POS AM: Post-effective amendment to a registration statement that is not immediately effective upon filing
Published on
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 13, 2005
REGISTRATION NO. 333-103473
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
POST-EFFECTIVE AMENDMENT NO. 5
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
(Exact Name of Registrant)
NEW JERSEY
(State or other jurisdiction of incorporation or organization)
22-2426091
(I.R.S. Employer Identification Number)
C/O PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-7333
(Address and telephone number of principal executive offices)
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THOMAS C. CASTANO
ASSISTANT SECRETARY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-4780
(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
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box .............................[X]
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* Securities are not issued in predetermined units
** Registration fee for these securities, in the amount of $75 million, was paid
at the time the securities were originally registered on Form S-3 as filed by
Pruco Life Insurance Company of New Jersey on 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)
ANNUITY ONE 3
VARIABLE ANNUITY
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PROSPECTUS: MAY 2, 2005
THIS PROSPECTUS DESCRIBES AN INDIVIDUAL VARIABLE ANNUITY CONTRACT OFFERED BY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY (PRUCO LIFE OF NEW JERSEY) AND THE
PRUCO LIFE OF NEW JERSEY FLEXIBLE PREMIUM ANNUITY ACCOUNT. PRUCO LIFE OF NEW
JERSEY OFFERS SEVERAL DIFFERENT ANNUITIES WHICH YOUR REPRESENTATIVE MAY BE
AUTHORIZED TO OFFER TO YOU. EACH ANNUITY HAS DIFFERENT FEATURES AND BENEFITS
THAT MAY BE APPROPRIATE FOR YOU BASED ON YOUR FINANCIAL SITUATION, YOUR AGE AND
HOW YOU INTEND TO USE THE ANNUITY. THE DIFFERENT FEATURES AND BENEFITS INCLUDE
VARIATIONS IN DEATH BENEFIT PROTECTION AND THE ABILITY TO ACCESS YOUR ANNUITY'S
CONTRACT VALUE. THE FEES AND CHARGES 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 OF NEW JERSEY IS AN INDIRECT WHOLLY-OWNED
SUBSIDIARY OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA.
THE FUNDS
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Strategic Partners Annuity One 3 offers a wide variety of investment choices,
including variable investment options that invest in underlying mutual funds.
Currently, portfolios of the following underlying mutual funds are being
offered: The Prudential Series Fund, Inc., American Skandia Trust, Gartmore
Variable Insurance Trust, and Janus Aspen Series.
You may choose between two basic versions of Strategic Partners Annuity One
3. One version, the Contract With Credit, provides for a bonus credit that we
add to each purchase payment you make. If you choose this version of Strategic
Partners Annuity One 3, some charges and expenses may be higher than if you
choose the version without the credit. Those higher charges could exceed the
amount of the credit under some circumstances, particularly if you withdraw
purchase payments within a few years of making those purchase payments.
PLEASE READ THIS PROSPECTUS
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Please read this prospectus before purchasing a Strategic Partners Annuity One 3
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 the Summary.
TO LEARN MORE ABOUT STRATEGIC PARTNERS ANNUITY ONE 3
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To learn more about the Strategic Partners Annuity One 3 variable annuity, you
can request a copy of the Statement of Additional Information (SAI) dated May 2,
2004. The SAI has been filed with the Securities and Exchange Commission (SEC)
and is legally a part of this prospectus. Pruco Life of New Jersey also files
other reports with the SEC. All of these filings can be reviewed and copied at
the SEC's offices, and can also be obtained from the SEC's Public Reference
Section, 450 5th Street N.W., Washington, D.C. 20549-0102. (See SEC file numbers
333-49230 and 333-103473.) You may obtain information on the operation of the
Public Reference Room by calling the SEC at (202) 942-8090. The SEC maintains a
Web site (http://www.sec.gov) that contains the Strategic Partners Annuity One 3
SAI, material incorporated by reference, and other information regarding
registrants that file electronically with the SEC. The Table of Contents of the
SAI is set forth in Section 11 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.
THE SEC HAS NOT DETERMINED THAT THIS CONTRACT IS A GOOD INVESTMENT, NOR HAS THE
SEC DETERMINED THAT THIS PROSPECTUS IS COMPLETE OR ACCURATE. IT IS A CRIMINAL
OFFENSE TO STATE OTHERWISE. INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT
TO RISK, INCLUDING THE POSSIBLE LOSS OF YOUR MONEY. AN INVESTMENT IN STRATEGIC
PARTNERS ANNUITY ONE 3 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. ORD01182NY
CONTENTS
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PART I SUMMARY
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STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS
5
PART I
STRATEGIC PARTNERS ANNUITY ONE 3 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 and
withdrawal charges.
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 will be
adjusted to reflect subsequent purchase payments, withdrawals, and any step-up.
ANNUAL WITHDRAWAL AMOUNT
Under the terms of the Lifetime Five Income Benefit, an amount that you can
withdraw each year as long as there is Protected Withdrawal Value remaining. The
Annual Withdrawal Amount is set initially to equal 7% of the initial Protected
Withdrawal Value, but will be adjusted to reflect subsequent purchase payments,
withdrawals, and any step-up.
ANNUITANT
The person whose life determines the amount of income payments that we will pay.
If the annuitant dies before the annuity date, the co-annuitant (if any) becomes
the annuitant if the contract's requirements for changing the annuity date are
met. If, upon the death of the annuitant, there is no surviving eligible
co-annuitant, and the owner is not the annuitant, then the owner becomes the
annuitant.
ANNUITY DATE
The date when income payments are scheduled to begin. You must have our
permission to change the annuity date. If the co-annuitant becomes the annuitant
due to the death of the annuitant, and the co-annuitant is older than the
annuitant, then the annuity date will be based on the age of the co-annuitant,
provided that the contract's requirements for changing the annuity date are met
(e.g., the co-annuitant cannot be older than a specified age). If the
co-annuitant is younger than the annuitant, then the annuity date will remain
unchanged.
BENEFICIARY
The person(s) or entity you have chosen to receive a death benefit.
BUSINESS DAY
A day on which 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 requirements for
changing the annuity date are met. No co-annuitant may be designated if the
owner is a non-natural person.
CONTRACT DATE
The date we accept your initial purchase payment and all necessary paperwork in
good order at the Prudential Annuity Service Center. Contract anniversaries are
measured from the contract date. A contract year starts on the contract date or
on a contract anniversary.
CONTRACT OWNER, OWNER, OR YOU
The person entitled to the ownership rights under the contract.
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
CONTRACT VALUE
This is the total value of your contract, equal to the sum of the values of your
investment in each investment option you have chosen. Your contract value will
go up or down based on the performance of the investment options you choose.
CONTRACT WITH CREDIT
A version of the annuity contract that provides for a bonus credit with each
purchase payment that you make and has higher withdrawal charges and insurance
and administrative costs, and may provide lower interest rates for fixed rate
options than the Contract Without Credit.
CONTRACT WITHOUT CREDIT
A version of the annuity contract that does not provide a credit and has lower
withdrawal charges and insurance and administrative costs than the Contract With
Credit.
CREDIT
If you choose the Contract With Credit, this is the bonus amount that we
allocate to your account each time you make a purchase payment. The amount of
the credit is a percentage of the purchase payment. Bonus credits generally are
not recaptured once the free look period expires. Our reference in the preceding
sentence to "generally are not recaptured" refers to the fact that we have the
contractual right to deduct, from the death benefit we pay, the amount of any
credit corresponding to a purchase payment made within one year of death.
DEATH BENEFIT
If 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 is available for an additional charge. See
Section 4, "What Is The Death Benefit?"
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.
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.
GMDB PROTECTED VALUE
The amount guaranteed under the Guaranteed Minimum Death Benefit, which equals
the GMDB step-up value. 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 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
7
GLOSSARY CONTINUED
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
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, and any
withdrawals 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.
INCOME APPRECIATOR BENEFIT (IAB)
An optional feature that may be available for an additional charge that provides
a supplemental living 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.
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.
LIFETIME FIVE INCOME BENEFIT
An optional feature available for an additional charge 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
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
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
Under the Contract Without Credit, 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 or
transfers 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 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 19176. For express
overnight mail: 2101 Welsh Road, Dresher, PA 19025. The telephone number is
(888) PRU-2888. Prudential's Web site is www.prudential.com.
PURCHASE PAYMENTS
The amount of money you pay us to purchase the contract. 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 of New Jersey Flexible Premium Variable
Annuity Account. The separate account is set apart from all of the general
assets of Pruco Life of New Jersey.
STATEMENT OF ADDITIONAL INFORMATION
A document containing certain additional information about the Strategic
Partners Annuity One 3 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
Section 10, "What Are The Tax Considerations Associated With The Strategic
Partners Annuity One 3 Contract?"
VARIABLE INVESTMENT OPTION
When you choose a variable investment option, we purchase shares of the
underlying mutual fund that are held as an investment for that option. We hold
these shares in the separate account. The division of the separate account of
Pruco Life of New Jersey that invests in a particular mutual fund is referred to
in your contract as a subaccount.
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
SUMMARY FOR SECTIONS 1-11
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FOR A MORE COMPLETE DISCUSSION OF THE FOLLOWING TOPICS, SEE THE CORRESPONDING
SECTION IN PART II OF THE PROSPECTUS.
SECTION 1
WHAT IS THE STRATEGIC PARTNERS ANNUITY ONE 3 VARIABLE ANNUITY?
The Strategic Partners Annuity One 3 variable annuity is a contract between you,
the owner, and us, the insurance company, Pruco Life Insurance Company of New
Jersey (Pruco Life of New Jersey, we or us). 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.
There are two basic versions of the Strategic Partners Annuity One 3 variable
annuity.
Contract With Credit.
- - provides for a bonus credit that we add to each purchase payment that you
make,
- - has higher withdrawal charges and insurance and administrative costs than the
Contract Without Credit,
- - may provide lower interest rates for fixed interest rate options than the
Contract Without Credit, and
- - does not offer the market value adjustment option.
Contract Without Credit.
- - does not provide a credit,
- - has lower withdrawal charges and insurance and administrative costs than the
Contract With Credit.
- - may provide higher interest rates for fixed interest rate options than the
Contract With Credit, and
- - offers the market value adjustment option.
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 the 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.
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 Annuity One 3, you
may cancel your contract within 10 days after receiving it (or whatever period
is required by applicable law). This time period is referred to as the "Free
Look" period.
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
SECTION 2
WHAT INVESTMENT OPTIONS CAN I CHOOSE?
You can invest your money in several 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.
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). 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. See Section 3, "What Kind
Of Payments Will I Receive During The Income Phase?"
The Lifetime Five Income Benefit (discussed in Section 5) and the Income
Appreciator Benefit (discussed in Section 6) each may provide an additional
amount upon which your annuity payments are based.
SECTION 4
WHAT IS THE DEATH BENEFIT?
In general, if the sole owner or first to die of the owner or joint owner dies
before the income phase of the contract begins, the person(s) or entity that you
have chosen as your beneficiary will receive, at a minimum, the greater of (i)
the contract value, (ii) either the base death benefit or, for a higher
insurance and administrative cost, a potentially larger Guaranteed Minimum Death
Benefit (GMDB).
The base death benefit equals the total invested purchase payments reduced
proportionally by withdrawals. The Guaranteed Minimum Death Benefit is equal to
the "GMDB protected value" of the highest value of the contract on any contract
anniversary, which we call the "GMDB step-up value".
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,
in Section 4, are met.
SECTION 5
WHAT IS THE LIFETIME FIVE(SM) INCOME BENEFIT?
The Lifetime Five Income Benefit 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 is Protected Withdrawal Value (adjusted, as
described in Section 5) (the "Withdrawal Benefit"). The annuitant must be at
least 45 years old when the Lifetime Five Income Benefit is elected.
The charge for the Lifetime Five Income Benefit is a daily fee equal on an
annual basis to 0.60% of the contract value allocated to the variable investment
options. This charge is in addition to the charge for the applicable death
benefit.
SECTION 6
WHAT IS THE INCOME APPRECIATOR BENEFIT?
The Income Appreciator Benefit is an optional benefit, available for an
additional charge, that provides an
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SUMMARY FOR SECTIONS 1-11 CONTINUED
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
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. You can activate this benefit in one of three ways, as described
in Section 6. Note, however, that the annuitization options within this benefit
are limited.
SECTION 7
HOW CAN I PURCHASE A STRATEGIC PARTNERS ANNUITY ONE 3 CONTRACT?
You can purchase this contract under most circumstances with a minimum initial
purchase payment of $10,000. You must get our prior approval for any initial and
additional purchase payment of $1,000,000 or more, unless we are prohibited
under applicable state law from insisting on such prior approval. 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. The
Contract With Credit provides for the allocation of a credit with each purchase
payment.
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 8
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS ANNUITY ONE 3
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 $75,000. This charge is currently equal to
the lesser of $30 or 2% of your contract value. We do not impose the contract
maintenance charge if your contract value is $75,000 or more.
- - 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 (or other) option that you choose.
The daily cost is equivalent to an annual charge as follows:
-- 1.40% if you choose the base death benefit,
-- 1.65% if you choose the step-up Guaranteed Minimum Death Benefit option
(i.e., 0.25% in addition to the base death benefit charge), or
-- 0.60% if you choose the Lifetime Five Income Benefit. This charge is in
addition to the charge for the applicable death benefit.
- - We impose an additional insurance and administrative charge of 0.10% annually
for the Contract With Credit.
- - 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 May 1, 2004 (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.
- - There are also expenses associated with the mutual funds. For 2004, the fees
of these funds ranged on an annual basis from 0.38% to 1.79% of fund assets,
which were reduced by expense reimbursements or waivers to 0.38% to 1.30%.
These reimbursements or waivers may be terminated at any time.
- - If you withdraw money less than seven contract anniversaries after making a
purchase payment, then you may have to pay a withdrawal charge on all or part
of the withdrawal. This charge ranges from 1-7% for the Contract Without
Credit and 5-8% for the Contract With Credit.
For more information, including details about other possible charges under
the contract, see "Summary Of Contract Expenses" and Section 8, "What Are The
12
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
Expenses Associated With The Strategic Partners Annuity One 3 Contract?"
SECTION 9
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. For the Contract Without Credit, if
you withdraw money less than seven contract anniversaries after making a
purchase payment, we may impose a withdrawal charge ranging from 1-7%. For the
Contract With Credit, we may impose a withdrawal charge ranging from 5-8%.
Under the market value adjustment option, you will be subject to a market
value adjustment if you make a withdrawal or transfer from the option prior to
the end of a guarantee period.
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. You
also may access your Income Appreciator Benefit through withdrawals.
SECTION 10
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS ANNUITY
ONE 3 CONTRACT?
Your earnings are generally not taxed until withdrawn. If you withdraw money
during the accumulation phase, the tax laws treat the withdrawal 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 11
OTHER INFORMATION
This contract is issued by Pruco Life Insurance Company of New Jersey (Pruco
Life of New Jersey), an indirect subsidiary of The Prudential Insurance Company
of America, and sold by registered representatives of affiliated and
unaffiliated broker/dealers.
RISK FACTORS
There are various risks associated with an investment in the market value
adjustment option that we summarize below.
Issuer Risk. The market value adjustment option, fixed interest rate options,
and the contract's other insurance features are available under a contract
issued by Pruco Life of New Jersey, and thus backed by the financial strength of
that company. If Pruco Life of New Jersey were to experience significant
financial adversity, it is possible that Pruco Life of New Jersey's ability to
pay interest and principal under the 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 of
New Jersey 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, 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.
13
SUMMARY FOR SECTIONS 1-11 CONTINUED
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
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 ANNUITY ONE 3 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 ANNUITY ONE 3. 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 Section 8, "What Are The Expenses Associated With The
Strategic Partners Annuity One 3 Contract?" 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 8.
2: Currently, we charge $25 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 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.
15
SUMMARY OF CONTRACT EXPENSES CONTINUED
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 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.
PERIODIC ACCOUNT EXPENSES
3: Currently, we waive this fee if your contract value is greater than or equal
to $75,000. If your contract value is less than $75,000, we currently charge the
lesser of $30 or 2% of your contract value. This is a single fee that we assess
(a) annually or (b) upon full withdrawal made on a date other than a contract
anniversary.
4: 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 May 1,
2004 (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. The fee is
withdrawn from each variable investment option in the same proportion as the
contract value allocated to that variable investment option represents to the
total contract value in all variable investment options. Subject to certain age
or duration 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. When the GMIB roll-up is increasing at an effective annual
interest rate of 5%, 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.
5: We impose this charge only if you choose the Income Appreciator Benefit. The
charge for this benefit is based on an annual rate of 0.25% of your contract
value. The Income Appreciator Benefit charge is calculated: on each contract
anniversary, on the annuity date, upon the death of the sole owner or first to
die of the owner or joint owner prior to the annuity date, upon a full or
partial withdrawal, and upon a subsequent purchase payment. The fee is based on
the contract value at the time of the calculation, and is prorated based on the
portion of the contract year since the date that the charge was last deducted.
Although it may be calculated more often, it is deducted only: on each contract
anniversary, on the annuity date, upon the death of the sole owner or first to
die of the owner or joint owner prior to the annuity date, upon a full
withdrawal, and upon a partial withdrawal if the contract value remaining after
such partial withdrawal is not enough to cover the then-applicable 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.
16
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
TOTAL ANNUAL MUTUAL FUND OPERATING EXPENSES
The next item shows the minimum and maximum total operating expenses (expenses
that are deducted from underlying mutual fund assets, including management fees,
distribution and/or service (12b-1) fees, and other expenses) charged by the
underlying mutual funds that you may pay periodically during the time that you
own the contract. More detail concerning each underlying mutual fund's fees and
expenses is contained below and in the prospectus for each underlying mutual
fund. The minimum and maximum total operating expenses depicted below are based
on historical fund expenses for the year ended December 31, 2004. Fund expenses
are not fixed or guaranteed by the Strategic Partners Annuity One 3 contract,
and may vary from year to year.
* Actual expenses for the mutual funds were 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 were 0.38% and 1.30%, respectively.
17
SUMMARY OF CONTRACT EXPENSES CONTINUED
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
18
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 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 Series and/or Trust providing such services. Amounts
paid by a Portfolio under those arrangements are included under "Other
Expenses."
2. Effective July 1, 2004, Quantitative Management Associates LLC became the
Sub-adviser of the Portfolio. Prior to July 1, 2004, Prudential Investments LLC
served as Sub-adviser of the Portfolio.
3. 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:
4. 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.
5. The Portfolio was merged into the SP Mid Cap Growth Portfolio on April 29,
2005.
6. Effective November 19, 2004, LSV Asset Management became Sub-adviser of the
Portfolio. Prior to November 19, 2004, Deutsche Asset Management, Inc. served as
Sub-adviser of the Portfolio, then named "SP Deutsche International Equity
Portfolio."
7. The Portfolio was merged into the Prudential Equity Portfolio on April 29,
2005.
8. Effective May 1, 2005, Neuberger Berman Asset Management Inc. and Eagle Asset
Management became Sub-advisers of the Portfolio. Previously, State Street
Research and Management Company served as Sub-adviser of the Portfolio, then
named "SP State Street Research Small Cap Growth Portfolio."
9. The Portfolio was merged into the SP Prudential U.S. Emerging Growth
Portfolio on April 29, 2005.
10. Until November 18, 2004, the Trust had a Distribution Plan under Rule 12b-1
to permit an affiliate of the Trust's investment managers to receive brokerage
commissions in connection with purchases and sales of securities held by the
Portfolios, and to use these commissions to promote the sale of shares of the
Portfolio. The Distribution Plan was terminated effective November 18, 2004. The
Total Annual Portfolio Operating Expenses do not reflect any brokerage
commissions paid pursuant to the Distribution Plan prior to the Plan's
termination.
