POS AM: Post-effective amendment to a registration statement that is not immediately effective upon filing
Published on
AS FILED WITH THE SEC ON FEBRUARY 14, 2005
REGISTRATION NO. 333-103474
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 4
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PRUCO LIFE INSURANCE COMPANY
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(Exact Name of Registrant)
ARIZONA
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(State or other jurisdiction of incorporation or organization)
22-194455
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(I.R.S. Employer Identification Number)
C/O PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-7333
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(Address and telephone number of principal executive offices)
THOMAS C. CASTANO
ASSISTANT SECRETARY
PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-4708
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(Name, address, and telephone number of agent for service)
Copies to:
C. CHRISTOPHER SPRAGUE
VICE PRESIDENT,
CORPORATE COUNSEL
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-6997
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Approximate date of commencement of proposed sale to the public -- May 2, 2005
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box ........................[X]
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* Securities are not issued in predetermined units.
** Registration fee for these securities was paid at the time they were
originally registered on Form S-3 as filed by Pruco Life Insurance Company on
February 27, 2003. The current amount of registered, but unsold, securities is
reported quarterly by the Registrant on Form 10-Q and annually on Form 10-K.
STRATEGIC PARTNERS(SM)
FLEXELITE
VARIABLE ANNUITY
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PROSPECTUS: MAY 2, 2005
THIS PROSPECTUS DESCRIBES AN INDIVIDUAL VARIABLE ANNUITY CONTRACT OFFERED BY
PRUCO LIFE INSURANCE COMPANY (PRUCO LIFE) AND THE PRUCO LIFE FLEXIBLE PREMIUM
VARIABLE ANNUITY ACCOUNT. PRUCO LIFE 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
UNDER THE ANNUITY CONTRACT AND THE COMPENSATION PAID TO YOUR REPRESENTATIVE MAY
ALSO BE DIFFERENT AMONG 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. PRUCO LIFE IS A WHOLLY-OWNED SUBSIDIARY
OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA.
THE FUNDS
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Strategic Partners FlexElite offers a wide variety of investment choices,
including variable investment options that invest in underlying mutual funds.
Currently, portfolios within the following underlying mutual funds are being
offered: The Prudential Series Fund, Inc., American Skandia Trust, Gartmore
Variable Insurance Trust, and Janus Aspen Series.
PLEASE READ THIS PROSPECTUS
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Please read this prospectus before purchasing a Strategic Partners FlexElite
variable annuity contract and keep it for future reference. 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. The Risk Factors section relating to the market value
adjustment option appears in Section 10 of the Summary.
TO LEARN MORE ABOUT STRATEGIC PARTNERS FLEXELITE
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To learn more about the Strategic Partners FlexElite variable annuity, you can
request a copy of the Statement of Additional Information (SAI) dated May 2,
2005. The SAI has been filed with the Securities and Exchange Commission (SEC)
and is legally a part of this prospectus. Pruco Life also files other reports
with the SEC. All of these filings can be reviewed and copied at the SEC's
offices, and can be obtained from the SEC's Public Reference Section, 450 5th
Street N.W., Washington, D.C. 20549-0102. 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 FlexElite SAI, material incorporated by reference, and other
information regarding registrants that file electronically with the SEC. The
Table of Contents of the SAI is described in Section 10 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 19176.
YOU MAY ELECT BEFORE YOUR 3RD AND 6TH CONTRACT ANNIVERSARIES TO HAVE A CREDIT
ADDED TO YOUR CONTRACT VALUE. IF YOU MAKE A CREDIT ELECTION, YOUR CHARGES MAY BE
HIGHER THAN IF YOU HAD NOT MADE THE ELECTION AND THEY COULD EXCEED YOUR CREDIT
AMOUNT IF YOU MAKE A WITHDRAWAL WITHIN 3 YEARS OF YOUR ELECTION.
THE SEC HAS NOT DETERMINED THAT THIS CONTRACT IS A GOOD INVESTMENT, NOR HAS THE
SEC DETERMINED THAT THIS PROSPECTUS IS COMPLETE OR ACCURATE. IT IS A CRIMINAL
OFFENSE TO STATE OTHERWISE. INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT
TO RISK, INCLUDING THE POSSIBLE LOSS OF YOUR MONEY. AN INVESTMENT IN STRATEGIC
PARTNERS FLEXELITE IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
STRATEGIC PARTNERS(SM) IS A SERVICE MARK OF THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA ORD01091
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CONTENTS
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3
CONTENTS CONTINUED
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4
PART I SUMMARY
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STRATEGIC PARTNERS FLEXELITE PROSPECTUS
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5
PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
GLOSSARY
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WE HAVE TRIED TO MAKE THIS PROSPECTUS AS EASY TO READ AND UNDERSTAND AS
POSSIBLE. BY THE NATURE OF THE CONTRACT, HOWEVER, CERTAIN TECHNICAL WORDS OR
TERMS ARE UNAVOIDABLE. WE HAVE IDENTIFIED THE FOLLOWING AS SOME OF THESE WORDS
OR TERMS.
ACCUMULATION PHASE
The period that begins with the contract date (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
for any market value adjustment minus any charge we impose for premium taxes,
withdrawal charge and credit election withdrawal charge.
ADJUSTED PURCHASE PAYMENT
Your invested purchase payment is adjusted for any subsequent withdrawals. The
adjusted purchase payment is used only for calculations of the Earnings
Appreciator Benefit.
ANNUITANT
The person whose life determines the amount of income payments that we will pay.
If the annuitant dies before the annuity date, the co-annuitant (if any) becomes
the annuitant if the contract's requirements for changing the annuity date are
met. If, upon the death of the annuitant, there is no surviving eligible
co-annuitant, and the owner is not the annuitant, then the owner becomes the
annuitant.
ANNUITY DATE
The date when income payments are scheduled to begin. You must have our
permission to change the annuity date. If the co-annuitant becomes the annuitant
due to the death of the annuitant, and the co-annuitant is older than the
annuitant, then the annuity date will be based on the age of the co-annuitant,
provided that the contract's requirements for changing the annuity date are met
(e.g., the co-annuitant cannot be older than a specified age). If the
co-annuitant is younger than the annuitant, then the annuity date will remain
unchanged.
ANNUAL INCOME AMOUNT
Under the terms of the Lifetime Five Income Benefit, an amount that you can
withdraw each year as long as the annuitant lives. The annual income amount is
set initially as a percentage of the Protected Withdrawal Value, but may be
adjusted to reflect subsequent purchase payments, withdrawals, and any step-up.
BENEFICIARY
The person(s) or entity you have chosen to receive a death benefit.
BUSINESS DAY
A day on which the New York Stock Exchange is open for business. Our business
day generally ends at 4:00 p.m. Eastern time.
CO-ANNUITANT
The person shown on the contract data pages who becomes the annuitant (if
eligible) upon the death of the annuitant if the contract's requirement for
changing the annuity date are met. No co-annuitant may be designated if the
owner is a non-natural person.
CONTRACT DATE
The date we accept your initial purchase payment and all necessary paperwork in
good order at the Prudential Annuity Service Center. Contract anniversaries are
measured from the contract date. A contract year starts on the contract date or
on a contract anniversary.
CONTRACT OWNER, OWNER OR YOU
The person entitled to the ownership rights under the contract.
CONTRACT VALUE
This is the total value of your contract, equal to the sum of the values of your
investment in each investment option you have chosen. Your contract value will
go up or down based on the performance of the investment options you choose.
CREDIT
The amount we add to your contract value if you make a credit election.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
CREDIT ELECTION
Your election to have a credit added to your contract value. At least 30
calendar days prior to your 3rd and 6th contract anniversaries, we will notify
you of your option to make a credit election. We will give you notice only if
the credit election is available under your contract and you have not previously
declined to receive a credit. We must receive the credit election in good order
no later than the applicable contract anniversary.
DAILY VALUE
For purposes of the Highest Daily Value Death Benefit, which we describe below,
the contract value as of the end of each business day. The Daily Value on the
contract date is equal to your purchase payment.
DEATH BENEFIT
If a death benefit is payable, the beneficiary you designate will receive, at a
minimum, the total invested purchase payments, reduced proportionally by
withdrawals, or a potentially greater amount related to market appreciation. The
Guaranteed Minimum Death Benefit, or Highest Daily Value Death Benefit, are
available for an additional charge. See "What Is The Death Benefit?" below.
DEATH BENEFIT TARGET DATE
With respect to the Highest Daily Value Death Benefit, the later of the contract
anniversary on or after the 80th birthday of the current contract owner, the
older of either joint owner or the annuitant, if entity owned, or five years
after the contract date.
DOLLAR COST AVERAGING FIXED RATE OPTION (DCA FIXED RATE OPTION)
An investment option that offers a fixed rate of interest for a selected period
during which periodic transfers are automatically made to selected variable
investment options or to the one-year fixed interest rate option.
EARNINGS APPRECIATOR BENEFIT (EAB)
An optional feature available for an additional charge that may provide a
supplemental death benefit based on earnings under the contract.
FIXED INTEREST RATE OPTIONS
Investment options that offer a fixed rate of interest for either a one-year
period (fixed rate option) or a selected period during which periodic transfers
are made to selected variable investment options or to the one-year fixed rate
option.
GOOD ORDER
An instruction received at the Prudential Annuity Service Center, utilizing such
forms, signatures and dating as we require, which is sufficiently clear that we
do not need to exercise any discretion to follow such instructions.
GUARANTEE PERIOD
A period of time during which your invested purchase payment in the market value
adjustment option earns interest at the declared rate. We may offer one or more
guarantee periods.
GUARANTEED MINIMUM DEATH BENEFIT (GMDB)
An optional feature available for an additional charge that guarantees that the
death benefit that the beneficiary receives will be no less than a certain GMDB
protected value. The GMDB is a different death benefit than the Highest Daily
Value Death Benefit, which we describe below.
GMDB PROTECTED VALUE
The amount guaranteed under the Guaranteed Minimum Death Benefit, which may
equal the GMDB roll-up value, the GMDB step-up value, or the greater of the two.
The GMDB protected value will be subject to certain age restrictions and time
durations, however, it will still increase by subsequent invested purchase
payments and reduce proportionally by withdrawals.
GMDB ROLL-UP
We use the GMDB roll-up value to compute the GMDB protected value of the
Guaranteed Minimum Death Benefit. The GMDB roll-up is equal to the invested
purchase
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
GLOSSARY CONTINUED
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payments compounded daily at an effective annual interest rate starting on the
date that each invested purchase payment is made, subject to a cap (for certain
contracts) and reduced proportionally by withdrawals.
GMDB STEP-UP
We use the GMDB step-up value to compute the GMDB protected value of the
Guaranteed Minimum Death Benefit. Generally speaking, the GMDB step-up
establishes a "high water mark" of protected value that we would pay upon death,
even if the contract value has declined. For example, if the GMDB step-up were
set at $100,000 on a contract anniversary, and the contract value subsequently
declined to $80,000 on the date of death, the GMDB step-up value would
nonetheless remain $100,000 (assuming no additional purchase payments or
withdrawals).
GUARANTEED MINIMUM INCOME BENEFIT (GMIB)
An optional feature available for an additional charge that guarantees that the
income payments you receive during the income phase will be no less than a
certain GMIB protected value applied to the GMIB guaranteed annuity purchase
rates.
GMIB PROTECTED VALUE
We use the GMIB protected value to calculate annuity payments should you
annuitize under the Guaranteed Minimum Income Benefit.
The value is calculated daily and is equal to the GMIB roll-up, until the
GMIB roll-up either reaches its cap or if we stop applying the annual interest
rate based on the age of the annuitant, number of contract anniversaries or
number of years since last GMIB reset. At such point, the GMIB protected value
will be increased by any subsequent invested purchase payments. Any withdrawals
in subsequent contract years will proportionally reduce the GMIB protected
value. The GMIB protected value is not available as a cash surrender benefit or
a death benefit, nor is it used to calculate the cash surrender value or death
benefit.
GMIB RESET
You may elect to "step-up" or "reset" your GMIB protected value if your contract
value is greater than the current GMIB protected value. Upon exercise of the
reset provision, your GMIB protected value will be reset to equal your current
contract value. You are limited to two resets over the life of your contract,
provided that certain annuitant age requirements are met.
GMIB ROLL-UP
We will use the GMIB roll-up value to compute the GMIB protected value of the
Guaranteed Minimum Income Benefit. The GMIB roll-up is equal to the invested
purchase payments (after a reset, the contract value at the time of the reset)
compounded daily at an effective annual interest rate starting on the date each
invested purchase payment is made, subject to a cap, and reduced proportionally
by withdrawals.
HIGHEST DAILY VALUE DEATH BENEFIT
An optional death benefit available for an additional charge that can provide a
death benefit that exceeds the contract value on the date of death. The amount
of the death benefit is determined with reference to the Highest Daily Value, as
defined below.
HIGHEST DAILY VALUE
An amount equal to the highest of all previous "Daily Values" less proportional
withdrawals since such date and plus any purchase payments since such date.
INCOME APPRECIATOR BENEFIT (IAB)
An optional feature that may be available for an additional charge that may
provide a supplemental income benefit based on earnings under the contract.
IAB AUTOMATIC WITHDRAWAL PAYMENT PROGRAM
A series of payments consisting of a portion of your contract value and Income
Appreciator Benefit paid to you in equal installments over a 10 year period,
which you may choose, if you elect to receive the Income Appreciator Benefit
during the accumulation phase.
IAB CREDIT
An amount we add to your contract value that is credited in equal installments
over a 10 year period, which you may choose, if you elect to receive the Income
Appreciator Benefit during the accumulation phase.
INCOME OPTIONS
Options under the contract that define the frequency and duration of income
payments. In your contract, we also refer to these as payout or annuity options.
INCOME PHASE
The period during which you receive income payments under the contract.
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8
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
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.
LIFE INCOME BENEFIT
One of the two benefits available under the Lifetime Five Income Benefit, under
which you can receive an amount each year as long as the annuitant lives.
LIFETIME FIVE INCOME BENEFIT
An optional feature that guarantees your ability to withdraw amounts equal to a
percentage of an initial principal value (called the "Protected Withdrawal
Value"), regardless of the impact of market performance on your contract value,
subject to our rules regarding the timing and amount of withdrawals. There are
two options -- one is designed to provide an annual withdrawal amount for life
and the other is designed to provide a greater annual withdrawal amount (than
the first option) as long as there is Protected Withdrawal Value.
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
An investment option for contracts sold on or after May 1, 2003, or upon
subsequent state approval. This investment option may offer various guarantee
periods and pays a fixed rate of interest with respect to each guarantee period.
We impose a market value adjustment on withdrawals that you make from this
option prior to the end of its guarantee period.
NET PURCHASE PAYMENTS
Your total purchase payments less any withdrawals you have made.
PROPORTIONAL WITHDRAWALS
A method that involves calculating the percentage of your contract value that
each prior withdrawal represented when withdrawn. Proportional withdrawals
result in a reduction to the applicable benefit value by reducing such value in
the same proportion as the contract value was reduced by the withdrawal as of
the date the withdrawal occurred.
PROTECTED ANNUAL WITHDRAWAL BENEFIT
One of the two benefits available under the Lifetime Five Income Benefit, under
which you can withdraw amounts until you have exhausted your Protected
Withdrawal Value.
PROTECTED WITHDRAWAL VALUE
Under the Lifetime Five Income Benefit, we guarantee an amount that you can
withdraw each year until those annual withdrawals, when added together, reach an
aggregate limit. We call that aggregate limit the Protected Withdrawal Value.
Purchase payments and withdrawals you make will result in an adjustment to the
Protected Withdrawal Value. In addition, you may elect to step-up your Protected
Withdrawal Value under certain circumstances.
PRUDENTIAL ANNUITY SERVICE CENTER
For general correspondence: P.O. Box 7960, Philadelphia, PA, 19101. For express
overnight mail: 2101 Welsh Road, Dresher, PA 19176. 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, you can make
additional purchase payments at any time during the accumulation phase.
SEPARATE ACCOUNT
Purchase payments allocated to the variable investment options are held by us in
a separate account called the Pruco Life Flexible Premium Variable Annuity
Account. The separate account is set apart from all of the general assets of
Pruco Life.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
GLOSSARY CONTINUED
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STATEMENT OF ADDITIONAL INFORMATION
A document containing certain additional information about the Strategic
Partners FlexElite variable annuity. We have filed the Statement of Additional
Information with the Securities and Exchange Commission and it is legally a part
of this prospectus. To learn how to obtain a copy of the Statement of Additional
Information, see the front cover of this prospectus.
TAX DEFERRAL
This is a way to increase your assets without currently being taxed. Generally,
you do not pay taxes on your contract earnings until you take money out of your
contract. You should be aware that tax favored plans (such as IRAs) already
provide tax deferral regardless of whether they invest in annuity contracts. See
"What Are The Tax Considerations Associated With The Strategic Partners
FlexElite Contract," in Section 9.
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 that invests in a particular mutual fund is referred to in your
contract as a subaccount.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SUMMARY FOR SECTIONS 1-10
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FOR A MORE COMPLETE DISCUSSION OF THE FOLLOWING TOPICS, SEE THE CORRESPONDING
SECTION IN PART II OF THE PROSPECTUS.
SECTION 1
WHAT IS THE STRATEGIC PARTNERS FLEXELITE VARIABLE ANNUITY?
The Strategic Partners FlexElite Variable Annuity is a contract between you, the
owner, and us, the insurance company, Pruco Life Insurance Company (Pruco Life,
we or us). The contract allows you to invest on a tax-deferred basis in variable
investment options, fixed interest rate options, and the market value adjustment
option. The contract is intended for retirement savings or other long-term
investment purposes and provides for a death benefit.
The variable investment options available under the contract offer the
opportunity for a favorable return. However, this is NOT guaranteed. It is
possible, due to market changes, that your investments may decrease in value,
including an investment in Prudential Money Market Portfolio variable investment
option.
The fixed interest rate options offer a guaranteed interest rate. While your
money is allocated to one of these options, your principal amount will not
decrease and we guarantee that your money will earn at least a minimum interest
rate annually.
Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed and
the interest amount that your money will earn is guaranteed by us to be at least
3%.
You may make up to 12 free transfers each contract year among the investment
options. Certain restrictions apply to transfers involving the fixed interest
rate options.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase.
- - During the accumulation phase, any earnings grow on a tax-deferred basis and
are generally only taxed as income when you make a withdrawal.
- - The income phase starts when you begin receiving regular payments from your
contract.
The amount of money you are able to accumulate in your contract during the
accumulation phase will help determine the amount you will receive during the
income phase. Other factors will affect the amount of your payments such as age,
gender and the payout option you select.
The contract offers a choice of income and death benefit options, which may
also be available to you.
There are certain state variations to this contract that are referred to in
this prospectus. Please see your contract for further information on these and
other variations.
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.
If you change your mind about owning Strategic Partners FlexElite, you may
cancel your contract within 10 days after receiving it (or whatever time period
is required under applicable law). This time period is referred to as the "Free
Look" period.
SECTION 2
WHAT INVESTMENT OPTIONS CAN I CHOOSE?
You can invest your money in 57 variable investment options. The variable
investment options are classified according to their investment style, and a
brief description of each portfolio's investment objective and key policies is
set forth in Section 2, to assist you in determining which portfolios may be of
interest to you.
Depending upon market conditions, you may earn or lose money in any of these
options. The value of your contract will fluctuate depending upon the
performance of the underlying mutual fund portfolios used by the variable
investment options that you choose. Past performance is not a guarantee of
future results.
You may also invest your money in fixed interest rate options or in a market
value adjustment option.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SUMMARY FOR SECTIONS 1-10 CONTINUED
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SECTION 3
WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE? (ANNUITIZATION)
If you want to receive regular income from your annuity, you can choose one of
several options, including guaranteed payments for the annuitant's lifetime.
Generally, once you begin receiving regular payments, you cannot change your
payment plan.
For an additional fee, you may also choose, if it is available under your
contract, the Guaranteed Minimum Income Benefit (GMIB) and the Income
Appreciator Benefit. The Guaranteed Minimum Income Benefit provides that once
the income period begins, your income payments will be no less than a value that
is based on a certain "GMIB protected value" applied to the GMIB guaranteed
annuity purchase rates. The Income Appreciator Benefit provides an additional
income amount during the accumulation phase or upon annuitization. See "What
Kind Of Payments Will I Receive During The Income Phase" in Section 3.
You may also receive payments during the income period under the Lifetime
Five Income Benefit. See "What Is The Guaranteed Withdrawal Benefit Available
Under The Contract," in Section 5.
SECTION 4
WHAT IS THE DEATH BENEFIT?
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL,
in general, if the sole owner or first to die of the owner and joint owner dies
before the income phase of the contract begins, the person(s) or entity that you
have chosen as your beneficiary will receive at a minimum, the greater of (i)
the contract value, (ii) either the base death benefit or, for a higher
insurance charge, a potentially larger Guaranteed Minimum Death Benefit (GMDB)
or Highest Daily Value Death Benefit (HDV).
The base death benefit equals the total invested purchase payments reduced
proportionally by withdrawals. The Guaranteed Minimum Death Benefit is equal to
a "GMDB protected value" that depends upon which of the following Guaranteed
Minimum Death Benefit options you choose:
- - the highest value of the contract on any contract anniversary, which we call
the "GMDB step-up value";
- - the total amount you invest increased by a guaranteed rate of return, which
we call the "GMDB roll-up value"; or
- - the greater of the GMDB step-up value and GMDB roll-up value.
HDV provides a death benefit equal to the greater of the base death benefit
or the highest daily value less proportional withdrawals.
FOR ALL OTHER CONTRACTS, THE DEATH BENEFIT OPTIONS ARE MORE LIMITED, AND THE
DEATH BENEFIT WILL BE PAID UPON THE DEATH OF THE SOLE OWNER OR IF SPOUSAL JOINT
OWNERS, THE LAST SURVIVING OWNER.
On the date we receive proof of death in good order, in lieu of paying a
death benefit, we will allow the surviving spouse to continue the contract by
exercising the Spousal Continuance Benefit, if the conditions that we describe
below are met.
For an additional fee, you may also choose, if it is available under your
contract, the Earnings Appreciator supplemental death benefit, which provides a
benefit payment upon the death of the sole owner or first to die of the owner or
joint owner during the accumulation period.
SECTION 5
WHAT IS THE GUARANTEED WITHDRAWAL BENEFIT AVAILABLE UNDER THE CONTRACT?
The Lifetime Five Income Benefit (Lifetime Five) is an optional feature that
guarantees your ability to withdraw an amount equal to a percentage of an
initial principal value (called the "Protected Withdrawal Value"), regardless of
the impact of market performance on your contract value, subject to our rules
regarding the timing and amounts of withdrawals. There are two options -- one is
designed to provide an annual withdrawal amount for life (the "Life Income
Benefit"), and the other is designed to provide a greater annual withdrawal
amount (than the first option), as long as there
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
is Protected Withdrawal Value (adjusted, as described in Section 5) (the
"Withdrawal Benefit"). The annuitant must be at least 45 years old when Lifetime
Five is elected. The charge for Lifetime Five is a daily fee equal on an annual
basis to 0.60% of the contract value allocated to the variable investment
options.
SECTION 6
HOW CAN I PURCHASE A STRATEGIC PARTNERS FLEXELITE CONTRACT?
You can purchase this contract, under most circumstances, with a minimum initial
purchase payment of $10,000. Where allowed by law, you must get our approval for
any initial and additional purchase payment of $1,000,000 or more. Generally,
you can make additional purchase payments of $500 ($100 if made through
electronic funds transfer) or more at any time during the accumulation phase of
the contract. Your representative can help you fill out the proper forms.
You may purchase this contract only if the oldest of the owner, joint owner,
annuitant, or co-annuitant is age 85 or younger on the contract date. In
addition, certain age limits apply to certain features and benefits described
herein.
SECTION 7
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS FLEXELITE CONTRACT?
The contract has insurance features and investment features, both of which have
related costs and charges.
- - Each year (or upon full surrender) we deduct a contract maintenance charge if
your contract value is less than $100,000. This charge is currently equal to
the lesser of $50 or 2% of your contract value. We do not impose the contract
maintenance charge if your contract value is $50,000 or more. We may impose
lesser charges in certain states.
- - For insurance and administrative costs, we also deduct a daily charge based
on the average daily value of all assets allocated to the variable investment
options, depending on the death benefit option that you choose. The daily
cost is equivalent to an annual charge as follows:
- 1.65% if you choose the base death benefit,
- 1.9% if you choose either the roll-up or the step-up Guaranteed Minimum
Death Benefit option,
- 2% if you choose the greater of the roll-up and step-up Guaranteed Minimum
Death Benefit option, or
- 2.15% if you choose the Highest Daily Value Death Benefit.
The 1.65%, 1.9%, and 2% charges referenced immediately above apply to any
Strategic Partners FlexElite contract sold on or after May 1, 2003, or
upon subsequent state approval. Otherwise, those charges are 1.6%, 1.8%,
and 1.9%, respectively. The Highest Daily Value Death Benefit is available
only with respect to the version of the contract sold on or after May 1,
2003 or upon subsequent state approval.
- - We will deduct an additional charge if you choose the Guaranteed Minimum
Income Benefit. We deduct this annual charge from your contract value on the
contract anniversary and upon certain other events. The charge for this
benefit is equal to 0.50% for contracts sold on or after January 20, 2004, or
upon subsequent state approval (0.45% for all other contracts), of the
average GMIB protected value.
- - We will deduct an additional charge if you choose the Income Appreciator
Benefit. We deduct this charge from your contract value on the contract
anniversary and upon certain other events. The charge for this benefit is
based on an annual rate of 0.25% of your contract value.
- - We will deduct an additional charge if you choose the Earnings Appreciator
supplemental death benefit. We deduct this charge from your contract value on
the contract anniversary and upon certain other events. The charge for this
benefit is based on an annual rate of 0.30% of your contract value.
- - We will deduct an additional charge if you choose the Lifetime Five Income
Benefit. The charge for this benefit is imposed daily, based on an annual
rate of 0.60% of your contract value.
- - There are a few states/jurisdictions that assess a premium tax on us when you
begin receiving
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SUMMARY FOR SECTIONS 1-10 CONTINUED
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regular income payments from your annuity. In those states, we deduct a
charge designed to approximate this tax, which can range from 0-3.5% of your
contract value.
- - There are also expenses associated with the mutual funds. For 2004, the fees
of these funds ranged on an annual basis from % to % of fund
assets, which are reduced by expense reimbursements or waivers to % to
%. These reimbursements or waivers may be terminated at any time.
- - If you withdraw money within three years of the contract date or a credit
election, you may have to pay a withdrawal charge up to 7% on all or part of
the withdrawal.
For more information, including details about other possible charges under
the contract, see "Summary Of Contract Expenses" and "What Are The Expenses
Associated With The Strategic Partners FlexElite Contract" in Section 7.
SECTION 8
HOW CAN I ACCESS MY MONEY?
You may withdraw money at any time during the accumulation phase. You may,
however, be subject to income tax and, if you make a withdrawal prior to age
59 1/2, an additional tax penalty as well. If you withdraw money within three
years of the contract date or a credit election, we may impose a withdrawal
charge.
Under the market value adjustment option, you will be subject to a market
value adjustment if you make a withdrawal prior to the end of a guarantee
period.
We offer an optional benefit, called the Lifetime Five Income Benefit, under
which we guarantee that certain amounts will be available to you for withdrawal,
regardless of market-related declines in your contract value. You need not
participate in this benefit in order to withdraw some or all of your money.
SECTION 9
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS FLEXELITE
CONTRACT?
Your earnings are generally not taxed until withdrawn. If you withdraw money
during the accumulation phase, the tax laws treat the withdrawals as a
withdrawal of earnings, which are taxed as ordinary income. If you are younger
than age 59 1/2 when you take money out, you may be charged a 10% federal tax
penalty on the earnings in addition to ordinary taxation. A portion of the
payments you receive during the income phase is considered a partial return of
your original investment and therefore will not be taxable as income. Generally,
all amounts withdrawn from an Individual Retirement Annuity (IRA) contract
(excluding Roth IRAs) are taxable and subject to the 10% penalty if withdrawn
prior to age 59 1/2.
SECTION 10
OTHER INFORMATION
This contract is issued by Pruco Life Insurance Company (Pruco Life), a
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 options,
and the contract's other insurance features are available under a contract
issued by Pruco Life, and thus backed by the financial strength of that company.
If Pruco Life were to experience significant financial adversity, it is possible
that Pruco Life's ability to pay interest and principal under the market value
adjustment option and fixed interest rate options 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
holds to support the market value adjustment option. Nonetheless, the market
value adjustment formula 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,
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
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. If you anticipate
needing to withdraw your money prior to the end of a guarantee period, you
should be prepared to pay the withdrawal charge that we will impose.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SUMMARY OF CONTRACT EXPENSES
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THE PURPOSE OF THIS SUMMARY IS TO HELP YOU TO UNDERSTAND THE COSTS YOU WILL PAY
FOR STRATEGIC PARTNERS FLEXELITE. THE FOLLOWING TABLES DESCRIBE THE FEES AND
EXPENSES THAT YOU WILL PAY WHEN BUYING, OWNING, AND SURRENDERING THE CONTRACT.
THE FIRST TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME
THAT YOU BUY THE CONTRACT, SURRENDER THE CONTRACT, OR TRANSFER CASH VALUE
BETWEEN INVESTMENT OPTIONS.
For more detailed information, including additional information about current
and maximum charges, see "What Are The Expenses Associated With The Strategic
Partners FlexElite Contract?" in Section 7. The individual fund prospectuses
contain detailed expense information about the underlying mutual funds.
CONTRACT OWNER TRANSACTION EXPENSES
1: Each contract year, you may withdraw a specified amount of your contract
value without incurring a withdrawal charge. We will waive the withdrawal charge
if we pay a death benefit or under certain other circumstances. See "Withdrawal
Charge" in Section 7. In certain states reduced withdrawal charges may apply.
Your contract contains the applicable charges.
2: We impose these withdrawal charges only if you elect to have the credit added
to your contract value prior to your 3rd and 6th contract anniversaries. These
charges may be lower in certain states.
3: Currently, we charge $10 for each transfer after the twelfth in a contract
year. As shown in the table, we can increase that charge up to a maximum of $30,
but we have no current intention to do so. We will not charge you for transfers
made in connection with Dollar Cost Averaging and Auto-Rebalancing or transfers
from the market value adjustment option at the end of a guarantee period, and do
not count them toward the limit of 12 free transfers per year.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
The next table describes the fees and expenses that you will pay periodically
during the time that you own the contract, not including underlying mutual fund
fees and expenses.
ANNUAL ACCOUNT EXPENSES
4: Currently, we waive this fee if your contract value is greater than or equal
to $100,000. If your contract value is less than $100,000, we currently charge
the lesser of $50 or 2% of your contract value. This is a single fee that we
assess (a) annually or (b) upon a full withdrawal made on a date other than a
contract anniversary. As shown in the table, we can increase this fee in the
future up to a maximum of $60, but we have no current intention to do so.
5: The 1.65%, 1.90%, and 2.00% charges listed here apply to any Strategic
Partners FlexElite contract sold on or after May 1, 2003 or upon subsequent
state approval. For all other contracts, these charges are 1.60%, 1.80%, and
1.90%, respectively, and we reserve the right to impose an additional insurance
charge of 0.10% annually of average account value for contracts issued to those
aged 76 or older, under which the Guaranteed Minimum Death Benefit has been
selected. The Highest Daily Value Death Benefit is available only with respect
to the version of the contract sold on or after May 1, 2003, or upon subsequent
state approval.
6: We impose this charge only if you choose the Guaranteed Minimum Income
Benefit. This charge is equal to 0.50% for contracts sold on or after January
20, 2004, or upon subsequent state approval (0.45% for all other contracts) of
the average GMIB protected value, which is calculated daily and generally is
equal to the GMIB roll-up value. Subject to certain age restrictions, the
roll-up value is the total of all invested purchase payments (after a reset, the
contract value at the time of the reset) compounded daily at an effective annual
rate of 5%, subject to a cap of 200% of all invested purchase payments.
Withdrawals reduce both the roll-up value and the 200% cap. The reduction is
equal to the amount of the withdrawal for the first 5% of the roll-up value,
calculated as of the latest contract anniversary (or contract date). The amount
of the withdrawal in excess of 5% of the roll-up value further reduces the
roll-up value and 200% cap proportionally to the additional reduction in
contract value after the first 5% withdrawal occurs. We assess this fee each
contract anniversary and when you begin the income phase of your contract. We
also assess this fee if you make a full withdrawal, but prorate the fee based on
the portion of the contract year that has elapsed since the full annual fee was
most recently deducted. If you make a partial withdrawal, we will assess the
prorated fee if the remaining contract value after the withdrawal would be less
than the amount of the prorated fee; otherwise we will not assess the fee at
that time.
7: We impose this charge only if you choose the Income Appreciator Benefit. The
charge for this benefit is based on an annual rate of 0.25% of your contract
value. The Income Appreciator Benefit charge is calculated: on each contract
anniversary, on the annuity date, if a death benefit is payable, upon the death
of the sole owner or first to die of the owner or joint owner prior to the
annuity date, upon a full or partial withdrawal, and upon a subsequent purchase
payment. The fee is based on the contract value at the time of the calculation,
and is prorated based on the portion of the
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SUMMARY OF CONTRACT EXPENSES CONTINUED
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contract year since the date that the charge was last deducted. Although it may
be calculated more often, it is deducted only: on each contract anniversary, on
the annuity date, if a death benefit is payable, upon the death of the sole
owner or first to die of the owner or joint owners prior to the annuity date,
upon a full withdrawal, and upon a partial withdrawal if the contract value
remaining after such partial withdrawal is not enough to cover the
then-applicable charge. With respect to full and partial withdrawals, we prorate
the fee based on the portion of the contract year that has elapsed since the
full annual fee was most recently deducted. We reserve the right to calculate
and deduct the fee more frequently than annually, such as quarterly.
8: We impose this charge only if you choose the Earnings Appreciator Benefit. We
deduct this charge annually. We also deduct this charge if you make a full
withdrawal or enter the income phase of your contract, or if a death benefit is
payable, but prorate the fee to reflect a partial rather than full year. If you
make a partial withdrawal, we will deduct the prorated fee if the remaining
contract value after the withdrawal would be less than the amount of the
prorated fee; otherwise we will not deduct the fee at that time. The fee is also
calculated when you make any purchase payment or withdrawal but we do not deduct
it until the next deduction date. For contracts sold prior to May 1, 2003, or
upon subsequent state approval, we reserve the right to impose an additional
charge of 0.10% annually of account value for contracts issued to those aged 66
or older, under which the Earnings Appreciator Benefit has been selected.
9: We impose this charge if you choose the Lifetime Five Income Benefit. This
charge is equal to 0.60% of the average daily net assets of the subaccounts,
which is calculated daily.
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, 2004. Fund expenses
are not fixed or guaranteed by the Strategic Partners FlexElite 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 % and %, respectively.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SUMMARY OF CONTRACT EXPENSES CONTINUED
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PART I
STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
1. As noted above, shares of the Portfolios generally are purchased through
variable insurance products. Some of the Portfolios and/or their investment
advisers and/or distributors have entered into arrangements with us as the
issuer of the contract under which they compensate us for providing ongoing
services in lieu of the Trust providing such services. Amounts paid under these
arrangements are included under "Other Expenses."
2. The portfolios' total actual annual operating expenses for the year ended
December 31, 2004 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:
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
PART I
STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
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. The Portfolios' total actual annual operating expenses for the year ended
December 31, 2004 were less than the amount shown in the table due to fee
waivers, reimbursement of expenses and expense offset arrangements. These
waivers, reimbursements, and offset arrangements are voluntary and may be
terminated by American Skandia Investment Services, Inc. and Prudential
Investments LLC at any time. After accounting for the waivers, reimbursements
and offset arrangements, the Portfolios' actual annual operating expenses were:
Effective May 1, 2004, the Investment Managers have voluntarily agreed to waive
a portion of their fee equal to .05% of the average daily net assets of the AST
Hotchkis & Wiley Large-Cap Value Portfolio. If such waiver had been in place at
year-end, the Portfolio's actual annual operating expenses would have been
0.93%.
5. Effective February 23, 2004, J.P. Morgan Investment Management, Inc. became
Subadviser of the Portfolio. Prior to February 23, 2004, Strong Capital
Management, Inc. served as Subadviser of the Portfolio, then named "AST Strong
International Equity."
6. Effective November 22, 2004, JP Morgan Investment Management, Inc., Lee
Munder Investments, Ltd., and Integrity Asset Management, became subadvisers of
the Portfolio. Prior to November 22, 2004, GAMCO Investors, Inc. served as
subadviser of the Portfolio, then named "AST Gabelli Small-Cap Value".
7. Effective May 1, 2004, Hotchkis and Wiley Capital Management LLC became
Subadviser of the Portfolio. Prior to May 1, 2004, INVESCO Funds Group, Inc.
served as Subadviser of the Portfolio, then named "AST INVESCO Capital Income."
8. The DeAM Global Asset Allocation Portfolio invests primarily in shares of
other AST Portfolios (the "Underlying Portfolios"). (a) The only management fee
directly paid by the Portfolio is a 0.10% fee paid to American Skandia
Investment Services, Inc. and Prudential Investments LLC. The management fee
shown in the chart for the Portfolio is (i) that 0.10% management fee paid by
the Portfolio plus (ii) an estimate of the management fees paid by the
Underlying Portfolios, which are borne indirectly by investors in the Portfolio.
The estimate was calculated based on the percentage of the Portfolio invested in
each Underlying Portfolio as of December 31, 2004 using the management fee rates
shown in the chart above. (b) The expense information shown in the chart for the
Portfolio reflects (i) the expenses of the Portfolio itself plus (ii) an
estimate of the expenses paid by the Underlying Portfolios, which are borne
indirectly by investors in the Portfolio. The estimate was calculated based on
the percentage of the Portfolio invested in each Underlying Portfolio as of
December 31, 2004 using the expense rates for the Underlying Portfolios shown in
the above chart.
9. Effective May 1, 2004, Goldman Sachs Asset Management, L.P. became Subadviser
of the Portfolio. Prior to May 1, 2004, Federated Investment Counseling served
as Subadviser of the Portfolio, then named "AST Federated High Yield."
10. 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.
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PART I STRATEGIC PARTNERS FLEXELITE 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.
EXPENSE EXAMPLES FOR SUBSEQUENT VERSION OF STRATEGIC PARTNERS FLEXELITE SOLD ON
OR AFTER MAY 1, 2003
EXAMPLE 1A: Highest Daily Value Death Benefit; Guaranteed Minimum Income
Benefit, Earnings Appreciator Benefit, Income Appreciator Benefit, Credit
Elections, and You Withdraw All Your Assets
This example assumes that:
- - You invest $10,000 in the Contract;
- - You choose the Highest Daily Value Death Benefit;
- - You choose the Earnings Appreciator Benefit;
- - You choose the Guaranteed Minimum Income Benefit (for contracts sold
beginning January 20, 2004);
- - You choose the Income Appreciator Benefit;
- - You make credit elections prior to your 3(rd) and 6(th) contract
anniversaries;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - The investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year; and
- - You withdraw all your assets at the end of the indicated period.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
PART I
STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
EXAMPLE 1b: Highest Daily Value Death Benefit, Guaranteed Minimum Income
Benefit, Earnings Appreciator Benefit, Income Appreciator Benefit, Credit
Elections, and You Do Not Withdraw Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
EXAMPLE 2a: Base Death Benefit and You Withdraw All Your Assets
This example assumes that:
- - You invest $10,000 in the Contract;
- - You choose the Base Death Benefit;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - The investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year;
- - You do not make a credit election; and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 2b: Base Death Benefit and You Do Not Withdraw All Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
EXPENSE EXAMPLES FOR ORIGINAL VERSION OF STRATEGIC PARTNERS FLEXELITE
EXAMPLE 3a: Greater of roll-up and step-up GMDB; Earnings Appreciator Benefit;
Credit Elections and You Withdraw All Your Assets
This example assumes that:
- - You invest $10,000 in the Contract;
- - You choose the Greater of roll-up and step-up GMDB;
- - You choose the Earnings Appreciator Benefit;
- - You make credit elections prior to your 3(rd) and 6(th) contract
anniversaries;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - The investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year; and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 3b: Greater of roll-up and step-up GMDB; Earnings Appreciator Benefit;
Credit Elections; and You Do Not Withdraw Your Assets
This example makes exactly the same assumptions as Example 3a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
EXPENSE EXAMPLES CONTINUED
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PART I
STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
EXAMPLE 4a: Base Death Benefit and You Withdraw All Your Assets
This example assumes that:
- - You invest $10,000 in the Contract;
- - You choose the Base Death Benefit;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - The investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year;
- - You do not make a credit election; and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 4b: Base Death Benefit and You Do Not Withdraw Your Assets
This example makes exactly the same assumptions as Example 4a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
NOTES FOR EXPENSE EXAMPLES:
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Note that withdrawal charges (which are reflected in Examples 1a, 2a, 3a, and
4a) are assessed in connection with some annuity options, but not others.
The values shown in the 10 year column are the same for the examples with
withdrawal charges and the examples without withdrawal charges. This is because,
if 3 or more years have elapsed since your last credit election before your 6th
contract anniversary, no withdrawal charges apply.
The examples use an average contract maintenance charge, which we calculated
based on our estimate of the total contract fees we expect to collect in 2005.
Based on these estimates, the contract maintenance charge is included as an
annual charge of % of contract value. Your actual fees will vary based on
the amount of your contract and your specific allocation among the investment
options.
Premium taxes are not reflected in the examples. We deduct a charge to
approximate premium taxes that may be imposed on us in your state. This charge
is generally deducted from the amount applied to an annuity payout option.
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
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PART II SECTIONS 1-10
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STRATEGIC PARTNERS FLEXELITE PROSPECTUS
27
1:
WHAT IS THE STRATEGIC PARTNERS FLEXELITE
VARIABLE ANNUITY?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
THE STRATEGIC PARTNERS FLEXELITE VARIABLE ANNUITY IS A CONTRACT BETWEEN YOU, THE
OWNER, AND US, PRUCO LIFE INSURANCE COMPANY (PRUCO LIFE, WE OR US).
Under our contract, in exchange for your payment to us, we promise to pay you a
guaranteed income stream that can begin any time after the second contract
anniversary. Your annuity is in the accumulation phase until you decide to begin
receiving annuity payments. The date you begin receiving annuity payments is the
annuity date. On the annuity date, your contract switches to the income phase.
This annuity contract benefits from tax deferral. Tax deferral means that you
are not taxed on earnings or appreciation on the assets in your contract until
you withdraw money from your contract. (If you 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 FlexElite is a variable annuity contract. During the
accumulation phase, you can allocate your assets among the variable investment
options, guaranteed fixed interest rate options, and a market value adjustment
option. If you select variable investment options, the amount of money you are
able to accumulate in your contract during the accumulation phase depends upon
the investment performance of the underlying mutual fund(s) 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 the owner of the contract, you have all of the decision-making rights
under the contract. You will also be the annuitant unless you designate someone
else. The annuitant is the person whose life is used to determine how much and
how long (if applicable) the annuity payments will continue once the income
phase begins. On or after the annuity date, the annuitant may not be changed.
The beneficiary is the person(s) or entity you designate to receive any death
benefit. You may change the beneficiary any time prior to the annuity date by
making a written request to us.
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"
If you change your mind about owning Strategic Partners FlexElite, you may
cancel your contract within 10 days after receiving it (or whatever period is
required by applicable law). You can request a refund by returning the contract
either to the representative who sold it to you, or to the Prudential Annuity
Service Center at the address shown on the first page of this prospectus. You
will receive, depending on applicable state law:
- - Your full purchase payment less any applicable federal and state income tax;
or
- - The amount your contract is worth as of the day we receive your request, less
any applicable federal and state income tax withholding. This amount may be
more or less than your original payment. We impose neither a withdrawal
charge nor any market value adjustment if you cancel your contract under this
provision.
To the extent dictated by state law, we will include in your refund the
amount of any fees and charges that we deducted.
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THE CONTRACT GIVES YOU THE CHOICE OF ALLOCATING YOUR PURCHASE PAYMENTS TO ANY OF
THE VARIABLE INVESTMENT OPTIONS, FIXED INTEREST RATE OPTIONS, AND A MARKET VALUE
ADJUSTMENT OPTION.
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 current prospectus for the underlying mutual fund. The
current prospectuses for the underlying mutual funds also contain other
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.
The Jennison Portfolio, Prudential Equity Portfolio, Prudential Global
Portfolio, Prudential Money Market Portfolio, Prudential Stock Index Portfolio,
Prudential Value Portfolio, and each "SP" Portfolio of the Prudential Series
Fund, 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.
The portfolios of the American Skandia Trust are co-managed by PI and
American Skandia Investment Services, Incorporated, also under a manager-of-
managers approach. American Skandia Investment Services, Incorporated is an
indirect, wholly-owned subsidiary of Prudential Financial, Inc.
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.
Pruco Life has entered into agreements with certain underlying portfolios
and/or the investment adviser or distributor of such portfolios. Pruco Life may
provide administrative and support services to such portfolios pursuant to the
terms of these agreements and under which it receives a fee of up to [ ]%
(as of May 1, 2005) of the average assets allocated to the portfolio under the
contract. These agreements, including the fees paid and services provided, can
vary for each underlying mutual fund whose portfolios are offered as
sub-accounts.
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.
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PART II
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
FIXED INTEREST RATE OPTIONS
We offer two fixed interest rate options:
- - a one-year fixed interest rate option, and
- - a dollar cost averaging fixed rate option (DCA Fixed Rate Option).
When you select one of these options, your payment will earn interest at the
established rate for the applicable interest rate period. A new interest rate
period is established every time you allocate or transfer money into a fixed
interest rate option. (You may not transfer amounts from other investment
options into the DCA Fixed Rate Option.) You may have money allocated in more
than one interest rate period at the same time. This could result in your money
earning interest at different rates and each interest rate period maturing at a
different time. While these interest rates may change from time to time they
will not be less than the minimum interest rate indicated in your contract which
can range from 1% to 3%.
Payments allocated to the fixed interest rate options become part of Pruco
Life's general assets.
ONE-YEAR FIXED INTEREST RATE OPTION
We set a one-year base guaranteed annual interest rate for the one-year fixed
interest rate option. Additionally, we may provide a higher interest rate on
each purchase payment allocated to this option for the first year after the
payment for contracts sold on or after May 1, 2003, or upon subsequent state
approval. This higher interest rate will not apply to amounts transferred from
other investment options within the contract or amounts remaining in this option
for more than one year.
DOLLAR COST AVERAGING FIXED RATE OPTION
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL,
you may allocate all or part of your initial purchase payment to the DCA Fixed
Rate Option (for all other contracts you may allocate all or part of a purchase
payment to the DCA Fixed Rate Option). Under this option, you automatically
transfer amounts over a stated period (currently, six or twelve months) from the
DCA Fixed Rate Option to the variable investment options and/or to the one-year
fixed interest rate option, as you select. We will invest the assets you
allocate to the DCA Fixed Rate Option in our general account until they are
transferred. Transfers to the one-year fixed interest rate option will remain in
the general account.
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE
APPROVAL, if you choose to allocate all or part of a purchase payment to the DCA
Fixed Rate Option, the minimum amount of the purchase payment you may allocate
is $2,000 (for all other contracts, the minimum amount is $5,000). The first
periodic transfer will occur on the date you allocate your purchase payment to
the DCA Fixed Rate Option. Subsequent transfers will occur on the monthly
anniversary of the first transfer. Currently, you may choose to have the
purchase payment allocated to the DCA Fixed Rate Option transferred to the
selected variable investment options or to the one-year fixed interest rate
option in either six or twelve monthly installments, and you may not change that
number of monthly installments after you have chosen the DCA Fixed Rate Option.
You may allocate to both the six-month and twelve-month options. FOR CONTRACTS
SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL, you may
allocate to both the six-month and twelve-month options, but the minimum amount
of your initial purchase payment that may be allocated to one or the other is
$2,000. (In the future, we may make available other numbers of transfers and
other transfer schedules--for example, quarterly as well as monthly.)
If you choose a six-payment transfer schedule, each transfer generally will
equal 1/6th of the amount you allocated to the DCA Fixed Rate Option, and if you
choose a twelve-payment transfer schedule, each transfer generally will equal
1/12th of the amount you allocated to the DCA Fixed Rate Option. In either case,
the final transfer amount generally will also include the credited interest. You
may change at any time the investment options into which the DCA Fixed Rate
Option assets are transferred. You may make a one time transfer of the remaining
value out of your DCA Fixed Rate Option, if you so choose. Transfers from the
DCA Fixed Rate Option do not count toward the
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maximum number of free transfers allowed under the contract.
If you make a withdrawal or have a fee assessed from your contract, and all
or part of that withdrawal or fee comes out of the DCA Fixed Rate Option, we
will recalculate the periodic transfer amount to reflect the change. This
recalculation may include some or all of the interest credited to the date of
the next scheduled transfer. If a withdrawal or fee assessment reduces the
monthly transfer amount below $100, we will transfer the remaining balance in
the DCA Fixed Rate Option on the next scheduled transfer date.
By investing amounts on a regular basis instead of investing the total amount
at one time, the DCA Fixed Rate Option may decrease the effect of market
fluctuation on the investment of your purchase payment. Of course, dollar cost
averaging cannot ensure a profit or protect against loss in a declining market.
MARKET VALUE ADJUSTMENT OPTION
THE MARKET VALUE ADJUSTMENT OPTION IS AVAILABLE TO STRATEGIC PARTNERS FLEXELITE
CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL. THIS
OPTION MAY NOT BE AVAILABLE IN YOUR STATE.
Under the market value adjustment option, we may offer one or more of several
guarantee periods provided that the interest rate we are able to declare will be
no less than 3% interest with respect to any guarantee period. This option is
not available for contracts issued in some states. Please see your contract. 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.
IF AMOUNTS ARE WITHDRAWN FROM A GUARANTEE PERIOD, OTHER THAN DURING THE
30-DAY PERIOD IMMEDIATELY FOLLOWING THE END OF THE GUARANTEE PERIOD, THEY WILL
BE SUBJECT TO A MARKET VALUE ADJUSTMENT EVEN IF THEY ARE NOT SUBJECT TO A
WITHDRAWAL CHARGE.
You will earn interest on your invested purchase payment at the rate that we
have declared for the guarantee period you have chosen. You must invest at least
$1,000 if you choose this option.
We refer to interest rates as annual rates, although we credit interest
within each guarantee period on a daily basis. The daily interest that we credit
is equal to the pro rated portion of the interest that would be earned on an
annual basis. We credit interest from the business day on which your purchase
payment is received in good order at the Prudential Annuity Service Center until
the earliest to occur of any of the following events: (a) full surrender of the
contract, (b) commencement of annuity payments or settlement, (c) end of the
guarantee period, (d) transfer of value in the guarantee period, (e) payment of
a death benefit, or (f) the date the amount is withdrawn.
During the 30-day period immediately following the end of a guarantee period,
we allow you to do any of the following, without the imposition of the market
value adjustment:
(a) withdraw or transfer the value in the guarantee period,
(b) allocate the value to another available guarantee period or other investment
option (provided that the new guarantee period ends prior to the annuity
date). You will receive the interest rate applicable on the date we receive
your instruction, or
(c) apply the value in the guarantee period to the annuity or settlement option
of your choice.
If we do not receive instructions from you concerning the disposition of the
contract value in your maturing guarantee period, we will reinvest the amount in
the Prudential Money Market Portfolio investment option.
During the 30-day period immediately following the end of the guarantee
period, or until you elect to do (a), (b) or (c) delineated immediately above,
you will receive the current interest rate applicable to the guarantee period
having the same duration as the guarantee period that just matured, which is
offered on the day immediately following the end of the matured guarantee
period. However, if at that time we do not offer a guarantee period with the
same duration as that which matured, you will then receive the current interest
rate applicable to the shortest guarantee period then offered.
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Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed by
us and the interest amount that your money will earn is guaranteed by us to be
at least 3%.
Payments allocated to the market value adjustment option are held as a
separate pool of assets. Any gains or losses experienced by these assets will
not directly affect the contracts. The strength of our guarantees under these
options is based on the overall financial strength of Pruco Life.
MARKET VALUE ADJUSTMENT
When you allocate a purchase payment or transfer contract value to a guarantee
period, we use that money to buy and sell securities and other instruments to
support our obligation to pay interest. Generally, we buy bonds for this
purpose. The duration of the bonds and other instruments that we buy with
respect to a particular guarantee period is influenced significantly by the
length of the guarantee period. For example, we typically would acquire
longer-duration bonds with respect to the 10 year guarantee period than we do
for the 3 year guarantee period. The value of these bonds is affected by changes
in interest rates, among other factors. The market value adjustment that we
assess against your contract value if you withdraw or transfer outside the
30-day period discussed above involves our attributing to you a portion of our
investment experience on these bonds and other instruments.
For example, if you make a full withdrawal when interest rates have risen
since the time of your investment, the bonds and other investments in the
guarantee period likely would have decreased in value, meaning that we would
impose a "negative" market value adjustment on you (i.e., one that results in a
reduction of the withdrawal proceeds that you receive.) For a partial
withdrawal, we would deduct a negative market value adjustment from your
remaining contract value. Conversely, if interest rates have decreased, the
market value adjustment would be positive.
Other things you should know about the market value adjustment include the
following:
- - We determine the market value adjustment according to a mathematical formula,
which is set forth at the end of this prospectus under the heading
"Market-Value Adjustment Formula." In that section of the prospectus, we also
provide hypothetical examples of how the formula works.
- - A negative market value adjustment could cause you to lose not only the
interest you have earned but also a portion of your principal.
- - In addition to imposing a market value adjustment on withdrawals, we also
will impose a market value adjustment on the contract value you apply to an
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.
YOU SHOULD REALIZE, HOWEVER, THAT APART FROM THE MARKET VALUE ADJUSTMENT, THE
VALUE OF THE BENEFITS IN YOUR GUARANTEE PERIOD DOES NOT DEPEND ON THE INVESTMENT
PERFORMANCE OF THE BONDS AND OTHER INSTRUMENTS THAT WE HOLD WITH RESPECT TO YOUR
GUARANTEE PERIOD. APART FROM THE EFFECT OF ANY MARKET VALUE ADJUSTMENT, WE DO
NOT PASS THROUGH TO YOU THE GAINS OR LOSSES ON THE BONDS AND OTHER INSTRUMENTS
THAT WE HOLD IN CONNECTION WITH A GUARANTEE PERIOD.
TRANSFERS AMONG OPTIONS
Subject to certain restrictions, you can transfer money among the variable
investment options and the one-year fixed interest rate option. The minimum
transfer amount is the lesser of $250 or the amount in the investment option
from which the transfer is to be made. In addition, you can transfer your
contract value out of a market value adjustment guarantee period into another
market value adjustment guarantee period, into a variable investment option, or
into the one-year fixed interest rate option, although a market value adjustment
will apply to any transfer you make outside the 30-day period discussed above.
You may transfer contract value into the market value adjustment option at any
time, provided it is at least $1,000.
In general, you may make your transfer request by telephone, electronically,
or otherwise in paper form to
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
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 liable for following unauthorized telephone or electronic instructions
that we reasonably believed 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
4:00 p.m. Eastern time will take effect at the end of the next business day.
With regard to the market value adjustment option, you can specify the
guarantee period from which you wish to transfer. If you request a transfer from
the market value adjustment option, but you do not specify the guarantee period
from which funds are to be taken, then we will transfer funds from the guarantee
period that has the least time remaining until its maturity date.
YOU CAN MAKE TRANSFERS OUT OF A FIXED INTEREST RATE OPTION, OTHER THAN THE
DCA FIXED RATE OPTION, ONLY DURING THE 30-DAY PERIOD FOLLOWING THE END OF THE
ONE YEAR INTEREST RATE PERIOD. TRANSFERS FROM THE DCA FIXED RATE OPTION ARE MADE
ON A PERIODIC BASIS FOR THE PERIOD THAT YOU SELECT. TRANSFERS FROM THE DCA FIXED
RATE OPTION CANNOT BE MADE INTO THE MARKET VALUE ADJUSTMENT OPTION BUT CAN BE
MADE INTO THE FIXED RATE OPTION, AT OUR DISCRETION. WE CURRENTLY ALLOW TRANSFERS
INTO THE FIXED RATE OPTION.
During the contract accumulation phase, you can make up to 12 transfers each
contract year, among the investment options, without charge. Currently we charge
$10 for each transfer after the twelfth in a contract year, and we have the
right to increase this charge up to $30. (Dollar Cost Averaging and Auto-
Rebalancing transfers do not count toward the 12 free transfers per year. Nor do
transfers made during the 30-day period immediately following the end of a
guarantee period count against the 12 free transfers.) If a transfer that you
request out of the market value adjustment option will be subject to a transfer
charge, then:
- - We will deduct the transfer charge proportionally from the contract value in
each guarantee period, where you have directed us to transfer funds from
several guarantee periods; and
- - If you have directed us to transfer the full contract value out of a
guarantee period, then we will first deduct the transfer charge and
thereafter transfer the remaining amount; and
- - In any event, we will deduct the applicable transfer charge prior to
effecting the transfer.
For purposes of the 12 free transfers per year that we allow, we will treat
multiple transfers that are submitted on the same business day as a single
transfer.
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 any transfer that involves 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
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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 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.
- - We may impose specific restrictions on financial transactions (including
transfer requests) for certain portfolios based on the portfolio's investment
and/or transfer restrictions. We may do so to conform to any present or
future restriction that is imposed by any portfolio available under this
contract.
- - 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
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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
The dollar cost averaging (DCA) feature (which is distinct from the DCA Fixed
Rate Option) allows you to systematically transfer either a fixed dollar amount
or a percentage out of any variable investment option into any other variable
investment options (OR FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON
SUBSEQUENT STATE APPROVAL, THE ONE-YEAR FIXED INTEREST RATE OPTION). Under this
feature, you cannot make transfers into the market value adjustment option and
transfers into a fixed rate option are at our discretion. You can have these
automatic transfers occur monthly, quarterly, semiannually or annually. By
investing amounts on a regular basis instead of investing the total amount at
one time, dollar cost averaging may decrease the effect of market fluctuation on
the investment of your purchase payment. Of course, dollar cost averaging cannot
ensure a profit or protect against a loss in declining markets.
Transfers will be made automatically on the schedule you choose until the
entire amount you chose to have transferred has been transferred or until you
tell us to discontinue the transfers. You can allocate subsequent purchase
payments to be transferred under this option at any time.
Your transfers will occur on the last calendar day of each transfer period
you have selected, provided that the New York Stock Exchange is open on that
date. If the New York Stock Exchange is not open on a particular transfer date,
the transfer will take effect on the next business day.
Any dollar cost averaging transfers you make do not count toward the 12 free
transfers you are allowed each contract year. The dollar cost averaging feature
is available only during the contract accumulation phase 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 percentage or to a subsequent allocation percentage you
select. We will rebalance only the variable investment options that you have
designated. The DCA account cannot participate in this feature.
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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.
SCHEDULED TRANSACTIONS
Scheduled transactions include transfers under dollar cost averaging, an asset
allocation program, auto-rebalancing, systematic withdrawals, minimum
distributions or annuity payments. Scheduled transactions are processed and
valued as of the date they are scheduled, unless the scheduled day is not a
business day. In that case, the transaction will be processed and valued on the
next business day, unless the next business day falls in the subsequent calendar
year, in which case the transaction will be processed and valued on the prior
business day.
VOTING RIGHTS
We are the legal owner of the shares of 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 contract owners. When a vote is
required, we will mail you a proxy which is a form that 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 contract owners. 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.
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PAYMENT PROVISIONS
We can begin making annuity payments any time on or after the second contract
anniversary (or as required by state law if different). Annuity payments must
begin no later than the contract anniversary coinciding with or next following
the annuitant's 95th birthday (unless we agree to another date).
Upon annuitization, any value in a guarantee period of the market value
adjustment option may be subject to a market value adjustment.
The Strategic Partners FlexElite variable annuity contract offers an optional
Guaranteed Minimum Income Benefit, which we describe below. Your annuity options
vary depending upon whether you choose this benefit.
Depending upon the annuity option you choose, you may incur a withdrawal
charge when the income phase begins. Currently, if permitted by state law, we
deduct any applicable withdrawal charge if you choose Option 1 for a period
shorter than five years (ten years for contracts sold on or after May 1, 2003,
or upon subsequent state approval), 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 (ten years for contracts sold on or after
May 1, 2003, or upon subsequent state approval) or longer or Option 2. For
information about withdrawal charges, see "What Are The Expenses Associated With
The Strategic Partners FlexElite Contract" in Section 7.
PAYMENT PROVISIONS WITHOUT THE GUARANTEED MINIMUM INCOME BENEFIT
We make the income plans described below available at any time before the
annuity date. These plans are called "annuity options" or "settlement options."
During the income phase, all of the annuity options under this contract are
fixed annuity options. This means that your participation in the variable
investment options ends on the annuity date. If an annuity option is not
selected by the annuity date, the Life Income Annuity Option (Option 2,
described below) will automatically be selected unless prohibited by applicable
law. GENERALLY, ONCE THE ANNUITY PAYMENTS BEGIN, THE ANNUITY OPTION CANNOT BE
CHANGED AND YOU CANNOT MAKE WITHDRAWALS.
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 1.5% a year for contracts sold on
or after May 1, 2003, or upon subsequent state approval (and 3% a year for all
other contracts).
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
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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 1.5% a year for contracts sold on
or after May 1, 2003, or upon subsequent state approval (and 3% a year for all
other contracts). 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.
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, you should consider the
minimum distribution requirements when selecting your annuity option.
If a contract is held in connection with "qualified" retirement plans (such
as a Section 401(k) plan), please note that if you are married at the time your
payments commence, you may be required by federal law to choose an income option
that provides at least a 50 percent joint and survivor annuity to your spouse,
unless your spouse waives that right. Similarly, if you are married at the time
of your death, federal law may require all or a portion of the death benefit to
be paid to your spouse, even if you designated someone else as your beneficiary.
For more information, consult the terms of your retirement arrangement.
GUARANTEED MINIMUM INCOME BENEFIT
The Guaranteed Minimum Income Benefit (GMIB), is an optional feature that
guarantees that once the income period begins, your income payments will be no
less than the GMIB protected value applied to the GMIB guaranteed annuity
purchase rates. If you want the Guaranteed Minimum Income Benefit, you must
elect it when you make your initial purchase payment. Once elected, the
Guaranteed Minimum Income Benefit cannot be revoked. This feature may not be
available in your state. You may not elect both GMIB and the Lifetime Five
Income benefit.
The GMIB protected value is calculated daily and is equal to the GMIB roll-up
until the GMIB roll-up either reaches its cap or if we stop applying the annual
interest rate based on the age of the annuitant, number of contract
anniversaries, or number of years since the last GMIB reset, as described below.
At this point, the GMIB protected value will be increased by any subsequent
invested purchase payments and reduced by the effect of withdrawals.
The Guaranteed Minimum Income Benefit is subject to certain restrictions
described below.
- - The annuitant must be 75 or younger in order for you to elect the Guaranteed
Minimum Income Benefit.
- - If you choose the Guaranteed Minimum Income Benefit, we will impose an annual
charge equal to 0.50% for contracts sold on or after January 20, 2004, or
upon subsequent state approval (0.45% for all other contracts) of the average
GMIB protected value, described below.
- - Under the contract terms governing the GMIB, we can require GMIB participants
to invest only in designated underlying mutual funds or can require
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GMIB participants to invest according to an asset allocation model.
- - TO TAKE ADVANTAGE OF THE GUARANTEED MINIMUM INCOME BENEFIT, YOU MUST WAIT A
CERTAIN AMOUNT OF TIME BEFORE YOU BEGIN THE INCOME PHASE. THE WAITING PERIOD
IS THE PERIOD EXTENDING FROM THE CONTRACT DATE TO THE 7TH CONTRACT
ANNIVERSARY BUT, IF THE GUARANTEED MINIMUM INCOME BENEFIT HAS BEEN RESET (AS
DESCRIBED BELOW), THE WAITING PERIOD IS THE 7-YEAR PERIOD BEGINNING WITH THE
DATE OF THE MOST RECENT RESET.
Once the waiting period has elapsed, you will have a 30-day period each year,
beginning on the contract anniversary (or in the case of a reset, the
anniversary of the most recent reset), during which you may begin the income
phase with the Guaranteed Minimum Income Benefit by submitting the necessary
forms in good order to the Prudential Annuity Service Center.
GMIB ROLL-UP
The GMIB roll-up is equal to the invested purchase payments (after a reset, the
contract value at the time of the reset), increased daily at an effective annual
interest rate of 5% starting on the date each invested purchase payment is made,
until the cap is reached (GMIB roll-up cap). We will reduce this amount by the
effect of withdrawals. The GMIB roll-up cap is equal to two times each invested
purchase payment (for a reset, two times the sum of (1) the contract value at
the time of the reset, and (2) any invested purchase payments made subsequent to
the reset).
Even if the GMIB roll-up cap has not been reached, we will nevertheless stop
increasing the GMIB roll-up value by the effective annual interest rate on the
latest of:
- the contract anniversary coinciding with or next following the
annuitant's 80th birthday,
- the 7th contract anniversary, or
- 7 years from the most recent GMIB reset (as described below).
However, even if we stop increasing the GMIB roll-up value by the effective
annual interest rate, we will still increase the GMIB protected value by
subsequent invested purchase payments, reduced by the effect of withdrawals.
EFFECT OF WITHDRAWALS
In any contract year when the GMIB protected value is increasing at the rate of
5%, withdrawals will first reduce the GMIB protected value on a
dollar-for-dollar basis, by the same dollar amount of the withdrawal up to the
first 5% of GMIB protected value, calculated on the contract anniversary (or,
during the first contract year, on the contract date). Any withdrawals made
after the dollar-for-dollar limit has been reached will proportionally reduce
the GMIB protected value. We calculate the proportional reduction by dividing
the contract value after the withdrawal by the contract value immediately
following the withdrawal of any available dollar-for-dollar amount. The
resulting percentage is multiplied by the GMIB protected value after subtracting
the amount of the withdrawal that does not exceed 5%. In each contract year
during which the GMIB protected value has stopped increasing at the 5% rate,
withdrawals will reduce the GMIB protected value proportionally. The GMIB
roll-up cap is reduced by the sum of all reductions described above.
The following examples of dollar-for-dollar and proportional reductions
assume: 1.) the contract date and the effective date of the GMIB are January 1,
2004; 2.) an initial purchase payment of $250,000; 3.) an initial GMIB protected
value of $250,000; 4.) an initial 200% cap of $500,000; and 5.) an initial
dollar-for-dollar limit of $12,500 (5% of $250,000):
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
A $10,000 withdrawal is taken on February 1, 2004 (in the first contract year).
No prior withdrawals have been taken. Immediately prior to the withdrawal, the
GMIB protected value is $251,035.26 (the initial value accumulated for 31 days
at an annual effective rate of
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5%). As the amount withdrawn is less than the dollar-for-dollar limit:
- - The GMIB protected value is reduced by the amount withdrawn (i.e., by
$10,000, from $251,035.26 to $241,035.26).
- - The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000, from
$500,000 to $490,000).
- - The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of
the first contract year is also reduced by the amount withdrawn (from $12,500
to $2,500).
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
A second $10,000 withdrawal is taken on March 1, 2004 (still within the first
contract year). Immediately before the withdrawal, the contract value is
$220,000 and the GMIB protected value is $241,968.88. As the amount withdrawn
exceeds the Remaining Limit of $2,500 from Example 1:
- - The GMIB protected value is first reduced by the Remaining Limit (from
$241,968.88 to $239,468.88).
