feature twice, the
surviving spousal owner may not exercise the GMIB reset at all. If the attained
age of the surviving spouse at activation of the spousal continuance benefit,
when added to the remainder of the GMIB waiting period to be satisfied, would
preclude the surviving spouse from utilizing the guaranteed minimum income
benefit, we will revoke the guaranteed minimum income benefit under the contract
at that time and we will no longer charge for that benefit.
FOR CONTRACTS SOLD THE LATER OF MAY 1, 2003 OR UPON STATE APPROVAL, IF YOU
ELECTED THE INCOME APPRECIATOR BENEFIT, on the owner's death, the income
appreciator benefit will end unless the contract is continued by the owner's
surviving spouse under the spousal continuance benefit. See "Spousal Continuance
Benefit" page 40. If the contract is continued by the surviving spouse, we will
continue to pay the balance of any income appreciator benefit payments over the
remainder of the 10-year payment period, or until the surviving spouse attains
age 95, whichever occurs first.
If the income appreciator benefit has not been in force for 7 contract years,
the surviving spouse may not activate the benefit until it has been in force for
7 contract years. If the attained age of the surviving spouse at activation of
the spousal continuation benefit, when added to the remainder of the IAB waiting
period to be satisfied, would preclude the surviving spouse from utilizing the
income appreciator benefit, we will revoke the income appreciator benefit under
the contract at that time and we will no longer charge for that benefit. If the
income appreciator benefit has been in force for 7 contract years, but the
benefit has not been activated, the surviving spouse may activate the benefit at
any time after the contract has been continued. If the income appreciator
benefit is activated after the contract is continued by the surviving spouse,
the income appreciator benefit calculation will exclude any amount added to the
contract at the time of spousal continuance resulting from any death benefit
value exceeding the contract value.
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41
5:
HOW CAN I PURCHASE A STRATEGIC PARTNERS
FLEXELITE CONTRACT?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
PURCHASE PAYMENTS
A purchase payment is the amount of money you give us to purchase the contract.
The minimum purchase payment is $10,000. With some restrictions, you can make
additional purchase payments of at least $500 or more at any time during the
accumulation phase. We impose a minimum of $100 with respect to additional
purchase payments made through electronic funds transfers. However, no purchase
payments may be made on or after the earliest 85th birthday of:
- - the owner;
- - joint owner; or
- - the annuitant.
We have established an aggregate maximum purchase payment limit of $20
million, and we limit the maximum total purchase payments per contract in any
contract year, other than the first, to $2 million. You must obtain our approval
prior to submitting a purchase payment of $5 million or greater within the first
contract year, or greater than $2 million for subsequent purchase payments.
Depending on the applicable state law, other limits may apply.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your purchase payment among the
variable investment options, fixed interest rate options, or the market value
adjustment option based on the percentages you choose. The percentage of your
allocation to a specific investment option can range in whole percentages from
1% to 100%. You must allocate at least $1,000 to any guarantee period under the
market value adjustment option. If, after the initial invested purchase payment,
we receive a purchase payment without allocation instructions, we will allocate
the corresponding invested purchase payment in the same proportion as your most
recent purchase payment (unless you directed us to allocate that purchase
payment on a one-time-only basis).
You may submit an allocation change request at any time. Contact the
Prudential Annuity Service Center for details.
We generally will credit the initial purchase payment to your contract within
two business days from the day on which the payment is received at the
Prudential Annuity Service Center, if we receive the application in good order.
If the initial purchase payment and application are not received in good order,
we will take up to five business days to try to complete the application. If the
application cannot be completed within that five business day period, we will
return your payment to you (unless you consent to our retention of it). We
credit subsequent payments on the business day on which they are received in
good order at the Prudential Annuity Service Center. Our business day ends when
the New York Stock Exchange closes, usually at 4:00 p.m. Eastern time.
CALCULATING CONTRACT VALUE
The value of your contract will go up or down depending on the investment
performance of the variable investment option(s) you choose. To determine the
value of your contract allocated to the variable investment option(s), we use a
unit of measure called an accumulation unit. An accumulation unit works like a
share of a mutual fund.
Every day we determine the value of an accumulation unit for each of the
variable investment options. We do this by:
1) adding up the total amount of money allocated to a specific investment
option;
2) subtracting from that amount insurance charges and any other applicable
charges such as for taxes; and
3) dividing this amount by the number of outstanding accumulation units.
When you make a purchase payment, we credit your contract with accumulation
units of the subaccount or subaccounts selected. The number of accumulation
units credited to your contract is determined by dividing the amount of the
purchase payment allocated to an investment option by the unit price of the
accumulation unit for that investment option. We calculate the unit price for
each investment option after the New York Stock Exchange closes each day and
then credit your contract. The value of the accumulation units can
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42
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
increase, decrease, or remain the same from day to day.
We cannot guarantee that your contract value will increase or that it will
not fall below the amount of your total purchase payments.
We reserve the right to terminate the contract, and pay the contract value to
you, in either of the following scenarios: (i) if immediately prior to the
annuity date, the contract value is less than $2000, or if the contract would
provide annuity payments of less than $20 per month and (ii) if during the
accumulation period, no purchase payment has been received during the
immediately preceding two contract years and each of the following is less than
$2000: (a) the total purchase payments (less withdrawals) made prior to such
period, and (b) the current contract value.
CREDIT ELECTION
We will notify you of your option to make a credit election thirty days before
your 3rd and 6th contract anniversaries. If you make a credit election, we will
add to your contract value a credit amount of at least 0.5% of the contract
value as of the applicable contract anniversary. Currently, we will add a credit
amount of 1% of the contract value as of the applicable contract anniversary.
The credit will be allocated to the variable investment and fixed interest rate
options in the same proportion as the contract value on the contract
anniversary. We must receive your credit election in good order by your contract
anniversary in order to add the credit to your contract value. This option is
not available if the annuitant or co-annuitant is 81 or older on the contract
date, the contract is continued under the Spousal Continuance Benefit, or you
previously elected not to take the credit.
After you make a credit election, amounts you withdraw will be subject to the
following credit election withdrawal charges depending upon the number of
contract years since your credit election:
The credit election withdrawal charges are determined and applied in the same
manner as the withdrawal charges described on page 44. Credits and related
earnings are treated as earnings under the contract.
We recoup the cost of the credit by assessing higher charges. If you make a
withdrawal during the credit election withdrawal charge period you may be in a
worse position than if you had declined the credit.
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43
6:
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC
PARTNERS FLEXELITE CONTRACT?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
THERE ARE CHARGES AND OTHER EXPENSES ASSOCIATED WITH THE CONTRACT THAT REDUCE
THE RETURN ON YOUR INVESTMENT. THESE CHARGES AND EXPENSES ARE DESCRIBED BELOW.
INSURANCE AND ADMINISTRATIVE CHARGE
Each day, we make a deduction for the insurance and administrative charge. The
insurance and administrative charge covers our expenses for mortality and
expense risk, administration, marketing and distribution. If you choose a GMDB
option, the insurance and administrative charge also includes a charge to cover
our assumption of the associated risk. The mortality risk portion of the charge
is for assuming the risk that the annuitant(s) will live longer than expected
based on our life expectancy tables. When this happens, we pay a greater number
of annuity payments. The expense risk portion of the charge is for assuming the
risk that the current charges will be insufficient in the future to cover the
cost of administering the contract. The administrative expense portion of the
charge is for the expenses associated with the administration of the contract.
This would include preparing and issuing the contract; establishing and
maintaining contract records; preparation of confirmations and annual reports;
personnel costs; legal and accounting fees; filing fees; and systems costs. The
GMDB risk portion of the charge, if applicable, covers our assumption of the
risk that the protected value of the contract will be larger than the base death
benefit if the contract owner dies during the accumulation phase.
We calculate the insurance and administrative charge based on the average
daily value of all assets allocated to the variable investment options. These
charges are not assessed against amounts allocated to the fixed interest rate
options. The amount of the charge depends on the death benefit option that you
choose. The charge on an annual basis is equal to 1.65% if you choose the base
death benefit, 1.90% if you choose either the roll-up or step-up GMDB option,
and 2.00% if you choose the greater of the roll-up or step-up GMDB option. The
charges described above apply to contracts sold the later of May 1, 2003 or upon
state approval. For all other contracts, these charges are 1.60%, 1.80%, and
1.90%, respectively.
If the charges under the contract are not sufficient, then we will bear the
loss. We do, however, expect to profit from this charge. The insurance risk
charge for your contract cannot be increased. Any profits made from this charge
may be used by us to pay for the costs of distributing the contracts.
WITHDRAWAL CHARGE
A withdrawal charge may apply if you make a full or partial withdrawal within
three years of the contract date. The withdrawal charge may also apply if you
begin the income phase during these periods, depending upon the annuity option
you choose. The withdrawal charge is a percentage, shown below, of the amount
withdrawn.
In certain states reduced withdrawal charges may apply for certain ages if a
credit election is made.
In addition, as described on page 43, when you make a credit election a 7%
withdrawal charge will be applied to amounts withdrawn for the three contract
years following the credit election.
If a withdrawal is effective on the day before a contract anniversary, the
withdrawal charge percentage as of the following contract anniversary will
apply.
If you request a withdrawal, we will:
- deduct an amount from the contract value that is sufficient to pay the
withdrawal charge, and
- provide you with the amount requested.
If you request a full withdrawal, we will provide you with the full amount of
the contract value after making deductions for charges.
Each contract year, you may withdraw a specified amount of your contract
value without incurring a withdrawal charge. We determine the "charge-free
amount" available to you in a given contract year on the contract anniversary
that begins that year. The
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
charge-free amount in a given contract year is equal to 10% of the sum of all
purchase payments that you have made as of the applicable contract anniversary.
During the first contract year, the charge-free amount is equal to 10% of the
initial purchase payment.
When you make a withdrawal, we will deduct the amount of the withdrawal first
from the available charge-free amount. Any excess amount will then be deducted
from purchase payments in excess of the charge-free amount and subject to
applicable withdrawal charges. Once you have withdrawn all purchase payments,
additional withdrawals will come from any earnings. We do not impose withdrawal
charges on earnings.
If you surrender your contract, and later change your mind, we currently
allow you to reinstate your contract during a limited period of time after the
surrender. For purposes of computing any withdrawal charge on a withdrawal you
make after the reinstatement, we will view the contract as having remained in
effect continuously. The minimal sales costs associated with reinstatements
allow us to offer this administrative option.
However, if a withdrawal is taken from a market value adjustment guarantee
period prior to the expiration of the rate guarantee period, we will make a
market value adjustment.
WAIVER OF WITHDRAWAL CHARGE FOR CRITICAL CARE
Except as restricted by applicable state law, we will waive all withdrawal
charges and any market value adjustment upon receipt of proof that the owner or
a joint owner is terminally ill, or has been confined to an eligible nursing
home or eligible hospital continuously for at least three months after the
contract date. We will also waive the contract maintenance charge if you
surrender your contract in accordance with the above noted conditions. This
waiver is not available if the owner has assigned ownership of the contract to
someone else.
EARNINGS APPRECIATOR CHARGE
We will impose an additional charge if you choose the Earnings Appreciator
supplemental death benefit. The charge for this benefit is based on an annual
rate of 0.30% of your contract value.
We calculate the charge on each of the following events:
- each contract anniversary,
- on the annuity date,
- upon death of the sole or first to die of the owner or joint owner prior
to the annuity date,
- upon a full or partial withdrawal, and
- upon a subsequent purchase payment.
The fee is based on the contract value at time of calculation and is
pro-rated based on the portion of the contract year since the date that the
earnings appreciator benefit charge was last calculated.
Although the earnings appreciator benefit charge may be calculated more
often, it is deducted only:
- on each contract anniversary,
- on the annuity date,
- upon death of the sole owner or first to die of the owner or joint owner
prior to the annuity date,
- upon a full withdrawal, and
- upon a partial withdrawal if the contract value remaining after the
partial withdrawal is not enough to cover the then applicable earnings
appreciator benefit charge.
We withdraw this charge from each investment option (including each guarantee
period) in the same proportion that the amount allocated to the investment
option bears to the total contract value. Upon a full withdrawal or if the
contract value remaining after a partial withdrawal is not enough to cover the
then-applicable earnings appreciator benefit charge, we will deduct the charge
from the amount we pay you. We will deem the payment of the earnings appreciator
benefit charge as made from earnings for purposes of calculating other charges.
As noted above, the charge is calculated and deducted at least once a year on
the contract anniversary. In the future, we may calculate and deduct this fee
more frequently, such as quarterly.
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WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS FLEXELITE CONTRACT?
CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
CONTRACT MAINTENANCE CHARGE
On each contract anniversary during the accumulation phase, if your contract
value is less than $100,000, we will deduct the lesser of $50 or 2% of your
contract value, for administrative expenses. (This fee may differ in certain
states). While this is what we currently charge, we may increase this charge up
to a maximum of $60. Also, we may raise the level of the contract value at which
we waive this fee. The charge will be deducted proportionately from each of the
contract's variable investment options, fixed interest rate options, and
guarantee periods within the market value adjustment option. This same charge
will also be deducted when you surrender your contract if your contract value is
less than $100,000.
GUARANTEED MINIMUM INCOME BENEFIT CHARGE
We will impose an additional charge if you choose the guaranteed minimum income
benefit. This is an annual charge equal to 0.45% of the GMIB protected value of
your contract, which we deduct from your contract value on each of the following
events:
- - each contract anniversary,
- - when you begin the income phase of the contract,
- - when you decide no longer to participate in the guaranteed minimum income
benefit,
- - upon a full withdrawal, and
- - upon a partial withdrawal if the remaining contract value would not be enough
to cover the then applicable guaranteed minimum income benefit charge.
If we impose this fee other than on a contract anniversary, then we will
pro-rate it based on the portion of the contract year for which the guaranteed
minimum income benefit was in effect. We withdraw the fee from each investment
option in the same proportion that your contract value is allocated to that
investment option. Upon a full withdrawal or if the contract value remaining
after a partial withdrawal is not enough to cover the applicable guaranteed
minimum income benefit charge, we will deduct the charge from the amount we pay
you.
In some states, we may calculate the charge for the guaranteed minimum income
benefit in a different manner, but that charge will not exceed 0.45% of the GMIB
protected value.
We will not impose the guaranteed minimum income benefit charge after the
income phase begins, after you revoke the guaranteed minimum income benefit, or
after you choose your GMIB payout option.
INCOME APPRECIATOR BENEFIT CHARGE
We will impose an additional charge if you choose the income appreciator
benefit. This is an annual charge equal to 0.25% of your contract value. The
income appreciator benefit charge is calculated:
- on each contract anniversary,
- on the annuity date,
- upon the death of the sole owner or first to die of the owner or joint
owner prior to the annuity date,
- upon a full or partial withdrawal, and
- upon a subsequent purchase payment.
The fee is based on the contract value at the time of the calculation, and is
prorated based on the portion of the contract year since the date that the
income appreciator benefit charge was last calculated.
Although the income appreciator benefit charge may be calculated more often,
it is deducted only:
- on each contract anniversary,
- on the annuity date,
- upon the death of the sole owner or first to die of the owner or joint
owners prior to the annuity date,
- upon a full withdrawal, and
- upon a partial withdrawal if the contract value remaining after such
partial withdrawal is not enough to cover the then-applicable income
appreciator benefit charge.
We reserve the right to calculate and deduct the fee more frequently than
annually, such as quarterly.
The income appreciator benefit charge is deducted from each investment option
in the same proportion that the amount allocated to the investment option bears
to the total contract value. Upon a full withdrawal, or if the contract value
remaining after a
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
partial withdrawal is not enough to cover the then-applicable income appreciator
benefit charge, the charge is deducted from the amount paid. The payment of the
income appreciator benefit charge will be deemed to be made from earnings for
purposes of calculating other charges.
We no longer assess this charge upon election of IAB Option 1, the completion
of IAB Option 2 or 3, and upon annuitization.
TAXES ATTRIBUTABLE TO PREMIUM
There are federal, state and local premium based taxes applicable to your
purchase payment. We are responsible for the payment of these taxes and may make
a deduction from the value of the contract to pay some or all of these taxes.
Some of these taxes are due when the contract is issued, others are due when the
annuity payments begin. It is our current practice not to deduct a charge for
state premium taxes until annuity payments begin. In the states that impose a
premium tax, the current rates range up to 3.5%. It is also our current practice
not to deduct a charge for the federal deferred acquisition costs paid by us
that are based on premium received. However, we reserve the right to charge the
contract owner in the future for any such deferred acquisition costs and any
federal, state or local income, excise, business or any other type of tax
measured by the amount of premium received by us.
TRANSFER FEE
You can make 12 free transfers every contract year. We measure a contract year
from the date we issue your contract (contract date). If you make more than 12
transfers in a contract year (excluding Dollar Cost Averaging and
Auto-Rebalancing), we will deduct a transfer fee of $10 for each additional
transfer. We have the right to increase this fee up to a maximum of $30 per
transfer, but we have no current intention of doing so. We will deduct the
transfer fee pro-rata from the investment options from which the transfer is
made.
COMPANY TAXES
We will pay the taxes on the earnings of the separate account. We are not
currently charging the separate account for taxes. We will periodically review
the issue of charging the separate account for these taxes and may impose a
charge in the future.
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HOW CAN I
ACCESS MY MONEY?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
YOU CAN ACCESS YOUR MONEY BY:
- - MAKING A WITHDRAWAL (EITHER PARTIAL OR COMPLETE); OR
- - ELECTING TO RECEIVE ANNUITY PAYMENTS DURING THE INCOME PHASE.
WITHDRAWALS DURING THE ACCUMULATION PHASE
When you make a complete withdrawal, you will receive the value of your contract
minus the applicable charges and fees. We will calculate the value of your
contract and charges, if any, as of the date we receive your request in good
order at the Prudential Annuity Service Center.
Unless you tell us otherwise, any partial withdrawal and related withdrawal
charges will be made proportionately from all of the variable investment and any
available fixed interest rate options you have selected. The minimum amount
which may be withdrawn is $250. If you request a withdrawal that would reduce
your total contract fund below the minimum $2,000, we will withdraw the maximum
amount that will not reduce the total contract fund below that amount.
With respect to the variable investment options, we will generally pay the
withdrawal amount, less any required tax withholding, within seven days after we
receive a withdrawal request in good order. We will deduct applicable charges,
if any, from the assets in your contract.
With respect to the market value adjustment option, you may specify the
guarantee period from which you would like to make a withdrawal. If you indicate
that the withdrawal is to originate from the market value adjustment option, but
you do not specify which guarantee period is to be involved, then we will take
the withdrawal from the guarantee period that has the least time remaining until
its maturity date. If you indicate that you wish to make a withdrawal, but do
not specify the investment options to be involved, then we will take the
withdrawal from your contract value on a pro rata basis from each investment
option that you have. In that situation, we will aggregate the contract value in
each of the guarantee periods that you have within the market value adjustment
option for purposes of making that pro rata calculation. The portion of the
withdrawal associated with the market value adjustment option then will be taken
from the guarantee periods with the least amount of time remaining until the
maturity date, irrespective of the original length of the guarantee period. You
should be aware that a withdrawal may avoid a withdrawal charge based on the
charge-free amount that we allow, yet still be subject to a market value
adjustment.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY
WITHDRAWAL. FOR A MORE COMPLETE EXPLANATION, SEE SECTION 8 OF THIS PROSPECTUS.
AUTOMATED WITHDRAWALS
We offer an Automated Withdrawal feature. This feature enables you to receive
periodic withdrawals in monthly, quarterly, semiannual or annual intervals. We
will process your withdrawals at the end of the business day at the intervals
you specify. We will continue at these intervals until you tell us otherwise.
You can make withdrawals from any designated investment option or proportionally
from all investment options (other than a guarantee period within the market
value adjustment option). The minimum automated withdrawal amount you can make
is $100.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO AUTOMATED
WITHDRAWALS. FOR A MORE COMPLETE EXPLANATION, SEE SECTION 8 OF THIS PROSPECTUS.
INCOME APPRECIATOR BENEFIT OPTIONS DURING THE ACCUMULATION PHASE
The income appreciator benefit (or "IAB") is discussed on page 33. As mentioned
there, you may choose IAB Option 1 at annuitization, but you may instead choose
IAB Options 2 or 3 during the accumulation phase of your contract. Income
appreciator benefit payments under IAB Options 2 and 3 will begin on the same
day of the month as the contract date, beginning with the next month following
our receipt of your request in good order. Under IAB Options 2 and 3, you can
choose to have the income appreciator benefit amounts paid or credited monthly,
quarterly, semi-annually, or annually.
IAB OPTIONS 2 AND 3 INVOLVE A TEN-YEAR PAYMENT PERIOD. IF THE 10-YEAR PAYMENT
PERIOD WOULD END AFTER
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
THE ANNUITY DATE AND YOU CHOOSE AN ANNUITY SETTLEMENT OPTION OTHER THAN ANY
LIFETIME PAYOUT OPTION OR PERIOD CERTAIN OPTION OF AT LEAST 15 YEARS OR YOU MAKE
A FULL WITHDRAWAL, YOU MAY LOSE ALL OR ANY REMAINING PORTION OF THE INCOME
APPRECIATOR BENEFIT. IN SUCH INSTANCES, WE WOULD NOT REIMBURSE YOU FOR THE
EXPENSES YOU HAD PAID US FOR THIS BENEFIT.
IAB OPTION 2 -- INCOME APPRECIATOR BENEFIT AUTOMATIC WITHDRAWAL PAYMENT PROGRAM
Under this option, you elect to receive the income appreciator benefit during
the accumulation phase. When you activate the benefit, a 10-year income
appreciator benefit automatic withdrawal payment program begins. We will pay you
the income appreciator benefit amount in equal installments over a 10-year
payment period. You may combine this income appreciator benefit amount with an
automated withdrawal amount from your contract value, in which case each
combined payment must be at least $100.
The maximum automated withdrawal payment amount that you may receive from
your contract value under this income appreciator benefit program in any
contract year during the 10-year period may not exceed 10% of the contract value
as of the date you activate the income appreciator benefit.
Once we calculate the income appreciator benefit, the amount will not be
affected by changes in contract value due to the investment performance of any
allocation option. Withdrawal charges may apply to automatic withdrawal payment
amounts, but not income appreciator benefit amounts, of the income appreciator
benefit program payments.
After the ten-year payment period has ended, if the remaining contract value
is $2,000 or more, the contract will continue. If the remaining contract value
is less than $2,000 after the end of the 10-year payment period, we will pay you
the remaining contract value and the contract will terminate. If the contract
value falls below the minimum amount required to keep the contract in force due
solely to investment results before the end of the 10-year payment period, we
will continue to pay the income appreciator benefit amount for the remainder of
the 10-year payment period.
DISCONTINUING THE INCOME APPRECIATOR BENEFIT AUTOMATIC WITHDRAWAL PAYMENT
PROGRAM UNDER IAB OPTION 2
You may discontinue the income appreciator benefit payment program under IAB
Option 2 and activate IAB Option 3 at any time after payments have begun and
before the last payment is made. We will add the remaining income appreciator
benefit amount to the contract value at the same frequency as your initial
election until the end of the 10-year payment period. We will treat any income
appreciator benefit amount added to the contract value as additional earnings.
Unless you direct us otherwise, we will allocate these additions to the
variable, fixed interest rate, or market value adjustment options in the same
proportions as your most recent purchase payment allocation percentages.
You may discontinue the income appreciator benefit payment program under IAB
Option 2 before the last payment is made and elect an annuity or settlement
option. We will add the balance of the income appreciator benefit amount for the
10-year payment period to the contract value in a lump sum before determining
the adjusted contract value. The adjusted contract value may be applied to any
annuity or settlement option that is paid over the lifetime of the annuitant,
joint annuitants, or a period certain of at least 15 years (but not to exceed
life expectancy).
IAB OPTION 3 -- INCOME APPRECIATOR BENEFIT CREDIT TO CONTRACT VALUE
Under this option, you can activate the income appreciator benefit and receive
the benefit as credits to your contract value over a 10-year payment period. We
will allocate these income appreciator benefit credits to the variable
investment options, the fixed interest rate option, or the market value
adjustment option in the same manner as your current allocation, unless you
direct us otherwise. We will calculate the income appreciator benefit amount on
the date we receive your written request in good order. Once we have calculated
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HOW CAN I ACCESS MY MONEY? CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
the income appreciator benefit, the income appreciator benefit credit will not
be affected by changes in contract value due to the investment performance of
any allocation option.
Before we add the last income appreciator benefit credit to your contract
value, you may switch to IAB Option 2 and receive the remainder of the income
appreciator benefit as payments to you (instead of credits to the contract
value) under the income appreciator benefit program for the remainder of the
10-year payment period.
You can also request that any remaining payments in the 10-year payment
period be applied to an annuity or settlement option that is paid over the
lifetime of the annuitants, joint annuitants, or a period certain of at least 15
years (but not to exceed life expectancy).
EXCESS WITHDRAWALS
During the 10-year period under IAB options 2 or 3, an "excess withdrawal"
occurs when any amount is withdrawn from your contract value in a contract year
that exceeds the sum of (1) 10% of the contract value as of the date the income
appreciator benefit was activated plus (2) earnings since the income appreciator
benefit was activated, that have not been previously withdrawn.
We will deduct the excess withdrawal on a proportional basis from the
remaining income appreciator benefit amount. We will then calculate and apply a
new reduced income appreciator benefit amount.
Withdrawals you make in a contract year that do not exceed the sum of (1) 10%
of the contract value as of the date the income appreciator benefit was
activated plus (2) earnings since the income appreciator benefit was activated,
that have not been previously withdrawn, do not reduce the remaining income
appreciator benefit amount.
EFFECT OF TOTAL WITHDRAWAL ON INCOME APPRECIATOR BENEFIT
We will not make income appreciator benefit payments after the date you make a
total withdrawal of the contract surrender value.
SUSPENSION OF PAYMENTS OR TRANSFERS
We may be required to suspend or postpone payments made in connection with
withdrawals or transfers from a variable investment option for any period when:
- - The New York Stock Exchange is closed (other than customary weekend and
holiday closings);
- - Trading on the New York Stock Exchange is restricted;
- - An emergency exists, as determined by the SEC, during which sales and
redemptions of shares of the mutual funds are not feasible or we cannot
reasonably value the accumulation units; or
- - The SEC, by order, permits suspension or postponement of payments for the
protection of owners.
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8:
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC
PARTNERS FLEXELITE CONTRACT?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
The tax considerations associated with the Strategic Partners FlexElite contract
vary depending on whether the contract is (i) owned by an individual and not
associated with a tax-favored retirement plan, or (ii) held under a tax-favored
retirement plan. We discuss the tax considerations for these categories of
contracts below. The discussion is general in nature and describes only federal
income tax law (not state or other tax laws). It is based on current law and
interpretations, which may change. It is not intended as tax advice. A qualified
tax adviser should be consulted for complete information and advice.
CONTRACTS OWNED BY INDIVIDUALS (NOT ASSOCIATED WITH TAX-FAVORED RETIREMENT
PLANS)
TAXES PAYABLE BY YOU
We believe the contract is an annuity contract for tax purposes. Accordingly, as
a general rule, you should not pay any tax until you receive money under the
contract.
Generally, annuity contracts issued by the same company (and affiliates) to
you during the same calendar year must be treated as one annuity contract for
purposes of determining the amount subject to tax under the rules described
below.
If the Internal Revenue Service (IRS) determines that the deductions for one
or more benefits under the contract, including without limitation the Earnings
Appreciator benefit and Guaranteed Minimum Death Benefit, are taxable
withdrawals, then the owner may revoke the affected benefit(s) within 90 days
after notice from us.
TAXES ON WITHDRAWALS AND SURRENDER
If you make a withdrawal from your contract or surrender it before annuity
payments begin, the amount you receive will be taxed as ordinary income, rather
than as return of purchase payments, until all gain has been withdrawn. You will
generally be taxed on any withdrawals from the contract while you are alive even
if the withdrawal is paid to someone else.
If you assign or pledge all or part of your contract as collateral for a
loan, the part assigned will be treated as a withdrawal. Also, if you elect the
interest payment option, that election will be treated, for tax purposes, as
surrendering your contract.
If you transfer your contract for less than full consideration, such as by
gift, you will trigger tax on the gain in the contract. This rule does not apply
if you transfer the contract to your spouse or under most circumstances if you
transfer the contract incident to divorce.
It is our position that the Guaranteed Minimum Death Benefit option, "the
supplemental death benefit option," and other contract benefits are an integral
part of the annuity contract and accordingly that the charges made against the
annuity contract's cash value for the option should not be treated as
distributions subject to income tax. It is possible, however, that the IRS could
take the position that such charges should be treated as distributions.
TAXES ON ANNUITY PAYMENTS
A portion of each annuity payment you receive will be treated as a partial
return of your purchase payments and will not be taxed. The remaining portion
will be taxed as ordinary income. Generally, the nontaxable portion is
determined by multiplying the annuity payment you receive by a fraction, the
numerator of which is your purchase payments (less any amounts previously
received tax-free) and the denominator of which is the total expected payments
under the contract.
After the full amount of your purchase payments have been recovered tax-free,
the full amount of the annuity payments will be taxable. If annuity payments
stop due to the death of the annuitant before the full amount of your purchase
payments have been recovered, a tax deduction may be allowed for the unrecovered
amount.
TAX PENALTY ON WITHDRAWALS AND ANNUITY PAYMENTS
Any taxable amount you receive under your contract may be subject to a 10 % tax
penalty. Amounts are not subject to this tax penalty if:
- - the amount is paid on or after you reach age 59 1/2 or die;
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WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS FLEXELITE
CONTRACT CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
- - the amount received is attributable to your becoming disabled;
- - the amount paid or received is in the form of level annuity payments paid or
received not less frequently than annually under a lifetime annuity; and
- - the amount received is paid under an immediate annuity contract (in which
annuity payments begin within one year of purchase).
If you modify the lifetime annuity payment stream (other than as a result of
death or disability) before you reach age 59 1/2 (or before the end of the five
year period beginning with the first payment and ending after you reach age
59 1/2), your tax for the year of modification will be increased by the penalty
tax that would have been imposed without the exception, plus interest for the
deferral.
TAXES PAYABLE BY BENEFICIARIES
All the death benefit options are subject to income tax to the extent the
distribution exceeds the adjusted basis in the contract and the full value of
the death benefit is included in the owner's estate.
Generally, the same tax rules apply to amounts received by your beneficiary
as those set forth above with respect to you. The election of an annuity payment
option instead of a lump sum death benefit may defer taxes. Certain minimum
distribution requirements apply upon your death, as discussed further below.
REPORTING AND WITHHOLDING DISTRIBUTIONS
Taxable amounts distributed from your annuity contracts are subject to federal
and state income tax reporting and withholding. In general, we will withhold
federal income tax from the taxable portion of such distribution based on the
type of distribution. In the case of an annuity or similar periodic payment, we
will withhold as if you are a married individual with three exemptions. In the
case of all other distributions, we will withhold at a 10% rate. You may
generally elect not to have tax withheld from your payments. An election out of
withholding must be made on forms that we provide.
State income tax withholding rules vary and we will withhold based on the
rules of your State of residence. Special tax rules apply to withholding for
nonresident aliens, and we generally withhold income tax for nonresident aliens
at a 30% rate. A different withholding rate may be applicable to a nonresident
alien based on the terms of an existing income tax treaty between the United
States and the nonresident alien's country. Please refer to the CONTRACTS HELD
BY TAX FAVORED PLANS section for withholding rules for tax favored plans (for
example, an IRA).
Regardless of the amount withheld by us, you are liable for payment of
federal and state income tax on the taxable portion of annuity distributions.
You should consult with your tax advisor regarding the payment of the correct
amount of these income taxes and potential liability if you fail to pay such
taxes.
ANNUITY QUALIFICATION
DIVERSIFICATION AND INVESTOR CONTROL. In order to qualify for the tax rules
applicable to annuity contracts described above, the contract must be an annuity
contract for tax purposes. This means that the assets underlying the annuity
contract must be diversified, according to certain rules. It also means that we,
and not you as the contract-owner, must have sufficient control over the
underlying assets to be treated as the owner of the underlying assets for tax
purposes. We believe these rules, which are further discussed in the SAI, will
be met.
REQUIRED DISTRIBUTIONS UPON YOUR DEATH. Upon your death (or the death of a
joint owner, if earlier), certain distributions must be made under the contract.
The required distributions depend on whether you die before you start taking
annuity payments under the contract or after you start taking annuity payments
under the contract.
If you die on or after the annuity date, the remaining portion of the
interest in the contract must be distributed at least as rapidly as under the
method of distribution being used as of the date of death.
If you die before the annuity date, the entire interest in the contract must
be distributed within 5 years after the date of death. However, if an annuity
payment option is selected by your designated beneficiary and if
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
annuity payments begin within 1 year of your death, the value of the contract
may be distributed over the beneficiary's life or a period not exceeding the
beneficiary's life expectancy. Your designated beneficiary is the person to whom
benefit rights under the contract pass by reason of death, and must be a natural
person in order to elect an annuity payment option based on life expectancy or a
period exceeding five years.
If any portion of the contract is payable to (or for the benefit of) your
surviving spouse, that portion of the contract may be continued with your spouse
as the owner.
CHANGES IN THE CONTRACT. We reserve the right to make any changes we deem
necessary to assure that the contract qualifies as an annuity contract for tax
purposes. Any such changes will apply to all contractowners and you will be
given notice to the extent feasible under the circumstances.
ADDITIONAL INFORMATION
You should refer to the SAI if:
- - The contract is held by a corporation or other entity instead of by an
individual or as agent for an individual.
- - Your contract was issued in exchange for a contract containing purchase
payments made before August 14, 1982.
- - You transfer your contract to, or designate, a beneficiary who is either
37 1/2 years younger than you or a grandchild.
CONTRACTS HELD BY TAX FAVORED PLANS
The following discussion covers annuity contracts held under tax-favored
retirement plans.
Currently, the contract may be purchased for use in connection with
individual retirement accounts and annuities ("IRAs") which are subject to
Sections 408(a), 408(b) and 408A of the Internal Revenue Code of 1986, as
amended (Code). At some future time we may allow the contract to be purchased in
connection with other retirement arrangements which are also entitled to
favorable federal income tax treatment ("tax favored plans"). These other tax
favored plans include:
Simplified employee pension plans ("SEPs") under Section 408(k) of the Code;
Saving incentive match plans for employees-IRAs ("SIMPLE-IRAs") under Section
408(p) of the Code; and Tax-deferred annuities ("TDAs") under Section 403(b) of
the Code. This description assumes that (i) we will be offering this to both IRA
and non-IRA tax favored plans, and (ii) you have satisfied the requirements for
eligibility for these products.
YOU SHOULD BE AWARE THAT TAX FAVORED PLANS SUCH AS IRAS GENERALLY PROVIDE TAX
DEFERRAL REGARDLESS OF WHETHER THEY INVEST IN ANNUITY CONTRACTS. THIS MEANS THAT
WHEN A TAX FAVORED PLAN INVESTS IN AN ANNUITY CONTRACT, IT GENERALLY DOES NOT
RESULT IN ANY ADDITIONAL TAX DEFERRAL BENEFITS.
TYPES OF TAX FAVORED PLANS
IRAS. If you buy a contract for use as an IRA, we will provide you a copy of
the prospectus and the contract. The "IRA Disclosure Statement" on page 63
contains information about eligibility, contribution limits, tax particulars and
other IRA information. In addition to this information (some of which is
summarized below), the IRS requires that you have a "free look" after making an
initial contribution to the contract. During this time, you can cancel the
contract by notifying us in writing, and we will refund all of the purchase
payments under the contract (or, if provided by applicable state law, the amount
credited under the contract, calculated as of the date that we receive this
cancellation notice, if greater) less any applicable federal and state income
tax withholding.
Contributions Limits/Rollovers: Because of the way the contract is designed,
you may only purchase a contract for an IRA in connection with a "rollover" of
amounts from a qualified retirement plan or transfer from another IRA. You must
make a minimum initial payment of $10,000 to purchase a contract. This minimum
is greater than the maximum amount of any annual contribution allowed by law
that you may make to an IRA. For 2002 to 2004 the limit is $3,000;
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CONTRACT CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
increasing in 2005 to 2007 to $4,000; and for 2008 to $5,000. After 2008 the
contribution amount will be indexed for inflation. The tax law also provides for
a catch-up provision for individuals who are age 50 and above. These taxpayers
will be permitted to contribute an additional $500 in years 2002 to 2005 and an
additional $1,000 in 2006 and years thereafter. The "rollover" rules under the
Code are fairly technical; however, an individual (or his or her surviving
spouse) may generally "roll over" certain distributions from tax favored
retirement plans (either directly or within 60 days from the date of these
distributions) if he or she meets the requirements for distribution. Once you
buy the contract, you can make regular IRA contributions under the contract (to
the extent permitted by law). However, if you make such regular IRA
contributions, you should note that you will not be able to treat the contract
as a "conduit IRA," which means that you will not retain possible favorable tax
treatment if you subsequently "roll over" the contract funds originally derived
from a qualified retirement plan or TDA into another Section 401(a) plan or TDA.
Required Provisions: Contracts that are IRAs (or endorsements that are part
of the contract) must contain certain provisions:
- - You, as owner of the contract, must be the "annuitant" under the contract
(except in certain cases involving the division of property under a decree of
divorce);
- - Your rights as owner are non-forfeitable;
- - You cannot sell, assign or pledge the contract, other than to Pruco Life;
- - The annual premium you pay cannot be greater than the maximum amount allowed
by law, including catch-up contributions if applicable (which does not
include any rollover amounts);
- - The date on which annuity payments must begin cannot be later than the April
1st of the calendar year after the calendar year you turn age 70 1/2; and
- - Death and annuity payments must meet "minimum distribution requirements"
(described on page 56).
Usually, the full amount of any distribution from an IRA (including a
distribution from this contract) which is not a rollover is taxable. As taxable
income, these distributions are subject to the general tax withholding rules
described earlier. In addition to this normal tax liability, you may also be
liable for the following, depending on your actions:
- - A 10% "early distribution penalty" (described on page 56);
- - Liability for "prohibited transactions" if you, for example, borrow against
the value of an IRA; or
- - Failure to take a minimum distribution (also generally described on page 56).
SEPs. SEPs are a variation on a standard IRA, and contracts issued to a SEP
must satisfy the same general requirements described under IRAs (above). There
are, however, some differences:
- - If you participate in a SEP, you generally do not include in income any
employer contributions made to the SEP on your behalf up to the lesser of (a)
$40,000 in 2003 or (b) 25% of the employee's earned income (not including the
employer contribution amount as "earned income" for these purposes). However,
for these purposes, compensation in excess of certain limits established by
the IRS will not be considered. In 2003, this limit is $200,000;
- - SEPs must satisfy certain participation and nondiscrimination requirements
not generally applicable to IRAs; and
- - Some SEPs for small employers permit salary deferrals (up to $11,000 in 2002
and $12,000 in 2003) with the employer making these contributions to the SEP.
However, no new "salary reduction" or "SAR-SEPs" can be established after
1996. Individuals participating in a SARSEP who are age 50 or above by the
end of the year will be permitted to contribute an additional $2,000 in 2003,
increasing in $1,000 increments per year until reaching $5,000 in 2006.
Thereafter the amount is indexed for inflation.
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
You will also be provided the same information, and have the same "free look"
period, as you would have if you were purchasing the contract for a standard
IRA.
SIMPLE-IRAS. SIMPLE-IRAs are another variation on the standard IRA, available
to small employers (under 100 employees, on a "controlled group" basis) that do
not offer other tax favored plans. SIMPLE-IRAs are also subject to the same
basic IRA requirements with the following exceptions:
- - Participants in a SIMPLE-IRA may contribute up to $8,000 in 2003, as opposed
to the usual IRA contribution limit, and employer contributions may also be
provided as a match (up to 3% of your compensation); and
- - Individuals age 50 or above by the end of the year will be permitted to
contribute an additional $1,000 in 2003, increasing in $500 increments per
year until reaching $2,500 in 2006. Thereafter the amount is indexed for
inflation.
- - SIMPLE-IRAs are not subject to the SEP nondiscrimination rules.
ROTH IRAS. Like standard IRAs, income within a Roth IRA accumulates
tax-deferred, and contributions are subject to specific limits. Roth IRAs have,
however, the following differences:
- - Contributions to a Roth IRA cannot be deducted from your gross income;
- - "Qualified distributions" (generally, held for 5 years and payable on account
of death, disability, attainment of age 59 1/2, or first time-homebuyer) from
Roth IRAs are excludable from your gross income; and
- - If eligible, you may make contributions to a Roth IRA after attaining age
70 1/2, and distributions are not required to begin upon attaining such age
or at any time thereafter.
Because the contract's minimum initial payment of $10,000 is greater than the
maximum annual contribution permitted to be made to a Roth IRA, you may purchase
a contract as a Roth IRA only in connection with a "rollover" or "conversion" of
the proceeds of another traditional IRA, conduit IRA, SEP, SIMPLE-IRA, or Roth
IRA. The Code permits persons who meet certain income limitations (generally,
adjusted gross income under $100,000), and who receive certain qualifying
distributions from such non-Roth IRAs, to directly rollover or make, within 60
days, a "rollover" of all or any part of the amount of such distribution to a
Roth IRA which they establish. This conversion triggers current taxation (but is
not subject to a 10% early distribution penalty). Once the contract has been
purchased, regular Roth IRA contributions will be accepted to the extent
permitted by law.
TDAS. You may own a TDA generally if you are either an employer or employee
of a tax-exempt organization (as defined under Code Section 501(c)(3)) or a
public educational organization, and you may make contributions to a TDA so long
as the employee's rights to the annuity are nonforfeitable. Contributions to a
TDA, and any earnings, are not taxable until distribution. You may also make
contributions to a TDA under a salary reduction agreement, generally up to a
maximum of $12,000 in 2003. Individuals participating in a TDA who are age 50 or
above by the end of the year will be permitted to contribute an additional
$2,000 in 2003, increasing in $1,000 increments per year until reaching $5,000
in 2006. Thereafter the amount is indexed for inflation. Further, you may roll
over TDA amounts to another TDA or an IRA. You may also rollover TDA amounts to
a qualified retirement plan, a SEP and a 457 government plan. A contract may
only qualify as a TDA if distributions (other than "grandfathered" amounts held
as of December 31, 1988) may be made only on account of:
- - Your attainment of age 59 1/2;
- - Your severance of employment;
- - Your death;
- - Your total and permanent disability; or
- - Hardship (under limited circumstances, and only related to salary deferrals
and any earnings attributable to these amounts).
In any event, you must begin receiving distributions from your TDA by April
1st of the calendar year after the calendar year you turn age 70 1/2 or retire,
whichever is later.
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WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS FLEXELITE
CONTRACT CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
These distribution limits do not apply either to transfers or exchanges of
investments under the contract, or to any "direct transfer" of your interest in
the contract to another TDA or to a mutual fund "custodial account" described
under Code Section 403(b)(7).
Employer contributions to TDAs are subject to the same general contribution,
nondiscrimination, and minimum participation rules applicable to "qualified"
retirement plans.
MINIMUM DISTRIBUTION REQUIREMENTS AND PAYMENT OPTION
If you hold the contract under an IRA (or other tax-favored plan), IRS
minimum distribution requirements must be satisfied. This means that payments
must start by April 1 of the year after the year you reach age 70 1/2 and must
be made for each year thereafter. The amount of the payment must at least equal
the minimum required under the IRS rules. Several choices are available for
calculating the minimum amount, including a new method permitted under IRS rules
released in January 2001. More information on the mechanics of this calculation
is available on request. Please contact us a reasonable time before the IRS
deadline so that a timely distribution is made. Please note that there is a 50%
IRS penalty tax on the amount of any minimum distribution not made in a timely
manner.
You can use the Minimum Distribution option to satisfy the IRS minimum
distribution requirements for this contract without either beginning annuity
payments or surrendering the contract. We will send you a check for this minimum
distribution amount, less any other partial withdrawals that you made during the
year.
PENALTY FOR EARLY WITHDRAWALS
You may owe a 10% tax penalty on the taxable part of distributions received
from an IRA, SEP, SIMPLE-IRA (which may increase to 25%), Roth IRA, TDA or
qualified retirement plan before you attain age 59 1/2. There are only limited
exceptions to this tax, and you should consult your tax adviser for further
details.
WITHHOLDING
Unless a distribution is an eligible rollover distribution that is "directly"
rolled over into another qualified plan, IRA (including the IRA variations
described above), SEP, 457 government plan or TDA, we will withhold at the rate
of 20%. This 20% withholding does not apply to distributions from IRAs and Roth
IRAs. For all other distributions, unless you elect otherwise, we will withhold
federal income tax from the taxable portion of such distribution at an
appropriate percentage. The rate of withholding on annuity payments where no
mandatory withholding is required is determined on the basis of the withholding
certificate that you file with us. If you do not file a certificate, we will
automatically withhold federal taxes on the following basis:
- - For any annuity payments not subject to mandatory withholding, you will have
taxes withheld by us as if you are a married individual, with 3 exemptions;
and
- - For all other distributions, we will withhold at a 10% rate.
We will provide you with forms and instructions concerning the right to elect
that no amount be withheld from payments in the ordinary course. However, you
should know that, in any event, you are liable for payment of federal income
taxes on the taxable portion of the distributions, and you should consult with
your tax advisor to find out more information on your potential liability if you
fail to pay such taxes.
ERISA DISCLOSURE/REQUIREMENTS
ERISA (the "Employee Retirement Income Security Act of 1974") and the Code
prevents a fiduciary and other "parties in interest" with respect to a plan
(and, for these purposes, an IRA would also constitute a "plan") from receiving
any benefit from any party dealing with the plan, as a result of the sale of the
contract. Administrative exemptions under ERISA generally permit the sale of
insurance/annuity products to plans, provided that certain information is
disclosed to the person purchasing the contract. This information has to do
primarily with the fees, charges, discounts and
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
other costs related to the contract, as well as any commissions paid to any
agent selling the contract.
Information about any applicable fees, charges, discounts, penalties or
adjustments may be found under "What Are the Expenses Associated with the
Strategic Partners FlexElite Contract" starting on page 44.
Information about sales representatives and commissions may be found under
"Other Information" and "Sale and Distribution of the Contract" on page 58.
In addition, other relevant information required by the exemptions is
contained in the contract and accompanying documentation. Please consult your
tax advisor if you have any additional questions.
SPOUSAL CONSENT RULES FOR RETIREMENT PLANS -- QUALIFIED CONTRACTS
If you are married at the time your payments commence, you may be required by
federal law to choose an income option that provides survivor annuity income to
your spouse, unless your spouse waives that right. Similarly, if you are married
at the time of your death, federal law may require all or a portion of the death
benefit to be paid to your spouse, even if you designated someone else as your
beneficiary. A brief explanation of the applicable rules follows. For more
information, consult the terms of your retirement arrangement.
Defined Benefit Plans, Money Purchase Pension Plans, and ERISA 403(b)
Annuities. If you are married at the time your payments commence, federal law
requires that benefits be paid to you in the form of a "qualified joint and
survivor annuity" ("QJSA"), unless you and your spouse waive that right, in
writing. Generally, this means that you will receive a reduced payment during
your life and, upon your death, your spouse will receive at least one-half of
what you were receiving for life. You may elect to receive another income option
if your spouse consents to the election and waives his or her right to receive
the QJSA. If your spouse consents to the alternative form of payment, your
spouse may not receive any benefits from the plan upon your death. Federal law
also requires that the plan pay a death benefit to your spouse if you are
married and die before you begin receiving your benefit. This benefit must be
available in the form of an annuity for your spouse's lifetime and is called a
"qualified pre-retirement survivor annuity" ("QPSA"). If the plan pays death
benefits to other beneficiaries, you may elect to have a beneficiary other than
your spouse receive the death benefit, but only if your spouse consents to the
election and waives his or her right to receive the QPSA. If your spouse
consents to the alternate beneficiary, your spouse will receive no benefits from
the plan upon your death. Any QPSA waiver prior to your attaining age 35 will
become null and void on the first day of the calendar year in which you attain
age 35, if still employed.
Defined Contribution Plans (including 401(k) Plans). Spousal consent to a
distribution is generally not required. Upon your death, your spouse will
receive the entire death benefit, even if you designated someone else as your
beneficiary, unless your spouse consents in writing to waive this right. Also,
if you are married and elect an annuity as a periodic income option, federal law
requires that you receive a QJSA (as described above), unless you and your
spouse consent to waive this right.
IRAs, non-ERISA 403(b) Annuities, and 457 Plans. Spousal consent to a
distribution is not required. Upon your death, any death benefit will be paid to
your designated beneficiary.
ADDITIONAL INFORMATION
For additional information about the requirements of federal tax law
applicable to tax favored plans, see the "IRA Disclosure Statement" on page 63.
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9:
OTHER
INFORMATION
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
PRUCO LIFE INSURANCE COMPANY
Pruco Life Insurance Company is a stock life insurance company organized in 1971
under the laws of the State of Arizona. Pruco Life is licensed to sell life
insurance and annuities in the District of Columbia, Guam and in all states
except New York and therefore is subject to the insurance laws and regulations
of all the jurisdictions where it is licensed to do business.
Pruco Life is a wholly owned subsidiary of The Prudential Insurance Company
of America (Prudential), a New Jersey stock life insurance company that has been
doing business since 1875. Prudential is an indirect wholly-owned subsidiary of
Prudential Financial, Inc. (Prudential Financial), a New Jersey insurance
holding company. As Pruco Life's ultimate parent, Prudential Financial exercises
significant influence over the operations and capital structure of Pruco Life
and Prudential. However, neither Prudential Financial, Prudential, nor any other
related company has any legal responsibility to pay amounts that Pruco Life may
owe under the contract.
Pruco Life publishes annual and quarterly reports that are filed with the
SEC. These reports contain financial information about Pruco Life that is
annually audited by independent accountants. Pruco's Life annual report for the
year ended December 31, 2002, together with subsequent periodic reports that
Pruco Life files with the SEC, are incorporated by reference into this
prospectus. You can obtain copies, at no cost, of any and all of this
information, including the Pruco Life annual report that is not ordinarily
mailed to contractholders, the more current reports and any subsequently filed
documents at no cost by contacting us at the address or telephone number listed
on the cover. You may read and copy any filings made by Pruco Life with the SEC
at the SEC's Public Reference Room at 450 Fifth Street, Washington, D.C. 20549.
You can obtain information on the operation of the Public Reference Room by
calling 1-800-SEC-0330. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC at http://www.sec.gov.
THE SEPARATE ACCOUNT
We have established a separate account, the Pruco Life Flexible Premium Variable
Annuity Account, to hold the assets that are associated with the variable
annuity contracts. The separate account was established under Arizona law on
June 16, 1995, and is registered with the SEC under the Investment Company Act
of 1940, as a unit investment trust, which is a type of investment company. The
assets of the separate account are held in the name of Pruco Life and legally
belong to us. These assets are kept separate from all of our other assets and
may not be charged with liabilities arising out of any other business we may
conduct. More detailed information about Pruco Life, including its audited
financial statements, are provided in the SAI.
RISK FACTORS
There are various risks associated with the purchase of the market value
adjustment option annuity that we summarize below.
ISSUER RISK. Your market value adjustment option is issued by Pruco Life, and
thus is backed by the financial strength of that company. If Pruco Life were to
experience significant financial adversity, it is possible that Pruco Life's
ability to pay interest and principal under the market value adjustment option
could be impaired.
RISKS RELATED TO CHANGING INTEREST RATES. You do not participate directly in
the investment experience of the bonds and other instruments that Pruco Life
holds to support the market value adjustment option. Nonetheless, the market
value adjustment formula (which is detailed in the appendix to this prospectus)
reflects the effect that prevailing interest rates have on those bonds and other
instruments. If you need to withdraw your money during a period in which
prevailing interest rates have risen above their level when you made your
purchase, you will experience a "negative" market value adjustment. When we
impose this market value adjustment, it could result in the loss of both the
interest you have earned and a portion of your purchase payments. Thus, before
you commit to a particular guarantee period, you should consider carefully
whether you have the ability to remain in the
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
contract throughout the guarantee period. In addition, we cannot, of course,
assure you that the market value adjustment option will perform better than
another investment that you might have made.
RISKS RELATED TO THE WITHDRAWAL CHARGE. We impose withdrawal charges under
the variable annuities that offer the market value adjustment option as a
companion option. If you anticipate needing to withdraw your money prior to the
end of a guarantee period, you should be prepared to pay the withdrawal charge
that we will impose.
SALE AND DISTRIBUTION OF THE CONTRACT
Prudential Investment Management Services LLC (PIMS), 751 Broad Street, Newark,
New Jersey 07102-3777, acts as the distributor of the contracts under a "best
efforts" underwriting agreement with Pruco Life under which PIMS is reimbursed
for its costs and expenses. PIMS is an indirect wholly-owned subsidiary of
Prudential Financial, Inc. and is a limited liability corporation organized
under Delaware law in 1996. It is a registered broker-dealer under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc.
We pay the broker-dealer whose registered representatives sell the Contract
either:
- - a commission of up to 8.0% of your Purchase Payments; or
- - a combination of a commission on Purchase Payments and a "trail"
commission -- which is a commission determined as a percentage of your
contract value that is paid periodically over the life of your contract.
The commission amount quoted above is the maximum amount which is paid. In
most circumstances, the registered representative who sold the contract will
receive significantly less. We will generally pay less compensation with respect
to contracts issued to customers over 80 years old.
From time to time, Prudential or its affiliates may offer and pay non-cash
compensation to registered representatives who sell the Contract. For example,
Prudential or an affiliate may pay for a training and education meeting that is
attended by registered representatives of both Prudential-affiliated broker-
dealers and independent broker-dealers. Prudential and its affiliates retain
discretion as to which broker-dealers to offer non-cash (and cash) compensation
arrangements, and will comply with NASD rules and other pertinent laws in making
such offers and payments. Our payment of cash or non-cash compensation in
connection with sales of the contract does not result directly in any additional
charge to you.
ASSIGNMENT
You can assign the contract at any time during your lifetime. We will not be
bound by the assignment until we receive written notice. We will not be liable
for any payment or other action we take in accordance with the contract if that
action occurs before we receive notice of the assignment. An assignment, like
any other change in ownership, may trigger a taxable event.
If the contract is issued under a qualified plan, there may be limitations on
your ability to assign the contract. For further information please speak to
your representative.
FINANCIAL STATEMENTS
The financial statements of Pruco Life, the co-issuer of the Strategic Partners
FlexElite contract, are included in the SAI.
STATEMENT OF ADDITIONAL INFORMATION
Contents:
- - Company
- - Experts
- - Litigation
- - Principal Underwriter
- - Determination of Accumulation Unit Values
- - Performance Information
- - Comparative Performance Information
- - Federal Tax Status
- - State Specific Variations
- - Directors and Officers
- - Financial Statements
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OTHER INFORMATION CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
HOUSEHOLDING
To reduce costs, we now send only a single copy of prospectuses and shareholder
reports to each consenting household, in lieu of sending a copy to each
contractholder that resides in the household. If you are a member of such a
household, you should be aware that you can revoke your consent to householding
at any time, and begin to receive your own copy of prospectuses and shareholder
reports, by calling 1-877-778-5008.
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PART II
STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
MARKET-VALUE
ADJUSTMENT FORMULA
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MARKET-VALUE ADJUSTMENT FORMULA
GENERAL FORMULA
The formula under which Pruco Life calculates the market value adjustment
applicable to a full or partial surrender, annuitization, or settlement under
the market value adjustment option is set forth below. The market value
adjustment is expressed as a multiplier factor. That is, the Contract Value
after the market value adjustment ("MVA"), but before any surrender charge, is
as follows: Contract Value (after MVA) = Contract Value (before MVA) X (1 +
MVA). The MVA itself is calculated as follows:
1 + I
MVA = [(-------------)to the N/12 power] -1
1 + J + .0025
PENNSYLVANIA FORMULA
We use the same MVA formula with respect to contracts issued in Pennsylvania as
the general formula, except that "J" in the formula above uses an interpolated
rate as the current credited interest rate. Specifically, "J" is the
interpolated current credited interest rate offered on new money at the time of
withdrawal, annuitization, or settlement. The interpolated value is calculated
using the following formula:
m/365 X (n + 1) year rate + (365 - m)/365 X n year rate,
where "n" equals the number of whole years remaining in the Contract's current
guarantee period, and "m" equals the number of days remaining in year "n" of the
current guarantee period.
INDIANA FORMULA
We use the following MVA formula for contracts issued in Indiana:
1 + I
MVA = [(-----------)to the N/12 power] -1
1 + J
The variables I, J and N retain the same definitions as the general formula.
MARKET VALUE ADJUSTMENT EXAMPLE
(ALL STATES EXCEPT INDIANA AND PENNSYLVANIA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.05 + 0.0025)]to the (38/12)
power -1 = 0.02274
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.02274 = $253.03
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $253.03 = $11,380.14
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MARKET-VALUE ADJUSTMENT FORMULA CONTINUED
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The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.07 + 0.0025)] to the(38/12)
power -1 = -0.03644
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.03644) = -$405.47
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$405.47) = $10,721.64
MARKET VALUE ADJUSTMENT EXAMPLE
(PENNSYLVANIA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 3 years (the number of whole years remaining) is 4%, and for a
guarantee period of 4 years (the number of whole years remaining plus 1) is
5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.0417 + 0.0025)] to the
(38/12) power-1 = 0.04902
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.04902 = $545.45
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $545.45 = $11,672.56
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 3 years (the number of whole years remaining) is 7%, and for a
guarantee period of 4 years (the number of whole years remaining plus 1) is
8%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.0717 + 0.0025)] to the
(38/12) power-1 = -0.04098
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.04098) = -$455.99
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62
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3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$455.99) = $10,671.12
MARKET VALUE ADJUSTMENT EXAMPLE
(INDIANA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.05)] to the (38/12) power-1 =
0.03047
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 x 0.03047 = $339.04
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $339.04 = $11,466.15
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.07)]to the (38/12) power -1
= -0.02930
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.02930) = -$326.02
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$326.02) = $10,801.09
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63
IRA DISCLOSURE STATEMENT
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
This statement is designed to help you understand the requirements of federal
tax law which apply to your individual retirement annuity (IRA), your Roth IRA,
your simplified employee pension IRA (SEP) for employer contributions, your
Savings Incentive Match Plan for Employees (SIMPLE) IRA, or to one you purchase
for your spouse. You can obtain more information regarding your IRA either from
your sales representative or from any district office of the Internal Revenue
Service. Those are federal tax law rules; state tax laws may vary.
FREE LOOK PERIOD
The annuity contract offered by this prospectus gives you the opportunity to
return the contract for a full refund (less any applicable federal and state
income tax withholding) within 10 days (or whatever period is required by
applicable state law) after it is delivered. This is a more liberal provision
than is required in connection with IRAs. To exercise this "free-look"
provision, return the contract to the representative who sold it to you or to
the Prudential Annuity Service Center at the address shown on the first page of
this prospectus.
ELIGIBILITY REQUIREMENTS
IRAs are intended for all persons with earned compensation whether or not they
are covered under other retirement programs. Additionally, if you have a
non-working spouse (and you file a joint tax return), you may establish an IRA
on behalf of your non-working spouse. A working spouse may establish his or her
own IRA. A divorced spouse receiving taxable alimony (and no other income) may
also establish an IRA.
CONTRIBUTIONS AND DEDUCTIONS
Contributions to your IRA will be deductible if you are not an "active
participant" in an employer maintained qualified retirement plan or you have
"Adjusted Gross Income" (as defined under Federal tax laws) which does not
exceed the "applicable dollar limit." IRA (or SEP) contributions must be made by
no later than the time you file your income tax return for that year. For a
single taxpayer, the applicable dollar limitation is $40,000 in 2003, with the
amount of IRA contribution which may be deducted reduced proportionately for
Adjusted Gross Income between $40,000 -- $50,000. For married couples filing
jointly, the applicable dollar limitation is $60,000, with the amount of IRA
contribution which may be deducted reduced proportionately for Adjusted Gross
Income between $60,000 -- $70,000. There is no deduction allowed for IRA
contributions when Adjusted Gross Income reaches $50,000 for individuals and
$70,000 for married couples filing jointly. These amounts are for 2003. Income
limits are scheduled to increase until 2006 for single taxpayers and 2007 for
married taxpayers.
Contributions made by your employer to your SEP are excludable from your
gross income for tax purposes in the calendar year for which the amount is
contributed. Certain employees who participate in a SEP will be entitled to
elect to have their employer make contributions to their SEP on their behalf or
to receive the contributions in cash. If the employee elects to have
contributions made on the employee's behalf to the SEP, those funds are not
treated as current taxable income to the employee. Elective deferrals under a
SEP are limited to $12,000 in 2003, with a permitted catch-up contribution of
$2,000 for individuals age 50 and above. Contribution limits and catch-up
contribution limits are scheduled to increase through 2006 and are indexed for
inflation thereafter. Salary-reduction SEPs (also called "SARSEPs") are
available only if at least 50% of the employees elect to have amounts
contributed to the SARSEP and if the employer has 25 or fewer employees at all
times during the preceding year. New SARSEPs may not be established after 1996.
The IRA maximum annual contribution and your tax deduction is limited to the
lesser of: (1) the maximum amount allowed by law, including catch-up
contributions if applicable, or (2) 100% of your earned compensation.
Contributions in excess of the deduction limits may be subject to penalty. See
below.
Under a SEP agreement, the maximum annual contribution which your employer
may make on your behalf to a SEP contract that is excludable from your income is
the lesser of 25% of your salary or $40,000 in
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64
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
2003. An employee who is a participant in a SEP agreement may make after-tax
contributions to the SEP contract, subject to the contribution limits applicable
to IRAs in general. Those employee contributions will be deductible subject to
the deductibility rules described above.
The maximum tax deductible annual contribution that a divorced spouse with no
other income may make to an IRA is the lesser of (1) the maximum amount allowed
by law, including catch-up contributions if applicable or (2) 100% of taxable
alimony.
If you or your employer should contribute more than the maximum contribution
amount to your IRA or SEP, the excess amount will be considered an "excess
contribution." You are permitted to withdraw an excess contribution from your
IRA or SEP before your tax filing date without adverse tax consequences. If,
however, you fail to withdraw any such excess contribution before your tax
filing date, a 6% excise tax will be imposed on the excess for the tax year of
contribution.
Once the 6% excise tax has been imposed, an additional 6% penalty for the
following tax year can be avoided if the excess is (1) withdrawn before the end
of the following year, or (2) treated as a current contribution for the
following year. (See Premature Distributions page 65 for penalties imposed on
withdrawal when the contribution exceeds the maximum amount allowed by law,
including catch-up contributions if applicable.)
IRA FOR NON-WORKING SPOUSE
If you establish an IRA for yourself, you may also be eligible to establish an
IRA for your "non-working" spouse. In order to be eligible to establish such a
spousal IRA, you must file a joint tax return with your spouse and, if your
non-working spouse has compensation, his/her compensation must be less than your
compensation for the year. Contributions of up to the maximum amount allowed by
law, including catch-up contributions if applicable, may be made to your IRA and
the spousal IRA if the combined compensation of you and your spouse is at least
equal to the amount contributed. If requirements for deductibility (including
income levels) are met, you will be able to deduct an amount equal to the least
of (i) the amount contributed to the IRAs; (ii) twice the maximum amount allowed
by law, including catch-up contributions if applicable; or (iii) 100% of your
combined gross income.
Contributions in excess of the contribution limits may be subject to penalty.
See above under "Contributions and Deductions." If you contribute more than the
allowable amount, the excess portion will be considered an excess contribution.
The rules for correcting it are the same as discussed above for regular IRAs.
Other than the items mentioned in this section, all of the requirements
generally applicable to IRAs are also applicable to IRAs established for
non-working spouses.
ROLLOVER CONTRIBUTION
Once every year, you are permitted to withdraw any portion of the value of your
IRA or SEP and reinvest it in another IRA or bond. Withdrawals may also be made
from other IRAs and contributed to this contract. This transfer of funds from
one IRA to another is called a "rollover" IRA. To qualify as a rollover
contribution, the entire portion of the withdrawal must be reinvested in another
IRA within 60 days after the date it is received. You will not be allowed a
tax-deduction for the amount of any rollover contribution.
A similar type of rollover to an IRA can be made with the proceeds of a
qualified distribution from a qualified retirement plan or tax-sheltered
annuity. Properly made, such a distribution will not be taxable until you
receive payments from the IRA created with it. You may later roll over such a
contribution to another qualified retirement plan. As long as you have not mixed
it with IRA (or SEP) contributions you have deducted from your income, you can
retain favorable tax treatment permitted you on distributions from a qualified
retirement plan. (You may roll less than all of a qualified distribution into an
IRA, but any part of it not rolled over will be currently includable in your
income without any capital gains treatment.) Funds can also be rolled over from
an IRA or SEP to another IRA or SEP or to another qualified retirement plan or
457 government
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65
IRA DISCLOSURE STATEMENT CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
plan even if additional contributions have been made to the account.
DISTRIBUTIONS
(a) PREMATURE DISTRIBUTIONS
At no time can your interest in your IRA or SEP be forfeited. To insure that
your contributions will be used for retirement, the federal tax law does not
permit you to use your IRA or SEP as security for a loan. Furthermore, as a
general rule, you may not sell or assign your interest in your IRA or SEP to
anyone. Use of an IRA (or SEP) as security or assignment of it to another will
invalidate the entire annuity. It then will be includable in your income in the
year it is invalidated and will be subject to a 10% tax penalty if you are not
at least age 59 1/2 or totally disabled. (You may, however, assign your IRA or
SEP without penalty to your former spouse in accordance with the terms of a
divorce decree.)
You may surrender any portion of the value of your IRA (or SEP). In the case
of a partial surrender which does not qualify as a rollover, the amount
withdrawn will be includable in your income and subject to the 10% penalty if
you are not at least age 59 1/2 or totally disabled unless you comply with
special rules requiring distributions to be made at least annually over your
life expectancy.
The 10% tax penalty does not apply to the withdrawal of an excess
contribution as long as the excess is withdrawn before the due date of your tax
return. Withdrawals of excess contributions after the due date of your tax
return will generally be subject to the 10% penalty unless the excess
contribution results from erroneous information from a plan trustee making an
excess rollover contribution or unless you are over age 59 1/2 or are disabled.
(b) DISTRIBUTION AFTER AGE 59 1/2
Once you have attained age 59 1/2 (or have become totally disabled), you may
elect to receive a distribution of your IRA (or SEP) regardless of when you
actually retire. In addition, you must commence distributions from your IRA by
April 1 following the year you attain age 70 1/2. You may elect to receive the
distribution under any one of the periodic payment options available under the
contract. The distributions from your IRA under any one of the period payment
options or in one sum will be treated as ordinary income as you receive them to
the degree that you have made deductible contributions. If you have made both
deductible and nondeductible contributions, the portion of the distribution
attributable to the nondeductible contribution will be tax-free.
(c) INADEQUATE DISTRIBUTIONS--50% TAX
Your IRA or SEP is intended to provide retirement benefits over your lifetime.
Thus, federal tax law requires that you either (1) receive a lump-sum
distribution of your IRA by April 1 of the year following the year in which you
attain age 70 1/2 or (2) start to receive periodic payments by that date. If you
elect to receive periodic payments, those payments must be sufficient to pay out
the entire value of your IRA during your life expectancy (or over the joint life
expectancies of you and your spouse/beneficiary). The calculation method is
revised under the IRS proposed regulations for distributions beginning in 2002.
If the payments are not sufficient to meet these requirements, an excise tax of
50% will be imposed on the amount of any underpayment.
(d) DEATH BENEFITS
If you (or your surviving spouse) die before receiving the entire value of your
IRA (or SEP), the remaining interest must be distributed to your beneficiary (or
your surviving spouse's beneficiary) in one lump-sum by December 31st of the
fifth year after your (or your surviving spouse's) death, or applied to purchase
an immediate annuity for the beneficiary. This annuity must be payable over the
life expectancy of the beneficiary beginning by December 31st of the year
following the year after your or your spouse's death. If your spouse is the
designated beneficiary, he or she is treated as the owner of the IRA. If minimum
required distributions have begun, and no designated beneficiary is identified
by December 31st of the year following the year of death, the entire amount must
be distributed
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
based on the life expectancy of the owner using the owner's age prior to death.
A distribution of the balance of your IRA upon your death will not be considered
a gift for federal tax purposes, but will be included in your gross estate for
purposes of federal estate taxes.
ROTH IRAS
Section 408A of the Code permits eligible individuals to contribute to a type of
IRA known as a "Roth IRA." Contributions may be made to a Roth IRA by taxpayers
with adjusted gross incomes of less than $160,000 for married individuals filing
jointly and less than $110,000 for single individuals. Married individuals
filing separately are not eligible to contribute to a Roth IRA. The maximum
amount of contributions allowable for any taxable year to all IRAs maintained by
an individual is generally the lesser of the maximum amount allowed by law and
100% of compensation for that year (the lesser of the maximum amount allowed by
law is phased out for incomes between $150,000 and $160,000 for married and
between $95,000 and $110,000 for singles). The contribution limit is reduced by
the amount of any contributions made to a traditional IRA. Contributions to a
Roth IRA are not deductible.
For taxpayers with adjusted gross income of $100,000 or less, all or part of
amounts in a traditional IRA may be converted, transferred or rolled over to a
Roth IRA. Some or all of the IRA value will typically be includable in the
taxpayer's gross income. Provided a rollover contribution meets the requirements
of IRAs under Section 408(d)(3) of the Code, a rollover may be made from a Roth
IRA to another Roth IRA.
UNDER SOME CIRCUMSTANCES, IT MAY NOT BE ADVISABLE TO ROLL OVER, TRANSFER OR
CONVERT ALL OR PART OF A TRADITIONAL IRA TO A ROTH IRA. PERSONS CONSIDERING A
ROLLOVER, TRANSFER OR CONVERSION SHOULD CONSULT THEIR OWN TAX ADVISOR.
"Qualified distributions" from a Roth IRA are excludable from gross income. A
"qualified distribution" is a distribution that satisfies two requirements: (1)
the distribution must be made (a) after the owner of the IRA attains age 59 1/2;
(b) after the owner's death; (c) due to the owner's disability; or (d) for a
qualified first time homebuyer distribution within the meaning of Section
72(t)(2)(F) of the Code; and (2) the distribution must be made in the year that
is at least five tax years after the first year for which a contribution was
made to any Roth IRA established for the owner or five years after a rollover,
transfer, or conversion was made from a traditional IRA to a Roth IRA.
Distributions from a Roth IRA that are not qualified distributions will be
treated as made first from contributions and then from earnings, and taxed
generally in the same manner as distributions from a traditional IRA.
Distributions from a Roth IRA need not commence at age 70 1/2. However, if
the owner dies before the entire interest in a Roth IRA is distributed, any
remaining interest in the contract must be distributed by December 31 of the
calendar year containing the fifth anniversary of the owner's death subject to
certain exceptions.
REPORTING TO THE IRS
Whenever you are liable for one of the penalty taxes discussed above (6% for
excess contributions, 10% for premature distributions or 50% for underpayments),
you must file Form 5329 with the Internal Revenue Service. The form is to be
attached to your federal income tax return for the tax year in which the penalty
applies. Normal contributions and distributions must be shown on your income tax
return for the year to which they relate. Beginning with Form 5498 issued in
January 2004, we will indicate to you and to the IRS that your account is
subject to minimum required distributions if you were at least 70 1/2 at the end
of the prior year.
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67
APPENDIX
ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
As we have indicated throughout this prospectus, the Strategic Partners
FlexElite Variable Annuity is a contract that allows you to select or decline
any of several features that carries with it a specific asset-based charge. We
maintain a unique unit value corresponding to each combination of such Contract
features. Here we depict the historical unit values corresponding to the
contract features bearing the highest and lowest combinations of asset-based
charges during the period May 1, 2002 to December 31, 2002. During that period,
the highest combination of asset-based charges amounted to 1.90%, and the lowest
combination of asset-based charges amounted to 1.60%. For contracts sold on or
after May 1, 2003, the highest combinations of asset-based charges now amounts
to 2.00%, and the lowest combination of asset-based charges now amounts to
1.65%.
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68
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69
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* COMMENCEMENT OF BUSINESS
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70
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71
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* COMMENCEMENT OF BUSINESS
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PART III PROSPECTUSES
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VARIABLE INVESTMENT OPTIONS
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Incorporated by reference to Part II, Item 2 or Part II, Item 5 of the
Registrant's most recently filed report on Form 10-Q or 10-K, respectively.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant, in connection with certain affiliates, maintains various
insurance coverages under which the underwriter and certain affiliated persons
may be insured against liability which may be incurred in such capacity, subject
to the terms, conditions and exclusions of the insurance policies.
Arizona, being the state of organization of Pruco Life Insurance Company
("Pruco"), permits entities organized under its jurisdiction to indemnify
directors and officers with certain limitations. The relevant provisions of
Arizona law permitting indemnification can be found in Section 10-850, et seq.
of the Arizona Statutes Annotated. The text of Pruco's By-law, Article VIII
which relates to indemnification of officers and directors, is incorporated by
reference to Exhibit 3(ii) to its Form 10-Q, filed August 15, 1997.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 16. EXHIBITS
(a) EXHIBITS
(1) Form of a Distribution Agreement between Prudential Investment Management
Services, Inc., "PIMS" (Principal Underwriter) and Pruco Life Insurance
Company (Depositor). (Note 2)
(4) (a) Strategic Partners Variable Annuity Contract VBON-2000 (Note 3)
(b) Strategic Partners Variable Annuity Contract VDCA-2000 (Note 3)
(c) Strategic Partners MVA Endorsement ORD 112805 (Note 1)
(d) Strategic Partners Application ORD 99730 (Note 1)
(e) FlexElite Variable Annuity Contract VFLX-2003 (Note 7)
(f) FlexElite Application (to be filed by post-effective amendment)
II - 1
(5) Opinion of Counsel as to the legality of the securities being registered.
(Note 1)
(24) Powers of Attorney:
(a) Vivian L. Banta, Richard J. Carbone, and Helen M. Galt (Note 4)
(b) Ronald P. Joelson. (Note 6)
(c) James J. Avery, Jr. (Note 5)
(d) David R. Odenath, Jr. (Note 6)
(e) William J. Eckert, IV (Note 6)
- ----------
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Post Effective Amendment No. 4 on Form
S-1, Registration No. 33-61143, filed April 15, 1999, on behalf the Pruco
Life Insurance Company.
(Note 3) Incorporated by reference to the initial registration on Form N-4,
Registration No. 333-37728, filed May 24, 2000 on behalf of the Pruco Life
Flexible Premium Variable Annuity Account.
(Note 4) Incorporated by reference to Post-Effective Amendment No. 5 to Form
S-6, Registration No. 333-85115, filed on or about June 28, 2001 on behalf
of the Pruco Life Variable Universal Account.
(Note 5) Incorporated by reference to Post-Effective Amendment No. 2 to Form
S-6, Registration No. 333-07451, filed June 25, 1997 on behalf of the Pruco
Life Variable Appreciable Account.
(Note 6) Incorporated by reference to initial Registration on Form N-4,
Registration No. 333-52754, filed December 26, 2000 on behalf of the Pruco
Life Flexible Premium Variable Annuity Account.
(Note 7) Incorporated by reference to Post-Effective Amendment No. 1 to Form
N-4, Registration No. 333-75702, filed February 14, 2003 on behalf of Pruco
Life Flexible Premium Variable Annuity Account.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10 (a)(3) of the
Securities Act of 1933;
II - 2
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information in the registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d)
of the Securities Exchange Act of 1934 that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II - 3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Newark, State of New Jersey, on this 27th day of
February, 2003.
PRUCO LIFE INSURANCE COMPANY
(Registrant)
By: /s/ ANDREW J. MAKO
----------------------
ANDREW J. MAKO
EXECUTIVE VICE PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE AND TITLE
/s/ * February 27, 2003
-------------------------------------------
VIVIAN L. BANTA
PRESIDENT AND CHAIRMAN
/s/ * *By: /s/ CLIFFORD E. KIRSCH
------------------------------------------- ---------------------------
WILLIAM J. ECKERT, IV CLIFFORD E. KIRSCH
VICE PRESIDENT AND CHIEF (ATTORNEY-IN-FACT)
ACCOUNTING OFFICER,(PRINCIPAL FINANCIAL
OFFICER AND CHIEF ACCOUNTING OFFICER)
/s/ *
-------------------------------------------
RONALD P. JOELSON
DIRECTOR
/s/ *
-------------------------------------------
RICHARD J. CARBONE
DIRECTOR
/s/ *
-------------------------------------------
HELEN M. GALT
DIRECTOR
/s/ *
-------------------------------------------
JAMES J. AVERY, JR.
VICE CHAIRMAN AND DIRECTOR
/s/ *
-------------------------------------------
DAVID R. ODENATH, JR.
DIRECTOR
II - 4
EXHIBIT INDEX
(4)(c) Endorsement ORD 112805
(4)(d) Application ORD 99730
(5) Opinion of Counsel