11. 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
19
SUMMARY OF CONTRACT EXPENSES CONTINUED
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
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:
12. Effective November 18, 2004, Integrity Asset Management, Lee Munder Capital
Group, and J.P. Morgan Fleming Asset Management became Sub-advisers of the
Portfolio. Prior to November 18, 2004, GAMCO Investors, Inc. served as
Sub-adviser of the Portfolio, then named "AST Gabelli Small-Cap Value
Portfolio."
13. Effective May 1, 2005, Alliance Capital Management, L.P. became Sub-adviser
of the Portfolio. Prior to May 1, 2005, Sanford C. Bernstein & Co., LLC served
as Sub-adviser of the Portfolio, then named "AST Sanford Bernstein Core Value
Portfolio."
14. Effective May 1, 2005, Alliance Capital Management, L.P. became Sub-adviser
of the Portfolio. Prior to May 1, 2005, Sanford C. Bernstein & Co., LLC served
as Sub-adviser of the Portfolio, then named "AST Sanford Bernstein Managed Index
500 Portfolio."
15. (a) The AST Global Allocation Portfolio invests primarily in shares of other
AST Portfolios (the "Underlying Portfolios"). The only management fee directly
paid by the Portfolio is a 0.10% fee paid to Prudential Investments LLC and
American Skandia Investment Services, Inc. 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.
(c) Effective May 1, 2005, Prudential Investments, LLC became Sub-adviser of
the Portfolio. Prior to May 1, 2005, Deutsche Asset Management, Inc. served as
Sub-adviser of the Portfolio, then named "AST DeAM Global Allocation Portfolio."
16. Because the 12b-1 fee is charged as an ongoing fee, over time the fee will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
17. Effective May 1, 2005, the name of the Portfolio was changed from "Growth
Portfolio -- Service Shares" to "Large Cap Growth Portfolio -- Service Shares."
20
PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
EXPENSE EXAMPLES
- --------------------------------------------------------------------------------
THESE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
CONTRACT WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITY CONTRACTS. THESE
COSTS INCLUDE CONTRACT OWNER TRANSACTION EXPENSES, CONTRACT FEES, SEPARATE
ACCOUNT ANNUAL EXPENSES, AND UNDERLYING MUTUAL FUND FEES AND EXPENSES.
THE EXAMPLES ASSUME THAT YOU INVEST $10,000 IN THE CONTRACT FOR THE TIME PERIODS
INDICATED. THE EXAMPLES ALSO ASSUME THAT YOUR INVESTMENT HAS A 5% RETURN EACH
YEAR AND ASSUME THE MAXIMUM FEES AND EXPENSES OF ANY OF THE MUTUAL FUNDS, WHICH
DO NOT REFLECT ANY EXPENSE REIMBURSEMENTS OR WAIVERS. ALTHOUGH YOUR ACTUAL COSTS
MAY BE HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS, YOUR COSTS WOULD BE AS
INDICATED IN THE TABLES THAT FOLLOW.
EXAMPLE 1a: Contract With Credit: Step-Up Guaranteed Minimum Death Benefit,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit, and You Withdraw
All Your Assets
This example assumes that:
- - You invest $10,000 in the Contract With Credit,
- - You choose the Step-Up Guaranteed Minimum Death Benefit,
- - You choose the Guaranteed Minimum Income Benefit (for contracts sold on or
after May 1, 2004),
- - You choose the Income Appreciator Benefit,
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses,
- - The investment has a 5% return each year,
- - The mutual fund's total operating expenses remain the same each year, and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 1b: Contract With Credit: Step-Up Guaranteed Minimum Death Benefit,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit, and You Do Not
Withdraw Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
21
EXPENSE EXAMPLES CONTINUED
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
EXAMPLE 2a: Contract With Credit: Base Death Benefit, and You Withdraw All Your
Assets
This example assumes that:
- - You invest $10,000 in the Contract With Credit,
- - You do not choose any optional insurance benefit,
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses,
- - The investment has a 5% return each year,
- - The mutual fund's total operating expenses remain the same each year, and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 2b: Contract With Credit: Base Death Benefit, and You Do Not Withdraw
Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
EXAMPLE 3a: Contract Without Credit: Step-Up Guaranteed Minimum Death Benefit,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit, and You Withdraw
All Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you invest in the Contract Without Credit.
EXAMPLE 3b: Contract Without Credit: Step-Up Guaranteed Minimum Death Benefit,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit, and You Do Not
Withdraw Your Assets
This example makes exactly the same assumptions as Example 1b except that it
assumes that you invest in the Contract Without Credit.
EXAMPLE 4a: Contract Without Credit: Base Death Benefit; and You Withdraw All
Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you invest in the Contract Without Credit.
EXAMPLE 4b: Contract Without Credit: Base Death Benefit; and You Do Not Withdraw
Your Assets
This example makes exactly the same assumptions as Example 2b except that it
assumes that you invest in the Contract Without Credit.
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 Example 1a and 1b, 2a
and 2b, 3a and 3b, and 4a and 4b. This is because if 10 years have elapsed since
your last purchase payment, we would no longer deduct withdrawal charges when
you make a withdrawal.
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 0.024% of contract value. Your actual fees will vary based on
the amount of your contract and your specific allocation among the investment
options.
A table of accumulation unit values appears in Appendix A to this prospectus.
22
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24
PART II SECTIONS 1-11
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STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS
25
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-11
1:
WHAT IS THE STRATEGIC PARTNERS ANNUITY ONE 3
VARIABLE ANNUITY?
- --------------------------------------------------------------------------------
THE STRATEGIC PARTNERS ANNUITY ONE 3 VARIABLE ANNUITY IS A CONTRACT BETWEEN YOU,
THE OWNER, AND US, PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY (PRUCO LIFE OF NEW
JERSEY, WE OR US).
Under our contract, in exchange for your payment to us, we promise to pay you a
guaranteed income stream that can begin any time on or after the first contract
anniversary. Your annuity is in the accumulation phase until you decide to begin
receiving annuity payments. The date you begin receiving annuity payments is the
annuity date. On the annuity date, your contract switches to the income phase.
This annuity contract benefits from tax deferral. Tax deferral means that you
are not taxed on earnings or appreciation on the assets in your contract until
you withdraw money from your contract. (If you purchase the annuity contract in
a tax-favored plan such as an IRA, that plan generally provides tax deferral
even without investing in an annuity contract. Therefore, before purchasing an
annuity in a tax-favored plan, you should consider whether its features and
benefits beyond tax deferral meet your needs and goals. You may also want to
consider the relative features, benefits and costs of these annuities compared
with any other investment that you may use in connection with your retirement
plan or arrangement.)
There are two basic versions of Strategic Partners Annuity One 3 variable
annuity.
Contract With Credit.
- - provides for a bonus credit that we add to each purchase payment that you
make,
- - has higher withdrawal charges and insurance and administrative costs than the
Contract Without Credit,
- - may provide a lower interest rate for the fixed interest rate options than
the Contract Without Credit, and
- - does not offer the market value adjustment option.
Contract Without Credit.
- - does not provide a credit,
- - has lower withdrawal charges and insurance and administrative costs than the
Contract With Credit,
- - may provide a higher interest rate for the fixed interest rate options than
the Contract With Credit, and
- - offers the market value adjustment option.
Unless we state otherwise, when we use the word contract, it applies to both
versions.
Because of the higher withdrawal charges, if you choose the Contract With
Credit and you withdraw a purchase payment, depending upon the performance of
the investment options you choose, you may be worse off than if you had chosen
the Contract Without Credit. We do not recommend purchase of either version of
Strategic Partners Annuity One 3 if you anticipate having to withdraw a
significant amount of your purchase payments within a few years of making those
purchase payments.
Strategic Partners Annuity One 3 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. The market value adjustment option is only available in the Contract
Without Credit. 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.
26
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PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-11
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 annuity
phase begins. On or after the annuity date, the annuitant may not be changed.
The beneficiary is the person(s) or entity you designate to receive any death
benefit. You may change the beneficiary any time prior to the annuity date by
making a written request to us.
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"
If you change your mind about owning Strategic Partners Annuity One 3, 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 a refund equal to your contract value (plus the amount of any fees
or other charges) as of the date you surrendered your contract.
If you have purchased the Contract With Credit, we will deduct any credit we
had added to your contract value.
27
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-11
2:
WHAT INVESTMENT OPTIONS
CAN I CHOOSE?
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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 risk 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 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 of New Jersey has entered into agreements with certain underlying
portfolios and/or the investment adviser or distributor of such portfolios.
Pruco Life of New Jersey 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 0.55% annually (as of May 2, 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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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 1.5% for the one-year fixed interest rate option, or 3%
for the dollar cost averaging fixed rate option. We may offer lower interest
rates for Contracts With Credit than for Contracts Without Credit.
Payments allocated to the fixed interest rate options become part of Pruco
Life of New Jersey'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. 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
You may allocate all or part of any purchase payment to the DCA Fixed Rate
Option. Under this option, you automatically transfer amounts over a stated
period (currently, six or twelve months) from the DCA Fixed Rate Option to the
variable investment options and/or to the one-year fixed interest rate option,
as you select. We will invest the assets you allocate to the DCA Fixed Rate
Option in our general account until they are transferred. You may not transfer
from other investment options to the DCA Fixed Rate Option. Transfers to the
one-year fixed interest rate option will remain in the general account.
If you choose to allocate all or part of a purchase payment to the DCA Fixed
Rate Option, the minimum amount of the purchase payment you may allocate is
$2,000. The first periodic transfer will occur on the date you allocate your
purchase payment to the DCA Fixed Rate Option. Subsequent transfers will occur
on the monthly anniversary of the first transfer. Currently, you may choose to
have the purchase payment allocated to the DCA Fixed Rate Option transferred to
the selected variable investment option, 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. (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 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
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monthly transfer amount below $100, we will transfer the remaining balance in
the DCA Fixed Rate Option on the next scheduled transfer date.
By investing amounts on a regular basis instead of investing the total amount
at one time, the DCA Fixed Rate Option may decrease the effect of market
fluctuation on the investment of your purchase payment. Of course, dollar cost
averaging cannot ensure a profit or protect against loss in a declining market.
MARKET VALUE ADJUSTMENT OPTION
Under the market value adjustment option, we 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 annually with respect to any guarantee period. This
option is only available in the Contract Without Credit. 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 the 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 of 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) listed immediately above, you
will receive the current interest rate applicable to the guarantee period having
the same duration as the guarantee period that just matured, which is offered on
the day immediately following the end of the matured guarantee period. However,
if at that time we do not offer a guarantee period with the same duration as
that which matured, you will then receive the current interest rate applicable
to the shortest guarantee period then offered.
Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed and
the interest amount that your money will earn is guaranteed by us to 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 of New Jersey.
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
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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.
YOU SHOULD REALIZE, HOWEVER, THAT APART FROM THE MARKET VALUE ADJUSTMENT, THE
VALUE OF THE BENEFIT IN YOUR GUARANTEE PERIOD UNDER YOUR CONTRACT DOES NOT
DEPEND ON THE INVESTMENT PERFORMANCE OF THE BONDS AND OTHER INSTRUMENTS THAT WE
HOLD WITH RESPECT TO YOUR GUARANTEE PERIOD. APART FROM THE EFFECT OF ANY MARKET
VALUE ADJUSTMENT, WE DO NOT PASS THROUGH TO 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 a 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 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 in good order by us, or by certain entities that we have
specifically designated. Our business day generally closes at 4:00 p.m. Eastern
time. Our business day may close earlier, for example if regular trading on the
New York Stock Exchange closes early. Transfer requests received after the close
of the business day 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,
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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.
During the contract accumulation phase, you can make up to 12 transfers each
contract year, among the investment options, without charge. Currently we charge
$25 for each transfer after the twelfth in a contract year, and we have the
right to increase this charge up to $30. (Dollar Cost Averaging and
Auto-Rebalancing transfers do not count toward the 12 free transfers per year.)
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 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
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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 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 option or the one-year fixed interest rate option. You can have these
automatic transfers occur monthly, quarterly, semiannually or annually. By
investing amounts on a regular basis instead of investing the total amount at
one time, dollar cost averaging may decrease the effect of market fluctuation on
the investment of your purchase payment. Of course, dollar cost averaging cannot
ensure a profit or protect against loss in 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
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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. If you also participate in the DCA feature, then the variable
investment option from which you make the DCA transfers will not be rebalanced.
You may choose to have your rebalancing occur monthly, quarterly,
semiannually, or annually. The rebalancing will occur on the last calendar day
of the period you have chosen, provided that the New York Stock Exchange is open
on that date. If the New York Stock Exchange is not open on that date, the
rebalancing will take effect on the next business day.
Any transfers 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, the 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
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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 first contract
anniversary. Annuity payments must begin no later than the later of the contract
anniversary coinciding with or next following the annuitant's 90th birthday or
the tenth contract anniversary.
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 Annuity One 3 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.
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. IN ADDITION TO THE ANNUITY PAYMENT
OPTIONS DISCUSSED IN THIS SECTION, PLEASE NOTE THAT IF YOU CHOOSE THE OPTIONAL
LIFETIME FIVE INCOME BENEFIT, THERE ARE ADDITIONAL ANNUITY PAYMENT OPTIONS THAT
ARE ASSOCIATED WITH THAT BENEFIT. SEE SECTION 5 OF THIS PROSPECTUS FOR
ADDITIONAL DETAILS.
OPTION 1
ANNUITY PAYMENTS FOR A FIXED PERIOD
Under this option, we will make equal payments for the period chosen, up to 25
years (but not to exceed life expectancy). The annuity payments may be made
monthly, quarterly, semiannually, or annually, as you choose, for the fixed
period. If the annuitant dies during the income phase, payments will continue to
the beneficiary for the remainder of the fixed period or, if the beneficiary so
chooses, we will make a single lump-sum payment. The amount of the lump sum
payment is determined by calculating the present value of the unpaid future
payments. This is done by using the interest rate used to compute the actual
payments. The interest rate will be at least 3% a year.
OPTION 2
LIFE INCOME ANNUITY OPTION
Under this option, we will make annuity payments monthly, quarterly,
semiannually, or annually as long as the annuitant is alive. If the annuitant
dies before we have made 10 years worth of payments, we will pay the beneficiary
in one lump sum the present value of the annuity payments scheduled to have been
made over the remaining portion of that 10 year period, unless we were
specifically instructed that such remaining annuity payments continue to be paid
to the beneficiary. The present value of the remaining annuity payments is
calculated by using the interest rate used to compute the amount of the original
120 payments. The interest rate will be at least 3% a year.
If an annuity option is not selected by the annuity date, this is the option
we will automatically select for you.
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
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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. 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 proportionally by 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 May 1, 2004 (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 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 proportionally by 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
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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). The GMIB roll-up cap is also reduced by withdrawals
in the same manner. 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,
2006; 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, 2006 (in the first contract year).
No prior withdrawals have been taken. Immediately prior to the withdrawal, the
GMIB protected value is $251,038.10 (the initial value accumulated for 31 days
at an annual effective rate of 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 $251,038.10 to $241,038.10).
- - 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, 2006 (still within the first
contract year). Immediately before the withdrawal, the contract value is
$220,000 and the GMIB protected value is $241,941.95. 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
$241,941.95 to $239,441.95).
- - 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: $239,441.95 X (1 -
($7,500/$217,500)), or $231,185.33.
- The GMIB 200% cap is reduced by the sum of all reductions above
($490,000-$2,500-$8,256.62, or $479,243.38).
- - 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, 2007 (second contract year). Prior to the withdrawal, the GMIB
protected value is $240,837.69. The dollar-for-dollar limit is equal to 5% of
this amount, or $12,041.88. 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 $240,837.69 to $230,837.69).
- - The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000, from
$479,243.38 to $469,243.38).
- - The Remaining Limit for the balance of the second contract year is also
reduced by the amount withdrawn (from $12,041.88 to $2,041.88).
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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
of the annuitant (and, if there is one, the co-annuitant). After we first deduct
a charge for any applicable 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 payment for at least 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 May 1, 2004 (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
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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
90 or the 10th contract anniversary.
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 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).
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 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 May 1, 2004
(and 2.5% to 3.5% for all other contracts). For non-GMIB annuity options, the
guaranteed minimum rate is 3%. 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
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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 May 1, 2004 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 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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WHAT IS THE
DEATH BENEFIT?
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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. A change of beneficiary will take effect on the date
you sign the change request form, provided we receive the form in good order.
Unless an irrevocable beneficiary has been named, during the accumulation
period, you can change the beneficiary at any time before the owner dies.
However, if the contract is jointly owned, the owner must name the joint owner
and the joint owner must name the owner as the beneficiary. For entity-owned
contracts, we pay a death benefit upon the death of the annuitant.
CALCULATION OF THE DEATH BENEFIT
If the owner or joint owner dies during the accumulation phase, we will, upon
receiving the appropriate proof of death and any other needed documentation in
good order (proof of death), pay a death benefit to the beneficiary designated
by the deceased owner or joint owner. If there is a sole owner and there is only
one beneficiary who is the owner's spouse on the date of death, 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.
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). If you have purchased the Contract With Credit, we will first deduct
any credit corresponding to a purchase payment made within one year of death.
We impose no market value adjustment on contract value held within the market
value adjustment option when a death benefit is paid.
2) Either the base death benefit, which equals the total invested purchase
payments you have made proportionally reduced by any withdrawals, or, if you
have chosen the Guaranteed Minimum Death Benefit (GMDB), the GMDB protected
value.
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.
The GMDB protected value option equals the GMDB step-up. The GMDB protected
value is calculated daily.
GMDB STEP-UP
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE 80
ON THE CONTRACT DATE, the GMDB step-up before the first contract anniversary is
the initial invested purchase payment increased by subsequent invested purchase
payments, and proportionally reduced by the effect of withdrawals. The GMDB
step-up on each contract anniversary will be the greater of the previous GMDB
step-up and the contract value as of such contract anniversary. Between contract
anniversaries, the GMDB step-up will increase by invested purchase payments and
reduce proportionally by withdrawals.
We stop increasing the GMDB step-up by any appreciation in the contract value
on the later of:
- - the contract anniversary coinciding with or next following the sole or older
owner's 80th birthday, or
- - the 5th contract anniversary.
However, we still increase the GMDB protected value by subsequent invested
purchase payments and proportionally reduce it by withdrawals.
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.
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IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB step-up before the third contract
anniversary is the sum of invested purchase payments, reduced by the effect of
withdrawals. On the third contract anniversary, we will adjust the GMDB step-up
to the greater of the then current GMDB step-up or the contract value as of that
contract anniversary. Thereafter, we will only increase the GMDB protected value
by subsequent invested purchase payments and proportionally reduce it by
withdrawals.
Special rules apply if the beneficiary is the spouse of the owner and the
contract does not have a joint owner. In that case, upon the death of the owner,
the spouse will have the choice of the following:
- - If the sole beneficiary under the contract is the owner's spouse, and the
other requirements of the Spousal Continuance Benefit are met, then the
contract can continue, and the spouse will become the new owner of the
contract; or
- - The spouse can receive the death benefit. A surviving spouse who is eligible
for the Spousal Continuance Benefit must choose between that benefit and
receiving the death benefit during the first 60 days following our receipt of
proof of death.
If ownership of the contract changes as a result of the owner assigning it to
someone else, we will reset the value of the death benefit to equal the contract
value on the date the change of ownership occurs, and for purposes of computing
the future death benefit, we will treat that contract value as a purchase
payment occurring on that date.