- - The result is then further reduced by the ratio of A to B, where:
- A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
- B is the contract value less the Remaining Limit ($220,000 - $2,500, or
$217,500). The resulting GMIB protected value is: $239,468.88 X (1 -
($7,500/$217,500)), or $231,211.33.
- The GMIB 200% cap is reduced by the sum of all reductions above ($490,000
- $2,500 - $8,257.55, or $479,242.45).
- - The Remaining Limit is set to zero (0) for the balance of the first contract
year.
EXAMPLE 3. DOLLAR-FOR-DOLLAR LIMIT IN SECOND CONTRACT YEAR
A $10,000 withdrawal is made on the first anniversary of the contract date,
January 1, 2005 (second contract year). Prior to the withdrawal, the GMIB
protected value is $240,837.86. The dollar-for-dollar limit is equal to 5% of
this amount, or $12,041.89. As the amount withdrawn is less than the
dollar-for-dollar limit:
- - The GMIB protected value is reduced by the amount withdrawn (i.e., reduced by
$10,000, from $240,837.86 to $230,837.86).
- - The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000, from
$479,242.45 to $469,242.45).
- - The Remaining Limit for the balance of the second contract year is also
reduced by the amount withdrawn (from $12,041.89 to $2,041.89).
GMIB RESET FEATURE
You may elect to "reset" your GMIB protected value to equal your current
contract value twice over the life of the contract. You may only exercise this
reset option if the annuitant has not yet reached his or her 76th birthday. If
you reset, you must wait a new 7-year period from the most recent reset to
exercise the Guaranteed Minimum Income Benefit. Further, we will reset the GMIB
roll-up cap to equal two times the GMIB protected value as of such date.
Additionally, if you reset, we will determine the GMIB payout amount by using
the GMIB guaranteed annuity purchase rates (specified in your contract) based on
the number of years since the most recent reset. These purchase rates may be
less advantageous than the rates that would have applied absent a reset.
PAYOUT AMOUNT
The Guaranteed Minimum Income Benefit payout amount is based on the age and sex
(where applicable) of the annuitant (and, if there is one, the co-annuitant).
After we first deduct a charge for any applicable
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premium taxes that we are required to pay, the payout amount will equal the
greater of:
1) the GMIB protected value as of the date you exercise the GMIB payout option,
applied to the GMIB guaranteed annuity purchase rates (which are generally
less favorable than the annuity purchase rates for annuity payments not
involving GMIB) and based on the annuity payout option as described below, or
2) the adjusted contract value--that is, the value of the contract adjusted for
any market value adjustment minus any charge we impose for premium taxes and
withdrawal charges--as of the date you exercise the GMIB payout option
applied to the current annuity purchase rates then in use.
GMIB ANNUITY PAYOUT OPTIONS
We currently offer two Guaranteed Minimum Income Benefit annuity payout options.
Each option involves lifetime payments with a period certain of ten years. In
calculating the amount of the payments under the GMIB, we apply certain assumed
interest rates, equal to 2% annually for a waiting period of 7-9 years and 2.5%
annually for waiting periods of 10 years or longer for contracts sold on or
after January 20, 2004, or upon subsequent state approval (and 2.5% annually for
a waiting period of 7-9 years, 3% annually for a waiting period of 10-14 years,
and 3.5% annually for waiting periods of 15 years or longer for all other
contracts).
GMIB OPTION 1
SINGLE LIFE PAYOUT OPTION
We will make monthly payments for as long as the annuitant lives, with payments
for a period certain. We will stop making payments after the later of the death
of the annuitant or the end of the period certain.
GMIB OPTION 2
JOINT LIFE PAYOUT OPTION
In the case of an annuitant and co-annuitant, we will make monthly payments for
the joint lifetime of the annuitant and co-annuitant, with payments for a period
certain. If the co-annuitant dies first, we will continue to make payments until
the later of the death of the annuitant and the end of the period certain. If
the annuitant dies first, we will continue to make payments until the later of
the death of the co-annuitant and the end of the period certain, but if the
period certain ends first, we will reduce the amount of each payment to 50% of
the original amount.
You have no right to withdraw amounts early under either GMIB payout option.
We may make other payout frequencies available, such as quarterly, semi-annually
or annually.
Because we do not impose a new waiting period for each subsequent purchase
payment, if you choose the Guaranteed Minimum Income Benefit, we reserve the
right to limit subsequent purchase payments if we discover that by the timing of
your purchase payments, your GMIB protected value is increasing in ways we did
not intend. In determining whether to limit purchase payments, we will look at
purchase payments which are disproportionately larger than your initial purchase
payment and other actions that may artificially increase the GMIB protected
value. Certain state laws may prevent us from limiting your subsequent purchase
payments. You must exercise one of the GMIB payout options described above no
later than 30 days after the later of the contract anniversary coinciding with
or next following the annuitant's attainment of age 95 (age 92 for contracts
used as a funding vehicle for IRAs).
You should note that GMIB is designed to provide a type of insurance that
serves as a safety net only in the event that your contract value declines
significantly due to negative investment performance. If your contract value is
not significantly affected by negative investment performance, it is unlikely
that the purchase of GMIB will result in your receiving larger annuity payments
than if you had not purchased GMIB. This is because the assumptions that we use
in computing the GMIB, such as the annuity purchase rates, (which include
assumptions as to age-setbacks and assumed interest rates), are more
conservative than the assumptions that we use in computing non-GMIB annuity
payout options. Therefore, you may generate higher income payments if you were
to annuitize a lower contract value at the
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current annuity purchase rates, than if you were to annuitize under the GMIB
with a higher GMIB protected value than your contract value but at the annuity
purchase rates guaranteed under the GMIB.
TERMINATING THE GUARANTEED MINIMUM INCOME BENEFIT
The Guaranteed Minimum Income Benefit cannot be terminated by the owner once
elected. The GMIB automatically terminates as of the date the contract is fully
surrendered, on the date the death benefit is payable to your beneficiary
(unless your surviving spouse elects to continue the contract), or on the date
that your contract value is transferred to begin making annuity payments. The
GMIB may also be terminated if you designate a new annuitant who would not be
eligible to elect the GMIB based on his or her age at the time of the change.
Upon termination of the GMIB, we will deduct the charge from your contract
value for the portion of the contract year since the prior contract anniversary
(or the contract date if in the first contract year).
INCOME APPRECIATOR BENEFIT
THE INCOME APPRECIATOR BENEFIT (IAB) IS AVAILABLE TO STRATEGIC PARTNERS
FLEXELITE CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE
APPROVAL. The IAB is an optional, supplemental income benefit that provides an
additional income amount during the accumulation period or upon annuitization.
The Income Appreciator Benefit is designed to provide you with additional funds
that can be used to help defray the impact taxes may have on distributions from
your contract. IAB may be suitable for you in other circumstances as well, which
you can discuss with your registered representative. Because individual
circumstances vary, you should consult with a qualified tax advisor to determine
whether it would be appropriate for you to elect the Income Appreciator Benefit.
If you want the Income Appreciator Benefit, you generally must elect it when
you make your initial purchase payment. Once you elect the Income Appreciator
Benefit, you may not later revoke it.
- - The annuitant must be 75 or younger in order for you to elect the Income
Appreciator Benefit.
- - If you choose the Income Appreciator Benefit, we will impose an annual charge
equal to 0.25% of your contract value. See "What Are The Expenses Associated
With The Strategic Partners FlexElite Contract?" in Section 7.
ACTIVATION OF THE INCOME APPRECIATOR BENEFIT
YOU CAN ACTIVATE THE INCOME APPRECIATOR BENEFIT AT ANY TIME AFTER IT HAS BEEN IN
FORCE FOR SEVEN YEARS. To activate the Income Appreciator Benefit, you must send
us a written request in good order.
Once activated, you can receive the Income Appreciator Benefit:
-- IAB OPTION 1 at annuitization as part of an annuity payment;
-- IAB OPTION 2 during the accumulation phase through the IAB automatic
withdrawal payment program; or
-- IAB OPTION 3 during the accumulation phase as an Income Appreciator
Benefit credit to your contract over a 10-year period.
More information about IAB Option 1 appears below. For information about IAB
Options 2 and 3, see "How Can I Access My Money?" in Section 8.
Income Appreciator Benefit payments are treated as earnings and may be
subject to tax upon withdrawal. See "What Are The Tax Considerations Associated
With The Strategic Partners FlexElite Contract?" in Section 9.
IF YOU DO NOT ACTIVATE THE BENEFIT PRIOR TO THE MAXIMUM ANNUITIZATION AGE YOU
MAY LOSE ALL OR PART OF THE IAB.
CALCULATION OF INCOME APPRECIATOR BENEFIT AMOUNT
We will calculate the Income Appreciator Benefit amount as of the date we
receive your written request in good order (or, for IAB Option 1, on the annuity
date). We do this by multiplying the current earnings in the contract by the
applicable Income Appreciator Benefit percentage based on the number of years
the Income
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Appreciator Benefit has been in force. For purposes of calculating the Income
Appreciator Benefit:
- - earnings are calculated as the difference between the contract value and the
sum of all purchase payments;
- - earnings do not include (1) any amount added to the contract value as a
result of the Spousal Continuance Benefit, or (2) if we were to permit you to
elect the Income Appreciator Benefit after the contract date, any earnings
accrued under the contract prior to that election;
- - withdrawals reduce earnings first, then purchase payments, on a
dollar-for-dollar basis;
- - the table below shows the Income Appreciator Benefit percentages
corresponding to the number of years the Income Appreciator Benefit has been
in force.
IAB OPTION 1 -- INCOME APPRECIATOR BENEFIT AT ANNUITIZATION
Under this option, if you choose to activate the Income Appreciator Benefit at
annuitization, we will calculate the Income Appreciator Benefit amount on the
annuity date and add it to the adjusted contract value for purposes of
determining the amount available for annuitization. You may apply this amount to
any annuity or settlement option over the lifetime of the annuitant, joint
annuitants, or a period certain of at least 15 years (but not to exceed life
expectancy).
UPON ANNUITIZATION, YOU MAY LOSE ALL OR A PORTION OF THE INCOME APPRECIATOR
BENEFIT IF YOU CHOOSE AN ANNUITY SETTLEMENT OPTION OTHER THAN ANY LIFETIME
PAYOUT OPTION OR PERIOD CERTAIN OPTION FOR AT LEAST 15 YEARS. IN SUCH INSTANCES,
WE WOULD NOT REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR THIS BENEFIT.
EFFECT OF INCOME APPRECIATOR BENEFIT ON GUARANTEED MINIMUM INCOME BENEFIT
If you exercise the Guaranteed Minimum Income Benefit feature and an Income
Appreciator Benefit amount remains payable under your contract, the value we use
to calculate the annuity payout amount will be the greater of:
1. the adjusted contract value plus the remaining Income Appreciator Benefit
amount, calculated at current IAB annuitization rates; or
2. the GMIB protected value plus the remaining Income Appreciator Benefit
amount, calculated using the GMIB guaranteed annuity purchase rates shown in
the contract.
If you exercise the Guaranteed Minimum Income Benefit feature and activate
the Income Appreciator Benefit at the same time, you must choose among the
Guaranteed Minimum Income Benefit annuity payout options available at the time.
TERMINATING THE INCOME APPRECIATOR BENEFIT
The Income Appreciator Benefit will terminate on the earliest of:
- - the date you make a total withdrawal from the contract;
- - the date a death benefit is payable if the contract is not continued by the
surviving spouse under the Spousal Continuance Benefit;
- - the date the Income Appreciator Benefit amount is reduced to zero (generally
ten years after activation) under IAB Options 2 and 3;
- - the date of annuitization; or
- - the date the contract terminates.
HOW WE DETERMINE ANNUITY PAYMENTS
Generally speaking, the annuity phase of the contract involves our distributing
to you in increments the value that you have accumulated. We make these
incremental payments either over a specified time period (e.g., 15 years) (fixed
period annuities) or for the duration of the life of the annuitant (and possibly
co-annuitant) (life annuities). There are certain assumptions that are common to
both fixed period annuities and life annuities. In each type of annuity, we
assume that the
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value you apply at the outset toward your annuity payments earns interest
throughout the payout period. For annuity options within the GMIB, this interest
rate ranges from 2% to 2.5% for contracts sold on or after January 20, 2004, or
upon subsequent state approval (and 2.5% to 3.5% for all other contracts). For
non-GMIB annuity options, the guaranteed minimum rate is 3% (or 1.5% depending
on the option elected and the version of the contract). The GMIB guaranteed
annuity purchase rates in your contract depict the minimum amounts we will pay
(per $1000 of adjusted contract value). If our current annuity purchase rates on
the annuity date are more favorable to you than the guaranteed rates, we will
make payments based on those more favorable rates.
Other assumptions that we use for life annuities and fixed period annuities
differ, as detailed in the following overview:
FIXED PERIOD ANNUITIES
Currently, we offer fixed period annuities only under the Income Appreciator
Benefit and non-GMIB annuity options. Generally speaking, in determining the
amount of each annuity payment under a fixed period annuity, we start with the
adjusted contract value, add interest assumed to be earned over the fixed
period, and divide the sum by the number of payments you have requested. The
life expectancy of the annuitant and co-annuitant are relevant to this
calculation only in that we will not allow you to select a fixed period that
exceeds life expectancy.
LIFE ANNUITIES
There are more variables that affect our calculation of life annuity payments.
Most importantly, we make several assumptions about the annuitant's or co-
annuitant's life expectancy, including the following:
- - The Annuity 2000 Mortality Table is the starting point for our life
expectancy assumptions. This table anticipates longevity of an insured
population based on historical experience and reflecting anticipated
experience for the year 2000.
GUARANTEED AND GMIB ANNUITY PAYMENTS
- - Because life expectancy has lengthened over the past few decades, and likely
will increase in the future, our life annuity calculations anticipate these
developments. We do this largely by making a hypothetical reduction in the
age of the annuitant (or co-annuitant), in lieu of using the annuitant's (or
co-annuitant's) actual age, in calculating the payment amounts. By using such
a reduced age, we base our calculations on a younger person, who generally
would live longer and therefore draw life annuity payments over a longer time
period. Given the longer pay-out period, the payments made to the younger
person would be less than those made to an older person. We make two such age
adjustments:
1. First, for all annuities, we start with the age of the annuitant (or
co-annuitant) on his/her most recent birthday and reduce that age by either
(a) four years, for life annuities under the GMIB sold in contracts on or
after January 20, 2004, or upon subsequent state approval or (b) two years,
with respect to guaranteed payments under life annuities not involving GMIB,
as well as GMIB payments under contracts not described in (a) immediately
above. For the reasons explained above in this section, the four year age
reduction causes a greater reduction in the amount of the annuity payments
than does the two-year age reduction.
2. Second, for life annuities under both versions of GMIB as well as guaranteed
payments under life annuities not involving GMIB, we make a further age
reduction according to the table in your contract entitled "Translation of
Adjusted Age." As indicated in the table, the further into the future the
first annuity payment is, the longer we expect the person receiving those
payments to live, and the more we reduce the annuitant's (or co-annuitant's)
age.
CURRENT ANNUITY PAYMENTS
Immediately above, we have referenced how we determine annuity payments based on
"guaranteed" annuity purchase rates. By "guaranteed" annuity purchase rates, we
mean the minimum annuity
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WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE? (ANNUITIZATION)
CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
purchase rates that are set forth in your annuity contract and thus
contractually guaranteed by us. "Current" annuity purchase rates, in contrast,
refer to the annuity purchase rates that we are applying to contracts that are
entering the annuity phase at a given point in time. These current annuity
purchase rates vary from period to period, depending on changes in interest
rates and other factors. We do not guarantee any particular level of current
annuity purchase rates. When calculating current annuity purchase rates, we use
the actual age of the annuitant (or co-annuitant), rather than any reduced age.
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4:
WHAT IS THE
DEATH BENEFIT?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
THE DEATH BENEFIT FEATURE PROTECTS THE CONTRACT VALUE FOR THE BENEFICIARY.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued, unless you
change it at a later date. Unless an irrevocable beneficiary has been named,
during the accumulation period you can change the beneficiary at any time before
the owner or last survivor, if there are spousal joint owners, dies. However, if
the contract is jointly owned, the owner must name the joint owner and the joint
owner must name the owner as the beneficiary.
CALCULATION OF THE DEATH BENEFIT
If the sole owner dies during the accumulation phase, we will, upon receiving
appropriate proof of death and any other needed documentation in good order
(proof of death), pay a death benefit to the beneficiary designated by the
owner. If there is a sole owner and there is only one beneficiary who is the
owner's spouse, then the surviving spouse may continue the contract under the
Spousal Continuance Benefit. If there are an owner and joint owner of the
contract, and the owner's spouse is both the joint owner and the beneficiary on
the date of death, then, at the death of the first to die, the death benefit
will be paid to the surviving owner, or the surviving owner may continue the
contract under the Spousal Continuance Benefit (FOR CONTRACTS SOLD ON OR AFTER
MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL. FOR ALL OTHER CONTRACTS, if the
owner and joint owner are spouses we will pay this death benefit upon the death
of the last surviving spouse who continues the contract as the sole owner.) If
the contract has an owner and a joint owner and they are not spouses at the time
one dies, we will pay the contract value and the contract will end. Joint
ownership may not be allowed in your state.
Upon receiving appropriate proof of death, the beneficiary will receive the
greater of the following:
1) The current contract value (as of the time we receive proof of death in good
order). We impose no market value adjustment on contract value held within
the market value adjustment option when a death benefit is paid.
2) Either the base death benefit, which equals the total invested purchase
payments you have made proportionally reduced by any withdrawals, or (i) if
you have chosen a Guaranteed Minimum Death Benefit (GMDB), the GMDB protected
value or (ii) if you have chosen the Highest Daily Value Death Benefit, a
death benefit equal to the highest daily value (computed as detailed below in
this section).
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE
APPROVAL, you may elect (i) the Guaranteed Minimum Death Benefit if you are age
85 or younger when you purchase the contract or (ii) the Highest Daily Value
Death Benefit if you are 79 or younger when you purchase the contract.
FOR ALL OTHER CONTRACTS, you may elect the base death benefit if you are 85
or younger and you may elect a GMDB if you are 79 or younger when you purchase
the contract.
GUARANTEED MINIMUM DEATH BENEFIT
The Guaranteed Minimum Death Benefit provides for the option to receive an
enhanced death benefit upon the death of the sole owner or the first to die of
the owner or joint owner during the accumulation phase. If you elect the GMDB
feature, you must elect a GMDB protected value option. You cannot elect a GMDB
option if you choose the Highest Daily Value Death Benefit.
The GMDB protected value option can be equal to the:
- GMDB roll-up,
- GMDB step-up, or
- Greater of the GMDB roll-up and the GMDB step-up.
The GMDB protected value is calculated daily.
GMDB ROLL-UP
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE 80
ON THE CONTRACT DATE, the GMDB roll-up is equal to the invested purchase
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WHAT IS THE DEATH BENEFIT? CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
payments, increased daily at an effective annual interest rate of 5% (SUBJECT TO
A 200% CAP FOR CONTRACTS SOLD PRIOR TO MAY 1, 2003, OR SUBSEQUENT STATE
APPROVAL) starting on the date that each invested purchase payment is made. The
GMDB roll-up value (AND THE CAP FOR CONTRACTS SOLD PRIOR TO MAY 1, 2003, OR
SUBSEQUENT STATE APPROVAL) will increase by subsequent invested purchase
payments and reduce by the effect of withdrawals.
We stop increasing the GMDB roll-up by the effective annual interest rate on
the later of:
- - the contract anniversary coinciding with or next following the sole owner's
or older owner's 80th birthday, or
- - the 5th contract anniversary (APPLICABLE ONLY TO CONTRACTS SOLD ON OR AFTER
MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL).
However, the GMDB protected value will still increase by subsequent invested
purchase payments and reduce by the effect of withdrawals.
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE
APPROVAL, withdrawals will first reduce the GMDB protected value on a
dollar-for-dollar basis up to the first 5% of GMDB protected value calculated on
the contract anniversary (on the contract date in the first contract year), then
proportionally by any amounts exceeding the 5%. FOR ALL OTHER CONTRACTS,
withdrawals will reduce the GMDB protected value and the cap proportionally.
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE
APPROVAL, if the sole owner or the older of the owner and joint owner is between
age 80 and 85 on the contract date, the GMDB roll-up is equal to the invested
purchase payments, increased daily at an effective annual interest rate of 3% of
all invested purchase payments, starting on the date that each invested purchase
payment is made. We will increase the GMDB roll-up by subsequent invested
purchase payments and reduce it by the effect of withdrawals.
We stop increasing the GMDB roll-up by the effective annual interest rate on
the 5th contract anniversary. However we will continue to reduce the GMDB
protected value by the effect of withdrawals.
Withdrawals will first reduce the GMDB protected value on a dollar-for-dollar
basis up to the first 3% of GMDB protected value calculated on the contract
anniversary (on the contract date in the first contract year), then
proportionally by any amounts exceeding the 3%.
GMDB STEP-UP
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE 80
ON THE CONTRACT DATE, the GMDB step-up before the first contract anniversary is
the initial invested purchase payment increased by subsequent invested purchase
payments, and proportionally reduced by the effect of withdrawals. The GMDB
step-up on each contract anniversary will be the greater of the previous GMDB
step-up and the contract value as of such contract anniversary. Between contract
anniversaries, the GMDB step-up will increase by invested purchase payments and
reduce proportionally by withdrawals.
We stop increasing the GMDB step-up by any appreciation in the contract value
on the later of:
- - the contract anniversary coinciding with or next following the sole or older
owner's 80th birthday, or
- - the 5th contract anniversary (APPLICABLE ONLY TO CONTRACTS SOLD ON OR AFTER
MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL.)
However, we still increase the GMDB protected value by subsequent invested
purchase payments and proportionally reduce it by withdrawals.
Here is an example of a proportional reduction:
The current contract value is $100,000 and the protected value is $80,000.
The owner makes a withdrawal that reduces the contract value by 25% (including
the effect of any withdrawal charges). The new protected value is $60,000, or
75% of what it was before the withdrawal.
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB step-up before the third contract
anniversary is the sum of invested purchase payments,
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
reduced by the effect of withdrawals. On the third contract anniversary, we will
adjust the GMDB step-up to the greater of the then current GMDB step-up or the
contract value as of that contract anniversary. Thereafter, we will only
increase the GMDB protected value by subsequent invested purchase payments and
proportionally reduce it by withdrawals.
GREATER OF STEP-UP AND ROLL-UP GUARANTEED MINIMUM DEATH BENEFIT
Under this option, the protected value is equal to the greater of the step-up
value and the roll-up value.
If you have chosen the base death benefit and death occurs after age 80, the
beneficiary will receive the base death benefit described above. If you have
chosen the Guaranteed Minimum Death Benefit option and death occurs on or after
age 80, the beneficiary will receive the greater of: 1) the current contract
value as of the date that due proof of death is received, and 2) the protected
value of the GMDB roll-up or the GMDB step-up reduced proportionally by any
subsequent withdrawals.
HIGHEST DAILY VALUE DEATH BENEFIT
The Highest Daily Value Death Benefit (HDV) is a feature under which the death
benefit may be "stepped-up" on a daily basis to reflect increasing contract
value. HDV is currently being offered in those jurisdictions where we have
received regulatory approval, but is not being offered within the original
version of the Strategic Partners FlexElite contracts. Certain terms and
conditions may differ between jurisdictions once approved. The HDV is not
available if you elect the Guaranteed Minimum Death Benefit. Currently, HDV can
only be elected at the time you purchase your contract. Please note that you may
not terminate the HDV death benefit once elected. Moreover, because this benefit
may not be terminated once elected, you must, as detailed below, keep your
contract value allocated to certain Prudential Series Fund asset allocation
portfolios.
Under HDV, the amount of the benefit depends on whether the "target date" is
reached. The target date is reached upon the later of the contract anniversary
coinciding with or next following the elder owner's (or annuitant's, if entity
owned) 80th birthday or five years after the contract date. Prior to the target
date, the death benefit amount is increased on any business day if the contract
value on that day exceeds the most recently determined death benefit amount
under this option. These possible daily adjustments cease on and after the
target date, and instead adjustments are made only for purchase payments and
withdrawals.
IF THE CONTRACT HAS ONE CONTRACT OWNER, the contract owner must be age 79 or
less at the time the HDV is elected. If the contract has joint owners, the older
owner must be age 79 or less. If there are joint owners, death of the owner
refers to the first to die of the joint owners. If the contract is owned by an
entity, the annuitant must be age 79 or less, and death of the contract owner
refers to the death of the annuitant.
If you elect this benefit, you must allocate your contract value to one or
more of the following asset allocation portfolios of the Prudential Series Fund:
SP Balanced Asset Allocation Portfolio, SP Conservative Asset Allocation
Portfolio, and SP Growth Asset Allocation Portfolio.
The HDV death benefit depends on whether death occurs before or after the
Death Benefit Target Date.
IF THE CONTRACT OWNER DIES BEFORE THE DEATH BENEFIT TARGET DATE, THE DEATH
BENEFIT EQUALS THE GREATER OF:
- - the base death benefit; and
- - the HDV as of the contract owner's date of death.
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4:
WHAT IS THE DEATH BENEFIT? CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
IF THE CONTRACT OWNER DIES ON OR AFTER THE DEATH BENEFIT TARGET DATE, THE DEATH
BENEFIT EQUALS THE GREATER OF:
- - the base death benefit; and
- - the HDV on the Death Benefit Target Date plus the sum of all purchase
payments less the sum of all proportional withdrawals since the Death Benefit
Target Date.
The amount determined by this calculation is increased by any purchase payments
received after the contract owner's date of death and decreased by any
proportional withdrawals since such date.
CALCULATION OF HIGHEST DAILY VALUE DEATH BENEFIT
EXAMPLES OF HIGHEST DAILY VALUE DEATH BENEFIT CALCULATION
The following are examples of how the HDV death benefit is calculated. Each
example assumes an initial purchase payment of $50,000. Each example assumes
that there is one contract owner who is age 70 on the contract date.
EXAMPLE WITH MARKET INCREASE AND DEATH BEFORE DEATH BENEFIT TARGET DATE
Assume that the contract owner's contract value has generally been increasing
due to positive market performance and that no withdrawals have been made. On
the date we receive due proof of death, the contract value is $75,000; however,
the Highest Daily Value was $90,000. Assume as well that the contract owner has
died before the Death Benefit Target Date. The death benefit is equal to the
greater of HDV or the base death benefit. The death benefit would be the Highest
Daily Value ($90,000) because it is greater than the amount that would have been
payable under the base death benefit ($75,000).
EXAMPLE WITH WITHDRAWALS
Assume that the contract value has been increasing due to positive market
performance and the contract owner made a withdrawal of $15,000 in contract year
7 when the contract value was $75,000. On the date we receive due proof of
death, the contract value is $80,000; however, the Highest Daily Value ($90,000)
was attained during the fifth contract year. Assume as well that the contract
owner has died before the Death Benefit Target Date. The Death Benefit is equal
to the greater of the Highest Daily Value (proportionally reduced by the
subsequent withdrawal) or the base death benefit.
Highest Daily Value = $90,000 - [$90,000 * $15,000/$75,000]
= $90,000 - $18,000
= $72,000
Base Death Benefit = max [$80,000, $50,000 - ($50,000 * $15,000/$75,000)]
= max [$80,000, $40,000]
= $80,000
The death benefit therefore is $80,000.
EXAMPLE WITH DEATH AFTER DEATH BENEFIT TARGET DATE
Assume that the contract owner's contract value has generally been increasing
due to positive market performance and that no withdrawals had been made prior
to the Death Benefit Target Date. Further assume that the contract owner dies
after the Death Benefit Target Date, when the contract value is $75,000. The
Highest Daily Value on the Death Benefit Target Date was $80,000; however,
following the Death Benefit Target Date, the contract owner made a purchase
payment of $15,000 and later had taken a withdrawal of $5,000 when the contract
value was $70,000. The death benefit is equal to the greater of the Highest
Daily Value on the Death Benefit Target Date plus purchase payments minus
proportional withdrawals after the Death Benefit Target Date or the base death
benefit.
Highest Daily Value = $80,000 + $15,000 - [($80,000 + $15,000) * $5,000/$70,000]
= $80,000 + $15,000 - $6,786
= $88,214
Base Death Benefit = max [$75,000, ($50,000 + $15,000) - I($50,000 + $15,000) *
$5,000/$70,000J]
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
= max [$75,000, $60,357]
= $75,000
The death benefit therefore is $88,214.
PAYOUT OPTIONS
The beneficiary may, within 60 days of providing proof of death, choose to take
the death benefit under one of several death benefit payout options listed
below.
The death benefit payout options are:
Choice 1. Lump sum payment of the death benefit. If the beneficiary does not
choose a payout option within sixty days, the beneficiary will receive this
payout option.
Choice 2. The payment of the entire death benefit within a period of 5 years
from the date of death.
The entire death benefit will include any increases or losses resulting
from the performance of the variable or fixed interest rate options during
this period. During this period the beneficiary may: reallocate the contract
value among the variable, fixed interest rate, or the market value adjustment
options; name a beneficiary to receive any remaining death benefit in the
event of the beneficiary's death; and make withdrawals from the contract
value, in which case, any such withdrawals will not be subject to any
withdrawal charges. However, the beneficiary may not make any purchase
payments to the contract.
During this 5 year period, we will continue to deduct from the death
benefit proceeds the charges and costs that were associated with the features
and benefits of the contract. Some of these features and benefits may not be
available to the beneficiary, such as Guaranteed Minimum Income Benefit.
Choice 3. Payment of the death benefit under an annuity or annuity settlement
option over the lifetime of the beneficiary or over a period not extending
beyond the life expectancy of the beneficiary with distribution beginning
within one year of the date of death of the owner.
If the owner and joint owner are spouses, any portion of the death benefit
not applied under Choice 3 within one year of the date of death of the first to
die must be distributed within five years of that date of death.
The tax consequences to the beneficiary vary among the three death benefit
payout options. See "What Are The Tax Considerations Associated With The
Strategic Partners FlexElite Contract?" in Section 9.
EARNINGS APPRECIATOR BENEFIT
The Earnings Appreciator Benefit (EAB) is an optional, supplemental death
benefit that provides a benefit payment upon the death of the sole owner or
first to die of the owner or joint owner during the accumulation phase. Any
Earnings Appreciator Benefit payment we make will be in addition to any other
death benefit payment we make under the contract. This feature may not be
available in your state.
The Earnings Appreciator Benefit is designed to provide a beneficiary with
additional funds when we pay a death benefit in order to defray the impact taxes
may have on that payment. Because individual circumstances vary, you should
consult with a qualified tax advisor to determine whether it would be
appropriate for you to elect the Earnings Appreciator Benefit.
If you want the Earnings Appreciator Benefit, you generally must elect it at
the time you apply for the contract. If you elect the Earnings Appreciator
Benefit, you may not later revoke it.
Upon our receipt of proof of death in good order, we will determine an
Earnings Appreciator Benefit by multiplying the Earnings Appreciator Benefit
percentage below by the lesser of: (i) the then-existing amount of earnings
under the contract, or (ii) an amount equal to 3 times the sum of all purchase
payments previously made under the contract.
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE
APPROVAL, for purposes of computing earnings and purchase payments under the
Earnings Appreciator Benefit, we calculate earnings as the difference between
the contract value and the sum of all purchase payments. Withdrawals reduce
earnings first, then purchase payments, on a dollar-for-dollar basis.
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
FOR ALL OTHER CONTRACTS, for purposes of computing earnings and purchase
payments under the EAB, we increase the initial purchase payments by any
subsequent purchase payments and reduce it proportionally by any
withdrawals--the total contract value less that resultant sum being earnings.
When determining the amount of 3 times the sum of all purchase payments
mentioned in this section, we exclude purchase payments made both (i) after the
first contract anniversary and (ii) within 12 months of the date of death
(proportionally reduced for withdrawals).
The EAB percentages are as follows:
- - 40% if the owner is age 70 or younger on the date the application is signed.
- - 25% if the owner is between ages 71 and 75 on the date the application is
signed.
- - FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE
APPROVAL, 15% if the owner is between ages 76 and 79 on the date the
application is signed.
If the contract is owned jointly, the age of the older of the owner or joint
owner determines the EAB percentage.
If the surviving spouse is continuing the contract in accordance with the
Spousal Continuance Benefit (See "Spousal Continuance Benefit" below), the
following conditions apply:
- - In calculating the Earnings Appreciator Benefit, we will use the age of the
surviving spouse at the time that the Spousal Continuance Benefit is
activated to determine the applicable EAB percentage.
- - For the original version of the contract, we will not allow the surviving
spouse to continue the Earnings Appreciator Benefit (or bear the charge
associated with this benefit) if he or she is age 76 or older on the date
that the Spousal Continuance Benefit is activated. FOR CONTRACTS SOLD ON OR
AFTER MAY 1, 2003, OR UPON STATE APPROVAL, we will not allow the surviving
spouse to continue the Earnings Appreciation Benefit (or bear the charge
associated with this benefit) if he or she is age 80 or older on the date the
Spousal Continuance Benefit is activated.
- - If the Earnings Appreciator Benefit is continued, we will calculate any
applicable Earnings Appreciator Benefit payable upon the surviving spouse's
death by treating the contract value (as adjusted under the terms of the
Spousal Continuance Benefit) as the first purchase payment.
TERMINATING THE EARNINGS APPRECIATOR BENEFIT
The Earnings Appreciator Benefit will terminate on the earliest of:
- - the date you make a total withdrawal from the contract,
- - the date a death benefit is payable if the contract is not continued by the
surviving spouse under the Spousal Continuance Benefit,
- - the date the contract terminates, or
- - the date you annuitize the contract.
SPOUSAL CONTINUANCE BENEFIT
This benefit is available if, on the date we receive proof of the owner's death
in good order, (1) there is only one owner of the contract and there is only one
beneficiary who is the owner's spouse; or (2) FOR CONTRACTS SOLD ON OR AFTER MAY
1, 2003, OR UPON SUBSEQUENT STATE APPROVAL, there are an owner and joint owner
of the contract, and the joint owner is the owner's spouse and the owner's
beneficiary under the contract. In no event, however, can the annuitant be older
than the maximum age for annuitization on the date of the owner's death, nor can
the surviving spouse be older than 95 on the date of the owner's death. Assuming
the above conditions are present, the surviving spouse can elect the Spousal
Continuance Benefit, but must do so no later than 60 days after furnishing proof
of the owner's death in good order.
Upon activation of the Spousal Continuance Benefit, the contract value is
adjusted to equal the amount of the death benefit to which the surviving spouse
would have been entitled. This contract value will serve as the basis for
calculating any death benefit payable upon the death of the surviving spouse. We
will allocate any increase in the adjusted contract value among the variable,
fixed interest rate and market value adjustment options in the same proportions
that existed
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
immediately prior to the spousal continuance adjustment. We will waive the
$1,000 minimum requirement for the market value adjustment option.
Under the Spousal Continuance Benefit, we waive any potential withdrawal
charges applicable to purchase payments made prior to activation of the Spousal
Continuance Benefit. In addition, the contract value allocated to the market
value adjustment option will remain subject to a potential market value
adjustment.
IF YOU ELECTED THE BASE DEATH BENEFIT, then upon activation of the Spousal
Continuance Benefit, we will adjust the contract value to equal the greater of:
- - the contract value, or
- - the sum of all invested purchase payments (adjusted for withdrawals),
plus the amount of any applicable Earnings Appreciator Benefit.
IF YOU ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GMDB ROLL-UP, we
will adjust the contract value to equal the greater of:
- - the contract value, or
- - the GMDB roll-up,
plus the amount of any applicable Earnings Appreciator Benefit.
IF YOU ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GMDB STEP-UP, we
will adjust the contract value to equal the greater of:
- - the contract value, or
- - the GMDB step-up,
plus the amount of any applicable Earnings Appreciator Benefit.
IF YOU HAVE ELECTED THE HDV DEATH BENEFIT, we will adjust the contract value
to equal the greater of:
- - the contract value, or
- - the Highest Daily Value,
plus the amount of any applicable Earnings Appreciator Benefit.
After we have made the adjustment to contract value set out immediately
above, we will continue to compute the GMDB roll-up, the GMDB step-up, or HDV
death benefit (as applicable) under the surviving spousal owner's contract, and
will do so in accordance with the preceding discussion in this section.
If the contract is being continued by the surviving spouse, the attained age
of the surviving spouse will be the basis used in determining the death benefit
payable under the Guaranteed Minimum Death Benefit or Highest Daily Value Death
Benefit provisions of the contract. The contract may not be continued upon the
death of a spouse who had assumed ownership of the contract through the exercise
of the Spousal Continuance Benefit.
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE
APPROVAL, IF YOU ELECTED THE GUARANTEED MINIMUM INCOME BENEFIT, it will be
continued for the surviving spousal owner. All provisions of the Guaranteed
Minimum Income Benefit (i.e., waiting period, GMIB roll-up cap, etc.) will
remain the same as on the date of the owner's death. If the GMIB reset feature
was never exercised, the surviving spousal owner can exercise the GMIB reset
feature twice. If the original owner had previously exercised the GMIB reset
feature once, the surviving spousal owner can exercise the GMIB reset once.
However, the surviving spouse (or new annuitant designated by the surviving
spouse) must be under 76 years of age at the time of reset. If the original
owner had previously exercised the GMIB reset feature twice, the surviving
spousal owner may not exercise the GMIB reset at all. If the attained age of the
surviving spouse at activation of the Spousal Continuance Benefit, when added to
the remainder of the GMIB waiting period to be satisfied, would preclude the
surviving spouse from utilizing the Guaranteed Minimum Income Benefit, we will
revoke the Guaranteed Minimum Income Benefit under the contract at that time and
we will no longer charge for that benefit.
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE
APPROVAL, IF YOU ELECTED THE INCOME APPRECIATOR BENEFIT, on the owner's death,
the Income Appreciator Benefit will end unless the contract is continued by the
owner's surviving spouse under the Spousal Continuance Benefit. If the contract
is continued by the surviving spouse, we will continue to pay the balance of any
Income Appreciator Benefit payments until the earliest to occur of the
following: (a) the date on which 10 years' worth of IAB automatic withdrawal
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
payments or IAB credits, as applicable, have been paid, (b) the latest date on
which annuity payments would have had to have commenced had the owner not died
(i.e., contract anniversary coinciding with or next following the annuitant's
95th birthday), or (c) the contract anniversary coinciding with or next
following the annuitants' surviving spouse's 95th birthday.
If the Income Appreciator Benefit has not been in force for 7 contract years,
the surviving spouse may not activate the benefit until it has been in force for
7 contract years. If the attained age of the surviving spouse at activation of
the Spousal Continuation Benefit, when added to the remainder of the Income
Appreciator Benefit waiting period to be satisfied, would preclude the surviving
spouse from utilizing the Income Appreciator Benefit, we will revoke the Income
Appreciator Benefit under the contract at that time and we will no longer charge
for that benefit. If the Income Appreciator Benefit has been in force for 7
contract years or more, but the benefit has not been activated, the surviving
spouse may activate the benefit at any time after the contract has been
continued. If the Income Appreciator Benefit is activated after the contract is
continued by the surviving spouse, the Income Appreciator Benefit calculation
will exclude any amount added to the contract at the time of spousal continuance
resulting from any death benefit value exceeding the contract value.
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UNDER THE CONTRACT?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
LIFETIME FIVE INCOME BENEFIT
The Lifetime Five Income Benefit (Lifetime Five) is an optional feature that
guarantees your ability to withdraw amounts equal to a percentage of an initial
principal value (called the "Protected Withdrawal Value"), regardless of the
impact of market performance on your contract value, subject to our rules
regarding the timing and amount of withdrawals. There are two options -- one is
designed to provide an annual withdrawal amount for life (the "Life Income
Benefit") and the other is designed to provide a greater annual withdrawal
amount (than the first option) as long as there is Protected Withdrawal Value
(adjusted as described below) (the "Withdrawal Benefit"). If there is no
Protected Withdrawal Value, the Withdrawal Benefit will be zero. You do not
choose between these two options; each option will continue to be available as
long as the annuity has a contract value and Lifetime Five is in effect. Certain
benefits under Lifetime Five may remain in effect even if the contract value is
zero. The option may be appropriate if you intend to make periodic withdrawals
from your contract and wish to ensure that market performance will not affect
your ability to receive annual payments. You are not required to make
withdrawals -- the guarantees are not lost if you withdraw less than the maximum
allowable amount each year. Lifetime Five is only being offered in those
jurisdictions where we have received regulatory approval and will be offered
subsequently in other jurisdictions when we receive regulatory approval in those
jurisdictions. Certain terms and conditions may differ between jurisdictions
once approved.
Lifetime Five is subject to certain restrictions described below.
- - Lifetime Five can only be elected once each contract year, and only where the
annuitant and the contract owner are the same person or, if the contract
owner is an entity, where there is only one annuitant.
- - The annuitant must be at least 45 years old when Lifetime Five is elected.
- - Lifetime Five is not available if you elect the Guaranteed Minimum Income
Benefit or Income Appreciator Benefit.
- - As long as Lifetime Five is in effect, you must allocate your contract value
to one or more of the following asset allocation portfolios of the Prudential
Series Fund: SP Balanced Asset Allocation Portfolio, SP Conservative Asset
Allocation Portfolio, and SP Growth Asset Allocation Portfolio.
PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is initially used to determine the amount of each
initial annual payment under the Life Income Benefit and the Withdrawal Benefit.
The initial Protected Withdrawal Value is determined as of the date you make
your first withdrawal under the contract following your election of Lifetime
Five. The initial Protected Withdrawal Value is equal to the greater of (A) the
contract value on the date you elect Lifetime Five, plus any additional purchase
payments each growing at 5% per year from the date of your election, or
application of the purchase payment to your contract, as applicable, until the
date of your first withdrawal or the 10th anniversary of the benefit effective
date, if earlier), (B) the contract value as of the date of the first withdrawal
from your contract, prior to the withdrawal, and (C) the highest contract value
on each contract anniversary prior to the first withdrawal or on the first 10
contract anniversaries if earlier than the date of your first withdrawal after
the benefit effective date. Each value is increased by the amount of any
subsequent purchase payments.
- - If you elect Lifetime Five at the time you purchase your contract, the
contract value will be your initial purchase payment.
- - For existing contract owners who are electing the Lifetime Five Benefit, the
contract value on the date of the contract owner's election of Lifetime Five
will be used to determine the initial Protected Withdrawal Value.
- - If you make additional purchase payments after your first withdrawal, the
Protected Withdrawal Value will be increased by the amount of each additional
purchase payment.
You may elect to step-up your Protected Withdrawal Value if, due to positive
market performance, your
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CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
contract value is greater than the Protected Withdrawal Value. You are eligible
to step-up the Protected Withdrawal Value on or after the 5th anniversary of the
first withdrawal under Lifetime Five. The Protected Withdrawal Value can be
stepped up again on or after the 5th anniversary following the preceding
step-up. If you elect to step-up the Protected Withdrawal Value, and on the date
you elect to step-up, the charges under Lifetime Five have changed for new
purchasers, you may be subject to the new charge going forward.
Upon election of the step-up, we increase the Protected Withdrawal Value to
be equal to the then current contract value. For example, assume your initial
Protected Withdrawal Value was $100,000 and you have made cumulative withdrawals
of $40,000, reducing the Protected Withdrawal Value to $60,000. On the date you
are eligible to step-up the Protected Withdrawal Value, your contract value is
equal to $75,000. You could elect to step-up the Protected Withdrawal Value to
$75,000 on the date you are eligible. If your current Annual Income Amount and
Annual Withdrawal Amount (as described below) are less than they would be if we
did not reflect the step-up in Protected Withdrawal Value, then we will increase
these amounts to reflect the step-up as described below.
The Protected Withdrawal Value is reduced each time a withdrawal is made on a
"dollar-for-dollar" basis up to 7% per contract year of the Protected Withdrawal
Value and on the greater of a "dollar-for-dollar" basis or a pro rata basis for
withdrawals in a contract year in excess of that amount until the Protected
Withdrawal Value is reduced to zero. At that point, the Annual Withdrawal Amount
will be zero until such time (if any) as the contract reflects a Protected
Withdrawal Value (for example, due to a step-up or additional purchase payments
being made into the contract).
ANNUAL INCOME AMOUNT UNDER THE LIFE INCOME BENEFIT
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value. Under Lifetime Five, if your cumulative withdrawals in a
contract year are less than or equal to the Annual Income Amount, they will not
reduce your Annual Income Amount in subsequent contract years. If your
cumulative withdrawals are in excess of the Annual Income Amount (Excess
Income), your Annual Income Amount in subsequent years will be reduced (except
with regard to required minimum distributions) by the result of the ratio of the
Excess Income to the contract value immediately prior to such withdrawal (see
examples of this calculation below). Reductions include the actual amount of the
withdrawal, including any withdrawal charges that may apply. A withdrawal can be
considered Excess Income under the Life Income Benefit even though it does not
exceed the Annual Withdrawal Amount under the Withdrawal Benefit. When you elect
a step-up, your Annual Income Amount increases to equal 5% of your contract
value after the step-up if such amount is greater than your Annual Income
Amount. Your Annual Income Amount also increases if you make additional purchase
payments. The amount of the increase is equal to 5% of any additional purchase
payments. Any increase will be added to your Annual Income Amount beginning on
the day that the step-up is effective or the purchase payment is made. A
determination of whether you have exceeded your Annual Income Amount is made at
the time of each withdrawal; therefore, a subsequent increase in the Annual
Income Amount will not offset the effect of a withdrawal that exceeded the
Annual Income Amount at the time the withdrawal was made.
ANNUAL WITHDRAWAL AMOUNT UNDER THE WITHDRAWAL BENEFIT
The initial Annual Withdrawal Amount is equal to 7% of the initial Protected
Withdrawal Value. Under Lifetime Five, if your cumulative withdrawals each
contract year are less than or equal to the Annual Withdrawal Amount, your
Protected Withdrawal Value will be reduced on a "dollar-for-dollar" basis. If
your cumulative withdrawals are in excess of the Annual Withdrawal Amount
(Excess Withdrawal), your Annual Withdrawal Amount will be reduced (except with
regard to required minimum distributions) by the result of the ratio of the
Excess Withdrawal to the contract value immediately prior to such withdrawal
(see the examples of this calculation below). Reductions include the actual
amount of the withdrawal, including any withdrawal
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
charges that may apply. When you elect a step-up, your Annual Withdrawal Amount
increases to equal 7% of your contract value after the step-up if such amount is
greater than your Annual Withdrawal Amount. Your Annual Withdrawal Amount also
increases if you make additional purchase payments. The amount of the increase
is equal to 7% of any additional purchase payments. A determination of whether
you have exceeded your Annual Withdrawal Amount is made at the time of each
withdrawal; therefore, a subsequent increase in the Annual Withdrawal Amount
will not offset the effect of a withdrawal that exceeded the Annual Withdrawal
Amount at the time the withdrawal was made.
Lifetime Five does not affect your ability to make withdrawals under your
contract or limit your ability to request withdrawals that exceed the Annual
Income Amount and the Annual Withdrawal Amount. You are not required to withdraw
all or any portion of the Annual Withdrawal Amount or Annual Income Amount in
each contract year.
- - If, cumulatively, you withdraw an amount less than the Annual Withdrawal
Amount under the Withdrawal Benefit in any contract year, you cannot
carry-over the unused portion of the Annual Withdrawal Amount to subsequent
contract years.
- - If, cumulatively, you withdraw an amount less than the Annual Income Amount
under the Life Income Benefit in any contract year, you cannot carry-over the
unused portion of the Annual Income Amount to subsequent contract years.
However, because the Protected Withdrawal Value is only reduced by the actual
amount of withdrawals you make under these circumstances, any unused Annual
Withdrawal Amount or Annual Income Amount may extend the period of time until
the remaining Protected Withdrawal Value is reduced to zero.
The following examples of dollar-for-dollar and proportional reductions and
the step-up of the Protected Withdrawal Value, Annual Withdrawal Amount and
Annual Income Amount assume: 1.) the contract date and the effective date of
Lifetime Five are February 1, 2005; 2.) an initial purchase payment of $250,000;
3.) the contract value on February 1, 2006 is equal to $265,000; 4.) the first
withdrawal occurs on March 1, 2006 when the contract value is equal to $263,000;
and 5.) the contract value on March 1, 2011 is equal to $240,000.
The initial Protected Withdrawal Value is calculated as the greatest of (a),
(b) and (c):
(a) Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 * 1.05(393/365) = $263,484.33
(b) Contract value on March 1, 2006 (the date of the first withdrawal) =
$263,000
(c) Contract value on February 1, 2006 (the first contract anniversary) =
$265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Withdrawal Amount is equal to $18,550 under the Withdrawal Benefit (7% of
$265,000). The Annual Income Amount is equal to $13,250 under the Life Income
Benefit (5% of $265,000).
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
If $10,000 was withdrawn (less than both the Annual Income Amount and the Annual
Withdrawal Amount) on March 1, 2006, then the following values would result:
- - Remaining Annual Withdrawal Amount for current contract year = $18,550 -
$10,000 = $8,550
- - Annual Withdrawal Amount for future contract years remains at $18,550
- - Remaining Annual Income Amount for current contract year = $13,250 - $10,000
= $3,250
- - Annual Income Amount for future contract years remains at $13,250
- - Protected Withdrawal Value is reduced by $10,000 from $265,000 to $255,000
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
a) If $15,000 was withdrawn (more than the Annual Income Amount but less than
the Annual Withdrawal Amount) on March 1, 2006, then the following values
would result:
- - Remaining Annual Withdrawal Amount for current contract year = $18,550 -
$15,000 = $3,550
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CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
- - Annual Withdrawal Amount for future contract years remains at $18,550
- - Remaining Annual Income Amount for current contract year = $0
- - Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 =
$1,750) reduces Annual Income Amount for future contract years.
- - Reduction to Annual Income Amount = Excess Income/contract value before
Excess Income * Annual Income Amount = $1,750/($263,000 - $13,250) * $13,250
= $93
- - Annual Income Amount for future contract years = $13,250 - $93 = $13,157
- - Protected Withdrawal Value is reduced by $15,000 from $265,000 to $250,000
b) If $25,000 was withdrawn (more than both the Annual Income Amount and the
Annual Withdrawal Amount) on March 1, 2006, then the following values would
result:
- - Remaining Annual Withdrawal Amount for current contract year = $0
- - Excess of withdrawal over the Annual Withdrawal Amount ($25,000 - $18,550 =
$6,450) reduces Annual Withdrawal Amount for future contract years.
- - Reduction to Annual Withdrawal Amount = Excess Withdrawal/contract value
before Excess Withdrawal * Annual Withdrawal Amount = $6,450/($263,000 -
$18,550) * $18,550 = $489
- - Annual Withdrawal Amount for future contract years = $18,550 - $489 = $18,061
- - Remaining Annual Income Amount for current contract year = $0
- - Excess of withdrawal over the Annual Income Amount ($25,000 - $13,250 =
$11,750) reduces Annual Income Amount for future contract years.
- - Reduction to Annual Income Amount = Excess Income/contract value before
Excess Income * Annual Income Amount = $11,750/($263,000 - $13,250) * $13,250
= $623
- - Annual Income Amount for future contract years = $13,250 - $623 = $12,627
- - Protected Withdrawal Value is first reduced by the Annual Withdrawal Amount
($18,550) from $265,000 to $246,450. It is further reduced by the greater of
a dollar-for-dollar reduction or a proportional reduction.
- - Dollar-for-dollar reduction = $25,000 - $18,550 = $6,450
- - Proportional reduction = Excess Withdrawal/contract value before Excess
Withdrawal * Protected Withdrawal Value = $6,450/($263,000 - $18,550) *
$246,450 = $6,503
- - Protected Withdrawal Value = $246,450 - max [$6,450, $6,503] = $239,947
EXAMPLE 3. STEP-UP OF THE PROTECTED WITHDRAWAL VALUE
If the Annual Income Amount ($13,250) is withdrawn each year starting on March
1, 2006 for a period of 5 years, the Protected Withdrawal Value on March 1, 2011
would be reduced to $198,750 [$265,000 - ($13,250 * 5)]. If a step-up is elected
on March 1, 2011, then the following values would result:
- - Protected Withdrawal Value = contract value on March 1, 2011 = $240,000
- - Annual Income Amount is equal to the greater of the current Annual Income
Amount or 5% of the stepped up Protected Withdrawal Value. Current Annual
Income Amount is $13,250. 5% of the stepped-up Protected Withdrawal Value is
5% of $240,000, which is $12,000. Therefore, the Annual Income Amount remains
$13,250.
- - Annual Withdrawal Amount is equal to the greater of the current Annual
Withdrawal Amount or 7% of the stepped up Protected Withdrawal Value. Current
Annual Withdrawal Amount is $18,550. 7% of the stepped-up Protected
Withdrawal Value is 7% of $240,000, which is $16,800. Therefore, the Annual
Withdrawal Amount remains $18,550.
BENEFITS UNDER LIFETIME FIVE
- - If your contract value is equal to zero, and the cumulative withdrawals in
the current contract year are greater than the Annual Withdrawal Amount,
Lifetime Five will terminate. To the extent that your contract value was
reduced to zero as a result of cumulative withdrawals that are equal to or
less
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
than the Annual Income Amount and amounts are still payable under both the
Life Income Benefit and the Withdrawal Benefit, you will be given the choice
of receiving the payments under the Life Income Benefit or under the
Withdrawal Benefit. Once you make this election we will make an additional
payment for that contract year equal to either the remaining Annual Income
Amount or Annual Withdrawal Amount for the contract year, if any, depending
on the option you choose. In subsequent contract years we make payments that
equal either the Annual Income Amount or the Annual Withdrawal Amount. You
will not be able to change the option after your election and no further
purchase payments will be accepted under your contract. If you do not make an
election, we will pay you annually under the Life Income Benefit. To the
extent that cumulative withdrawals in the current contract year that reduced
your contract value to zero are more than the Annual Income Amount but less
than or equal to the Annual Withdrawal Amount and amounts are still payable
under the Withdrawal Benefit, you will receive the payments under the
Withdrawal Benefit. In the year of a withdrawal that reduced your contract
value to zero, we will make an additional payment to equal any remaining
Annual Withdrawal Amount and make payments equal to the Annual Withdrawal
Amount in each subsequent year (until the Protected Withdrawal Value is
depleted). Once your contract value equals zero no further purchase payments
will be accepted under your contract.
- - If annuity payments are to begin under the terms of your contract or if you
decide to begin receiving annuity payments and there is any Annual Income
Amount due in subsequent contract years or any remaining Protected Withdrawal
Value, you can elect to either:
1. apply your contract value to any annuity option available;
2. request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. We make
such annuity payments until the annuitant's death; or
3. request that, as of the date annuity payments are to begin, we pay out
any remaining Protected Withdrawal Value as annuity payments. Each year
such annuity payments will equal the Annual Withdrawal Amount or the
remaining Protected Withdrawal Value if less. We make such annuity
payments until the earlier of the annuitant's death or the date the
Protected Withdrawal Value is depleted.
We must receive your request in a form acceptable to us at the Prudential
Annuity Service Center.
- - In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a single life fixed annuity with five
payments certain using the greater of the annuity rates then currently
available or the annuity rates guaranteed in your contract. The amount that
will be applied to provide such annuity payments will be the greater of:
1. the present value of future Annual Income Amount payments. Such present
value will be calculated using the greater of the single life fixed
annuity rates then currently available or the single life fixed annuity
rates guaranteed in your contract; and
2. the contract value.
If no withdrawal was ever taken, we will determine a Protected Withdrawal
Value and calculate an Annual Income Amount and an Annual Withdrawal Amount as
if you made your first withdrawal on the date the annuity payments are to begin.
OTHER IMPORTANT CONSIDERATIONS
- - Withdrawals under Lifetime Five are subject to all of the terms and
conditions of the contract, including any withdrawal charges.
- - Withdrawals made while Lifetime Five is in effect will be treated, for tax
purposes, in the same way as any other withdrawals under the contract.
Lifetime Five does not directly affect the contract value or surrender value,
but any withdrawal will decrease
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PART II
STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-10
the contract value by the amount of the withdrawal (plus any applicable
withdrawal charges). If you surrender your contract, you will receive the
current contract value, not the Protected Withdrawal Value.
- - You can make withdrawals from your contract while your contract value is
greater than zero without purchasing Lifetime Five. Lifetime Five provides a
guarantee that if your contract value declines due to market performance, you
will be able to receive your Protected Withdrawal Value or Annual Income
Amount in the form of periodic benefit payments.
- - You must allocate your contract value to one or more of the following asset
allocation portfolios of the Prudential Series Fund: SP Balanced Asset
Allocation Portfolio, SP Conservative Asset Allocation Portfolio, and SP
Growth Asset Allocation Portfolio.
ELECTION OF LIFETIME FIVE
WITH RESPECT TO THE SUBSEQUENT VERSION OF STRATEGIC PARTNERS FLEXELITE SOLD ON
OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL, Lifetime Five can be
elected at the time you purchase your contract, or after the contract date. WITH
RESPECT TO THE ORIGINAL VERSION OF STRATEGIC PARTNERS FLEXELITE, Lifetime Five
can be elected only after the contract date. Elections of Lifetime Five are
subject to our eligibility rules and restrictions. The contract owner's contract
value as of the date of election will be used as the basis to calculate the
initial Protected Withdrawal Value, the initial Annual Withdrawal Amount, and
the initial Annual Income Amount.
TERMINATION OF LIFETIME FIVE
Lifetime Five terminates automatically when your Protected Withdrawal Value and
Annual Income Amount reaches zero. You may terminate Lifetime Five at any time
by notifying us. If you terminate Lifetime Five, any guarantee provided by the
benefit will terminate as of the date the termination is effective.
Lifetime Five terminates:
- - upon your surrender of the contract,
- - upon the death of the annuitant (but your surviving spouse may elect a new
Lifetime Five benefit if your spouse elects the spousal continuance option
and your spouse would then be eligible to elect the benefit as if he/she were
a new purchaser),
- - upon a change in ownership of the contract that changes the tax
identification number of the contract owner, or
- - upon your election to begin receiving annuity payments.
The charge for Lifetime Five will no longer be deducted from your contract
value upon termination.
ADDITIONAL TAX CONSIDERATIONS FOR QUALIFIED CONTRACTS
If you purchase an annuity contract as an investment vehicle for "qualified"
investments, including an IRA, the minimum distribution rules under the Code
require that you begin receiving periodic amounts from your annuity contract
beginning after age 70 1/2. The amount required under the Code may exceed the
Annual Withdrawal Amount and the Annual Income Amount, which will cause us to
increase the Annual Income Amount and the Annual Withdrawal Amount in any
contract year that required minimum distributions due from your contract that
are greater than such amounts. Any such payments will reduce your Protected
Withdrawal Value. In addition, the amount and duration of payments under the
contract payment and death benefit provisions may be adjusted so that the
payments do not trigger any penalty or excise taxes due to tax considerations
such as minimum distribution requirements.
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HOW CAN I PURCHASE A STRATEGIC PARTNERS
FLEXELITE CONTRACT?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
PURCHASE PAYMENTS
The initial purchase payment is the amount of money you give us to purchase the
contract. The minimum initial purchase payment is $10,000. Where allowed by law,
you must get our approval for any initial and additional purchase payment of
$1,000,000 or more. With some restrictions, 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.
You may purchase this contract only if the oldest of the owner, joint owner,
annuitant, or co-annuitant is age 85 or younger on the contract date. Certain
age limits apply to certain features and benefits described herein. No
subsequent purchase payments may be made on or after the earliest of the 86th
birthday of:
- - the owner;
- - the joint owner;
- - the annuitant; or
- - the co-annuitant
Currently, the maximum aggregate purchase payment you may make is $20
million. We limit the maximum total purchase payments in any contract year,
other than the first to $2 million absent our prior approval. Depending on the
applicable state law, other limits may apply.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your purchase payment among the
variable investment options, fixed interest rate options, or the market value
adjustment option based on the percentages you choose. The percentage of your
allocation to a 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.
Allocations to the DCA Fixed Rate Option must be no less than $2,000 for
contracts sold on or after May 1, 2003, or upon subsequent state approval (for
all other contracts $5,000) and, allocations to the market value adjustment
option must be no less than $1,000.
You may change your allocation of future invested purchase payments 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.
CREDIT ELECTION
We will notify you of your option to make a credit election thirty days before
your 3rd and 6th contract anniversaries. If you make a credit election, we will
add to your contract value a credit amount of at least 0.5% of the contract
value as of the applicable contract anniversary. Currently, we will add a credit
amount of 1% of the contract value as of the applicable contract anniversary.
The credit will be allocated to the variable or fixed interest rate options or
the market value adjustment option in the same proportion as the contract value
on the contract anniversary. We must receive your credit election in good order
by your contract anniversary in order to add the credit to your contract value.
This option is not available if the annuitant or co-annuitant is 81 or older on
the contract date, the contract is continued under the Spousal Continuance
Benefit, or you previously elected not to take the credit.
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
After you make a credit election, amounts you withdraw will be subject to a
credit election withdrawal charge of 7% for the first three contract years since
your credit election.
These charges may be lower in certain states.
The credit election withdrawal charges are determined and applied in the same
manner as the withdrawal charges. Credits and related earnings are treated as
earnings under the contract.
We recoup the cost of the credit by assessing withdrawal charges for a longer
period of time. If you make a withdrawal during the credit election withdrawal
charge period you may be in a worse position than if you had declined the
credit. This credit option may not be available in your state.
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 option(s) 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. An accumulation
unit works like a share of a mutual fund.
Every day we determine the value of an accumulation unit for each of the
variable investment options. We do this by:
1) adding up the total amount of money allocated to a specific investment
option;
2) subtracting from that amount insurance charges and any other applicable
charges such as for taxes; and
3) dividing this amount by the number of outstanding accumulation units.
When you make a purchase payment to a variable investment option, we credit
your contract with accumulation units of the subaccount or subaccounts for the
investment options you choose. We determine the number of accumulation units
credited to your contract by dividing the amount of the purchase payment
allocated to a variable investment option by the unit price of the accumulation
unit for that variable investment option. We calculate the unit price for each
variable investment option after the New York Stock Exchange closes each day and
then credit your contract. The value of the accumulation units can increase,
decrease, or remain the same from day to day.
We cannot guarantee that your contract value will increase or that it will
not fall below the amount of your total purchase payments.
We reserve the right to terminate the contract, and pay the contract value to
you, in either of the following scenarios: (i) if immediately prior to the
annuity date, the contract value is less than $2000, or if the contract would
provide annuity payments of less than $20 per month and (ii) if during the
accumulation period, no purchase payment has been received during the
immediately preceding two contract years and each of the following is less than
$2000: (a) the total purchase payments (less withdrawals) made prior to such
period, and (b) the current contract value.
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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 AND ADMINISTRATIVE CHARGE
Each day we make a deduction for the insurance and administrative charge. This
charge covers our expenses for mortality and expense risk, administration,
marketing and distribution. If you choose a Guaranteed Minimum Death Benefit
option or Highest Daily Value Death Benefit option, the insurance and
administrative charge also includes a charge to cover our assumption of the
associated risk. The mortality risk portion of the charge is for assuming the
risk that the annuitant(s) will live longer than expected based on our life
expectancy tables. When this happens, we pay a greater number of annuity
payments. We also incur the risk that the death benefit amount exceeds the
contract value. The expense risk portion of the charge is for assuming the risk
that the current charges will be insufficient in the future to cover the cost of
administering the contract. The administrative expense portion of the charge is
for the expenses associated with the administration of the contract. This
includes preparing and issuing the contract; establishing and maintaining
contract records; preparation of confirmations and annual reports; personnel
costs; legal and accounting fees; filing fees; and systems costs. The Guaranteed
Minimum Death Benefit risk portion of the charge, if applicable, covers our
assumption of the risk that the protected value of the contract will be larger
than the base death benefit if the contract owner dies during the accumulation
phase. The Highest Daily Value Death Benefit portion of the charge covers our
assumption of the risk that the highest daily value on the date of death will
exceed the contract value.
We calculate the insurance and administrative charge based on the average
daily value of all assets allocated to the variable investment options. These
charges are not assessed against amounts allocated to the fixed interest rate
options. The amount of the charge depends on the death benefit option that you
choose.
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE
APPROVAL, the charge is equal to:
- 1.65% on an annual basis if you choose the base benefit,
- 1.9% on an annual basis if you choose either the roll-up or step-up
Guaranteed Minimum Death Benefit option,
- 2% on an annual basis if you choose the greater of the roll-up and
step-up Guaranteed Minimum Death Benefit option, and
- 2.15% on an annual basis if you choose the Highest Daily Value Death
Benefit.
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
FOR ALL OTHER CONTRACTS:
- 1.6% on an annual basis if you choose the base benefit, and
- 1.8% on an annual basis if you choose either the roll-up or step-up
Guaranteed Minimum Death Benefit option.
- 1.9% on an annual basis if you choose the greater of the roll-up and
step-up Guaranteed Minimum Death Benefit option.
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 insurance risk charge for your contract cannot be increased. Any profits
made from this charge may be used by us to pay for the costs of distributing the
contracts.
WITHDRAWAL CHARGE
A withdrawal charge may apply if you make a full or partial withdrawal during
the withdrawal charge period for a purchase payment. When you make a credit
election, a 7% withdrawal charge will be applied to amounts withdrawn for the
three contract years following the credit election. The withdrawal charge may
also apply if you begin the income phase during these periods, depending upon
the annuity option you choose.
The withdrawal charge is the percentage, shown below, of the amount
withdrawn. Full contract years are measured from the contract date with respect
to the initial withdrawal charge and from the date you make a credit election
with respect to the credit election withdrawal charge.
In certain states reduced withdrawal charges may apply for certain ages if a
credit election is made.
If a withdrawal is effective on the day before a contract anniversary, the
withdrawal charge percentage as of the next following contract anniversary will
apply.
If you request a withdrawal, we will deduct an amount from the contract value
that is sufficient to pay the withdrawal charge, and provide you with the amount
requested.
If you request a full withdrawal, we will provide you with the full amount of
the contract value after making deductions for charges.
Each contract year, you may withdraw a specified amount of your contract
value without incurring a withdrawal charge. We determine the "charge-free
amount" available to you in a given contract year on the contract anniversary
that begins that year. The charge-free amount in a given contract year is equal
to 10% of the sum of all purchase payments that you have made as of the
applicable contract anniversary. During the first contract year, the charge-free
amount is equal to 10% of the initial purchase payment.
When you make a withdrawal (including a withdrawal under the optional
Lifetime Five Income Benefit), we will deduct the amount of the withdrawal first
from the available charge-free amount. Any excess amount will then be deducted
from purchase payments in excess of the charge-free amount and subject to
applicable withdrawal charges. Once you have withdrawn all purchase payments,
additional withdrawals will come from any earnings. We do not impose withdrawal
charges on earnings.
If 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.
WAIVER OF WITHDRAWAL CHARGE FOR CRITICAL CARE
Except as restricted by applicable state law, we will waive all withdrawal
charges and any market value adjustment upon receipt of proof that the owner or
a joint owner is terminally ill, or has been confined to an
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eligible nursing home or eligible hospital continuously for at least three
months after the contract date. We will also waive the contract maintenance
charge if you surrender your contract in accordance with the above noted
conditions. This waiver is not available if the owner has assigned ownership of
the contract to someone else.
MINIMUM DISTRIBUTION REQUIREMENTS
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL,
if a withdrawal is taken from a tax qualified contract under the minimum
distribution option in order to satisfy an IRS mandatory distribution
requirement only with respect to that contract's account balance, we will waive
withdrawal charges. See "What Are The Tax Considerations Associated With The
Strategic Partners Annuity One Contract?" in Section 9.
CONTRACT MAINTENANCE CHARGE
On each contract anniversary during the accumulation phase, if your contract
value is less than $100,000, we will deduct the lesser of $50 or 2% of your
contract value, for administrative expenses. (This fee may differ in certain
states). While this is what we currently charge, we may increase this charge up
to a maximum of $60. Also, we may raise the level of the contract value at which
we waive this fee. The charge will be deducted proportionately from each of the
contract's variable investment options, fixed interest rate options, and
guarantee periods within the market value adjustment option. This same charge
will also be deducted when you surrender your contract if your contract value is
less than $100,000.
GUARANTEED MINIMUM INCOME BENEFIT CHARGE
We will impose an additional charge if you choose the Guaranteed Minimum Income
Benefit. FOR CONTRACTS SOLD ON OR AFTER JANUARY 20, 2004, OR UPON SUBSEQUENT
STATE APPROVAL, we will deduct a charge equal to 0.50% per year of the average
GMIB protected value for the period the charge applies. FOR ALL OTHER CONTRACTS,
this is an annual charge equal to 0.45% of the average GMIB protected value for
the period the charge applies. We deduct the charge from your contract value on
each of the following events:
- - each contract anniversary,
- - when you begin the income phase of the contract,
- - upon a full withdrawal, and
- - upon a partial withdrawal if the remaining contract value would not be enough
to cover the then applicable Guaranteed Minimum Income Benefit charge.
If we impose this fee other than on a contract anniversary, then we will
pro-rate it based on the portion of the contract year that has elapsed since the
full annual fee was most recently deducted.
Because the charge is calculated based on the average GMIB protected value,
it does not increase or decrease based on changes to the annuity's contract
value due to market performance. If the GMIB protected value increases, the
dollar amount of the annual charge will increase, while a decrease in the GMIB
protected value will decrease the dollar amount of the charge.
The charge is deducted annually in arrears each contract year on the contract
anniversary. We deduct the amount of the charge pro-rata from the contract value
allocated to the variable investment options, the fixed interest rate options,
and the market value adjustment option. No market value adjustment will apply to
the portion of the charge deducted from the market value adjustment option. If
you surrender your contract, begin receiving annuity payments under the GMIB or
any other annuity payout option we make available during a contract year, or the
GMIB terminates, we will deduct the charge for the portion of the contract year
since the prior contract anniversary (or the contract date if in the first
contract year). Upon a full withdrawal or if the contract value remaining after
a partial withdrawal is not enough to cover the applicable Guaranteed Minimum
Income Benefit charge, we will deduct the charge from the amount we pay you.
THE FACT THAT WE MAY IMPOSE THE CHARGE UPON A FULL OR PARTIAL WITHDRAWAL DOES
NOT IMPAIR YOUR RIGHT TO MAKE A WITHDRAWAL AT THE TIME OF YOUR CHOOSING.
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We will not impose the Guaranteed Minimum Income Benefit charge after the
income phase begins.
INCOME APPRECIATOR BENEFIT CHARGE
We will impose an additional charge if you choose the Income Appreciator
Benefit. This is an annual charge equal to 0.25% of your contract value. The
Income Appreciator Benefit charge is calculated:
- on each contract anniversary,
- on the annuity date,
- upon the death of the sole owner or the first to die of the owner or joint
owner prior to the annuity date,
- upon a full or partial withdrawal, and
- upon a subsequent purchase payment.
The fee is based on the contract value at the time of the calculation, and is
prorated based on the portion of the contract year that has elapsed since the
full annual fee was most recently deducted.
Although the Income Appreciator Benefit charge may be calculated more often,
it is deducted only:
- on each contract anniversary,
- on the annuity date,
- upon the death of the sole owner or first to die of the owner or joint
owners prior to the annuity date,
- upon a full withdrawal, and
- upon a partial withdrawal if the contract value remaining after such
partial withdrawal is not enough to cover the then-applicable Income
Appreciator Benefit charge.
We reserve the right to calculate and deduct the fee more frequently than
annually, such as quarterly.
The Income Appreciator Benefit charge is deducted from each investment option
in the same proportion that the amount allocated to the investment option bears
to the total contract value. No market value adjustment will apply to the
portion of the charge deducted from the market value adjustment option. Upon a
full withdrawal, or if the contract value remaining after a partial withdrawal
is not enough to cover the then-applicable Income Appreciator Benefit charge,
the charge is deducted from the amount paid. The payment of the Income
Appreciator Benefit charge will be deemed to be made from earnings for purposes
of calculating other charges. THE FACT THAT WE IMPOSE THE CHARGE UPON A FULL OR
PARTIAL WITHDRAWAL DOES NOT IMPAIR YOUR RIGHT TO MAKE A WITHDRAWAL AT THE TIME
OF YOUR CHOOSING.
We do not assess this charge upon election of IAB Option 1, the completion of
IAB Option 2 or 3, and upon annuitization. However, we do assess the IAB charge
during the 10-year payment period contemplated by IAB Options 2 and 3. Moreover,
you should realize that amounts credited to your contract value under IAB Option
3 increase the contract value, and because the IAB fee is a percentage of your
contract value, the IAB fee may increase as a consequence of those additions.
EARNINGS APPRECIATOR BENEFIT CHARGE
We will impose an additional charge if you choose the Earnings Appreciator
supplemental death benefit. The charge for this benefit is based on an annual
rate of 0.30% of your contract value.
We calculate the charge on each of the following events:
- each contract anniversary,
- on the annuity date,
- upon death of the sole or first to die of the owner or joint owner prior
to the annuity date,
- upon a full or partial withdrawal, and
- upon a subsequent purchase payment.
The fee is based on the contract value at time of calculation and is
pro-rated based on the portion of the contract year since the date that the
Earnings Appreciator Benefit charge was last calculated.
Although the Earnings Appreciator Benefit charge may be calculated more
often, it is deducted only:
- on each contract anniversary,
- on the annuity date,
- upon death of the sole owner or first to die of the owner or joint owner
prior to the annuity date,
- upon a full withdrawal, and
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- upon a partial withdrawal if the contract value remaining after the
partial withdrawal is not enough to cover the then applicable charge.
We withdraw this charge from each investment option (including each guarantee
period) in the same proportion that the amount allocated to the investment
option bears to the total contract value. No market value adjustment will apply
to the portion of the charge deducted from the market value adjustment option.
Upon a full withdrawal or if the contract value remaining after a partial
withdrawal is not enough to cover the then-applicable Earnings Appreciator
Benefit charge, we will deduct the charge from the amount we pay you. We will
deem the payment of the Earnings Appreciator Benefit charge as made from
earnings for purposes of calculating other charges.
LIFETIME FIVE INCOME BENEFIT CHARGE
We will impose an additional charge if you choose the Lifetime Five Income
benefit. We calculate the charge for this benefit based on the average daily
value of all assets allocated to the variable investment options. On an annual
basis, the charge is equal to 0.60%. Upon any reset of the amounts guaranteed
under this benefit, we reserve the right to adjust the charge to that being
imposed at that time for new elections of the benefit. We cease imposing the
charge upon the earliest to occur of (i) your election to terminate the benefit,
(ii) our receipt of appropriate proof of the death of the owner (or annuitant,
for entity owned contracts), (iii) the annuity date, (iv) automatic termination
of the benefit due to an impermissible change of owner or annuitant, or (v) a
withdrawal that causes the benefit to terminate.
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 charge against the value of the contract to pay some or all of these taxes. It
is our current practice not to deduct a charge for state premium taxes until
annuity payments begin. In the states that impose a premium tax on us, the
current rates range up to 3.5%. It is also our current practice not to deduct a
charge for the federal tax associated with deferred acquisition costs paid by us
that are based on premium received. However, we reserve the right to charge the
contract owner in the future for any such tax associated with deferred
acquisition costs and any federal, state or local income, excise, business or
any other type of tax measured by the amount of premium received by us.
TRANSFER FEE
You can make 12 free transfers every contract year. We measure a contract year
from the date we issue your contract (contract date). If you make more than 12
transfers in a contract year (excluding Dollar Cost Averaging and
Auto-Rebalancing), we will deduct a transfer fee of $10 for each additional
transfer. We have the right to increase this fee up to a maximum of $30 per
transfer, but we have no current plans to do so. We will deduct the transfer fee
pro-rata from the investment options from which the transfer is made.
COMPANY TAXES
We will pay company income taxes on the taxable corporate earnings created by
this separate account product. While we may consider company income taxes when
pricing our products, we do not currently include such income taxes in the tax
charges you pay under the contract. We will periodically review the issue of
charging for these taxes and may impose a charge in the future.
In calculating our corporate income tax liability, we derive certain
corporate income tax benefits associated with the investment of company assets,
including separate account assets, which are treated as company assets under
applicable income tax law. These benefits reduce our overall corporate income
tax liability. Under current law, such benefits may include foreign tax credits
and corporate dividend received deductions. We do not pass these tax benefits
through to holders of the separate account annuity contracts because (i) the
contract owners are not the owners of the assets generating these benefits under
applicable income tax law and (ii) we do not currently include company income
taxes in the tax charges you pay under the
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
contract. We reserve the right to change these tax practices.
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 2004, the fees of these funds ranged on an annual
basis from % to % 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.
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HOW CAN I
ACCESS MY MONEY?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
YOU CAN ACCESS YOUR MONEY BY:
- - MAKING A WITHDRAWAL (EITHER PARTIAL OR COMPLETE); OR
- - CHOOSING TO RECEIVE ANNUITY PAYMENTS DURING THE INCOME PHASE.
WITHDRAWALS DURING THE ACCUMULATION PHASE
When you make a full withdrawal, you will receive the value of your contract
minus any applicable charges and fees. We will calculate the value of your
contract and charges, if any, as of the date we receive your request in good
order at the Prudential Annuity Service Center.
Unless you tell us otherwise, any partial withdrawal and related withdrawal
charges will be taken proportionately from all of the investment options you
have selected. The minimum contract value that must remain in order to keep the
contract in force after a withdrawal is $2,000. If you request a withdrawal
amount that would reduce the contract value below this minimum, we will withdraw
the maximum amount available that, with the withdrawal charge, would not reduce
the contract value below such minimum.
With respect to the variable investment options, we will generally pay the
withdrawal amount, less any required tax withholding, within seven days after we
receive a withdrawal request in good order. We will deduct applicable charges,
if any, from the assets in your contract.
With respect to the market value adjustment option, you may specify the
guarantee period from which you would like to make a withdrawal. If you indicate
that the withdrawal is to originate from the market value adjustment option, but
you do not specify which guarantee period is to be involved, then we will take
the withdrawal from the guarantee period that has the least time remaining until
its maturity date. If you indicate that you wish to make a withdrawal, but do
not specify the investment options to be involved, then we will take the
withdrawal from your contract value on a pro rata basis from each investment
option that you have. In that situation, we will aggregate the contract value in
each of the guarantee periods that you have within the market value adjustment
option for purposes of making that pro rata calculation. The portion of the
withdrawal associated with the market value adjustment option then will be taken
from the guarantee periods with the least amount of time remaining until the
maturity date, irrespective of the original length of the guarantee period. You
should be aware that a withdrawal may avoid a withdrawal charge based on the
charge-free amount that we allow, yet still be subject to a market value
adjustment.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS ALSO MAY APPLY TO ANY
WITHDRAWAL. FOR A MORE COMPLETE EXPLANATION, SEE SECTION 9.
AUTOMATED WITHDRAWALS
We offer an automated withdrawal feature. This feature enables you to receive
periodic withdrawals in monthly, quarterly, semiannual or annual intervals. We
will process your withdrawals at the end of the business day at the intervals
you specify. We will continue at these intervals until you tell us otherwise.
You can make withdrawals from any designated investment option or proportionally
from all investment options (other than a guarantee period within the market
value adjustment option). The minimum automated withdrawal amount you can make
is generally $100. An assignment of the contract terminates any automated
withdrawal program that you had in effect.
INCOME TAXES, TAX PENALTIES, WITHDRAWAL CHARGES, AND CERTAIN RESTRICTIONS MAY
APPLY TO AUTOMATED WITHDRAWALS. FOR A MORE COMPLETE EXPLANATION, SEE SECTION 9.
INCOME APPRECIATOR BENEFIT OPTIONS DURING THE ACCUMULATION PHASE (IAB)
You may choose IAB Option 1 at annuitization, but you may instead choose IAB
Options 2 or 3 during the accumulation phase of your contract. Income
Appreciator Benefit payments under IAB Options 2 and 3 will begin on the same
day of the month as the contract date, beginning with the next month following
our receipt of your request in good order. Under IAB
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
Options 2 and 3, you can choose to have the Income Appreciator Benefit amounts
paid or credited monthly, quarterly, semi-annually, or annually.
IAB OPTIONS 2 AND 3 INVOLVE A TEN-YEAR PAYMENT PERIOD. IF THE 10-YEAR PAYMENT
PERIOD WOULD END AFTER THE ANNUITY DATE AND YOU CHOOSE AN ANNUITY SETTLEMENT
OPTION OTHER THAN ANY LIFETIME PAYOUT OPTION OR PERIOD CERTAIN OPTION OF AT
LEAST 15 YEARS OR YOU MAKE A FULL WITHDRAWAL, YOU MAY LOSE ALL OR ANY REMAINING
PORTION OF THE INCOME APPRECIATOR BENEFIT. IN SUCH INSTANCES, WE WOULD NOT
REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR THIS BENEFIT.
IAB OPTION 2 -- INCOME APPRECIATOR BENEFIT AUTOMATIC WITHDRAWAL PAYMENT PROGRAM
Under this option, you elect to receive the Income Appreciator Benefit during
the accumulation phase. When you activate the benefit, a 10-year Income
Appreciator Benefit automatic withdrawal payment program begins. We will pay you
the Income Appreciator Benefit amount in equal installments over a 10-year
payment period. You may combine this Income Appreciator Benefit amount with an
automated withdrawal amount from your contract value, in which case each
combined payment must be at least $100.
The maximum automated withdrawal payment amount that you may receive from
your contract value under this Income Appreciator Benefit program in any
contract year during the 10-year period may not exceed 10% of the contract value
as of the date you activate the Income Appreciator Benefit.
Once we calculate the Income Appreciator Benefit, the amount will not be
affected by changes in contract value due to the investment performance of any
allocation option. Withdrawal charges may apply to automatic withdrawal payment
amounts, but not to amounts attributable to the Income Appreciator Benefit.
After the ten-year payment period has ended, if the remaining contract value
is $2,000 or more, the contract will continue. If the remaining contract value
is less than $2,000 after the end of the 10-year payment period, we will pay you
the remaining contract value and the contract will terminate. If the contract
value falls below the minimum amount required to keep the contract in force due
solely to investment results before the end of the 10-year payment period, we
will continue to pay the Income Appreciator Benefit amount for the remainder of
the 10-year payment period.
DISCONTINUING THE INCOME APPRECIATOR BENEFIT AUTOMATIC WITHDRAWAL PAYMENT
PROGRAM UNDER IAB OPTION 2
You may discontinue the Income Appreciator Benefit payment program under IAB
Option 2 and activate IAB Option 3 at any time after payments have begun and
before the last payment is made. We will add the remaining Income Appreciator
Benefit amount to the contract value at the same frequency as your initial
election until the end of the 10-year payment period. We will treat any Income
Appreciator Benefit amount added to the contract value as additional earnings.
Unless you direct us otherwise, we will allocate these additions to the variable
investment options, fixed interest rate options, or the market value adjustment
option in the same proportions as your most recent purchase payment allocation
percentages.
You may discontinue the Income Appreciator Benefit payment program under IAB
Option 2 before the last payment is made and elect an annuity or settlement
option. We will add the balance of the Income Appreciator Benefit amount for the
10-year payment period to the contract value in a lump sum before determining
the adjusted contract value. The adjusted contract value may be applied to any
annuity or settlement option that is paid over the lifetime of the annuitant,
joint annuitants, or a period certain of at least 15 years (but not to exceed
life expectancy).
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IAB OPTION 3 -- INCOME APPRECIATOR BENEFIT CREDIT TO CONTRACT VALUE
Under this option, you can activate the Income Appreciator Benefit and receive
the benefit as credits to your contract value over a 10-year payment period. We
will allocate these Income Appreciator Benefit credits to the variable
investment options, the fixed interest rate options, or the market value
adjustment option. We will waive the $1,000 minimum requirement for the market
value adjustment option. We will calculate the Income Appreciator Benefit amount
on the date we receive your written request in good order. Once we have
calculated the Income Appreciator Benefit, the Income Appreciator Benefit credit
will not be affected by changes in contract value due to the investment
performance of any allocation option.
Before we add the last Income Appreciator Benefit credit to your contract
value, you may switch to IAB Option 2 and receive the remainder of the Income
Appreciator Benefit as payments to you (instead of credits to the contract
value) under the Income Appreciator Benefit program for the remainder of the
10-year payment period.
You can also request that any remaining payments in the 10-year payment
period be applied to an annuity or settlement option that is paid over the
lifetime of the annuitants, joint annuitants, or a period certain of at least 15
years (but not to exceed life expectancy).
EXCESS WITHDRAWALS
During the 10-year period under IAB options 2 or 3, an "excess withdrawal"
occurs when any amount is withdrawn from your contract value in a contract year
that exceeds the sum of (1) 10% of the contract value as of the date the Income
Appreciator Benefit was activated plus (2) earnings since the Income Appreciator
Benefit was activated, that have not been previously withdrawn.
We will deduct the excess withdrawal on a proportional basis from the
remaining Income Appreciator Benefit amount. We will then calculate and apply a
new reduced Income Appreciator Benefit amount.
Withdrawals you make in a contract year that do not exceed the sum of (1) 10%
of the contract value as of the date the Income Appreciator Benefit was
activated plus (2) earnings since the Income Appreciator Benefit was activated,
that have not been previously withdrawn, do not reduce the remaining Income
Appreciator Benefit amount. Additionally, if the amount withdrawn in any year is
less than the excess withdrawal threshold, the difference between the amount
withdrawn and the threshold can be carried over to subsequent years on a
cumulative basis and withdrawn without causing a reduction to the Income
Appreciator Benefit amount.
EFFECT OF TOTAL WITHDRAWAL ON INCOME APPRECIATOR BENEFIT
We will not make Income Appreciator Benefit payments after the date you make a
total withdrawal of the contract surrender value.
SUSPENSION OF PAYMENTS OR TRANSFERS
The SEC may require us to suspend or postpone payments made in connection with
withdrawals or transfers for any period when:
- - The New York Stock Exchange is closed (other than customary weekend and
holiday closings);
- - Trading on the New York Stock Exchange is restricted;
- - An emergency exists, as determined by the SEC, during which sales and
redemptions of shares of the 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 process any transfer made
from the fixed interest rate options promptly upon request.
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WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC
PARTNERS FLEXELITE CONTRACT?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
The tax considerations associated with the Strategic Partners FlexElite contract
vary depending on whether the contract is (i) owned by an individual and not
associated with a tax-favored retirement plan (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). 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 the 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 if you
transfer the contract incident to divorce.
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TAXES ON ANNUITY PAYMENTS
A portion of each annuity payment you receive will be treated as a partial
return of your purchase payments and will not be taxed. The remaining portion
will be taxed as ordinary income. Generally, the nontaxable portion is
determined by multiplying the annuity payment you receive by a fraction, the
numerator of which is your purchase payments (less any amounts previously
received tax-free) and the denominator of which is the total expected payments
under the contract.
After the full amount of your purchase payments have been recovered tax-free,
the full amount of the annuity payments will be taxable. If annuity payments
stop due to the death of the annuitant before the full amount of your purchase
payments have been recovered, a tax deduction may be allowed for the unrecovered
amount.
TAX PENALTY ON WITHDRAWALS AND ANNUITY PAYMENTS
Any taxable amount you receive under your contract may be subject to a 10% tax
penalty. Amounts are not subject to this tax penalty if:
- - the amount is paid on or after you reach age 59 1/2 or die;
- - 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 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
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benefit may defer taxes. Certain minimum distribution requirements apply upon
your death, as discussed further below.
Tax consequences to the beneficiary vary among the death benefit payment
options.
- - Choice 1: The beneficiary is taxed on earnings in the contract.
- - Choice 2: The beneficiary is taxed as amounts are withdrawn (in this case
earnings are treated as being distributed first).
- - Choice 3: The beneficiary is taxed on each payment (part will be treated as
earnings and part as return of premiums).
REPORTING AND WITHHOLDING 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
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the date of death. However, if a periodic payment option is selected by your
designated beneficiary and if such payments begin within 1 year of your death,
the value of the contract may be distributed over the beneficiary's life or a
period not exceeding the beneficiary's life expectancy. Your designated
beneficiary is the person to whom benefit rights under the contract pass by
reason of death, and must be a natural person in order to elect a periodic
payment option based on life expectancy or a period exceeding five years.
If the contract is payable to (or for the benefit of) your surviving spouse,
that portion of the contract may be continued with your spouse as the owner.
CHANGES IN THE CONTRACT. We reserve the right to make any changes we deem
necessary to assure that the contract qualifies as an annuity contract for tax
purposes. Any such changes will apply to all contractowners and you will be
given notice to the extent feasible under the circumstances.
ADDITIONAL INFORMATION
You should refer to the 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 OF WHETHER THEY INVEST IN ANNUITY CONTRACTS. THIS MEANS THAT
WHEN A TAX FAVORED PLAN INVESTS IN AN ANNUITY CONTRACT, IT GENERALLY DOES NOT
RESULT IN ANY ADDITIONAL TAX DEFERRAL BENEFITS.
TYPES OF TAX FAVORED PLANS
IRAS. If you buy a contract for use as an IRA, we will provide you a copy of
the prospectus and contract. The "IRA Disclosure Statement" 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
that you may make to an IRA. For 2005 the limit is $4,000; increasing to $5,000
in 2008. 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
increasing to $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
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extent permitted by law). However, if you make such regular IRA contributions,
you should note that you will not be able to treat the contract as a "conduit
IRA," which means that you will not retain possible favorable tax treatment if
you subsequently "roll over" the contract funds originally derived from a
qualified retirement plan into another Section 401(a) plan.
REQUIRED PROVISIONS. Contracts that are IRAs (or endorsements that are part
of the contract) must contain certain provisions:
- - You, as owner of the contract, must be the "annuitant" under the contract
(except in certain cases involving the division of property under a decree of
divorce);
- - Your rights as owner are non-forfeitable;
- - You cannot sell, assign or pledge the contract, other than to Pruco Life;
- - 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".
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";
- - Liability for "prohibited transactions" if you, for example, borrow against
the value of an IRA; or
- - Failure to take a minimum distribution.
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
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distribution penalty). Once the contract has been purchased, regular Roth IRA
contributions will be accepted to the extent permitted by law.
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.
Effective in 2006, in accordance with recent changes in laws and regulations,
required minimum distributions will be calculated based on the sum of the
contract value and the actuarial value of any additional death benefits and
benefits from optional riders that you have purchased under the contract. As a
result, the required minimum distributions may be larger than if the calculation
were based on the contract value only, which may in turn result in an earlier
(but not before the required beginning date) distribution under the contract and
an increased amount of taxable income distributed to the contract owner, and a
reduction of death benefits and the benefits of any optional riders.
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
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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 costs related to the
contract, as well as any commissions paid to any agent selling the contract.
Information about any applicable fees, charges, discounts, penalties or
adjustments may be found under "What Are The Expenses Associated With The
Strategic Partners FlexElite Contract".
Information about sales representatives and commissions may be found under
"Other Information" and "Sale And Distribution Of The Contract".
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".
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OTHER
INFORMATION
PRUCO LIFE INSURANCE COMPANY
Pruco Life Insurance Company (Pruco Life) is a stock life insurance company
organized in 1971 under the laws of the State of Arizona. It is licensed to sell
life insurance and annuities in the District of Columbia, Guam and in all states
except New York, and therefore, is subject to the insurance laws and regulations
of all the jurisdictions where it is licensed to do business.
Pruco Life is a wholly-owned subsidiary of The Prudential Insurance Company
of America (Prudential), a New Jersey stock life insurance company that has been
doing business since 1875. Prudential is an indirect wholly-owned subsidiary of
Prudential Financial, Inc. (Prudential Financial), a New Jersey insurance
holding company. As Pruco Life's ultimate parent, Prudential Financial exercises
significant influence over the operations and capital structure of Pruco Life
and Prudential. However, neither Prudential Financial, Prudential, nor any other
related company has any legal responsibility to pay amounts that Pruco Life may
owe under the contract.
Pruco Life publishes annual and quarterly reports that are filed with the
SEC. These reports contain financial information about Pruco Life that is
annually audited by independent accountants. Pruco Life's annual report for the
year ended December 31, 2004, together with subsequent periodic reports that
Pruco Life files with the SEC, are incorporated by reference into this
prospectus. You can obtain copies, at no cost, of any and all of this
information, including the Pruco Life annual report that is not ordinarily
mailed to 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 is 33-37587. You may read and
copy any filings made by Pruco Life with the SEC at the SEC's Public Reference
Room at 450 Fifth Street, Washington, D.C. 20549-0102. You can obtain
information on the operation of the Public Reference Room by calling (202)
942-8090. The SEC maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC at http://www.sec.gov.
THE SEPARATE ACCOUNT
We have established a separate account, the Pruco Life 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
Arizona law on June 16, 1995, and is registered with the SEC under the
Investment Company Act of 1940, as a unit investment trust, which is a type of
investment company. The assets of the separate account are held in the name of
Pruco Life and legally belong to us. These assets are kept separate from all of
our other assets and may not be charged with liabilities arising out of any
other business we may conduct. More detailed information about Pruco Life,
including its audited consolidated financial statements, is provided in the
Statement of Additional Information.
SALE AND DISTRIBUTION OF THE CONTRACT
Prudential Investment Management Services LLC (PIMS), a wholly-owned subsidiary
of Prudential Financial, Inc., is the distributor and principal underwriter of
the securities offered through this prospectus. PIMS acts as the distributor of
a number of annuity contracts and life insurance products we offer. PIMS also
acts as an introducing broker-dealer through which it may receive a portion of
brokerage commissions in connection with purchases and sales of securities held
by certain Prudential-advised funds which are offered as underlying investment
options under the contract.
PIMS's principal business address is 100 Mulberry Street, Newark, New Jersey
07102-4077. PIMS is registered as a broker-dealer under the Securities Exchange
Act of 1934 (Exchange Act) and is a member of the National Association of
Securities Dealers, Inc. (NASD).
The contract is offered on a continuous basis. PIMS enters into distribution
agreements with broker-dealers who are registered under the Exchange Act and
with entities that may offer the contract but are exempt from registration
(firms). Applications for the contract are solicited by registered
representatives of those firms. Such representatives will also be our appointed
insurance agents under state insurance law. In addition,
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PIMS may offer the contract directly to potential purchasers.
Commissions are paid to firms on sales of the contract according to one or
more schedules. The individual representative will receive a portion of the
compensation, depending on the practice of his or her firm. Commissions are
generally based on a percentage of purchase payments made, up to a maximum of
8%. Alternative compensation schedules are available that provide a lower
initial commission plus ongoing annual compensation based on all or a portion of
contract value. We may also provide compensation to the distributing firm 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 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 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 services and/or other services.
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. A list of
firms that PIMS paid pursuant to such arrangements and the range of fees that
PIMS paid is provided in the Statement of Additional Information which is
available upon request.
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 contract that is not eligible for these compensation
arrangements. While compensation is generally taken into account as an expense
in considering the charges applicable to a contract product, any such
compensation will be paid by us or PIMS and will not result in any additional
charge to you. 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 and that are typical of the businesses in which Pruco
Life 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'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 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'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
replace-
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
ment sales and NASD rules. We brought this matter to the New York Insurance
Department and the NASD's attention in response to an internal investigation,
and in consultation with both New York and the NASD, we have initiated a
remediation program for all affected customers which has already provided $8
million in remediation.
ASSIGNMENT
In general, 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
you assign the contract, that assignment will result in the termination of any
automated withdrawal program that had been in effect. If the new owner wants to
re-institute an automated withdrawal program, then he/she needs to submit the
forms that we require, in good order.
If the contract is issued under a qualified plan, there may be limitations on
your ability to assign the contract. For further information please speak to
your representative.
FINANCIAL STATEMENTS
The financial statements of the separate account and Pruco Life, the co-issuer
of the Strategic Partners FlexElite contract, are included in the Statement of
Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
Contents:
- - Company
- - Experts
- - Principal Underwriter
- - Payments Made to Promote Sale of our Products
- - Allocation of Initial Purchase Payment
- - Determination of Accumulation Unit Values
- - Federal Tax Status
- - State Specific Variations
- - 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 contract
owner 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.
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MARKET-VALUE
ADJUSTMENT FORMULA
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MARKET-VALUE ADJUSTMENT FORMULA
GENERAL FORMULA
The formula under which Pruco Life calculates the market value adjustment
applicable to a full or partial surrender, annuitization, or settlement under
the market value adjustment option is set forth below. The market value
adjustment is expressed as a multiplier factor. That is, the Contract Value
after the market value adjustment ("MVA"), but before any withdrawal charge, is
as follows: Contract Value (after MVA) = Contract Value (before MVA) X (1 +
MVA). The MVA itself is calculated as follows:
1 + I
MVA = [(-------------)to the N/12 power] -1
1 + J + .0025
PENNSYLVANIA FORMULA
We use the same MVA formula with respect to contracts issued in Pennsylvania as
the general formula, except that "J" in the formula above uses an interpolated
rate as the current credited interest rate. Specifically, "J" is the
interpolated current credited interest rate offered on new money at the time of
withdrawal, annuitization, or settlement. The interpolated value is calculated
using the following formula:
m/365 X (n + 1) year rate + (365 - m)/365 X n year rate,
where "n" equals the number of whole years remaining in the Contract's current
guarantee period, and "m" equals the number of days remaining in year "n" of the
current guarantee period.
INDIANA FORMULA
We use the following MVA formula for contracts issued in Indiana:
1 + I
MVA = [(-----------)to the N/12 power] -1
1 + J
The variables I, J and N retain the same definitions as the general formula.
MARKET VALUE ADJUSTMENT EXAMPLE
(ALL STATES EXCEPT INDIANA AND PENNSYLVANIA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.05 + 0.0025)]to the (38/12)
power -1 = 0.02274
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.02274 = $253.03
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $253.03 = $11,380.14
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.07 + 0.0025)] to the(38/12)
power -1 = -0.03644
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.03644) = -$405.47
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$405.47) = $10,721.64
MARKET VALUE ADJUSTMENT EXAMPLE
(PENNSYLVANIA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 3 years (the number of whole years remaining) is 4%, and for a
guarantee period of 4 years (the number of whole years remaining plus 1) is
5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.0417 + 0.0025)] to the
(38/12) power-1 = 0.04902
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.04902 = $545.45
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $545.45 = $11,672.56
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 3 years (the number of whole years remaining) is 7%, and for a
guarantee period of 4 years (the number of whole years remaining plus 1) is
8%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.0717 + 0.0025)] to the
(38/12) power-1 = -0.04098
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.04098) = -$455.99
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MARKET-VALUE ADJUSTMENT FORMULA CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$455.99) = $10,671.12
MARKET VALUE ADJUSTMENT EXAMPLE
(INDIANA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.05)] to the (38/12) power-1 =
0.03047
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 x 0.03047 = $339.04
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $339.04 = $11,466.15
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.07)]to the (38/12) power -1
= -0.02930
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.02930) = -$326.02
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$326.02) = $10,801.09
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IRA DISCLOSURE STATEMENT
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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, or applicable state
required period, if longer. The amount of the refund is dictated by state law.
This is a more liberal provision than is required in connection with IRAs. To
exercise this "free-look" provision, return the contract to the representative
who sold it to you or to the Prudential Annuity Service Center at the address
shown on the first page of this prospectus.
ELIGIBILITY REQUIREMENTS
IRAs are intended for all persons with earned compensation whether or not they
are covered under other retirement programs. Additionally, if you have a non-
working spouse (and you file a joint tax return), you may establish an IRA on
behalf of your non-working spouse. A working spouse may establish his or her own
IRA. A divorced spouse receiving taxable alimony (and no other income) may also
establish an IRA.
CONTRIBUTIONS AND DEDUCTIONS
Contributions to your IRA will be deductible if you are not an "active
participant" in an employer maintained qualified retirement plan or you have
"Adjusted Gross Income" (as defined under Federal tax laws) which does not
exceed the "applicable dollar limit." IRA contributions must be made by no later
than the due date for filing your income tax return for that year. For a single
taxpayer, the applicable dollar limitation is $50,000 in 2005, with the amount
of IRA contribution which may be deducted reduced proportionately for Adjusted
Gross Income between $50,000 -- $60,000. For married couples filing jointly, the
applicable dollar limitation is $70,000, with the amount of IRA contribution
which may be deducted reduced proportionately for Adjusted Gross Income between
$70,000 -- $80,000. There is no deduction allowed for IRA contributions when
Adjusted Gross Income reaches $60,000 for individuals and $80,000 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").
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
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IRA DISCLOSURE STATEMENT CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
income levels) are met, you will be able to deduct an amount equal to the least
of (i) the amount contributed to the IRAs; (ii) twice the maximum amount allowed
by law, including catch-up contributions if applicable; or (iii) 100% of your
combined gross income.
Contributions in excess of the contribution limits may be subject to penalty.
See "Contributions And Deductions". 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
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
any one of the periodic payment options available under the contract. The
distributions from your IRA under any one of the periodic payment options or in
one sum will be treated as ordinary income as you receive them to the degree
that you have made deductible contributions. If you have made both deductible
and nondeductible contributions, the portion of the distribution attributable to
the nondeductible contribution will be tax-free.
(c) INADEQUATE DISTRIBUTIONS--50% TAX
Your IRA is intended to provide retirement benefits over your lifetime. Thus,
federal tax law requires that you either (1) receive a lump-sum distribution of
your IRA by April 1 of the year following the year in which you attain age
70 1/2 or (2) start to receive periodic payments by that date. If you elect to
receive periodic payments, those payments must be sufficient to pay out the
entire value of your IRA during your life expectancy (or over the joint life
expectancies of you and your spouse/beneficiary). The calculation method is
defined under IRS regulations. If the payments are not sufficient to meet these
requirements, an excise tax of 50% will be imposed on the amount of any
underpayment.
(d) DEATH BENEFITS
If you (or your surviving spouse) die before receiving the entire value of your
IRA, the remaining interest must be distributed to your beneficiary (or your
surviving spouse's beneficiary) in one lump-sum by December 31st of the fifth
year after your (or your surviving spouse's) death, or applied to purchase an
immediate annuity for the beneficiary, or as a program of minimum distributions.
This annuity or minimum distribution program must be payable over the life
expectancy of the beneficiary beginning by December 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 lesser of the maximum amount allowed by
law is phased out for incomes between $150,000 and $160,000 for married and
between $95,000 and $110,000 for singles). The contribution limit is reduced by
the amount of any contributions made to a traditional IRA. Contributions to a
Roth IRA are not deductible.
For taxpayers with adjusted gross income of $100,000 or less, all or part of
amounts in a traditional IRA may be converted, transferred or rolled over to a
Roth IRA. Some or all of the IRA value will typically be includable in the
taxpayer's gross income. Provided a rollover contribution meets the requirements
of IRAs under Section 408(d)(3) of the Code, a rollover may be made from a Roth
IRA to another Roth IRA.
UNDER SOME CIRCUMSTANCES, IT MAY NOT BE ADVISABLE TO ROLL OVER, TRANSFER OR
CONVERT ALL OR PART OF A TRADITIONAL IRA TO A ROTH IRA. PERSONS CONSIDERING A
ROLLOVER, TRANSFER OR CONVERSION SHOULD CONSULT THEIR OWN TAX ADVISOR.
"Qualified distributions" from a Roth IRA are excludable from gross income. A
"qualified distribution" is a distribution that satisfies two requirements: (1)
the distribution must be made (a) after the owner of the IRA attains age 59 1/2;
(b) after the owner's death; (c) due to the owner's disability; or (d) for a
qualified first time homebuyer distribution within the meaning of
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99
IRA DISCLOSURE STATEMENT CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
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.
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100
APPENDIX A
ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
As we have indicated throughout this prospectus, the Strategic Partners
FlexElite Variable Annuity is a contract that allows you to select or decline
any of several features that carries with it a specific asset-based charge. We
maintain a unique unit value corresponding to each combination of such contract
features. Here we depict the historical unit values corresponding to the
contract features bearing the highest and lowest combinations of asset-based
charges. The remaining unit values appear in the Statement of Additional
Information, which you may obtain free of charge by calling (888) PRU-2888 or by
writing to us at the Prudential Annuity Service Center, P.O. Box 7960,
Philadelphia, PA 19176.
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
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102
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
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103
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
* DATE THAT THE ORIGINAL VERSION OF THIS ANNUITY WAS FIRST OFFERED.
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104
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
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105
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
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106
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
* DATE THAT THE LATER VERSION OF THIS ANNUITY WAS FIRST OFFERED.
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107
PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER
DETAILS ABOUT THE PRUCO LIFE ANNUITY DESCRIBED IN PROSPECTUS ORD01091 (05/2005).
---------------------------------------------------------
(print your name)
---------------------------------------------------------
(address)
---------------------------------------------------------
(city/state/zip code)
MAILING ADDRESS:
PRUDENTIAL ANNUITY SERVICE CENTER
P.O. Box 7960
Philadelphia, PA 19176
ORD01091
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registation Fees
Pruco Life registered $200 million of interests in the market value adjusted
annuity contracts described in this registration statement. Pruco Life has paid
$16,180 to the SEC for the registration fees required under the Securities Act
of 1933.
Federal Taxes
Pruco Life estimates the federal tax effect associated with the deferred
acquisition costs attributable to receipt of $30 million of purchase payments
over a two year period to be approximately $118,400.
State Taxes
Pruco Life estimates that approximately $6,400 in premium taxes will be owed
upon receipt of purchase payments under the contracts, and that additional
premium taxes in the approximate amount of $64,000 would be owed if the full $32
million of purchase payments were applied to annuity options. The taxes set
forth here are an estimate, based on the amount of purchase payments we expect
to receive during the next two years.
Printing Costs
Pruco Life estimates that the costs of printing prospectuses for the amount of
securities registered herein will be approximately $200,000.
Legal Costs
This registration statement was prepared by Prudential attorneys whose time is
allocated to Pruco Life.
Accounting Costs
PricewaterhouseCoopersLLP, the independent public accountant that audits Pruco
Life's financial, charges approximately $10,000 in connection with each filing
of this registration statement with the Commission.
Premium Paid to Indemnify Officers
Officers and Directors of Pruco Life are indemnified under a policy that also
covers officers and directors of other entities controlled by Prudential
Financial, Inc. A portion of the cost of that policy is attributed to Pruco
Life.
II-1
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant, in connection with certain affiliates, maintains various
insurance coverages under which the underwriter and certain affiliated persons
may be insured against liability which may be incurred in such capacity, subject
to the terms, conditions and exclusions of the insurance policies.
Arizona, being the state of organization of Pruco Life Insurance Company
("Pruco"), permits entities organized under its jurisdiction to indemnify
directors and officers with certain limitations. The relevant provisions of
Arizona law permitting indemnification can be found in Section 10-850, et seq.
of the Arizona Statutes Annotated. The text of Pruco's By-law, Article VIII
which relates to indemnification of officers and directors, is incorporated by
reference to Exhibit 3(ii) to its Form 10-Q, filed August 15, 1997.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 16. EXHIBITS
(a) EXHIBITS
(1) Form of a Distribution Agreement between Prudential Investment Management
Services, Inc., "PIMS" (Principal Underwriter) and Pruco Life Insurance
Company (Depositor). (Note 2)
(3) (i) Articles of Incorporation of Pruco Life Insurance Company, as amended
through October 19, 1993 (Note 9)
(ii) By-Laws of Pruco Life Insurance Company, as amended through May 6,
1997 (Note 10)
(4) (a) Strategic Partners Variable Annuity Contract VBON-2000 (Note 3)
(b) Strategic Partners Variable Annuity Contract VDCA-2000 (Note 3)
(c) Strategic Partners MVA Endorsement ORD 112805 (Note 8)
(d) Strategic Partners Application ORD 99730 (Note 8)
(e) Strategic Partners FlexElite Variable Annuity Contract VFLX-2003 (Note
7)
(f) Strategic Partners FlexElite Application (Note 11)
(g) Strategic Partners SPAO and FlexElite GMIB Endorsement ORD 112963
(Note 12)
(h) Strategic Partners SPAO Application (Note 13)
(i) Strategic Partners FlexElite Application (Note 13)
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(j) Strategic Partners SPAO and FlexElite GMIB Endorsement Supplement ORD
112963 (Note 13)
(k) Periodic Value Death Benefit Endorsement (HDV) (Note 15)
(l) Schedule Supplement Periodic Value Death Benefit (HDV) (Note 15)
(m) Guaranteed Minimum Payments Benefit Endorsement (Lifetime 5) (Note 15)
(n) Schedule Supplement Guaranteed Minimum Payments Benefit (Lifetime 5)
(Note 15)
(5) Opinion of Counsel as to the legality of the securities being registered.
(Note 1)
(24) Powers of Attorney:
(a) Helen M. Galt (Note 4)
(b) Ronald P. Joelson. And David R. Odenath, Jr. (Note 6)
(c) James J. Avery, Jr. (Note 5)
(d) Andrew J. Mako (Note 12)
(e) C. Edward Chaplin, John Chieffo, Bernard J. Jacob (Note 14)
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Post Effective Amendment No. 4 on Form
S-1, Registration No. 33-61143, filed April 15, 1999, on behalf the Pruco Life
Insurance Company.
(Note 3) Incorporated by reference to the initial registration on Form N-4,
Registration No. 333-37728, filed May 24, 2000 on behalf of the Pruco Life
Flexible Premium Variable Annuity Account.
(Note 4) Incorporated by reference to Post-Effective Amendment No. 5 to Form
S-6, Registration No. 333-85115, filed on or about June 28, 2001 on behalf of
the Pruco Life Variable Universal Account.
(Note 5) Incorporated by reference to Post-Effective Amendment No. 2 to Form
S-6, Registration No. 333-07451, filed June 25, 1997 on behalf of the Pruco
Life Variable Appreciable Account.
(Note 6) Incorporated by reference to initial Registration on Form N-4,
Registration No. 333-52754, filed December 26, 2000 on behalf of the Pruco
Life Flexible Premium Variable Annuity Account.
(Note 7) Incorporated by reference to Post-Effective Amendment No. 1 to Form
N-4, Registration No. 333-75702, filed February 14, 2003 on behalf of Pruco
Life Flexible Premium Variable Annuity Account.
(Note 8) Incorporated by reference to initial Form S-3 Registration Statement
No. 333-103474 filed February 27, 2003 on behalf of Pruco Life Insurance
Company.
(Note 9) Incorporated by reference to the initial registration on Form S-6,
Registration No. 333-07451, filed July 2, 1999 on behalf of the Pruco Life
Variable Appreciable Account.
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(Note 10) Incorporated by reference to Form 10-Q as filed August 15, 1997 on
behalf of Pruco Life Insurance Company.
(Note 11) Incorporated by reference to Post-Effective Amendment No. 2 to Form
N-4, Registration No. 333-75702, filed April 23, 2003 on behalf of Pruco Life
Flexible Premium Variable Annuity Account.
(Note 12) Incorporated by reference to Post-Effective Amendment No. 11 to Form
N-4, Registration No. 333-37728, filed November 14, 2003 on behalf of Pruco
Life Flexible Premium Variable Annuity Account.
(Note 13) Incorporated by reference to Post-Effective Amendment No. 3 to Form
S-3, Registration No. 333-103474, filed April 12, 2004 on behalf of Pruco Life
Insurance Company.
(Note 14) Incorporated by reference to Post-Effective Amendment No. 14 to Form
N-4, Registration No. 333-37728, filed November 15, 2004 on behalf of Pruco
Life Flexible Premium Variable Annuity Account.
(Note 15) Incorporated by reference to Post-Effective Amendment No. 5 to Form
N-4, Registration No. 333-75702, filed January 20, 2005 on behalf of Pruco
Life Flexible Premium Variable Annuity Account.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10 (a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information in the registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d)
of the Securities Exchange Act of 1934 that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
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(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Newark, State of New Jersey, on this 14th day of
February, 2005.
PRUCO LIFE INSURANCE COMPANY
(Registrant)
By: /s/ BERNARD J. JACOB
------------------------
BERNARD J. JACOB
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE AND TITLE
/s/* February 14, 2005
------------------------------------
JAMES J. AVERY JR
VICE CHAIRMAN AND DIRECTOR
/s/* *By: /s/ CLIFFORD E. KIRSCH
------------------------------------ ---------------------------
BERNARD J. JACOB CLIFFORD E. KIRSCH
PRESIDENT AND DIRECTOR (ATTORNEY-IN-FACT)
/s/*
------------------------------------
JOHN CHIEFFO
VICE PRESIDENT, CHIEF ACCOUNTING OFFICER AND
PRINCIPAL FINANCIAL OFFICER
/s/*
------------------------------------
C. EDWARD CHAPLIN
SENIOR VICE PRESIDENT AND DIRECTOR
/s/*
------------------------------------
HELEN M. GALT
DIRECTOR
/s/*
------------------------------------
RONALD P. JOSELSON.
DIRECTOR
/s/*
------------------------------------
ANDREW J. MAKO
DIRECTOR
/s/*
------------------------------------
DAVID R. ODENATH, JR.
DIRECTOR
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