424B3: Prospectus [Rule 424(b)(3)]
Published on
As Filed Pursuant to Rule 424(b)(3)
Registration No. 333-62246
STRATEGIC PARTNERS(SM)
SELECT
VARIABLE ANNUITY
- --------------------------------------------------------------------------------
PROSPECTUS: MAY 1, 2004
THIS PROSPECTUS DESCRIBES AN INDIVIDUAL VARIABLE 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.
The Funds
- ------------------------------------------------------------
Strategic Partners Select offers a wide variety of investment choices, including
variable investment options that invest in underlying mutual funds managed by
these leading asset managers.
Prudential Investments LLC
Jennison Associates LLC
A I M Capital Management, Inc.
Alliance Capital Management, L.P.
Calamos Asset Management, Inc.
Davis Advisors
Deutsche Asset Management Investment Services Limited
The Dreyfus Corporation
GE Asset Management, Incorporated
Goldman Sachs Asset Management, L.P.
Hotchkis and Wiley Capital Management LLC
Janus Capital Management LLC
J.P. Morgan Investment Management Inc.
Massachusetts Financial Services Company (MFS)
Pacific Investment Management Company LLC (PIMCO)
Salomon Brothers Asset Management
State Street Research and Management Company
William Blair & Company, LLC
Please Read this Prospectus
- ------------------------------------------------------------
Please read this prospectus before purchasing a Strategic Partners Select
variable annuity contract and keep it for future reference. The Risk Factors
section relating to the market value adjustment option appears on page 10 of
this prospectus. The current prospectuses for the underlying mutual funds
contain important information about the mutual funds. When you invest in a
variable investment option that is funded by a mutual fund, you should read the
mutual fund prospectus and keep it for future reference.
To Learn More About
Strategic Partners Select
- ------------------------------------------------------------
To learn more about the Strategic Partners Select variable annuity, you can
request a copy of the Statement of Additional Information (SAI) dated May 1,
2004. The SAI has been filed with the Securities and Exchange Commission (SEC)
and is legally a part of this prospectus. Pruco Life of New Jersey also files
other reports with the SEC. All of these filings can be reviewed and copied at
the SEC's offices, and can also be obtained from the SEC's Public Reference
Room, 450 5th Street N.W., Washington, D.C. 20549-0102. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
(202) 942-8090. The SEC also maintains a Web site (http://www.sec.gov) that
contains the Strategic Partners Select SAI, material incorporated by reference,
and other information regarding registrants that file electronically with the
SEC. The Table of Contents of the SAI is on page 49 of this prospectus.
For a Free Copy of the SAI call us at:
- ------------------------------------------------------------
- ---- (888) PRU-2888 or write to us at:
- ---- Prudential Annuity Service Center
P.O. Box 7960
Philadelphia, PA 19101
THE SEC HAS NOT DETERMINED THAT THIS CONTRACT IS A GOOD INVESTMENT, NOR HAS THE
SEC DETERMINED THAT THIS PROSPECTUS IS COMPLETE OR ACCURATE. IT IS A CRIMINAL
OFFENSE TO STATE OTHERWISE. INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT
TO RISK, INCLUDING THE POSSIBLE LOSS OF YOUR MONEY. AN INVESTMENT IN STRATEGIC
PARTNERS SELECT 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 0RD01009NY
CONTENTS
- --------------------------------------------------------------------------------
2
- --------------------------------------------------------------------------------
3
THIS PAGE INTENTIONALLY LEFT BLANK
4
PART I SUMMARY
- --------------------------------------------------------------------------------
STRATEGIC PARTNERS SELECT PROSPECTUS
5
PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
GLOSSARY
- --------------------------------------------------------------------------------
We have tried to make this prospectus as easy to read and understand as
possible. By the nature of the contract, however, certain technical words or
terms are unavoidable. We have identified the following as some of these words
or terms.
ACCUMULATION PHASE
The period that begins with the contract date (which we define below) and ends
when you start receiving income payments or earlier if the contract is
terminated through a full withdrawal or payment of a death benefit.
ADJUSTED CONTRACT VALUE
When you begin receiving income payments, the value of your contract adjusted by
any market value adjustment and minus any charge we impose for premium taxes and
withdrawal charge.
ANNUITANT
The person whose life determines how long the contract lasts and the amount of
income payments that will be paid.
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 when the sole
or last surviving annuitant dies.
BUSINESS DAY
A day on which both the New York Stock Exchange and Pruco Life of New Jersey are
open for business. Our business day generally ends at 4:00 p.m. Eastern time.
CASH VALUE
This is the total value of your contract adjusted by any market value
adjustment, minus any withdrawal charge(s) or administrative charge.
CO-ANNUITANT
The person shown on the contract data pages who becomes the annuitant (if
eligible) upon the death of the annuitant before the annuity date. 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.
CONTRACTOWNER, OWNER OR YOU
The person entitled to the ownership rights under the contract.
CONTRACT VALUE
This is the total value of your contract, equal to the sum of the values of your
investment in each investment option you have chosen. Your contract value will
go up or down based on the performance of the investment options you choose.
DEATH BENEFIT
If a death benefit is payable, the beneficiary you designate will receive, at a
minimum, the current contract value as of the date that proof of death is
received, or a potentially greater amount related to market appreciation. See
"What Is The Death Benefit?" on page 34.
DOLLAR COST AVERAGING FIXED RATE OPTION (DCA FIXED RATE OPTION)
An investment option that offers a fixed rate of interest for a selected period
during which periodic transfers are automatically made to selected variable
investment options.
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.
GUARANTEED MINIMUM DEATH BENEFIT (GMDB)
A feature available for an additional charge, which guarantees that the death
benefit that the beneficiary receives will be no less than a certain GMDB
protected value.
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.
6
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
INTEREST CELL
The segment of the interest-rate options that is established whenever you
allocate or transfer money into an interest-rate option.
INTEREST-RATE OPTION
An investment option that offers a fixed-rate of interest for a one-year period
(fixed-rate option) or a seven-year period (market value adjustment option).
INVESTED PURCHASE PAYMENTS
Your purchase payments (which we define below) less any deduction we make for
any tax charge.
JOINT OWNER
The person named as the joint owner, who shares ownership rights with the owner
as defined in the contract. The joint owner may be the owner's spouse but need
not be.
MARKET VALUE ADJUSTMENT
An adjustment to your contract value or withdrawal proceeds that is based on the
relationship between interest you are currently earning within the market value
adjustment option and prevailing interest rates. This adjustment may be positive
or negative.
MARKET VALUE ADJUSTMENT OPTION
This investment option offers a specified guarantee period, and pays a fixed
rate of interest. We impose a market value adjustment on withdrawals that you
make from this option prior to the end of a guarantee period.
PRUDENTIAL ANNUITY SERVICE CENTER
For general correspondence: P.O. Box 7960, Philadelphia, PA 19101. For express
overnight mail: 2101 Welsh Road, Dresher, PA 19025. The phone number is (888)
PRU-2888. Prudential's Web site is www.prudential.com.
PURCHASE PAYMENTS
The amount of money you pay us to purchase the contract. Generally, with some
restrictions, you can make additional purchase payments at any time during the
accumulation phase.
SEPARATE ACCOUNT
Purchase payments allocated to the variable investment options are held by us in
a separate account called the Pruco Life of New Jersey Flexible Premium Variable
Annuity Account. The Separate Account is set apart from all of the general
assets of Pruco Life of New Jersey.
STATEMENT OF ADDITIONAL INFORMATION
A document containing certain additional information about Strategic Partners
Select variable annuity. We have filed the Statement of Additional Information
with the Securities and Exchange Commission and it is legally a part of this
prospectus. To learn how to obtain a copy of the Statement of Additional
Information, see the front cover of this prospectus.
TAX DEFERRAL
This is a way to increase your assets without currently being taxed. Generally,
you do not pay taxes on your contract earnings until you take money out of your
contract. You should be aware that tax favored plans (such as IRAs) already
provide tax deferral regardless of whether they invest in annuity contracts. See
"What Are The Tax Considerations Associated With The Strategic Partners Select
Contract," on page 40.
VARIABLE INVESTMENT OPTION
When you choose a variable investment option, we purchase shares of the
underlying mutual fund that are held as an investment for that option. We hold
these shares in the separate account. The division of the separate account of
Pruco Life of New Jersey that invests in a particular mutual fund is referred to
in your contract as a subaccount.
7
PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
SUMMARY OF SECTIONS 1-9
- --------------------------------------------------------------------------------
For a more complete discussion of the following topics, see the corresponding
section in Part II of the prospectus.
SECTION 1
WHAT IS THE STRATEGIC PARTNERS SELECT VARIABLE ANNUITY?
This variable annuity contract, offered by Pruco Life of New Jersey, is a
contract between you, as the owner, and us. The contract allows you to invest on
a tax-deferred basis in one or more of the variable investment options. There
are also two interest-rate options, the fixed-rate option and the market value
adjustment option. The contract is intended for retirement savings or other
long-term investment purposes and provides a death benefit and guaranteed income
options.
The variable investment options available under the contract offer the
opportunity over the long term for a better return than the fixed interest rate
options. However, this is NOT guaranteed. It is possible, due to market changes,
that your investments may decrease in value, including the Prudential Money
Market Portfolio variable investment option.
The interest-rate options offer an interest rate that is guaranteed. While
your money is in the fixed-rate option or if your money remains in the market
value adjustment option for a full seven-year 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 fixed-rate option become part of
Pruco Life of New Jersey's general assets. Payments allocated to the market
value adjustment option are held as a separate pool of assets, but the income,
gains or losses resulting from these assets are not credited or charged against
the contracts. As a result, the strength of our guarantees under these
interest-rate options are based on the overall financial strength of Pruco Life
Insurance Company of New Jersey.
You can invest your money in any or all of the variable investment options
and the interest-rate options. You are allowed 12 transfers each contract year
among the investment options, without a charge. There are certain restrictions
on transfers involving the interest-rate options.
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 GENERALLY ONLY taxed as income when you
make a withdrawal. The income phase starts when you begin receiving regular
payments from your contract. The amount of money you are able to accumulate in
your contract during the accumulation phase will help determine the amount of
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
select.
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 Select,
you may cancel your contract within a time period known as the "free look
period," which is generally 10 days in New York.
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 and the
ability to access your annuity's contract value. The fees and charges you pay
and compensation paid to your registered 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.
8
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
SECTION 2
WHAT INVESTMENT OPTIONS CAN I CHOOSE?
You can invest your money in any of the following variable investment options:
The Prudential Series Fund, Inc.
Jennison Portfolio
Prudential Equity Portfolio
Prudential Global Portfolio
Prudential Money Market Portfolio
Prudential Stock Index Portfolio
Prudential Value Portfolio
SP Aggressive Growth Asset Allocation Portfolio
SP AIM Aggressive Growth Portfolio
SP AIM Core Equity Portfolio
SP Alliance Large Cap Growth Portfolio
SP Balanced Asset Allocation Portfolio
SP Conservative Asset Allocation Portfolio
SP Davis Value Portfolio
SP Deutsche International Equity Portfolio
SP Goldman Sachs Small Cap Value Portfolio
(formerly SP Small/Mid Cap Value Portfolio)
SP Growth Asset Allocation Portfolio
SP Large Cap Value Portfolio
SP MFS Capital Opportunities Portfolio
SP Mid Cap Growth Portfolio
SP PIMCO High Yield Portfolio
SP PIMCO Total Return Portfolio
SP Prudential U.S. Emerging Growth Portfolio
SP State Street Research Small Cap Growth Portfolio
(formerly SP INVESCO Small Company Growth Portfolio)
SP Strategic Partners Focused Growth Portfolio
SP Technology Portfolio
(formerly SP Alliance Technology Portfolio)
SP William Blair International Growth Portfolio
(formerly SP Jennison International Growth Portfolio)
Janus Aspen Series
Growth Portfolio -- Service Shares
Depending upon market conditions, you may earn or lose money in any of these
options. The value of your contract will fluctuate depending upon the investment
performance of the underlying mutual funds used by the variable investment
options you choose. Past performance is not a guarantee of future results.
You may also invest your money in a fixed interest rate option or a market
value adjustment option.
SECTION 3
WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE? (ANNUITIZATION)
If you want to receive regular income from your annuity, you can choose one of
several options, including guaranteed payments for the annuitant's lifetime.
Generally, once you begin receiving regular payments, you cannot change your
payment plan.
SECTION 4
WHAT IS THE DEATH BENEFIT?
If the sole or last surviving annuitant dies during the accumulation phase, the
designated person(s) or the beneficiary will receive, at a minimum, the current
value of the contract.
SECTION 5
HOW CAN I PURCHASE A STRATEGIC PARTNERS SELECT ANNUITY CONTRACT?
You can purchase this contract, under most circumstances, with a minimum initial
purchase payment of $10,000 but not greater than $1 million absent our prior
approval. You can make additional purchase payments of $500 or more at any time
during the accumulation phase of the contract. Your representative can help you
fill out the proper forms.
You may purchase this contract only if the annuitant and co-annuitant are age
85 or younger (69 for qualified contracts unless a minimum distribution option
is elected, in which case the annuitant and co-annuitant may be age 80 or
younger) on the contract date. Certain age limits apply to certain features and
benefits described herein.
9
SUMMARY OF SECTIONS 1-9 CONTINUED
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
SECTION 6
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS SELECT CONTRACT?
The contract has insurance features and investment features, and there are costs
related to each.
Each year we deduct a $30 contract maintenance charge if your contract value
is less than $50,000. For insurance and administrative costs, we also deduct an
annual charge of 1.52% of the average daily value of all assets allocated to the
variable investment options. This charge is not assessed against amounts
allocated to the interest-rate investment options.
There are also expenses associated with the mutual funds. For 2003, the fees
of these funds ranged on an annual basis from 0.37% to 2.56% of fund assets,
which are reduced by expense reimbursements or waivers to 0.37% to 1.30%. These
reimbursements or waivers may be terminated at any time.
During the accumulation phase, if you withdraw money less than seven years
after the contract date, you may have to pay a withdrawal charge on all or part
of the withdrawal. This charge ranges from 1-7%.
For more information, including details about other possible charges under
the contract, see "Summary Of Contract Expenses" on page 12 and "What Are The
Expenses Associated With The Strategic Partners Select Contract" on page 37.
SECTION 7
HOW CAN I ACCESS MY MONEY?
You may withdraw money at any time during the accumulation phase. If you do so,
however, you may be subject to income tax, and if you make a withdrawal prior to
age 59 1/2, an additional tax penalty as well. Each year, you may withdraw up to
10% of your total purchase payments without charge. Withdrawals greater than 10%
of your purchase payments will be subject to a withdrawal charge. This charge
decreases 1% each year. After the 7th year, there is no charge for a withdrawal.
A market value adjustment may also apply.
SECTION 8
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS SELECT
CONTRACT?
Your earnings are not taxed until withdrawn. If you withdraw money during the
accumulation phase, earnings are withdrawn first and 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 and therefore will not
be taxable as income. Generally, all amounts withdrawn from IRA contracts
(excluding Roth IRAs) are fully 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 Insurance Company of New Jersey (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 market value
adjustment option that we summarize below.
Issuer Risk. The market value adjustment option, fixed interest rate option,
and the contract's other insurance features are available under a contract
issued by Pruco Life of New Jersey, and thus are backed by the financial
strength of that company. If Pruco Life of New Jersey were to experience
significant financial adversity, it is possible that its ability to pay interest
and principal under the market value adjustment option and fixed interest rate
option and to fulfill its insurance guarantees 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 market value adjustment option. Nonetheless, the
market value adjustment
10
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
formula (which is detailed in the appendix to this prospectus) reflects the
effect that prevailing interest rates have on those bonds and other instruments.
If you need to withdraw your money prior to the end of a guarantee period and
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
market value adjustment option will perform better than another investment that
you might have made.
Risks Related to the Withdrawal Charge. We may impose withdrawal charges on
amounts withdrawn from the market value adjustment option.
11
PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
SUMMARY OF CONTRACT EXPENSES
- --------------------------------------------------------------------------------
The purpose of this summary is to help you to understand the costs you will pay
for Strategic Partners Select. The following tables describe the fees and
expenses that you will pay when buying, owning, and surrendering the contract.
The first table describes the fees and expenses that you will pay at the time
that you buy the contract, surrender the contract, or transfer cash value
between investment options.
For more detailed information, including additional information about current
and maximum charges, see "What Are The Expenses Associated With The Strategic
Partners Select Contract?" on page 37. The individual fund prospectuses contain
detailed expense information about the underlying mutual funds.
TRANSACTION EXPENSES
- --------------------------------------------------------------------------------
WITHDRAWAL CHARGE(1)
- --------------------------------------------------------------------------------
During contract year 1 7%
During contract year 2 6%
During contract year 3 5%
During contract year 4 4%
During contract year 5 3%
During contract year 6 2%
During contract year 7 1%
MAXIMUM TRANSFER FEE(2)
- --------------------------------------------------------------------------------
each transfer after 12 $25.00
ANNUAL ACCOUNT EXPENSES
- --------------------------------------------------------------------------------
MAXIMUM ANNUAL CONTRACT FEE(3)
- --------------------------------------------------------------------------------
$30.00
AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE IN VARIABLE INVESTMENT OPTIONS
Mortality and Expense Risk: 1.37%
Administrative Fee: 0.15%
Total: 1.52%
1: As of the beginning of the contract year, you may withdraw up to 10% of the
total purchase payments plus any charge-free amount carried over from the
previous contract year without charge. There is no withdrawal charge on any
amount used to provide income under the Life Annuity with 120 payments (10
years) certain option or annuity payments for a fixed period of five years or
more. (see page 32). Withdrawal charges are waived when a death benefit is paid
due to the death of an annuitant.
2: You will not be charged for transfers made in connection with dollar cost
averaging and auto-rebalancing.
3: This fee is not charged if the value of your contract is $50,000 or more.
This is a single fee that we assess (a) annually or (b) upon a full withdrawal
made on a date other than a contract anniversary.
12
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
TOTAL ANNUAL MUTUAL FUND OPERATING EXPENSES
The next item shows the minimum and maximum total operating expenses (expenses
that are deducted from underlying mutual fund assets, including management fees,
distribution and/or service (12b-1) fees, and other expenses) charged by the
underlying mutual funds that you may pay periodically during the time that you
own the contract. More detail concerning each underlying mutual fund's fees and
expenses is contained below and in the prospectus for each underlying mutual
fund. The minimum and maximum total operating expenses depicted below are based
on historical fund expenses for the year ended December 31, 2003. Fund expenses
are not fixed or guaranteed by the Strategic Partners Select contract, and may
vary from year to year.
* Actual expenses for the mutual funds are lower due to certain expense
reimbursements or waivers. Expense reimbursements or waivers are voluntary and
may be terminated at any time. The minimum and maximum expenses, with expense
reimbursements, are 0.37% and 1.30%, respectively.
13
SUMMARY OF CONTRACT EXPENSES CONTINUED
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
1. The Total Expenses do not reflect fee waivers, reimbursement of expenses, or
expense offset arrangements for the fiscal year ended December 31, 2003.
2. The portfolios' total actual annual operating expenses for the year ended
December 31, 2003 were less than the amount shown in the table due to fee
waivers, reimbursement of expenses and expense offset arrangements. These
expense reimbursements are voluntary and may be terminated by Prudential
Investments LLC at any time. After accounting for the expense reimbursements,
the portfolios' actual annual operating expenses were:
3. Each asset allocation portfolio invests in a combination of underlying
portfolios of The Prudential Series Fund, Inc. The Total Expenses for each asset
allocation portfolio are calculated as a blend of the fees of the underlying
portfolios, plus a 0.05% advisory fee payable to the investment adviser,
Prudential Investments LLC. The 0.05% advisory fee is included in the amount of
each investment advisory fee set forth in the table above.
4. Because the 12b-1 fee is charged as an ongoing fee, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales charges
permitted by the National Association of Securities Dealers, Inc.
14
PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
EXPENSE EXAMPLES
- --------------------------------------------------------------------------------
THESE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
CONTRACT WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITY CONTRACTS. THESE
COSTS INCLUDE CONTRACT OWNER TRANSACTION EXPENSES, CONTRACT FEES, SEPARATE
ACCOUNT ANNUAL EXPENSES, AND UNDERLYING MUTUAL FUND FEES AND EXPENSES.
THE EXAMPLES ASSUME THAT YOU INVEST $10,000 IN THE CONTRACT FOR THE TIME PERIODS
INDICATED. THE EXAMPLES ALSO ASSUME THAT YOUR INVESTMENT HAS A 5% RETURN EACH
YEAR AND ASSUME THE MAXIMUM FEES AND EXPENSES OF ANY OF THE MUTUAL FUNDS, WHICH
DO NOT REFLECT ANY EXPENSE REIMBURSEMENTS OR WAIVERS. ALTHOUGH YOUR ACTUAL COSTS
MAY BE HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS, YOUR COSTS WOULD BE AS
INDICATED IN THE TABLES THAT FOLLOW.
EXAMPLE 1: IF YOU WITHDRAW YOUR ASSETS
Example 1 assumes that:
- - You invest $10,000 in Strategic Partners Select;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - You withdraw all your assets at the end of the time period indicated;
- - Your investment has a 5% return each year; and
- - The mutual fund's total operating expenses remain the same each year.
EXAMPLE 2: IF YOU DO NOT WITHDRAW YOUR ASSETS
Example 2 assumes that:
- - You invest $10,000 in Strategic Partners Select;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - YOU DO NOT WITHDRAW any of your assets at the end of the time period
indicated;
- - Your investment has a 5% return each year; and
- - The mutual fund's total operating expenses remain the same each year.
NOTES FOR EXPENSE EXAMPLES:
THESE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE
SHOWN.
Note that withdrawal charges (which
are reflected in Example 1 are
assessed in connection with some
annuity options, but not others).
The values shown in the 10 year
column are the same for Example 1
and 2. This is because after 10
years, we would no longer deduct
withdrawal charges when you make a
withdrawal or when you begin the
income phase of your contract.
If your contract value is less than
$50,000, on your contract
anniversary (or upon a surrender),
we deduct a $30 fee. The examples
use an average annual contract fee,
which we calculated based on our
estimate of the total contract fees
we expect to collect in 2004. Based
on these estimates, the annual
contract fee is included as an
annual charge of 0.029% of contract
value. Your actual fees will vary
based on the amount of your
contract and your specific
allocation(s).
The table of accumulation unit
values appears in the appendix to
this prospectus.
- --------------------------------------------------------------------------------
15
This page intentionally left blank
16
PART II SECTIONS 1-9
- --------------------------------------------------------------------------------
STRATEGIC PARTNERS SELECT PROSPECTUS
17
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
1:
WHAT IS THE STRATEGIC PARTNERS SELECT
VARIABLE ANNUITY?
- --------------------------------------------------------------------------------
THE STRATEGIC PARTNERS SELECT VARIABLE 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 Select is a variable annuity contract. This means that
during the accumulation phase, you can allocate your assets among the variable
investment options as well as guaranteed interest-rate options. If you select a
variable investment option, the amount of money you are able to accumulate in
your contract during the accumulation phase depends upon the investment
performance of the underlying mutual fund associated with that variable
investment option. Because the underlying mutual funds' portfolios fluctuate in
value depending upon market conditions, your contract value can either increase
or decrease. This is important, since the amount of the annuity payments you
receive during the income phase depends upon the value of your contract at the
time you begin receiving payments.
As mentioned above, Strategic Partners Select also contains interest-rate
options: a fixed-rate option, and a market value adjustment option. The
fixed-rate option offers an interest rate that is guaranteed by us for one year
and will be at least 3% per year. The market value adjustment option guarantees
a stated interest rate, generally higher than the fixed-rate option. However, in
order to get the full benefit of the stated interest rate, assets in this option
must be held for a seven-year period.
As the owner of the contract, you have all of the decision-making rights
under the contract. You will also be the annuitant unless you designate someone
else. The annuitant(s) is the person upon whose death during the accumulation
phase, the death benefit is payable. The annuitant is the person who receives
the annuity payments when the income phase begins. The annuitant is also the
person whose life is used to determine the amount of these 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 annuitant (or last surviving annuitant, if there are
co-annuitants) dies during the accumulation phase. You may change the
beneficiary any time prior to the annuity date by making a written request to
us. Your request becomes effective when we approve it. If the annuitant and
owner are not the same and the owner dies during the accumulation phase, the
subsequent owner (typically the owner's estate unless a joint or contingent
owner is named) receives the contract benefit subject to tax requirements
concerning distributions. See "What Are The Tax Considerations Associated With
The Strategic Partners Select Contract?" section beginning on page 40.
SHORT TERM CANCELLATION RIGHT
OR "FREE LOOK"
If you change your mind about owning Strategic Partners Select, you may cancel
your contract within 10 days after receiving it. You can request a refund by
returning the contract either to the representative who
18
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
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 a refund equal to your
contract value (plus the amount of any fees or other charges) as of the date you
surrendered your contract.
This amount will be reduced by any applicable federal and state income tax
withholding and may be more or less than your original payment.
19
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
2:
WHAT INVESTMENT OPTIONS
CAN I CHOOSE?
- --------------------------------------------------------------------------------
THE CONTRACT GIVES YOU THE CHOICE OF ALLOCATING YOUR PURCHASE PAYMENTS TO ANY
ONE OR MORE OF THE VARIABLE INVESTMENT OPTIONS, AS WELL AS INTEREST-RATE
OPTIONS.
The variable investment options invest in underlying mutual funds managed by
leading investment advisers. These underlying mutual funds may sell their shares
to both variable annuity and variable life separate accounts of different
insurance companies, which could create the kinds of risks that are described in
more detail in the prospectus for the underlying mutual fund. The current
prospectuses for the underlying mutual funds also contain important information
about the mutual funds. When you invest in a variable investment option that is
funded by a mutual fund, you should read the mutual fund prospectus and keep it
for future reference.
VARIABLE INVESTMENT OPTIONS
The following chart classifies each of the portfolios based on our assessment of
their investment style (as of the date of this Prospectus). The chart also
provides a description of each portfolio's investment objective (in italics) and
a short, summary description of their key policies to assist you in determining
which portfolios may be of interest to you. There is no guarantee that any
portfolio will meet its investment objective. The name of the adviser/subadviser
for each portfolio appears next to the description.
All the portfolios on the following chart, except for the Janus Aspen
Series--Growth Portfolio, are Prudential Series Fund portfolios. The Jennison
Portfolio, Prudential Equity Portfolio, Prudential Global Portfolio, Prudential
Money Market Portfolio, Prudential Stock Index Portfolio and Prudential Value
Portfolio, and each "SP" Portfolio of the Prudential Series Fund, are managed by
an indirect wholly-owned subsidiary of Prudential Financial, Inc. called
Prudential Investments LLC (PI) under a "manager-of-managers" approach. The SP
Aggressive Growth Asset Allocation Portfolio, SP Balanced Asset Allocation
Portfolio, SP Conservative Asset Allocation Portfolio, and SP Growth Asset
Allocation Portfolio invest in other Prudential Series Fund Portfolios, and are
managed by PI.
Under the manager-of-managers approach, PI has the ability to assign
subadvisers to manage specific portions of a portfolio, and the portion managed
by a subadviser may vary from 0% to 100% of the portfolio's assets. The
subadvisers that manage some or all of a Prudential Series Fund portfolio are
listed on the following chart.
A fund or portfolio may have a similar name or an investment objective and
investment policies resembling those of a mutual fund managed by the same
investment adviser that is sold directly to the public. Despite such
similarities, there can be no assurance that the investment performance of any
such fund or portfolio will resemble that of the publicly available mutual fund.
An affiliate of each of the funds may compensate Pruco Life based upon an
annual percentage of the average assets held in the fund by Pruco Life under the
contracts. These percentages may vary by fund and/or portfolio, and reflect
administrative and other services we provide. With regard to its variable
annuity contracts generally, Pruco Life receives fees that range from 0.05% to
0.40% annually for providing such services.
As detailed in the Prudential Series Fund prospectus, although the Prudential
Money Market Portfolio is designed to be a stable investment option, it is
possible to lose money in that portfolio. For example, when prevailing
short-term interest rates are very low, the yield on the Prudential Money Market
Portfolio may be so low that, when separate account and contract charges are
deducted, you experience a negative return.
20
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
21
2:
WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
22
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
23
2:
WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
24
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
25
2:
WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
26
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
27
2:
WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
INTEREST-RATE OPTIONS
We offer two interest-rate options: a one-year fixed-rate option, and a market
value adjustment option. We set a one year guaranteed annual interest rate for
the one-year fixed-rate option. For the market value adjustment option, we set a
seven-year guaranteed interest rate. The market value adjustment option is
registered separately from the variable investment options, and the amount of
market value adjustment option securities registered is stated in that
registration statement.
When you select one of these options, your payment will earn interest at the
established rate for the applicable interest rate period. An interest cell with
a new interest rate period is established every time you allocate or transfer
money into a interest-rate option. You may have money allocated in more than one
interest rate period at the same time. This could result in your money earning
interest at different rates and each interest rate period maturing at a
different time. While these interest rates may change from time to time, the
minimum rate set will never be less than 3%.
At the maturity of an interest cell for a fixed-rate or market value
adjustment option, you may elect to transfer the amount in the cell to any other
investment option available on that date. If you do not make a transfer election
during the 30-day period following the interest cell's maturity date, then we
will transfer the amount in the cell to a new interest cell with the same time
to maturity as the old cell.
Payments that you apply to the interest-rate option become part of Pruco Life
of New Jersey's general assets. Payments that you apply to the market value
adjustment option are held as a separate pool of assets, but the income, gains
or losses resulting from these assets are not credited or charged against the
contracts. As a result, the strength of the interest-rate option guarantees is
based on the overall financial strength of Pruco Life of New Jersey. If Pruco
Life of New Jersey suffered a material financial set back, the ability of Pruco
Life of New Jersey to meet its financial obligations could be affected.
MARKET VALUE ADJUSTMENT
If you transfer or withdraw assets from the market value adjustment option
before an interest rate period is over, the assets will be subject to a market
value adjustment. The market value adjustment may increase or decrease the
amount being withdrawn or transferred and may be substantial. The adjustment,
whether up or down, will never be greater than 40%. The amount of the market
value adjustment is based on the difference between the:
1) Guaranteed interest rate for the amount you are withdrawing or transferring;
and
2) Current interest rates that are in effect on the date of the withdrawal or
transfer.
The amount of time left in the interest rate period is also a factor. You
will find a detailed description of how the market value adjustment is
calculated on page 50 of this prospectus.
Other things you should know about the market value adjustment include the
following:
- - We determine the market value adjustment according to a mathematical formula,
which is set forth at the end of this prospectus under the heading
"Market-Value Adjustment Formula." In that section of the prospectus, we also
provide hypothetical examples of how the formula works.
- - A negative market value adjustment could cause you to lose not only the
interest you have earned but also a portion of your principal.
- - In addition to imposing a market value adjustment on withdrawals, we also
will impose a market value adjustment on the contract value you apply to an
annuity or settlement option, unless you annuitize within the 30-day period
discussed above. The laws of certain states may prohibit us from imposing a
market value adjustment on the annuity date.
TRANSFERS AMONG OPTIONS
Subject to certain restrictions you can transfer money among the variable
investment options and the interest-rate options. Your transfer request may be
made by telephone, electronically, or in paper form to the Prudential Annuity
Service Center. We have procedures in place to confirm that instructions
received by telephone or electronically are genuine. We will not be
28
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
liable for following telephone or electronic instructions that we reasonably
believe to be genuine. Your transfer request will take effect at the end of the
business day on which it was received. Our business day usually closes at 4:00
p.m. Eastern time. Transfer requests received after 4 p.m. Eastern time will
take effect at the end of the next business day.
YOU GENERALLY CAN MAKE TRANSFERS OUT OF THE ONE-YEAR FIXED-RATE OPTION ONLY
DURING THE 30-DAY PERIOD FOLLOWING THE END OF AN INTEREST RATE PERIOD. ANY
AMOUNT TRANSFERRED FROM A MARKET VALUE ADJUSTMENT OPTION IS SUBJECT TO A MARKET
VALUE ADJUSTMENT, UNLESS THE TRANSFER IS MADE DURING THE 30-DAY PERIOD FOLLOWING
THE MATURITY OF THE INTEREST CELL.
During the contract accumulation phase, you can make 12 transfers each
contract year, among the investment options, without charge. If you make more
than 12 transfers in one contract year, you will be charged $25 for each
additional transfer. (Dollar Cost Averaging and Auto-Rebalancing transfers do
not count toward the 12 free transfers per year.) Nor do transfers made during
the 30-day period immediately following the end of an interest cell count
against the 12 free transfers.
ADDITIONAL TRANSFER RESTRICTIONS
We limit your ability to transfer among your contract's variable investment
options as permitted by applicable law. We impose a yearly restriction on
transfers. Specifically, once you have made 20 transfers among the subaccounts
during a contract year, we will accept any additional transfer request during
that year only if the request is submitted to us in writing with an original
signature and otherwise is in good order. For purposes of this transfer
restriction, we (i) do not view a facsimile transmission as a "writing", (ii)
will treat multiple transfer requests submitted on the same business day as a
single transfer, and (iii) do not count transfers that involve one of our
systematic programs, such as asset allocation and automated withdrawals.
Frequent transfers among variable investment options in response to
short-term fluctuations in markets, sometimes called "market timing," can make
it very difficult for a portfolio manager to manage an underlying mutual fund's
investments. Frequent transfers may cause the fund to hold more cash than
otherwise necessary, disrupt management strategies, increase transaction costs,
or affect performance. For those reasons, the contract was not designed for
persons who make programmed, large, or frequent transfers.
In light of the risks posed to contract owners and other fund investors by
frequent transfers, we reserve the right to limit the number of transfers in any
contract year for all existing or new contract owners, and to take the other
actions discussed below. We also reserve the right to limit the number of
transfers in any contract year or to refuse any transfer request for an owner or
certain owners if: (a) we believe that excessive transfer activity (as we define
it) or a specific transfer request or group of transfer requests may have a
detrimental effect on accumulation unit values or the share prices of the
underlying mutual funds; or (b) we are informed by a fund (e.g., by the fund's
portfolio manager) that the purchase or redemption of fund shares must be
restricted because the fund believes the transfer activity to which such
purchase and redemption relates would have a detrimental effect on the share
prices of the affected fund. Without limiting the above, the most likely
scenario where either of the above could occur would be if the aggregate amount
of a trade or trades represented a relatively large proportion of the total
assets of a particular underlying mutual fund. In furtherance of our general
authority to restrict transfers as described above, and without limiting other
actions we may take in the future, we have adopted the following specific
restrictions:
- - With respect to each variable investment option (other than the Prudential
Money Market Portfolio), we track amounts exceeding a certain dollar
threshold that were transferred into the option. If you transfer such amount
into a particular variable investment option, and within 30 calendar days
thereafter transfer (the "Transfer Out") all or a portion of that amount into
another variable investment option, then upon the Transfer Out, the former
variable investment option becomes restricted (the "Restricted Option").
Specifically, we will not permit subsequent transfers into the Restricted
Option for 90 calendar days after the
29
2:
WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
Transfer Out if the Restricted Option invests in a non-international fund, or
180 calendar days after the Transfer Out if the Restricted Option invests in
an international fund. For purposes of this rule, we do not (i) count
transfers made in connection with one of our systematic programs, such as
asset allocation and automated withdrawals and (ii) categorize as a transfer
the first transfer that you make after the contract date, if you make that
transfer within 30 calendar days after the contract date. Even if an amount
becomes restricted under the foregoing rules, you are still free to redeem
the amount from your contract at any time.
- - We reserve the right to effect exchanges on a delayed basis for all
contracts. That is, we may price an exchange involving a variable investment
option on the business day subsequent to the business day on which the
exchange request was received. Before implementing such a practice, we would
issue a separate written notice to contract owners that explains the practice
in detail. In addition, if we do implement a delayed exchange policy, we will
apply the policy on a uniform basis to all contracts in the relevant class.
- - If we deny one or more transfer requests under the foregoing rules, we will
inform you promptly of the circumstances concerning the denial.
- - We will not implement these rules in jurisdictions that have not approved
contract language authorizing us to do so, or may implement different rules
in certain jurisdictions if required by such jurisdictions. Contract owners
in jurisdictions with such limited transfer restrictions, and contract owners
who own variable life insurance or variable annuity contracts (regardless of
jurisdiction) that do not impose the above-referenced transfer restrictions,
might make more numerous and frequent transfers than contract owners who are
subject to such limitations. Because contract owners who are not subject to
the same transfer restrictions may have the same underlying mutual fund
portfolios available to them, unfavorable consequences associated with such
frequent trading within the underlying mutual fund (e.g., greater portfolio
turnover, higher transaction costs, or performance or tax issues) may affect
all contract owners. Apart from jurisdiction-specific and contract
differences in transfer restrictions, we will apply these rules uniformly,
and will not waive a transfer restriction for any contract owner.
Although our transfer restrictions are designed to prevent excessive
transfers, they are not capable of preventing every potential occurrence of
excessive transfer activity.
DOLLAR COST AVERAGING FEATURE
The dollar cost averaging (DCA) feature allows you to systematically transfer
either a fixed dollar amount or a percentage out of any variable investment
option or the one-year fixed-rate option and into any variable investment
option(s). You can transfer money to more than one variable investment option.
The investment option used for the transfers is designated as the DCA account.
You can have these automatic transfers made from the DCA account monthly,
quarterly, semiannually or annually. By allocating amounts on a regular schedule
instead of allocating the total amount at one particular time, you may be less
susceptible to the impact of market fluctuations. Of course, there is no
guarantee that dollar cost averaging will ensure a profit or protect against a
loss in declining markets.
Each transfer must be at least $100. Transfers will be made automatically on
the schedule you choose until the entire amount you choose to have transferred
has been transferred or until you tell us to discontinue the transfers. If the
remaining amount to be transferred drops below $100, the entire remaining
balance will be transferred on the next transfer date. You can allocate
subsequent purchase payment to be transferred at any time.
Your transfers will occur on the last calendar day of each transfer period
you have selected, provided that the New York Stock Exchange is open on that
date. If the New York Stock Exchange is not open on a particular transfer date,
the transfer will take effect on the next business day.
Any dollar cost averaging transfer you make do not count toward the 12 free
transfers you are allowed per
30
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
year. This dollar cost averaging feature is available only during the contract
accumulation phase, and is offered without charge.
ASSET ALLOCATION PROGRAM
We recognize the value of having asset allocation models when deciding how to
allocate your purchase payments among the investment options. If you choose to
participate in the Asset Allocation Program, your representative will give you a
questionnaire to complete that will help determine a program that is appropriate
for you. Your asset allocation will be prepared based on your answers to the
questionnaire. You will not be charged for this service, and you are not
obligated to participate or to invest according to program recommendations.
Asset allocation is a sophisticated method of diversification which allocates
assets among classes in order to manage investment risk and enhance returns over
the long term. However, asset allocation does not guarantee a profit or protect
against a loss. You are not obligated to participate or to invest according to
the program recommendations. We do not intend to provide any personalized
investment advice in connection with these programs and you should not rely on
these programs as providing individualized investment recommendations to you.
The asset allocation programs do not guarantee better investment results. We
reserve the right to terminate or change the asset allocation programs at any
time. You should consult your representative before electing any asset
allocation program.
AUTO-REBALANCING
Once your money has been allocated among the variable investment options, the
actual performance of the investment options may cause your allocation to shift.
For example, an investment option that initially holds only a small percentage
of your assets could perform much better than another investment option. Over
time, this option could increase to a larger percentage of your assets than you
desire. You can direct us to automatically rebalance your assets to return to
your original allocation percentages or to subsequent allocation percentages you
select. We will rebalance only the variable investment options that you have
designated. The interest-rate options and the DCA account cannot participate in
this feature.
You may choose to have your rebalancing occur monthly, quarterly,
semiannually or annually. The rebalancing will occur on the last calendar day of
the period you have chosen, provided that the New York Stock Exchange is open on
that date. If the New York Stock Exchange is not open on that date, the
rebalancing will take effect on the next business day.
Any transfers you make because of Auto-Rebalancing are not counted toward the
12 free transfers you are allowed per year. This feature is available only
during the contract accumulation phase, and is offered without charge. If you
choose auto-rebalancing and dollar cost averaging, auto-rebalancing will take
place after the transfers from your DCA account.
VOTING RIGHTS
We are the legal owner of the shares in the underlying mutual funds used by the
variable investment options. However, we vote the shares of the mutual funds
according to voting instructions we receive from contractowners. When a vote is
required, we will mail you a proxy which is a form you need to complete and
return to us to tell us how you wish us to vote. When we receive those
instructions, we will vote all of the shares we own on your behalf in accordance
with those instructions. We will vote fund shares for which we do not receive
instructions, and any other shares that we own in our own right, in the same
proportion as shares for which we receive instructions from contractowners. We
may change the way your voting instructions are calculated if it is required or
permitted by federal or state regulation.
SUBSTITUTION
We may substitute one or more of the underlying mutual funds used by the
variable investment options. We may also cease to allow investments in existing
funds. We would not do this without the approval of the Securities and Exchange
Commission (SEC) and any necessary state insurance departments. You will be
given specific notice in advance of any substitution we intend to make.
31
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
3:
WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE
INCOME PHASE? (ANNUITIZATION)
- --------------------------------------------------------------------------------
PAYMENT PROVISIONS
We can begin making annuity payments any time after the first contract
anniversary. Annuity payments must begin no later than the later of the contract
anniversary next following the annuitant's 90th birthday or the tenth contract
anniversary. Upon annuitization, any value in an interest cell of the market
value adjustment option may be subject to a market value adjustment.
We make the income plans described below available at any time before the
annuity date. These plans are called annuity options. During the income phase,
all of the annuity options under this contract are fixed annuity options. This
means that your participation in the variable investment options ends on the
annuity date. If an annuity option is not selected by the annuity date, the
Interest Payment Option (Option 3, described below) will automatically be
selected. However, if your contract is held as an IRA and an annuity option is
not selected by the annuity date or prior to the maximum annuity age, a lump sum
payment of the contract value will be made to you. GENERALLY, ONCE THE ANNUITY
PAYMENTS BEGIN, THE ANNUITY OPTION CAN NOT BE CHANGED AND YOU CANNOT MAKE
WITHDRAWALS.
Depending upon the annuity option you choose, you may incur a withdrawal
charge when the income phase begins. Currently, if permitted by state law, we
deduct any applicable withdrawal charge if you choose Option 1 for a period
shorter than five years, Option 3, or certain other annuity options that we may
make available. We do not deduct a withdrawal charge if you choose Option 1 for
a period of five years or longer or Option 2. For information about Withdrawal
Charges, see "What are the Expenses Associated with Strategic Partners Select?"
page 37.
OPTION 1
ANNUITY PAYMENTS FOR A FIXED PERIOD
Under this option, we will make equal payments for the period chosen, up to 25
years (but not to exceed life expectancy). The annuity payments may be made
monthly, quarterly, semiannually, or annually, as you choose, for the fixed
period. If the annuitant dies during the income phase, payments will continue to
the beneficiary for the remainder of the fixed period or, if the beneficiary so
chooses, we will make a single lump sum payment. 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 INCOME ANNUITY OPTION
Under this option, we will make annuity payments monthly, quarterly,
semiannually, or annually as long as the annuitant is alive. If the annuitant
dies before we have made 10 years worth of payments, we will pay the beneficiary
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.
If an annuity option is not selected by the annuity date, this is the option
we will automatically select for you, unless prohibited by applicable law. If
the life income annuity option is prohibited by applicable law, then we will pay
you a lump sum in lieu of this option.
OPTION 3
INTEREST PAYMENT OPTION
Under this option, we will credit interest on the adjusted contract value until
you request payment of all or part of the adjusted contract value. We can make
interest payments on a monthly, quarterly, semiannual, or annual basis or allow
the interest to accrue on your contract assets. Under this option, we will pay
you interest at an effective rate of at least 3% a year. This option is not
available if your contract is held in an IRA.
Under this option, all gain in the annuity will be taxable as of the annuity
date, however, you can withdraw part or all of the contract value that we are
holding at any time.
32
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
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 43, you
should consider the minimum distribution requirements mentioned on page 45 when
selecting your annuity option.
If contracts are held in connection with "qualified" retirement plans (such
as a Section 401(k) plan), please note that if you are married at the time your
payments commence, you may be required by federal law to choose an income option
that provides at least a 50 percent joint and survivor annuity to your spouse,
unless your spouse waives that right. Similarly, if you are married at the time
of your death, federal law may require all or a portion of the death benefit to
be paid to your spouse, even if you designated someone else as your beneficiary.
For more information, consult the terms of your retirement arrangement.
33
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
4:
WHAT IS THE
DEATH BENEFIT?
- --------------------------------------------------------------------------------
THE DEATH BENEFIT FEATURE PROTECTS THE CONTRACT VALUE FOR THE BENEFICIARY.
PLEASE NOTE, THAT NO DEATH BENEFIT IS PAYABLE UPON THE DEATH OF THE OWNER OR
JOINT OWNER. A DEATH BENEFIT IS ONLY PAYABLE UPON THE DEATH OF THE ANNUITANT OR
CO-ANNUITANT (AS APPLICABLE).
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death benefit
upon the death of the annuitant or co-annuitant. 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 annuitant or last surviving annuitant dies.
CALCULATION OF THE DEATH BENEFIT
If the annuitant (or the last surviving annuitant, if there are co-annuitants)
dies during the accumulation phase, we will, upon receiving appropriate proof of
death and any other needed documentation in good order ("due proof of death"),
pay a death benefit to the beneficiary designated by the contractowner. We
require due proof of death to be submitted promptly.
If the annuitant (older co-annuitant) is under age 80 on the contract date
and prior to his or her 80th birthday, the annuitant (last surviving annuitant)
dies, the beneficiary will receive the greater of the following (as of the time
we receive due proof of death):
- - Current contract value (as of the time we receive appropriate proof of
death). We impose no negative market value adjustment on contract value held
within the market value adjustment option when a death benefit is paid.
- - Guaranteed Minimum Death Benefit (GMDB)--This is the step-up value which
equals the highest value of the contract on any contract anniversary date --
that is, on each contract anniversary, the new step-up value becomes the
higher of the previous step-up value and the current contract value. Between
anniversary dates, the step-up value is only increased by additional invested
purchase payments and reduced proportionally by withdrawals.
On or after the annuitant's (older co-annuitant's) 80th birthday, if the
annuitant (last surviving annuitant) dies, the beneficiary will receive the
greater of: 1) the current contract value as of the date that due proof of death
is received, and 2) the Guaranteed Minimum Death Benefit as of age 80, increased
by additional invested purchase payments, and reduced proportionally by
withdrawals. For this purpose, an annuitant is deemed to reach age 80 on the
contract anniversary on or following the annuitant's actual 80th birthday.
If the annuitant (older co-annuitant) is age 80 or older on the contract
date, upon the annuitant's (last surviving annuitant's) death, the beneficiary
will receive, as of the date that due proof of death is received, the greater
of: 1) current contract value as of the date due proof of death is received; or
2) the total invested purchase payments reduced proportionally by withdrawals.
Here is an example of a proportional reduction:
The current contract value is $100,000 and step-up value is $80,000. The
owner makes a withdrawal that reduces the contract value by 50% (including the
effect of any withdrawal charges). The new step-up value is $40,000, or 50% of
what it was before the withdrawal.
This death benefit is payable only in the event of the death of the sole or
last surviving annuitant and will not be paid upon the death of an owner who is
not the annuitant.
DEATH OF OWNER OR JOINT OWNER
If the owner and the annuitant are not the same person and the owner dies during
the accumulation phase, the subsequent owner generally receives the cash value
subject to tax requirements concerning distributions.
If the contract has an owner and joint owner who are spouses at the time of
the owner's or joint owner's death during the accumulation phase, the contract
will continue and the surviving spouse will become the sole owner of the
contract, entitled to any rights and privileges granted by us under the
contract. However, the surviving spouse may, within 60 days of providing
34
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
due proof of death take the cash value under one of the payout options listed
below.
If the contract has an owner and joint owner who are not spouses at the time
of the owner's or joint owner's death during the accumulation phase, the
surviving owner will be required to take the cash value under one of the payout
options listed below.
The payout options are:
Choice 1. Lump sum.
Choice 2. Payment of the entire contract value within 5 years of the date of
death.
Choice 3. Payment under an annuity or settlement option over the lifetime of
the survivor or over a period not extending beyond the life
expectancy of the surviving owner with distribution beginning
within one year of the date of death.
This contract is subject to special tax rules that govern the required
distributions upon the death of the owner or joint owner. See "What are the Tax
Considerations Associated with the Strategic Partners Select Contract?" section
beginning on page 40.
35
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
5:
HOW CAN I PURCHASE A STRATEGIC PARTNERS
SELECT CONTRACT?
- --------------------------------------------------------------------------------
PURCHASE PAYMENTS
The initial purchase payment is the amount of money you give us to purchase the
contract. The minimum purchase payment is $10,000. You must get our prior
approval for any initial purchase payment over $1 million and any subsequent
payment over $2 million. You can make additional purchase payments by means
other than electronic fund transfer of no less than $500 at any time during the
accumulation phase. However, we impose a minimum of $100 with respect to
additional purchase payments made through electronic fund transfers.
For qualified contracts, you may purchase the contract only if the annuitant
is 69 or younger on the contract date (age 80 or younger if a minimum
distribution option has been selected). For non-qualified contracts, you may
purchase this contract only if the annuitant or co-annuitant is 85 or younger on
the contract date.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your purchase payment among the
variable or fixed interest rate options, or the market value adjustment option
based on the percentages you choose. The percentage of your allocation to a
particular investment option can range in whole percentages from 0% to 100%.
When you make an additional purchase payment, it will be allocated in the
same way as your most recent purchase payment, unless you tell us otherwise.
You may change your allocation of future invested purchase payment at any
time. Contact the Prudential Annuity Service Center for details.
We generally will credit the initial purchase payment to your contract within
two business days from the day on which we receive your payment in good order at
the Prudential Annuity Service Center. If, however, your first payment is made
without enough information for us to set up your contract, we may need to
contact you to obtain the required information. If we are not able to obtain
this information within five business days, we will within that five business
day period either return your purchase payment or obtain your consent to
continue holding it until we receive the necessary information. We will
generally credit each subsequent purchase payment as of the business day we
receive it in good order at the Prudential Annuity Service Center. Our business
day generally closes at 4:00 p.m. Eastern time. Subsequent purchase payments
received in good order after 4:00 p.m., Eastern time will be credited on the
following business day.
CALCULATING CONTRACT VALUE
The value of the variable portion of your contract will go up or down depending
on the investment performance of the variable investment options you choose. To
determine the value of your contract allocated to the variable investment
options, we use a unit of measure called an accumulation unit. A variable
accumulation unit works like a share of a mutual fund.
Every day we determine the value of an accumulation unit for each of the
variable investment options. We do this by:
1) Adding up the total amount of money allocated to a specific investment
option;
2) Subtracting from that amount insurance charges and any other applicable
charges; and
3) Dividing this amount by the number of outstanding accumulation units.
When you make a purchase payment to a variable investment option, we credit
your contract with accumulation units of the subaccount or subaccounts selected.
The number of accumulation units credited to your contract is determined by
dividing the amount of the purchase payment allocated to an investment option by
the unit price of the accumulation unit for that investment option. We calculate
the unit price for each investment option after the New York Stock Exchange
closes each day and then credit your contract. The value of the accumulation
units can increase, decrease, or remain the same from day to day.
We cannot guarantee that the value of your contract will increase or that it
will not fall below the amount of your total purchase payments. However, we do
guarantee a minimum interest rate of 3% a year on that portion of the contract
value allocated to the fixed-rate option and to the market value adjustment
option if held for the full seven-year period.
36
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
6:
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC
PARTNERS SELECT CONTRACT?
- --------------------------------------------------------------------------------
THERE ARE CHARGES AND OTHER EXPENSES ASSOCIATED WITH THE CONTRACT THAT REDUCE
THE RETURN ON YOUR INVESTMENT. THESE CHARGES AND EXPENSES ARE DESCRIBED BELOW.
The charges under the contracts are designed to cover, in the aggregate, our
direct and indirect costs of selling, administering and providing benefits under
the contracts. They are also designed, in the aggregate, to compensate us for
the risks of loss we assume pursuant to the contracts. If, as we expect, the
charges that we collect from the contracts exceed our total costs in connection
with the contracts, we will earn a profit. Otherwise, we will incur a loss. The
rates of certain of our charges have been set with reference to estimates of the
amount of specific types of expenses or risks that we will incur. In most cases,
this prospectus identifies such expenses or risks in the name of the charge;
however, the fact that any charge bears the name of, or is designed primarily to
defray a particular expense or risk does not mean that the amount we collect
from that charge will never be more than the amount of such expense or risk. Nor
does it mean that we may not also be compensated for such expense or risk out of
any other charges we are permitted to deduct by the terms of the contract.
INSURANCE CHARGES
Each day, we make a deduction for insurance charges. The insurance charges have
two parts:
1) Mortality and expense risk charge
2) Administrative expense charge
1) MORTALITY AND EXPENSE RISK CHARGE
The mortality risk charge is for assuming the risk that the annuitant(s) will
live longer than expected based on our life expectancy tables. When this
happens, we pay a greater number of annuity payments. The expense risk charge is
for assuming the risk that the current charges will be insufficient in the
future to cover the cost of administering the contract.
The mortality and expense risk charge is equal, on an annual basis, to 1.37%
of the daily value of the contract invested in the variable investment options.
This charge is not assessed against amounts allocated to the interest-rate
options.
If the charges under the contract are not sufficient to cover our expenses,
then we will bear the loss. We do, however, expect to profit from this charge.
The mortality and expense risk charge cannot be increased. Any profits made from
this charge may be used by us to pay for the costs of distributing the
contracts.
2) ADMINISTRATIVE EXPENSE CHARGE
This charge is for the expenses associated with the administration of the
contract. The administration of the contract includes preparing and issuing the
contract, establishing and maintaining contract records, issuing confirmations
and annual reports, personnel costs, legal and accounting fees, filing fees, and
systems costs.
This charge is equal, on an annual basis, to 0.15% of the daily value of the
contract invested in the variable investment options. This charge is not
assessed against amounts allocated to the interest-rate options.
ANNUAL CONTRACT FEE
During the accumulation phase, if your contract value is less than $50,000, we
will deduct $30 per contract year. This annual contract fee is used for
administrative expenses and cannot be increased. The $30 charge will be deducted
proportionately from each of the contract's investment options. This charge will
also be deducted when you surrender your contract if your contract value is less
than $50,000.
WITHDRAWAL CHARGE
During the accumulation phase you can make withdrawals from your contract. When
you make a withdrawal, money will be taken first from your purchase payments for
purposes of determining withdrawal charges. When your purchase payments have
been used up, then we will take the money from your earnings. You will not have
to pay any withdrawal charge when you withdraw your earnings.
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. If the contract is sold under circumstances that reduce
the sales expenses, we may reduce or eliminate the
37
6:
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS SELECT CONTRACT?
CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
withdrawal charge. For example, a large group of individuals purchasing
contracts or an individual who already has a relationship with us may receive
such a reduction. We will not permit a reduction or elimination of charges where
it would be unfairly discriminatory.
You can withdraw up to 10% of your total purchase payments each contract year
without paying a withdrawal charge. This amount is referred to as the
"charge-free amount." If any of the charge-free amount is not used during a
contract year, it will be carried over to the next contract year. During the
first seven contract years, if your withdrawal of purchase payments is more than
the charge-free amount, a withdrawal charge will be applied proportionately to
all of the variable investment options as well as the interest-rate options.
This charge is based on your contract date.
The withdrawal charge is the percentage, shown below, of the amount
withdrawn.
PERCENTAGE OF APPLICABLE WITHDRAWAL CHARGES
- ------------------------------------------------------------
Note: There is no withdrawal charge on any amount used to provide income
under the Life Annuity with 120 Payments (10 years) Certain Option or the
annuity payments for a fixed period option with a period of five years or more.
There will be a reduction in the withdrawal charge for contracts issued to
annuitants whose age is 84 and older.
If a withdrawal is taken from a market value adjustment guarantee period
prior to the expiration of the rate guarantee period, we will make a market
value adjustment to the withdrawal amount. We will then apply a withdrawal
charge to the adjusted amount.
Withdrawal charges will never be greater than permitted by applicable law.
TAXES ATTRIBUTABLE TO PREMIUM
There may be federal, state and local premium based taxes applicable to your
purchase payment. We are responsible for the payment of these taxes and may make
a deduction from the value of the contract to pay some or all of these taxes. It
is our current practice not to deduct a charge for state premium taxes until
annuity payments begin. New York does not, however, currently charge 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 contractowner 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.
TRANSFER FEE
You can make 12 free transfers every year. If you make more than 12 transfers in
a year (excluding Dollar Cost Averaging and Auto-Rebalancing), we will deduct a
transfer fee of $25 for each additional transfer. We will deduct the transfer
fee pro-rata from the investment options from which the transfer is made. The
transfer fee is deducted before the market value adjustment, if any, is
calculated.
COMPANY TAXES
We will pay the taxes on the earnings of the separate account. We do not
currently charge you for these taxes. We will periodically review the issue of
charging for these taxes, and may impose such a charge in the future.
UNDERLYING MUTUAL FUND FEES
When you allocate a purchase payment or a transfer to the variable investment
options, we in turn invest in shares of a corresponding underlying mutual fund.
Those funds charge fees that are in addition to the contract-related fees
described in this section. For 2003, the fees of these funds ranged on an annual
basis from 0.37% to 1.30% of fund assets (these fees reflect the effect of
expense reimbursements or waivers, which may terminate at any time). For
additional information about these fund fees, please consult the prospectuses
for the funds.
38
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
7:
HOW CAN I
ACCESS MY MONEY?
- --------------------------------------------------------------------------------
YOU CAN ACCESS YOUR MONEY BY:
- - MAKING A WITHDRAWAL (EITHER PARTIAL OR COMPLETE); OR
- - ELECTING TO RECEIVE ANNUITY PAYMENTS DURING THE INCOME PHASE.
YOU CAN MAKE WITHDRAWALS ONLY DURING THE ACCUMULATION PHASE
When you make a full withdrawal, you will receive the value of your contract on
the day you made the withdrawal, less any applicable charges. We will calculate
the value of your contract, and charges, if any, as of the date we receive your
request in good order at the Prudential Annuity Service Center.
Unless you tell us otherwise, any partial withdrawal will be made
proportionately from all of the affected investment options and interest-rate
options you have selected. You will need our consent to make a partial
withdrawal if the requested withdrawal is less than $250.
With respect to the variable investment options, we will generally pay the
withdrawal amount, less any required tax withholding, within seven days after we
receive a properly completed withdrawal request. We will deduct applicable
charges, and apply a market value adjustment, if any, from the assets in your
contract.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS ALSO MAY APPLY TO ANY
WITHDRAWAL YOU MAKE. FOR A MORE COMPLETE EXPLANATION, SEE SECTION 8 OF THIS
PROSPECTUS.
AUTOMATED WITHDRAWALS
We offer an automated withdrawal feature. This feature enables you to receive
periodic withdrawals in monthly, quarterly, semiannual or annual intervals. We
will process your withdrawals at the end of the business day at the intervals
you specify. We will continue at these intervals until you tell us otherwise.
You can make withdrawals from any designated investment option or
proportionally from all investment options. Market value adjustments may apply.
Withdrawal charges may be deducted if the withdrawals in any contract year are
more than the charge-free amount. The minimum automated withdrawal amount you
can make generally is $100.
INCOME TAXES, TAX PENALTIES, WITHDRAWAL CHARGES, MARKET VALUE ADJUSTMENTS AND
CERTAIN RESTRICTIONS MAY APPLY TO AUTOMATED WITHDRAWALS. FOR A MORE COMPLETE
EXPLANATION, SEE SECTION 8 OF THIS PROSPECTUS AND THE TAX DISCUSSION IN THE
STATEMENT OF ADDITIONAL INFORMATION.
SUSPENSION OF PAYMENTS OR TRANSFERS
The SEC may require us to suspend or postpone payments made in connection with
withdrawals or transfers from the variable investment options for any period
when:
- - The New York Stock Exchange is closed (other than customary weekend and
holiday closings);
- - Trading on the New York Stock Exchange is restricted;
- - An emergency exists, as determined by the SEC, during which sales of shares
of the underlying mutual funds are not feasible or we cannot reasonably value
the accumulation units; or
- - The SEC, by order, permits suspension or postponement of payments for the
protection of owners.
We expect to pay the amount of any withdrawal or transfer made from the
interest-rate options promptly upon request.
39
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
8:
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC
PARTNERS SELECT CONTRACT?
- --------------------------------------------------------------------------------
The tax considerations associated with the Strategic Partners Select 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.
It is possible that the Internal Revenue Service (IRS) would assert that some
or all of the charges for the optional benefits under the contract such as the
Guaranteed Minimum Death Benefit, should be treated for federal income tax
purposes as a partial withdrawal from the contract. If this were the case, the
charge for these benefits could be deemed a withdrawal and treated as taxable to
the extent there are earnings in the contract. Additionally, for owners under
age 59 1/2, the taxable income attributable to the charge for the benefit could
be subject to a tax penalty.
If the IRS determines that the charges for one or more benefits under the
contract are taxable withdrawals, then the sole or surviving owner will be
provided with a notice from us describing available alternatives regarding these
benefits.
TAXES ON WITHDRAWALS AND SURRENDER
If you make a withdrawal from your contract or surrender it before annuity
payments begin, the amount you receive will be taxed as ordinary income, rather
than as return of purchase payments, until all gain has been withdrawn. You will
generally be taxed on any withdrawals from the contract while you are alive even
if the withdrawal is paid to someone else.
If you assign or pledge all or part of your contract as collateral for a
loan, the part assigned 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 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
40
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
and will not be taxed. The remaining portion will be taxed as ordinary income.
Generally, the nontaxable portion is determined by multiplying the annuity
payment you receive by a fraction, the numerator of which is your purchase
payments (less any amounts previously received tax-free) and the denominator of
which is the total expected payments under the contract.
After the full amount of your purchase payments have been recovered tax-free,
the full amount of the annuity payments will be taxable. If annuity payments
stop due to the death of the annuitant before the full amount of your purchase
payments have been recovered, a tax deduction may be allowed for the unrecovered
amount.
TAX PENALTY ON WITHDRAWALS AND ANNUITY PAYMENTS
Any taxable amount you receive under your contract may be subject to a 10% tax
penalty. Amounts are not subject to this tax penalty if:
- - the amount is paid on or after you reach age 59 1/2 or die;
- - 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 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.); 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.
(See "Federal Tax Status" in the Statement of Additional Information).
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 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.
41
8:
TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC
PARTNERS SELECT CONTRACT CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
- - Choice 1: The beneficiary is taxed on earnings in the contract.
- - Choice 2: The beneficiary is taxed as amounts are withdrawn (in this case
earnings are treated as being distributed first).
- - Choice 3: The beneficiary is taxed on each payment (part will be treated as
earnings and part as return of premiums).
REPORTING AND WITHHOLDING ON DISTRIBUTIONS
Taxable amounts distributed from your annuity contracts are subject to federal
and state income tax reporting and withholding. In general, we will withhold
federal income tax from the taxable portion of such distribution based on the
type of distribution. In the case of an annuity or similar periodic payment, we
will withhold as if you are a married individual with 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
Diversification And Investor Control. In order to qualify for the tax rules
applicable to annuity contracts described above, the assets underlying the
variable investment options of the annuity contract must be diversified,
according to certain rules. We believe these diversification rules will be met.
An additional requirement for qualification for the tax treatment described
above is that we, and not you as the contract owner, must have sufficient
control over the underlying assets to be treated as the owner of the underlying
assets for tax purposes. While we also believe these investor control rules will
be met, the Treasury Department may promulgate guidelines under which a variable
annuity will not be treated as an annuity for tax purposes if persons with
ownership rights have excessive control over the investments underlying such
variable annuity. It is unclear whether such guidelines, if in fact promulgated,
would have retroactive effect. It is also unclear what effect, if any, such
guidelines may have on transfers between the investment options offered pursuant
to this prospectus. We will take any action, including modifications to your
contract or the investment options, required to comply with such guidelines if
promulgated.
Please refer to the Statement of Additional Information for further
information on these diversification and investor control issues.
Required Distributions Upon Your Death. Upon your death, certain
distributions must be made under the contract. The required distributions depend
on whether you die before you start taking annuity payments under the contract
or after you start taking annuity payments under the contract.
If you die on or after the annuity date, the remaining portion of the
interest in the contract must be distributed at least as rapidly as under the
method of distribution being used as of the date of death.
If you die before the annuity date, the entire interest in the contract must
be distributed within 5 years after the date of death. However, if 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
42
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
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,
that portion of the contract may be continued with your spouse as the owner.
Changes In The Contract We reserve the right to make any changes we deem
necessary to assure that the contract qualifies as an annuity contract for tax
purposes. Any such changes will apply to all contract owners and you will be
given notice to the extent feasible under the circumstances.
ADDITIONAL INFORMATION
You should refer to the Statement of Additional Information if:
- - The contract is held by a corporation or other entity instead of by an
individual or as agent for an individual.
- - Your contract was issued in exchange for a contract containing purchase
payments made before August 14, 1982.
- - You transfer your contract to, or designate, a beneficiary who is either
37 1/2 years younger than you or a grandchild.
CONTRACTS HELD BY TAX FAVORED PLANS
The following discussion covers annuity contracts held under tax-favored
retirement plans.
Currently, the contract may be purchased for use in connection with
individual retirement accounts and annuities (IRAs) which are subject to
Sections 408(a), 408(b) and 408A of the Code. This description assumes that you
have satisfied the requirements for eligibility for these products.
YOU SHOULD BE AWARE THAT TAX FAVORED PLANS SUCH AS IRAS GENERALLY PROVIDE TAX
DEFERRAL REGARDLESS WHETHER THEY INVEST IN ANNUITY CONTRACTS. THIS MEANS THAT
WHEN A TAX FAVORED PLAN INVESTS IN AN ANNUITY CONTRACT, IT GENERALLY DOES NOT
RESULT IN ANY ADDITIONAL TAX DEFERRAL BENEFITS.
TYPES OF TAX FAVORED PLANS
IRAs. If you buy a contract for use as an IRA, we will provide you a copy of
the prospectus and contract. The "IRA Disclosure Statement" on page 52 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 $10,000 to purchase a contract. This minimum
is greater than the maximum amount of any annual contribution allowed by law you
may make to an IRA. For 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 to 2005 and an additional $1,000 in
2006 and years thereafter. The "rollover" rules under the Code are fairly
technical; however, an individual (or his or her surviving spouse) may generally
"roll over" certain distributions from tax favored retirement plans (either
directly or within 60 days from the date of these distributions) if he or she
meets the requirements for distribution. Once you buy the contract, you can make
regular IRA contributions under the contract (to the extent permitted by law).
However, if you make such regular IRA contributions, you should note that you
will not be able to treat the contract as a "conduit IRA," which means that you
will not retain possible favorable tax treatment if you subsequently "roll over"
the
43
8:
TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC
PARTNERS SELECT CONTRACT CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
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 below).
Usually, the full amount of any distribution from an IRA (including a
distribution from this contract) which is not a rollover is taxable. As taxable
income, these distributions are subject to the general tax withholding rules
described earlier. In addition to this normal tax liability, you may also be
liable for the following, depending on your actions:
- - A 10% "early distribution penalty" (described on page 45);
- - 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 45).
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 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 $10,000 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.
44
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT 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% tax penalty 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 or Roth IRA 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.
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 do
primarily with the fees, charges, discounts and other
45
8:
TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC
PARTNERS SELECT CONTRACT CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
costs related to the contract, as well as any commissions paid to any agent
selling the contract.
Information about any applicable fees, charges, discounts, penalties or
adjustments may be found under "What Are The Expenses Associated With The
Strategic Partners Annuity One Contract" starting on page 37.
Information about sales representatives and commissions may be found under
"Other Information" and "Sale And Distribution Of The Contract" on page 47.
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 federal tax law requirements applicable to tax
favored plans, see the "IRA Disclosure Statement" on page 52.
46
PART II
STRATEGIC PARTNERS SELECT 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.
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
www.sec.gov.
THE SEPARATE ACCOUNT
We have established a separate account, the Pruco Life of New Jersey Flexible
Premium Variable Annuity Account (separate account), to hold the assets that are
associated with the variable annuity contracts. The separate account was
established under New Jersey law on May 20, 1996, and is registered with the SEC
under the Investment Company Act of 1940, as a unit investment trust, which is a
type of investment company. The assets of the separate account are held in the
name of Pruco Life of New Jersey and legally belong to us. These assets are kept
separate from all of our other assets and may not be charged with liabilities
arising out of any other business we may conduct. More detailed information
about Pruco Life of New Jersey, including its audited financial statements, is
provided in the Statement of Additional Information.
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, Inc. and is a limited liability corporation
organized under Delaware law in 1996. It is a registered broker-dealer under the
Securities Exchange Act of 1934 (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
7%. Alternative compensation schedules are available that provide a lower
initial
47
9:
OTHER INFORMATION CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
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 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.
48
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
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 financial professional.
FINANCIAL STATEMENTS
The financial statements of the separate account and Pruco Life of New Jersey,
the co-issuer of the Strategic Partners Select contract, are included in the
Statement of Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
Contents:
- - Company
- - Experts
- - Principal Underwriter
- - Allocation of Initial Purchase Payment
- - Determination of Accumulation Unit Values
- - Federal Tax Status
- - Directors and Officers
- - Financial Statements
HOUSEHOLDING
To reduce costs, we now send only a single copy of prospectuses and shareholder
reports to each consenting household, in lieu of sending a copy to each
contractowner that resides in the household. If you are a member of such a
household, you should be aware that you can revoke your consent to householding
at any time, and begin to receive your own copy of prospectuses and shareholder
reports, by calling (877) 778-5008.
49
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
MARKET VALUE
ADJUSTMENT FORMULA
- --------------------------------------------------------------------------------
MARKET VALUE ADJUSTMENT FORMULA
THE ADJUSTMENT INVOLVES THREE AMOUNTS
The Market Value Adjustment, which is applied to withdrawals and transfers made
at any time other than the 30-day period following the end of an interest rate
period, involves three amounts:
1) The number of whole months remaining in the existing interest rate period.
2) The guaranteed interest rate.
3) The interpolated value of the interest rates that Pruco Life of New Jersey
declares for the number of whole years remaining and the duration 1 year
longer than the number of whole years remaining in the existing interest rate
period.
STATED AS A FORMULA, THE MARKET VALUE IS EQUAL TO:
(M/12) X (R-C)
not to exceed +0.40 or be less than -0.40; where,
The Market Value Adjustment is then equal to the Market Value Factor multiplied
by the amount subject to a Market Value Adjustment.
STEP BY STEP
The steps below explain how a market value adjustment is calculated.
STEP 1: Divide the number of whole months left in the existing interest rate
period (not to be less than one) by 12.
STEP 2: Interpolate the interest rates Pruco Life declares on the date the
request for withdrawal or transfer is received for the duration of years equal
to the whole number of years determined in Step 1, plus the whole number of
years plus 1 additional year.
STEP 3: Subtract this interpolated interest rate from the guaranteed interest
rate. The result could be negative.
STEP 4: Multiply the results of Step 1 and Step 2. Again, the result could be
negative. If the result is less than -0.4, use the value -0.4. If the result is
in between -0.4 and 0.4, use the actual value. If the result is more than 0.4,
use the value 0.4.
STEP 5: Multiply the result of Step 3 (which is the Market Value Factor) by the
value of the amount subject to a Market Value Adjustment. The result is the
Market Value Adjustment.
STEP 6: The result of Step 4 is added to the interest cell. If the Market Value
Adjustment is positive, the interest cell will go up in value. If the Market
Value Adjustment is negative, the interest cell will go down in value.
Depending upon when the withdrawal request is made, a withdrawal charge may
apply.
The following example will illustrate the application of a market value
adjustment and the determination of the withdrawal charge:
Suppose a contractowner made two invested purchase payments, the first in the
amount of $10,000 on December 1, 1995, all of which was allocated to the Equity
Subaccount, and the second in the amount of $5,000 on October 1, 1997, all of
which was allocated to the MVA option with a guaranteed interest rate of 8%
(0.08) for 7 years. A request for withdrawal of $8,500 is made on February 1,
2000 (the contract owner does not provide any withdrawal instructions). On that
date the amount in the Equity Subaccount is equal to $12,000 and the amount in
the interest cell with a maturity date of September 30, 2004 is $5,985.23, so
that the contract fund on that date is equal to $17,985.23.
On February 1, 2000, the interest rates declared by Pruco Life of New Jersey
for the duration's 4 and 5 years
50
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
(4 whole years remaining until September 30, 2004, plus 1 year) are 10.8% and
11.4%, respectively.
The following computations would be made:
1) Calculate the Contract Fund value as of the effective date of the
transaction. This would be $17,985.23.
2) Calculate the charge-free amount (the amount of the withdrawal that is not
subject to a withdrawal charge).
The charge-free amount in the fifth Contract year is 10% of $15,000 (total
purchase payments) plus $5,500 (the charge-free amount available in the
fourth Contract year) for a total of $7,000.
3) Since the withdrawal request is in the fifth Contract year, a 3% withdrawal
charge rate applies to any portion of the withdrawal which is not
charge-free.
The Contract provides that the Contract Fund will be reduced by an amount
which, when reduced by the withdrawal charge, will equal the amount
requested. Therefore, in order to produce the amount needed to complete the
withdrawal request ($1,500), we must "gross-up" that amount, before applying
the withdrawal charge rate. This is done by dividing by 1 minus the
withdrawal charge rate.
-----------------------------------------------------------
$1,500.00 / (1-.03) =
$1,500.00 / 0.97 = $1,546.39 grossed-up amount
Please note that a 3% withdrawal charge on this grossed-up amount reduces it
to $1,500, the balance needed to complete the request.
4) The Market Value Factor is determined as described in steps 1 through 5,
above. In this case, it is equal to 0.08 (8% is the guaranteed rate in the
existing cell) minus 0.11 (11% is the interpolated value for the interest
rates that would be offered for interest cells with durations of whole years
remaining and whole year plus 1 remaining in the existing interest rate
period), which is -0.03, multiplied by 4.58333 (55 months remaining until
September 30, 2004, divided by 12) or -0.13750. Thus, there will be a
negative Market Value Adjustment of approximately 14% of the amount in the
interest cell that is subject to the adjustment.
5) The total amount to be withdrawn, $8,546.39, (sum of the surrender charge,
$46.39, and the requested withdrawal amount of $8,500) is apportioned over
all accounts making up the Contract Fund following the Market Value
Adjustments, if any, associated with the MVA option.
6) The adjusted value of the interest cell, $5,162.26, reduced by the withdrawal
of $2,570.68 leaves $2,591.58. This amount must be "unadjusted" by dividing
it by 0.86250 (1 plus the Market Value Adjustment of -0.13750) to determine
the amount remaining in the interest cell to which the guaranteed
interest-rate of 8% will continue to be credited until September 30, 2004 or
a subsequent withdrawal. That amount is $3,004.73.
51
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
IRA DISCLOSURE STATEMENT
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
This statement is designed to help you understand the requirements of federal
tax law which apply to your individual retirement annuity (IRA), your Roth IRA,
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. 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 jointly, the
applicable dollar limitation is $65,000, with the amount of 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 53).
IRA FOR NON-WORKING SPOUSE
If you establish an IRA for yourself, you may also be eligible to establish an
IRA for your "non-working" spouse. In order to be eligible to establish such a
spousal IRA, you must file a joint tax return with your spouse and, if your
non-working spouse has compensation, his/her compensation must be less than your
compensation for the year. Contributions of up to the maximum amount allowed by
law, including catch-up contributions if applicable, may be made to your IRA and
the spousal IRA if the combined compensation of you and your spouse is at least
equal to the amount contributed. If requirements for deductibility (including
income levels) are met, you will be able to deduct an
52
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
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 52. 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% tax penalty does not apply to the withdrawal of an excess
contribution as long as the excess is withdrawn before the due date of your tax
return. Withdrawals of excess contributions after the due date of your tax
return will generally be subject to the 10% penalty unless the excess
contribution results from erroneous information from a plan trustee making an
excess rollover contribution or unless you are over age 59 1/2 or are disabled.
(b) DISTRIBUTION AFTER AGE 59 1/2
Once you have attained age 59 1/2 (or have become totally disabled), you may
elect to receive a distribution of your IRA 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
53
IRA DISCLOSURE STATEMENT CONTINUED
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
PART II
STRATEGIC PARTNERS SELECT 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 period payment options, or in
one sum, will be treated as ordinary income as you receive them, to the degree
that you have made deductible contributions. If you have made both deductible
and nondeductible contributions, the portion of the distribution attributable to
the nondeductible contribution will be tax-free.
(c) INADEQUATE DISTRIBUTIONS--50% TAX
Your IRA 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 31st of the year following
the year after your or your spouse's death. If your spouse is the designated
beneficiary, he or she is treated as the owner of the IRA. If minimum required
distributions have begun, and no designated beneficiary is identified by
December 31st of the year following the year of death, the entire amount must be
distributed based on the life expectancy of the owner using the owner's age
prior to death. A distribution of the balance of your IRA upon your death will
not be considered a gift for federal tax purposes, but will be included in your
gross estate for purposes of federal estate taxes.
ROTH IRAS
Section 408A of the Code permits eligible individuals to contribute to a type of
IRA known as a "Roth IRA." Contributions may be made to a Roth IRA by taxpayers
with adjusted gross incomes of less than $160,000 for married individuals filing
jointly and less than $110,000 for single individuals. Married individuals
filing separately are not eligible to contribute to a Roth IRA. The maximum
amount of contributions allowable for any taxable year to all IRAs maintained by
an individual is generally the lesser of the maximum amount allowed by law and
100% of compensation for that year (the maximum amount allowed by law is phased
out for incomes between $150,000 and $160,000 for married and between $95,000
and $110,000 for singles). The contribution limit is reduced by the amount of
any contributions made to a traditional IRA. Contributions to a Roth IRA are not
deductible.
For taxpayers with adjusted gross income of $100,000 or less, all or part of
amounts in a traditional IRA may be converted, transferred or rolled over to a
Roth IRA. Some or all of the IRA value will typically be includable in the
taxpayer's gross income. Provided a rollover contribution meets the requirements
of IRAs under Section 408(d)(3) of the Code, a rollover may be made from a Roth
IRA to another Roth IRA.
UNDER SOME CIRCUMSTANCES, IT MAY NOT BE ADVISABLE TO ROLL OVER, TRANSFER OR
CONVERT ALL OR PART OF A TRADITIONAL IRA TO A ROTH IRA. PERSONS CONSIDERING A
ROLLOVER, TRANSFER OR CONVERSION SHOULD CONSULT THEIR OWN TAX ADVISOR.
"Qualified distributions" from a Roth IRA are excludable from gross income. A
"qualified distribution" is a distribution that satisfies two requirements: (1)
the distribution must be made (a) after the owner of the IRA attains age 59 1/2;
(b) after the owner's death; (c) due to the owner's disability; or (d) for a
qualified first time homebuyer distribution
54
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
PART II
STRATEGIC PARTNERS SELECT 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 traditional
IRA to a Roth IRA. Distributions from a Roth IRA that are not qualified
distributions will be treated as made first from contributions and then from
earnings, and taxed generally in the same manner as distributions from a
traditional IRA.
Distributions from a Roth IRA need not commence at age 70 1/2. However, if
the owner dies before the entire interest in a Roth IRA is distributed, any
remaining interest in the contract must be distributed under the same rules
applied to traditional IRAs where death occurs before the required beginning
date.
REPORTING TO THE IRS
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.
55
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
APPENDIX
- --------------------------------------------------------------------------------
ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
56
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
- --------------------------------------------------------------------------------
57
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
58
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
59
THIS PAGE INTENTIONALLY LEFT BLANK
PART III PROSPECTUSES
- --------------------------------------------------------------------------------
VARIABLE INVESTMENT OPTIONS
ORD01009NY