SPECIAL RULES IF JOINT OWNERS
If the contract has an owner and a joint owner and they are spouses at the time
that one dies, the Spousal Continuance Benefit may apply. If the contract has an
owner and a joint owner and they are not spouses at the time one dies, we will
pay the death benefit and the contract will end.
PAYOUT OPTIONS
The beneficiary may, within 60 days of providing proof of death, choose to take
the death benefit under one of several death benefit payout options listed
below.
The death benefit payout options are:
Choice 1. Lump sum payment of the death benefit. If the beneficiary does not
choose a payout option within sixty days, the beneficiary will receive this
payout option.
Choice 2. The payment of the entire death benefit within a period of 5 years
from the date of death of the first to die of the owner or joint owner.
The entire death benefit will include any increases or losses resulting
from the performance of the variable or fixed interest rate options during
this period. During this period the beneficiary may: reallocate the contract
value among the variable or fixed interest rate options; name a beneficiary
to receive any remaining death benefit in the event of the beneficiary's
death; and make withdrawals from the contract value, in which case, any such
withdrawals will not be subject to any withdrawal charges. However, the
beneficiary may not make any purchase payments to the contract.
During this 5 year period, we will continue to deduct from the death
benefit proceeds the charges and costs that were associated with the features
and benefits of the contract. Some of these features and benefits may not be
available to the beneficiary, such as the Guaranteed Minimum Income Benefit
(with respect to the version of GMIB sold on or after May 1, 2004, we impose
no GMIB charge after death) and Income Appreciator 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 not 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
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must be distributed within five years of the survivor's date of death.
The tax consequences to the beneficiary vary among the three death benefit
payout options. See Section 10, "What Are The Tax Considerations Associated With
The Strategic Partners Annuity One 3 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) 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 or market value adjustment options in the same proportions
that existed immediately prior to the spousal continuance adjustment. We will
waive the $1,000 minimum requirement for the market value adjustment option.
Under the Spousal Continuance Benefit, we waive any potential withdrawal
charges applicable to purchase payments made prior to activation of the Spousal
Continuance Benefit. However, we will continue to impose withdrawal charges on
purchase payments made after activation of this benefit. In addition, contract
value allocated to the market value adjustment option will remain subject to a
potential market value adjustment.
IF YOU ELECTED THE BASE DEATH BENEFIT, then upon activation of the Spousal
Continuance Benefit, we will adjust the contract value to equal the greater of:
- - the contract value, or
- - the sum of all invested purchase payments (adjusted for withdrawals).
IF YOU HAVE ELECTED THE GMDB STEP-UP, we will adjust the contract value to
equal the greater of:
- - the contract value, or
- - the GMDB step-up.
After we have made the adjustment to contract value set out immediately
above, we will continue to compute the GMDB step-up 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 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.
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 Mini-
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mum Income Benefit, we will revoke the Guaranteed Minimum Income Benefit under
the contract at that time and we will no longer charge for that benefit.
IF YOU ELECTED THE LIFETIME FIVE INCOME BENEFIT, on the owner's death, the
Lifetime Five Income Benefit will end. However, if the owner's surviving spouse
would be eligible to acquire the Lifetime Five Income Benefit as if he/she were
a new purchaser, then the surviving spouse may elect the Lifetime Five Income
Benefit under the Spousal Continuance Benefit. The surviving spouse (or new
annuitant designated by the surviving spouse) must be at least 45 years of age
at the time of election.
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
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., the later of the contract anniversary next following the annuitant's 90th
birthday or the 10th contract anniversary), or (c) the later of the 10th
contract anniversary or the contract anniversary next following the surviving
spouse's 90th birthday (or the annuitant's 90th birthday if other than the
surviving spouse).
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 Continuance 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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5:
WHAT IS THE LIFETIME FIVE
INCOME BENEFIT?
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 subject to certain restrictions described below.
- - Currently, 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. We
reserve the right to limit the election frequency in the future. Before
making any such change to the election frequency, we will provide prior
notice to contract owners who have an effective Lifetime Five Income Benefit.
- - 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 (before reducing the contract value by
the amount of the withdrawal) as of the date of the first withdrawal from your
contract, 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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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 charges that may apply. When
you elect a step-up, your
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5:
WHAT IS THE LIFETIME FIVE INCOME BENEFIT? CONTINUED
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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).F
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
- - Annual Withdrawal Amount for future contract years remains at $18,550
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- - 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 than the Annual Income Amount and amounts are
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5:
WHAT IS THE LIFETIME FIVE INCOME BENEFIT? CONTINUED
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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 one of the following three options:
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 the contract value by the amount of the
withdrawal
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(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
Lifetime Five can be elected at the time you purchase your contract, or 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 reach 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.
We cease imposing the charge for Lifetime Five 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.
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 Internal
Revenue Code of 1986, as amended (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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6:
WHAT IS THE
INCOME APPRECIATOR BENEFIT?
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INCOME APPRECIATOR BENEFIT
The Income Appreciator Benefit (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 Section 8, "What Are The Expenses
Associated With The Strategic Partners Annuity One 3 Contract?"
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 when determining 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.
Income Appreciator Benefit payments are treated as earnings and may be
subject to tax upon withdrawal. See Section 10, "What Are The Tax Considerations
Associated With The Strategic Partners Annuity One 3 Contract?"
IF YOU DO NOT ACTIVATE THE BENEFIT PRIOR TO THE MAXIMUM ANNUITIZATION AGE YOU
MAY LOSE ALL OR PART OF THE IAB.
CALCULATION OF THE INCOME APPRECIATOR BENEFIT
We will calculate the Income Appreciator Benefit amount as of the date we
receive your written request in good order (or, for IAB Option 1, on the annuity
date). We do this by multiplying the current earnings in the contract by the
applicable Income Appreciator Benefit percentage based on the number of years
the Income Appreciator Benefit has been in force. For purposes of calculating
the Income Appreciator Benefit:
- - earnings are calculated as the difference between the contract value and the
sum of all purchase payments;
- - earnings do not include (1) any amount added to the contract value as a
result of the Spousal Continuance Benefit, 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
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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.
Upon termination of the Income Appreciator Benefit, we cease imposing the
associated charge.
INCOME APPRECIATOR BENEFIT OPTIONS DURING THE ACCUMULATION PHASE
You may choose IAB Option 1 at annuitization, but you may instead choose IAB
Options 2 or 3 during the accumulation phase of your contract. Income
Appreciator Benefit payments under IAB Options 2 and 3 will begin on the same
day of the month as the contract date, beginning with the next month following
our receipt of your request in good order. Under IAB Options 2 and 3, you can
choose to have the Income Appreciator Benefit amounts paid or credited monthly,
quarterly, semi-annually, or annually.
IAB OPTIONS 2 AND 3 INVOLVE A TEN-YEAR PAYMENT PERIOD. IF THE 10-YEAR PAYMENT
PERIOD WOULD END AFTER 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
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WHAT IS THE INCOME APPRECIATOR BENEFIT? CONTINUED
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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).
IAB OPTION 3 -- INCOME APPRECIATOR BENEFIT CREDIT TO CONTRACT VALUE
Under this option, you can activate the Income Appreciator Benefit and receive
the benefit as credits to your contract value over a 10-year payment period. We
will allocate these Income Appreciator Benefit credits to the variable
investment options, the fixed interest rate options, or the market value
adjustment option in the same manner as your current allocation, unless you
direct us otherwise. We will 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
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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.
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7:
HOW CAN I PURCHASE A STRATEGIC PARTNERS
ANNUITY ONE 3 CONTRACT?
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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. You must get our
prior approval for any initial and additional purchase payment of $1,000,000 or
more, unless we are prohibited under applicable state law from insisting on such
prior approval. 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 payments you may make is $7
million. We limit the maximum total purchase payments in any contract year other
than the first to $2 million absent our prior approval.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your invested purchase payment
among the variable or fixed interest rate investment options, or the market
value adjustment option based on the percentages you choose. The percentage of
your allocation to a particular investment option can range in whole percentages
from 0% to 100%.
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 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. Our business day may close
earlier, for example if regular trading on the New York Stock Exchange closes
early. Subsequent purchase payments received in good order after the close of
the business day will be credited on the following business day.
At our discretion, we may give initial and subsequent purchase payments (as
well as withdrawals and transfers) received in good order by certain
broker/dealers prior to the close of a business day the same treatment as they
would have received had they been received at the same time at the Prudential
Annuity Service Center. For more detail, talk to your registered representative.
CREDITS
If you purchase the Contract With Credit, we will add a credit amount to your
contract value with each purchase payment you make. The credit amount is
allocated to the variable or fixed interest rate investment options or the
market value adjustment option in the same percentages as the purchase payment.
The bonus credit that we pay with respect to any purchase payment depends on
(i) the age of the older of the owner or joint owner on the date on which the
purchase payment is made and (ii) the amount of the purchase payment.
Specifically,
- - if the elder owner is 80 or younger on the date that the purchase payment is
made, then we will add a bonus credit to the purchase payment equal to 4% if
the purchase payment is less than $250,000; 5% if the purchase payment is
equal to or greater than
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$250,000 but less than $1 million; or 6% if the purchase payment is $1
million or greater; and
- - if the older owner is aged 81-85 on the date that the purchase payment is
made, then we will add a bonus credit equal to 3% of the amount of the
purchase payment.
Under the Contract With Credit, if the owner returns the contract during the
free look period, we will recapture the bonus credits. If we pay a death benefit
under the contract, we have a contractual right to take back any credit we
applied within one year of the date of death.
CALCULATING CONTRACT VALUE
The value of the variable portion of your contract will go up or down depending
on the investment performance of the variable investment options you choose. To
determine the value of your contract allocated to the variable investment
options, we use a unit of measure called an accumulation unit. 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, plus
(if you have purchased the Contract With Credit) any applicable credit,
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
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.
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8:
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC
PARTNERS ANNUITY ONE 3 CONTRACT?
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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 CHARGES
Each day, we make a deduction for the insurance and administrative charges.
These charges cover our expenses for mortality and expense risk, administration,
marketing and distribution. If you choose a Guaranteed Minimum Death Benefit
option, or Lifetime Five Income Benefit option, the insurance and administrative
cost also includes a charge to cover our assumption of the associated risk. The
mortality risk portion of the 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 compensates us for
the expenses associated with the administration of the contract. This includes
preparing and issuing the contract; establishing and maintaining contract
records; preparation of confirmations and annual reports; personnel costs; legal
and accounting fees; filing fees; and systems costs.
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 (or other) option
that you choose.
The death benefit charge is equal to:
- 1.40% on an annual basis if you choose the base death benefit, or
- 1.65% on an annual basis if you choose the step-up Guaranteed Minimum
Death Benefit option (i.e., 0.25% in addition to the base death benefit
charge).
We impose an additional insurance and administrative charge of 0.10% annually
(of account value attributable to the variable investment options) for the
Contract With Credit.
We impose an additional charge of 0.60% annually if you choose the Lifetime
Five Benefit option. The 0.60% charge is in addition to the charge we impose for
the applicable death benefit. 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.
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 these charges.
Any profits made from these charges may be used by us to pay for the costs of
distributing the contracts. If you choose the Contract With Credit, we will also
use any profits from this charge to recoup our costs of providing the credit.
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WITHDRAWAL CHARGE
A withdrawal charge may apply if you make a full or partial withdrawal during
the withdrawal charge period for a purchase payment. The amount and duration of
the withdrawal charge depends on whether you choose the Contract With Credit or
the Contract Without Credit. The withdrawal charge varies with the number of
contract anniversaries that have elapsed since each purchase payment being
withdrawn was made. Specifically, we maintain an "age" for each purchase payment
you have made by keeping track of how many contract anniversaries have passed
since the purchase payment was made.
The withdrawal charge is the percentage, shown below, of the amount
withdrawn.
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. In calculating the charge-free amount, we divide purchase
payments into two categories -- payments that are subject to a withdrawal charge
and those that are not. We determine the charge-free amount based only on
purchase payments that are subject to a withdrawal charge. The charge-free
amount in a given contract year is equal to 10% of the sum of all the purchase
payments subject to the withdrawal charge that you have made as of the
applicable contract anniversary. During the first contract year, the charge-free
amount is equal to 10% of the initial purchase payment.
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 or transfer is taken from a market value adjustment guarantee
period, prior to the expiration of the rate guarantee period, we will make a
market value adjustment to the withdrawal amount. We will then apply a
withdrawal charge to the adjusted amount.
If you choose the Contract With Credit and make a withdrawal that is subject
to a withdrawal charge, we may use part of that withdrawal charge to recoup our
costs of providing the credit.
Withdrawal charges will never be greater than permitted by applicable law.
MINIMUM DISTRIBUTION REQUIREMENTS
If a withdrawal is taken from a tax qualified contract under the minimum
distribution option in order to satisfy an Internal Revenue Service mandatory
distribution requirement only with respect to that contract's account balance,
we will waive withdrawal charges. See Section 10, "What Are The Tax
Considerations Associated With The Strategic Partners Annuity One 3 Contract?"
CONTRACT MAINTENANCE CHARGE
On each contract anniversary during the accumulation phase, if your contract
value is less than $75,000, we will deduct the lesser of $30 or 2% of your
contract value, for administrative expenses. We may raise the
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WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC
PARTNERS ANNUITY ONE 3 CONTRACT? CONTINUED
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level of the contract value at which we waive this fee. The charge will be
deducted proportionately from each of the contract's investment options. This
same charge will also be deducted when you surrender your contract if your
contract value is less than $75,000.
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 MAY 1, 2004, 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. 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.
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
owner prior to the annuity date,
- upon a full withdrawal, and
- upon a partial withdrawal if the contract value remaining after such
partial withdrawal is not enough to cover the then-applicable Income
Appreciator Benefit charge.
We reserve the right to calculate and deduct the fee more frequently than
annually, such as quarterly.
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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 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.
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.
TAXES ATTRIBUTABLE TO PREMIUM
There may be federal, state and premium based taxes applicable to your purchase
payment. We are responsible for the payment of these taxes and may make a
deduction from the value of the contract to pay some or all of these taxes. New
York does not currently charge premium taxes on annuities. It is 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 $25 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 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 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 0.38% to 1.30% of fund assets (these fees reflect the effect of
expense reimbursements or waivers, which may terminate at any time). For
additional information about these fund fees, please consult the prospectuses
for the funds.
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9:
HOW CAN I
ACCESS MY MONEY?
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YOU CAN ACCESS YOUR MONEY BY:
- - MAKING A WITHDRAWAL (EITHER PARTIAL OR FULL); OR
- - CHOOSING TO RECEIVE ANNUITY PAYMENTS DURING THE INCOME PHASE.
WITHDRAWALS DURING THE ACCUMULATION PHASE
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 your
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 YOU MAKE. FOR A MORE COMPLETE EXPLANATION, SEE SECTION 10.
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 10.
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;
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- - 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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10:
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC
PARTNERS ANNUITY ONE 3 CONTRACT?
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The tax considerations associated with the Strategic Partners Annuity One 3
contract vary depending on whether the contract is (i) owned by an individual
and not associated with a tax-favored retirement plan (including contracts held
by a non-natural person, such as a trust, acting as an agent for a natural
person), or (ii) held under a tax-favored retirement plan. We discuss the tax
considerations for these categories of contracts below. The discussion is
general in nature and describes only federal income tax law (not state or other
tax laws). It is based on current law and interpretations, which may change. The
discussion includes a description of certain spousal rights under the contract
and under tax-qualified plans. Our administration of such spousal rights and
related tax reporting accords with our understanding of the Defense of Marriage
Act (which defines a "marriage" as a legal union between a man and a woman and a
"spouse" as a person of the opposite sex). The information provided is not
intended as tax advice. You should consult with a qualified tax advisor for
complete information and advice. References to purchase payments below relate to
your cost basis in your contract. Generally, your cost basis in a contract not
associated with a tax-favored retirement plan is the amount you pay into your
contract, or into annuities exchanged for your contract, on an after-tax basis
less any withdrawals of such payments.
This contract may also be purchased as a non-qualified annuity (i.e., a
contract not held under a tax-favored retirement plan) by a trust or custodial
IRA or 403(b) account, which can hold other permissible assets other than the
annuity. The terms and administration of the trust or custodial account in
accordance with the laws and regulations for IRAs or 403(b)s, as applicable, are
the responsibility of the applicable trustee or custodian.
CONTRACTS OWNED BY INDIVIDUALS (NOT ASSOCIATED WITH TAX-FAVORED RETIREMENT
PLANS)
TAXES PAYABLE BY YOU
We believe the contract is an annuity contract for tax purposes. Accordingly, as
a general rule, you should not pay any tax until you receive money under the
contract.
Generally, annuity contracts issued by the same company (and affiliates) to
you during the same calendar year must be treated as one annuity contract for
purposes of determining the amount subject to tax under the rules described
below.
It is possible that the Internal Revenue Service (IRS) would assert that some
or all of the charges for the optional benefits under the contract such as the
Guaranteed Minimum Death Benefit, should be treated for federal income tax
purposes as a partial withdrawal from the contract. If this were the case, the
charge for this benefit could be deemed a withdrawal and treated as taxable to
the extent there are earnings in the contract. Additionally, for owners under
age 59 1/2, the taxable income attributable to the charge for the benefit could
be subject to a tax penalty.
If the IRS determines that the charges for one or more benefits under the
contract are taxable withdrawals, then the sole or surviving owner will be
provided with a notice from us describing available alternatives regarding these
benefits.
TAXES ON WITHDRAWALS AND SURRENDER
If you make a withdrawal from your contract or surrender it before annuity
payments begin, the amount you receive will be taxed as ordinary income, rather
than as return of purchase payments, until all gain has been withdrawn. You will
generally be taxed on any withdrawals from the contract while you are alive even
if the withdrawal is paid to someone else.
If you assign or pledge all or part of your contract as collateral for a
loan, the part assigned generally will be treated as a withdrawal. Also, if you
elect any interest payment option that we may offer, that election will be
treated, for tax purposes, as surrendering your contract.
If you transfer your contract for less than full consideration, such as by
gift, you will trigger tax on any gain in the contract. This rule does not apply
if you transfer the contract to your spouse or under most circumstances if you
transfer the contract incident to divorce.
TAXES ON ANNUITY PAYMENTS
A portion of each annuity payment you receive will be treated as a partial
return of your purchase payments
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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 gains in the
contract as well as the 10% tax penalty of pre-age 59 1/2 withdrawals. The IRS
has reserved the right to treat transactions it considers abusive as ineligible
for this favorable partial 1035 exchange treatment. We do not know what
transactions may be considered abusive. For example we do not know how the IRS
may view early withdrawals or annuitizations after a partial exchange. In
addition, it is unclear how the IRS will treat a partial exchange from a life
insurance, endowment, or annuity contract into an immediate annuity. As of the
date of this prospectus, we will accept a partial 1035 exchange from a
non-qualified annuity into an immediate annuity as a "tax-free" exchange for
future tax reporting purposes, except to the extent that we, as a reporting and
withholding agent, believe that we would be expected to deem the transaction to
be abusive. However, some insurance companies may not recognize these partial
surrenders as tax-free exchanges and may report them as taxable distributions to
the extent of any gain distributed as well as subjecting the taxable portion of
the distribution to the 10% tax penalty. We strongly urge you to discuss any
transaction of this type with your tax advisor before proceeding with the
transaction.
TAXES PAYABLE BY BENEFICIARIES
The death benefit options are subject to income tax to the extent the
distribution exceeds the cost basis in the contract. The value of the death
benefit, as determined under federal law, is also included in the owner's
estate.
Generally, the same tax rules described above would also apply to amounts
received by your beneficiary. Choosing any option other than a lump sum death
benefit may defer taxes. Certain minimum distribution requirements apply upon
your death, as discussed further below.
Tax consequences to the beneficiary vary among the death benefit payment
options.
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- - Choice 1: The beneficiary is taxed on earnings in the contract.
- - Choice 2: The beneficiary is taxed as amounts are withdrawn (in this case
earnings are treated as being distributed first).
- - Choice 3: The beneficiary is taxed on each payment (part will be treated as
earnings and part as return of premiums).
REPORTING AND WITHHOLDING ON DISTRIBUTIONS
Taxable amounts distributed from your annuity contracts are subject to federal
and state income tax reporting and withholding. In general, we will withhold
federal income tax from the taxable portion of such distribution based on the
type of distribution. In the case of an annuity or similar periodic payment, we
will withhold as if you are a married individual with three exemptions unless
you designate a different withholding status. In the case of all other
distributions, we will withhold at a 10% rate. You may generally elect not to
have tax withheld from your payments. An election out of withholding must be
made on forms that we provide.
State income tax withholding rules vary and we will withhold based on the
rules of your State of residence. Special tax rules apply to withholding for
nonresident aliens, and we generally withhold income tax for nonresident aliens
at a 30% rate. A different withholding rate may be applicable to a nonresident
alien based on the terms of an existing income tax treaty between the United
States and the nonresident alien's country. Please refer to the CONTRACTS HELD
BY TAX FAVORED PLANS section below for a discussion regarding withholding rules
for tax favored plans (for example, an IRA).
Regardless of the amount withheld by us, you are liable for payment of
federal and state income tax on the taxable portion of annuity distributions.
You should consult with your tax advisor regarding the payment of the correct
amount of these income taxes and potential liability if you fail to pay such
taxes.
ANNUITY QUALIFICATION
Diversification And Investor Control. In order to qualify for the tax rules
applicable to annuity contracts described above, the assets underlying the
variable investment options of the annuity contract must be diversified,
according to certain rules. We believe these diversification rules will be met.
An additional requirement for qualification for the tax treatment described
above is that we, and not you as the contract owner, must have sufficient
control over the underlying assets to be treated as the owner of the underlying
assets for tax purposes. While we also believe these investor control rules will
be met, the Treasury Department may promulgate guidelines under which a variable
annuity will not be treated as an annuity for tax purposes if persons with
ownership rights have excessive control over the investments underlying such
variable annuity. It is unclear whether such guidelines, if in fact promulgated,
would have retroactive effect. It is also unclear what effect, if any, such
guidelines may have on transfers between the investment options offered pursuant
to this prospectus. We will take any action, including modifications to your
contract or the investment options, required to comply with such guidelines if
promulgated.
Please refer to the Statement of Additional Information for further
information on these diversification and investor control issues.
Required Distributions Upon Your Death. Upon your death, certain
distributions must be made under the contract. The required distributions depend
on whether you die before you start taking annuity payments under the contract
or after you start taking annuity payments under the contract.
If you die on or after the annuity date, the remaining portion of the
interest in the contract must be distributed at least as rapidly as under the
method of distribution being used as of the date of death.
If you die before the annuity date, the entire interest in the contract must
be distributed within 5 years after the date of death. However, if a periodic
payment option is selected by your designated beneficiary and if such payments
begin within 1 year of your death, the value of the contract may be distributed
over the beneficiary's life or a period not exceeding the beneficiary's life
expectancy. Your designated beneficiary is the person to whom benefit rights
under
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the contract pass by reason of death, and must be a natural person in order to
elect a periodic payment option based on life expectancy or a period exceeding
five years.
If the contract is payable to (or for the benefit of) your surviving spouse,
that portion of the contract may be continued with your spouse as the owner.
Changes In The Contract. We reserve the right to make any changes we deem
necessary to assure that the contract qualifies as an annuity contract for tax
purposes. Any such changes will apply to all contract owners and you will be
given notice to the extent feasible under the circumstances.
ADDITIONAL INFORMATION
You should refer to the Statement of Additional Information if:
- - The contract is held by a corporation or other entity instead of by an
individual or as agent for an individual.
- - Your contract was issued in exchange for a contract containing purchase
payments made before August 14, 1982.
- - You transfer your contract to, or designate, a beneficiary who is either
37 1/2 years younger than you or a grandchild.
CONTRACTS HELD BY TAX-FAVORED PLANS
The following discussion covers annuity contracts held under tax-favored
retirement plans.
Currently, the contract may be purchased for use in connection with
individual retirement accounts and annuities (IRAs) which are subject to
Sections 408(a), 408(b) and 408A of the Code. This description assumes that you
have satisfied the requirements for eligibility for these products.
YOU SHOULD BE AWARE THAT TAX FAVORED PLANS SUCH AS IRAS GENERALLY PROVIDE TAX
DEFERRAL REGARDLESS WHETHER THEY INVEST IN ANNUITY CONTRACTS. THIS MEANS THAT
WHEN A TAX FAVORED PLAN INVESTS IN AN ANNUITY CONTRACT, IT GENERALLY DOES NOT
RESULT IN ANY ADDITIONAL TAX DEFERRAL BENEFITS.
TYPES OF TAX FAVORED PLANS
IRAs. If you buy a contract for use as an IRA, we will provide you a copy of
the prospectus and contract. The "IRA Disclosure Statement," attached to this
prospectus, contains information about eligibility, contribution limits, tax
particulars, and other IRA information. In addition to this information (some of
which is summarized below), the IRS requires that you have a "free look" after
making an initial contribution to the contract. During this time, you can cancel
the contract by notifying us in writing, and we will refund all of the purchase
payments under the contract (or, if provided by applicable state law, the amount
your contract is worth, if greater), less any applicable federal and state
income tax withholding.
CONTRIBUTIONS LIMITS/ROLLOVERS. Because of the way the contract is designed,
you may only purchase a contract for an IRA in connection with a "rollover" of
amounts from a qualified retirement plan or transfer from another IRA. You must
make a minimum initial payment of $10,000 to purchase a contract. This minimum
is greater than the maximum amount of any annual contribution allowed by law you
may make to an IRA. For 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 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.
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Required Provisions. Contracts that are IRAs (or endorsements that are part
of the contract) must contain certain provisions:
- - You, as owner of the contract, must be the "annuitant" under the contract
(except in certain cases involving the division of property under a decree of
divorce);
- - Your rights as owner are non-forfeitable;
- - You cannot sell, assign or pledge the contract, other than to Pruco Life of
New Jersey;
- - The annual contribution you pay cannot be greater than the maximum amount
allowed by law, including catch-up contributions if applicable (which does
not include any rollover amounts);
- - The date on which annuity payments must begin cannot be later than April 1st
of the calendar year after the calendar year you turn age 70 1/2; and
- - Death and annuity payments must meet "minimum distribution requirements".
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
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.
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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
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
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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 Section 8, "What Are The Expenses Associated With
The Strategic Partners Annuity One 3 Contract?"
Information about sales representatives and commissions may be found under
"Other Information" and "Sale And Distribution Of The Contract" in Section 11.
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," attached to this prospectus.
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11:
OTHER
INFORMATION
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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Pruco Life Insurance Company of New Jersey (Pruco Life of New Jersey) is a stock
life insurance company organized in 1982 under the laws of the State of New
Jersey. It is licensed to sell life insurance and annuities in New Jersey and
New York, and accordingly is subject to the laws of each of those states.
Pruco Life of New Jersey is an indirect wholly-owned subsidiary of The
Prudential Insurance Company of America (Prudential), a New Jersey stock life
insurance company doing business since 1875. Prudential is an indirect
wholly-owned subsidiary of Prudential Financial, Inc. (Prudential Financial), a
New Jersey insurance holding company. As Pruco Life of New Jersey's ultimate
parent, Prudential Financial exercises significant influence over the operations
and capital structure of Pruco Life of New Jersey and Prudential. However,
neither Prudential Financial, Prudential, nor any other related company has any
legal responsibility to pay amounts that Pruco Life of New Jersey may owe under
the contract.
Pruco Life of New Jersey publishes annual and quarterly reports that are
filed with the SEC. These reports contain financial information about Pruco Life
of New Jersey that is annually audited by independent accountants. Pruco Life of
New Jersey's annual report for the year ended December 31, 2004, together with
subsequent periodic reports that Pruco Life of New Jersey files with the SEC,
are incorporated by reference into this prospectus. You can obtain copies, at no
cost, of any and all of this information, including the Pruco Life of New Jersey
annual report that is not ordinarily mailed to contract owners, the more current
reports and any subsequently filed documents at no cost by contacting us at the
address or telephone number listed on the cover. The SEC file number for Pruco
Life of New Jersey is 33-18053. You may read and copy any filings made by Pruco
Life of New Jersey with the SEC at the SEC's Public Reference Room at 450 Fifth
Street, Washington, D.C. 20549-0102. You can obtain information on the operation
of the Public Reference Room by calling (202) 942-8090. The SEC maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC at
http://www.sec.gov.
THE SEPARATE ACCOUNT
We have established a separate account, the Pruco Life of New Jersey Flexible
Premium Variable Annuity Account (separate account), to hold the assets that are
associated with the variable annuity contracts. The separate account was
established under New Jersey law on May 20, 1996, and is registered with the SEC
under the Investment Company Act of 1940 as a unit investment trust, which is a
type of investment company. The assets of the separate account are held in the
name of Pruco Life of New Jersey and legally belong to us. These assets are kept
separate from all of our other assets and may not be charged with liabilities
arising out of any other business we may conduct. More detailed information
about Pruco Life of New Jersey, including its audited financial statements, is
provided in the SAI.
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'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, PIMS may offer the
contract directly to potential purchasers.
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11:
OTHER INFORMATION CONTINUED
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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 of New Jersey and/or the contract on a
preferred or recommended company or product list and/or access to the firm's
registered representatives), we or PIMS may enter into compensation arrangements
with certain broker/dealer firms 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
they provide to us or our affiliates. These services may include, but are not
limited to: educating customers of the firm on the contract's features;
conducting due diligence and analysis; providing office access, operations and
systems support; holding seminars intended to educate registered representatives
and make them more knowledgeable about the contract; providing a dedicated
marketing coordinator; providing priority sales desk support; and providing
expedited marketing compliance approval and preferred programs to PIMS. A list
of firms that PIMS paid pursuant to such arrangements is provided in the
Statement of Additional Information which is available upon request.
To the extent permitted by NASD rules and other applicable laws and
regulations, PIMS may pay or allow other promotional incentives or payments in
the form of cash or non-cash compensation. These arrangements may not be offered
to all firms and the terms of such arrangements may differ between firms.
You should note that firms and individual registered representatives and
branch managers within some firms participating in one of these compensation
arrangements might receive greater compensation for selling the contract than
for selling a different 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. Overall compensation paid to the distributing firm does not
exceed, based on actuarial assumptions, 8.5% of the total purchase payments
made. Your registered representative can provide you with more information about
the compensation arrangements that apply upon the sale of the contract.
LITIGATION
Pruco Life of New Jersey is subject to legal and regulatory actions in the
ordinary course of its businesses, which may include class action lawsuits.
Pending legal and regulatory actions include proceedings relating to aspects of
the businesses and operations that are specific to Pruco Life of New Jersey and
that are typical of the businesses in which Pruco Life of New Jersey operates.
Class action and individual lawsuits may 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 may also be 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 may seek large and/or
indeterminate amounts, including punitive or exemplary damages.
Pruco Life of New Jersey has received formal requests for information
relating to its variable annuity business from regulators, including, among
others, the Securities and Exchange Commission and the State of
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New York Attorney General's Office. As part of a broad initiative by the
National Association of Insurance Commissioners, Pruco Life of New Jersey has
received a request for information from the New Jersey Department of Banking and
Insurance related to producer compensation and fee arrangements. It is possible
that other regulators will issue similar requests.
Pruco Life of New Jersey's litigation is subject to many uncertainties, and
given the complexity and scope, the outcomes cannot be predicted. It is possible
that the results of operations or the cash flow of Pruco Life of New Jersey in a
particular quarterly or annual period could be materially affected by an
ultimate unfavorable resolution of litigation and regulatory matters. Management
believes, however, that the ultimate outcome of all pending litigation and
regulatory matters should not have a material adverse effect on Pruco Life of
New Jersey's financial position.
ASSIGNMENT
In general, you can assign the contract at any time during your lifetime. If you
do so, we will reset the death benefit to equal the contract value on the date
the assignment occurs. For details, see Section 4, "What Is The Death Benefit?"
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 of New Jersey,
the co-issuer of the Strategic Partners Annuity One 3 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
- - 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
The general formula under which Pruco Life of New Jersey calculates the market
value adjustment applicable to a full or partial surrender, annuitization, or
settlement under Strategic Partners Annuity One 3 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 power of (N/12)] -1
1 + J + .0025
The MVA formula with respect to contracts issued in New York is what is depicted
above. The formula uses an interpolated rate "J" as the current credited
interest rate. Specifically, "J" is the interpolated current credited interest
rate offered on new money at the time of withdrawal, annuitization, or
settlement. The interpolated value is calculated using the following formula:
m/365 X (n + 1) year rate + (365 - m)/365 X n year rate,
where "n" equals the number of whole years remaining in the Contract's current
guarantee period, and "m" equals the number of days remaining in year "n" of the
current guarantee period.
MARKET VALUE ADJUSTMENT EXAMPLE
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2005 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2007. 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, 2007 the interest rate declared by Pruco Life of New Jersey for a
guarantee period of 3 years (the number of whole years remaining) is 4%, and
for a guarantee period of 4 years (the number of whole years remaining plus
1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.0417 + 0.0025)] to the power
of (38/12) -1 = 0.04871
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.04871 = $542.00
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $542.00 = $11,669.11
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, 2005 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2007. 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, 2007 the interest rate declared by Pruco Life of New Jersey for a
guarantee period of 3 years (the number of whole years remaining) is 7%, and
for a guarantee period of 4 years (the number of whole years remaining plus
1) is 8%.
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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 power
of (38/12) -1 = -0.04126
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.04126) = -$459.10
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$459.10) = $10,668.10
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APPENDIX A
ACCUMULATION UNIT VALUES
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As we have indicated throughout this prospectus, the Strategic Partners Annuity
One 3 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.
The portfolio names shown for the corresponding unit values are as of
December 31, 2004. For a complete list of the current portfolio names, see
Section 2, "What Investment Options Can I Choose?"
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ACCUMULATION UNIT VALUES
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* DATE THAT THE ANNUITY WAS FIRST OFFERED.
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* DATE THAT THE ANNUITY WAS FIRST OFFERED.
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88
PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER
DETAILS ABOUT THE PRUCO LIFE OF NEW JERSEY ANNUITY DESCRIBED IN PROSPECTUS
ORD01182NY (05/2005).
---------------------------------------------------------
(print your name)
---------------------------------------------------------
(address)
---------------------------------------------------------
(city/state/zip code)
MAILING ADDRESS:
PRUDENTIAL ANNUITY SERVICE CENTER
P.O. Box 7960
Philadelphia, PA 19176
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ORD01182NY
STRATEGIC PARTNERS(SM)
PLUS 3
VARIABLE ANNUITY
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PROSPECTUS: MAY 2, 2005
THIS PROSPECTUS DESCRIBES AN INDIVIDUAL VARIABLE ANNUITY CONTRACT OFFERED BY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY (PRUCO LIFE OF NEW JERSEY) AND THE
PRUCO LIFE OF NEW JERSEY FLEXIBLE PREMIUM ANNUITY ACCOUNT. PRUCO LIFE OF NEW
JERSEY OFFERS SEVERAL DIFFERENT ANNUITIES WHICH YOUR REPRESENTATIVE MAY BE
AUTHORIZED TO OFFER TO YOU. EACH ANNUITY HAS DIFFERENT FEATURES AND BENEFITS
THAT MAY BE APPROPRIATE FOR YOU BASED ON YOUR FINANCIAL SITUATION, YOUR AGE AND
HOW YOU INTEND TO USE THE ANNUITY. THE DIFFERENT FEATURES AND BENEFITS INCLUDE
VARIATIONS IN DEATH BENEFIT PROTECTION AND THE ABILITY TO ACCESS YOUR ANNUITY'S
CONTRACT VALUE. THE FEES AND CHARGES 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 OF NEW JERSEY IS AN INDIRECT WHOLLY-OWNED
SUBSIDIARY OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA.
THE FUNDS
- ------------------------------------------------------------
Strategic Partners Plus 3 offers a wide variety of investment choices, including
variable investment options that invest in underlying mutual funds. Currently,
portfolios of the following underlying mutual funds are being offered: The
Prudential Series Fund, Inc., American Skandia Trust, Evergreen Variable Annuity
Trust, Gartmore Variable Insurance Trust, and Janus Aspen Series.
You may choose between two basic versions of Strategic Partners Plus 3. One
version, the Contract With Credit, provides for a bonus credit that we add to
each purchase payment you make. If you choose this version of Strategic Partners
Plus 3, some charges and expenses may be higher than if you choose the version
without the credit. Those higher charges could exceed the amount of the credit
under some circumstances, particularly if you withdraw purchase payments within
a few years of making those purchase payments.
PLEASE READ THIS PROSPECTUS
- ------------------------------------------------------------
Please read this prospectus before purchasing a Strategic Partners Plus 3
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 the Summary.
TO LEARN MORE ABOUT STRATEGIC PARTNERS PLUS 3
- ------------------------------------------------------------
To learn more about the Strategic Partners Plus 3 variable annuity, you can
request a copy of the Statement of Additional Information (SAI) dated May 2,
2004. The SAI has been filed with the Securities and Exchange Commission (SEC)
and is legally a part of this prospectus. Pruco Life of New Jersey also files
other reports with the SEC. All of these filings can be reviewed and copied at
the SEC's offices, and can also be obtained from the SEC's Public Reference
Section, 450 5th Street N.W., Washington, D.C. 20549-0102. (See SEC file numbers
333-49230 and 333-103473.) You may obtain information on the operation of the
Public Reference Room by calling the SEC at (202) 942-8090. The SEC maintains a
Web site (http://www.sec.gov) that contains the Strategic Partners Plus 3 SAI,
material incorporated by reference, and other information regarding registrants
that file electronically with the SEC. The Table of Contents of the SAI is set
forth in Section 11 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.
THE SEC HAS NOT DETERMINED THAT THIS CONTRACT IS A GOOD INVESTMENT, NOR HAS THE
SEC DETERMINED THAT THIS PROSPECTUS IS COMPLETE OR ACCURATE. IT IS A CRIMINAL
OFFENSE TO STATE OTHERWISE. INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT
TO RISK, INCLUDING THE POSSIBLE LOSS OF YOUR MONEY. AN INVESTMENT IN STRATEGIC
PARTNERS PLUS 3 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. P2401NY
CONTENTS
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3
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4
PART I SUMMARY
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STRATEGIC PARTNERS PLUS 3 PROSPECTUS
5
PART I
STRATEGIC PARTNERS PLUS 3 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 and
withdrawal charges.
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 will be
adjusted to reflect subsequent purchase payments, withdrawals, and any step-up.
ANNUAL WITHDRAWAL AMOUNT
Under the terms of the Lifetime Five Income Benefit, an amount that you can
withdraw each year as long as there is Protected Withdrawal Value remaining. The
Annual Withdrawal Amount is set initially to equal 7% of the initial Protected
Withdrawal Value, but will be adjusted to reflect subsequent purchase payments,
withdrawals, and any step-up.
ANNUITANT
The person whose life determines the amount of income payments that we will pay.
If the annuitant dies before the annuity date, the co-annuitant (if any) becomes
the annuitant if the contract's requirements for changing the annuity date are
met. If, upon the death of the annuitant, there is no surviving eligible
co-annuitant, and the owner is not the annuitant, then the owner becomes the
annuitant.
ANNUITY DATE
The date when income payments are scheduled to begin. You must have our
permission to change the annuity date. If the co-annuitant becomes the annuitant
due to the death of the annuitant, and the co-annuitant is older than the
annuitant, then the annuity date will be based on the age of the co-annuitant,
provided that the contract's requirements for changing the annuity date are met
(e.g., the co-annuitant cannot be older than a specified age). If the
co-annuitant is younger than the annuitant, then the annuity date will remain
unchanged.
BENEFICIARY
The person(s) or entity you have chosen to receive a death benefit.
BUSINESS DAY
A day on which 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 requirements for
changing the annuity date are met. No co-annuitant may be designated if the
owner is a non-natural person.
CONTRACT DATE
The date we accept your initial purchase payment and all necessary paperwork in
good order at the Prudential Annuity Service Center. Contract anniversaries are
measured from the contract date. A contract year starts on the contract date or
on a contract anniversary.
CONTRACT OWNER, OWNER, OR YOU
The person entitled to the ownership rights under the contract.
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STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
CONTRACT VALUE
This is the total value of your contract, equal to the sum of the values of your
investment in each investment option you have chosen. Your contract value will
go up or down based on the performance of the investment options you choose.
CONTRACT WITH CREDIT
A version of the annuity contract that provides for a bonus credit with each
purchase payment that you make and has higher withdrawal charges and insurance
and administrative costs, and may provide lower interest rates for fixed rate
options than the Contract Without Credit.
CONTRACT WITHOUT CREDIT
A version of the annuity contract that does not provide a credit and has lower
withdrawal charges and insurance and administrative costs than the Contract With
Credit.
CREDIT
If you choose the Contract With Credit, this is the bonus amount that we
allocate to your account each time you make a purchase payment. The amount of
the credit is a percentage of the purchase payment. Bonus credits generally are
not recaptured once the free look period expires. Our reference in the preceding
sentence to "generally are not recaptured" refers to the fact that we have the
contractual right to deduct, from the death benefit we pay, the amount of any
credit corresponding to a purchase payment made within one year of death.
DEATH BENEFIT
If 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 is available for an additional charge. See
Section 4, "What Is The Death Benefit?"
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.
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.
GMDB PROTECTED VALUE
The amount guaranteed under the Guaranteed Minimum Death Benefit, which equals
the GMDB step-up value. 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 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
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GLOSSARY CONTINUED
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PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
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, and any
withdrawals 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.
INCOME APPRECIATOR BENEFIT (IAB)
An optional feature that may be available for an additional charge that provides
a supplemental living 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.
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.
LIFETIME FIVE INCOME BENEFIT
An optional feature available for an additional charge 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
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STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
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
Under the Contract Without Credit, 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 or
transfers 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 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 19176. For express
overnight mail: 2101 Welsh Road, Dresher, PA 19025. The telephone number is
(888) PRU-2888. Prudential's Web site is www.prudential.com.
PURCHASE PAYMENTS
The amount of money you pay us to purchase the contract. 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 of New Jersey Flexible Premium Variable
Annuity Account. The separate account is set apart from all of the general
assets of Pruco Life of New Jersey.
STATEMENT OF ADDITIONAL INFORMATION
A document containing certain additional information about the Strategic
Partners Plus 3 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
Section 10, "What Are The Tax Considerations Associated With The Strategic
Partners Plus 3 Contract?"
VARIABLE INVESTMENT OPTION
When you choose a variable investment option, we purchase shares of the
underlying mutual fund that are held as an investment for that option. We hold
these shares in the separate account. The division of the separate account of
Pruco Life of New Jersey that invests in a particular mutual fund is referred to
in your contract as a subaccount.
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SUMMARY FOR SECTIONS 1-11
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FOR A MORE COMPLETE DISCUSSION OF THE FOLLOWING TOPICS, SEE THE CORRESPONDING
SECTION IN PART II OF THE PROSPECTUS.
SECTION 1
WHAT IS THE STRATEGIC PARTNERS PLUS 3 VARIABLE ANNUITY?
The Strategic Partners Plus 3 variable annuity is a contract between you, the
owner, and us, the insurance company, Pruco Life Insurance Company of New Jersey
(Pruco Life of New Jersey, we or us). 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.
There are two basic versions of the Strategic Partners Plus 3 variable
annuity.
Contract With Credit.
- - provides for a bonus credit that we add to each purchase payment that you
make,
- - has higher withdrawal charges and insurance and administrative costs than the
Contract Without Credit,
- - may provide lower interest rates for fixed interest rate options than the
Contract Without Credit, and
- - does not offer the market value adjustment option.
Contract Without Credit.
- - does not provide a credit,
- - has lower withdrawal charges and insurance and administrative costs than the
Contract With Credit.
- - may provide higher interest rates for fixed interest rate options than the
Contract With Credit, and
- - offers the market value adjustment option.
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 the 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.
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 Plus 3, you may
cancel your contract within 10 days after receiving it (or whatever period is
required by applicable law). This time period is referred to as the "Free Look"
period.
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STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
SECTION 2
WHAT INVESTMENT OPTIONS CAN I CHOOSE?
You can invest your money in several 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.
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). 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. See Section 3, "What Kind
Of Payments Will I Receive During The Income Phase?"
The Lifetime Five Income Benefit (discussed in Section 5) and the Income
Appreciator Benefit (discussed in Section 6) each may provide an additional
amount upon which your annuity payments are based.
SECTION 4
WHAT IS THE DEATH BENEFIT?
In general, if the sole owner or first to die of the owner or joint owner dies
before the income phase of the contract begins, the person(s) or entity that you
have chosen as your beneficiary will receive, at a minimum, the greater of (i)
the contract value, (ii) either the base death benefit or, for a higher
insurance and administrative cost, a potentially larger Guaranteed Minimum Death
Benefit (GMDB).
The base death benefit equals the total invested purchase payments reduced
proportionally by withdrawals. The Guaranteed Minimum Death Benefit is equal to
the "GMDB protected value" of the highest value of the contract on any contract
anniversary, which we call the "GMDB step-up value".
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,
in Section 4, are met.
SECTION 5
WHAT IS THE LIFETIME FIVE(SM) INCOME BENEFIT?
The Lifetime Five Income Benefit 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 is Protected Withdrawal Value (adjusted, as
described in Section 5) (the "Withdrawal Benefit"). The annuitant must be at
least 45 years old when the Lifetime Five Income Benefit is elected.
The charge for the Lifetime Five Income Benefit is a daily fee equal on an
annual basis to 0.60% of the contract value allocated to the variable investment
options. This charge is in addition to the charge for the applicable death
benefit.
SECTION 6
WHAT IS THE INCOME APPRECIATOR BENEFIT?
The Income Appreciator Benefit is an optional benefit, available for an
additional charge, that provides an
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SUMMARY FOR SECTIONS 1-11 CONTINUED
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PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
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. You can activate this benefit in one of three ways, as described
in Section 6. Note, however, that the annuitization options within this benefit
are limited.
SECTION 7
HOW CAN I PURCHASE A STRATEGIC PARTNERS PLUS 3 CONTRACT?
You can purchase this contract under most circumstances with a minimum initial
purchase payment of $10,000. You must get our prior approval for any initial and
additional purchase payment of $1,000,000 or more, unless we are prohibited
under applicable state law from insisting on such prior approval. 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. The
Contract With Credit provides for the allocation of a credit with each purchase
payment.
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 8
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS PLUS 3 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 $75,000. This charge is currently equal to
the lesser of $30 or 2% of your contract value. We do not impose the contract
maintenance charge if your contract value is $75,000 or more.
- - 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 (or other) option that you choose.
The daily cost is equivalent to an annual charge as follows:
-- 1.40% if you choose the base death benefit,
-- 1.65% if you choose the step-up Guaranteed Minimum Death Benefit option
(i.e., 0.25% in addition to the base death benefit charge), or
-- 0.60% if you choose the Lifetime Five Income Benefit. This charge is in
addition to the charge for the applicable death benefit.
- - We impose an additional insurance and administrative charge of 0.10% annually
for the Contract With Credit.
- - 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 May 1, 2004 (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.
- - There are also expenses associated with the mutual funds. For 2004, the fees
of these funds ranged on an annual basis from 0.38% to 1.79% of fund assets,
which were reduced by expense reimbursements or waivers to 0.38% to 1.30%.
These reimbursements or waivers may be terminated at any time.
- - If you withdraw money less than seven contract anniversaries after making a
purchase payment, then you may have to pay a withdrawal charge on all or part
of the withdrawal. This charge ranges from 1-7% for the Contract Without
Credit and 5-8% for the Contract With Credit.
For more information, including details about other possible charges under
the contract, see "Summary Of Contract Expenses" and Section 8, "What Are The
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PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
Expenses Associated With The Strategic Partners Plus 3 Contract?"
SECTION 9
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. For the Contract Without Credit, if
you withdraw money less than seven contract anniversaries after making a
purchase payment, we may impose a withdrawal charge ranging from 1-7%. For the
Contract With Credit, we may impose a withdrawal charge ranging from 5-8%.
Under the market value adjustment option, you will be subject to a market
value adjustment if you make a withdrawal or transfer from the option prior to
the end of a guarantee period.
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. You
also may access your Income Appreciator Benefit through withdrawals.
SECTION 10
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS PLUS 3
CONTRACT?
Your earnings are generally not taxed until withdrawn. If you withdraw money
during the accumulation phase, the tax laws treat the withdrawal 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 11
OTHER INFORMATION
This contract is issued by Pruco Life Insurance Company of New Jersey (Pruco
Life of New Jersey), an indirect subsidiary of The Prudential Insurance Company
of America, and sold by registered representatives of affiliated and
unaffiliated broker/dealers.
RISK FACTORS
There are various risks associated with an investment in the market value
adjustment option that we summarize below.
Issuer Risk. The market value adjustment option, fixed interest rate options,
and the contract's other insurance features are available under a contract
issued by Pruco Life of New Jersey, and thus backed by the financial strength of
that company. If Pruco Life of New Jersey were to experience significant
financial adversity, it is possible that Pruco Life of New Jersey's ability to
pay interest and principal under the 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 of
New Jersey 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, 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.
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SUMMARY FOR SECTIONS 1-11 CONTINUED
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PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
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 PLUS 3 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 PLUS 3. 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 Section 8, "What Are The Expenses Associated With The
Strategic Partners Plus 3 Contract?" 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 8.
2: Currently, we charge $25 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 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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SUMMARY OF CONTRACT EXPENSES CONTINUED
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PART I
STRATEGIC PARTNERS PLUS 3 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.
PERIODIC ACCOUNT EXPENSES
3: Currently, we waive this fee if your contract value is greater than or equal
to $75,000. If your contract value is less than $75,000, we currently charge the
lesser of $30 or 2% of your contract value. This is a single fee that we assess
(a) annually or (b) upon full withdrawal made on a date other than a contract
anniversary.
4: 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 May 1,
2004 (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. The fee is
withdrawn from each variable investment option in the same proportion as the
contract value allocated to that variable investment option represents to the
total contract value in all variable investment options. Subject to certain age
or duration 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. When the GMIB roll-up is increasing at an effective annual
interest rate of 5%, 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.
5: We impose this charge only if you choose the Income Appreciator Benefit. The
charge for this benefit is based on an annual rate of 0.25% of your contract
value. The Income Appreciator Benefit charge is calculated: on each contract
anniversary, on the annuity date, upon the death of the sole owner or first to
die of the owner or joint owner prior to the annuity date, upon a full or
partial withdrawal, and upon a subsequent purchase payment. The fee is based on
the contract value at the time of the calculation, and is prorated based on the
portion of the contract year since the date that the charge was last deducted.
Although it may be calculated more often, it is deducted only: on each contract
anniversary, on the annuity date, upon the death of the sole owner or first to
die of the owner or joint owner prior to the annuity date, upon a full
withdrawal, and upon a partial withdrawal if the contract value remaining after
such partial withdrawal is not enough to cover the then-applicable 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.
16
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PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
TOTAL ANNUAL MUTUAL FUND OPERATING EXPENSES
The next item shows the minimum and maximum total operating expenses (expenses
that are deducted from underlying mutual fund assets, including management fees,
distribution and/or service (12b-1) fees, and other expenses) charged by the
underlying mutual funds that you may pay periodically during the time that you
own the contract. More detail concerning each underlying mutual fund's fees and
expenses is contained below and in the prospectus for each underlying mutual
fund. The minimum and maximum total operating expenses depicted below are based
on historical fund expenses for the year ended December 31, 2004. Fund expenses
are not fixed or guaranteed by the Strategic Partners Plus 3 contract, and may
vary from year to year.
* Actual expenses for the mutual funds were 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 were 0.38% and 1.30%, respectively.
17
SUMMARY OF CONTRACT EXPENSES CONTINUED
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PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
18
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PART I
STRATEGIC PARTNERS PLUS 3 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 Series and/or Trust providing such services. Amounts
paid by a Portfolio under those arrangements are included under "Other
Expenses."
2. Effective July 1, 2004, Quantitative Management Associates LLC became the
Sub-adviser of the Portfolio. Prior to July 1, 2004, Prudential Investments LLC
served as Sub-adviser of the Portfolio.
3. 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:
4. 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.
5. The Portfolio was merged into the SP Mid Cap Growth Portfolio on April 29,
2005.
6. Effective November 19, 2004, LSV Asset Management became Sub-adviser of the
Portfolio. Prior to November 19, 2004, Deutsche Asset Management, Inc. served as
Sub-adviser of the Portfolio, then named "SP Deutsche International Equity
Portfolio."
7. The Portfolio was merged into the Prudential Equity Portfolio on April 29,
2005.
8. Effective May 1, 2005, Neuberger Berman Asset Management Inc. and Eagle Asset
Management became Sub-advisers of the Portfolio. Previously, State Street
Research and Management Company served as Sub-adviser of the Portfolio, then
named "SP State Street Research Small Cap Growth Portfolio."
9. The Portfolio was merged into the SP Prudential U.S. Emerging Growth
Portfolio on April 29, 2005.
10. Until November 18, 2004, the Trust had a Distribution Plan under Rule 12b-1
to permit an affiliate of the Trust's investment managers to receive brokerage
commissions in connection with purchases and sales of securities held by the
Portfolios, and to use these commissions to promote the sale of shares of the
Portfolio. The Distribution Plan was terminated effective November 18, 2004. The
Total Annual Portfolio Operating Expenses do not reflect any brokerage
commissions paid pursuant to the Distribution Plan prior to the Plan's
termination.
19
SUMMARY OF CONTRACT EXPENSES CONTINUED
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PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
11. 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:
12. Effective November 18, 2004, Integrity Asset Management, Lee Munder Capital
Group, and J.P. Morgan Fleming Asset Management became Sub-advisers of the
Portfolio. Prior to November 18, 2004, GAMCO Investors, Inc. served as
Sub-adviser of the Portfolio, then named "AST Gabelli Small-Cap Value
Portfolio."
13. Effective May 1, 2005, Alliance Capital Management, L.P. became Sub-adviser
of the Portfolio. Prior to May 1, 2005, Sanford C. Bernstein & Co., LLC served
as Sub-adviser of the Portfolio, then named "AST Sanford Bernstein Core Value
Portfolio."
14. Effective May 1, 2005, Alliance Capital Management, L.P. became Sub-adviser
of the Portfolio. Prior to May 1, 2005, Sanford C. Bernstein & Co., LLC served
as Sub-adviser of the Portfolio, then named "AST Sanford Bernstein Managed Index
500 Portfolio."
15. (a) The AST Global Allocation Portfolio invests primarily in shares of other
AST Portfolios (the "Underlying Portfolios"). The only management fee directly
paid by the Portfolio is a 0.10% fee paid to Prudential Investments LLC and
American Skandia Investment Services, Inc. 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.
(c) Effective May 1, 2005, Prudential Investments, LLC became Sub-adviser of
the Portfolio. Prior to May 1, 2005, Deutsche Asset Management, Inc. served as
Sub-adviser of the Portfolio, then named "AST DeAM Global Allocation Portfolio."
16. Effective April 18, 2005, the name of the Fund was changed from "Evergreen
VA Foundation Fund" to "Evergreen VA Balanced Fund."
17. The Fund was merged into the Evergreen VA Growth and Income Fund on April
15, 2005.
18. Effective April 18, 2005, the name of the Fund was changed from "Evergreen
VA Growth and Income Fund" to "Evergreen VA Fundamental Large Cap Fund."
19. Because the 12b-1 fee is charged as an ongoing fee, over time the fee will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
20. Effective May 1, 2005, the name of the Portfolio was changed from "Growth
Portfolio -- Service Shares" to "Large Cap Growth Portfolio -- Service Shares."
20
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STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
EXPENSE EXAMPLES
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THESE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
CONTRACT WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITY CONTRACTS. THESE
COSTS INCLUDE CONTRACT OWNER TRANSACTION EXPENSES, CONTRACT FEES, SEPARATE
ACCOUNT ANNUAL EXPENSES, AND UNDERLYING MUTUAL FUND FEES AND EXPENSES.
THE EXAMPLES ASSUME THAT YOU INVEST $10,000 IN THE CONTRACT FOR THE TIME PERIODS
INDICATED. THE EXAMPLES ALSO ASSUME THAT YOUR INVESTMENT HAS A 5% RETURN EACH
YEAR AND ASSUME THE MAXIMUM FEES AND EXPENSES OF ANY OF THE MUTUAL FUNDS, WHICH
DO NOT REFLECT ANY EXPENSE REIMBURSEMENTS OR WAIVERS. ALTHOUGH YOUR ACTUAL COSTS
MAY BE HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS, YOUR COSTS WOULD BE AS
INDICATED IN THE TABLES THAT FOLLOW.
EXAMPLE 1a: Contract With Credit: Step-Up Guaranteed Minimum Death Benefit,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit, and You Withdraw
All Your Assets
This example assumes that:
- - You invest $10,000 in the Contract With Credit,
- - You choose the Step-Up Guaranteed Minimum Death Benefit,
- - You choose the Guaranteed Minimum Income Benefit (for contracts sold on or
after May 1, 2004),
- - You choose the Income Appreciator Benefit,
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses,
- - The investment has a 5% return each year,
- - The mutual fund's total operating expenses remain the same each year, and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 1b: Contract With Credit: Step-Up Guaranteed Minimum Death Benefit,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit, and You Do Not
Withdraw Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
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EXPENSE EXAMPLES CONTINUED
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PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
EXAMPLE 2a: Contract With Credit: Base Death Benefit, and You Withdraw All Your
Assets
This example assumes that:
- - You invest $10,000 in the Contract With Credit,
- - You do not choose any optional insurance benefit,
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses,
- - The investment has a 5% return each year,
- - The mutual fund's total operating expenses remain the same each year, and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 2b: Contract With Credit: Base Death Benefit, and You Do Not Withdraw
Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
EXAMPLE 3a: Contract Without Credit: Step-Up Guaranteed Minimum Death Benefit,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit, and You Withdraw
All Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you invest in the Contract Without Credit.
EXAMPLE 3b: Contract Without Credit: Step-Up Guaranteed Minimum Death Benefit,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit, and You Do Not
Withdraw Your Assets
This example makes exactly the same assumptions as Example 1b except that it
assumes that you invest in the Contract Without Credit.
EXAMPLE 4a: Contract Without Credit: Base Death Benefit; and You Withdraw All
Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you invest in the Contract Without Credit.
EXAMPLE 4b: Contract Without Credit: Base Death Benefit; and You Do Not Withdraw
Your Assets
This example makes exactly the same assumptions as Example 2b except that it
assumes that you invest in the Contract Without Credit.
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 Example 1a and 1b, 2a
and 2b, 3a and 3b, and 4a and 4b. This is because if 10 years have elapsed since
your last purchase payment, we would no longer deduct withdrawal charges when
you make a withdrawal.
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 0.024% of contract value. Your actual fees will vary based on
the amount of your contract and your specific allocation among the investment
options.
A table of accumulation unit values appears in Appendix A to this prospectus.
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PART II SECTIONS 1-11
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STRATEGIC PARTNERS PLUS 3 PROSPECTUS
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STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
1:
WHAT IS THE STRATEGIC PARTNERS PLUS 3
VARIABLE ANNUITY?
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THE STRATEGIC PARTNERS PLUS 3 VARIABLE ANNUITY IS A CONTRACT BETWEEN YOU, THE
OWNER, AND US, PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY (PRUCO LIFE OF NEW
JERSEY, WE OR US).
Under our contract, in exchange for your payment to us, we promise to pay you a
guaranteed income stream that can begin any time on or after the first contract
anniversary. Your annuity is in the accumulation phase until you decide to begin
receiving annuity payments. The date you begin receiving annuity payments is the
annuity date. On the annuity date, your contract switches to the income phase.
This annuity contract benefits from tax deferral. Tax deferral means that you
are not taxed on earnings or appreciation on the assets in your contract until
you withdraw money from your contract. (If you purchase the annuity contract in
a tax-favored plan such as an IRA, that plan generally provides tax deferral
even without investing in an annuity contract. Therefore, before purchasing an
annuity in a tax-favored plan, you should consider whether its features and
benefits beyond tax deferral meet your needs and goals. You may also want to
consider the relative features, benefits and costs of these annuities compared
with any other investment that you may use in connection with your retirement
plan or arrangement.)
There are two basic versions of Strategic Partners Plus 3 variable annuity.
Contract With Credit.
- - provides for a bonus credit that we add to each purchase payment that you
make,
- - has higher withdrawal charges and insurance and administrative costs than the
Contract Without Credit,
- - may provide a lower interest rate for the fixed interest rate options than
the Contract Without Credit, and
- - does not offer the market value adjustment option.
Contract Without Credit.
- - does not provide a credit,
- - has lower withdrawal charges and insurance and administrative costs than the
Contract With Credit,
- - may provide a higher interest rate for the fixed interest rate options than
the Contract With Credit, and
- - offers the market value adjustment option.
Unless we state otherwise, when we use the word contract, it applies to both
versions.
Because of the higher withdrawal charges, if you choose the Contract With
Credit and you withdraw a purchase payment, depending upon the performance of
the investment options you choose, you may be worse off than if you had chosen
the Contract Without Credit. We do not recommend purchase of either version of
Strategic Partners Plus 3 if you anticipate having to withdraw a significant
amount of your purchase payments within a few years of making those purchase
payments.
Strategic Partners Plus 3 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. The market value adjustment option is only available in the Contract
Without Credit. 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.
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STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
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 annuity
phase begins. On or after the annuity date, the annuitant may not be changed.
The beneficiary is the person(s) or entity you designate to receive any death
benefit. You may change the beneficiary any time prior to the annuity date by
making a written request to us.
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"
If you change your mind about owning Strategic Partners Plus 3, 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 a refund equal to your contract value (plus the amount of any fees or
other charges) as of the date you surrendered your contract.
If you have purchased the Contract With Credit, we will deduct any credit we
had added to your contract value.
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PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
2:
WHAT INVESTMENT OPTIONS
CAN I CHOOSE?
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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 risk 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 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 of New Jersey has entered into agreements with certain underlying
portfolios and/or the investment adviser or distributor of such portfolios.
Pruco Life of New Jersey 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 0.55% annually (as of May 2, 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 STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
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PART II STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
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PART II STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
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PART II STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
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PART II STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
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PART II STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
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PART II STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
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PART II STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
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 1.5% for the one-year fixed interest rate option, or 3%
for the dollar cost averaging fixed rate option. We may offer lower interest
rates for Contracts With Credit than for Contracts Without Credit.
Payments allocated to the fixed interest rate options become part of Pruco
Life of New Jersey'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. 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
You may allocate all or part of any purchase payment to the DCA Fixed Rate
Option. Under this option, you automatically transfer amounts over a stated
period (currently, six or twelve months) from the DCA Fixed Rate Option to the
variable investment options and/or to the one-year fixed interest rate option,
as you select. We will invest the assets you allocate to the DCA Fixed Rate
Option in our general account until they are transferred. You may not transfer
from other investment options to the DCA Fixed Rate Option. Transfers to the
one-year fixed interest rate option will remain in the general account.
If you choose to allocate all or part of a purchase payment to the DCA Fixed
Rate Option, the minimum amount of the purchase payment you may allocate is
$2,000. The first periodic transfer will occur on the date you allocate your
purchase payment to the DCA Fixed Rate Option. Subsequent transfers will occur
on the monthly anniversary of the first transfer. Currently, you may choose to
have the purchase payment allocated to the DCA Fixed Rate Option transferred to
the selected variable investment option, 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. (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 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
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PART II STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
monthly transfer amount below $100, we will transfer the remaining balance in
the DCA Fixed Rate Option on the next scheduled transfer date.
By investing amounts on a regular basis instead of investing the total amount
at one time, the DCA Fixed Rate Option may decrease the effect of market
fluctuation on the investment of your purchase payment. Of course, dollar cost
averaging cannot ensure a profit or protect against loss in a declining market.
MARKET VALUE ADJUSTMENT OPTION
Under the market value adjustment option, we 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 annually with respect to any guarantee period. This
option is only available in the Contract Without Credit. 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 the 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 of 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) listed immediately above, you
will receive the current interest rate applicable to the guarantee period having
the same duration as the guarantee period that just matured, which is offered on
the day immediately following the end of the matured guarantee period. However,
if at that time we do not offer a guarantee period with the same duration as
that which matured, you will then receive the current interest rate applicable
to the shortest guarantee period then offered.
Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed and
the interest amount that your money will earn is guaranteed by us to 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 of New Jersey.
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
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PART II STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
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.
YOU SHOULD REALIZE, HOWEVER, THAT APART FROM THE MARKET VALUE ADJUSTMENT, THE
VALUE OF THE BENEFIT IN YOUR GUARANTEE PERIOD UNDER YOUR CONTRACT DOES NOT
DEPEND ON THE INVESTMENT PERFORMANCE OF THE BONDS AND OTHER INSTRUMENTS THAT WE
HOLD WITH RESPECT TO YOUR GUARANTEE PERIOD. APART FROM THE EFFECT OF ANY MARKET
VALUE ADJUSTMENT, WE DO NOT PASS THROUGH TO 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 a 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 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 in good order by us, or by certain entities that we have
specifically designated. Our business day generally closes at 4:00 p.m. Eastern
time. Our business day may close earlier, for example if regular trading on the
New York Stock Exchange closes early. Transfer requests received after the close
of the business day 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,
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PART II STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
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.
During the contract accumulation phase, you can make up to 12 transfers each
contract year, among the investment options, without charge. Currently we charge
$25 for each transfer after the twelfth in a contract year, and we have the
right to increase this charge up to $30. (Dollar Cost Averaging and
Auto-Rebalancing transfers do not count toward the 12 free transfers per year.)
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 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
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PART II STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
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 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 option or the one-year fixed interest rate option. You can have these
automatic transfers occur monthly, quarterly, semiannually or annually. By
investing amounts on a regular basis instead of investing the total amount at
one time, dollar cost averaging may decrease the effect of market fluctuation on
the investment of your purchase payment. Of course, dollar cost averaging cannot
ensure a profit or protect against loss in 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
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PART II STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
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. If you also participate in the DCA feature, then the variable
investment option from which you make the DCA transfers will not be rebalanced.
You may choose to have your rebalancing occur monthly, quarterly,
semiannually, or annually. The rebalancing will occur on the last calendar day
of the period you have chosen, provided that the New York Stock Exchange is open
on that date. If the New York Stock Exchange is not open on that date, the
rebalancing will take effect on the next business day.
Any transfers 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, the 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
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PART II STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
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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WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE
INCOME PHASE? (ANNUITIZATION)
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PAYMENT PROVISIONS
We can begin making annuity payments any time on or after the first contract
anniversary. Annuity payments must begin no later than the later of the contract
anniversary coinciding with or next following the annuitant's 90th birthday or
the tenth contract anniversary.
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 Plus 3 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.
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. IN ADDITION TO THE ANNUITY PAYMENT
OPTIONS DISCUSSED IN THIS SECTION, PLEASE NOTE THAT IF YOU CHOOSE THE OPTIONAL
LIFETIME FIVE INCOME BENEFIT, THERE ARE ADDITIONAL ANNUITY PAYMENT OPTIONS THAT
ARE ASSOCIATED WITH THAT BENEFIT. SEE SECTION 5 OF THIS PROSPECTUS FOR
ADDITIONAL DETAILS.
OPTION 1
ANNUITY PAYMENTS FOR A FIXED PERIOD
Under this option, we will make equal payments for the period chosen, up to 25
years (but not to exceed life expectancy). The annuity payments may be made
monthly, quarterly, semiannually, or annually, as you choose, for the fixed
period. If the annuitant dies during the income phase, payments will continue to
the beneficiary for the remainder of the fixed period or, if the beneficiary so
chooses, we will make a single lump-sum payment. The amount of the lump sum
payment is determined by calculating the present value of the unpaid future
payments. This is done by using the interest rate used to compute the actual
payments. The interest rate will be at least 3% a year.
OPTION 2
LIFE INCOME ANNUITY OPTION
Under this option, we will make annuity payments monthly, quarterly,
semiannually, or annually as long as the annuitant is alive. If the annuitant
dies before we have made 10 years worth of payments, we will pay the beneficiary
in one lump sum the present value of the annuity payments scheduled to have been
made over the remaining portion of that 10 year period, unless we were
specifically instructed that such remaining annuity payments continue to be paid
to the beneficiary. The present value of the remaining annuity payments is
calculated by using the interest rate used to compute the amount of the original
120 payments. The interest rate will be at least 3% a year.
If an annuity option is not selected by the annuity date, this is the option
we will automatically select for you.
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
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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. 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 proportionally by 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 May 1, 2004 (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 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 proportionally by 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
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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). The GMIB roll-up cap is also reduced by withdrawals
in the same manner. 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,
2006; 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, 2006 (in the first contract year).
No prior withdrawals have been taken. Immediately prior to the withdrawal, the
GMIB protected value is $251,038.10 (the initial value accumulated for 31 days
at an annual effective rate of 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 $251,038.10 to $241,038.10).
- - 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, 2006 (still within the first
contract year). Immediately before the withdrawal, the contract value is
$220,000 and the GMIB protected value is $241,941.95. 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
$241,941.95 to $239,441.95).
- - 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: $239,441.95 X (1 -
($7,500/$217,500)), or $231,185.33.
- The GMIB 200% cap is reduced by the sum of all reductions above
($490,000-$2,500-$8,256.62, or $479,243.38).
- - 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, 2007 (second contract year). Prior to the withdrawal, the GMIB
protected value is $240,837.69. The dollar-for-dollar limit is equal to 5% of
this amount, or $12,041.88. 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 $240,837.69 to $230,837.69).
- - The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000, from
$479,243.38 to $469,243.38).
- - The Remaining Limit for the balance of the second contract year is also
reduced by the amount withdrawn (from $12,041.88 to $2,041.88).
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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
of the annuitant (and, if there is one, the co-annuitant). After we first deduct
a charge for any applicable 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 payment for at least 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 May 1, 2004 (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
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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
90 or the 10th contract anniversary.
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 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).
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 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 May 1, 2004
(and 2.5% to 3.5% for all other contracts). For non-GMIB annuity options, the
guaranteed minimum rate is 3%. 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
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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 May 1, 2004 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 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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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. A change of beneficiary will take effect on the date
you sign the change request form, provided we receive the form in good order.
Unless an irrevocable beneficiary has been named, during the accumulation
period, you can change the beneficiary at any time before the owner dies.
However, if the contract is jointly owned, the owner must name the joint owner
and the joint owner must name the owner as the beneficiary. For entity-owned
contracts, we pay a death benefit upon the death of the annuitant.
CALCULATION OF THE DEATH BENEFIT
If the owner or joint owner dies during the accumulation phase, we will, upon
receiving the appropriate proof of death and any other needed documentation in
good order (proof of death), pay a death benefit to the beneficiary designated
by the deceased owner or joint owner. If there is a sole owner and there is only
one beneficiary who is the owner's spouse on the date of death, 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.
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). If you have purchased the Contract With Credit, we will first deduct
any credit corresponding to a purchase payment made within one year of death.
We impose no market value adjustment on contract value held within the market
value adjustment option when a death benefit is paid.
2) Either the base death benefit, which equals the total invested purchase
payments you have made proportionally reduced by any withdrawals, or, if you
have chosen the Guaranteed Minimum Death Benefit (GMDB), the GMDB protected
value.
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.
The GMDB protected value option equals the GMDB step-up. The GMDB protected
value is calculated daily.
GMDB STEP-UP
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE 80
ON THE CONTRACT DATE, the GMDB step-up before the first contract anniversary is
the initial invested purchase payment increased by subsequent invested purchase
payments, and proportionally reduced by the effect of withdrawals. The GMDB
step-up on each contract anniversary will be the greater of the previous GMDB
step-up and the contract value as of such contract anniversary. Between contract
anniversaries, the GMDB step-up will increase by invested purchase payments and
reduce proportionally by withdrawals.
We stop increasing the GMDB step-up by any appreciation in the contract value
on the later of:
- - the contract anniversary coinciding with or next following the sole or older
owner's 80th birthday, or
- - the 5th contract anniversary.
However, we still increase the GMDB protected value by subsequent invested
purchase payments and proportionally reduce it by withdrawals.
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.
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IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB step-up before the third contract
anniversary is the sum of invested purchase payments, reduced by the effect of
withdrawals. On the third contract anniversary, we will adjust the GMDB step-up
to the greater of the then current GMDB step-up or the contract value as of that
contract anniversary. Thereafter, we will only increase the GMDB protected value
by subsequent invested purchase payments and proportionally reduce it by
withdrawals.
Special rules apply if the beneficiary is the spouse of the owner and the
contract does not have a joint owner. In that case, upon the death of the owner,
the spouse will have the choice of the following:
- - If the sole beneficiary under the contract is the owner's spouse, and the
other requirements of the Spousal Continuance Benefit are met, then the
contract can continue, and the spouse will become the new owner of the
contract; or
- - The spouse can receive the death benefit. A surviving spouse who is eligible
for the Spousal Continuance Benefit must choose between that benefit and
receiving the death benefit during the first 60 days following our receipt of
proof of death.
If ownership of the contract changes as a result of the owner assigning it to
someone else, we will reset the value of the death benefit to equal the contract
value on the date the change of ownership occurs, and for purposes of computing
the future death benefit, we will treat that contract value as a purchase
payment occurring on that date.
SPECIAL RULES IF JOINT OWNERS
If the contract has an owner and a joint owner and they are spouses at the time
that one dies, the Spousal Continuance Benefit may apply. If the contract has an
owner and a joint owner and they are not spouses at the time one dies, we will
pay the death benefit and the contract will end.
PAYOUT OPTIONS
The beneficiary may, within 60 days of providing proof of death, choose to take
the death benefit under one of several death benefit payout options listed
below.
The death benefit payout options are:
Choice 1. Lump sum payment of the death benefit. If the beneficiary does not
choose a payout option within sixty days, the beneficiary will receive this
payout option.
Choice 2. The payment of the entire death benefit within a period of 5 years
from the date of death of the first to die of the owner or joint owner.
The entire death benefit will include any increases or losses resulting
from the performance of the variable or fixed interest rate options during
this period. During this period the beneficiary may: reallocate the contract
value among the variable or fixed interest rate options; name a beneficiary
to receive any remaining death benefit in the event of the beneficiary's
death; and make withdrawals from the contract value, in which case, any such
withdrawals will not be subject to any withdrawal charges. However, the
beneficiary may not make any purchase payments to the contract.
During this 5 year period, we will continue to deduct from the death
benefit proceeds the charges and costs that were associated with the features
and benefits of the contract. Some of these features and benefits may not be
available to the beneficiary, such as the Guaranteed Minimum Income Benefit
(with respect to the version of GMIB sold on or after May 1, 2004, we impose
no GMIB charge after death) and Income Appreciator 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 not 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
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must be distributed within five years of the survivor's date of death.
The tax consequences to the beneficiary vary among the three death benefit
payout options. See Section 10, "What Are The Tax Considerations Associated With
The Strategic Partners Plus 3 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) 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 or market value adjustment options in the same proportions
that existed immediately prior to the spousal continuance adjustment. We will
waive the $1,000 minimum requirement for the market value adjustment option.
Under the Spousal Continuance Benefit, we waive any potential withdrawal
charges applicable to purchase payments made prior to activation of the Spousal
Continuance Benefit. However, we will continue to impose withdrawal charges on
purchase payments made after activation of this benefit. In addition, contract
value allocated to the market value adjustment option will remain subject to a
potential market value adjustment.
IF YOU ELECTED THE BASE DEATH BENEFIT, then upon activation of the Spousal
Continuance Benefit, we will adjust the contract value to equal the greater of:
- - the contract value, or
- - the sum of all invested purchase payments (adjusted for withdrawals).
IF YOU HAVE ELECTED THE GMDB STEP-UP, we will adjust the contract value to
equal the greater of:
- - the contract value, or
- - the GMDB step-up.
After we have made the adjustment to contract value set out immediately
above, we will continue to compute the GMDB step-up 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 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.
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 Mini-
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mum Income Benefit, we will revoke the Guaranteed Minimum Income Benefit under
the contract at that time and we will no longer charge for that benefit.
IF YOU ELECTED THE LIFETIME FIVE INCOME BENEFIT, on the owner's death, the
Lifetime Five Income Benefit will end. However, if the owner's surviving spouse
would be eligible to acquire the Lifetime Five Income Benefit as if he/she were
a new purchaser, then the surviving spouse may elect the Lifetime Five Income
Benefit under the Spousal Continuance Benefit. The surviving spouse (or new
annuitant designated by the surviving spouse) must be at least 45 years of age
at the time of election.
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
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., the later of the contract anniversary next following the annuitant's 90th
birthday or the 10th contract anniversary), or (c) the later of the 10th
contract anniversary or the contract anniversary next following the surviving
spouse's 90th birthday (or the annuitant's 90th birthday if other than the
surviving spouse).
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 Continuance 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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5:
WHAT IS THE LIFETIME FIVE
INCOME BENEFIT?
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 subject to certain restrictions described below.
- - Currently, 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. We
reserve the right to limit the election frequency in the future. Before
making any such change to the election frequency, we will provide prior
notice to contract owners who have an effective Lifetime Five Income Benefit.
- - 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 (before reducing the contract value by
the amount of the withdrawal) as of the date of the first withdrawal from your
contract, 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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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 charges that may apply. When
you elect a step-up, your
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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).F
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
- - Annual Withdrawal Amount for future contract years remains at $18,550
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- - 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 than the Annual Income Amount and amounts are
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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 one of the following three options:
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 the contract value by the amount of the
withdrawal
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PART II STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-11
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(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
Lifetime Five can be elected at the time you purchase your contract, or 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 reach 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.
We cease imposing the charge for Lifetime Five 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.
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 Internal
Revenue Code of 1986, as amended (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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6:
WHAT IS THE
INCOME APPRECIATOR BENEFIT?
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INCOME APPRECIATOR BENEFIT
The Income Appreciator Benefit (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 Section 8, "What Are The Expenses
Associated With The Strategic Partners Plus 3 Contract?"
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 when determining 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.
Income Appreciator Benefit payments are treated as earnings and may be
subject to tax upon withdrawal. See Section 10, "What Are The Tax Considerations
Associated With The Strategic Partners Plus 3 Contract?"
IF YOU DO NOT ACTIVATE THE BENEFIT PRIOR TO THE MAXIMUM ANNUITIZATION AGE YOU
MAY LOSE ALL OR PART OF THE IAB.
CALCULATION OF THE INCOME APPRECIATOR BENEFIT
We will calculate the Income Appreciator Benefit amount as of the date we
receive your written request in good order (or, for IAB Option 1, on the annuity
date). We do this by multiplying the current earnings in the contract by the
applicable Income Appreciator Benefit percentage based on the number of years
the Income Appreciator Benefit has been in force. For purposes of calculating
the Income Appreciator Benefit:
- - earnings are calculated as the difference between the contract value and the
sum of all purchase payments;
- - earnings do not include (1) any amount added to the contract value as a result
of the Spousal Continuance Benefit, 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
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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.
Upon termination of the Income Appreciator Benefit, we cease imposing the
associated charge.
INCOME APPRECIATOR BENEFIT OPTIONS DURING THE ACCUMULATION PHASE
You may choose IAB Option 1 at annuitization, but you may instead choose IAB
Options 2 or 3 during the accumulation phase of your contract. Income
Appreciator Benefit payments under IAB Options 2 and 3 will begin on the same
day of the month as the contract date, beginning with the next month following
our receipt of your request in good order. Under IAB Options 2 and 3, you can
choose to have the Income Appreciator Benefit amounts paid or credited monthly,
quarterly, semi-annually, or annually.
IAB OPTIONS 2 AND 3 INVOLVE A TEN-YEAR PAYMENT PERIOD. IF THE 10-YEAR PAYMENT
PERIOD WOULD END AFTER 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
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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).
IAB OPTION 3 -- INCOME APPRECIATOR BENEFIT CREDIT TO CONTRACT VALUE
Under this option, you can activate the Income Appreciator Benefit and receive
the benefit as credits to your contract value over a 10-year payment period. We
will allocate these Income Appreciator Benefit credits to the variable
investment options, the fixed interest rate options, or the market value
adjustment option in the same manner as your current allocation, unless you
direct us otherwise. We will 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
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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.
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7:
HOW CAN I PURCHASE A STRATEGIC PARTNERS
PLUS 3 CONTRACT?
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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. You must get our
prior approval for any initial and additional purchase payment of $1,000,000 or
more, unless we are prohibited under applicable state law from insisting on such
prior approval. 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 payments you may make is $7
million. We limit the maximum total purchase payments in any contract year other
than the first to $2 million absent our prior approval.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your invested purchase payment
among the variable or fixed interest rate investment options, or the market
value adjustment option based on the percentages you choose. The percentage of
your allocation to a particular investment option can range in whole percentages
from 0% to 100%.
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 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. Our business day may close
earlier, for example if regular trading on the New York Stock Exchange closes
early. Subsequent purchase payments received in good order after the close of
the business day will be credited on the following business day.
At our discretion, we may give initial and subsequent purchase payments (as
well as withdrawals and transfers) received in good order by certain
broker/dealers prior to the close of a business day the same treatment as they
would have received had they been received at the same time at the Prudential
Annuity Service Center. For more detail, talk to your registered representative.
CREDITS
If you purchase the Contract With Credit, we will add a credit amount to your
contract value with each purchase payment you make. The credit amount is
allocated to the variable or fixed interest rate investment options or the
market value adjustment option in the same percentages as the purchase payment.
The bonus credit that we pay with respect to any purchase payment depends on
(i) the age of the older of the owner or joint owner on the date on which the
purchase payment is made and (ii) the amount of the purchase payment.
Specifically,
- - if the elder owner is 80 or younger on the date that the purchase payment is
made, then we will add a bonus credit to the purchase payment equal to 4% if
the purchase payment is less than $250,000; 5% if the purchase payment is
equal to or greater than
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$250,000 but less than $1 million; or 6% if the purchase payment is $1
million or greater; and
- - if the older owner is aged 81-85 on the date that the purchase payment is
made, then we will add a bonus credit equal to 3% of the amount of the
purchase payment.
Under the Contract With Credit, if the owner returns the contract during the
free look period, we will recapture the bonus credits. If we pay a death benefit
under the contract, we have a contractual right to take back any credit we
applied within one year of the date of death.
CALCULATING CONTRACT VALUE
The value of the variable portion of your contract will go up or down depending
on the investment performance of the variable investment options you choose. To
determine the value of your contract allocated to the variable investment
options, we use a unit of measure called an accumulation unit. 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, plus
(if you have purchased the Contract With Credit) any applicable credit,
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
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.
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8:
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC
PARTNERS PLUS 3 CONTRACT?
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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 CHARGES
Each day, we make a deduction for the insurance and administrative charges.
These charges cover our expenses for mortality and expense risk, administration,
marketing and distribution. If you choose a Guaranteed Minimum Death Benefit
option, or Lifetime Five Income Benefit option, the insurance and administrative
cost also includes a charge to cover our assumption of the associated risk. The
mortality risk portion of the 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 compensates us for
the expenses associated with the administration of the contract. This includes
preparing and issuing the contract; establishing and maintaining contract
records; preparation of confirmations and annual reports; personnel costs; legal
and accounting fees; filing fees; and systems costs.
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 (or other) option
that you choose.
The death benefit charge is equal to:
- 1.40% on an annual basis if you choose the base death benefit, or
- 1.65% on an annual basis if you choose the step-up Guaranteed Minimum
Death Benefit option (i.e., 0.25% in addition to the base death benefit
charge).
We impose an additional insurance and administrative charge of 0.10% annually
(of account value attributable to the variable investment options) for the
Contract With Credit.
We impose an additional charge of 0.60% annually if you choose the Lifetime
Five Benefit option. The 0.60% charge is in addition to the charge we impose for
the applicable death benefit. 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.
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 these charges.
Any profits made from these charges may be used by us to pay for the costs of
distributing the contracts. If you choose the Contract With Credit, we will also
use any profits from this charge to recoup our costs of providing the credit.
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WITHDRAWAL CHARGE
A withdrawal charge may apply if you make a full or partial withdrawal during
the withdrawal charge period for a purchase payment. The amount and duration of
the withdrawal charge depends on whether you choose the Contract With Credit or
the Contract Without Credit. The withdrawal charge varies with the number of
contract anniversaries that have elapsed since each purchase payment being
withdrawn was made. Specifically, we maintain an "age" for each purchase payment
you have made by keeping track of how many contract anniversaries have passed
since the purchase payment was made.
The withdrawal charge is the percentage, shown below, of the amount
withdrawn.
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. In calculating the charge-free amount, we divide purchase
payments into two categories -- payments that are subject to a withdrawal charge
and those that are not. We determine the charge-free amount based only on
purchase payments that are subject to a withdrawal charge. The charge-free
amount in a given contract year is equal to 10% of the sum of all the purchase
payments subject to the withdrawal charge that you have made as of the
applicable contract anniversary. During the first contract year, the charge-free
amount is equal to 10% of the initial purchase payment.
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 or transfer is taken from a market value adjustment guarantee
period, prior to the expiration of the rate guarantee period, we will make a
market value adjustment to the withdrawal amount. We will then apply a
withdrawal charge to the adjusted amount.
If you choose the Contract With Credit and make a withdrawal that is subject
to a withdrawal charge, we may use part of that withdrawal charge to recoup our
costs of providing the credit.
Withdrawal charges will never be greater than permitted by applicable law.
MINIMUM DISTRIBUTION REQUIREMENTS
If a withdrawal is taken from a tax qualified contract under the minimum
distribution option in order to satisfy an Internal Revenue Service mandatory
distribution requirement only with respect to that contract's account balance,
we will waive withdrawal charges. See Section 10, "What Are The Tax
Considerations Associated With The Strategic Partners Plus 3 Contract?"
CONTRACT MAINTENANCE CHARGE
On each contract anniversary during the accumulation phase, if your contract
value is less than $75,000, we will deduct the lesser of $30 or 2% of your
contract value, for administrative expenses. We may raise the
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level of the contract value at which we waive this fee. The charge will be
deducted proportionately from each of the contract's investment options. This
same charge will also be deducted when you surrender your contract if your
contract value is less than $75,000.
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 MAY 1, 2004, 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. 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.
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
owner prior to the annuity date,
- upon a full withdrawal, and
- upon a partial withdrawal if the contract value remaining after such
partial withdrawal is not enough to cover the then-applicable Income
Appreciator Benefit charge.
We reserve the right to calculate and deduct the fee more frequently than
annually, such as quarterly.
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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 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.
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.
TAXES ATTRIBUTABLE TO PREMIUM
There may be federal, state and premium based taxes applicable to your purchase
payment. We are responsible for the payment of these taxes and may make a
deduction from the value of the contract to pay some or all of these taxes. New
York does not currently charge premium taxes on annuities. It is 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 $25 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 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 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 0.38% to 1.30% of fund assets (these fees reflect the effect of
expense reimbursements or waivers, which may terminate at any time). For
additional information about these fund fees, please consult the prospectuses
for the funds.
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9:
HOW CAN I
ACCESS MY MONEY?
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YOU CAN ACCESS YOUR MONEY BY:
- - MAKING A WITHDRAWAL (EITHER PARTIAL OR FULL); OR
- - CHOOSING TO RECEIVE ANNUITY PAYMENTS DURING THE INCOME PHASE.
WITHDRAWALS DURING THE ACCUMULATION PHASE
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 your
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 YOU MAKE. FOR A MORE COMPLETE EXPLANATION, SEE SECTION 10.
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 10.
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;
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- - 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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10:
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC
PARTNERS PLUS 3 CONTRACT?
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The tax considerations associated with the Strategic Partners Plus 3 contract
vary depending on whether the contract is (i) owned by an individual and not
associated with a tax-favored retirement plan (including contracts held by a
non-natural person, such as a trust, acting as an agent for a natural person),
or (ii) held under a tax-favored retirement plan. We discuss the tax
considerations for these categories of contracts below. The discussion is
general in nature and describes only federal income tax law (not state or other
tax laws). It is based on current law and interpretations, which may change. The
discussion includes a description of certain spousal rights under the contract
and under tax-qualified plans. Our administration of such spousal rights and
related tax reporting accords with our understanding of the Defense of Marriage
Act (which defines a "marriage" as a legal union between a man and a woman and a
"spouse" as a person of the opposite sex). The information provided is not
intended as tax advice. You should consult with a qualified tax advisor for
complete information and advice. References to purchase payments below relate to
your cost basis in your contract. Generally, your cost basis in a contract not
associated with a tax-favored retirement plan is the amount you pay into your
contract, or into annuities exchanged for your contract, on an after-tax basis
less any withdrawals of such payments.
This contract may also be purchased as a non-qualified annuity (i.e., a
contract not held under a tax-favored retirement plan) by a trust or custodial
IRA or 403(b) account, which can hold other permissible assets other than the
annuity. The terms and administration of the trust or custodial account in
accordance with the laws and regulations for IRAs or 403(b)s, as applicable, are
the responsibility of the applicable trustee or custodian.
CONTRACTS OWNED BY INDIVIDUALS (NOT ASSOCIATED WITH TAX-FAVORED RETIREMENT
PLANS)
TAXES PAYABLE BY YOU
We believe the contract is an annuity contract for tax purposes. Accordingly, as
a general rule, you should not pay any tax until you receive money under the
contract.
Generally, annuity contracts issued by the same company (and affiliates) to
you during the same calendar year must be treated as one annuity contract for
purposes of determining the amount subject to tax under the rules described
below.
It is possible that the Internal Revenue Service (IRS) would assert that some
or all of the charges for the optional benefits under the contract such as the
Guaranteed Minimum Death Benefit, should be treated for federal income tax
purposes as a partial withdrawal from the contract. If this were the case, the
charge for this benefit could be deemed a withdrawal and treated as taxable to
the extent there are earnings in the contract. Additionally, for owners under
age 59 1/2, the taxable income attributable to the charge for the benefit could
be subject to a tax penalty.
If the IRS determines that the charges for one or more benefits under the
contract are taxable withdrawals, then the sole or surviving owner will be
provided with a notice from us describing available alternatives regarding these
benefits.
TAXES ON WITHDRAWALS AND SURRENDER
If you make a withdrawal from your contract or surrender it before annuity
payments begin, the amount you receive will be taxed as ordinary income, rather
than as return of purchase payments, until all gain has been withdrawn. You will
generally be taxed on any withdrawals from the contract while you are alive even
if the withdrawal is paid to someone else.
If you assign or pledge all or part of your contract as collateral for a
loan, the part assigned generally will be treated as a withdrawal. Also, if you
elect any interest payment option that we may offer, that election will be
treated, for tax purposes, as surrendering your contract.
If you transfer your contract for less than full consideration, such as by
gift, you will trigger tax on any gain in the contract. This rule does not apply
if you transfer the contract to your spouse or under most circumstances if you
transfer the contract incident to divorce.
TAXES ON ANNUITY PAYMENTS
A portion of each annuity payment you receive will be treated as a partial
return of your purchase payments
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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 gains in the
contract as well as the 10% tax penalty of pre-age 59 1/2 withdrawals. The IRS
has reserved the right to treat transactions it considers abusive as ineligible
for this favorable partial 1035 exchange treatment. We do not know what
transactions may be considered abusive. For example we do not know how the IRS
may view early withdrawals or annuitizations after a partial exchange. In
addition, it is unclear how the IRS will treat a partial exchange from a life
insurance, endowment, or annuity contract into an immediate annuity. As of the
date of this prospectus, we will accept a partial 1035 exchange from a
non-qualified annuity into an immediate annuity as a "tax-free" exchange for
future tax reporting purposes, except to the extent that we, as a reporting and
withholding agent, believe that we would be expected to deem the transaction to
be abusive. However, some insurance companies may not recognize these partial
surrenders as tax-free exchanges and may report them as taxable distributions to
the extent of any gain distributed as well as subjecting the taxable portion of
the distribution to the 10% tax penalty. We strongly urge you to discuss any
transaction of this type with your tax advisor before proceeding with the
transaction.
TAXES PAYABLE BY BENEFICIARIES
The death benefit options are subject to income tax to the extent the
distribution exceeds the cost basis in the contract. The value of the death
benefit, as determined under federal law, is also included in the owner's
estate.
Generally, the same tax rules described above would also apply to amounts
received by your beneficiary. Choosing any option other than a lump sum death
benefit may defer taxes. Certain minimum distribution requirements apply upon
your death, as discussed further below.
Tax consequences to the beneficiary vary among the death benefit payment
options.
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- - Choice 1: The beneficiary is taxed on earnings in the contract.
- - Choice 2: The beneficiary is taxed as amounts are withdrawn (in this case
earnings are treated as being distributed first).
- - Choice 3: The beneficiary is taxed on each payment (part will be treated as
earnings and part as return of premiums).
REPORTING AND WITHHOLDING ON DISTRIBUTIONS
Taxable amounts distributed from your annuity contracts are subject to federal
and state income tax reporting and withholding. In general, we will withhold
federal income tax from the taxable portion of such distribution based on the
type of distribution. In the case of an annuity or similar periodic payment, we
will withhold as if you are a married individual with three exemptions unless
you designate a different withholding status. In the case of all other
distributions, we will withhold at a 10% rate. You may generally elect not to
have tax withheld from your payments. An election out of withholding must be
made on forms that we provide.
State income tax withholding rules vary and we will withhold based on the
rules of your State of residence. Special tax rules apply to withholding for
nonresident aliens, and we generally withhold income tax for nonresident aliens
at a 30% rate. A different withholding rate may be applicable to a nonresident
alien based on the terms of an existing income tax treaty between the United
States and the nonresident alien's country. Please refer to the CONTRACTS HELD
BY TAX FAVORED PLANS section below for a discussion regarding withholding rules
for tax favored plans (for example, an IRA).
Regardless of the amount withheld by us, you are liable for payment of
federal and state income tax on the taxable portion of annuity distributions.
You should consult with your tax advisor regarding the payment of the correct
amount of these income taxes and potential liability if you fail to pay such
taxes.
ANNUITY QUALIFICATION
Diversification And Investor Control. In order to qualify for the tax rules
applicable to annuity contracts described above, the assets underlying the
variable investment options of the annuity contract must be diversified,
according to certain rules. We believe these diversification rules will be met.
An additional requirement for qualification for the tax treatment described
above is that we, and not you as the contract owner, must have sufficient
control over the underlying assets to be treated as the owner of the underlying
assets for tax purposes. While we also believe these investor control rules will
be met, the Treasury Department may promulgate guidelines under which a variable
annuity will not be treated as an annuity for tax purposes if persons with
ownership rights have excessive control over the investments underlying such
variable annuity. It is unclear whether such guidelines, if in fact promulgated,
would have retroactive effect. It is also unclear what effect, if any, such
guidelines may have on transfers between the investment options offered pursuant
to this prospectus. We will take any action, including modifications to your
contract or the investment options, required to comply with such guidelines if
promulgated.
Please refer to the Statement of Additional Information for further
information on these diversification and investor control issues.
Required Distributions Upon Your Death. Upon your death, certain
distributions must be made under the contract. The required distributions depend
on whether you die before you start taking annuity payments under the contract
or after you start taking annuity payments under the contract.
If you die on or after the annuity date, the remaining portion of the
interest in the contract must be distributed at least as rapidly as under the
method of distribution being used as of the date of death.
If you die before the annuity date, the entire interest in the contract must
be distributed within 5 years after the date of death. However, if a periodic
payment option is selected by your designated beneficiary and if such payments
begin within 1 year of your death, the value of the contract may be distributed
over the beneficiary's life or a period not exceeding the beneficiary's life
expectancy. Your designated beneficiary is the person to whom benefit rights
under
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the contract pass by reason of death, and must be a natural person in order to
elect a periodic payment option based on life expectancy or a period exceeding
five years.
If the contract is payable to (or for the benefit of) your surviving spouse,
that portion of the contract may be continued with your spouse as the owner.
Changes In The Contract. We reserve the right to make any changes we deem
necessary to assure that the contract qualifies as an annuity contract for tax
purposes. Any such changes will apply to all contract owners and you will be
given notice to the extent feasible under the circumstances.
ADDITIONAL INFORMATION
You should refer to the Statement of Additional Information if:
- - The contract is held by a corporation or other entity instead of by an
individual or as agent for an individual.
- - Your contract was issued in exchange for a contract containing purchase
payments made before August 14, 1982.
- - You transfer your contract to, or designate, a beneficiary who is either
37 1/2 years younger than you or a grandchild.
CONTRACTS HELD BY TAX-FAVORED PLANS
The following discussion covers annuity contracts held under tax-favored
retirement plans.
Currently, the contract may be purchased for use in connection with
individual retirement accounts and annuities (IRAs) which are subject to
Sections 408(a), 408(b) and 408A of the Code. This description assumes that you
have satisfied the requirements for eligibility for these products.
YOU SHOULD BE AWARE THAT TAX FAVORED PLANS SUCH AS IRAS GENERALLY PROVIDE TAX
DEFERRAL REGARDLESS WHETHER THEY INVEST IN ANNUITY CONTRACTS. THIS MEANS THAT
WHEN A TAX FAVORED PLAN INVESTS IN AN ANNUITY CONTRACT, IT GENERALLY DOES NOT
RESULT IN ANY ADDITIONAL TAX DEFERRAL BENEFITS.
TYPES OF TAX FAVORED PLANS
IRAs. If you buy a contract for use as an IRA, we will provide you a copy of
the prospectus and contract. The "IRA Disclosure Statement," attached to this
prospectus, contains information about eligibility, contribution limits, tax
particulars, and other IRA information. In addition to this information (some of
which is summarized below), the IRS requires that you have a "free look" after
making an initial contribution to the contract. During this time, you can cancel
the contract by notifying us in writing, and we will refund all of the purchase
payments under the contract (or, if provided by applicable state law, the amount
your contract is worth, if greater), less any applicable federal and state
income tax withholding.
CONTRIBUTIONS LIMITS/ROLLOVERS. Because of the way the contract is designed,
you may only purchase a contract for an IRA in connection with a "rollover" of
amounts from a qualified retirement plan or transfer from another IRA. You must
make a minimum initial payment of $10,000 to purchase a contract. This minimum
is greater than the maximum amount of any annual contribution allowed by law you
may make to an IRA. For 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 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.
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Required Provisions. Contracts that are IRAs (or endorsements that are part
of the contract) must contain certain provisions:
- - You, as owner of the contract, must be the "annuitant" under the contract
(except in certain cases involving the division of property under a decree of
divorce);
- - Your rights as owner are non-forfeitable;
- - You cannot sell, assign or pledge the contract, other than to Pruco Life of
New Jersey;
- - The annual contribution you pay cannot be greater than the maximum amount
allowed by law, including catch-up contributions if applicable (which does
not include any rollover amounts);
- - The date on which annuity payments must begin cannot be later than April 1st
of the calendar year after the calendar year you turn age 70 1/2; and
- - Death and annuity payments must meet "minimum distribution requirements".
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
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.
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TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC
PARTNERS PLUS 3 CONTRACT CONTINUED
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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
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
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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 Section 8, "What Are The Expenses Associated With
The Strategic Partners Plus 3 Contract?"
Information about sales representatives and commissions may be found under
"Other Information" and "Sale And Distribution Of The Contract" in Section 11.
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," attached to this prospectus.
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11:
OTHER
INFORMATION
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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Pruco Life Insurance Company of New Jersey (Pruco Life of New Jersey) is a stock
life insurance company organized in 1982 under the laws of the State of New
Jersey. It is licensed to sell life insurance and annuities in New Jersey and
New York, and accordingly is subject to the laws of each of those states.
Pruco Life of New Jersey is an indirect wholly-owned subsidiary of The
Prudential Insurance Company of America (Prudential), a New Jersey stock life
insurance company doing business since 1875. Prudential is an indirect
wholly-owned subsidiary of Prudential Financial, Inc. (Prudential Financial), a
New Jersey insurance holding company. As Pruco Life of New Jersey's ultimate
parent, Prudential Financial exercises significant influence over the operations
and capital structure of Pruco Life of New Jersey and Prudential. However,
neither Prudential Financial, Prudential, nor any other related company has any
legal responsibility to pay amounts that Pruco Life of New Jersey may owe under
the contract.
Pruco Life of New Jersey publishes annual and quarterly reports that are
filed with the SEC. These reports contain financial information about Pruco Life
of New Jersey that is annually audited by independent accountants. Pruco Life of
New Jersey's annual report for the year ended December 31, 2004, together with
subsequent periodic reports that Pruco Life of New Jersey files with the SEC,
are incorporated by reference into this prospectus. You can obtain copies, at no
cost, of any and all of this information, including the Pruco Life of New Jersey
annual report that is not ordinarily mailed to contract owners, the more current
reports and any subsequently filed documents at no cost by contacting us at the
address or telephone number listed on the cover. The SEC file number for Pruco
Life of New Jersey is 33-18053. You may read and copy any filings made by Pruco
Life of New Jersey with the SEC at the SEC's Public Reference Room at 450 Fifth
Street, Washington, D.C. 20549-0102. You can obtain information on the operation
of the Public Reference Room by calling (202) 942-8090. The SEC maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC at
http://www.sec.gov.
THE SEPARATE ACCOUNT
We have established a separate account, the Pruco Life of New Jersey Flexible
Premium Variable Annuity Account (separate account), to hold the assets that are
associated with the variable annuity contracts. The separate account was
established under New Jersey law on May 20, 1996, and is registered with the SEC
under the Investment Company Act of 1940 as a unit investment trust, which is a
type of investment company. The assets of the separate account are held in the
name of Pruco Life of New Jersey and legally belong to us. These assets are kept
separate from all of our other assets and may not be charged with liabilities
arising out of any other business we may conduct. More detailed information
about Pruco Life of New Jersey, including its audited financial statements, is
provided in the SAI.
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'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, PIMS may offer the
contract directly to potential purchasers.
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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 of New Jersey and/or the contract on a
preferred or recommended company or product list and/or access to the firm's
registered representatives), we or PIMS may enter into compensation arrangements
with certain broker/dealer firms 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
they provide to us or our affiliates. These services may include, but are not
limited to: educating customers of the firm on the contract's features;
conducting due diligence and analysis; providing office access, operations and
systems support; holding seminars intended to educate registered representatives
and make them more knowledgeable about the contract; providing a dedicated
marketing coordinator; providing priority sales desk support; and providing
expedited marketing compliance approval and preferred programs to PIMS. A list
of firms that PIMS paid pursuant to such arrangements is provided in the
Statement of Additional Information which is available upon request.
To the extent permitted by NASD rules and other applicable laws and
regulations, PIMS may pay or allow other promotional incentives or payments in
the form of cash or non-cash compensation. These arrangements may not be offered
to all firms and the terms of such arrangements may differ between firms.
You should note that firms and individual registered representatives and
branch managers within some firms participating in one of these compensation
arrangements might receive greater compensation for selling the contract than
for selling a different 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. Overall compensation paid to the distributing firm does not
exceed, based on actuarial assumptions, 8.5% of the total purchase payments
made. Your registered representative can provide you with more information about
the compensation arrangements that apply upon the sale of the contract.
LITIGATION
Pruco Life of New Jersey is subject to legal and regulatory actions in the
ordinary course of its businesses, which may include class action lawsuits.
Pending legal and regulatory actions include proceedings relating to aspects of
the businesses and operations that are specific to Pruco Life of New Jersey and
that are typical of the businesses in which Pruco Life of New Jersey operates.
Class action and individual lawsuits may 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 may also be 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 may seek large and/or
indeterminate amounts, including punitive or exemplary damages.
Pruco Life of New Jersey has received formal requests for information
relating to its variable annuity business from regulators, including, among
others, the Securities and Exchange Commission and the State of
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New York Attorney General's Office. As part of a broad initiative by the
National Association of Insurance Commissioners, Pruco Life of New Jersey has
received a request for information from the New Jersey Department of Banking and
Insurance related to producer compensation and fee arrangements. It is possible
that other regulators will issue similar requests.
Pruco Life of New Jersey's litigation is subject to many uncertainties, and
given the complexity and scope, the outcomes cannot be predicted. It is possible
that the results of operations or the cash flow of Pruco Life of New Jersey in a
particular quarterly or annual period could be materially affected by an
ultimate unfavorable resolution of litigation and regulatory matters. Management
believes, however, that the ultimate outcome of all pending litigation and
regulatory matters should not have a material adverse effect on Pruco Life of
New Jersey's financial position.
ASSIGNMENT
In general, you can assign the contract at any time during your lifetime. If you
do so, we will reset the death benefit to equal the contract value on the date
the assignment occurs. For details, see Section 4, "What Is The Death Benefit?"
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 of New Jersey,
the co-issuer of the Strategic Partners Plus 3 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
- - 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
The general formula under which Pruco Life of New Jersey calculates the market
value adjustment applicable to a full or partial surrender, annuitization, or
settlement under Strategic Partners Plus 3 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 power of (N/12)] -1
1 + J + .0025
The MVA formula with respect to contracts issued in New York is what is depicted
above. The formula uses an interpolated rate "J" as the current credited
interest rate. Specifically, "J" is the interpolated current credited interest
rate offered on new money at the time of withdrawal, annuitization, or
settlement. The interpolated value is calculated using the following formula:
m/365 X (n + 1) year rate + (365 - m)/365 X n year rate,
where "n" equals the number of whole years remaining in the Contract's current
guarantee period, and "m" equals the number of days remaining in year "n" of the
current guarantee period.
MARKET VALUE ADJUSTMENT EXAMPLE
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2005 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2007. 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, 2007 the interest rate declared by Pruco Life of New Jersey for a
guarantee period of 3 years (the number of whole years remaining) is 4%, and
for a guarantee period of 4 years (the number of whole years remaining plus
1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.0417 + 0.0025)] to the power
of (38/12) -1 = 0.04871
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.04871 = $542.00
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $542.00 = $11,669.11
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, 2005 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2007. 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, 2007 the interest rate declared by Pruco Life of New Jersey for a
guarantee period of 3 years (the number of whole years remaining) is 7%, and
for a guarantee period of 4 years (the number of whole years remaining plus
1) is 8%.
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MARKET-VALUE ADJUSTMENT FORMULA CONTINUED
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PART II
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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 power
of (38/12) -1 = -0.04126
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.04126) = -$459.10
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$459.10) = $10,668.10
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APPENDIX A
ACCUMULATION UNIT VALUES
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As we have indicated throughout this prospectus, the Strategic Partners Plus 3
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.
The portfolio names shown for the corresponding unit values are as of
December 31, 2004. For a complete list of the current portfolio names, see
Section 2, "What Investment Options Can I Choose?"
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ACCUMULATION UNIT VALUES
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* DATE THAT THE ANNUITY WAS FIRST OFFERED.
** DATE THAT THE FUND FIRST BECAME AVAILABLE WITHIN THIS ANNUITY.
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PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER
DETAILS ABOUT THE PRUCO LIFE OF NEW JERSEY ANNUITY DESCRIBED IN PROSPECTUS
P2401NY (05/2005).
---------------------------------------------------------
(print your name)
---------------------------------------------------------
(address)
---------------------------------------------------------
(city/state/zip code)
MAILING ADDRESS:
PRUDENTIAL ANNUITY SERVICE CENTER
P.O. Box 7960
Philadelphia, PA 19176
This page intentionally left blank
P2401NY
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Pruco Life Insurance Company of New Jersey has registered $75 million of
interests in the market value adjusted annuity contracts described in this
registration statement. Pruco Life Insurance Company of New Jersey has paid
$6,067.50 to the SEC for the registration fees required under the Securities Act
of 1933.
Federal Taxes
Pruco Life Insurance Company of New Jersey estimates the federal tax effect
associated with the deferred acquisition costs attributable to receipt of $3
million of purchase payments over a two year period to be approximately $11,100.
State Taxes
Pruco Life Insurance Company of New Jersey estimates that approximately $0 in
premium taxes will be owed upon receipt of purchase payments under the
contracts.
Printing Costs
Pruco Life Insurance Company of New Jersey estimates that the cost of printing
prospectuses for the amount of securities registered herein will be
approximately $97,472.
Legal Costs
This registration statement was prepared by Prudential attorneys whose time is
allocated to Pruco Life Insurance Company of New Jersey.
Accounting Costs
PricewaterhouseCoopers LLP, the independent public accountant that audits Pruco
Life Insurance Company of New Jersey's financial statements, 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 Insurance Company of New Jersey are
indemnified under a policy that also covers officers and directors of other
entities controlled by Prudential Financial, Inc. A portion of the cost of that
policy is attributed to Pruco Life Insurance Company of New Jersey.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant, in connection with certain affiliates, maintains various
insurance coverages under which the underwriter and certain affiliated persons
may be insured against liability which may be incurred in such capacity, subject
to the terms, conditions and exclusions of the insurance policies.
New Jersey, being the state of organization of Pruco Life Insurance Company
of New Jersey ("PLNJ") permits entities organized under its jurisdiction to
indemnify directors and officers with certain limitations. The relevant
provisions of New Jersey law permitting indemnification can be found in Section
14A:3-5 of the New Jersey Statutes Annotated. The text of PLNJ's By-Law Article
V, 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 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is,
II-1
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 16. EXHIBITS
(a) Exhibits
(1) (a) Form of Distribution Agreement between Prudential Investment
Management Services LLC (Underwriter) and Pruco Life Insurance Company
of New Jersey (Depositor). (Note 5)
(3) (i) Articles of Incorporation of Pruco Life Insurance Company of New
Jersey as amended through February 12, 1998 (Note 8)
(ii) By-Laws of Pruco Life Insurance Company of New Jersey as amended June
7, 1999. (Note 9)
(4) (a) Strategic Partners Annuity One Variable Annuity Contract VBON 2000-NY
Ed. 10/2000. (Note 6)
(4) (b) Strategic Partners Annuity One Variable Annuity Contract VDCA 2000-NY
Ed. 10/2000. (Note 6)
(4) (c) Strategic Partners Annuity One Endorsement (MVA) ORD 112805-NY.
(Note 7)
(4) (d) Strategic Partners Application ORD 99730 NY-1. (Note 7)
(4) (e) Strategic Partners Annuity One Variable Annuity Contract VDCA-NY
Ed 5-2003. (Note 10)
(4) (f) Strategic Partners Annuity One Endorsement (GMIB) ORD 112737-NY.
(Note 10)
(4) (g) Strategic Partners Annuity One Endorsement (Transfers) ORD 112878.
(Note 10)
(4) (h) Strategic Partners Annuity One Endorsement (IAB) ORD 112718-NY.
(Note 10)
(4) (i) Strategic Partners Annuity One Application. (Note 11)
(4) (k) Endorsement Supplement (GMIB) ORD 112963-NY. (Note 11)
(4) (l) Form of Strategic Partners FlexElite Annuity Contract VFLX-2002-NY
(Note 13)
(4) (m) Fixed Rate Account Endorsement for Strategic Partners FlexElite
(Note 13)
(4) (n) DCA Fixed Rate Investment Option Endorsement for Strategic Partners
FlexElite (Note 13)
(4) (o) Credit Election Endorsement for Strategic Partners FlexElite (Note 13)
(4) (p) General Endorsement for Strategic Partners FlexElite (Note 14)
(4) (q) Guaranteed Minimum Death Benefit and Spousal Continuance Benefit
Endorsement for Strategic Partners FlexElite (Note 14)
(4) (r) Guaranteed Minimum Death Benefit - Step Up and Spousal Continuance
Benefit Endorsement for Strategic Partners FlexElite (Note 14)
(4) (s) Maximum Age Endorsement (Note 15)
(4) (t) Transfer Endorsement ORD 112878 for Strategic Partners FlexElite
(Note 10)
(5) Opinion of Counsel. (Note 1)
(23) Written Consent of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm. (Note 1)
(24) Powers of Attorney.
(a) James J. Avery, Jr. (Note 3)
(b) David R. Odenath, Jr. (Note 2)
(c) Ronald P. Joelson (Note 4)
(d) Helen M. Galt (Note 5)
(e) Andrew J. Mako (Note 7)
(f) C. Edward Chaplin, John Chieffo and Bernard J. Jacob (Note 12)
- ----------------------------------
(Note 1) Filed herewith.
II-2
(Note 2) Incorporated by reference to Form S-6, Registration No. 333-49334,
filed February 8, 2001 on behalf of the Pruco Life of New Jersey
Variable Appreciable Account.
(Note 3) Incorporated by reference to Post-Effective Amendment No. 10 to Form
S-1, Registration No. 33-20018, filed April 9, 1998 on behalf of the
Pruco Life of New Jersey Variable Contract Real Property Account.
(Note 4) Incorporated by reference to Post-Effective Amendment No. 14 to Form
S-1, Registration Statement No. 33-20018, filed April 10, 2001 on
behalf of the Pruco Life of New Jersey Variable Contract Real
Property Account.
(Note 5) Incorporated by reference to Post-Effective Amendment No. 5 to Form
S-6, Registration No. 333-85117 filed June 28, 2001 on behalf of the
Pruco Life of New Jersey Variable Appreciable Account.
(Note 6) Incorporated by reference to Post-Effective Amendment No. 4 to Form
N-4, Registration No. 333-49230 filed December 10, 2002 on behalf of
the Pruco Life of New Jersey Flexible Premium Variable Annuity
Account.
(Note 7) Incorporated by reference to Post-Effective Amendment No. 1 to Form
N-4, Registration No. 333-99275, filed June 27, 2003, on behalf of
the Pruco Life of New Jersey Flexible Premium Variable Annuity
Account.
(Note 8) Incorporated by reference to Post-Effective Amendment No. 12 to Form
S-1, Registration No. 33-20018 filed April 16, 1999, on behalf of
the Pruco Life of New Jersey Variable Contract Real Property
Account.
(Note 9) Incorporated by reference to Form S-6, Registration No. 333-85117
filed August 13, 1999 on behalf of the Pruco Life of New Jersey
Variable Appreciable Account.
(Note 10) Incorporated by reference to Post-Effective Amendment No. 9 to Form
N-4, Registration No. 333-49230, filed September 26, 2003, on behalf
of the Pruco Life of New Jersey Flexible Premium Variable Annuity
Account.
(Note 11) Incorporated by reference to Post-Effective Amendment No. 12 to Form
N-4, Registration No. 333-49230, filed April 20, 2004 on behalf of
the Pruco Life of New Jersey Flexible Premium Variable Annuity
Account.
(Note 12) Incorporated by reference to Post-Effective Amendment No. 13 to Form
N-4, Registration No. 333-49230, filed January 20, 2005 on behalf of
Pruco Life of New Jersey Flexible Premium Variable Annuity Account.
(Note 13) Incorporated by reference to Initial Registration on Form N-4,
Registration No. 333-99275, filed September 6, 2002 on behalf of
Pruco Life of New Jersey Flexible Premium Variable Annuity Account.
(Note 14) Incorporated by reference to Pre-Effective Amendment No. 1 on Form
N-4, Registration No. 333-99275 filed April 25, 2003 on behalf of
the Prudo Life of New Jersey Flexible Premium Variable Annuity
Account.
(Note 15) Incorporated by reference to Post-Effective Amendment No. 6 on Form
N-4, Registration No. 333-49230, filed April 23, 2003 on behalf of
Pruco Life of New Jersey Flexible Premium Variable Annuity Account.
II-3
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually,
or in the aggregate, represent a fundamental change in the
information in the registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
II-4
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 amendment to 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 the 13th day of
April, 2005.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
(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
*
--------------------------------------
JAMES J. AVERY JR.
VICE CHAIRMAN AND DIRECTOR
*
------------------------------------
BERNARD J. JACOB
PRESIDENT AND DIRECTOR
* Date: April 13, 2005
-------------------------------------
JOHN CHIEFFO
VICE PRESIDENT, CHIEF ACCOUNTING
OFFICER AND PRINCIPAL FINANCIAL OFFICER
* *By: CLIFFORD E. KIRSCH
-------------------------------------- -----------------------
RONALD P. JOELSON CLIFFORD E. KIRSCH
DIRECTOR (ATTORNEY-IN-FACT)
*
-------------------------------------
C. EDWARD CHAPLIN
SENIOR VICE PRESIDENT AND DIRECTOR
*
------------------------------------
HELEN M. GALT
DIRECTOR
*
------------------------------------
DAVID R. ODENATH, JR.
DIRECTOR
*
------------------------------------
ANDREW J. MAKO.
DIRECTOR
II-5
EXHIBIT INDEX
EXHIBITS
(5) Opinion of Counsel.
(23) Written Consent of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm