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 APRIL20, 2007
REGISTRATION NO. 333-104036
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 5
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PRUCO LIFE INSURANCE COMPANY
(Exact Name of Registrant)
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ARIZONA
(State or other jurisdiction of
incorporation or organization)
22-194455
(I.R.S. Employer
Identification Number)
-----------------
c/o PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-7333
(Address and telephone number of principal executive offices)
-----------------
THOMAS C. CASTANO
SECRETARY
PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-4708
(Name, address, and telephone number of agent for service)
-----------------
Copies to:
C. CHRISTOPHER SPRAGUE
VICE PRESIDENT,
CORPORATE COUNSEL
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-6997
-----------------
Approximate date of commencement of proposed sale to the public -- Immediately
upon effectiveness
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box:. [ ]
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]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a registration statement pursuant to General Instruction I.D.
or a post-effective amendment thereto that shall become effective upon filing
with the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. [ ]
If this Form is a post-effective amendment to a registration statement filed
pursuant to General Instruction I.D. filed to register additional securities or
additional classes of securities pursuant to Rule 413(b) under the Securities
Act, check the following box. [ ]
Calculation of Registration fee
================================================================================
Proposed Proposed
maximum maximum
Title of each class of Amount offering aggregate Amount of
securities to be price per offering registration
to be registered registered* unit* price fee**
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Market value adjustment
annuity contracts (or
modified guaranteed annuity
contracts) $500,000,000 $500,000,000 $-0-
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* Securities are not issued in predetermined units.
** Registration fee for these securities, in the amount of $46,000, was paid
at the time the securities were originally registered on Form S-1 as filed
by Pruco Life Insurance Company on May 31, 2002.
Prudential Investment Management Services LLC, the principal underwriter of
these contracts under a "best efforts" arrangement, will be reimbursed by Pruco
Life Insurance Company for its costs and expenses incurred in connection with
the sale of these contracts.
The risk factors section appears in Section 9 of the Summary of the prospectus.
The exhibit index appears in Part II of this registration statement.
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STRATEGIC PARTNERS/SM/ HORIZON ANNUITY
Prospectus: May 1, 2007
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This prospectus describes a market value adjusted individual annuity contract
offered by Pruco Life Insurance Company (Pruco Life). Pruco Life offers
several different annuities which your representative may be authorized to
offer to you. Each annuity has different features and benefits that may be
appropriate for you based on your financial situation, your age and how you
intend to use the annuity. The different features and benefits include
variations in death benefit protection and the ability to access your
annuity's contract value. The fees and charges under the annuity contract and
compensation paid to your representative may also be different between each
annuity. If you are purchasing the contract as a replacement for variable
annuity or variable life coverage, you should consider, among other things,
any surrender or penalty charges you may incur when replacing your existing
coverage. Pruco Life is a wholly owned subsidiary of the Prudential Insurance
Company of America. Pruco Life is located at 213 Washington Street, Newark, NJ
07102-2992, and can be contacted by calling 800-944-8786. Pruco Life
administers the Strategic Partners Horizon Annuity contracts (See file No.
333-104036) at the Prudential Annuity Service Center, P.O. Box 7960,
Philadelphia, PA 19176. you can contact the prudential annuity service center
by calling, toll-free, (888) PRU-2888.
PLEASE READ THIS PROSPECTUS
Please read this prospectus before purchasing a Strategic Partners Horizon
Annuity contract and keep it for future reference. The Risk Factors section
appears in Section 9 of the Summary.
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THE SEC HAS NOT DETERMINED THAT THIS CONTRACT IS A GOOD INVESTMENT, NOR HAS
THE SEC DETERMINED THAT THIS PROSPECTUS IS COMPLETE OR ACCURATE. IT IS A
CRIMINAL OFFENSE TO STATE OTHERWISE. INVESTMENT IN A MARKET VALUE ADJUSTED
ANNUITY CONTRACT IS SUBJECT TO RISK, INCLUDING THE POSSIBLE LOSS OF YOUR
MONEY. AN INVESTMENT IN STRATEGIC PARTNERS HORIZON ANNUITY IS NOT A BANK
DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY.
Strategic Partners/SM/ is a service mark of the Prudential Insurance Company
of America ORD01124
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CONTENTS
2
PART I SUMMARY
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STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS
3
GLOSSARY
WE HAVE TRIED TO MAKE THIS PROSPECTUS AS EASY TO READ AND UNDERSTAND AS
POSSIBLE. BY THE NATURE OF THE CONTRACT, HOWEVER, CERTAIN TECHNICAL WORDS OR
TERMS ARE UNAVOIDABLE. WE HAVE IDENTIFIED THE FOLLOWING AS SOME OF THE KEY
WORDS OR TERMS. OTHER DEFINED TERMS ARE SET FORTH IN YOUR CONTRACT.
Accumulation Phase
The period that begins with the contract date (which we define below) and ends
when you start receiving income payments, or earlier if the contract is
terminated through a full withdrawal or payment of a death benefit.
Adjusted Contract Value
When you begin receiving income payments, the value of your contract minus any
charge we impose for premium taxes and withdrawal charges, adjusted for any
market value adjustment.
Annuitant
The person whose life determines the amount of income payments that we will
pay. If the annuitant dies before the annuity date, the co-annuitant (if any)
becomes the annuitant if the contract's requirements for changing the annuity
date are met. If, upon the death of the annuitant, there is no surviving
eligible co-annuitant, and the owner is not the annuitant, then the owner
becomes the annuitant.
Annuity Date
The date when income payments are scheduled to begin. You must have our
permission to change the annuity date. If the co-annuitant becomes the
annuitant due to the death of the annuitant, and the co-annuitant is older
than the annuitant, then the annuity date will be based on the age of the
co-annuitant, provided that the contract's requirements for changing the
annuity date are met (e.g., the co-annuitant cannot be older than a specified
age). If the co-annuitant is younger than the annuitant, then the annuity date
will remain unchanged.
Beneficiary
The person(s) or entity you have chosen to receive a death benefit.
Business Day
A day on which 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 requirements for changing the
annuity date are met. No co-annuitant may be designated if the owner is a
non-natural person.
Contract Date
The date we accept your initial purchase payment and all necessary paperwork
in good order at the Prudential Annuity Service Center. Contract anniversaries
are measured from the contract date. A contract year starts on the contract
date or on a contract anniversary.
Contract Owner, Owner or You
The person entitled to the ownership rights under the contract.
Contract Surrender Value
This is the total value of your contract adjusted by any market-value
adjustment, minus any withdrawal charge(s) and premium taxes.
Contract Value
The total value of the amount in a contract allocated to a guarantee period as
of a particular date.
Death Benefit
If a death benefit is payable, the beneficiary you designate will receive the
contract value as the death benefit. If the contract is owned by an entity
(e.g. a corporation or trust), rather than by an individual, then we will pay
the death benefit upon the death of the annuitant. See Section 4, "What Is The
Death Benefit?"
4
Good Order
An instruction received at the Prudential Annuity Service Center, utilizing
such forms, signatures and dating as we require, which is sufficiently clear
that we do not need to exercise any discretion to follow such instructions.
Guarantee Period
A period of time during which your invested purchase payment earns interest at
the declared rate. We currently make available guarantee periods equal to any
or all of the following: 1 year (currently available only as a renewal
option), 3 years, 5 years, 7 years, and 10 years.
Income Options
Options under the contract that define the frequency and duration of income
payments. In your contract, we also refer to these as payout or annuity
options.
Invested Purchase Payment
Your purchase payment (which we define below) less any deduction we make for
any tax charge. In addition to the initial invested purchase payment, we allow
you to make additional purchase payments during the 30 days preceding the end
of a guarantee period.
Joint Owner
The person named as the joint owner, who shares ownership rights with the
owner as defined in the contract. A joint owner must be a natural person.
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 phone number
is (888) PRU-2888. Prudential's Web site is www.prudential.com.
Purchase Payments
The amount of money you pay us to purchase the contract, as well as any
additional payment you make.
Tax Deferral
This is a way to increase your assets without currently being taxed.
Generally, you do not pay taxes on your contract earnings until you take money
out of your contract. You should be aware that tax favored plans (such as
IRAs) already provide tax deferral regardless of whether they invest in
annuity contracts. See Section 8, "What Are The Tax Considerations Associated
With The Strategic Partners Horizon Annuity Contract?"
5
For a more complete discussion of the following topics, see the corresponding
section in the prospectus.
SECTION 1
What Is The Strategic Partners Horizon Annuity?
This market value adjusted annuity contract, offered by Pruco Life, is a
contract between you, as the owner, and us. The contract is intended for
retirement savings or other long-term investment purposes and provides a death
benefit and guaranteed income options.
While your money remains in the contract for the full guarantee period, your
principal amount is guaranteed and the minimum interest amount that your money
will earn is dictated by applicable state law. Payments allocated to the
contract are held as a separate pool of assets, but the income, gains or
losses experienced by these assets are not directly credited or charged
against the contracts. As a result, the strength of our guarantees under the
contract are based on the overall financial strength of Pruco Life.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase,
earnings grow on a tax-deferred basis and are taxed as income when you make a
withdrawal. The income phase starts when you begin receiving regular payments
from your contract. The amount of money you are able to accumulate in your
contract during the accumulation phase will help determine the amount of the
payments you will receive during the income phase. Other factors will affect
the amount of your payments such as age, gender and the payout option you
selected.
