POS AM: Post-effective amendment to a registration statement that is not immediately effective upon filing
Published on
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 2004
REGISTRATION NO. 333-100713
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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PRUCO LIFE INSURANCE COMPANY
OF NEW JERSEY
(Exact Name of Registrant)
NEW JERSEY
(State or other jurisdiction of incorporation or organization)
22-2426091
(I.R.S. Employer Identification Number)
C/O PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-7333
(Address and telephone number of principal executive offices)
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THOMAS C. CASTANO
ASSISTANT SECRETARY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-4708
(Name, address and telephone number
of agent for service)
Copies to:
C. CHRISTOPHER SPRAGUE
VICE PRESIDENT, CORPORATE COUNSEL
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
213 WASHINGTON STREET
NEWARK, NJ 07102-2992
(973) 802-6997
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Approximate date of commencement of proposed sale to the public -- Immediately
upon effectiveness
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
** Registration fee for these securities, in the amount of $18,400, was paid at
the time the securities were originally registered on Form S-3 as filed by Pruco
Life Insurance Company of New Jersey on October 24, 2002. The current amount of
registered, but unsold, securities is reported quarterly by the Registrant on
Form 10-Q and annually on Form 10-K.
Prudential Investment Management Services LLC, the principal underwriter of
these contracts under a "best efforts" arrangement, will be reimbursed by Pruco
Life Insurance Company of New Jersey for its costs and expenses incurred in
connection with the sale of these contracts.
The risk factors section appears on page 7 of the prospectus. The exhibit index
appears in Part II of this Registration Statement.
STRATEGIC PARTNERS(SM)
HORIZON ANNUITY
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PROSPECTUS: MAY 1, 2004
THIS PROSPECTUS DESCRIBES A MARKET VALUE ADJUSTED INDIVIDUAL ANNUITY CONTRACT
OFFERED BY PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY (PRUCO LIFE OF NEW
JERSEY). PRUCO LIFE OF NEW JERSEY IS AN INDIRECT WHOLLY OWNED SUBSIDIARY OF THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA. PRUCO LIFE OF NEW JERSEY IS LOCATED AT
213 WASHINGTON STREET, NEWARK, NJ 07102-2992, AND CAN BE CONTACTED BY CALLING
(973) 367-1730. PRUCO LIFE OF NEW JERSEY ADMINISTERS THE STRATEGIC PARTNERS
HORIZON ANNUITY CONTRACTS AT THE PRUDENTIAL ANNUITY SERVICE CENTER, P.O. BOX
7960, PHILADELPHIA, PA 19101. YOU CAN CONTACT THE PRUDENTIAL ANNUITY SERVICE
CENTER BY CALLING, TOLL-FREE, (888) PRU-2888.
PLEASE READ THIS PROSPECTUS
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Please read this prospectus before purchasing a Strategic Partners Horizon
Annuity contract and keep it for future reference. The Risk Factors section
appears on page 7 of this prospectus.
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 MARKET VALUE ADJUSTED ANNUITY
CONTRACT IS SUBJECT TO RISK, INCLUDING THE POSSIBLE LOSS OF YOUR MONEY. AN
INVESTMENT IN STRATEGIC PARTNERS HORIZON ANNUITY IS NOT A BANK DEPOSIT AND IS
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
STRATEGIC PARTNERS(SM) IS A SERVICE MARK OF THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA ORDO1146NY
CONTENTS
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2
PART I SUMMARY
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STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS
3
PART I
STRATEGIC PARTNERS HORIZON ANNUITY 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 THE KEY WORDS
OR TERMS. OTHER DEFINED TERMS ARE SET FORTH IN YOUR CONTRACT.
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 for any market value adjustment.
ANNUITANT
The person whose life determines the amount of income payments that we will pay.
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 eligible
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. You must have our
permission to change the annuity date. If the co-annuitant becomes the annuitant
due to the death of the annuitant, and the co-annuitant is older than the
annuitant, then the annuity date will be based on the age of the co-annuitant,
provided that the contract's requirements for changing the annuity date are met
(e.g., the co-annuitant cannot be older than a specified age). If the
co-annuitant is younger than the annuitant, then the annuity date will remain
unchanged.
BENEFICIARY
The person(s) or entity you have chosen to receive a death benefit.
BUSINESS DAY
A day on which both the New York Stock Exchange and Prudential are open for
business. Our business day generally ends at 4:00 p.m. Eastern time.
CO-ANNUITANT
The person shown on the contract data pages who becomes the annuitant (if
eligible) upon the death of the annuitant if the requirements for changing the
annuity date are met. No co-annuitant may be designated if the owner is a
non-natural person.
CONTRACT DATE
The date we accept your initial purchase 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 SURRENDER VALUE
This is the total value of your contract adjusted by any market-value
adjustment, minus any withdrawal charge(s) and any premium taxes.
CONTRACT VALUE
The total value of the amount in a contract allocated to a guarantee period as
of a particular date.
DEATH BENEFIT
If a death benefit is payable, the beneficiary you designate will receive the
contract value as the death benefit. If the contract is owned by an entity (e.g.
a corporation or trust), rather than by an individual, then we will pay the
death benefit upon the death of the annuitant. See "What Is The Death Benefit?"
on page 16.
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.
GUARANTEE PERIOD
A period of time during which your invested purchase payment earns interest at
the declared rate. We currently make available guarantee periods equal to any or
all of the following: 1 year (currently available only as a renewal option), 3
years, 5 years, 7 years, and 10 years. A guarantee period that does not exceed
five years will always be available as a renewal option.
4
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PART I
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SUMMARY
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.
INVESTED PURCHASE PAYMENT
Your purchase payment (which we define below) less any deduction we make for any
tax charge. In addition to the initial invested purchase payment, we allow you
to make additional purchase payments during the 30 days preceding the end of a
guarantee period.
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.
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, as well as any
additional payment you make.
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 Horizon
Annuity Contract," on page 21.
5
PART I
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SUMMARY
SUMMARY OF SECTIONS 1-9
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FOR A MORE COMPLETE DISCUSSION OF THE FOLLOWING TOPICS, SEE THE CORRESPONDING
SECTION IN THE PROSPECTUS.
SECTION 1
WHAT IS THE STRATEGIC PARTNERS HORIZON ANNUITY?
This market value adjusted annuity contract, offered by Pruco Life of New
Jersey, is a contract between you, as the owner, and us. The contract is
intended for retirement savings or other long-term investment purposes and
provides a death benefit and guaranteed income options.
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 be at least 3%. Payments allocated to the contract 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 the contract are based on the
overall financial strength of Pruco Life of New Jersey.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
grow on a tax-deferred basis and are 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 the 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.
We may amend the contract as permitted by law. For example, we may add new
features to the contract. Subject to applicable law, we determine whether or not
to make such contract amendments available to contracts that already have been
issued.
Free Look. If you change your mind about owning Strategic Partners Horizon
Annuity, you may cancel your contract within 10 days after receiving it (or
whatever other 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 the amount your contract is worth as of the
day you submit your request.
We impose neither a withdrawal charge nor any market value adjustment if you
cancel your contract under this provision.
Pruco Life of New Jersey offers several different annuities which your
representative may be authorized to offer to you. Each annuity has different
features and benefits that may be appropriate for you based on your financial
situation, your age and how you intend to use the annuity. The different
features and benefits include variations in death benefit protection, the
ability to access your annuity's contract value and the charges that you will be
subject to if you choose to surrender the annuity. The fees and charges under
the annuity contract and the compensation paid to your representative may also
be different between each annuity. If you are purchasing the contract as a
replacement for existing variable annuity or variable life coverage, you should
consider, among other things, any surrender or penalty charges you may incur
when replacing your existing coverage.
SECTION 2
WHAT GUARANTEE PERIODS CAN I CHOOSE?
You can allocate your initial purchase payment to one of the guarantee periods
available under the contract. We have the right under the contract to offer one
or more of the following guarantee periods: 1 year (currently available only as
a renewal option), 3 years, 5 years, 7 years, or 10 years, and we may offer
other guarantee periods in the future. At any time, we may offer any or all of
these guarantee periods. You may not allocate your purchase payment to more than
one guarantee period.
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.
Once
6
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PART I
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SUMMARY
you begin receiving regular payments, you cannot change your payment plan.
SECTION 4
WHAT IS THE DEATH BENEFIT?
If the sole owner or the first of the joint owners dies, the designated
person(s) or the beneficiary will receive the contract value as the death
benefit. If the contract is owned by an entity (e.g., a corporation or trust),
rather than by an individual, then we will pay the death benefit upon the death
of the annuitant.
SECTION 5
HOW CAN I PURCHASE A STRATEGIC PARTNERS HORIZON ANNUITY CONTRACT?
You can purchase this contract, under most circumstances, with a minimum initial
purchase payment of $5,000, but not greater than $5 million, absent our prior
approval. We allow you to make additional purchase payments only during the 30
days immediately preceding the end of a guarantee period. Your representative
can help you fill out the proper forms.
SECTION 6
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS HORIZON ANNUITY
CONTRACT?
During the accumulation phase, if you withdraw money, you may have to pay a
withdrawal charge on all or part of the withdrawal. The withdrawal charge that
we impose depends on the guarantee period from which you are withdrawing your
money. The withdrawal charge ranges from 0%-7%. You also will be subject to a
market value adjustment if you make a withdrawal prior to the end of a guarantee
period.
SECTION 7
HOW CAN I ACCESS MY MONEY?
You may withdraw money 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. Each contract year after the first,
you may withdraw without charge, an amount equal to the interest you earned
during the previous contract year. Withdrawals greater than that amount will be
subject to a withdrawal charge. A market-value adjustment may also apply.
SECTION 8
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS HORIZON
ANNUITY CONTRACT?
Your earnings are generally not taxed until withdrawn. If you withdraw money
during the accumulation phase, the tax laws first treat the withdrawals as a
withdrawal of earnings, which are taxed as ordinary income. If you are younger
than age 59 1/2 when you withdraw money, 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. Generally, all amounts withdrawn from an Individual
Retirement Annuity (IRA) contract 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 of New Jersey, an indirect subsidiary of
The Prudential Insurance Company of America, and sold by registered
representatives of affiliated and unaffiliated broker/dealers.
RISK FACTORS
There are various risks associated with an investment in the Strategic Partners
Horizon Annuity that we summarize below.
ISSUER RISK. Your Strategic Partners Horizon Annuity is available under a
contract issued by Pruco Life of New Jersey, and thus is backed by the financial
strength of that company. If Pruco Life of New Jersey were to experience
significant financial adversity, it is possible that Pruco Life of New Jersey's
ability to pay interest and principal under the annuity 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 of
New Jersey holds to support the Strategic Partners Horizon annuities.
Nonetheless, the market value adjustment formula (which is detailed in the
appendix to this
7
SUMMARY OF SECTIONS 1-9 CONTINUED
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PART I
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SUMMARY
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 invested throughout the guarantee period.
In addition, we cannot, of course, assure you that the Strategic Partners
Horizon Annuity will perform better than another investment that you might have
made.
RISKS RELATED TO THE WITHDRAWAL CHARGE. We may impose withdrawal charges that
range as high as 7%. 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.
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9
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10
PART II SECTIONS 1-9
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STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS
11
PART II
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
1:
WHAT IS THE STRATEGIC PARTNERS HORIZON
ANNUITY?
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THE STRATEGIC PARTNERS HORIZON ANNUITY IS A CONTRACT BETWEEN YOU, THE OWNER, AND
US, THE INSURANCE COMPANY, PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY (PRUCO
LIFE OF NEW JERSEY, 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 first
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 purchase 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. Therefore, before purchasing an
annuity in a tax-favored plan, you should consider whether its features and
benefits beyond tax deferral meet your needs and goals. You may also want to
consider the relative features, benefits and costs of these annuities compared
with any other investment that you may use in connection with your retirement
plan or arrangement.)
Strategic Partners Horizon Annuity allows you to allocate a purchase payment
to one of several guarantee periods that we offer at the time. 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 owner is the
person upon whose death during the accumulation phase, the death benefit
generally is payable. The annuitant is the person whose life is used to
determine the amount of annuity payments and how long the payments will
continue. On and after the annuity date, the annuitant may not be changed.
The beneficiary is the person(s) or entity designated to receive any death
benefit if the owner (or first to die of joint owners) dies during the
accumulation phase. You may change the beneficiary any time prior to the annuity
date by making a written request to us.
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"
If you change your mind about owning Strategic Partners Horizon Annuity, 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 the amount your contract is worth as of the day you submit your
request, 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.
12
PART II
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
2:
WHAT GUARANTEE PERIODS
CAN I CHOOSE?
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THE CONTRACT GIVES YOU THE CHOICE OF ALLOCATING YOUR PURCHASE PAYMENT TO ONE OF
THE GUARANTEE PERIODS THAT WE ARE OFFERING AT THE TIME.
GUARANTEE PERIODS
Under each Strategic Partners Horizon Annuity contract, 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), 3 years, 5 years, 7 years,
or 10 years in length. In the future, we may offer other guarantee periods on
substantially the same terms as described in this prospectus. We are not
obligated to offer more than one guarantee period at any time. However, we will
always make available a guarantee period not exceeding 5 years in length.
We will apply your purchase payment to the guarantee period you have chosen.
You must allocate all of your initial purchase payment to a single guarantee
period. 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.
In addition to the basic interest, we also may pay additional interest with
respect to guarantee periods other than the one year and three year periods. The
amount of the additional interest varies according to the amount of your
purchase payment. Specifically, we will pay additional interest equal to 0.50%
annually for a purchase payment of $25,000 to $74,999, and 1.00% annually for a
purchase payment of $75,000 or more.
If we grant additional interest to you, you will earn that interest only
during the first year of your contract (and during the first year of the initial
renewal guarantee period, other than the one and three year periods). We are not
obligated to offer this additional interest continuously, meaning that we
reserve the right to offer additional interest only during limited time periods
of our choosing. We also reserve the right to change the amount of the
additional interest.
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, or (d) death of the first to die of the owner and joint
owner (or annuitant, for entity-owned contracts).
During the 30-day period immediately preceding the end of a guarantee period,
we allow you to do any of the following, without the imposition of the
withdrawal charge or market value adjustment: (a) surrender the contract, in
whole or in part, (b) allocate the contract value to another guarantee period
available at that time (provided that the new guarantee period ends prior to the
contract anniversary next following the annuitant's 90th birthday (or ten years
after the contract date, if later) and that you reinvest at least $2,000), or
(c) apply the adjusted contract value 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 a guarantee period having the same duration as
the guarantee period that matured (provided that the new guarantee period ends
prior to the contract anniversary next following the annuitant's 90th birthday
(or ten years after the contract date, if later) and that you reinvest at least
$2,000). If any available new guarantee period would end on or after the
contract anniversary next following the annuitant's 90th birthday (or ten years
after the contract date, if later), or if the annuitant is 91 years old at the
end of the guarantee period, then we will make only the one year guarantee
period available as the renewal period. We will not impose a withdrawal charge
on amounts you withdraw from the one year guarantee
13
2:
WHAT GUARANTEE PERIODS CAN I CHOOSE? CONTINUED
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PART II
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
period described in the immediately preceding sentence, although such a
withdrawal would be subject to a market value adjustment.
MARKET VALUE ADJUSTMENT
When you allocate a purchase payment 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 could
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.
- - You may withdraw (after the first contract year), without the imposition of
any market value adjustment, an amount equal to the interest earned under
your contract during the immediately preceding contract year.
- - 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, except if you annuitize or settle during the
30-day period preceding the end of a guarantee period (See Section 3 for
details).
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.
14
PART II
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
3:
WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE
INCOME PHASE? (ANNUITIZATION)
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PAYMENT PROVISIONS
We can begin making annuity payments any time after the first contract
anniversary. Annuity payments must begin no later than the contract anniversary
coinciding with or next following the annuitant's 90th birthday (or ten years
after the contract date, if later). If you begin annuity payments or commence a
settlement option at a time other than the 30-day period prior to the end of a
guarantee period, then we will impose a market value adjustment.
We make the income plans described below available before the annuity date.
These plans are called annuity options. You must choose an annuity option at
least 30 days in advance of the annuity date. If you do not, we will select
Option 2 below on your behalf unless prohibited by applicable law. During the
income phase, all of the annuity options under this contract are fixed annuity
options. GENERALLY, ONCE THE ANNUITY PAYMENTS BEGIN, THE ANNUITY OPTION CANNOT
BE CHANGED AND YOU CANNOT MAKE WITHDRAWALS.
If the annuitant dies or assigns the contract, and the new annuitant is older
than the original annuitant, then the annuity date will be based on the new
annuitant's age. If the annuitant dies or assigns the contract, and the new
annuitant is younger than the original annuitant, then the annuity date will
remain unchanged. In no event, however, may an original or revised annuity date
be later than the contract anniversary next following the annuitant's 90th
birthday (or ten years after the contract date, if later).
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 no less than 10 years). The annuity payments may be made monthly,
quarterly, semi-annually, or annually, as you choose, for the fixed period. If
the annuitant dies during the income phase, a lump sum payment generally will be
made to the beneficiary. 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
will be at least 3% a year.
OPTION 2
LIFE ANNUITY WITH 120 PAYMENTS (10 YEARS)
Under this option, we will make annuity payments monthly, quarterly,
semi-annually, 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
in one lump sum the present value of the annuity payments scheduled to have been
made over the remaining portion of that 10 year period, unless we were
specifically instructed that such 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 will be at least 3% a year.
OPTION 3
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 23, you
should consider the minimum distribution requirements mentioned on page 26 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.
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4:
WHAT IS THE
DEATH BENEFIT?
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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, you
can change the beneficiary at any time before the owner or last surviving owner
dies. However, if the contract is 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 first to die of the owner and joint owner) dies during the
accumulation phase, we will, upon receiving appropriate proof of death and any
other needed documentation in good order (proof of death), pay a death benefit
to the beneficiary designated by the deceased owner or joint owner. If the
contract is owned by an entity (e.g., a corporation or trust), rather than by an
individual, then we will pay the death benefit upon the death of the annuitant.
We require proof of death to be submitted promptly. The beneficiary will receive
a death benefit equal to the contract value (less any applicable premium tax) as
of the date that proof of death is received in good order at the Prudential
Annuity Service Center.
Instead of asking us to pay a death benefit, the surviving spouse may opt to
continue the contract, as discussed below. Generally, we impose no withdrawal
charge or market value adjustment when we pay the death benefit.
JOINT OWNERSHIP RULES
If the contract has an owner and a joint owner and they are spouses, then upon
the first to die of the owner and joint owner, the surviving spouse has the
choice of the following:
- - The contract can continue, with the surviving spouse as the sole owner of the
contract. In this case, the contract held by the surviving spouse will
continue to be subject to the withdrawal charge and market value adjustment;
or
- - The surviving spouse can receive the death benefit and the contract will end.
If the surviving spouse wishes 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 contract will continue with the surviving spouse as the
sole owner.
If the contract has an owner and a joint owner, and they are not spouses, the
contract will not continue. Instead, the beneficiary will receive the death
benefit.
The death benefit payout options are:
Choice 1. Lump sum.
Choice 2. Payment of the entire death benefit within 5 years of the date of
death of the first to die. Under this choice, we will impose a
market value adjustment upon any withdrawal made during the 5 year
period (unless the withdrawal is made during the 30-day period
immediately preceding the end of a guarantee period).
Choice 3. Payment under an annuity or 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 first to die.
The tax consequences to the beneficiary may vary among the three death
benefit payout options. See "What Are The Tax Considerations Associated With The
Strategic Partners Horizon Annuity Contract?" on page 21.
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5:
HOW CAN I PURCHASE A STRATEGIC PARTNERS HORIZON
ANNUITY CONTRACT?
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PURCHASE PAYMENT
A purchase payment is the amount of money you give us to purchase the contract.
The minimum initial purchase payment is $5,000, and may not exceed $5 million
absent prior approval. You can allocate subsequent purchase payments to a
guarantee period only during the 30-day period immediately preceding the end of
a guarantee period, provided that any such purchase payment is at least $1,000.
Generally, your initial purchase payment consists of a single sum. However,
with respect to an exchange or roll-over, your purchase payment can consist of
multiple sums that you identify at the time of application. With respect to the
latter:
- - we will aggregate each sum for purposes of computing the amount of any
additional interest that we pay on each sum; and
- - each sum will earn interest only from the business day on which it is
received in good order at the Prudential Annuity Service Center until the end
of the guarantee period.
We generally will sell you a contract only if the eldest of the owner, any
joint owner, annuitant, and any co-annuitant is 85 or younger on the contract
date (age 69 or younger, for IRAs).
ALLOCATION OF PURCHASE PAYMENT
When you purchase a contract, we will allocate your invested purchase payment to
the guarantee period of your choosing, provided that we are offering that
guarantee period at the time. You must allocate all of your initial purchase
payment to a single guarantee period. Likewise, any subsequent purchase payment
you make during the 30-day period immediately preceding the end of a guarantee
period will be consolidated with your existing contract value, and the total
will be allocated to a single guarantee period of your choosing.
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6:
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS
HORIZON ANNUITY CONTRACT?
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THERE ARE CHARGES ASSOCIATED WITH THE CONTRACT THAT MAY REDUCE THE RETURN ON
YOUR INVESTMENT. THESE CHARGES ARE DESCRIBED BELOW.
WITHDRAWAL CHARGE
The withdrawal charge is for the payment of the expenses involved in selling and
distributing the contracts, including sales commissions, printing of
prospectuses, sales administration, preparation of sales literature and other
promotional activities.
You may surrender your contract in whole or in part while the guarantee
period remains in effect. If you do so, however, you will be subject to (a) a
possible withdrawal charge, (b) a market value adjustment (which we discussed in
Section 2 above) and (c) possible tax penalties. After the first contract year,
you may withdraw, without the imposition of any withdrawal charge or market
value adjustment, an amount equal to the interest earned under your contract
during the immediately preceding contract year. When we calculate the withdrawal
charge and market value adjustment, we first take into account any available
charge-free amount. We impose a withdrawal charge and market value adjustment
only after that amount has been exhausted. In addition, we do not impose either
a withdrawal charge or a market value adjustment on amounts you withdraw under
the contract's minimum distribution option to satisfy Internal Revenue Service
minimum distribution requirements.
If you make a full withdrawal, we will deduct the withdrawal charge from the
proceeds that we pay to you. If you make a partial withdrawal, we will deduct
the withdrawal charge from the contract value remaining in the guarantee period.
We calculate the withdrawal charge after we have given effect to any market
value adjustment.
The withdrawal charge that we impose is equal to a specified percentage of
the contract value withdrawn that is in excess of the charge-free amount
described above. With respect to the initial guarantee period, the withdrawal
charge is based on the number of contract anniversaries that have elapsed since
the contract date. Withdrawal charges also are imposed during your first,
renewal guarantee period, as discussed below. No withdrawal charges apply to any
guarantee period that you choose subsequent to your first, renewal guarantee
period. Moreover, we impose no withdrawal charge on withdrawals from any one
year guarantee period. The withdrawal charge for the initial guarantee period is
equal to the following:
The withdrawal charge during the first year of the first renewal guarantee
period is equal to the lesser of 5%, or 1% times the number of years in the
renewal guarantee period, and the charge decreases by 1% per year thereafter.
The withdrawal charge schedule for those aged 90 or older differs slightly. Some
or all of the guarantee periods that we offer at any given time will be shorter
than the time periods indicated immediately above. If a withdrawal is effective
on the day before a contract anniversary, the withdrawal charge percentage will
be that as of the next following contract anniversary.
TAXES ATTRIBUTABLE TO PREMIUM
There may be 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. 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 on us, the current rates range up
to 3.5%. New York, however, does not
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STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
currently impose a charge for premium taxes. It is also our current practice not
to deduct a charge for the federal tax associated with 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 tax associated
with 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.
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7:
HOW CAN I ACCESS
MY MONEY?
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You can withdraw money at any time during the accumulation phase. If you do so,
however, you may be subject to income tax and, if the withdrawal is prior to
your attaining age 59 1/2, an additional tax penalty. You will need our consent
to make a partial withdrawal if the requested withdrawal is less than $250.
During the accumulation phase, we generally have the right to terminate your
contract and pay you the contract value if the current contract value is less
than $2,000 and certain other conditions apply.
INCOME TAXES, TAX PENALTIES, WITHDRAWAL CHARGES, AND A MARKET VALUE
ADJUSTMENT MAY APPLY TO ANY WITHDRAWAL YOU MAKE. FOR A MORE COMPLETE EXPLANATION
OF TAX CONSEQUENCES, 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 withdrawal at the end of the business day at the intervals you
specify. We will continue at these intervals until you tell us otherwise. We
reserve the right to cease paying automated withdrawals if paying any such
withdrawal would cause the contract value to be less than $2,000.
The minimum automated withdrawal amount you can make is $100. Withdrawal
charges, and a market value adjustment, may apply to any automated withdrawal
you make. You may not use the automated withdrawal feature to withdraw the
interest earned under your contract.
INCOME TAXES, TAX PENALTIES, WITHDRAWAL CHARGES, AND A MARKET VALUE
ADJUSTMENT MAY APPLY TO AUTOMATED WITHDRAWALS. FOR A MORE COMPLETE DISCUSSION OF
TAX CONSEQUENCES, SEE SECTION 8 OF THIS PROSPECTUS.
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8:
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
HORIZON ANNUITY CONTRACT?
- --------------------------------------------------------------------------------
The tax considerations associated with the Strategic Partners Horizon Annuity
contract vary depending on whether the contract is (i) owned by an individual
and not associated with a tax-favored retirement plan (including contracts held
by a non-natural person, such as a trust acting as an agent for a natural
person), 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. The
discussion includes a description of certain spousal rights under the contract
and under tax-qualified plans. Our administration of such spousal rights and
related tax reporting accords with our understanding of the Defense of Marriage
Act (which defines a "marriage" as a legal union between a man and a woman and a
"spouse" as a person of the opposite sex). The information provided is not
intended as tax advice. You should consult with a qualified tax advisor for
complete information and advice. References to purchase payments below relate to
your cost basis in your contract. Generally, your cost basis in a contract not
associated with a tax-favored retirement plan is the amount you pay into your
contract, or into annuities exchanged for your contract, on an after-tax basis
less any withdrawals of such payments.
This contract may also be purchased as a non-qualified annuity (i.e., a
contract not held under a tax-favored retirement plan) by a trust or custodial
IRA or 403(b) account, which can hold other permissible assets other than the
annuity. The terms and administration of the trust or custodial account in
accordance with the laws and regulations for IRAs or 403(b)s, as applicable, are
the responsibility of the applicable trustee or custodian.
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.
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 withdrawal from a 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 generally will be treated as a withdrawal. Also, if you
elect the interest payment option that we may offer, 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 any 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.
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.
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CONTRACT CONTINUED
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PART II
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
TAX PENALTY ON WITHDRAWALS AND ANNUITY PAYMENTS
Any taxable amount you receive under your contract may be subject to a 10
percent 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 substantially equal payments
not less frequently than annually (please note that substantially equal
payments must continue until the later of reaching 59 1/2 or 5 years.
Modification of payments during that time period will result in retroactive
application of the 10% tax penalty.); or
- - the amount received is paid under an immediate annuity contract (in which
annuity payments begin within one year of purchase).
SPECIAL RULES IN RELATION TO TAX-FREE EXCHANGES UNDER SECTION 1035
Section 1035 of the Internal Revenue Code of 1986, as amended (Code) permits
certain tax-free exchanges of a life insurance, annuity or endowment contract
for an annuity. If the annuity is purchased through a tax-free exchange of a
life insurance, annuity or endowment contract that was purchased prior to August
14, 1982, then any purchase payments made to the original contract prior to
August 14, 1982 will be treated as made to the new contract prior to that date.
Partial surrenders may be treated in the same way as tax-free 1035 exchanges
of entire contracts, therefore avoiding current taxation of any gains in the
contract as well as the 10% tax penalty on pre-age 59 1/2 withdrawals. The
Internal Revenue Service (IRS) has reserved the right to treat transactions it
considers abusive as ineligible for this favorable partial 1035 exchange
treatment. We do not know what transactions may be considered abusive. For
example, we do not know how the IRS may view early withdrawals or annuitizations
after a partial exchange. In addition, it is unclear how the IRS will treat a
partial exchange from a life insurance, endowment, or annuity contract into an
immediate annuity. As of the date of this prospectus, we will accept a partial
1035 exchange from a non-qualified annuity into an immediate annuity as a "tax-
free" exchange for future tax reporting purposes, except to the extent that we,
as a reporting and withholding agent, believe that we would be expected to deem
the transaction to be abusive. However, some insurance companies may not
recognize these partial surrenders as tax-free exchanges and may report them as
taxable distributions to the extent of any gain distributed as well as
subjecting the taxable portion of the distribution to the 10% tax penalty. We
strongly urge you to discuss any transaction of this type with your tax advisor
before proceeding with the transaction.
TAXES PAYABLE BY BENEFICIARIES
The death benefit options are subject to income tax to the extent the
distribution exceeds the cost basis in the contract. The value of the death
benefit, as determined under federal law, is also included in the owner's
estate.
Generally, the same tax rules described above would also apply to amounts
received by your beneficiary. Choosing any option other than 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 contract 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
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STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
if you are a married individual with three 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 below for a discussion regarding 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
REQUIRED DISTRIBUTIONS UPON YOUR DEATH. Upon your death, certain
distributions must be made under the contract. The required distributions depend
on whether you die on or 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 a periodic
payment option is selected by your designated beneficiary and if such 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 a periodic payment option based on life expectancy or a period
exceeding five years.
If the contract is payable to (or for the benefit of) your surviving spouse,
such 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.
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 Code. This description assumes that you
have satisfied the requirements for eligibility for these products.
This contract may also be purchased as a non-qualified annuity (i.e., a
contract not held under a tax-favored retirement plan) by a trust or custodial
IRA or 403(b) account, which can hold other permissible assets other than the
annuity. The terms and administration of the trust or custodial account in
accordance with the laws and regulations for IRAs or 403(b)s, as applicable, are
the responsibility of the applicable trustee or custodian.
YOU SHOULD BE AWARE THAT TAX FAVORED PLANS SUCH AS IRAS GENERALLY PROVIDE
INCOME 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 BENEFITS (SUCH AS INCOME TAX DEFERRAL AND
INCOME TAX FREE TRANSFERS).
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TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS HORIZON ANNUITY
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PART II
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
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 33
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
your contract is worth, 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 $5,000 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 2004, the limit is $3,000; increasing in 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 2004 and 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 into another
Section 401(a) plan.
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 of
New Jersey;
- - The annual contribution 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 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 26).
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 26);
- - 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 26).
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" from a Roth IRA are excludable from gross income. A
"qualified
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STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
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; and
- - If eligible (including meeting income limitations and earnings requirements),
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 $5,000 is greater than the
maximum annual contribution permitted to be made to a Roth IRA, you may only
purchase a contract for a Roth IRA in connection with a "rollover" or
"conversion" of amounts of another traditional IRA, conduit IRA, or Roth IRA.
This minimum is greater than the maximum amount of any annual contribution
allowed by law you may make to a 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.
Tax Deferred Annuities (TDAs). You may own TDAs 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. 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 $13,000 in 2004. Individuals
participating in a TDA who are age 50 or above by the end of the year will be
permitted to contribute an additional $3,000 in 2004, 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. TDA amounts may also be rolled over to a qualified retirement plan 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.
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.
25
8:
TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS HORIZON ANNUITY
CONTRACT CONTINUED
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PART II
STRATEGIC PARTNERS HORIZON ANNUITY 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 generally 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. 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% 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 distribute to you this minimum
distribution amount, less any other partial withdrawals that you made during the
year.
Although the IRS rules determine the required amount to be distributed from
your IRA each year, certain payment alternatives are still available to you. If
you own more than one IRA, you can choose to satisfy your minimum distribution
requirement for each of your IRAs by withdrawing that amount from any of your
IRAs.
PENALTY FOR EARLY WITHDRAWALS
You may owe a 10% tax penalty on the taxable part of distributions received from
an IRA, Roth IRA, TDA or qualified retirement plan before you attain age 59 1/2.
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; or
- - the amount paid or received is in the form of substantially equal payments
not less frequently than annually (please note that substantially equal
payments must continue until the later of reaching age 59 1/2 or 5 years.
Modification of payments during that time period will generally result in
retroactive application of the 10% tax penalty.)
Other exceptions to this tax may apply. You should consult your tax advisor
for further details.
WITHHOLDING
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 three
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. There may be additional state income tax withholding
requirements.
ERISA DISCLOSURE/REQUIREMENTS
ERISA (the "Employee Retirement Income Security Act of 1974") and the Code
prevent 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
26
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PART II
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
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 Horizon Contract" starting on page 18.
Information about sales representatives and commissions may be found under
"Other Information" and "Sale And Distribution Of The Contract" on page 28.
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.
ADDITIONAL INFORMATION
For additional information about the requirements of federal tax law applicable
to tax favored plans, see the "IRA Disclosure Statement" on page 33. The
following additional tax considerations also may be of interest.
ENTITY OWNERS.
Where a contract is held by a non-natural person (e.g., a corporation), other
than as an agent or nominee for a natural person (or in other limited
circumstances), the contract will not be taxed as an annuity and increases in
the value of the contract will be subject to tax.
PURCHASE PAYMENTS MADE BEFORE AUGUST 14, 1982.
If your contract was issued in exchange for a contract containing purchase
payments made before August 14, 1982, favorable tax rules may apply to certain
withdrawals from the contract. Generally, withdrawals are treated as a recovery
of your investment in the contract first until purchase payments made before
August 14, 1982 are withdrawn. Moreover, any income allocable to purchase
payments made before August 14, 1982, is not subject to the 10% tax penalty.
GENERATION-SKIPPING TRANSFERS.
If you transfer your contract to a person two or more generations younger than
you (such as a grandchild or grandniece) or to a person that is more than 37 1/2
years younger than you, there may be generation-skipping transfer tax
consequences.
27
PART II
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
9:
OTHER
INFORMATION
- --------------------------------------------------------------------------------
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Pruco Life Insurance Company of New Jersey (Pruco Life of New Jersey) is a stock
life insurance company, organized in 1982 under the laws of the State of New
Jersey. It is licensed to sell life insurance and annuities in New Jersey and
New York, and accordingly is subject to the laws of each of those states.
Pruco Life of New Jersey is an indirect wholly-owned subsidiary of The
Prudential Insurance Company of America (Prudential), a New Jersey stock life
insurance company 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 of New Jersey's ultimate
parent, Prudential Financial exercises significant influence over the operations
and capital structure of Pruco Life of New Jersey and Prudential. However,
neither Prudential Financial, Prudential, nor any other related company has any
legal responsibility to pay amounts that Pruco Life of New Jersey may owe under
the contract.
Pruco Life of New Jersey publishes annual and quarterly reports that are
filed with the SEC. These reports contain financial information about Pruco Life
of New Jersey that is annually audited by independent accountants. Pruco Life of
New Jersey's annual report for the year ended December 31, 2003, together with
subsequent periodic reports that Pruco Life of New Jersey 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 of New Jersey
annual report that is not ordinarily mailed to contract owners, 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. The SEC file number for Pruco
Life of New Jersey is 33-18053. You may read and copy any filings made by Pruco
Life of New Jersey with the SEC at the SEC's Public Reference Room at 450 Fifth
Street, Washington, D.C. 20549-0102. You can obtain information on the operation
of the Public Reference Room by calling (202) 942-8090. 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.
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 of New Jersey under which
PIMS is reimbursed for its costs and expenses. PIMS is an indirect wholly-owned
subsidiary of Prudential Financial 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 (Exchange Act) and a member of the National
Association of Securities Dealers, Inc. (NASD).
Commissions are paid to broker/dealers that are registered under the Exchange
Act and/or entities that are exempt from such registration (firms) according to
one or more schedules. The individual representative will receive a portion of
the compensation, depending on the practice of the firm. Commissions are
generally based on a percentage of purchase payments made, up to a maximum of
5%. Alternative compensation schedules are available that provide a lower
initial commission plus ongoing annual compensation based on all or a portion of
contract value. We may also provide compensation for providing ongoing service
to you in relation to the contract. Commissions and other compensation paid in
relation to the contract do not result in any additional charge to you or to the
separate account.
In addition, in an effort to promote the sale of our products (which may
include the placement of Pruco Life of New Jersey and/or the contract on a
preferred or recommended company or product list and/or access to the firm's
registered representatives), we or PIMS may enter into compensation arrangements
with certain broker/dealer firms or branches of such firms with respect to
certain or all registered representatives of such firms under which such firms
may receive separate compensation or reimbursement for, among other
28
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PART II
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
things, training of sales personnel and/or marketing and/or administrative
and/or other services they provide to us or our affiliates. To the extent
permitted by NASD rules and other applicable laws and regulations, PIMS may pay
or allow other promotional incentives or payments in the form of cash or
non-cash compensation. These arrangements may not be offered to all firms, and
the terms of such arrangements may differ between firms. You should note that
firms and individual registered representatives and branch managers within some
firms participating in one of these compensation arrangements might receive
greater compensation for selling the contract than for selling a different
annuity that is not eligible for these compensation arrangements. While
compensation is generally taken into account as an expense in considering the
charges applicable to an annuity product, any such compensation will be paid by
us or PIMS, and will not result in any additional charge to you. Overall
compensation paid to the distributing firm does not exceed, based on actuarial
assumptions, 8.5% of the purchase payments made. Your registered representative
can provide you with more information about the compensation arrangements that
apply upon the sale of the contract.
LITIGATION
We are subject to legal and regulatory actions in the ordinary course of our
business, including class actions. Pending legal and regulatory actions include
proceedings relating to aspects of the businesses and operations that are
specific to Pruco Life of New Jersey and that are typical of the businesses in
which Pruco Life of New Jersey operates. Class action and individual lawsuits
involve a variety of issues and/or allegations, which include sales practices,
underwriting practices, claims payment and procedures, premium charges, policy
servicing and breach of fiduciary duties to customers. We are also subject to
litigation arising out of our general business activities, such as our
investments and third party contracts. In certain of these matters, the
plaintiffs are seeking large and/or indeterminate amounts, including punitive or
exemplary damages.
Pruco Life of New Jersey's litigation is subject to many uncertainties, and
given the complexity and scope, the outcomes cannot be predicted. It is possible
that the results of operations or the cash flow of Pruco Life of New Jersey in a
particular quarterly or annual period could be materially affected by an
ultimate unfavorable resolution of pending litigation and regulatory matters.
Management believes, however, that the ultimate outcome of all pending
litigation and regulatory matters should not have a material adverse effect on
Pruco Life of New Jersey's financial position.
In January 2004, the NASD fined Prudential Equity Group, Inc. (formerly known
as Prudential Securities Incorporated) and PIMS $2 million, and ordered the
firms to pay customers $9.5 million for sales of fixed and variable annuities
that violated a New York State Insurance Department regulation concerning
replacement sales and NASD rules. We brought this matter to the New York
Insurance Department and the NASD's attention in response to an internal
investigation, and in consultation with both New York and the NASD, we have
initiated a remediation program for all affected customers which has already
provided $8 million in remediation.
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.
HOUSEHOLDING
To reduce costs, we now send only a single copy of prospectuses to each
consenting household, in lieu of sending a copy to each contract owner that
resides in
29
9:
OTHER INFORMATION CONTINUED
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PART II
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
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, by calling (877) 778-5008.
INDEMNIFICATION
Pruco Life of New Jersey, in conjunction with certain affiliates, maintains
insurance on behalf of any person who is or was a trustee, director, officer,
employee, or agent of Pruco Life of New Jersey, or who is or was serving at the
request of Pruco Life of New Jersey as a trustee, director, officer, employee or
agent of such other affiliated trust or corporation, against any liability
asserted against and incurred by him or her arising out of his or her position
with such trust or corporation.
New Jersey, being the state of organization of Pruco Life of New Jersey,
permits entities organized under its jurisdiction to indemnify directors and
officers with certain limitations. The relevant provisions of New Jersey law
permitting indemnification can be found in Section 14A:3-5 et. seq. of the New
Jersey Statutes Annotated. The text of Pruco Life of New Jersey's By-law,
Article V, which relates to indemnification of officers and directors, is
incorporated by reference to Exhibit 1.A.(6)(c) to Form S-6, Registration No.
333-85117, filed August 13, 1999 on behalf of Pruco Life of New Jersey Variable
Appreciable Account.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of Pruco
Life of New Jersey pursuant to the foregoing provisions or otherwise, Pruco Life
of New Jersey 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 Pruco Life
of New Jersey of expenses incurred or paid by a director, officer or controlling
person of Pruco Life of New Jersey 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, Pruco Life of New Jersey 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.
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PART II
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
MARKET-VALUE
ADJUSTMENT FORMULA
- --------------------------------------------------------------------------------
MARKET-VALUE ADJUSTMENT FORMULA
The general formula under which Pruco Life of New Jersey calculates the market
value adjustment applicable to a full or partial surrender, annuitization, or
settlement under Strategic Partners Horizon Annuity 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
The MVA formula uses an interpolated rate "J" 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 additional days remaining in the
current guarantee period.
MARKET VALUE ADJUSTMENT EXAMPLE
The following will illustrate the application of the Market-Value Adjustment.
For simplicity, surrender charges are ignored in these hypothetical examples.
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 has 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 of New Jersey 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) Calculate the Charge Free Amount. The Charge Free Amount is the interest
credited in the contract in the previous contract year. This amount is
$600.00. It is not subject to a Market Value Adjustment.
2) Subtract the Charge Free Amount from the Contract Value. The result is the
amount subject to a Market Value Adjustment (MVA).
$11,127.11 - $600.00 = $10,527.11
3) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.0417 + .0025)](38/12) -1 =
0.04871
4) Multiply the amount subject to a Market Value Adjustment by the factor
calculated in Step 3.
$10,527.11 X 0.04871 = $512.78
5) Add together the Market Value Adjustment and the amount subject to the MVA.
$10,527.11 + $ 512.78 = $11,039.89
6) Add back the Charge Free Amount to get the total Contract Surrender Value.
$11,039.89 + $600.00 = $11,639.89
The MVA may not always be positive. Here is an example where it is negative.
31
MARKET-VALUE ADJUSTMENT FORMULA CONTINUED
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PART II
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
- - 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 has 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 of New Jersey 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) Calculate the Charge Free Amount. The Charge Free Amount is the interest
credited in the contract in the previous contract year. This amount is
$600.00. It is not subject to a Market Value Adjustment.
2) Subtract the Charge Free Amount from the Contract Value. The result is the
amount subject to a Market Value Adjustment (MVA).
$11,127.11 - $600.00 = $10,527.11
3) Determine the Market Value Adjustment Factor.
The MVA Factor calculation would be: [(1.06)/(1.0717 + .0025)](38/12) -1 =
- -0.04126
4) Multiply the amount subject to a Market Value Adjustment by the factor
calculated in Step 3.
$10,527.11 X -0.04126 = -$434.35
5) Add together the Market Value Adjustment and the amount subject to the MVA.
$10,527.11 - $434.35 = $10,092.76
6) Add back the Charge Free Amount to get the total Contract Surrender Value.
$10,092.76 + $600.00 = $10,692.76
32
PART II
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
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,
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 refund (less any applicable federal and state income
tax withholding) within 10 days after it is delivered or applicable state
required period, if longer. The amount of the refund is dictated by state law.
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 contributions must be made by no later
than the due date for filing your income tax return for that year. For a single
taxpayer, the applicable dollar limitation is $45,000 in 2004, with the amount
of IRA contribution which may be deducted reduced proportionately for Adjusted
Gross Income between $45,000 -- $55,000. For married couples filing joint
returns, the applicable dollar limitation is $65,000, with the amount of the IRA
contribution which may be deducted reduced proportionately between
$65,000 -- $75,000. There is no deduction allowed for IRA contributions when
Adjusted Gross Income reaches $55,000 for individuals and $75,000 for married
couples filing jointly. Income limits are scheduled to increase until 2006 for
single taxpayers and 2007 for married taxpayers.
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 should contribute more than the maximum contribution amount to your
IRA, the excess amount will be considered an "excess contribution." You are
permitted to withdraw an excess contribution from your IRA 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 on page 34.)
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
33
IRA DISCLOSURE STATEMENT CONTINUED
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PART II
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
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 "Contributions And Deductions" on page 33. 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 and reinvest it in another IRA. 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 Simplified Employee Pension IRA to
an IRA or to another qualified retirement plan or 457 government plan.
DISTRIBUTIONS
(A) PREMATURE DISTRIBUTIONS
At no time can your interest in your IRA be forfeited. To insure that your
contributions will be used for retirement, the federal tax law does not permit
you to use your IRA as security for a loan. Furthermore, as a general rule, you
may not sell or assign your interest in your IRA to anyone. Use of an IRA 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 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. 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% penalty tax 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 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. If you own more than one IRA, you can
choose to satisfy your minimum distribution requirement for each of your IRAs by
withdrawing that amount from any of your IRAs. You may elect to receive the
distribution under
34
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PART II
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
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 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
defined under IRS regulations. 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, 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, or as a program of minimum distributions.
This annuity or minimum distribution program must be payable over the life
expectancy of the beneficiary beginning by December 31 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
September 30 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 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 Roth 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 non-Roth 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 non-Roth 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 NON-ROTH 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
35
IRA DISCLOSURE STATEMENT CONTINUED
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PART II
STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS SECTIONS 1-9
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 non-Roth
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
non-Roth 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. The contract may not be available to Roth IRA's in New York.
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. If you were at least 70 1/2 at the end
of the prior year, we will indicate to you and to the IRS, on Form 5498, that
your account is subject to minimum required distributions.
36
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ORD01146NY
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration Fees
Pruco Life Insurance Company of New Jersey has registered $200 million of
interests in the market value adjusted annuity contracts described in this
registration statement. Pruco Life Insurance Company of New Jersey has paid
$18,400 to the SEC for the registration fees required under the Securities Act
of 1933.
Federal Taxes
Pruco Life Insurance Company of New Jersey estimates the federal tax effect
associated with the deferred acquisition costs attributable to receipt of $5
million of purchase payments over a two year period to be approximately $18,500.
State Taxes
Pruco Life Insurance Company of New Jersey estimates that approximately $0
in premium taxes will be owed upon receipt of purchase payments under the
contracts, and that additional premium taxes in the approximate amount of
$0 would be owed if the full $5 million of purchase payments were applied
to annuity options.
Printing Costs
Pruco Life Insurance Company of New Jersey estimates that the cost of printing
prospectuses for the amount of securities registered herein will be
approximately $12,655.
Legal Costs
This registration statement was prepared by Prudential attorneys whose time is
allocated to Pruco Life Insurance Company of New Jersey.
Accounting Costs
PricewaterhouseCoopers LLC, the independent public accountant that audits Pruco
Life Insurance Company of New Jersey's financial statements, charges
approximately $4,000 in connection with each filing of this registration
statement with the Commission.
Premium Paid to Indemnify Officers
Officers and Directors of Pruco Life Insurance Company of New Jersey are
indemnified under a policy that also covers officers and directors of other
entities controlled by Prudential Financial, Inc. A portion of the cost of that
policy is attributed to Pruco Life Insurance Company of New Jersey.
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.
New Jersey, being the state of organization of Pruco Life Insurance Company of
New Jersey ("Pruco") permits entities organized under its jurisdiction to
indemnify directors and officers with certain limitations. The relevant
provisions of New Jersey law permitting indemnification can be found in Section
14A:3-5 et seq. of the New Jersey Statutes Annotated. The text of Pruco's By-Law
Article V, which relates to indemnification of officers and directors, is
incorporated by reference to Exhibit 1.A.(6)(c) to Form S-6, Registration No.
333-85117, filed August 13, 1999 on behalf of the Pruco Life of New Jersey
Variable Appreciable Account.
S-1
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") 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) (a) Form of Distribution Agreement between Prudential Investment
Management Services, Inc., ("PIMS") (Principal Underwriter)
and Pruco Life Insurance Company of New Jersey (Depositor).
(Note 2)
(4) Form of Contract (Note 7)
(4)(a) Form of Application [ORD 99720] (Note 7)
(4)(b) Form of Application [ORD 99720 New York Third Party] (Note 7)
(5) Opinion of Counsel as to legality of the securities being
registered. (Note 1)
(23) Consent of PricewaterhouseCoopers LLP (Note 1)
(24) Powers of Attorney:
(a) Vivian L. Banta, Richard J. Carbone, and Helen M. Galt
(Note 3)
(b) James J. Avery, Jr. (Note 4)
(c) David R. Odenath, Jr., William J. Eckert (Note 5)
(d) Ronald P. Joelson (Note 6)
(e) Andrew J. Mako (Note 8)
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Post Effective Amendment No. 4 of
Form N-4, Registration No. 333-18117, filed April 16, 1999, on
behalf of Pruco Life Insurance Company of New Jersey.
(Note 3) Incorporated by reference to Post-Effective Amendment No. 5 to
Form S-6, Registration No. 333-85117 filed June 28, 2001 on
behalf of the Pruco Life of New Jersey Variable Appreciable
Account.
(Note 4) Incorporated by reference to Post-Effective Amendment No. 10 to
Form S-1, Registration No. 33-20018, filed April 19, 1998 on
behalf of the Pruco Life of New Jersey Variable Contract Real
Property Account.
(Note 5) Incorporated by reference to Form S-6 Registration No.
333-49334 filed February 8, 2001 on behalf of the Pruco Life
of New Jersey Variable Appreciable Account.
(Note 6) Incorporated by reference to Post-Effective Amendment No. 14 to
Form S-1, Registration No. 33-20018, filed April 10, 2001 on
behalf of the Pruco Life of New Jersey Variable Contract Real
Property Account.
(Note 7) Incorporated by reference to Initial Filing on Form S-3 to
this Registration Statement, filed October 24, 2002.
(Note 8) Incorporated by reference to Post-Effective Amendment No. 27 to
Form N-4 Registration No. 333-99275, filed June 27, 2003, on
behalf of the Pruco Life of New Jersey Flexible Premium Variable
Annuity Account.
S-2
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) 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.
S-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 post-effective
amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Newark, State of New
Jersey, on the 7th day of April, 2004.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
(Registrant)
By: /s/ ANDREW J. MAKO
-------------------
ANDREW J. MAKO
PRESIDENT AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and the date indicated.
SIGNATURE AND TITLE
/s/*
- ----------------------------------
VIVIAN L. BANTA
CHAIRMAN AND DIRECTOR
/s/* April 7, 2004
- ----------------------------------
JAMES J. AVERY, JR.
VICE CHAIRMAN AND DIRECTOR
/s/* *By: /s/ CLIFFORD E. KIRSCH
- ---------------------------------- ----------------------------
RICHARD J. CARBONE CLIFFORD E. KIRSCH
DIRECTOR (ATTORNEY-IN-FACT)
/s/*
- ----------------------------------
WILLIAM J. ECKERT
VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
/s/*
- ----------------------------------
HELEN M. GALT
DIRECTOR
/s/*
- ----------------------------------
RONALD P. JOELSON
DIRECTOR
/s/*
- ----------------------------------
ANDREW J. MAKO
PRESIDENT AND DIRECTOR
/s/*
- ----------------------------------
DAVID R. ODENATH, JR.
DIRECTOR
S-4
EXHIBIT INDEX
(5) Opinion of Counsel
(23) Written Consent of PricewaterhouseCoopers LLP, independent accountants