We may amend the contract as permitted by law. For example, we may add new
features to the contract. Subject to applicable law, we determine whether or
not to make such contract amendments available to contracts that already have
been issued.
Free Look. If you change your mind about owning Strategic Partners Horizon
Annuity, you may cancel your contract within 10 days after receiving it (or
whatever 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.
We impose neither a withdrawal charge nor any market value adjustment if you
cancel your contract.
SECTION 2
What Guarantee Periods Can I Choose?
You can allocate your initial purchase payment to one of the guarantee periods
available under the contract. We have the right under the contract to offer
one or more of the following guarantee periods: 1 year (currently available
only as a renewal option), 3 years, 5 years, 7 years, or 10 years, and we may
offer other guarantee periods in the future. At any time, we may offer any or
all of these guarantee periods. You may not allocate your purchase payment to
more than one guarantee period.
SECTION 3
What Kind Of Payments Will I Receive During The Income Phase? (Annuitization)
If you want to receive regular income from your annuity, you can choose one of
several options, including guaranteed payments for the annuitant's lifetime.
Once you begin receiving regular payments, you cannot change your payment plan.
SECTION 4
What Is The Death Benefit?
If the sole owner or the first of the joint owners dies, the designated
person(s) or the beneficiary will receive the contract value as the death
benefit. If the contract is owned by an entity (e.g., a corporation or trust),
rather than by an individual, then we will pay the death benefit upon the
death of the annuitant.
SECTION 5
How Can I Purchase A Strategic Partners Horizon Annuity Contract?
You can purchase this contract, under most circumstances, with a minimum
initial purchase payment of $5,000, but not greater than $5 million, absent
our prior approval. We allow you to make additional purchase payments only
during the 30 days immediately preceding the end of a guarantee period. Your
representative can help you fill out the proper forms.
SECTION 6
What Are The Expenses Associated With The Strategic Partners Horizon Annuity
Contract?
There are a few states/jurisdictions that assess a premium tax on us when you
begin receiving regular income payments from your annuity. In those states, we
deduct a charge designed to approximate this tax, which can range from 0-3.5%
of your contract value.
6
During the accumulation phase, if you withdraw money, you may have to pay a
withdrawal charge on all or part of the withdrawal. The withdrawal charge that
we impose depends on the guarantee period from which you are withdrawing your
money. The withdrawal charge ranges from 0%-7%. You also will be subject to a
market value adjustment if you make a withdrawal prior to the end of a
guarantee period.
SECTION 7
How Can I Access My Money?
You may withdraw money at any time during the accumulation phase. You may,
however, be subject to income tax and, if you make a withdrawal prior to age
59 1/2, an additional tax penalty as well. Each contract year after the first,
you may withdraw without charge, an amount equal to the interest you earned
during the previous contract year. Withdrawals greater than that amount will
be subject to a withdrawal charge. A market-value adjustment may also apply.
SECTION 8
What Are The Tax Considerations Associated With The Strategic Partners Horizon
Annuity Contract?
Your earnings are generally not taxed until withdrawn. If you withdraw money
during the accumulation phase, the tax laws first treat the withdrawals as a
withdrawal of earnings, which are taxed as ordinary income. If you are younger
than age 59 1/2 when you withdraw money, you may be charged a 10% federal tax
penalty on the earnings in addition to ordinary taxation. A portion of the
payments you receive during the income phase is considered a partial return of
your original investment. Generally, all amounts withdrawn from an Individual
Retirement Annuity (IRA) contract (excluding Roth IRAs) are taxable and
subject to the 10% penalty if withdrawn prior to age 59 1/2.
SECTION 9
Other Information
This contract is issued by Pruco Life Insurance Company, a subsidiary of The
Prudential Insurance Company of America, and sold by registered
representatives of affiliated and unaffiliated broker/dealers.
RISK FACTORS
There are various risks associated with an investment in the Strategic
Partners Horizon Annuity that we summarize below.
ISSUER RISK. Your Strategic Partners Horizon Annuity is available under a
contract issued by Pruco Life, and thus is backed by the financial strength of
that company. If Pruco Life were to experience significant financial
adversity, it is possible that Pruco Life's ability to pay interest and
principal under the Strategic Partners Horizon Annuity could be impaired.
RISKS RELATED TO CHANGING INTEREST RATES. You do not participate directly in
the investment experience of the bonds and other instruments that Pruco Life
holds to support the Strategic Partners Horizon Annuity. Nonetheless, the
market value adjustment formula (which is detailed in the appendix to this
prospectus) reflects the effect that prevailing interest rates have on those
bonds and other instruments. If you need to withdraw your money during a
period in which prevailing interest rates have risen above their level when
you made your purchase, you will experience a "negative" market value
adjustment. When we impose this market value adjustment, it could result in
the loss of both the interest you have earned and a portion of your purchase
payments. Thus, before you commit to a particular guarantee period, you should
consider carefully whether you have the ability to remain invested throughout
the guarantee period. In addition, we cannot, of course, assure you that the
Strategic Partners Horizon Annuity will perform better than another investment
that you might have made.
RISKS RELATED TO THE WITHDRAWAL CHARGE. We may impose withdrawal charges that
range as high as 7%. If you anticipate needing to withdraw your money prior to
the end of a guarantee period, you should be prepared to pay the withdrawal
charge that we will impose.
7
PART II SECTIONS 1-9
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STRATEGIC PARTNERS HORIZON ANNUITY PROSPECTUS
8
1: WHAT IS THE STRATEGIC PARTNERS HORIZON ANNUITY?
The Strategic Partners Horizon Annuity is a Contract Between You, the Owner,
and Us, the Insurance Company, Pruco Life Insurance Company (Pruco Life, We or
Us).
Under our contract or agreement, in exchange for your payment to us, we
promise to pay you a guaranteed income stream that can begin any time after
the second contract anniversary. This time period may differ in certain
states. Your annuity is in the accumulation phase until you decide to begin
receiving annuity payments. The date you begin receiving annuity payments is
the annuity date. On the annuity date, your contract switches to the income
phase.
This annuity contract benefits from tax deferral. Tax deferral means that you
are not taxed on earnings or appreciation on the assets in your contract until
you withdraw money from your contract. (If you purchase the annuity contract
in a tax-favored plan such as an IRA, that plan generally provides tax
deferral even without investing in an annuity contract. Therefore, before
purchasing an annuity in a tax-favored plan, you should consider whether its
features and benefits beyond tax deferral meet your needs and goals. You may
also want to consider the relative features, benefits and costs of these
annuities compared with any other investment that you may use in connection
with your retirement plan or arrangement.)
Strategic Partners Horizon Annuity allows you to allocate a purchase payment
to one of several guarantee periods that we offer at the time. As the owner of
the contract, you have all of the decision-making rights under the contract.
You will also be the annuitant unless you designate someone else. The owner is
the person upon whose death during the accumulation phase, the death benefit
generally is payable. The annuitant is the person whose life is used to
determine the amount of annuity payments and how long the payments will
continue. On and after the annuity date, the annuitant may not be changed.
The beneficiary is the person(s) or entity designated to receive any death
benefit if the owner (or first-to-die of joint owners) dies during the
accumulation phase. You may change the beneficiary any time prior to the
annuity date by making a written request to us. Your request becomes effective
when we approve it.
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"
If you change your mind about owning Strategic Partners Horizon Annuity, you
may cancel your contract within 10 days after receiving it (or whatever period
may be required by applicable law). You can request a refund by returning the
contract either to the representative who sold it to you, or to the Prudential
Annuity Service Center at the address shown on the first page of this
prospectus. You will receive, depending on applicable state law:
.. Your full purchase payment less any applicable federal and state income tax
withholding; or
.. The amount your contract is worth as of the day we receive your request,
less any applicable federal and state income tax withholding. This amount
may be more or less than your original payment.
We impose neither a withdrawal charge nor any market value adjustment if you
cancel your contract under this provision. To the extent dictated by state
law, we will include in your refund the amount of any fees and charges that we
deducted.
2: WHAT GUARANTEE PERIODS CAN I CHOOSE?
THE CONTRACT GIVES YOU THE CHOICE OF ALLOCATING YOUR PURCHASE PAYMENT TO ONE
OF THE GUARANTEE PERIODS THAT WE ARE OFFERING AT THE TIME.
GUARANTEE PERIODS
Under each Strategic Partners Horizon Annuity contract, we have the right to
offer one or more of several guarantee periods. These guarantee periods are 1
year (currently available only as a renewal option), 3 years, 5 years, 7
years, or 10 years in length. In the future, we may offer other guarantee
periods on substantially the same terms as described in this prospectus. We
are not obligated to offer more than one guarantee period at any time. We will
apply your purchase payment to the guarantee period you have chosen. You must
allocate all of your initial purchase payment to a single guarantee period.
We declare the interest rate for each available guarantee period periodically,
but we guarantee that we will declare at least a minimum interest rate, in the
amount dictated by applicable state law. You will earn interest on your
invested purchase payment at the rate that we have declared for the guarantee
period you have chosen.
In addition to the basic interest, we also may pay additional interest with
respect to guarantee periods other than the one year and three year periods.
The amount of the additional interest varies according to the amount of your
purchase payment. Specifically, we will pay additional interest equal to 0.50%
annually for a purchase payment of $25,000 to $74,999, and 1.00% annually for
a purchase payment of $75,000 or more.
9
2: WHAT GUARANTEE PERIODS CAN I CHOOSE? continued
If we grant additional interest to you, you will earn that interest only
during the first year of your contract (and, in most states, during the first
year of the initial renewal guarantee period, other than the one and three
year periods). We are not obligated to offer this additional interest
continuously, meaning that we reserve the right to offer additional interest
only during limited time periods of our choosing. We also reserve the right to
change the amount of the additional interest.
We express interest rates as annual rates, although we credit interest within
each guarantee period on a daily basis. The daily interest that we credit is
equal to the pro rated portion of the interest that would be earned on an
annual basis. We credit interest from the business day on which your purchase
payment is received in good order at the Prudential Annuity Service Center
until the earliest to occur of any of the following events: (a) full surrender
of the Contract, (b) commencement of annuity payments or settlement,
(c) cessation of the guarantee period, or (d) death of the first to die of the
owner and joint owner (or annuitant, for entity-owned contracts).
During the 30-day period immediately preceding the end of a guarantee period,
we allow you to do any of the following, without the imposition of the
withdrawal charge or market value adjustment: (a) surrender the contract, in
whole or in part, (b) allocate the contract value to another guarantee period
available at that time (provided that the new guarantee period ends prior to
the contract anniversary next following the annuitant's 95/th/ birthday and
that you reinvest at least $2,000), or (c) apply the adjusted contract value
to the annuity or settlement option of your choice. If we do not receive
instructions from you concerning the disposition of the contract value in your
maturing guarantee period, we will reinvest the contract value in a guarantee
period having the same duration as the guarantee period that matured (provided
that the new guarantee period ends prior to the contract anniversary next
following the annuitant's 95/th/ birthday and that you reinvest at least
$2,000). If any available new guarantee period would end on or after the
contract anniversary next following the annuitant's 95/th/ birthday, or if the
annuitant is 91 years old at the end of the guarantee period, then we will
make only the one year guarantee period available as the renewal period. We
will not impose a withdrawal charge on amounts you withdraw from the one year
guarantee period described in the immediately preceding sentence, although
such a withdrawal would be subject to a market value adjustment.
MARKET VALUE ADJUSTMENT
When you allocate a purchase payment to a guarantee period, we use that money
to buy and sell securities and other instruments to support our obligation to
pay interest. Generally, we buy bonds for this purpose. The duration of the
bonds and other instruments that we buy with respect to a particular guarantee
period is influenced significantly by the length of the guarantee period. For
example, we typically would acquire longer-duration bonds with respect to the
10 year guarantee period than we do for the 3 year guarantee period. The value
of these bonds is affected by changes in interest rates, among other factors.
The market value adjustment that we assess against your contract value if you
withdraw prior to the end of a guarantee period involves our attributing to
you a portion of our investment experience on these bonds and other
instruments.
For example, if you make a full withdrawal when interest rates have risen
since the time of your investment, the bonds and other investments in the
guarantee period likely would have decreased in value, meaning that we would
impose a "negative" market value adjustment on you (i.e., one that results in
a reduction of the withdrawal proceeds that you receive). For a partial
withdrawal, we would deduct a negative market value adjustment from your
remaining contract value. Conversely, if interest rates have decreased, the
market value adjustment could be positive.
Other things you should know about the market value adjustment include the
following:
.. We determine the market value adjustment according to a mathematical
formula, which is set forth at the end of this prospectus under the heading
"Market-Value Adjustment Formula." In that section of the prospectus, we
also provide hypothetical examples of how the formula works.
.. A negative market value adjustment could cause you to lose not only the
interest you have earned but also a portion of your principal.
.. You may withdraw (after the first contract year), without the imposition of
any market value adjustment, an amount equal to the interest earned under
your contract during the immediately preceding contract year.
.. In addition to imposing a market value adjustment on withdrawals, we also
will impose a market value adjustment on the contract value you apply to an
annuity or settlement option, except if you annuitize during the 30-day
period preceding the end of a guarantee period (See Section 3 for details).
You should realize, however, that apart from the market value adjustment, the
value of the benefits under your contract does not depend on the investment
performance of the bonds and other instruments that we hold with respect to
your guarantee period. Apart from the effect of any market value adjustment,
we do not pass through to you the gains or losses on the bonds and other
instruments that we hold in connection with a guarantee period.
10
3: WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION)
PAYMENT PROVISIONS
We can begin making annuity payments any time after the second contract
anniversary (or as required by state law if different). Annuity payments must
begin no later than the contract anniversary coinciding with or next following
the annuitant's 95/th/ birthday. If you begin annuity payments or commence
Option 3 at a time other than the 30-day period prior to the end of a
guarantee period, then:
.. We will impose both a withdrawal charge, if applicable, and a market value
adjustment if you choose an annuity option with a fixed period of fewer
than 10 years or Option 3. (If your adjusted contract value is allocated to
the one year guarantee period, we will impose only a market value
adjustment).
.. We will impose a market value adjustment, but not a withdrawal charge, if
you choose a life annuity or an annuity option with a fixed period of at
least 10 years.
We make the income plans described below available before the annuity date.
These plans are called annuity options. You must choose an annuity option at
least 30 days in advance of the annuity date. If you do not, we will select
Option 2 below on your behalf unless prohibited by applicable law. During the
income phase, all of the annuity options under this contract are fixed annuity
options. GENERALLY, ONCE THE ANNUITY PAYMENTS BEGIN, THE ANNUITY OPTION CANNOT
BE CHANGED AND YOU CANNOT MAKE WITHDRAWALS.
If the annuitant dies or assigns the contract, and the new annuitant is older
than the original annuitant, then the annuity date will be based on the new
annuitant's age. If the annuitant dies or assigns the contract, and the new
annuitant is younger than the original annuitant, then the annuity date will
remain unchanged. In no event, however, may an original or revised annuity
date be later than the contract anniversary next following the annuitant's
95/th/ birthday.
Option 1
Annuity Payments for a Fixed Period: Under this option, we will make equal
payments for the period chosen, up to 25 years (but no less than 5 years). The
annuity payments may be made monthly, quarterly, semi-annually, or annually,
as you choose, for the fixed period. If the annuitant dies during the income
phase, a lump sum payment generally will be made to the beneficiary. The
amount of the lump sum payment is determined by calculating the present value
of the unpaid future payments. This is done by using the interest rate used to
compute the actual payments. The interest rate will be at least 3% a year.
Option 2
Life Annuity with 120 Payments (10 Years): Under this option, we will make
annuity payments monthly, quarterly, semi-annually, or annually as long as the
annuitant is alive. If the annuitant dies before we have made 10 years worth
of payments, we will pay the beneficiary in one lump sum the present value of
the annuity payments scheduled to have been made over the remaining portion of
that 10 year period, unless we were specifically instructed that such
remaining annuity payments continue to be paid to the beneficiary. The present
value of the remaining annuity payments is calculated by using the interest
rate used to compute the amount of the original 120 payments. The interest
rate will be at least 3% a year.
Option 3
Interest Payment Option: Under this option, we will credit interest on the
adjusted contract value until you request payment of all or part of the
adjusted contract value. We can make interest payments on a monthly,
quarterly, semiannual, or annual basis or allow the interest to accrue on your
contract assets. Under this option, we will pay you interest at an effective
rate of at least 1.50% a year. This option may not be available in all states,
and is not available if you hold your contract in an IRA.
Option 4
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
required minimum distribution rules under the tax law when selecting your
annuity option.
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4: WHAT IS THE DEATH BENEFIT?
BENEFICARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued, unless
you change it at a later date. Unless an irrevocable beneficiary has been
named, you can change the beneficiary at any time before the owner or last
surviving owner dies. However, if the contract is jointly owned, the owner
must name the joint owner and the joint owner must name the owner as the
beneficiary.
CALCULATION OF THE DEATH BENEFIT
If the owner (or first-to-die of the owner and joint owner) dies during the
accumulation phase, we will, upon receiving appropriate proof of death and any
other needed documentation in good order (proof of death), pay a death benefit
to the beneficiary designated by the deceased owner or joint owner. If the
contract is owned by an entity (e.g., a corporation or trust), rather than by
an individual, then we will pay the death benefit upon the death of the
annuitant. We require proof of death to be submitted promptly. The beneficiary
will receive a death benefit equal to the contract value as of the date that
proof of death is received in good order at the Prudential Annuity Service
Center.
Instead of asking us to pay a death benefit, the surviving spouse may opt to
continue the contract, as discussed below. Generally, we impose no withdrawal
charge or market value adjustment when we pay the death benefit.
JOINT OWNERSHIP RULES
If the contract has an owner and a joint owner and they are spouses, then upon
the first to die of the owner and joint owner, the surviving spouse has the
choice of the following:
.. The contract can continue, with the surviving spouse as the sole owner of
the contract; or
.. The surviving spouse can receive the death benefit and the contract will
end. If the surviving spouse wishes to receive the death benefit, he or she
must make that choice within the first 60 days following our receipt of
proof of death. Otherwise, the contract will continue with the surviving
spouse as the sole owner.
If the contract has an owner and a joint owner, and they are not spouses, the
contract will not continue. Instead, the beneficiary will receive the death
benefit.
The death benefit payout options are:
Choice 1. Lump sum.
Choice 2. Payment of the entire death benefit within 5 years of the date of
death of the first to die. Under this choice, we will impose a market value
adjustment upon any withdrawal made during the 5 year period (unless the
withdrawal is made during the 30-day period immediately preceding the end of a
guarantee period).
Choice 3. Payment under an annuity or settlement option over the lifetime of
the beneficiary or over a period not extending beyond the life expectancy of
the beneficiary with distribution beginning within one year of the date of
death of the first to die.
The tax consequences to the beneficiary may vary among the three death benefit
payout options. See Section 8, "What Are The Tax Considerations Associated
With The Strategic Partners Horizon Annuity Contract?"
5: HOW CAN I PURCHASE A STRATEGIC PARTNERS HORIZON ANNUITY CONTRACT?
PURCHASE PAYMENT
A purchase payment is the amount of money you give us to purchase the
contract. The minimum initial purchase payment is $5,000, and may not exceed
$5 million absent our prior approval, unless we are prohibited under
applicable state law from insisting on such prior approval. You can allocate
subsequent purchase payments to a guarantee period only during the 30-day
period immediately preceding the end of a guarantee period, provided that any
such purchase payment is at least $1,000.
Generally, your initial purchase payment consists of a single sum. However,
with respect to an exchange or roll-over, your purchase payment can consist of
multiple sums that you identify at the time of application. With respect to
the latter:
.. we will aggregate each sum for purposes of computing the amount of any
additional interest that we pay on each sum; and
.. each sum will earn interest only from the business day on which it is
received in good order at the Prudential Annuity Service Center until the
end of the guarantee period.
We generally will sell you a contract only if the eldest of the owner, any
joint owner, annuitant, and any co-annuitant is 85 or younger on the contract
date.
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Applicable laws designed to counter terrorists and prevent money laundering
might, in certain circumstances, require us to block a contract owner's
ability to make certain transactions, and thereby refuse to accept purchase
payments or requests for transfers, partial withdrawals, total withdrawals,
death benefits, or income payments until instructions are received from the
appropriate regulator. We also may be required to provide additional
information about you and your contract to government regulators.
ALLOCATION OF PURCHASE PAYMENT
When you purchase a contract, we will allocate your invested purchase payment
to the guarantee period of your choosing, provided that we are offering that
guarantee period at the time. You must allocate all of your initial purchase
payment to a single guarantee period. Likewise, any subsequent purchase
payment you make during the 30-day period immediately preceding the end of a
guarantee period will be consolidated with your existing contract value, and
the total will be allocated to a single guarantee period of your choosing.
6: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS HORIZON
ANNUITY CONTRACT?
There are charges associated with the contract that may reduce the return on
your investment. These charges and expenses are described below.
WITHDRAWAL CHARGE
The withdrawal charge is for the payment of the expenses involved in selling
and distributing the contracts, including sales commissions, printing of
prospectuses, sales administration, preparation of sales literature and other
promotional activities.
You may surrender your contract in whole or in part while the guarantee period
remains in effect. If you do so, however, you will be subject to (a) a
possible withdrawal charge, (b) a market value adjustment (which we discussed
in Section 2 above) and (c) possible tax penalties. After the first contract
year, you may withdraw, without the imposition of any withdrawal charge or
market value adjustment, an amount equal to the interest earned under your
contract during the immediately preceding contract year. When we calculate the
withdrawal charge and market value adjustment, we first take into account any
available charge-free amount. We impose a withdrawal charge and market value
adjustment only after that amount has been exhausted. In addition, we do not
impose either a withdrawal charge or a market value adjustment on amounts you
withdraw under the contract's minimum distribution option to satisfy Internal
Revenue Service minimum distribution requirements.
If you make a full withdrawal, we will deduct the withdrawal charge from the
proceeds that we pay to you. If you make a partial withdrawal, we will deduct
the withdrawal charge from the contract value remaining in the guarantee
period. We calculate the withdrawal charge after we have given effect to any
market value adjustment.
The withdrawal charge that we impose is equal to a specified percentage of the
contract value withdrawn that is in excess of the charge-free amount described
above. With respect to the initial guarantee period, the withdrawal charge is
based on the number of contract anniversaries that have elapsed since the
contract date. If permitted by state law, the below withdrawal charge schedule
is reinstated during your first, renewal guarantee period, and the contract
anniversaries set out in the table below also refer to contract anniversaries
within the first, renewal guarantee period. No withdrawal charges apply to any
guarantee period that you choose subsequent to your first, renewal guarantee
period. Moreover, we impose no withdrawal charge on withdrawals from any one
year guarantee period. The withdrawal charge generally is equal to the
following, if the contract is issued (or the initial renewal guarantee period
is selected) by an owner who is 84 or younger at that time:
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6: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS HORIZON
ANNUITY CONTRACT? continued
As specified in the contract, we reduce withdrawal charges (from what is
depicted above) if the owner is 85 or older. There is a separate withdrawal
charge schedule applicable to each of ages 85, 86, 87, 88, 89 and 90. With
certain exceptions, the withdrawal charge at any contract anniversary declines
by 1% from one age to the next successive age, at such older ages. Some or all
of the guarantee periods that we offer at any given time will be shorter than
the time periods indicated immediately above. As such, the length of the
guarantee period that you have selected, in and of itself, may prevent you
from taking advantage of the decreasing withdrawal charges depicted above. For
example, if you choose a three year guarantee period, you would not be able to
take advantage of the lower withdrawal charges that would have been available
in subsequent contract years. If a withdrawal is effective on the day before a
contract anniversary, the withdrawal charge percentage will be that as of the
next following contract anniversary. The withdrawal charge applicable to
contracts issued in certain states differs slightly from what we describe
above--check your contract for complete details.
WAIVER OF WITHDRAWAL CHARGE FOR CRITICAL CARE
We will allow you to withdraw money from the contract, and will waive any
withdrawal charge and market value adjustment, if the owner or joint owner (if
applicable) becomes confined to an eligible nursing home or hospital for a
period of at least three consecutive months after the contract was purchased.
You would need to provide us with proof of the confinement. If a physician has
certified that the owner or joint owner is terminally ill (has twelve months
or less to live) there will be no charge imposed for withdrawals nor any
market value adjustment. Critical Care Access is not available in all states.
Eligibility for this waiver may vary, depending on the terms of the contract
issued in your State. Please consult your contract.
TAXES ATTRIBUTABLE TO PREMIUM
There may be federal, state and local premium based taxes applicable to your
purchase payment. We are responsible for the payment of these taxes and may
make a charge against the value of the contract to pay some or all of these
taxes. It is our current practice not to deduct a charge for state premium
taxes until annuity payments begin. In the states that impose a premium tax on
us, the current rates range up to 3.5%. It is also our current practice not to
deduct a charge for the federal tax associated with deferred acquisition costs
paid by us that are based on premium received. However, we reserve the right
to charge the contract owner in the future for any such tax associated with
deferred acquisition costs and any federal, state or local income, excise,
business or any other type of tax measured by the amount of premium received
by us.
7: HOW CAN I ACCESS MY MONEY?
You can withdraw money at any time during the accumulation phase. If you do
so, however, you may be subject to income tax and, if the withdrawal is prior
to your attaining age 59 1/2, an additional tax penalty. You will need our
consent to make a partial withdrawal if the requested withdrawal is less than
$250. During the accumulation phase, we generally have the right to terminate
your contract and pay you the contract value if the current contract value is
less than $2,000 and certain other conditions apply.
Income taxes, tax penalties, withdrawal charges, and a market value adjustment
may apply to any withdrawal you make. For a more complete explanation of tax
consequences, see Section 8.
AUTOMATED WITHDRAWALS
We offer an automated withdrawal feature. This feature enables you to receive
periodic withdrawals in monthly, quarterly, semiannual, or annual intervals.
We will process your withdrawal at the end of the business day at the
intervals you specify. We will continue at these intervals until you tell us
otherwise. We reserve the right to cease paying automated withdrawals if
paying any such withdrawal would cause the contract value to be less than
$2,000.
The minimum automated withdrawal amount you can make is $100. An assignment of
the contract terminates any automated withdrawal program that you had in
effect. Withdrawal charges, and a market value adjustment, may apply to any
automated withdrawal you make. You may not use the automated withdrawal
feature to withdraw the interest earned under your contract.
Income taxes, tax penalties, withdrawal charges, and a market value adjustment
may apply to any withdrawal you make. For a more complete explanation of tax
consequences, see Section 8.
8: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
HORIZON ANNUITY CONTRACT?
The tax considerations associated with the Strategic Partners Horizon Annuity
contract vary depending on whether the contract is (i) owned by an individual
and not associated with a tax-favored retirement plan (including contracts
held by a non-natural person, such as a trust, acting as an agent for a
natural person), or (ii) held under a tax-favored retirement plan. We discuss
the tax considerations for these categories of contracts below. The discussion
is general in nature and describes only federal income tax
14
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 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, as applicable, are the responsibility
of the applicable trustee or custodian.
CONTRACTS OWNED BY INDIVIDUALS (NOT ASSOCIATED WITH TAX FAVORED RETIREMENT
PLANS)
Taxes Payable by You
We believe the contract is an annuity contract for tax purposes. Accordingly,
as a general rule, you should not pay any tax until you receive money under
the contract.
Generally, annuity contracts issued by the same company (and affiliates) to
you during the same calendar year must be treated as one annuity contract for
purposes of determining the amount subject to tax under the rules described
below.
Taxes on Withdrawals and Surrender
If you make a withdrawal from your contract or surrender it before annuity
payments begin, the amount you receive will be taxed as ordinary income,
rather than as return of purchase payments, until all gain has been withdrawn.
Once all gain has been withdrawn, payments will be treated as a nontaxable
return of purchase payments until all purchase payments have been returned.
After all purchase payments are returned, all subsequent amounts will be taxed
as ordinary income. You will generally be taxed on any withdrawal from a
contract while you are alive even if the withdrawal is paid to someone else.
Withdrawals as systematic payments are taxed under these rules.
If you assign or pledge all or part of your contract as collateral for a loan,
the part assigned generally will be treated as a withdrawal. Also, if you
elect the interest payment option that we may offer, that election will be
treated, for tax purposes, as surrendering your contract.
If you transfer your contract for less than full consideration, such as by
gift, you will trigger tax on any gain in the contract. This rule does not
apply if you transfer the contract to your spouse or under most circumstances
if you transfer the contract incident to divorce.
Taxes on Annuity Payments
A portion of each annuity payment you receive will be treated as a partial
return of your purchase payments and will not be taxed. The remaining portion
will be taxed as ordinary income. Generally, the nontaxable portion is
determined by multiplying the annuity payment you receive by a fraction, the
numerator of which is your purchase payments (less any amounts previously
received tax-free) and the denominator of which is the total expected payments
under the contract.
After the full amount of your purchase payments have been recovered tax-free,
the full amount of the annuity payments will be taxable. If annuity payments
stop due to the death of the annuitant before the full amount of your purchase
payments have been recovered, a tax deduction may be allowed for the
unrecovered amount.
Tax Penalty on Withdrawals and Annuity Payments
Any taxable amount you receive under your contract may be subject to a 10
percent tax penalty. Amounts are not subject to this tax penalty if:
.. the amount is paid on or after you reach age 59 1/2 or die;
.. the amount received is attributable to your becoming disabled;
.. the amount paid or received is in the form of substantially equal payments
not less frequently than annually (please note that substantially equal
payments must continue until the later of reaching 59 1/2 or 5 years.
Modification of payments during that time period will 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).
15
8: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
HORIZON ANNUITY CONTRACT? continued
Special Rules in Relation to Tax-Free Exchanges Under Section 1035
Section 1035 of the Internal Revenue Code of 1986, as amended (Code) permits
certain tax-free exchanges of a life insurance, annuity or endowment contract
for an annuity. If the annuity is purchased through a tax-free exchange of a
life insurance, annuity or endowment contract that was purchased prior to
August 14, 1982, then any purchase payments made to the original contract
prior to August 14, 1982 will be treated as made to the new contract prior to
that date.
Partial surrenders may be treated in the same way as tax-free 1035 exchanges
of entire contracts, therefore avoiding current taxation of any gains in the
contract as well as the 10% tax penalty on pre-age 59 1/2 withdrawals. The
Internal Revenue Service (IRS) has reserved the right to treat transactions it
considers abusive as ineligible for this favorable partial 1035 exchange
treatment. We do not know what transactions may be considered abusive. For
example we do not know how the IRS may view early withdrawals or
annuitizations after a partial exchange. In addition, it is unclear how the
IRS will treat a partial exchange from a life insurance, endowment, or annuity
contract into an immediate annuity. As of the date of this prospectus, we will
accept a partial 1035 exchange from a non-qualified annuity into an immediate
annuity as a "tax- free" exchange for future tax reporting purposes, except to
the extent that we, as a reporting and withholding agent, believe that we
would be expected to deem the transaction to be abusive. However, some
insurance companies may not recognize these partial surrenders as tax-free
exchanges and may report them as taxable distributions to the extent of any
gain distributed as well as subjecting the taxable portion of the distribution
to the 10% tax penalty. We strongly urge you to discuss any transaction of
this type with your tax advisor before proceeding with the transaction.
Taxes Payable by Beneficiaries
The death benefit options are subject to income tax to the extent the
distribution exceeds the cost basis in the contract. The value of the death
benefit, as determined under federal law, is also included in the owner's
estate.
Generally, the same tax rules described above would also apply to amounts
received by your beneficiary. Choosing any option other than a lump sum death
benefit may defer taxes. Certain required minimum distribution provisions
under the tax law apply upon your death, as discussed further below.
Tax consequences to the beneficiary vary among the death benefit payment
options.
.. CHOICE 1: The beneficiary is taxed on earnings in the contract.
.. CHOICE 2: The beneficiary is taxed as amounts are withdrawn (in this case
earnings are treated as being distributed first).
.. CHOICE 3: The beneficiary is taxed on each payment (part will be treated as
earnings and part as return of premiums).
Considerations for Co-Annuitants
There may be adverse tax consequences if a Co-Annuitant succeeds an Annuitant
when an Annuity is owned by a trust that is neither tax exempt nor qualifies
for preferred treatment under certain sections of the Code. In general, the
Code is designed to prevent indefinite deferral of tax. Continuing the benefit
of tax deferral by naming one or more Co-Annuitants when an Annuity is owned
by a non-qualified trust might be deemed an attempt to extend the tax deferral
for an indefinite period. Therefore, adverse tax treatment may depend on the
terms of the trust, who is named as Co-Annuitant, as well as the particular
facts and circumstances. You should consult your tax advisor before naming a
Co-Annuitant if you expect to use an Annuity in such a fashion.
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).
16
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.
Entity Owners
Where a contract is held by a non-natural person (e.g. a corporation), other
than as an agent or nominee for a natural person (or in other limited
circumstances), the contract will not be taxed as an annuity and increases in
the value of the contract over its cost basis will be subject to tax annually.
Where a contract is issued to a trust, and such trust is characterized as a
grantor trust under the Internal Revenue Code, such contract shall not be
considered to be held by a non-natural person and will be subject to the tax
reporting and withholding requirements for contracts not held by tax favored
plans.
Required Distributions Upon Your Death. Upon your death, certain distributions
must be made under the contract. The required distributions depend on whether
you die on or before you start taking annuity payments under the contract or
after you start taking annuity payments under the contract.
If you die on or after the annuity date, the remaining portion of the interest
in the contract must be distributed at least as rapidly as under the method of
distribution being used as of the date of death.
If you die before the annuity date, the entire interest in the contract must
be distributed within five years after the date of death, or as periodic
payments over a period not extending beyond the life or life expectancy of the
designated beneficiary (provided such payments begin within one year of your
death). Your designated beneficiary is the person to whom benefit rights under
the contract pass by reason of death, and must be a natural person in order to
elect a periodic payment option based on life expectancy or a period exceeding
five years.
Additionally, if the contract is payable to (or for the benefit of) your
surviving spouse, such portion of the contract may be continued with your
spouse as the owner.
Changes in the Contract
We reserve the right to make any changes we deem necessary to assure that the
contract qualifies as an annuity contract for tax purposes. Any such changes
will apply to all contract owners and you will be given notice to the extent
feasible under the circumstances.
CONTRACTS HELD BY TAX FAVORED PLANS
The following discussion covers annuity contracts held under tax-favored
retirement plans.
Currently, the contract may be purchased for use in connection with individual
retirement accounts and annuities (IRAs) which are subject to Sections 408(a)
and 408(b) of the Code and Roth Individual Retirement Accounts (Roth IRAs)
under Section 408A of the Code. This description assumes that you have
satisfied the requirements for eligibility for these products.
This contract may also be purchased as a non-qualified annuity (i.e., a
contract not held under a tax-favored retirement plan) by a trust or custodial
IRA or 403(b) account, which can hold other permissible assets other than the
annuity. The terms and administration of the trust or custodial account in
accordance with the laws and regulations for IRAs or 403(b)s, as applicable,
are the responsibility of the applicable trustee or custodian.
You should be aware that tax favored plans such as IRAs generally provide
income tax deferral regardless of whether they invest in annuity contracts.
This means that when a tax favored plan invests in an annuity contract, it
generally does not result in any additional tax benefits (such as income tax
deferral and income tax free transfers).
Types of Tax Favored Plans
IRAs. If you buy a contract for use as an IRA, we will provide you a copy of
the prospectus and the contract. The "IRA Disclosure Statement," 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.
Contribution 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, as a transfer from another IRA, as a
regular contribution
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8: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
HORIZON ANNUITY CONTRACT? continued
and catch-up contribution if you are age 50 or over by the end of the tax year
for which you are making the contribution, or as a combined contribution for
both the current and prior tax year (only available between January 1st and
April 15th). You must make a minimum initial payment of $5,000 to purchase a
contract. This minimum is greater than the maximum amount of any annual
contribution allowed by law you may make to an IRA. For 2007 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, allowing these individuals an
additional $1,000 contribution each year.
The "rollover" rules under the Code are fairly technical; however, an
individual (or his or her surviving spouse) may generally "roll over" certain
distributions from tax favored retirement plans (either directly or within 60
days from the date of these distributions) if he or she meets the requirements
for distribution. Once you buy the contract, you can make regular IRA
contributions under the contract (to the extent permitted by law). However, if
you make such regular IRA contributions, you should note that you will not be
able to treat the contract as a "conduit IRA," which means that you will not
retain possible favorable tax treatment if you subsequently "roll over" the
contract funds originally derived from a qualified retirement plan into
another Section 401(a) plan.
Required Provisions. Contracts that are IRAs (or endorsements that are part of
the contract) must contain certain provisions:
.. You, as owner of the contract, must be the "annuitant" under the contract
(except in certain cases involving the division of property under a decree
of divorce);
.. Your rights as owner are non-forfeitable;
.. You cannot sell, assign or pledge the contract, other than to Pruco Life;
.. 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 required minimum distributions 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 required minimum distribution
provisions under the tax law.
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 earnings will be 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.
The "IRA Disclosure Statement" attached to this prospectus contains some
additional information on Roth IRAs.
Because the contract's minimum initial payment of $5,000 is greater than the
maximum annual contribution permitted to be made to a Roth IRA, you may only
purchase the contract for a Roth IRA in connection with a "rollover" or
"conversion" of amounts of a traditional IRA, conduit IRA, SEP, SIMPLE-IRA or
another Roth IRA, as your regular Roth IRA contribution and catch-up
contribution if you are age 50 or over by the end of the tax year for which
you are making the contribution, or as a combined Roth IRA contribution for
both the current and prior tax year (only available between January 1st and
April 15th). The Code permits persons who meet certain income limitations
(generally, adjusted gross income under $100,000) who are not married filing a
separate return, 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. Beginning January 2008, an individual receiving an eligible
rollover distribution from a qualified plan can directly roll over
contributions to a Roth IRA,
18
subject to the same income limits. 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. In addition, as of January 1, 2006, an individual
receiving an eligible rollover distribution from a designated Roth account
under an employer plan may roll over the distribution to a Roth IRA even if
the individual is not eligible to make regular or conversion contributions to
a Roth IRA. If you are considering rolling over funds from your Roth account
under an employer plan, please contact your financial professional prior to
purchase to confirm whether such rollovers are being accepted.
Required Minimum Distribution and Payment Options
If you hold the contract under an IRA (or other tax-favored plan), IRS
required minimum distribution provisions 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. Roth IRAs are not
subject to these rules during the owner's lifetime. The amount of the payment
must at least equal the minimum required under the IRS rules. Several choices
are available for calculating the minimum amount. More information on the
mechanics of this calculation is available on request. Please contact us a
reasonable time before the IRS deadline so that a timely distribution is made.
Please note that there is a 50% penalty tax on the amount of any minimum
distribution not made in a timely manner.
You can use the Minimum Distribution option to satisfy the IRS required
minimum distribution provisions 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. Similar rules apply if you inherit more than one Roth IRA
from the same owner.
Required Distributions Upon Your Death for Qualified Contracts Held by Tax
Favored Plans
Upon your death under an IRA, 403(b) or other "qualified investment", the
designated beneficiary may generally elect to continue the contract and
receive required minimum distributions under the contract instead of receiving
the death benefit in a single payment. The available payment options will
depend on whether you die before the date required minimum distributions under
the Code were required to begin, whether you have named a designated
beneficiary and whether that beneficiary is your surviving spouse.
. If you die after a designated beneficiary has been named, the death
benefit must be distributed December 31/st/ of the year including the
five year anniversary of the date of death, or as periodic payments not
extending beyond the life or life expectancy of the designated
beneficiary (as long as payments begin by December 31/st/ of the year
following the year of death). However, if your surviving spouse is the
beneficiary, the death benefit can be paid out over the life or life
expectancy of your spouse with such payments beginning no later than
December 31/st/ of the year following the year of death or
December 31/st/ of the year in which you would have reached age 70 1/2,
which ever is later. Additionally, 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.
. If you die before a designated beneficiary is named and before the date
required minimum distributions must begin under the Code, the death
benefit must be paid out by December 31st of the year including the five
year anniversary of the date of death. For contracts where multiple
beneficiaries have been named and at least one of the beneficiaries does
not qualify as a designated beneficiary and the account has not been
divided into separate accounts by December 31/st/ of the year following
the year of death, such contract is deemed to have no designated
beneficiary.
. If you die before a designated beneficiary is named and after the date
required minimum distributions must begin under the Code, the death
benefit must be paid out at least as rapidly as under the method then in
effect. For contracts where multiple beneficiaries have been named and at
least one of the beneficiaries does not qualify as a designated
beneficiary and the account has not been divided into separate accounts
by December 31/st/ of the year following the year of death, such contract
is deemed to have no designated beneficiary.
A beneficiary has the flexibility to take out more each year than mandated
under the required minimum distribution rules.
Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment"
continue to be tax deferred. Amounts withdrawn each year, including amounts
that are required to be withdrawn under the minimum distribution rules, are
subject to tax. You may wish to consult a professional tax advisor for tax
advice as to your particular situation.
For a Roth IRA, if death occurs before the entire interest is distributed, the
death benefit must be distributed under the same rules applied to IRAs where
death occurs before the date required minimum distributions must begin under
the Code.
19
8: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
HORIZON ANNUITY CONTRACT? continued
Penalty for Early Withdrawals
You may owe a 10% tax penalty on the taxable part of distributions received
from an IRA, Roth IRA, or qualified retirement plan before you attain age
59 1/2. Amounts are not subject to this tax penalty if:
.. the amount is paid on or after you reach age 59 1/2 or die;
.. the amount received is attributable to your becoming disabled; or
.. the amount paid or received is in the form of substantially equal payments
not less frequently than annually (please note that substantially equal
payments must continue until the later of reaching age 59 1/2 or 5 years.
Modification of payments during that time period will generally result in
retroactive application of the 10% tax penalty.)
Other exceptions to this tax may apply. You should consult your tax advisor
for further details.
Withholding
Unless you elect otherwise, we will withhold federal income tax from the
taxable portion of such distribution at an appropriate percentage. The rate of
withholding on annuity payments where no mandatory withholding is required is
determined on the basis of the withholding certificate that you file with us.
If you do not file a certificate, we will automatically withhold federal taxes
on the following basis:
.. For any annuity payments not subject to mandatory withholding, you will
have taxes withheld by us as if you are a married individual, with three
exemptions; and
.. For all other distributions, we will withhold at a 10% rate.
We will provide you with forms and instructions concerning the right to elect
that no amount be withheld from payments in the ordinary course. However, you
should know that, in any event, you are liable for payment of federal income
taxes on the taxable portion of the distributions, and you should consult with
your tax advisor to find out more information on your potential liability if
you fail to pay such taxes. There may be additional state income tax
withholding requirements.
ERISA Requirements
ERISA (the "Employee Retirement Income Security Act of 1974") and the Code
prevent a fiduciary and other "parties in interest" with respect to a plan
(and, for these purposes, an IRA would also constitute a "plan") from
receiving any benefit from any party dealing with the plan, as a result of the
sale of the contract. Administrative exemptions under ERISA generally permit
the sale of insurance/annuity products to plans, provided that certain
information is disclosed to the person purchasing the contract. This
information has to do primarily with the fees, charges, discounts and other
costs related to the contract, as well as any commissions paid to any agent
selling the contract.
Information about any applicable fees, charges, discounts, penalties or
adjustments may be found under Section 6, "What Are The Expenses Associated
With The Strategic Partners Horizon Contract?"
Information about sales representatives and commissions may be found under
"Other Information" and "Sale And Distribution Of The Contract" in Section 9.
In addition, other relevant information required by the exemptions is
contained in the contract and accompanying documentation. Please consult your
tax advisor if you have any additional questions.
Please consult with your tax advisor if you have any questions about ERISA and
these disclosure requirements.
Additional Information
For additional information about federal tax law requirements applicable to
tax favored plans, see the "IRA Disclosure Statement," attached to this
prospectus. The following additional tax considerations also may be of
interest.
Purchase Payments Made Before August 14, 1982
If your contract was issued in exchange for a contract containing purchase
payments made before August 14, 1982, favorable tax rules may apply to certain
withdrawals from the contract. Generally, withdrawals are treated as a
recovery of your investment in the contract first until purchase payments made
before August 14, 1982 are withdrawn. Moreover, any income allocable to
purchase payments made before August 14, 1982, is not subject to the 10% tax
penalty.
Generation-Skipping Transfers
If you transfer your contract to a person two or more generations younger than
you (such as a grandchild or grandniece) or to a person that is more than
37 1/2 years younger than you, there may be generation-skipping transfer tax
consequences.
20
9: OTHER INFORMATION
PRUCO LIFE INSURANCE COMPANY
Pruco Life Insurance Company (Pruco Life) is a stock life insurance company,
organized on December 23, 1971 under the laws of the State of Arizona. It is
licensed to sell life insurance and annuities in the District of Columbia,
Guam, and in all states except New York.
Pruco Life is a wholly-owned subsidiary of The Prudential Insurance Company of
America (Prudential), a New Jersey stock life insurance company that has been
doing business since October 13, 1875. Prudential is an indirect wholly-owned
subsidiary of Prudential Financial, Inc. (Prudential Financial), a New Jersey
insurance holding company. As Pruco Life's ultimate parent, Prudential
Financial exercises significant influence over the operations and capital
structure of Pruco Life and Prudential. However, neither Prudential Financial,
Prudential, nor any other related company has any legal responsibility to pay
amounts that Pruco Life may owe under the contract.
Pruco Life publishes annual and quarterly reports that are filed with the SEC.
These reports contain financial information about Pruco Life that is annually
audited by independent accountants. Pruco's Life annual report for the year
ended December 31, 2006, together with subsequent periodic reports that Pruco
Life files with the SEC, are incorporated by reference into this prospectus.
You can obtain copies, at no cost, of any and all of this information,
including the Pruco Life annual report that is not ordinarily mailed to
contract owners, the more current reports and any subsequently filed documents
at no cost by contacting us at the address or telephone number listed on the
cover. The SEC file number for Pruco Life is 33-37587. You may read and copy
any filings made by Pruco Life with the SEC at the SEC's Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549-0102. You can obtain information
on the operation of the Public Reference Room by calling (202) 551-8090. The
SEC maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC at http://www.sec.gov.
SALE AND DISTRIBUTION OF THE CONTRACT
Prudential Investment Management Services LLC (PIMS), 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.
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
5%. Alternative compensation schedules are available that provide a lower
initial commission plus ongoing annual compensation based on all or a portion
of contract value. We may also provide compensation to the distributing firm
for providing ongoing service to you in relation to the contract. Commissions
and other compensation paid in relation to the contract do not result in any
additional charge to you or to the separate account.
In addition, in an effort to promote the sale of our products (which may
include the placement of Pruco Life and/or the contract on a preferred or
recommended company or product list and/or access to the firm's registered
representatives), we or PIMS may enter into compensation arrangements with
certain broker/dealer firms with respect to certain or all registered
representatives of such firms under which such firms may receive separate
compensation or reimbursement for, among other things, training of sales
personnel and/or marketing and/or administrative services and/or other
services 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 to
PIMS. A list of firms that PIMS paid pursuant to such arrangements 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.
21
9: OTHER INFORMATION continued
You should note that firms and individual registered representatives and
branch managers within some firms participating in one of these compensation
arrangements might receive greater compensation for selling the contract than
for selling a different contract that is not eligible for these compensation
arrangements. While compensation is generally taken into account as an expense
in considering the charges applicable to a contract product, any such
compensation will be paid by us or PIMS and will not result in any additional
charge to you. Your registered representative can provide you with more
information about the compensation arrangements that apply upon the sale of
the contract.
LITIGATION
Pruco Life 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 and that are typical of the
businesses in which Pruco Life operates. Class action lawsuits 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.
Pruco Life may also be subject to litigation arising out of its general
business activities, such as its investments and third party contracts. In
certain of these matters, the plaintiffs may seek large and/or indeterminate
amounts, including punitive or exemplary damages.
Stewart v. Prudential, et al. is a lawsuit brought in the Circuit Court of the
First Judicial District of Hinds County, Mississippi by the beneficiaries of
an alleged life insurance policy against Pruco Life and Prudential. The
complaint alleges that the Prudential defendants acted in bad faith when they
failed to pay a death benefit on an alleged contract of insurance that was
never delivered. In February 2006, the jury awarded the plaintiffs $1.4
million in compensatory damages and $35 million in punitive damages. Motions
for a new trial, judgment notwithstanding the verdict and remittitur, were
denied in June 2006. Pruco Life's appeal with the Mississippi Supreme Court is
pending.
Pruco Life's litigation and regulatory matters are subject to many
uncertainties, and given the complexity and scope, the outcomes cannot be
predicted. It is possible that the results of operations or the cash flow of
Pruco Life in a particular quarterly or annual period could be materially
affected by an ultimate unfavorable resolution of litigation and regulatory
matters, depending, in part upon the results of operations or cash flow for
such period. Management believes, however, that the ultimate outcome of all
pending litigation and regulatory matters, after consideration of applicable
reserves and rights to indemnification, should not have a material adverse
effect on Pruco Life's financial position.
ASSIGNMENT
In general, you can assign the contract at any time during your lifetime. We
will not be bound by the assignment until we receive written notice. We will
not be liable for any payment or other action we take in accordance with the
contract if that action occurs before we receive notice of the assignment. An
assignment, like any other change in ownership, may trigger a taxable event.
If you assign the contract, that assignment will result in the termination of
any automated withdrawal program that had been in effect. If the new owner
wants to re-institute an automated withdrawal program, then he/she needs to
submit the forms that we require, in good order.
If the contract is issued under a qualified plan, there may be limitations on
your ability to assign the contract. For further information please speak to
your representative.
HOUSEHOLDING
To reduce costs, we now send only a single copy of prospectuses to each
consenting household, in lieu of sending a copy to each contract owner that
resides in 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.
INDEMNIFICATION
Pruco Life, in conjunction with certain affiliates, maintains insurance on
behalf of any person who is or was a trustee, director, officer, employee, or
agent of Pruco Life, or who is or was serving at the request of Pruco Life as
a trustee, director, officer, employee or agent of such other affiliated trust
or corporation, against any liability asserted against and incurred by him or
her arising out of his or her position with such trust or corporation.
Arizona, being the state of organization of Pruco Life, permits entities
organized under its jurisdiction to indemnify directors and officers with
certain limitations. The relevant provisions of Arizona law permitting
indemnification can be found in Section 10-850 et. seq. of the Arizona
Statutes Annotated. The text of Pruco Life's By-law, Article VIII, which
relates to indemnification of officers and directors, is incorporated by
reference to Exhibit 3(ii) to its form 10-Q filed August 15, 1997.
22
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of Pruco
Life pursuant to the foregoing provisions or otherwise, Pruco Life has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Pruco Life of expenses
incurred or paid by a director, officer or controlling person of Pruco Life in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, Pruco Life 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.
MARKET-VALUE ADJUSTMENT FORMULA
With respect to residents of states, other than Indiana and Pennsylvania, in
which Strategic Partners Horizon Annuity is being offered.
The formula under which Pruco Life calculates the market value adjustment
applicable to a full or partial surrender, annuitization, or settlement under
Strategic Partners Horizon Annuity is set forth below. The market value
adjustment is expressed as a multiplier factor. That is, the Contract Value
after the market value adjustment ("MVA"), but before any surrender charge, is
as follows: Contract Value (after MVA) = Contract Value (before MVA) X (1 +
MVA). The MVA itself is calculated as follows:
For contracts issued in Indiana, we use the same formula as is set forth
above, except that the .0025 component of the formula is eliminated. We use
the same MVA formula with respect to contracts issued in Pennsylvania, except
that "J" in the formula above uses an interpolated rate as the current
credited interest rate. Specifically, "J" is the interpolated current credited
interest rate offered on new money at the time of withdrawal, annuitization,
or settlement. The interpolated value is calculated using the following
formula:
m/365 X (n + 1) year rate + (365 - m)/365 X n year rate,
where "n" equals the number of whole years remaining in the Contract's current
guarantee period, and "m" equals the number of additional days remaining in
the current guarantee period.
Market Value Adjustment Example
(ALL STATES EXCEPT INDIANA AND PENNSYLVANIA)
The following will illustrate the application of the Market-Value Adjustment.
For simplicity, surrender charges are ignored in these hypothetical examples.
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 has 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 for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 5%.
The following computations would be made:
1) Calculate the Charge Free Amount. The Charge Free Amount is the interest
credited in the contract in the previous contract year. This amount is
$600.00. It is not subject to a Market Value Adjustment.
23
9: OTHER INFORMATION continued
2) Subtract the Charge Free Amount from the Contract Value. The result is the
amount subject to a Market Value Adjustment (MVA). $11,127.11 - $600.00 =
$10,527.11
3) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06) / (1.05 + .0025)]/38/12/ -1 =
0.02274
4) Multiply the amount subject to a Market Value Adjustment by the factor
calculated in Step 3.
$10,527.11 X 0.02274 = $239.39
5) Add together the Market Value Adjustment and the amount subject to the MVA.
$10,527.11 + $239.39 = $10,766.50
6) Add back the Charge Free Amount to get the total Contract Surrender Value.
$10,766.50 + $600.00 = $11,366.50
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 has 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 for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
The following computations would be made:
1) Calculate the Charge Free Amount. The Charge Free Amount is the interest
credited in the contract in the previous contract year. This amount is
$600.00. It is not subject to a Market Value Adjustment.
2) Subtract the Charge Free Amount from the Contract Value. The result is the
amount subject to a Market Value Adjustment (MVA). $11,127.11 - $600.00 =
$10,527.11
3) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.07+.0025)]/38/12/ -1 = -0.03644
4) Multiply the amount subject to a Market Value Adjustment by the factor
calculated in Step 3.
$10,527.11 X -0.03644 = -$383.61
5) Add together the Market Value Adjustment and the amount subject to the MVA.
$10,527.11- $383.61 = $10,143.50
6) Add back the Charge Free Amount to get the total Contract Surrender Value.
$10,143.50 + $600.00 = $10,743.50
24
Market Value Adjustment Example
(INDIANA)
The following will illustrate the application of the Market-Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
.. Suppose a contract owner made an invested purchase payment of $10,000 on
July 1, 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 for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 5%.
The following computations would be made:
1) Calculate the Charge Free Amount. The Charge Free Amount is the interest
credited in the contract in the previous contract year. This amount is
$600.00. It is not subject to a Market Value Adjustment.
2) Subtract the Charge Free Amount from the Contract Value. The result is the
amount subject to a Market Value Adjustment (MVA). $11,127.11 - $600.00 =
$10,527.11
3) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: ([(1.06)/(1.05)] f/38/12/ -1 = 0.03047
4) Multiply the amount subject to a Market Value Adjustment by the factor
calculated in Step 3.
$10,527.11 X 0.03047 = $320.76
5) Add together the Market Value Adjustment and the amount subject to the MVA.
$10,527.11 + $320.76 = $10,847.87
6) Add back the Charge Free Amount to get the total Contract Surrender Value.
$10,847.87 + $600.00 = $11,447.87
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 for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
The following computations would be made:
1) Calculate the Charge Free Amount. The Charge Free Amount is the interest
credited in the contract in the previous contract year. This amount is
$600.00. It is not subject to a Market Value Adjustment (MVA).
2) Subtract the Charge Free Amount from the Contract Value. The result is the
amount subject to a Market Value Adjustment. $11,127.11 - $600.00 =
$10,527.11
3) Determine the Market Value Adjustment factor.
25
9: OTHER INFORMATION continued
The MVA factor calculation would be:
[(1.06)/(1.07)]/38/12/ -1 = -0.02930
4) Multiply the amount subject to a Market Value Adjustment by the factor
calculated in Step 3.
$10,527.11 X -0.02930 = -$308.44
5) Add together the Market Value Adjustment and the amount subject to the MVA.
$10,527.11 - $308.44 = $10,218.67
6) Add back the Charge Free Amount to get the total Contract Surrender Value.
$10,218.67 + $600.00 = $10,818.67
(Pennsylvania)
The following will illustrate the application of the Market-Value Adjustment.
For simplicity, surrender charges are ignored in these hypothetical examples.
Positive market value adjustment
.. Suppose a contract owner made an invested purchase payment of $10,000 on
July 1, 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 has 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 for a guarantee
period of 3 years (the number of whole years remaining) is 4%, and for a
guarantee period of 4 years (the number of whole years remaining plus 1) is
5%.
The following computations would be made:
1) Calculate the Charge Free Amount. The Charge Free Amount is the interest
credited in the contract in the previous contract year. This amount is
$600.00. It is not subject to a Market Value Adjustment.
2) Subtract the Charge Free Amount from the Contract Value. The result is the
amount subject to a Market Value Adjustment (MVA).
$11,127.11 - $600.00 = $10,527.11
3) Determine the Market Value Adjustment factor.
The MVA factor calculation would be:
[(1.06)/(1.0417 + .0025)] /38/12/ -1 = .04871
4) Multiply the amount subject to a Market Value Adjustment by the factor
calculated in Step 3.
$10,527.11 X 0.04871 = $512.78
26
5) Add together the Market Value Adjustment and the amount subject to the MVA.
$10,527.11 + $512.78 = $11,039.89
6) Add back the Charge Free Amount to get the total Contract Surrender Value.
$11,039.89 + $600.00 = $11,639.89
The MVA may not always be positive. Here is an example where it is negative.
.. 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 has 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 for a guarantee
period of 3 years (the number of whole years remaining) is 7%, and for a
guarantee period of 4 years (the number of whole years remaining plus 1) is
8%.
The following computations would be made:
1) Calculate the Charge Free Amount. The Charge Free Amount is the interest
credited in the contract in the previous contract year. This amount is
$600.00. It is not subject to a Market Value Adjustment.
2) Subtract the Charge Free Amount from the Contract Value. The result is the
amount subject to a Market Value Adjustment (MVA).
$11,127.11 - $600.00 = $10,527.11
3) Determine the Market Value Adjustment Factor.
The MVA Factor calculation would be:
[(1.06)/(1.0717 + .0025)] /38/12/ -1 = -0.04126
4) Multiply the amount subject to a Market Value Adjustment by the factor
calculated in Step 3.
$10,527.11 X - 0.04126 = -$434.35
5) Add together the Market Value Adjustment and the amount subject to the MVA.
$10,527.11 - $434.35 = $10,092.76
6) Add back the Charge Free Amount to get the total Contract Surrender Value.
$10,092.76 + $600.00 = $10,692.76
27
LOGO
The Prudential Insurance Company of America
751 Broad Street
Newark, NJ 07102-3777
ORD01124
PRSRT STD
U.S. POSTAGE
PAID
LANCASTER, PA
PERMIT NO. 1793
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration Fees
Pruco Life registered $500 million of interests in the market value adjusted
annuity contracts described in this registration statement. Pruco Life has paid
$46,000 to the SEC for the registration fees required under the Securities Act
of 1933.
Federal Taxes
Pruco Life Insurance Company estimated the federal tax effect associated with
the deferred acquisition costs attributable to receipt of $50 million of
purchase payments over a two year period (from 2004 to 2006) to be
approximately $185,000.
State Taxes
Pruco Life estimated that approximately $10,000 in premium taxes would be owed
upon receipt of $50 million of purchase payments under the contracts, and that
additional premium taxes in the approximate amount of $100,000 would be owed if
the full $500 million of purchase payments were applied to annuity options.
Printing Costs
Pruco Life estimated that the cost of printing prospectuses for the amount of
securities registered herein would be approximately $23,866.
Legal Costs
This registration statement was prepared by Prudential attorneys whose time is
allocated to Pruco Life.
Accounting Costs
PricewaterhouseCoopers LLP, the independent registered public accounting firm
that audits Pruco Life'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 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.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant, in conjunction with certain of its affiliates, maintains
insurance on behalf of any person who is or was a trustee, director, officer,
employee, or agent of the Registrant, or who is or was serving at the request
of the Registrant as a trustee, director, officer, employee or agent of such
other affiliated trust or corporation, against any liability asserted against
and incurred by him or her arising out of his or her position with such trust
or corporation.
Arizona, the state of organization of Pruco Life Insurance Company ("Pruco"),
permits entities organized under its jurisdiction to indemnify directors and
officers with certain limitations. The relevant provisions of Arizona law
permitting indemnification can be found in Section 10-850 et. seq. of the
Arizona Statutes Annotated. The text of Pruco's By-law, Article VIII, which
relates toindemnification 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, as amended (the "Securities 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 Securities 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 Securities Act and will be governed by the final adjudication
of such issue.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)EXHIBITS
(1) Form of a Distribution Agreement between Prudential Investment
Management Services, Inc., ("PIMS") (Principal Underwriter) and
Pruco Life Insurance Company (Depositor). (Note 2)
(1a) Amendment No. 1 to Distribution Agreement between PIMS and Pruco
Life Insurance Company. (Note 3)
(4) Form of Contract (Note 3)
(4)(a) Form of Application (Note 3)
(5) Opinion of Counsel (Note 5)
(23) Consent of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm. (Note 1)
(24) Powers of Attorney:
(a) James J. Avery, Jr., Helen M. Galt, Bernard J. Jacob, Ronald P.
Joelson, David R. Odenath, Jr. (Note 4)
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Post Effective Amendment No. 4 on
Form S-1, Registration No. 33- 61143, filed April 15, 1999, on
behalf the Pruco Life Insurance Company.
(Note 3) Incorporated by reference to Pre-Effective Amendment No. 1 to
Form S-1, Registration No. 333- 89530, filed September 27, 2002,
on behalf of Pruco Life Insurance Company.
(Note 4) Incorporated by reference to Post-Effective Amendment No. 13 to
Form S-3 to Registration No. 333-33-61143, filed April 19, 2006
on behalf of Pruco Life Insurance Company.
(Note 5) Incorporated by reference to initial Form S-3 filing to
Registration No. 333-104035, filed March 26, 2003 on behalf of
Pruco Life Insurance Company.
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; and
(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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this post-effective
amendment to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Newark, State of New Jersey, on this 20th day of
April, 2007.
PRUCO LIFE INSURANCE COMPANY
(Registrant)
By: /s/ SCOTT D. KAPLAN
---------------------------
SCOTT D. KAPLAN
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
SIGNATURE AND TITLE
/s/ *
----------------------------------- April 20, 2007
JAMES J. AVERY, JR.
DIRECTOR
/s/ * /s/ THOMAS C. CASTANO
----------------------------------- *By: ---------------------
BERNARD J. JACOB THOMAS C. CASTANO
DIRECTOR (ATTORNEY-IN-FACT)
/s/ *
-----------------------------------
TUCKER I. MARR
CHIEF FINANCIAL
OFFICER
/s/ *
-----------------------------------
RONALD P. JOELSON
DIRECTOR
/s/ *
-----------------------------------
HELEN M. GALT
DIRECTOR, SENIOR VICE PRESIDENT AND
CHIEF ACTUARY
/s/ *
-----------------------------------
DAVID R. ODENATH, JR.
DIRECTOR
EXHIBIT INDEX
(23) Written Consent of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm